Solvay Sa Act

Good afternoon everyone and welcome to Solvay's fourth quarter and full year 2025 earnings call. I'm Geoffrey Lautremont, Head of Investor Relations and with me today are our CEO Philippe Quérin and our CFO Alexandre Blum. 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 shared today are also available on the website. We will first discuss our full year earnings and the outlook for 2026, and then take your questions. Philippe, over to you for the introduction.

Thank you, Jean-François, and hello everyone. In 2025, we delivered healthy margins and strong cash flow despite the challenging environment. In this context, we remain disciplined and act to secure our competitiveness, leveraging energy transition and footprint optimization. Our strategy has proven to work and we continue to focus on being a leading essential chemical company with safety and sustainability at the heart of it. Let me share more details on this, starting with safety. Safety remains our top priority and we continue working toward our zero accident objective. In 2025, we launched a major safety culture transformation program designed to improve safety performance across all our sites. While the reportable injuries increased slightly compared to last year, the severity of the incidents decreased overall. This is a sign that our efforts are starting to pay off. We're not there yet, but we are fully committed to continuing our transformation in 2026. Let me now share with you our progress on sustainability, implementing our four generations roadmap across the business, moving to slide number six. We've progressed well on our greenhouse gas emissions targets. Our CO2 emissions, scope one and two, have decreased by 29% compared to 2021, and that's already close to our 2030 target of minus 30%. The reduction was driven equally by decarbonisation projects and also by lower activity levels. The largest structural contributors were the coal phase-out projects in our soda ash plants in the US and in Germany, which were completed in 2024 and which delivered their full impact in 2025. The next steps will be the new cogeneration unit in Donval, France, which will substitute coal with refuse-derived fuel and which is expected to be operational later this year. The nuclear generation project in Torre la Vega in Spain, announced in 2025, is expected to be operational in 2027. One year ago, we also announced our new biodiversity commitment for the group. In 2025, we launched a pilot at Ardonval site, testing a science-based framework provided by the IUCN, the International Union for the Conservation of Nature. This framework aims to develop a blueprint for effective biodiversity actions that can be replicated across global operations. At the end of 2025, Already 16% of our lands are under conservation or restoration. We'll continue working closely with the IUCN and the next step will be a second pilot at our Rossignano site in Italy where we'll further apply and refine the methodology. We also moved forward on our better life KPIs. As mentioned earlier, safety improved slightly compared to last year and we are dedicated and focused on improving this even more. We've been steadily moving on our diversity target with 28.8% of women in mid and senior management. Lastly, on living wage, we're very proud to have achieved our target already one year in advance with 100% of our own workforce throughout the world receiving a decent living wage. Now turning to slide number seven. Before Alex takes you through the details of the results, let me leave you with three key messages for the year. First, in 2025, we continue to deliver healthy margins and strong cash. The transformation of the company is progressing well and the operational excellence savings associated with it are supporting our performance. In 2025, the overall environment remained very challenging and we had some transformation expenses generating cash outflows. These are expenses tied to the separation, including phasing out the transition service agreements and building a new simplified ERP, as well as essential initiatives for the new Solvay, including the ongoing Fluorine business restructuring. At the same time, we generated 350 million euros of free cash flow, thanks to our disciplined cash allocation framework and decisive working capital management throughout the year. This is a real achievement in such a difficult year. 2026 will be another challenging year. On the top line, the demand environment is not yet showing any sign of recovery, and the bottom line will be impacted by the transformation expenses. So in this context, and this is my second key message, we continue taking actions to make sure we can emerge stronger. Strengthening our competitiveness is essential. One key lever is accelerating our energy transition with a particular focus on phasing out coal across our European operations. Our decarbonisation roadmap is progressing well, but at the same time, we need to align the European climate policies, ETS and CBAN, with industrial reality. We cannot force decarbonisation decades ahead of the 2050 target without the right framework. Extending three quotas until 2050 is a technical necessity to fund the transformation of historical sites instead of shutting them down. We need the support of the authorities for a competitive energy access. This is critical if we want to maintain competitive supply chains in Europe. The other key lever is industrial footprint optimization to safeguard long-term competitiveness. will regularly assess each site to ensure it can remain competitive in the evolving environment. When this is no longer the case, we act decisively. This has led to the restructuring of our fluorine operations in Germany, to the closure of our SANA site in France in 2025, and earlier decisions to close our peroxides plant in Warrington in the UK and in Pogua in Portugal. Yesterday, we launched a consultation process to reduce our production capacity at the Torre de la Vega plant in Spain from 600,000 tons to 420,000 tons, starting in Q3 2026. This measure allows us to define a very clear industrial roadmap for the site, which will focus on local sodash customers and competitive and low-carbon, high-grade bicarbonate. All these measures strengthen the overall performance and agility of our European manufacturing base. Together, our footprint optimization and energy transition initiatives enable us to maintain an asset base that is highly competitive in its markets. So in summary, one, we deliver. Two, we act to protect and reinforce our competitiveness. Third key message is that we remain focused on the deployment of our essential chemistry strategy. We continue the long-term transformation, which is about simplification of our organization and digitalization of our plants. We are preparing the future and we invest where demand justifies it. In 2025, we inaugurated our new rare earth workshop in La Rochelle for permanent magnets. And we doubled the capacity of our electronic grade of hydrogen peroxide plant in China. In January 2026, we inaugurated our production line of bio-source silica in Livorno, Italy. It's the first of its kind in Europe. And we have more projects. with a clear potential of additional developments in La Rochelle, for instance, where we will start separating heavy rare earths already this year. So you see, we're very committed to our strategy. At the same time, we act when necessary to make sure we will emerge stronger. We carefully look at our portfolio and we assess if changes are needed, but we also continue to invest in selective areas where it makes sense to prepare for the future. All of this while being laser focused on our financial policy, a stable to growing dividend and an investment rating. Now over to you for the financials, Alex.

Thank you, Philippe, and good morning, good afternoon, everyone. Moving to the financial, we have two key messages. First, on cash generation. In 2025, we're able to generate strong free cash flow by rapidly adapting to our environment. Second message is that our balance sheet is healthy and these fully support the execution of our strategy. Moving to slide 11. As usual, I remind you that my comments are based on organic evolution, meaning at constant scope and currency, unless otherwise stated. Underlying net sales in 2025 reached 4.3 billion euros, down 6% versus 2024. The decline was mostly driven by lower volumes, which were down 4% year on year, mainly in sodash and coatties business units. Forex had a negative impact for the year from the strengthening of the Euro against the US dollar and the Brazilian reais. In Q4, volumes were also down, mainly driven by Coatis and the Sodash export markets, and with a slightly more pronounced seasonality in the silica business. However, volumes in bicarbonate, peroxide, and special cane remained very resilient throughout the year. Let's now move to the ABDA bridge on slide 12, where you see that despite all the headwinds, we have retained a healthy ABDA margin. Underlying ABDA amounted to 881 million euros in 2025, down 13% compared to 2024. But within our revised guidance range, the ABDA margin remains strong, close to 21%. Volumes and mix were mostly done due to sodash and the absence of a peroxide license, but this was partly compensated by the positive impact of the optimization of our portfolio of European CO2 credits. Net pricing decreased year on year, primarily driven by the seaborne sodash market and co-actives. Margins in the other businesses remained extremely resilient. For fixed cost and over, we can highlight three main moving parts. In fixed cost, minus 23 million of negative impact from the temporary traded costs related to the split. And then, we have two non-repeat elements from 2024 offsetting each other. Last year, we had plus 20 million linked to a one-off TSA reinvoice fixed cost, versus minus 29 million from provision in order linked to our Bombal energy project. Moving now to look at our structural cost saving on slide 13. As expected, our structural cost saving program continued to deliver significantly in 2025. when we have achieved 101 million of gross structural savings, bringing the cumulative amount since the start of the program to 211 million and so exceeding our 2025 target. We will continue to focus on what we can control and we expect cumulative savings to be around 300 million by the end of 2026. I now move to the segment review, mainly focusing on Q4 development and starting with basic clinical on slide 14. Sales in the sodash and derivative business unit were lower for the quarter by 13%, with sodash volumes and pricing steady in the domestic market, but showing a continued sharp decline in the seaboard markets. Bicarbonate volume and pricing, on the other hand, continue to be extremely resilient and are up year on year. In peroxide, our electronic grade for semiconductor industry continue to deliver double-digit growth supported by AI-related investment, while volumes remain broadly stable in the merchant market. Overall, the segment EBDA was down by 20% in Q4, mostly due to the lower volumes, including the non-repeat of the peroxide license and lower pricing of sodash exports. The EBDA margin reached 25.1%, slightly lower compared to Q4, 2024. Moving now to performance chemical on slide 15. This segment has a certain Year-on-year, silica sales were impacted by slightly lower tire volumes, while the consumer and industrial good markets remained stable. Coatis continued to struggle with volumes and prices down in oil and market due to the difficult environment caused by U.S. tariff, and we will see if the recent changes can help the local industry to recover. Special chem, on the other hand, increased in Q4, with higher errors volume in electronics and medical applications, which offset slightly lower demand in autocatalysis and fluoride. Overall, the segment ABBA was down 18%, while the ABBA margin decreased to 14%. I will now cover the corporate segment. In 2025, the corporate segment result was impacted by 23 million of temporary stranded costs due to the TSA exit. They will continue to impact our performance in 2026, while OPEX related to the ERP will impact both 2026 and 2027. As of 2028, our target operating model will be fully in place, generating a new wave of savings, allowing to reach a run rate below 50 million for the corporate segment. Overall, the full year 2025 EBDA was minus 40 million, including a positive impact of 40 million from the CO2 emission rights optimisation. Moving to slide 70 to look at our free cash flow, which, as you know, is at the top of our priorities. We delivered a strong free cash flow of 350 million despite a weaker EBITDA generation. First, we have limited our capex to a level below 300 million as guided. The 292 million includes around 240 million of essential capex, of which 26 million for energy transition project. The rest, roughly 50 million, was dedicated to targeted investment in new capacity, including the completion of our new sodash capacity in Green River, the doubling of our EH2O2 capacity in China, and the biosource silica unit in Italy. So even in a difficult year, we continue to invest to make Solvay future-proof. The other cash driver was working capital, whose positive contribution reflects a strong discipline, the low level of activity at year-end, and the positive impact from the exit of TSA with ScienceCo in our residuals. As expected, provision cash out were high at $260 million for the year. They include approximately $130 million of what you could call normalized cash out for the provision, into pension, environmental liabilities, and some restructuring. And on top, there was $60 million related to Dombal Energy Project and $70 million of additional restructuring and overhead expenses related to the transformation we have initiated since the spin-off. As indicated, financing costs were higher in 2025 as it was the first year of full interest payment for the bond issued in April 2024. Let's now move to the slide 18 where I guide you through the temporary cash impact on the free cash flow. Here we have the main element behind the transformation expenses and how they will temporarily weigh on our cash generation. First, the stranded cost, which mainly impact 2025 and 2026. In 2025, we stopped rendering services to ScienceCo, but it will take one to two years to adjust our support functions. Second, the cost related to the new ERP. With the split, it becomes a necessity to design and deploy IT systems that are adapted to our new operating model. Third, the restructuring snapshot. They mainly relate to the exit of the TSA, partially compensated by Siam School, and the restructuring of our fluorine business. They were the highest in 2025 and gradually decreased starting in 2026. To wrap up the 2025 financial, let me take a word on the debt on slide 19. Underlining net debt was 1.6 billion at the end of 2025, roughly stable compared to 2024. The leverage ratio remained healthy at 1.8 times. Regarding provision, in December 2025, we took an important step to de-risk our balance sheet. we did a lift out. This means that we transfer a portion of our US pension plan to an insurance company, which is now solely responsible for managing the benefits and the underlying investments. The transaction resulted in a reduction of our liabilities of 159 million and of our assets by 155 million, hence generating a profit of approximately 3 million in Q4. Based on the free cash flow generation and in line with the dividend policy of the company, the board of directors has decided to propose to the shareholders a total gross dividend of 2.43 euros per share, which includes the interim dividend paid in January. Let me leave you with a final key message. Whatever the environment, our capital allocation framework drives all our decisions. Our essential context are the priority. Then we have an equally important and clear dividend policy. And then we have options to prepare for the future growth of the company. The last bucket is more valuable as it will be always sized based on merit and affordability. It will be mostly for organic investment and might be supported with inorganic opportunities. If they become available, make sense and meet our rigorous criteria. With that, Philippe, back to you for the outlook.