Solvay Sa Act

Good afternoon, everyone, and welcome to Solvay's first quarter of 2026 earnings call. I'm Geoffrey Loutremont, Head of Investor Relations, and I'm joined today by 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. We'd like to remind you that the presentation includes forward-looking statements that are subject to risk and uncertainties. And the slides presented in today's call are also available on our website. Let's get started. Philippe, over to you.

Thank you, Geoffroy, and hello, everyone. As you know, safety is at the core of our operations, and we continue to work hard on the different programs we have in place in the organization, and they are already delivering tangible results. A word also on our Solvay employees located in the Middle East. They are all safe and this is our top priority. We monitor the situation on a daily basis and we are ready to act swiftly to support them if necessary. Turning now to the results on slide six. Our first quarter shows the resilience of Solvay in a macro environment that continues to be challenging. Overall, the situation in the Middle East had a limited impact on our results this quarter, although there are several effects that we are actively mitigating. The most direct impact concerns our Saudi Arabian HPPO peroxides business, with production temporarily suspended since mid-March. We follow the situation very closely and we will be ready to start up again as soon as the situation clarifies. Then the conflict has a direct impact on our energy, raw materials and transportation costs. We are mitigating this with price increases, including the activation of pass-through closures in our energy intensive businesses. And I will come back to this later in the call. Finally, indirect effects may materialize from disruptions in the value chain and further pressure on demand in some end markets. This could be partially offset by improved market conditions for the Coati's business, which, by the way, also benefits from lower tariffs between Brazil and the US. Besides this, we haven't seen any major change in our main market dynamics. demand environment remained overall soft and we continue to see some price pressure for our sodash seaborn activities in southeast asia the coati's business remains down year on year but it is showing clear signs of improvement on a sequential basis alex over to you for the details of the q1 results thank you philippe and good morning good afternoon everyone

Our financial performance in Q1 highlighted again that most of our activities are resilient. And our free cash flow in the first quarter showed that the very strong performance of Q4 2025 was not realized at the expense of 2026. All of these allow us to continue executing our strategy and transformation while maintaining a healthy balance sheet. Let's now move to the detail, and as usual, I will comment on organic evolution, meaning at constant scope and currency, unless otherwise stated. Moving to slide eight. Underlying net sales in Q1 reached close to 1 billion euro, 9% lower compared to the first quarter of 2025. Overall volumes proved resilient, with only limited decline in certain product lines against a stronger comparative base. Pricing pressure was mainly concentrated again in the Sudash Seaborne market and in Coatis, both of which started to soften in Q2 last year. Forex remained a headwind as the start of the quarter, so weaker dollar against the euro. Now moving to EBITDA. Looking at the year-on-year comparison, there are two important elements to consider. On the one side, a positive impact from the CO2 emission right sales, and on the other side, the negative impact from distributed costs. We delivered an EBITDA of 219 million euros during the first quarter, down 10%. The EBITDA margin remained steady at a solid 21.9%. Volume and mix was positive, supported by the sales of CO2 emission right, which generated 38 million euros in January. Excluding this, volumes would have decreased by 17 million euros versus a strong comparison base in Q1 2025. Net pricing decline was limited to minus 13 million euros, with lower prices in some of our businesses being partly offset by reduction in variable cost. These were driven by cost-saving initiatives and effective energy management. On fixed cost, our ongoing cost initiatives at both plant and corporate levels are allowing us to absorb inflation. The negative impact shown in the bridge mainly reflects the temporary stranded cost linked to the exit from the TSA with ScienceCo. The expected negative year-on-year impact of the full 2026 is mostly concentrated in the first quarter. Moving on to segment review, I'll start with basic chemicals on slide 10. Sodash and derivative sales were down 7% year-on-year. Sudash volumes for the quarter were overall flat, up slightly in the seaboard market and marginally down in North America. In terms of production, we continue to shift some of the seaboard volume from European plants to our Green River site in North America. Combined with lower energy costs, this allowed us to reduce variable costs and partially offset the impact of lower sudash prices. Our bicarbonate business on the other hand continued to be very resilient with volumes only marginally lower in flue gas treatment application given a slower start of the year. Peroxide sales for the quarter decreased by 6% compared to Q1 2025. The electronic grade business once again delivered double digit growth in volumes driven by demand from the semiconductor industry. On the other hand, both volume and pricing were slightly down in the merchant market, as well as in our HPTO and intermediate businesses, compared to a high 2025 pace. The segment EBITDA was down 17%, reflecting primarily the impact of lower SEDASH pricing, especially in the seaborn market, but also a slight negative mix across two business units. Moving on to performance chemical on slide 11. Silica sales declined by 7%, reflecting a lower tire volume compared to a stronger Q1 of last year, which had benefited from some customer restocking. In Ducati's business, sales were down 16% compared to Q1 2025, which was the last quarter before the announcement of the US tariff on Brazil. Although still at a low level, business performance has improved sequentially each month so far this year. The improvement has been supported first by the reduction in US tariffs and by the reduced pressure from China following Middle East related supply disruption. Finally, in our special chem business, sales declined by 11%. This is mainly due to lower volume on electronic which also benefited from pre-buying and restocking in the first quarter of last year. Although they remain marginal, we have started seeing the first contribution from volumes for permanent magnet applications. The overall segment EBITDA was down 8% with lower net pricing in co-entities as the primary type. Before we move to the free cash flow, a quick word on corporate segment. as it delivered a positive contribution of 6 million for Q1 2026. As explained earlier, this is due to the 38 million gain from further optimization of our portfolio of European CO2 emission rights, which more than offset the higher temporary stranded cost. Turning now to the free cash flow on slide 12. I am pleased to highlight our resilient cash generation. Even with a particularly strong cash performance in 2025 in general and in Q4 in particular, we continue to deliver positive free cash flow quarter after quarter. Our capex spending remained very disciplined in Q1, with investment targeted mostly towards essential capex, covering HSNE, maintenance, and ongoing energy transition projects. Working capital saw a negative variation, broadly in line with the usual Q1 seasonality, despite a record low working capital position at year end. As we had announced, provisioned cash out is progressively reducing but is still above our normalized level due to the transformation restructuring project. This is mainly linked to the TSXC, to the Fluorine Business Footprint Optimization and to some remaining cash out from the Dombal Energy Transition Project. Moving on to the Net Debridge on slide 13. underlying net debt increased by a limited €0.1 billion in Q1, mainly from the interim dividend payment in January. Our leverage ratio remained very healthy at 2. As you know, maintaining a healthy balance sheet and preserving our investment grade rating is a cornerstone of Solvay's financial policy. In conclusion, our financial results prove that despite the pressure from the external factors, Solvay has the ability to continue generating solid free cash flow quarter after quarter. Philippe, back to you for an update on Solvay energy management in 2026.

Thank you, Alex. So I will now share how we manage our energy exposure at Solvay. We have a relatively sizable energy footprint and Europe is a large part of it. But we have a strong and highly experienced energy team with a clear mandate focusing on optimizing energy costs and delivering on our energy transition objectives. So even in the context of rising energy prices, we do not expect to see a material impact on our bottom line. As we walk you through the figures, there are two key takeaways. First, our energy transition roadmap is successfully driving the decline of our exposure to fossil fuels year after year. And second, we have contractual arrangements in most of our energy intensive businesses, allowing us to limit the impact of energy cost fluctuations. And this disciplined approach also applies to our raw materials. Solvay's energy consumption, as disclosed in our annual report, amounts to around 18 TWh per annum. This represents a total spend of just over 500 million euros per year. Over the past two years, our total energy costs have been reduced by approximately 30%, benefiting from the lower energy prices in Europe. At the same time, we've been structurally reducing our overall exposure to fossil fuels, which are by definition more volatile as recent events have once again shown. We already shared our coal phase-out initiatives, notably in Green River, where coal has been replaced by locally sourced natural gas, and in Rheinberg, Germany, where it has been replaced by recycled biomass. Together, These projects have allowed for a one third reduction in our coal consumption. Let me also illustrate this transition from fossil fuels with a very recent example. Two months ago, our new electric furnace in Cologne, France, started to produce silicate using electricity, which in France is both competitive and low carbon. This replaces the fuel-based furnace and allows us to almost entirely eliminate the group's remaining oil exposure, which was already below 1% of the group of consumption before. Overall, these efforts are clearly reflected in the evolution of our energy consumption. Over the past two years, our fossil fuel consumption has declined by 10% in volume, while biomass consumption has increased by 60%. and even up by 150% if we compare to four years ago. Now, moving to slide 16, 18 of our 43 production sites are located in Europe, including some of our highly energy-intensive activities, such as synthetic sodash. As a result, Europe accounts for two-thirds of the total energy spent of solar today. This is the only region where we still use coal, which was historically the main source of energy for our sodash plants. In 2025, coal and coal products still represent half of the energy span, while natural gas exposure in Europe is more limited. Both will decline in the coming years as we move away from fossil fuel towards renewable alternatives. So as I've shared with you, we act and we take our energy transition as an opportunity to be more competitive and more independent from the short-term fluctuations on the global energy markets. Moving on to slide 17, where we illustrate our proactive approach to manage risks related to energy and also to raw materials costs. So being an energy intensive company, Solvay has built core competencies in the energy domain together with a robust risk mitigating model. First, we act strategically to structurally reduce our exposure to the most volatile feedstocks. On the energy side, this is driven by our energy transition out of fossil fuels, which I've just illustrated. On raw materials, our exposure to oil and gas derived feedstocks is largely concentrated in one single business, Coatis. Additionally, we benefit from a high degree of vertical integration across many of our activities, which significantly reduces our external exposure to raw materials fluctuations. Second, The remaining exposure is primarily managed through commercial pass-through mechanisms. Since 2022, energy clauses and protection mechanisms cover the majority of the group sales. Finally, for the residual energy exposure that cannot be passed through contractually, we make limited and targeted use of financial hedging. So taken together, All these mechanisms significantly reduce solvay's exposure to energy and raw material price volatility and in that way effectively limiting the impact on our bottom line. Now moving to the outlook. While the conflict in the Middle East is adding another layer of challenges and volatility, our guidance for the year 2026 remains unchanged. underlying EBITDA between 770 and 850 million euros. Free cash flow to solve the shareholders from continuing operations to exceed 200 million euros with capex under 300 million euros. So in conclusion, Our essential chemistry strategy is more relevant than ever in the current environment, and we can see our efforts to transform the company are paying off. For example, our energy transition projects, especially in Europe, allow us to disconnect from the volatility in the market by using alternative energy sources. Our local to local model proves very relevant as well. We remain close to customers and we use local raw materials whenever possible. We remain fully committed to our strategy and we are confident it will allow us to continue to navigate external uncertainty and to build a stronger, more resilient Solvay for the future. Next to that, we continue to protect our financial strengths with a very clear focus on cash generation. Thank you for listening. And now we're happy to take your questions with us.

Thank you, Philippe and Alexandre. Gaia, can you please open the line now for the questions?

Ladies and gentlemen, if you wish to ask a question, please dial pound key five on your telephone keypad. If you wish to withdraw your question, please dial pound key six. The first question is coming from Martine Rudiger from Kepler Chevron. Your line is now open. Please go ahead.

Yes, thanks for taking my two questions. Firstly, on the demand situation, many other chemical companies mentioned that their business in March was clearly better than January and February. I hope that it's the same also for you. Please confirm that. And looking at the business in the last five weeks, i.e. April and the beginning of May, and also factoring in what you see in your order book for the upcoming weeks to come, do you have the impression that current demand right now stays on the same level as in March? That's my first question. Second question is on the seabor market for soda ash. Most of the Chinese producers use either the Hu process or the Solvay process to produce soda ash, which is a very energy intense process. Now energy availability and energy costs become a topic in China. Do you see that A, competition is easing in the seaboard market since the start of the Middle East conflict and B, do you see that pricing is sequentially improving in that region? Thank you.

Thank you very much, Martin, for your questions. I will first maybe ask Alex to make an update on the situation of March and April regarding the demand of the different businesses. And then I will probably take the question on Solange. Alex?

Yeah. Hello, Martin. Yes, indeed. We have seen January, February were quite soft and we've seen some improvement. That's true in basic chemical I've mentioned. merchant market, the bicarbonate. And since March and April and continuing in Q2, we see some improvement. And looking at the order book, yes, the order book is solid. We have not seen a complete change of pattern. So it's solid, much better than the beginning of the year, but well in line with what we were expecting.

Thank you. So regarding your question on Sodash, first disclaimer, I would say that the WHO and Solvay process, Chinese producers, according to our estimations, were already cash negative before the crisis, before the conflict. So the conflict makes it even worse and probably even more unsustainable. What we see today, two things I would say. First, we see a stabilization and potentially a slight recovery, even though it's not really obvious, I must say today, if you look at volumes and prices in China and in Southeast Asia, but certainly at least a stabilization. Then there's a second element that I think is very important, is that we have a big plant in the US, SVM, that has shut down. And this will create a decrease, I would say, of production. So all in all, we expect indeed the situation to, at worst, stabilize, at best, improve.

Thank you very much.

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

Hi there. Thanks very much for the opportunity to ask questions and the presentation. Just two questions on the energy exposure slides that you've put up. Firstly, can you help me understand what the implications are behind this for CO2 credits if you're reducing your fossil fuels consumption by 7% divided by 2, let's call it 3% to 4% a year? Is that going to mean that in coming years you'll have more surplus CO2 credits to sell back to the market? And secondly, kind of related, of that energy saving, the total energy spend down 29%, are Has 100% of that been passed back to customers? That's my energy exposure question. Second question, kind of following up on Martin, around 2Q, so your underlying EBITDA in 1Q, if I strip out the litigation and the CO2 sale was 174. Can we see a stronger than seasonality pick up based on the comments you've just made? Or should we just assume a modest 2Q improvement more in the lines of kind of 10 to 15 million euros quarter on quarter? Thank you.

Thank you, Tom, for your question. So I will probably let Alex take the last one. For the first one, so CO2 credit surplus As we explained, I think already last time, what we're doing is we have a portfolio of different instruments that allow us to balance and manage our CO2 exposure. And this portfolio comprises three quotas, also CO2 that we have in inventories and purchased in the past, forward purchases, and of course the energy transition project. So everything that we explain today is part of our analysis and assessment of the portfolio. So I would say this is already somehow included. Of course, the more we execute the project, the more we de-risk our trajectory. And so that allows us to indeed optimize the portfolio and valorize some of the CO2 instruments that we have in inventory and so on. This is what we did this year. We will reassess continuously the situation of this portfolio. We don't expect to have a major adjustment to make this year at this point. Do we transfer the savings to the customers? I would say this is a general question that concerns energy savings as well as all the savings that we are generating. Of course, the tighter the markets are, the more we keep in terms of savings. So very clearly in the current situation, in particular on the Soudage market, we are giving a part of these savings to the customers, but that also reinforces our competitiveness. So this is the way it works. Maybe on the last question, Alex, if you can take it.

Sure. Thank you. In fact, we don't want, generally we do not give guidance by And I think in the current environment, which is, as you know, extremely volatile, we have even more reason not to do so. But we are looking at the full year. And given everything we know, we have reconfirmed our full year guidance for ABDA and free cash flow. What you have to keep in mind is there are certain elements which will progressively play more positively in the second part of the year, especially as we mentioned, Coatis, which was really down for the past few quarters, is seeing some improvement and that will continue progressively for the year. And obviously the stranded cost, progressively we are reducing this cost and quarter after quarter we'll see some improvement.

Okay, thank you very much. Much appreciated.

The next question is coming from Katie Richards from Barclays. Your line is now open. Please go ahead.

Hi, good afternoon. Yes, I had some questions on the energy pass-through clauses, which you have spoken about, and thank you for the information on the slides. It's very useful. I'm just a bit confused because some of your peers have reported that they're seeing little to no price increases in Europe for soda rash despite the higher cost energy environment that we're seeing. And I guess the speculation that they were making was that this is potentially due to the fact that some players in Europe have decarbonized and now that the plants are running on biomass or waste rather than coal or gas. um or maybe as a result of hedging so i guess my question is for the plants which are now 100 biomass based like reinberg can you clarify how the pricing mechanism actually works here and whether it differs from the usual price mechanism that has existed historically and if you could specify as well what the threshold to pass through this surcharges in europe please

Yes, so we have in all of our contracts those energy closures and this is the case since 2021-22 when we had this big price surge in Europe. Indeed, we have thresholds that are, let's say, around €50 per megawatt hour of natural gas price. That's more or less the way it works. But this is in place, I would say, everywhere in our contract.

Okay, thank you. Just one other admin question. For Q1, were you affected by the power supply outage and the weather disruption that some of the peers in Wyoming reported in the last quarter?

Where was that? In Wyoming?

There was a 20-hour power outage, I believe.

Not significantly.

Sorry, I didn't quite hear.

No, we've not been significantly impacted.

Okay, thank you. The next question is coming from Anna Harms from BNP Paribas. Your line is now open. Please go ahead.

Good afternoon. I just wanted to confirm that the improved March wasn't a reflection of any pre-buy. And then secondly, on the peroxide run rate for the year, Should we be looking at the revenues you had in Q1 as kind of the sequential run rate, besides obviously the possibility of a license coming in H226, if that's still the case? Thank you.

Yes, so for peroxide, no, I think Q1 was, as Alex said earlier on, was a little bit softer than expected, in particular on the merchant market. And we have no license in Q1, and we expect indeed to have this opportunity in the next couple of quarters or two or three quarters. Did we see any pre-buy? Difficult to say at this point. I don't think we've seen any specifically any pre-buying in March.

No, it was more the I would say phasing, January, February, a little bit soft, things picking up and continuing in Q2. But we don't see pre-buying.

Great. Thank you. The next question is coming from Julia Winkelmann from Bank of America. Your line is now open. Please go ahead.

Hi. Thanks for taking my question. I have a follow-up one on pair of sides. You said that 2025 seemed like it was exceptionally strong. Could you give more color on the current trends, particularly in the HPPO and intermediaries business, and whether the softness there is critical or is it more structural? And then also on HPPO specifically, How should we think about the downside risk to the take or pay contracts? Is there like a floor price that customers pay or how does it work? And then my second question is on the energy transition projects. The 17 million cash out at Donbass in Q1, Can you provide a bit more detail on what's driving these continued cash outflows and whether there is more to come from this particular project? And then for the next project, which was supposed to be the one in Spain, what's the financing structure there? And is it already finalized? And is there a similar risk on higher costs, like similar to what we've seen in Donbasel? Thank you.

OK. So on HPPO, I would say what we see today is a relatively stable business, except, of course, for our plant in Saudi Arabia, which is, as we said, currently stopped. What we can say is that this plant in Saudi Arabia, which is one of the three mega plants we have in our industrial chemical platform business is in a big platform, right? So we're talking about a platform operated by Sadara, which is a JV between Aramco and Dow Chemicals. It represents $20 billion of assets. And so we are inside this platform operating as a JV with Sadara 50-50. an hydrogen peroxide plant which is currently shut down. We don't expect this plant to restart before Q3, right? And this has been taken into account when we reconfirmed our guidance, so it's within our guidance. On the energy projects, Donbal Energy is a project that we are right now completing. We will still have some cash outs this year and part of next year. Everything has been provisioned by the way. And so you would see gradually the cash outs coming. I remind you that this is a very specific project because we are doing the engineering. And this is why you see the provisions and the cash out that way. For Spain, it's completely different. We're not doing the engineering, so you won't have this type of impact and mechanisms. You want maybe to complement, Alex?

Yeah, I think in Spain, the technology is also more simple than what is done in France.

Okay, thank you. The next question is coming from James Hooper from Bernstein. Your line is not open. Please go ahead.

Hi, thank you. Good afternoon. Thank you for taking the questions. I've got two, please. First is on the digital transformation. I saw recently that you've extended your agreement with IMI. Is this more of a continuation of the existing strategy or is this an extension? Is this, have you got more to go in terms of saving digitization beyond the plan? And then secondly is an update on the European carbon proposals we've seen in the press recently, there's potential for increases in free allowances perhaps. I don't know if you could please give us an update on what you've what you're seeing and what your preferred options would be in terms of European carbon prices. Thank you.

Thank you. So no digitalization where we continue to run our program at this point. And the plan is really to roll out and implement as many sensors, IOTs as possible in our plans. We are today at 5,000 and I think at the end of this year, we will be at 9,000. So we are roughly halfway. And what we see is that really it delivers the the savings and even more than I think what we expected, both in terms of fixed costs, so predictive maintenance in particular, and variable costs, so consumptions of energy and raw materials. So we continue with the same dedication and ambition. On the ETS, 2026 is an important year because it's the year where we will start working on the post 2030. And this is very important because it's quite amazing to think that we still don't know what will happen after 2030. And it's very important because what we need is to align the trajectory with the ambition that we have. And the ambition that we have at Solvay at a lot of different companies as well and at the European level is to become a neutral in 2050, not in 2039 or before. And today the ETS is designed such as there is no more free quotas in 2039. So what we're currently doing is to work with the European Commission to align this trajectory with the real objectives and also with the realistic trajectory that we can achieve. So basically keep the ambition, but redesign the trajectory so that we avoid having big disruptions or step changes in terms of free allowances.

Thank you.

The next question is coming from Sebastian Bray from Berenberg. Your line is now open. Please go ahead.

Hello, good afternoon, and thank you for taking my question. Can I focus on coartes? How good is it going to be in Q2, Q3? Because the commodity chemicals pricing in Brazil is sometimes a little difficult to track. But if you look at what the business has done in April and the type of shortage economics that apply, could Q2 be a record quarter for the business? That's my first question. I'll pause there.

Well, yeah. Thank you, Sébastien. You want to take it, Alex?

Yeah, I can take it. So again, what we are saying, it's a commodity, which is, it's a GBU, which is more closer to commodity type. and which typically behave better when the international index of this kind of product, such as benzene and other derivatives, are higher. It's more closer to a spread business. So it's not necessarily the index in Brazil, but the general global index are higher. and mechanically it's better and it's the combination of that plus the fact that some of our brazilian customers had difficulties to sell to the us because of the 60 percent tariff that were put in place last year so there is a demand coming back and finally chinese pressure lowering okay the positive impact and the positive momentum will come progressively will allow us to get back closer to the mid cycle okay we had some records a few years ago i don't know yet if we will get back there but it's more going from below really being at the trough it was a business which is always generating enough cash which is not going into cash burn mode but we were really at the trough we are getting back to uh to mid cycle progressively and we will see h2 being stronger than q2 that's helpful my second one is on special cam

There are two parts here. The first is for the settlement that was granted as a result of the litigation in Auto Catalyst. I think this litigation has been going on for a decade. Is there any more to come because a 10-year legal case and a 7 million euro payout, it's not huge, but I appreciate these things sometimes happen. The segment had a bit of a softer quarter, you said, because of the strong comparables, but electronics markets globally are booming. Why would this segment of electronics not do well for the next two or three years, exposure-wise?

want to comment uh the part on litigation on electronics uh very very clearly yeah i mean i agree we we should see uh you know good performance of this market and this is what we uh we expect now that being said it's not of course uh a major uh impact for for uh for the group let's face it alex you want to comment for the maybe yeah yeah on the on the litigation indeed this is uh

This is the last part and we've settled everything that was part of the final settlement with this company on all the IP issues.

That's helpful. Thank you.

And the last question is coming from Chitan Udeshi. Your line is now open. Please go ahead.

Hi, thanks for taking my questions. The first question was Apologies for being direct here, but Alex, I heard you talk about resilient volumes. I'm sorry, you know, your volumes are down 15%, 16% versus 2019 levels. I mean, I don't know how you can call these resilient. I mean, if I look at your EBITDA, it's probably down like 30% from that same point. So I'm just curious, you know, what makes you think this is a resilient performance? especially when you strip out the one-off CO2 sale and litigation costs. The second question is just on your rare earths business. You know, there is a huge M&A activity that is happening in the rare earth ecosystem, especially in the U.S., and I'm a bit puzzled how Solvay is not seeing some of that come through. Maybe your positioning in the rare earth supply chain is no longer as strategic as it used to be because you probably haven't invested in that business for many years. Why is it that your, not your customers, but all of these ecosystem companies who are building these big mines for the future are not approaching Solvay to essentially sign up that supply for separation of this business? I would have thought by now, people should be knocking at your doors quite aggressively.

All right, so shall we start with your challenge on our resilience? Thank you very much by the way Chetan for those challenges that are of course extremely good questions. And then I will take the one on... on rare earth maybe, but I think if you look at the cash that we've generated over the past years, that makes us think that indeed we have a resilient business.

Yeah, and some of the volume, again, what we've said is we don't want to fight at any price on the on all volumes and typically a large part of the decline you've seen is concentrated on seaboard. The fact that we are selling CO2 is also an arbitrage we are doing. Instead of selling at zero margin or even maybe at a loss, we'd rather monetize the CO2 credit we had foreseen, we had purchased. Now again, it's something we have purchased in the past and we'd rather monetize. And you will see a large part of the of the drop in volume is there, it's also a little bit in co-atties, and that's for the reason we have explained. If you look at the rest of the business, it's been rather resilient. And of course, as Philippe mentioned, it's also our ability to adjust capex.

No, I mean, yeah, I agree. And very clearly, it's... Look at the cash that we generate in Q1, and Q1, we know that it's, you know, traditionally a low quarter in terms of cash. I'm not sure that you have a lot of companies that are positive in free cash flow in Q1. And this also shows that we have not taken any specific measure end of last year to make it better in 25. So we're really resilient in that way. We are delivering cash quarter after quarter in a very consistent way, whatever the market is. Now, on Rare Earth, thank you very much for the challenge. Don't worry, we're working on it. We, by the way, have started production of NDPR last year. We have started production of samarium, yttrium and gadolinium. We will start in the coming weeks production of DYTB. It will be the first time ever in Europe that someone is producing DYTB. So we are not inactive. We are doing things that have never been done outside of China in the past. And it's not because we're not communicating permanently on this, maybe as opposed to others, then we are not acting. We're constantly reviewing our portfolio and ensure alignment with our long-term strategy and capital allocation priorities all the time. Thank you, Chetan.

Can I follow up on just... Second quarter, I know you don't want to give guidance specifically, but I was just trying to do some math. I mean, if I take your Q1, if I strip out all of the one-offs, you're probably at like 180 million run rate in Q1. If I just assume 180 per quarter for the remainder of the year, you just get up to something like 760, which is pretty much the low end. of your guidance. I'm just curious to get to the midpoint, what are you assuming? I mean, should the next couple of quarters be better than 180 because of seasonality and some other factors? Or how are you thinking about that phasing, you know, by quarter basically?

Yeah, no, I mean, as Alex said, I mean, of course, Q2 is difficult to say. We know that the net impact of the Middle East crisis conflict is probably slightly negative, even with the positive impact on Coatis, but it's very difficult to give exactly a number. What we know, however, is that H2 should be better than H1. for different reasons. First, our stranded costs will decrease quarter after quarter, so they will be lower in H2 versus H1. And then we are also working on a certain number of business opportunities as usual, and in particular, peroxide license, which should land probably somewhere in H2. So that's why we reconfirmed the guidance exactly as it was issued at the beginning of the year. That's clear. Thank you. You're welcome, Chetan.

We have a follow-up question from Katie Richards from Barclays. Your line is now open. Please go ahead.

Hi, thank you. Just a few follow-ups. Firstly, on the rare earths comment you just made there, do you think that the reason you're not getting some funding is actually due to your positioning in the value chain, in the sense that Solvay is more in the purification end, if I understand correctly, rather than the mining, the extraction itself. And I just wanted to check that, assuming about a 10 million EBITDA annualized for the peroxides, JV would be sensible for the year.

Okay, so I will let Alex maybe comment on the peroxide plan. I mean, anyway, we will... But now for Rare Earth, I mean, very clearly we are supported. I mean, very clearly today we have the support of the French government to invest in our capacity expansion in France. And by the way, the separation step is probably the one that is the most difficult to achieve and where you have really a strong differentiation in terms of process and technological know-how. So, no, what matters, what is today the limiting factor, I would say, is the development of the whole value chain, right? It's not our step in particular, it's that from mining to the electric motor, you need to have a consistent uh valorization i would say to make all those projects uh happen and this is what we're doing uh when we talk to uh both the european and the american uh policy makers is we're trying and the japanese by the way as well they are all working in order to create the right uh profitability for the whole value chain in order to have those those investments now on the outside uh

Just to add also on the errors, I mean, it's not the funding, which is a problem. I mean, this funding, it's really the operating model. We don't want to invest ahead of demand without having certain form of certainty on the output. And as I said today, I mean, we have a few customers, a small one. This is why it's not moving the needle in our Q1 results. But there is a little bit of contribution also because we want to demonstrate our capability to produce these categories of errors that we are the only one. But we will not invest before we have a certain form of certainty. Getting back to peroxide GV, again, sorry, but we cannot comment. you first have to understand the situation is extremely, extremely complex to manage. Philippe described how big and this is the biggest chemical complex in the world. And we are just a small piece, a small piece of that. So how what the only thing we can say is that in our guidance, we reconfirm the Fulia guidance. assuming the overall platform will remain closed, will remain shut down in Q2. Thank you.

There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks.

Thank you, Gaia, and thank you all for your participation today. If you have any questions, please feel free to reach out to the IR team. And there are a few rituals and conferences that are planned later in May and June. As always, you can find them on the financial calendar page on our website. And our Q2 earnings will be published on July the 29th. Thank you very much.