Umicore Sa Ord New

Welcome to the Umicore half-year 2025 results conference call. My name is Alan and I will be your coordinator for today's event. Please note this call is being recorded and for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star 1 on your telephone keypad. If you require assistance at any time, please press star 0 and you'll be connected to an operator. I will now hand you over to your host, Bart Saab, CEO, to begin today's conference. Thank you.

Hello, very good morning, everyone, and welcome to the H1 2025 results for Umicore. I do realize that for many of you, it's a very busy season and very busy week, so I highly appreciate for you being here in the call. As usual, we have an interesting agenda for you. On the first point, I want to take us back to the core strategy in a first snapshot, so a small reminder of our CMD. Then we'll have a look at our key figures and highlights. I'll cover the business review. Juanos will then go to the financial review. I'll be back with the outlook 2025. We'll wrap it up, and then we'll open the floor for Q&A. So let's have a look at our core strategy, which we launched in March 2025. Now, as you might remember, we are building on our core, which is our business model, right? And our business model is more relevant than ever. We are building on our business model with four key pillars, key focus domains, with the first one being capital. Then we have performance, people and culture, and partnerships. So on the capital, it's all about a more midterm balanced capital allocations. So what does that mean? We continue to invest in battery materials, but at a lower pace. But we also allocate a significant portion of our future capex to our recycling business in Hoboken to further unlock the flow sheet. It means for the mid-term plan that we have been reducing our capex with 1.4 billion euro over that 25 to 2028 period. And this versus the previous plan. On performance, as you also see in our numbers, we really focus on increasing our operational efficiency and our overall performance and value extraction across all our activities. The goal for this year is 100 million EBITDA, and we are well on track in H1 to already be halfway with 15 million in the pocket. Now, if we look at people and culture, that it's all about installing this performance and value-oriented culture. And building on the successful cultural shift we had in automotive catalyst, this we now want to bring to the entire group to further unlock that potential that we have with this beautiful company. Partnerships, we continue to actively explore partnerships, especially in the field of our battery material solution activities, while at the same time, we continue to focus also on our solid midterm plan for our battery cathode materials business. I also would like to highlight, and it's important also for the analyst community out there and anybody who is following Umicore closely, we did update our reporting structure with our new strategy. It means that we have expanded the battery cathode material business group with the battery recycling business that we have put in there. So we now have the business group battery materials solution, and this actually encompasses all battery-related activities. But it means that also from a reporting point of view, we are now restating our numbers for 2024. And we are actually reporting in H1 2025 for the first time in this new reporting structure. So it means that the recycling activities, battery recycling activities, which used to be reported under the recycling business group, has now been moved to the battery materials solution. So it's important to shift those numbers in order to have a good comparison. Now, let me now have a look on the key figures and highlights. Now, I would say that we really had an encouraging performance in H1 2025. We have seen a sustained demand and also very good operational efficiency. So we're happy with this set of numbers. Now, if we look at our revenues, we came out at 1.8 billion. Our EBITDA for H1, 433 million euro, well up versus last year. A return on capital of 16.4. Our leverage remains below 2.5 and at the level of 2.3 and a very solid EBITDA margin of 24.3%. And we have slightly free cash flow negative for the first half. If I look at some of the business group out there, you will see that consistently throughout the business groups, we have good returns on capital. Catalysis, 43.7%. Recycling, 154%. And also in specialty materials on the back of a stronger cobalt momentum, we now have a return on capital above 12.5 or at 12.5%, which is in line with our 2028 target. Now, we also recently upgraded our guidance for 2025, and we have upped it in that 790 to 840 million range. We did that at the start of July. Now, if I look at the highlights of H1, and I would like to highlight two pillars here basically is capital deployment and capital rigorous now our work our capital expenditures have come in in h1 2025 at 109 million euro which is well below the level of h1 2024 and now we foresee for 2025 capex projections to be reduced to 350 million euro I remind you, last year we were at 550. We were aiming roughly to be 20% lower. So still here, we take another step down in the expected CAPEX, reflecting our strict approach in capital allocation, but also in timing our CAPEX at the right moment. Now, if we look at performance, we did more than 50 million euro in the first half in efficiency savings, which is a great objective. And as mentioned before, we're aiming for at least 100 million euro for the year. Now, if I now go to the next business review, let me start off with the battery materials solutions. Battery materials solutions for the first half of the year, we see that revenues are somewhat lower. We have an adjusted EBITDA roughly in line with H1 2024. Now for battery cathode materials, which is the first leg within that battery materials solutions business group, we have revenues of about 208 million euros, which is below H1 2024. We have slightly lower refining volumes and also slightly lower cam volumes as we anticipated. So our legacy contracts are fading out and new contracts are ramping up. Now the main customers for the ramp up in 2025 are SKON, ACC, and IronWay. Now, SKON, we talk about this contract. It's quite relevant in 2025 from a volume point of view. So this is also an interesting customer that we have showing the diversification of our customer portfolio and our technology position. Now, if I look at the adjusted EBITDA for the first half of 2025, it stands at minus 15 million euro. while for the full year in the outlook, and I'm mentioning here the outlook for battery materials, cathode materials specifically, we are still confident in being around break even for the full year, so that would mean that the run rates in the second half of the year would be 15 million euro positive, so on an annualized basis, 13 million euro positive EBITDA run rates for the business. For battery recycling solutions, we see lower spending in H1 2024, And the majority of our spending is really on further optimizing and preparing ourselves on that flow sheet and technical capabilities of this really unique pyrometallurgical process that we have. So on the technology front, we also have a small yet significant update for you. That is that now you have seen that BMW and Solid Power have brought an all-solid-state battery vehicle to the market. And we can share with you that actually this is Umicore cathode material inside. So it means and it reconfirms, and that's also what we see across the board, that our solid-state battery cathode material technology is really well received. So we're very proud. But also, we now have this real test car on the road together with BMW and Solid Power. Let me now transit to catalysis. Now, if we look to the overall IC passenger car production for the year, we see a slight decline of H1 2024 versus H1 2025. So we go down from 38.3 to 37.5. This means a contraction of the market of 1.7%. It's a different picture throughout the world, like China, slight growth, North America, well, minus 6%, Europe minus 9%, but South America, 8.7%. While we had a slow underperformance in the Chinese market, so a marginal underperformance there, we did strongly outperform the market in North America, in Europe, and especially South America. And in South America, it has to do with the introduction of PLAs, where we acquired a broader customer base. There's a step-up in legislation, so it's an additional brick and also actually a higher PGM loading. So we're pretty happy with that. In the HDD, we see that the market was a bit softer in Europe, while in China, the market recovered. So then looking at the underlying numbers. So once more, a strong performance with good volume and also a really great quality of earnings. Now, if you look at automotive catalysts, revenues in line with H1 2024 and earnings as well. So that means we continue to offset, let's say, and improve our quality of earnings. And we continue to offset the historical PGM price decline we have seen. So if I would take you back to 2021 at the bottom right of the slide, we would have an H1 performance of 240 million euro. at much higher PGM prices versus today where we are now posting a 222 million euro EBITDA at significantly lower PGM prices. So it's clear that our quality of earnings is improving and also our average EBITDA margin has been trending up over the last years. Now, if we look at precious metals chemistry, there we have higher revenues in our inorganic chemicals and this more than offsets a somewhat weaker volume development in our homogeneous catalyst business fuel cells and stationary catalysts also uh quite uh interesting evolutions both in fuel cells and stationary catalysts or uh or volumes and revenues are uh up in the stationary catalyst business interesting evolution as you know is on that backup uh these backup generators for data centers, there we also have a very interesting business and we see quite some volume growth in that segment. If we then look at the construction of our fuel cell catalyst plant in China, well on track, really also from a capital point, well managed and still to be expected commissioning in early 2026 as communicated earlier. So let's have a look at recycling. So recycling, of course, when we talk about recycling, we have to talk about metal prices, and we have seen that rhodium, gold, platinum, silver, these price levels that we have seen in euros, because the dollar significantly depreciated versus the euro lately. But in euro, we see stronger prices than before. A reminder is that we are well hedged for our PGM exposure in H1, but also in H2. and that we were complemented by a supportive minor and specialty metal price environment to which exposure is not hedged. And Juanos will come back to you later on on this PGM hedge evolution. Now let's go to the second slide for this section. So a deep dive more in the numbers. Also here, I dare to say that it's a really solid performance with a strong adjusted EBITDA in line with H1 2024. in the precious metals refining activities. Our revenues were close to H1 2024. We have seen higher volumes, yet slightly less favorable supply conditions. What do I mean by this? We see the SAC market still moving more in the same range as we have seen it before. The spent industrial catalyst, there's a weaker chemical segment out there, so there's some softness there. And also with the flooding in South Africa, some complex refinery feed did not well, was lower than before as anticipated, but we see that recovering better in the second half of the year. Now, as the earnings are somewhat lower than H1 2024 for precious metals refining, this is really reflecting the decreasing average hedge price level. And as well, of course, we have had some inflation, which is always there, yet we were able to partially offset this inflation increase operational efficiencies. In the jewelry and industrial metals, we have higher revenues against H1 2024. We see good volumes, strong contribution from the refining and recycling activities, but also really a strong product demand for products for the luxury and markets. Precious metals management, we have seen PGM volatility and precious metals volatility in general. And of course, volatility means a beneficial and favorable trading environment. And then also, the momentum was strong. Here again, EBITDA margins still well above 41%. So also here, pretty happy with our performance. Now, of course, as you know, for Umicore, we do add a lot of value to sustainability. meaning that we continue to invest in sustainability improvements of our facilities and the surroundings. What does this mean? It means that we were able to continue the building of that perimeter and the green zone. It's almost finalized now. And yet on top, we continue to invest an annual 25 million euro to further improve our environmental performance because we continue to raise the bar and are committed to remaining the world's most efficient and environmentally friendly refined. For us, business and this statement go hand in hand, and that protects the long-term potential of this activity. Let me now transit to specialty materials. So specialty materials, we had a strong H1 for this business. EBITDA up 35%. Higher margins in the cobalt product segments. Yet also here again, operational efficiency improvement. And you see operational efficiency focusing on that value and capital discipline. It runs throughout the organization. And that's why, yeah, we almost have to come back to it because you really see that reflection in our numbers. Now, in cobalt and specialty materials, revenues were whatsoever lower. At the same time, higher margins for the cobalt products, as mentioned. But also here again, those efficiency measures. In metal deposition solutions, it was all about a solid demand for a decorative application, a solid demand in semiconductor, somewhat offsetting lower revenues in the electronics segments. In the electric optic materials business units, we had good demand for our high purity germanium crystals, and we continue to see a strong demand for our germanium refining and recycling services. So you know that also there the geopolitics play and having that in-house recycling capability is also really a differentiator for this business. So EBITDA margin now again above the 20%. So we have 21, close to 22%. So also here a good step up in performance. Now, we have seen how the world around us is evolving. We see that metals or resources are often used to play out the political game or actually used to actually put some tension between different blocks in the world. And it means that also for Umicore, the fact that we are active in so many metals and so many of these core or critical metals is really differentiated, especially as we also have a footprint, not only in China, but especially also in Europe. And this you clearly see here on this slide. At Umicore, we're active in 17 out of the 34 critical raw materials. So that's on the refining side. At the same time, also for some of these products on the material side. So you can understand as that more critical raw material independence or more balanced dependency becomes more important, you can see that this is a very interesting future undercurrent for our organization. Now with that, Juanes, maybe you can have a look at... the financials a bit from a closer buy.

Yes, thank you, Bart. And good morning, everyone. So as Bart mentioned, over the past six months, we continued our disciplined approach to cost and capital allocation. Our results were boosted by group-wide operational efficiencies, together with solid activity levels in catalysis, recycling, and specialty materials. The group EBITDA margin increased from 22% to 24%. Adjusted EBITDA was up 10%, or 40 million euro and amounted to 433 million for the first half of the year. The efficiency measures supported the earnings with more than 50 million euro from initiatives across the foundation businesses, battery material solutions, as well as the corporate segment. And I will come back with insights on the key drivers later in this presentation. The increased activity levels, as Bart mentioned, in catalysis, in recycling, and in specialty materials resulted in an EBITDA uplift of almost €40 million. These uplifts allowed to compensate for the €53 million headwind from inflation and foreign exchange, with the forex impact being largely linked to the translational effect for non-euro subsidiaries. In the first half, the reduction of favourable price levels for precious metal hedges was almost fully compensated by improved prices for non-hedged precious, minor and specialty metals. So let me provide you more insight into our efficiency program. Savings are well on track with a year-to-date contribution of €55 million versus a full-year target of €100 million. Now looking at the breakdown of the savings, 25% of the uplift in EBITDA came from top-line growth, 15% from reduced cost of goods sold, 40% from SG&A, and around 20% from savings in R&D. The restructuring of group corporate functions, as well as the streamlining of corporate R&D, which we announced end of last year, was implemented ahead of plan this year. In catalysis, the R&D footprint was further optimized with the consolidation of the research center for heavy-duty diesel in Germany, and in battery materials, SG&A was structurally reduced. Now, turning to the consolidated P&L, The net results group share was 137 million euro. The depreciations and amortizations decreased to 131 million euro following the impairment in battery materials in June last year. Adjusted EBIT was 302 million, up 61 million euro. Adjusted net finance costs increased to 102 million euro due to a higher average net debt, lower interest income on cash deposits as the interest rates came down, together with a negative impact from Forex. The average cost of gross debt amounted to 3.2% and was stable versus previous year, thanks to long maturities and over 80% of debt being fixed rate. The adjusted tax charge amounted to 64 million euro, stable versus last year. The pre-tax income was up, but the adjusted effective tax rate decreased from 36 to 32% this year. This resulted in an adjusted net profit group share of €135 million. The adjusted earnings per share were up 16% to €0.56. Moving to the consolidated balance sheet, the liquidity of the group remained strong for the cash position of €1.1 billion. Gross financial debt decreased from €3.4 to €2.9 billion after the repayment of the 500 million convertible bond in June. And the equity for the group amounted to 2.02 billion euro. Net financial debt was 1.9 billion euro and the net gearing ratio landed at 47.6%. Now, let me provide more insights on our net financial debt position based on the net cash flow bridge. Cash flow from operations amounted to 260 million euro Networking capital increased with 197 million euro, reflecting the higher activity levels in catalysis, recycling and specialty materials. CAPEX, including capitalized development expenses, decreased to 117 million euro. We apply a maximum control on the phasing of CAPEX and spending will be more weighted in the second half of the year. So CAPEX, excluding capitalized development expenses for 2025, is now anticipated to be around 350 million euro versus the initially foreseen, let's say 440 million euro. This results in a free cash flow from operations of minus 54 million. Taking into account a contribution of 250 million euro of equity into Iron Way in January and cash out related to taxes, financing, dividends and other items of 99 million euro, this resulted in a net financial debt increase of 404 million and a net debt of 1.8 billion for the group. This is in line with what we anticipated for, and as a result, the leverage ratio increased to 2.28 times last 12 months adjusted EBITDA. And here I want to repeat that, as mentioned during our capital markets day, leverage will peak during 25 and 26. We anticipate leverage to turn below two times from 27 onwards, following the strong cash flow generation in the group, and with the finalization of the investments in battery cathode materials. Now, moving to the next slide, I would like to remind you that for 2025 to 2028, a substantial portion of the future strategic metal exposure has been locked in through forward contracts. And with this strategic hedging policy, we aim to protect future earnings from price volatility while ensuring we also do not overhedge or anticipated exposure. Over the past six months, our hedged position remained largely stable. We have increased forward metal hedges for silver in 29, and we are in the midst of executing additional mandates for 29 for rhodium. So as a conclusion, we are putting a strong focus on those things that we can control, cost, cash, and capital. EBITDA improved and is up 40 million, driven by a solid underlying performance and supported by over €50 million in efficiency measures. Capital expenditures were reduced to €109 million, and we expect full-year CAPEX to be around €350 million. And we continue to keep tight control over net debt and leverage, and we expect to keep the leverage below the 2.5 times adjusted EBITDA. And here, I would like to hand it back to Bart for the outlook. Yes, thank you, Juanes. Very clear.