Earnings call transcript: Science Co Q2 2025 earnings beat EPS expectations

Science Co reported its Q2 2025 earnings, exceeding EPS expectations with a reported €1.37 compared to the forecasted €1.25. The company missed its revenue forecast, posting €1,590 million against an expected €1,640 million. The market responded positively, with the stock price rising by 2.88% in pre-market trading. According to InvestingPro analysis, the stock is currently slightly undervalued, with a "Fair" overall financial health score of 2.4 out of 5.

Key Takeaways

• EPS surpassed expectations by 9.6%, highlighting strong profitability.
• Revenue fell short by 3.05%, pointing to sales challenges.
• Stock price increased by 2.88% following the earnings report.
• Improved EBITDA margin to 21.1%, up 190 basis points.
• Positive outlook on the semiconductor market recovery.

Company Performance

Science Co demonstrated robust performance in Q2 2025, particularly in profitability, as evidenced by the EPS beat. The company has been focusing on operational efficiencies, which contributed to an improved EBITDA margin of 21.1%. Despite the revenue miss, the company’s strategic initiatives in electric vehicles and semiconductors are expected to bolster future growth. InvestingPro data reveals the company’s last twelve months EBITDA stands at €1.33 billion, with analysts expecting improved profitability this year. Discover more insights with InvestingPro’s comprehensive research report, available for over 1,400 US stocks.

Financial Highlights

• Revenue: €1,590 million, down from forecast.
• Earnings per share: €1.37, exceeding forecast by 9.6%.
• Gross Margin: 32%
• Underlying EBITDA: €335 million
• EBITDA Margin: 21.1%

Earnings vs. Forecast

Science Co reported an EPS of €1.37, beating the forecasted €1.25 by 9.6%. Revenue, however, was lower than expected at €1,590 million, missing the forecast by 3.05%. The EPS beat is significant and aligns with the company’s historical trend of strong profitability, although the revenue miss highlights potential sales challenges.

Market Reaction

The market reacted positively to the earnings report, with Science Co’s stock price increasing by 2.88% in pre-market trading. This movement reflects investor confidence in the company’s profitability despite the revenue shortfall. InvestingPro analysis shows the stock generally trades with low price volatility, currently trading at €80.88, between its 52-week range of €61.41 to €97.04. The stock’s relative stability is further supported by its strong Altman Z-Score of 8.31, indicating solid financial health.

Outlook & Guidance

Science Co maintains a positive outlook, with full-year 2025 underlying EBITDA guidance of approximately €1,300 million. The company anticipates easing semiconductor destocking in the second half of the year and expects cost savings to become more visible. Capital expenditure is projected to remain below €600 million. According to InvestingPro data, analysts maintain a bullish consensus on the stock, with price targets ranging from €80.05 to €108.65, though two analysts have recently revised their earnings expectations downward.

Executive Commentary

Ilham Kadri, CEO, stated, "We are ahead of schedule as we complete our separation from Solvay." This highlights the company’s strategic progress. Christopher Davis, CFO, noted, "2025 is a year of transition from a cash perspective," emphasizing the focus on financial restructuring.

Risks and Challenges

• Revenue miss indicates potential sales challenges.
• Transition to electric vehicles poses strategic risks.
• Macroeconomic pressures could impact future growth.
• Supply chain issues may affect operational efficiency.
• Market volatility presents ongoing financial risks.

Q&A

During the earnings call, analysts focused on the semiconductor market’s recovery and its impact on future performance. Executives reassured that the company is well-positioned to capitalize on improving market conditions, with no significant impact expected from potential disruptions such as a Boeing strike.

Full transcript - Syensqo SA (SYENS) Q2 2025:

Regina, Conference Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Science Co Second Quarter twenty twenty May. I would now like to turn the conference over to Sherif Bakra, Head of Investor Relations. Please go ahead.

Sherif Bakra, Head of Investor Relations, Science Co: Thank you, Regina. Hello, everyone, and welcome to Science Co’s second quarter twenty twenty five earnings call. I’m Sharif Bakra, head of investor relations, and I’m joined today in Brussels by our CEO, Ilham Kadri, our CFO, Christopher Davis, as well as Peter Browning, president of the Specialty Polymers business unit. Going forward, and in addition to our usually quarterly results discussion, we plan to invite one of our business unit presidents to our earnings call from time to time to provide the investment community with a greater understanding of their business and to participate in our q and a sessions. As a reminder, today’s call is being recorded and will be accessible for replay on the investor relations section of our website later today at scienceco.com/investors.

I would also like to remind you that during this call, we will be making forward looking statements regarding our future business and financial performance that are subject to risks and uncertainties. The slides related to this presentation, along with today’s press release, are also available to download from our website. Okay. Turning to today’s agenda. Ilham will begin with an overview of the quarter, with Peter covering the performance of Specialty Polymers.

Chris will then go into more details on our financials before turning the call back to Ilham, who will discuss our outlook for the balance of the year. We will then be happy to take your questions. With that, I’ll turn the call over to Ilham.

Ilham Kadri, CEO, Science Co: Thank you, Sherif, and good afternoon, good morning to everyone. The second quarter of the year saw us deliver on our outlook in a challenging and uncertain market environment. The combination of our specialty positioning and unique value proposition, strong balance sheet and ongoing focus on what we can control has, and we expect it, will continue to support our performance as we navigate the elements that are out of our control. In our first eighteen months as an independent company, we have made great progress to advance our strategy and strengthen our foundations to support future growth and value creation. And indeed, in times like these, the separation has enhanced our ability to accelerate change, to become leaner, more agile, and to better serve our customers and capture market share.

For example, we are ahead of schedule as we complete our separation from Solve, running our stand alone ERP system since May and taking full ownership of shared service environments. We we will be moving faster and further to delayer the organization and to realize our structural cost savings, scaling our hunting culture and sharpening our value proposition to win with customers, which is already translating to incremental growth and market share opportunities, focusing our investments on attractive growth projects that will create long term value and advancing our strategy to become a purer play specialty company with a divestments process that is well on track. Turning to the highlights for quarter two. Chris will take you through the details in his remarks that we had another quarter of resilient pricing and margin performance in our core segments despite the temporary headwinds impacting year on year volume growth in Specialty Polymers as previously flagged. On a sequential basis, EBITDA of €330,000,000 increased by 8%, resulting in an EBITDA margin of 21.1%, up a healthy 190 basis points versus quarter one, supported by our cost saving programs.

And excluding the Other Solutions segment, which, as you know, is planned for divestments, our EBITDA margin was above 23%, approximately 200 basis points higher than our overall margin level achieved in quarter two. Sticking with initiatives that are within our control, I’m also pleased with the progress we have made as we complete our separation from Solvay. Overall, we are ahead of schedule. And having successfully completed the key milestone around our digital infrastructure and shared services, we remain fully on track to meet our year end targets, which will allow us to drive for additional levels of simplification and cost savings. And as Chris will discuss, we also completed offering, which further enhances our strong liquidity profile.

Cash conversion remained healthy at 72%, and we continued to execute our €300,000,000 share buyback program, completing the third tranche. So we are now halfway through the total program and will commence the fourth tranche today. As you can see on Slide six, it has been another busy few months for Sainsco since last quarter’s call as we continue to execute our strategy. This has included bringing new and differentiated innovation to support our customers, bringing more sustainable and high performance solutions across our portfolio, as well as establishing new partnerships with industry leaders, which we believe can also provide new sources of growth. During the quarter, along with our composite materials leadership team, I attended the Paris Air Show meeting with many customers, both existing and new, in the civil, space and defense, and advanced air mobility sectors.

What was clear was there are strong growth opportunities in all of these sectors. Civil aerospace has record levels of new orders. Defense spend is expected to increase significantly across the globe, with opportunities to gain share through new program builds and additional sources of growth in unmanned aircraft vehicles or UAVs spanning multiple applications. In addition to the significant long term demand in all of these areas, what struck me was how our innovation is at the core of our customers’ needs. How we make any flying object lighter, leading to less fuel consumption, lower CO2 emissions at a lower total cost of ownership.

I was also thrilled to announce our new collaboration with Microsoft, which will leverage their leadership in AI with our research and innovation capabilities. Most notably, the partnerships gives us early access to Microsoft discovery in the private preview stage. In addition to gaining this first mover advantage, we are cocreating an agentic AI first platform that has the potential to transform the way we do science and accelerate our time to market. Before turning the call over to Chris, I wanted to make some high level comments on our segment’s performance in the quarter, and I’m happy to be joined today by Peter Browning, the president of Specialty Polymers, to share some insights as well as answer any question when we get to the q and a session. As a reminder, Science Co’s mix of revenue and earnings reflects our position as one of the leading pure play specialty materials companies.

In q two, more than 70% of our EBITDA was generated by our high margin materials segment, where we saw a 70 basis points sequential margin expansion, reaching approximately 30%. And despite lower year on year volumes, we continued to see stable net pricing. Composite Materials saw another quarter of strong underlying demand and solid margin performance despite the continued impact of destocking at Boeing. Excluding this, civil aerospace sales increased by 2% compared to quarter two twenty twenty four. As a reminder, our exposure to a mix of civil aviation customers, space and defense applications and a number of new programs demonstrates the strong value proposition of our range of products as well as healthy mix of growth drivers.

I will now turn the floor over to Peter to take you through specialty polymers. Peter?

Peter Browning, President of Specialty Polymers Business Unit, Science Co: Thank you, Ilham, and good afternoon, everyone. It’s my pleasure to have the opportunity to share some insights with you on the Specialty Polymers business and our performance in Q2. As a reminder, Specialty Polymers is Science Co’s highest margin business. And our value proposition is based on our ability to work with our customers to solve their toughest application challenges. We use the widest range of high performance polymers and technologies in the industry.

We focus on ensuring our customers have the lowest cost of ownership so they can win in their marketplace. In addition, our end market exposure to attractive growth markets such as lightweighting, electrification, and energy efficiency in automotive, ultra high purity materials for semiconductor fab construction, better and safer solutions in health care, and high performance and the most sustainable solutions for the energy sector give us a compelling opportunity to structurally outgrow the broader market for the years to come. Looking at it in a different way, we’re we’re positioned at the very top of the polymer performance pyramid. This is reflected in our industry leadership position and the deep customer relationships we hold, our breadth and depth of innovation capability, and our strong and consistent margin performance. Since the separation from Solvay, our customers have appreciated the greater focus that we’ve been able to bring to them, notably the acceleration of our joint innovation projects.

Turning back to our Q2 performance, we delivered resilient underlying volume growth in a pretty challenging market environment with another quarter of strong margin delivery. As Ilham referenced and as expected, the second quarter was impacted by shorter term headwinds in electronics, which offset growth in healthcare, food, and pharma packaging, and even a slight growth in automotive. So excluding electronics, we saw 3% year on year volume growth. On a sequential basis, specialty polymers delivered 7% net sales growth supported by healthy volume growth, stable pricing, resulting in an improvement in our gross margin versus the first quarter. As I just mentioned, we saw strong year on year growth in health care, particularly in biopharma, and our pharma and food packaging businesses continued to show steady growth.

In electronics, I I was pleased to see that the destocking in our semiconductor foundry construction business is easing. And also strong interest in our proprietary nonfluorosurfactant sealing technologies. This is a market first where we’re targeting opportunities in semicon production in really, really demanding industrial applications. This should further extend our leadership position and support long term growth. Clearly, the external market context remains a challenging one.

So we’re very much focused on what we can control, bringing new value to our customers as rapidly as possible, leveraging the type of artificial intelligence investments that I’ll have mentioned to identify new opportunities, and rigorously managing our cost structure. These are all strong foundations to support our faster the market growth ambition over the longer term. With that, let me pass you back to Wilhelm to cover the rest of the businesses, and I look forward to answering any questions you may have.

Ilham Kadri, CEO, Science Co: Thank you, Peter. Turning to Performance and Care, where we delivered 4% year on year growth, led by North Care, supported by increased demand in agro and home and personal care. And for technology solutions, we continue to see growth in mining solutions, again supported by market share improvements. At the segment level, underlying EBITDA margin exceeded 19% and saw a healthy sequential increase, up 150 basis points. With that, I’ll turn the call over to Chris to go through our financial performance in more detail.

Chris?

Christopher Davis, CFO, Science Co: Perfect. Thank you very much, Ilham. Good morning and good afternoon to everyone on the call. As Ilham mentioned, it’s fair to say that 2025 has been defined by heightened trade tensions and policy unpredictability, leading to widespread uncertainty and delays in investment as caution takes hold. This has led to different behaviors in customer order patterns, including a wait and see approach, which has impacted visibility across the broader value chain.

Despite this, I am pleased to report that we finished the 2025 slightly above expectations. With that in mind, let us turn to slide nine, which summarizes our second quarter financial results. For the second quarter, net sales totaled €1,600,000,000 Volumes were down 3%, primarily due to the expected lower demand in Specialty Polymers and lower volumes in both Composite Materials and Technology Solutions. I will talk more about the sales drivers of each business segment in a later slide. As I’ve previously mentioned, we remain committed to defending our gross margins as this reflects our value proposition as a specialty chemicals company and how we manage both our sales and cost of goods sold.

In this respect, our gross margin at 32% continues to reflect our Specialty value proposition and has improved on a sequential basis, driven by a favorable mix of Specialty Polymers sales and continued pricing benefits in Composite Materials. Over the past six quarters, since the inception of ScienceCo, we have continued to demonstrate our ability to defend pricing and maintain cost discipline over the period, particularly in the Materials segment regardless of the impact of volumes. At €335,000,000 underlying EBITDA for the second quarter is slightly above expectations. Turning to operating performance by segment on slide 10. Within Specialty Polymers, sales revenue reduced by 9% compared to the prior year.

Excluding the translation effect of FX, Specialty Polymers revenue was down 6%, primarily due to the expected lower volumes in Electronics. However, as Peter referenced, the second half is already showing signs of improved orders into the Electronics segment and is in line with our expectations. On the positive side, volumes in the second quarter improved in Healthcare and Food and Pharma Packaging applications on the back of market share gains, a return to more normalized buying patterns and a large order in the Healthcare space. Revenue from Composite Materials at €288,000,000 showed a decrease of 7% compared to the prior year. Excluding the translation effect of FX, Composites Materials revenue was down 3%, primarily due to lower sales to the Automotive segment.

It is important to note that the 2025 is the third highest sales quarter in U. S. Dollars on record since 2019, demonstrating the recent sustained improvement in demand for both Civil Aviation and Space and Defense customers. The other highest quarters were the 2025 and the 2024 being the two comparables used today. In addition, pricing also continues to remain strong in Composite Materials.

Despite the expected impact of lower sales to Boeing, increased sales to other commercial aviation programs and space and defense applications drove a strong performance in the quarter with all other civil aviation customers increasing their sales year on year. Sales to space and defense applications improved 2% in the quarter. At this stage, we expect the Boeing destocking to continue into the second half of the year. The net result in our Materials segment is EBITDA of €269,000,000 in the quarter and a strong EBITDA margin at 30%. NovaCare delivered sales of €347,000,000 and Technology Solutions sales were €164,000,000 Within NovaCare, agro sales increased 31% year on year.

Whilst we have seen a shift of product mix to lower margin product in the agrochemicals markets, the end of destocking in the 2024 and the strong recovery in Latin America and EMEA markets has resulted in demand returning to more balanced levels. Home and Personal Care sales increased 8% driven by share gains in targeted business across Asia and a rebound in demand from distributor customers in the North American market with customers opting for lower cost alternatives. Technology Solutions continues to benefit from new business and customer wins and higher reagent consumption in copper mining, which continues to show growth in this high margin segment. This has been offset by a decline in sales to Building and Industrial Applications in the lower margin Polymer Additives segment. EBITDA margins in Technology Solutions are the second highest margins in our business and have improved against both the prior year and sequentially as a result of an improved mix of sales to mining activities.

The net result is that Performance and Care delivered an EBITDA of €98,000,000 in the quarter and an EBITDA margin of 19%. Within the Other Solutions segment, EBITDA was €8,000,000 in the quarter with an EBITDA margin of 5%. The net effect of what I’ve just described is reflected on slide 11. As mentioned on the previous slide, stronger volumes were experienced in a number of sectors including healthcare, food and pharma packaging, agro, home and personal care and mining applications compared to the prior year. That said, the lower volumes in Electronics is the single largest driver at a Science Co Group level of the year on year decline in EBITDA.

Whilst Composite Materials is lower on the back of strong comparables, the business continues to perform well with improving demand across all customer applications. Absent the lower sales volumes in Electronics, Specialty Polymer volumes improved year on year, reflecting the shorter term headwinds in semicon foundry construction activity. Within Materials cost savings resulted in a reduction in fixed costs in the quarter. The net result is a decline of EBITDA of €22,000,000 in the Materials segment compared to the 2024. In Performance and Care, strong sales from Technology Solutions and NovaCare were offset by higher input costs, most notably Oleo Chemicals as well as higher labor costs within NovaCare.

This resulted in a year on year EBITDA decline of €11,000,000 in the 2025. Other Solutions declined by €12,000,000 compared to the prior period. The net result is EBITDA of €335,000,000 for the quarter, which includes an adverse variance of €12,000,000 year on year associated with a stronger euro against our basket of currencies including the U. S. Dollar.

As a reminder, the impact of the €12,000,000 from FX is based on a prior year comparable rate of $1.08 to the euro compared to our second quarter actual of US1.14 dollars As we entered 2025, our assumption for 2025 was an exchange rate of 1.05. Where we stand today, rates have increased to around 1.17 with some market participants predicting rates as high as 1.2 for the remainder of the year. This impact is purely translational for Science Co. Turning to capital expenditure. Our total capital expenditure for the quarter was €113,000,000 bringing the capital expenditure for the first half of the year to €289,000,000 This remains in line with our expectations and in line with our updated capital expenditure envelope of less than €600,000,000 for the year.

Included within the €113,000,000 is growth capital expenditure of €63,000,000 primarily related to spend on the Specialty Polymers facility in Tervaux, France the Galdin capacity expansion in Specialty Polymers in Spineta, Italy as well as automation and capacity debottlenecking in Composite Materials. As a reminder, 2025 is expected to be a peak year of capital investments, driven by significant spend on the Tavos site and the transition to a separate digital and IT infrastructure from Solvay. Our focus going forward is therefore on leveraging our existing spare capacities that we have today to meet future volume growth. This requires no additional capital expenditure. Secondly, investing in smaller and faster organic growth opportunities where the market exists and where we are at capacity, thereby accelerating our strategy.

This includes increased investment in adhesives capacity in composite materials, debottlenecking our Welland plant to increase capacity for mining customers and an increase in capacity of Gelden to service semiconductor demand in Specialty Polymers. These are areas where we are winning. And finally, our focus will be on maintaining our investment grade credit rating and rewarding shareholders in line with sustainable cash generation. As indicated, we have updated our capital expenditure guidance to be less than €600,000,000 in 2025. Given the limited visibility in the current environment, we will remain disciplined and agile, carefully managing capital expenditure and cash to balance our shorter term targets with longer term value creation.

Where we are winning and where the returns are compelling, we will continue to invest. And where they aren’t, we won’t. Moving to operating cash flows on slide 13. The generation of strong operating cash flows remains a key focus for the business. Consistent with historic practice, the operating cash flows in the second quarter were impacted by the annual payment of employee incentives in respect of the prior financial period of some €120,000,000 and an absorption of €63,000,000 into trade working capital in the quarter.

The net result is that operating cash flows for the quarter was a positive €20,000,000 bringing the last twelve months cash flow from operating activities to €751,000,000 and a cash conversion of 72%. Free cash flow to shareholders for the quarter was a negative €67,000,000 As Ilham will outline later in the presentation, our expectation for free cash flow for the full year is approximately €350,000,000 As we approach the 2025, we expect a meaningful reduction in trade working capital, in particular inventory, as we slow down production in the face of the current demand environment. This is expected to result in a release of well over €100,000,000 in cash and will be most noticeable in the latter part of the year. Additionally, and as disclosed in the financial report, with the recent dismissal by the Italian Supreme Court of Edison SPA’s appeal, we expect to receive a further €90,000,000 in the second half of the year for losses, damages and costs that were awarded in ScienceCo’s favor. These two items along with the second half earnings are expected to support a significant improvement in cash generation in the second half of the year aligned with our outlook of full year free cash flow to shareholders of approximately €350,000,000 As I said in the first quarter of the year, 2025 remains a year of transition from a cash perspective.

With the separation from Solvay in late twenty twenty three, there remain separation costs to be incurred so that Science Co can operate as an independent company. As we head into 2026, the situation will improve significantly with reduced spend on separation activities and a finalization of growth capital being spent on the Tervaux site. Together, these account for more than €200,000,000 of cash outflow in 2025 that will not repeat in 2026 and beyond. Turning to our financial position. I am pleased to report that we continue to have a strong balance sheet with our net debt at €2,200,000,000 a gearing ratio of 26% and a leverage ratio of 1.7 times.

The increase in net debt is fully aligned with prior comparable periods with the second quarter historically impacted by the timing of the payment of the annual dividend and variable compensation in respect of the prior financial year. Both gearing and leverage ratio are expected to improve in the second half of the year as it did in the prior financial period. We continue to have strong levels of liquidity available as demonstrated by the €1,700,000,000 of undrawn committed bank facilities and a further €1,300,000,000 of cash on hand as of the 06/30/2025. Finally, I’m pleased to report that in the second quarter of the year, we successfully closed our second senior bond issuance of €1,200,000,000 split in two tranches, namely €600,000,000 with a six year maturity and €600,000,000 with a ten year maturity. The ratings of the bonds are aligned with our corporate ratings being BBB plus and Baa1 with S and P and Moody’s respectively.

The transaction was met with strong interest with the participation of more than 125 institutional investors and an order book that was more than four times oversubscribed, thereby allowing us the opportunity to tighten pricing on the day. The net result is not only do we have a strong balance sheet with low levels of gearing, but also a balanced debt maturity profile. With that, I’ll now hand you back to Elam. Thank you.

Ilham Kadri, CEO, Science Co: Thank you very much, Chris. Looking into the balance of the year, there is clearly a lot of uncertainty in the world. Based on current information, we continue to believe that the combination of our balanced regional footprint and mitigation actions positions us to see a limited direct impact from tariffs. Nevertheless, and as referenced by Chris, a number of industries are facing increased demand challenges and uncertainty, which has also impacted near term visibility across value chains. Our focus continues to be on what we can control to navigate the short term, strengthen our foundations for future growth and accelerate our transformation to become a purer play specialty company.

Turning to our outlook for the balance of the year. The high level takeaway is that based on the assumptions we shared at the February, our 2025 outlook is unchanged, as shown on the left hand side of the slide. However, with better visibility into the impact of FX and tariffs than we had versus last quarter’s call, we have now updated our outlook to reflect current FX rates and expected impacts of tariffs, which we estimate to be approximately €100,000,000 split roughly twothree on FX and onethree on tariffs. As a result, our outlook is now as follows: Underlying EBITDA of approximately EUR 1,300,000,000.0, CapEx to be below EUR 600,000,000 and free cash flow of approximately €350,000,000 For the second half of the year, and as both Peter and Chris mentioned, we continue to expect the easing of headwinds in semiconductors. And while we started to see the benefits of cost savings in quarter two, we continue to expect this to become more visible in the second half.

In closing, the second quarter saw us deliver on our outlook with improved margin in our core segments, supported by our strong value proposition and focus on what we can control, combination we believe will serve us well as we navigate the coming quarters and position us for future profitable growth. With that, we are ready for your questions. Thank you.

Sherif Bakra, Head of Investor Relations, Science Co: Thank you, Ilham. We’ll now move to the Q and A session. And I kindly invite you to limit yourself to one question and one follow-up and to rejoin the queue as necessary in order to allow more analysts to ask their questions. Regina, can we please have our first question?

Regina, Conference Operator: First question will come from the line of Nicholas Witting with Bernstein. Please go ahead.

Nicholas Witting, Analyst, Bernstein: Thank you for taking my question. I just wanted to dig into the outlook basically for the electronics. And so, yes, how is that sort of shaping up for the rest of the year? And if you could comment on that regionally, please, that would be great.

Ilham Kadri, CEO, Science Co: Yes. Thank you, Nicolas. The question was on electronics and auto?

Sherif Bakra, Head of Investor Relations, Science Co: Electronics.

Ilham Kadri, CEO, Science Co: Electronics. Okay. Well, in electronics and, you know, Peter is with us, and I’m sure there will be more questions. Semicons in in h two are expected to improve versus the first half driven by the end of destocking. We’ve seen you know, we’ve been talking about destocking for a while as our key semiconductors customers are expected to to tell full contract volume as we speak.

And with that, we expect specialty polymer to have a stronger second half. We expect resilient margin performance to continue supported by our strong value proposition. And this is, Nicolas, not a wishful think, and maybe, Peter, you can tell our audience that this is real and we see the first orders coming in.

Peter Browning, President of Specialty Polymers Business Unit, Science Co: Yeah. Sure. So within semiconductors, we’re heavily exposed to foundry construction. And we’ve got really quite good insight on the sellout of our major customers. So often in applications like ultra high water, ultra high purity water piping systems.

And so it’s that sellout and that understanding of the inventory of those customers that leads us to confidence in our second year growth outlook. Back to you, Uh-huh.

Ilham Kadri, CEO, Science Co: Thank you. Back to you, Sherif.

Sherif Bakra, Head of Investor Relations, Science Co: Next question, please.

Regina, Conference Operator: Our next question comes from the line of Geoff Haire with UBS. Please go ahead.

Jetan Udeshi, Analyst, JPMorgan: Yes. I just

Geoff Haire, Analyst, UBS: need to get help. I just want to ask a question about the Materials business. So since the formation of Science Co, the margins in the business have declined on a year on year basis, I think with the exception of Q4 last year. And certainly from the commentary you provided, it seems to be mainly coming from pressure and specialty polymers. So I was wondering if Peter could sort of help us by I know you won’t give us the exact numbers, but if you could help us understand where the margin profile is in Specialty Polymers relative to history, peak trough?

Or has there been any structural changes in the business, which means that margins are structurally lower? And I’ve got another question after that.

Ilham Kadri, CEO, Science Co: Thank you very much, Geoff. Maybe I’ll start. It’s a good question. If I let me start, and then Peter, you can jump in on Specialty Polymers. If I go back to full year 2023, the EBITDA margin in our Materials segment were around 33% compared to around 30% in quarter two, right?

Those are the facts. So unpacking this a bit, Joff, we have seen higher growth in Composite Material. And despite the improvements in their margin, obviously, this had, you know, an unfavorable mix impacts on the segment’s margin, given that specialty polymers, as you all know, has a larger margin than composite material. So maybe, Peter, you can go through the specialty polymer piece.

Peter Browning, President of Specialty Polymers Business Unit, Science Co: Yeah. Sure, Ilham. So within specialty polymers, it’s really a question of mix. Our net pricing over the activity has has been very sticky, resilient. We have given back some pricing.

We’ve got some benefits from raw materials, but we’ve really focused on keeping our percent gross margin. So I I think looking forward, what we see is is a really quite interesting opportunity in terms of operating leverage as and when our volumes return because we’ve already spent CapEx to build capacity. We have the assets in place and we should be able to serve additional demand which will translate through into quite healthy incremental margins.

Sherif Bakra, Head of Investor Relations, Science Co: Jeff, do have a follow-up?

Geoff Haire, Analyst, UBS: Yes. I just also wanted to ask, Ilium, a question, sorry. In your introductory remarks, you talked about the work you’ve done at Science Co since the formation eighteen months ago, and you talked about value creation. Could you outline a little bit more about what the value creation is you’ve seen in the last eighteen months?

Ilham Kadri, CEO, Science Co: Yeah. Thank you, Geoff. Well, listen, I mean, it’s a start up company, you know, with a legacy, but still eighteen months, you know, of existence. So what we’ve done is really separate from Solve. I know this is a hidden part of the job.

It’s the plumbing. It’s the infrastructure. You didn’t see it, and we don’t we didn’t want you to see it, but it’s so critical for standing up, you know, a company. So what we’ve done is separating our ERP system, ITIS and GBS. We hired 800 people in five hundred days, believe it or not, to separate fully.

We accelerate the separation in tough markets because, you know, we can double down, and that’s it’s allowing us now, as we engage in the second half, to engage in the new operating system by delayering our organization, further simplifying it quicker than by the end of this year, preparing for 2026. We also focus, obviously, on our research and innovation. So we’ve been reviewing our pipeline. We told you that we moved to more archetypes which are short, faster than longer term. So that has been done in the company.

We focus on our capital investments, and you’ve seen us outside Davout, which will end up this year. We moved to fast and quick and high returns type of capital investments. And actually, some of them are actually going to Galdan, for example, on Genii and Semicon from specialty polymers or the Button Necken, the mining solution. So yeah. And and the hunting hunting culture, Right?

It’s not easy, but we’re not here because it’s easy and turning our company to more entrepreneurship. And, you know, it’s good actually to do it and start a new company in a tough environment because that’s, you know, push management to really reform, reform faster and focus once we control our costs, our relationship with our customers and disciplined capital allocation. Back to you.

Sherif Bakra, Head of Investor Relations, Science Co: Next question, please.

Regina, Conference Operator: Our next question comes from the line of Aaron Ciccarelli with Berenberg. Please go ahead.

Aaron Ciccarelli, Analyst, Berenberg: Hello. Good afternoon. I have a question on Specialty Polymers. Given your broad portfolio in Specialty Polymers, perhaps one of the broadest in the market, would you consider M and A as a strategy to strengthen your position in a specific polymer or to expand to new markets? And the follow-up to that is we’ve seen VITREX adopting a more aggressive pricing strategy in a bid to drive volume growth.

How is Sansko responding to this? Thank you.

Ilham Kadri, CEO, Science Co: Well, M and A, let me start and maybe we’ll talk about the peak, right, story, Peter, if you can prepare yourself. I think we’ve been very disciplined in the past six years all over about M and A. I think we had a history of M and As, specifically in specialty polymers. I remind you, in the past twenty years, polymers doubled its revenues through M and A first and then organically. We’ve been very disciplined for the reason that we were a mixed bag.

Separating from Solvay made us purer player, but we we are still, you know, considering divesting, as you know, noncore, which will make us even purer. And we have a lot of organic opportunities, Erin, right, in in in our organization. So you’ve seen, you know, building capacity in specialty polymers, in mining, composite material is a fabulous opportunity in defense application where budgets are being doubled the right in Europe or India, where I visited India just a few weeks ago. So there are a lot of organic opportunities where we have the talent, the competencies, and the cash, right, to to put there. Peter, on peak?

Peter Browning, President of Specialty Polymers Business Unit, Science Co: Yeah. Thank you, Ilham, and thanks for the question, Aaron. I I think that it’s important to see our business as a a collection of segments. And we we’re really focused on delivering a differentiated value through innovation in specific market segments. And so whilst, of course, we make peak, Vectrex make peak, we don’t really compete head on in the new business that we’re doing.

We build strong customer intimacy and a unique value proposition. And I I think that that’s a general way of looking at our business. What we’re trying to do is bring our investment in r and I to solve the problems of our customers. We work with those customers really closely to co development solutions, we make those solutions work. And that builds an extremely strong customer loyalty and makes it very difficult for, someone else to penetrate those businesses using pricing as a tool.

Ilham Kadri, CEO, Science Co: Back to you. Next question.

Sherif Bakra, Head of Investor Relations, Science Co: Our next question?

Regina, Conference Operator: Our next question comes from the line of Jetan Udeshi with JPMorgan. Please go ahead. J. 10, your line might be muted.

Jetan Udeshi, Analyst, JPMorgan: Yes, it was. Thanks. Hello, all. First question I had was, if I look at your guidance, it sort of implies H2 flattish versus H1 more or less. We know Q4 is seasonally weaker just because of number of days.

So does that imply that you are expecting third quarter to be sequentially better than second quarter? I mean maybe if you can help us with the phasing between Q3 and Q4 that you have assumed in your full year guidance overall. The second question was a bit more strategic, I would say. Elam, you’ve talked a number of times, today, but in the past about getting that hunting spirit within your sales team to grow the business. Mhmm.

And I think correct me if my if I’m wrong, but, you know, your volumes don’t show that. You know? And maybe it takes time, but I I just wanted to compare and contrast. And, you know, Peter is on the call, so this is a a good question for him as well. EMS, Chemic is the benchmark for specialty polymer industry, at least in terms of margins.

And when I look at their volumes, their margin development over the last twelve months, I mean they’ve been able to grow volumes, they’ve been able to improve margins and that’s what probably some would argue the hunting sort of success is visible. So I’m just curious where are you in that curve of hunting for new business? And when do we actually see the upside from that?

Ilham Kadri, CEO, Science Co: Yes. Thank you, Chetan. Great questions. Let me start with the phasing maybe or you want Chris to do it? Let’s Chris talk a bit.

Christopher Davis, CFO, Science Co: Okay. So just looking at our phasing and our full year, I mean, given all the geopolitical uncertainty and dynamics around tariffs, I think it’s pretty fair to say that it’d be difficult to be precise at this time. And what you can appreciate is that volumes can flow from one quarter to the next. On this call, what we’ve deliberately done is updated our full year outlook and we expect EBITDA to be approximately $1,300,000,000 I think you need to also keep in mind that in the second half of the year, we expect our results to benefit from two primary drivers: one being the end of destocking in semiconductors that Peter spoke about, which we can already see in our order books and should drive around a $40,000,000 tailwind to the second half of the year versus the first and then secondly, the phasing of cost savings, which are balanced to the second half. However, as we’ve pointed out today, this will be offset by FX and tariffs, as we’ve explained.

In this environment, with all the uncertainty, orders can flow from one quarter to another, and we are actively engaged with customers to really get a better view on the shape of the second half, especially in Specialty Polymers. So right now, our focus is really on delivering the targets for the full year that we have set, and we’re ready to meet potential changes in demand should they materialize.

Ilham Kadri, CEO, Science Co: Yes. And on your, you know, second question, Chetan, which is indeed a good one, and as you said, the culture is not that easy. It’s easier it’s it’s painful, but easier to restructure and manage what you control like like costs. But, you know, the hands in culture any culture takes time, but we are not here because it’s easy. So let me tell you what I’m doing as a CEO, maybe, Peter, prepare yourself as a as a president of the specialty polymer GBU to to to respond.

Establishing a hands in culture, what does it mean? It takes training. It takes rehiring. It takes building accounts management processes and and and and enhancing for new accounts, which we are doing. All of our senior leaders, the top 30 are now, you know, sponsors of customers or noncustomers, you know, to really get that hands in mindset with the Salesforce, but also at the top of the company.

We’re using SciGrow. This is our Gen I I sales body we launched in May, which is growing in scale, by the way, in the automotive sector. This is we prioritize actually Peter’s business, and we are rolling it out globally. So yeah, it takes time. Maybe Peter, you can give our audience a bit of color and examples on the hands in culture within your business.

Peter Browning, President of Specialty Polymers Business Unit, Science Co: Yeah. Thanks, Hilham. And just a starting observation that our overall portfolio is a bit different from that of EM’s. But nevertheless, I think when we look at something that’s comparable, we would be comfortable that we’ve outperformed the underlying auto market in the first half of the year.

Ilham Kadri, CEO, Science Co: You know them well because you competed with them in Exactly. Your engineering

Peter Browning, President of Specialty Polymers Business Unit, Science Co: I’ve been competing with them for about fifteen years now because in the engineering plastics business, I was really head on with them. So when we look about hunting, first of all, we’ve created the opportunity for our salespeople to sell things. So we’ve doubled our compounding in China. We’ve expanded in North America. Every week, every one of our salespeople is in a weekly win room sessions moving opportunities forward.

Every one of the visit reports that our salespeople put in the system, I’m reading, I’m interacting with them. I’m speaking with all my commercial directors every month. And I think we’re pretty clear as an organization about where our priority is. And this is absolutely what it is, Chetan.

Ilham Kadri, CEO, Science Co: You you also change the incentives and

Peter Browning, President of Specialty Polymers Business Unit, Science Co: Yeah.

Ilham Kadri, CEO, Science Co: Have campaigns on one more deal and know, there are lots of cool things going on we can share offline. Thanks. Back to you.

Sherif Bakra, Head of Investor Relations, Science Co: Next question, please.

Regina, Conference Operator: Our next question comes from the line of Katie Richards with Barclays. Please go ahead. Hi, thank you for taking my questions. I had one on the destocking impact at Boeing. You’re saying that this might continue into the second half of the year.

I also saw that Boeing itself is facing the possibility of another strike, this time affecting some of its defense lines, which I believe science case applies to the f 18, if I’m correct. Mhmm. So I just wanted to hear from you about whether there was any read read across the ScienceCase here and and the delay in the recovery.

Ilham Kadri, CEO, Science Co: Yeah. Yeah. Thank you, Katie. Yeah. As you mentioned, we heard the CEO of Boeing who has indicated that company is managing the situation, noting that the scope of the potential strike is much smaller than, obviously, the last year one we all remember.

Regarding our exposure, KT, to these sites, it’s very small, and it’s catered. There are several programs, by the way, not only the f 18. There is the triple seven x, the f 15, the m q 25. So but there, its exposure remains very small. So we currently don’t expect this have much of an impact on us.

Back to you.

Christopher Davis, CFO, Science Co: I’m happy to deal with the question about the destocking in the second half of the year. I think you’ve seen within Composite Materials, we had a really strong first quarter and even our second quarter of this year was very strong. There will be a delay into the second half of the year, but we don’t believe that over the full course of the year, the delta is going to be far different from what we described at the beginning of the year. So it’s all good for the full year basis.

Regina, Conference Operator: Our next question comes from the line of Thomas Riegelsworth with Morgan Stanley. Please go ahead.

Thomas Riegelsworth, Analyst, Morgan Stanley: Thanks very much. My first question is aimed at Peter really. But in terms of looking at the business say two to three years out in terms of the end market and products that you’ll sell versus, say, the last five years, what are you expecting to see as the big changes? Is it this semiconductor rollout that’s really going to change? And does that is there a wide variance in margins between the end markets that you serve?

So a semiconductor solution is a higher margin solution on average than a solution you might sell to automotive or a consumer electronics product? That’s my first question.

Ilham Kadri, CEO, Science Co: Yeah. Go ahead, Peter.

Peter Browning, President of Specialty Polymers Business Unit, Science Co: Okay. Thanks, Tom. Interesting questions. If we look five years out, what I would expect to see being a bigger part of our portfolio. First of all, electrical vehicles, substantial driver, really strong tailwind for this business over a longer term period.

Secondly, I’d expect to see significantly more in semicon. That business is cyclical but there’s a great underlying growth trend. And then lastly, I I think there’s a really meaningful opportunity to continue developing the business in healthcare. In terms of the margin structure between those three businesses, we really focus on applications which are challenging and complex. And so we tend to earn strong margins in each of the businesses in which we participate.

So I’m not sure you should expect to see a significant difference.

Thomas Riegelsworth, Analyst, Morgan Stanley: Okay. Thank you very much for that cut.

Ilham Kadri, CEO, Science Co: Yeah. And the good news is the diversification of your portfolio not only in term of technologies but in term of markets we serve. And there was a name of formidable competitor, Annals, which brings us to compounding. So we are a high performance polymer makers but we do also compound. Maybe you can explain what we are doing in China, for example.

For Polysulphone in India.

Peter Browning, President of Specialty Polymers Business Unit, Science Co: Yeah. No. There’s a couple of really good emerging market things. I think the first thing is we’ve tried to put all the decision making for our Chinese business in China so we’re quick, we’re reactive, and we can seize opportunity. On India, it’s an interesting production location.

It’s low cost. There’s great technology, great competency there, and it’s a really interesting basis for export as well as being a fast growing market in its own domain. So again, I think what we’ve tried to do is set the local teams free so they can build a business whilst providing them support on leading edge innovation and access to capital they need to grow.

Thomas Riegelsworth, Analyst, Morgan Stanley: Interesting color. If I can ask a separate second question on the cost savings, which we’re now starting to see emerge. I’m going to dangerously join two dots. It looks like SG and A was down around EUR 50,000,000 year over year. And in your bridge on your EBITDA, costs improvement is up EUR 15,000,000.

So as we think about I’m just trying to kind of get a sense of the phasing of the EUR 200,000,000 fixed cost savings that are going to come through by 2026? And also what’s kind of going to come through in the second half? A, is that am I joining the right dots, I. E, we’re getting a kind of 30% drop through now from the headline number to the actual profit improvement? And secondly, what do we see in the second half?

I mean, Chris touched on it but didn’t actually give us a number for the second half in terms of the cost savings.

Christopher Davis, CFO, Science Co: Yes. So what we’ve always said is it would be $200,000,000 run rate by the 2026. And obviously, we said that equates to three years of inflation. Just to give people a sense of the magnitude, The lowest level of that savings will be 2025. We always said it was back end weighted in 2025, so the second half of the year, where we said there would be a $40,000,000 uplift as a result of savings.

We got some of that in quarter two. You’re right. You can see it in the corporate savings. Some of it relates to reduced spend in R and R. That’s our cost savings program.

And some of it relates to lower labor costs. And there’s an element of timing on that.

Regina, Conference Operator: Our final question will come from the line of Matthew Yates with Bank of America. Please go ahead.

Nicholas Witting, Analyst, Bernstein: Hey, good afternoon, everyone. And I just wanted thanks for having Peter on the call. I think everyone’s found that incredibly useful. Two quick ones. Can you just clarify the lower polymer pricing in autos?

Is that net pricing? Or is that raw mat pass throughs? And then the second question, just on other solutions. You’ve got profits down, let’s call it, 50% either year on year or sequentially. Is that a function of the end markets?

Or is there an issue here that the assets have become somewhat orphaned and there’s an issue around sort of morale and performance in this interim period where you review your strategic options? Thank you.

Ilham Kadri, CEO, Science Co: Yes. No, I mean, let me start with the second one, and Peter, you can answer the specialty polymers and the auto pricing. No, there is I mean, listen, when a business is under our roof, it stays under our roof with the same care. And there, noncore doesn’t mean that these businesses are not good businesses. They are good businesses in right hands of the right owners.

They’re going to thrive. So the process is on. Our people are fully committed to do that. We knew what’s going on, and I think you know the symptoms of some of them since a while, even when I joined Solvay on the oil and gas and the shale gas and the aroma, specifically on the commodity side. So nothing new.

I think the team did really a good job. We isolated them. We fixed them. We restructured them. And now they are in the processes on track to get them exit our business.

On the specialty polymers and the auto pricing?

Peter Browning, President of Specialty Polymers Business Unit, Science Co: Yeah. In terms of pricing, I think we’re really not a pass through pricing type of business. We we try to be a little bit more intelligent than that. And so we we try to work out where we have additional pockets of value we can capture and where it’s better for us to give some pricing up in order to gain share. And I think over the first half of the year, as you’ve seen, we’ve seen quite a pleasing trend on gross margin.

So at least from my perspective, we’re doing pretty well on that.

Ilham Kadri, CEO, Science Co: Yeah. And I I think must congratulate Peter and the team, I think the audience remembers that. I think the stickiness on nets on pricing and the net pricing, which we’ve been socializing with you, right, for a while. And I think on the specialty polymer side and the specialty businesses in general, I think this is how I measure the specialties is on net pricing and the gross margin. Back to you, Sherif.

Sherif Bakra, Head of Investor Relations, Science Co: Thank you. I believe we have no further questions. So that ends our session for today. Thank you for your participation and and good questions. And as usual, the investor relations team will be here to answer any remaining questions that you have.

Have a good day.

Ilham Kadri, CEO, Science Co: Thank you.

Regina, Conference Operator: And that will conclude today’s call. Thank you all for joining. You may now disconnect.

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