Earnings call transcript: Solvay Faces Declining Sales in Q1 2025

Solvay SA reported a 6% year-over-year decline in underlying net sales for the first quarter of 2025, reflecting ongoing challenges in the global market. Despite this, the company’s EBITDA margin remained stable at 22%. The stock currently trades at $34.41, with InvestingPro analysis suggesting the company is significantly undervalued based on its Fair Value model. According to InvestingPro data, Solvay maintains a "GREAT" overall financial health score of 3.11 out of 5.

Key Takeaways

• Solvay’s Q1 2025 net sales decreased by 6% year-over-year.
• EBITDA margin held steady at 22%.
• The company is targeting €200 million in cost savings by the end of 2025.
• Net debt has increased to €1.9 billion.
• Solvay’s stock price rose by 0.3% post-earnings announcement.

Company Performance

Solvay’s performance in Q1 2025 was marked by a decline in net sales, attributed to global economic uncertainties and market volatility. The company’s diversified portfolio and strategic investments in new technologies and materials helped maintain a stable EBITDA margin. However, increased net debt and a challenging soda ash market environment posed significant hurdles.

Financial Highlights

• Revenue: €1,100 million, down 6% year-over-year
• Underlying EBITDA: €250 million, down 6% year-over-year
• Free cash flow to shareholders: €42 million
• Net debt: €1.9 billion
• Leverage ratio: 1.7x

Outlook & Guidance

Solvay expects to reach the lower half of its full-year underlying EBITDA guidance of €1,000-1,100 million. The company anticipates improved performance in the second half of the year, driven by cost savings initiatives and potential business opportunities. Free cash flow for the year is projected to be around €300 million, with most generation expected in the latter half.

Executive Commentary

Philippe Kehran, CEO of Solvay, emphasized the company’s strategic transformation and resilience in his remarks: "We are fully focused on our strategic transformation," he stated, highlighting the diversified portfolio as a strength. Kehran also expressed confidence in navigating complex market conditions and delivering on commitments.

Risks and Challenges

• Global economic uncertainty and market volatility
• Softness in the soda ash market, particularly in Southeast Asia
• Increased net debt and leverage ratio
• Potential market restructuring in China affecting soda ash demand
• Continued volatility in international trade and logistics

Despite these challenges, Solvay remains committed to its strategic initiatives and cost-saving measures, aiming to bolster its financial position and operational efficiency in the coming quarters. The company maintains a healthy current ratio of 1.3 and demonstrates strong cash flow generation with a free cash flow yield of 10%. For detailed analysis of Solvay’s financial health metrics and future growth potential, investors can access comprehensive reports and real-time data through InvestingPro.

Full transcript - Solvay SA (SOLB) Q1 2025:

George, Conference Coordinator: Hello, and welcome to the Solvay Q1 Results Conference. My name is George. I’ll be coordinator for today’s event. Please note this conference is being recorded. And for the duration of the call, your lines will be in a listen only mode.

However, you will have the opportunity to ask questions towards the end of the presentation. I’ll now hand the call over to your host today, Mr. Geoffroy Dutzomont, Head of Investor Relations, begin today’s conference. Please go ahead, sir.

Jean Paul Loutrement, Head of Investor Relations, Solvay: Good afternoon, everyone, and welcome to Solvay’s first quarter twenty twenty five earnings call. I’m Jean Paul Loutrement, Head of Investor Relations, and I’m joined here today on the call by our CEO, Philippe Kehran and our CFO, Alexandre Blom. This call is indeed 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 risks and uncertainties. The slides presented in today’s call are available on our website.

Today, we will discuss our first quarter earnings and the outlook of 2025, and then we’ll be available to

Philippe Kehran, CEO, Solvay: take your questions. Philippe, the floor is yours. Thank you, Geoffroy, and hello, everyone. As usual, we will start with safety. Following the tragic loss of three colleagues, subcontractors in 2024, We took decisive measures, and we launched a transformation program on the culture of safety at Solvay.

To do so, we established a dedicated group safety task force, which is reviewing and reinforcing our safety plans all over the organization. In Q1 of this year, there were no reportable high severity injuries. But we all know safety is a daily commitment and is never ever a given. So we will continue to work on our reinforced road map. Safety will always remain our number one priority.

Slide six, please. So Alex will go through the earnings in detail, but I will first comment on the environment of the last few weeks. During our Q4 earnings call, we mentioned that we had seen a little bit of pre buying during that quarter, which positively impacted our Basic Chemicals segment in Q4 twenty twenty four. This resulted in some softness in our soda ash business in the first quarter of this year. However, we saw a resilient performance in all the other businesses.

Solvay is not only a soda ash player, and the strength and resilience of Solve lies in its diversified portfolio of leading businesses operating locally and serving numerous end markets. This unique profile gives us a strong confidence in our ability to navigate these conditions. The second half of the quarter saw growing macroeconomic uncertainty on trade tensions and making customers more cautious. I will come back on this in our outlook. But now Alex, can I ask you to walk us through the Q1 results, please?

Alexandre Blom, CFO, Solvay: Thank you, Philippe, and good morning, good afternoon, everyone. So moving to the financials. And as usual, I will comment on the organic evolution, meaning at constant scope and currency, unless otherwise stated. Moving to Slide eight. Underlying net sales in Q1 twenty twenty five reached €1,100,000,000 lower by 6% versus the first quarter of twenty twenty four.

The volume decline, primarily in soda ash and silicate muted, drove the decrease. Most of our businesses saw stable volumes, while bicarbonate and peroxide continued to grow year on year. Meanwhile, pricing was resilient and even slightly up in Performance Chemicals. Underlying EBITDA amounted to €250,000,000 in Q1 twenty twenty five, down minus 6%. Regarding volumes, you might recall that Q1 of the previous year included some volume benefits from restocking and short term demand increase, particularly in our soda ash table market in Asia.

These opportunistic sales did not repeat this year, but they were only marginally profitable as can be seen with a limited drop through from sales, 75,000,000, to EBITDA, 15,000,000. On net pricing, the slight decrease is mainly driven by basic chemicals from the higher energy cost in Europe incurred in the first few months of the quarter, which are now behind us. Regarding fixed costs compared to last year, while there are several elements, the key takeaway is that our cost savings initiatives are successfully offsetting inflation. Overall, the EBITDA margin was stable at 22%. Moving to the segment review, and I will start with Basic Chemicals.

Soda ash sales were lower for the quarter compared to the first strong quarter last year. We continue to see low demand in our domestic Europe and U. S. Market and demand in seaborne softened sequentially. On the other hand, bicarbonate demand continued to be strong, benefiting from global megatrends such as previous treatment and volume continued to grow year on year.

Peroxides also delivered positive year on year growth, primarily from higher volumes in electronic grade and Latin American merchant market. The segment, which was down 20% compared to Q1 twenty twenty four from lower volumes and somewhat lower net pricing and with a slight increase in fixed costs compared to a lower base in Q1 twenty twenty. Overall, the EBITDA margin reached 24% this quarter. Performance Chemicals on Slide 11. Sales were down in Special Care due mostly to the auto catalytic business, which was down year on year, but which has improved sequentially.

This was partly offset by higher demand in Electronics. Sales in Silica and Covantis remained very steady organically. Compared to Q1 twenty twenty four, the overall segment was up 20%, but twothree of that impact was driven by the one off gain on the favorable outcome of a patent dispute in our auto catalyzes business, the remaining third coming from positive net pricing and mix improvement. The EBITDA margin subsequently increased accordingly to 21%. One word on our Corporate segment.

Fixed costs remain under control, and our credit costs were limited in Q1 to low single digit million euros as the exit of the TSA with Science Group is being gradually implemented. The exit will be mostly completed by the end of the first semester. Free cash flow. This brings us to the free cash flow to shareholders from continuing operation, which amounted to €42,000,000 in Q1 twenty twenty five. The main building blocks from EBITDA to free cash flow were the same.

CapEx reached €70,000,000 during the quarter, in line with our €300,000,000 revised full year objective. Working capital saw a seasonal increase in Q1 of €46,000,000 which mirrored the seasonal decrease we see in Q4. Finally, provision cash out includes the usual pension and environmental liabilities as well as some restructuring, Dortmund Energy and other small cash outs. Let me spend a few minutes on explaining the phasing of free cash flow. The quarterly split of last year should not be considered as the normal seasonality level.

On a normalized basis, we expect the phasing of free cash flow to be onethree in the first half of the year and twothree in the second half. And here are the key elements explaining this pattern. First, working capital. Q4 usually show a reduction with lower activity level in December and hence a positive cash impact. But we typically see the mirror effect in Q1 of the following year.

The non variable remuneration, they are paid in Q2 and represent this year approximately €80,000,000 Finally, coupon statement. We have two senior bonds with annual coupons paid in April and October for €30,000,000 each. As we issued this bond last year, 2025 will be the first year with no rolling payment phasing. So for this year, given the planned cash out in Q2 and the dividend payment, please note that our net debt will totally increase to €1,900,000,000 at the June. Net debt.

I will end this financial review with a word on it. It increased in Q1 primarily due to the additional lead on the balance sheet in relation to the launch of the Westwood boiler in Rheinberg, Germany. This €105,000,000 impact is reflected in the other bucket. Overall, our leverage ratio remained healthy at 1.7x at the end of the quarter. And with that, Philippe, back to you for the update.

Philippe Kehran, CEO, Solvay: Thank you, Alex. So moving to the outlook now. Well, as you all know, we are in a period of global economic uncertainty, and it’s certainly very hard to predict what will happen with trade negotiations, currency fluctuations or GDP evolution. So in times like this, rest assured we stay close to our customers, and I make sure that the organization remains fully focused on cost savings and cash management. Looking at the short term, I expect Q2 to be comparable to Q1, set aside the positive one off we had in Q1 and that Alex mentioned and also set aside the sequential increase of the temporary stranded costs related to the transition service agreement with Science Corp.

We confirm the underlying EBITDA guidance for the year of €1,000,000,000 to €1,100,000,000 and currently expect to reach the lower half of the range should current market conditions and currency exchange rates continue to prevail. We confirm that we expect €200,000,000 of cost savings by the end of twenty twenty five, which will add €90,000,000 in terms of EBITDA in 2025 in the P and L versus 2024. And more importantly, given our commitment towards cash generation, we are also confirming our free cash flow guidance to Solvay shareholders at around €300,000,000 for the full year. As explained by Alex earlier, we expect the majority of this cash generation to occur in the second half of the year, and this is typical for our business due to natural phasing of certain elements. And in response to the prevailing market conditions, we are also taking some action to optimize our CapEx, and we are now targeting a CapEx of around €300,000,000 for the year.

That’s a reduction from our previous range of 300,000,000 to €350,000,000 As a word of conclusion, I want to remind you of Solvay’s resilience and our commitment on cash generation, as we have demonstrated in the past. We remain fully focused on our strategic transformation, and we are confident in our ability to navigate these complex times and deliver on our commitments. Thank you for listening. And now Jean Francois, we’re happy to take your questions.

George, Conference Coordinator: Thank you very much. Operator? Thank you very much. First question is coming from Hannah Karnes from BNP Paribas. Please go ahead.

Your line is open.

Hannah Karnes, Analyst, BNP Paribas: Good afternoon and thank you for taking my question. Would you be able to clarify why the seaborne soda ash market was softer sequentially? I’m curious if it was driven by price or volume or if there were any specific countries that were particularly weak or if indeed the impact was caused by the minimum import price in India?

Philippe Kehran, CEO, Solvay: So the seaborne market is softer, in particular, in Southeast Asia. It’s softer versus Q1 last year because in Q1 last year, you might remember that China was importing. Today, we are back to a normal situation, which is that China is exporting at normal usual level. And it’s softer sequentially versus Q4 ’twenty four because the demand has weakened a little bit. We’ve seen a good momentum throughout 2024 with all the signals turning to green.

And we’ve seen a sort of slowdown in 2025 in front of all the uncertainties we mentioned and the trade disputes.

George, Conference Coordinator: Thank you, Sarah. We’ll now move to Tom Riddlesworth of Morgan Stanley. Please go ahead.

Tom Riddlesworth, Analyst, Morgan Stanley: Yes. A couple of questions, if I may. The first is on the kind of volume picture. It looks like volume is down 9% in the first quarter. Is that just indicative of a catch up of well, what do we expect for the rest of the year?

Obviously, you’ve cited some pre buying, but I’m also cognizant that, obviously, the things like flat glass demand was down like 10% last year. And I’m wondering if there’s sort of kind of lag effects coming through the system that will weigh on the volume picture for some of your traditionally contract markets. So a little bit of and on the other side, I guess, the bicarb world, can we continue to see are you confident that you can continue to drive growth in that market given that on the consumer side of the equation, there are some concerns, at least in The U. S, around the strength of the consumer? My second question is then on Specialty Chemicals.

That, seem to recall, has a high China exposure relative to the rest of your businesses. And I was wondering how that’s going to fare in the light of the tariffs and any of the trade uncertainty fallout. So any comments there would be helpful.

Philippe Kehran, CEO, Solvay: Thank you very much. So let’s start with soda ash and bicarbonate. So indeed, soda ash, again, I mean, we’ve seen good signals in the course of last year that made us think that 2025 would recover. And this is not what we see beginning of twenty twenty five, and this is clearly coming from the uncertainty that we have on the market, a very, very prudent behavior of the customers. And the fact, as you mentioned, that flat glass has not restarted yet.

And of course, whenever construction will restart, we will see the impact a couple of months, a couple of quarters after immediately in our order book. Buy car continues to its growth very clearly. That’s confirmed quarter after quarter. And the main segments that are driving this growth are really flue gas treatments and pharmaceutical applications. So of course, no one can predict what will happen, but we don’t see at this point any risk coming from consumers reducing their changing their behaviors and so on.

Now on Specialty Chemicals, you’re fully right. I mean if you take our global exposure to tariff, it’s limited because we are very much local to local, and more than 80% of our sales are regional. Whenever they’re not regional, we pass through the cost to the customers. So the impact and this is what, by the way, we see our, in particular, probably on solar is that there is an impact on demand coming from the inflation. But our only direct exposure of which we are really monitoring very closely is on heavy rare earth export control from China.

So if this is what you’re referring to, so it’s not, of course, a big exposure. It’s a small business in our portfolio. So we are monitoring this very carefully and checking that we can continue to export those materials from China, which are very important. I’ll remind you, by the way, that we have a plant in China as well. So that’s, for us, an advantage.

And I think that also highlights the fact that the projects that we are developing and that we’ve announced in La Rochelle are timely, I would We need to connect to verify the recording. We need to connect So the last time, Andy got We we I think we can hear a background noise. Open? Thank you.

Jean Paul Loutrement, Head of Investor Relations, Solvay: Thank you, Tom. Operator?

Tom Riddlesworth, Analyst, Morgan Stanley: Thank you.

George, Conference Coordinator: Thank you. I think the volume was probably coming from the questioners line. Gentlemen, right now, we’re going to move to Chetan Udeshi of JPMorgan. Yes.

Chetan Udeshi, Analyst, JPMorgan: Hi. Thanks for taking my question. First question I had was, can you explain what’s going on with your corporate line? It’s sometimes minus 2%, sometimes minus 15%. Like what’s really going on?

It’s very confusing for us from quarter to quarter. That’s the first question. Second question is just going back to the rare earth discussion, can you remind us what how big is that business these days? Where we’ve seen a big jump in pricing for many of these rare earths metros in the last two months, especially. Is that something that helps your business anymore?

Or is gone are those days where rare earth prices actually matter for Solvay? And the last question is just on volumes in soda ash. I’m a bit curious because when I look at the some of your customers on the container glass side, their volumes have actually turned positive. And you are saying you are seeing weakness. So I’m just trying to tie those two things together.

Are you actually losing market share? Are you seeing more competition? I’m just not sure what is going on. Thank

Philippe Kehran, CEO, Solvay: you very much, Chetan. I will maybe start with the volume in soda ash and then turn over to Alex for the corporate lines, and then we will answer also your question on the size of the rare earth business. So in soda ash, good news that container glass is moving. We are also expecting FlyGlass to do so at some point during the year. We will see.

There’s always a little bit of lag until it comes to our order book. So we will continue to monitor. For the time being, we don’t see any significant change yet. Just to answer your question, there is no market share that was lost. The only share impact that we have is probably versus Q1 of last year.

Again, when China was exporting and we seized some opportunities that we were not used to volumes that we were not used to deliver in the past. Now we are more back to a normal situation where China is exporting the expected quantities of soda ash. Now let’s move maybe to the corporate line question.

Alexandre Blom, CFO, Solvay: Alex? Yes. Hi, Chetan. Yes, we presented that Q3 of last year as we have the slide. I acknowledge that when you look on the quarter, and this is the segment where we concentrate some one off units.

When we have such a context, we tend to keep the corporate cost low. What we’ve indicated is that the normalized run rate this year should be 70,000,000 to €90,000,000 annual run rate. So you should see the corporate segments apart from one off offsetting we can do on corporate costs that should trend towards that.

Philippe Kehran, CEO, Solvay: On rare earth, I think the size of the special chem business is 12%, right, in terms of top line. So it’s important market, but of course, it’s not the most important. And the business that we’ve started, the new one in April in order to produce the first tons of rare earth oxides of permanent magnets is really very small at this point. So it’s a potential opportunity for the future, But at this point, it’s only marginal in our account.

George, Conference Coordinator: Thank you. Thank you, sir. Our next question will be coming from Sebastien Brie of Berenberg. Please go ahead. Your line is open.

Sebastien Brie, Analyst, Berenberg: Hello. Good afternoon and thank you for taking my questions. It’s centered on The U. S. Capacity expansion plan for soda ash.

So correct me if I’m wrong, but my understanding is that within the 11% organic decline in soda ash, there is both a price and volume component. My understanding is that The U. S. Investment, about 500 kilotonnes, is due to start ramping up midway, maybe a little later during the year. Is this going to be delayed or somehow stretched out?

Because it looks as if Solvay would be adding volumes to a market where pricing may already have the margins be under pressure. I appreciate it’s a lower cost position, but how exactly do you think about that? My second question is on auto catalyst, but I’ll ask it after the first. Yes.

Philippe Kehran, CEO, Solvay: So first question, indeed, on the we are not slowing down the investment. We are not pushing, of course, because the capacities today are not needed. But I mean, the CapEx has already been spent more or less. But clearly, the ramp up, we don’t envisage a ramp up of this capacity before 2026. So we might do some arbitration in order to seize the competitiveness because this capacity is very competitive.

So we might decide to slow down another capacity. But our expectation is that we will not need these additional volumes before next year. And that’s what we have in our outlook and guidance.

Sebastien Brie, Analyst, Berenberg: That’s helpful. Could I just confirm before I move on to the auto catalyst question, both the prices and the volumes were down in soda ash in Q1?

Philippe Kehran, CEO, Solvay: Mostly volume, mostly volumes. Prices have been relatively resilient in Europe and North America. And they are, of course, very volatile on the seaborne and under pressure on seaborne. Yes, Alex, you want to

Alexandre Blom, CFO, Solvay: take maybe Just to remind that Q1 last year, it included, I will flag that at the time of opportunistic. And so it’s true when you look just one quarter of Q1 versus Q1, you see a trending volume, which is not necessarily our prem or that even the

Philippe Kehran, CEO, Solvay: overall Absolutely, absolutely. So if we get back to the question raised earlier by Chetan on the market shares, I mean, we cannot consider that we’ve I mean we have our fair market share. It’s just that in Q1 ’twenty four, even the very, very unusual situation in China, I mean China is normally not importing soda ash. So we were able last year to seize those opportunities. I would say it’s more now back to normal, but in a market that is very, very well supplied.

But again, what I want to say, just to be clear, is that it’s this situation can change quickly. And that whenever construction restarts, this market can turn tight quickly.

Sebastien Brie, Analyst, Berenberg: That’s helpful. And my other question was on the auto catalyst component of the rare earth market. Can you talk a little on the pricing here and the unit margins? It’s a little difficult to differentiate the decline in volumes over the last two and three years from what looks like inflationary or close to inflationary pricing. Is there and it partly relates to Chetan’s question, but is there here a unit margin improvement story where prices can be pushed a bit even if the volumes decline?

Or what exactly is the growth outlook for this business on a two- or three year view?

Philippe Kehran, CEO, Solvay: Maybe I will let Alex give a few words.

: Yes, I

Philippe Kehran, CEO, Solvay: mean How

Alexandre Blom, CFO, Solvay: much both on the volumes and pricing, it’s been relatively stable. It’s the type of business that tends to be not completely even over the quarters. So we can see a quarter a little bit higher, a little bit lower. I would say, overall, we were expecting this business to slowly decline as it’s linked to internal combustion engine. And this is why also we are looking at new opportunities.

But finally, I mean, it turned out to be probably more stable than we thought. It’s good news. It helped us further in the meantime because this is a business very few people are investing in. It helps to hold the price. The customer need the product.

But structurally, it will decline slowly as electric And this business, AutoCAD is needed in hybrid vehicles and the fact that hybrid is also probably

Philippe Kehran, CEO, Solvay: not a long future or at least during a certain transition.

George, Conference Coordinator: We’ll now move to Jeff Haire of UBS. Please go ahead. Your line is open, sir.

Jeff Haire, Analyst, UBS: Yes. Good afternoon, and thank you for the opportunity to ask questions. I just had one left. I was just wondering if you’d seen any changes in interregional trade or have customers talk to you about that given the prospect of tariffs changes related to that?

Alexandre Blom, CFO, Solvay: The first part is, can you repeat the first part of your question?

Jeff Haire, Analyst, UBS: Yes. Given obviously the prospect of tariffs coming, I was just wondering if any of your customers have discussed with you or you have actually already seen changes in trade dynamics globally as in where product is going, etcetera?

Philippe Kehran, CEO, Solvay: Do you want to take it?

George, Conference Coordinator: Let me see if

Alexandre Blom, CFO, Solvay: you want to complain. For the moment, our customers are like everybody. They have difficulties figuring out what are the rules. We see a lot of logistic disruption today. I mean, you have even the customers having difficulties to know how what tariff or what restrictions apply.

You have congestion in certain ports. So I think it’s probably the type of things we see today navigating the short term volatility. We are not aware of any customer changing fundamentally. It’s that time. I mean, you see the example in electronics in one week, people thought, okay, you could not sell, you could not produce mobile from China to The U.

S. And one week later. So we think that that explains a little bit of the softness we are currently seeing here and there, this uncertainty. But beyond that, no significant change in the market.

George, Conference Coordinator: Next question will be coming from Tristan Lamott of Deutsche Bank.

: Hi, thanks for taking my questions. The first one is, it seems like at this kind of run rate, you need a bit of a step up in H2 to reach the low end of your guidance. So could you maybe just clarify the reasons why you see H2 above H1, especially given a probably weak Q4? And then second question is, I just want to clarify what the expectation is for soda ash for the rest of the year. Could there be further downside on price to come and on volumes?

And that this kind of price and volume run rate, can you hit the bottom end of your guide? Thank

Philippe Kehran, CEO, Solvay: you, Tristan. So what do we see in H2? First,

Tom Riddlesworth, Analyst, Morgan Stanley: we will have

Philippe Kehran, CEO, Solvay: cost savings, right? The impact of the cost savings program that will gradually build up and produce results in H2 that are higher than in H1. And that will more than compensate the stranded costs that we will see from the termination of the Science Co contracts kicking in Q2 of this year. Then we also have some business opportunities we’re working on, right? And this is something that will also materialize in H2.

So that’s why what we’re saying is that if current conditions prevail, we should land somewhere in the lower half of the range that we’ve given in terms of guidance. Now on soda ash, what are our expectations for the rest of the year? I would say a certain stability in Europe and in North America. And potentially, continuous volatility in seaborne, knowing that you need to be aware that at this point of time, prices are at very low levels and that a lot of operators, in particular in China, are operating at negative contribution when they sell at this price. So we don’t see any potential for further deterioration.

We see only potential of upside on this point. But again, how long will it take? No one knows.

George, Conference Coordinator: Thank you for your questions, Mr. Limit. Now we’ll go to Peter Clark of Bernstein. Please go ahead.

Jean Paul Loutrement, Head of Investor Relations, Solvay0: Yes. Good afternoon, everyone. Yeah. Just following up on that. I’m just wondering in Europe, obviously, you’ve had a couple of players now shut capacity.

How helpful you think that will be when you look forward? Obviously, it’s a tough market. And then in terms of the guidance for the second half, again, obviously, year, you were sort of baking in, in your thoughts, some licensing come on HPPO coming in at the end of the quarter, and you’ve been pretty good on signing these things every year. Is that in your thinking again for this year that you get some HBDO signature on license income? Yes.

Philippe Kehran, CEO, Solvay: Thank you, Peter. Capacity, I guess, this question was on Solace more? So indeed, I mean, what we’ve seen since the beginning of this year is, I mean, the pressure on the lease competitive capacities on the market. And you might have seen that two capacities shut down in Europe and one forever, which is in The UK and one supposedly for I mean, it was announced for as the most volume. I think this shows that indeed the market is restructuring, and that’s normal because that’s the name of the game for this type of market.

I think we also expect this to happen in China because they’ve started a very competitive capacity, as you know, close to 5,000,000 tons now. And we expect also some restructuring to take place in China. This seems to be a little bit slower than what we expected. Obviously, if this speeds up, I would say it will bring some also relief on the market. Licensing and sales, obviously, that’s one of the elements of the business opportunities that I mentioned earlier on that we’re working on very, very hard for H2.

Chetan Udeshi, Analyst, JPMorgan: You.

George, Conference Coordinator: Thank you very much, Mr. Clark. The next question will be coming from Alex Stewart, Clarke from Barclays. Please go ahead.

Jean Paul Loutrement, Head of Investor Relations, Solvay1: Hello. Thank you for taking my questions. I wanted to probe a little bit on this idea that Chinese synthetic soda ash companies are making breakeven or negative contribution margins and will therefore shut. Could you tell us how easy and how quick it is to shut down a synthetic soda ash plant and then potentially restart it again in the future? I guess my thought process here is that they will presumably want to be prepared for some recovery in their markets.

And now that the imposition of tariffs and potential future tariffs make trade more difficult, what’s the risk here that they just decide to keep them running to maintain a state of preparedness? But I don’t know what the technical considerations are. So I’m interested in your view on that. And then the second question, you added €100,000,000 of lease liabilities related to, I think, a conversion of a plant in Germany. It seems very high.

You ended 2024 with IFRS 16 lease assets of 200 just over $260,000,000 So adding another €100,000,000 in that context is a big sum. Could you just talk us through why that’s so significant? And why indeed you decided to lease the asset rather than purchase it outright? I’m just curious.

Philippe Kehran, CEO, Solvay: Thank you, Alex. So I will let the other Alex answer the second question, and I will take the first one that is first that has a first technical aspect. Of course, it’s always difficult to shut down a plant. I mean, even if I mean, whatever the plan is, to shut it down and then restart it is always a headache, because you have to keep the assets in good shape, and you have to keep the people. So how do you manage this?

It’s not necessarily unique to the soda ash market. It’s a little bit the same for all types of businesses. Now purely technically, you can imagine keeping I mean shutting down and restarting. Of course, if you shut it down for a long period of time, it means you have to cool down completely the installation, then it would probably take three months to restart, technically, I mean, but that’s something that you can very well imagine doing. Now that’s not necessarily, I think, what people have in mind because here, we’re talking about a structural restructuring that is needed because we have this big capacity that is super competitive that has been launched based on Trona.

And we have in China a part of the industry that is noncompetitive. And when I say noncompetitive, it’s less competitive than anywhere else in the world. And that also has environmental challenges. So I think at some point, those will probably shut down forever. But the current situation is probably not helping to move faster in this on this aspect.

Now maybe I turn to Alex for the leasing the question on the leasing.

Alexandre Blom, CFO, Solvay: Yes. You, Alex. So here, again, we are getting back to the cash allocation framework of Solvay. I mean as you know, our cash allocation framework will start by essential CapEx, euros $250,000,000 to €300,000,000 per year. And into that, we have the energy transition CapEx, and we want to spend every year around $30,000,000 30 5 million dollars per year.

Then we will pay our dividend, and then we will do discussion on CapEx. So that’s the overall framework. The investment we are talking about, it’s linked to the coal phase out of our plant in Weinberg. I mean we’ve made some communication around that. Plant.

It’s a huge asset, but it’s one of our biggest soda ash plant, and it’s half of the steam capacity. And we’ve communicated it’s about 300,000 tons CO2 equivalent reductions, which is big. And this is typically the type of investment. We don’t want to put at risk our dividend capability or our investment capability. So leasing the asset is a way to spread the cash over the period over a long period.

And on top of that, in Germany, you have certain incentives which are paid annually. So you match the incentives in Germany and the cash out linked to the assets. So that’s for us, again, very important, making sure we are not putting our dividend capability at risk. And if you look at the balance we have about today, we have about 400,000,000 lease assets. So it’s going to add another €100,000,000 Yes, it was this is not a surprise.

We’ve been building that asset for a few years, so it’s well anticipated in our balance sheet.

Jean Paul Loutrement, Head of Investor Relations, Solvay1: And out of interest, if you had bought and built the asset rather than leased it, how much would it have cost roughly?

Alexandre Blom, CFO, Solvay: Well, it’s roughly the same. It’s really the leasing. It’s really a way to have it. It’s our own. We’ve built it.

I mean we have we are building it. We are operating it. So it’s really, again, a way to limit our annual CapEx energy transition CapEx to €35,000,000 I mean, that’s the type of capability and knowledge we have on how to structure this energy transition project. Sometimes, we ask other people to do it. And typically, because it’s an interesting example here, typically, there are certain value you need to recover all the wood in the region, the wood from furniture, construction and so on.

This part, we did even if it’s just next to our plant, we decided to completely outsource. It’s an external company doing it. But the steel production here, we decided to do it, but again, leasing to spread the CapEx.

George, Conference Coordinator: Next question will be coming from Ronald Orr of Citi. Please go ahead.

Jean Paul Loutrement, Head of Investor Relations, Solvay2: Hi. Thanks for taking my questions. I’ve got two. The first one is just on the cost savings. And maybe you can just help understand the phasing that help me understand the phasing a bit this year.

I think I got a bit confused. I think you said in your comments relating to the second half earnings step up, you’d see increased cost savings contribution. But when I look, I think you did €27,000,000 in Q1, call that €60,000,000 for the first half. And then implying roughly €30,000,000 still to come in the second half based on your €90,000,000 P and L contribution comment from earlier. So I think I’ve gone wrong somewhere.

Maybe you can help just clarify. And my second one is just on the CapEx reduction, where that’s coming from? And does that have any impact on your growth projects?

Philippe Kehran, CEO, Solvay: Okay. So maybe I will start with CapEx and then Alex will answer on the cost savings phasing. So on the CapEx, clearly, what we do is we do the essential CapEx. Clearly, this is something that, of course, we can optimize, I would say, the phasing, but marginally. But basically, the essential CapEx are done, meaning of maintenance of our assets, safety, environment, energy transition, this continues.

And for the rest, it means that the discretionary CapEx are really reduced to the strict minimum. So we continue to invest in the small projects that deliver high level of profitability and growth like electronic grade hydrogen peroxide, biosourced silica or the very small investment we did for to start rare earth production for permanent magnets. And all the rest is pushed later. Alex, I don’t know if you want to say a few words on the I

Alexandre Blom, CFO, Solvay: think, again, I mean, what we said we will deliver over 200,000,000 we are committing to €200,000,000 cost savings this year. We are cumulative over two years. So yes, we delivered EUR 6 to 27,000,000 in Q1. We will continue. I mean when we have this type of environment, you’ve seen us in the past.

We adapt, we will focus on the cost saving and on cash management. So I’m not sure it’s has mechanical as doing the calculation quarter by quarter, but we are mitigating the business environment with the cost savings.

Philippe Kehran, CEO, Solvay: Thank you very much.

George, Conference Coordinator: Thank you very much, Mr. Orr. Ladies and gentlemen, we have time for only one question and this is a follow-up question from Tom Riegelsworth of Morgan Stanley. Please go ahead, sir.

Tom Riddlesworth, Analyst, Morgan Stanley: Hi. Sorry. We kind of got cut off in a weird way from a follow-up question. So with regards to these rare earth chemicals that you’re I’ve assumed that you’re bringing out of China and you then send to your customers around the world. You talk about monitoring them.

It’s a kind of interesting microcosm for us in terms of how the systems are adapting. Are you hoarding in hoarding? Are you storing inventory in countries where you feel there might be a tariff impact? Could you just have it or is business continuing as normal? There’s no change.

None of the freight rates have impacted any developments. I’m kind of just intrigued that you have this insight into a Chinese resource that gets exported out to the rest of the world?

Philippe Kehran, CEO, Solvay: No. Here, it’s very clear. It’s just we need China has implemented an export control on some types of rare earth, and those are heavy rare earths. We need some of those materials to produce rare earths mixed oxides for the autocatalysis market. And this is done outside of China and also in China, by the way.

And so right now, we are operating on with our inventory, And we are working with the Chinese authorities in order to get the license to be able to continue to export in the future. So that’s the situation. So when we say we monitor is we work with the Chinese authorities in order to get the licenses to continue to export those material for our customers from the auto sector.

George, Conference Coordinator: We have no further questions. At this time, I’d like to turn the conference back to Mr. Geoffroy Dutremont for any additional or closing remarks. Thank you.

Jean Paul Loutrement, Head of Investor Relations, Solvay: Thank you, and thank you all for participating today in our call. If you have any questions, please feel free to reach out to the Investor Relations team. We will have a couple of roadshow activity in the coming weeks. Next week, on the May 14, management will take part in the virtual Small and Mid Cap CEO Week organized by Kepler Cheuvreux. It’s a kind of fireside chat in the afternoon.

Then management will be in London on May 15, in Nice on May 20, Amsterdam May ’20 ’1 and the June in Chicago and New York. Thank you very much. And our Q2 earnings will be published on the July 30. Thank you.

George, Conference Coordinator: Thank you very much. Ladies and gentlemen, that will conclude today’s conference. Thank you for your attention. You may disconnect. Have a good day, and goodbye.

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