Earnings call transcript: Solvay Q2 2025 sees EBITDA decline amid market challenges

Solvay SA reported a decline in its second-quarter earnings for 2025, with underlying net sales and EBITDA both experiencing year-over-year decreases. Despite these challenges, the company maintained a robust EBITDA margin and highlighted several strategic initiatives aimed at future growth. The stock, currently trading at $33.29, showed a modest increase, reflecting cautious investor optimism. According to InvestingPro analysis, Solvay appears undervalued based on its Fair Value metrics, suggesting potential upside opportunity.

Key Takeaways

• Solvay’s Q2 2025 net sales decreased by 4% year-over-year to €1.1 billion.
• Underlying EBITDA fell by 12% year-over-year but maintained a healthy margin of approximately 21%.
• The company is focusing on cost-saving measures, achieving €29 million in savings for the quarter.
• Market conditions remain challenging, with global tariff discussions and high inventory levels impacting performance.
• Solvay is advancing its rare earth and soda ash projects to strengthen its market position.

Company Performance

Solvay’s performance in the second quarter of 2025 reflects a challenging market environment, with a 4% decline in net sales and a 12% drop in EBITDA compared to the same period last year. The company’s focus on cost management and operational efficiency has been crucial in maintaining its EBITDA margin at around 21%. Solvay’s strategic investments in rare earth processing and soda ash expansion underscore its commitment to long-term growth despite current market headwinds.

Financial Highlights

• Revenue: €1.1 billion, down 4% year-over-year
• Underlying EBITDA: €230 million, down 12% year-over-year
• EBITDA margin: ~21%
• Free cash flow to shareholders: €54 million in Q2, €97 million in H1 2025
• Cost savings: €29 million in Q2, totaling €55 million in 2025

Outlook & Guidance

Looking ahead, Solvay projects its underlying EBITDA for 2025 to range between €880 million and €930 million, with a free cash flow target of approximately €300 million. The company anticipates a sequential decline in performance for the third quarter but remains focused on cost savings and operational efficiency. With the next earnings announcement scheduled for November 6, 2025, investors will be watching closely. Solvay’s ongoing investments in rare earth processing and soda ash expansion are expected to bolster its competitive position in the coming years.

Executive Commentary

CEO Philippe Caren emphasized the importance of cash flow in capital allocation and dividend policy, stating, "Cash is the key enabler of our capital allocation and our dividend policy." He also reassured stakeholders of the company’s commitment to its strategic objectives, saying, "We are taking the necessary measures to deliver on our commitments."

Risks and Challenges

• Global tariff discussions pose potential risks to Solvay’s Coatis business, particularly with US-Brazil trade relations.
• The soda ash market is facing pricing pressures, especially in Southeast Asia, due to reduced demand.
• High inventory levels in China present challenges for market balance and pricing.
• Geopolitical tensions continue to impact various business segments, creating uncertainty.
• The company must navigate potential supply chain disruptions and cost fluctuations.

Solvay’s strategic focus on innovation and cost management, coupled with its robust financial framework, positions it to navigate the current market challenges while pursuing long-term growth opportunities. The company maintains a debt-to-equity ratio of 1.95, reflecting its leveraged but manageable financial position. For detailed analysis and comprehensive insights, investors can access Solvay’s full Pro Research Report, available exclusively on InvestingPro, along with reports on 1,400+ other top stocks.

Full transcript - Solvay SA (SOLB) Q2 2025:

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

However, we will have the option to take questions towards the end of the presentation, and this could be done by pressing star one on your top of the keypad to register your question. If you require assistance at any point, please press 0, and you’ll be connected to an operator. I’d like to hand the call over to your host today, mister Georges Dutroumo, head of Investor Relations, begin today’s conference. Please go ahead, sir.

Leopold Lutremont, Head of Investor Relations, Solvay: Thank you, George. Good afternoon, everyone, and welcome to Solvay’s second quarter and first half twenty twenty five earnings call. I’m Leopold Lutremont, Head of Investor Relations, and I’m joined here today on the call by our CEO, Philippe Caren and our CFO, Alexander Blum. This call is being recorded and will be accessible for replay on the Investor Relations section of Solvay’s website later today. I would like to remind you that the presentation includes forward looking statements that are subject to risks and uncertainties.

The slides presented in today’s call are available on our website. We will first discuss the second quarter earnings and then the outlook for 2025, and

Philippe Caren, CEO, Solvay: then we will take your questions. Philippe, the floor is yours. Thank you, Geoffroy, and hello, everyone. As usual, we will start with a word on safety. We continue to work hard on the transformation of the safety culture.

The task force that we put in place last year supported by external advisors is visiting our sites and taking actions to improve the safety of our people. The number of reportables is stable, but the number of high potential incidents is decreasing and that’s encouraging. So let’s continue our efforts, be disciplined and work on our mindsets and behaviors, and it will pay off. Safety will always be our number one priority. Slide six, please.

As usual, Alex will go through the earnings in detail, but I will first comment on the environment of the last few months. As indicated in our communication two weeks ago, when we updated our 2025 guidance, we continued to see a soft market environment in the second quarter, impacted by the ongoing global tariff discussions, the foreign exchange movements and the heightened geopolitical tensions. All of this led to a progressive reduction of demand and a slowdown in order books. That’s particularly visible in some soda ash end markets and in the Coates business unit. In soda ash, more particularly, we continue to see different and volatile market conditions.

In Europe and in The US, the market demand has been soft for the past two years already. In the seaborne market and most specifically in Southeast Asia, we have seen a decrease in demand in second half of last year. And as this continued in the first and second quarter of this year, the pricing pressure has naturally increased. Coatis, our Brazilian business unit active in phenol and solvents is producing and generating most of its sales in Latin America. The second quarter was difficult for Coatis, impacted by increased competition in the region, in particular from Asia.

And the renewed tensions around tariffs are adding pressure on the business and on our customers there. We are monitoring the situation closely and taking measures to improve the business. Aside from Coates and soda ash, it’s important to keep in mind that our other businesses are delivering in line with our expectations, even if they feel some pressure from the current environment. One example is rare earth, where Chinese rare earth export control is putting pressure on the whole value chain. This situation reinforces the need for rare earth production capacity outside of China.

And we can confirm that we have seen growing interest from customers in our newly opened La Rochelle production line dedicated to rare earth production for permanent magnets in France. The capacity we have now is very limited, but if we can embark all stakeholders in this project, we could grow our capacity further and quickly. Clearly, this is not what we expected at the beginning of the year. But we are taking all the necessary actions to navigate this environment and to make sure that we deliver on our commitments. I will come back to that when I will discuss the outlook.

Now, Alex, can you please walk us through the Q2 results? Sure. Thank you, Philippe, and good morning, good afternoon, everyone. Moving to the financials. I remind you that my comments are based

Leopold Lutremont, Head of Investor Relations, Solvay: on organic evolution, meaning at constant scope and currency, unless otherwise stated. Moving to Slide eight. Underlying net sales in Q2 twenty twenty five reached €1,100,000,000 down minus 4% versus Q2 twenty twenty four. On volumes, we benefited from a one off revenue of around CHF 20,000,000 related to the termination of a customer’s contract in Special Care. Excluding this impact, we observed a year on year decline of minus 4%, primarily driven by the weaker performance in the Coatis business and in the soda ash seaborne market.

Volumes for Bica and Peroxide were steady and Special Care suffered from a strong comparison base in Q2 twenty twenty four. Prices were overall resilient, but we saw decrease in the soda ash seaborne market while the price remained stable in the other businesses. Moving to Slide nine. Underlying EBITDA amounted to EUR230 million in Q2 twenty twenty one, down minus 12% compared to Q2 which was the strongest quarter of last year. Overall, the EBITDA margin remains healthy, close to 21%.

Volume and mix impact was slightly down when excluding the one off, as already explained in the sales bridge. Net pricing, which reflects the evolution of our unit margins, decreased year on year, primarily driven by soda ash and Cretis. This decline was due to pricing pressure, but also to higher variable costs resulting from the inefficiencies of our low production rate. As far as fixed costs are concerned, selling programs continue to exceed inflation, but year on year variation this quarter was negatively impacted by two elements. First one, temporary credit costs, which really started in Q2 of this year as Science Co progressively exited most of the transition service agreement.

And also higher fixed costs in our basic chemical plants from operational issues. Finally, the other bucket of the bridge reflects the non repeat of the Q2 twenty twenty four accrual of minus CHF 18,000,000 for the Dombal Energy transition project. Moving to an update on our cost saving programs. Cultural cost saving initiative delivered €29,000,000 in the second quarter, bringing the 2025 savings to €55,000,000 and €165,000,000 in total since the beginning of 2024. We continue to accelerate savings where we can, and we expect to exceed our intermediary target of €200,000,000 by the 2025.

One

George, Conference Coordinator: of

Leopold Lutremont, Head of Investor Relations, Solvay: the key drivers remains the digitalization of our plant. We are leveraging the use of devices such as IoT captures or drone in our sites supporting saving both in variable and fixed costs. For example, by reducing the time for maintenance inspection, by extending the life of equipment or by optimizing our energy consumption. Moving to the segment review and starting with basic chemicals. Let me start for once with the peroxides business.

With sales year on year down 2%, volumes remained resilient. Mining and water treatment end markets were more robust which compensated for lower demand from the chemical applications. The electronic grades saw higher demand in semiconductors which have offset lower volumes from the solar panel industry. Now let me elaborate on the soda ash and derivatives business units where sales were down minus 4%. Bicarbonate demand continued to be robust, driven by food and feed and flue gas treatment.

As a reminder, and based on 2024 figures, this business now represents more than 30% of the GDU sales and 12% of the sales at group level. DoorDash volumes were lower year on year due to the continued sluggish demand in our domestic market in Europe and North America as well as from an increasing pricing pressure on the seaborne market, especially in Southeast Asia. During the quarter, the business unit also had higher unit variable costs resulting from less efficient low production rate. The soda ash unit also faced some operational issues, which negatively impacted fixed costs this quarter and which we are currently addressing. Consequently, the segment EBITDA was down minus 25% compared to Q2 twenty twenty four.

Overall, the MTA margin decreased to 21% this quarter. Moving to Performance Chemicals on Slide 12. Sildeka sales continued to be very resilient with volumes only slightly down compared to a rather strong Q2 twenty twenty four. Qualities saw the largest decline with minus 19%. Volumes and pricing were negatively impacted by strong competition from Asian players on the whole value chain, while at the same time, high tension around tariffs are impacting demand.

In Special Chem, sales were up plus 6%. This includes the positive one off of circa EUR20 million highlighted previously, and this is linked to the termination of a customer’s contract. Volume in rare earth’s auto catalytic business were lower compared to the strong performance of Q2 twenty twenty four when we had opportunistic sales captured in Asia. Chinese rare earth export control implemented in April also explained to a lesser extent the lower volume in autocat. While there are alternative sources for the light reverse, heavy reverse oxide are still mainly sourced from China.

So far the impact on Solvay has been quite limited as we have been able to get licenses to export most of our products or as we have found other solutions for our customers such as alternative supplies, reformulation or some inventories abroad. All in all, in Q2 twenty twenty five, thanks to the one off gain, the Performance Chemicals segment EBITDA was up 9% compared to an already strong Q2 twenty twenty four. And the EBITDA margin increased year on year to 24%. Slide 13, Corporate segment results. Solvay has been delivering support function support function and IT services to Science Co since the spin off.

A large majority of these services were terminated progressively during Q2 twenty twenty five. We consequently started to adjust our cost base, but the full offset will take some time, and hence, we started to see temporary stranded costs this quarter. The Corporate segment EBITDA for the quarter ended at minus EUR 15,000,000, sequentially lower than in Q1 due to these temporary stranded costs. Regarding the full year, we expect corporate cost to be between EUR80 million and minus EUR90 million, with the peak of the stranded cost being obviously H2 twenty twenty five. Regarding the upcoming years, our projection remains consistent with what we presented during last year Q3 earnings.

In 2026, our corporate net costs are anticipated to temporarily increase from the loss of TFA revenue and from operational expenditure associated with our ERP implementation. Then we anticipate the full offset of the temporary stranded costs and the delivery of the structural savings from the targeting operating model in year 2027 and 2025 along with the ERP rollout. Overall, this will bring the corporate segment to a normalized level around this year. This brings us to the free cash flow to shareholders from continuing operation, which amounted to EUR54 million in Q2 twenty twenty five, reaching €97,000,000 for H1 twenty twenty five. This is in line with our previous indication to generate approximately onethree of the annual free cash flow in the first half of the year and twothree in the second half.

You will note the working capital seasonal cash out for H1 of EUR 56,000,000. All of it can be attributable to the variable remuneration cash out we are doing in Q2. For the full year, we are committed to reach our free cash flow target of around €300,000,000 We will come back to this in the outlook section. I will end this financial review with a word on the net debt. As indicated during our previous earnings call, net debt increased in H1, primarily due to the dividend payment and to additional lease on our balance sheet in relation to the launch of the West Peak boiler in Rhineberg, Germany.

We expect net debt to come back to a level of approximately EUR1.7 billion by the end of the year. Our leverage ratio remained healthy at 1.9 at the end of this quarter. Philippe, back to you for the introduction.

Philippe Caren, CEO, Solvay: Thank you, Alex. So moving to the outlook now. As you know, we revised our outlook for twenty twenty five two weeks ago to adapt it to the new reality of our markets. I will not repeat what I said at the beginning of this call, but we are currently facing very unique circumstances. There is limited visibility, but one element is clear, the second half of the year will continue to present significant challenge.

While we recognize the current macroeconomic and geopolitical environment is not supportive, we are taking the necessary measures to deliver on our commitments and we stay firm on our strategic priorities. More specifically, we continue and accelerate where and whenever possible the transformation of Solvay to make it stronger for the future. Now let me repeat the guidance for 2025. We expect the underlying EBITDA to be between €880 and €930,000,000 assuming current foreign exchange levels for the second half of the year. I can also confirm the third quarter is expected to be sequentially down versus the second quarter.

Our underlying demand continues to be negatively impacted by the tariff latest announcements, especially for our Coatis customers in Brazil. As said, our cost savings initiatives are well on track. And we now to exceed the indication of €200,000,000 cumulative savings by the 2025. Finally, on cash, we confirm that the free cash flow from continuing operations to Solvay shareholders will be around EUR300 million. This is really the way we operate.

And to anticipate some of your questions, Alex will now give you some additional elements on how we can reach EUR300 million of free cash flow in this new context.

Leopold Lutremont, Head of Investor Relations, Solvay: Sure. On Slide 18, we provide you with a schematic bridge for 2025 going from EBITDA to free cash flow. You know the EBITDA range already. Considering the evolution of the business context, we have decided to limit CapEx to a maximum of EUR300 million in 2021. Cash out for provision is expected to be around EUR250 million this year and that includes approximately €100,000,000 for pension and environmental liabilities together, as well as €60,000,000 related to the energy transition project in Domain.

The rest is mostly for restructuring and some litigation. 2025 is exceptionally high on cash out for provision, and we see our baseline cash out to be around €130,000,000 per year, so about half of what we’re going to see in 2025. Financing expenses should be around EUR 80,000,000 and tax and other probably around the same amount. This leaves us with the working capital, which is where we expect a positive contribution in 2025. I will mention three elements.

The first relates to the TSA exit we discussed before. Before. All in all, we will have less working capital at the end of the year, which should contribute for a good CHF 25,000,000. Second element, in such a lower demand environment, we will see some natural improvement from our working capital. And thirdly, and more generally, we are looking at each component of the working capital, be it in inventory, receivable or payable, and we will look at what we can do in such a depressed environment.

Philippe Caren, CEO, Solvay: Thank you, Alex. So now maybe let me conclude this first part. So we’re navigating a period where our focus is very much on the short term. This is essential, particularly as we anticipate a lower EBITDA in 2025. However, we have the organization, the model and the flexibility to meet our cash commitment.

Cash is the key enabler of our capital allocation and our dividend policy and it will remain at the forefront of my attention. This short term focus doesn’t mean that we’re losing sight of our long term strategic priorities. We continue to engage closely with our customers and leverage our local footprint to support them in this challenging environment. We are actively involved in the transformation of our industry. For example, I’m personally engaging with many stakeholders on the EU Chemicals Industry Action Plan to sustain competitiveness of the European industry for which decarbonization is an imperative.

At our level, the energy transition continues to be well underway and will enable us to further reduce our greenhouse gas emissions by 10% in 2025 versus 2024. Finally, we accelerate the transformation of survey, And we will stay agile and disciplined in the future, ready to seize new opportunities or adapt our footprint depending on the evolutions of the market. Thank you. Back to you, Geoffrey.

Leopold Lutremont, Head of Investor Relations, Solvay: Thank you, Philippe and Alex. This closes our prepared remarks and we will now take your questions. Jean, you may open the line.

George, Conference Coordinator: Thank you very much, Our very first question is coming from Katie Richards of Barclays. Open.

Katie Richards, Analyst, Barclays: Hi, there. Thank you for taking my question. Two, please. One on soda ash and then one on Cotis. So on soda ash, can you give us some more color, please?

In the pre release, you mentioned a progressive reduction of demand in soda ash market. But in the release today, you said volumes have improved sequentially versus Q1. So it sounded like a little bit of a shift in tone. Can you help reconcile this? And in Cotis, sales were obviously down quite significantly this quarter.

Can you elaborate on the factors behind this? And specifically, to what extent the competition from Asian producers intensified and which product chains are mostly affected by this and if you see potential for further deterioration?

Philippe Caren, CEO, Solvay: Okay. Thank you. So maybe I will start with Coatis. I think the situation there is probably where, I mean, the changes are the most important during Q2 for different reasons, and I think mainly two, and they are not completely unrelated. There is today a strong pressure coming from the potential future tariffs between Brazil and The US.

We’re talking about 50%. And this is supposed to be implemented as the August 1. And this changes completely the behavior and the strategy of our Brazilian customers that are exporting some of their products to The U. S. And so they clearly reduced their orders based on this uncertainty.

The second element, which is an indirect effect of the tariff between China and The US is that there is a lot of very aggressive competition in Latin America coming from China on the products manufactured by Coatis. So the situation really changed very much between Q1 and Q2 for Coatis. So again, Coatis is not the biggest of our businesses, but the impact is significant. What will be the future of evolution? It’s very difficult to say.

We’re getting organized to face any potential scenario, including adjusting the way we operate our assets and reduce our cost basis. But we will see. I mean, it will also very much depend on what Brazil will do versus those new tariffs and so on. So it’s very difficult to say at this point. Regarding soda ash, maybe Alex, you want to Sure.

Address the

Leopold Lutremont, Head of Investor Relations, Solvay: can give you a comment and you feel free to complement. I think you’re right. What you are mentioning is that it’s true the volumes in terms are slightly higher in Q2 versus Q1, but still below last year. I think fundamentally nothing has changed between Q1 and Q2, even we could say the tariff are positively increasing the pressure. But what happened in Q1 is that volumes are particularly low.

As you may remember, maybe I don’t know if you joined the call at the time that in Q4 last year, we have seen quite strong volume as some people were probably anticipating some purchase and some production in Q4 before the tariff, before the churn. And that has impact temporarily Q1. So I would say fundamental trend, if you look on the kind of holding average, no change. I mean, Q2, we saw a little bit of catch up.

Sebastian Bray, Analyst, Berenberg: Thank you, Henrik.

Katie Richards, Analyst, Barclays: Thank you.

George, Conference Coordinator: Thank you very much, Ben. We’ll now move to Thomas Wrigglesworth of Morgan Stanley. Please go ahead, sir.

Thomas Wrigglesworth, Analyst, Morgan Stanley: Hi, gentlemen. Thanks very much for the opportunity. My question is just a kind of a bit of a follow on from on this soda ash because the margin is down 300 basis points quarter on quarter. Normally, I mean, from my outside in type of model, it looks like you’ve managed to lose price in base chemicals at the same time has experienced a cost increase, which is normally quite unusual. So is it that you’ve lost really high value tons in 2Q or that there’s something else or that there’s you’ve got some high cost inventory.

I didn’t quite catch in your prepared comments what you were saying around fixed cost absorption. And if it is fixed cost absorption, how temporary is that? I mean, obviously, guidance suggests it’s going to it’s not. So something seems to have more meaningfully changed in margins in base chemicals in 2Q. And I guess the question is, is that resetting the base for ’26 now?

Or is there a basis to think that, that might normalize back up? That’s my first question. My second question is just as a follow-up on Coates. I mean, obviously, you built this plant originally because Brazil is a net importer. Do you think that’s now structurally changed?

And or do you think that this is just because of those tariffs and once tariffs abate, we’ll see that material redirect I. E. Is there a strong disincentive for the Chinese logistically to sell to Brazil versus ship to The US? Thank you.

Philippe Caren, CEO, Solvay: Okay. So first on soda ash margins, you’re right. I mean, it’s not, I mean, there is a decrease in price, not in Europe, not in North America, but in Southeast Asia. Because we’ve seen between Q1 and Q2 additional pressure in Southeast Asia. When we continue to see, even though the volume exported from China are relatively stable and probably close to their maximum already, we see some players selling really at extremely low prices and most probably not even covering their variable costs.

But the big impact comes from our costs and not from prices. And you are right, we had in Q2 several elements. A lot of them are non structural. We had unplanned maintenance and also scheduled maintenance, but that were phased in Q2 and that you don’t see when you compare to Q2 last year or to the previous quarter very clearly. So we have additional costs that will not repeat.

And we also have additional costs that are a little bit more structural because we run at lower rates, right? So our plants are optimized to run, let’s say at 80%, 85% utilization rate. Today, are slightly below that. We’ve been running like that for a few quarters already. And so we see a little bit the effect of this lower rate on our specific consumptions and yields.

So I would say this will reset somehow at some point. I’m not talking about the market at this point, because we don’t see any recovery in our order book visible at this point. But there are a certain number of elements in our costs that will not repeat. So this should not be completed the basis for 2026 in terms of costs, at least. And so of course, in terms of impact on margins.

Regarding your question on Coatis, I mean, this is intrinsically a good business. We have the only phenol production unit in Latin America. We have two value chains that are important on polyamide and on solvent. And I would even say on solvent, we are exporting from Brazil. So I think now we have a non structural pressure coming from a lot of uncertainties as long as there is no clear visibility on what will be the tariffs between Brazil and The US.

And until we are in a more stable situation, I would say. As long as we will be in this uncertain environment, it will be very difficult for all the players in the value chain to get organized. Once this stabilizes, I’m pretty convinced that the business will find its balance and its way to operate because it’s legitimate, it has competitiveness, and it has a market.

Thomas Wrigglesworth, Analyst, Morgan Stanley: Okay. Thank you very much. Appreciate those answers.

George, Conference Coordinator: Thank We’ll you, now move to Vim Hosten of KBCS. Please go ahead. Your line is open, sir.

Vim Hosten, Analyst, KBCS: Thank you, and good afternoon. I also have a couple of questions. The first one is on the tariff impact. I think you mentioned clearly the impact or the uncertainty around Brazil, but can you maybe elaborate on the other regions, the 15%, for example, that have been agreed recently between Europe and The US. What kind of impact that might create for for some of your businesses?

Second question is on the outlook for the peroxides business. And specifically, I’m interested in the semiconductors and solar panels market segments. Is there some restocking in in semicon, for example, that has helped you? Is the solar panel weakness temporary? Or is it also tied to tariff impacts?

If you can just elaborate a little bit on that, that would also be helpful. And then the third and last question would be on the rare earths business of special chem. Can you maybe elaborate on how close are you or what is the current thinking about potential timing of expansion projects in that business? You said you see some interest. Does that mean that, yeah, expansion in Europe of that business might come rapidly?

A bit of clarification on that would also be helpful. Thank you.

Philippe Caren, CEO, Solvay: Thank you, Vin, for your questions. So first, So indeed, what we said is that we are not so much directly impacted by tariffs because we have a lot of flows that are local to local, but we are always, of course, indirectly impacted because those tariffs have an impact on the inflation and so on demand. That’s the same for, you know, the new tariffs announced between EU and US. We don’t have flows between EU and US. Very limited flows on rare earths, for example, but that’s really small and non substitutable.

So those taxes will have to pay anyway by the customers. So that can have an impact on demand, of course, but not on our margins. So we won’t be impacted directly, but indirectly today it’s very difficult to point too early to say what will be the impact of those new tariffs. A lot of people say it’s good, some people say it’s not good. So I mean, who knows, right, how this will evolve.

Where we see the highest level of impact today is really in Brazil, to be clear, because of two elements. I mean, there is a lot of business. I mean, Brazil is selling a lot to The US. And so all our customers, the Brazilian industry is currently potentially impacted if it’s confirmed that The US would put 50% of our tariff on these flows. And also because Asia is redirecting some of its flows from The US to Latin America.

So Brazil is very much potentially impacted. I have absolutely no doubt that they will take measures. They will take measures to protect their markets. I’m pretty sure of that. This is what they did in the past.

It was already in place and then they can do it to a larger extent. Peroxide. Peroxide, so electronic great electronic markets doing good. Of course, there’s a high level of volatility, I would say in this market right now, but all in all, good level of demand and good performance of the business. When we talk about the other grades that are for the solar panels, here the market is still down, I would say, but it will recover.

I mean, we will need some of panels in the future to do the energy transition. But for the time being, we still see a level of demand that is up. I don’t know if you wanted to complement Alex or anything?

Leopold Lutremont, Head of Investor Relations, Solvay: Sure, Donald. I think the Q2 is a little bit an adjustment. If you look again beyond one quarter and we are conducting markets already, it shows the fundamental demand in the electronic segment, especially sustained by artificial intelligence where there is a need for a lot of chips where our product is largely outperforming the photovoltaic. So even if you assume flattish photovoltaic, the demand will be positive for our ultra purity grade.

Philippe Caren, CEO, Solvay: Thank you, Alex. And then you had a question on rare earth. So clearly there’s an interest in this business that is bigger and bigger. We see our customers coming to us and asking for new options, in particular with what’s happening in terms of export control from China on some heavy rare earth materials. And so we started producing light rare earth oxides for carbon and magnets in our shell earlier this year.

For the time being, as we said, the volumes are relatively small. Today, have not yet decided to go further and we’re waiting for our customers and for the policymakers to give us the right level of comfort to invest. Again, as I said earlier, we are extremely strict on cash management in these circumstances, probably even more than we are normally, and we are normally already very, very strict. So we will not invest if we are not secured on the revenues that we will get from this unit. We will wait to secure our sales before investing, and that’s even more true in the current circumstances.

Did I miss something, Amaris? No. Okay. Vincent. Thank you very much.

George, Conference Coordinator: Thank you very much, sir. Next question will be coming from Hannah Harmes of BNP Paribas, Exane. Please go ahead.

Hannah Harmes, Analyst, BNP Paribas Exane: Hi. Good afternoon. I just wanted to have a little bit of clarification on the corporate costs if possible. My understanding was before that it was, suggested we’d have a range of 70 to 90, and now we’re obviously at the upper end of that. I was just wondering what the reason for that was or whether it’s a pull forward from next year.

And secondly, just going back to soda ash, if I may. I know that Tata Chemicals mentioned that there’s increased inventory levels in soda ash across the board at the moment, which kind of implies that we might see more pricing pressure. Is that something that you think we might see for us this year and indeed into 2026? Thank you.

Philippe Caren, CEO, Solvay: Thank you very much, Anna. I will take your maybe your question on soda ash. But first, I will give the floor to Alex on the corporate costs.

Leopold Lutremont, Head of Investor Relations, Solvay: Sure. And yes, you pointed to the corporate costs. Indeed, we have yes, about 10,000,000 more than what we indicated Q3 last year. The main driver here is the fact that the science school exited the TSA very quickly and that makes sense. At the end that does not change fundamentally anything.

I mean we can address the cost earlier, but just to give you an order of magnitude, I mean every day in the TSA, we were invoicing EUR 1,000,000. So just one or two weeks of TSA duration can create this difference. So no fundamental difference. It’s just the difference between what we thought would be the average exceed date and what was the actual exceed date. But this year, we confirm, I mean, nothing changed for twenty twenty seven, twenty twenty eight.

Philippe Caren, CEO, Solvay: We will get back to a normalized level. Thank you, Alex. Regarding soda ash, what we see is a high level of inventory in China. Not in the other regions, nothing unusual. But in China, we are at a high level.

I think it’s 1,500,000 tons of soda ash currently. This has been seen in the past, but probably not for such a long period of time. So this is obviously creating some pressure, at least in the Southeast Asian region, and might have a little bit of effect on some of other seaborne markets. So this is something that obviously we’re monitoring. The level of export is at a run rate of around, I think, 2,000,000 tons per year.

So again, high point, not unheard of, we’ve seen that in the past as well. But the combination of these export and inventory for a longer period of time than usually is a little bit unusual. So we still think that the Chinese soda ash industry will restructure. And I think we’re comforted by also the latest announcements made by the Chinese government in what they call the anti involution law, where they’re looking at assets that are more than 20 year old. And if they are more than 20 years old, they need to check if they can be upgraded or otherwise they will be shut down.

And I think there’s also a reference to more than 30 year old assets that would most probably be shut down. So that represents a significant portion of the soda ash assets in China. So this could be the start of the process that we expected. But, you know, let’s see. I mean, this is obviously something that will not happen overnight neither.

Hannah Harmes, Analyst, BNP Paribas Exane: Great. Thank you.

George, Conference Coordinator: Thank you very much, ma’am. We’ll now move to Sebastian Bray of Berenberg. Please go ahead.

Sebastian Bray, Analyst, Berenberg: Hello. Hello. Good afternoon, and thank you for taking my questions. I have two, please. The first is on environmental adjustments and provisions.

I think that Solvay previously has indicated that annual cash out should be around €60,000,000 or so to service environmental provisions. If I add up what has been booked in adjustments under the litigation stroke remediation line over the last three quarters, it’s pretty close to a 100,000,000 already. And the current adjustment in q two of about 60,000,000 seems to refer to a single project. What is going on with the adjustments? Because at some stage, one would assume that the provisions and the cash effective amounts normalized to the level of each other, they should equal each other.

But it seems what’s running through the P and L at the moment is higher than cash. Is there one project that is particularly occupying your thoughts? My second question is on Performance Chemicals. Even allowing for the one off tailwind of $20,000,000 EBITDA in Special Chem, actually the underlying margins in this business, seem to have held up quite well. What is going right there?

Is it something elsewhere in special chem, hybrid vehicles, something happening in silica? Any color is welcome. Thank you.

Philippe Caren, CEO, Solvay: Thank you very much. So I will give the floor to Alex for the question on the cash out from provisions.

Leopold Lutremont, Head of Investor Relations, Solvay: Yes. Thank you for the question, Justin. Indeed, we put some additional provision, environmental provision in Q2 and we indicated in our financial report that this was mostly linked to one remediation activity. Overall, as you know, this kind of provision are based on the cash flow estimated for at least two decades. So the cash impact of this specific provision we had to book is quite back ended.

So it doesn’t change our estimate for the normalized cash out from provision. As I was explaining to give you the vision for 2025, we estimate about 100,000,000 for pension and environment. That number is still the same we’ve been giving for one year and even changed by these recent provisions. Performance chemical, indeed there are very different dynamics between the business. Definitely Coatis is not a large business, but which have seen a complete change in the dynamic.

The rest of the business are quite resilient and silica in particular, and you probably saw the announcement of the big tire manufacturer, which have been quite resilient. So we are seeing that and it’s one it’s the largest business between within Performance Chemical. And even if last year was quite good, we saw last year some destocking in the good start of the year. This year is still quite good. And in Performance Chemical, I mean, there is electronic activities there, both in hairs and in fluorine.

And this type of business has also been quite resilient. Generally, the electronic application continue to see a sustained business. So that explains, you’re right, beyond the one time we wanted to make a clientele quite a resilient thing.

Philippe Caren, CEO, Solvay: Thank you, Ani. Thank

Leopold Lutremont, Head of Investor Relations, Solvay: much,

George, Conference Coordinator: you sir. Next question will be coming from James Hooper of Bernstein. Please go ahead.

James Hooper, Analyst, Bernstein: Hi. Good afternoon, and thank you very much for taking my questions. The the first question is about working capital in in the bridge as you’re trying to manage that down. What do you think the sustainable level of working capital is without affecting service levels for the business and either percentage of sales or DSOs? How big is the opportunity here?

Because will this be managed in 2025? And then what will change in 2026? And then my second question is about Green River. Has the plans to ramp this up for later in the year or early twenty twenty six changed given the demand environment in soda ash? Thank you.

Philippe Caren, CEO, Solvay: Thank you, James. So I will give the first question to Alex and

Leopold Lutremont, Head of Investor Relations, Solvay: I will probably take the second one in soda ash. Sure. As we indicated, clearly the part which is linked to the TSA, it’s here to say it’s represented 25,000,000. Generally, I don’t have the exact number in mind, I think our working capital sale if you look on the moving average is around 13%, which is quite good in the industry. But again, as the sales have been going down, there will be a mechanical effect.

And we think within the €100,000,000 that there are probably few tens of million euro, we can structurally gain in our working capital. That’s again, that’s what make us confident in our ability to reach the EUR 300,000,000 of free cash flow this year despite the lower.

Philippe Caren, CEO, Solvay: And for ’26? Yes,

Leopold Lutremont, Head of Investor Relations, Solvay: ’26, yes, we are 12% today, 12%, 13% as a total working capital on sale is the right order of magnitude. And that puts us again in probably the first, second quartile of the clinical industry.

Philippe Caren, CEO, Solvay: But we will continue to work on How will we continue to work there? Reducing to the over dues, the terms, this is already

Leopold Lutremont, Head of Investor Relations, Solvay: Yeah. It’s typically inventories. Okay. In the context like it is now, you can probably be a little bit more aggressive on inventories than you could be in a more tight in a more tight environment.

Philippe Caren, CEO, Solvay: Thank you. Second question. So on soda ash expansion in Green River, two elements. I mean, the first one is we will complete the project. So as we said earlier on that we are going to strictly monitor our CapEx and be extremely mindful about launching new discretionary CapEx.

This one is almost complete, right? So we will complete it. It’s almost done. We will start up in the second part of this year and ramp up this new capacity until the end of the year. Number two, if those tons are not needed by the market, we will use this capacity because it’s the most competitive and we will reduce the production in another asset.

That’s what we will do. And just by doing this, we will generate better margins, right? But as long as the capacity is not needed, we will not increase the global level of production of our industry footprint.

James Hooper, Analyst, Bernstein: Thank you very much, guys. Thank you.

George, Conference Coordinator: Thank you much, sir. We’ll now move to Chetan Udeshi of JPMorgan. Please go ahead. Your line is open.

Chetan Udeshi, Analyst, JPMorgan: Yes. Hi, thank you. I just wanted to clarify your third quarter comment. When you said, Philippe, that Q3 will be below Q2, is that including the one off in Q2? Or even without the one off, you expect Q2 sorry, Q3 to be below Q2?

Philippe Caren, CEO, Solvay: Well, that frankly speaking, we don’t see today any improvement in terms

Leopold Lutremont, Head of Investor Relations, Solvay: of market.

Philippe Caren, CEO, Solvay: So it’s clear that we have the one off in Q2 that will not repeat in Q3. I would say both the positive and negative. Now we said also that we had a little bit of negative one off coming from soda ash in terms of cost. But all in all, I think it’s you need to neutralize the off the positive one off that we had in Q2 to take your new reference. We also have a little bit of higher stranded costs in Q3 versus Q2.

I would say Q3 would probably be a soft, a low point.

Chetan Udeshi, Analyst, JPMorgan: So below 200, basically, slightly, perhaps?

Philippe Caren, CEO, Solvay: That’s not what we’re saying. We don’t give numbers. I mean, I don’t no. We we don’t give numbers. Just, you know, take the reference, taking out the one offs, and and and and this is, you know, basically, where you’re.

Chetan Udeshi, Analyst, JPMorgan: Okay, fine. Okay. The second question was, I saw MP Materials, which is in the rare earth value chain. They got a huge sort of sort of check from the U. S.

Government. I’m just curious, is MP Materials a competitor to Solvay? Is that a partner? Because I think at some point, you were the only one or Solvay was the only one who had the capability to separate out the rare earths from the concentrates. So how is the dynamics?

Where are you now in that value chain on the rare earths outside China? I know you talked about the magnet, but to get to the magnet, you perhaps first need to do the separation of the redwood concentrates. And I’m just curious how does that MP Materials deal, which is quite big. Does that have any implications on Solvay?

Philippe Caren, CEO, Solvay: Yeah. Thanks, Chetan. We’re still the only one to have, at this point, to have one plan that is able indeed to take any source of material and produce any type of rare earth elements. MP Materials has a project at this point, and which is linked to a mine. So it’s a little bit different.

I mean, our assets in La Rochelle can take any product from any type of mine or even recycled material and so on and adjust its process to produce all sorts of rare elements. What I understand again, but of course you would have to ask directly to NP material is that their project is really linked to a mine. And at this point, it’s a project. However, what I’ve seen, so it doesn’t change really the landscape and the value chain. But what I saw that is very interesting is a mechanism in which in fact they would have a sort of guaranteed price because you know that today in the rare earth segment, there are a lot of different projects, but none of them is profitable because the rare earth prices that are set by China are too low.

Right? And so I think the Department of Defense or the US administration is proposing to set a floor price and to compensate the operator if the market price is below this floor price. I think this is probably something that we should look at as well in other regions and in particular in Europe if we want to develop new projects in La Rochelle. Really see what’s missing, right? The budget.

Will

Chetan Udeshi, Analyst, JPMorgan: you be adopting the same strategy that you know you would require an upfront deposit from your customers and these guaranteed minimum prices for you to invest if you have to invest a lot of money in setting up this capacity?

Philippe Caren, CEO, Solvay: Yes, we need to have a sort of security if we want to invest. Absolutely. So I don’t know if it’s upfront payment in detail, it’s possible to adjust. But yeah, I think we need to have a certain level of commitment both in terms of volume and prices. Absolutely.

So either directly from the customers or like in The US, but again, let’s see how it works. It’s just for the time being, I think an indication, but sort of mechanism that will compensate if the market price is too low. It’s a little bit like the development of renewable energies. When the electricity price was too low, people that developed solar panels or windmills, they were compensated in order to have a decent return.

Chetan Udeshi, Analyst, JPMorgan: Understood. Thank you.

George, Conference Coordinator: Thank you much, sir. Next question will be coming from Tristan Lamott of Deutsche Bank. Please go ahead.

Leopold Lutremont, Head of Investor Relations, Solvay0: Hi. I’ve got three questions, please. The first is, I was wondering if you could comment on roughly what proportion of your soda ash prices you currently sell at or above the spot price in the relevant region due to lags in your contracts? The second one is, there are some capacities that I think are expected to come back online in China, in soda ash in h two. To what extent do you see impact from that?

And also to what extent is Bayrun’s production getting out to the market now? And then the third one, I’m just interested in the kind of monthly sequential trends that you saw through the quarter and the visibility you have now on August and September. Thanks.

Philippe Caren, CEO, Solvay: And sorry, your first question can Tristan The share of spot price. The share of spot price. Good question. I think do we have this information? 20%.

20% minus. Mostly seaborne? So, I mean, it’s not really spot price. It’s more quarterly prices. And quarterly prices, let’s say short term prices are mostly in seaborne, mostly in Southeast Asia, and it’s around 20%.

Is that correct? Percent for some. For the capacity in China, I think Beowon is in the market already. I don’t know if they have an additional I mean, are new capacities coming online in the future, but I think the capacity of Beowon is more or less in the market today. And again, as I said, we are in a situation where I think inventories are at 1,700,000 tons and the export at 2,000,000 tonnes.

So high levels, but nothing beyond the historical records.

Leopold Lutremont, Head of Investor Relations, Solvay: And I would say one of the reasons that we provided the updated outlook on EBITDA is because we think we don’t see signs that it could recover in H2. So we think that loan is there. There are high inventories. The fundamental that I think the new law we saw in China is going in the right direction. But for the moment, we need to take consider that the environment will not improve.

And we need to work on our side, on our cost to make sure we adjust to this reality. Absolutely. Thank you.

Philippe Caren, CEO, Solvay: Thank

George, Conference Coordinator: you much, sir.

Leopold Lutremont, Head of Investor Relations, Solvay: Specific.

George, Conference Coordinator: Very sorry for that, sir. Ladies and gentlemen, due to time constraints, we have time for only one more question, and this question will be coming from mister Martin Roediger of Kepler Cheuvreux. Please go ahead, Your line is open.

Leopold Lutremont, Head of Investor Relations, Solvay1: Okay. Thanks. Good afternoon. First is on Special Chem. I understood that one customer has dissolved the contract, so you were compensated by gaining $20,000,000 in EBITDA.

This means this customer will be missing as of q three and beyond, which means sequentially lower demand. Is the effect for upcoming absence in sales and earnings at Special Chem meaningful? And the second one is on in the context of Coates, you talked about the redirection of Chinese products to Brazil instead of The US on the back of the upcoming tariffs. Is there any risk that the problems you have in COTIS in Brazil, I e, this massive increase by Chinese competition, that this could happen in Europe as well, I e, in other activities such as for some silica or in the fluorine business in special chem? Thank you.

Philippe Caren, CEO, Solvay: Thank you. So first question, indeed, had a customer that terminated a contract and this is the reason why we have this one off element. Obviously, this means that we will have lower revenues in the future. And this has been clearly taken into account into the guidance outlook that we’ve given for 2025.

Leopold Lutremont, Head of Investor Relations, Solvay: Very clearly. It shows also that we try when we have a significant customer to have good contracts. So that I mean, when market dynamics are changing, we can get a compensation. So no sizable impact in 2025 and we are looking at what is necessary for the future.

Philippe Caren, CEO, Solvay: Then your question on what we see in Brazil, can it happen in other places? In theory, yes, of course. But if you take soda ash or even silica, those are bulky products that cost much less to produce than Coatis is producing. And so we don’t see today and we don’t expect to see in the future Chinese soda ash lending in Europe. Obviously, this would not be competitive.

Now that being said, we’ve discussed extensively about the situation in China where the inventory level is high and they are exporting to Southeast Asia. This has not a direct impact on Europe, but it has a global effect that is creating this sort of trough today in the soda ash market. But I think

Leopold Lutremont, Head of Investor Relations, Solvay: on Coates, it was the situation is quite particular where you have this supply of 50% tariff nobody was expecting. Brazil is a net importer from U. S. So suddenly the activity in Brazil is reduced. You have very low transport costs, freight costs from Asia to Latin America.

And suddenly some Chinese products, which have to find a place to be sold. So I don’t think it’s the perfect storm, but almost so what is happening in Latin America. And as Philippe said, I mean, we know we are quite a large player there. We know the authorities are working on putting some limitation to avoid product dumping. The transport costs are increasing.

So we are analyzing, we are adjusting, we are taking measures. But it was and it will be a case for the coming few weeks and months, quite a complex situation to navigate that very specific.

Sebastian Bray, Analyst, Berenberg: Thank you very much.

George, Conference Coordinator: Thank you very much, sir. You. I’m very sorry

Leopold Lutremont, Head of Investor Relations, Solvay: to Yeah. Interrupt you, Thank you very much for your participation today. If you have any questions, please feel free to reach out to the IR team, preferably by using the investor. Relationssolva dot com email address given the summer break in the coming weeks. In September, we’ll be presenting in a few events and cities, and the calendar is available on our financial calendar page on our website.

Q3 will be published on November 6. Thank you very much. Thank you. Thank you.

George, Conference Coordinator: Thank you so much, sir. Ladies and gentlemen, that will conclude today’s conference. Thank you for your attendance. You may

Philippe Caren, CEO, Solvay: now disconnect.

George, Conference Coordinator: Have a good day, and goodbye.

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