Elementis Stock

Good morning. Thank you for joining us. I'm Luc van Ravenstein, CEO of Elementis, and you know Kath, our CFO, and it's great to share Elementis' results for the first half of 2026.

There are a lot of good things happening. Here's the agenda. I'll give a summary of the progress at H1. Kath will then cover the financials, and I'll then talk about how we are driving growth. And then there'll be a Q&A at the end.

Let's get straight into it. It is a strong performance. One year into Elevate Elementis, the strategy we launched last year, we're making great progress on all fronts. Revenue up 5% at organic constant currency, profit up 16%, a significant increase and margins at 23%.

And in terms of portfolio, we're making great strides. We completed the pharma sale in June and started a share buyback. We acquired Alchemy, a fast-growing, high-margin skin care business. And we now have the right portfolio, an excellent global manufacturing footprint that gives us supply resilience so we can fully focus on growth. And this all means we're confident of meeting expectations for 2026 full year. The order book into Q3 is solid, and that's in mixed markets.

So this is the new Elementis. You can see the transformation over the last years. We've sold talc, chromium and pharma. And this gives us a unique high-quality portfolio. Elementis today is a pure-play specialty chemicals leader in large and growing markets.

Additives are a small part of formulations, typically 1% to 2%, but they're critical for performance. So think strong margins. But also think growth. We focus on areas that make us special and where we can win, and that's hectorite, rheology and formulations.

Rheology is critical for our customers' products. That's about getting the right stability and texture. And hectorite is a unique and versatile mineral that enhances performance in a wide range of applications. And our formulations are the expertise we've built up over a long period for our customers, and that's our secret sauce.

And this is Elevate Elementis, the strategy we launched this time last year. We talked about 3 strategic priorities to create value. Accelerating top line growth is the first one. The second is getting closer to our customers, so we are their first choice. And the third one is creating a simpler and leaner Elementis. And we're taking big strides forward in all of these areas. I'll come back to that later.

On the right side, you see our financial ambitions. We're now hitting a lot of these targets. Mid-single-digit growth through the cycle. We are at 4.7% organic constant currency revenue growth. Adjusted operating profit margins of 23% plus were there at the half year, but that doesn't mean it's job done, and Kath will go into more details on this. 3-year operating cash conversion greater than 19%, we are at 95% and ROCE greater than 30%. We're getting very close there.

So that's our priorities and our progress. It's early days, but the strategy is working. And you see that in our numbers, but you also feel it when you talk to our Elementis colleagues. Our people know this is a special time here, and they feel the freedom to win.

And on that, over to Kath.

Thank you, Luc, and good morning, everyone.

Firstly, I'd like to say we're pleased that we're able to present a strong set of financials in the first half. A couple of housekeeping points around the presentation of the financials. Following the sale of the pharmaceutical manufacturing business, this is now reported as discontinued operations. The 2025 H1 P&L and cash flow figures have been restated for continuing operations and used for comparison purposes.

I wanted to briefly show an overview of the key metrics for H1 2026. Most of these items will cover in the following slides, so we won't go into detail here other than highlighting mid-single-digit revenue growth contributed to strong growth in adjusted operating profit and a 140 basis improvement in margins.

In combination with lower net finance costs and a lower number of shares following the buyback last year and the start of the current share buyback, adjusted earnings per share was up 28.8% to $0.085. We've experienced mixed conditions in the first half, but the team's focus on performance and delivery is evident, and we're starting to see the delivery of the Elevate Elementis strategy.

As we turn to look at group revenue, you'll see that despite the mixed backdrop, we delivered a strong performance with overall revenue up 9.4% on a reported basis and 4.7% on an organic constant currency basis to $318.2 million. Bridging from 2025, we had favorable FX tailwind of approximately $9.8 million and the contribution of Alchemy was $3.5 million.

Volumes were up $16 million, primarily in Coatings with strong demand in Asia and EMEA, partially offset by the weak demand environment in North America. And the muted growth in Personal Care was also impacted in Americas due to isolated weak demand in Q1.

On pricing, we delivered $6.8 million across both businesses, a testament to the specialty nature of our portfolio and ability to price accordingly in response to the inflationary impacts of the Middle East war.

And turning lastly to mix. This was down $8.7 million, primarily in Coatings as we see the benefit of our local-for-local strategy, for example, NiSATs in China. NiSATs are additive for premium decorative coatings. This strategy has benefited volumes, absolute profit and margin improvement, but comparatively lower prices result in downward pressure on revenue mix.

In Personal Care, the negative mix was due to a product mix weighted towards lower-priced but higher-margin products. We anticipate that we are slightly more weighted in H1 than recent years due to the strong Asia demand in both Personal Care and Coatings and the timing of customer promotional activity in AP Actives, alongside the ongoing macroeconomic uncertainty.

Moving on to operating profit. We delivered strong operating profit growth, which increased by 16.4% to $73.2 million. Within this, we benefited from favorable FX of $2.6 million and the contribution of Alchemy. Higher volumes resulted in $6.4 million drop-through to operating profit, representing a 40% drop-through. And the net price/mix impact was broadly neutral after pricing offset inflationary cost increases.

Our ongoing self-help savings initiatives resulted in savings of $1.3 million in the first half, bringing the total since Elevate Elementis was launched this time last year to $7.3 million. As part of the strategy, we also stated that we would invest an incremental $6 million in R&D over 2026 and 2027. And we started this in H1 with an additional spend of $0.8 million and expect more to come in the second half.

Taking the savings and incremental R&D spend together, the first half savings are a net $0.5 million of the $4 million we committed to in 2026, and we are on track to complete this by year-end.

As noted earlier, our strong profit performance helped drive higher margins, increasing 140 basis points to 23% -- the anticipated H1 weighting will moderate this in margin in H2 and for the full year.

Now let's take a deeper look into the reporting segments. Starting with Personal Care. Revenue was up 2.9% on an organic constant currency basis to $109.2 million, with strong growth in cosmetics, particularly in skin care in Asia. EMEA saw good growth, whilst North America growth was muted, particularly due to the isolated weaker demand in Q1.

AP Actives' revenue was flat with volume increases offset by mix due to a lower price product mix. In addition, there was the benefit of the Alchemy acquisition and FX tailwinds.

Good progress was made in adjusted operating profit with a 3.1% organic constant currency improvement with pricing offsetting inflationary increases, improved profitability from product mix despite the downward pressure on revenue and cost savings contributing. In addition, there was the benefit of the Alchemy acquisition.

The higher profits in turn helped to drive a higher margin, which was up 30 basis points to 38.1% compared to the reported margins last year, Personal Care now includes a circa 380 basis point improvement due to the sale of the pharmaceutical manufacturing business.

And lastly, on this slide, I wanted to highlight that Alchemy acquired in November 2025 is performing well, fully integrated into Elementis and on track for sustainable double-digit growth. Progress has also been made with the wider portfolio.

Now moving on to the Coatings segment. We delivered a strong performance in revenue, particularly compared to the mixed market backdrop with 5.6% organic constant currency growth to $209 million. We saw particularly strong growth in Asia and EMEA, partially offset by continued weak demand in North America linked to weak construction activity.

Our local-for-local strategy, which I referenced earlier, primarily benefited Coatings and especially our Asia and LatAm regions. We also saw good growth in the energy sector, which was helped by the ongoing improvements in the last year at St. Louis. The combination of higher volumes, profitable mix and cost savings has driven a strong profit and margin uplift in this segment with organic constant currency operating profit up 18.7% to $43.2 million and a 250-basis point increase in margins to 20.7%.

Now taking a look at free cash flow. A key feature of this business is its strong cash flow generation, and I'm pleased to report that we've continued to generate good free cash flow whilst investing for growth.

Looking at the key components, the seasonal working capital outflow in the first half has been driven by a combination of higher receivables and inventory. Higher receivables are due to the revenue growth, particularly in Q2, which was up circa 7% alongside no factoring in June 2026 compared to $16 million in June 2025.

Inventories are higher, reflecting raw material prebuys and inflation linked to the Middle East conflict. However, we've had a specific focus on inventory in the last 6 months, and I'm pleased to say that the quality of inventory mix has improved, and we continue to take actions to manage inventory closely.

CapEx increased versus last year as we have continued to invest in growth CapEx and complete our new Porto office and labs, which the team moved into last week. As a result of these movements, our adjusted operating cash flow was $29.8 million compared to $41.3 million last year.

And as we move down the cash flow statement, it's worth calling out 2 items. Firstly, our cash taxes were higher due to an IRS refund in 2025 relating to claimed utilized net operating losses for prior periods. And adjusting items were $7.1 million lower following a lower level of restructuring implementing Elementis simplification and leaner strategy for which actions have finished at the end of H1.

There will be some P&L charges in H2 and cash outflow in H2 and 2027. In addition, we sold the Middletown site in New York, which was closed in 2024, resulting in a circa $3.5 million net cash inflow for the half.

Our balance sheet remains robust and net debt has reduced to $163.8 million and 1.1x leverage. Looking at the key movements from left to right, we started the year with a net debt balance of $185.4 million. Adding back the free cash flow generated of $13.3 million as well as the $32.7 million of the combined net proceeds from the sale of the pharma manufacturing business and its cash outflow during our ownership, we had an increase in cash available for distribution of $46 million.

Of this amount, we used $6.7 million to repurchase shares, $4.1 million from the share buyback program started in early June and the remainder for the purchase of 1.3 million shares by the Employee Share Options Trust. The 2025 final dividend was paid in May and has a small FX impact on net debt. The share buyback program is ongoing, and we expect to finish towards the end of the year or early next year.

Now turning to capital allocation. Our aim is to maximize return on invested capital while maintaining a strong balance sheet and strategic optionality. In relation to investments, our CapEx program continues to be focused on investing for growth and productivity.

We're continuing to invest in R&D and are in progress to increase total spend from 2% of revenue to 3% by the end of 2027. To complement these organic growth investments, we will selectively pursue bolt-on acquisitions, and we continue to look for opportunities in this area whilst being mindful of our Elevate Elementis targets.

Return on capital employed at the end of June was 29.4%, a 100 basis point improvement on the prior year continuing operations ROCE and close to our minimum 30% target. On dividends, our policy is for a payout ratio of around 30% of adjusted earnings on a full year basis. As we announced this morning, the Board has approved an interim dividend of $0.015, representing a 15.4% increase on last year.

In considering future additional returns, we will assess several factors, including prevailing market conditions, our existing progressive dividend policy, the investment requirements of the business and our desire to maintain leverage at around 1x net debt to EBITDA over time, which we continue to anticipate we will achieve by the end of 2026.

I'd now like to hand you back to Luc, who will take you through the rest of the presentation. Thank you.

Thank you, Kath.

All right. I'm going to get into the 3 priorities for our strategy, Elevate Elementis, growth, customers and a leaner platform to move forward. But before I do, let me come back to why Elementis is unique, and these are the winning differentiators that I mentioned before.

Going from right to left, formulation solutions. This is our expertise we've built up over years for our customers' formulations. It's about how we deliver value to help our customers day in, day out make better cosmetics or paints.

And then rheology, where Elementis is the global leader. We have the broadest portfolio in the industry. This is about 2/3 of our business, and it is a crucial component of any formulation.

And then hectorite. It's unique, highly efficient. It's very versatile. It's being used in mascara, drilling muds, lipsticks and self-leveling coatings. And that's the red piece of the pie underneath. It's now 1/3 of our sales, and that's good for our margins, but also hectorite has given us exciting growth.

So what's so special about it? Hectorite is natural, pure and unique. And I won't go through all of these benefits here, but we're confident that hectorite will deliver double-digit growth through the cycle. And this is why, we have a unique access to pure hectorite. We own the largest commercially viable high-grade deposit in the world. Our current known resources will last for more than 50 years, and this is a competitive advantage to us.

But it's not an asset only. We don't typically sell straight hectorite. We formulate it, blend it, and this is where we innovate and add value. We're building 3-in-1 systems to bring together rheology with other functional additives such as skin care, for example. So customers get easier to use products.

But also hectorite has a unique composition that allows us to get into a lot of new exciting opportunities also outside of Coatings and Personal Care. For example, it removes PFAS, the forever chemical from wastewater. We've demonstrated on a pilot scale that it's highly efficient. So that's a snapshot of hectorite. We're just scratching the surface here on hectorite, and we're going to do much more of this. So these are our 3 strategic priorities. We have some key deliverables to advance in these 3 areas. Let me talk you through them.

Let's start with growth. I want to give you a feel for how hectorite launches are driving growth because we're always obsessing about finding new applications. And a great example is skin care. This is a large market, $800 million for rheology and sustainability is critical here. And premium textures are a sweet spot for hectorite.

A few years ago, we had hardly any sales here. So we invested in resources. We hired sales and R&D people from the skin care industry that talk our customers' language. We launched new products such as HYDROCLAY that are a great fit for this application. And last year, we had about 3% share here. So plenty of room to grow.

This year, we've seen a significant uptick. We've had a sales increase by 12% in the first half, but maybe even more exciting is the amount of end products launched, including hectorite that jumped up by 25%. There were more than 800 new skin care and sun care products on the shelves in H1 that include our hectorite. And that is a great leading indicator for expected sales.

We brought some samples for you, self-tanning cream that includes hectorite. I think of that as an early Christmas present. We developed that with a regional champion. We benefit from our local-for-local model. We've got great customer relationships, and this has gone from 0 to millions in 1 year. First choice for customers. This is something that's critical to accelerate growth. We want to be best-in-class in terms of service levels for our customers.

Let me come back to the targets we set last year. There were 2 areas that need our attention, OTIF on time in full, improving that performance and St. Louis, our biggest site in the U.S. where we make organic clays. One year on, this is a snapshot of the early benefits.

On OTIF, at the end of 2024, we were at 76%. We moved it up to 88% this H1. So we're getting close. And on St. Louis, we've made leadership changes to add know-how. We're applying best practices from other sites. That's not rocket science, but it's working.

About 99% of our production is right first time now. That's a big improvement, and it supported our growth. It's critical for the confidence of our people on the road with customers. And a great example is CHARGUARD. That's a product that stops wires and cables from burning by preventing dripping. And you see an image on the right-hand side here. This is a totally new application. Coming out of St. Louis, has generated $1.5 million of business in H1, and it's all self-help.

So the focus for us is on sustainable growth, but there was also a significant opportunity to simplify Elementis, making it a leaner, more agile company. And the structure now is leaner. For example, a much smaller top management team, but we also streamlined several functions. And on the other hand, we've invested in growth, particularly in innovation and sales. The net cost savings were about $0.5 million towards our target of $4 million for the year.

So that's a run-through of how this Elevate Elementis program works in practice, and we're very excited by the early results we're seeing. So, bringing this all together, this is a strong performance in H1. We're on track for Elevate Elementis. We are now a pure-play leader in specialty chemicals, and you see that coming through in our results. We're confident of hitting our full year '26 expectations, and that's in spite of mixed markets.

But let me end where I started, growth. I said earlier, people ask me what makes us different. They ask me what about our growth agenda. And that's exactly what we'll get into for our Product Innovation Day. Date in the diary is November 3. It's at our new state-of-the-art lab in Porto, Portugal, and we want you to get a better feel for how Elementis will accelerate growth. We'll go deeper into how our products work, innovation, how we work with our customers and we partner up with them. But it's also a great opportunity for all of you to meet our teams.

And with that, we'll take your questions. Thank you very much.

Angelina Glazova from JPMorgan. I have 2 questions, please. My first one is on the full year guidance and current developments. So we have seen strong first half results, and congratulations on that. And you have mentioned a strong momentum in the order book into Q3. But at the same time, you have opted to maintain the full year guidance, which one might read as somewhat cautious.

So could you give us a bit more color as to how you think about the second half? Obviously, external environment might be difficult to predict. But when you look between the businesses, where do you think there might be a deceleration at some point in the second half?

And then secondly, my question is on hectorite. You have mentioned today that it's already 1/3 of group sales, yet I remember that when we spoke at the full year results, it was closer to 1/4 of sales. So if you could give us a bit more color on what drove this change? And to what extent it is a change in the scope for the sale of pharma manufacturing business? And to what extent this is acceleration between segments? You have mentioned skin care. So that's maybe one to focus on.

And if you could just remind us the split of the Personal Care business between different buckets, so skin care, AP Actives because there might have been some change as well in recent years.

Thank you for those questions. I'll start with your first one. Look, we're very pleased with our H1 performance and the advancement of our Elevate Elementis strategy. But let's be clear, I think that the macro environment is still very uncertain. Consumer spending is still not great. So we prefer to be cautious and not get ahead of ourselves. But indeed, we're very pleased with our performance, and we're very confident of delivering our strategy medium term. But let's not get ahead of ourselves there.

On your second point, hectorite, yes, it has gone from 1/4 to 1/3. You're absolutely right. And this has been basically driven by 2 aspects. One is indeed the pharma sale and the other one is great growth for hectorite. We've mentioned that we are going to grow hectorite double digit through the cycle. So that's definitely been helping us in the first half as well. Skin care is growing 12%, a lot of that from hectorite, and we foresee that, that's going to continue.

So split of the businesses. For us, the Personal Care business, we've got the AP, antiappeasement actives business, and then we've got, let's say, the cosmetics business, which consists of color cosmetics, skin care and some other smaller bits and pieces.

Skin care, we just mentioned is about -- for us, we have about 3% of that $800 million market that was last year. So -- and we had 12% growth in the first half. So, it's still quite small for us, but it's growing fast. Color Cosmetics is still the vast -- or the largest part of the cosmetics business and the AP Actives business. I don't have the exact numbers in front of me, but still $75-ish million of revenue.

On a full year basis.

On a full year basis, yes. Thank you.

Vanessa Jeffriess from Jefferies. Congratulations on the results and the share price, which hasn't been here in a long time. So, you set these growth and margin targets last year, and now you're already here, which is nice to you. But can we expect any kind of further margin target or anything now that you're there? Or is the focus really on accelerating growth?

Thank you for your support, Vanessa. Look, first of all, 23% plus is our margin targets. We're only 1 half in. As Kath mentioned, typically, we have a bit of a stronger first half than the second half. So, we really -- let's first get there. And also, let's demonstrate quarter after quarter, half after half growth on the top line, margin delivery and results delivery. We're 1 half in. We're very confident that we're doing the right things and delivering our strategy. But let's deliver.

I don't know, Kath, if you have anything to add to this.

I think that's fair. I mean 1 half doesn't make us -- that we've achieved the target. So -- and just on the margin point, as I said, we do expect that to moderate in the second half just because of the H1 and H2 weighting.

And then you talked about 12% skin care growth in the first half. I didn't give numbers on cosmetics, but I imagine that was pretty good as well. I think you said it's flat. I think when we spoke a couple of months ago, there was a comment about the World Cup maybe being a tailwind I'm not sure if that came through.

You said on Page 29, the double-digit growth from high efficacy actives, which represent the majority of the portfolio. So, I'm not sure that we've seen that growth in AP Actives come through for a while. So, I guess if you can talk about that. And then I'm sorry if this is an off-based question. But I guess given what you've achieved in pharma and talc, is AP Actives actually central to the strategy anymore? And does that actually fit as part of the portfolio?

Yes. So, if you look at AP Actives, indeed, you're right about that one-off event. which I wish had ended in a different way. But if you look at the business, at the AP Actives business and the portfolio, it has changed fundamentally from where we were in 2018 when we acquired it to where we are now. So, these high-end, high-efficacy actives have grown fast. So, the shape of the business, although indeed performance has been relatively flat from a revenue and top line perspective, the shape of the business is different, and it's a profitable business.

So, we're, in that sense, happy to have it also because it gives us a better foot in the door, a stronger Personal Care business, and it helps us in conversation with large customers. And we're moving towards new applications, innovations, et cetera. We talked about new natural actives. We've had our first sale there actually in the first half, small, but still, I think, significant to demonstrate proof of concept. So, we're actually happy where this business is going. But thank you for those questions.

Kevin Fogarty from Deutsche Numis. Two, if I could. Just on Coatings, pretty strong performance if we think about the backdrop in global coatings markets, et cetera. Could you just provide a bit of detail in terms of how much of that is perhaps penetrating kind of newer markets for coatings perhaps as a driver there rather than kind of industrial and deco markets?

And just secondly, on innovation, there's clearly quite a lot going on. You're pulling out sort of 25% in terms of skin care. And I just sort of wondered what's the sort of speed of innovation like, I guess, and how does that suit a player like you guys? And perhaps wrapping into that, how does it change the customer base perhaps you're working with?

Yes. Thank you, Kevin. Your first question, coatings, indeed, I mean, a bit of a mixed backdrop. First half in the U.S., I mean, people are not moving houses. Mortgage rates are still 6% to 7%. So, the underlying market has been relatively soft. globally, a bit of a mixed bag.

Our growth has come from a couple of areas. Indeed, one is, to your point, entering into new applications. We have given the example of CHARGUARD. This is reported on the coatings. It is ending up in wire and cables, think data centers. So there, we've seen some nice growth in the first half, and we expect that to continue. But we also sell into new applications such as defense. So we sell an ultra-emitting agent that helps military vehicles not to be detectable by infrared. You can imagine that's an interesting application as well.

But other areas in existing coatings areas, Asia has done very, very well. Although the underlying market has been tough, we've grown very fast there. Like Kath mentioned, we have this new site that we installed 2 years ago, the growth has really started to come from that area. So I'd say underlying market still relatively soft, but our Coatings business has done well because we've penetrated new markets plus grown in Asia.

On your second question, innovation and hectorite and skin care. Look, I think you're spot on. If you look at our customer base and where we've been very successful in innovation, it's exactly with these kinds of customers that need our formulation expertise, need our help.

The example that you have in your bag there is a local Greek manufacturer of sun and skin care products. They were looking for a new formulation. And these kinds of customers are able to move very fast. And within months of working together, "Hey, we're looking for this kind of formulation." We brought guide formulations to them. And this has gone from, as I mentioned, 0 to millions in about 12 months.

So this is the kind of innovation we love because it's where Elementis can really add value, not just because we have fantastic products, but because we can help our customers innovate, help them make better products.

So to your point on customer base, I do believe that our sweet spot in customers is indeed those local and regional champions where we can definitely add lots of value through our local presence, through our innovation, for our formulation knowledge for both customers in Personal Care and Coatings.

Kara from ABN AMRO. Nice to see you guys again. AI is obviously quite a buzzword in the world right now. And I guess linking into the innovation point, how are you seeing AI benefit the business? Are you utilizing it to your full potential right now?

Yes. Thank you for the question. I mean I'll give a couple of thoughts on AI, and I don't think we're there yet. But we have benefit in a couple of areas. One, I mentioned OTIF, on time in full. We used to have a bunch of salespeople filling in data for forecasting models.

Now they don't -- salespeople always wrong in terms of forecasting. So now we use -- I used to be one, by the way. Now we use AI to actually understand looking at millions and millions of data from the last years to have a better forecasting model. That has actually driven our OTIF up. We're now at 88% been a big driver.

Your point was more around innovation. And I think -- we haven't really cracked that yet, but there's a few examples we gave here about new applications for hectorite. So one of the things we've done is utilizing AI, large language models, understanding where hectorite could potentially be used in a new application. And actually, some of the things we've talked about today are a result of that. But I think utilizing the full force of AI, multiplying the knowledge of the folks in our labs by AI is something that we'd love to understand better and do more of.

I don't know, Kath, if you have anything to add to that.

So I think part of it is also making sure that your data is in the right format and place so that you can leverage the AI. And we have projects ongoing at the moment and some investment to support that so that we can utilize AI further in the future.

We've got a couple of questions that have come in online. The first question is from Sebastian Bray at Berenberg. It's 3 questions, I should say. First one is, are there any signs of sequential weakening in demand into the second half of the year?

Second question is on the Coatings business. How did prices and volumes evolve in the first half of the year in Coatings?

And then the third part of the question is on the energy business. So how did the energy business perform in the first half of the year? And again, is that price or volume driven?

Thank you, Sebastian, for those questions. First one on demand, no, we haven't seen a weakening of demand. Actually, we've seen a solid start of Q3, so a solid order book. But back to the question that was asked earlier, macro is still uncertain. So, we prefer to be not getting ahead of ourselves here, but solid order book into Q3.

Second question, coatings. We've actually had quite some success in volumes. I mentioned China, Asia. Yes. $15.8 million driven by volume indeed in the group revenue. Price has gone up a little bit as well in Coatings, but I think the vast majority has been driven by volumes. We always look to price for inflation as well as in Personal Care and also in Coatings.

Energy, we've benefited there as well from volumes. I mean, partly because our St. Louis plant has been debottlenecked, which is where if we compare H1 this year versus H1 last year, we were still struggling in the first quarter to get product out of St. Louis, which is a very heavily energy-driven plant. But there, again, I'll make the same comment as in Coatings, we price for inflation.

And I think if you look at the group from the presentation, that pricing is offsetting the inflationary costs that we've seen, so we're about net neutral.

Next question was from Matthew Yates at Bank of America. So, Matthew says, can you remind me and elaborate on what drives the seasonality in Personal Care margins? H1 margins were well above consensus. So how much fade would we expect in the second half of the year?

Maybe one comment, Matthew, and thanks for that question. If you look at the margins in Personal Care, obviously, they've been increased significantly through the sale of the pharma business, which used to be reported under Personal Care. Growing hectorite is beneficial for our Personal Care margins, and we've grown hectorite nicely. You've seen skin care going up 12%. That's good for our margins.

Kath, I don't know if you have anything to add to that.

Yes. So I think if you look back in the history, you do see the H1, H2 weighting and both on revenue. And so from a fixed cost recovery perspective, that also supports margins in H1, but I think we'll expect broadly similar margins to last year in H2.

There's no more questions online.

We're good. Thank you very much, everybody. It was efficient.

Thank you.

All right. Good morning, everyone, and welcome to the Elementis 2025 Results Presentation, and thank you for joining us. Great to see you.

In terms of agenda, I'll begin with our highlights for the year and Kath, our new CFO, will then run you through our financial performance. Then I'll take you through our strategic progress over the past year and finally, to our outlook for 2026. And we'll then open for questions.

It has been quite the year. Looking back 10 months into the job, I'm really proud of everything we've achieved together. We delivered strong profit growth and margin expansion despite soft demand environment, and that's a clear proof of the quality and resilience of our business. From a strategic perspective, the sale of the Talc business and launching our Elevate Elementis strategy were more than milestones. They set the foundation for this company can achieve when we focus and move forward as one team. And we're making solid progress across all of our strategic priorities, such as innovation sales up to a record of 16.4% and 0 lost time accidents. So lots of positive momentum.

You might remember a version of this slide from our last half year result presentations. Our portfolio has fundamentally transformed over the past years. We've reshaped Elementis into a pure-play specialty chemicals business, focused on our 2 segments, Personal Care and Coatings. Selling Talc was a major step in making this happen, and it was my first priority when I started as CEO. And with Chromium sold in 2023, we exited these commoditized capital-intensive businesses, and it was absolutely the right decision. It allows us to focus on our core strengths and capabilities.

As you will have seen this morning, I'm pleased to share that we've agreed to sell our pharmaceutical business to ABF, and this sale is in line with our strategy as well, further sharpens our focus.

More on this on the next slide. In November, we added Alchemy to the portfolio, a fantastic bolt-on right in our personal care sweet spot. It's a fast-growing, high-margin business that strengthens our position in skin care and cosmetics. So this is the new Elementis. We're a company with a unique position built on 3 real differentiators: hectorite, rheology and formulation solutions. And we're really pleased with the shape of the portfolio, and we're well positioned for growth.

So we announced today that we reached an agreement to sell our noncore pharmaceutical manufacturing business to ABF. Last year, the business made $35 million in revenue. Our pharmaceutical business was originally acquired as a part of SummitReheis in 2017. It manufactures antacids and pharmaceutical excipients from our Ludwigshafen site in Germany. And while the business has performed well, it's clear that it no longer fits with our strategic focus. And because of that, the sale we announced today is the best outcome for both the Pharma business and for Elementis. It's a straightforward, clean transaction. It will reduce our capital intensity and on a pro forma basis, will deliver an uplift to 2025 group operating margins. We're working towards the completion in Q2.

With the Talc business sold, we accelerated the delivery of all of our 2026 financial targets by 1 full year, which is a fantastic result. And with Elevate Elementis, we shared our new targets, mid-single-digit revenue growth, operating margins of more than 23% and 3-year operating cash conversion to be above 90%, ROCE, excluding goodwill, of more than 30%. And our proven track record gives us the confidence that we can meet these targets and be among the top of our peer group.

Moving to sustainability. Next slide. Starting with safety, which is fundamental to how we operate. Last year, we achieved our first 0 lost time accidents since 2019. That's a big milestone. On the environment, we continue to make good progress. The divestments of Talc and Chromium have significantly reduced our carbon footprint, which is now nearly 80% lower than 2019. And we continue to transition to a more sustainable and responsible business. For example, at our hectorite mine, we moved to almost entirely renewable energy from a 0% base last year. Finally, on people, we've made a lot of changes in the organization with Fit for the Future, which was a big reorganization for us. And the engagement scores actually improved with voluntary attrition down by 40%. We're well below industry average now. But for me, even more importantly, I see it when I visit our sites, how proud the team is when I visit the Newberry, which is where we have our hectorite site or when I visit the new Porto team.

And with that, I'm delighted to hand you over to Kath, our new CFO, to cover our financial performance.

Thank you, Luca, and good morning, everybody. Before I begin, I'd just like to share some initial reflections of my first few months in Elementis. I've been here for 4 months now and 2 months as the CFO, and I've been genuinely impressed and frankly, relieved by what I've seen. I've had a really warm welcome with lots of people taking time out of their busy schedules to help me on-board. And it's clear, everyone is working with real commitment to unlock the full potential of Elementis. I've had the opportunity to visit locations in the U.K., Europe and U.S.A., and I really enjoyed learning about the business. There's nothing quite like the manufacturing environment, seeing products being made and looking to see what we're talking about in the meetings. And the real highlights for me have been hands-on in the Alchemy lab and visiting the hectorite mine.

What has really stood out is the passion, dedication, commitment and pride of our people. They care deeply about the company and rightly so. And I'm confident that we can continue to build on these strong foundations, demonstrating that we have opportunities to grow revenue and profit and continue to generate strong cash and returns.

When I look at the macro backdrop for 2025, we could be standing here looking at a very different set of results, and I'm definitely glad that I don't have to present that. Despite the challenging market, we have made good progress in 2025, and the team have done a fantastic job. And it's in this context, I'd like to cover the results for the prior year.

Following the sale of Talc, the 2024 P&L and cash flow figures have been restated for continuing operations and used for comparison purposes. I wanted to show a brief overview of the metrics for 2025. Most of these will cover in the following slides, so we won't go into detail here other than highlighting. Despite a small decline in group revenues, we delivered strong growth in adjusted operating profit and a 150 basis point improvement in margins. In combination with lower net finance costs and a lower number of shares following the buyback, adjusted earnings per share was up 14.2% to $0.137, an outstanding performance considering the challenging operating environment that Luc referenced earlier.

And as we turn to look at group revenue, you'll see that despite the backdrop, we delivered a resilient performance with overall revenue down 1% on a reported basis and 1.9% on a constant currency basis to $597.5 million. Bridging from 2024, we had a favorable FX tailwind of approximately $5.2 million. Volumes were down $5.6 million due to the weak demand environment in Coatings, resulting in a reduction of $14.1 million, and this was partially offset by volume growth in Personal Care of $8.5 million.

On pricing, we delivered $7.8 million across both businesses, a testament to the specialty nature of our portfolio. Of note, a combination of proactive pricing, procurement agility and supply chain optimization actions helped us to fully offset the direct impact of tariffs in the year. And we believe the latest news on this topic, at least of Saturday, 21st of February, will continue to leave us in a neutral position. Turning lastly to mix. This was down $13.7 million, primarily due to a combination of one-off sales in Coatings of $3.4 million in 2024, not repeated in 2025, along with the continued softness in industrial coatings and decorative end markets. And AP actives saw strong growth in lower-priced but margin-accretive products as well as a consumer-driven shift from aerosol to roll-on formats in LatAm.

As we turn our eyes to adjusted operating profit, we delivered strong growth, which increased 4.6% to $126.7 million. Within this, we benefited from favorable FX of $1.9 million. Lower volumes had an adverse impact of $1.9 million and the net price impact after offsetting inflation was $10.5 million. These headwinds were mitigated by the ongoing delivery of our self-help initiatives, which led to $18 million of total cost savings in the year and more to come on this shortly. As noted earlier, our strong profit performance helped drive higher margins, increasing 150 basis points to 21.2%, so let's take a look deeper into the reporting segments.

Starting with Personal Care. Revenue was up 2.4% to $224.5 million with strong growth in skin care and cosmetics, offsetting a slight decline in AP actives. Looking at the regional performance, we saw higher revenues in EMEA and Americas with Asia flat compared to last year. Adjusted operating profit was up strongly at $72.8 million or 16.9% and importantly, brings the absolute profitability of the Personal Care segment in line with the Coatings segment. This improved profitability was driven by improved volumes and pricing alongside cost savings. The higher profits in turn helped to drive higher margin, which is up 410 basis points to 32.4%, including the benefit of one-off volume and cost savings in H1 previously noted at the half year.

And lastly, on this slide, I wanted to highlight that our results in 2025 included the pro rata contribution from the recent acquisition of Alchemy, a small quantum for the year given the late acquisition timing, but meaningful strategically.

And now moving on to the Coatings segment. We delivered a resilient performance with revenue of $373 million compared to $386.4 million last year, with a decline in Coatings partially offset by strong performance from our Energy business. The year-on-year decline was impacted by the benefit of high-margin one-off sales in Q4 2024. The drop-through from the lower revenue led to a lower adjusted operating profit of $70.4 million. However, the combination of higher pricing and our self-help actions supported the operating margins, finishing the year at 18.9% compared to 20.3% in the year before.

You will recall at H1, we highlighted some operational challenges at St. Louis that were holding back our Coatings performance. Whilst there's still progress to be made, I wanted to share positive news that the debottlenecking program at St. Louis is progressing well and leading to improved performance, which Luc will cover more fully later.

Last year, we successfully completed the balance of our 2-year $30 million cost savings program by delivering $12 million via our Fit for the Future restructuring and supply chain initiatives. In addition to this, we announced in July a further $10 million in savings that we were aiming to deliver over the remainder of 2025 and 2026. These are net of planned additional R&D spend, which will increase our total spend from 2% of revenue to 3% over the next 2 years. As we announced this morning, we have delivered $6 million of savings already, and we will deliver the balance of $4 million by the end of 2026.

Our cost saving programs have reduced complexity and improved operational efficiency. We will continue to proactively identify opportunities to streamline our cost base and capture further efficiencies as we deliver on our growth agenda and become a simpler and leaner company.

Now taking a look at free cash flow. A key feature of this business is its strong cash flow generation. And I'm pleased to report that we generated good free cash flow of $41 million in 2025 compared to $51 million in the prior year. Looking at the key components, higher adjusted EBITDA was more than offset by the working capital outflow in the year, driven by higher receivables due to lower debt factoring and strategic inventory build. We also had higher CapEx as we increased our investment to support adjacent market growth and capital investment in support of the St. Louis improvement program. As a result of these movements, our adjusted operating cash flow was $104.7 million compared to $123.2 million in the prior year.

As we move down the cash flow statement, it's worth calling out 2 items. Firstly, our cash taxes were lower by $4.4 million, primarily due to an IRS refund received relating to a 2024 claim to utilize net operating losses for prior periods. And also adjusting items were $6.7 million lower as the Fit for the Future program finished during the year.

Our balance sheet remains robust. And whilst leverage ticked up to 1.3x, this was after acquiring Alchemy and returning cash to shareholders. Looking at the key movements from left to right, we started the year with a net debt balance of $157.2 million, adding back the free cash flow of $41 million as well as the proceeds from the Talc sale of $52.5 million, we had an increase in cash available for distribution of $93.5 million. Of this amount, we returned $79.1 million through our first buyback program and the 2024 final dividend and the 2025 interim dividend. The share buyback program led to the purchase and cancellation of approximately 4% of our issued share capital.

In October, we completed the disposal of the disused Eaglescliffe site for a negative cash consideration of $11.1 million. I would like to specifically note the strategic divestment of both Talc and the Eaglescliffe site have enabled us to significantly reduce our environmental liabilities and provisions. In November, we completed the acquisition of Alchemy for a total upfront consideration of $20.1 million. Taking off the FX of $11.4 million, we ended the year with a net debt balance of $185.4 million and a net debt-to-EBITDA ratio of 1.3x.

Our aim is to maximize return on invested capital while maintaining a strong balance sheet and strategic optionality. In relation to investments, our CapEx program will be focusing on investing in growth and productivity. We will also invest in R&D and have plans to increase total spend here from 2% to 3% of revenue. To complement these organic growth investments and as we demonstrated with the acquisition of Alchemy, we will selectively pursue bolt-on acquisitions whilst maintaining a strong balance sheet.

On dividends, our policy is for a payout ratio of around 30% of adjusted earnings. And as we announced this morning, the Board has recommended a final dividend of $0.03, taking the full year dividend for 2025 to $0.043, up 7.5% from last year and represents a 31% payout ratio.

In considering future additional returns, we will assess several factors, including prevailing market conditions, our existing progressive dividend policy, the investment requirements of the business and our desire to maintain a leverage around 1x net debt to EBITDA over time, which we anticipate we will achieve on an organic basis in 2026.

In light of the announcement of the pharmaceutical manufacturing business disposal, our expectation is to distribute the net proceeds to shareholders following completion. and we will provide a further update upon closing.

And lastly, for your reference, we've included some technical guidance for 2026 on Slide 19.

So with that, I'll now hand over to Luc, who will take you through our strategic progress over the last 12 months and the outlook for the year. Thank you.

Thank you, Kath.

For those less familiar with Elevate Elementis, this is our new strategy. We presented that in July. The plan is simple. We have 3 strategic priorities. First, top line growth, and this is about focusing on what we do best in the areas that make Elementis unique without the distractions of Talc and Chromium. Our objective is to grow revenue by mid-single digit over the medium term. And in the next slides, I'll share a view of our growth opportunities and our progress in 2025.

The second priority is about service delivery. Our ambition is to be best-in-class and the first choice for our customers. We've made some great progress, and I will show that later. Third, simplification and agility. We're building a simpler and leaner Elementis that empowers colleagues, makes us more agile and allows us to execute at pace.

Delivering against these 3 priorities is what will drive value creation and will help us to deliver the new medium-term targets.

So looking at our first priority. For us to grow and unlock our full potential, it is important to focus on what makes Elementis unique and what will allow us to win. We call these our winning differentiators, and let me briefly touch upon them. Hectorite, this is a very special asset. It's a white mineral that comes from our mine with long-term reserves. It has really unique properties because of its chemical composition and its platelet structure. We don't just sell hectorite. We modify it, add value to it, for example, by making preformulated gels for cosmetics, and our customers love its efficiency. You only need a tiny amount to get a big effect. It's natural, and it delivers the kind of premium skin feel that consumers are looking for.

Rheology, this is the science of flow. It's what's needed to stabilize ingredients in a paint can. It's also what makes sunscreen spread evenly on a skin. And here, Elementis is the global leader. Formulation Solutions, this is our expertise built up over the years of our customers' formulations. It's how our people work together with our customers to improve the performance of a paint or a skin care product day in, day out. And our colleagues in the labs have worked at AkzoNobel or Estee Lauder. They talk our customers' language, and that's a huge benefit.

Now we operate in big attractive markets, as you can see here. Our focus, though, is to target these niche areas where our winning differentiators set us apart. And we work together with our customers to improve their products. For example, in skin care, we're replacing synthetic additives by hectorite, giving a more premium texture. And in industrial coatings, we help the transition from solvent-borne to high-performance water-based formulas.

I'm not going to go into the detail of all of these here, but the point is we are using our expertise and our unique portfolio to help our customers make better and more sustainable products. So lots to go for in our current markets.

And outside of our existing markets, there is a large new adjacent space for us that we're tapping into as well. We're using the same model, and we have entered areas that we're going to scale. One example is hectorite for geothermal energy. And here, because the wells are extremely deep, you're facing ultra-high temperatures at which hectorite is stable. We're using our formulation knowledge and existing customer relationships to grow with this market. We had our first sales in 2025 and have a number of field trials planned for this year in the U.S. and Germany. So lots of exciting opportunities and potential for growth.

So we're focusing on the right areas, building on our winning differentiators, but what levers are we pulling to now bring in this growth? First, we're investing more in R&D, 50% more. For example, in application knowledge to support customers, and we're building a hectorite center of excellence. We're already seeing the benefits. Last year, innovation sales reached a record of 16.4%. That has doubled in the last 5 years. We launched 19 new products, of which we sent more than 1,500 samples to our customers.

Some of the innovation highlights from last year on the right-hand box. We launched DEOLUXE, our patent-pending non-metal-based active, and this is looking quite promising. Several large customers are testing, and we expect the first sales in the second half of this year. We also launched a number of new hectorite products, BENTONE ULTIMATE, also patent pending. It's a highly active hectorite technology that delivers exceptional skin feel, mostly for lipstick and mascara. And in coatings, we launched THIXATROL 5050W for metallic pigment orientation and waterborne automotive coatings. So lots of excitement around innovation.

And next, we're covering more customers directly, also local and regional accounts. We want to understand firsthand about their needs. And we've made good progress last year. We now service about 67% of our customers directly. We're also building a local-for-local footprint, and this reduces cost and increases reliability. More and more customers are demanding local supply, particularly in China.

So this is how we're going to look at growing organically. To complement our organic growth, we're looking at bolt-on acquisitions, but in a very disciplined way and only when it fits our strategy, which does not depend on M&A. But the acquisition of Alchemy is a great example. In November last year, we announced the acquisition of Alchemy right in our Personal Care sweet spot. And Alchemy develops innovative rheology modifiers for personal care. They are fully natural and can fully replace synthetic raw materials in cosmetics. And the business has done really well in recent years, delivering double-digit revenue growth and operating margins in line with our Personal Care business. And we're bringing on a team with incredible expertise in this market. We're already working together on new products, including with hectorite, quite a nice synergy. The point is, with Elementis behind it, Alchemy can scale faster, leveraging our global sales network as well as our application capabilities. It's a great example of how bolt-ons can strengthen our core and accelerate growth.

To make the most of this growth agenda, we need to be the best supplier to our customers. An important measure is On-Time-In-Full. And in July, we shared our target to deliver a 20% uplift over the medium term. And I'm pleased to share that we're now already halfway, and we'll stay focused on this. Second, we talked about St. Louis in July, one of our largest sites, and we have been dealing with some backlogs there. We had a big opportunity, 30% by unlocking capacity. I've made some leadership changes there, brought some experienced people back, and we're seeing the results, a 20% improvement since the first half of 2025. That puts us 2/3 the way there.

At the end of the day, all of this comes down to customer focus and mindset, whether you work in sales, R&D or in the plant. And with some of the changes we've made, we have a new top-notch customer service center in Porto, we've seen a 50% reduction in customer response times. We've also received external recognition that you can see on the screen, which is a great acknowledgment for the team.

We're building a simpler, leaner Elementis. And to us, this means driving agility, faster execution and responsiveness, so we can scale and deliver more value to our customers. And we've made good progress. We've streamlined our organization and leadership team. We've eliminated the stranded costs related to Talc. And some of these things were low-hanging fruit like reducing office spaces that we didn't really need. And some things took more coordinated effort like qualifying 50 new suppliers that led to quite significant procurement savings.

Looking ahead of 2026, we're not done here. There'll be more procurement savings to come. We're making our supply chain more efficient, and we'll continue to move towards a local-for-local model. This is a continuous journey.

All right. On to our last slide, outlook. While we remain mindful of the recent geopolitical uncertainty, we're confident in another year of progress. We're seeing great momentum and excitement building in the business. And I'm pleased that we've made a solid start to 2026 and our priorities for the year are clear: deliver organic growth through R&D and customer intimacy, achieve best-in-class customer service levels; and lastly, drive operational efficiency and continue to deliver cost savings. And the team and I are fully focused on delivering this plan.

Thank you very much. And with that, let's move to Q&A, please. Everybody could please say their name, speak to the microphone, so that folks on the call know who you are. Thank you.

Vanessa Jeffriess from Jefferies. Just wondering if you could speak first about how the first quarter has started given weather in the U.S. and improving beauty markets and how you think about seasonality for the year given coatings is normally stronger in the first half, but we're probably not going to see much improvement soon.

Hi Vanessa Jeffriess from Jefferies, thank you for that question. We had a solid start of the year which is encouraging -- Q4 was relatively soft. So solid start in coatings as well, which particularly was softer in Q4. And the seasonality is -- we expect it to be quite typical, 52-48 balance. So yes, encouraging start.

And then just on your new growth areas, great that you were able to execute on Alchemy. But how do you think about the mix between achieving that growth from bolt-on M&A and not diluting margins, given I can't imagine there's much out there making the margins you are.

Yes. Absolutely. Look, this is an organic-led strategy. So we're really focusing on organic growth, which there are great opportunities in our existing segments, as we say, Personal Care and Coatings as well as these new areas that we talked about. It really is organic-led. Look, we work with many, many companies out there, such as Alchemy. We knew that for a long time, this company -- those could be nice new arrows to our bow. But again, it's really organic-led. You're right, our margins are in a nice spot. We're driving them up further. And it's difficult to find companies that are actually accretive to our margins. Alchemy was one of those, by the way. So we're very happy to use them to grow faster.

And then just on pharma. I know that you didn't give profit, but based on past commentary, I would guess that, that's making probably 10% margins. So it seems like you sold at a multiple similar to your own group multiple, which is interesting. I think since your undervaluation, but what else is left in the group do you think that is making similar margins and could be sold?

I think you're absolutely spot on in terms of your analysis around the margins and what we did there with pharma. So for us, this was a really good step from a margin and a CapEx perspective, but also from a strategic perspective, most importantly. Pharma was really an activity that it's a really great piece of business, but it doesn't fit with us.

Looking at the rest of the portfolio now, we're really pleased with the portfolio we have. We don't have any other business in this kind of margin area. So yes, right now, it's about growth really. That's what we're focused on. We're pleased with the portfolio.

Kevin Fogarty from Deutsche Numis. If I could kick off firstly on innovation. So you called out some several examples of progress, I guess, in new rheology markets. It feels like you're making sort of more progress there perhaps rather than the current ones. It's obviously sort of quite a different sale in terms of new markets rather than the current. I just wondered if you could sort of talk a little bit about that process. And sort of I guess, culturally, how is that different in terms of what you're trying to do there relative to what Elementis has done in the past? You're at 16% in terms of innovation sales. Just thoughts on the 20% target you've got out there?

And just secondly, if we can think about Personal Care, just if you could frame the benefits from cost savings perhaps during the year. Any thoughts on Personal Care Asia and dynamics there during the year would be quite useful and just sort of confidence on retaining the margin, which is clearly at a significantly higher level than in the past?

Yes. Thank you, Kevin, for those questions. Perhaps I can take the first couple and then Kath, you can help me on the third, if you don't mind. Thank you.

So in terms of the new markets, so indeed, look, we have a large market in Personal Care and Coatings where we have great opportunities for growth. We talked in July, for example, about replacing some of the synthetic additives in sun care. That's our existing markets, huge opportunities. And if I look at our growth going forward, probably the largest piece of growth is actually going to come from those existing markets. We have exciting opportunities in new markets for sure as well, where, frankly, we've started to look into only relatively recently. Some of these opportunities, we will actually be able to address and bring in with our current sales force, application knowledge, et cetera.

I gave a little example of geothermal. So geothermal drilling is actually -- is happening a lot with our existing customer base already, the Schlumberger of this world. So we have the access to customers. We have the knowledge of deepwater drilling through our oil and gas business. So that's an opportunity we'll bring in with our existing setup.

Other opportunities, for example, we've identified a new opportunity for hectorite to remove PFAS out of wastewater. That's really interesting, but we're not going to build a whole sales force and application knowledge to -- for wastewater removal. So there, we might work with a partner, right? So I think for these new opportunities, very large, some of them will bring in with our existing knowledge. Some we will build, some knowledge we'll build, for example, in the construction market. And some we'll just have to partner up with other people. So that's the way I look at that, but a lot of innovation coming from our existing markets.

Your second question was around innovation and about our path towards the 20%. Absolutely key indeed, because if you think about everything we do in innovation, innovation sales typically generate 5% to 10% higher margins than the rest of our sales. So it's really important. It also helps us to -- in our relationship with our customers and our relevance to our customers. So we've made great steps last year, 200 basis points up to 16.4%. We foresee to further progress that with all the activities that are ongoing towards indeed our medium-term target of 20%, but we're making some good progress and the investment in R&D, which sometimes is also simply about bringing that application knowledge in is going to help.

Your third question was around Personal Care, particularly Personal Care Asia. For us, Personal Care in Asia is still a relatively smaller business compared to the European and the U.S. Personal Care business. We had some movements in Personal Care in the first half last year, Korea, color cosmetic market is a big one for us, and there was some order timing for which H1 was relatively softer. We had a better second half of the year. So we continue to see good momentum. What I would say is in the fourth quarter, we did see in antiperspirant some softness, particularly from some format changes in Latin America, as I think Kath referred to. So aerosols moving to roll-ons. That's for the antiperspirant business. But in general, we see good momentum. We're very happy with the margins. As said, Alchemy is accretive there or it is actually in line with our Personal Care markets margins.

I don't know, Kath, if you want to add anything on the margin point that Kevin was asking about.

So I think last year, we made good progress with the Fit for the Future finalization and the start of the new cost savings. Personal Care specifically also benefited from the closure of the Middletown site. So that is directly related to Personal Care. But from the other perspective, a lot of it ends up being in allocations because we've got joint plants and back office, which ends up being allocated.

Angelina Glazova from JPMorgan. I have 2 questions. First, I wanted to ask about the midterm targets on margins for 23%. You have already talked us through some drivers for growth that you see in the midterm. How should we think about Elementis bridging the gap in operating margins from current level to target of 23% plus? And do you see any particular drivers as more important relative to others? And then there is also clearly a difference in margin profiles between the 2 divisions. So how do you see that developing? And is there anything maybe for the Coatings business where you see those actions that could help lift the margins?

And then secondly, looking at 2026, are there any particular items in terms of cash flow generation, net debt development that we should be mindful of?

I'll kick-off with the first question and then if you don't mind, to complement and go on to the second question.

So in terms of the margin development, look, we made a nice step in the right direction. Actually, selling the pharma business is going to help us, like Vanessa just said, a little bit more. Look, this is really about growth. And as we just discussed, we're growing in areas that are actually margin accretive. Hectorite, we're actually looking to selling more hectorite and growing that double digit. So that's going to help the mix. That's going to help our margin development. Obviously, we're taking some more cost out this year, but there is a limit to that at a certain point. We're really -- the big reorganizations are behind us. We have Fit for the Future behind us. So this is about high-margin growth.

Obviously, we continue to look at how we can do things more efficiently. We'll always think about how we can do things at a lower cost and having Kath come in with a fresh pair of eyes a couple of months ago has also really helped in that respect. But it is about growth and about high-margin growth, and that's the way we're going to really get to that 23% plus level.

Kath, anything to add? Or you want to go to the second part?

Well, I think it's also related to the profiles in Personal Care. It has got higher margins and higher growth, and therefore, that would naturally generate some accretive margin.

Yes, good point.

With respect to cash flow and net debt, so Page 19 has some technical guidance. We're flagging CapEx will be between 4% to 5% in 2026. We will also expect a small working capital outflow in the year. I referenced in my script that we still had some factoring at the end of 2025, we will not be factoring in 2026. And so that will naturally unwind. And then with the sales increase that we're expecting, we will need to fund that.

I think from a sort of just big picture, we are expecting to be circa 1x leverage on an organic basis by the end of 2026. And when I say organic, I'm ignoring the sale of the pharma business because as we said, we expect to give the net proceeds back.

This is Madhumanti Sanyal from CaixaBank. So I want to know if there is -- if you think there is a strong synergy between the Coatings and the Personal Care business, like if Coatings continues to show lower-than-expected performance, would you consider a sale of the Coatings business without affecting the performance of the Personal Care business?

Thank you for the question. Look, Coatings and Personal Care are different markets, right? So our customers in Coatings are Sherwin-Williams and PPG and AkzoNobel and in Personal Care, you talk to L'Oreal and Estee Lauder. So the markets are different. But in terms of how we operate at Elementis, there's a lot of synergies. So most of our manufacturing plants are actually multipurpose and multi-market plants. So they service both markets, so both Coatings and Personal Care. Our plant in Livingston in Scotland and the U.K. is about half-half Personal Care, Coatings. So in that respect, there's a lot of synergies.

Also, if you look at the products that we manufacture and the knowledge that we have in our laboratories, we talked about rheology, we talked about hectorite, all of that ends up in both Coatings and Personal Care. So the product knowledge, the manufacturing footprint synergy, these businesses are intertwined. So no. But I would add to that as well is that we're actually quite pleased with the performance of Coatings. If you look back at Coatings, where we were 7, 8 years ago, the margins of the Coatings business were in a bad year, 10 percentage points around that. In a good year, it was 14%, 15%. Right now, in a low demand environment, we're at 18.9%. So we're actually quite pleased with the Coatings performance, and we're excited about the opportunities ahead.

I've got some questions from Sebastian Bray at Berenberg. Has there been any change in the energy business that led to the strong performance as you've highlighted, despite the oil price decline? One.

Second question, what are management's thoughts on additional buyback after receiving proceeds from the sale of the pharma business?

And thirdly, are there any signs of the recovery in hectorite sales in Personal Care? Did these grow in 2025? And if not, why this was the case?

Shall I take 1 and 3 and you do 2?

Sounds good.

All right. Let's do it. So Energy business, we're actually very pleased with the performance of the Energy business. And it is a relatively small business, give or take, $40 million, but it did very, very well last year. One thing that Sebastian might remember, we closed our Charleston site in the U.S. back in 2019 or early 2020, and that was at the time a purely energy-focused business, or plant, I should say. We moved the manufacturing of those products to St. Louis. So that helped us in terms of margins. That's one thing that helped us.

I would also say that by doing so, we really transformed the energy business, which if I look --when I joined Elementis 14 years ago, it was a much larger business. But now we really focus this business, one on manufacturing only from St. Louis, focus on hectorite. Why on hectorite? Because we really have a unique winning differentiator with hectorite because it works very well for deepwater drilling. So if you go very deep, you have to drill at temperatures of 250, 280 degrees Celsius and hectorite is stable at those temperatures.

So we refocused the team. We have a smaller portfolio. And actually looking at last year, we've had a lot of success indeed in difficult conditions for drilling such as deepwater. We talked about the geothermal energy opportunity. So that's what we're doing here. Smaller business, relatively small team, close the plant down to do cost out and focus on the areas that make Elementis unique. And we'll continue to do that actually.

The third question was around Personal Care and hectorite. Yes, we have grown. Obviously, last year, with the markets being a little bit soft, also the Personal Care growth was low single digits also in hectorite. But if I look at Personal Care, again, I'm turning the clock back 14, 15 years ago when I joined, this was a $30-or-so million business. We actually reported it at a certain point under oil and gas, you wouldn't believe that. But that was a purely hectorite business. And we understood where else we could sell hectorite in Personal Care in adjacent areas. So looking at the last 5, 10, 14 years, hectorite in Personal Care has grown really, really nicely. Last year was relatively lower growth, but still growth. But looking at the opportunities ahead in Personal Care as well, replacing synthetics, which continues to be very, very exciting opportunity, entering skin care, which is a $20 million or so business for us now, we're going to scale that, lots of exciting opportunities.

So I think with respect to the question on share buybacks. So as we said this morning, following the sale of the pharma manufacturing business, upon closing, we expect to distribute those funds to shareholders. We also have the target of net debt to EBITDA of about 1x, we expect to be there by the end of 2026. So that will give you a signal of what we're expecting in this year. And then as we look forward, we'll continue to take into consideration where we are on leverage and expectations.

Sorry, I've got to pretend to be Anil now. Anil Shenoy from Barclays has sent 2 questions as well. We didn't see any guidance on 2026. So are you happy with where the consensus is at for adjusted EBIT? And if so, could you help to bridge the gap between 2025 EBIT to 2026 consensus EBIT. What are you assuming in terms of growth? And what are you assuming in terms of savings?

Shall I do the first part and you the second?

Okay.

All right. Thank you, Anil, for those questions. Look, we had a solid start of the year, like we just mentioned. So we're quite happy with that. And therefore, comfortable with the consensus. In terms of the bridge EBIT '25, '26, I mean, Kath, do you want to add on that?

So as I mentioned, we expect the incremental $4 million in savings to come through. We do expect volume growth, so we'll get some natural leverage and some margin accretion continue to drop through, and that's how we're moving from 2025 to 2026. So sort of steady as she goes with the additional cost savings.

And just some last questions from Chetan Udeshi from JPMorgan. Are you expecting Q1 sales to be up compared to last year? And secondly, we didn't see volume growth this year. What are your expectations for volume growth for '26?

I think for Q1, as I said, we made a solid start. I think the most important is that if you look at where we -- the exit rate of Q4 last year was relatively softer. So we're happy to see good progression after that. For the full year, again, back to the previous questions from Anil, we're comfortable with where consensus is. We are looking at a typical balance between H1, H2, which I think also can help Chetan in terms of his modeling.

Anything to add, Kath?

[indiscernible] but I would just note the geopolitical situation has weakened. So we have an expectation, and we hope we will deliver that, but some things are out of our hands. But we will maintain our focus on our strategic targets.

Yes, we're 2 months in. It's early days. Good point.

[Technical Difficulty]

Not so much anymore, actually. When we own Talc, I had the Dutch gas price on my phone here. I was tracking it every half an hour, and I didn't get a lot of sleep. Luckily, we don't have that business anymore. And we are in specialty chemicals. So if you look at how we generate our margins, it's about adding value to our customers' formulations rather than trying to squeeze out a cent on our costs. So very much a different situation than where we were a year ago. Good question. Thank you. And we'll continue to monitor. I mean, I think perhaps one of the things to add, we continue to monitor the situation, the situation that Kath mentioned, obviously, that the recent occurrence in the Middle East. And if our input costs go up, we typically look to price to compensate for that input cost increase, definitely. Thank you. Good question.

No more questions?

Can we just get a mic to you?

Sorry, just to clarify what you just said that you're happy with consensus sales and EBIT, but you've got the loss of Pharma business, which is $35 million sales and $3.5 million EBIT, right?

So that's on a pre-adjustment for pharma, but I do suggest that people wait until it actually closes before adjusting numbers.

I am seeing no questions on the conference line. So with that, thank you very much.

Thank you, everybody.

Thank you.