Mersen Stock

Ladies and gentlemen, welcome to Mersen 2026 Half Year Results. The webcast will be structured in 2 parts. First, a presentation by the Mersen management team, represented by Salvador Lamas, Group CEO; and Thomas Baumgartner, Group CFO. Afterwards, there will be a Q&A session. [Operator Instructions]

I will now hand over to Salvador Lamas. Sir, please go ahead.

Thank you, Nathalie. Good morning, everyone, and thank you for joining us. Before turning to our first half results, let me say how pleased I am to speak to you for the first time as CEO of Mersen. Although I officially took over the role in May, I've been part of the group since 2021 and have been closely involved in defining and implementing our current strategy.

Over the past few months, I had also the opportunity to spend a great deal of time with our teams, our customers across different markets and of course, you, our investors. Those discussions have reinforced my conviction that Mersen has unique strengths: highly differentiated technologies, long-standing customer relationships, a truly global industrial footprint, and strong positions in markets that are benefiting from powerful long-term trends.

At the same time, they have confirmed something equally important, the fact that our strategy is the right one. Therefore, my priority today is to continue and accelerate its execution with discipline, agility, remaining close to our customers and ensuring that we succeed in translating these strengths into profitable growth, cash generation and value creation.

I do see opportunities to further improve our execution, additional simplification and better capital allocation. These opportunities are already today translated into internal group initiatives, aiming to further improve our quality, our processes, productivity, lead times, which are becoming more and more important these days, and efficiency in our manufacturing sites. The first half results we are presenting today are, I believe, a very good illustration of that. The market environment is very dynamic in some end markets, while remaining contrasted across geographies. We delivered very solid organic growth, maintaining healthy profitability. And therefore, today, we are raising our guidance for the full year.

So now, turning to our results. Mersen delivered a dynamic first half performance. Sales reached EUR 611 million for the first half, leading to a solid organic growth of plus 3.9% EBITDA amounted to EUR 97.4 million, which corresponds to 15.9% of sales. And operating income before nonrecurring items amounted to EUR 56.5 million, representing 9.2% of sales. This represents a solid first half, and with that, we are raising our guidance. Thomas will come back into more detail later on.

The 3.9% organic increase in sales compared to the first half of 2025 was driven first by strong growth in North America. We continue to see in the region, a very dynamic electrical distribution business as data centers customers are expanding at a very rapid pace. This is not the only growing market, as aeronautics and wind power are also on a strong momentum. Demand for silicon semiconductors also remained very strong in North America, which, by the way, is even more visible in Asia.

Going to Asia Pacific, also reporting significant growth organically, reaching plus 7.6%, even though China remained in negative territory due to weak solar and chemical end markets. As I mentioned in my introduction, the group is extremely well positioned in a wide range of countries. And in this region, even with the decrease in China, we delivered growth in India and in South Korea, driven by rail, semicon, data centers and energy storage markets.

Europe is lagging a little bit behind, reporting a slight decrease. This is mainly due to weak chemical market sales, which is in line with the difficult situation of this market. Without this market, the region would have reported positive organic growth. This decline in chemicals hides finally the good performance in aeronautics and rail in this region.

During the first half of the year, the group performed well, and I would like to briefly share and comment on some of these key successes we have. We met -- we were able to meet this strong demand for fuses to protect data centers installations in different regions. As mentioned before, data centers is a key growth segment for us, and I will come back with more details in a moment.

We also reported significant growth in silicon semiconductors. Mersen is very well positioned in the manufacturing process, especially in the ion implantation phase. Regarding EV, the group has been selected to supply fuses for Ford and Leapmotor. We released our communication on that topic a few days ago.

Finally, and this is more for the long term, we are pursuing our partnership with Terra Innovatum for the SMRs that could generate future growth potential. These achievements illustrate very clearly our position in key markets with long-term growth trends, particularly electrification, data centers, energy transition and sustainable moving.

Let me explain you now why we see data centers as such an attractive opportunity for Mersen. Behind the AI story, there is, first and foremost, an electricity story. Every new data center requires power generation, grid infrastructure, power conversion and electrical protection. We are present across virtually the entire electrical value chain, supporting these critical infrastructures. It starts upstream with power generation, where we provide solution for renewable energy projects. Electricity then needs to be conducted, transported and stored before it reaches the data centers. At every step of this electrical chain, Mersen provides technologies that help to manage, conduct and to protect the flow of electricity.

Our technologies are also present inside the data centers itself, supporting both the electrical infrastructure and the computing equipment. Across this value chain, our Electrical Power business provides critical electrical protection and power management solutions.

At the same time, growing demand for data centers also drives a high demand for semiconductors. This benefits our Advanced Materials segment, where our graphite solutions are used in critical semiconductor manufacturing processes. This growth positioning is one of our unique strengths. We are not exposed to a single product or a single application. As investments in data centers continue to accelerate, we benefit from growth across multiple parts of the ecosystem. Looking further ahead, SMRs will complete this ecosystem and will become an additional growth opportunity for the group, and I will come back to that in a moment.

For the full year 2026, we expect to exceed EUR 40 million revenue from data centers, roughly twice the level of 2025. In the first half of 2026, we already confirmed this trend by reaching above EUR 20 million.

Data centers are also one of the key drivers behind the strong momentum we are seeing in silicon semiconductors, alongside artificial intelligence, electrification and the increasing computing requirements across many industries. This is a market where Mersen enjoys a strong competitive position built over many, many years. Our products are used in several critical stages of semiconductor manufacturing, particularly ion implantation, where our graphite solutions are recognized by leading customers.

Our competitive advantages are clear, a global industrial footprint close to our customers, long-standing relationships with the leading semiconductor manufacturers and recognized expertise in high-performance graphite grades. These strengths allow us to benefit from the current acceleration of the silicon semiconductor market. In the first half of 2026, revenue from silicon semiconductors exceeded EUR 30 million, representing a strong double-digit growth compared to last year. And for the full year, we currently expect revenue of more than EUR 60 million.

Let me now turn to EV, electrical vehicles. Our strategy in this market is very selective. Rather than trying to participate across the entire EV value chain, we focus on critical electrical protection and interconnection functions, where qualification barriers are high and where our technologies create the most value. We already communicated a few years ago on our nomination with ACC to supply busbars for interconnection and monitoring of battery cells. Recently, we have announced that Mersen has been selected to supply fuses for electrical and hybrid vehicles, manufactured by Ford and Leapmotor, in addition to the nomination received from CATL at the end of 2025. These recent wins demonstrate the growth, the competitiveness of our technologies and the relevance of our global industrial footprint.

Finally, let me briefly touch on the small modular reactors, or SMRs. We see this as a promising long-term opportunity rather than a short-term growth driver. The expected growth is primarily driven by the political commitment in the United States and the growing demand for power from hyperscalers. We are well positioned in this market, and we are the only integrated isostatic graphite producer in the United States. We have, therefore, in our portfolio, graphite grades available for SMR key applications such as moderator or reflector blocks.

We are also pursuing our collaboration with Terra Innovatum, where Mersen supplies nuclear-grade graphite for the First-of-a-Kind process currently under development. Their ambition is to move toward industrial deployment before the end of the decade. While commercial volumes remain some years away, this illustrates how Mersen is positioning itself on the next generation of energy infrastructure.

I will now hand over to Thomas for more details on H1 results.

Thank you. Thank you, Salvador. The first half was indeed very strong with a very robust performance of the Electrical Power segment. This was driven by, I would say, different drivers, strong growth in power electronics, where we supply different passive components for OEMs. EV was also solid, thanks to the ramp-up of busbar deliveries for ACC. And finally, and maybe more importantly, electrical distribution continues to grow significantly, largely due to the increase in demand for data centers.

The Advanced Materials segment also benefited from growth in several markets, silicon semiconductors, as mentioned by Salvador, aeronautics, rail. On the other hand, the activity in chemicals suffered from the difficult situation of this market. Salvador mentioned it. And as far as solar is concerned, we've not seen yet any sign of recovery. And finally, SiC semiconductor sales remained, as expected, at a low level. Volumes have increased but were offset by the nonrecurrence of one-off positive effect linked to the silicon carbide long-term contract renegotiation. Those renegotiations occurred in H1 2025.

All in all, we released group sales at EUR 611 million, including a negative exchange rate conversion impact, I would say, of EUR 22 million, mainly in Q1. And what you can see as well is that we have an improvement in organic growth in Q2 compared to Q1.

If we come to profitability, the group maintained a good level of operating income and EBITDA. At constant exchange rate, operating income improved by 2% and EBITDA by almost 4%. As expected, the D&A increased as a result of our large CapEx program, and we expect a further increase in H2 as we have planned to commission large equipment. Operating margin reached 9.2% and EBITDA margin, 15.9%.

I will now comment in more detail on our operating margin and the move of operating margin between 2025 and 2026, and we have 2 positive effects and 2 negative. Starting with the positive, you can see that our volume was positive and contributed by 90 basis points to the change of margin. Second very positive thing is that the price increases and productivity measures have offset inflation, inflation on raw materials, silver and copper mainly, but as well, inflation on energies and wages.

On the other hand, depreciation and amortization have increased, as expected. I mentioned it. And more important, we had to face the positive impact of the renegotiation of long-term contract with our silicon carbide customer in H1 2025. The latter represents about 100 basis points of margin.

If we look now in more details by segment, the profitability of Advanced Materials segment has been impacted by the nonrecurrence of renegotiation of the SiC contract I just mentioned. Besides that, price increases and productivity have offset inflation.

The Electrical Power segment is growing very strongly, gaining 280 basis points on EBITDA, almost the same in operating margin, thanks to the volume effect. And what's more, we have been very successful in increasing prices, and we expect an even more important impact on H2.

If we look at the net income, you can see that it's growing by 5%, and even 10% at comparable rates with very low nonrecurring expenses of EUR 1 million. The net financial expenses are in the same range as last year with a slightly higher cost of debt at 4.9%. And income tax reached EUR 10.6 million. That is an effective tax rate of 25%, which is similar to last year.

Coming now to cash flow. I will start with the focus on change in working capital. So the change in working capital was -- over the semester was about EUR 45 million during the first half. It includes different things. First, an impact of EUR 36 million linked to the increased activity, especially in June. We posted high sales in June. So it had raised significantly and temporarily receivables, that will be paid in H2. Second effect, our inventories were revalued to the -- due to the important increase in silver and copper price. Third effect, we also reimbursed part of the SiC customer advances, as expected. And last, as it is every year, we paid net variable compensation in the first half. So, all these effects on working capital were partially offset by additional factoring and by some other effects for a net positive impact of EUR 11 million. So keep in mind that it's an important increase in working capital. But as always, with Mersen, we decrease working capital in H2.

So if you look now at the operating cash flow after CapEx, you can see that it's quite similar this year compared to last year with 2 very opposite effects. The first one is the working capital increase I just mentioned, and the second one is a lower CapEx than last year. We spent not a lot of CapEx this half year. And you remember that at the end of the year, we will have lower CapEx than in 2025.

So I would like to take the opportunity to comment on the performance in our inventories. Last year, we benefited from a huge decrease in inventory, and this explained at that time, a low consumption of working capital. And this year, we keep a very good performance in inventory. To give some numbers, our inventory level at comparable sales is lower by 9% compared to the same period last year.

So if we look now at the net debt, it reached EUR 400 million. The company financial structure remains very solid with a leverage ratio of 2.3. Our liquidity profile is very strong. As you can see, the average maturity of our financing is 5.4 years. We redeemed a private placement Schuldschein in the first half of the year, mainly using our cash in hand. So in other words, we have strong liquidity to cover medium-term repayments.

As mentioned by Salvador, all these very positive factors enabled the group to raise its guidance for the full year. We now expect organic growth between 4% and 6%. This is the upper range of our initial guidance for the full year. EBITDA margin before nonrecurring items between 16% and 16.5%, also the upper end of our initial range for the full year. Operating margin before nonrecurring items between 9% and 9.5%. This is above our initial guidance, which was between 8% and 9%. And eventually, our industrial CapEx between EUR 80 million and EUR 90 million, below our initial guidance, which was between EUR 90 million and EUR 100 million.

I now [ leave ] Salvador conclude.

Thank you, Thomas. Looking ahead, I remain confident in our [ perspectives ]. I'm convinced that Mersen enters the next phase of its development from a position of strength. That strength is built on competitive advantages that are very difficult to replicate, differentiated technologies, demanding qualification processes, long-standing customer relationships and a unique global industrial footprint.

We are very well positioned in markets, supported by powerful long-term trends such as low-carbon power generation, electrification, the transition towards direct current, the rapid development of data centers and artificial intelligence, clean mobility, and the broader industrial transition. Of course, the markets will not evolve in a straight line. Each one follows its own cycle, as we experienced in the previous years. But the long-term direction remains unchanged, and we believe Mersen is well positioned to benefit from these structural trends.

Over the past few years, we have invested significantly to prepare for these opportunities, particularly in the AM segment, in the Materials segment. Today, our industrial platform is largely in place and our focus increasingly shift from building capacity to generating returns on those investments and [ results ]. We also benefit from a truly global industrial footprint, allowing us to remain close to our customers, while limiting our exposure to geopolitical and trade restrictions. Finally, our financial position gives us the flexibility to pursue disciplined value-creating acquisition as opportunities arise.

Altogether, I believe Mersen has the right markets, the right capabilities and the right teams to continue delivering profitable growth and creating value over the long term. As a result, I can confirm our 2029 medium-term road map: sales around EUR 1.7 billion; EBITDA margin of 19%, plus or minus 50 basis points; operating margin of 12%, plus/minus 50 basis points; and ROCE at 13%, plus or minus 50 basis points. I remind you that these objectives have been defined in February 2023 with different exchange rates.

With that, thank you, and let's move to you questions.

[Operator Instructions] The next question is from Giovanni Selvetti from Berenberg.

Can you hear me?

Yes.

Congratulations for the results. I have a few questions. One is like about a few numbers just to kind of understand if I got them right. You said that revenues from data centers were around EUR 40 million in H1, whilst from -- for the semiconductor business was around EUR 60 million. Is that correct?

No, it's the full year amount.

Yes, EUR 60 million for the full year and EUR 30 million in H1. Is that correct?

Yes. I think for data center, it's EUR 40 million for the full year.

Okay. And maybe you also mentioned that there's -- the increase in the organic growth for the Electrical Power division is also linked to the ramp-up of deliveries of ACC -- for ACC. If you can please quantify that in Q2 and in H1?

And my last question is really on the profitability of the electrical power distribution because you clearly mentioned that with volumes, margins are improving. And I was wondering how close you are to full capacity in that division. So how much room you have more to improve margins going forward?

Maybe I will start with the last question. In fact, in terms of capacity for -- in electrical distribution. In fact, it's not very capital intensive. So you can follow quite easily the capacity increase in capacity without weighting on your margins. And what we can say is that as always, electrical distribution for us is more profitable than -- in the U.S. especially than in other regions. So when we do business in the U.S., it's -- we have a positive mix. So it's profitable for Electrical Power business.

But can you just give us a rough quantification of the difference in the profitability, like 2 points more, 3 points more?

No, I'm sorry, we don't do that.

Okay. And yes, and then on ACC?

Yes. We don't disclose exactly the number of ACC deliveries. What I can tell you is, H1 deliveries -- the ramp-up continues in ACC. We have delivered more or less close to 3x the volume compared to last year in terms of parts, in terms of volume. It still is behind the schedule of ACC, as probably know. Ramp-up has been a little bit more difficult than scheduled, but we are following this growth, and it keeps growing in H2.

The next question comes from Thomas Renaud from Kepler Cheuvreux.

Can you hear me?

Yes.

I have several questions, please. The first one on pricing. What was the price effect in Q2? And are you, let's say, satisfied with the price increase implemented so far?

I have a second question on guidance. As you expect a stronger growth in H2 compared to H1, is the low end of the guidance simply cautious? Or are there specific factors that could bring the growth closer to that level?

And I have 2 more questions on data center and working cap. On data center, U.S. peers are reporting orders and sales growth well above 100%, alongside, let's say, 2x to 3x increase in content for new architectures. Are you seeing similar trends?

And on working cap, you mentioned the advance payment in H1. Could you please quantify the amounts remain to be repaid over the coming years and how it could impact the working cap profile over the next two years?

So the price increase in the second quarter was around 3%. So it's increased compared to the Q1. And it will further increase -- there will be further increase in H2.

With regard to the strong growth in H2, you said that the guidance -- that the low end of the guidance is maybe conservative. I would say that, you know what, the environment -- geopolitical, macroeconomic environment is not obvious, changing. So we will see at the end of the year, for us, it's a good level of the guidance what we gave today.

Regarding data centers, I can take that one. Yes, I confirm the numbers are these. We see this trend of [ times 2 ], potentially more on this trend on volume.

And on working capital, you said that, yes, we still have some advanced payments to be repaid, something between -- I won't give very, very -- I would give rough figures, between EUR 20 million and EUR 30 million to be repaid, but in several years, I mean.

The next question comes from Julien Onillon from Marex.

Yes. Can you hear me?

Yes.

Yes. So, a few questions -- 4 questions to start with. The first, could you tell us what your sales are in EV in the first half to EVs? And I got in mind, for the full year, around -- last year, about EUR 30 million. What you could expect for this year in terms of EV sales, considering all the growth you have?

A similar question about silicon carbide. You didn't speak so much. I had in mind about EUR 55 million last year. Is it something where you see, however, a bit of growth? You mentioned it's still weak. But could you see some small improvement anyway this year?

And 2 specific markets I just want to talk. First, you had contract with the DLA for the defense in the U.S. Potentially, it's going to effectively some missile in the U.S. for using some graphite. Knowing that the U.S. is consuming right now a lot of missile in Iran, are you -- have some numbers to give us on what sort of sales you are doing right now, what could happen for this year?

And the fourth question, coming to the Soitec contract, I remember, you have done an impairment on that. But you mentioned that you were working on a solution to a new market. Could you tell us where you're going right now on this specific market -- specific project here? And have you effectively in mind something that you could [ fill ] the investments you have done?

I will -- thank you for your question. I will answer to the specific numbers you asked. EV is around EUR 15 million in H1, and we give no guidance on the end of the year. And SiC business, silicon carbide business, semiconductor was around [indiscernible] for the H1.

Yes. Regarding DLA, DLA, you know it's a defense contract with the Logistics Agency in North America. We are supplying this contract. We communicated the envelope of this contract, which is close to $10 million. We are delivering to that contract, okay? So we don't know at this stage, additional contracts to come. They might be their discussions. But at this stage, it's early to say.

And regarding Soitec, yes, we are today focusing on working the diversification program on our processes that we have developed to supply this energy. This is not short-term action. This is medium, long-term impact.

The next question comes from Jean-Francois Granjon from ODDO BHF.

Can you hear me?

Yes.

Four questions from my side. The first one, I would just come back on the -- I don't quite understand the amount of the sales for the SiC business during the first half. So just could you remind us the sales for this business for the first half?

The second question is regarding the depreciation. We see, I would say, relative stabilization in H1 compared to last year. Do you expect the similar level for the full year? And the question is, so in fact, your guidance, you expect -- you improved the guidance for EBITDA, but you expect -- you increased more the expectation for the EBIT margin versus the EBITDA margin. So can we explain that by probably less depreciation compared to what you expect previously?

The third question is, you have reached a historical level EBIT margin, 14.9% for the Electrical Power. Is it sustainable for the coming years, I would say, on average, 15% or more than that?

And the last question, I will come back on the working capital. So if I understand, you expect higher or better level for the working capital during the second half. And could you give us some more color regarding what you expect for the free cash flow for the full year after the EUR 6 million mentioned last year?

Okay. Maybe I will start with some figures. Sales in SiC, it's around EUR 25 million in the first half. So regarding depreciation impact, yes, it's because exchange rate -- at the same exchange rate impact, depreciation increased by EUR 2 million, compared to the first half last year. And it's less than what was expected because we commissioned, for technical reasons, the CapEx a little bit later this year compared to what we thought at the beginning of the year. So that's why, at the end of it, there will be more depreciation in the second half but still lower that was expected when we made the guidance at the beginning of the year.

I will take the third one regarding the sustainability, we can say, of the Electrical Power performance in terms of EBIT margin. The answer is yes. We -- at this stage, we don't expect any reduction on this performance. The opposite, when we compare this performance to peers, we can say like this, we still can see slight margin improvement in the next months, okay, I should say. So yes, I think it's sustainable, to answer the question.

Regarding working capital, I will not give number, Jean-Francois. Why? Because it will depend on the growth in Q1 2027 for working capital. That's why I will not comment today on the cash that will be -- but I can tell you that even with whatever the scenario, the second half would be far better before CapEx, so far better.

So Thomas, we can confirm that normally, you should have a higher free cash flow compared to last year, compared to the EUR 6 million in the last year?

This is a fair assumption.

There are no further oral questions at this time. So I will now return the conference to the speakers for the writing questions.

And then, we have several questions from Paul Manigault of Amiral Gestion. I will list them and then you can answer. So regarding data center, Littelfuse mentioned that the new architecture for the 800-volt DC will be very positive for the product by 2 or by 4 compared to the current architecture. Is this the same order of magnitude for you?

Second question, new data center might use more SiC semiconductor. When do you see a reverse for the SiC market? You mentioned EUR 30 million of sales for silicon. So I can give again that -- Thomas just mentioned it. It's EUR 25 million for SiC sales in the first term.

And last question on that is also comparing to Littelfuse. Littelfuse expects a strong acceleration for Q3. Do you see a similar acceleration for your Electrical Power division in Q3 that also accelerated in Q2? So maybe, we'll start with that.

Yes. Thank you for the questions. So yes, I think you've been reading exactly the Littelfuse press releases. That's good. We are in the same type of market, not the same type of product portfolio. So I can say, yes, regarding our portfolio today and the new product portfolio that will come, once this architecture of 800-volt DC will be, let's say, finalized, at least first version, yes, we see a positive impact on some of our product ranges [ times 2, times 4 ]. It's not a surprise. At the same time, moving to 800-volt DC, yes, will trigger some additional opportunities for us in the group, meaning the Advanced Materials segment, where the SiC normally will take over part of this architecture as well. In line with what you mentioned, the question about H2, definitely, H2 we would expect to be higher than H1.

So now, one question on the LTA with SiC customer. Will we have a negative impact in the second half? Or is it, I would say, in the first half?

The very last important impact was done in the first half, in fact. Clearly, we have some residual impact in H2, but it's residual.

So now, one question maybe on the breakdown of data center sales. So the question is, so we mentioned EUR 20 million for the first half, EUR 40 million for the full year. Is it split of Asia, U.S.? Any comment on that? Is one region growing faster than the other?

Definitely, North America is faster than anybody else. We do see recently -- and I think this is the sense of your question -- as capacities have been saturated in North America for data centers providers, I should say, infrastructure suppliers of components as we are, we see an increase in Asia to deliver customers that will position their systems, their solutions in North America. So this is why the number between 50% is difficult to calculate, depending how you look to the situation. So yes, North America is much faster than anybody else.

One clarification also. It was mentioned EUR 60 million for the full year was for silicon semiconductor as the first half is EUR 30 million for silicon semiconductor. And we mentioned also the second part, which is SiC being EUR 25 million for the first half.

So there are no other questions on the chat.

Any questions?

The next questions come from Julien Onillon from Marex.

Sorry, I just come back with 3 more questions. First. SMR. You mentioned that you will be starting some prototype tests during '26 and '28, new customer will start. Any small sales or it will be really marginal? And have you maybe some idea what could be in 20230 some revenue on this part?

Second question, you mentioned about the decline in the sales in chemicals. Could you remind us basically the revenue you have done maybe in H1? What was the decline compared to last year in percentage to have in mind how big was the decline in chemicals?

And third question, very technical question maybe, but I've seen on the cash flow statement, there is a EUR 4.6 million scope effect, negative scope effect. What it's about? Because I don't have in mind any acquisition or disposal at this time. So what is this scope effect?

Okay. We'll start with the SMR question. The line was not so good. Hopefully, you got the question right. Yes, this SMR, yes, I explained, is definitely mid, long term. This being said, we already received some orders for the prototypes, for example, with Terra Innovatum. There are other customers as well that we are working today as prototype stage. This will generate very low number of sales, mostly in 2027, not definitely in 2026. So this is still small as of today. We expect really ramp-up of this technology once these reactors start to be qualified by the nuclear authorities in North America. And this is expected between '28, '29, '30, depending on different customers.

For chemicals, in fact, to give you a sense of the decline, it was between minus 15% and minus 20%. This is linked, as we said, to the industry, as well to the fact that the H1 was very, very strong last year. And the chemical sales is around EUR 45 million, I would say, in the first half. And you know what, they are sometimes big orders. So it's -- you can have some very good years, strong years and some declines because of this project effect, I would say.

Then the scope effect, in fact, I think you mentioned the fact that there was an activity that was previously in Electrical Power, which now is in Advanced Materials, in fact, for rail industry, contract for rail industry. And in fact, Electrical Power was doing something, Advanced Materials was doing another thing. And we wanted to combine both in the same segment in order to increase synergies.

[Operator Instructions] The next question comes from Jean-Francois Granjon from ODDO BHF.

Yes. Two more questions from my side. The first one concerns the Advanced Materials business. Without solar and chemicals, could you give us the trend of sales for the first half, growth or not without solar and chemicals?

And the second question, due to the fact that, as mentioned by Salvador that EBIT margin is sustainable for the Electrical Power, so more or less 15%. If we expect positive leverage for the Advanced Materials in the coming years? And previously, the margin for this division was quite high. You expect 12% EBIT margin in 2029. It seems quite cautious if we take account 15% for the EP and probably a similar level for the Advanced Materials. So do you confirm that 12% or plus 50 basis points is probably cautious or too cautious for 2029?

I will answer to that question -- this question, Jean-Francois. In fact, you see that we are not cautious on EBITDA margin, 19% compared to 16% today. And it's reasonable, but it's an increase. Don't forget that we have -- the depreciation will increase a lot. That's why, okay? And that's why -- that makes the difference. So the 12% is not understated, I would say. Okay? And then, for sure, don't forget that -- I forgot that to mention, but don't forget that there is Advanced Materials, EP and central cost well -- Electrical Power and central cost as well. You have to deduct that.

Coming back to your first question, yes, if you add back solar, clearly, Advanced Materials is in nice positive territory in terms of growth.

The next question comes from Thomas Renaud from Kepler Cheuvreux.

I don't know if I well understood, so just a clarification on what Salvador said. So you are expecting a growth acceleration in Electrical Power in H2, right?

We are seeing increase in -- especially in [ ICs ] in H2, in fact.

You mean prices? Because the question was about Littelfuse Q3 growth acceleration. And you mentioned that you could expect something broadly similar.

Littelfuse will also increase prices, so both.

Yes. But Littelfuse Q3 growth should be higher than what they published in H1, 5 points above, if I remember well.

I cannot comment the Littelfuse assumptions. I don't know them. Clearly, we see an acceleration in H2 compared to H1. It is a combination of both price and volumes related to the activity on Electrical Power. It's true. It's both of them. It's more pricing than volume, probably.

Okay. So you expect an acceleration in H2?

Yes.

Okay. And so, when we look at the basis effect in Advanced Materials, which was down 9% I think last year, we could expect something very strong in H2 at the group level, I think. Okay.

We see -- as we said, we see that the chemical will be lower than what we expected, and chemical is in Advanced Materials. We see no acceleration and no pickup in solar and not at all. And we see not a big deal in -- not a change on SiC semiconductors. So at the end of it, it will be -- we'll see.

I will come back to what Littelfuse -- in fact, we were -- in Electrical Power, we were talking about -- we have 2 business units. It's electrical distribution and power protection. We were speaking when we are commenting on Littelfuse, it's electrical distribution, in fact. Electrical protection is not the power conversion effect. So please don't keep in mind that necessarily there will be a huge pickup in Electrical Power globally. So what we said -- we gave the guidance. We don't give guidance per segment. But at the end of it, compared to -- if you do the H2, it will be slightly to much more growth than H1 globally.

The next question comes from Giovanni Selvetti from Berenberg.

I have last one maybe on M&A. We haven't touched on that. I was wondering if there is any update there, if you're scouting for any deals at the moment? And if so, in which area would you concentrate your targets?

I will take that one. Of course, the answer is, yes. We mentioned it a few months ago as well. We restarted our activities on M&A. It's always difficult or tricky to say something about it. What I can tell is confirm what we said before, and I mentioned, it's bolt-on acquisitions. We are looking at specifically some territories, Europe, North America, Asia, not in China.

Okay. But is this mainly for the Electrical Power division or for the Advanced Materials, if you can say so?

It's both.

I have one more question on the chat. So could you quantify the opportunity of sales for Mersen per SMR? For instance, [indiscernible] communicated respectively of EUR 10 million and EUR 25 million per SMR with xEnergy.

Yes. At this time, I will not give a figure. SMR is a new technology. Depending the customer you have in front, you have different constraints in terms of fuel, in terms of qualification time requirement, in terms of graphite inside each one of the solutions, depending what the technology they are looking for. The only thing I can mention is, these numbers are not at all surprising to me compared to what we could do in the potential future. The question there is, it's not, again, short term. It is long term. And we are today working with, I should say, the good projects or the fastest projects with the highest chances of being qualified as soon as possible. I'm specifically talking about fuel. We know Terra Innovatum. This is the customer. We do know and work with xEnergy as well. But at this stage, we have decided not to communicate any number regarding this SMR.

No more question on the chat.

So, thank you. Many, many questions today. So we look forward to updating you on our progress on October 28 for Q3 sales figures. So enjoy your holidays, and see you soon.

Thank you. Bye...

Bye-bye.

Welcome, ladies and gentlemen. Welcome to Mersen 2026 First Quarter Sales Presentation. The webcast will be structured in 2 parts. First, a presentation by the Mersen management team represented by Luc Themelin, Group CEO; Salvador Lamas, Group COO; and Thomas Baumgartner, Group CFO. [Operator Instructions] I will now hand the call to Luc Themelin to begin today's call. Please go ahead.

Thank you. I'm happy to introduce this presentation for the last time. As you know, I will hand over to Salvador in less than 1 month. But about the quarter 1, we have a positive set of results to share. It actually marks a return to quarterly organic growth with plus 3.1%. All in all, reported Q1 2026 sales of EUR 296 million with 2 main highlights: robust growth in the Electrical power segment with organic growth of plus 8.7%. Electrical power is increasingly acting as a key growth engine for the group, supported by strong structural demand around electrification, grid deficiency and data centers. Positive momentum in North America with 8.2% organic growth for the period.

As far as exchange rates are concerned, we have a negative impact of EUR 17 million mainly linked to the depreciation of the U.S. dollar and the RMB. I remind you that this does not impact our competitiveness. It is purely a commercial effect. I will now turn over to Salvador and Thomas for more details.

Thank you, Luc, and hello, everyone. So the organic growth stood at 3.1% for the quarter, including around 2% of price increases, and if we look at our performance by geography, here are the key highlights, beginning with North America, the largest area in terms of revenue with 42% of the total. So North America reported a strong growth of 8.2%. This is a very solid performance driven especially by growth for data centers and growth in aeronautics. Europe reported a slight decrease, and this reflects 2 things, low deliveries in chemicals compared with a very strong quarter in 2025. And on the other hand, growth in other markets, which underlines the resilience of our business in the region, excluding chemicals, organic growth would have been close to plus 3%.

Eventually, Asia. Asia Is back to positive organic growth at 1.9%. This reflects growth in India and South Korea, driven especially by rail markets and energy storage solution. On the other hand, China reported a decrease heavily impacted by the solar market and weak deliveries in chemicals.

If we look now at our performance by segment, what we see, first, a strong growth in electrical power, driven by projects in grid quality and driven as well by a solid sales momentum for data centers. And on the other hand, a slight decrease in Advanced Materials. We saw a lower level of activity in solar and chemicals, which was largely offset by growth in the rail markets, in aeronautics and semiconductors, both SiC and SI. So overall, this segment reflects a mix trend with short-term headwinds in a few markets, but solid momentum in structural growing areas. So now I will turn over to Salvador.

Thank you, Thomas. Hello, to everyone. I would like first to briefly comment on a few business successes achieved during the first quarter. As already mentioned by Luc and Thomas, we recorded a high level of sales in electrical distribution in the United States with double-digit growth compared to the previous year. This is driven by grid quality and data center demand.

In terms of new markets, we have made progress in our collaboration with Terra Innovatum. Terra is developing a micro modular reactor that is scalable, affordable and deployable anywhere with the power of 1 megawatt at a time. Mersen will supply nuclear-grade graphite. And today, the first-of-a-kind prototype has been manufactured. Terra will now enter into a more industrial phase, which will continue to support very closely.

On the EV side, specifically the battery -- concerning the battery, we disclosed last week the signing of a contract with Vulcan Energy. This is an interesting company that is developing the first integrated lithium and energy business with a carbon neutral footprint. We will supply to Vulcan Energy, a specific synthesis unit in graphite called in our ranges, Eco&FLEX.

This is a quite unique solution that will support the conversion of a lithium chloride into lithium hydroxide, and on top of that, it will also enable to recover the energy release during the process, which will be reused in the customer processes, contributing to make this project carbon neutral. Finally, energy storage continues to be an important market. We are active in South Korea with customers such as Samsung SDI, delivering fuses to fully protect the battery storage systems. All these achievements illustrate very clearly our position in our key markets with long-term growth trends, particularly electrification, energy transition and sustainable mobility.

Now looking ahead, we remain confident on our ability to deliver our full year objectives. We are well positioned on structurally attractive end markets, such as electrification, energy transition, clean mobility, grid reinforcement and advanced technologies. At the same time, we remain focused on excellent execution while maintaining a strict cost discipline in the company. As a reminder, in 2026, the group is aiming for organic sales growth between 2% and 6%, with stronger growth in second half of the year versus H1 of this year. An EBITDA margin before nonrecurring items of 16% plus/minus 50 basis points, operating margin before nonrecurring items of 8.5% plus/minus 50 basis points, reflecting a further significant rise in amortization and capital expenditure between EUR 90 million and EUR 100 million, which is representing a significant decrease compared to previous year 2025.

As a reminder, our guidance considers a significant increase in raw material costs, particularly copper and silver, which we expect to offset through price adjustments with an impact that will be more visible in the second half of the year. With this, let's move to answering questions.

[Operator Instructions] The first question comes from Thomas Renaud, of Kepler Cheuvreux.

Okay. Two questions from my side. Can you split the Q1 price contribution by end market, if possible? This is my first question. And the second one is related to the SiC business. It appears to be recovering a bit faster than expected. Is it true or not? And what are the main drivers there? Is it the end of destocking phase, new order intake? I don't know for data centers or maybe a recovery in the EV market. So could you elaborate a bit on that point too?

Okay. Maybe I can answer to the first question. What we can say is that we have more price impact in North America and a little bit more in Electrical Power, but this is not being with a specific market, I would say. It's easier in North America compared to other regions in the world. SIC?

Yes. There is a slight jump, it's not a big difference compared to last quarter. We cannot say that there is a recovery. It's just a question of mainly segments. We don't know...

Yes. We had -- it's in line with the expectation. We had a compensation linked also not a big, big one, but few millions, a few small millions with a negotiation of last contract with 1 customer. And in fact, I can say, we have EUR 17 million of SIC sales, and last quarter was EUR 15 million. So this is not a big jump.

The next question comes from Jean-Francois Granjon from ODDO BHF.

Sorry. I was on mute. So three questions from my side. The first one concerning the U.S. distribution. So as we see a huge improvement or positive trend for this quarter, so if I will remember, this business is quite -- had some well margin in the past. So do you expect you to a strong growth coming from the U.S. distribution higher margin? And are you more confident regarding your guidance for the full year?

The second question, you mentioned in the press release strong growth coming from data centers. So this should have an impact on the U.S. distribution. So I think you have a good idea on what the business made with data centers. So could you give us more precisely or could quantify the percentage made with the data center business for all the group?

And the last question concern the solar business. So you do not expect any inflection improvement for the short term. What is your scenario for the medium term for this business? Do you expect more growth, not this year, but next year? What about the storage, et cetera.

Okay. I will answer to the first question. Effectively, we have a strong business in electrical distribution. Part of it also is driven by price increase. And as you know, price increase is compensated partially or totally increase in silver costs. So it doesn't increase the margin. So that's why today, we just continue to say that our guidance -- we maintain our guidance in terms of margins.

Regarding the second question, I will take it. So yes, data centers is an activity that we are following, of course, much more closer. Today, we can say that the Q1 result is around EUR 10 million, okay? Which represent 2x what was expected -- what was the result in Q1 2025. So effectively it's a business that is growing, and we are well positioned in this part of applications.

And regarding the solar inflection, your question about medium term, definitely, we do not expect inflection this year. We expect inflation during 2027. At this time, we still don't see the signal that will trigger this inflection. It will come from the restructuring of the industrial [ setup ] and the companies in China, producing the sales. And as we speak today, this is not still making it a reality in China. We still believe that this business could come as we say, we're always positioned in high-end applications in this market that still are true and will continue to exist in the future.

[Operator Instructions] The next questions come from Julien [indiscernible] from [ Marex. ]

So I have several questions. First, one technical question. It seems that you have changed some of the company from division, going from Electric Power to graphite. Could you explain that? Because when you look at the number of last year, they seems to have changed?

Second question, I would like to come back more fundamentally on some -- plenty of question on your different contracts, recently signed. First on Vulcan, you mentioned that it is a multiyear contract of million euros. What does it mean? Is it EUR 10 million, EUR 20 million? What type of, let's say, of revenue we can expect from this contract to come starting -- is something you expect in '26 or it's something it will come later on in '27 terms of for Vulcan?

Same question for Terra. You have not mentioned any numbers here, but I understand that there is now starting a new phase with Terra. Which type of revenue you can expect from Terra coming. Is it something here, we're expecting more in 2029 and nothing really in the short term. But just to know if any revenue are expecting for Terra.

Another contract you are not mentioning, but it's something which you already mentioned during the annual results, which is a contract with the U.S. Defense, the DLA, for providing some graphite for new rockets, considering that the U.S. has consumed a lot of rocket recently. We had in mind something like EUR 10 million potentially. Are you expecting now something much bigger coming on stream, and it will be -- again, if you have some numbers, are you expecting -- how much do you expect for this year and maybe for next year on this contract?

And finally, still on the contract, I'm talking about Korea, you mentioned in your presentation, effectively this battery energy storage contracts. I was not aware what -- how much we are talking about specifically again, EUR 10 million?

I will maybe start with the first question. So we are talking about a small business product line, which is linked with transportation. In fact, the system, it was a system to connect to the ground, the rail system. In fact, it was done, it was manufactured in Electrical Power. And it uses also graphite in it. And so it was better in order to maximize the synergies to put them in the same segment, which is Advanced Materials. And in fact, it represents something like EUR 20 million of sales per year.

Now regarding the second question on the contract regarding Vulcan, it is several million euro contract, as we explained, we will not release the full amount. It's a multiyear contract, but the expectation will be starting invoicing this contract late 2026, mainly '27 and a little bit in 2028. What we can say is you should expect on this contract -- in the life of the contract, a little bit less than EUR 10 million, just to give you some figures. The third one regarding...

Sorry, I didn't hear. It's -- I mean, broadly around EUR 10 million, so maybe plus and minus...

Less than EUR 10 million.

Less than -- okay. Clear.

Now regarding Terra, Terra, we submitted a prototype, as I mentioned, in 2026. We do expect the industrialization phase to ramp up not before 2028 because it takes time to put in place everything that is needed, okay?

Now DLA, DLA, as you know, is the Defense Logistics Agency in North America. It is not to specify what is the use of this graphite. It's for strategic purposes. And it's a contract that lasts a few years. It could be repeated. At this stage, we don't know yet, but it's something that, yes, could be renewed but at this time, not much information to share with you about it.

Regarding Korea, Korea, Samsung SDI is a recurring customer for us. So there's contracts awarded systematically every other year regarding new platforms. I can give you a number, roughly, you can expect about this contract, several million euros per year of sales on fuses.

There are no further oral questions at this time. So I will now return the conference to the speaker for the written questions.

Yes. Thank you. So a number of questions have already been answered, but there's one around small modular reactors. So the question is, can you quantify the consumption of ton of graphite by small modular reactors?

Consumption, I don't know what you mean by consumption. In fact, when you build the small modular reactor, you have to fill the reactor with around 100 tons of graphite. And it stay at least 15 years during the usage of the reactor before being replaced. That means each time they will sell a small reactor, we have to supply 100 ton of graphite.

Okay. Now move to question around organic growth. So since you printed an organic growth of 3.1% already in Q1 and you expect a stronger growth in H2, is it fair to assume that you will end in the upper end of the range provided in the guidance?

So we keep our guidance Why? Because last year, we had a very strong Q2 impact linked with some contract renegotiation. So at the end of it, that's why we don't -- we are comfortable with the guidance we gave, but we have no more indication to give.

Second question is from Giovanni, is what kind of growth did you have in Q1 for semicon both silicon and silicon carbide?

In fact, in silicon carbide, it's really important because it was very low in the first quarter of last year, it was around EUR 10 million. And as I said, it's EUR 17 million today. And on the SI, it's a double-digit growth. So a good start, I would say.

So just a clarification, ask on the tons of graphite for small [ SMRs, ] small modular reactors. So can you clarify that you said, Luc, that's for you. So 100 tons of graphite are sold to each modular reactor. What tonnage of graphite did Mersen sell in 2025?

Something around less than 12,000.

Okay. So the range 10,000 to 12,000.

Yes.

Then I have a question from Jeremy. So what is the anticipated pricing impact for the year? And maybe together with the second question, why not tighten the organic growth guidance towards the upper end of the range after the Q1 performance, especially given that organic growth is expected to be stronger in H2.

Today, I already said, and don't forget that there is a war in Iran, and can have impact -- not direct impact, I would say, but indirect impact. So I think it's not the time to give a very precise range of sales.

Now the pricing impact we have today a 2% price impact compared to last year. This is the full-year impact, the full-year impact. This will -- the 2% will disappear, okay, because we increased last year the price gradually. So it will go back to 0. I don't know if I am clear, but the 2% will disappear. And then we will add other price increases, okay, that will be -- we will see them in the end of this quarter, the second quarter and in H2, especially to cover or to compensate for the increase in raw material, namely silver and copper. That's why, yes, maybe it will be higher than 2%, but don't forget that it's not in addition to 2%.

Okay. Now we have a question on the context. So can you share some information regarding the situation in Middle East and possible impact for Mersen?

Yes, I will take this one. So effectively, the group is closely monitoring what is happening in Middle East, that's for sure. At this stage, we know that we have not seen any significant direct impact on our activities. Of course, this is lasting long or longer than expected for a lot of people. And yes, we could have some repercussions in the global economy.

So yes, we are watching it. At this stage, no significant direct impact. We may have some indirect impacts like transportation cost increasing that we are seeing. And this we consider that we can most of it compensated by price increases during the year.

Thank you. So I don't have other questions. So if you may, we still have time if you want to send a question or ask. I think Thomas wants to ask more questions.

We have a follow-up from Thomas Renaud from Kepler Cheuvreux.

Just to clarify on the Middle East question. So you are not expecting any bottleneck on your own supply chain or raw materials for the formulation of graphite or something like that?

No, no impact. No.

We don't...

No, no, we are not impacted directly.

So no more question here.

No, me neither. We don't have any more questions now.

Okay. So if we have no more questions, we look forward to updating you on our progress on July 30, sorry, for the half year results.

Thank you.

Thank you.

Thank you, Luc.

Thank you, everyone, for connecting to this call. The call is now over. You may now disconnect. Thank you.

Good morning. I think we can start our presentation. All right. To start with, I'd like to say hello. Hello to you in the room and those who are following at a distance with the webcast. As you will see this year, we're going to have 3 speakers. Salvador is going to be replacing me in May. He's with us, and he's going to talk us through the nicest part of the presentation. He's going to enjoy it. And then, of course, Thomas, whom you already know, our CFO. And I think some of you have met Salvador before several times.

Right. 2025 is a year for resilience. There's nothing much to say about the year. We've seen how the markets reacted with a slowdown in the different cycles. That's something we talked about a year ago. That's for the EV market. And then we talked about the important impact on solar energy. Well, you will see the figures in a minute, but we fared well with the other activities that we have in the group. And by and large, well, there's not much to say about the tariffs that's a year ago. We were very busy with tariffs. It was a bit worrying when we saw the tariffs and the rates announced by Trump, but yet the year was good.

Right. Let's have a look at our achievements. This is what Salvador will be talking about. We've seen interesting things that will pay off later on. Let's start with the business. We've had good successes in India for a product that we wouldn't really work on, that is the pantographs. Usually, we would be in the friction elements and the unit sales at several tens, dozens or hundreds of euros now at thousands of euros. And there's a program that focuses on revamping and changing the fleets in India, a massive program. We are qualified. And if you look at our sales, they were really good this year. And thanks to technological developments, we have gain new markets as well, like in Brazil, for instance.

Now there's something else that's important. First time that we've been nominated by CATL, the biggest battery producers in the world, a Chinese company that has 50% of all batteries manufactured wherever they are on cars, but also in energy storage. And so far, they have not turned to us for protection devices, that is fuses. And then all of a sudden, 6 months ago, they came to us, they said, could you bid on that and cover many applications. I think there are 3 platforms for cars. There's stationary batteries. There's a flying vehicle, not a plane, not an aircraft, a flying vehicle that they're going to use and therefore, a huge market for us.

A big potential if we're good in the months to come because we're working hard on that at present. And then we've been qualified as well. And that's a bit surprising, I must say. I didn't really believe in that, but the teams believed that it would be a success. So sometimes you have to follow your teams. As I said, we got a good order from the DLA, a good DLA contract for graphite applications, military applications that we can't say anything about. But we are a French company. We have a good foothold in the U.S., as you probably know, and we signed this contract with the DLA against an American competitor.

Then good bookings for what we call the grid, HVDC is the name of these contracts. And I think that Salvador will talk about this. There's ENGIE, one of the big players. And the other big player is Siemens. Well, Siemens is a big bigger than ENGIE. And then the Chinese, that's for the HVDC Chinese lines, but they're signing some export contracts. And therefore, we are working with them on the export contracts, not the contracts in China with them. So that's a good ramp-up for us, very positive. It's connected to PV and also wind farms, offshore wind farms usually. That's for the grid.

Good sales as well, which has been the case for the past years with fuses, good sales for fuses and mainly in America. And the beginning of the year was very good. And then we've written down data centers, but it's not just the data centers. The whole business is doing well. Sometimes we get 50% of our bookings for companies that equip data centers. That's really good. And as you know, this is a buoyant business, and we know that this business is going to last. We know that it's going to last at least 10 years, and that's aerospace. Aeronautics, we have many certified sites, [ AS/EN 9100 ] and we'll have to be certified in the U.S., and we'll have to deliver locally in India in the future, in the near future and probably in China as well.

Now who are the top managers? Well, Salvador will be heading the whole team and all of these top managers are ready now. They were nominated. It's been the case since January, as you know. So Salvador will be steering this boat, and he'll talk you through the business. You know him. And the 2 segments that we're talking about, I have 2 heads, 2 new heads, people who are working for us, they know the house through and through. And therefore, we have good ComEx members and even a level down the Executive Committee, the ComEx or ExCo.

Now let me talk very quickly about CSR, corporate social responsibility. We've been hatching many action plans for years. And these are the highlights, if you will. That's for 2025. The emissions have gone down. Well, the CO2 emissions, that is, of course, Scope 1, Scope 2, down 50% versus 2022. That's a big drop. Not many companies can boast that they do the same. And what's important for us as well is to have a high level of waste recycling. And if we have waste, we try and reuse our waste, 73%. That's good. When we started working on that, we were at 40% or 42% recycling rate. Now the materials segment is working hard on that because we develop our products from [indiscernible], whereas for electrical distribution, we buy components. We don't produce aluminum, we buy aluminum. So 73% is an average. We still have to work on materials. And this year, the target is 75%. That's the recycle rate. Always difficult to go up and up.

And then we've worked on Scope 3. Quite a lot of work that we put into that. You have to measure the carbon footprint of your products when you've sold them, when the customers have them. Well, first, you have to know how customers use them, what they're going to do with the products. And then what's going to happen if they're going to be recycled, reused and whatnot.

Now if you look at our figures, you will see that Scope 3 is an important scope. And usually, there's electricity that goes through our products, and we lose electricity in the wires, in your homes, those who sell copper wires as well. And we've also worked on what we call Mersen care, all types of benefits. Now I think this is something that -- let me see. We have to make sure that all of the employees who work for Mersen get something from our profit. That's the profit-sharing scheme in France that we call in [Foreign Language] in French, that's profit sharing. And we have more complicated schemes in the U.S., but it works locally.

If the sites do well, if the results are good, we give some of the money back to the employees. 96% of the Mersen workers and employees benefit from profit sharing. Skills development, 20 hours of training in average per capita, there's monitoring and many more things for the employees. And for people with disabilities, well, we have a plan. The first objective is to try and -- oh, sorry, I'm out of breath this morning. I don't know why. We've tried to identify people with disabilities in the group and then work on the working conditions for them, so as to improve the working conditions and give them a better type of access to the workstation so that life is simpler for them.

Then the energy transition, there's not much to say about this. As you can see on the slide, there's sustainable development sales. Now it's called the energy transition. It's connected to global warming. Today is a day at 2.6 degrees above the average. So you see this is the topic nowadays. We've done the math again. We have 59% connected to the energy transition. There's not much change compared to the percentage we had before. We've reclassified a number of products, though. And as you can see, the product delivers on markets that focus on the transition -- the energy transition.

Then let's have a look at the numbers for 2025. Sales to start with, let you know. EBITDA at EUR 190 million. It's in the guidance, 16% of sales. Capital expenditure, EUR 129 million. We have a strong action plan to reduce our capital expenditure, so down to reach EUR 129 million. Our guidance was at a higher level. And then what's very positive this year, as you can see, is the free cash flow. We thought that we would meet the target in 2025, EUR 6 million positive. That's free cash flow. We thought we would reach the target a year later. That's very positive for the year.

Now a few words about SiC semiconductors. There was a slowdown in 2025, which has started in 2024. I think you know that by heart as well. There were delays due to the EV market. And now with the main clients that we have, we've worked on the PVT technology that is the normal SiC, the monoblock, the ingots, and we've negotiated our contract that the clients were not following and well, 2 of them mainly. And as you know, there was a massive impact on last year's EBITDA, which is not going to be the case this year if you look at this year's figures.

So it was quite okay. And most of our clients managed to stick to their commitments that they had in writing in the contracts. And therefore, if you look at the 2 largest clients, the contracts have been modified and spread over the coming years with quantity outlooks that have been modified depending on the needs, but we'll still have these volumes in the future, quite high volumes.

And then as you can see on the slide as well, usually sometimes people mix this with the second topic. We have graphite to produce ingots. Now let's have a look at the P-S-I-C, p-SiC. Now here again, look at the EV market. Demand is not really that good for this product and for other products, but more specifically for this p-SiC product. We have a production line to produce p-SiC. And now we know that the volumes will not be that good, which was the case as well, as I said, for PVT. And even though that we're thinking about diversification because, as you know, we've identified other applications to use our production lines, manufacturing lines, but we will have a EUR 37 million noncash impairment loss this year. And now given our cash performance, the group level cash performance, we've decided the following policy, a dividend payout of EUR 0.09, that is EUR 0.09, EUR 0.09 this year. That means a 39% payout rate by restating the net income.

Thomas has some slides on that, and he'll give you more information on that. Now there we are as far as I'm concerned.

Good morning, everyone. I'm going to present 2025, and we've indicated solid results for 2025, starting with sales, nearly EUR 1.2 billion. There are a few highlights that I would like to remind you of. We've been impacted by negative -- the negative depreciation of the euro versus many currencies, starting with the dollar, U.S., the Chinese renminbi, EUR 40 million. These are mainly -- these are conversion or ForEx impacts, which does not, of course, mean we have changed anything in respect with our competitiveness. There are some scope effects. We made some acquisitions in 2024. I will come back to the prices as well, which illustrates our pricing power. I have some interesting information to share with you.

And the last point, as you know, we have been significantly impacted by solar, semiconductors and solar, minus 40% -- more than minus 40% in those 2 markets. And conversely, we've had very good performance in other markets, electrical distribution, for example, wind energy, rail as well. And if you exclude solar, you have growth of 3.5%, which is not neutral at all. It shows that we've actually had a fairly good year.

Let's take a look at the company's profitability. EBITDA amounts to EUR 190 million, which is a margin of 16%, which is very much in line with the guidance we gave at the beginning of the year. We said between 16% and 16.5%. So that's a good performance given the solar market context, which ended up being much lower than expected. Amortizations have increased. Again, this is very much in line with our investment plan. Those investments have been made and the expected returns have not appeared yet, and this has an impact, about 90 basis points. And so this has an impact on operating income. Salvador will come back to this. Those investments will continue to increase as we move forward in 2026.

Sorry, this is the wrong slide. Here we go. Let's now take a closer look at the evolution of operating margins in 2024 and 2025. I'm going to start with the center price and productivity, which offset some of the inflation on raw materials, on labor as well. Labor is a significant item line on this table, 0.4% margin, and this illustrates our pricing power. The inflation also includes customs duties, tariffs. We've said this time and again. This is not something new, but we have an objective. We define objectives, and we've reached the objective. And then we have the volume effect, which is negative. Some sites specialize more in solar or semiconductors and others. They've been impacted. But again, this was offset by adaptation plans, which partially offset this unable these unfavorable effects, 160 basis points.

Let's move to some of the adaptation measures that were taken. You may remember that we launched an adaptation plan in 2024. We said we were going to close some small operations, transfer productions. We said we were going to optimize and restructure some businesses, some operations. And in order to reduce headcounts in some locations, this cost us a total of EUR 23 million. The bulk of this was in 2024, some of it in 2025, I think EUR 17 million in 2024. And of course, this generated significant gains, EUR 20 million in the 2 years, 2024 and 2025, mainly in 2025. As a matter of fact, exceeding our expectations. So this is quite a positive point. And the return on investment was rapid. The plan cost us EUR 15 million in cash.

So in H2 2024, we said we were going to reduce tax by minus EUR 30 million within 1 to 2 years. So we're at minus EUR 63 million in 1.5 years, 18 months. So this shows that we have been very focused on this matter in quite a successful way, EUR 63 million once again in 2024 and then in 2025 with working capital requirement, which has become quite low.

Let's now take a look at margins for each of our divisions, starting with Advanced Materials, which is on the left, you can see that EBITDA is at EUR 111 million with a margin of 18.2%. This is down versus 2024. But it's a moderate drop given the significant drop of SiC and solar. SiC is only impacts Advanced Materials and solar represents the bulk of Advanced Materials. So this division had some significant market headwind, and it lost some of its operating margin as well because of amortizations, investment plans were really made for Advanced Materials. So margins shrunk. But conversely, there -- when volumes will come back, there will be a real lever effect, which means that they will significantly offset things and this will be quite considerable.

Moving to Electrical Power represents half of our total business. You can see that margin -- sorry, that was my phone. The margin went up 300 basis points, which is considerable because of the price effects. Thanks to some competitively measures, which we undertook, and they have significantly contributed to this division. Electrical Power, you can see that margins are up in similar proportions, which is positive. So Advanced Materials went down, but there is this lever effect. Electrical Power actually improved and became a more competitive division.

Looking at the overall income, net income is EUR 14 million, and this includes EUR 53 million in noncurrent. This includes the EUR 37 million mentioned by Luc earlier for p-SiC. So these are p-SiC depreciations. We have nearly EUR 8 million in additional asset depreciations. Some of them are so-called underused assets in solar. And then we have the remainder, which is linked to the competitiveness issues. The average debt has slightly increased. We have taxes as well. The tax -- EUR 18 million represents nearly -- represents a 25% tax rate. If we restate some of the asset depreciations, which could not be recovered.

Moving on to the next slide. In terms of cash, we've posted a very good performance for 2025. The operating cash flow was already very good in 2024. As you can see, we had heavily invested, but before investments, we had generated a lot of cash flow because we already started to reduce stock minus EUR 63 million once again, and the bulk of that was in H2 '24 and about EUR 30 million in 2025. So we have generated very good cash flow. This gave us a positive free cash flow, as Luc said, 1 year ahead of schedule, 1 year ahead of our plans. Thanks to a contraction of capital expenditure. We said EUR 160 million or EUR 170 million or we're at EUR 129 million, and we continued to further reduce stocks. So working capital requirement is 18%. It has never been so low.

So this takes us to an increase of debt. We have -- of course, after the free cash flow, we have the dividends. The debt is slightly going up 3%. And our financial structure remains extremely robust. We have a leverage ratio of 2.2, which is very much in line with our policy between 1.5 and 2.5 leverage ratio, which is well below our bank covenants. And we have significant cash, cash reserves, thanks to the renegotiation of a USPP in 2 segments in 2032 and 2035, they generated some cash. We have a syndicated loan as well. And in 2025, we have a deadline, and there will be no problem to reimburse it with the cash reserves. We may also use some of the syndicated credit. The average debt maturity is 5 years with fixed rate debt, which is 78%. So very good coverage.

So in summary, this gives us a fairly good balance sheet, good resilience of our margins, good cash, good financial structure. I'm going to give the floor to Salvador for what is ahead of us, mainly with a focus on 2026. Thank you.

Thank you, Thomas. I'd like to come back to some of the key points of the company to show our strengths in the current market environment and better help you understand our perspectives moving forward. First of all, we're #1 or #2 worldwide in our product categories with market share ranging from 15% to 30%. We are a recognized and well-established company in those -- in these markets. There are several types of entry barriers. First of all, from an industrial standpoint with unmatched graphite production capabilities worldwide. Another barrier is the technical with the design of specific fuses or the graphite manufacturing procedures, and these are just two examples. We're also a unique supplier of a wide range of passive components that are used in power conversion. And last but not least, we have a unique global footprint.

So this footprint is a strength. First of all, it allows us to have genuine proximity with our customers, which is very important in designing customers. It also limits the tariffs. We've really seen an increase in tariffs. More than 80% of the products we manufacture are manufactured locally and delivered locally in the same geography. And last but not least, it allows us to reduce intercontinental shipments of trade, which is really an advantage in the current context.

I would also like to say that our suppliers are largely local as well, which means, again, that we source primarily in the same geographies. So -- the company is -- operates in markets that are structurally growing midterm and long term. Renewable energies is one example, and we have some additional example here of growth rates, renewable energy between now and 2034, for example, power transmission, power distribution with infrastructures that require new operations and new applications like energy and power storage all the way to other applications such as data centers, for example, the transport sector, railway, electric vehicles, aerospace as well, which is increasingly electrifying as well. So all these markets are connected and Mersen has become an absolutely necessary, a much needed player for those industries.

Well, these markets will be drivers in the long run for Mersen. And therefore, we'll be able to reach 65% of our total sales connected to the energy transition by 2030, but also in the short term, as we know today, this is going to be a winding road, which is what we saw with solar markets. and with the SiC markets. Now this year, the solar energy market is at a low level and the turnaround point that we expected for EVs, that is SiC is something that we expect at the end of 2027. We shouldn't forget that we are strong because we operate on different markets. So even though the solar and SiC markets are at a lower level than expected, other markets will be growing. It's the case for aeronautics and the rail transport business plus the energy transition, and that includes data centers.

Which is what we can see on the slide, the following page, where renewable energies will be going down due to the fact that we'll have less on the solar front, but the other markets connected to the energy transition will be growing. On the right-hand side, we have the chemical industry markets and process industries that will follow the global economy and the global trends.

So all in all, in 2026, what we expect is an organic growth in our sales in between 2% and 6%, with more growth during the second half versus the first half of 2026. The expected EBITDA margin will be at the level of 2025 that we expected, that is 16%, plus or minus 50 bps. Then the operating margin before nonrecurring items will be impacted by the increase in amortization, which is what Thomas said earlier on. And therefore, the margin will be at 8.5%, plus or minus 50 basis points. And the industrial capital expenditure that will be in between EUR 90 million and EUR 100 million, therefore, a sharp decrease compared with 2025.

We took a number of assumptions for raw material prices, copper and silver, more particularly that we use in our products. And the assumption is that we'll maintain a high level of copper and silver price, but will offset the impact, thanks to the prices that will increase that the clients will pay. What's also important to say is that given the general backdrop and the situation in the Middle East, -- by the way, we are following very carefully what's happening in the Middle East. As we speak, we have not identified any significant direct impact on our activities. Now of course, as you know, the situation keeps on changing day in, day out. So we'll keep a close eye on the developments in the Middle East.

And if we look at capital allocation, we're going to continue and invest to maintain the level of capacity, but also to deliver on some growth projects. The normative level will be 6.5% CapEx on sales of sales after 2026. We'll also continue our dividend policy return to shareholders with a dividend that's going to be paid, which is what we've shown you. And finally, we're going to continue and use the M&A approach, our lever, which is very important for us. And by the way, if you look at our pipeline, we have quite a lot of active projects, very interesting projects for what we call the bolt-on acquisitions.

And in the midterm, that is by 2029, we can confirm our objectives with sales nearing EUR 1.7 billion. EBITDA margin before nonrecurring items, 19% plus or minus 50 basis points, operating margin before nonrecurring items, 12%, plus or minus 50 bps and ROCE, 13%, plus or minus 50 basis points. These objectives were defined in February 2023 with the numbers that you can see on the screen. And those have to be remembered.

Thank you very much for your attention. Now Luc, Thomas and myself are here to answer all of your questions -- should you have any questions.

Hello. I'd like to start with the short-term outlook. And the growth that you mentioned, which is rather easy to understand, but back to the margin levels. Okay, there's organic growth. So we might expect that this would have an impact -- a lever effect on the margins in addition to the -- going beyond the increase in amortization. Now how have you been conservative or not? Why are margins not improving better given the sales that's going to improve? We could talk about the EBITDA margin, but we could look at operations as well because in theory, there's the lever effect.

So have you factored in a number of things like the increase in the price of raw materials? Do you think that there's going to be some type of squeezing there? Do you think that the price of energy will go up? Do you have some hedging because you use energy in a way or another with coke and other elements. Could you perhaps give us more color on that? Why have margins not improved that much? Is it due to the commodity effect or raw materials?

I'll start. Now as Luc said earlier on, we renegotiated our SiC contracts. We had some positive one-offs. That is we managed to offset the situation with 0 cost, and that is equal to 0.5 margin points. And the second effect that's important is that we've seen a sharp increase in the price of silver and copper. Silver, well, the price increased twofold versus last year. And therefore, if you look at our assumptions, working assumptions, well, of course, we'll try and offset part of these increases but we can't offset all of these price increases. The impact is a big impact, EUR 10 million, EUR 15 million. It will vary, of course, there's fluctuation. So we'll have to have some type of hedging or we'll need to offset that.

By the way, our hedging will have bigger impacts during the second half versus H1. So the margins will be more positive for H2 versus the first half. So the other reason as well is that we have more volumes during H2, the second half of the year. It has to do with the phasing in of contracts. And as you know, with EVs and ACC, we have more volumes during the second half. That's the reason. That's why the margins are not increasing that much. We've given you a figure of 16%. And the operating margin, we'll do the math. It's due to amortization, the equipment that we commission, et cetera. And therefore, all of these impacts.

And to answer your question about energy, it's 3% of our sales. There's electricity. No real impact. Gas is 1% of sales, more or less. There could be some effect here and plus transport. It's not easy to do any simulation with this, but we think we have pricing power. And then there are the indirect impacts. Frankly, we don't know how to quantify this, like the suppliers who themselves would be impacted. Very difficult to quantify this. But as we speak, well, there will be some impacts here and there that will probably almost certainly be able to offset completely or partly, thanks to our pricing power, the price increase as we speak.

I couldn't understand this 16%, where there was no change, even though there's a growth in between 2% and 6% because apart from that, you have this operating lever that you could use. So if we go to the upper part of the bracket, it's surprising that we stick to the margin, that's not going to change. That's for EBITDA. Could you tell us more about this?

I have a second question to ask. Very good performance if we look at Electrical Power, the margin is 13%. Is that something that could last given the general context? And thirdly, you've confirmed your objective for 2029 in your road map. But it's a major leap forward, I'd say, if you look at the 2026 guidance going from an 8.5% margin to more or less 12%, 10%, 12%. You trust you can meet the objectives in the road map. What are the main drivers according to you to justify this improvement of your margin in only 3 years?

I'll try and answer. I'll answer the question on the road map, your third question. Well, that's true. It's a leap forward, as you said, if you look at what we're saying for 2026. But today, we know that there are M&A opportunities. We've not yet finished with the M&A pipeline. In the plan, we factored in EUR 100 million. That's M&A for 2027. By the way, this is not fully realized. And our plans now stretch to 2029, which means that we can still factor in more bolt-on acquisitions, M&As. That's my first answer. And also, we factored in an improvement in the volumes for the EV markets. The EV market will turn around, and there's a direct impact on our products, products for the EV cars, but also for the SiC market. So important levers, which means more volumes and improvements of margins, significant improvement.

Then to answer your question about the electrical segment, you're right. The progress we made was considerable if you look at the EBITDA margin and the EP segment margin. We looked around, we looked at our peers and our results are rather good and yet slightly below the average of the large corporates, the very large companies. It's not easy to do this type of benchmark because they have a portfolio of products that's broader than ours, yet we think that this level is a level that we can sustain and we can still improve in the years to come. All right?

I think I've answered your question, Jean-Francois. If you set aside the contract effect, we have an improvement of 50 bps. And this notwithstanding the increase in the price of commodities. If you look at our working consumptions, you might call them conservative or not, but we can't really offset all of these increases, even though this is still our objective.

I'd like to come back to solar. You said quite clearly that this year, 2026 will be complicated again. And looking forward, however, 2027 and beyond, don't you think there might be a risk that things don't change or that the future market remains sluggish. You're producing primarily out of China for the solar segment. The market today is much, much bigger in terms of size than what it used to be. Your sales went up. You reached EUR 100 million. It then dropped. It went back to EUR 100 million, but with a much bigger market, which means that indirectly, you've actually lost market share, significant market share. It's 4x bigger now than it was in 2011, and your market share hasn't really changed. The entry barriers are less significant. The temperature required to make those products is lower than 6.

So you do have a real competitive edge. And here, compared to Chinese players, this is not the case. And the Chinese have been very, very aggressive on prices. So how do you see the market in 3, 4 years from now? Do you really expect the market to pick up? And do you really expect to grow? Or do you consider you may not be as competitive as Chinese players? So -- in other words, you've depreciated some assets in China. I'd like to hear you on the Chinese market in 3, 4 years, again, a very complex market.

Well, I guess I'm the one who should answer with 15 years of experience in this area. We've said for a while now that we focus on niche markets. And you're right, we have small market share. Chinese players are very active and are producing ingots extensively. We also work on PECVD coatings in which we have a very strong footprint. This is a market where our competitors are not as active. And 600 gigawatts were produced in China in 2025. Capacity is 1,000. The Chinese authorities are pushing them to reduce their production. Everybody wants a piece of the cake, of course, needless to say. They wanted 1,000 2 years ago. Everybody is losing money today, including our competitors with stock problems. And of course, we consider we cannot lose money for decades, but we are convinced that eventually things will come back to a more normal situation in all segments.

And you referred to 2011. There were 350 players in China who are supplying the solar market. The market consolidated. Today, there are 5 or 6 companies that make ingots and maybe 1 or 2 too many. So I think we can reasonably expect the market to further consolidate, which means more simplification of the market. I don't think our competitors are willing to continue and produce while making losses.

Salvador earlier presented the 2029 plan. We we've remained quite modest when it comes to the contribution of solar. And then we have the other applications, power conversion, for example, which will contribute. We deliberately moved out of some cheap value add or low value-added markets. We remain quite active on critical components. Some of those markets are a bit less active than what they used to be. We have some other projects in China. We mentioned them last year. We also have 2 projects in India, [indiscernible] and Corning in the U.S. as well. And on those markets, we don't really have the same competition and therefore, more market share. Those markets are more appealing for us. So we'll see what things -- what happens in terms of sales in both 2026 and 2027.

e have some questions through the webcast. Giovanni from Berenberg. In your presentation, you mentioned an increase of prices with a more significant impact on H2. Does that mean H1 profitability will be below 8.5%? And will that increase in H2? As far as the divisions are concerned, 8.5% you said, does that reflect a deterioration of the 2 divisions or only of the Advanced Materials division?

I can take those questions. The Advanced Materials division is most impacted because amortizations were primarily involve the Advanced Materials divisions. As far as operating margins, I'm not going to talk about operating margin, but EBITDA margin rather because it really depends on the timing and the phasing. But in terms of EBITDA margin, I think H2 is -- could be better than H1 for the reasons I mentioned earlier, greater volumes and the price effect in H2 more than in H1. So the currency effect and high prices are already in our P&L.

Question two, on utility prices, energy prices, what is included in your 2026 guidance? Is it based on -- is the guidance based on an increase or not?

The energy costs are not very significant, as we said earlier. And I would like to repeat once again that we have good pricing power. That's really all I can say at this point. Right now, we're looking at the indirect impact. It also very much depends on how much time all this is going to last more so than the direct impact.

A question from Mr. [indiscernible]. In p-SiC, in your press release, you talked about diversification opportunities for new applications and new customers, which could partially offset the slowdown of the EV market. Could you clarify what specific markets you're referring to and what could be the impact in sales on sales in 2026?

Well, we're looking at multiple diversification opportunities for p-SiC. Most of those applications would be industrial, residential/building or construction, not so much to be expected in 2026. We're looking at product qualifications for 2027. It is a bit early at this point to develop.

We have questions from [indiscernible] who is very passionate about electrical distribution, as you probably know. Could you help me quantify the chipset of Mersen for the 800-volt direct current of Mersen versus the current applications, current infrastructure applications. In order to benefit from this very rapidly growing market between now and 2027, would it be foreseeable to have partnerships for Mersen? Do you confirm a 3 chipset, which is 3x higher than 800-volt DC versus 50 -- the current 50 DC for used in -- for the production of data centers?

You want to go for it? Go ahead. Go ahead.

Well, I think what's important first is to look at how data centers operate -- is it alternative current and or not? The fact is that there are multiple conversions, which means significant electrical or power losses. Data centers require more and more power. And when you don't have enough with 220 volts at home, you switch to 380. So they're going to move to 800-volt DC delivered to the data center. Those 800 -- so you need a converter to do this. It captures alternative current, converts it into 800 DC. So ST says they're going to make those chips. They're going to require, I don't know how many diodes for a data center. In a car, you need 34, not 1, 34, depending on the phases. So -- some say there could be some interesting volumes. Right now, we're sort of waiting and -- but we'll see what happens down the road, 2027, 2028, even if the EV market remains sluggish.

Coming back to data centers. However, once you have your 800-volt direct current, you need converters, GaN converters. GaN converters allow you to bring that to 1.2, 1.5 volts on chipsets or in microprocessors, which means much more simplicity, much more efficiency. NVIDIA has made some recent announcements as well. They sell chips that are increasingly powerful, but they, of course, want to know what kind of power supply will be delivered.

So to answer the question, indirectly, the SiC market is going to increasing -- sorry, increase a bit more, which is good news, mainly for PVT technologies. We'll see what happens with volumes, but our assumptions are quite positive. On fuses and fuse architecture, I think this should also serve. Right. The 800-volt architecture is used in different applications by different customers. Each customer has their own architecture with 800 volt.

I recently traveled to the U.S. Everybody there is interested in data centers. There are massive investments being made. And we're seeing a move towards 800 volt. And what we're seeing is also is that there is a race against time to build new data centers. With the current infrastructure, with the current supply chain, whatever is widely available to beat competitors. So this is really what we're seeing in the U.S. And the electrical architecture, including fuses are quite positive for us because we make fuses. In data centers, you have controlled areas, but you need to supply them. You need UPS, UPS ensure a good power supply throughout the entire life cycle of a data center. And of course, you need to supply data centers through the grid.

Right now, this is a problem. There is not enough power. And this is why we're working on small nuclear reactor projects that will supply data centers. As far as chipsets are concerned, well, we have a range of applications. It's easier to find chipsets on planes than for data centers.

But it's not negative?

No, no, no, it's not negative at all.

Next question on investments. You made fewer investments than initially planned. Does that mean you've discontinued or postponed some projects -- and if yes, what decisions were made?

Well, as we said, 2027, 6.5% of investments -- 6.5% of sales. We could do less. It depends on growth. So we've somewhat reduced, but there are potential opportunities to turn this around.

An easy question for Thomas. What's the average cost of your debt for 2026?

That's a lot easier than chipsets. In 2025, it was 420 hedging is 80%. With the current situation, the residual 20%, I don't know with -- it's a bit like foreign exchange. I don't have a crystal ball, so I don't know. But if you're at 420, I think 420 is a pretty good assumption.

Okay. Here is a more general question. Who are our current competitors? Who are our future competitors?

Well, I guess, in graphite and materials, we have GL [indiscernible] in Germany and Japanese players, Toyo Tanso, Tokai, [indiscernible] and Nippon Carbon.

Sorry, the question was asked from someone who does not have a microphone.

They are not really in graphite. They're in ceramics. They have a small business unit. I mean, EUR 300 million. It's a fairly small operation. And then power transmission, pantographs, for the electric segment, we have a lot of different competitors, Eaton [indiscernible] and FUSE in Europe, there are companies like [indiscernible], [indiscernible] and many Chinese players, Sinofuse and mainly Sinofuse. And in other areas, we have additional competitors like Axel. There are a lot of competitors. I won't make -- give you the full list.

But I think that is why we intend to go for more mergers and acquisitions. A lot of competitors because we have a lot of product lines. But for each individual product line, we don't have that many competitors. We have market share that ranges between 15% and 30% depending on what the segment. In graphite, the graphite segment, we are the only fully integrated player on the U.S. market, which means we are on site. GL is not -- they operate in the U.S. and Germany, but they cannot produce everything out of the U.S. And the same thing is true for the Japanese. And in materials, there are no U.S. competitors.

Now back to nuclear. Here's the question. There's a German competitor that's GL Carbon, that says that there are opportunities to develop SMRs for graphite. Do you have the products for that? And do you have contracts that you're currently discussing?

Well, there are many projects, and there's a lot of technology. And some and many use graphite in the reactors. Graphite is used as a moderator. That is thanks to graphite, we reduce the level of chain reactions. There are other devices, of course, depending on the reactors, the HTR, high-temperature reactors, et cetera. In the core of the reactor, there are different types of graphites. GL say that they have so-called extruded graphite. 20 years ago, that was "qualified." That's for the moderator. We have a Japanese competitor, Toyo, which is still delivering as a static graphite for a small HTR that they've had in Japan over the past 25 years. And they delivered the first interest for the first 2 HTRs in China. The Chinese have been using the technologies.

So GL has a product that we don't really have in our catalog. There's not much I can say. I'd say, well, good, they have an interesting offer. Now Toyo is unbeatable because the product is being used. So it's qualified. They're ahead of us. But we have some products that are "qualified" in the U.S., not much has happened in Europe. So I could say that, yes, that's true. We target the same projects, but we cover other parts of the reactor. And we have 4 or 5 other companies that are doing well as well.

Well, read the papers, there's a client who talked about the fact that we were chosen for graphite products on these markets. It's easy. Have a look at the Internet. That's all we can say. But we're making progress with Terra Innovatum. We can give you the name. It's one of the projects that we're working on. We'll talk about this later on, as you will see.

Right. We have another question. You cover the SiC manufacturing cycle for furnaces, but you also cover the GaN manufacturing.

Less, less. Well, there are two answers to the question. GaN can be placed on a SiC substrate for some applications. It's what you do for a car. We'll do the same. And GaN is placed on the substrate with machines, MOCVD machines that we also supply. So when it's on a SiC substrate, it's the equivalent for us and very interesting. Most of these GaN devices usually use silicon. We do this as well to some extent, but to a lower level. So GaN on SiC is good.

I have a question about 2 markets and more specific contracts. The p-SiC, I know that you've done your depreciation. So you think the market is not going to turn around. You're trying to diversify your business for the next 2, 3 years. Yes. So now there were potentially good contracts that have suffered ACC with the batteries. And so what about this? What about the outlook for the market? And there's something more positive, as you said as well, which is India. What about your sales level today? You probably have interesting contracts in the rail transport business. What is the sales level that you expect perhaps in '26, '27, '28, '29, if we look at the longer run objectives compared to your net sales today in India in the rail business?

And the second interesting topic that you've mentioned is new contracts gained with CLT or CATL and the Chinese player. So do you have estimates of potential sales with CATL? Are these busbars or fuses with your busbar technology that you hoped you would do good things with ACC. So what is the future like? What about these 2 new opening markets for you? Could you give us a flavor of that, a color of that? What's your sales level in 1, 2, 3, 5 years from now?

I'll start with ACC. Well, as you've seen, they've had some difficulties in the ramp-up to produce the cells, and that is something that happened throughout 2025. Then look at the quantities delivered in 2025. Well, the quantities will increase threefold in '26 and during the second half of the year mainly. We'll have the same level of activity versus what we did at the end of 2025 during the first quarter of the year, a slight growth during the second quarter and then a strong increase during the second half, which is why we will have more sales during the second half than H1.

The volumes, of course, are still below the levels that we had set in the plan, but we have other projects to offset this and to reach the target for 2029. CATL. Well, these are fuses. As Luc was saying, CATL is the biggest battery manufacturer in the world that produce cells, batteries assembled in groups of batteries that will be used for different market segments. First, the EVs, you have different packs together. You have to protect them. For this, you need fuses for the safety of the operations of these packs. And the packs can be used for energy storage, for instance, container systems where you need protection as well, given that there's electricity in current with different ranges of products. So we're developing a specific range for CATL, which is one of our strengths, as I said before. So storage of energy, EVs, passengers plus industrial EV applications and the rail business as well.

There are batteries on trains and also what we call the flying taxis that we might have seen during the Olympic Games, but they were not approved. They have them in China. They've been certified, and it's going to be going very quickly. If you travel to China, you'll probably have these flying taxis from A to B with no driver or pilot. Now we use battery packs as well on these vehicles and potentially, there will be fuses.

And as I said, there is the rail business. So it means we're competitive in China with the products designed and made in China, that's a major breakthrough, good wins with these customers. And therefore, later on, once we walk the talk, once we've delivered on our promise because you know the Chinese market is very competitive, not just the price levels, I mean, but the quality of products, but also the deliveries, once you've managed to show that you do a good job, but we have the teams to do this. We trust we can do this in 2026, then this would be a door opener. We could sell other products such as bus bars for the interconnection of batteries. That's my answer for CATL.

But we can't give you any numbers for 2026. No. This is not going to have a major impact on the sales of the group. Okay. We're nominated for a platform. What is important is to be nominated and then we have to do our job, and you will see and then we'll reap the volumes that they're going to sell. And India, who's going to answer that?

Okay. Let's say, more or less EUR 50 million. Nice growth in India in the recent years with the pantograph contract. We work well with Alstom as well, Siemens, GE to some extent as well. They said that we should produce locally. That's for converters, electric trains, not just electric trains. And what we're looking at several millions each year. So we have a subsidiary. We have 6 industrial buildings. That's a subsidiary. It's rather good success. So we're targeting 100, I don't know when, in 2028, maybe. We're growing. It's been so hard for the past 10 or 15 years. Sales were going down, but now we're going up. And there are projects for manufacturing electronic devices and to subcontract locally a number of parts that will be used on some French aircraft that have been sold.

So you can see from the industrial point of view, there's some type of buoyancy. There aren't that many competitors either. And therefore, they're trying not to buy too many Chinese products at a low cost. That's not really what they want. They'd rather do the job themselves. So it's better for us.

Another question in [indiscernible]. A question about the data centers, a buzzword. Now you know that there are many companies that are trying to quantify this business in their global business, overall business, Schneider, Legrand, that's a KPI that's very important for them. Could you quantify this perhaps for Mersen? And also, we've seen massive redevelopment of data centers in the U.S. plus capital expenditure. There will be soon investments made in Europe as well in data centers. Are you ready? Will you follow the main players? Will you work with them generally in France or in Europe? Do you think there's going to be a tidal wave in 2 or 3 years?

Well, I'll start and answer your first question on data centers. It's difficult for us to quantify. How many of our products will be used in the data centers? Well, it depends how you sell them, which is the marketing channel. Usually, we work with distributors. It's usually the retailers, the distributors that include these devices and products in their architectures that are developed by those who sell the data centers. I can't give you any number. I don't have them. But we're working on that so that we have more visibility of what's going to happen on the markets. We will tell you more about this in the months to come.

Then your point about the U.S., yes, we have a good positioning with our products and devices in the U.S. And in Europe, we're ready as well. I think the teams are ready. And as you know, it starts with the use of existing products on existing platforms or in existing families of products, and we're good at developing specific products for future architectures. So my answer is yes, we're ready for this wave. Will it be a tidal wave? When will it come? We don't know. We don't really know. We don't have the numbers, and we're seeing that there are changes. Yes, Electrical Power, that's good for Electrical Power. EP, we've seen some interesting orders. We have more repeat orders and bigger orders, but we don't really have any numbers to give you. So we're not going to do that.

Just back to some questions we received from the webcast. I will read this question in English -- creating 3D bipolar plate this year.

So these are plates for fuel cells. So this question probably comes from an expert. We're not a big player in this specific industry. Some are made with graphite. I guess, graphite or bakelite. It's resin, a mix of resin and powder, not really something we do, but we use -- we make some for more sophisticated industrial applications in a few countries, but this is -- I guess, maybe in 3D printing, 3D, that's probably what the question is referring to. And the answer is no, when you make a part with graphite, you don't do 3D printing.

And the last question on human robots or humanoid robots. In Mersen's portfolio, are there any products that could be used to manufacture robots?

Fuses, possibly. If you see those human-like robots, yes, some may use fuses indeed. We also sell products for AGVs. So they're automatic vehicles, not robots, not necessarily humanoid or human-like robots, but robots and some robots look like humans, but they're robots.

We have no additional questions on the webcast. Are there any final questions in the room, please? I think there are no more questions in the room. In that case, many thanks. Bye-bye.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Ladies and gentlemen, welcome to Mersen's 2025 Full Year Sales Presentation. [Operator Instructions].

I will now hand over to Mrs. Boca. Madam, please go ahead.

Good morning, and good afternoon to everyone, and thank you very much for joining us today. For your information, this call is being recorded, and a replay will be available on the Investors section of our website at the end of the call. So as it has just been mentioned, a Q&A session will occur after the end of the formal present today with Luc Themelin, our CEO; and Thomas Baumgartner, our CFO.

I will now turn the call over to our CEO, Luc Themelin.

Thank you, Veronique. 2025 was a busy year, marked by a contrasting global environment. And we can say that Mersen delivered a solid performance under these conditions. 2025 was not uniform year across our markets, but it was a year that clearly demonstrated the resilience of our portfolio and the relevance of our global and diversified footprint. Reported sales for the full year reached EUR 1.186 million, representing an organic decline of 3.2% which is at the high end of the guidance we communicated in October. We faced strong headwinds from exchange rates with the U.S. dollar and RMB representing 2/3 of the total exchange rate impact. I would like to stress that these are only conversion impact as the group is global with an industrial presence where it sits.

Throughout the year, we achieved strong momentum across several key markets, wind, energy storage, power electronics, aeronautics, rail and electrical distribution to name the most important. This helped offset the weakness in the solar and silicon carbide markets that have already commented on in previous calls.

I will now turn over to Thomas, who will go into more details.

Thank you, Luc. Hello, everyone. So as you can see on the slide, the sale evolution over the year was impacted by several factors. So the first one is currency effect. As Luc mentioned, the depreciation of the Chinese renminbi and U.S. dollar to name the most important ones had a significant impact on the reported figures amounting to approximately EUR 40 million for the full year. This was partly offset or totally offset by the scope effect. Scope effect reflects the contribution of the acquisitions made in 2024 in the U.S. and also compensated by the pricing power, we reach to increase the price by 1.5% -- the effect is 1.5% for the full year.

Regarding the business performance, we had a strong commercial successes in a number of markets, we will come back to that later on. And conversely, softer market conditions in solar and SIC semiconductors mentioned by Luc earlier on. So all in all, we reported a full year sales of EUR 1.186 billion, and now you can see markets by markets, what happened at our first -- my first comment is to say that our diversified end markets provide us a good level of stability, and we could compensate a decline -- a sharp decline in solar and SIC semiconductors.

As you can see, we had a positive momentum in other markets fueled by strong drivers, as mentioned on the slide, first, stable and solid growth in wind and energy storage. We benefited also from a return to more stable condition in the SIC semiconductor markets with the second half of the year, much stronger than the first half. We benefited also from a strong growth in power conversion, supported by significant contracts for HVDC lines, underlining our positioning in large-scale grid investments.

We had also a continued growth in -- and strong growth in aeronautics and rail. We see also some stable markets are typically EV markets. We had -- which was stable, reflecting 2 opposite, I would say, trends. from one hand, growth in vehicles. And from the other hand, decline in charging infrastructure. And then we benefited also from a very strong year in electrical distribution. So many, many markets doing well in growth, from all what I said, it represents almost 60% of total sale, the rest of the remaining part concern process industries, chemicals and conventional energies, which were globally flat compared with the last year.

So if we break down this performance by geography, I will start with North America because it's by far the largest area in terms of revenue. As you can see, we were resilient with a growth of 0.7% despite the very weak demand for SIC semiconductors. On the other hand, Asia suffered from a decline of 13%, the region was strongly impacted by the solar market in China and weak deliveries in chemicals. And in the middle, I would say, Europe, the decrease is a combined but limited decrease is a combined result of strong performance in HVDC lines, aeronautics and rails which was more than compensated by wind markets in process industries, SIC semiconductors mostly.

So if you -- we look now by segment, starting with Electrical Power. This segment experienced growth throughout the year with very strong drivers being rail, wind, power conversion and electrical distribution in the U.S. On the other hand, you can see that Advanced Materials segment is in decline, affected by a sharp drop in solar and SIC semiconductor, as already mentioned. We had also but to a limited extent, a small decline in chemical and process industries, which was in line with our expectation. And this was to a certain level compensated by dynamic markets such as aeronautics, wind and rail.

For the fourth quarter, we experienced a minus 0.5% organic decline compared to minus 4% in Q3. So it's a significant change. This translates into a 2.2% sequential improvement in Q4 compared to Q3. We had also this quarter impact of exchange rate, which was more significant, I would say, this quarter than before, amounting to minus EUR 18 million. Just to remind you, the dollar against euro was at [ EUR 1.05 ] at the beginning of the year. And it was an average of [ EUR 1.13 ] over the year, and I would say, almost [ EUR 1.16 or EUR 1.17 ] in the last quarter. More generally, dollar was the most significant impact, but we were also impacted by the appreciation of euro compared to most of the currency.

If we look at the regions, Europe had been quite resilient this quarter with good momentum in chemicals, grid, wind, aeronautics and rail that compensate for the decline in semiconductors. North America performed well with a growth close to 3%, especially thanks to electrical distribution still very strong. By segment, electrical power performed well over the period, thanks to a strong momentum in both power electronics and electrical distribution markets. Advanced Materials sales were down by 6.6% of the quarter with strong growth in wind power, aeronautics and rail markets, but still a sharp decline in solar and SIC semiconductor markets, I would say, less SIC semiconductor market this quarter compared to solar.

I now turn over back to Luc.

Thank you. Now for the full year, we can be more specific. Current EBITDA margin remained at around 16%, similar to what has been disclosed in October. Current operating margin will be around 9.2% in the mid-range of the guidance disclosed in October. And finally, we have managed to reduce again the CapEx level, which will end up being around EUR 135 million.

I would like to conclude with a few words on 2026. You know that we will disclose our full guidance on the 18th of March. So we will not answer precise question on guidance at this stage, but I want to underscore an important message. We are focused on CapEx discipline as was the case in 2026 already. We will continue to reduce CapEx in 2026 and this should bring free cash flow back into positive territory in 2026.

All the elements we have discussed today are fully consistent with our 2029 road map despite the challenging and uneven market environment. Our strategic priorities remain unchanged. Our road map is built on the structurally attractive end markets such as electrification, energy transition, clean mobility, grid reinforcement and advanced technologies, which will continue to drive demand over the medium term. Our margin ambition are based not just on market condition, but also on the key levers at our disposal, pricing discipline, portfolio mix and operational efficiency. Moreover, we are also focused on being selective in our CapEx and disciplined with working capital to improve free cash flow. Taken together, this gives us confidence in our ability to deliver on our 2029 ambitions.

So if you have questions, please it's the time for questions.

[Operator Instructions] We have a question from Thomas Renaud from Kepler Chevreux.

Okay. I will go with the question that we have received on the platform. So the question is, are you still -- are you present, sorry, on the data center market? And what is the level of sales in this particular market?

The answer is quite difficult to give you in a precise way. But yes, we are because we have customers delivering the data center in terms of electrical protection. It's easy to find through the distribution. And indirectly, as you know, there is plenty of electronics, power electronics in data center. We are in, but it's more difficult to identify. And the trend on this market is easy to see, I would say, since 2 years in our fuses business and it's still good. I would say '26 will be nice as well.

It explains partly the growth we had the very, very good staff.

In North America.

Yes. Yes.

So one other question. One other question is, can we expect a rebound in SIC in 2026 and the same for solar?

We don't expect a big move in silicone carbine in '26. We see more something happening in mid '27 at this stage of our knowledge. Solar is more difficult to answer because there is a situation in China, not easy to understand. You -- I guess you read already some results from some Chinese company like Lanjing. They are not in good shape. They are not profitable. It seems that the -- again, this market is a trying to be reorganized by the Chinese administration soon. We will see, but we don't expect something extremely booming in solar this year.

So more question, and I will read because it's quite long question. So NVIDIA and ecosystem partner are transitioning data center power distribution to 800 VDC architecture to support megawatt scale AI racks starting in 2027. How is Mersen positioning its product portfolio, particularly liquid cooler busbars, power distribution blocks and cooling distribution unit to capture this opportunity. More specifically, are you currently engaged in design win process with hyperscalers or Tier 1 OEM for 800 VDC infrastructure? Can you quantify the potential revenue opportunity per megawatt of installed 800 VDC capacity versus traditional 54 volts 400 VAC architecture. What is your expected commercialization timeline? And when do you anticipate meaningful revenue contribution from 800 VDC-related products?

The question is coming from Mr. [indiscernible]. We need to hire you because you are extremely good in your question. First, on the power conversion in the data center, I think we will cover this new, I would say, specification. I don't think that we need more liquid cooling busbar or cooling device in this case than before.

About the question about the voltage and the fact that they will move from AC to DC, it should help a little bit the fuse technology because the breaker at this time cannot really cut the current in the DC shape. But as well because we see NVIDIA on your question, people are working on solid-state breaker and it's more in the end of company like Schneider, but we are quite happy not only on data center to see the direct current coming in our market because it's more interesting [indiscernible] but in short because...

So now we have the question from Thomas Renault that he was not able to ask his question directly. Could you share with us the group like-for-like performance in Q4 excluding the solar and SIC markets?

So yes, in the Q4, it was between 5% and 6%, I don't have the precise figure. In H1, if my memory is correct, it was 3%, something like that. So yes, far better than in Q1.

So any reason why the operating margin is expected to be at the low to mid-range of the guidance while like-for-like growth came in at the top end? Is this driven by potential FX effects?

In fact, when you remember, we changed our guidance offsets at the beginning of the -- in October. We didn't change the operating margin, which was large, in fact, and we are in between -- so in fact, this is totally consistent with the fact that we have lower sales than that at the beginning of the year. We have a better margin. We have the midrange of the margin. So we are -- we have better -- we are resilient in margin, and this is especially due to the fact that we have lowered the CapEx, so we have lower amortization.

Could you elaborate on the dynamic in the process industry in Q4? And how you see this segment evolving in 2026?

Q4, it was a little bit different between the electrical power, which was really tremendous, very good, I would say, especially but we said data center typically. And it was less -- it was not so good in advanced materials segment, however, not so bad as well. It's difficult to predict in 2026, why? Because it's driven by the macroeconomic by the industrial GDP. And as you know, in electrical distribution, even if the trends in more electrification, more grid storage, et cetera, you need more electrification. So typically more of our product -- we know as well that electrical distribution, the time to market is quite between the order and the sales are quite quick. So it's a bit difficult to predict today. It's -- I can't say more. Maybe we will say more in March.

So now we'll go with the -- I think there are some questions on the phone, if I can say.

So now we have a question from Giovanni Selvetti.

I think I missed the first 5 minutes, so maybe you already said that. But I have 3 questions. The first one is that if you can, in a way, break down this price increase across division? Is it mainly price increases in electrical power or is it across the all firm? The second question is, if I look at your slide, I can see that the silicon carbide accounted for 5% of total sales in 2025 which means basically EUR 59 million, which would imply a fourth quarter of EUR 20 million, which is quite above what you reported in the past quarters. So I was wondering if you can explain why it have kind of accelerated in Q4? And what is a rough range we can expect for 2026?

And the last one is on CapEx. Is this reduction in the CapEx related to, let's just say, a growth that is lower than what you had in mind? Or it's just because you think you can deliver the same growth with lower CapEx needs?

Okay. I will start with the price and the pricing. It's more important in electrical power than in Advanced Material and more important in the U.S., as you can imagine in Europe and in Asia. And in fact, you certainly note that we have -- the pricing is -- the pricing effect is more important in Q4 especially because we have some tariff, but it's limited and we totally covered this tariff increase by pricing. That is first question. The second one...

Silicon carbide.

Yes. So the silicone carbide, in fact, when we say 5%, it's about 5%, if you want the figure around EUR 55 million for the full year. And yes, the Q4 was better than the Q3 with around EUR 15 million not EUR 20 million or EUR 15 million, and in fact, it's -- yes, we said that it will recover slowly...

No, but it's quite difficult to explain by the number because we have mainly 4, 5 and big customers all are not at the same level of inventory coming from the past. That means, one is asking a little bit more end of the year than the other. And -- but at the end, the average will be a little bit better in '26, but we had already discussion before. We don't see a dramatic increase on silicon carbide demand next year. The CapEx...

But we see a growth on...

We see a growth. The CapEx, we could deliver more, but as you may know, we invest quite a lot 2 years ago, I would say, to reach the demand that everybody were asking us. There is a huge demand in silicone carbide, but since this date, this demand decreased quite a lot. That means we have started to invest and considering the demand for the next 2 years, we decided to reduce as much as possible, but most of the CapEx was already spent. This is why we try to be focused on having less and less CapEx, but the amount is still high.

[Operator Instructions].

So I will continue with the question we received. So can you confirm the organic growth for the full year without solar and SIC?

Yes, it's a little bit -- it's less than 4%, it's between 3.5% and 4%...

Then the second question is with a low level of CapEx at EUR 135 million, can you forecast a free cash flow close to breakeven in 2025?

You remember that I said that it will be difficult to reach free cash flow in 2025. And I think I will make a teasing. I don't know we'll give some idea in March. So you will wait for that answer.

One more question on SIC. I read the question, but I think this is not a confirmation. Could you confirm that H2 sales in SIC are superior to H1?

I can answer that it's not the case. We didn't say that...

No.

We say maybe it was not clear enough that for silicon semiconductor H2 was superior to H1, but it's not the case for us.

Yes. In SIC it's more or less stable between H1 and H2. But in H1, we had -- we benefited in Q2, especially. Remember, we've done a very good Q2. In fact, we benefited from -- some, I would say, payments from customers in the frame of the renovation churn of our contracts.

So one more question from [indiscernible]. Are you still working on the Smart City project?

Yes, we are still working, but I'm not sure that -- but you have behind the equation. The market at the end is the sales and silicon carbide, Smart SIC and silicon [indiscernible] end market EV. And it showed unlike the silicon carbide and in terms of commercial activity. I would say, in Soitec it's not very -- I'm not very busy, but in Mersen, we still have some things to do in technical aspect the next 6 months to be absolutely ready to supply. So, yes, we are still working. We are still starting equipment as a schedule.

So one more question from [indiscernible]. Once you have completed your committed CapEx program, how much more capacity will you have as a percentage of '25 volumes?

We need to come back maybe 2 years ago because we did already this announcement as a big part of the CapEx on advanced materials because we had a few on the electrical side, where to address the silicon carbide demand. And we decided to invest to move up by 4,000 tons of Isostatic graphite to cover this market at the beginning. And this is always the possibility of the group. Now we need to see this demand coming back. And at this step, we have quite a lot extra capacity to address this market. Yes. We cannot answer in percentage really.

I would say 30% or maybe a little bit more of available capacity.

So I don't have other questions on the platform. So no more questions.

[Operator Instructions].

So if no question, we -- additional questions, we look forward to seeing you on March 18 for the full year results. It will be in Paris. So if you are in Paris, you can join the meeting in person at 10 a.m. It will be at La Maison [indiscernible] in Paris.

Thank you very much.

Thank you very much...

Thank you. Bye.

Welcome to the conference call on Mersen's Q3 sales presented by Mr. Luc Themelin, Chief Executive Officer; and Thomas Baumgartner, CFO. [Operator Instructions]

I will now hand over to the speakers.

Hello, everyone, and welcome to this conference on Mersen's sales for Q3 '25. We posted sales of EUR 285 million for the quarter, representing an organic growth of minus 4.3%, which is in line with what we saw in the first half of the year. This brings revenue for the first 9 months to EUR 895 million, representing organic growth of minus 4.1%, which is in line with the minus 4% reported at the end of June.

We saw contrasted trends in our markets in Q3, strong growth, meaning double digit in rail, wind and power electronic markets, recovery in the silicon semiconductor market, low level compared to last year in SiC semiconductors. And finally, contrary to what -- to our expectations, we did not see a positive turnaround in the solar market during this quarter.

For this reason, we've adjusted our targets for '25 to the lower end for organic growth and EBITDA margin. We've also revised our investment plans downwards, and we're maintaining our current operating margin target. I will come back in greater detail to this at the end of the presentation.

Without further ado, over to Thomas, who is going to give us a more detailed review of sales.

Hello, Luc, and hello, everyone. I will start by commenting the 9 months sales before we focus on Q3. Revenue for the first 9 months of the year amounted to EUR 895 million, as Luc said, the scope impact corresponds to acquisitions in North America in 2024. So the consolidation of GMI for 2 quarters, the consolidation of Barlow for 3 quarters and the consolidation of KTK for 3 quarters.

So as you can see, the scope effect offsets a very unfavorable currency impact amounting to EUR 22 million, mainly due -- in Q3 and due to the conversion into euros of the Chinese RMB and the U.S. dollar and to a lesser extent, the Canadian dollar. We continue to increase prices, particularly in North America for a net total of EUR 12 million. Organic decline was 4.1% over the 9 months, mainly due to declines in the solar and SiC semiconductor markets this year versus the previous year.

So developments, evolutions varied greatly from market to market. If you look at what we're seeing in the -- what we saw in the first 9 months, we see that growth in the transport markets with dynamic aerospace and rail and stable EV markets. We also saw a decline in energy markets with solid growth in wind power and a significant decline in solar power.

A decline in electronics as well with a significant drop in SiC semiconductors, quasi-stability in SI semiconductors for the last 9 months and strong growth, however, in power electronics. Limited decline in process industries with strong growth for electrical distribution and a decline in the traditional industries, which is very much in line with the macroeconomic context. Last but not least, a slight drop in the chemical market.

Let's now specifically look at Q3 first by geography, starting with North America. As you can see by North America, by far is, first of all, stable compared to last year in spite of the negative impact of weak demand for SiC semiconductors. Electrical distribution has been very dynamic, driven primarily by data center and energy network segments. Again, as a reminder, North America is by far the first geography in terms of sales for the company.

In Europe, the decline was 5.9% with the drop in semiconductors and solar, which was offset by the growth in transport. Activity remains buoyant in France, while Germany is down. Last but not least, Asia. The decline in Asia is minus 10.4%, mainly due to slow solar business in China and weak deliveries in chemicals. India, however, is confirming its strong growth, driven primarily by rail.

Let's now look at things by business segment on the right side here, starting with the Electrical Power segment. Growth has accelerated in Q3, plus 9.8% after a first half at 4% thanks to stronger demand in electrical distribution, particularly in the United States and continued dynamic activity in rail, but also wind power and power electronics.

The Advanced Materials division, however, is experiencing a drop in sales affected by the sharp drop in sales in solar and SiC semiconductors. Deliveries to the chemical and process industries are also down, which is in line with our expectations. However, there were some positive factors such as the gradual recovery in silicon semiconductors, and there's been a positive momentum in rail and aerospace markets.

Back to Luc, who is going to tell us about Q4.

Thank you. So Q4, the company expects for energy markets to pursue its positive momentum in wind power market, and we expect the solar market to remain weak. For the electronics market, we expect, on the one hand, continued recovery of SI semiconductors and a sequential improvement for SiC semiconductor market, which will remain at a low level. And on the other hand, the continuation of power conversion projects for electricity transmission. HVDC, that is for transportation markets, we expect a positive trend in the transportation markets to continue, thanks to rail and aerospace and the ramp-up of deliveries for ACC for EV batteries. The chemical market declined in line with expectations. And last but not least, for process industries, evolution, which is in line with global -- the global economic context.

As I said in my introduction, we have to take into account the fact the lack of recovery in solar, and we are expecting organic growth of sales between minus 5% and minus 3% versus minus 5% and 0% previously. We expect a current EBITDA around 16%. Previously, it was between 16% and 16.5% as a result of the decline in revenue. The forecast of current operating margin remains unchanged between 9% and 9.5% decline in CapEx, we'll come back to this, is leading to a drop in depreciation.

We continue to be selective in our investment plans and to adapt to our main markets. And therefore, the forecast is now between EUR 140 million and EUR 150 million, previously between EUR 160 million and EUR 170 million.

In conclusion, I would like to emphasize that Mersen once again has demonstrated its strength -- the strength of its diversified model with certain markets such as rail and power electronics performing well, partially offsetting the economic weakness of other markets such as solar or the SiC semiconductors. We are extremely focused on market opportunities and cash flow generation to support the company's sustainable performance and achieve our 2029 targets, which we confirm.

This concludes this presentation. Thomas and I would be delighted to answer your questions.

[Operator Instructions] Next question from Thomas Renaud, Kepler Cheuvreux.

Can you hear me okay? I had a first question. You communicated in -- at the end of H1. Could you -- you communicated the organic growth, excluding SiC and solar. I think it was plus 2% or plus 4% in H1. That was my first question. My second question has to do with solar, obviously, how do you explain this counter performance? Is it because there's been a real slowdown in August and September? Is that what's behind this drop? And what is your forecast for 2026 for that specific segment? And how do you see solar in the next quarters as well?

Question three. The last question on free cash flow. You have a bit less CapEx a bit less EBITDA. Should we still expect free cash flow to be slightly negative for the full year?

So to your first question, on growth, excluding SiC and solar, I haven't really done the math. But I don't -- we don't expect -- there are no real reasons for it to really change much. The decline is pretty much the same. It's maybe slightly more marked on solar, SiC. But I think we're going to stick to what we said during the presentation.

So the question -- to the question on solar, there hasn't really been any deterioration. We were already operating at a low level and things haven't really recovering. So we -- the Chinese authorities have given directives for production to be lowered, but we're still supplying some stock, product stock. I think we must wait for the full year results and see really what happens with the facilities in terms of installations and see what will happen in 2026. It's difficult to say at this point.

For free cash flow, I prefer not to comment. We said we were going to increase the debt -- with the dividends, we can consider that will increase. I think it very much depends also on working capital. We will find out more at the beginning of 2026. I would rather not answer your question this evening.

Okay. If I may, I would -- I have one last question on process industries. I'd like to understand what's behind the decline? What markets specifically have declined? I don't think we've seen a decline on that specific segment in several quarters. So what is it? Is it because some markets are really suffering more than others? Or is it really a global phenomenon?

Nothing very specific. We have a lot of large projects on thermal processing, some that have been slightly postponed in time. But -- and in the U.S., things are okay. It's maybe things are a bit slower in Europe. That's really what I can say. It's not bad at all compared to other years.

[Operator Instructions] We're going to move on to questions on the chat. The first question is coming from [ Bruno Ertz ]. What is the SiC -- what are the SiC sales in Q3? And what are your expectations for...

I think he meant -- 2025 for the full year. What are your expectations for the full year for 2025? I think it's 2025, if not. Well, we're not going to give any objectives for 2026. We have a global guidance for 2025. For Q3, SiC was EUR 10 million. It will be higher in Q4 because -- there are some differences between Q3, Q4. Some -- there have been some slight evolution, so it will be slightly higher.

So we answered already the question about SiC-related revenue. The next question is any update on the PSC project? And can you also give a sense of how electrical distribution performed in Q3? Can you give us a range of growth? And last one is what was the main driver of the growth in the U.S. for electrical distribution?

So the main driver in the U.S., picking up on the last question. We talked about the data centers, medium voltage electrical distribution lines that is -- very strong in the U.S. Some large distributors are adding some additional stock. Q3 was really fantastic with an all-time high. And we're -- our bookings are still looking quite good lately for P SiC. Not much news since last time. You know the silicon carbide market, the P SiC is pretty much following the same trend, as we said before. Shipment forecasts have been postponed, and we're still operating at very low -- relatively low levels. Mainly for Soitec customers. But there is otherwise nothing new, nothing really specific for this segment.

And in terms of growth, I think it's above 10%. And it also -- for electrical distribution, it comes also from price increases. There have been a number of price increases linked to tariffs to offset some of the tariffs or the effects of tariffs.

We have a question from [indiscernible]. As of 2026 in data centers, we're going to get the new 800 DC volt architecture. Does that architecture require greater use of busbars? And if yes, what could be the impact on Mersen?

Not necessarily to my knowledge, but there will be additional needs for other products, protection and 800 volt, there has been a lot of growth for us already, especially in the U.S. They use a lot of fuse protections. But I do think we have to work more on direct current 800-volt direct current and fuses because it's not the same product as for alternative current, AC. That's in summary, what I can say.

We have a question from [indiscernible] on CapEx reduction. Are you postponing them to 2026?

In part, in part, but only in part. We will only go for additional CapEx if we consider it makes sense to do so. So it will be later.

We have no additional questions in the chat. And I believe we have no more questions on the phone. We're just going to give you one more minute. And should there be any final questions either on the phone or chat.

Okay. There are no additional questions. We will see you again January 28 for the 2025 results. Thank you very much for your attention, and have a pleasant evening, everyone. Bye-bye now.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]