RHI Magnesita Stock

Hello, and welcome to the RHI Magnesita 2026 Half Year Results. My name is Carla, and I will be coordinating your call today. [Operator Instructions]

I will now hand over to your host, the CEO, Stefan Borgas, to begin. Please go ahead when you're ready.

Thank you, Carla. Good morning, good afternoon, everybody, from Vienna. Thank you for joining us for the presentation of our 2026 half year results. I'm joined today by our CFO, Ian Botha; and our Head of Investor Relations, Alexander Ordosch; and as a special guest, Gustavo Franco, our Chief Customer Officer.

Before moving -- we move into the main presentation, let me highlight the 3 key takeaways from our results from our perspective. First takeaway, our self-help measures continued to deliver on what we have set them up to deliver, and they are the main driver of the business improvement that we see in the number despite a soft and volatile market. These self-help measures were especially visible in our steel business. To sustain this momentum into 2027 and even beyond, we are advancing new self-help initiatives across our raw materials plants, our refractory plant network and driven by our digitization investments that are coming to a level where we can start to take advantage of them. Together, these measures enhance our operating leverage and will have a very significant improvement potential for the business once demand will recover.

Second takeaway, our steel business, our cement business and our nonferrous businesses all performed well. While the global industrial projects business, the investment of our industrial customers into their plants remains very challenging from a demand perspective.

We see our steel business on a positive trajectory as trade measures in some regions put a floor under soft steel demand, just put a floor, and support price adaptations to balance out our cost increases. The 4PRO business development activities decreased the churn of customers, they improved the value delivery to our customers and also have a positive margin effect and some positive volume effect on RHI Magnesita.

The industrial project order book is rebounding now. The second half orders look solid, but the industrial project order book still remains significantly below the historic norms.

Third key message, we confirm our full year guidance. While market conditions remain very volatile in all regions actually, self-help delivers and will continue to deliver well on the profit side. Our order book for steel and industrial is firm for the second half. The focus on cash flow is central to our H2 performance and to our intended deleveraging.

With this, let me get -- start to get a little bit more into the details. And as usual, I would like to start with safety. This remains the core value at RHI Magnesita. Regardless of the commercial environment or the operational challenges we face, our objective is always the same, ensuring that every employee and our contractors return home safely at the end of every working day.

The first half of 2026 continued our safety culture transformation that we have started 2 years ago. Our digital global safety management system went live in the first quarter of 2026 and now incorporates an ever-increasing number of sites, including most of the hundreds of customer sites where our workforce is present. The adoption of this new digital system is encouraging.

Employees proactively submitted over 110,000 safety reports that are quickly processed so that we can mitigate any reported risk. While the rising number of the total recordable injury frequency, which includes even injuries with low severity like first-aid cases, reflect our proactive and transparent approach to safety, our priority is now to reduce potential serious injuries, potential serious injuries and fatalities. We call them SIFps.

Our focus remains on [ visible, felt ] leadership, behavior-based safety rules and strengthened standard operating procedures. But also many physical improvements happened in our sites and in the sites in which we take leadership and ownership at our customers' locations.

Overall, we undertake practical measures designed to influence how we act and how we work on a daily basis. This improves accountability and it raises the standards across every site around the globe. We remain fully committed to our long-term objective, zero harm, no injuries.

Ladies and gentlemen, let me pass to the financial highlights now of the first half. We continue to operate against a soft and volatile market backdrop. Our revenue declined by 4.9% to about EUR 1.6 billion, but they remain broadly flat on a constant currency basis. So it's a foreign exchange rate induced decline. This shows this strong foreign exchange headwinds that we experienced, not just the U.S. dollar, which could not be fully offset by management actions with respect to the top line.

We delivered an adjusted EBITA of EUR 165 million, which is a nominal increase of EUR 24 million year-on-year. If we compare this on a constant currency basis, the year-on-year improvement is above 40%. Margins improved as a result from 8.4% in the first half of last year to 10.3%, which was driven largely by the benefit of the management-induced self-help measures. As a result of the higher earnings, our adjusted earnings per share increased significantly to EUR 1.81 per share.

In line with the group's dividend policy, the Board declared an interim dividend of EUR 0.60, and we also paid a full year dividend in the first half of this year.

Now moving to our steel business. Our steel business remained resilient in a volatile market environment and volatile it is. Revenues increased by approximately 5% on a constant currency basis with volumes being down slightly. Self-help and our operational discipline supported these margins.

Gross profit improved 17% on a constant currency basis to EUR 249 million. We successfully adjusted pricing to the ever-changing cost realities, energy, freight, labor costs, to name a few. We reduced fixed costs in the plant network in Europe, and we signed new or expanded existing 4PRO solution contracts in most of the regions.

Our China team is using 4PRO successfully now to gain market share for the first time in several years and protect our price levels at the same time in this super competitive market. They are successfully developing with their local partners, a cutting-edge robotic solution for ladles that we are excited to roll out very soon, first in China and then globally.

Also, the strategic cooperation with robotics and automation specialist, Polytec, signed in October last year starts getting to live. The first customer project of this partnership is already close to full operation. An encouraging pipeline has been developed with a very competent Polytec team, which also fits very well to RHI Magnesita's culture actually on the people side.

Steel production around the world was soft amidst ongoing volatility in the first half. World Steel Association data through June 2026 showed a slight increase in crude steel production year-to-year. However, when removing the countries contributing most to the decline, China, Russia, Iran, Ukraine and a few more, the remaining regions look more constructive, although starting from a very subdued level. Our growth rates are difficult to take as naked numbers because the base is so low.

Therefore, we see the steel business on a stronger trajectory than previously because steel demand recovers locally. It's also going to be supported by trade barriers eventually and Chinese steel exports coming down, although only very, very slowly and still staying at almost record levels. However, we also faced challenges in the steel business.

We lost temporarily some market share in the U.S. and in India. In India, we consciously focused on sustainable growth and exited low-margin business, and we are focusing much more on 4PRO enabled growth. In the U.S., the ERP go-live temporarily impacted customer service levels and our market shares negatively in the second quarter. But both of those are short-term effects and already starting to recover.

Additionally, our overproportionate exposure to the GCC countries to the Gulf countries in the Middle East, Türkiye and Africa region impacted us more than world steel production data suggests. Conversely, shipment growth in China demonstrates we can make a difference with 4PRO, as already elaborated, even in super strong commodity market.

Let's go to our industrial business. We need to look at our industrial business from 2 perspectives. The cement business inside this industrial division performed well. 2026 had an unusually weak start for our industrial projects business, however. Overall, revenues declined even more, namely by 13%, 1-3, to EUR 466 million as a result of a decrease in the industrial projects business from -- and that is from a historically low 2025 level already.

The overall numbers of industrial projects did not meaningfully recover. Fewer projects resulted in lower volumes, weaker product mix and fixed cost under absorption in key high-cost plants, mostly in Europe, but also in a few other regions. These are very complex plants that make these products for these projects, and they are very expensive, and they have been very underutilized.

Our glass business, especially was close to the bottom. Industrial applications, other industries investments was similarly weak. The nonferrous project business was more resilient with earnings in the first half performing at the level of our expectations at least.

Customers in all markets, in all regions, exercise caution around CapEx decisions. That is what drives the industrial projects. As a result, about EUR 50 million of high-margin project revenue has been deferred already into 2027 from the first half of this year and another EUR 10 million moved into the second half of this year. Only a small number of projects were totally canceled, most of those in the Middle East.

Looking forward, we expect an improvement in the industrial projects business in the second half based on the order book. The stronger industrial sales are supported by the Northern Hemisphere cement maintenance season in the fourth quarter that we expect like we see it every year.

The order books of nonferrous and glass have started to recover, but they remain well below historic norms. So we are breathing a little bit easier, but not really. This will support fixed cost absorption in high key cost plants a little bit more and give an improved product mix, will also result in meaningful inventory reductions in the second half of this year.

A couple of thoughts around the development of our strategy, ladies and gentlemen, to put the results in a bit more longer-term context. The industrial projects, which, of course, are a concern now, have strong fundamentals. It remains -- this business remains a cornerstone of RHI Magnesita's competitive offering and also of our earnings performance today and especially in the future.

While the project number has been much lower than expected, we believe this is a temporary effect and that the long-term fundamentals remain strong. These projects represent the most demanding refractory applications. Furnaces can operate up to 20 years. Processing high-value products under strict safety, reliability and efficiency requirements is key. A single project typically involves hundreds of different refractory products that together in a complex installation and in a certification process has to be delivered. Only a handful of suppliers can deliver on time and on quality all these products and services at the same time.

The refractory material costs represent a smaller share of the total project investments of our customers, but a failure here carries significant operational and financial consequences for our customers. Therefore, they continue to rely on RHI Magnesita's market leadership and the decades of experience.

New 4PRO contract elements are under development and are being introduced also into these complex projects as they become available to our customers. We expect the industrial project demand to normalize slowly over the next 12 to 24 months with a stronger second half and a solidly looking 2027 from today's perspective.

The cement and lime business is our largest industrial end market actually, although projects represent a small share compared to the annual maintenance business. Growth opportunities are concentrated in developing markets, of course, where capacity is expanding to meet local cement demand and in mature markets where kiln upgrades improve energy efficiency and environmental performance.

We are mitigating quickly -- we are mitigating the project weakness quickly through closer OEM partnerships, the companies who build these cement plants and the rollout of our 4PRO maintenance model, which is finding, I would say, enthusiastic reception from our customers. Recent innovations, particularly laser scanning technology for kiln wear monitoring connected with AI-based optimization and effective software visualization are transforming maintenance practices and seeing rapid customer adoption pushed by customers' management teams.

The nonferrous metals offers in the nonferrous metals business, we see the strongest long-term growth potential. This is supported by strong demand for metals such as copper, nickel, platinum and for lithium, all required for the electrification, for data centers and also for the long-term decarbonization. RHI Magnesita is the clear market leader.

For example, we are supplying most copper smelters outside China in the world. And inside China, we still have a significant market share. The deliveries in nonferrous metals projects declined to 38 projects last year compared with a historic range of 45 to 55. But we believe that annual demand can increase to around 60 projects in the midterm. We are leveraging this expertise also in the green steel market, where new furnace designs require advanced refractory solutions at similar complexity than for the nonferrous metals materials. Therewith, we have the ability to translate that knowledge. It results in several high-profile project wins that we have already gained.

The glass business remains our weakest larger end market, and it is expected to stay below historical activity levels despite an improving order book that we see at the moment and that will deliver in the second half of 2026. We are addressing this through network optimization, reduction of capacities and a sharper commercial strategy also.

Finally, the industrial applications segment, all the other industries span a very diverse range of technically demanding industries where our market share remains very low because we haven't focused on it very much in the past. Project deliveries often establish long-term customer relationships here, but meaningful growth is most likely through acquisitions of those kinds of portfolio.

The Resco acquisition in North America has strengthened our position in that region and the P-D acquisition in Europe has strengthened our position there, while other regions continue to offer attractive expansion opportunities based on the portfolio of those 2 transactions.

And finally, before I turn over to Ian to dive into the details of the financials, let me have a few words on our network optimization because this is one of the key drivers of profit improvement at the moment. The network optimization delivers sustainable savings and it drives our cash return on invested capital. We have built valuable experience in the last years to execute these plant mergers.

Every acquisition that we make offers new optionality to optimize our network in a generally oversupplied industry. In all regions in the world, there's too much refractory capacity. We are operating this and making these decisions in a very volatile market backdrop. We delivered the guided savings with our efforts in Europe.

Spending on restructuring is behind us, the big spending and the guided savings are happening and they are reoccurring. However, we continue to work on our plant footprint in Europe as our European team uncovers new potential for cost optimization and customer service improvements at the same time. European plants focus more on local demand, but still optimize for export of sophisticated high-value refractive products. The first wave of self-help measures is advanced, and we have already started looking into the second wave in Europe.

In the Americas, the Resco acquisitions and the new trade environment created an opportunity to accelerate plant network adjustments in the U.S. especially, where customers are asking for more local for local supply and are pushing us for more secure supply chains, including security in raw materials. Onshoring is the main driver here with the main benefit of shorter supply chains and for RHI Magnesita, lower invested inventory in the entire chain. We are preponing now measures to realize within the next 18 to 24 months and follow our customers' needs more aggressively.

In Latin America, the opportunity lies more in restructuring, meaning concentration into larger flagship plants, notably Contagem in Brazil and Tlalnepantla in Mexico. This will increase the local-for-local share in both U.S. and Latin America and unlock fixed cost savings at the same time.

I'm going to hand over to Ian and let him walk you through the financials in more details. Ian?

Thank you, Stefan, and good morning, ladies and gentlemen. As Stefan highlighted, I'll walk you through our first half 2026 financial performance and then our expectations for the full year. The first half of '26 demonstrates the strength and the resilience of our operating model.

Adjusted EBITA increased by 17% year-on-year from EUR 141 million to EUR 165 million, and our adjusted EBITA margin improved from 8.3% to 10.3%. We faced a EUR 24 million foreign exchange headwind, mainly driven by the weaker U.S. dollar and the Indian rupee against the euro. On a constant currency basis, adjusted EBITA increased by 42% year-on-year. This improvement reflects the continued delivery of the group's pricing actions and structural cost self-help measures across our plant and SG&A in line with our expectations for this year. These benefits were partly offset by weaker demand for high-margin industrial projects in glass and industrial applications.

Despite the challenging environment, we defended our margins. Since the 2017 merger, our adjusted EBITA margin has remained above 11% every year. This consistency reflects our diversification across regions and end markets. But more fundamentally, it reflects disciplined execution and active management. The refractory margin temporarily dipped below 10% in the first half, mainly due to weaker demand in high-margin industrial projects. As Stefan highlighted, the resulting fixed cost under absorption in key high-cost plants, particularly in Europe, could not be fully offset by our self-help measures.

We are maintaining our full year refractory margin guidance at around 10.5%, supported by continued self-help, improving performance in steel and the expected step-up in industrial projects. The backward integration margin remains at its cyclical low, and we continue to expect only around 1 percentage point for the full year. We remain focused on our raw material self-help initiatives, including increasing sales of magnesite-based raw materials into nonrefractory markets and reducing raw material production costs.

Consistent with our normal working capital cycle, working capital increased in the first half as we built raw material inventory ahead of a stronger second half order book. Foreign exchange also added EUR 22 million to our working capital. Accounts receivable temporarily increased as well. In North America, receivables were up EUR 40 million due to delayed invoicing in the May month end following the new ERP go-live. We expect this to unwind in the second half and to support cash generation.

The temporary inventory build and higher receivables will ease in the second half, and we are retaining our full year guidance of around 22% working capital intensity. As working capital increased in the first half, our net debt rose by EUR 33 million to EUR 1.528 billion. The group's leverage ratio remained stable at 2.9x net debt to adjusted EBITDA. While operating cash flow was temporarily softer in the first half at EUR 160 million, cash generation remains a core strength of our business, and we again delivered strong cash conversion of 97%.

The stronger order book in the second half, continued delivery of self-help gives us flexibility to reduce net debt in the second half. And we, therefore, continue to expect net debt to reduce to approximately EUR 1.4 billion and leverage to move towards 2.6x by the end of this year.

We have also refinanced EUR 800 million of debt this year. This has increased our weighted average cost of borrowing slightly from 3.3% at the beginning of the year to 3.5% at the 30th of June, really only as a result of higher benchmark rates on the new debt, but our borrowing costs remain highly competitive. In line with our dividend policy, finally, we've declared an interim dividend of EUR 0.60 per share, unchanged year-on-year.

Finally, looking ahead, we are confirming our full year guidance. We expect full year EBITA to increase to EUR 435 million on a constant currency basis and to EUR 400 million on a reported basis, reflecting a EUR 35 million year-on-year foreign exchange headwind. The group remains on track to deliver self-help from pricing and cost measures, including the previously guided EUR 15 million EBITA improvement from each of pricing and network optimization and the administrative cost savings.

This self-help is being delivered in the current low demand environment, strengthening our group and improving operating leverage for when demand does recover. We're also pursuing further measures across raw materials and our plant network to sustain momentum in 2027 and beyond. We expect steel to contribute an additional EUR 25 million in the second half, driven by a stronger order book, particularly in India and META and continued progress on 4PRO. This step-up was also evident, you will recall, in the second half of last year and has always been part of our full year guidance bridge.

We expect industrial to contribute an additional EUR 35 million in the second half. The second half is typically stronger for the industrial segment. It's supported by the Northern Hemisphere cement maintenance season and by higher-margin industrial project sales. The industrial projects order book for the second half is showing growth across nonferrous metals, glass and some also in industrial applications in most geographies, albeit from a low base. As before, the risk remains customers delaying some of these high-margin projects into 2027, particularly for geopolitical reasons.

In summary, we remain confident in stronger operational and financial performance going forward, supported by continued operational improvements, firmer order books in steel and industrial projects and a clear focus on cash generation and deleveraging.

Thank you. And I'll now hand you back to Stefan for closing remarks.

Thank you, Ian. Just to summarize the first half again, the execution of our self-help measures delivered consistently. This was the driver of our improved performance in the first half. We will continue on this avenue and are in the process of identifying additional measures that will also continue this self-help supported improvement in 2027 and beyond.

Second message, our steel business, our cement business and our nonferrous business performed well, whereas the global industrial projects business remains challenging. We continue to see positive trajectory in steel that is driven mostly by the rollout and penetration of our 4PRO business development. The industrial projects order book is rebounding, but from a very low level and remains below historic norms.

Third message, we confirm the full year guidance in a remaining very volatile market environment and rely on self-help measures more than on anything else.

Thank you very much for dialing in this morning, and we're, of course, very happy now to listen to your questions and answer them as best as possible.

[Operator Instructions] Our first question comes from Jonathan Hurn with Barclays.

I actually have 3 questions, if I may. The first one to Stefan, just essentially on some of the comments that you made in terms of your opening remarks, you are talking about, obviously, the actions that you're taking now and the actions you're going to take going forward are going to improve the operating leverage of this business essentially. So I just wondered if you could sort of frame that a little bit better.

So obviously, where do you think that the operational leverage in the business will go to on the back of these measures? Could we see sort of drop-through at a much higher rate going forward than we have done historically? That was the first question. I can give you all 3 at the same time, if you want. Okay.

Go ahead.

The second question just to go through was actually just relating to a chart on Slide 5. And it was just in terms of Europe. Just looking at that chart there, obviously, steel production was down. But in terms of, obviously, your volumes, you underperformed that and also it looks like you had some pricing pressure there. Can you just sort of fill us in a little bit more in terms of what you're seeing in that refractory market in Europe?

And then the third and final question was just on industrial projects. Obviously, you've talked about that picking up. But can you just talk about maybe the size of those industrial projects? I know the number is down year-on-year, but were you seeing any sort of difference in the value of those projects? So that -- are they also going down or are they flat or maybe they're increasing? Those are the 3 questions, please.

Let me ask Gustavo to answer the industrial projects outlook and pipeline because he has got really the best detailed view on this. And let me answer the other 2 questions first.

Look, the operating leverage pull-through is about a 25% drop-through. So whatever additional growth comes, we will have a much superior profit contribution. And we would estimate that's the blended drop-through. It's higher in industrial and it's a little bit lower in steel because of the nature of these plants, but that's what we are expecting, and that is what we have calculated.

Of course, with every measure that we take, we want that drop-through to increase, whereas these measures that we take are designed to reduce current costs and improve current performance, not just focus on the drop-through because otherwise, we can't have a proper payback of any matter, right? So this is the focus here.

Second question on Europe. The European refractory market is -- has always been split in 2 segments. There is a commodity brick per ton or mix per ton segment. That is a pure material specification delivered to the customers' plants, dumped on their doorstep, if you don't mind me saying it that way. That market already in the last 15 years was increasingly dominated by cheap Chinese imports through more or less traders, people who had stuff produced there and just shipped it to European customers. And when markets were calm, that segment grew because it's less risky. And then when markets get more volatile, that segment shrinks because it's too risky for customers to rely on this. This is in Europe, I would say, about 1/3 of the refractory market.

The other 2/3 are much more customized offerings in all market segments, from iron making to the casting line, but also in any kind of industrial application, non-ferrous, copper, cement, glass and so on. And what is happening here? Here, the customers want a total service packaging. And that market is actually maturing more and more.

And with respect to RHI Magnesita, we managed to convert successfully some of this very commoditized approach at our customers to a more full solution approach. We can give you specific examples. I think we don't have time now to do this, but this is the direction of the European market.

From a volume perspective, total demand, we don't expect Europe to grow. Where should it come from? Construction is depressed. The transportation market is not growing very much. The machinery market is not booming. The end market demand isn't pulling through the materials of our customers. Therefore, we will not see volume growth in Europe for the long term. Yes, in the short term, from one quarter to the next, that might be different, but structurally, there's no growth in Europe. So we need to be able to have a value improvement, and that comes from integrating our offering with our customers.

Gustavo, would you mind to give a bit of a specificity on the industrial projects pipeline?

Sure. Firstly, let's talk about the size of these projects before talking about the pipeline. Of course I think that here, it's interesting to understand the impact that it brings to us. So these projects, they can bring to us a revenue of about EUR 1 million to EUR 2 million or even EUR 10 million to EUR 15 million, depending on the size of it. That's the range that it fluctuates.

And of course, it highlights the consequence that it brings for us. Obviously, the impact in our fixed cost absorption in our plants is also sizable when we don't have such a strong pipeline. Anyway, we need to be ready when it comes. So that's the challenge that we face in this segment.

From the customer perspective, we remain very strong with our offering. Our win-loss ratio is above 50% in most of the industries that we serve. In nonferrous metals, it reached 70% win-loss ratio. So pretty much we win most of the projects that are available in the market. And what we track is, of course, on the sales pipeline, how solid, how firm are our customers in the projected demand. So during this year, we have some shipments that were postponed from first half to the second half or even already to 2027. So in the next rounds of interactions, for sure, we'll keep updating you about the development of this segment.

Once again, we remain very strong with our offering. Our market share remains very solid. We continue to win the available projects in the market.

And the reason why we give you a number of projects is because there's enough projects that the average of the smaller ones and the bigger ones balance each other out. So the number of projects really is a good KPI because that shows the activity of our customers' industries.

And our market share development.

Yes, and our market development.

[Operator Instructions] And our next question comes from Jamie Murray with Bank of America.

It is Jamie Murray from Bank of America. I had a couple of questions. The first one just about industrial projects, which clearly is the main source of uncertainty. I just have a couple of questions around the EUR 35 million industrial demand recovery that you expect in H2. I'm just trying to gauge the level of confidence you have over that number. So can I please ask what proportion of that improvement depends on projects that have already been delayed at least once?

And secondly, can I just ask about how much visibility you get before customers tell you about delays? Again, I'm just trying to gauge how much additional slippage you could absorb before the EUR 400 million target comes under pressure and when you might know about it.

And then separately, could I just hear about your latest views on how you see the price of magnesite and dolomite evolving over the next 12 to 24 months and how that will impact your vertical integration margins?

Yes. Thanks for the question, Jamie. So the number, the EUR 35 million results from specific concrete order book entries. More than half of this, not 2/3, but more than half has already started production. We are super confident on those because even if customers in those projects eventually come to the conclusion that they want to delay their own CapEx project by a few months, usually, we manage to deliver these projects. Customers take that because they know that, of course, we have already [ preapproved ]. So we are very safe on those.

The other ones are signed, dated in full engineering rollout, but with a bit more of a risk. And that risk, of course, goes 2 ways. It goes -- we can add a couple more projects and then the EUR 35 million becomes EUR 40 million. But we can also experience -- usually, this happens in November -- yes, around November time line when customers look at their CapEx budgets and they see they come under pressure and they get instructions from their top management to save on cash flow and then they move the CapEx into the next year. That happens every year, but this is the risk that we run here. And I think we have to quantify it about this way. It's about a 60-40 super safe and 40 is more variable.

Still, we remain confident because, of course, we also have a pipeline of projects that is not yet that firm that can move into this. And business as usual, it happens every year, so it doesn't make us very nervous.

Jamie, just to add to that. Going into the year, like for steel, we expected a higher second half weighting on industrial demand, in particular because of the cement season, but also because we have a higher weighting traditionally on industrial projects. That was EUR 20 million of that EUR 35 million.

EUR 15 million, you will recall on the full year bridge, was the improvement year-on-year. Indeed, part of that, we did expect to come through in the first half of the year. That didn't happen and it's now fully weighted to the second half.

Yes, super. Thank you very much, Ian. On the magnesite price, there's a modest increase of fused magnesia and dead-burned magnesia prices, but modest. This is mostly driven by the fact that in China, the caustic kilns that have been operating under very dirty environmental conditions have been stopped in operations, almost all of them. So there's a very good recovery on the caustic magnesia, which is the precursor product for the ones that we use.

We benefit a little bit from this. We will in the second half. That's why our backward integration margin is a bit higher in the second half than in the first half because we have a good order book for those types of products. The pricing on the other materials is moderately increasing. I think we remain skeptical that this is a structural improvement at this point in time.

Capacity is reducing in China in the sector, but we are nervous that this shortage on the caustic is contributing to this short-term price increase and it will live itself out of the system again next year once these old kilns have been replaced. That's a bit of nervousness. That's why we're not so bullish yet on the backward integration.

And our next question comes from Harry Philips. The scope for additional cost reduction, particularly in local for local in the U.S. and well developed is the transition to the global service model.

Harry, thank you for the question. So as you've seen, we have delivered fully on our network optimization program in Europe. We guided that we would do EUR 10 million in 2025, EUR 20 million in 2026 and EUR 30 million in 2027. We are delivering well against that and have high confidence in that.

As we've highlighted, there are further network optimization opportunities, both in the Americas and in Europe. In the Americas, in particular, we would expect savings in double-digit millions, but we have not yet guided on those figures. And certainly, in aggregate, we expect a lower capital intensity to be able to realize those savings.

The latter, Harry, is from a cash return on invested capital, actually the interesting piece. That's onetime step down in supply chain -- the capital in the supply chain. That in the U.S. is very attractive because this is where our longer supply chain is.

As Ian mentioned, we are working through these numbers. Hopefully, in November, we can give you a bit more of a clear guidance on it.

[Operator Instructions]

There are no more questions, I take it?

We have no further questions in the queue. So I'll hand back over to the team for any final comments.

Okay. Thank you very much. Ladies and gentlemen, thanks for dialing in this morning. I know it's a busy day for you all. We will leave you now. Thanks for your interest. We look forward to interacting with you over the course of the next days and weeks and see you after the summer. Goodbye from Vienna.

Goodbye.

Thank you, everyone. This concludes today's call. You may now disconnect. Have a good rest of your day.

Welcome to today's RHI Magnesita Q1 Trading Update. My name is Seb and I'll be the operator for your call today. [Operator Instructions]

I will now hand you over to Stefan Borgas, CEO, to begin. Please go ahead.

Thank you very much. Good morning from Vienna. I'm Stefan, RHI Magnesita CEO. I'm joined here in the room by Ian Botha, our CFO; and our Investor Relations team around Alex Ordosch. Let me give you the highlights, the key messages for the last 3 months or the first 3 months of the year and then I give you a bit of more granularity around this and Ian will give you some headline numbers.

The 4 key messages. Unfortunately, demand for refractories across both of the big market segments, steel and industrial, was slightly weaker in the first quarter of 2026 than in the appropriate time period in 2025. Our own volumes into the steel market were more or less in line with prior year with some pricing coming through -- pricing benefits coming through. But our industrial project-related volumes remain subdued even compared to last year. First message, really still very soft demand.

Second message. Our adjusted EBITA increased meaningfully year-on-year, which was all related to the continued execution of our self-help initiatives that we have put in place and that we continue to accelerate. Some pricing actions to catch up with cost increases actually, a lot of cost discipline around our company, network optimization in our production network and some targeted supply chain measures also supported this EBITA growth. Additional activities around the geopolitical surprises that we experienced during the first quarter really relying on our digital supply chain capabilities that we have now that we have built in the last years helped us to navigate through this difficulty around logistics problems around the Strait of Hormuz quite well. That's the second message, very good EBITA improvement.

The third message. We can reconfirm our full year guidance for adjusted EBITA of EUR 435 million on a constant currency basis or EUR 400 million around if we take today's view on foreign exchange rates into consideration. Same outlook that we had in the full year 3 months ago. And that will translate together with our strong cash generation that we show a leverage reduction towards about 2.6x net debt to EBITDA. Those are the 3 key messages; very weak demand, really good progress on the profit development of the company, and affirmation of the guidance both on cash flow as well as on profitability.

Let me give you bit more detail now about these topics. Demand remained weak. It's a challenging market in which we are and it is made more challenging through the geopolitical tensions. Our own steel volumes were broadly in line with the first quarter last year, some moderate pricing benefits, but the regional performance is actually quite different. On the industrial project side, our volumes stay subdued. In the steel segment, price improvements helped to have a slightly positive trend on the top line, on the revenue line. This is an encouraging performance because the global steel production fell by 2.3% in the first quarter of this year. 2.3% lower steel production globally just published by World Steel Association compared to the first quarter of 2025, which wasn't exactly banger.

Our cost management measures together with the pricing benefit supported a recovery in the gross profit towards more normalized levels with a clear improvement compared to the prior year clearly. And based on our current visibility, we see early signs of a possible gradual improvement in steel demand through the remainder of 2026 although some of the Western world steel reporting early the first -- early ones from the first quarter are not super encouraging on the volume side. In industrial market, cement season was broadly normal not super strong. Earnings very similar level than first quarter of 2025, but industrial project-related volumes remain still very, very low.

Nonferrous metals were broadly flat versus last year, but glass volumes in the first quarter were even lower than 2025. Also here our cost discipline together with some pricing action supported gross profit positive gross profit so that we could at least keep it flat year-over-year despite lower volumes. The order book in industrial projects shows a good improvement especially in nonferrous metals, in other market segments less so. So we are carefully confident about the improvements especially in the second quarter that is very clearly there because we're already producing materials against these orders. But also in the second half of the year, the order book looks slightly better than last year.

I'd like to give you the regional perspective of this as well. North America -- not just the segment perspective. North America and Latin America continued to deliver strong earnings in Q1. In North America, the steel business performed well alongside quarterly steel production growth of 2.3% per year compared to last year despite supply chain disruptions because of all the winter storms. That happens in the U.S. so nothing to worry about and that equaled each other out over time not fully in the first quarter, but that will happen.

In Latin America, our performance was more driven by the strength of the industrial business than by the steel business because steel in Latin America is down. India, China, East Asia and Middle East and Africa performed broadly in line with our expectations with a little bit stronger steel performance in those regions offsetting weaker industrial demand pretty much everywhere in this part of the world. Europe and CIS underperformed across both steel and industrial in terms of volumes reflecting this volume -- reflecting a volume shift from the first quarter into the second quarter especially on the industrial side.

In Europe, the performance is expected to improve over the remainder of the year especially driven by the cost reductions that are now coming into the P&L step by step and by a recovery albeit slow in the industrial projects. Staying with Europe, we have to note that towards the end of the quarter, we announced a review of our production footprint in France, which includes the potential to close 1 plant there and to convert another one into a recycling hub because it's really well positioned there from a circular economy perspective in the middle of many, many customer sites. To advance this discussion, we are deeply engaged with the local works councils and we of course are totally committed to manage this transition responsibly together with them.

The actions are part of the ongoing network optimization program that aims at improving our competitiveness, our operational efficiency, improve our customer service level and reduce our costs. The conflict in the Middle East had not had a material impact on the group's performance until now. Local customers in the Middle East clearly were affected. We had lower volumes to them because they produced less and they needed less. But our overall exposure to that region in the total context of RHI Magnesita is relatively small so we don't feel it in the total context very much yet.

Important to be noticed or we're kind of proud that all shipments that were affected by this, you can imagine dozens and dozens of containers were affected when this incident happened some weeks ago, but all of them were successfully redirected via alternative routes with a superfast reaction that started even on the day of the very first attack that happened in that region. On that very day, we already redirected some of the shipments. And that shows that the supply chain capabilities that we have built in the last 3 years enable now a really rapid response service level for our customers that are not affected by such disruptions although -- even not the service level in that region.

And therefore, I think we have a really world-leading supply chain capability and delivery capability for our customers now. More broadly speaking, inflationary pressures that are linked to the energy cost and freight costs and now also related raw material costs are being actively managed. We are largely able to mitigate the impact on RHI Magnesita through pricing measures, including surcharges for those activities. Customers are very cooperative. It doesn't affect them very much because it's such a small part of their total cost. So they work with us. It's a really good and open discussion with customers and pricing is generally accepted here.

The longer-term impact of the conflict remains uncertain. We can just not predict this. We will continue to monitor this closely and if we can see structural changes, of course we will let everybody know and talk about it. Against this backdrop, our local-for-local strategy and our modern increasingly digitalized supply chain capabilities continue to support the service levels that we can offer to customers and we can really be confident that we can deliver here because we've just, as said, tested these capabilities.

Let me hand over to Ian, who will give you a bit more details on the numbers. Ian?

Thank you, Stefan. Good morning. Adjusted EBITA in the first quarter increased by approximately 15% year-on-year or 46% on a constant currency basis. This improvement reflects sustained cost discipline and the ongoing benefits of self-help measures implemented in 2025 and in '26, supporting a recovery in profitability towards more normalized levels. Foreign exchange represented a significant headwind as we guided primarily due to the year-on-year depreciation of the U.S. dollar and the Indian rupee. We confirm our full year guidance for adjusted EBITA of EUR 435 million on a constant currency basis or approximately EUR 400 million after foreign exchange impacts.

The improvement in earnings continues to be underpinned by 4 structural levers, most of which are progressing in line with our expectations. First, our network optimization program is on track. Second, SG&A reduction is delivering in line with expectations driven by digitalization, process standardization and the continued expansion of our shared services model. Third, pricing discipline remains strong supported by the ongoing expansion of our 4PRO offering. And finally, we are seeing early signs of a gradual improvement in the industrial business, particularly as Stefan mentioned, in nonferrous metals.

These measures have already demonstrated their effectiveness in the second half of 2025 and we remain confident in their continued contribution to earnings improvement to 2026 and beyond. Turning to net debt. Net debt increased in Q1 compared to the year-end 2025 with leverage remaining broadly in line with recent levels. The increase was driven by higher working capital reflecting a planned buildup in inventories ahead of anticipated stronger sales in the second quarter, particularly in industrial projects. This buildup is consistent with normal seasonal patterns and is expected to unwind over the remainder of the year.

Cash conversion for the full year is expected to exceed 90% supported by disciplined working capital management. Year-end working capital intensity is expected to be around 22%, in line with our earlier guidance although it will be higher at the half year as is normal. We expect net debt to decline over the course of the year to around EUR 1.4 billion with leverage reducing to approximately 2.6x by year-end.

I will now hand you back to Stefan for closing comments.

Thank you, Ian. Not much left to say. Let me summarize our key messaging again. We delivered a solid start to the year in an environment of weaker demand both in the steel markets if we look at it from a global perspective and in the industrial markets as well. Second, our earnings had a meaningful improvement, all driven by disciplined execution of our self-help initiatives and supported by our strong supply chain agility and capability to sustainably deliver a best-in-class service to our customers. Third, we reconfirm our full year guidance both on profits as well as on cash flow.

Thank you for joining us this morning and of course we're super happy about your questions and the discussion that will now follow.

[Operator Instructions] So starting with questions. From the phone, we have Jonathan Hurn with Barclays.

Just a few questions from me, please. Sorry if I missed this. But can you just talk about that sort of robust order intake you saw in the Middle East or you've seen in the Middle East for Q2? Is that kind of back to the level you were in sort of Q4 in terms of order intake or has it kind of normalized relative to where it was historically? So that was the first question on Middle East.

The second question was just on the profitability. Obviously you've seen a good organic growth in terms of profit and also you called out the self-help measures. But can you just sort of talk us through maybe or break out how we think about the margin just between sort of the backward integration and the normal margin there? That was the second one.

And the third one is just in terms of the industrial projects. So if we look at the sort of the history there, it looked like in terms of industrial products -- projects I should say, 2025 was the low. So what you're saying here is that we should actually get back to industrial project growth '26 on '25. That's essentially my 3 questions.

All right. Let me start and then maybe Ian can give you bit of a profit breakdown on the backward integration. Order intake in the Middle East, we didn't specifically talk about this. What we have experienced is a clear increase in order intake especially in nonferrous metals. For the second quarter of this year, the deliveries are in full implementation here. So clearly, there's a step-up and also a bit of a stronger order intake for the second half of this year again driven -- in the industrial business driven by industrial projects.

In the Middle East, the trend is very similar. Industrial projects are little bit stronger than last year, that helps, but order intake in general isn't very much higher. We have benefited little bit from customers' need for short-term deliveries because we're able to fulfill those. So that gives us a bit of a market share improvement here. But otherwise, the Middle East isn't much stronger than last year at this point in time. In terms of profit split, backward integration margin is not improving. Raw material prices have not increased significantly. So there's not a big change this year.

Our profit improvement in the company comes solely from the self-help measures that we have already talked about. So it's the cost reduction in the production network, it's the efficiency improvements, it's the SG&A measures and it's some cost reduction also on the raw material side doing that, of course that helps the backward integration. Industrial projects, we are still, Jonathan, in a very low level. There's no recovery to historic levels yet to be seen. In nonferrous, this is underway, but it's not a jump. It's a step-by-step improvement. So we are confident that we'll have a better nonferrous year this year than last year and then next year it should improve yet again because of the projects that are in the making that's already visible.

And in glass, we see an increased number of requests for quote and project discussion, but not yet reflected in the order intake. We see some good business development in the refinery sector interestingly despite the Middle East or maybe because of the Middle East situation. So that segment also will help us. And we see some interesting activities especially in the interest of many of our cement customers around the world for more of a solution approach rather than simple commodity selling, which is also good because it helps us on the market share and it helps us on the stability of the business.

This is the industrial improvement, but we're not at the level yet where we can say industrial projects will this year or even next year be back at the level of 2023, we're not there. Ian, any more comments on the profit improvement?

So we confirm our full year EBITA margin guidance of 11.5%. That includes 1% for backward integration. Our Magnesita-based raw material prices and our raw material plant utilization remains subdued. So essentially we're seeing a continuation of where we were at the end of 2025 so around 1%. Also just to mention on the absolute margin, that 11.5%, there is a timing dimension to it. So we would expect to see the second quarter normally being better than the first quarter and the second half to be better than the first half. So I think at around the half year, we should probably be looking at a margin of around 10.5%; but for the full year, the 11.5%. That's the very normal trend that you see in our business.

We had a question on the line from Harry Philips, but I believe he has withdrawn the question. So just moving on to those on the text side. So firstly, we have Jamie Murray. How do you see the EU regulation that is due to come into force in the H2 '26 impacting RHI in H2 '26 and 2027?

Okay. All things being equal, this regulation on steel and the enforcement of CBAM also supporting European production versus imports should help us moderately in the steel business on the volume side. So it's a slightly positive impact for the European business. And therefore, of course it's highly margin accretive because every volume improvement in Europe is almost gross margin drops down to profits because it's a fixed cost dilution topic. So that should be positive. Jamie, I don't want to quantify this specifically for '26 or '27. I think it's too early to tell. There was a lot of optimism 3 months ago. Now if you listen to customers, this is more careful. We were maybe the most pessimistic 3 months ago. Now it looks like our opinion is more mainstream. So let's see how this develops, but it's difficult to quantify.

We do have Harry Philips back on the line now.

Apologies for the slight logistics line there, but thankfully back on track. Just a little bit more on pricing, if you could. I get a sense maybe wrongly, but my sense is that what you're seeing in pricing this year is a sort of annualization of what you got through in the second half of last year. So is that a correct assumption? And then if it is, is there scope if Europe picks up in any way that we get into a sort of pricing positive environment? And then in terms of the project side of industrials, just sort of noting the commentary and I know in Jonathan's question, you were talking about it. But is that project side sort of deferrals of all projects have already been deferred or is this a sort of new set of projects that are again being pushed to the right?

Okay. So on pricing, there's 2 things going on here. There's the annualization of course that's fully ongoing. That has the effect that we already discussed several times. But there's also the surcharge -- new surcharges especially triggered by high energy costs and higher freight costs triggered by what's going on in the Strait of Hormuz. That is fully in implementation and you will see it in the revenue, but you will not see it dramatically in the profit of course. So that happens. There's a bit of a countermeasure here and that's in some of the more commoditized industrial projects not so much in nonferrous and not so much in the very sophisticated glass projects.

But in more of the commoditized ones, aluminum and the simple blast furnaces; there's a huge hunger of all global competitors to finally improve the industrial projects order intake. So some pricing is not very conducive to margins. We try to stay out of it. And then if somebody wants to dump and not make any money by overpromising, then we don't participate in this. So that's a bit of a counter move on the pricing side. But in general, pricing is very stable with a maybe slow upwards trend.

On industrial projects, we never expected higher industrial project delivery in the first quarter of this year so there hasn't been a lot of postponements. The second quarter always was the one, at least from the perspective of November, December last year, was always going to be the one with a high delivery percentage. That is still happening. Therefore, we have this inventory built up and this cash consumption in the first quarter. That will reverse now in the second quarter because we deliver these projects. So nothing to worry about. Much less of a postponement than we experienced last year. And the order intake for the second half of the year was weak 6 months ago, is a little bit better now. So we actually indeed see some glimpse of hope in the industrial projects for the second half of the year and of course that is a trend then that will continue into next year.

Just moving on to the next question via the webcast. This is from Andrew Douglas with Jefferies. Three questions. Firstly, please can you explain the increase in industrial order book given the soft market backdrop seems odd? Secondly, can you explain the delta between 15% growth in adjusted EBITA and plus 46% growth in constant currency terms seems a big FX hit? And third, please can you guide to the expected first half/second half split of sales and EBITA?

Yes. So the second half/first half split is more like in normal years so it's about 45% first half, 55% second half. We have no reason to believe that this will be very different this year. You remember last year that was super different. So we were all nervous in the half year or this is more normalized again. The industrial project growth is explained by 2 things. In nonferrous, it's really growth of the business because the related metals; zinc, lithium, but especially copper; are high; pricing for those is high.

Demand is high. Capacities are at a high -- capacity utilization at those customers are at a high level. So there's a lot of activities there in order to keep the capacity utilization high and that is a positive effect. It's actual real demand improvement. On the glass side and in aluminum and in a couple of other markets, it is the effect of 2 years of very subdued low deliveries. And now some of the furnaces cannot be stretched another year so they need repairs. And that helps a little bit on the order book here. So that's not actually our customers' end demand, but it's the repair and maintenance cycle that supports our business. Yes, those are the 2 trends in industrial growth. Ian, on the ForEx effect.

Andrew, also just on the first half/second half split as Stefan highlighted, something much more normal this year. I think if you look at the first half, probably around EUR 170 million of our EUR 400 million and the second half would be around EUR 230 million. So first half would be up from EUR 140 million last year to EUR 170 million this year-ish and then the second half broadly similar and that gets you towards the 45% that Stefan mentioned.

Currency has a material impact. We've guided on this. Really it's the impact of the -- guided impact of the weaker U.S. dollar and it's the weaker Indian rupee. So if you think last year the dollar was averaging around $1.12. Now it's averaging around $1.17, $1.18. Every cent movement is over EUR 4 million on our earnings. Likewise, the Indian rupee last year was averaging around INR 90. Now it's over INR 107 to INR 110 and so it's very material impact. Actually what we have also seen in the first quarter is the impact of the Mexican peso, the Turkish lira and the Chinese renminbi moving against us. So it's been a little bit weaker than actually even we guided in our trading update earlier this year.

Also a follow-up from Andrew. Please can you update us with your thoughts on M&A outlook? What is the pipeline looking like?

Pipeline looks very good. Discussions have started again, but no updates compared to what we said before, no cash out this year.

Great. And then we have from Jamie Murray. Can you provide any growth rates on revenue for steel and industrial in Q1?

Yes. So Jamie, in constant currency terms: steel would be up around 6%, industrial would be down around 6%. So in constant currency, we're looking at the group around 2% plus. But then obviously you've got the significant impact of currency impacting so down around 5% year-on-year on a reported basis. But with strong margin improvement coming through with the benefit of all of the self-help around network optimization, SG&A, operational excellence driving the earnings accretion.

[Operator Instructions] We have no further questions on the call or webcast. I'll hand the call back to the team for any closing comments.

Wonderful. Thank you very much for listening in this morning. Let me just repeat the 3 conclusions of the first quarter. We continue to be in an environment of weak demand negatively impacted by geopolitics. The outlook is in our expectations, but below what many other people in the market expect. In this environment, RHI Magnesita could deliver a meaningful improvement in earnings, all driven by self-help measures and supported by our significantly improved digitalized supply chain capability. Third message, we can reconfirm the guidance for the year of about EUR 400 million of EBITA and gearing of 2.6x net debt to EBITDA.

Thank you very much for listening in this morning and we're looking forward to speaking with all of you during the course of the day and the week. Goodbye from Vienna.

Goodbye.

This concludes today's call. Thank you all very much for joining and you may now disconnect.

Okay. Good morning. Thank you for joining us today in London for RHI Magnesita's 2025 Full Year Results Presentation. As usual, Ian Botha, our CFO, and myself will do this together and lead you through the events of 2025 and, of course, look at the incredible forecast of 2026 and maybe a little bit beyond even. Before we get started, let me just send our thoughts to our colleagues and our customers and our suppliers and our business partners in the Middle East who woke up yesterday in a different world than they would like to be in. So our thoughts are with them, our support is with them, and we hope that things normalize very quickly there and that people are not hurt as much as possible.

2025 was a challenging year, actually quite a challenging year. But ultimately, with a good ending at least for RHI Magnesita. Before moving into the presentation, let me highlight 3 key takeaways from 2025. First highlight, we delivered our self-help mostly cost-based initiatives, as we had planned them already starting very early in 2024. And therefore, we could meet our profit guidance. This is important because we're improving the business structurally and sustainably. These are not short-term measures. These are structural improvements by focusing on what we can control and not relying on the outside world.

Second, this momentum of self-help will continue into 2026. New measures that will start this year are already well advanced, and they will then support that velocity also into 2027. Third message, there is currently no visible market recovery. We know our view is not shared by all, but we retain substantial operating leverage ourselves that could benefit from this one day when demand improves, but we do not expect any improved demand before 2027. We're not relying on this. If we are wrong with our forecast and you are all right, then we will all have a happy drink at the end of this year.

Before I go into the results, let me start, like always, with health and safety. Safety remains the core value at RHI Magnesita. In 2025, triggered by fatalities in the year before, we made significant progress in our group-wide safety culture transformation program. This is not just a corporate initiative. It is a fundamental shift towards embedding a deeply rooted safety mindset across the organization.

In 2024, we recognized that we need a different approach here, greater depth and greater accuracy in our health and safety reporting. Therefore, last year, in 2025, we added more than 200 sites to our safety reporting, mostly on our customer sites, but also, of course, sites from acquisitions that we didn't have before.

They often have a lower safety maturity because they come into the group, but also because we didn't focus on them enough before. And this maturity now that we can measure, we can also address. And therefore, you see a different number in 2025 that looks shockingly increased, but it comes from a complete re-reporting.

This increase results in a big increase in transparency. And this improved visibility allows us now to address risks much more systematically and holistically. We are focusing with greater discipline on controlling the company's critical risks to prevent serious injuries and fatalities.

Our key initiatives center now on visible felt leadership, how do people perceive their own supervisors on site. We have introduced 7 life-saving rules and strengthened standard operating procedures, and these practical measures is very practical on the ground, influence behaviors, improve accountability and raise the standards across every site. We remain fully focused and committed to have a zero harm, no injury environment. That's the only acceptable objective.

Let me now turn to the results. We delivered against the continued challenging market backdrop. While the Steel business saw a slight downward trend across most regions in 2025, the fall in the industrial project in 2025 was unprecedented, never seen before. This industrial projects business is a high-margin segment for RHI Magnesita that contributes disproportionately to earnings normally. In addition to that fall, foreign exchange headwinds further pressured profitability, mostly the U.S. dollar, but not only the U.S. dollar.

Despite these challenges, we achieved our full year guidance, delivering EUR 373 million of EBITA and a margin of 11.1%. The earnings recovery was accompanied by strong operating cash flow of EUR 391 million. In these days, this is at least as important as profit. This is a cash conversion of more than 100% and driven, of course, by a quite meaningful reduction in working capital, which shows you the financial discipline that we have in the meantime everywhere in all operations. We finished the year with a leverage of 2.9x net debt to EBITA, a little bit better actually than we guided, driven by that really good cash flow performance.

Based on this performance, the Board is recommending a final dividend of EUR 1.20 per share, bringing the full year dividend to EUR 1.80, in line with 2024. But that's not the whole thing about the story of 2025. It was a story of 2 completely different halves.

The first half of 2025 was one of the weakest semesters on record of the company. Even if we include major economic shocks, it was one of the weakest. In anticipation of this because we saw this coming already in 2024 and to be able to respond to such a development, management implemented targeted self-help measures that had an effect then starting in the second quarter, but especially in the second half. These actions underpinned a strong recovery then in H2 with adjusted EBITA rising to EUR 232 million just in the second half, actually starting in August, not even in July. This was 65% higher than in the first half and also 7% higher than in the comparable period in the year before. Nothing changed on the market. It's just purely 100% driven by self-help.

We delivered, therefore, a step change of the EBITA margin, which was at 8.4% in the first half to 13.7% in the second half. It was achieved despite continuous market weakness, no demand increase. The Steel business, if we now look at these 2 different sectors, declined slightly, reflecting either weak demand in many regions. And in those regions in which we had good demand, we had weak pricing.

This demand weakness was primarily caused by record levels of Chinese steel exports, which are displacing local production, and therefore, we cannot supply into the local steel plants. And that is a problem, of course, because the local steel demand is not growing. As a result, gross margins came under pressure, driven by an unfavorable volume mix, fixed cost under absorption but also nervous competitors who made price concessions and elevated Chinese refractory exports into several markets, mostly attainable to China.

India remains the main engine of global steel production growth, delivering approximately 10% steel growth. Our revenues, however, did not increase at the same pace as we had to make price concessions and there with except margin reductions in India. This is the market with the most undisciplined competitive behavior.

North America delivered a very strong performance, not solely due to the acquisition of Resco, which happened, I think, at the perfect time. Excluding Resco, revenues increased still by 6% against broadly flat steel production in North America. We are benefiting from the green steel transition outside of North America mostly, but there also actually because of the strength of our 4PRO offering, our total solution offering and our very solid market position wherever these green steel transformations happen.

In contrast, revenues in Latin America, in Europe, in China and in East Asia declined in the Steel business as weak domestic steel demand coincided with record Chinese steel export volumes, which continue to displace local production and reduce local refractory purchases as a consequence, of course.

The Middle East, Turkey, Africa region, the META region, experienced a revenue decline, primarily -- mostly because of 2 issues with 2 key customers in the first half of the year. So they just bought a lot less. So it's a onetime thing. We're not so worried about it, but also in this region with significant margin pressure due to Chinese refractory imports. Steel production growth elsewhere in this region was insufficient to offset this impact of these 2 very big customers that had a weak year. We focus on restoring that performance in the Middle East region now in 2026. At least that's what we thought until yesterday. We have to see how this unfolds now. Looking forward, we do not see in our order book any green shoots of improved steel demand. We do not see an order increase in no region.

Let's turn to the Industrial business. 2025 was an exceptionally weak year for our industrial project business. The impact was particularly visible in the first half of the year. Our Cement business, which is not the industrial projects, it's a different business unit, was remarkably resilient, but the number of industrial projects declined by 40%, 4-0. Our Glass business remains at a historic low level. There's no sign of recovery anywhere.

The nonferrous part of the industrial projects is a little bit more resilient. We are not yet seeing a big turnaround here either, but there, the forecast is a little bit better. As a result of this industrial project downturn, revenues declined by 9%. This is the first top line contraction in this business since 2020. More significant, however, was an impact on gross margin here.

Industrial project business, particularly in glass and nonferrous, typically generates above-average margins because this is a very technical and supply chain complex business. We are the clear market leader worldwide in these high complexity projects. The sharp reduction in project volumes, therefore, has a disproportionate impact on our margin mix because these projects are done in very expensive complex plants. And if they're not utilized, the fixed cost there is very high that we are stuck with.

To support this business globally, we operate these specialized plants with structurally high fixed cost basis. The exceptionally weak order intake leads then to these material fixed cost under absorptions, which we can only partially compensate with reduction short-term reduction of cost, which actually we don't want to do either because then we're not ready for the recovery.

Looking forward, we expect a gradual improvement now in the Industrial business. Project activity could particularly improve in the second half of this year, although it will remain way below historic levels. Why are we so sure? Because the delivery time for these projects is somewhere between 9 and 18 months. So whatever we don't see in the order book now will not happen in 2026.

Let me update you a little bit on our strategy. We sharpened our strategy at the end of 2025, together with our Board to adapt to these new geopolitical and also technological challenges and opportunities. We are reviewing our portfolio. We are innovating with new products, but also with new business models. Both of them should create greater value, of course, for existing and future customers.

We are boosting productivity through scaled and optimized footprint through smarter operations and through a digital transformation. We lead in sustainability by pioneering technologies that set the path for green transformation of our industry. Our main objective continues to focus on the consolidation of the global refractory industry in order to get scale for all of these things.

In 2025, the acquisition of Resco, of course, transformed our North America footprint for the better. Leveraging our scale remains the only structural avenue to be able to continue to pay for innovation and for improved customer services, which they expect. We will go into more detail in a couple of minutes together with you.

We continue to evaluate these opportunities, these acquisition opportunities in many markets. We don't expect a meaningful cash out in 2026 because these negotiations take time. When we look at the broader steel and refractory industries, it becomes evident that global demand no longer moves in a synchronized demand-driven cycle as it once did. Instead, we see more and more diverging regional trajectories, also influenced by the growing scale and impact of Chinese exports and protectionist reactions that are very different from one region to another.

In the past, regional demand for metals and industrial goods drove local capacity development and then trade flows. Together, however, global and particularly Chinese industrial capacity is sufficient to supply demand growth almost everywhere in the world because of the overcapacities there. This structural overcapacity in China places sustained pressure on local industries in many markets.

As a result, global trade is gradually shifting from a free trade model towards a more protectionist environment with countries and regional trade blocks increasingly managing supplies differently depending on their capabilities. Given their strategic importance, refractory consuming industries are at the center of this transition and of that protectionist. The only large exception to this is the cement industry because it operates anyway under a fundamentally different dynamic.

Unlike steel, cement is not broadly exported around the world, never has been, due to technical and commercial reasons. As a result, the cement sector is less exposed to global overcapacity and to rerouted trade flows. This more regional market, which always was a regional market, allows our Cement business to perform resiliently.

Mature markets such as Europe and North America, but also South America in a way, are leading the implementation of trade protection measures. Markets like India and META are less protected. And therefore, they absorb much more of the rerouted Chinese exports that don't make it into the protected markets anymore. This adds margin pressure there. And as you have heard, we saw this already last year. It, therefore, also limits at least profit growth opportunities for us in these markets because volume growth gets compensated by margin pressure. RHI Magnesita began this regionalization focus in 2021. And we're so happy that we did this because we continue to steer the company now strategically by regions.

We believe this regionalization is a key response to this ongoing reorganization of global trade. The creation of the META region, Middle East, Turkey and Africa, is the last step -- the latest step in this approach, probably not the last. Many of these markets still import the majority of their refractory demand and are, therefore, also particularly exposed to this global trade dynamics and of course, imports from places like China.

Under the right conditions, trade barriers can create a more supportive local environment, under the right conditions, but only locally, not globally. In the United States, for example, tariffs on certain Chinese refractories used in steelmaking support more sustainable pricing levels for us to keep local production running. That has been a political decision actually since many, many years.

In Europe, measures to limit steel imports could eventually help to put a floor under domestic production, which in turn then can support local refractory demand also. We expect this to potentially have an effect in 2027, potentially. In Brazil, investigations into tariffs on Chinese refractories could restore pricing a little bit there to more sustainable levels, but also they are not for a while. It's still under investigation.

Why we have not observed any tangible impact on our order books globally, there remains a possibility that pricing and demand dynamics could gradually improve across certain regions over time, but it could also then go at the detriment of other regions.

At present, however, ladies and gentlemen, there is no direct benefit from this for our forecast in 2026, not on cash and not on profit. At the same time, while this is all happening, China recognizes that globally deployed excess capacity is straining their trade relationships and maybe more than trade relationships. Therefore, capacity reforms and potential export limitations in China could benefit other regions in the years to come and support the development of a more sustainable value-creating refractory industry within China also because capacity reduction there has to happen. It is recognized. But again, this will take years until this will take effect. At present, we see no benefit from these announced measures, not in our order book, nor in our forecast, nor in our performance for 2026.

I want to spend a couple of minutes on North America and particularly the U.S. This is our most attractive refractory market globally at this moment in the cycle. It doesn't have to stay like this. The U.S. market is characterized by balanced supply and demand structures. Maybe that's the most valuable part here, which enables disciplined pricing and mature capital allocation among suppliers and between customers and suppliers. At the same time, U.S. steel producers operate at very healthy margin levels, supporting continuous investment in low-carbon steelmaking. Despite the noise you hear the U.S. is the leader in low-carbon steelmaking. And this is important for us because it creates strong demand for our market-leading 4PRO and electric arc furnace offerings.

While the U.S. currently offers attractive margins, it also presents challenges, particularly around tariff volatility, where should we supply from next month and the U.S. dollar devaluation because we account in other currencies. The recent acquisition of Resco significantly strengthens this local-for-local strategy and thus reduce the tariff risks and gives us some more natural hedges.

We have launched a network optimization Americas program to increase our local-for-local share in the U.S. to approximately 80% from -- which we will attain in 2028 from about 50% that we had until 2024. This will allow us to deliver best-in-class services with lower working capital intensity and reduced tariff exposure while also delivering further margin upside through synergy realization and self-help measures also in the U.S.

Let's talk about sustainability. In 2019, we set ambitious sustainability targets that many believed were unachievable. There are and they continue to be a cornerstone for developing our business model for the next decade because the emission problem doesn't go away. In 2025, we delivered the first key milestone on this sustainability agenda, including a meaningful reduction in CO2 intensity. This is really significant for a heavy industry here, more than 15%.

On the back of this progress, we remain committed, fully committed to our decarbonization road map and now the next set of targets that we have set. First, our recycling rate now stands just under 16%, up from 3.5% in 2018 despite the dilution from acquired businesses who had a much, much lower percentage. They now all operate at much -- they did operate at much lower recycling levels, and we are bringing them up step by step. So you see there's still potential here, quite a bit of potential here. With continued investments and now technological advancements in recycling and sorting, we will further increase this recycling content and scale also the commercialization of secondary raw material businesses globally.

Second, our carbon capture and utilization technology developed together with MCI Carbon in Australia is currently undergoing industrial scale testing. This green mineral technology could become a key lever in addressing geogenic emissions, which are unavoidably technically, especially in our raw material operations. We are targeting the first international large-scale industrial development in 2030.

Third, we continue to test hydrogen where it is economically and technically viable. A specialized furnace in Germany is central to advancing these trials where we have technically everything in place across different refractory products because hydrogen burns differently. The technical feasibility of using hydrogen as a fuel is very much possible. We know this now, and we know how to do it.

But commercially, hydrogen is not a viable fuel alternative for the time being. So we will not continue any more activities here at least in the short term. Recycling already contributes meaningfully to earnings via our joint ventures in Europe and in the U.S. on top of the raw material cost savings that it brings. Our recycling capabilities in particularly are a clear differentiator now also in our 4PRO offering for our customers because we can present to them a true 100% circular economy solution for refractories. We are seeing strong interest from the new green steel mills overall around the world, actually in every region, that are looking to integrate these circular solutions into their operations. They don't want any landfills anymore. In 2025, we signed 4 green steel contracts, some including recycling components, and we expect further progress in the years ahead.

Let's go to the financial review that you've all been waiting for so long, and I would like to ask Ian to lead you through the numbers, and then I'll come back at the end.

Thank you, Stefan. Good morning, ladies and gentlemen. I'll walk you through our 2025 financial performance and our expectations for '26. 2025 was a challenging year externally. However, internally, we responded with discipline and with speed. And the second half performance clearly demonstrates the impact of our managerial actions. Adjusted EBITA declined from EUR 407 million in 2024 to EUR 373 million in '25. The primary drivers were market related.

In Industrial, EBITA declined by EUR 74 million. This as the number of high-margin projects in glass and nonferrous metals fell by 40% as customers postponed rebuilds and delayed maintenance. This also led to under-absorption of fixed costs in our specialized plants. In Steel, EBITA declined by EUR 41 million. This as demand remained weak in Europe, in Latin America and in the first half in META. High levels of Chinese steel and refractory exports intensified pricing pressure across multiple markets.

Currency reduced our earnings by EUR 13 million, mainly driven by the weakness in the U.S. dollar and the Indian rupee. These were significant external headwinds. Offsetting this, management-led self-help measures delivered EUR 70 million in 2025. This included pricing discipline, operational cost improvements and SG&A reduction. In addition, Resco contributed EUR 25 million, including synergy benefits. The important point is that the earnings recovery in the second half was execution driven, not market-driven.

'25 was clearly a year of 2 halves. The first half was one of the weakest since the merger with EBITA of EUR 141 million. This reflected the full force of the industrial downturn, weak steel demand, pricing pressure and fixed cost under absorption. In the second half, the benefits of our self-help measures came through strongly, increasing EBITA to EUR 232 million, 65% higher than the first half and 7% above the second half of '24. This improvement was delivered despite continued market weakness and a EUR 19 million currency headwind in the second half. Against our guidance, steel outperformed. The industrial recovery was delayed with projects moving into 2026. Pricing delivered at the top end of our expectations. SG&A savings were more than double what we guided, and the plant measures were delivered as planned. All of our cost actions are structural and will continue into 2026 and beyond. They do not rely on temporary reductions or borrowing from the future.

Even in this challenging environment, we defended our margins. Since the 2017 merger, our adjusted EBITA margin has remained above 11% every year. That consistency reflects our diversification across regions and end markets, but more fundamentally, it reflects disciplined execution and active management. The refractory margin remained robust at 10%, supported by synergies, pricing discipline and operational excellence.

The backward integration margin, however, remained at cyclical lows at 1.1%, contributing EBITA of EUR 37 million. This was primarily due to continued weak Chinese magnesite pricing, reflecting industry overcapacity and high levels of above-ground inventory of ore as well as lower fixed cost absorption at our own raw material plants.

Importantly, our backward integration margin remains positive, demonstrating the competitiveness of our cost base. To improve returns from our raw material assets, we've implemented targeted self-help measures to reduce costs and expand sales into non-refractory markets, and we expect these actions to support a gradual recovery in profitability from '26 onwards.

Moving to working capital. Working capital intensity improved strongly to 21.7%, marking the third consecutive year of improvement. This reflects disciplined credit management with our accounts receivable as well as inventory reduction driven by continued progress on our local-for-local strategy and the rollout of new supply chain technological solutions to strengthen our inventory control.

The acquisitions of Resco and BPI added EUR 51 million of working capital. At the same time, we reduced our working capital by EUR 143 million, with roughly half of that driven by management actions and half by currency movements. In total, this translated into an EUR 84 million release of cash flow from working capital reduction.

Cash generation remains a core strength of our business. In '25, adjusted operating cash flow was EUR 391 million, resulting in a cash conversion of 105% and free cash flow of EUR 214 million. Net debt increased to EUR 1.5 billion, primarily reflecting the acquisition of Resco. Leverage closed at 2.9x net debt to adjusted EBITA, and this was slightly stronger than our guidance.

Our liquidity remains strong and approximately 70% of our debt is fixed with an attractive weighted average cost of borrowing of 3.3%. We are comfortable operating temporarily at elevated levels of leverage to fund compelling value-accretive M&A, particularly in high-margin segments, such as in '25 in North America.

Our strong cash generation provides a clear path to deleveraging, and we expect leverage to reduce to around 2.6x, about EUR 1.4 billion by the end of this year. This level of cash generation gives us flexibility to invest in growth, to reduce net debt and to maintain disciplined shareholder returns. We are, therefore, recommending a final dividend of EUR 1.20 per share, bringing the full year dividend to EUR 1.80, in line with our dividend policy.

Finally, looking ahead, we expect the market environment to remain challenging as ongoing global uncertainty continues to dampen customer demand and investment. Steel end markets remain at cyclical lows globally with no near-term recovery in demand apparent in our order books. At the same time, magnesite-based raw material pricing is likely to remain subdued, keeping our backward integration margin around current levels.

In addition, currency is becoming a much more material headwind this year, both from the U.S. dollar and from the Indian rupee with an expected negative impact of around EUR 35 million at current exchange rates. Against this backdrop, our performance improvement will once again be driven by what we control. We are, therefore, guiding to EUR 435 million adjusted EBITA on a constant currency basis, representing a 17% increase versus 2025. After reflecting anticipated currency headwinds, this translates to approximately EUR 400 million of reported adjusted EBITA, implying a margin of around 11.5%.

The earnings improvement is underpinned by 4 structural measures, each contributing approximately EUR 15 million on a like-for-like basis. First, we expect a gradual improvement in the Industrial business. Project activity should improve, particularly towards the second half, although it will remain well below historic levels. We do not expect a demand improvement in our steel business overall.

Second, we continue to drive pricing discipline and expand our 4PRO offering, increasing the share of higher-value solution-based revenues. Third, our network optimization programs in Europe and the Americas will deliver further benefits with the Americas now contributing around EUR 5 million of the EUR 15 million total impact this year.

And finally, we achieved further structured SG&A reductions through administrative efficiencies, supported by the investments that we've been making in digital transformation, in process standardization and leveraging our shared services model. These measures have already proven effective in driving the second half turnaround, and we will continue to build on them to deliver further improvements in 2027. We are not relying on market recovery to achieve this guidance.

So to conclude, 2025 demonstrated the resilience of our model. We acted early. We defended margins. We generated strong cash flow and completed a transformative acquisition in North America. 2026 is now about continuing our disciplined execution and delivering in a still challenging demand environment. Thank you. Now back to Stefan.

Thanks, Ian. Let me summarize for you. First, in 2025, we delivered significant self-help cost initiative as we had planned to meet our profit guidance. We are improving our business structurally and sustainably by focusing on what we can control.

Second, the momentum of self-help continues into 2026 and new measures get added to improve 2026, but that already will prepare the next improvement for 2027.

And third, there is no visible market recovery that will benefit our business in 2026. We retain great operational leverage, which will enhance our performance if and when such a demand recovery will come. We don't expect this before 2027, even if we want to be optimistic.

On that basis, Ian has outlined the guidance, so I don't need to do it again. Our gearing will go down more. Our cash generation will become -- we will stay disciplined and our expenditure control will provide the actual improvements. And it will build strategic opportunities for the future.

Let me summarize our investment case. Before we move -- in 2025, we made very good progress towards this investment case. We have significant opportunities to grow the business and improve our margins. We do have these opportunities. We demonstrated in 2025, how disciplined self-help measured can deliver stable performance even in a weak market environment, and that's what we continue to focus on.

Second, we continue to consolidate the refractory industry, unlocking on average around 35% synergies per acquisition, 35% of the acquired company's EBITA in a structurally stagnant global market. The acquisition of Resco marks an important milestone in the U.S. because we had this gap there. It's just one of the examples.

At the same time, we're building a highly efficient digitalized corporate platform. We're in the middle of this transformation that will enable us to integrate future acquisitions dramatically much faster, within weeks, and drive cost leadership. It will also make us AI ready. And we're not 5 years away, we're 12 to 18 months away from this. Our strong cash flow supports an attractive dividend while also giving us strategic flexibility that many competitors do not have. Already today, we generate FTSE 100 level cash flows and EBITA with a market capitalization of the FTSE 250 company. Taken together, this underpins a value-accretive strategy and a long-term compelling investment case. Thank you, Ian, for being at my side here, like all the time and like we've done in so many years. And let's take your questions now. Please. Yes. Please wait for the microphone, so that in the phone call, we can also hear about it.

I'm vanessa Jeffriess from Jefferies. Just first on the points about the Chinese export problem in India. Just given the weakness that we saw in China production last week and what you're saying about the help you'll get, I'm just wondering why you're not factoring in any benefit from that for this year? And then secondly, just on M&A, given how tough things are and the fact that you don't expect demand to recover this year, I would have thought there'd be a few more consolidation opportunities than there are. So just wondering about that point as well. And then third, just a reporting question. Just wondering, last year, you switched to reporting EBITA for the divisions, and now you stopped doing that. So just wondering why you did that.

All right. On Chinese exports to India, this is unfortunately not a major problem in India. There are Chinese refractory exports to India, of course, always have been because in some raw materials, India is not self-sufficient. But the biggest problem in India is local competition. International refractory companies and local promoters have overbuilt. And the biggest problem in India is dramatic overcapacity that we have in the country there, and that leads to the margin decline. And we need competitors to understand this finally instead of continuing to build, which they are still doing.

So I don't see any short-term hope, unfortunately, in India. The avenue for us also here is not so much on cost cutting because the cost levels in India are very low. But the approach here is on technology improvement. So it's the solution approach to the customer that will help us to decommoditize. And that cannot be done by everybody because it takes global scale in order to bring robotic solutions, sensor technology, circular economy setups and things like that, that are not being able to match. That's the avenue in India.

On M&A, you're totally right. The opportunities will be there. They are there. It's just a matter of negotiation cycle. It takes an average of 2 years from when we engage with somebody who is willing to talk about merging with us until we close the deal. And that's the reason why 2026, we have no cash up or no big one. On the reporting question....

Vanessa, on EBITA, we actually got some very helpful feedback from the investment community last year around the merits in trying to thin down our material, reduce the complexity, and that's what we sought to do. So we have continued to provide gross profit. If there are certain specific metrics, EBITA as an example, that you find particularly helpful, please reach out to us, and we can certainly help.

It's Jonathan Hurn from Barclays. Just a couple of questions. Firstly, just topically, Middle East. Could you just talk a little bit about your exposure there in terms of size? Also in terms of your guidance for 2026, your overall group guidance, what were you expecting? What was the Middle East contributing? No, just in terms of revenue. So I'm just trying to get a feel for the importance of the Middle East, what part -- what the outlook for that business was in terms of 2026 for your guidance and also sort of what actions you can take there?

And then the second one is just in terms of coming back to those regulatory tailwinds or potentially regulatory tailwinds. Can you just give us a feel for what the impact of those could be in terms of monetary value, EBITA, both for Europe and potentially what regulations in Brazil could bring through as well? And then maybe just lastly, if I can squeeze another one in. Just in terms of that backwards integration margin. I mean, look, you've given us some steps about what you're going to do there to improve it. Can you just give us a little feel for how you think the profile of that margin should develop going forward, please?

Maybe, Ian, you can talk about the META guidance. Let me pick up the other 2 pieces. The regulatory tailwinds, well, in Brazil, this is an investigation. But Brazil is very connected with China. So there's a basic hesitancy to put big trade barriers for Chinese imports in Brazil. Why?

Because it goes both ways. So it's a -- in principle, it's a free trade spirit between the 2 countries, which in principle is good news because we -- I think, in general, long term, we need less protectionism and more free trade again. Therefore, nothing will happen this year. This is all under discussion. This is under investigation. It's done in a friendly way. We are sitting on the fence and watching this. I think if at all, there could be a bit of a margin stabilization effect for our Brazilian business for 2027. And this can come from a stabilization of the steel production.

Steel production in Brazil has been reducing 1%, 2%, 3% per year, mostly because of Chinese imports. And on the refractories is the same thing. It has been reducing because customers have started to commoditize. And that trend could be turned back and then bring a couple of percentages of margin improvement for us, more on the margin side than on the volume side.

In Europe, it's an investigation as well. There could be a floor on imports, but actual Chinese imports into Europe are very small. It is not a very large issue. If you had hoped for some of this to happen already, I advise you to look at January world Steel numbers that have just come out a couple of days ago. Europe steel production is down by 2.5% compared to January 2025, which wasn't exactly a bombastic January either. So we're not seeing any of this now. So please don't put any hope in it. And should this happen, again, this is maybe putting a floor on European steel production and therewith on refractory consumption as well. So nothing happened this year.

On the backward integration, look, there's 2 components here. There's a cost improvement, mostly on mining optimization and energy consumption and processing for us. And then there is a portfolio aspect. We've always looked at our raw material backward integration as a raw material backward integration. How many refractory raw materials can we make, at which cost so we don't need to buy it and have an advantage out of this.

If we look at our raw material assets from a perspective of a raw material asset, then we have started to ask the question last year. What profit can we generate or what revenue and profit can we generate out of these raw material assets, of course, for refractory purposes, but also for maybe other markets. And so there's a bit of a market expansion opportunity here because we have some minerals there that are not suited for refractories, but maybe for other applications, and we're looking at this. This is a benefit from maybe EUR 2 million, EUR 3 million, EUR 4 million, EUR 5 million this year, but it will be one of the elements that gives us velocity for next year because we need self-help for '27 as well, right? We cannot rely on the market to give us a bonanza. We have to create that ourselves. Ian on On META?

On Middle East, Turkey and Africa. So we had EUR 350 million of revenue last year, almost EUR 80 million of gross profit. Our forecasts anticipate around a 10% step-up in that gross profit really as you see the benefits of the slightly stronger second half '25 industrial volumes coming through and slightly stronger pricing that we realized in '25.

And then very importantly, with the benefits of the lower plant costs, both because we import a lot of finished goods out of Europe into that region. And as the Europe cost structure improves, including with the footprint rationalization, META is one of the regions to benefit. And then also from the measures that Stefan has just touched on around raw materials in our Turkey plants.

One of the areas that I think we'll be watching carefully is obviously the impact of the increase in oil prices that we've seen during the course of the last 25 days -- last 24 hours. Our energy cost last year was about EUR 225 million, half of that went into gas, 20% into electricity, 30% into diesel. And typically, we would expect to pass on any increase in the diesel price to our customers. We do have somewhat of a hedging for part of this year. So that's an area that we will continue to focus on this year. Clearly, our guidance is based on an expectation that there is no net negative from the oil price increase.

And I think that with what happened now, the volume recovery, at least in the Middle East, I would argue is at risk. It's early days because we are only 2 days into this new war, but I don't see customers as a first priority now looking at volume increases. Their first priority is to protect themselves. And hopefully, industrial infrastructure doesn't get hit. So it's anything but good news. Harry?

It's Harry Philips from Peel Hunt. A couple of questions, please. Just thinking about the working capital number, which has been very impressive. And just noted thankfully that the factoring element was very stable as well. So it's a clean number rather than a variable number. Just thinking that how much -- if we look to the medium term and think about recovery, thinking around working capital intensity into that, how much might that change, if at all? And sort of if you like to sort of reline to step into recovery, how much do you need to put back in?

And then the second is sort of more thinking about the sort of margin profile of the business again into the medium term, where the sort of picture of, say, a 14% to 15% margin, 300, 350 basis points from vertical integration, balance from refractories. Given the extent of the self-help that you're currently conducting and the network optimization post the M&A and the sort of market issues around vertical integration, does that sort of change that mix in any way? Or is this just a sort of transitionary process that will work its way back to norms in the future?

Okay. Let me try to take a stab at this and then Ian, please, you should add a couple of thoughts here. On the margin profile, in the second half of this year, we were at 13.7%. So of course, there are some good positive effects here. This is not 13.7% sustainably, but the refractory part of the business can run between 12% and 13%. That's clearly possible. And this is not very far away.

And then the backward integration between 2% and 3%. So we are between 15% and 16% as a margin potential. In a normalized way and when the market recovers during the recovery phase, when we have operational leverage, then it could be even higher. But that's a short-term phase. But now we are lower in a short-term phase. Well, it's a pretty long short-term phase, but we have that potential.

On the net working capital, this is also a long journey. Actually, one of the major focus areas of our digital transformation is net working capital. Because we have buffers in our inventories everywhere. We have buffers at the supplier. We have buffers on the boats. We have buffers in the warehouses. We have buffers at the customers. We have buffers in our plants. And why? Because our planning accuracy capability are not where they could eventually be. And this big digital transformation in which we are spending a triple-digit million amount of money, which will be completed in the middle of 2027 will give us then the machine to drive working capital down.

If you look at world-class, very complex industrial businesses from a working capital perspective, world-class, they should -- we should run at about 20%, 21%, 22% working capital. So that's massive. I'm not yet saying we'll get there because we first need the machine to use, but that's the ambition level here. Ian, would you say I'm too optimistic here?

No, no. I think that over the next couple of years, delivering a 2% reduction in our working capital intensity must be our North Star. I think that the focus for '26 is very much on operating in a stable fashion at this 21.7% that we've achieved. We achieved that at the end of last year. That was a good performance. But during the course of the year, we weren't consistently at that level.

And if we can use our new o9 technology, if we can use the local for local to drive that consistency, then we also get a very important finance charge benefit. And that's the focus, particularly for this year. I'm not sure that we would expect to be in a very different place at the end of '26. But going forward, another 2%...

So when I'm saying 20%, 21%, this is without financial measurement. So this is a 4, 5 percentage point improvement. That's the long-term potential.

Mark Fielding from RBC. Actually, I just want to follow up on your answer to Harry's question and talking about, obviously, the second half margin was 13.7% and your comment was not near-term sustainable. I suppose my question is why isn't that margin sustainable this year in the context of -- I know there's a second half bias in the Industrial business, but it was much less pronounced last year than is normal, and you're looking for it to be a bit better this year. There's a number of other self-help factors. Why aren't we taking the second half profit and doubling it, ignoring I am very cognizant of the Middle East stuff and how that then feeds in.

Yes. So Mark, you're absolutely right in your initial premise. You can't double our second half because of the industrial on the cement side, also the fact that we have slightly higher steel production. And obviously, there is a significant currency headwind that has built up during the course of the second half of last year.

If you look at the EUR 15 million, those 4 drivers, if you look at pricing, we delivered EUR 27 million in the second half of last year. Now we're guiding to EUR 15 million. Why? Because we can see an increasing headwind around certain of the raw material prices coming down and the threat that, that imposed.

On our plant measures, actually a very good message. We're going from EUR 10 million second half of last year, and we're adding EUR 15 million now. On SG&A, we did EUR 21 million in the second half of last year. Now we're guiding to EUR 15 million. But remember, there's still a significant labor cost inflation headwind that we hit. So that's around just short of EUR 10 million for us. So to achieve that EUR 15 million, as we've outlined, we need to do more around our processes, our shared services, our Europe footprint.

And then from an Industrial perspective, we delivered EUR 23 million second half last year. Now we're guiding to EUR 15 million, and that's because of this impact of industrial projects just moving. And it's not that we've lost the projects that were supposed to be delivered in November and December last year. They've moved now into the first quarter, but that drift carries on.

There is a normal seasonality in our business. The second half is always stronger because of the projects delivery focus in the fourth quarter. CapEx projects are always back-end loaded in every company. And of course, we're in the CapEx cycle here, but also because of the cement season. So you can never double the profitability of the second half to the first half. Usually, we have -- last year, we had a 65-35 split between first half and second half. But normally, we still have 45-55 split. Therefore, you've got to take the second half down a little bit on the margin side.

And then just the last component of that waterfall, on steel, clearly, we're adding 0 because here, we believe any modest low-margin growth that we get out of India is offset by weakness in Brazil, in Mexico, in Canada and in Europe. So that's how you get to our numbers.

And could we just follow up slightly more on the big currency headwind? Because it feels like a lot of that should have started to be there in the second half when I think it feels like currency was about a 5% headwind, but the guidance on profit, the guide is more like an 8% for this year. So maybe just talk a little bit more about the moving parts there, where there's also some hedging factors and things too or anything like that.

So there is no hedging disadvantage that we have this year. We have put in place some protection to avoid significant further weakness in the basket. If you look last year, the first half, we had a currency advantage of EUR 7 million. And in the second half of last year, we had a weakness of EUR 20 million because of the weakness in the Canadian dollar, the Indian rupee, the Brazilian real and particularly the U.S. dollar.

So that EUR 35 million impact for this year, that's the impact of going from about $1.18 now from $1.12 and every one movement is EUR 4.2 million. You've got that detail in the appendix. That's EUR 25 million just on the impact of the U.S. dollar. And then the Indian rupee, again, you'll see it in the appendix. Currently, it's about INR 107 versus INR 90. That's another EUR 13 million impact coming through. So it's a very significant headwind for us.

Actually, the Indian rupee devaluation is such a big effect that it has destroyed profitability totally for some of our competitors in India who are importing. So because they pushed on pricing and then they got the rupee on top of it. So some competitors really look terrible.

Mark, at a macro level, really what's happened during the course of last year is we started to benefit from weakness in our producer currencies, which is a good thing for us. And then in the second half, it moved to weakness in particularly in our high revenue geographies, and that's now what's continuing in '26.

Shall we go? Any questions in the conference? No, no questions in the phone conference. Sure.

Could I just ask just one follow-up question. Just in terms of your sort of sea freight and obviously, the rates there. I mean, if we do see a spike, how are you priced for that in terms of obviously, you move stuff by that method. Are you sort of locked in, in terms of your forward rates for that? Or do you buy it at spot? Just any idea there, please?

No, we have a structurally actually really good setup on freight. So it's super predictable. It's very well contracted. It's variable enough that we're not stuck with any freight. And by and large, it's a pass-through item. So we don't have any downside because we are really well integrated now with some of the very big companies around the world. It took us 2.5 hours yesterday after the attack in the Middle East and the close of the Strait of Hormuz to understand which containers were 2.5 hours. So that's outstanding. We really learned our lesson from the post-COVID mess that we had. So we react really, really fast, and we can keep customers supplied because as sea freight gets redirected now, we have some of the boats that were going through the Suez Canal now that's completely closed.

So now this is going around the horn of Africa, which means some customers will be delayed, but we see this coming, and we already started production elsewhere to supply those customers who would have been affected, including some in the Middle East, actually. So that is good, and therefore, we can pass on sea freight costs quickly because customers see a real, really, real service upside.

Well, thank you very much for dialing in this morning. Just to summarize, we delivered our self-help measures, which saved the 2025 year and improved our business structurally. Second, that momentum continues into 2026. And with new measures that are already under full implementation, that momentum will also continue into 2027. Third message, no help from the market. So those companies who can help themselves should bring the focus of your investors and those who hope on the market not.

Thank you very much for dialing in this morning and for being here this morning. Goodbye from London.

Hello, everyone, and welcome to today's RHI Magnesita November Trading Update Call. My name is Seb, and I'll be the operator for your call today. [Operator Instructions] I will now hand over to Stefan Borgas to begin the call. Please go ahead.

Thank you very much, Seb. Good morning, ladies and gentlemen. Thank you for joining RHI Magnesita's 10-month trading update. Ian and I will lead you through what happened during the quarter, over the course of the next 15, 20 minutes, and then we'll be happy to answer your questions, of course.

Before I go into details, let me start with 3 key messages really that perhaps you can think of taking away. Firstly, first message, we delivered the strong recovery that we expected to deliver, but in a still very challenging environment during the second half of this year. We remain fully on track to meet our 2025 full year guidance that we gave to you throughout the first half of this year.

Second message, the overall market remains very, very weak. Then therefore, the performance increase that we have now seen in the second half is delivered by our self-help efforts. They are clearly paying off. This is better cost efficiency, good continued pricing discipline, but also progress with the integration of the Resco acquisition in North America. All of these are boosting our earnings in the second half versus the first half.

Third message, we are now quite well positioned for a stronger 2026 compared to the full year of 2025 because we can take this momentum of our self-help measures and a little bit stronger order book into the first half of 2025 and have a clearly better performance there than in the first half of 2025. We take that into 2026.

All right. Let me go a little bit more into detail now. RHI Magnesita delivered a marked improvement through the past 4 months, largely driven by our self-help actions around cost reduction, both in our plants, but also in the whole SG&A area. And we benefited from some price increases also that came through. I'll get into a little bit more detail later.

The adjusted EBITA year-to-date October reached EUR 136 million. This is a margin of almost 13%, 12.7%. This is a clear step-up from the first half. And this is also quite a bit higher than usually what we experienced in the third quarter because the third quarter usually is the weakest quarter of the year, is the seasonally soft period usually. So from a revenue perspective, this is still the case, but the profitability is much better.

How does this split between the businesses? Our steel volumes remain quite subdued, although a little bit improving compared to the first half. The steel volumes can be explained with continued softness, maybe even bigger softness in the Western world, especially because the automotive markets are very weak. And that has been offset -- the overall steel business has been offset by market share recoveries in India and META, that we had lost in the second half of 2024 and at the beginning of 2025 because of pricing discipline at that time.

We've been a little bit more price flexible. So we recovered the volumes in these regions. So it's not the volume recovery in steel, the slight volume recovery in steel is not due to an overall improvement of the markets, but just to this market share effect that we've had in the Middle East and Africa regions -- Middle East, Turkey, Africa regions and India.

Our industrial order book has strengthened in the recent months compared to the very, very weak H1. H1 2025 was really extraordinary weak. We've not experienced this before. And now we have good visibility, of course, for the rest of the year for all the industrial project order deliveries and also into the first half of 2026. Still, our orders for especially the higher-margin business in nonferrous metals and glass projects remain at a very low point, still the order volumes in 2025 as a total will be 40% below the average of the last 10 years, ups or downs.

The nonferrous order book has already started to improve somewhat, but in glass, we don't see this improvement at all yet anywhere in the world. The pricing environment across the world remains challenging, if not very challenging, particularly in the markets with strong overcapacities among refractory producers and our customers' industries as well. These markets are China and the regions that are directly exposed to Chinese export, particularly India, East Asia and the Middle East. There, the pricing environment is really challenging.

We achieved modest price increases in the Americas, in Europe and a little bit also in India, although by no means to the level that we were targeting. The price increases there are supported by customer confidence in our local-for-local supply model. So that -- here the trade balances -- the trade wars help.

But also our 4PRO contracts are full service inclusion contracts, and they are also supported by multiple sourcing options and last but not least, by our innovation pipeline that has started to bring new solutions to our customers. Our robotic solution, especially in flow control applications have gained good traction this last month. We have -- with this introduction of these robotic solutions strengthened customer partnerships in many regions and differentiate us in the high-tech segments of the market. Recent highlights include a full tundish robotic system implementation in the U.S., our very first advanced robotics installation in India and a ladle robot solution at a customer in Germany. So this is really happening all over the world.

Looking at backward integrations, one of the pillars of RHI Magnesita, margins remain still at historical low at around 1% contribution to our EBITDA. This is very low. This reflects depressed raw material prices, especially in magnesita-based raw materials. We are taking targeted action to improve this profitability because we can't change pricing as we're price takers in the raw material business. This targeted improvement actions include the expansion into selected non-refractory markets, which we haven't traditionally looked at before, but also the introduction of new raw material grades that offer a structural cost advantage.

And of course, from an operational perspective, switching selected care in operations to lower-cost energy sources wherever we can do this. These steps that we have decided in our Board in the third quarter of this year will progressively strengthen the earnings from backward integration over the next 2 years, purely out of self-help measures again. The Resco integration as another piece of the RHI Magnesita puzzle continues to progress successfully.

Synergies are being delivered in line with our ambitious expectations. The acquisition has significantly strengthened our North American footprint. Local production now covers just above 65% of U.S. demand, up from 50% before the acquisition, and we expect to exceed 75% by the end of next year with more potential for a higher local-for-local production percentage even after this. This takes another year because, of course, now we're going into improvements, physical improvements, investments in the plants in North America.

This integration supports our strategy of building a more balanced regionally self-sufficient global supply network with sourcing alternatives for each product category on top of just the local-for-local production. There, with this, we can leverage our global network and provide resilience to all of our customers against supply chain disruptions. If we take this together, these actions demonstrate that RHI Magnesita can deliver real earnings improvement even in subdued demand conditions almost entirely out of self-help actions.

Let me -- before handing over to Ian, just leave you with a couple of thoughts on the tariff environment, which has remained very volatile. In North America, we have successfully passed through the increased import tariffs on refractory products to customers, more or less maintaining margins and also supply reliability. Our local-for-local strategy with production now over 65%, as I mentioned, remains a key competitive advantage in seamlessly supplying our U.S. customers, also in mitigating cost and logistical risks. More recently, however, the tariffs introduced on raw materials and finished goods exported from Brazil to the U.S. being higher now than the tariffs from China to the U.S. have created new headwinds for RHI Magnesita business.

With these summary comments about the quarter or about the last months since the half year, let me hand over to Ian, who will take you through a couple of the financial metrics and the bridge of our self-help actions in a little bit more detail. Ian?

Thank you, Stefan, and good morning, ladies and gentlemen. The contrast between the 2 halves of this year could not be clearer. The first half was our weakest period since 2017, while the second half is shaping up to be one of our strongest. In the 4 months to October, we achieved adjusted EBITA of EUR 136 million, over 40% higher than the first half run rate, with margins improving to 12.7%. This improved performance was driven primarily by cost-saving measures benefiting the steel business, along with modest pricing improvements in certain regions despite the continued weak volumes.

In the fourth quarter, we see a step-up in volumes in the Industrial segment, supported by the cement season and planned deliveries of higher-margin industrial projects. Overall, the improvement over this period has very largely been achieved through disciplined management actions rather than stronger demand. We remain firmly on track with the bridge that we shared at the interim results, and I'd like to go through each of the key components.

We expect to fully deliver the guided EUR 10 million EBITA improvement in the second half from each of the key self-help measures, EUR 10 million from SG&A cost savings, EUR 10 million from plant closures, EUR 10 million from Resco synergies. These are all sustainable actions that will have a full year impact in 2026. Despite tough markets, pricing actions are on track and expected to deliver around EUR 25 million in additional second half earnings. This is up from the EUR 21 million contracted at the time of our interims. And this mainly comes through from North America, from Latin America, from Europe with a smaller and more recent contribution from India.

Steel volumes have shown a modest improvement due to the market share recoveries in India and META on the first half average, reflecting progress towards the previously identified potential EUR 20 million EBITDA uplift in the second half. We see industrial EBITA improve, built by the start of the cement season and strong delivery of high-margin projects in the final quarter. We will make good progress towards the EUR 50 million EBITDA uplift potential in the second half, even if we don't reach the full amount this year. The outlook for November and for December is solid with all major orders secured.

Turning finally to cash flow and to leverage. Working capital has risen temporarily to support the stronger order book, but we expect solid cash generation through to year-end, enabling deleveraging to around 3x net debt to EBITDA with a year-end net debt of approximately EUR 1.5 million. Our full year cash conversion should remain strong at roughly 90%. Our full year guidance remains unchanged with adjusted EBITA of EUR 370 million to EUR 390 million and a margin of 10.5% to 11%. This is despite the additional headwinds since our first half update from currency impacts and the U.S. tariffs on imports of finished goods and raw materials from Brazil, each which reduced our second half EBITA by over EUR 5 million.

With that, I'll now hand you back to Stefan for some closing comments.

Thanks, Ian. To summarize, we've delivered a strong performance over the past 4 months that we planned for, confirming the effectiveness of our management actions. We expect this momentum from the second half to continue into first half of 2026, hopefully, the full year, supported by all of the self-help programs that we just talked about and the order book that we can already -- that we already have visibility on for the first half of next year, although normal seasonality needs to be considered, so it's not a direct H2 equals H1 performance, of course.

While the end markets remain subdued also into next year, we are confident that RHI Magnesita is well positioned to navigate the current cycle and capture upsides as the conditions will then eventually normalize. I'd really like to thank all of our employees, colleagues across RHI Magnesita Group around the world for their continued commitment and execution of all of these hundreds or maybe thousands of different actions.

Thank you for listening. Ian and I now are open for all of your questions, please.

[Operator Instructions]

The first question is from Jonathan Hurn at Barclays.

Just a few questions from me, please. Firstly, Ian, if you could just come back to the profit bridge, but not focus on '25, but instead focus on FY '26. Can you just talk us through the main moving parts of that profit bridge, essentially the contribution from the various buckets that we can expect in '26, please? That was the first one.

The second one was just in terms of the backward integration margin. Obviously, you're taking actions there. Could you maybe sort of quantify what you think the benefit of those actions will be to the integration margin?

And then thirdly, just looking further ahead, I think you said in your statement that the benefits potentially from the EU cutting tariff free import quota will come through in maybe late '26, possibly more likely '27. Can you just give us a feel for how material you think that potentially could be to you? Those are the 3 questions.

All right. Let me start with the -- from the back and then for the first one, hand over to Ian. The EU tariff or the EU protection measures, especially on steel imports, which is a mix between tariffs and quotas should have a positive effect on the production rate in Europe. That's the purpose of the measures, of course. And therefore, we should see an improved demand from our European customers, positively impacting the production rates in our European plants. And because our European plants are the most expensive one from a fixed cost perspective, we will get an overproportionate operational leverage effect there.

To put a number against this, I think, is highly speculative first from a timing perspective because we don't know exactly when this will be put in place. As we wrote, we expect this to affect maybe the tail end of next year. And from a volume perspective, it's even more difficult to predict because, of course, the volumes of steel produced in Europe depend not just on these protection measures, but also on the overall demand in Europe as a whole.

So really, I don't want to put any numbers here, but it's a volume impact and then an operational leverage impact on top of that because our European plants will be positively affected. As to the backward integration, we haven't quantified this to you guys quite on purpose because we are not quite sure how fast we can implement these measures. And of course, we don't want to overpromise in a short period of time. But the overall package has a good double-digit million EBIT improvement -- EBITDA improvement potential. We just have to start with these measures now and see how quickly we can improve them -- implement them.

They depend a lot on how customers will accept this, on customer acceptance of some new products, which is going to be the bottleneck. But they will be implemented during the course of 2026 and 2027. And now if you would ask me to speculate, I would say we will probably reach about 1/3 of these benefits in '26 and the remaining 2/3 in '27, if we look at the run rate. But it's about -- yes, good double-digit million potential.

Ian, do you want to talk about the moving parts of the first half of 2026?

Yes. Thanks, Stefan. So we're not seeking to move consensus for 2026, which is just below EUR 410 million. I think that we see a much more normal first half, second half split than we've seen in 2025. The building blocks, clearly, we're going to get the increase from, firstly, the annualized benefit of the self-help, all of which is sustainable, the plant measures, the SG&A measures, the Resco synergies, plus we will see the start coming through of the raw material measures.

We expect our price improvements to be sustained. We're not expecting big price changes going into 2026. We also should see a small benefit coming through from volume, probably not much more than 1%. Steel demand remains very soft outside of India, but we'll just have the small improvement that we can see on our industrial projects in the second half of this year being sustained, still well below normal.

And then against these positives, we're going to have the negatives of the annualized impact of currency headwinds. We'll also have slightly higher variable compensation, and we're seeing continued high SG&A -- so high labor inflation impacting SG&A in our plants.

Our next question is from Harry Philips at Peel Hunt.

Again, a couple of questions, please. Just thinking about the market share, regaining of market share in META and India and just how -- I mean, I suppose I can sort of guess it one way, how you might have done it, but just how you're doing that? Is it particularly just lowering price to become more competitive? Is it sort of approaching customers in a different way, different terms and conditions, different inventory profiles, that sort of angle would be very helpful.

And then secondly, thinking about tariffs more into North America, just in terms of as Resco becomes -- or becomes a platform for more local-for-local, the benefits potentially from the tariffs there, and you can see local production already ticking along sort of reasonably higher, much higher than a year ago. And then also the flip in the headwind presented by Brazil imports into North America and how those 2 might balance out, please?

Okay. So the market share gains, really, this is a bouquet of different effects. The first one is simply the recovery of the market share that we lost in the second half of last year in India because we kept -- we were very, very disciplined on pricing and didn't release any pricing at that time. Mostly in the commodity segments, this happened, and now we regained this back by accepting somewhat lower margins. We could get a bit of a price concession, but not very much, especially not on the commodity. So that's one aspect.

In India, the contract periods usually go from July to June. So as you negotiate these contracts after the end of the fiscal year in India in the second quarter of the calendar year, then you implement the new contracts as of July. And that's why now these volumes are in our P&L in the second half of this year, more in the commodity parts of the market.

Then we have changed the game at some of our customers in India by being much more aggressive in pushing a full solution concept. And the Indian market wasn't very -- or still isn't very much used to this concept, but we are starting to make very good progress, especially in many of the new steel plants that are coming on stream now. One of the frustrations is that whenever you start with a new steel plant, you suffer under potential delays that the start-up has, and we see this again in the second half of this year. Some of these volumes simply moved into next year because the plant start up a couple of months later, and that makes a difference, of course.

But here, we can implement more of a full solution concept with a much higher service level and a much higher robotics and automation level. That's the second piece of the bucket. In Middle East, Turkey and Africa, the effect is much more on the recovery of some lumpy ordering in some of the countries. Some of the countries in this region buy through letter of credit tools and sometimes these letter of credits don't get approved for a while. And then you have very large orders covering 3/4 of the demand of a full year in 1 or 2 months because the letter of credit is then available. And that's a little bit what happened here.

So there, it's more of a seasonality effect. The frustration in the Middle East region -- especially in the Middle East, is the fact that the region is very much flooded by Chinese imports, and it suffers under commoditization. So here, we have some more work to do in order to introduce solutions as well. This gives you a bit of granularity, I hope.

Turning to North America. The benefit of the tariffs are there. They are in the P&L. We are quite happy with the profitability of the business in North America. It's not super stellar, but it's very satisfying still. But of course, some of these pricing benefits get eaten up by higher cost of production in the U.S. That's why the measures are in place, right, because producing in the U.S. and U.S. plants is more expensive than producing in other parts of the world and then importing to the U.S. That's why it only happens now that the tariffs are there.

So from that perspective, the tariffs do exactly what they are intended to do. They bring production back. And then the recent duties against Brazil, of course, eat up some of this benefit for us again. Why? Because, of course, the U.S. is not self-reliant in especially raw materials. And if we bring -- we have traditionally brought raw materials from Brazil to the U.S., and we can't do this anymore. We need to now import raw materials from China into the U.S. because simply the tariffs on Brazil make it uncompetitive to bring it from Brazil.

So we have shifted the supply chain just like everyone else also in the market. And of course, this weighs a little bit on our margins because we don't have the benefit in Brazil anymore on the sale of these raw materials. This is the biggest effect that we have here. That could change if the duty regime against Brazil changes. And of course, we are following this as excitedly as you are. Then there's a smaller effect in the U.S. as well that goes against us. Ian has indicated, this is the weakness of the U.S. dollar. That, of course, eats up some of the price increases that we've been able to put through.

Fantastic. And then if I could just one final question. In terms of the sort of new thinking and ideas around the backward integration, would that mean you would look to sell more sort of externally than you traditionally have done to sort of get crystallize and maximize the opportunity in introducing these new sort of grades and other factors?

Yes. So there's 2 components here. One is to sell more of the raw materials externally, but in nonrefractory markets. These are chemical markets that where we -- especially coming out of Brazil, the high quality of the minerals that we have are quite well suited to some chemical markets that we haven't simply given enough attention in the past.

And that's what we have -- that we're in the process of changing now. Those markets -- those chemical markets require a relatively long approval time period. So the effect of that piece is probably only going to be there in 2027 and not in 2026 because we're going to spend 2026 in approving our product in these applications. But we have very competitive offering here compared to what's on the market today.

The second piece, which is a little bit the bigger piece is the optimization of the product portfolio for refractories where with the certain reduction of magnesium oxide content, we can optimize the mining output, have a higher percentage of the ore that we bring from the mine convert into raw materials and therefore, get a better dilution of the fixed cost and then the overall cost improvement. This is under full implementation already now. It requires some formulation adjustments in the downstream refractories, mostly internal actually.

And then, of course, we need to make trials at customers and put it into place. But here, we will already see benefits in the second half of 2026. But those are the 2 big blocks.

Our next question is from Vanessa Jeffriess with Jefferies.

Congratulations on the great update. Just one more on the market share regains. Would you be able to quantify how much market share there is left to regain in India and if you're still at the kind of 30% market share level? And then obviously, you're still integrating Resco, but wondering if there's more to do on M&A front.

Yes. So on Resco -- on India, we have recovered this market share now. I think with the new -- more -- a little bit more confident experience that we have now on the solutions and on the robotics, there could be interesting opportunity, maybe not in -- but it's for certain -- for sure, over the next couple of years because we have learned now through the pressure over the last 1.5 years, 2 years that if we play the commodity game, then we go into this downward spiral of the market.

Unfortunately, many competitors have overbuilt capacities in India in the last 2 years and now the refractory capacity is higher than it actually should be for the size of the market. And that is accelerated by Chinese imports at the same time, which are still competitive and still possible. And decommoditizing this now with this new solution was a good experience over the last 6, 9 months. And I think with this approach, we will be able to continue to improve our market share somewhat in these -- especially with the more sophisticated customers. And yes, we are back to the roughly 30% market share now that we had in India before.

Great. And then I was just wondering if there's anything interesting out there in the M&A.

If anything is interesting out there in the M&A., as you know, we're always taking a look at this. We have a good focus on deleveraging at the moment, however. So this is the primary focus at this moment in time. But opportunities come along. Our M&A team is very focused, actually also on some smaller divestitures that we have the opportunity to do, now on noncore parts of the business. So always exploring.

[Operator Instructions]

We have no further questions on the call at this time. So I'll hand back to Stefan for closing comments.

Well, thank you very much for dialing in this morning. Let me repeat our key messages for the last 4 months. First, we delivered the recovery that we expected to deliver, and we remain fully on track for our 2025 guidance. Second, the overall market demand remains very, very weak. Therefore, improvements come almost exclusively from self-help measures, cost efficiency improvement, some pricing differentiation, especially in relation to solutions and progress with the Resco integration. Third, we are well positioned for a stronger 2026 with a good momentum now coming mostly from these self-help measures and a solid, more balanced order book for 2026.

Thank you very much for listening this morning, and we're looking forward for an interaction with all of you during the course of the next days and weeks. Goodbye from Vienna.

This concludes today's conference call. Thank you very much for joining, and you may now disconnect your lines.