Syensqo Stock

Hello, everyone. Thank you for joining us, and welcome to the Syensqo Second Quarter 2026 Results Analyst Call. [Operator Instructions]

I will now hand the conference over to Sherief Bakr, Chief Communications Officer and Head of Investor Relations at Syensqo. Please go ahead.

Hello, everyone, and welcome to Syensqo's Second Quarter 2026 Earnings Call.

I'm Sherief Bakr, Chief Communications Officer and Head of Investor Relations. And I'm pleased to be joined today in Brussels by our CEO, Mike Radossich; and our CFO, Christopher Davis.

As a reminder, today's call is being recorded and will be accessible for replay on the Investor Relations section of our website later today at syensqo.com/investors.

I would also like to remind you that during this call, we'll be making forward-looking statements regarding our future business and financial performance that are subject to risks and uncertainties. The slides related to this presentation, along with today's press release are also available to download from our website.

Turning to today's agenda. Mike will begin with an overview of the quarter. Chris will then go into more details on our financials before turning the call back to Mike, who will discuss our updated outlook for the balance of the year. We'll then be happy to take your questions.

And with that, I'll turn the call over to Mike.

Thank you, Sherief, and good morning and good afternoon to everyone joining us today.

During our last earnings call, I spoke about our focus on moving quickly from diagnosis to action in order to accelerate Syensqo's value creation. Since then, I've been very encouraged by the progress we have made and the pace at which we are translating our strategic and operational priorities into tangible actions that are strengthening both our near-term performance and our longer-term growth trajectory.

The sense of urgency across the organization to close the gap between our potential and our performance is beginning to show in our results. We returned to year-over-year growth in the second quarter, an important milestone that reflects the momentum we are building. Looking ahead, we expect this positive momentum to continue through the second half of the year as reflected in our updated outlook.

Turning to the highlights of the quarter on Slide 5. In the second quarter, we delivered 5% year-over-year growth in both volumes and net sales despite a dynamic operating environment. This performance was driven primarily by strong volume growth in our core Materials segment with Performance & Care also contributing to growth.

Composite Materials delivered an outstanding quarter with sales increasing 18% year-over-year. In Specialty Polymers, the improved momentum we have seen since the beginning of the year continued, resulting in a return to year-over-year growth.

The improved performance in Specialty Polymers was broad-based, led by strong growth in semiconductors, driven by improving end market demand and continued share gains with key customers. We also delivered strong volume growth in automotive, particularly in battery-related applications as well as in construction and broader industrial markets.

Within Performance & Care, healthy volume growth continued in our Mining business with Technology Solutions as well as in our industrial applications and Home and Personal Care within Novecare. These gains more than offset weaker demand in agro following an exceptionally strong second quarter last year as well as lower volumes in Coatings, reflecting softer demand in North America.

Turning to profitability. We expanded our gross margin by 100 basis points to 34%, driven by top-line growth, the strength of our differentiated value proposition and our continued focus on improving gross margin performance. Underlying EBITDA of EUR 311 million exceeded our expectations despite temporary cost headwinds. This reflects the improving momentum we are seeing across the business, which we expect to continue into the second half of the year.

From a strategic perspective, the most significant update since last quarter's call was the launch of the strategic review of Performance & Care, which we announced towards the end of May. If you recall my first earnings call in February, I spoke about setting a clear strategic direction for Syensqo with a singular focus on accelerating value creation.

Since then, together with the Board, we have undertaken a comprehensive strategic assessment of the company's long-term direction defining where we will focus, where we will prioritize our investments and how we will optimize our portfolio to deliver sustained innovation leadership, above-market growth and superior financial performance.

The outcome of that assessment is a clear strategic intention to position Syensqo as a pure-play specialty materials and advanced technologies company with greater exposure to structurally attractive end markets, including aerospace and defense, electronics, health care, energy and advanced mobility.

Since announcing the strategic review, we have been moving with urgency, including the appointment of advisers to evaluate a full range of strategic options with a clear focus on maximizing long-term value for all stakeholders, and we will continue to provide updates on our progress as appropriate.

Slide 6 provides a high-level overview of Syensqo's portfolio across our 3 business segments. As you can see, Materials is our largest and highest margin segment, generating more than 70% of our underlying EBITDA.

Between Specialty Polymers and Composite Materials, we believe we have 2 of the most distinctive and attractive businesses in the industry. Their leadership positions are built on differentiated innovation, deep application expertise, strong customer partnerships and exposure to highly attractive end markets.

Starting on the left, since the beginning of the year, one of my top priorities has been to improve the performance of Specialty Polymers, our largest and highest margin business within materials. This is where we identified the greatest gap between the business' potential and its performance, making it our single largest organic opportunity to create value.

In addition to strengthening the leadership team, we have undertaken a comprehensive diagnostic supported by external experts to identify the actions needed to translate the business' outstanding fundamentals and strong competitive advantages into faster growth, sustained pricing leadership and strong margin delivery.

I am encouraged by the progress we have made. While returning to year-over-year growth in the second quarter was an important milestone, we still see significant additional opportunity to accelerate our growth trajectory, improve how we bring innovation to market, win new business and further strengthen our customer partnerships.

Importantly, we have substantial available capacity across the business, enabling us to drive meaningful top line growth without significant incremental capital investment. Over time, this should translate into stronger cash flow generation and higher returns.

Turning to Composite Materials. This is our fastest-growing business driven by technology leadership, strong underlying demand across both commercial aerospace and defense applications and the breadth of our customer relationships and platform exposure.

As a reminder, aerospace is our largest end market and a key growth platform for Syensqo, representing more than 20% of group net sales and approximately 35% of materials net sales.

As Rodrigo Elizondo, President of Composite Materials, highlighted on our last earnings call, the majority of our business is secured through long-term contracts and supported by extensive qualification databases that are integral to the certification of many of the world's most advanced aircraft programs.

To put this in perspective, the breadth of our technologies and product portfolio gives us presence on virtually every major aerospace platform from legacy aircraft to the latest next-generation programs.

As a trusted advanced materials partner to OEMs and suppliers, we provide the differentiated materials and application expertise that support today's production platforms while enabling the next generation of aerospace programs that will ramp over the coming decade. We also continue to strengthen our position in the defense and space markets, providing an additional avenue for growth while further diversifying our portfolio.

At the recent Farnborough International Airshow, I had the opportunity to meet with customers and partners from across the aerospace and defense industry. Whether discussing advanced air mobility, next-generation commercial aircraft or future defense programs, the message was consistent. Our advanced materials are increasingly critical to enabling their innovation and growth.

These discussions also reinforce the importance of our collaborative approach, working alongside customers and our partners across the value chain to shape the future of the industry. This is also evident through our commercial successes. For example, our new multiyear agreement with Airbus, covering our range of composite and adhesives across commercial, defense and helicopter programs.

Turning to performance in Care. As a reminder, we are a global leader in surface chemistry solutions and specialty mining reagents, serving the consumer care, agro coatings and mining end markets. Within the segment, Novecare is a global leader in formulation technologies with a strong track record of innovation and successfully scaling differentiated solutions into high-value market niches.

Technology Solutions is a leading provider of specialty mining reagents and technical service that enable the efficient extraction of critical metals such as copper. Our deep application expertise and on-site technical support creates strong customer partnerships and help drive long-term growth.

These are terrific businesses, which I led for a number of years, which have a different financial profile, length of innovation cycles, investment requirements and growth levers to materials.

Finally, on other solutions or Aroma, where I previously mentioned that we would aim to have an update around the middle of the year, we are continuing to make progress and are in active discussions with a number of interested parties.

Before turning the call over to Chris, I wanted to briefly go through the pillars I set out in February, transparency, execution excellence, innovation leadership and disciplined capital deployment and comment on the progress we are making.

From a transparency perspective, we remain committed to being open about what is working, what is not and the actions we are taking to improve performance. That has included strengthening our leadership team and proactively launching the strategic review of our Performance & Care business. The same philosophy guides how I lead internally. We have increased the frequency and quality of dialogue across the organization to better understand where we can move faster, serve our customers more effectively and accelerate growth.

Turning to commercial execution. We are operating at a very different pace than we were at the start of the year with a sharper focus on creating new growth opportunities while expanding our share of wallet with existing customers.

Within Specialty Polymers, I'm encouraged by the commercial progress we have made, particularly in the share gains in ultrapure water piping for semiconductor manufacturing, where demand remains strong and in under-the-hood applications in automotive, where our high-performance specialty polymers continue to replace metal.

We also secured a long-term extension of our partnership with Sealed Air to develop high-performance, high-barrier food packaging solutions. In Composite Materials, I referenced our new multiyear agreement with Airbus. This builds on the long-term agreement we announced earlier this year with Boeing and further reinforces our position as a trusted partner to the world's leading aerospace manufacturers. We look forward to supporting their growth for many years to come.

Turning to innovation, our most important competitive advantage and a key driver of sustainable growth. Alongside the more structural objectives we have established to increase our vitality index and shorten the time from innovation to commercialization, we continue to bring differentiated solutions to the market across both Materials and Performance & Care.

Within Specialty Polymers, we are scaling the commercialization of our next-generation Diofan Super B high-performance polymer for pharmaceutical packaging. It delivers superior protection against oxygen and moisture while enabling smaller, more sustainable packaging formats.

In Performance & Care, we recently launched a new soil release polymer for liquid laundry detergents that combines outstanding cleaning performance with energy savings by enabling effective washing in shorter and colder cycles.

Finally, turning to capital allocation. Our priority remains clear, doing more with less by maximizing returns from our existing asset base before committing capital to new capacity. Where compelling organic growth opportunities exist, we will continue to evaluate them with discipline against all other capital allocation alternatives.

A good example is the expansion of our Havre de Grace facility in Maryland, which will strengthen our U.S. manufacturing footprint to support growing customer demand in the aerospace market while delivering attractive returns.

With that, I'll turn the call over to Chris, and I'll return later to discuss our outlook for the balance of the year.

Thank you, Mike. Good morning and good afternoon to everyone on the call.

The second quarter of 2026 showed selective areas of strength, while the broader industrial recovery remains uneven. Demand was particularly encouraging in semiconductors, batteries, automotive and composite materials, even though dynamics differ by end market and position in the value chain. Encouragingly, we are seeing early signs of improving momentum in several of these markets that give us confidence in the underlying direction of the business.

Turning to Slide 9, reflecting the second quarter financial results. As Mike mentioned, the second quarter marked a clear improvement in our underlying performance as we returned to organic sales growth. Net sales for the quarter was EUR 1.6 billion on the back of broad-based volume gains across our portfolio.

Sequentially, sales have increased 11%, supported by higher volumes and improved mix in both Specialty Polymers and Composite Materials. I will walk through the key drivers of performance across our business segments in a later slide.

As we have previously mentioned, we remain committed to defending our gross margins as this reflects how we manage both our sales and cost of goods sold. Our pricing discipline remains central to how we manage the business. Combined with disciplined cost management, it continues to support the resilience in our gross margins.

Gross profit increased to EUR 528 million for the quarter, resulting in a gross margin of 34%, a sequential improvement of 230 basis points, driven by stronger volumes in Specialty Polymers and Technology Solutions.

EBITDA of EUR 311 million for the quarter increased 24% sequentially, reflecting stronger performance improvement across all businesses, most notably Specialty Polymers, which saw stronger volumes in semiconductor and automotive applications.

EBITDA was lower largely due to year-over-year increased variable compensation costs, along with incremental costs in Specialty Polymers to support commercial execution and operational improvement, which are not expected to be incurred beyond 2026.

Excluding the above target element of variable compensation expenses, our underlying operating performance continued to improve, and our EBITDA margin would have been approximately 200 basis points higher than the 20% we reported this quarter.

Operating cash flow was EUR 131 million in the quarter, a EUR 111 million increase compared to the prior year, bringing the year-to-date operating cash flow to EUR 213 million. The improvement reflects our continued discipline in working capital management, along with no separation costs compared to the prior comparable period of 2025.

For 2026, we continue to expect operating cash flow of approximately EUR 700 million, driven by the nonrepeat in subsequent quarters of the annual variable compensation cash outflow in the second quarter and absence of separation costs.

Turning to operating performance by segment on Slide 10 and starting with Materials. Compared to the prior year, organic sales increased 7%, driven by volume growth in Composite Materials and a return to growth in Specialty Polymers.

Specialty Polymers delivered a 2% year-on-year organic sales growth. The improvement was driven by broad-based volume gains across the automotive, industrial and building applications, while electronics also returned to year-on-year volume growth as the semiconductor market showed early signs of recovery. This growth was partially offset by lower volumes in the health care and food and packaging end markets.

In automotive, Tecnoflon, one of our high-performance heat-resistant sealing solutions for under-the-hood applications delivered strong growth in batteries, momentum remains strong, driven by robust demand for separator coatings and NMC binders across Asia as well as new program wins. Higher volumes in industrial and building were driven by robust demand for our high-performance polymer solutions used in advanced piping systems.

Composite Materials delivered its strongest quarter on record since the inception of Syensqo with organic sales increasing 18% year-on-year. Growth was driven by Civil Aerospace, supported by the Boeing recovery and higher build rates across key commercial aircraft programs. Sales growth in space and defense reflects the continued execution of our disciplined commercial strategy.

The combination of Specialty Polymers returning to growth and another record performance in Composite Materials resulted in our Materials segment delivering an underlying EBITDA of EUR 266 million. This is aligned with the prior year despite the previously mentioned higher variable remuneration and increased costs to drive growth and operational efficiencies. This translated into an EBITDA margin of 28%.

Turning to Performance & Care. Organic sales were stable year-on-year as continued strength in mining within Technology Solutions offset lower volumes in Novecare. Within Novecare, growth in Home and Personal Care and in industrial applications was offset by softer demand in agro, reflecting lower volumes from a key customer and continued product rationalization in Latin America. Building remained challenging, although market conditions showed early signs of stabilization.

Technology Solutions continued to benefit from strong mining activity with healthy reagent demand supported by favorable copper pricing. The net result is that Performance & Care delivered EBITDA of EUR 92 million in the quarter, down 7% year-on-year, but up 12% sequentially and delivered an EBITDA margin of 18%.

Within the Other Solutions segment, EBITDA was EUR 8 million for the quarter with an EBITDA margin of 11%. Importantly, at a Syensqo Group level, sales and EBITDA increased 11% and 24%, respectively, compared to the first quarter of 2026, driven by improved performance across all business units. The net effect of what I've just described is reflected on Slide 11.

Moving to EBITDA for the quarter. Underlying EBITDA of EUR 311 million declined by 6% year-on-year, driven by lower underlying EBITDA in Specialty Polymers and Novecare, partially offset by higher EBITDA in Composite Materials.

The decrease in EBITDA for Specialty Polymers was driven by selective pricing action in certain end markets as well as an increase in costs to drive an improvement in business performance, partially offset by volume recovery in automotive, battery, industrial building and a return in semiconductor demand.

This was offset by improved performance from the Composite Materials segment, driven by stronger volume growth across all applications as well as improved margins. The net result is underlying EBITDA in Materials is flat on an organic basis compared to the second quarter of 2025.

Performance & Care delivered resilient results with EBITDA EUR 7 million below the prior year on an organic basis, reflecting lower volumes and higher fixed costs in Novecare. Other Solutions was up EUR 2 million compared to the prior year period.

Corporate costs have increased by EUR 15 million in the quarter, primarily due to the reload of variable incentives. This is expected to continue through the remainder of the year.

Turning to capital expenditure on Slide 12. Our total capital expenditure for the quarter was EUR 95 million, down 16% year-on-year, including capital expenditure for the new ERP program. As we have previously stated, we will leverage our existing spare capacities to meet future volume growth, which requires no significant additional capital expenditure.

Looking ahead, we will continue to make disciplined investments where demand is strong, returns are attractive and additional capacity is required. This includes composite materials. For example, the capacity expansion in the U.S. that Mike referenced, where aerospace demand continues to support long-term growth and targeted capacity expansions in Specialty Polymers, including the Spinetta and Changshu plants to meet increasing demand from semiconductor fabrications as investment activity begins to recover.

We will continue to carefully manage capital expenditure and cash to balance our shorter-term targets with longer-term value creation. Our capital expenditure guidance of approximately EUR 450 million for the full year remains unchanged.

Turning to our financial position on Slide 13. I am pleased to report that we continue to have a strong balance sheet with our net debt at EUR 2.1 billion, a gearing ratio of 25% and a leverage ratio of 1.9x. We continue to have strong levels of liquidity available as demonstrated by the EUR 1.5 billion of undrawn committed bank facilities and a further EUR 700 million of cash on hand.

Net financing costs of EUR 75 million were incurred in the quarter, reflecting the payment of coupons on corporate bonds that occurs in the second quarter of the year, bringing the year-to-date net financing costs to EUR 78 million, and this remains aligned with our full year outlook of approximately EUR 130 million.

With that, I'll turn the call back to Mike. Thank you.

Thank you, Chris.

Turning to our outlook for 2026. Taking into account current market visibility and the ongoing geopolitical uncertainty, we continue to expect a gradual year-over-year recovery in volumes through the remainder of the year. This is expected to support stronger growth in the second half, led by our Materials segment and to a lesser extent, Performance & Care.

As you will have seen in the morning's press release, we have updated our outlook for the full year. Based on our first half performance and current order book visibility, we now expect low to mid-single-digit year-over-year volume growth in 2026. This compares with our previous expectation of low single-digit growth with the improvement primarily driven by Specialty Polymers and to a lesser extent, Composite Materials and Technology Solutions.

Turning to EBITDA. We now expect full year underlying EBITDA of at least EUR 1.1 billion compared to our previous guidance of approximately EUR 1.1 billion. This reflects the improved volume outlook we have now for the balance of the year.

Moving on to cash flow. Our outlook for operating cash flow remains unchanged, reflecting the expected working capital investment required to support higher volumes in the second half. We also continue to expect capital expenditures of approximately EUR 450 million for the year.

In closing, I am encouraged by the momentum we have built since the beginning of the year. Both segments are contributing to our improved performance with particularly strong progress in Specialty Polymers and Composite Materials. Our focus remains on executing the changes needed to unlock Syensqo's full potential, accelerating growth, improving operational performance and delivering stronger cash generation and returns over the long term.

With that, we'd be happy to take your questions. Thank you.

Thank you, Mike. We'll now move to the Q&A session. [Operator Instructions] Operator, can we please have our first question?

[Operator Instructions] Your first question comes from the line of Laurent Favre with BNP.

My question is regarding those comments, those encouraging comments on the semi side. I understand that comps are also easy. So I'm wondering to what extent you're seeing actual underlying growth. And that's, I guess, partly for Q2, but more importantly, how you think about the second half and into 2027 for that important segment?

Laurent, yes, we are seeing some early momentum in the semiconductors as we enter the second half of the year, supported by an improving order book and strengthening demand that we're seeing across our semicon customers.

This is aligned with our earlier comments in 2026 when at that time, if you recall, we said that for semiconductors, while visibility remains challenging, we do expect to see a gradual recovery in year-on-year volumes, resulting in stronger growth in the second half of the year. So as we look at it now, this is largely what we're seeing in the semiconductor space and the recovery is unfolding as expected.

In terms of structural growth drivers, they remain intact, and we believe our positioning, available capacity, customer engagements are going to leave us very well placed to benefit as the market continues to recover here in 2026 and into 2027.

And on the follow-up, I heard from Chris that the accrual for comp weighed about 200 basis points, which I guess is about EUR 30 million. I just wanted to make sure I got that right. And that, that will continue in H2. So I mean, is it right that your new guidance includes a step-up of, I don't know, mid-double digit, let's say, absolute euro impact and that next year, this impact should go away because I'm assuming that your incentives will be set against, I guess, reset targets or budget.

Yes. I mean the way you've calculated is accurate. Our variable remuneration, both on short-term and long-term incentives in the current year is accrued in line with the performance of the business for 2026. In 2027, we will similarly accrue in line with the performance targets that are set for 2027, depending on the actual results at the time.

Your next question comes from the line of Sebastian Bray with Berenberg.

I have one on the relative profitability of Composites and Specialty Polymers now because from what I understand, Spec Polymers was still a little bit compressed on pricing in Q2. It wouldn't surprise me if Composites is at all-time highs now in terms of margin. Are we now talking about mid- to high 20s for Composites? How close are these 2 businesses together?

Yes. Let me take that one. I think as we've previously disclosed before, Composite Materials, which is exposed to a broad range of civil and defense customers and programs has really strong underlying demand.

The business has increased its EBITDA margin over the last 5 years from probably the low double digit to above 20% and it remains in the low 20s as we've continued to hire resources to increase the operational output and performance of that business. Now taking that into account, the margin for the Materials segment is about 27.7% that we've disclosed, and that's in the second quarter of this year.

That's helpful. And on the follow-up, if we talk about the longer-term portfolio structure, if Novecare and related businesses goes, what is the implication for the tax rate of the remaining group given it's probably a bit more U.S. focused? Is it higher? Or is it too early to say?

Listen, I mean the exact -- the tax rate, as you'll appreciate, is impacted by the mix of profits in the countries in which they are generated. That said, on average, this can range between about 27% and 29% in any 1 year. But the way we look at it today, the sale of either Novecare or Aroma makes no material impact on the effective tax rate going forward and it will really depend on the mix of profits in the countries of origin in the future.

Your next question comes from the line of Chetan Udeshi with JPMorgan.

I'll start with first on Specialty Polymers. If I look at your sales in second quarter, they were up 18% versus Q1. How much of this do you think is prebuy? Because we've seen different level of prebuy across different value chains. I'm just curious how much of your Specialty Polymer increase do you think is a prebuy?

And related to that, how much is pricing within that EUR 18 million? And I'm asking this because if I look at year-on-year basis, your prices in Specialty Polymers were still negative, and I'm mindful that your raw material inflation will start to bite in Q3. So without pricing uplift, there could be a squeeze in margins. So are you able to raise prices to at least cover the inflation on cost?

Second question, just going back to the semis discussion, I was just reminding myself, through last year, I think the message from the management was that you've seen a headwind of EUR 40 million, 4-0 million from semiconductor destocking, which started, I think, in second half of '24. Where are we with recovering that headwind of EUR 40 million?

I mean some would argue that given the strong growth we've seen in the underlying semiconductor market, you should actually see more than EUR 40 million of earnings recovery from that end market. I'm just curious how much of that you've actually seen in Q2? And how much do you expect to see more in second half?

And sorry, if I can squeeze last one. There was a big increase in your admin costs in Q2 to EUR 192 million from EUR 164 million in Q1 and even last year, it was only EUR 130 million. I'm just curious what is driving that? Maybe there's a bit of bonus, but just curious why such a big increase there.

Chris, do you want to start on the last question, and then I'll cover the one on Specialty Polymers and semis?

Yes, that's fine, Mike. What you -- when you look at the administrative costs on the face of the income statement, most of the increase is explained by the reload of the variable incentives, as mentioned in the financial section of my presentation and also as mentioned by Laurent in his question, I think his numbers were reasonably accurate as well as the incremental costs in Specialty Polymers to support the operational improvement.

And then in Composite Materials, we continue to hire resources to increase the operational output and performance. I mean the incremental costs in Specialty Polymers are not expected to recur beyond 2026, and this doesn't really detract from the ongoing savings programs where structural savings continue to be delivered.

So as I said, I mean, the bulk of it relates to the reload. It will continue for the remainder of the year, but whereas the incremental costs in Specialty Polymers, we expect that to not recur.

Okay. Thank you, Chris.

Regarding your question around Specialty Polymers and prebuy, I would say that, no, there was no prebuy, and I would say that pretty much across the company. Specifically in Specialty Polymers, the 18% quarter-on-quarter growth in net sales was largely driven by higher volumes with pricing in Q2 that remained overall flat compared to Q1. The sequential increase in Specialty Polymers volumes reflects stronger underlying demand.

And as we noted, it's in particular, in the electronics end market driven by semicon as well as, but to a lesser extent, what we're seeing in the automotive and industrial and chemicals end markets. It's really not driven by any temporary effects linked to conflict or precautionary stocking.

When it comes to higher raw material prices resulting from the conflict, as previously mentioned, we implemented pricing actions, including surcharges at the start of the quarter of Q2 with the aim of offsetting any type of cost increases. So we don't expect that to be a significant driver one way or another as we sit here today.

On your second question, which was with regards to semis, just at a high level, electronics represents about 8% of our net sales. Approximately 2/3 of our electronics sales serves the semiconductor applications, around 1/4 is smart devices and the balance is electronic applications.

As mentioned at the beginning of the year, our outlook for semicon expects a gradual recovery in year-on-year volumes, resulting in stronger growth in the second half of the year. In Q2, semicon was up double digit year-on-year and then grew at a higher number sequentially driven by a recovery in underlying demand and share gains. So for the balance of the year, we expect stronger year-on-year growth compared to H1 for semis.

I'm not going to comment specifically on margin levels, but Specialty Polymers is our highest margin business. And more broadly, as semiconductor demand continues to strengthen in H2 and the comparison in smart devices becomes easier, we expect electronics to become a more meaningful growth contributor over time.

Your next question comes from the line of Sebastien Afoy with Bernstein.

On the strategic review, what would be your framework for [indiscernible] Materials?

Thank you, Sebastian. On the strategic review, having assessed our long-term direction, capital allocation, our value creation priorities, our intention is to further sharpen our portfolio, as we mentioned, to become a pure-play specialty materials and advanced technologies company as well as making sure that we're focusing on the technologies where we see the strongest long-term growth opportunities like aerospace and defense, electronics, health care, energy. This will help us drive sustainable innovation-led differentiation.

As a result, we are evaluating a range of strategic options for our Performance & Care segment with an emphasis on maximizing long-term value for our shareholders. We just mentioned that we appointed advisers and experts to help us with that process, and we'll provide an update next quarter.

Okay. And for the follow-up, how should we think about the first quarter EBITDA development in the context of strong Q2 because consensus was forecasting sequential acceleration. Is this fair, do you think?

Sorry, Sebastian, could you repeat the question?

Sorry, do you hear me?

Yes, we can hear you now.

Okay. So how should we -- sorry for the follow-up. How should we think about Q3 EBITDA development in the context of the strong Q2 because consensus was casting sequential acceleration versus Q2. Is this fair, do you think?

From our side, the quarterly performance can really be driven by the timing of shipments in any one quarter. At this stage, we remain committed to our full year guidance of EBITDA of at least EUR 1.1 billion with the third quarter expected to be broadly in line with the second quarter. Now I need to caveat that we continue to operate in an uncertain geopolitical environment, which continues to limit our visibility.

Your next question comes from the line of Tristan Lamotte with Deutsche Bank.

First one is -- thanks Mike, for the additional detail on semis. I just wanted to dive a little bit more into that. And I'm wondering if you went back to historic levels in that semi business, what would the kind of incremental EBITDA be? Is that kind of more than EUR 100 million? I'm basically just wondering if this is a game changer or whether it's more of a side story.

And then kind of linked to that, how do you think that semis growth has phased -- because I guess there's been changes in stock levels at your customers and the fab build-out is increasing in pace.

And then the second question is you gave a lot of numbers around automotive and batteries and Specialty Polymers. I'm just wondering if you could give a little bit more detail on kind of what our main takeaway should be there? Because I guess pricing is down, volumes up. What are the main drivers for the business here as we kind of look forward?

Okay. I'll start on the second question, and then maybe, Chris, you can handle the first one on semis. The organic sales growth that you referenced was driven by higher volumes and slightly lower pricing in the Automotive segment.

Volume growth was pretty broad-based, but it was led by automotive, industrial, building applications. Specifically, the higher growth that we saw in automotive was driven by both batteries as well as our broader automotive business as we continue to substitute metal with our high-performing polymers and sealants.

In batteries, we had more than 20% year-on-year growth, and that was driven by robust demand for separator coatings and NMC binders across Asia as well as with new program wins. If you exclude batteries, we saw mid-single-digit year-on-year growth in automotive, and we continue to drive market share gains and new customer wins.

And by way of example, Tecnoflon is one of our high-performing heat-resistant sealing solutions for under-hood applications. That's delivering very strong growth. So again, our growth is coming from share gains as well as driving innovation across the segment.

Yes. Listen, just from my side on the semiconductors, I think Mike answered it in one of the previous questions. So just for the risk of not repeating a lot of it. We're not going to really comment on the specific margin levels. But Specialty Polymers, as Mike said, is probably one of our highest margin businesses.

Now more broadly, as the semiconductor demand continues to strengthen in the second half, we do expect electronics to -- the smart devices to become more meaningful as well as the electronics sector overall.

But just to repeat a few of the stats that Mike gave is that electronics is approximately 8% of our net sales and approximately 2/3 of the electronics business is the semiconductor applications. So, we do expect in quarter 2, the semiconductors were up double-digit year-on-year. We are seeing a reduction in the stock level that you spoke about, and that should have a recovery in our underlying business and market share gains.

Your final question comes from the line of Katie Richards with Barclays.

Just 2 for me, please. So, one, I would just be interested to hear a comment on the incremental costs you've incurred in Specialty Polymers to support your execution. What are the changes that you're making here?

And secondly, I noticed that in the space and defense applications, you're seeing high single-digit growth year-on-year now. But if I remember correctly, the beginning -- the outlook at the beginning of the year was flat. Could you talk us through the drivers of this and whether it's just a one-off order?

Sure. Thank you very much for the question, Katie. First, on the incremental cost in Specialty Polymers, Q2 2026 performance really kind of reflects low double-digit incremental costs in the Polymers business to support what I would say, both commercial execution and operational improvements.

And I think Chris mentioned it, these are not expected to recur beyond 2026. These incremental costs relate to actions announced at the start of the year to accelerate growth and enhance the efficiency of our Specialty Polymers business, and they include targeted commercial initiatives aimed at unlocking new sources of growth, increasing our share of wallet with existing customers as well as changes in our operating model.

Just to give you a little bit more detail. On the commercial side, these initiatives are to strengthen customer engagement improve our commercial execution, accelerate new business wins, leveraging AI, for instance. And then the operational side, the focus has really been on simplifying our processes, improving productivity and identifying structural efficiency opportunities across the business.

If I move to your next question, which is about Space and Defense, yes, we had forecasted space and defense to be flat year-on-year coming off a record year for 2025, if I'm not mistaken. And there's always some quarterly variability in the business. Use of defense assets is not accompanied by an immediate or direct increase in material sales, rather, it relies on stockpiles and field readiness.

But that said, we remain positive on the medium-term outlook, supported by continued strength in defense spending, again, while recognizing that quarterly growth rates can fluctuate.

There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Sherief Bakr for final remarks.

Thank you very much, everyone. Thank you for the questions. As usual, the Investor Relations team is available to answer any remaining questions and wishing you all a great day. Thank you very much.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, and welcome to the Syensqo First Quarter 2026 Earnings results analyst call. [Operator Instructions]

I would now like to turn the conference over to Sherief Bakr, Chief Communications Officer and Head of Investor Relations. You may begin.

Hello, everyone, and welcome to Syensqo's First Quarter 2026 Earnings Call. I'm Sherief Bakr, Chief Communications Officer and Head of Investor Relations. And I'm joined today in Brussels by our CEO, Mike Radossich, our CFO, Christopher Davis; as well as Rodrigo Elizondo, President of the Composite Materials business unit.

As a reminder, today's call is being recorded and will be accessible for replay on the Investor Relations section of our website later today at syensqo.com/investors.

I'd also like to remind you that during this call, we will be making forward-looking statements regarding our future business and financial performance that are subject to risks and uncertainties. The slides related to this presentation, along with today's press release, are also available to download from our website.

Turning to today's agenda. Mike will begin with an overview of the quarter, with Rodrigo covering the performance of Composite Materials. Chris will then go into more details on our financials before turning the call back to Mike, who will discuss our outlook for the balance of the year. We will then be happy to take your questions.

And with that, I'll turn the call over to Mike.

Thank you, Sherief, and good morning and good afternoon to everyone joining us today. During our call at the end of February, I outlined how I plan to lead the company. Our near-term priorities and what we expect for 2026. Today, having completed my first 100 days as CEO, I want to share what we have accomplished and how these actions will deliver on the Board's mandate to accelerate our value creation trajectory.

Turning to our Q1 performance. We delivered in line with the outlook we provided despite a complex operating environment and saw improved order momentum. We delivered net sales of EUR 1.4 billion with underlying EBITDA of EUR 251 million, up 6% sequentially. Volumes were stable year-on-year, reflecting improved momentum versus the previous quarter. We also delivered a resilient gross margin of 32%, reflecting our specialty value proposition an ongoing focus on driving our gross margin performance.

The quarter also saw us secure a new multiyear agreement with Boeing across both commercial and defense programs, reinforcing our position as a leading partner to the world's leading aerospace manufacturers. And from a portfolio perspective, we completed the sale of the oil and gas business in January with net proceeds of approximately EUR 130 million.

Moving now to the conflict in the Middle East. This began affecting global markets in early March, driving a sharp increase in energy costs greater logistics complexity and ultimately, higher raw material prices. Our direct commercial exposure to the region remains limited as sales to Middle Eastern customers are not material. At the start of Q2, we implemented pricing actions, including surcharges to offset these cost increases across both Specialty Polymers and Performance & Care. In Composite Materials, we have not seen any material impact on civil aerospace demand or build rates. There may be some incremental demand in defense, although this is unlikely to be reflected in our near-term financials.

Overall, the conflict has disrupted global logistics, resulting in higher freight costs, longer lead times as well as increased input and energy costs. To manage the uncertainty and volatility, we have established a cross-functional task force across all business units, focusing on mitigating actions across our supply chains and commercial operations maintaining agility and addressing customer needs. That said, the longer the conflict persists, the greater the risk and the potential for more structural impacts on future demand. For the full year, based on what we know today, we currently expect the impact of the conflict to be limited.

I also want to spend time today going through the pillars I set out in February: transparency, execution excellence, innovation leadership and disciplined capital deployment and the evidence of progress against each. On last quarter's call, I said I would be open about what is working, what is not and how we will fix it. So let me start there.

While we delivered on our outlook for Q1, it is clear that relative to our potential, our performance is not yet where it needs to be. So let me share what has changed over the past 3 months in our rapid shift from diagnosis to action. In addition to completing my new leadership team, we have launched targeted commercial and operational programs in the businesses where the gaps are the greatest.

On leadership, we announced 3 external appointments, starting with Kerstin Artenberg, our new Chief People Officer. Arnaud Valenduc joined as President of Specialty Polymers, with the role elevated to full representation on our executive leadership team. This deliberate change underscores the importance of restoring growth in that business through structural actions independent of near-term market dynamics. We have also appointed Arnaud Wisnia to the newly created role of Chief Strategy and Transformation Officer, focused on driving the operating model changes needed to accelerate growth and improve efficiency.

Having spent significant time within the Specialty Polymers team over the past 100 days, I have gained deeper insight into how we translate our innovation and application expertise into value by addressing specific customer needs. This includes understanding where we are winning in the market, where we are not and what is driving these outcomes.

What I've learned is that the recent performance of Specialty Polymers particularly over the past several quarters reflects cyclical or temporary challenges rather than longer-term structural issues or a permanent loss of market share. Nevertheless, there is more we must do. to accelerate our growth trajectory, drive new business wins and better serve our customers, which takes me to our actions to improve our commercial performance.

On commercial execution, we are moving at pace with a clear focus on accelerating and delivering new sources of growth as well as increasing our share of wallet with existing customers. This has included a recalibration of our key account priorities and shifting the operating rhythm of our teams, and we're already seeing results. Through the actions we have implemented, the initial indications show opportunities are converting more quickly than otherwise would have fallen into later quarters. This is something I'm personally overseeing and expect to come back to you in the coming quarters with both the quantifiable measures as well as the progress we are making.

More specifically, within Specialty Polymers, we have also moved quickly to shift from identifying the root cause of issues in electronics to quickly acting to fix them. This has included changes in our leadership team.

And along with Arnaud, I have recently spent time visiting our key customers in the semiconductor end market. I'm pleased to report the inventory levels are normalizing, and we remain confident that we will see a recovery in volumes as we go through the balance of the year, driven by underlying demand from key customers to support new fab construction projects.

Turning to innovation, our competitive moat and key driver of sustainable growth. As I have mentioned previously, we need to accelerate the pace at which we convert innovation into growth and focus our investments on projects more directly linked to customer demand. In line with this, I have set 2 specific targets for the teams. Within Specialty Polymers, we aim to increase the vitality index which is the share of sales from products less than 5 years old to 30% over the next 5 years, up from approximately 23% today. We'll do this by leveraging existing resources with a stronger focus on shorter-term higher-impact projects.

We also plan to reduce the cycle time from initial customer opportunity to commercial realization from around 24 months to less than 12. To achieve this, we are driving more focus throughout our research and innovation processes and leveraging digital tools and AI to improve how we design, test and scale new solutions. This will help us accelerate development, improve success rates and bring innovation to market more efficiently.

While our innovation engine is a source of strength and differentiation, our next wave of innovation needs to be delivered faster. This is a key lever for us to both accelerate growth and continue to deliver strong margin performance.

Turning to capital deployment. Our near-term focus is on doing more with less and prioritizing returns from existing capacity over new commitments. During the quarter, we further tightened our CapEx envelope resulting in CapEx expenditure of EUR 97 million, down 44% year-on-year. For the full year, we have reduced our CapEx outlook by up to EUR 50 million, reflecting our increased discipline around capital deployment and now expect CapEx to be around 20% lower than in 2025.

Finally, on the broader topic of capital allocation and portfolio optimization, having completed the divestment of the oil and gas business, the process to divest the Aroma business is advancing, and I expect to share more specific updates by our Q2 call at the end of July.

Overall, we will continue to focus our portfolio on the areas where we have the strongest right to win and the greatest opportunity to create value. With that, let me hand it over to Rodrigo to share his perspectives on Composite Materials and the growth drivers in our Aerospace segment, our largest end market.

Rodrigo, over to you.

Thank you, Mike, and good morning, and good afternoon, everyone. It's my pleasure to share some insights about the Composite Materials business and our performance for the first quarter. As a reminder, our business develops, manufactures and supplies advanced high-performance composite materials and adhesives for the aerospace and defense and end markets, as well as the premium end of the high-performance automotive market. We also developed solutions for the energy sector, where our activity remains more limited today but represents an additional avenue for future growth.

Composite Materials is a business built over decades of M&A and technology innovation. Our portfolio of innovative solutions has set the benchmark for performance and field deployment supported by qualification databases that underpin certification for some of the most advanced aircraft programs in operations to date. In short, we solve our customers' challenges through materials innovation.

As Mike mentioned, Aerospace is our largest end market and a key growth platform, reflecting the strategic importance of composite materials within Syensqo. Within our full year 2025 sales mix, civil aerospace represents about 60%. Space & Defense is 35%. And the balance comes from high-performance automotive and energy which together gives us a well-diversified and resilient portfolio across the aerospace and defense value chains. Within aerospace and defense, the majority of our business is secured under long-term contracts that both require execution and reinforce our position on critical programs.

Syensqo's breadth of technologies and product portfolio gives us presence across virtually every major aviation platform from legacy aircraft to the newest launches. As an advanced material partner to OEM and suppliers, we provide the materials and expertise that support current production and the next generation of programs that will ramp over the coming decade.

The scope of our program is evident in our backlog, highlighting our broad exposure across large OEMs, such as Boeing, Airbus and COMAC as well, as across multiple programs and end markets. This diversity provides multiple avenues for growth and underpins the resilience of our business. Building on this space and defense is an increasingly important component in our portfolio. From 2023 to 2025, space and defense sales increased more than 20%, reflecting our strong positions and long-term customer relationships. This growth adds another layer of diversification in another lever to drive value. Against that backdrop, we believe we are well positioned to deliver sustainable growth and value because our advanced materials address some of the industry's most critical needs such as performance, lightweighting and energy efficiency. Together, these drivers support our continued growth and reinforce the role we play in enabling innovation in aerospace.

Our order book remains robust across nearly all market segments, reflecting sustained demand and disciplined purchasing behaviors from our customers. Quarterly book-to-bill ratios are running roughly 5 percentage points above prior years. As customers place orders earlier to support increasing production rates and our full year order book is already approximately 90% filled. As production rates continue to ramp, both OEMs and their suppliers are securing inventory proactively to ensure production continuity and supply chain resilience. That gives us strong backlog visibility and supports our growth outlook. This broad-based strength reflects not only the resilience of the aerospace end market, but also our strategic positioning within it. As customers continue to prioritize supply chain reliability and capacity readiness to meet their accelerating build rates.

Now turning to our first quarter performance. We delivered the second highest quarter sales in the history of Composite Materials, expressed in U.S. dollars, surpassed only by the fourth quarter of 2025. Year-on-year organic growth of approximately 1% was driven by growth in civil aerospace, supported largely by the Boeing recovery and higher demand from Airbus. As expected, this growth was partially offset by lower volumes in space and defense applications. Sales in these segments are closely tied to government contracts and defense equipment replenishment and therefore, can fluctuate from quarter-to-quarter.

Looking ahead to the remainder of the year, we expect space and defense sales to be roughly in line with last year, a strong prior year comparison. On a sequential basis, composite materials sales were 2% lower compared to a record sales fourth quarter, reflecting softer space and defense volumes, offset by solid growth in civil aerospace and disciplined portfolio management across all end segments.

Looking ahead, our priorities are clear. We are investing in capacity to support growing demand, executing flawlessly on time, in full on our long-term contracts. And continuing to leverage our technology and qualification base to create value and win on both existing and future programs. With our differentiated and innovative portfolio, strong backlog and deep integration into our customers' platforms, we are confident that Composite Materials is well positioned to deliver sustainable growth and value.

With that, I pass the call to Chris and I look forward to answering any questions you might have in the Q&A session.

Thank you, Rodrigo. Good morning and good afternoon to everyone on the call. The first quarter of 2026 was broadly characterized by a challenging operating environment, volatile trade policies and geopolitical uncertainties that disrupted supply chains. Despite this higher-value niches tied to advanced materials remained comparatively resilient. And in electronics, we are seeing improved momentum in the semiconductor end market.

Turning to Slide 12, reflecting the first quarter financial results. Net sales for the quarter totaled EUR 1.4 billion with overall volumes stable compared to the prior comparable period. Sequentially, sales have improved 5% against the last quarter of 2025, supported by higher volumes in automotive, health care and industrial end markets. I will talk more about the sales drivers of each business segment in a later slide.

As we have previously mentioned, we remain committed to defending our gross margins as this reflects how we manage both our sales and cost of goods sold. Taking into account our gross profits of EUR 444 million for the quarter. This resulted in a gross margin of 32%, a 260 basis point sequential improvement driven by higher volumes in Technology Solutions and margin benefits in Composite Materials. EBITDA of EUR 251 million for the first quarter represents a 6% sequential improvement driven by Specialty Polymers, Novecare and Composite Materials.

Operating cash flow was EUR 82 million in the quarter. The performance reflects a higher working capital requirements, primarily driven by the increased inventory to support stronger composite material sales, higher accounts receivables following the stronger sequential volumes in Specialty Polymers and Novecare as well as the timing of taxation payments and the last of the separation costs. For 2026, we continue to expect operating cash flow of approximately EUR 700 million.

Turning to operating performance by segment on Slide 13, starting with Materials. On a year-on-year basis, Materials net sales decreased by 2% organically. This was primarily driven by lower pricing in Specialty Polymers as well as lower volumes in Space and Defense within Composite Materials. Specialty Polymers net sales decreased 4% organically, primarily due to selective pricing actions in the automotive and health care end markets to support volume growth. Specialty Polymers volumes were approximately flat year-on-year, driven by growth in the automotive, health care and in industrial and chemicals end markets, offset by lower volumes in the electronics and food end markets.

Higher volumes in automotive were driven by strong execution and share gains in under-the-hood applications such as thermal management and electrical components. Higher volumes in health care were driven by hemodialysis and medical devices. Whilst volumes in electronics were in line with expectations, driven by lower sales in smart devices. Finally, lower volumes in food packaging were driven by the challenging comparison versus the first quarter of 2025, when volumes increased by more than 30% year-on-year.

Net sales in Composite Materials grew 1% organically against the prior year. As Rodrigo commented, the Composite Materials business recorded its second highest quarter of sales on record in the first quarter of this year. The stronger performance was driven by increased production rates on key civil aviation programs as well as business jets and engines with sales up almost 10% year-on-year while growth in space and defense applications was impacted by the timing and maturity of certain programs. Space & Defense remains an important growth driver for composite materials.

In the first quarter, our Materials segment delivered an underlying EBITDA of EUR 215 million or a 10% sequential improvement driven by higher underlying EBITDA in both Specialty Polymers and Composite Materials. At the segment level, this translated into an EBITDA margin of 26%, up 170 basis points sequentially.

Moving to Performance & Care. Year-over-year sales were down 2% organically driven by lower volumes in Novecare, partially offset by strong volume growth in mining within Technology Solutions. Within Novecare, growth in Industrial & Chemicals and Home & Personal care was offset by softer demand in coatings, which has continued to be characterized by uneven demand, regional divergence and ongoing price and mix pressure in several subsegments as persistently high interest and mortgage rates continue to weigh on the housing market, particularly in the United States.

Turning to Technology Solutions. The first quarter results reflect the increased demand driven by higher copper prices, which are boosting reagent demand. The net result is that Performance & Care delivered an EBITDA of EUR 82 million in the quarter, up 11% sequentially and an EBITDA margin of 16%.

Within the Other Solutions segment, EBITDA was EUR 3 million for the quarter with an EBITDA margin of 4%. Importantly, at a Syensqo group level, sales and EBITDA increased 5% and 6%, respectively, versus the last quarter of 2025, driven by specialty polymers Novecare and Composite Materials. The net effect of what I've just described is reflected on Slide 14.

Moving to EBITDA for the quarter. Excluding the impact of foreign exchange and scope, underlying EBITDA of EUR 251 million declined by 13% year-on-year, driven by lower underlying EBITDA in Specialty Polymers partially offset by higher EBITDA in Composite Materials. The decrease in EBITDA for Specialty Polymers was primarily driven by selective pricing actions in certain end markets as well as the expected softer demand in the electronics end market. This was partially offset by improved performance from the Composite Materials segment. The net result is a EUR 27 million decline in underlying EBITDA in materials on an organic basis compared to the first quarter of 2025.

In Performance & Care, EBITDA declined by EUR 6 million in the first quarter of 2026 on an organic basis compared to the prior year primarily due to lower margins in Technology Solutions and lower volumes in Novecare's coatings business. This was partially offset by strong year-on-year volume growth from mining customers within Technology Solutions. Other Solutions were down EUR 5 million compared to the prior period. At a total company level, EBITDA of EUR 251 million increased sequentially, with improved performance in both the Materials and Performance & Care segments.

Turning to capital expenditure on Slide 15. Our total capital expenditure for the quarter was EUR 97 million, down 44% year-on-year, including capital expenditure for the new ERP program. We have previously stated we will leverage our existing spare capacities that we have today to meet future volume growth. This requires no significant additional capital expenditure. As a result, we have performed a further detailed review of capital expenditure for the year and are reducing our full year capital expenditure outlook by up to EUR 50 million, resulting in a new capital expenditure outlook of approximately EUR 450 million, which includes the capitalized spend on our SAP implementation. We will continue to carefully manage capital expenditure and cash to balance our shorter-term targets with longer-term value creation.

Turning to our financial position on Slide 16. I am pleased to report that we continue to have a strong balance sheet with our net debt at EUR 2.0 billion, a gearing ratio of 24% and a leverage ratio of 1.7x. We continue to have strong levels of liquidity available as demonstrated by the EUR 1.5 billion of undrawn committed bank facilities and a further EUR 700 million of cash on hand. On the 31st of March 2026, the group redeemed its EUR 500 million bond due in 2027, efficiently allocating available cash resources, deleveraging and strengthening our strong investment grade profile.

As previously reported, the divestment of the Oil & Gas business unit was completed in January 2026 with net cash proceeds of approximately EUR 130 million, reducing the net debt and sharpening our focus on our core businesses.

Our credit rating remains investment grade at BBB with S&P and I am pleased to report that Moody's maintained our Baa1 rating with stable outlook at their recent annual review.

Net financing costs of EUR 3 million were incurred in the quarter and remained in line with our full year outlook of approximately EUR 130 million. As a reminder, the coupon payments on Syensqo's outstanding bonds are made in the second and fourth quarters of the year.

With that, I'll turn the call back to Mike. Thank you.

Thank you, Chris. Turning now to our outlook for 2026. At a high level, our expectations on volume growth and profitability remain unchanged. The ongoing conflict in the Middle East has created additional uncertainty across value chains, and we will continue to mitigate the direct impact on our financials to the extent possible. As I mentioned earlier, we now have lowered our full year CapEx envelope by up to EUR 50 million, aligned with our focus on capital discipline and further improving cash flow generation. The change is driven by actions we have taken to reduce sustenance and ERP-related spend.

We continue to expect our first quarter EBITDA to be the lowest of the year supported by improving order book trends we have seen in Q2 as well as a gradual recovery in year-on-year volume growth as we go through the balance of the year. For example, in Composite Materials, and in electronics within our Specialty Polymers business unit. Given this, and despite the ongoing uncertainty in the Middle East, we now have greater line of sight towards the delivery of our full year EBITDA and operating cash flow outlook which remains unchanged.

In closing, we delivered on our outlook in Q1, and we are working at pace to drive the necessary changes to improve our performance across the company with a focus on accelerating growth as well as improving cash flow and returns.

With that, we are happy to take your questions. Thank you.

Thank you, Mike. We'll now move to the Q&A session. [Operator Instructions]

Operator, can we please have our first question?

[Operator Instructions] Your first question comes from the line of Katie Richards with Barclays.

My first question would be sort of on the competitive landscape and how you've seen that change in the last month, particularly in relation to Novecare and Specialty Polymers, please? Have you noticed any reduced import pressure here?

And my second question is for you, Rodrigo. To what extent are the synergies between Specialty Polymers and the Composite division, commercial when it comes to the cross-selling of prepack materials? So what I mean by that is, in a hypothetical scenario, if Syensqo were to separate these businesses, can you give us an idea how margins in the Composite division would change from losing this integration?

Thank you, Katie, and good afternoon. With your first question with respect to the competitive landscape, particularly on Novecare, no, we have not seen any material impact from changes in the competitive dynamics. Really -- and again, spillover effect for your question around Specialty Polymers, we haven't seen really any implications on most of our businesses as a result of the conflict in the Middle East. As mentioned, we currently assume that there will be limited impact to our product volumes for the Middle East, and that's reflected in our full year 2026 outlook. And when it comes to supply of raw materials, we are leveraging our diversified supplier base. And as in previous periods of disruptions, we have been very successful in implementing pricing actions to mitigate higher costs.

And Rodrigo, over to you for question 2.

8 Thanks for your question, Katie. So Composite Materials has dedicated commercial teams covering aerospace, defense and the high-performance automotive. But we do have areas where there are synergies that go beyond commercial activities. For instance, and as I mentioned in my presentation, we have a meaningful business development opportunity in thermoplastic composites for energy applications where we have clear synergies. We have common customers with Specialty Polymers. We have raw materials integration. And of course, we have a complementary expertise I must say that as an advanced materials company, we do have synergies in material science and expertise overall. And of course, this brings benefits beyond commercial of having a larger talent pool.

This question comes from the line of James Hopper with Bernstein.

The first question, obviously, you've referenced the improving order book. Can you go through some more detail where those improvements have come from and also help us put in the context of Q2? If you could help us a little bit around where the market is expecting an improvement there? What sequentially, what would be driving that and what year-on-year growth rate perhaps we can see?

And then the second question is around the pricing approach. Can you go into a little bit more detail around where you're using surcharges and kind of pass through [indiscernible]? And then secondly, on pricing more strategically, you've cut price in auto in the past, and that's clearly leading to volume growth, are you considering doing something similar more broadly across the business? Are you not raising price in this environment to capture some volumes?

Yes, James, thanks very much. I'll take the first question, and I'll try and lead you through some of the moving parts Q2 and all the way through to the end of the year. I mean, in line with our original February outlook, our Q1 EBITDA is expected to be the low point of the year. Now what we have seen is improving order trends and a gradual volume recovery, particularly in Composite Materials and the electronics sector within Specialty Polymers. So this would support stronger growth through the year as we -- and particularly now where we sit in quarter 2, we have greater visibility over that and as a result, expect a higher EBITDA versus quarter 1.

More specifically on Q2, we also expect to see volume improvement sequentially primarily in the Materials and Specialty Polymers space across most of the end markets and including, in particular, as I mentioned, the electronics and also to some degree in the automotive applications. On composites, we also expect to see volume improvements in civil aerospace. In fact, we are expecting a reasonably decent second quarter in that respect.

With respect to the year-on-year developments, as I mentioned in the outlook that we gave previously, we anticipate a gradual recovery in year-on-year volumes over the year, and this is really expected to drive the stronger growth for the balance of the year. For example, as I've already mentioned, composite materials and electronics. Now from a pricing perspective, we're expecting that to be broadly neutral through the year as we have implemented pricing actions to offset inflationary pressures from the conflict in the Middle East. I'll pause at that and then hand you back to Mike for the rest.

Yes. So I think I need to pick up on the automotive end market. Pricing in the first quarter was lower than in the prior year. and that was deliberate, deliberate for price volume trade-offs in a very highly competitive market environment rather than a structural shift in our pricing model. In the first quarter of 2026, these targeted pricing actions supported higher volumes and translated into market share gains, particularly in the under the hood applications.

And you also asked to comment around the rest of the portfolio. I'd say across the rest of Materials segment, we continue to price for value. With the exception of health care, where we have selectively adjusted prices in Q1 to protect volumes. And then I would say in Novecare, where our businesses operate in a more intensely competitive setting. We are also actively managing price volume elasticity there.

Your next question comes from the line of Tristan Lamotte with Deutsche Bank.

First one, I was wondering if you could maybe give a little bit more detail on the semiconductor business. Is it fair to say it's about 4% of sales, but quite high margin. So any idea on kind of how large that business is? And then maybe a little bit more color on the inventories in the chain and how much that could pick up through the year, given the structural drivers out there. And linked to that, I'd also be interested in the size of the business in coolants for data centers.

And then secondly, one for Rodrigo maybe, your peers saw commercial aerospace sales up 19% in Q1 and defense was up 7%. And I think they have a larger exposure to Airbus. I think your organic growth was 1%. So I was wondering if you could maybe try to explain some of the difference there and the extent to which you expect a bit of catch up through the year?

Well, Tristan, and thank you very much for the questions. So I'll start with the an overview and an update on semicon. We have disclosed in the past that approximately 8% of our group sales in full year 2025 related to our electronics business within Specialty Polymers with around 70% of that linked to semiconductor applications where we're principally a key supplier into semicon fab construction. Since late 2024, the business has been impacted by elevated customer inventories following delays in certain fab projects. Conditions are now gradually normalizing, supported by improving order trends, and we continue to expect a progressive recovery through the year, broadly flattish versus full year last year.

So what I said at the end of February was, for the full year, we'd be flat. For 2026, we would see a stronger second half than first half as some of those new construction projects started to materialize and inventories normalized. And that's pretty much what we're seeing here today. We don't disclose margins by end market, but what I can say is that our electronics margins are directionally above our Specialty Polymers average.

On your last point regarding data centers, our current exposure to data centers is rather modest. Again, the majority of our business is related to fab construction, and we do have some consumables. But data centers does have long-term growth potential driven by AI and advanced connectivity, and we all see the ongoing data center expansion. So this is a target for us. We do have some modest sales into here with some of our products around cooling, as you mentioned, but we are trying to increase and improve our value proposition here to drive stronger growth.

Rodrigo, I'll turn it over to you on the composites question.

Yes. First of all, I would like to clarify that the supply chains in our business are extremely long. From the time we supply a product that can be to one of our tiers of the OEMs, it takes a long time to get it to a delivery of an aircraft, and this varies program to program. So my message is one quarter in such a long cycle business is very difficult to reconcile numbers. Second message, is that in Syensqo, we are exposed to many, many programs. We are not overexposed to a specific program. So I suppose, by your question, you referred to a peer that might be exposed to one company or one program. As you read in the slide that -- it -- was in my presentation, we are very exposed to basically all the programs. So what you will see over the coming quarters is the growth will be following the growth in civil aerospace.

Your next question comes from the line of Laurent Favre with BNP.

I have 2 questions for Rodrigo, please. The first one, I mean if we compare the backlog that you presented today, versus the backlog slide of when you presented the spinoff, there is I guess one big change at the top, which is [ COMAC ] and [indiscernible]. I think you went from 100 aircraft to over 1,000. And I'm just wondering, how do you think about, I guess, the, let's say, the cadence or the ramp-up there? Are we talking about an opportunity which should start to drive meaningful growth over the next 2 years? Or is it more longer dated? That's the first question.

And the second one, on margins, I think we were sort of -- a couple of quarters ago that you -- composites were back to low 20s in percentage terms. From here, do you think you need to reinvest into the business and bottom line growth will broadly be in line with sales? Or would you expect to see further operating leverage helping margins?

So thanks for your question. I think your question about COMAC, just to put it in perspective, COMAC is supplying a single-aisle aircraft competing with the likes of Boeing and Airbus. Comparatively, comparing the build rates, this is a very, very small portion of the single-aisle market. So it's growing and it's ramping up, but from a very, very low base. Will it grow substantially in the future? The answer is probably yes. But this is a very long-cycle business. I don't expect a sudden growth that will move the needle for the aviation industry is a very long-cycle business. We need to keep that into perspective.

Yes. And then the second question, just to clarify, can you repeat the question because I didn't take note.

The question was on profitability. And I was wondering whether -- as we are now back to low 20% in -- for composites, whether we should be expecting further reinvestment into the business to cash margins or would you expect operating leverage to get margins a bit higher, a bit closer to Materials' average or Specialty Polymers level?

Yes. We are -- okay, we are focused on satisfying demand. We're going through a very, very good cycle. In terms of capacity, we have many activities, debottlenecking our activities. Where we see bottlenecks, we are debottlenecking. We -- this is also an industry where it's not like the chemical industry, you operate machines with shifts. So we're adding shifts in process improvements to get more product out the door. And we are looking at our assets. We have 13 industrial sites. We are rebalancing our product and asset combinations to satisfy demand. And of course, we have projects that are very targeted on increasing our capacities wherever we see bottlenecks.

Yes, Laurent, if I could just add to that, you'll recollect from a previous call where we indicated we are focusing our growth capital on areas where we have the customer demand and where we're operating at capacity. And one of the examples I gave at that point was investing in additional adhesives capacity given that, that's the secret sauce. So it's an area of focus for us as a business.

Your next question comes from the line of Matthew Yates with Bank of America.

It's really just one for Mike, and I'd like to talk about the changes you're making to the executive team as you sort of implement your strategy. I'm curious why you decided to make 2 appointments of former [ Solvay ] executives? Is there not an argument to be had for trying to change the culture and the performance of the group that perhaps it would have been better to go externally if you wanted to have a sort of a different perspective? Or is there something about those specific individuals that you felt was the right fit for the role?

Sure. Thank you very much, Matthew. Appreciate the question. Culture is extremely important to me. And I've had worked both with both Arnauds, Arnaud Wisnia and Arnaud Valenduc, in the past with a long relationship. They had left the company for various reasons. And we've always kept in touch because I always had tremendous respect and value for them, what they accomplish and how they do things.

When we -- when I recast the executive leadership team, and I also looked at roles and responsibilities and we eliminated the role of Chief Operating Officer and created a new role called Chief Strategy and Transformation Officer. I did look externally. And then I compared them to including the 2 Arnauds to internal candidates. And after an exhaustive search, it was very clear to me that bringing back the 2 Arnauds was the right thing to do based on what I see for this company, what we need to do, how we need to do it, the speed, the execution. They already have a running knowledge of some of our systems and products and things like that. So they weren't going to be starting from 0, and I wanted to dive with pace. So for me, they were clearly the best candidates to complete my team.

Your next question comes from the line of Chetan Udeshi with JPMorgan.

The first question probably is for Chris or Mike, whoever needs to answer, which is, if I look at the consensus for second quarter, it's about 285. And there was always a bit of whether you call it hockey stick or a big ramp-up in your guidance for the full year compared to what you've delivered for Q1. So I'm just curious, as you sit today, are you happy with the consensus that we have for second quarter? And that would probably need another step up in Q3. And I'm just curious from the order book that you have, are you comfortable having another step-up in Q3 versus Q2 because to some extent that is required to get to your guidance, assuming some seasonal decline in Q4?

The second question, which is for Chris, you talked about the changes that you are implementing or have already implemented in the first 100 days. And I think there was a section or comment on execution excellence that you referred to, which mentioned increasing share of wallet also recalibrated key account priorities. I'm quite curious to understand what have you done on both those points, especially around share of wallet because externally, the impression we've got is Syensqo maybe actually losing share of wallet rather than gaining because you lose or you lost some business in electronics, in EV batteries or storage batteries, you are not participating to the same extent because of the different chemistry type. So how will you drive that increased share of wallet? And maybe you can also throw some light on what has recalibrated [indiscernible]?

Chetan, I'll take your first question about the EBITDA consensus. In line with our February outlook, our quarter 1 EBITDA continues and is expected to be the low point of the year. Importantly, we do have better visibility on Q2, and we have greater line of sight on the full year outlook of EUR 1.1 billion that we've previously guided to.

Now with respect to your question regarding the consensus for the second quarter, it is reasonably aligned with our full year outlook. But at this stage, we are not providing a specific Q2 outlook. More specifically on Q2, we expect to see sequential volume improvement primarily in the Materials space and in Specialty Polymers across most of our end markets. And then we also expect to see volume improvements in civil aerospace.

And I'll take the second question, was related to the first 100 days. So specifically on execution, the focus has -- is being much more targeted and disciplined commercially. We've recalibrated our key account priorities to focus on the highest value opportunities, and we're working to increase our share of wallet, as you mentioned, with existing customers. I'm out visiting with our customers, and we're not losing share of wallet. I think that we've been growing in line or outpacing some of our key market segments where we're focused. And we're doing that through tighter commercial execution and really a more structured pipeline management looking at that opportunity pipeline management, making sure that we're bringing together the technical, the operational and commercial teams with a strong biorhythm and making sure that we're driving accountability and capturing these actions.

Again, we've also made some several changes to our Specialty Polymers leadership team to increase that commercial and operational focus. I mentioned Arnaud Valenduc who's leading now the Specialty Polymers business and we also changed out our leader in the electronics business segment. So -- and along with Arnaud, I'm out there, I'm spending time with our customers, visiting our key customers, was recently with our semiconductor market customers, where our performance has been weaker. And as a result of those visits and the insight that we gain, we've taken targeted actions there to win back business and we're already seeing signs of faster conversion of opportunities into sales.

If I can follow up, Chris. So are you also implying Q3 has to be better than Q2 just to get the guidance? I guess it does, but I just wanted to clarify.

Sorry, Chetan, did you -- what was the question again? Am I implying what is better than Q2, Q3?

I mean I just saying, let's say, Q2 consensus the right number in the right zip code, Q3 has to be better than Q2, I suppose to get to the full year guidance. Would that be part of your trajectory that you've sort of assumed in the full year guidance?

Yes, it would be. I mean, ultimately, I think when we came out with our outlook in February, we indicated that the second half of the year would be weighted with the incremental volumes coming from electronics as well as the initiatives that we had generally put in place. And then also, what was happening on civil aviation.

There are no further questions. I will now turn the conference back over to Sherief for closing remarks.

Thank you, Angela, and thank you, everyone, for joining today's call. That ends our session for today. Thank you to everyone for your participation and questions. And as usual, the Investor Relations team is available to answer any remaining questions. Have a great day. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Syensqo Fourth Quarter 2025 Results Analyst Call. [Operator Instructions]

Thank you. And now, I would like to turn the call over to Sherief Bakr, Chief Communications Officer and Head of Investor Relations at Syensqo. Please go ahead.

Hello, everyone, and welcome to Syensqo's Fourth Quarter and Full Year 2025 Earnings Call. I'm Sherief Bakr, Chief Communications Officer and Head of Investor Relations. And I'm joined today in Brussels by our CEO, Mike Radossich; and our CFO, Christopher Davis. As a reminder, today's call is being recorded and will be accessible for replay on the Investor Relations section of our website later today at Syensqo.com/investors.

I would also like to remind you that during this call, we will be making forward-looking statements regarding our future business and financial performance that are subject to risks and uncertainties. The slides related to this presentation, along with today's press release, are also available to download from our website.

Turning to today's agenda. Mike will begin with an overview of the quarter and comments on how he is setting Syensqo's strategic direction. Chris will then go into more details on our financials before turning the call back to Mike, who will discuss our outlook for 2026. We will then be happy to take your questions.

With that, I'll turn the call over to Mike.

Thank you, Sherief, and good morning/good afternoon to everyone joining us today. This is my first earnings call as CEO of Syensqo, and I want to start by expressing my gratitude to our Board and Ilm for their confidence in me, to our investors for your continued support and partnership, and to our employees, our explorers, whose dedication and expertise make everything we do possible. I also want to thank our customers who place their trust in us every day. That trust is something that we must continue to earn through consistent execution, innovation and continually creating new sources of value, which allow them to win in their markets.

Today, I want to focus on 3 things: first, how I'm setting the strategic direction for Syensqo with a focus on accelerating value creation; second, sharing some perspectives from my first 2 months in the role, focusing on the actions we are already taking; and third, sharing some of my shorter-term priorities as I fully flesh out our future road map and targets over the coming months.

But before I cover that, I also want to be clear about the mandate the Board has given me and why I've taken this role. It is purely to accelerate the trajectory of value creation at Syensqo. Given the value and the caliber of people, our technologies, our end market exposures, leadership positions and financial strength, we will focus on unlocking more value beyond the broader demand environment. The new realities our industry is experiencing require new ways of working and operating to find new opportunities. For Syensqo, that means becoming faster and more nimble, fully leveraging the benefits of our heightened focus we have gained since the separation and not hesitating to make bold decisions where they're needed. With the team, we will move with urgency to adapt to the changing environment as necessary.

Speaking of the team, I want to pay tribute to our former colleague and leader, Herve Tiberghien, our Chief Operations and People Officer, who sadly passed away at the end of December. Herve's passing has underscored how critical the right leadership and culture are to Syensqo's future. In recent weeks, we have appointed a new Chief People Officer, and we're in the process of hiring a new Chief Operations Officer and a new Chief Strategy Officer. They will bring fresh perspectives, deep experience, as well as a shared commitment to driving performance and delivering results.

Before talking about our results, I want to share with you what you should expect from us going forward, irrespective of external factors, as they will help to shape our future direction. It boils down to 4 pillars: transparency, execution excellence, setting the industry benchmark for innovation and disciplined capital deployment. I will be open about what is working, what is not and how we will fix it. For me, the key to an effective strategy is flawless execution. We will set clear targets, align our teams and hold ourselves accountable for consistently delivering results.

Our differentiation comes from our technologies, end market exposures, application expertise and our problem-solving capabilities, all while delivering compelling value for our customers. Leveraging our strong financial position and balance sheet optionality, we must remain an innovation powerhouse to deepen and widen our competitive moat. That will also involve making choices and prioritizing where we can truly differentiate, which leads me to the final principle, disciplined capital deployment. Every euro we invest must generate attractive returns and with a zero-based capital redesign with the aim of doing more with less. We will continue to be thoughtful, rigorous and focused on value creation, not growth for growth's sake or investors that do not -- or investments that don't meet our thresholds or aren't in line with our strategic priorities. These principles will also guide how we drive change across our organization and be the basis of our targeted culture.

Taking a step back, Syensqo's separation from Solvay marked the first chapter of our transformation, creating a pure-play specialty company with strong technology platforms in attractive markets. But that chapter was about creating the company, built on a very strong foundation. My job is to write the next chapter to take our portfolio, our capabilities and our optionality and turn this into a higher-performing, higher-returning Syensqo, realizing our full potential.

Chris will take you through more of the details, but at a high level, we exceeded our previous cash flow outlook for 2025 despite weaker-than-expected volume performance in Q4, primarily in our Electronics segment. On a full year basis, net sales of EUR 6.1 billion declined 6% year-on-year, or 3% organically, driven by lower volumes in Specialty Polymers with overall pricing broadly stable. The standout performer was Composite Materials, which, despite the impact of destocking at Boeing, delivered 4% year-on-year net sales growth on a full year basis and 11% in Q4.

On a pro forma basis, underlying EBITDA of EUR 1.21 billion declined by 14%, resulting in an EBITDA margin of about 20%, reflecting lower volumes and unfavorable product mix. And from an innovation perspective, a key driver of our differentiated value proposition and long-term growth, we continue to demonstrate our leadership with approximately 20% of our sales generated from products that are less than 5 years old.

2025 also saw us becoming a fully independent company, exiting more than 100 transition service agreements, which will allow us to find new ways to simplify our organization and reduce costs. So we are starting 2026 in a strong position to drive the next chapter of our transformation.

I was pleased to start my tenure as CEO with the successful completion of the sale of the Oil and Gas business unit in early January. In addition to unlocking value for our shareholders and further bolstering our balance sheet, it makes Syensqo a higher-margin, pure-play specialty company, a process we expect to continue in 2026 with the planned divestment of the Aroma business.

Finally, the combination of our cash generation and strong balance sheet provides us with optionality to both invest in organic growth and reward our shareholders. Over the course of 2025, we repurchased approximately EUR 120 million of our shares and have proposed a dividend of EUR 1.62 per share. When combined with the share buyback, this totals more than EUR 280 million in shareholder returns for the year and an increase of 22% versus 2024.

My first 2 months as CEO have given me clear insight into our opportunities, our challenges and how to turn both into consistent strong results. I have listened to what matters most to our customers and investors, and I have visited our sites to hear directly from our teams. What I have found confirmed what I already knew. We have a unique company with strong foundations, great technology, great people and attractive growth prospects, all supported by a strong financial position and balance sheet.

Let me start with Specialty Polymers. Driving the performance of this business is a top priority for me and the team. Our fundamentals remain strong. Our differentiated technology and innovation leadership, our deep application know-how, our attractive market exposure and customer relationships underpin many areas of competitive advantage. But this needs to be translated into stronger growth, continued price leadership and strong margin delivery. Moreover, with our existing capacity, we can simultaneously drive top line growth without significant additional CapEx, improving cash flow and returns over time. From an organic perspective, I see this as our biggest lever to drive value.

We are working at pace and already implementing concrete corrective actions to accelerate our growth in Specialty Polymers and raising the bar on commercial and operational excellence with an emphasis on driving growth. For example, identifying the root causes of the issues in Electronics and quickly acting to fix them, scaling win rooms with a renewed and systemic focus on identifying and converting new growth opportunities, leveraging AI, as well as driving faster returns on innovation spend, focused on how we add value to our customers. Over the coming quarters, I expect to share more concrete proof points on these initiatives, and it's essential that we turn actions into results.

Beyond driving growth in Specialty Polymers, my shorter-term priorities center on 4 areas: first, driving higher levels of commercial and operational excellence across the organization. As I mentioned, many initiatives are already underway. In parallel, I see opportunities to simplify. And we must keep driving out inefficiencies and better leverage our technology investments.

Second, embracing a high-performance culture. We will strengthen the culture of accountability, agility and customer obsession. That means ensuring we have senior leaders with the right skills and capabilities, setting clear expectations, aligning incentives and empowering our teams to make decisions closer to the customer.

Third, smartly deploying capital. 2025 was a peak year for capital investment. We will now focus on driving higher returns from our existing capacity with selective debottlenecking and targeted capacity additions, particularly in Composite Materials and Technology Solutions. We will also continue to prioritize investments in research and innovation. That remains the fuel for sustainable differentiation and staying ahead of our competition, but it also must generate the growth and returns we expect. And from a broader capital allocation perspective, we benefit from having the flexibility to fund organic growth, pursue value-creating M&A, as well as rewarding shareholders.

Fourth, continuing to optimize our portfolio. We must ensure that every part of our specialty portfolio has sustainable differentiation, leadership and a clear pathway to structural growth outperformance. Where we can achieve or maintain leading positions, we will consider strategic options. My approach will be thorough and objective with a clear perspective on how each advances our strategy, strengthens our financial positions and performance and creates value. Earlier this year, we completed the divestment of Oil and Gas, exiting a business that did not fit our pure-play specialty strategy and freeing up resources to invest where we can create more value.

Across all of these 4 areas, if we conclude that incremental tweaks are not enough, we are prepared to take bolder structural decisions. Over the course of the year, I plan to progressively share an updated strategic and financial framework with a clear set of targets. That does not mean we will slow down our ongoing actions such as delivering on our cost-saving targets or our plans to divest the Aroma business. Where we see clear opportunities to improve performance or to create value, we are already moving and we will continue to move decisively.

In closing, I have tremendous confidence in our potential. We have world-class technologies and deep application expertise, leading positions with our customers, incredibly talented people grounded in innovation, and exposure to some of the most attractive long-term growth markets such as aerospace, electronics, clean mobility, health care and mining. I look forward to providing quarterly updates on our progress, and once we complete the work, the targets that will underpin our longer-term trajectory and value-creation framework.

With that, let me turn it over to Chris to walk you through the financials in more detail.

Thank you, Mike. Good morning and good afternoon to everyone on the call. It's fair to say that in 2025, specialty chemicals markets were defined by weak but stabilizing demand, a focus on cost actions and an ongoing overcapacity in parts of the value chain. Destocking largely ran its course with year-on-year volume declines and no broad-based snapback in volumes. This is reflected in our fourth quarter performance on Slide 10.

The numbers presented in the presentation today are based on pro forma figures, including the contribution of Oil and Gas, which is reported as discontinued operations in the year-end financial statements. The pro forma figures allow us to compare Syensqo's performance in terms of net sales, gross profit and underlying EBITDA consistently with the guidance provided in the previous quarter, which also included Oil and Gas. For comparison purposes, a similar table is provided in the appendix to the slides to show the reported numbers with Oil and Gas treated as discontinued operations.

For the fourth quarter, net sales totaled EUR 1.4 billion. Volumes were down 5% year-on-year, primarily due to the lower demand in Specialty Polymers and Novecare. This was partially offset by stronger year-on-year volume growth in Composite Materials. I will talk more about the sales drivers of each business segment in a later slide.

As we have previously mentioned, we remain committed to defending our gross margins, as this reflects how we manage both our sales and cost of goods sold. In this respect, our gross margin at 31% for the full year continues to reflect our specialty value proposition. Finally, we delivered an EBITDA of EUR 238 million for the fourth quarter of the year. Taking into account the profit attributable to Syensqo shareholders for the 12 months ended 31 December 2025 of EUR 381 million, this results in underlying earnings per share of EUR 3.72.

Turning to operating performance by segment on Slide 11. Within Specialty Polymers, sales reduced by 18% compared to the prior year. Excluding the translation effect of FX, Specialty Polymers revenue was down 13%, primarily due to the lower volumes in Electronics, which was weaker than previously expected, and lower volumes in Healthcare. Despite this, we saw volume growth in environment and energy, industrial and other chemical end markets in our Specialty Polymers segment.

Revenue from Composite Materials increased 3% to EUR 302 million compared to the prior year. And excluding foreign exchange translation effects, organic revenue growth was 11% in the quarter. Our fourth quarter sales for Composite Materials reached an all-time record in U.S. dollars, driven primarily by higher build rates at Boeing compared to the prior year. With Boeing destocking now behind us and continued growth across other civil aviation programs, we delivered strong growth in civil aerospace, up 18%, reflecting strong underlying demand and a diverse customer base within Composite Materials. Sales to space and defense applications also improved in the quarter, further supporting the robust performance of the business. Looking back at the fourth quarter, the net result in our Materials segment is an EBITDA of EUR 196 million and an EBITDA margin of 24%.

Novecare delivered sales of EUR 301 million and Technology Solutions sales were EUR 159 million. Within Novecare, home and personal care volumes increased 6% year-on-year, driven by increased demand from key customers. This was offset by weaker demand primarily from coatings as high interest and mortgage rates persist, weighing on consumer confidence, and in agro following the strong growth we delivered in the fourth quarter of 2024.

Turning to Technology Solutions. The fourth quarter results reflect the temporary closure of a large copper mine. Looking ahead, we expect this mine to reopen in the second half of 2026. Despite this headwind, Technology Solutions continues to post the second highest EBITDA margin in Syensqo's overall business. The net result is that Performance & Care delivered an EBITDA of EUR 74 million in the quarter and an EBITDA margin of 16%. Within the Other Solutions segment, EBITDA was EUR 5 million in the quarter with an EBITDA margin of 3%.

The net effect of what I've just described is reflected on Slide 12. In Specialty Polymers, weak volumes, combined with lower customer demand as many actively managed their supply chains to preserve cash, also weighed on the fourth quarter EBITDA. Additionally, a slowdown in production in our plants in the fourth quarter to manage inventory levels and cash further contributed to the softer EBITDA in the fourth quarter. This was partially offset by fixed cost savings as a result of us anticipating softer demand in certain end markets.

Specialty Polymers remains our highest-margin business. However, the year-over-year volume decline in Electronics was the primary driver of our lower EBITDA in the 12 months. Approximately half of the decline in Electronics is attributable to weaker volumes in semiconductors, and the other half is attributable to a previously announced design change at a customer. Excluding the impact of Electronics, the full year volumes in Specialty Polymers in 2025 was flat compared to 2024.

The fourth quarter EBITDA in Composite Materials improved year-on-year, driven by higher volumes, stronger pricing and gains in operational efficiencies. Overall, the Materials segment reported a EUR 54 million decline in EBITDA on an organic basis compared to the fourth quarter of 2024. In Performance & Care, EBITDA declined by EUR 14 million in the fourth quarter of 2025, primarily due to lower volumes in Novecare, which was partially offset by slightly higher pricing in the home and personal care segment. Additionally, as I've already mentioned, the temporary closure of a customer mine in Indonesia led to lower volumes in Technology Solutions in the quarter. Other Solutions was down EUR 5 million compared to the prior year period. Finally, the Corporate segment saw EUR 23 million year-on-year lower costs, reflective of our ongoing cost savings initiatives. The net result is EBITDA of EUR 238 million for the quarter. This brings the full year EBITDA to EUR 1.21 billion, slightly below our previous outlook. As we have previously mentioned, the single largest reason for the decline in full year performance relates to the lower volumes in Electronics and Specialty Polymers. Self-help measures, including fixed cost and procurement savings, as well as lower incentive costs, have partially offset the volume headwinds. The impact of FX includes an adverse variance of EUR 31 million compared to the prior 12 months associated with a stronger euro against our basket of currencies, including the U.S. dollar. This impact is purely translational for Syensqo.

Turning to capital expenditure. Our total capital expenditure for the quarter was EUR 135 million, bringing the capital expenditure for the full year to EUR 563 million, comfortably in line with our expectations of less than EUR 600 million for the year. Included within the EUR 135 million is growth capital expenditure of EUR 49 million, including spend related to the Specialty Polymers facility expansion in Tavaux, France, expansion of Tecnoflon production capacity and investments in Galden capacity for electronic customer applications.

As we enter 2026, we will leverage our existing spare capacities that we have today to meet future volume growth. This requires no significant additional capital expenditure. And we will only invest in smaller and faster organic growth opportunities where the market exists and where we are at capacity. In 2026, our expectation is that capital expenditure will be less than EUR 500 million, which includes the capitalized spend on our SAP implementation of approximately EUR 50 million. We will carefully manage capital expenditure and cash to balance our shorter-term targets with longer-term value creation.

Moving to operating cash flows on Slide 14. The generation of strong operating cash flows remains a key focus for the business. In the final quarter of the year, operating cash flow was stronger than we expected at EUR 252 million as a result of improved working capital management, in particular, debtors and inventory. This brings the last 12 months' cash flow from operating activities to EUR 779 million and a cash conversion of 76%. The key drivers for the strong cash flow include the previously disclosed receipt of EUR 92 million from Edison in the third quarter, as well as an improvement in trade working capital in the last quarter of the year, following the slowdown of production to reduce inventory levels, combined with a strict discipline on cash collection. Free cash flow to shareholders for the quarter was a positive EUR 136 million, bringing the full year free cash flow to shareholders to EUR 356 million, 10% above our guidance at the end of the third quarter. As we go into 2026, we expect net operating cash flows of approximately EUR 700 million.

Turning to our financial position on Slide 15. I am pleased to report that we continue to have a strong balance sheet with our net debt at EUR 2 billion, a gearing ratio of 25% and a leverage ratio of 1.7x. We continue to have strong levels of liquidity available, as demonstrated by the EUR 1.5 billion of undrawn committed bank facilities and a further EUR 900 million of cash on hand as at 31 December 2025. In 2026, I expect net financing costs of approximately EUR 130 million. Importantly, following the signing of a sale and purchase agreement for our Oil and Gas business in the third quarter of 2025, I am pleased to report the transaction completed, and we received cash proceeds of EUR 136 million in early January, resulting in a further improvement in net debt in 2026.

Turning to shareholder returns on Slide 16. I am pleased to report that we have declared a dividend of EUR 1.62 per share, which is in line with 2024. Taking into account the share buyback activity completed in 2025, in which we purchased 1.7 million shares for a total value of EUR 116 million, this brings the total cash returned to shareholders in 2025 to EUR 281 million, an increase of 22% over the 2024 financial year. All shares acquired in terms of the share buyback program will be canceled, thereby reducing the issued share capital of the company.

With that, I will now hand you back to Mike. Thank you.

Thank you, Chris. Before I get into the details of our 2026 outlook, I want to share some thoughts on my guidance philosophy and how I'm thinking about the year. In order to live by the values that we are setting around transparency, operational excellence and high performance, my focus is unlocking growth, particularly in Specialty Polymers, driving cash flow and increasing returns.

Turning to our outlook for 2026. I would describe it as grounded on the realities that we see. Overall, we expect 2026 to see a return to volume growth, led by Composite Materials and specifically civil aerospace. While we also continue to see strong underlying growth in space and defense applications, our growth in 2026 is expected to be approximately flat compared to a record year in 2025, driven by the timing and maturity of programs.

For Specialty Polymers, we expect to see a mixed year with volume growth in some end markets such as automotive and energy and with flattish growth in other end markets. Specifically, within Electronics, we expect sales to slightly decline in 2026 with a gradual recovery in year-on-year sales to the semiconductor end market, balanced towards the second half of the year. For consumer electronics, which experienced a design change at a major customer in 2025, we expect to see an additional headwind in 2026, given lower sales and unfavorable product mix at the same customer. Separately and in line with our strategy to phase out the use of fluorinated surfactants across our product lines, we have stopped production of 2 products to the industrial market. Together, these headwinds are expected to have an approximately EUR 30 million of impact year-on-year in underlying EBITDA.

For Novecare, we expect low-single-digit volume growth driven by agro and home and personal care, partially offset by modestly lower pricing. For Technology Solutions, we expect low-to-mid single-digit volume growth in mining solutions, including the impact of the temporary closure of a customer mine in Indonesia, which is expected to be a year-on-year headwind in the first half of 2026.

From a gross margin perspective, we expect to see a broadly stable development in 2026 across our 4 core businesses, including selective pricing concessions, most notably in the automotive sector within Specialty Polymers.

Turning to costs. We remain on track to deliver on the gross savings announced at the end of 2024. For 2026, we expect the cost savings to essentially offset inflationary pressures on fixed costs, as well as our variable cost base. In addition, we need to drive more growth and further differentiation out of our research and innovation spend.

Putting all this together, we expect to deliver underlying EBITDA of approximately EUR 1.1 billion. On a constant currency and scope basis, that is excluding the divested Oil and Gas business, this compares to approximately EUR 1.14 billion in 2025. This assumes a euro-to-dollar rate of $1.20.

Turning to cash flow, where our outlook is now anchored on operating cash flow and the overall expected change to net debt. Given the moving pieces related to the separation and ERP costs, neither of which are captured in our free cash flow definition, we have elected to focus on operating cash flow, which includes these items, and to continue to report separately and provide an outlook for CapEx. Along with Chris, I think this provides a more comprehensive perspective on our cash flow performance and how that ultimately ties to the level of cash we will report at the end of the year. For 2026, we expect operating cash flow of approximately EUR 700 million. On CapEx, and as mentioned earlier, we see 2025 as a peak year for capital investment. Consequently, and as Chris mentioned, we now expect CapEx of less than EUR 500 million in 2026, or more than EUR 50 million lower year-on-year.

From a seasonality perspective, we expect our first quarter EBITDA to be approximately the same level as the fourth quarter of 2025, reflecting a slow start to the year across a number of our end markets, the continuation of slower trends in Electronics, as well as lower sales in Composite Materials, following a record fourth quarter.

Before we take your questions, I want to remind you of my mandate: to accelerate value creation. Based on the pillars I have described, transparency, execution excellence, being an innovative powerhouse and smartly deploying capital, we will move with the urgency to implement the actions that will define our next chapter, restore growth and fully realize our potential.

With that, we are happy to take your questions. Thank you.

[Operator Instructions] Your first question comes from the line of Laurent of BNP.

Mike, you mentioned that your, I guess, primary focus is going to be unlocking growth in Specialty Polymers. I think it's fair to say we've only seen declines for the last 10 quarters or so for a number of reasons. And I'm just wondering what makes you think that, I guess, growth is to be unlocked? It looks like -- you could argue that you've been losing maybe share. Maybe there's commoditization. So I'm just wondering how you look at this business now? And in particular, do you see a trade-off between margins, which used to be above 30%, maybe now closer to 25%, and top line growth?

Laurent, thank you very much for your question. What I have found is that the fundamentals for Specialty Polymers remain very strong. We have strong innovation capabilities. We have very good end market exposures with strong market secular trends, and we have best-in-class application expertise. This is also reflected in the high and relatively stable contribution margin that we've seen over the last several years.

Another metric that I'm watching to support this view pertains to our innovation and a key performance indicator that we use to measure the percent of new product sales within our portfolio. And this metric has gone from 19% in 2023 to 23% in 2025. And we expect that number to go up again in 2026, and I'm challenging the business to target 30% going forward. This is how we're going to continue to differentiate this business, high-quality innovation-driven growth.

That said, over the last couple of years, the demand environment has clearly been challenging with slower growth in a number of our end markets. We also had nearly EUR 100 million impact from a phaseout of fluorosurfactant-based products as we switch our portfolio toward non-fluoro-based surfactants. And we've seen the declines in Electronics that have been very well noted. And just as a reminder, for Specialty Polymers, if you exclude Electronics, volumes were approximately flat in 2025, and we expect to see modest growth volumes in 2026, which again is assuming no real substantial volume recovery in Electronics. But my top priority is on the actions that we're going to take to accelerate the growth in Specialty Polymers and continue to fuel our innovation to deepen and widen our moat. That's the key in this business.

But do you think that, that growth needs to come at a lower margin? Or do you think that with innovation, you can target to go back to where you were?

I think with innovation, we'll continue to try to expand our value proposition to extend our -- like I said, the moat versus competition. With our products, we value-sell our products. And they're bringing differentiation to the marketplace, lower total cost of ownership. We will remain competitive. And in some of our segments, where we needed to execute against surgical price reductions to either maintain or grow our share, we've demonstrated our ability to do that. But again, overall, our margins have been very sticky, and we continue to advance our value proposition by selling these higher-value products.

Okay. And if I may squeeze in one, you mentioned culture. I was wondering what you are actually changing, and if you can share anything with us in terms of maybe changes that we've seen at the management level below the Board and also in terms of incentives. We were under the impression that there was already alignment on incentives, KPIs, cash flow, et cetera. That's certainly, I think, what we have been hearing a lot about over the last 2.5 years.

Yes. We're looking at our KPIs. We're a growth company. We want to incentivize on sales growth. We want to drive margins and gross margins and EBIT margins. And we want to drive our return on capital employed. So we are looking at our KPIs and how we're incentivizing the team and if there's different ways that we need to do that to drive some more focused growth that we're looking for.

As far as culture is concerned, it's critically important for me. I've been 30 years with this company, Syensqo, Solvay and Cytec, so the legacy. I drive a strong performance culture. And I want an aligned team. I want to have a strategy where it's very clear and articulated and everybody knows what the priorities are of the company. And so, again, from a culture standpoint, I want to empower the organization. I want to make decisions close to our customers, and I want to drive a strong performance culture.

Your next question comes from the line of Geoff Haire of UBS.

Mike, I've got 2 questions. First of all, I just -- I look back at the Capital Markets Day presentation from 2023 that was given prior to the spin, and the main difference between the priorities at that point and the priorities now seem to be around commercial and operational excellence. I wonder if you could share with us exactly what you're going to do in this area and how far you can push this? And I suppose the question is, what has been done in the 2 years up to now to improve that since the spin?

And then the second question I had was that in the start of your presentation, you mentioned about how we have seen a change in the industry. How much of that do you think is structural? And how much do you think of that is cyclical? Because obviously, if it's cyclical, you can argue you don't want to change the business too much, whereas if it's structural, we'd have to see some significant change, which is sort of what you've alluded to through the presentation.

Thanks very much. I appreciate the question. On the commercial and operational excellence, since we launched this company, it's been a very difficult market environment, the geopolitics, tariffs, inflation, consumer sentiment, consumer demand, a lot of headwinds. So we've made adjustments, and we've made those very well known. As far as commercial and operational excellence, I think that we're looking at leveraging tools like artificial intelligence. We launched what was called Star Factory, which is kind of to bring our plants up to state-of-the-art over time with a balanced approach on where we're investing and where we're driving improvements in our plant operations. So a lot of these initiatives have been started and were accelerated due to the market environment.

And as far as commercial excellence, we launched last year, and we're really pushing it this year and developing more focused new business development teams around what we call win rooms. So looking at what are the -- what's that opportunity pipe? How do we expand the opportunity pipe? How do we make sure that we're moving things through the opportunity pipe with pace? How do we increase our success rate with respect to those opportunities? And then, how do we scale those opportunities once we see them? So to me, this is a muscle that we continue to develop as an organization, and we're leveraging AI to help us with all of that.

As far as the changes in the industry, was that with respect to any particular end market that you were referring to?

I think at the start of your presentation, you mentioned about how we're seeing significant change in the chemical industry, which we're all very aware of. I just wondered whether or not, in your opinion -- as you look to sort of remodel Syensqo for that change, whether or not you see that as being mainly a structural change or a more cyclical change. With a cyclical, you may see some recovery. From a structural, obviously, it's more challenging.

Okay. Now I got your question. Thank you very much. I would describe it as a combination of several things. Destocking across a number of our end markets, along with the typical seasonal trends. We saw a slower recovery in semiconductors, which for me is -- in our business, in particular, it's a question of timing rather than anything that's structural. Lower sales in consumer electronics, given the sales and unfavorable mix, that lasting impact will depend on our ability to win new business with that particular customer. We took actions that prioritize cash flow over EBITDA in Q4, given some of the overall softer markets that we saw. So for me, it tends to be more cyclical than structural, but we have to make adaptations to how we address these situations. We got to make sure that we're very agile and nimble, and that's what we're doing.

Your next question comes from Sebastian Bray of Berenberg.

Can I ask you to cast some light on the pricing development in Specialty Polymers and Electronics? Because it looks like the price cuts accelerated sequentially in Q4 versus Q3. And is this a one-off development? Or is it potentially something which is going to be deep-seated in order to improve capacity utilization? Are there any particular product groups, be it fluoropolymers, PEEK or others that are affected by this trend? And can you give a bit of color if we're basically seeing similar trends now in automotive to what we did in electronics, i.e. pricing as well?

And a technical question. Can you remind me if there are any other differences in the new definition of adjusted EBITDA aside from removing the Oil and Gas business, i.e., no reallocation of corporate costs to excluded business and so on, the guidance is simply referring to underlying EBITDA excluding Oil and Gas?

Yes. So let me start with pricing, and Chris, maybe I'll turn it over to you for the EBITDA. We have been selectively given back pricing in auto. That's been since 2023. That's not a new phenomenon. But no pricing reductions in Specialty Polymers in 2025. They were lower than what we had given back in price in 2024 and 2023. So -- and again, they remain focused really on the transportation segment, especially in the PVDF battery, and that's to maintain our market share and drive volume growth. We expect this trend to continue with a modest price giveback in 2026. Chris?

Sorry. Sebastian, thanks for your question. In many respects, I think you answered it yourself. What we've shown on Page 3 of the press release is the 2025 underlying EBITDA, which was $1.18 million, and that excludes the impact of the Oil and Gas business. So hence, the scope effect from discontinued operations is really EUR 23 million of EBITDA. As we go into 2026, Oil and Gas is not included in our outlook.

And additionally, we've assumed an FX rate of $1.2 to the U.S. dollar. Now, the average rate in 2025 of FX was $1.13. So this gives us an adverse impact on translation of the higher FX rate of approximately EUR 40 million in 2026. And that's where Mike pointed out in his presentation, a comparable of about $1.14 for 2025.

Your next question comes from the line of James Hooper of Bernstein.

James, if you're asking a question, we cannot hear you.

Can you hear me now?

Yes, we can. Yes, we can hear you, James.

Sorry about that. Okay. So Mike, first question for you. In your intro about Specialty Polymers, you talked about, number one, identifying the root causes of what's been causing the recent lack of growth. Can you give us some details about how far you are along with that process, what you see the causes are? And then any details you can start to give about the solutions that will form the concrete kind of proof points that you were mentioning?

And then, secondly, can you go through a little bit about some of the dynamics that we haven't quite covered? We covered Electronics, but kind of in Specialty Polymers, I mean, particularly the kind of health care market, I think it would be interesting to see what's happening there, and the energy side of things as well, please.

Okay. Thanks, James. What improvements can we make in Specialty Polymers? I mentioned before, scaling the win rooms to improve the momentum. We really started driving this in 2025 and pushing that for momentum in 2026, again, leveraging AI. That's something that we have to do, and we continue to push that across with the teams. Innovation, as I mentioned, this is one of the most key differentials that we have. You look at the applications that we're in, the quality that's needed, the regulatory expertise that's needed, the decades of knowledge and data that we apply to bring a customer solution, that's formidable. And this is where we have to draw the most on, so really making sure that we're investing appropriately in R&I and driving that innovation and converting that to real value and doing that as quickly as we possibly can, so bringing a lot more rigor to that process. And then obviously, there needs to be some self-help measures, reducing our cost structure, maintaining our competitiveness, while also maintaining our gross margin.

So that's how I kind of look at Specialty Polymers. But overall, we're going to expect modestly higher volumes in 2026, which we'll be focusing very carefully on. And we didn't assume any recovery as we sit here today in Electronics. And over the coming quarters, I expect to be with you with more concrete proof points on how these initiatives are turning into real value. But again, innovation and driving that commercial excellence and then some of those self-help activities, we need to continue and drive with greater pace.

As far as the health care and energy sector, we see great opportunities there with our technology. We have some differentiated technology. We're selling into membranes for hemodialysis and with respect to health care. And as health care systems improve across the world, we'll be able to take advantage of those opportunities. And then, in the energy sector, we have quite a few materials that are going to on and offshore risers, and we see some very positive developments happening there.

Your next question comes from the line of Chetan Udeshi of JPMorgan.

I have 3. First is -- and apologies if this is a bit more critical question, Chris. Given the magnitude of shortfall in your guidance versus consensus, and I guess, you will also appreciate, versus some of the targets that were given previously, the guidance for 2026 is well below. I'm just curious, there is the concern that market would have, is there a bit of a mode of denial within Syensqo that maybe nothing has changed in industry, it's all destocking, Electronics one-off. How should we get confidence that there is no sense of denial in the sense like you're not acting on what might be more structural changes under the guise of more destocking? And this is not Syensqo specific. This is, to some extent, relevant for the entire sector, but I guess, given the magnitude of the miss that we have today versus the consensus, probably more pertinent to Syensqo in a way.

The second question I had was just looking at your outlook for Q1, you are saying close to Q4. I'm assuming that Q4 is including the Oil and Gas contribution, so let's say, around EUR 230 million. So to get to your EUR 1.1 billion for the year, you still need that step-up through the year. And I'm -- I guess, the concern would be why this may not be the repeat of '25, where we exactly started the same way that you had lower Q1 and there was a baked in recovery, which never came through. So what will be different this year?

And last question, sorry, which is just on CapEx. It's good to see some reduction again this year. But if my math is correct, you are still implying close to 8% CapEx to sales for 2026. I mean, what evidence should investors expect? And what should we see in terms of confidence that this higher CapEx will create value rather than dilute returns? Because you've spent a lot of growth CapEx in the last 4 years, but the earnings have only gone down. So why the CapEx to sales is still so high?

Thanks, Chetan. As always, you give us some really direct questions that we appreciate. Listen, just looking back at 2025, I mean, I will remind you that through the course of the year, the first indication of the lower earnings was really driven by FX and tariffs and largely something out of our control. And then, when we went into Q3, and as we've ended the year, it's really been a sort of story about the slower volumes in Electronics. As to the missing of guidance, I don't particularly believe 2% miss is a fairly hefty miss. But what we have seen is, we continue to be impacted by delayed semiconductor-related projects. And you can see it in the announcement by a number of our customers and a number of the key fab investors where there's subdued demand in key areas. And we continue to see fewer active projects. That said, the project pipeline remains healthy. Additionally, a number of our customers are still holding inventories of our materials, which is expected to be utilized during the course of the first half of the year. So we remain bullish on semicon and the impact that it will have on Electronics going forward. So to your point, this is not a structural issue. This is probably more of a seasonal issue.

If I can go to the next one on CapEx, and I might have to ask you to repeat your second question. CapEx, I think we're coming in at about EUR 500 million that we indicated. Now, the 8% CapEx to sales ratio you mentioned is impacted by the lower sales levels in 2026. In absolute terms, CapEx has declined by more than EUR 100 million in 2025 versus 2024. We reacted quickly in the market when we saw that the demand environment was very different to what we predicted at the time of the Capital Markets Day. And then, going into 2026, we've once again lowered our CapEx. So we are adapting to the circumstances. Now, of the large capital expenditure we've incurred over the last couple of years, we've been very clear that, that's about Tavaux. I firmly believe that will be a good plant in the future. Automotive, particularly around hybrids and around electric vehicles, continues to grow. It's just a question of timing.

Now, one other point is, of the total capital expenditure, approximately half relates to sustenance and One Planet spend to maintain our license to operate. And this is really reflective of our operational footprint of the business. A further approximately 30% relates to IT and lease obligations. Now, leases are a function of the accounting rules, and IT includes our current infrastructure and the implementation of a new single SAP system as our current system isn't supported beyond 2028. And then, the balance is growth capital expenditure.

And we continue to see growth in Composite Materials. We see a gradual recovery in Electronics and Specialty Polymers in general. And then, we expect to return to global better demand levels. And we've got the capacity in place to service that in some areas. So as and when the market returns, the operating leverage on this business is significant. And we believe this is the right level of capital investments at the moment.

Your second question related -- just remind me, around outlook and the step-up through the year?

Yes. Just on guidance, when you guide Q1 same as Q4, firstly, whether you are including Oil and Gas in that Q4? So is it EUR 236 million or EUR 220 million, whatever that number is, as a base? And then, I think, there is an implied step-up through the year. And I'm just curious if -- what will drive that step-up? And could this be just a repeat of last year where we start with the hope and then it never comes through?

I mean, Chetan, I think it's unfair to say to start with the hope. We've been one of the consistent players. And you'll remember, 2024, when we came out with our guidance, we were probably one of the lowest. And in fact, we were right at that point in time. That said, let me just bridge the Q4 to Q1 for you, and then I'll talk about the rest of the year. Now, we've guided for an underlying EBITDA in quarter 1 that will be approximately at the same level as Q4 2025. And that's based on a slow start that we see to the year already across a number of our end markets. It's also based on lower quarter-on-quarter volumes in Electronics, and that's mainly due to the lower sales in the Consumer segment. And also, we had a very, very strong quarter 4 in Composite Materials. So we're expecting slightly lower volumes in the first quarter of 2025 as Boeing had already started its restocking in the quarter 4. So overall, it's not the worst outcome.

Now, what we are expecting in the second half of the year is an increase in Electronics spend because we do know the customers particularly sitting with the inventory levels, and we know our inventory levels. And then, we expect, to a certain extent, a higher EBITDA in Novecare from higher volumes in both agro and home and personal care. So it is grounded on what we can see in our business. But what we won't do is give you an outlook that's unrealistic, but rather adapt it as we come through the course of the year if the circumstances change.

[Technical Issues]

That was a very garbled introduction. It's Tom Wrigglesworth from Morgan Stanley. So just following on really maybe kind of trying to clarify, the sense that I'm interpreting is -- or I think we're struggling with is that there's a very substantial profit drop for the volume and price drop in the fourth quarter, specifically in Specialty Polymers where noting that Composites has actually done very well in the fourth quarter, just to your recent point. And so, can you help clarify this? Because optically or at least at a superficial level, it sounds like you've got 1 or 2 substantial customers in Electronics, both in semiconductor and consumer, who represent a disproportionate amount of your profit. And whatever they do has a huge influence on your group-level of profitability, which is not what I -- previously I understood about the business.

And secondly, is there a kind of -- and/or is this echoing that ultimately, you pushed price very, very hard as a strategy and very successfully, right, in the kind of post-COVID period, and that is ultimately now echoing in customers thrifting out volumes, to Chetan's point about what's destocking versus what's not volumes? Because it's just surprising how weak both the fourth quarter and the guide is.

Last question, somewhat separately, for that 1Q guide, similar to the level of 4Q, can you just identify what are the one-timers that you've baked into that versus what would be, in your mind, the kind of -- given some of the outages that you've called out and/or timing issues, just so we can get a better understanding of what the underlying rate is that you're giving in the 1Q '26 number?

Chris, maybe I'll take the first one and talk about the drop in Q4. What we're seeing is and what we're hearing from our customers and we're visiting them, we're not losing market share. What we're seeing is that, yes, we do have a concentrated customer base with respect to our semis, where we are the leader. And again, when we visit our customers, when we hear from them, where we're tracking our inventory with them, they are working down inventory. And there has been a slowdown in fab construction, which is where our sales are. That also compounded with the lower sales at the consumer Electronics application that we talked about. And you combine that also with our focus on cash. So we continue to drive inventory down to slow our plants to make sure that our production is in line with demand. So I think that it really was a combination of factors which were impacting our Q4 performance.

And on the second question, Chris?

Yes. As far as our pricing is concerned, we value-price our products. We work with our customers. We have long relationships, and we value-price our products. We spend a lot of money on research and innovation and in our application and technical support, and they see that come back to them in terms of the products that we're commercializing with them and what we develop. We did push price hard in 2022, and we have given up some of that in 2023 and '24 to be responsive to the market. But again, we value-base price. We're helping our customers win in the marketplace, and they could see that value come back through with the innovation that we're developing. And I talked a little bit about that new innovation that we're developing and driving that. So, that drives differentiation and helps them win in their market space.

Sorry. Just to your question about the Q1 and are there any one-timers, there is no one-timers. We believe that's a true underlying result, and it's a clean result as we go forward.

I believe we have no further questions. So, that ends our session for today. I just want to thank everyone for your participation and your questions. And as usual, the Investor Relations team will be here to answer any remaining questions, and wish everyone a great day. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by, and welcome to Syensqo Third Quarter 2025 Earnings Call. My name is Rochelle, and I will be your conference operator today. [Operator Instructions]

I would now like to turn the call over to Sherief Bakr, Head of Investor Relations. Please go ahead.

Thank you, Rochelle. Hello, everyone, and welcome to Syensqo's Third Quarter 2025 Earnings Call. I'm Sherief Bakr, Head of Investor Relations, and I'm joined today in Brussels by our CEO, Dr. Ilham Kadri; and our CFO, Christopher Davis. Similar to last quarter, we will periodically feature one of our business unit presidents on these calls, providing greater insights into their businesses. So I am also especially pleased to be joined by Mike Radossich, President of the Performance & Care segment and our CEO elect.

As a reminder, today's call is being recorded and will be accessible for replay on the Investor Relations section of our website later today at www.syensqo.com/investors. I would also like to remind you that during this call, we'll be making forward-looking statements regarding our future business and financial performance that are subject to risks and uncertainties. The slides related to this presentation, along with today's press release are also available to download from our website.

Turning to today's agenda. Ilham will begin with an overview of the quarter with Mike covering the performance of Novecare and Technology Solutions. Chris will then go into more details on our financials before turning the call back to Ilham, who will discuss our outlook for the balance of the year. We'll then be happy to take your questions.

So with that, I'll turn the call over to Ilham.

Thank you, Sherief. Good afternoon and good morning to everyone. The third quarter of the year saw us deliver a resilient margin and strong free cash flow performance in a challenging and uncertain market environment, thanks to our specialty positioning, unique value proposition and ongoing focus on what we can control. In addition, our strong balance sheet continues to be a differentiator as we navigate the shorter-term elements that are out of our control. Indeed, as we approach my final quarter as a CEO, I am proud of the progress we have made over the past 2 years to advance our strategy, and I have no doubt that the action we have taken to build and strengthen Syensqo's foundation will support future profitable growth and value creation.

And in times like this, it has been more important that we are accelerating change, becoming leaner, becoming more agile, sharpening our value proposition with existing customers, finding incremental growth opportunities with new customers and becoming a pure-play specialty company that will outgrow our markets for years to come.

Now as you can see on Slide 5, we have continued to advance our strategy, demonstrating continued leadership in key areas. This has included launching new and differentiated innovation to support our customers, bringing more sustainable and high-performance solutions across our portfolio, which was also recognized by our customers.

Recognition also came in the form of achieving the prestigious leadership level with an A- rating by CDP in their 2024 assessment, a rating achieved by only around the top 5% of companies worldwide. To receive this recognition is a tremendous achievement and positions us as a sustainability leader in our sector.

Another first Syensqo and a source of great pride for the team was to win the Global Supplier Award from Bosch, a key customer in the automotive sector. And building on the comments shared on last quarter's call by Peter Browning, the President of Specialty Polymers, we have expanded our proprietary non-fluorosurfactant sealing technologies, another market first, where we are bringing unmatched performance, targeting opportunities in semiconductor production and very demanding industrial applications. This should further extend our leadership position and support longer-term profitable growth.

Speaking of growth, I was thrilled to open our first AI lab in Morocco, partnering with one of the leading universities in Africa and in Europe, Middle East, Africa, focused on building next-generation agentic AI technologies for chemistry and material science. And as I've just mentioned, we are accelerating how we will become a pure-play specialty company. Of course, this started almost 2 years ago with the birth of Syensqo, and another important strategic milestone was achieved last week with the announced agreement to divest the oil and gas business to SNF.

With an enterprise value of EUR 135 million, this represents approximately 7x EBITDA multiple, which is actually a similar multiple with where Syensqo trades today, and allows us to focus on our high-margin specialty businesses, as we see this as both advancing our strategy and unlocking value. We are targeting to close the transaction by the first quarter of 2026, subject to customary closing conditions and consultations. And once completed, we will be higher margin, simpler and pure-play specialty company.

Now turning to the highlights for quarter 3. Chris will take you through the details in his remarks, but we had another quarter of resilient margin performance in our core segments despite the previously flagged headwinds impacting year-on-year volume growth in the Materials segment as well as weaker overall demand environment than we expected 3 months ago. On an overall company basis, our primary challenge in 2025 has been the volume performance of Specialty Polymers, our highest margin business, and the headwinds from specific customer dynamics in electronics that we called out at the start of the year.

In the 9 months to the end of September, these had an approximately 600 basis point impact on year-on-year volume growth in Specialty Polymers, with the remaining 80% of Specialty Polymers delivering approximately 2% year-on-year growth. Despite this, we have continued to deliver resilient margins reflecting strong execution of our strategy and the specialty nature of our portfolio.

Looking at the third quarter performance, net sales of EUR 1.52 billion reflected a modest 1% decline in volumes and pricing. EBITDA of EUR 326 million translated to 40 basis points of sequential margin expansion. And excluding the noncore Other Solutions segment, our EBITDA margin was above 23%, approximately 200 basis points higher than our overall margin level achieved in quarter 3.

Sticking with initiatives that are within our control, I'm also pleased with the progress we have made as we complete our separation from Solvay. Overall, we are ahead of schedule with only a few remaining agreements to exit, and we remain fully on track to meet our year-end targets, which will allow us to drive for additional levels of simplification and cost savings.

And we have continued to reward shareholders by buying our own shares, and we are almost 60% of the way through our EUR 300 million program. The highlight of the quarter was our strong free cash flow performance reflecting our ongoing focus on cash generation in a weaker demand environment.

Before now turning the call over to Chris, I wanted to make some high-level comments on our segment's performance in the quarter. And I'm happy to be joined today by Mark Radossich, the President of Performance & Care and our CEO elect, to share some insights on Novecare and Technology Solutions as well as answer questions when we get to the Q&A session.

Now Slide 8. Syensqo's mix of revenue and earnings reflects our position as one of the leading pure-play specialty materials companies. In quarter 3, more than 70% of our EBITDA was generated by our high-margin Materials segment. Composite Materials saw another quarter of strong underlying demand and solid margin performance despite the continued impact of destocking at Boeing. Indeed, while overall civil aerospace net sales were approximately flat year-on-year, we saw high single-digit growth excluding this.

Composite Materials exposure to a mix of civil aviation customers, space and defense applications and a number of new programs demonstrate the strong value proposition of our range of products as well as a healthy mix of growth drivers. In addition, with higher defense spending announced by several countries around the globe, this is expected to support strong growth in Composite Materials in 2026 and beyond.

Turning to Specialty Polymers, where volumes declined by 2%. However, excluding electronics, Specialty Polymers delivered 4% year-on-year volume growth, driven by double-digit growth in automotive and healthcare. And at Materials segment level, we saw 130 basis points sequential margin expansion, reaching approximately 31%.

I will now turn the floor over to Mike to take you through the Performance & Care. Mike?

Thank you, Ilham, and good morning and good afternoon, everyone. It's my pleasure to have the opportunity to share some insights with you on the Performance & Care business and our quarter 3 performance. But before I do that, I also want to express how honored and humbled I am to take on the role as the next CEO of Syensqo at the start of next year. Having spent more than 3 decades with this company and its predecessors, I know firsthand the strength of our people, our innovation power and our portfolio.

My initial priority is to build on the foundation Ilham and our teams have created with the aim of accelerating growth and delivering sustainable value for our customers, employees and shareholders. And as eager as I am to fully engage with the financial community, my responsibility for the rest of the year will remain focused on the Novecare and Technology Solutions businesses, while I finalize my handover with Ilham, which is well underway.

As a reminder, Performance & Care consists of the Novecare and Technology Solutions business units. And as the segment name reflects, our value proposition, which is about delivering solutions that enhance performance, boost efficiency and optimize resource utilization in applications across all our markets that we serve, while prioritizing sustainable innovation through the introduction of natural, renewable and biodegradable solutions. We have a broad but highly specialized portfolio that serves a wide range of attractive end markets, and you'll find our solutions at the heart of iconic consumer brands and products used every day.

Novecare's business of surface chemistry solutions and deep formulation and applications expertise is dedicated to innovations for natural and sustainable solutions, with leadership positions spanning the home and personal care, coatings and agricultural end markets. While the Technology Solutions business is the global leader in specialty mining reagents and technical service to maximize performance in metal extraction and mineral processing for copper, alumina and battery metals.

In addition and complementing Syensqo's Materials segment, Performance & Care has the characteristics to deliver short and midterm growth with low capital intensity, serve a diverse range of attractive end markets, where customers value high performance, such as in coatings and mining, benefit from rapid product development cycles driven by innovation and sustainability trends and leverage our advanced labs, deep formulation and application expertise as well as our close customer collaborations across the globe.

Since the separation, our customers have appreciated our greater focus and execution. This is also supported by innovation, bolt-on M&A, such as our JinYoung Bio acquisition as well as several joint innovation partnerships that leveraged our combined capabilities to better serve our customers with higher performing and more differentiated solutions.

Turning back to our Q3 performance starting with Novecare, where despite a challenging market environment and uncertain demand, we continue to see volume growth in agro and home and personal care supported by market share gains. Over the course of 2025, we have seen particularly strong volume growth in agro as demand has returned to more normalized levels after an extended period of destocking, most notably in EMEA and Latin America with a more wait-and-see approach for customers in North America given ongoing tariff uncertainty.

In the home and personal care segment, we have continued to outperform the overall market in a highly competitive environment. We have also seen the impact of trading down by some consumers toward more private label brands as well as the impact of higher input costs, most notably oleochemicals, which has driven margin pressure over the past few quarters.

And in the coatings and industrial applications, the broader market has been impacted by weaker construction activity throughout 2025, particularly affecting our business in North America. Despite these challenging conditions, I'm pleased how the Novecare teams have managed to selectively flex our pricing to capture incremental volumes while continuing to deliver solid margins.

Turning to Technology Solutions which had a strong quarter, delivering 10% year-on-year net sales growth driven by higher volumes in mining solutions, supported by market share gains and new mine wins. A large portion of our mining reagents are used in copper separation, and the underlying demand for this critical metal is expected to remain robust over the medium term. We also benefited from higher sales of phosphorus specialties for diverse high-value applications, which helped to support our strong overall margin performance in the quarter. At a segment level, Performance & Care margin of more than 18% remains healthy, although lower year-on-year, following a very strong quarter in Q3 of 2024.

With that, I'll turn the floor over to Chris, and I look forward to answering any questions you may have in the Q&A session.

Thank you, Mike. Good morning and good afternoon to everyone on the call. It's fair to say that the third quarter of 2025 in the specialty chemicals sector has continued to be defined by macroeconomic and foreign exchange headwinds, weak industrial demand as well as cost inflation pressures, which has led to changing and less predictable order patterns, impacting visibility across the broader value chain. This is reflected in our third quarter performance.

With that in mind, let us turn to Slide 10, which summarizes our third quarter financial results. Overall, we delivered another quarter of resilient performance. For the third quarter, net sales totaled EUR 1.5 billion. Volumes were down 1% year-on-year primarily due to the lower demand in Specialty Polymers and to a lesser extent in Novecare. This was largely offset by strong year-on-year volume growth in Technology Solutions. I will talk more about the sales drivers of each business segment in a later slide.

As we have previously mentioned, we remain committed to defending our gross margins as this reflects our value proposition as a specialty chemicals company and how we manage both our sales and cost of goods sold. In this respect, our gross margin at 32% continues to reflect our specialty value proposition. On a sequential basis, gross margin was stable as higher gross margin in Specialty Polymers was offset by unfavorable mix in Novecare.

Over the past 7 quarters, since the inception of Syensqo, we have continued to demonstrate our ability to defend pricing and maintain cost discipline over the period, particularly in the Materials segment, regardless of the impact of volumes. Finally, we delivered an EBITDA of EUR 326 million for the third quarter of the year.

Turning to operating performance by segment on Slide 11. Within Specialty Polymers, sales revenue reduced by 9% compared to the prior year. Excluding the translation effect of FX, Specialty Polymers revenue was down 6% primarily due to the expected lower volumes in electronics. Within automotive and battery applications, we saw double-digit volume growth, driven by innovation in peak and cell phones, partially offset by a planned and selective price decreases to customers to sustain competitiveness. Additionally, and as Ilham has referenced, we also saw double-digit volume growth in health care, industrial and other chemical segments in our Specialty Polymers business.

Revenue from Composite Materials at EUR 277 million showed a decrease of 5% compared to the prior year. Excluding the translation effect of FX, Composite Materials revenue improved in the quarter. It is important to note that the third quarter of 2025 is the fourth highest sales quarter in U.S. dollars on record since 2019. Despite the expected impact of lower sales to Boeing, increased sales to other commercial aviation programs resulted in flat sales to civil aviation programs compared to the prior year quarter. This reflects the strong underlying demand and diverse customer base within Composite Materials. Sales to space and defense applications improved in the quarter.

Going forward, we expect further improvements in Composite Materials, driven by the completion of the destocking effect at Boeing and the full year effect of improved pricing in 2026. Whilst the destocking effect in 2025 is a short-term impact, we remain bullish on the sector with Boeing announcing an increase in production rates for its 737 MAX aircraft to 42 planes per month. The improvement in the overall civil aviation supply chain alongside the expected increase in defense spending are expected to deliver significant incremental revenues over the medium term and as build rates get to maturity. Looking back at the third quarter, the net result in our Materials segment is an EBITDA of EUR 267 million and a strong EBITDA margin of 31%.

Novecare delivered sales of EUR 327 million and Technology Solutions sales were EUR 169 million. Within Novecare, agro and home and personal care volumes increased 7% and 5% year-on-year, respectively. This was offset by weaker demand from building activity. This has impacted Novecare's coatings business throughout 2025, resulting in an unfavorable product mix, given the relatively higher margin we generate in coatings compared to agro and home and personal care.

Technology Solutions continues to benefit from customer wins and higher demand from existing customers in copper mining as well as improved performances from phosphorus applications and polymer additives. EBITDA margins in Technology Solutions are the second highest in Syensqo's overall business and continue to be strong, benefiting from an improved mix of sales to mining customers. The net result is that Performance & Care delivered an EBITDA of EUR 90 million in the quarter and an EBITDA margin of 18%. Within the Other Solutions segment, EBITDA was EUR 9 million in the quarter with an EBITDA margin of 6%.

The net effect of what I've just described is reflected on Slide 12. As mentioned on the previous slide, stronger volumes were experienced in a number of sectors, including health care, battery applications, home and personal care and mining applications compared to the prior year. That said, the lower volumes in electronics continues to be the single largest driver at a Syensqo group level of the year-on-year decline in EBITDA.

Absent the lower volumes in electronics, Specialty Polymers volumes improved by almost 4% year-on-year, reflecting the shorter-term headwinds in fab construction activity. Whilst we did experience a sequential growth in both volumes and sales in electronics, the recovery is turning out to be slower than we had originally anticipated, impacting the second half performance in Specialty Polymers. Ilham will cover this when she will discuss our updated outlook for the year.

Stripping out the effect of foreign exchange translation, Composite Materials EBITDA improved against the prior period, driven by an improvement in overall operational efficiencies and pricing. Within Materials, cost savings, particularly in Specialty Polymers, resulted in a reduction in fixed costs in the quarter. The net result is a decline in EBITDA of EUR 26 million in the Materials segment compared to the third quarter of 2024.

In Performance & Care, increased volumes in Technology Solutions were offset by lower volumes and higher labor and input costs in Novecare, most notably earlier chemicals where prices have increased due to weaker harvests in Southeast Asia. In addition, Novecare experienced an unfavorable product mix, given the weaker-than-expected coating sales. This resulted in a year-on-year EBITDA decline of EUR 27 million in the third quarter of 2025. Other solutions improved by EUR 3 million compared to the prior period.

Finally, the corporate segment saw lower year-on-year costs, benefiting from ongoing cost savings initiatives. The net result is EBITDA of EUR 326 million for the quarter, which includes an adverse variance of EUR 12 million year-on-year associated with a stronger euro against our basket of currencies, including the U.S. dollar. This impact is purely translational for Syensqo. As we enter the final quarter of the year, we have commenced a temporary slowdown in production to address weaker demand in certain markets and to carry out maintenance activities, providing us with a stronger starting point for 2026.

Turning to capital expenditure. Our total capital expenditure for the quarter was EUR 140 million, bringing the capital expenditure for the 9 months year-to-date to EUR 420 million. This remains in line with our expectations and in line with our capital expenditure envelope of less than EUR 600 million for the year. Included within the EUR 140 million is growth capital expenditure of EUR 58 million, including spend related to the Specialty Polymers facility in Tavaux, France, expansion of Tecnoflon production capacity, investments in Galden capacity for electronic customer applications and capacity expansion in adhesives for aviation applications.

As a reminder, 2025 is expected to be a peak year of capital investments, driven by significant spend on the Tavaux site and modernization of our IT infrastructure. Our focus going forward is, therefore, on leveraging our existing spare capacities that we have today to meet future volume growth. This requires no additional capital expenditure.

Secondly, investing in smaller and faster organic growth opportunities where the market exists and where we are at capacity, thereby accelerating our strategy. This includes increased investments in adhesives capacity and Composite Materials, debottlenecking our Welland plant in Canada to increase capacity for mining customers and an increase in capacity to service semiconductor demand. And finally, our focus will be on maintaining our investment-grade credit rating and rewarding shareholders in line with sustainable cash generation.

As we enter 2026, we have performed a zero-based design of our capital allocation. Given the limited visibility in the current environment, we will remain disciplined and agile, carefully managing capital expenditure and cash to balance our shorter-term targets with longer-term value creation.

Moving to operating cash flows on Slide 14. The generation of strong operating cash flows remains a key focus for the business. As we previously communicated and in line with our expectations, the third quarter delivered strong cash flow generation, with operating cash flow of EUR 331 million, bringing the last 12 months cash flow from operating activities to EUR 872 million and a cash conversion of 76%.

The key drivers for the strong cash flow include the previously disclosed receipt of EUR 92 million from Edison SpA following the recent dismissal by the Italian Supreme Court of Edison's appeal consistent with our free cash flow expectations from the start of the year. This more than offset cash outflows related to taxation, the use of provisions and costs incurred to complete the separation from Solvay. Free cash flow to shareholders for the quarter was a positive EUR 250 million.

As previously mentioned, 2025 remains a year of transition from a cash perspective. With the separation from Solvay in late 2023, separation costs have been incurred in 2025 so that Syensqo can operate as an independent company. As we head into 2026, these cash outflows will improve significantly with reduced spend on separation activities and the finalization of growth capital being spent on the Tavaux site. Together, these account for approximately EUR 200 million of cash outflow in 2025 that will not repeat in 2026 and beyond.

Turning to our financial position. I am pleased to report that we continue to have a strong balance sheet with our net debt at EUR 2.1 billion, a gearing ratio of 25% and a leverage ratio of 1.6x. We continue to have strong levels of liquidity available as demonstrated by the EUR 1.7 billion of undrawn committed bank facilities and a further EUR 1.4 billion of cash on hand as at the 30th of September 2025. Importantly, the signing of the sale and purchase agreement for our oil and gas business for EUR 135 million will close in early 2026, resulting in further cash proceeds and an improvement in net debt.

With that, I'll now hand you back to Ilham. Thank you.

Thank you, Chris. So now looking into the fourth quarter, there remains a lot of uncertainty in the world. From ongoing trade and tariff dynamics to the temporary closure of a larger copper mine in Indonesia as well as potential supply chain disruption in automotive, the near-term environment remains challenging across global value chains, coupled with shorter order cycles and limited overall visibility. In addition, we have seen a further strengthening of the euro versus major currencies since our quarter 2 call. So given all of this, we remain focused on what we can control.

First, costs by accelerating our restructuring savings and completing our social dialogues; second, exiting the last 2% of the TSAs we still have enhanced and unleashing the benefits of our new IT/GBS systems; next is scaling gen AI to generate further productivity gains, organizational efficiency and open new growth opportunities; obviously, continuing to transform the portfolio towards becoming a fully independent pure-play specialty company; and continuing to nurture the hunting mindset to drive new sources of incremental growth, which I know Mike will take forward as one of his priorities.

Now turning to our outlook for the balance of the year. At a high level, our updated EBITDA and free cash flow outlook is broadly aligned with current consensus expectations. Going into more details, the approximately EUR 50 million change in outlook is driven by 3 things: more than 50% is driven by a slower than previously expected recovery in electronics volumes in both quarter 3 and quarter 4 as customers manage near-term inventories with the uplift now largely pushed out into 2026.

Approximately 25% is due to less favorable foreign exchange movements with the balance driven by a combination of the extended destocking at Boeing as well as the expected impact of a temporary closure of a large copper mine in Indonesia following a tragic incident. And on behalf of Syensqo, I would like to share our deepest condolences to those impacted.

Mitigating the result in lower volume outlook we are accelerating our cost savings initiatives and continue to target more than EUR 200 million of run rate savings by the end of 2026. Now from a free cash flow conversion perspective, the implied target for the year is unchanged. Putting this all together, we now see our full year outlook as follows: underlying EBITDA of approximately EUR 1.25 billion, CapEx to be below EUR 600 million and free cash flow of approximately EUR 325 million.

Now before we take your questions, and as this is my last earnings call as a CEO of this company, I want to reflect on our journey and share a few personal thoughts about what we've built and what lies ahead. Nearly 2 years ago, we launched Syensqo, following almost 5 transformative years since I began as the CEO of Solvay. Throughout this period, we have navigated extraordinary complexity and global uncertainty, consistently emerging stronger and more resilient each time reinforcing our ability to deliver sustainable value well beyond the numbers.

So our strategy has been and is now clear. Syensqo's stands as a focused specialty leader with the financial strength, the flexibility and disciplined approach to capital allocation necessary to seize future opportunities. These foundations laid through hard choices and bold ambition ensure we are well positioned for long-term value creation.

As we move to a new chapter for Syensqo, I have every confidence that Mike will bring the dynamism and unwavering commitment to performance as our new next CEO, and I look forward to supporting the transition. I'm also deeply grateful to our investors for your enduring trust, to the analyst community for your rigor questions and engagement; even between you and me, some of your challenging questions and reports gets us on our toes; so our customers, partners and above all, the Syensqo team, our dear explorers, thank you.

Thank you from the bottom of my heart for your commitment and passion, which have made this journey possible. Together, we have created more than a new company. We have set a new standard for innovation, for resilience and for value creation in our sector. Serving Syensqo has truly been the honor of my career. And above all, I'm confident the best is yet to come.

With that, we are ready for your questions. Back to you, Sherief.

Thank you, Ilham. We'll now move to the Q&A session. Rochelle, can we please have our first question.

Your first question comes from Sebastian Bray with Berenberg.

I would have 2, please. The first is on the, if I think about business structure, since the split, it looks as if the Performance & Care business has come under a bit of pressure. Is there still any rationale for keeping it together in Materials?

My second question is on the divestment of oil and gas to SNF. The SNF already has quite high market share in oil and gas chemicals. How long do you think it's going to take to get regulatory approval and what makes you confident the regulator is going to say yes?

Great question. Thank you, Sebastian. I'll take them. Well, listen, on the Novecare and Tech Sol, I mean, obviously, this is a specialty business at the power of two splits. You may remember Sebastian, we agreed what goes to new Solvay what comes to Syensqo, and we were pretty clinical agnostic, just looking at the specialty nature of the business.

The P&C complements the Material in a way. It's a specialty businesses, both our specialties, Materials and Performance & Care with strong value proposition. They have different innovation cycles and obviously, level of capital intensity, which we like, by the way, P&C being low in capital intensity, Material, higher. So it's provided a nice balance and they have this complementarity as well in market exposure, right? The mining and home and personal care, agro versus more automotive and aviation and mobility in general.

But that said, Sebastian, I think we have demonstrated that there are no taboos. I mean, in the 7 years I've been in the job we divested, you remember the polyamide, the amphoteric with Mike, by the way, who's sitting in front of me, right? He did a great job with Novecare businesses, all the commodities. We even did a spinoff from Solvay and we left the commodities behind.

And we have a very analytical rather than emotional view about our portfolio as whether we are the right owners or not and how we can unlock and create value for our shareholders. So being with us, Mike will be on the road, and you know you will hear the word also from him. I think this company is about unleashing the potential of the specialty Syensqo more than anything else.

On your SNF question on oil and gas, I cannot comment on the specific approvals we are doing, but we are confident, Sebastian to have a closing in quarter 1 2026. And in assessing the preferred buyer of the asset, we considered, among other things, the likelihood for deal completion and regulatory hurdles. So that was part of my assessment and our assessment. So given that antitrust filing will only be made in few minor jurisdictions, we do not expect issues that would result in a delay to the completion of the deal as we speak. Sherief?

We'll take our next question.

Your next question comes from the line of Thomas Wrigglesworth with Morgan Stanley.

Two questions, if I may. The first is you called out double-digit growth in auto in the quarter, if I think I've understood that correctly. But what we've seen in the broader global auto picture, this year has been a demand pull forward. I think global auto is expected to be up 2.5% production growth, but then it's expected to dip in the first half of 2026. So is that the right picture that we should be thinking for your business? How do you see the auto outlook so that over the next 6 months or whatever visibility you have?

Second question, if I may, is on Technology Solutions. As I understand it, that business has been constrained on volumes, you've debottlenecked it. Could you give us some sense of if you could -- from that debottlenecking, if you were to fully load business, what the incremental sales is from potential? I know it would take time to fill, but give us some understanding of the potential that, that debottlenecking allows for the high-margin business.

Thank you very much, Thomas. I will take the automotive and then Mike, you take the next one on Tech Sol. Listen, Thomas, you're right. I mean, S&P, you've seen the light vehicle build went from 3.5% in the beginning of the year to 4.4% last quarter and now its decline. We know that in the first half of next year, it will be a decline year-on-year. But as you've seen, automotive volumes in Specialty Polymers increased by around 10% in the quarter, ahead of the global light vehicle production, which was around 4% according to S&P.

At the same time, obviously, there are volumes which can travel from one quarter or another. There are variations between the external and internal data points. Given differences, this can be by region, by customer exposure, this can be due to inventory levels across the value chain. So not going into specific guidance by end markets, we don't do that, but we clearly expect a weaker quarter 4 in automotive compared to quarter 3, also driven by the typical industry seasonality and when we know from S&P, and that was baked in our guidance.

Now beyond that, and allow us to come back to you in 2026, we remain cautious on near-term trends in auto are not helped by potential supply chain disruption that had been in the news over the past week and some of the comments from OEMs we have received. And as we have stated throughout the year, customers are also adopting their demand weakness and uncertainty, which has reduced in a way to reduce our visibility.

So it's difficult to talk about trends now by first half of next year. And I want to be cautious, prudent, respectful of Mike coming in. He's busy with the budget with the team. And by the end of February, we'll come to you with our guidance for next year. But definitely, we see what you say, Thomas, about auto, yes, I'm very proud about us outperforming our markets and our peers.

Mike, on Tech Sol?

Sure. Thank you, Ilham. The 10% growth that you referenced, Thomas, is largely driven by the improved volumes that we saw in the quarter. Pricing had largely no impact for the quarter. And just to be clear, the incremental debottlenecking of the capacity at the Welland, Canada plant, it's expected to increase capacity over the course of 2026 in a phased approach as we complete elements of the project, and that's well aligned with market demand. And as you said, these are high-value products and technologies, and we want to make sure that we can supply.

Next question comes from Katie Richards with Barclays.

One question from me. Thank you to you, Ilham. I just wanted to ask a question on how you see the trends into Q4. You've just referenced potentially weaker automotive. I'd also be interested for some comments on electronics. And you've also referenced a potential impact from a landslide at an Indonesian copper mine. Specifically, do you expect the incident to affect your Q4 numbers? And when would you expect it to reopen if you feel the impact is significant?

As we have Mike with us, Mike can you comment on the mining?

Katie, as far as the mine, it is a large mining customer with operations in Indonesia, and they had an unfortunate landslide impacting its people and its operations. And I'd like to share our deepest condolences to those that were impacted. It is also expected that the mine will not have full recovery of operations until late 2026. So our focus for now will be on supporting both our customer and our people at the operation as they deal with this unfortunate incident. It is a large mine site, and it will have a small impact on our Technology Solutions business Q3 and throughout 2026.

Chris, do you want to talk about the trends?

So let me just talk about Q4. I mean, typically, Katie, as you would have seen in our business, and this is actually quite a strong trend. Q4, we generally see customer destocking, which historically results in a sequential decline in the fourth quarter compared to the preceding third quarter. Our current outlook is a decline of approximately 15%, yet, historically, that range has been up to 25% against Q3. Now like any quarter, we have a balanced view to our outlook, and we're going to strive to achieve the targets we have set and focusing really on what we can control, such as managing our costs and managing our cash.

Then, do want to add on?

No. I mean, Chris, you said it. I mean the auto still is soft, we address it with Thomas' question and Katie, the electronics demand is pushed to 2026, and this is consistent with the outlook.

Next question comes from Chetan Udeshi with JPMorgan.

My first question was on your Specialty Polymers business, and it's good to see some volume growth after a prolonged period of declines in the last 2 years, but again that volume growth is excluding electronics. So I guess to just be blunt here, it seems polymers, there's always some or the other reason why we never see an inflection in this business.

I'm just curious how much of this is just a reflection of the fact that, like we see across the sector the competitive environment is structurally far worse than used to be maybe even 2 years back? And at what point do you think we actually start to see this business returning to proper volume and earnings growth? Can 2026 be that year or you still don't feel confident enough to call that inflection in this business? Because eventually, this is a key business within Syensqo that everybody cares most about.

The second question was just following your oil and gas divestments. Any thoughts on what we should expect on Aroma? Is that something that you expect to still be announced before end of this year? And how are the dynamics in that business now given that you've secured antidumping tariffs at, I think it was in the middle of the year, both in the U.S. and Europe?

Thank you, Chetan. I know you told me to accelerate. I hope you are happy with the oil and gas divestiture done. Well, listen, let me start with the Specialty Polymer one. Obviously, I think we discussed the electronics. I think -- I mean, indeed, it didn't happen the way we were expecting it. But anyway, I think the resilience and meeting Street's expectation shows that we rebalance things.

Your question actually is more structural, right? I think, indeed, the biggest challenge at Syensqo level, and I mentioned it, I mean, Mike knows it, has been the volume, not the pricing, not our contribution margin. I hope guys that by now, we've been -- and I've been with the team proving that our net pricing stickiness and all of this is behind us.

Even now Composite Material, I'm very proud of them. They reopened the contracts, and we are now exercising new pricing as we renew our contracts and the contribution margin are really good. And we follow closely the volumes, and we are able to see volumes, margin by product, customer and end markets. What I can tell you, Chetan, is that what we see, we are not losing market share with our customers, that's clear.

The second derivative is whether our customers are winning or losing market share. It's not only about us. And what I told the team is, it's time for me to give them feedback as a gift, is about, let's look if we are with the winners and the losers out there, right, around the globe, and look at what's happening even more for our customers, which is not as straightforward to measure accurately in the real time.

So from the data we have, our contribution margin in Specialty Polymers have remained extremely resilient. Our volume performance, excluding the headwinds we talked about in electronics, have demonstrated growth. I'm not going to comment in 2026. It's a fair question, but give us time with courtesy and respect to Mike, who is also engaging into budget exercise as we speak.

I truly believe, as I told you since 7 years and even in the past 2 years, focusing on Syensqo's portfolio, we have a unique portfolio. We have an end market exposure no one else has and customer relationship and our innovation track record with the vitality index of more than 20% with products less than 5 years old. Best-in-class vitality index score and position us to outperform over the mid, long term.

So this is coupled, and the last point before I address your Aroma question, we have existing capacities. The leverage is huge when the volumes are back. So the existing capacities we have will support the volume growth when it returns and should support our margin and improvement of the returns. I'd remind you to look at probably 2023 was a peak of performance and our returns at that time. So when the volumes are back, we'll be at the rendezvous.

Chris, do you want to take maybe the Aroma one?

Yes, just on the status of the divestment of Aroma, we are really committed to advancing the strategy to become a pure-play specialty company. And you can see it in the divestment of the oil and gas assets. As we've previously stated, Aroma continues to be an attractive asset to the right buyer, and it certainly will thrive under the right ownership. Now as the divestment process is actively progressing, we will provide an update at the right time. And as you know, similar to what we did on oil and gas, we will ensure we try and get the right multiple for this business. So in oil and gas, we've got 7x, and we'll take it as we need.

Mike, do you want to add anything to Aroma?

Yes, I think I also had a comment about the antidumping measures. Pleased to finally see that the antidumping measures have taken hold, as you mentioned. It's about 131% in Europe and 232% additional duties in the United States. And really, it's leveling the playing field for our business. So we should see improvement in the Aroma business going forward. It will take a little bit of time to become visible in our numbers given the level of inventory that customers have purchased ahead of the rulings. The benefit should come though through 2026 with the potential to be a very meaningful driver in our future profitability.

Our final question comes from the line of Tristan Lamotte of Deutsche Bank.

First one is, I'm just wondering if there are areas of the portfolio where you've seen an acceleration of competition from imports since Liberation Day? And if so, where in the portfolio is that?

Tristan, thank you for the question. Well, I mean, obviously, the U.S. tariffs on Europe and the dumping of Asian and Chinese products into the EU has been a bit of chaotic moment in my 30-year career and 11 years as a CEO. Well, the good news for Syensqo is that, as I told you, 40% of our revenues are generated in Americas with 50% of our assets are in the U.S. and 35% of our revenues are in Asia.

So the smallest region is where we are sitting here in the headquarter in Europe. At the end of the day, I really like these demographics, right? We were very agile in the tariffs, right, I mean, when the tariffs came in, and we had a real risk management exercise across the company from the supply perspective from suppliers, but as where we produce.

We start onshoring activities, for example, compounding in China, extremely quickly which was good for us, getting even closer with the customer without any risk on our IP, et cetera. We started looking where we can move the flow of goods from the U.S. to Europe because you have the 15% to 0, as you know, unless you have exempt.

Where we had issues like the Aroma, Mike just talked about it and gave you the number, they were a bit slow to come in Europe in terms of tariffs and antidumping measures, but we are good and this is a level playing field we want and now we are reopening our line in Saint-Fons. So yes, I mean, the companies today who will try are the companies who are going to manage with agility, their value chain, right, their supply chain, both from the supplier and the manufacturing and build resilience and flexibility.

But frankly, we cannot do it alone. Even if we have the, what I would call, ideal footprint around the world, you need to do it with the customers because you need that demand, right? So you need to have a very close relationship with your customers. I can specify Bosch because we were recognized recently. It's almost an open book where we can be closer to them, where we can support them and it's a win-win.

So more and more supply chain will not only matter, it will be a differentiator in the competitor area. But so far, we are managing it very well. And actually, we are more suffering from the FX than the tariff as we speak, right? And hopefully, the EU competitiveness will help, but this is my hat as a CEFIC President will help the European players to build competitive and resilience and save the chemical industry. You've seen how it's hurting the commodities. But so far, Syensqo has been really doing well proud of the team.

Back to you, Sherief.

I don't know, Tristan, do you have any follow-up questions?

Yes. Maybe just one more. I was wondering if you could give a little bit of detail on the trends that you're seeing in your semiconductor business, and how you see that shaping up over the next few quarters, the demand, the inventories, et cetera?

Yes. I mean, that was a bit of our disappointment, the H2. But at the end of the day, we came back, beating expectation and doing exactly what we told you we're going to do. So that shows the resilience and the complementarity of our portfolio. Listen, it's about the inventory built in the system. As we speak, and frankly, I promised to the team before I step down, we are going to ensure we call every single customer and ensure we understand what they have, what they don't have, et cetera. So we believe it's a tailwind. We believe it's something which is going to stay very strong midterm sector, very strong one in electronic, in chips.

So despite the short-term volatility due to destocking and these macro headwinds, the demand for semiconductors are huge, right? The smart devices proliferation and the next generation of electronic architecture, the gen AI demand is huge. You heard about the news about whenever the chips are missing, it impacts all of us. So as the destocking unwinds, normalized inventory levels will be rich and are expected to return across the value chain setting the stage for a more constructive demand environment in 2026. So be patient, Mike and the team will come back to you in the February earnings with more clarity on that. Thanks for the question.

I will now turn the call back over to the company for the closing remarks.

Thank you, Rochelle. I believe we have no further questions. So that ends our session for today. Thank you for your participation and for your great questions. And as usual, the Investor Relations team is here to answer any remaining questions. So have a great day, everyone. Thank you.

Thank you. That concludes today's call. Thank you all for joining. You may now disconnect.