Azelis Group Aktie

Good day, and welcome to Azelis First half 2026 Earnings Presentation. Today, we have Anna Bertona, Group CEO, who will give an update on our operating progress year-to-date. Boris Cambon-Lalanne, Group CFO, will present the financial results, and then Anna will say a few words on the outlook.

After their presentations, we will open the call for Q&A. But until then, you will be on listen-only mode. As a reminder, this presentation may contain forward-looking statements that are subject to risks. We will make a recording of this call available on our website later today. I will now hand you over to Anna.

Thanks, Pam, and good day to everyone. Thank you for dialing in today. We realize it is a very busy day for corporate earnings and many of you are probably 1 report away from your summer holidays. So we will be sharp and efficient and start right away. As usual, I will kick off with the most important messages based on our performance in the first half of the year. And let me start by saying that we are proud to have delivered positive group organic revenue growth for the first time in more than a year. The 4% organic growth achieved in the second quarter reversed the decline in Q1, resulting in stable organic revenue for the first half of '26.

These results demonstrate our agility in capturing growth in a volatile environment, building on our strong reputation with our customers and principles. The stable margins achieved during the first half of the year are another accomplishment and a testament to our team's commitment to balancing the need of all our stakeholders. Delivering this outcome while navigating raw material volatility, mixed demand patterns and ongoing supply chain challenges requires both discipline and execution excellence.

This consistent and disciplined approach has translated into strong earnings growth with Q2 EBITA increasing by 12% versus prior year and 23% sequentially. We are pleased with this performance, which reflects both the quality of our business model and the dedication of our employees across the group.

Now let's have a look at the drivers of these results on the next slide. In the first half of the year, we generated revenue of EUR 2.2 billion, more than 3% higher than prior year in constant currency. These were driven by a 3% contribution from acquisitions, supported by stable organic revenue growth. We achieved adjusted EBITA of EUR 233 million and generated cash of EUR 122 million, even as we invested a bit more in working capital to support the growth in the business, especially in the second quarter.

And let me walk you now through the drivers of our organic revenue. Momentum varied across regions with APAC and Americas delivering strong performance, while EMEA remained challenging, also due to the tougher comps. The impact of broad-based price increases vary across end markets and across regions. As said, APAC growth substantially and remain the largest driver of our positive organic revenue performance, accelerating from 4% in Q1 to 13% in Q2. And while the region benefit from some prebuying in the beginning of the quarter, we believe that the strong performance was also the result of our team's commercial focus and strengthening of our position.

Second, the green shoots that we saw in Life Sciences in the Americas in Q1 are taking root, with continued recovery in Personal Care and sustained solid performance in Food. In EMEA, we are starting to see a recovery in CASE, both in terms of volume and price, supporting the Industrial Chemicals performance in that region. While we are building on this positive momentum, we still face challenges in some markets. In EMEA, demand in general remains soft, especially in Life Sciences, although the pressure is somewhat easing. We saw a smaller year-on-year organic rate of decline of 5% in Q2 compared to the 9% decline in Q1.

In the region, we continue to see competitive pressure in flavors and fragrance. And in addition, our agri business was impacted by the exceptionally dry weather. In U.S., we recorded weak volumes in CASE, only somewhat offset by positive pricing. And the weak volumes were partly due to supply constraints at some key principles during the period.

And lastly, the weak macroeconomic situation in Brazil and Mexico is reflected in overall weakness in our business there. In summary, we are continuously strengthening our position, building on the momentum in markets with positive dynamics and focusing on improving performance in more challenging markets. I will now hand you over to Boris to take you through our financial performance in more detail.

Thank you, Anna, and good morning, everyone. As Anna mentioned during the business update, Azelis delivered an improved performance in the first half '26, with a return to organic growth, while maintaining strong cost discipline. Let me make -- let me take you through the group P&L before we move to the regional performance. Please note that as I get you through the P&L and the regional performances over the next 2 slides, I will be referring to prior year of sequential comparisons in constant currency.

We clearly provide the impact of FX alongside organic and M&A in the headline growth table on Slide 10. In the first half year, Azelis delivered a revenue of EUR 2.2 billion, representing year-on-year growth of 3.2%. The growth was broad-based across both Life Sciences and Industrial Chemicals, with Life Sciences growing at 3.8% and Industrial Chemicals at 2.1%. Gross profit in the first half year was EUR 524 million, up 4.3% and corresponds to a margin of 24.2%. The 28-basis point margin improvement reflects positive pricing momentum across some end markets, supported by a favorable inventory position, partially offset by the negative mix effect from higher growth contribution from APAC.

Adjusted EBITA in the first half year was EUR 233 million, an increase of 2.6% versus the prior year, supporting a broadly stable adjusted EBITA margin of 10.7%. As I indicated during our Q1 earnings call back in April, the 2025 performance included some favorable one-off items such as the provisions for the variable remuneration that had to be adjusted, especially in Q2 last year, while the company faced adverse performance. The impact of the improving trends in 2026 is therefore reflected in the change in provisions versus prior year, as highlighted in the chart.

Normalized from these one-off items and the FX, the H1 2026 EBITDA growth will then be plus 12% versus same period last year. This performance was derived from organic gross profit growth as well as from the full benefit of the cost saving actions announced in April 2025, representing a plus EUR 11 million improvement and well aligned with the EUR 20 million planned run rate. M&A contributed another EUR 10 million versus H1 2025, and the conversion margin remained at a healthy 44.4%, showing a sequential improvement from 42.4% in Q1 '26.

Let's now move to the overview of the regional performance on the next slide. In EMEA, which accounts for 46% of the group, revenue in the first half year was EUR 990 million, representing a year-on-year growth of 1.7%, driven by a growth contribution from acquisition of 6.3%, offsetting organic decline of 4.6%. Gross profit was EUR 257 million, implying a gross profit margin of 25.9%. This 52-basis point gross margin expansion reflects the positive pricing environment offsetting continued volume softness. Adjusted EBITA of EUR 127 million resulted in an adjusted EBITA margin of 12.9% and a 31-basis point margin expansion during the period.

Turning to the Americas. First half revenue grew 2.3% to EUR 748 million. The region which accounts for 34% of group revenue delivered entirely organic growth led by a 3.4% increase in Life Sciences, while Industrial Chemicals grew 0.9%. Gross profit in the region increased by 3.9% to EUR 182 million, corresponding to a gross profit margin of 24.3%, which represents a 40-bps expansion. This reflects broadly positive pricing momentum in Industrial Chemicals in North America and improved performance in Latin America. Adjusted EBITA decreased by 1.1% to EUR 83 million, resulting in EBITA margin of 11.1%. This slight adjusted EBITA margin contraction was largely driven by a higher change in provisions, reflecting the improving business performance.

In Asia Pacific, which represents 20% of the group, revenue in the first half year increased by 8.2% compared to the prior year of -- to EUR 428 million, also entirely driven by organic growth. The organic revenue increased by 8.2% in Life Sciences and 8.0% increase in Industrial Chemicals versus prior year. Gross profit in the region increased by 7% to EUR 86 million, corresponding to a gross profit margin of 20%. The 24-bps contraction reflects the continued weakness in Australia and New Zealand, partially mitigated by volume growth as well as a positive pricing in most of end markets in the rest of the region.

Adjusted EBITA increased by 8.2% to EUR 43 million, with adjusted EBITA margin stable at 10.1%. The strong cost discipline resulted in a solid conversion margin of 50.4%. Overall, FX remained a significant headwind, particularly in Americas and APAC, with top line impacted respectively by negative 3.9% and negative 6.2% versus prior year on revenue. across the group, the FX headwind to gross profit down by negative 2.6% and EBITA by minus 3.4%.

I will leave you to review this slide at your convenience. We provide this table to give you the detailed growth breakdown of the key metrics between organic M&A and FX.

Let me now take you through the net profit on the next slide. In line with the EBITA development during the first half, operating profit was EUR 188 million. This compares to EUR 191 million in the prior year. But looking below the operating line, the net financial expense decreased by almost 6% year-on-year to EUR 66 million. This improvement was mainly driven by a significant reduction of interest expense and other financial costs despite the one-off refinancing costs linked to the bond refinancing executed in Q1 this year.

As a result, profit before tax increased slightly to EUR 122 million compared to EUR 121 million in the prior year. Tax expenses for the first half was EUR 36 million, corresponding to an effective tax rate of 29.4%, broadly stable compared with 29.3% in H1 2025 and improving versus the 35.3% at the end of the year 2025. Overall, despite the slightly lower operating profit, the lower financing costs enabled the group to deliver a slight increase in net profit to EUR 86 million.

And moving on to cash. As business returned to growth during the first half, the net working capital to revenue increased to 16% at the end of June compared to 14% at the end of March and also December, but similar level at the same time last year. Comparing with December 2025, DSO and DPO almost equally increased from 38 days to respectively, 51 and 50 days while DIO increased from 51 to 58 days. Inventory remains a strategic asset for Azelis enabling us to ensure high service levels for both our customers and principles, while maintaining a disciplined approach to inventory optimization.

In absolute terms, this translated to a change in net working capital of EUR 107 million, deducted from an adjusted EBITA -- EBITDA, sorry, of EUR 254 million, and together with EUR 20 million of lease payments and EUR 5 million of capital expenditure. The free cash flow stood at EUR 122 million for the first half. This corresponds to a free cash flow conversion ratio of 52.3% compared to 63.8% in the prior year, reflecting the temporary investment in working capital to support the return to organic growth, and we expect free cash flow conversion to improve as working capital normalizes over the course of the year.

Now before I hand it back to Anna, let's close on our net debt position. At the end of June 2026, the net debt remained broadly stable at EUR 1.6 billion, resulting in a stabilized leverage ratio of 3.4x and while EBITDA growth was more modest our disciplined capital allocation and continued cash generation enabled us to maintain stable leverage profile, and we continue to work at bringing down the leverage ratio by the end of the year. Overall, our resilient cash generation and ample liquidity provide us with the financial flexibility to invest in growth and support our long-term strategy.

And with that, I'll hand it back to Anna for the closing remarks.

Thanks, Boris. And as you can all appreciate, we are operating in an environment where volatility has become the norm rather than the exception. The geopolitical developments, trade dynamics, shifting customer sentiments continue to create uncertainty, making short-term trends difficult to predict. At the same time, this environment reinforces the importance of ensuring that our business is well positioned to perform throughout the cycle. Given the limited visibility on how the current geopolitical situation will evolve, we are assuming that current market conditions will broadly continue. And against this backdrop, we remain focused on executing our commercial and strategic priorities, capturing growth opportunities where they arise but also on maintaining our disciplined approach to cost, driving efficiencies through our digital tools and continuing to generate strong cash flow.

Based on our performance in the first half of the year and the momentum we have seen in the second quarter, our objective is to deliver positive EBITA growth for the full year, while continuing to strengthen the long-term foundations of our business. I will close the formal presentation with that and open the floor for Q&A. Operator, you can open the lines.

[Operator Instructions] Your first question comes from the line of Suhasini Varanasi from Goldman Sachs.

Just a couple for me, please. A very healthy improvement in the second quarter. I just wanted to check if you could give some color on 3Q trading, whether you've seen something similar to 2Q, maybe a little bit better or worse? Just some color there would be really helpful, please. And the second question is if we look at the gross margin, for 2Q. There was mentioned that it was supported by favorable inventory position.

So I just wanted to get a sense of how much could potentially unwind on gross margins in the third quarter as the inventories rebase to the slightly higher price points from the suppliers.

Thank you for your questions. For the Q3 trading, we see the order books continuing in a positive way. And that's why we are positive on the outlook. But with the caveat that yes, we are uncertain about what geopolitical situation might bring us. And that's why we said, if the things continue in the market as they do, then yes, we aim for a growth of our EBITDA by the end of the year. And that's based, of course, on the past performance, but also on the order book that we have currently in our hands.

On the margin, yes, of course, as you know, we benefited like it's normal in distribution from stock which is around 2 to 3 months, meaning we had that at a lower price. Prices went up. So we benefit from that. That benefit will ease out, we have, at the moment, no indications of large price increases or decreases from our principles to come. They have been passed through in the course of Q2, so in that respect, there is no change to be expected on the pricing side.

Your next question comes from the line of Stijn Demeester from ING.

Yes. I have 2. First, given your relative exposure to the Middle East in EMEA. Can you comment on the current condition and outlook for the region? And could you give maybe some indication on how EMEA performs relative to Continental Europe in terms of organic growth in Q2, if that's possible. And then secondly, your competitor made a remark on supplier mandate wins as a key driver for growth in Q2, while also seeing increased outsourcing trend at suppliers. Can you comment on the dynamic regarding those 2 topics for -- at your end?

Yes, of course. On EMEA, indeed, we have a larger exposure to that. It's normally, I would say, a very interesting region with nice growth potential. They -- in Q1, they had a more difficult start. But during the Q2, we saw their performance improving, and we see that this is continuing. So that's going to be helpful in -- if it continues indeed for the rest of the year, it's going to be helpful for the performance of EMEA.

Suppliers, yes, we have many strong relationships with our principles, and we always work on expanding our footprint with our strategic ones. And actually, yes, in any given year, our net wins are always more than our losses. And also this year, that's the case. We have some nice conversations ongoing. And I see no reason why this year should be different from any other year. The trend in outsourcing continues.

As you know, we talked already in the past that sometimes in adverse market circumstances, you see opposite, I would say, movements from principals, you see the ones that are restructuring their sales force and move more to distribution, then you see also the ones that for, I would say, a shorter period of time, take back some direct -- some accounts to serve directly, that normally doesn't last that long as these customers are used to a service level that they don't get from the principal. So overall, I would say these positive trends are there and continue.

Your next question comes from the line of Eric Wilmer from Kempen.

Actually, I also wanted to dig a little bit deeper on that topic regarding EMEA and the Middle East because despite the 100-basis points year-on-year and sequential gross margin improvement you are showing in the region, so in EMEA, I believe you reported the negative 1% organic sales growth for the same region. So as such, I was wondering if you could perhaps decompose this 1% number. I believe in EMEA, the Middle East and Africa represent about 15% of sales.

And you also highlighted softer Life Sciences performance in EMEA, which typically carries a higher gross margin. So to what extent is this negative 1% organic sales growth and better EMEA gross margins at kind of counterintuitive perhaps driven by soft performance in EMEA, which may carry a lower gross margin. I'm just trying to understand a bit better these 2 dynamics and indeed also in light of your peer that reported yesterday.

Yes. There's a couple of drivers behind the EMEA performance. First of all, let's not forget the comps are tough. And yes, I'm not -- I'm managing Azelis and not our peer. So I don't comment so much on their performance, but we have tough comps and there's, I would say, 2 other drivers that negatively impacted our EMEA performance. One is we have a large business in F&F and there's quite some price pressure at the moment there. And the other thing that is -- there's also a negative impact is our A&ES, our agro business. I know you're also sitting in Europe. So it's probably no surprise. We had an exceptionally dry weather.

And this dry weather is not favorable for our agro business. And agro business is, by the way, for us, also a high-margin business. So we feel that. I think these are the biggest, I would say, points that we can mention.

Your next question comes from the line of Luuk Van Beek from Degroof Petercam.

I have 2 questions. First of all, can you give a bit of a comment on the breakdown between volumes and price? I know that you cannot give an exact figure, but roughly the volume trend when you had to exclude the price impact? And secondly, you commented that the inventories are strategically high service levels. And obviously, customers are more and more relying on just in time. Do you expect them to remain structurally higher? Or do you see room for improvement from current levels?

Thanks for your question. Let me take the question on the price and volume. So first, there is no one answer across all the markets. It varies across the markets. I can highlight, for example, that pricing has been supportive, especially in Industrial Chemicals. Overall, in Q2, most of the growth Industrial Chemical was indeed price driven, and I would say Life Sciences was more mixed between volume and price.

When it goes to inventory, your question about inventory. Yes. I mean I think we highlighted that in Q1 already that we may have to increase inventory should the sale goes up. And also if customers started to do a pre-buy, we didn't see significant pre-buys as we expected. But definitely, we had to build up inventory to get ready for Q3 and Q4. Anna highlight that the order book was well oriented and that is just following this trend.

Your next question comes from the line of Anil Shenoy from Barclays.

Just the 2, please. The first one is on your cost structure. If you could talk a little bit about your cost, please. Because -- I'm asking because it's been a while since EBITA organic growth has outperformed gross profit organic growth. So I was just wondering, even going forward, can we expect EBITA growth to be higher than gross profit organic growth. In other words, do you see any increase in cost structure going forward? Or do you think it'll remains flat for the next 2 or 3 quarters? So that's my first question.

And the second question is on your guidance. First of all, thank you for giving guidance this time. it makes our lives easier. If you could just give us some comments on the segments for your guidance, like, I mean, when you say you expect EBITA to grow in 2026, is it more in Life Sciences? Or is it more in CASE? And also which regions do you see more growth?

Let me take these 2 questions. Thanks for your questions. Let me start with guidance. So we gave an indication of how we expect the year to end and that's already, I think, some improvement in clarity on our performance expected and I think we won't give any further details by segments. On the cost structure, sure, we are always managing our cost very delicately, I will say, and we have to manage also the investments required sometime when you see your top line picking up. And that's what is happening, as you saw in Q2. So while we have printed another quarter of savings in our announced plan back last year in April 2025, just as a reminder, in my slide, I highlighted in the bridge, I show you an EUR 11 million for the first half of structural savings, in line with the previous announced plan.

We are continuing to explore optimization in our cost structure. We're doing that in the back office, and we are doing that thanks to our IT structure and digital capabilities in our frontline to help our frontline, our commercial folks to be more effective in what they do with a clear mindset on optimizing the costs. So you asked a question whether our EBITA growth should be higher than gross profit. What I can tell you is all we do will have an impact, we still have to face inflation. We're trying to be better than inflation, but it's a constant focus that we have in Azelis.

[Operator Instructions] And your next question comes from the line of Philip Ngotho from Kepler Cheuvreux.

I have a few left. First of all, on the CapEx, so the CapEx on first half year was significantly down versus last year. Is this simply timing? Or what level of CapEx should we assume for the full year? And I also had a question on the financing cost. So after excluding the roughly EUR 10 million of refinancing costs and net excess fair value effects in H1. What's the run rate that we should be assuming for the second half of the year?

And finally, I was also wondering given working capital movements, has the utilization of non-recourse factoring changed versus last year?

I will take, again, the questions. CapEx down versus last year. It's really related to timing. We don't have a regular CapEx spend, so it really depends on the need. So don't expect to be that as a trend, it's just a phasing. Financing costs, indeed, in the first half, you see some reduction overall. As a reminder, the refinancing we did earlier this year saves us EUR 6.5 million of borrowing cost of coupons costs.

And that's what you should expect half of that, of course, in the second half in the P&L. Regarding factoring, we are usually very delicate in the use of factoring. It's a relatively inexpensive way to obtain liquidity when needed and also something that we mostly do in Europe. There is no fundamental change in the way we use that. And we will be keeping the rate of usage about 25% of our receivables, which is, if I'm not mistaken, broadly stable which is what we've been doing so far.

[Operator Instructions] There are no further questions -- apologies, your next question comes from the line of Anil Shenoy from Barclays.

Sorry, just a quick follow-up, please. Did you -- could you sort of give us some color on what kind of prebuying you've seen in Q2, I may have missed it, but did you use the word significant to mention the pre-buying in Q2? Or was it -- was it just -- I mean, was it meaningful? That's what I'm trying to ask.

No, it is very limited, actually, in -- we saw a bit in APAC, but for the rest, I would say, very, very limited.

There are no further questions on the conference line. We have come to the end of this call. I will now hand over to Chief Executive Officer, Anna Bertona, for her closing remarks.

Thanks. I would like to close the call in which we gave an update on our progress and some reassurance on why we remain confident in the medium- to long-term potential of our market. We hope to see you at our annual lab tour at the end of September. And there, we plan to provide more details on our longer-term plans and also on our digital developments.

Thank you for your continued interest in Azelis, and I also would like to thank our teams around the world for their dedication and commitment in delivering these results. We wish you a relaxing and enjoyable summer.

Good day, and thank you for joining us as we present our trading update for Q1 2026. As usual, we have Anna Bertona, Group CEO, who will give an update on our operating progress year-to-date. Boris Cambon-Lalanne, Group CFO, will present the financial results, and then Anna will say a few words on the outlook. After their presentations, we will open the call for Q&A. [Operator Instructions] As a reminder, this presentation may contain forward-looking statements that are subject to risks. We will make a recording of this call available on our website later today.

I will now hand you over to Anna.

Thanks, Pam, and good morning to everyone. Let me start with the most important messages regarding Q1 '26. First, we saw mixed trends across our regions during the quarter. Some end markets are stabilizing and others continue to be very challenging. In this quarter, we have seen some, but still limited prebuying from customers, but we expect this to change as the Middle East conflict continues. The relatively limited prebuying suggests that there are at least part of the stabilization that we have seen in some end markets and that has been demand driven.

I will go into more detail by region and end market in the next slide. Second, we generated broadly the same amount of cash despite lower EBITA during the period, translating into a 113% cash conversion. This performance is another demonstration of the asset-light, cash-generative nature of our business. And this is actually a good segue to my third point. The Middle East conflict has further increased volatility across our markets, highlighting the need to balance growth and take the right actions to protect our profits. And this is exactly what we are doing.

We are on track with the implementation of strategic programs, while at the same time, prioritizing cash generation and remaining disciplined on costs. This means managing our own costs as well as passing on the cost to customers as a result of price increases from principals and logistics. Now let's move on to the key highlights from the first quarter on the next slide. In this quarter, we generated a revenue of EUR 1 billion, which is broadly stable versus the prior year in constant currency. This was driven by the 3.9% organic revenue decline being offset by a 3.3% contribution from acquisitions.

We achieved an adjusted EBITA of EUR 104 million and a very strong cash conversion ratio of 113% during the quarter, once again demonstrating the benefit of an asset-light cash-generative business. Overall, market volatility persists, and this is evidenced by diverging trends across regions. Generally, we have -- where we have seen stabilization, it was mostly driven by volume growth. The pricing picture remains mixed across end markets and did not change materially in quarter 1 versus quarter 4 last year.

Now let's look at the drivers of our organic revenue growth. Clearly, the largest supportive driver in our revenue performance was APAC, which is 20% of our group revenue. The region turned positive for the first time in 10 quarters and generated a 4% organic growth. The constant focus on commercial programs and the pruning of our portfolio is delivering results. In the markets that generated growth, it was mostly driven by a volume increase. Another positive in Q1 was the sustained momentum in U.S. Food based on volume growth and stable pricing. And we also saw green shoots in Personal Care and F&F in U.S., which both turned positive in Q1, supported by volume growth. These positive trends were offset by some challenges.

Europe recorded a significant organic decline due to the tough comps as the demand environment across all end markets was challenged compared to Q1 of last year. This is also valid for EMEA, but there, we have seen an acceleration in negative momentum since the start of the conflict. LatAm did not grow organically, especially Mexico and Brazil have seen pressure on both volume and price. And lastly, in APAC, there are still pockets of weakness and specifically in ANZ, and that makes up 20% of APAC. There, volume decline persists.

And if you take this weakness of ANZ into account, it means that the growth in the rest of APAC was even larger than the 4% organic growth. While we manage the short-term challenges, we remain focused on executing on our strategy. The strategy that we presented in '24 remains unchanged and is based on segment leadership, being an active consolidator and building one agile Azelis.

We have three important strategic programs to achieve our objectives. Customer's First Choice is focused on strengthening the value proposition to our customers and equipping our salespeople with better tools. From our global customer satisfaction survey, we know we are good, but also where we need to improve. The program is one of the elements contributing to improving top line performance and gross margin management.

Winners of the future is about expanding our cooperation with companies that provide a portfolio of innovative, high-quality and sustainable products. I am personally spending considerable time on this, and I'm pleased to see we have been successful to add new mandates with existing and new partners. Future Fit is a program that is shaping our organization to become more customer-focused and more agile. As we are shifting certain activities to regional structures, our local teams can focus on what really matters, our customers.

This also enables us to accelerate the rollout of our digital tools for business operations, and we are currently in the middle of the implementation of this program. Digital and AI play an important role in especially Customer's First Choice and Future Fit, both supporting the commercial side as well as the back-office processes. We are making good progress on the three programs and more information about the impact will be shared with you later in the year.

With that, let me turn you over to Boris, who will take you through the numbers.

Thank you, Anna, and good morning, everyone. As Anna mentioned during the business update, Azelis once again generated robust cash flow in a difficult market. But first, let's get started with the group P&L. In the first quarter, Azelis delivered a revenue of EUR 1 billion, representing a 0.7% year-on-year decline at constant currency. This performance was supported by a little growth in Life Sciences, which was up by 0.2%, while Industrial Chemicals declined by 2.1%, both expressed at constant currency.

Gross profit in the first quarter was EUR 246 million, a year-on-year decline of 2.3% in constant currency, corresponding to a margin of 23.7%. The 43 basis point margin contraction reflects the negative mix effect across the group, notably an unfavorable country mix in Asia Pacific. Adjusted EBITA in the first quarter was EUR 104 million, a decline of 7.9% in constant currency versus prior year.

However, the EBITA in Q1 last year included about EUR 5 million favorable one-off items that are not present this year. So adjusting for those and still at constant currency, the EBITA decline would be limited to 4.4%, corresponding to an EBITA margin of 10.0% compared to an equivalent of 10.4% last year. This evolution was driven by the lower gross profit, but was partly offset by the full benefit from our cost-saving actions implemented last year.

As a reminder, we announced in April 2025, a EUR 20 million run rate cost saving program that was fully implemented by the end of 2025 and that is now fully impacting the 2026 P&L. The conversion margin remained at a healthy 42.4%, which although lower than Q1 of prior year, shows an incremental improvement from 36.2% in Q4 '25 and 41.5% in Q3 '25.

Let's move on to the overview of the regional performance. In EMEA, which makes up 46% of the group, revenue was EUR 483 million, representing a year-on-year decline of 2.3% in constant currency, driven by organic revenue decline of 9.5%, with most end markets weak. Gross profit was EUR 123 million, implying gross profit margin of 25.4% with strong margins in Europe offsetting continued weakness in Middle East and Africa.

Adjusted EBITA of EUR 58 million resulted in a margin of 12.1%, with cost discipline and contribution from acquisition partly mitigating top line pressure versus prior year, M&A in Europe delivered plus 7.2% in sales, plus 8.6% in gross profit and plus 9.3% in EBITA. In the Americas, which makes up 34% of the group, first quarter revenue was EUR 351 million or 1.2% behind last year in constant currency, reflecting organic performance during the period.

The organic performance was driven by stable Life Sciences, where we have started to see tentative signs of stabilization, as Anna mentioned. This was offset by Industrial Chemicals, which remains weak. Gross profit in the region decreased by 2.1% in constant currency to EUR 83 million, and the adjusted EBITA decreased by 9.8% to EUR 36 million, resulting in EBITA margin of 10.2%. The margin contraction was largely due to dilution from lower EBITA margin in Latin America.

In Asia Pacific, which makes up 20% of the group, revenue in the quarter increased by 4% in constant currency compared to the prior year to EUR 208 million, reflecting the organic growth in the region. We saw some early signs of stabilization in some end markets with revenue growth in the region driven by volume growth in industrial chemicals and stable Life Sciences and stabilizing prices across most end markets. Gross profit in the region was EUR 40 million, a decrease of 3.3% in constant currency, driven by negative mix effects as well as competitive pressure in the region. The strong cost control in the region translated into an adjusted EBITA of EUR 20 million and a conversion margin of 49.8%.

Overall, foreign exchange remained a significant headwind, mostly in Americas and APAC, with top line impacted, respectively, by 7.4% negative and 8.8% negative versus prior year, driving gross profit down by negative 4.2% and EBITA by minus 4.8% on this FX impact. Showing now usual breakdown of the performance in this detailed table, let's move directly to the overview of our cash and its biggest operational lever, the working capital.

Net working capital to sales is down to 13.9% at the end of Q1 2026 versus 14.7% prior year March and versus 14.1% at 2025 year-end. This reduction reflects our continuous focus on working capital management and cash generation as reflected in the incremental optimization of working capital intensity from the end of 2025. So let me be very clear. We're reducing the inventory we don't need like the slow movers, while managing strategically the inventory we do need.

Free cash flow was EUR 119 million, broadly stable compared to the prior year and represents a free cash flow conversion ratio of 113% compared to 100% in the prior year and a further improvement from the 106% reported in December 2025, again, reflecting the group's strong focus on efficient management of working capital. This relentless focus on working capital efficiency and cash generation allowed us to further drive down our net debt at the end of March to EUR 1.5 billion, a 4% reduction compared to the end of December 2025. Although the EBITA decline is keeping leverage ratio above our target to 3x, we will continue with our cash focus to drive down our leverage ratio.

Now let me hand you back to Anna for some words on the outlook.

Thanks, Boris. When I presented our strategy in '24, I stated that volatility is here to stay. And that insight has proven to be highly relevant. The persistent market fluctuations have reinforced our commitment to staying agile and proactive. Rather than relying on short-term trends or waiting that situations improve, we focus proactively on robust long-term strategy to navigate uncertainty and deliver value.

So while indeed, we are seeing tentative signs of stabilization in some end markets, volatility makes it difficult to assess whether it can be sustained. Anticipated price inflation and growing risk of supply chain disruptions may trigger prebuying. But so far, we are not seeing broad substantial prebuying from all of our customers. And in any case, we believe that an uplift from price preempting and stock building is unlikely to be in the same magnitude as the post-COVID disruption, given the weaker demand environment prior to the year.

Ultimately, inflation can bring also a demand recovery in jeopardy. We are well positioned to capture growth, whether it is from significant prebuying or structural end demand improvements. We remain committed to cost management in general, cash generation while volatility persists.

So this concludes our presentation, and we are ready to take questions. So operator, you can open the line.

[Operator Instructions] We will take our first question from the line of Suhasini Varanasi from Goldman Sachs.

Thank you for all the color by the different regions. It was really helpful. Just want to dig in to some of the commentary that you had given regarding the Middle East conflict. Clearly, you've seen some element of prebuy, but you've maintained that it's not across the board.

But apart from Asia, were there any other regions that saw some element of prebuy and have those trends changed in early April? How does your order book look? That's the first one. And regarding price increases on chemicals, your commentary in the press release has suggested some stabilization in some areas. But just wanted to understand if things have changed towards the end of the quarter on pricing and in early April as well?

Yes. So let me start first on the prebuying comment. The prebuying has been limited. We have seen some, I would say, the most pronounced that we've seen was in APAC and the Americas and very limited actually in the European ones. On the outlook, as you know, we are not really giving, I would say, a very detailed outlook. What I can say is that what we can expect with the price increases that you also mentioned, yes, there have been large price increases announced, and we are passing them on to our customers as we have done also in the past, and that is in our business model.

Any color on order book or early April trading, please?

It's continuing, I would say, in the right direction.

Your next question comes from the line of Hannah Harms from BNP Paribas.

I just wanted to understand, in the wake of the Middle East conflict, whether it's changing your strategy around M&A? And also on the cost saving side, I understand that, that was not implemented in 2025, but can we expect any new announcements for 2026, given you're emphasizing the need to manage cost? Thank you.

I'll give an answer on the M&A and then Boris, you can maybe take the question on the cost savings. So our strategy has not changed. Consolidating and being an active consolidator remains a part of our strategy. As you know, due to our leverage, we are prudent in our M&A, I would say, execution. But there's also another reason. I also think that still at this moment, the asks from selling companies is not in line with what we think it should be. So we are pacing this due to that reason as well.

Boris, maybe you can...

Yes. On the cost saving, Hannah, so yes, this is the set of actions we announced last year. And again, we have fully implemented these actions at the end of 2025. So that's why in Q1 '26, you see the full benefit, as we mentioned in our last earnings call, you see the full benefit now coming into the P&L. Do we have other cost savings action to announce later in the year? We remain very agile depending on the situation. And if needed, we will take necessary actions. But of course, today, I have nothing to share with you on that, but we will remain agile all over the year. And again, as needed, we will act accordingly as usual.

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

First, Anna, are you able to source all of your raw materials or you are seeing the shortages in sourcing raw materials? That's my first question. The second question is, from your perspective, when we look at '21, '22 to now, why would you say you're not seeing like a broad-based prebuying yet because to some extent, this potential -- or sorry, disruption to supply could also be quite significant.

If the Strait of Hormuz blockade sort of continues, then we would have thought your customers should be preempting that supply shortages and buying now. So from your perspective, why are you not seeing a broad-based prebuying? Is this because maybe there are healthy level of stocks in the system? Or do you think there are some other reasons why you may not be seeing it?

Thanks for your question. So in the Q1 results, there are no impact on shortages, but we expect there will come. And that's a bit the chemical industry is very intertwined and some input chemicals that might be short and up in chemicals that we buy from our principles that you would not maybe expect at the first moment. So even, for example, in the processing of food ingredients, you have certain chemicals. Before that is all clear, that takes a little bit of time, but I'm expecting absolutely shortages coming up and there can be severe shortages. I think it first will impact more the industrial segments. But I expect that also, for example, some Personal Care ingredients will also be impacted.

It's true that we see less broad-based substantial prebuying from customers. I think there's a number of things there. It's not because stocks are high, because we actually think that stocks with customers are lower than, I would say, in the more normal years before the pre-COVID problems. I think there are 2 things. First of all, at that time, end demand was healthy. And the end demand is not -- was not at the same, I would say, a healthy level before the war.

Second thing is, I believe that customers have been burnt at that time in the sense that they bought a lot and then they sat on stock for some times a year, and they don't want to repeat that same mistake. So they might be a bit more reluctant to do these large, substantial prebuying. That's just my, I would say, observation.

Just a follow-up. You said you expect shortages, but so far in month of April, are you seeing any shortages?

It's starting to come. Our principles, and we are in very close contact with them because we rely on them. As soon as the war started, of course, they are looking into what can be short and whatnot. We are in close contact with them about that. It's taken some time to understand the impact for them probably as well, what's going to be short and whatnot. So I expect that shortages will soon start.

Your next question comes from the line of Stijn Demeester from ING.

Two, if I may. Firstly, on China, what growth have you seen in Q1, now with the region evolving? And has the pressure from Chinese exports into Southeast Asia and LatAm dissipated or is this still ongoing?

And secondly, on the U.S. CASE segment, we've seen some announcements by the coatings producers of strong price increases to offset higher input. Is underlying demand still -- seems quite fragile, do you believe that the market can digest these increases in U.S. CASE?

And maybe a final one on the principal behavior and then the debate that we had in the recent quarters on principals in sourcing. Is this trend still ongoing?

I'm not sure if I understood your second question well, but let me first start with -- because the line was a bit blurry. Your first question was about China, what you see there. China actually performed well for us in the first quarter, and we've seen both on Life Science and Industrial a recovery. And I'm expecting, of course, that when shortages from -- and that's not so much our own, I would say, our own performance in China, but from Chinese suppliers. I'm expecting that as there will be shortages, they will protect their domestic demand and probably we will see less export into -- outside of China flowing into our markets, which should also help us further into the recovery of Southeast Asia.

On the coatings, I understood that you asked about how -- if the coatings market was still fragile, and I can confirm that. The U.S. CASE business is, I would say, stabilizing -- toward stabilizing, but definitely not back on track again.

On the principal behavior in sourcing, as I was telling probably also in the last call, when you have, I would say, more challenged market conditions, we see principles acting in opposite ways. Some of them might take customers direct, so that they can benefit from the margin internally. Others are actually doing exactly the opposite and outsourcing more as they reduce their sales force. And yes, that is something that we've seen every time that market is getting difficult, and that's not different from any other situation, I would say.

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

In the presentation, you mentioned that last year, there was [Technical Difficulty] exceptional benefit in the Q1 profit. Perhaps it's my oversight. I can't recall that being pointed out at the time. I just had a quick flip back through your press release from the time. Can you elaborate a little bit on what that was and where it was disclosed?

Boris, maybe you can take it?

Yes, Matthew, thanks. Yes, we wanted to highlight this one because we made some accounting adjustments in Q1 last year. The primary adjustment that was made last year was in response to a weaker-than-expected performance in Q1. So we're talking mostly about the variable remuneration. Last year, early in the year, it was probably clear that the performance would be below the expectations, and therefore, adjustments were made. A few other adjustments were made on the balance sheet, and that's not repeating in Q1 '26 this year, and that's the main reason why you see this difference. And we wanted to single that out in order to actually be better presenting the actual performance that we're delivering this year.

That makes sense. And maybe a second question. Just curious about how you are looking to manage this situation and potentially capitalize on some of the opportunities that may arise because the leverage is still quite high. And I think Anna said in the introductory remarks that the priority is still cash generation. Does that limit your ability to take any sort of strategic inventory positions that may help your customers and bring trading opportunities through the coming weeks and months? I was a bit surprised that your inventory wasn't higher at the end of March, particularly if you're saying that April is continuing in the right direction. Do you feel that your balance sheet constrained right now?

No. Actually, what we are doing, Matthew, is that we're working on deleveraging. As I was saying repeatedly, the main reason why the leverage is not going down significantly yet is mostly because the EBITA is not supporting. The net debt actually is going down. We have a healthy cash generation. And actually, this is being seen in the reduction of the net debt as we highlight.

What is the situation limiting us to do is on M&A, as we discussed. So today, we don't have a pipe anyway that is inviting us to be sad about this. So we don't see opportunities that are being missed. It is a limiting factor for M&A. But we are actually working on the balance sheet and cash generation without missing opportunities. That's our reality.

When it goes to stock inventory, it is not a limiting factor. Stock is a strategic asset for us, distributor, and we are managing this very strategically. And our balance sheet situation is not a limiting factor for that management. Though what we're focusing on, that's what I said is, we're focusing on the stock we do not need. So we're actually cleaning our inventories of stock that we don't need, and that gives us some power actually to work and buy the stock we do need.

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

First question is, I was wondering if you could maybe give a little bit of color on kind of what proportion of your business is linked to oil, either directly or indirectly and would kind of 50% to 60% be a reasonable estimate?

I can't give you that answer. I'm sorry, I don't have that. Because as I said, you have derivatives going into, for example, processing aids in the food industry. So I really can't give you that precise answer.

Got it. And then maybe second, I guess, in specialty, which is the majority of your business, you need to call up customers and ask for price increases in most cases. When you're having these conversations so far and through April, are customers kind of generally accepting those price increases? Or are you seeing some pushback? And what kind of retention are you seeing?

It's a mix. I mean, price increases are never really cheered upon by customers, I think, by no one. So it's not that, let's say, that they are glad to accept it. But everyone needs to read the newspaper and therefore, it's also something that it is expected. The thing is, of course, this is not caused by, I would say, one company that has a force majeure and therefore is out, and we happen to represent them. This is really global and broad based. And that means that if they are trying to find alternatives, they will find exactly the same conditions. And that helps us, of course, to pass these price increases through.

Your next question comes from the line of Nicole Manion from UBS.

Anna and Boris, just a follow-up, please, on the working capital and specifically the inventory. Boris, you talked about being strategic in terms of inventory. You don't need an inventory, you do. But I wonder if you could say anything more specific here about what you mean and what you're tracking? Are there specific sort of product categories or end markets that you've got in mind that are still oversupplied and vice versa?

Thanks for the question. We are focusing, when we talk about cleaning, on the inventory that are slow moving. So we have some categories, and it's very depending on markets, what slow-moving is. So we have different markets and different buying pattern. On average, our DIO, as you know, is in the 50s. That gives you an idea on how fast our stock rotates, though in some markets, we have longer and some others we have shorter.

Really, the cleaning happens on when we have some products that are not moving, that are not sold anymore. We're trying to find some way to sell them, clearly to recover the cash. Of course, that is rather limited in our portfolio, but it's still some value that we can actually monetize in the balance sheet.

The buying strategy, we are a very large distributor serving different markets. So I won't be able to give you how we manage that. This is at our core competence panel actually to manage this inventory and listening to the needs of customers and conversing with our principal, we determine what is the best buying pattern. But again, we have kind of a diverse rhythm of buying in different markets. So there is no blanket answer I can give you now.

[Operator Instructions] And your next question comes from the line of Anil Shenoy from Barclays.

Two from me, please. The first one is that you just confirmed that you will see some shortages in the coming months, supply shortages. So are we to understand that if there are these supply shortages, then Azelis will see confirmed benefits because of that? I'm asking this because in 2021, 2022, the benefits that you saw were more from pricing and less from volumes. I remember you saying about 40% volumes and 60% pricing. So this time, if there are supply shortages, maybe the volume benefit may not come because of the demand. But should we be sure that we'll see some pricing benefits there? And will that come in the coming quarters? So that's my first question.

And the second question is on the competition from China. So you said that the competitive pressures from China had persisted all year in 2025. And you also said that the pressure from China was getting beyond APAC to Brazil and Mexico as well. So have you seen that getting better in Q1 2026? And on that note, do you see that -- do you think European principles may see structural benefit because of the disruptions from the Chinese players? Any color on that will be very helpful.

Thanks for your question. Let me start with the shortages. Obviously, when you have a shortage, it impacts volume, so you can never have a volume increase when you have shortages, it's price-driven indeed, as you were saying. And depending on where the shortage is, how long it takes. And if it is, I would say, in a product category or just an input material that can really not be replaced. Yes, prices go up because volume is scarce.

It's very difficult to predict what's exactly going to happen, and that's why I keep on my statement, the volatility is here to stay, but it makes it also difficult to make the predictions, how and where exactly we will benefit from it. But that we can benefit from this, that's absolutely true, and that's also what happened, of course, in the post-COVID period.

Now regarding competition from China. In the first quarter as the conflict, of course, ended -- happened at the end of the first quarter, we have not seen yet what I was describing, that shortages from producers in China make them focus on their domestic market and, therefore, export less, but I'm expecting this. I'm expecting this, and we see a little bit already of some signals here that Chinese principals are keeping more of, say, their list prices instead of reducing prices heavily to gain market share. So we see it already a little bit now. It's early in the quarter, but I'm expecting this to continue indeed.

Is this a structural benefit for the Western principals? No, I just think that it is a temporary benefit. But please don't forget that the shortages are also impacting the Western principles. So it's not that it's only hampering the Chinese ones. So we're all in the same boat.

Your next question comes from the line of Eric Wilmer from Kempen.

Could you talk a bit about the pricing attitude of your suppliers? I mean, you talked a bit about it before, but are you seeing differences? And I'm actually referring to specialty specifically, between your Western and Chinese suppliers in the magnitude of their pricing actions, maybe even difference between U.S., Europe and China? And could you also give us a sense of your current visibility on pricing from your suppliers? Did this reduce? Is this now very ad hoc based?

Then the next one, how is your specialty -- your semi-specialty or commodity part of the portfolio navigating the current conflict? Is this potentially an explanation behind some of the prebuying you referred to and a strong APAC in Q1 as the semi-specialty part might see some recent benefits?

And then last question, you highlighted these potential shortage issues. And I think in this context, surfactants and coatings have been mentioned, which also have a skew towards the Middle East. Could this turn out to be a net positive for Azelis as these may drive demand towards your EU-based manufacturers? I think this has been kind of answered, but still want to press a bit on this one.

Prices from principals depend -- I can't give you, I would say, all the details. They range from price increases from, I would say, 5% to even 30%, 40% price increases. It depends, of course, for them, whether it's -- what is exactly impacted in their production process. And it's, I would say, in various parts of our portfolio. It's not only in the industrial side, it's also products that go, for example, in Home Care, Personal Care. And as I said, they might also, at this moment, not yet, but they might also end in food ingredients as some products are used for -- as process aids. Some chemicals are used as process aids in the food processing industry.

Now, you were asking also about the effect of prebuying and semi-specialties and if that was having the uplift in APAC. Actually APAC, we've seen improving month after month. So that's what I said. It's -- we think that -- and there is some prebuying, but it is limited. So we don't think that APAC return to organic growth is solely based on the conflict and the pre-buying. It's a trend that's positive, and we see that continuing.

On the last question, surfactants and shortages, let's not forget that some input materials again are coming from that region or are coming sometimes from China and are exported. These are precursors from China to our principles in Europe. So the European surfactant manufacturers are absolutely impacted as well.

And then maybe just on that other question in between on your visibility from your suppliers. So I would believe that there's probably some visibility generally with regard to pricing, not all immediately quote based. Is this now more ad hoc?

Our principles have been -- probably what I've seen because we are very close to several of them. As soon as the conflict started, they,, of course, scrambled to understand what the impact would be and where they would see price increases, whether it was to higher input prices for them or whether it was by expected price, I would say, shortages, which would make them, I would say, benefit. So they have compiled lists of their price increases.

So I don't know what you mean by ad hoc. I think it's a well-based, structured approach that we have seen from our principles. Of course, we don't have insight in their complete production process, which is also not necessary, of course.

There are no further questions on the conference line. We have come to the end of this call. I will now hand over to Chief Executive Officer, Anna Bertona, for her closing remarks.

Thank you for spending time with us today, and we have given you insights in our progress as we navigate the very volatile business environment, but also how we are positioning ourselves for the longer term. Yes, there are challenges, but we know where we want to be and also how to get there.

And with that, I wish you a good day, and I'm looking forward to seeing you or speaking with you again soon.

Good day, and welcome to Azelis' Full Year 2025 Results Presentation. My name is Pam Antay, Investor Relations. I have Anna Bertona, Group CEO, who will present the key developments in 2025. We are also joined by our new Group CFO, Boris Cambon-Lalanne, who will present the financial results of the group. Anna will then conclude the presentation with some remarks on the outlook before we open the floor for Q&A.

As a reminder, this presentation may contain some forward-looking statements that are subject to risks. [Operator Instructions] We will make a recording of the presentation available online later today.

With that, I'm handing the floor to Anna.

Thanks, Pam, and good morning, everyone. Thank you for dialing in. I understand it's a busy day for corporate earnings, so I appreciate that you're taking the time to join us. And I'm also very happy to sit here with Boris, our new Group CFO. So please join me in welcoming Boris in his first Azelis earnings call. And I'm sure that you will have an opportunity to engage with him, along with the rest of the Azelis IR team, in the coming days.

Let me start with the key takeaways from our results. In a year marked by tariff uncertainty and softer demand, we continued to execute on our long-term strategy and made progress in becoming the reference in the industry for our customers and principals. I will give more details later in the presentation.

Second, we delivered strong growth in free cash flow. While momentum remains muted overall, we continue to focus on what we can control: cost, working capital and cash optimization. Our performance underscores the resilience of our business model and the structural downside protection it provides through the cycle.

Third, we are sharpening our capital allocation to ensure efficient use of our resources and rebuild balance sheet headroom. This is deliberate. We want to be ready to accelerate when markets stabilize, to capture organic growth and to lead consolidation as it reemerge. Boris will walk you through our capital deployment framework later on.

I've said it before and I will say it again. The challenges that the chemical distribution market is going through are temporary. 2025 was a demanding year for the industry, yet our cash performance demonstrates the strength of our model. And our strategy continues to position Azelis to deliver sustainable long-term value creation.

So let's turn to the detailed results for the year. Last year, we achieved a revenue of EUR 4.1 billion, a 1.3% increase over prior year in constant currency. Organic revenue for the full year declined 1.6% as the market deterioration in the second half reversed the organic growth we achieved in the first half. Our gross profit was EUR 968 million with gross margin contracting 91 bps due to negative mix effects across our business. Our adjusted EBITA came in at EUR 411 million, resulting in conversion margin of 42.4%.

As mentioned, our strong focus on cost and working capital management allowed us to generate EUR 442 million of free cash flow, translating to a cash conversion ratio of 106%. And this demonstrates how our asset-light, cash-generative business creates value even in challenging markets. And then also, we completed 4 acquisitions in '25, all perfectly fitting our portfolio and our strategy for bolt-ons to reinforce our footprint.

Now let's look at some of the drivers behind these results. In terms of organic performance, we saw softer demand across Life Sciences and Industrial Chemicals. We experienced weak trends in the most cyclical businesses, while the more defensive end markets like Pharma and Food & Nutrition performed better.

If we go in each of the end markets, these are the following comments that I can make. There was a strong momentum in Pharma. Food & Nutrition was positive in U.S., offset by a weak APAC. While in EMEA, food was broadly stable. For agro, the weather-related weakness in U.S. was partially offset by stable performance in EMEA. Personal Care was stable in EMEA but continued to see headwinds in both the U.S. and APAC. And CASE and AMA were weak across the 3 regions, reflecting the subdued industrial output. And then finally, lubes and metalworking fluids, trends were a bit mixed across the regions.

If we look at the regions. In EMEA, the modest growth in Life Sciences was offset by weak Industrial Chemicals, while in the Americas, the shift in sentiment that started around Liberation Day continued throughout the year. Lastly, in APAC, the competitive pressures from increased supply from China persisted all year and especially in Southeast Asia.

In terms of inorganic growth, we have been pacing our M&A and executing on only the most strategic acquisitions: Solchem in nutraceuticals in Spain; S Amit in India, Distona in Switzerland and ACEF in Italy, creating by far the largest personal care distributor in Italy, providing scale benefits and synergies. It is worth noting that regardless of our own appetite and capacity, the current down cycle is slowing the pace of acquisitions in the industry. We see that sellers have still high expectations and hesitates to be valued on current performance. The pace is expected to pick up again once the market inflects.

As we navigate the short-term market challenges, we are not losing sight of our strategy. Throughout '25, we have executed different programs to realize our longer-term objectives. And I want to give you some high-level insights on how we are building and positioning for the future as this will drive our performance in the coming years.

As a reminder, our strategy of being the reference in the industry rests on three pillars: one, leadership in our focused end markets; second, play a proactive role in consolidation, and this is not limited to M&A, but we also want to consolidate our position with customers and with principals; and strengthen our company and move as one agile Azelis.

Regarding the first pillar, leadership in our focus end markets. We are continuously refining our portfolio for each of these end markets to ensure we have the best products and service offerings for our customers, and this allows us to develop applications to expand the market for our principals' products. And it goes beyond the mandates that we pitch for. It's also investment we make in our technical capabilities.

For the second pillar, we have launched several commercial campaigns to strengthen our position. To create focus, we have appointed a Global Commercial Director to lead these initiatives. We also conducted our first edition of a global customer satisfaction survey, where we received feedback from over 4,000 customers globally. Although we are very pleased with the score of 8.3 on 10, we derived several important improvement actions that have been incorporated in our programs.

As part of winning with principals, we have continued to identify and build relationships with the winners of the future: principals that can deliver us the best portfolio of innovative and high-quality specialty chemicals and food ingredients. I am personally spending a considerable amount of time in strengthening our relationship with these principals. And as just mentioned, we continue to execute on the most strategic and compelling M&A projects.

And then finally, for the third pillar, which is equally future-oriented, we are pursuing multiple internal programs to align the entire organization with our long-term objectives. In '25, we started several activities to reorganize so that the local operations can focus on accelerating commercial actions while, in parallel, we are building efficient AI-enabled back offices. We also accelerated the rollout of shared service centers in each region to maximize efficiency in certain functions like finance. And it is actually one of the things that will keep Boris busy in the coming months. And to conclude, we have initiated several HR programs to build a best-in-class organization.

I also want to give an update on our progress on what we refer to as strategic growth accelerators. The first accelerator is innovation. At Azelis, this is a critical business driver. Our mission is to help our customers to win and innovate, solving technical problems and creating innovative formulations for them. I'm very proud to say that in '25, Azelis won 8 industry innovation awards, reflecting once again our focus on innovation.

The second accelerator is digital, where we invest significantly for both commercial and operational gains. On the commercial side, we now have over 200 customer portals live, generating more than 100,000 product views per month with over 100,000 documents downloaded in the year. We also started rolling out version 3 of the principal portal for some of our largest suppliers. And internally, AI starts to be embedded in most of our processes. And as an example, the rollout of several custom designs AI tools, supported by our robust digital backbone, are already producing efficiency gains across the operations.

And then the third accelerator is sustainability. And as you know, we launched Impact 2030 last year with some ambitious targets. Last year, our CDP rating was upgraded to A- and reflecting our progress towards environmental stewardship and transparency. Along with our MSCI ESG AA rating, the CDP rating upgrade reflects our commitment to sustainability. And you can find more details in our integrated report which is, by the way, already online.

These are just a few highlights of our achievements that are very critical milestones for our long-term strategy. Now with this, let me turn it over to Boris, who will take you through the financial results.

Thank you, Anna, and good morning, everyone. I'm pleased to be joining Anna in our first earnings presentation together, and I'm looking forward to meeting all of you in due course.

As Anna outlined during the business update, Azelis delivered a very robust cash flow growth in a difficult market. I'll guide you through the impact of the challenges on each of the headline metrics, starting with the group P&L. Azelis achieved a revenue of EUR 937 million in the fourth quarter, bringing full year 2025 revenue to EUR 4.1 billion. This is a 1.3% year-on-year growth at constant currency. This performance was led by Life Sciences with plus 1.9% while Industrial Chemicals grew at a modest plus 0.3%, both expressed at constant currency.

Gross profit in the fourth quarter was EUR 217 million, bringing full year to EUR 968 million, corresponding to a margin of 23.6%. The margin contraction reflects the adverse mix effect across the group, notably in the traditionally high-margin businesses within Life Sciences such as Personal Care and F&F.

Adjusted EBITA in the fourth quarter was EUR 78 million, translating for the full year in EUR 411 million and in an adjusted EBITA margin of 10%, a 170 basis point reduction versus prior year, weighed by the unfavorable impacts of higher cost at recently acquired companies and overall inflation in the organic scope of the group. However, Azelis successfully implemented its cost saving plans and delivered more than the EUR 20 million initially announced to offset part of these headwinds, resulting in a full year conversion margin of 42.4%, a contraction of about 3 percentage points versus the strong level of prior year.

Further down in the P&L, the net profit ended at EUR 113 million for 2025, a 37.6% decline versus prior year, mostly driven by noncash items that I will comment just after closing first on the breakdown of our growth. Acquisitions delivered plus 2.9% revenue growth, more than offsetting a modest 1.6% organic decline mostly in APAC with ongoing competitive pressures in the region and in the Americas with a soft market demand. However, the global strong foreign exchange headwinds of minus 3.8% impacted the total reported revenue that decreased by 2.4% versus prior year.

The 6% decline in gross profit was primarily driven by organic contraction, mostly in APAC, with minus 11.6%, reflecting competitive pressure both on volumes and prices from an oversupplied market. In Americas, the organic gross profit decline was limited to minus 6.5% due to weakness in traditionally high-margin businesses like F&F and Personal Care as well as dilution from Latin America. EMEA, in contrast, grew by plus 1.8%, thanks to a plus 6% growth from M&A, offsetting a modest adverse mixed effect impact, driving organic gross profit down by 2.5%.

Consequently, the group adjusted EBITA ended behind prior year by 12.7%. In APAC, tight cost control resulted in adjusted EBITA decline being broadly limited to the impact of the gross profit contraction. Overall, the results of the group reflect a softer demand environment with negative product and geographic mix effects, broader cost inflation and adverse foreign exchange, against which the group mitigated in part with cost savings.

Now let's step back and look at the overall pictures by region. EMEA, which makes up 46% of the group, grew its revenue by plus 4.4% to EUR 1.9 billion in 2025 supported by acquisitions and stable organic revenue, though partially offset by negative impact from foreign exchange. Gross profit benefited from this top line growth and reached EUR 471 million or a plus 1.8% growth versus prior year.

However, adjusted EBITA decreased by 4.7% to EUR 218 million, resulting in a 110 basis point contraction in adjusted EBITA margin, pulled down by the product mix development within the segments and dilution from recent acquisitions. Consequently, the conversion margin that remains strong at 46.2% contracted by 314 basis points versus prior year.

In the Americas, which make up 35% of the group, full year revenue was EUR 1.4 billion or 6.6% behind last year, reflecting a modest 2.8% organic decline and a stronger 4.7% FX headwind. Azelis observed weakness across most end markets in the region as customers remain unwilling to meaningfully build up stock given uncertain demand outlook. In Life Sciences, Pharma and Food & Nutrition was strong throughout the year, partially mitigating the broad-based demand softness in other end markets in the segment. Performance in Industrial Chemicals remained weak with softer volume notably in CASE.

Gross profit in the region decreased by 11.2% to EUR 340 million. And the adjusted EBITA decreased to EUR 156 million, resulting in 147 basis point margin contraction to 10.9% with dilution from lower EBITA margin in Latin America. Conversion margin remained at a healthy level of 45.8% but conceding 367 basis points the prior year.

In Asia Pacific, which makes up 19% of the group, full year revenue was EUR 805 million or 9% versus prior year on the back of a 4.3% organic contraction compounded by a strong 5.6% negative impact from FX translation. The group's businesses saw pressures across most end markets in both Life Sciences and Industrial Chemicals as tariff-related uncertainty continues to weigh on demand and pricing that remain under pressure in certain product categories due to excess supply, especially in Southeast Asia.

Gross profit in the region was EUR 157 million, 15% lower than prior year, the strong cost control in the region translating into an adjusted EBITA decline of a comparable 14.7% and a reinforced conversion margin of 47.9%, a 33 basis point expansion during the year.

Now let me come back to the net profit evolution. Following the EBITA down trend, the operating profit declined by 19%, weighed down by additional noncash item accounting impacts. Looking at financial expenses, Azelis successfully reduced its borrowing costs and other financial expenses by EUR 25 million, corresponding to a 140 basis point reduction versus prior year.

However, net of the reduced financial income mostly coming from lower noncash favorable accounting impacts of acquisition-related liabilities revaluation, the net financial expenses slightly increased by EUR 8 million, weighing on the profit before tax ending at EUR 175 million or minus 32% versus prior year.

Finally, the group effective tax rate for the year increased to 35.3% versus 26.0% in 2024, impacted by the lower benefit from nontaxable fair value adjustments on acquisition-related liabilities, the mix of contribution from geographies with higher tax rates and the impact of unrecognized current tax losses. All this resulted in a net profit of EUR 113 million for the year versus EUR 189 million in 2024.

Moving on to cash. Net working capital to sales was once more reduced and reached 14.1% at the end of 2025 versus 15.3% at the end of September 2025 and 15.9% at the end of 2024. This reduction reflects our continuous focus on working capital management and cash generation, as we can also see in the reduction in DIO from 57 to 51 days. It is important to note that inventory management is critical for the business and the financial element at Azelis, where we hold stock strategically both for our customers and our principals. Our inventory optimization program is carefully executed, as an example, by driving down slow-moving stocks.

Overall, this relentless focus on efficient working capital management resulted in a reduction in total working capital from 58 to 51 days of sales. And along with cost control, this resulted in a strong EUR 442 million free cash flow generated or an increase of plus 29% versus prior year. This performance corresponds to a cash conversion expanded to 106% of adjusted EBITA, a testimony to our asset-light resilience and countercyclical cash-generating business model and our focus on operational discipline.

Now let's see how this is translating into our net debt evolution. The strong free cash flow delivered in 2025 net of tax cash-out, interest and a stable dividend payout enabled Azelis to self-finance its M&A strategic investments. These also included about EUR 100 million in deferred payments from previous acquisitions. Overall, net debt remained fairly stable, reaching EUR 1.6 billion at the end of 2025 versus EUR 1.532 billion at the end of 2024.

Now looking at the leverage ratio. Despite a rather stable net debt, given the EBITA contraction in 2025, the leverage ratio ended up at 3.3x at the end of the year versus 2.9x at the end of 2024 and a slight reduction versus the 3.4x of September 2025 end.

With this in mind, let me conclude by giving you some clarity about the general framework of our capital allocation. As Anna mentioned at the beginning of the presentation, we have sharpened our capital allocation priorities to build back headroom in our balance sheet. This will be largely enabled by our strong track record of EBITA to free cash flow conversion steadily over 90% for a number of years.

We don't expect any meaningful change in this level of cash conversion as we will continue to be disciplined in managing our working capital, and we will continue to invest for growth via capital expenditures in our organic scope. This will include investments in our lab network, in our product and service portfolio, in our commercial programs and in our digital infrastructure.

Net of tax and interest expense payments, of which we also remain vigilant, any excess cash will be deployed in priority for shareholder remuneration via dividend according to our policy, deleveraging as necessary to maintain our BB+ credit rating, value-accretive acquisitions that will also include the acquisition of Azelis own shares subject to the same returns criteria. A high level of discipline in our cash generation and cash deployment are essential to maintain a healthy balance sheet and maintain the ability to seize attractive and affordable opportunities to continue growing our business.

With that, let me give it back to Anna for some words on the outlook.

Thank you, Boris. Since I last spoke to you in October, there has been plenty of news and some is encouraging and some is worrying. Will there, for example, be deregulation on the EU that could benefit our industry? Or will Greenland trigger another wave of trade disruptions? Or will deglobalization result in industrial investments?

The near-term uncertainty persists and continues to weigh on demand. And we will continue to control what we can: our cost, working capital and our focus on generating cash. But it's equally important not to lose sight of opportunities emerging from the ongoing volatility and to pursue growth. We will remain agile, which is embedded in our values and our strategy. And this is the time to show our value to our customers and principals. This is the time to make bold actions that will pay off when the cycle turns. And the cycle will turn.

The long-term fundamentals have not changed. They remain compelling. A lot of the challenges that apply to chemical producers today don't apply to us. We are more flexible and agile and can adapt quicker to market conditions than producers. Some of the challenges they face create opportunities for us. We can take away some of the complexities to help them focus on their core activities. And lastly, the industry is still very fragmented with many opportunities to grow through consolidation.

I'm confident that we have the right strategy, footprint, portfolio, business model and, most importantly, the people to balance short-term requirements and the achievements of our longer-term growth objectives.

So this concludes our presentation and we are ready to take questions. So operator, you can open the line.

[Operator Instructions] We will take our first question from the line of Suhasini Varanasi from Goldman Sachs.

A couple, please. In APAC, you had done decommoditization. I just want to understand whether the impact is a one-off in 4Q or whether we should expect further drag on the top line in 1Q, 2Q and 3Q of this year.

And the second one is just on leverage. Given where it is right now at 3.3x net of EBITA, can you just remind us of the covenants and your plans for further deleveraging?

Can you repeat the first question? Because the line was not so good. The second, I got.

Just on the decommoditization in APAC, I just wanted to understand the drag potential in 1Q, 2Q, 3Q of this year or whether it was just a one-off impact in 4Q.

So on the decommoditization in APAC, it actually will not have much impact in 2026. As you know, with acquisitions that we do, sometimes there's a bit more commodities than we would like to have. In general, we have 15% to 20% semi-commodities. And in some acquisitions, we have a bit more.

In APAC and, by the way, in all the regions, we have been constantly pruning our portfolio. It's an ongoing activity. But it's true that last year we maybe did a little bit more. In '26, I don't expect a lot of extra, I would say, visible impact on our P&L.

And Boris, maybe you can give an answer on the leverage and the covenants.

Yes. So thanks for this question. Yes, the leverage ended up at 3.3 at the end of the year 2025, which is on the high side of our target. The best way to deleverage is to grow our EBITA. So as necessary, we will deploy capital towards deleveraging as we remain committed to maintain an appropriate leverage number in line with our credit rating.

It will not be sensible to give you a number where we will land as early as it is in the year, but rest assured that this will be a focus for 2026. And regarding your question about covenants, we want to keep ample headroom to be as far as we can from these thresholds.

Your next question comes from the line of Stijn Demeester from ING.

Also two, if I may. Can you provide some color on the current trading and the evolution of the order book year-to-date and maybe also elaborate on the current sentiment amongst your principals?

Second question. Your competitor made a comment yesterday concerning principals taking back larger accounts in exchange for smaller ones or new geographies or end markets, the dynamic which they describe as horse trading. Is this a new one that you recognize? As it's somewhat contradictory to the narrative that principals outsource more business in times of hardship. And now the opposite seems to be happening. These are my questions.

Yes. First, on the current trading, I would say we see a continuation of the trends that we saw in the last quarter. It's way too early to tell, of course, where the year will end. If I speak with principals and customers, they see more or less the same which is, I would say, not a very bright environment.

But it's also not deteriorating. And some of the indicators like the PMI have been going up. So at a certain point, the market will inflect. When that is, it's difficult to say. But if you look at our current trading and order book, I would say, a continuation of the trends that we have been seeing.

Now on the horse trading, I've never heard about this terminology in this sense. Actually, there's nothing new. So what we see in difficult times, we see two things happening. You have some principals who give more to distribution. They focus on the core, they lay off salespeople and, therefore, they give more to distribution. We have also seen, and that's nothing new, it's always been going on, we've also seen that -- yes, we call it the short-term margin grab. They take away customers from distribution. This is often something that's short term because, yes, the value of the distributor is there.

And therefore, customers, after a certain time, they start complaining and they want to go back to distribution because we can give them much more attention, much more service. We have different payment terms. We have more stock available for them. And so we often see that the short-term actions are reversed within a certain time after 1 year, sometimes 2 years. I would say, normally, it's a wash. We see both happening. And also in this crisis or in this situation of the market, we've seen that happening as well. So I would say nothing new.

Okay. If I may squeeze in one more. In the current environment, is there increased competitive pressure from within the distributors? Are you buying more aggressively for the same mandates? Or is this still unchanged?

I would say it is unchanged. There's always competition. We have a couple of larger ones. As you know, you have regionals, you have smaller ones. There's always competition. I continue to see the trends that's there already for a long time that consolidation is happening. Principals are looking for professional distributors with a large footprint, with strong technical capabilities. And they consolidate with the larger ones and I see that continuing. And we have very healthy conversations ongoing for new mandates like we did before.

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

First question. Yesterday, your peer mentioned that FX was negatively impacting not only the FX number but also the organic growth number. I'm wondering if you're also seeing that and if you know how much impact that has had and how that mechanism works.

And then second question. You just provided a comment on the level of competition that you're seeing from Asia. And if there have been any changes in the intensity of that competition and any changes in the pricing trends related to that?

Yes. I'll take first question on Asian competition and then Boris will take the FX impact. There's not a lot of change. We already have announced ongoing for some time, there's pressure from especially Chinese producers on the more commoditized side of the portfolio. And there, of course, you see also the pricing pressure.

Overall, I would say prices are stable. But especially, as I say, on the lower end of the portfolio, which is not more than 15% to 20%, we have some more pressure from the Asian. But that has been there already for quite some time and I don't see it intensifying.

Yes. For FX, it's a fair point. This year has been challenging in terms of foreign exchange headwinds. I commented that in my review of the P&L, and you see the impact in the revenue and profit and EBITA.

The FX headwinds is more pronounced in Americas and Asia Pacific than EMEA, of course. But in all regions, we faced a headwind. In EMEA, it was 2.1% negative for the full year, while in Americas and Pacific it was around 5%. The average is a headwind of 3.8% for the full year. And you find a similar impact in the gross profit and down to the EBITA as well.

Just to follow up on that point on FX. My question was more whether the FX is negatively impacting your organic growth, for example, because you're pricing in dollars and then you have a lag and then you settle in local currency. Is that something you're seeing as well as your peer? Or is that maybe specific to them?

I think, I mean, given the diverse portfolio and the diverse set of customers and different regions we serve, I think we are exposed to the similar FX context. So it is actually a little bit similar. Typically, the numbers we provide, we split FX, the M&A growth and the organic so you can see the different effects. But yes, it has an impact definitely. And there is many different impacts. Lags, the one you mentioned, could be one, of course, yes. But not very different from what you could see from our peers.

Your next question comes from the line of Hannah Harms from BNP Paribas.

Two questions from me, please. The first is, I'm interested where you think we are in a cycle and when you think we can expect to return to organic growth. And secondly, just on the weakness in volumes in Latin America, I was wondering if you could provide any more color there.

Yes. That's a good question, when the cycle return to organic growth. For the moment, I think it's too volatile to do any statements about that. And as I was also saying, some things seem to turn positive, the PMI. There are some developments in Europe, where maybe the competitiveness of the European-based manufacturers is going to improve. But then some other things happen out of the blue. And therefore, yes, I find it difficult to predict. On the volumes on LatAm, it's mostly, I would say, Brazil that is suffering and also Mexico.

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

The first question I had was when I look at your total M&A spend in 2025, it was quite a bit above what I was estimating. And actually, your annual report is quite comprehensive and big. So I just looked at the business combination section, and it seems the number of acquisitions that you did are consistently what I had in mind.

And if I look at your disclosures, it seems maybe the annualized EBITDA run rate here is something like EUR 20 million based on what you've told us in terms of contribution last year. And since you paid EUR 164 million for it. I'm just curious, is that the right way to think about it? Or are the multiples much different than what you typically pay, which is something like 7 to 8x EBITDA?

The second question I had was just going back to the discussions around in-sourcing versus outsourcing. From what you seem to be saying, Anna, is this is not different from past years. Or do you actually see more push for in-sourcing? And I'm asking this because, I mean, you are clearly aware, as we all are, that this down cycle in the industry is probably one of the longest, if not the longest down cycle. So my question to you is more, is this prompting more in-sourcing than you typically would have seen?

Yes. Let me first answer that question and I'll give to Boris then about the M&A spending. Yes. I see more or less the same that I've seen before in difficult times. It's true what you say that, of course, it's been a long downward cycle. And so the situation for principals is tough. But equally, therefore, some are giving more to, I would say, distribution than before. So that's why I say I see the same trends, the pluses and the minuses. And nothing really different from what I've seen in the 13 years that I work here. Maybe you can give more information on the M&A.

Yes. On the M&A, Chetan, thanks for the question. I think first off, in 2025, we had a payout a little bit higher than EUR 200 million, EUR 230 million exactly. First off, you need to keep in mind that we have deferred consideration related to prior M&A that is also included in that cash-out. And it's about EUR 100 million.

So for the acquisition, actually, we closed this year 4 in total. Actually, this is what I commented on the growth impact it had. So overall, it was a 3.3% growth on the M&A side for the year, mostly in Europe given where the acquisition were, I mean, ACEF and Distona, for example, in Europe. The total revenue combined, it corresponds to EUR 110 million versus prior year.

In multiples, and probably I'll give it back to you, Anna, I don't see that there is any specific trend change or worries in that respect. But probably on the market and on the M&A multiple that we see or the expectations we see in the market, you want to have that back.

Yes. So normally, as you know, we paid in the past high single digits. And as I said it also in my presentation, we see that currently the owners, they have too high expectations. They base their expectation, of course, on the past good years, and they are very reluctant to have a new baseline.

And that's one of the reasons we are also facing. And that's why, I think, also why many of our peers are also doing less acquisitions. So I see, yes, some stability there. And we are expecting that at a certain moment this will ease. We just don't want to overpay for our acquisitions.

Your next question comes from the line of Nicole Manion from UBS.

Just one follow-up, please, on the competitive pressure from Chinese suppliers. I know you specifically called out Southeast Asia as where you're may be feeling most of this pressure.

But some peers maybe haven't seen this in the region or perhaps they're seeing similar pressures from China but actually more in different regions like LatAm. I wonder if you've got a sense of whether these differences are just down to specialty versus semi-specialty mix and how that differs by region.

Or is there anything you can call out specifically in terms of the end market or country exposures? Are you particularly exposed, for instance, to parts of the market which are especially oversupplied in Southeast Asia? Any color there would be helpful.

Yes. Actually, we see the pressure everywhere where we have more semi-commodities. And as you heard also from earlier comments, for example, in Asia, in APAC, where we did some acquisitions, we have that. But we have it also across the other regions.

So if you look at Europe, Middle East, Africa, we have -- and mostly Africa actually, we also have more pressure. But as this is, of course, part of the bigger EMEA, in total, we see it less. And LatAm, we see exactly the same. And that's also why, for example, Brazil and Mexico are performing less well than we were anticipating. So no, it's not only in Southeast Asia. We mentioned Southeast Asia, but it's definitely not only there.

Your next question comes from the line of Annelies Vermeulen from Morgan Stanley.

Anna, Boris, I have two questions, please. So just on the cost program, which I think you've delivered your cost savings run rate that you had targeted. How much more is there to do in '26? And what specifically are you focusing on in terms of any ongoing cost reductions?

And then secondly, just a follow-up on Asia as well. Could you talk a little bit about how this competitive pressure is shaping your strategy for 2026? Are you planning to work more with Chinese suppliers? And if so, how are you managing that alongside your relationships with your Western suppliers? Can you talk about that?

I'll take the first question and then maybe you, Boris, you can give more about the cost program. So on APAC competitive strategy, very important is, of course, to increase our specialties there. And we've been doing that actually for a number of years already every time we do an acquisition. Therefore, we also have this decommoditization done constantly. We invest there in technical resources, in labs, in specialty portfolio.

And that's, I would say, not linked to Chinese suppliers and our strategy there. We are agnostic. As I already said before, we want to have the best portfolio for our customers. So we look for principals who can provide us with innovative, high-quality, reliable products. And yes, they can come from everywhere. For us it doesn't matter the way they come. And today, of course, they come from mostly the Western principals. If in the future years, that will change, we will look there as well.

We have plenty of gaps in our portfolio. We don't need to drop any current existing relationship. And especially in Asia Pacific, which is a young region for us with an emerging portfolio, we have a lot of gaps in the portfolio that we can fill with either Western principals, Asian principals, any one that is helping us actually in serving our customers better with a very strong specialty portfolio.

And for cost saving programs, so yes, indeed, we announced a EUR 20 million run rate cost saving in April. And actually, we delivered on this cost saving in 2025. But let me clarify. So we had a positive impact in the P&L in 2025 already of a little bit more than EUR 20 million. That includes structural cost savings but also one-offs that will not repeat in 2026.

However, the run rate we achieved at the end of 2025 for structural cost savings is also a little bit above EUR 20 million. So expect some of the impact to continue to spill into 2026. We won't give you any proportion, but it will be a complement of what we already saw in 2025. Overall, a little bit more than EUR 20 million run rate was achieved by the end of the year.

And just to clarify on the cost. Is there more cost that you want to take out in 2026? Or are you happy with the cost base, where it is today?

So we have implemented the actions that we expected to implement. So the impact that will be seen in 2026 in full comes from actions already implemented in 2025. Now given the start of the year, we will be very vigilant and disciplined on the way we manage costs. And as necessary, we'll take actions to continue on optimizing our cost base.

[Operator Instructions] And your next question comes from the line of Matthew Yates of Bank of America.

A couple of questions, please. For Boris, can you just clarify, did you take any sort of inventory write-down or adjustment in the quarter? I see you highlighted that your number of inventory days were down quite significantly. Just wondering if there was any sort of cleaning up effect there specifically at year-end?

And the second question really for Anna. You mentioned this phrase in your introductory remarks about sharpening the capital allocation. I guess with the benefit of hindsight, what lessons have been learned over the last few years about the way you've allocated your capital? Having leverage of 3.3x at the moment is somewhat unfortunate because you're not in the position to invest countercyclically in assets or in your own shares, as you alluded to.

So is there some admission here, some humility that maybe the company deployed too much capital in a short space of time? It wasn't necessarily identifying the right or the best assets for the portfolio and it's been relatively slow to integrate them and drive synergies through? I'm just wondering what lessons have been learned about the last few years.

So I'll take the first one. Thanks, Matthew, for the point. We have rules, right, to impair inventory when they become aged or when they become nonsalable. We don't have any specific cleanup happening in Q4. So the reduction that actually we commented on is really actions to work on the volume, right?

So again, as we said, we hold strategic stock for customers and principals and we want to keep the stock. But there is also a part of our inventory that requires some optimization. This is the one we worked on. But no specific accounting write-down that will be overweighing the reduction that we commented on the inventory.

Yes. And on the sharpening of the capital allocation and the lessons learned, if you look at all our acquisitions, and I think maybe last call or one of our lab tours, I alluded to it, we did a deep dive in the performance of all our acquisitions. And actually most of them are performing very well. It just takes a little bit longer than we expect. And especially, of course, when the market turns more difficult, which has happened the last 2 years, I would say, it takes longer.

And so I don't think that we applied too much capital to M&A. I think that, yes, again, it takes more than we were anticipating. But we see that ultimately it delivers the value. At this moment, of course, we are being prudent. We are pacing it. Leverage is, of course, something that we take seriously, and that's also what we have presented before. But it's also, as I said, at the moment, I have a bit less appetite. I don't want to overpay.

And we have a lot of talks with M&As. And they still say, well, I'm just going to wait until results get better and then we talk again. And yes, we'll keep in contact. But I don't want to overpay. So lessons learned and something too differently, I think we had already quite a good process in screening targets that are accretive to us, that fit exactly in the gaps in our portfolio. And we will continue to do that when the market turns.

Your next question comes from the line of Luuk Van Beek from Degroof Petercam.

I have a question about, say, the sentiment among your customers, when you talk to. Them, do you see any change that they now have, for example, adjusted to the impact of the tariffs and are more looking to increase the business in the coming years? Is there any change in the attitude?

It's a very different per segment and per region, I would say. So if I would have to make a big average, I would say it's the same as the last couple of months. So not really a difference. But in some segments, yes, they are a bit more upbeat. And in other segments like, for example, the industrial, they still don't see the light at the end of the tunnel.

Okay. And you mentioned the BB+ rating that you want to keep. Do you have a specific leverage level in mind that you want to keep? Can it stay around current levels? Or does it need to go down?

Yes, I will take that one. Listen, today, we are at 3.3. Again, as I said, it's a little bit on the high side. So if you want to keep a direction of travel, we don't want to be too far away from 3.0. So that's the direction of travel we see. We're not short of actions in 2026. Again, as I said, number one is to raise the EBITA. And then we'll allocate the necessary cash to deleverage to stay around that level.

[Operator Instructions] And your next question comes from the line of Stefano Toffano, ABN AMRO ODDO.

A few questions left from me. So the first one is on a comment that you made about the free cash flow conversion, mentioning that historically it has been over 90% and that you expect it to remain at those levels. To me, this reads as in basically, you expect no growth for this year. Do I understand that correctly?

Then the second one is, again, sorry, on these Chinese producers. So I understand that you have lots of gaps, of white space left in Asia Pacific and that you remain supplier agnostic. But I was wondering, is targeting more business with Chinese suppliers, would that, in some way in the future, impair your relationship maybe with the Western suppliers also given exclusivity agreements? And maybe would that also mean going a little bit more vertical, so a little bit more mix in blending, that kind of stuff?

And the last question that I had was on the capital allocation. You mentioned also the buybacks. I don't know if you can be a little bit more specific on that in terms of maybe timing, on the quantity. What kind of levels would you expect to see?

Shall I take first the question on Chinese producer? And then you can take The free cash flow and capital allocation.

Yes.

On the Chinese producer, as I said, we have so many gaps, by the way, not only in APAC. Even in Europe in, I would say, a mature position we have, there's still a lot of gaps in our portfolio. It's very common, I would say, that you have different principals in your portfolio. Today already, we work with several competitors, Western ones for a given product portfolio, obviously not in the same region or in the same country.

So it's widely accepted that we or distributors, not only me, distributors work with different producers in different markets. And also they work with different distributors. So they work with us. They work with IMCD. They work with any other ones. So I don't see it really as a big problem. And so first, we have gaps enough. Second, it's widely accepted that, yes, you have competing principals in your relationship, again, not in one given geography but across the world, yes. So I don't see really a problem there.

For your first question about free cash flow conversion, Stefano, I don't see the link with the absence of growth. I mean, the average conversion rate that we talk about is measured over 5 to 6 years. And in these years, we did grow. So we are simply converting a lot of cash from our EBITA. If the EBITA is growing, so does cash. The number one thing that we want to highlight for this year is when the EBITA is not growing, we still deliver a very healthy amount of cash that we are then able to deploy according to the capital allocation policy I described.

And talking about that, listen, on buybacks, like other elements that I talked about in the capital allocation priorities, this is one option we have. We don't have a specific action in mind as we speak, but this is something we definitely don't want to rule out and consider. And it will be measured on its own merit when we decide to have the deployable capital at hand.

There are no further questions on the conference line. We have come to the end of this call. I will now hand over to Chief Executive Officer, Anna Bertona, for her closing remarks.

Thank you. And thanks, everyone, for spending time with us today. We have given you insights on what drove our performance in '25 and how we are positioning ourselves for the longer term. More importantly, I trust that I have conveyed how ready we are to face what is ahead and come out on top. Yes, there are challenges, but we know where we want to be and how to get there.

So with that, I wish you a good day, and I'm looking forward to seeing you or speaking with you again soon.

Good morning, and welcome to Azelis' Nine-month Trading Update Call. As usual, we have Anna, Group CEO; and Thijs Group CFO, with us. Anna will give a high-level overview of our performance and a few words on the outlook at the end of the presentation. Thijs will walk us through the numbers.

We will take questions after the presentation, but until then you will be on listen-only more. We would like to remind you that the presentation and Q&A may contain forward-looking statements that are subject to risks.

Now let me hand you over to Anna.

Thanks, Ben, and good morning, and thank you for joining us today.

I will go off script a bit here and open the call by addressing our announcement regarding our group CFO. As you have read, after 10 years of service, Thijs has decided that it's time for him to move on and get cracking with new challenges outside of Azelis. Thijs started at Azelis three years after I did, and I was then CEO of EMEA, and he decided to fill in the open EMEA CFO position of interim next to its group role, originally for a short time, but he continued in this role until I moved to the group CEO position. So we have worked together very closely for 10 years. When he joined Azelis, we had an EBITA of EUR 90 million, leverage of almost 7x and a disjointed finance organization that shared only the Azelis name and not much else. He came from a cushy APAC finance leadership role in a big international chemical company. He must have been tempted to turn around and catch the next flight back to Singapore. But for some reasons, he stayed and took on the challenge, and I'm very glad he did.

One of the milestones in his finance leadership journey was obviously leading the IPO of Azelis in 2021. I'm also grateful for Thijs for helping me with my transition into the group CEO role last year. We are in the process to appoint his successor, and we have agreed that Thijs will stay until is necessary to have an orderly handover. And in the meantime, we plan business as usual. One thing is certain, I will miss him as a colleague and as a person.

Now let's turn to our results for the first nine months of 2025. And as usual, I will start with the most important messages based on our progress year-to-date. First, the market remained difficult with the challenges in the first half of the year persisting in Q3 as the industry normalizes and adjusts with the ever-shifting geopolitical and trade dynamics. The 34% increase in our free cash flow demonstrates our strong ability to align our working capital investments to the demand environment. Second, as we have limited visibility on when the market will normalize, we are balancing our cost structure, cost reduction measures to rightsize the organization while doubling down on investments to future-proof Azelis and ensure that we emerge even stronger. I am pleased we are delivering well above the commitment we gave on our cost savings program.

And my last point will be familiar to you, and it's a point that I firmly believe in. The fundamentals of the specialty chemicals and ingredient distribution industry are intact and the long-term drivers remain attractive as was also confirmed by the latest BCG chemical distribution study. Yes, we face some temporary challenges. Yes, the normalization is taking time, but consumers will continue to consume and products will continue to be produced. Principals more than ever need a strong partner to grow their business and the role that large distributors like Azelis play will only expand.

Now let's move to the results of the first nine months on the next slide. In the first nine months, we made revenue of EUR 3.2 billion, a 2% increase over the prior year in constant currency. Organic growth was broadly stable despite the slowdown, specifically in EMEA in Q3. Our gross profit in the first nine months was EUR 752 million, which is 1% behind the previous year in constant currency. Gross margin contraction was due to the negative mix effect from our newer business in emerging markets.

Adjusted EBITA for the period was EUR 333 million, and adjusted EBITA margin was 10.5%, while conversion margin was 44.2%. The contraction in our profit margin reflects the compression in our gross profit and partial benefit from our cost savings measures, which will ramp up in Q4.

We generated EUR 293 million in free cash flow, so our cash conversion ratio expanded by 29 percentage points to 87%. This reflects our disciplined approach to managing the business and shows once again the resilient nature of our business model. Our leverage at the end of September reached 3.4x due to the slow organic EBITA development, a peak in deferred payments earlier in the period as well as M&A investment in select growth opportunities. We are still committed to our leverage policy and expect to manage this back to below 3x while balancing investments for the future.

Now let's turn to the drivers of these results on the next slide. And in this slide, I'll walk you through the key trends that we saw during the period. We saw mixed trend in Life Sciences and incremental challenges in Industrial Chemicals, especially in the third quarter. Momentum remains strong in pharma across all three regions. Food was strong in the U.S. and in fact, growth accelerated in Q3. In APAC, we saw some green shoots with some normalization. However, this was offset by weak performance in EMEA, especially in Middle East and Africa. Agri was broadly stable. And in Personal Care, the continued positive momentum in EMEA mitigated the softer trends in U.S. and APAC. Although in these regions, the rate of decline in PC somewhat moderated in Q3.

Turning to Industrial Chemicals. We saw incremental slowdown. In case, we saw weaker trends in EMEA with volume growth offset by price pressure, especially in Middle East, Africa. In the Americas, demand remained soft and prices are holding up. Where we saw though some positive signs was in APAC with positive volume growth for the first time in seven quarters. Although I would be cautious here, it is too early to tell if this is a real inflection point. And then Lubes, Metalworking Fluids delivered soft performance in Q3, driven mostly by weakness in EMEA, lower volume and price pressure. And this was somewhat mitigated by better performance in U.S., while in APAC, Lubes was stable.

If we look at the regions, EMEA delivered weak performance in Q3 after a strong start of the year, and that's mainly driven by a slowdown in industrial chemicals and broad-based weakness in Middle East, Africa. Trends in the Americas remained soft across the board with the uncertainty over the short-term economic outlook continuing to weigh on demand. And then lastly, in APAC, the competitive pressure across Southeast Asia due to oversupply from China continues. But on a positive note, we are starting to see some green shoots in China.

If we look at inorganic growth, we continue to pace our M&A, focusing only on the most strategic projects while our leverage is elevated. We will not pursue compelling growth opportunities, and this is reflected in the acquisitions that we have completed year-to-date. Solchem was the missing piece in our offering in Spain and gives us access to the lucrative and growing nutraceutical market. S. Amit and Distona are small bolt-ons that complete our business in India and Switzerland, respectively. And with ACEF, we are creating the largest personal care distributor in Italy, providing scale benefits and synergies.

The pipeline remains strong, and I'm confident that we will return to full M&A execution as soon as we have stabilized the balance sheet to below 3x leverage.

And with that, I now hand over to you, Thijs, to walk us through the numbers.

Thank you, Anna, and good morning, everyone. As Anna mentioned, our resilient model and disciplined execution continue to support us through a volatile environment. I will now walk you through the group's financial performance and regional developments for the first nine months of 2025 with a focus on the third quarter.

Now let's start on the next slide with a high-level overview of the P&L and the drivers of our performance in the third quarter and the first 9 months of 2025. Our group revenue for the first nine months of 2025 reached EUR 3.2 billion, representing a year-on-year growth of 2.1% measured at constant currency. This reflects a 2.4% growth delivered by our Life Science business and 1.7% growth of Industrial Chemicals, both measured at constant rate. In the third quarter, revenue came in at around EUR 1 billion. This indicates a 3.8% year-on-year decline, giving a 3.5% FX headwind and a 4.1% organic decline offsetting a 3.9% revenue growth contribution from acquisitions.

Gross profit for the first nine months came in at EUR 752 million, representing a 1.3% year-on-year decline at constant currency. Gross profit as a percent of revenue contracted by 80 basis points to 23.7%, mainly due to mix effects from emerging markets and competitive pressure in Asia and Latin America. The adjusted EBITA came in at EUR 333 million, reflecting a year-on-year decline of 7.1% at constant currency, resulting in an adjusted EBITA margin of 10.5%. This performance reflects our lower gross profit from especially emerging markets and only the partial benefit from our cost savings, which are on track and are expected to ramp up in Q4. The slower development in EBITA growth resulted in a conversion margin of 44.2% compared to 47.1% in 2024, but this indicator remains robust in my view.

Now let's look at the breakdown of our performance drivers on the next slide. On this slide, we provide a high-level breakdown of revenue, gross profit and adjusted EBITA into organic, M&A and FX. The breakdown by business provides insight into our regional diversification as well. Now on the revenue line, growth contribution from acquisitions offset the decline in organic revenue as well as the negative FX effect of FX translation.

Organic revenue was broadly stable in the first nine months of the year with growth in EMEA, offsetting softness in the Americas and Asia Pacific. In the third quarter, organic revenue declined 4.1%, mainly in Industrial Chemicals, while Life Science remained resilient with a pickup towards the end of the quarter.

Gross profit in the first nine months declined by 4.1%, driven by an organic decline of 4% and a 2.8% FX headwind, partially offset by a 2.7% growth contribution from recent acquisitions. In the third quarter, organic gross profit declined by 8.6%, driven by mix effects, price pressure and regional dilution.

Adjusted EBITA for the first nine months was supported by contribution from the acquisitions, partly mitigating the 10.2% decline in organic EBITA and 2.8% headwind. The organic EBITA decline was driven by lower gross profit margin and higher operating costs in EMEA and Americas as the benefits from our cost-saving initiatives are only partly reflected in the results.

Maybe zoom in a little bit on that. Please note that our operating cost in the quarter is coming down significantly and is lower than prior year despite payroll inflation and acquisition impact. The operating cost is down 2% year-on-year despite roughly 3% to 4% salary inflation and acquisition impact, resulting in being well ahead with the communicated cost savings, and we will see more ramp-up in the fourth quarter.

Now let's have a look at the regional financial performance on the next slide. Start with EMEA, which makes up 45% of our group revenue. Revenue for the first nine months came in at EUR 1.4 billion, representing a year-on-year growth of 5.9% or 7.2% in constant currency. This was driven by organic revenue growth of 1.4% and revenue growth contribution from acquisitions of 5.8%, partially offset by a 1.3% FX headwind. In the third quarter, revenue increased by 4.2% year-on-year as the organic decline of 5.6% was offset by a 0.8% FX tailwind and 9% revenue growth contribution from acquisitions that we did.

During the quarter, the Life Science business was broadly stable with growth in Agri and Personal Care, offset by weakness in food, in particular Middle East, Africa. Industrial Chemicals delivered weaker performance during the quarter, especially in CASE and lubes and metalworking fluids as demand in terms of volume slowed in the largest markets and our business in less mature markets saw only modest volume growth.

Gross profit in EMEA grew by 3.6% year-on-year or 4.7% constant currency to EUR 365 million, translating to a 56 basis point contraction in gross profit margin to 25.4%. This is mainly driven by a mix effect across the businesses in terms of volume. During the quarter, margins were stable compared to previous year at 25.4%. The adjusted EBITA margin decreased by 3% to EUR 175 million, resulting in a 112 basis points adjusted EBITA margin contraction to 12.2%. This is driven mainly by the aforementioned mix effects and higher operating costs compared to prior year with the benefits of the cost savings actions in the region partially reflected in this result. I'm not concerned there because this region is well on track to deliver their cost savings commitments ahead of communication, and we expect improvement of the run rate of these savings in the fourth quarter and, of course, next year. The above resulted in 329 basis point step down in conversion margin to 48%.

Now let's turn to the Americas. This makes roughly 35% of our group revenue. The revenue for the first nine months ended at EUR 1.1 billion, reflecting a year-on-year decline of 5% or 0.9% in constant currency. Organic revenue and M&A growth revenue contribution were broadly stable. While FX translation presented a negative impact of 4.1% as the euro strengthened versus the dollar, and that obviously impacts our performance. In the third quarter, the revenue declined 8.1% with minus 6% FX effect, quite material and 2.1% organic decline. The organic revenue decline was driven by a mixed performance in Life Sciences, where we see accelerated strong growth in food and pharma, offset by demand softness in other end markets in the segment.

Our Industrial Chemicals business in the Americas remained weak. We returned although slower-than-expected volume growth in case, partially supported by better growth in lubes and metalworking fluids, but that's coming at lower margins. Gross profit in the region declined by 9.2% to EUR 266 million with 109 basis points contraction in gross profit margin to 23.7%. The margin contraction was mainly driven by mix effects across the business in the region with higher contribution from Industrial chemicals and Latin America as well as margin pressures in that region, LatAm, where margins were diluted by low-margin products in Colombia. Adjusted EBITA declined by 15% to EUR 127 million, driving adjusted EBITA margin to 11.3%. The 133 basis point contraction was mainly due to the softer top line gross profit and dilution from a less mature Latin America business. Also here, the results only reflect partial impact from the cost savings programs, which we expect to ramp up in the fourth quarter. The lower adjusted EBITA resulted in a conversion margin of almost 48% for the first nine months of 2025.

Now let's move to the last region, Asia Pacific. There, the revenue declined by 7.2% to EUR 617 million, driven by an organic decline of 4%, FX headwind of 4.4%, partially offset by revenue growth contribution from acquisitions of about 1.1%. The third quarter was tough. In the third quarter, revenue declined 11.7% with 7.6% FX and 4.6% organic. This organic revenue decline was driven by continued pressure in Southeast Asia as in our view, tariff-related uncertainties continues to weigh on demand and pricing due to excess supply. Also weakness in Australia and New Zealand and residual impact of our portfolio optimization program in the region as we close the plan.

On a positive note, and Anna also already alluded to, China delivered broadly stable performance during the quarter, and we're seeing green shoots within CASE and AMA and a return to organic growth in the Life Sciences business as well. Gross profit in Asia Pacific declined by 12.8% to EUR 121 million, representing gross profit margin of 19.6%. The 126 basis point gross profit margin contraction reflects negative mix effects as well as the competitive pressure in Southeast Asia, which we also flagged in H1. The adjusted EBITA for the first nine months declined by 10.4% or 6.2% in constant currency to EUR 59 million, resulting in a 35 basis points margin step down to 9.6%. In here, the conversion margin actually expanded by 129 basis points to 49%, demonstrating disciplined cost control to mitigate ongoing demand pressure. The region is performing here very well.

Now let's turn to the main driver of our cash flow generation, working capital on the next slide. Net working capital as a percent of sales came in at 15.3% at the end of September 2025 compared to 15.9% at the end of December 2024 and 16% at the end of September 2024. As communicated before, we are very confident and we indicated that also in H1 to bring this back in line and are delivering on these commitments.

Compared to December, we've made continuous progress reducing our working capital levels. We've made significant progress in improving our DIO, and we are expecting our working capital will continue to trend down in Q4 in line with some historical seasonality and our commitment to managing our working capital while the demand environment remains uncertain.

As always, and I've been building that over the years with the teams, our systems, processes and team efforts as well as our predictive engines, allowing us to optimize working capital to protect our cash flow and manage our debt levels. That leads to in the first nine months, our free cash flow increased by 34.3% year-on-year to EUR 293 million, representing 29 percentage point uplift in free cash flow conversion to 87.1% for the period compared to 59% in 2024. This is a true reflection of our asset-light business model. And please note, we generate cash.

Now in summary, Q3 reflects margin pressure, regional volatility and FX headwinds, but our cost actions are delivering, and we remain on track for Q4 recovery. Our resilient asset-light business model, strong liquidity and disciplined execution position us well to navigate the remainder of 2025, and we're well positioned to pick up volume as and when the market returns.

Now with that, I will hand back to Anna for some closing remarks.

Thanks, Thijs. And I will not spend a lot of time explaining the outlook as my views have not changed since the last presentation in July. Near term, the uncertainty from all the geopolitical and trade issues continue to weigh on demand. We are controlling what we can, cost and working capital to navigate the short-term challenges and at the same time, remaining focused on executing on our long-term strategy. We are rightsizing Azelis while leveraging our footprint to capture growth wherever it emerge. Longer term, the fundamentals have not changed, and they remain compelling. The most recent industry-wide paper from BCG confirms this, as I said already before.

I want to reemphasize, we are a service company. We help our customers and principles to grow and innovate, and there are no indications that there is a decreased demand for these services. Actually, the opposite. Also, we don't manufacture, and we are asset-light. This is important as a lot of the challenges that apply to chemical producers today don't apply to us. We are flexible and agile and can adapt quicker to market changes than producers. And then lastly, the industry is still very fragmented with many opportunities to grow through M&A. I see plenty of opportunities to create value as we diligently execute on our strategy.

We are accelerating investments that shape Azelis into an even stronger company fit for the future. I'm confident that we have the right strategy, footprint, portfolio, business model, and most importantly, the people to balance short-term requirements and the achievements of our longer-term objectives. Our innovation, sustainability and digital capabilities make us a key partner for customers and principles. And this is the Azelis value proposition through every phase of the cycle.

And with this, we are ready to take questions. Operator, you can open the line.

[Operator Instructions] We will take our first question from Stijn Demeester of ING.

Beforehand, Thijs, I'd like to wish you all the best in your future endeavors.

Three questions from my end. Firstly, on APAC, the impact of the price competition during the quarter seems more severe than thought. Do you expect that this resolves as China consumes more without domestically? Or if not, are you contemplating other actions to send this pressure on the segment?

And secondly, in spite of the current challenges, do you see any trends that make you optimistic for '26 as a year where the industry and Azelis could revert to organic growth? Or is it too soon to tell?

And then lastly, on the CFO change, since specialty chemicals distribution is a highly specific industry, can you comment on whether an internal or external CFO candidate is being sought to fill shoes?

Yes. So maybe -- and good morning, Stijn. Maybe starting with your first question on APAC. We think that some of the trends might continue for a while and the pressure in Southeast Asia is coming from China oversupply. But we -- yes, we -- I was there a couple of weeks ago. I spent quite some time with the teams, especially also in Southeast Asia, also in China, by the way. And actually, I can see that there are really some green shoots coming in some of the countries, more specifically in Vietnam, but it's a bit too early to say again, also there that it's a real inflection point.

We -- the price pressure is also in our F&F business in APAC, and that's just a cyclical business. So that will, in the end, also, I would say, dissipate. It will take some time, but I'm also confident that we get through the cycle. For 2026, I really think it's a bit early to tell. If I look at our results, there are important things that are, I would say, positive and not only in APAC. If I look at the U.S., our food business is doing very well. And actually, the growth is accelerating. In EMEA, I saw a strong personal care developments. And so that is also something that I don't see decelerating very soon. So, yes, there are some positive things. It's too early to tell, but to tell you that 2026 will be a booming year, that's also not reflect in my opinion.

And your last question about the CFO, it's a bit too early to give more details. We will communicate about the person, his background and -- in a couple of weeks' time.

Your next question comes from the line of Suhasini Varanasi of Goldman Sachs.

I appreciate the climate is quite difficult at this point in time. But is there any color that you can share on recent trading or on order books? And -- or any color that you can share on what it will take to actually see some stability in the top line or on other sizes?

Yes, good morning. We see a continuation of the trends and the volatility is still there. We still have the order pattern that we have talked about before. So we have still more frequent smaller orders that is a sign that the volatility is still continuing. And let's not forget that although there seems to be some agreements on the tariffs, the details are still not clear. And sometimes, if you think, for example, Europe and U.S. are already clear, no, there are still product categories that go in and out of that. And so this uncertainty still remains.

If I look forward, I would say a continuation of what we have seen in the past months. And what it does take to stabilize, I think, to have a clear view on where the tariffs will end and really have a clear view on what the percentages are of the tariffs between the different countries and also what exactly the product categories are that are in and which are out. If we have that, I think then the market might normalize.

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

The first question was, can you quantify the savings that you achieved in Q3? I think if I'm not mistaken, earlier this year, the announcement was to have EUR 25 million of total gross savings. And I'm just curious how much of that came in Q3? How much do you think can come in Q4, so we can think about the phasing? And also with these savings ramping up in Q4, should we be expecting Q4 to show probably better than seasonal trends because historically, Q4 is usually down 5% to 10% on earnings versus Q3. I mean, should we be modeling somewhat better trend than that because you'll have higher contribution from savings?

The other question was just on your comments about green shoots and you mentioned specifically even in China. I was just curious which end markets do you see these green shoots? Or is it more broad-based?

Yes. So, Chetan, thank you for your question. We're well on our track with our operating costs. To give you some math here behind it. Our operating costs in Q3 were EUR 139 million versus last year, EUR 142 million. but this also includes a large part of M&A. So that's roughly EUR 6 million. Our organic costs basically, if you then go back, there's basically EUR 4 million lower than Q3 2024 at constant currency, but it also includes roughly EUR 2 million of salary inflation.

So, yes, if you add that all together and you take the EUR 6 million of the inflation -- the EUR 6 million from the M&A and the EUR 2 million of the inflation out, yes, that's quite a cost saving. Now obviously, these cost savings started somewhere in April, May, and they're ramping up, that takes time. So we see a ramp-up in Q4 of these cost savings. So we're forming -- we said to the market that we will generate a cost savings on an annual basis of EUR 20 million. of which half will be in 2025. But yes, we're going, of course, much more towards the EUR 20 million already in 2025 and probably higher based upon the run rate where we are right now. So that will give you some color.

So far, we are ahead on our schedule on our cost savings program, and we expect to deliver that full EUR 20 million, as I said, or outperform it by the end of this year versus our initial commitment of -- that we basically indicated for Q1 2026 completion. So that comes to the Q4 answer. Yes, there will be an uptick in the cost savings. And yes, you can use a little bit of trend and amplify that from Q3.

And then you had a question indeed about the green shoots in China. It's the industrial segment case that we see bottoming out. And that's for the first time that we have seen that since, I think, seven quarters or so. And as I was also saying, Japan, Australia are also in Korea are also back into organic growth, and that gives me confidence that we are on the right track.

Your next question comes from the line of Annelies Vermeulen of Morgan Stanley.

I have two questions, please. So firstly, on the competition from Chinese suppliers. We obviously spoke about this at the half year. Could you talk a little bit about how that has developed through Q3? Have you seen that competition step up, particularly as tariff noise has increased and whether you're seeing it elsewhere outside of Southeast Asia, so in LatAm or EMEA, for example, and whether you expect that to continue for the foreseeable future?

And then secondly, just on leverage, you've reiterated your commitment to be below 3x. Can I just check what your expectations are in terms of leverage at the full year and whether in that context, you expect to complete further deals in Q4?

Yes. Regarding your question on competition in China, we've seen it's indeed in Southeast Asia, but we also see it in Middle East, Africa and in LatAm. I think that it's logical that it goes there. It's the surplus that comes from China. It doesn't flow into the U.S. It flows less into Europe because of the, I would say, regulatory barriers. So it's less easy to get a quick disposal of oversupply. And then it goes into these regions that we are seeing. That's also one of the reasons that our Middle East, Africa business is down, although that is also created due to the conflict, of course, that's ongoing in the Middle East. Due to the current situation with the cease fire, we hope that, that will also give a positive push to our business that is down also due to that.

Thijs, you can maybe answer the question on the leverage expectation.

Yes, sure. If there's no improvement in the organic EBITA growth, we might still be above 3x, but lower than where it is right now. We also are working, of course, on our working capital, and there's some seasonal inflow towards the end of the year. So it's up 3x, maybe only early in 2026. But okay, it's, of course, difficult to say because it's related to an organic EBITA development. Also on the M&A side, we have no large deals in the pipeline. We have a strong pipeline. But basically, what we're doing there, we're pacing the M&A as we indicated to do before. And then that's how we manage that. And Anna is, of course, very much in discussion on the valuations of those deals.

Just a follow-up on the Chinese competition or Chinese excess supply. Would you say that, that has stepped up in Q3 versus Q2?

I would say mainly in Southeast Asia, Q3 versus Q2 a bit more. And for the rest, it was already visible in Q2.

Okay, very clear. Thank you. Thijs, thanks very much, and best of luck for the next chapter.

Thank you, Annelies.

Your next question comes from the line of Nicole Manion of UBS.

Just one follow-up, please, on the cost base. Obviously, you've been very clear about your actions for this year to rightsize the business for the demand picture. I'm just wondering if you have any sort of early thoughts about how that kind of develops into next year. You've obviously been clear that the structural attractions of your industry are intact. How are you expecting to balance that with how you think about budgets and so on into 2026?

Yes. As we communicated now, we communicated to the market the EUR 20 million on a run rate basis, but we're already making that for 2025. And if you take basically the cost savings delivered in Q3, it's roughly around EUR 5 million, EUR 6 million. So you can take that as a run rate. Obviously, we will see Q4, it will pick up. And we have already delivered roughly EUR 10 million to EUR 13 million already in cost savings in this year. So I think that the run rate, what you can use there, of course, majority of these cost savings are sticky and they will remain can use for a run rate in 2026.

[Operator Instructions] Your next question comes from the line of Luuk Van Beek with Degroof Petercam.

First a question about stock levels. I hear some chemical companies talking about destocking at the customers. Is that something that you recognize?

And the second question is about Latin America and Southeast Asia, where you mentioned that margins are now lower. Do you see that something that structural would make it more less attractive as a growth target? Or do you still think that those markets offer potential in the longer run?

And finally, I was wondering about the trade-off between dividends and M&A. I can imagine that you can base your acquisitions only limited time, but otherwise the opportunities will go away. How -- to what extent are you willing to lower your dividend to your ability to execute acquisitions?

So, on the stock levels, we have -- we think that the stock levels at our customers are actually already pretty low. And that happened already in Q3 and Q2, and it's still going on as customers are uncertain what's going to happen. yes, they wait and buy just what they need. That's also reflected, as I said, in our order pattern, this higher frequency, lower value orders that we see. So I don't see a destocking for me if it happened, it's already behind us. I think as soon as the market grows, we will see immediate an uptick because from our perspective, these are stock levels that cannot be maintained in a normal business environment at our customers.

Second question on LatAm. No, the margins that we have seen is really a mix due to the business drivers behind it. So it's not something structural that will continue. We have had, as Thijs already explained, some more commodity part in LatAm that did a bit better than the rest. And that, of course, makes our gross profit percentage go down, but it's not something structural.

On your M&A question, divestments and those kind of things, our leverage is elevated. So it's not a relevant question at this point in time. On the M&A, obviously, we have full pipeline.

So maybe Anna can get some comments on the valuations, what you're seeing, but it's just like we're pacing it at this point in time.

Yes, we have indeed -- we normally don't have formal processes. So, it's one-on-one discussions. They can also, therefore, be more easily delayed. We have a lot of discussions going on. We see that multiples are coming down because in this uncertainty, also for the owners of this company, they don't know exactly what's going to happen, and that plays in our favor to wait out a bit here and there. So I don't want to overpay. And yes, it's not all negative to pace our M&A at the moment.

Your next question comes from the line of Hannah Harms of BNP Paribas.

I was just wondering if you could give a little bit more color on your comments on F&F cyclicality in Asia. Are you able to tell us more about what products or categories you're seeing more pricing pressure?

Yes, sure. There are two specific products. It's menthol and patchouli that have been impacted and prices came down. And so that is also affecting our results in the APAC region.

Your next question comes from the line of Eric Wilmer from Kempen.

Obviously, free cash flow was quite strong in Q3 following net working capital savings. Could it have been a factor in printing negative mid-single-digit like-for-like sales growth in EMEA as net working capital is often used to support sales by some of your competitors?

And assuming we might hopefully see some signs of recovery in H2, who knows next year. As a percentage of sales, what would your ideal net working capital position be? To what extent could this pressure your net debt EBITA position next year as you may also need to invest again?

And then lastly, when corrected for negative Q3 performance of Latin America, would you say your North American business was roughly flat in Q3? I know that you never talk about the split, but perhaps could you provide some qualification there?

For my information, maybe you can repeat your first question was not completely clear to me. It was quite complicated. And Anna will give you on North America later on and the working capital, I can pick that up for you. Can you repeat, please, the first part?

Yes, of course. I mean, yes, sure. So free cash flow was quite strong in Q3. And I wonder if this is tied to your mid-single-digit like-for-like sales growth decline in EMEA. So, to what extent? Because what I learned or thought I've learned is that some of your competitors actually use working capital to support sales. So they're quite aggressive on how soon they can deliver product to customers. So hence, if you're cutting inventory, perhaps you may start to lose some sales towards such clients?

Okay. Okay, I see what you're saying. Listen, what we do basically, we basically -- I think compared to our competitors, we have state-of-the-art systems when it comes to S&OP. We do this in conjunction with the customers. So it's extremely back-to-back integrated. I don't see any other difference. We also invested a lot in our supply chain organization. Our service levels are very high. Our premise is to have stock, obviously, close to the customer. Please note, we have roughly over EUR 600 million in stock in every country we can supply as and if we want.

It's more basically aligning the order patterns from the customers with the purchases, Eric. And yes, there, we, of course, take action. That takes some time. So that's why I said also in H1, give me some time, I will bring it down for three days. That's it. So I don't see that there is any competitive pressure or competitors what they're doing. I think we just manage our working capital much better than they do, and we have historically have been always doing that.

So, post the question, when you say when the recovery is coming, yes, I track, of course, what are the sales orders, what are the purchase levels, what are my inventory levels. And we have basically an S&OP cycle where we do integrate reconciliation with the business procurement and those kind of things. And we feel that we have sufficient stock to manage basically the coming basically three to six months. If that picks up, of course, we can also invest back into the business and those items pick up, but your supplier cost, your EPO will also go up accordingly.

So that is absolutely not an issue for us. where we always have an inefficiency in our working capital is always on the M&A side. And we've been quite transparent about that, and I still have quite some work to do there.

Anna, maybe you can give a bit of an offer.

Sure, in North America.

You can give a bit of.

Yes. So, actually, North America is weak. It's -- we saw a case actually an incremental weakness in Q3. Personal Care is still weak, although we expect an improvement for the last quarter. our food business is doing very well, but the food business is small compared to the other business in that case in Personal Care. So it cannot make up. And that's also why midterm, we want to invest more in food and pharma, by the way, as well, which is also very small in our North America and especially U.S. business. But yes, it's -- North America is weak at the moment.

So you would say it was performing below Latin America.

Yes. So, actually in Latin America, we had a small top line growth, but margin was under pressure also due to the mix. As Thijs already said, there was more the commodity side of our business in Colombia that did well, and therefore, our margin went down. But top line, actually, they had small growth.

Very clear. Thanks very much, and all the best in the future, Thijs.

There are no further questions on the conference line. We have come to the end of this call. I will now hand over to Chief Executive Officer, Anna Bertona, for her closing remarks.

Thank you. And we trust today's call has provided some insights into how we are navigating the current market environment and why we remain confident in the medium- to long-term potential of our market. We believe we are well positioned to seize the opportunities ahead, and we are excited about what the future holds.

As always, our Investor Relations team is here for any questions or follow-up that you might have. So, please don't hesitate to reach out. Thanks again for attending, and have a nice day.