Elementis Aktie

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thank you, Kath.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes, good point.

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

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

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

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

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

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

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

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

Shall I take 1 and 3 and you do 2?

Sounds good.

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

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

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

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

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

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

Shall I do the first part and you the second?

Okay.

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

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

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

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

Anything to add, Kath?

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

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

[Technical Difficulty]

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

No more questions?

Can we just get a mic to you?

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

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

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

Thank you, everybody.

Thank you.

Good morning, and thank you for taking the time to join us today. It's great to be here. And for those of you who don't know me, I'm Luc van Ravenstein, I took over as CEO of Elementis at the end of April. I know this business well. It's been part of my life for the last 13 years and I've run both divisions and I'm passionate about this business and confident in the value we can create for all our stakeholders.

In terms of the agenda, I will start with the highlights and then will hand over to Ralph to cover the financials and segment performance. I'll then take you through to our plans for the future and then we can move on to some Q&A.

Starting with the overview of H1. We delivered strong financial performance despite a soft demand environment and we're on track to deliver full year expectations. We increased profits and margins. And an important milestone in the period was the sale of the Talc business, which we completed in May. And this helped us to accelerate the delivery of our CMD targets a year ahead of plan. And lastly, I'm excited to announce the launch of our new Elevate Elementis strategy and medium-term financial targets that will take Elementis to the next level and more on that later.

So turning to the first half financials on Slide 5. Revenues were resilient at $308 million. Operating profit was up 6% and margins increased to 21% and these margins are already sector leading. Adjusted earnings per share increased 19% and we have continued to delever with net debt to EBITDA at 0.9x. So a very strong balance sheet to support our growth and returns. And we have declared an interim dividend of $0.013 per share, up 18% from last year.

My first priority in the new job was to get the Talc sale done and in May we announced the simultaneous signing and completion of the sale to IMI Fabi for $121 million with cash proceeds of $55 million and we were delighted. I mean it was a clean break with all assets and liabilities fully transferred to IMI allowing us to move on and look at the future. We also started our first share buyback program of $50 million using the net proceeds.

With the Talc business sold, we have accelerated the delivery of our 2026 financial targets as you can see here. Our operating margin is currently 21% compared to our target of 19% plus. On operating cash conversion, we're currently at 94% compared to our 90% target. And lastly, on ROCE, we're currently delivering 28%. Now these financials put us among the top of our peer group and that's a fantastic basis to build on.

Let me now hand you over to Ralph to cover the highlights from the first half.

Thanks very much, Luc, and good morning, everyone. Before I cover the financials, I wanted to touch on our sustainability progress. On environment, I'm delighted to share that following the sale of the Chromium and Talc businesses, our carbon intensity has reduced significantly. Our Scope 1 and 2 greenhouse gas emissions intensity has reduced by 70% over the last 6 years. We were pleased to have had our science-based targets validated for Scope 1, 2 and 3 in the first half and we're committed to reducing Scope 1 and 2 emissions by 59% by 2034 and Scope 3 emissions by 35% over this time frame. We're making good progress towards our target of achieving 0 greenhouse gas emissions by 2050.

On people, our Fit for the Future restructuring program has completed whilst employee engagement has improved, a positive result given all the changes in the business. And finally, moving on to safety. We're committed to becoming a 0 injury business and we continue to invest in building a strong proactive safety culture. Regrettably, during the first half of the year, we had 3 recordable incidents compared to 1 last year. As a result of this, we doubled the number of audits and inspections across our sites to reinforce safe behaviors and identify improvement opportunities.

Moving on to the financials and starting with group revenue. In a soft demand environment, revenue was down 1% on a constant currency basis to $308 million. FX headwinds were approximately $2 million and volumes were down $2 million with Coatings down 6% and Personal Care up 4%. Price effects were positive and we were up $5 million. Adverse mix impact was $7 million. This was partly related to product mix in Cosmetics whilst in Coatings there was an impact from lower demand from industrial and construction applications.

Moving on to group operating profit. This rose by 6% on a reported basis or 7% on a constant currency basis to $65 million driven by self-help and pricing actions. The price/mix impact net of inflation was $4 million and we delivered $8 million of cost savings in the period and we're on track to achieve the targeted $12 million cost savings this year, part of the $30 million cost program we announced with the 2023 CMD financial targets and I'll cover this in more detail later.

Turning next to our segmental performance and starting with Personal Care. Sales were ahead 2% on a constant currency basis to $116 million driven by growth in both our Cosmetics and AP Actives businesses. Adjusted operating profit was up 19% on a constant currency basis to $40 million reflecting improved volumes and pricing alongside cost savings, including the impact of the closure of the Middletown AP Actives plant in U.S.A. We also saw around $2 million of oneoff benefits related to higher volumes and favorable cost absorption. As a result, the adjusted operating profit margin was up at 34% compared to 29% last year, a 460 basis points improvement.

In terms of operational highlights from our Personal Care business. In color cosmetics, we launched 2 new hectorite products based on a new gel technology that is 100% natural and it gives formulators more flexibility due to its efficacy and stability benefits. Overall demand was weaker in color cosmetics in Asia in the first half due to the impact of tariffs. We do continue to see a growing demand for natural products and skinification.

In skin care, the biggest trend remains sustainability and replacing nonbiodegradable polymers with natural thickeners. That's driving sales in the HYDROCLAY range, which is up more than 40% compared to last year. During the second half, we expect to launch our new natural film former. Finally, on AP Actives, a significant highlight for the period was the launch of our non-metal sweat control antiperspirant and deodorant active Deoluxe at the In-cosmetics Global trade fair in Amsterdam in April. Right after the launch, we received a tremendous amount of sample requests and there's a lot of excitement about this product. Lastly, our high-efficacy AP Actives range is up 13% and now represents 50% of AP actives.

Moving next to our Coatings business. We delivered a resilient performance in a soft global demand environment with revenues down 4% on a constant currency basis to $192 million. We had some operating challenges at our St. Louis site in the U.S. that affected volumes in the first half. We are now addressing these. Adjusted operating profit and margins were $35 million and 18.2%, respectively. In terms of highlights starting with architectural coatings, we developed a new thickener for ultra-low VOC paints. This was developed together with a key customer and we're now rolling it out globally.

Our bio-based and powdered NiSAT range is performing well. We're capturing the demand for sustainable products there. In industrial coatings while the automotive market remains weak, we are seeing continued strong demand in marine and protective coatings. We launched THIXATROL 5050W, our latest innovation for waterborne automotive coatings, which has seen a lot of traction with Chinese EV manufacturers. And it's not just in coatings, our products perform well. We have other exciting adjacencies, which Luc will talk about later.

Turning next to our cash flow profile. Working capital outflow was as usual reflecting normal seasonality alongside some modest stock builds to support new business gains. The CapEx run rate is slightly behind last year. We currently expect CapEx to be around $20 million for the full year. That's around 3% of sales. And as Luc mentioned, the sale of the Talc business generated $53 million. Of this amount, we used $8 million until the end of June to purchase shares as part of our first share buyback program. Net cash flow was $32 million. This cash flow has helped continue our net debt and leverage track record, which you can see here.

From the difficult times in 2020 when our leverage was 3.2x, we really have repaired the balance sheet and significantly strengthened our position. Turning now to cost savings. As indicated in our March results, the delivery of our targeted $30 million annual cost savings is continuing to progress faster than expected. Having delivered $8 million of cost savings in the first half, a large part of which relates to the completion of our Fit for the Future restructuring program, we're on track to deliver the targeted final $12 million of cost savings for the full year. We remain focused on improving our operational performance and efficiency levels and this will continue to be a feature of the business as Luc will discuss shortly.

Moving on to our capital allocation priorities. Our capital intensity has reduced significantly and we currently expect to spend around 3% to 4% of sales annually over the medium term from around 6% historically. Our focus will be on investing in growth and productivity. We have options for bolt-on acquisitions whilst all the time taking a disciplined approach to maintaining balance sheet strength. On dividends, our policy is to pursue a payout ratio of around 30% of adjusted earnings and our strong cash generation gives us future shareholder return optionality. This is in the context of preserving balance sheet strength. We will look to maintain leverage over time at around 1x net debt to EBITDA. And lastly, on pensions, I'm pleased to share that our U.K. pension scheme is well funded and the assets are now significantly derisked.

So with that, let me hand back to Luc to cover our strategic update and introduce you to our Elevate Elementis agenda.

Thank you, Ralph. This is a very exciting time for Elementis. We're at an inflection point here. We are ready to elevate Elementis. Let me begin by introducing you to the new Elementis. With Talc and Chromium sold, which were both quite commoditized and capital-intensive businesses, we're now a pure-play specialty additives leader in large and growing markets and that's a great place to be in because additives are a small part of formulations, but are critical to performance so think high margins. And Elementis has a unique position today with 3 winning differentiators: rheology, hectorite and formulation solutions. We'll talk more about these 3 advantages that make our business really stand out.

So this is the new Elementis. We've now got the portfolio we need and we're ready for growth. I've been at Elementis long enough to know what makes this company really special, but also some of the challenges that have been holding us back, and we have a big opportunity right here in front of us. And this is not about venturing into businesses that we don't know about. This is about focusing on the things that make us really special and doing them really well and our plan is not complicated.

We have 3 simple strategic priorities. First, in terms of top line growth, we haven't grown fast enough and of course markets have been challenging lately, but the distractions in Talc haven't helped. So my first priority is to accelerate growth. Secondly, our service delivery as a specialty additive supplier has to be topnotch to win new business and win it faster and today we're good, but we can do better. We want to be best-in-class. We want to be the first choice for our customers. And finally, we have an opportunity to simplify and streamline the way we work.

We're building a simpler and leaner Elementis and delivering on those 3 priorities will drive value creation. And our new ambitions are mid-single-digit growth through the cycle, adjusted operating profit margins of 23% plus, 3-year operating cash conversion greater than 90% and ROCE greater than 30%. And the team and I are focused on delivering and executing on this agenda. I'm going to be spending most of my time today talking about growth and this growth will come from the areas that make Elementis truly special, our winning differentiators.

Starting with hectorite; it’s natural, very pure and it's unique. It's used in many personal care and coatings formulations because it delivers superior rheology. And we've grown hectorite nicely over the last years. As you can see here, it's around 1/4 of our sales today and a higher proportion of our margin. Next, rheology. We have the broadest portfolio in the industry. Rheology sales, including hectorite, are about 2/3 of our business today and this is what makes formulations work. It stabilizes ingredients in a paint can. It also makes it flow from the brush and it builds a network that's needed to cover a wall. And here, Elementis is the global leader.

Finally, formulation solutions. This is our expertise. We've built it up over years and this is everything we do. It's about how we deliver value to our customers day in, day out. Now by focusing on these 3 differentiators, we will deliver mid-single-digit revenue through the cycle. I'm going to look at each of them in turn now.

Starting with hectorite. It has so many benefits. It delivers premium flow for coatings, it delivers a luxurious skin feel for cosmetics and it is natural. So it aligns perfectly with sustainability trends and we own the world's only high-grade mine giving us a unique competitive advantage. But this is not just about an amazing asset. Over the years we've developed the value chain for our plants, our labs and with our customers who can in turn offer consumers exciting new products. And our growth from hectorite actually had been good mid- to high single digit, but we can do much more here and let me tell you how.

First, we're driving deeper penetration into Personal Care and Coatings. Hectorite can replace other rheology modifiers like synthetics for example in skin care, it's more efficient and natural. I'll give you a little example of that shortly. Second, we're moving up the value chain. We're developing preformulated hectorite solutions that can offer our customers easier-to-use products. So we're building 3-in-1 systems that combine rheology control with other functional additives. We've started this, but we're going to do much more of this.

And finally, hectorite's unique properties opens doors well beyond personal care and coatings and some exciting examples are in replacing PFAS or forever chemicals in powder coatings or improving the efficiency of fire retardants. We're just scratching the surface with hectorite here. So we're doubling down on hectorite. This is a true gem in our portfolio and a massive opportunity and we are confident that hectorite will deliver double-digit growth through the cycle.

Now as I mentioned, Elementis is global leader in rheology and with operations on every continent, we are well positioned to serve customers worldwide and our teams have decades of experience here and that goes well beyond hectorite. Anybody having a rheology issue, whether it's L'Oréal or Sherwin-Williams, they will come to Elementis. And our strategy to grow rheology is clear and is focused. First, we'll gain market share regionally by leveraging our global presence and that's a big opportunity not least in the current trade environment.

Just to give you an example, in Asia where we today have relatively small market share, we have a great manufacturing setup and actually today we're expanding our site in Anji, China with local demand increasing. But we also want to expand into adjacent markets. Today, we mostly serve personal care and coatings, but our technologies are a great fit for, for example, agrochemicals, construction, other large markets. There's about $4 billion of white space in the rheology market out there and we're going to go after it. So this is very exciting.

Okay. Slide 26, Formulation Solutions. This is about how we translate our expertise into tailored solutions for our customers. We don't just sell additives. Our teams develop paint concepts and personal care formulations that can readily be adopted by our customers. And paints and cosmetic formulations are continuously changing because of regulation, sustainability or performance. And these are complex systems. There are millions of different ones out there. So for us, having this expertise is a huge enabler for growth, and we want to do more of this. So how are we going to do this?

First, innovation. We will be scaling up our R&D investment from about 2% to 3% of sales. And we're looking for fast delivery and high-impact projects. We're building a new applications lab and dedicated hectorite center of excellence in Portugal. Our goal is to grow innovation-driven sales from 15% to 20%. And these innovation sales, on average, generate margins that are about 10% above the rest. On bolt-on M&A, for me, this is about looking for technologies that would be a great fit in our toolbox, I think complementary additives that we can plug into our hectorite formulations or natural synthetic rheology. But we're highly disciplined and selective here, though. Our growth does not depend on M&A.

Finally, we want to further enhance our customer intimacy. We want to call on more customers directly, also the smaller and local champions. This is where we can bring a lot of value and fast. But we also learn a lot. Let me bring this to life with a little example. This key sun care customer was looking to replace synthetic thickeners. And because of our deep understanding of rheology and how to formulate sun care products, we developed a new hectorite-based formulation with excellent UV protection. And it also gives a great sensory feel. This is a big success. It was launched recently, and we've brought some bottles for you today to take on your vacation. Try it out. It feels great.

All right. And to make the most of this growth agenda that we just discussed, we need to be the best supplier to our customers. We want to be best-in-class in terms of service levels. We're a premium additive supplier. So that's what our customers expect from us, right? Getting there is not rocket science. The way I look at this is about mindset. It's about attention to detail. This is not a volume business. This is a value business. And we have an opportunity here in front of us to improve our on-time and full performance. We're about 20% below best-in-class, and I know we can get there. And secondly, we have a big opportunity to debottlenecking one of our biggest sites, actually St. Louis, where we make organoclays.

There's a 30% opportunity by unlocking the capacity. That's a big upside. We've actually been dealing with some backlogs there. And I've made some leadership changes recently and brought back some experience, so we're seeing the first results. But in the end, what all of this is about, it's about customer focus. And this has to be ingrained in each and every Elementis employee.

And in some areas, we might have lost that a little bit over the last years. It's not just for colleagues that are in sales or in customer service. For us, as a leadership team or if you're in HR or IT, how do our decisions and our actions, how do they impact and help our customers. And I've built relationship with customers across the business over the years, and I will continue to foster them clearly. So what we're doing here will bring us closer to our customers and reinforce our position as their trusted partner of choice. And this is a mindset thing, which brings me to the next topic.

So we just discussed how we're going to deliver sustainable growth, but there's also a significant opportunity to simplify Elementis, make it a leader company. We've identified an additional $10 million of cost savings to be delivered over the remainder of this year and next. And this amount is net of the increased R&D spend I just discussed. It's really important to execute this, certainly given the challenging demand environment we're in. And these savings will come from 2 areas. First, on overheads. We're streamlining our cost base by creating a flatter but also more efficient culture -- structure, I should say. And also, we're eliminating stranded costs associated with the Talc business. We'll be consolidating and reducing support offices and renegotiating tolling agreements. And the team and I have started this. For example, we're saving $1 million starting this year on offices. We're taking things out like IT applications that we really didn't need another $1 million of savings.

So this is important. But beyond cost savings, real priority for me is to make Elementis a more dynamic and nimble company. That means stopping activities that have no clear value, but also about delegating decisions to the front line. If a plant manager orders a pump, I don't want that plant manager to have to go through all kinds of approval processes with me involved and say, I want that person to order the pump. They'll know it better than me. And like this, we will become a more responsive and frankly, more fun place to work and one that is better positioned to deliver our growth strategy. It's also about smarter working. I don't want salespeople to be running around doing forecasts when AI can do that better.

So Elementis will be simpler and leaner and a place more rewarding to work and to do business with. So that's our Elevate Elementis agenda. 3 strategic simple priorities to drive value for all of our stakeholders, not least our shareholders. So that's it.

To recap, we've delivered a strong first half. We're on track for the full year. And with the sale of Talc, our CMD targets have been delivered early. And we're now a pure-play specialty additives business. We've set out today our Elevate Elementis agenda. And I want to ask you to come with us on this journey. We have a plan, and we're very focused on delivering. And I'll keep you updated on our progress as we take the business to the next level.

Thank you so much for listening. And with that said, Ralph and I will be happy to take your questions. Thank you. We'll hand out the microphones, if you don't mind introducing yourself, Kevin.

So Kevin Fogarty from Deutsche Numis. If I could kick off with 2, please. And just to, I guess, add some sort of credibility to the targets outlined today on the sort of growth target, could you give us some snapshot of kind of how parts of the portfolio have historically grown to sort of, I guess, sort of give some believability to the objective that you've outlined today? And does that objective require any more kind of rationalization within the portfolio?

And secondly, just in terms of the margin objective outlined today, again, could you sort of help us a little bit of a snapshot as to how much of the portfolio is kind of at or above that that objective and maybe a sense of the R&D resource that now is kind of supporting that objective, perhaps sort of given sort of Talc out of the business and any resources that may have been freed up, I guess, to support that?

Thank you for those questions. I'll give it a shot and then might dial a friend if needed. But first of all, on our portfolio, Kevin, and our growth agenda, this is about focus and about focus on what we know we're great at, things that make Elementis special. And to give you an example, hectorite, rheology, we just discussed, hectorite is about 25% of our portfolio, rheology 2/3. We have grown those businesses nicely over the last years, high to mid-single digits. So clearly, this is about focus, and we know we can grow in those areas.

In terms of our margin potential and how we're going to deliver that. Well, first of all, we discussed about our cost savings that will be a big benefit to our margin delivery. But also those parts of the portfolio that we are growing, hectorite and also rheology are accretive to our margins, as you can imagine. So that will help the mix. And perhaps thirdly, to your question around R&D and how we're going to grow all of this business. Look, today, we spent only 2% of our revenue in R&D. That's relatively little. And the additional percent, give or take, $6 million that we look to invest in R&D, this will be focused on those areas that we just discussed. I want to build a center of excellence for hectorite. I want people in our R&D teams, but also on the road with customers to be obsessing about where else can I sell this thing that makes Elementis so special.

And frankly, today, and you're right, I mean, we've been a little bit distracted, right, by the rest of our portfolio, but Talc, which we just sold. So this is also about pivoting R&D efforts, pivoting capital, but most importantly, pivoting all of our attention to what makes us really, really special. And by doing so, I'm convinced we can deliver what we just discussed.

Vanessa Jeffriess from Jefferies. Just a follow-up on the growth target. I don't want to ask you to give divisional targets, but maybe if you can just talk a bit about the divisional dynamics of growth and particularly how it pertains to hectorite because I guess there's probably a lot more room in Coatings to grow hectorite given it represents a lower proportion.

Thank you, Vanessa, for that question. And indeed, hectorite is a lower part of the Coatings business than it is for Personal Care. In Personal Care, almost half of our business is composed of hectorite or hectorite blends, whereas in Coatings, the penetration is a bit lower. It's perhaps 20% or less. So there's a lot of space to grow in the Coatings business with hectorite. I absolutely agree with that. However, what I would say is that we discussed about 3 angles to grow hectorite, one of them being going forward upward in the value chain, which is about can we add additives to hectorite to our hectorite blends or our gels to move forward to more preformulated products. That's very important for Personal Care. So I do see as we grow hectorite strongly also to the Personal Care products and business to benefit from that significantly.

So I do think that Personal Care or actually from a hectorite perspective, might grow a little bit faster than Coatings. But as I said, we're obsessing about where we can grow it. It is also beyond Coatings and Personal Care, right? We've just launched products into, for example, fire retardants that have taken off, and we've received the first orders into construction additives into agrochemicals. So for hectorite, there is a big space beyond the 2 businesses that we just discussed.

And then you've had a really good performance in Coatings given the kind of updates that we've seen from your peers. Can you just let us know how you're thinking about the second half and if you expect that to deteriorate?

Well, the market out there has been pretty tough, right, in Coatings, as you say. And we're happy that we've been pretty resilient in terms of our margins, and we've been holding up pretty well. In terms of the second half, typically, our Coatings business is about 52% first half, 48% second half. We expect that to be a little bit tighter, i.e., closer to 50-50 or 51-49. We do have some nice new business in the pipeline that we're starting to deliver. So -- but this is not about markets. I spend a lot of time with customers, understand what's going on there. They don't necessarily see the market to recover very quickly, but we do have some nice new business in the pipeline and do see a resilient second half delivery from Coatings as well. Yes. Are there any questions on the phone line? If there are, please, if you could state your name?

Yes. We…

Yes.

We have a question from the phone lines. [Operator Instructions] The first question comes from Chetan Udeshi with JPMorgan.

Luc, this is a question for you actually. And apologies if this is a bit of a direct straight question, but you're talking about accelerating growth, which is great. But at the same time, you are talking about cutting costs. I would have thought just to achieve that growth, especially in newer applications like ag or construction, et cetera, you probably would have had to put more resources rather than to have -- to be cutting costs. So I'm just curious how those 2 things actually tying together on one hand, wanting to grow and on the other hand, still focusing on cutting costs?

The second question is -- and apologies if this was raised previously, but I'm just curious if you can talk about the trends as you see in the current quarter. There is some concern that June was perhaps quite a weak month in second quarter. So exit rate into third quarter might be worse. This is not something Elementis specific, but more across the sector. So maybe if you can give some color on how you see trends across your different businesses in the current quarter?

Thank you, Chetan, for those questions. Let me start with the first one, cost and growth. For me, this is not in contradiction because the kind of cost we're taking out here is all related also to making Elementis a simpler company, right?

I mean we talked about the IT applications. We talked about the offices. So this is actually making us a more agile company that helps us to move faster. So that's a big piece of the simpler, leaner Elementis. So I think it will actually help us. Also just to note that the cost, the $10 million that we discussed is net of R&D investment. So we're spending a percentage more on R&D, $6 million. And a lot of that is going to be in the areas that you just mentioned, Chetan. So for example, I mentioned the center of excellence for hectorite, where we'll have a group of people looking at where else we can sell hectorite. You mentioned agrochemicals. It's a great opportunity in terms of suspending agent in agrochemicals blends.

So that's what those people will be doing. So I don't see our cost agenda and our simplification agenda to be in conflict with our growth agenda. I think it's rather the opposite. It will help each other. To your second question in terms of trading and June, we haven't seen that, frankly. We saw June was pretty much in line with April and May. The point is that June last year was actually quite soft. So the comparison versus June last year was quite strong for us, but that was because of a soft comparative. But no, we did not see that drop off.

Obviously, the outlook, we have less visibility than we used to have 5 years ago where you knew 12 weeks ahead in terms of your order pattern. Today, it's 4 to 6 weeks. But no, we did not see that June drop-off that you mentioned.

[Operator Instructions] And the next question comes from Georgina Barnard with ION Analytics.

Yes. Just a couple of quick questions. And first one is quite -- again, quite blunt, quite direct. But given some of your shareholders, it's no secret, they voice kind of logic in a takeover or breakup of the business, particularly given following the Talc and Chromium sales. What are your views on kind of the optimal structure of the group moving forward? And then just the second one is just if you could go into any kind of more granular detail on any of the bolt-on M&A plans just in terms of kind of more specific verticals, target regions or size?

Thank you for those questions. I mean the first question, honestly, my job is to maximize the value of this company and to focus on what we just discussed around growth platforms, growth opportunities and delivering them. So that's my focus. That's what I have in control. And honestly, I'm very excited about the opportunities we have here ahead of us. So that's all honestly, I can comment in that area.

On the second point, bolt-on M&A. First point to mention here, though, is this growth agenda, our focus is on organic growth, right? We don't depend on bolt-on M&A. We focus on the areas we just discussed. Now if there are technologies out there that are a great fit with our portfolio, for example, that we can plug in with hectorite. We talked about the functional additives that we add to hectorite and bring value to our customers as such, that will be fantastic. We're looking at that. But this is about complementary smaller bolt-on M&A that can help us grow faster, but our growth agenda doesn't depend on that.

[Operator Instructions]

Any more questions on the phone line or on the -- on the web, no.

We have no further questions on the phone line. So I'll hand back over to the management team.

All right. Well, I thank you very much for attending. I really appreciate that. Don't forget your sun care products because it's vacation time. But no, thank you so much for attending. I really appreciate this, and I look forward to continuing to interact with all of you. Thank you so much.