IMCD Aktie

Hello, and welcome to IMCD's 2026 Half Year Results Conference Call hosted by Marcus Jordan, CEO, and Hans Kooijmans, CFO. [Operator Instructions] I would now like to give the floor to Marcus Jordan. Mr. Jordan, please go ahead.

Thank you very much, Elba. Good morning to you all, and a warm welcome. I'm Marcus Jordan, and I'm here today with our CFO, Hans Kooijmans, for the 2026 half year results, which we published in a press release earlier this morning. We had a positive first half of the year with both gross profit and EBITA organic growth and a strong cash conversion. When looking at the overall business during the first half of the year, I'm proud of how our teams navigated the dynamic environment, which included the majority of our suppliers implementing price increases.

The magnitude of these price increases varied significantly with the larger specialty part of the portfolio generally receiving much lower percentage increases and showing less volatility than our smaller semi-specialty component. We, as IMCD, have been particularly careful and responsible when passing on price increases as we maintain our focus on long-term partnerships with our customers and suppliers. If we now move on to the business from a demand perspective. As Hans and I highlighted on our last call, we did not see any significant prebuying in Q1, but we did see some at the beginning of the second quarter, although I must say that the amount appears to have been relatively limited as we believe customers learned valuable lessons from post-COVID when they overstocked and ended up with high-priced inventory.

Later in the quarter, demand was more stable, and we have not to date seen any significant reduction. Looking across our various markets, our Pharmaceutical and Signet business in India, as we anticipated, has returned back to its normal order pattern during the first half of the year. Food and Nutrition continues to perform well. And in Beauty & Personal Care, we generally see stable demand versus last year. This is an area that we continue to focus on as there are good opportunities with the technical capabilities and lab infrastructure we have. On the industrial side, the best way to describe our business in the first half of the year is positive with some nice bright pockets in areas such as medical plastics, wire and cable and the lubricant market.

This business was also supported by some nice supplier wins. Looking a bit forward, it is still early in the third quarter, but I can say that we have had a promising start in what are still dynamic market conditions. And as always, we have confidence in our specialty focused and diverse business model. Moving on to the 2026 half year numbers. You will find a summary of our financial results on Slide 4, where we reported gross profit of EUR 658 million, up 7% on a constant currency basis. EBITA was up to EUR 285 million, which is plus 8% on a constant currency basis. And I'm happy to report that we increased our free cash flow to EUR 222 million, leading to a cash conversion margin of 76.2%, which illustrates our close attention to working capital management and at the same time, ensuring that we have the right inventory in place to service our customers on a just-in-time basis.

If we now look at M&A, you can see on Slide 5 that we have made 3 acquisitions during the first half of the year. Firstly, Dong Yang FT in South Korea, a company active in Beauty and Personal Care. The second acquisition was Willows Ingredients in the U.K. and Ireland, a company active in human and animal nutrition. And the third acquisition we announced at the end of June is Merit Solutions, which will strengthen our position as a solution provider for the plastics and compounding market in Thailand. Moving on to the next slide for some updates on our strategic pillars, where you will see that we continue to expand the use of AI to support our commercial organization through a number of initiatives, including further development of our sales assistant tool and more recently, a fully automated pre-visit summary for our salespeople, which summarizes all major topics that they should cover when visiting or calling their customer.

On the people pillar, with people being our greatest asset, we are pleased to add a Global People Director to IMCD's Executive Committee, and we look forward to working closely together to continue to further enhance our ability to attract, develop and internally promote top talent within our organization. You will have seen some examples of this at Managing Director level during the first half of this year. And last year, we announced our commitment to setting SBTi near-term targets, and we will shortly submit our targets for validation. To summarize and to end my part of the introduction, I believe we have executed well in the first half of the year, and I see good traction on the commercial, operational and digital excellence initiatives we have been focused on, including supplier development and expansion.

In these unpredictable times, it is even more important that we have the highest level of sales activity that we quickly adapt to changing market conditions and that we remain a reliable partner for both customers and suppliers. We focus on the things that we can control and are committed to delivering long-term growth for our partners and stakeholders in the years ahead.

I would now like to hand over to our CFO, Hans Kooijmans, who will give you an update on the numbers.

Thanks for the introduction, Marcus, and good morning, ladies and gentlemen. And I would like to start as usual on Page 8 of the presentation, where you will find a summary of the key figures taken from the press release with our 2026 first half year results. And as you can see, ForEx adjusted revenue increased 11%, which is a combination of 3% organic growth and 7% resulting from the impact of the first-time inclusion of acquisitions. And ForEx adjusted gross profit increase was 7% compared to the same period of last year, a combination of 5% resulting from acquisitions and 2% organic. We started the year, as you know, with a minus 4% organic growth in the first quarter, followed by a positive 7% organic growth in the second quarter.

And in this second quarter, all regions reported organic gross profit growth. Gross profit in percentage of revenue was 24.9%, which is about 0.7 percent points lower than last year. It's important to mention that more than half of this decrease in percentage was the result of recently acquired companies, mainly in EMEA with on average, lower gross profit margins than the legacy IMCD business. We further had the usual impact of changes in product mix, local market circumstances, price and currency fluctuations. Then ForEx adjusted operating EBITA increased 8%, and this increase was a combination of modest organic growth and a positive contribution of acquisitions of 7%. Like gross profit, we started the year with minus 9% organic growth in the first quarter, followed by a positive 11% organic growth in the second quarter.

And in this second quarter, all regions reported organic EBITDA growth. As explained to you in our Q1 call, we had quite some currency headwind in the first half of the year, both operational and when translating local currencies into the euro. The minus 4% currency translation impact on EBITDA in the first half of the year was in absolute numbers, a minus EUR 12 million. Operating EBITA in percentage of revenue of 10.8% and a conversion margin of 43.3% were both just slightly lower than the same period of last year. On the bottom of this slide, you see that IMCD has about 5,200 full-time employees. Compared to the end of June last year, we welcomed about 150 new colleagues as a result of acquisitions. We further invested in the quality of our sales and digital teams, and we rationalized the back office where needed to the back office structure and that leaded to a net saving of about 200 employees.

We exercised prudence in filling vacancies and maintained strict cost control, resulting in no organic increase in our own cost compared to last year. Then ForEx adjusted net result and earnings per share all increased with double-digit percentages, and Marcus already referred to the healthy cash flow, and I will come back on cash flow later in the presentation. Page 9, a bit more color on the year-on-year development of gross profit, EBITA and conversion margin per operating segment, whereby the differences, as you see, are split in organic acquisition and currency impact. In EMEA, in the first column was by far the best performing segment in the first half year. The organic gross profit growth in the first quarter was flat, followed by 11% growth in the second quarter, resulting in the reported 5%. The drop in gross profit margin in this segment from 27.5% to 26.7% this year was pure M&A related.

When normalizing for the impact of recent acquisitions, the average gross profit margin would have been slightly higher than last year. Similar pattern for organic EBITA growth in EMEA. A minus 4% in Q1 was followed by a very strong 20% organic growth in the second quarter, resulting in 7% organic growth in the first 6 months. The EBITA margin was stable at 11.7% and conversion margin slightly improved to 43.6% -- in the Americas, we had, as you might remember, a soft start of the year with substantial negative organic gross profit and EBITA growth in the first quarter.

Although still modest, we are happy to see that the second quarter improved, but we reported low single-digit organic gross profit and EBITA growth. The organic growth in the second quarter was not enough to compensate the decrease in Q1, resulting in negative organic growth in the first half of this year and a decrease of EBITA and conversion margin. In Asia-Pacific, after a low single-digit organic decrease in gross profit and EBITA in Q1, we saw a much healthier second quarter with positive mid-single-digit organic growth. Operating EBITA and conversion margin were more or less similar as last year and still the best-performing segment in the group. Holding costs in the last column were lower than last year at 0.6% of revenue compared to 0.7% last year. This decrease is partly due to lower cost and partly the result of a higher cost recharge to the operating segments.

Then on Page 10, a summary of the P&L lines between operating EBITA and net results for the period. You can see net result is EUR 12 million or 10% higher compared with the same period of last year. Higher income tax expenses were compensated by lower finance costs. Amortization of intangible assets increased as a result of acquisitions done and these are, as you know, noncash costs related to the amortization of supplier relations, distribution rights and other intangibles. Then the one-off costs are EUR 6 million lower than last year. And on this line, we reported a gain of EUR 4 million on the sale of a warehouse as a profit and slightly lower costs related to acquisitions and one-off adjustments to the organization.

On Page 11, a specification of the net finance cost. And as you can see, lower changes in deferred considerations as a negative and lower currency exchange results as a positive are the main drivers of the reported decrease. Currency exchange results are, as you know, realized and unrealized result of translating the monetary assets that we have in foreign currencies into local currencies. Then the IFRS hyperinflation adjustment relates to IMCD Turkey. Page 12, summary of the IMCD balance sheet. And on most lines, little changes compared to the year-end 2025 numbers. Property, plant and equipment, so the real fixed assets that we own are still relatively low as a result of the asset-light business model.

The combination of intangible assets and related deferred tax liabilities of about EUR 2.5 billion in total are a result of acquisitions done since July 2014 and our history as a private equity-owned company. On the financing side, there is EUR 1.6 billion of debt, and I will come back on that in a minute and EUR 2.1 billion of equity. This substantial equity position covers 58% of our capital employed. Page 13, a summary of reported working capital. Total working capital at the end of June was just over EUR 1 billion, which is about 10% more than December 2025 and EUR 66 million more than June last year. And the overall increase that is a combination of the impact of working capital as a result of acquisitions done.

We had some currency impact and some operational developments. The increase compared to December is the usual cycle during the year and mainly the result of higher debtor positions as a result of higher sales in the month of June compared to the month of December. When translating the amount of working capital in days of revenue, we reported 70 days end of June this year compared to the 69 days end of June 2025. And on the bottom of this slide, you could see the development of the days for the 3 most important working capital components. And -- the increased debtor days from 60 last year to 68 this year is mainly driven by much higher sales in the second quarter this year compared to last year.

Last year, June, I explained to you that 54 days of stock was relatively high. You might remember at that time, I spoke about external and internal factors having a negative impact. And we discussed last year items like the Red Sea issue, customers postponing delivery dates due to changing market conditions like tariffs and corrective measures that we took to bring down stock levels in various segments. This year, the relatively high stock days number is more positive. As Marcus mentioned, we had a promising start of Q3, whereby current stock levels are needed to cover demand of our customers. On the next slide, a summary of our net debt position, leverage ratios and the maturity profile of our debt.

Net debt in the first 6 months was more or less stable at EUR 1.6 billion. And in the first 6 months, we spent about EUR 50 million on acquisitions. We paid a dividend of EUR 107 million and generated healthy cash flow. The leverage ratio end of June based on IFRS and our loan documentation was 2.8x EBITDA. This level was well below the maximum set in our loan documentation. And as you know, we are historically more cash generative in the second half of the year. So dependent upon our acquisition activity, I expect our leverage to come down. On the right side of this slide, you will find our debt maturity profile.

I would like to finish this short summary with a cash flow overview on Page 15. Free cash flow was EUR 222 million, an increase of EUR 49 million compared to the same period of last year. The main driver of this increase are higher operating EBITDA combined with lower working capital investments. CapEx of approximately EUR 3 million were lower than last year's spending and primarily directed towards IT investments, a bit of office improvements and lab equipment. Then last but not least, on Page 17, you will find the outlook for this year. I assume everybody has already read the text in our press release, and therefore, I won't repeat it allowed.

And I would like to hand over back to Elba, the operator, to open the lines for Q&A.

[Operator Instructions] The first question comes from Suhasini Varanasi from Goldman Sachs.

A couple from me, please. On 2Q, a very healthy improvement. Is it possible to give some color on pricing versus volume trends? Would you say that most of the growth was pricing led? Or did you also see volume improvement? And within this, you had indicated some pre-buy at the beginning of the quarter. Is it possible to quantify that? Is it something that benefited maybe EMEA growth in particular? And then the last one, please. You've indicated a promising start to 3Q. would you say the trends are probably broadly similar to the second quarter at the beginning of 3Q or any variances by region?

Thank you for the questions. If we look at the second quarter and the pricing versus the volume impact, I think there's a variety of different components that really drove the organic growth that you saw in the second quarter. There were definitely some tailwinds from pricing. But as I mentioned in my previous commentary, I would say the bigger impact on pricing with the greater percentages was very much focused on the smaller, let's say, semi-specialty, semi-commodity component of the portfolio. On our larger specialty component, the percentages were much, much less single-digit percentages.

So whilst there was an impact there, it was just one component. The volume side, I think it's fair to say that we did gain some market share on the more semi-specialty semi-commodity part, where availability from Asia-Pacific in some of the more remote locations, I would say, became less. But 2 other, I would say, just as important components was, firstly, I feel that our teams are executing particularly well. And also, I feel that we've got very good levels of commercial activity.

As Hans -- and I mentioned on, I think, the last couple of calls, we've quite significantly strengthened the commercial teams during Q4 last year and the beginning of this year. And we're very pleased, I would say, with the increased level of commercial activity that we see. And then linking to that, as I also mentioned in the commentary, some nice supplier wins, which have begun to come through.

on the promising side, Marcus?

Yes. The promising side. Yes, for Q3. I think that's as much as we can say at this stage. I mean, we're still in very dynamic market conditions. We're very focused on the things that we can control. Let's wait and see how the quarter develops. But as I said, we've had a promising start.

Sorry, just rephrase that EMEA a bit alone because the strength in EMEA was exceptionally strong compared to other regions. Would you say that, that's an underlying strength? Or is it more one-off in nature linked to the geopolitical conflict? I think it's something that would help us understand how trends should evolve in the second half of the year.

Yes. I think it's fair to say that EMEA is the more stable market that we see. You could also read into a bit the supplier win component that I mentioned where I would say, for the 3 regions, that's probably the greatest impact there. Also, if we look from the other side, if you look at the North America, I think that, that is also a market that's been more insulated and isolated from things like the price increases. So you've also got a variance there where you see a little bit more, I would say, tailwind from pricing in EMEA and less from a North America perspective.

The following question comes from Anil Shenoy from Barclays.

Just 2, please. The first one is on your cost development. Now Q2 -- I mean, this quarter was the first time after 4 quarters that we've seen positive operating leverage. That is EBITA organic growth exceeding gross profit organic growth. Now you had said in your 2Q '25 call that you had built up some costs in the system because you were anticipating like 4% to 5% kind of gross profit growth, which did not materialize. And that is why we have been seeing the negative leverage for the last 4 quarters. So I'm just trying to understand, has the business now reached a scale where these prior cost investments are now completely leveraged?

And can we expect this positive operating leverage to continue into H2? So that's my first question. And the second question is on Americas. In your Q1 call, you highlighted that there was a substantial organic decline in Americas due to a volatile business mix. Given that now we've reported 2% organic growth in both gross profit and EBITA, maybe you could provide some color on the -- on whether the American business has stabilized? And what is the outlook for this -- for Americas for the rest of the year, please?

Yes. Perhaps I should answer the cost question.

Yes, that's the go, yes.

What we report in our year-to-date figures is that the cost structure is more or less flat compared to last year. What we did is, on the one hand, we strengthened the sales organization, as what Marcus mentioned, because it's very important to be active, active in the field and have the right people on the road to further develop businesses and also to deal with the new suppliers that we onboarded. At the same time, over the years, we developed a lot of digital tools to support the salespeople. And that also means that we can make our back-office infrastructure much more efficient. And that net-net, resulted in a slightly lower number of people, but also a change in the mix of people.

At the same time, I hope to report at year-end a little bit of a cost increase because we had to pay higher bonuses because people reach the targets. You might remember that over the last 2 years, we had difficulties with the results that also resulted in savings on the bonus side. And I hope to report at year-end to say, unfortunately, my costs increased a bit, but it has to do with the fact that we had a fantastic year and paid a bit more bonuses. But so far, we have a structure that can cope with more sales than what we have today, thanks to all the digital developments and thanks to the additional salespeople that we got on board in the first 6 months.

Great. Thank you, Hans. And if we move on to the question for the Americas, I think, just as a reminder, we, of course, had a very tough comp for Q1, where Q1 2025, we showed organic growth of 21%. As I mentioned before, if we look at the U.S., the North America dynamics are a little bit different to what we saw elsewhere in the second quarter, where, let's say, the pricing impact was somewhat delayed and muted. So we saw relative to the other regions, I think, a little less prebuying although -- and as you know, also, and we've mentioned before, in the U.S., particularly, we've got a larger industrial component, particularly on the coatings and construction side, and we still see quite a weak market within the U.S. on that space.

As you say, we have seen a better Q2 performance, but we're still not at the level that we want to be. And we have recently strengthened quite a lot of the management team within the region to ensure basically that we fully capture the opportunities that are definitely available to us. So we see a lot of opportunity still for the region. Again, we're focused on the things that we can control. And I feel that we're on a better track to deliver the kind of growth numbers that we expect going forward.

The following question comes from Annelies Vermeulen from Morgan Stanley.

I have 2 questions, please. So firstly, you commented in one of the previous answers, I think that you saw some less availability in Asia-Pacific and saw some market share gains, particularly, I think on the semi-specialty side, you said as a result of that. So could you expand on that a little bit in terms of are you seeing supply issues anywhere else? Any sort of constraints in supply from the Middle East and how that has driven any market share gains anywhere else in the portfolio and how that's developing so far in Q3?

And then secondly, just on the balance sheet, I think previously, you said you'd expect to see a working capital improvement through the year. But given the improvement in growth that we've seen and assuming that continues and the inventory that you need to cover the demand, how would you expect working capital to develop through the second half now?

Annelies, on the availability side, in general, I would say we haven't suffered tremendously from availability issues so far. It's fair to say that we have seen pockets though. And it's really -- I would say that it's quite widespread. So it's not that I would say that it's one region or another that we've been particularly impacted. But again, I would say that the impact is not so material in the second quarter, but with some pockets. And Hans, on the working capital?

Yes. On the balance sheet and working capital, Annelies, what basically, I don't expect big changes in the number of days is what I would call for the different components. So it will hover a bit what will happen with the revenue. So if the revenue goes up, my debt position goes up. And during the year, we have the typical cycle that Q2, Q3 are always the highest points in the cycle because we have the biggest revenues always in Q2 and Q3. And towards year-end, we typically see a drop in the working capital amount. And I don't expect that, that trend will change during this year. But I hope to come back to you that we invested a lot of debtors because of high sales. It's a bit similar to the bonus thing. That is the result of additional activities. And I'm happy to report that to you if that happens.

Just a follow up on the last part. Marcus, you said you're not seeing it -- it's not been material in the second quarter, that availability piece. But do you see anything changing through Q3, perhaps as later impacts from some of the issues in the Middle East start to come through on the supplier side? Or at the moment, is it stable?

At the moment, I would say that it's stable. So coming into the third quarter, no difference really than we saw in Q2. Of course, as I mentioned before, it's dynamic market conditions. So let's wait and see what happens. But yes, I would say it's stable so far.

The following question comes from David Kerstens from Jefferies.

Two questions from my side, please. First of all, on the pricing tailwinds that you highlighted, would you say those were strongest in the second quarter? Or will you see a continuing impact in the second half of the year and will inflation remain elevated for longer? I think, Marcus, you indicated the delayed impact from that inflation in the Americas. And also on the inflation, the impact was largest on the semi-commodity side. Besides the higher prices, is that also a reflection of easing competition from Chinese suppliers in markets such as Brazil and Southeast Asia?

Then the second question is on the M&A. You highlighted 3 acquisitions. I think you spent EUR 50 million. That seems the lowest level since 2020. How do you see the market for M&A at the current moment?

David, the pricing tailwinds, I mean, yes, we -- I would say that we saw during Q2, the number of increases, I would say, was particularly high at the beginning of the quarter. And then I would say, somewhat eased. I would say that it's still a dynamic price market at the moment, very much related to what's happening within the conflict. But I think it's fair to say that generally, it's become a bit quieter as we kind of progress through the latter part of Q2. Easing competition from China, I think it's fair to say that in some of the more remote countries like Brazil, it's fair to say that during the second quarter, we did see less competition on the semi-specialty semi-commodity side.

But also maybe in the latter part of the quarter, maybe some of that Chinese competition was more focused also into the Asia-Pacific market. So again, it's quite dynamic on that side. And again, it's really a case of the commercial teams being very focused and adjusting as fast as they can and they need to. On the M&A side, I'm very pleased with the 3 very important acquisitions that we made in the first half of the year, albeit they are quite small. As you know, we don't set a target in terms of either the value or the amount that we spend on acquisitions or the number. I feel that, that's incredibly important because we need to remain, as we've always been very laser-focused on only acquiring those companies that are a good strategic fit that we have confidence that will accelerate our organic growth.

We still have a healthy pipeline. But it is fair to say that the discussions on the acquisition side are taking longer during these dynamic market conditions. We are definitely not being impatient, and it's a case of us also gaining confidence that we're paying the right price for the acquisition.

The following question comes from David Symonds from BNP Paribas.

A couple of questions from me, please. Firstly, can I ask on Signet, how that progressed in the second quarter? I remember you said there were some green shoots there. I know the comps get easier for Signet in the second half of the year, but I'm just curious as to whether we are flat year-on-year in Q2, down, up or how that business is trending in general?

And then secondly, you mentioned obviously that the pricing was concentrated in the semi-specialty part of the business. So just to understand from a different lens, the dynamics in the second quarter, were the specialty earnings higher year-on-year, do you think? Or was it just a semi-specialty contribution?

Firstly, as I mentioned at the beginning, we've seen, in general, the pharmaceutical market. If you recall, we went through a fairly exceptional stage in Q4 of last year. And we did anticipate for the normal, let's say, ordering pattern and performance to come back in the first half, and we have seen that. And the SIG business, I would say, has followed pretty much the same trend. So nothing exceptional there. On the pricing side, David, I think it's important to kind of reiterate that the -- what I was trying to say is that the semi-specialties also because they're lower-priced products typically, the percentage increases were greater than the specialties.

That's not to say that we didn't receive price increases on the specialty component of the portfolio. But as a percentage, it was quite a bit lower. Yes. So does that answer your question there?

It does. Yes, yes.

The next question comes from Nicole Manion from UBS.

Can you talk a bit more about the supplier wins, please, on the industrial side of the business and maybe what you're seeing in general across the group in terms of winning these new mandates? Has the pickup here been anything opportunistic to do with the environment? Or would you say it's more a reflection of longer-term efforts to engage some of these new suppliers?

Yes. I don't want to go into specifics, but I think what I find most encouraging is it's not focused on one particular market. I feel that as an organization over, let's say, the 12-plus months, we've really strengthened the spotlight on what we're doing from a commercial excellence perspective. We strengthened the team, as Hans and I mentioned commercially at the end of last year coming through the beginning of this. And the reputation in delivering what we promise goes a long way. So I believe that we've always had a very strong reputation within the market. I feel that with suppliers, almost our doubling down during a difficult economic climate on the sales organization and infrastructure that we have has been received particularly well.

I think also that suppliers, in general, are having a pretty tough time. And so they're also more critically looking at their own organizations to say what sales organization do they need on a fixed cost basis and what percentage of their business do they then outsource. So I've mentioned on a couple of calls prior to this that we've been having, I would say, more and more positive discussions. I think this is the first time that we've spoken proactively about the wins. So it's with great pleasure and a credit to the whole team that we've really been able to, I would say, convert those or some of those.

The following question comes from Luuk Van Beek from Degroof Petercam.

I have 2 questions. First, about the low stock levels at customers and the requirements for just-in-time delivery. Does that imply any changes on your end in a sense of stock levels or logistics or any other changes that you need to make?

And my second question is about the volume impact of the price increases and in general, the cost inflation that we see globally. Do you see any indications that customers are becoming more cautious on the volumes because of this global cost inflation?

Luuk, on the just-in-time side, I think that we've spoken pretty much on every call for the last 2 years around the customer behavior is such that because of the volatile or the dynamic market conditions that this just-in-time delivery has become, I would say, more of a norm. So I wouldn't say that we've seen dramatic changes from an order pattern perspective. But as a distribution company, and we keep reiterating this, it is absolutely our job to have inventory in place to be able to service those customers, but to also take advantage of, let's say, the market conditions whereby with the uncertainty, we are back up from an inventory perspective for them.

And on the volume impact on the price increases, as I mentioned in my preamble, we've been very careful when we pass on the level of price increase, also working in hand with our suppliers to make sure that we don't destroy the demand for the longer term. So it could have been that through this uncertain time that we push through very large excessive price increases, but that's not the case. As a company, we really look at the long-term future, the relationship that we've got with the customers and suppliers and being very cautious together with our suppliers in terms of minimizing as much as possible the price increase that we pass through.

The next question comes from Eric Wilmer from Kempen.

I also had a question on the Americas, where organic sales growth seemed a bit more modest in Q2 compared to the other divisions. I would assume that Latin America has likely performed relatively well, both pricing and volume-wise in light of its skew towards semi-specialty as well as given less Asian competition that you highlight in the region. Would this imply negative volumes in North America?

And then another question to what extent are you now seeing some customers potentially return in general, so in general, in your portfolio that were potentially less willing to buy when prices immediately started to peak back in March and April. and at some point simply have to return? And then last question, I was wondering if you could also talk us through what you're roughly expecting in terms of cash out later this year and next year for previously announced M&A, including, for example, earn-outs.

Thank you for your questions, Eric. If we look at the Americas, please don't underestimate the scale of the coatings and construction market within that space. And I would say what we're really waiting for there is, unfortunately, interest rates to come down so that there's more of a dynamic move from the housing space. So I would say, yes, as I mentioned before, it is fair to say that we've picked up an additional business on the semi-specialty side, but we also shouldn't overestimate what the percentage of that is across the region as a whole. So in pockets, we do have a greater percentage. Brazil is the country that I've spoken about before.

And it is fair to say that we did pick up some market share during the second quarter. On the negative volumes in North America, I don't think we've seen that. I think what we have seen from a North America perspective is a little bit of a delay, but also a much more muted level from a price increase perspective. So both in terms of the number of increases that we've seen, but certainly the percentage increase amount. And from a customers returning now perspective, we did see some pre-buy at the beginning of the quarter, as I mentioned. I don't think that, that was significant. I think most of that would have been worked through during the second quarter. And again, you can read into that with the promising start to Q3 that there's not a lot of, I would say, volatility from a month-to-month perspective that we've seen so far.

Shall I say something about deferred considerations, Marcus?

Yes, please yes.

Eric, I think what we reported is at the end of last year, we had about EUR 40 million on our balance sheet as deferred considerations. In the press release that we issued, you could see that from that EUR 40 million, we paid about EUR 18 million, and we added about EUR 5 million to the deferred consideration as a result of recent acquisitions. So the balance in my total debt position is relatively small at the moment. I hope that helps. And the details you can find on Page 23 in the press release.

The next question comes from Quirijn Mulder from ING.

I would limit myself to 2 questions. Hans, we discussed last year that, let me say, the supplier streamlining coast to coast. Is that process going on and has some impact on the second quarter in your view in the U.S.? And the second is about the tariffs. So 1 year in the tariffs, was there -- is there anything to say specific about the impact of tariffs in the, let me say, second quarter? And also something maybe about repayments or something like that? Is that possible that you get some repayments from the government because of the change in the policy there?

Thank you for the questions, Quirijn. The supplier streamlining across the U.S., that is an ongoing process. I would say nothing really to report exceptional in Q2. And on the tariffs, I would say -- yes, I mean, it's an ongoing topic, but again, nothing material in Q2. And on the repayments, that's something that we're in the process of getting back and then being able to pass that back to the customers. But just to remind you that, by far, the majority of our business in the U.S. is on a local-for-local basis. So the amount of tariff, let's say, refund is actually quite small.

And they also gave it back to customers.

The following question comes from Tristan Lamotte from Deutsche Bank.

The first one is, could you talk a bit about the pipeline and level of innovation activity? I think some of your producers have talked about an increase in innovation. So I'm wondering what trends you're seeing? And is it translating through to organic growth yet? And then second question is, I'm somewhat concerned that quite a lot of this improvement is temporary given the size of the swing that we're seeing in organic growth from Q1 to Q2 and in conversion margin. Specifically on conversion margin, you increased from 41.6% in Q1 to 44.9% in Q2. Could you maybe talk through the kind of elements that you see as temporary versus more permanent there?

Great. Thank you. On the pipeline and innovation trend, I think I've mentioned on the last couple of calls how busy the labs are that we have. So we're really focused on making sure that the projects that we're working on generate gross profit. We definitely see quite a lot of traction in terms of both the number of projects that we've got coming through the lab, but also from a conversion perspective. And that's one of the real values and pillars that we -- as IMCD have. And I believe the reputation is strong, whereby that formulatory expertise where customers come to us not looking for individual ingredients, but also from a formulatory guidance perspective. So yes, I would say that is and remains an extremely important pillar.

And I would say gross profit growth contributor for the future. Your question on the temporary change. I think, Tristan, it's a case again of we don't know what the future holds. I believe that we've executed well in the first half of the year. We focus on the things that we can control that I've mentioned before. Let's wait and see what the future brings. But again, I feel that with the sales activity level, which we've seen increase, the relationships that we've got with both the customers and suppliers, we are on a good path. But unfortunately, we don't have the crystal ball to predict the future. But again, we have had a promising start to Q3. So, let's see.

The final question comes from Chetan Udeshi from JPMorgan.

Maybe first one to Hans. I was looking at the cash flow statement. It seems your cash taxes in H1 were quite low compared to last year and also what I had in the model. So I was just wondering, is there some structural change? Or is it just phasing between H1, H2, which may have resulted in much lower cash tax payments? The second question is just going back to your comment, Marcus, about very limited prebuying -- and I'm just trying to tie that up with the fact that your gross profit in second quarter is up almost, I think, 12% or so versus Q1.

I mean there's a bit of seasonality between Q1 to Q2 that Q2 tends to go up generally, but not to the extent that we've seen in Q2. So I mean, if you've not seen as much prebuying, how do you square that sharper increase in second quarter because it doesn't feel like end demand in general has seen any real improvement overall.

Chetan, on the tax side, basically, we pay the tax and the tax is due in the countries where we make profits and need to pay taxes. And we also saw that in the first 6 months, I think the tax burden in the P&L was higher than last year, in line with increased results. And the tax cash out was, I think, about EUR 10 million or EUR 12 million lower than last year in the same period. It's just a timing situation, when do you pay what and when. And that is not in our own control. It depends on the timing of the local tax authorities. Definitely, the tax that we accrue and that you see flowing through the P&L at a certain moment, we need to pay it with more timing.

Yes. And on the pre-buy and the gross profit growth, we don't know exactly what the customers buy and how much they have in stock. But we haven't really seen an abnormal, I would say, order book. And as I said, quite some stability from a month-to-month perspective. And that brings us to the belief that there wasn't a lot of pre-buy. And then in terms of the gross profit growth, as I mentioned before, I think it's a combination of -- from the pricing tailwind, there's a component there, but also bringing the execution that I believe that we've done well and also the supplier wins. So it's really a combination of those factors, and it's difficult to really quantify exactly what from where. But I'm comforted again by the fact that we haven't seen big variations from a month-to-month perspective.

I will now hand the word back over to Mr. Jordan for any closing remarks.

Thank you, Elba, and to everybody for joining the call this morning and for your questions. And we wish you all a very good remainder of the summer. Thank you all.

Hello. Welcome to the IMCD's First 3 Months 2026 Results Conference Call, hosted by Marcus Jordan, CEO; and Hans Kooijmans, CFO. [Operator Instructions] I would now like to give the floor to Marcus Jordan. Mr. Jordan, please go ahead.

Thank you very much. Good morning to you all, and a warm welcome. I'm Marcus Jordan, and I'm here today with our CFO, Hans Kooijmans, for the first 3 months 2026 results, which we published in a press release earlier this morning. I'm going to keep my opening brief to allow sufficient time for Q&A, as we have our AGM immediately after this meeting. And so we have a hard stop at 10:00.

Our first quarter of 2026 delivered solid results against a strong Q1 2025 comparable, and I'm happy to report an increase in free cash flow and a robust cash conversion margin. During the previous full year call, we referred to positive conversations with our suppliers and customers regarding the demand outlook and green shoots potentially coming our way. Since that full year call, a lot has happened, as there have been some reversals in tariffs following the court ruling that deemed the tariffs illegal, and introduction of other tariffs and then the conflict in the Middle East, which has created further uncertainty and quite some changes in the market dynamics.

Focusing on the Middle East, since the conflict began, we have seen a significant amount of price increases, which can be broken down into 2 categories. Firstly, the direct impact of fuel increases on transportation costs; and secondly, an increase in the cost of the product itself, as the cost of the raw materials and energy costs needed in the manufacturing processes have both risen. As we have done in the past, we are able to quickly identify and pass on any of the increases we receive. With the large number of increases we have and are receiving, the situation is quite often compared to what we saw post-COVID. But I think important to highlight that those post-COVID increases were primarily driven by pent-up demand, which is not necessarily the case now.

During the first quarter, we didn't observe significant prebuying, but we do see some indications of this as we enter the second quarter. The increase we see is, however, relatively modest as we believe our customers learned some lessons from the post-COVID years, in which they prebought too much inventory at a high price. The key question going forward is how will the conflict impact end consumer confidence and thus demand, which ultimately is the biggest driver of our business. We are, therefore, cautious in the outlook.

Moving on to the first 3 months of 2026 numbers, you will find a summary of our financial results on Slide 4. We reported gross profit of EUR 312 million, up 1% on a constant currency basis. EBITA was lower than last year at EUR 130 million, whereby our lower cost in the first 3 months of 2026 could not fully compensate for the decline in reported gross profit. I'm happy to report that we increased our free cash flow to EUR 121 million, leading to a cash conversion margin of almost 91%.

If we now look at M&A, we completed 2 acquisitions in the first 3 months of this year. Firstly, Dong Yang FT in South Korea, a company active in beauty and personal care with 14 people and EUR 34 million (sic) [ EUR 32 million ] in revenue. This is our second beauty and personal care acquisition in South Korea within a year, and it further strengthens our position in one of the most innovative and largest beauty and personal care markets in the world. The second acquisition was Willows Ingredients in the U.K. and Ireland, a company active in food and nutrition with 26 (sic) [ 36 ] people and EUR 30 million in revenue. This is an exciting acquisition as it strengthens our capabilities in specialized health, sports and animal nutrition.

To end my part of the introduction, in these unpredictable times, it's critical to remain a reliable partner for both customers and suppliers, and to ensure that we quickly adapt to changing market conditions. We remain focused on the things that we can control to deliver long-term growth to our partners and stakeholders in the years ahead.

I would now like to hand over to our CFO, Hans Kooijmans, who will give you an update on the numbers.

Thanks for the introduction, Marcus, and good morning, ladies and gentlemen. I'm happy to give you a short summary of IMCD's first quarter trading update. I'll start on Page 6 of the analyst call presentation. Marcus already referred to challenging market conditions and comps of last year. And as explained during our 2025 full year analyst call in February, these challenging conditions coincided with significant currency headwinds. As shown on this slide, the negative translation impact of foreign exchange is reflected in a notable difference between reported and ForEx-adjusted figures.

You may also recall that when comparing Q1 this year with Q1 last year, the weakening, particularly of the U.S. dollar, had an adverse effect on sales volumes across several regions. Given these conditions, we are certainly not satisfied with the reported outcome. However, it represents a solid start to the year.

As you can see, ForEx-adjusted revenue increased 6% and gross profit increased 1% in the first quarter of this year. This gross profit increase was a combination of 4% organic decline and 5% as a result of the first-time inclusion of companies acquired in 2025 and 2026. The gross margin percentage in the first quarter is 24.6%. And as you can see, it's 1.2% below Q1 last year. About half of this decrease in percentage is the result of recently acquired companies with, on average, lower gross profit margins. This first quarter gross margin percentage, the 24.6%, is slightly higher than the 24.2% reported in the second half of last year. This increase in percentage compared to the second half of last year was a combination of changes in product mix, changes in local market circumstances, but also internal gross margin improvement initiatives that helped to further increase the margin percentage.

Then ForEx-adjusted operating EBITA that decreased 2% to EUR 130 million, and the operating EBITA margin decreased to 10.2% and the conversion margin dropped to 41.6%. Lower organic own-cost in the first 3 months of 2026 could not fully compensate for the decline in reported gross profit. And when talking about own-cost reduction, you could see on the bottom of this slide that we increased the number of people with 112 employees, an increase of 2%. And this increase is the result of acquisitions. As anticipated by Marcus and myself on previous calls, on a like-for-like basis, we slightly reduced the number of employees compared to last year.

ForEx-adjusted net result decreased 3% to EUR 63 million. And later, I will come back on free cash flow, which is really healthy for the first quarter. Q1 cash earnings per share is EUR 1.46, a reported decrease of 6% compared to last year. But when normalizing for ForEx impact, the cash earnings per share would have been similar to last year.

The next slide, Slide 7, you will find a few key figures from P&Ls for operating segments and as usual, with a focus on gross margin and EBITA development. I already mentioned the currency headwind. And as you can read from this slide, the negative translation impact is most significant in the Americas and APAC. EMEA is the only operating segment reporting modest gross profit and EBITA growth. The gross margin in EMEA decreased by 0.9% to 26.6%. When I would normalize for the impact of the recent acquisitions in EMEA, the gross margin percentage would have been slightly higher than the first 3 months of 2025.

Organic own-costs in EMEA were slightly lower than last year in Q1, and the small organic decrease in EBITDA in EMEA was, as a consequence, the result of differences on other P&L lines like doubtful debt provisions, other operating income, and slightly higher third-party costs. As a consequence, EBITA-related ratios all slightly decreased compared to the same period of last year.

In the Americas, yes, there, we reported a substantial negative organic growth on gross profit and EBITA. It's, amongst others, a combination of the more industrial and volatile business mix and a very strong Q1 in 2025. And you might remember, last year, Marcus and myself had to explain how we could grow our EBITA in the Americas more than 20% organically. I'm a bit afraid that you will ask us now to explain the 20-plus percent decrease during the Q&A. And you can imagine that I prefer to explain a double-digit growth here. But unfortunately, that's not the case so far.

Then Asia Pacific in the third column, where you can read that the positive impact of acquisitions is more than wiped away by negative currency impact. Organic EBITA and gross profit were more or less stable compared to last year. And then in the last column, you will find, in the holding companies, all nonoperating companies, including the head office in Rotterdam. In Q1, we spent 0.6% of revenue on holding cost compared to 0.8% last year.

On Page 8, a summary of IMCD's free cash flow. As mentioned before, free cash flow in Q1 was EUR 19 million better than last year. And when taking into account the typical working capital cycle during the year, a Q1 cash conversion ratio above 90% could be considered very healthy. The decrease of adjusted operating EBITDA of EUR 11 million was more than compensated by lower working capital investment. CapEx of EUR 1 million was slightly lower compared to last year.

Page 9, short update on net debt and leverage. Reported leverage ratios and leverage ratios based on the definitions in the loan documentation were similar to 2025 year-end numbers at 2.8x and 2.7x LTM EBITDA.

And then last but not least, on Page 11, you will find our outlook. And I assume you already read it yourself when reading our press release. And in summary, what Marcus also mentioned, we are positive but cautious.

So far, the short summary of our financials, and Marcus and myself are happy to answer your questions. So back to [ Bart-Jan ].

[Operator Instructions] Our first question comes from Anil Shenoy from Barclays.

Just 2 from me, please. The first one is, if you could give us some color on the outlook for Q2. The reason I'm asking this is one of your competitors mentioned last week that they've started seeing supply chain disruptions in the system, and they expect this to benefit their financials in Q2, and it did not benefit in Q1. And they also said that they've not seen the benefit yet, but they expect it to come sometime later in Q2 and probably the full impact will be seen in Q3. Do you kind of agree with this? Or are you seeing something similar? So if you could comment on that, please? That's my first question.

And second question, on a related note, even without supply chain disruptions, many of the European producers have increased prices for their chemicals, BASF being the latest one. And they just mentioned in the call about an hour ago that they've increased prices and they expect this again to hit their financials in Q2. So even without the disruptions, and just these price increases, I would expect IMCD and Azelis to benefit because of the opacity in the pricing model. Would that be right? And if not, you could give some color around that?

Anil, thank you very much indeed for the questions. As you can imagine, we're not going to give too much detail on, let's say, the Q2 outlook as a whole. But what I can say is that we've seen a solid start to the quarter. I think if you look at supply chain disruptions, whether it be IMCD or one of our competitors, supply chain disruptions are really one of the skill sets that we have. As a distribution company, we're agile, we're fast acting. We've, of course, got the inventory in stock on a local basis. And you know that we're very used to now this just-in-time delivery and being the partner of choice, whether it be to both the customer or the supplier.

So whilst the Middle East crisis is, of course, terrible, the market disruption, I would say, is something that, if anything, as a business fits into the wheelhouse that we have. And really then, as I said before, really focused on the things that we can control. But yes, I think that the teams are very busy. And that kind of leads then on to the second point in terms of absolutely, we can confirm the very high level of number and, in some cases, the absolute amount of the price increases that we've received.

This kind of started, to be honest with you, relatively slow, because quite particularly the European manufacturers, they spent a lot of time and effort either maintaining or growing their market share over the last 1 to 2 years. So when the Middle East crisis started and it was thought to be short term, quite some suppliers were holding back on the increases, even though they themselves might have been incurring additional cost. As the crisis has then continued in time, we have seen the number and level of those increases increase quite significantly. And I think it's fair to say that it's more, I would say, the exception than the rule to have not received a price increase. If I was to break it down into the regions, I would say it's at a lower level from a North America perspective than the other 2 regions.

Yes. Just a quick follow-up. Does that -- I mean, can you confirm that these price increases are beneficial for IMCD?

I think that you've seen in the past that when there's pricing volatility, as a distributor, for a variety of reasons, we typically perform well. It's, of course, always a balance with making sure that we continue to be, as I said, that long-term partner with both the customers and suppliers. So yes, it's really a case-by-case basis. But yes, wherever possible, we try to take the advantage.

The next question comes from Annelies Vermeulen from Morgan Stanley.

I have 2 questions, please. Just firstly, a quick follow-up on those price increases. Can you quantify how substantial they are? Are we talking 5%, 10%, 15%? Or is this 30%, 40%, 50%? And I appreciate it will vary enormously by product type and probably end market. But any kind of range would be useful. And then secondly, also on the supply chain, are you seeing any supply issues or shortages as yet? Any products that you're already seeing some pressure? And is it fair to say that you'll expect to see more shortages through Q2?

Annelies, the first question is very difficult to answer because, as you say, it's really very much product specific. And I think that you can read in the press from many of our suppliers, the levels of the increases that are being made, and it does range extremely broadly, mentioning pretty much all of the numbers that you just said.

On the supply chain issues and shortages, we haven't yet experienced shortages. But it's fair to say that the volume of the narrative around potential shortages is beginning to increase. And I think important to reiterate that even some of the very base chemicals, and we all hear about methanol as an example, which is a pure commodity, which, of course, we're not involved with. But methanol being a solvent is very short, particularly within the Asia Pacific region. And a base solvent such as that goes into the manufacture of a lot of specialty products.

So whilst we were at in-cosmetics the week before last, some of our Asia Pacific suppliers are beginning to talk about methanol shortages and maybe there being an impact in the future on their ability to manufacture their specialties. So I think at the moment, it's a case of we don't see it, but people are becoming more concerned as the conflict continues.

The next question comes from Suhasini Varanasi from Goldman Sachs.

My first one is on the organic GP declines of minus 4% that you reported in the quarter. Can you help us understand maybe how the declines evolved over the course of the quarter? Was March maybe better than Jan, Feb? And if it was, then which geographies or verticals did you see the most material change? And I appreciate that you don't give any guidance on 2Q per se, but is there any color that you can give on whether organic GP inflected to positive territory yet in 2Q? My last one is on working capital investments. Given all of these concerns around product shortages, do you anticipate higher requirements on working capital inventory perhaps just to make sure you can navigate the next few quarters effectively?

Thank you for your questions. The breakdown over the first quarter, I mean, as you know, we don't give a lot of breakdown month by month. But I think it's fair to say that we had a softer-than-expected start to the year, particularly that we had quite a soft end to 2025, and then a nice increase as we went through the quarter. The Q2 outlook, I think that I've said as much as I really want to say there.

And on the working capital levels, it's really a case of making sure that we've got the right inventory in place to be able to fulfill the customers' demands. As you can imagine, the forecasting from the customers is very short term or, in some cases, invisible. But it's working very closely together with those customers to try and make sure that we've got the right inventory in place, but also working with the suppliers to make sure that we don't also over-order product from them that then creates the shortage for the future. So it's very much about communication, and again, being agile and fast-acting on everything that we do from a supply chain perspective. But I think, we're pretty comfortable with the working capital.

Yes. And then Suhasini, I really hope to report much higher working capital at the end of Q2, driven by much higher debtor positions because of higher sales. And that is, of course, the ideal scenario. And then I'm happy to report a higher working capital position. If I look at the end of Q1, we never disclosed specific numbers on working capital positions, but it's fair to say that our stock days were similar to what we reported at year-end, and a little bit increase that we saw was related to increased debtor position because of stronger sales in March. And I hope that, that continues going forward. And then I'm happy to report a bit more working capital due to higher debtors, not because of higher debtor days, but because of more sales.

Our next question comes from Matthew Yates from Bank of America.

Hans, I actually wanted to follow up on that working capital comment, because we don't have the balance sheet, so I was going to ask you about the breakdown. Firstly, a little bit counterintuitive that your free cash flow is very good despite working capital days being up by 3 year-on-year. So any other moving parts that would explain that?

Secondly, in terms of that working capital, if you've seen better momentum through the quarter and order intake, as you've suggested on the receivables, why has that not come through in the inventory position yet? Were you, I don't know, trying to clean up older stock, and that's maybe offset some of the extra buffer that you may have been securing supply or to fill orders?

Matthew, as you know, we typically report a full balance sheet twice a year, and we see the Q1 and Q3 really as a trading update to give you a feel where we are. If I look at working capital days, what I already mentioned, stock days more or less flat. We are very cautious in handling our stock, as Marcus already mentioned. But what we see at the moment that there is supply chain issues that we also can more quickly turn stocks, quickly get it out of the warehouses again. If I look at the days that we would have reported and will report mid-June -- sorry, on the basis of our half year figures, I don't expect material changes there.

And I come back on the point that I made previously, I hope to report a higher debtor position because of higher sales with similar debtor days. So we don't see collection issues or these type of things. It's just in the ordinary course of business. And the other thing you need to realize is that a working capital position at a month end or a quarter end is just a snapshot of a certain moment in time, not paying a creditor just before or just after a quarter end could have an impact on these type of days.

Got it. And if I can ask a follow-up, Hans. If we think about the sort of prior supply chain cycle coming out of COVID when we had a lot of price inflation in the industry, to what extent does something like inventory revaluation have a meaningful impact on numbers very short term?

Yes. We are not in the business to take speculative stock positions whereby we bet on future price increases. And so we base our order pattern on often confirmed demand by our customers. And as a consequence, at the moment that we then fix prices with customers, we also try to fix that with suppliers. And where we could benefit a bit is where we have old stock in the warehouse that we can sell off. So old stock bought at a lower price and now sell it off at a slightly higher price, but that's, in most cases, immaterial compared to the total margin that we generate. I think you could see this more in the more commodity businesses where people really take a position and start now betting on shortages in methanol as an example, take a position and then hope to sell it at a higher price. But that's not the business that we are in.

The next question comes from David Kerstens from Jefferies.

I wanted to focus on the return to growth in the Asia Pacific region with 3.5% organic revenue growth. And the first question is, are you already seeing any relief from fading competition from Chinese suppliers in semi specialties in Southeast Asia and maybe also in Brazil?

And secondly, I think you talked about the reversal of some of the tariffs. Have you already seen any signs of an improving performance in India? I remember Signet was quite hard hit by tariffs in the third quarter of last year, also impacting gross margins. Do you see any improvement in that situation already?

Good morning, David. Firstly, related to India and the Signet business, yes, I mean, as we mentioned in the full year call, we anticipated kind of the more normal ordering pattern to return during the first quarter, and I can confirm that, that was the case. Tariffs in general, I mean, I think that it's become a bit more of a muted point because of the Middle East conflict. But of course, that is still, I would say, to a certain extent, a concern in the background, because there is uncertainty not only in terms of the original tariffs that were imposed and are there rebates now given, but also the new tariffs that were then superimposed and when those end. So I think those tariff discussions, we shouldn't underestimate that there is still some impact there.

In terms of the APAC question and potentially, I think your wording was fading China. It is fair to say that we have seen restrictions and hear more of restrictions of exports out of China for particular product groups. And we have seen in countries like Brazil and Southeast Asia, certainly more requests coming through the beginning of the second quarter, more requests from customers for, let's say, more of a local to local supply. So I wouldn't say that there was an impact in the first quarter. But again, the narrative is beginning to build in terms of availability issues out of China, and that could also benefit us potentially.

Our next question comes from David Symonds from BNP Paribas.

So I appreciate your comments on April and what you can say there and the comparison to the post-COVID period. But I guess the post-COVID period was split into 2021, where you had very strong demand, and 2022, when we had Russia-Ukraine, and energy price shock, and a kind of gradual decline of demand through the year. So just trying to kind of get an idea of the scale of the benefit you could see from the disruption we're seeing. How comparable is this to 2022, which was, I guess, a bit more similar from a macro perspective?

And then on the OpEx side, how are you running with the organic headcount reduction that you provisioned in Q4? Have we worked through those provisions yet? Or is there more to come through the rest of the year?

Great. If you look at the similarities or dissimilarities related to COVID, there was certainly a huge similarity from a supply chain disruption and the level of pricing increases, both in terms of the number and level. And as I mentioned prior, I think that really fits into the skill set that we have as an organization and super important that we get closer to the customers. And there are then opportunities also that come out of it when we prove what we can deliver also from a supplier expansion perspective. So I think that there's a lot of positives there.

I think underlying that is the question mark in terms of consumer demand going forward. And I don't think that any of us really know the answer to that. I was at in-cosmetics 2 weeks ago, and there was still a lot of positivity at that show. So I think in general, there's still positive talks. But the longer the conflict goes, the market dynamics can change. But I think in general, David, again, we focus on the things that we can control. And yes, I would say the teams are fairly upbeat at present.

And then in terms of the organic headcount reduction, I think Hans spoke about that a bit in the full year call, where there was still some impact coming into this year. I think in general, we're very happy that we've got the right people in the right places. As I also mentioned on the previous call, we further invested in the commercial team that we have in place, both from an internal and an external perspective. So we're happy with the organization that we have.

Maybe if I could just ask a quick follow-up actually, which occurred to me. The digital sales tool that you've been rolling out through 2025, what's the uptake of that been like in the sort of early part of 2026, and since the disruptive effect of the Iran war? Have you seen people increasingly sort of adopting that tool? Or are they jumping on the phones as a kind of first point of call?

So the sales assistance tool, as you know, we rolled out fully internally, to begin with, during the course of last year. We're very happy with the uptake, let's say, from an internal perspective, from the commercial teams looking to how do we increase the cross-sell rate and be able to offer the right product first time. We've only relatively recently, during the course of the end of last year, and completed during the end of Q1, rolled out this tool externally. We're very happy with, I would say, the uptake from customers on the MyIMCD platform. But ultimately, we still want to be speaking to the customer. So it's still very much a combination, but we're pleased with the uptake of the tool and the ability to be able to, I think, certainly offer a wider range of products first time.

Our next question comes from Tristan Lamotte from Deutsche Bank.

The first one is, I wanted to ask your view on kind of overall demand. You said Q2 started relatively well. Has there been any prebuying do you think? One chemical producer implied March was very strong, but then April much softer. Is that the same kind of trend that you've seen? Or do you think, as a distributor, the trend is a bit different?

As I mentioned before, we didn't see really prebuying during the first quarter. And I said, we'd had a solid start to the second quarter. So I do think that there is some prebuying at the beginning of the second quarter. But as I also mentioned before, I think it's very muted relative to what we may have expected from the past, because I think customers have really learned the lesson, as they came out of COVID, about bringing in too much inventory at a high price. And the customers, when we speak to them, I think that if the Middle East and when the Middle East crisis finishes, you could then see some material price decreases. But again, the longer that the conflict goes on, I think the longer that the longer-term supply chain disruptions will last, even when the conflict finishes. And even if the conflict was to finish the end of this week, I think it's still quite some months it would take to then recover.

And then second question is, I was wondering if you could comment a bit on your performance in the Americas, which is quite soft versus the other regions and softer than your peers. So maybe could you split out the performance of some of the sub-businesses there?

Yes, sure. I mean, in LatAm, it was generally a challenging market in the first quarter. I've mentioned on previous calls with Brazil, in particular, having a higher percentage than the group average on the semi-specialty side. And it's fair to say that particularly at the beginning of the quarter, we were seeing quite some pricing pressure there from China, for example. And as I mentioned earlier in the call, that is a country where we have seen a bit of a shift coming through the beginning of Q2. Also some currency headwind. I mean, you know the translational side, but also still some operational currency headwinds there.

And then from a North America perspective, you know that we're a bit more industrially focused there and still a softer demand in the coatings and construction housing market for an example. And also some moving parts there from a supplier perspective. As you know, within the U.S., we're quite unique that we really try to work with suppliers on a coast-to-coast basis. Sometimes we need to make supplier changes where some suppliers only want to work with us maybe in 1 or 2 of the regions within the U.S. So sometimes we make some difficult decisions there to then work with new partners coast-to-coast, and there's a bit of a timing impact. So that was a bit of the case there in the Q1 numbers. And then, of course, you know the biggest impact was related to, as was explained by Hans, the very strong comp for Q1 last year.

If you compare with our peer, we never mention the name, but we all know who we are talking about, we reported last year in the Americas plus more than 20% organic growth and this year, more than 20% minus. They did better this year, also with a minus. But last year, they also reported a minus on the organic growth. So the comps is also slightly different than our comps. Nevertheless, it's not good, what we reported, and we will work hard to get it back to more normal. But that region is at the moment for us a bit more volatile than the other parts of the group. And that has sometimes the positive impact and sometimes the negative impact. And unfortunately, we are now on the negative side.

Our next question comes from Chetan Udeshi from JPMorgan.

I was just wondering if you can give us some color by end markets. I remember last year, you were seeing a more difficult environment in your beauty and personal care market. And as we sit today, based on all of the volatility, have you seen any notable changes across any of your key end markets? And just broadly speaking, it's quite interesting I find these days, when I speak to markets, you guys or some other distributors, I mean, they say, okay, we've not seen any supply shortages.

And then at the same time, we see these huge price increases that are happening in the industry. So there is clearly something off, either there is supply shortages that maybe you are not seeing, some of your competitors are not seeing, but somebody else is, or people are just anticipating those shortages and trying to or willing to pay higher prices, which perhaps then creates a risk that if the supply is actually not short, things can unwind quite rapidly. So how do you square that from your perspective?

Chetan, let's begin with the second question first from the price increase side. I mean this is very much driven by raw material cost pricing. So the energy costs associated with manufacturing, of course, has gone up dramatically. And you also see the cost of some of the base hydrocarbons, which is driven by basically crude. So I don't think that there's -- it's certainly not driven, I don't believe, by opportunistic price increases at present. It's very much driven by raw material costs.

In terms of the end markets, as we mentioned before, I think if you look at the Life Science side to begin with pharma, pharma pretty much normal resilience. The Indian Signet business, we already spoke about, returning back to a normal type of ordering pattern in the first quarter. Food and Nutrition had a very strong year last year. So a bit of a difficult comp, but we're happy with the performance on Food. Beauty has been a bit of a softer demand market in general. But the commentary at the in-cosmetics show was pretty positive. So let's wait and see there. And I wouldn't say anything material changed from what we spoke about on the full year call on the industrial side, which is generally a bit softer, particularly within the coatings and construction space.

Our next question comes from Nicole Manion from UBS.

Just one follow-up question, please, on some of the previous ones around volumes. Given you saw limited prebuying, it looks as though there was some underlying volume improvement in Q1. But then in the outlook for Q2, maybe you're seeing kind of more risks to underlying demand, understandably given the geopolitical situation. I wonder, can you help us unpack that demand weakness a bit, because it seems as though stock levels are quite low at customers, if anything, and have been actually for some time, and maybe we're about to get some shortages on top of that. So how should we think about that volume softness? Is it literally just less product going out the door? Is there sort of less innovation going on? Any extra detail there would be great to hear.

I think if you look at, let's call it, demand rather than volume, we spoke about the potentially green shoots coming and more narrative around that at the beginning of the year. And I think that as we were coming through the first quarter before the Middle East conflict, that messaging was really being reinforced. So I think that consumer confidence and demand was generally expected to steadily increase during the course of the year. It's very difficult at the moment, because of the Middle East conflict, to really then say where are we in terms of that consumer demand confidence. So unfortunately, it's a little bit wait and see.

And as I said, it's clouded a bit by what I believe is a bit of prebuying at the beginning of this quarter that we have seen. But again, nothing like we saw in the past. And I also agree with you that the stock levels downstream with the customer are light and lean, which is where, again, I think us as a distributor plays a very important part, because we are seen as that reliable partner being able to deliver just in time. So this inventory management that we've touched on a few times is extremely important.

Our next question comes from Quirijn Mulder from ING.

I have 2 questions. The first question is about the M&A in EMEA. It has a negative impact on your gross profit margin. As we understand, you said excluding these acquisitions, we had a positive development of the gross profit margin. If I look at these numbers, then it looks like that Tillmanns in Italy is the deciding factor here with gross profit margins below, I would say, 18%. Is there any explanation for that low gross margins? Is that normal for this company? Are you going to recover that in the coming period?

And my second question is about the U.S. still, what is then the reason that your gross profit margin is so much under pressure compared to the revenues? Because that's a serious difference here. We see a 200 basis points loss in your gross profit margin. Maybe you can a little bit explain that?

Perhaps I should for sure take the first one. If you look at the acquisitions that we did in EMEA, we had Tillmanns, we had Ferrer, we had TECOM, so food businesses in Spain. When we publish acquisitions, then we often indicate something about revenue and number of people that we buy, and there's also a bit of a standard way that if the EBITDA margin deviates a lot from what we typically do on average, then we also mention something. There was no information about EBIT margin. But what you see now in the numbers is that the combination of these 3 acquisitions at a decent EBIT margin, but a much lower gross margin percentage. And that has to do with partly the product mix that they sell to the market, the type of products they do.

And it also offers us an opportunity that if we do well, that we should be in a position to bring gross margin percentages in areas of the portfolio where that is possible in the current market conditions where we could improve the margin percentage. And that is also why I mentioned in the introduction that we have also internal projects to improve margin percentages. And one of the things that you might have seen is that the gross margin percentage in the first quarter of this year is already slightly higher than what we saw in the second half of last year.

So for us, it's, if you buy something with a lower gross margin, partly product related, difficult to change, but there where we can change, we do, and you see that happening. The drop in gross margin percentage in the Americas, looking at Marcus, I think if you would like to give...

I think the main thing there is that a couple of changes in the product mix that we had there having an impact on the overall margin percentage. Marcus referred to a change in supplier setup, timing difference there that played a bit of a role. Another important thing is the way we need to deal with currency volatility in that region having a negative impact. So a lot of moving bits and pieces having an impact on the margin that we make there.

I think also important that we -- I mean, of course, gross margin percentage is a good indicator. But as I've mentioned before, we incentivize and really focus internally on the absolute amount of gross margin. And the reason for that is also making sure that as a company, we don't miss out on incremental new wins. So you can imagine that trying to incentivize our sales team to go out and to win new business, quite often, that new business can start at a lower gross margin percentage than the group average that we have. So a drop in the gross margin percentage doesn't necessarily mean poor business performance. And it's important that we remember that. But I think to reiterate Hans' overall point is, we're focused very hard on improving the performance of the Americas as a region. So yes, more to come.

Okay. But your conversion margin is also now below 40% for that area. So I can imagine that's a little bit concerning.

No, that is a bit concerning, but also room for improvement.

And with that, I will now turn the call back to Mr. Jordan for any closing remarks.

Well, a big thank you from Hans and myself to you all for joining the call this morning and for the questions. And we wish you all a very good day. Thank you all.

Welcome to the IMCD 2025 Full Year Results Conference Call, hosted by Marcus Jordan, CEO; and Hans Kooijmans, CFO. [Operator Instructions] I would now like to give the floor to Marcus Jordan.

Mr. Jordan. Please go ahead.

Thank you very much, Elba. Good morning to you all, and a warm welcome. I'm Marcus Jordan, and I'm here today with our CFO, Hans Kooijmans, for the 2025 results, which we published in a press release earlier this morning.

After a positive start to the year with good first quarter results, the following quarters of 2025 were challenging amid macroeconomic conditions, tariff uncertainty and geopolitical unrest. This resulted in softer demand across a number of markets, limited order visibility and continued just-in-time deliveries.

Looking at our business segments. We saw Pharmaceuticals and Food & Nutrition have the most solid performance in 2025, and our Beauty & Personal Care and Industrial segments being generally soft in demand across all 3 regions.

Moving on to the 2025 numbers. You will find a summary of our financial results on Slide 4. Gross profit at almost EUR 1.2 billion is slightly down versus last year, but up 3% on a constant currency basis. The gross profit margin is down from 25.4% to 25%, primarily as a result of the impact of acquired companies and product mix.

EBITA was down 3% on a constant currency basis to EUR 498 million. This is a result of a slightly lower gross profit combined with inflation-driven cost growth. As mentioned in the Q3 call, we optimized our structure during the second half of the year to further intensify our sales efforts and to drive cost effectiveness throughout the company, resulting in an overall reduction in the number of FTEs.

I'm happy to report that we increased our cash -- our free cash flow to EUR 465 million, leading to a cash conversion margin of 91.4%. We proposed a dividend of EUR 1.81 per share, the payout ratio being 35%, which is at the top of the 25% to 35% range of the adjusted net income, as mentioned in our dividend policy.

If we now look at M&A, we completed 7 acquisitions in 2025, with the 2 largest being Tillmanns and Ferrer, both in Europe, which, as you know, is our most mature region.

Tillmanns in Italy operates across a broad range of markets, including coatings, construction, food and nutrition and water treatment, and in 2024, had 78 people and a revenue of EUR 143 million. And Ferrer, a distributor of food and beverage ingredients in Spain, with 37 employees and EUR 112 million revenue in 2024.

On a full year basis, the 7 acquisitions completed add about EUR 320 million revenue and 200 employees based on their last full year numbers before acquisition.

Recently, in January 2026, we also completed a further acquisition, Dang Yong FT in South Korea, a company active in Beauty & Personal Care with 14 people and EUR 34 million in revenue. With this acquisition, we strengthened our position in South Korea, which, as you know, is one of the most innovative and largest beauty and personal care markets in the world.

If we now go to the next slide. Having defined our 6 strategic growth pillars, which we presented during our Investor Day in Milan in 2024, I'm pleased to share some highlights of our progress in these areas.

I am particularly proud of the complete rollout of the sales assistant product recommendation tool, which empowers our people to easily identify the right solutions for our customers. We have seen good traction with the tool and are confident that this will improve our ability to increase our right first-time product recommendation and thus, our cross-sell ratio.

Behind every success within our company are our people. And in 2025, our people completed more than 175,000 hours of learning, leading to a 57% increase in training hours per employee with a particular focus on sales and operational excellence topics.

We also continued our focus on developing talent from within through 2 Rising Leader programs. We also further strengthened our supplier partnerships, and I'm encouraged with the number of positive discussions we are having with both existing and new suppliers to further expand our business.

In summary, we are confident in our asset-light business model, which enables us to stay adaptable to ever-changing market needs and reinforce our focus on customer centricity and supplier expansion. We also continue to invest in the tools and platforms that keep us both efficient and agile with a focus and commitment to creating long-term value for all IMCD stakeholders in the years ahead.

I would now like to hand over to our CFO, Hans Kooijmans, who will give you an update on the numbers.

Thank you for the introduction, Marcus, and good morning, ladies and gentlemen. And as you have seen earlier today, we issued a press release summarizing IMCD's financial results for 2025. And on the 4th of March, we will publish IMCD's annual report, a more than 300 pages report, including more detailed financial info, nonfinancial info and various business examples.

In this call, I will take you through a summary of the financial numbers before we move to Q&A. On Page 8 of the presentation, you could see a ForEx adjusted revenue increase of 5% and a gross profit increase of 3%. And this increase in gross profit was a combination of 1% organic decline and a positive 4% as a result of the first time inclusion of acquisitions.

The year started strong, as Marcus mentioned, with 6% organic growth in the first quarter, followed by modest growth in the second and single-digit negative organic growth in the last 2 quarters.

And as Marcus already indicated, we saw demand softening in the course of this year due to ongoing tariff discussions, geopolitical unrest and related uncertainty, which had a significant negative impact on customer demand. Further, the weakening of currencies like the U.S. dollar did not help and resulted in a negative impact of the absolute amount of revenue and gross margin.

Then the 4% acquisition growth is the balance of the full year impact of acquisitions done in 2024 and more recent acquisitions signed and closed in 2025. And you could find an overview of the 2025 acquisitions on Page 5 of this presentation.

Gross profit in percentage of revenue slightly decreased to 25% in 2025. About half of the 0.4% decrease is the impact of the first-time inclusion of acquisitions and higher additions to provisions for slow-moving stocks. The other half of the 0.4% is the result of usual changes in product mix, changes in local market circumstances, currency impacts, partly offset by continuous internal gross margin improvement initiatives.

I skip the operating EBITA line, which we included for your convenience and would like to move to operating EBITA, where you can see that ForEx adjusted operating EBITA decreased 3% to EUR 498 million. And this decrease was...

[Technical Difficulty]

Ladies and gentlemen, hold on. It appears we have some technical difficulties.

Good morning, ladies and gentlemen. Hans Kooijmans again. I hope you can hear me right now because we have the impression that the line broke when I started talking on Slide 9, where I went through the segments.

And I first wanted to start with the overall currency impact. And as mentioned earlier, we had some currency headwind when translating local results into euros, most significant in APAC and the Americas. This currency translation impact is easy to quantify, and in 2025, resulting in a minus 4% on revenue and EBITA and a minus 3% on gross profit.

In absolute numbers, in 2025, we lost all in all, about EUR 20 million of EBITA as a result of negative translation differences when comparing with 2024. Weakening of the U.S. dollar and the Indian rupee since the second quarter of 2025 were the most important drivers.

I realize also that nobody can predict exchange rates going forward, neither the impact on the EBITA for this year. At the same time, as most of the non-euro exchange rates further weakened in the course of 2025, it's easy to predict that we might expect negative currency translation losses again in the first half of 2026.

And just to get a feel for a number, and please see this as an indication, I recalculated first half 2025 EBITA at the exchange rates prevailing end of January this year. When doing so, I arrived at a negative currency translation impact for our first half 2025 EBITA somewhere between EUR 13 million and EUR 15 million. This is something to keep in mind when talking about the first half year result.

Where this currency translation impact is easy to quantify and also reported as a separate line, the operational impact of these currency fluctuations is more complicated to calculate. But I think it's obvious that these currency fluctuations had a negative impact in regions where it is common to quote in dollars and to invoice in local currency.

Therefore, it's fair to assume that these currency fluctuations negatively impacted our top line results in countries in LatAm, APAC and a few of the EMEA countries.

Then going to the columns and the segments. In the first column, EMEA, the only segment where we report modest but positive organic gross profit growth. Unfortunately, this 1% growth was not enough to compensate for inflation driven on cost growth. And as a consequence, there is a negative organic EBITA growth and lower EBITA and conversion margins in the EMEA region.

The decrease in gross margin percentage in EMEA that you saw in the second half of the year is mainly the result of the impact of the first-time inclusion of acquisitions with on average lower gross margin percentages.

Then in both Americas and APAC, organic gross profit growth was slightly negative. And in both regions, the positive impact of acquisitions on gross profit and EBITA was more or less wiped away by negative currency translation impact of the total region. For the same reasons, as mentioned before, EBITA and conversion margin slightly decreased in both regions.

And in the last column then, you will find the holding companies. As you know, the nonoperating companies, including the head office in Rotterdam and regional offices in Singapore and the U.S. and holding cost as a percentage of total revenue slightly decreased from 0.8% in 2024 to 0.7% of revenue in 2025.

Then on the next page, you will find a couple of P&L lines from EBITA to the net result for the period. Some general remarks by -- I will summarize net finance cost and income tax expenses on a separate slide. On this slide, amortization of intangible assets are noncash costs related to the amortization of supplier relations, distribution rights and other intangibles, and the increase is mainly a result of acquisitions done.

Then the EUR 25 million of nonrecurring expenses, and this includes about EUR 15 million severance costs related to one-off adjustments to the organization, EUR 7 million related to successful and unsuccessful acquisitions and a few other small one-off items.

Then on Slide 11, a breakdown of the 2025 net finance cost, adding up to EUR 80 million, and this is about EUR 35 million more than previous year. And as you can see on this slide, our real cash interest cost decreased by EUR 5 million. And the remainder, about EUR 40 million noncash cost is a combination of EUR 20 million changes in deferred considerations and EUR 16 million more negative currency exchange results.

As you might remember, a part of our net debt referred to deferred purchase price considerations of acquisitions done and related potential earn-out obligations. At the end of 2024, we reported a deferred consideration of EUR 99 million, which came down to EUR 36 million end of 2025.

And this decrease was a combination of payments made in 2025, additions due to new acquisitions and changes in estimated future payments of existing deferred considerations. And especially these changes in estimates will, as you know, flow through the P&L through the interest line as a noncash cost item.

When making your financial model, I could imagine to adjust for these noncash IFRS-related adjustments. The hyperinflation adjustment that you see is a result of hyperinflation accounting mainly related to Turkey and currency exchange results relate to realized and unrealized currency exchange differences on our monetary assets.

Then on the next page, a summary of our income tax expenses. On the regular income tax expenses, we report a decrease of EUR 20 million. The tax credits related to amortization, a noncash tax component, increased in line with amortization.

And as a guidance for our tax cost, you might remember, we always indicated to expect a blended tax rate in the range of 24% to 28% of result before tax. And this result before tax is then calculated as EBITA minus finance and nonrecurring costs. On the bottom of this page, you could read that IMCD's blended regular tax rate in 2025 was 22.9%, which is slightly below the '24 level and also below the low end of our guidance.

Then on the next page, the calculation of cash earnings per share and our dividend proposal. As you can see on the slide, we report EUR 5.19 cash earnings per share in 2025. And at the AGM in April, we will propose a dividend of EUR 1.81 in cash per share.

The company has a dividend policy with a target annual dividend in the range of 25% to 35% of adjusted net income. And this dividend proposal leads to a payout ratio of 35%, which is at the top of the range that we set ourselves as a policy.

Then on Page 14, a summary of IMCD's balance sheet. Property, plant and equipment mainly increased due to acquisitions done and limited investments in the IT infrastructure of the buildings and labs. As a result of the asset-light business model, the absolute amount is still relatively low compared to the size of our business.

Then right-of-use assets, that's, as you know, the result of the application of IFRS 16, and this EUR 98 million reflects capitalized operational leases and the related lease liability of EUR 104 million is included in the net debt line. The increase in intangible assets and changes in related deferred tax liabilities are mainly a result of acquisitions done.

Then I will come back on working capital in a minute. Then you see a solid equity position of about EUR 2 billion, covering 57% of capital employed, and therefore, working capital and also net debt, I would like to go to the next 2 pages. Page 15, you will find a summary of the absolute amounts of the various working capital components and these amounts translated in days of revenue.

As you can see, the absolute working capital amount increased EUR 27 million. And this increase in net working capital reflects the positive impact of further optimization in net working capital days in 2025 compared with last year, then the positive impact of the exchange rate differences on year-end balance sheet positions and as a negative, the impact of acquisitions completed in 2025.

At the bottom of this slide, the development of the most important working capital components in days of revenue. And we report, as you can see, an improvement on stock and debtor days and reduction of the creditor days.

On Page 16, a summary of our net debt position. At the end of 2025, we report EUR 1.6 billion of net debt. And the majority of this net debt position consists of EUR 1.3 billion of corporate bonds. Further, it includes, as mentioned before, the EUR 104 million of operational lease liabilities and about EUR 36 million of deferred considerations.

On the same page, an overview of the maturity profile of our debt structure as per December 2025. In Q1 2026, so at the first quarter of this year, we increased the maximum amount of our revolving bank facility with an additional EUR 100 million to EUR 700 million. And the revolver facility bar that you see in the chart on the right reflects the old EUR 600 million maximum amount we can use as per the end of 2025.

Reported leverage at the end of 2025 was 2.8x EBITDA and the leverage ratio based on definitions used in the IMCD loan documentation was slightly lower at 2.7x, which was well below the required maximum as set in the loan documentation.

I would like to finish this financial summary with the cash flow overview on Page 17. And as you can see, the absolute amount of free cash flow in 2025 was EUR 465 million which results in a cash conversion ratio of 91%. The change in conversion ratio versus last year is a combination of lower operating EBITA combined with lower working capital investment compared to last year.

And then finally, on the last slide of the presentation, you will find the outlook in which we, amongst other, indicate that we remain confident that we will continue to contribute value to our stakeholders and to sustain our growth trajectory.

So far, a little bit bumpy summary of the 2025 figures with the break in the line. But Marcus and myself are happy to answer any questions that you may have. So back to Elba, the operator.

[Operator Instructions] Our first question comes from Annelies Vermeulen from Morgan Stanley.

I have 3 questions, please. So firstly, just on customer behavior. I think it's probably clear there was no real improvement in customer order dynamics in Q4, looking at your numbers, but perhaps you could talk about how that's developed year-to-date. Are you seeing any increased signs of optimism or more normalized order patterns?

And then secondly, just on pricing. Perhaps could you talk about how that's developed through year-end and year-to-date? And in that context, perhaps a comment on the competitive environment. I know we spoke a lot about more competition in Asia through last year. So wondering how that's developed.

And then just lastly, a quick one on the one-off costs. So you mentioned EUR 15 million of severance costs in that acquisition and one-off cost line. But are the majority of those restructuring costs done? Or is there more to go in 2026? How do you expect that number to develop?

Annelies, thank you very much for the questions. Firstly, from a customer behavior perspective, what we see there is pretty much a continuation of what we were speaking about on the Q3 call with very muted demand in general. Just-in-time deliveries have pretty much, as we said before, become the norm, a lot of orders shifting from 1 month to the next. So I would say that unpredictability, unfortunately, remains.

In terms of kind of the show of green shoots, we don't really see green shoots yet appearing. But I think positively, we hear more conversations from both our customers and suppliers about the anticipation of that coming. So in general, I think the kind of the narrative in the market is more positive. But for us, a little bit early to see -- to say that we see those green shoots materializing yet.

On the pricing side, again, if you break it down into 2 different components, the specialty side of the business, whilst, of course, it's not immune to pricing competition, we still see quite a lot of stability there.

On the semi specialty side, very similar to what we reported in Q3, basically with the demand being so low, people fighting quite aggressively for a share of a smaller piece of the pie. So it's fair to say, yes, it's a very competitive market.

But we're doing everything that we can, of course, to make sure that we remain competitive. And again, focus on the absolute amount of gross margin that we win, not the gross margin percentage.

And maybe just on that point on the gross margin percentage to complement to what Hans said, if we win new pieces of business, particularly on that semi specialty side, you can also expect that initially, that would be at a slightly lower GM percentage. So if there is a slight fall away there, we're not concerned also looking again at what that absolute GM amount is.

And then maybe, Hans, on the severance side?

Yes, perhaps to add something, Annelies, and it's perhaps more anecdotal than anything else. But a lot of people always ask us, what is pricing and what is volume, what is the impact of both on your business. And I always answer that it's difficult to come to a conclusion because some products we do in kilos, others in grams and others in tons. And then if you add it up, it doesn't make sense.

But just as an exercise, I calculated the total volume in kilos that we sold and divided and took the total sales for both 2024 and 2025. And when dividing the 2, the funny outcome is that my on average sales price in the group, which is in itself a ridiculous number because it doesn't say anything, but the average sales price in 2024 and 2025 was exactly the same.

So I did not see any change in the average sales price across the group. I saw a huge differences per market segment. I saw also quite some changes between regions, market segments than anything else.

And doing the same on the cost price side, I saw an increase -- an average increase, which was below 1%. So if we talk about what did we mainly see last year compared to the year before is a volume issue, not a price issue.

For sure, on the different segments and individual product lines, huge differences, but in total, that was more or less the outcome. Again, see this more as anecdotal because I don't like to do that adding up of all these kilos and tons and grams. But this is what comes out if you would do.

Then coming back on your one-off, I think we are in the process there. I don't expect short-term additional one-off costs, but we are still in the process of separating from a number of people in our organization. And as you know, in Europe, that often takes a bit more time than in other parts of the world.

The next question comes from Matthew Yates from Bank of America.

Maybe I'd just like to follow up on Hans, your anecdote, please. So if you look at the year gross margin down 40 basis points, I think you said in the introductory remarks, roughly half of that can be put down to the M&A dilution.

So you've got another 20 basis points that encompasses product mix, regional market conditions and FX. So again, is the conclusion from that, that pricing really is not playing a material role in the outcome of your profitability here?

And I don't know whether the message or the anecdote would have changed as you went through the course of the year because the Q4 gross margin was down much more significant 140 basis points. I guess you have that more pronounced European M&A in there and the more adverse currency moves.

But I was just wondering if you could just elaborate a little bit more on the relative order of importance between those 4 drivers that you've put in the press release about the margin evolution.

And then maybe just a second question, just to follow up on that one on restructuring and the cost base. As you look into 2026, is your expectation that your organic cost base is flat, higher or lower, based on that restructuring effort that you were doing in Q4? Do you feel like we're going to see less inflationary pressure on the cost base going into 2026?

Shall I start, Marcus, with the last -- the second one?

Yes, and then I'll -- yes.

We go back to the margin percentage and -- Matthew, what -- I think if you look at the development of the cost base, there are a couple of factors there, that is number of people, that is the wage and salary component, there is the bonus item and what I would call all the other operating costs that we have.

If I look at the wage and salary component, the combination of the number of people and salary inflation, I think that it's fair to assume that we try to take out of the cost structure, the impact of the wage inflation by doing the reduction in people.

But at the same time, I hope that we come back to a situation where we can pay our people full bonuses that we have now 2 or more or less 3 years in a row that people missed their targets massively in certain areas. On the one hand, that leads to a cost saving, and that part of the cost will come back if people reach the targets, and the targets are based on growing compared to last year.

And that is -- that, I think, on the cost base. Then on the margin, Marcus?

Yes. So Matthew, as I mentioned before, if you look at that kind of product mix, and not to go into too much of the detail, but as I mentioned on the Q3 call with the pharmaceutical market being soft, predominantly related to the India tariffs, we did see that continue quite heavily, I would say, in the fourth quarter.

So there was an impact there, which is why we do refer to the product mix, but also market. I think just on that pharma piece, positively, we do see more normal ordering pattern coming back into play at the beginning of this year. But the price pressure is, again, it's really on that semi-specialty component part where there is an aggressive, I would say, competition.

And again, it's not to say that specialties are immune from that, but definitely much more protected. And again, to reiterate, the much bigger impact is from a demand perspective.

Does that give you the color that you would like, Matthew?

Yes, that's fine.

The next question comes from David Kerstens from Jefferies.

I've got 3 questions, please. First of all, maybe following up on the gross margins in Asia Pacific. There, we did see a recovery quarter-on-quarter. And Marcus, you highlighted that you do still see that impact from Indian tariffs on Signet.

But now with the trade deal in place between the U.S. and China, do you expect that will continue to show further improvements into 2026? And how do you see the competition from Chinese suppliers moving up the value chain in semi specialties?

Second question for Hans. You're cutting the dividend by 16% based on the top end of your payout ratio. I think you earlier were indicating that you are contemplating share buybacks as the M&A process takes relatively longer to complete.

What made you change your mind? Is that the relatively higher leverage ratio at 2.8x EBITDA? Or do you still have a full M&A pipeline and confidence that these acquisitions will complete?

And then maybe finally, Marcus, you highlighted you do see constructive conversations with your suppliers about outsourcing? How do you see these trends in the current environment and particularly in Europe where your suppliers are under substantial pressure?

Great. David, firstly, from a pharmaceutical India perspective, as I mentioned, we do see, I would say, more normal ordering pattern at the beginning of this year. Of course, we're only 1.5 month through the quarter. So a bit difficult to say that this is now the new norm. But our general feeling at least today is that there's much more confidence coming back on that front.

With regards to competition from China. Firstly, we very much recognize and take seriously both the threat, but very importantly, the opportunity from Chinese suppliers. And as we've spoken about before, we have had our own China sourcing office in place for more than 20 years.

In general, we see that, yes, China, in particular, we're not involved with the commodity side, but they're very present there more and more in the semi specialties and, of course, have the ambition to play within the specialty field.

We have worked and do work heavily in some cases, with quite some Chinese suppliers through that China sourcing office that we have. And it really, I would say, is a slow process as with actually with Western suppliers when we founded the company, but really building the relationships with those Chinese suppliers over time, where we get to know them, they get to know us, we get more comfort on the quality of the products that they have to supply.

And maybe even more importantly, the stability of supply, how committed are they, for example, genuinely in having long-term supply to Europe, to LatAm, or is this just because they have products available today that they're looking for a greater amount of export.

But these are relationships, as I said, they're not new to us. Our business with Chinese suppliers continues to grow. As those relationships do develop, there are examples of them offering initially customer exclusivity, and then in some of the smaller countries, again, with many years of relationship building where there are some exclusive relationships coming into play.

But their business model, as I've mentioned before, in general, is quite different. But yes, it is an important, I would say, consideration for us. And again, we see this as not only a threat but an opportunity for the future.

Maybe, Hans, do you want to cover the leverage and then I talk about...

So David, basically, your question about capital allocation. We have a dividend policy whereby we indicated from the start of our listing that we would use a payout ratio between 25% and 35%. The last 5, 6 years, we have been on the top end of that range, and we did not see any reason to change the dividend policy, neither the place where we are in that range, on the top end of that range.

And that's why we pay out what we mentioned in the call and in the press release. At least we proposed it to the AGM. And it is, of course, up to the AGM to approve.

Then on the M&A pipeline, we have a healthy pipeline there. We have quite some processes, processes that what we mentioned earlier, sometimes take longer, take longer due to discussions around valuations, about what the sustainable EBIT going forward.

And at a certain moment, we need to decide if these processes take longer than expected, what do we find an acceptable leverage and how do we use the cash that we have available for M&A.

And I would like to keep all options open there. So I did -- we did not really change our mind, but we always look at the combination of case that we generate, M&A pipeline and opportunities to put the cash at work most efficient for all our stakeholders.

And then your last question, David, from a supplier outsourcing trend perspective. I would say here, it's really a bit of a mixed bag. What you see is quite some suppliers making some mass redundancies and therefore, looking to outsource a much greater percentage of their business because, of course, they're reducing quite significantly their own in-house commercial and tech support teams.

On the other hand, you also see some suppliers, which are looking at IMCD and the customer base that we've successfully been able to develop and looking at which are some of the larger accounts which we've successfully developed and could they take those accounts back in-house for short-term win for themselves. Of course, those are then healthy conversations that we have with them, a little bit, I would say, of horse trading.

And in some cases, you can imagine that there are those bigger accounts taken back in-house, but in return, either for some smaller accounts transferred to us or even, in some cases, product line or geographical expansions. So I would say, in general, there's even more healthy conversations happening with suppliers about further developments and expansion than I've seen for a long, long time.

The next question comes from Anil Shenoy from Barclays.

Yes. Just 2 questions, please. First is on costs. Am I right -- I mean, did I understand it right when you said that going forward in 2026 that any kind of a wage hike will be offset by a decrease in FTE? So we can -- on an organic basis, we can expect costs to be flat.

And if that is so, given -- I mean I'm trying to understand what kind of a gross profit growth would be required so that you can offset any kind of a cost inflation, if there is any? So sort of like if I'm building a bridge between 2025 and 2026 EBITA, then if EBITA has remained constant between 2025 to 2026, then what kind of a gross profit growth would be required? That's my first question.

And the second question is specifically on the organic EBITA decline of 18% in Q4, which has been considerably worse than the Q3 EBITA decline. I know you don't like to talk about the business on a quarter-on-quarter basis. But I'm just trying to understand what has gone worse in Q4 versus Q3. Is there any particular end market or any one-off costs? Just any kind of color on that would be very helpful.

Yes. Perhaps I should come back on the cost side to make clear what I just mentioned that what we see, if I look at -- we are in an environment where people expect a salary increase every year. And what we see is that the reductions that we made in the organization should compensate for the average salary increase. That is the basic work assumption that we have.

On top of the salary increase, a lot of people missed their bonus this year. So that is a saving this year, like it was a saving in 2024 and unfortunately, also in 2023. So we have 3 years in a row that people massively missed their bonus targets.

We hope that, that will come back. If that comes back, that leads to additional costs. And I'm happy to pay these costs as that is just a sign of a successful outcome of a year, and the successful outcome of a year means that we will grow gross margin substantially compared to last year. And that is the working assumption that we have.

And then you were talking about an 18% miss and things that went wrong in the last quarter. I think it's first important to take into account that the base number of result is much lower than the quarter before. So mathematically, already the percentage goes up.

At the same time, we are not happy with the development of gross profit. The organic decrease in the third quarter was minus 3% and minus 7% in the last quarter. Basically, yes, that's not good. And we had a bit of a weak finish of the year. October, pretty okay, November, soft, December, well, very soft, I would go like that.

And again, in general, we would say that the pharma market was surprisingly soft for us again in the fourth quarter, as we mentioned on the Q3 call. But yes, I think -- and to support it, it was really a surprising lack of demand again from customers. And yes, it wasn't a particular market segment or region, it was pretty much across the board.

Yes. Got it. If I could ask a very quick follow-up. How has the trading in January been? I mean you mentioned that November and December have been soft and very soft. So have you seen -- have we started seeing any kind of improvement in January? Or is it similar?

Well, as you know, the first quarter of last year was our strongest quarter, and January was actually the strongest month within that quarter. Hans also has already spoken about the significant currency headwinds that we're facing on a like-for-like basis. So that comp is very tough.

But I would say, look, beginning of the year, January looked pretty okay. We're only halfway through Feb. So we have limited variability. So it's a bit too early to comment. But we're very much focused on the things that we can control, the commercial team activity, developing and converting the new opportunities, both with the customers and the suppliers that I've mentioned, and of course, being cost-conscious.

The next question comes from David Symonds from BNP Paribas.

Maybe I could just dive into that January comment. Could you talk about different -- I know it's early in the year, but could you talk about the different end markets and what you're seeing changing? I think you said Pharma was looking a bit more positive.

But maybe you could give some views on the industrial side of the business. We've seen obviously U.S. ISM was much more positive. There are some European sentiment surveys, which are looking a bit better in January. So is the industrial side also coming back?

Secondly, if I look at the implied margins of acquired businesses in EMEA, then actually -- obviously, it's still quite dilutive, but Q4 was less dilutive than Q3. I think implied margin was like 6.5% EBITA versus 5% in Q3. Is that the early impacts of cost being taken out of that business? And sort of how quickly would you expect the sort of acquired businesses to come back to group levels of margin?

And then if there's anything you could say about price decreases with supplies in January? Should we expect a sort of step down in your COGS as you sort of negotiate new terms of suppliers at the start of this year?

Thanks, David. I think firstly, if we look across the various markets, as you say, it's a bit early to really look at what the market trends are, but I think we're seeing, with the exception of Pharma, pretty much a continuation of the trends that we saw coming out of last year, where we see Food & Nutrition, I think being very stable to actually some pretty nice growth on a global basis across all 3 regions.

Pharma, I spoke about globally, I think we're seeing more normal order patterns beginning to come back into play. Beauty Personal Care, it was a soft market for us last year. I would say when I spoke about the green shoots and people talking about green shoots, the beauty market is definitely one of those markets where people are beginning to talk about an upturn coming.

And as I mentioned on the previous call, again, we see a lot of reformulatory activity coming through our labs. So I'm pretty excited about the beauty opportunity. So we're confident about that market for the longer term.

The industrial side, unfortunately, is the one that's more difficult to predict. We likewise hear, again in the U.S., things like the coatings and construction market, which has been very depressed, and we all know about the stagnation from a housing market perspective.

We hear people talking about, again, these green shoots coming, but we don't yet see them. So I think, unfortunately, on the industrial side, it's a case of wait and see. But of course, I mean, we're confident that it will come.

Then you had a question about the integration of M&A and if that -- how quickly you can bring them back to more average IMCD levels. Most of the acquisitions that you referred to, either we did in December or in the third quarter of last year. So there is -- it will take a bit of time. We are, especially on the Ferrer side, in the process of integration.

We are also cautious. It's always important in the first year that you don't lose your customers and your suppliers by massive price increases to get margins up to a more IMCD average level.

So it's more important that to stabilize the business there where we can get our cost benefits we will do, but we don't want to lose critical people, critical suppliers and customers in these processes. But for sure, over time, you could expect a bit more normalization of profit levels in these activities.

Yes. And then, David, on the pricing side, you speak about price decreases at the beginning of the year, but what we've actually seen is quite some price increases. Of course, it's not across all product lines and all markets. But I think it's fair to say that, particularly outside of the semi specialty side, we've seen more price increases than decreases.

And interestingly, that also includes from Chinese suppliers. So let's wait and see how much of those price increases really stick, but there's certainly ambition from our suppliers to try to push pricing up.

The next question comes from Suhasini Varanasi from Goldman Sachs.

Just a couple for me, please. It's just a follow-up to some of the previous questions. If we think about your 2025 results and the tariff-related uncertainty that you saw impacting numbers, would you see that tariff-related uncertainty being -- representing more of a one-off kind of a weakness and that hit your numbers and potentially hit your numbers in 1H '26?

If that eases, would you expect volumes to improve? Just trying to understand what went -- what changed in '25? What is the catalyst to help it the change in '26, I suppose?

And then the next question is on gross margins. What do you think is more important for the gross margin percentage? Is it pricing of chemicals? Or is it volumes? If, let's say, we see further chemical price deflation, especially on the semi commodity side of things, but volumes recover, do you think gross margins can see some improvement underlying organic FX adjusted?

Thank you for your questions. I think with regards to the tariff uncertainty and the impact that, that had, I mean, of course, it was a big shock wave that came into the market. And I think the biggest impact of that was it really damaged consumer confidence.

My own personal feeling is that as we get and are beginning to get already some more certainty around what the tariff numbers are, I think that we will gradually get better consumer confidence back, and therefore, the volume demand will follow.

And it's that volume demand, which we need in order, I would say, to re-kickstart the business. So again, I think the talk of the green shoots are definitely there. Let's see when those green shoots do actually develop. But yes.

And on the gross margin, I think, again, really important that we don't focus just on the GM percentage because you could imagine that as demand does pick up, particularly on the industrial side, and the industrial side, as we mentioned before, does tend to have a slightly lower GM percentage, as those markets do pick up, there could be a slight drop in the overall GM percent.

So important that we really focus on what the absolute gross margin amount is. Also, again, to make sure that we're taking advantage of gaining new business because typically, when you gain a new piece of business, particularly on that semi specialty side, again, the GM percent can be a bit lower. And then over time, as we build the relationship with the customer, we then look to increase that over time.

The next question comes from Luuk Van Beek from Degroof Petercam.

First of all, I've a question about your working capital. I noticed that the payables increased significantly year-on-year. So can you give a bit more color on the working capital developments that you saw in Q4 and what you expect in '26?

And my second question is on the bonuses. You mentioned those as a potential dampening impact on the stabilization of operating costs. So can you give a rough indication how much lower they were in the last 2 years versus the previous period, for example? So how big can that swing factor be?

Yes. Luuk, thanks for the questions. First, working capital. I think, and you specifically referred to creditor days. And as a company, IMCD is always -- we pay our creditors in time on the due date, and we don't want to play around with that.

And if the due date is just before Christmas, then we pay just before Christmas, and we don't want to push the payment in the first day of the new year to show a better number there. So this is more timing difference than anything else. I don't see a change in the behavior of suppliers there.

On the bonus component, in previous calls, we have mentioned a couple of times that if you look at the average bonus amount, I think if you look across the company, we talk about somewhere between 1.5, 2.5 months of salary that people can make.

At least half of the target is linked to financial performance, reaching your financial targets, and there are always individual targets in there. And that is a bit of flexibility that we have there. I don't want to mention a specific number there, but that should give you a bit of a feel of the magnitude we are talking about.

The following question comes from Nicole Manion from UBS.

Just 1 question, please, on the Americas business as regionally, that's where you've seen perhaps the biggest slowdown through the latter part of the year.

I wonder if you could give any detail on what you're seeing in LatAm perhaps compared to North America through Q4. Obviously, aware that markets like Brazil, you've called out some pressure from increased competition, but you've also maybe got pressures on the U.S. consumer side too. If you could help us isolate some of that maybe.

Yes, I would say from a U.S. perspective, the biggest impact there is on the industrial side, particularly, I would say, Coatings & Construction. Beauty Personal Care also being fairly muted throughout last year.

And then moving on to LatAm, yes, Brazil most definitely, one of the more impacted countries that we have. As we've mentioned before, through the acquisitions that we made quite some time ago, a little bit more of a higher industrial semi specialty component there and quite some price pressure. So yes, Brazil definitely, as a result of that price pressure, I would say, one of the poorer performers.

And for me also, Nicole, Brazil is one of the areas where we saw quite some operational currency impact. That is typically a market where we quote in dollars and then invoice in the local currency. And if I look at -- if I compare the exchange rate, U.S. dollar, euro, versus what happens in Brazil, we saw a 13% drop in the dollar and only a 3% drop in the reais.

And you can imagine then you already lose 10% of your sales value locally with the same cost structure. And so these type of things people often forget how important local currencies versus the dollar, how that plays a role in the day-to-day business environment. And that is one of the things that also really hit hard the P&L in that country.

The following question comes from Eric Wilmer from Kempen.

I was wondering, are you seeing a difference between larger and smaller Chinese suppliers in their willingness to go exclusive? Are the bigger ones also as willing to go exclusive? I can see the smaller ones wanting this, but what about the larger ones? Would this be for them, perhaps something that is seen as a potential sales limitation when you bet in one distributor?

And then yesterday, I think a key food ingredient supplier highlighted a deterioration in Q4 with regards to food ingredient volumes in EMEA and then particularly in food service. And I think you actually stuck a bit more optimistic tone. I was wondering, is this because you're perhaps differently exposed?

And then lastly, maybe a bit of a silly question, but I believe you generally talk about 20% of your business being geared to semi specialties. I was wondering, is this 20% still 20% or more like 15%, perhaps given the underperformance? Or is it actually still 20% due to recent M&A?

On the food ingredient volume side, I would say that we haven't seen a big impact there. I mean when we talk about food ingredients for us, it's also the nutritional side. So we see, for example, quite some nice formulatory opportunities as people are looking to increase the amount of protein and fiber within their diet. Similarly, by the way, for the U.S. where GLP-1 drugs have quite an impact, I would say, on consumer behavior.

But again, similar to Beauty Personal Care, a lot of formulatory work going through our labs as people are really looking to, I would say, enhance the quality of the products that they eat. Larger versus smaller...

Chinese suppliers.

Chinese suppliers, sorry. Eric, definitely, in our experience, the smaller Chinese suppliers are much more, I would say, willing to build a closer relationship. Again, this is not something that happens overnight, but over a time frame of a few years as we get to know them and vice versa.

In our experience, the smaller ones are more willing to give the customer protection and in some cases, the country exclusivity. The larger ones, I would say, it's pretty rare. In our experience, almost never happens. But yes.

And then the final question on the semi specialty to specialty. It really differs by market, where I think we've said before that things like the pharmaceutical market, you could imagine, is a much smaller semi-specialty percentage. But I think fair to say that across the board, that roughly 20% still stands.

The following question comes from Chetan Udeshi from JPMorgan.

I had a few questions. First on the trend of outsourcing, Marcus, I think I'm hearing this for the first time you referring to some sort of a horse trading with a few suppliers trying to gain the access back to some of the bigger accounts. And I'm just curious, what is the net impact of that on IMCD?

Are you seeing more, let's say, cannibalization or accretion in your customer relationship because of those changes or it's not meaningful in terms of impact? I'm just curious if this is a new trend of maybe customers wanting to in-source? Or it is something that you would say is part and parcel of the negotiations that you generally do?

The second question was, and Hans, you highlighted this a couple of times during your notes, which is the operational impact from currency. And I'm just curious, and this is just my impression speaking to my colleagues in India, correct me if I'm wrong, but even Signet in India prices in euros or dollars and then invoiced in rupee.

Is this -- beyond just the P&L impact, is this creating some sort of a competitive pressure as well? Why would customers not look to source from local distributor or supplier who can quote them in rupee rather than having to pay in euros or dollars given the rupee in India has depreciated by 15% to 20% in the last 18 months? I'm just curious is this coming with some competitive pressure on top?

And the last question on Signet. Is Signet back to growth now in Q1, do you think?

You're very specific on Signet.

Maybe if I begin with the outsourcing, I think firstly, Chetan, when I talk about this horse trading and kind of the discussions that we have with suppliers, when we grow accounts to a certain size, that's nothing new. I mean that's been with us since the foundation of the company.

I think what I was referring to there is that there's more and more discussions with suppliers about expansions and opportunities as I think they themselves also struggle significantly with their own performance, I think that they are more open to making change.

And as I mentioned in my initial starting speech, I'm encouraged by the number of positive supplier conversations that we've got ongoing. So I would say generally very positive about that outsourcing trend.

And Hans, on the India and Signet?

Yes. Now perhaps more in general around currencies, Chetan. That is -- in a lot of countries, we import material, and then in a lot of countries, it's common to quote in either euros or dollars and then invoice in the local currency. We see that in India with Signet, we see that in Mexico, I see that in Brazil, I see that in Poland, I see that in Turkey.

In a lot of B2B environment, this is quite a common practice. If you then compete with a local producer that produces locally and always quotes in the local currency, that could be a positive or a negative.

I think if I specifically look at the segment, there the risk is remote because basically, we import their material from American and European suppliers that are part of the formulation, part of an FDA-approved recipe. So the customers are, they are more or less obliged to use that material because the final product is then sold back to the American market or to the U.S. -- to the European market.

But if I look, for instance, at the coating business in Mexico, there, we quote -- everybody quotes in dollars, and then you invoice in Mexican pesos. And if I look at the exchange rate, again, as an example, U.S. dollar versus the euro versus the Mexican pesos versus the euro. If I see a drop of 13% in dollars and I see more or less a flattish Mexican pesos, I basically lose about 13% of my top line, and my cost base is still in Mexican pesos.

So what you then see is lower organic growth because of this currency impact, and you see the same cost base because in the end of the day, all these companies report in euros, and that is for me always difficult to explain the impact of these changes, but it definitely had a negative impact in the second half of last year on top line growth and margin growth, but by the cost line still remains in the local currency. But there is always that competitive element if there is a local producer that still quotes in local currency.

The following question comes from Stefano Toffano from ABN AMRO ODDO BHF.

Yes. Two questions remaining for me. So I mean, the first one. Taking a step back, I'm curious to see if you can highlight where do you think we are in the cycle? Because obviously, end of Q1 last year, Q2, lots of volatility due to tariff discussion, et cetera. And I think many thought Q2, Q3 would perhaps be the bottom. And I think today's surprise is mainly to see that it's getting worse.

But looking at your free cash flow conversion up in the 90-plus percent, et cetera, it's very high, maybe signaling really, really low demand. So just we can't see the future, obviously, but I'm just curious where do you think we are in the cycle today?

And then the second question is on the, let's say, headroom for M&A. How much headroom do you really have? The question here is because 2.8x, obviously, compared to your bank covenants, you still have some room. But in my experience, particularly European investors, when the leverage gets to 3x, they get nervous. Maybe in the U.S., they say it's still too low. But in Europe, that's my experience at least.

Also thinking again about the high free cash flow conversion. If should demand come back, you need to invest something in your working capital. So overall, on the base of 2.8x, it might be that your headroom for acquisitions might be lower than it looks. If you can please comment on that.

The first question relates to where do we think we are in the cycle. I think we would also love to know that ourselves. But I think when we look at all of the different market reports and as I mentioned before, speaking to customers and suppliers, I generally feel that there's more optimism than there was certainly during Q3 and Q4.

And I think that the market reports, as was previously mentioned on this call, was an indicator of that. So we don't have a crystal ball. But as we said, I think people talking about the green shoots coming, we've definitely heard more of that since the beginning of this year.

And Hans, on the...

And also a nicely building order book, a bit more positive there. Stefano, the headroom on M&A. I understand your question. At the same time, I think you also saw that we generate quite a bit of cash every quarter, creating additional headroom.

With looking at the pipeline and the speed of executing the M&A opportunities, there is room for us to maneuver, sufficient room to maneuver. And if for whatever reason we see something that drives our leverage temporary just over 3x, we are not shy to do a transaction if that really -- if we really feel this is needed to further grow the business.

But then we will also explain to the market how we will bring leverage back to below the 3x that you just mentioned, mainly because of European investors. Because the American investors always tell me that we are -- the leverage is much low and the business can have much more. But yes, we need to take into account all stakeholders in this respect. But I feel confident with the room that we have to maneuver there.

The following question comes from Tristan Lamotte from Deutsche Bank.

Two questions, please. The first is on 2025, you talked about relative price stability. But at the same time, you're saying explicitly that there's continued pricing pressure in semi specialties. Are your European producers losing market share because they are pricing above Asian competitors?

And therefore, effectively, although your pricing might look stable in some areas, effectively, the net impact is the same as prices basically traded for volumes lost? So really still the leading indicator here is pricing even if that is kind of indirect. Is that fair?

And then second question. We're back at pre-COVID conversion margins in Q4, so kind of around your long-term average. Is this kind of a normalized level for the business? Or was Q4 a bit of a one-off due to some destocking? And what kind of range could you see on that margin in 2026?

Yes. Perhaps first, let me answer your last question. Q4 is for us always a quarter whereby the December month is more or less half a month. And for the cost base, we need to pay the full salaries in third quarter -- the fourth quarter. And so the conversion margin in the last quarter is always the lowest in the year. So this is not the new normal going forward as far as we see it.

Pricing, pricing stability?

Yes. Tristan, I think, I mean it's a very complicated question to answer, as you can imagine, because with over 50,000 products within the portfolio. But in general, as I've mentioned before, what we see is on the specialty side, pricing stability during 2025 with, I would say, quite some price increases coming through the beginning of this year.

But you're right, on the semi specialty side, there is pricing pressure, has been pricing pressure. But again, it's early stage, but we have seen some price increases at the beginning of this year coming out of China. So let's see again if that sticks. But yes, with such a diverse portfolio, it's difficult to be specific.

Did we now create more confusion, Tristan? Or did we try to answer your question?

That's very helpful.

The last question comes from Quirijn Mulder from ING.

Of course, a lot of discussions. First of all, Marcus, maybe can you tell me something you presented, let me say, at the Capital Markets Day in September 2024, the new tools and the high expectations you had from that. Is there anything visible yet on the rollout of that and the successes of that? That's my first question.

So thank you for the question. Yes. So I presented the Sales Assistant. Delighted, as I mentioned in my pre-commentary, with the full rollout of that internally from a global perspective during the course of last year. And yes, we are seeing very good traction from our commercial teams there, the usage of the system and also the ability to increase the cross-sell rate.

That tool has already been rolled out for 4 of our business groups externally on the MyIMCD platform and will be rolled out to the other bigger business groups during the course of the next 1 to 2 months.

Okay. Perfect. And then, Hans, with regard to the restructuring, can you indicate any size of that and how it is spread over the areas? And to what extent is this acquisition-related? Because it's for me not clear what exactly the amounts...

Maybe if I could just say a quick word on that to begin with, Quirijn. And it wasn't a significant restructuring. What it was, was us really looking across the whole organization, making sure that we are as sales-orientated and customer-centric as possible to be able to drive the sales activity in the most effective way.

So we had a look at this. And in some areas of the business, it meant actually investing in additional highly qualified commercial staff, but also looking at where can we make efficiencies. You mentioned the Sales Assistant, but you can also imagine that we've got quite some work ongoing around AI use on things like the -- on the order to cash or quote-to-cash process.

So it's a combination of really looking across the company and making sure that, again, we're as active and proactive as we can be commercially, but also as efficient as we can be from a back-office perspective.

Net-net, as we said, that resulted in a reduction in the number of FTEs. But it wasn't so much a massive restructure focused purely on reducing cost. It was really also about making sure that we are that hungry sales organization.

Yes. And if you then ask me, if you look at the regional split, I think it's fair to say it was a bit more EMEA oriented than any other parts of the world. But all in all, the fact that we have a global integrated IT CRM system allowed us to make these efficiency changes across the globe. So it impacted more or less each and every country in the IMCD structure.

Okay. Maybe a final question. So on the M&A, so the pressure on the gross profit margin in EMEA, you mentioned, let me say, was related to the M&A, as I see it. Yes, mainly because -- but it is a little bit strange to me because it was only 2% increase of the revenue because of M&A. And the pressure 80 basis points, something like EUR 4 million. So it's, in my view, a little bit strange that the effect can be so large.

Yes. It was, I think, larger than you would expect. I think I mentioned 2 things. I mentioned a combination of M&A and additional stock provisions. So it's fair to say that you need to take into account both. And in EMEA, we had both. And basically, the stock provision impact is something that happens...

All right. And with that, I would now like to hand the call back over to Mr. Jordan for any closing remarks.

Great. I just want to thank you all very much for joining the call this morning and for your questions. And yes, Hans and I wish you all a very good day. Thank you all.

Hello. Welcome to the IMCD 2025 First 9 Months Results Conference Call hosted by Marcus Jordan, CEO; and Hans Kooijmans. [Operator Instructions]

I would now like to give the floor to Marcus Jordan. Mr. Jordan, please go ahead.

Thank you very much, Elba. Good morning to you all, and a warm welcome. I'm Marcus Jordan, and I'm here today with our CFO, Hans Kooijmans for the 2025 first 9 months results, which we published in a press release earlier this morning.

The first 9 months of 2025 were generally characterized by challenging market conditions as a result of continued macroeconomic uncertainty, particularly around tariffs across all regions. This resulted in softer demand across a number of markets, limited order visibility and just-in-time deliveries.

Moving on to the first 9 months numbers. You will find a summary of our financial results on Slide 4, whereby considering these continued challenging macroeconomic conditions, I am pleased with our gross profit growth in the first 9 months, which is up 5% on a constant currency basis to EUR 927 million. This increase is driven by a combination of organic performance, successful acquisitions and resilient gross profit margins.

EBITA also increased by 1% on a constant currency basis to 340 -- sorry, EUR 394 million. And our cash flow of EUR 284 million was a bit lower compared with the first 9 months of 2024, driven by a combination of a slightly lower EBITA and a modest increase in working capital investments.

As we mentioned in the half year call, we are actively working on reducing our inventory amount back to historical levels, but I also want to stress how important it is that during these uncertain times, we have inventory in place to fulfill the demands of our customers.

If we now look at M&A, we announced 4 acquisitions in the first half of 2025. And in Q3, we were very happy to add another 2. In August, we announced the acquisition of Tillmanns in Italy, which operates across a broad way markets, including coatings and construction, food and nutrition and water treatment. Tillmanns have 78 people and had a revenue of EUR 143 million in 2024. I'm very proud of this acquisition as we've become a real powerhouse for our partners, teams and suppliers in Italy.

In October, we also announced the acquisition of Dang Yong FT in South Korea, a company active in beauty and personal care with 14 people and EUR 34 million in revenue. We strengthened our position in South Korea, which, as you know, is one of the most innovative and largest Beauty & Personal Care markets in the world. On a full year basis, these 6 acquisitions will add around EUR 340 million revenue and 185 employees based on their last full year numbers before acquisition.

Looking at our business segments. We have seen pharmaceuticals, food and nutrition, having the most solid performance in the first 9 months and our Beauty & Personal Care and Industrial segments being generally soft in demand across the 3 regions.

Related to demand, we get a lot of questions around Chinese competition in our various markets. And during this year, it is fair to say that we have seen more competition from China. And whilst we are somewhat protected from this due to our specialty focused portfolio, we have seen some pricing pressure, primarily on the semi specialty components of our portfolio and especially in the APAC and LatAm countries.

It is important to highlight that competition from China is nothing new to us. And we -- and as we have done throughout the history of IMCD, we regularly review the portfolio we have in all countries and markets to ensure we are for the longer term competitive and where necessary, adapt our portfolio accordingly, again, with the long-term growth of the company in mind.

To summarize, despite the ongoing uncertainties in global trade and tariffs, our business model has shown resilience during the first 9 months of the year. We are further intensifying our efforts to drive cost effectiveness and commercial excellence throughout the company and ensuring that we have the right people and the right positions for the future.

We are in the process of further strengthening our sales organization, both those on the road and inside sales specialists. At the same time, we're taking advantage of our digital initiatives to optimize other areas of the business. Overall, this will result in a reduction in the number of FTEs going forward.

We are well positioned for the future through our adaptable specialty-focused portfolio, geographic and market diversity combined with advanced digital and supply chain capabilities, and we remain confident in the strength and long-term outlook of our asset-light business model.

I would now like to hand over to our CFO, Hans Kooijmans who will give you an update on the numbers.

Thank you, Marcus, and good morning, ladies and gentlemen. And I will, as usual, briefly summarize IMCD's results for the first 9 months before we go to Q&A. And I would like to start on Page 7 of the presentation.

On this page, you can see ForEx adjusted revenue and gross profit both increased with, respectively, 6% and 5% compared to last year. Despite the challenging conditions, Marcus just mentioned, we still achieved a modest level of organic gross profit growth, along with a 4% increase as a result of the first time inclusion of acquired businesses.

Gross profit in percentage of revenue slightly decreased to 25.2%. And about half of this 0.2% decrease is the result of the negative impact from acquisitions, acquisitions with, on average, a lower gross profit margin than group average.

Furthermore, we saw the usual fluctuations in our product mix, currency impacts and changes in local market conditions. Then ForEx adjusted operating EBITA, which increased 1% to EUR 394 million. And this increase resulted from an organic decline of 3% that was more than compensated by the positive impact of the first time inclusion of the acquisitions.

The reported EBITA and conversion margin both decreased. And this is mainly the result of gross profit growth that could not fully compensate inflation driven on cost growth. When you look at the cost growth, the year-to-date organic own cost growth came down to just below 4%. And compared to September 2024, the number of full-time employees normalized for the impact of acquisitions slightly decreased.

ForEx adjusted net result on the next line, that decreased 9%. And in our trading update, we usually don't break down this difference in detail. However, it's fair to assume the main factors are similar to what you saw in our half year results, lower reported EBITDA and higher finance costs as the main drivers. And these higher finance costs in year-to-date 2025 are mainly the result of a bit more ForEx losses and lower gains from fair value adjustments of deferred considerations.

Further, we reported and will report additional cost related to one-off adjustments to the organization. And these additional cost items are partly compensated by lower tax cost. At year-end, you could expect higher than usual additional costs related to one-off adjustments to the organizations. You know and we told you before that we are always cost conscious and prudent with our cost structure. However, as indicated also by Marcus, current market conditions, but also opportunities as a result of our digital investments allow us to reduce our fixed cost base and adjust the organization to changes in market conditions.

Then on free cash flow, we reported cash conversion margin of 71%, which is slightly lower than the same period of last year. As mentioned in our previous call, we took additional measures to reduce our working capital investment, why we are careful to carry sufficient stock to fulfill our customer requirements.

In our previous call, when we discussed the end of June figures, we reported that our working capital days were 6 days higher than the same period of last year. End of September, we were able to reduce this gap to 3 days. And we feel confident that we will report at year-end, a cash conversion ratio somewhere around high 80% or a low 90% number.

Then on the next page, Slide 8, you will find a summary of a few key figures split into the various regional operating segments. When looking at top line and gross profit, we were able to grow organic as you can see in all 3 regions despite these difficult market conditions. We also had quite some currency headwinds when translating local results into the euro, most significant in APAC and the Americas. This currency translation impact is easy to quantify and report it as a separate line, but more complicated is calculating the operational impact of these currency fluctuations.

It's obvious that these currency fluctuations had a negative impact in regions where it's common to quote in dollars and invoice in local currency. Therefore, it's fair to assume that these currency fluctuations this year negatively impacted our results in LatAm, APAC and a few EMEA countries.

On the bottom of this slide, you will find EBITA margin conversion margin per segment, and we report a negative development in 3 of the 4 segments. And the only positive exception is Holdings where the cost in percentage of revenue ratio slightly improved due to lower holding cost.

EMEA reports the biggest EBITDA and conversion of deviation compared to last year. And as mentioned in previous call, you should keep in mind that the majority of the global business group costs are reported in the EMEA region. And this then automatically leads to, in general, higher cost base.

The biggest swings in results during the year were reported in the Americas and Asia Pacific. The America and APAC reported, respectively, a positive 21% and 7% organic EBITA growth in the first quarter, which turned into a minus 4% and minus 3% year-to-date September. Marcus gave you already a bit of color on the background.

On Page 9, a summary of IMCD's free cash flow. The absolute amount of free cash flow was EUR 16 million lower than last year, and the cash conversion ratio was 71%. And lower EBITDA, a slightly higher working capital investment were the main drivers of the difference compared to last year. As mentioned before, we are confident that we will report at year-end a cash conversion ratio somewhere around the high 80% or low 90% number.

Page 10, update on net debt and leverage. By net debt at the end of September was close to EUR 1.5 billion, slightly lower than end of September last year and EUR 228 million higher than the end of December. The year-to-date increase of our net debt position was, amongst others, impacted by a combination of on the one hand, positive operating cash flows, combined with cash outflows of EUR 281 million as a result of acquisitions and EUR 127 million dividend payment.

Our reported leverage ratio, including the full year impact of acquisitions done was 2.6x EBITDA, which is similar to the leverage based on the definitions in our loan documentation.

And then last but not least, on Page 12, you will find our outlook for 2025, and I assume everybody has already read the text in the press release. Therefore, I don't want to repeat it again loud.

And I would like to hand over to Elba, the operator, to open the lines for Q&A.

[Operator Instructions] Our first question comes from Annelies Vermeulen from Morgan Stanley.

I have 2 questions, please. So firstly, could you talk a little bit about how pricing has developed over the quarter? We had talked earlier in the year about stabilization, but I'm just wondering now how the combination of tariff-driven inflation and some of the increased competition you mentioned is driving pricing and how that has trended relative to your expectations?

And then secondly, just on the competition from Chinese suppliers. We -- I think we spoke about this at the half year. So could you talk a little bit about how that has developed during Q3? Have you seen that competition step up, particularly as tariff noise has increased? And do you expect that to continue for the foreseeable future? And in that context, you mentioned keeping the portfolio under review. And so are there any structural changes that you're considering if you assume that, that competitive pressure will continue?

Annelies, thank you very much for the questions. I think in terms of pricing, what we can say there is that we haven't seen any real significant change during the quarter. We've seen, I would say, a little bit more normal pricing behavior where for some product lines, we've seen small increases. But also related to your second question, we have continued to see pricing pressure in certain areas and business lines on the semi specialty side from China. So I would say nothing, I would say, changed significantly since the last quarter.

And then moving on to competition from China. Again, I wouldn't say that we've seen a very significant increase in the third quarter versus what we've seen in the past. I think generally, we have seen more competition this year than last. But I think also important to stress, as I mentioned, Chinese competition is nothing new. And I think then related to the structural change and how we review the portfolio. I think important to mention that we've had Asia sourcing offices in place in India and China for more than 20 years.

Historically, those were very much focused on some of the product lines that actually were predominantly manufactured there. Pharmaceutical actives is a good example. But as you can imagine, we also use those sourcing offices sometimes to look at what are the white spots that we've got, particularly in countries that we're maybe freshly entering into.

And so we do keep a very close eye on what is happening within the, let's say, China manufacturers looking at our portfolio. Still remaining very loyal to those long-term partners that we have and always been, I think, looking at the long-term growth of the company, making sure that we don't do knee-jerk reactions for what could be short-term market conditions.

But again, I think the beauty of our business model is we've got a very agile product portfolio. We can adapt where we need to. But again, let's be cautious and make sure that we're doing that with a very long-term view.

The next question comes from Matthew Yates from the Bank of America.

I'd really like just to continue on the theme of that competitive pressure really. Looking at your Asian performance, it would be helpful to unpack that a little bit. I mean flattish top line feels respectable in light of the tariff uncertainty that the world is operating in, but then the 13% decline organically in EBITA suggest some competitive pressure or investment that you're making to drive future growth, I don't know.

But when -- Marcus, when you talk about portfolio review, that to me, just sounds like walking away from business and accepting that there are product lines that are no longer profitable for IMCD to operate in. Is that fair? If so, how much of the portfolio are we talking and is there anything else you can do to sort of reinforce the business model and the pricing pressure you have in light of these challenges, I appreciate you're saying there's nothing new, but equally, at the same time, it does feel like it's intensifying or accelerating.

Okay. Matthew. Maybe if I speak a bit about the first point first and the Asia Pacific numbers. And I think the standout there, Matthew, is related to India. where we do see, I would say, quite a softness from a performance perspective during the third quarter. And if we dig a little bit deeper into that, I think that we can talk then the most, I would say, the largest effect is related to pharma. So I think we all saw the pharmaceutical tariff discussions, which took place during the third quarter that, of course, I would say, in general, quite some uncertainty. There was a big pharmaceutical exhibition in Frankfurt called CPHI last week. We had the opportunity there to speak to a broad range of our own suppliers and customers.

I think everybody saw the same trend of that softness in the third quarter, but pretty much everybody is also speaking confidently that, that will be turned back to some kind of normality during Q1. So I think that this is a short-term thing.

I think with regards to then walking away from certain business, that's definitely not the case. I think, firstly, if you look again at those long-term supplier relationships, which we have, also important to state that with the partners that we have, a lot of those partners also have assets in China. So they're able to also keep competitive.

When we talk about reviewing the portfolio, again, this is nothing new. We constantly country by country, look at what are the white spots that we've got, how can we strengthen the business, how can we strengthen the portfolio but also looking at which, again, nothing new is are there pieces of business or particular product ranges where we can't be competitive. And typically then, that business has already deteriorated or is very small. So it's more a case of looking at how do we boost the business and grow the business again for the future rather than walking away from business that we have.

The next question comes from Suhasini Varanasi from Goldman Sachs.

Just a couple for me, please. Can you maybe discuss how conversations with your customers are progressing? Are you seeing any signs of volume stability on a sequential basis at this point? And any color on the order book would also be helpful.

And if you think about the gross margins in this quarter, it has deteriorated quite significantly versus the first half trends. You mentioned half of it was M&A. But the rest, is that basically the price pressure that you saw effectively?

Firstly, I would say, on the customers and kind of the volume stability or outlook, whatever, I would say that there's no change, unfortunately, in terms of the visibility that we have. So still, a very volatile order book, I would say, minimal forecasting, a lot of just-in-time deliveries. So I would say unfortunately, no general improvement there. And on the gross margin percentage, I think Hans kind of already covered that where I would say that there's nothing exceptional there. A little bit of dilution from the M&A impact, maybe product mix to a certain extent. But I would say nothing material.

The next question comes from David Kerstens from Jefferies.

I've got 2 questions, please. First of all, on the stable organic revenues in the third quarter, that seems like a good performance against a substantially tougher comparative. I was wondering, can you highlight maybe some product market combinations where you see this improvement sequentially relative to the second quarter?

Then the second question is on the balance sheet with leverage going up to 2.6x EBITDA and the Tillmanns acquisition not yet closed how do you see that leverage ratio develop into the fourth quarter towards the year-end and after the closing of Tillmanns? And does that still leave you with sufficient headroom for further M&A going into 2026? Or would you temporarily allow higher leverage given the short-term unfavorable market conditions?

I think with regards to the stable organic growth, I think behind the scenes, there's obviously an awful lot of work going into making that happen. I think if there's a market which has maybe stood out from a stability perspective, it's the food and nutrition space. I wouldn't say that there's a significant change between the quarters. But out of the different market segments, that's the most stable and robust that we've seen for this year. And then on the M&A and leverage, Hans?

David, Hans here. On the leverage, I don't want to predict the leverage number for year-end, and you're right, I still need to pay. And I also need to close Tillmanns that we expect to do in the last part of this quarter if we get all the formalities done. If and when that happens, yes, leverage will move around that 2.6 number. I expect, so sufficient room to do further M&A. Typically, working capital will come down towards year-end, what we indicated as a cash conversion ratio should lead to an additional cash inflow. So I'm not concerned at all about our firepower.

The next question comes from Nicole Manion from UBS.

Just one question from me, please. Can you elaborate a bit on your comments around the cost base and particularly FTEs? Obviously, there seems to be a nod to the volatility of the environment at the moment. But you've also linked, I think, to ongoing digital initiatives, which might suggest it's a bit of a longer-term project. I'm not sure if you can share any more details here or whether this is something you're looking at across regions, what's in scope? Yes, any sort of color would be helpful.

Great. Thank you, Nicole. Yes, as I mentioned, it's not something new, but it's fair to say that we are intensifying our efforts to really drive that cost effectiveness. But also making sure that we're delivering premium customer service. And as we've spoken about before, the expectations of customers that they are evolving this omnichannel way of working. And for us, that means very critically, making sure that we've got very highly skilled technical development resource on the road, visiting those customers face to face, but also having very highly qualified inside salespeople so that regardless of the way that the customer wants to interact, they've got immediate contact, and we're able to react in a very timely and effective and efficient way.

So what we're doing is really looking at making sure that we've got the right people in the right positions to really, again, be the leader from that sales excellence perspective to drive the long-term growth but also using the digital tools that we're very proud of, basically to optimize other areas of the business.

And I think if you look at just one example, but through the use of AI and different topics, things like the marketing side, the way that we're able to handle that and to drive that in a more efficient way, I think that's a good example. So again, it's not something new to us, but it's fair to say that we are intensifying the focus there, also because of the pretty challenging market conditions that we face. But again, I think what is important is looking for the long-term growth.

The next question comes from [ David Simmons ] from BNP Paribas.

So just coming back on the gross profit. So you mentioned some impact perhaps from M&A and maybe some impact from mix. I'm just curious, given that you're trying to bring down inventory and you've done a better job on free cash flow conversion in the third quarter, is there any inventory effect on gross profit margins at all?

And then maybe a little bit of a sort of outlook question, again on gross profit margins. Do you expect the sort of -- I mean we didn't really see any pressure on gross profit margins in the first half or flat year-on-year, but they're down 90 bps in Q3. Would you expect that to reverse in the quarters ahead? Or is that sort of new level based on different mix and the different -- and new M&A you've done for the next few quarters?

David, I answer, I understand your question. And if you look historically at IMCD's numbers, there is always quite some volatility in the margin percentage between the quarters, and there is no exception in this year. And it's often driven by slightly changes in the product mix, M&A having, in this case, a bit of a negative impact on the overall margin percentage, for sure here and there on the more commoditized products. There was a bit of pricing pressure. That played a bit of a role, but that also already happened in the previous quarter.

At the end of the day, it is not so much about permanently increasing your margin percentage. It's more about growing the absolute amount. So the focus of our salespeople is always linked to having an absolute amount of margin target and not the percentage target. And if this is the new normal, I don't think so, but let's see what the future will bring.

The next question comes from Eric Wilmer from Kempen.

I got 1 question. Does the ongoing demand pressure and competitive pressure as European manufacturers have any implications for the level of outsourcing that they work with? Some manufacturers, I think, including today have announced new incremental cost savings measures? So could this actually be perhaps another source of outsourcing. And does the growing Chinese presence gives you leverage towards your existing suppliers potentially for a larger share of wallet?

Thank you, Eric. I mean, this very much depends on a supplier-by-supplier basis. But as I think we've spoken before, the general trend is to outsource a greater percentage. And I think that as our suppliers go through these tough market conditions, I mean, we do hear about quite some redundancies and headcount reductions that they're making. And they really then, I think, value us even more as their outsource sales and marketing partner.

So yes, I think it's fair to say that in general, there are greater opportunities when there is more market uncertainty, but it differs supplier by supplier. But we're in continual discussion with not only our existing suppliers, but also potential new ones to look at how can we further expand the relationships, both geographically and across more product lines.

[Operator Instructions] The next question comes from Carl Raynsford from Berenberg.

Just 2 from me, please. I just wanted to ask about your comments around food and nutrition being the most stable end market segment this year. Previously, pharma was seen as a -- I'll paraphrase this, by far the best performing segment, judging by comments from yourselves and peers in the first half. But it feels that there's been a significant slowdown in Q3 based on your comments sort of more around food and nutrition now. Is that a fair assumption?

And then the second question, I just wanted to focus on the comment around decreasing FTEs over time again. Presumably, you mean decreasing the absolute number even as revenue increases. This business has always been about relationships and sales and high service levels and the AI opportunity in theory was useful for cross-selling. So could you discuss why you think you can maintain the same levels of sales and relationships alongside an increase in cross-selling and at the same time decrease the number of FTEs and able to be on the road, use omnichannel ways of working and the same service levels really? Or just considering your answer to Nicole's question earlier, is it more on the marketing side, you're considering that.

Firstly, on the first question related to food and nutrition and pharma. As I mentioned before, we did see in Q3 a bit of a softening in the pharma market, but predominantly in the India space because of the tariff conversations. So because of that and also the feedback that we had at CPHI last week, that was the reason for my comments of not including pharma in that. But I mean, overall, pharma, when you look at it across the year, it's still performing well versus last year. But as I said, a bit of a softening in the third quarter, but we expect that to come back relatively short term.

In terms of the service levels, I think it's really important, again, to reiterate that, if anything, we're further investing in the commercial organization and infrastructure. So when you look at the FTE reduction, that's definitely not reducing the people out on the road. It's not the people that are interacting with customers or suppliers. It's really looking at how can we bring better efficiency through the digital tools and more of those, let's say, support functions. Hopefully, that helps.

That does, indeed. Very reassuring.

The last question comes from Stefano Toffano from ABN AMBRO ODDO.

Yes. And Hans, 2 questions remaining for me. And apologies if the first one is already answered, but I missed it. Regarding the Americas, can you maybe provide a little bit of just some highlights, some light on what you are seeing there in terms of end markets and also the consumer, how the consumer is behaving.

And the second question is more of a general question. I mean you obviously throughout the years have seen quite some cycles. Is there anything different in this cycle compared to the past cycles where you say, well, this might be here to stay. This will continue to have an impact or is it just one of those cycles where you say, give it or take or whatever 1, 2 years, we will definitely go back to a normal environment?

Thank you, Stefano. I think with regards to the Americas question, I think the standout there, if you look at, let's say, more soft performance, I think the 2 countries maybe that we mentioned, and it's for different reasons. I think the U.S., in general, from the demand side, consumer confidence, we see that as being soft at present.

And then Brazil is one of the countries when we speak about Chinese competition and maybe greater competition in that semi specialty space in APAC and LatAm. I would say, within the LatAm region, Brazil definitely is one of the countries which has been the most affected there.

And then coming on to the cycle difference, I do think that this is very different to what we've experienced in the past because we're not going through a normal kind of market cycle. I think that there are these kind of shock waves that come in through things like the tariff discussions, where we're kind of getting back to a more normal kind of market cycle as we were coming through the end of last year and the beginning of Q1 and you saw the performance, I would say, more normalizing.

But then the shock wave of tariffs and then the uncertainty around it, also with the continually changing messages about what is the tariff percentage, but also what are the products included in the categories within the tariffs. So I think that we just need some kind of clarity and stability on those kind of topics. And then hopefully, we'll get back to a more normal type of market cycle.

With that, due to time constraints, I will give the word back over to Mr. Marcus for any closing remarks.

Great. Thank you. And on behalf of Hans and I, a big thank you all for joining the call this morning and for your questions, and we wish you all a very good day. Thank you very much.