Syensqo SA/NV (SYENS) Earnings Call Transcript

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Syensqo Second Quarter 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Sherief Bakr, Head of Investor Relations. Please go ahead.

Thank you, Regina. Hello, everyone, and welcome to Syensqo's second quarter 2025 earnings call. I'm Sherief Bakr, Head of Investor Relations, and I'm joined today in Brussels by our CEO, Ilham Kadri; our CFO, Christopher Davis; as well as Peter Browning, President of the Specialty Polymers business unit. Going forward, and in addition to our usually quarterly results discussion, we plan to invite one of our business unit presidents to our earnings call from time to time to provide the investment community with a greater understanding of their business and to participate in our Q&A session. As a reminder, today's call is being recorded and will be accessible for replay on the Investor Relations section of our website later today at syensqo.com/investors. I would also like to remind you that during this call, we will be making forward-looking statements regarding our future business and financial performance that are subject to risks and uncertainties. The slides related to this presentation along with today's press release are also available to download from our website. Okay. Turning to today's agenda. Ilham will begin with an overview of the quarter, with Peter covering the performance of Specialty Polymers. Chris will then go into more details on our financials, before turning the call back to Ilham, who will discuss our outlook for the balance of the year. We will then be happy to take your questions. With that, I'll turn the call over to Ilham.

Thank you, Sherief, and good afternoon, good morning to everyone. The second quarter of the year saw us deliver on our outlook in a challenging and uncertain market environment. The combination of our specialty positioning and unique value proposition, strong balance sheet and ongoing focus on what we can control has, and we expect it will continue to support our performance as we navigate the element that are out of our control. In our first 18 months as an independent company, we have made great progress to advance our strategy and strengthen our foundations to support future growth and value creation. And indeed, in times like these, the separation has enhanced our ability to accelerate change, to become leaner, more agile and to better serve our customers and capture market share. For example, we are ahead of schedule as we complete our separation from Solvay, running our stand-alone ERP system since May and taking full ownership of shared service environment. We will be moving faster and further to delayer the organization and to realize our structural cost savings, scaling our hunting culture and sharpening our value proposition to win with customers which is already translating to incremental growth and market share opportunities, focusing our investments on attractive growth projects that will create long-term value, and advancing our strategy to become a pure-play specialty company with a divestment process that is well on track. Turning to the highlights for quarter 2. Chris will take you through the details in his remarks, but we had another quarter of resilient pricing and margin performance in our core segments despite the temporary headwinds impacting year-on-year volume growth in Specialty Polymers as previously flagged. On a sequential basis, EBITDA of EUR 330 million increased by 8%, resulting in an EBITDA margin of 21.1%, up a healthy 190 basis points versus quarter 1, supported by our cost-saving programs. And excluding the Other Solutions segment, which as you know is planned for divestments, our EBITDA margin was above 23%, approximately 200 basis points higher than our overall margin level achieved in quarter 2. Sticking with initiatives that are within our control, I'm also pleased with the progress we have made as we complete our separation from Solvay. Overall we are ahead of schedule. And having successfully completed the key milestone around our digital infrastructure and shared services, we remain fully on track to meet our year-end targets, which will allow us to drive for additional levels of simplification and cost savings. And as Chris will discuss, we also completed a EUR 1.2 billion bond offering, which further enhances our strong liquidity profile. Cash conversion remained healthy at 72%, and we continue to execute our EUR 300 million share buyback program, completing the third tranche. So we are now halfway through the total program and will commence the fourth tranche today. As you can see on Slide 6, it has been another busy few months for Syensqo since last quarter's call as we continue to execute our strategy. This has included bringing new and differentiated innovation to support our customers begin more sustainable and high-performance solutions across our portfolio, as well as establishing new partnerships with industry leaders, which we believe can also provide new sources of growth. During the quarter, along with our Composite Materials leadership team, I attended the Paris Air Show, meeting with many customers, both existing and new in the civil, space and defense and advanced air mobility sectors. What was clear was there are strong growth opportunities in all of these sectors. Civil aerospace has record levels of new orders. Defense spend is expected to increase significantly across the globe with opportunities to gain share through new program builds and additional sources of growth in unmanned aircraft vehicles, or UAVs, spanning multiple applications. In addition to the significant long-term demand in all of these areas, what struck me was how our innovation is at the core of our customers' needs, how we make any flying object lighter, leading to less fuel consumption, lower CO2 emissions at a lower total cost of ownership. I was also thrilled to announce our new collaboration with Microsoft, which will leverage their leadership in AI with our research and innovation capabilities. Most notably, the partnership gives us early access to Microsoft discovery in the private previous stage. In addition to gaining these first-mover advantage, we are co-creating an agentic AI-first platform that has the potential to transform the way we do science and accelerate our time to market. Before turning the call over to Chris, I wanted to make some high-level comments on our segment's performance in the quarter, and I'm happy to be joined today by Peter Browning, the President of Specialty Polymers, to share some insights as well as answer any questions when we get to the Q&A session. As a reminder, Syensqo mix of revenue and earnings reflects our position as one of the leading pure-play specialty materials companies. In Q2, more than 70% of our EBITDA was generated by our high-margin material segments where we saw a 70 basis point sequential margin expansion, reaching approximately 30%. And despite lower year-on-year volumes, we continue to see stable net pricing. Composite Materials saw another quarter of strong underlying demand and solid margin performance despite the continued impact of destocking at Boeing. Excluding this, civil aerospace sales increased by 2% compared to quarter 2 2024. As a reminder, our exposure to a mix of civil aviation customers, space and defense applications and the number of new programs demonstrates the strong value proposition of our range of products as well as a healthy mix of growth drivers. I will now turn the floor over to Peter to take you through Specialty Polymers. Peter?

Thank you, Ilham, and good afternoon, everyone. It's my pleasure to have the opportunity to share some insights with you on the Specialty Polymers business and our performance in Q2. As a reminder, Specialty Polymers is Syensqo's highest-margin business. And our value proposition is based on our ability to work with our customers to solve their toughest application challenges. We use the widest range of high-performance polymers and technologies in the industry. We focus on ensuring our customers have the lowest cost of ownership, so they can win in their marketplace. In addition, our end market exposure to attractive growth markets, such as lightweighting, electrification and energy efficiency in automotive, ultra-high purity materials for semiconductor fab construction, better and safer solutions in health care, and high performance and the most sustainable solutions for the energy sector, give us a compelling opportunity to structurally outgrow the broader market for the years to come. Looking in a different way, we're positioned at the very top of the polymer performance pyramid. This is reflected in our industry leadership position and the deep customer relationships we hold, our breadth and depth of innovation capability and our strong and consistent margin performance. Since the separation from Solvay, our customers have appreciated the greater focus that we've been able to bring to them, notably the acceleration of our joint innovation projects. Turning back to our Q2 performance. We delivered resilient underlying volume growth in a pretty challenging market environment with another quarter of strong margin delivery. As Ilham referenced and as expected, the second quarter was impacted by shorter-term headwinds in electronics, which offset growth in health care, food and pharma packaging, and even a slight growth in automotive. So excluding electronics, we saw 3% year-on-year volume growth. On a sequential basis, Specialty Polymers delivered 7% net sales growth, supported by healthy volume growth, stable pricing, resulting in an improvement in our gross margin versus the first quarter. As I just mentioned, we saw strong year-on-year growth in health care, particularly in biopharma. And our pharma and food packaging businesses continue to show steady growth. In electronics, I was pleased to see that the destocking in our semiconductor foundry construction business is easing, and also strong interest in our proprietary non-fluorosurfactant ceiling technologies, that this is a market first where we're targeting opportunities in semicon production in really, really demanding industrial applications. This should further extend our leadership position and support long-term growth. Clearly, the external market context remains a challenging one. So we're very much focused on what we can control, bringing new value to our customers as rapidly as possible, leveraging the type of artificial intelligence investments Ilham mentioned to identify new opportunities, and rigorously managing our cost structure. These are all strong foundations to support our faster-than-market growth ambition over the longer term. With that, let me pass you back to Ilham to cover the rest of the businesses, and I look forward to answering any questions you may have.

Thank you, Peter. Turning to Performance & Care, where we delivered 4% year-on-year growth, led by [ North Care], supported by increased demand in agro and Home & Personal Care. And for Technology Solutions, we continue to see growth in mining solutions again supported by market share improvements. At the segment level, underlying EBITDA margin exceeded 19%, and saw a healthy sequential increase, up 150 basis points. With that, I'll turn the call over to Chris to go through our financial performance in more detail. Chris?

Perfect. Thank you very much, Ilham. Good morning and good afternoon to everyone on the call. As Ilham mentioned, it's fair to say that 2025 has been defined by heightened trade tensions and policy unpredictability, leading to widespread uncertainty and delays in investments as caution takes hold. This has led to different behaviors in customer order patterns, including a wait-and-see approach, which has impacted visibility across the broader value chain. Despite this, I am pleased to report that we finished the second quarter of 2025 slightly above expectations. With that in mind, let us turn to Slide 9, which summarizes our second quarter financial results. For the second quarter, net sales totaled EUR 1.6 billion. Volumes were down 3%, primarily due to the expected lower demand in Specialty Polymers and lower volumes in both Composite Materials and Technology Solutions. I will talk more about the sales drivers of each business segment in a later slide. As I've previously mentioned, we remain committed to defending our gross margins as this reflects our value proposition as a specialty chemicals company and how we manage both our sales and cost of goods sold. In this respect, our gross margin at 32% continues to reflect our specialty value proposition and has improved on a sequential basis, driven by a favorable mix of specialty polymer sales and continued pricing benefits in composite materials. Over the past 6 quarters since the inception of Syensqo, we have continued to demonstrate our ability to defend pricing and maintain cost discipline over the period, particularly in the Materials segment, regardless of the impact of volumes. At EUR 335 million, underlying EBITDA for the second quarter is slightly above expectations. Turning to operating performance by segment on Slide 10. Within Specialty Polymers, sales revenue reduced by 9% compared to the prior year. Excluding the translation effect of FX, Specialty Polymers revenue was down 6%, primarily due to the expected lower volumes in electronics. However, as Peter referenced, the second half is already showing signs of improved orders into the electronics segment and is in line with our expectations. On the positive side, volumes in the second quarter improved in health care and food and pharma packaging applications on the back of market share gains, a return to more normalized buying patterns and a large order in the health care space. Revenue from Composite Materials at EUR 288 million showed a decrease of 7% compared to the prior year. Excluding the translation effect of FX, Composites Materials revenue was down 3%, primarily due to lower sales to the automotive segment. It is important to note that the second quarter of 2025 is the third highest sales quarter in U.S. dollars on record since 2019, demonstrating the recent sustained improvement in demand for both civil aviation and space and defense customers. The other highest quarters were the first quarter of 2025 and the second quarter of 2024, being the 2 comparables used today. In addition, pricing also continues to remain strong in Composite Materials. Despite the expected impact of lower sales to Boeing, increased sales to other commercial aviation programs and space and defense applications drove a strong performance in the quarter, with all other civil aviation customers increasing their sales year-on-year. Sales to space and defense applications improved 2% in the quarter. At this stage, we expect the Boeing destocking to continue into the second half of the year. The net result in our Materials segment is EBITDA of EUR 269 million in the quarter and a strong EBITDA margin at 30%. Novecare delivered sales of EUR 347 million, and Technology Solutions sales were EUR 164 million. Within Novecare, agro sales increased 31% year-on-year. Whilst we have seen a shift of product mix to lower-margin product in the agro chemicals markets, the end of destocking in the first half of 2024 and the strong recovery in Latin America and EMEA markets has resulted in demand returning to more balanced levels. Home & Personal Care sales increased 8%, driven by share gains in targeted business across Asia and a rebound in demand from distributor customers in the North American market, with customers opting for lower-cost alternatives. Technology Solutions continues to benefit from new business and customer wins and higher reagent consumption in copper mining, which continues to show growth in this high-margin segment. This has been offset by a decline in sales to building and industrial applications in the lower-margin Polymer Additives segment. EBITDA margins in Technology Solutions are the second highest margins in our business and have improved against both the prior year and sequentially as a result of an improved mix of sales to mining activities. The net result is that Performance & Care delivered an EBITDA of EUR 98 million in the quarter and an EBITDA margin of 19%. Within the Other Solutions segment, EBITDA was EUR 8 million in the quarter, with an EBITDA margin of 5%. The net effect of what I've just described is reflected on Slide 11. As mentioned on the previous slide, stronger volumes were experienced in a number of sectors, including health care, food and pharma packaging, agro, home and personal care and mining applications compared to the prior year. That said, the lower volumes in electronics is the single largest driver at a Syensqo group level of the year-on-year decline in EBITDA. Whilst Composite Materials is lower on the back of strong comparables, the business continues to perform well with improving demand across all customer applications. Absent the lower sales volumes in electronics, Specialty Polymer volumes improved year-on-year, reflecting the shorter-term headwinds in semicon foundry construction activity. Within Materials, cost savings resulted in a reduction in fixed costs in the quarter. The net result is a decline of EBITDA of EUR 22 million in the Materials segment compared to the second quarter of 2024. In Performance & Care, strong sales from Technology Solutions and Novecare were offset by higher input costs most notably [ Olio Chemicals ] as well as higher labor costs within Novecare. This resulted in a year-on-year EBITDA decline of EUR 11 million in the second quarter of 2025. Other Solutions declined by EUR 12 million compared to the prior period. The net result is EBITDA of EUR 335 million for the quarter, which includes an adverse variance of EUR 12 million year-on-year associated with the stronger euro against our basket of currencies, including the U.S. dollar. As a reminder, the impact of the EUR 12 million from FX is based on a prior year comparable rate of USD 1.08 to the euro, compared to our second quarter actual of USD 1.14. As we entered 2025, our assumption for 2025 was an exchange rate of USD 1.05. Where we stand today, rates have increased to around USD 1.17, with some market participants predicting rates as high as USD 1.2 for the remainder of the year. This impact is purely translational for Syensqo. Turning to capital expenditure. Our total capital expenditure for the quarter was EUR 113 million, bringing the capital expenditure for the first half of the year to EUR 289 million. This remains in line with our expectations and in line with our updated capital expenditure envelope of less than EUR 600 million for the year. Included within the EUR 113 million is growth capital expenditure of EUR 63 million, primarily related to spend on the Specialty Polymers facility in Tavaux, France, the Galdon capacity expansion in Specialty Polymers in Spinetta, Italy, as well as automation and capacity debottlenecking in Composite Materials. As a reminder, 2025 is expected to be a peak year of capital investments, driven by significant spend on the Tavaux site and the transition to a separate digital and IT infrastructure from Solvay. Our focus going forward is, therefore, on leveraging our existing spare capacities that we have today to meet future volume growth. This requires no additional capital expenditure. Secondly, investing in smaller and faster organic growth opportunities where the market exists and where we are at capacity, thereby accelerating our strategy. This includes increased investment in adhesives capacity in Composite Materials, debottlenecking our [ Welland ] plant to increase capacity for mining customers and an increase in capacity of Galdon to service semiconductor demand in Specialty Polymers. These are areas where we are winning. And finally, our focus will be on maintaining our investment-grade credit rating and rewarding shareholders in line with sustainable cash generation. As indicated, we have updated our capital expenditure guidance to be less than EUR 600 million in 2025. Given the limited visibility in the current environment, we will remain disciplined and agile, carefully managing capital expenditure and cash to balance our shorter-term targets with longer-term value creation. Where we are winning and where the returns are compelling, we will continue to invest. And where they aren't, we won't. Moving to operating cash flows on Slide 13. The generation of strong operating cash flows remains a key focus for the business. Consistent with historic practice, the operating cash flows in the second quarter were impacted by the annual payment of employee incentives in respect of the prior financial period, of some EUR 120 million, and an absorption of EUR 63 million into trade working capital in the quarter. The net result is that operating cash flows for the quarter was positive EUR 20 million, bringing the last 12 months cash flow from operating activities to EUR 751 million and a cash conversion of 72%. Free cash flow to shareholders for the quarter was a negative EUR 67 million. As Ilham will outline later in the presentation, our expectation for free cash flow for the full year is approximately EUR 350 million. As we approach the final quarter of 2025, we expect a meaningful reduction in trade working capital, in particular, inventory, as we slow down production in the face of the current demand environment. This is expected to result in a release of well over EUR 100 million in cash and will be most noticeable in the latter part of the year. Additionally, and as disclosed in the financial report, with the recent dismissal by the Italian Supreme Court of Edison SPA's appeal, we expect to receive a further EUR 90 million in the second half of the year for losses, damages and costs that were awarded in Syensqo's favor. These 2 items, along with the second half earnings, are expected to support a significant improvement in cash generation in the second half of the year, aligned with our outlook of full year free cash flow to shareholders of approximately EUR 350 million. As I said in the first quarter of the year, 2025 remains a year of transition from a cash perspective. With the separation from Solvay in late 2023, there remains separation costs to be incurred, so that Syensqo can operate as an independent company. As we head into 2026, the situation will improve significantly with reduced spend on separation activities and a finalization of growth capital being spent on the Tavaux site. Together, these account for more than EUR 200 million of cash outflow in 2025 that will not repeat in 2026 and beyond. Turning to our financial position. I am pleased to report that we continue to have a strong balance sheet with our net debt at EUR 2.2 billion, a gearing ratio of 26% and a leverage ratio of 1.7x. The increase in net debt is fully aligned with prior comparable periods, with the second quarter historically impacted by the timing of the payment of the annual dividend and variable compensation in respect of the prior financial year. Both gearing and leverage ratio are expected to improve in the second half of the year as it did in the prior financial period. We continue to have strong levels of liquidity available as demonstrated by the EUR 1.7 billion of undrawn committed bank facilities and a further EUR 1.3 billion of cash on hand as at the 30th of June 2025. Finally, I'm pleased to report that in the second quarter of the year, we successfully closed our second senior bond issuance of EUR 1.2 billion, split in 2 tranches, namely EUR 600 million with a 6-year maturity and EUR 600 million with a 10-year maturity. The ratings of the bonds are aligned with our corporate ratings being BBB+ and Baa1 with S&P and Moody's, respectively. The transaction was met with strong interest with the participation of more than 125 institutional investors and an order book that was more than 4x oversubscribed, thereby allowing us the opportunity to tighten pricing on the day. The net result is not only do we have a strong balance sheet with low levels of gearing, but also a balanced debt maturity profile. With that, I'll now hand you back to Ilham. Thank you.

Thank you very much, Chris. Looking into the balance of the year, there is clearly a lot of uncertainty in the world. Based on current information, we continue to believe that the combination of our balanced regional footprint and mitigation actions positions us to see a limited direct impact from tariffs. Nevertheless, and as referenced by Chris, a number of industries are facing increased demand challenges and uncertainty which has also impacted near-term visibility across value chains. Our focus continues to be on what we can control, to navigate the short term, strengthen our foundations for future growth and accelerate our transformation to become a purer-play specialty company. Turning to our outlook for the balance of the year. The high-level takeaway is that based on the assumptions we shared at the end of February, our 2025 outlook is unchanged, as shown on the left-hand side of the slide. However, with better visibility into the impact of FX and tariffs than we had versus last quarter's call, we have now updated our outlook to reflect current FX rates and expected impacts of tariffs, which we estimate to be approximately EUR 100 million, split roughly 2/3 on FX and 1/3 on tariffs. As a result, our outlook is now as follows. Underlying EBITDA of approximately EUR 1.3 billion. CapEx to be below EUR 600 million. And free cash flow of approximately EUR 350 million. For the second half of the year, and as what Peter and Chris mentioned, we continue to expect the easing of headwinds in semiconductors. And while we started to see the benefits of cost savings in quarter 2, we continue to expect this to become more visible in the second half. In closing, the second quarter saw us deliver on our outlook with improved margin in our core segments, supported by our strong value proposition and focus on what we can control, combination, we believe, will serve us well as we navigate the coming quarters and position us for future profitable growth. With that, we are ready for your questions. Thank you.

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

Our first question will come from the line of [ Nicolas Whitting ] with Bernstein.

I just wanted to dig into the outlook basically for the electronics. And so yes, how is that sort of shaping up for the rest of the year? And if you could comment on that regionally, please, that would be great.

Yes. Thank you, Nicolas. The question was on electronics and auto, yes?

Electronics.

Electronics. Okay. Well, in electronics, and Peter is with us and I'm sure there will be more questions, semicons in H2 are expected to improve versus the first half, driven by the end of destocking. We've seen -- we've been talking about destocking for a while, as our key semiconductors customers are expected to tell full contract volume as we speak. And with that, we expect specialty polymer to have a stronger second half. We expect resilient margin performance to continue, supported by our strong value proposition. And this is Nicolas, not wishful thinking. Maybe, Peter, you can tell our audience that this is real and we see the first orders coming in.

Yes, sure. So within semiconductors, we're heavily exposed to foundry construction. And we've got really quite good insight on the sellout of our major customers. So often in applications like ultra-high water -- ultra-high purity water piping systems. And so it's that sellout and that understanding of the inventory of those customers that leads us to confidence in our second year growth outlook. Back to you, Ilham.

Our next question comes from the line of Geoff Haire with UBS.

I just want to ask a question about the Materials business. So since the formation of Syensqo, the margins in the business have declined on a year-on-year basis, I think, with the exception of Q4 last year. And certainly from the commentary you provided, it seems to be mainly coming from pressure on Specialty Polymers. So I was wondering if Peter could sort of help us by, I know you won't give us the exact numbers, but if you could help us understand where the margin profile is in Specialty Polymers relative to history, peak trough? Or has there been any structural changes in the business, which means that margins are structurally lower? And I've got another question after that.

Thank you very much, Geoff. Maybe I'll start. It's a good question. If I -- let me start and then, Peter, you can jump in on Specialty Polymers. If I go back to full year 2023, the EBITDA margin in our Materials segment were around 33% compared to around 30% in quarter 2, right? Those are the facts. And back in this bit, Geoff, we have seen higher growth in Composite Materials. And despite the improvement in their margin, obviously, this had an unfavorable mix impact on the segment's margin given that Specialty Polymers, as you all know, has a larger margin than Composites Material. So maybe, Peter, you can go through the Specialty Polymer piece.

Yes. Sure, Ilham. So within Specialty Polymers, it's really a question of mix. Our net pricing over the activity has been very sticky, resilient. We have given back some pricing, we've got some benefits from raw materials, but we've really focused on keeping our [ prescient ] gross margin. So I think looking forward, what we see is a really quite interesting opportunity in terms of operating leverage as and when our volumes return. Because we've already spent CapEx to build capacity. We have the assets in place. And we should be able to serve additional demand, which will translate through into quite healthy incremental margins.

Geoff, do you have a follow-up?

Yes. I just also wanted to ask Ilham a question, sorry. In your introductory remarks, you talked about the work you've done at Syensqo since the formation 18 months ago, and you talked about value creation. Could you outline a little bit more about what the value creation as you've seen in the last 18 months?

Yes. Thank you, Geoff. Well, listen, I mean, it's a start-up company with a legacy but still 18 months of existence. So what we've done is really separate from Solvay. I know this is a hidden part of the job. It's the [indiscernible] it's the infrastructure, you didn't see it and we didn't want you to see it, but it's so critical for standing up a company. So what we've done is separating our ERP system, IT, IS and GBS. We hired 800 people in 500 days. I believe it's [indiscernible] to separate fully. We accelerate the separation in tough markets because we can double down, and that's -- it's allowing us now as we engage in the second half to engage in the new operating system by delayering our organization, further simplifying it, quicker than by the end of this year, preparing for 2026. We also focus obviously on our research and innovation. So we've been reviewing our pipeline. We told you that we moved to more archetypes which are short, faster than longer term. So that has been done in the company. We focus on our capital investments, and you've seen us outside Tavaux, which will end up this year, we moved too fast and quick and high-return type of capital investment. And actually, some of them are actually going to Galdon, for example, on GenAI and semicon from specialty polymers or debottlenecking the mining solution. So yes, and the hunting, hunting culture, right, is not easy, but we're not here because it's easy. And turning our company to more entrepreneurship. And it's good actually to do it and start a new company in a tough environment because that's -- push management to really reform faster and focus once we control our costs, our relationship with our customers and disciplined capital allocation. Back to you.

Our next question comes from the line of Aron Ceccarelli with Berenberg.

I have a question on Specialty Polymers. Given your broad portfolio in Specialty Polymers, perhaps one of the products in the market, would you consider M&A as a strategy to strengthen your position in a specific polymer or to expand into new markets? And the follow-up to that is we've seen [ Victrex ] adopting a more aggressive pricing strategy in a bid to drive volume growth. How is Syensqo responding to this?

Well, M&A, let me start and maybe we'll talk about the peak, right, story, Peter, if you can prepare yourself. I think we've been very disciplined in the past 6 years all over about M&A. I think we had a history of M&A, specifically in Specialty Polymers. I'll remind you in the past 20 years, Specialty Polymers double-digit revenues through M&A first and then organically. We've been very disciplined for the reason that we were a mixed bag. Separation from Solvay made us a purer player, but we are still considering divesting, as you know, noncore, which will make us even purer. And we have a lot of organic opportunities, Aron, right, in our organization. So you've seen building capacity in Specialty Polymers in mining, Composites Material is a fabulous opportunity in defense application where budgets are being doubled, right, in Europe or India, where I visited India just a few weeks ago. So there are a lot of organic opportunities where we have the talent, the competencies and the cash, right, to put there. Peter, on peak?

Yes. Thank you, Ilham, and thanks for the question, Aron. I think that it's important to see our business as a collection of segments. And we're really focused on delivering a differentiated value through innovation in specific market segments. And so whilst, of course, we make peak, [ Victrex ] make peak, we don't really compete head-on in the new business that we're doing. We build strong customer intimacy and a unique value proposition. And I think that's a general way of looking at our business. What we're trying to do is bring our investment in ROI to solve the problems of our customers. We work with those customers really closely to co-develop solutions, and we make those solutions work. And that builds an extremely strong customer loyalty and makes it very difficult for someone else to penetrate those businesses using pricing as a tool.

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

First question I had was, if I look at your guidance, it sort of implies H2 flattish versus H1 more or less. We know Q4 is seasonally weaker just because of number of days. So does that imply that you are expecting third quarter to be sequentially better than second quarter? I mean maybe if you can help us with the phasing between Q3 and Q4 that you have assumed in your full year guidance overall. The second question was a bit more strategic, I would say. Ilham, you've talked a number of times, not today, but in the past about getting that hunting spirit within your sales team to grow the business. And I think, correct me if I'm wrong, but your volumes don't show that. And maybe it takes time. But I just wanted to compare and contrast, and Peter is on the call, so this is a good question for him as well. MSME is the benchmark for specialty polymer industry, at least in terms of margins. And when I look at their volumes, their margin development over the last 12 months, I mean, they've been able to grow volumes, they've been able to improve margins. And that's what probably some would argue the hunting sort of success is visible. So I'm just curious, where are you in that curve of hunting for new business? And when do we actually see the upside from that?