SOLB.BRSOLB.BRBRU
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Geoffroy d'Oultremont: Good afternoon, everyone, and welcome to Solvay's Fourth Quarter and Full Year 2025 Earnings Call. I'm Geoffroy d'Oultremont, Head of Investor Relations. And with me today are our CEO, Philippe Kehren; and our CFO, Alexandre Blum. This call is being recorded and will be accessible for replay on the Investor Relations section of Solvay's website later today. I would like to remind you that the presentation includes forward-looking statements that are subject to risks and uncertainties. The slides shared today are also available on the website. We will first discuss our full year earnings and the outlook for 2026 and then take your questions. Philippe, over to you for the introduction.
Philippe Kehren: Thank you, Geoffroy, and hello, everyone. In 2025, we delivered healthy margins and strong cash flow despite the challenging environment. In this context, we remain disciplined and act to secure our competitiveness, leveraging energy transition and footprint optimization. Our strategy has proven to work and we continue to focus on being a leading essential chemical company with safety and sustainability at the heart of it. Let me share more details on this, starting with safety. Safety remains our top priority and we continue working towards our zero-accident objective. In 2025, we launched a major safety culture transformation program designed to improve safety performance across all our sites. While the reportable injuries increased slightly compared to last year, the severity of the incidents decreased overall. This is a sign that our efforts are starting to pay off. We're not there yet, but we are fully committed to continuing our transformation in 2026. Let me now share with you our progress on sustainability, implementing our 4 generations road map across the business, moving to Slide #6. We've progressed well on our greenhouse gas emissions targets. Our CO2 emissions, Scope 1 and 2 have decreased by 29% compared to 2021 and that's already close to our 2030 target of minus 30%. The reduction was driven equally by decarbonization projects and also by lower activity levels. The largest structural contributors were the coal phaseout projects in our Soda Ash plants in the U.S. and in Germany, which were completed in 2024 and which delivered their full impact in 2025. The next steps will be the new cogeneration unit in Dombasle, France, which will substitute coal with refuse-derived fuel and which is expected to be operational later this year. The new cogeneration project in Torrelavega in Spain announced in 2025 is expected to be operational in 2027. One year ago, we also announced our new biodiversity commitment for the group. In 2025, we launched a pilot at our Dombasle site, testing the science-based framework provided by the IUCN, the International Union for the Conservation of Nature. This framework aims to develop a blueprint for effective biodiversity actions that can be replicated across global operations. At the end of 2025, already 16% of our lands are under conservation or restoration. We'll continue working closely with the IUCN and the next step will be a second pilot at our Rosignano site in Italy, where we will further apply and refine the methodology. We also moved forward on our better life KPIs. As mentioned earlier, safety improved slightly compared to last year and we are dedicated and focused on improving this even more. We've been steadily moving on our diversity target with 28.8% of women in mid and senior management. Lastly, on living wage, we're very proud to have achieved our target already 1 year in advance with 100% of our own workforce throughout the world receiving a decent living wage. Now turning to Slide #7. Before Alex takes you through the details of the results, let me leave you with 3 key messages for the year. First, in 2025, we continue to deliver healthy margins and strong cash. The transformation of the company is progressing well and the operational excellence savings associated with it are supporting our performance. In 2025, the overall environment remained very challenging and we had some transformation expenses generating cash outflows. These are expenses tied to the separation, including phasing out the transition service agreement and building a new simplified ERP as well as essential initiatives for the new Solvay, including the ongoing fluorine business restructuring. At the same time, we generated EUR 350 million of free cash flow, thanks to our disciplined cash allocation framework and decisive working capital management throughout the year. This is a real achievement in such a difficult year. 2026 will be another challenging year. On the top line, the demand environment is not yet showing any sign of recovery and the bottom line will be impacted by the transformation expenses. So in this context and this is my second key message, we continue taking actions to make sure we can emerge stronger. Strengthening our competitiveness is essential. One key lever is accelerating our energy transition with a particular focus on phasing out coal across our European operations. Our decarbonization road map is progressing well. But at the same time, we need to align the European climate policies, ETS and CBAM with industrial reality. We cannot force decarbonization decades ahead of the 2050 target without the right framework. Extending free quotas until 2050 is a technical necessity to fund the transformation of historical sites instead of shutting them down. We need the support of the authorities for a competitive energy access. This is critical if we want to maintain competitive supply chains in Europe. The other key lever is industrial footprint optimization to safeguard long-term competitiveness. We regularly assess each site to ensure we can remain competitive in the evolving environment. When this is no longer the case, we act decisively. This has led to the restructuring of our fluorine operations in Germany to the closure of our Salindres site in France in 2025 and earlier decisions to close our peroxides plant in Warrington in the U.K. and in Povoa in Portugal. Yesterday, we launched a consultation process to reduce our production capacity at the Torrelavega plant in Spain from 600,000 tonnes to 420,000 tonnes starting in Q3 2026. This measure allows us to define a very clear industrial road map for the site, which will focus on local soda ash customers and competitive and low-carbon high-grade bicarbonate. All these measures strengthen the overall performance and agility of our European manufacturing base. Together, our footprint optimization and energy transition initiatives enable us to maintain an asset base that is highly competitive in its markets. So in summary, one, we deliver; two, we act to protect and reinforce our competitiveness. Third key message is that we remain focused on the deployment of our essential chemistry strategy. We continue the long-term transformation, which is about simplification of our organization and digitalization of our plants. We are preparing the future and we invest where demand justifies it. In 2025, we inaugurated our new rare earth workshop in La Rochelle for permanent magnets. And we doubled the capacity of our electronic grade of hydrogen peroxide plant in China. In January 2026, we inaugurated our production line of BioSource silica in Livorno, Italy. It's the first of its kind in Europe. And we have more projects with a clear potential of additional developments in La Rochelle, for instance, where we will start separating heavy rare earths already this year. So you see we're very committed to our strategy. At the same time, we act when necessary to make sure we will emerge stronger. We carefully look at our portfolio and we assess if changes are needed, but we also continue to invest in selective areas where it makes sense to prepare for the future. All of this while being laser-focused on our financial policy, a stable growing dividend and an investment-grade rating. Now over to you for the financials, Alex.
Alexandre Blum: Thank you, Philippe, and good morning, good afternoon, everyone. Moving to the financial with 2 key messages. First, on cash generation. In 2025, we were able to generate strong free cash flow by rapidly adapting to our environment. Second message is that our balance sheet is healthy and this fully support the execution of our strategy. Moving to Slide 11. As usual, I remind you that my comments are based on organic evolution, meaning at constant scope and currency, unless otherwise stated. Underlying net sales in 2025 reached EUR 4.3 billion, down 6% versus 2024. The decline was mostly driven by lower volumes, which were down 4% year-on-year, mainly in Soda Ash and Coatis business units. ForEx had a negative impact for the year from the strengthening of the euro against the U.S. dollar and the Brazilian reals. In Q4, volumes were also down, mainly driven by Coatis and the Soda Ash export market and with a slightly more pronounced seasonality in the silica business. However, volumes in bicarbonate, peroxide and special chem remained very resilient throughout the year. Let's now move to the EBITDA bridge on Slide 12, where you see that despite all the headwinds, we have retained a healthy EBITDA margin. Underlying EBITDA amounted to EUR 881 million in 2025, down 13% compared to 2024, but within our revised guidance range. The EBITDA margin remained strong, close to 21%. Volumes and mix were mostly down due to Soda Ash and the absence of a peroxide license, but this was partly compensated by the positive impact of the optimization of our portfolio of European CO2 credits. Net pricing decreased year-on-year, primarily driven by the seaborne Soda Ash market and Coatis. Margins in the other businesses remained extremely resilient. For fixed cost and other, we can highlight 3 main moving parts. In fixed cost, minus EUR 23 million of negative impact from the temporary stranded costs related to the split. And then we have 2 nonrepeat elements from 2024 offsetting each other. Last year, we had plus EUR 20 million linked to a one-off TSA reinvoice in fixed cost versus minus EUR 29 million from provision in order linked to our Dombasle Energy project. Moving now to look at our structural cost saving on Slide 13. As expected, our structural cost saving program continued to deliver significantly in 2025 when we have achieved EUR 101 million of gross structural savings, bringing the cumulative amount since the start of the program to EUR 211 million and so exceeding our 2025 target. We will continue to focus on what we can control and we expect cumulative savings to be around EUR 300 million by the end of 2026. I now move to the segment review, mainly focusing on Q4 development and starting with basic chemical on Slide 14. Sales in the Soda Ash and derivative business unit were lower for the quarter by 13% with Soda Ash volumes and pricing steady in the domestic market, but showing a continued sharp decline in the seaborne market. Bicarbonate volume and pricing, on the other hand, continued to be extremely resilient and are up year-on-year. In peroxide, our electronic grade for semiconductor industry continued to deliver double digit growth, supported by AI-related investment, while volumes remained broadly stable in the merchant market. Overall, the segment EBITDA was down by 20% in Q4, mostly due to the lower volumes, including the non-repeat of peroxide license and lower pricing in Soda Ash exports. The EBITDA margin reached 25.1%, slightly lower compared to Q4 2024. Moving now to Performance Chemicals on Slide 15. This segment has a certain degree of seasonality in Q4. Year-on-year, silica sales were impacted by slightly lower higher volumes, while the consumer and industrial good markets remained stable. Coatis continued to struggle with volumes and prices down in all end markets due to the difficult environment caused by U.S. tariff and we will see if the recent changes can help the local industry to recover. Special Chem, on the other hand, increased in Q4 with higher rare earth volume in electronics and medical applications, which offset slightly lower demand in autocatalysis and fluorine. Overall, the segment EBITDA was down 18%, while the EBITDA margin decreased to 14%. I will now cover the Corporate segment. In 2025, the Corporate segment result was impacted by EUR 23 million of temporary stranded costs due to the TSA exit. They will continue to impact our performance in 2026, while OpEx related to the ERP will impact both 2026 and 2027. As of 2028, our target operating model will be fully in place, generating a new wave of savings, allowing to reach a run rate below EUR 50 million for the Corporate segment. Overall, the full year 2025 EBITDA was minus EUR 40 million, including a positive impact of EUR 40 million from the CO2 emission rights optimization. Moving to Slide 17 to look at our free cash flow, which, as you know, is at the top of our priorities. We delivered a strong free cash flow of EUR 350 million despite a weaker EBITDA generation. First, we have limited our CapEx to a level below EUR 300 million as guided. The EUR 292 million includes around EUR 240 million of essential CapEx, of which EUR 26 million for energy transition project. The rest, roughly EUR 50 million was dedicated to targeted investment in new capacity, including the completion of our new Soda Ash capacity in Green River, the doubling of our eH2O2 capacity in China and the BioSource silica unit in Italy. So even in a difficult year, we continue to invest to make Solvay future proof. The other cash driver was working capital, whose positive contribution reflect a strong discipline, the low level of activity at year-end and the positive impact from the exit of TSA with Syensqo in our receivable. As expected, provision cash out were high at EUR 260 million for the year. They include approximately EUR 130 million of what you could call normalized cash out for the provision linked to pension, environmental liabilities and some restructuring. And on top, there was EUR 60 million related to Dombasle Energy project and EUR 70 million of additional restructuring and other expenses related to the transformation we have initiated since the spin-off. As indicated, financing costs were higher in 2025 as it was the first year of full interest payment for the bond issued in April 2024. Let's move to the Slide 18, where I guide you through the temporary cash impact on the free cash flow. Here, we have the main element behind the transformation expenses and how they will temporarily weigh on our cash generation. First, the stranded cost, which mainly impact 2025 and 2026. In 2025, we stopped rendering services to Syensqo, but it will take 1 to 2 years to adjust our support functions. Second, the cost related to the new ERP. With the split, it becomes a necessity to design and deploy IT system that are adapted to our new operating model. Third, the restructuring cash. They mainly relate to the exit of the TSA partially compensated by Syensqo and the restructuring of our fluorine business. They were the highest in 2025 and gradually decreased starting in 2026. To wrap up the 2025 financial, let me take a word on the debt on Slide 19. Underlying net debt was EUR 1.6 billion at the end of 2025, roughly stable compared to 2024. The leverage ratio remained healthy at 1.8x. Regarding provision, in December 2025, we took an important step to derisk our balance sheet. We did a lift out. This means that we transfer a portion of our U.S. pension plan to an insurance company, which is now solely responsible for managing the benefits and the underlying investments. The transaction resulted in a reduction of our liabilities of EUR 159 million and of our assets by EUR 155 million, hence generating a profit of approximately EUR 3 million in Q4. Based on the free cash flow generation and in line with the dividend policy of the company, the Board of Directors has decided to propose to the shareholders a total gross dividend of EUR 2.43 per share, which includes the interim dividend paid in January. Let me leave you with a final key message. Whatever the environment, our capital allocation framework drives all our decisions. Our essential CapEx are the priority. Then we have an equally important and clear dividend policy. And then we have options to prepare for the future growth of the company. The last bucket is more variable as it will be always sized based on merit and affordability. It will be mostly for organic investment and might be supported with inorganic opportunities if they become available, makes sense and meet our rigorous criteria. With that, Philippe, back to you for the outlook.
Philippe Kehren: Thank you, Alex, and let's move indeed to the outlook now. So as I said at the beginning of this call, we know that 2026 will be another challenging year, but we are acting decisively to protect our competitiveness and to focus on our long-term transformation. We don't expect the situation in our Soda Ash or Coatis businesses to change rapidly. For Soda Ash, the overcapacity in China is a challenge for the Chinese and the Southeast Asian markets. And it also creates some pressure outside of the region, for example, on the exports from the U.S. As for Coatis, it continues to suffer from the situation generated by the introduction of the tariffs. Our other businesses are much more resilient, but we remain cautious as we currently have little visibility. So for 2026, we expect an underlying EBITDA between EUR 770 million and EUR 850 million. This already includes negative impact year-on-year of EUR 20 million from currencies, another EUR 40 million from the transformation expenses and a positive contribution similar to last year from the sale of EUA that we've done in January 2026. Free cash flow to Solvay shareholders from continuing operations will exceed EUR 200 million and that is after covering EUR 90 million of transformation expenses. We ask the teams to remain very disciplined with investments and we will limit again our CapEx to under EUR 300 million for the foreseeable future until the environment improves. Our strategy is solid and we are executing it in a disciplined way. We accelerate its deployment where it makes sense and we take actions to mitigate the environment in which we've been for the last 2 years. You can count on us to relentlessly keep our focus on costs and on cash. So this concludes our prepared remarks. Thank you for listening and we're happy to take your questions. Now back to you, Geoffroy.
Geoffroy d'Oultremont: Thank you, Philippe and Alex. Gaia, you may now open the line for questions, please.
Operator: [Operator Instructions] The first question is coming from Martin Roediger from Kepler Cheuvreux.
Martin Roediger: First is on your EBITDA guidance. With a high comparison base in Q1 and also adverse FX effects in Q1 and partly in Q2, should we expect a different earnings trajectory in 2026 being more back-end loaded? And linked to the EBITDA guidance to say with that, just to clarify, you did not factor in your guidance any sale from licenses, i.e., in hydrogen peroxide, but you factor in another sale of CO2 emission rights. Is that correct? And then finally, sorry to come back to the Coatis business. Philippe, you said that the Coatis business will continue to suffer in 2026. Can you provide some background information? I heard that there are some hopes that the Brazilian government could interfere here and may support Brazilian players. Is that true?
Philippe Kehren: Thank you, Martin, for your questions. And I will let -- I will start answering some of your questions and then let Alex complement. So in terms of phasing, I mean, difficult to say at this point. You know that the business is relatively nonseasonal. So I would say the base load performance of the business, you should not expect too much of a phasing. However, as we said, we sold -- because the market conditions were good, so we sold the CO2 quotas already. So you might expect a little bit of -- I mean, this impact in Q1. So it will be a little bit front-loaded, but we also have other elements in the course of the year. So for Coatis maybe and then I will let Alex complement on the other elements of the EBITDA. I mean, a lot of parts are moving to be clear. I mean, we just heard -- you heard the decision from the Supreme Court on the tariffs. And typically, Coatis and Brazil have been the area which have been the most impacted by the tariff because it has impacted very much our customers. And you remember that we have a 50% tariff on Brazilian export to the U.S. This could, of course, be a game changer if this value would change. On top of this, you're right, there are currently discussions with the Brazilian authorities to implement, first, a mechanism that would support the Brazilian chemical industry. And second, also some measures potentially being implemented to protect the Brazilian market from imports from China. So we're watching this very closely. We didn't put anything in our outlook regarding this. So it could be potentially an upside. But frankly speaking, for the time being, I think it's too early to say anything. Now Alex, if you want to say a few words on the EBITDA elements.
Alexandre Blum: Yes, so as Philippe explained, EBITDA, take it roughly equally spread during the year. You may have small variation, but it's roughly equally spread. So your question is whether we have included license on the one side of CO2. If I take a step back, what just defined the range of EBITDA? Primarily, the range of EBITDA is driven by volumes. That's one of the main uncertainty of the year. We are quite clear on the short term, but I mean, we know the situation can change. The single uncertainty factor are the few business opportunities we are considering. And one of them, obviously, is licenses. We want to continue to do so, but we do it only if it's quality customers and if it generates some value. So it's part of the uncertainty factor. Third factor of uncertainty are more the margin, price of energy, the tariff impact, which is also an uncertainty factor. And CO2, yes, we have included only one sale. We knew from the data, we always monitor our exposure to CO2 in Europe to make sure we are well covered until 2030, early 2026, we saw that volumes in Soda Ash in the short term should not see a very different change. We saw favorable regulatory environment. We see things tends to improve, not deteriorate. And at the same time, the CO2 -- EUA prices at the beginning of the year in Europe are quite favorable. So we've decided to derisk this element.
Operator: The next question is coming from Tom Wrigglesworth from Morgan Stanley.
Thomas Wrigglesworth: Two questions, if I may. The first question is just trying to understand the dynamics around these CO2 emissions rights sales. Hypothetically, if volumes were to recover to peak levels very quickly, again, let's call it, by the end of the year and you need to increase your utilization rate heavily in your European business, do you then have to go and buy these credits back from the market in order to produce those tonnes? And is your assumption that you'd be able to pass on that cost if required, because the European market suddenly became tight? I'm just trying to think about what the sacrifice is on recovery here that you're making as you shut down assets in Europe and then sell the associated CO2 rights. That's my first question. My second question, if I may, is just on the Soda Ash contract price that's embedded in your guide. I think CMA reported Europe down 3% year-over-year. Can you confirm that's your price, broadly speaking? And associated with that, was there a very -- what was the kind of -- what was the thought process behind that if you try to support price but cut volumes and therefore, you'd expect to take a disproportionate volume hit this year in Soda Ash because you've tried to protect price? Just trying to understand the dynamics that took place in that contract.
Philippe Kehren: Yes. Thank you, Tom. So first, on EUAs, clearly, I mean, if ever the volumes would recover at some point later this year, we are -- we have enough quotas, right? I mean, so until 2030, we are covered. So there is no need to go back to the market at this point to hedge our CO2. And more broadly, you mentioned the capacity reduction and the fact that we would lose this capacity if ever the market would recover. Well, it's very simple. The capacity that we have typically in Spain here, it's a capacity that was used to export out of Europe to the seaborne market. We consider that this capacity is not sustainable, right? First, because we would have to invest massively to do the energy transition on this capacity and we would not be able to get the return on this investment on the seaborne market. And second, we have enough capacity in the U.S. to supply the seaborne market. So this is the right move to do for the long term, okay? So no regret. This is strategic and done on purpose. Now on Soda Ash, obviously, we will not comment on the detailed price movements linked to the negotiations. What we can say is that basically, Europe has been resilient. And there's a little bit of pressure on price, but which is very limited and we kept the volumes, so good resilience in Europe. The opposite on the seaborne and in particular in Southeast Asia, margins are at the trough with the overcapacity in China and the pressure put by this Chinese overcapacity. So here, we signed very short-term contracts because we don't want to commit at this level of price. And we even produce a bit less. This is, by the way, why we also have some EUAs to valorize in Europe because we're not producing at full speed in order to sell in this very depressed market. In the U.S., it's a little bit of a mix. In the U.S. -- sorry, in the U.S., it's strong pressure on export. And so this puts pressure on the U.S. production. So the situation is a little bit mixed in the U.S. But overall, I would say the domestic prices are relatively resilient.
Operator: The next question is coming from Hannah Harms from BNP Paribas.
Hannah Harms: I just wanted to clarify on your free cash flow guidance. So my understanding is obviously that includes this carbon credit sale. So what other levers do you have left if you're looking to cover the dividend for the year? And would you have an appetite to raise leverage?
Philippe Kehren: Thank you, Hannah, for your question. I will let probably Alex complement my answer. So indeed, the free cash flow guidance includes the CO2 sales that we've done in Q1. And this -- with this into -- taken into account, our guidance is to generate at least EUR 200 million of free cash flow despite, as we said, the EUR 90 million of temporary transformation costs. So then what are the levers that we have? Maybe, Alex, you wanted to explain a little bit what we plan to do.
Alexandre Blum: Yes. I think if you really try to compare 2025 to 2026, so EUA, it's quite comparable, okay? We had it last year. We had it this year, broadly same. CapEx, same financing, tax, assume that more or less is stable. The big difference is the fact that last year in 2025, we could activate working capital, we've optimized it and we ended with quite a low level of activity. That has generated EUR 170 million of working capital reduction while in 2026, we have assumed this to be broadly stable. That's the main source of variation. Then we have all these transformation expenses, which are broadly flat, slightly higher. On the other side, we have provision cash out and especially Dombasle Energy project were quite high in 2025, will be lower in 2026, but it's not the same magnitude as our working capital variation.
Operator: The next question is coming from Geoff Haire from UBS.
Geoffery Haire: A lot of my questions have been answered. I just have one left. Obviously, there's been speculation recently about changes to the European ETS scheme. If those changes that have been put in the press come to fruition, what does that mean for Solvay? Is that a positive or a negative?
Philippe Kehren: Yes. Thank you, Geoff, for the question. No, it's positive, obviously, it's very positive. And I think it makes sense, right? Because it won't change anything until 2030. I mean, until 2030, except the fact that we know that now that the CBAM will not take place. So we are comforted in the strategy that we presented, which is to be covered until 2030. Now there were and there are still, to some extent, a little bit of uncertainties as to what will happen after 2030. We already cut our CO2 emissions by half since 2005 when the ETS was implemented. And our commitment is to reach minus 30% in '23 versus 2021. We will do it. No doubt about that. And then the other commitment is to do carbon neutral in 2050. So in 2050, not in 2030, not in 2039. And that's, by the way, in line with the target of the EU, which is to be carbon neutral by 2050. So what we're saying is that we need to align the ETS to the 2050 target. So instead of having cliffs or disruptions in 2030, in 2033, in 2039, whenever, we want to align the trajectory to 2050. So this is good news because it will allow us to do in a good condition to finalize the energy transition and move to carbon neutrality.
Operator: The next question is coming from Katie Richards from Barclays.
Katie Richards: Yes, I just had one follow-up on the ETS too. I mean, can you just clarify what you meant about with reference to CBAM there, the rules changing? And also just try to understand what exactly -- if you could have your dream scenario here would be the best case for Solvay. Would it be for pushing back the free allowance date later? Would you rather the ETS costs move to EUR 30 to EUR 40 like [ Micron ] is pushing for? What would be your dream scenario? And my second question would be on the energy costs. Could you please clarify the degree of the energy cost pass-through in the Soda Ash contracts and whether the current energy tailwinds would be retained in the unit margins or could decline further due to competitive pressure, please?
Philippe Kehren: Okay. So my reference was to say there is an option to include Soda Ash and only Soda Ash in our portfolio into the CBAM. We know that this will not take place at least before 2030 and we are currently discussing and realizing that integrating Soda Ash to the CBAM would raise a lot of questions and concern. That's why, by the way, also the European Commission is starting to say we could envisage to continue to give free allowances, in particular for volumes that are exported because obviously, if you don't give free allowances to exports, you would put those volumes under tremendous uncompetitive pressure. Now we don't have dreams. We're talking about reasonable and efficient trajectories with the European Commission. And I would say that what would be the most efficient would be to have an extension of the ETS with a trajectory that would bring us to neutrality in 2050, right? So something that is much more realistic than what is envisaged today and something that will also be in line with the fact that today, there is no competitive low-carbon energy available in Europe. So you cannot ask the consumers like us to be carbon neutral if there is no carbon-neutral energy available on the market. So it's just to have a reasonable trajectory for the ETS going forward after 2030. And I think this is something that really is resonating more and more with the European policymakers. Now on your question, I guess it was on the energy clause that we have in the Soda Ash contracts. So those energy clauses still exist, right? Because we've been through a period where energy prices went up and peaked in extremely strong movements. And so we still have those protections, but they operate when really prices are extremely high. So in the current market situation, we don't expect those energy clauses to be operational and to have an impact to be activated.
Operator: The next question is coming from Tristan Lamotte from Deutsche Bank.
Tristan Lamotte: Firstly, just wondering on Q1. I'm trying to think about the underlying earnings power of the company this year, given you have some temporary impact on EBITDA in the guidance. If you strip out the exceptional impact from the sale of CO2 credits, is the consensus for Q1 of around EUR 205 million a reasonable base level of earnings for this year's kind of run rate? Or is it fair to say it would likely be lower than that given that the Q4 was EUR 170 million and given that you've talked about not seeing too much seasonality in the business in the past?
Philippe Kehren: Yes. Thank you, Tristan. Well, clearly, I mean, it's difficult to give any guidance, of course, for Q1. From a business perspective, I would say that we -- what we see in Q1 so far is very in line with what we observed in the second semester of last year. Q4 was softer, and that's known, right? We know that the end of the year is always softer in some of the businesses. We also had some accruals to take and so on. So Q4 was not representative, I think, of the business performance over the year. So that being said, what you can take into account is that we're -- we have a guidance of EUR 770 million -- between EUR 770 million and EUR 850 million. And that we suppose business-wise that there is no significant phasing over the year.
Tristan Lamotte: Okay. Got it. And then secondly, sorry to come back on ETS, but I'm just wondering what the size of the risk is here in a kind of downside scenario. So I'm wondering in the absence of free allowances, is it fair to take your Scope 1 emissions, which I think were around about 6.8 million tonnes and multiply that out by the carbon price of EUR 70 to come to a theoretical cost that you would bear in the absence of free allowances? Just to understand the size of that risk without free allowances as it stands.
Philippe Kehren: No, no. I mean, it's not at all this number. I mean, the number that you mentioned is the total emissions globally and a big part of those emissions are not part of ETS, right? You have emissions in the U.S., emissions in Brazil in a lot of areas. So it's not at all this number. And again, as we said, there is no scenario today, I think, where we would stop getting free allowances. I mean, there's no one in Europe today saying that we should stop giving free allowances. On the contrary, the momentum today and I'm much more positive today than I would have been probably a few months ago is to say we need to continue and even to protect even more the European industry because what will happen is that we will shut down our industry and we will import the carbon content from outside. So it wouldn't make any sense.
Operator: The next question is coming from James Hooper from Bernstein.
James Hooper: First question is around working capital. You did a great job on that in the fourth quarter. To what extent the -- can you just take us through how you managed to make such a big improvement? And then whether you'd expect -- how you'd expect to maintain working capital at that level? I mean, you mentioned in the SCF question that you're looking for working capital to be flat. And then the second question is about the footprint because obviously, you're working and you have yesterday's announcement. If we stay in the current macro picture, is there further restructuring to come here kind of after the plans that we've got in 2026? Is the footprint -- if you're starting Solvay again tomorrow, would the footprint look like it is?
Philippe Kehren: I will let Alex answer the question on the working capital, but I will take the one on footprint. So first, I mean, there is no further announcement planned clearly for this year. We, of course, continuously optimize our industrial footprint. This is what we've done for 160-plus years. And we are operating on markets where all the players are doing that and are making sure that they always have on a given market, the best possible assets. So we will, of course, continue to do that, but we don't expect any big movement in terms of footprint. Now would we build the same footprint? Probably not. I mean, every year, we would build it in a different way, but we have, of course, a footprint that is good and that is sustainable and we're making sure that it's the best one in the long run as well. So no, that's why we have this very important discussion with the European Commission on the future of the ETS is to make sure that we have a footprint that will be able to operate in a fair competitive landscape, right? Alex, if you want to comment on the working capital?
Alexandre Blum: Sure. So on working capital, as we said, it's the combination of an internal program and the demand trend, you may remember, end of Q4 last year, it was before the tariff, there was -- the demand was quite good until the end of the year while this year it was quite slow. We can see that in Solvay, but we could also see that in our customers and in our peers. So you have one driver which is different. But a large part of the improvement is a program we have on inventory, receivable, payable. As our products are quite bulky, it will be more on receivable and payable and we've looked at all the businesses, all the item and we've pushed it. What it means is that if you look our working capital on sales at the end of the year, we are in the 10-plus percent, which is among the best-in-class in the chemical space. It's possible to maintain this level with the current level of activity. If the activity picks up, we will have to -- it will be a good problem to have. We will have to rebuild a little bit of working capital just proportionally and maybe give a little bit more safety on different elements. But for the moment, as our guidance for 2026 assumes, it remains broadly flat.
James Hooper: Can I ask a quick follow-up actually just on the market? Just China, have you seen any rationalization or any evidence of capacity changes or demand improvements there in Soda Ash?
Philippe Kehren: Not yet. Not yet. We know this will happen, right? Because I don't see why in the long term, plants would run and burn cash every month. It doesn't make any sense. But at this point, we have not seen that happening yet. What we've seen linked to the [ MCL ] evolution, but on other -- in particular on other businesses is that China is now really looking very, very carefully at the new permits. So before getting a new permit for a new capacity, you need really to demonstrate that it makes sense and that it's not an overcapacity that we are going to generate.
Alexandre Blum: Not specifically on Soda Ash.
Philippe Kehren: Not specifically on Soda Ash, on other types of businesses.
Operator: The next question is coming from Chetan Udeshi from JPMorgan.
Chetan Udeshi: My first question is on rare earth. It seems things have gone quiet. Since some excitement at some point last year, nothing seems to have happened. Maybe it's a wrong impression, but I was just curious if you can update us on what's happening. Are you seeing more activity? Are you seeing more requests from European Union in terms of building the capacity because they have been talking about building the rare earths and other critical minerals value chain in Europe? And the second question was just around this EU ETS thing. Can you remind us how much of your allowances or how much of your emissions rather are covered by free allowances today in Europe? Is it 100% because you're clearly not producing at full run rate? Or in other words, how much are you buying from the market every year? What I'm trying to get to is if we have, let's say, 2% lower reduction of free allowances every year, is that meaningful for Solvay in terms of benefit? Or is that virtually no impact because you don't buy any of the free allowance -- sorry, any of the emissions from the market anyway?
Philippe Kehren: Thank you, Chetan. So on rare earths -- well, Chetan, when things are quiet, it's not necessarily a bad news. So what I can say is that right now, we continue to have discussions with all the stakeholders, with the buyers because they are more and more interested, of course, to diversify their portfolio, their purchasing of those critical materials and also with the policymakers, both in Europe and in the U.S. And there are currently discussions on what would be the best mechanism in order to secure the volumes and the prices in the long term. And there are in particular discussions about floor prices, both in the U.S. and in Europe. So I hope things will move very, very quickly now. But I can tell you that it's a bit more silent, but it's quite active. On the ETS, no, we have a deficit very clearly. I mean, we are emitting more than the free allowances and that has been the case from the beginning from 2005 onwards. So what we do is we manage our emissions and we protect them with a portfolio of different instruments. So we have, of course, the level of production, which is a key parameter. We have our energy transition project road map. And so the more we secure and derisk those projects, the more clarity we have on our future emissions. We have the free allowances. We have some quotas that we have in inventory and that we purchased a long time ago. We started a long time ago. That's why the price today has nothing to do with the market price. We also have forward positions. So we have a portfolio of things. And we reassess this position continuously. And this is why sometimes we say we can sell some quotas that we have in inventory, or we can unwind some of our forward positions and so on and so forth. So we manage this very, very actively. So 2% is at the same time, not too much, but it is quite significant and it's an element that we take into account to make sure that we are covered. Now what is really important is what will -- what happens when we have disruptions. This is why the post-2030 discussions are important because we know exactly what will happen until 2030. The only uncertainty is, I would say, the level of production, our project in Dombasle, if it starts one or a few weeks later or a few weeks earlier, that can have a little bit of impact, okay? But everything is known until 2030. What is not known is what will happen afterwards. CBAM with or without free allowances, what will be the new benchmark. This is why the discussions with the EU policymakers is important.
Operator: There are no more questions at this time. So I hand the conference back to Geoffroy for any closing remarks.
Geoffroy d'Oultremont: Thank you, Gaia, and thank you, all, for your participation today. And if you have any further questions, please feel free to reach out to the Investor Relations team. We have a few events planned in March, roadshows and conferences. They are available on the financial calendar page on our website and we will publish our first quarter earnings on the 7th of May. Thank you very much.
Philippe Kehren: Thank you.
Operator: Thanks for participating to today's call. You may now disconnect.