Good day and welcome to Azelis' F irst Half 2026 Earnings Presentation. Today, we have Anna Bertona, Group CEO, who will give an update on our operating progress year-to-date. Boris Cambon-Lalanne, Group CFO, will present the financial results. Anna will say a few words on the outlook. After their presentations, we will open the call for Q&A. Until then, you will be on listen-only mode. As a reminder, this presentation may contain forward-looking statements that are subject to risk. We will make a recording of this call available on our website later today. I will now hand you over to Anna.
Thanks, Pam. Good day to everyone. Thank you for dialing in today. We realize it is a very busy day for corporate earnings. Many of you are probably one report away from your summer holidays, so we will be sharp and efficient and start right away. As usual, I will kick off with the most important messages based on our performance in the first half of the year. Let me start by saying that we are proud to have delivered positive group organic revenue growth for the first time in more than a year. The 4% organic growth achieved in the second quarter reversed the decline in Q1, resulting in stable organic revenue for the first half of 2026. These results demonstrate our agility in capturing growth in a volatile environment, building on our strong reputation with our customers and principals.
The stable margins achieved during the first half of the year are another accomplishment and a testament to our team's commitment to balancing the need of all our stakeholders. Delivering this outcome while navigating raw material volatility, mixed demand patterns, and ongoing supply chain challenges requires both discipline and execution excellence. This consistent and disciplined approach has translated into strong earnings growth with Q2 EBITDA increasing by 12% versus prior year and 23% sequentially. We are pleased with this performance, which reflects both the quality of our business model and the dedication of our employees across the group. Let's have a look at the drivers of these results on the next slide. In the first half of the year, we generated revenue of EUR 2.2 billion, more than 3% higher than prior year in constant currency. These were driven by 3% contribution from acquisitions, supported by stable organic revenue growth.
We achieved adjusted EBITDA of EUR 233 million and generated cash of EUR 122 million, even as we invested a bit more in working capital to support the growth in the business, especially in the second quarter. Let me walk you now through the drivers of our organic revenue. Momentum varied across regions, with APAC and Americas delivering strong performance, while EMEA remained challenging also due to the tougher comps. The impact of broad-based price increases vary across end markets and across regions. As said, APAC grew substantially and remained the largest driver of our positive organic revenue performance, accelerating from 4% in Q1 to 13% in Q2. While the region benefited from some pre-buying in the beginning of the quarter, we believe that the strong performance was also the result of our team's commercial focus and strengthening of our position.
Second, the green shoots that we saw in Life Sciences in the Americas in Q1 are taking root, with continued recovery in Personal Care and sustained solid performance in food. In EMEA, we are starting to see a recovery in CASE, both in terms of volume and price, supporting the Industrial Chemicals performance in that region. While we are building on this positive momentum, we still face challenges in some markets. In EMEA, demand in general remains soft, especially in Life Sciences, although the pressure is somewhat easing. We saw a smaller year-on-year organic rate of decline of 5% in Q2 compared to the 9% decline in Q1. In the region, we continue to see competitive pressure in Flavors & Fragrances, and in addition, our agri business was impacted by the exceptionally dry weather. In U.S., we recorded weak volumes in CASE, only somewhat offset by positive pricing.
The weak volumes were partly due to supply constraints at some key principles during the period. Lastly, the weak macroeconomic situation in Brazil and Mexico is reflected in overall weakness in our business there. In summary, we are continuously strengthening our position, building on the momentum in markets with positive dynamics, and focusing on improving performance in more challenging markets. I will now hand you over to Boris to take you through our financial performance in more detail.
Thank you, Anna, and good morning, everyone. As Anna mentioned during the business update, Azelis delivered an improved performance in the first half 2026 with a return to organic growth while maintaining strong costs discipline. Let me take you through the group P&L before we move to the regional performance. Please note that as I guide you through the P&L and the regional performances over the next two slides, I will be referring to prior year or sequential comparisons in constant currency. We clearly provide the impact of FX alongside organic and M&A in the headline growth table on slide 10. In the first half year, Azelis delivered a revenue of EUR 2.2 billion, representing year-on-year growth of 3.2%. Growth was broad-based across both Life Sciences and Industrial Chemicals, with Life Sciences growing at 3.8% and Industrial Chemicals at 2.1%.
Gross profit in the first half year was EUR 524 million, up 4.3%, and corresponds to a margin of 24.2%. The 28 basis points margin improvement reflects positive pricing momentum across some end markets, supported by a favorable inventory position, partially offset by the negative mix effect from higher growth contribution from APAC. Adjusted EBITDA in the first half year was EUR 233 million, an increase of 2.6% versus the prior year, supporting a broadly stable adjusted EBITDA margin of 10.7%. As I indicated during our Q1 earnings call back in April, the 2025 performance included some favorable one-off items, such as the provisions for the variable remuneration that had to be adjusted, especially in Q2 last year, while the company faced adverse performance. The impact of the improving trends in 2026 is therefore reflected in the change in provisions versus prior year, as highlighted in the chart.
Normalized from these one-off items and the FX, the H1 2026 EBITDA growth would then be +12% versus same period last year. This performance was derived from organic gross profit growth as well as from the full benefit of the cost-saving actions announced in April 2025, representing a +EUR 11 million improvement and were aligned with the EUR 20 million planned run rate. M&A contributed another EUR 10 million versus H1 2025, and the conversion margin remained at a healthy 44.4%, showing a sequential improvement from 42.4% in Q1 2026. Let's now move to the overview of the regional performance on the next slide. In EMEA, which accounts for 46% of the group, revenue in the first half year was EUR 990 million, representing a year-on-year growth of 1.7%, driven by a growth contribution from acquisition of 6.3%, offsetting organic decline of 4.6%.
Gross profit was EUR 257 million, implying a gross profit margin of 25.9%. This 52 basis points gross margin expansion reflects the positive pricing environment offsetting continued volume softness. Adjusted EBITDA of EUR 127 million resulted in an adjusted EBITDA margin of 12.9% and a 31 basis points margin expansion during the period. Turning to the Americas. First half revenue grew 2.3% to EUR 748 million. The region, which accounts for 34% of group revenue, delivered entirely organic growth, led by 3.4% increase in Life Sciences, while Industrial Chemicals grew 0.9%. Gross profit in the region increased by 3.9% to EUR 182 million, corresponding to a gross profit margin of 24.3%, which represents a 40 basis points expansion. These reflects broadly positive pricing momentum in Industrial Chemicals in North America and improved performance in Latin America. Adjusted EBITDA decreased by 1.1% to EUR 83 million, resulting in EBITDA margin of 11.1%.
This slight adjusted EBITDA margin contraction was largely driven by a higher change in provisions reflecting the improving business performance. In Asia Pacific, which represent 20% of the group, revenue in the first half year increased by 8.2% compared to the prior year to EUR 428 million. Also entirely driven by organic growth. The organic revenue increased by 8.2% in Life Sciences and 8.0% increase in Industrial Chemicals versus prior year. Gross profit in the region increased by 7% to EUR 86 million, corresponding to a gross profit margin of 20%. A 24 basis points contraction reflects the continued weakness in Australia and New Zealand, partially mitigated by volume growth, as well as a positive pricing in most of end markets in the rest of the region. Adjusted EBITDA increased by 8.2% to EUR 43 million, with adjusted EBITDA margin stable at 10.1%.
The strong cost discipline resulted in a solid conversion margin of 50.4%. Overall, FX remained a significant headwind, particularly in Americas and APAC, with top line impacted respectively by -3.9% and -6.2% versus prior year on revenue. Across the group, the FX headwind to a gross profit down by -2.6% and EBITDA by -3.4%. I will leave you to review this slide at your convenience. We provide this table to give you the detailed gross breakdown of the key metrics between organic, M&A, and FX. Let me now take you through the net profit on the next slide. In line with the EBITDA development during the first half, operating profit was EUR 188 million. This compares to EUR 191 million in the prior year. Looking below the operating line, the net financial expense decreased by almost 6% year-on-year to EUR 66 million.
This improvement was mainly driven by a significant reduction of interest expense and other financial costs, despite the one-off refinancing costs linked to the bond refinancing executed in Q1 this year. As a result, profit before tax increased slightly to EUR 122 million compared to EUR 121 million in the prior year. Tax expenses for the first half was EUR 36 million, corresponding to an effective tax rate of 29.4%, broadly stable compared with 29.3% in H1 2025, and improving versus the 35.3% at the end of the year 2025. Overall, despite the slightly lower operating profit, the lower financing costs enabled the group to deliver a slight increase in net profit to EUR 86 million. Moving on to cash.
Business returned to growth during the first half, the net working capital to revenue increased to 16% at the end of June, compared to 14% at the end of March and also December, but similar level at the same time last year. Comparing with December 2025, DSO and DPO almost equally increased from 38 days to respectively 51 and 50 days, while DIO increased from 51- 58 days. Inventory remains a strategic asset for Azelis, enabling us to ensure high service levels for both our customers and principals, while maintaining a disciplined approach to inventory optimization. In absolute terms, this translated to a change in net working capital of EUR 107 million, deducted from an adjusted EBITDA of EUR 233 million, and together with EUR 20 million of lease payments and EUR 5 million of capital expenditure, the free cash flow stood at EUR 122 million for the first half.
This corresponds to a free cash flow conversion ratio of 52.3%, compared to 63.8% in the prior year, reflecting the temporary investment in working capital to support the return to organic growth. We expect free cash flow conversion to improve as working capital normalizes over the course of the year. Before I hand it back to Anna, let's close on our net debt position. At the end of June 2026, the net debt remained broadly stable at EUR 1.6 billion, resulting in a stabilized leverage ratio of 3.4x. While EBITDA growth was more modest, our disciplined capital allocation and continued cash generation enabled us to maintain stable leverage profile, and we continue to work at bringing down the leverage ratio by the end of the year. Overall, our resilient cash generation and ample liquidity provide us with the financial flexibility to invest in growth and support our long-term strategy.
With that, I'll hand it back to Anna for the closing remarks.
Thanks, Boris. As you can all appreciate, we are operating in an environment where volatility has become the norm rather than the exception. The geopolitical developments, trade dynamics, shifting customer sentiments continue to create uncertainty, making short-term trends difficult to predict. At the same time, this environment reinforces the importance of ensuring that our business is well-positioned to perform throughout the cycle. Given the limited visibility on how the current geopolitical situation will evolve, we are assuming that current market conditions will broadly continue. Against this backdrop, we remain focused on executing our commercial and strategic priorities, capturing growth opportunities where they arise, but also on maintaining our disciplined approach to cost, driving efficiencies through our digital tools, and continuing to generate strong cash flow.
Based on our performance in the first half of the year and the momentum we have seen in the second quarter, our objective is to deliver positive EBITDA growth for the full year, while continuing to strengthen the long-term foundations of our business. I will close the formal presentation with that and open the floor for Q&A. Operator, you can open the lines.
If you would like to ask a question, please signal by pressing star one. We will pause for a moment to assemble the queue. Your first question comes from Suhasini Varanasi from Goldman Sachs. Your line is open.
Hi. Good morning. Thank you so much for taking my questions. Just a couple for me, please. A very healthy improvement in the second quarter. I just want to check if you could give some color on 3Q trading, whether you've seen something similar to 2Q, maybe a little bit better or worse. Just some color there would be really helpful, please. The second question is, if we look at the gross margins for 2Q, there was a mention that it was supported by favorable inventory position. So I just wanted to get a sense of how much could potentially unwind on gross margins in the third quarter as the inventories rebase to the slightly higher price points from the suppliers. Thank you.
Sorry. Yeah. Thank you for your questions. For the Q3 trading, we see the order books continuing in a positive way and, sorry. That's why we are positive on the outlook. With the caveat that, yeah, we are uncertain about what geopolitical situation might bring us. That's why we said if the things continue in the market as they do, then we aim for a growth of our EBITDA by the end of the year. That's based, of course, on the past performance, but also on the order book that we have currently in our hands. On the margin, of course, as you know, we benefited like it's normal in distribution from stock, which is around two to three months, meaning we had that at a lower price. Prices went up, so we benefit from that. That benefit will ease out.
We have, at the moment, no indications of large price increases or decreases from our principals to come. They have been passed through in the course of Q2. In that respect, there's no change to be expected on the pricing side.
Understand. Thank you.
Your next question comes on the line of Stijn Dem eester from ING. Your line is open.
Yes. Good morning. Thanks for taking my questions. I have two. First, given your relative exposure to the Middle East in EMEA, can you comment on the current conditions and the outlook for the region? Could you give maybe some indication on how EMEA performs relative to Continental Europe in terms of organic growth in Q2, if that's possible? Secondly, your competitor made a remark on supplier mandate wins as a key driver for growth in Q2, while also seeing increased outsourcing trends at suppliers. Can you comment on the dynamic regarding those two topics at your end? Thanks.
Yes, of course. Good morning. On EMEA, indeed, we have a larger exposure to that. It's normally, I would say, a very interesting region with nice growth potential. In Q1, they had a more difficult start. During the Q2, we saw their performance improving and we see that this is continuing. That's going to be helpful if it continues indeed for the rest of the year. It's going to be helpful for the performance of EMEA. Suppliers, we have many strong relationships with our principals, and we always work on expanding our footprint with our strategic ones. Actually, in any given year, our net wins are always more than our losses. Also this year that's the case. We have some nice conversations ongoing, and I see no reason why this year should be different from any other year. The trend in outsourcing continues.
As you know, we talked already in the past that sometimes in adverse market circumstances, you see opposite, I would say, movements from principals. You see the ones that are restructuring their sales force and move more to distribution. You see also the ones that, for, I would say, a shorter period of time, take back some accounts to serve directly. That normally doesn't last that long, as these customers are used to a service level that they don't get from the principal. Overall, I would say these positive trends are there and continue.
Thank you very much.
Your next question comes from the line of Erick Wilmer from Kempen. Your line is open.
Hi. Good morning. Actually, also wanted to dig a little bit deeper on that topic, regarding EMEA in the Middle East. Despite the 100 basis points year-on-year and sequential gross margin improvement you are showing in the region, so in EMEA, I believe you reported a - 1% organic sales growth for the same reason. As such, I was wondering if you could perhaps decompose this 1% number. I believe in EMEA, the Middle East and Africa represent about 15% of sales. You also highlighted softer Life Sciences performance in EMEA, which typically carries a higher gross margin. To what extent is this - 1% organic sales growth and better EMEA gross margin, the kind of counterintuitive, perhaps driven by soft performance in EMEA, which may carry a lower gross margin?
I'm just trying to understand a bit better these two dynamics, and indeed also in light of your peer that reported yesterday. Thank you.
Yeah. There's a couple of drivers behind the EMEA performance. First of all, let's not forget the comps are tough and I'm managing Azelis and not our peers, so don't comment so much on their performance. We have tough comps. There's, I would say, two other drivers that negatively impacted our EMEA performance. One is we have a large business in F&F, and there's quite some price pressure at the moment there. The other thing that is also a negative impact is our A&ES, our agro business. I know you're also sitting in Europe, so it's probably no surprise we had an exceptionally dry weather. This dry weather is not favorable for our agro business. Agro business is, by the way, for us also a high margin business, so we feel that.
I think these are the biggest, I would say, points that we can mention.
Understood. Thank you.
Your next question comes in the line of Luuk van Beek from Degroof Petercam. Your line is open.
Yes, good morning. I have two questions. First of all, can you give a bit of a comment on the breakdown between volumes and price? I know that you cannot give an exact figure, but roughly the volume trends when you had to exclude the price impact. Secondly, you commented that the inventories are strategically high service levels, and obviously customers are more and more relying on just in time. Do you expect them to remain structurally higher, or do you see room for improvement from current levels?
Thanks for your question. Let me take the question on the price and volume. First, there is no one answer across all the markets. It varies across the markets. I can highlight, for example, that pricing has been supportive, especially in Industrial Chemicals. Overall, in Q2, most of the gross Industrial Chemicals was indeed price driven, and I would say Life Sciences was more mixed between volume and price. When it goes to inventory, your question about inventory. I think we highlighted that in Q1 already, that we may have to increase inventory should the sales goes up, and also if customers started to do a pre-buy. We didn't see significant pre-buys as we expected. Definitely, we had to build on inventory to get ready for Q3 and Q4. Anna highlighted the order book was well-oriented, and that is just following this trend.
Thank you.
Your next question comes to line of Anil Shenoy from Barclays. Your line is open.
Hi. Good morning, thank you so much for taking my questions. Just the two, please. The first one is on your cost structure. If you could talk a little bit about your costs, please. I'm asking because it's been a while since EBITDA organic growth has outperformed gross profit organic growth. I was just wondering, even going forward, can we expect EBITDA growth to be higher than gross profit organic growth? In other words, do you see any increase in cost structure going forward, or do you think it'll remain flat for the next two or three quarters? That's my first question. The second question is on your guidance. First of all, thank you for giving a guidance this time. It makes our lives easier. If you could just give us some comments on the segments for your guidance.
When you say you expect EBITDA to grow in 2026, is it more in Life Sciences or is it more in CASE? Also, which regions do you see more growth in? Thank you.
Let me take these two questions. Thanks for your questions. Let me start with guidance. We give an indication of how we expect the year to end, that's already, I think, some improvement in clarity on our performance expected, I think we won't give any further details by segments. On the cost structure, sure. We are always managing our costs very delicately, I would say, we have to manage also the investments required sometime when you see your top line picking up. That's what is happening as you saw in Q2. While we have printed another quarter of savings in our announced plan back last year in April 2025. Just as a reminder, in my slide, I highlighted in the bridge I show you an EUR 11 million for the first half of structural savings, in line with the previous announced plan.
We are continuing to explore optimization in our cost structure. We're doing that in the back office, we are doing that thanks to our IT structure and digital capabilities in our frontline to help our frontline, our commercial folks, to be more effective in what they do with a clear mindset on optimizing the costs. You asked the question whether our EBITDA growth should be higher than gross profit. What I can tell you is all we do will have an impact. We still have to face inflation. We're trying to be better than inflation, it's a constant focus that we have in Azelis.
Thank you.
As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one to ask a question. Your next question comes to the line of Philip Ngotho from Kepler Cheuvreux. Your line is open.
Hi. Good morning. Thanks for taking my questions. I have a few left. First of all, on the CapEx. I saw the CapEx on the first half year was significantly down versus last year. Is this simply timing, or what level of CapEx should we assume for the full year? I also had a question on the financing cost. After excluding the roughly EUR 10 million refinancing cost and net excess fair value effects in H1, what's the run rate that we should be assuming for the second half of the year? Finally, I was also wondering, given working capital movement, has the utilization of non-recourse factoring changed versus last year?
I will take, again, the questions. Thanks for them. CapEx down versus last year, it's really related to timing. We don't have a regular CapEx spend, it really depends on the needs. Don't expect to be that as a trend, it's just a phasing. Financing costs. Indeed, in the first half, you see some reduction. Overall, as a reminder, the refinancing we did earlier this year saves us EUR 6.5 million of borrowing cost, of coupons cost. That's what you should expect half of that, of course, in the second half in the P&L. Regarding factoring, we are usually very delicate in the use of factoring. It's a relatively inexpensive way to obtain liquidity when needed, and also something that we mostly do in Europe. There is no fundamental change in the way we use that.
We will be keeping the rate of usage about 25% of our receivables, which is, if I'm not mistaken, broadly stable, which is what we've been doing so far.
Okay. Thank you.
As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. There are no further questions. Apologies. Your next question comes from the line of Anil Shenoy from Barclays. Your line is open.
Hi. Good morning again. Sorry, just a quick follow-up, please. Could you sort of give us some color on what kind of prebuying you've seen in Q2? I may have missed it, but did you use the word significant to mention the prebuying in Q2? Or was it meaningful? That's all I'm trying to ask.
No, it is very limited, actually. We saw a bit in APAC, but for the rest, I would say very limited.
Great. Thank you.
There are no further questions on the conference line. We have come to the end of this call. I will now hand over to Chief Executive Officer, Anna Bertona, for closing remarks.
Thanks. I would like to close the call in which we gave an update on our progress and some reassurance on why we remain confident in the medium to long-term potential of our market. We hope to see you at our annual lab tour at the end of September, and there we plan to provide more details on our longer-term plans and also on our digital developments. Thank you for your continued interest in Azelis, and I also would like to thank our teams around the world for their dedication and commitment in delivering these results. We wish you a relaxing and enjoyable summer