Ladies and gentlemen, welcome to the Umicore Full Year Results 2025 Conference Call. Your speaker for this call will be Bart Sap, CEO, and Wannes Peferoen, CFO. For the first part of the conference, the participants will be in listen-only mode. During the question and answer session, the analysts joining the call are able to ask questions by clicking on the Raise Your Hand button on the player. I will now hand the conference over to the speakers. Please go ahead.
Good morning, everyone, and welcome to the Full Year Results 2025 of Umicore. And as you can see here, of course, we have taken this picture, a beautiful gold nugget, and I think for the ones following us will understand why we have put that picture forward. And of course, I'll be coming back on that later, when I look back on 2025. Now, if you read our set of numbers, I would like to highlight again that we have adjusted during the CMD, a new reporting structure, a different segmentations in our business groups. So please do have another good look at at this slide, because we will be reporting and commenting the numbers in the new structure.
So Wannes is sitting here on the left with me, and he will also comment, of course, on the finance and some of the business trends as well as usual. And let's have a short look at the agenda. So nothing particular here. First of all, we go on the core strategy, the key numbers. We go over the outlook, ultimately for 2026, and then hopefully have an engaging Q&A at the end of the session. Yes. Our core strategy. Now, we launched our core strategy in March 2025, where we indeed had a different approach and not just chasing growth at any cost, much more towards that value recovery and battery materials, but also more value extraction in our foundation businesses.
Roughly around the time that we were announcing our CMD, right? Our new strategy, the world started to move, I would say, violently. The geopolitical landscape has been changing fundamentally, and therefore, also the markets, as well as supply chains, have been reshaped and continue to be influenced by new policies coming out. The world is structurally different, well, versus roughly a year ago. Volatility is, for the time being, the new normal, and we will continue to navigate and, of course, react and adjust according to the volatility that we see.
Now, if I zoom out and see what's happening in the world, it's clear that we have a much more fragmented world, and that the world is waking up that, if you want to be a technology leader, if you want to have a strong economy going forward, you need these critical raw materials. You need to have your own supply chains, and that's where Umicore's circular business model, which is multi-metal, on the one hand, on the Recycling, refining side, but also on the materials that activate the world's, you know, downstream, the applications downstream, is more relevant than ever. Having a secure and sustainable supply chain in different parts of the world becomes a key element for society.
This is right up the alley of our strategy, and we paired our business model with four key pillars: capital, performance, people and culture, and partnerships. Let me now highlight some of the achievements that we had in these different segments over the years and some of the actions that we took. First of all, on the capital, and that was the first picture of the presentation. Obviously, we sold and had a subsequent lease in our permanent gold inventories. This has unlocked significant value. This also has helped further to deleverage the company, but also it transitions the price risk, the long-term price risk of these inventories outside of Umicore. Now, we also said at that time that lease rates for gold are typically stable.
It's an alternative versus cash or pure money in the end, and even in that volatility and that frenzy, let's say, around PGMs at this point in time, also, lease rates for gold have remained stable at 0.5%-1%, well below typical financing rates that you would expect for normal debt. Now, next to the gold, we also have been very disciplined on our CapEx. Remember, we guided at the start of the year more to EUR 400 million. In the end, we came in at EUR 310 million by making deliberate choices, but also being very strict on the execution of the projects that we are having. If I go to the performance pillar, there, the full year results is in line with our latest upgraded guidance.
We set between EUR 790 million and EUR 840 million during the summer. We came out, slightly above that, EUR 840 million, so we're very satisfied with this set of numbers. A strong performance, I would say. It was really, really also supported by the efficiencies, targets, and the mindsets that we are cultivating more and more within Umicore. We promised EUR 100 million. We achieved that target, and Wannes will explain later on, of course, that this helped to offset the inflation, but also some FX headwinds that we had in 2025. I mentioned it already. We're driving the company much more to a performance culture, where we take our accountability. We really focus on what is the essence.
We do what we need to do in a very disciplined way, and this is showing results, and we will continue to push forward in that direction. On the partnerships, we also not have been sitting still, I would say. We had quite some action there as well, and we closed a partnership around our silicon anode materials with a Korean company, HS Hyosung Advanced Materials, and together with them, we will industrialize this really interesting and exciting technology, and we found a way actually to bring that technology to the market without having to allocate excessive cash or very sizable amounts of cash for Umicore.
Next to that, critical raw materials. We have been working on that front, of course, already for quite a while, and we announced our partnership with STL, Société pour le Traitement du Terril de Lubumbashi. So basically, we have shared technologies have upgraded installations in the DRC in order to recover germanium from old mining tailings. And this was really a support for the business growing in 2025 and beyond. Now, let me go to the key figures. Wannes we'll go in more detail, so I'll stay pretty high level here. I would say we really had a strong performance in our foundation business.
It was supported by group-wide operational excellent efforts and a favorable metal price environment. EBITDA up 11% to EUR 847 million, 24% EBITDA margin, a good free cash flow supported by the gold inventory sales of EUR 524 million, and leverage of 1.6x. I think we can all agree this is a very solid set of numbers in the current environment that we live in. So happy with that. Let me now go to the different business groups. Let's start off with Battery Materials Solutions. So for your reference, Battery Materials Solutions now represents, on the one hand, Battery Cathode Materials and the battery Recycling business.
Before I go in the details of the different business units, I would like to have another glance at the Battery Cathode Materials and EV markets, markets out there at this point in time. So at the CMD in March 2025, we said that this market is still taking shape and has inherent volatility. Well, that's what we have seen in 2025 and also what we continue to see in 2026. EV penetration around the globe is progressing, but at quite different speeds. China leading decisively, Europe is following more moderate, and U.S., well, there actually we are quite behind. And of course, the policy change of the U.S., of the new U.S. administration is not helping with that.
The CO2 tolerance is much higher than in previous administrations. That is clear, and that's why the policy is shifting and pivoting away, I even would have to say, from EVs to internal combustion engines, right? This clearly has an impact, and you have seen announcements that even battery makers in the U.S. are now focusing more on energy storage than pure EVs. And of course, quite a number of OEMs have had to make difficult announcements. If I look to Europe and China, that's really a—it’s depicted here as well with an arrow, that's really an area where there's an interdependency.
Today, we see that China still has overcapacity, that a lot of OEMs are relying on China to import their batteries into Europe. Also, for cathode material, we still see cathode material flowing into Europe at this point in time. Competition is fierce. I think that is fair to say. At the same time, we also see that there's a heightened risk of trade tensions, of potential restrictions of exports of certain technologies by the Chinese government on the one hand, but also in Europe, a much stronger talk about these local resilient supply chains and local content requirements. The next days, the E.U. is expected to come out with some policies.
These will be important to monitor and could really make a substantial difference in the European landscape. In general, summarizing, the recent industry announcements are emphasizing the growth in Europe, but is somewhat challenging. It also highlights the increased importance of our take-or-pay contracts, and I'll get back to that. Now, going to the numbers. If we look in 2025 for Battery Cathode Materials, we did see a revenue growth, a revenue growth of roughly 11% versus 2024. Volumes, actual deliveries, were up versus last year. We did collect take-or-pay compensations for contractual volume shortfall. There was a partial offset by lower refining income because of a weaker, more challenging cobalt environment on the pure refining side.
Also, of course, the nickel price environment was not necessarily beneficial. Now, the adjusted EBITDA, as per our expectation, came in around breakeven, which is a clear improvement versus last year, where the breakeven result was still containing a substantial one-off, a positive one-off, in 2024. Now, if you look at Battery Recycling Solutions, during the CMD, we said we would be roughly at - 25. We came in at - 21. Really also here, we continue to focus on optimizing our process and recycling technology. At the same time, we're also very diligent here on the execution and cost management.
As overall, you can see a clear also improvement on the EBITDA level, 2024 versus 2025, despite that, we did not have that one-off in there. All right. Let's go to the next business group, and that's Catalysis. In good tradition, we also always start with an overview of the internal combustion passenger car production numbers. Here we see that 2025 is slightly lower than 2024. It's not a substantial drop, actually, it's -0.7%. Europe was more down. At the same time, South America and China, these regions even further progressed. If I then look at the HDD segment, Europe, a slight decline, but a positive evolution in China of 7.1% growth.
Of course, starting from a relatively low base at the previous quarters, or actually, the last quarters in 2024 were not strong. Now, looking at the numbers, a solid set of numbers. We see a sustained demand for our products throughout the business group in a volatile market, I would say, in an overall challenging economic backdrop. At the same time, we also continue to focus on our operational excellence as we have been doing for the last years, and we're getting increasingly better at this year after year. Now, if I look to the autocats, our volumes in autocats were strong.
We outperformed the ICE, so the internal combustion engine, light-duty vehicle market, which reflects our strong position, but also the focus, as I mentioned, of operational excellence and efficiency is really part of the DNA. We continue further footprint consolidation, amongst others in Asia, where we have taken decisions around our Japanese operations. Precious metals chemistry, that follows to a certain degree, of course, with Automotive Catalyst business, with the inorganic chemicals. They're the supplier of the inorganic solutions to the Automotive Catalyst business. So also a growing, a strong performance there. A good set, of course, PGM price support, helping this business also forward.
Now, our homogeneous catalyst business, which is selling typically in the broader chemical industry, we saw some softness in line with the overall chemical industry pain that we're all going through. Fuel cells and stationary catalysts, the earnings clearly improved. We had higher deliveries for our fuel cell catalyst solutions. We also are on track with our proton exchange membrane fuel cell plant in China, expected to start production in the course of 2026. On the stationary catalyst side of things, we do see a strong demand for backup power solutions and exhaust for these backup power solutions, specifically for data centers in the context of the high demands of the AI companies, the AI application.
Catalysis, EBITDA margin, 27%. Recycling. Well, you cannot talk about Recycling, unless you talk about the metal prices, and here you can of course, see that metal prices in 2025 are significantly higher than 2024. You know, that Umicore, that we decided to hedge quite a number of our— quite an amount of our exposure forward. Why? It creates visibility, it stabilizes earning profile, and it also protects against downside risk. That means if the price environment rallies beyond the average hedge price, indeed, you have some opportunity loss, but still today, we're very happy with these hedges. Now, on the remaining open exposure, of course, there's a positive upside of stronger PGM prices to the overall earnings of the business group segment.
Now, if we look at the overall set of numbers for the business group, we see an advancement in the revenues at the same time, a stable EBITDA performance with a 39% EBITDA margin. So in Precious Metals Refining, our revenues were in line with previous years. The metal price environment was supportive. We had good volumes. There were, of course, we had some average hedge rates decreasing year -on -year, which was a backdrop or actually a yeah, a drag, let's say, on the results as such. The overall mix was somewhat less favorable. Still a very strong set of numbers for Precious Metals Refining.
We had some slight temporary process inefficiencies which will no longer be there in 2026, but we were able to offset these by solid contributions from our operational excellence and cost-saving efforts also in this business unit. Jewelry and Industrial Metals, I mean, the central theme here is gold, gold recycling, gold processing. I mean, really a very strong market, strong revenue growth, and also a good margin expansion. So this business also doing really well on, on basically also the gold's evolution and the gold focus, which is there in the market. Precious Metals Management.
Well, we've talked about already volatility in precious metals prices is an excellent market environments to trade and make trading gains, so this business unit also performed really strong. Next business group would be Specialty Materials, and Specialty Materials is maybe a business group which is sometimes a bit, yeah, underrepresented or underappreciated maybe by the markets or, and maybe we should also further strengthen our communication on this business group because it has a couple of beautiful gems in there. If I look at the business group here, a 16% EBITDA growth in 2025. EBITDA margin approaching 20%.
Cobalt and Specialty Materials, there was a support of a cobalt trend where we saw a better momentum for cobalt premium products, right? And also here, again, efficiency. You've understood by now that efficiency is really part of our overall performance, and that's why we continue to stress it. If I look at Electro-Optic Materials, there we have seen that China has taken a stronger stance on exports, and not a lot of germanium has left China in the course of 2025. We have this joint venture with, for instance, Société with STL, basically, which I highlighted earlier. And this allowed us also to continue to supply our customers in a very strong germanium price market, aided by our closed-loop refining and recycling services that we have.
So Electro-Optic Materials sees strong top-line growth at the end of the year, and we expect to continue to see that growth also in 2026, so one to watch going forward. Metal Deposition Solutions, I would say overall, a good, stable performance with a different, mix between, the business groups, but, yeah, also pretty good there. So I think this is where I would like to leave it at this point in time and hand towards to Wannes.
Thank you, Bart, and good morning, everyone. Today, we'll start with EBITDA before moving on to cash flow, net debt, the P&L, and balance sheet. Adjusted EBITDA was up 11%, reaching EUR 847 million, driven by volume growth across all businesses and efficiency savings. This broad-based growth resulted in EUR 125 million of EBITDA contribution. We also delivered EUR 100 million of efficiency benefits, which more than offset inflation of EUR 68 million. Metal results declined by EUR 17 million due to favorable hedges rolling off. This was partially offset by increased prices for precious and platinum group metals, as well as minor metals for the remaining open or unhedged position.
There was a headwind from foreign exchange of around EUR 45 million, largely due to translational effects as the euro strengthened. Adjusted EBITDA margin improved from 22% to 24%, in line with our Capital Markets Day targets of more than 23%. Now, zooming in on our efficiency program. We delivered EUR 100 million of efficiency benefits in line with our target. 25% came from top-line growth, 20% was due to a reduction in cost of goods sold, and 55% came from a reduction in SG&A in research and development, in particular in Battery Material Solutions, Catalysis, and Corporate. Headcount in the group reduced 3%.
Turning to cash flow. Cash flow from operations before changes in working capital amounted to EUR 1.1 billion. This was supported by cash proceeds of EUR 525 million from the sale and subsequent leasing of the permanent gold inventory in Recycling. We finalized this transaction in October last year. It enabled us to unlock significant value, strengthen our balance sheet, and reduce finance costs. Net working capital increased by EUR 298 million, mainly as a result of higher activity and to some extent, increased metal prices. The significant reduction in CapEx, down to EUR 310 million, demonstrates our capital discipline.
This reduction is most prominent in Battery Cathode Materials, where we are leveraging footprint flexibility and phasing our spending. Free cash flow from operations was EUR 524 million. Moving to the net cash flow bridge and net debt. The free operating cash flow largely covered the EUR 250 million equity injection into our joint venture, IONWAY, in January 2025, as well as taxes, interest, and dividends paid. In January this year, after the year-end, Umicore and PowerCo each contributed an additional EUR 175 million to the IONWAY joint venture. Net debt reduced slightly to EUR 1.4 billion, resulting in a leverage of 1.6x adjusted EBITDA, down from 1.9x at the end of 2024.
This is well below the anticipated peak of 2.5x as we focus on capital discipline and maintaining a solid balance sheet. Looking at the consolidated P&L, adjusted EBIT improved by 21% to EUR 579 million. Adjusted net finance costs of EUR 173 million were up EUR 65 million, mostly due to lower interest income on cash as rates came down and a negative impact from foreign exchange. Adjusted tax charges were in line with the prior year. Pre-tax income was slightly up, but the adjusted effective tax rate came down from 29% to 26%. Adjusted net income of EUR 288 million was up EUR 33 million, and adjusted earnings per share were up 13% at EUR 1.2.
We are proposing a dividend of EUR 0.50 per share, in line with last year and with our policy of a stable or rising dividend. This represents a payout ratio of 42%. Adjustments to EBITDA amounted to EUR 365 million. As I said earlier, we optimized our business model in Recycling by selling the permanent gold inventory and replacing it by revolving leases. This generates a pre-tax gain of EUR 486 million. This was partly offset by an impairment of our joint venture participation in Element Six and provisions related to specific restructuring programs. Adjustments to net result include a derecognition of a previously recognized deferred tax asset and the tax impact of the gold inventory sale.
Net income was EUR 385 million, compared to -EUR 1.5 billion in the prior year, when there was an impairment charge for Battery Cathode Materials. There was a big improvement in return on capital employed from 12.3% to 15.7%. Now, turning to the consolidated balance sheet, our liquidity remains robust, with cash of EUR 1.6 billion after repaying EUR 500 million convertible bonds in June. And as I said earlier, net debt was stable at EUR 1.4 billion, and the leverage ratio came down from 1.9 x to 1.6 x by the end of the year. Group equity improved to EUR 2.3 billion, corresponding to a net gearing ratio of 37%.
We have hedged a substantial portion of our metal exposure for 2026, 2027, and 2028, and we continue to look for opportunities to hedge further, in particular for 2029 and 2030, taking into account market interest and forward rates. So to sum up, we delivered a strong performance in 2025 as a result of volume growth across across the board and EUR 100 million of efficiency benefits. Adjusted EBITDA improved in every business, except Recycling, where it was stable, and CapEx was well below the prior year.
Selling the permanent gold inventory has given us additional headroom while reducing future finance costs, and we continue to focus on driving cost efficiencies, controlling working capital, and disciplined capital allocation in 2026. I will now hand it back to Bart. Thank you.
Thank you, Wannes, for that, overview. Very clear. Let's maybe have a look at the outlook for 2026. So, the essence basically is that we enter the year on a stronger footing, and if I look at the different business groups on Catalysis, we continue to have a, yeah, a very strong performance in this business group. We see that continue into 2026, and we are happy with the state in which it is, and that's which will continue going forward. And Recycling, I think the essence is that in the current favorable metal price environment, that we'll be able to offset the negative impact of the average lower hedged metal prices, as well as the shutdown, which is foreseen in 2026.
So also moving on well there. Specialty Materials, continued strong performance. We expect to continue to see their top line growth amongst others in the germanium products, but also a supportive cobalt price environment will help to further support the results. And in Battery Materials, we continue to pursue the mid-term plan to recover the value, while at the same time we of course have to navigate a volatile and competitive markets. So we continue to focus on rigorous capital allocation. We're going to continue to lever our customer contracts with our take-or-pay commitments, on which we clearly say that the importance of the take-or-pay mechanisms is increasing given the volume development that we see.
And in Battery Materials, we continue to be disciplined in our spending, broadly in line with 2025. On Corporate costs, we expect a slight increase because we continue to invest in AI-driven solutions to further enhance and support our operational excellence. For capital expenditures, we are expected to increase versus 2025, and this is mainly driven by a selective growth initiatives in Recycling. So engineering that we do for the decision we need to take around the expansion in Hoboken in our precious metals recycling business, that we will take in 2026, but also selective high quality growth investments in Specialty Materials.
So on CapEx, we do expect to be in a range between this year and last year guidance of EUR 400 million, with, again, a very good focus on disciplined execution. So if I sum that up, I would say that we will not be providing a concrete guidance today, and this is because the market is still very dynamic, and we have— we'll have to continue to navigate that environment. Yet, based on what we see today, we would expect adjusted EBITDA to further progress into 2026. Now, shortly wrapping up before we go into the Q&A. And this is also a shout-out to the teams.
I think 2025 was really a pivotable year, and Umicore and the teams have shown great resilience. They have shown great discipline, also to focus on what our core is, and taking courageous actions to basically be able to deliver this strong set of numbers. It's fully in line with our core strategy execution. We're well on track. We're entering 2026 on a much stronger footing, and we will continue to build on the momentum of 2025, going into 2026. So really positive 2025, and with confidence, we go into 2026. And with that, we go to the Q&A.
Ladies and gentlemen, if an analyst, if an analyst, sorry, wishes to ask a question, please click on the Raise Your Hand button on the player. The first question that we have is coming from Wim Hoste, from KBC Securities. Your line is now open. You can unmute your microphone.
Good morning, do you hear me?
Yes. Hi, good morning, Wim.
Yes, good morning, everybody. Thanks for taking my questions. I have two, please. On metal price hedging, you indicated that hedge levels in 2026 will be below 2025. Can you maybe elaborate a little bit on the outlook of the—your hedge book? Is it fair to assume that the hedging price levels will increase, probably materially as from 2027 onwards? Can you maybe elaborate on that? And then also linked to, to metal price hedges, yeah, what are the limitations to hedging more and further into the future? I think you indicated that you're looking to increase, the hedgings for 2029 and 2030.
What is prohibitive in this case? Is it just availability of counterparties? Is it financing costs, which get increasingly expensive extending the hedges into time? Can you maybe elaborate also a little bit on that? Those are the questions. Thank you.
Yes. Good morning, Wannes. Good morning, Wim. Wannes here.
Good morning.
I'll take, I'll take those questions. Yep. So, looking at the metal price levels of the hedges, that is something we don't communicate, but at the same time, we can also share that, I mean, moving from 2025 into 2026, there will be less support from the average hedge prices that we have, looking at 2026. At the same time, looking at the average hedges that have been locked in, or the volume of hedges that we have locked in, looking at 2026 and 2027, this is where 70% on average of the exposure that has been locked in. So I think looking at the metal price exposure, this is where in the current favorable environment, there's still potential, there's still upward potential, but it's limited to that open exposure of, let's say, roughly 30%.
Now, we are looking into hedging further, looking at 2029, 2030, again, on the back of creating that visibility, creating that predictability of the earnings. But this is where looking at the market environment, on the one hand, we see a heavy backwardation, looking in particular at the PGM prices, but also limited market interest from counterparts to lock in those prices, hence also the heavy backwardation. So this is something that we are monitoring closely, in order to secure basically at the right time the right price levels for those years, 2029 and 2030.
Okay, clear. Thank you very much.
You're welcome.
The next question is coming from Sebastian Bray from Berenberg. Your line is now open. You can unmute your microphone.
Sebastian, we don't hear you.
I have a few, please. The first is on the financing costs. Are there any one of my—
Sebastian, we lost you for a second. I will open your line again.
Thank you. I think there's a lag on the mic, so I'm just going to speak. What would you provide as guidance for 2026 financing costs? Uh, my second question is on the PG—
Sorry, Sebastian, we really can't hear your question.
Why can't we go back by 2028, 2029 to a level of Recycling earnings akin to what we had in 2021, i.e., just-?
So, maybe let's see what we think we understood. So, I think there's a question on the one hand around financing evolution.
The final one on the VW JV. Is there any chance this might get up?
Maybe, I think-
Maybe we go to-
We have an issue with the line on your side, Sebastian, so I think it's difficult to receive your questions. If there is any opportunity to send them over the chat, that would maybe be helpful, and then we can move on for now to the next analyst.
Yeah
I believe, because it's difficult to take these as such. Thank you. Gaia, can you move on?
Yeah
To the next analyst, please?
Yeah. The next question is coming from Chetan Udeshi from JP Morgan. Your line is now open. Please unmute your microphone and go ahead.
Hi, can you hear me okay?
Yeah, yeah, yeah. Loud and clear, Chetan.
Okay, cool. So I had a few questions. First one, appreciate you're not giving the guidance, even though you gave same point last year, some guidance for 2024. But I also remember, you know, Umicore historically never gave guidance at the start of the year. So I don't know if—
Correct
... are just going back to the old practices.
Right.
But just based on all of the things that you mentioned, qualitative assessment, what you've seen so far, what is your feeling on the consensus that we have from Vara for 2026? You know, do you have a view on where the consensus is, and is that in the right part? The second question, I was just curious on your take-or-pay contribution in the Battery Materials. It's pretty, pretty clear right now that some of your customers, like ACC, you know, they publicly announced that they, they are scaling back the ramp-up plans.
So I'm just curious, are you getting compensated one-to-one for the lost volumes, or is it more a negotiation where, you know, you are still trying to be flexible if your customer can't take the volumes? And the third question, on Recycling, you mentioned some process inefficiencies. Can you quantify that? Is that a material drag last year, which shouldn't recur this year? Thank you very much.
Okay, Wannes, you go on the guidance, or I can go on the guidance. It doesn't matter.
Well, I think on the guidance, again, we highlighted it's too early to be very concrete. At the same time, looking at EBITDA, this is where we say, yes, we are confident on the year 2026, and we expect to make some progress in 2026. Looking at other elements of guidance, CapEx, we highlighted— we expect the CapEx to come in between EUR 300 million and EUR 400 million. We will continue to be diligent and disciplined. If you look at Battery Cathode Materials, we reduced the spend in 2025 versus what we anticipated, and we anticipate to do the same for 2026. At the same time, looking at the foundation business, this is where in precious metals refining, we are working.
We are engineering on that expansion of the flow sheet that will result in some step up in CapEx. In Specialty Materials, we see some very specific growth opportunities which we want to support, so hence the range of EUR 300 million-EUR 400. Now, the favorable metal price environment is obviously can be supportive to the EBITDA, but it can also put pressure on the working capital, and this is something where we will diligently work on in order to make sure that we can offset to a maximum extent any upside pressure on working capital. I think those are key elements I think we can guide on today.
Yeah, that's right, Wannes. Last year we decided to guide because of the specific circumstances around all the trade uncertainty and the tariffs, right? So we want to be clear also there— where group was heading and to give you clarity, because it was probably the biggest uncertainty out there in the market at that point in time. Now, on your second question, the take-or-pay and the further progress. Well, first of all, I mean, I think we have been pretty transparent and clear that in 2025, there is indeed a portion of take-or-pay in the results for which we are financially covered. The ramp up across contracts, I will not talk about specific contracts. I will never do that.
But we see that across—if I talk more broadly, on the ramp-up, it is slower than what we would have wanted to see or what our best view was at the CMD in March. So the weight of take-or-pay, in that trajectory that we shared is increasing, right? And this is something that I would like to highlight. At the same time, we continue to have strong confidence in our contracts, and we will continue to leverage these contracts as we have done in 2025, and we'll also be doing going forward. On the Recycling, I forgot what exactly.
Especially the process inefficient-
Oh, the process inefficiencies. Yes. Wannes, if you want.
Yep. So, I mean, looking at Recycling, we highlighted that the volumes were up, the volumes processed were up. At the same time, looking at the downstream, this is where we had some technical hiccups, resulting in some additional costs, some additional rework, but not too material, but at the same time, we also wanted to highlight as it is impact the results a lot.
That's right. And, as I highlighted in my presentation, we did offset those with further efficiencies in other parts of the plant. We just want to be transparent and open around this. Again, for 2026, there's not going to be any effect of these operational inefficiencies, so not to be taken into account for you for 2026.
Understood. Thank you.
Before—sorry , before we move on, we can maybe take the questions of Sebastian Bray that have come in through the chat.
Yeah. Thank you, Chetan.
The first question is the financing costs in 2026, could this be down versus 2025? The second question is, could recycling return to levels of full year 2021? Then the final question is on the JV, the IONWAY JV. Could this be recut or renegotiated as Volkswagen is cutting back on battery? Yes.
Maybe you take the first one, I'll take the two other ones.
Yep. So looking at finance costs, obviously very difficult to guide because there's two components which we don't have fully in control. One is basically the cash deposits and the interest rates we get on those cash deposits. And this is also where there has been a steep decline in 2025, and hence, also less contribution to the finance income, I would say. The other element is the forward points looking at the financing transactions in foreign currencies, this is where we also carry the forward points, and again, hard to predict I would say.
At the same time, I think 2025 seems rather exceptionally high looking at the financing costs. I think I would anticipate to have that lower going into 2026, but again, hard to give guidance on.
Yeah, and then, on Recycling, well, I think, it's true. I mean, it's a fact that actually your hedged exposure or unhedged exposure, let's say in 2029, 2030, the more we move out in that period, I think we're substantially less hedged in that time frame. Suppose that the current favorable metal environment remains, for all the main metals such as platinum, palladium, rhodium, and of course, some others as well, clearly, there could be a substantial upside versus the EBITDA that we are reporting today. At the same time, these prices are not guaranteed, so it's impossible for us to guide on that.
But in theory, there would be, of course, a higher upside, possible. On the Volkswagen question, you understand, I will not comment on that. We have clear contracts in place. We are going to continue to enforce these contracts, and at this point, I have nothing material to share with you on that point.
As a reminder.
Thank you.
As a reminder, if the analyst wish to ask a question, you can click on the Raise Your Hand button on the player. We have our final question at the moment coming from Mazahir Mammadli from Rothschild and Co. and Redburn. Your line is now open. Please go ahead.
From me. So assuming that we have a favorable metals price environment going forward in the next couple of years, what would your priorities be in terms of allocating the excess free cash flow that you generate?
Hmm. Yeah. So, basically, if I've understood well, it's actually a cash flow allocation question, Wannes. But I mean, let me start off here as well. I think our focus today is still really on further being cash disciplined. It's really on that value recovery. And, once the balance sheet continues to remain strong and solid, we will, of course, then, yeah, decide what to do with the excess funds and will be coming out to the market. So we don't have a clear view on that at this point in time because we're still— our focus is still on solidifying, in a structural way, the balance sheet. So, Wannes, I don't know if you would have any?
No, completely, completely right. I mean, looking at what we said in the CMD, is that we look at landing at a leverage, structural leverage, between 1.5 x and 2x, let's say. And once we have that in place, once we see that recurring, that's then the next topic that we will need to discuss.
Yes.
Thank you.
Thank you, Mazahir.
We will now take our final question from Stijn Demeester. Your line is now open. Please go ahead.
I received the message from Stijn.
Unmute your microphone.
Sorry. I received the message. Okay, you're in. Okay.
Yes, I'm in.
Thank you.
Yeah, yes, some difficulties here. So first one is on the SK On contract and the probability of renewal in 2026. Second one, on the margins for take-or-pay versus actual volumes, can you say something there, in terms of where they sit? And then the last one on the shutdown in Recycling, any view on when this will happen? These are my questions.
Sorry, Stijn, can you repeat the last question?
When the shutdown will happen?
On the shutdown in Recycling and when we should plan it in.
Yeah. So okay, thank you, Stijn. Very clear. On SK On indeed, we said that there was a probability to extend the contract, and that did happen, som we continue to supply SK On in 2026, so that is definitely a positive. On the margin of the take-or-pay, there, I think, what I said, I mean, the idea of the take-or-pay margins is to protect the investments that we have done. And as you have seen also when we were guiding for 2028, we had seen different scenarios of take-or-pay and actual volume delivery, and you saw that that range, EUR 275 million-EUR 325 million, right, was rather muted.
So you could, from that, of course, deduct that the margins indeed are sufficiently strong to cover volume shortfall margins. Now, on the shutdown from Hoboken, PMR, I mean, this is happening in the second half or later this month actually. So, we are preparing or entering, as we speak, the shutdown.
Okay. If I may-
And then before we close. Sorry. Yeah, go ahead, Stijn.
So is it, is it a correct assumption that if you would fully lean on take-or-pay, that you hit the EUR 275 million, or is that a too positive take?
Well, I mean, I mean, we have, we have said during the CMD that indeed, different scenarios of take-or-pay, as well as volume, real volume offtake, would give that range of EUR 275 million-EUR 325 million. So the answer is yes, correct.
Thank you.
Before we close it off, I still have an email of Georgina from Goldman Sachs.
Mm-hmm.
I also want to highlight that we will look into the difficulty that people are having to connect to this call.
Yeah, this is not.
That this will not happen, going forward. But so, let me then, phrase Georgina's questions here. How much CapEx investment needs still outstanding for battery materials? The next question is: Is this increasingly in conflict with potential growth opportunities in recycling specialty materials in management's views? Feels to me like the opportunity cost is getting larger.
Mm-hmm. Okay, very clear. Wannes, maybe you take one, I'll take two.
Yes. So, looking at Battery Cathode Materials, as I said, in 2025, we reduced the CapEx spend as we are optimizing or using basically the footprint flexibility in order to reduce and phase the CapEx. So looking at Battery Cathode Materials, what we shared with the market during the CMD is that on the one hand, we have the fully owned capacity, where we would need to invest about EUR 350 million. This is where we expect to be able to reduce it with EUR 100 million, looking at 2025 and 2026.
Then what we also highlighted in the capital market day is that we have the capital injection into IONWAY, where we anticipated still to invest EUR 500 million between 2025 and 2026. This is where we invested in 2025, EUR 250 million, and where at the start of this year, invested EUR 175 million. So bringing that to a total of EUR 425 million. We expect to stay within that budget of EUR 500 million, in order to finalize, basically, IONWAY.
Yeah. I think that's correct, that's correct, Wannes. In other words, we're facing our CapEx in function of the real underlying demand that we see, and we said that we would be disciplined, and for the time being, we're not spending those CapEx. As discussed earlier, the importance of take-or-pay is growing and that immediate need is not there. That's transits in that question on the conflict versus Recycling. Well, I mean, I would say, first of all, we have a set of businesses that we have today, right? A very strong core foundation business, in which we're going to continue to invest in selective growth initiatives.
I've been highlighting in the germanium and the field of Electro -Optic Materials. We will decide on the investment in Hoboken in 2026, and I think the current evolution of Battery Materials is not holding us back to do that, if we wanted to do that from a financial point of view. So no, there's not an immediate conflict. Of course, if you would think about really bold moves, then of course, value recovery and Battery Materials would definitely be an important milestone to achieve. So, no, I don't see that immediate conflict on the CapEx, as we are keeping it to the lowest amounts possible, and we continue to lean on our take-or-pay contracts.
Okay, we still have questions from UBS as well. A small reminder that normally we stick to one question per analyst, but given the situation that we are in, I'm making some exceptions here. For UBS, the first question is, can you tell us what percentage of Battery Materials Solutions sales came from take-or-pay payments? The second question is, does the guidance for the CapEx include the IONWAY payments? If not, what should we anticipate for? In the cost savings, could you give an indication for the cost savings in 2026? We still have a question on what do you expect the E.U. to do to protect the EV supply chain? A final one, has Nick Orbin asked the joint projects.
Well, I think it's quite the list.
Slowly start to close the call, but of course, IR will remain available to respond to your questions, and I'm now handing the floor back to Bart and Wannes to answer these final questions.
Yeah, thank you, [Jeff], for the questions. Juan, as you take one and two?
Yeah. So, looking at take-or-pay in 2026, I mean, as you have seen, looking at the revenues, top line and bottom line, we saw a step up. I mean, looking at the revenues, 11% up. Looking at the bottom line and excluding the one of 2024, we also saw a significant step up. This is driven by effective volume shipments but also by take-or-pay. And that's also why we highlight it, because it is a material contribution to the top line and the bottom line. Now, looking at CapEx guidance, so the guidance we give the EUR 300 million-EUR 400 million is excluding contributions to IONWAY.
And this is where, as I highlighted earlier, in 2026, we contributed already EUR 175 million, and we will stay within the budget that we set in the Capital Markets Day. So meaning that for 2026, we will not exceed EUR 250 million for IONWAY equity contributions. Then looking at the cost-saving objective for 2026, this is where, in line with what we shared with the market in March last year, is where we are targeting to offset inflation, and we anticipate inflation to be EUR 50 million-EUR 75 million. So that's the target that we have put forward to the teams, to at least generate savings in order to offset that anticipated inflation.
Yeah, on the question on the E.U. EV supply chain. Well, I think I can only base myself, of course, on the information which is out there in the press and that you might also have seen, but which somehow also confirms the feeling that I had earlier, is that the Commission might be looking at, indeed, onshoring more battery production as well as battery materials production in the E.U., right? The word in the street is that if you would want to get support from the E.U. in terms of CapEx or OpEx going forward, that you would need to have a strong amount of local content, including for batteries, and therefore also cathode materials.
As mentioned in that one slide that I had, that could significantly change, of course, the equation of the European battery investments, for battery materials investments, which are out there. Probably I'm as keen as you to learn what ultimately the Commission will decide. On Project Fold, I mean, I would say that in general, we're talking to several regional, let's say, leaderships, and not only in the E.U., but of course, also in the U.S. In the meanwhile, I think the biggest impact of Project Fold, of course, is that the overall price environment for these metals is supportive.
So whether a direct or an indirect effect that you have is basically that such stockpiling, which they are talking about, is typically supportive for price trends, at least in the shorter term. So with that, Caroline, I think we— I don't know if there's any other questions outstanding?
No, I think with this, we can indeed wrap it up and close the Q&A for today.
Well, first of all, I was looking forward to an engaging Q&A. The quality of the questions was definitely good, the quality of the line definitely not. But I mean, we get a rematch with most of you next week in London. I'm really looking forward to that. Now, in a summary, it will not be a surprise. We're really satisfied on how things evolved in 2025. It was a pivotal year, where 2024 was the year of crisis management, 2024, 2025 was the year of a clear new direction for the company, with disciplined execution on which we delivered strongly. Our culture and the organization is moving in the right direction. We're focused on our goals, and we will continue to do so for 2026.
Thank you for your attention, attendance, and the ones that I see next week, looking forward to that, and talk to you soon. Have a wonderful day.
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