Welcome to the conference call on Mersen's Q3 sales, presented by Mr. Luc Themelin, Chief Executive Officer, and Thomas Baumgartner, Chief Financial Officer. Participants will be on listen mode only first. During the Q&A, you will have the opportunity to ask questions in writing using the chat below the audio player, or ask your questions directly by dialing the pound sign plus five on your phone. I will now hand over to the speakers.
[Foreign language].
Hello everyone, and welcome to this conference on Mersen's sales for Q3 2025. We posted sales of EUR 285 million for the quarter, representing an organic growth of -4.3%, which is in line with what we saw in the first half of the year. This brings revenue for the first nine months to EUR 895 million, representing organic growth of -4.1%, which is in line with the -4% reported at the end of June. We saw contrasted trends in our markets in Q3: strong growth, meaning double-digit in rail, wind, and power electronics markets; recovery in the silicon semiconductor markets, low level compared to last year in SiC semiconductors. Finally, contrary to our expectations, we did not see a positive turnaround in the solar market during this quarter. For this reason, we've adjusted our targets for 2025 to the lower end for organic growth and EBITDA margin.
We've also revised our investment plans downwards and are maintaining our current operating margin target. I will come back in greater detail to this at the end of the presentation. Without further ado, over to Thomas, who is going to give us a more detailed review of sales.
Hello, Luc, and hello everyone. I will start by commenting the nine months' sales before we focus on Q3. Revenue for the first nine months of the year amounted to EUR 895 million, as Luc said. The scope impact corresponds to acquisitions in North America in 2024, so the consolidation of GMI for two quarters, the consolidation of Barlow for three quarters, and the consolidation of KTK for three quarters.
As you can see, the scope effect offsets a very unfavorable currency impact amounting to EUR 22 million, mainly due to Q3 and due to the conversion into euros of the Chinese RMB and the US dollar, and to a lesser extent, the Canadian dollar. We continue to increase prices, particularly in North America, for a net total of EUR 12 million. Organic decline was 4.1% over the nine months, mainly due to declines in the solar and SiC semiconductor markets this year versus the previous year. Developments, evolutions varied greatly from market to market. If you look at what we're seeing in the first nine months, we see that growth in the transport markets with dynamic aerospace and rail, and stable EV markets. We also saw a decline in energy markets with solid growth in wind power and a significant decline in solar power.
A decline in electronics as well, with a significant drop in SiC semiconductors, quasi-stability in Si semiconductors for the last nine months, and strong growth, however, in power electronics. Limited decline in process industries with strong growth for electrical distribution, and a decline in the traditional industries, which is very much in line with the macroeconomic context. Last but not least, a slight drop in the chemical markets. Let's now specifically look at Q3. First, by geography, starting with North America. As you can see, North America by far is, first of all, stable compared to last year, in spite of the negative impact of weak demand for SiC semiconductors. Electrical distribution has been very dynamic, driven primarily by data center and energy network segments. Again, as a reminder, North America is by far the first geography in terms of sales for the company.
In Europe, the decline was 5.9%, with a drop in semiconductors and solar, which was offset by the growth in transport. Activity remains buoyant in France, while Germany is down. Last but not least, Asia. The decline in Asia is minus 10.4%, mainly due to slow solar business in China and weak deliveries in chemicals. India, however, is confirming its strong growth, driven primarily by rail. Let's now look at things by business segment. On the right side here, starting with the electrical power segment, growth has accelerated in Q3, + 9.8% after a first half at 4%, thanks to stronger demand in electrical distribution, particularly in the United States, and continued dynamic activity in rail, but also wind power and power electronics. The advanced materials division, however, is experiencing a drop in sales, affected by the sharp drop in sales in solar and SiC semiconductors.
Deliveries to the chemical and process industries are also down, which is in line with our expectations. However, there were some positive factors, such as the gradual recovery in silicon semiconductors, and there's been a positive momentum in rail and aerospace markets. Back to Luc, who is going to tell us about Q4.
Thank you. Q4. The company expects for energy markets to pursue its positive momentum in the wind power market, and we expect the solar market to remain weak. For the electronics market, we expect, on the one hand, continued recovery of Si semiconductors and a sequential improvement for SiC semiconductor market, which will remain at a low level, and on the other hand, the continuation of power conversion projects for electricity transmission, HVDC, that is, for transportation markets.
We expect a positive trend in the transportation markets to continue, thanks to rail and aerospace, and a ramp-up of deliveries for ACC for EV batteries. The chemical market declined in line with expectations, and last but not least, for process industries, you know, evolution, which is in line with the global economic context. As I said in my introduction, we have to take into account the fact that the lack of recovery in solar, and we are expecting organic growth of sales between -5% and -3% versus -5% and 0% previously. We expect on current EBITDA around 16%. Previously, it was between 16% and 16.5% as a result of the decline in revenue. The forecast of current operating margin remains unchanged between 9% and 9.5%. Decline in CapEx, we'll come back to this, is leading to a drop in depreciation.
We continue to be selective in our investment plans and to adapt to our main markets, and therefore, the forecast is now between EUR 140 million and EUR 150 million, previously between EUR 160 million and EUR 170 million. In conclusion, I would like to emphasize that Mersen, once again, has demonstrated its strength, the strength of its diversified model with certain markets such as rail and power electronics performing well, partially offsetting the economic weakness of other markets such as solar or the SiC semiconductors. We are extremely focused on market opportunities and cash flow generation to support the company's sustainable performance and achieve our 2029 targets, which we confirm. This concludes this presentation. Thomas and I would be delighted to answer your questions. If you would like to ask a written question, please use the chat box below the audio player.
If you would like to ask a question directly, please dial pound plus five on your phone. If you would like to withdraw your question, please press the pound sign and six on your phone. Next question from Thomas Renaud, Kepler Cheuvreux. Sir, your line is now open.
Hello, can you hear me okay?
Yes, we can hear you very well.
I have a first question. You communicated in at the end of H1. Could you communicate that the organic growth, excluding SiC and solar, I think it was plus two or plus four in H1. That was my first question. My second question has to do with solar, obviously. How do you explain this counter-performance? Is it because there's been a real slowdown in August and September? Is that what's behind this drop? What is your forecast for 2026 for that specific segment?
How do you see solar in the next quarters as well? Question three, the last question on free cash flow. You have a bit less CapEx, a bit less EBITDA. Should we still expect free cash flow to be slightly negative for the full year? Thank you.
To your first question, on growth excluding SiC and solar, I haven't really done the math, but we don't expect there are no real reasons for it to really change much. The decline is pretty much the same. It's maybe slightly more marked on solar, as I see, but I think we're going to stick to what we said during the presentation. The question on solar, there hasn't really been any deterioration. We were already operating at a low level, and things haven't really recovered.
The Chinese authorities have given directives for production to be lowered, but we're still supplying some stock, product stock. I think we must wait for the full year results and see really what happens with the facilities in terms of installations and see what will happen in 2026. It's difficult to say at this point. For free cash flow, I prefer not to comment. We said we were going to increase the debt. With the dividends, we can consider debt will increase. I think it very much depends also on working capital. We will find out more at the beginning of 2026. I would rather not answer your question this evening.
Okay, thank you. If I may, I have one last question on process industries. I'd like to understand what's behind the decline. What markets specifically have declined? I don't think we've seen a decline on that specific segment in several quarters. What is it? Is it because some markets are really suffering more than others, or is it really a global phenomenon?
Nothing very specific. We have a lot of large projects on thermal processing, some that have been slightly postponed in time, but in the U.S., things are okay. Maybe things are a bit slower in Europe. That's really what I can say. It's not bad at all compared to other years.
Okay, very good. Thank you.
Once again, if you would like to ask a written question, please use the chat located below the audio player. If you would like to ask a question directly, please dial pound sign plus five on your phone. If there are no additional questions on the phone, we're going to move on to questions on the chat. The first question is coming from Bruno Ertz.
What are the SiC sales in Q3, and what are your expectations for, I think he meant, 2025 for the full year? What are your expectations for the full year for 2025? I think it's 2025. If not,
we're not going to give any objectives for 2026. We have a global guidance for 2025. For Q3, SiC was EUR 10 million. It will be higher in Q4 because there are some differences between Q3 and Q4. There have been some slight evolutions, so it will be slightly higher.
We answered already the question about SiC-related revenue. The next question is any update on the PESIC project? Can you also give a sense of how electrical distribution performed in Q3? Can you give us a range of growth? Last one is what was the main driver of the growth in the U.S. for electrical distribution?
The main driver in the U.S., picking up on the last question, we talked about the data centers, medium voltage, electrical distribution lines, that is. Very strong in the U.S. Some large distributors are adding some additional stock. Q3 was really fantastic with an all-time high. Our bookings are still looking quite good lately for PESIC. Not much news since last time. The silicon carbide market, the PESIC is pretty much following the same trend as we said before. Shipment forecasts have been postponed, and we're still operating at very low, relatively low levels, mainly for Soitec customers. There is otherwise nothing new, nothing really specific for this segment. In terms of growth, I think it's above 10%. Electrical distribution, it comes also from price increases. There have been a number of price increases linked to tariffs, to offset some of the tariffs or the effects of tariffs.
We have a question from Gilles Choufou.
As of 2026 in data centers, we're going to get the new 800 DC volt architecture. Does that architecture require greater use of bus bars? If yes, what could be the impact on Mersen?
Not necessarily, to my knowledge. There will be additional needs for other products. Protection, in 800 volt, there has been a lot of growth for us already, especially in the U.S. They use a lot of fuse protections. I do think we have to work more on direct current, 800 volt direct current, and fuses because it's not the same product as for alternative current, AC. That's, in summary, what I can say. We have a question from Bertrand Faure on CapEx reduction. Are you postponing them to 2026? In part, in part. Only in part.
We will only go for additional CapEx if we consider it makes sense to do so. It will be later.
We have no additional questions in the chat. I believe we have no more questions on the phone. We're just going to give you one more minute. Should there be any final questions, either on the phone or chat?
There are no additional questions. We will see you again January 28th for the 2025 results. Thank you very much for your attention, and have a pleasant evening, everyone. Bye-bye now.