Ladies and gentlemen, Welcome to Mersen 2025 Full Year Sales Presentation. The webcast will be structured in two parts. First, a presentation by the Mersen management team. Afterwards, there will be a Q&A session, during which you may ask question in two ways: by submitting a written question in the box below the player, or by clicking the green hand button on the player to ask your question orally. I will now hand over to Véronique Boca. Madam, please go ahead.
Good morning and good afternoon to everyone, and thank you very much for joining us today. For your information, this call is being recorded, and a replay will be available on the investor section of our website at the end of the call. As it has just been mentioned, a Q&A session will occur after the end of the formal presentation today with Luc Themelin, our CEO, and Thomas Baumgartner, our CFO. I will now turn the call over to our CEO, Luc Themelin.
Thank you, Véronique. 2025 was a busy year marked by a contrasting global environment, and we can say that Mersen delivered a solid performance under these conditions. 2025 was not a uniform year across our markets, but it was a year that clearly demonstrated the resilience of our portfolio and the relevance of our global and diversified footprint. Reported sales for the full year reached EUR 1,186 million, representing an organic decline of 3.2%, which is at the high end of the guidance we communicated in October. We face strong headwinds from exchange rates with the U.S. dollar and the RMB, representing two-thirds of the total exchange rate impact. I would like to stress that these are only conversion impact as the group is global, with an industrial presence where it sells.
Throughout the year, we achieved strong momentum across several key markets: wind, energy storage, power electronics, aeronautics, rail, and electrical distributions, to name the most important. This helped offset the weakness in the solar and silicon carbide markets that I've already commented on in our previous calls. I will now turn over to Thomas, who will go into more details.
Thank you, Luc. Hello, everyone. So as you can see on the slide, the sales evolution over the year was impacted by several factors. So the first one is the currency effect. As Luc mentioned, the depreciation of the Chinese renminbi and the dollar, U.S. dollar, to name the most important ones, had a significant impact on the reported figures, amounting to approximately EUR 40 million for the full year. This was partly offset, or totally offset, I would say, by the scope effect. Our scope effect reflects the contribution of the acquisitions made in 2024 in the U.S . and also compensated by the pricing power. We reach to increase the price by 1.5%. The effect is 1.5% for the full year.
Regarding the business performance, we had a strong commercial successes in a number of our markets. I will come back to that later on. And, conversely, softer market conditions in solar and SiC semiconductors, mentioned by Luc earlier on. So all in all, we reported full-year sales of EUR 1.186 billion, and now you can see, markets by markets, what, what happened. And our first. My first comment is to say that our diversified end markets provide us a good level of stability, and, we could compensate a decline, a sharp decline in solar and, and SiC semiconductors. And as we can see—you can see, we had positive momentum in other markets, fueled by strong drivers, as mentioned on the slide.
First, stable and solid growth in wind and energy storage. We benefited also from a return to more stable condition in the Si semiconductor markets, with the second half of the year much stronger than the first one, first part. We benefited also from a strong growth in power conversion, supported by significant contracts for HVDC lines, underlining our positioning in large-scale grid investments. We had also a continued growth in and strong growth in aeronautics and rail. We see also some stable markets are typically EV, EVs markets. We had, which was stable, reflecting two opposite, I would say, trends. From one end, a growth in vehicles, and from the other end, a decline in charging infrastructure.
Then we benefited also from a very strong year in electrical distribution. So many, many markets going well and in growth. And from all what I said, it represent almost 60% of total sale. The rest, the remaining part, concern process industries, chemicals, and conventional energies, which were globally flat compared with the last year. So if we break down by this performance by geography, I will start with North America because it's by far the largest area in terms of revenue. As you can see, we were resilient with a growth of 0.7%, despite the very weak demand for SiC semiconductors. On the other hand, Asia suffered from a decline of 13%.
The region was strongly impacted by the solar market in China and weak deliveries in chemicals. In the middle, I would say, Europe, the decrease is a combined, but a limited decrease, is a combined result of a strong performance in HVDC designs, aeronautics, and rails, which was more than compensated by wind markets in process industries, SiC semiconductors, mostly. So we look now by segment, starting with electrical power, this segment experienced growth throughout the year with very strong drivers being rail, wind, power conversion, and electrical distribution in the US. On the other hand, you can see that advanced material segment is in decline, affected by a sharp drop in solar and SiC semiconductor, as already mentioned.
We had also, but to a limited extent, a small decline in chemical and process industries, which was in line with our expectation. This was, to a certain level, compensated by dynamic markets such as aeronautics, wind, and rail. For the fourth quarter, we experienced a -0.5% organic decline compared to -4% in Q3, so it's a significant change. This translates into a 2.2% sequential improvement in Q4 compared to Q3. We had also this quarter impact of exchange rate, which was more significant, I would say, this quarter than before, amounting to -EUR 18 million.
Just to remind you, the U.S. dollar against euro was at 1.05 at the beginning of the year, and it was an average of 1.13 over the year, and I would say almost 1.16 or 1.17 in the last quarter. More generally, but the U.S. dollar was the most significant impact, but we were also impacted by the appreciation of euro compared to most other currency. If we look at regions, Europe had been quite resilient this quarter, with good momentum in chemicals, grid, wind, aeronautics, and rail, that compensate for the decline in semiconductors. North America performed well, with a growth close to 3%, especially thanks to electrical distribution, still very strong.
By segment, electrical power performed well over the period, thanks to a strong momentum in both power, electronics, and electrical distribution markets. Advanced material sales were down by 6.6% of the quarter, with a strong growth in wind power, aeronautics, and rail markets, but still a sharp decline in solar and SiC semiconductor markets. I would say, less SiC semiconductor market this quarter, compared to solar. I now turn over back to Luc.
Thank you. Now for the full year, we can be more specific. Current EBITDA margin remains at around 16%, similar to what has been disclosed in October. Current operating margin will be around 9.2% in the mid-range of the guidance disclosed in October. And finally, we have managed to reduce again the CapEx level, which will end up being around EUR 135 million. I would like to conclude with a few words on 2026. You know that we will disclose our full guidance on the 18th of March, so we will not answer precise question on guidance at this stage. But I want to underscore an important message. We are focused on CapEx discipline, as was the case in 2026 already.
We will continue to reduce CapEx in 2026, and this should bring free cash flow back into positive territory in 2026. All, the elements we have discussed today are fully consistent with our 2029 roadmap. Despite the challenging and uneven market environment, our strategic priorities remain unchanged.
Our roadmap is built on structurally attractive end markets, such as electrification, energy transition, clean mobility, grid reinforcement, and advanced technologies, which will continue to drive demand over the medium term. Our margin ambition are based not just on market condition, but also on the key levels at our disposal, pricing discipline, portfolio mix, and operational efficiency. Moreover, we have also focused on being selective in our CapEx and discipline with working capital to improve free cash flow. Taken together, this give us confidence in our ability to deliver on our 2029 ambitions. So if you have questions, please, it's the time to for questions.
If you wish to ask a question, you may do so in one of the two ways: by submitting a written question in the box below the player, or by clicking the green hand button on the player to ask your question orally. We have a question from Thomas Renaud from Kepler Cheuvreux. Please unmute your mic. Go ahead. Mr. Renaud, we can hear you. Please go ahead. Thomas Renaud, please unmute your mic, and please go ahead with your question.
Okay. I will go with the question that we have received on the platform. So the question is, are you still. Are you present, sorry, on the data center market? And what is the level of sales in this particular market?
The answer is quite difficult to give you in a precise way. But yes, we are, because we have customer delivering the data center in terms of electrical protection. It's easy to find through the distribution. And indirectly, as you know, there is plenty of electronics, power electronics in data center. We are in, but it is more difficult to identify. And the trend of this market is easy to see, I would say, since two years in our fuses business. And still good, I would say. 2026 will be nice as well.
It explain partly the growth we had, the very, very good start.
In North America.
Yeah. Yeah.
So one other question, one other question is: Can we expect a rebound in SiC in 2026, and the same for solar?
We don't expect a big move in silicon carbide in 2026. We see more something happening in mid-2027, at this stage of our knowledge. Solar is more difficult to answer because there is a situation in China not easy to understand. I guess you read already some result from some Chinese company, like LONGi. They are not in good shape. They are not profitable. It seems that, again, this market is trying to be reorganized by the Chinese administration soon. We will see. But we don't expect something extremely booming in solar this year.
So more question, and I will read because it's quite long, the question. So NVIDIA and ecosystem partner are transitioning data center power distribution to 800 VDC architecture to support megawatt-scale AI racks, starting in 2027. How is Mersen positioning its product portfolio, particularly liquid cooler, busbar, power distribution blocks, and cooling distribution unit, to capture this opportunity? More specifically, are you currently engaged in design win process with hyperscalers or tier- one OEM for 800 VDC infrastructure? Can you quantify the potential revenue opportunity per megawatt of installed 800 VDC capacity versus traditional, 54 volts, 400 VAC architecture? What is your expected commercialization timeline, and when do you anticipate meaningful revenue contribution from 800 VDC-related product?
The question is coming from Mr. Gilles Chauffour, I read that. But we need to hire you, because you are extremely good in your question. First, on the power conversion in the data center, I think we will cover this, the new. I would say specification. I don't think that we need more liquid cooling busbar or cooling device or in this case than before. About the question about the voltage and the fact that they will move from AC to DC, it should help a little bit the fuse technology because the breaker at this time cannot really cut the current in the DC shape.
But as well, because we see NVIDIA on your question, people are working on solid state breaker. And it's more on the end of a company like Schneider. But we are quite happy, not only on data center, to see the direct current coming in in our market, because it's more interesting for Mersen than the AC. But in short, because.
So now we have the question from Thomas Renaud, that was not able to ask his question, directly. Could you share with us the group like-for-like performance in Q4, excluding the solar and SiC markets?
So, yes, in the Q4 it was between 5%-6%. I don't have the precise figure. In H1, if my memory is correct, it was 3%, something like that. So yes, far better than in Q1.
So any reason why the operating margin is expected to be at the low to mid-range of the guidance, while like-for-like growth kept at the top end? Is this driven by potential FX effects?
In fact, when you remember we changed our guidance of sales at the beginning of the in October, we didn't change the operating margin, which was large in fact, and we are in between. In fact, this is totally consistent with the fact that we have lower sales than at the beginning of the year. We have a better margin. We have the mid-range of the margin, so we are resilient in margin. This is especially due to the fact that we have lowered the CapEx, so we have lower amortization.
Could you elaborate on the dynamic in the process industry in Q4, and how you see this segment evolving in 2026?
Q4, it was a little bit different between the electrical power, which was really tremendous, very, very, very good, I would say. Especially, but we said on data center, typically, and it was less, it was not so good in advanced material segment. However, not so bad as well. Difficult to predict in 2026. Why? Because it's driven by the macroeconomy, by the industrial GDP. And as you know, in electrical distribution, even in the trends, in you know, more electrification, more grid storage, et cetera, you need more electrification. So typically more of our product. We know as well that the electrical distribution, the time to market is quite between the order and the sales are quite quick. So it's a bit difficult to predict today. It's. I can't say more. Maybe we'll say more in March.
So now we'll go with the. I think there are some question on the phone, if I can say.
So now we have a question from Giovanni Salvetti. Please, sir, go ahead and unmute your mic.
Can you hear me?
Yes, I will.
Hello, everyone. Hello, everyone, and thanks for taking my questions. I kind of. I think I missed the first 5 minutes, so, maybe, you already said that. But I have 3 questions. The first one is that if you can, in a way, break down this price increase across, division, is it mainly price increases in electrical power or is it across the, the, all firm? The second question is, if I look at your slide, I can see that the silicon carbide accounted for 5% of total sales in 2025, which means, basically, EUR 59 million, which would imply a fourth quarter of, 20 million, which is, quite above what you reported in the past quarters.
So I was wondering if you can explain why it have kind of accelerated in Q4? And what is a rough range we can expect for 2026? And the last one is on CapEx. Is this reduction in the CapEx related to, let's just say, a growth that is lower than what you had in mind, or it's just because you think you can deliver, you know, the same growth with lower CapEx needs?
O kay, I will start with the price of, and the pricing. It's more important in electrical power than in advanced material, and more important in the U.S., as you can imagine, than in Europe and in Asia. And in fact, you certainly note that the pricing effect is more important in Q4. Especially because we have some tariff, but it's limited, and we are totally covered this tariff increase by pricing. That is first question. The second one.
Silicon carbide.
Yeah. So the silicon carbide, in fact, when we say 5%, it's about 5%. If you want the figure, it's around EUR 55 million for the full year. And yes, the Q4 was better than the Q3, with around EUR 15 million, not 20, 15. And, in fact, it's. Yes, we said that it will recover.
Slowly.
Slowly. So maybe you.
No, but it's quite difficult to explain by the number, because we have mainly four or five main and big customer. All are not at the same level of inventory coming from the past. That means one is asking a little bit more end of the years than the other, and but at the end their average will be a little bit better in 2026. But we had already discussion before. We don't see a dramatic increase on silicon carbide demand next year. The CapEx.
But we see a growth.
We see a growth.
We see it. We should
The CapEx, we could deliver more, but, as you may know, we invest quite a lot. Two years ago, I would say, to raise the demand that everybody were asking us. I mean, a huge demand in silicon carbide, but since this date, this demand decreased quite a lot. That mean we have started to invest. And considering the demand for the next two years, we decided to reduce as much as possible, but most of the CapEx was already spent. This is why we try to be focused on having less and less CapEx, but the amount is still high.
Okay. Thank you very much. Thank you.
As a reminder, if you wish to ask a question, you may do so in one of the two ways: by submitting a written question in the box below the player, or by clicking the green hand button on the player to ask your question orally.
I will continue with the question we received. Can you confirm the organic growth for the full year without solar and SiC?
Yes, it's a little bit. It's less than 4%, or it's between 3.5% and 4% for this year.
The second question is, with a low level of CapEx at EUR 135 million, can you forecast a free cash flow close to breakeven in 2025?
You remember that I said that it will be difficult to reach a free cash flow in 2025, and I think I will make a teasing. I don't know, we will, we'll give some idea in March, huh? So you will wait for that answer.
One more question on SiC. I read the question, but I think this is not a confirmation. Could you confirm that H2 sales in SiC are superior to H1? I can answer that it's not the case?
No.
We didn't say that. We say, and maybe it was not clear enough, that for silicon semiconductor, H2 is superior to H1.
Yes.
But it's not the case for.
In SiC, it's more or less stable between H1 and H2, but in H1 we benefited from negotiation in Q2 especially. Remember we, we've done a very good Q2. In fact, we benefited from, you know, some, how to say, payment from customers in the frame of the renovation of our contracts.
So one more question from Bruno Hertz. Are you still working on the SmartSiC project?
Yes, we are still working, but, I'm not sure that. But you have realized the question, the market at the end is the same as than silicon carbide, SmartSiC and silicon carbide are the same end market, EV. And, it slowed down like the silicon carbide in term of commercial activity. I would say in Soitec, it's not very, very. They are not very busy. But in Mersen, we still have some things to do in a technical aspect, the next six month to be absolutely ready to supply. So I think, yes, we are still working, we are still starting equipment as a schedule.
So one more question from Timour: Once you have completed your committed CapEx program, how much more capacity will you have as a percentage of 25 volumes?
We need to come back maybe two years ago because we did already just this announcement. There's a big part of the CapEx on advanced materials, because we had few on the electrical side. We have to address the silicon carbide demand. And we decided to invest to move up by 4,000 tons of isostatic graphite to cover this market at the beginning. And this is always the possibility of the group. Now we need to see this demand coming back. And at this step, we have quite a lot extra capacity to address this market.
Um, yes.
I cannot answer in percentage, really.
I would say, 30, 30%.
Maybe
O r maybe a little bit more of available capacity. Mm.
I don't have other question on the platform, so maybe no more questions?
As a reminder, if you wish to ask a question, you may do so in one of the two ways: by submitting a written question in the box below the player, or by clicking the green hand button on the player to ask a question orally.
So if no question, additional question, we look forward to seeing you on March 18 for the full year result. It will be in Paris, so if you are in Paris, you can join the meeting in person at 10:00 A.M. It will be at La Maison des Travaux Publics, Rue de Berri in Paris.
Easy to find.
Thank you very much.
Thank you very much.
Thank you.
Nice meeting.
Bye.