Welcome, ladies and gentlemen. Welcome to Mersen 2026 first quarter sales presentation. The webcast will be structured in two parts. First, a presentation by the Mersen management team represented by Luc Themelin, Group CEO, Salvador Lamas, Group COO, and Thomas Baumgartner, Group CFO. Afterwards, there will be a Q&A session during which you may ask questions in two ways: by submitting a written questions in the box below the player, or by clicking the green N button on the player to ask your question orally. I will now hand the call to Luc Themelin to begin today's call. Please go ahead.
Thank you. I am happy to introduce this presentation for the last time. As you know, I will hand over to Salvador in less than one month. But about the quarter one, we have a positive set of results to share. It actually marks a return to quarterly organic growth with +3.1%. All in all, we reported a Q1 2026 sales of EUR 296 million, with two main highlights. Robust growth in the electrical power segment with organic growth of +8.7%. Electrical power is increasingly acting as a key growth engine for the group, supported by strong structural demand around electrification, grid efficiency, and data centers. Positive momentum in North America with 8.2% organic growth for the period.
As far as exchange rates are concerned, we have a negative impact of EUR 17 million, mainly linked to the depreciation of the US dollar and the RMB. I remind you that this does not impact our competitiveness. It is purely a conversion effect. I will now turn over to Salvador and Thomas for more details.
Thank you, Luc, and hello, everyone. The organic growths to that 3.1% for the quarter, including around 2% of price increases. If we look at our performance by geography, here are the key highlights. I'm beginning with North America, the largest area in terms of revenue with 42% of the total. North America reported strong growth of 8.2%. This is a very solid performance driven especially by growth for data centers and growth in aeronautics. Europe reported a slight decrease. This reflects two things, low deliveries in chemicals compared with a very strong quarter in 2025. On the other hand, growth in other markets, which underlines the resilience of our business in the region.
Excluding chemicals, organic growth would have been close to +3%. Eventually, Asia. Asia is back to positive organic growth at 1.9%. This reflects growth in India and South Korea, driven especially by rail markets and energy storage solution. On the other hand, China reported a decrease heavily impacted by the solar market and weak deliveries in chemicals. If we look at now, at our performance by segment, what we see, first, a strong growth in electrical power driven by projects in grid quality and as well by a solid sales momentum for data centers. On the other hand, a slight decrease in advanced materials. We saw a lower level of activity in solar and chemicals, which was largely offset by growth in the rail markets, in aeronautics, and semiconductors, both SiC and Si.
Overall, this segment reflects a mixed trend with short-term headwinds in a few markets, but solid momentum in structural growing areas. Now I will turn over to Salvador.
Thank you, Thomas. Hello to everyone. I would like first to briefly comment on a few business successes achieved during the first quarter. As already mentioned by Luc and Thomas, we recorded a high level of sales in electrical distribution in the United States with double-digit growth compared to the previous year. This is driven by grid quality and data center demand. In terms of new markets, we have made progress in our collaboration with Terra Innovatum. Terra is developing a micro modular reactor that is scalable, affordable, and deployable anywhere with a power of 1 MW at a time. Mersen will supply nuclear-grade graphite, and today, the first of a kind prototype has been manufactured. Terra will now enter into a more industrial phase, which we'll continue to support very closely.
On the EV side, specifically the battery, concerning the battery, we disclosed last week the signing of a contract with Vulcan Energy. This is an interesting company that is developing the first integrated lithium and energy business with a carbon neutral footprint. We will supply to Vulcan Energy a specific synthesis unit in graphite called, in our ranges, Ecoflex.
This is a quite unique solution that will support the conversion of lithium chloride into lithium hydroxide. On top of that, it will also enable to recover the energy released during the process, which will be reused in the customer processing, contributing to make this project carbon neutral. Finally, energy storage continues to be an important market. We are active in South Korea with customers such as Samsung SDI, delivering fuses to fully protect the battery storage systems. All these achievements illustrate very clearly our position in key markets with long-term growth trends, particularly electrification, energy transition, and sustainable mobility. Now, looking ahead, we remain confident on our ability to deliver our full year objectives. We are well-positioned on the structurally attractive end markets such as electrification, energy transition, clean mobility, grid reinforcement, and advanced technologies.
At the same time, we remain focused on excellent execution while maintaining a strict cost discipline in the company. As a reminder, in 2026, the group is aiming for organic sales growth between 2% and 6%, with stronger growth in second half of the year versus H1 of this year. An EBITDA margin before non-recurring items of 16% ±50 basis points. Operating margin before non-recurring items of 8.5% ±50 basis points, reflecting a further significant rise in amortization. Capital expenditure between EUR 90 million and EUR 100 million, which is representing a significant decrease compared to previous year, 2025.
As a reminder, our guidance considers a significant increase in raw material costs, particularly copper and silver, which we expect to offset through prices, price adjustments, with an impact that will be more visible in the second half of the year. With this, let's move to open questions.
Ladies and gentlemen, if you wish to ask a question, you may do so in one of the two ways. Once again, by clicking the green hand button on the player to ask your question orally, or once you activated your line, you will see a message to unmute your microphone. Please make sure to do so before you speak. Or by submitting a written question in the box below the player. The first question comes from Thomas Renaud of Kepler Cheuvreux. Please go ahead. Thomas, I see your microphone is muted. Yes, go ahead.
Yes. Hello, can you hear me? Can you hear me?
Yes. Yes.
Yeah? Yeah.
We can, yeah.
Okay. Two question for my side. Can you split the Q1 price contribution by end market, if possible? This is my first question. The second one is related to the SiC business. It appears to be recovering a bit faster than expected. Is it true or not? What are the main driver there? Is it the end of de-stocking phase? A new order intake, I don't know, for data centers or maybe a recovery in the EV market. Could you elaborate a bit on that point too? Thank you.
Okay. Maybe I can answer to the, to the first question. What we can say that we have a more price impact in North America and a little bit more in electrical power, but this is not linked with a specific market, I would say. It's easier in North America, compared to other regions, in the world.
SIC?
Yes.
There is a slight jump. It's not a big difference compared to last quarter. We cannot say that there is a recovery. It's just a question of maybe a sequence.
We, we-
from our customer.
Yeah. We had it's in line with the expectation. We had a compensation linked also not a big one, but a few small million with the renegotiation of a last contract with one customer. In fact, I can say we had EUR 17 million of SiC sales, and last quarter was EUR 15 million, so this is not a big jump.
Okay. Very clear. Thank you.
The next questions come from Jean-François Granjon from Oddo BHF. Please go ahead. Jean-François, we cannot hear you.
Could you hear me?
Yes. Now, yes.
Okay. Sorry. I was on mute. Three questions from my side. The first one concerns the U.S. distribution. We see a huge improvement or positive trend for this quarter. If I remember, this business is quite well, has some good margins in the past. Do you expect due to a strong growth coming from the U.S. distribution a higher margin? And are you more confident regarding your guidance for the full year? The second question, you mentioned under pressure is strong growth coming from data centers, so this should have an impact on the U.S. distribution. I think you have a good idea on what the business mix with data centers.
Could you give us more precisely or quantify the percentage made with the data center business for all the group? The last questions concern the solar business. You do not expect any inflection improvement for the short term. What is your scenario for the medium term for this business? You expect more growth not this year, but next year? What about the storage, etc.? Thank you.
Okay. I would answer to the first question. Effectively, we have a strong business in integrated distribution. Part of it also is driven by price increase. As you know, price increase is compensated partially or totally, increase in silver cost, so it doesn't increase the margin. That's why, today we just continue to say that our guidance, we maintain our guidance in terms of margins. Regarding the second question, I will take it. Yes, data center is an activity that we're following, of course, much more closer. Today we can say that the Q1 result is around EUR 10 million, okay? Which represents 2x what was expected, what was the result in Q1 2025.
Effectively it's a business that is growing, and we are well-positioned on this part of applications. Regarding the solar inflection, your question about medium term, definitely we do not expect inflection this year. We expect inflection during 2027. At this time, we still don't see the signal that will trigger this inflection. It will come from the restructuring of the industrial setup and the companies in China producing the cells. As we speak today, this is not yet making it a reality in China. We still believe that this business could come. As we say, we always position in high-end applications in this market that still are true and will continue to exist in the future.
Okay. Thank you.
As a reminder, if you wish to ask a question, please either click on the green N button in the player to ask your question orally or submit a written question using the form below the player. The next questions come from Julien Onillon from Marex. Please go ahead.
Hi. Hi. Good afternoon. I have several questions. First, one technical question. It seems that you have changed some of the company from division, going from electrical power to graphite. Can you explain that? Because when you get the number of last year, it seems to have changed. Second question, I would like to come back more fundamentally on plenty of questions on your different contracts you have recently signed. First on Vulcan, you mentioned that it is a multi-year contract of million euros. What does it mean? Is it EUR 10 million, EUR 20 million euro? What type of, let's say, of revenue we can expect from this contract to come? Starting, is it something you expect in 2026, or it's something you will come later on in 2027 for Vulcan?
Same question for Terra. You have not mentioned any numbers here, but I understand that there is now. You are starting a new phase with Terra. Which type of revenue you can expect from Terra coming? Is it something here we are expecting more in 2029 and nothing really in the short term? Just to know if any revenue you are expecting for Terra. Another contract you are not mentioning, but it is something which you already mentioned during the annual results, which is the contract with the U.S. Defense, the DLA, for providing some graphite for new rockets. Considering that the U.S. have consumed a lot of rockets recently, I had in mind something like EUR 10 million potentially. Are you expecting now something much bigger coming on stream, and it will be, you know.
Again, if you have some numbers, how much do you expect for this year and maybe for next year on this contract? Finally, still on the contract, talking about Korea. You mentioned in your presentation effectively this battery energy storage contracts. I was not aware. How much we are talking about, specifically again, in terms of million euros? Thank you.
I will maybe start with the first question. We are talking about a small business product line, which is linked with transportation. In fact, the system, it was a system to connect to the ground, the rail system. In fact, it was manufactured in electrical power, and it uses also graphite in it. It was better in order to maximize the synergies to put them in the same segment, which is advanced materials. In fact, it represents something like EUR 20 million of sales per year.
Okay. Very clear.
Now, regarding the second question on the contract regarding Vulcan Energy, it is a several million euros contract, as we explained. We will not release the full amount. It's a multi-year contract, but the expectation would be starting invoicing this contract late 2026, mainly 2027 and a little bit in 2028. What we can say is you should expect on this contract, in the life of the contract, a little bit less than EUR 10 million contract.
Okay.
Just to give you some figures. This third one regard-
Sorry, I didn't hear. It's, I mean, broadly around EUR 10 million. I maybe plus or minus-
Less than EUR 10 million.
Less than. Okay. Sorry.
Less than EUR 10 million. Okay?
Okay. Okay.
Now regarding Terra. Terra, we submitted a prototype, as I mentioned, in 2026. We do expect that the industrialization phase to ramp up not before 2028 because it takes time to put in place everything that is needed. Okay? Now DLA. DLA, as you know, is the Defense Logistics Agency in North America. It is not specified what is the use of this graphite. It's for strategic purposes. It's a contract that lasts a few years. It could be repeated. At this stage, we don't know yet. It's something that, yes, could be renewed. At this time, not much information to share with you about it.
Regarding Korea Samsung SDI is a recurring customer for us. There's contracts awarded systematically every other year regarding new platforms. If I can give you a number, roughly you can expect about this contract several million EUR per year of sales on fuses.
Okay. Thank you very much.
Thank you. There are no further oral questions at this time, so I will now return the conference to the speaker for the written questions. Please go ahead.
Yes. Yes, thank you. A number of questions have already been answered, but there's one around small modular reactors. The question is, can you quantify the consumption of tons of graphite by small modular reactors?
Consumption. In fact, I don't know what you mean by consumption. In fact, when we build the small modular reactor, you have to fill the reactor with around 100 ton of graphite. It stay at least 15 years during the usage of the reactor before being replaced. That means each time they will sell a small modular reactor, we have to supply 100 ton of graphite.
Okay. Now move to question around organic growth. Since you printed an organic growth of 3.1% already in Q1 and you expected stronger growth in H2, is it fair to assume that you will end in the upper end of the range provided in the guidance?
We keep our guidance. Why? Because last year we had a very strong Q2, in fact, linked with some you know contract renovation. At the end of it, that's why we are comfortable with the guidance we gave, but we have no more indication to give.
Second question is from Giovanni, what kind of growth did you have in Q1 for semicon, both silicon and silicon carbide?
In fact, in silicon carbide, it's really important because it was very low in the first quarter of last year. It was around EUR 10 million, and as I said, it's EUR 17 million today. On the Si, it's a double digit growth, so a good start itself.
Just a clarification ask on the tons of graphite for small SMR, small modular reactors. Can you clarify that you said, Luc, that's for you.
I said.
100 tons of graphite are sold to each modular reactor. What tonnage of graphite did Mersen sell in 2025?
Ooh, something around 12,000, less than 12,000 tons.
Okay. The range.
The total for the-
The range 10,000-12,000 tons .
Yes.
I have a question from Jeremy. What is the anticipated pricing impact for the year?
Um-
Maybe together with the second question, why not tighten the organic growth guidance toward the upper end of the range after the Q1 performance, especially given that organic growth is expected to be stronger at H2?
Today I already said, don't forget that there is a war in Iran and can have impact, not direct impact I would say, but indirect impact. I think it's not the time to give a very precise range of sales. Now, the pricing impact. We have today a 2% price impact compared to last year. This is a full year impact. The 2% will disappear, okay? Because we increased last year the price gradually, so it will go back to zero. I don't know if I am clear, but the 2% will disappear.
We will add other price increases, okay. We will see them in the end of this quarter, the second quarter, and in H2, especially to cover, to compensate for the increase in raw material, namely silver and copper. That's why maybe it will be higher than 2%, but don't forget that it's not in addition to 2%.
Okay. Now we have a question on the context. So can you share some information regarding the situation in Middle East and possible impact for Mersen?
Yes, I will take this one. Effectively, the group is closely monitoring what is happening in Middle East, that's for sure. At this stage, we know that we have not seen any significant direct impact on our activities. Of course, this is lasting long or longer than expected for a lot of people. Yes, we could have some repercussions in global economy. Yeah, we are watching it. At this stage, no significant direct impact. We may have some indirect impacts like transportation costs increasing that we are seeing. This we consider that we can, most of it, compensated by price increases during the year.
Thank you. I don't have other question. If you may, we still have time if you want to send a question or ask. I see Thomas wants to ask more questions.
Yes. We have a follow-up from Thomas Renaud, please go ahead.
Yeah, just to clarify on the Middle East question. You are not expecting any bottleneck on your own supply chain? Or if some raw materials or for the formulation of graphite or something like that?
No. No impact. We don't buy sulfur or No, no. We are not impacted directly.
Okay. Okay, thank you.
Thank you.
No more question here.
No, me neither. We don't have any more questions now.
Okay. If we have no more question, we look forward to updating you on our progress on July, the 30th.
30th.
... 30th, sorry, for the half year, result.
Thank you. Goodbye.
Thank you. Goodbye.
Bye.
Thank you. Luc.
Thank you everyone for connecting to this call. The call is now over. You may now disconnect. Thank you.