Imerys S.A. (NK) Earnings Call Transcript & Summary

Good morning to all of you and thank you for joining us today to review Imerys Q4 and full year 2023 results. With me, as usual, our CFO, Sebastien Rouge. Let me start by giving you some highlights of the year we just closed. Once again, I think in 2023, Imerys continue to demonstrate resilience and agility in what we can call a complex market environment. Revenues were close to EUR 3.8 billion which sales volumes impacted by weak demand in certain or maybe in several end markets, notably residential, construction, industrial and paper markets as well as significant destocking throughout the year. Despite last year high comparables, prices went up this year, again 2.6% on a full year basis, though slowing in Q4 with a negative 4% clearly to reflect the end of certain surcharges. Sebastien will deep dive on these in few minutes. Thanks to price discipline, and really strong actions on costs Imerys posted a current EBITDA for the full year at EUR 633 million in line with guidance even for Q4 '23 EBITDA at EUR 152 million in line or even slightly above Q4 2022. Good news on the cash side, Imerys generated substantial free operating cash flow for the year EUR 288 million before strategic CapEx EUR 192 million after strategic CapEx compared to EUR 20 million last year, which means 10x. This was possible, thanks to really a great work of my teams, but also structural actions we put in place on working capital management, leading especially to a significant inventory decrease, of course, also helped by lower inflationary pressure in 2023. To conclude, the board of directors will propose to the shareholder's meeting in May, a cash dividend of EUR 1.35 per share for the year in line or above historical payout ratios. We now look a bit over the last 3 year development of the group Imerys confirms its business model, its resiliency even in challenging times, with record inflation in the past, lower volumes this year. Current EBITDA margin remains resilient around 17% confirming the group agility and adaptability to the situation. On the right side, that's a good example. We were capable of adjusting our prices to the evolution of variable costs especially in 2022 while also adjusting to the inflationary pressure on fixed costs and overheads, and we maintained such price even when input costs dropped, like you can clearly see in 2023. This was necessary to maintain our profitability, and all the actions we put in place to reduce the cost base as described in the next slide. What I want to underline here is really the tremendous effort done by the team on costs, net of all the external events like foreign exchange or perimeter and things that are not directly under our control savings of EUR 126 million in 2023, 3.3% of the overall cost base more than compensating still persistent inflation. And really the action encompass all aspects of Imerys from purchasing, operational efficiency plans, capacity adjustments, overheads reductions, discretionary spending limitations. These savings, I think is very important are structural. Therefore, they will durably and positively impact our cost base in the future. If we now look a bit at our end market, as a reminder, the construction market remains today our largest end market with around 37% followed by consumer goods in general and healthcare with around 20%, followed by automotive, energy and industrial activities and the others we register here, steel, our paper activities. If we deep dive on these markets, let's start with construction. As you can see here, overall, construction is showing a positive impact or a positive trend mostly, thanks to the dynamic infrastructure sector. Unfortunately, Imerys products are not used or very present in infrastructure. Our exposure is largely on the residential market, which is severely impacted by high interest rates and credit tightening both in Europe and in America, which are our main markets. Some figures, U.S. housing starts decreased 3% in Q3 and Q4 and 9% for the year. Similar picture in Europe, drop of 1% in Q4, the rolling 12 months, datas are available until September, shows a 9% drop in residential building permits. The good news -- there are good news. The good news is that there is a lack of housing certainly in the U.S. and probably in large part of Europe. So we are convinced that as soon as the market will stabilize, there should be a start or a restart or even a jump start of construction supported by an inversion in interest rate trends. Private consumption is holding well in the U.S., robust job market that's helped consumption, a bit more flattish in Europe, following high or higher inflation, good rebound in China post-COVID that continues. If we move on to automotive, quite a good 2023 and a robust Q4 in general. Of course, 2022 comparable basis was very low. There was a backlog. We believe it's coming to an end, and that's why we are prudent on the development of the automotive market for 2024. What is to be noted? Europe remains still way below pre-crisis level, minus 15% approximately. China more solid, leveraging especially exports. Energy, negative, very much related to industrial production, so especially in Europe and partly in North America. Electronics coming back, big spike during COVID, a big drop afterwards. Now I think we are coming back to more normal levels. Electric vehicles in mixed pictures below expectation in Europe and in the U.S., what we hear also right now, buoyant in China, thanks especially to a rise in exports. And the next slide is industry and equipment, weak in Europe, weak in the U.S. We do expect a bit of recovery this year 2024, especially if we will enjoy an easing of monetary policy, not yet the case, but we remain confident for the second part of the year. A bit less affected the U.S. China did come back, but I would say in a disappointing way in terms of especially expectations. On the bottom, 2 sectors that are still suffering significantly, I would say, still subdue, both in the U.S. and in Europe, of course, as a consequence of its main uses, which is construction and partly industrial, automotive. Paper still recovering from very -- historically very high inventories at the end of '22 that affected significantly production in '22, affected '23. Inventories are coming to an end. So even for this sector, we see '24 under a better light. Let's look a little bit at our lithium projects. I think a lot has been done, but '24 will be a milestone year. Let's start with France, with the EMILI projects. Just as a reminder, target is to produce 34,000 tons per year of lithium hydroxide. Some steps were achieved. I think the attractiveness of the deposit is confirmed. The technology works. We are producing today in a laboratory scale hundreds of kilos of battery-grade lithium, which is a great achievement. We have selected the locations, of course, for the mine, but also for the loading station and the conversion plant in Montlucon recently announced. Key in '24, Commission nationale du débat public, so the public debate that will be launched at the beginning of March should take around 3 months and be concluded at the beginning of Q3. This should really give credibility to the quality of this fantastic opportunity. In parallel, we should -- we will complete the prefeasibility study, therefore, eliminate all the variables in these projects and create a document that will be the basis for our future estimation of CapEx, OpEx, partners, potential partners and, of course, become, I would say, a marketable document. Last, we count on launching the construction of the pilot plants after obtaining the necessary permitting. As far as British Lithium, our joint venture in the U.K. is concerned, again, target 21,000 tons of lithium carbonate. Drilling campaign is continuing. The target is to assess the size and potential of these deposits, improve our pilot lab plant that we have on site to confirm the technology and then move on to complete the prefeasibility study. As you can see, the project is behind. The French one started later, but we count on the synergies of the 2 projects to catch up and use the learning in France to increase speeds in the U.K. Few words on innovation. Again, we launched number of new products, [ 50 ] in 2023, 3 focus areas: sustainable energy, sustainable construction and natural solutions for many applications, especially consumer goods. I will not enter into all the details but I would say 2 key messages, constant effort to satisfy market needs -- market demand, especially towards new trends. And second, each innovation is screened. It has to be sustainable for the long term. It is audited by an external independent body and 78% of our innovation solutions are sustainable or what we call SustainAgility Solutions in 2023. Moving on, focus on ESG, our roadmap, our objectives, many of them or some of them represented here, and of course, I will not go in detail. We set a program, a 3-year program, '23-'25. We are in the middle of the journey. Here is a snapshot where we stand today. What is important is we are well on track. We are well on track to achieve our goals. And I want to focus, if -- one particular importance is CO2 emissions and then move straight to the next page. In 2023, we have committed to reduce our CO2 or greenhouse gases emissions in absolute terms -- in absolute value by 42%, Scope 1 and 2 and 25% Scope 3 by 2030 to align with the 1.5 degree trajectory. These targets have been submitted and validated by SBTi. We have reduced 24% in 2 years. So we are well ahead of schedule. We are not there yet. We know we'll get there. We will leverage few elements, and you see some here on the left side. We have launched a specific energy efficiency program called Energize, multi-year program to increase really the efficiency of our project processes in terms of energy. We are working to convert our fuel usage away from fossil to other kind of uses, typically biomass or electrification of certain processes. And of course, when you electrify, you want to buy low carbon electricity. We have launched a big project across the entire group, what is called Power Purchasing Agreements to purchase low-carbon electricity rapidly throughout the world with reliable partner. As said, an ambitious target, confident we will achieve it. And on this, I hand over to Sebastien for more details on our financial accounts.

Thank you, Alessandro. Good morning, everyone. Let's walk through some of the key aspects of our financial performance, starting with revenue. Sales reached EUR 3.8 billion in '23 with soft volumes. This represents a 9% organic decrease versus 22%, which was at record levels in terms of revenues. It includes a negative EUR 31 million perimeter effect following the small divestiture that we did in '22 and a negative currency effect of EUR 83 million, mainly due to the depreciation of U.S. dollar compared to euro. Price remained steady during the year after the exceptional 2022 inflation. You can note that in Q4, the drop in volume reduced as compared to the same period in '22, I would say only to 6%, while it was running at 13% or 14% if we are looking at Q3 only or year-to-date September. Let's now look into more details at our business segments, which have been slightly modified in the perimeter for this publication as required by accounting norms following the updated organization of the group. You can find the quarterly historical data at the end of the press release in full detail. Performance Minerals generates 62% of the group's turnover with sales of EUR 2.3 billion in '23. All geographies saw headwinds with like-for-like revenues down 7.2% versus 2022. If we look at the market, paper producers massively destocked in '23, and it has driven a decrease of around EUR 80 million of our sales. Construction industry was impacted in Europe and in the U.S. because of higher interest rates. Demand for consumer goods was solid in the U.S., but softer both in Europe and in Asia. Current EBITDA for Performance Minerals landed at EUR 374 million, which is a 16% EBITDA margin, price and cost actions, partly compensating the sales reduction. Now our solutions for refractory abrasive and construction business. This segment recorded sales of EUR 1.2 billion, representing 32% of Imerys' consolidated revenue. Looking at the end markets, volumes were impacted by low iron and steel production and weak industrial end markets in Europe, Asia and, to a lesser extent, in the U.S. Some of our European facilities of highly energy-intensive products suffered from Asian competition, which enjoy better energy and logistics costs. Despite adverse market conditions, specialty binders for construction kept a good momentum, thanks to market share gains at key customers. Current EBITDA landed at EUR 141 million, hit by revenue decrease versus last year. Saving actions are in place and footprint adjustment measures have been launched to mitigate the volume impact. Now how does it look like for the group profitability as a whole. Current EBITDA for '23 met the guidance announced last July at EUR 633 million, down 12% versus last year. This evolution reflects a decrease in volume contribution for EUR 240 million, a continuing positive price contribution, EUR 106 million associated with a decrease in costs, thanks to saving actions and lower inflationary pressure. You even see that looking at Q4, we had, as anticipated, an acceleration of the variable cost decrease, EUR 51 million positive versus EUR 28 million for Q3 only. You remember it was negative in H1, so real shift in trend. It has enabled Imerys to push price downwards and maintain a positive price/cost balance in every quarter. 2023 EBITDA development was also driven by a good control of fixed costs and overhead, lower than last year in spite of [indiscernible] inflation. Also driven by an increased dividend contribution from our joint ventures and associate The Quartz Corporation, in particular. You remember that our EBITDA definition takes into account the dividends received, but not the full net profit that we recognize in the P&L. As a result, current EBITDA margin stabilized at 16.7% in line with the profitability of last year. If we look now at the other elements of our income statement, current operating income landed at EUR 365 million, which represents 9.6% of sales. Net financial expenses negative at EUR 38 million, decreased by EUR 12 million versus [ previous ] year and this is in particular driven by the reduction of our net debt. Income tax expense, EUR 81 million corresponds to an effective current tax rate decreasing at almost 25%. Also, the bigger contribution of net profit from JVs, not taxed our -- at our level, supported this rate decrease. Current net income from continuing operation at the end, ended up at EUR 242 million, down 30% versus last year, which is very close to our sales decrease. Another important element, the net operating expenses are impacted by a large EUR 175 million impairment of the assets serving the paper market plus some transaction and restructuring expenses. Unchanged since H1 is the contribution of the discontinued operation. And all in all, the net income landed at EUR 51 million last year. If we look now at the cash flow generation, this time, a great improvement as compared to last year. We report a large reduction in working capital due to the combined effect of lower sales, lower inflationary pressure and management actions. We will continue to drive further improvement in '24. I wanted to highlight this characteristic of our business model. When volumes are soft, we are able to adapt our working capital and secure extra cash generation. As far as capital expenditure are concerned, we have not compromised the strategic CapEx and invested EUR 97 million that will fuel incremental growth. Overall, with CapEx spend at EUR 390 million, we delivered a free operating cash flow of EUR 191 million. How do these different elements translate into Imerys' balance sheet? Thanks to the divestiture of HTS business activity and our substantial cash generation. Even after the exceptional dividend payments of last year, we have deleveraged the company and reinforced the balance sheet. Just a small technical note, as far as HTS is concerned, you see flows directly in the net disposal column and also the plus EUR 119 million that corresponds to the net debt that has disappeared with the assets that have been disposed of. So 2 positive contribution. At the end of '23, the ratio of net financial debt to current EBITDA decreased as compared to December '22, reaching 1.8x. In absolute terms, the net financial debt decreased to EUR 1.1 billion, down 33% or almost EUR 550 million versus last year. It now represents 35% of shareholders' equity. On this good note about Imerys financial structure, I now hand over to Alessandro for the outlook.

Thank you, Sebastien. So let's wrap up this presentation. Few takeaways with experience in 2023 throughout the year and unprecedented destocking, which further impacted already some weak demand in certain markets. But we believe markets have stabilized and probably the worst is behind us. Construction, notably residential construction, maybe to a lesser extent, automotive will remain low for some time, I believe. Other businesses, especially consumers, life sciences, energy, electronics should progress well throughout the year. In this, let's say, still uncertain economic and let's not forget, geopolitical environment, Imerys will maintain a strict cost discipline. We have showed it in '23. We will prioritize growth and we know we have good commercial actions ongoing. We have new industrial capacities coming on stream. We have innovative products, as you have seen, and we are exposed to some very attractive markets, growing markets like mobile or/and sustainable energy. This will all be done in the back of our mind, ESG and especially sustainability and greenhouse gases reductions. This will drive all our decisions going forward. Thank you for your attention, and we now open the floor to your questions.

[Operator Instructions] The first question is from Sven Edelfelt from ODDO.

Couple of questions for me, if I may. Firstly would be on the, The Quartz Corporation. Can you help us understand, what's the main driver for the contribution of the EUR 87 million JV contribution in '23? Correct me if I'm wrong, but it seems to me that [indiscernible] on i.e. is the main driver. So growth is set to be stellar. I have done a model on The Quartz Corp and I forecast a net profit of close to EUR 300 million in 2024. Is it a fair assessment? Industry experts are telling me it's too low. I would be interested to have your view. Shall I continue or you answer the question -- the first question?

At least we have time to think.

I'll continue. So second question on the carbon black. I would like to know where my money is. We've seen a lot of CapEx going through for the last few years. So could you help us understand where is the current revenue on EBITDA? And can you help us understand as well what would be the trajectory? What would it be in, let's say, 2 years' time? Also, can you remind us what was the capital invested? And lastly, on the asbestos, on the Delaware website, the final document is ready to be signed. Only the signature are pending for this joint disclosure hearing. So is it something -- it is something we haven't seen since the last vote. So shall we start getting excited on the possible resolution of this litigation?

Sven, I'll start, and I'll take one by one, and then I will ask Sebastien to give us some specific information on numbers to put numbers next to words. On The Quartz Corp, TQC is -- I remind you, is our joint venture with Norsk Mineral, our long-term partner in Norway. As you said, it's a business that has developed well in the last few years. What are the main drivers? I don't think artificial intelligence is the only one. This business serves primarily, I would -- primarily 3 markets. It is the solar and photovoltaic markets. It is the semiconductor and microchips market and, to a lesser extent, optical fiber. As you can understand, all 3 markets are fundamentally going well, some exceptionally like photovoltaic because of the drive to renewable energies. Imerys is a very good example. I mentioned before, power purchase agreements, low-carbon electricity. We are looking at all options. Eolic is one of them, but solar and photovoltaic will be definitely the main driver. We have a lot of sites. We consume a lot of electricity. We will buy a lot of photovoltaic panels in the future. So that's why I don't think AI alone is the driver. It's fortunately a more broad business, a broad markets with all underlying markets pointing in the right direction. We don't comment specifically on any business on future performance. So we will certainly not do it for this one. And as a group, you know that we tend to await the beginning of the year to see developments and express our targets rather around midyear for the group only. In terms of impact of TQC Sebastien, do you want to say a few words to explain the difference between net income and...

Yes. 2 set of numbers maybe to set the frame First of all, in the P&L. So the net result contribution, if you look at '21, '22 and '23, so which represents 50% of The Quartz Corp net result. It was a little bit less than EUR 7 million in '21, went up to EUR 18 million in '22 and EUR 80 million in '23. So obviously, a very good development. That's what we -- you see in the P&L. What you see -- what we record in EBITDA is only the dividend that we received. And in '23, for the first time, TQC as distributed dividend, the Imerys share is EUR 48.5 million. And that's what you see in our reports. All the JV combined brought EUR 54 million overall to the EBITDA of Imerys. Obviously, the EBITDA of TQC itself and our 50% of this EBITDA would be higher. It would be actually more than EUR 100 million if we were to completely take that into account in our financials. But again, since years, the EBITDA definition of Imerys is to take into account the dividend and not the full contribution that we get from this joint venture.

Thank you, Sebastien. And we are considering on how we could, in the future, maybe better present or expose this business because it is definitely becoming important within the group. If I now move on to your second question, you call it carbon black. I would call it graphite and carbon. This is our activity. Where is the money? The money is in new lines that are not delivering yet at their full potential, but I have no doubt on the mid-long-term trajectory. Main driver is lithium-ion batteries. If you look at the year '23, we had 6 months perfectly aligned to our trajectory with solid growth, profit volumes and revenue. We had a very difficult second half of the year when the entire market slowed down. Fundamentally, it's very high inventories. If you remember, 2022, there was not enough raw materials, lithium went through the roof, nickel went through the roof, cobalt went through the roof, our products went through the roof, over-purchasing, overproduction overstocking that it was paid in the second half of '23. So low -- very low 2023 -- second half '23. Overall, the year is slightly negative in terms of growth, so not exactly what we were expecting. Does it change in the trajectory? Not for a second. We said this business will become a EUR 500 million and potentially EUR 1 billion business down the road. We remain fully convinced. The electric vehicle world will continue to grow. It might slow down, it might accelerate, there are political decisions behind, but if we want to decarbonize the world, we have to remove the 25% that road transportation causes in emissions and therefore, we will move to electrical vehicles. It's the only mature economic technology today available. It will require lithium and it will require a lot of synthetic graphite and carbon black. So given a pause, it will continue. We -- maybe not in January or in February as we are coming out of this destocking in this specific market, but we already see orders coming in for March and April at very -- at increased levels. So the trajectory that you have seen at the Capital Market Day is for me unchanged. It might be delayed 6, 9 months. Our CapEx are well invested. The third line has been commissioned. The second line for graphite has been commissioned. The fourth line for carbon black is being built. It will be completed in '24, and I'm sure they will all be full very soon. A word on talc, you call it asbestos, I prefer to call it talc, because there is a big difference between the 2 things. Your comments are correct as when there has been a significant step, for sure compared to the last 18 months or 2 years, where only mediation was ongoing. There has been an agreement between Plaintiff's and different law firms. This has been translated into a document, a so-called reorganization plan that has been signed. All ancillary agreements, including the last one around voting has been filed this week -- had been filed or have been filed this week. So all documents are at the court. The North American talc entities have requested a hearing to confirm the plan. I remind you once this plan is confirmed by a court, a vote will be launched to approve it or not. There is a preliminary date in March. We are waiting for the judge to confirm it. That's why I don't want to get excited yet because I will -- only when the hearing confirms a vote is launched and the vote is positive, then it will be the right time to celebrate. But for sure, a step was done and is an important one, and it is more -- something that we have not seen in several, several months.

The next question is from [ Laurent Runacher of LR ESG Advisory ].

Congratulations for all the productivity gains. Again, going to ask question on The Quartz Corporation. Is it fair to assume that if I look at the equity accounted results, let's say, the very impressive improvement from EUR 18 million to EUR 80 million is the -- is due among the businesses you've been quoting to the semiconductor part. I know that solar PV has improved quite a lot, but we hedging by the figures of Nvidia, which were almost, I would say, 4x and the results which have been let's say, 20x if I do recall well. So the one thing is, is it fair to assume that the major factor of improvement was the semiconductor part of The Quartz Corp?

It's the only question, Laurent?

This is the first question. And then depending your question, I will have -- your answer could have some additional...

We take them all. Please put them all on the table.

So I understand you're referring to give some color on the improvement you expect for 2024. But is it -- looking at your volumes for this service subsidiary is a good judge to look partly at what has been giving Nvidia as far as their revenue interest not expected?

Okay. This is more of the same. Listen, I -- the semiconductor market is an important market for this business, for the high-purity quartz, but it's not the only one. So the answer is partly, yes, semiconductor is important. AI will play a role. And you yourself mentioned Nvidia is somebody benefiting strongly from this. But once again, high-purity quartz is a unique product because of this purity. It has evolved over time. Several years ago, the biggest market were lighting now with lead the world moved on. Semiconductors came photovoltaic, was irrelevant 10 years ago. It has become a significant part today. Optical fiber, we're cabling the entire world. And so there are different pillars on which we build this business. All of them are just as important. Semiconductor is definitely an important one, but I would not necessarily tie -- we are good. No, there are other things that are very different from the semiconductor that are just as important for us. But what is important, all of them at the moment are pointing in the right direction for this business.

Okay. So as a sum up, is it fair to say that almost half of your results are tied up with solar PV semiconductor and the strength from AI and optical fibers, so more or less half of your results. And it's weird that the equity accounted [indiscernible] such a large part of your revenue.

We say that and we don't disclose what the single markets represents for this business as well as for the others. I let you take your assumptions.

The next question is from Aron Ceccarelli of Berenberg.

My first one is, again, on the quartz business. I would assume that most of the growth come from higher prices. I mean, I understand that's also volume growth, but I would like to understand what kind of visibility do you have for prices in the high-purity quartz in for 2024? Or in other words, is there more supply coming on stream, or do you expect the supply of these products to remain quite tight? And if you can elaborate on the reasons behind that, if this is the reason based on the fact that the product is superior to the one from competitors? The second question is about price mix, good price mix in 2023. I would like to understand a little bit how you think about pricing going in 2024 in an environment where raw material costs are going down. The third one is on CapEx. So you invested EUR 97 million in your -- in group CapEx in 2023. I would like to understand a little bit the moving parts for 2024. How much you think about growth CapEx and maintenance? And I have a final one, which is just a clarification on carbon black and synthetic graphite. So is it fair to assume that in your EBITDA for 2024, there's no contribution from these businesses yet?

Let's start with our high-purity quartz. I think the most important thing you said is it's a superior product, and it's high quality. It is effectively a unique product that starts in a unique mine, a unique deposit in the U.S., and we have a unique process technology really state-of-the-art to make it one of the best products in the market. That's what really drives the growth. The work that the team there has done to create something of extreme purity is what really drives the growth. And it's for sure not only pricing, its solid organic growth, its volume growth because we are becoming the preferred solution, the preferred supplier for our large customers. There is competition and one of our largest competitors in Europe has recently published a big study on this market. I'm sure you will find it. They are increasing capacity. So I don't think it's a matter of tightness. I think it's really a matter of the value that this product brings to the technology and to the application, which is a little bit in Imerys history. The next question you pose is on carbon black. Carbon black in a lithium-ion battery is probably 1% of the cost. But if it's not good, you can throw away your battery. So that's a little bit our strength. We supply something which is a small part in the overall finished product, but it has an incredible impact on the performance. That's what I would like to say on quartz. And coming to Carbon black and then Sebastien, I let you comment on the price mix component or side. No, no, there will be a significant impact in '24 in carbon black, for sure. The business is there. We are talking about EUR 230 million, EUR 250 million business that is delivering his contribution to the group. Capacities are largely installed. Some will be finished in '24. They will be filled. So not only what we already have will deliver, but I think the new capacity will start to deliver sales, volumes and EBITDA in '24, pending these markets to rebound or restart along the line that we expect. So there will be a contribution. We count on it, it's important even if few months of delay, I'm very confident. And the last word on my side on CapEx. Yes, EUR 97 million in the year '23. It was a peak in terms of graphite and carbon business, second line of graphite, third and fourth in carbon black. This world or at this side of the business in terms of CapEx is coming to an end, we should have around EUR 25 million to go in 2024. And then I believe we have a solid, well-built expanded capacities to feed the market at least for the next 2-3 years. So on the graphite and carbon, I do not expect any significant CapEx going forward 2-3 years. And as we have announced in our Capital Market Day, the next step will be a new facility somewhere else in the world to serve the next level of productions. The second big chunk of strategic CapEx was around lithium projects. On the contrary, we did not spend much in 2023. Sebastien, how much was...

6, plus a little bit in the U.K.

So let's say, around EUR 40 million. We were invested in all our studies, tests, labs, drilling. '24 will be a big year. So we are counting on investing significant money in the lithium project. Overall, to make it simple, we expect '24 to be lower in terms of strategic CapEx and lower in terms of running CapEx or maintenance overburden, sustenance, small developments as this year. This year, we invested EUR 30 million less than the year before because we believe our assets are well invested, well maintained. We have reached what we wanted to reach. We -- you need to invest to keep your assets at a good level. But good work was done. Volumes are, let's say, flattish or have been slightly down before. I think we are looking for a year of lower CapEx than in the past in all senses. Price mix?

On the price mix, I think what we can also summarize is the very brittle shift between '22, '23 and in short, we hope '24 is normalizing. '22, we had massive increase in cost, massive increase in price. '23, you have seen that the trend are reversing. We started the year with a continuation of year-on-year cost and price increase. It has crossed the line in Q3, and you see that in Q4 year-on-year, we are on the other side. A good positive contribution of costs, in particular, freight and energy that are stabilizing at lower level, importantly; and adjustment in price so that we keep this very good dynamic of adapting the price by country, by market, by customer, which is one of the strengths of Imerys. What we see in '24 is more stabilization of the different elements, price and cost. We've been able to hedge a large amount of what can be hedge, currency and commodities, hedging of electricity hedging of oil and gas has been made for the most of 2024. So now we can deliver to our customer a more stable price valid for the full year and also enjoy more stability on the cost side. So our commitment is still to monitor the balance to make sure it's slightly positive or positive, but we do not expect at this day swings as brutal as we have seen in the last 2 years.

The next question is from Jamie Fletcher of The Analyst.

Unfortunately, it's more on The Quartz Corp. The first one was -- so I think you kind of alluded to this, but the income from the JVs now is 25% of operating income. So I just wanted to ask if we can expect more detail and discussion on this in the next results. And the second question was, so my understanding is that given the bottleneck of high-purity quartz in solar, TQC has been able to secure longer-term contracts at much higher pricing, but also the CapEx is mostly covered by large prepayments from solar customers securing supply. So meaning the cash even with growing capacity, the cash flow is very strong. So what can we expect in terms of dividend policy at the Quartz Corp?

Jamie, the only question that I wish to answer is that will we communicate more on this business. The answer is yes. That's what we are considering because as you rightly point out, it has become a significant component in our overall activity, and of course, in our financial accounts. Therefore, with Sebastien, we are considering on how we could feed you with more up-to-date information. On the rest, what you're asking are confidential information, if we have what kind of contracts, what kind of CapEx, what kind of prices we do, it's really confidential to the business itself. I know that one of our competitors has published something in this direction for other reasons. It was interesting to read, but it's also a competitive disadvantage when you publish too much. So on your other questions, I'm not in a position to answer, sorry. But...

Be patient.

Be patient. But we will -- we are working on how we can give you more -- a better picture on this very nice business. That's for 2024 and I hope as soon as possible.

And sorry, just to follow-up, are you able to confirm if at all if there is a dividend policy in place at the moment? Just trying to understand how things might flow into EBITDA.

Also, I prefer not to comment is part of our joint venture agreement. So I do believe that it's a confidential information. What I think is clear, for me is 2 things. One thing we -- and if you look at Imerys as a whole, is the same. One thing we want to guarantee that each business has required money to continue -- to progress, to continue in its capacity to deliver, to invest to maintain its assets. So that for me is the first priority when I look at this business as well as the others. The second is once the money is available and you have secured your long-term business, of course, you distribute. Imerys is distributing high deal last year, an exceptional one. This year, again, a high dividend. So for sure, we will make sure that dividends are distributed as long as the mid-long-term development of the business, especially a good one like this one is secured. Clearly before -- it's the first time this business has distributed dividends. This business was built. So we had debts. We repaid all the debts in the past. Now it's the moment to enjoy the returns. So I see no reason why it should not continue to distribute these dividends, especially if the business remains solid. But we will decide as we move along with our partner.

The next question is from Matthias Kubli of Tiger Asset Management.

Obviously, there were already quite a few questions on The Quartz Corporation, The Quartz joint venture, but I just want to follow-up on one point. I mean, when we look at public available prices, your material for the inner layer seems to have gone up significantly in price. What we have seen is from CNY 28,000 per tonne to more than CNY 400,000 per tonne. This level of prices, are you now able to roll up with these prices on new contracts? And do you think this is sustainable? And the follow-up would be, there is only one competitor in this market, as you mentioned, one European competitor Sibelco. Do you see anyone else being able to enter the market short-term to end these prices or this cycle?

Matthias, needless to say that commenting on prices is not the right place, not adequate. I think each product determine is on price, like our carbon black, like our kaolin or our carbonates. It's the value in use. So I'm sure that if a customer pays a certain price and whatever the price is, it's because there is value attached to it. I disagree that there is only one competitor. There are other competitors. The one you mentioned is for sure the largest, but there is a very solid Chinese company producing this product. There are others around the world, smaller, but there is competition, which is healthy for the market. Still, I think it is -- to produce a high-purity product like this one is not something you can do tomorrow. It takes -- and we didn't do it in 3 years. This business belongs to Imerys at 50% when it was created with our friends in Norway since 2011. And it took us year -- years to reach the quality, the purity that somebody called superior in the past. So its efforts, it's R&D, its knowledge of applications that gives you then eventually a competitive advantage that you may use in the proper way in the market. But there is competition. We will always be careful and monitor this competition because that's what you need to do if you want to be long-term profitable in the market. That's what I can say, Matthias.

The next question are 3 written questions received from Ebrahim Homani from CIC. The first question is, can you elaborate on 2024 in terms of prices and volumes. The second one is regarding the impairment of the paper assets on what ground will occur the future disposal? And the third one is lithium. How do you grasp the decline of lithium prices?

Hello, Ebrahim, I guess the voice call didn't work. So thank you for posting the questions. How do I see '24? Partly, we mentioned it in the outlook. I think construction will remain subdued at least at the beginning of the year. We don't see a recovery now nor in the coming months. What I hear from banks is that interest rates will drop, will start to drop this year. I think along the message that there is an inversion could have a very positive impact and allow a restart of this sector. It will take time. We will not see immediately. As you know, it takes time to build especially house residential, which is our strength. So construction will remain so, so. Automotive, I would say, flattish. On one side, there is demand, but inflation costs a car today is expensive. Interest rates at this level will not facilitate decision by consumers. So I hope to have a medium to good -- flattish to good year in automotive. Consumers will remain solid, especially with inflation dropping, especially if interest drop. So I see positive there. Industrial, I think it depends on the rest. If there is demand for automotive for construction machinery will move, therefore, slow starts, but I'm confident that after really 18 months of low business or slow business, I hope around the second half to see a pickup. EVs will continue. Energy and Electronics should continue. So all in all, on volumes, I do expect and I want to be optimistic in volume growth for 2024, maybe not exceptional, but a growth compared to '23. Prices, as Sebastien said, I think we are entering a phase of stability, costs, typically prices. So I would tend to say a flattish environment. If inflation drops, variable costs are on the drop year-on-year, we are still something to gain because last year, we progressively went down energy, freight and so on. So I would rather say stability on pricing, if I may guess. Paper, you speak about the future disposal. We are analyzing our options and alternatives. We didn't say that we are disposing off this business, but we remain convinced that from a strategic point of view, Imerys today is focusing on growing markets. The paper market has a structural decline, might enjoy a good '24 after a very low '23. But still on the mid-long-term, we will consider potentially a divestiture. The market has changed. As I said, '23 was really a terrible year that, by the way, impacted the overall volumes of the group up to a 2%, 3% level, although it is a small business, really driven by inventories. Entering '23, inventories weigh sky high. And therefore, a lot of mills stopped, reduced or even stopped production that are partially restarting now. We thought it is prudent to adjust the value of our assets to this new reality, a lower market, a smaller market, and therefore, we have taken this step before any other decision is taken. It's just, I believe, a prudent approach since it is an accounting entry. And we will keep you updated if there are any strategic decision in -- of course, in this direction. Last on lithium. If you listen, if you manage to find some of my statements about a year ago, you will see that. I said, I do expect a correction on price, $80 was crazy, per kilo, because some brownfield capacity will come on stream rapidly, easily is the easy one to expand capacity, if you can. That's what happened. Plus just as for our carbon black business for lithium-ion batteries, exactly the same overstocking, end of the year with pipeline full of raw materials, batteries and cars with the battery. So I would say 2 factors that offer or production above demand. And that's why we saw these prices collapse very rapidly. One of the largest producer of lithium just announced recently that at this level, new -- a lot of producers are losing money, therefore they will not continue. And based on the price -- on these prices, nobody will start the project. It's another way to say prices will rise, prices will need to be higher if we want to sustain the growth, the investments in this field and the growth of this business. No question on future demand. So after -- I cannot tell you, there are different opinion if it's going to be a year or 2, but everybody today is -- or every study today confirms that the mid-long-term price of lithium will go way beyond current prices because demand will continue to grow and capacity will not be enough to match demand. I personally, fully aligned with this idea. Then your lithium has to be competitive, and I believe both EMILI and British lithium will be competitive in a production scale. Our potential future production is down the road few years in a market that I hope by then we'll have re-stabilized. So summary is our expectations, our dreams on lithium have not changed at all. Of course, we will be more prudent before we start the big investments. And as I said in the past, we will try to secure some of our volumes before launching this big project. But I have not changed at all my opinion on the long-term attractiveness of this business.

The next question is a follow-up from Aron Ceccarelli of Berenberg.

I have 2. One is on construction, which is representing a big chunk of your business. I'd just like to ask you for a little bit more color. It looks like the market remains -- it's bouncing around the bottom. Customers are really managing cash at this stage. Maybe can you give us a little bit more color around the conversation you've been having over the last 2 months since the year started on construction. And if you have inventory levels of customers? And the second one is again on the high-purity quartz. Can you confirm that the visibility you have from a volume standpoint in this business is similar to the rest of Imerys.

I did not understand the second.

If we have visibility for this business.

So basically, it's on visibility. Construction, I think you -- your comments are straight to the point. Today, customers manage inventories down. So I don't think there is a lot of inventories in the pipeline. On the contrary, we start hearing customers saying -- end users saying, I cannot even construct because there is no inventories. We see some urgent requests for supply. But as you say, it will remain a bit slow for the nearby future, but there is no inventory. And therefore, the moment that the confidence is back, I think we will see really a significant increase. Demand for housing is there. There is a lack of housing. So it's only a matter of confidence, of course, interest rates that need to give this confidence and then we will see it coming back. But no signs yet. For sure, we're not going down. That's important. As I said, it stabilized and ready for the next one. On the second question, visibility around our high-purity quartz business the -- limited in time because it's not -- our products typically don't have a very, very long lead times, so you basically look at 4 to 8 weeks. But the visibility is around rather the end markets. Some of your colleagues mentioned semiconductor will go up, optical fiber will go up, photovoltaic and solar will go up. So for me, the visibility is given by the end markets. There will be ups and downs. There is Chinese New Year, so production drops. But the main underlying markets are on good trends for the nearby future. And I really don't see at the moment anything that should impact these 3 markets, frankly, because we are cabling everything. We are macro -- semiconductors in an electric car, in -- and artificial intelligence will be needed, and we all want renewable energy. So fundamentally, I believe the visibility is given rather by the end markets.

The next question is a follow-up from Sven Edelfelt of ODDO.

A couple of follow-up from me as well. On the high-purity quartz, you have roughly 90% of the market together with Sibelco. So correct me if I'm wrong, that if those 2 mines are closed by the U.S. administration for whatever reason, it will damage close to 90% of the photovoltaic on semiconductor market. And therefore, you have here a very stronger position on pricing power. That's the first one. Secondly, on the volume, you had minus 6.1% in Q4. What was the monthly trend? I mean, it was obviously -- December would have been the best month. And possibly, can you give us an indication of what was January, possibly already positive or flat. Lastly, on your margin, your price are going down. This is consistent with the decline in cost. On [indiscernible], it seems to me that you have a -- you had a positive price over cost on margin gain in Q4 despite negative volume. So can it be extrapolated for full year of 2024?

I'll leave you the last one. Complicated question, Sven, thank you. I don't comment on market shares. I think you are a bit optimistic, but I don't comment on market shares in the high-purity quartz world. I'm not as pessimistic as you are in terms of geopolitical risk. Yes, we have a mine in the U.S., but it's not our only source of raw material. We also have some other sources, including, among others, Norway, with a quite good deposit. So I think we are balanced in our supply. I feel more comfortable having different sources. Then we have this treatment plant, which is really an exceptional tool that allow us also to consider different sources. And therefore, I am sure we will be a partner to these industries, semiconductor, photovoltaic and so on in the future, independently from the geopolitical tensions, I hope and I believe. And no comments on pricing. Volumes for the group, I would say in Q3 was mixed. We had a good October. We had a low December, which was a bit surprising. It is true that everybody manages inventories this year probably more than in the past. So difficult to give you a trend, maybe the positive message is that January that we just closed is not bad in terms of volume. So that reconfirms that probably the worst is behind. Let's see if the next months will confirm that the curve is pointing up. Prices overall, Sebastien, do you...

On prices, I think our commitment is always to look at the balance. I think you got the answer in the question then. We will be in Q1 with high comparable, both in cost and price. So we can surely expect that both of them are relaxed. We stick to our commitment of adjusting the price to the best commercial conditions, geographic and customer. So I think it will be up to you to extrapolate, but we confirm our commitment to maintain a positive balance throughout the year. I think the last years have proven that overall, we were able to manage that ahead of the curve. So sometimes, we need a few months to catch up in one direction or the other. But I would say historically also, when costs were going down, it was not bad for Imerys as a whole.

Gentlemen, that was the last question. Back to you for any closing remarks.

Thank you. So if there are no more questions, first of all, thank you for dedicating the -- this time this morning and for the many questions we have received. We have noted that there is increased interest in our high-purity quartz business, is well noted. And we will see if we can follow-up with a bit more on this topic. Other than that, at the end, in a difficult context, I think we delivered. We delivered on the guidance. We delivered within fantastic cash in '23, probably low point behind. So let's see what '24 brings. Thanks to cost savings, cash management, I think we are equipped. We are equipped to enter the New Year, ready if volumes don't pick up, but I believe if and when volume picks up with the cost -- basis we have today, I think we should -- we would be very happy of the performance of this company and of this group. Thank you very much, and have a good day. Bye.

Thank you.