Solvay SA (SOLB) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Solvay Auto Batteries conference call. So Jodi, the floor is yours.

Good afternoon, and welcome to our webinar focused on the automotive market. My name is Jodi Allen, and I'm the Head of Investor Relations. I'm joined virtually by our CEO, Ilham Kadri; and Michael Finelli, President of our growth platform. Following today's presentation, we will host a Q&A session where we will also be joined by one of our leading technical experts, Maurizio Gastaldi, Director of our Battery Materials platform as well as by Karim Hajjar, our CFO. Today's call is being recorded and will be made available for replay on the Investor Relations section of our website. You may refer to the slides related to today's broadcast, which are also available on our website. With that, I'll turn the presentation over to Ilham.

Thank you, Jodi. Hello, everyone, and thank you for joining us today to discuss what we believe is an exciting transformation occurring across the entire transportation industry. In fact, as we think about the future of mobility, we are preparing for significant and ongoing advancements across many forms of transportation in cars, in trucks, in trains and even air travel. But let me first take a step back and give you an overview of our Materials business segment. When I launched our growth strategy 2 years ago, I had indicated that our ambition was to extend our leadership position as a pure play in advanced materials. To do so, we realigned our resources to become a market-driven organization focused on our key growth markets: transportation, electronics and health care shown here on Slide 4. And we have prioritized our investments in this segment to leverage our leading positions and accelerate our growth. This focus allowed us to emerge stronger following COVID, outperforming many of our peers. As you know very well, this attractive and high barrier to entry business delivers industry-leading margins of around 30%, high returns and strong cash conversion of around 70%. In fact, believe it or not, our Specialty Polymers business is as cash generative as our soda ash business. And it's an innovation machine with 1,000 patent families in the segment, 200 of which were filed in the past 2 years alone. And with many exciting opportunities in front of us, we estimate around 10% sales growth in this segment annually over the next several years. Looking ahead, we will continue to share more on our positions in each of the key markets through a series of webinars, leading up to a more formal Capital Market Day to be held this year. As a reminder, we began this update with our ESG webinar in December. And the feedback from investors on our Solvay One Planet plans and progress has been very positive. Most importantly, our progress is helping our customers to be more sustainable. Today, we will highlight the automotive industry, our leading position and the electrification transformation that is underway. Now before we dive into auto, let me remind you why our material business is so attractive, which I will define as a repeatable successful model. First, we have an unmatched portfolio of technologies. We offer an extensive and proprietary range of high-performance polymers and innovative compounds. And we have high-performance carbon fiber composite materials, as you know. Today, the composites mainly serve the aerospace industry. Our high-performing polymers are all on the top part of the performance pyramid. These include PVDF, PEEK, PPA, PPS and many other high-quality, high-performing polymers that enable us to meet a wide range of performance needs. Let me be clear, we are not just selling products. In fact, we are invoicing products. What we are selling is a unique value proposition as compared to other competitors. Nobody out there has the breadth of portfolio we have. When customers come to us, they do not come for a PEEK solution or for a PVDF solution, they come for the best technology at the lowest total cost of ownership -- with us, they save money, they save time and they become more sustainable. In fact, we are using these technologies together with our customers to develop unique combinations of properties that solve their specific application and performance and competitive cost requirements. You will hear later in the presentation some examples of the type of solutions and the benefits they offer. So our customers simply are looking for this kind of strategic partnerships. They look for us for the capabilities to innovate for their specific needs at the right time, at the right cost in the right region, actually regardless of the technology used, and this has awarded us many qualifications and long-lasting partnerships over the years. Also, with the largest portfolio of specialty polymers in the market and the composite resin infusion know-how, we have in-house all the building blocks to make the best mobiles composite in the market, and our customers are asking for. And these materials will be needed for future mobility platforms and even more. As a reminder, we do not participate in the lower performing or commodity polymers, which are products you know them, such as polyolefins, polyamide, polycarbonates, polyacetate. And this is by choice. As you may recall, we have been divesting our commodities, including more recently the polyamide business in January 2020 and other commodities to stay focused on offering high-end, higher-value solutions. On Slide 6, we remind you that our business has a global presence that can support our customers globally and locally. We have 26 production sites across 3 regions. Our automotive market is served by several main hubs in each of these regions, including China, France, Italy, Belgium and the United States of America. We will share more about our expansion plans later in the presentation. Of our 5,800 employees in this segment, about 40% are dedicated to commercial research innovation, technical service and development with our customers, and we are proud of them. Now Slide 7. Today, we are going to focus on the automotive market and the opportunities are just enormous. They are driven by sustainable megatrends, including lightweighting and electrification. And as you may know, our materials are enabling lower CO2 emissions while enhancing performance, let me put it into context. For every 100-kilo weight reduction, it leads to lower CO2 emissions by 7.6 grams per kilometer. If you think about it, we light in any object be it a car, be it an aircraft be it an e-bike. And we enable our customers to become more sustainable. It's a fabulous opportunity for us as a company to become the leading pure play in clean mobility, especially on Scope 3, where the whole value chain is considered. This is the next ambition of Solvay One Planet. Slide 8. As you all know, the auto transformation is clearly underway, and it's being driven by several factors from a shift in consumers' mobility preferences to increasing regulations as many regions in the world have set ambitious goals for decarbonization. You have already seen commitments in China, in parts of the United States of America and in Europe, and it is clear the momentum will continue. We have seen carbon pricing markets and carbon pricing increasing and it's trading being real. We are witnessing the green deal in Europe, and of course, the Airbus of batteries value chain localization. Slide 9. As you all know, automotive OEMs are already moving quickly to meet these demands. In fact, they are making significant investments, which total over EUR 400 billion to increase their electric vehicle portfolio, bringing more than 300 new BEV models to market by 2025. We are excited about all the opportunities that these changes will bring not only because they are good for our planet, but also because they are going to fuel the top line growth, justify brownfield investments at high returns, and they are profitable. In fact, Solvay is already well positioned to be a key material player throughout the next decade. In Slide 10, I'd like to start with our proven business model and how we have established our leadership position in this space. In this slide, you see a high-level view of our 4 main drivers of success. First, you may not realize that Solvay has been supplying solutions to the automotive industry for over 30 years. And through these multidecades, we have formed partnerships with OEMs and Tier 1 players. Today, we have about $900 million worth of opportunities in our pipeline across major OEMs and tier suppliers. Second, we listen. We listen and we work with our customers to better define their unmet needs, which include reducing the weight of vehicle parts and objects and therefore, helps reduced in the CO2 emissions. Depending on the application, we can reduce waste by substituting metal with polymers anywhere between 20% to 50%. For the electric powertrain, we have an entirely new set of problems to solve, including making batteries go further, be safer and charge faster while helping to reduce the overall cost of ownership. Three, innovation is key. Innovation is another essential part of the process. As you can see from our Vitality Index, 25% of our sales are derived from solutions introduced in the past 5 years, which is remarkable. And we have strong intellectual property with over 1,000 patent families covering our materials technologies, as I mentioned before. Finally, obviously, we must also invest in our capacity and in our people to maintain our leadership position. Yesterday's announcement will bring our capacity in Europe only to 35 kt. This will enable us to meet our 2025 growth ambition of EUR 1.5 billion. We must not forget the investments in our people. It's all about people. In the past 2 years, we have increased our resources in this area with our dedicated battery platform led by Maurizio, who is sitting in the room with me today to ensure focus, speed and success. Since its creation, the platform has both hired and deployed resources, and we now have nearly 400 full-time equivalent dedicated to auto and batteries a significant increase in the past few years. So now before I introduce our next speaker, Mike, let me summarize what we are going to show you today First, we have a proven track record of outgrowing the auto market with our repeatable model. Second, we will show you how the shift to EV will accelerate us to deliver double-digit growth. Third, will show that our current leadership position in EV batteries is sustainable, thanks to our investments and innovation. And finally, how our investment to date will secure our growth until 2025 and beyond. Now it's my pleasure to introduce Mike Finelli. Mike is the President of Solvay's global growth platform. He has been in the business for the past 28 years. Previously, he was the leader of our Specialty Polymer business from 2018 to 2020. And I ask him to come and lead our growth platform since 2020, actually, because these platforms are strategic to Solvay and essential for our future growth. Mike is going to share with you how we will continue to win and grow our position in the auto market. Mike, the floor is yours.

Thank you, Ilham, and hello, everyone. I'm thrilled to be here today to explain a little bit more about the market and how we are positioned to further accelerate our growth. As Ilham stated, it's clear that the transformation to electric mobility has begun, and the need to reduce emissions is accelerating. As you can see from Slide 12, roughly half of all cars produced worldwide are expected to either be fully electric or a hybrid model by 2030. That is a massive transformation for the industry. The electrification of the powertrain will be the dominant trend facing this industry. As Ilham shared in the beginning, this shift is already gaining momentum globally and is one of the biggest growth opportunities in the chemical industry. You can also see from this chart that there are 3 types of vehicles from a market perspective: internal combustion engine cars, also known as ICE, battery electric vehicles and hybrids. But from our perspective, there's actually just 2 application areas, which, for the purpose of this presentation, we label as ICE powertrain and electric powertrain. And this is because the hybrid model is exactly that. It combines both technologies from the ICE and the electric powertrain. Moving to Slide 13. Let's take a look at what this transformation means for Solvay. We have outperformed the market over the past 5 years. And as you can see, despite the auto industry decline of 4% from 2016 to 2021, we grew our polymer sales to the auto industry by 8% per year over the same period. Why? Well, despite the production decline in the standard combustion engine market, we benefited from the continued penetration of our polymers in replacing traditional metal applications. And we continue to penetrate into new areas around the lithium-ion battery. And I'll share some examples with you shortly. What is even more exciting is that our growth will significantly accelerate over the next 10 years. We estimate double-digit growth in sales between now and 2030, with sales projected to exceed EUR 2.5 billion, reflecting an average annual growth exceeding 13% per annum, and this is from a basis of around EUR 800 million at the end of 2021. Now let me explain how we will achieve this. We already reviewed the market growth expectations with the transition to electric powertrains. This transition means that the addressable market for our materials actually doubles. We've shared with you before that the weight of our technologies in an electric powertrain increases as more hybrid and electric vehicles are produced. And today, we can confirm that the value of content per vehicle actually doubles with the transition to an electric vehicle. For Solvay, this means that we will also increase our market share as the addressable market and value per vehicle increases. Now let's deep dive into why the addressable market per car doubles with electric vehicles. Now for the past 10-plus years, there's been a big industry trend for decreasing emissions, and we have helped the industry to reach those goals by enabling OEMs to make vehicles lighter, safer and more efficient. And we did this by replacing metal parts with high-performing polymers, well before the introduction of the electric powertrain. You can find many Solvay technologies in today's internal combustion engine vehicles. If you look at the left slide of Slide 15, we've used our broad portfolio of polymers to develop solutions for a wide range of applications, spanning thermal management, structural parts, lighting and electronic systems. The good news is that most of these applications are also needed for hybrid and electric vehicles. In fact, lightweighting and safety become even more critical when a battery -- when a heavy battery is introduced into the powertrain. In addition to the translation of applications from ICE to hybrid and BEVs, electric vehicles bring new performance challenges that require the use of our most advanced solutions. And you can see the added applications on the right side of the diagram in blue. The battery applications are the most obvious, but we also have developed solutions for other electric applications such as power electronics and e-motors. We need to reduce weight, and emissions is not going away. And in fact, it's accelerating the need for our technologies. Again, this is why the emergence of the electric vehicle doubles our addressable market. Slide 16. According to the European Commission, reducing the car's weight by 100 kgs leads to lower CO2 emissions of 7.6 grams per kilometer driven. Now let's take a look at some specific parts that are now being made using Solvay polymers. We have an example from each vehicle type, ICE to hybrids and BEVs. The first one on the left, these are coolant lines. These are commercially used today with several major OEMs for ICE powertrains. The advantage over metal is a 50% weight reduction and design flexibility. And the advantage of our commodity plastic is higher performance such as temperature resistance. Now moving to the middle image. What you see here is a magnet wire used in e-motors for hybrid and electric vehicles. And Solvay was the first mover in this space to use PEEK to enable OEMs to increase horsepower and torque, which allows them to reduce the motor weight by up to 25%. Moving to the third picture. This is an example of a disruptive application. This is a battery enclosure based on our thermoplastic composite technology. It reduces the weight of the enclosure by 25% versus aluminum and a massive 40% versus steel. And in addition to that, it also allows a functional integration of the components. It's a perfect example of how our technologies are inside and around the battery. So now let's deep dive into a battery. Lithium-ion batteries have 4 main components: the cathode, the anode, the electrolyte and the separator. And we have solutions for all 4 of them. PVDF is universally used as a binder in the capital composition. It's also used as a coating on the separator. PVDF as a binder allows improved energy density and the PVDF coating on the separator improves safety. It's also important to note that although PVDF adds significant value and performance benefits, it only represents a minor portion of the total battery cost. And while PVDF is an exciting growth area for us, it's not our only offering. We have a number of other solutions to improve battery performance. We also produce additives and solvents used in the electrolytes. These will become even more important to enable next-generation batteries with even higher energy densities. We produce lithium salts such as LiFSI, also used in the electrolytes to support faster charging that cannot be achieved with incumbent salts. And so as I mentioned previously, we truly circle the battery inside and outside. And this is why our solutions to the battery itself offer an opportunity of over EUR 2 billion by 2030, excluding non-battery applications. So how does this all fit in the value chain? Let's take a closer look at our customers and more specifically, where we hold a unique position. As I just mentioned, you can find our materials in the cathode binder and in the separator coating and in the electrolytes. But let me be clear, we do not make the cathode or the separator or the electrolyte, but we supply materials as ingredients to make these perform better. Our customers include key battery manufacturers and OEMs. And we are specified with all of the major players. Recycling is another area where Solvay is active. We have signed a JV with Veolia to establish a European consortium where Solvay's role is to purify and extract the noble metals such as lithium, cobalt and nickel from the black mass coming from batteries at the end of life and from production scraps. These metals will be battery grade and will be used as a precursor for new cathodes, closing the loop and bringing a true circular economy to the battery industry. And we are pleased to have Renault as the first OEM to join the consortium. Slide 19. Now I'd like to focus on the cathode, which plays a significant role in determining the battery capacity. Today, there are several types of cathode technologies. Two of them make up the largest share of the market today and are expected to grow in the next couple of years. As you can see in the chart on the left are the LFP and NMC batteries. LFP uses lithium iron phosphate as the cathode material, whereas NMC uses lithium, manganese and cobalt. LFP is the solution of choice for entry models where cost prevails versus performance, while NMC has high energy density, which means there is more energy with the same amount of battery, allowing the vehicles to have an extended range. Therefore, we expect to see NMC on the higher end of the market for larger or higher performance vehicles. Both cathode chemistries require the use of PVDF binders. And there are 2 types of PVDF technologies in the market today, suspension PVDF and emulsion PVDF. Suspension chemistry is more flexible and can be used in both LFP and NMC batteries. While emulsion technology is primarily used only in the LFP batteries. Solvay participates in both types, thanks to its range of technological capabilities. But we focus more on NMC because suspension chemistry allows us to continuously innovate and solve our customers' increasing performance requirements. As an example, our customers have been asking for higher levels of adhesion. As you can see in the chart to the right, with suspension chemistry, we are able to achieve more than 2x the adhesion achieved by emulsion technologies and higher adhesion means higher energy density, which translates into a more powerful battery in your vehicle. In fact, we are the world leader in suspension PVDF, which makes us the supplier of choice in the industry for NMC binder solutions Innovation is a continuous process. And every day, we are collaborating with our partners to understand and anticipate their future needs and higher performance requirements for the next generation of technologies. Solvay is actively supporting our customers in shaping the next generations of battery technologies along a clear road map. We are developing new chemistries that will continue to solve the most difficult challenges for Gen 3 and Gen 4 batteries. Gen 3 batteries will need higher-performing salts and additives that can increase high- and low-temperature battery performance. And we are in full development of LiFSI and of other proprietary additives. Now the surge of high manganese cathodes is also triggering the need for high-voltage resistant solvency for electrolytes. And this is why Solvay is introducing a new Energain solvent with unique resistance to voltages up to 4.9 volts. Now Generation 4 batteries, these are the famous solid-state batteries that are expected to be introduced later in this decade, and we already have developed a new solid film with an encapsulated electrolyte, which we branded Solgain. This technology will allow the industry to achieve the significant improvements in energy density and safety that solid-state batteries have promised. And Solvay is the frontrunner in Europe for this new technology, and we are investing in the most advanced pilot plant in Europe Slide 21. Now you've probably read the announcement we made yesterday. This significant investment will allow us to reach about 35 kilotons of PVDF capacity at Solvay's site in Tavaux, France, making us the largest PVDF producer in Europe. With this investment, we will be 3x the size of the closest competitor in Europe, and it will solidify our position as the largest suspension PVDF supplier in the world. As a reminder, we added additional capacity in our site in China, which is coming on stream at the end of the second quarter. Our new expansion in France is scheduled to be completed at the end of 2023 with respect to permitting and these will secure our 2025 growth ambition. We now have PVDF operations in 3 regions, serving multiple end markets in the United States, in China and our large-scale flagship site in France. This will prepare us to meet the growing demands that our customers require, and we will continue to develop our industrial road map to ensure we can keep up with our customers' needs for the rest of the decade. So you could expect to hear from us on additional expansions in China and in the United States in the future. Thank you for your time today, and I will now turn the presentation back to Ilham.

Thank you very much, Mike. And I hope, ladies and gentlemen, that you can now understand why I'm so excited and thrilled from day 1 about this opportunity when we launched our battery platform back in 2019. And -- you can understand that we have a proven track record of outgrowing the auto market. We have a resume. We have in-house the technology, the resources and more importantly, the talent to thrive in this market. We have been, in fact, preparing this new investment for almost a year as it includes a fully integrated suspension PVDF platform, which includes almost 4 different mini plants, which will cater to the high-end battery market in Europe. We are very excited about our ability to supply this exciting growth markets and more importantly, enabling our customers to become more sustainable while creating value for our shareholders. Thank you very much for listening, and we will now take your questions.

[Operator Instructions] So we have one first question from Jaideep Pandya from On Field Research.

A couple of questions, if I may. Firstly, congratulations on the investment decision. PVDF prices, both for lithium grade and solar and coatings grade have seen significant increase in China. And current prices are almost EUR 40 to EUR 60 a kilo. So could you just explain to us how are your contracts with your longer-term customers in this regard? And then secondly, just on the site in France, are you going to be completely backward integrated into the precursor 142? And have you secured all the regulatory requirements from the Montreal protocol for the same?

Yes. Thank you for the question. As we have the President of the business, Mike, would you like to take the question on the contracts?

Yes. So thank you for the question. Simply put, we are setting our contracts up so that we have the flexibility to pass on raw material costs. And we've been able to do that so far. So we're quite confident we'll be able to continue along that path. The second part of the question -- I'm sorry, it was about our vertical integration in our -- the new investment that we announced. Is that correct?

Yes. On the vertical integration on the 142b, that was the question, yes.

So as Ilham mentioned earlier, the investment in Tavaux is actually 4 plants. So we have several precursors even before 142-B. So we have the precursor to 142-Bthat we're expanding, the 142-B, the VDF and of course, the PVDF. So that's actually a fully integrated facility that we're investing in. And I think the last question was about the ODS, the 142-B. Yes, in Europe, this is a regulated substance, but we convert it to another material. And as long as we follow the rules of the regulations, there's no problem. And there's no limit on how much we can produce and convert into PVD.

Yes. Thank you, Mike. So I hope the answer was clear. Vertical integration, yes, it's so important, and it's actually a big differentiator, and that's why it took us -- we took our time to put the right plant in France and obviously go with the full integration because we believe that's a huge competitive advantage. And on pricing, Mike and his team and with the President of the Materials business, obviously, you're right, with the inflation and with the supply/demand, which is very, very tight for years to come, we have contract pricing, but there are also quarterly closes and pricing depending on raw material and the situation of the supply/demand. Back to you.

The next question is from Mr. Sebastian Bray from Berenberg.

I'll start with your comments, Ilham, earlier on the cash generation of this Specialty Polymers segment. Was the referenced 70% cash conversion, just taking EBITDA of the segment and deducting CapEx? Is that the right definition? And when you say the specialty polymers are as cash generative as soda ash, is this in relative, i.e., percentage or absolute terms, the number of euro million of cash that are released by the business each year? My second question is on the implications for group CapEx planning over the next few years of this investment. That EUR 300 million looks as if it's going to be compressed over 2 or so years of investment cycle, plus apparently some investments in the pipeline for U.S. or China and PVDF maybe a bit of catch-up CapEx from what was deferred from corona. Is it possible group CapEx moves towards EUR 900 million or even EUR 1 billion over the next few years?

Yes. Thank you, Sebastian. So your question on the definition. Yes, you're right, is EBITDA. And I have Karim with me, so we can jump in EBITDA minus CapEx over EBITDA right, Karim. So that's the right -- the cash conversion is indeed EBITDA less CapEx Karim, do you want to...

And I think what you can -- essentially what we're saying is the Specialty Polymers business has been at least as good a cash generator as our soda ash business over time, both as a percentage but also in absolute terms as well. And that's one of the reasons it gives us the platform and the confidence and we've taken the next step, this huge investment.

Yes. And you've seen on the cash, Sebastian, that the group has dramatically improved the cash generation from mid 20 years back to my first year was 28%. So obviously, 2020 was the temporary cost-saving. We hit the 50% and around 40% for the first 9 months of 2021. You will see by the end of the month, right, the full year. I remind all that we funded our pensions by almost EUR 1 billion and deleverage the debt and that help us to spend less cash, obviously, on the pension interest rates and redirect them to more investments. So we are a better company in terms of free cash flow. Conversion, it's quality, it's phasing, including in the growth platform, and this gives us the foundation to both invest more for superior growth and continue this journey now of reinvestments. Yes, 2020, you remember we had a lower CapEx for obvious reason, COVID-19, and we wanted to look at how it's going to -- we are going to emerge stronger from the crisis, which we did. So in quarter 3 2020, we really started reinvesting. You will see the CapEx we spend in 2021 and be patient by the end of the month. But definitely, what I promise in quarter 3 is that you're going to see an acceleration and you will see it happening, yes.

Next question is from Mr. Chetan Udeshi from JPMorgan.

I'll start with a very basic question. Can you help us understand -- and again, I don't want specific numbers, averages are fine. Like what is the typical PVDF content per kilowatt-hour battery? And if you can give us some specific numbers for LFP versus NMC that would be useful for us just to think about the potential in this market. The second question I had was clearly the top line numbers that you guys have given from batteries look very strong, but there was no mention of what we should think about in terms of margin and returns because we've seen in other places where the growth in the EV battery market essentially comes with a much lower margin and return. So can you help us understand how you think the margin and return profile of the incremental sales from batteries would look like? Can we expect 30% margin to be sustained, et cetera? And the last question was on patent protection. I saw last year, there was some news that the Chinese government or Chinese courts upheld a particular patent of Solvay against a Chinese player on PVDF. So can you help us understand how is your patent protection in this particular segment? And is that something that you can leverage to maybe defend your position in the market from a long-term perspective?

Yes. Thank you very much, Chetan. I have Maurizio with me. He's leading our growth platform batteries since 2019. So I'll leave him the technical question, and I will take the margin after.

Yes. I'll answer your first and third question. About the specific consumption of PVDF in the batteries, the data point to roughly 40% more consumption for LFP chemistry than NMC. And in general, the model delivers results of 40 tons per gigawatt-hour for NMC chemistry and 55 or so for LFP chemistry. And in terms of specific amount in the weight of the batteries, we're talking about 1% to 1.5%. For the third question that is related to the way we protect our IP for our materials, well, we do this very vigorously. And the case you referred to in China is a case of, I suppose, the infringement of one of our patents from a Chinese contender that we're going to fight very hard. We have invested massively in this technology in the past. We want to make sure that we protect it and that we've done any possible way.

Yes. Thank you, Maurizio. On the margin side, Chetan, I can confirm that the return we expect to deliver are significant and highly value accretive. As you know, we have margins around 30%, and they will be sustained at the minimum, right? It's a prudent assumption. We are raising the bar in terms of pricing, contracting, et cetera. You heard it from Mike and from Maurizio as well, the suspension has more barriers to entry than emulsion. We are not going to go after the low-end market where you see a lot of competitors entering in the emulsion space. Suspension is another game. It delivers high-end properties. And today, the battery business is not at all a lagger in terms of property in our crown jewel, the material business. So we will continue. We target this high-end battery market. The customers value our differentiated performance. And I fully believe personally that commoditization will start basically in the emulsion space, not at all in our space. Back to you.

Next question is from Mr. Laurent Favre from BNP Exane.

I've got a question for, I guess, Maurizio or Mike, around the -- or specifically the new entrants. So [ Dongye, Wanhaw ]. I just wanted to, I guess, get a bit more clarification. Are you saying that they are only entering in emulsion and that that's an area where you think where you have less exposure, and therefore, the risk on pricing in that area is already captured in your targets for 2025? That's the first question. And then the second question, it's going back to the -- having Sebastian's question on CapEx, maybe for Karim. It looks like you target -- well, I guess sales in battery is going from about EUR 200 million to about EUR 800 million. How much CapEx on top of the EUR 300 million do you think you will need to get to that number for 2025? Thank you.

Okay. Maurizio, do you want to take the new entrant?

Yes, I can comment on the situation with the new entrants. I would say that it would be a mistake to underestimate the strength of competitors in general for any company. At large, it is true that the Chinese competitors entering the market are developing an emulsion type. Some of them are already working on suspension technology with many, many years of delaying with respect to the leading companies in the market like Solvay in Korea. It would be not logical to think that this gap will never be closed in the future. But for the time being, the position on suspension technology for the leaders is extremely strong. However, the majority, as I said, of the capacity, which has been installed in the new project point at the developing emulsion technology.

To answer your second question. We're completely covered to get to 2025. So this really equips us to deliver that to get towards the 2030 ambition. Yes, of course, you can expect us to continue to invest but very, very, call it, wisely.

Thank you. Next question is from Peter Clark from Societe Generale.

It's a quick question on probably one of the less exciting polymers you have. But I remember when you bought Ryton from Chevron, you cracked the technology, as you said you would. And I just wondering what sort of growth that business has had and what sort of scale it is, how something like that grows. And then looking at that sort of area, of course, we were always told that these acquisitions were extremely rare. So this is a business about CapEx really and leveraging your technology. But I just want to reconfirm that when you look at the acquisition list in the specialty polymer area, this is just not really going to happen, not too much anyway.

Yes. Is that Peter, right? You were talking about CPS Peter, I didn't...

Correct. CPS.

Yes. Mike, as Mike is with us, and he's the [ one ] of his business. He led it for many years. So Mike, can you pick it up?

I can answer real quick. So the Ryton business is a fantastic business in automotive. It's one of the reasons why we bought it. And it really opens up the door with a lot of companies so that we can bring other polymers to the market. Our expectations of growth is double digits. And in fact, when we look at electric vehicles, we're finding even more applications for Ryton PPS than we found in an ICE engine. So we're quite excited about the future. We have made good progress on debottlenecking that plant. There's still more room to grow, and we expect this business to be a really nice business moving forward.

And I think that was -- I cannot see you, Mike, but that was the example you have been giving on the coolant line, right, during the...

Yes. In fact, actually, the coolant line was PPS. We're also -- now that was an ICE engine, but we're also finding, for example, bus bars on an electric vehicle. There's a whole new range of applications that are high temperature. And I think a lot of people may not realize, I mean, a battery gets really hot. I mean, thermal management in a battery electric vehicle is just as challenging as it is in an ICE around the engine.

Your next question is from Mr. Andreas Heine from Stifel.

Two questions, if I may. I'm interested in what you said in only one sentence. The composites, you said that you were able to mix some thermoplastics and carbon fibers, I think that's pretty new as most of these composites are based on thermosets. Do you think that with these technologies, so being able to bundle the carbon fibers with thermoplastics that you will make inroads in the automotive? Or is that only a story for the next decade? And secondly, in the battery housing, is it right that basically in battery housing, everything has to be plastics and that aluminum and steel will not be used for safety reasons? So that the whole battery housing will be a business for high-end plastic producers.

Yes. So yes, thank you. Who's speaking? Is that Andreas?

Andreas Heine.

Yes, I mean, I'm really excited about the thermoplastic composites, and it was the second growth platform I launched after batteries because I really felt from day 1 when I looked at what differentiates Solvay and the material pure-play against competitors, nobody out there has the breadth and the variety of portfolio we have. And why it matters, as I said during my prepared remarks, when customers, they go to a competitor who delivers PEEK or PVDF, they buy just one product, one technology bit. When a customer comes to Solvay, they should come for the best technology, being agnostic to technology. It may look bizarre, but that's how I see it, and how we see it. And to deliver the best solution at the best total cost of ownership, obviously. So that's important. And for thermoplastic composites, this is the best at the intersection, you can take the best of the thermoplastics polymers and then the know-how of the thermoset composite which are thermoset not recyclable and based on epoxy resin infusion. And now we are including in them and replacing this epoxy resin with our thermoplastics. And again, the sky is the limit. It can be PEEK. It can be something else. And that's the second platform we are now pushing -- so maybe, Mike, you can give perspective. Mike is leading, by the way, our 3 growth platforms: Battery, thermoplastics and hydrogen. We're not going to talk about hydrogen today. And maybe Maurizio can answer the second question, Mike?

Yes, absolutely. So for thermoplastic composites in automotive, this is actually a very exciting area for us. It will take some years to develop. But I will tell you right now, under development. We've got quite a few applications. I -- in fact, I wanted to share with you guys a picture of one of them, but we were not allowed to do so by the OEM. But I can tell you, it's a very large part. It's a structural part in an automobile. And we are able to do, in one shot, a thermoplastic composite and an overmold with our -- one of our other polymers, and make this part in one shot when today, it's made out of 22 pieces of steel welded together. So that's a massive opportunity for us. And there's 2 things that make thermoplastic composites very exciting in auto. One, they're inherently recyclable compared to thermosets. So this is a big issue for auto, and that's why thermoplastic composites are quite exciting for the OEMs. And the other thing is, with thermoplastic composites, you could do high throughput which you can't do with thermosets. So we really think that the thermoplastic composites have a play in auto and structural parts.

We can go to batteries as well, Mike, right? I mean...

Well, we already have applications, we're working on around the casing. Now your last part of your question was around -- I'm not sure I fully understood. It's something around aluminum or metal casing being banned. I don't know -- I've not heard that. But Maurizio?

Maurizio will take this up.

Yes, Mike, I can answer this. No, we don't think that aluminum will be replaced by polymers in the battery casing. You need to have a very good heat exchange and the plastics will not do the job. But on the other side, there's many components in the battery casing where our plastics have tremendous value proposition and particularly for gasket and insulators.

Next question is from Alex Stewart from Barclays.

I've got 2, hopefully, quite simple questions. Going back to your slide about -- Slide 13, you talked about roughly EUR 300 million in sales growth from the automotive industry between '16 and '21.

We can't hear you very well, Alex. You are cutting off.

Yes. I seem to have this problem often. Is that better now?

Yes, definitely.

Yes. Okay. So if I look at your slide, you talk about roughly EUR 300 million of incremental sales from the automotive industry in Materials between 2016 and '21. Your Specialty Polymer division overall has grown revenue by just over EUR 100 million over that period, which implies that something else in Specialty Polymers is declining to offset some of the growth in automotive. With that in mind, could you possibly talk about which part of the polymer business has been shrinking and whether that's likely to continue? Or what you think the outlook is there? Because obviously, that will detract from some of your aspirations in the automotive industry. And then the second question, just very quickly, could you tell us how much of your PVDF production today goes into these EV applications? It would be very helpful.

Yes. And I will leave the floor to Mike. But you will see, obviously, historically, we are serving different applications. Oil and gas, for example, is very cyclical, right? It can be up and down. We have also some electronic materials go into smart devices, which historically and I think prior to my time, all analysts have that question during the earnings call for Solvay, right, about phones and smart devices when they move from plastics to metal back and forth. So there are some cyclical markets out there, which we will, obviously, give you more clarity. But definitely, the automotive market has been repeatable and proven. And for me, when moving specialty polymers from a technology-driven organization, which was OpEx to you probably, when I joined the company to becoming more market-driven, has been revealing, right? Our strength and proven record of repeatable and successful conversion and penetration of technology in the automotive. So that's the highlight of today. Mike, anything to add?

No, I think you covered a lot there, Ilham. I think, if I come back to the original statement that you said over that period, was it especially polymers you said only grew EUR 100 million? I don't recall what you said.

I'm just looking at your -- the revenues in your polymer business, which was EUR 1.9 billion in 2016 and the consensus hazard at about EUR 2.1 billion, 2021. So it's about EUR 130 million.

Okay. Yes, okay. So we haven't released the 2021 results yet. Ilham will talk about that, I think, later in the month.

Yes, definitely.

But I think you may be surprised. But what I'll also say is, Ilham touched on it, 2016 was a very strong year for us in electronics. It was the PEEK year. And there's a very specific application that disappeared. So that pretty much answers most of the question that you had.

Yes. Yes. Yes. It's mainly the electronics and the smart devices.

Next question is from Mr. Daniel Chung from Redburn.

Really appreciate the presentation, it's very helpful. Just a couple from my end. I think first is, it seems like the focus here is primarily on light-duty passenger vehicles. So how should I think about any further opportunities in heavy-duty or trucks, for instance? And then secondly, maybe we can have a quick comment just in terms of just near-term trading dynamics. We've spoken about autos being quite soft into 4Q. Has that rolled over into 1Q this year? Or has it sequentially improved? Would be appreciated.

Definitely. Mike, would you like to talk about trucks and heavy-duty and give them a bit of pace, although it's early enough on the hydrogen one?

Yes. I think that's great. So great question. Thank you. So we have a third platform, we call the green hydrogen platform. And in this space, this is where we see the utility in heavy equipment, trucks, things like that. [Technical Difficulty]

We're still online?

Yes, I can hear you.

What Solvay does [Technical Difficulty] to play. So the membranes [Technical Difficulty]

Sorry. Mike, you were cut off for a few seconds. If you can take it back again.

Sorry, sorry. It looks like I have an unstable Internet connection. No, I was saying that we have a third platform on hydrogen, where our materials are actually the membrane that create -- split the water atom, the water molecule into hydrogen and oxygen. And then in the fuel cell, which we would see in heavy equipment, trucks, trains, things like that, we actually recombine, oxidize the hydrogen and create energy and water as a byproduct. So Solvay plays in that space. What I will say is we don't see the acceleration in this more towards the end of the decade, whereas batteries is today, and then we're seeing explosive growth now, we expect to see this more towards the end of the decade for our hydrogen platform.

Next question is from Mr. Mubasher Chaudhry from Citi.

Just got the 1 left, please. In one of the slides, you talk about the fact that your growth until 2025 is secure. Is that assuming for the EUR 1.5 billion by 2025 from autos? Is that assuming the full ramp-up of the Tavaux plant? And if not, could you give us a feel for what the contribution from that plant could be just on a top line basis? And kind of what kind of CapEx number should we be thinking about up for the EUR 2.5 billion by 2030.

Yes. Good question. Thank you, Mubasher. Yes, I mean, the EUR 300 million investments will secure the growth by 2025 on the of the CapEx-- we have to be prudent with the permitting. I cannot see the face of Mike because in Alpharetta in the U.S., but I'm sure I'm pushing him as hard as I can to accelerate because the demands are there, and customers are expecting enough to produce. So you can to be safe mid-2024 summer 2024 will get to the run rate in the second half of 2024. So 2025 is secured. If you can do it earlier, we will do it, obviously. So we target to December 2023. But we don't own and control the permitting, right? So that's something we're going to work on. What was your second question, Mubasher?

I was just trying to figure out what kind of investment could be needed to get to the EUR 2.5 billion by 2030. Is that kind of an incremental, I don't know, another one of these or another 2, 3 of these plants coming online to kind of enable you to get to that EUR 2.5 billion?

Yes. Yes, it's too early to third question. We'll share with you. We'll give you more color as we share with you and discuss 2 webinars like this one, which are very useful, I hope, for you. And definitely, we enjoyed it. Our plans, we are working on different plans, be it in Asia Pacific. Not all true, we may look at alliances rather than doing it by our own. So depending on the market on the geography, we will look at different ways of doing it. But we'll come back to you on our CapEx envelope. What you can expect from us is now that the free cash flow generation has been extremely robust discipline proven in the company, and that was my first target is that will continue and discuss generation enables us to invest in what it takes to stay leaders and to continue innovating, right? Specifically in early years where we are the #1, and we know we can win -- the market is real, first. It's really real. It's profitable, we can win, and we have differentiation, and then it works it obviously from the return point of view.

We have no other questions. Back to you for the conclusion.

Thank you so much to our presenters today and for all of your great questions. As always, the Investor Relations team is here if you have additional questions, we're happy to respond. And again, thank you very much. Ilham, would you like to say any closing remarks?

Yes. Thank you very much. I think it's the first time we're running such webinar above and beyond our ESG webinar. I think I enjoyed hosting our team. So thank you, Maurizio here. Thank you, Mike, in Alpharetta, and we plan to actually do it again, and thank you, Jodi, and the IR team for a good job and Karim. Thanks to you all. Bye-bye.

Thank you, Solvay team. Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.