Solvay SA (SOLB) Earnings Call Transcript & Summary

Welcome to Solvay's Peroxide Webinar Conference call. Solvay team, the floor is yours.

Thank you. Good afternoon, and welcome to our Peroxide webinar. This is Jodi Allen, Head of Investor Relations. I'm joined today by our CEO, Ilham Kadri; and the President of our Peroxide business, Peter Browning. Immediately following today's presentation, we will host a Q&A session where Ilham and Peter will be happy to take your questions. Today marks another installment in our webinar series that began back in December 2021. You'll recall that we began with an ESG webinar focused on the progress Solvay has made to reduce our environmental impact. Then in February 2022, we hosted a webinar on a material segment serving the automotive industry, driven primarily by lightweighting and electrification. At the end of February, we presented a brief update on our Soda Ash & Derivatives business. And then in June, we presented our consumer-facing businesses, which are mainly our Novecare and Aroma Performance businesses. Recordings of all of the webcast are available on our Investor Relations section of our website. We do intend to continue with this webinar series over the coming months, and we will provide more details at a later date. 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. I would like to remind all participants that today's webinar includes forward-looking statements, which are subject to risks and uncertainties. Please refer to our Safe Harbor statement at the end of the presentation for more details. With that, I'll turn the presentation over to Ilham.

Thank you, Jodi, and hello, everyone. Thank you for attending today's virtual webinar focused on the Peroxide businesses. I am particularly excited about today's topic as it puts a spotlight on one of the exciting businesses that will be going to the future EssentialCo. Two of our last 3 webinars were about future SpecialtyCo businesses, so it's nice to put Peroxide today in the spotlight for a bit. As you are all well aware, back in March of this year, we announced plans to split Solvay into SpecialtyCo and EssentialCo in the second half of 2023. EssentialCo would comprise leading mono-technology businesses, including Soda Ash, Peroxides, Silica, Coatis and Special Chem. EssentialCo will provide technologies that have proven essential across a number of attractive and resilient end markets, including building, consumer goods, automotive, and benefits from a foundation of strong leadership positions. As an independent company, EssentialCo would be positioned to further reinforce its leadership through expansion and consolidation opportunities, including accelerating growth in natural soda ash and sodium bicarbonate, pursuing growth in the Asia Pacific region and further extending its leadership in a consolidating hydrogen peroxide market. It would also play a key role in accelerating the energy transition that began in the Soda Ash business in order to be carbon neutral by 2050 for soda ash and for all other EssentialCo businesses before 2040. Following the separation, EssentialCo would strengthen its operating model by enhancing its cost leadership and maximizing cash generation. These businesses are based on Solvay's strong legacy of technology leadership, and in fact, have shown to be significantly less volatile than other more cyclical businesses across the chemical industry. As we prepare for the future, we have recently announced several investments to support future sustainability and growth of EssentialCo businesses. As a reminder, we announced plans to expand our operations in La Rochelle to enter the value chain for rare earths, permanent magnets in Europe. As you know, we have been the technology leader in rare earth separation, purification, finishing and formulation. Therefore, these investments is focused on developing a European hub for critical materials in the magnet value chain that are currently imported from overseas. This will support bringing more sustainable solutions to fast-growing markets including electronics, electrical vehicles and wind power. In Soda Ash, we have shared many investments this year. And in May, we announced the acquisition of the 20% minority stake of AGC in the Soda Ash joint venture operated in Green River, Wyoming in the United States of America, building on our leadership position in trona-based soda ash production. In June, Solvay Saudi, our joint venture with Sisecam unveiled the results of another large-scale investment projects at the Devnya plant in Bulgaria, which will add 200,000 tonnes of additional sodium bicarbonate capacity per annum. These investments also support our energy transition goal to phase out coal by 2030 and to reach carbon neutrality in soda ash production by 2050. In September, we also announced our breakthrough process innovation which reinvents the 160-year-old process developed by our founder. We are now working on validating this innovation, which will pave the way to achieve the future company's carbon neutrality objective by 2050. And 2 more recent announcements that are very relevant to today's webinar topic are the announcement in July to invest in a new electronic-grade hydrogen peroxide facility in the state of Arizona in the United States of America to serve the growing U.S. semiconductor manufacturing markets, where our technology is an essential component for electronic devices. Our sales growth in this technology is expected to be 25% across the midterm, and you will hear more on this from Peter. Now the completion of the new hydrogen peroxide plant in Chile, with a capacity of 34 kilotons per year to serve the region's growth in applications, including pulp, mining and aquaculture customers. Also as a reminder, last year, we created the joint venture to supply our electronic-grade hydrogen peroxide to the growing Taiwan semiconductor industry. The operations are scheduled to begin in the first quarter of 2023. So you see, even though the future EssentialCo will continue to demonstrate its cost and cash leadership, its businesses also have attractive growth opportunities, and therefore, these investments are important to support their ambitions. Now before I hand the floor to Peter, I will summarize what we are going to share with you today. First, we have a proven track record of strong and resilient cash generation and cash conversion. Our strong EBITDA growth has been at 12% per annum since 2013, and our cash conversion for the businesses have been at around 80% over the same time frame. We are leveraging our experience and prior performance in this market to further expand, innovate and grow, and I expect this team to execute flawlessly based on this track record. More recently, the peroxide business has delivered strong sales growth over the past 18 months. Both volume and pricing have contributed to the strong performance. Second, as you will hear from Peter later, we have well-established strengths versus competition in costs, scale and technology leadership, and our unique technological process is recognized as being best-in-class, delivering lower costs, higher purity and greatest reliability with a very high level of safety. Solvay has been in business for the past 70 years, and we continuously invested in the operations and research to maintain this position. Innovation and agility are 2 of our peroxide business trends. For instance, hydrogen peroxide quality can degrade over long shipping routes. So to meet the expectations of our customers in more remote areas, including South America, we introduced a new concept of mini plants to be located at customers' manufacturing locations. Another example is the growing industrial demand for propylene oxide, which is another growth driver, leveraging a unique expertise in mega plants producing H2O2 as feedstock for propylene oxide in the framework of HPPO or Hydrogen Peroxide To Propylene Oxide partnerships. We have, in fact, the right scale and production assets around the world to grow the business in the most attractive markets. Which brings me to the third and final key takeaway. We have exposure to the most attractive market segments in Peroxide segment. Our products are used in a wide variety of applications. You can find our molecule in the disinfectants you use to protect against viruses. It plays a role in making the seats in your automobile and even in protecting the food we eat, such as its use in salmon farming. We are especially excited about its use in newer innovative applications like electronics, battery recycling and urban mining applications where H2O2 can be an effective and sustainable enabler to these emerging markets. Hydrogen peroxide is, by its nature, a product that fits very well with our One Planet goals to beneficially impact the climate, resources and better life. Don't worry, this won't be a chemistry lecture, I promise. The chemical process to produce this material is very simple. Think about it, oxygen and hydrogen are the raw materials to produce hydrogen peroxide. Energy is required to produce the raw materials and make the final products, and our plans to reduce our greenhouse gas emissions through alternative energy sources are currently underway. Part of what makes this molecule so attractive to our customers is that it exists naturally in biological systems, including the human body. Hydrogen peroxide breaks down after use into water and oxygen. This breakdown is accelerated by light, and for that reason, it's stored in dark colored bottles, as you might have noticed if you have some in your home. Our plants utilize circular production processes that continuously reuse working fluid and catalysts to minimize waste. Also by exploring renewable, low-carbon emission forms of energy for the production of raw materials and the peroxide itself, Solvay targets full carbon neutral production before 2040. As for applications, hydrogen peroxide is driving greener chemistry on the back of sustainability trends. Our customers across a diverse array of markets faced a common challenge: They need solutions that are powerful enough to guarantee absolute product quality and that can stand up to the growing environmental concerns we already face today, which demand greener practices and often a substantial shift in processes. These solutions must minimize health risks for employees and end users alike. And we have the portfolio, the resume and the technical expertise to meet their needs. All of us have vitally used hydrogen peroxide in our homes to disinfect a small wound, but it's far more versatile chemical than just that. And I for one, as a child, always preferred hydrogen peroxide to isopropyl alcohol or iodine, as you know, for my scraped knee because it was painless and didn't leave a trace. Now more seriously, in chemistry terms, hydrogen peroxide's power and versatility comes from the high oxidizing potential of the extra oxygen in the molecule. This oxidation process is exactly what is employed in killing germs, microorganism, bleaching fabrics and fibers, and chemical [ censuses ] and a wide range of activities and applications. The variety of applications is the results of researchers making breakthroughs in cleaner and greener chemistry in new and emerging markets with strict environmental drivers. Hydrogen peroxide is a powerful, environmentally-friendly bleaching agent used to sterilize, for example, carbon packages like Tetra Paks and juice bottles. In its highest purity form, it's also an efficient cleaning agent used to produce high-quality semiconductors and it's also used to disinfect wastewater and enhance mineral recovery to safely secure scarce resources. It is an essential molecule and a growing business, as Peter will further explain. I would like now -- I'm extremely excited to introduce Peter Browning. Peter is President for -- of the Peroxide business unit since 18 months, I asked him to pick up this business and transform it. And after starting his career with Procter and Gamble in manufacturing and then sales, has had 25 years of experience and leadership experience within Solvay in a number of different businesses, including Novecare, Silica, Engineering Plastics and Aroma Performance. So indeed, when I joined Solvay, asked Peter to come lead this dutiful business in order to double down and accelerate its growth perspective. Peter, the floor is yours.

Thank you, Ilham, and good afternoon, everyone. It's my pleasure to be with you this afternoon to provide some additional insights into the Peroxides business. This is a business where Solvay has a strong leadership position, and I'll try to explain why that is the case and why the business will be successful into the future. First, as Ilham has said, hydrogen peroxide enables extremely clean chemistry. And as a result of this, it's become a preferred choice for green processes across a wide range of industries in the last 50 years. The shift to hydrogen peroxide started in the '70s with textiles, and continues today. Years ago, its main benefit was to provide a more friendly bleaching agent by replacing chlorine. Certainly, that was an application that developed strongly in Pulp & Paper. And in Pulp & Paper, we tend to think about traditional paper for newsprint or office paper. But really, where the opportunity is today in that segment is the growth of pulp in packaging. I think of all those Amazon boxes you get delivered to your house. So that really has offset the decline in the printing paper market. Another big example of the use in hydrogen peroxide is as an environmentally-friendly oxidizing agent to make propylene oxide. This is used as a precursor in products like antifreeze or polyurethane foams. And it was this business, the Hydrogen Peroxide To Propylene Oxide technology, which led Solvay to develop and invest in the creation of mega scale hydrogen peroxide plants which are fully integrated into our downstream customers. Hydrogen peroxide is also used in the chemical industry to make polyamides where our process has replaced the more traditional processes, enabling lower energy usage, lower capital intensity. So I think a key point on this slide is while we sell into a wide range of applications, Solvay has a far higher exposure than our peer group to the 2 fastest-growing segments of the market: chemical production, which I've just given you a flavor of; and electronics, which will dive into in just a few slides. So if we summarize the peroxide business in numbers, this year, we'd expect about EUR 1 billion in sales. Now before we go on, I want to quickly explain that number. What we're presenting today is the whole perimeter of peroxides, so that's slightly different to our historical financials. We've included the peroxide sales as reported in chemicals. We've also included the hydrogen peroxide sales reported in electronic-grade, which today sits within our special chem business, and we are also including our share of our peroxides joint venture in Brazil, which together add about EUR 250 million to the traditional perimeter. So altogether, peroxides, as we presented today, is about EUR 1 billion in sales. Ilham has touched on this, but the business has seen a quite impressive compound EBITDA growth, 12% per year over the last 10 years, and we've been able to reliably convert a large part of that EBITDA into cash flow. Looking forward, because of the exposure to the attractive markets I've just described, we see sales for this business continuing to grow above GDP. Now, that growth record has led to a tripling of the business EBITDA over the last 10 years in a pretty steady, consistent trend. That's converted well through into cash flow. When we look forward, we have the ambition to sustain the EBITDA trajectory, to sustain the cash conversion. And in fact, over a long period of time, this business has historically been sold a strongest and most reliable generator of cash relative to its side. So why do we have this confidence? What makes us believe in the future of this business? Three things summarized on the right, and then we'll detail in the following slides. Firstly, we have significant competitive advantage on both scale and technology. Second, we benefit from a substantial and sustained investment in operational excellence and proprietary technology. And last, as already mentioned, we expect that our specific market exposure will provide a strong tailwind. Before digging into the growth opportunity, I want to take a few minutes to explain how we've been able to grow profitably and why we are confident that will continue into the future. So let's start with our market leadership. Peroxides is a regional market. This is important to understand. And the underlying rationale for that is very simple. Hydrogen peroxide is difficult and expensive to transport, so it's better seen as a set of regional markets rather than a global one. So on this slide, you can see our leadership positions in the 4 regions. But before diving into those, I would like to make the observation that our overall global position is pretty similar to that of our next 5 competitors combined, 17% of the global market by volume. Digging into the regions. Our strongest regional position is in South America, where we have a wonderful team. They've been able to grow this business and to create a competitive position, which is far better than our -- far better than our competitors. In Europe, we also have a leadership position. And the key opportunity for us there is the growth in the semiconductor market, where we are by far the largest single supplier in the region. In America, we're a strong #2. But a lot of the growth in North America is going to come on the West Coast from electronics and from electrical vehicle battery recycling. And for that, we are ideally situated with our assets in Texas and in Oregon. And then lastly, the APAC market is much more fragmented, but we still hold a clear leadership position in Southeast Asia. And in China, we focus only on segments where we have differentiated technology, principally electronics, but also attractive niche segments, such as food and health care. The scale that I talked about on the last slide combines with differentiated technology, as Ilham mentioned, to ensure a very high level of competitiveness. As you can see from the regional cost curves, the vast majority of our capacity is extremely well placed. More than 90% of our total capacity are amongst the most competitive assets in each region. Now as you can see from these slides, we do still have small units in Europe, in Asia Pacific, which are not cost leaders. And I think over time, you'll see us looking for solutions for those assets. In addition to simple size and scale, we derive our attractive cost position from the technology advantage we have. But we operate a quite distinct technology compared to competition based on a proprietary working fluid, which gives us advantage in terms of CapEx intensity and cash cost of our process. This affords us the advantage of having a more productive and a more sustainable process than our peers. Our assets are also built to be modular, allowing us to easily adjust capacities to meet customer needs. Lastly, we have a large number of sites around the world. As one site discovers and implement process development, our technical experts quickly engage with the global network and implement the same improvements elsewhere. It's truly a high-performing, collaborative global team, and this supports our reputable business model. Now we've talked about scale, I'd like to talk about our secret sauce. It's not quite Coca-Cola, but it's still interesting. We have a proprietary working fluid, which is the material in which the reaction occurs. We produce this internally, and it's the core of our competitive advantage. We're totally back integrated in the production of this material, and we have a unique, well-protected process which is at the heart of our production system. This technology, developed and optimized over many years, outperforms other working fluids in terms of CapEx intensity, in terms of operating cost. It enables greater energy efficiency and competitive and sustainable process. In addition to these inherent advantages, we have an enduring focus on continuous process improvement, with an intention and the resources to improve yield and further enhance energy efficiency. To give you a feeling of the long-term impact of this program, over the next 5 years, we're targeting EUR 40 million of hard gain just from this initiative. So this includes a step change in energy efficiency, improvements in catalysis, the extension of the use of digital tools to enhance yield and productivity. We also see ourselves benefiting from further improvement in fixed cost productivity in a business where we already have a turnover of about EUR 1 million for every employee we have. A key differentiating feature of our business is we've been able to customize assets over time to reach distinctly different customer segments. So our first offer, the [indiscernible] H2O2 units, are on customer sites. They're remotely operated, so the control team is a completely different location, a central location. So it's ideal for serving out-of-the-way plants. That avoids logistics costs, it avoids duplification of capital. We started up the first of these units in Brazil in Imperatriz. We use utilities supplied by our customer, and we provide all of their product for the bleaching of their pulp. Secondly, and more classically, we have commercial products, mid-sized plants which serve their regional locations. Here, our intention is in the market, for the market. Thirdly, we have our mega plants. These are huge units, which are integrated into chemical complexes, providing a clear advantage on cost for our customers with a huge scale effect driven by best-in-class technology. And then also important to mention but very different from the other assets are our purification plants. It's here that we make ultra pure hydrogen peroxide to meet the most stringent quality requirements from the world's leading semiconductor players, and also some other very demanding applications. We either co-locate these units with a commercial hydrogen peroxide plant or we put them right by the end user. An important component of competitiveness for the future is, of course, accelerating towards carbon neutrality. And I'd like to spend just a minute or 2 on sustainability, and in particular, our greenhouse gas emissions. When we talked about cost improvement, energy efficiency is a key driver, and what is good for our wallet is also good for the planet. As Ilham said, as a long-term objective, this business will be carbon neutral by or before 2040, to align with the ambitious goals we've set within the Solvay One Planet [indiscernible]. However, in the current energy context, we see a substantial opportunity to invest in accelerating our energy efficiency. And whilst we've already achieved an 11% in carbon dioxide reductions in '21 compared to 2018, that's a hard decrease. So despite sales growth, we accept to step up in our performance over the coming 5 years and expect to reduce our emissions by 35% against the same baseline by 2026. Once again, that's a hard measure, an absolute reduction compared to the 2018 baseline despite substantial volume growth. The majority of this improvement comes from the reduction of energy usage, and thus significantly contributes to competitiveness. In today's context of extremely high energy costs, that's very welcome. Just to give you some more data, about 60% of our Scope 1 and 2 greenhouse gas emissions come from the use of hydrogen as a raw material and about 40% from the energy we use in our process. So the principal levers we're pulling to achieve the reduction targeted are firstly, improving our process. So moving excess heat from part of our process to a place where previously we've need to use energy. Secondly, the progressive decarbonization of our hydrogen raw material. And lastly, reducing transport emissions. I talked about in the region, for the region, Ilham talked about our investment in Chile, and this is a great example of how we can do good and be profitable. This is the only hydrogen peroxide plant on the West Coast of South America, and it will vary substantially reduce the CO2 emissions associated with serving our customers there whilst providing us with a meaningful gain in transport costs. When we talk about this, our project portfolio to achieve this whole reduction is defined, costed and offers economically attractive returns. Now that we've covered the underlying competitiveness of the business, so the solid foundation, I'd like to move on to talking about growth. As I touched on at the beginning, we see 2 segments with disproportionate growth. Firstly, Electronics, especially semiconductor; and secondly, Integrated Chemical Complexes, we call them ICC. So by that, we mean downstream integration with partners on the same platform. Whilst the overall hydrogen peroxide market is expected to grow at about 3.5% per year through 2026, the vast majority of that growth comes from these 2 segments. Integrated Chemical Complex grows twice as fast as the overall market, and Electronic Applications grow 6x as fast. The other technical applications will grow but in a rather moderate way. Just on the right side of this slide, you can see why we are well positioned to capture this growth. In Electronics, we are 1 of 3 global suppliers for this product, and this is the most demanding application in terms of technology. You require state-of-the-art proprietary purification technology and a deep well of trust with the customers. As the only producer back integrated in every region, we offer secure, competitive, reliable supply for our customers in North America, Europe and Asia. In ICC, we have a strong track record of sustainable partnerships. Solvay's unique technology provides hydrogen peroxide as a cost-effective an environmentally-friendly oxidizing chemistry for downstream chains such as propylene oxide, where we are well established, and Caprolactam, and intermediate for nylon, where we see room for growth. Let me provide a bit more detail on both of these opportunities. A little bit of technology for you before we get to growth rates and targets. Within the Electronics market, there are a number of segments that use hydrogen peroxide as a cleaning agent. So your flat screen TV, the solar panels I hope you have on your house, and also the semiconductors you see in your PCs, they're all produced using hydrogen peroxide. However, the most exciting opportunity is in semiconductor. So why do we see the growth in semiconductor? Firstly, digitalization is driving demand for microchips. And secondly, as chips become smaller, they need more hydrogen peroxide. Reducing the size of a chip increases the number of etching steps, and every etching step requires a post-etching wash with hydrogen peroxide. And now we're getting to levels of purity, which are truly amazing. We are being asked to supply products with less than 1 part per trillion of contaminant. To put that into context, the total number of dollars in circulation is only about $1.2 trillion, and we are asked to just provide 1 of those dollars out of the whole trillion to our customers. Complex technology. Our unique proprietary technology means that we are one of a very small number of companies around the world that can achieve this reliably and consistently, and we are the only supplier with vertical integration in all the main semiconductor-producing geographies. By focusing on a small number of key customers and making significant investments, we've already been able to grow at double the market rate in this segment. But we see a substantial acceleration over the next 5 years. The semicon market growing at about 5%, but our business in this segment growing at 25% per year for the next 5 years. That is why we've made the expansion announcements in Europe in the U.S., in Asia that Ilham talked to. With our greenfield investment in Arizona, we will be serving the market with these ultrapure products. And again, on the sustainability theme, that facility will, of course, be powered with renewable electricity. So I think you can now understand why we see this market as an attractive opportunity. Nevertheless, I'd like to reiterate the levers that we have in place to continue to be successful both at our existing sites and our 2 new greenfield investments in Arizona and Taiwan. Firstly, vertical integration in all of the main semiconductor-producing regions. This is unique, and offers unparalleled quality and reliability for our customers. Secondly, we have best-in-class proprietary technology and are focused on the most sophisticated and demanding chip applications, those that represent the strongest growth. Lastly, we have our customers' trust. We are a recognized Tier 1 supplier to the industry, and as an example of that, we were very proud that Intel chose to recognize us with a Supplier Achievement Award in 2020. Moving on from electronics, I wanted to touch on our Integrated Chemical Complex business. Remember that this business produces large volumes of hydrogen peroxide on or by a customer site at huge scale for immediate usage in their downstream process. The business model is a pipe to pipe, with the intention of having the lowest cost of highest productivity. This helps our customers move from older processes to the more sustainable, more cost-competitive hydrogen peroxide-enabled process for their oxidation. Specifically, by using direct synthesis, they can avoid byproducts, they can use less energy and they can discharge cleaner wastewater at their plants. Our technological advantage enables us to build the biggest plants in the world, enabling lower capital cost per tonne, lower operating expense, lower CO2 emissions. And to give you an idea of the economy of scale, one of these units is up to 10x the size of a more traditional pump, but there is exactly the same number of people. There are huge economies of scale on the variable cost structure, and that's why we have a very significant global share today for the supply of hydrogen peroxide and propylene oxide. We've got a proven track record with 3 existing mega plants in Belgium, Thailand and the Kingdom of Saudi Arabia. And as you can see, relative to the electronic hydrogen capacities we discussed, that this is in a completely different league in terms of volumes. What we're particularly proud of is we're working with our partners on all 3 of these units to further grow capacity. Now from a financial point of view, these joint ventures benefit from long-term contracts, which provide a steady income stream. And more recently, we've seen the opportunity to extend our reach in this space by licensing. Earlier this year, we announced our first licensing agreement with Sanning, who are working with us to build a world-scale mega plant to support their own in-house production of nylon monomers. Before handing back to Ilham, I wanted to finish by touching on a couple of new application segments in which our product is a sustainable enabler for the circular economy. Now these applications are just beginning today, but they have the potential to become key growth drivers for the future. First of all, we are already supplying hydrogen peroxide for electrical vehicle battery recycling in North America. Today, this is almost entirely management of scrap from battery production. But as this technology matures and as vehicles start to reach the end of life, we see the opportunity in this market taking off exponentially. Whilst that takeoff point is about 2030, there is a meaningful opportunity for us well before that, which we are ideally placed to take. A second interesting growth segment is urban mining. And by this, I mean the recovery of rare precious metals from electrical or electronic waste, such as printed circuit boards. As part of the chemical treatment of these waste, hydrogen peroxide is used to recover gold, silver and copper. But whilst this is a smaller opportunity for us than the battery recycling, it's still material and we're delighted to have just recently started a business, we're the leading company in this space, who've scaled up their first full-scale production unit in Australia. So hopefully, I've given you some more detail on why we think that this is a winning business. And with that, I'd like to hand back over to Ilham to conclude.

Thank you, Peter. Your presentation is simply fascinating. And this business is a fascinating example of how technology, strong reliable processes at scale, reputable business model can have a sustainable and profitable impact. Even though hydrogen peroxide has been in our portfolio for the past 70 years, there are unique and big opportunities here, as you've seen, and witnessed to create so much value when our teams put efforts and ingenuity at the service of our customers. I'd like now to wrap up things and with the key takeaways again. First of all, hydrogen peroxide is a natural fit to our One Planet goals. Not only are we substantially reducing our own emissions, but we support our customers in reducing their own environmental impact the same as Scope 3. As you know, sustainability is at the core of our strategy in all our businesses, the Peroxide business is certainly no different. We've demonstrated our proven track record of strong resilience, cash generation and cash conversion. We showed our EBITDA growth rate of 12% since 2013, and our historical cash conversion rate of 80%. As far as performance is a leading indicator for future performance, we target growing our EBITDA by 30% or 40% over the next 5 years while maintaining cash conversion above 80%. We have well-established strength versus competition in costs, scale and technology leadership. This powerful combination, had earned know-how has enabled us to establish a global asset base where 90% plus of our hydrogen peroxide capacity is within the top 50% industry cost performance. The scale and integration of our ICC plants have enabled us to have a leading position in HPPO as we explore opportunities to supply other chemical value chains and look to license our technology through key partnerships. From a cost perspective, our proprietary work in fluid will enable us to reduce costs by EUR 40 million by 2026. Solvay has been in this business for the past 70 years and have used that time to develop [ reputable ], proven business model. We continuously invested in the operations and research to maintain this position. We have today the right scale and production assets around the world to grow the business in the most attractive markets. Which brings me to my final key takeaway, our exposure to the most attractive market segments in Peroxide, our Integrated Chemical Complexes and Electronics. Our history and prudent investment in ICC has resulted in a significant market share in HPPO globally as we concurrently explore expanding into new markets like Caprolactam and new business models like licensing as we are doing with our key partners. We also are looking to maintain our momentum in the electronics market as we invest in new greenfield sites and continue to expand capacities at our other sites. As we told you, Electronics is expected to provide growth rates of around 20% per annum over the next 4 years. We are also looking at the market of tomorrow by exploring battery recycling and urban mining, which could provide additional opportunities. Now before getting into the Q&A in a moment, I would like to comment on the macro environment, which is presenting this industry and our industry with some unique challenges. Our Peroxide business is not immune to rising natural gas and logistical costs. Our plants maybe use gas and electricity in the hydrogen peroxide and HPPO processes. We manage our exposure by working with customers in order to secure margins, and we also have measures in place to manage our risk and keep our assets running. It's important to note that our hydrogen peroxide products cannot be stored and they are also produced to address direct demand. We are, therefore, less impacted by the stocking, destocking effects. The risk of natural gas curtailments on peroxide units in Europe is manageable despite the current challenging environment. If we have to move materials from other sites, other regions, the implied additional costs can be contained. As for our ICC mega plants, we expect no specific issues in the Kingdom of Saudi Arabia. In Thailand, we have priority from the government that there is little to no trade-off between energy for industry versus consumers as we head into the winter. We continue to monitor the situation in Antwerp here in Belgium, but we and our partners there consider that containment is unlikely given the importance of the site. As we prepare to establish the future EssentialCo, we will keep our team focused on delivering value to our customers. In Peroxide, our proven approach will allow us to continue to outperform the hydrogen peroxide market and accelerate our top line growth above 5% per annum across the midterm. Looking ahead, we will build on the strategic pillars that have driven our success, focusing on targeted investments, maintaining our technical and market leadership and continuing our cost and efficiency measures. In essence, we are well positioned in the hydrogen peroxide markets not only to capture large shares of the growing markets, but also to enable the transformation of the chemical industry to greener products better reliable processes and byproduct that's enhancing quality of life. Jodi, back to you.

Thank you, Ilham, and thank you, Peter, for a great presentation. Operator, we're now ready to open the Q&A.

[Operator Instructions] Your first question comes from Wim Hoste from KBC Securities.

I have 2 questions, if I may. And the first one is on the technology licensing opportunity and the trade-off you're making with putting CapEx in the ground yourself, and I think more specifically on the HBPO side. So does the new licensing model mean you will not invest yourself anymore in any really large-scale mega plants in the future? Is that the pathway taken here, or can you maybe walk a little bit or talk a little bit around that issue? And the second question I would have is on the pricing dynamics for hydrogen peroxide. I think for HPPO also, there's some guaranteed returns. Can you maybe elaborate a little bit here on the duration of the contracts? I think your first HPPO-related site is open for almost 15 years. How long is that contract turning? And when will it maybe come up to renewals? And then also for the non-HPPO side, can you maybe talk about pricing and things like energy charges, et cetera? How fast and easily can you introduce these things and how flexible is pricing? Those are my questions.

Yes. Thank you very much, Wim. Those are great questions for Peter, so we're going to having him answer the question. And I think on the licensing, Peter, would be great to go through the mega plant business model. Very different from our new licensing to non-core markets and with the first one in China. Floor is yours, Peter.

Thank you, Ilham. As you rightly said, Wim, the choice of licensing versus joint venture is a trade-off on CapEx. The first 3 mega plants that we've built are all in a joint venture model, this last one that we're supporting our customer Sanning and building is on a licensing model. And it's in the licensing model where I think we are very comfortable that we've taken the right steps to protect our technology for the long term. I think it's simply a question of choice and the economics of the bills that we have available to us. So I can see us potentially, in the future, entering into a joint venture. I can see us potentially doing other licensing deals. To my mind, it depends on the business opportunity itself.

Yes. And we, at the end of the day, we have been licensing through our history, right, Peter, with major partners. Obviously, what we announced recently in February, with Sanning we will build the world's first H2O2 mega plant fully dedicated to Caprolactam, so this is something different and new. The production is about 500 kt, right, Peter, per annum, and the launch will be in 2023. So we're extremely -- And this is, frankly, when Peter joined the 70-year-old business, I also asked him not only to run in a cruise mode, but to look outside the box on how we can reinvent and reimagine the business model. And we know that we are extremely good not only at licensing, but we operate these plants safely, right, with continuous production and productivity improvements year-on-year. So extremely glad with this, and more to come. There was a question from Wim --