Solvay SA (SOLB) Earnings Call Transcript & Summary

Hello, and welcome to the Solvay Q1 Results Conference. My name is George. I'll be coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I will now hand the call over to your host today, Mr. Geoffroy d'Oultremont, Head of Investor Relations to begin today's conference. Please go ahead, sir.

Good afternoon, everyone, and welcome to Solvay's First Quarter 2025 Earnings Call. I'm Geoffroy d'Oultremont, Head of Investor Relations, and I'm joined here today on the call by our CEO, Philippe Kehren; and our CFO, Alexandre Blum. This call is indeed being recorded and will be accessible for replay on the Investor Relations section of Solvay's website later today. I would like to remind you that the presentation includes forward-looking statements that are subject to risks and uncertainties. The slides presented in today's call are available on our website. Today, we will discuss our first quarter earnings and the outlook of 2025, and then we'll be available to take your questions. Philippe, the floor is yours.

Thank you, Geoffroy, and hello, everyone. As usual, we will start with safety. Following the tragic loss of 3 colleagues, subcontractors in 2024, we took decisive measures, and we launched a transformation program on the culture of safety at Solvay. To do so, we established a dedicated group safety task force, which is reviewing and reinforcing our safety plans all over the organization. In Q1 of this year, there were no reportable high severity injuries. But we all know safety is a daily commitment and it's never ever a given. So we will continue to work on our reinforced road map. Safety will always remain our #1 priority. Slide 6, please. So Alex will go through the earnings in detail, but I will first comment on the environment of the last few weeks. During our Q4 earnings call, we mentioned that we had seen a little bit of prebuy during that quarter, which positively impacted our Basic Chemicals segment in Q4 '24. This resulted in some softness in our soda ash business in the first quarter of this year. However, we saw a resilient performance in all the other businesses. Solvay is not only a soda ash player and the strength and resilience of Solvay lies in its diversified portfolio of leading businesses operating locally and serving numerous end markets. This unique profile gives us a strong confidence in our ability to navigate these conditions. The second half of the quarter saw a growing macroeconomic uncertainty on trade tensions and making customers more cautious. I will come back on this in our outlook. But now, Alex, can I ask you to walk us through the Q1 results, please?

Thank you, Philippe, and good morning, good afternoon, everyone. So moving to the financials. And as usual, I will comment on the organic evolution, meaning at constant scope and currency, unless otherwise stated. Moving to Slide 8. Underlying net sales in Q1 2025 reached EUR 1.1 billion, lower by 6% versus the first quarter of 2024. The volume decline primarily in soda ash and drove this decrease. Most of our businesses saw stable volumes, while bicarbonate and peroxide continued to grow year-on-year. Meanwhile, pricing was resilient and even slightly up in Performance Chemicals. Underlying EBITDA amounted to EUR 250 million in Q1 2025, down minus 6%. Regarding volumes, you might recall that Q1 of the previous year included some volume benefits from restocking and short-term demand increase, particularly in our soda ash seaborne market in Asia. These opportunistic sales did not repeat this year, but they were only marginally profitable as can be seen with the limited drop-through from sales, EUR 75 million to EBITDA EUR 15 million. On net pricing, the slight decrease is mainly driven by Basic Chemicals from the higher energy cost in Europe incurred in the first few months of the quarter, which are now behind us. Regarding fixed costs compared to last year, while there are several elements, the key takeaway is that our cost savings initiatives are successfully offsetting inflation. Overall, the EBITDA margin was stable at 22% -- moving to the segment review, and I will start with Basic Chemicals. Soda ash sales were lower for the quarter compared to the first strong quarter last year. We continue to see low demand in our domestic Europe and U.S. market and demand in seaborne softened sequentially. On the other hand, bicarbonate demand continued to be strong, benefiting from global megatrends such as previous treatment and volume continue to grow year-on-year. Proxid also delivered positive year-on-year growth, primarily from higher volumes in electronic grade and Latin American merchant market. The segment, which was down 20% compared to Q1 2024 from lower volume and somewhat lower net pricing and with a slight increase in fixed costs compared to a lower base in Q1 2024. Overall, the EBITDA margin reached 24% this quarter. Performance Chemicals on Slide 11. Sales were down in Special Chem due mostly to the auto catalysis business, which was down year-on-year, but which has improved sequentially. This was partly offset by higher demand in Electronics. Sales in Silica and Coatis remained very steady organically. Compared to Q1 2024, the overall segment was up 20% but 2/3 of that impact was driven by the one-off gain on the favorable outcome of a patent dispute in our auto catalysis business, the remaining 1/3 coming from positive net pricing and mix improvement. The EBITDA margin subsequently increased accordingly to 21%. One word on our corporate segment. Fixed costs remain under control and our stranded costs were limited in Q1 to low single-digit million euro as the exit of the TSA with Syensqo is being gradually implemented. The exit will be mostly completed by the end of the first semester. Free cash flow. This brings us to the free cash flow to shareholders from continuing operation, which amounted to EUR 42 million in Q1 2025. The main building blocks from EBITDA to free cash flow were the following: CapEx reached EUR 70 million during the quarter, in line with our EUR 300 million revised full year objective. Working capital saw a seasonal increase in Q1 of EUR 46 million, which mirrors the seasonal decrease we see in Q4. Finally, provision cash out include the usual pension and environmental liabilities as well as some restructuring, DAL Energy and other small cash -- let me spend a few minutes on explaining the phasing of free cash flow. The quarterly split of last year should not be considered as the normal -- the normal seasonality. On a normalized basis, we expect the phasing of free cash flow to be 1/3 in the first half of the year and 2/3 in the second half. And here are the elements explaining this pattern. First, working capital. Q4 usually show a reduction with lower activity level in December and hence a positive cash impact. But we typically see a mirror effect in Q1 of the following year. The variable remuneration, they are paid in Q2 and represent this year approximately EUR 80 million Finally, coupons payment. We have 2 senior bonds with annual coupons paid in April and October for EUR 30 million each. As we issued this bond last year, 2025 will be the first year with normal coupon payment phasing. So for this year, given the planned cash out in Q2 and the dividend payment, please note that our net debt will temparily increase to EUR 1.9 billion at the end of June. Net debt. I will end this financial review with a word on it. It increased in Q1 primarily due to the additional need on the balance sheet in relation to the launch of the waste wood boiler in Reinberg, Germany. This EUR 105 million impact is reflected in the other bucket. Overall, our leverage ratio remained healthy at 1.7x at the end of the quarter. And with that, Philippe, back to you for the outlook.

Thank you, Alex. So moving to the outlook now. Well, as you all know, we are in a period of global economic uncertainty, and it's certainly very hard to predict what will happen with trade negotiations, currency fluctuations or GDP evolution. So in times like this, rest assured, we stay close to our customers, and I make sure that the organization remains fully focused on cost savings and cash management. Looking at the short term, I expect Q2 to be comparable to Q1, set aside the positive one-off we had in Q1 and that Alex mentioned and also set aside the sequential increase of the temporary stranded costs related to the transition service agreement with Syensqo. We confirm the underlying EBITDA guidance for the year of EUR 1 billion to EUR 1.1 billion and currently expect to reach the lower half of the range should current market conditions and currency exchange rates continue to prevail. We confirm that we expect EUR 200 million of cost savings by the end of 2025, which will add EUR 90 million in terms of EBITDA in 2025 in the P&L versus 2024. And more importantly, given our commitment towards cash generation, we are also confirming our free cash flow guidance to Solvay shareholders at around EUR 300 million for the full year. As explained by Alex earlier, we expect the majority of this cash generation to occur in the second half of the year, and this is typical for our business due to natural phasing of certain elements. And in response to the prevailing market conditions, we are also taking some action to optimize our CapEx, and we are now targeting a CapEx of around EUR 300 million for the year. That's a reduction from our previous range of EUR 300 million to EUR 350 million. As a word of conclusion, I want to remind you of Solvay's resilience and our commitment on cash generation as we have demonstrated in the past. We remain fully focused on our strategic transformation, and we are confident in our ability to navigate these complex times and deliver on our commitments. Thank you for listening. And now d'Oultremont, I think we're happy to take your questions.

[Operator Instructions] Today's first question is coming from Hannah Harms from BNP Paribas.

Would you be able to clarify why the seaborne soda ash market was softer sequentially? I'm curious if it was driven by price or volume or if there were any specific countries that were particularly weak or if indeed the impact of caused by the minimum import price in India? Thank you.

So the seaborne market is softer, in particular, in Southeast Asia. It's softer versus Q1 last year because in Q1 last year, you might remember that China was importing. Today, we are back to a normal situation, which is that China is exporting at normal usual level. And it's softer sequentially versus Q4 '24 because the demand has weakened a little bit. We've seen a good momentum throughout 2024 with all the signals turning to green. And we've seen a sort of slowdown in 2025 in front of all the uncertainties we mentioned and the trade disputes.

We'll now move to Tom Wrigglesworth of Morgan Stanley.

Yes. A couple of questions, if I may. The first is on the kind of volume picture. It looks like volume is down 9% in the first quarter. Is that just indicative of a catch-up of -- what do we expect for the rest of the year? Obviously, you've cited some prebuying, but I'm also cognizant that obviously, things like flat glass demand was down like 10% last year. And I'm wondering if there's a kind of lag effects coming through the system that will weigh on the volume picture for some of your traditionally contract markets? So a little bit of -- and on the other side, I guess, in the bicarb world, can we continue to see -- are you confident that you can continue to drive growth in that market given that on the consumer side of the equation, there are some concerns, at least in the U.S. around the strength of the consumer. My second question is then on Specialty Chemicals. That I seem to recall, has a high China exposure relative to the rest of your businesses. And I was wondering how that's going to fare in the light of the tariffs and any of the trade uncertainty fallout. So any comments there would be helpful.

Thank you very much. So let's start with soda ash and bicarbonate. So indeed, soda ash, again, I mean, we've seen good signals in the course of last year that made us think that '25 would recover. And this is not what we see beginning of '25, and this is clearly coming from the uncertainty that we have on the market, a very, very prudent behavior of the customers. And the fact, as you mentioned, that flat glass has not restarted yet. And of course, whenever construction will restart, we will see the impact a couple of months -- a couple of quarters after immediately in our order book. Bicar continues to -- its growth very clearly. That's confirmed quarter after quarter. And the main segments that are driving this growth are really flue gas treatment and pharmaceutical applications. So of course, no one can predict what will happen, but we don't see at this point any risk coming from consumers reducing their -- changing their behaviors and so on. Now on Specialty Chemicals, you're fully right. I mean, if you take our global exposure to tariff, it's limited because we are very much local to local, and more than 80% of our sales are regional. Whenever they're not regional, we pass through the cost to the customers. So the impact -- and this is what, by the way, we see in particular for on soda ash is that there is an impact on demand coming from the inflation. But our only direct exposure, which we are really monitoring very closely is on heavy rare earth export control from China. So this is what you're referring to. So it's not, of course, a big exposure. It's a small business in our portfolio. So we are monitoring this very carefully and checking that we can continue to export those materials from China, which are very important. I remind you, by the way, that we have a plant in China as well. So that's for us an advantage. And I think that also highlights the fact that the projects that we are developing and that we've announced in are timely…

I think the line was probably coming from the question line. Gentlemen, right now, we're going to move to Chetan Udeshi of JPMorgan.

First question I had was, can you explain what's going on with your corporate line? It's sometimes minus 2%, sometimes minus 15. Like what's really going on? It's very confusing for us from quarter-to-quarter. That's the first question. Second question is just going back to the rare earth discussion. Can you remind us what -- how big is that business these days where we've seen a big jump in pricing for many of these rare earths metros in the last 2 months, especially. Is that something that helps your business anymore? Or are those days where rare earth prices actually matter for Solvay? And the last question is just on volumes in soda ash. I'm a bit curious because when I look at the -- some of your customers on the container glass side, their volumes have actually turned positive. And you are saying you are seeing weakness. So just trying to tie those 2 things together. Are you actually losing market share? Are you seeing more competition? I'm just not sure what is going on.

Thank you very much, Chetan. I will maybe start with the volume in soda ash and then turn over to Alex for the corporate lines, and then we will answer also your question on the size of the rare earth business. So in soda ash, good news that container glass is moving. We are also expecting flat glass to do so at some point during the year. We will see. There's always a little bit of lag until it comes to our order book. So we will continue to monitor. For the time being, we don't see any significant change yet. Just to answer your question, there is no market share that was lost. The only share impact that we have is probably versus Q1 of last year. again, when China was exporting and we seized some opportunities that we were not used to volumes that we were not used to deliver in the past. Now we are more back to a normal situation where China is exporting the expected quantities of soda ash. Now let's move maybe to the corporate line question. Alex?

Yes. Yes, we've presented that Q3 of last year, you have a slide. I acknowledge that when you look on the quarter, and this is the segment where we concentrate some one-off events. When we have such a context, we tend to keep the corporate costs low. What we've indicated is that the normalized run rate this year should be EUR 70 million to EUR 90 million annual run rate. So you should see the corporate segment apart from one-off savings we can do on corporate costs that should trend towards that.

On rare earth, I think the size of the special chem business is 12%, right, in terms of top line. So it's an important market, but of course, it's not the most important. And the business that we've started the new one in April in order to produce the first tonnes of rare earth oxides for permanent magnet is really very small at this point. So it's a potential opportunity for the future. But at this point, it's only marginal in our accounts.

Our next question will be coming from Sebastian Bray of Berenberg.

It's centered on the U.S. capacity expansion plan for soda ash. So correct me if I'm wrong, but my understanding is that within the 11% organic decline in soda ash, there is both a price and volume component. My understanding is that the U.S. investment about 500 kilotons is due to start ramping up midway, maybe a little later during the year. Is this going to be delayed or somehow stretched out? Because it looks as if Solvay would be adding volumes to a market where pricing may already at the margins be under pressure. I appreciate it's a lower cost position, but how exactly do you think about that? My second question is on autocatalyst, but I'll ask it after the first.

Yes. So first, a question, indeed, we are not slowing down the investment. We're not pushing, of course, because the capacities today are not needed. But I mean, the CapEx has already been spent more or less. But clearly, the ramp-up, we don't envisage a ramp-up of this capacity before 2026. So we might do some arbitration in order to seize the competitiveness because this capacity is very competitive. So we might decide to slow down another capacity. But our expectation is that we will not need these additional volumes before next year. And that's what we have in our outlook and guidance.

That's helpful. Could I just confirm before I move on to the auto catalyst question, both the prices and the volumes were down in soda ash in Q1?

Mostly volume, mostly volumes. Prices have been relatively resilient in Europe and North America. And they are, of course, very volatile on the seaborne and under pressure on seaborne. Yes, Alex, you want to take...

Just to remind that Q1 last year, it included we flagged that at the time of opportunistic sales -- when you look just 1 quarter, Q1 versus Q1, you see a trading volume, which is not necessarily representative of the overall…

Absolutely So if we get back to the question raised earlier by Chetan on the market shares, I mean, we cannot consider that we -- I mean we have our fair market share. It's just that in Q1 even the very, very unusual situation in China. I mean, China is normally not importing soda ash. So we were able last year to seize those opportunities. I would say it's more now back to normal, but in a market that is very, very well supplied. But again, what I want to say, just to be clear, is that it's -- this situation can change quickly. And that whenever construction restarts, this market can turn tight quickly.

That's helpful. And my other question was on the auto catalyst component of the rare earths market. Can you talk a little on the pricing here and the unit margins? It's a little difficult to differentiate the decline in volumes over the last 2 and 3 years from what looks like inflationary or close to inflationary pricing. Is there -- it partly relates to Chetan's question, but is there here a unit margin improvement story where price can be pushed a bit even if the volumes decline? Or what exactly is the growth outlook for this business on a 2- or 3-year view?

Maybe I will let Alex give a few words, but yes, I mean...

Both on volumes and pricing, it's been relatively stable. It's the type of business that tends to be not completely even over the quarters. So we can see a quarter a little bit high, a little bit down. I would say, overall, we were expecting this business to slowly decline as it's linked to internal combustion engine. And this is why also we are looking at new opportunities -- but finally, I mean, it turned out to be probably more stable than we thought. It's good news. It helped us in the meantime because this is a business very few people are investing in. It helps to hold the price. The customers need the products. But structurally, it will decline as electric vehicles replace internal combustion engine. And this business, Autocat is needed in hybrid vehicle vehicles. And the fact that hybrid is also probably not of the future or at least during a certain transition.

We'll now move to Geoffrey Haire of UBS.

I just had one left. I was just wondering if you've seen any changes in interregional trade or have customers talked to you about that given the prospect of tariffs and changes related to that?

Can you repeat the first part of your question?

Yes. Given obviously the prospect of tariffs coming, I was just wondering if any of your customers have discussed with you or you have actually already seen changes in trade dynamics globally as in where product is going, et cetera?

You want to take it? -- if you want to…

for the moment, our customers like everybody, they have difficulties figuring out what are the routes. We see a lot of logistic disruption today. I mean you have even the customers having difficulties to know how -- what tariff or what applies, you have congestion in certain ports. So I mean it's probably the type of things we see today navigating the short-term volatility. We are not aware of any customer changing fundamentally. It's I mean you've seen the example in electronics in 1 week, people thought, okay, you could not sell -- you could not produce mobile phone from China to the U.S. and week later. So we've seen that explains a little bit of the softness we are currently seeing here and there, this uncertainty. But beyond that, no significant change.

Next question will be coming from Tristan Lamotte of Deutsche Bank.

The first one is, it seems like at this kind of run rate, you need a bit of a step-up in H2 to reach the low end of your guidance. So could you maybe just clarify the reasons why you see H2 above H1, especially given a probably weak Q4? And then second question is, I just want to clarify what the expectation is for soda ash for the rest of the year. Could there be further downside on price to come and on volumes? And at this kind of price and volume run rate, can you hit the bottom end of your guide?

So what do we see in H2? First, we will have cost savings, right, the impact of the cost savings program that will gradually build up and produce results in H2 that are higher than in H1, and that will more than compensate the stranded costs that we will see from the termination of the Syensqo contracts kicking in, in Q2 of this year. Then we also have some business opportunities we're working on. right? And this is something that will also materialize in H2. So that's why what we're saying is that if current conditions prevail, we should land somewhere in the lower half of the range that we've given in terms of guidance. Now on soda ash, what are our expectations for the rest of the year? I would say a certain stability in Europe and in North America. And potentially a continuous volatility in seaborne, knowing that you need to be aware that at this point of time, prices are at very low levels and that a lot of operators, in particular in China, are operating at negative contribution when they sell at this price. So we don't see any potential for further deterioration. We see only potential of upside on this point. But again, how long will it take? No one knows.

Now we'll go to Peter Clark of Bernstein.

Yes, just following up on that. I'm just wondering in Europe, obviously, you've had a couple of players now shut capacity. How helpful you think that will be when you look forward? Obviously, it's a tough market. And then in terms of the guidance for the second half, again, obviously, last year, you were sort of baking in, in your thoughts some license income on HPPO coming in at the end of the quarter, and you've been pretty good on signing these things every year. Is that in your thinking again for this year that you get some HPPO signature on license income?

Yes. Thank you, Peter. Capacity, I guess this question was on soda ash more. Yes. So indeed, I mean, what we've seen since the beginning of this year is, I mean, a pressure on the least competitive capacities on the market. And -- and you might have seen that 2 capacities shut down in Europe and one forever, which is in the U.K. and one supposedly for -- I mean, it was announced for -- as a mostbing. I think this shows that indeed, the market is restructuring, and that's normal because that's the name of the game for this type of market. I think we also expect this to happen in China because they started up a very competitive capacity, as you know, close to 5 million tonnes now. And we expect also some restructuring to take place in China. This seems to be a little bit slower than what we expected. Obviously, if this speeds up, I would say it will bring some also relief on the market. Licensing and perils, obviously, that's one of the elements of the business opportunities that I mentioned earlier on that we're working on very, very hard for H2.

The next question will be coming from Alex Stewart calling from Barclays.

I wanted to probe a little bit on this idea that Chinese synthetic soda ash companies are making breakeven or negative contribution margins and will therefore shut. Could you tell us how easy and how quick it is to shut down a synthetic soda ash plant and then potentially restart it again in the future? I guess my thought process here is that they will presumably want to be prepared for some recovery in their markets. And now that the imposition of tariffs and potential future tariffs make trade more difficult. What's the risk here that they just decide to keep them running to maintain a state of preparedness. But I don't know what the technical considerations are. So I'm interested in your view on that. And then the second question, you added EUR 100 million of lease liabilities related to, I think, a conversion of a plant in Germany. It seems very high. You ended 2024 with IFRS 16 lease assets of just over EUR 260 million. So adding another EUR 100 million in that context is a big sum. Could you just talk us through why that's so significant? And why indeed you decided to lease the asset rather than purchase it outright? I'm just curious.

Thank you, Alex. So I will let the other Alex answer the second question, and I will take the first one that is first -- that has a first -- a technical aspect. Of course, it's always difficult to shut down a plant. I mean, even if -- I mean, whatever the plan is to shut it down and then restart it is always a headache because you have to keep the assets in good shape and you have to keep the people. So how do you manage this? It's not necessarily unique to the soda ash market. It's a little bit the same for all types of businesses. Now purely technically, you can imagine keeping -- I mean, shutting down and restarting. Of course, if you shut it down for a long period of time, it means you have to cool down completely the installation, then it would probably take 3 months to restart technically, I mean, but that's something that you can very well imagine doing. Now that's not necessarily, I think, what people have in mind because here, we are talking about a structural restructuring that is needed because we have this big capacity that is super competitive that have been launched based on Trona. And we have in China, a part of the industry that is noncompetitive. And when I say noncompetitive, it's less competitive than anywhere else in the world. And that also has environmental challenges. So I think at some point, those will probably shut down forever. But the current situation is probably not helping to move faster on this aspect. Now maybe I turn to Alex for the leasing -- the question on the leasing.

Yes. Thank you, Alex. So here, again, we are getting back to the cash allocation framework of Solvay. And as you know, our cash allocation framework, we start by essential CapEx, EUR 250 million to EUR 300 million per year. And into that, we have the energy transition CapEx we want to spend every year around EUR 30 million, EUR 35 million per year. Then we will pay our dividend and then we will do discretionary CapEx. So that's the overall framework. The investment we are talking about, it's linked to the coal phaseout of our plant in Reinberg. I mean we've made some communication around that. It's a huge asset. It's one of our biggest soda ash plant and it's half of the steam capacity. And we've communicated it's about 300,000 tonnes CO2 equivalent reduction. So it's big. And this is typically the type of investment. We don't want to put at risk our dividend capability or our investment capability. So leasing the asset is a way to spread the cash over the period, over a long period -- and on top of that, in Germany, you have certain incentives which are paid annually. So you match the incentives in Germany and the cash out linked to the asset. So that's for us, again, reinforcing, making sure we are not putting our dividend capability at risk. And if you look at the balance, we have about -- today, we have about EUR 400 million of lease assets. So it's going to add another EUR 100 million. It was -- this is not a surprise. I was building that asset for a few years. So it's well anticipated in our balance sheet.

And out of interest, if you had bought and built the asset rather than leased it, how much would it have cost roughly?

It's roughly the same. It's really the leasing, it's really a way to it. It's our own we build it. I mean we have -- we are building it. We are operating it. So it's really, again, a way to limit our annual CapEx, energy transition CapEx to EUR 35 million. I mean that's the type of capability and knowledge we have on how to structure this energy transition project. Sometimes other people do it typically because it's an interest example here. there are certain you need to recover all the wood in the region wood from furniture, construction and so on. This part we did -- even if it's just our plant, we decided to completely outsource an external company -- but the steel production here, we decided to do it. But again, leasing to spread the CapEx.

Next question will be coming from Ranulf Orr.

I got 2. The first one is just on the cost savings. And maybe you can just help understand the phasing -- help me understand the phasing a bit this year. I've got a bit confused. I think you said in your comments relating to the second half earnings step-up, you'd see increased cost savings contribution. But when I look, I think you did EUR 27 million in Q1, call that EUR 60 million for the first half. and then implying roughly EUR 30 million still to come in the second half based on your EUR 90 million P&L contribution comment from earlier. So I think I've gone wrong somewhere. Maybe you can help just clarify. And my second one is just on the CapEx reduction, where that's coming from? And does that have any impact on your growth projects?

Okay. So maybe I will start with CapEx and then Alex will answer on the cost savings phasing.  So on the CapEx, clearly, what we do is we do the essential CapEx. Clearly, this is something that, of course, we can optimize, I would say, the phasing, but marginally. But basically, the essential CapEx are done, meaning maintenance of our assets, safety, environment, energy transition. This continues. And for the rest, it means that the discretionary CapEx are really reduced to the strict minimum. So we continue to invest in the small projects that deliver high level of profitability and growth like electronic grade, hydrogen peroxide or biosource silica or the very small investment we did to start rare earth production for permanent magnets. And all the rest is pushed later. Alex, I don't know if you want to say a few words on the...

I think, again, I mean, what we said we will deliver over 200,000,000 we are committing to €200,000,000 cost savings this year. We are cumulative over 2 years. So yes, we delivered EUR 27 million in Q1. We will continue. I mean, when we have this type of environment, you've seen us in the past, we adapt, we will focus on the cost savings and on cash management. So I'm not sure it's as mechanical as doing a calculation quarter by quarter, but we are mitigating the business environment with the cost savings.

Ladies and gentlemen, we have time for only one question and a follow-up question from Tom Wrigglesworth of Morgan Stanley.

Sorry, I kind of got cut off in a weird way from a follow-up question. So with regards to these rare earth chemicals that you're -- I assume that you're bringing out of China and you then send to your customers around the world. You talk about monitoring them. It's a kind of interesting microcosm for us in terms of how the system is adapting. Are you holding? Are you storing entry in countries where you feel there might be a tariff impact? Could you suggest -- or is business continuing as normal? There's no change. None of the freight rates have impacted any developments? I'm kind of just intrigued that you have this insight into a Chinese resource that gets exported out to the rest of the world.

No. Here, it’s very clear. It’s just we need China has implemented an export control on some types of rare earth, and those are heavy rare earths. We need some of those materials to produce rare earth mixed oxides for the auto catalysis market. And this is done outside of China and also in China, by the way. And so right now, we are operating on with our inventory, and we are working with the Chinese authorities in order to get the license to be able to continue to export in the future. So that's the situation. So when we say we monitor as we work with the Chinese authorities in order to get the licenses to continue to export those materials for our customers from the auto sector.

We have no further questions. At this time, I'd like to turn the conference back to Mr. Geoffroy d'Oultremont for any additional or closing remarks.

Thank you. Thank you, and thank you all for participating today in our call. If you have any questions, please feel free to reach out to the Investor Relations team. We will have a couple of roadshow activity in the coming weeks. Next week on the 14th of May, management will take part in the virtual small and mid-cap CEO week organized by Kepler Cheuvreux. It's a kind of fireside chat in the afternoon. Then management will be in London on May 15, in Nice on May 20, Amsterdam, May 21 and the first week of June in Chicago and New York. Thank you very much. And our Q2 earnings will be published on the 30th of July. Thank you.

Thank you very much. Ladies and gentlemen, that will conclude today's conference. Thank you very much for your attendance. You may disconnect. Have a good day, and goodbye.