Victrex PLC

LSE:VCT

Earnings Call Analysis

Victrex navigates tough year, anticipates growth in FY 2025

Victrex reported a challenging year with a 5% revenue decline to GBP 291 million, heavily impacted by a 19% drop in medical segment sales due to destocking. However, the second half of FY '24 showed a 15% volume increase, indicating a recovery potential. The gross margin experienced a significant drop of 680 basis points to 46.2%, yet the company aims for a margin improvement to around 50% in FY '25. Revenue growth guidance for the impending year is driven by demand normalization and expected ASP between GBP 75 and GBP 80 per kilogram. Cash flow improved substantially, allowing for the maintenance of dividends at 59.56p per share【4:1†source】.

Navigating a Tough Year

In the recently concluded fiscal year (FY '24), Victrex faced significant challenges, particularly due to a downturn in the medical sector impacted by destocking. Full-year production volumes rose by 4%, reaching 3,731 tonnes, largely driven by end-market improvements in the second half of the year. Despite this, total revenue fell to GBP 291 million—down 5% year-on-year. The medical segment was particularly hard hit, declining 19% in constant currency as the industry continued to adjust inventory levels.

Profitability and Margins under Pressure

Profit before tax demonstrated a notable decline, down 26% to GBP 59.1 million, with reported profits dropping even further to GBP 23.4 million due to exceptional items. Gross margins suffered, decreasing from 53.0% to 46.2%, mainly due to lower asset utilization and negative impacts from inventory cost adjustments. The company is targeting a gross margin recovery to around 50% in FY '25, predicated on increased production capacity and easing raw material costs.

Cost Control Measures

Victrex implemented strict cost containment measures, resulting in a 10% reduction in overheads to GBP 74 million. These included tight control over innovation spending and minimal increases to operational expenses despite wage inflation of 4.5%. The firm expects to stabilize operational costs while using a revised employee bonus scheme to enhance retention.

Cash Flow and Dividends

Victrex reported an impressive 114% cash conversion rate for FY '24, with free cash flow significantly increasing to GBP 51.4 million from just GBP 3.2 million a year ago. The company maintained a final dividend of 46.14p per share, totaling 59.56p for the year. As inventory unwinding aligns with targets, cash generation is anticipated to improve further.

Future Outlook with Strategic Focus

Looking ahead to FY '25, Victrex expects to achieve mid-single-digit volume growth driven by improvements in sustainable solutions and potential stabilization in the medical sector. The average selling price (ASP) is projected to fall between GBP 75 to GBP 80 per kilogram, with expectations that recovered volume and margins will help offset cost headwinds including approximately GBP 7 million to GBP 8 million in currency impacts.

Investments in Growth and Capacity

Victrex has completed a significant four-year investment cycle aimed at enhancing capacity and operational capabilities. The company now possesses a nameplate capacity of approximately 8,000 tonnes, primarily driven by facilities in the UK and China. The strategic establishment of the China facility is expected to benefit long-term growth aspirations, although initial contributions to revenue are expected to be modest.

Medical Segment Transition

The medical segment, which continues to be soft, is poised for potential improvement. The firm anticipates a return to growth following the destocking phase, with specific projects like the trauma and knee device initiatives gaining traction. Current trajectories suggest a current revenue contribution from mega-programmes at GBP 25 million, showing resilience amid challenging market conditions.

Navigating Challenges and Embracing Opportunities

Victrex’s leadership articulated a clear commitment to navigating the headwinds faced over the past year while positioning the organization for growth. With a focus on cost control, enhanced capacity, and sustainable innovations, management is confident in returning to a growth trajectory in FY '25.

Earnings Call Transcript 2024-Q4

[Jakob Sigurdsson, executive]

[ Hello ], and welcome to the Victrex full year results presentation. I'm Jakob Sigurdsson, CEO of Victrex. And we also have here in the room with us today, Ian Melling, our Chief Financial Officer; and Andrew Hanson, our IR Director.

Welcome to those joining us in the room here at JPMorgan as well as those sort of dialing into the call.

First, some housekeeping. The slide presentation is on our website at www.victrexplc.com under the Investors tab and by clicking on Reports and Presentations. And I will call out the slide number when we're speaking.

I will kick off the presentation with our key messages and a summary of the results materials, and Ian will then cover the financial details. I will summarize the business performance and our outlook towards the end of the presentation. And once we finish that, we'll go into Q&A. [Operator Instructions]

So if we now move to Slide 3. We call the headlines for FY '24. Firstly, we saw solid volume improvement, particularly in the second half with a 15% increase in the second half versus the first. Full year volumes were up 4%, and we also saw our first 1,000-tonne quarter for a couple of years in our fourth quarter.

Medical destocking did continue to impact us and remained soft right now, but we're anticipating some improvement in FY '25 based on normalizing demand -- or based on demand normalizing in the current year 2025. As a reminder, surgery rates are growing. And if you look at the medical device industry forecast, so the rates are increasing by around 4% year-on-year. The midterm outlook to 2030 forecast, around 7% revenue CAGR for medical device companies. And we'd be looking to grow above those levels in Medical once destocking is over.

Ian will cover pricing shortly, but it is pleasing to see robust ASP despite the tough period the chemical industry have seen and the negative mix impact derived from medical destocking in our specific situation.

At the PBT level, it's clear that profitability took a big impact, a large year-on-year impact from much lower asset utilization and also Medical destocking, both of which impacted our gross margin. I will cover ourselves, our program later, but this program will help us underpin profitability over the years ahead.

We have been taking strong actions to contain costs in the light of the volatile business environment, and that's clearly reflected in our SG&A line. And as I said, Ian will take us through that in greater detail.

Finally, strongly improving financial position. Good cash conversion of 114% during the year. Inventory has been unwinding in accordance to plan and guidelines. And we're also entering a period now where we have done most of our foundational investment, and we'll be moving in 2 years of significantly lower CapEx than we have seen over the last 3 to 4 years. Last, but not least, we fully paid up our RCF facility at the end of the financial year.

Turning to Slide 4. Taking a step back and looking at the bigger picture over the short to midterm. I'd like to cover 3 key messages. Firstly, we are signaling the opportunity to return to growth. This will be driven by demand normalization both in the core business and Medical. We have seen improvement in the former but not seen the latter yet, as I indicated in my opening words. We are aligned well to global megatrends, CO2 reduction, energy efficiency and clinical outcomes are 3 examples. We're also expecting a step-up in mega-programme revenues in FY '25.

On margins, there are a number of factors that support margin improvement going into FY '25 and beyond. We'll be seeing better asset utilization as well as some input from cost, as well as some positive impact from input costs. Ian will cover those in details at a later stage. Medical mix will clearly help once Medical starts to recover after the period of destocking. And as it relates to China, as a new facility will start to build up volume, it will reduce the drag that it is currently on the margin line. And last, but not least, as I said before, we are ensuring that self-help remain strong, and we will cover that at a later stage in the presentation.

We have completed our investment phase with well-invested assets now that underpin our growth and give confidence to customers and our support and our ability to support them in the longer-term programs. Inventory unwind is on track and CapEx is coming down. So good opportunity to further improve our cost generation over the coming years.

So all in all, strong foundations and foundations that have been significantly invested in and improved over the toughest cycles that the chemical industry has seen for a long, long time.

Turning to Slide 5, briefly on run rates. A very interesting one. We had a soft start to FY '24, a weaker Q1, in fact, since the COVID period of only 751 tonnes in the quarter, but an average of 932 tonnes across the 4 quarters, even allowing for a weak start. And we've started FY '25 well, solid in October and November and with a good outlook for December as well.

We will see some seasonality in the current quarter as normal, and trading contentions are mixed. Medical remains soft right now. But Electronics and VARs have shown some improvement of late as 2 examples. We are anticipating improvement through the year in Medical, but we haven't seen this yet. But even the seasonality in the first quarter, delivering run rate similar to our Q4 exit rate in the auto course. This helps to support at least mid-single-digit volume growth for the year based on demand remaining robust in Sustainable Solutions. Medical is expected to see some improvement as we move through the year but clearly not until we're into the calendar year 2025.

And with improved asset utilization and raw material benefits even after the impact of China, this impacts our goal for PBT growth ahead of volume growth. As we noted in our outlook statement, the timing of Medical recovery will play a key role in the scale of PBT growth, but other factors to support an improvement for FY '25.

Thank you, and I'll now hand it over to Ian for the financial review.

[Ian Melling, executive]

Thank you, Jakob. Good morning, everyone. Firstly, I'd like to echo the key messages that -- Jakob has given us. A key message from me, as CFO, is that we've navigated a very tough year for the business. Clearly, we're not where we want to be, but we've seen some volume progression, robust pricing and run rate improvements in recent quarters. Our overheads were down for the year. CapEx and inventory is lower. Cash conversion was strong, and we've maintained our dividend.

As we noted this morning in our outlook, we are focused on delivering growth in FY '25 with the opportunity for good top and bottom line growth, supported by cost control and our self-help program, which will help enhance profitability in FY '25 and the short to medium term.

Starting with Slide 7 and the income statement. Full year volumes were up 4% to 3,731 tonnes. This was driven by some end markets improving in the second half with a solid finish to FY '24 and over 1,000 tonnes in the final quarter, our highest since Q4 of FY '22. Jakob will cover the end markets in his section shortly. At the revenue level, we reported full year revenue of GBP 291 million, down 5% on the prior year or 2% down in constant currency. Medical remained soft through the second half year as the industry destocking effect lingered. This was despite good growth in procedures across the Medical space as customers reduce their high inventory levels. We have seen this flagged by our peers under other companies supplying into the medical device space. This was a key impact on our revenue decline with medical itself down 19% or 16% in constant currency with the second half being flat on the first half of FY '24.

Sustainable Solutions revenue was down 2%, up 2% in constant currency. After a soft first half, Aerospace, VAR and Electronics drove an improvement in the second half. Sustainable Solutions revenue was up 9% in H2 2024 versus the first half of the year. The summary of our business unit income statement is shown in the appendix on Slide 34.

Moving on to gross profit, which was 17% lower than the prior year at GBP 134.3 million. This is after the effect of the gain on currency contracts of GBP 5.2 million. We saw a less favorable sales mix during the year after a record Medical performance last year and an improvement in Sustainable Solutions with the likes of VAR driving this progress in the second half.

Our higher cost of sales reflects a much lower asset utilization this year with approximately 1,000 tonnes lower production year-on-year, as we unwound inventory and demand remained muted. The impact of selling inventory built at a higher cost during FY '23 was also a year-over-year drag, which should now be behind us. This led to a GBP 10 million impact from under recovery of fixed costs, including the impact of China, which only started up during the second half of our financial year. We saw our raw material costs start to ease in FY '24. And this will see more of a benefit in FY '25 as the price flows through inventory. I will cover the FY '25 guidance shortly.

Gross margin was down 680 basis points, up 46.2% with the major impacts directly related to lower asset utilization and cost impact from inventory. These items are shown on Slide 10, which I'll come on to in a moment.

Turning to overheads. Overheads for the year were down 10% at GBP 74 million, excluding the impact of exceptional items with tight cost control and careful innovation spend, primarily in our Medical acceleration program. We also incurred some China costs and wage inflation based on average salary increases of 4.5%. No payout for our employee bonus scheme was triggered during the year for both employees and executives though we are revising the scheme for FY '25 to include other key metrics such as operating cash conversion as well as strategic objectives. This will support retention whilst retaining PBT as the primary metric for bonus purposes. We've now written to our major shareholders regarding this change and will include details in our annual report. As I have signaled previously, we continue to focus on limited increases to operating overheads going forward.

Interest was an expense of GBP 1.2 million this year, reflecting both our China loan where the interest will be expensed going forward and interest you on our revolving credit facility, which was fully repaid before the end of the year.

Going forward with China [ senior's ] first full year of operation in FY '25, interest is expected to be an expense of approximately GBP 2 million per annum. Our underlying profit before tax was GBP 59.1 million, down 26% or 32% in constant currency. Reported PBT was GBP 23.4 million, down 68%, which reflects exceptional items of GBP 35.7 million. These exceptional items reflect the impairment on Bond 3D as we signaled at the half year, totaling GBP 21.2 million, our ERP system and wider business improvement program together at GBP 9.9 million and a noncash impairment relating to one of our U.S. downstream facilities of GBP 4.6 million. Reported earnings per share was 19.8p.

One item I do want to flag is our effective tax rate of 32.5%, which is materially higher than the 15.9% in FY 2023. This was due to the impact of bond and the U.S. downstream facility impairment being nontax deductible as well as a lower proportion of profits being eligible for the Patent Box. Excluding the impact of exceptional items, our effective tax rate was 22.2% with the increase relating to U.K. corporation tax rates, China start-up losses and a lower proportion of profits eligible for Patent Box.

We continue to benefit from Patent Box. As previously noted, the benefits on the rate increases in line with profits as there is a baseline of profits that do not benefit. Our midterm guidance is for an effective tax rate of 14% to 18%.

Finally, turning to our dividend. We are pleased to maintain the dividend with a final dividend of 46.14p per share proposed, giving total dividends of 59.56p per share for the year. I will come back to cash flow later and how our cash profile should further improve as we move through the next 1 to 2 years.

Moving to Slide 8. This shows the underlying year-on-year PBT movements. As I noted in my summary of the income statement, the key drivers on profitability during the year with the trading environment and in particular, Medical, and a much lower level of asset utilization that created a material under-recovery of fixed costs in the P&L. Whilst we saw a GBP 3 million improvement in Sustainable Solutions, Medical impacted us adversely by GBP 9.9 million with the destocking effect within the medical device industry. Cost inflation in inventory showed a GBP 7.7 million year-on-year impact. This was all in the first half of FY '24. The underutilization impact was a GBP 9.9 million year-on-year movement as we unwound inventory. This includes the impact of China.

Wage inflation, I've already touched on, was a GBP 2.2 million year-on-year movement. We're targeting gross investments of GBP 600,000 year-on-year, largely in Medical to support the scale up with new customers in Trauma and Knee at our new product development facility in Leeds. Overhead savings represented a GBP 2.5 million favorable year-on-year movement in the bridge as we continue to control costs carefully. Interest was a GBP 1.8 million year-on-year movement as we moved from net interest income to net interest expense due to the interest incurred for our China loan, which was previously capitalized and the RCF. Finally, currency was GBP 4.4 million PBT benefit in the year, leading to underlying PBT of GBP 59.1 million, broadly in line with our expectations and reflecting that Medical remained soft during the second half.

If we move to Slide 9, price and margin. I'm pleased to say that our like-for-like pricing was robust with mix and FX, the key drivers on our full year average selling price. ASP of GBP 78 per kilogram was broadly in line with our expectations and guidance of high 70s. Remember that sterling strengthened in FY '24 through the course of the year and Medical remains softer for longer. ASP in constant currency was down 5% with mix and the impact of much lower Medical revenues being the key driver on ASP split roughly equally.

The second chart on the slide is also worth noting. For us, this demonstrates the ability to price Victrex PEEK for its performance benefits and indeed, the technical service application know-how across the economic cycles. Remember, we also invest 5% to 6% of revenue back into R&D. This was 6% in FY '24 as evidence of the focus and innovation we drive in the business to support customers. So in the financial years from FY '21 to '24, we have seen price accretion to reflect recovery of input inflation in that period.

A quick word on ASP guidance for FY '25. Whilst we have seen a solid start to the year, Medical will be a key driver on ASP once we see signs of recovery there. Consequently, we are guiding to a range of GBP 75 to GBP 80 per kilogram for ASP in FY '25.

Turning to Slide 10 on gross margin. This chart shows the main drivers on our gross margin during the year, which moved from 53.0% to 46.2%. As we have signaled already, lower asset utilization and the cost impact from inventory were the key drivers. These 2 factors accounted for 670 basis points of the 680 basis point margin decline. Mix was obviously softer during the year, which reflects the challenges in Medical and then Sustainable Solutions improving during the second half, but being driven by the likes of VAR. Looking forward, we are focused on gross margin improvement to around 50% in FY '25 and as you can see on the chart, we show the key drivers influencing our margin.

Improved asset utilization will be positive in FY '25 as we expect to produce more supporting volume growth. In FY '24, we were approximately 3,100 tonnes of production, whilst in FY '25, we expect to be significantly above that, subject to underlying demand. So a year-on-year tailwind from better asset utilization, though noting that China annualization will offset some of this benefit. Secondly, we are also anticipating some modest benefit from raw materials in FY '25. China will be ramping up in FY '25, and I'll cover that shortly. It will be dilutive to margin in FY '25 on its own. But with the improvement in asset utilization and lower raw material costs, we are focusing on improvement in gross margin even after the impact of China.

A quick word on the midterm outlook for gross margin and the basis for our mid- to high 50% target as shown on Slide 11. Firstly, we are seeing improving asset utilization moving into FY '25. Even though we will continue to unwind inventory, we will be producing more than FY '24. Secondly, we're seeing some recovery in volume run rates, as Jakob explained in his introduction. And thirdly, as I've mentioned, raw material price reduction will see some benefit for us over the next year and into FY '26. On mix, whilst Medical remains soft right now, surgery growth in the industry is healthy, and it's clear that Medical will see a recovery with timing at this stage uncertain.

With depreciation and a full year of China operations, this will be dilutive to margin in FY '25, but will steadily improve its contribution as we ramp up and sell product from this facility. Despite the currency headwind in FY '25, adversely affecting gross margin, the other factors support an overall improvement in gross margin to around 50% in the coming year.

On Slide 12, we cover currency. As usual, the impact of currency hedging is shown on the face of the P&L in line with IFRS 9. Note that the offsetting currency impacts on underlying trading are embedded in other lines most significantly the adverse impact in revenue. We saw a GBP 4.4 million tailwind at PBT level during FY '24. This is the net impact of the benefit from hedging with FY '24, seeing a positive impact of GBP 5.2 million compared to a GBP 7.6 million loss in FY '23, a favorable year-on-year movement of GBP 12.8 million, partially offset by adverse spot rate movements following the strengthening of sterling during the year. Currencies hedged at the dollar and euro, although it's worth noting some unhedged Asian currencies are becoming of greater importance as our growth moves faster in those regions. We keep our hedging policies under review in respect of these currencies.

Against the dollar, our effective rate, which includes the impact of hedging was 1.20 for FY '24 versus 1.30 in FY '23. Against the euro, the effective rate was 1.13, slightly favorable to FY '23 at 1.17. Looking forward, it's important to flag that sterling strengthened through FY '24 and without the benefit of full contracts seen in FY '24 from deals placed in FY '23, there is now approximately GBP 7 million to GBP 8 million adverse impact to PBT for FY '25. This is higher than the GBP 3 million to GBP 4 million headwind we had signaled -- here in May.

On Slide 13, we cover cash. With a heavy period of investment in capacity and capability concluded, and with improved trading and further inventory unwind, we do see an opportunity for further improvement in absolute cash flow over the next few years.

Looking at the main movements in FY '24 cash flow, firstly, from an operating profit of underlying operating profit of GBP 60.3 million, we saw a slightly higher level of depreciation as our U.K. asset improvement program completed and our China facilities came online in the second half of FY '24. Depreciation was GBP 23.3 million compared to GBP 21.6 million in FY '23. We expect this number to increase slightly to reflect an annualized depreciation. Working capital was an inflow of GBP 17.5 million, driven by our inventory unwind of 115 -- to GBP 115.1 million from GBP 134.5 million in the prior year as we made good progress towards our inventory target level of around GBP 100 million.

Capital expenditure was lower at GBP 32.6 million as we concluded our China investment and also the U.K. asset improvement program that gets our U.K. nameplate capacity to around 8,000 tonnes, supporting high-volume programs like Magma, Aerospace and E-mobility. These items drove a strong operating cash flow performance with operating cash flow of GBP 68.5 million and an underlying operating cash conversion of 114% compared to 18% in FY '23. The net outflow of income tax totaled GBP 4.3 million, slightly higher than the GBP 2 million last year. Cash exceptional items of GBP 9.5 million related to our ERP system and a slightly higher cost versus FY '23 of GBP 7.5 million, remembering that we are targeting go live of our [ D365 ] system in the first half of FY '25 to leverage and enhance our digital capabilities.

As a result, free cash flow was materially higher than the prior year at GBP 51.4 million versus GBP 3.2 million in the prior year. On dividends, we were pleased to have been able to maintain our dividend through this challenging period with cash generation now improving. Our closing position show -- saw a small increase in net debt position in the year to GBP 21.1 million including cash and cash equivalents of GBP 29.3 million.

As a recap, we also drew down and paid back our RCF during the financial year, and we retain these facilities, which we renewed last year totaling GBP 60 million, GBP 40 million committed and GBP 20 million accordion as the associate expires in October 27.

Moving on to Slide 14, a quick word on CapEx. We've now concluded what has been a major investment phase over the past 4 years, investing in assets, people and capability. FY '24 CapEx came in at GBP 32.6 million with China and our U.K. asset improvement program, the key items. The benefit from these projects is that we have well-invested assets and significant capacity for the coming years to support our growth programs.

On the chart, we also show our capital allocation policy with CapEx guidance at 8% to 10% of revenues going forward including some ESG and decarbonization CapEx. With cash generation improving as FY '25 progresses, we will be in a better position to start to think about incremental shareholder returns.

On Slide 15, we're pleased to update investors that we are commercially operational in our China facilities. China for China is the key message here. This is a strategic asset built for the mid- to long term underpinning our growth opportunities across several end markets in the region. Remember, this is a portfolio extension as we manufacture Type 2 PEEK there. Whilst China has also been challenged economically of late, our long-term opportunities there remain significant in a region which accounts for around 20% of our group volumes. For FY '25, we do not expect a material contribution to the top line with up to 150 tonnes of production will further ramp up over the next couple of years.

My final slide is Slide 16, and I'd like to spend a moment summarizing what underpins our expectations for growth in FY '25. As we noted in our outlook statement, we have seen a solid start to 2025, even if trading conditions are mixed, and the macro environment remains muted. But with better asset utilization, lower raw material pricing and improving sales volume run rates, we do see the opportunity for growth.

Briefly then on the key items. On volumes, the FY '24 exit rate of approximately 1,000 tonnes per quarter supports FY '25 delivering at least mid-single-digit volume growth. This is being driven by our Sustainable Solutions business. Our current quarter, Victrex' Q1 is traditionally our weakest seasonally, but we are tracking ahead of the prior year in overall volume and revenue terms.

Medical does remain soft currently. Though we do expect some improvement in Medical through the year, the timing of which will determine the scale of revenue and PBT improvement. ASP, I have touched on already. We're guiding to GBP 75 to GBP 80 per kilogram at current FX rates.

Turning to gross margin. Higher production levels moving closer to 4,000 tonnes and a Medical improvement should support gross margin growing to around 50% despite China annualization.

On OpEx, we see relatively stable OpEx ex-wage inflation of close to 4%. There will be an OpEx increase driven by employee incentive plans, which have not paid out in the past 2 years. Finally, on self-help and Project Vista, which Jakob will cover shortly, we will have some modest costs in addition to the final ERP costs in the year, meaning exceptionals of GBP 5 million to GBP 10 million as we seek to enhance our go-to-market and sales effectiveness and how we serve our customers.

In summary, we're macro outlook right now and trading does remain mixed with Medical remaining soft. However, we are expecting top and bottom line growth this year with self-help, cost control, efficiency and run rate supporting us. Our expectations for PBT growth of for it to be ahead of volume growth, notwithstanding the higher FX headwind versus current analyst estimates in the market.

Thank you. And I'll now hand back to Jakob.

[Jakob Sigurdsson, executive]

So thank you, Ian. We'll now move to Slide 18 in the pack. On Slide 18, we covered the summary of our Sustainable Solutions performance over the year. It was a mixed year indeed, but better indicators at the close across most of these markets.

If we start with Automotive. Volumes were up 5% for the year in line with our guidance at the half year. In this case, the growth came during the first half of the year with some restocking benefit, followed by a much tougher second half year as expected. Volumes were down 4% in the second half versus the prior year and down 15% half 2 versus half 1.

If we look at S&P data, the forecast for car production in 2024 is 2% down for car build, but up 2% for car sales. 2025 has an industry forecast of 1% growth in car build. We know that auto headwinds remain on the horizon, and we're cautious on the near-term outlook, even if we're well positioned across different application areas. On E-mobility, we saw a slightly lower revenue performance in mega-programme, but importantly, some broader battery and EV applications plus new platforms that will support growth in E-mobility as we head into 2025.

Turning to Aerospace. A very strong performance. Build rates and -- build rates are improving, and we're seeing new application growth as well. Volume were up 15% for the full year. Half 2 was up 12% versus the second half of last year. Volumes were also up 16% in the second half versus the first.

So what's driving this growth? Well, build rates have been increasing steadily. And if we look at Airbus, which we have a greater weighting too, the Q3 [ did ] a 2% increase year-on-year in deliveries in that quarter. And don't forget that we also have a growing business with [ COMAC ] in China, with COMAC doubling their build rates in 2024 from 10 to 20 planes on the C919 model and we have over 300 kilograms of PEEK on this plane. And their forecast for 2025 is to double the output again from 20 planes to 40 planes.

A brief word on LMPAEK or [ Lome PEEK ]. This is a new patented grade we developed to support compasses in aerospace and in particular, faster processing with the ability to process at 40 degrees lower. It's building commercial revenues and getting strong feedback from customers, which supports the upside opportunity in the coming years.

Moving to Energy & Industrial. Volumes down 5% for the year but second half volumes were up 6% versus 8% to last year, and half 2 was up 17% versus the first. In context, rig count was down 1% year-on-year to November.

And in the Sustainable Solutions space, this is still a mixed picture with PMIs below 50 in Europe, actually 45 for the November and the year or so. 50 China and the U.S. at 49, but moving upwards. But we do have some strong opportunities in this space. One of these is replacing PFOA or PFAS materials with PEEK, which you may have seen in some of our social media posts and marketing activity. It's a good opportunity for us in applications, including footwear, cabling and other industrial equipment.

I spent some time in Asia, the U.S. and on the continent in Europe recently with customers, and it is surprising to see how strong the potential for this replacement opportunity is. Actually, in some cases, quite a bit ahead of the legislative impact that might be on the horizon for limitations of use of PFAS and PFOS.

Turning to Electronics. Electronics volumes were down 12% for the year, which really was a year of 2 halves, if you wish. Second half volumes were up 19% versus the second half of 2023 and 39% up versus the first half of the year. So a soft start but a very good finish and in line with our expectations, mainly predicated on an improved situation in the semiconductor market as well as with some nice opportunities on the consumer electronics side.

As I said, much of this was driven by improvement in the semiconductor cycle. And I think JPMorgan's estimate is for 19% growth in semis for 2024. And if you look at WSTS figures, they're expecting and forecasting continued growth in semicon as we head into 2025.

With AI, the increased memory and -- being used in both the CapEx and OpEx part of the semicon process is -- presents a good opportunity for us. If we look at smart devices, also a strong area for us, but with more limited growth this year compared to semicon. IDC estimates that smartphone shipments should grow by 2.5% in 2025 driven by 5G and AI-enabled handsets. So this is something that definitely supports RP content per phone. Remember that PEEK are good play in these devices, including [ Araptifilm ] with film-film supporting heat persistence, durability and quality requirements for a range of smart device brands.

Finally, on value-added resellers. Volumes up 14% for the year. Volumes were up 55% in half 2 versus the second half of 2023. So some encouraging signs of progress and a really solid exit rate for the year. H2 versus H1 was up 25%. But now mindful that the outlook is not always clear until we move into our Q2, so calendar 2025, though we're tracking nicely ahead of Q1 last year overall, and that includes obviously VARs.

Slide 19, Medical update. It's clearly been a tough period for those working with medical device companies and supplying into this space. Revenue was down 19% for the full year at GBP 53 million with a flat second half compared to the first. So the effect of customers' destocking and high inventory levels lingered through the year. We've seen our peers also comment on this impact, that is those that are not in PEEK, but who supply into the medical device space.

The destocking impact is despite surgery rates remaining in good growth. Destocking did impact across most application areas, but particularly in Spine. One application area that continue to enjoy good growth was cranial -- facial or skull plates, 7% growth in this application. It supports improved brain fraction post surgery with a very strong clinical study in this area. This is now over GBP 11 million of our revenue, making up around 40% of our non-Spine business.

Despite the challenges of destocking this year, it's worth noting that we are a much broader Medical business now, more application areas and more opportunities. 60% non-Spine, including CMF arthroscopy, drug delivery, cardio and of course, growing revenues in Trauma and with a significant upside potential in Knee.

Innovation is strong in this area. Remember, we've invested incrementally in Medical since FY '20 to support our new product pipeline with our facility in Leeds, which is primarily dedicated to design specific trauma plates and specific needs for the customers that we signed joint development agreements with. And you may have noted that PEEK secured and approval for 3D-printed spinal case back in September, a really strong milestone for us as well sort of representing, in many ways, the holy grail of spinal implants.

Taking PEEK and combining it with 3D printing capabilities in our -- structure, which could offer the better both worlds for PEEK and Spine going forward.

Slide 20, on the Medical outlook, a brief word. Slide 20 shows the breakdown of our geographical and also non-Spine versus Spine revenues. Spine was 3/4 of our Medical revenues 10 years ago. Now it's 40%. And it's -- and importantly, Asia and Europe are together larger than the U.S. by now. The U.S. remains a key health care market for us, so there's a high degrees of innovation, taking part of that market with an attractive regulatory regime. But the challenge on titanium is more evident there in pores and titanium expandable cages.

In Asia, the speed of innovation is just remarkable. But we, like all other medical players, have been going through the challenges of volume-based procurement in China. Europe is -- has PEEK well placed. And we see the opportunity for PEEK Knee to seek its next regulatory submission in this region following the submission in India in September.

Overall, the key message here is that we are a much broader and more diversified business in Medical today than 10 years ago. Many of these opportunities do take time to come to fruition. But with the likes of CMF in the core Medical business with drug delivery applications and then the mega-programmes like Trauma and Knee gaining traction, you can see a strong future for our Medical business.

Slide 21 on our mega-programmes. 5 potentially game-changing projects. There's also Slide 31 in the appendix, which shows a detailed milestones for each of these programs. They have not delivered as fast as we would like or as fast as investors would have wanted. But the important point now is that the key milestones are coming through strongly, offering us the prospect of a significant step-up in revenues in 2025 towards our target from GBP 10 million today.

But we're mindful that the timing of Magma may have offset overall progress. But that program is at a very advanced stage with TechnipFMC and Petrobras, and we have regulatory pathways in Medical, which can't be compressed.

I was fortunate to visit Technip facilities in France in the plant recently where we had a staying committee, and it was truly impressive to see the qualification trials that are going on there and how -- PEEK and flexible composite pipe is passing all qualification trials in flying colors, but also to see the commitment that Technip is placing to development of this opportunity and a close collaboration that we have with Petrobras.

I don't tend to go through all the mega-programmes in detail, but the key milestones have been strong. Trauma delivered strong revenue growth above GBP 1 million and now has a broader customer base. E-mobility is be a key driver on progress in FY '25 and the step-up in revenue in 2025 with broader EV platforms. Knee, really strong progress. Our regulatory submission in India, and we await the opportunity for the first commercial PEEK Knee to be available in that market during 2025.

I also want to add that on Knee, we have a significant interest from top 5 knee players. Remember that we signed up with the [ Fifth SK Lab ], but others are showing great interest in partnering with us to develop their own slate of deep placed knee with discussions ongoing.

Slide 22 on E-mobility, a quick word. Clearly, there was a headwind in EV sales during 2024, which meant no progress on our E-mobility revenues. But the shift to faster charging and long range has been making great strides and it is a place where we're well placed for increasing PEEK content in electric vehicles with the opportunity of around 200 grams per 800 world motor as an example. And this is coming from a place where we, on average, have around 11 grams of PEEK in a car today.

PEEK isn't the only material competing in this space but with durability, fast processing and higher heat and higher voltage performance requirements are higher, which plays well for PEEK performance and the total cost of ownership per application. So great opportunity, and I think we'll be able to report on a step-up in demand in that specific sector as we go through 2025.

Trauma and Knee, on Slide 23. We cover the pathway for Trauma and Knee and how our strong pipeline and see into a development partnership with a customer and then the regulatory process towards validation and commercialization. Remember that our PEEK trauma plates are commercially available and already in the body with over GBP 1 million in revenue for trauma plates this year and more to come in FY '25.

Plates include -- and angle plates to support fracture fixation. Knee has some limited development revenue coming through, which is set up -- to step up in FY '25 and beyond. What this slide shows is the states and gate process across these 2 key programs. Trauma has a quicker regulatory pathway given that it's a Class II device compared to Knee with [ CONMED ], our key customers and then additional customer launches in the U.S. and China coming behind them. So a broader customer base in Trauma, which will support revenue growth in FY '25.

In Knee, it's a more complex pathway to commercial revenues. We've had to work through additional clinical work as this is a Class III device. The clinical trials in India, Italy and Belgium have progressed very well. 57 patients been implanted and 20 post the 2 years already with no intervention. As you can see, the submission for PEEK Knee in India was completed in September 2024. In the U.S., there's a clinical still underway with 120 patients once fully recruited, and we look forward to getting this underway as well.

So key milestones delivered and strong progress. These milestones also support how we're seeking to increase the percentage of revenue from Medical over the longer term, delivering the return to our Medical -- delivering the return on Medical acceleration investment.

Slide 24. I want to mention that we aren't just waiting for a sustainable recovery in the macro environment, of course. We have been working hard on self-help through cost control as evidenced by the 10% reduction in overheads last year and through a new program called Project -- which is focused on improving how we go to market, and it's targeted at improving our sales effectiveness, greater deployment of digital solutions to support both customers, R&D work and process optimizations will also target greater efficiencies on the back of our ERP system implementation that is coming to a close and also seeking opportunities in the procurement area.

Some of these measures are simple ones, a more regional sales team structure. For example, salespeople selling across end markets, a broader range of end markets and driving efficiency. Overall, this will help support profitability in FY '25 and in the years ahead. And we will update investors on our progress and the associated outcomes as we move through FY '25.

Slide 25, wrapping up with our outlook slide. You can see our view on the end market outlook. We're optimistic on Aerospace, driven by plane build COMAC business increasing in China and our additional composite business based on our LMPAEK platform.

VAR and Electronic. Visibility on VARs remains limited and, in fact, always has been limited. But we're optimistic to neutral here, but we do see growth for the year as a whole in VARs. And remember, there's also a strong correlation here with some of the key end markets, particularly Electronics. Electronics, itself, as I covered earlier, semicon market indicators are more supportive this year as is the outlook for smart devices.

On Medical, we're expecting an improvement based on customer engagement but we haven't seen this yet as we've, I think, clearly articulated both Ian and I, but we will be expecting to see it at the very latest in the second half of this financial year.

Energy & Industrial, some caution here as rig counts are down year-on-year, but let's see what come through, particularly in the U.S. next year. And finally, on auto, we are mindful that all of our peers have flagged the headwinds in auto over recent months. And we share this caution with S&P forecasting only 1% growth in 2025, though in E-mobility significantly -- or specifically, we do expect to see some progress as new 800 world platforms commenced production with PEEK in electric applications.

Just to summarize on Slide 26. It's been tough times for the chemical industry and ourselves in the last couple of years. But we have strong foundations. We've invested through this period to underpin our future, overall GBP 170 million in CapEx since 2020, as an example. We have a very attractive recovery opportunity once demand improves more sustainably, and we have been seeing improving run rates, as we've talked about during this presentation. We also playing a part with self-help and cost control and improving how we serve our customers and go to market to increase our differentiation as well in our leadership position in peak.

Overall, the addressable market remains attractive in all application areas. And we estimate that at least 5x the size of the application that PEEK serves today is available to us in the years going forward. So our core and a macro recovery, self-help and then increasing commercialization in mega-programme with a step-up in FY '25 to underpin growth. Finally, an opportunity for improved cost generation and improving returns over the short term.

So really, 3 key points we can see our path towards volume growth through demand normalization. We've seen it on the industrial side. We're expecting it during the year on the Medical side. So that will definitely contribute to volume growth as will the fact that mega-programmes will start to contribute during the year.

On the margin side, we should be expecting better margins associated with the volume growth, improved production rates and better overhead absorption and with the return in Medical. And then on the cash side, well, clearly, volume will help there. We're coming off a high CapEx cycle and inventory will continue to align. So we should see significantly improved cash flows as well as we go through FY '25.

So that was the end of our formal presentation, and I think we'll take questions from the audience first here in the room and then from those on the phone afterwards.

[Lauren Baker Iguaz, analyst]

Lauren Baker at Peel Hunt. I have a question about the mega-programme. In last year's results, it was said that the revenue contribution from the mega-programmes for FY '25 would be GBP 25 million to GBP 35 million. And today, you're saying it will be GBP 25 million. So what is causing this decrease in guidance? Is it mainly because of the Magma delays and the Medical progress? Or because...

[Jakob Sigurdsson, executive]

There's a couple of things there. I think this year, there has been a slower uptake in E-mobility and has impacted it this year. And actually, a bit of a, how should I say that, transition in the asset strategy associated with Technip and Magma. So there is an investment going in, in the extrusion facilities in Portsmouth right now to support growth. And that means that, that equipment has to be taken down, while that capacity increase is being embedded.

Once that's up and running, we'll start to see contributions from that. But clearly, the time frame has been pushed out a little bit as well. So E-mobility and Magma this year and going -- and Magma going into next year and Trauma plate was lower this year than we had anticipated in the early stages. But in any event, we will see a significant step-up in mega-programme revenues for the year.

[Lauren Baker Iguaz, analyst]

Okay. And just another question. On Page 20, when you say the Medical revenue split, what is the goal between Spine and non-Spine? And then also if you can comment on the margins from Spine and non-Spine, how they compare?

[Jakob Sigurdsson, executive]

Want to take one?

[Ian Melling, executive]

Yes, sure. So we don't have a stated goal for a split between Spine and non-Spine. What I would expect is that we have more new opportunities outside of Spine at the moment. So I think we can continue to build that diversity. And remember that non-Spine in itself is quite diverse across arthroscopy, the mega-programmes, CMF, cardiovascular. So we have a broad range within the non-Spine piece. So I would expect that to continue to grow.

And your other question was the relative pricing. I would say there's a fairly broad range of pricing in the non-Spine piece. Some of them more kind of core implantable technologies where you make specific implants that are quite Spine-like in pricing. Some other applications a little bit lower where we maybe sell larger pieces of PEEK that are the machine down, then those ASPs can be a little bit lower in the medical spectrum, but still significantly higher than the sustainable solutions space.

[Chetan Udeshi, analyst]

Chetan from JPMorgan. 2 few questions. Maybe for Ian, can you walk through the bridge for 2025 PBT? Because I was just trying to do some math on my head. You've got GBP 7 million of FX headwind, maybe GBP 4 million to GBP 5 million from bonus, that's already GBP 12 million of headwind to offset and grow the earnings. So what are the tailwinds? And if you can quantify on the other side.

The second was the comment on raw material price benefits. Can you talk about which are the raw materials you actually see coming down? And what is your pricing expected to do this year in '25?

And one, just a broader question. Most of your production is in the U.K., you are selling it into the U.S., especially for the medical market. Now there is a threat of tariffs. So there are 2 questions here. How are you going to manage that if there is going to be a tariff on imports of PEEK from the U.K. into U.S.? And number two, how you actually see your customers sort of restock ahead of that tariff in any of your markets?

[Jakob Sigurdsson, executive]

So maybe I'll start with the last one first here. I'll take the tariff situation. I think there is a 6% tariff on -- into the U.S. currently. Nobody knows what it might be or where it might end up. Interesting to note, though, that before the first Trump administration went out of power, there was pretty much a free trade agreement on the table between the U.K. and the U.S. So it will be an interesting thing to see whether that will be sort of resurrected. And that was a pretty favorable 1 for chemicals and for PEEK. But 6% is a tariff right now.

There's only one competitor making PEEK in the U.S. currently. They, however, are importing all the raw materials from China pretty much, or India. So I think there might be a potential tariff coming on the one going into the U.S. that would sort of mitigate the relative impact of cost for both parties, if you wish. And then other competitors are solely dependent on Chinese monomers and obviously, only exporting from China. So that's sort of the competitive landscape around tariffs as we speak.

You asked whether we're seeing any prebuying impact, and the answer to that is no. And most of the customers that we have talked to expect to deal with that in -- through pricing in due time should that lead to a cost inflation on your side.

[Chetan Udeshi, analyst]

You're not expecting to raise your prices to pass on the higher tariffs?

[Jakob Sigurdsson, executive]

Wouldn't exclude anything in that context.

[Ian Melling, executive]

Okay. Good. Okay. Should I go back to your first one on the bridge, Chetan? So you correctly identified foreign exchange and bonus, hopefully, as headwinds this coming year. I think the major tailwinds, so you do have better asset utilization. That was GBP 10 million headwind this last year. I wouldn't expect to reverse all of that, but a significant portion of it. So let's say, half-ish of that reversing this year. That's a tailwind year-over-year.

The benefit of lower cost inventory and raw material pricing coming through, some of that's in inventory now versus last year. Some of that will come in, in raw materials we purchased during the year. And I'll come back to your question on that in a moment. And then the remainder would be just the volume growth coming through the drop-through on gross margin from Sustainable Solutions growth that we've talked about plus Medical improvement later in the year. So those would be the big positive items in the bridge.

[Chetan Udeshi, analyst]

On pricing? Your pricing?

[Ian Melling, executive]

So pricing has remained robust. You saw the chart on that. I think we've been clear that we don't price our product based on the input costs of our products. That meant we couldn't pass that price on very quickly, which you saw, but we are now in a place where we've recovered most of the inflation we've seen through the pricing that we've put in and maintained over this year, FY '24 and into FY '25. So we will continue to price PEEK based on the value it brings to our customers.

And we -- whilst there will be -- we don't see a significant movement one way or the other this year, there will be basis where price increases and there will be places where price decreases, depending on the competitive situation, the geography, currency, potentially in the future tariffs and other things, but we continue to price PEEK based on the value it brings, not based on the input costs that make it up.

[Vanessa Jeffriess, analyst]

Vanessa Jeffriess from Jefferies. First, I was just wondering on your end market outlook. I guess it's pretty easy to see 80% of your markets potentially go the right way next year. But in Automotive, you're still saying cautiously neutral. I would think it would be a bit more cautious than that, just given the data we're seeing on light vehicle production in the EV market. And what do you think the downside risk is there?

[Jakob Sigurdsson, executive]

Yes. Specifically asking about Automotive outlook. I think it's interesting. So car production is going 2% down this year, and we were up 5%. So I think we're also getting into new applications and other starting to show up in the numbers. And in fact, [indiscernible] the decline in the outlook for car production this year and the latest decision from IHS is driven by Europe and the U.S. actually. And then at the high level, we're forecasting 1% growth next year.

Our exposure right now is roughly 40% Europe directly in Automotive. It's 50% in Asia. And from the Asia fraction, 25% where half of it is China and has been growing very rapidly in the last 5 years. So I think we're well positioned. We are -- and Automotive is the one that we're most cautious on. So we saw 5% growth this year. The year is starting in line with our budget. But we are well aware of the uncertainties around the auto demand but we're not seeing it go backwards for sure. I think we're seeing modest growth for Automotive with some risk attached to it.

I think what's encouraging for us to see is the better outlook in Electronics. And we clearly saw it coming through in the second half of the calendar year, mainly driven by semicon again and then to a lesser degree, consumer electronics and the positive outlook for that market. And there is also sort of a derived benefit from that if I can trade it that way, and that is that quite a bit of the VARs business is associated with Electronics as well and semicon in particular. So that gives us confidence.

We've seen actually good traction in Energy & Industrial as well in the first couple of months of this financial year as we saw in the last quarter. And I think there's a reason to believe that there will be a modest momentum behind that, where that suffered significantly in the earlier part of FY '24. So when you look at this in the round about guiding to volume growth in the mid-single-digit area is something that we can stand by, recognizing the overall sort of balance of risk and upside, if you wish.

But you are right, everybody is most concerned about auto these days. And that's our reason for caution here. But stating the factor or underpinning the assumption as well, models growth is but a small one possibly.

[Vanessa Jeffriess, analyst]

And then following your China expansion, I think you have between 30% to 40% of total PEEK capacity in China. I don't know if that's right. But I mean, I find it fairly difficult to get insight into that market, and you'll be utilizing about 10% of that next year. Maybe if you could talk us a little bit through the competitive landscape there and if you're seeing other capacity expansions?

[Jakob Sigurdsson, executive]

Sure, sure. So in China, we have a nameplate of 1,500 tonnes. And remember, the industry talks in nameplate, but that's not a fair representation of what can be derived from that plant -- or those plants. So everybody talks in -- by the way, and that's why we're doing it for consistency's sake. But if you look at it on the face of it, that's probably demonstrated capacity of close to 1,200 tonnes. So let me make that caveat. We're saying we'll be well over 100 tonnes from that plant this year. And it is primarily geared to serve our value-added resellers customers, but it will also play a very important role in E-mobility. And that's where with the nurturing opportunities for 5, 6 years right now that are really starting to come to fruition. So the fact that we have that asset there is absolutely key for us.

Specifically, on a competitive landscape. [ Evonique ] has their manufacturing facilities out of there and have had for quite some time, making PEEK in China with Chinese-based input. There is a local company -- there have been many in the past that have been claiming to put in capacity and manufacturing PEEK. Actually, a few that have survived the journey from designing, building, making, making quality and then building a market that is conservative. But there is one company that is there to stay called [ Jilin Changan ] primarily and there might be a few smaller. I think these will be the significant ones.

So if you look at the PEEK universe today, it is the science courts were already with [ Evonique one ] and the local Chinese player that I mentioned. The last 2 completely operating out of China saw science cooperating out of India and the U.S. dependent on monomers coming from China and/or India.

[Ian Melling, executive]

I think it's worth saying is it's close to 15% of our capacity in China.

[Vanessa Jeffriess, analyst]

Just looking at all these kind of articles from the Chinese players in 2018. It's very difficult to get a sense of the market there.

[Jakob Sigurdsson, executive]

Yes, yes. And sometimes, just sort of put for thought is that when and if there is a capacity announcement in a certain country, it happens that they do add the capacity of each process step, and that then defines the total capacity that is in the announcement. So it basically means that you take all the different vessels from the pre-blending stations, the reactors for actually creating the PEEK itself and the refining steps and the solvent recovery steps and you add that up, not quite often presented as capacity. So just fruitful part when you're calibrating your assessment of what is actually installed.

[Aron Ceccarelli, analyst]

Aron Ceccarelli with Berenberg. Perhaps maybe can you shed some light on your current level of capacity utilization as you exited Q4? And as of today, what expectation do you have for production into 25?

Then maybe just a follow-up on pricing. There's clearly a wide range, I think, depends on Medical. But what are the end markets where you feel most confident about raising prices going to 2025?

And on your raw material basket, I assume you're still seeing benefit simply because of the inventories you have now your balance sheet. If you have to buy raw materials today, what's the year-over-year change in the raw materials?

[Jakob Sigurdsson, executive]

So I'll take first 2, and then Ian, maybe you can elucidate a little bit more on the raw material purchasing price. So currently, past utilization, let me start by again using nameplate. So in China, we've got 1,500 tonnes of nameplate. And then at [ Hillhouse ] right now, having totally renovated our oldest asset, which was called PP1, polymer plant 1, totally revamped that and taken the opportunities as well to get more out of it at the same time, which makes sense given the future outlook. We have around 8,000 tonnes of nameplate there. So previous figure, there was 7,150 tonnes, but through what we have done at Hillhouse and mainly through this refurbishment of all these assets, we've gained probably additional 850 tonnes of nameplate. So that's that.

The utilization right now, so we sold just sort of through 3,700 tonnes last year -- just in excess of 3,700 tonnes. We made less. We will be making more this year. How much? I cannot exactly say. But we'll be making significantly more in the coming year based on the demand that we are expecting. Still working down the inventories. And remember, this is overall inventory, so it's inventories of both finished products, work in process and raw materials and actually spare parts as well. So there's a lot of factors in there. But overall, we will be reducing inventory. We will be producing more. I think -- is one of the supporting arguments for why we're saying we're getting better cash flow. So continued growth cash flows and better margins as we head into FY '25.

On pricing, it's not necessarily the different sectors. It may also be based on an application within a sector. So that's where you have to be highly surgical. And we -- remember what Ian said, PEEK is price to value. So it can be very different even in the space of Electronics, how you would price a certain form or a grade of PEEK, whether it's just pure granules or its powder, whether it's a compound or whether it is even a film. It still actually represents a big part of what we sell into Electronics. So I think that's an area where you wouldn't make a general statement across sectors, but it's more driven by specific applications and the value that we bring to those, and the delivery form of the PEEK.

Ian, maybe you can shed a little bit of light on the raw material side.

[Ian Melling, executive]

Yes, I'll try. And I might actually to clarify a little bit your question. But I think on raw materials, generally, we're seeing raw materials have come down in price over the last 6 to 12 months. We continue to see them competitively priced now. And we continue to lock in those prices where we can and agree purchases for the next few months ahead, year ahead or so as we go through the year. We continually talk to our suppliers, and we talk to potential new supplies as well who might have more competitive prices, too. So we're always -- we have an active procurement program that's always looking at raw materials and getting the most effective sources of raw materials. Does that answer your question? Or...

[Aron Ceccarelli, analyst]

Yes. I just wanted to know maybe if you can quantify what is today versus like a year ago? It's down? Is it flat?

[Ian Melling, executive]

I would say versus a year ago, probably marginally down in the round. Clearly, there are ups and downs across the piece. I think we saw that decrease, I would say, probably 6 to 12 months ago. And since then, it's been relatively flat. But if you go back a full year, we're probably a little bit lower now than we were then.

[Aron Ceccarelli, analyst]

Are you not seeing competitors pricing down in this environment with raw materials are still down and the end markets are not fully back?

[Ian Melling, executive]

So we do see pricing -- yes, we do see competitors competing on price. We've always seen our competitors compete on price. And there are places in the market where we have to respond to that. And we do when it's necessary. It's not a -- PEEK is not somehow special. There is always price competition in the market. But for our competitors as well, PEEK is the premium products. So they need to price it relative to their other products as well.

So I think we're always sensitive to the pricing dynamics. And yes, I would say overall, the pressure is downwards, and that's why Jakob said, we're not seeking like maybe where we were 2 years ago to push price up everywhere. I don't think that's realistic. But we look at where the value of PEEK is, as Jakob said, what the form and grade of peak we're selling and we price accordingly.

[Jakob Sigurdsson, executive]

I think it's worth making the point as well that if you look at the polymer pyramid, the pricing mechanisms are wildly different if you're at the -- in the upper half of it, let me say, and if you're at the bottom half. When you are dealing with polyethylene, polypropylene, polystyrene, most pricing contracts are intact to some PEEK stock materials -- but -- so automatically sort of progress accordingly, and you see much more swings in pricing, whereas the higher you get in terms of performance into engineered and specialty polymers, the more stable it is, as a general rule. And you will not have the same indexing mechanisms at play.

So seems like there are not any further questions from the room at the very moment. So we take questions from the audience online.

[Operator]

[Operator Instructions] And your first question comes from the line of Martin Evans of HSBC.

[Martin Evans, analyst]

Just following on again sort of Chetan's question on the bridge and where that leads us with consensus for this year. I mean there's obviously a lot of positives to build your GBP 59 million just reported as you said, in terms of operational leverage from volumes and so on. But if we take that asset a bit, the GBP 7 million to GBP 8 million plus the auto uncertainty plus Medical still not recovering fully, is it enough? I'm looking at the Street numbers for '25 here, you said on your website and on Bloomberg, GBP 74 million pretax this coming year. I mean that does seem pretty ambitious, given all the ifs on the growth outlook. So are we looking more in the sort of early to mid -- early to mid-60s for this coming year, which would make you feel more comfortable than the early 70s on consensus back?

[Ian Melling, executive]

Yes. Thank you, Martin. I mean I don't think we're going to give a specific number. I think what we have said is that most -- the current consensus A lot of people updated following the half year results in the summer. Some have updated since, and I'm probably at the lower end of those ranges, I think, of the current consensus. I think FX has moved adversely since then. So what was a GBP 3 million or GBP 4 million headwind at the half year is now GBP 7 million or GBP 8 million. So I think that's certainly kind of new news versus consensus.

So I wouldn't be surprised to see the overall number come down a bit from where it is I'm not going to be drawn on specifically what number. We're not guiding to a specific number. But we have said with volume growth in the mid-single digits, we would hope to grow PBT faster than volume. So I think with those pieces, you should be able to put something together.

[Martin Evans, analyst]

Sure. So just a second, just a very quick follow-up on pricing versus raw materials. I think the earlier question sort of hinted at the possibility that in response to, as you say, lower raw materials which customers will hear about that competitors may undercut you and therefore, you get deflation, which doesn't help anyone. To what extent do you think on your contracts, you have that famous quality pricing power? Or we've been trying as we are progressing, you also have begun to lower prices on new contracts in order to keep the business?

[Jakob Sigurdsson, executive]

I mean I think that's just the reality of the everyday business world that you need to play this by ear. Clearly, we do have competition. We are pricing at a premium for a variety of reasons and we believe, justifiably so. But as things progress, we may need to react as well. Most of our contracts are longer term though remember. So in most cases, we've got contract for a year and sometimes longer, although after the inflationary period a couple of years ago, we built more flexibility in those prices as well. So that is a dynamic situation.

And as I said in relation to the specific comment that was raised on tariffs, we wouldn't exclude raising prices if there is an incremental tariff placed on our products imported into the U.S. as an example.

So it is a dynamic situation, Martin, with no absolute answer with the flexibility that we have, particularly to cope with upside things. Now could that flip backwards? Given customers' added flexibility when things are going in the other direction, of course, but that is then a subset of a negotiation, but most of our contracts, as I said, are placed at least a year out in advance.

[Operator]

Your next question comes from the line of Kevin Fogarty from Deutsche Numis.

[Kevin Fogarty, analyst]

Two questions, if I could. Firstly, on Medical. I just wondered if there's any change in terms of your visibility over customer inventory levels, just that might sort of underpin your confidence of that coming back into sustainable growth in the year ahead? Because I see that sort of inflection, I guess, will sort of drive -- help to drive at least the overall group.

And secondly, just in terms of the shape of volume growth in the year ahead, given what you've said about Q1 and the volume levels there. I just wondered sort of is there any feeling on the sort of H1 versus H2 split for the year ahead on volumes, i.e., is there anything kind of exceptional seasonality, I guess, in Q1 -- or sorry, in Q4 that you might sort of influence how the year pans out from a kind of H1 and H2 split?

[Jakob Sigurdsson, executive]

So on the visibility for Medical, this I had an absolute answer for you on that one, but I don't. What I can say is that we're not seeing recovery yet. Depending on what tiers supplying the medical industry you talk to, they're expecting recovery in the calendar year 2025. Some are saying Q1. Some are saying Q2. I'm not sure we'll see it in Q2. Our financial quarter Q2, I'm not sure we will see it in the time frame between January and March. I think it's more likely to see in the second calendar quarter, so our third financial quarter and that sort of our base assumption.

Now if we do our technical analysis segment by segment and look at sort of the growth trends for different segments, we look at the area with the curve, we look at the area under the curve, post COVID or post the period a point in time when the system was in equilibrium the last time around, then we see that the area under the curve is greater than the area above the curve for all of them. So that means that they're probably getting to lower inventory levels than we have seen prior to COVID, but it's not yet leading to any uptick in demand.

Now we do get an insight into, in some cases, into the sale of parts that contain our PEEK from some of our customers. So we can see that the run rate of the sales of those parts are consistent with the growth rate that we're seeing in the market. but we don't have that for all customers. That gives us confidence in the fact that it is indeed destocking in our case, which is the hypothesis anyway for the sector in general. But I think these are sort of pointers if you wish, Kevin, but I do not have an absolute answer for you, unfortunately.

As you say -- as you asked about volume growth in 2025, Q1 is always our seasonally weakest quarter. So October, December is always the lowest volume quarter for us. And then Q2, Q3, Q4 tend to be similar and no one necessarily sticking out there. We are encouraged by what we see in Q1, October and November, and what we've seen on the order books in December, will already take us ahead of where we were last year. But we are cautious because of limited visibility, as always, and I think as well documented. But we have stated our assumptions for why we think we should be aiming at mid-single-digit volume growth going into the year with a correspondingly higher profit growth and Ian has a sort of explained the key rationale for arriving at that conclusion.

So hopefully, that adds a bit of a color, Kevin, even if I cannot give you an exact answer in these uncertain times.

[Operator]

There are no further questions on the conference line. I'll now hand back over to the management for closing remarks.

[Jakob Sigurdsson, executive]

So thank you very well, everybody, those that joined us in the room here at JPMorgan today and those who are on the line. Clearly, a tough year behind us but a year in a period during which we have really focused on strengthening the foundations of Victrex and prepare it for the future. And hopefully, we communicate it clearly how we can see our return to growth in volume, in revenues on the profit line and as it relates to cash generation going forward as well with enough detail on the assumptions to help you update your opinions. Thank you, everybody, and have a good day.

[Ian Melling, executive]

Thank you.