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Solstice Advanced Materials (SOLS) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Materials· Jul 30, 2026

Source: earnings call transcript

Executive summary

Solstice Advanced Materials Q2 FY26 — Strong Demand Drives Top and Bottom Line Growth, Full-Year Guidance Raised

Solstice Advanced Materials delivered robust Q2 FY26 results, driven by strong demand in key end markets like AI infrastructure, data centers, and nuclear energy, leading to a raised full-year outlook. The company is actively investing in high-return growth areas and pursuing the strategic acquisition of Element Solutions to accelerate its advanced materials platform, while maintaining a strong balance sheet and returning capital to shareholders.

Highlights

5

  • Net sales of $1.148 billion, up 11% year-over-year, exceeded the top end of guidance.

  • Adjusted EBITDA of $290 million, up 2% year-over-year, exceeded the top end of guidance.

  • Operating cash flow of $461 million in H1 2026, supported by disciplined working capital management.

  • Six of seven businesses grew this quarter, with four at double-digit rates, driven by strong demand in nuclear energy, electronic materials, refrigerants, and healthcare packaging.

  • Maintained a conservative net leverage ratio of 1.3x and $1.75 billion in total liquidity.

Concerns

3

  • Adjusted EBITDA margin declined year-over-year to 25.3%, primarily due to the timing of certain plant turnaround activity and prior year production incentive credits.

  • Refrigerants and Applied Solutions (RAS) adjusted EBITDA decreased 6% year-over-year, with margin down 648 basis points, attributed to plant turnarounds and production incentive credits.

  • Building Solutions and Intermediate net sales declined 1% year-over-year due to continued construction market softness.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Net Sales
$4.125 billion to $4.185 billion
high materiality
High
Full-year 2026 Adjusted EBITDA
$1.035 billion to $1.055 billion
high materiality
High
Full-year 2026 Adjusted Diluted EPS
$2.75 to $2.95
high materiality
High
Full-year 2026 Capital Expenditures
$420 million to $440 million
medium materiality
High
Q3 2026 Net Sales
$990 million to $1.30 billion
medium materiality
High
Q3 2026 Adjusted EBITDA Margin
around 25%
medium materiality
Medium
Refrigerants and Applied Solutions (RAS) Adjusted EBITDA Margins
mid-30%
high materiality
High
Element Solutions Acquisition Close
first half of 2027
high materiality
High
Net Debt to EBITDA Ratio
less than 3x
high materiality
High
Negative Revenue Impact from Nuclear Product Loan Returns
approximately $30 million
medium materiality
High
Corporate Expense
roughly $60 million
low materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Company-wide
Net sales exceeded the top end of guidance, driven by strong demand across key businesses. Adjusted EBITDA also exceeded guidance, though margin declined year-over-year due to plant turnarounds and prior year production incentive credits.
$1.148 billion11%—25.3% Adjusted EBITDA margin
Refrigerants and Applied Solutions
Growth driven by volume and favorable pricing. Decrease in EBITDA and margin primarily due to timing of plant turnaround activity and prior year production incentive credits.
Adjusted EBITDA growth: -6% YoYAdjusted EBITDA margin change: -648 bps YoY
$850 million12%—$280 million Adjusted EBITDA (32.9% margin)
Refrigerants
Driven by favorable pricing and volume growth, particularly from the HFO transition and robust data center orders.
$473 million13%——
Nuclear
Reflecting favorable pricing and increased volumes, reinforced by new supply agreements with 3 small modular reactor developers.
$125 million27%——
Building Solutions and Intermediate
Continued construction market softness weighed on net sales.
$180 million-1%——
Healthcare Packaging
Increase driven by a recovery in customer demand patterns following destocking in H2 2025, as well as favorable net pricing.
$73 million24%——
Electronic and Specialty Materials
Growth driven by volume in electronic materials and productivity improvements.
Adjusted EBITDA growth: 24% YoYAdjusted EBITDA margin change: +280 bps YoY
$298 million8%—$64 million Adjusted EBITDA (21.6% margin)
Electronic Materials
Driven by volume growth and robust customer demand across semiconductor applications. Recognized with top supplier award from SK Hynix.
$119 million15%——
Safety & Defense Solutions
Returned to growth driven by non-ArmOR applications, with ongoing investment in capacity expansion for Spectra line.
$43 million7%——
Research and Performance Chemical
Growth in big chemicals partially offset by ongoing end market softness in specialty additives.
$135 million3%——

Product announcements

ProductTypeDetails
Next-generation non-PFS refrigerant moleculesroadmap
Next-generation molecules for 2-phase direct-to-ship immersion coolingroadmap

Deals & partnerships

Element Solutions Acquisition to build an industry-leading advanced materials platform with increased exposure to high-growth electronics AI infrastructure and other attractive end markets.

Announced on July 6. Subject to shareholder and regulatory approvals and other customary closing conditions. Synergies outlined in investor materials.

Capital programs

Spokane expansion (Electronic Materials) underway

Benefit:increasing output

Accelerating expansion to meet robust sputtering target demand for AI and data center-driven semiconductor applications. Initial discussions for further expansion are underway due to strong demand.

Spectra ballistic fibers expansion (Virginia) underway

Benefit:capacity expansion

Actively investing to support long-term market demand for the Spectra line of solutions.

Nuclear conversion business expansion (Metropolis facility) underway

Benefit:beyond 10,000 metric tons

Working through debottlenecking and exploring attractive incremental opportunities to take capacity beyond 10,000 metric tons. More information expected later this year.

Risks & headwinds

Plant Turnaround Activity Q2 2026

Adjusted EBITDA margin declined year-over-year to 25.3% (Q2 2026), and RAS adjusted EBITDA down 6% YoY, margin down 648 bps YoY.

Mitigation:Q2 was the most significant outage quarter; all sites are now back up and operating well. Minor planned outages expected in the fall, but not at the same scale.

Production Incentive Credits Timing Q2 2026

Adjusted EBITDA margin declined year-over-year to 25.3% (Q2 2026), and RAS adjusted EBITDA down 6% YoY, margin down 648 bps YoY.

Mitigation:Prior year production incentive credits were cumulative in Q2 2025, creating difficult year-over-year comps. Going forward, recognition will be more linear each quarter.

Construction Market Softness Q2 2026

Building Solutions and Intermediate net sales down 1% year-over-year.

Mitigation:Focused on advancing LGWP solutions and maintaining disciplined operational execution to be well positioned for a return to more normalized demand.

Macroeconomic Volatility Ongoing

Uncertain macroeconomic backdrop.

Mitigation:Company's strong portfolio and execution demonstrate resilience through macroeconomic volatility.

Raw Material Inflation Q2 2026 and ongoing

Inflation in sulfur (refrigerants), diesel fuel, and transportation costs.

Mitigation:Precious metals inflation is passed through. Team has done a great job securing price to offset sulfur inflation, maintaining good price/cost execution.

Nuclear Product Loan Returns H2 2026, skewed modestly toward Q4.

Negative revenue impact of approximately $30 million.

Mitigation:Factored into H2 guidance.

Tax-Free Spin-off Restrictions Near term

Some near-term restrictions on portfolio optimization.

Mitigation:Management acknowledges this but will continue to look at optimizing the portfolio in the future where appropriate.

What to watch in Q3 FY26

Refrigerants Adjusted EBITDA Margins

H2 2026
Current 32.9% (Q2 RAS)
Target Mid-30s%

Why it matters

This is a key profitability driver for the largest segment, indicating successful HFO transition and aftermarket development.

I think we talked about mid-30s for the second half of the year, which we feel very confident in.

Find out whether SOLS delivers this. Inve re-checks your case every morning.

Q&A highlights

How do you see sales and EBITDA growth unfolding in the back half of the year for refrigerants, and what margin impact do you expect from incremental HFO unit sales?

Management expects continued sequential margin expansion for refrigerants, targeting mid-30% adjusted EBITDA margins for the second half of the year. They are confident in continued strong demand and see an acceleration to HFOs from HFCs, with additional upside from the developing HFO aftermarket in North America.

“What we talked about for our refrigerants business is continued sequential margin expansion. I think we talked about mid-30s for the second half of the year, which we feel very confident in.”

asked by Matt Heyer · answered by Unknown Executive

2 min read 6 chapters

Detailed narrative

Element Solutions Acquisition Progress

The acquisition of Element Solutions, announced on July 6, is progressing towards an expected close in the first half of 2027, pending shareholder and regulatory approvals. This strategic combination aims to significantly accelerate Solstice's advanced materials platform, enhancing exposure to high-growth electronics and AI infrastructure markets. By integrating Solstice's chemistry expertise with Element's formulation capabilities, the combined entity expects to create a leading innovation platform. Management anticipates rapid deleveraging of net debt to less than 3x EBITDA within 18 months following the transaction's completion.

Strategic Investments in Growth Areas

Solstice is actively reinvesting in high-return opportunities across its electronic materials, safety and defense solutions, and nuclear businesses, aligning with long-term demand trends in artificial intelligence, data centers, and semiconductor manufacturing. This includes increased capital expenditures and R&D spending. Notable projects include the accelerated Spokane expansion for sputtering targets and ongoing debottlenecking efforts at the Metropolis nuclear facility, which aims to expand capacity beyond 10,000 metric tons.

Refrigerants Business Momentum

The Refrigerants and Applied Solutions segment demonstrated strong demand, particularly for HFO refrigerants, driven by the ongoing HFO transition and robust data center orders. While data center cooling currently represents a smaller but rapidly growing portion of the business, Solstice is investing in next-generation non-PFS refrigerant molecules and 2-phase immersion cooling solutions. The segment anticipates achieving mid-30% adjusted EBITDA margins in the second half of 2026 as the aftermarket for HFOs continues to develop.

Nuclear Business Renaissance

The nuclear business experienced 27% year-over-year net sales growth, bolstered by favorable pricing, increased volumes, and new supply agreements with three small modular reactor (SMR) developers. Management is exploring further debottlenecking at the Metropolis facility to expand capacity and is engaged in discussions with customers for long-term contracts extending into the mid-2030s. The company also noted encouraging feedback from the Department of Energy and NRC regarding potential expansion support.

Electronic Materials Capacity Expansion

The Electronic Materials business achieved 15% year-over-year net sales growth, fueled by robust customer demand across semiconductor applications, especially for copper manganese sputtering targets used in leading-edge nodes. Solstice is accelerating its Spokane capacity expansion to meet this strong AI and data center-driven demand, with increased output expected in the second half of the year. Initial discussions are already underway for potential further expansion beyond the current project due to sustained high demand.

Capital Allocation and Balance Sheet Strength

Solstice generated $461 million in operating cash flow during the first half of 2026, attributed to disciplined working capital management. The company maintains a conservative net leverage ratio of 1.3x and possesses $1.75 billion in total liquidity, providing financial flexibility. This strength supports significant growth investments and consistent return of capital to shareholders, including a recently declared quarterly dividend of $0.075 per share.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.