SOLS: Previewing Q2 - Expect Solid Results and Guide Raise on Strong Refrigerants, EM

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SOLS: Previewing Q2 - Expect Solid Results and Guide Raise on Strong Refrigerants, EM

Solstice Advanced Materials Inc.

Recent Messaging at SOLS is Tracking with Q1. At recent conferences, SOLS has noted that Q2 is

tracking broadly consistent with expectations laid out in its Q1 print, and there were no material

changes to the outlook. Electronic materials (ESM) emerged as a modest upside area, benefiting

from continued AI-driven demand and advanced node chip growth, corroborated by the recent

Micron report. Building & Construction/housing remains soft, as expected, while Nuclear and

S&DS are performing in line with guidance.

US DOE Loans for Westinghouse AP1000 builds. Recently, the US DOE announced plans to

provide funding of low-cost debt for new Nuclear power capacity (see note from RBC analyst

Andrew Wong here), in which it plans to provide $17.5B of loans for growth across the Nuclear

supply chain, in order to facilitate the construction of 10 additional facilities. This could alleviate

some investor concerns on new builds, as cost over runs and delays in projects in Georgia have

been significant. That said, additional capacity should continue to spur demand for UF6, which

is a vital step in the fuel enrichment process. As such, we continue to think SOLS should remain

on track for strong Nuclear growth over the next several years, and with further government

support for capacity builds, it could potentially see lower cost of capital for greenfield, which

we have previously estimated at ~$200-300M/kt (vs. brownfield at ~$100M/kt). Per SOLS, its

priority remains identifying where to build and securing grants with below-market financing.

Segment Commentary. In RAS, SOLS sees little earnings impact from the HFO step-down delay

for food/grocery.