Solstice Advanced Materials (SOLS) 2026年第3四半期決算説明会：業績見通しを上方修正

主要なポイント

• 2026年第3四半期の売上高は、電子材料、冷媒、ヘルスケア・パッケージングが牽引し、前年同期比8%増の約10億5,000万ドルとなりました。
• 調整後EBITDAは13%増の2億6,500万ドルとなり、調整後EBITDAマージンは109ベーシスポイント拡大して25.3%となりました。調整後希薄化後EPSは0.80ドルでした。
• 電子・機能性材料部門は、四半期として過去最高の3億2,000万ドルの売上高（13%増）を記録し、調整後EBITDAは44%増加しました。電子材料の売上高は、スパッタリングターゲットおよびサーマルソリューションの需要に支えられ、31%増加しました。
• Solsticeは2四半期連続で2026年通期の業績予想を上方修正しました。現在、売上高は41億9,500万ドル〜42億2,000万ドル、調整後EBITDAは10億5,000万ドル〜10億6,000万ドルを見込んでいます。
• 原子力関連の受注残高は26億ドルに達し、契約期間は2039年まで及んでいます。経営陣は、Metropolis工場の生産量が2026年に1万トンを超えると予想しており、低資本のボトルネック解消により、さらに1,000〜2,000トンの潜在能力を特定しました。
• Solsticeは第3四半期に1億ドルの自社株買いを完了し、現在の授権に基づく残りの4億ドルについても2027年第1四半期末までに実質的に完了させる意向です。

主要財務データ

事業および業績の動向

冷媒・応用ソリューション

セグメント売上高は6%増の7億2,600万ドルとなりました。調整後EBITDAは3%増の2億5,100万ドルとなり、マージンは34.5%となりました。

冷媒の売上高は8%増の4億3,300万ドルとなりました。自動車向けおよびデータセンター向けの需要が、住宅用市場の低迷と継続的なR-454Bの流通在庫削減の影響を相殺しました。経営陣は、第4四半期の冷媒売上高が前年同期比で緩やかな伸びにとどまり、2027年には正常化すると予想していますが、詳細は第4四半期の決算発表時に提供するとしています。

原子力関連の売上高は、以前公表した製品貸出返却による約3,000万ドルの影響があったものの、4%増の6,600万ドルとなりました。受注残高はここ数か月で22億ドルから26億ドルに拡大し、複数の小型モジュール炉（SMR）顧客からのコミットメントが含まれています。

ヘルスケア・パッケージングの売上高は、2025年後半の顧客による在庫削減を経て数量と価格設定が改善したことで、24%増の6,100万ドルとなりました。経営陣は、本事業を正常化ベースで1桁台半ばの成長を達成する事業と位置付けています。

建築ソリューションおよび中間体の売上高は、建設関連市場の低迷が続いたため、5%減の1億6,700万ドルとなりました。

電子・機能性材料

セグメント売上高は13%増の3億2,000万ドルとなりました。調整後EBITDAは44%増の6,800万ドルに急増し、マージンは453ベーシスポイント拡大して21.2%となりました。

電子材料の売上高は、メモリーやAI関連用途で使用されるスパッタリングターゲットおよびサーマルソリューションの需要に牽引され、31%増の1億3,500万ドルとなりました。Solsticeはスポケーン工場の生産能力を倍増させるため2億ドル以上を投資しています。経営陣は、2027年に一部増量を見込むものの、拡張の大部分は2028年を予定しています。

セーフティ・防衛ソリューションの売上高は3%増の5,400万ドル、リサーチ・パフォーマンス化学品の売上高は4%増の1億3,100万ドルとなりました。

AIおよびデータセンター関連事業の露出

AIおよびデータセンター用途向け事業は、2026年の予想売上高の約6%を占めており、売上高は前年同期比で50%以上増加しました。これにはウラン濃縮転換事業は含まれていません。

Solsticeは、2026年の売上高のうち、冷媒セグメントにおけるデータセンター冷却用途から約1億ドル、サーマル・インターフェース・マテリアル（TIM）、ヒートスプレッダ、成膜ターゲット、電子ポリマーを含む電子材料製品から1億5,000万ドル以上を見込んでいます。

経営陣による業績見通し（ガイダンス）

Solsticeは、これまでの業績実績と継続的な事業モメンタムに基づき、2026年通期の業績予想を上方修正しました。

経営陣は、設備投資について、顧客需要に支えられ魅力的なリターンが見込まれるプロジェクトを引き続き重点的に実施すると述べました。研究開発費比率はスピンオフ時の売上高の約2%から約2.6%に上昇しており、会社目標である約3%に向けて推移しています。

リスクと注目点

• スポケーン工場は現在の成膜材料の生産能力上限近くで稼働しており、追加生産のタイミングは設備の調達状況やプロジェクトの実行力に一部依存します。
• 住宅用空調（HVAC）の低迷とR-454Bの在庫削減は冷媒事業の逆風となっていますが、経営陣は2027年に正常化すると見込んでいます。
• 建築ソリューションおよび中間体では、建設関連需要の低迷が続いています。
• 原子力関連の収益は、長期にわたる発注・出荷スケジュールのため不均一になる場合があります。経営陣は、第4四半期に予想される減少について、特段の操業上の問題ではなくタイミングによるものと説明しました。
• Metropolis工場の大型拡張は、顧客のコミットメント、米国政府との調整、プロジェクトコスト、期待リターンを条件としています。同社は着手前に計画しているモジュール生産能力の約80%をカバーするコミットメントの確保を目標としていますが、まだその水準には達していません。
• 次世代冷媒分子への継続的な研究開発投資が、短期的な冷媒・応用ソリューションセグメントのマージンを圧迫しています。

アナリスト質疑応答のハイライト

• 原子力のボトルネック解消： 経営陣は2027年にかけて段階的な生産改善を見込んでおり、1,000〜2,000トンの追加生産能力は年内に完了する予定です。これらのプロジェクトに必要な追加資本は限られており、より大規模な拡張の可能性に代わるものではありません。
• 電子材料の生産能力： Solsticeはスポケーン工場で生産可能な成膜用途向け製品をすべて販売しています。同社は資本投下を加速させており、現在のプロジェクトを超えたさらなる拡張について初期段階の協議を開始しています。
• 冷媒事業の見通し： 自動車向け、業務用、データセンター向けの製品ポートフォリオの幅広さが、住宅向けの低迷を打ち消しています。経営陣は、R-454Bの在庫削減が2026年中にほぼ完了すると見込んでいます。
• M&A戦略： Element Solutionsとの取引中止を受け、経営陣は大規模な事業変革を伴うM&Aを推進しない方針を示しました。選別的なボルトオン（小規模補完型）買収の可能性は残されているものの、現在は自律的成長（オーガニック）への投資を最優先としています。
• 株主還元： 経営陣は、電話会議で議論された現在の株価水準での自社株買いを魅力的な資金使途とみなしており、既存の5億ドルの自社株買いプログラムがほぼ完了した時点で、追加授権の可能性について取締役会と協議する予定です。
• 原子力関連契約： Solsticeは通常、年間生産能力の約90%を契約で確定させ、約10%をスポット市場向けに残しています。ボトルネック解消により、さらなる柔軟性が確保される可能性があります。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Greetings. Welcome to Solstice Advanced Materials Third Quarter 2026 Earnings Call. Please note, this conference is being recorded. I'll now turn the conference over to Mike Leithead, Vice President, Investor Relations. Thank you. You may now begin.

Michael Leithead

Thank you, and good morning, everyone. Welcome to Solstice's Third Quarter 2026 Earnings Call. We released our third quarter 2026 financial results earlier this morning.

Today's presentation, including non-GAAP reconciliations and our earnings press release are available on the Investor Relations portion of Solstice' website at investor.solstice.com. Our discussion today will include forward-looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties, including the ones described in our SEC filings.

Joining me today are David Sewell, our President and CEO; and Tina Pierce, our CFO. David will open today's call with highlights of our third quarter results and an update on a few key strategic initiatives. Tina will then review our segment performance, capital deployment and financial outlook before turning the call back to David for closing remarks. We will then be happy to take your questions.

With that, I'll now turn the call over to David.

David Sewell

Thank you, Mike, and thank you, everyone, for joining us today. During the third quarter, Solstice again delivered strong results with performance that reflects the quality of our portfolio, the durability of our customer relationships and disciplined execution across the company. I would like to take this opportunity to thank each of our team members for their incredible hard work that enabled this outcome.

Third quarter net sales increased 8%, exceeding the top end of our guidance range, led by electronic materials, refrigerants and health care packaging. Nuclear also continues to demonstrate strong underlying momentum despite the impact of previously communicated product loan returns. Together, this continued top line momentum demonstrates that Solstice is well aligned to several durable secular trends such as nuclear energy, thermal management, AI and data centers.

At the same time, the team is relentlessly focused on operational execution and delivering on the 25% margin commitment we made following our spin last year. We are happy to report that Solsys has completed its transition of all remaining legacy Honeywell TSAs this quarter, both ahead of schedule and under budget.

Our financial performance has led to strong cash generation, which we are able to utilize for both reinvestment into the growth of our business and for increased return of cash to shareowners. We completed $100 million of share repurchases in the third quarter and are now intending to substantially complete the remaining $400 million under our current share repurchase authorization by the end of the first quarter of 2027.

Pulling it all together, our solid year-to-date performance and continued momentum enable us to raise full year 2026 guidance for a second consecutive quarter. Before discussing a couple of our growth initiatives in more detail, I want to take a step back and spend just a moment on where we are strategically as a company.

Following the mutual termination of our merger with Element Solutions, we have been moving forward with strong conviction in our business and stand-alone strategy as well as confidence in our ability to create shareholder value through disciplined execution of our growth plan. Solstice truly is a differentiated advanced materials company because of our long-standing customer relationships, technical expertise and unique asset base. Those characteristics create attractive and durable positions across our portfolio. Our expertise in materials innovation is primed to solve challenges such as thermal management and energy evolution, which are key concerns for growing economic sectors such as AI infrastructure and data centers.

This business has grown net sales at a 4% compounded annual rate since 2017, and we believe our exposure to these areas will serve as a foundation for even better performance going forward. Last week marked 1 year since Solsys became an independent company. Our transition to a stand-alone public company is complete, and our organization is focused on operational excellence, margin improvement and cash flow generation.

Finally, we are maintaining a disciplined approach to capital allocation that balances investment in our business along with returning excess capital to shareholders. We are funding organic investments where our technology, customer access and existing asset base give us a clear right to win.

At the same time, we are returning excess cash to shareowners through our dividend and share repurchase program. Altogether, we believe Solsys provides a unique combination of secular growth, leading margins and strong cash generation with compelling opportunities to prudently deploy capital and reinvest in the business.

Turning to Slide 5. Data center growth provides a useful example of how Solsys' innovation is positioned to drive superior growth and value creation. Today, Solsys' businesses serving data center and AI-related applications represent approximately 6% of our expected 2026 revenue with sales up more than 50% versus last year. I would note this does not include sales from our nuclear conversion business, which indirectly helps power facilities with clean energy today.

In refrigerants, we expect approximately $100 million of 2026 sales from differentiated data center cooling applications. In Electronics, we expect over $150 million of 2026 sales from our thermal interface materials, heat spreaders, physical vapor deposition targets and electronic polymers, which support performance across the semiconductor and data center value chain.

What makes the data center opportunity particularly attractive for Solstice is that the industry's constraints are increasingly materials driven. Higher computing density increases thermal loads, more advanced chips and memory require enhanced deposition materials, packaging solutions and thermal management. Data center growth will necessitate investment in future nuclear production.

Customers need partners that can solve these challenges at scale with strong reliability. Solstice brings proprietary intellectual property, deep technical know-how and an established manufacturing asset base to those conversations. We are partnering directly with customers to address current requirements while developing the next generation of solutions.

As the materials landscape evolves, we are working hand-in-hand with our customers on future solutions such as 2-phase direct-to-chip fluids, potential immersion cooling applications, further expansions of our sputtering targets productions and innovation in advanced packaging. This is the Solsys growth algorithm in action, start with a differentiated technology position, work closely with customers on mission-critical challenges and reinvest in R&D and capacity where we see durable demand and attractive returns.

Turning to Slide 6. We also want to provide an update on our nuclear conversion growth strategy. Industry demand continues to strengthen, supported by the need for reliable carbon-free baseload power recent government lending activity, the scheduled end of waivers for Russian enriched uranium imports at the start of 2028 and long-term power agreements between hyperscalers and energy providers. Our nuclear backlog reached $2.6 billion in the third quarter with contracts now extending through 2039. This backlog includes supply commitments in place with multiple small modular reactor customers. Against that backdrop, we continue to advance capacity in a disciplined way.

Through the commendable efforts of our manufacturing team working on incremental debottlenecking at our Metropolis facility, we now expect to exceed 10,000 tons in production this year with a clear pathway to an additional 1,000 to 2,000 tons at limited incremental capital cost. We will increase our production beyond 10 kt in a measured way in line with contracted customer demand and operational readiness.

The strong outcome at Metropolis gives us not only increased operational flexibility, but also enables us to respond to U.S. government requirements for unobligated uranium hexafluoride as needed. This low-risk and high-return expansion once again reinforces the differentiated position of Metropolis as the only established uranium conversion facility in the United States. In parallel, we continue to evaluate a large-scale expansion.

We have completed our initial engineering study and customer discussions regarding expansion-related offtake continue to progress very well with multiple conditional agreements signed or under negotiation. Any final decision will remain grounded in expected returns, additional customer commitments and further refinement of net project costs. And while the opportunity is significant, our approach will remain disciplined. We will align capital deployment with contracted demand and attractive economics rather than build ahead of the market.

With that overview, I will now turn it over to Tina to discuss our third quarter financial performance in more detail.

Tina Pierce

Thank you, David, and good morning, everyone. Turning to Slide 7. I'd like to discuss our third quarter 2026 consolidated results. Third quarter net sales were approximately $1.05 billion, an increase of 8% year-over-year and which, as David noted, exceeded the top end of the guidance we provided for the quarter.

Both of our reporting segments contributed to the increase with growth led by Electronic Materials, refrigerants and Healthcare Packaging. GAAP net income attributable to Solstice was $80 million compared with a net loss attributable to Solstice of $35 million in the third quarter of 2025. Diluted EPS was $0.50 and adjusted diluted EPS was $0.80. Adjusted EBITDA was $265 million, an increase of 13% from adjusted stand-alone EBITDA of $235 million in the prior year period.

Adjusted EBITDA margin was 25.3%, up 109 basis points year-over-year, reflecting sales growth and improved operating leverage. Turning to Slide 8. I will walk through in more detail the key drivers of our year-over-year net sales and adjusted EBITDA performance for the third quarter. Net sales was approximately $1.05 billion for the quarter. Organic net sales was approximately 8%, reflecting volume and pricing improvement across both segments.

Volume growth was led by Electronic Materials, reflecting robust demand for deposition and thermal solutions, along with higher refrigerant and health care packaging volumes. Pricing was also favorable, helping offset modest raw material inflation. Adjusted EBITDA increased from $235 million to $265 million, with contributions from both segments reflecting net sales growth and operational leverage. Corporate costs also declined modestly year-over-year.

Turning to Slide 9. Our Refrigerants & Applied Solutions segment generated net sales of $726 million, up 6% year-over-year. Segment adjusted EBITDA increased 3% to $251 million, and adjusted EBITDA margin was 34.5%, consistent with our prior expectations. Refrigerant sales increased 8% to $433 million. The breadth of our portfolio continues to be an important advantage as strong automotive and data center demand more than offset softer residential end markets.

Nuclear sales increased 4% to $66 million. Results in the quarter included the approximately $30 million impact of previously communicated product loan returns. Underlying demand remains robust as demonstrated by the $2.6 billion backlog and the longer duration of customer contracts. Building Solutions and Intermediates sales declined 5% to $167 million, reflecting continued softness in construction-related end markets.

Healthcare Packaging sales increased 24% to $61 million, driven by higher volume and favorable pricing following customer destocking in the second half of 2025. Overall, the RAS segment continues to benefit from a diversified portfolio, strong positions in attractive applications and disciplined execution.

Now turning to Slide 10. Our Electronic and Specialty Materials segments delivered a record quarter with strong growth and margin expansion. Segment net sales were $320 million, up 13% year-over-year. Adjusted EBITDA increased 44% to $68 million, and adjusted EBITDA margin expanded 453 basis points to 21.2%. The improvement in segment adjusted EBITDA margin was driven primarily by sales growth and strong operating leverage. Electronic Materials sales increased 31% to $135 million. Demand remained robust for sputtering targets and thermal solutions used in memory and AI-related applications.

Our expansion in Spokane to double sputtering target capacity continues to progress well, and we are committed to meeting our customers' demand. Safety and Defense Solutions sales increased 3% to $54 million, reflecting improved volumes. Research and Performance Chemicals sales increased 4% to $131 million, driven by higher demand for specialty additives. In summary, the ESM results demonstrate the earnings power of this portfolio and reinforce our confidence in our growth investments.

Moving to Slide 11. Our balance sheet and cash flow remain important sources of strategic flexibility. Through the first 9 months of 2026, operating cash flow was $693 million, supported by healthy earnings and disciplined working capital management, including continued focus on inventory optimization.

Capital expenditures were $325 million, up 31% from the prior year period as we funded multiyear capacity expansions in Electronic Materials, Safety and Defense Solutions and Nuclear. Even with that higher investment, free cash flow was $368 million. We would highlight that since our spin-off from Honeywell approximately 1 year ago, our cash position has increased approximately $250 million after returning approximately $136 million of cash to shareowners.

As of September 30, total debt was approximately $2 billion. Cash and cash equivalents were $714 million and net debt was approximately $1.25 billion. Net leverage ended the quarter at 1.3x trailing 12-month adjusted EBITDA. Total liquidity was approximately $1.7 billion, including $1 billion of availability under our revolving credit facility.

Turning now to capital allocation. We would like to spend a moment to highlight how Solstice views its disciplined process of allocating capital. First, we see the best opportunities today in reinvesting in our existing portfolio. Solstice maintains a robust pipeline of high-return organic growth projects such as our sputtering targets expansion in electronic materials and the nuclear work we discussed earlier.

Additionally, investment comes in the form of R&D as we continue to drive innovation with the development pipeline of next-generation refrigerant molecules. Second, we continue to work to optimize our portfolio. Our company continually assesses our portfolio for ways to sharpen around our core businesses, while at the same time, evaluating selective bolt-on M&A that would deliver high-value opportunities in our growth markets.

Third, we are committed to returning excess cash to shareowners as demonstrated with our recent $500 million share repurchase authorization, which we intend to substantially complete by the end of the first quarter 2027. We intend to deploy capital to these priority areas while staying grounded in commitments to annually grow our dividend, invest in maintenance and asset reliability and maintain a balance sheet that supports our current credit ratings.

Turning to Slide 13. Based on our robust year-to-date performance, we are again raising our full year 2026 guidance. We now expect full year net sales in the range of $4.195 billion to $4.22 billion with adjusted EBITDA in the range of $1.05 billion to $1.06 billion and adjusted diluted EPS in the range of $2.90 to $2.95.

Our capital expenditure outlook is unchanged at $420 million to $440 million. We remain focused on how we sequence growth projects and continue to prioritize investments backed by attractive returns and customer demand. For the fourth quarter, we expect net sales of $1.01 billion to $1.035 billion, adjusted EBITDA of $246 million to $256 million and adjusted EPS of $0.57 to $0.62.

I will now turn the call back to David for closing remarks.

David Sewell

Thank you, Gina. Our third quarter performance reinforces the core elements of the Solstice investment thesis. We have a differentiated portfolio with leading positions in mission-critical materials. That portfolio is aligned to attractive secular trends in nuclear energy, thermal management, AI and data centers. We are converting these exposures into tangible growth as evidenced by our Q3 growth in electronic materials of 31% and refrigerants of 8% as well as our growing nuclear backlog.

We are also demonstrating consistent operational execution. Our Q3 adjusted EBITDA increased 13%. Adjusted EBITDA margin expanded to 25.3%, and both segments contributed to year-over-year earnings growth. At the same time, we are investing for the future. Our growth capital is targeted toward opportunities where we have differentiated technology, established customer relationships and visible demand.

And we are maintaining a disciplined approach to capital allocation. Our strong balance sheet and cash generation allows us to reinvest in the company while returning meaningful excess cash to shareholders through the dividend and share repurchases.

Looking ahead, our priorities are straightforward: deliver on our commitments, execute our growth investments with discipline, continue to improve productivity and returns and allocate capital in a way that maximizes long-term shareowner value. We are committed to building on the progress the Solsa team has made in our first year as a stand-alone public company, and I want to thank our employees around the world for their continued focus on our customers, safe operations and strong execution. And with that, we are ready to take your questions.

Operator

And our first question will be coming from the line of Kevin McCarthy with Vertical Research Partners.

質疑応答

Kevin McCarthy

David, nice to see the debottlenecking of nuclear at Metropolis. Can you talk a little bit about how you're achieving that incremental 1 to 2 kilotons associated cost and the timing of that? And then what impact, if any, does that have on your ambitions to explore more substantial capacity expansion?

David Sewell

Kevin, in regards to the debottlenecking, there are a series of low capital projects that our manufacturing and engineering team have identified and are underway. I think you'll see incremental improvements throughout 2027 with kind of that completion before the end of the year of '27. As far as the impact to the expansion, it just gives us great flexibility, but it doesn't I don't think it deters our conviction for long-term expansion of the facility.

We're moving forward with really robust conversations with customers. We continue with strong government engagement. We now have kind of some initial preliminary costs. We've talked about those being the 3 pillars. So this additional 1 to 2 kt expansion really fulfills potential unmet needs through 2030, and then we'll continue to look for further expansion beyond that as those 3 pillars come to fruition.

Kevin McCarthy

Great. And then as a second question, if I may, I appreciate the additional disclosures this morning around your data center exposure and the associated growth. Maybe just broadly, if I think about the 31% growth that you posted in Electronic Materials, can you speak to forward trajectory as you see it in coming quarters and then also provide an update on the Spokane, Washington expansion project.

David Sewell

Certainly, Kevin. It's really an important growth segment for us. We continue to see very robust demand for data center-related projects. We see no signaling of any slowdown. In fact, if anything, customers are actually looking for us to pull forward demand, particularly around thermal interface and sputtering targets -- so we are moving with alacrity and accelerating where we can on Spokane to the second question you had, we have pulled in capital to try to accelerate. We will get some volume increments from that acceleration in 2027 with the majority of that in 2028, but we're doing everything possible because the demand is so robust to try to see where we can continue to outpace our current forecast for '27 and our manufacturability for additional capacity.

Operator

The next question is from the line of Josh Spector with UBS.

Joshua Spector

I was wondering if you could talk about refrigerants a bit. I mean the 8% growth you've had in the quarter was definitely pretty strong. Curious how you expect that to trend in the fourth quarter and just lend some of your own voice to what's happening in the market. A lot of conversation around choppiness in residential HVAC demand. But obviously, you're seeing some pretty good growth. So what explains what you're seeing versus some of the others?

David Sewell

Yes. Thanks, Josh, for the question. We're really proud of what the team has been able to execute and accomplish in refrigerants. To your point, there's definitely headwinds in 454B and stationery because of where housing is as well as the destocking of what's happening year-over-year. But where the team was really able to execute, which we've communicated is the breadth of our portfolio, the strength of our IP around that portfolio in areas like automotive, data center growth and commercial has offset that.

As we look to Q4, we do see modest growth year-over-year. We definitely see that 454 headwind continuing. But then as we go into 2027, we expect normalization in that market. So we feel like we're very well positioned with the execution of what the team has been able to do in the market and then with hopeful tailwinds that we see for 454 as we go into '27.

Joshua Spector

Maybe if I could just follow up on '27 then specifically is what does normalization look like? Do you have visibility for that aftermarket in 454B being cleaned up enough to say that it enables growth in '27? And then maybe just expand on the data center comment where that's whatever, 5%, 6% of sales growing 50%, it seems like that should be an adder for next year as well.

David Sewell

Yes. So I'll start with the latter part of your question. We definitely see continued strength in data centers as we move forward. So we feel very good about that. We definitely believe we'll see normalization in 454B. Probably a little early to talk about 2027 exactly, but we do see us coming out of that from where we're at '26. I think about it a little bit like health care. We had the destocking in 2025 in health care. You've seen how we've been able to come out of that growth in 2026. So we're thinking a little bit similar that the destocking will be complete through '26, and then we'll be back to that normalization in '27.

Operator

The next questions are from the line of Aleksey Yefremov with Barclays.

Aleksey Yefremov

On the conversion business, what are your latest thoughts on the more substantial expansion? I guess, is this more likely to go than not? And then can you comment approximately what percent of your target contracts have you been able to lock in to greenlight this project so far?

David Sewell

Yes. So we -- as we've talked about, it's those 3 pillars. It's locching up about 80% of customer commitments to fulfill a modular design plant as we build that out in phases. It's the continued coordination with the U.S. government, Department of Energy, and it ties in with the return of the investment that we see.

So the debottlenecking is definitely an exciting part of our growth algorithm over the next several years. We do believe with all of the investments that are happening in new reactors, you've seen the announcements from Korea. You've seen reactors that were decommissioned that are now coming back online. You look at the global aspect of 30-plus reactors being built around the world. We do believe that additional capacity will be needed as we get beyond the 2030s.

We're having really good dialogue with our customers, as we alluded to in the prepared remarks, -- we already have multiple conditional volume commitments for that expansion. We're not all the way up to that 80% level yet, though. But as we get to that level, I think that will be a trigger with where the costs land and the alignment with the DOE. So certainly more to come on that.

Aleksey Yefremov

And I wanted to ask you about Refrigerants and Applied segment margins. I mean they're good but down year-over-year. What kind of normalized margins should we think about for this segment sort of over the next few quarters?

David Sewell

So as we think about RA margins, I'll certainly have Tina add additional color. as 454 continues to rebound, we do expect that margin expansion. And as we've talked about, when that aftermarket kicks in for 454 with HVAC units in the residential sector established, we do see margin expansion there. So this was a really good quarter for RAS because we did get that sequential margin expansion, which we've talked about, and we would expect that to continue with aftermarket coming into play once that hits as well as the normalization of 454.

Tina Pierce

And the only thing I would add, David, is just the R&D spend. We continue to invest in the next generation of refrigerant molecules. So that was the other contributing factor.

Operator

Our next question is from the line of Mike Harrison with Seaport Research Partners.

Michael Harrison

Just to follow up on the electronic materials strength. You guys were about to do a meaningful acquisition in that space, and it didn't work out. Just curious if you can speak to how you're thinking about other bolt-on or maybe more transformative M&A opportunities to better access the electronics opportunities we see going forward.

David Sewell

Yes. Thanks for the question, Mike. That was really a once-in-a-generation opportunity we looked at with the Element acquisition. The -- we reacted quickly from shareholder feedback. The logic was sound. We've got great feedback that everyone understood the strategic logic, but they really liked our portfolio, the organic nature of the portfolio, the strong IP position we had. So there really is no transformational M&A that we would look at on the horizon.

As we think about electronics moving forward, we really have a strong position on the front end with depositions as well as in thermal management on the back end, and then you throw the work we're doing in refrigerants that tie into that. So we feel really good about our portfolio as well as organic opportunities we're working on with our customers on new applications. So we would look at it that way.

And then if there is a unique tuck-in type acquisition that strengthens and brings that shareholder value that we would look at, we would certainly do so. But right now, there's nothing from a transformation type M&A that we would do, and we feel really good with our portfolio today.

Michael Harrison

All right. And then a second question on the nuclear business. It looks like you're expecting some decline in Q4 just related to shipment timing, and I know that business can be a little bit lumpy. But I'm just wondering, are there any known unusual factors that we need to keep in mind as we're thinking about order timing and the growth pattern during 2027 in nuclear?

David Sewell

Yes, Mike, you captured it perfectly. It's just a lumpy type order pattern, as you know, because you're talking about orders 3 and 4 years out. Absolutely nothing unusual, fully anticipated. We actually came in a little bit higher in our full year growth than we anticipated. Now with the debottlenecking, we'll look for further opportunistic sales where they might be available. And we've expanded our backlog from $2.2 billion to $2.6 billion in the last several months. So we feel great about where we're at as well as where negotiations are at for conditional volume with the plant expansion.

Operator

Our next questions are from the line of Hassan Ahmed with Alembic Global.

Hassan Ahmed

A question around any potential electronic material capacity constraints you guys may be seeing. I mean, obviously, the sort of semiconductor-related growth has been strong. So I'm just wondering whether you're running into any constraints if you guys are just to sort of maintain that double-digit growth over there, what sort of capital would need to be sort of invested to sort of maintain that double-digit growth?

David Sewell

Thanks, Hassan. Very fair question. And the answer is we are a little bit constrained right now. We are making and selling, I should say, everything we can make at our Spokane facility for depositions. We are pulling in capital. We've committed over $200 million to double the size of the plant as well as make it more efficient.

And so we're trying to accelerate that to meet the demand. It's a very complex manufacturing process that we have, very unique that provides the great purity of the material and help improve our customer yields at the same time. So we're doing everything we can for 2027 to accelerate that expansion. Obviously, you're at a little bit of a weight on when equipment can arrive that's on order, that kind of thing.

So we're working with our suppliers in that regard. But we're doing everything we can to meet the demand forecast from our customers on depositions. We don't feel like we're constrained in thermal management right now. We feel like we have a really good supply chain there. We're seeing terrific growth there. We're able to continue to meet our customer needs there. But we're really focused on our Spokane facility and continuing to look for ways to flow through more targets for 2027.

Hassan Ahmed

Understood. And David, as a follow-up on Health care packaging, again, very strong growth year-on-year over there, sales up 24%. Was that primarily customer restocking? Was it new business wins? And then as sort of one thinks about 2027, what sort of growth -- would those growth levels be sustainable as sort of one looks into the next year?

David Sewell

Yes, Hassan, you're spot on. We definitely saw the destocking from last year. And when you look at maybe a 2-year CAGR growth, the normalization is around that 6% is where it would fall in. And we just see normalization of that now that we're out of the destocking. So we do think about that as kind of a mid-single-digit business, but we'll be able to give more clarity on health care and the forecast as we get into fourth quarter earnings.

Operator

The next questions are from the line of Peter Osterland with Truist Securities.

Peter Osterland

This is Alec on for Pete. How can we think about the relative scale of the R&D investments across the 2 segments? And how is that balance expected to change heading into 2027?

David Sewell

What we've talked about from a company standpoint overall is when we spun, we thought we were underinvested in R&D. We were about 2% of sales. Our vision because of the innovation, because of the co-innovation we do with our customers, the next-generation molecules that are in development, -- our target was to get closer to 3% of sales. We're at about 2.6% now.

And so we'll continue to slightly edge that up. But what's exciting is what this R&D team is able to deliver as we continue to do that. We've got some really exciting molecules in development, both in refrigerants as well as next-gen technologies and electronics, all under testing. So you've seen that ramp up.

As Tina mentioned, you saw that impact on margins with RAS because it was more heavily skewed to RaaS on the investment just because of the nature of the next-gen molecules. But there'll be a little bit more, but we're getting to a place where we feel is normalized for where we want to be as an innovation company.

Peter Osterland

Okay. And on capital allocation, is there anything about this environment in particular that you think favors share repurchases post M&A or vice versa?

David Sewell

Well, as we've talked about, we're in the midst of a $500 million share buyback. We think this is a great time to buy with where the share price is at. We'll be largely complete, as Tina alluded to, by the end of the first quarter. We'll work with our Board before then on further share repurchases.

But until that time, it probably would be more prudent to wait until coming out of that meeting with our Board as we talk about further share repurchases. But that with the amount of cash we're generating, the organic nature of where we're at, we do see opportunities to continue with share repurchases and returning capital to shareholders.

Operator

Next questions are from the line of John Roberts with Mizuho.

John Ezekiel Roberts

General Atomics minority interest declined significantly. I assume that was related to the U.S. 6 loan repayment. What level of price and margin was applied to that $30 million? Was that at conditions at the time of the loan? Or was it current conditions? And would that minority interest have been closer to the second quarter or your fourth quarter guidance without that repayment?

Tina Pierce

Well, John, what -- I think what you're alluding to is the NCI. And we have seen an increase there. We're kind of guiding towards $70 million for the year. And what we've seen is really a favorable mix as well as what David alluded to in terms of the site has been running extremely well. So it was really a combination of those 2 factors.

David Sewell

And John, to your point on pricing, we don't really talk about how we do our loan returns on pricing. But as you can imagine, it's not -- it's at a more probably lower priced repayment. But as we talked about, we're now really pretty much at the end of our -- a little bit more drips and drabs, but we think we're definitely through the -- almost all of the loan repayments, which would be a negative impact on pricing.

Operator

The next question is from the line of Arun Viswanathan with RBC.

Arun Viswanathan

Congrats on the strong results here. I guess, first off on refrigerants, just curious your comments earlier, it's a little bit early to -- when do you expect, I guess, get that visibility on the channel...

David Sewell

Arun, you broke up on us a little bit. We'll give a lot more clarity on that when we get through fourth quarter. I would say, though, we do have a high degree of confidence that we'll be through the destocking and be to a normalization rate. When we spun, we talked about a normalization rate in the high single digits in HFOs, cannibalizing low single digits in HFCs. So I don't think our forecast would alter too much from that, but we'll give you better clarity when we do fourth quarter earnings.

Arun Viswanathan

Okay. And then if I could just ask on Electronic Materials. I think you've discussed that the Spokane facility has been largely accounted for at this point. Is that accurate? And does that require even greater capacity expansion? Is there like a second phase that you're still working on as well?

David Sewell

Yes. So I'll talk about the expansion. I'll certainly have Tina talk about the accounting on that. So we are in the throes of accelerating the capacity expansion to get that complete. As we talked about, it's kind of 2028. We're trying to do as much as we can to pull in for '27. The demand has been so robust, and we're getting forecast well out to 2030 from our customers and beyond. So we are in early stages of yet conversations of yet another expansion so we can get in front of that. But right now, the main focus is getting through this initial expansion.

Tina Pierce

Yes. As mentioned, for the initial expansion, it's a 3-year program that will conclude in 2028. When we increased our capital guidance last quarter to $420 million to $440 million, one of the considerations was, as Dave alluded, we're trying to pull more of that CapEx in from '27 and '28 so that we can get more product out to our customer. And then secondly, we are looking at kind of the next potential project as well. We see -- we're continuing to have very strong demand signals from our customers. But overall, the program is proceeding extremely well.

Operator

Next question is from the line of Charles Boakye with Jefferies.

Charles Boakye

I wanted to ask a quick question around the unobligated material you referenced and the ability for the debottlenecking to address those requirements for the U.S. government. Can you just speak to what the margin profile may look like for these government-specific requirements? Do they look and mirror the standard utility contracts? Will they be different? And if you could speak around volumes around that, if they'll be prioritized given the U.S. government connection there?

Michael Leithead

Yes. Thanks, Charles. This is Mike. I mean I think, look, obviously, I think, a very constructive signal in the UF6 market to see the NNSA out there with their RFI looking for potential further UF6 demand sources. I think it's too early for us, particularly where we are in the process to give any sort of comment around price. But I think, look, they've obviously been on public record saying they need 1.5 kt as early as the 2030s.

And I think what we wanted to show today is that we've now found an incremental 1 to 2 kt out of Metropolis. We have the ability to service that from our existing asset and continuously look for further areas to serve our customers as the established site here in the U.S. So look, early days, but I think we're in a credible position today with our asset base.

Charles Boakye

Great. And maybe one last question on pricing. I mean, in the conversion market today, you're seeing sort of spot prices slightly higher than the long-term side of things. Of the uncontracted capacity, how are you guys thinking about leaving the spot open given the current price delta and where you envisage pricing going?

David Sewell

So from what -- the way we've approached our capacity and ensuring that we're good partners with our customers through their supply chain is typically about 90% of our capacity is through contract pricing and about 10% would be open for the spot market per year. With this additional debottlenecking that could give us further opportunity. So we'll continue to see how those orders progress with the demand globally. But that's typically how we run our plants and locking up about 90% of that volume with contract pricing.

Operator

At this time, I'll turn the floor back over to Mr. Leithead for closing comments.

Michael Leithead

Great. Well, look, I really appreciate everybody joining us today and your continued interest in Solstice. If you have any questions, I'll be around all day. But thank you, and have a good day.

Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.