Arkema Sa · EURONEXT:AKE
Arkema Sa — Bank of America Materials & Infrastructure Conference 2020
37 slides from Arkema Sa's conference presentation, December 2020
Slide 1: Arkema - Bank of America Materials & Infrastructure Conference 2020
ARKEMA BANK OF AMERICA MATERIALS & INFRASTRUCTURE CONFERENCE 2020 DECEMBER 2020
Slide 2: Arkema in a Snapshot
INNOVATIVE “@& CHEMISTRY
Slide 3: Arkema at a Glance
ARKEMA AT A GLANCE 2019 SALES SPLIT 7% 4% 21% 24% 7% 22% 28% 7% 36% Businesses End markets Regions 15% 22% 24% 31% 20% 32% Adhesive Solutions General industry Building & Construction Europe Advanced Materials Consumer goods Automotive & Transportation North-America Coating Solutions Electrics, elect
Slide 4: A High-Level Financial Performance
A HIGH-LEVEL FINANCIAL PERFORMANCE 1,474 1,457 EBITDA margin 1,391 16.7% 667 since 2017 565 499 EBITDA to cash conversion rate 52% in 2019 above the target of >40% by 2024 15.8 Working capital (% of annual sales) % 13.8% at 30/12/2019 close to the very good level of 2018 2017 2018 2019 2017 2018 201
Slide 5: Diversified Financing Resources
DIVERSIFIED FINANCING RESOURCES Solid investment grade rating 1,000 BBB+ stable outlook (S&P) 900 Baa1 stable outlook (Moody’s) 1.5% 700 1.5% Net debt (excl. hybrids) / EBITDA 500 (31/12/2019) 400 0.75% 1.1x 2.75% 300 300 1.5% 150 Hybrid bonds 0.125% 3.125% (booked as shareholders’ equity) €700 m 20
Slide 6: Strong CSR Requirements
STRONG CSR REQUIREMENTS NON-FINANCIAL RATINGS OUR AMBITION 2015 2019 42 65 BB A C B • Rank among the Top 1% best perfoming companies Global n.a.1 4e/38 chemist • Inclusion in the DJSI EUROPE 120 INDICES EUROZONE 120 INDICES 1. Not disclosed 6 BOFA CONFERENCE - DECEMBRE 2020
Slide 7: Evolution of the Share Price Since 1st January 2019
EVOLUTION OF THE SHARE PRICE SINCE 1st JANUARY 2019 Arkema : -7.8% Average of peers* : -11.9% TSR since May 2006 100 100 (with reintegrated dividends) CAC 40 : -17.0% Arkema around 74.96 80 80 x4 Average of peers* Arkema : + 26.3% around Average of peers* : + 18.1% 60 60 CAC 40 : + 26.4% x2.6 CAC 40
Slide 8: Our Long Term Ambition
INNOVATIVE “@& CHEMISTRY
Slide 9: Our Vision
OUR VISION Be the Specialty Materials leader offering the most innovative and sustainable solutions to address our customers’ current and future challenges 9 BOFA CONFERENCE - DECEMBRE 2020
Slide 10: We Have Aligned Our Business Structure With Our Vision
WE HAVE ALIGNED OUR BUSINESS STRUCTURE WITH OUR VISION 2019 FINANCIALS Specialty Materials Adhesive Solutions Advanced Materials Coating Solutions Intermediates High- PMMA Construction Industrial Performance Coating Coating Performance Fluorogases & Consumer Assembly Additives Resins Additives Polym
Slide 11: Our Vision Is to Become a Pure Specialty Materials Player
OUR VISION IS TO BECOME A PURE SPECIALTY MATERIALS PLAYER SPECIALTY MATERIALS INTERMEDIATES OUR 2024 AMBITION €10-11b sales 3-3.5% p.a. average annual organic revenue growth GDP+ organic growth > M&A to more than double Develop differentiated High group profitability organic growth strategies
Slide 12: Each Platform Has Set Growth and Profitability Ambitions
EACH PLATFORM HAS SET GROWTH AND PROFITABILITY AMBITIONS Adhesive Solutions Advanced Materials Coating Solutions Be a consolidator of the market, Invest and innovate to support Continue to enhance focused on high performance exponential needs for materials the value proposition bonding and construct
Slide 13: Adhesive Solutions Strategy at a Glance
ADHESIVE SOLUTIONS STRATEGY AT A GLANCE 2019 KEY FINANCIALS 2019 REVENUE SPLIT 2024 AMBITION 10% €2.1b Building & Construction sales 42% Do-it-yourself3 High single-digit 48% Industry3 Annual sales growth 12.9% incl. M&A2 EBITDA margin 3% 30% Europe CAPEX intensity1 46% +300 bps North America Asia &
Slide 14: Advanced Materials Strategy at a Glance
ADVANCED MATERIALS STRATEGY AT A GLANCE 2019 KEY FINANCIALS 2019 REVENUE SPLIT 2024 AMBITION 4% Building & Construction €2.7b 10% 8% 35% Consumer goods sales General industry 4% 11% Electrics, electronics & energy Annual organic sales growth 21.7% 14% 18% Automotive & Transportation EBITDA margin Pa
Slide 15: Coating Solutions Strategy at a Glance
COATING SOLUTIONS STRATEGY AT A GLANCE 2019 KEY FINANCIALS 2019 REVENUE SPLIT 2024 AMBITION Paint & coatings €2.1b 8% 8% Consumer goods Nutrition & Water sales 8% 3% General industry 60% 14% Building & Construction Annual organic sales growth 14.4% Electrics, electronics & energy EBITDA margin 5-6%
Slide 16: Investigating Differentiated Strategy Across Intermediates Businesses
INVESTIGATING DIFFERENTIATED STRATEGY ACROSS INTERMEDIATES BUSINESSES … Sales 2019, €b MMA/ PMMA FLUOROGASES ASIA ACRYLICS 0.61 0.7 0.3 Explore potential disposal Focus on specialty segment Balance acrylic monomer Once these strategies are of MMA/ PMMA (~€0.2b) high-value capacity in Asia through ex
Slide 17: Cash Allocation Priorities
CASH ALLOCATION PRIORITIES Estimated cash to allocate over the 5 year plan ~€3.5b at constant leverage 3 (~1.6x) SUBJECT TO MARKET CONDITIONS +25% 40-45% Reiterating our progressive dividend policy, targeting 40% payout ratio by 2024 Return to shareholders Opportunistic share buy-back program
Slide 18: Maintain Strict Financial Discipline
MAINTAIN STRICT FINANCIAL DISCIPLINE ROCE Net debt to EBITDA ratio Solid investment grade rating >10% <2x Incl. hybrid bonds Recurring Capex Controlled working capital ~5.5% ~14% of sales of sales 18 BOFA CONFERENCE - DECEMBRE 2020
Slide 19: Strong Commitment on Climate and Environment
STRONG COMMITMENT ON CLIMATE AND ENVIRONMENT CLIMATE CLIMATE PLAN ENVIRONMENT Commitment to Paris agreement New targets for 2030 and Science-Based Target trajectory well below 2°C AIR WATER ENERGY GHG EMISSIONS in kt eq. CO2 Greenhouse gas emissions 6,480 (GHG) new target for 2030 -65% -60% -20% vs
Slide 20: Innovation to Support Sustainable Development
INNOVATION TO SUPPORT SUSTAINABLE DEVELOPMENT Industry leading range of bio- Large range of VOC-free Lightweight composites Circular economy initiatives based specialty polyamides coating solutions to reduce GHG emissions (e.g. recyclable resins) PORTFOLIO SUSTAINABILITY ASSESSMENT RESEARCH & INNOVA
Slide 21: Cultivate an Open Dialogue With Our Stakeholders
CULTIVATE AN OPEN DIALOGUE WITH OUR STAKEHOLDERS EMPLOYEES COMMON GROUND® 80% are actively Nearly 1000 engaged initiatives taken From 23% to 25% DIVERSITY PHILANTHROPY in 2025 Promotion of women Funds for and international education, talents in senior salary rounding, management women in senior spon
Slide 22: Q3 2020 Results
Q3 2020 RESULTS INNOVATIVE “@& CHEMISTRY
Slide 23: Solid Q3'20 Performance in the Current Context
SOLID Q3’20 PERFORMANCE IN THE CURRENT CONTEXT SALES EBITDA ADJ. NET INCOME FREE CASH FLOW In €m In €m In €m In €m -13.9% 16.1% €1.42 x1.3 MARGIN ADJ. EPS 2,216 285 385 1,909 307 218 166 109 Q3'19 Q3'20 Q3'19 Q3'20 Q3'19 Q3'20 Q3'19 Q3'20 23 BOFA CONFERENCE - DECEMBRE 2020
Slide 24: Strong Sequential Volumes Improvement and Excellent Cash Generation
STRONG SEQUENTIAL VOLUMES IMPROVEMENT AND EXCELLENT CASH GENERATION 9% decline at constant scope and currency (-18% in Q2'20), in line with the guidance of around -10% issued end July. Negative volume effect of 4.4% €1,909m sales Rebound in the construction and decorative paints markets. Industrial
Slide 25: Q3'20 Key Figures
Q3’20 KEY FIGURES In €m Q3’19 Q3’20 Change Sales 2,216 1,909 (13.9)% EBITDA 385 307 (20.3)% Specialty Materials 312 268 (14.1)% Intermediates 92 55 (40.2)% Corporate -19 -16 EBITDA margin 17.4% 16.1% Specialty Materials 1 17.7% 16.9% Intermediates 1 20.6% 17.5% Recurring operating income (REBIT) 250
Slide 26: Q3'20 Sales Bridge
Q3’20 SALES BRIDGE In €m Volumes Prices Scope Currency (4.4)% (4.5)% (1.7)% (3.3)% More favorable dynamic Impact of lower Divestment of Further vs Q2’20 (-12.2% YoY) propylene prices in Functional depreciation of Coating Solutions Polyolefins on US dollar and Rebound in construction 1 June 2020 cert
Slide 27: Adhesive Solutions (27% of Group Sales)
ADHESIVE SOLUTIONS (27% OF GROUP SALES) Q3’20 KEY FIGURES Q3’20 SALES DEVELOPMENT Q3’20 SALES BY BUSINESS LINE In €m Q3’19 Q3’20 Change Volumes (0.3)% Sales 522 516 (1.1)% Construction & Prices +0.4% Consumer 222 EBITDA 71 73 +2.8% 294 Currency (3.7)% EBITDA margin 13.6% 14.1% Industrial Assembly Re
Slide 28: Advanced Materials (31.5% of Group Sales)
ADVANCED MATERIALS (31.5% OF GROUP SALES) Q3’20 KEY FIGURES Q3’20 SALES DEVELOPMENT Q3’20 SALES BY BUSINESS LINE In €m Q3’19 Q3’20 Change Volumes (12.6)% Sales 708 603 (14.8)% 178 High Performance Prices +0.8% Polymers EBITDA 159 127 (20.1)% Currency (3.0)% EBITDA margin 22.5% 21.1% 425 Performance
Slide 29: Coating Solutions (24.5% of Group Sales)
COATING SOLUTIONS (24.5% OF GROUP SALES) Q3’20 KEY FIGURES Q3’20 SALES DEVELOPMENT Q3’20 SALES BY BUSINESS LINE In €m Q3’19 Q3’20 Change Volumes +2.1% Sales 532 469 (11.8)% 117 Coating Resins Prices (11.3)% EBITDA 82 68 (17.1)% Currency (3.4)% EBITDA margin 15.4% 14.5% Coating Additives 352 Rec. ope
Slide 30: Intermediates (17% of Group Sales)
INTERMEDIATES (17% OF GROUP SALES) Q3’20 KEY FIGURES Q3’20 SALES DEVELOPMENT In €m Q3’19 Q3’20 Change Volumes (3.8)% Sales 447 315 (29.5)% Prices (10.5)% EBITDA 92 55 (40.2)% Currency (3.0)% EBITDA margin 20.6% 17.5% Rec. operating income 61 27 (55.7)% Scope (12.2)% Q3’20 HIGHLIGHTS €315m sales, dow
Slide 31: High Free Cash Flow in Q3'20
HIGH FREE CASH FLOW IN Q3’20 RECONCILIATION OF EBITDA TO NET CASH FLOW Q3’20 HIGHLIGHTS In €m Q3’19 Q3’20 Tax rate Q3’20: ~22% of REBIT (excl. EBITDA 385 307 exceptional items) Current taxes (48) (31) Cost of debt (24) (19) Strict working capital management ● 13.9% working capital on annualized Chan
Slide 32: Q3'20 Net Debt Bridge (Including Hybrid Bonds)
Q3’20 NET DEBT BRIDGE (INCLUDING HYBRID BONDS) In €m 1.6x LTM EBITDA 2,134 (285) 5 15 1,869 1,000 Hybrid bonds 700 Hybrid bonds 300 Hybrids reclassified as current debt * 1,134 869 30/06/2020 Free cash M&A FX and 30/09/2020 flow others * Refunded in October 2020 32 BOFA CONFERENCE - DECEMBRE 2020
Slide 33: Portfolio Management Highlights Since 1 January 2020
PORTFOLIO MANAGEMENT HIGHLIGHTS SINCE 1 JANUARY 2020 Bolt-on acquisitions in Adhesive Solutions Divestment LIP FIXATTI IDEAL WORK FUNCTIONAL POLYOLEFINS Danish leader in tile adhesives, water Leading global manufacturer of high- Specialized in high-end decorative Sale of Arkema’s Functional proofing
Slide 34: Main Organic Growth Projects Since 1 January 2020
MAIN ORGANIC GROWTH PROJECTS SINCE 1 JANUARY 2020 Attractive growth capex in Innovative partnership for the New plant in industrial adhesives Advanced Materials supply of (AHF) KERTEH 2 JAPAN NUTRIEN Doubling of the methyl mercaptan production New world-scale industrial adhesives plant Long term sta
Slide 35: CSR Highlights
CSR HIGHLIGHTS PORTFOLIO SUSTAINABILITY ASSESSMENT ELIUM® 65% of Group sales assessed at end Sept. 2020 (44% at end 2019) ZEBRA project for the first 100% recyclable wind turbine blade Around 46%of assessed sales 2020 Pierre Potier Prize: Elium® thermoplastic resin for wind turbines significantly co
Slide 36: Outlook
OUTLOOK The fourth quarter is marked by a second wave of Covid-19 in many countries, especially in Europe, which could weigh on global demand. In this uncertain environment, Arkema estimates at this stage that activity levels should nevertheless be in the continuity of those of the third quarter, ex
Slide 37: Disclaimer
DISCLAIMER The information disclosed in this document may contain forward-looking statements with respect to the financial condition, results of operations, business and strategy of Arkema. In the current context, where the Covid-19 epidemic continues to rapidly spread across the world, and the evol
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