Arkema Sa · EURONEXT:AKE
Arkema Sa — Investor Day (April 2020)
45 slides from Arkema Sa's investor day presentation, Apr 2, 2020
Slide 1: Strategy Update
STRATEGY 20200 JU P-DAT l= —
Slide 2: Disclaimer
Disclaimer The information disclosed in the whole 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
Slide 3: Agenda for today
Agenda for today 11:00-12:15 Arkema strategy update 12:15-13:00 Q&A Our speakers Thierry Le Hénaff Marie-José Donsion Marc Schuller Virginie Delcroix Vincent Legros Chairman and CEO CFO COO VP Sustainable Development EVP Adhesive solutions 3 STRATEGY UPDATE 2 APRIL, 2020
Slide 4: Introduction
Introduction ▪ This Strategy Update takes place in the unusual context of the current COVID-19 outbreak ▪ Our priority remains the safety and well-being of our employees while ensuring the continuity of our operations to support our customers ▪ Our teams are fully mobilized to manage the impact of t
Slide 5: Update on the COVID-19 situation
Update on the COVID-19 situation Impact of COVID-19 on Q1 2020 ▪ Estimated EBITDA impact of €40-50m PROTECT EMPLOYEES STRONG BALANCE SHEET at the end of Q1 ▪ No visibility on full year Dedicated crisis management cells, We have refinanced our next 3-years’ impact at this stage centrally and in each
Slide 6: Our Vision
OUR VISION Be the Specialty Materials leader offering the most innovative and sustainable solutions to address our customers’ current and future challenges 6 STRATEGY UPDATE 2 APRIL, 2020
Slide 7: Our world is changing fast
Our world is changing fast accelerating demand for new materials Future of mobility Urbanization Environment Industry 4.0 Consumer demand Lightweighting Insulation Wind, solar, hydrogen 3D printing Personalized design Durability Energy efficiency Water treatment Miniaturization Performance Batteries
Slide 8: Arkema has unique materials capabilities to address these challenges
Arkema has unique materials capabilities to address these challenges Structuring Bonding Protecting Additive Surface Piezoelectric materials materials surfaces technology science materials Change picture (wind turbine blade) Composite Recyclable Bio-based Rheology UV curing Nanoscience materials mat
Slide 9: We have organized this know-how into 3 synergistic growth platforms
We have organized this know-how into 3 synergistic growth platforms Adhesive Advanced solutions materials Specialty Materials Coating solutions Building & Automotive & General industry Consumer goods Electric & energy Paint & coatings Nutrition & water construction transportation Key end markets 9 S
Slide 10: Progressive development of 3 platforms since 2005 through portfolio shift
We have progressively developed these 3 platforms since 2005 through a profound portfolio shift Sales split 2005 2019 50% 79% Specialty Materials Specialty Materials 13% 31% 24% 50% €5.7b €8.7b 37% 24% 21% Adhesive solutions Advanced materials Coating solutions Intermediates 10 STRATEGY UPDATE 2 APR
Slide 11: M&A was critical in rotating our portfolio towards specialty
M&A was critical in rotating our portfolio towards specialty Colored boxes represent the largest acquisitions and divestments over the period Select Dow Seppic specialty Oxido polymer XL Coatex acrylic assets surfactants Sunke crosslinkers Brands Prochimir LIP 7.6x €4.4b Average EV/EBITDA multiple a
Slide 12: Beyond portfolio management, Arkema improved performance across 5 dimensions
Beyond portfolio management, Arkema strongly improved its performance across 5 dimensions 1 2 3 4 5 We became a We innovated We realized We made We made balanced global through 6 R&D strong significant CSR a step-change player growing our platforms focused operational improvements in financial prese
Slide 13: Fully rebalanced geographic footprint
1 | Fully rebalanced geographic footprint Sales split per region EUROPE 57% 36% Employees 11,200 US Plants 61 ASIA 32% R&D centers 7 25% 28% Employees 4,075 2005 2019 13% Employees 4,320 Plants 43 Plants 30 R&D centers 4 R&D centers 4 2005 2019 ROW 2005 2019 Employees 905 5% 4% Plants 10 R&D centers
Slide 14: Innovation through focused R&D platforms dedicated to sustainability
2 | Innovation through 6 focused R&D platforms dedicated to sustainability ARKEMA R&D 2019 AT A GLANCE Water management 1,600 222 Researchers New patents in 2019 New energies Bio-based products 6 2.8% R&D spend 10,268 Patents FOCUSED R&D as % of sales in force PLATFORMS Lightweight Electronics solut
Slide 15: Strong operational efficiency gains and lean overhead
3 | Strong operational efficiency gains and lean overhead TOTAL FIXED COSTS WORKING CAPITAL REVENUE & EMPLOYEES as % of sales indexed to 2005 as % of sales Revenue, €b Employees, ‘000 Base 100 23.6% -16% 8.7 -42% +53% 5.7 13.8% 18.4 +12% 20.5 2005 2019 2005 2019 2005 2019 WHILE MANAGING MULTIPLE VAL
Slide 16: Strong CSR progress
4 | Strong CSR progress OUTSTANDING CSR TRACK-RECORD COMBINED WITH SUSTAINABLE INNOVATION Industry leading range of bio- Large range of VOC-free -13% vs. 2015 -88% vs. 2005 based specialty polyamides coating solutions GHG Recordable emissions injuries Lightweight composites Circular economy initiati
Slide 17: Step-change in financial performance
5 | Step-change in financial performance REVENUES EBITDA FREE CASH FLOW ROCE €b €b €m % of sales 1.46 8.7 667 11.7% +53% 5.7 +300% +7.5 p.p. 16.7% 4.2% 0.36 6.2% <0 2005 2019 2005 2019 2005 2019 2005 2019 Dividends have increased at a rate of 12% p.a. on average between 2007-2018 Despite the current
Slide 18: Arkema Today
STRATEGY zozco UPDATE ARKEMA TODAY INNovaTive @& CHEMISTRY
Slide 19: 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 20: 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 21: Specialty Materials platforms provide strong growth & resilience
The Specialty Materials platforms provide strong growth & resilience EBITDA margin EBITDA evolution of Specialty % Materials platforms €b Adhesive solutions Coating solutions Advanced materials Total Specialty Materials platforms Intermediates +7.5% 1.16 30% p.a. 25% +8.0% p.a. 0.87 Intermediates 20
Slide 22: The combination of our Specialty Materials platforms is unique
The combination of our Specialty Materials platforms is unique Specialty Materials Adhesive solutions Advanced materials Coating solutions Leadership position #3 #1-2 #2-3 ▪ Henkel ▪ H.B. Fuller ▪ EMS ▪ Evonik ▪ DSM ▪ Dow Main competitors ▪ Sika ▪ EMS ▪ Kureha ▪ Solvay ▪ BASF ▪ Allnex ▪ DuPont ▪ Dow
Slide 23: The platforms are well-positioned on growth trends
The platforms are well-positioned on growth trends UNDERLYING MARKET GROWTH KEY TRENDS ▪ Population growth and urbanization Adhesive solutions ~3% p.a. ▪ Energy efficiency and insulation ▪ Lightweighting (replacement of mechanical bonding) ▪ Lightweighting for CO2 and energy reduction in transport ▪
Slide 24: Leading material solutions provider for Li-ion batteries
Arkema is a leading material solutions provider for Li-ion batteries Adhesive solutions Advanced materials Coating solutions ARKEMA SOLUTIONS FOR E-MOBILITY LIGHTWEIGHTING AND HEAT TRANSFER OF BATTERY PACKS Protection of bus bar Bio-based Polyamide 11 30+% Casing (substitute metal) Recyclable thermo
Slide 25: Leading material solutions provider for 3D printing
Arkema is a leading material solutions provider for 3D printing Advanced materials Coating solutions 20+% HIGH-PERFORMANCE POLYMERS FOR 3D PRINTING CAGR ’19-241 PEKK PVDF Bio-based PA11 Easy to process in powder Filaments with Powders with improved or filaments & ultra high excellent UV and impact r
Slide 26: Strong position in lightweighting solutions
Arkema has a strong position in lightweighting solutions Advanced materials HIGH PERFORMANCE POLYMERS WITHSTANDING EXTREME CONDITIONS HIGH Performance Carbon fiber composites High temperature PA auto Bio-sourced PEKK/CF Tapes fluid transfers PEKK PVDF 2x stronger than steel 7x lighter than steel PA
Slide 27: Solutions for all aspects of construction
Arkema provides solutions for all aspects of construction Adhesive solutions Advanced materials Coating solutions OUR SOLUTIONS ARE EVERYWHERE Wood coatings & Roofing coatings adhesives Roofing & wall insulation Wall covering Construction Sealants Flooring, waterproofing, dampening Insulating glass
Slide 28: Intermediates have leading positions and solid profitability over the cycle
Intermediates have leading positions and solid profitability over the cycle MMA/ PMMA FLUOROGASES ASIA ACRYLICS Key strengths ▪ Integrated player in innovative ▪ Strong global player supported ▪ Attractive geographic location PMMA Resins by historical leadership positions ▪ Access to the first marke
Slide 29: Our vision is to become a pure Specialty Materials player
Our vision is to become a pure Specialty Materials player
Slide 30: 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 31: 4 levers underpin our strategy
4 levers underpin our strategy Accelerate Strengthen our Commercial Achieve best-in-class organic specialty platforms and operational CSR performance growth and through bolt-on excellence amongst chemical innovation M&A initiatives players 31 STRATEGY UPDATE 2 APRIL, 2020
Slide 32: 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 33: Adhesive solutions strategy at a glance
Adhesive solutions strategy at a glance 2019 KEY FINANCIALS 2019 REVENUE SPLIT 2024 AMBITION €2.1b 10% Building & Construction sales 42% Do-it-yourself3 High single-digit 48% Industry3 Annual sales growth 12.9% incl. M&A2 EBITDA margin 3% 30% CAPEX intensity1 46% Europe North America +300 bps Asia &
Slide 34: 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 35: 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% Annual organic sales growth 14.4% Building & Construction Electrics, electronics & energy EBITDA margin 5-6%
Slide 36: 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 strategic options Focus on specialty segment Balance acrylic monomer Once these strategies are for MMA/ PMMA (~€0.2b) high-value capacity in Asia through ex
Slide 37: Cash allocation priorities
Cash allocation priorities Estimated cash to allocate over the 5 year plan ~€3.5b at constant leverage3 (~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 ▪ E
Slide 38: 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 38 STRATEGY UPDATE 2 APRIL, 2020
Slide 39: We continue to drive CSR improvements across our value chain
We continue to drive CSR improvements across our value chain CSR EFFORTS ACROSS OUR VALUE CHAIN OUR AMBITIONS With our Suppliers Inside Arkema & its community For our customers Integrate the DJSI Responsible Climate & Safety Diversity Community Innovation on sourcing Environment Sustainable products
Slide 40: 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 41: Our employees and values are at the core of what we do
Our employees and values are at the core of what we do OUR SHARED VALUES OUR INITIATIVES PERFORMANCE SOLIDARITY 6.3% Philanthropic of outstanding shares actions driven by held by employees employees choice of cause, e.g., the Arkema Fund for Education and salary rounding schemes ACCOUNTABILITY SIMPL
Slide 42: Key take-aways
KEY TAKE-AWAYS Complete transition to a pure Focused and resilient CSR at the core player in Specialty Materials portfolio of our strategy Unique innovation based High profitability and cash New value creation phase on megatrends generation for our shareholders & stakeholders 42 STRATEGY UPDATE 2 AP
Slide 43: Backup
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Slide 44: Changes in segment reporting as of Q1 2020
Changes in segment reporting as of Q1 2020 Separate reporting Now including Thiochemicals Now including UV cure resins Now including Asia Acrylics which of Adhesives (Bostik) and Hydrogen peroxide (Sartomer) but excluding Asia Acrylics does not benefit yet from integration ADHESIVE SOLUTIONS ADVANCE
Slide 45: New Executive Committee organization
New Executive Committee organization Thierry Le Hénaff Marie-José Donsion Thierry Parmentier Bernard Boyer Luc Benoit-Cattin Chairman and CEO CFO EVP Human Resources and EVP Strategy EVP Industry and CSR Corporate Communication Vincent Legros Marc Schuller Richard Jenkins Marie-Pierre Chevallier Erw