Arkema Sa · EURONEXT:AKE
Arkema Sa — Morgan Stanley Chemicals Cannonball Run 2024
37 slides from Arkema Sa's conference presentation, Jun 26, 2024
Slide 1: Morgan Stanley Chemicals Cannonball Run 2024
Thierry Le Hénaff Chairman and CEO MORGAN STANLEY CHEMICALS CANNONBALL RUN 2024 26 June 2024 – Paris, France
Slide 2: Arkema in a snapshot
Arkema in a snapshot MORGAN STANLEY - CHEMICALS CANNONBALL RUN 2024 26/06/2024 2
Slide 3: Arkema in a snapshot (2023)
Arkema in a snapshot (2023) €9.5bn sales Europe €275m 34% of sales R&D expenditure North America Asia 37% of sales 24% of sales €634m total capex Rest of the world 5% of sales 21,100 employees 55 countries 151 production sites MORGAN STANLEY - CHEMICALS CANNONBALL RUN 2024 26/06/2024 3
Slide 4: 3 coherent Specialty Materials segments serving attractive markets
3 coherent Specialty Materials segments serving attractive markets Segments 31% Building & construction Specialty Materials 38% 92% 27% General industry 25% 19% Consumer goods & electronics 29% 8% 12% Water, health & nutrition Adhesive Solutions Coating Solutions Advanced Materials Intermediates 11%
Slide 5: A solid financial performance in 2023 in a demanding context
A solid financial performance in 2023 in a demanding context EBITDA (€m) Sales (€bn) EBITDA margin (%) 2,110 1,727 1,501 1,457 1,182 18.1% 18.3% 11.5 16.7% 9.5 9.5 8.7 7.9 15.0% 15.8% 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 MORGAN STANLEY - CHEMICALS CANNONBALL RUN 2024 26/06/2024 5
Slide 6: Excellent cash generation
Excellent cash generation Recurring cash flow (€m) EBITDA to cash conversion rate (%) EBITDA to cash conversion rate 933 50.7% in 2023 above the target of 40% 786 762 756 761 Strict working capital 64% management 13.1% of sales at end December 2023 (excluding PIAM) 54% 51% 44% 44% Capital expenditur
Slide 7: Debt successfully refinanced in 2023 and early 2024
Debt successfully refinanced in 2023 and early 2024 Debt maturity schedule (€m) 1,100 Refinancing of the €1,100m senior bond in 2023 900 and of the €400m hybrid bond 1.5% in March 2024 700 700 1.5% 4.25% Average maturity (excluding hybrids) 4 years (at end-Q1 2024) 500 400 400 0.75% 400 3.5% RCF 2.7
Slide 8: Delivering 1.5°C trajectory by 2030, paving the way for Net-Zero in 2050
Delivering 1.5°C trajectory by 2030, paving the way for Net-Zero in 2050 GHG emissions 2030 targets (vs 2019) -48.5% for Scopes 1 & 2 -39% in 2023 vs 2019 -54% for Scope 3 -53% in 2023 vs 2019 Net energy purchases 2030 targets (vs 2012) - 25% - 9% in 2023 vs 2012 MORGAN STANLEY - CHEMICALS CANNONBAL
Slide 9: CSR achievements recognized by non-financial rating agencies
CSR achievements recognized by non-financial rating agencies Improved to A- for Climate change B for Water security IMPROVED Inclusion in the RATING CAC® SBT 1.5° Index created in 2023 Maintained in CAC 40® ESG Among top 4% 1st decile (global) Rating A of the sector MORGAN STANLEY - CHEMICALS CANNON
Slide 10: A steadily growing dividend
A steadily growing dividend Dividend1 (in €/share) Payout ratio of 40% for fiscal year 2023 + 12% on average per year over 2019-23 period 3.4 3.5 3.0 2.5 2.2 In line with the Group’s ambition to progressively increase the dividend 2019 2020 2021 2022 2023 1. Dividend per fiscal year MORGAN STANLEY -
Slide 11: Strategy and ambition
Strategy and ambition MORGAN STANLEY - CHEMICALS CANNONBALL RUN 2024 26/06/2024 11
Slide 12: Our vision is shaped by the accelerating demand for high-performance materials
Our vision is shaped by the accelerating demand for high-performance materials A SIGNATURE “Be the Specialty Materials leader, offering the most innovative and FOR A VISION sustainable solutions to address our customers’ current and future challenges” MORGAN STANLEY - CHEMICALS CANNONBALL RUN 2024 2
Slide 13: 3 unique and complementary capabilities
Our know-how is centered on materials science 3 unique and complementary capabilities to seize opportunities from global megatrends Creating and strengthening Bonding and assembling Protecting and modifying materials materials materials MORGAN STANLEY - CHEMICALS CANNONBALL RUN 2024 26/06/2024 13
Slide 14: Our strategy underpins ambitious financial objectives
Our strategy underpins ambitious financial objectives 2028 Strict financial discipline c. €12bn Sales Net debt to EBITDA ≤2 Solid investment grade rating EBITDA c. 18% margin Operating cash ~70% conversion rate1 Sales +4%/y Organic CAGR EBITDA +7-8%/y over 2024-28 ROCE ~10% 1. Free cash flow before
Slide 15: Each segment has aligned its targets with the Group objectives
Each segment has aligned its targets with the Group objectives Forecasts defined in normalized macroeconomic and market conditions Advanced Materials Adhesive Solutions Coating Solutions % of Group sales in 2028 c. 45% c. 30% c. 25% Organic sales CAGR +6%/y +3.5%/y +3%/y over 2024-28 2028 EBITDA mar
Slide 16: EBITDA growth is driven by well identified levers
EBITDA growth is driven by well identified levers +€650m Cumulative EBITDA +€350m from major capex focused on superior growth markets 2024-28 ~€10bn +€300m from ongoing organic growth combining: -30% c. €500m from increased volumes, pricing and product mix, including for tax, interest expense, recov
Slide 17: Capital allocation will be value driven and attractive for our shareholders
Capital allocation will be value driven and attractive for our shareholders Operating cash flow over 2024-28 period c. €7bn Allocated to: Maintenance and regulatory capex Around +15% vs last 5y period (2019-23) to reflect ~55% Capex inflation, decarbonization and increased focus on batteries Growth
Slide 18: We place sustainability at the heart of our strategy
We place sustainability at the heart of our strategy Leverage the Achieve superior Ramp-up Further strengthen Drive our strength of growth from recent major capex the portfolio manufacturing One Arkema to sustainable and carry out with bolt-on M&A excellence including enhance employee innovation in
Slide 19: We identified key submarkets with superior growth driven by sustainable megatrends
We identified 5 key submarkets with superior growth driven by sustainable megatrends Our end-markets Selected submarkets with outstanding growth Transportation and energy Green energy and electric mobility Advanced electronics Consumer goods and electronics Sustainable lifestyle Building and constru
Slide 20: With these differentiated technologies, we are uniquely positioned to serve the key submarkets
With these differentiated technologies, we are uniquely positioned to serve the key identified submarkets Advanced Materials Adhesive Solutions Coating Solutions Green energy and electric mobility Advanced electronics Sustainable lifestyle Efficient buildings and homes Water filtration, medical devi
Slide 21: This combination of technologies x submarkets will accelerate our growth
This combination of technologies x submarkets will accelerate our growth 15% 25% 2023 2028 85% €9.5bn sales 75% c. €12bn sales 3x higher organic sales CAGR than Group’s average Over 50% of Arkema R&D spendings Green energy Water filtration, medical devices Advanced electronics Efficient buildings an
Slide 22: Recent capex supporting Arkema's ambition
Recent capex supporting Arkema’s ambition PVDF UV curing resins Bio-based PA11 Pebax® Fluorospecialties Expansions Doubling capacity New units Expansion HF with Nutrien (US) (China, France) (China) (Singapore, China) (France) HFO 1233zd (US) Batteries, semicon New energies, Consumer goods, Consumer
Slide 23: New attractive capex initiatives will be implemented
New attractive capex initiatives will be implemented Additive Decarbonization of Niche additive for biofuels acrylics production for renewable energy DMDS capacity Manufacturing process Expansion in Changshu, in Beaumont, US. modification at Carling, China. “Mission critical” Essential additive in F
Slide 24: PIAM acquisition closed in December offering superior growth potential
PIAM acquisition1 closed in December offering superior growth potential in attractive markets PI Advanced Materials Progressive rebound expected from Q2’24 Superior sales growth after slow 2023 expected at 13%/y • Volume ramp-up from March • In line with electronics market dynamic PI films and varni
Slide 25: Acquisition of Dow's flexible packaging laminating adhesives
Acquisition1 of Dow’s flexible packaging laminating adhesives: a high-quality business strengthening our existing position One of the global leaders for adhesives in flexible packaging A unique opportunity • Become a leader in the flexible packaging market Annual sales around US$ 250m • Become a tec
Slide 26: Acquisition of Dow's flexible packaging laminating adhesives: a highly value creative operation
Acquisition of Dow’s flexible packaging laminating adhesives business: a highly value creative operation • Based on a US$150m Enterprise Value Transaction price • Corresponding to book value of WC and assets • Representing around 10x EBITDA 2024F Implementation Around US$50m over the next three year
Slide 27: A clear CSR roadmap is embedded in our strategy
A clear CSR roadmap is embedded in our strategy Climate Scopes 1 + 2 Sustainable Sales contributing Safety Total recordable by 2030 vs 2019 GHG emissions solutions significantly by 2030 injury rate TRIR to UN SDGs -48.5% 0.8 Process safety Near-term Scope 3 event rate PSER SBTi targets GHG emissions
Slide 28: First-quarter 2024 results
First-quarter 2024 results Extract from « First quarter 2024 results and outlook » presentation (7 May 2024) MORGAN STANLEY - CHEMICALS CANNONBALL RUN 2024 26/06/2024 28
Slide 29: Q1'24 financial highlights
Q1’24 financial highlights → Down 7.3% YoY €2,341m sales • Slight volume growth in the 3 Specialty Materials segments (+2.7%) • Good momentum in structural bonding, sports, automotive and energy markets • Negative 8.4% price effect in Specialty Materials mainly reflecting lower raw material prices a
Slide 30: Sales evolution reflecting mainly lower raw materials
Sales evolution reflecting mainly lower raw materials Sales in €million -0.2% -7.2% -1.7% +1.8% Slight growth in the Ongoing Stronger euro Integration of PIAM, as 3 Specialty Materials unfavorable against US dollar well as Polytec PT and segments (+2.7%) conditions in and Chinese yuan Arc Building P
Slide 31: Adhesive Solutions (29% of Group sales)
Adhesive Solutions (29% of Group sales) Key figures Highlights in €m Q1’24 Q1’23 Change → Volumes up 1.7% YoY Sales 680 698 -2.6% • Stronger demand in structural bonding EBITDA 105 93 +12.9% and packaging in all 3 key regions • Construction activity slightly down EBITDA margin 15.4% 13.3% REBIT 82 7
Slide 32: Advanced Materials (38% of Group sales)
Advanced Materials (38% of Group sales) Key figures Highlights in €m Q1’24 Q1’23 Change → Volumes up 1.6% YoY Sales 878 937 -6.3% • Positive momentum in High Performance Polymers EBITDA 162 160 +1.3% in Asia, notably in the battery, automotive and sport markets EBITDA margin 18.5% 17.1% • Performanc
Slide 33: Coating Solutions (26% of Group sales)
Coating Solutions (26% of Group sales) Key figures Highlights in €m Q1’24 Q1’23 Change → Volumes up 5.3% YoY Sales 615 661 -7.0% • Improving demand in Coating Additives, notably EBITDA 75 94 -20.2% for industrial markets • Higher volumes in upstream acrylics in Europe EBITDA margin 12.2% 14.2% REBIT
Slide 34: Intermediates (7% of Group sales)
Intermediates (7% of Group sales) Key figures Highlights in €m Q1’24 Q1’23 Change Sales 158 218 -27.5% → Volumes down 30.7% YoY EBITDA 39 49 -20.4% • Mechanical impact on volumes from lower refrigerant gas quotas EBITDA margin 24.7% 22.5% • Lackluster business context for acrylics in REBIT 29 36 -19
Slide 35: Cash flow generation reflecting usual seasonality
Cash flow generation reflecting usual seasonality in €million Q1’24 Q1’23 EBITDA 350 367 → Q1’24 tax rate 22% of REBIT (excl. exceptional items) Current taxes -39 -55 Cost of debt -14 -16 Change in working capital and fixed assets payables (1) -255 -243 → Working capital Recurring capital expenditur
Slide 36: Outlook
Outlook → The macroeconomic environment remains marked by a lack of visibility and ongoing geopolitical tensions, with no clear signs yet of a rebound in demand. → In this context, Arkema will focus primarily on internal momentum, and will benefit from the gradual ramp-up from Q2 onwards of several
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 a context marked by strong geopolitical tensions, where the evolution of the world economy remain uncertain
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