Arkema S/Adr

Good morning, everyone. Welcome to Arkemas Q2 2021 Results Conference Call. With me today are Marie-José, our CFO, and the Investor Relations Team. As always, you will be able to download the set of slides used during this webcast from our website. And together with Marie-José, we'll be happy to answer your questions at the end of the presentation. After an already strong start of the year, we are very pleased. with the way this second quarter has developed. Actually, we consider this quarter to be another significant milestone in the development of the company, consolidating all the growth ingredients which were steadily implemented over the past years. Market dynamics stayed very well oriented with a combination of strong underlying growth and tight supply chains. On top of that, we benefited from a clear acceleration in the demand for sustainable solutions and from the strength of our innovation pipeline. We really took advantage of our unique positioning in high-performance materials, the demand for which will definitely continue to expand on the back of powerful megatrends like climate change, resource scarcity, urbanization, and clean mobility. In the first half, we have many very exciting examples of high-growth applications, such as battery, but there are many others, and this will continue over the coming months and years. Our performance was therefore excellent this quarter, with an EBITDA of 478 million euros, up 67% year-on-year, despite a negative combined scope and currency effects, of around 30 million euros. EBDA margin reached a record level of 20%. Just as importantly, the EBDA was well above the pre-COVID level of Q2 2019. This reflects also the soundness of our decisions made during 2020 not to cut R&D investment and CAPEX project, And this now allows us to capitalize on our recent capacity additions and to capture the growth. We are strongly encouraged by the quality of this performance. Importantly, it was rerun by all segments, each of them showing strong EBITDA progression supported by high volumes and robust pricing power. With volumes of almost 20% compared to last year, and 3.5% above 2019 levels, specialty material, which now represents around 85% of our sales, led the growth. In the continuity of Q1, underlying demand was still very solid in most of the groups and market. And as I said just before, we also benefited from the accelerating contribution of new developments driven by sustainable innovation in attractive and promising areas like battery, bio-based materials, 3D printing, engineering adhesives, or eco-friendly paints. As you certainly know, the raw materials environment was quite challenging this quarter. This is part and parcel of the economic recovery. We saw a sharp increase of input costs, including energy and logistics, which we continue in Q3. Thanks to our pricing actions, we managed to completely offset this negative impact at group level, including in our most downstream businesses. Of course, there are nuances depending on activities and geographies, but the net impact was neutral to positive in all the segments of the group. At Bostik, Pricing versus raw materials net impact was neutral, which is quite an achievement given the context. It is highly positive in coating solutions, benefiting from good pricing power in the downstream businesses, as well as tight market conditions in the acrylic chain. This pricing action will continue in Q3, so that despite further significant increases in input costs, the net pricing impact will be again at least neutral for Q3 for the group. Our specialty material, the ABDA, reached 417 million euros, almost 40% above Q2-19 pre-COVID levels, back on track with our 2024 ambition. The ABDA margin was also excellent, despite the raw materials inflation, high-performance polymer and cotexation achieving a historically high performance, above 20%, while Bostik delivered on its promise and reached 14.3% despite the dilutive mechanical effect of price increases of around 50 bps. This is in line with Bostik's confirmed objective of 14% for the full year despite the ongoing challenge of raw materials. Intermediate showed also a strong progression year-on-year despite a negative scope effect linked to the PMMA disposal on the back of more favorable market conditions. Given this strong set of results and the dynamics of the market, we remain rather positive on the outlook, even if we stay attentive and agile with regard to the evolution of both the public health situation and the difficult for material environment. Please also note that last year H2 already showed a good recovery, so the base of comparison with the higher will be higher than in H1. On the qualitative front, I would like to shed some light on several developments and projects which reinforce our commitment to sustainability and strengthen our positioning in high-performance materials in line with our 2024 ambition. Firstly, I wanted to highlight some examples of our eco-friendly innovation. As I said before, the demand for sustainable solutions is accelerating. driven by megatrends, and we are ideally positioned to benefit from it. Our high-performance materials are a good example, with our PVDF in batteries, serving clean mobility, our biobased conception of biobased polymer 11 used not only in transportation to replace metal parts and reduce energy consumption, but also in customers' eyewear for its ease of design. In construction, we have developed low VOC powder coatings, mainly for automotive applications, or new eco-friendly additive solutions for insulated glass ceilings. All this is really very exciting for the coming months and years. We also recently announced two new organic projects supporting our commitment to sustainability. The supplier 233ZD, which is part of the new generation of fluorospecialties with minimal emissive impact, and the launch of our new renewable PVDF grades for battery, which will allow an almost 20% climate change impact reduction using a residue of wood pulp manufacturing as a source of carbon. In parallel, we are significantly progressing with the construction of our two major CAPEX projects, also directing towards sustainability. We have launched the final phase of our integrated biofactory in Singapore for polyimide 11, and we are on track to start mid-2022 the production of HF in the U.S. from an innovative process allowing to reduce CO2 emissions by 20 times compared to the traditional process. Last and not least, on the M&A side, as you know, we finalized in Q2 the PMMA disposal ahead of an already ambitious schedule. We also made a few bolt-on acquisitions and equity investments in specialty materials to strengthen our positioning, for example, in the circular economy with the acquisition of AgiPlus, which is a leader in the regeneration of high-performance polymers and which was an historical partner of Arkema in recycling operations. We reinforced our additive segment with two Bolton acquisitions in the start of the year. And we also took minority stakes in innovative companies like recently Verkost to accelerate our battery strategy in Europe or Airpro 3D to extend our expertise in 3D printing. So as you could see, a very positive quarter. And we now hand it over to Marie-Josée and we'll comment then on the outlook at the end of the presentations.

Thank you. Let's review some financial metrics together, starting with the sales range. At 2.4 billion euros, sales are up 26% on-year. So in organic terms, they grew 35% versus the second quarter of 2020, and 12% versus the pre-COVID quarter of 2019 level. Relative to last year, organic growth was evenly split between volume growth and price effect. And relative to 2019, the 12% organic growth is picked between 3% volume growth and 9% price. From a regional perspective, Europe and Asia were particularly strong, with North America a little below, partly due to some raw material shortages constraining growth. The strong price effect is linked to our actions to increase prices in the face of a much higher input cost. But we also benefited from favorable conditions in the acrylics chain in all three regions. There is a negative 4.5% perimeter effect in the quarter versus 2020, which is attributable to divestment of functional polyolefins last year and the sale of PMMA in May of this year, with some offset from the acquisitions that remain on specialty materials. When comparing to 2019, this perimeter effect is only 2% as ARMA's integration only took place in July 2019. Currency also had an adverse effect on sales in the second quarter, to the tune of 4.2% negative. The same effect applies when compared to 2020 or 2019, since it comes mainly from the stronger euro versus dollar. US dollar, which stands basically at around 120 in the second quarter 2021 versus 110 in the second quarter 2019. The turnover growth allowed Arkema to achieve a very strong 67% growth in Q2 EBDA to 478 million euros. Looking at it in the different segments, we are first in Bostik. an achievement of 82 million euros EBDA at 64% year-on-year, and by more than 15% relative to the second quarter 19. As it is, the benefit is from strong volumes in construction, do-it-yourself and industrial markets, as well as from the integration of acquisitions and price increases in the face of high-euro materials. The EBDA margin was a strong 14.3%, fully in line with our full-year target that we confirmed at 14% for 2021. Advanced material DBDA is up over 40% year-on-year and up 25% versus second quarter 19. And DBDA margin is at a record level of 24.4%. High-performance polymers are the very strong quarter indeed, with volumes boosted by accelerating demand in most end markets, including construction, batteries, electronics, consumer goods, and transportation. Performance additives were less dynamic than the decline in oil and gas, and a high comparison base in animal nutrition, detergents, and disinfection applications. EBITDA of cooking solutions of €167 million is much higher than last year. and even than the second quarter 2019 level, which was at 91 million euros. This is driven by higher values across all major markets, including decorative paints, 3D printing, and industrial coatings, with an acceleration of the trend toward eco-friendly offerings, such as powder coatings and water-based paints. We also implemented price increases to reflect higher raw material and energy costs. The price versus raw materials impact was clearly positive for the segments overall, as we benefited from favorable conditions in the acrylics chain for activities that are not integrated downstream, so for the more merchant part of it. Finally, intermediate CBD exudes 32% to 87 million euros, in spite of the negative parameter impact from the divestment of PMNA and functional polyolefins. The segment benefited from good market conditions in acrylics in Asia in particular. With depreciation and amortization at 133 million recurring EBIT came to 345 million euros versus the 144 million in second quarter 2020. and the rebate margin stood at 14.4%, which is up almost 8% versus last year. After the particular year linked to COVID in 2020, our performance this year places our return on capital employed back above our long-term target of 10%. Non-recurring items amount to a positive 732 million euros. This mainly reflects the pre-tax capital gain of nearly €960 million into the sale of PMMA and also includes PPM amortization when off charges and restructuring expenses. Financial results stand at €13 million negative thanks notably to the benefits of refinancing our bonds at a lower rate and lower interest rates coming from the debt swapped into US dollar. At €218 million, the tax charge includes the tax linked to the capital gain on the sale of PMMA that will be mostly disbursed in the second half of 2021, and also reflects improving profitability. In the first half, the recurring effective tax rate came to 20% of recurring EBIT, which is a bit lower than last year's level of 22%, thanks to a more favourable geographic split of profits. Consequently, Q2 adjusted net income was nearly multiplied by 3 to 267 million euros, which corresponds to 3.5 euros per share. Moving on to cash flow and net debt, I would like to flag first that in order to facilitate comparability of the cash performance indicators, we have defined a recurring cash flow metric that excludes actually the positive variance and working capital coming from the tax liability and disposals. This recurring cash flow amounts to 245 million in Q2 2021 versus 284 million in Q2 2020. The year-on-year variance includes, first, the increased cash generated from our operations, consistent with our improved profitability, and second, the working capital rebuilt in the context of higher volumes and higher raw material prices. I'd like to flag that the working capital ratio on annualized sales, excluding PMMA activity now, stands at a very low level, just below 12%, versus 15.5% of sales last year. This is well below our normative level, which would be more around 14% of sales for a normative working capital ratio. The high level of demand did not really allow the various businesses to rebuild stock at this point, and we would therefore expect this working capital level to rise in second half as we rebuild some inventories in a continued price inflation context. Capital expenditure totalled €157 million in the quarter, versus €122 last year, partly inflicting higher exceptional capex of €64 million, This is as a result of the acceleration in the construction of the polyamide 11 plant in Singapore and the nutrient projects in the U.S. Total recurring and exceptional capital expenditure is still expected to amount to around 750 million euros this year. Second quarter free cash flow amounts to 313 million euros including a non-recurring amount of €132 million due to the timing of tax disbursements linked to the PMMA sale. The net debt at the end of June 2021 amounts to €1.3 billion, and that includes €700 million of hybrid bonds. The net debt also includes the totality of the €300 million commitment linked to the share-buy-back program that we launched in May, Our balance sheet remains extremely solid with an adept to EBITDA ratio at 0.9 times. Thank you for your attention and I'll now hand it over to Thierry for the outlook.

Thank you Marie-José for your explanations. Again, we were very pleased by the result of the first half which reflects the increasing strength of our portfolio. The positive dynamics that we saw in H1 are continuing. with good demand across the majority of our end markets. Our specialty materials in particular will continue to strongly benefit from our sustainable innovation drive and recent capacity expansions we made to leverage the accelerating demand linked to global megatrends. We are also keeping a close eye on the evolution of the public health situation and raw materials inflation. This is why we remain nimble, and in particular ready to further increase prices when needed. Our raw materials index will continue to increase materially in Q3, but we have demonstrated, as you know, our pricing power so far this year, and I am quite confident that we will at least neutralize their impact in H2. Given the strength of our first half results, and our confidence in the unique quality of our portfolio and of our growth levels, we decided to raise for the second time this year our full year 2021 guidance for specialty materials, which as you know now constitute the vast majority of our scope. We now expect specialty materials EBITDA to increase by around 30% year-on-year in 2021 at constant scope and currency, versus plus 20% announced when we raised guidance at the Q1 results publication in May, and plus 10% when we gave the original guidance in Feb. This would mean a very robust H2 for specialty materials, with an EBITDA slightly above H2 2019, despite a negative currency impact of around 30 million euros. All in all, this means that for the group, we expect an EBITDA of around 1.4 billion euros in 2021. At constant currency, our EBITDA would then be close to the 19 and 18 levels for the whole group, despite the disposal of functional polyethylene and PMMA for 8 months and the significant decline in fluorogase contribution over the period. so with a much better mix and also much lower debt. And it was the whole aim of our new vision for the company which we announced last year in April, and this is very value-creative for our shareholders. Beyond delivering on our financial results, we'll continue to execute our strategy, accelerating innovation and new development in Megatrend, continuing Bolton acquisitions, specialty materials, implementing the strategic review in fluorogases, and above all, making further progress on our policy of corporate social responsibility, to which our employees are fully committed. So I thank you very much for your attention, and we are now together with Marie-Josée, ready to answer the questions you may have.

Thank you, ladies and gentlemen. If you wish to ask a question, please press 01 on your telephone device. We have a first question from Matthew A. from Bank of America. Sir, please go ahead.

Hey, good morning, Thierry and Marie. The first one around standing by your margin guidance for Bostik this year. Forgive me, it's a bit unfair, but we've obviously spent the last week hearing from Axe and the Bell and some of the coating companies that they are not able to fully protect their margins this year. So is there something inherently different about the adhesive business model or its raw material basket? Or should we more see this as a function of how Arkema itself is executing? And the second question may be around the materials margin. I think Marie said that's a record 24% and obviously higher than 2019. I'm wrong, but I think your midterm guidance is 22%. So are we looking at perhaps a seasonal peak in profitability for this business? Or there's some sort of startup cost coming into the company next year with Singapore? Or is, again, the way you're executing, are you trending above that 22% midterm guidance that you previously talked about?

Okay. Thank you for your question. Mathieu, overall, The good thing, and I think it's important that we can raise a debate about this figure or that figure. What is very important, and thank you for recognizing that, is that this semester and this quarter, and even the full year guidance, let's say, confirm that we are really fully on track for our 2024 ambition. All businesses, all parameters, we are really confirming, and this is the fruit, the benefit of our strategy and the execution. Thank you for mentioning execution. I think we execute very well the strategy, which is value-creative. And we are really fully on track, and this second quarter is demonstrating that pretty much. With regard... The adhesive is very difficult to compare businesses which are not the same, and I will not comment for the paint companies which are partners and customers of us. On the adhesive, clearly, as you mentioned, I mean, the raw material challenge is a big one for two reasons. The first one is value, an absolute value to compensate raw material which are increasing far more than what everybody was expecting at the beginning of the year and also when you are able to compensate the absolute value of the impact of raw material you have by definition a derivative impact on the margin because you divide the same number by a number which are the top line which is higher because it's inflated by the pricing increase that we pass to our customers Despite of that, we maintain, we confirm our EBITDA margin target of 14% for the whole year. So far, we are above that. But as you know, the last quarter is a raise lower because you have December month. And even in the second quarter, you have the August month. So normally, you have a seasonality which makes our margin percentage lower in the second part of the year. And as you know, In the first quarter, we benefited from the delayed impact of raw material. But overall, we consume our 14%, which would be quite an achievement in this inflated context of raw material. So we remain confident, to make the story short, on this, let's say, demanding target. And the good thing of it is that if we deliver this target, we'll be very well positioned to deliver the 16% for 2024 for Bostik, knowing that the current raw material environment is not completely normalized. It's above the norm. So if we deliver the 14% in this environment, this gives us a good hope for the longer term. With regard to the... I think your question was on advanced material? Yes. Clearly, we are more than in line with our long-term target, which is good. Can we do more? We'll see. I think let's first deliver what we have promised, which is, I think, again, very demanding, but we are really more than in track. And it's coming, Mathieu, I would say, with sort of acceleration of our HPP growth coming both from PVDF and from polyamide, long-chain polyamide. I would say PVDF with clearly battery, but also other markets. It's not only battery story, but we are clearly very well positioned for battery, but it's more than that. We see in electronics, in coatings, industrial coatings, some very good areas of growth supported by sustainability and this new world again. And on polyamide, particularly polyamide 11, which is one of our start products, it's amazing to see that, in fact, you know, the difficulty with polymers is that some of them are not well positioned for this clean mobility, and some are well positioned. And polyamide 11, beyond all this incredible prospect in biosource polymers, in sport shoes, we could quote plenty of new businesses accelerating polyamide, On top of that, with regard to clean mobility and automotive, it's a fact that this polymer is particularly well positioned. So we sell more, for example, poly-eleven in automotive, in electrical vehicles, significantly more than we were selling in thermal vehicles. So it's quite a good element. So to make the story short, strong quarter in HPP, which is supporting the whole advanced material. Quite good hopes for the long term, so we are very well positioned to deliver at least what we have promised for the 2024 ambition, which was already very demanding. And the exhibition, as mentioned, is here.

Thank you. Next question from Emmanuel Matto from OdoBHF. Sir, please go ahead.

Hello, Thierry, Marie-José, and the investor relations team. Hello. Several questions for me, please. First, do you think the recovery is too strong, meaning that it's going to be difficult for Arkema to further increase your EBITDA in 2022, notably in H1 due to this very high basis of comparison of this year? Yes. Second, do you face some shortages of some raw materials which could impact your H2? Are you well protected against that risk? I have also a question about corporate costs this year. What shall we expect because those costs have doubled in Q2? Maybe it's related to the PMMA disposal. And maybe a question about acquisitions. We have seen several buttons since the beginning of the COVID crisis. Do you remain confident to achieve also some mid-sized deals? Do you have some opportunities in the pipe? Thank you.

Okay, Manuel, different elements. Maybe Marie-Josée will answer corporate costs if you want. You want to do it now or at the end?

I can actually quickly confirm that corporate costs are coming back, let's say, to pre-COVID levels. So despite we are not fully recovering in terms of traveling, but let's say most of the marketing, advertising and... are back on track to support, in fact, the volume recovery that we are facing. The second aspect is we have clearly some initiatives in terms of digital that we want to accelerate and contribute to this trend. So for this year, I'm targeting, let's say, to be at the level of 2019 corporate cost overall.

Thank you, Marie-Josée. And this confirms that, and you know, it was one part of our discussion last year. We recognize that. We have never been, last year, the company which has cut more costs. We cut a lot. And we have always had in mind to make sure that the company was really positioned for the growth. We are now entering, as we mentioned several times, a new area of growth for Arkema. Organic growth, you know how we have frequent costs, but sometimes you need to spend money because you believe that you're really on the right way for growing. And it is the case for Arkema. It is the case in ADZ, it is the case in HPP, it is the case in cooking solution, where sometimes, and we have discussion in the past, the potential of growth has been underestimated, including profitability improvement. And we are in this very nice period, and we should not be underestimated and recognize really because we feel it good from this growth standpoint and sometimes you need to put some costs and this is what we are doing and thank you Henri-José for confirming that we go back to 19 level but maybe with a mix of costs which is more oriented towards growth and modernization of the company which is good. With regard to recovery It's interesting what you say because sometimes we get the question, are we becoming cautious for the second semester? So we have to choose what the right question. But no, I think at the same time, you need to be positive, but also to recognize that trees do not rise to the sky. So I think we are fully on track with our 2024 target, which is good. We deliver very solid results. result above what everybody had in mind. So, I mean, it's great. I mean, it's fantastic. But it doesn't mean that you need to think that, you need to recognize after that the different elements of the performance. You have some, in fact, you have two faces of the coin of the recovery you have strong demand but at the same time raw material is a challenge and when I say raw material is also supply chain constraint that we need to manage and this supply chain constraint that you are mentioning including shortages of raw material we got them already in the Q2 and they will be there also in the Q3 and certainly in Q4 so you have a combination of different elements some are supporting you like growth And some are challenges, like raw material shortages that you are mentioning, and I think we are good at managing that. It helps us also on some value chains like acrylics, and some other value chains, it's more on the stakeholders. So we have a combination of different elements, but overall it's positive for the company, and I confirm that We are fully on track, which was not obvious because we got the COVID in the middle of announcing our long-term target of 24. So don't forget that. Despite of that, we are fully on track with this 24. This means we completely swallow and more than swallow the crisis level and we are able to rebound more than others because we are uniquely positioned in this megatrend. This is positive, but positive doesn't mean that a tree is right to the sky, so everybody has to be at the same time confident, positive, but realistic. Then on acquisition, because I think I answered the first two at the same time, no? Yes, you're right. Thank you. Yes. So I can go to acquisition. Acquisition, so certainly I will not comment things which are in the pipeline by this edition. No, I think we stay on what we say. Some of Bolton, and we have good ideas on small ones, and there will be new ones which will be announced in this year. When we have possibilities, some bigger deals, let's say... intermediate size and maybe one big size in the next three years. So nothing is different from what we have said so far. So as you know, half of our growth will come from acquisition, and it's still the pattern that we are expecting. So nothing new on this side, but we are determined to make acquisition as part of our growth. on top of the organic growth, which, as I mentioned, is going in the right direction.

Thank you very much.

You're welcome.

Thank you. And next question from Mutasha Chaziri from Siti.

Sir, please go ahead. Hi. Hi. Thank you for taking my question. Just coming back to your comments on the busted margins, It seems that you're doing quite well with the price increases to also the raw materials in 2021, but looking further out, should raw materials normalize? Should we expect the pricing to decline as that happens, or are you expecting to hold on to the pricing as the raw materials come off, for example, in 2022, therefore presenting a margin expansion opportunity looking further out? And then the second question is also a bit of a follow-up on the M&A side of things. I think when you did RMAS, you said that was kind of the very, very high-end of the bolt-on size that you'd be looking at. Is that still valid, or are you, given the PMMA proceeds and given where the balance sheet stands today, you're willing to look at something around the billion mark or something around the biggest size for acquisitions. Obviously, if it matched with your criteria and was in line with your capacity, is that something that would be undercut or would you completely write that off just because of the size? Thank you.

Okay, Moubacher. On the last one, you will tell me if I answer because I'm not sure. I quote the whole question, but I will try to... To do it, first of all, we have to manage first by step. And it was, I think, the nature of the initial question at the beginning of the question session. On BOSIC, we are glad so far to have a safe raw material. And beyond that, to maintain the percentage at the level of the guidance that we gave you. We have another challenge, not only us, but all specialty chemicals or materials companies, which is coming with Q3, because there is a new wave of raw materials. For the time being, before talking about normalizing, everybody has to be aware that there is another wave of raw material which will come, and as we say, Despite all that, for Bostik, for the full year, we maintain our 14% objective position, which is quite a strong objective. After that, when the raw material will normalize, you will get some normalization of pricing by definition because, I mean, you cannot ask whatever business... to offset raw material increase, which are quite significant, and just to keep it for yourself, or this means you are not at all customer focused. So no, I think there will be some normalization. But it's true that an environment for a downstream business like adhesive is always more challenging when raw material go up, especially significantly, than when they go down, which means that if we are able to deliver the 14% margin for Bostik this year, he certainly put us, and it was my message, in good position, quite in good position for the 16% for 2024. So it reinforced our, I would say, our guidance. But it's important that you appreciate the work that Bostik has to do to deliver the 14% in this kind of environment. And so we were very pleased by the Q2, and now we move to the Q3. With regard to M&A, We are open, by definition, to larger acquisitions to the extent that the opportunity makes sense. So there is no religion on that. I think we are opportunistic on acquisitions. Our bread and butter are Bolton acquisitions, small size. We know it's nearly statistic. We have a large number of possibilities, and from time to time, let's say, three to five times a year, we deliver some. After that, if you go down the list, we are open to medium-sized ones. For example, we had Den Draven a few years ago, which was medium-sized, I would say, but they don't come every year. So let's say we plan to make, let's say, two of them up until 2024. And then we have the financial flexibility to make a bigger one, but we'll do it Only from a strategic standpoint and value creation, it makes sense. And this, it's impossible to say it's for sure because it depends on opportunity and it would be a mistake to say I want to do it for the sake of it. We do it because it makes sense and we are at the same time determined but also patient because it depends really on opportunity. So we have the financial flexibility but the financial flexibility is not enough It has to make sense from a strategy standpoint and from a value creation standpoint. And we gave you, I think, a record on acquisition since the start of Arkema. And you have seen how much value we can create. And it was on a total of $4 billion, I think. So we are really strict on what we buy. But at the same time, I think we have proven that we were able to create value with acquisition. So in their opportunities, we will look at them. So I cannot be more specific, as you can imagine, but I try to answer as best as I could to your question, Boumesher.

Thank you very much. That's already very helpful. Thank you. You're welcome.

Thank you. Next question is from Daniel Cheng from Redburn. Sir, please go ahead.

Hi, Chiari. Hi, Maria. Yeah, firstly, well done on the impressive results. Just two from me. So first off was, how do you view the development of the supply tightness in acrylics that, given plants are ramping back up and, you know, what are your assumptions here on potential normalization? Maybe we can touch on the sustainability of demand as well in coating solutions, especially with painted coatings. And then secondly, you touched earlier on high-performance polymers. It would be really helpful to get a picture on how big the growth was for PVDF and maybe in PA11, whether that was due to new customer wins or market share gains. That would be very helpful. Thanks.

Okay. We'll start with the last question and go backward. Okay. On the PVDF and polyimide 11, yes, the growth was especially good in PVDF, as you know, because the battery segment is going very well. But it's beyond that. I think we have... So I would say the supply chain is tight, and we have a lot of innovation, so we are... let's say PVDF on average is growing 7% a year and if I take the average of 2 years because 20 is not sufficiently meaningful as a reference I would say if you take 19 and 20 and 21 so far we are above this 7% with the acceleration in batteries which is good and this is why you have seen a some new investments in PVDF recently, and we'll continue to invest in this. We are in pretty good shape. But as expected, when we publish the Capital Market Day, it's really our sustainability innovation which is there. On Polymide 11, in fact, we grow quite well with regard to 20. But in fact, you know, up until we have the Singapore plant, we are limited in capacity, so it's tight. and we'll get back. So we are significantly above 20, but we go back to the level of 18, 19, just because, but with a better mix. This means that more and more we are focusing on niches. So you can see that in the pricing also, because we can add really a lot of value in a niche, like, for example... sport shoes is quite a good example but I could name or in medical or I could name even some application for automotive but related to clean mobility okay high pricing businesses because you have a lot of innovation behind that so the mix is evolving in a very positive way but in terms of volume themselves we don't have flexibility so far up until we have the Singapore plant so the Singapore plant we come really at the right moment from our standpoint, and then we can talk again about growing. So different patterns for PVDF and polyamide 11, but polyamide 11 should join PVDF once we have the Singapore plant starting. With regard to coating solutions, sustainability of demand in coating solutions, I would say Q2, the Q2 level, you have some restocking, but not only for us, for our customers, for... our competitors, so it's true. So don't think that the growth in volume that we enjoy will stay forever. But I think the growth will stay quite robust for a simple reason. It's that with this Green Deal, this new habit of consumption, people renovating their house, we believe that the demand for construction-related business will stay good for the second semester and for the next years. Also with this stimulus package which comes on stream in Europe and the US. So you have plenty of elements which we believe should support this kind of business, scouting business, also constructional business. They are more or less in the same area. Don't extrapolate second quarter, which was absolutely outstanding, but consider that we are positive for the second semester and the coming years on this cutting solution demand. With a lot of innovation in low VOC, powder resin for powder coating, powder paint, it's This new type of demand is really accelerating, supported by sustainability and this green deal. With regard to the acrylic value chain, I think you mentioned also the monomer part. Clearly, we benefit from... But this is also the beauty of the portfolio. You have to appreciate that. We have different elements on our portfolio between the ADDs, which have a pattern, Advanced material, which is another pattern. And then we have a third pattern with coating solution. In an environment of tight raw material, I would say that Bostik, even if they resist well, is suffering more. But on the other side, coating solution is enjoying more this kind of pattern. And then you have to look at the whole group performance, which is really more and more resilient because of this quite complementary With regard to acrylics, again, don't extrapolate the margin support that we will get in Q2 forever. It will certainly normalize more with all capacity begun stream on the second semester, but it will stay at a good level without extrapolating the condition of the Q2, but it will stay at a good level. quite a good level. So I think we are, what is very good, and I will take advantage of your question to extrapolate a little bit the answer. What is good, really, on the Q2, on the Q1, and on the full year, what we will deliver on the full year, is that it's not the contribution of one element. It's really the contribution of different elements, different business units, nearly at equal levels, and we are very pleased about that because it's a very balanced development of the year, not only compared to 20, but also compared to 19 and compared to 18. And for us, what is very important that you have in mind is that we build a long-term project. It's not a matter of one quarter or one semester or one year. What is very important is to deliver ongoingly, and this is what we are doing thanks to this portfolio reshaping.

Great. Thanks, Thierry.

Thank you, Mubasher. Daniel, sorry. Thank you, Daniel. Thanks. Other questions?

Thank you. Next question.

I think I heard you say that the raw material net pricing balance in adhesives in the second quarter was neutral. I just wanted to confirm that that's correct. And if it is correct, can you comment on whether you think that the second half will also be neutral or whether you'll see some absolute earnings lost because of the war pricing balance? That would be very helpful. Thank you. Just in adhesives rather than the group.

Okay. As we mentioned, and... We confirm first the 14% because we have some questions on that. The 14% will be the margin target for the full year. We still think that in terms of... So, clearly, the raw material escalation is significant, but we confirm that we should be, if not at all, close to compensating the whole raw material in absolute terms. But because of that, you have a deletion or the margin percentage. This means that we would have done better, in fact, than the guidance in a normal environment, which is quite an achievement. But then you have some dilution of the percentage. But in value, we should be at par or close even in the second semester, which means a lot of effort, as you can imagine.

That's great. Thank you. You're welcome.

Thank you. Next question. We don't hear the sound, sorry.

I'm ready to answer the question, but I need to have the questions.

Next question is from from One Field Research. Please go ahead.

Thank you. So I give you questions in theory if you're ready to answer. First question is really around your project with nutrients where you're taking a different route to the fluoropolymer chemistry. Could you just give us a little bit more information around the HFS route and also in terms of just patenting this technology or just sort of getting some exclusivity around this technology, how exclusive is it for you, worse with Nutrien? Because I'm reading that there's also some projects in China which are using HFS route rather than HF route. So do you think in the future this will be the way to sort of manufacture sustainable, you know, fluoro chemicals? And also, yeah, if you can give us some color on how much you're going to use within PVDF versus your new, you know, low GWP gases like 1, 2, 3, 4YF or 1, 2, 3, 3ZD. That's my first question. The second question is really around M&A. So, obviously, you know, DSM went to Cabestro and recently LNEX has also gone to Asian Player. And both those multiples were not significantly punchy, you know, 10 to 12 times. So, I mean, what is your view around resin assets these days? I mean, was there a particular reason why you, again, chose not to go for LNX? And how is your own portfolio developing, especially with regards to water-based coatings versus solvent-based coatings? in that regard. Thanks a lot. And congrats on getting Thierry Polanco on your board, but don't let him take all the credit.

Okay, thank you very much for the comments and questions. With regard to nutrients, I will not do it too technically because we have many people listening and I want to make sure that everybody understands what we are talking about. In fact, you have basically the traditional route where you start from the mine, so you have the floor spa, which is a minaret, the stone, and you extract it from the mine, and then with that, you treat this, to make an HF, you treat this minaret in a traditional, with an oven, inside an oven, and et cetera. So this process, consume a lot of energy, as you can imagine, at the two stages, and then is a strong emitter of CO2. It's a traditional process which is used, I would say, in more than the vast majority. It's nearly the process, I would say. So, the process that we have been working on, I would not say it's not necessarily exclusive, But I think at the end of the day, you will not have many companies using it just because you need to find the right place to implement it. And the beauty of this process is that you use a byproduct, which is an intriguing process. So you don't add any emission of CO2. It's incredibly favorable because you don't have... the emission of the CO2 coming from the mining extraction. And on top of that, you don't have the pollution of HF, which is coming from your own process, which emits again CO2, because you use, in a positive way, just a by-product. So you don't add any CO2 on top of that. So from this standpoint, it's very elegant. It's true that in Asia you have some comparable processes which have been implemented but again it's a very large minority of these processes and I think in the US we will be the only one. Now in China we use more traditional processes. We cannot use it everywhere and we will not spend this amount of money every year. everywhere. Otherwise, you will then question us on our capital employees. So we try to find the right balance when it makes sense. And clearly in the U.S., for different reasons, which is competitiveness, safety, security of supply, and sustainability footprint, it's very, very good. So we are very pleased about this new process. With regard to M&A, this is not because you have things to be sold that we will buy everything. I think in coating, we have already a very good size. We are one of the strong leaders worldwide. We are very happy about our portfolio, which has been built over years. I would say, and it was normal for many years, we have been challenged on the profitability of the segment. You start to see that we were right about the potential of the segment. in terms of profitability. I think sustainability footprint is really very good compared to some other actors. So I think we have a good portfolio that will continue to improve, but we will do it through Bolton acquisition, and we don't plan to make major acquisition in the coating segment. Even if you will recognize that the multiple, which has been, I think it was 12 times, for the big acquisition that you have mentioned, The multiples that you have seen on cutting solutions clearly reflect the value of our cutting solution segment as such. I hope that you will appreciate that when you make some of the parts. But I think our strategy on cutting is still the same. We want to make Bolton acquisitions, and we'll find some good ones which will reinforce both our technology, geographical footprint, and create value for our shareholders. We are not chasing the big target.

Great, thanks a lot.

You're welcome.

Thank you. We have an next question from Sam Perry from Credit Suisse.

Sir, please go ahead. Hi, can you hear me now?

Yes, it's okay.

It's okay. Great. So just a couple of basic questions on PVDS, please. So prices in China have significantly increased from EV demand. Can you... give an indication of your PVDF capacity and how much of that is sold into China, and is your entire capacity of high enough quality to be supplied into batteries? And apologies if I've missed it, but what were the capacity expansion plans over the next few years there, please? Thanks.

Okay, obviously I will not give you the details, which our competitors would love to know. Okay, so... We will not give how much is in EV, how much is in China. The only thing that I can say is that for many years, we are one of the worldwide leaders, if not the worldwide leader in PVDF. We are very strong technologically speaking. We have traditional businesses which are behaving very well. And on top of that, we have the battery which is accelerating the demand. So we are really well positioned. position for that. We benefited as one of element of the growth of HPP, which is itself one element of the advanced material growth. Okay, so after that you can make your own assumption of how much PVDF is contributing. You have some interesting note which has been published recently and by some of your colleagues, so you can also benefit from it. But I would say that It's really one of the elements that, I mean, we must have, in our sustainability innovation, we must have maybe 12 staff, and PVDF for battery is one of the 12 staff. And it's fantastic that we are positioned there, but we have some other which are also very good. Now, as I mentioned, our base plan for PVDF growth was 7% a year. We think we should do more than that now. But we try to have capacity extension which make us available, which make us, let's say, in position to follow this kind of growth. So 7% in the past, so it will certainly be above 10% in the coming year. This year is far more than that, even if we don't disclose it. But we are in good shape. And you have seen sequentially several investments in PVDF in the recent. So you can take the announcements which we have published and it gives you a good idea of what we can do. But sorry, I cannot do that. I cannot disclose you confidential information. We disclose to nobody. And that... Other people, we love to have, but it's one of the bright spots inside Arkema, as others. Fortunately, we have, as I mentioned, 10 of them, at least inside Arkema.

Great. Thanks very much.

You're welcome.

Thank you. Next question from Jer Care from UBA. Hi.

Good morning. Most of my questions have been asked, but I just wanted to have one last one. When I look at your guidance, your implied guidance for the second half of this year, clearly it's below the level of EBITDA for the second half of last year. You already said that some of that is to do with currency, 30 million, I think you said. But I'm assuming also that we have a contribution from PMMA in the second half of last year. Could you possibly tell us what the amount of EBITDA for PMMA was in the second half of last year?

First of all, I'm sorry, but please, you can check with Beatrice. We'll not do it in front of everybody. But our guidance for the HO for this year is significantly above last year, first of all. Okay. Secondly, what we said and what I said is that we will be slightly above 2019. And I remember the discussion we had at the beginning of the year where the question was how much time it will take for us to go back to 2019. So what we say is that not only we delivered a fantastic H1, but on top of that, we confirmed that we'll get quite a robust H2, and it's a guidance. After that, it's your duty, and if you want to put more, you put more. It's up to you. But if you're even more confident than us, this means that there is upside, and everybody will be happy. But the guidance that we gave, which is very robust, means that for the H2, we'll be certainly... went above 2020 despite exchange rate. But on top of that, we'll be slightly above 2019 despite on specialty materials. I am on specialty materials despite the exchange rate which we valued around 30 million. So overall, it's what I would call, after a very strong H1, quite a robust H2. which is very good, which, and I would also make this note, is true that the more you are good on H1, the more when you look at the difference with the full year, you can get the impression that we are more conservative on H2, but you have to appreciate H1. And when you look at the full year guidance, which is very important, this is why we wanted to mention it, what we say, is that for the full year, we should be around 1.4 billion. If you make the calculation at constant currency, and thank you for asking the question because it's allowed me to explain it very clearly. At constant currency, this would mean that we would be back close to 2019 for the full group. 19 and also 18, which was the record ever. But with a difference, which is quite significant, is that PMMA has disappeared. for eight months. Functional polyethylene has disappeared for 12 months. Fluorogas, which was, as you remember, and it was weighing down on our EBITDA multiple, was fantastic in 18, and we have lost on fluorogas. So it's with a lower contribution of fluorogas, which means that will be at par, at concentrate, with what was in 1918, but with a far better mix of specialties. And on top of that, it's not just that, it's with a level of debt. Despite Charmaïbak, where we are 300 in the debt of today, despite all that, we have a level of debt which is significantly below what it was at that time. Comparable results, a far better portfolio with the transformation that we have implemented, far more specialty, far more resilient, higher margin. And on top of that, you have far less debt. So I think in terms of value creation for a shareholder, it's quite significant. So we are far from what you have just described, which is 2021 H2 guidance is below 2020. It's not true. And if you look really in detail, and I encourage you to discuss with Beatrice and Peter. They will be really happy to discuss with you. It's quite a very robust guidance. Not only H2, but you have also to look at the full year. Maybe I could finish also with that. We are building, certainly, and you know how focused we are on delivering quarter by quarter in the full year. But you should not forget the fact that we are building also a company for the long term. very solid, very resilient, and very robust to fit. And this is also what we are doing. So quarter by quarter is important. Full year, I think, is more important. And certainly the way we develop our ability to deliver 2024 year by year is very important for you because it's really the execution of the strategies that we have announced. And we are very proud of that because, in fact, We'll go back to Rickon Leon, but with a far better portfolio again and a far lower debt.

Okay, thank you.

You're welcome.

Thank you. Next question from Andreas Heine from Stefan.

So please go ahead. What I propose is that because we've run out of time, maybe I take again a couple of questions. And with pleasure, and maybe we stop there, and certainly Beatrice and Peter, and myself if needed, and Marie-José will be able to take questions separately afterwards in the afternoon.

Okay? Thanks for the opportunity to be the last. Thanks. I start with theochemicus. Could you outline a little bit what you expect as trends sequentially going into the second half? So is animal nutrition demand and the refinery part doing? That's the first one. Second, you were talking about the new wave in raw material price increases. Part of that with the acrylics, as far as I can see it, at least on average, Q3 seems to be even better in the U.S. and Europe if it comes to acrylic margins. I would like to have your thoughts on that. And last, Asia. At first, I think I missed to congratulate you on buying the second half of this site for 70 million in 2019, so sorry for that. And Asia, yeah, we are looking for a partner, at least that was what I was taking from the strategic targets. Isn't that now the right time to look for a partner as the market is very balanced and margins are attractive?

What was the next question? Sorry, Andreyov.

Whether you now would think that it is a good time to find a partner for Asian expertise.

Okay. So many questions. I would say first of all, thank you for the comment on the investment in acrylics in a In China, because we could have mentioned that, but we did not do it, but it's clear that the second trench that we bought at a very discounted price in the context of today, I mean, payback is incredible. So I think even in a strategy of pure specialties that we have, you can see that what we have done on some intermediates like acrylic in China, We benefit from it, and it's a generation that we can re-employ in our specialty. So thank you for the comment. Is that the right time to find a partner? I would say yes and no. First of all, we believe that even if there will still be some volatility in accretion in China, market conditions in the mid-run should stay rather good in China so we have some time to discuss and we can continue to develop the profitability there. As you know we have in terms of disposal program or decontrolization program to make it larger Our priority now is to look at our fuel gas. So it doesn't mean that we cannot manage two things at the same time. It's just that we have already managed acquisition and disposal sequentially, and it has been very good for our ability to execute, to integrate, on top of all the rest. So we have contacts. It's not about time to develop contacts. I agree with you that it means that it's necessarily the right time to... to execute the partnership, but we listen to the market anyway, and our strategy is clear on that. So you were wise to mention this point through your question. I think you had a point on the animal nutrition demand in H2, and also refining, so we are more in the thiochemicals segment. Our feeling, to be frank, This anti-ochemical, it has not been one of the, it has been okay, solid, but not the bright star of the first semester. But looking ahead in the second semester, it seems to us that refining is getting better. And I think it was one of your questions. Animal nutrition should be okay, but we don't expect necessarily a senior role, I would say, for the second semester. We are a little bit attentive to the development of the health situation in Malaysia. You see that the COVID is again strong there. So, depending on that, you can have some constraint about the production for our customers and for ourselves. So, we monitor that closely. But I would say beyond that, I would say more useful on the second semester, for animal nutrition and the positive on the refining, especially with biorefinings. This is what is interesting. And it's not only Asia, but also the U.S., where biorefinery is developing and is good for our products. Did I check with my team if I answered the question, the question?

That one was great. The last one was?

As I mentioned, they will stay and see for the coming quarters. I have no doubt about that, but I would say that Q2 is a peak. It is certainly a peak because what you have seen on supply chain, the fact that the world as a whole is constrained in terms of materials, and you know it yourself, you can read it in the newspapers, certainly Accelic is a little bit in the same context. We benefit from it in the Q2. I would not call that normal conditions. So you can have some normalization, but still staying at a good level. So I have no worries there. But this is what I mentioned. I think Q2 is fantastic. Don't extrapolate the kind of growth in Q2 on everything forever. It doesn't work like that. But we remain confident and our results will continue to be robust overall. It's my conclusion, fully in line with our ambition for 2024. So the team is really quite excited, motivated by the quality of the result of Q2, confident on the H2 and for the coming years. And what is important for me, it will be my last words, is not Okay, macro is one thing and we appreciate when macro is better. What is very important is what you do structurally and I think the opportunities coming from sustainability is mega trend for a company like Arkema which has spent so much time, energy, resources to get positioned is very exciting. So, it's my conclusion. Thank you for your attention and I wish you all a nice summer and a nice vacation for the one Thank you.