Arkema S/Adr

Thank you very much. Good morning, everyone. Welcome to our Arkema Q3 2022 results conference call. With me today are Marie-Josée Doncion, our CFO, and the investor relations team. As usual, to support this conference call, we have posted the presentation on our website, which details our third quarter performance and confirmed full year outlook. I will comment the highlights of the quarter before letting Marie-Josée go through the financials in more detail. And otherwise, we will answer your question at the end of the call. We delivered a very solid set of results with a record Q3 EBITDA slightly above last year's level. The cash flow generation was strong. As you know, this performance was achieved in a challenging operating environment with elevated inflation, the energy crisis in Europe, as well as a clear slowdown again in Europe, which amplified by destocking in the construction market impacted our volumes. We expect, obviously, this destocking to continue into Q4. More broadly, the results show clear contrasts depending on which region and which market we are talking about, the bright spot being the US, with Europe being more challenging, and Asia between the two. We'll come back to this in more detail. These results are in line with our expectations and with our confirmed full year guidance of an EBITDA of 2.1 billion euros. Specifically, I would like to mention the following key points of this third quarter. Arkema's EBITDA rose by nearly 5% to 495 million euros. and the EBITDA margin came close to the 17% level without reaching the very high level of the first half. While intermediates were down as expected, this performance was driven by our specialty material with an 8% increase in EBITDA, thanks to a number of factors. Firstly, our pricing power continued across all businesses to offset the ongoing inflationary trends in raw material and energy costs, Although the temporary tightness in PVDF is as expected, inaccurate spreads have normalized in Europe and Asia. Our product mix was positive, as appetite for high-value added applications in areas like clean mobility, lightweighting, 3D printing, and value-based material remain well-oriented. Thirdly, our balanced geographical and end-market exposure served us well. slowed down materially, impacted by destocking in the construction market. But the excellent contribution from the Americas and to a lesser extent Asia, where China nevertheless remains soft, enabled us to offset the weakness in Europe. We have also observed in Q3 a stabilization of raw materials prices, even the first signs of declines. This decline should accelerate in Q4, but the impact on the P&L should take three to six months. Looking briefly at Arkema's segment, Bostik and Advanced Materials delivered solid results. Bostik's EBITDA resisted well, despite half of their sales being exposed to construction, growing by 14% in the quarter, driven by their pricing power, product mix, and of course, integration of Ashland adhesives, confirming the quality of this recent acquisition. We expect Bostik volumes to continue to suffer in the near term, but we should start to see some benefits from lower raw materials as we go into 2023. Like we have seen through this year, advanced materials earnings rose strongly, driven by our innovation and application of how in Megatrans, high-performance polymer with a standout performance with exposure of the innovation to megatrons, despite progressive normalization on PVDF prices, and some exciting product introduction at key customers in areas like sport and mobility. Regarding performance additives, they deliver the resilient performance despite lower volumes, reflecting the macro environment. In cutting solutions, EBITDA was lower than last year, very high level. Conditions in extreme acrylic, which represent, as you know, around one-third of segment sales, were more challenging in Europe. Pricing power remained solid in the downstream, but their volumes were impacted by destocking in construction-related markets. In intermediate, the dynamic in refrigerant gases remained good, while market conditions for acrylic in China as expected, were challenging after a few very tight quarters. Last but not least, I'm sure you noticed it, Arkema generated excellent cash flow this quarter, thanks to the level of EBITDA and our focus on managing working capital. This impacted favorably the balance sheet, the low level of debt being a key asset for Arkema. Beyond the financials, We also continue to work on our long-term ambition this quarter, with a strong emphasis on sustainability, which is at the heart of our development strategy. We published in July our new, more ambitious climate plan, aligned with a 1.5-degree trajectory, including scope-free emissions, and we launched a number of innovative products linked to the circular economy. We also continue to invest in our employees, and we are proud. that Arkema is very well ranked among the world's best employers published by Forbes this year. Our progress in ESG was further recognized with Euronext confirming Arkema present in the CAC 40 ESG and Moody's ESG Solutions Rating Agency improving our overall score, placing Arkema among the best companies in its sector. In terms of organic growth, we are making headway with our various ongoing projects. In our new polyimide 11 plant in Singapore, we have produced the first tons and the startup phase should be completed by year end. We have around six months delay with HF plant with nutrient due to some adjustment, but we confirm the level of contribution for this project next year, more weighty towards the second half. Our other project which will all strengthen our sustainable growth profile are progressing well, and all in all, we confirm an expected EBITDA contribution of 50 to 70 million euros next year. As a matter of fact, more towards the upper end of the range. On the M&A front, in early September, we finalized the acquisition of Polymerose Special F, and we announced earlier this month the divestment of Febex, a small company specialized in phosphorus-based products, that fits within the performance IDT business, but had very limited synergy with the rest of the group. So we continue to prove the portfolio. I will comment on the outlook at the end of the call, so I will now hand it over to Marie-Josée. Thank you for your attention.

Thank you, Thierry. I'll start with revenues. So at the €3 billion sales, up 24% year-on-year, and up 11% organically. The price effect at... plus 19% in the driver, reflecting our pricing policy in the face of continued cost inflation, as well as a better product mix. Group volumes were down close to 8%, mainly as a result of lower activity levels in Europe and the stocking and construction, which impacted primarily Bostik and coatings segment. The currency effect is a positive 9%, driven by a stronger US dollar and Chinese Yuan versus the Euro, The scope effect of plus 3.8% is linked to the integration of Ashland's adhesives business, Permosil in adhesives as well, and Polymeros Especiales in importing solutions. Q3 BDA came at €495 million, with a solid growth in specialty materials, driven in particular by advanced materials. while coating solutions and intermediates were below last year's very high level, as Thierry detailed earlier. I take this opportunity to confirm that Ashland's integration is taking place smoothly and delivers, according to business plan, around €20 million EBITDA per quarter. Recurring EBIT came to €356 million, up 4% relative to last year. Rebid margins stood at 12%, moderating somewhat versus the 14.3% achieved in Q3 2021. Non-recurring items amount to 35 million euros and include 21 million of purchase accounting depreciation and amortization, and 14 million euros, one-off charges, restructuring and legal expenses. Financial results stand at minus 17 million euros in line with last year's level. At 76 million euros, the tax charge reflects higher earnings and their geographic split. Excluding exceptional items, the tax rate stands at 21% of recurring EBIT year-to-date. Consequently, Q3 adjusted net income is similar to last year's level at 260 million euros, which corresponds to 3.5 euros per share. Moving on to cash flow and net debt, As you could see, Q3 recurring cash flow is up strongly to 434 million euros. Cash flow generation benefits from a 138 million euro inflow linked to the evolution of working capital. I think this reflects these results from our good operating discipline and also our continuous monitoring of our credit risk and inventory levels. The working capital ratio on annualized sales stands at 15.5%. versus 12.3% last year, and is below the 16.4% pre-COVID level of end-September 2019. It is worth noting that in the context of increasing selling prices, cost inflation, and higher value inventories, the working capital increased in the nine months by around 500 million euros compared with the end 2021. Total capital expenditure amounted to 152 million euros in the quarter. It encompasses exceptional capex for 21 million euros and recurring capex for 131 million. In Q3, we also recorded a cash outflow of 121 million euros related to portfolio management operations linked mainly with the acquisitions of Permasil in South Africa and Polymeros in Mexico. Net debt at the end of September 22, therefore, amounts to 2.6 billion euros, including 700 million euros of hybrid bonds, a little below the quarter two level, thanks to our strong cash generation. The net debt to last 12-month EBITDA ratio stands at 1.2 times. I thank you for your attention, and we'll now hand it over back to Thierry for the outlook.

Thank you, Marie-José. As you know, there has been a clear change in the economic environment, currently much more pronounced in Europe. Due to the energy crisis, the shutdown in construction, you are well aware of it, which is temporarily amplified by destocking by certain customers. So those elements were anticipated. I think we had the opportunity to talk about it a couple of months ago. It was well factored into our full guidance, which we are confirming. and which will make overall 2022 a very strong year with two different halves, as is now becoming often the case. The implicit first quarter guidance factors in some expected customer destocking, while Q4 EBITDA will be below last year's performance, which was by far our best ever Q4, thanks to significant restocking, it should end up around the Q4 2019 level, But despite a much less favorable economic environment, so structurally it will be better than Q4 2019. We observed that raw material prices have started to decrease reflecting the softer macro. We should benefit at a certain point on most downstream activities. So this is more on upside for Q4 2023, around springtime. I mentioned three to six months to take into account the effect of inventories. Over the coming months, we have two key priorities, working as usual for our two-time horizons, let's say short-term, long-term, to make it simple. Firstly, and among other priorities, we will focus on cash flow. You could see the benefit of this focus on the third quarter, and we will continue and adapt to the changing economic environment with actions on costs and inventories. Secondly, helped by our strong balance sheets that you recognize and our diversification in terms of end market and geographies, we will execute our long-term strategy in all its aspects, pursuing product innovation for sustainability, making further progress on operational excellence, building a less carbon-intensive trajectory, and fully engaging with employees on all those subjects, as well as on continuing to digitalize and modernize our work organization. As you know, we are well on track regarding our 2024 trajectory, and in fact, we are starting to think about a longer-term ambition and targets for the group. I thank you very much for your attention, and we are now together with Marie-Josée, ready to answer your questions. Thank you.

Thank you, ladies and gentlemen. If you wish to ask a question, Please press 01 on your telephone keypad. First question from Matthew Yates from Bank of America. So please go ahead.

Good morning, Thierry. Having seen the Trinzio results, I'm certainly glad that Arkema is no longer in the PMMA business and perhaps puts the valuation you got for that business in a better light. So I wanted to ask about plans for exiting the other parts of the portfolio that you've highlighted as non-core. The upstream acrylic position in China, you said, needs to have better integration one way or the other. Is there a greater sense of urgency on finding a solution for that now that we're seeing spreads come down? And then with regards to flora gases, appreciate you made the announcement recently that you continue to prune that portfolio down. But overall, should we continue to expect progress over the next year or so towards a simpler Arkema portfolio? Thank you.

Okay, Mathieu, so hello and thank you for the fair question, which we had the opportunity to discuss already also in the past. Clearly, our strategy is very clear, and you're right to mention it for fluorogas and China. Thank you for mentioning that PMMA was... certainly done at the right moment, so we appreciate that. And even if flue gas and what we want to do mid-long term in China, acrylics is... We started the process as we mentioned a couple of months ago. I would say that we are not seeing steel because you have seen the disposal of Febex, so you could argue that it's small, but at the end of the day, steel cash, which in turn is something which is non-strategic for the company, which shows you that We, again, on M&A will continue. It's a signal that on M&A will continue to be dynamics as always. On fluorogas, which is your main point, I would not say that many things have happened since we took last time because it was in September. But we have a structure of the process. We have, which means also with advisors, et cetera, and we are launching the process. So it's really starting now. Is there a sense of... Of urgency, I don't like too much this world, as you know me. I think same for acquisition. I think there is, on M&A, it's not a matter of urgency. It's a matter of finding the right balance between speed, price, timing. The world is very volatile, so I think timing is important. So you can trust us when we say that we want to do it because we have done so much since the start of Arkema. Again, we want to manage the timing under our control. So no sense of urgency, but a clear desire to do it.

Thank you. And maybe if I can ask another one. You said the Ashland acquisition was performing broadly in line with the plan you have. Now you've owned the asset for a little bit longer. Any further thoughts on sort of positive or negative surprises you've seen in the asset base or the customer reception to the portfolio?

I would maybe start with a confirmation, which this is why we bought it, is that it's a resilient business. It's in the U.S. for most of it. It's 90% in the U.S. It's, as you know, pressure-sensitive adhesives linked to resilient businesses. And I know that in the current year, there are plenty of acquisitions everywhere, which were done in the past year. six months to 12 months and not all are resilient by i would say in the industry or outside of the industry we are very pleased to see that ashland it's a confirmation it's a resilient business now in terms of culture again another confirmation is really fitting very well with uh with our chemo they are strong people they are dedicated to performance they are also On ESG, it's really an awareness which was developed inside Ashland itself. And so really, we are very pleased with what we see. Surprises, positive, negative, I would say no. You know, we spent really, we had in-depth discussion with them before because it was a significant acquisition for Arkemon. And because of that, I would not say we have found surprises. The potential is really there. And we are really focusing short-term to confirm the resilience of the performance and to make the integration as smooth as possible from information system to raw material to business synergies with cutting solution and with BOSIC. So, confirmation, I would say.

Thank you, Thierry.

You're welcome, Mathieu.

Thank you. Next question from Martin Rudiger from Kepler Chavreux. Sir, please go ahead.

Yes, thanks. I have two questions. First, on the business environment, can you talk a bit about your order books in Q4, the demand patterns in October and beginning of November? You mentioned already that you see customer destocking. You mentioned already that North America is strong, but Europe is weak. But I'm more interested in the Customer industries beyond construction, construction you mentioned also is weak, but other end markets such as automotive, consumer goods, that would be my first question. And the second question is on coating solutions. You indicate that the upstream profitability dropped in the third quarter. Is there any meaningful gap in margins between upstream and downstream? If so, is downstream now more profitable than upstream? And regarding acrylics, Do you see margins in acrylics at low cycle conditions or still at mid-cycle conditions? Thanks.

Okay. So thank you, Martin, for your question. I would say on the macro, okay, I will share what we see, but there is nothing different from what you can hear from other people. You know, we are a diversified market base. Construction is 28%, as you know, one-third in each region. So spread, Europe is about 10%. But clearly, strong destocking in European construction. I would say in U.S., far more moderate so far. And China, it was already soft since the start of the year. So I think, and normally in Asia, they don't build as much stock. So it's less an issue of destocking. But clearly in Europe, the underlying demand that you can measure on construction, you have external statistics, was amplified by this talking. With regard to Otto, in fact, Otto is a bit special because the starting point was rather low because of lack of components, and because of that, you don't see so much slowdown in Otto, but not so much adjustment about the fact that Otto is growing, it's more adjustment about the fact that because there was a sort of backlog on auto, and so we don't see the, if it is your question, we don't see the slowdown on auto, and I'm not counting electrical vehicle, because this is on top of it. I was talking more of the traditional auto, then we have the growth coming from the battery. On consumer goods, sport is doing very well, but also because we have a lot of innovation, new platform, bio-based products, difficult for me to judge for example the base business electronics consumer electronics is slowing down so I would say so you have it's interesting because we are sort of transition phase not only Arkema everybody about the macro so the macro will stabilize at a certain point but so far depending on which region and which end market you have plenty of different momentum. So I try to answer the one you asked me question about. With regard to coating solution, it's more, maybe with the exception of Europe, it's more, which because of the specific context is suffering more, but for the rest, it's more a topic of volumes. And don't forget that for coating, the volume at the end of the year is a low season. So you have the traditional effect of volume that you did not see last year because it was a restocking mode for many of our markets. This year is more from this standpoint standard. So you have the seasonality, which is already low starting in October. On top of that, you have the slowdown in Europe. China construction is quite soft, as everybody knows. So it's more a topic of volume than a topic of... cycle, but clearly if we look at Australia actually including China, I would say US is quite resilient. Europe, completely an issue of volume destocking. Okay, so our focus is on stock. We are reducing our stock. And China, the cycle is really down. But then it's end of the year, so it doesn't It does not, don't extrapolate for what it could be for semester for China Creek because it can move very fast. Okay? And I don't, I would like to make a comment on this talking maybe, which is a general comment. Again, depending on the, if you take all the companies, let's say in chemicals, depending on your positioning on the market, you have clearly different volume trend and some see this talking now that some will see this talking later based on what, and market their position on. So for me, to have some destocking now is not a bad thing. I prefer to have destocking, for example, in construction, even for adhesive and coating today, and to have an FC base end of the year or early next year than the contrary. So again, you have, in some negative, you have also some positive. So what is important is to keep the big picture. Thank you. You're welcome.

Thank you. Next question from Charlie Webb from Morgan Stanley. Sir, please go ahead.

Morning, everyone. Morning, Thierry. Morning, Marie-Josée. Thank you for taking the question. Maybe just following up on your last point there, Thierry, around destocking, not extrapolating per se the fourth quarter. When we think about that sequential decline in the fourth quarter, how much of that is just an acceleration of that destocking plus some of the seasonal effect? Or are there any other factors we should be considering in Q4 where you're proactively also kind of maybe optimizing cash flow over EBITDA? Just kind of trying to get a gauge on that for the fourth quarter and then how we think about next year or the start of next year. And just on that destocking, do you think much of that will be done by Q4? Or do you think some of that lingers into Q1 just in terms of the reality of how quick that destocking can happen. And then second question, just on advanced materials, it's clearly been a very strong year in 2022. You know, you've alluded to some perhaps over-earning in areas like PVDF, but other trends obviously still very strong. So just, you know, how do you think about advanced materials into next year? If things, you know, we start to see a bit of deflation creeping in, you know, where does a normalized basis look like for 2023 or at least kind of directionally versus what has been, as I said, a fantastic performance this year.

Okay, Charlie. Hello, thank you for your question. I would be modest on your two questions, or humble. I think the visibility, as you know, on destocking is a difficult sport. And we have many end markets, so clearly construction, it will not happen for... for many months again, so we started early. Maybe some will happen before, so it's difficult to judge. There will still be some destocking certainly, but it's not on the Arkema. Everybody certainly in the first quarter of next year would be surprised because some markets maybe will adjust later. Certainly construction in Europe, When I see the kind of decline we have, I assume it will not stay too long. So hopefully at the end of the year, the base will be quite healthy. After that, your question is, what will it be the demand in Q1 2023? You don't know, I don't know. I mean, we can invent figures, but then it's more about the general macro where we have still uncertainties. What we think is that we are very solid on our feet. that will be when construction market will pick up again, will be in very good shape. But for the time being, we need to digest this kind of restocking and underlying demand. But it's an offsetting factor of what has happened before. I'll never forget that. We had restocking, there had been some starting mid-20s, very strong years. And so now there is a sort of digestion. Up until when, honestly, nobody knows. Because you don't know what is the stock all along the chain. But, you know, when you look at Q4, because I see your underlying comment, which is your Q4, if you look at it with a little bit from the top, so last year was very, very strong with stronger stocking. completely atypical with the kind of Q4 we have had so far. So then you go back to 19, pre-COVID, and in the pre-COVID, we were delivering the same as we planned for Q4 this year. And the difference is that in the pre-COVID, there was no destocking. And this year, there will be destocking. So it's not, when you look at it from a structural standpoint, it's not so bad. So... Okay, so I wanted to share this qualitative point with you, and on your point on cash flow versus EBITDA, we don't arbitrate. This means that we deliver, as usual, the best EBITDA that we can, and we'll try to manage our cash flow according to the market condition. I think we did a good job. We'll continue to do so, but it's not one against the other, if it is your question. With regard to advanced materials, thank you for... for noticing that we delivered a superb performance. As you know, we try to be transparent to the market. Maybe sometimes people think that we are a bit too cautious, but I think it's our style and we manage it like this. We think that there is, because the question was asked, some over-warning in terms of In this year, mostly PVDF and acrylics, and we give a number close to 400, which we confirm year on year. So after that, you can say half, half, or a bit more half and a bit less than half. But let's say this is the order of magnitude. which will impact PVDF, even if our volume will continue to grow in PVDF. It's not a matter of volume at all. It's just that there was too much tightness at the beginning of the year. But on the other side, polyamide will be good next year because we'll get the new plant. We have been quite tight in terms of delivery. So fortunately, we will, and we gave guidance on the contribution of all our projects. So you have that also. Now, it's too early to give you guidance for 2023. We never do it. We will not do it this year. Normally, it's when we publish our annual results that we come back to you and that we try to guide you as much as we can on what we could do in 2023. But for the time being, we really focus on managing our cash, our costs, to be prepared for next year as we are doing every year. Thank you very much. You're welcome, Charlie.

Thank you. Next question from Shadi Pandia from Anchor Research. Please go ahead.

Yes, thanks a lot. The first question is on adhesives, really, and I appreciate, sorry, for asking a 23 question, but when you think about the moving parts, you know, of price versus raw material relief and then extra months of Ashland plus synergies plus FX, at least seems that you will be able to, you know, grow next year. So just wanted to understand, you know, what sort of margin progression should we expect in adhesives next year? And, you know, do you think you're confident that you can grow in absolute EBITDA? That's my first question. The second question is on PVDF actually. And given the nutrient project and you're sort of, you know, improving the ecological footprint of the value chain, You know, what are your plans for investments in the U.S., especially under the IRA now? I mean, do you intend to put green for your plant or just continue the brownfield expansion? That's my second question. And the third question really is around the additive side of things where you did flag some, you know, destocking. Just want to understand, you know, how is the order book looking like for molecular sieves? And with regards to cross-linkers as well, what is the competitive dynamics these days with regards to cross-linkers? Thanks a lot.

Just to confirm that on adhesive, we are confident to grow next year. I think we have a structural element which will take us, and there is uncertainty about the macro, but adhesive will continue to grow. They were impacted this year by the level of raw material, as you know, and at the end of the year by the construction, but... Again, I think we are in the right direction on the disease. On PVDF, as you can imagine, I will not announce to you things that we have not announced externally yet. We'll do it at our pace. What I can say, and thank you for the question, is that we have capacity starting in China early next year, the same for France. and that we have significant ambition in the U.S., we are already very strong, and we continue to invest in the U.S. Now, when, how much, will be disclosed at a certain point, but we have our plans, and you wisely mentioned that there are also some support that can be given in the U.S., and we'll make our efforts to benefit from it. So, yes, clearly U.S., but it's not only for PVDF. for other end markets and technologies is a strong point of Arkema, as you know, from history, and we'll continue to invest materially in the coming years in the U.S., including if we have the opportunity on M&A. And so just to conclude on PVDF, yes, there will be movement in the U.S., but too early to say, but we know exactly what we want to do.

If I can just add one follow-up to Mary-José, actually. Well, first of all, well done on the free cash flow. And when we think about 23, what sort of capex levels should we think about? And, you know, from the envelope of the outflow of working capital, how much do you think, based on the way raw materials are trending these days, could we see as an inflow next year? Thanks a lot. So,

Thank you, J.D. I confirm the culture of the company is very much focused on cash. I mean, it's part of the incentives of all managers. So I guess it helps having a conversation on that metric internally. Basically, as I mentioned, you know, In cumulative, for the nine months, we have accumulated still half a billion in working capital value. I expect some reversal. I mean, the reversal has partly started in Q3. I obviously expect some additional reversal in Q4. Depending on the evolution of the inflation metrics, obviously, there could be actually some benefit into next year. So it's a lot depending, let's say, on how much the price is. of raw materials will fluctuate, and the volumes, in fact, will fluctuate. As Thierry mentioned, you know, our visibility level for 23 is frankly limited, and there are lots of, many potential scenarios, so it's difficult to be very precise on this, but I think we've demonstrated in the past that we are focused on this metric, and we normally, you know, optimize the performance of Arkema on cash.

Maybe to complete what Marie-Josée is saying, a few points. You know our guidance on the cash flow generation, which is 40%. Conversion, yeah. Conversion, so I think it applies every year, so first thing, at least 40%. The second thing is that... Lack for lack, this means in given circumstances, I think we consider that, and you know us now since many years, we have this ability to deliver superior performance in working capital and cash flow. So after that, as Marie-Josée mentioned, it depends on the macro itself and the parameters. But at given parameters, I think it would be, again... superior performance. And with regard to CAPEX, without giving more precise elements than Marie-Josée is too early, so you know first that we are already reasonable in terms of CAPEX, but at the same time, we want to be able to support these opportunities coming from Megatrend, where we believe Arkema has an incredible potential, and with internal rate of return of our organic CAPEX, We have to find this balance between deliver this growth on megatrends and being reasonable on the CAPEX. You also have in mind that we want to deliver our 1.5 degrees trajectory on the CO2 emission. We are working on all these elements, and same as for EBITDA. We'll come back to you, Marie-Josée, I think, when we publish the fuller results. We'll give more maturity on that. Thanks a lot.

Mechanically, as you know, we will have some capex contributing later to the new trajectory of emissions, so this is factored in the new normative level of capex for the company.

Thanks a lot, both of you. Thank you.

Thank you. Next question from Andreas Heiner from Stifel. Sir, please go ahead.

Thanks for having the opportunity to ask my two questions. The first is really on the high-performance polymers. We were talking in recent quarters that you are basically running at capacity at least for the prime products, polyamide 11 and PVDF. Has that changed? So the destocking we see across many industries, is that also affecting the high-performance polymers, or can that decouple And then the second is more on PVDF. So we see a normalization in prices. What is driving this? Is it competition from Chinese new capacities? Is it capacity additions by Western players? Or is there also a slowdown in demand? Thanks for your question.

uh okay um i don't think uh marie jose correct me if i'm wrong i don't think that the z-stocking is affecting uh hpp so you might deliver or pvdf it's not a matter of this talking small matter of underlying demand for some of the end market but on polyamide we are sold out anyway and on the on the so on pvdf Part of your point is true, which means that it's temporary. There has been so much momentum on the first six months, eight months on the batteries. that this is, there is some, let's say, I would not say destocking, just the fact that you cannot continue at this pace, at least, but overall, so we are quite optimistic on the volume for all batteries, but I would say the last four months of the year show some digestion of the of the trend but nothing to worry about but so because of that i would say we are running at capacity but there is not this tightness that we had seen at the beginning of the year so it's one element and the second one is that you start to see more more capacities on pvdf which weighs a little bit on the overall PVDF, but so this is what I can say.

Is that Western capacity or Chinese capacity that's changing the supply?

No, it's more of a Chinese capacity. I would say in Europe and U.S., you will not see new capacities coming in the short term. You need some time to implement them. So it's more a topic for Asia. But you know our strategy on PVDF. We really focus on the... end of the range on the technology differentiation. We have a lot of technology assets and we build our whole developmental portfolio. This is why we try to find in terms of growth, the right balance between growing, but growing on where we want to go. And this is a permanent strategic exercise and revisiting the market, the end market. And we are not talking only about batteries and PVDF is plenty of markets. And I challenge the team to make sure that we continue to deliver strong value going forward, as we have been doing in the past 15 years.

Thank you. Next question from Georgina Fraser from Goldman Sachs. Please go ahead.

Hi, I've just got one question. Thanks Thierry and hi Maria-José. So my question is, I know you hesitate to do this but would really love if you could give us a bit of an overview of the sub-segments within performance additives. If you could give us some idea of the demand trends in thiochemicals between animal nutrition and oil and gas and also in hydrogen peroxides. A lot of your competitors in Europe were facing a very tough environment with the energy prices recently. So any comments you can share would be great. Thanks.

I would say you will find, first of all, Georgina, good to talk to you. You will find a little bit from the regional standpoint the same as you find for the rest of the business. This means that the U.S. is very solid, quite strong, and Asia in between. And I would say Europe suffering because of the lack of DMA. You find that a little bit. Now, I would say with regard to animal nutrition, in terms of volume, it's still... is still there. Oil and gas is very strong. So clearly we benefit from it. It's not a big business for Arkema, as you know, but clearly since you have the question specifically, we are quite solid there. Paper, what is linked to paper is difficult, challenging to give you a name. So you have, what is linked to new energies? because we have also some good exposure to what is new mobility or new energy there is going quite well. So you have a mix. You have quite a mix from a market standpoint. And from a regional standpoint, again, the U.S. is more solid of the three regions. But overall, it was a quite robust performance of this performance additive segment.

That's great. Thank you.

Thank you. We have no more questions for this moment. Ladies and gentlemen, just a reminder, if you have a question, please press 01 on your telephone keypad. Thank you.

Okay. If there is no more questions, I'd like to thank you all for your participation, for your questions, and I wish you a good day. And don't hesitate if you have any follow-up questions. Yes, we have.

Sorry, we have a last question, maybe, from Laurent Fabre from BNP. So please go ahead.

Oh, hi. Really sorry, Dino, that you are wrapping up, Thierry. I had a follow-up on Jaydeep's question on CAPEX, actually. I think all of us are modeling CapEx down quite a bit year-on-year into 2023. And I guess we're all assuming that there will be no exceptional CapEx for next year. I think, Marie-Josée, you're implying that there might be some on decarbonization. I'd just like to check. I guess if there's anything you can say directionally for CapEx for next year.

Actually, you're correct. We are completing the two exceptional projects that are in the portfolio, so namely Singapore and Nutrien in the U.S. So let's say aside from some, you know, cutoff, 10, 20 million slip into next year, definitely I think I do not expect any exceptional spending there. What I was referring to is that the normative level of CAPEX is roughly increasing to a bit higher than 6% on sales, which actually today now incorporates the CAPEX linked to decarbonation. So the ratio previously was more in the range of 5.5% of our turnover, and it's been revised up alpha point to 6% to actually take those decarbonation capex into account.

In fact, we are rather consistent with what we see so far. This means that we increase, as Marie-Josée mentioned, the 5.5 to 6. And on top of that, we are in nuances. I would say we have maybe, what, 2030, you say, a cutoff from, we spend a little bit in exceptional capex this year, okay? And so maybe you're a little bit high by 2030 this year in your capex estimate, but we'll have them next year. So altogether, it doesn't make more on exceptional, except that there is a little bit of spillover to 23. And when we increased the 5.5 to 6%, we explained that it was because of the 1.5 degrees trajectory. So we are all consistent now. What I added to that is that in terms of sequence, we don't want to miss any opportunities for megatron because we are very strong there. And based on that, you can have, depending on which year, a little bit more, a little bit less. And so this, we need to factor everything and to come back to you. But at the end, we are talking about nuances from something that we have largely covered together.

Okay, thank you.

Thank you.

We have no more questions.

Okay, thank you all again, and I will not make my wrap-up again. So have a nice day, and don't hesitate if you have any follow-up with our teams. Okay, bye-bye.