Arkema S/Adr

Thank you very much. Good morning, everyone. Welcome to Arkema's full year 2022 results conference call. Joining me today are Marie-Josée D'Ancien, our CFO, and the investor relations team. As always, the slides used during this webcast are available on our website, and together with Marie-Josée, we'll be able to answer your question at the end of the presentation. our chemist teams can be proud of what they achieved. And I'd like to highlight some key points. We delivered an all-time high EBITDA of 2.1 billion euros, fully in line with our guidance, with growth in all three specialty materials segments, and a rebate margin at a high level of 13.5%, in a demanding operating environment marked in particular by the war in Ukraine supply disruptions, and persistently elevated raw materials and energy costs. I will let Marie-José provide more detail by segment later on. The 20% plus growth in sales in this inflationary environment demonstrates our agility and pricing power and enabled us to more than offset lower volumes. We also delivered an excellent recurring cash flow of over 900 million euros and an EBITDA to cash conversion rate above our long-term target of 40%, a performance which really sets us apart from our competitors. I would really like to thank the teams for this achievement and for the hard work in this challenging context. Our balanced geographic footprint and diversified end-market exposure proved once again to be a real asset, as strength in some areas enabled us to offset weakness in others. 2022 was a year of two halves, with a very strong performance in H1, which benefited also from an exceptional tightness in some product lines. essentially acrylics and PVDF, while in H2, we were impacted by the slowdown in the European economy, particularly in construction, as well as by significant stocking in Q4. But in those different environments, our expertise in material science and the accelerating shift toward higher value-added, high-performance materials was the underlying structural driver of our success. In fact, specialty materials now make up 91% of our sales, positioning us on track toward our 2024 roadmap. Beyond this excellent financial performance, we continue to strengthen our profile in 2022. With the value creative acquisition of Ashon's performance additives, which we have successfully integrated into the group as well as a couple of Boltons. We also made good progress in our organic capex projects to support our customers' sustainable growth. Sustainability is indeed the key driver of our growth. First of all, through our innovative materials. Innovation in sustainable megatrends and designing solutions that are essential to addressing the world challenge is key to our success And we benefited from it in 2022. And you can see in the slide a number of examples. Our positioning across three core segments is unique and allows Arkema to benefit from strong synergies in terms of technological know-how, market expertise, or customer intimacy, and to provide a complementary offering. Products launched less than five years ago made up around 15% of our specialty materials sales in 2022, solidifying our ambition to generate 1.5 billion euros of additional sales coming from our five innovation platforms by 2030 versus the 2019 baseline. The past few years have provided us with a wealth of opportunities in areas like batteries, eco-friendly paint, 3D printing, or home efficiency. I met with many of our larger customers last year, and they are really excited by the technological solutions that we can provide that are critical to them to innovate and meet the challenges and expectations generated by new environmental regulations and the circular economy. Sustainability is embedded in the way we work and interact with stakeholders. Our ESG commitment was strengthened in 2022 with a new climate plan on a 1.5-degree trajectory across a whole value chain, and our continuous progress in our CSR performance was again highly recognized by external agencies. For example, we kept our third place in the chemicals category of the DGSI World Index with an improved rating. We also improved our Moody's ESG solution score and we were confirmed as part of the CAC 40 ESG Index for the second year running. We are also proud to have been certified as top employer in four key countries for the group and named as a Forbes Best Employer in third place within our sector globally. As a result of our very good financial performance in 2022 and the Board's confidence in Arkema's growth prospects, a dividend of €3.4 per share will be proposed as the next HGM, up by 13% versus last year, and in line with our Progressive Dividend Growth Strategy. the magnitude of the increase is appropriate and reasonable, and it leaves room for the coming years. I will come back to the outlook at the end of the presentation, and we'll now hand it over to Marie-Josée, who will review in more detail our Q4 and FOLIA results.

Thank you, Thierry. So as already said, 2022 was a record year for Arkema, despite the weaker year-ends. Analyzing the sales breach at 11.6 billion euros, sales were up 21% year-on-year, with organic growth reaching nearly 14%. The price effect at 21% for the main driver, reflecting our initiatives to transfer to our selling prices the elevated inflation in raw materials, energy, and transportation costs. Volumes were 8% lower, impacted in the second half by the slowdown and destocking in Europe. especially in the construction market, where we had experienced robust growth since mid-2020. U.S. demand was resilient over the year, also impacted in Q4 by some destocking in construction, while activity in China was weak due to the COVID situation. There is a small 1% perimeter effect attributable to the acquisitions we made in specialty materials, Ashland's performance adhesives offsetting the divestment of PMMA in May 2021. Currencies had a positive impact of 6.5% on sales, mainly due to the stronger US dollar and Chinese Yuan against the Euro. EBITDA grew 22% to 2.1 billion euros in line with our guidance. North America actually delivered a strong growth, which reflects our good positioning in the region. Regarding the phasing of the year, first nine months benefited from some extraordinary profits estimated at around 400 million euros. They were linked to a very tight supply chain in specialty materials. I would say around two-thirds came from PVDF and one-third from acrylics. In this context, the group EVD margin reached 18.3%. EBITDA amounted to 291 million euros in the context of a very high comparison base in the prior year. Looking at the profitability of the different segments, I'll start with Bostik, which used an EBITDA of 366 million euros, up by 16% year-on-year, supported by the integration of Ashland's adhesives, which performed well throughout the year. Our price management, as well as a better product mix, more than offset the 8% drop in volume. The EBITDA margin resisted well at 12.6%, given the nearly 2 percentage point negative impact linked to the mechanical dilution of price increases. In Q4, the stocking accelerated in Europe, but we managed to maintain neutral net pricing, and Q4 EBITDA rose to 9%. rose by 9% to 75 million euros. Advanced materials EBDA is up 40% year-on-year to 941 million euros, with an EBDA margin reaching 21.7%. High-performance polymers are an excellent year, of course, benefiting from a better product mix on the backs of a solid demand for batteries and other premium solutions. Q4 EBDA came in at 148 million euros, lower than last year's high level due to the drop in volumes and to moderating tightness in PVDF. EBITDA of coating solutions grew 13% to 593 million euros and the EBITDA margin reached 18.2%. Volumes declined mainly because of the slowdown and destocking in Europe, especially in decorative paints. However, In a context of much higher input costs, our pricing in the downstream as well as the upstream was supported. In Q4, EBDA for the segment dropped to 63 million, affected especially by weak volumes. Finally, EBDA was stable year-on-year in intermediates at 306 million euros, despite the negative impact from the divestment of PMMA. This performance was supported by the good momentum of refrigerant gases, especially in the U.S. EBITDA in Q4 was down strongly to $24 million, given much less favorable conditions for acrylics in Asia and in a context of low seasonality in refrigerant gases. With depreciation and amortization at $550 million in 2022, recurring EBIT is up 32% versus last year, at close to 1.6 billion euros. Rebate margin improved by 110 basis points, standing at 13.5%. Financial results stand at 61 million euros negative, close to last year. Due to higher interest rates, we foresee a slight increase of the cost of debt in 2023 from the debt that is swapped into US dollar in our portfolio. The recurring tax rates came to 21% of recurring EBITs, and we expect the 2023 rates to remain at this level. All in all, adjusted net income increased by 30% year-on-year at close to 1.2 billion euros, which corresponds to 15.75 euros per share. Moving on to cash flow now, recurring cash flow amounted to $933 million in 2022, up a strong 24% from last year. The growth in cash flow is broadly in line with the evolution of our operating results. We had a working capital outflow, as you know, in H1, which was partly reversed in H2, thanks to our strict management of inventories and receivables in the context of slowing activity levels. The working capital ratio on annualized sales is unchanged versus last year at 12.6%, and still stands at quite a low level relative to the 14% that we consider more as our normative level. Capital expenditure totalled €707 million during the year, which reflects lower exceptional capex of €123 million as we are finalizing the construction of the polyamide 11 plant in Singapore. In 2023, recurring capital expenditure should come to around 6% of group sales, and we should have a limited 30 million of exceptional capital expenditure linked to the Nutrien project in the U.S., which spills over slightly from 2022. Pre-cash flow amounts to 784 million euros, and the EBITDA to cash conversion rate stands at 44%, in line with our 40% long-term target. Net debt at the end of 2022 stands at 2.4 billion euros, including the 700 million euros of hybrid bonds, and the net debt to last 12 months EBITDA ratios stands at 1.1 times. I thank you for all your attention, and we'll now hand it over to Thierry for the output.

Thank you, Marie-Josée. The dynamics at the beginning of 2023 are quite similar to what we experienced in Q4 2022, with weak demand in Europe and China, as well as continued destocking. So clearly, in this type of environment, we will focus on managing fixed costs and working capital in order to generate strong cash flow once again this year. We expect 2023 to offer a different profile relative to 2022, with a slower start to the year, and a greater weighting for H2. Furthermore, the comparison base is elevated, as we benefited last year from, as you know, from atypical tightness in a number of our product lines, as Marie-Josée said. Taking these elements into consideration, we expect EBITDA in H1 2023 to be clearly below last year's very high level, as I think already recognized in the current consensus for Q1. Having said that, we see several positive drivers developing. We expect volume to improve progressively, hopefully during the spring, driven by China's reopening and the stabilization of Europe after many months of significant stocking. In addition, we'll benefit from our new key projects focused on decarbonization and sustainability. Many are bio-based and recyclable PA11 units in Singapore, Our eco-friendly project with Nutrien in the U.S., expansion of our exceptional PBACS material in France, PVDF expansion in France and China, and Sartomer in China also. We expect an EBITDA contribution of 50 to 70 million euros in 2023 from those new projects, essentially positioned in the second half of the year, given the wrap-ups. Together with the board, I visited the Singapore unit in January and really I was very impressed by the quality of the construction and also by the team's work. We also expect adhesives to improve, driven by Ashland's performance adhesives and our ongoing synergy program, which confirms the strong growth potential of this combination. All in all, at this stage, we aim to achieve in 2023 an EBITDA of around 1.5 to 1.6 billion euros. When you look at the last three years, we delivered an average EBITDA of around 1.7 billion euros. So this guidance takes into account the economic shutdown we are seeing, and it means that we will be above the pre-COVID levels of around 1.4 billion euros. We also aim to keep an elevated cash conversion ratio, which is part of the DNA of the company, as you know, over 40% this year. Besides, we are entering 2023 with a robust balance sheet that Marie-Josée underlines with an EBITDA ratio at 1.1, which places us in a good position to carry out our projects, including further targeted M&A should opportunities arise. This financial flexibility is a valuable asset as we continue to deliver our 2024 roadmap. But we are of course thinking beyond 2024 and we will hold a capital market base on September 27th, I think the last one was in March 2020, when we will unveil new financial targets and our vision for the future of Arkema with our unique positioning around our three specialty materials platforms, adhesives, advanced materials, and coating solutions, led by innovation, sustainability-driven manufacturing, and strong societal commitment. I thank you very much for your attention, and we are now together with Marie-Josée, ready to answer your questions.