Arkema S/Adr

Thank you for holding and welcome to Arkema's first quarter 2023 results presentation. For your information, this call is being recorded. It will take place in a listen-only mode and you will have the opportunity to ask questions after the presentation by pressing star and one on your telephone keypad. I will now hand you over to Thierry Le Henaf, Chairman and CEO. Sir, please go ahead.

Thank you very much. Good morning, everybody, and welcome to Arkema's Q1 2023 results conference call. Joining me today are Marie-Josée Doncion, our CFO, and the investor relations team. As always, to support this conference call, we have posted a set of slides, which are available on our website. I will comment the highlights of the quarter before letting Marie-Josée go through the financials, and at the end of the presentation, we'll be available, as usual, to answer your questions. After, as you know, an exceptional performance in the first half of last year, driven by AfriMac Relics and PVDF in China, we knew Q1 2023 would come back to more normalized levels, especially given the challenging economic environment marked by destocking and weaker demand on specific end markets, notably constructions. In this context, we delivered a solid set of results. Of course, clearly lower relative to last year, but still comparable to 2021 and pre-COVID levels, despite weak volumes. Here are some key points I would like to highlight. We delivered an EBITDA of €367 million, broadly in line with our expectations, may be even a bit better in adhesives and performance additives and consistent with our full-year EBITDA guidance. This performance includes a reversal of last year's overrunning in PVDF and octane acrylics, mainly in the first half, which was mainly in the first half last year. It also reflects the more difficult macroeconomic conditions versus Q1 2022, which materialize in most end markets except for automotive, aeronautics and oil and gas, but which combined only represent a relatively low share of ourselves. Our volumes were lower year-on-year due to poor demand in Europe, slowdown in construction in the U.S., and significant stocking in the battery chain, temporary but significant in China, which impacted PVDF. Extrusion PVDF volumes in China are pretty much in line with last year's levels for specialty market materials. against a rather low comparison base. Looking briefly at the performance of our specialty material segments, Adhesive had a solid quarter with a resilient EBITDA margin, thanks to our mix toward more value-added solutions, our pricing actions, and the benefit from Ashland, which continues to perform well. In advanced material, we had the headwind from PVDF, and also some impact from the strike in France, which overshadowed some good new business developments, always aligned with mega-France, and also a solid U.S. business in high-performance polymer. Performance additives deliver, frankly, a very resilient performance, despite some lower volumes. In coatings, we benefit from solid pricing in the downstream, in the context of broad stocking, but as expected, we suffered from last year's elevated comparison base in the F3 business. Beyond these financials with sustainability at the core of our strategy, we are very happy to announce that SBTI approved our ambitious next-term climate plan on a 1.5-degree trajectory across the whole value chain. As you saw in the press release today, given the strength of our results in our decarbonization path in the past couple of years, we further raised our commitment and will reduce greenhouse gas emissions by 2030 for both Scopes 1 plus 2 and Scopes 3, even further than we had planned. So I am really proud of our team's work in this area and very happy to be part of the few companies with an SBTI-approved 1.5-degree seduce near-term trajectory. During the quarter, we also continue to sharpen our portfolio with the divestment of FEBEX at the start of the year, and our M&A strategy will continue this year to further strengthen our specialty materials. As always, we'll be patient and make sure acquisitions are a good strategic fit and offer significant synergy potential. On the organic project front, which are important as they will impact the second semester positively, we are entering the final stages of the start-up for our new bio-based polyimide 11 plant in Singapore, which should contribute nicely in the second half of the year. Over the past 15 years, although we enjoyed on this line very strong EBITDA growth, thanks to the positive evolution of the mix, our volume growth was really pretty much constrained by our plant's capacity. So the startup of this new plant is really a breath of fresh air, and we are really excited about its potential with numerous opportunities at a time where carbon footprint reduction is increasingly a key factor for our customers. We are also making good progress. We are very pleased with it. In our other organic APEX projects, including Nutrien, which will start shortly, PBACs, PVDF in France, and Sartomer in China. So this was my summary, and I'd like to hand it over to Marie-Josée for a more in-depth look at the financials before we discuss the outlook at the end of the presentation.

Thank you, Thierry. As usual, I'll start with the sales bridge. So at 2.5 billion euros, sales decreased by nearly 13% year-on-year. Volumes were down 18%, reflecting notably the less favorable demand conditions in upstream acrylics and PVDF, as well as the soft demand in construction and coatings applications. The global price effect came in at plus 2.7%, reflecting the resilience of our pricing in adhesives, performance additives, and coating additives. The scope effect is positive. at plus 2.2% thanks to the two-month additional contribution of Ashland Acquisition. And the currency effect is limited at 0.8% and may become negative as the US dollar continues to devalue versus the euro. Q1 EBD at group level came in at 367 million euros. Detailing it by segment, we have Bostik, who achieved an EBITDA of 93 million euros, up 3%. Volumes remained on the low side in construction-related markets, but our pricing stood firm and we benefited from tight cost management. The EBITDA margin was stable at 13.3% despite lower volumes and mechanically diluted impacts of price increases. since actually we benefited from resilient engineering-adhesive applications and appreciative M&A. Advanced material DBDAs stood at €160 million. We saw contrasting trends here, with performance additives being very much in line with last year. However, the lower contribution from PBDF in China, which we had clearly identified since last year, and some disruption from French strikes, weighted on the segment's profitability. EBITDA in coating solutions came in at 94 million euros with margin above 14%. While much lower than last year's exceptionally high level when our upstream activities enjoyed very tight market conditions, this is actually a good performance in the context of weak demand, especially in construction. We notably managed to hold on to pricing in the downstream, partly reflecting ongoing efforts to position our range of products toward more biobased and eco-friendly solutions. Finally, intermediates EBDA stood at 49 million euros. We had, on the one hand, lower volumes and less favorable market conditions in Asia acrylics, and on the other hand, continued positive pricing dynamics in fluorogacids. Depreciation and amortization stood at €133 million, leading to a recurring EBIT of €234 million and a rebate margin of 9.3%. Non-recurring items amounted to €38 million. They include roughly €30 million of PPA depreciation and amortization. $28 million for one-off charges, restructuring legal expenses, and the startup costs of our Foliamide 11 plant in Singapore. And a net positive of €21 million from the gain of our divestment of FIBEX plans. Financial expenses stand at €19 million on the back of higher interest rates for our US dollar swap debt. And we also... on the cost of the additional 400 million euro bond issued in January. The tax charge at 41 million euros reflects the group's lower results and is in line with our full year tax rate guidance of 21% of recurring EBIT. Consequently, Q1 adjusted net income stood at 162 million euros, which corresponds to 2.17 euros per share. Moving on to cash flow and net debt, Q1 recurring cash flow amounts to 21 million euros negative. It reflects the usual first quarter working capital seasonality. Working capital ratio on annualized sales actually stands at 16.3% versus 14% last year. The higher level being linked to some restocking following the low point of year end 2022. Total capital expenditure amounted to 89 million euros in the quarter, including decreasing exceptional capex of 7 million euros, that is 40 million last year, as our two major projects get closer to completion. In terms of M&A, we cashed in 30 million euros linked to the sale of FIBEX, obviously compared to a 1.5 billion euro outflow in Q1 last year, corresponding to the acquisition of Ashland. Net debt at the end of March 23, therefore amounts to 2.4 billion euros, including a 700 million euro of hybrid bonds, unchanged, versus the end of 22 level. The net debt to last 12 months EBDA ratio stands at 1.3 times. And this concludes my presentation. Thank you for your attention. And I'll now hand it over to Thierry for the comments.