Arkema S/Adr

Welcome to Arkema's second quarter 2024 results and outlook conference call. 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 1 on your touch-tone telephone. I will now hand you over to Thierry Le Henaf, Chairman and Chief Executive Officer. Sir, please go ahead.

Thank you. Good morning, everybody. Welcome to Arkema's Q2 2024 Results Conference Call. Joining me today are Marie-Josée Doncion, our CFO, and, as usual, the Investor Relations Team. To support this conference call, we have posted a set of slides which are available on our website. As always, I will comment the highlights of the quarter before letting Marie-Josée go through the financials. and at the end of the presentation will be available to answer your questions. In June 2, 2024, the macro environment did not see any real global recovery on the demand side, remaining broadly unchanged versus the past six to nine months. This is also confirmed by the raw materials environment, which remains sequentially fairly stable. with the exception of those few raw materials which saw some tightness linked to the Red Sea situation or some temporary issues at suppliers, like in Texas recently after Hurricane Beryl. Arkema was nevertheless able to achieve a 5% volume growth compared with last year, which was a good growth, reflecting the end of most of the destocking, a good performance in Asia, and the benefit of new business development in the superior growth of sustainable market platforms presented at our last Capital Markets Day. The volume growth was more significant in industrial adhesives, specialty polyamide, and the downtrend of coating solutions. PM's contribution was included in the Scope FX since it was acquired at the end of last year. But note that they also enjoyed a good volume improvement compared to last year, with material progress at some of their key customers in electronics. Overall, given the state of the economy, Arkema delivered a robust set of results in Q2, well above last year's level, with an 8% progression of the EBITDA. Another strong point of the quarter was the EBITDA margin reaching nearly 18%. This undoubtedly underlies the strength of the specialty materials portfolio we have built over the years, which allows us to combine high performance and resilience in more challenging times. Our results were already appreciated by the financial community, as you remember, in 2023. as we maintain our guidance throughout the challenging year. And this year, our solid results are also, again, clearly demonstrating the benefits of our long-term strategy. The contribution of the measure organic projects listed in the Capital Market Day presentation was close to 15 million euros in the quarter, totaling 20 million in the first semester, We expect this amount to double in second semester, so to reach around 60 million in the full year. The polyamide 11 plant in Singapore is now fully operational with significant technical progress achieved by the team in the second quarter. H2 will be the start of the commercial ramp-up, so the contribution naturally to H2A bidder will be by nature limited, materially increasing over the years with the ramp-up. The comment applies as well to the HF operations at Nutrien. We will also start in the fall the 1233 ZD capacity in the U.S., which is, as you already know, a new generation of two ORO specialty, complementing our existing seven. All our segments recorded EBITDA growth in the quarter, with adhesive leading the way, thanks to double-digit growth, more precisely, plus 15%, which is, from our standpoint, remarkable in the context, following on the positive dynamic in Q1. Also, for the first time, BOSTIC exceeded 15% EBITDA margin in a semester, confirming that the segment has reached a new milestone in its development. We continue to benefit from a more favorable product mix and from the successful integration of our past acquisitions in line with our strategy towards differentiated technologies. The volume growth was at a good level of 5%, supported by the industrial assembly, packaging, and laboring markets, in short, industrial market, while the dynamics in construction remain subdued. In advanced material, our EBITDA was up slightly, supported in particular by our new business development in Asia in attractive markets like batteries, energy, sports, medical, and by the contribution of PIAM, which benefited from the launch of new models by large consumer electronics players, and with a clearly accelerated performance in Q2 versus Q1. Performance additives were, as expected, below the record achievement of last year, penalized by three major planned maintenance and around entire chemicals. Note also that in the first week of June, Germany experienced an exceptional flooding of the Danube River, with the water actually rising above the 1,000-year flood level, so creating some damage at one of our plants in Gazebo, mostly electrical installation. The site will have to shut down for three months, and the impact on the EBITDA is estimated mostly in Q3 at around 15 million euros, 1.5. In coating solution, while the upstream of the segment remains impacted by the low cycle in acrylic monomer, Downstream activities EBITDA was clearly up, benefiting from strong volume growth, and the segments continued to rise to one more sustainable and valued added solution. So the mix in the quarter was positive, less acrylic monomer, more in the downstream. We are pleased also to deliver in this segment an EBITDA margin still at 14% given the relative headwind of the upstream, which shows you the intrinsic quality of this activity after years of positive repositioning. On the M&A front, we expect the acquisition of Dell's flexible packaging laminating adhesive business still to close end of Q4 and wrap up from the beginning of next year. The teams are actively preparing the post-closing phase and are fully mobilized to deliver the benefits of this great deal we should create significant value for shareholders over time. After this introduction, I will now 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. At 2.5 billion euros, sales are up 3.8% year-on-year, driven by a 4.7% rise in volumes. The price effect stood at a negative 2.4%, reflecting essentially lower raw material prices. The scope effect is positive at 2.3% and corresponds mainly to the contribution of PI advanced materials in Korea. Finally, currencies had a negative impact of 0.8% on sales as a result of the depreciation of the Chinese yuan and the Argentinian peso relative to the euro. U.S. dollar is relatively neutral compared to last year. As you recommended earlier, Q2 EBITDA came in at 451 million euros by 8.2% year-on-year. EBITDA margin grew 70 bps, reaching the solid level of 17.8%. Depreciation and amortization stood at 149 million euros, leading to a recurring EBIT of 302 million euros. up 6% compared to Q2 2023. Non-recurring items include, on one hand, 37 million euros of PPA depreciation. EI, Advanced Materials PPA Depreciation, represented roughly 5 million euros per quarter. On the other hand, 49 million euros of one-off charges encompassing M&A costs linked to the acquisition of DOWS adhesives, restructuring and legal expenses, and startup costs for our PA11 platform in Singapore. Financial expenses stand broadly unchanged at €15 million, with the cost of the newly issued bonds offset by higher interest on cash investments. At €52 million, the tax charge represents 22% of rebate, And consequently, Q2 adjusted net incomes to the €214 million, which corresponds to €2.87 per share. Moving on to cash flow and net debt, Q2 recurring cash flow amounts to €132 million, quite consistent with the last year's Q2, which includes €170 million capital expenditure in the quarter, as well as the usual first semester working capital seasonality. The working capital ratio on annualized sales stands at 15.7% at the end of quarter two, which is in line with our normative level of CSK 15%. And for M&A, we spent 20 million euros in Q2. This cash outflow corresponds mainly to the acquisition of the majority stake in Pryonic, and various M&A costs linked to the acquisition of DAOs laminating a disease business. Net debt at the end of June 24, therefore, amounts to only 3.3 billion euros, including 1.1 billion euros of hybrid bonds, and the net debt to last-world multibit debt ratio stands at 2.2 times. Thank you for your attention, and I'll now hand it over back to Thierry for the exam.