Arkema S/Adr

Good morning, everybody. Welcome to our KMAS Q3 24 results conference call. With me today are, as usual, our CFO, Marie-Josée Doncion, and the Investor Relations Team. To support this conference call, we have posted a set of slides which are available on our website. And as usual, I will start with some comments on the highlights of the quarter before meeting Marie-Josée to go through the financials. And at the end of the presentation, we'll be available to answer your questions. So the macroeconomic conditions we encountered in the third quarter remain broadly in line with what has already been observed for several quarters, namely continued self-demand in a global challenging macro environment. Once again, there was no sign of remount overall, and we should even add that the automotive sector has worsened, not to be in Europe. After an encouraging month of July, demand slowed down in September, which reflects inventory adjustments end of the quarter at some customers. Despite this context, Arkema achieved, we believe, strong financial results, significantly higher than the average of its peers. We were able to deliver again a solid sales growth in Q3, up 2.9% compared with last year, driven by specialty materials in Asia and in the U.S., while Europe suffered from low demand overall. Besides, we increased our EBITDA by more than 5% and reached an EBITDA margin at the elevated level of 17%. confirming once again the strength of our portfolio, the high resilience of the group's top line and profitability in these more difficult market conditions. Our performance in Q3 was driven by our specialty materials, 92% of our sales and recorded a significant 90% EBITDA growth and 80 bps EBITDA margin increase compared with last year. To achieve this good result, we continue to manage quickly our costs and to push the commercialization of high value-added solutions, notably in those sub-markets supported by the global megatrends. If we look now briefly at the results of our three specialty material segments, here are some key points I'd like to outline. First of all, adhesives. Adhesives delivered again a strong quarter in the continuity of the first semester. EBITDA significantly grew by 9% compared with last year, and EBITDA margin reached its record high at 15.7%. This was, we think, quite an achievement. These very good performance were delivered in a low-volume environment, particularly in the construction market. while some industrial markets, such as packaging or labeling, showed a more positive dynamic. In advanced materials, EBITDA growth was also significant at 10% year-on-year, primarily driven by high-performance polymers while performance at IT were facing the high comparison base of last year, and were also impacted, as you know, by this temporary shutdown of our German organic peroxide plant. The segment benefited in the quarter from PM contribution, despite at a slightly lower level than Q2, from the positive dynamic in new generations to our specialties, and from the continued development of our high-performance solutions in attractive markets like energy, sports, and healthcare. As I mentioned earlier, the automotive sector started to slow down, notably in Europe, and in particular, at least temporarily, the EV market seems to grow more slowly than expected. The coating solution segment resisted relatively well while continuing to face low cycle market conditions in the upstream part. Fortunately, the segment benefited from better volumes and an improved mix in the downstream additives and resin. All in all, EBITDA was up in this segment by 6.5% and EBITDA margin reached a reasonably robust 13% figure. Beyond delivering this short-term, we have continued to prepare our mid-term features with a gradual ramp-up of our major organic projects, including the successful restart of our polyamide 11 operation in Singapore in September after its regulatory shutdown. The smooth completion of our investment in our new 1-2-3-3 ZD capacity in the U.S., which is expected to start by the end of this year, And also, and we look forward to that, the preparation of the closing of those laminating adhesive business acquisition expected in Q4. We have also made significant progress on our CSR roadmap to decarbonize our value chain and more and more crucial topic for our customers. As an example, thanks to improved process efficiency and the use of renewable and low-carbon energy, we have decreased even further the carbon footprint of our flagship biobased polyamide deliverance, which is now 80% less than a comparable fossil-based polyamide, such as P820. In this space, we have also developed more and more products based on bio-sourced or renewable raw materials, enabling to reduce their carbon footprint while maintaining their performance. Last and not least, you may have seen that we have recently announced some changes to the Executive Committee following the retirement of two of its members. With the appointment of Sophie Fouillard and Thilo Quint, with the appointment of Laurent Tellier, the Executive Committee maintains its sense of competence while further increasing its diversity. With this new organization at the top of the company, we are well equipped to move on with our 2028 roadmap. 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, and good morning to all of you.

So I'll start with our revenues. So group sales amounted to 2.4 million euros in Q3, increasing by 2.9% in one year.

Volumes were up 3.8% organically in the specialty materials perimeter, benefiting from more favorable trends in energy, sports, packaging, and healthcare, while construction stays relatively low and automotive is slowing down. Volumes in intermediates were down, reflecting the quota enforcement mechanism in refrigerants, both in Europe and U.S. The price effect was fairly stable, standing at minus 0.2% in line with the evolution of raw material prices overall. The scope effect was positive at plus 2.3%, corresponding essentially to the integration of PI advanced materials. And finally, currencies had an adverse effect of 1.4% on sales, reflecting the depreciation relative to the euro of the US dollar and several Latin American currencies. As Thierry commented earlier, Q3 beta was up 5.4% on year, reaching 407 million euros, driven in particular by additive solutions and advanced materials. Actually, this is supported by increased volumes as well as a positive spread on pricing and mix. Depreciation amounted to €161 million, including the impact of PI, Advanced Materials Consolidation, and that of organic projects startup. As a result, recurring EBIT was flat compared to last year, standing at €246 million, with a fairly stable REBIT margin at 10.3%. Non-recurring items amounted to 62 million euros in Q3. This is composed of 38 million related to a PPA depreciation and amortization, and 24 million euros corresponding essentially to restructuring expenses, startup costs for our Polyamide 11 platform in Singapore, and M&A costs linked to the acquisition of the other business that will be closing soon. Adjusted net incomes to that 168 million euros, which corresponds to a 2.25 euro per share. Looking now at cash flow and net debt, Akema delivered a solid cash flow generation in Q3. Recurring cash flows stood at 190 million euros, which reflects a well-controlled working capital. Actually, working capital stood at 16.4% of annualized sales, which is very similar to last year. And it includes as well a total capital expenditure of 167 million euros in the quarter. For 2024, CapEx are expected to reach a total of 770 million euros. in line with the annual guidance. And if we look ahead, taking into account the slower pace of development that we see on the electric vehicle market, we refined our analysis of potential future capex and plan to reduce our annual capex spend by around 100 million euros compared to what was announced in the capital market day back in September 23. So let's say for 2025, this means the capex spend is expected between 650 and 750. September 24th to that 3.1 billion euros. It includes 700 million euros of hybrid bonds after the 400 million euro outstanding hybrid bond that was redeemed in September 17th. In addition, Arkema continued to refinance its upcoming bond maturities in September and completed the 500 million euro senior bond issue with a 10 million maturity and an annual coupon of 3.5%.

So at the end of September, we have actually an average maturity of our own debt, which stands at 4.3 years. excluding hybrids, and with an average coupon of 2.2%, net debt to last 12 months EBITDA ratio, that's 4 cents at 2 times EBITDA.

Thank you for your attention, and I will now hand it over back to Thierry for your thoughts.

Thank you, Marie-José, for this explanation. As previously said, going into Q4, the macroeconomic environment remains challenging, marked by low visibility, self-demand overall, and the recent shutdown of the auto sector, even if we are not overexposed in this sector. As always, we will focus on optimizing the short term and, at the same time, as we finalize and report on growth projects. Therefore, strict management of operations, of course, capex and working capital will remain among our top priorities in Q4. In this context, as the response of the macroeconomic environment has not materialized yet, which was one of the possibilities, as you know, we envisaged when we guided in July for the full year, we expect to achieve in 2024 an EBITDA at the lower end of the guidance range of 1.53 billion euros. This would mean a full year performance likely above last year. reflecting the stronger in adhesive and the growth in high-performance polymers and coating solution downstream activities, while other activities would show more contrasted performances. Going into 2025 and beyond, we don't know yet what the market conditions will be next year, but we can confirm that Arkema, after several years of resilience in challenging market conditions, will be in a unique position to go, with 12 projects significant projects, nearly fully financed, you know this project well, and this project includes Organic Apex and M&A. They should bring, for the most part independently from the macro, around €100 million of additional EBITDA every year up until 2028, just more than €400 million, to be exact €440 million additional EBITDA At the end of the period, this means in 2028, and you have the detail in the slide presentations. So I thank you very much for your attention, and we are now together with Marie-Josée open to answer your questions.

Thank you. If you wish to ask a question over the phone, please press star 1 on your telephone keypad. If you wish to withdraw your question, please press star 2. Again, please press star one on your telephone to enter the question queue and wait for your name to be announced. Our first question comes from the line of Tom Riskelwurst of Bargain Stanley. Please go ahead.

Thank you, Terry, Maria, for your presentation. Terry, just to come back to that last point, You talk about €100 million of EBITDA growth on average for the period as we think to 2028. Can we just expand a little bit further on that in terms of So in 2025, we shouldn't have the repeat of the German outage. Is that going to cost you €30 million? And then how should we think about net cost inflation? Can you balance cost pressures with cost savings in 2025? That's my first question. My second question is, Clearly, it's just a little bit more detail on the HPP performance. Within the auto picture that you're describing, specific on EVs, is it that Europe's weaker and Asia's stronger and it's net balanced? Or on aggregate, it's still a negative? And is there a big margin differential between Europe you selling HPP products to Chinese EVs over European EVs. Thank you.

Okay, so to be clear on 25, and we were not guiding on 25, it's still not the topic today, we were telling you which contribution we should expect from a selection of major projects that you know, which is described on the presentation on page 16, which is just a confirmation of what we already presented, I think, during the summer. So you have 12 projects, organic CapEx and still the ramp-up of three acquisitions, one which is more old, which is Ashon, which is still ramping up, and another one which is expected for the end of the year. So the message there was to say, if you take these 12 identified projects, both organic and acquisition, okay, they should be nearly fully financed at the end of 2024. So the cash... from 25 to be spent for this project will be, I think, 100 million around, okay? But then the EBITDA will come. So for the acquisition, the EBITDA has already started. For example, Ashland and some will be new, like for Dow. And for the organic capex, we should raise this year. We gave it for 60 million, I think. We should be a bit below, okay, but we should be close to that. So most of the contribution will come from 25. So what we say is that if you take this 12 project nearly fully financed at the end of 24, we should expect an addition of 440 million euros which will be built step by step over the years for 28. This means that the contribution of this project should be if you divide by four, it should be more or less like now, around 100 million additional EBITDA for 2025 coming from this project. So it's not linked to any other points, whatever cost inflation or no one from the side or whatever. These kind of elements are the elements which will be part of the guidance for 2025. But as you know, we should start to guide at the end of next year when we publish the full 24 results. So I was a little bit long, but to clarify, I was mentioning what you should expect, which I think is unique in this industry, this contribution which is significant from projects which would have been nearly fully financed at the end of 24. Now, in 25, cost pressure versus pricing, I think we have demonstrated our ability every year to be in terms of raw material evolution that we don't know. And by the way, to be at least at par every year, hopefully to have a little bit of positive pricing every year. So we'll see for next year. But this is what we have demonstrated so far. I think we have managed... more broadly, raw material rather well. Despite the volatility, I think we have been able to adapt to different environments for raw material over the years, and we should be able to do so in 2025. With regard to I think if it was your question was specifically with my feeling, today most of the EV is in Asia. including China, Europe, and the U.S. is just starting. And so I would say the majority, the large majority of ourselves are from the time in Asia, but our intention is to step by step to benefit from the ramp up in this component depending on the speed that we don't know that they will have. In Q3 more specifically I would say that the topic is Malaysia, because Europe has not yet very much developed, nor the U.S., even if we have a lot of contacts. And what we say is that in Asia, in EV, in Q3, we had less traction. as we had in the first part of the year, that's all. But maybe, I will tell you, the country in Q1 2025 is still very volatile, you know. But I think at the end, the EV, at least for Asia, will continue to be positive next year and the years beyond.

Thank you very much, Thierry. Very clear. Thank you. You're welcome.

The next question comes from the line of Emmanuel Matou of Odo. Please go ahead.

Hello, Thierry. Hello, Marie-José. Four questions for me, please. First, why Q4 should be slightly down for EBITDA? Because despite an already challenging environment, Q2 and Q3 were up. Is it related to the recent deterioration of market conditions in automotive? Second, do you intend to step up your investment in the US following Donald Trump's likely victories? Are you already well balanced between your revenues and your industrial production? in this country, the US. Third, how do you explain the strong volatility per quarter for intermediates? And my last question, why is there no improvement of your working capital compared to last year in percentage of sales? It is a priority for you. Thank you.

Okay, the third question on the intermediate was what?

How do you explain the strong volatility per quarter for intermediate?

Ah, OK. So on the Q4, first of all, if you make the math, it should still be quite a solid Q4. Last year, we had, it's not specific to automotive, whatever. We are not overexposed in automotive. You can automotive, certainly we have a little bit of effect in the HPP, but I would not make a case there. No, it's just that last year we had in refrigerants, so in intermediates, we had, maybe it comes also to your last point, which is the point, your third question, we had last year quite a good refrigerant business in the Q4, which is a little bit atypical, because normally the seasonality is quite low in refrigerant. And this year we should be more normalized, so you can expect maybe, I don't know the exact number yet, but maybe 15 million euros less in refrigerant business in the last quarter, so it's one explanation. And you have still a little bit of our site in Germany where we had 8 million and we should have a number close because we stay 59 in total for the semester we had only 8 in the third quarter so we should have maybe 7 6-7 in the second quarter so all in all it makes a the difference with last year. But again, you know, if you take out last year, if you look at the long history, including before COVID, we should be above where we were in the past before COVID. So it should be a solid but not at the same level as we had last year, which was specifically robust. With regard to the investment in the EU, I think your question is a little bit of a paradox to me, because... We are now in the U.S. North America is getting close to 40% of our KMSL thanks to our investment.

We are investing in two major ones, three major ones, Nutrien, 233ZD,

And the DNDES in the U.S. just starting really to ramp up significantly next year. So I think we are full speed in the U.S. and we continue to be full speed. For us, there is no question that we will continue to invest in the U.S. because we believe in this part of the world. We have been able to have a relative stability year after year, which is quite a good achievement, I can tell you, because the nature of this business So we have been able, despite all that, to be rather, not perfectly stable, but rather stable in intermediate. Now, per quarter, the volatility is inherent to the business. So you can have a stronger quarter than a lower quarter, but at the end, the year is rather stable, and this is what we target. So I have no comment. It's more the nature of intermediate. But don't forget that 92% of our sales are now specialty materials where you don't have this kind of volatility. So we should appreciate that. Working capital, I will ask Marie-Josée to... Okay.

So as I mentioned, in fact, you know, working capital is very comparable in terms of percentage of sales to last year. You know, the normative level we target is around 15%, which we normally try to reach by... So for me, frankly, no major change in our management of this metric inside the company. This being said, it's fair to say that we were probably having a better track record in H1, and we were probably a little bit surprised by some, let's say, disappointing September months. which contributed to this ratio basically being at the same level as last year. But for me, this metric remains a key point of attention of the company, and therefore there should be a significant contribution of working capital in Q4.

Okay, that's very clear. Thank you very much.

The next question comes from the line of Aaron Ciuccarelli of Berenberg. Please go ahead.

Hello. Good morning, Terry. Good morning, Mary-José. I have three questions. So my first one goes back to slide 16. And if I compare it to your slides from the Capital Market Day, basically you reduce the capital by around $100 million per year. But it's totally been reduced by $10 million from $650 to $640. And the reason is because if you understood correctly, you basically have this project already financed. But when I look at the capex for the next few years, the $650 to $700, there should still be an element of growth there because your maintenance capex should be something around $550. So what kind of growth should we expect from this element of growth in your CapEx? And also, maybe, can you tell us if you are still expecting 40 million contributions from new projects in the second half of this year? My second question goes back to your footprint. So when I look at your global footprint, you have around 150 plants with a majority, let's say, 40%. in Europe, despite your sales contribution from the whole continent has decreased from 50% to 34% over the last few years. So, what's the competitive advantage to keep the strong foothold in the region? And would you expect this to remain like that in the future? My final one is on coding solutions. With this strong pricing, strong volumes, what's really preventing a margin to expand? Thank you.

Thank you for this various question. So, on the South France, thank you for recognizing that we are very consistent with the market day. The reason why, in fact, we said the EBITDA change is not so big, the first reason was is that, first of all, we still plan to deliver and to deliver well on our different projects, which will be reassuring for you. And the second one is that a part of the CAPEX, which was not identified yet, but which was in the envelope of the CAPEX, was ramping up from 27. So you were in the middle of the So when you look at the ratio, it's not completely right, because when you start to spend with new CAPEX, you start to spend in, I would say, in 26, 27, 28. You start to deliver more in 28, 29, 30, et cetera. So you have only a partial benefit from these projects. With regard to the project contribution in H2, So we say 40 million should be more close to 30 million. So this means that for the full year, not 60, but more 50, 55, still to be confirmed. The only reason being it's not the technical ramp-up of the CAPEX. It's just that, as we mentioned, the second half is... a little bit soft in the macro. There is no rebound, and because of that, we have a little bit less of contribution of this. But at the end, it changed nothing about the momentum we expect, as I confirmed when I talked about the 440 million and the 100 million for around 100 for next year. When you say 150 sites, you should not forget that a big part of these sites are linked to adhesives, to Bostik. And so you have some sites they make, you have 20 persons, you have 40 persons, because they are very local. So you remove a site, you have no business anymore. So it's important if you want to continue. In Europe, we were, in terms of sales and footprint, quite heavy. And when we started Arkemon, now it's something which is more balanced. There is still certainly some work to do in terms of foothold, but depending on the evolution of the element, we are quite flexible on that, as we have ever been, and we review our footprint all the time. When you see 150, a big part of them are in Europe, Don't forget that the mix is different, the presence of Bostik is still quite robust in Europe, and it's an advantage because we are quite profitable with Bostik in Europe. So we should not, let's say, consider that because we have sites in Europe, it's a disadvantage. I think we try to have a state-of-the-art site in Europe, and when we are not, we see what we have to do in order to improve or in order to reduce our food freight. In coating solution, the only thing which is present in the margin to improve is really the low cycle in the upstream. So with this kind of low-demand environment, it's difficult to offer axillic acid, axillic monomer, high margin. And I would even say that the margin we have delivered so far in the year is relatively good compared to the context. So now, to do more, it's easy. We have 100 million of euros of energy there, which is missing from the cycle in acrylics in Europe and U.S. So you have to consider it as an exercise for the mid-term.

That's great.

Thank you very much.

The next question comes from the line of Chetan Udeshi of JP Morgan. Please go ahead.

Thank you for taking my questions. Thanks again for your slide about the contribution from projects. It's very useful, as always. I'm just struggling a little bit. You know, you said previously to one of the questions that, you know, the contribution this year is a bit lower because of the macro context. And if I look at the volumes of Verkema and try to compare versus 2019, and I know you don't run the business on volumes, you know, that's fair, but In your materials business, we are still 10% lower than 2019 organic. I'm just trying to tie these things together. On one hand, you've been investing in projects, but yet your volumes are lower than 2019. So how do we square that and how do we see the growth in terms of the business in general from an organic perspective? perspective and the second question was just more a clarification which is if I look at your R&D historically has ranged between 60 to 70 million per quarter I think for some reason this quarter it was 47 so just curious what is what has changed in that line in Q3 thank you so on the first one

I think you forget, or maybe it's not included in your question, the evolution of the mix, which is considerable. Our pressing power has been very significant over the period because we have adapted to the world as it was changing. So we had some line with volumes down and some line with volumes up. Where we invest, and I see the rationale of your question, but where we invest are businesses on which we have had growth since 1990. so on which we are sold out. So we invest in order to continue to grow. Okay? And then it comes back to the question previously of Aaron, is that what we do is that ongoingly we review our footprint of our site because on certain sites, We have lost volumes because the world has changed. I mean, the world is permanently changing, and the DNA of our teammates, that changes. So we try to, even if we don't, are too visible on that and make too much noise, we permanently review our footprint, reorganize our sites, and in order to cope for those sites who have lower volumes since 2019, and on the other side, where the business line is really developing stronger, We invest, and this is why you have this special thing, where all the businesses which are mentioned are businesses on which we have very significant growth. So the mix between 19 and between... And this is why we are able to deliver a comparable level of EBITDA in a far less favorable macroeconomics with lower volume in 23-24 than 1960 because the mix has considerably improved and in fact we have spent with higher value in average. Hopefully I was clear. And on the R&D expenses, maybe Marie-Josée, you want to comment? So actually, you probably noted that there are phenomena in the GNA, so in fact, there have been 20 million swings in terms of classification of various items between those two lines, but clearly it will be corrected back in Q4, so no...

Thank you.

The next question comes from the line of Georgina Fraser of Goldman Sachs. Please go ahead. Hi. Good morning, Terry. Good morning, Mary-José.

It's one long question and also a bit of a follow-up to Aaron's question on quoting solution margins.

So today you've already got very impressive margins in adhesives. You're very close to your 2028 target already. You're still 400 bits short in advanced materials. And if I mechanically take the $100 million in EBITDA that you said is missing from the cycle in coaching solutions, then that means you're kind of already at the 16% target or 17% target that you have for 2028. So my question is, is there anything that is over-earning in adhesives, or do you actually see upside to your 2028 target given what you've already achieved today? and what's needed in advanced materials to deliver that extra 400 basis points. Thank you.

Thank you, Georgina, for your question. I would say in additives, we should be close this year to 15.5%. It's more 15.5% than 16%. And normally, if we work well, we gain half a point a year. And we say we target 17%. So this means that we should reach the 17 in three years, which takes us to five, six, seven in 27, maybe instead of 28. So there is maybe one year difference, we'll see. But don't forget that we will integrate DAO. for which it's a low-cost acquisition, which is very good, certainly a very strong payback, but it will take a little bit of time. It will take a little bit of margin down at the beginning, okay? So because of that, we lose a year, okay? We try to be stable next year and then to go up again. So if you factor this, you go exactly in 28 at 17%. Obviously, if we can do better, we'll do better. But for us, it's very clear. And because of the how, we lose the year. So we lose the year, but with the project, we're very attractive. OK? For HPP, frankly speaking, if you look at the quality, a big part of the projects which are based on organic effects are for HPP. So if you factor this project in HPP, it will be easily... at the 2028 target, which was discussed at the Capital Markets Day. So for us, I would not say it's a no-brainer, but frankly speaking, I would be disappointed if we are only at 23% in 2028 for this business. Advanced materials, in fact. And then there was the last question. No, that was it. It was just a really long one question. You had something on coding. I was saying... Do you have a comment or a question?

It was just a comment. It was saying from this cycle gets you to the target. So all very clear.

Thank you. Okay. Thank you very much.

The next question comes from the line of Joe Hare of UBS. Please go ahead.

Good morning. Thank you for the presentation. I'm just wondering if we could talk a little bit about your exposure in autos, whether or not you'd be willing to sort of split that down between sort of EVs, hybrids, ICAs, and also comment on recently what you're seeing in autos at the moment.

So on O2, I think we have no problem to differ on O2.

We are around 7% of our cells in O2, alpha-V being in EV, and alpha-V being on traditional health. Yeah, me too. We don't make the split between EV and hybrid, but given the conception of our products, they are far more in pure EV than in hybrid. I would say it's mostly EV, even if we have some good cells in hybrid. But I put EV hybrid together and thermal on the other side, and I would say it's half-half, and not exactly the same product lines. Now, by region... My region, I would say the majority, less than half, but the bigger region is in Asia. And then it would be split equally between U.S. and Europe. Okay.

Okay, thank you.

The next question comes from the line of Jaideep Pandiya of Onfield Research. Please go ahead.

Thank you. Sorry to ask you this, but on the intermediates, can you tell us how is the path for quotas looking like in the US and in China? And what should we really expect from this division in the next couple of years to come? Do you think that stability around the 200 plus minus level is sort of the level of EBITDA we should be thinking even as volumes go down. Second question really is around Bostik. I think this was asked before, but in the current margin, which is phenomenal, is there any sort of price versus raw material

benefit you're getting or is this going to continue to progress into 2025 given the product mix is improving and you will have probably synergies from DAO as well.

And then the last question really is

on the PI Advanced business. I know it's a public company, but what are you seeing with regards to the product pipeline, given now we are seeing clearly electronics and marketing improving? So could you give us some information around this, and also,

you know on the legacy electronics exposure of arkema and how you're trying to combine the two and achieve synergies thanks a lot okay so with uh in terms of this quickly uh mostly a topic in US and Europe and more than China for us. Okay. The idea on the evolution of it goes down progressively rather slowly over the years. So we will lose every year for the coming years. It could be a slow decrease, but you have to know that The fluorogas, or specialty fluorogas, low HFO, are specialty fluorogas and are part of the HPUP. So all in all, Our fuel gas business is in good shape. It's growing. But by nature, the refrigerant part, which is intermediate, will continue to decrease in the coming years at a reasonable rate. On the other hand, I would say that we try to get incremental net positive pricing every year.

Most of the story of BOSIC, and we expect that from the team, is with more volume driven.

We have invested a lot for the volume, both in R&D and in certain selected CapEx. So the team is doing a good job on that, but we expect them to ramp up quicker. And back to the point of what we have lost against 2019, we believe that there is a little bit of growth. We should come with some recovery of business that we have lost after COVID or during COVID, and that we should get back in the coming year or so. More volume story, but still a little bit, but more incremental, positive net pricing, year after year, as much as we can, but far more limited than when we have had in the past years. With regard to PAM, as you can see, we have some good expectations from electronics. It was quite strong in Q2. Q3 was more moderate, but still quite solid. Q4 is a low season, so it should be less than that. So now it's really linked to what we can expect from the launch of the big consumer electronics company. Hopefully, there will be a success. It's too early to say, so we'll see. I would say the strategy of Arkema, as we have mentioned when we bought Pyarm, is certainly to benefit from the strength in electronics. and to expand it more geographically. But I would say we want to diversify their business portfolio, certainly in batteries where they have some position, but we want to accelerate their position with the development of GEV. And also it's more industrial business. where they are rather weak and where we can bring a lot. So the PR story will not be far from being a pure literary story. On the contrary, we have plenty of other cards to play that we start to play by putting the teams together. I think I answered your question, Philippe.

If I may follow up on PVDF, one of your key competitors will ramp up plant, I guess, towards the end of next year in Europe. And there have been delays on the US side. When you look at PVDF as a product, and you know this product very well for the last decades,

What is the outlook from your point of view with regards to the capacity you have? Do you want to optimize the mix and not invest in fresh CapEx or Do you think that on a 10-year review, there is a need for fresh cap, especially in the U.S.? And therefore, we could expect an announcement from Arkema over the next six months on PVDF. On PVDF, as I mentioned many times, our strategy, I mean, the cost of the market, which was 7% in the old time, has with EV nearly doubled. Okay, the message we pass is that we don't want to double our growth. We want to stay with what it was by focusing on the high end of the range. And because of that, we continue in terms of CapEx to do what we have been doing in the past 20 years, which is from time to time to add a new reactor with some amount of money which is reasonable. So we'll see humanity, but certainly there will be investment in the US, maybe again somewhere in Asia. maybe in Europe, I don't know, but we are quite pragmatic on that. And the idea is really to go step by step with incremental investment from time to time in order for us to be able to deliver this 7% average growth for PVDF worldwide.

Thanks a lot.

The next question comes from the line of Ranulph or of CTE. Please go ahead.

Hi. Morning. Thanks for taking the question. I'd actually just like to go back to the project, please. And apologies if I missed this, but my question is really what gives you the confidence that you can still deliver this linear ramp-up in earnings contribution, given the macro. I mean, the demand environment, autos, EVs, is well below kind of where we hoped it would be back in the end of 2023. So why has the ramp not become a lot more back-end loaded? Thank you.

No, thank you for the question. It's a fair question. In fact, it's not one project. It's a sum of 12 projects. which intervene in different areas, so I will not comment them all, but for example, if you take HF with NITRI-M, it's a back integration, so this is mechanical, it's not linked to the macro. The HFO-1233-ZD is linked to a new legislation in fluoro gas, so it's NITRI-M. I would not say it's mechanical, but I mean it's not linked to the macro again. For maybe a third one, and we'll stop on this, for the biofuel in the U.S., even if we take conservative assumptions because of the macro, This is the key trend, which is not dependent too much on the macro. This is really the development of the biofuels, and the DMDS is a key element of this. Then we have another one, which is more for green energy in China. We have no doubt that it will continue. You can have some quarters, which are better than others, but it will continue. The way we position these web projects are for, we are not immune to the macro, but we already took some baffles when we published the forward 40 million. We think it is still quite a solid assumption, and by taking a line of progression of 100 million per year. I think we are confident. But the main reason why is that it is supported by Megatrans. It's a project by project. Every project is different. They have all their rationale. And we... We have also superior technology, which outperforms current technology. So I would say these are some elements that I could share with you.

Great. Thank you very much. You're welcome.

The next question comes from the line of Matthew Yates of Bank of America. Please go ahead.

Hey, good morning everyone. Thanks for taking the questions.

Perhaps they're going to be from Maria, as I would imagine, but it's clear that Arkema's in a very well-invested business with your cap expense. We'll talk on this call about the contribution from the new projects. Can I ask you

sort of the operating expenses and the part of the cost base. You have taken what we might call contingency measures over the last 18 months or so Would you describe those as temporary savings and they need to be reinvested in the business as we go into next year?

Or is that a more permanent thing that you can reduce the cost base on? I ask because it's an issue that Avonic have had today. The second question, so not the most exciting one, but it's just around taxes. I don't think we've had the opportunity to discuss any impact in the French market from potential tax changes.

Can you just remind me, given sort of your deferred losses, whether or not that's going to impact the tax rate of the group going forward? Thank you.

Okay, I will let my José answer on the second one. It depends really on the, and we'll see where we stand early next year on the macroevolution. We, clearly there is always arbitration between reducing costs in certain areas, reinvesting for growth in other areas. We try to do that as much as we can. But clearly, we'll continue to dig in and to review all our operating expenses to see if we find a further potential savings. As you know, we have announced already at the Capital Markets Day, and it's still alive, this $250 million on five years split between fixed costs and variable costs. So your question is more, can we do more than that? And clearly this year we have saved more than the $50 that we had in mind with some temporary savings that should come back next year. But on the other side, we are working on some other ideas. So it's permanent, let's say, analysis that we are doing with the teams. It's true that we are a little bit less visible in what we are doing than other companies. This is our style. You know us since many years now. But it doesn't mean that we are more shy than them at all. I think it's part of our day-to-day and our duty. to implement new savings all the time. So we are really on this matter, and we have new things which will come to offset at least one of that we had this year on top of the 250 that we have mentioned. So now I will ask a little question for the...

Regarding the 2045 finance bill that is actually not finalized, which is the caveat of my answer,

But at this point, what we see from a corporate tax standpoint is that there should be no effect on Arkema corporate tax rate.

We have indeed numerous tax policies that we can utilize in France and other limited profitability in that market.

The second

aspect would be the social charges. So we are assessing the different measures. I would also think there should be a limited effect of those proposed measures at this point. We assess something like 3-4 million euro impact next year depending on the bill that we pass or not.

I'm a bit too confident, but what I should say is that we fight to try this reform vision, but we are not the only company in France to fight against it, clearly. And anyway, the topic of Europe is beyond that because there is quite a gap in competitiveness in the current years in Europe versus Asia and the U.S. or Europe. among other companies, passing the message in order to not just to attack, but also to continue to reduce what has been done in the past years in order to improve the competitiveness of our operations, mostly in in France, but there is still a long way. This is why we have a tendency in Europe to focus on high-value products, otherwise it's difficult to get positioned in a competitive way on the things which are more commoditized. Okay, thank you.

The next question comes from the line of Alex Stewart of Barclays. Please go ahead.

Hello. Good morning. Thank you for taking my questions, and thanks for the discussion. Just wanted to clarify, the $100 million on upstream acrylics as the cycle normalizes, that's presumably the European, US, and Chinese business? Or is that just developed markets? I'm just curious on that. And then on PI. Could you talk a bit about how the redistribution of cash flow will work? You're a majority shareholder, but there are still minority shareholders. Will the company continue to pay dividends as it did in the past? Will you push for a higher redistribution of dividends? I'm trying to figure out how the cash flow comes back to Arkema. We'll be very interested in your views on that. Thanks.

Okay, so I will let the second one. I will take the first one. I mean, what I said before is that it's the 100. We could get it for most part of it, let's say, U.S., Europe. If you include China, it could be a bit more, but let's say this is the order of magnitude. In fact, you can see the worldwide, let's say, It may be 120 if you take the free region, but it's an order of magnitude. What does it mean normalization? But we are there, okay?

So regarding the PI... So we own 54% of the company, so it's fully integrated in our books, and then you will find basically the minority shareholders portion just above net income. So in terms of cash, we're not guided on the different patterns, let's say, compared to historical trends. been severely impacted by the slowdown of the electronics industry.

There has been a stop in any development, also due to the fact that there was a pretty ambitious

a capex plan that they had to digest. So this had reduced the dividend distribution. Going forward, it could basically resume. But at this point, we don't have a change in patterns for the shareholders, the historical shareholders of QAM.

So, no indication that, you know, they visited their policy. Thank you. So, we have the last question. Mr. Lenaf, there are no more questions. Okay.

Okay, so thank you to all for your questions and for the quality of the discussion. And don't hesitate if you have any further questions to contact directly Beatrice and the team. Okay, thank you very much. Have a good day.