Arkema S/Adr

Good morning, everybody. Welcome to our CHEMAS full-year 2024 results conference call. With me today are Marie-Josée Doncion, our CFO, and also 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 available to answer your question at the end of the presentation, as usual. In 2024, Arkema delivered a solid set of results within the range of the full year guidance we gave a year ago, and in a macroeconomic environment that you perfectly know, which eventually remains challenging throughout the whole year. In this context, our teams demonstrated their commitment and their agility, working actively to manage the short term as best as possible, and also continuing to implement with a high level of execution the major projects which will contribute to accelerate the growth of the company in the future. I know many of you are already focused on 2025 and we'll talk about the outlook later, but it's important to appreciate the robustness of our 2024 performance. We proved again to be among the most resilient in our industry. as the slide number six of the deck shows, and this in very different types of environment. This indeed values the strategic and operational work we have accomplished over the past several years. So here are some key points of last year I'd like to share with you. First of all, the group delivered the growth with an EBITDA of 1.2%. 53 billion euros in 2024, up 2% year-on-year. This result was driven, first of all, by the adhesive solution segment, which has increased its EBITDA by more than 8%, reaching a record high EBITDA margin of 15.1% to be compared with 14% a year ago. This quite encouraging performance was delivered in an overall low-volume environment, like for all our business, reflecting all the work done on the value pricing, the strict management of operations, and also the benefit from recent synergies, including Ashland, which is a good illustration of the one-Archema combined approach, in this case applied on pressure-sensitive adhesives. Secondly, the advanced material segment delivered a robust 20% EBITDA margin with significant improvement potential ahead and primarily supported by the overall good growth of high-performance polymers. The main drivers last year were the innovation and new business development in applications linked to sustainable megatrends, for example, in sports and in batteries, Also, PRAMs promising first full-year contribution and the expansion for more efficient building of fluorospecialties with low emissive impact. On the other hand, performance indices were down, but this was compared to high base last year and impacted by the year before and impacted by a few technical hurdles like the millennium flooding of our site in Lisbon. Concerning cutting solutions to constructed views, downstream activities improved compared to last year, in particular thanks to our strong development in Asia, namely in electronics and industrial cuttings market. But this was offset by upstream acrylics, low cycle condition, which we experienced in Europe and U.S. You have more detail on this segment in the press release and in the slide, and I will be certainly happy to answer any of the questions you may have on the last year's performance. Another highlight of the year was our EBITDA margin, which tended at 16.1%, slightly up compared to last year. This figure illustrates the strength of the specialty materials portfolio we have built over the years, focusing more and more on high-performance, sustainable solutions. It's also the result of our value pricing and our strict discipline on operational costs. Thanks to our cost-cutting initiative, we have been able to offset around half of the inflation, which was rather high last year, in line with our target to achieve €250 million of annualized cost savings, both fixed costs and variable costs, by 2028. has also benefited this year from its well-balanced geographical footprint. Each of our main regions now represents more or less one-third of our sales in Asia, with our fastest-growing region in 2024. So we have reached the balance we wanted to reach, one-third, one-third, one-third. This underlines the acceleration of the group in the most dynamic region, which will be further supported by the progressive contribution of our major growth project, essentially located in Asia and North America. Most of you already have this project well in mind, but as a reminder, we put that list on the slide 11 of the deck, and you will notice that we added the PVDF expansion in the U.S. that we announced yesterday. You may have also some questions. We reviewed several options. as indicated during our 2023 CMD with regard to PVDF in the U.S. And finally, we have decided to take a wise and step-by-step approach to match market development. We start with a 15% capacity increase in our second-largest PVDF site in the world, a high-return project with a limited investment of $20 million U.S., which will enable us to follow the evolution of the demand for innovative PVDF grades, notably in heavy and semiconductor markets. Among these major projects, let me highlight also the ramping up of our Singapore plant for biosource polymer, the new 1233 ZD unit in the U.S. that is starting just right now, the PM acquisition, which should deliver another strong growth in 2025, supported, for example, by the promising development of ultra-thin films for smartphones, and finally, the DAO acquisition, which was closed end of last year, and whose integration so far is starting well. They are all quite attractive from a financial standpoint. They leverage Arkema's differentiated positioning and will be supported for a large part by the Megatrends. As importantly, the cash to fund this project has almost being fully spent as of end of 2024. We made a simulation taking into account the ramping up of this project and the demand dynamic of its region expected in the coming years. And as explained in the slide, we could foresee a further evolution of our geographical footprint in the long run, with North America to represent around 40% of our total sales, Asia and the rest of the world around 35%, which Europe could be diluted to around 25% of our total sales. This measure project will contribute up to more than 400 million euros of additional EBITDA in the next four years, as explained in the slide 10 of the deck. 100 million euros of additional EBITDA being the estimate we confirmed for this year. I also wanted to quickly highlight some of our CSR results, where we made good progress overall in 2024. This is the case for decarbonization, where the group's numerous initiatives to reduce its carbon footprint are paying off, for instance, with the signing of new long-term agreements for renewable energy in China and in the US. We are also well ahead of our 2030 target for scope-free emissions, validated by SBTI, So we have decided to strengthen our mission to 67% reduction by 2030 against 54% previously. Another key priority for Arkebar is, as you know, to further increase diversity among the employees, including the share of women in management positions. On this last element, we have decided to increase the target from 30% to 35% in 2030. back on the speed of our progress in the area so far. As a result of our solid financial performance in 2024 and the most confidence in Arkema's growth prospect, a dividend of 3.60 euros per share will be proposed as the next HGM, up almost 3% compared to last year, and in line with our progressive dividend growth strategy. This also represents a payout ratio of 44%, which is fully in line, as you know, with our long-term targets. I will come back to the outlook at the end of the presentation, but now I would like to hand it over to Marie-Josée, who will review in more detail our Q4 and full year results.

Thank you, Thierry. Let me start with the revenues. Arcana Group sales amounted to €9.5 billion in 2024, quite stable year-on-year. In fact, volumes were up. 2.4%, which corresponds to a volume growth of more than 3% in specialty materials in one hand, and a volume reduction in refrigerant gases in line with the quota reductions in the U.S. and Europe on the other hand. In a context of weak demand, specialty materials benefited from more favorable market trends in sports, packaging, batteries, and energy, while construction stabilized at a low point, and automotive faced several destocking waves. Price effect on sales was a negative 3% in line with the evolution of raw material prices overall. The scope effect at 2% reflected essentially the integration of PI advanced materials. And finally, the currency effect at minus 1% reflected the depreciation relative to euro of several Latin American currencies and the Chinese yuan, while in fact the US dollar remains stable in average for 24 compared to 23. As presented by Thierry, the group EBDA came at 1.53 billion, up 2% year-on-year, and our EBDA margins stood at 16.1%, reflecting our efforts to maintain both the solid pricing and cost discipline. Looking at Q4 specifically, Bostik delivered an EBDA of €91 million, quite resilient pricing in a low-volume environment. Advanced materials delivered 166 million, up 11% year-on-year, mainly driven by high-performance polymers in Asia and by PI advanced materials consolidation. Coating solutions Q4 EBDA was down to 54 million euros, impacted by low cycle margins in upstream acrylics, where downstream activities were stabled. And finally, EBITDA in intermediates was down at 24 million euros versus a high comparison base in refrigerant gases in Q4 last year. Please note that we also recorded two specific one-offs in Q4, namely the cost of acquisition of Dow Adhesives for 15 million euros and the IFRS 2 charge linked to the capital increase reserved to employees for 15 million euros also. Both items were reported as non-recurring items in Q4. Now, back on the full year basis, with recurring depreciation and amortization of €637 million in Q4, including the impact of PI advanced materials consolidations and that of organic project startup, the recurring EBIT amounted to €895 million, and this corresponds to a recurring EBIT margin of 9.4%. A world of non-recurring items, which amounted to €155 million for the year. They included €40 million Singapore startup costs, €30 million related to M&A costs, in particular the acquisition of Dow. Some restructuring charges for roughly €25 million, and various provisions, notably regulatory and environmental yields for €30 million. Financial expenses were stable at €73 million, as well as our average tax rate, which remains stable at broadly 22% of our recurring EBIT. All in all, adjusted net income came in at €616 million, which corresponds to €8.23 per share. Moving on to cash flow, we delivered a recurring cash flow of 419 million euros in 24. This included a spend in capital expenditure for a total of 761 million, in line with our guidance and reflecting the ramp-up of our major CAPEX projects. Looking at 25 and further, the group plans for a lower CAPEX intensity, as you know. We indeed expect an annual CAPEX spend comprised between 650 and €700 million over the period of 2025 to 2028. Working capital remains well controlled. The working capital ratio on annualized sales standing at 13.8%. Free cash flow amounted to €358 million, including a non-recurring outflow of €61 million, linked primarily, as you know, to the startup costs of our Singapore platform, as well as some restructuring costs. Taking into account the net cash outflow of 177 million from the portfolio management operations linked to the acquisition of DAOs laminating adhesives, our camera group net debt stood at 3.2 billion euros, including 700 million of hybrid bonds. The group continues, therefore, to enjoy a strong balance sheet with a net debt to last 12 multi-bid buy ratio of 2.1 times. Thank you for your attention. And I will now hand it over back to Thierry.

Thank you, Marie-Josée, for all this explanation. So now I will comment a little bit on the outlook. So as we say in our press release, the demand at the beginning of 2025 is relatively soft overall. Of course, there are some specific areas like electronics, battery, and sports continuing to be well-oriented. As you know, we have a good indicator in the company, which is the adhesives, and this is quite consistent with what our competitors publish in this area. We see some softness where last year it was really very resilient and very performing in a challenging environment. So our interpretation is that the joke Current geopolitical context with all this discussion around the tariff is driving our customer to wait and see, which will not be long-lasting, but this is what we see in this first quarter. So in this context, we guided an EBITDA level in the first quarter slightly below the performance of last year, as you could see, which If we follow the publication of our peers, including this morning, this compares well to them and confirms our stronger resilience. In the rest of the year, beyond the evolution, the clarification of this tariff topic and the evolution of the macro, we will focus on our setup, as usual, and our project, which is really the DNA of the company. And we will benefit from the progressive ramp-up of our major projects and our specialty materials. We should contribute around 100 million euros of additional EBITDA, which is quite significant. On the other side, the intermediate segment EBITDA is expected to decrease by roughly 30 million euros, mostly reflecting the impact of the quota's reduction in refrigerant. On the full year... will benefit from our balance geographical footprint serving the region from the region. So far what we have seen even in the beginning of the year is that our Asia cells are still dynamic. So this is consistent with this tariff story. This is Europe and U.S. which are lagging. But certainly the fact to be so balanced as Arkema is an advantage in the volatile world of today. Besides, we plan to reinforce our initiatives on our operational costs, as we did last year and the years before, and to continue to strictly manage our working capital. So if we take all these elements into account, so we plan to grow this year in 2025, and to reach a level between 1.53, which is the level of this year, up to 1.67 billion euros. The high point of the range, obviously, assumes a notable improvement of the macroeconomic conditions progressively in the year. In terms of cash flow, we wanted to update you. So we plan to significantly increase our recurring cash flow compared to last year to reach around 600 million euros, driven by lower capex. And year on year, last year was... peak year in terms of capex and we guide it to lower capex in 2025. So driven by lower capex, our EBITDA growth and also a free control of our working capital. In parallel, we continue to implement our 2028 roadmap. We have a lot of projects which need to be executed at the highest level of quality. This will help to develop high-performance specialty materials with this focus on sustainability and innovation to answer our customer needs for less carbon-intensive solutions. So this is what I wanted to comment with regard to the outlook, and thank you for your attention. And together with Marie-Josée, we are ready to answer your questions.