Arkema S/Adr

Welcome to Arkema's first half 2025 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 one on your touchtone telephone. I will now hand you over to Terry Lenhoff, Chairman and Chief Executive Officer. Sir, please go ahead.

Thank you very much. Good morning, everybody. Welcome to Arkema's second quarter 2025 results conference call. Joining me today are Marie-Josée D'Ancien, our CFO, and the Investor Relations team that you know well. To support this conference call, we, as usual, posted a set of slides, which are available on our website. As always, I will comment on the highlights of the quarter, and then we'll let Marie-Josée go through the financials. And at the end of the presentation, as was said before, we'll be available to answer your questions. In Q2 2025, as you know, the macroeconomic environment was challenging with an increasing wait and see attitude of customers. This was no doubt reinforced by the uncertainty and lack of visibility around trade tariffs. As a result, the weakness of the demand has persisted through the quarter, impacting notably the U.S. and Europe. Asia, on the other hand, continues to be well-oriented from what we could see. The second quarter was also marked by an unfavorable evolution of exchange rates with the weakening of the U.S. dollar against the euro, as well as other currencies, such as the Korean won. All this is neither specific to Arkema nor something new to you, but it's important to mention this to start with. This context and these headwinds had, of course, an impact on our financial performance, but overall, Arkema reserves ended up relatively well with a slight decline in volumes, a robust EBITDA margin of 15.2%, and a solid cash generation on the quarter. This was supported by the good resilience of our adhesive solutions and high-performance polymers, demonstrating the quality of our portfolio and the work carried out in the last two years to deeply transform and strengthen Arkema. EBITDA was nevertheless lower year-on-year at €364 million for the quarter, reflecting mostly on top of the FX headwind, the decline in refrigerant gases, already well-flagged in Q1, but improving quarter-on-quarter, as well as a low cycle market condition in upstream acrylic directly impacted by the current macro. Looking briefly at the performance of specialty material segment. Adhesives had a very decent quarter, with an EBITDA slightly down compared to last year, despite the continued pressure of volumes. This performance of BOSIC was supported by the ongoing work on efficiency and our strict price discipline, enabling us to mitigate the wind demand environment in industrial adhesives, in particular, North America. On the other hand, construction business was slightly better in Europe and Asia, with a good momentum in efficient buildings. The integration of DAO is progressing well and contributed incrementally to the segment's result. In advanced materials, volumes were strongly up 6% in the quarter with growth in most businesses. High-performance polymers delivered yet again solid performance. They benefited from our significant footprint in Asia over many years and from our high value-added new business development in differentiated materials serving fast-growing markets such as sports, batteries, 3D printing. On the other hand, Elida was impacted by unfavorable geographical mix and overall weaker market conditions in performance additives. The margin of the advanced material segments remain overall then at a good level, close to 20%. Lastly, in coatings, the unit margins in atrium acrylics remain challenging, while the volume in downstream were disappointing, especially in North America. affected by the weakness of construction in this region. Therefore, the performance of the segment was significantly lower than last year. To adjust to the challenging environment, ARCEMA implemented also significant cost-cutting measures across the organization and tightly controlled working capital in CAPEX. Thanks to these specific initiatives, and I would like to highlight the hard work of the team, The group was able to offset fixed cost inflation over the quarter and generated a robust level above €110 million of recurring cash flow, which was not a given in the context. In parallel, the fundamentals of the group, as you know, are very solid. The megatrends beyond the short-term challenges will continue to drive the growth of the global economy, so it's important to continue to work on the long term and to be prepared for better times of the world economy. From this standpoint, one of our first priorities remains to ramp up our major projects, those which have been financed in the recent years. They are, as you know, centered on innovative material and focus on key growth markets such as electric mobility, sustainable lifestyle and goods, advanced electronics, and efficient buildings. We are now starting up our new capacity for additive in the U.S. for refining and biofuel just now. as well as the expansion of our organic peroxide in China for renewable energy. Besides, as anticipated, I am happy to confirm that our new green field plant in Singapore for biosource polyamide 11 is reaching the breaking point. And as announced at the beginning of July, we have decided to invest in a new unit of red sample transparent polyamide on this same site. expected to be operational quite quickly in the first quarter of 2026. This last investment represents a limited capex of around $20 million that will triple Arkema's global production with a very attractive payout. This will also contribute to our strategy to develop local supply close to our customers in this region. This comes on top of the new capacity which was recently announced. It was in February in the U.S. for PVDF. which is also scheduled to be completed by mid-2026, and this will enable us to follow market development and answer the increasing demand for locally manufactured PVDF in energy storage systems, semiconductors, cable markets, and other natural markets of PVDF. This was for my introduction. We 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. Good morning, everyone. So, starting with revenues at 2.4 billion euros, quarterly sales were down 5.6% year-on-year, impacted by a negative 3.3% currency effect. This reflects the weakening of the U.S. dollar against the euro and that of most other currencies, including the Chinese yuan, the Korean won, and the Mexican peso. Volumes came in slightly down at 1.3%, mainly due to an overall weak demand environment in Europe and North America. On the other hand, several markets continued to grow in high-performance problems, especially in Asia. The price effect was a negative 2.5%, reflecting the unfavorable geographic means, the evolution of certain raw materials, as well as the market conditions, in particular in extreme acrylics. Continuing with profits, Q2 EBITDA came in at €364 million, impacted by the decreased contribution from the refrigerant gases, as well as a decline in cutting solutions, while adhesives and advanced materials were more resilient. Q2 EBITDA included also an unfavorable currency effect, estimated at around €15 million. Half is dollar-related. The other half is from all other currencies. Depreciation and amortizations stood at 166 million euros and included the amortization of new production units, which started during 2024. This leads to a recurring EBIT of 198 million euros and a rebate margin of 8.3%. Non-recurring items amounted to 82 million euros. They include 34 million euros of PPA amortization and 47 million euros of one-off charges, notably restructuring costs, linked to the reorganization of hydrogen peroxide sites in France. Financial expenses stood at 34 million euros, reflecting mainly the increased cost of our bonds and the low interest on invested cash. Consequently, 42 adjusted net income stands at 118 million euros, which corresponds to a 1.56 euro per share. Moving on to cash flow and net debt, Arkema delivered a very solid cash flow generation in quarter two. Recurrent cash flows stood at 111 million euros, reflecting a well-controlled working capital. The working capital ratio actually stands on annualized sales at 17%, which is comparable to last year. I'd like to thank the teams to have been able to strictly manage the level of stocks in a difficult-to-predict environment. Total capital expenditure amounted to 151 million euros in line with our guidance of annual cap expense of 650 million euros for the full year 25. Net debt and hybrid bonds at the end of June 25 amount to close to 3.6 billion euros, including 1.1 billion euros of hybrid bonds. Since a new 400 million euro hybrid was issued in May, refinancing the upcoming maturity early 26th. The net debt to last 12 months EBITDA ratio now stands at around 2.5 times. Thank you for your attention, and I'll now hand it over to Thierry for the office.