Arkema S/Adr

Welcome to Arkema's full year 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 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 very much. Good morning, everybody. Welcome to Arkema's full-year 2025 results conference call. With me today are Marie-José, our CFO, and the Investor Relations Team. As always, the slides used during this webcast are available on our website, and together with Marie-José, we'll be available to answer your questions at the end of the presentation. In 2025, The macroeconomic environment was, as you know, particularly challenging, probably one of the most difficult our industry has faced in the last 20 years. The second part of the year, in particular, was marked by subdued demand across many end markets, the slowdown in the U.S. while Europe remained at low levels. This reflected ongoing cautiousness of economic actors as well as tight end inventory management and many of our customers. On the other hand, Asia continued to be the most dynamic region for the group, in particular China, where we could see an acceleration in certain sectors like electric mobility, advanced electronics, and sustainable consumer goods as well. As you could expect in this context, the group focused on its fundamentals of customer proximity and innovation while strengthening its cost and cash initiatives. The teams have been fully mobilized on a daily basis to best address the environment and strictly control the operations. As a result, we generated a high level of cash at 464 million euros, well above our revised guidance of 300 million euros. This performance was also better than last year's level despite the significant EBITDA decrease. EBITDA stood indeed at 1.25 billion euros with a margin of 13.8%, so close to 14%, not living up to our expectation at the beginning of our year, but not different from what most of our peers have experienced. We were able to offset fixed cost inflation and delivered around 90 million euros of fixed and variable cost savings in 2025, nearly doubling our initial annual target set at CMD. This work will be pursued in 2026 as we strive to offset against the inflation, and we should therefore be able to deliver the 2028 cumulative cost savings target of 250 million euros two years in advance. As you can see in slide 7, the group has launched a number of new initiatives to make the organization even more efficient, leading to more than 2% headcount reduction in 2025, and we anticipate the further reduction of around 3% per year over the next few years. Our performance continues to be supported by several of our key attractive markets, namely batteries, sports, 3D printing, healthcare, and new generation fluorospecialties, with low global warming potential, which benefited from strong dynamics with sales of 16% year-on-year. These markets will continue to grow in the future and contribute to the ramp-up of our major projects listed on slide 5. These projects delivered around 60 million euros additional EBITDA in 2025, and we expect this trend to continue in 2026. The group will benefit from the ramp-up of the recent investment in the U.S. and Asia, successfully started in 2025 and early 2036, namely our new 1233 ZD and DMDS unit in the U.S., as well as the recent clear transparent polyamide capacity downstream of the polyamide 11 plant in Singapore. In addition, our investment in PVDF in the U.S. is planned to start up in the first half of 2026, increasing our capacity by 15% in the region. PIAM should continue to benefit from the launch of new smartphones, notably foldable and ultra-thin models, in which polyimide is becoming essential to answer their higher requirements in terms of reliability and thermal management. TIAM should also start benefiting from successful diversification into new high-end applications in industry markets. After this important wave of organic projects offering significant room for growth mid-term, Arkema will further reduce its capex envelope to €600 million in 2026. This level will enable the group to continue investing in targeted projects with high returns and fast payback. We did not only focus on the very short term, but continued to build Arkema for the future by developing strategic partnerships with leaders in their domain in order to strengthen our positioning in key markets such as batteries or sports. Maintaining our efforts in R&D is key in order to stay differentiated and accelerate our growth in high-end applications. We stay focused on sustainable innovation. We leverage our competencies by collaborating with startups. Hulu in carbon capture is a good example. Coming back to our 2025 EBITDA performance outside of the negative currency impact, the low cycle in upstream acrylics and the decline of old generation refrigerants explained most of the decrease. The rest of Arkema's business was far more resilient, but this performance to a certain extent was overshadowed by these other activities. That's why, in order to improve the reading of the group's results, we have decided to implement a new segmentation starting in 2026 to better highlight the distinct dynamics and business models of the resilient and fast-growing platforms within specialty materials compared to the most cyclical and large-scale industrial activities which will be regrouped in a new segment called primary materials. The global acrylic monomer business will be included in this new segment. This business has been much more volatile in recent years than it used to be, as you can see in slide 21. However, looking back since the acquisition of our American asset in 2010, this activity has been tremendously cash-generative, largely contributing to fund the growth portfolio transformation over the past year, so we will continue to leverage our strong industrial and commercial position in acrylics to generate solid cash generation and capital returns over the cycles. The new segmentation will also bring more visibility to our next-generation low-GWP solution for air conditioning, which we have actively managed to enhance our prospects. They will now be integrated into the fuel specialties portfolio and will benefit from accelerated growth in applications like heat pumps and data centers. On the other hand, all-generation refrigerants that have been a highly profitable and cash-generative business since 2020 – probably exceeding potential proceeds from a disposal, will join the primary material segment. While this business will quickly fade over the coming years, Arkema will benefit on the other end and within the specialty materials from the ongoing growth of the load GWP solution, generating substantial value. I believe this new segmentation will provide the financial community with greater transparency on Arkema's portfolio business rivals and specialty materials performance. Finally, I think it's important, I also want to quickly highlight some of our CSR results where we made again strong progress and achieved quite good performance in 2025. This is a case for our climate plan where the group's numerous initiatives to reduce its carbon footprint are paying off. We reduced our Scope 1 and 2 emissions by 48.7% at the end of 2025, compared to 2029, fully in line with our target, and we have also decided to strengthen our water reservoirs and introduced a new target on waste treatment, another key priority for Arkema. Given the strength of the group's balance sheet, the board decided to propose a stable dividend of €3.60 per share to the annual general meeting, despite the challenge at home, which is a sign of confidence, both in the quality of the portfolio and in the relevance of the strategy. Thank you for your attention. I will now hand over to Marie-Josée, who will review in more detail the financial results before I come back to discuss the outlook with you.

Thank you, Thierry, and good morning, everyone. As commented by Thierry, 2025 was a challenging year, starting with revenues of 9.1 billion euros, still to about 5% earlier in the year, impacted by a negative 2.9% currency effect, reflecting mainly the weakening of the U.S. dollar against the euro, but also from other currencies, including the Chinese yuan and the Korean won. The scope effect at plus 1.6% reflected the integration of Dow's laminating adhesives, Volumes were down 1.6%, reflecting the overall weak demand environment in Europe and North America, as well as a tight inventory management by customers in the fourth quarter. On the other hand, we continued to benefit from a positive dynamic in Asia, and more particularly in China, mainly driven by high-performance polymers. Price effect was a negative 2.1%, impacted essentially by the acrylic cycle and by the refrigerant gases that are transitioning from old to new generation. Other activities showed a more limited price decrease of 0.8% in a context of declining costs of raw materials. The group EBITDA came in at 1.25 billion euros, including 40 million euro negative currency effect. Let's mention first Q4. which is a seasonally low quarter. The declining EBITDA in the fourth quarter reflected the overall weak demand environment in Europe and in the U.S., as well as the strong destocking due to tight year-end inventory management at our customers and ourselves, actually, which impacted particularly our adhesives and advanced material segments. Looking now at the full-year performance by segment, Adhesives margin came in at around 14% if we exclude the dilutive effect of Dow's laminating adhesives business, still in its integration phase. Foliere Vita reflected the weak demand in industrial adhesives and the slowdown in the U.S. in the second half, notably in flexible packaging, transportation, and construction. Bust-in performance continues to be supported by our ongoing work on efficiency and our price discipline. Advanced materials resisted well with a broadly stable volume of prices, delivering an EBITDA margin of 17.9%. High-performance polymers in particular showed a 10% organic growth on the year, supported by new business developments in batteries, sports, and 3D printing, and the ongoing positive dynamic in Asia. The segment CBDA was nonetheless impacted by the negative currency effect, by an unfavorable mix in performance additives, as well as by lower volumes in Europe and in U.S. In coatings, EBITDA was impacted by the low cycle conditions in the upstream acrylics, as well as by the weak demand environment in coating markets. Construction and decorative paints markets in Europe and U.S. were subdued. The performance of the segment was therefore significantly lower than last year, despite the resilience of downstream activities. Lastly, intermediate EBITDA was mostly impacted by the decline in refrigerants in the first half of the year, while acrylics in Asia improved slightly. The group recurring EBIT amounted to €564 million, which corresponds to a recurring EBIT margin of 6.2%. It takes into account €687 million of recurring 6% depreciation, higher than last year due to the integration of DAOs laminating adhesives. and to the starting amortization of new production units, which came online during 2025. Non-retiring items amounted to 276 million euros. They include 144 million euros of PPA depreciation and 132 million euros of one-off charges, notably the restructuring costs linked to the hydrogen peroxide site in France. Financial expenses stood at minus 125 million euros The increase versus last year reflects the increased interest cost of our bonds on one hand and the lower interest on invested cash on the other. All in all, adjusted net income amounted to €328 million, which corresponds to €4.34 per share. Moving on to cash and debt. Arkema delivered a strong cash flow generation, with recurring cash flow standing at 464 million euros. This reflects our continuous initiatives to tightly manage our working capital. Working capital ratio on annualized sales reached 12.5% on EBITDA, and the EBITDA to operating cash conversion rates stood at 88%. Our spend in capital expenditure amounted to €636 million, below the level of our recurring depreciation in Vienna. Retail flow amounted to €390 million, including a non-recurring outflow of €74 million, linked essentially to research ring costs. Taking into account these elements, Arkema net debt and hybrid bonds were slightly down at €3.2 billion, which includes the €1.1 billion of hybrid bonds. The group continues to enjoy a strong balance sheet with a net debt to last 12 months EBITDA ratio of 2.5 times. Note that our 2026 maturities were all pre-financed in 2025. The 300 million euro outstanding hybrid bond issued in January 2020 was redeemed in January 2026. So our portfolio of hybrid bonds at the end of this month, end of Jan, is back at 800 million euros. I hand it over back to Thierry now.