Arkema S/Adr

Good morning, this is the conference operator. Welcome and thank you for joining the Arkema first quarter 2026 results and outlook conference call. As a reminder, all participants are in listen-only mode. And after the presentation, there will be an opportunity to ask questions by pressing star and one at any time. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Thierry Le Hannaf, Chairman and Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good morning, everybody. Welcome to Arkema's Q1 26 Results Conference Call. Joining me today are Marie-Josée Doncion, CFO, and the Investor Relations Team. As always, to support this conference call, We have posted a set of slides which are available on our website. I will comment the highlights of the quarter before letting Marie-Josée go through the financials. And at the end of the presentation, we'll be available, as usual, to answer your questions. In the continuity of 2025, market conditions remained soft into January and Feb 2026 before improving in March. Regional trends were contrasted, with demand continuing to be subdued in Europe and in the US, while Asia showed again solid momentum across several of our end markets. In addition, the quarter was once more affected by the depreciation of the US dollar compared to last year, while this impact is expected to be more limited from the second quarter onwards. End of February saw the outbreak as the conflict in the Middle East, which started to impact global supply chains and quickly led to a sharp rise in certain raw materials, as well as in energy and logistic costs beginning in Asia. So, in this complex environment, Arkema delivered stable volumes year on year, a solid performance in the context. This was particularly driven by specialty materials, whose volumes increased by 1.5%, supported by a strong pickup in March. All specialty material segments were up. Coating solutions benefited notably from better dynamics in UV-turing resins. Advanced materials posted solid growth in key extractive markets for high-performance polymers. Adhesives were supported by durable goods and some limited improvements in construction. This volume performance also reflects Arkema's continued momentum in high-growth pockets, with volumes up 15% in attractive end markets such as batteries, sport, 3D printing, and healthcare. Batteries once again deliver strong growth supported by the rapid expansion of energy storage systems, a key additional driver for the group, particularly within high-performance polymers. As a result, Q1 EBITDA came in slightly above expectation, reaching 283 million euros, up 14% versus the fourth quarter of 2025, supported by an improvement in March. EBITDA was nevertheless down year on year, primarily impacted by a significant negative currency effect of around 20 million euros and the absence of rebound in the US and euro so far. Besides, advanced materials experienced a slow start to the year, in line with the trend observed in Q4. However, momentum improved in March, and Q2 should be up sequentially, supported by HPP. I would also like to underline the good performance of cutting solutions, which improved its EBITDA margin by 100 basis points, supported by a more favorable product mix. Additive solutions delivered a significant sequential improvement, despite being down year on year. On the other hand, primary material increase earnings, likely year on year, mainly driven by legacy refrigerants in the U.S. In actually, the improving spread in Asia came late in the quarter and so had only a limited impact, while the business in Europe and the U.S. continued to be challenging, particularly in January and February. However, from today's perspective, it is fair to assume that the actual spread should improve in Q2, with the magnitude still to be confirmed. As you can expect, all teams are fully mobilized to effectively and swiftly manage the current economic and geopolitical challenges. In the first quarter, we have set fixed-cost inflation at constant currencies, and we are well on track to achieve this objective for the full year, supported by a number of cost-cutting initiatives. Turning to the Middle East crisis, the group is reacting swiftly to mitigate supply chain disruption, both in terms of raw material availability and more important, input cost inflation. Pricing adjustments have been initiated to assess the increase in raw materials, energy, and logistic costs, while actions deployed selectively by product, market, and geography. This has required close and continuous coordination with both suppliers and customers. Price increases will become visible in future. Arkema's well-balanced geographical footprint to serve customers predominantly from their region is worth mentioning as a good advantage in the current environment. So far, we have been able to navigate this crisis without any supply disruption. Moreover, Arkema remains focused on executing its major growth project. The group is currently finalizing the completion of its new PVDF capacity in the U.S., scheduled to start mid-year. This will add 15% additional capacity in the region to meet growing demands for locally manufactured PVDF, particularly for energy storage systems, semiconductors or cable applications. In parallel, the group also announced a further 20% capacity expansion at its PVDF plant in China, set up to start in 2028. Also, the new unit of real-time clear downstream of our PA11 in Singapore started up successfully at the beginning of the year and is expected to support HPP earnings momentum from Q2 onwards, driven by capacity growth. I would also like to underline the strong first quarter performance of PIAM. EBITDA was up more than 30% year-on-year in local currency, with a 35% EBITDA margin. As highlighted during our last call, QIAM continues to benefit from good momentum, driven in particular by solutions for foldable and ultra-thin smartphones, as well as its expansion into higher-end applications. We expect this positive trend to continue into the second quarter, with robust share-on-your-self growth. In addition, Arkema's tight discipline in its capital allocation will deliver the solid performance with regard to working capital management This contributed to recurring cash flow coming in better than last year. This performance also reflects lower CapEx, fully in line with our 600 million full-year CapEx target. I will now hand it over to Marie-Josée for a more in-depth look at the financials by segment before we discuss the outlook at the end of the presentation.

Thank you, Thierry, and good morning, everyone. Arkema's Q1 revenues at 2.2 billion euros were down 8.4% year-on-year. They were impacted by a negative 5.1% currency effect, reflecting mainly the weakening of the US dollar against the euro compared to Q1 last year. Volumes came out broadly stable year-on-year, supported by a strong month of March after a relatively soft start of the year. The price effect was a negative 3%, reflecting essentially the lower selling price environment compared to Q1 2025, in line with the progressive decrease in raw material costs observed in 2025. Q1 EBITDA came in at 283 million euros. The currency effect represented a negative of around 20 million euros. Looking at the performance by segments, Adhesive solutions achieved an EBITDA of 89 million euros. It reflected on top of the currency impact the seaweed demand in North America and Europe. Volumes grew significantly overall or slightly less overall, supported mainly by Asia. This performance was driven mainly by adhesives for durable goods with an improvement in aerospace and heavy truck markets in North America. On the other hand, packaging remains soft and construction was better oriented, especially in Europe. In advanced materials, the EBITDA stood at 139 million euros. Apart from the currency effect, the EBITDA was essentially affected by the unfavorable product and geographical mix. Market conditions in much of the quarter were similar to what we observed in Q4 last year. which means that the continuing weak demand in the US and in Europe, while Asia continues to show a positive dynamic. Coating solutions delivered a good performance in the context, with an EBITDA stable compared to last year at €51 million. Volumes were up 3%, driven mainly by strong growth in Asia, in particular in UV curing resins. The EBITDA margin improved by 100 bps at 13%, benefiting from our development in higher value-added applications. Lastly, primary materials. EBITDA was slightly up at 33 million euros, especially supported by a good performance in legacy refrigerants in the US, while acrylic monomers stayed in the low cycle conditions in most of the quarter. Depreciation and amortization stood at 165 million euros, leading to a recurring EBIT of 118 million euros and a rebate margin of 5.4%. Non-recurring items amounted to 45 million euros. They include 34 million euros of PPA depreciation and 11 million euros of one-off charges, notably some restructuring and reorganization costs. Financial expenses. through that minus 29 million euros. The increase versus last year reflecting mainly the cost of carry of a pre-financed green bond issued end of 2025. Consequently, the Q1 adjusted net income amounted to 65 million euros, which corresponds to 0.86 euros per share. Moving on to cash flow and net debt, Q1 recurring cash flow amounted to minus 95 million euros, which included The first quarter, classical working capital seasonality. The working capital ratio on annualized sales stands at 16.3%, which is better than a year ago. Total fiscal expenditure amounted to 75 million euros in the quarter, which is in line, again, with our guidance of annual cap expense of 600 million euros for the full year 2026. Net debt and hybrid bonds. at the end of March 26, amounted to 3.3 billion euros. The net debt-to-last-12-month EBITDA ratio stands at 2.8 times. Thank you for your attention, and I'll hand it over to Thierry for the outlook.