AKE Arkema

• A very good year end, driving an excellent full-year performance for 2017 and demonstrating the rationale of the Group’s strategy
• €8,326 million in sales, up 10.5% on 2016, with 8.9% organic growth
• EBITDA up 17% to €1,391 million, led by strong growth for all three of the Group’s divisions
• EBITDA margin at 16.7% (15.8% in 2016)
• Adjusted net income up 42% to €592 million, representing €7.82 per share (€5.56 per share in 2016)
• Very strong cash generation, with €565 million in free cash flow and a significant reduction in net debt to €1,056 million (versus €1,482 million at 31 December 2016), i.e. 0.8 times 2017 EBITDA
• Proposed dividend increase from €2.05 to €2.30 per share

Regulatory News:

The Board of Directors of Arkema (Paris:AKE) met on 21 February 2018 to approve the Group's consolidated financial statements for 2017 and the annual financial statements of the parent company. At the close of the meeting, Chairman and CEO Thierry Le Hénaff stated:

“Our very good performance in 2017 reflects the quality of our underlying strategy and the strength of the growth projects for our specialty businesses. We largely exceeded the medium-term financial targets we set ourselves in 2014, with close to €1.4 billion in EBITDA, excellent cash generation and a low level of debt.

The Group is reaping the benefits of its successful innovations for advanced materials meeting our customers’ high demand for lighter materials, new energies, 3D printing and consumer goods as demonstrated by our ranking, for the seventh consecutive year, in the Top 100 Global Innovators by Clarivate Analytics.

With Bostik, we have created a leading growth platform in adhesives, which currently represents almost a quarter of our overall sales. Bostik is proving all its potential, with its EBITDA up by more than 50% since it joined Arkema three years ago.

Lastly, our intermediate chemical businesses achieved an excellent performance supported by a very solid environment and the development and productivity initiatives undertaken since several years.

Arkema has demonstrated over the past three years and in different types of operating contexts, the quality of its portfolio of businesses with one of the best growth rates in its industry.”

2017 KEY FIGURES

(In millions of euros)     2017     2016    

Year-on-yearchange

Sales     8,326     7,535     +10.5% EBITDA     1,391     1,189     +17.0% EBITDA margin     16.7 %     15.8 %       Recurring depreciation and amortization     (449)     (455)     -1.3% Recurring operating income (REBIT)     942     734     +28.3% REBIT margin     11.3%     9.7%       Depreciation and amortization related to purchase price allocation*     (45)     (38)     N/A Other income and expenses*     (52)     21     N/A Operating income     845     717     +17.9% Adjusted net income     592     418     +41.6% Net income – Group share     576     427     +34.9% Adjusted net income per share (in €)     7.82     5.56     +40.6% Weighted average number of ordinary shares     75,682,844     75,201,739      

* In the consolidated income statement, “Depreciation and amortization related to the revaluation of tangible and intangible assets as part of the purchase price allocation process” is now recognized in “Operating expenses”. For 2016, other income and expenses were restated to reflect this reclassification.

2017 BUSINESS PERFORMANCE

Sales totaled €8,326 million in 2017, up 10.5% on 2016. At constant exchange rates and business scope, the increase was 8.9%. Volumes, which were 2.4% higher year on year, significantly increased in High Performance Materials (+4.4%) driven by Asia, the Group’s innovation drive and the start­up of new units. The price effect was positive for all three divisions with a positive 6.5% price effect overall. This reflects the actions taken by the Group to raise selling prices in specialty businesses (which accounted for 71% of Group sales for the year) and positive market conditions in intermediate chemical businesses (which contributed 29% to the Group’s total sales figure1). The scope effect added 3.3% to sales and included the contribution of Den Braven as well as the impact of the divestment of the activated carbon and filter aid business and the oxo alcohols business. The currency effect was a negative 1.7%, primarily due to the appreciation of the euro against the US dollar.

Broken down geographically, North America represented 32% of Group sales, Europe 38% and Asia and the rest of the world 30%.

At €1,391 million, EBITDA reached an all-time high, up 17% year on year and largely exceeding the €1.3 billion target that the Group set itself in 2014 for 2017. All three divisions reported EBITDA rises despite higher raw materials costs than in 2016. This performance was led by Bostik’s growth, with in particular the contribution of Den Braven, the benefits of sustainability innovations and new manufacturing units for advanced materials, excellent results from the Industrial Specialties division, improvements in the acrylic cycle and operational excellence initiatives.

EBITDA margin increased to16.7% from 15.8% in 2016, in line with the Group’s medium- and long-term targets.

Recurring operating income amounted to €942 million compared to €734 million in 2016, in line with EBITDA increase. It includes €449 million in recurring depreciation and amortization, which was overall stable compared to 2016 (€455 million). REBIT margin, which corresponds to recurring operating income as a percentage of sales, rose to 11.3% from 9.7% in 2016.

At €845 million, operating income was up 18% year on year. It included €52 million in net other expenses, roughly half of which stemmed from the consequences of hurricane Harvey in the United States and the remaining half from restructuring and acquisition costs. It also included €45 million in depreciation and amortization related to the revaluation of assets carried out as part of the Bostik and Den Braven purchase price allocation processes.

Financial result represented a net expense of €103 million, unchanged from 2016.

Income taxes represented a net expense of €162 million in 2017 versus a net €193 million expense in 2016. Excluding exceptional items, the tax rate corresponded to 26% of recurring operating income, down significantly on the 29% rate for 2016 due to the more balanced geographic split of the Group’s results in 2017. The income tax expense figure comprises various exceptional items, including a one-time €36 million gain with no cash impact arising from the adjustment of deferred taxes following the decrease in corporate tax rate announced in the United States. In view of the Group’s strong position that it has built up in the United States and based on its 2017 results, Arkema will benefit with the US tax reform from an estimated tax saving representing around 6% of its adjusted net income, which will reduce its tax rate to around 23% of recurring operating income. This tax saving comes at a time when the Group is substantially increasing its capital expenditure in the United States.

Net income – Group share rose sharply to €576 million from €427 million in 2016. Excluding the post-tax impact of non-recurring items, adjusted net income came to €592 million, representing €7.82 per share (up 41% on 2016).

In line with the Group’s dividend policy, the Board of Directors has decided that at the Annual General Meeting of 18 May 2018 it will recommend increasing the dividend to be paid entirely in cash from €2.05 per share to €2.30, representing a payout rate of almost 30% of the Group’s adjusted net income. Shares will be traded ex-dividend on 25 May 2018 and the dividend will be paid as from 29 May 2018.

2017 PERFORMANCE BY DIVISION

HIGH PERFORMANCE MATERIALS (46% OF TOTAL GROUP SALES)

(In millions of euros)     2017     2016    

Year-on-yearchange

Sales     3,830     3,422     +11.9% EBITDA     632     570     +10.9% EBITDA margin     16.5%     16.7%       Recurring operating income (REBIT)     474     416     +13.9% REBIT margin     12.4%     12.2%                  

Sales generated by the High Performance Materials division totaled €3,830 million, up 11.9% on 2016. The scope effect was a positive 8.0%, reflecting the integration of Den Braven and the CMP business within Bostik as well as the divestment of the activated carbon and filter aid business. At constant exchange rates and business scope, year-on-year sales growth was 5.9%, led by a 4.4% increase in volumes. Volumes rose for all the division’s businesses, driven in particular by very high demand in Asia for lighter materials, new energies (batteries and photovoltaics) and consumer goods (sports and consumer electronics) as well as by the contribution of the new specialty molecular sieves unit in Honfleur (France). The price effect was a positive 1.5%, reflecting the actions undertaken by the Group to raise its selling prices. The currency effect was a negative 2.1%.

At €632 million, EBITDA increased 10.9% year on year, supported by strong volume momentum for advanced materials (Technical Polymers and Performance Additives), as well as by Bostik’s growth fueled by the integration of Den Braven and the benefits of first synergies. This strong rise was achieved despite the significant impact of higher costs for certain raw materials and the stronger euro versus the US dollar.

At 16.5%, EBITDA margin held firm compared with the 16.7% margin for 2016.

INDUSTRIAL SPECIALTIES (31% OF TOTAL GROUP SALES)

(In millions of euros)     2017     2016    

Year-on-yearchange

Sales     2,545     2,316     +9.9% EBITDA     585     473     +23.7% EBITDA margin     23.0%     20.4%       Recurring operating income (REBIT)     411     300     +37.0% REBIT margin     16.1%     13.0%                  

Industrial Specialties sales were up 9.9% year on year to €2,545 million. At constant exchange rates and business scope, sales growth was 11.3%, driven by a 9.6% positive price effect reflecting higher prices for certain fluorogases particularly in Europe and Asia, and positive market conditions in the MMA/PMMA chain. Volumes were 1.7% higher than in 2016, driven mainly by good demand in Thiochemicals. The currency effect was a negative 1.4%.

At €585 million, EBITDA increased 23.7% year on year and EBITDA margin reached 23% in a market boosted by robust global growth and a more intense environmental policy in China. Against this backdrop, the division’s results reflect the return of Fluorogases to a very good level of results, a tight supply/demand situation in the MMA/PMMA business, and a solid performance by Thiochemicals and Hydrogen Peroxide.

COATING SOLUTIONS (23% OF TOTAL GROUP SALES)

(In millions of euros)     2017     2016    

Year-on-yearchange

Sales     1,924     1,771     +8.6% EBITDA     244     208     +17.3% EBITDA margin     12.7%     11.7%       Recurring operating income (REBIT)     135     83     +62.7% REBIT margin     7.0%     4.7%                  

At €1,924 million, sales for the Coating Solutions division rose 8.6% on 2016, led by a 12.1% positive price effect thanks to a better acrylic cycle as well as measures taken to raise selling prices across the entire chain. Volumes were generally stable year on year (edging down just 0.4%), as higher volumes in the division’s downstream businesses offset the impact in the Acrylics business of maintenance turnarounds. The divestment of the oxo-alcohol business resulted in a 1.5% negative scope effect and the currency effect was a negative 1.5%.

The division’s EBITDA amounted to €244 million, up 17.3% year on year, and EBITDA margin rose to 12.7% from 11.7% in 2016. As the Group expected, unit margins for acrylic monomers gradually improved from the low points seen in 2016, and were positioned in 2017 between the low and mid point of the cycle. This more than offset the impact of higher input costs on downstream businesses.

CASH FLOW AND NET DEBT AT 31 DECEMBER 2017

In 2017, Arkema generated a high level of free cash flow (which corresponds to net cash flow excluding the impact of portfolio management), with a year-on-year increase of €139 million to €565 million (€426 million in 2016). This increase reflects the significant rise in EBITDA and tight control of working capital despite a context of rising raw materials costs. At 31 December 2017, the ratio of working capital to annual sales reached a record low at 13.1% compared with 14.5% at 31 December 2016 (excluding Den Braven which was acquired in late 2016). This ratio, which was positively impacted by the appreciation of the euro, mainly reflects the continuing implementation of a strict operational discipline and the optimization drive conducted in several businesses.

The free cash flow also includes €431 million in recurring capital expenditure 2 (representing 5.2% of Group sales) as well as €10 million in exceptional investments for the initial work undertaken as part of the project to double thiochemical production capacity in Malaysia.

In 2018 Arkema expects capital expenditure to amount to around €550 million, corresponding to recurring capital expenditure representing around 5.5% of sales and to exceptional investments for the specialty polyamides project in Asia and the thiochemicals project in Malaysia presented at Arkema’s Capital Markets Day in July 2017.

Finally, free cash flow also included €54 million in non-recurring expenses, primarily relating to the consequences of hurricane Harvey in the United States and restructuring costs.

Free cash flow excluding exceptional investments represented 41% of EBITDA for 2017, thus exceeding the Group’s target of a 35% EBITDA conversion rate into cash. This performance is in the top range for the industry as a whole.

Portfolio management operations represented a net cash outflow of just €5 million in 2017, with the impact of the purchase of the assets of CMP Specialty Products in the adhesives business almost entirely offsetting the effect of the divestment of the oxo alcohols business.

Cash flow from financing activities totaled €192 million in 2017 and included a bond issue for a total net amount of €891 million, the repayment of a bond that had reached maturity for a net amount of €494 million, the payment of a €2.05 per-share dividend totalling €155 million and a €33 million coupon paid on a hybrid bond.

At 31 December 2017 net debt stood at €1,056 million, down significantly on the €1,482 million net debt figure at 31 December 2016. The Group’s gearing decreased to 24% from 35% at end-December 2016 and net debt represented 0.8 times EBITDA for the year. In accordance with IFRS standards, these figures exclude the hybrid bond.

KEY FIGURES FOR FOURTH-QUARTER 2017

(In millions of euros)     Q4 2017     Q4 2016    

Year-on-yearchange

Sales     1,957     1,852     +5.7% EBITDA     283     243     +16.5% High Performance Materials 131 116 +12.9% Industrial Specialties 120 87 +37.9% Coating Solutions     44     41     +7.3% EBITDA margin 14.5% 13.1%

High Performance Materials

14.4%

13.8%

Industrial Specialties

19.8%

15.3%

Coating Solutions

   

10.1%

   

9.3%

      Depreciation, amortization and impairment     (118)     (119)     -0.8% Recurring operating income (REBIT)     165     124     +33.1% REBIT margin     8.4%     6.7%       Adjusted net income     115     68     +69.1% Net income – Group share     137     86     +59.3% Adjusted net income per share (in €)     1.52     0.90     +68.9%  

In the fourth quarter of 2017, sales rose 6.7% year on year to €1,957 million at constant exchange rates and business scope. The price effect was positive for all three divisions with a positive 6.7% price effect overall. This reflects the actions taken by the Group to raise its selling prices for specialty businesses as well as continuously positive market conditions for intermediate chemical businesses. Despite a 4% increase in volumes for advanced materials, volumes for the Group as a whole remained overall stable against the high basis of comparison of the fourth quarter of 2016, particularly in the Coating Solutions division. The scope effect was a positive 3.7% and included the contribution of Den Braven as well as the impact of the divestment of the oxo alcohols business. The currency effect was a negative 4.7%, primarily attributable to the stronger euro versus the US dollar.

Against this backdrop EBITDA was up 16.5% to €283 million and EBITDA margin reached 14.5% compared to 13.1% in fourth-quarter 2016, despite much higher raw materials costs in fourth-quarter 2017 and the stronger euro versus the US dollar. This performance was led by higher volumes for advanced materials, the benefits from Den Braven’s integration and first synergies, as well as a very good performance from the Industrial Specialties division.

The High Performance Materials division delivered a good performance in spite of higher raw materials costs and the stronger euro. At €909 million, the division’s sales rose 8.3% on fourth-quarter 2016, led by a 9.3% positive scope effect, mainly related to the integration of Den Braven and CMP. At constant exchange rates and business scope, year-on-year sales growth came to 3.5%, driven by a 4% increase in volumes for advanced materials driven by Asia and innovation. EBITDA came to €131 million, up 12.9% on fourth-quarter 2016, reflecting the strong sales rise.

The Industrial Specialties division achieved another very good quarter, with sales up 6.7% year on year to €606 million. At constant exchange rates and business scope, the increase was 11.7% led by a 13.3% positive price effect, with a positive price effect for all of the division’s businesses. At €120 million, the division’s EBITDA surged 37.9%, supported by increases across all of the division’s businesses and reflecting the continuing tight market conditions for the MAM/PMMA chain as well as good results from the Fluorogases business despite the usual year-end seasonality.

The Coating Solutions division reported a slight increase against a high basis of comparison in the fourth quarter of 2016, especially for Asia. At €437 million, Coating Solutions sales were generally stable versus fourth-quarter 2016, edging down just 0.7%, with a 2.1% negative scope effect following the divestment of the oxo alcohols business. At constant exchange rates and business scope, sales rose 6.3% on the fourth quarter of 2016, thanks to a 9.0% positive price effect. EBITDA increased by 7.3% to €44 million, with better margins for acrylic monomers in Europe and the United States more than offsetting the impact in downstream businesses of higher input costs.

POST BALANCE SHEET EVENTS

In line with its strategy of continuing to expand in adhesives, on 2 January 2018 Bostik acquired the assets of XL Brands, a leader in floor covering adhesives in the United States. This transaction, based on a US$205 million enterprise value, will enable Bostik to offer a full range of solutions for this growing high added-value market. The Group aims to reduce the EV/EBITDA multiple paid from 11 times to 7 times within four to five years and after implementing synergies.

In February 2018, Arkema announced a 25% increase of its global polyamide 12 production capacities. This new capacity will be added at Arkema’s Changshu platform in China and is expected to come on stream by mid-2020. This investment of a few tens of millions of euros will support the strong demand in growing applications such as cable protection, lighter materials in automobiles, high performance sports shoes and consumer electronics.

OUTLOOK FOR 2018

In 2018, demand in the three main geographic regions should remain well oriented and the environment characterized by a marked strengthening of the euro versus the US dollar 3 and higher and volatile raw materials costs.

Against this backdrop, the Group will benefit from its strong innovation drive in advanced materials, from Bostik’s growth with the integration of XL Brands and from a market environment expected to remain globally robust for its intermediate chemical businesses. It will continue to implement its major manufacturing projects, as presented during its Capital Markets Day, for thiochemicals, specialty polyamides, fluoropolymers and Sartomer.

Lastly, the Group will continue its actions to pass on in its selling prices the continuous rises in raw materials costs as well as the rollout of its operational excellence initiatives to partly offset inflation on its fixed costs.

Supported by a good start of the year and this strong internal momentum and despite the euro’s current strength, Arkema is confident in its ability to increase its EBITDA in 2018 compared to the excellent performance achieved in 2017.

Further details on the 2017 results and outlook are provided in the "Full year 2017 results" presentation available on Arkema’s website at www.finance.arkema.com

The consolidated financial statements at 31 December 2017 have been audited, and an unqualified certification report has been issued by the Company's statutory auditors. These accounts and the statutory auditors’ report will be available at end-March in the Company’s reference document which will be posted online on Arkema’s website at www.finance.arkema.com

FINANCIAL CALENDAR

3 May 2018      

Publication of 1st quarter 2018 results

18 May 2018 Annual General Meeting 1 August 2018

Publication of 1st half 2018 results

6 November 2018

Publication of 3rd quarter 2018 results

 

A designer of materials and innovative solutions, Arkema shapes materials and creates new uses that accelerate customer performance. Our balanced business portfolio spans High Performance Materials, Industrial Specialties and Coating Solutions. Our globally recognized brands are ranked among the leaders in the markets we serve. Reporting annual sales of €8.3 billion in 2017, we employ around 20,000 people worldwide and operate in some 50 countries. We are committed to active engagement with all our stakeholders. Our research centers in North America, France and Asia concentrate on advances in bio-based products, new energies, water management, electronic solutions, lightweight materials and design, home efficiency and insulation. www.arkema.com

DISCLAIMER

The information disclosed in this press release may contain forward-looking statements with respect to the financial position, results of operations, business and strategy of Arkema. Such statements are based on management's current views and assumptions that could ultimately prove inaccurate and are subject to risk factors such as (but not limited to) changes in raw materials prices, currency fluctuations, the pace at which cost-reduction projects are implemented and changes in general economic and financial conditions. Arkema does not assume any liability to update such forward-looking statements whether as a result of any new information or any unexpected event or otherwise. Further information on factors which could affect Arkema's financial results is provided in the documents filed with the French Autorité des marchés financiers.

Balance sheet, income statement and cash flow statement data as well as data relating to the statement of changes in shareholders' equity and information by business division included in this press release are extracted from the consolidated financial statements at 31 December 2017 as reviewed by Arkema’s Board of Directors on 21 February 2018. Quarterly financial information is not audited.

Information by business division is presented in accordance with Arkema's internal reporting system used by management.

Details of the main alternative performance indicators used by the Group are provided in the tables appended to this press release.

For the purpose of analyzing its results and defining its targets, the Group also uses the following indicators:

• REBIT margin: recurring operating income (REBIT) as a percentage of sales.

• free cash flow: net cash flow from operating and investing activities excluding the impact of portfolio management.

For the purpose of tracking changes in its results, and particularly its sales figures, the Group analyzes the following effects (unaudited analyses):

• business scope effect: the impact of changes in the Group’s scope of consolidation, which arise from acquisitions and divestments of entire businesses or as a result of the first-time consolidation or deconsolidation of entities. Increases or reductions in capacity are not included in the scope effect.

• currency effect: the mechanical impact of consolidating accounts denominated in currencies other than the euro at different exchange rates from one period to another. The currency effect is calculated by applying the foreign exchange rates of the prior period to the figures for the period under review.

• price effect: the impact of changes in average selling prices is estimated by comparing the weighted average net unit selling price of a range of related products in the period under review with their weighted average net unit selling price in the prior period, multiplied, in both cases, by the volumes sold in the period under review.

• volume effect: the impact of changes in volumes is estimated by comparing the quantities delivered in the period under review with the quantities delivered in the prior period, multiplied, in both cases, by the weighted average net unit selling price in the prior period.

1 Acrylics, Fluorogases and PMMA.2 Excluding exceptional capex and capex relating to portfolio management.3 10% increase in euro / US dollar exchange rate has a €(50) m EBITDA impact (translation).

ARKEMA Financial Statements

Consolidated financial statements - At the end of December 2017

CONSOLIDATED INCOME STATEMENT                

4th quarter 2017

End of December 2017

3rd quarter 2016

End of December 2016

(In millions of euros)     (non audited)     (audited)     (non audited)     (audited)   Sales

1,957

8,326

1,852

7,535

  Operating expenses*

(1,559)

(6,467)

(1,504)

(5,926)

Research and development expenses (59) (235) (57) (222) Selling and administrative expenses (185) (727) (177) (691) Other income and expenses*     (32)     (52)     13     21 Operating income     122     845     127     717 Equity in income of affiliates 1 1 1 8 Financial result (25) (103) (28) (103) Income taxes     40     (162)     (16)     (193) Net income     138     581     84     429 Of which non-controlling interests     1     5     (2)     2 Net income - Group share     137     576     86     427 Earnings per share (amount in euros)** 1.37 7.17 0.7 5.24 Diluted earnings per share (amount in euros)**     1.36     7.15     0.69     5.22

* Depreciation and amortization associated with revaluation of tangible and intangible assets for allocation of the purchase price of businesses previously included in “Other income and expenses” (see note C4 “Other income and expenses”) have been reclassified as “Operating expenses”.** From 2017, in accordance with IAS 33, the earnings per share and diluted earnings per share are calculated based on net income (Group share) less the net-of-tax interest paid to bearers of subordinated perpetual notes (hybrid bonds). The 2016 figures have been restated accordingly.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                

4th quarter 2017

End of December 2017

3rd quarter 2016

End of December 2016

(In millions of euros)     (non audited)     (audited)     (non audited)     (audited) Net income     138     581     84     429 Hedging adjustments (5) 20 (20) (6) Other items (4) (4) 1 (6) Deferred taxes on hedging adjustments and other items - - (1) (2) Change in translation adjustments     (17)     (200)     68     7 Other recyclable comprehensive income     (26)     (184)     48     (7) Actuarial gains and losses 16 32 16 13 Deferred taxes on actuarial gains and losses     (6)     (11)     (10)     (12) Other non-recyclable comprehensive income     10     21     6     1 Total income and expenses recognized directly in equity     (16)     (163)     54     (6) Comprehensive income     122     418     138     423 Of which: non-controlling interest     4     5     (1)     - Comprehensive income - Group share     118     413     139     423   INFORMATION BY BUSINESS SEGMENT                    

4th quarter 2017

(In millions of euros)

HighPerformanceMaterials

IndustrialSpecialties

CoatingSolutions

Corporate Total   Non-Group sales 909 606 437 5

1,957

Inter segment sales 2 34 17 - Total sales     911     640     454     5       EBITDA     131     120     44     (12)     283 Recurring depreciation and amortization     (42)     (42)     (28)     (6)     (118) Recurring operating income (REBIT)     89     78     16     (18)     165 Depreciation and amortization associated with revaluation of tangible and intangible assets for allocation of the purchase price of businesses (11) - - - (11) Other income and expenses (5) (7) (7) (13) (32) Operating income     73     71     9     (31)     122 Equity in income of affiliates 0 1 - - 1   Intangible assets and property, plant and equipment additions 74 79 43 11 207 Of which Recurring capital expenditure 74 73 43 11 201     4th quarter 2016 (In millions of euros)

HighPerformanceMaterials

IndustrialSpecialties

CoatingSolutions

Corporate Total   Non-Group sales 839 568 440 5

1,852

Inter segment sales 2 25 14 - Total sales     841     593     454     5       EBITDA     116     87     41     (1)     243 Recurring depreciation and amortization     (39)     (44)     (35)     (1)     (119) Recurring operating income     77     43     6     (2)     124 Depreciation and amortization associated with revaluation of tangible and intangible assets for allocation of the purchase price of businesses (10) - - - (10) Other income and expenses 65 (48) - (4) 13 Operating income     132     (5)     6     (6)     127 Equity in income of affiliates - 1 - - 1   Intangible assets and property, plant and equipment additions 75 64 38 5 182 Of which Recurring capital expenditure 73 65 38 5 181   INFORMATION BY BUSINESS SEGMENT (audited)                     End of December 2017 (In millions of euros)

HighPerformanceMaterials

IndustrialSpecialties

CoatingSolutions

Corporate Total     Non-Group sales

3,830

2,545

1,924

27

8,326

Inter segment sales 7 141 72 - Total sales    

3,837

   

2,686

   

1,996

    27       EBITDA     632     585     244     (70)    

1,391

Recurring depreciation and amortization     (158)     (174)     (109)     (8)     (449) Recurring operating income (REBIT)     474     411     135     (78)     942 Depreciation and amortization associated with revaluation of tangible and intangible assets for allocation of the purchase price of businesses (45) - - - (45) Other income and expenses (19) (9) (8) (16) (52) Operating income     410     402     127     (94)     845 Equity in income of affiliates 1 0 - - 1   Intangible assets and property, plant and equipment additions 186 165 88 20 459 Of which Recurring capital expenditure 168 155 88 20 431     End of December 2016 (In millions of euros)

HighPerformanceMaterials

IndustrialSpecialties

CoatingSolutions

Corporate Total     Non-Group sales

3,422

2,316

1,771

26

7,535

 

Inter segment sales 14 109 56 - Total sales    

3,436

   

2,425

   

1,827

    26       EBITDA     570     473     208     (62)    

1,189

Recurring depreciation and amortization     (154)     (173)     (125)     (3)     (455) Recurring operating income     416     300     83     (65)     734 Depreciation and amortization associated with revaluation of tangible and intangible assets for allocation of the purchase price of businesses (38) - - - (38) Other income and expenses 60 (61) 2 20 21 Operating income     438     239     85     (45)     717 Equity in income of affiliates 1 7 - - 8   Intangible assets and property, plant and equipment additions 175 175 82 13 445 Of which Recurring capital expenditure 173 155 82 13 423   CONSOLIDATED BALANCE SHEET        

End of December 2017

End of December 2016

  (In millions of euros) (audited) (audited)   ASSETS   Intangible assets, net 2,706 2,777 Property, plant and equipment, net 2,464 2,652 Equity affiliates : investments and loans 30 35 Other investments 30 33 Deferred tax assets 150 171 Other non-current assets 230 227 TOTAL NON-CURRENT ASSETS     5,610     5,895   Inventories 1,145 1,111 Accounts receivable 1,115 1,150 Other receivables and prepaid expenses 181 197 Income taxes recoverable 70 64 Other current financial assets 17 10 Cash and cash equivalents 1,438 623 TOTAL CURRENT ASSETS     3,966     3,155 TOTAL ASSETS 9,576 9,050     LIABILITIES AND SHAREHOLDERS' EQUITY   Share capital 759 757 Paid-in surplus and retained earnings 3,575 3,150 Treasury shares (2) (4) Translation adjustments 101 301 SHAREHOLDERS' EQUITY - GROUP SHARE     4,433     4,204 Non-controlling interests     41     45 TOTAL SHAREHOLDERS' EQUITY     4,474     4,249   Deferred tax liabilities 271 285 Provisions for pensions and other employee benefits 460 520 Other provisions and non-current liabilities 443 464 Non-current debt 2,250 1,377 TOTAL NON-CURRENT LIABILITIES     3,424     2,646   Accounts payable 965 932 Other creditors and accrued liabilities 377 402 Income taxes payable 82 62 Other current financial liabilities 10 31 Current debt 244 728 TOTAL CURRENT LIABILITIES     1,678     2,155 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 9,576 9,050   CONSOLIDATED CASH FLOW STATEMENT        

End of December 2017

End of December 2016

  (In millions of euros) (audited) (audited)     Cash flow - operating activities   Net income 581 429 Depreciation, amortization and impairment of assets 501 530 Provisions, valuation allowances and deferred taxes (41) (56) (Gains)/losses on sales of assets (2) (106) Undistributed affiliate equity earnings 2 (5) Change in working capital (41) 11 Other changes 8 18               Cash flow from operating activities     1,008     821   Cash flow - investing activities   Intangible assets and property, plant, and equipment additions (459) (445) Change in fixed asset payables 6 (37) Acquisitions of operations, net of cash acquired (1) (338) Increase in long-term loans (60) (62)   Total expenditures (514) (882)   Proceeds from sale of intangible assets and property, plant and equipment 10 118 Change in fixed asset receivables 0 0 Proceeds from sale of operations, net of cash sold 11 43 Proceeds from sale of unconsolidated investments 0 19 Repayment of long-term loans 45 38   Total divestitures 66 218               Cash flow from investing activities     (448)     (664)   Cash flow - financing activities   Issuance (repayment) of shares and other equity 3 51 Purchase of treasury shares (17) (6) Dividends paid to parent company shareholders (188) (176) Dividends paid to non-controlling interests (4) (4) Increase/ decrease in long-term debt 870 (38) Increase/ decrease in short-term borrowings and bank overdrafts     (472)     (83) Cash flow from financing activities     192     (256)   Net increase/(decrease) in cash and cash equivalents 752 (99)   Effect of exchange rates and changes in scope 63 11 Cash and cash equivalents at beginning of period     623     711 Cash and cash equivalents at end of period     1,438     623   CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (audited)                                                 Shares issued           Treasury shares  

Shareholders'equity - Groupshare

 

Non-controllinginterests

 

Shareholders'equity

(In millions of euros)   Number   Amount  

Paid-insurplus

 

Hybridbonds

 

Retainedearnings

 

Translationadjustments

  Number   Amount       At January 1, 2017   75,717,947   757   1,211   689   1,250   301   (65,823)   (4)   4,204   45   4,249 Cash dividend -   - - - (188) - -   - (188) (4) (192) Issuance of share capital 152,559 2 5 - - - - - 7 - 7 Purchase of treasury shares - - - - - - (180,000) (17) (17) - (17) Grants of treasury shares to employees - - - - (19) - 212,598 19 - - - Share-based payments - - - - 13 - - - 13 - 13 Other   -   -   -   -   1   -   -   -   1   (5)   (4) Transactions with shareholders   152,559   2   5   -   (193)   -   32,598   2   (184)   (9)   (193) Net income - - - - 576 - - - 576 5 581 Total income and expense recognized directly through equity   -   -   -   -   37   (200)   -   -   (163)   -   (163) Comprehensive income   -   -   -   -   613   (200)   -   -   413   5   418 At December 31, 2017   75,870,506   759   1,216   689   1,670   101   (33,225)   (2)   4,433   41   4,474  

ALTERNATIVE PERFORMANCE INDICATORS

To monitor and analyse the financial performance of the Group and its activities, the Group management uses alternative performance indicators. These are financial indicators that are not defined by the IFRS. A reconciliation of these indicators and the aggregates from the consolidated financial statements under IFRS is presented below.

RECURRING OPERATING INCOME (REBIT) AND EBITDA                   (In millions of euros)  

End of December 2017

 

End of December 2016

 

4th quarter 2017

 

4th quarter 2016

                  OPERATING INCOME 845 717 122 127 - Depreciation and amortization associated with revaluation of tangible and intangible assets for allocation of the purchase price of businesses (45) (38) (11) (10) - Other income and expenses (52) 21 (32) 13 RECURRING OPERATING INCOME (REBIT)   942   734   165   124 - Recurring depreciation and amortization (449) (455) (118) (119) EBITDA   1,391   1,189   283   243    

Details of depreciation and amortizations:

                  (In millions of euros)

End of December 2017

End of December 2016

4th quarter 2017

4th quarter 2016

                  Depreciation and amortization   (501)   (530)   (136)   (162) Of which: Impairment included in other income and expenses (449) (455) (118) (119) Of which: Recurring depreciation and amortization (45) (38) (11) (10) Of which: Depreciation and amortization associated with revaluation of assets for allocation of the purchase price of businesses   (7)   (37)   (7)   (33)     ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE                   (In millions of euros)

End of December 2017

End of December 2016

4th quarter 2017

4th quarter 2016

                  NET INCOME - GROUP SHARE 576 427 137 86 - Depreciation and amortization associated with revaluation of assets for allocation of the purchase price of businesses (45) (38) (11) (10) - Other income and expenses (52) 21 (32) 13 - Other income and expenses - Non-controlling interests - 3 - 3 - Taxes on depreciation and amortization associated with revaluation of assets for allocation of the purchase price of businesses 12 10 2 1 - Taxes on other income and expenses 14 4 8 2 - One-time tax-effects 55 9 55 9 ADJUSTED NET INCOME   592   418   115   68 - Weighted average number of ordinary shares 75,682,844 75,201,739 - Weighted average number of potential ordinary shares 75,895,729 75,429,599 ADJUSTED EARNINGS PER SHARE (€)   7,82   5,56   1,52   0,90 DILUTED ADJUSTED EARNINGS PER SHARE (€)   7,80   5,54   1,52   0,89     FREE CASH FLOW                   (In millions of euros)

End of December 2017

End of December 2016

4th quarter 2017

4th quarter 2016

                  Cash flow from operating activities 1,008 821 350 246 + Cash flow from investing activities   (448)   (664)   (174)   (327) NET CASH FLOW   560   157   176   (81) - Net cash flow from portfolio management operations   (5)   (269)   (1)   (220) FREE CASH FLOW   565   426   177   139     RECURRING INVESTMENTS                   (In millions of euros)

End of December 2017

End of December 2016

4th quarter 2017

4th quarter 2016

                  INTANGIBLE ASSETS AND PROPERTY, PLANT, AND EQUIPMENT ADDITIONS 459 445* 207 182 - Exceptional investments 10 - 6 - - Investments relating to portfolio management operations 18 - - - - Investments with no impact on net debt - 22 - 1 RECURRING INVESTMENTS   431   423   201   181

* The 2016 figures have been corrected by €2 million, in coherence with the cash flow statement.

NET DEBT           (In millions of euros)  

End of December 2017

 

End of December 2016

  Non-current debt 2,250 1,377 Current debt 244 728 Cash and cash equivalents 1,438 623 NET DEBT   1,056   1,482     WORKING CAPITAL           (In millions of euros)

End of December 2017

End of December 2016

  Inventories 1,145 1,111 Accounts receivable 1,115 1,150 Other receivables including income taxes 251 261 Accounts payable (965) (932) Other liabilities including income taxes (459) (464) Derivatives 7 (21) WORKING CAPITAL   1,094   1,105     CAPITAL EMPLOYED           (In millions of euros)

End of December 2017

End of December 2016

          Goodwill, net 1,525 1,703 Intangible assets other than goodwill, and property, plant and equipment, net 3,645 3,726 Investments in equity affiliates 30 35 Other investments and other non-current assets 260 260 Working capital   1,094   1,105 CAPITAL EMPLOYED   6,554   6,829  

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INVESTOR RELATIONS CONTACTSSophie Fouillat+33 1 49 00 86 37sophie.fouillat@arkema.comFrançois Ruas+33 1 49 00 72 07francois.ruas@arkema.comorMEDIA CONTACTGilles Galinier+33 1 49 00 70 07gilles.galinier@arkema.com