Regulatory News:
Arkema (Paris:AKE):
The Group recorded excellent earnings growth in the second
quarter, notably with EBITDA up 67% compared to 2020 and above the
pre-crisis level of 2019.
This performance was driven by Specialty Materials (1), which
benefited from strong demand for innovative, sustainable materials
and from its unique positioning to support global
megatrends.
In this context, and in light of the quality of the
performance achieved in the first half of the year, Arkema is once
again significantly increasing its financial targets for
2021.
- Group sales of €2.4 billion, up 34.6% versus 2020
and up 12.1% versus 2019 at constant scope and currency:
- Significant growth in volumes (+17.1% vs. Q2’20 and +3.0% vs.
Q2’19), driven by high demand in most end markets and the strong
dynamic of new developments
- 17.5% increase in selling prices on average compared to the
prior year, reflecting the Group’s ability to offset the very
marked rise in raw materials and energy costs
- Sharp acceleration in the benefits of sustainable innovation,
particularly in the fast-growing batteries, bio-based materials, 3D
printing, electronics and environmentally friendly paints
markets
- EBITDA of €478 million, up 67.1% compared to
Q2’20, and a historically high EBITDA margin of 20.0%:
- Strong growth in the three segments that constitute Specialty
Materials, which recorded EBITDA of €417 million, up nearly 80%
versus Q2’20 and 37% versus the pre-Covid reference of Q2’19
- Intermediates’ EBITDA of €87 million, up 31.8% despite a
negative scope effect related to the PMMA divestment on 3 May 2021,
benefiting from more favorable market conditions than in the prior
year, which was marked by the health crisis
- Adjusted net income up almost threefold to €267
million, representing €3.50 per share
- Net debt of €1.28 billion (including €700 million
in hybrid bonds), representing 0.9x last-twelve-months EBITDA and
including €1.1 billion in gross proceeds from the PMMA divestment,
€191 million in dividend payments and a €300 million commitment
relating to the share buyback program launched at the end of
May
- Continuation of the strategy to refocus on Specialty Materials,
with the finalization of the PMMA divestment and the acquisitions
of Edge Adhesives and Agiplast
- Full-year guidance significantly raised; for 2021,
Arkema is now targeting around 30% growth in Specialty Materials’
EBITDA relative to 2020 at constant scope and currency (2), which
would result in Group EBITDA of around €1.4 billion, excluding a
systemic resumption of the health crisis
Following Arkema’s Board of
Directors’ meeting held on 28 July 2021 to approve the Group’s
consolidated financial statements for the first half of 2021,
Chairman and CEO Thierry Le Hénaff said:
“Arkema’s employees can be proud of the performance achieved in
the second quarter and I’d like to take this opportunity to thank
them warmly for their contribution. We expected the results to be
significantly above 2020 levels. But very sharply outperforming
2019, particularly in Specialty Materials, is a great achievement
that positions us perfectly on our trajectory to 2024. This
performance fully confirms the validity of our strategy of
sustainable growth and transformation towards innovative,
high-performance materials.
In a fast-changing world full of opportunities, we firmly
believe in the strength of our project, which is the product of our
teams’ unwavering commitment since many years, enabling us to
support in a unique manner our customers address the major
challenges of sustainable development.
Our technologies, the partnerships we forge with our customers,
our geographical footprint and our financial flexibility are all
valuable assets that will contribute both to speeding up our
organic growth via high-quality industrial projects and to
strengthening our Specialty Materials through bolt-on
acquisitions.
We’re more confident than ever in our potential to create value
and enthusiastic about growth opportunities notably in such areas
as lightweight and bio-based materials, batteries, hydrogen, 3D
printing, technical adhesives and more environmentally friendly
paints. Raising our guidance for the second time this year is a
reflection of this confidence.”
KEY FIGURES
(In millions of euros)
Q2'21
Q2'20
YoY change
H1'21
H1'20
YoY change
Sales
2,395
1,902
+25.9%
4,621
3,990
+15.8%
EBITDA
478
286
+67.1%
836
586
+42.7%
Specialty Materials
417
233
+79.0%
723
489
+47.9%
Intermediates
87
66
+31.8%
162
134
+20.9%
Corporate
-26
-13
-49
-37
EBITDA margin
20.0%
15.0%
18.1%
14.7%
Specialty Materials
20.7%
15.4%
18.8%
15.3%
Intermediates
23.5%
17.4%
21.1%
17.3%
Recurring operating income (REBIT)
345
144
+139.6%
568
304
+86.8%
REBIT margin
14.4%
7.6%
12.3%
7.6%
Adjusted net income
267
90
+196.7%
426
190
+124.2%
Adjusted net income per share (in €)
3.50
1.18
+196.6%
5.58
2.49
+124.1%
Recurring cash flow (*)
245
284
-13.7%
298
271
+10.0%
Free cash flow
313
288
+8.7%
297
250
+18.8%
Net debt including hybrid bonds
1,281
2,134
€1,910m as of 31/12/2020
(*) Recurring cash flow corresponds to the free cash flow
before exceptional items. It excludes non-recurring items and
exceptional capital expenditure.
SECOND-QUARTER 2021 BUSINESS PERFORMANCE
Sales amounted to €2,395 million, up 25.9%
compared to second-quarter 2020. At constant scope and currency,
sales were up 34.6% versus Q2’20 and up 12.1% versus the pre-Covid
level of Q2’19. Volumes rose by a sharp 17.1% year on year, and
were also 3.0% above 2019 levels, thanks to high demand in most of
the Group’s end markets, in particular construction, batteries,
electronics, transportation and consumer goods. Arkema is thus
reaping the benefits of its positioning on growth markets and on
innovative, sustainable, high-performance solutions, where demand,
linked to global megatrends, is accelerating. The evolution of
volumes in the packaging, nutrition and hygiene markets reflects
the high 2020 comparison base. The price effect was a positive
17.5%, reflecting price increase initiatives in all product lines
to pass on the steep rise in raw materials, energy and logistics
costs, and benefiting as well from tight market conditions in the
acrylics chain. The negative 4.5% scope effect relates to the
divestments of the Functional Polyolefins business on 1 June 2020
and the PMMA business on 3 May 2021, which were partially offset by
acquisitions in Specialty Materials. The euro’s rise against the US
dollar was the main factor behind the negative 4.2% currency
effect. In second-quarter 2021, Specialty Materials represented
84.5% of total Group sales (80% in Q2’20).
Group EBITDA, at €478 million, was up by a very
sharp 67.1% compared to Q2’20, despite a negative currency and
scope effect of around €30 million. This excellent performance was
driven by growth in volumes, particularly in Adhesive Solutions,
High Performance Polymers and Coating Solutions, the benefits of
our price increase initiatives as well as tight market conditions
in the acrylics chain. At €417 million, Specialty Materials’ EBITDA
was well above 2019 pre-Covid levels (+37.2% versus Q2’19 and
+79.0% versus Q2’20), with strong growth in all three segments. The
Group’s EBITDA margin reached a historic high of
20.0%, up 500 bps from Q2’20.
As a result, recurring operating income (REBIT) amounted
to €345 million compared to €144 million in the second
quarter of 2020. This figure includes recurring depreciation and
amortization of €133 million, down €9 million compared to
second-quarter 2020, primarily due to the currency and scope
effects. The REBIT margin was up by nearly 700 bps to
14.4%, thus repositioning the Group’s return on capital
employed above its 10% long term target.
Operating income came to €1.06 billion and
included a pre-tax capital gain of close to €950 million relating
to the divestment of PMMA, as well as expenses corresponding
primarily to asset impairments.
Adjusted net income rose by a strong 197% to €267
million, representing €3.50 per share. In the first
half, excluding exceptional items, the tax rate came in at 20% of
recurring operating income, versus 22% last year, reflecting the
geographic mix of the Group’s earnings.
CASH FLOW AND NET DEBT AT 30 JUNE 2021
For the sake of comparability between different years and to
neutralize in particular the significant non-recurring inflows
linked to the tax impacts of recent disposals, a recurring cash
flow excluding exceptional items is now calculated. This
recurring cash flow (3) thus came to €245 million in
second-quarter 2021, versus €284 million in second-quarter 2020. It
includes an increase in working capital linked to volume growth and
raw materials inflation in a context of a sharp improvement in
activity. At 30 June 2021, working capital remains well controlled
and represented 11.9% of annualized quarterly sales excluding the
PMMA business (16.5% at 30 June 2020 and 16.0% at 30 June 2019), an
exceptionally low ratio that remains below the normative level due
to strong demand and some difficulties to source raw materials,
which did not allow to rebuild inventories.
Free cash flow came to €313 million, versus €288
million in the second quarter of 2020. It included a non-recurring
inflow of €132 million, corresponding mainly to tax liabilities
relating to the capital gains tax on the PMMA divestment. The tax
has been recorded in net cash flow from portfolio management
operations but will be disbursed during the second half of the
year. Free cash flow for second-quarter 2020 also included a
non-recurring €48 million cash inflow, corresponding primarily to
tax savings linked to the use of tax losses.
This quarter, free cash flow also included an increase in
exceptional capital expenditure (€64 million versus €44 million in
Q2’20) relating to the construction of the polyamide bio-factory in
Singapore and the hydrofluoric acid supply project with Nutrien in
the United States.
Cash flows from portfolio management operations represented a
net inflow of €912 million in the quarter, essentially
corresponding to the PMMA divestment finalized on 3 May and that
also included the bolt-on acquisitions of Agiplast and Edge
Adhesives in Specialty Materials.
Including hybrid bonds, net debt stood at €1.28
billion at 30 June 2021 versus €1.91 billion at 31 December
2020. This figure includes €1.1 billion in gross proceeds from the
PMMA divestment, the €2.50 per share dividend payment for a total
payout of €191 million and a €300 million commitment corresponding
to the share buyback program launched in May 2021. The net debt
(including hybrid bonds) to last-twelve-months EBITDA ratio remains
well under control, at 0.9x.
Moreover, in line with its ambitions in terms of Corporate
Social Responsibility, Arkema has signed an addendum to its €1
billion syndicated credit facility set up in July 2020 in order to
integrate three key CSR criteria for the Group into the calculation
of the cost of credit: greenhouse gas emissions, volatile organic
compound emissions and the total recordable injury rate (TRIR).
Arkema also obtained approval from all lenders for the first
one-year extension, bringing the maturity date for the syndicated
credit facility to 29 July 2024.
SECOND-QUARTER 2021 PERFORMANCE BY SEGMENT
ADHESIVE SOLUTIONS (24% OF TOTAL GROUP SALES)
(In millions of euros)
Q2'21
Q2'20
YoY change
Sales
575
453
+26.9%
EBITDA
82
50
+64.0%
EBITDA margin
14.3%
11.0%
Recurring operating income (REBIT)
65
35
+85.7%
REBIT margin
11.3%
7.7%
Sales of the Adhesive Solutions segment totaled €575
million, significantly up 26.9% compared to second-quarter
2020. Volumes rose by 20.5%, lifted by positive trends in the
construction and DIY markets and by a significant rebound in
industrial applications. In the continuity of the first quarter,
the packaging and hygiene markets faced the high prior-year
comparison base. Up 3.8%, the price effect reflected the Group’s
actions to pass on raw materials inflation. Further pricing
initiatives will be implemented in the third quarter, as the impact
of rising raw materials will intensify. The 5.5% positive scope
effect corresponds to the integration of Fixatti, Ideal Work,
Poliplas and Edge Adhesives and the currency effect was a negative
2.9%.
EBITDA for the segment totaled €82 million, up
sharply 64.0% versus Q2’20 and up 15.5% versus Q2’19. This
performance was driven by high volumes, operational excellence
actions, the integration of acquisitions and initiatives to
increase selling prices to offset the rise in raw materials costs.
Despite the mechanical dilutive impact of price increases on this
ratio, the EBITDA margin reached 14.3%, more than 300 bps higher
than in the prior year, thereby consolidating the target of 14% set
for 2021 despite the raw materials context.
ADVANCED MATERIALS (30.5% OF TOTAL GROUP SALES)
(In millions of euros)
Q2'21
Q2'20
YoY change
Sales
729
628
+16.1%
EBITDA
178
124
+43.5%
EBITDA margin
24.4%
19.7%
Recurring operating income (REBIT)
116
61
+90.2%
REBIT margin
15.9%
9.7%
Sales of the Advanced Materials segment rose by a
significant 16.1% to €729 million. Volumes grew by 14.5%,
driven primarily by the excellent dynamic in High Performance
Polymers, which benefited from the acceleration of new
developments, particularly in lightweight materials, clean mobility
and bio-based products. The trend in volumes was favorable in most
of the segment’s end markets, including construction, batteries,
electronics, consumer goods and transportation. While gradually
improving, the oil and gas market was down year on year, and growth
was limited in the animal nutrition market, due to the high
comparison base in second-quarter 2020. The 5.9% positive price
effect reflects the price increases carried out to pass on the rise
in raw materials costs. The currency effect was a negative
4.3%.
At €178 million, the segment’s EBITDA increased by
more than 25% compared to pre-Covid Q2’19 levels and by 43.5% year
on year, mainly reflecting the marked increase in volumes and the
high technological content of Arkema’s solutions. In this context,
EBITDA margin reached a record 24.4% (19.7% in Q2’20
and 21.8% in Q2’19).
COATING SOLUTIONS (30% OF TOTAL GROUP SALES)
(In millions of euros)
Q2'21
Q2'20
YoY change
Sales
712
436
+63.3%
EBITDA
157
59
+166.1%
EBITDA margin
22.1%
13.5%
Recurring operating income (REBIT)
128
28
+357.1%
REBIT margin
18.0%
6.4%
Sales of the Coating Solutions segment rose by a sharp
63.3% to €712 million. The 25.4% increase in volumes
reflects the strong dynamic in the segment’s main markets, namely
decorative paints, electronics, 3D printing, graphic arts and
industrial coatings. The segment also benefited from its broader
offering of more environmentally friendly products, such as
waterborne paints and powder coatings. The 44.3% positive price
effect reflects price initiatives to offset the increased cost of
propylene, acrylics and VAM, as well as a tight acrylics market for
activities not integrated downstream. The currency effect was a
negative 6.4%.
At €157 million, EBITDA for the segment was up
very significantly (€59 million in Q2’20 and €91 million in Q2’19),
benefiting from higher volumes and prices, the shift in the product
mix toward higher added-value applications, and more favorable
market conditions in activities not integrated downstream. In this
context, the EBITDA margin came out at a record
22.1%, up by around 800bps relative to Q2’20 (13.5% in Q2’20
and 15.8% in Q2’19), thereby confirming the segment’s profitability
potential, in line with the ambition presented at the Capital
Market Days.
INTERMEDIATES (15.5% OF TOTAL GROUP SALES)
(In millions of euros)
Q2'21
Q2'20
YoY change
Sales
371
379
-2.1%
EBITDA
87
66
+31.8%
EBITDA margin
23.5%
17.4%
Recurring operating income (REBIT)
64
35
+82.9%
REBIT margin
17.3%
9.2%
Sales of the Intermediates segment fell 2.1% year on year
to €371 million, impacted by a negative 29.0% scope effect
corresponding to the divestments of the PMMA business on 3 May 2021
and of the Functional Polyolefins business on 1 June 2020. Volumes
grew by 7.7% and the price effect was a positive 22.4%, primarily
reflecting more favorable market conditions in acrylics in Asia as
well as a gradual improvement in the Fluorogases environment,
particularly in the United States. The currency effect was a
negative 3.2%.
EBITDA increased by 31.8% year on year to €87
million, with more favorable market conditions in the segment’s
various activities more than offsetting the negative scope effect.
The EBITDA margin rose to 23.5%, driven notably by
the tightness observed in the acrylics chain since the beginning of
the year.
OUTLOOK FOR 2021
The positive dynamic observed in the first half is continuing,
benefiting from solid demand in most of the Group’s end markets.
Arkema will nevertheless remain vigilant and ready to respond
rapidly to the current evolution of the health crisis and the
rising raw materials context, and will pursue its price increase
initiatives.
Moreover, Arkema will continue to leverage its strong
sustainable innovation dynamic and its recent capacity expansions
in order to capitalize on accelerating demand for sustainable,
high-performance solutions, driven by global megatrends.
In light of its first-half financial performance, and while
remaining attentive to the macroeconomic context which remains
volatile, the Group has significantly raised its full-year guidance
once again. Excluding a systemic resumption of the health crisis,
Arkema is now targeting for 2021, around 30% growth in Specialty
Materials’ EBITDA relative to 2020 at constant scope and currency
(4), versus the 20% previously announced. Group EBITDA should
therefore reach around €1.4 billion for the full year.
Finally, Arkema will continue to deploy its strategic roadmap,
in line with its ambition to become a pure Specialty Materials
player by 2024.
Further details concerning the Group’s second-quarter 2021
results are provided in the “Second-quarter 2021 results and
outlook” presentation and the Factsheet, both available on Arkema’s
website at www.finance.arkema.com.
REGULATORY INFORMATION
The half-year financial report for the six months ended 30 June
2021 is available on the Group’s website (www.arkema.com) under
Investor-relations/Financials/Financial results.
FINANCIAL CALENDAR
10 November 2021
Publication of third-quarter 2021
results
24 February 2022
Publication of full-year 2021 results
Building on its unique set of expertise in materials science,
Arkema offers a world-leading technology portfolio to
address ever-growing demand for new and sustainable materials. With
the ambition to become in 2024 a pure player in Specialty
Materials, the Group is structured into three complementary,
resilient and highly innovative segments dedicated to Specialty
Materials – Adhesive Solutions, Advanced Materials and Coating
Solutions – accounting for some 82% of Group sales in 2020, and a
well-positioned and competitive Intermediates segment. Arkema
offers cutting-edge technological solutions to meet the challenges
of, inter alia, new energies, access to water, recycling,
urbanization and mobility, and fosters a permanent dialogue with
all its stakeholders. The Group reported sales of around €8 billion
in 2020, and operates in some 55 countries with 20,600 employees
worldwide. 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.
In the current context, where the Covid-19 pandemic persists
across the world, and the evolution of the situation as well as the
magnitude of its impacts on the global economy are highly
uncertain, the retained assumptions and forward-looking statements
could ultimately prove inaccurate.
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, developments in the
Covid-19 situation, 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 segment included in this press release
are extracted from the condensed consolidated financial statements
at 30 June 2021 closed by Arkema’s Board of Directors on 28 July
2021. Quarterly financial information is not audited.
Information by segment 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 EBITDA margin, which corresponds to
EBITDA expressed as a percentage of sales, EBITDA equaling
recurring operating income (REBIT) plus recurring depreciation and
amortization of tangible and intangible assets, as well as REBIT
margin, which corresponds to recurring operating income (REBIT)
expressed as a percentage of sales.
For the purpose of tracking changes in its results, and
particularly its sales figures, the Group analyzes the following
effects (unaudited analyses):
- 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) Specialty Materials includes the
following three segments: Adhesive Solutions, Advanced Materials
and Coating Solutions (2) With the assumption of a €/$ exchange
rate of 1.2 for 2021, the impact on 2020 EBITDA is estimated at a
negative €30 million for Specialty Materials and a negative €10
million for Intermediates (3) Recurring cash flow corresponds to
free cash flow before exceptional items. It excludes non-recurring
items and exceptional capital expenditure. (4) With the assumption
of a €/$ exchange rate of 1.2 for 2021, the impact on 2020 EBITDA
is estimated at a negative €30 million for Specialty Materials and
a negative €10 million for Intermediates
Arkema 420, rue d’Estienne d’Orves –
F-92705 Colombes Cedex – France Tel: +33 1 49 00 80 80 – Fax: +33 1
49 00 83 96 A French société anonyme (joint stock corporation) with
share capital of €767,364,760 – Registered in Nanterre: RCS 445 074
685 arkema.com
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version on businesswire.com: https://www.businesswire.com/news/home/20210728006061/en/
INVESTORS Béatrice Zilm +33 1 49 00 75 58
beatrice.zilm@arkema.com Peter Farren +33 1 49 00 73 12
peter.farren@arkema.com Mathieu Briatta +33 1 49 00 72 07
mathieu.briatta@arkema.com Caroline Chung +33 1 49 00 74 37
caroline.chung@arkema.com
PRESS Gilles Galinier +33 1 49 00 70 07
gilles.galinier@arkema.com Véronique Obrecht +33 1 49 00 88 41
veronique.obrecht@arkema.com
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