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Arkema SA, with a market capitalization of €5.3 billion and a P/E ratio of 15.06, reported its second-quarter earnings for 2025, revealing a mixed performance in a challenging macroeconomic environment. The company posted revenues of €2.4 billion, a 5.6% decline year-over-year, with an EPS of €1.56. Despite the revenue decline, Arkema’s stock remained relatively stable, closing at €61.55, a slight decrease of 0.16%. According to InvestingPro data, the stock has shown relatively low price volatility, making it an interesting option for stability-focused investors.
Key Takeaways
- Arkema’s Q2 2025 revenues declined by 5.6% year-over-year.
- The company maintained a strong position in Adhesive Solutions and High Performance Polymers.
- A €100 million cost-saving program was implemented to manage financial challenges.
- Arkema forecasts an EBITDA contribution of €400 million from new projects by 2028.
- Geopolitical uncertainties and weak demand in Europe and North America pose ongoing challenges.
Company Performance
Arkema faced a tough second quarter, with revenues dropping to €2.4 billion, down 5.6% from the previous year. The company’s EBITDA also saw a decline, reaching €364 million. Despite these setbacks, Arkema’s Adhesive Solutions and High Performance Polymers divisions demonstrated resilience, maintaining stable margins and performance. The company continues to navigate a challenging macroeconomic landscape, with weak demand in Europe and North America offset by more resilient markets in Asia.
Financial Highlights
- Revenue: €2.4 billion, down 5.6% year-over-year
- EBITDA: €364 million, decreased from the previous year
- Adjusted net income: €118 million, or €1.56 per share
- Recurring cash flow: €111 million
- Net debt to EBITDA ratio: 2.5x
Outlook & Guidance
Arkema maintains its 2025 EBITDA guidance of €1.3-1.4 billion, anticipating a €400 million contribution from new projects by 2028. The company is managing capital expenditures carefully, with a target of €650 million for the year. Despite current market challenges, Arkema remains committed to its strategic focus and expects improvements in cyclical businesses such as Coating Solutions as demand recovers.
Executive Commentary
Thierry Lenhoff, CEO of Arkema, expressed confidence in the company’s long-term prospects, stating, "We are firmly convinced that mega trends are there to remain on the long term." He emphasized Arkema’s future-oriented strategy, saying, "We continue to build Arkema for the future," and assured stakeholders of the company’s solid fundamentals.
Risks and Challenges
- Geopolitical uncertainties and trade tariffs may impact market conditions.
- Weak demand in Europe and North America poses ongoing challenges.
- The cyclical nature of the Coating Solutions business could affect short-term performance.
- Supply chain disruptions and cost inflation remain potential risks.
Q&A
During the earnings call, analysts questioned the timing of market recovery and the potential for cyclical businesses like Coating Solutions to rebound. Management reiterated its commitment to maintaining a strategic portfolio focus and highlighted opportunities in the smartphone market for its polyamide technology.
Full transcript - Arkema SA (AKE) Q2 2025:
Conference Operator: to Arkema’s First Half twenty twenty five 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. I will now hand you over to Thierry Lenhoff, Chairman and Chief Executive Officer. Sir, please go ahead.
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: Thank you very much. Good morning, everybody. Welcome to Arkema’s second quarter twenty twenty five results conference call. Joining me today are Marie Jose Dansion, 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.
And as always, I will comment the highlights of the quarter and then we let Marie Jose go through the financials. And at the end of the presentation, as I said before, we’ll be available to answer all your questions. In Q2 twenty twenty five, 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 have persisted through the quarter impacting notably The U.
S. And Europe. Asia on the other hand continued 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 this headwind had of course an impact on our financial performance, but overall ASKEMA results ended up relatively well with a slight decline in volumes, a robust EBITDA margin of 15.2% and a solid cash generation in the quarter. This was supported by the good resilience of our adhesive solution and high performance polymer, 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 €364,000,000 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 actually directly impacted by the current macro.
Looking briefly at the performance of Specialty Materials segment. Adhesives had a very decent quarter with an EBITDA slightly down compared to last year despite the continued pressure on volumes. This performance of Bostik was supported by the ongoing work on efficiency and our strict price discipline enabling us to mitigate the weak 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. Integration of Dow is progressing well and contributed incrementally to the segment’s result.
In Advanced Materials, volumes were up 6% in the quarter with growth in most businesses. High performance polymer delivered yet again solid performance and benefited from our significant footprint in Asia in the government years and from our high value added new business development in differentiated materials serving fast growing markets such as sports, batteries, three d printing. On the other hand, EBITDA was impacted by unfavorable geographical mix and overall weaker market conditions in Performance Additives. The margin of the Advanced Materials segment remained overall led at a good level close to 20%. Lastly, in Coatings, the unit margins in Upstream Achilles remained challenging while the volume in downstream are disappointing, especially 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, Arkema implemented also significant cost cutting measures across the organization and tightly control working capital and 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 €110,000,000 of recurring cash flow, which was not a given in the context. In parallel, the fundamental 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 terms of the world economy. From this standpoint, one of our first priorities remain 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 focused on key growth markets such as electric mobility, sustainable lifestyle and goods advanced electronics and efficient buildings. We are now starting at 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 greenfield plant in Singapore for BioSource Polyamide 11 is reaching the breakeven point. And as announced at the July, we have invested we have decided sorry to invest in a new unit of Rifampir transparent polyamide on this same site expected to be operational quite quickly in the 2026. This last investment represents a limited CapEx of around US20 million dollars that we triple optimal production with a very attractive payout. This will also contribute our strategy to develop local supply close to our customer 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-twenty twenty six. And this will enable us to further market development and also the increasing demand for locally manufactured PVDF in energy storage systems, semiconductor, cable market and other natural markets of PVDF. This was for my introduction.
I will now hand it over to Marie Jose for a more in-depth look at the financials before we discuss the outlook at the end of the presentation.
Marie Jose Dansion, Chief Financial Officer, Arkema: Thank you, Thierry. Good morning everyone. So, starting with revenues at €2,400,000,000 quarter two 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 polymers, especially in Asia. The price effect was a negative 2.5% reflecting the unfavorable geographic mix, the evolution of certain raw materials, as well as the market conditions in particular in upstream acrylics. Continuing with profits, quarter two EBITDA came in at €364,000,000 in part by the decreased contribution from the refrigerant gases as well as the decline in coating solutions while adhesives and advanced materials were more resilient.
Quarter two EBITDA also an unfavorable currency effect estimated at around 15,000,000 Euro. Half is dollar related. The other half is from all other currencies. Depreciation and amortization stood at 166,000,000 Euro and included the amortization of new production units which started during 2024. This leads to a recurring EBIT of €198,000,000 and a EBIT margin of 8.3%.
Non recurring items amounted to €82,000,000 They include €34,000,000 of PPA amortization and €47,000,000 of one off charges, notably restructuring costs linked to the reorganization of our hydrogelina peroxide site in France. Financial expenses stood at €4,000,000 reflecting mainly the increased cost of our bonds and the lower interest on invested cash. Consequently, quarter two adjusted net income stands at €118,000,000 which corresponds to a €1.56 per share. Moving on to cash flow and net debt, Arkema delivered a very solid cash flow generation in quarter two. Recurring cash flow stood at €111,000,000 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 €151,000,000 in line with our guidance of annual CapEx spend of €650,000,000 for the full year ’25. Net debt and hybrid bonds at the June ’25 amount to close to €3,600,000 including €1,500,000 of hybrid bonds since a new €400,000,000 hybrid was issued in May, refinancing the upcoming maturity early twenty six. The net debt to last twelve 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 your question.
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: Well, thank you, Marie Jose. So, going now into H2, the macro environment seems to be in the continuity of the recent months. No surprise there with low demand, geopolitical uncertainty and limited visibility including on the tariff. Our industrial footprint close to our customers in our three major regions significantly protects the group from direct impact of higher tariffs. Obviously, we are remaining vigilant about what we call the direct impact on the global demand.
In this context, as already said, we reinforce our initiatives on cost and cash. This year, we aim to achieve €100,000,000 of savings in fixed and variable cost to offset inflation. If you remember, this is a double of the annual target set at the Capital Markets Day in September 23. We’ll also continue to control strictly our operations and tightly manage our working capital and CapEx as we did in Q2. In parallel, we continue to build Archimat for the future.
This is very important and this includes the execution of our major projects that you know. We still believe we can expect a contribution of more than EUR 400,000,000 to ARTIMA’s EBITDA in 2028 in comparison to 2024. This year, given the current context, the ramp up would be slower than expected and we see an additional contribution to the group’s EBITDA of around €50,000,000 versus last year. Based on all these factors, we now aim to achieve in 2025 as you could read an EBITDA of between 1,300,000,000.0 and €1,400,000,000 This includes an FX headwind of around €50,000,000 for the full year assuming a stabilization of exchange rate at the current level for the rest of the year. Based on this EBITDA forecast, the recurring cash flow should adjust accordingly to between 300,000,000 and €400,000,000 in 2025.
I know there have been a few questions to the IR team this morning on this topic. As a matter of fact, the range is a mechanical adjustment versus initial EBITDA and cash guidance of end of Feb and also quite consistent if we make the analysis compared to last year results. Beyond the current share, we are firmly convinced that mega trends are there to remain on the long term and that Arkema is very well positioned with its portfolio of cutting edge technology and sustainability driven innovation to continue to capture the numerous growth opportunities that we create. So, I thank you very much for your attention. And now together with management today, we are ready to answer your questions.
Conference Operator: Thank First question is from Tom Wigglesworth, Morgan Stanley.
Tom Wigglesworth, Analyst, Morgan Stanley: Thanks Thierry and Mariusz for the presentation. A couple of questions, if I may. Thierry, just kind of focusing on that second half guidance that you’ve given and your wait and see commentary, what have you baked into the second half? Is it that things continue at the current at the exit rate of 2Q? Is that what you’re expecting?
And around that, how long can these customers wait and see, right? Is there a certain point this year where they’ll have to come back if they want to sell products? Or can they last out through the whole year on this wait and see attitude? So that’s my first question. My second question is around Advanced Materials.
So just to unpack that a little further. I mean, obviously, we’re seeing good volume growth but declines in EBITDA. Is that because you’re seeing ramp up of volumes which aren’t carrying positive EBITDA yet but will in the future? Or is it that and at the same time that you’re losing high value volumes underlying that picture in other markets? Just trying to understand when the volumes kick into EBITDA growth in Advanced Materials.
Thank you.
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: Thank you, Tunda, very valid question. So, assumption for H2 are basically in continuity, but we put a range of 100,000,000 on the EBITDA, started from the exit rate of Q2. So depending on this range by nature, any range certainly a bit more optimistic for the high end of the range assuming certainly a little bit of rebound at the end of the year and the low end assuming absolutely no rebound. So I would say for the time being and nobody has any crystal ball and we have been all surprised by the length of the wait and see. We are just a leader.
We are only a new one. Think we prefer to be cautious because there are some elements which we don’t master including the tariffs. I think each time you think we get something rather clear, you have some surprise a few weeks after. So, it’s better to be cautious. So, I would say, we don’t know.
I keep saying it’s our experience in chemicals. We started to have some destock. It was in September 2023. It’s really a very long period. So we are absolutely convinced that there will be a rebound at certain time and then there will be certainly plenty of upside on the linked to the tension we have seen several times in the past ten years in chemicals.
The question is when? And really, frankly on this, we don’t know because beyond the typical macro cycle, you have some geopolitical factors that we don’t master. So, I would say, it’s neutral, but there will be at a certain point like in the tunnel and as usual, we believe that Arkema can get out of this period stronger than our competitors, which is what we have been proving since many, many years. With regard to less material, in fact, is a difficulty when the market are down, is that the mix is also a little bit affected. We have this means that we have a tendency to have more growth with the more commoditized businesses and the more specialty businesses and we have seen that always.
And you have the contrary when there is rebound, which is why we have double gain in EBITDA when there is a rebound. But when the volumes are more under pressure, I would say, purely specialty businesses are suffering a bit more. So it’s one answer. And the second one is that in terms of geographical mix,
Tom Wigglesworth, Analyst, Morgan Stanley: we
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: have U. S, which is disappointing. Asia is rather solid for us. And the mix between the two creates the discrepancy between volumes and EBITDA. But if I compare also to many peers, we have to despite all of these, we see for other material and for the group, the level of EBITDA margin is quite promising still.
I wanted to mention it.
Tom Wigglesworth, Analyst, Morgan Stanley: Okay. Thank you very much. Very clear.
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: Thank you, Tom.
Conference Operator: Next question is from Aaron Ciccarelli, Berenberg.
Aaron Ciccarelli, Analyst, Berenberg: Hello. Good morning. Thanks for taking my Thanks for Slide number five, where you showed a recap of the new projects. Perhaps what assumption underpinned the reiterated forecast of above €400,000,000 earnings contribution by 2028? Has this been reiterated on an assumption that by 2028, the macro would be as you originally expected?
Or do you expect market share gains to support it in some of the projects you mentioned? The second question is on free free cash flow and your leverage. I wonder if you can discuss a little bit what your thoughts are about the current leverage and the free cash flow generation going into the second half of the year. Thank you.
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: Okay. So on the first question, so the nature of these projects is a little bit different in each I would say different depending on which project we are talking about. For example, it’s different if you take the Singapore plant of I would say the project with project with Nutrien is already an integration of the raw material and then we mechanically as soon as it’s already ramping up, we increase our profitability and on this even we get the benefit far before 2028. On Singapore, you will get the ramp up of the business. So you have to assume clearly a recovery of the macro before 2028, but then it will be four years from now from September 23 to be for six years.
So on this, we think it’s a reasonable assumption that the macro at a certain point coming back to the answer to Tom, it will come back. The question is when and we get it closer certainly than it was two years ago. But so if you take Singapore development, you have a lot of development in niches. So you don’t really you take market share, but through technology, so it’s not like you bring the same product with a lower cost or what It’s really a new market that we are developing, or very technical market. We mentioned in sport, we mentioned in battery, we mentioned in optical also with this new project of polyamide, clear polyamide, etcetera.
We did a lot even if some people can have the impression that what is sustainability slowing down in terms of potential of growth, we still believe that it’s a big driver of the world and we’ll continue to push a lot on that. And so it’s not really market share. Again, it’s really a new development. We are very strict on new business development. We could mention also through PIAM Advanced Electronics, where because of the new mobility, you have plenty of application and digital plenty of application developing.
So there is even if you can have some taken down the mid, the long term is still very positive. So all this is coming from this new project including also to show you a third nature of projects as the acquisition of Dow adhesives by in flexible packaging by Bostik. So there is a little bit of market share recovery because in the past two years before we bought it, this business has lost market share. But it’s far beyond that. I think by putting three ranges together, the two belonging to Arkema and Bostik and another one belonging to this new acquisition, where I want really to be a full global player with a full range and in addition for flexible packaging and we will ramp up very quickly, because in terms of technology, we’ll be really at the top of the market.
So it’s a different nature again of project and this is what is good with this. So, I think we have 12 development projects. What is good about them, they have different natures. They are quite diversified. And if the macro is reasonably good, okay, I would say in the coming years, we are confident to deliver the €400,000,000 of contribution.
On the free cash flow, I will let on the current leverage, I will let Marie Jean Decommand just to mention that, I think again we had a quite if I compare also to some other press release quite a good free cash flow generation in Q2, which means really that is beyond to the DNA of Arcelor and steel and our balance sheet is quite solid.
Marie Jose Dansion, Chief Financial Officer, Arkema: So, regarding the updated guidance, basically it’s quite consistent with what we did at the start of the year. So, if you remember, end of Feb, we guided around 1,500,000,000.0 to €1,700,000,000 EBITDA with a €600,000,000 cash flow, the midpoint being €1,600,000,000 So, it’s now readjusted to between 1,300,000,000.0 and €1,400,000,000 So, midpoint is €1.35 So, I’d say you find basically a corresponding adjustment on the cash flow guidance. So, it still assumes actually similar type of a variance in working capital that we had generated last year and also assumes the reduction of CapEx that we have committed to deliver this year and on which we are on track. Therefore, I would think the leverage, if you take the midpoints of the two guidances should remain relatively stable between 2.4 times EBITDA and 2.5 times EBITDA.
Aaron Ciccarelli, Analyst, Berenberg: Thanks very much.
Conference Operator: Next question is from Martin Pfaff, BNP.
Martin Pfaff, Analyst, BNP: Hi, good morning. Two questions, please. The first one on the I mean, clearly, we’ve seen the resilience of the two specialty divisions, adhesives and advanced materials. But when we look at coatings, obviously, very different picture. So I was wondering if you could, I guess, talk about the different dynamics within the coatings division between downstream and upstream acrylics.
And maybe can you talk about the resilience of that downstream business in terms of, I guess, net pricing, margin contribution, etcetera? And then the second question for Marie Jose on that cash flow point. I understand that you’re taking the same assumption on working capital as last year. But I mean, last year, sales were up at group level. And I guess this year, they’re going to be down a few 100,000,000.
So I’m just wondering, you assuming that we see a recovery towards the end of the year and therefore, I guess, the working capital picture reflects an improvement into H1 next year? Thank you.
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: Thank you, Laurent. So on the first question, in fact, it’s true that we have two different dynamics between upstream and downstream. Upstream, no surprise in this kind of environment. And this is almost cyclical business. So, we suffer from unit margin, which is linked to so from the spread, which is linked to the cycle of the low demand And it will come back as soon as the demand is recovering.
So here, you can see it two ways. But if you are positive, you can say there is an upside for Arkema in the coming year, which is quite significant. And with regard to the Downstream, I would say that net pricing is resilient. The topic is volume. So, in fact, you have differentiated one, This is a net pricing, which is negative for the Upstream and the Downstream is not the volume, which reflects the global economy.
Marie Jose Dansion, Chief Financial Officer, Arkema: On cash flow, basically, when you compare the second half, let’s say, last year and this year, I expect a similar improvement in working capital, so close to EUR $250,000,000. So the main driver is probably we count on a more flattish seasonality of the business compared to last year, in line with what we’ve seen since the beginning of the year. So this I would say is the main change if you compare the two financial years. Obviously, the other change is the less expenses on CapEx that generate less payable of CapEx that I guess this is mechanically factored in your models already.
Conference Operator: Okay. Thank you. Next question is from James Hooper, Bernstein.
James Hooper, Analyst, Bernstein: Hi. Thank you very much for taking my questions. I have two, please. The first is around the incremental cost savings plan. Clearly, the plan was before to save roughly $50,000,000 per year through to 2028.
Are the incremental savings found this morning, are they additional to the plan? Or are these front loading of future savings given the pressure on the business? And then my second question is about the portfolio. Given the kind of different dynamics and the capital being invested is focused much more on high performance polymers and adhesives. Has the performance of coating solution changed your view on the right portfolio for Arkema?
Thank you.
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: Okay. So, two very different questions, but quite valid. So, the first one, in fact, we the 50 in average becomes 100 for this year. So, we should have achieved 50. So, it’s 50 incremental to the 50, which brings it to 100, which is quite significant Arkema.
And I would say structural, so it’s not the idea is that it’s not just sort of one off that we’ll get back next year. And the idea is that we set the base lower than it should have been with our previous plan. So it’s really a big effort from the team. So as you know us, we are always a little bit low profile in terms of communication on that. But I can tell you that the momentum by the team is really there.
With regard to the performance of Coating Solutions, in fact, it’s typical performance of Coating Solutions when the market is down. So we should not overreact. And we know you have to be prepared that actually can depending on the cycle to be lower than what is normalized conditions. So it’s a bit more even if EBITDA is quite disappointing, but it’s not horrible. I would say, we are in a position which are a little bit extreme for this kind of business because of this context that we have explained.
So it can get normalized quite soon. As soon as we start to see some rebound some tension, you will be positively surprised by Coating Solutions. So we don’t want to go in that We have, as you know, a strategy which is very clear around the three segments, which make our materials, specialty materials focus. They are very complementary. For example, in coatings, we see a lot of application in battery.
It’s a very important technology in battery, very complementary to what we do in adhesives and also in high performance polymer. So we really we continue to build on that. Once it’s up and you’re right, in terms of allocation of cash and of resources, we put a clear priority in high performance polymer and adhesives. And like in any portfolio, you have some businesses which play more to cash cow. And so, where you really put the emphasis on the growth.
James Hooper, Analyst, Bernstein: Thank you very much.
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: Thank you. Next
Conference Operator: question is from Matthew Yates, Bank of America.
Matthew Yates, Analyst, Bank of America: Hey, good morning everyone. Just a couple, please. I wanted to just revisit the balance sheet and the cash flow. Correct me if my numbers are wrong. I think at the strategy presentation, you talked about CHF $6.50 to 700,000,000 of CapEx on average through the coming years.
When you look at that leverage ratio, which is the highest I can remember at Arkema, and you also think about the state of the end markets, are you still intending to spend the same magnitude of CapEx over the next couple of years, or will you be revisiting that? And then the second question, slightly more specific really, is, there’s some press stories about a big US smartphone company potentially launching a foldable model next year. I don’t know if you have any insights into whether that would use polyamide technology, whether Arkema has a chance of selling into a US customer because that was obviously one of the big synergy opportunities from taking the Korean technology into different markets. So curious if you have any insights into that. Thank you.
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: Okay. So with regard to the Matthew, the first one, So, you’re right to say that we started with an amount which was $750,000,000 to 800,000,000 at the Capital Markets Day. We decreased to $650,000,000 to 700 Clearly, the current spend this year is max $6.50. If we can do less, we’ll do less, but this max is $6.50. And given the current context, it’s clear that we have not a tendency to exit $6.50 for next year.
So this will have to be confirmed. It depends on the macro. But we are just finishing a big launch of we have that we have financed last year finished the finance last year a big wave of CapEx. So we are not in a hurry to put big CapEx next year. So we’ll continue to I would say, streamline the CapEx.
So let’s consider that this year the MAX is €650,000,000 And then next year from what we see today the MAX will also be $650,000,000 but to be concerned. With regard to the smartphone, clearly, I don’t want to be too specific, especially in advance of PM and Umedica, the RBC company in Korea. So, I want them to let their communication go. But clearly, all you are talking about are opportunities for POLYM. PM is a global is supplying globally to supply global players on smartphones.
So they are very well positioned and they are taking opportunity from all the models. But I don’t want to be too specific, right of care.
Matthew Yates, Analyst, Bank of America: Thank you, Thierry.
Conference Operator: Welcome. Next question is from Chetan Udeshi, JPMorgan.
Chetan Udeshi, Analyst, JPMorgan: Hello? Can you
Martin Pfaff, Analyst, BNP: hear me? Yes.
Chetan Udeshi, Analyst, JPMorgan: Yes. The first question was, it seems from your comment that you haven’t really seen much change so far in July versus what you saw in Q2. And if that is correct, would you suggest that we model seasonal developments in third quarter compared to second quarter, which tends to be down like 5%, 10% versus second quarter? Or is there something that can be different in Q3 versus normal seasonality? That’s one.
The second question, perhaps for Mario Jose. Your net interest financing costs were higher than, I think, at least what we had in mind. I think historically, you’ve talked about EUR 80,000,000 to 90,000,000 of net financial expenses. Is that number now higher given what we’ve seen in Q2? I know you also have refinanced some of your debt.
And third question was, it seems you the comment about rapid recovery when demand turns suggests that you think all of the earnings pressure that you’ve seen in some of your businesses, most notably in Coatings, is cyclical, but we also know that the supply cycle today is far worse than we’ve had for many, many years. So why would your profitability recover rapidly? In other words, why should we not see some of your earnings pressure in some of your businesses to be more structural in the sense you’ve just lost it, just because you can’t compete with some of the very low price competitors?
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: Okay. So on the I will let Marie Jose answer on the two obviously. On the first one, I would say that July is if I put the seasonality aside, I mean, it’s the same kind of trend as the exit of Q2 and you have not, but you have not to expect Miracol, Uvala Lite, it will come. So, I would say, it’s really in the continuity. But without being too specific, should see the normal seasonality of Q3 versus Q2.
If you take the past ten years, you have seen that the Q3 is always below Q2 with a certain discount, which can be more or less important. If you take the average, I think it gives you a good idea. You need to take in mind that August is a low month, in a short month. So, no, so nothing no comment no special comment on that, just that we enter the quarter in continuity in the second quarter and that you will observe the normal seasonality, where because of our growth, the Q3 is lower more than the quarter than Q2. But nothing special there and it’s factored in the guidance.
Marie Jose?
Marie Jose Dansion, Chief Financial Officer, Arkema: Yes. So, the financial expenses, you are correct. In fact, we we faced an increase in financial expenses in our P and L. Have delivered €58,000,000 financial expenses for the first half. In fact, the cost of financing remains quite competitive because if you take the average cost of our bonds, both senior bonds and hybrids, the average rate that applies to Arkema is 2.7%, which frankly in the current market financial interest, it’s extremely competitive still.
But we have less liquidity that we invest. We basically repaid a senior bond of EUR700 million in Jan. And in fact, the main effect of this increased financial expenses is coming from the interest on invested cash, which is in fact lower than what we got as revenues last year. So, this is in fact the main phenomena. I was investing last year $1,700,000,000 at an average of 3% and I’m now investing an average of $1,200,000,000 cash at an average of 2.2% for instance.
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: Thank you, Marie Jose. So, on the last question, I did not say that profitability would recover quickly. What I say is that the profitability of the Coating Solutions and in particular of the Upstream, which is the Upstream Axelis, we will recover with the market. This means that it’s certainly in our specialty portfolio is more cyclical is the most cyclical business. And it’s linked to the profitability back to the question of law of the Upstream.
As a cycle is reflecting reflecting the macro. So for the time being, are in low cycle. So we see that on the net pricing on the unit margin of the Upstream and mechanically when the demand will come up, you will have a recovery of the earnings. Now, on your point, it also depends on the supply. And the supply, I mean, we have now close to sixteen years of experience on that.
White card is more Asia, because in Europe and U. S. You have absolutely no change in the supply since many years and there will not be because of it will make no sense to extend in these two regions. So it’s really depending on the demand there. And on Asia, you can see that we are already in under capacity, but I would say for the first part of the year finally, academic profitability is not so bad.
And I know that China wants to put more pressure on the, let’s say, rationalizing overcapacity in many sectors. So you can see it positively or negatively, but we try to say calm and neutral. So I would say to answer your question, we don’t think that the earning decrease is structural. For the reasons that I’ve mentioned three actually, since for the Downstream as I mentioned to Laurent, is truly the volume, it’s a volume topic and we really we should be addressed when the recovery. Now, about the speed of the recovery, I have no clue.
You have no clue. Nobody has any clue. We will wait and see, but we are prepared for when it will come. We’ll be ready there.
Chetan Udeshi, Analyst, JPMorgan: Thank you.
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: You’re welcome.
Conference Operator: We have no more questions registered at this time.
Thierry Lenhoff, Chairman and Chief Executive Officer, Arkema: Okay. I would like to thank you very much for your interesting question. And I wish you all a good continuation of the summer. Okay. Talk to you soon.
Bye bye.
Conference Operator: Ladies and gentlemen, this concludes this conference call. Akima, thank you for your participation. You may now disconnect.
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