Earnings call transcript: Arkema Q4 2024 misses EPS forecast, stock drops

Arkema SA (OTC:ARKAY) reported its fourth-quarter 2024 earnings, revealing a mixed performance. The company missed its earnings per share (EPS) forecast, reporting an EPS of €1.27 against the expected €1.65, a 23% shortfall. Despite this, Arkema (EPA:AKE)’s revenue slightly exceeded expectations at €2.27 billion, compared to the forecasted €2.26 billion. According to InvestingPro data, three analysts have recently revised their earnings downward for the upcoming period. The market reacted negatively, with Arkema’s stock price falling 4.67% to €79.55 in pre-market trading, reflecting investor disappointment over the earnings miss.

Key Takeaways

• Arkema’s EPS fell short of forecasts by 23%.
• Revenue slightly exceeded expectations by €10 million.
• Stock price dropped 4.67% in pre-market trading.
• Strong performance in Asia offset soft demand in Europe and the US.
• Ongoing cost-cutting initiatives aim for €250 million in savings by 2028.

Company Performance

Arkema demonstrated resilience in a challenging market, maintaining stable group sales of €9.5 billion for 2024. The company’s EBITDA rose by 2% year-on-year to €1.53 billion, with an improved EBITDA margin of 16.1%. InvestingPro analysis shows the company maintains strong financial health with a GOOD overall score of 2.73, supported by robust cash flows that sufficiently cover interest payments. Strong growth in high-performance polymers and robust results in Asia helped counterbalance weaker demand in Europe and the US.

Financial Highlights

• Revenue: €2.27 billion, slightly above forecast.
• EPS: €1.27, missing forecast by 23%.
• EBITDA: €1.53 billion, up 2% year-on-year.
• Adjusted net income: €616 million (€8.23 per share).
• Free cash flow: €358 million.

Earnings vs. Forecast

Arkema’s actual EPS of €1.27 missed the forecast of €1.65 by 23%, reflecting challenges in traditional chemical markets and geopolitical uncertainties. However, revenue slightly beat expectations, coming in at €2.27 billion versus the forecasted €2.26 billion.

Market Reaction

The earnings miss led to a 4.67% drop in Arkema’s stock price in pre-market trading, settling at €79.55. This decline places the stock closer to its 52-week low of €69.15, emphasizing investor concerns over the earnings shortfall despite the positive revenue surprise. InvestingPro data reveals the stock has shown relatively low price volatility historically, with a beta of 1.13, and maintains a P/E ratio of 17.3. Subscribers can access 8 additional ProTips and comprehensive valuation metrics through the Pro Research Report, available for over 1,400 top stocks.

Outlook & Guidance

Arkema projects its 2025 EBITDA to be between €1.53 and €1.67 billion, with an additional €100 million expected from new projects. The company aims for €600 million in recurring cash flow in 2025, focusing on sustainability and innovation.

Executive Commentary

CEO Thierry Loehnaff highlighted Arkema’s resilience: "We proved, again, to be among the most resilient in our industry." He emphasized the company’s commitment to shareholder returns, primarily through dividend policy, and ongoing efforts to drive initiatives and ideas forward.

Risks and Challenges

• Geopolitical uncertainties affecting customer orders.
• Soft demand in Europe and the US.
• Challenges in traditional chemical markets.
• Tariff uncertainties impacting customer behavior.
• Potential supply chain disruptions.

Q&A

During the earnings call, analysts inquired about the impact of tariff uncertainties on customer behavior and Arkema’s growth strategy in new markets like electronics and batteries. Executives also addressed potential mergers and acquisitions in the adhesives sector and clarified the strategy for expanding PVDF capacity.

Full transcript - Arkema SA (AKE) Q4 2024:

Conference Moderator: I will now hand you over to Thierry Loehnaff, Chairman and Chief Executive Officer. Sir, please go ahead.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: Thank you very much. Good morning, everybody. Welcome to our Kmart full year twenty twenty four results conference call. With me today are Marie Jose Danchon, our CFO and also the Investor Relations team. As always, the slides used during this webcast are available on our website and together with Marie Jose we’ll be available to answer your question at the end of the presentation, as usual.

In 2024, Arkema delivered a solid set of results within the range of the full year guidance we gave a year ago. And in a macroeconomic environment that you perfectly know, which eventually remains challenging throughout the whole year. In this context, our teams demonstrated their commitment and their agility, working actively to manage the short term as best as possible and also continuing to implement with a high level of execution the major projects, which will contribute to accelerate the growth of the company in the future. I know many of you are already focused on 2025, and we’ll talk about the outlook later. But it’s important to appreciate the robustness of our 2024 performance.

We proved, again, to be among the most resilient in our industry, as a slide number six of the deck shows. And this in very different types of environment. This indeed values the strategic and operational work we have accomplished over the past several years. So here are some key points of last year I’d like to share with you. First of all, the group delivered the growth with an EBITDA of EUR 1,530,000,000.00 in 2024, up 2% year on year.

This result was driven, first of all, by the Adhesive Solutions segment, which has increased its EBITDA by more than 8%, reaching a record high EBITDA margin of 15.1% to be compared with 14% a year ago. This quite encouraging performance was delivered in an overall low volume environment, like for all our business, reflecting all the work done on the value pricing, the strict management of operations and also the benefit from recent synergies, including Ashland (NYSE:ASH), which is a good illustration of the one Arkema combined approach, in this case, applied on pressure sensitive adhesives. Secondly, the Advanced Materials segment delivered a robust 20% EBITDA margin with a significant improvement potential ahead and primarily supported by the overall good growth of high performance polymers. The main drivers last year were the innovation and new business development in applications linked to sustainable megatrends, for example, in sports and in batteries. Also PM’s promising first full year contribution and the expansion for more efficient building of floral specialties with low emissive impact.

On the other hand, performance of disease were down, but this was compared to a high base last year and impacted by or the year before and impacted by a few technical hurdles like the Millennium flooding of our site in this book. Concerning Cutting Solutions, to construct thick views, downturn activities improved compared to last year, in particular thanks to our strong development in Asia, namely in electronics and industrial coatings market. But this was offset by upstream acrylics’ low cycle condition, which we experienced in Europe and U. S. You have more detail on this segment in the press release and in the slide, and I will be certainly happy with Marie Jose to answer any of the questions you may have on the last year performance.

Another highlight of the year was our EBITDA margin, which then did at 16.1%, slightly up compared to last year. This figure illustrates the strength of the Specialty Materials portfolio we have built over the years, focusing more and more on high performance sustainable solution. It’s also the result of our value pricing and our strict discipline on operational costs. Thanks to our cost cutting initiative, we have been able to set around half of the inflation, which was rather high last year, in line with our target to achieve EUR $250,000,000 of annualized cost savings, both fixed cost and variable costs, by 2028. The group has also benefited this year from its well balanced geographical footprint.

Each of our main regions now represent more or less one third of our sales in Asia, was our fastest growing region in 2024. So we have reached the balance we wanted to reach, one third, one third, one third. This underlines the acceleration of the group in the most dynamic region, which will be further supported by the progressive contribution of our major growth project, essentially located in Asia and North America. Most of you already have this project well in mind. But as a reminder, we put their list on the Slide 11 of the deck, and you will notice that we added the PVDF expansion in The U.

S. That we announced yesterday. You may have also some questions on this. We reviewed several options. As indicated during our 2023 CMD with regard to PVDF in The U.

S. And finally, we have decided to take a wise and step by step approach to match market development. We start with this 15% capacity increase in our second largest PVDF site in the world, a high return project with a limited investment of USD 20,000,000, which will enable us to follow the evolution of the demand for innovative PVDF grades notably in EV and semiconductor markets. Among this major project, let me highlight also the ramping up of our Singapore plant for Biosource Polymer, the new twelve thirty three Zendiyi unit in The U. S.

That is starting just right now, the PM acquisition, which should deliver another strong growth in 2025, supported, for example, by the promising development of ultra slim themes for smartphones. And finally, the Dow acquisition, which was closed end of last year and Ooz integration so far is starting well. They are all quite attractive from a financial standpoint. They leverage Arkema’s differentiated positioning and will be supported for a large part by the mega trends. As importantly, the cash to fund this project has almost been fully spent as of end of twenty twenty four.

We made a simulation taking into account the ramping up of this project and the demand dynamic of each region expected in the coming years. And as explained in the slides, we could foresee a further evolution of our geographical footprint in the long run, with North America to represent around 40% of our total sales, Asia and the rest of the world around 75%, which Europe could be diluted to around 25% of our total sales. This measured project will contribute up to more than EUR 400,000,000 of additional EBITDA in the next four years as explained in the Slide 10 of the deck, EUR 100,000,000 of additional EBITDA being the estimate we confirm for this year. I also wanted to quickly highlight some of our CSR results, where we made good progress overall in 2024. This is a case for decarbonization, where the group’s numerous initiatives to reduce its carbon footprint are paying off, for instance, with the signing of new long term agreement for renewable energy in China and in The U.

S. We are also well aware of our 02/1930 target for scope three emissions validated by SBTI. So we have decided to strengthen our emission to 67% reduction by 02/1930 against 54% previously. Another key priority for SKBAR is, as you know, to further increase the diversity among the employees, including the share of women in management position. On this last element, we have decided to increase the target from 30% to 35 in 2013 back on the speed of our progress in the area so far.

As a result of our solid financial performance in 2024 and the both confidence in our KEYMILE growth prospect, the dividend of EUR 3.6 per share will be proposed as the next HGM, up almost 3% compared to last year and in line with our progressive dividend growth strategy. This also represents a payout ratio of 44%, which is fully in line, as you know, with our long term targets. I will come back to the outlook at the end of the presentation, but now I would like to hand it over to Marie Jose, who will review in more detail our Q4 and full year results.

Conference Moderator: Thank you, Thierry. Let me start with the revenues. Our Kela group sales amounted to EUR 9,500,000,000.0 in 2024, quite stable year on year. In fact, volumes were up 2.4%, which corresponds to a volume growth of more than 3% in Specialty Materials in one hand and a volume reduction in Refrigerant and Gases in line with the quota reductions in U. S.

And Europe on the other hand. In the context of fleet demand, Specialty Materials benefited from a more favorable market trends in sports, packaging, batteries and energy, while construction stabilized at a low point and automotive faced several destocking waves. Price effects on sales was a negative 3%, in line with the evolution of raw material prices overall. The scope effect at 2% reflected essentially the integration of PI Advanced Materials. And finally, the currency effect at minus 1% reflected the depreciation relative to euro of several Latin American currencies and the Chinese yuan, while in fact, the U.

S. Dollar remains stable in average for ’24 compared to ’23. As presented by Thierry, the group EBITDA came at 1,530,000,000.00 up 2% year on year. And our EBITDA margin stood at 16.1%, reflecting our efforts to maintain both the solid pricing and cost discipline. Looking at Q4 specifically, Bostik delivered an EBITDA of EUR 91,000,000, quite resilient pricing in a low volume environment.

Advanced Materials delivered EUR 166,000,000, up 11% year on year, mainly driven by high performance polymers in Asia and by PI Advanced Materials consolidation. Coating Solutions Q4 EBITDA was down to EUR 54,000,000, impacted by low cycle margins in Upstream Acrylics, where downstream activities were stable. And finally, EBITDA in intermediates was down at EUR 24,000,000 versus a high comparison base in Refrigerant Gas bid in Q4 last year. Please note that we also recorded two specific one offs in Q4, namely the cost of acquisition of Dow Adhesives for EUR 15,000,000 and the IFRS two charge linked to the capital increase reserved to employees for EUR 15,000,000 also. Both items were reported as non recurring items in Q4.

Now back on the full year basis. With recurring depreciation and amortization of EUR $637,000,000 in 2020, including the impact of PI Advanced Materials consolidations and that of organic project start up. The recurring EBIT amounted to $895,000,000 and this corresponds to a recurring EBIT margin of 9.4%. A word on nonrecurring items, which amounted to EUR 155,000,000 for the year, they included a EUR 40,000,000 Singapore start up costs, EUR 30,000,000 related to M and A costs, in particular, the acquisition of Dow. Some restructuring charges for roughly million and various provisions, notably regulatory and environmental fields, for million.

Financial expenses was stable at EUR 73,000,000 as well as our average tax rate, which remained stable at roughly 22% of our recurring EBIT. All in all, adjusted net income came in at EUR $616,000,000, which corresponds to EUR 8.23 per share. Moving on to cash flow. We delivered a recurring cash flow of EUR $419,000,000 in 2024. This included a spend in capital expenditure for a total of EUR $761,000,000, in line with our guidance and reflecting the ramp up of our major CapEx projects.

Looking at ’25 and further, the group plans to for lower CapEx intensity, as you know, we indeed expect an annual CapEx spend comprised between EUR $650,000,000 and EUR 700,000,000 over the period of 2025 to 2028. Working capital remained well controlled, the working capital ratio on annualized sales standing at 13.8%. Free cash flow amounted to $358,000,000 including a nonrecurring outflow of EUR 61,000,000, linked primarily, as you know, to the start up cost of our Singapore platform as well as some restructuring costs. Taking into account the net cash outflow of EUR 177,000,000 from the portfolio management operations linked to the acquisition of DAS Laminating Adesis, our KEMA Group net debt stood at EUR 3,200,000,000.0, including EUR 700,000,000 of hybrid bonds. The group continues, therefore, to enjoy a strong balance sheet with a net debt to last 12 multi EBITDA ratio of 2.1 times.

Thank you for your attention. And I will now hand it over back to Felix.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: Thank you, Marie Jose, for all these explanations. So now I will comment a little bit the outlook. So as we said in our press release, the demand at the beginning of twenty twenty five is relatively soft overall. Of course, there are some specific areas like electronics, battery and sports continuing to be well oriented. But as you know, we have a good indicator in the company, which is the Adeliv’s where and this is quite consistent with what our competitors publish in this area.

We see some softness where last year it was really very resilient and very performing in a challenging environment. So our interpretation is that the current geopolitical context with all this discussion around the tariff is driving our customer to wait and see, which will not be long lasting, but this is what we see in this first quarter. So in this context, we guided an EBITDA level in the first quarter slightly below the performance of last year, as you could see, which if we follow the publication of our peers, including this morning, this compare well to them and confirms our stronger resilience. In the rest of the year, beyond the evolution the clarification of this tariff topic and the evolution of the macro, we will focus on our FEHEP, as usual, in our project, which is really the DNA of the company, and will benefit from the progressive ramp up of our major project in our specialty materials. We should contribute around EUR 100,000,000 of additional EBITDA, which is quite significant.

On the other side, the intermediate segment EBITDA is expected to decrease by roughly EUR 13,000,000, mostly reflecting the impact of the quota’s reduction in Refrigerant. On the full year, we’ll benefit from our balanced geographical footprint, serving the region from the region. So far, what we have seen even in the beginning of the year is that our Asia sales are still dynamic. And so this is but consistent with this tariff story. This is Europe and U.

S, which are nagging. So but certainly, the fact to be so balanced as Arkema is an advantage in the volatile world of today. Beside, we plan to reinforce our initiatives on our operational cost as we did last year and the years before and to continue to strictly manage our working capital. So if we take all these elements into account, so we plan to grow this year in 2025 and to reach a level between EUR 1.53, which is the level of this year, up to EUR 1,670,000,000.00. The high point of the range obviously assumes notable improvement of the macroeconomic conditions progressively in the year.

In terms of cash flow, we wanted to update you. So we plan to significantly increase our recurring cash flow compared to last year to reach around EUR 600,000,000, driven by lower CapEx and year on year, CapEx and year on year. Last year was peak year in terms of CapEx and we guided lower CapEx in 2025. So driven by lower CapEx, our EBITDA growth and also free control of our working capital. In parallel, we continue to implement our 2028 roadmap.

We have a lot of projects. We need to be executed at the highest level of quality. This will add to develop high performance specialty material, which is focused on sustainability and innovation to answer our customer needs for less carbon intensive solution. So this is what I wanted to comment with regard to the outlook. And thank you for your attention.

And together with Manager Veil, we are ready to answer your questions.

Conference Moderator: Thank you. The first question is from Aaron Cechcarelli of Berenberg. Please go ahead.

Aaron Cechcarelli, Analyst, Berenberg: Hello, good morning. Hello, Terry. Hello, Marijos. I have three questions, please. My first one is on your full year 2025 guidance, specifically on the lower end of your target.

Could you help me understand a little bit the assumption you’re baking in place? In this scenario, are you still assuming around $100,000,000 contributions on from new projects? Or is there any assumption from a business unit beside intermediates to decline? The second question is on Quitting Solutions. It would be great if you can help me reconcile a little bit the strength in the downstream business with the weakness in the upstream acrylics.

Is this a problem of supply? If this is a problem of supply, where does this come from at this stage? My final one is on the Adhesive Solutions business. Historically, you have not been very pushy, let’s say, on price increases. Raw materials are not declining anymore, but clearly demand remains relatively soft.

Would you expect pricing to be down on a year over year basis in 2025? Thank you.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: Yes. Thank you for your question. I will start with the last one because I’m surprised on your comment on price increase. I think on the contrary, we have done very good in value pricing. Certainly, there is an influence on raw materials.

But I would like to congratulate our team for the job they have done in Aditi value pricing. Don’t forget that we started when we bought Bostik in early twenty fifteen, we started with an EBITDA margin of 10%. We are now at 15% of EBITDA margin. And this has come a lot with our ability to pass price increase superior to raw materials and to have an evolution of the product mix, which is very favorable. So no, I don’t support your comment.

On the contrary, we do a good job. And hopefully, the net pricing in ’25 despite the low macroeconomic that you should not forget, which influence everyone. I think we expect net pricing a little bit positive, thanks to the work on the product mix and the dynamic pricing adjustment. So but at the end, it comes from innovation and differentiation. So this is a starting point.

And when I look at the quality of the portfolio in the disease today compared to what it has been, really, I’m very impressed by the job done by the team. So I think it goes in the right direction. On the full year guidance, I will not comment every element of the every point of the range. Obviously, it’s clear that you have a little bit of sensitivity of the EUR 100,000,000 to the macro and because EUR 100,000,000, this is not because you put a CapEx that you got the EBITDA. This is because you developed yourself and you can supply it from the CapEx.

So obviously, the macro has some influence on the project. The important point is that after our growth in 2024 that not many of our peers have delivered, that we have delivered, we expect again growth in 2025. The magnitude will depend on the evolution of the macro. So is the macro remains quite challenging with no clarification of tariffs, etcetera. It’s clear that U.

S. And Europe will suffer more and we are the one of the guidance. And if macro is rebounding step by step, as some of you can expect, then maybe you can share your assumption. After in the chemical industry, two years of soft demand, I think we can go up to 1.67. What we try to do also, whatever the macro, is to focus on our self help.

And we believe that compared to most of our peers, we will again deliver a superior performance versus last year. We believe that with the uncertainty on the macro EUR 150,000,000 is a range. I don’t know your feeling, but it’s reasonable, I think. And it gives you a good transparency on what we think. On Coating Solutions, I imagine your question is more on the acrylic upstream than on the downtrend downstream.

I think we did well last year. It’s clear that we are at the low point of the cycle. Oncotic solution, as you know, this is the acrylic presence in Europe and U. S. It’s not a matter of supply.

Supply has not increased. It’s a matter of demand. We have been in a world of low demand, as you know, in 2023 and 2024. And Axellix has gone down to a low cycle, but we try to stay positive and we consider it in the midterm as an upside for the company. We know we underperformed in Arcadix.

There is something like EUR 100,000,000 plus of EBITDA, which is missing in compared to normalized conditions in Europe and U. S. It will come back one day. Question is when? We don’t know with a lack of visibility on the macro, but what date will come and then it’s an upside that we’ll be able to catch.

But it’s not a matter of supply.

Aaron Cechcarelli, Analyst, Berenberg: Thank you. Just a clarification, the impact from intermediates is expected €30,000,000 3 point 0 million euros is that correct?

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: Yes, around €30,000,000 around.

Aaron Cechcarelli, Analyst, Berenberg: Okay. Thank you very much.

Conference Moderator: The next question is from Matthew Yates of Bank of America. Please go ahead.

Matthew Yates, Analyst, Bank of America: Hey, afternoon, Yvonne. I had a couple of questions for Marie Jose, really. Thank you for breaking down those $155,000,000 of non recurring items. That was going to be one of my questions. When we look into 2025, can you talk a little bit about what items will still be there next year?

Are we done now with the Singapore costs? I guess M and A depends what you do, but things like restructuring, environmental, do those repeat as a normal course of business? And then there’s somewhat of a sort of related follow-up. When you talk about $600,000,000 of recurring cash flow, what is the number that your IFRS accounts will actually show this time next year? I think you stopped talking about exceptional CapEx at the last MD.

We removed that definition, but again, probably related to those non recurring items in the P and L, what are the other things that may sort of mean that EUR 600,000,000 of free cash flow number is not exactly what’s reported? Thank you.

Conference Moderator: Thank you, Matthew. So I confirm that the nonrecurring was in particular impacted in 2024 by really two large items, which are the ramp up costs of the start up costs of Singapore site for roughly million as well as the cost of M and A transactions, notably the DAO transactions for overall EUR 30,000,000 in P and L. Both items actually, you find them back in cash. The first one in the non recurring cash flow, the second one in the M and A cash flow in the transactional cost of transactions cash flow. So I would think when I go back in history and when I joined, I guess, our more historical level of non recurring is more in the range of 60,000,000 I would say.

So you can never predict the events that are going to happen, but this would be something that we think will make sense. Looking at the EUR 600,000,000 target of recurring cash flow for next year, I think it’s a robust target. I need to assume that the underlying EBITDA we are forecasting. We have decreased CapEx spend as commented by Thierry. We’ve got, let’s say, our usual financial cash out and tax cash out.

So assuming working capital remains under control, it’s, let’s say, the normal IFRS cash flow generation.

Speaker 4: So if I’m sorry, is it good so it’s

Matthew Yates, Analyst, Bank of America: CHF 600,000,000 minus for the sake of argument CHF 60,000,000 of exceptional items is the way to think about that?

Conference Moderator: You could read it like that, yes.

Matthew Yates, Analyst, Bank of America: Perfect. Thank you.

Conference Moderator: The next question is from Tom Rigglesworth of Morgan Stanley (NYSE:MS). Please go ahead.

Tom Rigglesworth, Analyst, Morgan Stanley: Thank you very much. Two questions, if I may. The first one on the new projects and their ramp up, in particular, the PA 11 plant post the stop not the stop the re ramp that took place at the end of last year. What’s the current sales rate out of that facility versus the expected kind of I think it’s million of sales at run rate that we’re expecting? Second question, actually, let’s on Advanced Materials.

So can you just give us a kind of a global picture of PVDF? Are you building the new capacity in The U. S. Because the incentive pricing is there? Or is this a preemptive move ahead of anticipated demand?

And the third question is on Fluorogases in intermediates. Obviously, there’s a million reset this year, but is there how can you grow that business? Will the market normalize back to a higher level of its own accord? Or will you look to drive growth through pricing different products? Thank you.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: Okay. Thank you, Tom, for this question. So with regard to polyamide delivered, first of all, we have a nice growth so far. To start to generate EBITDA, we need to go beyond the breakeven point and a good new big plot, okay? This is why even if the sales increase will be rather significant on the P11, thanks to our innovation in many businesses, which ask for sustainability.

Among the 100, this would be one project, Montana. So the EBITDA is not directly your question, but it was important to mention it. The EBITDA contribution will be, I don’t say that you take 10 projects divided by 10 for the 100, but they are all in the same kind of order of magnitude, including PA level. So in fact, for every ramp up of this kind of plant, you have a little bit of disconnect in terms of EBITDA contribution between the sales, which will grow quite significantly, but you need first to reach the breakeven and then beyond the breakeven, you start to deliver the EBITDA and so it becomes exponential at a certain point. Okay.

So to answer your question on the sales, already there is the sales rate, which show quite a good growth. We say to wrap up 100% on Singapore, it will take five years, okay? But it will not be line error. This means the growth of the first years in order to exceed the breakeven will be more important than the growth of the last years, okay? So you take line error and you put a little bit more weight on the first two years.

On Advanced Materials, it’s a very nice project because which will get sort of a two years PEVAC, first of all. It’s not based on a sort of pre MT move, for example, on EV, which is certainly underwriting questions because our growth rate in The U. S. On PVDF over the past twenty years has been above 5%, okay? So here, we are 15%.

So if you have a little bit of battery once we start, you see that you can really see rather quickly this new capacity. On the other side, the cost of new capacity compared to what is the benchmark is quite low because we have found a very smart way to increase our capacity without spending too much in CapEx. So it’s quite, let’s say, solid in terms of business case. So it’s not incentivized. It’s not preemptive.

It’s really on our own. It’s quite a good value for what we can produce, completely consistent with the past growth, okay? So it’s quite a nice project and this is in the spirit of what we say after the Capital Market Day. On the Capital Market Day, it was a time where EV was really expected to grow everywhere very quick. Now the picture is different.

It will come at a later stage. And we have been able to, after one year, one good year of source to find a way step by step which really fitting well with our understanding of the market without taking any risk. On the Fluorogases, in fact, the way you have to look at it is that we have more or less, let’s say, top investment for Refrigerant as such. This means that all our investment, R and D, CapEx, in fuel or gases is on the HFO for insulation, for batteries, for thermal management, etcetera. So they are in HPP naturally because they find really they are home there and they are growing there.

So the growth is not small, but by definition, I would say, mechanically, the refrigerant, which is an intermediate, is following the quotas. So the contribution will remain at a good level, but you will lose a little bit of momentum every year, which is what is happening certainly in 2025, which is why we guided.

Tom Rigglesworth, Analyst, Morgan Stanley: Okay, great. Thank you, Terry, for a clear.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: You’re welcome.

Conference Moderator: The next question is from Tony Jones of Redburn Atlantic. Please go ahead.

Tony Jones, Analyst, Redburn Atlantic: Yes. Good morning, everybody, and thanks for taking my questions. I’ve got two. Firstly, on growth projects, when you’re deciding and budgeting to go ahead with these growth investments, how much visibility do you have on your demand? Are they usually off take agreements with big customers or is it more speculative?

And then secondly on uses of cash, share price is now trading at book value today and you’re not really getting much credit for the growth projects and acquisitions sadly. Is it now time to rethink about a major stock buyback program or is that just simply not going to happen? Thank you.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: Okay. On the growth project, it’s this is top of the game. I think we need really to predict in a world which is sometimes difficult to predict what will be the growth in order to deliver the payback expected from this growth project. In fact, you have different kind of growth project. The first important thing is to add portfolio of growth projects.

This means some will deliver better than expected, some will deliver lower at least at the beginning. But all in all, we deliver the trajectory of the portfolio of growth project, which we expected. Then you have different kinds of growth projects. You have like Singapore. It’s serving plenty of end markets.

A lot of them are linked to sustainability, so they depend on the geopolitical and macroeconomic context. But beyond that, there is a mega trend, which is very strong, where PA11 is a unique product. And then we have considered on the fact that whatever the macro, we are able to deliver enough growth to sustain this project. So there is a part of better in the CapEx, but it’s far beyond the macro. There are plenty of new business development and innovative project behind that, and this is why we build our confidence.

Now, for example, maybe sports will deliver quicker than expected, maybe EV vehicle will deliver, it will take more time, etcetera. Now you have a project like the twelve thirty three ZD in HFO, fuel gases for housing energy efficiency. This is linked to legislation. So it’s not depending so much on the macro, it’s depending on the evolution of the recession, which is not for sure. Then the third one is the partnership with Nitsienne on HF.

It’s backward integration. So this means that we know for sure that we will benefit on the integration because today, we buy outside. So all these projects are there different rational, but at the end of the day, we have enough visibility, not necessary on the macro, but on the drivers in order to make us on a portfolio of project, we expect that some project will over deliver, so under deliver to deliver altogether what was expected. Different question on the share buyback. I think I’ve made sometimes some kind of answer.

Our return to shareholders, we have decided that for long is based on mostly on the dividend policy, which is a nice one. As you could see, it has increased very significantly. It represents this year 44% payout, so it’s a rough time for the company, in a company which is still driving its growth with significant organic CapEx. We have plenty of ideas and some bolt on acquisition. So we have two times EBITDA in terms of debt.

So obviously, there is no place for share buyback and certainly massive share buyback. So this is a way it’s very transparent, very clear, very consistent year after year. Now if we have a disposal as we did, for example, for PMMA, there will be room for share buyback. We did it a few years ago. So there is no taboo.

But I think in terms of flexibility with the project we have, we placed the card of dividend and we certainly don’t want to create any step back on this component of share buyback.

Tony Jones, Analyst, Redburn Atlantic: Thank you, Thierry. That’s very helpful.

Conference Moderator: The next question is from Chetan Udeshi of JPMorgan. Please go ahead.

Chetan Udeshi, Analyst, JPMorgan: Yes, hi, thanks. Actually, my questions are for Marie Jose. First is, I saw there was a good step up in recurring DNA in Q4. Can you just give any guidance on what you think is the right number to look for in terms of recurring DNA for 2025? The second question was just a clarification on the recurring free cash flow again just to on Matt’s point earlier.

Can I confirm you don’t include the lease costs in that number? So that comes below that recurring cash flow. Is that right?

Conference Moderator: So in fact, you know the IFRS 16 and that is recorded, yes, differently in the cash flow statement. So it is not actually a cash flow movement of the period reported here. So the EUR 600,000,000 free cash flow target do not take into account, let’s say, the signature of a ten year lease, for instance, that would impact the debt. We only have in the cash flow, let’s say, the yearly amount that we pay for the lease in question. Regarding the depreciation and amortization, in fact, we have the various assets that we have invested.

And as Thierry mentioned, a number of those projects have basically now completed. So typically, if I look at the Singapore plant, we started the depreciation of the Singapore plant in 2024 and therefore you will have a full year impact in 2025. My expectation is that the depreciation and amortization is actually quite commensurate with the normal normative CapEx level. So I would think that, as you know, million to million being, let’s say, the normative CapEx that we see as a baseline for the company. Typically, D and A should reach this type of magnitude level in the future.

It makes total sense.

Chetan Udeshi, Analyst, JPMorgan: Understood. Thank you.

Conference Moderator: The next question is from Jean Luc Romain of CIC Market Solutions. Please go ahead.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: Thank you. Could you update us on the potential consequences

Jean Luc Romain, Analyst, CIC Market Solutions: of recent recently passed legislation on PFAS in France. I guess it’s not a lot, but I would like to have a confirmation.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: You have any one question or you have other question? Just one. Okay. Yes, there was a law on PFAS, which was adopted in France and in February 2025. This concern sort of ban for PFAS, as you know, is very large family.

So substances in textile, cosmetic, ski, waste are very specific. And we are not at all supplying this kind of market. So for us, there is no impact.

Jean Luc Romain, Analyst, CIC Market Solutions: Perfect. Thank you.

Conference Moderator: The next question is from Joof Heir of UBS. Please go ahead.

Joof Heir, Analyst, UBS: Yes, good morning and thanks for the presentation. Just had two questions. First of all, sorry, in your comments on the outlook, you mentioned the customers were holding back orders because of the uncertainty around tariffs. Could you give a little bit more details on that and what areas of the business you’re seeing that most acutely in? And also just on cost savings, you’re obviously targeting the $250,000,000 by 2028.

Do you see a need to increase that number going forward just given the current macro environment?

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: So, Geoff, on the first one, geographically, it’s certainly Europe and U. S. In fact, we had a good start in Asia. So we don’t see any influence there. So it’s really in these two parts of the world.

From a business standpoint, I would say that the superior gross market is still growing well. If I take one example, which is PM, for example, in electronics, actually, we have a good start of the year for PM. So it’s more, I would say, in the most traditional business, which is the main part of our business and of the business of chemical, even specialty chemical players, really a bit everywhere. And I would say this is why you mentioned the adhesive, because adhesive is a good, let’s say, indicator of what is the work. Because in adhesive, we don’t lose market share, we are everywhere.

So at the end and the start of the year was for Robustic. And Bostik, you saw the performance last year in a difficult market. We delivered superbly. So this means that this is why we see that our customers are not ordering as usual. And our interpretation, maybe you will discuss with other player in the industry, is that this tariff discussion is creating wait and see because they don’t know.

In fact, you order from one region and then you have a tariff. So what do you do? You need to get prepared for a way to do differently. So for me, I would put it on that. With regard to the cost, your question is wise.

I think it’s a good question. Certainly, we are trying to continue to work on our initiatives and ideas, and I will not be surprised that we delivered more than what we say. So our message is that don’t be worried. We did deliver what we promised at the Capital Market Day, but already if you multiply what extrapolate what we did last year For the next year, you will see that we should be above, and we’ll continue to find initiatives. But it’s true that in our communication, we have different style of communication.

We don’t over communicate on that, but clearly, we certainly work to do more than what was announced at the Capital Market Day.

Tony Jones, Analyst, Redburn Atlantic: Okay. Thank you very much.

Conference Moderator: The next question is from Laurent Favre of BNP Paribas (OTC:BNPQY). Please go ahead.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema0: Yes, good morning. Two questions please, Terry. The first one on PM. I think you mentioned that you got certifications for North American and European sales. I was wondering if you could talk about in which area in terms of end markets and products we should be thinking of?

That’s the first one. And the second one is on Slide 10. I know it’s a small difference, but at the Q3 stage, you were telling us that the bridge from 2024 to 2028 would be $440,000,000 and you’ve added PVDF in The U. S, but you’ve moved to $400,000,000 plus. And I’m just wondering if you’ve made more conservative assumptions or you just prefer to show us a round number?

Thank you.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: So the second question, so very easy. In fact, in the previous EUR $440,000,000, you had investment for decarbonization in France, which was not a gross CapEx, and we wanted in this presentation to show where was our gross CapEx. So we took it out and which was around $20,000,000 of EBITDA wide for PVDF, is more CHF10 million. So in fact, we kept the same guidance, but with lower contribution because in fact, PVDF, which is for the work of carbonization, as you know, is contributing less. So in fact, it’s the other way around.

We are more aggressive on the guidance. With regard to Pierre Me, yes, it was at least it confirmed what we had in mind. What we see is a rising demand for ultrafine poly midstream for including for smartphone. We see a good momentum. So there are some evolution of in smartphone, which are good for PAM for whatever reason because of the specification improvement of smartphone components.

So you have overheating issues. And for that, you need material like PAM. So we are very happy about that. And Piaomi is, as you know, a very highly intensive company, so they put their superior product range. And so this is one of the first reason.

And secondly, we start, but it takes some time to because there is a more litigation time for when you go you extend what you do in Asia to NA and to Europe. And we see a lot of potential with our teams between PMs and Arkema’s team to develop PMs product in Europe and NA. But I would say short term is more the contribution of some new trends like this interesting thing.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema0: And in Europe and North America, are we also looking at consumer electronics? Or is it other applications?

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: No, no. It’s the same. Okay. Thank you. Yes.

But it’s far beyond electronics. There are plenty PEM has already in Asia, plenty of industrial application that they have traditionally. And also, we are targeting battery, which will be in The U. S. And in Europe also.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema0: Okay. Thank you.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: You’re welcome.

Conference Moderator: The next question is from Jaydeep Pandia of On Field Research. Please go ahead.

Speaker 4: Thank you. Firstly is on sort of adhesives, but more broadly in the context of the construction chemicals industry. Theory, a lot of companies in the construction chemicals space, be it in roofing or are targeting now sort of the adhesives piece. There’s a lot of M and A that is going on, on the light side construction space. How do you see the competitive landscape evolving within from where you guys sit?

Is there more competition, but on the other hand also more opportunities for adhesives to penetrate in the construction industry? And what happens with regards to M and A for yourselves? Are there more opportunities or are the multiples actually going up because there are more people willing to invest in this area now? That’s my first question. Second question is around the shutdowns that we are hearing on and off, especially from American companies in Europe.

How do you see the upstream raw material availability, especially properly on a longer term basis for Europe? Is that an area of concern? Or you see abundant supply and therefore we shouldn’t worry about your acrylic assets in Europe? Thanks a lot.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: Two good questions. So on the M and A, I would say it’s not new. Some players are maybe different, but we have already seen the consolidation in the adhesive landscape. So we participate also to this evolution of scale on our product lines. This means the good thing on the in geosidase and chemical construction is that you have plenty of product line.

And when you say there is a new competitor or different competitors, in fact, we are not necessarily talking at all about the same product. So with regard to the product that we are making, we see a good stability of the big players, what is changing as a small player because you have some competition, we participate to the competition. You’re right to say that roofing is a good opportunity for us to develop, and we are growing every year. It’s not only in our construction, it’s both in industrial adhesive and construction adhesive, by the way, because it depends where is the application with level of the supply chain we are positioned to. So and we are positioned on both.

So to make the story short, yes, it’s an opportunity, the stability of big players on our own products and consolidation of the small players and we participate. On the in Europe, yes, it’s true to say that on the base chemicals, we see more and more shutdown in Europe with a point of attention. We don’t think it will be an issue for acrylics. We will watch, but we don’t think it’s an issue for acrylics. But overall, if you believe, like I believe, that to be strong in specialty chemicals in Europe, you need to have a strong base of intermediates and base chemical products.

It’s an element of attention that we need to follow. Now, Arkema, as you know, you have followed us since twenty years. We are quite pragmatic. We are a global player. We will adapt the company to what is sourcing available.

Competitiveness is not only sourcing, it’s competitiveness of the foreseen. We have shown above the past year that we were able to be quite reactive. And basically, unfortunately, you see the evolution of the trend of sales of RKM percentage of the total sales. You see it, so it reflects the fact that even if Europe remains quite interesting in the long run, will be lower in terms of share in Europe and will be bigger in U. S.

And in Asia. We have shown that in the past. We continue to show that. This is why we wanted to, let’s say, I don’t know if it is a guidance, but at least it gives you a forecast of what will be our self coverage in the long run with 40% in North America and also 30% in Asia. So I think it’s this means that Europe does mean that Europe will decrease.

It just means that if Europe is stable, because we will increase on the rest, it will continue to get diluted.

Tony Jones, Analyst, Redburn Atlantic: Thanks a lot.

Conference Moderator: The next question is from Ranulf Orr of Citi. Please go ahead.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema1: Hi, thanks for taking the questions. Two, please. Firstly, China acrylic spreads seems to move quite positively year to date. Is this something you’re seeing? And if these spreads are maintained for the rest of the year, can you give an idea of the positive and incremental earnings impact you could see?

And the second one is just on the outlook. Apologies if I missed it, so feel free to skip. But could you expand a little bit more on the Q1 outlook by division and the sequential EBITDA progressions? Thank you.

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: Okay. So on the first one, the issues that actually are a bit better on the start of the year. We certainly not extrapolate in China for acrylics. What is happening on two months on the full year as we don’t overreact when we see Europe and U. S.

On the full year. So I think we try to stay moderate in our, but it shows that we have some positive. We guided, I think, very precisely on intermediate, around minus CHF 40,000,000 on the full year. So this includes Fluor (NYSE:FLR) and Accreditics. So we’ll see what the dynamics in Accreditics, what the dynamics in Fluor.

We have different scenario for both of them. But all in all, we believe that 30,000,000 is a good number for us, the two, but we’ve got split between the two. With regard to Q1 by division, I think we already gave enough on the Q1. We certainly not do more than we see where I mean, every month there is a different momentum in each division. So I think what is important is what we said for the Q1 overall with different components.

As I mentioned, qualitatively, you see Asia better than U. S. And Europe. And by your business line, clearly, acrylics and other things are aligning more than some others. And then on the polymer, you benefit from some businesses export electronics.

So again, that is changing a little bit every month. What is important, you got a good forecast for the Q1 for the full year. I think it’s a level of granularity that not everybody is giving to you. So I think good in terms of transparency. Great.

Thank you. Welcome.

Conference Moderator: This was the last

Thierry Loehnaff, Chairman and Chief Executive Officer, Arkema: Okay. So I would like to thank all of you for all your questions, which are as always very interesting. And as I mentioned at the beginning, the Investor Relations team is at your disposal. If you have any further questions, you want to deep dive into one topic or another topic. And together with Marie Jose and the team, we’ll be we look forward to seeing some of you during the roadshows.

Thank you.

Conference Moderator: Ladies and gentlemen, this concludes this conference call. Arkema thanks you for your participation. You may now

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