Earnings call transcript: Arkema’s Q1 2025 results show revenue growth amidst challenges

Arkema SA (AKE.PA) reported its Q1 2025 earnings, revealing a slight revenue increase to €2.4 billion, up 1.7% year-on-year, but a decline in EBITDA. The company’s earnings per share fell short of expectations, and its stock price saw a minor dip in pre-market trading. According to InvestingPro data, Arkema’s last twelve months revenue stands at €9.9 billion, with a gross profit margin of 20.3%. Despite current challenges in Europe and North America, strong performance in Asia offers some optimism.

Key Takeaways

• Arkema’s Q1 2025 revenue increased by 1.7% year-on-year to €2.4 billion.
• EBITDA decreased by 6%, with Specialty Materials and Intermediates segments both experiencing declines.
• The company’s earnings per share missed forecasts, impacting stock performance.
• Strong growth in Performance Materials and successful integration of Dow laminating adhesives.
• The company remains cautious due to geopolitical uncertainties and market softness.

Company Performance

Arkema’s overall performance in Q1 2025 was mixed, with revenue growth overshadowed by a decline in EBITDA. The company reported €329 million in EBITDA, a 6% decrease from the previous year. Despite the challenging macroeconomic conditions, Arkema’s Performance Materials segment showed significant growth, with EBITDA up 70%. The integration of Dow laminating adhesives also contributed positively.

Financial Highlights

• Revenue: €2.4 billion, up 1.7% year-on-year.
• EBITDA: €329 million, down 6% year-on-year.
• Specialty Materials EBITDA: €331 million, down 3%.
• Intermediates EBITDA: €24 million, down nearly 40%.
• Adjusted Net Income: €99 million (€31 per share).

Earnings vs. Forecast

Arkema reported an earnings per share (EPS) of €31, falling short of the forecasted €1.56. The revenue of €2.4 billion also missed the forecast of €2.41 billion. This miss in both EPS and revenue forecasts reflects the ongoing challenges the company faces in its key markets.

Market Reaction

Following the earnings release, Arkema’s stock price experienced a slight decline of 0.31%, closing at €65.1. InvestingPro data shows the stock has declined 31.6% over the past year, currently trading near its 52-week low of €68.3, suggesting potential value opportunity. With a P/E ratio of 14.5x and strong free cash flow yield, the stock appears undervalued according to several metrics. Subscribers to InvestingPro can access detailed valuation analysis and 8 additional key insights about Arkema’s financial health.

Outlook & Guidance

Arkema maintains a cautious outlook for the remainder of 2025, with EBITDA expected to at least match last year’s performance at constant exchange rates. The company anticipates a recurring cash flow close to €600 million and potential improvements in the second half of the year. InvestingPro analysis reveals strong fundamentals, with cash flows sufficiently covering interest payments and liquid assets exceeding short-term obligations. The company has maintained dividend payments for 18 consecutive years, demonstrating financial stability despite market uncertainties.

Executive Commentary

Thierry Le Hénaff, CEO of Arkema, remarked on the challenging market environment, stating, "After a challenging macro in 2024, the market environment in Q1 twenty twenty five remained difficult." He also highlighted the positive momentum in Asia, saying, "We see a good momentum in Asia since now certain number of quarters."

Risks and Challenges

• Geopolitical uncertainties and trade tensions could impact global demand.
• Weak demand in Europe and North America continues to be a challenge.
• The company faces potential raw material price fluctuations.
• Destocking and low inventory levels across supply chains may affect sales.
• Ongoing tariff impacts could influence regional production strategies.

Q&A

During the earnings call, analysts focused on Arkema’s growth potential in Performance Materials and the impact of tariffs on operations. Executives confirmed limited direct tariff impact due to regional production and discussed the potential for raw material price decreases to benefit margins. Concerns about market softness were also addressed, with management expressing cautious optimism for the latter half of 2025.

Full transcript - Arkema SA (AKE) Q1 2025:

Conference Operator: Welcome to Arkema’s First Quarter 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 by pressing star I will now hand you over to Thierry Le Enaff, Chairman and Chief Executive Officer. Sir, please go ahead.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: Hello. Thank you very much. Good morning, everybody. So welcome to Arkema’s Q1 twenty twenty five Results Conference Call. Joining me today are Marie Jose Vincent, our CFO and the Investor Relations team.

As always, to support this conference call, we have posted a set of slides which are available on our website. I will comment now the highlights of the quarter before letting Marie Jose go through the financials. And at the end of the presentation, we’ll be available to answer your questions as usual. After a challenging macro in 2024, during which Arkema delivered a good performance, The market environment in Q1 twenty twenty five remained difficult with volatility and also a lack of visibility reinforced, as you well know, by the ongoing uncertainty around trade tariffs that has driven certain customers, particularly in The U. S.

To adopt a wait and see attitude. As a result, the demand globally through across most of our markets in Europe and The U. S. In the first quarter, while Asia remains solid with significant growth. Note that there were some exceptions in the market with well oriented markets like electronics, which again supported PM’s significant development.

In this context, Arkema results end up well with EBITDA slightly down at €329,000,000 for the quarter. Our Specialty Materials, which represent 93% of our total sales and which are the core of Arkema’s strategy showed a good resilience with EBITDA close to last year level with a 3% decline, supported by the strong growth of high performance polymers following on from the positive momentum of last year. On the opposite side, Intermediates, which is 7% of our sales, decreased significantly due to refresh on gases that are expected to stay weak in the second quarter before they start to improve. Looking briefly at the performance of our three specialty material segments. In the ADD segment, our ongoing work on efficiency, our strict control of operation, as well as our continuous dynamic price management enabled us to mitigate the weak demand environment in industrial adhesive in Europe and North America, while the construction business was rather stable.

Besides, Bostik benefited from the integration of those eliminating adhesive, which is starting well, I’m pleased to say. In Advanced Materials, our EBITDA was hung up by 7%, thanks to the good momentum in high performance polymers, especially in Asia. The dynamic of new business developments notably in batteries, electronic and sports drove the significant volume growth and was supported by the plant expansions. Moreover, I wanted to highlight PM, whose EBITDA increased by more than 70% in q one, supported notably by the rising demand for ultra thin, p I fins for smartphone, one of their latest innovations. Lastly, in putting solutions, market conditions remain at a low level in the spring acrylic impacting the performance of the segments.

I believe this Q1 results position us well amongst the industry and concerns the resilience of our portfolio of high value added technologies in specialty materials that we have built over the past years. In parallel, the group continue to implement with a high level of execution, its major project, which will support the growth of the company in the future. As mentioned already, we have made good progress in integrating the teams of Dow and already put in place a whole set of initiatives to restore their market position and improve the performance of this activity with procurement and cost optimization. This is really an exciting project where Arkema can make a difference with our other businesses are very complementary. We can now propose a full set of technology for flexible packaging to our customers and this should position us as a key player in the market.

We are happy to confirm our expectation of significant development and synergies over the next five years. On the organic project front, we are progressing well with the ramp up of the twelve thirty three ZD unit in The US. This new generation of fuel specialties with low emissive impact used for energy efficiency of buildings is already contributing nicely to our results. In addition, our DMDS capacity in The US should ramp up from midyear as well as the expansion of our organic peroxide in China. Besides, I’m very happy to confirm our greenfield polyamide 11 plant in Singapore is now running pretty well from a technical standpoint and should start to exceed breakeven around this summer.

Finally, as already announced in Feb, we shortly start to work on our new capacity in The US for PVDF, scheduled to be completed mid-twenty twenty six. This represents a high return project with a limited investment of US20 million dollars which will enable us to follow market development and also the increasing demand for locally manufactured PVDF, notably in semiconductor, cable market, and energy storage systems. I also wanted to come back quickly on the long term agreement we recently signed with ENGIE for the supply of biomethane from our second France. This means that approximately 85% of the gas consumption needed to run our Bostik operation in France will come from a renewable source. This follows the agreement we already signed last year also with ENGIE for advanced materials and those will contribute to reduce our CO2 scope one emission in line with our climate plan objective.

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 and we exchange all of your questions.

Marie Jose Vincent, Chief Financial Officer, Arkema: Thank you, Thierry, and good morning, everyone. So let’s start with the Alkermes revenues at €2,400,000,000 the Q1 sales were up 1.7% year on year, supported by 1.9 positive scope effect corresponding mainly to the €51,000,000 sales contribution of dark eliminating adhesives. Volumes came out broadly stable year on year supported by Asia and driven by the continued progression of high performance polymers in advanced materials. This performance, was achieved in the context of an overall weak demand environment in many markets in Europe and North America. The price effect was limited to minus 0.5%, reflecting the globally stable raw materials environment.

Q1 EBITDA came in at €329,000,000 6 percent below, last year. Main, items are the, intermediate EBITDA, which was down nearly 40% year on year at €24,000,000 essentially impacted by the significant decrease in refrigerant gases due to the implementation of new quotas in Europe as well as lower prices in The U. S. Acrylics in China allowed to offset partly this effect, thanks to good momentum on volumes at the start of the year. On the other hand, specialty materials were, very resilient with an EBITDA at €331,000,000, 3 percent below Q1 last year.

By looking at the different segments, Adhesive Solutions achieved an EBITDA of close to €100,000,000. It was impacted by the lower volumes mainly in industrial additives, while construction remained at a low level, but was supported by our dynamic pricing management and strict control of operations. The EBITDA margin reached 13.8%, which takes into account nearly 50 basis points of dilutive effect related to the consolidation of Dow’s laminating adhesives. Advanced Materials EBITDA increased significantly at €174,000,000 thanks to a solid growth in headphones polymers, benefiting from the growing contribution of PI Advanced Materials, deposited momentum in Fluorosppecialties and the progressive contribution of new projects. Performance Additives held up well in a weak environment.

And all in all, Advanced Materials EBITDA margin improved 100 basis points to 19.5%. EBITDA in Coating Solutions came in at EUR58 million reflecting low cycle conditions in the Upstream, as well as lower volumes in the Downstream activities. Depreciation and amortization stood at EUR169 million and included the amortization of the new production units, which started up during 2024, leading to a recurring EBIT of EUR160 million and EBIT margin of 6.7%. Non recurring items amounted to EUR58 million, including €36,000,000 of PPA amortization and €22,000,000 of one off charges, notably the reorganization costs at our Jari site in France and some restructuring and integration costs at both fixed. Financial expenses stood at minus EUR24 million reflecting the lower interest on invested cash.

Tax expenses at 22.5% of REBIT are consistent with the last year’s level. And consequently, the Q1 adjusted net income stood at EUR99 million, which corresponds to EUR31 per share. Moving on to cash flow, Q1 recurring cash flow amounted to minus EUR138 million, which included the first quarter working capital seasonality. The working capital ratio on annualized sales stands at 17.4%, slightly up year on year, including a negative change in fixed assets payables. This is clearly mechanically linked to the reduction in CapEx in the first quarter this year compared to the end of last year, which was at a peak level in a CapEx commitment.

Local capital expenditure amounted to EUR89 million in the quarter, in line with our guidance of annual CapEx spend around EUR650 million for the full year 2025. Net debt on hybrid bonds at the March ’25, therefore amounted to just over €3,400,000,000 The net debt to last twelve months EBITDA ratio stands at around 2.3 times. This concludes my comments. Thank you for your attention. I will now hand it over to Kerry for the outlook.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: Thank you, Marie Jose for your comments. So going into Q2, as you will know, the weakness and the uncertainty in the macroeconomic environment that we have said in Q1 was reinforced at the beginning of the second quarter by the announcement of significant tariffs by the U. S. Administration and by the wait and see attitude we could, observe from customers. With regard to this topic of tariffs, we have developed over the years a particularly strong industrial footprint, as you know, in the three major region of the world in order to serve customer from their own geography.

This proves to be a key element to protect the group from direct impact of higher tariffs, when which we assume should be therefore limited. Nevertheless, we are remaining obviously very attentive about the indirect impact of this tariff and the reply from other countries on the global demand and the macroeconomics. This is obviously not easy to quantify at this stage. On the other hand, we certainly continue to focus on our sales, controlling strictly our cost and operation as well as pursuing our main growth project execution and ramp ups. In this context, assuming no major slowdown in global growth occurring from the current tariffs implementation, the group will aim to achieve in 2025 an EBITDA at least equal to last year at constant exchange rates and a recurring cash flow of close to EUR600 million, which would mean a significant step up compared to last year.

I thank you very much for your attention. And together with Marie Jose, we are now ready to answer your questions.

Conference Operator: Thank First question is from Tom Britlesworth, Morgan Stanley. Please go ahead.

Tom Britlesworth, Analyst, Morgan Stanley: Good morning, Thierry, Mariusz. Two questions, if I may. The first one is on PM. I mean, clearly, you bought this as a business that would grow, but I don’t think I fully understood the point you’re making today. Are we now in a phase where PM is delivering its next phase of growth?

You talked about 70% year on year growth in 1Q, but clearly, there’s a strong step up expected in the PM consensus through the rest of this year. So are we now at a point where we’re going to start to see consistent growth from PM going forward? Second question, if I may, again, just around your 2Q guidance. So 1Q was down approximately 7% year over year. But is it fair to assume that the exit rate from 1Q was worse, I.

E, is down more than 7%, and therefore, the starting rate for 2Q is going to be below that, on top of which we then have to think about the FX impacts? I’m just trying to grapple with whether you’re seeing a further deterioration in the data in April versus what we saw in March with regards to this wait and see from U. S. Customers. You.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: Thank you for your question. So, yes, with regard to PM, our feeling is that but it was already the case. If you remember last year particularly in the second part of last year, we are growing, which is nice to see in the current world because the pocket of growth are quite limited in the current macroeconomics. And we believe that PM will continue to grow, especially in electronics, but hopefully with also some other developments in other industrial market will continue to grow in the coming quarter. So as you know, the equity story for PM was not just sort of short term growth, but also long term project where we could we believe we could change significantly the base of profitability for PM over five years.

And it’s nice to see that last year we started to see that. Start of the year, we confirm that and hopefully it will continue. Also, I will not promise that the kind of growth that you show in the first quarter will be the same for the following quarter, but we should continue to grow in the coming quarters and years. With regards to Q2 guidance, would say it’s not purely a guidance. It was more to give you some color on Q2 in a world which is rather uncertain to say the least.

What can I say? So we say that we talk about relative continuity, so which means that broadly similar trends to the ones in Q1. This mean still contrasted trend by region. This mean low demand in LA and Europe and Asia still continuing to do well. Most of end markets showing weak demand, but with exception like electronics that we mentioned with PR, but also batteries, port, three d.

Certainly significantly better resilience of specialty material versus intermediate. So these elements that we saw in Q1, we believe we will see them in Q2. The two difference will put a bit more pressure on Q2 than on Q1 that we spotted. One is mechanical, the FX evolution, whatever we do, we got and in April, it was not favorable. We’ll see what it is in May and June, but it’s quite volatile.

So the truth of one month can change the month after. But let’s say that if it continues like it was in April, it’s a negative factor compared to Q1. And then and again, it’s uncertain. We have no crystal ball and we need to see what is the landing point. We had early approved the confirmation of The U.

S. Tariff as you know and also of the magnitude, which in April reinforce the wait and see attitude of customers. So this is also the second difference between Q1 and Q2. But for the rest, this is what we say. We see a good continuity.

Tom Britlesworth, Analyst, Morgan Stanley: Okay. Thank you very much.

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

Conference Operator: Next question is from Martin Roger, Kepler Cheuvreux. Please go ahead.

Martin Roger, Analyst, Kepler Cheuvreux: Thank you. Hello. Good morning, Thierry and Marie Jose. First question, did you see any prebuying from your customers in Q1 in advance of the tariffs? The reason I’m asking is that the volumes in Intermediates were up by 16% in Q1, and that was driven primarily by acrylics China, which must have been skyrocketing in demand.

And the second question, a bit coming back to Tom’s question before regarding your guidance for 2025. EBITDA was down by 6% in Q1. You say the trend continues into Q2, which means EBITDA will be down in Q2 as well year over year. But your full year guidance is flattish EBITDA. That means you need to catch up in the second half to reach your guidance.

But the second half is usually seasonally weaker than the first half. So what makes you confident that this seasonality in the second half this year will be more favorable than in the past?

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: Okay. So on on the because in the market, which is chemical, which is serving so many customers, so many countries, so many end markets, is already difficult to have a complete feeling of maybe there has been a little bit of pre buy in Asia is possible. But on the if you look at Asia, this is a good trend. We already had it in last year’s second semester. So it was not the question of tariff at the time and the trend was good.

So we see and I think we share it with you. We see a good momentum in Asia since now certain number of quarters maybe because of our positioning in this region. So we see that on the other side, you took about three buy, but we saw also destock and we come back to that on the second point In Europe and US, so it’s a reason we’re sorry how customers can continue to destock. But it’s true that we believe that the stock in the China are rather low. So now when you look at the full year guidance, yes, clearly it shows some rebound in H2 of macro on H1, which is really atypical from what we have seen this kind of demand, the cautiousness, the wait and see is quite atypical.

So then all of you have different assumption, and and we have our own assumptions that we wanted to share with you, and we share also internally to get all our teams focus on the what we want to deliver. This is obviously what we shared with you. What we think is that so when you say seasonality is in fact we compare year on year. So this means we compare H1 with H1 and H2 with H2. And we think that we have low stock in the chain clearly as I mentioned.

Is the demand in the Q1 and Q2 is weak? We don’t see a collapse. And in fact, if you look at our volumes, they are negative, but not so negative. So this means you have not collapsed in the end market, which means that we believe and then we can have a debate on that. The clarification and stabilization of geopolitical topics should support an improvement with some level of rebound.

And then last but not least, on top of that, we have the contribution of the project with that promising ramp up. So even if we assume the lower end of the range to be consistent with our full year EBITDA guidance. You still deliver 80,000,000 EBITDA on the year and the majority of it will be on the second part of the year. So these are some elements that we can share with you.

Unknown, Participant: Thank you.

Conference Operator: Next question is from Aaron Ciccarelli, Berenberg. Please go ahead.

Aaron Ciccarelli, Analyst, Berenberg: Hello, good morning. Thanks for taking my question. I have just one on High Performance Polymers. Last week, one competitor of yours reported mid single digit price decline. I wanted to understand what’s driving your positive pricing in high performance polymers, if you can be specific in terms of which polymers and application that would be useful?

Thank you.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: So we don’t specifically disclose HPP. We disclose Advanced Materials. We have a combination. What is clear is that high performance polymer were mostly driven by good volume, by new business development introduction. Pricing, I would say, was neutral.

And it’s true that we work a lot on the mix with some introduction of new business in Fluorosppecialties. As you know, this I mentioned, I think in my speech, twelve thirty three MD, which is doing well. Clearly, it takes a mix up to good mix of development in the specialty polyamide supported by our Singapore plant, but not only is going in the right direction. Also, we really focus on new business with a high value as PM has a good pricing by nature. You know that PM you saw the business case on PM.

They have a strong profitability. So it’s certainly it. So it’s a combination, I would say, but it’s more it’s not really the pricing, it’s really the impact of the mix and which was favorable and on top of that a good volume development. But we were, I would say, for the same neutral plus in terms of pricing. Okay.

But the team are really doing a good job,

Tony Jones, Analyst, Redburn Atlantic: though. Thank you.

Conference Operator: Next question is from Alex Stewart, Barclays. Please go ahead.

Alex Stewart, Analyst, Barclays: Hello. Thank you for the discussion. A couple of quick questions. Did I hear you say that you’re still expecting €80,000,000 or so of contribution from the big projects starting up this year, and that you expect that to be more heavily weighted to the second half. I just wanted to clarify that point.

In Adhesive Technologies, you had quite a material slowdown in Q1, as you’ve highlighted. Could you tell us when in the quarter that started? Was it really towards the March? Was it sort of February, March? Just some idea of when that started to change would be very helpful.

And then finally, in Fluorogases, you talk about weaker pricing, which weighed on margins. Was that as you expected, or was it worse than you expected? And if it was worse than you expected, what are the main reasons why it was worse given that you had pretty good visibility into quotas and, this isn’t a business that moves around a huge amount quarter to quarter on volumes. So any insight on those three points would be great. Thank you.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: Okay. Yes. On the you you understood right on the the 80,000,000 contribution, at least from a project, but my message was we would be more on the one on the range. I will give you, I think, a range of 80 to 130. We say it should be closer to 80,000,000, but not surprised consistent with the overall environment.

And I would say we started to share with you, we started the first quarter. So all the projects are ramping up. Some projects have not even started. Some like now we just have to start, etcetera. So you can expect that the quarter by quarter development will be higher and higher.

And we started at 15 around 15 in Q1. So, yes, if you put some improvement in Q2, let’s say 20 to say something, then this means that the second semester will be significantly higher than the first one. With regard to adhesive, thank you for asking the question because, you know, I have quite experienced in the adhesive. And it’s very rare that we see the adelift, which normally, certainly, our most resilient business, which was not the case in the q one, which should not be the case in the q two either. More volatile times and advanced material.

So this was a typical and it’s really about we have seen that certain customers some without losing any share at all because we check customer by customer every month in detail without losing any share. We have some customer in The US, in Europe, but surprisingly enough in The US for which the level of demand was 20%, thirty %, forty % lower than than it was last year. So this means that they are destocking quite significantly and in a typical way. And for this reason, we believe that h two for Adelie will be significantly better. And it comes also to the question of which was asked at the beginning.

With regard to Fluorogases, yes, we must say we are a bit surprised that at the end on the Q1, we delivered our guidance. So which means that for the total company, which means that more or less, we have not too many surprises, but for gas pricing was a bit lower than expected. It comes from this general from this general environment where the demand is low, then you have as far intermediate traditionally intermediate businesses, you have a correlation between the volume and the pricing. And this is the reason why we think and we have some evidence of that, mid year should start to improve both volume pricing because the stock at our customers are quite low. Seasonality gives more volume in Fluorogases.

Q2 and Q3 are a bit bigger than Q3 is always bigger. It should help the prices. And also maybe this is an example where tariff should help. So for this result, we think that H2 should be quite better in with regard to Fluorogases. One last point on the disease of SOUX between Feb and March difference.

I mean, it’s always very difficult. It’s my experience to comment one month because, you know, what month is always it seems a sufficient amount. This is not because one month is lower or higher than another that it means anything. So it’s better to look at the whole as a whole quarter.

Conference Operator: Next question is from Ketan Udeshi, JPMorgan. Please go ahead.

Unknown, Participant: Yes, hi. Thanks for taking my questions. The first question was simple. Can you remind us what is your current sensitivity on FX, bearing in mind that euro has strengthened not just against U. S.

Dollar, but also a few other currencies like perhaps Chinese yuan or some of the LatAm currencies. So any I had a number of EUR 50,000,000 in mind, but maybe just wanted to check if that has changed given the portfolio ships and some acquisitions. The second question, just following back on the falling back to the discussion on Fluorogases, are you saying you expect the year on year to improve in second half of the year just because the comps become easier? Or you actually think the absolute contribution from Fluorogases actually gets better? And just related to that, I one of your competitors, Honeywell, announced, I think it was surcharge of 45%, etcetera, on certain refrigerant gases, HFO type.

Can you remind us, if I’m not mistaken, you produce all of your fluorogases in The US that you sell in The US. So for you, it should be a positive, but I’m not sure if this will be in intermediates or will that be in your advanced materials? Because I suppose some of your newer generation refrigerants are actually included in advanced materials. Thank you.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: Okay. So on the sensitivity, so first of all, on the FX, we have all to be with it because it changed really. It’s quite volatile and it changed every month, if not weeks. But I would say that what we have communicated so far, which is still true, is that for the U. S.

Dollar and euro parity is €50,000,000 as you mentioned, impacting EBITDA for plus or minus 10% change, okay? On the other FX, we have not communicated. But the main event is that can be current one, that can be RMB, that can be Japanese, etcetera. Well, it can come from many countries. I would say the main driver is The US and this is the one we we communicate to you regularly.

With regard to Fluorogases, I mentioned always when I when I say situation is improving, we are never sequential. We are always year on year. Whatever our comments, it can be for corona or whatever. When the I know that sometimes listening to all of chemical companies that can be some confusion, but with regard to our chemo, when we say team proves, it’s nearly always year on year. So the and in fuel gas, there are typical seasonality and reprioritize its own seasonality.

This is why second shift means not a lot. With regard to refresh around gases, I think like everybody, but it’s not linked to refresh on gases. We will when we did, we adapt on the tariff. So we’ll do what is necessary. I would say that the split between intermediates and HPP is quite simple.

Intermediate is really a refrigerant for refrigeration while in HPP. And in fact, there is a coincidence in the in the to the HFO by coincidence in our development, but since many, many year, I always been outside of refrigerant. So this means that the refrigerant or at least for most of it. So this means that in HPP, you will find the HFOs, the new generation and the application are most supported like for by mega trends. For example, one good example is this twelve thirty three that we use in building efficiency and which is there.

Unknown, Participant: You.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: Question is

Conference Operator: from Laurent Favreau, BNP Paribas Exane. Please go ahead.

Laurent Favreau, Analyst, BNP Paribas Exane: Yes, good morning. Two questions that may appear a bit technical, but the first one is around working capital. I think you’ve had one of the largest outflows in Q1 that certainly I can remember. And it looks like it’s mostly driven by inventories. I was wondering if that’s related to, I guess, inventories of finished products or whether that’s reflecting a higher level of purchase of raw materials as maybe you are preparing I understand you didn’t see prebuying from your customers, but I was wondering if you did some prebuying yourselves on raw materials.

That’s the first question. And the second one is on PM. I understand there’s a lot of growth, but when we look at the net income from minorities, it’s about EUR 1,000,000 in Q1 twenty twenty five, similar to Q1 twenty twenty three or before when you didn’t have PM. So I’m wondering why are we not seeing the, I guess, minorities flow back to the 46% of PM that you don’t own? Thank you.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: Maybe I will let Marie Jose for the two questions.

Marie Jose Vincent, Chief Financial Officer, Arkema: So regarding working capital, Laurent, basically we have two main effects. I would say we have clearly a significant outflow on payables of CapEx since the level of CapEx committed last year was at, let’s say, at a peak. So compared obviously to the decline of CapEx in the first quarter, there is a significant payout in the quarter. I would say it accounts for half the variance if we compare to the outflow of working capital with Q1 twenty twenty four. The second is, let’s say, customers

You are correct in inventories, the stocks are slightly increasing. Would say overall, no particular phenomenon. We are in fact, ramping up our stocks classically in this period of the year coming out of low Q4 levels. When I look at the seasonality of the sales in terms of proportion, stock levels are not inconsistent, let’s say, compared to last year. We also have increased in receivables with no sinisterality particular or no reduced particularly increasing, but more linked, let’s say, to be increase in a slight increase in sales.

So at this point, I I have no particular, let’s say, one off item to to to give you that would that would indicate, let’s say, a change in strategy where we continue in the organization, you know, be disciplined in terms of controlling our stocks and and our credit loss. PI, in fact, you look at the publication of PI and our own contribution, there is definitely in the conversion in euro a significant adverse variance, I would say, on the Korean one over the period. So probably going back to the question on the situation of currencies where a number of currencies are actually following a similar trend compared to dollar. So so no particular, let’s say, issue. The only, effect is inside the, depreciation of the, newly invested assets that we had in, in PI that we inherited.

And that, let’s say, increased, over the year last year. So no particular, no particular effect. We should see some reduction in the financial expenses. So in terms of net income, I I think we we should see, let’s say, a translation of their improved EBITDA into net income as we progress in the year.

Laurent Favreau, Analyst, BNP Paribas Exane: Okay. Thank you.

Conference Operator: Next question is from Emmanuel Matot, ODHF. Please go ahead.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema0: Hello, Thierry. Hello, Marie Jose. I still have three questions. First, I understand the integration of Dahua disease has started well. Does that mean that the 13.8 of EBITDA margin in Dahua disease in Q1 should be the low point and you should recover as from Q2?

Second, do you see much more imports from China to Europe because of the trade war between U. S. And China? Is that the risk you are considering? And last question, how much of your revenue in The U.

S. Is And what are the main business units exporting from Europe or Asia to The U. S? Thank

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: Thank you, Emmanuel. So with regard to Dow so yes, we confirm that the integration we are just at the first steps of the integration. But so far, from a quality standpoint, it’s going quite well and we are already implementing our plan. The effect on the margin of the, I think, now Jose was what alpha point on the legacy Bostik is 1414.3%. So have that in mind.

Now when you mentioned Q2, as we explained in Q2, we have a similar kind of environment plus the FX and plus the announcement of the magnitude of the tariff early April. So, you should more expect the improvement of the margin in Adhesives on the second semester, as we mentioned, for other business lines. But do we see much more import from China? You know China, not to be used in Europe, is a big importer. So now when we say that, it’s a general comment for the chemical industry.

And there are very notable nuances depending on which business then you are talking about. And the polyvalesic, we don’t see imports from China. You will see that more in acrylics. This is why the acrylic margin are more challenging these days. I would not say that we see a disruption or that we expect a risk or disruption on this matter in the coming quarter.

I think the landscape is very well known. And let’s say that the European Commission is aware not only for the chemical industry, but also for other industries that it is a topic and that they need to address one way or the other in the current world. Now for our company, for Arkema, we are a global player as you know. We take Europe as it is. We take China and Asia as they are.

And we take The US as well. There are some strengths, some element of weaknesses and it’s important to have a really good positioning that that we have. Now now with regard to The US, as I say, what is not produced locally is rather incremental. So it’s not I will not give you numbers, but it’s not a huge topic for Arkema. And we are supplying the region and we are very close to the customer.

We supply the region from the region, if not the country to the country for the largest country of Arkema. From what we see today, this is the direct impact and I think I mentioned it precisely to Arkema of tariff will be limited. The question for us and this is the one we mentioned when we gave it for the year and for Q2 is more the indirect impact, which is the one which is the same for everybody on the global macro and on the global demand. But with regard to local production for local sales, are our footprint is well adapted.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema0: Thank you very much.

Conference Operator: Next question is from Geoff Hayre, UBS. Please go ahead.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema1: Yes, good morning and thank you for the opportunity to ask questions. I just had one left. Looking at the Intermediates business for Q2, you obviously delivered somewhere in the region of $84,000,000 last year. Will that number be closer to where you were in Q1? Or will it be closer to where you were in Q2 last year?

Because it’s quite a big difference.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: With regard to Internet so I will not guide for every business for every quarter. What we say is that we had in Q1 quite a significant slowdown in our profitability year on year and that the profile in the Q2 should be continuity. So you will have a big again, a big slowdown in Q2 versus Q2 last year, as we mentioned. I think it was clear in the press release.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema1: Okay. Thank you.

Conference Operator: Next question is from Tony Jones, Redburn Atlantic. Please go ahead.

Tony Jones, Analyst, Redburn Atlantic: Hi. Good morning, Thanks for taking my questions. I’ve got two left. On PVDF, two part question. First, have you changed the growth strategy slightly?

So now also targeting pushing harder into applications like cables and semiconductors in addition to EV. And then secondly, could you talk about the sales split for PVDF, because I’m not really quite aware what that is? And then secondly, on Coating Solutions, and I know you touched on this a little bit a few minutes ago on the acrylic side, but the EBITDA margin now has been under 10% for a few quarters. We’ve just not seen that level back since 2015 or so when the acrylic chain was structurally oversupplied, and then we saw capacity taken out. What are you expecting to happen to the acrylics industry, in North America and Europe?

Thank you.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: So with regard to PVDF, no, we have not changed our strategy. What we have said, I think, in the past is that our so called legacy business, this means that before battery, has been growing in the the past by 7% in average. And this growth, so this include the semiconductor, cables, and the full time, etcetera, the traditional PVDF end market. This this will continue to grow not every year. It depends on the year, but in average, I would say, globally, at this kind of pace, let’s say, 7% a year.

On top of that, we got the we got the battery market, which have developed quite nicely in Asia and particularly in China. And if you remember well, we have put in the past, let’s say, ten years, a significant capacity in China in order to follow not only this market, but in particular this market. So what we are doing with this incremental investment, this is a small investment in The US. We are investing, let’s say, for it should start in ’26 for the year ’27, ’20 ’8, okay? In order to be able to follow the growth of the PVDF market in The U.

S, including the traditional business, which we continue to grow as they were in the past. But it gives also some space to take the first development in battery knowing that nobody knows exactly at which pace the Gigafactory will be implemented and developed in The U. S. So this means that with this kind of investment, which is strong profitability, but modest in size, we are able to be flexible. This means that we can do a bit more of batteries or we can do if batteries is not there to push a bit more in cable semiconductor or other business because we will continue to grow.

So I think this is but we have not changed the strategy fundamentally. The only question that we have had during the Capital Market Day was which size and at which stage we want to increase our capacity in The US for PVDF. And we have different kind of scenario, something very big, seeing average, something smaller. And we decided given the evolution of the electric mobility in The US, we decided to go for the smaller ones. Safety of p v d f, you did not mention if it was by region or end market, but anyway the answer will be the same.

We don’t give it. So I think it’s a level of split we don’t want to give to our competitors, so we don’t give it. Actually, it’s alright to say that we are below 10, but close to 10. So let’s say we are around 10, which is really a mid cycle sorry, a low cycle environment, which at the same time reflect on intermediate product, the kind of environment we are living in for the time being. But I think the stock are very low.

And again, it doesn’t mean that we still have that the whole year. We think that second semester should be better for our colleagues upstream.

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

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

Conference Operator: Next question is from James Hopper, Bernstein. Please go ahead.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema2: Hello, and thank you very much for taking my questions. I have one left. What do you expect the raw material progression to be in the revised guidance? And in particular, how will the oil price affect margins in the kind of upstream acrylics business and Coating Solutions and other acrylics businesses? Thank you.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: For raw material, we don’t have reasonable. For the time being, they have been rather stable since the beginning of the year. The oil price has decreased. We see is that long lasting or not. We don’t know.

Clearly, if if the demand is not rebounding, we’ll get certainly upside on the on the raw material, but we’ll get downside on the demand. Okay? So my feeling is that we should have some decrease of raw material, but not so huge on the second semester. This is what we we planned. And anyway, you have a sort of three to six months lag between the raw material decrease and and when it come to your to your p and l, let’s say that what we have assumed in our guidance maybe here and there a little bit of improvement in raw material, but nothing significant except maybe given the oil price on some raw material like propylene that will feed acrylic, which is back to your question.

But then, as you know, in acrylics, this is not a matter of let’s say that if you take our most downstream business, if you have lower raw material, you should have some benefit in your P and L. If you take actually it’s more driven by the supply demand. So the propylene price is reflected in the pricing in the acrylic. This is a nature of intermediate. So it’s not a big factor for acrylic and we have not put what we say is basically the second semester is better actually.

It will come from bit of demand and some restocking because as I mentioned, the pipeline of stock is rather weak but not not a matter of what I tell you.

Conference Operator: Next question is from Matthew Yates, Bank of America.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema3: Just a quick one. Just can we touch on the Additives part of the Materials division? You’re mentioning that was an area of softness in the portfolio. I think sales down 6%. Can you just expand on sort of where the weakness is and any view on whether or not that’s going to improve as the year progresses?

Thank you.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: So the additives were, I would say, in advanced material, we had two profile, HPP, which went very well and ADD, which were a bit lower than that last year. I would say combination of the general weakness. I would say, for example, if you take the chemical, which is more more present on some traditional market like refineries refinery on the first quarter where West India, for example. So you have some of the fees in The UK phone. H two zero two, as you know, we are impacted by the operation in France, which has been quite struggling in the context of difficulty of our supplier of Voco Rx, show factors, overhauling ad where high low volume.

So you you don’t have that. I would say it’s not it’s a bit below last year, which is not so bad in the current context, but I would say general weakness with some specific element like I mentioned in linked to refinery, linked to ag, linked to this specific topic. So some of these are not necessary in the Q2, but in H2 should improve.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema3: Got it. Thanks very much.

Conference Operator: Next question is a follow-up from Laurent Faber, BNP Paribas, Exane. Please go ahead.

Laurent Favreau, Analyst, BNP Paribas Exane: Yes. Morning again. Question on the oil and gas side of the business for PVDS and polyamide 11. We’ve seen one of the historic one of your historical customers, I guess, moved to a solution with a competing technology with a contract announced this morning in Brazil. I was wondering if you could remind us of how big oil and gas is for your PVDF and Polymer 11 business and whether that is, I think, a new serious competition that you are seeing or whether you think it’s more of one off?

Thank you.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: So with with regard to and then I take something broader than Q1, let’s say, last year also, etcetera. No, I would say that it’s a business. I would not give you the numbers on the side for obvious competitive reason. I don’t want to share that. But it’s one business among others in polyamide 11 and PVDF, which is a nice business, but not by far not the majority at all of what we have in PVDF in polyamide 11, but it’s a good line among the 10 others.

And so far, it has been a solid business and they are all depending on the application, some new technologies, but also you have the reverse way. We have benefited from change of technology, which were favorable to us. So I would say, we do know it’s a it’s a business on the it’s it’s a business which is You have some materials and others. But I would say with regard to Arkema and our development, it goes in the right direction.

Laurent Favreau, Analyst, BNP Paribas Exane: Okay. Thank you.

Conference Operator: Gentlemen, there are no more questions registered at this time.

Thierry Le Enaff, Chairman and Chief Executive Officer, Arkema: Okay. So is there no I’d like to thank all for your question, which are as a very interesting and don’t hesitate if in the day or the days after you have some complimentary question. Beatrice and James and the whole team will be certainly willing to exchange with you. And thank you again for your time and talk to you soon.

Conference Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone, and Arkema thanks you for your participation.

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