Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arkema SA (ARKAF, Financial) delivered a solid set of results in 2024, with an EBITDA of EUR1.53 billion, up 2% year-on-year.
- The Adhesive Solutions segment achieved a record high EBITDA margin of 15.1%, driven by value pricing and synergies from recent acquisitions.
- Advanced Materials segment maintained a robust 20% EBITDA margin, supported by growth in high-performance polymers and innovation in sustainable applications.
- The company achieved a balanced geographical footprint, with each main region representing approximately one-third of sales, and Asia being the fastest-growing region.
- Arkema SA (ARKAF) made significant progress in CSR initiatives, including decarbonization efforts and increasing diversity in management positions.
Negative Points
- The macroeconomic environment remained challenging throughout 2024, impacting overall demand and performance.
- Coating Solutions faced downturn activities in Europe and the US due to low cycle conditions in upstream acrylics.
- The Intermediate segment's EBITDA is expected to decrease by roughly EUR30 million in 2025, reflecting quota reductions in refrigerant gases.
- The company anticipates a soft demand at the beginning of 2025, with some areas like adhesives experiencing a slowdown.
- Arkema SA (ARKAF) faces uncertainties related to geopolitical factors, such as tariffs, which are causing customers to hold back orders.
Q & A Highlights
Q: Could you elaborate on the assumptions behind your full-year 2025 guidance, particularly at the lower end of your target? Are you still expecting around EUR100 million contributions from new projects?
A: The EUR100 million contribution from new projects is sensitive to macroeconomic conditions. While we expect growth in 2025, the extent will depend on macroeconomic developments. If conditions remain challenging, we might be at the lower end of the guidance. However, if the macroeconomic environment improves, we could reach the higher end of the range. Our focus remains on self-help initiatives to deliver superior performance compared to last year.
Q: Can you explain the strength in the downstream Coating Solutions business versus the weakness in upstream acrylics? Is this a supply issue?
A: The weakness in upstream acrylics is not due to supply issues but rather low demand, particularly in Europe and the US. We are currently at a low point in the cycle for acrylics. However, we view this as a mid-term upside opportunity for the company, as normalized conditions could bring significant EBITDA improvements.
Q: Regarding the recurring cash flow target of EUR600 million for 2025, what should we expect in terms of nonrecurring items?
A: The nonrecurring items in 2024 were significantly impacted by startup costs for the Singapore site and M&A transaction costs. Historically, nonrecurring items have been around EUR60 million. The EUR600 million target for recurring cash flow assumes normal IFRS cash flow generation, excluding lease costs.
Q: How do you view the competitive landscape in the adhesives market, especially with increased M&A activity in construction chemicals?
A: The adhesives market has seen consolidation, but the competitive landscape remains stable for our product lines. We see opportunities in roofing and industrial adhesives, and we continue to participate in market consolidation. The stability of major players and consolidation of smaller ones present opportunities for growth.
Q: Can you provide more details on the impact of recent legislation on PFAS in France?
A: The recent PFAS legislation in France concerns a ban on certain substances in textiles, cosmetics, and cookware. Arkema does not supply these markets, so there is no impact on our business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
