Second-quarter 2020 results

- Press release
Corporate - Finance
Arkema confirms its resilience with a robust financial performance and high cash flow generation in the context of a global economy strongly impacted by the effects of the Covid-19 pandemic.
  • €1.9 billion in sales, down 15.6% year on year (-10.7% in H1’20):

• significant slowdown in the construction, transportation and industrial sectors, overshadowing good demand in the nutrition, packaging and hygiene markets

• sequential improvement in June, supported by the progress in the construction market in Europe and the US and solid sales in China

  • €286 million in EBITDA (€407 million in Q2’19) and EBITDA margin of15.0% – a resilient performance in view of the context:

• solid performance of Advanced Materials, with an EBITDA margin of 20%

• sharp rebound for Bostik in June

• benefits of rapidly implemented interim fixed cost reduction initiatives

  • Adjusted net income of €90 million (€192 million in Q2’19), representing €1.18 per share
  • Excellent free cash flow, at €288 million (€90 million in Q2’19), reflecting strict management of working capital and capital expenditure
  • Net debt down sharply relative to end-March 2020 at €2,134 million (of which €1 billion in hybrid bonds), including the €168 million dividend payment and €246 million in net proceeds from the divestment of the Functional Polyolefins business
  • Further progress in the strategy of refocusing on Specialty Materials, with the finalization of the divestment of the Functional Polyolefins business to the South-Korea based corporation SK, and the proposed acquisition of Fixatti in Adhesive Solutions announced on 20 July
Arkema Chairman and Chief Executive Officer

Following Arkema's Board of Directors’ meeting held on 29 July 2020 to approve the Group's consolidated financial statements for the first half of 2020, Chairman and CEO Thierry Le Hénaff said:

 

“The second quarter was marked by the context of Covid-19 and the lockdown measures imposed in many countries. Arkema’s sales were clearly impacted by this situation, but the decline was contained thanks to the Group’s worldwide positioning and the diversity of its end markets. The Group demonstrated its resilience in this unprecedented context, thereby validating its strategy of refocusing its business portfolio toward specialties.

 

I am very pleased with the mobilization and reactivity of the Group’s employees throughout this period. Arkema’s teams worked hard, focusing on both the short- and mid-term.

 

For the short-term, we concentrated on the elements that are within our control, putting in place decisive initiatives to reduce costs and tightly control working capital and capital expenditure. This enabled us to deliver a robust financial performance in the second quarter and achieve a high level of cash generation despite the challenging operating environment. In the second half of the year, while expecting to see a gradual improvement in end markets, Arkema will continue its cost-saving and cash-generation efforts in an environment still marked by low visibility with regards to the evolution and effects of the pandemic.

 

At the same time, the Group confirmed its determination to implement the roadmap announced at the Investor Day on 2 April. The finalization of the divestment of the Functional Polyolefins business in early June, Bostik’s acquisition of Fixatti and the start of strategic reviews regarding the evolution of the portfolio in Intermediates marked the launch of the M&A phase. Our organic growth ambitions have been supported by the partnership with Nutrien, the progress made in the construction of our bio-based polymer plant in Singapore despite the Covid-19 pandemic, and the acceleration of sustainable innovation projects in Specialty Materials”.

Outlook for 2020

Based on the progressive lifting of lockdown measures in some important countries for the Group, Arkema expects that demand will continue to improve gradually in the second part of the year, while remaining below last year’s level. The pace and strength of this improvement are still uncertain, dependent on the evolution of the pandemic, and will vary between end-markets and geographies. Arkema estimates at this stage that sales in the third quarter will decline by around 10% year-on-year at constant scope and currency, representing a clear improvement compared to the decline of around 20% recorded in the second quarter.

 

In this context, Arkema will focus its efforts on the elements that are within its control, in particular costs, capital expenditure and working capital in order to maintain a strong level of liquidity. The Group thus confirms it is on track to reduce in 2020 its fixed costs by €50 million compared to 2019 and to reduce capital expenditure by €100 million compared to the level originally planned. Its innovation efforts in Specialty Materials will be preserved in order to meet its customers’ numerous technological and sustainable development opportunities. Thanks to those initiatives, and on the back of its solid performance in the second quarter given the current environment, the Group remains very confident in its ability to deal with this unprecedented crisis, drawing also on its balanced geographic exposure, diversified end markets and strong balance sheet.

 

Finally, Arkema will continue its acquisition strategy, the roll-out of its major organic growth projects, as well as its strategic review for Intermediates, in line with its ambition to become a pure Specialty Materials player by 2024.

 


 

Further details concerning the Group's second-quarter 2020 results are provided in the "Second-quarter 2020 results" presentation and the Factsheet, both available on Arkema's website at www.finance.arkema.com.

Financial calendar

5 November 2020

Publication of third-quarter 2020 results
25 February 2021 Publication of full-year 2020 results

 

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