Arkema: its worldwide Pebax elastomer capacity expansion will be greater than expected

(AOF) – Arkema has revised upwards its global capacity expansion for Pebax elastomers at its Serquigny site in France, from + 25% previously announced to + 40%, in two distinct phases. The first phase will take place in the first quarter of 2023 with a 15% increase in global capacity, with the additional 25% starting in the third quarter of 2023. Beyond this new capacity extension in France and to support the growth of its global customers , the group is currently evaluating other investment opportunities, particularly in Asia.

The further increase in Pebax elastomer capacity will support strong demand from partner customers in the sports, consumer electronics, medical and industrial markets, who value lightness, flexibility and Exceptional energy return from highly specialized Pebax grades. Application areas range from high-speed running shoes to catheters or flexible screens.

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Key points

– Leading French chemist and major player in specialty materials, former subsidiary of Total;

– Turnover of €9.5 billion, split between specialty materials (adhesives, advanced materials and coatings) for 85% and intermediate chemicals (fluorinated gases, acylics) and coating solutions, with world leading positions on the 9/10

th

of the portfolio;

– Turnover balanced between Europe (36% of sales), North America (31%) and the rest of the world – the United States, China and Southeast Asia being the three the group’s key markets;

– 3-point business model: accelerate organic growth and innovation, strengthen specialty materials through acquisitions, aim for operational and commercial excellence;

– Open capital (6% for employees), Thierry Le Hénaff being Chairman and Chief Executive Officer of the 14-member Board of Directors;

– Healthy balance sheet with €2.8 billion in net debt and a leverage effect of 1.3 at the end of June 2022.

Challenges

– 2024 ambitions, raised: expansion of world leadership positions and reduction of the cyclical bias / sales from €10 to €11 billion, operating margin around 17% and free cash generation of +40%;

– Innovation strategy serving sustainable development: €235m of R&D in 15 research centers with 200 patents dedicated to sustainable development out of a portfolio of more than 10,000 patents / incubation structure, digital laboratory focused on intelligence technology and scientific and industrial partnerships / 5 innovation platforms for €1.6 billion in cumulative additional sales in 2030;

– Environmental strategy with identified objectives, validated by the SBTi: reduce in 2030 by 46%, vs 2019, its CO2 emissions in scopes 2 and 3 and by 30% for the entire value chain, via 400 M€ of investments dedicated / increase the sustainable offer to 65% in 2030 and to 80% in 2025 the share of sustainable purchases / deploy the circular economy, from design to recycling of customer products (10% of revenues made from recycled materials in 2021);

– Continuation of disposals to be a pure player in specialty materials in 2024;

– Proactive investment in lithium-ion batteries (€1 billion in sales expected in 2030), elastomers for sports and adhesives (purchase of South African Permoseal);

Challenges

– Inflation of raw materials and shortages in the coatings business, offset by the increase in selling prices;

– Integration of the Mexican Polimeros Especiales and, in 2023, start-up of the Chinese polyamide powder plant;

– Ongoing review of intermediate chemistry activities;

– After a jump of 33% in sales and 66% in net profit in 2

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quarter, raising of the 2022 objective of an increase in operating profit of 17 to 22%, to €2.1 billion;

– Share buyback program.

A second part of the year at risk

Chemical players should be faced with a scissors effect. First, they have to face an explosion of costs: experts estimate that in 2022 natural gas prices should increase by 470% and electricity prices by around 300% following the war in Ukraine. Added to this is an oil price that is also on the rise. On the other hand, their ability to increase prices should be penalized by a less dynamic economic context, linked in particular to the difficulties on the Chinese market, weighed down by a wave of confinements. The world leader, BASF, anticipates a decline of between 6% and 14% in its profits in 2022.

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Arkema: its worldwide Pebax elastomer capacity expansion will be greater than expected


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