… to become a speciality chemicals company by 2024, by acquiring something pharma-like. Basically, Arkema plans to acquire the US-based adhesive platforms corralled together at Ashland’s Performance Adhesives business. The charm of the acquisition is that the acquired technologies will be globally rolled out, giving Arkema’s portfolio a broader stance. Management is quite optimistic it can generate substantial synergies including some positive tax effects, which should make the high valuation a
Companies: Arkema (AKE:EPA)Arkema SA (AKE:PAR)
Arkema surfs the chemicals wave well, being carried along by the strong recovery. Supply availability is one side of the coin. On the other, stands cash collection and the company was good at this. Business-wise, the paved path seems to be a well-chosen one.
We appreciate the guidance increase, but do not understand that it is based on an unchanged scope after the closing the PMMA divestment.
Consensus was beaten by +5.7% (top line) and +21% (adjusted EBITDA).
The top line has already matched the Q1 19 level, but profitability could not fully catch up, despite the optimised business structure, which might be related to the strongly rising raw material prices. Additionally, management managed the organic momentum of the growth well as NWC outflow remained quite stable. Management has become more optimistic after the clear beat in its Q1 guidance.
Figures were slightly above our expectations and beat street estimates.
Arkema’s increasing footprint in speciality chemicals helped to protect profitability. Furthermore, management has taken the next steps towards the mid-term target, even in a crisis. By divesting PMMA, its has taken advantage of a special situation, allowing for a decent valuation.
Unfortunately, the company still fully consolidates the to-be-divested business showing up our estimates. Consensus was clearly beaten as it still included the PMMA business.
Like other chemicals companies, Arkema had to manoeuvre in challenging times, but the adhesives business was an anchor with its quite resilient business. The other divisions were in rough seas, as expected, giving a mixed picture from a variety of impacts. Intermediates was negatively affected by all factors. The newly-provided guidance looks like a strong commitment.
The Q3 figures were a notch stronger than expected, but matched well with the street’s expectations.
Companies: Arkema SA
Like other chemicals, Arkema could not escape from the developments in the customer markets. Nevertheless, the speciality side of the company did quite well despite some meaningful declines in volumes, whereas Intermediates was hit by lower volumes and lower prices. All divisions saw a strong drop in profitability. The divestment proceeds of Functional Polyolefines were a tonic and helped profitability to beat our expectations. Consensus was also beaten.
Arkema’s business model is still a chemicals one, even though the specialities’ share has increased in the recent past. Interestingly, management’s strategy to focus on adhesives seems to be paying off. In addition to the spreading virus, the country, where Arkema has its headquarters, also had an adverse impact on profitability. Q1 came in a notch weaker than we expected. Consensus was perfectly met.
Arkema reported a better than expected set of figures (consensus was perfectly met on the profitability level). The portfolio changes in recent years have made the company’s financial mechanics more resilient to economic downturns. Despite all current uncertainties, management seems to be quite optimistic for 2020 – at first sight. But it has excluded any virus-triggered effects, which are estimated to be around €20m by the end of February.
The good point is that the EBITDA margin has not faded away as Arkema’s top-line was driven by an acquisition and FX tailwinds. However, lower raw material prices put some pressure on it. Volumes developed positively in most divisions.
Reported figures beat our expectations, but were below consensus. For Q4, we remain cautious.
At Group level, given the tough environment, Arkema’s results proved fairly resilient. After the company’s ‘overhaul’ in recent years and the increase in the proportion of specialties’ sales (to 71%), no one would have expected Coatings Solutions to report higher profitability. Despite confirming FY guidance, management indicated some weakness in H2. The figures did not fully meet our expectations (profitability undershoot), but consensus was beaten.
The announced acquisition of ArrMaz has a reasonable strategic rationale, but it also stresses Arkema’s gross debt. We do not expect any large issues that may prevent approval from the anti-trust authorities or affect financing. All in all, we value the announced deal as positive, despite being quite expensive.
Arkema’s negative organic development was characterised by lower demand from some industries as the implementation of higher sales prices to cushion higher raw material prices partly offset the lower volumes. After a period of margin expansion, Industrial Specialties saw organic regression, but defended the margin more or less. Coatings Solutions was driven by volumes.
Consensus was met, but our expectations were barely met.
Thanks to the differentiation, Arkema had a favourable business year. As High Performance Materials took a breath after recent years’ strong growth and with Coating Solutions suffering from a mix of higher raw material prices in some segments and high capacities in others, Industrial Specialties became a strong contributor to sales and earnings. Figures were above our expectations but did not meet the consensus. The higher than expected dividend could be valued shareholders’ pain killer as guida
Arkema was in a position to increase sales prices, especially in Industrial Specialties and Coating Solutions, in order to pass on higher raw material prices, notably acrylic acid and PMMA precursors. In general, PMMA is expected to see a stronger relief in Q4.
The Q3 figures met our expectations and slightly beat consensus. At first sight, it looks as if management had confirmed the recently-lifted guidance, but the footnote shows a kind of narrowing to ~5%.
Arkema not only passed on higher raw material prices, it also increased its profitability, especially in Industrial Specialities, where the acrylic glass business faced tight market conditions. Q2 figures were above our expectations and beat consensus.
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