France: Business Strategy Arkema Aims to become World Leader in Specialty Materials
With a special focus on its Adhesive Solutions, Advanced Materials, and Coating Solutions business, Arkema plans to become a global Specialty Materials leader. The company has also shared a roadmap as well as outlined its objectives for 2024 at a recently held ‘Strategy Update’ meeting.
France – At a ‘Strategy Update’ meeting on April 2, Arkema presents its ambition to become a world leader in Specialty Materials realigned around three coherent businesses with attractive growth prospects: Adhesive Solutions, Advanced Materials, and Coating Solutions. The Group unveils its roadmap and its objectives for 2024 at this event. In the context of Covid-19, Arkema also provides an update on the management and the consequences of this unprecedented health crisis.
While the management of the crisis related to Covid-19 requires everybody to be mobilised -priority being given to the health and safety of its employees while supporting its customers and its other stakeholders to the best of its abilities, Arkema decided to maintain its ‘Strategy Update’ meeting recently to share its vision and unveil its strong ambitions for the mid-term.
Since 2006, the Group has undertaken an in-depth transformation that has enabled it to progressively develop leading positions in Specialty Materials through targeted investments, an innovation policy focused on the major sustainable development trends, and pro-active portfolio management. These activities now account for almost 80 % of its sales.
Recently, Arkema entered a new phase in this transformation. This is based on three coherent and complementary divisions focused on Specialty Materials, namely Adhesive Solutions, Advanced Materials, and Coating Solutions. In a world in which demand for sustainable and high performance materials is growing, Arkema enjoys a unique positioning around those three growth platforms. These combine real in-house innovation expertise, strong commercial and industrial synergies, and a common approach to serving customers in sustainable and growing markets.
Thus, the Group has decided to align its organisation and reporting with this vision, which will now consist of:
o Three divisions that will be reported separately and will include all Arkema Specialty Materials: Adhesive Solutions, Advanced Materials, and Coating Solutions; and
o An ‘Intermediates’ division consisting of MMA/PMMA, Fluorogases and Asia Acrylics, consolidating activities with more volatile results and for which the Group will implement differentiated strategies. In particular, the Group will undertake a review of its strategic options for MMA/PMMA, explore possible alternatives to minimise its exposure to the most emissive applications of its Fluorogases, and rebalance its Asia Acrylics business between upstream and downstream.
By 2024, Arkema aims to become a pure Specialty Materials player, with a resilient and focused portfolio, characterised by high profitability and strong cash generation. Thus, Arkema aims to generate sales of 11 to 12 billion dollars and an Ebitda margin of around 17 % compared to 15.8 % today for the Specialty Materials business. To carry through this latest stage in its development, the Group intends to build on its many innovation projects and investments in major projects such as the expansion of its specialty polyamides in Asia, which will help for example meet the challenges of material lightweighting, 3D-printing, new energies, and energy efficiency in buildings.
Arkema also intends to continue playing an active part in the consolidation of the Adhesives market. In a world undergoing significant change, innovation, corporate social responsibility and commercial excellence will remain more than ever at the very heart of the Group's strategy.
Arkema will also maintain strict financial discipline, with a net debt (including hybrid bonds) to Ebitda ratio of less than 2 and a return on capital employed (Roce) in excess of 10 % by 2024. Over the next five years, the Group's cash generation is expected to grow further compared to the previous period (2015-2019).
By maintaining the net debt (including hybrid bonds) to Ebitda ratio around end-2019 levels, it should allow Arkema to finance major organic growth projects and portfolio management operations, as well as raise shareholder returns, the goal being to achieve a dividend pay-out ratio of some 40 % by 2024. It should also allow opportunistic share buy-backs under favourable market conditions.
In the short term, in the current and unprecedented context of Covid-19, the Group is implementing crisis management measures to ensure the protection of its employees’ health as a priority, adjusting its supply chain, and adapting its production facilities to best manage potential disruptions and ensure the continuity of supply to its customers in essential markets.
The Group continues to monitor its cash generation and is taking active steps to reduce its investments and fixed costs from the levels initially forecast for 2020. In the first quarter, the impact of Covid-19 on the Group’s Ebitda is estimated at between 43 and 54 million dollars. Given its very solid financial structure and liquidity levels, the Group is confident in its ability to get through these difficult times for the global economy and emerge in a position of strength.