InterviewArkema aims to become world leader in coatings materials

02 March 2011 18:04  [Source: ICIS news]

PARIS (ICIS)--Arkema intends to become a leader in the coatings material market once it completes the acquisition of Total’s resins businesses, the CEO of the French specialty chemicals company said on Wednesday.

Thierry Le Henaff said the company hopes to close the acquisition of Total's photocure and coatings-resins businesses by the middle of 2011 and to fully integrate them into Arkema in about one year after the deal's completion.

“[The acquisition] is a perfect fit with Arkema’s strategy in the acrylic value chain. It will increase downstream integration from 30% to 40%,” Le Henaff said.

“It will also help us implement an integrated and global coating-materials platform, and help us become the world leader in the coatings-material market.”

In addition, Le Henaff said the deal, which is subject to regulatory approvals, would put Arkema in a strong position in the high-growth, value-added photocure market and give the company a strong growth platform in Asia.

Total announced in December 2010 that it would sell its photocure and coatings-resins businesses to Arkema for an enterprise value of €550m ($753.4m).

The assets to be divested include the Cray Valley and Cook Composites & Polymers coatings-resins business as well as Sartomer’s photocure resins businesses, which produce specialty products for the paint, adhesives and industrial coatings markets.

Speaking about Arkema's financial results for last year, which were reported earlier on Wednesday, Le Henaff said they exceeded expectations and that in 2010 the company had achieved its best historical performance, well above pre-economic crisis levels.

Arkema's 2010 net profit was €347m against a net loss of €172m in 2009, while sales were up 33% year on year to €5.91bn as volumes rose by 11% compared with 2009.

Arkema's 2010 earnings before interest, tax, depreciation and amortisation (EBITDA) surged to €790m, up from €310m in 2009.

Le Henaff said that the company had significantly reduced its net debt in 2010 to €94m from €341m in 2009. However, the net debt in 2010 did not include the financing for the acquisition of Total’s photocure and coatings-resins businesses.

The CEO was also upbeat that the company had delivered on its targets first set five years ago, when it was spun off from oil major Total in 2006.

Le Henaff said that with a 13.4% EBITDA margin in 2010, the group exceeded the 12% target it had set, while it also achieved fixed cost savings of €540m in 2010, beating its initial target of €500m.

Le Henaff said he was particularly pleased that Arkema's EBITDA margin of 13.4% had caught up with its peer average of 13.6%.

Arkema’s peers include AkzoNobel, BASF (excluding oil and gas), Celanese, Chemtura, Clariant, Dow Chemical, DuPont, LANXESS, Rhodia, Solvay and Tessenderlo.

He said Arkema aimed to improve its EBITDA margin by between 14.0% and 15.0% within the next five years.

Le Henaff forecast that Arkema’s first-quarter EBITDA in 2011 would be significantly above the first quarter of 2010, as seasonal performance returned to more traditional patterns.

He added that the company was confident it could pass on any raw material cost increases.

“Naturally, the group will remain attentive to the changes in the macro environment. Beyond, Arkema is confident in its prospects for 2011. Throughout the year, Arkema will benefit fully from the work achieved in 2010,” he said.

Le Henaff also said the group was fully on track to achieve its 2015 long-term objectives: EBITDA above €1bn and sales of around €7.5bn, €1bn of which would come from new acquisitions.

The CEO said €750m of the sales target would come from the resins businesses from Total. Le Henaff added that the group's vinyls business would represent around 16% of Arkema's total sales after the integration of Total's businesses.

Looking at regional sales, those in Asia were expected to represent about 23% of the group's total by 2015, up from 18% in 2010, while sales in North America would grow 2% in five years to 32%.

The group would achieve 40% of its sales in Europe in 2015, down from 48% in 2010, Le Henaff said, adding that the company's main focus of future expansion would be in China, India and Brazil, in that particular order.

As part of the group’s strategy to actively increase its presence in Asia – predominantly in China, due to the size of potential demand – Arkema was planning two new start-ups in Changsu, China, as well as other projects in the region, he said.

“Two new plants will be brought on stream in China, the first in March for fluoropolymers and the second in the middle part of the year for specialty acrylic polymers,” Le Henaff said. He did not disclose the plant’s capacities.

Arkema currently spends about €50m a year in capital expenditure in China, and Le Henaff added that the group would continue to do so for the next three years.

The CEO said that among Arkema’s priorities this year, it would build an emulsions plant and expand its capacity in polyamides and fluoropolymers in Asia, as well as prepare long-term projects in the thiochemicals and acrylic monomers sectors in the region.

He added that the company would continue to make acquisitions throughout 2011, but it was more likely to be complementary bolt-on deals.

He said the group would also benefit from global megatrends, such as demand for new sources of energy, access to potable water, lightweight materials to replace metal in cars and bioplastics.

“The company wants to accelerate its growth in emerging applications for sustainable development, such as our photovoltaic range of products, high-temperature polyamides, bioplastics and water treatment. We have the solutions to these megatrends,” he said.

Le Henaff said he expects the positive economic climate in Asia and the US to continue, while Europe will have a slower recovery. He also forecast high material and energy costs, which he said the group could benefit from.

In 2011, Arkema also plans to carry out turnarounds. In April, there will be planned maintenance work at its vinyls production units in Lavera, France. During October and November, there will be turnarounds at its acrylics production sites in Carling, France, and Clear Lake, in the US, he added.

($1 = €0.73)

For more on Arkema visit ICIS company intelligence

By: Franco Capaldo
+44 (0)20 8652 3214

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