UpdateArkema confident of strong 2013 despite challenges in Europe

15 May 2013 11:02  [Source: ICIS news]

(adds outlook, further segment data, CEO comment)

By Franco Capaldo

Thierry Le Henaff, Arkema chairman and CEOLONDON (ICIS)--France-based specialty chemical producer Arkema on Wednesday reaffirmed its confidence in achieving a strong performance in 2013 but conceded that macroeconomic conditions, particularly in Europe, remain challenging.

In a quarterly earnings statement, in which Arkema booked a fall in earnings, the company said despite market conditions in North America being solid, the economic situation in Europe "remains challenging", while growth in China is slower than expected.

“The group’s repositioning on high added value specialty businesses, its global geographic presence, with a strong base in North America, and the diversity of its end-markets supported Arkema’s strong performance despite the slowdown seen in Europe," Thierry Le Henaff, Arkema chairman and CEO, said.

“For 2013, building on these assets and on its ongoing projects, and while staying cautious about the future economic environment, the group confirms its confidence in its ability to achieve a strong year,” he added.

Arkema also reaffirmed it is still targeting to generate €8bn in sales in 2016, with an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 16%.

In the first quarter of 2013, Arkema swung to net loss of €30m ($39m) from a profit of €100m in the previous corresponding period, because of heavy one-off expense related to the divestment of its vinyl operations, it said.

The company incurred a charge of €127m following the insolvency proceedings concerning Kem One SAS – the company operating the upstream activities (chlorine/caustic soda electrolysis and polyvinyl chloride) of the vinyl activities sold by Arkema to the Klesch group.

“The booked amount corresponds to Arkema’s estimated overall exposure to Kem One SAS,” it said.

Arkema’s sales for the first three months to end of March year slipped 3.7% year on year to €1.56bn, partly on the impact of the divestment of its tin stabiliser activities which was finalised on 1 October 2012.

“Volumes [of sales] recorded a slight decline [of 1.3%] compared to first quarter 2012. They reflect the slow start of the High Performance Materials segment at the beginning of 2013, affected, as expected, by the weak demand in some end-markets, in particular for fluoropolymers,” Arkema said.

“Volumes in the other two segments, Industrial Specialties and Coating Solutions, were slightly up compared to last year. Prices overall remained stable (+0.4%), while the translation effect was slightly negative (-0.7%),” it added.

Sales in Arkema’s High Performance Materials business amounted to €448m against €534m in the first quarter of 2012, primarily reflecting the impact of a change in the scope of its business, mostly the divestment of the tin stabiliser activities, and a decrease in volumes.

“High Performance Materials started off the year slowly with market conditions in the continuity of the end of last year and marked by weak demand in some specific markets such as photovoltaics and oil and gas,” the company said.

In the Industrial Specialties segment, sales reached €539m, slightly up from €532m recorded in the first quarter of 2012, on the back of higher volumes.

“All of the segment’s activities continued to benefit in particular from the on-going favourable environment in the United States where they enjoy a strong industrial presence,” Arkema added.

In the group’s Coating Solutions segment, sales amounted to €562m, up 2% year on year “thanks to a positive volume effect as well as price increases compensating rises in raw material costs”.

Adjusted net income from continuing operations fell by 21% year on year during the period to €97m, while first-quarter EBITDA decreased 7.5% year on year to €234m, with EBITDA margins falling to 15.0% from 15.6% in the same period last year.

Following the quarterly earnings announcement, investment bank JP Morgan Cazenove said Arkema “has been another victim of weak cyclical end markets, particularly in Europe”.

“Sales, EBITDA and EPS [earnings per share] were down significantly year on year. With full year 2013 company-provided consensus expecting growth in sales/ EBITDA versus 2012 levels, further cuts may be coming” it added.

At 09:37 GMT, Arkema’s shares were trading at €75.93 on the Paris stock exchange, up 4.13% from the previous close.

($1 = €0.77)

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

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