UpdateArkema swings to Q2 net income gain despite lower sales

01 August 2013 11:25  [Source: ICIS news]

(updates throughout, adds analyst comment)

Arkema Head OfficeLONDON (ICIS)--France-based specialties firm Arkema posted on Thursday a net profit of €112m ($149m) for the second quarter of the year compared with a €12m net loss during the same quarter in 2012, despite year-on-year falls in sales and earnings.

Sales for the June quarter declined 5.2% year on year to €1.63bn, with earnings before interest, tax, depreciation and amortisation (EBITDA) pulling back 10.8% to €273m as margins declined, the company said in a statement.

According to Arkema CEO Thierry Le Henaff, the second quarter of 2013 presented “[a] less favourable economic environment than last year which also shows strong disparities from one geographic region to another.”

Excluding the impact of the company’s sale of vinyls activities in July 2012, Arkema’s second-quarter adjusted net income declined 17.9% year on year to €124m, it said.

Le Henaff added that conditions were worsening in its home market of France, and that headwinds in Europe continued to prevail.

He said: “Market conditions in Europe are challenging, in particular in France where growth prospects have deteriorated since the end of last year and where the group continues to consider ways to improve its productivity.

“Nevertheless, the group benefited from its balanced geographic presence worldwide, its growing footprint in North America, and its diversified end-markets,” he added.

The company’s high performance materials division posted a 15% year on year fall in EBITDA to €93m as a result of weaker demand from the photovoltaic market and oil and gas project delays.

Industrial specialties EBITDA fell by 9% year on year during the quarter as a result of adverse weather conditions in Europe and competitive pressure in China and Europe on certain gases, Arkema said. US market conditions remained favourable during the quarter.

Coating solutions earnings were up slightly year on year from €83m in the second quarter of 2012 to €84m in the same quarter in 2013, buoyed by higher acrylics volumes, although lower margins eroded the jump in sales. Demand increased in North America but remained weak in Europe due to adverse weather conditions.

In the first half of 2013, Arkema’s net profit declined 6.8% year on year to €82m, with its adjusted net profit falling 19.3% to €221m and sales down 4.5% to €3.19bn, it said.

EBITDA for the period slipped 9.3% year on year to €507m, with EBITDA margin declining to 15.9% from 16.7% in the same period last year, it said.

Arkema predicted that third-quarter performance would undershoot the levels achieved during the same period in 2012, but that the fourth quarter would be higher year on year.

However, this indicates that full-year EBITDA may be below market expectations, according to US-headquartered analyst Bernstein Research.

“Arkema has guided for H2 [second half of the year] to be similar to last year. This implies full year EBITDA of €944m versus current consensus of €968m – so 2-3% cuts to full year EBITDA and 4-5% cuts to EPS [earnings per share] are likely,” the firm said.

Arkema maintained its longer term guidance.

“The group … confirms its ambition for 2016 to achieve €8bn sales and 16% EBITDA margin while maintaining gearing below 40%,” Arkema said.

Arkema’s EBITDA margin for the three months ending June 2013 slipped a full percentage point to 16.8%, with its industrial specialties and coating solutions businesses registering lower margins at 21.1% from 22.1%, and 14.0% from 14.4%, respectively, the company said.

Its high performance materials segment, on the other hand, showed an improved EBITDA margin of 19.5% in the second quarter from 19.1% in the previous corresponding period, it said.

($1 = €0.75)

Additional reporting by Pearl Bantillo.

By: Tom Brown
+44 208 652 3214

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