Arkema’s acquisition appetite drops post-Bostik purchase – CEO
Tom Brown
05-Mar-2015
Interview article by Tom Brown
PARIS (ICIS)–Arkema
is likely to pursue fewer large-scale acquisitions in 2015
following its purchase of adhesives maker Bostik last year,
the CEO of the France-headquartered chemicals producer said
on Thursday.
The company agreed to acquire France-headquartered
Bostik for €1.74bn from Total, its own former parent, in late
2014, and also brought a €200m thiochemicals plant in
Malaysia on stream at the start of this year, but is keen to
keep its financial gearing levels at an acceptable
margin, according to Arkema CEO Thierry le Henaff.
“Maybe we will have a bigger appetite for acquisitions in a
few years’ time, but we want to maintain gearing at 40% and
if you want to maintain at this level you need to be
reasonable in terms of acquisitions,” he said.
The company issued two €700m bonds, along with a €350m
share capital increase in late 2014 to help finance the
Bostik acquisition. It is also planning €700m-worth of small
asset disposals over the next few years.
“We have said we would make small divestments, even in
product lines that you’ve not much aware of, a few tens of
millions of euros here and there,” Le Henaff said.
Smaller investments have not been ruled out, with Arkema
announcing the acquisition of Oxido, an Italy-based organic
peroxides producer with annual sales of €20m, earlier this week.
It has also extended an option deadline to increase its
share in a Chinese acrylics production joint venture it runs
with local producer Jurong Chemical. Extended to January
2016, the call option could see Arkema increase the amount of
capacity it has access to at the site by 160,000 tonnes/year,
to 320,000 tonnes/year.
Despite currency tailwinds on the back of a weakening of the
euro against the dollar helping to buoy Arkema’s
fourth-quarter net income by 9.5% year on year to €23m,
weak markets for several of the company’s key products drove
down profits for the full year down 35.1% to €239m.
“We have been very strict in terms of finance but the 2014
results were marked by difficult market conditions for
fluorogases, acrylates and also polyamides at times, which
means [Arkema’s] performance was disappointing compared to
our ambitions a year ago,” Le Henaff said.
Acrylic monomers are languishing at the bottom of their
market cycle and unlikely to improve this year, according to
Le Henaff, while fluorogases earnings suffered from increased
competition and an unfavourable product mix.
Polyamides did not perform as poorly, but were competing
against a very strong market in 2013, and were impacted
further by a maintenance shutdown of Arkema’s unit in Mont,
France, in the second quarter of the year.
However, results for these three products obscured a much
stronger performance on the balance sheet by many
of the company’s other lines, according to Le
Henaff.
“These three products shouldn’t hide the fact that nine lines
out of 12 have shown an improvement, and
profitability has gone up for
these. There is a lot of groundwork [being
done] in product lines that are less cyclical,” he
said.
The group is predicting that favourable currency conditions
will continue through much of 2015, offsetting the expected weakness in acrylic monomer
markets, but that conditions are likely to remain “volatile
and contrasted” for different regions and product
lines.
Some European producers have benefited from a degree of
margin uplift for some products on the back of the fall in
oil prices, although the extent of those margin gains
may not be as great as some analysts
have predicted.
Arkema has forecast a limited impact from the fall in
crude prices this year, although raw material prices have
started to come down for some products, according to Le
Henaff. There is no single across-the-board effect on
pricing, and the impact is difficult to predict.
“Not all raw materials derived from crude have gone down [in
price]; on the contrary,” Le Henaff noted.
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