Europe has to boost competitiveness or lose – Arkema CEO

LONDON (ICIS)–France and the rest of Europe need to increase investment in innovation and boost industrial competitiveness to avert a decline in the region’s manufacturing base, the CEO of French chemical major Arkema  said on Wednesday.

Following the presentation of the firm’s second-quarter results, company chief Thierry Le Henaff said Arkema’s varied geographical exposure allows it to weather subdued economic growth in Europe.

Le Henaff said Arkema’s sales in the UK amount to around 4% of the total, providing a “clear protection” against potential negative effects from the so-called Brexit following the country’s vote to leave the EU in June.

France amounts for 10% of sales while wider Europe accounts for 37%, the CEO added.

“In a world which is not growing a lot and it’s volatile, we benefit from this balance geographical footprint. This is the beauty of the evolution of our portfolio, far more balanced today than it was in the old times,” said Le Henaff.

The euro’s loss of value against major currencies in the last 12 months has helped Arkema export more product overseas, offsetting subdued growth in Europe. US operations have been “solid” and Asia was better than expected, he added.

“But if you look at weaker points [in Europe], France’s economy and the potential consequences of Brexit, I’d say Arkema is rather well protected. France is only 10% and even if it is not growing, it’s solid, we shouldn’t complain more than.”

According to Le Henaff, Europe needs to boost its expenditure in innovation, a key sector which combined with an industrial policy could boost the fate of plants across the region by improving their competitiveness, he said.

“If you look at the facts, the eurozone – which has complex issues [to fix which should not be] underestimated, is lagging behind in terms of growth compared to North America or Asia. As an industrial company, I’d like to have more [economic growth],” said Le Henaff.

“At least we have now stability in the eurozone. Our duty [Arkema’s] is to balance our geographical portfolio to benefit the eurozone’s very moderate growth but stable, as well as Asia – where there is more volatility but growing more and finally the US, in the middle [of the two but with] more solid growth.”

Arkema’s CEO said the task of improving competitiveness could come in part from boosting innovation in Europe, but combined with policies – which he did not detail – which could also boost the productivity of European manufacturing sector to make it an attractive industrial hub again.

Le Henaff even said that, while two thirds of Arkema’s expenditure in research and development (R&D) takes place in France, he was not sure the products and materials envisaged in French laboratories would actually be made in France at a later stage.

“I think at the end of the day it should be a combination of public investment [to boost growth] but also innovation. As a company which is investing a lot in R&D, a key thing for us is how you can boost innovation and make sure Europe benefits from it,” he said.

“For example, when innovation is made in Europe, we need to make sure your plants will be in Europe. We haven’t been competitive enough, and that is a problem in France. We have more than two thirds of our R&D in France, but we are not sure it will be made in France or Europe, because competitiveness is still lagging. This is a key aspect for the economy in European countries,” he added.