OK
The Universal Selection Source:
Coatings Ingredients
Industry News

Arkema: 1st Quarter 2007 Results

Published on 2007-05-15. Author : SpecialChem

The Board of Directors of Arkema, chaired by President and CEO Thierry Le Hénaff, met on May 14th 2007 to review Arkema's consolidated accounts for the first quarter of 2007.Thierry Le Hénaff stated, commenting on the results:

"Over the first quarter of 2007, Arkema's results continued to improve significantly, with a 43% increase in the recurring operating income and a positive net result of €44 million, despite the negative impact of currency exchange rate evolution. Business overall was steady, with sound demand in Europe and Asia. The strong improvement in the Vinyl Products segment results, with an EBITDA margin of 7.5%, and the ongoing progress in the Performance Products segment, with an 11.7% margin, confirm our company's transformation process. In the first quarter Arkema announced new growth and competitiveness projects fully in line with its mid-term industrial strategy."

FIRST QUARTER 2007 PERFORMANCE

Sales in the 1st quarter 2007 were stable at €1,488 million, against €1,487 million in the 1st quarter 2006. The major increase in average sales prices in the three business segments (+3.5%), especially in Vinyl Products segment, together with organic volume growth (+1.2%) compensated for the reduction in volume resulting from the implementation of restructuring plans in Chlorochemicals and Urea Formaldehyde Resins (-1.9%), and for the negative conversion effect (-2.6%). Variations in the scope of business had a negligible impact on sales (-0.1%).

EBITDA was up 20% to €134 million compared to €112 million for the same period in 2006, confirming Arkema's swift transformation. This significant improvement results from favorable market conditions in Vinyl Products, strong growth in Technical Polymers and Specialty Chemicals businesses, and the company's steadily improving competitiveness. These factors fully compensated for lower unit margins in Acrylics, which were high in the 1st quarter 2006, and a less favorable environment in Fluorochemicals.

EBITDA margin significantly increased to 9% of sales in the 1st quarter 2007 (7.5% in the 1st quarter 2006). Recurring operating income stood at €80 million, up 43% over the same period in 2006, with depreciation increasing slightly up at constant exchange rates.

Operating income amounted to €53 million against €34 million in the 1st quarter 2006. This result includes €27 million non-recurring items related to the restructuring plans announced in the 1st quarter in Vinyl Products (Vinyl Compounds, Pipes and Profiles) and in Industrial Chemicals1 (Acrylics, Thiochemicals and Fluorochemicals).

Net income (Group share) was positive at €44 million after a €21 million tax charge. This result includes the capital gain on the sale of the Agrochemicals business (Cerexagri) for €18 million.

Cash flow in the quarter was positive at +€72 million compared to -€119 million in the 1st quarter 2006. This cash flow includes the proceeds of the sale of Cerexagri (+€ 106 million) which compensates for the increase in working capital (-€86 million) resulting from the seasonal increase in the activity between the 4th quarter 2006 and the 1st quarter 2007, and the cash outs related to non-recurring pre-spin off items2 (-€17 million). These items include €5 million capital expenditure relating to the Chlorochemicals consolidation plan, the other capital expenditure amounting to €42 million.

Net debt amounted to €257 million at the end of March, and the remaining non-recurring pre-spin off items amounted to €195 million. The ratio between the sum of both items and the equity was 23% at the end of March, against 28% at the end of December.

SEGMENT PERFORMANCE

Vinyl Products sales grew by 3.6% to €374 million against €361 million in the 1st quarter 2006, despite a reduction in volumes resulting from the closure at the end of March 2006 of the Saint-Auban loss-making production units as part of the Chlorochemicals restructuring plan. EBITDA for this segment improved significantly, standing at €28 million compared to €11 million in the 1st quarter 2006, with the margin reaching 7.5%. With strong demand in Europe, the improvement in the results also reflects the good operating rates at our production plants and the improvement in the cost structure. Moreover, the Vinyl Products segment booked non-recurring expenses amounting to €10 million related to the restructuring of the Chantonnay site (France) in Pipes and Profiles and the closure of the Dorlyl French and Italian activities in Vinyl Compounds.

Industrial Chemicals sales were down by 1.7% to €650 million. At constant exchange rate, sales rose by 1.9%, supported by higher unit selling prices in PMMA and Thiochemicals. EBITDA in the 1st quarter amounted to €66 million, which correspond to an EBITDA margin still above10% despite tougher market conditions in Fluorochemicals and lower unit margins in Acrylics compared to their level in the 1st quarter 2006. These results confirm the segment's ability to resist in a less favorable environment. Arkema continued to develop this segment, in particular with the announcement of a 10% increase of its hydrogen peroxide production capacity in Jarrie and of an MOU with the Essar Group for the proposed construction of an Acrylics plant in India. Furthermore, a number of restructuring plans3 concerning Thiochemicals, Acrylics and Fluorochemicals were announced to further adapt cost structure.

Performance Products sales remained stable at €463 million, up 3.2% at constant exchange rate, and despite the closure of the Urea Formaldehyde Resins production units in Villers-Saint-Paul (France) at the end of June 2006. This improvement results from an increase in unit selling prices and in volumes across all business units. In line with 2006, when the priority was to restore the competitiveness of this segment, EBITDA increased significantly to €54 million, while the EBITDA margin stood at 11.7% compared to 8.6% in the 1st quarter 2006. This major progress results from initiatives taken since two years which have resulted in the launch of new products in Technical Polymers and Specialty Chemicals, and a tight control of fixed costs.

OUTLOOK

Since beginning of 2007, market conditions were generally favorable despite the slowdown of the US economy and the impact of the euro/US dollar exchange rate. In this environment, the ongoing in-depth transformation of the company, which materialized with the announcement of numerous new projects, confirm Arkema's commitment to increase its EBITDA between 10 and 15% per year over the years 2006- 2008.

In 2007, capital expenditure should be €350 million including capital expenditure relating to the Chlorochemicals restructuring plan.

POST BALANCE SHEET EVENTS

On May 1st, Arkema announced the sale of its specialty amines business produced in Riverview (United States) to Taminco. This activity generates sales of $72 million. This disposal should have a slightly positive effect on the net result.

Arkema announced the shutdown, in two steps, of its co-polyamides powders and pellets production plant in Bonn (Germany). In a first step, the powder activity will be shutdown by end 2007 followed by the closure of the entire site beginning of 2009. This closure should result in the reduction of 83 positions.

Total Petrochemicals France informed Arkema that, following a technical problem, it would realize repair works on its steamcracker in Lavéra (France) from May 28th until June 13th.

Finally, in the context of Arkema's participation in the Exeltium consortium, an electricity supply contract has been signed on April 3rd, between Exeltium and EDF, the object of which is to ensure long-term supply at competitive prices.

Source: Arkema


Halcyon Group 3rd R&D Innovation Summit
Back to Top