Earnings Transcript for AKE.PA - Q4 Fiscal Year 2023

Thierry Le Hénaff: Thank you very much. Good morning everyone. Welcome to Arkema’s Full Year 2023 Results Conference Call. Joining me today are Marie-José Donsion, our CFO, and also the Investor Relations team. As always, the slides used during this conference call are available on our website, and together with Marie-José, we’ll be available to answer your question at the end of the presentation. So in 2023, Arkema delivered a solid set of results in challenging macroeconomic conditions. Our teams demonstrated their agility and their commitment as we managed to achieve a performance within the range of the full year guidance we gave a year ago despite a much more difficult backdrop than initially anticipated. I know many of you are already focused on 2024 and we’ll talk about the outlook later, but it’s important to appreciate the robustness of our performance in 2023, which really highlights the strategic and operational work we have accomplished over the past several years. So here are some key points I like to emphasize today. In 2023, we achieved a solid EBITDA at €1.5 billion, of course lower than last year’s exceptional performance and also slightly above the pre-COVID level. This highlights the quality of the performance of several of our businesses, particularly in additives and performance additives which have counterbalanced those product lines that were more impacted by the macro environment. I will let Marie-José go through the segments in greater detail later on. Our EBITDA margin proved resilient at 15.8%, so close to 16%, also supported by good demand for higher value added solutions linked to megatrends including grid energy as well as bio-based and recycled products. We are pleased to have delivered an excellent recurring cash flow of €761 million, one of our best ever, thanks to our team’s hard work in keeping CapEx and working capital under control. We came out of 2023 with an outstanding financial performance. It was in 2022 and we had highlighted already in September 2022. We saw reversal in 2023 of around €400 million EBITDA over earning as a result of the normalization of PVDF and acrylic. What no one had foreseen, however, at least at this level, was a persistent of a low underlying demand across many end markets for the chemicals industry. As we have shown in the past, we were able to adjust to the challenging environment in particular with a strict discipline on operational cost, pricing and stock management. We also benefited from our expertise in material science and from the shift towards higher value-added high performance materials. After 2022 when our high-performance polymer and coating solution drove a very strong performance, in 2023 we were very pleased to see that some of our businesses stepped up and delivered goals. Adhesives are an increasingly significant part of our business as they now represent nearly 30% of group sales and they played last year an important role in Arkema’s resilience. Performance additives also performed well, highlighting our solutions in new energies like biofuels and solar energy that are critical for our customers. These businesses, which stood out in 2023 fueling our technology metrics, which will drive our future growth in the fast-growing submarket, we spoke about at the last Capital Markets Day. This is the strength of Arkema’s business portfolio with different product lines that can address different environments and are built around three simple and coherent segments. Beyond these financials, last December, we achieved a new step in the strengthening of our Specialty Materials profile with the closing of the acquisition of a 54% majority stake in PIAM, PI Advanced Materials, which is a global leader in ultra-high performance polyimides. As you know, current momentum is soft given the weak end market, but we are convinced that PIAM’s performance will pick up significantly when the electronics market recovers and we believe we’ll see some good progress from Q2 this year. This acquisition provides numerous and significant synergy with our polymer adhesive and [indiscernible] have already started to work hard to deliver those synergies. On the organic CapEx front, we are finalizing some important project, as you know, to support our customer sustainable growth. The expansions of Sartomer and of PVDF in China and Pebax in France are up and running and are starting to contribute. For Nutrien, we have just started up and for polyamide 11 in Singapore we have still some adjustment to undertake. Polyamide delivery took more time than expected, we recognize. But as I’ve said in the past, it’s really a unique proprietary process which needs a lot of fine tuning, but it should really ramp up from the beginning of Q2. Overall, we can confirm that we expect an EBITDA contribution of €60 million to €70 million in 2024 from all those project, including the startup in the U.S. in the second part of the year of 1233zd, a new generation low emission fluorospecialty used notably in insulation foams for building and in batteries. We are also pleased by our progress in our ESG performance in 2023. We strengthened our commitment for the climate on the 1.5 degree trajectory by 2030, and this trajectory was validated by SBTi. Last year, we reduced greenhouse gases by 7% for Scopes 1 and 2 and by 9% for Scope 3 versus 2022 and our commitment remains well recognized by external agencies. Developing our employees is also at the forefront of our priorities and in 2023 we are very proud to have been certified as top employer in new countries also gaining the Top Employer Europe label. We are equally proud to have increased significantly the share of women in management position to 29%. This is not an easy task in the chemicals industry, but further progress in this area remains clearly one of our long-term priorities. Finally, a word on the important topic of the dividend, as a result of our solid financial performance in 2023 and the most confidence in Arkema’s outlook, a 3% increase in the dividend to €3.5 per share we will propose at the next AGM in line with our progressive dividend growth strategy. The payout at exactly 40% is in line with what we indicated at the 2020 Capital Market Day. Over the past five years, the dividend has grown on average by 7% per year from €2.5 in 2019 to €3.5 in 2024, which is a strong achievement given the declining volume environment we have been facing and is testament to Arkema’s ability to withstand different macro context and create value for shareholders. I will come back to the outlook at the end of the presentation and will now hand it over to Marie-José, who will review in more detailed our Q4 and full year results.

Marie-José Donsion: Thank you, Thierry. So I’ll start with the revenues at €9.5 million. 2023 sales were down 18% year-on-year. Volumes were 10% below 2022 level with destocking and weak demand throughout the year impacting some important end markets across all regions, especially Europe and U.S. The price effect of minus 6.1% reflects the normalization of PVDF and acrylics mainly as well as the decline of raw material prices in the second half of the year. We had a limited 0.7% parameter effect linked mainly to the contribution of Ashland adhesives in January and February, as well as some boltons and the consolidation of PI Advanced Materials in December. This was partly offset by the divestment of Febex at the start of 2023. Currencies had a negative impact of 2.2% on sales, mainly linked to the weaker U.S. dollar and Chinese yuan against the euro. EBITDA came in at €1.5 billion in line with the guidance we gave at the Capital Markets Day last September, and it reflects our efforts to maintain a solid pricing and cost discipline in a low volume environment. In Q4 EBITDA grew 14% year-on-year to €331 million supported notably by slightly better volumes and a strong contribution from Bostik. Indeed, looking at the profitability of the different segments, Bostik achieved a good performance with a yearly EBITDA of €380 million, up by 4% year-on-year despite a 8% drop in volumes. Focusing on the second half EBITDA, it was even up by 16%. The key drivers were our ability to hold on to pricing in a lower cost of raw materials context to control cost and to deliver operational excellence initiatives. We also got some support from acquisitions. EBITDA margin was up 140 basis points to 14%, a record high for Bostik, which constitutes a good base from which to expand the margin further in 2024. In Q4, EBITDA rose strongly by 25% to €94 million in Bostik, confirming the improving margin dynamics. Moving on to Advanced Materials, EBITDA came to €666 million, 29% down on last year’s given the absence of last year’s exceptional profits in PVDF, while performance additives add an excellent second half. In Q4, EBITDA was stable year on year at €149 million with performance additive offsetting the lower results of High Performance Polymers. EBITDA of Coating Solutions was down sharply to €327 million, which represents a margin of 13.6%. This was mainly driven by less favorable conditions in upstream acrylics in Europe and in the U.S. Downstream activities were impacted by lower volumes, but margins held up, better thanks to pricing discipline and improved mix. Q4 EBITDA for the segment rose by 10% to €69 million thanks to improved volumes of a low base. Finally, EBITDA in Intermediates fell 30% to €213 million with the less favorable conditions in Asian acrylics only partly offset by the good momentum on the refrigerant gases. With depreciation and amortization at €562 million in 2023, recurring EBIT amounted to €939 million and the rebate margins to that 9.9%. Financial expenses at €70 million reflect the bond issues we undertook last year. The average coupon on Arkema’s debt stands at 2.1% at the end of 2023. The recurring tax rate came to a 21% of recurring EBIT. This rate should remain relatively stable going into 2024. All in all, adjusted net income came to – €653 million, which corresponds to €8.75 per share. Moving on to cash flow, you saw we delivered a strong recurring cash flow of €761 million in 2023, which is equating to a bit more than a 50% EBITDA to cash conversion rate. This includes €170 million working capital inflow linked to the price effect, notably on receivables and to the quality of our management of inventories. The working capital ratio on analyzed sales stands at 13.4%, which is actually a pretty good level. Capital expenditure totaled €634 million reflecting lower exceptional CapEx of €26 million. As the construction of the Nutrien and polyamide 11 plants were being finalized. Free cash flow amounts to €625 million, it includes a non-recurring outflow of €110 million linked primarily to the startup costs of the Singapore platform, as well as both restructuring costs. Taking into account the net cash outflow of €708 million from the portfolio management operations linked essentially to the acquisition of PI advanced materials. Net debt at the end of 2023 stood at €2.9 billion, including the €700 million of hybrid bonds and the net debt to last 12 months EBITDA ratio stood at 1.95x. Thank you for your attention. I will now hand it over to Thierry for the outlook.

Thierry Le Hénaff: Thank you, Marie-José. So the environment at the beginning of 2024 is similar to what we have experienced in the latter part of 2023, with across all key regions weak demand. In Q1 2024, as we said in the press release, we expect EBITDA to be rather similar to the Q4 2023 level, which was a good Q4 by historic standards. For the year-on-year comparison, please also note that in the first quarter, market conditions were still particularly favorable in PVDF and upstream acrylics last year. Beyond the potential recovery in demand later in the year and the integration of the PIAM acquisition, Arkema will benefit, as you know, from the contribution of new organic projects at a level, as I said before, which we can estimate at €60 million to €70 million in terms of EBITDA, this number is quite consistent with we already said last year in the fall. The phasing will clearly be H2 weighted with a ramp up from Q2 onwards. By segment, we see the following dynamics. In Adhesive, first, we’ll continue to drive synergies linked to Ashland and a few recent hurdles and will benefit from our ongoing operating excellence and cost control initiatives. Adhesive, if you remember, were the first segment to successfully stepping in 2022 and as you could see, the dynamic has now turned positive driven by higher matchings. The contribution of new project that I’ve mentioned before will be in fact mostly concentrated within advanced material, as a matter of fact within high performance polymers. This includes notably Singapore, Nutrien and PIAM, for which we are working hand in hand with the management to ensure we implement synergies as quickly and efficiently as possible. As for Performance Additives, they will aim to consolidate their strong 2023 performance. In Coating Solutions, upstream acrylic remains soft for the time being, but we expect growth in the downstream resins and additives. Our strategy is focused on delivering more eco-friendly and biobased solution. This includes the decarbonization of our acrylics plant in France. It also includes the participation with the other segments in the One Arkema platforms of battery, electronics and biobased products. So all-in-all, we aim to achieve in 2024, an EBITDA of €1.5 billion to €1.7 billion depending on the dynamic of the recovery in demand, which is still unknown at this stage. Overall seasonality in 2024 will be more H2 weighted given the elements I’ve just mentioned. The lower end of the range assumes no real demand recovery, while the high end of the range assumes a clear recovery from the spring. We don’t control the macro, so as always, we’ll focus on what we do control, managing our business strictly, which has worked out rather well for us in the past. In addition to managing the short-term, our teams will deploy the longer term roadmap which we unveiled at the recent Capital Markets Day. We have many new important projects on the way. I mentioned the decarbonization of acrylics, but we have also started to work on the new DMDS capacity in the U.S. for biofuels and also our organic peroxide in China for new energies. Our balance sheet, as mentioned Marie-José, as we enter 2024, remains solid with a net debt-to-EBITDA ratio below 2x, including the acquisition of PIAM. So we’ll continue to look for small targeted M&A opportunities, notably in Adhesives. Last but not least, we’ll maintain our innovation drive in high performance specialty materials with a focus on sustainability, which provides a powerful tailwind for longer-term ambitions as defined at the Capital Markets Day. I thank you very much for your attention. And together with Marie-José, we are now ready to answer the question you may have.

Operator: Thank you. [Operator Instructions] The first question comes from Matthew Yates of Bank of America. Please go ahead.

Matthew Yates: Hey, good morning, everyone. A couple of questions, please. The first one just on the Q1 guidance. Correct me if I’m wrong, but I’d usually assume that there’s some favorable seasonality sequentially as demand picks up, particularly in construction, which is a big end market for you. So what is holding back the sequential profit development? Is there some incremental price pressure or is there cost going back into the business after the temporary savings that you made last year? And maybe one for Marie-José just to clarify, the PA11 startup costs, I think last year were treated as an exceptional in Q1, do you – do those simply go through the underlying numbers? And then the second question, bit more mid-term, but around adhesives, as you say, very good development in Q4. At the CMD you talked about, I think it was a billion of sales in four key platforms by 2028, or about €300 million incrementally. What does the journey look like between now and 2028? Is that a fairly linear progression of €60 million or so a year? And what is the incremental margin on these platforms? Does that continue to be accretive to the mix? Thank you.

Thierry Le Hénaff: Okay. Thank you, Matthew. So with regard to the Q1 guidance, so in fact, we made two comparisons, one is with Q4, which was more to give you the order of magnitude, and then the Q1, which is more traditional, I would say, of last year. With regard to the, if you compare to the Q4, in fact, the Q4, if you look at history, and I think we mentioned it quickly, but it’s true, when you compare at history, the Q4 was rather strong and you have a bit, what €30 million more what truly we were achieving in Q4, and we did that last year despite still a rather weak environment. So it was a very good Q4. So when you compare, you have to take that into account. So you have a little bit of seasonality that you see if you take a more normalized Q1. Now, you mentioned construction, but in fact, construction in a Q1 normally, at least for Arkema, and our type of business is still low. It’s really starting in Q2, this construction business to develop traditionally, and this is what we have seen. Maybe what I can add on the Q1, because for us, it was – I think this is more or less what we had in mind since a certain time for Q1 is that when you compare to last year, we had last year a sort of end of this gap with normalization, PVDF acrylic, which started last year but which was progressive. So we have about let’s say €30 million mostly weighted on acrylics, which explain also versus last year why we would be below, so for us, it’s rather mechanical and now it’s true, why it’s our duty also to mention it. But when I look at our peers that have, let’s say release their comment, or either American, which started early, or some European recently, I mean, we are all aligned on the fact that the start of the year is in terms of demand is rather soft. So all in all, it makes the consistency of the Q1, let’s say seasonality versus the full year guidance that you have. You mentioned the polyamide 11 startup cost, no, we will be consistent with what we did last year. We have still a little bit of startup cost starting the year because plant have not fully started and it should fade rather quickly after that. With regard to the adhesives, I think with regard to the main technology platform, you have – it’s not completely linear because it’s the start of a new cycle of new business development cycle with investment, either organic or acquisition. We mentioned PM, but is HPP [indiscernible] development and we have PMP, we have Polytec PT, some others, and we have also the new innovation investment of adhesive, I would say, I don’t know the word in English, but you start a bit slower and you accelerate over the period.

Matthew Yates: Okay, thank you Thierry.

Thierry Le Hénaff: You’re welcome, Matthew.

Operator: The next question is from Aron Ceccarelli of Berenberg. Please go ahead.

Aron Ceccarelli: Hello. Hi, good morning. I have one on you, 2024 EBITDA guidance. So if I take the PI Advanced Material contribution, which should be something around €50 million, plus the major projects around another €65 million. So I’m already at 1.615. I was wondering what kind of assumption are you guys making for the low end of your guidance? That would be the first question. The second one is on PVDF. I see that volumes are coming up again. Prices have collapsed last year. So I’m just wondering if you can provide a little bit more color also in terms of what capacity you are expecting from Chinese players in PVDF. And the final one is on CapEx. If I remember correctly, you gave a guidance of around €4 billion at the Capital Market Day for the next five years. Can you provide a little bit more color around the CapEx phasing in 2024 please? Thank you.

Thierry Le Hénaff: Okay, so with regards to, as we mentioned, we have a range. And for the 2024, you are mentioning the low end of the range. So the low end of the range means no recovery. So no recovery means a little bit more pressure on pricing. You have this gap that we have mentioned on the Q1 on PVDF of acrylics, which is €30 million. You have some ethics also that mostly looking at last year, euro, dollar and also RMB. I was checking with Marie-José. So all in all, and you mentioned the organic project, but if you have less recovery, the ramp up of the project is by nature, since they are expansions, is less quick because of the macro. So all in all, by nature it’s a low end of the range, but it takes into account this element, while on the other side, the 1.7 plan recovery, which is stronger. So it makes sense. And 200, I mean, I compare also with some peers in terms of the size of the range, is okay for this kind of environment. So we are at ease with this. With regard to PVDF, I would say that we have still a little bit of a pricing gap on the start of the year compared to last year, for the reason we have mentioned, it was progressive decrease last year. But I think we have reached something which is now more stable and clearly. Volumes are up. You’re right to say that a little bit up. We don’t have unlimited capacity, because we have never had any program of softness on PVDF. It was more a topic of price. So in fact, the volume we can add are the volume which will come from the capacity addition we had, I would say in China and in France, where we have six more months this year. With regard to the capacity from Chinese, it’s not a completely transparent market, but they have been significant, especially for the battery side. But I think it’s already rather factored and we stayed with good profitability on PVDF, but it has been normalized compared to the exceptional 2022 landscape. With regard to CapEx in 2024, so I think we have been quite clear, as the Capital Market Day, there will be a ramp up compared to, let’s say, an increase and compared to what it was in the previous four years period of 2023. So it gives you something for 2024, which is a good 100 in addition compared to what it was in 2023. Okay, but consistent with what we say, even if we take the trajectory which has been expressed using the Capital Market Day, it’s even a bit higher. But then it depends at which speed and with which magnitude, we confirm certain of project which has not been yet completely announced. So no surprise there.

Aron Ceccarelli: Thank you very much.

Operator: The next question is from Alex Stewart of Barclays. Please go ahead.

Alex Stewart: Hello, good morning or good afternoon. Thank you. And congratulations on your performance last year. Very good in the context. I had two questions. The first one is on the PA11 plant. I gather you haven’t built a new asset like this for a long time, so probably everybody who worked on the last one is no longer around, and that may explain the delays. But could you perhaps give us a little bit more information about the technical challenges you’ve had? Because we’re now probably almost 12 months delayed in ramping up compared to your initial guidance. It’d be very interesting to hear that. And secondly, in adhesives, I think in the wording in the presentation was that you’re expecting good growth. Could you just clarify what would good look like to you? And whether you’re talking about top line or bottom line growth, just give some more context around that, given the strong performance last year. Thank you so much.

Thierry Le Hénaff: So first of all, thank you for your kind message, Alex. On the polyamide 11, by the way, and as you know, we are very transparent to you, et cetera. But on the technology, which is, I would say the competitive technology to polyamide 11, polyamide 11 is superior performance, but they are long chain polyamide, which is PA 12. Two of our competitors have done important expansions on the PA 12 and they were more than a year, largely more than a year late. So this means that, in fact, this technical challenge, which is partly due to the complexity of this, you don’t have many players of this kind of process and to the tension on engineering, manpower, et cetera, is shared by many companies. You have more projects which are like now. With regard to Arkema, it’s not so much the size of the investment, because we did also in Malaysia, some investment, which is more the fine tuning, in fact, because the plant was on time and on budget. It’s more the fine tuning which we recognize took more time because there are a number of equipment which is 3x superior. Also, maybe we underestimated that 3x superior to the one of normal technology inside Arkema. Okay. And the second thing, which is very special is completely in-house process, which really have been improved year-after-year since past even before Arkema time in the past 40 years, and which make it more difficult than a more standard process, I would say. So nothing at the end, nothing very significant, it’s a little bit of sometimes matter of millimeters or nanogram or whatever, but which I would say make this delay. So we have to live with it, but we’ll make it. We are very confident. And at the end is also what protects the technology is that it is very complex. So let’s take this positive point. On the adhesives, so with regard certain, it will be, I would say in 2022, maybe in 2023. What’s the best way to address this is, in 2023 it was more a bottom line growth than a top line growth. In 2024 it will be more normal, I would say more normal growth, which means that the bottom line growth will be supported by the top line growth. You see what I mean? So there will be some recovery in volume, which we start to see in adhesives, because we have been suffering on destocking by 18 months. So this will disappear. So we start to see that and the unit margin are quite okay. So this is why we will grow. And on top of that, we have a little bit of bolt-on that helps, even the Ashland acquisition, where you get the synergy still – we have still two, three years of synergy to implement. So for all these reasons, we grow in adhesives. And we are happy to see that because as you know, it has been a bet of Arkema a long time ago. We have invested a lot. And now Bostik is really playing his role of something resilient with low CapEx. So good cash generation and we appreciate it.

Operator: The next question is from Chetan Udeshi of JPMorgan. Please go ahead.

Chetan Udeshi: Yes. Thank you. Good morning. A follow-up on the comment you made about the low end of the guidance. Sort of not assuming any recovery. Because the way I was thinking about it, you are saying Q1 is, let’s say €330 million. If I annualize it, I get to €1.32 million, I add all the contribution from new projects, maybe I get to €1.4 million. So clearly from €1.4 million to €1.5 million, which is the low end of the guidance, needs something which could be a bit of seasonality, I guess. So I’m just curious what sort of assumptions you make from Q1 to low end to reach that number of €1.5 million. The second question was just going back to the contribution from the startup of the project. And I appreciate all of these are complicated projects and that probably drives the differentiation. But I’m also curious, given that you are missing essentially a quarter of startup contribution, how are you still aiming for the same contribution for the full year? Because I would have thought you are sort of ramping up in phases. So if you don’t start up on time, you essentially lose the contribution for that particular quarter. So just curious, how is the number not lower given that it’s been delayed by a quarter. And the remaining two questions are just financials. One, I didn’t hear the CapEx guidance for this year, so appreciate if you can give that. And second, what is the depreciation number that we should have in mind as all of these projects start up in 2024? Thank you.

Thierry Le Hénaff: Okay, we let Marie-José on the third one. So on the first one is quite easy, it’s seasonality. I think Q1 is always one of the two lowest quarters and this year is even compared to Q4, because the project will ramp up over time. So I think it’s quite consistent. What you don’t know is, you don’t take any seasonality. So it’s a wrong calculation. If you do that over the year, if you take the past five years or six years, you will see that the math is working. So, I think it’s quite consistent. On the second one, so first of all, the €60 million to €70 million contribution is a sum of five, six main projects. So it’s not just one. Secondly, on the polyamide, anyway we took quite a low assumption in the first quarter, because it’s a quarter of ramp up. Don’t forget, it’s an expansion. So you need to have the sales beyond what we are doing from our plant in [indiscernible]. So at the end, it doesn’t make a material difference over just one quarter. So we are confident on the €60 million to €70 million. And on top of that, we have some projects, which will deliver more than we thought they would deliver. So with this addition, we are really confirming the €60 million, €70 million, knowing that we are always cautious when we give guidance on projects, or I think that you can be confident on that. On the guidance of CapEx, I think I already commented, and I say a good €100 million more compared to 2023, but I will let Marie-José complete and the comment on the depreciation charge if you want.

Marie-José Donsion: Okay. So yes, I’ll just confirm what Thierry mentioned. So the CapEx are expected around €750 million, €760 million for the year, so which is roughly a linear approach compared to our CMD five-year term plan. And regarding the depreciation, we would be expecting to have progressively Nutrien and polyamide 11, injecting some depreciation charges. So the amount of amortization and depreciation should be around €600 million versus €560 million in 2023.

Chetan Udeshi: Thank you.

Operator: The next question is from Andreas Heine of Stifel. Please go ahead.

Andreas Heine: Yes, thanks. I actually want to learn a little bit more about the special expenses in Arkema standards it is almost €260 million on EBIT to recurring EBIT is quite high. Could you split that out a little bit and give some guidance what we should expect for these special items going forward into 2024. Obviously the CapEx guidance of 2024 is very much in what you have planned in this range, 2024 to 2028. However, looking on how many large products you had, I’m not aware about any really big size of ribbon what you are still undertaking in 2024. Maybe you can explain a little bit where this €750 million will be spent more broadly? And then lastly, the acrylic acid margins in U.S. and Europe were probably not leased down because of pressure from Chinese exports. Do you see some relief on that? Or is the pressure from China – from exports from China still as high as we have seen it last year? Thanks.

Thierry Le Hénaff: Okay. So Marie-José, you can start, and then we’ll do the last two.

Marie-José Donsion: Okay. So regarding the nonrecurring expenses, as you know we have basically it’s half-half between the amortization of the purchase accounting that we have on the M&A objects that we’ve acquired. So roughly €130 million in 2023 are attached to those amortization of purchase price amortization mechanism. You should expect an increase of that linked to the PPA of PIAM that we will be doing in the year. So at this point, we have a preliminary goodwill and a preliminary PPA assumed. But of course, the exercise has not yet been fully concluded. So, I have no precise number to give you, but let’s say, if you add €30 million or €40 million to this amount, it is probably not a bad assumption. Regarding the other items outside of the purchase accounting depreciation, we would have still some start-up cost of Singapore at the start of 2024. Roughly, the trend we’ve had is between, let’s say, €15 million to €20 million per quarter. So you should still assume there will be impact in the first quarter in terms of start-up costs for Singapore. And then basically, the rest of the amount is pretty similar year-on-year. It’s different restructuring and transactional restructuring that we do in Arkema. And despite it’s, let’s say, different projects. All in all, we traditionally spend €30 million to €40 million in terms of cash on various restructuring operations we do in the company.

Thierry Le Hénaff: Thank you, Marie-José. So on the CapEx, you have already a big part of the information. In fact, actually, as you know, we have the big decarbonization project in France, in the site of Carling for acrylics, which is one from memory, you have the additive for biofuel in the U.S., and they were all in the capital market representation, which is – we ramp up quite quickly. We have organic peroxide in the performance additives in China for new energies, which is another one. You have the completion of the 1233zd project also, which is not finalized, which is also. And we have more – also more turnaround. Turnaround is not equal every year and depends really on the legislation. So it’s true that we have a bit more internal round this year. So all in all, it makes the mass knowing that last year we are pretty much event on the big project. So we didn’t spend so much on that. And as you know now in CapEx, and we don’t split between exceptional and recurring CapEx. So it’s all in all, it includes everything. With regards on acrylics margin, U.S., Europe, we see now – we start to see some stabilization, but not so much because of the demand booming. It’s more because of the Middle East logistics [indiscernible] et cetera, where it limits the import. So you start to see normal stabilization and some customers which start to see that it’s not so easy to get product from China. So you have a little bit of relief, but it’s moderate, so wait and see I would say.

Andreas Heine: Thanks a lot.

Thierry Le Hénaff: You are welcome.

Operator: The next question is from Jaideep Pandya of On Field Research. Please go ahead.

Jaideep Pandya: Thanks a lot. Yes. First of all, congrats on my side as well, Thierry, for predicting the results exactly to the 1.5 billion for 2023. I have four questions. First question is on intermediates actually. Could you tell us how much inventories do you have of R-22 in the U.S.? Obviously, these days you’re hardly spending any money in CapEx in this division. So the cash flow is very exciting. So just want to understand how much can we go forward? And really, if I look at the valuation of this business of fluorochemicals, I get to a figure of around 800 million to 1 billion before you even entertain a buyer. So am I crazy or am I not? That’s my first question. Second question is on PI actually. The management in PI is guiding for a sharp rebound in 2024. And it looks like the 2023 downturn was really just the top line driven. So when you did your due diligence, how much did you challenge on the top line side? I’m just wondering if there is competitive pressure or was it just an end market issue. That’s my second question. The third question is on performance. Marie-José described this as the second half was very good. Could you tell us what error in performance additives? And the last question is really on high performance polymers, I saw a Q4 versus Q3 sales increase in high performance polymers. What was driving this, considering probably pricing in PVDF was q-on-q down. So what is really driving sales increase q-on-q? Thanks a lot.

Thierry Le Hénaff: Okay. Thank you Jaideep for the question. So note 22 now is quite low. So the value are completely out of scope. So we come to the end on this of 22. So this is not. If it is your question is that what makes the profitability of fluoro gas by far no. Okay. And on PIAM, yes, we challenge really when we add the due diligence. So it’s really linked to the macro only is electronics is rebounding. There will be a sharp rebound of PIAM profitability. It’s not a matter of competition. They are very strong. I can tell you technically they have a superior products at a reasonable price. What is really encouraging us beyond the macro to pick is really the fact that we have now, and we have organized a lot of customer visits, starting with Europe and then U.S., because they are very small in these two regions. And the welcome by all these customers that we have inside the company for other products was very strong. So we see a lot of potential for this superior polymer. So to make the story short, mostly macro driven in terms of rebound, not [indiscernible] of competition. And a lot of potential beyond the normal PIAM business with all the commercial synergy we see with them, and technical synergy. So with regard to performance additives on the third part of the year, I would say the two areas which performed very well were thiochemicals, especially, and you will not be surprised in the world of energy either bio-energy or traditional energy. And also, we had a good development and growth in – if you remember well, this, I’m sure you remember well because you know all the detail of the ArrMaz acquisition in surfactants with mining and nutrition, which are two of the end market which is in the 2023 challenging economy performed well and ArrMaz beyond also all the work we are doing, benefited from this two market. With regard to HPP, what – the last question was on...

Jaideep Pandya: Yes. It’s just – if I just – you guys provide the detail on the split by quarter. And if I just look at Q4 versus Q3, you grew actually, I think, by €16 million quarter-on-quarter in sales in HPP, so just curious what was driving this?

Thierry Le Hénaff: It was, maybe it’s linked to one of the previous comments made. It was released the volumes in Asia, which were up, and we benefited from it compared to last year. It’s again a year-on-year comparison. But compared to last year, we had a good rally, I would say, in volumes in Asia with Performance Polymers.

Jaideep Pandya: Okay. And sorry, if I can just come back to my first question on intermediate. You started the process of divesting fluorochemicals and I guess the market underappreciates the value of this. So do you – how is the process going? And do you think that a number of sub-€500 million is something you’re not interested given the cash flow this business generates these days?

Thierry Le Hénaff: So I will make you softer. The priority, I think, as we said at the Capital Market Day, we confirm the intention to dispose of the business, but we say we’ll take our time. And for the time being, we enjoy good profitability of this business, which is really our best way to create value for our shareholders. So the intention remains the same that we take our time on that. And don’t forget that it’s a business which for certain lines will decline because of the legislation, okay? So they have to be factored in whatever value [audio dip] so I will not speculate at all on valuation. What is important is that we ensure you good cash generation from this business. And with that, we continue to do what we have done so well so far is really to continue to invest in the other businesses.

Jaideep Pandya: Thanks a lot, Thierry. Thank you.

Thierry Le Hénaff: You’re welcome.

Operator: The next question is from of Geoff Haire of UBS. Please go ahead.

Geoff Haire: Hi. Good morning, also good afternoon. Most of my questions have been asked. I just had one, you comment on volume recovery in the second half of 2024. I just wondered what gives you confidence that you’ll see that.

Thierry Le Hénaff: If I may, Geoff, if we made the two scenarios because we have a range, 1.5 to 1.7, so the second scenario, I would say the end of the range, the higher end of the range assumes a recovery. And the lower range assumes no recovery. So we are clear about that. So we have no crystal ball. What we think is that maybe two elements what could support the recovery beyond the overall macro on which everybody can have the opinion. The first one is that the stocks are low in the chain, I believe that. So this means that you don’t need so much recovery to start to have certain tension. This is our feeling. Again, it’s already difficult to know exactly where is the stock because the chain are long. But it’s our feeling the stock are not too high. And secondly, but you are more experienced than I am, when I look at the time for destocking and for really negative growth in chemicals is really a long time compared to our standard. So for these two reasons, it’s beyond the overall macro, which is a shared topic, but more specific to chemicals to what we have seen in the past two years, I think these two elements should be taken into consideration.

Geoff Haire: Okay. Thank you.

Thierry Le Hénaff: And the message maybe two – to complete the message to my team is that we have to be ready when there is a recovery there is recovery, but please focus on – as we did well in 2023 and before, focus really on our organic momentum. It’s really what we control.

Operator: The next question is from Laurent Favre of BNP. Please go ahead.

Laurent Favre: Yes. Good afternoon, Thierry. Just one question for me. On PVDF you had flagged that you’re looking at a significant expansion in the U.S. for the CMD and that the SID [ph] was spending. I’m wondering given all the uncertainty on the IRA and the elections, whether we should be assuming that the SID [ph] can – well, will be postponed at least to next year? Thank you.

Thierry Le Hénaff: Right. It’s a good question. What we flagged at the Capital Markets Day was an expansion. We didn’t say significant expansion, but it’s true that in our CapEx envelope for the four years it was meaning that it should be rather material. Beyond what we say, one of the elements we are monitoring is also the speed at which gigafactory is the same for Europe but also for U.S. will get implemented. So because of that, we take our time in order to – now we have a scenario which is more and more refined, which is reasonable and we’re likely to create strong value. The timing, I agree with you, depends on the certain number of factors. So we will – my feeling is that we should be able to announce in the course of this year, our plan is my feeling, but we will not spend too much money on that. It will be limited money this year on this U.S. expansion. So wait a little bit, we take into account the evolution of the macros, evolution of the speed at which gigafactory will get implemented, certainly high election, et cetera. But we want to grow in PVDF. So we have a plan. Normally we should announce this year.

Laurent Favre: Excellent. Thank you.

Thierry Le Hénaff: Thank you.

Operator: The next question is a follow-up from Aron Ceccarelli of Berenberg. Please go ahead.

Aron Ceccarelli: Hi, thanks for taking the follow-up. I have one on pricing. If we exclude Intermediates for a second, and we assume there’s a recovery happening in – from Q2 onwards in the second half. How do you think about pushing pricing at group level by different segments? Is this doable, you think, in the current environment? Thank you.

Thierry Le Hénaff: I think you mentioned the answer more or less in your question. I would say it depends really on the strength of the recovery, if you have. The difficulty when you have this kind of environment is that you never anticipate what could be the impact of any recovery and when – at which speed it comes. So this means what we have seen in the past is that sometimes when the stocks are low, you have a sudden recovery, not necessarily very significant, but being there. And then you have some pricing power. But if you exclude Intermediates, our policy is not to leverage too much a period of tension as is able to have pricing, which is more stable, whatever the macro is. So your question and it’s a paradox, should more apply to intermediate than the rest of the portfolio. You have more stability of the net pricing in the rest of the portfolio than you have in Intermediates where it’s more cyclical, as you know. So and we prefer our resilience and cyclicality. So to answer your question, we’ll see it will depend on the recovery. If you have the combination at a certain point of recovery and low stock, it will help pricing, but I would say mostly Intermediate.

Aron Ceccarelli: Excellent. Thank you very much.

Operator: The next question is a follow-up from Jaideep Pandya of On Field Research. Please go ahead.

Jaideep Pandya: Thank you. It’s just on Coating Solutions. I asked this question, I think, for the last couple of quarters. A lot of destocking last year in the value chain. Now your customers are all talking about volume growth this year of 1% to 2%, maybe even a bit more. You did 12 on a low comp. What sort of volume growth do you think the chain will do this year? And is there any link between the volumes for your customers in coatings versus Bostik. So I’m just trying to understand if the paint and coating guys do 2%, 3% volume growth. Is it fair to think that you will do 2%, 3% volume growth in Bostik as well? Thanks.

Thierry Le Hénaff: So it’s very difficult to give a precise number because, first, it depends on the macro. As we say, we have different scenarios, and you have yourself mentioning different scenarios. So the growth would be different depending on if you have a rebound in the market or not. Now when you mentioned 1%, 2% as a sort of intermediate scenario, yes, I think – but it’s not a scenario only for coating. It’s a scenario for other businesses. Is there a link between coatings and adhesives? It depends really on the mix of market. Yes, they are both downstream. So you have some element of comparison. But then you need to look at the – what the weight between construction, outside of construction and then some markets of adhesives, which are big, which are smaller in coatings. Adhesives is everywhere. Coating is not really everywhere. So this is why they are. But I would say, normally, yes, you have correlation, but not only between coatings and adhesives, but coatings and also all our whole businesses. If the world is growing a little bit, then you have in sort of a medium scenario. Yes.

Jaideep Pandya: Okay. Thanks a lot.

Thierry Le Hénaff: You’re welcome.

Operator: This was the last question. I will now give back the floor to the speakers for the closing remarks.

Thierry Le Hénaff: Thank you very much for attention. We try – I hope that our answers were helpful, and I wish you a very nice day. Don’t hesitate if you have any complementary question to come back to Beatrice and Peter for any other questions. Thank you very much.