Arkema, a leading chemical company, has released its financial results for Q1 2023. Despite continued low volumes and weak demand in Europe, the company has achieved a solid financial performance in line with its full-year guidance for 2023.
Sales Decline, But Prices Remain Resilient
Arkema reported sales of €2.5 billion for the first quarter of 2023, which is a decline of 12.6% year-on-year. This is mainly due to lower volumes, as the company was impacted by continued weak demand in Europe, a slowdown observed in construction in the United States, and temporary destocking in batteries in China. However, the company’s overall resilience in prices, which benefited from the work to position the portfolio on higher value-added solutions, helped to offset some of the impacts of lower volumes.
Sustainable Innovation Drives Growth
Despite the challenging market conditions, Arkema has benefitted from its sustainable innovation in high-performance solutions such as bio-based and recyclable materials, 3D printing, and more eco-friendly coatings. This has helped the company to maintain a solid financial performance, even in a tough market environment.
EBITDA and Adjusted Net Income
Arkema reported an EBITDA of €367 million for Q1 2023, with an EBITDA margin of 14.5%. This is down compared to the exceptionally high comparison base of Q1 2022 (€619 million and 21.4%, respectively), which benefited from particularly favorable market conditions in PVDF and upstream acrylics. Adjusted net income for Q1 2023 was €162 million, representing €2.17 per share (€5.08 in Q1 2022).
Recurring Cash Flow and Net Debt
Recurring cash flow for Q1 2023 was negative €21 million, reflecting the usual seasonality of working capital in the first quarter. Net debt remained stable at €2,389 million (€2,366 million at end-December 2022), including €700 million in hybrid bonds, representing 1.3x last-twelve-months EBITDA.
2023 Guidance Confirmed
Despite the challenging market environment, Arkema has reaffirmed its full-year guidance for 2023. The company aims to achieve EBITDA of around €1.5 billion to €1.6 billion and maintain a high EBITDA to cash conversion rate of over 40%.
Commitment to Sustainability
Arkema’s commitment to sustainability has been strengthened by the Group in light of the progress achieved in its carbon trajectory, and validated by SBTi. The company now aims to reduce its greenhouse gas emissions by 48.5% for Scopes 1+2 and by 54% for Scope 3 by 2030 versus 2019.
Chairman and CEO Thierry Le Hénaff said: “The quarter’s performance was achieved, as expected, in a general context of weaker demand, more particularly in Europe and in the construction market. The visibility expressed by our customers remains limited despite some more positive initial signals observed in Asia. In this economic environment that remains difficult, the Group achieved, thanks to its positioning and agility, solid results in the first quarter, and confirms its EBITDA and cash flow forecast for the year. Arkema will moreover remain attentive to strictly managing its costs and working capital.
The beginning of 2023 was also marked by two key milestones in the implementation of Arkema’s ambition in sustainable solutions: the launch of the final phase in the start-up of the bio-based polymer plant in Singapore, and SBTi validation for our 1.5°C carbon trajectory by 2030. In addition, several major industrial projects are progressing as planned and will soon contribute to the Group’s growth in Specialty Materials.”
Outlook for 2023
Looking ahead, Arkema is operating in an environment marked by a lack of visibility and continued low volumes. The outlook for the coming months should be contrasted by region, with Europe remaining weak, the United States down but holding up better overall, and Asia improving slightly from a low level. Raw material costs are showing signs of easing tightness but remain at elevated levels in Europe and the United States. Energy prices are declining but remain relatively high in Europe.
Arkema’s strategy for the remainder of the year will be focused on tightly managing its operations, with a strong emphasis on cost control, the optimization of working capital, and the environmental performance of its sites. Additionally, the Group will continue to implement its projects to develop sustainable solutions, including growth-driven industrial investments and the acceleration of targeted innovation in new energies, 3D printing, bio-based and recyclable materials, and new mobility.
Main expansion projects
Arkema will benefit in particular from the start-up and ramp-up of its main expansion projects, which should contribute €50 million to €70 million to the Group’s EBITDA in 2023, mainly in the second part of the year. This is expected to boost the Group’s financial performance in the latter half of the year.