Arkema Sa · EURONEXT:AKE
Arkema Sa — Shareholder Meeting (May 2020)
64 slides from Arkema Sa's shareholder meeting presentation, May 19, 2020
Slide 1: General Meeting 19 May 2020
2020 ; GENERAL MEETING a ee 19 May 2020 INNOVATIVE @& CHEMISTRY
Slide 2: Covid-19 Update
COVID-19 UPDATE INNOVATIVE @& CHEMISTRY
Slide 3: Our organization's priorities against Covid-19
OUR ORGANIZATION’S PRIORITIES AGAINST COVID-19 COVID-19 update OUR FIRST PRIORITY, TO GUARANTEE A HIGH LEVEL OF HEALTH PROTECTION TO OUR EMPLOYEES PRESENT ON OUR SITES ORGANIZE TELEWORKING AND MANAGE THE COMPANY CLOSELY ENSURE THE CONTINUITY OF OUR ACTIVITIES AND CUSTOMER SERVICE ORGANISE A PROGRESS
Slide 4: Reactivity and confidence in managing this unprecedented crisis
REACTIVITY AND CONFIDENCE IN THE ECONOMIC AND COVID-19 update FINANCIAL MANAGEMENT OF THIS UNPRECEDENTED CRISIS SIGNIFICANT DECLINE IN GLOBAL IMPLEMENTATION OF DECISIVE DEMAND IN Q2 MEASURES TO ADAPT COSTS AND CAPITAL EXPENDITURE GRADUAL IMPROVEMENT EXPECTED FROM MID-YEAR BENEFITS OF DIVERSIFIED END
Slide 5: Arkema supportive and responsible
ARKEMA SUPPORTIVE AND RESPONSIBLE COVID-19 update PRODUCTION AND DISTRIBUTION OF HAND SANITIZER TO HOSPITALS DEVELOPMENT OF ESSENTIAL MATERIALS FOR HEALTH AND MEDICAL EQUIPMENT DIVIDEND DECLINE OF 12% RELATIVE TO 2019 DONATIONS FROM THE CEO, THE EXECUTIVE COMMITTEE AND NUMEROUS MANAGERS 5
Slide 6: 2019 Performance
2019 PERFORMANCE INNOVATIVE @& CHEMISTRY
Slide 7: Arkema in a nutshell
ARKEMA IN A NUTSHELL 2019 performance 20,500 €8.7 bn 144 3 employees sales Industrial sites regional R&D hubs 55 16.7% €607 m €249 m countries EBITDA margin capital expenditure (1) R&D costs (1) Recurring and exceptional 2019 figures 7
Slide 8: Diversified and attractive end-markets
DIVERSIFIED AND ATTRACTIVE END-MARKETS 2019 performance CONSTRUCTION OIL AND GAS WATER TREATMENT BATTERIES AUTOMOTIVE AND TRANSPORT SPORT ANIMAL NUTRITION DECORATIVE PAINTS NEW ENERGIES CONSUMER ELECTRONICS 8
Slide 9: A high-level financial performance
A HIGH-LEVEL FINANCIAL PERFORMANCE 2019 performance 1,391 1,474 1,457 8.8 8.7 8.3 7.5 1,189 16.7% 16.7% 16.7% 15.8% 2016 2017 2018 2019 2016 2017 2018 2019 Sales EBITDA (€m) (€bn) and EBITDA margin (%) 9
Slide 10: Exceptional reduction of the dividend in the context linked to Covid-19
EXCEPTIONAL REDUCTION OF THE DIVIDEND IN THE 2019 performance CONTEXT LINKED TO COVID-19 Dividend proposal submitted to the vote of today’s general meeting 2.50 2.30 2.20 2.05 Pay-out 27% (as a % of adjusted net income / share) Dividend yield 2.3% (as a % of the share price as of 31/12/2019) 2016 20
Slide 11: Safety and diversity at the core of our action
SAFETY AND DIVERSITY AT THE CORE OF OUR ACTION 2019 performance SAFETY DIVERSITY 4.4 1.3 1.4 3.7 21% 23% 39% 40% 2018 2019 2018 2019 2018 2019 2018 2019 Total recordable injury rate Process safety event rate Percentage of women in Percentage of non-French (TRIR) (PSER) senior management nationals in
Slide 12: Environmental footprint reduction
ENVIRONMENTAL FOOTPRINT REDUCTION 2019 performance 1.00 1.00 1.00 1.00 0.87 0.91 0.60 0.50 2015 2019 2012 2019 2012 2019 2012 2019 Climate Energy Water Air Direct greenhouse Net energy Chemical oxygen Volatile organic gas emissions purchases demand compounds In absolute value terms compared with 201
Slide 13: Evolution of the share price since 1st January 2019
EVOLUTION OF THE SHARE PRICE SINCE 2019 performance 1st JANUARY 2019 Since May 2006 (with reintegrated dividends) around x1.5 80 CAC 40 more than 74.96 CAC 40 : + 26.4 % Arkema Peers’ average* x3 Arkema : + 26.3 % 60 around Average of peers* : + 18.1 % x2 40 2019 2020 2019 31 March 31 June 31 Septem
Slide 14: 2019 Highlights
2019 HIGHLIGHTS INNOVATIVE @& CHEMISTRY
Slide 15: Bolt-on acquisitions in adhesives
BOLT-ON ACQUISITIONS IN ADHESIVES 2019 highlights Automotive Construction Textile Medical Tiles Waterproofing Floor Specialized in high-performance Danish leader in tile adhesives, waterproofing systems thermobonding adhesive films and floor preparation solutions 15
Slide 16: ArrMaz, a highly complementary acquisition
ARRMAZ, A HIGHLY COMPLEMENTARY ACQUISITION 2019 highlights Major player in specialty surfactants, based in the United States Sales US$290 m Very resilient EBITDA margin of 18% Crop nutrition Mining Infrastructure 16
Slide 17: Industrial start-ups with attractive returns
INDUSTRIAL START-UPS WITH ATTRACTIVE RETURNS 2019 highlights CLEAR LAKE New 90,000 tonnes per year France acrylic acid reactor USA China Coating Solutions MOBILE MONT NANSHA > 50% global capacity increase of Production capacity increase of Start-up of the high-performance PA12 powders 30% for liquid
Slide 18: Extension in Malaysia in thiochemicals
EXTENSION IN MALAYSIA IN THIOCHEMICALS 2019 highlights Doubling of methyl mercaptan production capacity in Kerteh (Malaysia) Start-up in first quarter 2020 Animal nutrition Refining Petrochemicals 18
Slide 19: 3D printing growing strongly
3D PRINTING GROWING STRONGLY 2019 highlights AEROSPACE SPORTS Extremely complex Made-to-measure part made of helmet made of 100% Kepstan® PEKK composite biosourced Rilsan® PA11 INDUSTRY Partnership, and acquisition of a $20m stake in Carbon® High chemical resistance flange made of Kynar® PVDF 19
Slide 20: Increasingly effective lithium-ion batteries
INCREASINGLY EFFECTIVE LITHIUM-ION BATTERIES 2019 highlights ELECTRIC VEHICLES Optimized cell performance (charge time, energy density, recyclability) Anode - Cathode + Excellent heat transfer and battery pack weight reduction 20
Slide 21: Composites for materials lightweighting
COMPOSITES FOR MATERIALS LIGHTWEIGHTING 2019 highlights WIND AERONAUTICS Main structure of aircraft Recyclable wind turbine Kepstan® PEKK + carbon blades Joint R&D laboratory in Elium® composites + glass France with and Elium® + carbon CONSTRUCTION HYDROGEN Rebars, modular PVDF hydrogen tank with co
Slide 22: Piezotech electro-active fluorinated polymers
PIEZOTECH® ELECTRO-ACTIVE FLUORINATED POLYMERS 2019 highlights VIRTUAL REALITY HEALTH Haptic actuators for Printed biomedical sensors gaming, automotive, man- (heart rate…) machine interface Connected textile Smart floors for fall detection ENERGY SAFETY Integrated sensors in materials to monitor wi
Slide 23: Continued cross-functional initiatives
CONTINUED CROSS-FUNCTIONAL INITIATIVES 2019 highlights COMMERCIAL EXCELLENCE DIGITAL COMPETENCE Cross-functional approach Development of key Mobile applications Artificial intelligence to by market accounts for craftsmen optimize operations Sales Academy Digitalization Safety training Set-up of digi
Slide 24: 2019 Financial Performance
2019 FINANCIAL PERFORMANCE based on the organization of the Group as of 31 December 2019
Slide 25: Key figures
2019 financial KEY FIGURES performance €8,738 m €1,457 m Sales EBITDA close to the 2018 16.7% level EBITDA margin €625 m €1,631 m Adjusted net income Net debt €8.20 + €700 m hybrids per share 25
Slide 26: High Performance Materials (47% of sales)
HIGH PERFORMANCE MATERIALS 2019 financial performance (47% OF SALES) In €m 2018 2019 YoY change Remarkable performance of Bostik with high-teens EBITDA growth Sales 3,970 4,065 + 2.4% EBITDA 640 654 + 2.2% Good resistance of Advanced Materials in EBITDA margin 16.1% 16.1% spite of the slowdown of ce
Slide 27: Industrial Specialties (29% of sales)
2019 financial INDUSTRIAL SPECIALTIES (29% OF SALES) performance Very good performance of Thiochemicals and In €m 2018 2019 YoY change growth of H2O2 Sales 2,699 2,514 - 6.9% Normalization in the MMA/PMMA chain and EBITDA 675 621 - 8.0% illegal imports in Fluorogases in Europe EBITDA margin 25.0% 24
Slide 28: Coating Solutions (24% of sales)
2019 financial COATING SOLUTIONS (24% OF SALES) performance In €m 2018 2019 YoY change Strong volume growth in the US and in Asia Sales 2,120 2,133 + 0.6% EBITDA 243 264 + 8.6% Margin improvement in a more favorable raw EBITDA margin 11.5% 12.4% materials context 28
Slide 29: Record cash flow generation
2019 financial RECORD CASH FLOW GENERATION performance EBITDA to cash conversion rate 52% 667 above the target of 35% 565 499 Working capital (% of annual sales) 13.8% close to the very good level of 2018 Recurring and exceptional capital expenditure €607 m acceleration of major organic growth proje
Slide 30: A very solid balance sheet
2019 financial A VERY SOLID BALANCE SHEET performance Gearing (net debt excluding hybrids divided by shareholders’ equity) 1,631 31% Net debt / EBITDA 1,056 1,006 1.1x Acquisition of ArrMaz (included in net debt as of 31/12/2019) $570 m enterprise value 2017 2018 2019 Hybrid bonds (booked as shareho
Slide 31: Refinancings achieved
2019 financial REFINANCINGS ACHIEVED performance 900 900 1.50% 700 1.50% • December 2019: new 10-year 480 500 bond issue of €500 m 3.85% 400 0.75% 2.75% 300 • January 2020: new 6-year 300 4.75% 1.50% hybrid bond of €300 m* 150 3.125% 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Senior bond Hybr
Slide 32: Q1 2020 key figures
2019 financial Q1 2020 KEY FIGURES performance €2,088 m €300 m Sales EBITDA 14.4% down 5.7% EBITDA margin €100 m €1,481 m Adjusted net income Net debt €1.31 + €1 bn hybrids per share 32
Slide 33: Financial resolutions
2019 financial FINANCIAL RESOLUTIONS performance • Approval of the parent company and consolidated financial statements for 2019 • 1st and 2nd resolutions • Renewal of a statutory auditor’s term • 10th resolution • Renewal of the authorization to buy back shares: 2020 programme • 11th résolution • R
Slide 34: Corporate Social Responsibility
CORPORATE SOCIAL RESPONSIBILITY
Slide 35: CSR commitment integrated across the whole value chain
CSR COMMITMENT INTEGRATED ACROSS THE WHOLE VALUE CHAIN CSR With our suppliers Arkema and its community For our customers Climate & Innovation for Responsible sourcing Safety Diversity Community Environment sustainable development Mentoring programs 35
Slide 36: Sustainable solutions driven by innovation
SUSTAINABLE SOLUTIONS DRIVEN BY INNOVATION CSR ASSESSMENT RESEARCH & INNOVATION OF THE SOLUTIONS PORTFOLIO TO SUPPORT SUTAINABLE DEVELOPMENT Percentage of sales which significantly contribute to In 2019, 149 patent applications the Sustainable Development Goals (1) linked to sustainable development,
Slide 37: A responsible manufacturer: new 2030 targets
ARKEMA, A RESPONSIBLE MANUFACTURER: NEW 2030 TARGETS CSR CLIMATE ENVIRONMENT Volatile Chemical Greenhouse gas Net energy organic oxygen emissions puchases compounds demand Commitment to global warming of well below 2 °C, in line with the Paris agreement -38% -65% -60% -20% vs 2015 vs 2012 vs 2012 vs
Slide 38: Open dialogue with our stakeholders
OPEN DIALOGUE WITH OUR STAKEHOLDERS CSR MATERIALITY ASSESSMENT ARKEMA AND ITS COMMUNITY 5 priority areas were defined, covering issues identified in this assessment and relating to Arkema’s mission. COMMON PHILANTHROPY GROUND® Funds for education, salary SUSTAINABLE SOLUTIONS Nearly 1000 rounding, i
Slide 39: Strong CSR requirements
STRONG CSR REQUIREMENTS CSR NON-FINANCIAL RATINGS OUR AMBITION 2015 2019 42 65 BB A C B • Rank among the Top 1% best perfoming companies Global n.a.1 4e/38 chemist • Inclusion in the DJSI EUROPE 120 INDICES EUROZONE 120 INDICES 1. Not disclosed 39
Slide 40: 2024 Strategy
2024 STRATEGY INNOVATIVE @& CHEMISTRY
Slide 41: Our vision
OUR VISION 2024 strategy Become a global leader in Specialty Materials offering the most innovative and sustainable solutions to meet our customers’ needs, today and for the future 41
Slide 42: Arkema has a unique know-how in materials
ARKEMA HAS AN UNIQUE KNOW-HOW IN MATERIALS 2024 strategy Structural Material Protective Additive Surface Piezoelectric materials bonding surface technology science materials Change picture (wind turbine blade) Composite Recyclable Biosourced Rheology Photocure Nanoscience materials materials materia
Slide 43: A know-how organized around 3 highly synergistic segments
A KNOW-HOW ORGANIZED AROUND 3 HIGHLY 2024 strategy SYNERGISTIC SEGMENTS Adhesive Advanced Solutions Materials SPECIALTY MATERIALS Coating Solutions Building and Automotive and General industry Consumer goods Electric and energy Paints and coatings Nutrition and water construction transportation 43
Slide 44: A new organization aligned with our vision
A NEW ORGANIZATION ALIGNED WITH OUR VISION 2024 strategy Adhesive Solutions Advanced Materials Coating Solutions Intermediates Construction & Industrial High- Performance Coating Coating PMMA Consumer Assembly Performance Additives Resins Additives Fluorogases Polymers Asia Acrylics 24% 31% 24% 21%
Slide 45: Evolution of the Executive Committee
EVOLUTION OF THE EXECUTIVE COMMITTEE 2024 strategy Thierry Le Hénaff Marie-José Donsion Thierry Parmentier Bernard Boyer Luc Benoit-Cattin Chairman and CEO CFO EVP Human Resources and EVP Strategy EVP Industry and CSR Corporate Communication Vincent Legros Marc Schuller Richard Jenkins Marie-Pierre
Slide 46: Become a pure specialty materials player
BECOME A PURE SPECIALTY MATERIALS PLAYER 2024 strategy OUR 2024 AMBITION SPECIALTY MATERIALS INTERMEDIATES 3-3.5% average annual organic €10-11 bn sales revenue growth GDP+ organic growth High group profitability of ~17% Acquisitions to more than double EBITDA margin organic growth Develop different
Slide 47: Our strategy in Adhesive Solutions
OUR STRATEGY IN ADHESIVE SOLUTIONS 2024 strategy 2019 KEY FINANCIALS 2024 AMBITION GROWTH LEVERS Geographic expansion and €2.1 bn 30-35% technological developments sales percentage of group sales (high performance adhesives for industrial assembly, waterproofing and flooring) High single digit 12.9%
Slide 48: Our strategy in Advanced Materials
OUR STRATEGY IN ADVANCED MATERIALS 2024 strategy 2019 KEY FINANCIALS AMBITION 2024 GROWTH LEVERS Major industrial projects in Asia, €2.7 bn 35-40% with attractive returns sales percentage of group sales (bio-sourced polyamides, PVDF and thiochemicals) Innovation with a focus on 21.7% 4% sustainabili
Slide 49: Our strategy in Coating Solutions
OUR STRATEGY IN COATING SOLUTIONS 2024 strategy 2019 FINANCIALS 2024 AMBITION GROWTH LEVERS Increase our capacities in fast €2.1 bn 25-30% growing regions sales percentage of group sales (photocure resins in China, powder coatings in India) Optimize operating models 14.4% 3% (reinforcing the integra
Slide 50: Differentiated strategies in Intermediates
DIFFERENTIATED STRATEGIES IN INTERMEDIATES 2024 strategy MMA / PMMA FLUOROGASES ASIA ACRYLICS €0.6 bn* €0.7 bn €0.3 bn 2019 sales 2019 sales 2019 sales Focus on Balance acrylic monomer Explore possibility of sale specialty segments capacity and downstream growth €0.2 bn Investigate strategic alterna
Slide 51: Cash allocation for 2020-2024
CASH ALLOCATION FOR 2020-2024 2024 strategy ~€3.5 bn SUBJECT TO APPROPRIATE MARKET CONDITIONS +25% Return to Reiterating our progressive dividend policy, targeting 40% payout ratio by 2024 shareholders 40-45% Opportunistic share buy-back program Employee shareholder program Mostly small and
Slide 52: Strict financial discipline
STRICT FINANCIAL DISCIPLINE 2024 strategy Return on capital employed Net debt to EBITDA ratio Solid investment grade rating >10% <2x incl. hybrid bonds Recurring Capex Controlled working capital ~5.5% ~14% of sales of sales 52
Slide 53: Governance
‘g \@ GOVERNANCE INNOVATIVE @& CHEMISTRY
Slide 54: The Board of Directors in 2019
THE BOARD OF DIRECTORS IN 2019 Governance director representing 64% 1 shareholder employees 7 independent directors out of 11* 13 * In line with the recommendations of the AFEP-MEDEF code members 1 director representing employees 45 % of women** ** Excluding directors representing employees and shar
Slide 55: Recent changes in the Board of Directors' composition
RECENT CHANGES IN THE BOARD OF DIRECTORS’ COMPOSITION Governance 4 NEW INDEPENDENT DIRECTORS APPOINTED IN THE PAST 3 YEARS • These appointments help maintain the independence of the Board and strengthen its skills set in essential areas for Arkema such as executive management of a quoted company, th
Slide 56: Activity of the Board and the committees in 2019
ACTIVITY OF THE BOARD AND THE COMMITTEES IN 2019 Governance BOARD OF DIRECTORS SPECIALIZED COMMITTEES 8 1 AUDIT AND ACCOUNTS COMMITTEE meetings annual seminar dedicated to strategy 6 meetings 95% 1 100% attendance rate attendance rate 2-day on-site visit in Holland at Den Braven (Bostik) NOMINATING,
Slide 57: Arkema's governance structure: Chairman and CEO
ARKEMA’S GOVERNANCE STRUCTURE: Governance CHAIRMAN AND CEO An efficient structure at Arkema A structure adapted to the needs since 2006 of Arkema since 2006 • A strict respect of the balance of powers • Which has demonstrated its efficiency and between the Board of Directors and executive pertinence
Slide 58: Renewal proposed at the general meeting
RENEWAL PROPOSED AT THE GENERAL MEETING Governance Thierry Le Hénaff 2015-2019 CAREER born 4th May 1963 Chairman and CEO • New phase in the deep transformation of the • "Founder" of Arkema Group’s profile in 2006 • High-level individual and collective performance • Member of Michelin’s • Strong grow
Slide 59: Directors' 2020 compensation policy and attendance fees paid in 2019
DIRECTORS’ 2020 COMPENSATION POLICY AND ATTENDANCE FEES Governance PAID IN 2019 Proposed changes to the distribution modalities (6th resolution) Senior indep. Board of Directors Committees director Member Chairmanship €10,000 Fixed part €25,000 (no change) (no change) Variable part linked to physi
Slide 60: Compensation policy for the Chairman and CEO (1/2)
COMPENSATION POLICY FOR THE CHAIRMAN AND CEO FOR THE DURATION Governance OF THE NEW TERM (7th RESOLUTION) 1/2 AMOUNT DESCRIPTION • €900k unchanged since 2016, ie. an increase of 2.67% per year on average in the Fixed period compensation €1,000k • Start date postponed until 1st January 2021 in the co
Slide 61: Compensation policy for the Chairman and CEO (2/2)
COMPENSATION POLICY FOR THE CHAIRMAN AND CEO FOR THE DURATION Governance OF THE NEW TERM (7th RESOLUTION) 2/2 AMOUNT DESCRIPTION • 20% of annual compensation (fixed + variable) Retirement No change • Implemented in 2016 (corresponding to the termination date of the supplementary defined benefit pens
Slide 62: Elements of the Chairman and CEO's 2019 compensation
ELEMENTS OF THE CHAIRMAN AND CEO’S 2019 COMPENSATION SUBJECT TO Governance APPROVAL (9th RESOLUTION) AMOUNT DESCRIPTION Fixed compensation €900,000 • Unchanged since 2016 • High-level performance of the Group in a challenging market context • 3 quantitative criteria: EBITDA, recurring cash flow and
Slide 63: Capital increase reserved for employees
CAPITAL INCREASE RESERVED FOR EMPLOYEES Governance • Capital increases reserved for employees carried out every 2 years since 2006 • Policy of employee involvement in the Group’s development • Subscription rate from employees underlining their attachment and confidence in the Group 2016 capital incr
Slide 64: Disclaimer
DISCLAIMER The information disclosed in this press release may contain forward-looking statements with respect to the financial position, results of operations, business and strategy of Arkema. In the current context, where the Covid-19 epidemic continues to rapidly spread across the world, and the