Arkema Industrial Chemicals sales rise by 3.6%

07 Aug '08

5 min read

Industrial Chemicals sales rose by 3.6% to €682 million in the 2nd quarter 2008. Excluding the conversion effect and the impact of changes in the scope of business, sales grew by over 6%, sustained by price increases. EBITDA for the segment rose to €96 million in the second quarter, a very significant improvement of 18.5% compared to the 2nd quarter 2007. EBITDA margin reached a high level of 14.1%, against 12.3% in the 2nd quarter 2007, despite acrylics still in low cycle conditions.

This improvement is the result of new developments, in particular in Thiochemicals and Fluorochemicals, the successful integration of Coatex, and the productivity measures undertaken over the last two years.

Performance Products sales reached €430 million in the 2nd quarter 2008. Excluding the conversion effect and the impact of changes in the scope of business, sales rose by 8.4%, essentially supported by sales price increases. EBITDA rose very significantly by 22% to €61 million, against €50 million in the 2nd quarter 2007. EBITDA margin reached a historical level of 14.2% (against 11.0% in the 2nd quarter 2007 and 9.3% in the 2nd quarter 2006).

The development of new products in fast growing markets (polyamides, fluorinated polymers, molecular sieves, etc.) played a large part in the improvement of the segment's results.

CASH FLOW AND NET DEBT AT JUNE 30 2008:
Excluding change in working capital, cash flow related to operations reached €207 million in the 1st half 2008 against €171 million in the 1st half 2007. The change in working capital stood at -€128 million, reflecting the usual seasonality of sales.

Cash flow related to operations and investments in the first six months stood at –€81 million against +€132 million in the 1st half 2007, which included proceeds from portfolio management operations amounting to +€137 million.

Net debt at the end of June stood at €592 million against €459 million at the end of December 2007, corresponding to a ratio of net debt on shareholders' equity of 30%, which confirms the strength of the balance sheet. Net debt end of June takes into account the impact of the share capital increase operation reserved for employees amounting to a total of €19 million, the payment of dividend totaling €46 million, and share buyback operations amounting to €11 million.

2008 OUTLOOK:
The economic environment in the 2nd half of the year should remain challenging and uncertain, characterized, in particular, by high and volatile raw material and energy costs and a weak US dollar versus the euro.

In this context, Arkema will focus on increasing its prices, while continuing to implement self-help initiatives. Self-help initiatives already underway, the impact of which has been estimated for 2008 at €80 million, will underpin EBITDA growth. Furthermore, Arkema will remain attentive to the evolution of the economic environment, and continue to take the necessary measures to adapt accordingly.

Arkema's 2008 target of 10% EBITDA margin is on course. Based on the quality of ongoing projects, the results of the Industrial Chemicals and Performance Products segments should support this improvement in the results. Vinyl Products will continue to be affected by the sharp increase of ethylene.

Arkema Corporation

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