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Arkema Q4 profits fall amid difficult economic environment

February 28/2020

MOSCOW (MRC) -- Arkema reports a 13% decline year on year (YOY) to EUR102 million (USD111.6 million) in adjusted net income for the fourth quarter of 2019, on sales down 7% YOY to EUR2.05 billion, with market uncertainty “continuing to weigh heavily on demand,” it says.

Group EBITDA rose 3% to EUR295 million compared with the prior-year quarter, reflecting growth for its specialty businesses and more favorable raw materials prices, it says. The EBITDA margin increased to 14.4% from 13% a year earlier, it adds.

Arkema says the coronavirus disease 2019 (Covid-19) outbreak "has led to a number of disruptions” for the company. “Quarantined personnel and transportation restrictions in China have impacted the supply chain. Furthermore, lower activity levels have affected the level of demand of our customers in China and in Europe. Uncertainty persists concerning the evolution of the epidemic and its impact on the group’s results beyond the month of February,” it says. The company estimates the outbreak’s impact on EBITDA at the end of February at around EUR20 million.

Volumes in the fourth quarter declined 5.3% YOY, reflecting the ongoing slowdown in the transportation, oil and gas, and consumer electronics markets, as well as a high basis of comparison with the equivalent quarter in 2018 for the company’s coating solutions division, according to Arkema.

A negative 5.4% price effect is mainly due to lower propylene prices for acrylic monomers and ongoing very tough market conditions for fluorogases, which overshadowed a continuing positive price dynamic in high-performance materials, it says. The company says it was also impacted to a limited extent by the nationwide strikes protesting against pension reforms in France.

In Arkema’s high-performance materials business, sales rose 1.3% YOY to ˆ991 million, fueled by a 5.4% positive scope effect arising from the consolidation of the ArrMaz, Prochimir, and Lambson acquisitions. Solid momentum for batteries and 3D printing was countered by ongoing weaker demand in the transportation, oil and gas, and consumer electronics sectors, as well as inventory adjustments of some customers, leading to a 7.6% decline YOY in volumes. The division’s EBITDA rose to EUR140 million from EUR125 million a year earlier, driven in particular by ArrMaz’s contribution and Bostik’s continued growth.

The company’s industrial specialties division achieved sales of EUR593 million, down 13.2% YOY, mostly due to a 10.3% negative price effect, largely attributable to market conditions in fluorogases, it says. EBITDA was EUR133 million, down 5% YOY.

In the coating solutions division, sales fell 13.9% YOY to ˆ464 million, with the decrease in propylene prices having “a strong impact” on the overall price effect, which was a negative 12.6%. Volumes were 2.8% lower, while EBITDA declined to EUR36 million from EUR44 million a year earlier, with the company saying improved unit margins in downstream businesses failed to fully offset more challenging market conditions for upstream businesses.

For the full fiscal year 2019, Arkema reports adjusted net income of EUR625 million, down from EUR725 million in 2018, on sales of EUR8.7 billion, slightly lower than the previous year.

The company “experienced a more difficult economic climate in 2019, marked by downturns in some markets, such as the automotive and electronics sectors, as well as a general lack of visibility. In this context, the group’s performance remained at a high level and its resilience compared favorably with the sector average,” says CEO Thierry Le Henaff.

As it was written earlier, in October 2019, Arkema (Colombes, France) announced the proposed divestment of its Functional Polyolefins business to SK Global Chemical (Seoul, South Korea), a subsidiary of SK, the major South Korean corporation. With this project, Arkema continues its shift towards specialty chemicals and advanced materials.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
Author:Anna Larionova
Tags:PVC, PP, PE, Arkema.
Category:General News
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