Arkema Aktie

Good morning. This is the conference operator. Welcome, and thank you for joining the Arkema First Quarter 2026 Results and Outlook Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Thierry Le Henaff, Chairman and Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good morning, everybody. Welcome to Arkema's Q1 '26 Results Conference Call.

Joining me today are Marie-Jose Donsion, our CFO; and the Investor Relations team. As always, to support this conference call, we have posted a set of slides which are available on our website. I will comment the highlights of the quarter before letting Marie-Jose go through the financials. And at the end of the presentation will be available, as usual, to answer your questions.

In the continuity of 2025, market conditions remained soft into January and February 2026 before improving in March. Regional trends were contrasted with demand continuing to be subdued in Europe and in the U.S., while Asia showed again solid momentum across several of our end markets. In addition, the quarter was once more affected by the depreciation of the U.S. dollar compared to last year, while this impact is expected to be more limited from the second quarter onwards.

End of February saw the outbreak of the conflict in the Middle East, which started to impact global supply chains and quickly led to a sharp rise in certain raw materials as well as in energy and logistics costs beginning in Asia.

So in this complex environment, Arkema delivered stable volumes year-on-year, a solid performance in the context. This was particularly driven by Specialty Materials whose volume increased by 1.5%, supported by a strong pickup in March. All Specialty Materials segments were up.

Coating Solutions benefited notably from better dynamics in UV curing resins. Advanced Materials posted solid growth in key attractive markets for high-performance polymers. These were supported by durable goods and some limited improvement in construction. This volume performance also reflects Arkema's continued momentum in high-growth pockets with volumes up 15% in attractive end markets such as batteries, sport, 3D printing and healthcare.

Batteries once again delivered strong growth, supported by the rapid expansion of energy storage systems, a key additional driver for the group, particularly within High Performance Polymers.

As a result, Q1 EBITDA came in slightly above expectation, reaching EUR 283 million, up 14% versus the fourth quarter of 2025, supported by an improvement in March. EBITDA was nevertheless down year-on-year, primarily impacted by a significant negative currency effect of around EUR 20 million and the absence of rebound in the U.S. and euro so far.

Besides, Advanced Materials experienced a slow start to the year, in line with the trend observed in Q4. However, momentum improved in March and Q2 should be up sequentially supported by HPP. I would also like to underline the good performance of Coating Solutions, which improved its EBITDA margin by 100 basis points, supported by a more favorable product mix. Adhesive Solutions delivered a significant sequential improvement despite being down year-on-year.

On the other hand, Primary Materials increase earnings slightly year-on-year, mainly driven by legacy refrigerant in the U.S., and actually, the improving spreads in Asia came late in the quarter and so had only a limited impact while the business in Europe and the U.S. continued to be challenging, particularly in January and February. However, from today's perspective, it is fair to assume that the acrylic spread should improve in Q2 with the magnitude still to be confirmed.

As you can expect, all teams are fully mobilized to effectively and swiftly manage the current economic and geopolitical challenges. In the first quarter, we have set fixed cost inflation of at constant currencies, and we are well on track to achieve this objective for the full year, supported by a number of cost-cutting initiatives.

Turning to the Middle East crisis. The group is reacting swiftly to mitigate supply chain disruptions, both in terms of raw material availability and more important input cost inflation. Pricing adjustments have been initiated to our sales increase in raw materials, energy and logistics costs, while actions deployed selectively by product, market and geography. This has required close and continuous coordination with both suppliers and customers, cost increases will become visible in Q2.

Arkema's well balanced geographical footprint to serve customers predominantly from the region is worth mentioning, as a good advantage in the current environment. So far, we have been able to navigate this crisis without any supply disruption. Moreover, Arkema remains focused on executing its major growth projects.

So group is currently finalizing the completion of its new PVDF capacity in the U.S. scheduled to start mid-year. This will add 15% additional capacity in the region to meet growing demand for locally manufactured PVDF, particularly for energy storage systems, semiconductors or cable applications.

In parallel, the group also announced a further 20% capacity expansion at its PVDF in China, set up to start in 2028. Also, the new unit of Rilsan Clear, downstream of PA11 in Singapore started up successfully at the beginning of the year and is expected to support HPP earnings momentum from Q2 onwards, driven by capacity ramp-up.

I would also like to underline the strong first quarter performance of PIAM. EBITDA was up more than 30% year-on-year in local currency with a 35% EBITDA margin. As highlighted during our last call, PIAM continues to benefit from good momentum driven in particular by solutions for foldable and ultra-thin smartphones as well as its expansion into higher-end application. We expect this positive trend to continue into the second quarter with robust year-on-year sales growth.

In addition, Arkema stays disciplined in its capital allocation, we delivered a solid performance with regard to working capital management. This contributed to recurring cash flow coming in better than last year. This performance also reflects lower CapEx, fully in line with our EUR 600 million full year CapEx target.

I will now hand it over to Marie-Jose for a more in-depth look at the financials by segment before we discuss the outlook at the end of the presentation.

Thank you, Thierry, and good morning, everyone. Arkema's Q1 revenues at EUR 2.2 billion were down 8.4% year-on-year. They were impacted by a negative 5.1% currency effect, reflecting mainly the weakening of the U.S. dollar against the euro compared to Q1 last year.

Volumes came out broadly stable year-on-year, supported by a strong month of March after a relatively soft start of the year. The price effect was a negative 3%, reflecting essentially the lower selling price environment compared to Q1 2025, in line with the progressive decrease in raw material costs observed in 2025. Q1 EBITDA came in at EUR 283 million. The currency effect represented a negative of around EUR 20 million.

Looking at the performance by segment. Adhesive Solutions achieved an EBITDA of EUR 89 million. It reflected on top of the currency impact, the still weak demand in North America and Europe, volumes grew significantly overall or slightly less overall, supported mainly by Asia. This performance was driven mainly by adhesives for durable goods with an improvement in aerospace and heavy truck markets in North America.

On the other hand, packaging remains soft and construction was better oriented, especially in Europe. In Advanced Materials, the EBITDA stood at EUR 139 million. Apart from the currency effect, the EBITDA was essentially affected by the unfavorable product and geographical mix. Market conditions in much of the quarter were similar to what we observed in Q4 last year, which means a continuing weak demand in the U.S. and in Europe while Asia continued to show a positive dynamic.

Coating Solutions delivered a good performance in the context with an EBITDA stable compared to last year at EUR 51 million. Volumes were up 3% driven mainly by strong growth in Asia, in particular, in new recurring resins. The EBITDA margin improved by 100 bps at 13%, benefiting from our development in higher value-added applications.

Lastly, Primary Materials. EBITDA was slightly up at EUR 33 million, especially supported by a good performance in legacy refrigerants in the U.S., while acrylic monomers stayed in the low cycle conditions in most of the quarter.

Depreciation and amortization stood at EUR 165 million, leading to a recurring EBIT of EUR 118 million and a REBIT margin of 5.4%. Nonrecurring items amounted to EUR 45 million. That includes EUR 34 million of PPA depreciation and EUR 11 million of one-off charges, notably some restructuring and reorganization costs.

Financial expenses stood at minus EUR 29 million. The increase versus last year reflecting mainly the cost of carry of our prefinanced green bonds issued end of 2024. Consequently, the Q1 adjusted net income amounted to EUR 65 million, which corresponds to EUR 0.86 per share.

Moving on to cash flow and net debt. Q1 recurring cash flow amounted to minus EUR 95 million, which included the first quarter classical working capital seasonality. The working capital ratio on annualized sales stands at 16.3%, which is better than a year ago.

Total capital expenditure amounted to EUR 75 million in the quarter, which is in line again with our guidance of annual CapEx spend of EUR 600 million for the full year 2026. Net debt and hybrid bonds at the end of March '26 amounted to EUR 3.3 billion. The net debt to last 12 months EBITDA ratio stands at 2.8x.

Thank you for your attention, and I hand it over to Thierry for the outlook.

Thank you, Marie-Jose. So as you could see, despite the geopolitical headwinds, we could deliver positive volume growth across our Specialty Materials segment in the first quarter with a double-digit increase in our key attractive markets. As we move into the second quarter, the conflict in Middle East, which began 2 months ago, remains ongoing, as you know, with continued uncertainty regarding the direction and the duration, sorry, and the magnitude of its consequences on the global economy.

At this stage, obviously, the key priority of the group is to remain agile in navigating this volatile environment and to adapt this pricing policy swiftly to offset input cost inflation. This is what we are clearly doing. We remain attentive to other potential impact of this context, notably on global demand as everyone. At the same time, this crisis could also create some upside as it could also lead temporary to tighter supply-demand balance in certain value chain.

In parallel, the group continued to focus on self-help measures, maintaining tight cost and operational contrast -- control, as you could see in the first quarter, alongside the disciplined execution and the ramp-up of these growth projects. So in this context, the group confirms its target of a slight EBITDA growth at constant exchange rate for 2026.

Before opening the Q&A session, maybe a quick word on Arkema journey during the past 20 years, and we have a few slides in the deck on this anniversary. As you know, we became listed on May 18, 2006, and we'll be celebrating the Group's 20th anniversary in a few days.

Over this period, the company has undergone an in-depth and unique transformation from a big bag of commodity businesses, most of them were unprofitable at that time. They were European-centric for most of them, and we transformed the company into a global and profitable leader in Specialty Materials.

Today, Arkema benefits also from a strong financial structure, solid performance, also high nonfinancial standard and offer its customer superior set of cutting-edge technology.

While the chemical industry is currently in low cycle, which is reflected in the share price, leaving space for significant upside, going forward, Arkema has delivered strong long-term value creation over 20 years. EUR 1 invested in Arkema in May 2006 has become EUR 3.6 today, including dividends. Besides Arkema's share price increased over these 20 years is well above the evolution of the CAC count and its chemical peers, particularly in Europe.

So thank you very much for your attention. And together with Marie-Jose, we are now ready to answer the questions you may have.

[Operator Instructions] First question is from Tom Wrigglesworth, Morgan Stanley.

Two questions, if I may. So the first quarter has been characterized by better volumes in the more Specialty business in the -- and less so in the more upstream business, and yet your comment around tightening supply and demand chains would suggest that the reverse will now happen.

So is that what we should expect that now the upstream businesses? And could you comment to how you see that playing out, both for 2Q and the rest of the year, maybe regionally as well, given we're expecting quite diverse performances between, say, Asia and the U.S.? Be very keen to hear your views on that.

And the second question, related, but a follow-up is, what do you think the medium-term kind of structural or kind of more sustainable impacts will be or that you're seeing in customer behaviors from the conflict that's risen in the Middle East?

Thank you, Tom, for your question. Obviously, we are in an interesting world where none of us know exactly what is going to happen, the visibility remains limited. So the good thing, and this is certainly what you could read from the Q1 performance and from our comments on the full year is that we remain solid, and we have -- because we have both balanced portfolio from a geographical standpoint and also from a product line standpoint, sometimes diversity brings stability. And this is the case for Arkema.

So back to your question, I think that the dynamics, I would say, from a geographical standpoint, I mean, we stay with the same contract also Q2 and maybe the remaining part of the world where the engine will be clearly more Asia than Europe and U.S., but we'll see. From a product line standpoint, it can depend from months to months. What is clear is that, as we mentioned, acrylics, which is what we mentioned by your stream, acrylics will benefit in the Q2 at least from a better supply-demand balance.

And I think -- so last year, we suffered clearly in acrylics. Q2, we see light in the tunnel, which is good, which shows that our strategy is producing a benefit and that the diversity of the portfolio is playing its part.

Now as -- I mentioned a couple of months ago, I said this, and it was at the early stage of the Middle East crisis, I said that I believe that this crisis will have a positive and negative impacts. But all in all, for Arkema, it should be around neutral. We are still in this kind of philosophy, and this is why we confirmed the guidance for the full year.

So you -- we mentioned the upstream. But in Coatings, for example, we see some good momentum in -- so reverse of last year in the quarter Q1, and we should be confirmed in Q2. With regard to Adhesives, the sort of overall resilience solidity, not wonderful, but overall resilience.

In Advanced Materials, more contrast, I would say, because we believe that in HPP after a soft start, as I mentioned, we should start to see a sort of sequential momentum benefiting from all these key projects that we have mentioned and the investments.

While on the opposite, Performance Additives should be maybe the loser of the Middle East crisis because this is a business, the product line, which is -- which has the most customers in the Middle East and is certainly more impacted by some raw material increase like sulfur, where you have time lag to pass it to customers.

So I would say -- so I would say the portfolio will play is part everywhere. And -- but at the end, the good thing with what we deliver is that there is no surprise in a world of plenty of unknowns with some positive and negatives. But overall, we sort of neutral stability, but plenty of work for the team clearly.

Now the impact of the medium term on -- from Middle East crisis, which is -- I imagine your question is on the global demand. I would say nobody knows exactly. If it lasts a long time, certainly, there should be impact because of the inflation and the disruptions. But so far, we don't see too much unless the volumes are correct.

I would say, not worse than they were last year, so not an extraordinary level. But I would say not too much impact so far. So wait and see. But we confirm, I think taking everything into account, we believe that for Arkema, we -- this event in Middle East should be neutral with some positive element and some downside.

Just a follow-up on that. Do you think we can expect 2Q '26 EBITDA to be above that of 2Q 2025? I'm just trying to get some kind of reference point to understand the kind of how things might progress.

My feeling and it is factored in the full year guidance. Last year, we were more, if you remember, H2, Q4, we were more around minus 25% compared to last year, then we are minus 14% in Q1, so you see that step by step, we catch up and with last year, year-on-year. And I would say we ought to be comparable, I would say, Q2 '26 compared to last year, which would be a significant step up and which is really our road map to deliver the full year guidance. So we would be really aligned with the full year guidance by achieving that.

Next question is from Matthew Yates, Bank of America.

I wanted to ask about the Advanced Materials division. And from the starting point of the margin you currently have, and the trajectory to get towards the mid-term guide, and in particular, the point on mix, so I'm not sure I fully understand why mix is a headwind at the moment.

Maybe there's some specific products, but you alluded to geographic mix, and I'm struggling to reconcile that with the idea that your CapEx has been disproportionately in Asia to satisfy where the demand is coming from, yet somehow mix is negative. I wouldn't have intuitively assumed that the Asian demand was going to be margin dilutive or else that wouldn't be consistent with the mid-term targets.

So can you just explain to me what's been going on with mix and how you see that evolving? And then somewhat related, you've announced an incremental investment in PVDF in China. There's been a lot of debate in recent years about the degree of competition and commoditization. I see one of your peers in Japan recently took a large write-down on some investments they're making. Why do you still believe that you can make a reasonably attractive return in that PVDF segment and it warrants putting more capital into it?

Thank you, Matthew. A very interesting question, I think, completely of different nature. In fact, on -- overall, on the mid-term, we are comfortable on the fact that the mix, both geographical and product will improve. So this is not the topic of the short-term. The topic of the short-term is nearly mechanical, I would say. So as you know, the unit margin in Europe and U.S. are by nature on many of our businesses, higher in Europe and U.S., than they are in Asia. And it's true for many companies.

The reason being that the cost structure itself is heavier in Europe and U.S., than it is in Asia. But in the end in terms of profitability, okay, we have quite good profitability in Asia as we have in the U.S., we are lower in Europe.

Which means that for the same volume, when these volumes are more weighted, which is the case since 2 years in Asia because this is where we have the growth. In fact, for the same fixed cost, okay, in each of the region, you have less margin for a given volume in Asia than you have in Europe and U.S., okay?

So this means that in terms of EBITDA, the EBITDA is, let's say, is comparable everywhere, but the unit margin is lower in Asia than they are and the EBITDA margin is comparable, which means that when you have more volume and more development in Asia, it weighs on the average mix in -- for the same fixed cost, it weighs on the EBITDA margin, it is nearly mechanical, in fact, okay? But now if you think longer term, Europe and U.S., we are confident on that. We recoup volumes, okay? And step by step, it will come back.

And we confirmed. In fact, we are very happy to confirm the mid-term target for Advanced Materials, which will be well above the 20%, but it's purely -- this is what we explained with the mix. With regard to the product mix, I would say no, because beyond -- if I put aside this geographical discrepancy in terms of products, we develop the product with the highest margin. But again, even with themselves, they make more margin -- unit margin in Europe and U.S., than they are doing in Asia.

Now on the PVDF investment in China, which is for Asia, it's not just for China, it's for Asia, as it's really very consistent with our strategy since several years. We have had many questions on this PVDF. We must say that PVDF since many years and still today, is an engine of growth and profitability for the company, and we want to develop it globally. So we have this investment in the U.S. We have this investment in China, and we are quite comfortable that this investment will have quite a good payback now.

Korea, it's -- I don't know, we -- this is -- I would say, they are to pick their profile. But with regard to us, we are very comfortable on what we are doing, which shows that the quality of our innovation in PVDF, the positioning, the fact that we really focus on the high end of the range, is bringing in fruit. It can be in semiconductor. It could be in batteries. It can be in cables. I think we have a good and differentiated strategy in PVDF.

And Thierry, if you allow me just to follow up. In terms of the Q2 commentary around this business, is it that there are some specific projects ramping. I think you mentioned foldable phones in the intro, for example, that are very high margin or is it just simply an overall improvement in volumes helps to have better fixed cost absorption?

Yes. We got a few messages because we made the comments. I agree on the HPP, and in this matter. In fact, our message was -- Q1 was -- we joined -- to a certain extent, is linked to your first comment or your first question. I would say in the mix of Arkema, Advanced Materials in the Q1 from our standpoint was maybe the disappointing part.

And the message was to say, okay, it's a soft start, but it will ramp up in the second quarter, at least sequentially. We have a good business prospect from the major project and this major project are for HPP. And also, it was to spot the mix in HPP between -- the mix in Advanced Materials in the Q2 between HPP and Performance Additives with HPP with, let's say, a positive growth momentum, including PIAM, which is doing pretty well, as you mentioned, but beyond PIAM, PVDF, et cetera and polyimide and specialty fluorogas.

And on the other side, Performance Additives being impacted by the Middle East because they sell -- this is our business line, which is selling the most to Middle East and they have this sulfur topic. So this is more to give you some granularity inside Advanced Materials, which will be with, let's say, two contrasted business lines for the quarter after that, it can change.

The good thing is that maybe to complete on that is that our major projects step-by-step are ramping up, and this will impact in the short- and long-term, HPP, as you know, and as we often mentioned.

Next question is from James Hooper, Bernstein.

First question, about the -- obviously, you referenced, Thierry, in your answers, the geographic mix, where it's more Asia led. Do you -- and less strong in Europe and North America. Do you expect that to change, given the kind of U.S. PMI trajectory or what we're seeing since the conflict started on the Gold Coast and in other places?

And then secondly, can I also ask about March and obviously stronger than expected. Do you think any of this was customer pre-buying? Perhaps, obviously, Asia was very strong, and that tends to be the spot market and where you see perhaps the current -- most current capacity outages?

So thank you for the question. I would say with regard to the geographic mix, yes, as you know, we believe in U.S. because we invested a lot there. It's 35% of our sales. And we believe that from a competitive standpoint, even reinforced by what is happening in Middle East, their competitiveness, especially in terms of energy superior. So we believe that there are in the U.S., many ingredients for this economy to rebound at a certain point. This is not what we see today.

So it depends if your question is short-term or long-term? If it is short-term, we have to be cautious, and we still see these dynamics coming from Asia. Now it will -- I don't know, reverse is not really the [ weapon, ] because it would mean that Asia would get down, which would not be the case, but would rebalance with U.S. getting stronger. We are at a low point in many of our businesses in the U.S., we start to see a little bit of green shoots. There are minimal here and there, which maybe could get us feel that in the course of the year, we should see some improvement.

But now there are so many elements in the geopolitics that we have to be careful. With regard to March, maybe there is a little bit of prebuying, maybe in the more stream of our businesses. Maybe now when you look at the volume in March, we are just for the company at par compared to -- not so much, but for the quarter, compared to last year. So if you take Jan, Feb, to March, and we have a tendency to look at the whole quarter with different dynamics, a slow start and some offset or catch up in March.

Certainly a little bit of prebuying. But for example, if you look at April, I think we mentioned it in the press release or I think the April is starting -- is in the continuity of March, which is an element of answer also. This means that we see the good solid March is continuing in April. But we need that to have a Q2 in EBITDA comparable to last year.

Next question is from Laurent Favre, BNP Paribas Exane.

My question is on the downstream businesses. And I'm I guess, focused on net pricing. I was wondering if you could talk about sort of big buckets of Adhesives, Coatings and the rest. What are you seeing in terms of raw material inflation right now? Are we talking mid-single digits, low double digits, maybe high teens inflation?

And are you using surcharges? Or are you expecting to see, I guess, pricing commensurate with this type of inflation? When you talk about short-term squeezes on downstream, is it a few quarters or just a few weeks and months?

Okay. With regard to the raw material, all along the place, I would say, that is not only just for downstream businesses. It's for the whole company. You have increased on raw materials, which can run from a few percent to 100%. So it's really quite quick and quite steep.

This is why our teams, unfortunately, were already trained with what has happened during COVID, are really moving very fast to pass price increase. Now it's clear, and you know that very well because your experience is quicker in a upstream that it is in downstream to pass to the customers.

Our feeling is that the more downstream we go, the more we will have to use the full quarter to pass everything. So our idea is to fully offset instantly, I would say, for the end of the quarter. But since we have some businesses, as you know, more upstream that will have some upside effect in the case of acrylics in the quarter, it will fully offset the time lag we can have more downstream businesses. This is where the strength of the portfolio is diversity is playing. So overall, we should be good.

Now it's clear that you have some different color starting from upstream to downstream in the quarter. But the idea is to have done the job, full job for the end of the quarter. The reason why it takes -- you have some time lag. I would say the profile of the customer can be very, very different, even their own constraints. So this is why, as you know, in the real life, it takes always a little bit of time.

And also the raw material increase -- the waiver of the raw material increase are coming one-by-one. So this means that you need to come back and to say, okay, it's more, so we have to pass more, et cetera. So real life.

But overall, with our -- and this is why we sort of comment on this comparable to EBITDA comparable to last year in Q2 because we believe that with our portfolio, there will be some plus and minuses. But all-in-all, we can manage. But it's a job which takes a lot of energy from our teams, like I imagine for everybody.

And back in 2022, I mean you had very, very strong pricing even in downstream areas, at the expense of volumes. And I think at the time, you mentioned that there were certain volumes that you were happy to lose because they were lower quality, lower margins. Is there any of this right now? Or are you literally now fighting for every molecule as you see them as high quality and you want to retain those volumes?

I would say our -- it's clear that when you put a lot of emphasis on price increase, especially in a world where you have a war. We should not forget in Middle East, is not what is going to push volume up very strongly. So let's say that we target more or less flattish volume, okay?

And in this flattish volume guideline or context, we push the price, okay? So it's not exactly like in -- after COVID, where we are still to rationalize our portfolio, especially in the Adhesives, we are not -- this job has been done, okay? So it's more stable. But let's say, flattish volume and then we work on pricing.

Next question is from Jaideep Pandya On Field Research.

I have 3 questions. First one is on acrylic acid. Maybe -- when you look at this product in Europe and the U.S., for a long time, there hasn't been any capacity added, but margins have continuously sort of drifted downwards. Now in the backdrop of the war and the tightness in naphtha and propylene in Asia, how do you see the sort of mid-term outlook for acrylic acid?

And do you think there is a need for capacity rationalization in either Europe or the U.S. given some of the markets like India, for instance, have become more and more self-sufficient. That's my first question.

The second is around the sulfur topic. How do you see the upstream sort of methionine market from your point of view, the markup tons value chain given the shortage of sulfur. Have you been able to grab market share? Or is this an issue right now from your point of view?

And the last question is around PA11. Obviously, you made a very big investment in Singapore. I mean when you look at the plant in Singapore today versus your French plant, in terms of operational performance as well as profitability, where do we stand today? Is this now more or less at par in terms of product output, but profitability is yet to join? Or how do we stand there?

Okay. So with regard to acrylic acid, first of all, we're happy to see after, as you mentioned, a couple of years of challenges to see some improvement, and we appreciate that for the team is very important. And it's not in detriment of the downstream, which is good because you saw the Coating Solutions performance in Q1, which is at par with the previous year. So even in the previous year were not great. I think so this is a chain, which is which is solid right now.

Now as we mentioned, the tightness, we have no crystal ball. I think we are cautious because we are just out of 2 years where acrylics are really under pressure, but we think that clearly with the conflicts and maybe hopefully beyond the conflict, I think we'll stabilize around more normalized spread, but let's do it step-by-step. The first step is to do our job in a market which has changed nobody with Middle East crisis, and we'll see how long will this crisis last. It's a big parameter and nobody knows about it.

And after that, we'll see where we stand and we will certainly update to. I think the good news is that we benefit from this diversity of the portfolio with some more upstream business and some re-downstream businesses.

On the sulfur, I think we -- on the methionine, we are not in the methionine, we -- I would say we supplied our customers. So this market share is more [indiscernible]. What we do ourselves is to supply them the best way possible.

On the availability of the sulfur, we manage -- so this is the good news. Now the sulfur has increased very much. So our topic is to increase. And this is where we are sometime lag by contract. Not every market is the same. But I would say we find the sulfur.

On Singapore, I would say, first of all, the good news is that the Singapore plant is running very well. It took years, as you know. We started at a low point, and we learned a lot. And now it's really a very, very nice plant, very optimized.

So compared to Marseille, it's more modern, so it should be more profitable. But on the other side, the capacity is smaller than Marseille. So I would say, all-in-all, they are comparable to answer your question.

There are no more questions registered at this time. The floor is back to the management for any closing remarks.

Okay. So if there are no more questions, I thank you very much for your attention. And as usual, don't hesitate to contact the IR team to complete my answers. And have a nice day to everybody.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.

Welcome to Arkema's Full Year 2025 results and outlook conference call. For your information, this call is being recorded. [Operator Instructions] I will now hand you over to Thierry Le Henaff, Chairman and Chief Executive Officer. Sir, please go ahead.

Thank you very much. Good morning, everybody. Welcome to Arkema's Full Year 2025 Results Conference Call. With me today are Marie-Jose, our CFO; and the Investor Relations team.

As always, the slides used during this webcast are available on our website. And together with Marie-Jose, we will be available to answer your questions at the end of the presentation.

In 2025, the macroeconomic environment was, as you know, particularly challenging, probably one of the most difficult our industry has faced in the last 20 years. The second part of the year, in particular, was marked by subdued demand across many end markets. The slowdown in the U.S., while Europe remained at low levels. This reflected ongoing cautiousness of economic factors as well as tight year-end inventory management at many of our customers.

On the other hand, Asia continued to be the most dynamic region for the group, in particular, China, where we could see an acceleration in certain sectors like electric mobility, advanced electronics and sustainable consumer goods as well. As you could expect in this context, the group focused on its fundamentals of customer proximity and innovation while strengthening its cost and cash initiatives. The teams have been fully mobilized on a daily basis to best address the environment and strictly control the operations.

As a result, we generated a high level of cash at EUR 464 million, well above our revised guidance of EUR 300 million. This performance was also better than last year's level despite the significant EBITDA decrease. EBITDA stood indeed at EUR 1.25 billion with a margin of 13.8%, so close to 14%, not living up to our expectation at the beginning of our year, but not different from what most of our peers have experienced.

We were able to offset fixed cost inflation and delivered around EUR 90 million of fixed and variable cost savings in 2025, nearly doubling our initial annual target set at CMD. This work will be pursued in 2026 as we strive to offset against the inflation, and we should, therefore, be able to deliver the 2028 cumulative cost savings target of EUR 250 million, 2 years in advance.

As you can see in Slide 7, the group has launched a number of new initiatives to make the organization even more efficient, leading to more than 2% headcount reduction in 2025, and we anticipate a further reduction of around 3% per year over the next 3 years. Our performance continued to be supported by several of our key attractive markets, namely batteries, sports, 3D printing, healthcare and new generation fluorospecialties with low global warming potential, which benefited from strong dynamics with sales up 16% year-on-year.

This market will continue to grow in the future and contribute to the ramp-up of our major projects listed on Slide 5. These projects delivered around EUR 60 million additional EBITDA in 2025, and we expect this trend to continue in 2026. The group will benefit from the ramp-up of the recent investment in the U.S. and Asia, successfully started in 2025 and early 2026, namely our new 1233zd and the DMDS unit in the U.S. as well as the Rilsan Clear transparent polymer capacity downstream of the polyamide 11 plant in Singapore.

In addition, our investment in PVDF in the U.S. is planned to start up in the first half of 2026, increasing our capacity by 15% in the region. PIAM should continue to benefit from the launch of new smartphones, notably foldable and ultra slim models in which polyamide is becoming essential to answer their higher requirements in terms of reliability and thermal management. PIAM should also start benefiting from successful diversification into new high-end application in industry markets.

After this important wave of organic projects, offering significant room for growth midterm, Arkema will further reduce its CapEx envelope to EUR 600 million in 2026. This level will enable the group to continue investing in targeted projects with high returns and fast payback. We did not only focus on the very short term but continue to build Arkema for the future by developing strategic partnership with leaders in their domain in order to strengthen our positioning in key markets such as batteries or sports.

Maintaining our efforts in R&D is key in order to stay differentiated and accelerate our growth in high-end applications. We stay focused on sustainable innovation. We leverage our competencies by collaborating with doctors, OOYOO in carbon capture is a good example.

Coming back to our 2025 EBITDA performance, outside of the negative currency impact, the low cycle in upstream acrylics and the decline of old generation refrigerant explained most of the decrease. The rest of Arkema's business was far more resilient, but this performance to a certain extent, was overshadowed by these other activities. That's why in order to improve the reading of the group's results, we have decided to implement a new segmentation starting in 2026 to better highlight the distinct dynamics and business models of the resilient and fast-growing platforms within Specialty Materials compared to the most cyclical and last industrial activities, which will be rebooked in a new segment called Primary Materials.

The global Arkema polyamide business will be included in this new segment. This business has been much more volatile in recent years than it used to be, as you can see Slide 21. However, looking back since the acquisition of our American assets in 2010, this activity has been tremendously cash generative, largely contributing to further growth portfolio transformation over the past year. So we continue to leverage our strong industrial and commercial position in acrylics to generate solid cash generation and capital returns over the cycle.

The new segmentation will also bring more visibility to our next-generation low GWP solution for air conditioning, which were actively managed to enhance our prospects. They will now be integrated into the fluorospecialties portfolio and will benefit from accelerated growth in applications like heat pumps and data centers. On the other hand, old generation refrigerants that have been a highly profitable and cash-generative business since 2020, probably exceeding potential proceeds from a disposal will join the Primary Material segment. While this business will quickly fade over the coming years, Arkema will benefit on the other end and within the Specialty Materials from the ongoing growth of the low GWP solution, generating substantial value.

I believe this new segmentation will provide the financial community with greater transparency on Arkema's portfolio business drivers and Specialty Materials performance. Finally, I think it's important, I also want to quickly highlight some of our CSR results where we made again strong progress and achieved quite good performance in 2025. This is the case for our climate plan, where the group's numerous initiatives to reduce its carbon footprint are paying off. We reduced our Scope 1 and 2 emissions by 48.7% at the end of 2025 compared to 2029, fully in line with our target. And we have also decided to strengthen our ambition in water withdrawals and introduced a new target on waste treatment, another key priority for Arkema.

Lastly, given the strength of the group's balance sheet, the Board has decided to propose a stable dividend of EUR 3.60 per share to the Annual General Meeting despite the challenging macro, which is a sign of confidence, both in the quality of the portfolio and in the relevance of the strategy.

Thank you for your attention. I will now hand over to Marie-Jose, who will review in more detail the financial results before I come back to discuss the outlook with you.

Thank you, Thierry, and good morning, everyone. So as commented by Thierry, 2025 was a challenging year. Starting with revenues of EUR 9.1 billion. Sales were down 5% year-on-year that were impacted by a negative 2.9% currency effect reflecting mainly the weakening of the U.S. dollar against the euro, but also from other currencies, including the Chinese Yuan and Korean Won. The scope effect at plus 1.6% reflecting the integration of Dow's laminating adhesives.

Volumes were down 1.6%, reflecting the overall weak demand environment in Europe and North America as well as a tight inventory management by customers in the fourth quarter. On the other hand, we continue to benefit from a positive dynamic in Asia and more particularly in China, mainly driven by high-performance polymers. The price effect was a negative 2.1% impacted essentially by the acrylics cycle and by the refrigerant gases that are transitioning from old to new generation.

Our other activities showed a more limited price decrease of 0.9% in the context of declining cost of raw materials. The group EBITDA came in at EUR 1.25 billion, including EUR 40 million negative currency effect. Let's mention first, Q4, which is a seasonally low quarter. The decline in EBITDA in the fourth quarter reflected the overall weak demand environment in Europe and in the U.S. as well as the strong destocking due to tight year-end inventory management at our customers and ourselves, actually, which impacted particularly our Adhesives and Advanced Materials segment.

Looking now at the full year performance by segment. Adhesives margin came in at around 14% if we exclude the dilutive effect of Dow's laminating adhesives business still in its integration phase. Full year EBITDA reflected the weak demand in industrial additives and the slowdown in the U.S. in the second half, notably in flexible packaging, transportation and construction. Positive performance continues to be supported by our ongoing work on efficiency and our price discipline.

Advanced Materials resisted well with a broadly stable volumes and prices, delivering an EBITDA margin of 17.9%. High Performance Polymers in particular, showed a 2% organic growth on the year, supported by new business developments in batteries, sports and 3D printing and the ongoing positive dynamic in Asia. The segment's EBITDA was nonetheless impacted by the negative currency effect by an unfavorable mix in performance additives as well as by lower volumes in Europe and in U.S.

In Coatings, EBITDA was impacted by the low cycle conditions in the upstream acrylics as well as by the weak demand environment in coating market. Construction and decorative paints market in Europe and U.S. were subdued. The performance of the segment was therefore significantly lower than last year despite the resilience of downstream activities.

Lastly, Intermediates EBITDA was mostly impacted by the decline in refrigerants in the first half of the year, while acrylics in Asia improved slightly.

The group's recurring EBIT amounted to EUR 564 million, which corresponds to a recurring EBIT margin of 6.2%. It takes into account EUR 687 million of recurring fixed asset depreciation, higher than last year due to the integration of Dow's laminating adhesives and to the starting amortization of new production units, which came online during 2025.

Nonrecurring items amounted to EUR 276 million. They include EUR 144 million of PPA depreciation and EUR 132 million of one-off charges, notably the restructuring costs linked to the hydrogen peroxide site in France. Financial expenses stood at minus EUR 125 million. The increase versus last year reflects the increased interest costs of our bonds on one hand and the lower interest on invested cash on the other hand. All in all, adjusted net income amounted to EUR 328 million, which corresponds to EUR 4.34 per share.

Moving on to cash and debt. Arkema delivered a strong cash flow generation with recurring cash flow standing at EUR 464 million. This reflects our continuous initiatives to tightly manage our working capital. Working capital ratio on annualized sales reached 12.5% from EBITDA. And the EBITDA to operating cash conversion rate stood at 88%. Our spend in capital expenditure amounted to EUR 636 million, below the level of our recurring depreciation in . Free cash flow amounted to EUR 390 million, including a nonrecurring outflow of EUR 74 million, linked essentially to restructuring costs.

Taking into account these elements, Arkema's net debt and hybrid bonds were slightly down at EUR 3.2 billion, which includes a EUR 1.1 billion hybrid bonds. The group continues to enjoy a strong balance sheet with a net debt to last 12-month EBITDA ratio of 2.5x. Note that our 2026 maturities were all prefinanced till 2025. The EUR 300 million outstanding hybrid bond issued in January 2020 was redeemed in January 2026. So our portfolio of hybrid bonds at the end of this month -- end of Jan is back at EUR 800 million.

I hand it over back to Thierry now.

Thank you, Marie-Jose, for this explanation. So if we exchange all the outlook for this year. So at the beginning of the year, the environment remains and there is no surprise to find the continuity of the second half of last year, with limited visibility and weak demand. The currency effect, you saw it continues to be a headwind following the further weakening of the USD and Asian currencies against the euro.

In this context, as we said already, our first priority will continue to focus. And I think we did a good job last year, and we'll continue to do a good job this year on the elements under our control. This means, in particular, optimization of fixed costs, optimization of variable costs, CapEx and working capital. Besides, we continue to rely on the progressive ramp-up of our major project and it's slower than expected because of the macro, but is still material for the company, and it will support the Arkema growth in the long run.

So for '26 versus '25, we expect this project to contribute around EUR 50 million of additional EBITDA. It will continue to help us this year and in the following year to reinforce our geographical footprint, since we anticipate more long-term development potential in Asia and in the U.S.

In light of these elements for 2026, the group aims for its EBITDA to grow slightly at constant FX, and we prefer, obviously, to reason at constant FX, given the unusual volatility of exchange rates against the euro, not only the USD, as I mentioned, but also most of the Asian currencies. The year-on-year comparison will be more challenging in H1, and more particularly in Q1 since last year profile was more weighted on the first semester with significant destocking in the second half. Besides the currency effect on Q1 should be negative estimated at EUR 25 million.

If we put the currency effect aside, we expect in 2026, the macro more or less similar to '25. The comparison with last year should ease progressively until the end of the year, including specifically to Arkema, the ramp-up of our major project. As a result, we anticipate the performance of the 2 halves more balanced in '26 than in '25.

So thank you very much for your attention. And together with Marie-Jose, we are ready to answer the questions you may have.

[Operator Instructions] The first question comes from Tom Wrigglesworth with Morgan Stanley.

Two, if I may. First, could you talk a little bit about the construction end markets by region? And how -- and kind of help us understand how much step down you saw in the U.S. in the second half and how much weight that weighs on 2026? And conversely, there are expectations that construction refurbishment improves in Europe in '26. Do you see anything in your order books or in your discussions with customers that kind of talk to that?

And then secondly, if I may, just around obviously very strong free cash flow in the fourth quarter. How much of that was your decision to really cut the working capital versus the pricing element rolling through working capital, i.e., as we look at working capital for '26, if we do start to see some volume improvement at some point, do you need to see a rapid increase in working capital to meet that demand?

Okay. I will let Marie-Jose answer on the working capital. On the construction market, it's an interesting question because, as you know, we have -- compared to other peers, we have more -- we are more weighted in construction, especially Europe and U.S. and in Asia is less than that. I would say, and it joins your question, in fact, to a certain extent, the answer is in your question. Europe, we have reached certainly a bottom. I'm quite cautious on the signals because we have been caught several times by surprise. My feeling is that let's say, there is a little bit of incremental improvement, but to be confirmed, okay?

So Europe is like the bottom, it does not decrease anymore. And if there was a trend, it would be incrementally slightly better. In the U.S., clearly in second semester, it was one of the bad surprise. We are down in terms of business development. I would be -- I know the elasticity and the agility of the U.S. economy. So I would not extrapolate necessarily what we saw in the second semester in the U.S. with what it could be this year. What is clear is that -- and this is a difference with Europe, U.S. decreased second semester of last year in construction, while Europe gave the impression, it was more at the bottom and with a little bit more positive.

So U.S. we will see. I know that the administration -- Trump administration is trying to put in place some measures in order to support construction-related activities. We'll see if it brings -- it brings some support, but there are so many variables that are difficult to know today. So I would be cautious as I am on the macro -- overall macro economy, let's take month by month and see how things are developing.

On the cash?

Yes, the cash.

A few comments. So basically, you saw the working capital landed at 12.5% of our annual sales, frankly, reflecting the similar work that our customers have been doing on their end. For 2026 at constant macro, I would expect, frankly, a flat working cap. In case of a rebound, then for sure, working cap should increase in a commensurate way versus those 12.5% or 13% of our sales.

Okay. Just as a quick follow-up. I mean, do you think that the industry or the supply chain has overcut inventories and working capital? It just feels like everybody has cut aggressively at the end of last year and then aggressively cut again in the end of 2025 -- sorry, '24 and '25. I guess investors are surprised as to how much destocking has taken place. So any commentary or color there as to the level of inventories in the system would be very helpful.

Certainly, this question is worth a lot of money. The difficulty, as you know, and you know as much as I know, Tom, is in the supply chain in chemicals, they are complex and they are longer. So it's -- and fragmented, so it's very difficult to have a clear view what is sure is that. And it has been, to a certain extent, a little bit of a mystery for all of us because normally, when you have a cycle in chemicals doesn't last so long. It's clear that we see destock. Now we are already talking about end of destocking, 18 months ago, we thought it was already long. So -- but it's clear that the stock for most of the chain seems to be rather low, but they are low if there is a rebound, if there is no rebound, certainly, the chain can live with that.

So my theory is still the same. It does not change. And is that at a certain point, you will get a rebound. We don't know when it will happen. We don't know when and when the rebound will come, the chain will be under big pressure. This is obvious, but we don't know when. And there will be nuances depending on which region, which end market, which product line, et cetera. But basically, this is a typical cycle of chemicals, where you have volume and pricing on the both directions depending on the -- if it goes down or it goes up, always amplifying the industry. Then we have to be a bit patient, but it will come at a certain time. We don't know we'll see. So your question is valid.

Certainly stock are less at the end of this year than they were at the end of '24, '24 was less than end of '23. But now this is a demand which will be the main driver of the stock.

The next question comes from Matthew Yates of Bank of America.

I'd like to ask about the new structure, the divisional restatement. Not the first time the company has done that since its creation. And I heard your introductory remarks about the benefits of transparency. But I would put it to you that there is an argument that it highlights a lack of industrial logic to the portfolio that you can move things around so frequently. It hurts investors' ability to track performance over time because we lose that transparency. So can you just elaborate a little bit more as to why you think this is a good decision.

And by association, have you changed reporting lines or management structure? I had a quick glance at your exec committee on the website, which hasn't changed. But is there going to be a change in roles and responsibilities that may help us bring some better operational performance and some genuine benefit of this move?

First of all, Matthew, we don't change so often. And here, we are talking about an incremental change. I think the difficulty we had and hopefully, it was well explained in our -- and we are completely open to discuss more with you and who wants. The difficulty we had were 2 things. The first one, we got the impression that on the Specialty Material business, which is whatever definition, by far, the large majority of Arkema portfolio. We are really doing a great job and this year, we were frustrated by the fact that we could not read it and you could not read it simply.

And the reason was that we have -- things have changed over the past 3 years, the world has changed. I think maybe we change, but I think it's good to be agile and to try to be as transparent and as clear as possible in a world which is changing a lot, where yourself, ourselves, all our stakeholders are trying to understand what is happening and on what you can really rely and build for the future. And what we saw is that in fact on the refrigerant gas, while we saw that we were mostly old generation gases and little development in new generation, and this is why we wanted to sell it because we saw that there was no future and it was far from our sustainable strategy.

What we saw is 2 things: that the old generation that we know already, were going to -- were phasing out or fading out and with an acceleration in the past 2 years. But on the other side, we're far stronger, far better, far quicker in the development of new generation, not for the traditional application in refrigerant, but for new application, heat pump, data center, energy efficiency in the buildings, which were really completely core in terms of the strategy of Arkema with some of niches, same end market, same kind of growth pattern, et cetera.

So we wanted absolutely to recognize that. And this is why a part of this we split between old and new generation, and it makes completely sense from a portfolio standpoint that this new generation joins them. We have already started to do it, join the HPP. The second thing with regard to acrylics, for a long time, and we had -- I know discussion together on that. We are absolutely convinced that we would be able, for Europe and U.S., to stabilize their volatility by developing the downstream. It was true for Asia, but Asia, we knew that it would be quite limited. But Europe and U.S., we thought we could go at further on this path to balance the upstream and the downstream.

But in fact, we have seen that the targets were not so many. In fact, we bought already most of this target with Sartomer and Coatex. And the second thing was that not only we were -- we decided when we bought Bostik to put most of our allocation of cash for acquisition for adhesives. And the second trend that we see, which is linked to the fact that the world is becoming far more volatile than it was in the old time. You can see on every parameter, the FX, the -- also the macro figures in this or that market, et cetera, or the brand evolution. In fact, it reinforces the volatility of the acrylic acids, the acrylics monomers.

And we wanted to also to -- so we decided to put back China, Europe and U.S. together, and to recognize that in the portfolio, we have a minority, a small minority, which around 15% of the portfolio which is really in nature, more volatile. Even if on the -- over the cycle, we still generate a lot of a lot of cash. And for acrylics, it's normal because the upstream goes with this downstream. The upstream is a basic material. We know that basic material. So we think that with this evolution of the world that we want to recognize, the more volatility of what is now in primary materials, we are able really to be -- to show you that all the jobs that we have been doing on the Specialty Materials is really bearing its fruit with quite a resilience and the growth over time.

And it was in this context of '25, which was completely atypical and unexpected. They were able to deliver minus 5% EBITDA evolution, which, frankly speaking, given the level of the context or the challenges of the context was quite a good performance. So for us, it was far easier to explain it like this. So you have to take it as a better reading now. This is why we did it. So hopefully, it will -- and we are ready to discuss with any of you. For us, it reinforced the quality of the reading on the performance and also of the benefit of the strategy we have been leading over the past 10 years.

Okay. Can I ask a follow-up? Because from your answer, it sounds like the concept of integration across the value chain hasn't worked and is no longer valid. So this goes above and beyond simply the way you're reporting it. It questions the actual strategy of the company. Are you open to the idea of exiting the 3 upstream acrylics plants if there were to be a possible buyer out there? Or are they still core to the broader group?

No. I would say that we have to take it for what it is, which is a better reading and reporting of where we are. Acrylics remains a backbone, which is important of the downstream. So, so far, I would say, is really part of the portfolio. And anyway, the results are quite low. So it's not at all even beyond what you say, the topic of disposal. Now as you say and you have seen the history of Arkema, there is never any taboo. So I think that for the time being, it's quite a reporting topic, and we have to take it as such.

The next question comes from Laurent Favre of BNP.

My first question, I guess, is on HPP where we had a stable Q2, stable each Q3 and Q4, I think a bit of a collapse down -- sales down 15%. We saw something similar with your peer this morning. And I was wondering if you could talk about what you're seeing on beyond, I guess, destocking, what you're seeing on competitive pressures and in particular, maybe some kind of commoditization risk? That's question number one.

And the second one just to echo the comments from Matthew. I think best practice for us, especially if you're talking about adding transparency would be to have sort of restatements for the divisions going back to at least 2023. That would be really, I think, helpful for investors and for us. But a question related to the restatement is around acrylics. EU, U.S. I think it looks like you had EUR 13 million of EBITDA in 2025. And I was wondering how you're thinking about this going forward? It seems that we still have capacity additions in the industry in 2026 and maybe 2027. So are you expecting acrylics EU, U.S. to still be around that sort of breakeven EBITDA for '26 before we eventually see a recovery? What did you bake in the guidance?

Okay. So with regard to the first question, I really think that the end of the year and you mentioned also our peers on the -- on the HPP is really driven by the destock of customer. When I saw -- we saw in detail, you can imagine the dynamics to really understand the results beyond the fact that the impact of the FX was more important in Q4. Don't forget that. What we saw is that the impact of destock was quite high. And destock, it happened less in Asia, where by culture, they don't stock a lot, but in Europe and U.S. So in fact, not only we have destock globally, but the fact that the destock was more pronounced in Europe and U.S., where culturally, our customers have more stock changed the geographical mix, okay?

And it weighs on the profitability evolution. So the geographical mix was especially this low sales in the U.S. was a little bit of a surprise and that was linked to the destocking. We have spent a lot of time, as you can imagine, in this kind of contact with our customers. We knew, we understood that they would be very cautious in terms of stock at the end of the year. So this destocking topic is not just a matter of the chemical industry. Our customers, they destock, our suppliers, they destock, everybody try to finish the year with stock, which was, I would not say minimal, but more reasonable than they were given the level of the demand.

So for me, it's not a matter of more competition or anything special sort of change in evolution, we would have seen in Q4. It's really a matter of customer by customer destock, as you can imagine, we check our market shares very precisely also, no. So -- and you know Q4 is the last quarter of the year. So sometimes you can have certain years, you can have a little bit of amplification of the low demand. But I would not consider this sort of new trend at all. It's not my feeling.

And as you know, in HPP, we put a lot of efforts on the new business development, innovation and I think this is a paradox. I think we have been good on that. And so the growth is there. We are able to differentiate versus competition. And the market is not easy, but we are not particularly concerned for the next few years.

On restatement, so I pass the message to the Investor Relations team will do what we can, but the idea is certainly not to lose you on the contrary, is to help you. So don't worry on that. We'll do our best. Yes. And with acrylics, yes, EBITDA, you could make the math, at least maybe we're not -- it's complicated for you. But as you could see, you could try to find some new information that you had not before. So it helps you also. I can see you started to work on the acrylics.

Clearly, we are surprised by the, let's say, the depth of the cycle of acrylics is something. In fact, we have to go back to 2010 and the acquisition of the acrylics from Dow where the cycle were more or less that one. And I don't know if it makes you more comfortable. A year after, it was our one of best product line. So I think everybody has to be modest on anticipating. So I think that acrylics was under -- in Europe and U.S., was more under pressure than expected clearly in '25. We expect for the time being, something in, hopefully, a little bit of improvement, but something not far from what we saw in '25.

The next question comes from Emmanuel Matot of ODDO BHF.

Three questions for me. First, does that make sense to believe that H2 could be in line with H1 in terms of EBITDA? Is that the seasonality you are factoring into your guidance for 2026 because it's quite unusual historically? Second, given the ramp-up of your major projects , why do you expect those projects to have a lower additional contribution to the group's EBITDA in 2026? Because you are mentioning only EUR 50 million contribution compared to EUR 60 million last year. It seems to be cautious.

And last question. Do you feel that the authorities in Europe are more willing than in the past to help you and the sector regain competitiveness significantly and protect you more from unfair competition, in particular, from China?

Thank you, Emmanuel, for the question. On the first one, we didn't say it would be equal, we say it will be more balanced. So because on the contrary, in '25 was atypical, in terms of seasonality, but I'd say it would be at par H1 and H2. It's just the imbalance we had in '25 would be more back to normal, I would say. On the project, it's just -- in fact, there is no -- maybe it's counterintuitive, but it's not because you do a EUR 60 million in one year and EUR 50 million the following year. We are talking about incremental, as you know, additional EBITDA, okay?

It depends on the momentum of the project. If in '24, you had a project which was started with the first step in '25, with the first step, which was very high in terms of contribution, the year after the same project can deliver far less on top of it. So you can deliver on a project. I don't know I will give you an example. You deliver on 5 years EUR 100 million. You can have the first year of EUR 40 million, the second year EUR 20 million and then EUR 10 million, et cetera. So it's not linked. So what is important is cumulative, and it depends on the phasing of the projects. Some have started 3 years ago. Some will after -- have just started at the end of last year.

So don't -- there is no relation, I would say. What is important is accumulation. If we are cautious so much the better, it will depend on the macro. But I think that we should count on the EUR 50 million, I think it's reasonable. But the projects are -- what is more important beyond the figures is that we confirm that the positioning of the project is still completely valid from a strategic standpoint, from a geographical standpoint. And I think this is good news. This means that since the world is changing, your question could have been also, do you think that some of the projects are not relevant anymore because there were a change. It's not the case. We really confirm the quality of the projects. They are all meaningful even if it takes more time to develop than we would have thought at the beginning.

On the last question, yes, we think that -- so first of all, we are a global company. So this is not Arkema protected. This is the assets of Arkema in Europe, but we have assets everywhere. And we will be pragmatic at the end, even if we like our region our country, we put our money where we believe we can be competitive and we can develop. And now with regard to Europe, yes, authorities have understood the danger for the industrial assets of chemical company, but also beyond chemicals in Europe. This seems to be more aware of the danger, more protective, think more about competitiveness. So in terms of let's say, awareness and intent, I would say, is positive in terms of act for the time being, we see nothing.

The next question comes from Chetan Udeshi of JPMorgan.

I had maybe 2, maybe 3, I don't know, but I'll try. The first one was just I'm looking at your Advanced Materials Q4 numbers. And I mean you're saying you had destocking, but then your revenue in Q4 is actually above Q3 and your EBITDA has been -- I mean it seems revenue is up EUR 10 million versus Q3. EBITDA is down EUR 40 million versus Q3. So I'm just curious what happened there?

And maybe just to challenge your comment that Arkema is doing very well in Specialties. It doesn't seem like when I look at your numbers in Adhesives or Advanced Materials that's really coming through in terms of numbers. The EBITDA in both these divisions are down quite dramatically year-on-year. So just curious why you think we should think Arkema is doing well, and this is not a competitive pressure that is coming through in the business?

And the last question I had was just in Q1 -- sorry, Q1 guidance. Historically, if I go like many years back, your typically, Q1 will be up 20% to 30% versus Q4. But in the last 2 years, we've had a more modest improvement of 1% to 5%. What should we think in terms of the magnitude of that seasonal rebound that we should have in mind for Q1?

Okay, Chetan. I try to understand your -- the rationale of your questions. When you compare Q4 with Q2 with -- on Advanced Materials or no, I think on Advanced Materials, this is the answer to Laurent. This is a destock. So the destock -- as I said, which was not the case in Q3 happened mostly in Europe and the U.S. We have strong destocking in the U.S., and this is where in terms of added value, we are higher than in Asia. So the geographical mix is working against us. That's all. You have all the figures. So at the end, but it's more -- it's really the destock and the geographical mix.

We have some high-value applications in Europe and U.S., which really completely destock. And sometimes just in December, you have no order because your customers are just optimizing their stock. So this is what happened. But from what I see with other peers that I know that you have some peers you especially follow. You can see that we -- destock was all across the board by many peers. So I would say no, no, I confirm what we say. Then your second question that is...

It's the seasonality between Q1.

No, there was another one.

We said we are doing well in Specialty, but Chetan seems to flag that Adhesives and Materials were not so great.

No, I think what we -- I don't really understand what your question. But what we say is that I'm sure you are referring to my point to Matthew on the transparency, why we changed segmentation. I think what we see very clearly is that the EBITDA of the Specialty Material over the year has declined by 5%, which we consider in macroeconomic, which is one of the worst we have seen in 30 years is performance, which show the quality of this portfolio. That's all. For the rest, you have your own opinion as the rest. But we consider that we have minus 5% EBITDA in really more than trough conditions. On 85% of the portfolio is a performance which need to be appreciated and to be highlighted. This is what we do.

This is -- we think it was worth doing it. With regard to the Q1 guidance, we will not enter into precise figures. The only thing that we can say is that Q1 will be above Q4. There is a seasonality. The macro is comparable, certainly destocking should be less and the seasonality, typical, is better in Q1. We agree that in the recent years, it has been a bit less higher compared to Q4 than it was before. So you have some reference points that you can take.

But I think this is a qualitative element that it will certainly not be the kind of seasonality you could find a few years ago. It's more typical of the more recent years, but Q1 will be above Q4, no surprises there. The macro should be quite comparable, but the destocking will be less also. Okay. And don't forget the FX impact of EUR 25 million that we have mentioned.

The next question comes from James Hooper of Bernstein.

Can we go into a little bit more detail around the outlook, please? Specifically, kind of division through division, if that's possible? And another thing I'd like to try and understand is, obviously, you're guiding for the EUR 50 million cumulative effect from the projects. But is there a cannibalization impact on some of the existing revenues? Because I'm just trying to bridge to the kind of the -- how this -- and also the kind of impact of the specialty groups versus refrigerants?

With the outlook, I think we -- you got our press release and -- and what we can say at this stage on the outlook. So we are not given -- I think we have never given any guidance by division. We give a guidance for the whole company. Now I would say the macro and this is -- this was our feeling in '25, especially if you look at the new segmentation, I would say the macro is similar for each of the business, and there is there geographical footprint is quite comparable. The end markets are a little bit different, but they are all diversified in terms of end market.

So I would not make a big difference by division. And there was a question of Laurent on the primary products materials with the weight of acrylics, et cetera, where we think it will stay at least for the first part of the year at a low level. But for the rest, I think the macro should be similar. Now on HPP, you will benefit more of Advanced Materials. You will benefit more from the projects than the rest -- than the other division. You could see that in -- if you take the list of the project is more in Advanced Materials and in Adhesives, but certainly Advanced Materials than the other division.

Construction in Europe, we mentioned that I think, should more help the Adhesives and the Coating. So I'm sure you factored also old generation refrigerant and the primary material. So you have some nuances depending on which division you are talking about. So overall, a similar picture, but with some nuances that you know pretty well if you take our slide because you have where the projects are located. You have this discussion on construction, the discussion on old generation refrigerant and the acrylics.

On the project, the EUR 50 million, I don't know what you mean by cannibalization, but there is no cannibalization. So this means this is a really -- at least it does not cannibalize other product line, if it is your question, a new product line would replace another one. No, it's not the case, except with refrigerant, where refrigerant is -- that is one project. And in fact, it's not for us in the case of the new refrigerant business, the end market is not the same. So it's not a cannibalization, but we know that old generation disappear, new generation are coming. But for the rest, no, I didn't see any cannibalization coming from the projects.

And can I just ask a quick follow-up as well in terms of the cash outlook as well? Because I don't think you've given formal guidance for cash.

So on the cash outlook, as we said at, let's say, comparable macro, cash performance should be quite comparable, let's say, provided that you take into account that the working capital would remain flat. So you see, in fact, for 2025, the contribution of the working capital variance. If we assume macro remains comparable, then there is no change in working capital expected in '26.

Mr. Le Henaff, there are no more questions registered right now, so back to you for any closing remarks you may have.

Yes. So first of all, thank you very much for your attention. I think this new year will be quite interesting as was the previous one. I think the team is really focused on the 2 time horizon, as you know, and as you could appreciate the efforts, cash, fixed costs, which are very important, so we'll continue then with a lot of engagement, and we still are confident on our major projects. It's a very important part. It takes more time than expected to develop them in the current macro, but it will really be a very material contributor in the coming years. And for the rest, we confirm that we have really strong positioning on most of our business lines. And even if the macro for the time being, remain rather weak, we think that our leadership position is really a support in this kind of environment.

So looking forward to meeting you at different occasions. And have a good day. Thank you.

Ladies and gentlemen, this concludes this conference call. Arkema thanks you for your participation. You may now disconnect.

Welcome to Arkema's Third Quarter 2025 Results and Outlook Conference Call. For your information, this call is being recorded. [Operator Instructions] I will now hand you over to Thierry Le Henaff, Chairman and Chief Executive Officer. Sir, please go ahead.

Thank you very much. Good morning, everybody. Welcome to Arkema's Q3 2025 Results Conference Call. With me today are Marie-José Donsion, our CFO; and the Investor Relations team. To support this conference call, we have posted a set of slides, which are available on our website. And as usual, I will start with some comments on the highlights of the quarter before letting Marie-José go through the financials.

At the end of the presentation, we'll be available, as always, to answer your questions. Let's comment first on the economic environment, which remains, as you know, challenging. We noted weaker-than-anticipated trends in the U.S. over the summer. The lower demand is probably a reflection of ongoing uncertainty around the tariffs and frictions in adjusting supply chains. On the other hand, Europe and Asia remain consistent with what we have seen since the start of the year, Europe at relative low levels and Asia still with a positive dynamic in particular in China. The negative currency impact was also slightly stronger than in Q2.

Despite this challenging macro environment, our growth pockets, which are at the heart of Arkema strategy delivered substantial growth. As a matter of fact, our sales were up 20% in several key markets, namely batteries, sports, 3D printing, health care and new generation fluorospecialties with low Global Warming Potential. This positive momentum is also supporting the ramp-up of our major project shown on Slide 7. But all in all, that was not sufficient, obviously, to offset the strong macro headwinds of the third quarter.

With the Q2 results, we shared with you that this major project should bring EUR 50 million additional EBITDA in '25 versus '24. I am happy to convey that we reassessed the progress, and we can lift the impact to EUR 60 million. This contribution is essentially supported by the strong momentum in PVDF for batteries, by use of Pebax in sports and 1233zd fluorospecialties in building insulation. PIAM has also showed good growth since the start of the year, thanks to new smartphone models and now flexible packaging adhesives starting to contribute. This is certainly less than the initially estimated EUR 100 million attribute to the tough environment.

Nevertheless, these projects show good momentum and the setup for 2025 is encouraging. As you know, these projects are already fully financed and therefore, are included in our capital employed with only limited contribution to the P&L until now. In this regard, the group will gain around 2.5 points of ROCE from this project over the next years in addition to the improvement of the cycle, which will benefit to everyone. We can mention also the start of 2 new plants in Q3 in the U.S., both on budget and on schedule, the new 1233zd unit, a fluorospecialty with low emissive impact used for building insulation or thermal management and our new DMDS capacity for refining and biofuels with an impact on earnings still limited in 2025.

In addition, the new Rilsan Clear transparent polyamide plant reached mechanical completion. This unit, downstream of its polyamide 11 plant in Singapore is expected to be operational in the first quarter of 2026. Given the tough environment, I'd like to stress that all teams are fully mobilized on a daily basis to best manage the current economic and geopolitical context. We run a number of cost-cutting initiative as shown in Slide 3 and are on track to deliver the targeted EUR 100 million of fixed and variable cost saving by year-end. The cost alignment will continue, and we strive to again offset inflation in 2026.

In addition, Arkema stayed disciplined in capital allocation. You see that we made progress in working capital management and delivered EUR 200 million (sic) EUR 207 million recurring cash flow, up compared to last year despite lower earnings. This cash generation is fully reflected in the reduced debt, maintaining a robust balance sheet. Arkema will once more reduce CapEx next year to EUR 600 million while continuing to optimize its working capital. Despite all the efforts of the Arkema teams, EBITDA was down to EUR 310 million. Looking at the results by segment, you could recognize the different profile of each product line.

Adhesive Solutions and Advanced Materials are more resilient with earnings affected by lower demand, while net pricing was only slightly down. In contrast, there was more volatility in Coatings linked to the low cycle in upstream acrylics, while the old generation fluorogases in Intermediates reporting a seasonally lower outcome. I already mentioned the ramp-up of our major project, which reflects the execution of our growth strategy, but also our ability to work in parallel on 2 tasks.

We focus on optimizing our operations in the short term, but at the same time, secure our growth potential on the long term, both prepare us to be ready in a year when the macro will again be more supportive. As highlighted before, we follow our strategy focused on 5 identified high-growth markets where we continuously look for new opportunities. In this context, I am happy to announce that we will expand our potential in the attractive advanced electronics market by adding a new structure platform dedicated to data centers. We have shared details of it in Slide 5 of our Q3 presentation.

By dedicating a joint initiative to this powerful market, we see significant growth prospects, though starting from a low base. Besides, I would like also to emphasize Arkema's success in the battery market in Asia. Our bet on LFP batteries is clearly a winning one and our strategy to expand our asset base with modest CapEx in China, Europe and the U.S. turned out to be relevant, putting us in a good position to grow in this dynamic market. We recently inaugurated a new laboratory dedicated to the next generation of batteries using an innovative dry coating process for electrodes that significantly reduces the cost of battery production while lowering its carbon footprint.

This innovation illustrates that PVDF's long-term growth potential remains significant while offering premium margin when we target as we are doing the high end of the range. I will now hand it over to Marie-José for more details, so a more in-depth look at the financials before we discuss the outlook at the end of the presentation.

Thank you, Thierry, and good morning, everyone. Let's start with the Arkema's revenues. At EUR 2.2 billion, our Q3 sales were down 8.6% year-on-year. They were impacted by a negative 3.9% currency effect, reflecting mainly the weakening of the U.S. dollar against the euro, but also from other currencies, including Chinese yuan and Korean won. Volumes were down 2.5%, reflecting the lower demand observed in the U.S. over the summer and the overall weak demand environment in Europe. On the other hand, we continued to benefit from a positive dynamic in Asia and more particularly China, mainly driven by High Performance Polymers.

The price effect was a negative 3.7%, impacted essentially by the acrylic cycle and the old generation refrigerant gases. All other activities showed a more limited price decrease of 1.3% with a slightly negative net pricing, the benefit from lower raw material costs works progressively through the supply chain. Q3 EBITDA came in at EUR 310 million. The currency effect representing around EUR 15 million negative. Looking at the performance by segment. Adhesives EBITDA reflected the weak demand in industrial additives and the disappointing summer in the U.S., notably in flexible packaging and construction.

On the other hand, construction business grew in Asia, thanks to positive momentum in Asian buildings and remained broadly flat in Europe. The performance of Bostik continues to be supported by our ongoing work on efficiency and our price discipline. Finally, the integration of Dow's adhesives brought a limited contribution this quarter due to the softness in the U.S. market notably. In Advanced Materials, the EBITDA was essentially affected by the volume decrease in Performance Additives that were impacted by the weak demand environment in Europe and in the U.S. as well as the reorganization of our Jarrie site in France, in hydrogen peroxide.

On the other hand, High Performance Polymers volumes were stable, benefiting from strong growth in Asia. And the margin of the Advanced Materials segment remained overall at the good level, 18.8% with HPP maintaining its solid margin level of 20%. In coatings, EBITDA was essentially impacted by the low cycle conditions in the upstream acrylics. Sales declined in the U.S., in particular, in the construction and the decorative paints markets. The performance of the segment was therefore significantly lower than last year.

Lastly, Intermediates EBITDA included the usual seasonality of the third quarter as well as the impact of the evolution of regulations in the U.S. and Europe in refrigerant gases. Depreciation and amortization stood at EUR 168 million. They included the amortization of new production units, which started up in the course of 2024 as well as in 2025. This led to a recurring EBIT of EUR 142 million and a REBIT margin of 6.5%.

Nonrecurring items amounted to EUR 48 million. They include the typical EUR 35 million of PPA depreciation and EUR 13 million of one-off charges, notably restructuring costs linked to the reorganization of our hydrogen peroxide site in France. Financial expenses stood at EUR 33 million. The increase versus last year reflects mainly the increased cost of our bonds as well as the lower interest of invested cash. And consequently, Q3 adjusted net income stood at EUR 78 million, which corresponds to EUR 1.04 per share.

Moving on to cash flow and net debt. Arkema delivered a solid cash flow, as you could see in Q3 with recurring cash flow standing at EUR 207 million. This reflects our continuous initiatives to tightly manage our working capital and integrate also decreasing CapEx versus last year. The working capital ratio on annualized sales stood at 17.3% and total capital expenditure amounted to EUR 131 million, in line with our objective of EUR 650 million for the full year 2025.

Net debt amounts to EUR 3.4 billion, including EUR 1.1 billion of hybrid bonds. The net debt to last 12 months EBITDA stands at around 2.6x. Note also that we continue to refinance our 2026 loan maturities with the issuance in September of a EUR 500 million green bond with an 8-year maturity and an annual coupon of 3.5%. This has also enabled us to extend our debt maturity now to 4.6 years. Thank you for your attention, and I'll now hand it over back to Thierry for the outlook.

Thank you, Marie-José. So going into Q4, the macroeconomic environment remains challenging, marked by low visibility and weak demand in U.S. and Europe. So no surprises there. In this context, as already said, optimizing the short term by working on fixed costs, CapEx, working capital remains among our top priorities. We are on track, as mentioned, to achieve around EUR 100 million of fixed and variable cost savings in '25.

More specifically, our numerous initiatives on fixed costs will enable us to offset inflation in both '25 and '26. At the same time, we continue to build Arkema for the future. It's very important, by maintaining our efforts in R&D as well as in sales and marketing, focused on the key attractive market identified by the group, supported by the major projects that you are well aware of. Taking into account the macro environment that remains challenging and the softer-than-expected demand in the U.S. for the time being, at least, we aim at delivering an EBITDA of between EUR 1.25 billion and EUR 1.3 billion in 2025 with a midpoint globally consistent with the consensus and a recurring cash flow of around EUR 300 million.

I thank you now very much for your attention. And together with Marie-José, we are certainly ready to answer any of your questions.

[Operator Instructions] First question is from Martin Roediger, Kepler Cheuvreux.

I have 3 questions, if I may. The first question is for Thierry. Regarding the reason for this additional guidance cut this year, it seems you are getting more concerned about the U.S. market, especially about the weaker construction market in the U.S. How do you see the near-term prospects in the U.S. construction market?

And the other 2 questions are for Marie-José. Other chemical companies have released bonus provisions in Q3, some already in Q2. Have you done that as well? And do you plan that in Q4? And is that part of the EUR 100 million cost savings this year, which tackles both fixed costs and variable costs, and we know that bonus belongs to variable costs. And finally, on cost savings impact on your P&L. Your SG&A costs increased in Q3 quarter-on-quarter and year-over-year. Why do we not see the cost savings in your SG&A line?

Okay, Martin. So on the first -- thank you for your question. First -- on the first one, no, what we see today is that, yes, in the summer, the U.S. was weaker than expected, not necessarily weaker than Europe because Europe was already weak but does not mean necessarily that we are more pessimistic on U.S. going midterm.

I think U.S., and we have a long experience there because it's [ 45% ] of our total sales around. Experience in the U.S. is that things are moving quite fast. They are -- this country is very agile. So you can have a quarter which is disappointing and 2 quarters after, it goes in the other direction. So I would be cautious on the answer. We just comment on what we see in Q3. We think Q4 will be in the same [ vein ]. But I would be cautious in extrapolating what it means for the following quarters because [ this is the ] nature of U.S. to be more reactive and we have a little bit more volatility than we can have in other parts of the world.

So regarding cost saving, maybe more broadly, just to remind what we aim at doing. Basically, the objective is to deliver EUR 100 million cost saving. I would say, 2/3 fixed costs, 1/3 variable costs. And when we look at the fixed cost component, for sure, they incorporated bonuses. So this has been adjusted progressively as we progressed in the year based on the, let's say, the revised guidance we gave to you. So there is no last minute, I would say, effect that I expect in Q4. It has been progressively factored in the publications.

So when you look at the evolution year-on-year, basically, you see a slight increase, which means right now, we are not fully offsetting inflation, but we are actually quite largely offsetting inflation. I consider inflation amounts to roughly EUR 60 million, EUR 70 million a year on fixed costs for Arkema. And clearly, we are limiting the effect of increased fixed costs right now at, I would say, only a total of EUR 50 million. So clearly, we are producing or delivering the effort to massively compensate this inflation effect. So I'm not sure why you think it's not visible, but it's definitely visible internally when we look at our metrics. So no particular effect of provisions, which when you look at the balance sheet, are rather stable over the period. I hope it answers your question.

Maybe to add also to Marie-José, when we say that we remove inflation for next year, this means that we take into account the fact that, as Marie-José said, that a part of the savings this year are linked to bonuses. And we know that we will need to set that next year, but it's part of the game, and we take the challenge.

The next question is from Tom Wrigglesworth, Morgan Stanley.

Two questions, if I may. First one is around the data center presentation that you made and specifically the refrigerant gases. You talked about Forane for chillers. What does that do to the market? Will that rapidly tighten the currently -- the current offering of HFCs and HFOs. And then secondly, with regards to the immersive heaters. Is that going to be a higher-margin product than your current emissive refrigerant gas business? So that's a couple of questions there.

Secondly, on -- really on a kind of a higher level. Obviously, if I look at the bridges for all of this year, pricing is going down faster than raw materials. So is that a function of mix, i.e., you're losing higher-value products more so than you're retaining -- than you're keeping raw material gains? Or are you having to give back price to hold on to volume?

Okay. Thank you, Tom, for this question. So very different in nature. So with regard to data center, first, as you could see, you have a presentation, Page 5. It's the first, I would say, exchange with you on data centers. It does not include -- for the sake of your knowledge, it does not include what we do in battery for data centers. This means what -- stationary batteries each in the battery platform. So this means that when we say more than EUR 100 million of sales in 2030, starting from a base, which is today, our first estimate is a bit more than EUR 10 million. So a significant increase.

It does not include what we are doing in battery. So as you mentioned, chiller will be a key part on next generation of refrigerant. Today, the sales there are very, very limited, but we see strong potential for low GWP fluorogas in chiller. So it depends, as you know, on the technology of data centers, but we see there good growth with good margin, but it's only 1 point among 6 or 7. We see also growth for High Performance Polymers. It can be PVDF, it can be polyamide 11 for wire and cable. It can be also for [indiscernible] waterproofing. It can be even for direct-to-chip cooling, a kind of PVDF, et cetera. So we have plenty of application there. But as you mentioned, HFO is certainly one element.

With regard to pricing, in fact, it's interesting to see more detail what is happening in pricing. In fact, we separate acrylic monomers and fluorogas, which obviously are affected significantly in pricing. The first one because of the cycle, the second one because of the evolution of generation. So it's not you don't compare apple-to-apple because of the quota mechanism. But clearly, Intermediates is big -- certainly has a big impact on pricing. Outside of Intermediates, it's far less.

And outside of acrylic monomers, it's even far less for Adhesive Solutions and Advanced Materials. The net pricing is close to neutral, slightly negative, but close to neutral and the pricing itself is around minus 1%. Now with regard to raw material, what is happening is that, as you know, the supply chain, you have some stock, supply chain are long. And it takes time to work through for the raw material to work through the P&L. And so you have a little bit of a time lag between the pricing effect and the raw material. But we are not worried at all on, I would say, Adhesive Solutions and Advanced Materials.

We have some examples where we are a bit more, especially in China under pressure in pricing there. But on the other side, we have positive pricing in some other areas, including our new business development with a high price. For us, a question of pricing, but since the start of the year is really concerning refrigerant for the old generation and acrylic monomers.

The next question is from Matthew Yates, Bank of America.

A couple of questions, if I may. I just like to follow up on Tom's one around the data center. As you said, it's the first time you've really mentioned this. So I'm just trying to educate myself a little bit. Where are you in the commerciality of some of these products? Are they technically developed? Are they qualified with customers? Are they already generating sales? Or is this more of an ambition and there's a lot of work to do over the next few years to actually get these products to market and generate some revenue? So just -- that's the first question.

The second one, I'm not sure if it's for you, Thierry or Marie-José, but I wanted to ask about the dividend. And we know that traditionally, Arkema had sort of other strategic priorities, and the dividend payout ratio was relatively low. But compared to the amount of free cash you're now generating of EUR 300 million is effectively 100%. And you've got your leverage creeping up to 3x. So can you just give us an idea of how important and how sustainable that dividend is when you get to the end of the year, and you debate that with the Board? And whether has it got to the point where if we don't see a macro improvement paying out so much is going to infringe on your strategic flexibility and whether you want to do CapEx projects or M&A, whatever it is? So just like to hear your sort of philosophy around the dividend.

Thank you, Matthew, for this important question, clearly. So with regard to data center, as I mentioned, so we have around a bit more than EUR 10 million of sales, which means that we have already a commerciality of this product and that most of the products we are talking about have already been developed now what takes time. And this is why we have a ramp-up until 2030 to be above EUR 100 million. And it does not, as I mentioned, take into account the PVDF for batteries in stationary, which go to data center, which is not insignificant, which is already fully commercial.

But on what is outside, I would say we have already a certain maturity of the technology themselves. So it's more a matter of developing application with some qualification, et cetera. So it will take the time it takes, knowing that in data center, the technology are really continuing to evolve, as you may know, significantly. So even for -- you would have already mature sales in certain application, anyway, you need to work on the new application, the new technology and to adapt your product and your new business development to this.

So to answer your question, we are in the middle of your question, I would say, some commerciality, mature technologies, but application are not fully mature. So we need to ramp up, and it will take a certain number of years. But I think it was mature enough to share this data center call with you, and we'll have the opportunity to come back in far more detail next year on this topic of data center, which is, as I mentioned, joining the electronics -- advanced electronics platform.

With regard to the dividend to a certain extent, the answer is in the question. The good thing first is that we are in absolutely trough conditions in specialty chemicals and chemicals overall. And despite of that, we cover -- with the free cash flow, we cover the dividend. So I think it's good news. You know that the dividend return to shareholder is a very important policy for Arkema. So we will -- the idea is to make it sustainable as it has been in the past. You have not a year which looking like the other one.

And to make it sustainable beyond what I've just said, you could see that next year, our CapEx will be at EUR 600 million versus EUR 650 million this year. So it's a difference. Our project will also ramp up. So no, I think we stay in the same -- with the same idea of [ at least ] stable dividend. Obviously, it has to be decided by the Board. So we will have this discussion normally before the Feb presentation of full year results, but this is the philosophy of Arkema.

The next question is from Georgina Fraser, Goldman Sachs.

I've got 2. First question is on HPP. We've seen a decent amount of CapEx and also the acquisition of PIAM going to this division. And I just wanted to hear from you, how is the performance of this division been versus your expectations? And should we think about the fact that we're maybe at low utilization rates at the moment? I just want to try and gauge what kind of upside potential there is here and maybe why the performance has been a bit lackluster.

And then my second question, a little bit of a follow-up on the dividend or cash flow outlook question. EUR 600 million in CapEx next year is still quite high. Could you give us a sense of what your maintenance CapEx is and how much flexibility you have there if it was needed?

Yes. Okay. Thank you, Georgina. So on the first one -- first of all, we -- if you look at HPP, we have 4 lines, which are very interesting. We have PVDF, specialty fluorogases. We have polyamide 11, and we have PIAM. I would say all these line are growing line on which we have, as you mentioned, spent a high amount of money for development, for growth, for CapEx and for acquisition. Clearly, this year is a real challenging year for all chemicals company. So HPP is not immune.

As you could see this part of the performance of Advanced Materials, HPP has resisted [ quietly ] compared to what we can see outside, but below our expectation because of the macro. So the projects themselves are ramping up okay, but they are not immune to the macro. So we -- at the beginning of the year, we were expecting more from HPP. The good thing is that we think that all the strategic moves that we have done with HPP were the right ones that the line is certainly one of the most resilient inside Arkema.

And the prospect of growth -- even if they have been delayed to a certain extent because of the macro, the prospect of growth remain quite significant. With regard to utilization rate, it's clearly that in consistency with what we see from the macro, they are more on the low side. And don't forget that we are also optimizing our inventory as everybody is doing on the supply chain from customer down to our suppliers.

And that -- because of that, we, let's say, also adapt the utilization rate of our site. But we consider that HPP will continue to remain a bright spot of Arkema in the coming periods. With regard to CapEx, I don't share with you the fact that CapEx is still quite high at EUR 600 million. And to share with you because we have discussion with all of you and including investor, some are telling us the contrary that maybe is a bit too low. So I think for us, we think it's reasonable in this kind of environment to take down the CapEx to something which remain relatively okay not to jeopardize our mid- and long-term growth.

It would be a full mistake, and some companies have done that in the past in chemicals and now they regret it. So we try to stay consistent over years. And -- but on the other side, we were in '24 at EUR 750 million, then we are at EUR 650 million this year, next year, EUR 600 million. I think a good adjustment of the CapEx in order to take account the evolution of the macro. With regard to which part is maintenance, modernization, legislation, CapEx, I would say that we have around EUR 400 million -- when we are at EUR 650 million, we [indiscernible]. So this means that it's EUR 400 million, yes, around EUR 400 million. And the rest are really productivity and development CapEx, but which are more smaller scale compared to what we have been doing in the past 3 years with the major projects.

The next question is from Jean-Luc Romain, CIC Market Solutions.

[Technical Difficulty]

Romain, could you please get closer to the microphone, please?

I'm [indiscernible] microphone.

We hear a second voice behind you. Okay. So maybe we can take another one and then come back to you when we fix your topic.

Okay. So the next question is Chetan Udeshi, JPMorgan.

I just had a bit more philosophical question. It seems from all your comments that your view is this is much more a cyclical phenomenon in the sector, and you don't want to necessarily take any radical steps for that reason. Is that understanding correct? Because when I look at your numbers, and it's not just Arkema, right, I mean, to be fair, it's across the whole sector.

Everybody is suffering from same issue. And a lot of time, at least my personal opinion is it's blamed on demand weakness, which may or may not be the only reason. So I'm just curious, from your perspective, you don't see any structural changes in the industry that would warrant more structural changes in how Arkema is setup, I mean in terms of whether you need to have all the businesses that you have within Arkema, maybe it's better to monetize some of them, given the multiple.

So thank you for the question. It's a good question at least on the [ paper ] is that from what we see today, which part is, let's say, short-term cyclical and which part could be more structural. I would say we have been in the business, as you know, since 20 years, I'm frankly speaking. And you may have forgotten what we have seen in 20 years are significant shifts of the world. So you have at the same time -- and it can be positive and negative. When you see structural change, the negative is always one-to-one with a positive.

So you have opportunities and challenges at the same time. It's true today. It was true in the past 20 years. So this means that what we see today is a combination of -- and this is the majority of what we see by far of some macro-related cyclical issue, and it will come back. This is -- we are absolutely convinced of that. And then you have some more structural change. You have more, let's say, protectionism, you have more regionalization, you have more aggressiveness from Chinese competitors.

But by the way, we also take advantage of it because we are strong in China, and we have enjoyed quite a good year in China. Yes, this is a world of today. You need to be agile to adapt permanently. Where I don't agree with you is this question of radical step or whatever. I think if you look at the, for example, portfolio of Arkema, 60% of the business, which was at the origin has been sold, we changed completely, we made the acquisition. I think it's part of our business life, and we continue to take the steps that makes sense to do.

And so we are thinking all the time but not necessarily sharing what we are thinking with all of you, obviously. But no, no, I think we have a good level of reaction. And we try really to manage the 2 horizons at the same time. One is really short term, working on the cost, working on the cash. And we think we are doing quite a great job, thanks to the team on that. At the same time, having in mind that the frame in which we are operating is shifting a little bit, we are moving in order to adapt to that. This is what we have sold in the recent years with PMMA and we bought Ashland and PIAM. And even if these 2 are not in terms of ramp-up exactly where we would have thought they would be, I can tell you they are far more resilient than many business in chemicals.

So it goes in the right direction. It takes time. But I think we are doing -- we are really on the right topics, and we are doing what we need to do, and it does not prevent us from thinking all the time if another evolution could be meaningful or not. So no, no, we are -- we recognize that. And it's good for us. I've always said that Arkema would not be the Arkema of today if the world has been easy and lighter, then you would have had the same players as they were 20 years ago. I think the fact that there is a disruption, maybe we suffer short term.

But we think that in the long run, it gives opportunity to company like us, to companies that are reactive, agile, ready to question themselves to take new opportunities and to make a difference with the other guys.

The next question is from Emmanuel Matot, ODDO BHF.

I have 3 questions. First, do you think we are close to the bottom of the cycle now that the issue of customs tariff has been settled in the U.S.? What your main customers are telling you in that country? It seems you are very cautious about the scenario of recovery next year, considering your decision to reinforce your efforts on costs.

Second, can we have an update on PIAM? How is it delivering in the current context? And my last question, your inventory levels at the end of September are stable in value compared to the end of June at EUR 1.3 billion. Does this mean that it will be very difficult to reduce stock in the future, demand does not recover?

Okay. Clearly, as we mentioned, we are in a low cycle. So where are we exactly? I think everybody has to be modest on that. All the analysts and all the players in the industry, we have all been wrong. My feeling is that we are really at a low point -- and it has been also a long period of decline quarter after quarter. So I don't know if we are at the bottom, but we get close to the bottom. And what we cannot say is when the recovery will start.

And this is why -- and I think we gave the message, we want to be ready for whatever scenario. This is why at the same time, we really optimize what is linked to cost, cash, et cetera, but not jeopardizing the ability to rebound when the cycle is coming back. And your experience has been that each time the light has come back, we are one of the first one to take advantage of the recovery. So we want to stay with this mindset, while recognizing the challenge of the current macro and adapting what we have to do, but without losing the, I would say, the focus on the long-term development of Arkema.

It's a fine balance, but I think this is what we try to do so far. On [indiscernible], as you know, it depends really on the end market, particularly advanced electronic of PIAM. The vision per quarter can change because it depends on the stock policy of the customer, et cetera. But globally, we have done a good year, a good progression for PIAM with a margin around, again, 30% in Q3, which means the resilience of this -- of PIAM is far above any product line in specialty chemicals.

They were rather stable in Q3 after a very strong growth in Q2. I don't want to talk '26 for the time being. But with regard to PIAM, I can make just a short comment is that this seems to be quite positive on '26 and from their discussion with the customers. So I would say PIAM certainly lagged from their initial business plan, but quite resilient, growing this year, rather positive for next year. On your last question, I think the difficulty -- first, we are doing a good job on our stock.

You can see that in the cash generation. The difficulty when you are in the middle of the year, especially at the end of the Q3 is that you are still at a point where the sales seasonality is rather stable. So you cannot absorb, take the risk of losing sales. And -- but we know that we have opportunities to reduce further our stock up until the end of the year, and we will do it, and we know how to do it. Maybe Marie-José, you want to complete?

So in fact, Emmanuel, when you look at the ratio of inventory on sales, frankly, we are very much aligned if you compare with last year. Last year, end of the year, we finished with EUR 1.350 billion, which represented 14.7% of our sales in terms of level of stock. And this year, we are at EUR [ 1.309 ] billion, as you mentioned, which represents 15% of our 12-month sales. So ultimately, because it's still not year-end, there is a very limited, let's say, excess of stock in the chain compared to last year year-end level.

So definitely, we are adjusting permanently to the forecast, and there is an additional expected reduction for year-end on this metric in particular.

The next question is from James Hooper, Bernstein.

I have 2, please. The first is about the cost savings and delivery. How does the increase fit into the ambition that you had at the 2023 CMD to deliver EUR 250 million savings over the 5 years? So you've added the incremental EUR 50 million this year. Is this -- is it the opportunity has become EUR 50 million bigger? Or is this more just pulling forward savings to kind of take advantage of the current situation? And the second question is about the kind of Specialty Materials projects. So the -- initially, when you guide 2025, you had EUR 100 million. They've been downgraded to EUR 60 million. What kind of growth potential contribution are you expecting if we assume a similar macro environment in the coming years?

And then kind of put another way, if these projects have contributed EUR 60 million more and EBITDA is down EUR 250 million year-on-year, then how do -- what actions are you taking for the rest of the business? Or can these businesses grow fast enough to offset weakness elsewhere despite your cost savings?

Okay. With regard to additional -- to cost savings, so yes, clearly, what we are doing is not just to get quicker on the cost savings. It's to have cost savings. This means that if we say, for example, this year, we increased by [ EUR 50 million ]. This means this [ EUR 50 million ], you will find them at the end of the 5 years period. So this means that we are at EUR 300 million. If next year to deliver the offset of inflation, so we will be again significantly above the [ EUR 50 million ].

This above will be also on top of this EUR 300 million we have just talked about, et cetera. There is no way we said EUR 205 million to be, at the end, far more than EUR 250 million. I think it answer your first question. On the project contribution, the growth potential for us is intact. So the question is more -- it depends on the scenario of the macro. Well, it depends if the macro is coming back already in the course of next year or later or whatever. What is clear is that we believe that the number we have shared with you are still the same. The question is more the time line. This means that if the macro is coming back sooner than later, I think we can certainly still target EUR 400 million in '28.

If it take more time, it will be difficult to deliver the EUR 400 million. But I think the best will be to have an update in the course of next year on all this project. What is very important for me is that this project is from a strategic standpoint. And it comes to a certain extent, it's consistent with the answer I made to the question before, the strategy that is supporting this project is still completely valid. Even if the world is changing all the time, I think this project are still completely relevant from what we see of the evolution of the world, and this is the most important thing.

Now we can debate on the timing, if we can still maintain what we said for the achievement of the EUR 400 million for '28 or if the macro remains similar, as you mentioned, then by nature, there will be some delay. But at the end, the contribution will still remain very significant. And the endpoint would be the same, clearly. Now, as we said, I don't know if it clears really your question on additional action on the project. You got the answer or no? The work of Arkema is not limited to this project. There are plenty of new business, which are absolutely not linked to this project.

And clearly, looking at, for example, when we discuss data center, which was not in our -- so much in our vision up until recently is something that we will develop, will be not linked to this major project [ as something ] else. So we permanently to complete our new business development prospect based on the evolution of the world.

The next question is from Jean-Luc Romain, CIC Market Solutions.

[indiscernible] better now?

You have to talk a little bit louder, I don't know because it's very low.

My question relates to the 5 outlets, which have 20% growth. When you first talked about those 5 sectors, it was representing 52% of your sales and your target is 25%. Where are you now in terms of the weight of those 5 outlets, which are growing faster than the rest of your business?

Okay. So if I understood well the question, this 20% growth belongs to the 5 market, which represents 15% of Arkema, but they are not -- we don't make 20% on the full 15%. It's an extract -- the market we are mentioning at the beginning, battery, sport, et cetera. It's a part of that 5 market, of the 5 platform. This means this 20% applying more to around 7% of the sales. On the rest, the other 8%, we are far more stable. Does it answer your question?

We take the last question.

Gentlemen, there are no more questions registered at this time.

Okay. So if no other question, I would like to thank you very much for taking the time to hear us, and I wish you a good day. Don't hesitate to come back to Beatrice and to James if you have any further question. Thank you very much again.

Ladies and gentlemen, this concludes this conference call. Arkema, thanks you for your participation. You may now disconnect.

Welcome to Arkema's First Half 2025 Results and Outlook Conference Call. For your information, this call is being recorded. [Operator Instructions]

I will now hand you over to Thierry Le Henaff, Chairman and Chief Executive Officer. Sir, please go ahead.

Thank you very much. Good morning, everybody. Welcome to Arkema's Second Quarter 2025 Results Conference Call.

Joining me today are Marie-José Donsion, our CFO; and the Investor Relations team that you know well. To support this conference call, we, as usual, posted a set of slides, which are available on our website. And always, I will comment on the highlights of the quarter, and then we'll let Marie-Jose go through the financials and at the end of the presentation, as was said before, will be available to answer your questions.

In Q2 2025, as you know, the macroeconomic environment was challenging with an increasing wait-and-see attitude of customers. This was no doubt reinforced by the uncertainty and lack of visibility around trade tariffs. As a result, the weakness of the demand has persisted through the quarter, impacting notably the U.S. and Europe. Asia, on the other hand, continues to be well oriented from what we could see.

The second quarter was also marked by an unfavorable evolution of exchange rates with the weakening of the U.S. dollar against the euro as well as a currency such as the Korean won. All this is neither specific to Arkema or something new to do but it's important to mention this to start with. This context and these headwinds had, of course, an impact on our financial performance but overall, Arkema reserves ended up relatively well with a slight decline in volumes, a robust EBITDA margin of 15.2% and a solid cash generation in the quarter. This was supported by the good resilience of our adhesive solutions and high-performance polymer demonstrating the quality of our portfolio and the work carried out in the last 2 years to deeply transform and strengthen Arkema.

EBITDA was nevertheless lower year-on-year at EUR 364 million for the quarter, reflecting mostly on top of the FX headwind. The decline in refrigerant gases already was flagged in Q1 but improving quarter-on-quarter as well as the low cycle market condition in upstream acrylics directly impacted by the current macro.

Looking briefly at the performance of Specialty Materials segment. Adhesives had a very decent quarter with an EBITDA and slightly down compared to last year despite the continued pressure on volumes. This performance of Bostik was supported by the ongoing work on efficiency and our strict price discipline, enabling us to mitigate the weak demand environment in industrial adhesives in particular, North America.

On the other hand, construction business was slightly better in Europe and Asia with a good momentum in efficient buildings. The integration of Dow is progressing well and contributed incrementally to the segment's results.

In Advanced Materials, volumes were strongly up 6% in the quarter with growth in most businesses. High Performance Polymers delivered yet again a solid performance. They benefited from our significant footprint in Asia over many years and from our high value-added new business development in differentiated materials serving fast-growing markets such as sports, battery, 3D printing.

On the other hand, EBITDA was impacted by unfavorable geographical mix and overall weaker market conditions in Performance Additives. The margin of the Advanced Materials segment remain overall at a good level, close to 20%.

Lastly, in Coating, the unit margins in upstream acrylics remain challenging, where the volume in downstream were disappointing, especially North America affected by the weakness of construction in this reset. Therefore, the performance of the segment was significantly lower than last year. To adjust to the challenging environment, Arkema implemented also significant cost-cutting measures across the organization and tightly control working capital and CapEx. Thanks to these specific initiatives, and I would like to highlight the hard work of the team. The group was able to offset fixed cost inflation over the quarter and generated a robust level above EUR 110 million of recurring cash flow, which was not given in the context.

In parallel, the fundamentals of the group, as you know, are very solid. The megatrends beyond the short-term challenges will continue to drive the growth of the global economy. So it's important to continue to work on the long term and to be prepared for better times of the world economy.

From this standpoint, 1 of our first priorities remain to ramp up our major projects, which have been financed in the recent years. They are, as you know, centered on innovative materials and focus on key growth markets such as electric mobility, sustainable lifestyle goods, advanced electronics and efficient buildings.

We are now starting up our new capacity for additives in the U.S. for refining and biofuel just now as well as the expansion of our organic peroxide in China for renewable energy. Besides, as anticipated, I am happy to confirm that our new greenfield plant in Singapore for biosource polyamide 11 is reaching the breakeven point. And as announced at the beginning of July, we have invested -- we have decided, sorry, to invest in a new unit of recently transparent polyamide on the same site, expected to be operational quite quickly in the first quarter of 2026.

This last investment represents a limited CapEx of around USD 20 million that will triple Arkema global production with a very attractive payout. This will also contribute to our strategy to develop local supply flows to our customers in this region. This comes on top of the new capacity, which was recently announced. It was in February in the U.S. for PVDF, which is also scheduled to be completed by mid-2026, and this will enable us to follow market development, and answer the increasing demand for locally manufactured PVDF in energy storage systems, semiconductor, cable market and other natural markets of PVDF.

This was for my introduction. I will now hand it over to Marie-Jose for a more in-depth look at the financials before we discuss the outlook at the end of the presentation.

Thank you, Thierry. Good morning, everyone. So starting with revenues at EUR 2.4 billion. Quarter 2 sales were down 5.6% year-on-year, impacted by a negative 3.3% currency effect. This reflects the weakening of the U.S. dollar against the euro and that of most other currencies, including the Chinese yuan, the Korean won and the Mexican pesos.

Volumes came in slightly down at 1.3%, mainly due to an overall weak demand environment in Europe and North America. On the other hand, several markets continue to grow in high performance volumes, especially in Asia. The price effect was a negative 2.5%, reflecting the unfavorable geographic mix. The evolution of certain raw materials as well as the market conditions, in particular, in upstream acrylics.

Continuing with profits, quarter 2 EBITDA came in at EUR 364 million, impacted by the decreased contribution from the refrigerant gases as well as the decline in Coating Solutions, while Adhesives and Advanced Materials were more resilient. Quarter 2 EBITDA included also an unfavorable currency effect estimated at EUR 50 million, half is dollar related. The other half is from all other currencies.

Depreciation and amortization stood at EUR 166 million that included the amortization of new production units, which started during 2024. This is for a recurring REBIT of EUR 198 million and an REBIT margin of 8.3%. Nonrecurring items amounted to EUR 82 million. They include EUR 34 million of PPA amortization and EUR 47 million of one-off charges, notably restructuring costs linked to the reorganization of hydrogen peroxides site in France.

Financial expenses stood at EUR 34 million, reflecting mainly the increased cost of our bonds and the low interest on invested cash. Consequently, quarter 2 adjusted net income stands at EUR 118 million, which corresponds to a EUR 1.56 per share.

Moving on to cash flow and net debt. Arkema delivered a very solid cash flow generation in quarter 2, recurring cash flow stood at EUR 111 million, reflecting a well-controlled working capital. The working capital ratio actually stands on annualized sales at 17%, which is comparable to last year. I'd like to thank the team to have been able to strictly manage the level of stocks in a difficult-to-predict environment.

Total capital expenditure amounted to EUR 151 million, in line with our guidance of annual CapEx spend of EUR 650 million for the full year '25. Net debt and hybrid bonds at the end of June '25 amounted close to EUR 3.6 billion, including a EUR 1.5 billion of hybrid bonds. Since a new EUR 400 million hybrid was issued in May refinancing the upcoming maturity early '26. The net debt to last 12-month EBITDA ratio now stands at around 2.5x.

Thank you for your attention, and I'll now hand it over to Thierry for the outlook.

Thank you, Marie-Jose. So going now into H2, the macro environment seems to be the opportunity of the recent months, no surprise there with low demand, geopolitical uncertainty and limited visibility, including on the tariff. Our industrial footprint close to our customers in our 3 major regions significantly protect the group from direct impact of higher tariffs. Obviously, we are remaining vigilant about what we call the direct impact on the global demand.

In this context, as already said, we reinforced our initiatives on cost and cash. This year, we aim to achieve EUR 100 million of savings in fixed and variable costs to offset inflation. If you remember, this is a double of the annual target set at the Capital Markets Day in September '23. We'll also continue to control strictly our operations and frankly manage our working capital and CapEx as we did in Q2.

In parallel, we continue to be making up for the future. This is very important, and this includes the execution of our major projects that you know. We still believe we can expect a contribution of more than EUR 400 million Arkema's EBITDA in 2028 in comparison to 2024. This year, given the current context, the ramp-up would be slower than expected, and we see an additional contribution to the group's EBITDA of almost EUR 50 million versus last year.

Based on all these factors, we now aim to achieve in 2025, as you could read, an EBITDA of between EUR 1.3 billion and EUR 1.4 billion. This includes an FX headwind of around EUR 50 million for the full year, assuming a stabilization of exchange rate at the current level for the rest of the year. Based on this EBITDA forecast, the recurring cash flow should adjust accordingly to between EUR 300 million and EUR 400 million in 2025. I know there have been a few questions to the IR team this morning on this topic. As a matter of fact, the range is a mechanical adjustment versus initial EBITDA and cash guidance of end of Feb and also quite consistent if we make the analysis compared to last year results.

Beyond the current year, we are firmly convinced that megatrends are there to remain on the long term and the Arkema is very well positioned with its portfolio of cutting-edge technologies and sustainability-driven innovation to continue to capture the numerous growth opportunities that we will create.

So I thank you very much for your attention. And now together with management today, we are ready to answer your questions.

[Operator Instructions] First question is from Tom Wrigglesworth, Morgan Stanley.

A couple of questions, if I may. Thierry, just kind of focusing on that second half guidance that you've given and your wait-and-see commentary what have you baked into the second half? Is it that things continue at the current -- at the exit rate of 2Q? Is that what you're expecting? And around that, how long can these customers wait and see, right? Is there a certain point this year where they'll have to come back if they want to sell products? Or can they last out through the whole year on this wait-and-see attitude? So that's my first question.

My second question is around Advanced Materials. So just to unpack that a little further. I mean, obviously, we're seeing good volume growth but declines in EBITDA. Is that because you're seeing ramp-up of volumes, which aren't carrying positive EBITDA yet but will in the future? Or is it -- and at the same time that you're losing high-value volumes underlying that picture in other markets? Just trying to understand when the volumes kick in to EBITDA growth in Advanced Materials?

Thank you, Tom, the very valid question. So assumption for H2 are basically continuity but we put a range of EUR 100 million on the EBITDA started from the exit rate of Q2. So depending on this range by nature, in the range, certainly a bit more optimistic for the high end of the range, assuming certainly a little bit of rebound at the end of the year. And the low end, assuming absolutely no rebound. So I would say, for the time being, and nobody has any crystal ball, and we have been all surprised by the length of wait-and-see. We must do that. We are not the only one.

I think we prefer to be cautious because there are some elements,which we don't master, including the tariffs. I think time you say we get something rather clear. You have some surprise a few will after. So later to be cautious. So I would say we don't know, I think it's our experience in chemicals, we started to have some destock. It was in September '23. It's really very long period. So we are absolutely convinced that there will be a rebound at certain time and then there will be certainly plenty of upside linked to the tension, we have seen several times in the past 10 years in chemicals. The question is when and really frankly on this, I -- we don't know because beyond the typical macro cycle, you have some geopolitical factors that we don't master. So I would say it's neutral but there will be, at a certain point, light in the tunnel, and as usual, we believe that Arkema can get out of this period stronger than our competitor. This is not we have been proven -- proving since many, many years.

With regard to Advanced Material, in fact, this is a difficulty when the markets are down, is that the mix is also a little bit affected. We have -- this means that we have a tendency to have more growth in the more commoditized businesses and the more specialty businesses, and we have seen that always. And you have the contrary when there is rebound, which is why we have double gain in EBITDA while there is a rebound. But when the volumes are more under pressure, special -- I would say, Specialty businesses are suffering a bit more. So it's one answer.

And the second one is that in terms of geographical mix, we have U.S., which is disappointing and Asia is rather solid for us and the mix between the 2 create the discrepancy between volumes and EBITDA. But if I compare also to many peers. We have to -- despite all of this, we see for Advanced Material and for the group, the level of EBITDA margin is quite robust still. I wanted to mention it.

Next question is from Aron Ceccarelli, Berenberg.

Thanks for Slide #5, where you showed a recap of the new projects. Perhaps what assumption underpinned the reiterated forecast of above EUR 400 million earnings contribution by 2028? Has this been reiterated on an assumption that by 2028, the market would be as you originally expected? Or do you expect market share gains to support it in some of the projects you mentioned?

The second question is on free cash flow and your leverage. I wonder if you can discuss a little bit what your thoughts are about the current leverage and the free cash flow generation going into the second half of the year?

Okay. So on the first question, so the nature of this project is a little bit different in, I would say, different depending on which projects we are talking about, for example, is different if you take the Singapore plot or I would say, the project with Nutrien -- project with Nutrien is really an integration of the raw material. And then we mechanically as soon is really ramping up, we increased our profitability. And on this, even we'll get the benefit far before 2028. On the -- on Singapore, you will get the ramp-up of the business. So you have to assume clearly recovery of the macro before 2028. But then it will be 4 years from now and from September '23, it will be 6 years.

So on this, we think it's a reasonable assumption that the macro at a certain point, coming back to the answer to Tom, it will come back. The question is when. And we get closer certainly than it was two years. But so if you take Singapore development, you have a lot of development in niches. So you don't really -- you take market share but through technology, it's not like you bring the same product with a lower whole price or whatever. It's really a new market that we are developing or very technical market. We mentioned in sport, we mentioned in battery, we mentioned in optical also with this new project of polyamide, et cetera.

We did a lot, even if some people can have the impression that what is sustainability slowing down in terms of potential of growth. We still believe that it's a big driver of the world, and we'll continue to push a lot on that. And so it's not really market share. Again, it's really a new development. We are very strict on new business development. We could mention also through [indiscernible] Advanced Electronics, where because of the new mobility, you have plenty of application and digital plenty of application developing. So there is even if you can have some peak and down, the mid to long term is still very positive. So all this is coming from this new project, including also to show you a third nature of projects, the acquisition of Dow adhesives by in flexible packaging by Bostik. So there is a little bit of market share recovery because in the past 2 years before we bought it this business had lost market share, that is far beyond that.

I think by putting the 3 ranges together, the 2 belonging to Arkema and Bostik and another one belonging to this new acquisition, we're able to really to be a full global player with the full range and in adhesive for flexible packaging, and we will ramp up very quickly because in terms of technology, we will be really at the top of the market. So it's a different nature again of project, and this is what is good with this. So I think we have 12 development projects. What is good about them. They have different natures, they are quite diversified. And if the macro is reasonably good, okay, I would say, in the coming years, we are confident to deliver the EUR 400 million of contribution.

On the free cash flow, I will let -- on the current leverage, I will let Marie-José comment just to mention that, I think, again, we had quite -- if I compare also to some of our press release, quite a good free cash flow generation in Q2, which means really that is belong to the DNA of Arkema and our balance sheet is quite solid.

So regarding the updated guidance, basically, it's quite consistent with what we did at the start of the year. So if you remember, end of Feb, we guided around EUR 1.5 billion to EUR 1.7 billion EBITDA with a EUR 600 million cash flow, the midpoint being EUR 1.6 billion, so it's now readjusted to between EUR 1.3 billion, EUR 1.4 billion. So midpoint is EUR 1.350 billion. So let's say you find basically a corresponding adjustment on the cash flow guidance. So it still assumes actually similar type of a variance in working capital that we had generated last year and also assumes the reduction of CapEx that we have committed to deliver this year and on which we are on track. Therefore, I would think the leverage, if you take the midpoint of the 2 guidances, should remain relatively stable between 2.4x EBITDA and 2.5x EBITDA.

Next question is from Martin Favre from BNP.

Two questions, please. The first 1 on the -- I mean, clearly, we've seen a resilience of the 2 specialty divisions, Adhesives and Advanced Materials. But when we look at Coatings, obviously, a very different picture. So I was wondering if you could, I guess, talk about the different dynamics within the Coatings division between downstream and upstream acrylics, and maybe can you talk about the resilience of that downstream business in terms of, I guess, net pricing margin contribution, et cetera?

And then the second question for are cash flow point. I mean I understand that you're taking the same assumption on working capital as last year. But I mean last year, sales were up at group level. And I guess this year, they are going to be down the few hundred millions. So I'm just wondering, are you assuming that we see a recovery towards the end of the year. And therefore, I guess the working capital picture reflects an improvement into H1 next year?

Thank you, Laurent. So on the first question, in fact, it's true that we have 2 different dynamics between upstream and downstream. Upstream no surprise in this kind of environment, and this is our most cyclical the business. So we suffer from a unit margin, which is linked to from the spread linked to the cycle and the new demand, and it will come back as soon as the demand is recovering. So here, you can see it 2 ways. But if you're positive, you can say there is an upside for Arkema in the coming year, which is quite significant.

And with regard to the downstream, I would say that the net pricing is resilient. The topic is volume. So in fact, you have differentiated. One, this is net pricing, which is negative for the upstream and the downstream is more the volume, which reflects the global economy.

On cash flow, basically, when you compare the second half, let's say, last year and this year, I expect a similar improvement in working capital, so close to EUR 250 million. So the main -- let's say, the main driver is probably we count on a more flattish seasonality of the business compared to last year, in line with what we've seen since the beginning of the year. So this, I would say, is the main change if you compare the 2 financial years. Obviously, the other change is the less expenses on CapEx that generate less payable of CapEx, whether I guess this is mechanically factored in your models already.

Next question is from James Hooper, Bernstein.

I have 2, please. The first is around the incremental cost savings plan. Clearly, the plan was before to save roughly EUR 50 million per year through to 2028. The incremental savings found this morning, are they additional to the plan? Or are these molding of future savings given the pressure on the business?

And then my second question is about the portfolio. Given the kind of different dynamics, the capital being invested is focused much more on High Performance Polymers adhesives. Has the performance of Coating Solution changed your view on the right portfolio for Arkema?

Okay. So the 2 very different questions but quite valid. So the first one, in fact, we -- the EUR 50 million average becomes EUR 100 million for this year. So we should have achieved EUR 50 million. So it's incremental to the EUR 50 million, which brings it EUR 100 million, which is quite significant for Arkema. And I would say, structural. So if not -- the idea is that is not just sort of one month that we'll get back next year. The idea is that we set the base lower than it should have been with our previous plan. So it's really a big effort from the team. So as you know us, we are already a little bit low profile in terms of communication on that but I can tell you that the momentum by the team is really there.

With regard to the performance of Coating Solutions. In fact, it's typical performance of Coating Solutions when the market is down. So we should not overreact. We know you have to be prepared that actually can -- depending on the cycle to be lower than what is normalized condition. So it's a bit more even if EBITDA is quite disappointing but it's not reliable. I would say, we are in a position, which are a little bit extreme for this kind of business because of this context that we have explained. So it can get normalized quite soon. As soon as you will start to see some rebound, some tension, you will be positively surprised by Coating solutions.

So we don't want to that regard. We have, as you know, strategy which is very clear, around the 3 segments, which make of materials, Specialty Materials focus. They are very complementary for example in Coatings, we see a lot of application in battery. It's a very important technology in battery, very complementary to what we do in adhesives and in -- also in High Performance Polymers. So we really continue to build on that. One is that, and you're right, in terms of allocation of cash and resources, we put a clear priority in High Performance Polymers and Adhesives. And like in any portfolio, you have some businesses, which play more to cash cow and so where you really put the emphasis on the growth.

The next question is from Matthew Yates, Bank of America.

A couple, please. I wanted to just revisit the balance sheet and the cash flow. Correct me if my numbers are wrong. I think the strategy presentation, you talked about EUR 650 million to EUR 700 million of CapEx on average through the coming years. When you look at that leverage ratio, which is the highest I can remember at Arkema, and you also think about the state of the end markets. Are you still intending to spend the same magnitude of CapEx over the next couple of years? Or will you be revisiting that?

And then the second question, slightly more specific really, is there's some press stories about a big U.S. smartphone company potentially launching a foldable model next year. I don't know if you have any insights into whether that would use polyamide technology, whether Arkema has a chance of selling into a U.S. customer because that was obviously one of the big synergy opportunities from taking the Korean technology into different markets. So curious if you have any insights into that.

Okay. So with regard, Matthew, the first one, so you're right to say that we started with the amount which was EUR 750 million to EUR 800 million. At the Capital Markets Day, we decreased to EUR 650 million to EUR 700 million. Clearly, the current spend this year is max EUR 650 million. If we can do less,, we'll do less but it's max EUR 650 million. And given the current context, it's clear that we have not a tendency to exit EUR 650 million for next year. So this will have to be confirmed. It will depend on the macro. But we are just finishing a big launch that we have financed last year -- finished the finance last year a big wave of CapEx. So we are not in hurry to put big CapEx next year. So we'll continue to I would say, to streamline the CapEx. So let's consider that this year, the max is EUR 650 million. And then next year, from what we see today, the last will also be EUR 650 million that to be confirmed.

With regard to the smartphone, clearly, I don't want to be too specific, especially in advance of PIAM and they communicate they are a listed company in Korea. So I want them to let their communication go. But clearly, all you are talking about are opportunities for polyamide. PIAM is a global -- supplying globally -- to supply global players on smartphone. So they are very well positioned, and they are taking opportunity from all new models. But I don't want to be too specific related to PIAM.

The next question is from Chetan Udeshi, JPMorgan.

Can you hear me?

Yes, bit low.

Cool. The first question was, it seems from your comment that you haven't really seen much change so far in July versus what you saw in Q2. And if that is correct, would you suggest that we model seasonal developments in third quarter compared to second quarter, which tends to be down like 5%, 10% versus second quarter? Or is there something that can be different in Q3 versus normal seasonality? That's one.

The second question, perhaps for Marie-José, your net interest financing costs were higher than I think at least what we had in mind. And I think historically, you've talked about EUR 80 million to EUR 90 million of net financial expenses, is that number now higher given what we've seen in Q2? I know you also have refinanced some of your debt?

And third question was it seems you -- the comment about rapid recovery when demand turns suggests that you think all of the earnings pressure that you've seen in some of your businesses, most notably in Coatings is cyclical but we also know that the supply cycle today is far worse than we've had for many, many years. So why would your profitability recover rapidly? In other words, why should we not see some of your earnings pressure in some of your businesses to be more structural in the sense you've just lost it just because you can't compete with some of the very low-price competitors.

Okay. So on the -- I will let Marie-José answer on the 2, obviously. On the first one, I would say that July is, if I put the seasonality aside, I mean, it's the same kind of trend as the exit of Q2 and you have not to expect a miracle [indiscernible] it will come, I would say, is really the continuity. But without being too specific, you should see the normal seasonality of Q3 versus Q2. If you take the past 10 years, you have seen that Q3 is always below Q2 with a certain discount, which can be more or less important. If you take the average, I think it gives you a good idea.

You need to take in mind that August is a low month short months. So nothing -- no special comments on that, just that we enter the quarter in continuity in the second quarter and that you will observe the normal seasonality where because of the Q3 is a lower quarter than Q2. But nothing special there and factored in the guidance. Marie-José?

Yes. So regarding the financial expenses, you are correct. In fact, we are -- we faced an increase in financial expenses in our P&L. We have delivered EUR 58 million net financial expenses for the first half. In fact, the cost of financing remains quite competitive because if you take the average cost of our bonds, both senior bonds and hybrid the average rate that applies to Arkema is 2.7%, which frankly, in the parent market financial interest it's extremely competitive still.

But we have less liquidity that we invest. We basically repaid a senior bond of EUR 700 million in Jan. And in fact, the main effect of this increased financial expenses is coming from the interest on invested cash, which is in fact lower than what we got as revenues last year. This is, in fact the main phenomenon. I was investing last year EUR 1.7 billion at an average of 3%. And I'm now investing an average of EUR 1.2 billion cash at an average of 2.2% for instance.

Thank you, Marie-José. So on the last question, I did not say that profitability would recover quickly, what I say is the profitability of the coating solutions and the particular of the upstream acrylics will recover with the market. This means that it's certainly in our specialty portfolio is more cyclical -- is the most cyclical business and it's linked to the profitability back to the question of Laurent of the upstream. The cycle is reflecting the macro. So for the time being, we are in low cycle. So we see that on the net pricing on the unit margin of the upstream acrylics and mechanically, when the demand will come back, we will have a recovery of the earnings.

Now on your point, it also depends on the supply. On the supply, I mean we have now close to 60 years of experience on that. The wildcard is Asia because in Europe and U.S., you have absolutely no change in the supply since many years, and there will not be -- it make no sense to extend in these 2 regions. So it's really depending on the demand there. And on Asia, you can see we are already overcapacity but I would say for the first part of the year, finally, acrylics profitability is not so bad. And I know that China wants to put more pressure on the internationally using [indiscernible]. So you can see it positively or negatively but we try to stay calm and neutral.

So I would say to answer your question, we don't think that the earnings decrease is structural. For the reasons that I've mentioned in upstream actually for the downstream, as I mentioned to Laurent, it's volume. It's a volume topic, and we really will be addressed when the recovery. Now about the speed of the recovery, I have no clue. You have no clue, nobody has any clue. We will wait and see but we are prepared for when it will come, we'll be ready there.

[Operator Instructions] We have no more questions registered at this time.

Okay. I would like to thank you very much for your interesting questions. And I wish you all a good continuation of the summer. Okay. Talk to you soon. Bye-bye.

Ladies and gentlemen, this concludes this conference call. Arkema, thank you for your participation. You may now disconnect.