Meeting with Thierry Le Hénaff, Arkema Chairman and Chief Executive Officer
Looking back at the excellent 3rd quarter 2016 results, Thierry le Hénaff, who has been instrumental in Arkema’s transformation, reviews the Group’s development strategy and its successes over the last 10 years.
You recently announced the completion of the acquisition of the Den Braven group. What benefit will Arkema gain from this?
Thierry Le Hénaff > The acquisition of a European leader in high performance sealants is consistent with our development strategy in the adhesives sector, and is bolstering the business of Bostik, the world’s n°3 in adhesives, the most significant acquisition in the history of Arkema, conducted in 2014. Acquiring Bostik, which generates 1.6 billion euro sales, was just a starting point in this highly fragmented market.
With Den Braven, which will be consolidated in December, this activity will achieve 2 billion euro sales. The two companies are highly complementary in terms of sectors – we will cover the entire chain from sealing to bonding – as well as geographic presence. Hence, we anticipate annual synergies of 30 million euros given that Den Braven’s Ebitda (gross operating income) should reach 44 million euros in 2016. This acquisition will have a positive impact on earnings per share as early as 2017. We are very confident in its integration given that we are ahead of schedule in Bostik’s integration and in our objective to raise its Ebitda from 158 million euros in 2014 to 205 million euros in 2017 (excluding Den Braven).
Will this strengthening of less capital-intensive activities reduce the Group’s cyclicality?
Thierry Le Hénaff > Indeed, this shift in the Company’s profile towards specialties means a substantial reduction in the Group’s volatility. It is the result of the strategy we have been conducting over the last 10 years, in particular with the divestment of chlorochemicals, our increasing expansion in high added value technical polymers, the creation of downstream acrylics that ensures tighter control of the activity, the addition of an adhesives segment, and greater investment in Asia and the United States. Prior to the Den Braven acquisition, we had already successfully increased the share of activities with highly resilient margins to 70% of the Group’s entire portfolio. Hence the capital intensity ratio has been reduced from 8% to 6% of sales, our medium-term target being 5.5%.
In May 2016 Arkema celebrated its 10 years on the stock market in grand style…
Thierry Le Hénaff > Since its stock market listing in 2006, the Group has seen a sea change. We have bolstered our presence in the United States and in Asia where we now generate one third and one quarter of our business respectively, the relative weight of Europe falling from 60% to 37 % of sales. Our EBIDTA has more than tripled in 10 years. A shareholder who invested one euro into Arkema has multiplied his or her investment by 3.5 (excluding dividends) whereas the Cac 40 index has fallen slightly over the same period.
The results at 30 September have risen sharply. What has driven this improvement?
Thierry Le Hénaff > We have indeed reported a record Ebitda, which has enabled us to raise our target for 2016. We are now looking to a 9 to 10% improvement. The impacts of our operational excellence program, the progress of Bostik, the latest developments, and the technical innovations in performance materials around our brands Kynar® and Rilsan®, not to mention the ramp-up of our new thiochemicals plant in Malaysia and the recovery in fluorogas prices have all contributed to this performance. Our nine product lines have performed very well, except for acrylic acid which is close to low cycle conditions and taking longer to turn around than anticipated. By contrast, PMMA (a technical plastic), which should see its situation normalize, has remained at very high levels. As regards acrylics, we remain confident in global overcapacities waning and in a gradual return to mid cycle conditions. Note that our positioning in downstream acrylics has enabled us to stabilize margins in this activity.
Your mid-term targets are ambitious. How are you going to achieve them?
Thierry Le Hénaff > A large part of the transformation and restructuring operations has now been completed, and so has half of our 700 million euro sales divestment program. We will continue to strengthen our product lines. Arkema has now gained a new profitable growth momentum. We are aiming for 10 billion euro sales by 2020, i.e. a one-third increase in our size compared to 2016. This additional 2.4 billion euro in our business will come in equal share from acquisitions and from organic growth, the latter sustained by in-house progress and annual investments currently of the order of 450 million euros. Our objective is to report within this time frame an Ebitda margin close to 17% (against 13.8% in 2015). We also have projects to expand production in China in technical polymers. Part of the investments will also be allocated to modernizing our 140 sites around the world, to industrial safety, and to further reducing emissions.
Interview by Anne Barloutaud of the weekly magazine Investir (Les Echos Group)