Arkema: Third-quarter 2019 Results   

  • Sales up 2.3% year on year to €2,216 million, including growth in volumes of 0.7 %
  • Very good level of EBITDA at €385 million
    • Up by 3 % relative to the record level of 2018
    • Driven by the strong increase of specialty businesses (1)
  • EBITDA margin of 17.4% (17.3% in third-quarter 2018), resilient at a high level in a more challenging and uncertain macroeconomic environment
  • Adjusted net income of €166 million, representing 7.5% of sales
  • Strong free cash flow generation of €218 million, in continuity with the first half
  • Net debt at €1,770 million (1.2 times LTM EBITDA), including the recent acquisition of ArrMaz and of our partner’s stake in Sunke
  • Ongoing portfolio transformation towards specialties, with the planned divestment (2) of Functional Polyolefins announced on 14 October

COLOMBES, France--()--Regulatory News:

Arkema’s (Paris:AKE) Board of Directors met on 29 October 2019 to review the Group’s consolidated financial statements for the third quarter of 2019. Commenting the results, Chairman and CEO Thierry Le Hénaff highlighted the following points:

The third quarter was marked by the Group’s very good financial performance in a macroeconomic environment which remains globally challenging , as well as by the continued proactive portfolio transformation towards specialties, with the planned divestment (2) of the Functional Polyolefins business, the acquisitions of Prochimir and Lambson, and polymer capacity expansions for the 3D printing and battery markets.

Third-quarter results showed contrasting trends between our different product lines and confirm the improving momentum of specialties, notably around the three long-term growth pillars, namely adhesives, advanced materials and performance coatings.

Specialty businesses’ EBITDA rose significantly despite lower volumes, thanks to strong pricing, an improved product mix, a more favorable raw materials environment and the consolidation of ArrMaz. Adhesives’ EBITDA continued to grow strongly, up by nearly 20% at constant scope compared with the third quarter of 2018. The marked decline of Fluorogases weighed negatively however on the overall performance of intermediate (1) businesses, despite the resilience of Acrylics and MMA/PMMA.

In this less favorable external environment, the quality of our results rewards our teams’ engagement and efforts, and validate the Group’s continued strategic refocusing of the business portfolio. The acquisitions we have carried out so far have made an important contribution to the Group’s resilience and performance.”

(1) The Group distinguishes intermediate businesses, corresponding to the PMMA, Fluorogases and Acrylics Business Lines, and specialty businesses

(2) The transaction is subject to an information and consultation process involving Arkema’s employee representative bodies and to the approval of the relevant antitrust authorities

KEY FIGURES FOR THIRD-QUARTER 2019

(In millions of euros) 3Q'19 3Q'18 YoY change
Sales

2,216

2,167

+2.3%

EBITDA

385

374

+2.9%

EBITDA margin

17.4%

17.3%

 
Recurring operating income (REBIT)

250

265

-5.7%

REBIT margin

11.3%

12.2%

 
Adjusted net income

166

186

-10.8%

Adjusted net income per share (in €)

2.19

2.44

-10.2%

Free cash flow

218

227

 
Net debt (as of end of September)

1,770

1,167

 

As of 1 January 2019, the Group applies IFRS 16, "Leases". The income statement, balance sheet and cash flow statement items for the second third quarter of 2019 include the impacts of IFRS 16, which are detailed in the Group’s financial statements appended to this press release. The comparative figures for 2018 have not been restated.

THIRD-QUARTER 2019 BUSINESS PERFORMANCE

Sales for the third quarter of 2019 were up 2.3% year on year at €2,216 million. This performance was achieved in a challenging economic context, marked by trade wars amongst the world’s major powers and uncertainty weighing on demand. The +3.9% scope effect mainly reflects the consolidation of ArrMaz from 1 July. Volumes increased by 0.7%, driven notably by Coating Solutions. In High Performance Materials, the significant decline in demand in the transport, oil & gas and consumer electronics sectors was partly offset by the sustained positive momentum in batteries and 3D printing. The 4.4% negative price effect was due mainly to lower propylene prices in Coating Solutions and market conditions in Fluorogases, which overshadowed the 3% positive price effect in High Performance Materials. The currency effect was a positive 2.0%, essentially reflecting the appreciation of the US dollar against the euro.

With EBITDA of €385 million, up 2.9% compared with third-quarter 2018’s record high of €374 million, Arkema delivered an excellent performance in a macroeconomic environment that is was far less favorable than in 2018. In this context, specialty businesses (72% of sales) reported strong growth, supported by a significant increase at Bostik, innovation, product mix optimization, a more favorable raw materials environment and ArrMaz’s very good performance, fully in line with our expectations. Specialties have become the growth driver, taking over from intermediates, which were impacted by much lower profits in Fluorogases compared with last year’s very strong performance. EBITDA margin was stable at an excellent level of 17.4% (17.3% in third-quarter 2018).

Recurring depreciation and amortization charges of €135 million were up €26 million year on year due to the €14 million impact of IFRS 16, the start-up of several production units in 2019, the consolidation of ArrMaz and an unfavorable currency effect. Consequently, recurring operating income (REBIT) amounted to €250 million, representing a REBIT margin of 11.3%.

The financial result represented a net expense of €29 million (against a €26 million expense in third-quarter 2018). The change mostly reflects the unfavorable interest rate effect on the portion of the Group’s debt swapped into US dollars.

For the first nine months of the year, excluding non-recurring items, the tax rate came in at 20% of recurring operating income.

Consequently, adjusted net income totaled €166 million in the quarter, representing €2.19 per share.

THIRD-QUARTER 2019 PERFORMANCE BY DIVISION

HIGH PERFORMANCE MATERIALS (48% OF GROUP SALES)

(In millions of euros)

3Q'19

3Q'18

YoY change

Sales

1,068

987

+8.2%

EBITDA

182

162

+12.3%

EBITDA margin

17.0%

16.4%

 
Recurring operating income (REBIT)

134

123

+8.9%

REBIT margin

12.5%

12.5%

 

At €1,068 million, sales for the High Performance Materials division were up 8.2% year on year (€987 million in third-quarter 2018), driven by a 7.1% positive scope effect corresponding mainly to the consolidation of ArrMaz within Performance Additives as of 1 July 2019. The 3.0% positive price effect, positive across all Business Lines, reflects the impact of price increases and a favorable shift in the product mix towards higher value‑added applications, especially in adhesives. The 2.1% positive currency effect was mainly driven by the appreciation of the US dollar against the euro. Volumes were down 4.1%, penalized by the general economic context, with softer demand notably in the transport, oil & gas and consumer electronics segments, and by our customers’ cautious inventory management. In the continuity of the first half, momentum remained strong in certain niche markets such as batteries and 3D printing.

The division’s EBITDA was up 12.3% at €182 million (€162 million in third-quarter 2018), supported by the benefits of pricing actions and product mix optimization in a more favorable raw materials environment, and by the acquisition of ArrMaz, which delivered a very good performance, in line with our expectations. Bostik’s EBITDA grew by nearly 20%, while Advanced Materials resisted well despite soft volumes in some markets. The division’s EBITDA margin rose to 17.0% from 16.4% for the year-earlier period in the prior year, driven mainly by Bostik’s improved margin, which was up by around two percentage points.

INDUSTRIAL SPECIALTIES (28% OF GROUP SALES)

(In millions of euros)

3Q'19

3Q'18

YoY change

Sales

606

646

-6.2%

EBITDA

152

165

-7.9%

EBITDA margin

25.1%

25.5%

 
Recurring operating income (REBIT)

98

121

-19.0%

REBIT margin

16.2%

18.7%

 

Industrial Specialties sales declined 6.2% year on year to €606 million. The negative 10.8% price effect reflects the continued very challenging market conditions in Fluorogases and, to a lesser extent, normalization in the MMA/PMMA chain. The positive 2.8% volume effect was driven by a positive dynamic in Thiochemicals. The currency effect was a positive 1.7%, mainly attributable to the rise in the US dollar against the euro.

At €152 million, the division’s EBITDA was down relative to the €165 million reported for the year-earlier period, with the Business Lines delivering very contrasting performances. The results in Fluorogases remained strongly penalized by illegal HFC imports into Europe, which continued to weigh on the prices of this activity. In the fourth quarter, Fluorogases should be significantly below the exceptional performance of 4Q’2018. In contrast, the MMA/PMMA chain resisted well in the third quarter, benefiting from its strong integration, its quality of innovation and lower prices for certain raw materials. Thiochemicals continued to grow in the continuity of the first half, driven by solid demand in its end-markets.

The division’s EBITDA margin of 25.1% was close to last year’s level (25.5%).

Coating Solutions (24% of total Group sales)

(In millions of euros)

3Q'19

3Q'18

YoY change

Sales

535

527

+1.5%

EBITDA

70

65

+7.7%

EBITDA margin

13.1%

12.3%

 
Recurring operating income (REBIT)

39

39

-

REBIT margin

7.3%

7.4%

 

At €535 million, sales of the Coating Solutions division were up 1.5% year on year. Whilst the negative 10.7% price effect was mainly due to lower propylene prices, volume growth was very robust at +7%, mainly in acrylic monomers in Asia and the United States, where following the start-up of the new acrylic acid reactor at Clear Lake. The scope effect was a positive 2.9%, corresponding to Arkema’s acquisition of Jurong’s stake in Taixing Sunke Chemicals, the two companies’ joint venture that produces acrylic monomers in China. The currency effect was a positive 2.3%.

The division’s EBITDA rose 7.7% year on year to €70 million, driven mainly by improved unit margins in downstream businesses. The impact of the Imelda storm on the Clear Lake plant was limited to a few million US dDollars. The EBITDA margin rose to 13.1% (12.3% in third-quarter 2018).

CASH FLOW AND NET DEBT AT 30 SEPTEMBER 2019

Arkema generated strong free cash flow of €218 million in the third quarter of 2019 (€227 million in third­quarter 2018). This amount , reflectings the Group’s very good operating performance and including a €43 million reduction in working capital due to the seasonality of the business. At 30 September 2019, the ratio of working capital to annualized quarterly sales stood at 16.4% versus 16.1% at 30 September 2018.

Recurring and exceptional capital expenditure for the quarter amounted to €148 million, including €30 million of exceptional capital expenditure relating to Thiochemicals in Malaysia and specialty polyamides in Asia. For full-year 2019, recurring and exceptional capital expenditure is expected to total around €610 million.

Portfolio management operations represented a net cash outflow of €594 million, mainly stemming from the acquisitions of ArrMaz, finalized on 1 July 2019, and of Jurong’s stake in Taixing Sunke Chemicals, the two companies’ acrylic monomer production joint venture in China.

Consequently, at 30 September 2019, net debt, which also includes the €13 million cost of share buybacks, stood at €1,770 million compared with €1,308 million at 30 June 2019. Net debt represented 1.2 times EBITDA of the last 12 months and gearing stood at 34%.

POST BALANCE SHEET EVENTS

On 1 October, Arkema finalized the acquisition of Prochimir, a manufacturer of high performance adhesive films, and of Lambson, specialized in photoinitiators for photocure resins.

On 8 October, Arkema successfully brought on stream a new production line for ultra-high performance polyamide 12 powders at the Mont plant in France. The Group thus increases its global capacity by over 50% to support the increase in demand for fast-growing niche industrial applications, in particular in the coatings, personal care, composites and 3D printing markets.

On 14 October, Arkema announced the proposed divestment of its Functional Polyolefins business to SK Global Chemical, a major chemicals player in South Korea and a subsidiary of SK, the large South-Korean corporation. Part of the PMMA Business Line (Industrial Specialties division), the Functional Polyolefins business represents sales of some €250 million. The offer received is based on an enterprise value of €335 million. The proposed divestment is subject to an information and consultation process involving Arkema’s employee representative bodies and to the approval of the relevant antitrust authorities. The project is expected to be finalized in second quarter 2020.

Finally, on 15 October, driven by continued strong growth in the lithium-ion battery market for electric vehicles, Arkema announced plans to increase by approximately 50% the capacity of its high-performance polymer PVDF Kynar® dedicated to this market at its Changshu plant in China. by approximately 50%.

These projects will contribute to Arkema’s objective to increase the share of specialties in its portfolio, in line with its ambition for these businesses to exceed 80% of Group sales by 2023.

OUTLOOK FOR 2019

For the remainder of the year, the macroeconomic environment is expected to remain challenging and volatile, with continued geopolitical uncertainties likely to weigh on global demand and raw materials prices, leading to cautious inventory management by our customers. In this context, Arkema will maintain its focus on internal momentum and the implementation of its long-term strategy.

The Group will therefore continue to roll out its industrial projects, its operational excellence initiatives, its innovation drive for sustainable development and mobility, and its targeted acquisition dynamic. In the fourth quarter, intermediate businesses should be well below last year’s level, penalized mainly by a strong decline in Fluorogases. Specialties should however continue to report solid growth, driven notably by positive momentum at Bostik and performance coatings, as well as the contribution of ArrMaz, whilst technical polymers should be affected by lower demand from key customers.

Taking into account the performance over the first three quarters of the year and while remaining attentive to the development of the macroeconomic environment, Arkema confirms its ambition to consolidate its financial performance at high levels and to achieve in 2019 (3) an EBITDA comparable with the 2018 record level.

Further details on the Group’s third-quarter 2019 results and outlook are provided in the “Third quarter 2019 results and highlights” presentation available on Arkema’s website at www.finance.arkema.com

FINANCIAL CALENDAR

27 February 2020

 

Publication of full-year 2019 results 

(3) 2019 takes into account the new IFRS 16 standard.

A designer of materials and innovative solutions, Arkema shapes materials and creates new uses that accelerate customer performance. Our balanced business portfolio spans High Performance Materials, Industrial Specialties and Coating Solutions. Our globally recognized brands are ranked among the leaders in the markets we serve. Reporting annual sales of €8.8 billion in 2018, we employ 20,000 people worldwide and operate in some 55 countries. We are committed to active engagement with all our stakeholders. Our research centers in North America, France and Asia concentrate on advances in bio-based products, new energies, water management, electronic solutions, lightweight materials and design, home efficiency and insulation. www.arkema.com

DISCLAIMER

The information disclosed in this press release may contain forward-looking statements with respect to the financial position, results of operations, business and strategy of Arkema. Such statements are based on management's current views and assumptions that could ultimately prove inaccurate and are subject to risk factors such as (but not limited to) changes in raw materials prices, currency fluctuations, the pace at which cost-reduction projects are implemented and changes in general economic and financial conditions. Arkema does not assume any liability to update such forward-looking statements whether as a result of any new information or any unexpected event or otherwise. Further information on factors which could affect Arkema's financial results is provided in the documents filed with the French Autorité des marchés financiers.

Balance sheet, income statement and cash flow statement data, as well as data relating to the statement of changes in shareholders’ equity and information by business division included in this press release are extracted from the condensed consolidated financial statements at 30 September 2019 reviewed by Arkema’s Board of Directors on 29 October 2019. Quarterly financial information is not audited.

Information by business division is presented in accordance with Arkema’s internal reporting system used by management.

Details of the main alternative performance indicators used by the Group are provided in the tables appended to this press release. For the purpose of analyzing its results and defining its targets, the Group also uses REBIT margin as an indicator, corresponding to recurring operating income (REBIT) expressed as a percentage of sales.

For the purpose of tracking changes in its results, and particularly its sales figures, the Group analyzes the following effects (unaudited analyses):

  • scope effect: the impact of changes in the Group’s scope of consolidation, which arise from acquisitions and divestments of entire businesses or as a result of the first-time consolidation or deconsolidation of entities. Increases or reductions in capacity are not included in the scope effect;
  • currency effect: the mechanical impact of consolidating accounts denominated in currencies other than the euro at different exchange rates from one period to another. The currency effect is calculated by applying the foreign exchange rates of the prior period to the figures for the period under review;
  • price effect: the impact of changes in average selling prices is estimated by comparing the weighted average net unit selling price of a range of related products in the period under review with their weighted average net unit selling price in the prior period, multiplied, in both cases, by the volumes sold in the period under review;
  • volume effect: the impact of changes in volumes is estimated by comparing the quantities delivered in the period under review with the quantities delivered in the prior period, multiplied, in both cases, by the weighted average net unit selling price in the prior period.

 ARKEMA Financial Statements

Consolidated financial statements - At the end of September 2019

 

CONSOLIDATED INCOME STATEMENT
         
  3rd quarter 2019 End of September 2019 3rd quarter 2018 End of September 2018
(In millions of euros) (non audited) (non audited) (non audited) (non audited)
         
 
 
Sales

2.216

6.685

2.167

6.609

 
Operating expenses

(1.721)

(5.177)

(1.669)

(5.046)

Research and development expenses

(61)

(184)

(58)

(176)

Selling and administrative expenses

(193)

(577)

(183)

(553)

Other income and expenses

(24)

(47)

(8)

(12)

Operating income

217

700

249

822

Equity in income of affiliates

(1)

(2)

1

2

Financial result

(29)

(89)

(26)

(73)

Income taxes

(40)

(135)

(49)

(165)

Net income

147

474

175

586

Of which non-controlling interests

2

6

1

5

Net income - Group share

145

468

174

581

Earnings per share (amount in euros)

1.91

5.66

2.28

7.63

Diluted earnings per share (amount in euros)

1.90

5.63

2.27

7.61

       
The Group applied IFRS 16 for the first time at 1 January 2019, under the modified retrospective approach which does not require restatement of the comparative figures for 2018.
         
         
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
         
  3rd quarter 2019 End of September 2019 3rd quarter 2018 End of September 2018
(In millions of euros) (non audited) (non audited) (non audited) (non audited)
         
Net income

147

474

175

586

Hedging adjustments

(5)

(6)

(2)

(2)

Other items

(1)

-

(1)

(1)

Deferred taxes on hedging adjustments and other items

-

-

-

-

Change in translation adjustments

61

75

(14)

14

Other recyclable comprehensive income 

55

69

(17)

11

Actuarial gains and losses

(29)

(62)

1

19

Deferred taxes on actuarial gains and losses 

6

11

(1)

(5)

Other non-recyclable comprehensive income 

(23)

(51)

-

14

Total income and expenses recognized directly in equity

32

18

(17)

25

Comprehensive income

179

492

158

611

Of which: non-controlling interest

3

7

-

5

Comprehensive income - Group share

176

485

158

606

         
The Group applied IFRS 16 for the first time at 1 January 2019, under the modified retrospective approach which does not require restatement of the comparative figures for 2018.
         
INFORMATION BY BUSINESS DIVISION
(non audited)
                     
                       
      3rd quarter 2019
(In millions of euros)    

High
Performance
Materials

 

Industrial
Specialties

 

Coating
Solutions

 

Corporate

 

Total    

                       
                       
Non-Group sales    

1.068

606

535

7

 

2.216

Inter-division sales    

3

34

18

-

   
Total sales    

1.071

 

640

 

553

 

7

   
EBITDA     

182

 

152

 

70

 

(19)

 

385

Recurring depreciation and amortization of tangible and intangible assets    

(48)

 

(54)

 

(31)

 

(2)

 

(135)

Recurring operating income (REBIT)    

134

 

98

 

39

 

(21)

 

250

Depreciation and amortization related to the revaluation of tangible and intangible assets as part of the allocation of the purchase price of businesses     

(9)

 

-

 

0

 

-

 

(9)

Other income and expenses    

(20)

 

(4)

 

0

 

0

 

(24)

Operating income    

105

 

94

 

39

 

(21)

 

217

Equity in income of affiliates    

0

 

(1)

 

-

 

-

 

(1)

                       
Intangible assets and property, plant and equipment additions    

63

 

47

 

32

 

6

 

148

Of which recurring capital expenditure    

44

 

36

 

32

 

6

 

118

 
      3rd quarter 2018
(In millions of euros)    

High
Performance
Materials

 

Industrial
Specialties

 

Coating
Solutions

 

Corporate

 

Total    

                       
                       
Non-Group sales    

987

646

527

7

 

2.167

Inter-division sales    

3

47

21

-

   
Total sales    

990

 

693

 

548

 

7

   
EBITDA     

162

 

165

 

65

 

(18)

 

374

Recurring depreciation and amortization of tangible and intangible assets    

(39)

 

(44)

 

(26)

 

0

 

(109)

Recurring operating income (REBIT)    

123

 

121

 

39

 

(18)

 

265

Depreciation and amortization related to the revaluation of tangible and intangible assets as part of the allocation of the purchase price of businesses     

(8)

 

-

 

-

 

-

 

(8)

Other income and expenses    

(9)

 

(1)

 

0

 

2

 

(8)

Operating income    

106

 

120

 

39

 

(16)

 

249

Equity in income of affiliates    

1

 

-

 

-

 

-

 

1

                       
Intangible assets and property, plant and equipment additions    

48

 

60

 

27

 

11

 

146

Of which recurring capital expenditure    

38

  44*  

27

 

11

  120*
 
* Restated figures
INFORMATION BY BUSINESS DIVISION
(non audited)
                     
                       
      End of September 2019
(In millions of euros)    

High
Performance
Materials

 

Industrial
Specialties

 

Coating
Solutions

 

Corporate

 

Total    

                       
                       
Non-Group sales    

3.074

1.921

1.669

21

 

6.685

Inter-division sales    

8

112

57

-

   
Total sales    

3.082

 

2.033

 

1.726

 

21

   
EBITDA     

514

 

488

 

228

 

(68)

 

1.162

Recurring depreciation and amortization of tangible and intangible assets    

(137)

 

(158)

 

(87)

 

(5)

 

(387)

Recurring operating income (REBIT)    

377

 

330

 

141

 

(73)

 

775

Depreciation and amortization related to the revaluation of tangible and intangible assets as part of the allocation of the purchase price of businesses     

(26)

 

-

 

(2)

 

-

 

(28)

Other income and expenses    

(37)

 

(6)

 

(1)

 

(3)

 

(47)

Operating income    

314

 

324

 

138

 

(76)

 

700

Equity in income of affiliates    

0

 

(2)

 

-

 

-

 

(2)

                       
Intangible assets and property, plant and equipment additions    

167

 

128

 

75

 

11

 

381

Of which recurring capital expenditure    

127

 

92

 

75

 

11

 

305

                       
      End of September 2018
(In millions of euros)    

High
Performance
Materials

 

Industrial
Specialties

 

Coating
Solutions

 

Corporate

 

Total    

                       
     
Non-Group sales    

2.992

2.016

1.581

20

 

6.609

Inter-division sales    

8

141

59

-

   
Total sales    

3.000

 

2.157

 

1.640

 

20

   
EBITDA     

515

 

535

 

199

 

(62)

 

1.187

Recurring depreciation and amortization of tangible and intangible assets    

(117)

 

(131)

 

(77)

 

(2)

 

(327)

Recurring operating income (REBIT)    

398

 

404

 

122

 

(64)

 

860

Depreciation and amortization related to the revaluation of tangible and intangible assets as part of the allocation of the purchase price of businesses 

(26)

 

-

 

-

 

-

 

(26)

Other income and expenses    

(11)

 

(2)

 

(2)

 

3

 

(12)

Operating income    

361

 

402

 

120

 

(61)

 

822

Equity in income of affiliates    

1

 

1

 

-

 

-

 

2

                       
Intangible assets and property, plant and equipment additions    

110

 

135

 

53

 

23

 

321

Of which recurring capital expenditure    

89

  103*  

53

 

23

  268*
 
* Restated figures
CONSOLIDATED CASH FLOW STATEMENT
   
     
  End of September 2019 End of September 2018
 
(In millions of euros) (non audited) (non audited)
 
 
 
Cash flow - operating activities
 
Net income

474

586

Depreciation, amortization and impairment of assets

469

355

Other provisions and deferred taxes

(14)

(31)

(Gains)/losses on sales of long-term assets 

(6)

(2)

Undistributed affiliate equity earnings 

5

(2)

Change in working capital

(116)

(309)

Other changes

17

14

 
Cash flow from operating activities

829

611

 
Cash flow - investing activities
 
Intangible assets and property, plant, and equipment additions 

(381)

(321)

Change in fixed asset payables

(81)

(13)

Acquisitions of operations, net of cash acquired 

(606)

(199)

Increase in long-term loans 

(28)

(53)

 
Total expenditures

(1.096)

(586)

 
Proceeds from sale of intangible assets and property, plant and equipment 

8

2

Repayment of long-term loans

21

15

 
Total divestitures

29

17

 
Cash flow from investing activities

(1.067)

(569)

 
Cash flow - financing activities
 
Issuance (repayment) of shares and other equity

3

51

Purchase of treasury shares

(30)

(26)

Issuance of hybrid bonds

399

-

Redemption of hybrid bonds

(425)

-

Dividends paid to parent company shareholders

(190)

(176)

Interest paid to bearers of subordinated perpetual notes

(12)

-

Dividends paid to non-controlling interests

(1)

(1)

Increase in long-term debt 

2

1

Decrease in long-term debt 

(531)

(17)

Increase/ decrease in short-term borrowings

477

26

 
Cash flow from financing activities

(308)

(142)

 
Net increase/(decrease) in cash and cash equivalents

(546)

(100)

 
Effect of exchange rates and changes in scope

(42)

1

Cash and cash equivalents at beginning of period 

1.441

1.438

 
Cash and cash equivalents at end of period

853

1.339

 
The Group applied IFRS 16 for the first time at 1 January 2019, under the modified retrospective approach which does not require restatement of the comparative figures for 2018.
CONSOLIDATED BALANCE SHEET
     
 
  End of September 2019 End of December 2018
 
(In millions of euros) (non audited) (audited)
 
ASSETS
Intangible assets, net

3.274

2.877

Property, plant and equipment, net 

2.992

2.627

Equity affiliates : investments and loans 

35

38

Other investments 

53

33

Deferred tax assets

216

209

Other non-current assets 

255

243

 
TOTAL NON-CURRENT ASSETS

6.825

                                 6.027

 
Inventories 

                                 1.217

1.136

Accounts receivable

                                 1.348

1.247

Other receivables and prepaid expenses

181

173

Income tax receivables

85

80

Other current financial assets

6

7

Cash and cash equivalents 

853

1.441

 
TOTAL CURRENT ASSETS

3.690

4.084

TOTAL ASSETS

10.515

10.111

 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Share capital

766

766

Paid-in surplus and retained earnings 

4.302

4.099

Treasury shares

(56)

(28)

Translation adjustments 

216

142

     
SHAREHOLDERS' EQUITY - GROUP SHARE

5.228

4.979

     
Non-controlling interests

55

49

     
TOTAL SHAREHOLDERS' EQUITY

5.283

5.028

 
Deferred tax liabilities

267

268

Provisions for pensions and other employee benefits

555

470

Other provisions and non-current liabilities

404

433

Non-current debt

1.881

2.246

 
TOTAL NON-CURRENT LIABILITIES

3.107

3.417

 
Accounts payable

881

1.037

Other creditors and accrued liabilities

392

343

Income tax payables

94

78

Other current financial liabilities

16

7

Current debt

742

201

 
TOTAL CURRENT LIABILITIES

2.125

1.666

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

10.515

10.111

 
The Group applied IFRS 16 for the first time at 1 January 2019, under the modified retrospective approach which does not require restatement of the comparative figures for 2018.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(non audited)
                       
                       

 

Shares issued

 

 

 

 

Treasury shares

Shareholders'

equity - Group
share

Non-
controlling interests

Shareholders' equity

(In millions of euros)

Number

Amount

Paid-in surplus

Hybrid bonds

Retained earnings

Translation adjustments

Number

Amount

At January 1, 2019

76,581,492

766

1.263

689

2.147

142

(318.998)

(28)

4.979

49

5.028

Cash dividend

-

-

-

-

(202)

-

-

-

(202)

(1)

(203)

Issuance of share capital

42.728

0

3

-

-

-

-

-

3

-

3

Purchase of treasury shares

-

-

-

-

-

-

(355.621)

(30)

(30)

-

(30)

Grants of treasury shares to employees

-

-

-

-

(2)

-

22.749

2

-

-

-

Share-based payments

-

-

-

-

19

-

-

-

19

-

19

Issuance of hybrid bonds

-

-

-

399

-

-

-

-

399

-

399

Redemption of hybrid bonds

-

-

-

(394)

(31)

-

-

-

(425)

-

(425)

Other

-

-

-

-

-

-

-

-

-

-

-

Transactions with shareholders

42.728

0

3

5

(216)

-

(332.872)

(28)

(236)

(1)

(237)

Net income

-

-

-

-

468

-

-

-

468

6

474

Total income and expense recognized directly through equity

-

-

-

-

(57)

74

-

-

17

1

18

Comprehensive income

-

-

-

-

411

74

-

-

485

7

492

At September 30, 2019

76,624,220

766

1.266

694

2.342

216

(651.870)

(56)

5.228

55

5.283

ALTERNATIVE PERFORMANCE INDICATORS

To monitor and analyse the financial performance of the Group and its activities, the Group management uses alternative performance indicators. These are financial indicators that are not defined by the IFRS. This note presents a reconciliation of these indicators and the aggregates from the consolidated financial statements under IFRS.

           
           
RECURRING OPERATING INCOME (REBIT) AND EBITDA
           
(In millions of euros)

End of September 2019

End of September 2018

3rd quarter 2019

3rd quarter 2018

 
OPERATING INCOME

700

822

217

249

 
- Depreciation and amortization related to the revaluation of tangible and intangible assets as part of the allocation of the purchase price of businesses 

(28)

(26)

(9)

(8)

 
- Other income and expenses

(47)

(12)

(24)

(8)

 
RECURRING OPERATING INCOME (REBIT)

775

860

250

265

 
- Recurring depreciation and amortization of tangible and intangible assets

(387)

(327)

(135)

(109)

 
EBITDA

1.162

1.187

385

374

 
     
           
Details of depreciation and amortization of tangible and intangible assets:          
           
(In millions of euros) End of September 2019 End of September 2018 3rd quarter 2019 3rd quarter 2018  
Depreciation and amortization of tangible and intangible assets

(469)

(355)

(153)

(119)

 
Of which:  Recurring depreciation and amortization of tangible and intangible assets

(387)

(327)

(135)

(109)

 
Of which:  Depreciation and amortization related to the revaluation of assets as part of the allocation of the purchase price of businesses

(28)

(26)

(9)

(8)

 
Of which: Impairment included in other income and expenses

(54)

(2)

(9)

(2)

 
           
           
           
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE 
           
(In millions of euros) End of September 2019 End of September 2018 3rd quarter 2019 3rd quarter 2018  
     
NET INCOME - GROUP SHARE

468

581

145

174

 
- Depreciation and amortization related to the revaluation of tangible and intangible assets as part of the allocation of the purchase price of businesses 

(28)

(26)

(9)

(8)

 
- Other income and expenses

(47)

(12)

(24)

(8)

 
- Other income and expenses - Non-controlling interests

-

-

-

-

 
- Taxes on depreciation and amortization related to the revaluation of assets as part of the allocation of the purchase price of businesses

7

6

2

2

 
- Taxes on other income and expenses

13

4

10

2

 
- One-time tax-effects

-

2

-

-

 
ADJUSTED NET INCOME

523

607

166

186

 
- Weighted average number of ordinary shares

76,156,547

76,190,768

     
- Weighted average number of potential ordinary shares

76,613,410

76,306,477

     
ADJUSTED EARNINGS PER SHARE (€)

6.87

7.97

2.19

2.44

 
DILUTED ADJUSTED EARNINGS PER SHARE (€)

6.83

7.95

2.17

2.42

 
           
           
RECURRING CAPITAL EXPENDITURE
           
(In millions of euros) End of September 2019 End of September 2018 3rd quarter 2019 3rd quarter 2018  
     
INTANGIBLE ASSETS AND PROPERTY, PLANT, AND EQUIPMENT ADDITIONS

381

321

148

146

 
- Exceptional capital expenditure

68

34

30

16

 
- Investments relating to portfolio management operations 

-

4

-

4

 
- Capital expenditure with no impact on net debt 

8

15*

-

6*  
RECURRING CAPITAL EXPENDITURE

305

268*

118

120*  
* Restated figures          
           
FREE CASH FLOW 
           
(In millions of euros) End of September 2019 End of September 2018 3rd quarter 2019 3rd quarter 2018  
           
Cash flow from operating activities

829

611

345

361

 
+ Cash flow from investing activities

(1.067)

(569)

(721)

(161)

 
NET CASH FLOW

(238)

42

(376)

200

 
- Net cash flow from portfolio management operations

(619)

(201)

(594)

(27)

 
FREE CASH FLOW

381

243

218

227

 
           

WORKING CAPITAL

     
(In millions of euros) End of September 2019 End of December 2018
     
Inventories 

1.217

1.136

+ Accounts receivable

1.348

1.247

+ Other receivables including income taxes

266

253

+ Other current financial assets

6

7

- Accounts payable

881

1.037

- Other liabilities including income taxes

486

421

- Other current financial liabilities

16

7

WORKING CAPITAL

1.454

1.178

 
CAPITAL EMPLOYED
         
(In millions of euros) End of September 2019     End of December 2018
         
Goodwill, net

2.028

   

1.618

+ Intangible assets (excluding goodwill), and property, plant and equipment, net

4.238

   

3.886

+ Investments in equity affiliates

35

   

38

+ Other investments and other non-current assets

308

   

276

+ Working capital

1.454

   

1.178

CAPITAL EMPLOYED

8.063

   

6.996

         
NET DEBT
         
(In millions of euros) End of September 2019     End of December 2018
         
Non-current debt

1.881

   

2.246

+ Current debt

742

   

201

- Cash and cash equivalents

853

   

1.441

NET DEBT

1.770

   

1.006

     

IFRS 16 IMPACT ON THE MAIN API

As of January 1, 2019 Arkema applies IFRS 16 "Leases". The impacts of this standard on the main alternative performance indicators used by the Group are described below. The 2018 figures have not been restated.

           
           
CONSOLIDATED INCOME STATEMENT        
           
  3rd quarter 2019 End of September
2019
     
EBITDA

15

42

     
Recurring depreciation and amortization of tangible and intangible assets

(14)

(40)

     
Recurring operating Income (REBIT)

1

2

     
Operating Income

1

2

     
Financial result

(1)

(3)

     
Ajusted net income

-

(1)

     
Net income

-

(1)

     
           
           
CONSOLIDATED CASH FLOW STATEMENT        
           
  3rd quarter 2019 End of September
2019
     
Cash flow from operating activities

14

39

     
Cash flow from financing activities

(14)

(39)

     
Free cash flow

14

39

     
           
           
CONSOLIDATED BALANCE SHEET        
           
    End of September
2019
     
Property, plant and equipment, net   

158

     
Total assets  

158

     
Non-current debt  

115

     
Current debt  

44

     
Net Debt  

159

     
Net income  

(1)

     
Total liabilities and shareholders' equity  

158

     
           
           
INFORMATION BY BUSINESS DIVISION        
           
IFRS 16 impact (3rd quarter 2019) High
Performance
Materials
Industrial
Specialties
Coating
Solutions
Corporate  
EBITDA

5

5.5

3.5

1

 
Recurring depreciation and amortization of tangible and intangible assets

(5)

(5)

(3)

(1)

 
Recurring operating Income (REBIT)

-

0.5

0.5

-

 
           
IFRS 16 impact (End of September 2019) High
Performance
Materials
Industrial
Specialties
Coating
Solutions
Corporate  
EBITDA

13.5

18

8.5

2

 
Recurring depreciation and amortization of tangible and intangible assets

(13)

(17)

(8)

(2)

 
Recurring operating Income (REBIT)

0.5

1.0

0.5

-

 
           

 

Contacts

INVESTOR RELATIONS
Béatrice Zilm +33 1 49 00 75 58 beatrice.zilm@arkema.com
Peter Farren +33 1 49 00 73 12 peter.farren@arkema.com
Arié Taïeb +33 1 49 00 72 07 arie.taieb@arkema.com

MEDIA
Gilles Galinier +33 1 49 00 70 07 gilles.galinier@arkema.com
Véronique Obrecht +33 1 49 00 88 41 veronique.obrecht@arkema.com

Contacts

INVESTOR RELATIONS
Béatrice Zilm +33 1 49 00 75 58 beatrice.zilm@arkema.com
Peter Farren +33 1 49 00 73 12 peter.farren@arkema.com
Arié Taïeb +33 1 49 00 72 07 arie.taieb@arkema.com

MEDIA
Gilles Galinier +33 1 49 00 70 07 gilles.galinier@arkema.com
Véronique Obrecht +33 1 49 00 88 41 veronique.obrecht@arkema.com