Arkema SA

PAR:AKE

Earnings Call Transcript 2021-Q1

[Operator]

Ladies and gentlemen, welcome to the Arkema's Results Conference Call. I will now hand over to Mr. Thierry Le Henaff, CEO; and Madame Marie-José Donsion, CFO. Madame, sir, please go ahead.

[Thierry Le Henaff, Chairman & CEO]

Hello, everyone. Welcome to our results conference call. With me today are Marie-José Donsion, our CFO; and the Investor Relations team. So to support this conference call, we have posted on our website a set of slides which detail our first quarter performance and revised outlook. And as always, we'll answer your question at the end of the call. So let me comment first on the highlights of the first quarter before letting Marie-José go through the financials with more detail. This first month of the year were important, since we clearly stated during the webcast of full year 2020 results and following the roadmap announced at last year's Capital Market Day that Arkema was entering a new era of development. We said that we were very well positioned to deliver strong growth this year and beyond, supported by the exponential need for high-performance materials and the increasing shift towards sustainability. And we also said that we would make another significant step in our journey to become, soon, a pure specialty materials player. We delivered on that promise in the first quarter, and we are also confident on the outlook. As you could see, we had a strong start in the year. The economic environment has improved over the past few months. We strongly benefited from our pipeline of new businesses in this market driven by global mega trends, and we just closed 2 months ahead of schedule, the PMMA disposal to Trinseo. I would like to take this occasion to congratulate the teams for executing this transaction smoothly, efficiently, and I wish, of course, all the best to the PMMA team for this new adventure. Of course, not everything is perfect. The public health situation remains, as you know, a concern, with the appearance of new variants as a particularly difficult situation in some countries like India and Brazil. We can therefore expect that the current volatility of the environment and limited visibility will persist for a while. Nevertheless, as we were when we talked 2 months ago, we remain quite positive overall on the outlook, taking into account the acceleration of vaccination campaigns and the stimulus packages introduced by several large countries to boost the economy.Now more specifically on the quarter, I would like to underline the following key points. First, Q1 results were very strong, ahead of our expectations. Volumes were up nearly 8%, driven by solid underlying growth, some restocking by customers, but more importantly, an acceleration of new opportunities from cutting-edge innovation in global sustainable trends, such as batteries, light-weighting, electronics, 3D printing and obviously paint, to give you a few examples. Growth in Asia was particularly strong, while Europe rebounded well, but volumes in the U.S. were temporarily impacted by raw material shortages following the Uri storm. Arkema's EBITDA rose by 20% to EUR 358 million in spite of a negative currency impact of around EUR 15 million, and the EBITDA margin improved by 170 basis points to 16.1%. We were very pleased with the fact that each of our 3 Specialty Materials segments -- Adhesives, Coating, Advanced Materials -- showed a strong progression year-on-year, allowing Specialty's EBITDA to grow by 20%. Intermediates EBITDA grew by 11%, but at constant scope, because you know we divested Functional Polyolefins last year. Their growth reached nearly 20%, matching, in fact, Specialty's performance. We had, during the March road shows, a few questions on Bostik's ability to increase margins and navigate an inflationary environment. You have, I believe, the answer since Bostik's results were excellent, with EBITDA of 25% and EBITDA margin at 15.5%, fully on track to reach the full year EBITDA margin target of 14%. On a more qualitative front, beyond the finalization of the PMMA divestment, I would like to emphasize a few points which illustrate the way we are executing our strategy towards specialty material. First, Bostik acquired Poliplas to reinforce our positioning in the fast-growing Brazilian sealants market, and we expect to announce more bolt-ons this year, and not only in additives. Our 2 large industrial projects, our bio-factory for Advanced Materials in Singapore, and the environmentally friendly project with Nutrien in the U.S. are progressing smoothly. We have accelerated our initiative in the very attractive market for batteries for clean mobility, with several investments in our Kynar fluoropolymer in China. In addition, we are currently assessing further investment for electronics and 3D printing, also in Asia. Finally, I wanted to highlight our inclusion in the CAC 40 ESG Index announced towards the end of March, which regroups the 40 largest companies listed in Paris with the best ESG practice. This rewards, once again, all the efforts that Arkema has made in this field over the past years. I will now comment on the outlook, but at the end of the call. So I will now hand it over to Marie-José and come back to you.

[Marie-José Donsion]

Thank you, Thierry. I'll start with the sales bridge that you have on the Page 6 of the document. So at EUR 2.2 billion, sales are up 12.7% in organic terms. Volume growth of 7.7% was the main driver, as detailed by Thierry, together with a price effect of 5% on sales compared to the Q1 2020. This reflects good market trends in construction and consumer markets as well as from a regional perspective, a strong economic recovery in Asia and improved European demand relative to last year. Please take note of the adverse parameter and ForEx effect this quarter. They are due respectively to the disposal of the Functional Polyolefins in June last year, only partly offset by the integration of Fixatti and Ideal Work in the Adhesive segment. And to a stronger euro versus dollar. Euro is at $1.20 in Q1 '21 versus $1.10 in first quarter '20. Volumes were a key driver behind the 20% growth in Q1 EBITDA to EUR 358 million. Net pricing impact on EBITDA was neutral to positive across our various businesses, reflecting higher selling prices to pass on raw material cost inflation, and as well, reflecting an increased tension on the offer/demand balance. Looking at the different segments. Bostik achieved a record EBITDA margin at 15.5%, thanks to good volume growth in construction and DIY, and continued improvement in industrial markets. This was coupled with our operational excellence initiatives, the integration of acquisitions and the repositioning of our product range towards higher, value-added applications. The strong volume growth this quarter also generated an exceptional level of operating leverage on fixed costs. Advanced Materials EBITDA grew 16%, with an EBITDA margin above 20%. High Performance Polymers grew very strongly, thanks to their positioning leveraging global megatrends, and in part thanks to some customer restocking in certain markets like transportation. Performance Additives were held back by the decline in the oil and gas market, and the high comparison base in nutrition and health care applications linked to COVID last year. EBITDA in Coating Solutions grew 20% year-on-year, with an EBITDA margin of 13.8%, driven by higher volumes across all major markets, including decorative paints and 3D printing as well as higher prices. Please note that this segment experienced some shortages in upstream acrylics in a high propylene price environment, a phenomenon that should progressively normalize as the year progresses. Finally, Intermediates EBITDA grew 11%, thanks to a much improved market conditions in acrylics in Asia, while the market environment in PMMA and Fluorogases was less dynamic. Depreciation and amortization of EUR 135 million brings us to a Recurring EBIT of EUR 223 million, which is up nearly 40% year-on-year. And REBIT margin stood at 10%, up from the 7.7% in Quarter 1 last year. Non-recurring items represent 14 -- EUR 24 million and include [ PP ] amortization, one-off charges and recurring -- restructuring expenses, sorry. Financial results comes at minus EUR 13 million, benefiting from the refinancing of our bonds at lower rates and from the lower interest rate on the debt [ USD 42 ]. At EUR 43 million, the tax charge reflects improving profitability. We confirm the full year tax rate of 22% of Recurring EBIT, which, of course, excludes the exceptional [ tax in banking ] to the PMMA transaction. And consequently, the Q1 adjusted net income increased strongly, up 59% to EUR 159 million, which corresponds to almost EUR 2.1 per share. Moving on to cash flow and net debt. Q1 free cash flow amounts to minus EUR 16 million. This includes, first, the increased cash generated from our operations. Second, the working capital rebuild in the context of higher volumes and higher raw material prices; and third, the progress of our exceptional CapEx. So coming back to the working capital, the ratio on annualized sales stands at a very good level of 12.7% versus the 16.5% last year. Given the positive volumes outlook and associated working capital rebuild, we don't necessarily expect this level to be sustainable for the rest of the year. As I remind you, our normative level is more around 14% in terms of working capital ratio on sales. The capital expenditure amounted to EUR 125 million in the quarter versus EUR 92 million in Q1 2020, reflecting higher exceptional CapEx of EUR 53 million as a result of the progress that we are making in the construction of the polyamide 11 plant in Singapore and the Nutrien project in the U.S. Total recurring and exceptional capital expenditure is still expected to amount to around EUR 750 million this year. Net debt at the end of March 2021 amounts at EUR 2 billion, including the EUR 700 million of hybrid bonds. The net debt-to-EBITDA ratio stands at 1.6x, which means that our balance sheet remains extremely solid. As previously announced, we confirm our intention to implement the EUR 300 million share buyback program, as we have now closed the PMMA transaction. I thank you for your attention, and I will now hand it over to Thierry for the outlook.

[Thierry Le Henaff, Chairman & CEO]

Thank you, Marie-José. So as we said at the beginning, we remain attentive to the evolution of the public situation, but we assume in our guidance that there will not be a significant worsening of the pandemic. The improved business dynamics that we saw in Q1 is continuing, supported by robust demand in construction-related markets, and positive trends in most of the industrial markets that we serve. Our Specialty Material will continue to benefit from a strong new business and capitalize on growth opportunities linked to sustainability. Concerning raw material, cost inflation should accelerate in the second quarter, but we'll continue our initiatives to increase prices to offset the impact. So based on the strong start to the year and our confidence on our unique portfolio positioning, we decided to raise for the full year 2021, our guidance for Specialty Materials, which constitute virtually all of our scope. We now expect Specialty Materials EBITDA to increase by around 20% year-on-year in 2021 at constant scope and currency, versus this 10% announced previously. As expected, Bostik's EBITDA target is confirmed at 14% this year. In Intermediates, we should be able to deliver EBITDA at least at last year's level at constant scope and currency. And you can see in the press release, we give you the number for PMMA for this year and last year. Be aware that this is no longer a key aspect, Intermediates, as excluding PMMA, Intermediates should represent less than 10% of the group's total EBITDA. Of course, the execution of the strategy will continue. You know us, we work short term, midterm, long-term at the same time, so it will continue on 4 main levels. Firstly, the acceleration of innovation and new developments supported by megatrends, by global megatrends; the strategic review in fluorogases, continued bolt-on acquisition and further progress on corporate social responsibility. I thank you very much for your attention on this introduction, summary of the highlights of the quarter. And together with Marie-José, we are now ready to answer the questions you may have.

[Operator]

[Operator Instructions] We have our first question from Mr. Martin Roediger from Kepler Cheuvreux.

[Martin Roediger, Equity Research Analyst]

I have 3 questions. Number one, what is your order book telling you about the demand at the beginning of Q2? Is the demand as high as in Q1? Or do you see the restocking you have enjoyed from your customers fading? Second question is on the Texas freeze. Can you quantify the effect, the earnings effect on your business? And thirdly, you mentioned that the net effect between selling prices and raw materials was neutral or slightly positive in Q1. What is your expectation of the raw material price inflation in the course of this year? And do you think you will be able to fully pass on increasing raw material costs to customers without any time lag?

[Thierry Le Henaff, Chairman & CEO]

Thank you, Martin, for these questions. Overall, I would say, the order book and the macroeconomic context, to answer broadly, is in continuity of the Q1. You're right to say that restocking will be less than in Q1. It will certainly completely disappear in the course of the quarter. But at the same time, we were impacted in the U.S., as we mentioned in -- and as you mentioned in your second question, in Q1 by Uri, okay? So less restocking, certainly, but no impact of Uri. And then you have also the seasonality, which will help Q2 versus Q1. But overall, like-for-like, the macro environment is really comparable. We don't see any change. We are lucky to have -- we have no, in fact, market which has been structurally impacted by the COVID, which is good. We are not, nearly not in Aeronautics. Our presence in oil and gas is quite limited. And for the rest, we continue to enjoy a solid and robust growth. We don't quantify the impact on earnings of Texas freeze, otherwise, we would have put it in the press release. What is clear is that you have, integrated in the EBITDA of the first quarter, the impact of this freeze, which is already difficult to quantify because you have direct elements, you have indirect element. And clearly, we'll not have this impact anymore for the large majority of it in Q2, so it's certainly positive on Q2. But as I mentioned, not this restocking effect we had in Q1. So we are confident in Q2 to be in the continuity of Q1. With regard to the pricing, which as you know, it's a challenge, but it goes with the demand. It means that because we have a naphtha [ prices demand ] really, going up, it put pressure on the raw material. It adds also the [ accretive valuation ] of Arkema. I would say we -- Q2 should be another quarter of increased raw material, so this means the inflation of raw material will continue to develop into Q2, especially with the time lag. When you look at -- because of the stock on the P&L impact, but we are also confident on the other side, in parallel, to see our pricing sequentially continuing to develop. And because of that, we are confident to achieve for the -- globally and for the company, at least a neutral impact of pricing versus raw material in the Q2 and beyond.

[Operator]

Our next question is from Mr. Emmanuel Matot from ODDO.

[Emmanuel Matot, Analyst]

Several questions from me, please. First, which industrial markets have not yet recovered for Arkema? Second, don't you see any improvement in fluorogases, except from the basis of comparison? You seem to remain disappointed by Asia and Europe regarding that business, but what about U.S. also? Third, do you confirm you will launch the EUR 300 million share buyback program in the coming weeks, following the divestment of the PMMA business last Monday? And my last question, do you remain confident to achieve your ambitious program of acquisitions? How is the pipeline of opportunities at this time?

[Thierry Le Henaff, Chairman & CEO]

Okay. Thank you, Emmanuel. Maybe Marie-José, you want to take the share buyback, and it will be clear for everybody?

[Marie-José Donsion]

Okay. So as I mentioned during my introductory speech, we confirm we will implement this share buyback program. As you know, we still have a shareholder meeting happening later in the month to allow us to increase, in fact, the limit at which we can buy the share. You remember last year, the limit was set at EUR 100 million. And we are fortunate to have exceeded this limit. So we need a new vote to, in fact, lift this limit up so that we can actually implement and execute the program.

[Thierry Le Henaff, Chairman & CEO]

Thank you, Marie-José, very clear. So quickly, on the other question, I would say that nearly all industrial markets which we serve significantly -- you can always find, in this fragmented world, a market which is de minimis, very small for Arkema, but I would say for the one which count, I would say it's -- either it has recovered or it's recovering, rebounding materially. So I would say for us, the landscape is rather good these days. So there are some nuances, but I think we are -- we have a good mix of businesses, which has been also an advantage. In fact, we have the same advantage last year than this year. Last year, because we had a good positioning on our end markets and a good diversity of end markets, we lost only 4% in volume, which in the COVID time, was quite a good achievement. But this year we benefit, because we believe we are very uniquely positioned, we benefit from a recovery on the nearly all our end market. With regard to fluorogas, I think, as we told you, I think now Intermediates, which is what our colleagues in Asia in fluorogas, will represent less than 10% of the EBITDA of the company. So we'll not be the story there, and we don't want to create any speculation there. So this is why we say you have not to worry about it, we will be at least at the level of last year. Now, specifically on fluorogas. We are not disappointed, because we are where we thought we would be. Maybe a little bit better in the U.S., but Europe and Asia stay at a low cycle. Certainly upside midterm there, but today it's low cycle. And the fluorogas in the U.S. are a little bit benefiting from this antidumping legislation in the U.S. with that being in play, but I would say not a big story there. And the good thing with fluorogases is that we have a certain level of stability, which we certainly appreciate. While at the same time, for the rest of Intermediates, acrylic in Asia are in good shape. With regard to -- what was the last one? I cannot even read myself so...

[Marie-José Donsion]

Acquisition pipeline.

[Thierry Le Henaff, Chairman & CEO]

Acquisition pipeline. My writing is worse and worse and is terrible with this digital thing. Yes. Acquisition pipeline is -- we maintain what we say. I think it will be, in the 4 years, a combination and 1 or 2 major, but I would say the most of it will be some of bolt-on and -- which is not only for Adhesives. Adhesives is a priority, but we look also at Advanced Materials and Coatings, and we have some good ideas and a good pipeline. So as you know us, we try to make things which create value. This is why we -- sometimes we take our time, but I think we have quite a decent pipeline. So we are on track with good thoughts on bolt-on acquisition.

[Operator]

Next question is from Mr. Matthew Yates from Bank of America.

[Matthew John Peter Yates]

A few questions, please. Firstly, it's quite a short-term one just on thiochemicals. I think CJ is planning a 6-weeks maintenance shutdown through the course of June, July. Can you just remind me, from Arkema's perspective, do we see your own sales fall over that period? Or does the contract structure help to smooth that out? The second question is just around PVDF, where I know you've been making a series of capacity expansions, but we heard Solvay talk yesterday about 80% demand growth. So I guess the question is, are you actually investing enough to satisfy that demand over the coming years? And how big a business do you think this could be in, say, 3 or 5 years' time? And if I can squeeze in just a third one, just around Adhesives. I know you've reiterated the 14% guide -- margin guide for the year. But having just done over 15%, I wanted to ask if that increases your confidence in the 16% target for 2024? Or is really Q1 just what I would call a freakish quarter that we shouldn't extrapolate too much from?

[Thierry Le Henaff, Chairman & CEO]

Okay, Matthew. With regard to thiochemicals, I mean, we don't tell you specifically all our maintenance shutdown and all shutdown of a big customer, otherwise we would stand out discussing that, and there is no point there. So when CJ is getting maintained, we have less sales this month or this quarter or whatever, but it happens for CJ every year, and we have plenty of customers stopping from time to time. So at the end, for Arkema, I would say does not make a big specific element, and it's fully factored in our confidence on the year and the quarter. So for us, it's not -- but yes, clearly, if CJ is shut down, the contract is not protecting you. We'll sell less. But on the year, at the end, we sell good volumes. So it's not an issue for us on a specific issue or whatever, on the year. On the PVDF, you have seen we have accelerated our investment. So we are pleased to see with the demand growth and there may be more to come. But I think, yes, the idea is to be able to supply the whole demand. So for us it's one, it's not the only one by far. We have many elements of growth inside the company. This is why I say from the start our positioning is becoming more and more unique. It's -- hopefully, you start really to see. It's incredible how many opportunities we have in terms of new business development, battery is one. And with what we put in PVDF, by essence it will be tight because there is a big appetite for battery. But I think we have the project and the money to be able to follow. And this is why I'm sure you were comforted by what we have announced in the first quarter, but I would not be surprised to see other investments coming through. With the 14%, so I see -- and the 16%, yes, clearly, when you see in the Adhesives, because we had question, as I mentioned in my introduction, we had a question in the annual call in March about may be a stretch for Adhesives in this inflationary environment to deliver 14%. And we said no, we are confident. And because even if we don't pass through all raw material, at the end, with a combination of organic growth, operational excellence, synergy from acquisition, et cetera, we are confident to deliver the 14%. So what the quarter of -- the quarter -- the first quarter issuing is that we are on track. And so clearly, there is a little bit of support of the strong growth, but we benefit of it like our competitors. But I think the year will continue to develop [ Europe is ] certainly, 15.5% is certainly a peak which we supported by excellent sales. So it will not stay like that full year, which is why -- and there is also a little bit of seasonality at the end of the year and in August. So yes, we take all this into account to consume our 14%. But clearly, it shows to you that the work that we are doing in Adhesives is really going in the right direction. And this 15% plus is certainly a good signal to tell us that 16% is in 2024, it's completely achievable. So yes, it makes us even more confident, but we were already confident.

[Operator]

Your next question is from Mr. Laurent Favre from Exane BNP Paribas.

[Laurent Guy Favre, Research Analyst]

My question is actually certainly related to what has been discussed already on HPP. Sales were up 15% versus Q1 2019. I was wondering if you could talk about your utilization rates and if you have any more headroom to produce more, not just in PVDF, but also on the polyamide side. Are you at full capacity? And then the related question: recently you confirmed that you are on track for the Singapore start-up in H1 next year. I was wondering what prompted that release? Is it that you are in the process of locking in some customers? And should we expect positive contribution, positive EBITDA contribution in 2022 then? I'm assuming that there might be start-up costs, but thanks for any color you may give.

[Thierry Le Henaff, Chairman & CEO]

Okay. So clearly, because the demand is good, in certain plants we reached our limit. But in PVDF, we are implementing new reactors. So there is some room for maneuver, even if it is tight. We have increased, as you could see, not in the monomer, but on the polymer and polyamide in China with polyamide 12, for example. So it will help to grow. Also, we work a lot on the mix, as we did in the past. So it takes the average price. But it's clear that to be honest, in terms of pure organic growth beyond what we are doing today, which is quite good, as you could see this year. But if you compare to '19, which was already, at least for the first part of the year, a good reference point, organic growth possibility are a little bit limited in HPP by our capacity. But we have growth, we'll get organic growth this year which will be material. After that, on polyamide, if we start Singapore in mid-'20 -- mid-'22, which is the goal, and so far, we are really on track, then we should have positive contribution already in the second semester of '22 of Singapore, despite the start-up costs. So I think this is very exciting. To tell you the truth, both our fluoropolymer and our polyamide, I've never seen myself -- and as you know, I've been in the company for some years, I've never seen such a promising pipeline of new business development because of this global megatrends. I think there is a sort of acceleration of high performance, innovative, sustainable polymers. And we are really well positioned with our polymers. And it's true also for some polymers that you are not -- you are less aware of; for example, the Pebax, which is an elastomer we are selling for shoes. I mean the appetite for innovation from our customer has never been as large. So yes, up until '22, some limitation in capacities, which will limit organic growth, but it doesn't mean that we will not grow, as you could see this quarter. And also it will help on the mix and the pricing. But starting in mid '22, both in PVDF and in polyamide biosource, so polyamide 11 will get new capacities, and the pipeline will be quite good. Now if your question is that do we secure a long-term contract with the customer? We do it from time to time, but it's a minority of our business development. So it's not the way the industry work. For the specialty product you have new opportunities all the time. This means that you need to be confident in your ability to find these new opportunities every quarter. But we are confident we have the right opportunity, the right talent. So we are really -- there is a clear difference between where we are today and where we were 2, 3, 4 years ago.

[Operator]

Next question is from Mr. Jaideep Pandya from On Field.

[Jaideep Mukesh Pandya, Analyst]

Congrats first on inclusion in the ESG Index, Thierry. First question is really around your project with Nutrien. So assuming that this goes through successfully and you're significantly improving your environmental footprint, will this be a project which will stay with you? Or is this something that's going to be part of the initial part of fluorogases in your discussions to, whichever way you want to exit the MSA part of fluorogases? And if you can just talk about what this actually means for PVDF as well, from a food chain environmental point of view, in case it is staying with you. That's my first question. The second question is around 1234yf. I know you don't want to talk about fluorogases, but 2023 is when patents expire in the U.S., Europe and Japan for the 2 big boys, so what's your plan for 1234yf? And have you been -- sorry to use this word -- [ chickening ] producing a little bit in China in preparation for entry in 2023 if possible? And then the third question really is around molecular sieves. I haven't discussed much in recent times about this, but xylene production is going up, paraxylene production is going up a lot in Asia. So what's the pipeline for molecular sieves in 2021, 2022, 2023?

[Thierry Le Henaff, Chairman & CEO]

Okay, Jaideep, thank you. So very specific question. Clearly, the large majority of HF supply is for what I call specialty chemical numbers, so what goes into PVDF; what goes into gases which go into our partners which make themselves specialty polymers. And it goes also to our specialty chemicals that we will keep. So I would say, at the end of the day, most of the supply will stay with us.After that, it depends on the -- what if [ half of ] the company, which will be acquire majority or the full of fluorogases, we'll need [ a lot of checks. ] So to a certain extent, we'd be a seller of [ rechateau ]. All scenarios are possible. And as with that, we have not defined the scenario because, as you know, we are just starting the reflection on the fluorogas disposal. It's just [ do we know ] that we would take that into our action plan, it's too early to say. I think we are flexible. And what is more important is that we get the environmentally friendly and competitive supply to our specialty fluorochemical business that we keep, and this is what is most important. We are very proud of this project because economically, it makes sense. In terms of safety of supply, it makes sense. In terms of environmental footprint, it's very, very good compared to the traditional mining extraction. So after that, we'll be -- we'll do what is clever or when we take into account what is good to our flexibility. With regard to 1234yf, so to be clear, we don't sell because we are not authorized to sell. So we don't sell. After that, certainly, when the patent will be -- will have expired, we'll have the possibility to sell. But normally, at that time, we should not be far from disposing, of having already disposed. So I don't think it's a big element in our own business plan for what we keep inside Arkema, but it's certainly an upside for owners of our fluorogas business. With regard to molecular sieves, yes, the consumption, but there is a lot of capacity as the consumption increase. So I don't think that molecular sieves will make a big difference in the Arkema business plan for '24 in the coming years. This is -- we have -- and we mentioned them to you. We have plenty of elements of new growth for Arkema. I would not -- incrementally, molecular sieves can contribute, but I would not say it's a material element. So don't build your story on molecular sieves, okay?

[Jaideep Mukesh Pandya, Analyst]

And just sorry to come back to the Nutrien project. Would you say that at current floor of spot prices, the payback is less than 4 years for the investment?

[Thierry Le Henaff, Chairman & CEO]

I will not -- I know that -- but as we say for all our organic projects, and it is one development and growth project, and this one is one. When you look at the EBITDA generated after ramp-up, let's say, after 3, 4, 5 years, depending on the size of the project, you take the CapEx and you divide by 3.5 and 4 and it will be the case for Nutrien, the same as for the others. So I think, certainly, the price of HF currently reinforce the quality of this project, yes. Yes. No, I think it's -- we did not do it only for economics but -- and mostly for sustainability and safety of supply long term, but it's also good from an economical standpoint. As all our organic...

[Operator]

Next question is from Mr. Rob Hales from Morningstar.

[Rob Hales, Equity Analyst]

I just wanted to ask about engineering adhesives and your accelerating development there. When you talk about engineering adhesives, are you referring to a very high-margin, highly specified business similar to what Henkel has specialized in? And is there any sales in that business right now? And what are your aspirations?

[Thierry Le Henaff, Chairman & CEO]

Okay, so you have 2 definitions of engineering adhesives in the market, in fact. You have the one of Henkel, which is purely electronics, mostly. And you have the one of Fuller, which is more what we call ourselves durable goods. So durable goods is about, for us, about 20% of the 6 sites, okay? While engineering adhesives purely with the definition of Henkel. So with the definition of Fuller, it's 20% and it's a high-margin business, but not as high as what Henkel has in their definition of engineering adhesives. And if we take the definition of Henkel, so we have just started this new line and we are very excited but it will take time, there the sales are really minimal. They are -- it's rather small today. So it depends on your definition. But if you take the one of Henkel, we have just started. As you know, we have made a second acquisition. This time, they are a small acquisition. Really to reach [ 100 ], it's a matter of -- it will be a matter of 5 years. So we need time, but we knew that. It's a entrepreneurial project on some -- on a business which is quite monitored. But now if you extend the definition to the same as Fuller, which is another good definition, in durable goods, we are including this electronic adhesives. We are really growing at twice GDP and our EBITDA margin potential is above 20% EBITDA margin, just on this durable goods. So it's quite exciting, very interesting. We have some unique possibility. So it really depends on your definition.

[Operator]

Next question is from Mr. Alex Stewart from Barclays.

[James Alexander Stewart, Chemicals Analyst]

They're both on margins. Can I just clarify a comment you made at the beginning, where you said that you thought that the balance of pricing of raw materials would be, at least, neutral. Were you talking about the full year? Was that the comment you made?

[Thierry Le Henaff, Chairman & CEO]

The full year, quarter, whatever you want, yes. I would say it's true for Q1, it will be true for Q2, and it will be true for the full year.

[James Alexander Stewart, Chemicals Analyst]

Okay. So that's my question. So in Q2, you expect actually not to have any negative impact from [ high want in your...

[Thierry Le Henaff, Chairman & CEO]

No. Globally, for the company, then you can have pluses and minuses depending on the momentum of each business. Some business, it takes more time. Some others, it's more quicker. But overall, for the group, yes, will be pricing at least neutral, if not positive, yes. We are confident on that.

[James Alexander Stewart, Chemicals Analyst]

Okay, that's fantastic. And the second part of that question, in the first quarter in Coating Solutions, can you tell us whether the balance is better unit margins in the monomer business? And any impact on margins in the resin downstream? Was that a net positive? So if I look at unit margin, were they higher or lower than the year before when you take both the upstream and downstream into account?

[Thierry Le Henaff, Chairman & CEO]

Okay. So first of all, maybe to [ analyze ] your question. So Coating Solutions, so as you could see, we had a good -- quite a good growth, EBITDA growth. It could have been even better if we have not had urea, because it's certainly one of the business which has been the most impacted by urea in the U.S. So we have a strong performance in the Europe and Asia but more challenging in the U.S. because of urea. It's nothing to see with us. It's just the case for everybody. So first of all, so it could have been, in fact, even better, even if it was already excellent. Now in terms of net pricing, yes, it was -- on the whole Coating Solution, it was a net pricing positive, okay? And so more than neutral, right? It was positive. We benefited -- so certainly, the downstream was under pressure because of this, beauty of the integration. So we benefited from our integration. But it was overall, for the segment, pricing-positive. And on top of that, we had good volumes, which -- especially on the downstream. So we were happy about the performance of the Coating Solution. And as you can imagine, in Q2, it will be in good shape without the impact of urea, so.

[Operator]

Next question is from Mr. Andreas Heine from Stifel.

[Andreas Heine, Managing Director]

Three minor ones. The share buyback program, you said that you need the extension on the Annual General Meeting to get to the EUR 300 million. The EUR 100 million, is that something you would start immediately? Or will you wait until the AGM to start then program? And then secondly, on the acrylics in Asia, you have 3 lines there. Are all of them running? Or is one shut? And -- because you -- I think you had not the full -- could not place everything in the market in recent years. So I just want to know where you are in this more tight market. And lastly, on Advanced Materials, I do understand that the 850 is the main driver, and it's really a strong driver of the business. You have already talking about molecular sieves. And the other part, also beyond this 850, are there also, let's say, a more kind of resilient stable business? Or do you expect them to contribute to the price midterm?

[Thierry Le Henaff, Chairman & CEO]

Okay. Maybe Marie-José, again, on share buyback, if I may. Do you want to answer?

[Marie-José Donsion]

Sure. Probably my first answer was actually not very clear, so I'll repeat my answer. So the program is EUR 300 million. So this value is not changing. Right now, the authorization I have from the shareholder meeting is I can only buy shares up to EUR 100 stock price. Since the value of the share is higher than that, I actually cannot buy anything. So I need the shareholder meeting to increase the limit price by share so that, in fact, I can execute the EUR 300 million share buyback then.

[Thierry Le Henaff, Chairman & CEO]

Thank you, Marie-José. Very clear. Acrylic in Asia, we run the 3 lines. Advanced Materials, so you have 2, let's say, 2 subsegments, one is HPP. And the other one is Performance Additives, which I understand is more your question. Overall -- so I will answer from the companies and it would be clear for everybody. I would say the organic growth -- I don't talk about acquisition -- in terms of organic growth of the company in the coming years, I would say, because you cannot have everything growing at the same speed, it depends also on the momentum of the previous years. I would say it's mostly coming from Bostik, from HPP and from the downstream of Coatings. Which means that Performance Additives is more in cash flow generation mode, because we have grown so much in the previous years that we came to a point where we will more manage the stability and the resilience, okay? And this is more the rest of the portfolio, the 3 components, which are very big inside our portfolio, which will grow supported by mega trends. Clear?

[Andreas Heine, Managing Director]

Yes.

[Operator]

Next question is from Mr. Geoff Haire from UBS.

[Geoffrey Robert Haire, Managing Director and Equity Research Analyst]

I just had 2 clarification questions. First of all, could you just tell us what the FX impact was at the EBITDA level? I think I missed that in your commentary at the start. And then secondly, when we look at the Specialty Materials guidance of 20% growth in EBITDA, if you're expecting the net price delta to be flat, is all of that coming from volume? Or what else is driving that?

[Thierry Le Henaff, Chairman & CEO]

Okay, Geoff. Marie-José, do you want to answer on FX, yes?

[Marie-José Donsion]

Okay. So what we say is that, obviously, we have a significant portion of our business which is conducted in U.S. dollar. So you should assume that anytime the dollar to euro varies 10%, there is a yearly effect on EBITDA, in terms of conversion, of EUR 50 million in our accounts. So here, basically, clearly when you look at the dollar rate last year at EUR 1.10 and the rate of this year at EUR 1.20 in average for the first quarter, what we are saying is we have nearly EUR 15 million EBITDA -- adverse EBITDA impact for the quarter. My recommendation is that you need to assume the same for quarter 2, since in fact, the dollar started depreciating midyear last year. So I expect second half year to be comparable and the impact to be only in the first semester.

[Thierry Le Henaff, Chairman & CEO]

Thank you, Marie-José. So on Specialty Materials, clearly, and I think I mentioned that in my introduction, we are entering with Arkema an era of growth. And profitability is really sustained by growth. So it doesn't mean that we don't do anything on the pricing/mix and operational excellence. But I would say the big difference will come from organic growth, while costs are quite controlled, and we want, at least, to offset raw material with our pricing and our mix. And so this is what will be the story for Arkema. It's very important, because it shows that the portfolio of Arkema has significantly evolved about -- from the past, and where we had limited organic growth, now this time is over. We move forward. We have a good pipeline of innovation supported by mega trends. And last year, I think something -- hopefully, you could see it. Let's say, you had many companies which cut costs, including structurally. So we did it, but not so surely. We did it really troubles, [ where there was ] one-off costs, et cetera. But we really continue to invest, it was also true in CapEx, for the growth. And I said that it was very important to do that because the year would -- the world would rebound. And this is what is happening, and Arkema is very well positioned. And this is why in Q2, you will see, again, the benefit of this preparation we have done last year, we're ready for the growth. So Specialty Materials, yes, it's a growth story, which is nice to have because it will drive the value of the company.

[Operator]

Next question is from Mr. Chetan Udeshi from JPMorgan.

[Chetan Udeshi, Research Analyst]

Two quick ones. First, given the momentum you see at the moment, which are quite strong in the Asian acrylics business, should we expect any update anytime soon in terms of the strategy of better integration with downstream? Or is that still likely to take longer time? That's first. And second question, I know there is no specific Q2 guidance, but if I were to strip out the impact from PMMA business, would you say Q2 should be at least similar to Q1 in terms of EBITDA? Or will it be higher or lower, just in terms of direction?

[Thierry Le Henaff, Chairman & CEO]

Okay. With regard to the Asian -- Asian acrylics, you know our strategies, which will not change. We have 2 strategy, twofolds, to reinforce integration via organic growth. And this is what we do, for example, in 3D, electronics. I mentioned that we have some thoughts for further downstream investment there, but also in Coatings. And on the other side, we can still consider, despite the fact that acrylics in Asia seems to be quite healthy this year. We still are thinking about reducing our upstream volumes, so to concentrate, we see how much we need, but really on our big long-term customers and our downstream integration. So we need to reinforce our downstream integration to continue to serve our global customers in each part of the world, but also to implement, but we are not in a hurry, finding the right partner, implement this reduction of the upstream volume in Asia. So there is -- there is value, therefore, for us. And clearly, we have a very good site, very competitive. So we continue to do that. With regard to the Q2, I will not guide quarter-by-quarter. But basically, when you say that in Q2 the macro context is in continuity, that we don't have really anymore. But on the other side, restocking will more or less disappear. You have the effect of seasonality, we lose EUR 20 million because of PMMA and because of the divestment in May. All in all, yes, we should be at least like the first quarter.

[Operator]

We have no other questions. [Operator Instructions] We have no other questions, sir.

[Thierry Le Henaff, Chairman & CEO]

Okay. So I think it was long but very interesting. I would like to thank you for spending the time with us, and it's always a pleasure. And hopefully, Marie-José and myself, we were able to answer the questions as you were expecting it. So thank you. Have a good day. Talk to you soon. Bye-bye.

[Operator]

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.