Arkema SA

PAR:AKE

Earnings Call Transcript 2024-Q1

[Operator]

Welcome to Arkema's First Quarter 2024 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.

[Thierry Le Hénaff, executive]

Thank you very much. Good morning, everybody. Welcome to Arkema's Q1 '24 Results Conference Call. Joining me today, as usual, are Marie-José Donsion, our CFO, and the Investor Relations team with Beatrice and Peter. As always, to support this conference call, we have posted a set of slides which are available also on our website. I will comment on the highlights of the quarter before letting Marie-Jose go through the financials. And at the end of the presentation, we'll be able to answer your questions.

After a challenging macro in 2023, as you know, during which we performed well. The demand environment in Q1 2024 remained globally unchanged in the continuity of Q4 2023 with relatively weak volumes in Europe and the U.S. and some slight improvements in Asia. This materialized in a volume growth of 3% in Specialty Materials, with growth across all 3 platforms, the intermediate decreasing mechanically with the quota set in fluorogases. In this context, Arkema continued to deliver a robust set of results slightly lower relative to last year, which was still sustained by the high comparison in the pricing of acrylics and of PVDF. At the start of the year, is in line with what we expected and consistent with our full year guidance. Here are some key points I'd like to highlight to you.

We delivered an EBITDA of EUR 350 million close to last year's level despite the negative impact of around EUR 30 million from less favorable market conditions in PVDF and upstream acrylics specific and expected gap of Q1. Our performance was, in particular, driven by double-digit EBITDA growth in adhesives that I am pleased to underline. This follows on from the positive momentum of last year for adhesives. The group's results also reflect -- we've seen good growth in high-performance polymers and downstream coatings where our positioning in high-value applications is paying off. Note that our EBITDA margin increased versus last year at a good level of 15%. Now looking briefly at the performance of our 3 Specialty Materials segment. Adhesive had a really solid quarter with an EBITDA margin above 15%, thanks to the benefit of the successful integration of our acquisitions notably Ashland, which continues to perform well as well as good price management and a more favorable product mix in line with our strategy.

In Advanced Materials, our EBITDA was stable year-on-year despite the headwind from PVDF pricing, thanks to the good dynamic of high-performance polymers in Asia driven by volume growth in batteries, [ sports ], automotive and the contribution of [ PM ], which should accelerate from Q2. Performance Additives delivered another resilient performance while not at the excellent level of last year. Finally in Coatings, we benefited from good volume growth notably for Sartomer and [ Protex ], which only partly offset the lower contribution of upstream acrylics. Beyond the Q1 results, in the first month of this year, we were active on many fronts, including the M&A field. As you saw recently, we were pleased to announce that we agreed to acquire Dow's Flexible Packaging laminating adhesive business which will further fuel our medium-term growth for the Adhesive segment a couple of years after the [indiscernible].

This is really an exciting deal, which would create significant value from a set point for shareholders over time. It is a first-rate business, which has been like other specialty chemical businesses impacted by the challenging macro and customer disrupting in the past 2 years. But it is really a business we have been following for a long time with superior technologies and high-quality manufacturing assets and with a long history. The revenues amount at $250 million, and we will buy this business for an enterprise value of $150 million which represents 50-50 the working capital and the book value of the plants and other physical assets. So new goodwill is included in EV.

Since our adhesive businesses for flexible packaging are very complementary, we plan to generate significant synergies estimated at $30 million at the EBITDA level over the next 5 years equally split between cost and development. There will be implementation costs, which we estimate around EUR 50 million. And all in all, including this one-off cost to [ delivery ] for the sake of the calculation and the transaction multiple. We estimate heavy EBITDA at maturity, so let's say, within 5 years to reach around 3.5x. We also invested in 2 exciting start-ups, Tiamat and Proionic, which we strengthened our [ chemaposition ] as a key player in high-end solution for next-generation batteries. These small steps will participate in our strategy in battery to progressively build an extensive branch for this attractive and rapidly growing market.

Now on the organic project front. We started our paybacks capacity in [indiscernible] in France in January, and we are progressing well with a new project, which we announced at the Capital Market Day namely expanding our organic peroxide in China, the new DMDS unit in the U.S. and the decarbonization of acrylics production in France. They are, as you know, in the early construction phase, but so far, they are progressing as expected. As stated in this morning's press release, we had a few questions during the [indiscernible] on these 2 projects. Our [ polymer ] and Nutrien projects are now almost ready to deliver and will start contributing in June, end of June to be fully operational, starting in the second half.

We are very excited to finally see this 2 attractive and sustainability-focused project delivering. In the same decarbonization vein and as part of our climate plan, we recently signed long-term renewable energy agreement for a number of off-site in the U.S., including all Bostik sites. This means that by the end of 2024, approximately 40% of the power needed to run our operation in the U.S. will be obtained from renewable resources marking another step toward our long-term net zero ambitions.

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.

[Marie-José Donsion, executive]

Thank you, Thierry. So looking at the sales bridge at EUR 2.3 billion, [ EUR 10,000 ] 7.3% year-on-year, driven by a negative 7.2% price effect which is linked mainly to the price decrease of raw materials as well as lower PVDF and upstream acrylic prices. Volumes were stable year-on-year. On one hand, decreasing in intermediates due to the enforcement of quotas in the U.S. and Europe for [ fluoro ] gases. And on the other hand, slightly better than 3% in Specialty Materials, reflecting continued good demand in the automotive and energy markets. Construction seems to have now stabilized after over a year of customer destocking. The scope effect is basically offset by the currency effects. So the scope effect is positive at 1.8%, corresponding mainly to the contribution of the PI Advanced Materials acquisition and to a lesser extent to bolt-ons in adhesives.

And the currency effect is negatively impacted by 1.7% on Q1 sales as a result of the depreciation of the UN and the U.S. dollar relative to the euro. [ EBITDA ] came in at EUR 350 million. Looking at the different segments. On the one hand, we have Bostik, which achieved a good performance with EBITDA at EUR 105 million, up 13% year-on-year. Volumes grew slightly, thanks to good demand in structural and packaging adhesives, and we benefited from our dynamic pricing management, operational excellence actions and synergies linked to Ashland notably. The EBITDA margin reached a level of 15.4% as a progression compared to the exit point of Q4 last year.

Advanced Materials EBITDA was stable at EUR 162 million. The adverse impact of PVDF was offset by the contribution of PI, Advance Materials and the solid performance of other businesses in the segment, notably the polymers in Asia. Advanced Materials EBITDA margin improved 140 bps to 18.5%. The EBITDA of Coating Solutions came in at EUR 75 million, reflecting less favorable conditions in the upstream, while we enjoyed growth in some high value-added downstream activities. Finally, intermediate EBITDA stood at EUR 39 million. Volumes were lower given the impact of quotas reductions in refrigerant gases and the low environment for acrylics [ sale ]. In the positive side, pricing dynamics continue to be positive -- positive for the fluorogases. Depreciation and amortizations stood at EUR 148 million, leading to a recurring EBIT of EUR 202 million and a REBIT margin of 8.6%.

The nonrecurring items amount to EUR 67 million. That includes EUR 38 million of PPA depreciation and amortization and around EUR 29 million for one-off charges, restructuring and legal expenses as well as the start-up costs for our polyamide 11 platform in Singapore. Financial expenses stand at EUR 18 million, with the cost of the newly issued bonds partly offset by the higher interest of cash investments. So basically, we have a -- today, a cost of carry, which is basically neutral. At EUR 36 million, the tax charge represents 22% of REBIT and reflect the group's results evolution. Consequently, the quarter 1 adjusted net income stood at EUR 138 million, which corresponds to EUR 1.84 per share.

Moving on to cash flow and debt. The Tier 1 recurring cash flow amounts to negative EUR 60 million, which includes the usual first quarter working capital seasonality. The working capital ratio on annualized sales stands at 16.1%, broadly unchanged versus last year. Total capital expenditure amounted to a bit short of EUR 100 million in the quarter. As for M&A, we had a EUR 21 million outflow corresponding mainly to the acquisition of Arc Building Products in Ireland. To be compared with an inflow last year of EUR 30 million linked to the sale of [ feebacks ]. The net debt at the end of March 2024, therefore, amounts to just over EUR 3 billion, this includes a EUR 1.1 billion of hybrid bonds following the EUR 400 million issuance in March to anticipate the refinancing of the tranche of the same amount with the first call date in September '24 this year. The net debt to last 12-month EBITDA ratio stands at around 2x.

And thank you for your attention, and I will now hand it over to Thierry for the outlook.

[Thierry Le Hénaff, executive]

Thank you, Marie-Jose. So going into Q2, the current macroeconomic environment remains mostly in continuity. We have not yet witnessed a clear pickup in volumes, although there are here and there small improvement yet to be confirmed in activity level. So hopefully, things will start to move in the right direction at some point at the end of the quarter or during the second part of the year. For the second quarter, we'll continue, as you expect to focus on our [indiscernible] and our main projects. This is our [indiscernible]. We look forward to the initial contribution of some of our key projects. And in addition, we will benefit from the contribution of [ PM ] and the continued positive dynamic of adhesives.

So all in all, we expect in Q2, an EBITDA slightly above last year's level, we should show a positive trend after the slightly below trend performance of the first quarter. We confirm that our main organic projects would contribute EUR 60 million to EUR 70 million in EBITDA over the full year, mostly in the second half. So on the back of our Q1 results and the current outlook, we confirm our annual guidance and aim to achieve in 2024, an EBITDA of around EUR 1.5 billion to EUR 1.7 billion, depending on the strength of the recovery of the economy. We also continue to work towards achieving the medium-term targets we announced at the Capital Market Day with progress in our organic projects, integrating and delivering the synergies of acquisition and furthering our innovation together with our customers to best leverage our unique positioning across our 3 Specialty Materials segments.

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

[Operator]

[Operator Instructions] The first question comes from the line of Matthew Yates of Bank of America.

[Matthew Yates, analyst]

Can I ask a question about the Dow adhesives deal that you've announced? And really, if there's anything more you can say around the historical performance of this business, I guess we can imply that it's expected to do about a 6% margin at the moment and note that it has been impacted by the macro destocking. Is it possible to give more context as to where this has been historically because obviously, your synergy target to double or triple profits from the current level is very interesting. And then just as related on the chemo Adhesives business, your margins are up 200 basis points or so year-on-year. Marie-Jose mentioned a variety of different factors behind that improvement from mix to pricing. Are you able to break that down just a little bit more as to which drivers were more important than others, so we can think about the evolution going forward?

[Thierry Le Hénaff, executive]

Thank you, Matthew. So as you mentioned, it's quite an interesting deal for Arkema [indiscernible] flexible packaging and laminating adhesive business. It's a rare opportunity. It's clear that as a mini specialty business, it has been impacted by destock. We have seen that also at Arkema for the adhesive and some other polymers were on packaging, specifically, we were surprised by the level of the destocking -- the destocking of the past 2 years, which has been for market, which normally is quite resilient above what we expected. So clearly, the starting point which you estimated but that you could get through from our press release is well below what we have for EBITDA margin for Bostik today.

But in real time, without having all the precise numbers, but we know this business, we follow it since a long time. It was really the reference and adhesive for flexible packaging in the old time. It's a business which has delivered good margins. And so with, I would say, normal business conditions, with the integration also into pure adhesive company, we are confident that we will come back rather quickly to -- with some improvement of the macro to solid margin after that to go to the following step. It's really come from what you have mentioned, the synergy, which are certainly important because a little bit like for [indiscernible] these businesses are very technology-driven, intimacy with customers and you can do a lot by offering a far broader range and we see that every day with Ashland in industrial adhesives.

So -- so you have different elements of value. The first one is to have a decent recovery of the business after this year of destocking and then you have the layer of synergy, which are split more or less in 2. And 1 is cost and the other part, which is more of synergy, but which are not insignificant, which is more benefiting from the complementary wages with what Arkema has to do. So if you make a math, in fact, since the current -- the starting EBITDA multiple is applied to low EBITDA, it can really decrease over time, the EBITDA multiple quite significantly. So it's really a good acquisition and we appreciated that Dow proceed Arkema to finalize the deal, which was really a good move for both companies.

With regard to the adhesive margin in Q1, it's good that it's a rather good Q1, both in terms of increase of plus 11% of EBITDA and in terms of margin percentage, it was 15.4%. It's a good margin for Bostik for Q1. It can mostly from, I would say, first, from industrial adhesives. And especially this adhesive for durable goods, which really performed very well, which to a certain extent, show that the macro in electronics, in automotive, in specific application is a bit better, and we have a lot of new business in production also we supported this industrial adhesive and notably durable goods improvement of EBITDA. Beyond that, I would say, it's across the 3 regions, and it's a combination, I would say, rather balanced between net pricing, operational accelerance, introduction of new businesses with a higher margin.

[Operator]

The next question is from Martin Roediger of Kepler.

[Martin Roediger, analyst]

First on Advanced Materials, EBITDA was slightly up, which I think was a positive surprise because I thought that low PVDF prices would cause a decrease in earnings. Did you benefit from lower input costs in Q1, which overcompensated the effect from lower selling prices. And the second question is on Coating Solutions. You say [ upstream critics ] was down in earnings year-over-year. Downstream was up year-over-year. Given the current margin in Coating Solutions, my question is are we now at the low cycle conditions in upstream and at peak cycle conditions in downstream?

[Thierry Le Hénaff, executive]

Okay. So with regard to advanced material, maybe remark or precision, I would say, of the EUR 30 million that we incurred negative compared to last year in EBITDA for acrylics and PVDF. We put the 2 in the same basket. But in fact, the majority is already acrylics monomers. So PVDF was a contributor, but less than the acrylics part. Now what we had, we had different elements, maybe 3. I would say that the polyamide despite the fact that we had no contribution yet from Singapore, the polyamide compared to last year behaved well with a combination of better mix, a little bit of softer raw material, including [ net ] gas in Europe, but we had a good start of the year or, let's say, solid start of the year for polyamide 11 compared to last year. We had also [indiscernible] starting to contribute even if Q2, as we said, would be better.

And the last one, we have this specialty flow of chemicals fluorogas, which are -- in HPP, notably the [indiscernible] where we started to contribute a little bit. So we have a little bit of -- on the [indiscernible]. So some of those 3. And all in all, yes, because on Performance Additives, last year, especially the first part of the year was very strong. So because of that, we are overall -- and thank you for your comment, quite pleased by the more than stability of advanced material.

With regard to Coating Solutions, so different story, I would say. Yes, I believe that in the upstream, we are on the low cycle. Our low cycle is not -- it's a relative notion. So -- but I would say it's -- we think that we have reached a sort of low point in the current context. And this low point was, to a certain extent, driven by the differentiation of raw material between Asia and the rest of the world, namely Europe and U.S. So we had to absorb that, which has been the case but now the differential is not increasing further. And hopefully, it will start to get reduced a little bit. And the volume, as you could see, in Coating Solutions start to be a bit better, let's wait and see.

With regard to Sartomer and Coatex, it's clear that when the upstream is lower cycle, we benefit a little bit in the downstream as this is the beauty of having an integration. And also, we have a strong emphasis especially for Sartomer of new business development in electronics, in medical, in other one Arkema, I would say, development platform. And you remember that we started end of last year, rather big expansion of Sartomer in South of China in Guangzhou, and we see that also in the numbers. So I would not consider as a matter of cycle in the downstream. It's really a matter of structural improvement in the macro, which is slightly better than it was maybe at the same time last year for Sartomer.

[Operator]

The next question is from Aron Ceccarelli of Berenberg.

[Aron Ceccarelli, analyst]

My first one is on the ramp-up of your projects. Maybe can you update us a little bit on where you are from a technical standpoint. And it looks like you should start seeing some contribution in Q2 already. Is there any color you can provide about earnings contribution from these projects in Q2, please? The second one is on PVDF. We saw some recent industry reports, which highlighted the stabilization and improvement in PVDF prices. Today, you mentioned continued pressure because, of course, high comparable base. But I would like to understand a little bit what you see, especially in China from a competitive landscape.

[Thierry Le Hénaff, executive]

Okay. So on the first one, I would say that the technical, let's say, challenges in polyamide 11 and Nutrien are behind us. So we are now in a technical ramp-up, I would say, in terms of contribution, I would say, quite incremental and quite limited still in the second quarter. This is why we say, okay, let's assume that for the end of the quarter, we'll be at a nominal capacity. This means that we will start to ramp up from the start of the second semester, which is completely consistent with the share of that contribution into the EUR 60 million to EUR 70 million of major project on the full year. So this is all consistent.

But I would say we are now there technically, which is a good news. So now it's just a matter of some fine-tuning, let's say, up until June, so to make it around, let's say, end of the quarter, but we should really ramp up. Now also the limitation will not be anymore -- the technical limitation starting the second semester but will only be the ramp-up of the demand because we don't wrap up from the first day of this kind of investment. But this is a completely normal specialty products.

On PVDF, you're right to say that, in fact, the negative is compared to [indiscernible] quarter. Sequentially, we have -- now we have reached a sort of stability -- now it's really the product mix which is driving the improvement of PVDF. But I would say on the most, let's say, commoditized product, which is more on the big market and coatings and on batteries. We think that we have reached a sort of stability and we continue to grow in these 2 markets. And on top of that, we have a differentiation on the -- on the product mix. But there is a difference when you think year-on-year or sequentially. Your comment is right sequentially.

[Aron Ceccarelli, analyst]

Maybe if I can have a final one just on performance additives. You usually don't talk too much about this segment. I believe last year, the performance has been pretty strong, and it looks like volumes were strong again this quarter. Can you provide some color around that, please?

[Thierry Le Hénaff, executive]

No. It's clear that performance additives, it was nearly our base business last year. In terms of progression versus '22, which was already high. So this year, we continue to be solid our feeling, but we'll not be at the same level as last year. And to a certain extent, the Q1 was a little bit in this vein. This means that solid, but not as strong as last year, but seen this year is a year of ramp-up of HPP. It creates quite a solid performance of the total of Advanced Materials, okay?

[Operator]

The next question is from Emmanuel Matot of ODDO.

[Emmanuel Matot, analyst]

Three questions for me. First, why haven't you tightened your EBITDA guidance range for 2024? I'm surprised that without a sign of clear rebound in [ demand turning ] you still considered at the top end of the range at EUR 1.7 billion remains a possible scenario. Second, you still indicate that you expect growth to be more focused on the second half of the year. Is it the case for all your 4 segments and not only for Advanced Materials? And my last question, startup cost for the Singapore platform amount to 22 million shares in Q1. Should we expect further cost over the coming quarters?

[Thierry Le Hénaff, executive]

So with regard to the EBITDA guidance, I think we gave our EBITDA guidance. It was just 2 months ago. There is still a lack of visibility. And on the economy, you see it also in the communication of different players in the chemical industry, so start to see some positive signals, some considers they are not necessary, sustainable. So I think there is still uncertainty around it. So we don't see the value of tighten the EBITDA guidance. I think the good thing that you have to consider is that we confirm it and out the Q1 and our guidance also we gave a guidance for the Q2. We show a progressive ramp-up, as we explained to you in -- when we publish early March, is going in the right direction. But no, I think I'm sure that among you, depending on your sensitivities, some would expect some tightened range and some others we think that there is no necessity.

So I think that's -- I think that it's -- the important point is that we confirm the guidance and that development of the profitability of the company is going in the right direction with the second quarter, which is slightly up compared to Q1 and also, which would mean that it will be also including the seasonality significantly up compared to the Q1. With regard to the growth, all segment growth now, it's not the case because you could see that the adhesives is already growing in the H1. And also now, this is the beauty of even if all the segments are focused on the specialty materials, the beauty is that they don't have exactly the same economic profile. And the adhesives should grow all along the year for a while for example, HPP should grow also a while for the reason I mentioned before, performance additives comparing to a very high base will certainly be a bit lower.

And Coating Solution, we have still up until we see more clarity, some challenges. So it's good to have a portfolio which will all contribute to the guidance we have just mentioned before. And more generally, all this growth depends on the strength of the recovery, which you should not exclude. With regard to Singapore, I think, it's very consistent with what we say with regard to the rompers. This means you should still have a little bit of one-off in the Q2 but it should disappear for the second semester because the plant, as we mentioned, will have technically be fully developed at the end of the semester.

[Operator]

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

[Jean-Luc Romain, analyst]

Recently, the one [ prefecture ] mandated some changes also maybe some acceleration in adaptation to change of PFAS. Does it entail additional costs for you? Or is it already planned for you?

[Thierry Le Hénaff, executive]

Do you have any one question or you have similar question?

[Jean-Luc Romain, analyst]

Just only one.

[Thierry Le Hénaff, executive]

No, I think we have -- we make some analysis in cooperation with the administration. So we are incurring the cost of this analysis, which are asked by the administration. So we do that, and we fully cooperate in order to implement the analysis. They are asking us to do so we have this cost.

[Operator]

The next question is from Chetan Udeshi of JPMorgan.

[Chetan Udeshi, analyst]

I have 2 questions. First was, I just wanted to get -- understand the mechanics of the contribution from projects a bit better because if I'm not mistaken, you're already reporting the start-up costs, which are, I think, from memory, EUR 15 million per quarter as one-off cost below the adjusted EBITDA. So are you -- when you say EUR 60 million to EUR 70 million contribution in primarily second half, so that will be on top of those start-up costs actually coming into the adjusted EBITDA line. So that's actually looking more like -- more than EUR 100 million contribution run rate. Is that right understanding? Or those start-up costs will remain in the other line for some more time? That's the first question.

And the second question, just going back to the acquisition that you announced, and I appreciate you see significant synergies potential on this transaction. But I'm just curious, if I look at your ROCE -- pretax ROCE in your adhesives business over the last 5 years or so, it's remained between 7% to 8% pretax, which some would say is below the cost of capital. So how should we think about your ROCE transition in your adhesives business in the coming year, especially in the context of deals like Dow, which may still be return dilutive for at least a couple of initial years?

[Thierry Le Hénaff, executive]

Not sure if your question on the second was the ROCE of the EBITDA, but we'll come back to that. [indiscernible] on the first one, I think, is very clear. We said EUR 60 million to EUR 70 million EBITDA contribution. So what is below the line is not in the EBITDA. But I'm sure you knew the answer to the -- to the question as a startup [indiscernible] as we mentioned, will decrease already in Q2 and we disappear in second semester, just answered before.

With regard to the Dow acquisition. So Bostik, as you know, has been built from the start by acquisition. It's only acquisition mostly was bought. So clearly, you take more time to take the ROCE but the work then for organic, but this is a beauty of Arkema to have a combination of organic business that we have restructured over time, but which have a good strong ROCE, but they were a legacy. And then we make acquisitions, mostly from the proceeds of the businesses that we have disposed of. We share most of them very high ROCE. And we invest in -- mostly in adhesives. So it's -- the only thing is that when you sell, I've mentioned it to you many times and to all of you, when you sell, you have the capital gain on year 1, but you don't keep the benefit in your ROCE calculation for the future reinvestment that's [ mechanic ] of the accounting. But no, I think for Bostik, we will try to get, as we have mentioned many times, especially when we will make less acquisition above at work and then work from this standpoint, Dow acquisition will be accretive.

So this is an acquisition which -- for which a challenge is really to increase significantly the profitability. We take the challenge. But if we deliver the challenge, the return on capital employed of this acquisition will be very significant and it will be accretive after 2 years on the ROCE. Now on the EBITDA. As you make -- by making a simple math, it's clear that the first year, the EBITDA percentage of this acquisition is below the EBITDA percentage of Bostik, so it will be dilutive. But this is because it's dilutive and new EBITDA, this is why we create a lot of value on the lower end. So it goes together. But frankly speaking, it's a very nice acquisition. And for Bostik, it's a very good adopt. And Bostik, I think inside Arkema is really a very, very strong platform. We are very proud of what we have developed over time for this adhesive platform.

[Operator]

The next question is from Jaideep Pandya of On Field Research.

[Jaideep Pandya, analyst]

The first question is on PA11 actually. Thierry, you've been tight on this product for years. And obviously, you've had a mix improvement strategy. So for a lot of the legacy end markets like oil and gas, for instance, which used to use this product and unfortunately, you have to say no to them. And maybe you haven't, I'm just using that as an example. Now that you have capacity, how quickly can you bring some of those end markets back?

Or is your strategy actually to not bring those end markets and actually focus on further mix enhancement in the Singapore plant. So I'm just trying to understand whether it's going to be more value-oriented or volume-oriented strategy in PA11 as we speak. And how is the dynamic -- I know the products are 2 different ones, but how is the dynamic between 12 and 11, when 12 actually also has more capacity in the next couple of years? That's my first question.

The second question is on Coatings. Could you tell us what are you seeing sort of from an end market point of view with regards to volume when we look at the more industrial end markets, versus the more paint-oriented end markets in terms of volume? And then the last question, sorry to come back, but just on PVDF, how do you see the technology evolution within Arkema when we think about the suspension versus emerging grade, but also when we think about PVDF in other markets like electronics, for instance, how do you see your penetration given that your product suite in electronics has increased as well with the PI acquisition.

[Thierry Le Hénaff, executive]

Thank you for your question. So on [ Polymers ] and -- versus Specialty Products, this means it's not like you have a plant, you fill the plant like commodity plant. This means that, sure, you have to accept at the beginning, maybe some volumes, which are lower margin in order to have a plant which is running smoothly. But the philosophy of the polymer is really a focus on specialty markets, specialty application and the potential of development is really unlimited.

You mentioned oil and gas, but you have textile, you have shoes, you have [indiscernible], you have plenty of application and you have new ideas coming all the time. What we could not do because it's not possible, is in advance of the startup to fill strong density of new business, just to be ready to fill in the specialty product, [indiscernible] like that. So you need, as we have mentioned many times, for the let's say, the high end of the range of the portfolio, it will take several years to go where we want to go in Singapore.

But we have also some good growth on the good businesses, maybe not with superior margin at a solid margin that we will take also in the mid time because [indiscernible] 2 big qualities -- 3 big qualities is high performance, its [ BioSource ], as you know. And the third one that maybe not everybody has in mind is very competitive also. So because of that, we -- I think we are very confident in the coming years to fill this Singapore plant. But also, we don't want to go too quickly because as you know, it's a big ticket this time. And fortunately, I'll say, 70 years. So if we can see the Singapore, which knows the same size as Marseille, but still significant. In 5 years, it will be really in a very good shape and so we really managed the mix and take the time we need.

But now with regards to dynamic versus polyamide 12 -- polyamide 11 is not positioned as a competitor of polyamide 12. It's a higher performance, it's [ biosimilar ]. So we have our own market. Sometimes we have some gray area where we play on the 2 grades. We are in polyamide 12, we are not the leader, but we are a good challenger. We've shown very good products. We try also to position more on specialties and commodity. It's a whole game, which is marketing game that is very important in the long chain polyamide. But overall, you are right to say that we try to focus on the high end of the range because this is a superior product. On [indiscernible], I would say it's a growing market, the [indiscernible] value chain. It's a good chain from this standpoint. It has many applications, which are far beyond Coatings and Paints.

When we think coating solution by nature of mind goes to paint. But in fact, it's far beyond that. Electronics, batteries, we'll talk about battery later in your third question. In superabsorbent -- and when you say paint, it's industrial paint and paint for -- also for construction, new energy is a big market. So -- and so paper also is a market. So you have plenty of end market. It's growing, I would say at GDP with over time, you can take all history and also what you think looking forward, GDP is a good assumption. Now you have also -- you need to have in mind that in Europe and the U.S., our base of volume starting the year, if I look at '23 is rather lowest. So we have also some catch-up in this [ adhesive ] value chain. So you have a sort of, let's say, catch-up plus the natural growth of Coating Solutions.

But basically, if you go to the Capital Markets Day, not only is the main presentation, but the different deep dive, you will find plenty of elements of answer also GDP, if I may. Then on the PVDF, what more can I say compared to what I've said already, I think, on -- so first of all, on PVDF, you have plenty of applications far beyond the batteries on top of it. Secondly, with regard to battery, it's clear that you have one product which is better for NMCs as one is better for [ LFP ].

And I would say, if you look at midterm, the 2 technologies, LFP and NMC, we share the market. So I think I don't see where is this issue. And beyond that, emission is very strong for other application in batteries and is very strong for plenty of application outside of battery. So we like what we have. We certainly be a player in [ suspension ] one day. But for the time being, we have far enough to grow our PVDF plans, and most of the time we're sold out. So I would say we don't see any specific points there.

We work a lot to have an evolution of our range for battery, including PVDF and -- so we have plenty of ideas, but also we work outside of PVDF for batteries. As you could see, we have invested recently Liquid Ioniq, okay? Ioniq liquid which is really a very interesting technology, especially for solid-state batteries. And we are the end player, as you know, is able to provide both PVDF, so fluoropolymers and acrylic in battery, which is clearly a very strong advantage to Arkema. We have solution inside the [ sale ]. This is what I've just mentioned but also outside the sale, for example, with polyimide, with [indiscernible], et cetera. So plenty of hopes in this world of PVDF and plenty of hopes in this world of batteries.

[Operator]

The next question comes from Georgina Fraser of Goldman Sachs.

[Georgina Iwamoto, analyst]

I've got 2 questions. One of them is a little bit of a follow-up to Matt's question right at the beginning. This is maybe more specific to adhesives, but if you could relate it to the whole portfolio as well. Do you think that Q1 is where we will have the greatest price versus cost benefit throughout 2024? And then the second question is you've clearly based your guidance on a flat macro picture year-on-year, but with Arkema's own startups contributing to more second half-weighted momentum. Could you give us an update on how the end markets have been evolving? Is there anything that's surprising you?

[Thierry Le Hénaff, executive]

Thank you, Georgina. So on the first question, you need to -- I would say the answer to your question would be yes, but it's now becoming incremental because we compare to last year, where we had already a good net pricing benefit. So now I would say it's more incremental. And the topping becomes more from evolution of the mix from synergy, from acquisition and from growth coming both from the macro and from our major projects we have mentioned, the one we should contribute to 60 to 70.

So I would not take this year, the topic of net pricing, I would make more this year, a topic of volume with different flavors, including our own projects, including the dynamics of the different end market and also the synergies coming from acquisitions. For example, with Ashland, we had no time to mention it today, but we see a lot of possibility. I was there recently, it's very, very encouraging, how much business we can create beyond the organic momentum. On the '24, we don't say we assume a flat macro. We say that we have a range -- come back -- in fact, we come back to the question of the guidance range. We have 2 assumption and everything in the middle. So you have the one we say no improvement, which is lower end of the guidance at EUR 1.5 billion in EBITDA for the year.

And you have the one which assumes a strong recovery, which goes to [ 1.7 ]. And then you have the middle ground, which is basically the consensus of today. So beyond that, where we see some -- I would not talk about surprises. There is no particular surprises at this stage. We don't see signals of rebound that we would interpret like some seeing more than incremental and obviously, long lasting. So let's wait and see. There are some incremental signals, which are more positive, but difficult to interpret them. So we stay in this mood for the time being. If it is better, it's better, everybody will be happy. Now with regard to the end market batteries, maybe which referred to the question on PVDF, the start of the year was okay in China, was quite okay, sport, we suffered in the second part of last year.

We have application like [indiscernible] from sport. It's improving. Automotive, better than what we saw, but also this is an area where we have a lot of new business, and you have automotive and you have the new automotive, the [ clean ] mobility, which is doing well. Energy market, I will not surprise you, we are doing well. Construction is still challenging. I would say, let's say, if we are optimistic, we see stabilizing at a low level, but [indiscernible] the question there. So you have some different elements. But overall, we stay in the continuity of what we have seen. With some incremental signal, we still remain to be confirmed.

[Operator]

The last question is from Alex Stewart of Barclays.

[Alex Stewart, analyst]

Just building on something that Georgina said, I think I'm right in calculating your volumes are approximately 10% lower than they were in 2019, if I add up all of the volume numbers you give us. Do you think it's realistic to assume that all of the volume you've lost over the last 4 years will come back? Or do you think that there's a portion in there related to some construction markets that were a little bit peak. And so you may not get back to the 2019 level. I'm interested just qualitatively what your views are on that. And then the second one, we talk a lot about the EUR 60 million to EUR 70 million contribution from your new projects in fiscal 2024. But clearly, that will lap multiple years. So could you maybe give us an idea of what the annualized contribution from those projects would be if we take a sort of maybe Q3 or Q4 of this year, but over the course of a full 12 months rather than the half year that you're expecting to contribute would be very interesting.

[Thierry Le Hénaff, executive]

In fact, the 2 questions refer to a certain extent to the Capital Markets Day. On the volume, so first of all, we'll not get everything back this year, it's not possible. Our assumption that we took in the Capital Markets Day organic growth that we would recoup maybe 7% out of the 10%. At least it was in our model when we say for our plan '24 to '28. We have this organic growth and we say we would recoup not the whole 10% because the world has changed and maybe some markets we will -- some volume we are ready to give up because we are continuously improving our product mix, but let's say 7 out of the 10, but it will take a couple of years to get back this 7%.

On the new project contribution, again, I think from memory, it was in the Capital Markets Day, we say that latest in '28, this project, which contributes 60 to 70 would contribute full speed, EUR 250 million of EBITDA, EUR 250 million. But this EUR 250 million is not -- if it was your question, the annualize of the Q3 or Q4, that's all. Because the [indiscernible], we were mentioning before to [indiscernible] question the ramp-up of the [indiscernible], this will take several years to be at the speed we expect.

It's around EUR 100 million of EBITDA for this project. It will take years to go there. But -- so what you could do, Alex, I think this is the best is to take a sort of 0-point at the start of this year. You put EUR 250 million in '28 and you take a straight line will more or less be there then you have the EBITDA contribution year after year.

[Operator]

This was the last question. Back to you for any closing remarks you may have, Mr. Le Henaff.

[Thierry Le Hénaff, executive]

Okay. But I would like to thank you very much for your question, we were able to answer all of them, and I wish you, on behalf of the team, a good end of the day. Thank you.

[Operator]

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