Arkema SA
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Arkema SA
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Ladies and gentlemen, welcome to the Arkema's Results Conference Call. I will now hand over to Thierry Le Henaff, CEO. Sir, please go ahead.
Thank you very much. Good morning, everyone. Welcome to Arkema's Q2 2021 Results Conference Call. With me today are Marie-José, our CFO; and the Investor Relations team. As always, you would be able to download the set of slides used during this webcast from our website. And together with Marie-José, we'd be happy to answer your question at the end of the presentation.After an already strong start of the year, we are very pleased with the way this second quarter has developed. Actually, we consider this quarter to be another significant milestone in the development of the company consolidating all the growth ingredients, which were steadily implemented over the past years. Market dynamics stayed very well oriented with a combination of strong underlying growth and tight supply chains. On top of that, we benefited from a clear acceleration in the demand for sustainable solution and from the strength of our innovation pipeline.We really took advantage of our unique positioning in High Performance Materials, the demand for which will definitely continue to expand on the back of powerful mega trends like climate change, resource scarcity, urbanization and clean mobility. In the first half, we have many very exciting examples of high-growth application such as battery, but there are many others as this will continue over the coming months and years.Our performance was, therefore, excellent this quarter with an EBITDA of EUR 478 million, up 67% year-on-year despite a negative combined scope and currency effects of around EUR 30 million. EBITDA margin reached a record level of 20%. Just as importantly, the EBITDA was well above the pre-COVID level of Q2 '19. This reflects also the soundness of our decisions made during 2020 not to cut R&D investment and CapEx project. And this now allows us to capitalize on our recent capacity additions and to capture the growth.We are strongly encouraged by the quality of this performance. Importantly, it was driven by all segments, each of them showing strong EBITDA progression supported by high volumes and robust pricing power. With volumes up almost 20% compared to last year and 3.5% above 2019 levels, Specialty Material, which now represents around 85% of our sales, led the growth. In the continuity of Q1, underlying demand was still very solid in most of the group's end market.And as I said here before, we also benefited from the accelerating contribution of new development, driven by sustainable innovation in attractive and promising areas like battery, bio-based material, 3D printing, engineering adhesives or eco-friendly paints. As you certainly know, the raw material environment was quite challenging this quarter. This is part and parcel of the economic recovery. We faced a sharp increase of input costs, including energy and logistics, which will continue in Q3.Thanks to our pricing actions, we managed to completely offset this negative impact at group level, including in our most downstream businesses. Of course, there are nuances depending on activities and geographies, but the net impact was neutral to positive in all the segments of the group.At Bostik, pricing versus raw materials net impact was neutral, which is quite an achievement, given the context. It is highly positive in Coating Solution, benefiting from good pricing power in the downstream businesses as well as tight market conditions in the acrylics chain. This pricing action will continue in Q3 so that despite further significant increases in input cost, the net pricing impact will be, again, at least neutral for Q3 for the group.Our Specialty Materials EBITDA reached EUR 417 million, almost 40% above Q2 '19 pre-COVID levels back on track with our 2024 ambition. The EBITDA margin was also excellent despite the raw material inflation. High Performance Polymers and Coating Solutions achieving a historically high performance, above 20%, while Bostik delivered on its promise and reached 14.3% despite the dilutive mechanical effect of price increases of around 15 bps -- 50 bps. This is in line with Bostik's confirmed objective of 14% for the full year despite the ongoing challenge of raw materials. Intermediates showed also a strong progression year-on-year despite a negative scope effect into the PMMA disposal on the back of more favorable market condition.Given this strong set of results and the dynamics of the market, we remain rather positive on the outlook, even if we stay attentive and agile with regard to the evolution of both the public health situation and the difficult raw material environment. Please also note that last year, H2 already showed a good recovery. So the base of comparison with the higher -- will be higher than H1.On the qualitative front, I would like to shed some light on several developmental projects, which reinforce our commitment to sustainability and strengthen our positioning in High Performance Materials in line with our 2024 ambition. Firstly, I wanted to highlight some examples of our eco-friendly innovation. As I said before, the demand for sustainable solutions is accelerating, driven by mega trends, and we are ideally positioned to benefit from it. Our High Performance Materials are a good example with our PVDF in batteries, serving clean mobility or bio-based consumption or bio-based polymer delivered and used not only in transportation to replace metal parts and reduce energy consumption, but also in customers' eyewear for its ease of design.In construction, we have developed low VOC powder coatings, mainly for automotive application; our new eco-friendly adhesive solution for insulated glass sealants. All this is really very exciting for the coming months and years.We also recently announced 2 new organic projects supporting our commitment to sustainability: the supply of 1233zd, which is part of the new generation of fluoro specialties with minimal emissive impact; and the launch of our new renewable PVDF grades for battery, which will allow an almost 20% climate change impact reduction using the residue of wood pulp manufacturing as a source of crude oil.In parallel, we are significantly progressing with the construction of our 2 major CapEx projects also directed towards sustainability. We have launched the final phase of our integrated bio-factory in Singapore for polyamide 11. And we are on track to start mid-2022 the production of AHF in the U.S. from an innovative process allowing to reduce CO2 emissions by 20 times compared to the traditional process.Last, but not least, on the M&A side, as you know, we finalized in Q2 the PMMA disposal ahead of an already ambitious schedule. We also made a few bolt-on acquisition and equity investment in Specialty Materials to strengthen our positioning, for example, in the circular economy with the acquisition of Agiplast, which is a leader in the regeneration of High Performance Polymer and which is -- or was and is still a so-called partner of Arkema in recycling operations.We reinforced our Adhesives segment with 2 bolt-on acquisitions in the start of the year. And we also took minority stakes in an innovative company like recently Verkor to accelerate our battery strategy; or ERPRO 3D to extend our expertise in 3D printing. So as you could see, a very positive quarter.I will now hand it over to Marie-José, and I will comment then on the outlook at the end of the presentation.
Thank you, Thierry. Let me give some financial metrics together, starting with the sales bridge.At EUR 2.4 billion, sales are up 36% year-on-year. So in organic terms, they grew 35% versus the second quarter of 2020; and 12% versus the pre-COVID quarter 2 2019 level. Relative to last year, organic growth was split due to volume and -- volume growth and price effect. And relative to 2019, the 12% organic growth is still between 3% volume growth and 9% price.From a regional perspective, Europe and Asia were particularly strong, with North America a little below, partly due to some raw material shortages constraining growth. The strong price effect is claimed to our actions to increase prices in the face of a much higher input cost, but we also benefited from favorable conditions in the acrylics chain in all 3 regions.There is a negative 4.5% perimeter effect in the quarter versus 2020, which is attributable to divestments of functional polyolefins last year and the sale of PMMA in May of this year, with some offsets from the acquisitions that we made in Specialty Materials. When comparing to 2019, this perimeter effect is only 2%, as ArrMaz integration only took place in July '19.Currencies also had an adverse effect on sales in the second quarter to the tune of 4.2% negative. The same effect applies when compared to 2020 or 2019. It depends mainly from the stronger euro versus dollar, U.S. dollar, which stands basically at around 1.20 in the second quarter '21 versus 1.10 in the second quarter of '20 or '19.Turnover growth allowed Arkema to achieve a very strong 67% growth in quarter 2 EBITDA to EUR 478 million. Looking at it in the different segments. We had, first in Bostik, an achievement of EUR 82 million EBITDA, up 64% year-on-year; and by more than 15% relative to the second quarter '19 as it is benefited from strong volumes in construction, do-it-yourself and industrial markets as well as from the integration of acquisitions and price increases in the face of higher raw materials.The EBITDA margin was a strong 14.3%, fully in line with our full year target that we confirmed at 14% for 2021. Advanced Materials EBITDA is up over 40% year-on-year and up 25% versus second quarter '19. And EBITDA margin is at a record level of 24.4%.High Performance Polymers had a very strong quarter indeed with volumes boosted by accelerating demand in most end markets, including construction, batteries, electronics, consumer goods and transportation. Performance additives were less dynamic, given the decline in oil and gas and a high comparison base in animal nutrition, [ urgency ] and disinfection applications.EBITDA of Coating Solutions of EUR 157 million is much higher than last year and even than the second quarter 2019 level, which was at EUR 91 million. This is driven by higher volumes across all major markets including decorative paints, 3D printing and industrial coatings with an acceleration of the trend toward eco-friendly offerings such as powder coatings and water-based paints.We also implemented price increases to reflect higher raw material and energy costs. The price versus raw materials impact was clearly positive for the segment overall as we benefited from favorable conditions in the acrylics chain for activities that are not integrated downstream, so for the more merchant part of it.Finally, Intermediates EBITDA grew 32% to EUR 87 million in spite of the negative perimeter impact from the divestments of PMMA and functional polyolefins. The segment benefited from good market conditions in acrylics in Asia in particular.With depreciation and amortization at EUR 133 million, recurring EBIT came to EUR 345 million versus the EUR 144 million in second quarter of 2020. And the EBIT margin stood at 14.4%, which is up almost 8% versus last year.After the particular year linked to COVID in 2020, our performance this year places our return on capital employed back above our long-term target of 10%. Nonrecurring items amount for positive EUR 732 million. This mainly reflects the pretax capital gain of nearly EUR 950 million into the sale of PMMA and also includes PPE amortization, one-off charges and restructuring expenses. Financial result stands at EUR 30 million negative, thanks notably to the benefits of refinancing our bonds at a lower rates and lower interest rate coming from the debt swap into U.S. dollar.At EUR 218 million, the tax charge includes the tax linked to the capital gain on the sale of PMMA that will be mostly reversed in the second half of 2021 and also reflects improving profitability. In the first half, the recurring effective tax rate came to 20% of recurring EBIT, which is a bit lower than last year's level of 22%, thanks to a more favorable geographic split of profits. Consequently, Q2 adjusted net income was now multiplied by 3 to EUR 267 million, which corresponds to a EUR 3.50 per share.Moving on to cash flow and net debt. I would like to flag, first, that in order to facilitate comparability of the cash performance indicators, we have defined a recurring cash flow metric that excludes actually the positive variance on working capital coming from the tax liability on disposals. This recurring cash flow amounted to EUR 245 million in quarter 2 2021 versus EUR 284 million in quarter 2 2020. The year-on-year variance includes, first, the increased cash generated from our operations, consistent with our improved profitability; and second, the working capital rebuilt in the context of higher volumes and higher raw material prices.I'd like to flag that the working capital ratio on annualized sales, excluding PMMA activity, now stands at a very low level, just below 12% versus 16.5% of sales last year. This is well below our normative level, which would be more around 14% of sales for a normative working capital ratio. The high level of demand did not really allow the various businesses to rebuild stock at this point. And we would therefore expect this working capital level to rise in second half as we rebuild some inventories in the raw materials price inflation context.Capital expenditures totaled EUR 157 million in the quarter versus EUR 122 million last year, partly reflecting higher exceptional CapEx of EUR 64 million in Q2. And this is as a result of the acceleration 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.Second quarter free cash flow amounts to EUR 313 million, including a nonrecurring amount of EUR 132 million due to the timing of tax divestment linked to the PMMA sale. The net debt at end of June 2021 amounts to EUR 1.3 billion, and that includes EUR 700 million of hybrid bonds. The net debt also includes in totality of the EUR 300 million commitments linked to the share buyback program that we launched in May. Our balance sheet remains extremely solid with a net debt-to-EBITDA ratio at 0.9x.Thank you for your attention, and I'll now hand it over to Thierry for the outlook.
Thank you, Marie-José, for your explanations. Again, we were very pleased by the result of the first half, which reflects the increasing strength of our portfolio. The positive dynamics that we saw in H1 are continuing with good demand across the majority of our end markets. Our Specialty Materials, in particular, will continue to strongly benefit from our sustainable innovation drive and recent capacity expansions we made to leverage the accelerating demand linked to global mega trends.We are also keeping a close eye on the evolution of the public health situation and raw materials inflation. This is why we remain nimble, and in particular, ready to further increase prices when needed. Our raw materials index will continue to increase materially in Q3. But we have demonstrated, as you know, our pricing power so far this year. And I am quite confident that we will at least neutralize their impact in H2.Given the strength of our first half results and our confidence in the unique quality of our portfolio and of our growth levels, we decided to raise, for the second time this year, our full year 2021 guidance for Specialty Materials, which as you know now constitutes a vast majority of our scope. We now expect Specialty Materials EBITDA to increase by around 30% year-on-year in 2021 at constant scope and currency versus plus 20% announced when we raised guidance at the Q1 results publication in May and plus 10% when we gave the original guidance in Feb.This would mean a very robust H2 for Specialty Materials with an EBITDA slightly above H2 2019 despite a negative currency impact of around EUR 30 million. All in all, this means that for the group, we expect an EBITDA of around EUR 1.4 billion in 2021.At constant currency, our EBITDA would then be close to the '19 and '18 levels for the whole group, despite the disposal of functional polyolefin and PMMA for 8 months and a significant decline in fluorogases contribution above the barrier. So with a much better mix and also much lower debt. And it was the whole aim of our new vision for the company, which we announced last year in April, and this is very value accretive for our shareholders.Beyond delivering on our financial results, we'll continue to execute our strategy, accelerating innovation and new development in mega trend, continuing bolt-on acquisition in Specialty Materials, implementing the strategic review in fluorogases and, above all, making further progress on our policy of corporate social responsibility to which our employees are fully committed.So I thank you very much for your attention, and we are now, together with Marie-José, ready to answer the questions you may have.
[Operator Instructions] We have the first question from Matthew Yates from Bank of America.
A couple of questions, the first one around standing by your margin guidance for Bostik this year. Forgive me, it's a bit unfair, but we've obviously spent the last week hearing from Akzo Nobel and some of the coating companies that they are not able to fully protect their margins this year. So is there something inherently different about the adhesive business model or its raw material basket? Or should we more see this as a function of how Arkema itself is executing?And the second question may be around the materials margin. I think Marie said that's a record 24% and obviously higher than 2019. Correct me if I'm wrong, but I think your midterm guidance is 22%. So are we looking at perhaps a seasonal peak in profitability for this business? Or there's some sort of start-up costs coming into the company next year with Singapore? Or is the -- again, the way you're executing, are you trending above that 22% midterm guidance that you've previously talked about?
Okay. Thank you for your question. Matthew, overall, the good thing, and I think it's important that we can raise debate about this figure or that figure, what is very important, and thank you for recognizing that, is that this semester and this quarter and even the full year guidance, let's say, confirm that we are really fully on track for 2024 ambition. And you can take all businesses, all parameters we're already confirming, and this is the fruit, the benefit of our strategy and the execution. Thank you for mentioning execution. I think we execute very well the strategy, which is value-accretive. So -- and we are really fully on track, and this second quarter is demonstrating that pretty much.With regard the Adhesives, it's already difficult to compare businesses, which are not the same, and I will not comment for the paint company, which are partner and customer of ours. On the Adhesives, clearly, as you mentioned, I mean, the raw material challenge is a big one for 2 reasons. The first one is the value, absolute value to compensate raw material, which are increasing far more than what everybody was expecting at the beginning of the year.And also, when you are able to compensate the absolute value of the impact of raw material, you have, by definition, a dilutive impact on the margin because you divide the same number by a number which are the top line, which is higher because it's inflated by the pricing increase that we passed to our customers.Despite of that, we maintain, we confirm our EBITDA margin target of 14% for the full year. So far, we are above that. But as you know, the last quarter is a rate lower because it's -- you have December month. And even in the second quarter, you have the August month. So normally, you have a seasonality, which make our margin percentage lower in the second part of the year. And as you know, in the first quarter, we benefited from the delayed impact of raw material. But overall, we confirm our 14%, which is -- which would be quite an achievement in this inflated context of raw materials. So we remain confident, to make the story short, on this, let's say, demanding target.And the good thing of it is that if we deliver this target, we'll be very well positioned to deliver the 16% for 2024 for Bostik, knowing that the current raw material environment is not completely normalized, and it's above the norm. So if we deliver the 14% in December month, this gives us a good hope for the longer term.With regard to the -- I think your question was on Advanced Materials, yes. Clearly, we are more than in line with our long-term target, which is good. Can we do more? We'll see. I think let's first deliver what we have promised, which is, I think, again, very demanding. But we are really more than in track with -- and it's coming, Matthew, I would say, with a sort of acceleration of our HPP growth coming both from PVDF and from polyamide, long-term polyamide. I would say PVDF with clearly battery, but also other market, it's not only battery story. But we are clearly very well positioned for battery, but it's more than that.We see in electronics, in coating, industrial coating, some very good areas of growth, supported by sustainability in this new world again. And on polyamide, particularly polyamide 11, which is one of our star product, it's amazing to see that, in fact -- difficulty with polymer is that some of them are not well positioned for this clean mobility and some are well positioned.And polyamide 11, beyond all this incredible prospect in bio-sourced polymers, [indiscernible], we could quote plenty of new businesses accelerating. On top of that, with regard to clean mobility and automotive, in fact, it's a fact that this polymer is particularly well positioned. So we'll sell more, for example, polymer in automotive, in electrical vehicle, significantly more than we were selling in thermal vehicles.So it's quite a good element. So to make the story short, strong quarter in HPP, which is supporting the whole Advanced Materials, quite good hopes for the long term. So we are very well positioned to deliver at least what we have promised for the 2024 ambition, which was already very demanding. And the execution, as I mentioned, is clear.
Next question from Emmanuel Matot from ODDO BHF.
Several questions from me, please. First, do you think the recovery is too strong, meaning that it's going to be difficult for Arkema to further increase your EBITDA in 2022, notably in H1, due to this very high basis of comparison of this year.Second, do you face some shortages of some raw materials, which could impact your H2? Are you well protected against that risk? I have also a question about corporate costs this year. What shall we expect because those costs have doubled in Q2? Maybe it's related to the PMMA disposal. And maybe a question about acquisitions. We have seen several bolt-ons since the beginning of the COVID crisis. Do you remain confident to achieve also some midsized deals? Do you have some opportunities in the pipe?
Okay, Emmanuel, different elements. And maybe Marie-José will answer corporate costs, if you want. Do you want to do it now or at the end or...
Yes, I can actually quickly confirm that the corporate costs are coming back, let's say, to pre-COVID levels. So despite we are not fully recovering in terms of traveling, but let's say, most of the marketing, advertising and events are back on track to support, in fact, the volume recovery that we are facing. The second aspect is we have clearly some initiatives in terms of digital that we want to accelerate and contribute to these trends. So for this year, I'm targeting, let's say, to be at the level of 2019 corporate costs overall.
Thank you, Marie-José. And this confirms that -- and you know it was one part of our discussion last year. We recognize that. We have never been -- last year, the company, which has cut more cost, we cut a lot. And we have always had in mind to make sure that the company was really positioned for the growth. We are now entering, as we mentioned several times, a new area of growth for Arkema, organic growth.You know how we are strict on cost. But sometimes you need to spend money because you believe that you're already on the right way for growing. And it is the case for Arkema. It is the case in Adhesives. It is the case in HPP. It is a case in Coating Solutions where sometimes -- and we had a discussion in the past, the potential of growth has been underestimated, including profitability improvement.And we are in this very nice period, and we should not be underestimated and recognized really, because we feel good from this growth standpoint. And sometimes you need to put some costs, and this is what we are doing. And thank you, Marie-José, for confirming that we'll go back to '19 level, but maybe with a mix of cost, which is more oriented towards growth and modernization of the company, which is good.With regard to recovery, it's interesting what you say because sometimes we get the question are we becoming cautious for the second semester. So we have to show the -- what the right question. But no, I think -- at the same time, you need to be positive, but also to recognize that we do not write to the sky. So I think we are fully on track with our 2024 target, which is good. We delivered very solid 2021 results, above what everybody had in mind. So I mean, it's great. I mean, it's fantastic. But it doesn't mean that you're going to need to think that -- you need to recognize after that the different element of the performance.You have some -- in fact, you have 2 faces of the coin of the recovery. You have strong demand, but at the same time, raw material is a challenge. And when I say raw material, it's also supply chain constraints that we need to manage. And these supply chain constraints that you are mentioning, including shortages of raw material, we got them already in the Q2, and they will be there also in the Q3 and certainly in Q4. So you have a combination of different elements. Some are supporting you, like growth, and some are challenges like raw material shortages that you are mentioning.And I think we are good at managing that. It helps us also on some value chain like acrylics, okay. And some other value chain, it's more on a stake hold. So we have a combination of different element, but overall, it's positive for the company. And I confirm that we are fully on track, which was not obvious, because we got the COVID in the middle of announcing our long-term target of '24. So don't forget that.Despite of that, we are fully on track with this '24. This means we completely swallowed and more than swallowed the crisis level, and we are able to rebound more than others because we are uniquely positioned in this mega trend. So this is a positive. But positive doesn't mean that the trees write to the sky. So everybody has to be, at the same time, confident, positive, but realistic. Then on acquisition because I think I answered the first 2 at the same time.
Yes, you're right.
Yes. So I can go to acquisition. Acquisition, so certainly, I will not comment since we [ changed ] initial. No, I think we stand with what we say, some bolt-on, and we have good ideas on small ones. And there will be new ones, which will be announced in this year. When we have possibility, some bigger deals, let's say, intermediate size and maybe one big size in the next 3 years, so nothing different from what we have said so far.So we -- as you know, half of our growth will come from acquisition. And it is still the pattern that we are expecting. So nothing new on this side. But we are determined to make acquisition as part of our growth on top of the organic growth, which, as I mentioned, is going in the right direction.
And next question is from Mubasher Chaudhry from Citi.
And just coming back to your comments on the Bostik margins. So you're saying that you're doing quite well with the price increases to also the raw materials in 2021. But looking further out, should raw materials normalize? Should we expect the pricing to decline as that happens? Or are you expecting to hold on to the pricing as the raw materials come off, let's say, for example, in 2022 and therefore presenting a margin expansion opportunity looking further out?And then second question is over a bit of a follow-up on the M&A side of things. I think when we -- when you did ArrMaz, you said that was kind of the very, very high end of the bolt-on size that you'd be looking at. Is that still valid? Or are you -- given the PMMA proceeds and given where the balance sheet stands today, you're willing to look at something around EUR 1 billion mark or something around the bigger size for acquisitions? Obviously, if it matched your criteria, [indiscernible] is that something that would be on the cards? Or would you completely wipe that off just because of the size?
Okay, Mubasher. On the last one, you would tell me if I answer because I'm not sure I got the whole question, but I will try to do it. First of all, we have to manage by step as -- and it was, I think, the nature of the first -- the initial question at the beginning of the question session. On Bostik, we are glad so far to have offset raw material and, beyond that, to maintain the percentage of margin at the level of the guidance that we gave you. We have another challenge, not only us, but all specialty chemicals raw materials company, which is coming with Q3 because there is a new wave of raw material.So for the time being, before talking about normalizing, everybody is to be aware that there is another wave of raw material, which will come. And as we say, despite of that, for Bostik for the full year, we maintain our 14% objective of this year, which is quite a strong objective. After that, when the raw material would normalize, you would get some normalization of pricing by definition because -- I mean you cannot ask whatever business to offset raw material increase, which are quite significant, and just to keep it for yourself. This means you are not at all customer-focused. So no, I think there will be some normalization.But it's true that an environment for a downstream business like adhesive is always more challenging when raw materials go up, especially significantly, and when they go down, which means that if we are able to deliver the 14% margin for Bostik this year, it certainly puts us in, towards my message, in good position, quite in good position for the 16% for 2024. So it reinforces, I would say, our guidance. But it's important that you appreciate the work that Bostik has to do to deliver the 14% in this kind of environment. And so we are very pleased by the Q2 and now we move to the Q3.With regard to M&A, we are hopeful, by definition, to larger acquisition to the extent that the opportunity makes sense. So there is no restriction on that. I think we are opportunistic on acquisition. We are -- our bread and butter are bolt-on acquisitions, small size. We know it's nearly statistic. We have large number of possibilities. And from time to time, let's say, 3 to 5 times a year, we deliver some.After that, if you go down the list, we are open to medium-sized ones. For example, we had Den Braven a few years ago, which was medium sized, I would say. And -- but they don't come every year. So let's say, we plan to make, let's say, 2 of them up until '24, okay? And then we have the financial flexibility to make a bigger one, but we'll do it only if from a strategic standpoint and value creation it makes sense. And this -- it's impossible to say it's for sure because it depends on opportunity. And it would be a mistake to say I want to do it for the sake of it. We'll do it because it makes sense. And we are at the same time determined, but also patient because it depends really on opportunities.So we have the financial flexibility, but if the financial flexibility is not enough. It has to make sense from a strategic standpoint and from a value creation standpoint. And we gave you, I think, a track record on acquisition of -- since the start of Arkema, and you have seen how much value we can create. And it was on the total of EUR 4 billion, I think. But -- so we are really strict on what we buy. But at the same time, I think we have proven that we were able to create value with acquisitions. So if there are opportunities, we will look at them. So I cannot be more specific, as you can imagine, but I tried to answer as best as I could to your question, Mubasher.
Next question is from Daniel Chung from Redburn.
Yes, firstly, congratulations on the impressive results. Just 2 from me. So first off, was -- how do you view the development of the supply tightness in acrylics, given plants are ramping back up? And what are your assumptions here on potential normalization? Maybe we can touch on the sustainability of demand as well in Coating Solutions, especially with powder coatings. And then secondly was you touched earlier on high-performance polymers. It would be really helpful to get a picture on how big the growth was for PVDF and maybe -- and PA11, whether that was due to new customer wins or market share gains. That would be very helpful.
Okay. I will start with the last question and go backward. On the PVDF and polyamide 11, yes, growth was, well, especially good in PVDF, as you know, because the battery segment is growing very well. But it's beyond that. I think we have -- so I would say the supply chain is tight and we have a lot of innovation. So we are -- let's say, PVDF on average is growing 7% a year. And if I take the average of the 2 years because PVDF in '20 is not sufficiently meaningful as a reference. I would say, if you take '19 and '20 and '21, so far, we are above this 7% with the acceleration in batteries, which is good. And this is why you have seen some new investment in PVDF recently, and we'll continue to invest in this. So we are in pretty good shape.But as expected, when we publish the Capital Markets Day, it's really our sustainability innovation, which is there. On polyamide 11, in fact, we grow quite well with regard to '20. But in fact, we are -- up until we have the Singapore plant, we are limited in capacity. So it's tight. And we'll get back -- so we are significantly above '20, but we go back to the level of '18, '19 just because -- but with better mix. This means that more and more, we are focusing on niches.So you can see that in the pricing also because we can add really a lot of value in initiatives like, for example, sports shows is quite a good example, but I could name -- or in medical or I could name even in some application for automotive but related to clean mobility, okay, high pricing business here because you have a lot of innovation behind that. So the mix is evolving in a very positive way. But in terms of volume themselves, we don't have flexibility so far up until we have the Singapore plant. So the Singapore plant, we can really have the right moment from our standpoint, and then we can talk again about growing. So a different pattern for PVDF and polyamide 11, but polyamide 11 should join PVDF once we have the Singapore plant starting.With regard to Coating Solutions or sustainability of demand in Coating Solutions, I would say Q2, the Q2 level, you have some restocking, but not only for us, for our customers, for our competitors. So it's true. So don't think that the growth in volumes that we enjoy will stay forever. But I think the growth will stay quite robust for a simple reason, is that with this green deal, this new habit of consumption, people renovating their house, we believe that the demand for construction-related business will stay good for the second semester and for the next year, also with this stimulus package, which come on stream in Europe and U.S.So you have plenty of elements, which we believe should support this kind of businesses. Coating business, also construction, adhesives, they are more or less in the same area. So don't extrapolate second quarter, which was absolutely outstanding. But consider that we are positive for the second semester and the coming years on this acrylic demand -- with -- on this coating solution demand with a lot of innovation in low VOC, powder resin, powder coating, powder paint, it's -- this new type of demand is really accelerating, supported by sustainability and this green deal.With regard to the acrylic value chain, so I think you mentioned also the monomer part. Clearly, we benefit from -- but this is also the beauty of the portfolio, where -- you have to appreciate that. And we have different element on our portfolio between the Adhesives, which have a pattern; Advanced Materials, which is another pattern. And then we have a third pattern with Coating Solution. In an environment of tight raw material, I would say that Bostik, even if they resist well, is suffering more. But on the other side, Coating Solution is -- and showing more this kind of pattern. And then you have to look at the whole group performance, which is really more and more resilient because of this quite complementary part.With regard to acrylics, again, don't extrapolate them. The -- let's say, the margin support that we get in Q2, it will certainly normalize more with capacity began trim on the second semester, but it will stay at a good level without extrapolating the condition of the Q2. But it was clear, there's quite a good level. So I think we are -- what is very good, and I will take advantage of your question to extrapolate a little bit the answer.What is good really on the Q2, on the Q1 and the full year, what we will deliver on the full year is that it's not the contribution of one element, it's really the contribution of different elements, different business units, nearly at equal levels. And we are very pleased about that because it's a very balanced development of the year, not only compared to '20, but also compared to '19 and compared to '18. And for us, what is very important that you have in mind is that we build a long-term project. It's not a matter of 1 quarter or 1 semester or 1 year. What is very important is to deliver ongoingly. And this is what we are doing, thanks to this portfolio reshaping.
Next question, Alex Stewart from Barclays.
I think I heard you say that the raw material...
Alex, we cannot hear you. Sorry, the sound is very weak. Sorry for that. But -- yes, it's better, yes.
I think I heard you said the raw material and net pricing balance in Adhesives in the second quarter was neutral. I just wanted to confirm that, that's correct. And if it is correct, can you comment on whether you think that the second half will also be neutral or whether you'll see some absolute earnings lost because of the whole pricing balance? That would be very helpful. Just in Adhesives rather than the group.
Okay. And as we mentioned and we are -- we confirm 14% because we have some question on that -- on the 14% EBITDA margin target for the full year. We still think that in terms of -- so clearly, the raw material escalation is significant. But we confirm that we should be -- if not very close to compensating the whole raw material in absolute terms. But because of that, you have a dilution on the margin percentage. This means that we would have done better, in fact, than the guidance in a normal environment, which is quite an achievement. But then you have some dilution of the percentage. But in value, we should be at par or close even in the second semester, but -- which means a lot of effort, as you can imagine.
Next question, Sam Perry from Credit Suisse.
We don't hear the sound, sorry. I'm ready to answer the question, but I need to have the question.
Next question is from [indiscernible].
So I give you the questions then, Thierry, if you are ready to answer. First question is -- the first question is really around your project with Nutrien, where you're taking a different route to the fluoropolymer chemistry. Could you just give us a little bit more information around the HFS route? And also in terms of just patenting this technology or just sort of getting some exclusivity around this technology, how exclusive is it for you versus with Nutrien?Because I'm reading that there's also some projects in China, which are using HFS route rather than HF route. So do you think in the future, this will be the way to sort of manufacture sustainable fluorochemicals? And also, yes, if you can give us some color on how much you're going to use within PVDF versus your new low GWP gases like 1234yf or 1233zd? That's my first question.The second question is really around M&A. So obviously, DSM went to Covestro. And recently, Allnex has also gone to Asian player. And both those multiples were not significantly punchy, 10 to 12x. So -- I mean what is your view around resin assets these days? I mean was there a particular reason why you, again, chose not to go for Allnex? And how is your own portfolio developing, especially with regards to water-based coatings versus solvent-based coatings in that regard? And congrats on getting Thierry Pilenko on your Board, but don't let him take all the credit.
Okay. Thank you very much for the comment and question. With regard to Nutrien, so I will not do it too technically because we have many people listening, and I want to make sure that everybody understands what we are talking about. In fact, basically, the traditional route where you start from the mine, so you have the fluorspar, which is a mineral, the stone. And with this -- and you extract it from the mine.And then with that, you treat this to make NHA. You treat this mineral in traditional with an oven -- inside an oven and -- et cetera. So this process consume a lot of energy, as you can imagine. And there's 2 stages and is strong -- and then is a strong emitter of CO2. It's a traditional process, which is used, I would say, nearly for more than the vast majority. It's nearly the process, I would say.So the process that we have been working on, I would not say -- it's not necessarily exclusive. But I think at the end of the day, you will not have many companies using it just because you need to find the right place to implement it. And the beauty of this process is that you don't -- you use a byproduct, which is a Nutrien process. So you don't add any emission of CO2. It's incredibly favorable because you don't have the emission of the CO2 coming from the mining extraction. And on top of that, you don't have the production of HF, which is coming from your own process, which emit again CO2 because it's -- you use in a positive way just a byproduct. So you don't add any CO2 on top of that. So it's -- from this standpoint, it's very elegant. It's true that, in Asia, you have some comparable processes, which have been implemented. But again, it's a very large minority of these processes. So -- and I think in the U.S., we would be the only one. Now in China, we use more traditional processes. We cannot use it everywhere, and we'll not spend this amount of money everywhere. Otherwise, you will then question us on our capital employed. So we try to find the right balance when it makes sense. And clearly, in the U.S., for different reasons, which is competitiveness, safety of security of supply and sustainability footprint is very, very good. So we are very pleased about this new process.With regard to M&A, this is not because you have things to be sold that we will buy everything. I think in coating, we have already a very good size. We are one of the strong leader worldwide. We are very happy about our portfolio, which has been built over years, I would say -- and it was normal. For many years, we have been challenged on the profitability of the segment. You start to see that we were right about the potential of the segment in terms of profitability, I think sustainability footprint is really very good compared to some other [ factor ]. So I think we have a good portfolio that we'll continue to improve, but we will do it through bolt-on acquisition, and we don't plan to make major acquisition in the coating segment.Even if you will recognize that the multiple, which has been -- I think it was 12 times for the big acquisition that you have mentioned. The multiples that you have seen on Coating Solutions clearly reflects the value of our Coating Solutions segment as such. I hope that you will appreciate that when you make [ sum of the parts ]. So -- but I think our strategy on coating is still the same. We want to make bolt-on acquisitions, and we'll find some good ones, which will reinforce both our technology, geographical footprint and create value for our shareholders. We are not chasing the big target.
We have the next question from Sam Perry from Credit Suisse.
Can you hear me now?
It's okay, yes.
Okay. Great. So just a couple of basic questions on PVDF piece. So prices in China have significantly increased from EV demand. Can you give an indication of your PVDF capacity and how much of that is sold into China? And is your entire capacity of high enough quality to be supplied into batteries? And apologies if I've missed it, but what were the capacity expansion plans over the next few years here, please?
Okay. Obviously, I will not give you the detail, which would -- our competitors would love to know, okay? So I will not give how much is in EV, how much is in China. The only thing that I can say is that for many years, we are one of the worldwide leaders, if not the leader, worldwide leader in PVDF. We are very strong, technology speaking. We have traditional businesses which are behaving very well. And on top of that, we have the battery, which is accelerating the demand. So we are really well positioned for that. We benefited as one of the element of the growth of HPP, which is itself one element of the Advanced Materials growth, okay? So after that, you can make your own assumption of how much PVDF is contributing.You have some interesting note, which has been published recently and by some of your colleagues. So you can also benefit from it. But I would say that is really one of the elements that -- I mean we must have -- in our sustainability innovation, we must have maybe 12 staff, and PVDF for battery is one of the 12 staff. And it's fantastic that we are positioned there, but we have some other which are also very good.Now as I mentioned, our base plan for PVDF growth was 7% a year. We think we should do more than that now. But we try to have a capacity extension, which make us available -- which make us, let's say, in position to follow this kind of growth. So 7% in the past. So it will certainly be above 10% in the coming years. This year, it's far more than that, even if we don't disclose it. But we are in good shape.And you have seen sequentially several investment in PVDF, in the recent. So you can take the announcement, which we have published. It will give you a good idea of what we can do. But sorry, I cannot do that. I cannot disclose you confidential information. We disclose to nobody, and that other people will love to have. But it's one of the bright points inside Arkema. Fortunately, we have, as I mentioned, 10 of them, at least inside Arkema.
Next question from Geoffrey Haire from UBS.
Most of my questions have been asked, but I just wanted to have one last one. When I look at your guidance, your implied guidance for the second half of this year, clearly, it's below the level of EBITDA for the second half of last year. You already said that some of that has to do with currency, EUR 30 million, I think you said. But I'm assuming also that we have contribution from PMMA in the second half of last year. Could you possibly tell us what the amount of EBITDA for PMMA was in the second half of last year?
First of all, I'm sorry, but please, you can check with Beatrice. We'll not do it in front of everybody. But our guidance for the H2 for this year is significantly above last year, first of all, okay? Secondly, what we said, and what I said, is that we will be slightly above 2019. And I remember the discussion we had at the beginning of the year, where the question was how much time it will take for us to go back to '19. So what we say is that not only we delivered a fantastic H1, but on top of that, we confirm that we'll get quite a robust H2. And it's a guidance. After all, that is your duty and your -- if you want to put more, you put more. It's up to you. But if you're even more confident than this, this means that there is upside and everybody will be happy.But the guidance that we gave, which is very robust, means that for the H2, we'll be certainly well above 2020 despite exchange rate. But on top of that, we'll be slightly above 2019 despite -- on Specialty Materials, I am on Specialty Materials, despite the exchange rate, which we valued around EUR 30 million. So overall is what I would call, after a very strong H1, quite a robust H2, which is very good, which -- and I would also make this note. It's true that the more you are good on H1, the more when you look at the difference with the full year, you can get the impression that we are more conservative on H2, but you have to appreciate H1.And when you look at the full year guidance, which is very important, this is why we wanted to mention it, what we say is that for the full year, we should be around EUR 1.4 billion. If you make the calculation at constant currency -- and thank you for asking the question because it's allowed me to explain it very clearly. At constant currency, this would mean that we would be back close to 2019 for the full group, '19 and also '18, which was the record ever. But with the difference, which is quite significant, is that PMMA has disappeared for 8 months. Functional polyolefins has disappeared for 12 months. Fluorogas, which was, as you remember, and it was weighing down on the -- our EBITDA multiple, was fantastic in '18. And we have lost on fluorogas.So it's with a lower contribution of fluorogas, which means that we'll be at par at constant rate with what was '19 and '18, but with a far better mix of specialties. And on top of that, it's not just that. It's with a level of debt despite share buyback where we have EUR 300 million in the debt of today. Despite all that, we have a level of debt which is significantly below what it was at that time. So you have a comparable result with far better portfolio with the transformation that we have implemented, far more specialty, far more resilient, higher margin. And on top of that, you have falling debt. So I think in terms of value creation for our shareholders is quite significant.So we are far from what you just described, which is 2021 H2 guidance is below 2020 is not true. And if you look really in detail, and I encourage you to discuss with Beatrice and Peter, they would be really happy to discuss with you, it's quite a very robust guidance. Not only H2, but you have also to look at the full year. Maybe I could finish also with that, we are building certainly, and you know how focused we are on delivering quarter-by-quarter and the full year. But you should not forget the fact that we are building also a company for the long term, very solid, very resilient and very robust fit.And this is also what we are doing. So quarter-by-quarter is important. Full year, I think, is more important. And certainly, the way we develop our ability to deliver for 2024 year by year is very important for you because it's really the execution of the strategy that we have announced. And we are very proud of that because, in fact, we go back to record level, but we saw better portfolio again and follow on that.
A question from Andreas Heine from Stifel.
Sorry on that. Just what I propose is that because we run out of time, maybe I take again a couple of questions and with pleasure, and maybe we stop there. And certainly, Beatrice and Peter and myself, if needed, and Marie-José, we'd be able to take a question separately afterwards in the afternoon. Okay?
Okay. I start with a few chemicals. Could you outline a little bit what you expect as trends sequentially going into the second half, so how is animal nutrition demand and the refinery part doing? It's the first one. Secondly, you were talking about a new wave in raw material price increases. Part of that is the acrylics as far as I can see it, at least on average, rates seems to be even better in U.S. and Europe if it comes to acrylic margins. I would like to have your thoughts on that.And last, Asia. At first, I think I missed to congratulate you on buying the second half of the site for EUR 70 million in 2019. So sorry for that. And Asia, yes, we are looking for a partner, at least that was what I was thinking from the strategic targets. Isn't that now the right time to look for a partner as the market is very balanced and margins are attractive?
What was the last question? Sorry, Andreas.
Whether you now would think that it is a good time to find a partner for Asian acquisitions.
Okay. So many questions. I would say, first of all, thank you for the comments on our investments in acrylics in China because we could have mentioned that, but we did not do it. But it's clear that the second tranche that we bought at a very discounted price in the context of today, I mean, payback is incredible. So I think even in a strategy of pure specialties that we have, you can see that what we have done on some intermediates like acrylic in China, we benefit from it, and it's a strong cash generation that we can reemploy in our specialty. So thank you for the comment.Is that the right time to find a partner? I would say yes and no. First of all, we believe that even if there will still be some volatility in acrylics in China, market conditions in the mid-run should stay rather good in China. So we have some time to discuss, and we can continue to develop the profitability there. As you know, we have, in terms of disposal program or deconsolidation program to make it larger, our priority now is to look at our fluorogases. So it doesn't mean that we cannot manage 2 things at the same time. It's just that we have already managed acquisition and disposal sequentially. And it has been very good for our ability to execute, to integrate on top of all the rest.So we have contacts. It's not a bad time to develop contacts, I agree with you. It doesn't mean that it's necessarily the right time to execute the partnership. But we listen to the market anyway. And our strategy is clear on that. So you were wise to mention this point through your question.I think you had a point on the animal nutrition demand in H2, if we were -- and also refining. So we are more in the thiochemicals segment. Our feeling -- to be frank, this thiochemical, it has not been one of the -- it has been okay, solid, but not the bright star of the first semester. And -- but looking ahead in the second semester, it seems to us that refining is getting better, and I think it was one of your questions. Animal nutrition should be okay, but we don't expect necessary -- let's say, neutral, I would say, for the second semester. We are a little bit attentive to the development of the health situation in Malaysia. You see that the COVID is again strong there.So depending on that, you can have some constraints about production for our customers and for ourselves. So we monitor that very closely. But I would say beyond that, I would say, [ monitor ] on the second semester for animal nutrition and positive on the refining. Especially with bio-refining, this is what is interesting. And it's not only Asia, but also U.S. where biorefinery is developing and is good for our products. Did -- I checked with my team if I answered the question. Any more question?
That one was [ trends ] and the last one was, yes, acrylics.
As I mentioned, they will stay and see for the coming quarters, I have no doubt about that. But I would say that Q2 is a peak. It's certainly a peak because you have -- what you have seen on supply chain, the fact that the world as a whole is constrained in terms of materials, and you know it yourself. You can read it in the newspapers. Certainly, acrylic is a little bit in the same context. So we benefit from it in the Q2, and I would not call that normal condition. So you can have some normalization, but still staying at a good level. So I have no worries there.But don't -- this is what I mentioned. I think Q2 is fantastic. You don't extrapolate the kind of growth in Q2 for -- on everything forever. It doesn't work like that. But we remain confident, and our results will continue to be robust overall, it's my conclusion, fully in line with our ambition for 2024. So the team is really quite excited, motivated by the quality of the result of Q2, confident on the H2 and for the coming years.And what is important for me, it will be my last words, is not -- okay. Macro is one thing, and we appreciate when macro is better. What is very important is what you do structurally. And I think the opportunity is coming from sustainabilities, mega trend. For a company like Arkema, which has spent so much time energy resources to get positioned is very exciting. So it's my conclusion.Thank you for your attention, and I wish you all a nice summer and vacation for -- a nice vacation for the ones who took them now. Thank you.
Thank you, ladies and gentlemen. This concludes our conference call. Thank you all for your participation. You may now disconnect.