Arkema SA

PAR:AKE

Earnings Call Transcript 2022-Q3

[Operator]

Ladies and gentlemen, welcome to the Arkema's Third Quarter Results Conference Call. I will now hand over to Thierry Le Henaff, CEO. Sir, please go ahead.

[Thierry Le Hénaff, executive]

Thank you very much. Good morning, everyone. Welcome to Arkema Q3 2022 Results Conference Call. With me today are Marie-Jose Donsion, our CFO; and the Investor Relations team.

As usual, to support this conference call, we have posted the presentation on our website, which details our third quarter performance and confirmed full year outlook. I will comment the highlights of the quarter before letting Marie-Jose go through the financials in more detail. And otherwise, we will answer your questions at the end of the call.

We delivered a very solid set of results with a record Q3 EBITDA, slightly above last year level. The cash flow generation was strong. As you know, this performance was achieved in a challenging operating environment with elevated inflation, the energy crisis in Europe as well the clear slowdown again in Europe, which amplified by destocking in the construction market impacted our volumes. We expect, obviously, this destocking to continue into Q4.

More broadly, the results show clear contrast depending on which region and which market we are talking about, the bright spot being the U.S., with Europe being more challenging and Asia between the 2. We'll come back to this in more detail.

These results are in line with our expectations and with our confirmed full year guidance of an EBITDA of EUR 2.1 billion. Specifically, I would like to mention the following key points of the third quarter. Arkema's EBITDA rose by nearly 5% to EUR 495 million and the EBITDA margin came close to the 17% level without reaching the very high level of the first half. While intermediates were down, as expected, this performance was driven by our specialty material with an 8% increase in EBITDA, thanks to a number of factors.

Firstly, our pricing power continued across all businesses to offset the ongoing inflationary trends in raw material and energy costs. Although the temporary tightness in PVDF is as expected and accurate spreads have normalized in Europe and Asia. Our product mix was positive as appetite for high value-added applications in areas like clean mobility, light weighting, 3D printing and value-based materials remain well-oriented.

Thirdly, our balanced geographical and end market exposure served us well. Europe slowed down materially impacted by destocking in the construction market, but the excellent contribution from the Americas and to a lesser extent, Asia, where China nevertheless remains soft, enabled us to offset the weakness in Europe. We have also observed in Q3 a stabilization of raw materials prices, even the first signs of declines. This decline should accelerate in Q4, but the impact on the P&L should take 3 to 6 months.

Looking briefly at Arkema segment. Bostik and Advanced Materials delivered solid results. Bostik's EBITDA resisted well despite half of the sales being exposed to construction, growing by 14% in the quarter, driven by their pricing power, product mix and of course, the integration of Ashland Adhesives, confirming the quality of this recent acquisition. We expect Bostik volumes to continue to suffer in the midterm, but we should start to see some benefit from lower raw materials as we go into 2023.

Like we have seen through this year, Advanced Materials earnings rose strongly driven by our innovation and application of how in megatrends. High Performance Polymer we have a standout performance with the exposure of the innovation to megatrends despite progressive normalization on PVDF prices and some exciting product introduction at key customers in areas like sport and mobility. Regarding performance additives, we delivered a resilient performance despite lower volumes, reflecting the macro environment.

In Coating Solutions, EBITDA was lower than last year's very high levels. Conditions in upstream acrylic, which represent as you know around 1/3 of segment sales were more challenging in Europe. Pricing power remained solid in the downstream, but their volumes were impacted by destocking in construction-related markets. In Intermediates, the dynamic in refrigerant gases remained good, while market conditions for acrylic in China, as expected, were challenging after a few very tight quarters.

Last but not least, I'm sure you noticed it, Arkema generated excellent cash flow this quarter, thanks to the level of EBITDA and our focus on managing working capital. This impacted favorably the balance sheet, the low level of debt being a key asset for Arkema. Beyond the financials, we also continue to work on our long-term ambition this quarter with a strong emphasis on sustainability, which is at the heart of our development strategy. We published in July our new more ambitious climate plan aligned with the 1.5-degree trajectory including Scope 3 emissions and we launched a number of innovative products linked to the circular economy.

We also continue to invest in our employees, and we are proud that Arkema is very well-ranked among the world's best employers published by Forbes this year. Our progress in ESG was also recognized with Euronext confirming Arkema present in the [indiscernible] and Moody's ESG Solutions rating agency improving our overall score, placing Arkema among the best companies in sector.

In terms of organic growth, we are making headway with our various ongoing projects. In our new Polymer 11 plant in Singapore, we have produced the first tonnes and the startup phase should be completed by year-end. We have around 6 months delay with HF plant with Nutrien due to some adjustment, but we confirm the level of contribution for this project next year, more weighted towards the second half.

Our other project, which will all strengthen our sustainable growth profile are progressing well. And all in all, we confirm an expected EBITDA contribution of EUR 50 million to EUR 70 million next year as a matter of fact, more towards the upper end of the range. On the M&A front, in early September, we finalized the acquisition of Polimeros Especiales and we announced earlier this month the divestment of Febex, small companies specialized in phosphorus-based product that fits within the performance additive business, but had very limited synergy with the rest of the group. So we continue to improve the portfolio.

I will comment on the outlook at the end of the call, so I would now hand it over to Marie-Jose. Thank you for your attention.

[Marie-José Donsion, executive]

Thank you, Thierry. I'll start with the revenues. At EUR 3 billion sales, up 24% year-on-year and up 11% organically. The price effect at plus 19% [indiscernible] driver, reflecting our pricing policy in the face of continued cost inflation as well as a better product mix. Group volumes were down close to 8%, mainly as a result of lower activity levels in Europe and destocking in construction, which impacted primarily Bostik and Coatings segment.

The currency effect is a positive 9% driven by a stronger U.S. dollar and Chinese yuan versus the euro. The scope effect of plus 3.8% is linked to the integration of Ashland's adhesive business. Permoseal additives as well and Polimeros Especiales in construction -- in Coating Solutions.

Q3 EBITDA came at EUR 495 million with a solid growth in Specialty Materials, driven in particular by Advanced Materials, while Coating Solutions and intermediates were below last year's very high level as Thierry detailed earlier. I take this opportunity to confirm that Ashland's integration is taking place smoothly and delivers according to business plan around EUR 20 million EBITDA per quarter. Recurring EBIT came to EUR 356 million, up 4% related to last year. REBIT margin stood at 12%, moderating somewhat versus the 14.3% achieved in Q3 '21.

Nonrecurring items amount to EUR 35 million and include EUR 21 million of purchase accounting depreciation and amortization and EUR 14 million one-off charges, restructuring and legal expenses. Financial result stands at minus EUR 17 million, in line with last year's level. At EUR 76 million, the tax charge reflects higher earnings and their geographic split. Excluding exceptional items, the tax rate stands at 21% of recurring EBIT year-to-date. Consequently, Q3 adjusted net income is similar to last year's level at EUR 260 million, which corresponds to EUR 3.5 per share.

Moving on to cash flow and net debt. As you could see, Q3 recurring cash flow is up strongly to EUR 434 million. Cash flow generation benefits from EUR 138 million inflow linked to the evolution of working capital. I think this reflects these results from our good operating discipline and also our continuous monitoring of our credit risk and inventory levels. The working capital ratio on annualized sales stands at 15.5% versus 12.3% last year and is below the 16.4% pre-COVID level of end September '19.

It is worth noting that in the context of increasing selling prices, cost inflation and higher value inventories, the working capital increased in the 9 months by around EUR 500 million compared with the end 2021. Total capital expenditure amounted to EUR 152 million in the quarter. It encompasses exceptional CapEx for EUR 21 million and a recurring CapEx for EUR 131 million.

In Q3, we also recorded a cash outflow of EUR 121 million related to portfolio management operations linked mainly with the acquisitions of Permoseal in South Africa and Polimeros in Mexico. Net debt at the end of September '22, therefore, amounts to EUR 2.6 billion, including EUR 700 million of hybrid bonds, a little below the quarter 2 level, thanks to our strong cash generation. The net debt to last 12-month EBITDA ratio stands at 1.2x.

I thank you for your attention, and we'll now hand it over back to Thierry for the outlook.

[Thierry Le Hénaff, executive]

Thank you, Marie-Jose. As you know, there has been a clear change in the economic environment currently much more pronounced in Europe due to the energy crisis, the slowdown in construction, you are well aware of it, which is temporarily amplified by destocking by certain customers. So those elements were anticipated. I think we had the opportunity to talk about it a couple of months ago. It was well factored into our full year guidance, which we are confirming and which will make overall 2022 a very strong year with 2 different halves as is now becoming often the case.

The implicit first quarter guidance factors in some expected customer destocking, while Q4 EBITDA will be below last year performance, which was by far our best ever Q4, thanks to significant restocking, it should end up around Q4 '19 level. But despite a much less favorable economic environment. So structurally, it will be better than Q4 '19. We observed that raw material prices have started to decrease, reflecting the short-term macro. We should benefit at a certain point or most downstream activities. So this is more an upside for '23 around spring time, I mentioned 3 to 6 months to take into account the effect of inventories.

Over the coming months, we have 2 key priorities. Working as usual for Arkema on 2 time horizons, let's say, short term, long term to make it simple. Firstly, among other priorities, we'll focus on cash flow. You could see the benefit of this focus on the third quarter and we will continue and adapt to the changing economic environment with actions on costs and inventories.

Secondly, helped by our strong balance sheet that you recognize and our diversification in terms of end markets and geographies, we will execute our long-term strategy in all its aspects, offering product innovation for sustainability, making further progress on operational excellence, building a less carbon-intensive trajectory and fully engaging with employees on all those subjects as well as on continuing to digitalize and modernize our work organization. As you know, we are well on track regarding our 2024 trajectory. And in fact, we are starting to think about a longer-term ambition and targets for the group.

I thank you very much for your attention, and we are now, together with Marie-Jose, ready to answer your questions. Thank you.

[Operator]

[Operator Instructions] First question from Matthew Yates from Bank of America.

[Matthew Yates, analyst]

I've been seeing the Trinseo results. I'm certainly glad that Arkema is no longer in the PMMA business and perhaps put the valuation you got for that business in header light. So I wanted to ask about plans exiting the other parts of the portfolio that you've highlighted as noncore. The upstream acrylic position in China, you said needs to have better integration one way or the other.

Is there a greater sense of urgency on finding a solution for that now that we're seeing spreads come down? And then with regards to fluorogases, I appreciate you made the announcement recently that you continue to prune that portfolio. But overall, should we continue to expect progress over the next year or so towards a simpler Arkema portfolio?

[Thierry Le Hénaff, executive]

Okay. Matthew, so hello, and thank you for the fair question, which we had the opportunity to discuss already in -- also in the past. Clearly, our strategy is very clear, and you're right to mention it for fluorogas and China. Thank you for mentioning that PMMA was certainly done at the right moment. So we appreciate that. And we are -- even if fluorogas and what we want to do medium term in China, acrylics is really -- we start the process, as we mentioned a couple of months ago. I would say that we are not sitting still because you have seen the disposal of Febex. So you could argue that it's small, but at the end of the day, still cash, which enters something which is nonstrategic for the company, which shows you that we -- again, on M&A, will continue, it's a signal that on M&A, we continue to be dynamic as always.

On fluorogas, which is your main point, I would not say that many things have happened since we talked last time because it was in September, but we have structured the process. We have -- which mean also with advisers, et cetera, and we are launching the process. So it's really starting. Now is there a sense of urgency? I don't like too much this word. As you know me, I think same for acquisition. I think there is -- on M&A, it's not a matter of urgency. It's a matter of finding the right balance between speed, price, timing, the world is very volatile. So I think timing is important. So you can trust us when we say that we want to do it because we have done so much in the start of Arkema. But again, we want to manage the timing under our control. So no sense of urgency, but a clear desire to do it.

[Matthew Yates, analyst]

And maybe if I can ask another one. You said the Ashland acquisition was performing broadly in line with the plan you have. Now you've owned the asset for a little bit longer. Any further thoughts on sort of positive or negative surprises you've seen in the asset base or the customer reception to the portfolio?

[Thierry Le Hénaff, executive]

I would maybe start with the confirmation, which this is why we bought it, is that it's a resilient business. It's in the U.S. for most of it, 90% in the U.S. is, as you know, pressure-sensitive adhesives linked to resilient businesses. And I know that in the current year, there are plenty of acquisition everywhere, which we have done in the past 6 months to 12 months and not all are resilient by, I would say, in the industry or outside of the industry. We are very pleased to see that Ashland, it's a confirmation, it's a resilient business.

Now in terms of culture, again, another confirmation is really fitting very well with Arkema, they are strong people. They are dedicated to performance. They are also -- on ESG, it's really an awareness which was developed inside Ashland itself. And so really, we are very pleased with what we see. Surprises, positive, negative, I would say no, we spend really -- we had in-depth discussion with them before because it was a significant acquisition for Arkema. And because of that, I would not say we have some surprises. Potential is really there. And we are really focusing short term to confirm the resilience of the performance and to make the integration as much as possible from information system to raw material to business synergies with Coating Solutions and with Bostik. So confirmation, I would say.

[Operator]

Next question from Martin Roediger from Kepler Cheuvreux.

[Martin Roediger, analyst]

I have 2 questions. First, on the business environment. Can you talk a bit about your order books in Q4, the demand patterns in October and beginning of November? You mentioned already that you see customer destocking. You mentioned already that North America is strong, but Europe is weak. But I'm more interested in the customer industries beyond construction. Construction, you mentioned also is weak, but other end markets such as automotive, consumer goods. That would be my first question.

And the second question is on Coating Solutions. You indicate that the upstream profitability dropped in the third quarter. Is there any meaningful gap in margins between upstream and downstream? If so is downstream now more profitable than upstream? And regarding acrylics, do you see margins in acrylics at low cycle conditions or still at mid-cycle conditions?

[Thierry Le Hénaff, executive]

Okay. So thank you, Martin, for your question. I would say on the macro -- okay, I will share what we see, but there is nothing different from what you can hear from other people. You know we are a diversified market base. Construction is 28% as you know, 1/3 in each region. So spread, Europe is about 10%. But clearly, strong destocking in European construction, I would say, in U.S., far more moderate so far. And China, it was already softer since the start of the year. So I think -- and normally in Asia, they don't build as much stock. So it's less an issue of destocking. But clearly, in Europe, the underlying demand that you can measure, you have on construction, you have external statistics was amplified by destocking.

With regard to auto, in fact, auto is a bit special because the starting point was rather low because of lack of components. And because of that, you don't see so much slowdown in auto, but not so much a judgment about the fact that auto is growing is more judgment about the fact that because there was a sort of backlog on auto. And so we don't see the -- if it is your question, we don't see the slowdown on auto. And I'm not counting electrical vehicle because this is on top of it. I was talking more on the traditional auto. Then we have the growth coming from the battery.

On consumer goods, sport is doing very well, but also because we have a lot of innovation, new platform by your base products and difficult for me to judge, for example, the base business, electronics, consumer electronics is slowing down. So I would say -- so you have -- it's interesting because we are a sort of transition phase and not only Arkema, everybody, about the macro. So the macro will stabilize at a certain point. But so far, depending on which region and which end market, you have plenty of different momentum. So I try to answer the one you asked me a question about.

With regard to Coating Solution, it's more maybe with the exception of Europe, it's more which because of the specific contract is suffering more. But for the -- it's more a topic of volumes. And don't forget that -- don't forget that for coating the volume at the end of the year is a low season. So you have the traditional effect of volume that you did not see last year because it was a restocking mode for many of our markets. This year is more from the standpoint standard. So you have the seasonality, which is already low starting in October. On top of that, you have a slowdown in Europe.

China construction is quite soft as everybody knows. So it's more a topic of volumes and a topic of the cycle. But clearly, if we look at Asia acrylic, including China, I would say U.S. is quite resilient. Europe completely an issue of volume destocking, okay? So our focus is on stock. We are reducing our stock. So -- and China, the cycle is really down. But then it's end of the year. So it doesn't -- it does not -- don't extrapolate for what it could be for semester for China acrylic because it can move very fast, okay?

And I don't -- I would like to make a comment on destocking maybe, which is a general comment. Again, depending on the -- if you take all the company, let's say, in Chemicals, depending on your positioning on end market, you have clearly different volume trend and some destocking now that some would see destocking later based on what end market positioned on. So for me to have some destocking now, it's not a bad thing. I prefer to have destocking. For example, in construction, even for adhesives and coating today and to have a net base end of the year or early next year than the contrary. So again, you have -- in some negative, you have also some positive. So what is important is to keep the big picture.

[Operator]

Next question from Charles Webb from Morgan Stanley.

[Charles Webb, analyst]

Maybe just following up on your last point there, Thierry, around destocking, not extrapolating per se, the fourth quarter. How -- when we think about that sequential decline in the fourth quarter, how much of that is just an acceleration of that destocking plus some of the seasonal effect? Or are there any other factors we should be considering in Q4 where you're proactively also kind of ready optimizing cash flow over EBITDA. Just kind of trying to get a gauge on that for the fourth quarter and then how we think about next year or the start of next year? And just on that destocking, do you think much of that will be done by Q4? Or do you think some of that lingers into Q1 just in terms of the reality of how quick that destocking can happen?

And then second question, just on Advanced Materials. It's clearly been a very strong year in 2022. You've alluded to some perhaps over-earning in areas like PVDF, but other trends, obviously still very strong. So just how do you think about Advanced Materials into next year if we start to see a bit of deflation creeping in, where does a normalized basis look like for 2023 or at least kind of directionally versus what has been, as I said, a fantastic performance this year.

[Thierry Le Hénaff, executive]

Okay, Charlie, thank you for your question. I would be modest on your 2 questions or humble. I think the visibility as you know on destocking is a difficult quarter. So you -- and we have many end markets. So some -- clearly, construction, it will not happen for many months again. So we started early, maybe some will happen before. So it's difficult to judge. There will still be some destocking certainly, but it's not on Arkema, I think everybody, certainly in the first quarter of next year, I would be surprised because some markets maybe will adjust later.

Certainly, construction in Europe. When I see the kind of decline we have, I assume it will not stay too long. So hopefully, at the end of the year, the base will be quite healthy. After that, your question is what will it be the demand in Q1 2023, you don't know, I don't know. I mean, we can invent figures, but then it's more about the general macro where we have still uncertainties. What we think is that we are very solid on our feet that will be when construction market will pick up again, we'll be in very good shape. But for the time being, we need to digest this kind of restocking in them. But it's an affecting factor of what has happened before. I never forget that we have restocking. There have been some starting the mid-20 very strong years.

And so now there is a sort of digestion up until when, honestly, nobody knows, but because you don't know what is the stock on all along the chain. But when you look at Q4, because I see your underlying comment, which is -- if you look at it with a little bit from the top. So last year was very, very strong with a strong restocking completely atypical with kind of Q4 we have had so far. So then you go back to '19 pre-COVID and in the pre-COVID we were delivering the same as we planned for Q4 this year. And with the difference is that in the pre-COVID there was no destocking. And this year, they will be destocking.

So it's not -- when you look at it from a structural standpoint, it's not so bad. So -- okay. So I wanted to share this qualitative point with you. And on your point on cash flow versus EBITDA, we don't arbitrate. This means that we deliver, as usual, the best EBITDA that we can. And we'll try to manage our cash flow according to the market condition. I think we did a good job. We continue to do so. But it's not one again the other, if it is your question.

With regard to Advanced Materials, thank you for noticing that we delivered a super performance. As you know, we are -- we try to be transparent to the market. There may be some time people think that we are a bit too cautious, but I think it's our time, and we manage it like this. We think that there is -- because the question was asked some other earning in this year, mostly PVDF and acrylics, and we give a number close to EUR 400 million, which we confirm year-on-year. So after that, you can say as hard for a bit more half a little bit less than us. But let's say, this is the order of magnitude which will impact PVDF, even if our volume will continue to grow in PVDF, it's not a matter of volume at all. It's just that there was too much tightness at the beginning of the year.

But on the other side polyamide will be good next year because we'll get the new plant. We have been quite tight in terms of delivery. So fortunately, we will -- and we gave guidance on the contribution of all our projects. So we have that also. Now it's too early to give you guidance for '23. We never do it. We'll not do it this year. Normally, it's when we publish annual results that will come back to you. And that we try to guide you as much as we can on what we could do in '23. But for the time being, we really focus on managing our cash, our cost to be prepared for next year as we are doing every year.

[Operator]

Next question from Jaideep Pandya from OFI Research.

[Jaideep Pandya, analyst]

Yes. The first question is on adhesives really here. And I appreciate, sorry for asking a '23 question. But when you think about the moving parts of price versus raw material relief and then extra month of Ashland plus synergies, plus FX at least seems that you will be able to grow next year. So just wanted to understand what sort of margin progression should we expect in adhesives next year? And do you think you're confident that you can grow in absolute EBITDA? That's my first question.

The second question is on PVDF actually. And given the Nutrien project and you're sort of improving the ecological footprint of the value chain, what are your plans for investments in the U.S., especially under the IRA now? I mean do you intend to put greenfield plant or just continue the brownfield expansion? That's my second question.

And the third question really is around the additive side of things, where you did flag some destocking. I just want to understand how is the order book looking like for molecular seeds and with regards to cross linkers as well, what is the competitive dynamics these days with regards to cross linkers?

[Operator]

Sorry, Mr. Le Henaff, we can't hear you. Okay. Maybe we have a technical problem. Yes, we have a problem with the speaker. I will reconnect the line. Sorry for this problem. Yes, Mr. Le Henaff, yes, you are connected. We had a technical problem with the line.

[Thierry Le Hénaff, executive]

Okay. You listen to me or you can hear?

[Operator]

Yes, we can hear you. Yes, we can hear you. Go ahead.

[Thierry Le Hénaff, executive]

So [ Phillip ], sorry, I don't know if there was any technical interruption. I don't know why, but I don't know where I was. But just to confirm that on adhesive we are confident to grow next year. I think we have the structural element, which will take us and there is uncertainty about the macro, but adhesive will continue to grow. They were impacted this year by the level of raw material, as you know, and at the end of the year by the construction. But again, we are -- I think we are in the right direction on a disease. On PVDF, as you can imagine, I will not announce to you things that we have not announced externally yet. We'll do it at our pace.

What I can say -- and thank you for the question, is that we have capacity starting in China early next year, the same for France, and that we have a significant ambition in the U.S. We are already very strong, and we'll continue to invest in the U.S. Now when, how much, will be disclosed at a certain point, but we have our plans and you wisely mentioned that there are also some support that can be given in the U.S. and we'll make our efforts to benefit from it. So yes, clearly, U.S. but it's not only for PVDF, it's for other end markets and technologies is a strong point of Arkema, as you know, from history, and we'll continue to invest materially in the coming years in the U.S., including if we have the opportunity on M&A. And so just to conclude on PVDF, yes, there would be movement in the U.S., but too early to say, but we know exactly what we want to do.

[Jaideep Pandya, analyst]

If I can just ask one follow-up to Marie-Jose actually. Well, first of all, well done on the free cash flow. And when we think about '23, what sort of CapEx level should we think about? And from the envelope of the outflow of working capital, how much do you think based on the way raw materials are trending these days could we see as an inflow next year?

[Marie-José Donsion, executive]

So thank you, Jaideep. I confirm the culture of the company is very much focused on cash. I mean it's part of the incentives of all managers. So I guess it helps having a conversation on that metric internally. Basically, as I mentioned, in cumulative for the 9 months, we have accumulated still EUR 0.5 billion in working capital value. I expect some reversal. I mean, the reversal has partly started in Q3. I obviously expect some additional reversal in Q4.

Depending on the evolution of the inflation metrics, obviously, there could be actually some benefit into next year. So it's a lot pending, let's say, on how much the price of raw materials will fluctuate. And the volumes, in fact, will fluctuate. As Thierry mentioned, our visibility level for '23 is frankly limited, and there are lots of many potential scenarios. So it's difficult to be very precise on this. But I think we've demonstrated in the past that we are focused on this metric, and we normally optimize the performance of Arkema on cash.

[Thierry Le Hénaff, executive]

And maybe to complete what Marie-Jose saying, as you point, you know our guidance on the cash flow generation, which is 40%.

[Marie-José Donsion, executive]

Conversion, yes.

[Thierry Le Hénaff, executive]

Conversion, so I think it applies every year. So cost of thing, at least around 40%. The second thing is that like-for-like between in given circumstances, I think we consider that and you know us now since many years, we have this ability to deliver superior performance in working capital and cash flow. So after that, as Marie-Jose mentioned, it depends on the macro itself and the parameters. But at given parameters, I think it would be, again, a superior performance. And with regard to CapEx, without giving more precise element [indiscernible] is too early.

So you know that we are always reasonable in terms of CapEx. But at the same time, we want to be able to support these opportunities coming from Megatrend, where we believe Arkema is incredible potential and with internal rate of return of our organic CapEx, we have to find this balance between deliver this growth on megatrends and being reasonable on the CapEx. And you also have in mind that we want to deliver our 1.5 degrees trajectory on the CO2 emission, okay.

So we are working on all these elements and the same as for EBITDA. I will come back to you. Marie-Jose I think, when we publish the full year results, we'll give more maturity on that.

[Marie-José Donsion, executive]

Mechanically, we will have some CapEx contributing later to the trajectory, the new trajectory of emissions. So this is factored in the new normative level of CapEx for the company.

[Operator]

Our next question from Andreas Heine from Stifel.

[Andreas Heine, analyst]

The first is really on the high-performance polymer. So you were talking in recent quarters that you are basically running at capacity, at least for the prime products, polyamide 11 and PVDF. Has that changed? So the destocking we see across many industries, is that also affecting the high-performance polymers, what can that be couple? And then the second is more on PVDF. So we see a normalization in prices. What is driving this? Is it competition from Chinese new capacities? Is this capacity additions by Western players? Or is there also a slowdown in demand.

[Thierry Le Hénaff, executive]

Okay. I don't think, Marie-Jose, correct me if I'm wrong, I don't think that the destocking is affecting HPP. So you might deliver or PVDF. It's not a matter of destocking, small matter of underlying demand for some of the end market. But on polyamide, we are sold out anyway. And on the -- so on PVDF, part of your point is true, which means that the -- that is temporary, there has been so much momentum on the first 6 months, 8 months on the batteries that this is -- there is some, let's say, I would not say destocking just the fact that you cannot continue at this pace at least. But overall, so we are quite optimistic on the volume for batteries. But I would say the last 4 months of the year shows some digestion of the trend, but nothing to worry about.

But -- so because of that, I would say, we are running at capacity, but there is not this tightness that we have seen at the beginning of the year. So it's one element. And the second one is that you start to see more capacities on PVDF, which weighs a little bit on the overall PVDF. But -- so this is what I can say.

[Andreas Heine, analyst]

Western capacity or Chinese capacity business change in the supply?

[Thierry Le Hénaff, executive]

No, it's more change capacity. The capacity -- yes, I would say in Europe and U.S., you will not see new capacities coming in the short term. You need some time to implement them. So it's more a topic for [indiscernible]. But you know our strategic in PVDF will refocus on the end of the range and the technology differentiation. We have a lot of technology assets, and we build our development of portfolio. This is why we try to find in terms of growth, the right balance between growing but growing on where we want to go. And this is a permanent strategic exercise and revisiting the market, the end market, and we are not talking a little about batteries and PVDF is plenty of markets. And challenge the team to make sure that we continue to deliver strong value going forward, as we have been doing in the past 15 years.

[Operator]

Next question from Georgina Iwamoto from Goldman Sachs.

[Georgina Iwamoto, analyst]

I've just got one question, Thierry and Marie-Jose. So my question is, I know you hesitate to do this, but I would really love if you could give us a bit of an overview of the subsegments and within performance additives. If you could give us some idea of the demand trends in Thiochemicals between animal nutrition and oil and gas and also in hydrogen peroxide, a lot of your competitors in Europe were facing a very tough environment with the energy prices recently. So any comments you can share would be great.

[Thierry Le Hénaff, executive]

I would say you will find -- Georgina, good to talk to you. You will find a little bit from a regional standpoint, the same as you find for the rest of the business, this means that U.S. very solid, quite strong and Asia in between. And I would say Europe suffering because of the lack of demand, you find that a little bit.

Now I would say with regard to animal nutrition, in terms of volume is still there oil and gas is very strong. So clearly, we benefit from it. It's not a big business for Arkema, as you know. But clearly, on the -- since you have a question specifically, we are quite solid there. Paper, what is into paper is difficult, challenging to give you the name. So you have what is linked to new energies because we have also some good exposure to what is new mobility, our new energy there is going quite well. So you have a mix. You have quite a mix and from end market standpoint. And from a regional standpoint, again, the U.S. is a more solid of the 3 regions. But overall, it was a quite robust performance of this performance of the segment.

[Operator]

We have no more questions for this moment. [Operator Instructions]

[Thierry Le Hénaff, executive]

Okay. If there is no more question, I'd like to thank you for your participation, for your questions, and I wish you a good day. Don't hesitate if you have any follow-up questions where it was...

[Operator]

Yes, we have -- sorry, we have a last question maybe from Laurent Favre from BNP.

[Laurent Favre, analyst]

Really sorry. I didn't realize you are wrapping up, Thierry. I had a follow-up on Jaideep's question on CapEx actually. I think all of us are modeling CapEx down quite a bit year-on-year into 2023. And I guess, we're assuming that there will be no exceptional CapEx for next year. I think, Marie-Jose, you're implying that there might be some on decarbonization. I'd just like to check, I guess, if there's anything you can say directionally for CapEx for next year?

[Marie-José Donsion, executive]

Actually, you're correct. We are completing the 2 exceptional projects that are in the portfolio, so namely Singapore and Nutrien in the U.S. So let's say, aside from some cut off EUR 10 million, EUR 20 million slip into next year. Definitely, I do not expect any exceptional spending there. What I was referring to is that the normative level of CapEx is roughly increasing to a bit higher than 6% on sales, which actually today now incorporates the CapEx linked to the carbonation. So the ratio previously was more in the range of 5.5% of our turnover, and it's been revised up 0.5 point to 6% to actually take those decarbonization CapEx into account.

[Thierry Le Hénaff, executive]

In fact, we are rather consistent with what we said so far. This means that we increased as Marie-Jose mentioned, the 5.5% to 6%. And on top of that, that we are in nuances, I would say we have maybe what, 2030, you say, as a cutoff from -- we spend a little bit in exceptional CapEx this year, okay. And so maybe you're a little bit high by 2030 this year and your CapEx estimate, but we'll have them next year. So altogether, it doesn't make more on exceptional except that there is a little bit of spillover to '23.

And when we increase the 5.5% to 6%, we explained that it was because of the 1.5 degrees trajectory. So we are all consistent now. What I added to that is that in terms of sequence, we don't want to miss any opportunities from megatrends because we are very strong there. And based on that, you can have, depending on which year, a little bit more, a little bit less. And so this we need to factor everything and to come back to you. But at the end, we are talking about nuances from something that we have largely covered together.

[Operator]

We have no more question.

[Thierry Le Hénaff, executive]

Okay. Thank you all, and I will not make my wrap up again. So have a nice day and don't hesitate if you have any follow-up with our teams. Okay. Bye-bye.

[Operator]

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