Arkema Q3 net income declines 16% year-over-year to €109M as sales rise 19% to €1.85B; CEO says results boosted by strong performance in Asia, new markets developed with performance polymers, particularly solutions for sustainable development

PARIS , November 9, 2011 (press release) – STRONG PERFORMANCE
SUPPORTED BY ASIA AND THE DEVELOPMENT OF SPECIALTIES

• Sales up by 19% to €1,849 million
• EBITDA at €263 million, 7% up on 3rd quarter 2010
• Continued growth momentum in Asia and in specialty polymers
• Integration of coating resins acquired from Total
• Adjusted net income of €2.10 per share and positive free cash flow1 of €193 million
• Target for the year confirmed in a more uncertain macro-economic environment

The Board of Directors of Arkema met on November 8th 2011 to review the Company’s condensed consolidated accounts for 3rd quarter 2011. Thierry Le Hénaff, Chairman and CEO of Arkema, stated: 

In 3rd quarter, our Group achieved an excellent performance, fully in line with our expectations, and confirming the very positive trend in the level of the Company’s results over a few years. This performance was boosted by strong growth in Asia, a region that now accounts for 20% of our sales, and new markets developed with our performance polymers, in particular in solutions for sustainable development. The end of 3rd quarter saw a growing caution by certain customers in their inventory management, reflecting the current macro-economic conditions.

Finally, we were pleased to welcome, in July, the 1,750 employees from Cray Valley, Cook Composite and Polymers and Sartomer after the acquisition of Total specialty resins. With those new businesses, Arkema has become one of the leader in the coating materials market. 

3RD QUARTER 2011 ACTIVITY

Sales reached €1,849 million, 19% up on 3rd quarter 2010. The +12.3% price effect reflects the strong increases in sales prices across the businesses, thereby offsetting the significant rise in raw material costs year on year, and the ongoing repositioning of our product portfolio in higher added value markets, in particular in Performance Products. The expected return to a more traditional seasonal pattern compared to an atypical 3rd quarter 2010, combined with a challenging construction market in Europe for PVC, resulted in a 3.7% drop in volumes. The +13.2% scope of business effect essentially corresponds to the integration of Total’s specialty resins which became effective on July 1st 2011. Finally, the -3.2% currency translation effect
essentially reflects the strengthening of the euro vs the US dollar.

EBITDA rose by 7% to reach €263 million against €246 million in 3rd quarter 2010. Compared to the high comparison base of 2010, the increase in EBITDA reflects the Group’s growth momentum with the startup of production plants in China, many innovations in the field of sustainable development solutions and the acquisition of Total’s specialty resins. It also translates Arkema’s ability to fully pass on rises in raw material costs to its sales prices. Finally, EBITDA includes a negative translation effect of -€11 million.

EBITDA margin stood at 14.2%, with Industrial Chemicals and Performance Products overall achieving a 17.5% EBITDA margin.

Recurring operating income reached €184 million against €172 million in 3rd quarter 2010, after deduction of €79 million depreciation and amortization, €5 million up on 3rd quarter 2010 following the integration of Total’s specialty resins.

Non-recurring items which represent -€27 million (against +€1 million in 3rd quarter 2010) are linked primarily to the acquisition of Total’s specialty resins and in particular the accounting step-up of inventories to market value.

Adjusted net income stood at €130 million against €128 million in 3rd quarter 2010. It includes a €37 million income tax expense representing 20% of the recurring operating income which takes account of the impact of a one-off related to the acquisition of Total resins. Financial expenses of €15 million include, over the quarter, expenses incurred in the setting-up of a new credit line as well as the interest on the October 2010 bond issue.

Net income Group share stood at €109 million (€130 million in 3rd quarter 2010).



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