Arkema S.A.

Good morning, everyone. Welcome to our Q3 2021 Results Conference Call.

With me today are Marie-José Donsion, our CFO and the Investor Relations team. As usual, you can download the set of slides used during this webcast from our website and together with Marie-José we’ll be happy to answer your question at the end of the presentation.

Before commencing Q3 result, I would like to quickly come back on our new brand territory unveiled earlier this week, and this is a second time we have made such a change in the creation of Arkema. With our new identity, innovative material for a sustainable world, we are positioning our specialty materials at the heart of our ambition to play a leading role in addressing the world's major challenges.

In line with the strategy, we announced last year and placing our expertise of materials, science at the core. The timing of these new identity is good as Arkema deliver a set of excellent results in the third quarter, building on our strong dynamics in the beginning of the year.

Our teams can be proud of what they have accomplished and I feel that quarter-after-quarter, we are reaping the fruit of our strategy toward innovative and high performance materials. Over the past few years, we have accelerated Arkema’s repositioning of virtual growth markets.

And we have significantly strengthened our unique specialty materials platform around our three pillars of additive solution, advanced material and coating solutions. We have done this through acquisition, cutting edge innovation and high return CapEx and I expect that Arkema to continue to benefit from this strategy over the coming quarters and years thanks to the many exciting projects underway, which will enable us to fully capture of the significant growth opportunities from mega trends.

As you read in Q3, we achieved an EBITDA of €474 million at 54% year-on-year despite the negative scope effect of over €60 million. EBITDA margin reached a record level for third quarter at 19.8% or let's say 20% versus Q3, 2019 pre-COVID level of 17.4%.

We are very pleased with the quality of our reserves. Firstly, all of our specialty material segment contributed nicely with overall solid underlying volume growth in most of our markets, driven by accelerating demand for sustainable solution.

We're noting some exceptions in a small number of markets like automotive, oil and gas and paper. In parallel, our volumes were impacted by the lack of availability of certain material is not new to you, COVID really keep locked down in parts of South East Asia like Malaysia and the hostile [Ph] environment in China due to authorities measures to limit energy consumption.

In this context, volumes for the group are up more than 5% compared to last year, thanks especially to strong demand in high performance polymers and coating solution in market like batteries, consumer goods, eco-friendly paints, 3D printing and electronics. And a disease other laying demand remains from infrastructure that's for sure legacy for industrial application.

But with increasing raw material shortages had a negative impact estimated at 5% to 6% on volume for shortages, which is not insignificant. Indeed, our Q3 performance was achieved in a more difficult portion of context marked by rising raw material shortages, logistic constraints in HR and in the U.S.

and of course higher input cost. As you can see from the significant price effects in Q3 and why it is true that we benefit from tight market condition in the acrylics chain, our specialty material once again demonstrated robust pricing power in the face of accelerating higher raw materials, energy and logistics cost.

Thanks to our pricing actions, we managed to completely offset this negative impact at group level, including in our models from businesses like other additives, high performance polymer, and putting rising and additives, which is really, I think, a remarkable achievement in this context. We expect to see further increases in input costs in Q4.

So our pricing action will continue and the net pricing impact should again be at least neutral in Q4 for the group. Our Specialty Materials EBITDA reached EUR421 million, plus 45% against the Q3 2019 pre COVID level.

Speciality EBITDA margin was 20% thanks to the strong performance of high performance polymer and coating solution, while Bostik’s margin came in at 14% despite the mechanical derivative effect of pricing increases overall one point. So in spite of the headwinds of further input costs increases, as in fact, our volumes of raw material availability in Q4, we are maintaining Bostik’s 14% EBITDA margin target for the full year.

Frankly speaking, this would be a good performance for Bostik -- and aligning in recent years as this kind of environment is particularly challenging for businesses like additives. As you know, they have formulated products using a wide range of different raw material.

So there is just one of the components missing, we cannot make a product and we use a certain margin. Intermediates also recorded better than expected results as a negative scope effect link to the PMMA disposal was more than offset thanks to favorable market conditions in Asia I predict and solid fuel gases in the U.S.

Our specialty materials, which now represents nearly 90% of our sales are truly geared towards eco-friendly solution, high growth applications. They are driven by global mega trends and rapid rise of challenges of climate change, resource capacity, urbanization and new technologies amongst others.

From our five innovation platform aligned with the challenges we expect to generate additional sales of €500 million by 2024 and €1 billion by 2020 [Ph] versus 2019. These targets will be reviewed when we publish full year results and our feeling is that we'll be able to upgrade them given the current dynamic of new business development and positive outlook.

We’ll also try to give you more insight as regards this target. As you can see slide seven to nine.

There are multiple exciting examples of Arkema innovative solutions -- kitchen challenges the world is facing. In [Indiscernible] we are seeing a true acceleration in batteries.

And for us it is not just PVDF but the whole battery ecosystem including for example PA11, using casing and cooling lines, as well as tomorrow’s Bostik thermally conducive adhesive solution. If we look at H1, Arkema will also have a big part to play in addressing vehicles where our high performance PA11 as a compensate for the tank casing or as the liner inside the tank arose at the same time to reduce to very high pressure and reduce weight.

In addition our Elium composites are very promising for the tanks and also in terms of lightweight in for… When we look at living consultant home efficiency, we have really a wide range of eco-friendly solution over those three special key segments. Examples include bio-based and low VOC decorative paint nontoxic adhesive & sealant from Bostik, [Indiscernible] with Kynar Aquatec, which was to reduce temperature inside a building.

Consumer good is also an area where the acceleration of demand for products with higher performance, better underwater footprint and recyclability as well as improved design is most pronounced. We have a huge for example, and well recognized present high test performance sport shoes with outsole and payback.

Including 100% recycling offering, I could name also consumer electronics with Sartomer solutions in 5G also by your 3D printing glasses frame. Clearly it is a strength of our innovation and our best-in-class technology application of how it is instrumental in our ability to capture all these opportunities.

We are making solid progress on the two major CapEx which are directed towards sustainability which is Singapore, by your factory and also the new TMHF investment in the U.S. And finally, on the cash allocation front, we are on track to finalize by the end of November this €300 share buyback program launched in May after the divestment of PMMA.

And most of this share will be concerned as you know by next January. So in other in short, as a very positive quarter, you can see number of every other sector we are very pleased both from a financial and qualitative viewpoint despite an operational environment which is very demanding for the teams and will likely remain so in the near future.

As you're seeing GE outlook, which I will comment at the end of the presentation, we are very consistent for the rest of the year. So I will now hand it over to Marie-José, who will review in more details on those Q3 results.

Thank you, Thierry. And good morning to all of you.

I'll go quick to the financial. So regarding the sales bridge at €2.4 billion sales grew 29% organically one year versus 2020 and 17% versus the pre COVID Q3 19 level.

The volumes are up by over 5% relative to last year with a positive underlying momentum in all regions. The price effect is close to 24% which reflects the Adhesive’s pricing actions to offset higher input costs, as well as favorable conditions in the acrylic chain in all three regions as well.

This is there is a negative perimeter effects a bit short of 5% versus 2020, which is attributable to the divestment of PMMA in May of this year, and which is only partially offset with the bolt-ons that we have made in specialty materials. Currency had a slight positive impact of around 1% on sales in Q3 in light of the strengthening of the dollar versus the euro in particular.

Driven by higher volume, the positive net pricing and mix improvements Arkema achieved a very strong 54% growth in Q3 EBITDA at €474 million as mentioned by Thierry and looking at the EBITDA of the different segments we have, of course Bostik that achieved an EBITDA of €79 million at 8% year-on-year, thanks to a solid pricing power, leading to a broadly neutral net pricing. In fact, this has more than offset the effects of lower year-on-year volumes linked to raw material shortages and difficulties in logistics.

The underlying demand momentum though remains strong in all major markets. Advanced material EBITDA is up 40% year-on-year at €174 million, which is about 10% above the Q3 19 level, while the EBITDA margin remain at a high level above 22%.

The High Performance Polymers had a very strong quarter again, with strong volume growth in most end markets, especially batteries, electronics and consumer goods, and they also benefited from an improved product mix. Performance additives on the other hand, were less buoyant, let's say impacted by sluggish oil and gas and paper markets.

EBITDA of Coating Solutions is at €168 million so frankly, a strong year versus Q3 202013 as well as Q3 2019. The segment benefited from higher volumes across all major markets.

And naturally we benefited from the price increases in downstream activities of fetching high level material and energy costs, as well as from a favorable condition in the acrylics chain. Finally, Intermediates EBITDA grew 35% to €74 million thanks to a good market conditions in activity in Asia and in fuel gases in the U.S.

So with depreciation and amortization at €131 million or basically recurring EBIT came to €343 million, which is double last year level. And EBIT margins stood at 14.3% up from the 9% of last year.

So we can imagine this impacted very favorably the return on capital employed ratio. Financial results stood at €15 million versus €23 million in Q3 last year.

And this is clearly in light of the lower interest rate on debt swapped into dollars in our portfolio. In the first nine months, the recurring the effective tax rate came to 20% of recurring EBITDA, which is basically in line with the guidance we gave, and it is a bit below last year's level of 22%, thanks to a more favorable geographic split of profit.

Consequently, Q3 adjusted net income more than doubled year-on-year at €258 million which corresponds to €3.4 per share. Briefly on cash flow and debt, basically the Q3 recurring cash flow amounted to €236 million.

This is €311 million in Q3 2020. The difference comes from the working capital variance mainly, which represents an outflow of €103 million in the quarter versus an inflow of €158 million last year.

And this is the result of higher volumes of activity, as well as a price inflation, leading to a gradual rebuilding of, of inventories. The working capital ratio and annualized sales still stands at a low level of 12.3% versus a level of close to 14%.

The latter being basically what we consider to be close to a normative level. Capital Expenditure totaled €175 million in the quarter that's just €138 million last year, which reflects the momentum in exceptional CapEx as a result of the acceleration in the construction of the polyamide 11 plant in Singapore and the Nutrien project in the U.S.

So total recurring and exceptional capital expenditure is still expected to amount to around €750 million this year. Q3 free cash flow amounts to €74 million and includes the non-recurring outflow in the quarter of €99 million relating to the tax disbursements into the PMMA say in the U.S.

Consequently, net debt at the end of September is at €1.3 billion. This includes the €700 million of hybrid bonds, which remains the key stable quarter-on-quarter and the net debt level to last 12 months EBITDA ratios stands at €0.85.

Thank you very much for your attention. And now I’ll hand over to Thierry for the outlook.

Thank you, Marie-José, for this explanation. So after the – of third quarter fundamentals first quarter should be in line more or less with those we have seen in the past few months.

are in diminished goods across most of our end market. And we believe our unique portfolio specialty material is very well positioned to seize the growth opportunities thanks to our sustainable innovation and recent capacity additions.

We are however, mindful of the challenges in automotive into chip shortages and the energy rated restrictions in China. Of course with shortages and increase of raw material will remain a point of attention.

And we will adapt our pricing policy accordingly as we did in the previous quarters. We're confident that we can deliver a robust performance in the first quarter and so we decided to raise them for the sometime this year of full year 2021 guidance for specialty materials.

We now expect specialty materials begin to increase by at least 40% year-on-year in 2021 at constant scope and currency there says a plus 30% announced when we raise guidance for the H1 results publication in July. For the Group, we expect an EBITDA of around €1.6 billion in 2021.

This is the previous guidance which was €1.4 billion. This guidance shows a significant value creation we have generated over the past few years and will generate this year as our EBITDA will be well above the 19 and 18 levels, but with a much better mix and measure of that, as well as a smaller perimeter following the divestment of PMMA mix.

All the teams at Arkema are focussed on delivering the new vision for the company, which were nose at last year CMD. Innovation in specialty material is at the core of what we do to capture the huge opportunities for mega trends.

And at the heart of our brand positioning, we will also continue making value added bolt-on acquisitions specialty materials, progress with short strategic review in fuel gases, and to remain best-in-class within our sector in corporate social responsibility, including further significant progress on our carbon footprint reduction. Thank you very much for your attention.

And now together with Marie-José we are ready to answer your questions.

Good morning. Hi, José, good morning Thierry.

Thank you. Maybe first what can you tell us about 2022?

Is Arkema in a position to further grow EBITDA because the budget of comparison looks now very impressive, a challenge. Second, the cycle remains very good in creating end solutions.

When do you think you will go back to more normal market conditions out there notably from new capacities to come in acrylics in the acrylics market in Europe and North America in the next quarter? Do we have to worry about access to all materials for Arkema in the coming months?

Do you expect higher negative impact on volumes for additive? As you mentioned if I’m correct, minus 5% minus 6% of loss of volume seen in Q3 and in additives, could these shortages extend to all the businesses?

And last question, do you confirm that CapEx are going to reach a peak this year on should go down as from next year? Thank you.

Okay, thank you for your thank you for your questions. With regard to 2022, so clearly, we were positioned to the third quarter.

So I think, first of all, we need to appreciate the quality of the results. Otherwise, we already discussed what we have just achieved.

So I think it's important to recognize the quality with regard to 2022 we make use of semasa as I do every year. I think it's a topic to be more addressed than when we publish a full year.

So it delivers the first quarter and then they discuss 2022, what we try nobody knows exactly today what will be 2022 microenvironment. And I think that you look at 2021 you will remember the discussion we had in 2020.

Nobody would have predicted what has been 2021. So we can everybody can have an advice on the macro, which is a starting point on 2022.

But nobody knows exactly and everybody will be wrong. So it depends really on the assumption.

So what I often say is that and it has been, as you can see it has been quite beneficial is that inside Arkema we focus on the subtype and on the opposition, the to be able to adapt to and to be good at what will be the condition of the year. So I think every year we try to outperform the market.

This year it's absolutely awesome. And we are operating condition we are completely different from the one we would have seen for 2021.

So now for 2022 we'll continue on to bigger demands, we’ll continue to progress on the sustainability solutions, I mean will benefit from our new business in HPP, in additives, in downstream of equities. Certainly we should expect some normalization in a acrylic value chain.

But we know that but on the other side if volatile are getting well, we benefit from it. So it will be as usual as some of the elements.

But to go beyond that is too early. So what is clear is that we are confident and are positioning to do better than most of our peers in a given market.

And this is what we did this year, we did previous year, we try to do next year. With regard to the coating solution, you say, we should expect on things going back to normal or whatever first question to you is what is normal?

Because, I mean, it's, it's something which is a definition which is changing all the time. What is clear is that in coating solution, what we said has been true is that we are not satisfied with our performance in the past years, which means that we consider that developed profitability was not enough to reinvest them.

And we believe that this year we appreciate the fact that we did the right choices. And what we said was true, which means that it's a strong product line, and we appreciate that.

Now, it's clear that in some part, we are more than what should be normalized. So there could be some normalization to me, but it will stay at a solid, at a solid level.

After that there is a winner, it could normally -- it depends free, I mean, again, each context is different. So if you have some less tightness on the more capital intensive products, you will benefit from the downstream advisor.

So what is very important for Arkema again is a positioning, a frame downstream, different product line coatings or -- HPP performance additives to make sure that whatever the environment would perform well against competitor and we perform well, in absolute terms? So I think our positioning is better and better.

Now what, what can be market condition in acrylics is to tell you next year, or -- at which level we don't know exactly. But what is more important for us is to continue to improve actually our portfolio and to be more and more on our specialty.

And you see the full benefit clearly this year. On raw material.

Yes, it will continue to be challenging. But also we benefit from it.

You saw it in the in your previous question. So again, it's difficult to take one element and on the other.

So it's a sum of element. And we are clearly access to raw material is working against us this year and particularly with the businesses and pharmacy because as we mentioned fern is obviously a raw material which is missing.

This is a whole product that you cannot make. So it has a direct impact on the top line which we go to because we have lost more or less 5% of our reason in that we recoup when the raw material will be more accessible, but that we don't just because we could not make the product because one small additive was missing.

So what is our visibility on that? I think things will improve at which speed we don't know because we have all been surprised this year.

So it will not be -- it will not be easy to have a precise forecast. We think it will improve not in Q4, Q4 will be again difficult from the standpoint but hopefully in the first semester next year it will improve but again you have not, you have never a perfect environment.

So some environments are better for this project lines, some other are better for another product line. I think what is important for us is to be from a geographical and political standpoint to be balanced, also two different kinds of enrollment.

And the last one because you are many of them was CapEx. Do you want to answer Marie-José Donsion?

It is correct that the exceptional CapEx are hard to pick this year with €250 million spend in 2021 and basically since the start of both plants is taking place let's say in the second half of next year. We should basically as a tail of spending which probably will prevent something like €160 million next year.

So definitely this will reduce let’s say the total spend in CapEx that we that we project in 2022.

And again, maybe to complete what Marie-José -- I mean the CapEx we have this year we had last year we had next year's is exceptional CapEx. They are done for the good of the company which means they are very interested in CapEx in terms of return, in terms of sustainability component, and they are very, very good CapEx.

So for you is good news, because we are able to find project which really at the same time it will return and a significant improvement of the footprint of the company, both in terms of sustainability and in terms of innovation. So, you should appreciate that.

I'm sure you do.

I do. Thank you very much.

You're welcome.

Hi, Marie, hi Thierry, thank you for taking my questions. Just two please, I was thinking about the, the Nutrien project.

I think it's expected to come on sometime in 2022 just firstly, just from the timing of the start-up. And then secondly, what kind of contribution should we expect from that?

And then in the press release, I think you talked about the, that you were constrained or, or there was some capacity constrains from the dual controls in Asia acrylics. Is there any way of quantifying what that was and what you were seeing that picture turn and are you started to see more normal operation in Asia acrylics?

Thank you.

Okay. So with regard to Nutrien yes, it should start in the second quarter 2022.

So a little bit in advance compared to the Polyamides 11, if we keep the same track. In terms of contribution overall, for this big project we target to between four and five times EBITDA at maturity.

This means that let's say if we spend to say something around €150 million, you divide between 405 to be to get maturities as a profitability. And the maturity for this kind of big projects is after four to five years.

Okay. And then if you want to have an assumption, you like a liner from a zero point on four to five years, you take a liner progression, okay.

With regard to Asia capacity constraint?

Yes, sure. That especially now with this energy control, which has been a restriction, which has been implemented by the Chinese government we the acrylic is more tight even than it was at the beginning of the year, but you have less volume now.

So we put a pressure on the price, but you have less volume. So at the end you make certainly less money, but to the whole, it's clear that after many years where we have suffered and in, in China, we appreciate the fact that finally the result are really the expectation we had, which means that the investment we have made there, at least from a return on capital employed standpoint, we can debate about the cyclicality, but return on capital standpoint.

And I -- was is really very good. Now can stay next year at the same level?

The answer normally is no. I come back to the previous question from Emmanuel, there will be normalization.

The only thing is that what is a normal? I think it's what it has been in the previous years.

And it's below what it is this year. Now do we see but maybe it's a question which is beyond actually, do we see overall in our kind of products, significant capacity addition?

I would say, I would say no, the trend is less than it has been at a certain period, and this is for different reasons. The first reason is that the cost of making new capacity is more and more important, because of a lack of talent, not in our company, but for construction, for finding the lack of resources is true in the U.S.

It's true in Asia. And the cost of metal as you can see of is or any materials you need to build your plant is far more expensive because what you see on our, on pricing on our raw material is also true when you want to build the plant.

So you have a market condition which make the decision more difficult today to, to make. And I think the, from a CapEx standpoint we don't see significant capacity addition with regard to the products we are making, which is I believe a good thing knowing that in in China, for --we are starting from the high point in terms of capacity.

So we can only appreciate the fact that we start to see the light.

That's that's very helpful. Thank you.

Hi, good morning, Thierry and Marie-José. Couple of questions, please.

Maybe, maybe it's around the CapEx team, but very, very impressive performance in the materials division this quarter. And, and obviously that's an area you've been putting CapEx to work to try and support the future growth in these high margin, high return areas, but that even so given the, the growth that you're seeing and, and the mega trends you've talked about is this suggesting that we need to have an extended period of CapEx to add more capacity in areas like PVDF over the coming years.

So what you've described as exceptional CapEx actually becomes closer to, to normality? The second question is, is around the Intermediates division.

I'm just wondering how you are prioritizing the remaining strategic actions in the portfolio in light of recent market events. I guess you've got these better market conditions for acrylic spreads in China.

And I gather the EPA is also are now formalized a phase out process for the HFC gases in the U.S. So I don’t know if that regulatory clarity helps you engage in any in Asia, and Fluorogases discussions, if you could get an update there?

Thank you.

Okay. Thank you much to the first question is a very interesting one, because it's clear that as you mentioned, as I mentioned we are successful in the expansions that we have implemented.

And it's a matter of balance between being reasonable in terms of CapEx and which is part of the equity story of the company, but also to follow the rules. I would say, I would split the kind investment into when you talk about PVDF and we have increased CapEx very significantly in the past.

Finally it's recurring it's, it's higher than it has been, but it's recurring. After that we can debate is a base it's 5.5% or 6%.

But the discussion is around that. After that you have really the big, big ones.

And again, so far we see if it change, but so far where we believe we could have a sort of new exceptional CapEx is to double the plot in Singapore. And if we announce to you one day that we double the plant, then it'll be good news, which means that really it develops the way we sort this appetite for her bio-sourced, high performance polymer, because this product is unit, and we believe that we should not wait too long in order to, to double the plant, because the plant is more or less off of what we have in front.

So the natural size is to double it. So, so far my answer to your question is let's say maybe the 5.5% is really little bit fresh and it should be closer to 6% in a recurring basis.

Okay. To be confirmed.

We have not for the time being the, the complete answer and someday to announce doubling of Singapore, which basically would not we would not be able to complete is recurring envelope. Is that clear to you?

Yes, very much so.

With regard to intermediates, the consolidation represents the way you want to, to name, to name it. We are still following the, I would say the step by step approach.

So we did PMMA next step will be fuel -- clearly what you say is helping us. This means that at least in the U.S.

we have now a good idea of what would be the legislation framework, which is working in our favor and is better to sell activities when the landscape is solid, and in your in your favor is clear that atleast in Asia are working also in the right direction. But I don't think it would change order of doing things.

So I mean, if we have opportunities, we'll certainly look at it, but for the time being the way we see it is that let's take advantage of the products. And I say, I think in my speech, I say we and many times we will not update every, every month on that.

And we'll just update if we have some breaking news, which is not the case, and then we'll do a creeks after.

Thank you, Thierry.

You're welcome.

Yes. Good morning, Marie-José, Thierry and hello to the whole R team.

Three only minor questions. Firstly, on the coating solutions, did earnings in both business units, i.e.

Coating Resins, and Coating Adhesives grow similar percentage wise, like the segment, which was up by 147%, or was the earnings grow in upstream clearly higher than in downstream? Secondly on the general earnings drivers across the portfolio, you mentioned accelerating demand for more eco-friendly and higher value added solutions in coating solutions.

You mentioned accelerating demand for sustainable and high performance materials in advance materials. I understand that you benefit from such innovations.

Can you provide some color how strongly innovations performed in your portfolio versus the rest of your portfolio, and what is the current innovation rate? And thirdly, really minor question on the tax rate.

Can you provide some guidance for the full year and especially what do you think about the likely tax rate next year, given your exposure to the U.S. and the discussed changes in the tax rate there?

Thank you.

Thank you, Martin. Maybe we can start with the last one if Marie-José wants to answer?

Okay. So basically right now I understand by then administration is, is not fully clear on the tax rate for next year.

So initially we thought there would be an increase from 21% credit tax to 26% high. So this was what we were basically starting to work with.

We understand now the last tax let us believe that the tax could remain at 21%. So let's say obviously we will all be a probably fixed at the end of the year.

So right now, I'm building a budget as to flat for the whole tax rate of 21%.

Thank you, Marie-José.

You have different information on your side. I don't know.

Okay. On coating solutions, so both we, we contribute both upstream and downstream.

The first thing to have in mind is me because we had some question on that. Some of you, at some impression that coating solution was nearly under driven by acrylic stream, which is not the case.

We have very strong performance downstream. And for me downstream is Arkema coating resins, supplement for that and coating products.

So it's really additives under any kind of form and any kind of technology now the improvement from is a bit higher from upstream and downstream, but does it mean that a stream is a pure cycle matter? This means that if you look at the previous years, we are starting from really a low point, which was below the reinvestment point.

So this means that this year for the upstream, you have two things; you have and we agree some over earnings because the market is very tight and we accept that. But you have also some catchup from a situation which was not acceptable long term for the players.

Okay. So as that in mind, and then on the downstream, frankly speaking, we do a good job and beyond full year setting, the increase of raw material and this raw material and includes the acrylic numerator.

We have a good volume trend coming, and this comes to your second question from this innovation on mega trend and sustainability. Now if I understand what your second point you are thinking in China is really coming more on the HPP and coating solution.

And you say, what about the rest of the portfolio? In fact, if you go to the page 14 of this presentation, so everywhere in the presentation, you have 40 examples which go in different in different platform or business unit.

But if you go on page 14, you, okay. The capital market, but you have also, you have also in, on the slide you have our six platform of water management new energy, like 3D, Electronics, management of natural resources.

Okay. On this platform, the concern really all our business segment and coating solution, adhesives and raw material including HPP and performance.

If you take for example, adhesives they represent a new energy. For example, you have adhesive for cell to cell in battery, light weighting.

They are very important. Everything we developed through structural adhesives is present light weighting.

We are working on the bio-based raw material in order to develop new kind of adhesive compostable packaging or so we look at it. So you have plenty of examples in adhesives and the same for performance additive.

So I would say through that, when we give you examples, we try to give to everybody example, they can really understand, this is why we mentioned a lot about batteries, about tomorrow hydrogen [Ph] tanks, about eco-friendly paints or about sport shoes. But it's more than that.

It’s really every year in the company. And we have more and more platforms.

We touch not only one segment, but the all four segments. In terms of KPI, which was your last question.

We can say that we have 15% of sales consist of product below five years old. And I would say nearly everything now is dedicated to sustainability, nearly all our new business development, our research, I don't talk about fundamental research, but research for new business is dedicated to sustainability.

Okay. Thank you.

You're welcome.

Yes. Hi, thank you.

Morning few questions from me. The first question was it's, it's really impressive to see the ramp up in advanced material crisis to almost 15% year-over-year in Q3.

Are you able to give us some color on which products are, are driving that, that sort of a big increase? Is it across the board or is it specific to certain products?

We've seen, for instance, with PVDF in China, the prices have gone through the roof. So I don't know if that's contributing to, to that big price increase you've seen in HPM.

So that was the first question. The second question was going back to the discussion acrylic and coating solutions in general.

Is there a way for you to maybe isolate what could be the impact from the upstream tightness on earnings in Q3 or first three quarters of this year? And I think the, the broader question here is if I go back to the capital markets day, last year, the target was to, to have 16%, I think, margin in this system today, maybe we are on our own rate basis close to 20.

So is there a reason to believe maybe it should be more than 16 in the future? That's the second question.

Third, can I just confirm, because I wasn't very clear, should we at least expect the absolute CapEx to go down from this year to next year? Or is there a chance that it may not go down because of some additional growth CapEx that might be needed?

Thank you.

So I will let Marie-José complete on the CapEx because I thought she was clear that maybe she can complete, I will do it certainly. On the pricing in fact, what you do you should have in mind is that our pricing is mostly dictated by the raw material.

So this means that we, we have more pricing increase where we have more raw material increase. And this is the first thing.

Now beyond that it is clear that we have some most people from our colleagues as we mentioned, but in fact, it's fully across the border. We, we pass price increase nearly everywhere and even for adhesives, which is not a market where typically, since it's very downstream, very formulated.

You expect price increase. We have also in adhesives significant price increase.

And you have for example in Q3, you have 6.6%, but it's an average. This means that between the start of the Q3 and the end of the Q3, you have a ramp up and it'll continue in Q4.

So it's really a, a very special year. I've never seen where you have raw material and input cost, because you should add energy and transportation, which is all across the board.

And because of that, you have significant price increase all across the board. You are always through that.

Once we have said that we have significant price increase all across the board, you have some which are increasing a bit more than the other, but I will not enter into specifics. And the specifics can vary from quarter to quarter, so it can be even misleading.

But clearly we sell with benefit beyond the national pricing, pricing power coming from our innovation, our positioning, we have worked so much on the positioning since many years, that this year clearly we’ll benefit we’ll benefit from it. You mentioned that three years clearly is good doing well, but we can mention plenty of niches where we have we benefit from next with superior value product, because there is a lot of innovation in them.

And we, we really appreciate that. Now again on coating second question, coating solution, to be clear to everyone.

You have two different -- you have two different situation. You have the one of coating solution, which is specialty materials, where we have the [Indiscernible] for Europe and U.S.

This is where we have a significant integration. And because the integration and you have seen in the past ten years, we have been able to build a model of specialty, which is rather resilient and where between your frame is down frame.

You have some composition factors. So this is one.

And now to the point you mentioned, it's clearly, mostly focused on the acrylics in Asia and you, you benefit from this new segmentation where you have in intermediates a big part of the contribution, which is coming from fuel gas and acrylic in Asia, and a big part of the growth, which is coming from acrylic in Asia. So I think you have a picture which helps you read to understand where we are a superior increase.

Now, once I've said that it's clear that even in coating solution in this very special year, you have some overall links, which are linked to the special situation in acrylics that you need to appreciate. But overall, our improvement in coating solution is also significantly coming from the downstream.

Now I hand it over to Marie-José to complete your element on CapEx.

Okay. So, as I mentioned in in my speech, basically the total CapEx for 2021 is expected at €750 million, and includes in fact a peak of spending in exceptional CapEx, which amounts in 2021 to €250 million within this total of €750 million.

So this should decrease next year as the projects come to completion by roughly €100 million. So all in all I certainly expect the total CapEx to go down by the same amount.

Is that clear?

Yes. Thank you.

Maybe another point I would like to mention, and this is where what we are very proud of this year is that this year is not really a story of one product line or one specific amount. It’s really sum of plenty of elements, which help us really to deliver a superior growth in every element of Arkema.

So if you look year-to-date in adhesive, despite all this difficulty operating difficulty with raw material, with logistics, I think it's quite a good year. And which frankly speaking, you are fully pleased about the development in acrylics.

If you take HPP, which is mostly based on innovation really it's a, it's a very, very strong year. Clearly, performance additive is more, cash model this year because of a different element, but it's still a solid performance.

Coating solution is really quite strong, but coming both from the upstream and the downstream, which is very nice to see, and then intermediate is better than expected, but overall it's really, and this is what should be good for you. And really, this performance of the year is not one point or two point.

It's really a sum of different points. And we came to appreciate this content, which is quite diversified.

Thank you.

Yes. Thanks.

And good morning Thierry, if you could talk about inventory level in advanced materials, it sounds like inventory for your customers are very tight in that this is encroaching, but in advanced materials, I was wondering what the, the situation is there in particular in HPP where your sales were massively, versus Q1 and Q2 even if one of the key end markets like OTOs actually saw a production decline. So that's the first question.

My second question is on Advanced Materials margins. I think you are targeting 22%, which is a stable margin through 2024.

You're obviously on track to, to bid that this year. I was wondering if going forward, you are still driving the business to get to 22% and focusing on, or do you think there is upside to that margin in target?

And then the last small question free cash flow for Q4. I was wondering if we should expect this, the big seasonal inflow of working capital in Q4 nor, or whether you are trying to build up your own inventories and therefore we shouldn't get to carried away?

Thank you.

Okay. So the last one.

I will start on the first one -- because it linked, with also the first one. I think you were more talking in the first question about the stop of our customers then than of ourselves.

Yes. And in particularly now as PPE were incredibly high in Q3,

In fact I agree she’s maybe an advanced material where we have a decline in certain end markets. The majority is, is rubbish, but we have a decline in certain end market, and you could maybe expect some of the stock here and there, but it's not the case, even you to.

The decline is coming from the lack of ships. So in fact, they, they simply don't have enough stock.

So, and so I think I don’t know long it will take to get the ships back to normal, but then if we mean restocking from the automotive industry at that time. So overall, my feeling is that the, the level of stock in the chain, including ourselves, and it'll be a part of the, of the answer of Marie-José is still rather tight, not as tight as it has been after, after the COVID and the rebound, but I would say it's still rather tight.

So it's certainly an element which will be supportive in the, in the next year, even if in certain market, you can have some less for business than this year. I would say the whole, the, some restock will help next year in a certain, in a certain point.

With regard to the margin target I’m sorry, because I did not offer for coating solution before. It's a little bit the same question.

We are compared to our, which is the news. We should not complain, compared to our midterm target we are boosting coating solution and advanced material.

And the question of the two questions, yours and the one before was, does it mean that we can do better than our mid-term target, or is that basically shall you consider that what is on top should be considered as overall earnings and would disappear on EBITDA season. I imagine this is you have the double level but …

In detail, I guess that's some coaching, but no in advance majority it’s a genuine question.

Okay. So, no, I think that again, it's more question for capital marketing because we, we need to take off time really, to look at things in detail.

But clearly it means that we should at least deliver the percentage that we have mentioned for 2024 or which means that for you, what's called a question mark become the certainty here? Now, can we do a bit more or maybe, but it’s too early to, we need to take our time clearly -- we all more than on track from a percentage standpoint.

No it means that we should be both you can validate that. But I prefer to talk to this kind of question in in more formal way, when we have capital market day, because it's more question for me to have a capital market day, but we are very pleased by the fact that we get more value on this new business development.

So it goes to a certain extent with evolution of omics both in coatings and in and in, in indigenous materials, and should they pound. But again, for me, we are the starting point, we announced target for 24.

The first reaction to the target were they are a little bit ambitious. Now we have also the most realistic, can we do more?

Is it a bit too early to consume.

Okay. Thank you Thierry.

As Thierry mentioned, the reasoning beyond calendar 22 was also because we were hiding the Singapore plant and therefore bringing capacity to the market and bringing capacity to the market. And therefore the mission will be to manage the homework other than go and chase after let's increase the margin levels.

So this will basically be beyond the reasoning of the other 22.

Yes, at the same time, it's true that we have a lot of niches including PVDF, which are doing fine. So this is why and thank you Marie-Jose for the confirmatory point is always a sum of elements.

And it's important to take the time to think about it and this is what capital market may develop. It’s really to rethink about what we have done and to confirm where we are.

But the good news for all of you is that we are really on track of what we are going to do till 24 and we are pleased about that.

So then if I come to the free cash flow question for over Q4. So as I mentioned, it's fair to say that our working capital level is today a bit below let's say what we consider is our normative level, which is closer to 14% of our sales that is our position which is a bit above 20%.

So, definitely our intention is to try to reduce the volume talk into the increases in the stock value in fact 50% coming from volume, 50% coming from -- reviewable assessment, and therefore, I would definitely still believe in Q4. We should in fact, poorly for the first time in quite a number of years, not really being the in the kind of recurring trend that we gather.

Historically in terms of phasing of the year, I still believe the working capital should in fact not decrease as much as it was the case in in previous years. And remain let's say kind of flattish versus Q4 level which is what I am projecting at this point.

Okay, thank you.

Hi, thanks a lot for taking the question. I have a couple with me.

On first of all, by the way, Thierry great logo. So well done.

Certainly on PVDF sorry to ask this. But just wanted to understand what is Arkema’s position here sort of officially, especially in the light of what is happening in Europe with regards to 3M and Belgium.

You are changing your raw material mix significantly in with a nutrient project, changing the eco footprint for the flooring chain. So if you can just remind us, on the PVDF topic, is there any reason for us to worry or you're indemnified by total for the New Jersey side, and we shouldn't worry except for that.

The second question is a little bit tricky one, but I'm just going to ask it anyway. Thierry, you've done everything you promised over the years, and the stock is still sort of, sub seven times or seven times.

Now Bostik becomes a 550 million EBITDA asset. What would be your answer to an approach where you're sort of pushed to spin off Bostik to have value and locking?

So in other words, I'm just trying to understand, how would you tackle a situation like that? What is sort of your way to unlock value and so keep everything in the current structure?

And then the final question really is around M&A. There are a lot of funky polymers, which are specialty polymers in the polyamide chain that are coming to the market from both sides of the Atlantic.

Just wondering if you're very happy with your polyamine exposure? Or would you get to sign a few more checks on the M&A side?

Thanks a lot.

Okay, so I will be quick on your questions. Thank you.

So with regard I would take the last one, hold on a minute, well first of all we are very pleased with our positioning of today in HPP. And I think you read the numbers of yours that we should be very pleased and fully all the same.

There are some names, which are looking for some strategic review. Certainly as every strategic review, we look at them and see if we get positioned or pretty sure.

I think we have not -- up today, as part of our on-going strategic review each time somebody is making the move, and to see if it makes sense for us not that also. So we'll see, I think the good thing with Arkema is, we have a very good positioning, so there is no urgency to make any moves.

We could stay with what we are, and each time we make a rule, because we believe we can create value for the company. So obviously, so I have no answer.

Except that we, we have this flexibility to be more to where you are going to be what we do in terms of M&A. With regard to the – I was surprised with the second question.

As you know, we have been in the business now as a spinoff from where we started with the company for which the share price was 27. I think we are more than 120 today.

We compare with nearly all our European peers, okay, we see the value creation. So you can always divide that it could be better maybe you will be by yourself to do more than that.

But frankly speaking it’s a fantastic story of value creation. You -- in terms of you should also spend time to read again, what has been communicated as a capital market, which has really fantastic presentation of explaining what is the science of materials and if you want to learn more, we can share with you between a coating solution delivered and advanced material of history competitive current portfolio goes together, you cannot imagine yourself how many customers ask us to come up as a group in order to feed with new innovation in the science of materials, because you can stick material, you can shift it with material, you can create new materials.

And you can put material. It’s a unique offer, we took 15 years to build it.

We are very proud of it. We have created a lot of value.

And as you're mentioning, the multiple methods of not to judge myself a multipolar give us a lot of space for further value creation. So we are in a very good situation.

So but clearly we have a portfolio we like that we have been over the years, it has been really a long journey. Now we have this platform, which is frankly speaking very attractive for the coming years, which is very coherent, a lot of synergy incredible synergy between the different platforms.

And we'll continue to deliver this platform on this 3D tender. On capital market day, and I think we have delivered a lot.

And the capital market day last year was very clear on the what is our strategy, what we want to do, and, and we like to see to walk shoulder to shoulder on this strategy. With regard to PVDF, we have no specific news to collect otherwise we would have done it.

So I think if you read reference documents, you are legitimate so you need to work on this issue. On this issue on it here, yes.

Right. And thank you for mentioning it.

It's it's very strong project in terms of eco footprint and because there's a way to make a shift, not from a minor, but from a starting from a by-product from foresight. In fact, it's in terms of impact on the environment is so much more positive.

Now the teams are very proud to have implemented this breakthrough technology. And it goes certainly in the right direction.

And with the names you have mentioned with regard to the environmental impact, whatever, I cannot comment on other companies, I mean, they are different from us, so I cannot answer for them.

All right. Thanks a lot.

Thanks a lot for your call.

Welcome. Thank you.

Hi, thanks for taking my question, Rob Hill from Morningstar. Just one question on adhesive solution and pricing versus raw material changes.

And I think historically the lag was quite long, maybe six months or later, but that seems to super compressed now. So I'm just wondering, is that is there a structural change in terms of your pricing negotiations with customers, or is that just truly because we're in an exceptional environment right now and a year from now, we kind of go back to that historical six months lag or so?

No, I think there is -- I didn’t listen to your question because there is a lag in here. And at the end, we certainly need the most difficult part of our portfolio to pass through material because it's more than three months.

And this is why the performance we have done is very good. So but the performance is a sum of 20 odd elements working on the productivity, reformulation project mix.

I've already said that Bostik is in permanent position and we started from a loop point at 10% of EBITDA. We target now 17%.

We are hot in the middle of the little bit beyond the middle of the M&A. And the -- is made of plenty of elements.

So, we have some fairly significant headwind coming from raw material and continue is not easy. So, we have a lag of clearly between putting raw material and getting the raw material input, but at the same time we work on the product mix.

We have more and more innovation, and we work on the cost and because of that we are able to gain one point of EBITDA compared to last year while most of our competitors have lost some ground. So I think is history of rebuilding from a point which was okay, but low compared to what was our ambition and compared to Bostik.

And now we are ready completely on track with the whole admission. So no, I mean nothing has changed for sure in this market.

Okay, still the same because downstream is not a matter of what business, what positioning. It’s just that this nature of low downstream business compared to a more free business, it takes more time, and you have like two years to lag.

But with everything we are doing, we were able to compensate that.

Right. Thanks very much.

And we’ll take last question, because time is running, but if you have more questions don’t hesitate to come to us.

Good morning. Thank you for taking my question.

It relates to HPM and particularly...

Can you speak a little bit louder, please John because…

Okay. My understanding is Elium would be very good material for recycle windmill blades.

How are you progressing to qualify this material we've made builders of windmill blades?

So, we are – it is true that Elium, which is part of the new polymers we have developed over the past years, we strive to develop a new polymer, but we have a few of them like PKK – it’s another one. As you mentioned [Indiscernible] and we know the process to recyclable with chemical recycling.

Difficulty with blade for windmill is that you have longer motivation. But we know close to full motivation of 20 meters right so we are on the right track.

Now we fully will come to you start to see in the next couple of years blade with raw material, which is certainly a unique material and I don't think there is another one which is recyclable. So not only recyclable, but what the product was recycled is, is the quality of the product before difficulty to have the same usage.

And so we are -- we are very satisfied with the development, and I would say it's, for me the last couple of years to start ready to see someone. But it's a lot shorter by definition of this kind of ritual.

Thank you.

Thank you. Thank you to all for all your questions.

It was very interesting, and we appreciated the quality of the result this quarter and don't hesitate for any further question to come back to Beatrice and to Peter. Thank you.