Ladies and gentlemen, welcome to Arkema's full- year results conference call. I will now hand over to Mr. Thierry Le Hénaff, CEO. Sir, please go ahead.
Thank you very much. Good morning, everyone. Welcome to Arkema's full- year 2021 results conference call. Joining me today are Marie-José Donsion, our CFO, and the investor relations team with Beatrice and Peter. As always, you can download the slides used during this webcast from our website, and together with Marie-José, we will be available to answer your questions at the end of the presentation. Clearly, the news of the day is the Russian-Ukrainian conflict, but I propose you to certainly focus for this hour on Arkema 2021 results and outlook. In twenty-one, recognizing the hard work and resolve of Arkema's teams, we achieved an excellent financial performance, as you could see, positioning us fully on track toward our 2024 roadmap. At EUR 9.5 billion, our sales grew by more than 25% versus 2020.
At constant scope and currency, both our EBITDA at over EUR 1.7 billion and the group's EBITDA margin at 18.1% reached the best ever levels in a demanding operating environment marked by high input cost inflation and logistic disruptions. Our performance in 2021 confirmed the relevance of our long-term transformation strategy, marking the start of a new era of growth for Arkema. At EUR 1.5 billion, Specialty Materials EBITDA was up nearly 50% year-on-year and up 30% versus 2019, which we all considered as a reference point. In the context of the post-COVID economic rebound, we delivered growth beyond expectations, clearly demonstrating the strengths of our unique offering of Specialty Materials centered around the three highly synergistic segments of Adhesive Solutions, Advanced Materials, and Coating Solutions. This potential is captured in our new identity, which we unveiled last November.
Innovative materials for a sustainable world through which we are positioning our Specialty Materials at the core of addressing the planet's major challenges by fully leveraging our expertise of material science in line with the strategy we announced at the 2020 Capital Markets Day. Beyond the financials, we strongly reinforce our profile towards specialties, making significant progress in our strategic roadmap, first of all, in terms of external growth, but also organically with several targeted projects and a strong acceleration of new opportunities. Looking now at portfolio transformation, we delivered, as you know, two important milestones in 2021, finalizing the divestment of PMMA and announcing the acquisition of Ashland's Performance Adhesives. I'm convinced that Ashland will take our adhesive business to the next level given the significant complementarities and synergies with Bostik. Together, we look forward to the many growth opportunities that lie ahead.
Our M&A activity did not stop at the launch of this, however, as we also made four bolt-on acquisition, mostly in adhesives. In 2021, Specialty Materials made up over 85% of group sales. On a pro forma basis, including the contribution of all announced M&A deals, this figure rises close to 90%. You can see that we are decisively closing in our target to become a pure Specialty Materials player. Organically, over the coming two years, we look forward to a strong momentum of project that will support our customers in their quest for sustainable performance, leveraging our unparalleled know-how. The highlights include 50% capacity expansion for PVDF in China and France, particularly for the batteries market. To start up in the middle of this year of our PA11 biofactory in Singapore.
Our innovative eco-friendly project for the supply of hydrofluoric acid with Nutrien in the U.S. will start also by mid-year. The 1233zd production plant in the U.S., which should start by the end of 2023, which is in specialty fluorogases. Doubling Sartomer's photocure resins capacity in China, in particular for the electronics and renewable energy market. It will be again in 2023. In France, we are increasing by 25% our capacity of Pebax elastomers. You know, these elastomers which are used in high-performance sports shoes and consumer goods. All of those projects are geared towards sustainability and will support Arkema's growth and improve our environmental footprint in the medium term. The accelerating shift towards sustainability is here to stay from our standpoint, driven by powerful mega trends like climate change, resource scarcity, urbanization, and clean mobility.
Of course, to succeed in this new paradigm, the power of innovation is paramount and Arkema's valuable asset to leverage in this field. This makes us confident in our potential looking toward 2022 and beyond. In this respect, we are now aiming to generate EUR 1.5 billion of sales coming from our 5 innovation platform by 2030 versus 2019 baseline. This has to be compared with the EUR 1 billion you have in mind, which was previously announced. We have a strong position, and we are really recognized key partner in areas like batteries, 3D printing, bio-based materials, eco-friendly paints, electronics, sports, consumer goods. When I see the growth of new opportunities over those past three years, really my strong conviction is that we don't yet know the extent of these new opportunities that will emerge.
In 2021, we were very active in regard to corporate social responsibility, which is at the core of our strategy. Our strong commitment to CSR has been rewarded by the inclusion of Arkema in the CAC 40 ESG Index, which will group the 40 largest companies listed in Paris with the best ESG practices, and by an improved ranking to third place in the chemical sector of the DJSI World Index. We also maintain our best-in-class rankings among non-financial rating agencies, making robust progress during the year in our different programs. We have three of these programs, which are the following. We considerably expanded the scope of our activities covering our portfolio sustainability assessment program, which measures the percentage of sales that significantly contribute to the United Nations Sustainable Development Goals.
We are accelerating our initiatives in favor of a circular economy, increasing the share of sales covered by a life cycle analysis. As a reminder, we also acquired Agiplast last year, a specialist in the regeneration of high-performance polymer and historical partner of Arkema recycling operations. Finally, following the announcement in early 2020 of an ambitious climate plan to reduce greenhouse gases by 30% by 2030 versus a baseline in 2015, we have already been able to significantly reduce our emission by 34%, thanks to all our efforts. I believe it's a great achievement.
Last, but certainly not least in our achievement, we had a very good year in terms of safety, with the accident rate at the same low level as last year and the process safety event rate dropping significantly from above 4 to 3.1, allowing us to set new, more ambitious 2050 target at two. As a result of our strong financial performance in 2021 and given the Board and Management confidence in Arkema's positive prospects, we will propose a dividend of EUR 3 per share at the next AGM, up 20% versus last year and in line with our progressive dividend growth policy.
Also aligned with our capital allocation policy communicated at the 2020 Capital Markets Day, we completed last November, as you know, the EUR 300 million share buyback program, which we said we would carry out after the finalization of the divestment of PMMA. Going into 2022, we have a strong balance sheet with our net debt to EBITDA ratio below two times, including the Ashland Adhesives acquisition, as we said at the time of this acquisition. We have the firepower to carry out further value-added targeted M&A should opportunities arise. The evolution of our share price in 2021, in particular our performance versus peers, is testament to the shareholder value Arkema is creating and has created since the start of our transformation strategy. It validates also the soundness of our balanced capital allocation policy between transformative M&A and shareholder returns.
After this introduction, I will now hand it over to Marie-José, who will review in more detail our Q4 and full-year results, and then I will come back to the outlook at the end of the presentation.
Thank you, Thierry, and good morning, everyone. I'll start straight away with the sales bridge. At EUR 9.5 billion, sales were up 21% year-on-year. In the context of a post-COVID economic rebound and thanks to our leading positioning in a number of high-growth end markets, volumes were up by over 7%. The price effect is close to 19%, thanks to, first, an active pricing policy throughout the year across all product lines to offset the significant inflation and input costs. Second, as I said, the mix improvement towards high-value added applications. Third, obviously, favorable market conditions in upstream acrylics in all three regions.
Driven by this sales growth, Arkema achieved a very strong 46% increase in EBITDA to EUR 1.7 billion in spite of a negative scope impact of around EUR 75 million, linked mainly to the divestments in intermediates. Looking at the EBITDA of the different segments. Starting with Bostik, the segment achieved an EBITDA of EUR 316 million, up by 21% year-on-year, thanks to strong demand in construction and DIY and high performance industrial applications. We also had an improved product mix and the integration of the acquisitions. While solid pricing power led to a slightly positive net pricing impact over the year. In Q4, Bostik managed to maintain neutral net pricing in spite of accelerating input cost inflation.
Q4 EBITDA was slightly down year-on-year at EUR 69 million, while underlying demand trends remained well-oriented in all major markets. Our volumes were negatively impacted by raw material shortages. Our full- year EBITDA margin came at 13.9%, in line with the guidance, which is a great achievement given the negative mechanical dilution of price increases on this ratio. Regarding Advanced Materials, EBITDA was up 34% year-on-year at EUR 662 million, with an EBITDA margin improving to above 21%. High Performance Polymers had an excellent year indeed, thanks to accelerating demand in high performance sustainable solutions in markets like batteries, bio-based consumer goods and sports, which drove volumes and improved clearly the product mix. While growth in automotive was limited by chip shortages in the second half of the year.
The growth in performance additives was less buoyant, as demand was subdued in the oil and gas and data market, in particular. The positive momentum in High Performance Polymers was maintained in Q4, with the segment EBITDA up nearly 40% to EUR 168 million. Regarding Coating Solutions, EBITDA doubled year-on-year to EUR 525 million, and the EBITDA margin reached a high level of 19.1%, up from the 13.7% in 2020. In this segment, we benefited from a number of factors. I would say, first, higher volumes across all major markets, including decorative paints, 3D printing, graphics, electronics, and industrial coatings. Second, price increases in the downstream activities to offset higher raw material and energy costs. Third, a better product mix due to the trend toward more value-added eco-friendly products.
Fourth, last but not least, the favorable conditions in our upstream acrylics. In Q4, most of those drivers were still in place, driving EBITDA up 77% to EUR 122 million. With the exception of volumes, which declined given high prior-year comparison base. Finally, Intermediates EBITDA in 2021 grew 37% to EUR 360 million, thanks to good market conditions in acrylics in Asia and robust pricing dynamics in fluorogases. This segment recorded a EUR 90 million negative perimeter impact, as you know, from the divestment of functional polyolefins and PMMA, impacting the total contribution, of course, of Intermediates. The trend remained positive in Q4, with EBITDA up strongly to EUR 80 million.
Regarding the rest of the P&L, with depreciation and amortization at EUR 543 million, recurring EBIT nearly doubled versus last year at nearly EUR 1.2 billion, and the recurring EBIT margin was up 450 basis points and stood at 12.4%. Financial results stood at -EUR 56 million, benefiting from the lower interest rates on our debt swapped into dollars. The recurring tax rate came to 20% of recurring EBIT, thanks to a more favorable geographic split of profits. For 2022, we expect a recurring tax rate to amount to around 21% of recurring EBIT. Finally, adjusted net income more than doubled year-on-year to nearly EUR 900 million, which corresponds to EUR 11.8 per share. Moving on to cash flow and net debt.
Recurring cash flow amounted to EUR 756 million, which corresponds to an EBITDA conversion into cash of nearly 44%. This robust cash generation was achieved thanks to a much improved operating result versus last year, thanks to the limited rebuild of working capital for EUR 238 million and the controlled level of recurring CapEx. Coming back to working capital, the ratio on annualized sales stands at a relatively low level of 12.7% to be compared to 11.8% at end of 2020 and 13.9% at end of 2019. Keeping in mind that we consider the normative level for the company to be around 14%.
Including our exceptional project in Singapore and the U.S., the total capital expenditure amounted to EUR 758 million versus the EUR 600 million of last year. This reflects higher exceptional CapEx for EUR 252 million in 2021 as a result of the progress of the construction of the polyamide 11 plant in Singapore and the Nutrien project in the U.S. If we project 2022, we expect recurring capital expenditure should come to around 5.5% of group sales, and our exceptional capital expenditure should be finalized with an amount of around EUR 130 million. Consequently, net debt at the end of 2021 dropped to just below EUR 1.2 billion, including the EUR 700 million of hybrid bonds. The net debt to last twelve months EBITDA ratio stood at 0.7x EBITDA.
Indeed, this is a temporary situation before closing the acquisition, that is, transaction, as you can imagine. I thank you for your attention, and we now hand it over to Thierry for the outlook.
Thank you, Marie-José. If you look now at 2022, it should be a particularly dense and interesting year. First of all, in terms of projects, as we will start up in the middle of the year two exceptional CapEx, so polyamide 11 in Singapore and the Nutrien project in the United States, as well as the PVDF expansion in China by year-end. On the acquisition side, I look forward to welcoming Ashland, as you can imagine, which should be shortly, and convinced that they will play a key role in accelerating our adhesive strategy, as I said before. So far in 2022, global demand seems to be well-oriented overall.
Of course, there are nuances by market, by region, and we continue to benefit also from a favorable geographic and production positioning, especially on this mega trend we have discussed in depth before. There is, by definition, still a few challenges. The one of this morning, for example, and maybe largely geopolitical tensions, the evolution of the health crisis, which remains uncertain, even if it seems to get a little bit softer. Not surprisingly, raw material inflation and shortages is a continuity of what we have seen in the second half of last year. In this context, which is demanding for the team to manage, which needs agility, really what we ask our managers and our team is really to be focused on continuing to implement price increases to reflect higher input costs is still the case.
As we did so successfully in 2021, in order to and also to minimize what has been penalizing the effects of raw materials shortages. Having said that, in Q1 2022, group EBITDA, from what we see, should grow strongly, supported by the performance of Advanced Materials and Coating Solutions. We expect Adhesive Solutions to have a slower start into the year because of what I've explained before, which are all these raw material shortages. But whose effects should largely dissipate in Q2, which means we should have a Q1 EBITDA, still robust, but somewhere between the Q1 2021 and the Q1 2020 levels at constant scope. This does not question the fact that Adhesive will have a robust performance over the full year on track with the long-term target.
For the full- year 2022, in an environment that should remain volatile, Arkema is aiming for Specialty Materials EBITDA, as you know, which is really the core of what we build, to be comparable to the record level of 2021 at constant scope. Again, we have been very clear on that, and we expect our underlying growth to broadly offset the impact from the expected normalization of margin in acrylics, which mean a better mix. On top of that, we'll benefit from the contribution of Ashland Adhesives while the deal closes. EBITDA of the intermediate segment should mechanically reflect the residual impact of the divestment of PMMA because we did not have the divestment full year last year. We are still a part of the year with PMMA.
We also expect, with regard this time, acrylics in China, a progressive normalization of the margin. Although what we see in the first few months of the year is still well-oriented. We also believe fluorogases should deliver also a good performance. Beyond the financials, we continue to deliver, as we did in 2021, our 2024 roadmap by making value-added bolt-on acquisitions, specialty material, a few small ones every year, especially in adhesive, but not only. We pursue high return, also CapEx opportunities to meet customer demand in fast-growing end market. Clearly, as we say, corporate social responsibility is really for us a core area where we want to maintain a best-in-class standing. As a conclusion, we had a very good 2021 with an excellent financial performance, and we are fully ready to meet the opportunities and challenges of 2022.
We are very confident we will deliver our 2024 roadmap. I thank you very much for your attention, and together with Marie-José, we are now ready to answer your questions.
Thank you, ladies and gentlemen. If you wish to ask a question, you may press zero one on your telephones to add. First question is from Mr. Martin Roediger from Kepler Cheuvreux. Go ahead.
Yes. Good morning, Thierry, Marie-José, Beatrice, Peter. Congrats to the great performance. I have three questions. The first two are for Thierry. You mentioned in your outlook a strong start in Q1 2022, and you highlighted Advanced Materials and Coating Solutions. Question number one, is this primarily pricing-driven, or do you see also higher demand as well? Question number two, regarding adhesives, which you indicate basically decreasing year-on-year earnings in Q1. Just to clarify, this is purely due to the supply chain issues and raw material shortages, not because of any mismatch in contract durations. The third question is for Marie-José. The special items on the EBIT level, I mean, the delta between the recurring operating income and the recurring income has been rather high with EUR 109 million.
I know there are two components, the PPA related amortization, that is clear, but the remaining EUR 92 million expense is not clear. I see that occurred primarily in Advanced Materials and in Adhesive Solutions. Can you provide some details about this item? Are these restructurings or write-downs? Thanks.
Okay, Martin. Thank you for your question. On the first one, again, we are at the start of the year and January is always not a typical month. It can be varied from year to year. We had also a strong base in the past. I would say, it's mostly pricing effect. But when I say pricing, it's also the mix, which is very important. This means, as you know, we have still a lot of constrained capacity. What we do, thanks to our new business, we replace lower margin business by higher margin business. Okay. It's as you mentioned, certainly in the first quarter, mostly a pricing story which reflect the strength of our portfolio.
In this pricing, you have also the mix, which is an important part of what we deliver also last year, where we replaced lower margin sector by the higher opportunities coming from Megatrend. It's really a key part of our story. I think I was not completely clear. The second question is on adhesives or okay.
Adhesives is the one, yes.
It's really a raw material shortage story. I think we have some important product line where we have leaders, where what is missing is sometimes a key, sometimes a small one. Since they are formulated products, they are more impacted than the more extreme product we have in the portfolio, I would say. We have to recognize that for Bostik in the first quarter, already a little bit in the third, in the fourth, in the first quarter, it's penalizing. We believe that it's again a story of Q1, but Q2 should be far better from this standpoint, and we should renew for the growth with nothing else. They have done a good job.
I'm sure you have seen in terms of, we have been quite challenged at the beginning of last year on our ability to pass price increases in adhesives, our ability to deliver the 14% margin, and we did it. This means that Bostik is really focused on passing on this atypical and pressing input cost we got, and they have done a good job. I wanted to take advantage of your question to mention it.
Regarding the non-recurring, since we booked in quarter four, I would mainly quote two main factors. The first is impairment of assets in our hydrogen peroxide activities on the back of the evolution of the paper market. The second item is related to acquisition costs, mostly in adhesives, during the quarter.
Thanks.
Okay. Other question?
Thank you. Next question is from Mr. Charlie Webb from Morgan Stanley. Please go ahead.
Morning, Thierry. Morning, Marie-José. Maybe just three from me. Hopefully, some are quite simple. So just first off, on your comments there, Thierry, around adhesives and the pass-through of the raw material inflation, you know, how should we think about that in 2022? Has inflation peaked in your eyes as it relates to adhesives raw materials, or do you see a bit more still to come through in the start of this year? And when we put that together, you know, what's your expectations underlying ex Ashland for the margins in 2022, all else kind of equal as of today?
Secondly, on the point around demand and the fact that you guys are somewhat restricted in your ability to grow given capacity constraints, how should we think about demand in 2022? Maybe you can quickly run us through the divisions and your expectations there, given the capacities you have and how full they are. Then finally, quick question on PVDF. Clearly, looking at the market data, it appears to be a very tight market beyond just the good fundamentals and the growth of batteries. It feels like it's actually very tight and prices have gone up a lot. Just, you know, it'll be good to hear your view on that market.
It seems like there's lots of new capacity announcements coming, probably more a 2023 story than a 2022 story. How do you see that in terms of the current level of profitability in PVDF today versus what you think might be the longer or the medium term, longer term levels of profitability? Obviously, growth sounds very compelling, but just trying to gauge, you know, is it a case that actually right now, you know, profitability of that product today is very elevated, and where it might normalize? It would just be good to hear your views on that. That would be great.
Okay, Charlie. As usual, good questions. With regard to the raw material environment, particularly for the adhesives, we think it has not completely peaked to date. We continue a little bit because the way I see it, but again, we can all be wrong around the table. I'm quite relaxed when I say that. I think that the more extreme raw material are now getting stabilized and have reached a peak, and maybe some could decrease a little bit. The more you go down in the chain, which is the case for the raw material that Adhesive is buying, you have still some increase and some shortages. This is why Adhesive is a bit more impacted than others.
Again, I'm confident of the ability and we try, you know, we are very agile and focused on raw material evolution. I think what the team is doing is quite good in terms of anticipating and pushing the right price increase. The only difficulty for me is really the shortages is one, and the second thing is a dilution that it has as long as the raw material has at this level on the EBITDA percentage. It's mechanical, and there is nothing you can do about it, but you can take it as an upside, which means that at a certain point, raw material will get lower, and then you will have an accretive effect on the other side. Let's take it as an upside someday. Okay.
With regard to Ashland coming, first of all, Ashland, we are confident that they will deliver what we promised when we make the acquisition. You will get on a full -year around 1% accretion on the EBITDA margin. For this year, since it is a partial year, is more a little bit than 0.5%. Okay. We don't have the synergies yet. Let's say about 0.5%. The idea for Bostik without Ashland is try to maintain despite the dilution of the raw material, so of the pricing, to maintain the margin they had this year.
You would add a sort of consolidation, which will be, frankly speaking, a very nice performance, despite one year and a half of a very strong increase in raw material towards legacy Bostik maintaining this 21% margin. On top of that, to gain 0.5 points with Ashland, since it is not a full- year and we do not get the synergies on the first year in order to be around 14.5% for Bostik. When you make the calculation, you take the upside also coming from the fact that raw material at a certain point in the next two to three years will certainly get softer. I think we really come in at 17% for Bostik in 2024.
On the ability to grow, in fact, there is not one answer because, you know, we have completely different product line. Depending on which product line, you have capacity restrictions. For example, this is the case with polyamide 11 and PVDF. For example, on the Coating Solutions, depending on the region, we have capacities available. We have also in Adhesive Solutions capacity available. In Performance Additives, we have capacity available. Again, it's a mix. As you know, otherwise the profitability of Arkema would not have grown as much in the past year. I mean, for example, this bottleneck on polyamide 11, it exists for 15 years, and we have tremendously increased profitability of polyamide 11. The reason being that we manage the mix. This is what I explained to Martin before.
What you will get this year versus last year is an increase in volume where we have the capacity and we have a certain number of possibilities. We get improvement on mix where we are stacking capacity and we have some project which will start. We'll get half a year of the HF in the U.S. in partnership with Nutrien. We'll get some volume coming from Singapore also on polyamide 11. And then on the Sartomer also we get some extra capacity, et cetera.
Overall, we are confident in our guidance, which is a very robust guidance to say that we should consolidate in Specialty Materials before Ashland the level of 2021, which was by far the record of Arkema all time. With regard to PVDF, you know me, Charlie, so I will give you a few elements of answer, but I'm not the one who gives more about competitive position, et cetera. No, I think it will remain a good market driven by technology.
There will be new capacities, but currently, because of the batteries, but not only, there is a big appetite for this kind of products, which I mean, it's overall the exponential need for new high-performance material for sustainable solution, which is one. On top of that, in this world, I would say that PVDF for its ultra-high performance qualities is even more demanded. On top of that, you have this acceleration in batteries where it is an important product. All in all, I see no huge imbalance on the market. I think for me it should be manageable and for Arkema, PVDF should remain quite strong in the next decade. It's my feeling.
So far, it has not been disappointed by what we have achieved in PVDF, where we started very small, in fact, if I remember. I think so far quite a good progress. For the next decade, I would say we seem to be in good shape. We have plenty of projects, incredible amount of projects. High tech projects are not the one you can copy.
That's really helpful. Thank you very much.
Thank you, Charlie.
Thank you, sir. Next question is from Mr........................ From One Field Research. Sir, please go ahead.
Thanks a lot. The first question really is on Thiochemicals. You know, yesterday, one of your key customers announced a backward integration project in the U.S. Could you just give us some color about, you know, how Thiochemicals as a business has progressed, given you've done so many investments in Malaysia, for instance, and you know, how much today is dependent on the traditional methyl mercaptan market versus other markets? You know, because in sort of three years time, if they go for backward integration, then I just want to understand if you will really lose any volume or actually you'll make it up. That's my first question. The second question is around PVDF, more from a value chain point of view, because 142b prices in China have gone up a lot.
Just want to understand, you know, where are you with regards to backwardation in 142b, and when the Nutrien project comes online, you know, going forward, what do you see the future of PVDF with regards to the raw material chain? You know, and what sort of strategic advantage do you have there? That's my second question. The third question really is sort of around your coating business more on the downstream side of things. You know, like do you think that now you've done enough? Because, you know, last year was a very tough year for raw materials prices going up, but you know, downstream seems to have performed also very well.
you know, do you think that now you've achieved peer level profitability in some of your coating resin businesses or is there more to come here with regards to catch up? Thanks a lot.
Thank you, Jeet. On the first one, I'm a little bit hesitant to answer because I never disclose relationship with a customer. Is this a customer or no? I would say the only thing that I can say is that if in certain cases we have some specific contract, we have customer who decided to go upstream backward. You can imagine that we know that well in advance. This means that on the other side we have free capacity for our intermediate product that we can use to go more downstream. It goes in the two directions. Okay? If what you say is true, we have a plan which has been sorted and developed already some time ago. We are comfortable.
Again, as you know, in Thiochemicals, we have about half methionine unit, which is one output, and we have the other half, which are using the same intermediate, which is really developing very well. The other half have plenty of opportunities. You could assure that we could use our intermediates to reinvest on those downstream of the other half. Okay? On the PVDF, again, you asked a good question, but confidential question also. Clearly, you are right to say that it's not just PVDF, it's a whole value chain, which is complicated, which is different from region to region. The actors are different. Not everybody, including Arkema, [has] the same strategy, depending on each region.
We have different strategies that are discussed at high level inside Arkema since 15 years, where we build things brick by brick. It's difficult for me to tell you more. The only thing that I know is that we have the right strategy to sustain our CapEx development of PVDF. No, I will not openly communicate on what we do at 142b, too strategic. You see what I mean? On the sub-question on coatings, yes. You're right to say that we have, independently from the upstream, from the acrylic monomer, we have done quite a good job on the downstream by repositioning our offer, product offer, spending a lot of time with our customer to reinforce intimacy, partnership, innovation, leveraging the three platform.
Because when you say coating, it's coating which together with adhesive and advanced materials is working to serve our customer, large customers, because they are in some cases the same. They want, for example, PVDF and acrylic resins and some adhesive, some sealants, et cetera. It gives us a quite good and extensive offer. Because of that, we have been able really to take the profitability up for this coating downstream. Do we have more to come? The answer is yes. I think it's just a work of a few years. I think we continue to work hard to capture the opportunities which are again arising from megatrends. Eco-friendly trends is certainly an example, but you could. It's also for electronics.
You cannot imagine the number of opportunities that 5G is bringing. Also 3D because our material and cutting solutions are also used for 3D, et cetera, et cetera. We have really again, it comes from innovation, new business development, changing the mix, increasing the average pricing, and I think there is still more to come.
Okay, thanks a lot.
You're welcome.
Thank you. The next question is from Mr. Daniel Fereday from Redburn. Sir, please go ahead.
Morning, everyone. Thank you for taking my question. I've got a few. The first one is, given the current strength of the margins, it'd be helpful to get your views regarding whether you think there's a new sustainable margin levels for Specialty Materials being beyond the 17% target set out for 2024. And my second question is, you know, given the flexibility of the balance sheet, even with the acquisition of Ashland Adhesives coming in for 2022, what's your view on capital allocation, especially on further opportunities of share buybacks? Lastly, any comments regarding the progression of the exit of the HFC fluorogases would be helpful. Thank you.
Sorry, say again the last one.
Just, yeah, in terms of progression.
Okay. Now that I hear.
Yeah.
Thank you again for your question. With regard to Specialty Materials, I think we are. You know, when we announced in 2020 the 2024 target, I think most of the financial community thought it was very stretch. After 2020 was finished, when the result of many companies including Arkema declined, many people thought, oh, it becomes more than stretch. How can we reach it? Now we deliver 2021, fantastic 2021, and then we say, "Oh, maybe they were a little bit cautious." I think you know us. I think we say something, we deliver, we commit, we work hard to reach it. We say what we wanted to reach in 2024, 17%.
We are more at 18%. There is, let's say, a little bit of more cyclical part linked to the rebound of the COVID, the tension on the acrylics. You could argue that 17 remains a good target. Then you could say that, "Okay, let's assume that," but then you are already at 17, so you should continue to progress. Now what we want to do is to continue towards the evolution of the mix. This means we have still, and it's your last question, some disposal in intermediates to make, which are high margin, okay, which will be dilutive when they will exit. We want really to be a pure specialty player, increase adhesive, which has a lower margin, et cetera.
At the end, I think the 17% with the portfolio we target, which is not the same as today, the product mix we target for 2024 is quite a robust target and will further create value. We stay there. We stay on our strategy, which has been expressed at the Capital Markets Day, which to a certain extent answer your second question. Maybe Marie-José, you want to add on the second question, the capital allocation share buyback, to explain what we have in mind this year now.
As a reminder, you know, we have basically committed to spend, let's say, 15%-20% on the exceptional CapEx. This is well in progress. As I mentioned before, we will finish the exceptional CapEx both on our sites in Singapore and U.S. in the course of next year. This one is basically mostly over when we complete 2022. Then we had practically, you know, a quite well-balanced allocation between the net M&A that we wanted to achieve and the return to shareholders. We continue to be very active in M&A. Obviously Ashland will close in 2022. And we are looking for the disposal of fluorogases.
On this part, we are clearly sticking to the commitments. Regarding the return to shareholders, Thierry has announced basically the progression of the dividend that we want to continue to deliver to our shareholders. We've completed EUR 300 million. To be frank with you, regarding the evolution of the stock price, I think there is more value for us to continue to transform the portfolio than I spotted, let's say, from the share buyback. Nothing is, let's say, out of the table. Definitely today it is not in my immediate radar that we would do another share buyback.
Let's see how the stock evolves, and we'll continue looking at it opportunistically, as we said, during the Capital Markets Day.
Thank you, Marie-José. With regard to the exit of fluorogases, nothing really new. It's HFC fluorogases, and we keep specialty fluorogases, as we said. We're still working on it. As I said many times, we take our time. We do not update frequently the market, so we want to do it quickly. We are working on it, but we take the time to make sure this is the right project that we have. Nothing especially new there.
Fantastic. Thank you very much.
Thank you.
Thank you, sir. Next question is from Sir Xavier MONNE from Bank of America. Sir, please go ahead.
Hello. Can you hear me?
Yes.
Hi. I just have three very simple questions. First was just understanding a little bit about your price, your price pass-through mechanism. So I know prices were up this year, and you've guided that, you know, in the coming year you will look to offset pretty much most of the raw material price inflation. I just wanted to understand contractually how long your contracts are, how frequently they're renegotiated, and whether there's any indexation and whether there's any lag in the pricing being increased after any cost inflation. That's question one. Second question, hopefully simple, is what percentage of your costs are energy, and what's your hedging policy for energy? And the third question that I had was just sort of laser-ing in a little bit more on volumes. They were up, you know, 7% this year.
What's your expectation for 2022? Is it sort of mid-single-digit, low single-digit, or do you think it's going to be comparable to 2021? Thank you.
Okay. On the contract, in fact, you have all kinds of examples. By definition, for most of the cases, you have a lag, you know. I mean, the perfect world where you get a raw material increase and you don't discuss with your customer and you have your increase on pricing doesn't exist, so it's always negotiation. Whatever the contract is, it's discussion. You need to explain, et cetera. It takes away some time, but sometimes can even when you have automatic formula, which as I mentioned, is really a minor minority part, I would say for most of it can be between a month to three months.
The big difference, but it's not only Arkema, it's everybody, even beyond chemicals, is that in a normal year, world and year, you are increasing once a year your price, and sometimes you increase three times, four times, five times a year. It's completely different world because we have so much volatility in the raw material with a level of escalation which is incredible, that we have no choice. After that, you need to take into account the situation of each customer, each product line. We have discussion with our supplier, we have discussion with our customer, and there are as many cases as we have of supplier and customer. At the end, I think, looking at the result, we did a good job.
Unfortunately, I cannot give you a simple answer because it does not exist. The only thing which is for me important to have in mind is that, at least in the current period, the time where we are, negotiating and discussing, once a year is, disappear and, for certain time, and, we come back, with price increase, regularly, like, you know, for five times a year. Because we have no choice and the supplier do the same and their supplier do the same to us.
On the energy, which is electricity and nat gas, represents a mid-single-digit % of our total variable cost, which means that it's not small, especially when you have with the European gas, when it has been multiplied by eight or ten, it's at the end even a smaller volume, it make something huge.
I followed that. I didn't hear the percentage. Did you say?
Mid-single-digit% of our total variable cost. The volume is limited, but the increase is very high in Europe. It's mostly a European story, and it will not ease today. I would say the raw materials, as you know them, represent a significantly higher percentage. The magnitude of the increase is, for most of them, far smaller than the one we got in the nat gas in Europe, and we got today. At the end, because you mentioned energy, you could mention also transportation. Transportation cost, maritime freight has increased very significantly. What we do with our teams is that, in fact, one year ago, we are really focusing on raw material.
Now we say raw material plus energy plus transportation. You have the full package. We give you the how much it is connected, and the duty is really to pass it over to our customers, and I'm sure they do the same with their customers, et cetera. In terms of growth, in fact you cannot. I will not guide on the growth. I mean, we guide already on the EBITDA as we do every year. We don't guide. It depend actually on the macro context. When the volumes are lower, we try to manage our unit margin to be a bit more aggressive for the commodity, et cetera. When they're higher, we have more flexibility.
At the end, what counts is how much your EBITDA you deliver, in the average, we target to be GDP plus, for Arkema in Specialty Materials. What will be different between 2022 and 2021 is a better comparison, that we have a very strong rebound in 2021 compared to 2020, and because of that, we were above 10% organic growth in the first semester. It will not happen at all this year. In fact, you will get a different seasonality first, where we compare in volume, on the first semester, we compare to a strong base, and in the second semester, a little bit easier base. Year-on-year, when you compare 2021 and 2020, you compare a year to a year, which was a year of COVID crisis.
It's not the case anymore. You compare year to year of rebound. In the first semester last year, you had a rebound. This is why the first semester will be difficult to match, while the second semester will be a more normal type of GDP growth. Okay?
Thank you.
Thank you, sir. Next question is from Mr. Alex Stewart from Barclays. Please go ahead.
Hello, good afternoon. Thank you for-
Hello.
Hi there. In Advanced Materials, you did a strong volume growth number in the fourth quarter, which I believe was partially due to the phasing of your molecular sieves business, which can be quite seasonal. Could you possibly give us some idea of how much of that volume growth in Q4 was down to the sieves? That would be very useful. Thank you. Secondly, Marie-Josée, you talked about an impairment in H2O2 because of changes in the paper and pulp market. Presumably that's a long-term structural change, otherwise you wouldn't have had to impair the asset. Could you maybe talk a little bit about the drivers behind that impairment? I appreciate it's not huge, but just interested to know what the changes are. Thank you.
Okay. Sorry, Alex, we check the first question because your sound is very bad. I'm sure that at least Peter understood that.
How much of the Q4 volume are related to the molecular sieve?
In Advanced Materials. This year?
Yeah.
In Q4.
In Q4.
Is that all?
It's all I've got.
Frankly, it's not.
No, no, not at all. No, not at all.
Okay.
No, no. I know you are very powerful.
Yeah, we can't hear.
No, not at all. It's not at all the molecular sieve story. It's an aberration in Q4. No, it's really Advanced Materials is really fully supported by this need for new materials, megatrends, miniaturization, batteries, sport, et cetera. It's not a molecular sieve, no.
There is a bit of phasing on molecular sieve, but frankly.
As every year.
Okay.
Yeah. Sorry, can I just get back on that question then? Because in the first three quarters of 2021, your volume growth relative to 2019 was more or less flat, largely because you were sold out of a lot of products. In the fourth quarter, it stepped up quite meaningfully. There was clearly a change in the volume environment between the first three quarters and the last quarter. If it's not molecular sieve, could you possibly talk us through?
It's partially what affected. No.
Let me check.
Okay, we come back to you on the question later.
Yeah, yeah.
Regarding maybe H2O2, you're correct. Actually, we think the pulp and paper market is. We are revising, in fact, the growth perspective of this market. At the same time, obviously, the cost structure of our chlor-alkali business is highly impacted by the energy cost evolution. This is what triggered the impairment decision that we took.
I'm not sure. Okay. On the paper, to complete what Alex is saying, we have the digital. We all know that the paper is not in very good shape because of the digital trend. I think it's not a surprise. It's an impairment which at the level of the company is limited and okay, it was fair to take it. For what I see for Advanced Materials is for the whole 2021, the volume is up 10%. Am I right?
Yes.
Q4 is four only. What's the question? What's the problem? I don't understand. It's less in Q4 than it is in the full- year.
Yes. Sorry.
Alex, I suppose that, because I understood from your question that we had the sort of extra growth in the Q4 because of molecular sieve, while the rest of the year was with no growth. In fact, we have a 10% on the full- year, which is excellent. In fact, in Q4, we have less growth. This is the way. What I propose is that Peter and Beatrice come back to you precisely, because I'm not sure I capture the question. For me, Advanced Materials on the full- year is 10%. Q4 was less, but you know, Q4 is always a little bit atypical. The volumes for the full- year has really been driven by this megatrend. There is no doubt about that. Okay.
If you have a more specific question, Beatrice and Peter will answer it for you. Okay. I take a last question, maybe.
Last question is from Mr. Chetan Udeshi from J.P. Morgan. Sir, please go ahead.
Thank you. Just two questions quickly. You know, typically, the Q1 seasonality is that you guys historically have seen Q1 earnings EBITDA to be up sharply versus Q4. Can you maybe help us understand how you are thinking about that seasonality, given the Q4 base from last year is quite high, anyway? Any color there will be useful. I mean, given the startup of a few projects this year, do you have any number in mind in terms of how should we think about the EBITDA contribution from the startup of these projects in 2022, if at all, or is it more material only in 2023 and beyond? Thank you.
First one, I'm not sure I catch it. Again, I don't know why the connection is not very good. On the second one, first of all, for the main project, I'm sure you mentioned the HF in the U.S., you mentioned Singapore. The basic principle, and you have the CapEx amount that we established. You take them, you divide by between four and five, they are significant projects, and then you get the EBITDA at maturity after, let's say, four to five years. I would say with regard to the HF, we should be at maturity after three years. With regard to Singapore, I mean, it's 60% of capacity, which will be more at maturity after five years, which will be excellent.
Now, if you take 2022, it gives you, I would say, if you take a full -year 1, it gives you a ramp-up that you can easily with your model finalize. Then, I would say that, with regard to Nutrien, it's more half a year impact on the first year. You take the first year with a ramp-up until the fifth year, and you take half of this first year. Then for Singapore, you should take more a quarter, I would say, because in fact, we start midyear, but this kind of project need at the beginning to get really technically week by week with a technical ramp-up. I would say, it will be minimal. It's more 2023.
To answer the last part of your question, the material effect would be more in 2023 than 2022, even if in 2022 we have a little bit of each of them in our guidance for the full- year. Among maybe 15, 20 other projects. Okay?
Could you maybe come back to your first question that we could not actually hear well?
Yeah, I just was asking, historically, you've seen, you know, Q1 EBITDA is usually up very strongly versus the, you know, Q4 of the prior year. I'm just thinking, I mean, for Q1 this year, do you see a similar dynamic or just given the base from Q4 is, you know, relatively high, maybe, you know, the seasonality may not be as visible in Q1 this year is the question.
I will make a philosophical answer, which means that a year is made of four quarters. A year has a meaning. Every quarter can be different. I mean, you have so much volatility today between the raw materials, volumes, the base of comparison versus the previous year, the different region, China, U.S., Europe, et cetera. That is difficult completely to model quarter by quarter. This is why we told you, we mentioned this for our first quarter. I would say the seasonality year-over-year will be different certainly this year than last year because of the rebound effect we had last year on the first, in the first semester.
It should be true in volume, but the seasonality in terms of benefit from the pricing should be reverse, which means the contrary of the volume because we have the momentum of the second semester on pricing and in volumes, also. Volumes, compared to last year, it's more a pricing effect in the first semester and a volume effect in the second semester, which to a certain extent summarize what I've said before. Because of that, it's difficult to be very, very precise so far, so far on the seasonality. We are considering to deliver what we say we would deliver for the full- year. We know we start in profitability strongly, slow start in volume, but a good pricing power. We see what are the project which will deliver and when all along the year, organic project.
There is still for us, but also for you, some unknowns in terms of macro, it's obvious. It's really a seasonal thing, but we are really confident on the full- year. Last year we had Uri also, which had more impact in the second part of the first quarter. Which means that between January and March we should have a difference. You see you have plenty of elements. It's difficult to model and give you a clear answer. At the end of the year, it will be a very robust year for Arkema again in 2022. What exactly quarter by quarter for the full- year is too early.
Because of all organic projects, what we see from each product line, which will be in good shape. Okay, we stop here. I'm sure you could have 20 more questions, but I really appreciate your attendance and the quality of your questions. Don't hesitate, like Alex, if you have some complementary elements you want to get from Beatrice and Peter to call them, and they will welcome you for some more explanation. Okay. Thank you very much.
Ladies and gentlemen, this concludes the conference call. Thank you for your participation, and now disconnect.