And gentlemen, welcome to the Arkema's results conference call. I will now hand over to Thierry Leuneuf, CEO and Marie Jose Danchon, CFO.
Good morning, everyone. Of all, I would like to thank you for taking the time to join us today in these busy times. I am very happy to be here today to Present our full year results as well as our priorities for 2021, together with our CFO, Marie Jose Donschon and the IR team. It's been 1 year now since the pandemic started and deeply changed the way we live and work. However, I'm optimistic that we will be able to meet again in person in the not so distant future.
As usual, Today, we'll be happy to answer all your questions at the end of the presentation. So 2020 Has been a challenging year. It was like no other we have seen before. But the board and I are extremely grateful for the hard work And commitment of all Arkema's employees. They adapted quickly and enabled us to continue supplying the best possible product and services to our customers Safely and efficiently.
Since the beginning of the pandemic, our objective has been, at the same time, to manage operations to react to the crisis And limit its financial impact and to reposition the group to benefit fully from the post COVID rebound and emerge stronger than before. Unsurprisingly, COVID impacted many of our end market and key geographies. But despite the difficult context, we achieved a solid set of results, delivering an EBITDA margin of 15% Limiting the volume decline to 4%. Among the highlights of the year was our High cash generation with free cash flow of €651,000,000 and the resilience of our specialty materials platform, which, as you know, will represent the backbone of the company going forward. We finished 2020 On the strong dynamic, driven by the recovery in volumes in several end markets and deliver a Q4 EBITDA broadly stable compared to last year, representing a very clear sequential improvement.
Thus, despite the global pandemic and ensuring lockdowns, 2020 was another important year, And the efforts of Arkema's teams were focused both on the short term and on the execution of the medium term strategy. We made significant progress in our transformation journey to become a pure specialty materials payer. We also reinforced our commitment to sustainability and received external recognition for progress in this area. One of the elements of this movement towards sustainability is the innovation pipeline, mainly focused on the opportunities created by well Identify structural trends such as light weighting, energy efficiency and urbanization. Our large industrial project, which beyond generating significant financial returns and strengthening our position in high growth country, Will enable us to have the capacities in place to monetize the benefits of this innovation.
The resilience of our specialty material platform was concerned, validating the soundness of our strategy. As mentioned just before, they limited their EBITDA decreased to 1.2% to 12%, sorry, delivering solid results giving the context, while our intermediate business declined by around 40%. The performance of Specialty Materials in 2020 is perfectly in line with the historical pattern of robust resilience As evidenced by the chart outlining our EBITDA margin evolution since 2012. Our confident guidance for 2021 is another strong signal of the quality of specialty materials. Staying with specialty material, This platform represented 79% of group sales in 2019.
And in 2020, it increased to 82% of revenue. This proportion reaches 89% when taking into account the portfolio transformation steps we announced in 2020, Namely, the proposed disposal of PMMA, which is a big step forward in our transformation The earlier sale of functional polyethylene, both at an operative multi pole and our bolt on acquisition, mostly in adhesives. Beyond portfolio management, Arkema reinforced its commitment to sustainability We see several significant achievements in 2020. First of all, we define new ambitious climate and environmental targets, Having already reached most of the previous ones, this includes reducing our greenhouse gas emission By 38% in 2,030 compared to 2015 after a decrease of 23% in 2020. We also lowered our emission into air and water by 10%.
We continue sustainability projects around the world With the Pragat initiative, for example, to help Indian farmers produce castor oil in a more sustainable way. This same castor oil is used As a raw material for the production of our BioBet high performance polyamide 11, for which we successfully issued our first ever green bond of €300,000,000 To finance our new plant in Singapore. The last example I wanted to highlight is the Zebra project, a color derivative innovation scheme To develop the first 100 percent recyclable wind turbine blade, we measure innovation given the real challenge that blade Accessibility represents for the wind power industry. Furthermore, we have decided to strongly reinforce our commitment to diversity by increasing our ambition To reach 30% of women in senior management by 2,03050% of non French individuals. And we received strong recognition in 2020 For our initiatives in this corporate social responsibility space bearing testament to the focus that we are placing on this critical area.
I won't list everything we have achieved. I'll just mention one that we are particularly proud of, joining Sustainability World Index, the DGSI, in 6th place in the chemicals category among 140 companies assessed. This validates our position as a best in class company in the chemical sector and reward our years of effort to improve Our CSR profile. Benefiting from our intense efforts on Innovation and commercial excellence over the past 5 years. I believe the company is at the start of a long period of robust Organic growth, which will be supported by selective and high return investments.
All the industrial plants Launch or announced in 2020 relate to growth opportunity driven by mega trends in line with our sustainability commitment. As an example, the recent extension of our PVDF capacity in China is dedicated to the high growth battery market for electric mobility. Beyond batteries, the superior potential of PVDF led us to announce 2 days ago a further increase by 35 of its capacity in China. Also, we are, as you know, very excited about 2 high return exceptional CapEx, which broke ground in 2020. Those include the Biosource Polyamide 11 capacity in Asia and the Fluorhydric acid production unit in the U.
S. Since this spin off, the mobilization and solidarity of our teams has Always been a strong element for Arkema's successful transformation. It was particularly true this year given the context. We quickly assembled dedicated crisis management cell centrally and in each region to ensure that Arkema was strictly Implementing the required safety measures across all sites, ensuring protection of our employees while making sure that supply chain and deliveries to customer We are not materially disrupted. As we have said many times, the safety of our employees is our first priority.
In 2020, we sharpened our focus on CETYS through the pandemic, and I'm pleased to say that the results speak for themselves. We reached the lowest insurer rate ever with a number of accidents per 1000000 hours worked at 1. During this period, we also supported the local communities in which we operate, giving time and resources to support local initiative Focus on combating COVID, such as hand sanitizers gifts to hospitals and donation from the executive committee and managers. Finally, the financial performance of the year was very solid and benefited from our ability to quickly and significantly adapt our level of operating CapEx and working capital to the complex. Before I hand over to Marie Jose, I'm pleased to say that in line with our policy to increase shareholder return progressively and in line with the guidelines presented during the Capital Market Day Back in April, the Board of Directors has decided to propose a dividend at €2.5 for this year to the next Annual General Meeting.
This is an increase of 14% versus 2019 and back at the 2018 level. Also, we have decided to allocate €300,000,000 to a share buyback program to be started following the closing of the PMMA disposal scheduled midyear. We'll give further details regarding the implementation of this buyback program before we launch it. These provisions include of the €0.50 per share portion of the dividend retained last year in the context of the pandemic. The dynamic cash allocation is reflective of the And resilient that Arkema demonstrated in 2020 and is in line with capital market guidelines.
So now I will pass over to Marie Jose to present the financial performance of the year to you in more detail.
Thank you, Thierry, And good morning, everyone. So let's take now a look to the full year results for 2020. Annual sales, as you can see, amounted to €7,900,000,000 which represented an organic variance of minus 8% Compared to 2019, we saw a strong rebound in the last quarter of the year, enjoying a positive organic sales growth at 2%. EBITDA reached nearly €1,200,000,000 with an improved momentum in the second half And in particular, in the Q4, actually, last quarter, EBITDA of €289,000,000 was broadly stable versus last year's level And grew when looking at the scope of our Specialty Materials platform. This led to an adjustment An adjusted net income close to €400,000,000 representing €5,100,000 of earnings per share.
Regarding the cash generation, Arkema delivered 6.51 annual cash flow, representing a strong 67% Ratio of EBITDA conversion into recurring cash. It allowed us to decrease the net debt, including hybrid bonds, below €2,000,000,000 Looking at the sales bridge. The evolution of 2020 volumes was uneven across the year With a very strong decline in the 2nd quarter as a result of lockdowns in key markets, We then saw a sequential improvement in Q3, especially in construction and decorative paints, and a much better Q4, leading to an overall decline of 4.3% in the year. The price effect of minus 4.7% is mostly linked to a lower propylene price and to unfavorable market conditions in intermediates. The weaker dollar versus euro generated a negative 1.7% currency Impact concentrated in the second half of the year.
And the scope effect was positive at 0.9%, Taking into account the contribution of Armas in the first half of the year and that of bolt on acquisitions in adhesives, Offsetting the impacts of the disposal of the functional polyolefins business in June 2020. Focusing on the sales bridge of the last quarter. Organic sales were up 2.1% with volumes growing 5.2 on the back of a good momentum in construction, decorative paints, battery markets as well as the improvement of industrial markets, notably in transportation. The price effect of minus 3.1% remain impacted by the lower propylene prices in Coating Solutions And the difficult market conditions in Fluorogases, while adhesives and advanced materials were resilient. The scope effect minus 1.3% relating to the disposal of functional polyolefins will partly continue over the first half of twenty twenty one.
And the negative ForEx impact coming from the depreciation of the U. S. Dollar and emerging currencies, as is the euro, came to 4.1% in Q4. And we expect this ForEx impact to continue to be negative in H1 of this year. Now following slide, looking at each segment, we can see that 2020 ended up being a robust year for Adhesive After a very challenging Q2 when construction activity was heavily impacted by lockdowns, EBITDA eventually reached the same level as 2019 At €261,000,000 13.1 percent EBITDA margin, improving its in a challenging and therefore proving its resilience in a challenging environment.
In Q4, sales were up 2.4% to €512,000,000 with the momentum in construction remaining positive, beat in flooring applications, sealants and DIY And Industrial Adhesive continued to improve as well. As a result, Q4 EBITDA was up 15% to €69,000,000 boosted by the contribution of acquisitions, good cost control and a better mix. Q4 EBITDA margin reached 13.5% and was up 150 bps compared to Q4 2019. Looking now at Advanced Materials. 2020 was challenging in terms of volumes due to the decline in a number of end markets, namely transportation, oil and gas and consumer goods.
Prices were resilient, and margins remained at a high level at 19.6%, which reflects the good Positioning of our product portfolio in the value creation for our customers. In Q4, organic sales showed an increase of 0.8% year on year, Which reflects a very strong sequential improvement compared to the previous quarter. As a reminder, Q3 Pre organic sales have declined nearly 12% year on year. So this is a result of strong growth in batteries and much improved momentum in Industrial Markets and notably, Transportation. Looking now at Coating Solutions.
Prices were down strongly in 2020, driven by low propylene prices, which directly impacted the nonintegrated acrylic based activities that we have in Europe and U. S. EBITDA margin was, however, resilient at 13.7%. Q4 showed a significant volume growth of 14.5% year on year, Driven by decorative paints, industrial coatings, 3 d printing and graphic arts, the price effect And sales was a negative 8.4%, consistent with lower property prices again. Yet higher volumes led to a 19% Rise in Q4 EBITDA, with the margin rising nearly 200 bps to 14.1%.
Finally, for intermediates, 2020 was very challenging overall given the difficult market conditions linked to COVID, Especially in Fluorogases and Acrylics Asia, EBITDA dropped 40%, and EBITDA margin was down to 16.2%. Q4 sales variance mainly reflected the scope impact from disposal of functional polyolefins represented minus 13% compared to Q4 'nineteen. Volumes rose more than 6%, thanks to the strong momentum in Asian acrylic monomers and good demand in PMMA, while Fluorogases remain weak. Q4 EBITDA was down materially to €42,000,000 on the back of the polyolefins business and lower unit margins, notably in Fluorogases. Moving now to the cash.
Our cash flow generation was once again outstanding in 2020. Our free cash flow Amounted to €651,000,000 and our EBITDA to cash conversion rate reached 67%. This performance was achieved to a sharp decrease of our working capital that came from a combination of mainly two factors. I would say, on one hand, A proactive and effective management of our inventories and customer credit management. And on the other hand, as a result of a mechanical effect attached to decreasing sales and decreasing raw material prices.
At year end 2020, working capital represented 11.8 of sales. Considering the current trend that we see in sales growth and in raw material price increase, it is reasonable to expect An increase in working capital in 2021. The clients' monitoring of our capital expenditure Contributed to the cash generation as well. So for 2021, we expect recurring CapEx of around €500,000,000 Plus exceptional CapEx of around €250,000,000 since we will be at the peak of spending in both our polyamide 11 greenfield plant in Singapore and our HS plant in the U. S.
The Excellent cash generation and the resilient margins have allowed Arkema to maintain its financial strength intact, To weather this crisis in a strong position and to retain a very healthy balance sheet, it gives us flexibility to carry out The organic growth investments and the bolt on acquisition strategy, whilst maintaining our solid investment grade rating. From a financing standpoint, we have successfully refinanced our senior debt at attractive rates, lengthening our average maturity to 5.6 years now. At the end of 2020, our net debt, including hybrid bonds, amounted to €1,900,000,000 representing 1.6x EBITDA. It was down from €2,300,000,000 at the end of prior year. So this decrease came from the free cash flow generated, which was only partially allocated to exceptional CapEx for €140,000,000 and to cash returned to shareholders in the form of The €168,000,000 dividend payment.
While as you can see for M and A, the net impact was basically 0 since the divestment of functional polyolefins offset our bolt on acquisitions in adhesives in the year. I will now pass over to Thierry to present our 2021 priorities and outlook.
Thank you, Marie Jose, for your explanations. Turning to the year ahead, While we'll aim to deliver good earning growth, a key priority will also be to continue to execute our sustainable strategy on the road to 2024. His strategy is based on the combination of organic growth supported by sustainable innovation, strengthening our footprint in high growth Regions and acquisition to reinforce our leadership in Specialty Materials. As you all know, since 2006, Arkema has undertaken a profound transformation that's improving our portfolio and building on Our areas of strength. We have grown and advanced our areas of focus and expertise around materials.
The depth and range of materials capability, in particular in terms of bonding materials, protecting their surface, reinforcing or substituting traditional materials For lighter, Biobase 1 makes us a leading specialty materials player. The combination of these skills is unique in the industry And bring synergies in innovation, operation as well in the commercial field. The combination also provides Us with a differentiated ability to serve our customers across attractive end markets. We are now strategically organized around our core strengths into 3 highly current and synergistic growth platform Centered on material science, adhesive solution, advanced material, cutting solutions. Based on this and on the fruit of our innovation, we are aiming for mid to high single digit organic sales growth in 2021 For our Specialty Materials.
In a world of powerful global trends such as driving increasing urbanization, Resource Car City, Climate Change, New Technologies, Arkema offers its customer a unique range of cutting edge technological solutions. To capture further growth, the group concentrates its research efforts on innovation platforms linked to the United Nations Sustainable Development Goals. We have decided to set an ambitious target with 65% of our sales contributing significantly to these goals compared to 50% today. To reinforce our focus on the circular economy, we also decided to launch a new platform dedicated to natural resources management. We expect the products developed thanks to these 5 innovation platforms to generate around €400,000,000 of new sales by 2024 And up to around €1,000,000,000 by 2,030.
Finally, and I believe it's very important at board level, An innovation and sustainable growth committee is also created to support this major pillar of our strategy. Looking now at the priorities of the different segments for this year, beginning with additive solution. The second half of twenty twenty was characterized by the positive momentum that is maintained in the early part of 2021. In the past few years, our volume growth was led by, as you know, our strategy to discontinue low margin product line. This program now is over.
And Bostik organic growth will come from the reinforcement of the high performance platform. 1st, in Construction and Cielent, You know we enjoy a solid growth in high value added solution with capacity expansion in the Netherlands, France, U. S. For high added value products. The launch of high performance PU sealants worldwide and the launch of a new flooring in Do It Yourself With a pure fixed range.
In flooring, we keep expanding our offer globally. There is a new site which start in the U. S. To benefit from the post COVID U. S.
Market, we'll continue to reposition our offer With the launch of the new Bostik Academy, we have a digital service to train our customer. We made the acquisition of LEAP, as you know, which is really ramping well. And Industrial Adhesive will benefit from the launch of a full sustainable solution range in packaging and hygiene. We also enjoyed strong growth in engineering adhesive. You have seen the expansion of our bond to bond range.
We have a unique offering in film, in web, in powder coming from recent acquisition, Prochimere and 6 Satie. We also ramped up the new industrial adhesive plant in Nara, Japan. We started last September. So many news coming on stream. Still on Stig, after a year of strong resilience in 2020, we are really more confident than ever in the potential of our Adhesive platform over the long term, really.
We aim to increase this year our EBITDA margin to 14%, starting from 13% in 2020, 2020 which was very stable Despite the COVID and this 14% is a new step forward in the direction of the 16% margin target by 2024. And we'll do this, as you know, by 3 drivers: high margin solution, operational excellence and bolt on acquisition. Also, our objective is to recover this year's higher cost of raw material through price increases, which is A traditional work. Regarding organic growth, we cover this topic in this in the previous slide. So I just would like to mention one point on operational excellence.
We'll continue to roll out our integrated worldwide IT system for Bostik. It's working well. We'll continue also to deliver strong cost synergies that we implement with the rest of the group. And we work very significantly in reformulation in order to continue to improve our competitiveness. Regarding M and A, it's one of the key priority of Arkema, 3 to 4 small bolt on Every year, so it should be the case again this year and from time to time a bigger acquisition.
The market is still very fragmented. Our market share It's despite the fact that we are number 3, it's still low compared to the all sides of the market. So many possibilities That we'll continue to implement in the near future and in the longest term. Also, I would like to mention And that the impact of efforts are you can see them really in the evolution of the margin percentage In over the years, starting from the acquisition, so some could argue that it's really half Half a point, we know that. But at the end of the day, in a crisis like the COVID, the EBITDA Of Bostik was really completely stable, which was remarkable, really.
Now we move to Advanced Material. After a year that has been up until Q4, significantly impacted by the lack of volume and in our larger industrial Market, as you know. And but we feel now a better momentum. And clearly, with a recovery of volume In our end market and with really a lot of opportunities going further, with strong push of society and most political leader for Sustainability with these stimulus packages. So we are confident and also as you know, the Advanced Materials segment He's an innovation powerhouse, and we are really particularly well positioned with our technology and application now in the areas of clean mobility, sports, Electronics, bio based and 3 d printing market.
In 2021, to be more specific, our growth will be supported by several Recently started industrial investment in Asia. You could see a few days ago a new investment announced in PVDF following the start of the plant Early Jan. So this is to follow the strong growth in battery, not only but in majority on battery. We have also the benefit of our expansion in Malaysia 1 year ago and our recent Expansion in Polyamide 12 in China. Batteries, I will not comment in This slide, but it's clearly an area where SKEMA's unique expertise, project offering.
We see enormous potential in this field. We are very well positioned for the use in electrical vehicles, but also e Busse, Zeebak, Consumer electronic energy storage, we are the leader in the calendar PVDF for battery, for separator and binder. And we are recognized as a supplier of choice among key player in the field everywhere in the world. So we are very optimistic there. We have recently opened a new battery lab in Lyon in France after the one in Philadelphia.
And we are also present in electrolytes salts. You could maybe read a few weeks ago, the release of a project recognized as an important project of Common European interest by the UAE Commission. So we are really on the right track with regard to batteries. Now Singapore quickly, I don't need to tell you how strongly we believe in the strategic importance of 100% biobasedpolymer delivered investment in Asia. It's a fantastic really polymer, exceptional properties, flexibility, durability, likeness.
We are speaking about an outstanding advanced biocircular polymer. This is the most important organic project Arkema has ever done. You could argue that it's a big investment. It will weigh on our CapEx. But on the other hand, it's really strategic.
It's long term oriented, very attractive return. We spent €450,000,000 of investment. But after 5 years, we'll get an expected annual EBITDA of €100,000,000 The end market are many, but Specifically, electrical vehicles, 3 d printing, sport, lifestyle, consumer electronics, medical devices, wearable devices. And the main plant, as you know, will be in Singapore financed by our first ever green bond of €300,000,000 With regard to COVID solution quickly, Really, you can see I'm sure you can feel the progress in Coating Solutions platform. We had many questions on this platform over the past year, But you could see that a lot of work was done with the beginning of the implementation of the integration of the 3 components of the platform, Monomers raising additive with a strong emphasis on customer intimacy.
You could see the growth in the last quarter in Q4 Taking advantage of the reborn and specific innovation focus on 3 d, on adhesive and other market We'll benefit from the 2nd phase of the ramp up of the new Clear Lake reactor. We could not benefit of it up until Q3. Now it's time Really, to fully benefit of it, we have the Indian powder plant, which started in 2019 also. So we have beyond 3d and adhesive So the rapid emergence of 5 gs of electronics and will benefit from it. So many things going on for Coating Solutions.
With regard to intermediates, clearly, since the Capital market day, a lot has been accomplished. We have moved very quickly on the functional polyfin and the PMMA. The process on PMMA for the closing, which should take place in mid year is going as expected. So the next step now for us is Fluorogas. Our attention is to define the path to deconsolidate their emissive part, which represent around 75% of the business.
We'll do it either, as you know, partnership or disposal. You know that the regulatory and competitive It's different from region to region. So it could be a differentiated strategy by region. We are open on that. What is more important short term is really to refine the scope between what we deconsolidate, what Fluoro Specialties will keep to start prepare the carve out to investigate potential interested parties.
So now we really start this process. The good news that you could see recently, This is why the timing works out rather well. It's a recent clarification in the rigulat or HFC landscape in the U. S. Imposing tariffs on important R32 as well as the new administration willingness to implement the Key Galley amendment with quota phasedown.
So Fluorogas will be certainly a year of progress in 2021. Last and not least, some word about 2021 and beyond. Of course, for you, for ourselves, for competitors, for everybody, the global environment remains Uncertain. It remains volatile. There is still news flow with regard to the pandemic.
That our feeling because it's more a matter of feeling, nobody has a crystal ball. Our feeling as a management is that the development of the vaccine and the benefit the stimulus plan, we'll create a positive trend this year. So as I mentioned, for us, what was very important Was really that Arkema emerged stronger from last year's crisis and that will be positioned really well to benefit from the current rebound. And it makes clearly it will make clearly a big difference between different specialty chemical company. And you could see that in the Q4, which was already better, and we have a good feeling for the Q1.
And this is why. And we don't do it often, as you know. As a management, we don't really guide quarter by quarter. But we wanted to pass a positive message on the Q1, Despite still the uncertainty is that we estimate that our EBITDA in the Q1 could grow by around 10% relative to Q1 2020, Despite a negative currency impact that we estimate at €15,000,000 Arkema estimate at this stage that in The EBITDA of Specialty Materials, we wanted since the future of the company is clearly Specialty Materials to guide Separately, for Specialty Materials and Intermediate, we would have not done it, you would have asked us. So we prefer to do To say to you right away, so we believe that EBITDA of Specialty Materials could grow at constant currency significantly by around 10% At constant currency, which would mean if you do the math more or less returning to the pre COVID level of 2019 at constant currency.
The dynamic of this growth will be supported by Bostik Advanced Material Coating Solutions. So it's not only 1, it's really the 3. So you can see the benefit of our strategy. I will not come back to the specifics of the 3 because we it was well developed in my speech. I will move to the intermediate segment, where we expect to be so far at a level comparable to 2020 At constant perimeter and currency, we mentioned constant perimeter because we have the finalization of the disposal of PMMA, Which is still expected mid-two thousand and one.
So what we recommend in your forecast, if we may, is that you take, at this stage, 6 months of PMMA contribution. In parallel, because short term is important, but long term is also very important for a company like us, I think it's part of our DNA. The execution of the different element of our midterm strategy will continue to become a pure specialty materials player. We are really on the right track. The pieces of the puzzle are really gathering together.
We are very excited. And this includes the construction of our 2 major plants in Singapore and the U. S, The rollout of our M and A strategy and also the strong focus on innovation and corporate social responsibility. So I thank you for your attention. We were a little bit longer than usual for the quarter, but this is annual results With a lot of qualitative elements, I think it was worth the time spent.
And Marie Jose and myself will be happy now to answer your questions. Thank you.
So we have the first question coming from Matthew Yates from Libebank of America. Sir, please go ahead.
Hi, good morning, everyone. Thanks for the presentation.
A couple of questions, please.
First one around the Adhesives margin guide of 14%. Just wondering to what extent you factored in raw material inflation Here, particularly with all the disruption in Texas. I recall a couple of years ago, you got hit pretty hard in this business. So is there anything now about The portfolio or the way you're managing the operations to better deal with any raw material volatility? And then the second question, Maybe for Thierry, just curious about your approach to innovation and that creation of a new Kind of board role to have oversight on that.
How are you thinking about the absolute spending level of the company? This is a slightly outdated number, but I think it was about 3% of sales in the past. And how do you anticipate that translating into the organic growth Going forward in the context of that €1,000,000,000 incremental number you talked about? Thanks.
Okay, Mathieu. So first of all, on adhesives, I would like to mention again that we were stable in the middle of in the year of 1 of the worst a crisis that we have experienced in the past 20 years and the EBITDA was stable. So I would like to mention that really to underline The progress that we make step by step by the adhesives and all the benefit of having bought Bostik and make further acquisitions Since the start. So it's really I think we are on the right track. So you could argue that to go from 13% to 17% margin between 2019 2020 is not sufficient, but on the fact if you say that it was in the challenging time of the COVID, This was quite a performance, and I wanted to mention it again.
Now we say we want to go from 13% To 14%. Certainly, there is a part of catch up of what we didn't get in the COVID. We should not forget. After that, there is a raw material inflation For everybody, on your point on I know that there have been question on the I think it was a period 2018 you mentioned on the raw material inflation. I would be really ready to share some figures with you how we behave at that time versus competitor.
It proves that during 1 quarter, we lost a point Of margin because you have raised some time lag, but shortly after we came back on the track. So It was not so bad, but okay, I accept the point and the challenge. Now, yes, clearly, the 14% to answer shortly to your question include The environment. And but we should not forget that you have no perfect environment. This means that When the demand is shrinking, you benefit from lower raw material.
When you have restocking and demand is improving, You have good volume, but higher raw material. So at the end, it's a package. And we strongly believe that with all this package, higher raw material, But better volumes, some restocking, benefit from our innovation, operational excellence at the end. The 14% It's quite a good target for Bostik. And the team and myself, we are confident to deliver it.
Clearly, Texas, but it's, I would say short term, I mean, not for the full year, create some more pressure. This is why we are as But not only in Zadiv and not only for Arkema, it's for all of us will push us to increase our prices Stronger and quicker than maybe it was expected a couple of weeks ago. It's part of the game. But again, This raw material trend before Beyond Texas is really coming from the fact that the world is changing for the good, Which you have better volume, you are restocking. So I think let's take the package with the pros and cons.
And At the end, I'm confident that if we were able to deliver 13% stable margin in 2020, we should be able to deliver 14%. And the team has really a lot of initiative, as you can imagine, for that. Approach to innovation. Yes, as you know, 3% It's an average. So it's between 1.5% to 5%, 6%, 7% for certain Specific segment, especially battery, it's even above 10%, as you can imagine.
I would say that If you look at the organic growth, half of it is more supported by GDP, Increasing our presence in higher growth geographies, Customer intimacy and the other half is coming from innovation, which is €1,000,000,000 that you mentioned. So I would say It's Alf and Alf. So half of our organic growth will come from our innovation. The good thing Is that year by year, the pipeline is better and better. And even if we don't disclose to you all the figures in detail, We have really a number of prospects, so in batteries, in lightweight, in Support in electronics with 5 gs, for example, 3 d, which is really very, very interesting, very concrete and will contribute To this innovation, I want you also to mention that the innovation is mostly driven by sustainability.
This is not Just an innovation to add growth to Arkema to increase our sales, but most of it, the large majority is really by answering The key concern of the society of today, and we are very glad to have the right technology for that.
Thank you, Thierry. Take care.
Thank you.
So a new question coming Laurent Favreau from Exane BNP Paribas. Sir, please go ahead.
Yes, good morning all. Thank you. Two questions, please. The first one, Thierry, if you could provide us a bit of, I guess, context around the assets you've made on Temporary savings, I think initially you talked about €100,000,000 gross savings for the year. Where did you end up the end, and how much of a reversal are you expecting for 2020?
And against that, can you talk about the progress on Phase 2 of operational excellence in Adhesives, but also what you're doing in coatings. So I'm trying to understand if the net picture for cost Is it a big headwind or not? That's the first question. And the second one is around the late cycle market, which I think was still quite low in second half of last year, in particular, oil and gas. What are you seeing there?
Do you think that the In price, is it enough to see a recovery in activities back to 2019 levels? Or are we still very far from that? Thank you.
Okay, Laurent. Thank you for your question. With regard The savings, so we finished we were more than 100. I think we mentioned it, so maybe 120 to tell you something, Okay. 2020, most of it are the large majority.
We are honest and transparent as usual with you. It's coming from the fact that there was less volume, there was traveling were far less and that we just Adapt. But the focus of the company is really to accelerate organic growth. So these savings by definition, They are temporary. I would not consider them to be Edwin because again, with If the growth was not there, which is fortunately not the case for Arkema, which is quite well positioned, you could see that in Q4, you will see that in Q1, We would be able to maintain these savings.
It's not a problem. But the problem is that we want to reinvest in the growth, the growth will come. Fortunately, we'll be able to travel again. And as you know, we are quite clean also. So we don't think that the 2021 story is a story of a biggest cutting.
We'll continue as usual. I don't think it's our reputation to cut costs, and we don't market too much what we are doing. But I think beyond that, I think Product value, mix, pricing, organic growth is absolutely critical for this year, and I think we are well positioned on that. So I think same with CapEx. When we need to get into cut, we do it.
I think we are very reactive. But At the end of the day, you don't build a company long term just by cutting. If you are well positioned, you could benefit of your organic growth. We'll continue to Free from the cost and this is our DNA. But on top of that, our organic growth is better and better.
Hopefully, I answered your question and you tell me if I don't answer. With regard to oil and gas, I would not mention particularly Alinger, because as you know, we are not a very big player on that. Most of our energy now is in other field than oil and gas. And I would say the market yes, the market will improve not today. I would not say today it's really improving in terms of demand.
It's a bit better, but not very significantly I have markets which recover far more like automotive, for example, which is an obvious example. And plenty of other electronics is far better. Oil and gas is not a very big market for Arkema. And I would say, you don't have far, a stronger recovery, but normally, the 2nd part of the year should be better just because the pricings are increasing. But it's not I would say it's not for me top of my mind when I think about Magen Markets.
Okay. Thank you. And maybe if I can sneak in one going back To Matt's question on margins in Adhesives. Can you talk about the raw material what kind of raw material inflation you're Actually factoring in and in particular given that some of the annual contracts I assume have already been negotiated, do you think that you could we negotiate some of those annual contracts given the new picture of raw materials.
You mean a contract of raw material?
No, I meant selling prices with the
capital line. No, no, I think Not only us, but the negotiation of the contract in terms of pricing and in terms of volume Arnaud, I would say, and you have all kind of contracts. You have contracts where you have an index on raw material. You have contracts where you have spot. You have in terms of pricing, you have contact Well, you have close so you have plenty, I would say.
But no, clearly, we have flexibility, fortunately. We but not only us, Everybody on that and we'll push price significantly. And it's not, as I mentioned, just a question for Adhesive and it's a question for And not only for us, his question for the industry and for all market segment, but clearly, Nadisys, We push strongly. As you know, the magnitude, firstly, different from raw material to raw material. It depends on which end market for Adhesive.
And Adhesive is really at the end of the ocean. So when you start very high on the, for example, propylene, The impact on Adhesive is fortunately smaller at the end because but it's still a percentage and it's a top priority in these days for us, but As I imagine, many of the players.
Thank you.
Now we have the next question coming from J. D. Pangia from On Field Research. Sir, please go ahead.
Thank you. And firstly, on polyamide 112, if I can just ask, there is a Quite a lot of capacity coming in Polyamide 12 between you, Evonik and Vanhoo also is going to enter the market in 12 In 2022, I suppose. So Thierry, if you can just give us your confidence on both these products and how You are so confident in terms of polyamide 11. You've given us a lot of color on this, but just in terms of your customers, how much Pre orders or rather, which are the different end markets that you've developed applications for polyamide 11 versus polyamide 12 just to sort of give us A bit more information around this topic. And the second question is around Nutrien, the CapEx projects you are doing with them.
I'm just trying to understand how this is going to benefit Arkema long term given if you're going to look for strategic options For 75% of your Fluorogas exposure, how is it that backward integration in Spar is going Help you in that regard. And then just final question really, you gave us a strategic update Not so long ago. If I just look at sort of mid term sales of EUR 10,000,000,000 to EUR 11,000,000,000 Even if I'm giving you aggressive organic growth, I'm still missing about $1,000,000,000 to $1,500,000,000 of sales. So do you think that the intensity of midsize bolt ons will increase in the Arkema story in 2021 2022? Thanks a lot Thierry and Marie Jose.
Okay, J. Dibb, thank you for your question. Clearly, polyamide 11 is a unique product. It's lightweight. It's renewable.
It's biosourced. There is more and more demand for and it's unique because it's at the same time High performance and sustainable and is very, very important. So we believe that in the areas of sports, 3 d printing, clean mobility, consumer For the consumer electronic, bio based textile, the opportunities are many. And We have this unique positioning where we have the 2, polyamide 12 and 11. And this is why we position Polyamide 11, completely different free from Polyamide 12.
So these are two different stories. Now preorder, it does not exist In our world, I mean, to preorder years ago, we are over a polyamide level, it doesn't work like that. It will be based on and there are plenty of applications that we will supply in 2024 that we don't know today by definition. But What is clear is that this product is very promising by its sustainable qualities and its performance. Each time we have been under significant tightness of polyamide 11 because we had only one site.
And with some time, it was a site on which we had some technical issues, etcetera. So it was very necessary to have a brand new site To complete, but each time, we had availability of this product. It was sold out. So this is why we are not We have exactly done the same, if you remember well, with PVDF, where we decided at a certain point To our new capacity every year or 2, so different from polyamide level, right, so one big project, a PVDF is reactor by reactor, So small project each time. But at the end, it was really a fantastic growth for Arkema.
So we are very confident on the polyamide, 11. I know it's a big investment, like nearly like an acquisition, but it's the opportunities will be Totally incredible. And you can see that the market has been very challenging because of What Laurent call this late cycle end market in 20 20, but starting since Q4 November, you could see that the market was coming back and then polyamide 11 He's already growing a lot. So no, I think we are confident. I would confirm this confident.
Even if we are We are very attentive what is happening to pH 12, but not only pH 12, right? You have other polymers. But this demand for megatrends is really supporting polyamide 11. Nutrien, first of all, this is not because We have we want to deconsolidate the majority of our Fluorogases that we don't want them to be competitive. I think the value of Fluorogases also on the fact that long term and mid term will remain competitive.
So this is why this project, Even if it will benefit 50% fluoropolymer and 50% fluorogas and Fluorosepecialties, It's very important also for Fluorogases. Then why it's important? Because today, and this is where I just want to correct you, it's not an integration in spa. Its integration on the main raw material of Fluorogas is after SPAR and it will not come from Spar. It's a byproduct with a strong CSR profile where you reduce the emission of CO2, the consumption of energy, Because you don't start from the mine, but it's a byproduct of a plant which is doing something else.
So it's really very positive from sustainability. It's Quite competitive, and it's long term security. So for all these reasons, it's really a very, very good project. With regard to midterm sales, you're right. I think that we have never hidden the fact.
Our strategy is a balanced one between organic growth and acquisition. In Acquisition is balanced between a small bolt on and bigger one. And as we have done in the past, we'll continue to make bigger Acquisition, after that, I cannot tell you the year by definition, a bigger one or opportunistic, and it depends on the possibility on the market, We are confident and we have the financial flexibility to do it, which is quite important. So I think we you're right to say that organic growth will not be sufficient and that M and A will be important also.
Just a follow-up on to a polyamide 12. Does that concern you that Wanhua is entering the market And there could be a period of oversupply or you think there's enough demand in polyamide 12 as well to for all of you to survive because of A strong customer push or pull rather.
So first of all, we'll see when exactly when Huawei is entering. With what they're entering, I mean, on the value chain from the monomer down to the polymer down to the compounding, the expertise in applications, so it's a very long So we'll see exactly what it is. And it's a specialty product. So to build market expertise takes a year, sometimes decades. And also, we believe that as for Enevent, but in a different on different application, The growth is rather sustained and very solid growth coming from Megatrends again for the lead for lightweight and High performance material.
So for us, it's more a complementary product. And we are attentive to what happen with one word, but there are we have many elements of answer.
Thanks a lot. And well done on the buyback. Thank you.
Okay. Thank you.
So now we have the next question coming from Audacious Chaudhry from Citi, please go ahead.
Hi, thank you for taking my questions. Just one clarification, please, and one on Coating Solutions. On the guidance, in the Specialty Materials guidance, you talk about 10% up year on year in constant currency, But not in constant scope. So does that include the incremental bolt ons that are likely to happen in 2021? Or will those bolt ons be on top of this guidance?
And just related to that, and for the 1Q 2021 guidance, does that include the headwinds or any impact from the Texas outages? That's the first question. And then secondly, on Protein Solutions, the volumes were quite strong and then I think you've already mentioned The restocking, do you think these high volumes or high demand is likely to persist through 1Q and 2Q? And then are you seeing the margin develop in Europe, especially on the acrylic asset side? On a spot basis, they're looking to be tracking up quite sharply.
I was just wondering if that's something that you're seeing as well coming through the contracts. Thank you.
Thank you. So with regard on the first one, guidance on Specialty Materials does not include new bolt on in 2021. It's if we make new acquisition, you can add them to the guidance. It's normal. And we do that all the time.
And it's better like that. On the Texas, which is an external Meteorological event, in fact, it will be covered by our insurance. And on the coatings, We'll the trend in Q1 is still a good one. It's really a good one In volumes, after that, the restocking will disappear at a certain point, maybe in the course of the Q1. This is We believe that there will be normalization of the volumes in the course of the year.
But with but you compare to last year, Which was low for at least in the middle of the year. So there will be growth. So we are on the underlying demand, we are as I mentioned, with This plan launched by the states and there will be I'm we are confident Beyond that, restocking for me is temporary by definition, but we have still some restocking in Q1 that will certainly disappear in Q2. With regard to the margin of acrylic acid, I think it will remain tight for a while because and Texas will help also on that. So by definition, this tension will continue.
So sometimes it has to be to have still some acrylic acid, as you can So we'll enjoy it also after that to which level. You should not extrapolate Spot because Spot first The big customer are not on spot, and we want to support them. It's clear. It's part of our long term strategy. So we are not there just To price that's what, but give you an indication that the market is tight and our feeling that at least on the 1st semester, the market will remain tight on agriculture.
Thank you very much.
So we now have the next question coming from Rob Hill from Morningstar. Sir, please go ahead.
Thank you. Good morning or good afternoon, I guess, I should say. A question, please.
Can you just talk
a bit about how pricing power varies among the sub segments in adhesives? And the second question is, how should we think about exceptional CapEx over the cycles on a longer term period, maybe 5 years or something. Should we add some of the sales, just kind of a long term outlook for exceptional capital?
Okay. So, fresh power between such segments in Adesis, I would say, it's rather between construction and Pre when the raw material are increasing as much as it is increasing today, I would say pricing power is 1st is a necessity, it's followed by every competitor. So I would say it's solid and it's Rather share between the different sub segments now is clear that in distribution, when you are in do it yourself, You cannot have you have something which is more spread all over your range, Okay. Not completely linked to product, baked product to raw material. You have something which is more driven Whereas for industrial adhesive or even some construction adhesive, you really have a direct link between your pricing and your raw material product by Product, so it's more the way it is implemented, which is different.
I would say, the more you get to the end consumer, The more your increase is spread all across your range and this is the average which counts while for Other businesses which are more far from the more B2B is really product by project depending on the raw material input. But at the end, there is pricing power all across. But again, it's clearly the adhesives, but 24, you can take all our competitors. In terms of marginal variable costs, it's behaving better when raw material are low than when they are high. We all know that.
But it's a package. I mentioned it at the beginning with the question on Matthieu. It's a package. This means that you have to take into account at the same time The volumes, the pricing, the raw materials, the operational excellence, and this is why we are confident on this to deliver the 14 Margin for Bostik. Exceptional CapEx over the next 5 years, no, I think we come at the end of the exceptional CapEx for 24,000,000 if we take 24,000,000 which was what we published on the Capital Market Day, we have been very clear what we are Considering on the exceptional CapEx, so you have €420,000,000 of exceptional CapEx For 2025, on the period 2024, and we have already Spend on that a bit less than to, I would say to be confirmed, I would say let's say that Remaining, we have still about between €350,000,000 €400,000,000 about €380,000,000 €390,000,000 Too span.
But I would say these are the exceptional CapEx that you know. There is no other and we don't anticipate Any other up until 2024 and long term, I think we've done what we have done. So you should have in mind €1,024,000,000 reached 5.5%, all included on CapEx as a percentage of sales. So pretty consistent with what we have said so far. Was that clear or?
Yes, that's great. Thank you very much.
We have the next question coming from Jason Boudicchi from JPMorgan. Sir, the floor is yours.
Yes, hi. Just a couple of questions from my side. Number 1, just the Q1 guide of 10% on a reported EBITDA ratio, if I strip out, yes, that would imply 15% growth in constant currency. Should we assume within that the specialty part would be growing faster than 15%? That is the first question.
The second related question would be then Why are you talking about approximately 10% growth through rest of the year when frankly the comps would be much easier in 2nd quarters? Are you What's that guide for full year based on that assumption you mentioned previously that some of this is driven by restocking, which will probably come to an end I'll come to an end at some point later this year. And one question I had was on Fluorogases. The boat duty that you mentioned on R32, which is I believe the Fluorogas involved, It seems Arkema today is the only producer of that chlorogas in the U. S.
So is it possible for you to give us any feel of In terms of financial impact, is that material for Arcema? Or is that relatively small? Thanks.
So with regard to the Q1, I don't want to I mean, In terms of guidance, we do something that we don't do often, which is that we need to give something for the full year, Very early in the year, which is a big sign of confidence. We had guidance on the Q1. So we don't want to give more. I think the intermediates will grow. So after that between specialty and intermediates, We don't want to comment too much.
I will see how the Q1 develop. And At the end, this is a group. What is clear is that Specialty will have an excellent growth on the Q1, and We appreciate that. I think the key message and it comes also to your second question. I see the key message is It's a message of confidence.
1st of all, we give guidance and not every European company do that. Secondly, we give guidance which is ambitious, which is significant growth. And it confirms all the benefit of what we have said about Specialty Materials because not only We are more resilient on specialty materials than our intermediate, it's obvious, but also than many other company. But also on top of that, when the rebound is coming, we are well positioned for this rebound. And we take the wave from the Q4 4 and then the Q1.
So it's very encouraging for our shareholders. This means that we have a strong quality of our portfolio. Now why is Q1 A little bit above versus last year than the full year. First of all, because in terms of seasonality, year on year It's never exactly the same. So it's don't put too much Meaning to that.
And then as I mentioned, you have restocking in Q1 that will not end forever. So we'll benefit me, the good news is that we will benefit from it. It will not be the case of everybody. So I think we are well positioned to benefit from the restocking. But restocking is not the full story.
It's part of the story in Q1. But beyond that, we are confident to deliver the full year guidance On the company, better, please retain the fact that we give a precise guidance for the full year, which is a very positive one, which Solid, robust and we give you visibility on a world which is still volatile. These are good news. And it's very important for us that you take the good news as they are. On Certi2, yes, it should be Positive.
The fact to be only producer, not producer is not the main thing because the world is open. You can get product From everywhere in the world, but to get duties on China import was very important because price were not reflecting the true costs. So I think we are happy about that. It will normalize the pricing in F-thirty 2 and we will benefit from it. After that, we'll not guide on the air32 in Fluorogases.
I think we already guide. On the full company EBITDA, we'll not go, but it's one element which we participate to the stability Of intermediate in the full year, as we mentioned in our guidance.
Thank you.
Okay. So we have no more questions. So back to you, Mr. Legere.
Okay. So I would like to thank you for your attention. I was very pleased to spend some time with you on what we did. Fully, you recognize that not only the one, but I think the quality of the positioning, the portfolio, the cash allocation, I Many good news, many positive points, and I will be glad to follow-up with you with the team in the next weeks during the roadshow. Again, thank you for your attention.
And we were pleased together with Marie Jose and the team to share this time with you. Thank you.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.