Ladies and gentlemen, welcome to the ARTEMAS Full Year 2019 Results Conference Call. I now hand over to Thierrylouenaf, CEO. Sir, please go ahead.
Thank you. So good morning, everyone. Welcome to Arkema's 2019 Results Conference Call. So with me today are Marie Jose Donsion, our CFO and also the investor relations team. To support this conference call, we have posted on our website a set of slides, which includes the highlights of the full year performance, The outlook for 2020 detailed on the progress we are making with regard to our transformation and also our recently updated CSL policy, which includes new more ambitious climate and environmental targets for 2030.
After commenting this set of results with Marie Jose, you will be able to ask the question you may have to myself and Marie Jose. Starting with the highlights of 2019, I would like to underline four main points. The first one is that Arkema achieved in 2019, another year of strong resilient financial results with EBITDA of 1,457,000,000, is broadly in line with 2018 record performance. As you know, this was done in a challenging macroeconomic environment, which was marked by persistent geopolitical tensions and also slowdown in some key end markets. Particularly in the second half of the year, like automotive or electronics.
In this context, and we are proud of this achievement, We also managed to deliver robust end to the year with Q4 EBITDA growing 3%. Second point, which I think it's a very strong point, we generated an outstanding level of free cash flow EUR667 1,000,000, which is from memory record amount up strongly versus last year. 2019 result from our standpoint reflects the quality and the balance of our portfolio of businesses, with what you expect, which is a growing share of specialties, which delivers solid growth was intermediate businesses were impacted mainly by the very weak market conditions in Fluorogases as we discussed all along last year. To make your analysis EBITDA growth of specialties versus intermediates. We continue to implement actively our strategy formation with a high density of industrial project startups, significant M and A activity in 2019 and exciting R&D initiatives.
As you know, since 2006 we have never stopped transforming the portfolio and 2019 was another good illustration of this. We have strengthened the profile of Arkema by reinforcing again the share of specialties, which went from 40% of our revenues to 75% pro form a year. And as announced with regard to the whole strategy, we give an update at our Capital Market Day on April 2nd. These actions as well as the quality of our financial performance support the confidence of the group in the long term and also the decision of the board to propose a dividend, notable increase, plus 8%, which would represent a total amount of 2 1,000,000 in 2019. After this, bullish introduction and this underlining of key points.
Let's have a closer look at various businesses. I will start with the specialties. First of all, adhesives, they deliver a remarkable performance. I think with EBITDA growing in the high teens, driven by the momentum of your business development in construction and structural bonding, which are two areas which are growing. Year after year.
The benefit also of the pricing action we've took in 2018 and in the 1st part of 2019 with stable raw materials, a little bit favorable and also synergies from past acquisition, including the BRAVEN. Having mostly recoup, the impact from higher raw material, which has started in 2016, but fixed EBITDA margin now stands at close to 13%. So consistent with our plans and what we said last year. And we have still this ambition to reach 15% and higher in the medium term. Meanwhile, we continue to make value added bolt on acquisition with Proshimier and more recently with LEAP, which is a Scandinavian leader in construction chemicals, which we finalized on January.
And we'll continue this bolt on strategy on adhesives, in 2020. I move now to Advanced Materials. They delivered a rather resilient performance despite lower volume which we saw especially in the transportation, oil and gas and consumer, electronics sector, no surprise there. Everybody knows the trend of these businesses last year. Our Advanced Materials Alliance benefited from the integration of our map, which delivered a good performance in line with our expectations.
The teams also work hard to optimize product mix to our higher value application, which helped maintain profitability at a good level. Last and not least, we benefited from our continued innovation rye, which, for example, led to significant growth in the attractive market like 3 d printing batteries or lightweight polymers. Many exciting opportunities still like ahead In Composite during the spring of 2019, we opened a joint R and D laboratory in France with XL, the leader in carbon fiber, composite, especially for aircraft, which was generation of aircraft. In 3 d printing, we signed an agreement with Autodesk and far soon to develop optimized software hardware advanced materials ecosystem, with the goal of accelerating industrial production with Polymer Laser Centring. We inaugurated that we inaugurated last November new center of excellence for 3 d printing in France, which complement what we have in Z U S, in 2 centers.
And this effort should ensure we stay well positioned to capture growth in really the rapidly attractive three d printing market, And finally, not covering everything and all the lines, thiochemicals performed very well in 2019 in context of growing end markets. As you all know, the performance of our intermediate product line in 2019 was impacted by weak market condition in Fluorogases where illegal imports of HFCs in Europe weighed materially on volume and prices. In MMAP, MMA, the year was marked by normalization. It was expected by the impact of this normalization was suffered By our strong integration along the chain, it's one of the very strong, element of our MMAP, MMAP the benefits of innovation and somewhat more favorable raw materials. Finally, acrylics deliver solid volume growth in 2019, thanks to the diversity of the end market, mainly in Asia and U.
S, where our new state of the ARF reactor in Clear Lake started in the summer, and this strong growth of volume of say some more weakness at the end of the year in the spread. So overall, we delivered a very solid set of results in 2019. In a complex macroeconomic environment, while pursuing approximation and making further progress toward our 2023 objective, of making at least 80% of sales in specialty. So the shareholders now stand at pro form a with impact of the acquisition of Ormat Mirramsson And LEAP as well as the proposed divestment of the functional polyolefin business, which should be finalized in the second quarter. Stands at 75% pro form a.
Going forward, we'll continue to look for small and medium sized acquisition targets with a Roche strategic fit and synergy potential on our 3 growth platforms, namely adhesives, advanced material and performance coatings. 2019 was also a rich year in terms of organic project in higher gross mark region, we started our 1st WASCAL P AKK plant in the U. S after 10 years of development of this incredible polymer in R&D. We increased specialty polyamide power dose capacity in more in France by 50%, very attractive product line. We expect the Sartomer's capacity in China by 30% and we started the power of the quitting regime facility in India.
In 2020, one of our major projects, the doubling of capacity of our Cartier unit in Malaysia, Interchemical is expected to start shortly. Project for the second half of the year, if I stay with the CapEx, include a 25% expansion of polymetroev capacity, and the 50% PVDF expansion dedicated to batteries both in Changshu and China. We're also ramping up our construction of our oil PA 11 plant in Singapore, which is really an absolutely major important project is expected to start in 2020 2. So this high return CapEx project should enable the group to capture the structural growth opportunities, which are incredible in materials long term. As I say at the beginning, reflecting our confidence in our Arkema's long term prospects, solid cash flow generation, The Board of Directors will propose to increase the dividend by 8% to per share compared to per share last year, which means a significant increase in the payout ratio to 33% versus 26% last year.
Before concluding my initial remarks, I would like to highlight Arkema's commitment to corporate social responsibility. You know that very important for me. It's very important for our management and our board. It's an integral part of our business and strategy. Having already reached or made significant progress toward our 2025 social environmental and safety targets, We have decided to unveil new environmental and climate change targets for 2030.
Specifically as part of our commitment to the Paris agreement, we have introduced a new segment based greenhouse gas reduction target, which called for reduction of greenhouse gas emission of 38% by 2030, relative to 2015. So very significant decrease, very ambitious target indeed, and And I hope it reflects the importance and very mentally should have in all employee decision process today inside Arkema And I would like also to add that 2 copper associated responsibility criteria, diversity in greenhouse gas emission, have been included as part of my own long term incentive scheme. Thank you for your attention. So now I'd like to turn over call to our CFO, Marie Jose will detail the 2019 financial performance.
Thank you, Thierry, and good morning, everyone. So I'd like to start with some comments on our 4th quarter results. The economic context remained challenging. Translating into a billion sales level for the quarter, which represents a 10% organic decrease compared to last year's Q4. Also of the impact came from volumes and the other half from the price effect, reflecting, in particular, the lower price of propylene on the Coating Solutions segment.
At 1000000, though the EBITDA was up 3% on last year's already strong performance, reaching a 14.4% margin level. So looking at each division, in high performance materials, we achieved strong results with EBITDA up 12% thanks in particular to continued growth at Bostik and to the integration of our mass. Sales were up 1.3%, benefiting from pricing actions and favorable product mix. And despite a 7% decrease in volumes, coming from specific industries as well as general customer destocking. Industrial Specialties had a rather contrasted performance So on one hand, thiochemicals and hydrogen peroxide delivered another good quarter.
And MMA PMMA remain resilient, help by our footprint in the U. S. And our high level of integration. On the other hand, Fluorogases still suffers from the, illegal HFC imports in Europe, as Thierry mentioned. Finally, Coating Solutions posted a 13% sales decline in Q4, driven by the mechanical impact of lower propylene prices, as well as a 3% volume decline.
EBITDA came in at 1,000,000 versus 1,000,000 last year as a better downstream unit margins could not fully offset less favorable market conditions in upstream activity. I propose we move on now to our full year 2019 numbers. So let's start with the P and L. Our sales reached EUR 8,700,000,000 So broadly in line with last year's level, including a positive 2% currency effect, mainly due to a stronger U. S.
Dollar versus euro, and a positive scope effect of 1.8%, mainly corresponding to the integration of our mass in July. Volumes were down 2.4%, mainly due to lower demand in high performance materials, and the price effect was a negative 2.3 percent localized in Coating Solutions And Fluorogases, which offset positive pricing across our specialty business lines. EBITDA at 1,000,000,000 was similar to last year's record level and EBITDA margin was stable at 16.7%. What does that mean in terms of contribution mix? Between specialties and intermediates, it actually means that specialties delivered an EBITDA growth of more than 100,000,000 Partly offsetting the contribution from intermediates that actually declined by more than EUR 100,000,000 in EBITDA.
Our recurring EBIT reached 1,000,000 versus just over 1,000,000,000 last year. This translated into a rapid margin at 10.6%. The nonrecurring charges amounted to 1,000,000, so mainly corresponding to restructuring charges and asset impairments. Financial results at 1,000,000 was impacted by the higher interest rates on our U. S.
Dollar debt. In 2020, we could assume the financial results, are to benefit from the refinancing of our 480,000,000 Euro senior notes that are maturing in April 2020. And that would represent roughly a EUR 10,000,000 saving. Tax is stood at 1,000,000, which, excluding exceptional items correspond to a tax rate of 19 percent of our rebates, which is unchanged year on year. For 2020, we anticipate the tax rate on Revit to be around 20% as well.
Finally, 2019 adjusted net income came in at 1,000,000. Or per share, if you like. A few comments now on cash flow and net debt. As mentioned by Thierry, at 1,000,000, the free cash flow generation was once again the highlight for us this year. This reflects an inflow from working capital resulting from flight control, lower activity levels towards the end of the year, and lower raw material prices indeed.
This corresponds to an exceptional EBITDA to cash conversion rate of 52% compared to the 38% achieved last year. At, let's say, 13.8 percent of our sales, our working capital ratio is close to last year's figure. Recurring CapEx came in at 1,000,000 which represents 5.8% of our sales. Exceptional CapEx amounted to 1,000,000, and reflect the progress of our biochemical expansion in Malaysia and our specialty polyamide plants in Asia. For 2020, the sum of recurring and exceptional capital expenditure should amount to around EUR 700,000,000 in total, Of which, $200,000,000 exceptional CapEx are linked to the ramp up in particular of the Singapore plant.
Net debt rose by around 1,000,000 during the year to just over 1,000,000,000 at end of December 2019, including 1,000,000 spent on acquisitions and million linked to the application of IFRS Six 18 on January 1st January 2019. With a net debt to EBITDA ratio of 1.1 times Excluding our 1,000,000 hybrid financing, our balance sheet, of course, remains very healthy. So this would conclude my presentation. And I now hand it over to Thierry for the comments on the, on the outlook.
Thank you. So now is the outlook. So looking ahead, we the economic environment, no surprise to remain volatile this year, with, challenging also. In this context, in 2020, as we mentioned in the slide and in the press release, some Arkema aims to reach an EBITDA comparable to the 20 19 very solid level, excluding the impact of the COVID-nineteen. For the full year, I will give you some color on excluding against the impact of the COVID 19 on the main drivers without going into every business.
Bostik, I think is again expected to be an important driver for the group. And should achieve around 10% EBITDA growth, including a couple of small bolt on acquisitions, which will be again a combination of organic and a smaller acquisition, thanks to further progress on synergies, operational excellence measure, they have still room there. And we assume stable raw material, which is valid for the whole group. Advanced material contribution should be broadly stable despite expected continued weakness in auto and electronics on the first part of the year where if we don't see discontinuity in the trend compared to what we saw, in for the time being, last year or 2nd semester, while Fluorogases should decline a bit to a much lesser extent than last year, but we still should have some decline in Fluorogases because of this illegal import issue. As we have shown in 2019, we'll maintain a strong focus on our operational excellence measures We usually don't comment broadly on all the savings we are making, but I can tell you, and, the last year, example, was a good one.
We really are focused on that throughout the organization, and we plan to offset at least half of cost inflation by a fiscal improvement and by variable cost improvement. Normally, we do better than that. We'll certainly remain agile. This is a message, which is pass through the organization. And adapt to this economic environment as it evolves.
In terms of seasonality, we expect for different reasons and more balanced contribution between the two halves relative to last year. And one of the reason being the COVID 19 So regarding this COVID-nineteen, as everybody knows, visibility is low at this stage. The situation is changing nearly every week, we know, with some cases in Europe, while we do not have any factories in the UBuy province, I mentioned it because it has been asked to us, this question came through many times. So we don't have any factories in the Uber province. But like many companies, we have been facing a strong slowdown in demand from our customers who are themselves impacted and We also face challenges with regard to the transportation of goods, transportation of raw material.
We have, churn and greater quarantine in China, like many companies. And, as you know, China represents 12% of our sales and Asia, 25%. It seems to us that in the recent days, the epidemics were stabilizing in China, but we have to remain cautious. But on the contrary, spreading in some countries in Europe and the U. S.
As returned in the press release this morning, we estimate the negative EBITDA impact at the end of February, which means including January February, around 1,000,000. We've got also some questions on the split. So This includes around EUR 5,000,000 in January 15,000,000 in February. And we don't want it's our position. We don't want speculate with regard to the impact going forward, there is still uncertainty on how the situation evolve So it's too early to gauge the final impact at this stage.
Finally, I hope to see as many of you as possible at our Capital Market Day in London on April 2nd, during which we will present the group's long term strategy and growth project. So I thank you very much for your Chen. We are now together with Marie Jose, ready to answer your questions. Thank you.
Thank you. Ladies and gentlemen, you. First question from Martin Rydiker from Kepler Cheuvreux.
Hello. Yes, good afternoon. Thanks for taking my questions. I have 3, please. First, on the news that you have filed an anti dumping petition on refrigerant R32 in the U.
S. Due to Chinese imports there what is the situation and the prospects for Flu Chemicals in North America? Because you just today spoke about Europe. The second question is on coating solutions. And here, especially on the on scope effects because I remember in Q3, you had a positive scope effect in sales from the acquisition of the Euron stake in Beijing Sunke, but in Q4, there was no scope effect at all.
Why not? And the third question, picking up some news from Bloomberg in recent days, do you really prepare disposals? And if so, what do you see as your priority? Thank you.
Okay. Thank you, Martin, for your question. So as you know, we have filed with others an anti dumping, no, in fact, we filed an anti dumping recent on component in the U. S, but it's a process which will take some time. So I will not comment on it.
With regard to the situation on Fluorogas in North America, I would consider it, which is a difference with Europe, where we have this uncertainty on illegal import, I will consider it as stable, okay? Maybe we'll get some side, we'll see. But for the time being, my starting point is that it should be a rather stable year on year, but it's still, months of the year are low season. So it's too early to plan for the full year with no more on the spring, but let's say stable. With regard to Coating Solutions, you have to treat to consider St.
K. Really as a capacity addition, which we made really at the perfect time, because, since the market, when we negotiate this capacity addition, which buy the 50% remaining of Cenke was, at that time, China spread was quite low. We could get it really for our costs for an investment in a plant of this quality, which was really absolutely uniquely low. And so we got it. So if you take it as a capacity, then you have to consider that at the end of the last year and a second part of last year, volumes where because of the seasonality, but also because of some uncertainty on China, where were a bit weak and we did not need this capacity.
So it's a long term short. And as you know, with regard to our position in acrylics in China and in Asia, where we are working on downstream development rebalancing the upstream, we have still some way to go. But to answer precisely to your question, on the second part of last year, we did not need more capacity, okay? With regard for the sake of the efficiency of our discussion today, otherwise we'll spend a lot of time. I think you know us, since now, especially you Martin, a lot of time, you know, that our policy has never changed about any comment.
It can be on the shareholder. It can be on the portfolio movement, whatever we comments. So I have no more comments, you know, that we have, and you mentioned it, a Capital Market Day, which will come on the progress second, you know, that we have this Capital Market Day organized every 3 years. So it will be an opportunity for you. And hopefully, you will be there.
To see us presenting an update of our strategy, a full review of the Arkema, in-depth review of the Arkema strategy in all the components, as we do for every Capital Market Day, with innovation, with a major organic CapEx and with M and A and also there will be certainly a part on the on CSF. So I wanted to make the point clear in order to save time's discussion Okay. Thanks.
Thank you. Next question from Matti Yates from Bank of America.
I apologize if I'm going to preempt that April presentation, but a couple of questions, please. The first one is around your carbon targets, which are obviously quite long dated in terms of the timeframe, does that begin to influence the way you think about the portfolio? As you said in your introduction, since 2006, you've been constantly transforming it, but does this greater focus on carbon emissions maybe accelerate some of the changes to the portfolio? And the second question is around CapEx. You helpfully outlined in the slides, the projects you're doing and the high returns you expect on those.
So it looks a very good use of capital. Can you comment about, your sort of pipeline of additional projects beyond 2020? Should we expect continuation of high CapEx, high return projects? Or will we see that moderate and cash generation increase
Okay. So first of all, with regard to carbon emission, it's clear that every big project of the company first is integrating now the price of carbon, which is higher and higher. So the last one is 50. So we take now 50 and it's including internal rate of return of the capital expenditures that we have. And also in our decision process, beyond the economics, which are often not so much impacted by the decision.
What is important is that it obliges us to raise questions with regard to the impact of our manufacturing process. And if we can do better when we build or expand the plant, And it's really a very positive way of thinking. Now with regard to the portfolio, we FS ongoing leases now 2 years, the portfolio of Arkema with this not only with this angle but with this angle. So by definition, It can influence. I don't say it will influence, but it can influence.
It's taken into account, when we think about the strategy, organic and, also M and A of Arkema. So hopefully it's the case for Arkema, but it's the case for many company today. With regard to the CapEx, clearly, we are very selective in organic growth. We have invested a lot in in Asia in the past 10, 15 years because our positioning there was very limited. So we had to do what our predecessor had done, which was to put modern and significant plant in Asia.
I would say we have covered a lot of ground there. It does not mean that the road is finished, but we have still some way to go, but at least we have caught up with our best competitors, but there will be still plants and investment there beyond that, you the fashion when we started Arkema was more about the emerging countries. The fashion is more about the megatrends, especially I think about, electronics, batteries, lightweight material and this could trigger on some important CapEx. This is why we'll certainly not do it before the Capital Market Day. We'll continue with some CapEx of measure or measure investment, but we'll be very, very selective on that.
Very good. Thanks a lot.
You're welcome.
Thank you. Next question from Georgina Eduardo from Goldman Sachs. Please go ahead.
Hi. Good afternoon to you. I'm Thierry and Marie Jose. Thanks for taking my questions. I've got 3.
The first one is on Adhesive Could you give us an idea of what the run rate margin is for Bostik at the moment? I know that we talked about around about 13% third quarter. Just wondering if it's inched up a little bit with raw materials coming off. And in your guidance for 1,000,000 EBITDA in 2020, Can you help quantify how much of that growth is from scope and whether those acquisitions have already been announced or you're factoring in some new ones to come in 2020? And second question on CapEx.
Just wanted to understand, is there a risk that your medium term exceptional CapEx guidance needs to be raised? At the previous Capital Markets Day, you talked about 1,000,000 over 2018 to 2021. And I also wanted to just have a refresher of exactly the breakdown of your overall CapEx guide in terms of what is maintenance, what is growth and what is exceptional? And then finally, just on cost savings. So given the challenging macro backdrop, We've had a lot of peers announced cost savings programs and you have mentioned today inflation offsetting measures.
I was just wondering if there is scope for further if the business environment continues to deteriorate?
Okay, Georgina. So you went very fast. I will try to cover every team have been in the right direction. A bit, if you hear to me, took also the question. So, okay, let's start.
So with regard to adhesives, I would say that currently, we are just starting the year. Our run rate is a consistent with last year around 13%. But we plan to increase it a little bit again this year. It's at least at the point every year. So that it depends also on the appetite for some bolt on acquisition, but at least at the point every year, it's a good is a good, target with regard that I will answer on the CapEx.
But before that, because I've in mind, the savings not to forget. And, we, I know that we are different from our competitor and I respect all type communication. It's true that with our style and you know us, we are another one who put in front all the competitiveness that we are implementing. And most of what you see from competitors is never net of inflation. So in fact, at the end, either they cover inflation or part of inflation.
So we are very aligned with them. What is clear? You are seeing the quality and hopefully you have been positively surprised of our EBITDA in the 4th quarter. And you can imagine that to deliver this quality of EBITDA in the 4th quarter in the kind of environment we have equipped with in the fourth quarter, the impact of further competitiveness, both on variable costs and fixed costs, has been there. So we have been very reactive, very agile, but we, we try not to put this big plan.
What is clear is that, ongoingly, every year, to offset at least half of the inflation And last year, at the end of the year, in fact, we nearly covered the full inflation between value cost savings and fixed cost saving is quite a significant step. So let's continue on this track. And I think we navigate well with the with the environment. So with regard to the EBITDA of those stick of $300,000,000 of 2020. I will not give users fleet.
It will be compared to this year or I can nearly give you the split. It's nearly between the organic improvement as what will come from bolt on acquisition is nearly half anhalf. Okay, it's a split between the 2. So with all the data I will give you, you should have a good idea with a simple math of where we stood, in EBITDA in 2019. You see where what we target for 2020, and you can take has between bolt on and acquisition and organic, which means that organic continue to to be quite, quite strong.
With regard to the CapEx split and the exceptional CapEx, your question with regard to the CapEx split, we have, before exceptional, half between maintenance and gross. Are you but sometime we are a bit more in maintenance and in growth because the pressure on regulation is bigger and bigger. So some years, it can go to 55% for maintenance and 45% for growth. With regard to the question on exceptional, a little bit back to the question of Matthew, but for the view, of what we have today and we will update you on the Capital Market Day by definition, okay, on this two projects that are today in the envelope of exceptional CapEx where we get 1,000,000 we just need to take into account the euro dollar, which has been a bit a little bit higher dollar, but this is the main point. So we are really very consistent with the envelope that we have disclosed to the market.
Fantastic. That was really helpful. Thanks, Yuri.
Okay. Thank you very much.
Thank you. Next question from Mubasher Chaudhry from TD Hi,
thank you for taking my questions. Mine are a little bit on the guidance. On the outlook, can you provide some color on Fluorogases under acrylics market? So for Fluorogases, should we be expecting to go back to kind of 2015 2016 levels of sales? And then on the acrylic side, are you seeing any improvement in up in margins as you go into the new year?
And then secondly, just to clarify on the guidance, the guidance, does that include the impact of the bolt ons or will the bolt ons any bolt ons that incrementally carried out from this point forward are going to be on top the guidance that you've announced? Okay.
So with regard to the Fluorogases, I've not exactly in mind. I mean, we'll come back to you later where we were in 2015, 2016. What I can say is that, last year, we had a significant drop which took us below the 17 level and between closer to the 16, but in between 17, a little bit closer to 2016. And after that, we should continue to decline a bit, not at all the same magnitude that we had year, but still a bit. So we'll get back to a level which are closer to 2016, but I will need to check that, but it's a good question.
But I think I was thinking about 2016, 2017. So yes, 2016, it should be a place. Saw that, it is going to import at a certain point will be solved. The only thing is that we want to stay cautious on this year it will take some time for it to normalize. So we have to be a bit patient there.
With regard to acrylic, it's a loss, it's difficult to comment. For the timing, we don't see any discontinuity. Don't forget that the discontinuity we had in the Q 4 was more in Asia, okay. And Asia is very difficult to read because China has been very impacted by the virus. So, plus you had the Chinese New Year.
So it's very difficult to give you an insight there. You need to wait a bit more that we enter the spring to tell you where we stand with acrylic. With regard to to the guidance. If it includes bolt on, it includes really small bolt on. So at the end, I would say with with a guidance, which is comparable that we give at the beginning of the year, frankly speaking, some of the 2 bolt on acquisitions we are going to make, in adhesives on top of LEAP, which will make any significant difference.
So for me, it's not material.
Okay. Thank you.
Next question
from Yandhi Pandia for Millennium. Please go ahead.
Thank you. Yuri, I want to ask you firstly on Fluorogases. As a question for 2021, when the next set of regulation kicks in Europe? And then if you think that there is any sort of regulations that are coming in China or phase out. So just want to know what your view is, how the industry is going to react in Europe and then in China?
And the second question then is just around acrylic assets. So we are starting to see more and more sort of supply come in countries which used to be natural importers like India, for instance. So when do you really think that we will sort of globally be in a midcycle world? I mean, do you think that in your planning assumptions now you've sort of just taken that out? And then lastly, on polyamide 11, Could you tell us how tight are you today, I.
E, if there are 100 customers, only 50 are getting this product and therefore, when the supply comes in 2022, 2023. You already have decent level of demand to fill that plant. Thank you.
Okay. So on Fluorogas, with regard to regulation in China, and I'm not, I've not the full picture on my definition because it's an evolving picture. My feeling is that it will really take time in China implement the new regulation. So it's not a from it's not a topic for 2021. With regard to actually by the way, we are not far from mid cycle.
It's not like, I don't know your view of acrylics, but So, and it was mostly, I would say, the 2 good bill of mid cycle was mostly a matter of the end of the year, especially with some slowdown in China and that everybody has identified with regard to new capacity, India, which will take time. And I think when we started Arkema, you had already 3 projects in China, in India, which have never gone through. Okay? So it's a complicated conflict from this standpoint, but maybe this one will go through. I think it's a market acrylic, which is growing every year at GDP Plus supported by water treatment, by SAP, So super absorbent, etcetera.
So it's a growing market and quite from a demand standpoint, quite healthy market. You have a new capacity coming, but it's far more reasonable than it has been 5 years ago. I know you cannot compare. So it's more on our I would say, step by step. And at the same time, you have some closure of all site because your site which really have been built.
At a period where it was built cheaply, especially in China. So overall, no, we don't change our assumption, what we have told you on acrylics over the over the past year. So and for us, as you know, the important part of the strategy is really to develop the downstream. If you look at the evolution of the cutting solution margin, even if on the value we have to continue to increase, I would say, in terms of resilience, over the past year, despite some volatility on the acrylics, you could see that this mechanism which values integration is working very well on because the segment itself has been very resilient. With regard to polyamide, driven.
So 1st of all, up until early last year, it was very, very tight, incredible. After that, you got Automotive And Electronics certainly, the tightness has been ease, but it's really temporary. We are not anxious about that. The new business pipeline is quite a good after that, if your question is that for the specialty business, you start the plant and the 6 months after the plant is full, no, it doesn't work like that. There are specialties.
They need homologation. It's high value product. So we have already said that the ramp up to fulfill the plant will be 4 to 5 years. It's a greenfield plant. It's important capacity.
We don't want to push 2 quickly the volumes in the market. We want to do it really with a high specialty view, high value. So it will take 4 to 5 years, but profitability of the plant will be quite stronger. We are very very, very confident about the timing of this new plant, early 22, the use of the plan, but as a point will be profitable quite quickly and very profitable after for 5 years. So once the ramp up has been fully achieved.
Sorry, just on FCAS for 2021, do you think that could be sort of a fresh oxygen for European Fluorogas next year?
I will be frankly speaking, last year, we were hit, and I'm honest about that, we did not forecast it. We have been hit by legal import. I will not just now starting 2020 tell you what will be in 2021. What is sure is that the starting point of end of 2018 is far more normalized than the 1 of end of 2019, sorry, is far more normalized than the 1 of 2018, which is from this standpoint, once it was followed, a good deal.
Thank you so much, Siri. Thank you.
Thank you. Next question from Geoff Haire from UBS. Go ahead.
Good afternoon and thank you for the opportunity to ask question. I just wanted to touch on thiochemicals. I'm clearly at least looking at the mix for Q4, you had a very strong delivery in profitability in thiochemicals. I was wondering if you could run through what exactly is driving the increase in profitability of thiochemicals? Thank you.
I cannot I commit, comment on every quarter on every business line, but, what is clear is that, and it's not just the 4th quarter, right? All along the year that you can recall has been performing very well. As you know, We have about 50% of the thiochemicals, which is for animal feed, which is a growing market, steadily growing. Even if there are some, capacity for the end consumer, I think we are well positioned with our partner with one element. And then you have the new desulfuration, though, which help also in the oil and gas segment, plus some specialties that we don't mention too much, but which are developing.
So overall, if you if you had everything. I think it's a nice specialty business, which are the 3, 4 main segments and which are in terms of end market growth doing well.
And is it mix then that's driving margin?
The mix is, yes, the mix is rising a little bit, but the margin has not increase significantly, but the mix is going in the right direction. But you know, what you saw in, in 'nineteen is something that you have seen in many years during the period, 2006, 2019. It's not like suddenly 2019, thiochemicals, while waking up. It has been an ongoing development, not every year, last year was especially good, but I think the end markets are quite healthy. And, you know, we are really a leader in this in this segment, which helps.
Thank you. Next question from Alex Stewart from Barclays. Please go ahead.
My question. Hi there. But the first one is quite straightforward. I hope your comment about seasonality. Can I just clarify, when you say that expect it to be more even?
Does that mean closer to fifty-fifty in 2020? Or do you just mean more balance for normal, more normal than it was last year? I'm a bit confused what that means. And then the second question, which is less easy, I'm afraid. But you make a comment in the release saying there was a solid performance in all the other business lines in Industrial Specialties.
And yet, if I look at the revenue performance, Hydrogen peroxide revenue was down 6%, which is one of the biggest year on year declines for years. Biochemicals revenue was down 10%, which is 1 of the year on year decline, biggest year on year declines for years. So it actually looks like there's quite a lot of top line pressure in the other segments in the fourth quarter. So could you just help me understand whether there's something specific going on at the top line, which isn't impacting earnings or whether, whether something is changing in those segments would be extremely helpful Thank you.
Okay. With regard to the seasonality, in fact, as you know, not every year is the same. Last year was stronger in the first half and not atypically, but was a little bit atypical, stronger in the half and the second half. A little bit on the high side. This year, would be more diverse because you compare year on year.
So you know how it works and you have some specific element share on the beginning of the year. So I would say it's, we'll see at the end of the year if it is half half or still a bit more on the 1st semester than the second one. I mean, we cannot give you this level of precision now. But what is clear is that compared to last year, which was more heavy on the first semester than the second one it will get closer to the half half. Okay.
It's more a question of comparison and also the fact that have the virus on the first half and which will impact. So and even without the virus, I think we would have said the same thing, okay. We are with regard to the H202 and we'll come back to you as the industrial specialty. This seems to be from what because I was surprised by your comment and I checked, talking to you, to the team, but to me, if I'm right, is that there was a rounding Eroll? Yes, it's not an error, but you have wrong figure, so it's difficult to assess properly exactly the figures for each business line.
But regarding H202, In fact, it has been a flattish year on year in Q4. [SPEAKER JEAN FRANCOIS PRUNEAU:] Yes. Okay. This is what I didn't mind, but I was surprised by your question, but so Beatrice is confirming that, okay, but she will come back to you precisely on this point, okay, to make the mistake.
Okay. Thank you, Thierry. That's very kind of you to clarify that maybe it would just be really useful if you could give us the exact sales numbers for the different segments I know you've always given a percentage, but this does introduce rounding error, which is frustrating. So perhaps something to think about. In the past?
We do as a rise, but I will not comment now. I think, Beatrice will come back to you. And we are sure we understand exactly your clear. We are okay. And that's good.
Okay. Thank you.
Thank you very much.
Okay. Next question from Laurent Favre from Exane BNP Paribas.
Yes, good afternoon all. The first question, not good afternoon. Terry, not to preempt the CND in London or town. I'm a bit puzzled now and if it's Paris or London. But on the dividend, I was wondering if you could tell us I guess, how we should be thinking about the dividend increase for 2019, either what happened to operating profit on one side, on the other side, cash flow being stronger.
I mean, the 8% increase, is it driven by your view on where the payout should go ultimately? Or was there something else driving this increase of the dividend? So I guess that's the first question. And then the second question on Slide number 19, specialties, up 13%, 20% decline in intermediates. I don't remember you disclosing, I guess, numbers or profit numbers in this way.
Could you maybe help us understand I guess, what is your thinking around that disclosure, but also maybe can you, help us understand what the starting point was in terms of EBITDA, that would be very helpful, excluding corporate costs, for instance, for the 2 clusters.
Okay. So on the second one, I will ask Marie Jose to answer. She will do it perfectly. On the the dividend, no, I think, if you look at the past 4 years, the average, I think, was 9% increase. Okay.
So now we do 8%. You're right to says that the net result is below even if the EBITDA is comparable. But on the other side, the cash is quite good. So I think the board wanted to fool the confidence as in the long run of the company. So there is no nothing behind that more than that.
I think we are confident in the long run. We have the space in the balance sheet to continue to have a nice increase. I hope our shareholders will appreciate that. I think it's more a good news and bad news. Is consistent with what we have delivered.
Sometimes when we have a wonderful year or some people say, yeah, but why don't you increase the dividend more than that? What we try to do, it was something rather regular visible. So I think it's consistent with this approach, but nothing more more than that. I think it's good news, good cash, solid results. And if you look at the payout ratio, it's still something which is competitive the ball for Arkema.
I think we are below some peers. So, no, nothing special except that we are confident and we wanted to return amount to our shareholders. So that is completely consistent with what we did in the past. So maybe Marie Jose on the second question of Laurent,
regarding the mix of EBITDA contribution, as you know, we, we give, basically rough split of the portfolio between the portion that is more volatile and portion that is more resilient and that we call specialties. We expressed normally this ratio in terms of sales, and we thought it was, it was let's say, important to share with you the magnitude, let's say, of what has happened in the intermediates this year. That was in fact, clearly largely offset by the improvement in the specialty businesses. So that's why I mentioned that we we have in the 2019, more than EUR 100,000,000 improvement on EBITDA contribution of the specialty businesses, which actually almost fully offset the decrease in EBITDA that we faced from the intermediate activities. So I thought it was helpful, but maybe not.
No, no, it's extremely helpful as always. But when I try to reconcile the 2 starting points, I ended up with almost EUR 650,000,000 of EBITDA from intermediates. Which was certainly a lot higher than what I had in mind, and presumably a lot of investors and analysts as well. So I was just wondering if you could confirm that that actually ex PNMA and Fluoro in 2019, let's say, was around 5 to 5 50?
Let's review, offline, whatever the assumptions, the assumptions were. As you know, we don't disclose EBITDA in this format. So otherwise, it would be actually part of the document, but it is important that you see the magnitude of the swings and the resilience of the specialty portfolio we have in Arkema and that clearly has performed extremely well in 2019 despite a quite adverse environment economic environment.
What Marie Jose is saying. I think it also reflects our strategy and the benefit of the strategy to reinforce the size of specialty, not only in terms of the size revenues, but also in terms of profitability. And I think Jose investor, we appreciate this move to specialty. I think it's a good news. And it was important to give you these elements.
Thank you.
Thank you. And last question for a moment from Chita Moody from JP Morgan. Please go ahead.
Yes, hi. Thanks. One clarification and one other question. One clarification question is out of the 1% decline in EBITDA reported EBITDA for 2019, can you maybe help us understand how much is that on an organic basis. So stripping out IFRS 16, M and A, FX, etcetera.
That's first question. And the second question was more on the polyamide outlook. You guys are expanding 11 Evonik is expanding P12. Do you see any risk, of course, those are different, but can they be swapped from say the application in application, can you swap from 11 to 12? And does that pose any threat in terms of pricing over the next 2, 3 years in that market?
Okay. I will let Shail answer the first one, and I will answer the second one.
So regarding the EBITDA bridge, as I said, we don't disclose, in fact, EBITDA beyond, let's say, the 3 segments that are that are published. What is clearly fully documented is the impact of IFRS 16 in this year numbers. So we explained, in fact, this reclassification of a rent or OpEx charges into a depreciation of assets. Represents a bit more than 1,000,000 for the year. So what you observe is in EBITDA and an increase in depreciation accordingly and therefore a 0 effect or low zero effect on a recurring EBIT.
So this is the information that is available, let's say for the last, that's why I gave you some color in terms of what's going on in terms construction of EBITDA, EBITDA, telling you, basically specialties increased EUR 100,000,000 plus and almost offset basic see the decline in, in intermediate businesses, which declined more than 1,000,000 as well. So this basically is the qualitative information that people, right?
Thank you, Marie Jose. So for the PA12, so first of all, on the PA12, as you know, Arkema is also an important player. So I'm not the one who is not going to say it's going to say that P12 is not a very good product because it is a very good product and, we are strong in this area. But once it's that, a polymer delivery, because it is bio sourced because of this mechanical property, is absolutely unique and the more time it goes, the more we are able to develop, high value added application, which cannot be met with PA12. So I think really, we have said that many times, is one of the key strengths of Arkema, P11.
It's a fantastic product. Which will be supported uniquely by this ongoing demand of new materials. And so I think P12 is 1 and P11 is another 1. And the more it goes, the more P11 different shared from P12 and had own field of application. So we are not concerned by that.
You're welcome.
We don't have any more questions back to you for the conclusion.
Okay. So I would like to thank you very much for your question, which we are very diverse. I propose as usual that the IR team follow-up with you, if you have complimentary question, and, we'll see you again in the short run because we'll start our ruptures on Monday. So looking forward to seeing you again. Thank you very much.
Thank you, ladies and gentlemen. This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.