Ladies and gentlemen, welcome to the Arkema's second quarter 2019 results conference call. I will now hand over to Thierry Le Hénaff, Chairman and CEO. Sir, please go ahead.
Thank you. Good morning, everyone. Welcome to the second quarter 2019 results conference call. With me today are Marie-José Donsion, our CFO, and also, as usual, the IR team. As always, we have posted on our website, in addition to the press release, a set of slides which detail the second quarter performance that I'm happy to present to you today. Obviously, and it should be the case for the whole year, this first half was, as for our peers, the opportunity to test Arkema in a more challenging environment. The kind of environment in which the strength of the business portfolio, the balance of the geographical footprint, and quality of execution make a difference. As you have seen from the press release this morning, in the second quarter, Arkema achieved a very solid performance in what remains a volatile and complex macroeconomic environment.
I will start this conference call by highlighting a few key points of this strong set of results. Firstly, Arkema continues to demonstrate a good resilience at high levels, both from an EBITDA and operating cash flow standpoint, in an environment which has become, since the fall of 2018, increasingly complex and volatile. As you know, geopolitical tensions continue to weigh on global demand and amplify volatility in the oil price. In this context, customers remain cautious. They continue to manage tightly their inventories. This and the specific weakness in certain areas such as automotive and consumer electronics, explain that we have continued to see this quarter a lower demand compared to last year, with what we consider to be some inventory adjustment from customer and along the whole value chain.
As far as Arkema is concerned, this observation was particularly true in the more downstream businesses, namely the HPM segment. It is worth to mention, this is the second-best performance ever in a quarter, and in fact, the second time Arkema's quarterly EBITDA exceeds EUR 400 million. If fluorogases were, as we know, facing more adverse conditions, and TMST normalizing versus last year, we were glad to see that the large majority of our portfolio grew overall. EBITDA margin resisted well above 18%, and free cash flow was quite positive for the second quarter, more than twice last year's level. Second key point is a confirmation of the progress we are making at Bostik.
Since the start of the year, as expected, Bostik has really changed gears and managed to deliver a strong increase in EBITDA, with EBITDA margin at 13% and EBIT margin at 10%. As expected, this is a result of a number of factors. Our successful price increase strategy, the in-depth work undertaken since 2015 to prune Bostik's portfolio, modify the organization, enhance operational efficiency, and also our targeted acquisition strategy. The latest example being last week's announcement of the proposed acquisition of Prochimir and high-performance thermo-bonding films. As you can see, Bostik is well on track with its roadmap, and we are confident in our ability to further increase its profitability and top line in the coming years, in line with our ambitious mid and long-term ambition for this business. Overall, I'm rather pleased with the mix of this quarter.
It's a good mix with Bostik ramping up, as I was mentioning. Coating Solutions confirming its year after year upgrade, resilience, and margin % increase. fluorogas shrinking. Advanced Materials resisting quite well versus peers, with net pricing coming through. Third key point is a confirmation of our full-year guidance and our mission to achieve this year an EBITDA comparable with the 2018 record level. Lastly, beyond the day-to-day efforts of the team to cope with the current market condition, we have continued, and this is very key, to actively implement our long-term strategy, focusing on our well-known growth pillars. First, organic growth in the U.S. and Asia with the start-up of Sartomer expansion in China end of April. For the longer term, the announcement of the location for our flagship Polyamide 11 site in Asia and Singapore.
By the way, we are also in the process of starting, just now in fact, starting our new acrylic acid reactor in Clear Lake in the U.S. Second, technological partnership. We have announced, as you know, in the quarter, two recent developments with the opening of an R&D joint laboratory together with Hexcel for composite for the aerospace industry, and in 3D printing with a $20 million U.S. investment in the Californian Carbon 3D. They will both participate in our strong dynamic in the area of lightweight materials. Finally, bottom acquisition in High Performance Materials with the two announcement of the last few days, the planned acquisition of Prochimir in adhesives and of Lambson in performance additives. These are two small size acquisition, bringing unique technologies, fitting perfectly with our portfolio of hot melt adhesive for Bostik and UV curing resin for Sartomer.
These two announcements are the opportunity for me to come back on our acquisition philosophy. We believe in fact that small streams make big rivers. Prochimir is a high-performance solvent-free adhesive film specialist. Based in France, it is a technology leader in the fast-growing market and is therefore an exciting addition to our adhesive business, offering double-digit standalone growth and strong synergy potential. This type of a small acquisition with high returns done on a regular basis as Prochimir, CMP, XL Brands, Lita, to name the recent ones, allow us in fact to double the pace of Bostik's organic growth. On top of that, we still intend to carry out some mid-size ones such as Den Braven.
As regard Lambson, it is a photoinitiator specialist whose business will perfectly complement and enlarge Sartomer's product offering of UV curing resins at a time when the global supply of photoinitiators is in fact very tight. These two small acquisition nicely complement the larger acquisition of ArrMaz, which was completed early July and within a very short timeframe. So far, ArrMaz prospects confirmed to be quite promising. All these recent announcements, both organic and in M&A that I've just mentioned, mark another step towards our ambition to achieve more than 80% of our sales in specialties by 2023. Let me now hand it over to Marie-José for a more detailed look at Q2 results.
Hello, everyone. Let's take a look at some of our financial indicators for the second quarter 2019. As you could see, sales are close to last year at EUR 2.25 billion. Sales bridge shows a slightly negative 0.6% price effect, with declines in Industrial Specialties and Coating Solutions and a volatile raw material environment, largely offset by our strong pricing actions in the High Performance Materials division. In continuity with the start of the year, volumes declined 2.4%. In High Performance Materials, demand remained lower in markets such as automotive, customer electronics, and oil and gas, while volume growth remained very positive in Coating Solutions. Finally, we had a positive 1.9% currency effect, mainly reflecting a stronger U.S. dollar versus EUR. As a reminder, U.S. dollar rate is at 1.12 USD for the second quarter this year versus 1.19 USD same period last year.
Cloud effect was rather limited at 0.4% impact. EBITDA of €407 million was slightly down on last year's record performance. Despite weaknesses in certain of its end markets, High Performance Materials resisted well, thanks to a strong focus on pricing and mix, as mentioned by Thierry. Coating Solutions continued to progress this quarter, thanks to increased demand levels and pricing actions in the downstream acrylics. Our Industrial Specialties performance is lower, as expected, impacted by market conditions in fluorogases, and to a lesser extent, by normalization in M&A PMMA. EBITDA margins remain high at 18.1%, slightly down on last year and comparable to the second quarter '17 performance. Depreciation and amortization reached €129 million. As a result, recurring operating income amounted to €278 million and EBIT margin stands at 12.3%.
Non-recurring items include EUR 10 million of PPE amortization and EUR 11 million non-recurring charges, corresponding mainly to restructuring expenses and asset write-offs. Financial results to that minus EUR 33 million. This increase stems mainly from the interest rate impact on our net debt swap in US dollar and non-cash actuarial losses on certain employee benefit provisions. The tax rate for the exceptional items is at around 20% of recurring operating income for the semester. Overall in line with our full year guidance of 21%. Consequently, the second quarter adjusted net income amounted to EUR 192 million, which corresponds to a EUR 2.52 per share. You will note that reported EPS this quarter was impacted by the partial refinancing of our hybrid bonds with a one-off impact of EUR 37 million. Let's now go through the performance of our three business divisions.
First, in High Performance Materials, sales amounted to EUR 1 billion, close to last year. Prices increased by 4.7% thanks to continued price actions to optimize the product mix towards high value applications. Volumes are down 8%, reflecting softer volumes in the end market I previously mentioned, with some destocking activity visible in some of those chains. This overshadowed good growth in batteries and 3D printing, where the momentum is very positive. We expect volume declines to moderate over coming quarters as the destocking gradually comes to an end. The 0.9% scope effect corresponds to the integration of bolt-on acquisitions in Afinitica from last year. Consequently, EBITDA reached EUR 170 million, with a 17% EBITDA margin, which is close to last year's record level, with a significant contribution from both effects as mentioned by Thierry.
Regarding Industrial Specialties, sales were down around 5% year-on-year, with volumes down 1.3%, mainly due to fluorogases. As expected, the -5.7% price effect reflects lower prices on both MMA/PMMA and fluorogases compared to the record high, let's say, of last year. At EUR 179 million, the division is down, reflecting the impact mainly of the illegal HFC imports into Europe, as already flagged earlier this year. It continued to weigh both on volumes and prices of fluorogases. In MMA/PMMA, we continue to see the impact of normalization, but this remains in the continuity of both Quarter Four and Quarter One and fully in line with our assumptions. Meanwhile, both thiochemicals and H2O2 delivered a solid performance this quarter, and overall, the EBITDA margin of the division remains at a high level, that's at 26.6%.
In Coating Solutions, sales were up 5% year-on-year, mainly thanks to volumes up 6.7%, driven by the acrylic monomers. The price effect mainly reflects lower propylene prices, while prices in downstream activities are more stable. EBITDA rose sharply, so up to 20% to EUR 82 billion compared to last year, thanks to gradually improving market conditions in acrylic monomers, as well as a progressive recovery of unit margin in the downstream activities. I'll conclude my comments with a few words on cash flow and net debt. Free cash flow was positive at EUR 90 million, which is a clear increase relative to Quarter 2 2018. This stems mainly from a lower increase in working capital compared with last year, due to strict management, the positive impact of lower raw material costs, and also some lower activity levels.
At 16%, working capital ratio on annualized sales improved slightly compared to the 16.5% ratio at end of the first semester 2018. Capital expenditure of EUR 124 million, which includes both recurring and exceptional investments, are in line with our ambitious investment policy to support our future growth. For the full year, we continue to confirm our assumption of around EUR 610 million total capital expenditure. Net debt reached EUR 1.3 billion at the end of the first half, including the EUR 119 million dividend payment, the EUR 38 million cash outflow to the hybrid bond refinancing, and EUR 13 million of share buyback. This concludes my comments. Thank you for your attention, and I'll now hand over back to Thierry for the comments on the outlook.
Thank you, Marie-José. Now I will, as Marie-José mentioned, come back on the outlook, which was mentioned in the press release. Roughly, in the second half of the year, we expect, no surprise, the macroeconomic environment to remain volatile and complex, with geopolitical uncertainties continuing to weigh on global demand. However, this is, for us, a difference, we expect inventory adjustment, which has been quite significant from our customers in the first half, to ease compared with what we have seen in the first semester. In this context, in the continuity of what we have done so far this year, we'll continue to focus on what we control, which is our internal momentum, and also because we have to build for the long term in parallel the execution of our long-term strategy.
In the second half, we expect, in particular, to benefit from new startups in Surfactants, Technical Polymers, Acrylics also, we have mentioned Clear Lake startup currently, as well as the contribution from acquisition, namely ArrMaz and also Sunke, which is a bit less, but we expect to close in Q3. Taking into account all these elements, our operational excellence program, also our pricing actions, which is going through, as you could see in the first semester, we confirm our full-year guidance to achieve in 2019 an EBITDA comparable to 2018 full year level, thus consolidating our financial performance at high levels. Thank you very much for your attention, we are now ready, together with Marie-José, to answer your questions.
Ladies and gentlemen, if you wish to ask a question, please press zero one on your telephone keypad. The first question comes from Emmanuel Matot from Oddo BHF.
Good morning, Marie-José. Good morning, Thierry, and the Investor Relations team.
Hello, Emmanuel.
Several questions for me, please. First, what makes you confident to see less inventory adjustment during H2, and which end markets are you thinking about? Second, in Coating Solutions, do you think the situation is sustainable for having, at the same time, a bigger growth in acrylic monomers and in downstream activities? Historically, both activities used to go in opposite directions. My last question, we have seen Arkema very active on acquisitions since the beginning of the year. What are the main reasons, according to you? Would you say that the current macro environment is helping to make deals, and you feel, therefore, comfortable to achieve your M&A projects for the 2020 roadmap? Thank you.
Okay. Emmanuel, with regard to the inventory adjustment, I would say you have two things. You have the underlying demand in auto, in electronics, in oil and gas. As you know, we have a quite diversified set of end markets. I would say this underlying demand, I think, will continue the same pace in H2 than H1. I don't think any improvement. What we have seen in H1 is clearly, and we have a lot of practice, over more than 10 years or close to 15 years of managing Arkema, that when you start to have a change of trend in an end market, you have a very significant adjustment all along the chain, which goes far beyond what the end market suffers. For example, if you are automotive at minus 6%, to say something, then OEM will suffer minus 30%, by definition.
This is just adjustment of value chain of stock along the chain. It typically takes between six months, nine months. It started in the fall last year, step by step. We believe we will enter now a period where this inventory adjustment will get lower. I don't say there will be no more inventory adjustment, but compared to the first semester, which was quite significant, my belief is that this will be far less, and I think it's reasonable assumption. I think a lot of stock has been adjusted in the past nine months. With regard to the end market, it's a little bit everywhere.
It's clear that electronics, automotive, oil and gas, but we are not the only one to say that, have been quite more significant in terms of inventory adjustment, far beyond the trend of the end market themselves. We have not lost market share. Also some other markets can be concerned. With regard to Coating Solutions, first of all, it's not only external condition, as you mentioned, and you know, the market itself is, today, the global economy is challenging. You cannot achieve what we have achieved in Coating Solutions just by waiting for the environment. It's also internal momentum, which is quite strong in both acrylic monomer and Coating Solutions. I'm happy to prove to you year after year that this business, which was certainly underestimated by some, is really getting upgraded, quite resilient, if we look at the past years.
It's really a good element of mix. We benefit not only from lower propylene, for example, for the downstream, for the acrylic monomers, some gradual improvement that we confirm. We have confirmed that it's now three years, and we have been right to do it. All in all, we are in a satisfactory position in an environment which remains challenging, but on which I think we are well-positioned, and I think our strategy is paying off, I would say. With regard to the pace of acquisition, I think we continue at a pace which is really reflecting what we have done in the past years. Some of you may think that we are a bit slow, some may think that we are a bit too much, but I think it's a reasonable pace with a combination of small acquisition and bigger one.
Is the environment more favorable? If you look at the macro and you look at the multiple, I would not say it is the case. If I look at the interest rate, I think it's more favorable. At the end, this is not what makes a difference. What makes a difference is really our strategy to make a build-on acquisition with high synergy, high quality of technology. Once the opportunities are coming, we look at them, and we are very selective, as you know. I think all acquisitions that we have made since the start of Arkema have been quite good in terms of return to our shareholders, and so we try to stay selective. After that, what will we do in 2020? It's too early to say. It depends on opportunity. We are very selective.
It's not because we have a strong financial flexibility that we'll make acquisition for the sake of it, I think. We are not shy, but at the same time, we are always cautious about balance sheet and about the acquisitions that we are making. We'll continue at the same pace, hopefully, as we have been doing in the past years. That's very useful. Thank you.
Next question comes from Laurent from Exane BNP Paribas.
Yes, good morning all. Two questions, please. The first one, Thierry, is on HPM variable costs. It looks like you're seeing less inflation, but still a lot of inflation nevertheless. I was just wondering if you could help us understand what's happening on raw materials versus non-raw material costs, and whether or not you're starting to see some raw materials deflation, or you're expecting raw material deflation in the next couple of quarters. That's the first one. The second one on technical polymers. From memory, you had issues around availability of capacity, especially in Polyamide 11. Given what's happening to volumes, I'm just wondering how the business mix has changed and whether you've repositioned the business to keep utilization rates high but on lower mix.
As you get more, assuming you get more available capacity, does it mean that you can slow down the Asian CapEx as we are in a slower world? Thank you.
Thank you, Laurent. Two interesting questions, completely different. On the first one, we believe, and it's part of our guidance, that raw material will continue to ease a little bit. I would not say massively, but a little bit on the second part of the year. It's certainly good for Bostik, for all parts of HPM. You have all kind of raw material. With the exception of castor oil, but castor oil is increasing, butadiene, which is decreasing, one offsetting the other. I would say for the rest, we have some raw material which increase, some other which decrease, the net is a little bit in favor of Arkema, and especially for Bostik. I think it's typical of this kind of global market when the demand is going down, that normally you have a plus on raw material, which helps you to mitigate the lower volume.
This is what we got. I imagine our competitors got the same. For the second semester, we are not pessimistic on raw material, but it's not massive. It's incremental, but it's more on the positive than the negative. With regard to Technical Polymers, you're right that, at least from the first semester, but really it will not be so much the case in the second semester. We got some release of capacity for Polyamide 11. Last year we finish with very low stock, so it was important also to rebuild some stock because last year we were more than tight. In terms of this mix, the business mix has changed overall. I take the whole Technical Polymers in the right direction. As you know, we continue to prune some businesses. Our unit margin have continued to increase because we are very selective in our portfolio development.
We benefit of innovation on certain good value business. I would say, again, it's incremental, like for raw material, but business mix is continuing year after year to increase a little bit. No significant change, I would say I have to show a little bit improvement. On the Asian CapEx, except if suddenly the worldwide economic collapse, it's not the case for me, it's just a readjustment. I think we'll maintain the calendar on the Polyamide 11 in Singapore because we don't build for tomorrow, we build for the day after tomorrow. It's a CapEx which start end of 2021. We have plenty. Pipeline of innovation is very strong. It's to support the mega trend in battery, in lightweight materials. We have to be there.
Frankly speaking, over 15 years, Polyamide 11 has been far more tight than long in terms of supply and demand. It's a unique product, we need to maintain it. After that, we have always been, in terms of CapEx, reasonable and manage well the calendar. Philosophically, we stick completely our calendar on Polyamide 11, and the sooner would be the better.
Next question comes from Mubasher Chaudhry.
Hi, Thierry. Hi, Marie-José.
Hello, Mubasher.
Hi.
Hi. Two quick questions, please. The first one on the Bostik acquisition. I know the growth rate has been communicated, and it's quite positive. Could you just comment on the EBITDA margin of these latest two acquisitions and whether they are accretive to Arkema? If not, then what is the longer-term plan for these acquisitions and how they likely to incrementally benefit us going forward? That's the first question. Then the second question is a bit more nearer term. How have you seen demand play out in June and July? Are you seeing a bottoming of the inventory management? Are you seeing it come through or maybe an improvement in demand? Thank you.
Okay, on the first one. First of all, they are important acquisitions, but they have to be seen as a big package. This means that it's not a Lambson or Prochimir, standalone. We don't change the world for Bostik or for Sartomer. When you make the addition of many small, as I mentioned, at the end, you have really something very solid. In terms of margin, they are above the average. Okay. They participate to the overall target, the long-term target for Sartomer and for Bostik. They are both high-value businesses. Even if we don't disclose the margin, they are above the average. We are quite comfortable on this quality of this asset. Synergy will be significant. At the end, it's typically the kind of acquisition we like. Strong margin, strong synergy, unique technology, high growth pattern.
We just need to continue to make more of them. With regard to June, July, June was a weak month, I think, for listening to my peers, it was the case for everybody. If you count the number of days annually, there was two days less compared to last year. Impact is not so different. It's clear that it was maybe a little bit weaker than expected. Overall, the quarter is more meaningful, and the quarter is what we told you, and we don't think that it is a change in trend in June. If it was your question, underlying question. For us, it was just the fact that June was a less month, a less days, and that it's the last month of the semester with a very volatile end price of materials, so customer had a tendency to be cautious in restocking.
July is going normally, so no change in trend, so nothing special on July.
Thank you very much.
Next question comes from Chetan Udeshi from JP Morgan.
Yeah. Hi. Chetan from JP Morgan. Just a couple of questions on Bostik margin. Happy to see improvement there. I was just looking and comparing Bostik to a few of their listed peers, and it still feels like there is a big gap in margin, and it's not like Bostik is small in terms of top line anymore. You are probably close to EUR 2 billion, if my calculation is correct. What is needed to close that gap, you think, in terms of improving the Bostik margin more from here? That's number 1. Number 2 question was on fluorogases. Maybe if you can just update us on shorter term dynamics on pricing, but the question is more a structural, mid to long term question, which is, can you help us understand what is the mix?
I guess maybe this is the question might have been asked in the past calls, but what is the mix of legacy products in terms of earnings contribution which are at some extent at risk of being replaced by HFO? That we can just model that accordingly over the next three, four years. Thank you.
Okay. First of all, on Bostik. Before talking about margin, let's talk about value creation, where the equity story was to buy a company which huge potential in terms of technology, in terms of geographical footprint, in terms of what Arkema could bring. Step-by-step to improve it, knowing that the starting point was low because the margin was around 10%. In fact, what we are doing is that next year, with about two-third of acquisition and one-third of organic, the EBITDA value in million EUR of Bostik should have more or less doubled compared to the starting point. Okay. The EBITDA percentage would have gone from a bit more than 10% for next year. Certainly, this year should be 10% and will continue to improve.
It's really a great story because step-by-step, Bostik is really improving with an EBIT margin, which is now at 10%. Okay? Which is very resilient, we are really in what we wanted to do and is very encouraging. If you compare to peers in terms of margin, if you compare with Henkel, you have to take out their unique position, which nobody can beat in engineering adhesive, which is huge. With margin, we don't know exactly, but we are more in the range of 25%-30%. If you take the traditional margin of Henkel on the kind of businesses we have or H.B. Fuller have, they are certainly more, even if we don't know exactly, in the range of 15%, which we consider to be a good benchmark for Bostik.
This is where we say our midterm target for Bostik is to be at 15%. EUR 300 million of EBITDA in value for 2020, and a little bit after to reach a 15% EBITDA margin. Fuller is already there or above, but Fuller before the acquisition of Royal, after 10 years of restructuring and improvements, well not 3 or 4 years, but 10 years, they were more in the range of 13%, 12%, 13%. I think Bostik is really getting there quite quickly. Now, the Henkel level is not achievable because of that. In terms of We still get a quite good, strong margin, which we can get 15% and certainly after a little bit above. In terms of value creation, it will be fantastic. We are really pleased with what we are doing with Bostik.
In terms of resilience, you can see that this year, for example, compared to many chemical businesses, it's really quite favorable. On the fluorogases. It depends what you call the legacy. If it is a legacy, we have launched a big number of new products, which we continue for many years, including HFC. Okay. We have done that in the U.S. and in Asia. If you take just into account the traditional HFC versus the HFO, today's HFO are quite small in our portfolio. You know that we are not in the HFO-1234yf specifically for automotive, but we have some cards we are playing that we have announced for other HFO in other applications. As we often mention, we are not positioned as on Honeywell and Chemours, which have a specific access to HFO-1234yf.
I would say, in the group of all the players for fluorogases, we are well-positioned with HFO, not in automotive, but on the rest of the business, which will nicely complement our current HFC, which are still, if compared to last year, significantly down, but still at good levels and will continue to do so for many years. We have not changed what we say on the fluorogases. The performance of the coming year will be a combination of HFC, which will continue to deliver at good levels, certainly not at all what we had in 2018, but come back to more kind of 2017 level. What we'll start to lose from this HFC, which we'll be able to offset with access to HFO that we have.
Understood. Thank you.
You're welcome.
Next question comes from Georgina Ewans-Manto from Exane.
Hi, Thierry. Hi, Marie-José. Thanks for taking my questions. I've got two. The first one is on HPM. I was just hoping you could give us a little bit better understanding of the dynamics that we saw in the second quarter. I'll kind of summarize what we've said on the call so far for the division. We had better pricing and better mix, which will continue to improve, yet the unit margins deteriorating. Does that mean that actually operational leverage on the -8% volumes was pretty high? If you could maybe help us understand what happened to volumes sequentially. Was it the customer inventory adjustments which were worse in the second quarter versus the first, or was it underlying demand? The second question, I'm afraid I've got a repeat from the first quarter results.
Could you please help us understand the volume strength in Coating Solutions? Give us an update on what you expect for the acrylic acid market, especially in light of the profit warning from Nippon Shokubai last night, and given that there have been lots of industry articles citing demand weakness and rising input costs in Asia. Thank you.
Georgina, on acrylics, we are very and Coating Solutions, which is a downstream. We are very glad about the result, and I think you appreciate the quality of this volume, which was one of your questions in the past quarter. I think we have a quite positive answer. We are all very pleased. This is really the result of all these strategies that we are leading in Coating Solutions, which is quite a resilient at the end business. The big difference with Nippon Shokubai, but you know it, so you know the answer to your question, is that Nippon Shokubai is selling acrylic acid only for superabsorbent and superabsorbent, maybe they see at their level, but I cannot comment, a decrease.
With regard to Arkema, as you know, we are on plenty of different businesses from decorative paint to rheological additives to adhesives to oil and gas to superabsorbent, et cetera. It's very diverse, and we benefit, I imagine, from this standpoint, more resilient, even if I cannot comment on what are doing here. It's quite an element of this second quarter release, which is showing quite a good mix, as I mentioned. I'm sure you share that with HPM. With Advanced Materials, quite resilient with a robust ramp in there, with Coating Solutions confirming with upgrading year after year. We have very good news to share with you. With regard to HPM, I think I have different readings that what is your reading.
I think the volume on Advanced Materials are quite down compared to last year, but not different from what I see from all the peers. I think it's a paradox of this current context is that the more downstream you are, the more specialized you are, the less volume you have, is because certainly of the distinction. If you are purely electronics and automotive, your volume are far more down than when you are upstream driven.
We have volumes that you could see High Performance Materials down 8%, net prices, and the work on the mix on the pricing is allowing us to offset a big part of this, which means that because you are talking about the operational leverage, my reading is that it's very good because despite this very significant decrease of volumes in High Performance Materials, has gone down only 17%. I think it's quite a good performance.
Okay, thanks very much.
You're welcome.
Next question comes from Jean-Luc Romain from CIC Market Solutions.
Good morning. I have two questions about the multiples.
Can you talk a little bit louder?
Yes.
Because we can't hear you. Thank you very much.
My question relates to the two acquisitions you announced over the last few days. Should we infer from the EBITDA margins you signal, which are better than the rest of the HPM business. After synergies, the EBIT with the DA you paid for those acquisitions will be about the same as what you usually pay, i.e., about six times?
Nearly all acquisition that we are making, and this one are not exceptions. After synergy, we go down after 4, 5 years at 6, 7 times, depending on which acquisition. Yes.
Thank you.
Maybe six, even seven, but we are in this range. This one is no exception.
Thank you very much.
You're welcome.
We have no further questions. Ladies and gentlemen, let me remind you that if you wish to ask a question, you need to press zero one on your telephone keypad. Next question comes from Geoff Haire from .
Good morning. Thank you for the option to ask some questions. I just wanted to ask, in Q1, you said that you hoped that the EU would be able to stop the illegal imports of fluorogases into Europe. I was wondering if you could update us on when you think that might happen, possibly this year or next. Can you also just confirm what is left standing for your hybrid bond?
As the hybrid bond, Marie-José will answer.
No problem. Basically we refinance EUR 400 million out of the initial EUR 700 million hybrid bond. The new maturity of the EUR 400 million is 2024. The maturity of the remaining EUR 300 million is actually the same as the initial one, which is basically paying out for 2020.
Okay, thank you.
Thank you, Marie-José. On illegal import, which is, as you know, still a pain, not only for us, but for all the industry. We continue to work with the rest of the industry on coordinating our efforts and to address the issue by supporting investigation, building public awareness, pursuing very close cooperation with the European Commission. We do that also with member states and non-member states, with everybody. We spend a lot of time on that. What we see is that some concrete action which have been already implemented on the field by customs authority of several countries is still not enough. We continue to push very significantly. On your question, when is that fully implemented, having effect, is too early to say. For the time being, we don't assume any significant change up until the end of the year.
We prefer to be cautious. We follow carefully, and we put a lot of efforts on it together with, because it's not acceptable. It's purely application of law, and it has nothing to see with our business, legislation, whatever, just applying the law.
Are you still sort of happy with the guidance that you gave at Q1, which was for EBITDA and fluorogases to be back at 2017 levels, or are things got worse?
No. Yes, we are still planning to be close to 17, around 17, close to 17. It's clear that, I think we mentioned it already to a question which we are asked, the second semester will be in the same vein of the first semester on fluorogas. These, the positive elements will come from all the other business line more than the fluorogas. It will be for everyone.
Thank you.
Next question comes from Jean-Baptiste Rolland from Bank of America.
Good morning, Thierry. Good morning, Marie-José. I have one question to follow up on Geoff's question regarding fluorogases. Since you just said that these volumes are illegal in Europe, is there a possibility or do you expect that you could potentially seek compensation against the players who are selling illegally in Europe? That's my first question. Second question, I was just wondering if you could remind me what sort of pricing lag you have in PMMA versus the acetone raw materials. Thank you.
On your first question, the answer is no, you cannot. What you can, it's a law which is not applied by other people, it's really the European Commission as a member state to oblige and to penalize these people who are doing that. You cannot in the European law, you cannot ask compensation on that. It doesn't work like that. Maybe unfortunately, the law is like that. It's an indirect impact, you cannot ask compensation. It's really a matter of just having the law being applied. On the MMA, PMMA, without quantifying, acetone has helped a little bit for MMA, PMMA. Overall, what you look at is not so much raw material or pricing. It's what we call the spread, which is the net between the pricing and the raw material, which is reflecting the supply-demand.
I would say MMA, PMMA overall is aligned with our assumption since the beginning of the year. What we told you when we started the year, in fact, was well-defined and we are really in line with that, including the pricing, including raw material, including the machine volumes, which are challenging in automotive. Overall, we are really in line with what we were expecting. I would say overall for the portfolio of Arkema, we have some lines like Bostik, which is really developing quite positive from that as much as the challenges that we saw. To MMA, PMMA is in line. You have a sum of plus, minuses, but overall, as we mentioned, we are really comfortable on our guidance.
Thank you.
We have no further questions. Ladies and gentlemen, let me remind you that if you wish to ask a question, you need to press zero one on your telephone keypad. We have no further questions.
Okay. If you have no further question, I would like to thank you for your interesting question, and certainly wish you a nice summer, because I'm sure everybody is waiting for some break. Don't hesitate if you have any further questions to ask the IR team, which is there to answer your question. Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.