Ladies and gentlemen, welcome to Arkema's first quarter 2019 results conference call. I now hand over to Thierry Le Hénaff, Chairman and Chief Executive Officer. Sir, please go ahead.
Thank you very much. Good afternoon. Welcome to the first quarter 2019 results conference call. With me today are Marie-José Donsion, our Chief Financial Officer, and the AR team. I know you have a lot of results released today, we try to be short and straight to the point. As usual, we have posted on our website, in addition to the press release, a set of slides which detail the first quarter performance that I'm pleased to present to you today. As you have seen from the press release this morning, in the first quarter, Arkema achieved a very solid performance in a volatile and complex macroeconomic context. Obviously, market conditions are more challenging than they were last year at the same period. Geopolitical uncertainties continue to weigh on global demand, and the oil price has increased significantly since January.
In this context, our feeling is that customers remain cautious, managing tightly their inventories, and this environment globally weighs on volumes and requires each of us to be agile and adapt quickly. Having said that, Arkema reached in Q1 an EBITDA of EUR 370 million, only slightly below the record performance of first quarter 2018, and fully in line with the guidance we communicated when we published full-year results back in February. We thus continue to demonstrate a good level of resilience as well as the quality of our portfolio of businesses with a performance that was close to the all-time high in the first quarter and following the robust end to 2018. Before looking at this set of results in more detail, I would like to highlight a few important points. Firstly, despite some volumes, EBITDA grew in our specialty businesses as a whole.
As a reminder, they represent today more than 70% of Arkema's total revenues. This is a result of our pricing actions and the strong focus we put ongoingly on mix, which are really bearing fruit in adhesives, but also in other specialties, namely High Performance Materials, Thiochemicals, and downstream acrylics. With a higher contribution year-on-year, specialties are starting to take over from our intermediate businesses, in line with our stated ambition to further expand their share in our portfolio and earnings. Secondly, as expected, we saw clear signs of normalization in MMA/PMMA, no surprise there. The market condition in fluorogases were less favorable, both compared with the very strong base of last year. On the other hand, our assumption of a gradual improvement in acrylic monomers was confirmed.
This improvement in acrylic, supported by solid volume growth, is key to us as we get ready to integrate our partner's production capacity in China as soon as we have closed the transaction to purchase the stake. Overall, the global performance of our intermediate businesses declined year-over-year, the good news is that their EBITDA margin remained at a high level. In terms of cash generation, free cash flow is very positive this quarter at €73 million. I mention it because it is unusual for a first quarter, bearing in mind the traditional working capital seasonality. Consequently, net debt was again under tight control, and the balance sheet remains very solid. Our teams are busy on the ground implementing our long-term strategy to transform the company. They completed two significant startups since the beginning of the year. One was in the U.S.
It was a new PEKK plant, which I remind you is a new high-end engineering polymer resulting from 10 years of R&D efforts. The second one is in UV curing resin, so Sartomer, for which we expanded our capacity in China by 30% early 2Q. These two investments will support our development in the electronics and 3D printing. We announced yesterday, finally, we had many questions on this matter, the location of future mega site for the production of bio-based Polyamide 11 in Asia. The plant will be built, now you know, in Singapore, and construction is expected to be completed end of 2021. We are very excited about this project, as you can imagine. We knew that the start of the year would be a bit challenging for most chemical companies given the current macroeconomic context and the comparison base of last year.
You have seen a different result, and you can see that our resilience of our overall performance is a clear positive signal in Q1. This was, as a conclusion of this introduction, supported by the growth in our specialties, a high level of profitability of intermediates despite the normalization of market conditions, as well as the superior cash flow generation. All these elements, together with a quite positive trend of results we have consistently achieved since 2010, attest, if needed, to the success of our transformation strategy, as well as the balance and quality of our portfolio. I propose now to hand it over to Marie-José for a more detailed look at Q1 results. Marie-José.
[Foreign language] Thierry. Hello, everyone. I'll take you through some of our financial indicators for this first quarter, 2019. Sales were up 2% versus last year, at €2.2 billion. The sales bridge shows a 1.3% positive price effect, reflecting our strong pricing actions in High Performance Materials divisions in particular, and in downstream acrylics as well. Volumes declined 2.5% versus a strong Q1 '18. In High Performance Materials, demand was lower relative to last year in sectors such as automotive, electronics, and oil and gas, while on the other hand, Coating Solutions enjoyed solid volume growth. We had a positive scope and ForEx impact. The positive 2.8% currency effect mainly reflecting a stronger U.S. dollar versus the euro compared to last year. EBITDA remains at a high level, at €370 million, 3% below last year's high comparison base.
This reflects the strong focus on pricing and margins in specialty, the good margin levels in Industrial Specialties, the positive ForEx, and the EUR 13 million impact of IFRS 16. EBITDA margins stood at a solid 16.7%. Depreciation and amortization reached EUR 123 million. The EUR 17 million increase versus last year mainly coming from the IFRS 16 and from currency impacts. As a result, recurring operating income amounted to EUR 247 million and EBIT margin was at 11.2%. Non-recurring items included a EUR 9 million PPE amortization and EUR 12 million non-recurring charges corresponding mainly to restructuring expenses. Financial results stood at EUR 27 million, in line with Q4 2018. It included the cost of our financial debt in EUR, as you know, as well as the cost of debt that we swap in USD.
The tax rate, excluding exceptional items, is at 21% of recurring operating income, it's in line with our full-year guidance. Consequently, for the first quarter, adjusted net income amounts to EUR 165 million, which corresponds to a EUR 2.16 per share. Let's now go through the performance of our 3 business divisions. I'll start with High Performance Materials, where sales amounted to EUR 1 billion, up 1% on last year. Prices increased by 4.7%, with a positive effect across all product lines, thanks to continued price actions and efforts to optimize the product mix. Volumes are down 6.7%, reflecting both last year's exceptional contribution of specialty molecular sieves and softer volumes in certain end markets. These two impacts overshadowed the success of our innovations in high-growth segments such as batteries or 3D printing. We expect the market momentum to progressively improve over the coming quarters.
The 8% scope effect that you see in the bridge corresponds to the integration of acquisitions such as Nitta Gelatin Industrial Adhesives in Japan and Afinitica Instant Adhesives that we realized in the second half of last year. Consequently, for this division, EBITDA reached EUR 162 million. At 16.1%, EBITDA margin is equal, let's say, to the full year 2018 level. A notable point of satisfaction is the EBITDA improvement in adhesives, thanks to the progressive pass-through of higher raw material costs. Regarding Industrial Specialties, sales were down around 3% year-over-year, with volumes down 3.4% due to lower demand in the automotive sector and in China. As expected, the minus 2.4% price effect reflects normalization in both MMA, PMMA, and fluorogases compared with the very high prices reached in 2018. At EUR 157 million, EBITDA of the division reflects the normalization effect I just described.
In fluorogases, the comparison with 2018 is also impacted by some illegal imports in Europe. At the same time, biochemicals delivered an excellent performance this quarter, and as a result, the EBITDA margin of the division is flat at 24.5%. In Coating Solutions, sales were up 10% year-over-year, mainly driven by higher volumes up 6.9%, which benefited from a good dynamic. In downstream activities, the group continued to actively raise prices as well. EBITDA rose 15% to EUR 76 million, thanks to the good levels of demand in acrylic monomers and the gradual pass-through of higher raw material costs in our downstream activities. I'll conclude my comments with a few words on cash flow and on the net debt. As mentioned by Thierry, the cash flow was positive at EUR 73 million with a significant improvement relative to last year, quarter one, close to 100 million improvement, actually.
This stems mainly from a lower increase in working capital requirements compared to last year. As the effect, let's say, of the usual seasonality was mitigated by softer volumes and lower prices for certain raw materials. At 15.1%, working capital ratio on annualized sales is comparable to Q1 2018. Capital expenditure is in line with our ambitious investment policy to support our future growth. So for the full year, we reconfirm our guidance of around EUR 610 million total capital expenditure, both recurring and exceptional. Net debt reached EUR 1.1 billion at the end of the first quarter, including the impact of the first-time application of IFRS 16, which added around EUR 160 million of assets and of financial debt to the balance sheet. Thank you for your attention. I will now hand it over to Thierry.
Thank you, Marie-José. I will now comment some element of the outlook, but it was mentioned in the press release. Globally, we expect the macroeconomic environment to remain in the continuity of Q1, which is marked by these geopolitical uncertainties, which continue to weigh on global demand. In this context, we focus on what we control best, which is our internal momentum and the execution of our strategy long term. In particular, we'll further roll out our industrial project, which has some complementary startups which are expected in the coming months. As you know, we have this advanced material startup in Mont in the south of France, and also an important one in the acrylics in the U.S. We'll also continue to work on our major growth project. We have two going on at least. One is in Thiochemicals in Malaysia, is going pretty well.
The other one is the one we have mentioned before, which are specialty polyamides in Singapore. Together with the acquisition of our partner stake in Sunke, this project will contribute to our growth in the second part of the year. We also continue to implement our initiative as part of our operational excellence program, as well as our proactive action to raise prices selectively, in particular, as I mentioned at the beginning, in context of volatile oil prices. On the full year, our aim is, as we already mentioned in February, really to continue in this more complex challenging environment to demonstrate the group's resilience. This is what we believe we have done so far in Q1. In Q2, we expect to operate in an economic environment which is in the continuity of the start of the year.
The performance will therefore be below last year record high levels. From the second part of the year, our feeling is that we should benefit from improved market dynamics in specialties, especially compared to the first part of the year. Further improvement of unit margin in downstream activities, which is something we have started to see in the first quarter, and the startup of our new capacity I just mentioned above. Consequently, we confirm our aim to consolidate our financial performance at high levels and to achieve in 2019 an EBITDA which is comparable to 2018's record level. So I thank you for your attention and, together with Marie-José, I'm ready 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 Geoff Haire from UBS. Sir, please go ahead.
Good afternoon. I just had three quick questions.
Yeah.
First of all, you mentioned in the presentation that you have seen an improvement in margins at Bostik. I was wonder if you could help by quantifying that improvement year-over-year or sequentially. Just wanted to ask on biochemicals. I believe you'd made an announcement last year that you're expanding capacity in biochemicals at Beaumont, which I think you'd said was to supply Novus with biochemicals for their expansions in methionine. I know last week Novus announced that they would not be increasing their methionine capacity to the planned 440,000 tons. I just wonder if you could help us understand what impact that has then on biochemicals over the next couple of years.
Okay. You said, Geoff, that you had a third question, you said?
No, that's just two. Sorry. Just two.
Okay.
Miscounted.
No, no. No problem. Sorry on Bostik because for the timing, someday we will certainly change, but we don't split the inside of HPM. As we mentioned, there was an EBITDA increase year-on-year, which was not just 1% or 2%, it was more than that, clearly. If you look at the volumes which were quite challenging, especially in advanced material. You can see that Bostik was quite solid with an improvement of unit margin for the first time since a certain time. I think it's quite positive message because, for the one who may have some doubt, it really reflects what we have been saying all along last year. We were just trying to catch up with raw material increase. Once they have been a bit more stabilized, we have been able to really to see the benefit.
It's certainly a positive point in our release. With regard on Thiochemicals, as we said, and we have said many times to the question which were asked on Beaumont, we said that when our partner Novus announced their project, we said that we are there to support them if they wanted to go through. What they have said, as you mentioned wisely, is that they have decided to revisit their different scenario. This means that the project we had with them or the reflection we had with them, because there was nothing final, as we said, is clearly on hold and we follow what they want to do. They have said clearly that they wanted to revisit their scenario. For us, in the coming years and it change nothing because anyway, it was a very long-term project.
I think we are quite confident to continue. We have plenty of ideas, including the one in Malaysia, which will go through for next year. We are quite dynamic within Thiochemicals. Once said that, we are there to support our partner when they want to go, and it will certainly be the case when if Novus want to do something else.
Thierry, can I just confirm then, you haven't spent any additional CapEx to support Novus in their plans, which they had up until last week. Is that what I'm hearing, or?
If your question is that like we have spent CapEx, and we had CapEx spent for nothing? No, the answer is no. Not at all.
No. Okay. Thank you.
Okay. No impact on our accounts, whatever, if it is your question.
Yep.
Next question comes from Mubasher Sharif from Citi.
Hi, Thierry. Hi, Marie-Josèphe.
Hi, Mubasher.
Hi. Just two quick questions from me, please. First one is on fluorogases. Now, it looks to have softened year-on-year. Could you just help us quantify the impact of the illegal HFC imports and then how we should think about that going forward? The second question, this is a bit more for wider on Bostik and the Bolton acquisition. One, how are the conversations going? Two, do you think the, or have you seen the turbulent macro potentially create opportunities for you from a valuation perspective? That's my two questions.
On the fluorogases, as we mentioned, I think, you had also a certain number of elements from Chemours that you can also refer to. It is true that there are development of illegal import of HFCs in Europe. Our feeling is that this product, in fact, come mainly from China, by the way. Clearly, we have been reacting quickly as Arkema, but also as industry through the trade association. And the good news is that authorities are both at the level of the member state, but also at the European level, address the situation, which seems, for somebody who is discovering it, completely unexpected because it is just to apply the law. They are there to enforce the legislation. We are working on it actively.
Basically, what we say to answer your question on fluorogases performance, you remember certainly that what we said is that for this year after an extraordinary 2018 level, very good 2017, extraordinary 2018. We say, one, two months ago that still that our feeling that we should be somewhere in the middle between 2017, 2018. We believe that with expected normalization of fluorogases. We believe that we could end up around 2017 performance, which is still a high reference share, but a bit below what we thought a couple of months ago just because of this development of illegal import. I think it is under control. We are a bit more cautious on fluorogases, including in Q2, because it is a big quarter for fluorogases.
Because you put out the following question, which is on the full year guidance, which means that we have some other elements inside Arkema that will offset what we see on fluorogases. Yes, on Bostik. Bostik, on acquisition, do you see because of the macro some release of I think you have seen recently for what are big movements. You could see the announcement with regard to the acquisition of LORD, which are niche adhesives at a very high multiple. I do not think it showed that multiples were decreasing. We are still, because there is a lot of money from companies, corporate and private equity, still it is from many standpoint challenging.
I just say what we have been saying in the past year, and we are selective, so we will continue to make bolt-on acquisition, but we still believe that for our shareholders, the best deals, as we have shown always at Arkema, are the ones who are paid at reasonable prices on which you can have significant synergy. There is room for us, but we will continue to be selective. We do not see, to answer precisely your question, any change in multiple levels.
Thank you very much.
Next question comes from Laurent Favre from Exane. Sir please.
Good morning, all. Two questions please, Thierry. The first one is on HPM. Could you help us understand, qualitatively, the drivers on the volumes decline for Q1 between the molecular sieves comp, but also the product pruning that you've highlighted and the focus on pricing? Just generally, what's happening to the underlying environment? Maybe is there any sense of destocking in there? The second question on fluoro, you've mentioned the gray market in Europe. We're reading that spot prices in the U.S. have actually gone up a lot in the past few weeks. Is it something that you're seeing in your business? Thank you.
Okay. Thank you, Laurent, for the question. With regard to the volume, clearly there is a nine identify point, which is HPM reference point that we still have partially on the Q2 but not for the rest of the year. We have a little bit of pruning, but it's not, I would say, significant in the -6%. Certainly HPM is about, let's say, one third, to say something. The rest is really the fact that I think it's very difficult to know exactly, but because on the full year, I think things will be more rational. At the beginning of the year, you have a big variance depending on which end market we are talking about.
We have to recognize and for what is automotive, what is oil and gas, and what is consumer electronics, we have a big discrepancy without losing any market share compared to last year. It's fact of life. I think this is why we say we are more optimistic for the second part of the year. It can be reversed to a certain extent because at the end of the year, the variation will be far more normal. We have a sort of, you could call that destocking, I think. As you know, you have a long experience of chemicals when on certain end markets, you have some negative stress to consumer on the whole value chain, especially when you are at the chemical level. You have destocking movements that can impact one or two quarters. I think we are there. Okay. This is why.
We are not losing any market share, and we still believe that this market are IC market on the long run. On fluorogases, you are right to say that there are some spot prices in the U.S. which have gone up. We need to see if it is long-lasting or not. It's too early, really to answer. What is clear is that as we mentioned often in fluorogas, you have different elements of volatility, positive, negative. Clearly, we believe that Europe will be under pressure, clearly for the next quarters. U.S., you see some positive point, but we still need to be confirmed. Okay, I prefer to be cautious, but spot, it is true now we need to make sure that it is long-lasting. We'll see. We should know more in the coming months.
Okay. When you said that you assumed offsets in the guidance for the full year, it wasn't better U.S. pricing in HFCs. It's-
No
something else. Okay.
No. It's not in fluorogases. We are talking about other markets.
Okay. Thank you.
Okay?
Next question comes from Martin Roediger from Kepler Cheuvreux. Sir, please proceed.
Yes, thanks. Hello, Thierry Le Hénaff. Hello, Marie-José. Hello, Sophie, and team. On Coating Solutions, you talk about pass-through of higher raw material prices in downstream activities, while overall prices in the segment were down by 0.5%. This implies lower prices in the upstream activities, despite the fact that you mentioned good demand in acrylic monomers. How does that fit together? Is that the reason why last year propylene prices were quite high and this time in Q1 lower, and therefore, there was a pass-through effect? In connection to that, if the margin increase in the segment Coating Solutions, did that come from upstream or from downstream or from both? Thanks.
Okay. First of all, I'm sure this is what is in your message and underlying. We can all be happy of the performance of Coating Solutions. It's important. We have had many questions last year, many challenging, some of you thinking that acrylics would be quite a challenge for the year. We say, no, we don't think that, and we're happy to see that we were right with not a fantastic improvement, but a gradual improvement as we have had in the past years on acrylics. This is the first thing, and I think thank you for your question, which gives me the opportunity to state this fact.
With regard to the pricing, the difficulty as you know with pricing in Coating Solutions is, and you have that in mind, you have upstream and downstream, and a big part of the pricing is linked to the popular move in upstream. This is not because pricing would be down, that it has a positive or negative influence on the margin itself because it's more a matter of supply, demand. What is clear and what we see is we see two elements, a gradual improvement of the cycle in the upstream, the acrylic acid, which is confirmation of our assumption that we gave to you last year.
Second thing, on the downstream, after a very too difficult, challenging years, in 2017, 2018, some recovery of margin and the combination of the two make, I think, a quite good improved performance in the quarter in terms of EBITDA because we have an EBITDA improvement of 15%. At the end, you're right to look at pricing, volume, et cetera, but the EBITDA is the best indicator, and it increased by 15%. I would say, with a good momentum of the upstream, but also, the satisfactory performance and rebound of the downstream. Both were contributing.
Thanks.
Next question comes from Andreas Heine from MainFirst. The floor is yours.
Two questions if I may, please.
Yep.
You stated in the outlook, and that was not that much the case before, that you're looking for an improvement in these specialty markets. Is that something where you have any indications in your order book or trends in the end markets? Or is it just the expectation that Q1 was just a too low start to be real and reality has to come back? The second question on Sunke and the full control you will have of this acrylic acid upstream plant, can you update us what you will do and change at this site and what we can expect from this site as a contribution in the second half? Thanks.
With regard to the dynamic specialty, I would also refer to the answer to Laurent Favre's question. What we said in the press release of the outlook, we said that with regard to Q2, we don't see any real change. We said in the continuity of the context, so we don't say it will rebound, but what we say for the full year is that the second semester should be better. Then it's in fact the same answer as I did to Laurent. Your point is when you look, and we have a good experience, I think over 13 years of a specialty where we are very diversified in terms of a market, and we believe it is a strength. We have never seen such level of decrease, which is not reversing at least to a good portion in the year.
We believe it will be for the second semester, and certainly because there is an element of destocking. It's both my feeling and my experience. It doesn't mean necessary that the end market will suddenly go up strongly. It's just a sort of coming back to normal. Okay? It's our feeling, and we believe this assumption is a solid one. With regard to Sunke, the ramp-up will be progressive. We have to a certain extent, is lacking capacities. I think we will do what is necessary to supply our customers, the demand of our customer. To a certain extent, the same as what we will do in Clear Lake. Normally we try to ramp up on triggers, and we have new capacities in acrylic. This is the case in the U.S. In Sunke also, we try to do something like that. Okay?
Okay, thanks.
Next question comes from Georgina Iwamoto from Goldman Sachs. The floor is yours.
Hi, good afternoon, Thierry. Good afternoon, Marie-José. Thanks for taking my questions. I've got two. The first is on Coating Solutions volumes. As we saw in the fourth quarter last year, Q1 2019 has had very positive volumes. I was just hoping you could give a little bit more color around what's driving that, and how sustainable it is, so maybe by region and end market. Then the second question is, on your very strong cash performance in the first quarter, how much of that is attributable to kind of year-on-year change in working capital versus better cash generation, given the strength in your upstream businesses? And how are you thinking about the outlook for both of those in the latter part of the year? Be very helpful to get your views on that. Thanks.
Okay, Georgina. Hello. Marie-José will answer the last question first, and then I will go to Coating Solutions.
On cash generation, as you could see, the main driver is the improvement that we have compared in terms of working capital, let's say, requirements for the first quarter. We always have some seasonality impact on first quarter versus, obviously, the end of the year. Volumes are higher than in Q1 than in Q4, hence, let's say, the consumption of the working capital. When I look at the ratio, in fact, the management of the working capital remains, I think, a good asset of the company and a clear point of focus of all the business units. In terms of ratio, working capital is actually quite comparable in terms of ratio of annualized sales of the quarter. We are at 15%, as I mentioned in my speech.
For me, we are in a sustainable environment where basically, the work that has been done in terms of improving the management of the working capital last year remains and is sustainable across this year again.
Yes. Thank you, Marie-José. Georgina, on the Coating Solutions, which to a certain extent is a geocentric evaluation. First of all, I imagine it was a good surprise to you. With regard to the volumes to a certain extent, as I say, for High Performance Materials, on the other side, we are not going to grow at 7% every quarter, if it is your question. It's clear that we have a good momentum in Asia. I think the work that we have been doing, notably in China, there is more and more focus on the very well-managed pro, very compliant. I think we benefit from it with our customers. Certainly, the base of comparison of last year was not so strong also, we benefit from it. It's certainly a second element. We have, I would say, a correct dynamic in downstream business.
I would not say incredible, I think quite correct. I would say we certainly should continue to have a good momentum in our Coating Solutions for the whole year. I won't say really quarter by quarter, overall, we are relatively confident. We cannot say that we'll deliver 7% volumes every quarter. It would not be true. I think we are quite glad about the start of the year of Coating Solutions, which confirms our assumption on the geocentric value chain.
Yeah. That's quite helpful, Thierry. Thank you. What you're saying is a lot of the volume strength is taking market share from the competitors that have had supply disruptions in Q1. You don't seem to have kind of pointed out whether coating demand or paints or any of the other kind of end markets-
Sorry, I interrupt you because I think we have a conversation where I had a clear answer. I've never mentioned any taking market share of competitors.
Yeah.
No. What I say is that we had a good momentum in Asia, that we have a base of comparison of last year, which also helped and overall, a satisfactory dynamic in downstream. Just take what I said and not interpret. Thank you.
Okay. Thanks, Thierry.
Next question comes from Alex Georg from Deutsche Bank. The floor is yours, sir. Alex Jeff from Deutsche Bank. I'm going to present the next person, it's Chetan Udeshi from JPMorgan.
Yeah. Hi. Morning. A few questions. Firstly, on 2Q, can you give us some color on how you think Q2 year-over-year decline in EBITDA versus maybe Q1? Is the Q1 a right sort of year-over-year decline to think about in terms of 2Q when you talked about weaker 2Q year-over-year? That's number one. Number two question was on post unfortunate incident in Jiangsu Province. Correct me if I'm wrong, but you do have quite a few sites in and around that province. Is there some impact that you guys are seeing or do expect from any of your sites there? The last question is just clarification.
When you said at the beginning of the call that you expect the fluorogases sort of performance this year now to be somewhere close to 2017, is that just a comment around fluorogases or the Industrial Specialties division as a whole? Thank you.
Last point, I think I was very clear. I had the question on fluorogases, and I answered on fluorogases. Again, I remind you that Industrial Specialties is PMMA, fluorogases, Thiochemicals, H2O2 with a combination of specialty business and intermediate business. The twin cabinet business normalizing and the other two specialty, as you could see, for example, in first quarter, behaving quite well. On your third point, it was clear. It was an answer to a question which was asked specifically on fluorogases. With regard to the Jiangsu Province external incident, it was a Chinese company which had very big incident with material and human consequences. I think we have no impact at all.
I think clearly what you are mentioning is true, is that there is a lot of, let's say, attention from Chinese local authorities on what is environmental and safety, which I think is good for the industry. I think it's normal that we have that, This is why we permanently invest, upgrade our site to have them remain state-of-the-art, and I think we are well-positioned. Is that an element, to come back to the question of Georgina, of let's say, good volumes in H1 acrylic? Maybe a little bit, we don't know. There are plenty of elements which come with this kind of incident. It can be for challenging our raw material, On the other side, maybe can help on certain end market. We'll see.
What is clear, to answer precisely your question, we had no impact from this incident, We are not on this platform. Even if, by definition, you have plenty of sites in Shanghai area, Everybody to a certain extent is closed. Closed in the Chinese way is still a long way. With regard on the 2Q, maybe a way to phrase it is to say that more or less we will find 2Q elements of the run rate of what you have seen in Q1 with one difference, is that for the fluorogases, the Q2 is important one. This is when the distributors are stocking for the season. This means that in, not in percentage, but in absolute terms, the impact of the illegal import and of the normalization of fluorogases is more important in Q2 than it was in Q1.
With this exception, for the rest, you have many elements of similarities between Q1 and Q2, This is really the second semester that we expect from a market condition standpoint, including this discussion we had on destocking, should it really improve. At least this is the way we look at it.
Thank you.
Next question comes from Alex Jeff from Deutsche Bank. The floor is yours.
Hi, can you hear me?
Yes, sure.
Hi, sorry. It's Alex Jeff from Barclays. It seems to have got lost in translation. I don't work at Deutsche Bank, that's what confused me earlier. I apologize for that. Thank you for the presentation. I've got three questions and hopefully they're quite easy and quick to answer. First one, could you run through the reasons behind the particular strength in your biochemical business, what that means about the downstream methionine growth or perhaps the other uses for it? Secondly, can you just confirm or clarify your comment in the release that the Bostik EBITDA would have been above the prior year period, even without IFRS 16? Then finally, do you still have faith and believe in your 2020 revenue and EBITDA margin target, which has been de-emphasized a bit over the last year or two? Thanks so much.
On Thiochemicals, clearly the momentum, the end market, including methionine, I mean, in terms of volume was quite okay. It's certainly an element of the performance. Methionine, as you know, there are some weakness in pricing, but the volume dynamic is quite okay and we depend on the, as a supplier of intermediate product, we depend on the volume dynamic. The rest of the businesses for Thiochemicals was quite okay. As you know, we are a clear leader, so we benefit from our very strong position. With regard to Bostik, yes, it's above last year, including IFRS. Including, excluding if you do it like for like. In 2020, I think, but as you know, it's part of our, in terms of what is the organic contribution, we are there already since last year.
It's really what is now missing is really the M&A, let's say, evolution that we still need to complete. As we mentioned, and I mentioned already before, we are quite selective. We just not do M&A for the sake of achieving 2020 target, but we still believe it's achievable as I'm talking to you. A big part is M&A because if you look at the plan, you look at what we have achieved from an organic standpoint, what is remaining, it's mostly M&A, and we have the financial flexibility to deliver this M&A and to be exactly where we said we would be three years ago when we published the 2020 target. Everything is consistent from this standpoint.
That's great. Thank you so much, sorry for the confusion earlier.
We have no further questions.
Okay. Maybe last question or Okay. If not, thank you very much for your time, your question, and certainly our team is open to answer any of the questions that could come later. Thank you very much.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.