Ladies and gentlemen, welcome to the Aki Meters Quarter 2018 Results Conference Call. I will now hand over to Mr. Thierry Verinaz, CEO sir. Please go ahead.
Hello, everyone. Good morning. Welcome to this conference call with me today are Marie Jose Donsion. For our CFO and the IL team. As usual, we have posted on our website in addition to the press release a set of slides which details the soft quarter performance.
So what I propose is first to commence this set of results, and then I will answer your questions together with Marie Jose. As you have seen from the press release this morning, Arkema achieved this quarter, really another very solid performance. With an all time high EBITDA in the 3rd quarter at 1,000,000 and an adjusted net income, up 18% year on year, which is quite significant. Would like to start this presentation by focusing on a few highlights. 1st, this quarter, the EBITDA is up 5% year on year.
This is a very good performance bearing in mind. I'm sure you bear in mind that we were up against the excellent performance of Q3 last year. When EBITDA grew 17% and thus we are operating in a high raw material cost environment. In this context of high raw materials, Our specialty businesses resisted well at high levels, while our intermediate chemical businesses continued to benefit fully from this situation. As a result, our global performance is excellent and we continue to demonstrate progress and resilience in different types of environments as we have done since 2015.
I'll remind you also, if I may, that we have delivered EBITDA growth for sixteen quarters in a row. Secondly, EBITDA was up year on year in all 2 divisions, highlighting the quality and the diversity of our portfolio and our good geographic positioning. With regards to the macroeconomic environment, which has been a talking point, including this morning among investors, It remained as universal and contrasted with different dynamics by end market and regions. Yes, September was a bit softer than expected. But October is normal.
And, however, we have not noticed any significant slowdown in any and market and have continued to see good momentum in several markets such as oil and gas, electronics, battery, sports. Reflecting our focus on innovation. Going forward, we will continue to remain attentive to the macro development And certainly, we'll continue to focus on what we do best, which is what we come forward. Lastly, I wanted to highlight the strong priority we are we gave price increases during this quarter, something we discussed over the summer, sometime to the detriment of volume growth. In Q3, we continued to increase our selling prices to recoup higher raw material costs and have even intensified our actions especially in our more downstream businesses.
This resulted in a positive 6.6% price effect compared to 5.8% in Q2 and 5.4% in Q1. These efforts are bearing fruit and we are step by step restoring our unit margins. Raw material cost inflation, which started for some of them back in 2016. Now I would like also to comment on a few figures. At 17.3%, EBITDA margin is close to last year despite the impact of higher selling prices on this ratio.
This good level reflects the combination of strong pricing policy, mix optimization, innovation, bolt on acquisition and of course cost control. The second point is a significant increase of 18% of our adjusted net income and adjusted EPS, which reflects higher EBITDA, stable G and A and the benefit from lower taxes in particular in the U. S. With regard to cash, free cash flow amounted this quarter to EUR 227,000,000. We are pleased with this performance, achieving an environment of high raw material costs that impacted the level of both trade receivables and inventories.
It enabled us to decrease materially on net debt to below 1,000,000,000. I'm sure we have made the math, so as you can see, net debt is well under control. At 0.8 times EBITDA over the last 12 months. As usual, we work hard to deliver on the short term while continuing to invest for the long term and further seeds of our future growth. Without commenting in too much detail, On all our ongoing projects, I would like to focus on 2 examples of the small bolt on acquisition we are doing in analysis and which illustrate well our expansion strategy in industrial adhesives.
With the acquisition of industrial adhesives in Japan to supply the growing market of packaging, transportation and electronics. We have also completed a very promising acquisition in Engineering Adeville with affinity cap, which has developed an innovative and patented production process to formulate high performance standard disease with a broader number of applications compared to the traditional CIO accrual adhesives. This is the first step by Arkema in our ambition to build a solid position in engineering a disease used, especially in the electronics market. These two acquisitions will contribute to Bostik's long term growth and profitability improvement. I would like also to confirm that we are well on track with our major industrial projects that are due to start contributing from next year.
This is notably the case of our PE Tech plant in Alabama, our new 90,000 tonne reactors in acrylics in Clear Lake in the U. S. As well as Automotive unit during recent expansion in China. So as you can see, another busy quarter, implementing and delivering on our strategy. I will now hand it over to Marie Jose for the details of 3Q figures.
Thank you, Carrie, and good morning, everyone. So, I'll start in fact with the sales bridge. As you can see, our sales are up 7.3% compared to last year. Scope effect is positive at 0.9 percent, which reflects the integration of our bolt on acquisitions in a visit. So namely Epson Brands, and we have the Latin Industrial Logistics in Japan.
At constant exchange rate times call, revenues are up 6.7 percent at EUR 2,200,000,000, driven as Thierry mentioned by a 6.6% price effect which reflects the priority given to the continued actions to increase our selling prices and recover from the higher raw materials especially now more downstream businesses. Volumes are overall stable against last year's strong comparison base This reflects the price of a volume priority, I've just mentioned, as well as the impact of the regulations in Fluorogases. And customers more cautious approach if we can set towards the end of September. EBITDA reached 1,000,000 which is an all time high in October 3rd quarter. It's up 5.4% against last year, which was itself a high performance.
All three divisions are up concerning the good resilience of specialty businesses and a very robust performance of intermediate chemicals. At 17.3% EBITDA margin, it close to last year, reflecting the mechanical dilution on the rate resulting from the higher selling prices. Recurring operating income amounted to 1,000,000, up 7.6% year on year. So it includes a stable depreciation and amortization at 1,000,000. And therefore, the Revit margin is stable at 12 and 2%.
Nonrecurring items relate mainly to depreciation and amortization of PPA for 1,000,000 It corresponds in fact to the revaluation of assets carried out as part of the Bostik, then Broadband and XL Brands acquisitions, purchase price allocations. We also booked 8,000,000 of nonrecurring expenses as part of the implementation of synergies in, India visits. Taxes are down on last year at 1,000,000. Tax rates is therefore down year on year at 20% on recurring operating income. This reflects both the benefits from the U.
S. Tax reform our geographical mix of results. Consequently, adjusted net income reached 1,000,000 up 18% on last year and delivering a EUR 2.44 per share. Looking now at the performance of our 3 business divisions, high performance materials show sales up 2.4%. On last year at constant scope and FX with 1.9% price effect, reflecting our continued actions to raise selling prices across the business.
Volumes are up 0.5% compared to the high third quarter 'seventeen performance. Demand was lighter for lighter materials and the demand as well in a consumer goods was once again solid this quarter. But volumes were impacted by strong priority we gave to prices. The 2% scope effect corresponds to the integration of our bolt on acquisitions in Adhesives and in particular Escal brands, of course. With 1,000,000 EBITDA, and 16.4% EBITDA margin.
This division, high performance materials, confirmed resilience in an environment of higher raw material costs, benefiting from the price increase policy that we've implemented, notably at Bostik. This performance reflects also the benefits from innovation and investment payrolls, the smooth integration of our acquisitions in Additives as well as the lower contributions for the third quarter from the molecule sales compared to last year. Regarding industrial specialties, sales are up 8.1% at constant scope and effects. With 11.4% price effect, positive in all four business lines. Volume bar year on lower selling quarters in Fluorogases in particular.
EBITDA is up 10.7% at 1,000,000 with EBITDA margin at 25.5 percent. This performance is once again very robust and driven by the benefit from the F gas regulation in Europe. A slight normalization in PMMA towards the end of the quarter and the robust performance of both biochemicals and hydrogen peroxide. Finally, in our Coating Solutions, sales are up 7 13.7 percent as constant scope and FX, driven by price increases in the whole acrylic chain, resulting in a 10.2% price effect. Volumes are up 3.5%, mainly driven by solid demand in the U.
S. And in Asia. EBITDA increased 4.8 percent versus last year of 1,000,000, Thanks to the continued gradual improvement of the monomer unit margins and in line with our assumptions. Downstream businesses have continued to be impacted this quarter by higher raw material costs such as accretive to MMA. Looking now at cash.
Arkema generated strong free cash flow of 1,000,000 this quarter. It reflects the good cash generation from operations, the seasonal decrease of working capital, also 1,000,000 and EUR 142,000,000 of CapEx. This CapEx level is higher year on year and in line with our investment plan. So I remind you that for the full year, we expect CapEx both recurring and exceptional to amount to a EUR550 million. Working capital continues to be strictly managed.
With a working capital on annualized sales ratio at 16.1%. This compares to a 15.5% at end of September 2017. And 16.8 at the end of September 16. So we are let's say in between the 2. Our M and A investment amounted to 27,000,000 on the first quarter, mainly relating to the acquisitions in the Adhesive that Thierry mentioned, as well as the creation of a joint venture in this body, in a thermoplastic composite for the oil and gas market.
Net debt decreased significantly during Q3, to 1,000,000,000. If we present a point eight times, the last 12 months EBITDA and a 24% gearing. So as you can see, we continue to drive a strong balance sheet. That concludes my comments. And I can hand over back to Jerry.
Thank you, Marie Jose. I propose now to comment on the outlook for the full year before answering your questions. As you have seen this morning in our press release, taking into account these elements and the 1st 9 months of the year, we fully confirm Our 2018 guidance we communicated earlier August, targeting, as you know, a mid single digit EBITDA growth, meaning around 5% growth compared to the excellent performance achieved in 2017. So we are really in full continuity with what we said. Over the summer.
I said earlier today's economic environment remains legally volatile and we certainly as everyone, remain attentive, monitoring both macroeconomic and geopolitical developments. But more importantly, we continue to focus on what we control I mean, our internal actions, more specifically, our new business development through innovations, integration of bolt on acquisition, cash generations, implementation of large CapEx expansions in the U. S. And Asia. As emphasized earlier, we'll also continue to implement pricing policy to recover raw material inflation.
So to wrap up these introductory comments, we posted another very solid set of results this quarter, further demonstrating our resilience in a volatile and constructive environment, We confirmed our full year guidance and are confident to achieve it. And finally, we continue to actively invest for long term growth with our CapEx program, innovation efforts and bolt on acquisition. So that concludes my comments. And, I thank you really for your attention, and we are now ready together with Marjorie's attention to answer any of your questions.
We have one question from Mr. Marta Rudiger from Kepler Cheuvreux. Please go ahead.
Thank you. Three questions I have. 1st of all, on high performance materials, you gave priority to prices rather than volumes. Is the problem, the duration of the contracts, which hold you back in passing on increased raw materials to customers, or is it the competition? You have in high performance materials.
Staying with high performance materials, this is my second question. Can you talk about the individual end markets? And I mean, not only consumer goods, which performs quite well, but also other end markets such as construction, automotive or other industries. And finally, a minor question. This is on the PPA related amortization charges, which were quite low at 1,000,000 in Q3.
But it should be normally 1,000,000 because of 1,000,000 coming from Bostik and 1,000,000 from Dan BRAVEN. What do I miss here that PPAs now lower than it should be. Thanks.
Okay. I will start with the stuff too and then, manager there, we, we handle that, it is more specific. Okay. Only HPM, no, it's not a matter of long term contract or competition. We are talking about specialty product, the more you go downstream, the more your customer expect the stability of price.
So it takes with a magnitude, which was exceptional of the oil price increase over 2 years, which was simply doubled. Okay, just that it takes time. As you know, and you have a strong experience in chemicals. When you talk about intermediate products like acrylic acid and maybe it's a paradox, but it goes fast. When you talk about the specialty products, because of the nature of the product, which are highly valued, you, your product, which are more stable in price.
It takes more time to reflect very high increase of raw material. So there is nothing particular. I think the case for old specialty chemical company and it's difficult at the same time to chase volume knowing that Arkema has ever been a market aggressive in terms of market share, we always prefer our profitable growth as adjusted top line growth. And so we decided in the course of this year, really, to make sure that we were because, you cannot wait compensating raw material into our pricing, including 4 very downstream specialties, because in specialties, you have let's say, products like a polymer deliver, and we have already done the job, and the limit is more the production capacity. And, adhesives, which is even more downstream where it takes more time.
So there is nothing new. It's a phenomena I have transformed in, in a chemical. I think we are on good tracks. And at the end, what counts is your, your, in a high raw material environment, your ability to be readily and this is what we clearly demonstrated. So I think it's really frankly speaking, it's more positive news than anything else.
On the end markets, In fact, because your question is reflecting the question we had during our road show, which is what about automotive, what about China, what construction, etcetera. So it started 1 month ago, and we tried to observe the best way possible. Looking at our figures and what we see inside Arkema. Clearly, we don't I mean, we don't see any electron. It's clear that the world is volatile.
Any cautious because of all these geopolitical tension and this volatility and raw material, but at the end, we cannot identify if it is your question one end market which would really decline or whatever you some which are more positive, some which are more negative. But at the end, it's more about volatility than any significant decline of any market. You were mentioning the automotive, which is only 6% of the Arkema sales. Automotive, I don't know, it's a paradox, but where in fact, likely positive in the Q3. So Actually, it depends on the positioning of each one.
So then on construction, yes, it's clear that European construction was a bit negative. Is that a longer term trend? We don't know. So I'm always cautious to extrapolate. What I can say is that There'll be more volatility in September.
October is back to normal. We see what's going on, but for the time being, we don't see any market really significantly declining at least when we look at the sales of Arkela, which is, as you know, quite diversified, and we have not significant position on every market. Okay. On PPA, I will ask Marie Jose to answer.
Okay. So, in fact, the purchase price allocation is mainly allocated to intangible versus intangible. So basically we depreciate as we progress. So we just have a finishing depreciating some of the items. So the amount is lower than last year due to that reason.
So the EUR 8,000,000 is, let's say something you can, you can count on for the future.
Other questions?
Yes, we have another question from Thomas Wiegelsen from Citi.
Good morning. Thanks, Thierry, and thanks for my order. Three questions, if I may. Just looking at the drop through, if I look at the organic growth, either price and volume effects in the second quarter kind of led to about 1,000,000 of incremental EBIT, And we only saw a similar level of growth at the top line, but only around 1,000,000 of incremental EBITDA, so I actually correct myself. Could you help, why is that?
I mean, especially as it's very price heavy, it seems strange that there's not a better drop through coming through from the growth opportunity that is there? And secondly, in high performance materials, what do you think the underlying growth rate was for the business, noting that your volumes were 0.5. And thirdly, just on M and A, there have been announcements by IITI Asset.
Sorry. Tomas, you can ask again the second question because you go very fast. So we try to, you know, what you are saying and asking, but if you want to have clear questions, we need to have the time to answer questions. Okay, thank you.
So on the second question, what was the underlying growth rate in the high performance materials, markets noting that you prioritized price over volume So what do you think the underlying growth rate was in the third quarter? And how should we think about that for the 4th quarter? And a final question, if I may, around the Samac plant for M and A, seems to have been on and off, a loss over the last couple of months according to ICIS. I was wondering if you could confirm whether that plant is fully operational and what your expectations are for its contribution into the market over the into 2019? Okay.
So first, with regards to the results and, we compare also with industry with other industry for the sub first, we are very proud of our results. So I don't know if, we believe it's, when compared to last year, we was really a record. We should not forget that. We increased our net result by 18% compared to that. So maybe not everything perfect, but it shows that our portfolio is at very good quality.
It's clear, and we have mentioned it since the beginning of the year, even before starting the year when you have tension on raw material, raw material are increasing when you have this kind of geopolitical tension, It's a better environment for more intermediate products and it is for specialty. So the name of the game for us this year was at the same time, to grow, to take advantage of that to grow our industrial specialty profitability, notably and our intermediate business profitability And to demonstrate which you are expecting this because we've got many questions about the past year about the resilience of HPM to demonstrate that HPM whatever was the environment was able to resist well. And this is what we have demonstrated here, even in the Q3 where and, we see all your questions. We saw your questions during the roadshows, where you have yourself worries about the macro environment. And the answer of Arkema is to say, look at it.
We were, end of July early August, We have said we would deliver for the 2nd part of the year so much, and we are fully on track with that without any question. So at the end, some parts of the market are demanding their volatility, but I think that Arkema is baving well in this environment. So maybe we could have what you call a better or a drop through or whatever. But the result is really, very good, very strong, very resilient and where maybe you don't have so much visibility on the environment, but on my result, you can have visibility. We took the deck and it's always the challenge to give you a very precise guidance for the year, early August.
We are delivering. So I don't answer and detail your question, but I see some things that hopefully you should, if I may, Appreciate. And again, we compare to a level of profitability of last year, which was a quite quite, quite good. Now with regards to HPM, with regards what is the underlying growth, which is your second question? It's very difficult to know, especially on the quarter.
It's It's a business which theoretically can grow at GBP plus. As you know, we have some instance communication on certain product line like PA level. So for us, we are a little bit below the market that we manage very well the price have and the mix, which means that the EBITDA is able to grow over years quite well. It's clear that in the current environment, but don't just look at Arkema, look at everybody, Certainly, you have some because of this customer or cautious into the macro environment and geopolitical tensions. You have some adjustment of stocks, certainly somewhere, and you have less, you grow less than the GDP.
So you something below for the timing, which will certainly have a little bit of correction and it will come back. And as I mentioned, October was a quite quite okay. So, I think the underlying growth rate in HPM is still GDP plus After that, depending for Achima, depending on which line, some we are oversupply. We manage the mix and the volume, but the pricing some others, we we grow at this, at this rate, like, PVDF. And, for the current environment.
So if I took note, in a, for the year, but really for Q3 and Q4, It's clear that you have a little bit of, of disturbed leading to this cautiousness of, that you see in the environment. So at which we fully manage because again, I come back to our result, which are quite good and quite resilient. On the Sanmark, So it's always difficult to comment about other players. I think the operations are ramping up So certainly, I will not say everything is on the market, but the major part is on the market. So exactly what is difficult to know.
So you have process and maybe there. I know exactly what is clear is that, as we mentioned, and we told you, early in advance, we start to see some normalization that we will get in the Q4 gradual normalization. We're still seeing that this business will stay at a good level, but not at the peak. It has been for a couple of years. But, on the other side, we encourage you to look when you look at Arkema as a combination of our 3 intermediate businesses through all that acrylics and and then MMAPMA.
And we believe that, especially when you look at MMA, PMMA and that creates, I think one and, offset the others. This is ideal. And for the time being, we demonstrate that. So no specific concern for Arkema, MMA will still be at a good level, but there will be some influence clearly of this new capacity, knowing that for us. It's temporarily and it's manageable.
We have another question from Nelam Georgina Eranata from Goldman Sachs.
Hi, good morning, Kerry. Good bye, and good morning, Mauricio. I've got two questions. The first is on volumes So noticing that you are basically flat in volumes in the third quarter. I was wondering if you can give us kind of how to think about volumes for next year.
So I guess bearing in mind your volume constraints and assuming that you need to continue prioritizing pricing to offset rising input costs, does that mean we could even expect some negative volume growth in the coming quarters? And maybe you can remind us what capacity expansion we should expect to see and the timing of that next year? Then my second question is on acrylic acid. And can you just talk through the market dynamics you're seeing in each of the regions? Are you still seeing improvements across North America and Europe, and also in China.
And at what stage, like in what time frame would you expect market conditions to return to reinvest level? Thank you.
So with regard to volume, so for next year, I will, as you know, we'll comment we'll start to comment next year in March. In March of next year, every year. So we'll not change our hobbies, but we have no any specific concern with regards to volume. And We believe that, at the end, when we see price and volume, we have been wise enough can look at the past year to manage well on the combination to make sure that we deliver the EBITDA that we want. So we adapt permanently to market conditions, mainly the oil price would decrease and make sure I do not know.
So I think it's difficult to predict that. It depends really on the oil policy and We are a very flexible company, as you know. So we try to adapt to market conditions. So we'll see for next year. It's too early to say what should be our right policy.
What is clear and it's an important point that you have mentioned. I think we are very wise and attractive expansion that will go through an and the years following. So you will start next year with a PKK plant, then you will get the acrylic acid in Clear Lake also, which is a good with addition, you have Sartomer starting, especially with electronics and 3 d market in China also for in the spring of next year. So you have, you know, we have a slide presentations where not on this one, but on the summer 1, where we show our the CapEx and the U. S.
And Asia. And some of them will start in 2019. So I think we should have a decent growth in 2019, but it's too early to preside because Once again, it will depend on the which policy we follow depending on the what is the evolution of the oil price, but What is clear is that, in this world of high raw material, we have a priority, which is great to recover fully our raw material input. And I think we have done a good job this year on that. With regard to the acrylic acid, so if I look region by region, I would say you have U.
S. And you have your organic cycle now to quite okay. Europe is around mid cycle. Little bit below not far and I should continue to improve. In China, it's at the baton, this is why we were able, I'm sure you have seen that in the press release, we were able to sell this quite good opportunity for modest price.
To buy the remaining part of our Sankei joint venture. So clearly, it's the right time. This intermediate product. You make the best deal when you buy them in new conditions. If I look forward, we still think that we'll go through those and later to, normalize conditions.
So if following your question, normalize condition, reinvestment point, I don't know because, in fact, I think the reinvestment point is higher now significant year than it was in real time. Certainly, you need more than, more than mid cycle condition to justify the reinvestment. And we believe that with the base of Arkema, is quite competitive in terms of cost per ton, investment cost per ton that we have today. So we are in quite well position. To benefit from the from the progressive, the gradual improvement of the actually gas hit you need margin.
So maybe to make the story short, I think, there is upside in acrylic, which, again, should compensate what we could in GMMA and altogether, we should more or less nephritis.
Sorry, Terry, can I just ask a follow-up on the acrylic acid you buying out the rest of the share in the Sankey joint venture? Can you just talk about the strategy behind that? Because it seems a little bit at odds with growing the specialty part of the portfolio? Yes,
it's really opportunistic. I think just in our debt, we have an issue. I think, our strategy is still to increase significantly the specialty part, and we have the financial flexibility to do that. You look at the big CapEx project, there is the specialty. Each time we make a bolt on acquisition with this exception, we are We are in specialty.
So there is no doubt about that. Here, I adjust that for really a very modest price. We are able to have the full site, which means that we are somewhat flexible to manage our capacity and for the long time to do what we want to do And I think it brings the right move. So economically, it makes the last time. It's very easy.
If you take a Chinese Chinese margin in the mid cycle. So we are not in mid cycle and it will take a few years. So you have you need a little bit of questions, but in a if you take mid cycle, which is a way to measure it, through the investment will mean 2 times 2 times EBITDA. So it's quite reasonable. So it's more opportunities and strategic But at the end, it was really the right move, and it would have been a beginner to catch the opportunity.
So we'll, we'll leave it. Jeff Schnathy, the growth of our long term strategy, which is to deliver this increase of share of specialties, the quarter our portfolio, we have still in mind that we are 30, 70, intermediate and specialty, and we the 70% of specialty will 80% as soon as possible. So nothing has changed. Okay. Thank you.
We have our next question from Mr. Patrick Lambert from Bouygues. Please go ahead.
Good morning. Thanks for taking my few questions. Just first one, going back to Sunke, can you remind us exactly what would be the impact on on reported numbers. I think, now post, of course, the acquisition, I think the 4 80 kilo tons would be fully consolidated. If you could go a bit more in details of what would be a big difference between today and and tomorrow in terms of reporting.
First question, second question, always coming back on the HPM margins. And and basically the split between HPA sorry, technical polymers and and adhesives in particular. Is it fair to say that most of the drop of the EBITDA margin, the 50 basis Conversus last year is mostly due to adhesives margin. Meaning that the technical polymers did maintain the high level we've seen so far. And finally, a quick one on on China in particular.
Could you comment on Arkema China? How has been developing in Q3? In terms of key end use and yes, thank you. That's it.
Okay. Thank you, Patrick. So a restart to China, it's easy. It doesn't mean that you have the 1 or not easy, but China is even easier. So China has been a good Q3 for Arcela.
So we have continued to be very well. As you know, our focus on China is mostly on specialty high value products. And we still see a good momentum. So I know there are questions about automotive, but we are not a big supplier of automotive in China. There are questions about construction, but we are not directly such a big supplier in the construction.
We are more focused on megatrends and also on the air conditioning for Fluorogas, which is doing a web in China. So overall, we have quite a diversified portfolio in the China. And our profitability in the Q3 was quite okay. So, I know that some some specific quarries on China. But for returning, as a level of Arkema, we still see a low case situation and we see a normal momentum.
So we have not any specific concerns recognizing that China is by definition volatile, Zach, you can have some weakness here and there on this end market. But at the end, we see one of the strengths of Arkema. We are positioned on different end markets. And we manage well of all the Chinese position. With regard to scientists to start with your first question, today, we consolidate insurance operation, so at 50% and we consolidate 100% from the closing.
So, which take a certain number of months. So when it closes, we consolidate 100%. Okay, for the time being profitability is low, as you know, but this is also why we have this opportunity, but clearly, when it would be mid cycle condition, it would be quite a good impact on Afzema, but it should be a bit a bit patient. With regard to high performance materials, Martin, don't forget that we increase prices step by step every quarter and that by definition, for the same margin in absolute terms, you have a division because the pricing is higher. So you have a little bit of that.
Secondly, as you remember, incremental that for molecular feed, which is high margin, the full year will be stronger. That with a strong positioning on the first quarter. So by different, the second, third and first quarter, low in molecular history. So it has also an impact compared to last year on the sub nothing. It's a little bit specific, but it has some of, as usual, of different impacts.
And the third one, it's with regard to Bostik actually, we now finally compared to last year in terms of margin percentage. So we have catch up cut up with Martin. So it's not so much adhesive. It's more the first two points, but overall, we raised well. I think it's the 4th quarter and seasonality is a little bit weaker compared to the Q2.
And we are 16.4% versus 16.9%. We resist 12.
Excellent. Thank you.
We have another question from Emmanuel Sir, please go ahead.
Questions for me, please. 1st, what will be the position of Arkema in China following the deal with, Jerome, would you have leadership position? Which white type? Which white type of market share? And what needs China to go back to mid cycle condition and how long it would take according to you?
Just taking a sorry. So one question is what? Sorry.
It's about China and, actually, Cassie, the what needs, that market to go back to the cycle conditions and how long it could take according to you? Can we go back or So on high performance materials, if raw materials prices are stabilizing, could you quantify the level of EBITDA margin you should be in a position to recover in the next 12 months in that division. That would be helpful. And maybe aware that on M and A, still have some acquisitions to do and to reach your 2020 target. Would you say you are well on track maybe late due to lots of competition from private equities.
Okay, Emmanuel. So in China, we must be among the first two in acrylic, I see, I would say, certainly number 2, one on the 2, the number 1. So let's say number 2, to say something. It's alright if you could also know if in China is less transparent than the other region. When it is market to go to recycle condition, just fine.
There has not been an enhancement for many years in China. The one which has come recently, but we thought, I think, 2000 23 something like that, which is a big, big one. So we have time. And the market is growing at 5% a year, 50% a year. EBITDA.
So I think, just a matter of time, so how much time is very difficult to know. We have non GAAP in the U S, in the when we were in 2000 and 9, 2010, where the market was depressed and then it came very, very very high, very quickly. So not scientific, but I think it's a matter of several of years, I would say. I thought of yours should be, should allow. There will still be volatility and well, China by definition is more volatile than the rest of the world.
Let's say a couple of years a bit more, but I think it's a it will go to mid cycle condition. And then you will see that because we invested at very low cost. We've been in quite good position. With regard to M and A, No. I think M and A, I don't know if we are on track or if we are not on market.
I think we are pushing the we are looking at a reasonable price. And as you know, you don't need a lot to to do what you need to do. So I am not concerned about that. We find our opportunities left studying regularly, it's clear. And you know us, we are very selective.
We want to deliver value through our acquisition. It has been our reputation, so we'll continue to do so for It's clear that because multiple are behind these days, you have to be selective. You have to buy where you believe your source analysis, and this is what what we'll be doing. So we prefer to take more time and make the deals and the other way. But I would not say that we are late.
I think we are on the right track.
Okay. Maybe a word on high performance materials, how long it will take to recover It was the margin, from, the raw materials price increase we have seen. Before?
I think that it depends on what your price would be for next year, and again, so it's not but I say that raw material stability now, or you still have a 28 here, I would say.
And what will be this level of EBITDA margin you should be able to recover if prices are stabilizing regarding raw materials?
I see where we have lost is just as it is. It's not only the rest of HPM. We have recovered already. Okay. So it's only a disease.
And on a disease, as I mentioned, we lost a bit more than one point. I think I said that I said that less time, I think, of course, so let's say that you have a bit more than one point to gain back on the holidays Okay. And you should be done for the next year, latest.
You have another question from Mr. Alex Xu from Barclays. Sir, please go ahead.
Hey, good morning.
Thanks for the call.
The, the, extremely good value. But you're now, you now have a quite material net long position in acrylic, acids and acrylics. Does the acquisition of this 240,000 tonnes expedite your plans to cover that long position either through downstream coatings or perhaps through adhesives, or are you happy given the point in the cycle to to stay in that long. Any ideas of how your plans might change around that would be very helpful.
It's a good question. And the answer is that, we don't change our target. It's just, as you know, it's a mid long term target. Maybe it's a parallel, but, okay, we get more capacity, but we have more flexibility to do what we want to do with the City, if you see what I mean. So the fact that now we are here now, makes us more flexible in terms of what we can do medium term.
So it doesn't change our plan. And again, it's an opportunity to there'll be an opportunity to miss. So, and thank you for saying that it's a good value. I think it's a good value investment. And that is an exchange.
We still want to be more balanced between the stream of acrylic and the downstream and our strategy It will be more clearly downstream on a high value performance coating, which I believe is part of the year in New York.
It sounds like, your partner will have sold half of less than the build cost, which is unusual. They must have been very desperate to move out of the acrylic acid. Is there anything you can comment on regarding their incentives in their motion?
As you know, I will not comment on the spirit of partner. What is clear is that it's a matter opportunity also for them where they can reinvest their money, where they prefer to Zamanet. So I think, it's a time where we have combination of 2 things. So it's low condition for the acrylic, I see clearly. And the second thing for them, it's certainly an opportunity to reinvest their money in places where they believe it makes more value for them with their strategies, that's all.
Okay.
Okay. I suspect that you weren't going to comment, but thank you very much anyway. Welcome.
We have another question from Mr. Peter Klaus from Societe Generale. Sir, please go ahead.
Yes, good morning, everyone. I've still got 1 or 2, I think. Just effectively on the, volume growth. You're emphasizing obviously price over volume in this environment. On Bostik, Gavin, if I'm playing with the numbers, it doesn't look
like you've got much volume. Again. I'm just wondering how much, you know, bottom slicing is going on if there's significant bottom slicing going on in that business. Actually focus more on the price there. And obviously I saw the announcement about the price increase that
you were trying to push through. And then on the pricing side, moving into industrial specialties in the Fluorogases. But judging by the numbers, it looks like that was the strongest surge you saw in pricing. I know there's the F gas effect as well perhaps on mix just if you could comment on the pricing situation you saw in the third quarter on the Fluorogases?
Okay. So I'll start with the last point. And I finish with the first one, obviously, in the 4 specialties, our strategy seems to work well on when you look at the evolution of the EBITDA, plus 11% in the world of today, margin going from 25.1% to 25.5%. I think we are in quite good shape. And clearly, you have some places where we cannot grow by definition, which is the flow gap.
That also the MMA or you cannot say, yes, we are very happy. The MMA is at the peak and expect that people have more volume to grow. I think one goes with the other. So, okay, so I think that it's clear that limitation volumes in industrial specialties, one point being what you mentioned, which is the Evgas in Fluorogas. But at the end, our strategy is right.
Looking at the numbers, with regard to HPM, I think it's like the rest of HPM. I think, growth is limited by the fact that we decided to put more emphasis on, even more emphasis on pricing, but you have seen that on, on other companies, which are positioned in the position, like, I believe, for example, our paint companies have done the same. I think it's, it's important at the to recover the high raw material and it was a right moment to do it and We plan to do it again. Up until now, we have a fully recovered. Okay, Peter.
What I propose is to take maybe the last two questions. If I may?
Yeah, that's fine.
We have one last question from Mr. David Simons from JPMorgan. Sir, please go ahead.
Hi, this is actually Chetan Udeshi from JPMorgan. Just one or two questions. Hi. On technical polymers, can you give us some rough sense of how, you know, with other key end markets that we should think about in terms of exposure of that business, that's number one question. And the second question was on Fluorogas is where if I look at your pie chart that you give, it does suggest that there was a big acceleration in growth in that business in Q3 to almost 20% sales growth.
Versus first star, which was probably low to mid single digit growth. Can you comment on on the reason for such a big acceleration in Q3 given that Kammuz was actually talking about the base refrigerant prices coming down year on year. Thank you.
So with regard to technical polymer, so it's very diversified in terms of end market, but just to give you a few So technical for me now, again, for everyone, it's a polymer 11, polymer 12, PBX, and the PVS, honestly. For some other high value products. These are the big ones. So we supply a lot of end market consumer electronics support, so it's partials, optical, packaging, cosmetics, automotive, oil and gas. So it's very diversified.
And the growth is mostly driven by innovation, okay, but you have sensitivity to GDP by definition. Typically GDP plus business. And this is where we invest a lot in terms of new capacity because we have been, in fact, a good by our success. And on certain product line like PA11, we are nearly nearly oversold. So we manage the mix, but overall, are the key end markets.
And I think long term, it will be it will continue to grow significantly for Arkema for Linde our expansion. With regard to follow-up, I was surprised by your comment because we were already in the continuity of the previous quarter. We don't see any acceleration. It's a volatile market when you look at region by region and product by products. So each company can have different comments depending on where they are positioned.
But with regard to Coma, we say that we don't any discontinuity compared to what it has been. So if you have questions about the math and the numbers, don't hesitate to cut, suffice you give you the exact answer. Okay, but we don't see this acceleration. We see more stability.
Thank you.
Okay. What I propose now is just to close. I would like to thank you very much for your attention. And I think we about the lot of ground to be there. And again, we are confident to deliver our full year guidance.
Thank you again. Bye bye.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.