Ladies and gentlemen, welcome to the Akemas Q2 2018 Results Conference Call. I will now hand over to Terry Lenas, CEO. Sir, please go ahead.
Thank you very much. Good morning. Welcome to this conference call. With me today are Marjorie Deboncion of CFO, Thierry Monier and the RR team. As usual, we have posted on our website in addition to the press release, a set of slides which details the 2nd quarter performance.
So I propose first to comment the set of results. And then to answer your questions, As you have seen from the press release this morning, Arkema achieved another very strong performance with a record high EBITDA in the quarter. At EUR 430,000,000 and up 8% year on year. This percentage is even more important when the restate of constant exchange rate. The increase year on year becomes quite significant at 12.5%.
For the first time, since our spin off and we are very proud about it, EBITDA exceeded 1,000,000 in the quarter. And this year, the 15th consecutive quarter in which we deliver EBITDA goals. This remarkable and consistent performance, the result quarter after quarter, consumed the strong momentum of the company as well as the quality and balance of its portfolio of project lines with a combination of resilient and high value added specialty businesses and a short term in the chemical business team delivering excellent returns, as you know. Achieved in a volatile macro environment, marked by a significant oil price rise and geopolitical tension in different parts of the world. These financial results underlines the value of Akama's long term strategy, which aims at continuously reinforcing its profile through a 3 dimension growth strategy, including innovation focused on sustainability, targeted industrial investments in higher growth regions and bolt on value accretive acquisitions.
Looking now more specifically at the 2nd quarter results, I would like to extract a few highlights from the press release. First of all, we have again delivered a strong sales growth with nearly 7% year on year growth. A constant FX and scope of business. In the context of raising oil and raw materials, our ability to increase our prices was, of course, a major driver of these sales force. Our pricing initiatives are 30,000,000 team and have developed continuously over the past quarters, both in intermediate and specialty project lines in order to pass the higher raw material costs.
For the whole book, much to our satisfaction, our first in power in the second quarter was fully positive. Within the ongoing and significant inflation of input cost, we knew it will nevertheless take more time to fully restore the margins of our specialty businesses. This is why we are glad to see that in this second quarter, our actions are paying off and our margin in our specialty businesses, much overall the level of last year, as shown in the high performance material division figures. Nevertheless, we have still some work to do. For example, in a busy, we is, as you know, the most downstream business of our businesses.
To recover the full impact of raw material inflation we started in 2016 for some raw material. So this remains still a priority for the funding process. 2nd point, On volume, we continue to deliver solid year on year growth in fact performance material. If we take into account our volumes this quarter, Well, as you know, we mentioned it in the previous conference call temporarily impacted by struck as the FFAF, the 1st national railway company, which took place during the second quarter and if they keep some of our production in supply in France. More important over the first half of the year, which is more relevant, volumes in HPM were 4.4% up from last year.
Indeed, we continue to benefit from strong innovation drive in Advanced Materials for which we see strong demand and are really optimistic looking at the years to come. Demand for this solution is supported by structural trends with increasing need for lighter materials, 3 d printing batteries, but also consumer goods Sports and Economics. We should continue to see robust and consistent growth in these areas of the coming years reporting our significant organic investment plan for other material presented as the Capital Market Day last year. Relinverse in cutting solutions was also high at 9.2% compared to the second quarter 2017, which you may remember was effective and to a certain extent by investments turnaround at our Clear Lake in the U. S.
SoftBank is EBITDA. At 1,000,000, it is up 8% on last year, very, very strong baseline. This performance was achieved despite both the stronger euro, which represented an adverse EUR 18,000,000 EBITDA possession impact and higher raw materials. Excluding the impact of currencies, EBITDA, as I mentioned at the beginning, would have increased by 12.6% against the 2Q last year. This excellent performance is driven by all 3 business division, which are each of an up year on year.
EBITDA margin level is quite pleasing. The at 18.9% further progression on last year, 18.1%. Mister Ramos has mentioned previously, Australian Airlines, a quite positive combination of pricing power, mix evolution, organic development and cost control. As for any peer, There are nuances in the analysis of the performance when you dig at the level of each product line. But overall, for most of the product line, this quarter demonstrates the strength of our portfolio and represent a lot of hard work and engagement for the 20,000 employees of Arkema.
For storage and it's a very important point with a very significant progression of our adjusted net income and adjusted EPS at +31 percent, which reflects both the higher EBITDA, stable G and A, good control of financial expenses as a benefit of a lower tax rate, combination of the new legislation in ZULA and also our geographic colleagues. Before handing it over to Marie Jose, I would like to remind you quickly a few highlights of the first half of the year. You have all the details in the financial records. So I will be brief. First, the performance in the 1H is also quite up with an EBITDA 8% up from last year, an EBITDA margin at 18.3%.
And adjusted EPS of 31% on last year. So we can say that after a very good start to the year in Q1, Akema fully confirmed the 2nd quarter is 4 momentum. These performance supports are confident to achieve another excellent share in 2018, This is why we decided to upgrade our guidance for the full year, to reflect this confidence despite the uncertainties linked to the macro a political environment. I propose to come back to this perspective in my conclusion. Secondly, we have been active in further implementing our strategy.
As you know, we have continued to make bolt on acquisition in Abiliz as integrated early January, Xelbon, in the US, integration from my standpoint goes smoothly. They have delivered over the 1st semester of phone performance, which is probably seen for the future. In the qualitative context of the US confection market. We have also just announced this morning, you could, you could see it that we closed the acquisition of a neutral adhesive business in Japan. It represents only 1,000,000 in channel sales, but it will be a nice complement to protect existing position in Japan.
So you can see the step by step. We live in a boutique not only organically, but by bolt on acquisition as we are committed to. Several investment projects were also amongst in the first semester, and then with our long term strategy, we will expand our production capacity in Asia and specialty polymer 12, with a start up expected mid-twenty 20 and also in France and specialty polyamide powders with a start up expected earlier, between next year. Those projects are part of our major investment plan, specialty polymerize, and we help us support our customers' goals for new materials and solutions in sustainability. So as you can see, quite a busy and positive partner implementing and delivering on our strategy.
I propose now to hand it over to Marie Jose for the details of the 2nd quarter figure. Marie Jose, this is to you.
Okay. Thank you, Jenny, and good morning, everyone. It's my pleasure to be with you today on my first call on on Aspenal as well. So I'll take you through some additional details on the second quarter financial starting with the sales bridge. So sales have been up 3%, nominally, so including an adverse currency effect of minus 4 percent on the positive scope effect with the XL brand, the exigent intervention.
At constant ForEx and scope, revenues were up 6.7%. Of 1,000,000,000, driven by a 5.8% price effect, reflecting our auctions to increase selling prices as well as good market conditions in the internet based business. Volumes were up close to 1% with higher volumes in high performance materials and cooking solutions, offsetting lower volumes in industrial specialty and Fluorogases in particular. If we spend a minute on the rest of the P and L, I'd like to emphasize that at 1,000,000 EBITDA is up 8% compared to an already strong quarter, second quarter last year. Despite, as Terry mentioned, the strong renewal This increase is driven by strong demand in Advanced Materials, a smooth integration of bolt on acquisitions and the others, a progressive pass through of raw materials price increase and the very good performance on all four business lines in industrial specialty.
So BBB margin reached 18.9% compared to the 18.5% last year. The recurring operating income amounted to 1,000,000, up 11% from last year. And it includes a stable depreciation and amortization allowance of 1,000,000. In sheets, basically for recurring EBIT margin at 14%. As you know, Arkema reports many more some items.
So on this quarter, they amounted to a bit less than 1,000,000 and we have mainly to the amortization of the reevaluated assets. Coming from Bostik, Zenzraven, and XL Brands acquisition. For XL Brands, actually, the allocation of the purchase price was finalized at the end of June, which resulted into the booking of EUR 400,000,000 of intangible intangible assets. And in an annual 8,000,000 depreciation charge. The financial dollars lower than last year, thanks to the refinancing that we achieved in 2017 at more favorable market conditions.
The taxes are down as well on last year at 1,000,000 compared to 1,000,000 on the second quarter of 2017. The tax rate, including exceptional items actually is at 21% on the, recurring operating income. Which is significantly lower than last year with around 30%. And it mainly reflects the benefits from the tax reform, obviously, in the United States. Consequently, the net income is up to CHF 1 dollars from last year at 1,000,000, which is a bit below per share.
I propose to look now at the performance of our 3 business divisions. So, if we look at our high performance materials, sales were up 4% on last year at constant scope and effects. With, a 2.7% price effect, reflecting ongoing actions to raise the selling prices. Volumes were up 1 a half percent, driven by a good demand and our innovation drive in Advanced Materials. And despite, as Thierry mentioned, some impacts from the French national railway company, which affected some production in France.
At 1,000,000, EBITDA was up 2% on last year, We're seeing an all time high in a quarter for this division. This is a strong performance, taking into account the stronger duo and higher raw material costs. And it reflects that's clear good demand in Advanced Materials and the smooth integration of XL Brands within Bostik. EBITDA margin is at 17.6 percent on this table at a high level with a growing benefit from our pricing actions to a at a higher material cost. And notably, we have observed on the technical polymers.
In industrial specialties now, Sales were up 5% at constant scope and effects. The positive, close to 11% price effect reflects the implementation of the gas regulation in Europe and continuing tight market conditions in the month NNA a strong position in thiochemicals and a favorable market conditions in China in hydrogen peroxide. Volumes are down 5.7% on lower selling quarters in Fluorogases in Europe and in the United States. EBITDA of the division is up, 82% and EBITDA margin progressed further up 29%. Both friends were supported by all of the 4 business lines of the division.
Finally, on Coating Solutions sales were up 14% at constant scope and FX. Volumes are up 9%, on the second quarter 2017, which was impacted by a maintenance turnaround in acrylics monomers in the United States. The positive 5% effect reflects ongoing action stories selling prices across the entire acrylic chain notably to pass through the strong increase in property prices over the quarter. Results of the divisions are solid, with EBITDA up 6%. There are contracts contrasted region by region with performance very solid in the U.
S, but closely disappointing in China. Over the next quarters, unit margins in acrylics monomers should absorb higher propylene costs and gradually improve. Looking at cash flow, finally, it's a positive at the €41,000,000 for the quarter. It reflects the good profit generation as well as the high working capital utilization, which actually comes from both the higher activity and is also linked to usual seasonality at the end of June. It also includes actually higher CapEx in line with our a million guidance for the recurring and exceptional CapEx for the year, as well as a million loans 20 to the employees as part of the share capital increases up for employees.
Working capital continues to be strictly managed with a ratio of working capital and annual sales at 16.5%. That is the low point of 15.5% at end of June 17. And also, there's just a 17.2 percent at the end of June 2016. At 1,300,000,000,000. Net debt is slight up, compared to end of March following the payments of the million dividends in May.
Taking into account also the capital increase from employees of 1,000,000 and the share buyback of around 1,000,000. Balance sheet remains very solid with a gearing well under control at 29% and the net debt representing 0.9 times the last 12 months EBITDA. So this concludes my comments. I'm now, I can now hand over to Keri for the last concluding remarks.
Thank you, Marie Jose. I'd like now to commend the outlook for the full year. Taking into account the start of the year, I would like to confirm our confidence for the rest the year. And he said it was great off camera's initial objective, which was, as you know, was to improve EBITDA in 2018 compared to the excellent 2017 catalogs. As said earlier, the catalog of the first Presting and the current underlying conditions seem, robust even if volatile and the opportunity is, in this uncertain world, As you know, and as everyone, to continue to monitor closely, the macroeconomic and geopolitical development, as well as the volatility of both raw material costs and currencies.
As usual, in this context, we'll continue to focus on what will come through. I mean, our internal drivers, including our strong innovation driving Materials material, integration of Boston Acquisition in Abesys and a globally robust environment in our intermediate chemical businesses. With regard to raw material, we'll continue as we have been doing in the recent quarters to address our pricing policy. As I mentioned, as we're beginning to recover full impact of higher input costs. Taking into account all these elements, and the ones that Marie Jose and myself mentioned before and the first part of the year, we agreed, as mentioned previously, our 2018 guidance, assuming that continuing the current macroeconomic environment, we now expect a mid single digit EBITDA growth compared with excellent customer achieved in 2017.
I wanted to thank you for your attention that I wanted also to mention that it will be the last participation to a course call of results by Thierryle Mene before his retirement at the end of the summer. So I wanted to thank him slowly for his invaluable contribution over the past 12 years, his loyalty, his engagement, and what is he for assist as well, you know, that very well is reliability and financial skills. Most of you have been seeing the spin off in contact with him at many occasions, and have the opportunity to appreciate the strong competencies of theory. Now we are ready together with Thank you for your attention.
The first question comes from Thomas Furgessworth, Citi. Sir, please go ahead.
Good morning, Jerry. Jerry and Mary Jose. Jerry, congratulations on the on your retirement. My two questions. You're implying just 1 a half percent growth in the 2nd half of EBITDA, a 5% EBIT pro EBITDA growth for full year 2018, is it just conservatism around the declines in M And A that drive that step down in the growth rate versus in the second half versus the first half?
That's my first question. 2nd question is on Coating Solutions. Obviously, good sales growth, but poor drop through to EBITDA, I think, calculating looks like around just 10% drop through of that sales growth. To EBITDA, could you unpack that a little bit for me? Why wasn't there better operating leverage to the high volume growth in Commercial Solutions.
Thank you.
Okay. Thank you so much. Thank you for your congrats also. With regard to the guidance for the rest of the world, I think you know, a bit of a guidance. I think, this shows, 1st confidence confidence in our resilience, as you know, we compare to a very strong civil semester last year, and which was at 90,000,000 versus 2016.
I'm sure most of you have commented But at that time, we had many questions about the sustainability of this very high H2 2017 and And the message we give is that we are going to be slightly up this very strong response point. This is the first thing. So when we you look at what it would mean for the full year, especially if you integrate the impact of the FX and which was formed on the 1st semester. It's a very strong growth for the full year year on year. So what we see first is really confidence, is resilience, the fact that we caught Tyside, in this sense, such a world confirm this confidence.
So for us, it's really, all positive and it's, also beneficial for you because you know that you can count on this, on this, level despite the fact that we compared to a very favorable 2H 2017. Once we have said that, as you know, as every year, we do our best. But that is very important that you have a point on which you can really do that for your own forecast. And it was important for us to quantify what we could count on for the full year. With regard to cutting the solution, First of all, we have 2 parts in putting solution.
We have here 3, as you know, and the downstream. Because of the popular race, which, has been quite significant and following the price, which has gone smoothly, our downstream, more or less, without giving us a little figure by the business unit. Our downstream has been, rather stable in the 2nd quarter that fiscal year, which means that the full increase of profitability of, Naomi, the food has been coming from the upstream. And if you, look then on the extreme, which is the acrylics, business unit, the EBITDA growth, is double digit. So So I think, I know that for our reasons that I don't fully understand the consensus on this specific equipment solution was higher.
But for me, when I look at the performance, when I look at also, what was the reason that we are seeing in the clinical business, I think it's quite a decent performance for coating solution, it's true that because of the propylene you have on the ratio of margin and some dilution, as you know, propylene price up, pricing up, and then the ratio between the margin and the and the sales are, it's a bit below last year. But overall, I think it's a good performance, but with the from a regional standpoint, a little bit of contrast, where our U. S. Is quite to lead. Europe is not far from its cycle.
And, China, Asia, is still disappointing, but, it's just a question of sequence, and there will be a point where we will Asia for increase with just the club of the mid cycle. And I still believe that we have in the midterm scope for continued recovery in protein solution.
Just one follow-up, Jerry. And can you confirm that you are assuming a bit of a some softening in M and A in the second half. Is that is that part of the, is that included in the guidance now?
We still believe, but, for the time being, that's already in 2016. So we have been, wrong for the, and I think it's good news. We know that some, already, in part, it certainly more than half of the new capacity has been commercialized. And we are still enjoying currently, what's the tight condition in MMAP MMS, okay? So I think it shows that it should remain a big business even if to answer your question precisely, we still assume that in the course of the 2nd semester, there will be some normalization, okay, and it will be integrated.
Okay. Excellent. Thank you very much.
Thank you. You're welcome.
Thank you. The next question comes from Christian Sykes, Kepler Cheuvreux.
Yes. Good morning. Thanks for taking my, couple of questions. First of all, how do you see the acrylic markets in Europe heading into Q3? Some of your peers that operate in similar markets are flagging softer demand from coding players.
Do you share this view, especially on the coating side? And, second of all, in Vermont, if the maintenance turnaround concluded, I. E, there's no tech per Q3. And, 3rd, obviously, Terry, also, the best for your post Akama time.
So thank you for thank you for your comment, Christian. Thank you for Regarding the acrylic, you know, we don't we don't expect any, for 3 years. There will be the seasonality and usual seasonality of cutting in the 2nd semester which is in lower than in a 1st semester, but it is true every year, but we don't see any specific we should show some weakness in the 2nd semester. If I put a part of the seasonality versus the 1st semester, I would even say that in the in the first quarter, as you know, the the weather was not very favorable, for a good cutting business, you know, if it was the case in Europe and U. S, or with regard to Europe, no, we see continuity, but the Then we do the seasonality here, as you know, which is happening every year.
But beyond this usual seasonality, We don't see any discontinuity. I don't know if I answer your question, but we don't see any new LMS that change our mind. With regard to to Google, no, I think, the turnover is behind us, but you know, in a, we have a large turnover every year, in the company depending on which business you need. And once we try to mention to you, I'm really the one which I'm really understanding. And so as you could see, for the most to call, we have not mentioned any specific ones.
So, okay, but don't want to answer specifically your question. It's behind us.
Okay. Great. Thanks, Terry. And, again, for the other, Terry, all the best for your retirement.
Thank you.
The next question comes from Alex Stewart, Barclays. Sir, please go ahead.
Hi, guys. And Terry, congratulations again. I've got 4 questions that they're all very straightforward, I hope. Firstly, the X P 40 distribution agreement you have with, Chemours, could you, indicate whether you've got that to for the margins next year, I mentioned. Secondly, could you just quantify the impact on both volumes and earnings the French rail stripes particularly in High Point Materials.
3rd, if you could possibly give some idea of what the transactional currency impact was in the 2nd quarter I think you said it was about 10,000,000 in the first quarter, but I'll be interested to know what that was in Q2. And then finally, there's been some news that's, your joint venture plant, your clear joint venture plant in China, was down at the beginning of July. Could you give any indication whether that had an impact on the Q2 results and whether you expect it to, have a material impact on Q3. Sorry for the slightly long list of questions.
Sorry. On the q 2, and q 3 was relating to
So there was news that you're, Synkejorn venture, the 2 acrylic or 3 acrylic lines in in China were offline beginning in July, unexpectedly. If you could just confirm whether that was the case and whether it had in on Q2 and what the impact on Q3 might be?
Okay. With regards to, to Kingos, as you know, we, we, you know, we close any contract. I mean, if I've done that for any contract, I will not do it for this one. I think it's a good it's a good contract. It's a part of our strategy, as you know, to get position on the HFO.
And, in, in progress, there are current and to have a partnership. And so this one, I think we believe it's a right and good news don't disclose the volume and the margin. With regard to the French Huawei impact, we maintain the 10,000,000, you around 1,000,000 impact. And, I would say that Mr. Vicky is in, in HPM.
Okay. With regard to the transactional impact on the, second quarter. So we have 18 in terms of translation, which means that for the actual law, you could take, so if you want, sir, so if you agree with me, you don't see it, but So it's about 5,000,000 to say something, okay, which is mostly in, in HPM. So when we look at, To think that is the last two questions, when you look at the performance of HPM, where we were happy to to maintain the 7.6 percent EBITDA margin. You have to take into account that we have a switching we have the most of the French Huawei impact.
We have the translation and production and we have also to manage increase of raw material. With regard to our plant in China, I think we have, for maintenance purpose, there has been, one line, which has been, steel, which happened regularly in order to maintain. As you know, it's, I think, is working not full capacity because we have a freelancer. We manage it with our partner. Most of the time with 2 to 25 lines, but and this was a technical shutdown.
There has been absolutely no back in 2Q or on the performance of Coteq Solutions. So I'm back on the previous question of Thomas. At the end, if you look purely at accreditation, worldwide, it has been a very good growth compared to previous year.
That's it. Could I just leave
it back into the the French rail strike issue? I you guided €10,000,000 in in in back in April, which is very helpful. I suspect also there was an impact on volumes as well. Do you have any idea what the the volume growth may have been in the second quarter without those strikes? That'd be great.
Thank you.
It was difficult to, really to, to, to your precisely what I can say that, if you look at the first semester for HPM, which is one way to look at it, you were at 4.4%. Okay. With 7% in the first quarter and the in the second quarter, 1.5%. You had 2 elements, which were specific. 1 was the molecular sieves, which, as we mentioned, was at seasonality.
So we've talked seasonality in the first quarter and more seasonality in the second one. So what is important is to look at the full semester. And then you have this track, but I would say, so if you assume that the 4.5% for the 1st semester is not relevant and the 1.5% of the Q2, you could assume that the 3 points is coming mostly from from this flight, something like that. It gives you an idea. Okay.
It's not a compatibility, but it gives you an idea. Okay. 1.5% is less relevant than the 4% of the semester.
Thank you. So the next question is from Emmanuel Mato.
Hello to the team. Congrats for your Q2 figures. Several questions from me, please. First, do you think there are some risks for you regarding the trade war between US and China? Do you have, notably, some production tools between those two regions in terms of raw materials or final products.
Could that change your CapEx projects? What's your latest view about that. 2nd, could you come back on the situation in acrylic in China? You are talking about the replacement in q 2, but if I'm right, you remain confident for for for the near future, what will drive up unit margin in China in the coming quarters? And maybe also a question on fuel gases, do you expect high market conditions to remain in the coming years?
Because, if I'm looking to the to the level of margin, you reach on progress is sometimes I'm thinking about what happened a few years ago, and I I I want to to feel to feel confident about Well, that's, that's okay for you also. And my last question, for my resume, maybe what what is your annual tax height assumption for 2018. Thank you.
So on the first one, Emmanuel, so thank you first for your congratulations. On the trade war, First of all, the impact is not material for us at this point, but, we are, looking carefully at what is happening. We have a shipment left China from US to China and China to US, but it's limited. So I don't think a police and long term, I cannot imagine that we don't know, and we don't know, it's a long term, issue, but we'll see that at least for the timing that we are doing is that we, as you know, for most of our product lines, we are now doable with product Europe, in Asia and the U. S, we are releasing our production by, Brexit or by SKUs in order to make sure to minimize this impact.
So, at the end, otherwise we would have mentioned it more precisely, it's not material for us, but we are watching carefully And the full list is kind of, measure which are not good for the chemical industry as a whole. I'm sure how hard peers are feeling the same as we are feeling. We'll stop that You have no nearly affected quite limited for the time being. And so we are not at all thinking of changing or CapEx or strategy, whatever. I think all these things are very volatile.
You can change tomorrow. New things can happen. What we try to do in terms of CapEx or footprint is really to be to be balanced. And this is really the core of the strategy that we had expressed as the Capital Market Day and confirmed in the recent months. With regard to the situation in actually, as you know, we tried to give you some granular team.
And, so what we are seeing acrylics is, compared to what we saw at the end of last year. We are in a situation where we are not so far from the mid cycle. The margin advantage, it's a bit unique, the leading, the leading because you, as I mentioned before, you have the increase of the price which dilutes the margin. We have a situation where we are a little bit of a good cycle in the US in a solid market. We are, Europe, not so far from mid cycle despite the fact that, you have some restaff control from the asset, etcetera.
So it's a situation, all in all, U. S. Plus Europe, which is really consistent with what we saw. We are like in China where the market is cryptocurrency and China is more volatile so. So sometimes it's in your advantage and we have it in certain product lines.
Sometimes it's your advantage. What we still think, we don't say necessary near future. But what is clear is that mid term, even if we are disappointed by the situation currently in the China creates, We think that midterm will maintain what we think is a step by step. There will be some recovery in China to count in a, I don't know if it is a couple of years, but, in a lead cycle, in a in a collection of China. But overall, for the acrylics, because we have 3 regions, we have different positions, different end market for her acrylic assist.
We think that this year, we should not be far from our assumption that we had at the beginning of the year on at the end of last year, which was to be at its cycle, so we should be close to its cycle. And we still think that there is scope improvement in the coming years. So gradually coming really at mid cycle and going beyond in the years to come. Okay. So we have to be, maybe, a bit patient, notations than expected, but it's a good product line growing, which contrast the contrast depending on which region we start as a game.
I think we have a family with different regions, different business units. And for us, it's okay because we don't want necessarily all of for the time to be at peak. So I think we should take it as an upside and positive point. With regard to Fluorogases, First of all, as we have mentioned several times in the past 3 years, our split of profitability with Fluorogases coming both from our legislation, new business development and the evolution of the market itself. It's far more solid than it was, few years ago.
Because we have a profitability, it's some of split balance between North America, Europe, and Asia. In real time, it was very, very dependent on one product in China and 2 products in the U. S. Now we are dependent on form of products. And in some regions.
So from this standpoint, we confirm what we said when we started the year 2018 is that because we look at intermediate chemicals as a whole. You have, about 30% of Ascana, which is made of more intermediate chemicals that she's a specialty car. It's called as an MFPMMA and, acrylics. We try to manage a sort of stability and we can control it for the for this year in the coming year. On this, in term, more in term as yet, chemicals.
And, this is exactly with a family of 3 different business units with different momentum. We sell some normalization, coming in the MMP and MMS certain point, but still leaning at a good level. And on the other side, we saw scope for recovery, it was our recovery in acrylic acid. And is the middle of Fluorogas for which we manage, sort of stability for the for the community also is where we are and we confirm what we say. So now I propose to have Marie Jose answering from
So on the annual tax rate, actually as you know, we've guided on a 23 percent tax rate for the year end. Are currently a bit below. So we are still working on, some, assumptions and, and, basically, the impact of the, taxes also in France. And so far, basically, we don't see the need to change the guidance for year end. Keep you updated as we progress on that work.
Fair enough. The current level seems to to be clearly supporting this type of, of rate for the year end.
Okay. Thank you. And maybe what is your other authority using for your new EBITDA guidance of 2018?
I see. Which would mean, in fact, we are breakthrough to what we said at the beginning of the year, which was 120 in average. So it should take the first half and you combine with the current level for the second half. It gives you more or less 120 for, I think, no real difference of our previous guidance, if it is your question.
It makes sense. Okay.
Thank you very much.
That is a second life, which is a bit better than the first half.
For sure.
At least from the first quarter because, it was a big difference of the first quarter.
That's helpful. Thank you.
You're welcome.
Thank you. The next question comes from Patrick Lambert with Mondrine. Sir, please go ahead.
Hi, good morning, everybody. Thank you for taking my attention. Congratulations to both Thierry and Marie Jose. Two
questions for me
and they're pretty much related to the bridge of EBITDA in both, the hyper source materials and and industrial specialties. So in HPM, it's basically trying to understand a bit better the stability of the margins between between the additives and and the technical polymers. If I look at my my, underlying members, basically, we still have a a a a sort of 50 basis point dilution on margins in the ID. Is that the correct assumption in the Q2 numbers so that that's for HPM more clarity on the moves of margins inside the division. And in industrial specialties, it's it's just to confirm the broad based, movements in the EBITDA, 30,000,000 $32,000,000 plus versus Q2 2017.
That EBITDA bridge is both based, meaning that it's not just driven by PMMA, MMA, and and gases, but also, as as you I think you mentioned that it's it's it's more than that. Thank you. Okay.
Thank you, Patrick. So with regard to as you know, I will not dig into your model. I feel the shop. I mean, that's, I comment detail. I need to add.
What I could say is, First of all, on the EBITDA of HPM is quite a resilient performance. It's important to sustain it and because, it's not the case of, or specialty chemicals business. So I think for us, it's a stable 7 10.6 performance, which is a combination between elastic and the and the Advanced Materials. In the context of negative ethics and in context of, negative raw material with the impact of the French work. So you have to take that into account, which means that the underlying impact from loans, even if we didn't complete the team, It's quite a good.
So once we have said that, appreciating this resilience, it's clear that boosting because of the raw material is lag in a little bit below, below last year in percentage. The good thing is that we start to see now margin percentage will compare to at the end of the semester, at the end of last year, which means we start to see really impact price increase, knowing that this price increase, especially in the disease for certain raw material started in 2016. And that our product is not only to be year on year comparable in the second semester, but to be beyond that and to recoup or to recover also what we got in 2016. But I'm sure you have understood the full mechanics. So overall, Bostik has suffered a little bit, but I think as I mentioned, we are clear to see pleased to see that we are getting closer to leftovers by step.
And that, it's also 2nd, very important, sequential ways between q 2q1. So our boutique margin has improved from 1qtoq2. And the EBITDA of Advanced La Carriers, which is a PN, if we took out a receipt, is quite quite sustained. It's a very good performance coming from our product mix innovation, our pricing power many, many good news, even that. With regard to industrial specialty, the you are right to say that it's not, just driven by your MMAPMMA and Fluorogas.
It's really the 4 business units, which are contributing with an increase in EBITDA. This means also thiochemicals ratio to And also, I would like to mention again that you all know this that, industrial specialties, is not and the intermediates, we have 2 business units, which are intermediate and 2 which are belonging to the specialty world. You can recall and H2O2 and which are demonstrated over the past 10 years, a very resilient performance. Thank you, sir.
Thank you. The next question comes from Geoff Haire, UBS. So please go ahead.
Good morning. Just most of
my questions have been asked.
I just have one final question to ask. And as on working capital, clearly, we've seen a big move up in receivables and inventories in the in the half year. I was wondering if you could give us some idea of what levers you've got to recover that second half of the year.
Okay. So two things on the first one, we are confident to recover also to see a real strength in the second line. And, we're reaching 70% with, as you know, long term ambition of a 35% conversion rate Now when we assess that, you have 2 elements. Right? You have the usual seasonality that we have every year that you did not see last year for 1 it was in the year I think in the past 5 years that you did not see the seasonality.
The reason that one last year is that we took down the working capital percentage from 17.2to15.5percent. And because of that, you have one positive one off on your change of, you you go to a lower rate, but we said last year, it was a bit it was a bit lower. So if we take that out, really, we are like every year. We have the seasonality of the working capital because we are far higher sales in the mid of the year compared to the start of the year, and which we reverse in the second part of the year, like, like, every year, The second thing which is not specific to this year is that you have a huge increase in selling price, as you might have pricing power, but you have it also in the receivables and in the stock. Okay.
So this is mechanical. There is nothing you can do about that, except net passing price increase, but this is certainly not what we will do. So, you have that, and this obviously will keep it up until the end of the year because, raw material, we continue to stay high. So you have it on the stock, you have it on the receivables, you have it on the payables, but frankly speaking, there is no any concern or whatever on that is purely mechanical effect of the usual seasonality. And the second thing is mechanical effect of the pricing of the pricing on such price and raw material increase.
Thank you. Yes.
Thank you. The next question comes from Georgina Iwamoto, Goldman Sachs. Please go ahead.
Thank you. Good morning, everyone. I've got two questions. The first one is on your outlook for Fluorogases. And maybe you feel like you've have answered this question already given your comments on trade wars and Fluorogases' profitability outlook.
I'm just wondering if your outlook for stable earnings and Fluorogases takes into account the risk of rising raw material prices because of the trade wars. We've seen commentary from Plurals Bar producers highlighting strong pricing for this raw material, which, you know, maybe that be expected to continue given the ongoing tariff disputes between the U. S. And China? And then the second question, very simply the volume impact from French wheel strikes, whilst difficult to quantify, do you think you can recoup that over the course of the year, or is that just lost volumes?
Thanks. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:]
So just a one question. No, it's lost volume. I think as you know, we are on the, it's mostly, polyamide. So I think we have, you know, in Venezuela are pricing power, but no, I think it has the impact on the second quarter. We'll give you a very precise meeting impact and now it's, it belongs to the fact that it happened and it lost volumes.
On the first one, on the raw material effect on the Fluorogas, which is a different question compared to what we had, before. And you could say Floregas at Fluoropoly now, so which belong to HPM. So I think it's a matter of pricing power. No. I think it's, it's what integrated I'm not sure, I would check that I'm not sure that the trade war will have an impact so much on the on the on the floor star because the floor star is a pretty much by region.
So there are some movements that could impact, but, and sometimes, you know, the fact that the first part is more tight, is for certain of our gas, creative news. So you have, at the end, this is not because at the raw material and the raw material are increasing. Yeah. That is negative for the downstream. So To make it very short, we think that it's well integrated and that we should have compared to last year.
And because it's a long semester, we'll
compare
last year, which was a very, very strong, semester, which should be in the same kind of, net need to them.
Thank you. The next question comes from Peter Clark, Societe Generale. Please go ahead. Yes. Good morning.
Theory knows I've asked this a lot, so I
did like a broken record. So as it's your last call, I'll I'll
ask again in a different way. The industrial specialties margin now at 29 sense. I realized that, Q2 is above trend, but we've said that a lot, you know, a 1000
basis points above the top end of that
normalized guidance you give. Now I've heard your comments on this and quite clearly, you're in a very different place to when you set up guidance, particularly in Fluorogases, but also I guess fire chemical been beefed up. And I'm just wondering,
assuming there is no global recession in the next few years, is that guidance or
that normalized range pretty much redundant, which I presume it is. And then just a second clarification on the bostic margin and what Patrick was asking. Was like were you alluding to the fact that the margin is now sort of stabilizing and should be up as we go forward from here in terms of the raw material issue? Those are the two questions. Thank you.
We said already a lot, first of all, and, give a guidance for the full year. Say that we would be resilient on the 7th semester versus
the last year 7th semester, which I
remember exactly the question 2nd semester where everybody was saying, do you think it would be sustainable, what is going to happen in 2018, etcetera, etcetera. And what we are doing is that we confirm that, we are comfortable to to manage sort of the stability, the Sebondage compared to Sibondage last year or beyond that. And don't forget that when you talk about 29% as a fuel gas or even some other part of the industrial specialties in this quarter is by far the second quarter. So it's a long semester it's completely different in terms of margins. There is a clear seasonality and it's happened every year.
So you have to take that into account. But now it's clear that we gave, it was Capital Market Day. Long time ago, we gave some guidance in a different world and Florengas, you have not the FPS in Europe. For example, it was completely different world. We get some guidance for industrial specialties long term.
We did not reduce them as a capital market day last year. It's clear that, We do now a bit structurally in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, in a, We have done a lot on the business. The world is different. It's not only too far, but also for other company. So no, I think we have been very clear.
I think we have answered many
questions on the progress. I think what we
said, and this is why we
we define discrete intermediate products, which represents 30% of Arkema, including Florida M and APMMA.
And again, at acrylic acid and accretive premium. And we say with this, with the free that we manage as a sort of a small family inside the Kemar, we try to manage the stability and the established message now since a couple of years. And I think we are believable, and I think we should all appreciate that. It's a totally long haul of time. Than the rest of the portfolio.
But if you look at the evolution of the portfolio step by step, because you're looking at certain static, which means today, if you look at what it was, a long time ago, what it is today, what it could be in the long term, we continue to increase significantly as a part of shooting. So we have many good news to announce some resilience
of this small hotel business plus another evolving portfolio.
So I think we are on on the right track, in regards to the Bostik margin, yes, in fact, in the coming in the coming quarters, years and the technology will continue to improve. It's part of our plan. It's not only coming from the recovery of raw material. It's so coming from the fact that we are making a return acquisition with high synergy. We have seen the synergy of the power and we talked to them to finalize, we have the synergy of the severance, which are stepping up.
So we have many elements, we still, needing a coke for improvement of margin at the boutique. It takes time that we need to take time. But at the end, it's already a very good business case, from what we got when we reboot from that. So it's moving up and the margin will continue to move up, not virtually because this is the addictive world, but it will continue to move up in the coming years.
The next question comes from Michael Evans, H. B. H. VC. Please go ahead.
Yes. Thank you very much. And again, congratulations and very best wishes, to Tierrie. Happy memories, Tierrie of roadshows with you in the early years, particularly in the US. Super good luck, in the future.
The question just sort of up to date really is acquisitions, I guess to the other Thierry, Is there any, I mean, essentially, there's no mention of them, particularly either on the quarter or on the slides. And there was a period when I think, you were certainly being asked about further acquisitions and broadening the portfolio, and and you seem quite responsive to that debate. And there isn't now. So are you more conservative, or are you happier possibly with the current portfolio apart from, obviously, opportunistic add ons if and when they were to appear, in other words, do you now feel that you largely have the structure of the group right and that you don't therefore need to be too ambitious in terms of a large deal because the balance sheet would allow you buy something quite large, but it but I sense maybe you're sort of stepping back from that a little bit. Thanks.
No. I don't know how to answer your question. I think we have a very solid strategy, which is very clear, which is of a bolt on and medium sized acquisition. I think this is what we disclosed as the capital market day in 2017. So I think our base strategy is clear.
Once we have said that, you know, as I think you have followed the company of that in the beginning to the spin off, I think at this period of the life of the company, we believe we take a decision which make more sense. Somebody has announced on, which we have, sorted out later, we see that we believe that we have a good portfolio It's very important to continue to drive acquisition. I mean, this is not necessarily legal and because of the hit, you can create a lot of value, but small to medium size. For materials, if you want, as a material, it's more an issue of availability that I think we are completely open. There are a lot of skills there also accrued downstream.
So No, I think we are very consistent with what we say. As you know, we have financial flexibility the decision because we are there that we need to move them. I think it depends on the opportunities. I think that it's clear that really we can deliver the strategies that we have presented in the Capital Market Day, it's under our control. Once we accept that, if at a certain point next year in the coming years, we have other ideas, we will, we will implement them, but I think we are we believe that least what you know from our strategy is already a good value creation strategy.
It's a good base on an intricate count. After that, if can add to that on a more disruptive idea because they come and we will not be shy, you know, but our strategy currently is quite clear.
Good. Thanks very much.
Thank you. It's Sebastian.
The last question comes from Anton Brejuez Sir please go ahead.
Yes. Good morning. It's actually Laurent Saab from Exane. Good morning all. And, Thierry, good luck for you all.
Can playing career. Sidori, my question is on M And A. You talked about this family of the, let's say, more cyclical businesses, no one wants to say that they've got an ugly child. But I was wondering if you could talk about these I guess, strategic reasoning around the family and whether you would consider disposal, not just to finance and acquisition, but just to make the portfolio a bit more simple to follow, and also to benefit from the current good conditions in terms of M and A for disposal multiples?
No, I think that we're going to use the same as as Martina, I think we have a big strategy. You said the portfolio is It has no complaints that many of our peers are not sure. It's less complex than it was in the old time. It's far better than it was in the old time. It's a permanent evolution of As I mentioned to Martin, it's never been shy of having a disruptive strategy, but I think attending the strategy, which is really based on the good portfolio, which is really delivering quarter after quarter, year after year.
And I think we appreciate that in Chemical. It's called balance. We have, but we have also financial ability. We have, a strong track record of, changing portfolios. So as you can see, since kindergarten.
We are not trying to have anything. There is no table in the company, but, for the time being, let's say that we have a best strategy, which is, again, the one we presented to come back. It is difficult at all to tell to tell you more. And I'm not sure you expect more, but confusion by those, I would say.
And regarding, can you maybe update us to maybe outside of the family of those cyclical businesses, can you update us on your target to dispose of €700,000,000 of sales. I think we have about half of that left. Is this, I guess, at a lower, you know, priority in terms of, your strategic agenda than it used to be?
Thank you for the question. I see, Sam Agostik was a year ago after our trial was a good kick every quarter. And I remember my answer at the time was to say that, in terms of sales, it was, it was up to me. But as that in terms of, profitability and top price value, because in fact, we saw businesses with, higher profitability, even ticket at a time, and we were a lot of free for. So for me, let's say that we are not far, okay, and we will have no difficulty to do better in the, in the next, in the next 2 years.
So it's not, for us, it's not an issue. It's not that it is not is still a priority, but timing is very important. You are a mini parameter, which are, at stake, but we are completely considering to do more at the end of the day. So it's not an issue.
Okay. Thank you. That's very clear.
We currently have no further questions. You may now press your funds on your telephone keypad.
Sorry. Just a just a final comment on what you all said about the what you call the family of cyclical, which is more cyclical or intermediate. When you put this free together and see, fax a factor. You can assign it to every company. When we look at the recent years, very years by the world, since 4 years, which is businesses.
I think it's certainly, individually, more volatile than the rest of the for you is considered to be in terms of debt with certain level of volatility. It can be a young hotel, but also we love that certainly better as a year, but, each of them separately and, combination has been quite good with the with the patches.
We currently have
no further questions.
Okay. I would like to thank you all for your question. I would like to you, nice summer. And, if you have any further questions, open the site, as usual, to, to call Sophie. To answer you.
Thank you very much. Bye bye.
Ladies and gentlemen, this concludes this conference call. Thank you all for your participation. You may now disconnect.