Prospect - Through reorganizations, divestments, acquisitions, targeted investments, and a committed innovation drive, France's chemicals producer Arkema has steadily kept up its transformation since 2006, the year of its stock market listing. Today, the company has consolidated most of its core businesses and boasts sound financial strength to cope with the challenging economic environment. Ana Wood asked Pierre Chanoine, Executive Vice President for Performance Products, one of Arkema's three business segments, to review the key phases in Arkema's evolution, together with what constitutes its assets.

CHEManager Europe: Could you explain Arkema's continuous restructuring strategy?

P. Chanoine: Focusing on productivity has been a main objective since the creation of Arkema. This has been crucial as in 2005 we were losing market shares because we were not competitive compared to our competitors. So we did some selective work, with plenty of support measures, which was necessary in Europe and North America.
Recently, in June, we announced major plans for a reorganization of Methacrylics that will allow Arkema to secure this activity over the long term. This will have an impact on two French plants, namely Carling and Bernouville.

How will Arkema achieve its cost cutting objectives for the 2009 - 2010 period?

P. Chanoine: On the basis of our recent reorganizations announced in 2008 in Vinyls and in G&A procurement in France, and this year in our subsidiary in North America and in the Methacrylics activity in France, I am confident that Arkema will achieve its cost savings objective of €220 million by 2010. For the 2006 - 2008 period, we have already achieved cost savings of €330 million.
I would point out that with a gross operating margin close to 9 % in 2008, in three years we have succeeded in cutting by half the profitability gap between us and other chemicals manufacturers, who on average had an 11.2 % margin at that point in time.
Finally, we must remember that it is thanks to the structural efforts put in place since 2006, in particular the implementation of our ambitious €550 million 5-year cost-cutting plan, we are able to mitigate the effects of today's unprecedented crisis.

Quarter after quarter we continue to lower our breakeven point, and now show a very sound financial structure with gearing down to 21 % of shareholders funds.

What restructuring initiatives are taking place specifically in the Performance Products business?

P. Chanoine: The Performance Products segment illustrates our mix strategy - competitiveness, innovation and selective growth. We did restructure our polyamide activity in 2007 and 2008 by optimizing our Marseille and Serquigny sites, and by closing our copolyamide site in Bonn. But we also sold off our Urea Formaldehyde Resins business unit, while carrying out highly targeted acquisitions, like GEO in organic peroxides, and a number of small acquisitions in our Specialty Chemicals subsidiary CECA, which are boosting its surfactant and filter aid portfolios. These reentering operations enable us to consolidate our strategic business units.

What about portfolio expansion?

P. Chanoine: We have seen a large number of product launches in Products Performance Business Segment in the last two years, as we bank a great deal on innovation to develop our portfolio. In line with our decision to expand our range of polymers of renewable origin, we have announced a new transparent polyamide, a flexible polyamide capable of withstanding very high temperatures, and a partly bio-sourced thermoplastic elastomer, amongst others. And we were the first to market a surfactant-free PVDF. We have strong ambitions for the development of ultra performance materials, where we aim to multiply our sales tenfold to €250 million within five years.
To pursue our development strategy in ultra high performance materials, we decided to buy the American company OPM earlier this year, which markets polyether ketone ketone (PEKK), a polymer with outstanding properties: it is the only polymer on the market today capable of withstanding very high temperatures, of the order of 260 °C, while boasting unrivalled resistance to chemicals and abrasion.

How is OPM being integrated into Arkema's business units?

P. Chanoine: We shall be keeping the small OPM organization in the U.S., but the company will benefit from our commercial strength: OPM is already present in the field of medical implants and prostheses thanks to bio-compatibility with bone. By joining an international group like Arkema, OPM will be able to target new markets, such as aerospace and oil & gas, which offer a major development potential, in particular in terms of metal substitution.
OPM will also be able to capitalize on our process R&D resources, our objective being to start producing in Europe and the US significant PEKK volumes from next year. We are therefore very confident for this new polymer.