Arkema Outlines Forward-looking Goals

12.07.2017 -

At a Capital Markets Day in Paris on 11 July, French chemical producer Arkema outlined its forward strategy and announced investment projects for the period up to 2020 and beyond. At the core of the plans, CEO Thierry Le Hénaff said, are innovation and a strong focus on specialties, which the group wants to grow from currently 72% to more than 80% of sales by 2023. The approach will include bolt-on acquisitions in adhesives and expansion in higher growth regions. 

In particular, Le Hénaff said, Arkema aims to participate in the consolidation of the attractive and still fragmented adhesives market and invest heavily in advanced materials (for example, technical polymers and performance additives) that offer broad development and innovation opportunities such as material light-weighting. Bio-based polymers are a special focus.

The investments, which have not all been quantified, will be channeled into the three previously identified growth pillars of Adhesives, Advanced Materials and Thiochemicals, with attention also given to the digitalization process.

Arkema’s chief executive also announced financial goals for the foreseeable future, targeting a recurring operating income (REBIT) margin of 11.5% to 12.5%, which he said is “significantly up on 2016,” and an EBITDA-to-free-cash conversion rate maintained at 35%. These objectives will be achieved over time, while keeping a net debt over EBITDA ratio below 2, a return on capital employed of at least 10% and a solid investment grade rating by financial rating agencies.

Three new projects, all in Asia, were unveiled at the Paris meeting, including a major investment in the bio-sourced polyamide 11 chain, a project to double thiochemicals capacity in Malaysia and an increase in photocure resin output capability at the Sartomer affiliate in China.

In the first project, Arkema said it will spend €300 million stretched over five years to build a world-scale plant to produce its PA 11 biopolymer. The product sourced from castor oil is sold under the Rilsan trademark. This investment will mean a 50% increase in the group’s PA 11 global powder and granule production capacities and also enhance its presence in Asia, where it already derives 40% of its specialty grade PA sales.

The new plant, which will be able to produce both monomer and polymer, is due on stream in late 2021 and will give Arkema a second production base, complementing an existing plant at Marseilles, France. A location was not disclosed, but the group already has a manufacturing base for bio-sourced PA in China, where it makes PA 6.10 at Zhangjiagang.

Output of the new facility will be marketed to customers in the automotive, 3D-printing and consumer goods sectors, including sports and electronics. The investment includes production facilities for the bio-sourced polyamide elastomer Pebax RNew, which likewise has applications in sports and electronics.

In Malaysia, Arkema plans to double production capacity for methyl mercaptan at its Kerteh site, inaugurated in 2015. The output increase will support the strong growth of the animal feed, petrochemical and refining markets in Asia, it said, while strengthening the producer’s leading position in high value-added sulfur derivatives, which are expected to see annual growth rates of more than 5%.

The sulfur-based intermediate is key to the manufacture of methionine and other sulfur derivatives businesses. Annual growth of the targeted markets is expected to exceed 5% in the coming years.

To support the growth of Sartomer, which claims world leadership in specialty photocure resins, Arkema said it will expand production capacity for UV, LED and EB (Electron Beam) resins by 30% at its Nansha site south of Canton, China. The new line, expected to be up and running in early 2019, is aimed at meeting strong customer demand in the Asian electronics, 3D-printing and inkjet printing markets.