Arkema Raises Full-Year Earnings Outlook on Adhesives Boost

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  • The chemical company now targets 7 to 9 percent Ebitda growth
  • Arkema focusing on Bostik integration and sealant acquisition

Arkema SA raised its profit forecast for the year after the French chemical company reported better-than-expected second-quarter earnings that were boosted by the acquisition of adhesives maker Bostik.

Arkema now targets growth in earnings before interest, taxes, depreciation and amortization of 7 percent to 9 percent in 2016, the Colombes, France-based company said in a statement Wednesday. Arkema previously forecast growth for this year, without specifying how much.

“For 2016 as a whole, even though we prefer to remain cautious about the global economic environment, the excellent first half of the year supports our confidence in our ability to achieve a very good year,” Chief Executive Officer Thierry Le Henaff said in the statement.

The shares fell 0.5 percent to 75.09 euros at 9.38 am in Paris. They have risen 16 percent this year, giving the company a market value of 5.7 billion euros ($6.4 billion).

Arkema, a former unit of Total SA, has made a series of acquisitions in a bid to rely more on adhesives and coatings instead of cyclical chemicals. Last month, it unveiled the planned acquisition of Dutch sealant-maker Den Braven. This followed the purchase of Bostik for $2.2 billion, whose integration is “nearly completed,” the company said. The French company is also divesting lower-margin businesses and accelerating its expansion in areas such as thiochemicals, which are used in animal feed.

Sales Fall

Ebitda rose 6.6 percent to 341 million euros in the second quarter, the company said, beating the average estimate from four analysts of 326 million euros. Revenue dropped 7.3 percent to 1.95 billion euros, missing the average estimate of 2 billion euros. The drop was due to lower raw material and acrylic prices, divestment of its plastic and aluminium sheet distribution business and currency effects, it said in a presentation.

The second quarter was a “positive surprise,” Kepler Cheuvreux analyst Martin Roediger wrote in a note, calling the new targets “good news.”

The 485-million-euro acquisition of Den Braven will reinforce the adhesive activity and “contribute to the strong growth ambition we have for our adhesives,” Le Henaff said in the statement. The acquisition will generate at least 30 million euros of synergies, according to the presentation.

Wider Margin

Arkema’s profit-growth forecast assumes raw material, energy and currency prices are in line with the start of the year. It also plans to improve its fluorogas activities.

In the latest quarter, the chemicals maker widened its Ebitda margin by 2.3 percentage points, to 17.5 percent, a level the company said was “close to historic highs.” The margin reflects the growing share of higher-value activities such as high-performance materials and industrial specialties and the ramp-up of Bostik, it said.

Arkema plans to carry out by the end of the year a regulatory maintenance turnaround at a new thiochemicals plant in Malaysia, according to the statement.