(AOF) – Arkema has completed the acquisition of Permoseal in South Africa, a leader in adhesive solutions for DIY, packaging and construction. Permoseal’s well-known brands will complement Bostik’s offering in the region and strengthen its positions in the dynamic industrial, construction and DIY markets in South Africa and Sub-Saharan Africa.
Permoseal has a strong presence in South Africa’s distribution channels, generated sales of €43 million in 2021 and operates two production plants in the country.
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Key points
– Leading French chemist and major player in specialty materials, former subsidiary of Total;
– Turnover of €9.5 billion, split between specialty materials (adhesives, advanced materials and coatings) for 85% and intermediate chemicals (fluorinated gases, acylics) and coating solutions, with world leading positions on 9/10ths of the portfolio;
– Sales balanced between Europe (36% of sales), North America (31%) and the rest of the world – the United States, China and Southeast Asia being the three the group’s key markets;
– 3-point business model: accelerate organic growth and innovation, strengthen specialty materials through acquisitions, aim for operational and commercial excellence;
– Open capital (6% for employees), Thierry Le Hénaff being Chairman and Chief Executive Officer of the 14-member Board of Directors;
– Healthy balance sheet with €6.4 million in equity against €2.7 billion in debt and a leverage effect of 1.6.
Challenges
– 2024 ambitions, raised: expansion of world leadership positions and reduction of the cyclical bias / sales from €10 to €11 billion, operating margin around 17% and free cash generation of +40%;
– Innovation strategy serving sustainable development: €235m of R&D in 15 research centers with 200 patents dedicated to sustainable development out of a portfolio of more than 10,000 patents / incubation structure, digital laboratory focused on intelligence technology and scientific and industrial partnerships / 5 innovation platforms expected to generate €400 million in additional sales in 2024 and €1 billion in 2030;
– Environmental strategy: reduce CO2 emissions by 38% in 2030 vs. 2015 / increase the sustainable offer to 65% (vs. 51% in 2021) in 2030 and, from 2025, that of the share of sustainable purchases to 80% / deploy the circular economy, from design to recycling of customer products (10% of revenues made from recycled materials in 2021);
– Continuation of disposals to be a pure player in specialty materials in 2024;
– Proactive investment in lithium-ion batteries (€1 billion in sales expected in 2030), elastomers for sports and adhesives (purchase of South African Permoseal);
Challenges
– Inflation of raw materials and shortages in the coatings business, offset by the increase in selling prices;
– Start-up in 2022 of the factories in Singapore and the United States (bio-sourced materials and polymers) and, for 2023, of the Chinese factory (polyamide powders);
– Ongoing review of intermediate chemistry activities;
– After a good 1st quarter, 2022 objective of a slight increase in operating profit;
– 2021 dividend of €3 and share buyback program.
A second part of the year at risk
Chemical players should be faced with a scissors effect. First, they have to face an explosion of costs: experts estimate that in 2022 natural gas prices should increase by 470% and electricity prices by around 300% following the war in Ukraine. Added to this is an oil price that is also on the rise. On the other hand, their ability to increase prices should be penalized by a less dynamic economic context, linked in particular to the difficulties on the Chinese market, weighed down by a wave of confinements. The world leader, BASF, anticipates a decline of between 6% and 14% in its profits in 2022.