Arkema's Development Strategy and Sustainable Growth Goals

Introduction:

During the Capital Markets Day held on September 27, 2023, Arkema presented its development strategy for a new phase. Building on the achievements since its strategic upgrade in April 2020, the group aims to leverage industrial investments in high-value-added technological solutions. With a focus on sustainable development trends, Arkema aims to provide services to rapidly growing niche markets, accelerating organic sales growth in the midterm.

Financial Goals:
1. By 2028, Arkema aims to achieve sales of approximately €12 billion, with an EBITDA margin of around 18%.
2. The average annual organic sales growth rate is projected to be around 4% from 2024 to 2028, with an EBITDA organic growth rate of 7-8%.
3. Cash generation will remain strong, with a 30% increase in shareholder returns compared to the previous five-year period.

Sustainable Initiatives:
1. Arkema intends to obtain certification from the Science-Based Targets initiative (SBTi) for its 1.5°C decarbonization pathway, further strengthening its decarbonization efforts.
2. The company aims to achieve net-zero carbon emissions by 2050.
3. Arkema has made significant progress in improving workplace safety and promoting internal diversity.

Transformation and Expertise:
1. Since the strategic upgrade in April 2020, Arkema has transformed into a pure specialty materials producer.
2. The group's material science expertise revolves around three interrelated and complementary business sectors: adhesive solutions, advanced materials, and coating solutions.
3. This transformation has resulted in strong financial returns and enhanced structural profitability.

Market Positioning:
1. Arkema is positioned at the forefront of driving sustainable economic transformation through its high-performance innovative materials.
2. The group has acquired or established an unparalleled portfolio of technologies, enabling it to reach new heights in its development trajectory.

Strategic Drivers:
To achieve its ambitious financial targets, Arkema will focus on the following five key drivers:

1. Empowering Employees and Enhancing Customer Intimacy:
- Leverage the strength of "One Arkema" to align and empower employees while enhancing customer relationships.

2. Sustainable Innovation for Excellent Growth:
- Drive sustainable innovation in five key submarkets where Arkema has established a leading position through advanced technologies.

3. Increased Capital Expenditure:
- Allocate capital expenditure, particularly for projects such as the biobased PA11 plant in Singapore and PVDF capacity expansion.
- Explore new high-return projects in areas such as batteries, renewable energy, decarbonization, and biobased products.

4. Strengthening the Portfolio:
- Strengthen the investment portfolio through complementary acquisitions and the complete divestiture of intermediate businesses.

5. Pursuing Manufacturing Excellence:
- Focus on decarbonization and digitalization to drive manufacturing excellence.

Financial Outlook:
1. Cash generation is expected to remain strong, with a projected total of approximately €7 billion in discretionary operating cash flow.
2. Shareholder returns are expected to increase by around 30% compared to the 2019-2023 period, including stable dividend growth and opportunistic share buybacks.
3. Net acquisitions will account for half of the expenditure during the 2019-2023 period, while capital expenditure will increase by approximately 15%, reflecting inflationary pressures, decarbonization efforts, and growth-supporting projects, particularly in the battery sector.

Conclusion:
Arkema's development strategy focuses on sustainable growth and leveraging its expertise in high-value-added technological solutions. With ambitious financial goals and a commitment to sustainability, the company aims to excel in niche markets, achieve strong financial returns, and drive decarbonization efforts. By embracing innovation, empowering employees, and pursuing manufacturing excellence, Arkema is well-positioned to reach new heights and contribute to a more sustainable economic transformation.

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