Arkema S.A. (AKE) Earnings Call Transcript & Summary

Hello, and welcome to the Arkema Capital Market Day 2020. My name is Val, and I will be your coordinator for today's event. Please note this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Thierry Le Hénaff, Chairman and CEO, to begin today's conference. Thank you.

Good morning, everyone. First of all, I would like to sincerely thank each of you for joining us today in these exceptional circumstances. My hope is that you and your families are safe and healthy and will continue to be. Several of us are starting to see family members or acquaintances touched by the virus and are, first and foremost, concerned as citizens [ and leaders ] to participate in the common effort to contain the negative impact on this pandemic on the societies in which we all live and work. We have scheduled 2 hours today to provide you with a strategic update, of which 45 minutes for Q&A. With me are 4 other speakers I'd like to introduce at this stage: Marie-José Donsion, our CFO; Marc Schuller, our Chief Operating Officer; Virginie Delcroix, responsible for Sustainable Development; and Vincent Legros, the Head of Bostik. Before I dive into today's medium-term strategy update, I will start with a few comments on the current situation. I think it is fair to say that we are in uncharted territory. The current situation is fast moving and remain highly uncertain. At Arkema, our first priority around the world is to ensure the safety of our employees while working hard to continue to serve our customers and maintain our supply chain. I'm proud of how our company is handling the situation and how our people have risen to this challenge. Despite these unprecedented times, I'm confident that we will weather the storm and together emerge stronger. In these circumstances, we thought it was important to go ahead with this session, which was planned a long time ago. However, taking into account the current context and the restriction we are facing, we decided to streamline it in order to focus on the key aspects of the next phase in our transformation and organize it as a webcast. We will not have the opportunity to enter into deep dive of our businesses today. But as I know some of you would like, at some point, more exposure to our Executive Committee members, we will see how to organize such an exposure once the situation normalizes. As explained, we have planned our interaction today as a 2-hour session, including 45 minutes for Q&A in the second part. I would encourage you to focus your question on the medium-term strategic transformation, which is today's topic and which we believe will drive a lot of value over time as opposed to the current environment. With this in mind and before moving on, let me first shed some light on our response to the COVID-19 situation. Our first focus today is on protecting employees. To this effect, we have created dedicated crisis management cells centrally and in each region as well as must-dos that are strictly implemented at each of our sites. At the same time, Arkema is managing the situation with determination and creativity to ensure the continuity of our activities and operation with this constant focus on our employees and business partner safety. Our teams are fully mobilized and are taking actions to ensure the continuity of our operation, the service to our customers and the resilience of our supply chain to limit the overall effect on our business. The impact on our Q1 EBITDA is estimated between EUR 40 million and EUR 50 million. It is too early at this stage to have visibility on the full year impact given the extent of the various impact on global economy and the significant level of uncertainty concerning demand. Another key focus is cash management. We are fortunate to have maintained over the years a solid financing structure which will allow us to get through this crisis and retain a strong balance sheet. Our net liquidity currently stands at EUR 1.5 billion at the end of the Q1 2020, including an undrawn RCF of EUR 900 million. We are focused on cash generation and cost reduction, and we are rapidly taking initiative across all levels of the organization. From a financial standpoint, we are in the enviable position of having refinanced our next 3 years' maturities already. In this context, while recognizing that the midterm consequences of the COVID-19 crisis are difficult to evaluate at this early stage, we are confident in our ability to go through the current turmoil safely and exit in a position of strength. Taking now a step back from today's turmoil, I would now like to focus on the medium term starting with our vision. So you can follow the slide in the presentation starting from Slide 6. When Arkema was spun off in 2006, we already had a very clear vision of the company we wanted to become, a pure specialty materials leader. This meant we had to fully implement this vision we had in mind as the Arkema of 2006 was a very different company back then. We have undertaken a very profound transformation by reshuffling our portfolio, streamlining our organization and building on our areas of strength. Over the past 14 years, we have gotten used to presenting ourselves in reference to the Arkema that was spun off from Total in 2006. But with our transformation now largely advanced, we thought it was time to present Arkema now in accordance with the vision we are working towards. This is the Arkema we want to introduce today. The Arkema of our vision, a pure specialty materials leader focused on innovation and sustainability for materials solutions. We believe in this vision from the start as it addressed the fast-growing demand for innovative and sustainable new material. Today, this trend is accelerating, fueled by new mobility solutions, urbanization, stronger environmental pressure and new technologies such as 3D printing. It becomes our driving principle. Customers need materials that are light, based on renewable resources, recyclable, highly technical. Today, Arkema is exceptionally well positioned to meet these challenges through our unique capabilities in material science. Over the past years, Arkema has built a unique offer of solutions, thanks to the depth and range of its materials capability it has developed or acquired along the way, in particular how to bond materials; how to substitute traditional materials, for example, by purposing lightweight or bio-based alternatives; how to protect and cut materials. All these capabilities are built on a deep knowledge of material science, combining strong expertise in polymerization, formulation and application know-how. This expertise is at the heart of what we do at Arkema. It allows us to create tailor-made and innovative solutions for customers in the most demanding industry such as in electronics, aerospace or automotive. We organized this bonding, substituting, protecting materials capability into 3 highly coherent and synergistic growth platform centered around material science: Adhesive Solution, Advanced Material and Coating Solutions. Together, they are the 3 pillars of Arkema Specialty Materials vision. The combination of these 3 platforms is totally unique in the chemical industry. It brings synergies and outstanding benefits in innovation, operation and on the commercial side. The combination also provides us with a differentiated ability to serve our customers across attractive and diversified end markets. In 2005, our 3 platforms represented around 50% of Arkema's sale with the rest being a mix of intermediates with a limited link between them, mostly regional businesses and with no real leadership positions. Since then, we have worked hard to transform our portfolio so that today, these 3 platforms represent close to 80% of Arkema's sales, the remainder coming from selected intermediates in which we hold leadership position. To achieve this transformation, we have conducted a series of strategic M&A transaction, acquiring and divesting assets at the right time in order to advance our strategy while maximizing value creation. Over time, around 40% of Arkema's 2006 activity were divested in attractive social and financial conditions, and we have acquired twice as much in revenues, EUR 4.4 billion, to strengthen our Specialty Materials portfolio. A key step in this process was the acquisition of Bostik in 2015. This major move was then completed with several technology-driven, bolt-on acquisitions. We also significantly expanded our positions in Coating Solutions, notably in high-value-added acrylic downstream businesses such as Sartomer and Coatex. These acquisitions generated long-term value for Arkema and its shareholders in 2 ways. First, they made the group stronger, boosting growth and making it more resilient. Second, through optimization and synergies, it generated returns in excess of our cost of capital. Beyond portfolio transformation and thanks to the strong engagement of our employees and management during this entire journey, we have strongly improved our performance across 5 dimensions. We rebalanced our geographic exposure. The U.S. and Asia now account together for 60% of our sales versus less than 40% in 2005. We developed a superior pipeline of innovations dedicated to sustainability through an incubator structure, which was instrumental in developing outstanding breakthrough products such as: recyclable Elium resin used in wind turbine blades; our extreme polymer, PEKK; our bio-based ranges; our piezoelectric fluoropolymer that can be used to create smart material for electronic devices or hydrogen tanks; and many others. We combined the efficiency of central functions that unlock economies of scale and infuse state-of-the-art expertise into the businesses with a strong accountability and execution power of the business line. In a similar way, we empowered the business line and created 5 years ago a central corporate social responsibility organization. Our commitment to sustainability is tangible both internally in the way we manage our activities and externally in the innovation we bring to market to support our customer sustainable performance. Last, but not least, we delivered outstanding improvement in all aspects of our financial performance. Even taking into account the recent severe market correction relating to the challenging economic environment, we generated total shareholder returns over the period at the top of our peer group and consistently and significantly increased the dividend over the period. Today, Arkema is a stronger and balanced company both from an end market and regional perspective. We have 20,000 employees worldwide and operate close to 150 plants across 55 countries. Today, I am pleased to announce that we have decided to align our business structure with our vision as we enter the next step in our transformation journey towards a pure specialty materials player. Since adhesives has now become a major growth platform for Arkema and we now clearly see the benefits from our acquisition, we have decided to report Bostik results separately. This will address the market feedback we received regarding increasing transparency on this business to better monitor its progress. Advanced Materials will continue to combine our High-Performance Polymer and high-Performance Additive, which bring unique functional properties both to materials and processes for materials. This description obviously also applies to Thiochemicals and Hydrogen Peroxide. It, therefore, fully makes sense to include these 2 specialty lines with our Performance Additives. Sartomer is now in Coating Solutions because it is a unique downstream acrylic technology, and this is also consistent with the way our peers report. The full intermediate components of Arkema have been grouped in an Intermediates division. Beyond PMMA and fluorochemicals, which you already know, we have also included our Acrylic Asia (sic) [ Asia Acrylics ] monomers business, which is not yet vertically integrated. Such a presentation will actually better isolate the impact of our volatile businesses. This new business reporting structure is now clearly aligned with our division and provides additional transparency on our business. It will be implemented from Q1 results. We have included in the appendix a description of these reporting changes as well as an overview of the Executive Committee, which includes 3 new members: Richard Jenkins for Coating Solutions, Marie-Pierre Chevallier for Performance Additives and Erwoan Pezron, who will lead High-Performance Polymers. These new members will report to Marc Schuller. As you can see in Slide 21, the Specialty Materials platforms provide strong resilience to our business while Intermediates can have higher profitability but more volatility through the cycle. Beyond their resilience, the Specialty Materials share a pattern of robust historical growth. This illustrates our ability to use this platform as an engine for growth. I believe the distinction we now make between our Specialty Materials and Intermediates will answer a need for clarity regarding our vision for the future and illustrate our commitment to make Arkema an attractive investment for investors. We have strong leadership position in each of the platforms, and we are unique in so far as we are the only player to have such a leadership position across all 3 complementary businesses. The combination of these 3 platforms is highly synergistic as it is based on a common backbone of materials capability. This backbone has 2 key trends. First is the ability to design and formulate tailor-made polymers. This creates significant synergy, thanks to similar manufacturing expertise, common raw materials and joint cutting-edge innovation. This strong innovation is key in our ability to multiply the opportunities for us, whether that is to help our customers design the new generation of sports equipment, create tailored additives for mining process or an ultra-durable coating for reusable bottles. Second are the shared end markets such as automotive, aerospace, new energy, water, consumer goods and paints, which provide us with unique opportunities to leverage our application expertise and create tailor-made solutions for our customers' material needs and challenges. To reinforce our customer centricity, we have been increasingly organizing our business around key account managers who can unleash the full strength of our 3 platforms and identify cross-selling opportunities. Going forward, we expect our 3 platforms to see GDP-plus growth, supported by well-identified social trends, such as lightweighting, energy efficiency, urbanization, which all increase the demand for new technical material. Rather than a long speech on these trends, we now provide you with 4 concrete examples of how our 3 platform come together to capture high-growth opportunities. The first example is lithium-ion batteries. This is 1 of the 6 core R&D platform where we have developed deep application knowledge and we are now recognized as a leading provider. We are present both on the outer side of the battery to strengthen and bond the casing as well as inside the battery with our fluoro-based solution for separators, cathode bonding of high-purity electrolytes, all contributing to improving the performance of battery through increased energy efficiency or shorter charging time. Another great example is 3D printing, where we have developed remarkable capability through our global innovation centers and strong partnership. Today's 3D printing represents a market in materials worth about $1.1 billion. 80% of this amount is polymers, which are expected to grow at around 20% per annum over the next 5 years. They represent a large addressable market and a significant growth potential for Arkema. The group has one of the largest and most differentiated offerings of 3D printable materials in the industry adapted to all 3D technologies. These materials include polymers with extreme properties such as PEKK and PVDF as well as bio-based specialty polyamide or UV curable resins. All these advanced materials can be used in multiple end use market, transport to health and beauty to automotive and aeronautics. In the context of COVID-19, we are developing with our partners 3D-printed powder based on polyamide 11 to be used in frames, adjustors, connectors for respirators to help patients in the fight against COVID-19. Finally, Arkema is technology agnostic and provides material regardless of the equipment used by our customers. This explain why we are in contact with all machine producers and have strong partnership with recognized leaders in 3D printing such as HP or Carbon. The world needs extreme materials, and weight reduction is a common theme across many different industry, from aeronautics to automotive and from oil and gas to consumer goods. I will outline 2 examples. In aeronautics, weight reduction is achieved, thanks to metal replacement by high-performance polymers, such as our PEKK, combined with innovative composite technology. In the aircraft interior, our PVDF foam are replacing metal in functional parts like ducts or window seals. The spot market is already looking for ways to improve performance. Our new Pebax foams are very light while delivering 30% more energy return than any other solutions, causing the world's best athlete to use running shoes or soccer shoes containing Pebax as in the last World Cup in Russia. Finally, we have built a unique range of capabilities and solutions for the construction sector, where all our materials come together to build, to protect, to decorate their homes and buildings. Adhesives and coatings are found everywhere in the house, from waterproofing sealants to ingredients for decorative wall paints, and they continue to be a driver of innovation as energy efficiency standards and customer requirements increase. Moving now to our Intermediates. They are a set of robust businesses with solid across-the-cycle profitability, strong cash generation, leadership position in each of their market. Their financial performance is also more volatile than the rest of our portfolio. Our PMMA products are well positioned on the trend towards sustainable material with strong market position in Europe and the U.S. and room to grow in Asia. They are in the middle section of the materials pyramid I showed a few pages ago in the presentation where our High-Performance Polymers feature at the top. We are a leader in fluorogases and have unique proprietary know-how in new growth areas such as ultra-high-purity electrolyte salts for batteries and fluorochemicals, which are vertically integrated with our coatings and Advanced Materials platform. The refrigerants and coolants currently still form the larger majority of our Fluorogases business. They are more volatile and do not fit in the long-term corporate social responsibility vision of Arkema. Our position in acrylics in Asia is strong but so far not vertically integrated with the downstream coating business, in contrast to our European and North American businesses, which is why it is currently considered as an Intermediate. As shown in Slide 30, we are now ready to take the next step in our transformation towards becoming a pure specialty materials player. It is our ambition to reach EUR 10 billion to EUR 11 billion in sales by 2024 with sound organic growth and resilient group profitability, with an EBITDA margin of around 17%. To achieve this, we will focus our investment and efforts on growing our Specialty Materials activity, both organically and through M&A, while increasing their combined EBITDA margin, net of corporate costs, from 15.8% last year to 17% in 2024. In parallel, we will progressively reduce the size of our intermediates as we implement a differentiated strategy across this Intermediates business line detailed later in this presentation. Our objective is clearly to be a 100% specialty materials player by 2024. This next step is supported by 4 levers, which have been central to our transformation so far and will remain so. We will accelerate organic growth and innovation building on the expertise of our 3 complementary platform. We will further strengthen the businesses through bolt-on M&A, in particular in additives. We will push further our commercial and operational excellence initiatives, and we will achieve best-in-class corporate social responsibility performance. For each platform, we have set clear ambition supported by a strategic plan. For Adhesives, we want to increase organic growth revenue from 2% historically to 3% and increase EBITDA margin by 300 bps to 16%. Bolt-on M&A will also be an important lever to accelerate the growth of Bostik. In Advanced Materials, we aim at achieving 4% organic top line growth through a combination of innovation and capacity expansion while keeping EBITDA margin stable at a high level of around 22%. For Coating Solutions, we target to increase organic growth from 1.5% historically to 3% while also improving EBITDA margin by 150 bps to 16% through an enhanced product mix and notably a differentiated, sustainable offering. Let me now hand over to Vincent Legros, our Head of Adhesive Solutions; and Marc Schuller, our Chief Operating Officer, to give you more details on the growth plan for each of the platforms. After this, Marie-José, our CFO, will go through the cash allocation priorities and other financial element.

Thank you, Thierry, and good morning to everyone. Since we bought Bostik 5 years ago, we made significant progress. Sales increased on average by 6% every year. EBITDA on average increased by 11% every year, resulting in an improvement of the EBITDA margin that went from 10% to 13%. Our ambition is to continue on this path forward and to achieve another step change in size, operational excellence and financial performance. Over the coming 5 years, we plan to grow our Adhesives business by high single digit annually, 1/3 of this growth being organic and 2/3 of this growth being through M&A as the market remains fragmented and there are many opportunities. We will focus our development on 2 areas where Bostik has strong positions: firstly, high-performance adhesive for industrial assembly, supported by the need of lightweighting and sustainability; and secondly, construction, where we focus on 3 attractive segments, ceiling, flooring and DIY, do-it-yourself, supported by new environmental legislation and strong growth in emerging countries. As the rationalization of our portfolio comes to an end, we aim to increase our organic growth to 3%, which is in line with our peers. We also plan to carry out 2, 3 bolt-on M&A per year, consistent with what we have done over the last 4 years. And additionally, we may consider a couple of midsized acquisition. These acquisitions will again be selective and chosen for their technologies and their potential of synergies. Beyond this plan, we plan -- beyond this growth, also we plan to launch the Phase 2 of our operational excellence program, including a new step in the rationalization of our sites. And alone, this initiative in cost reduction should bring 1 percentage point of EBITDA margin and will thus contribute materially to our overall ambition to improve our EBITDA margin by 300 basis points up to 16% by 2024. I will now turn it over to Marc Schuller, who will give you more details on our strategy for Advanced Materials, Coating Solutions and Intermediates.

Thank you, Vincent. Good morning, everybody. Our Advanced Materials platform consists of our High-Performance Polymers and Performance Additives and is innovation powerhouse due to the exceptional range of products, diverse end market and deep application knowledge. This platform is the most exposed to the trend towards sustainable material through lightweighting, electric mobility and CO2 reduction technologies but also has a large range of bio-based compounds and processes such as specialty polyamides based on castor oil or our unique bio-methionine process in partnership with CJ in Malaysia, which uses an environmentally friendly fermentation process based on raw sugar and grape sugar. The strength of this platform resides notably in our customer intimacy and our breakthrough innovation. It, therefore, has the highest R&D intensity, reaching up, for example, to 7% in our fluoropolymers. Interestingly, in the current context, we see many of our products contributing to the fight against COVID-19 such as new types of masks containing nanofibers of our Kynar PVDF in the barrier layer to improve filtration and durability properties; or our Nitroxy molecule sieves, which feature in respiratory devices to absorb nitrogen and provide high-purity, oxygen-enriched air. This anecdote aside, we now have the conditions to accelerate our growth to 4-plus percent through a combination of additional capacity under construction and rapid acceleration of our innovation in fast-growing market opportunities. Allow me to highlight a few examples of our initiative to drive growth. We're expanding our capacity for bio-based, high-performance polyamides in Asia with numerous applications ranging from lightweight design of glasses to high-temperature, under-the-hood application or even materials for hydrogen tanks with unequal burst and fatigue resistance. We're ramping up the production of our extreme polymer, PEKK, in the U.S. and have set up a collaboration with XL to develop next-generation composites for aerospace, in line with our philosophy to invest in the region where our customers are growing. Our Performance Additives have been reinforced by Thiochemicals and Hydrogen Peroxide and will continue to solve critical customer needs in their processes. For example, Carelflex, which is a thiochemical used as a presulfiding or anti-cooking agent in oil and gas refining; Luperox, our organic peroxides that can accelerate and optimize polymerization processes; the unique value proposition of ArrMaz to produce tailored surfactants for oil and gas and mining processes such as phosphate production in order to increase yields. We work side by side with our customers to develop the ideal additive for their process, including frequent in-front process consultations and joint R&D. While our base plan is based mostly on organic growth, we will keep our option open for potential M&A, particularly in High-Performance Polymers. Our Coating Solutions have made solid progress over the last years, increasing margin from 12% to 14% by enhancing our mix and optimizing our asset base. Our ambition for 2024 is to accelerate organic revenue growth from 1.5% to 3%. This will be achieved through the combination of an enhanced presence in Asia where Coating Solutions is currently still underrepresented in a fast-growing market and the launch of new products answering our customers' need for sustainable and innovative solutions. In other words, with the asset optimization in the mature regions coming to a conclusion, the demonstrated growth rate of our remaining ongoing businesses will continue. Example of recent capacity additions in faster-growing economies includes addition of capacity in India, Malaysia, Brazil and China. We also plan to increase EBITDA margin by 150 basis points to 16% through operational efficiency measures and by reinforcing our sustainable offering, low-VOC formulations such as auto coating, UV curing and water-based emulsions as well as our range of bio-based compounds for coatings, which is a strong differentiator for Arkema. 3D printing solutions from Sartomer, Coatex thickener, an additive for MS sealants, are examples of high-margin new products that are outgrowing the market and improving the mix. Finally, we will optimize our operating model by further integrating acrylic monomers, which contributes to a stronger resilience of this platform and our competitive advantage. The inclusion of Sartomer in the Coating Solutions platform will also further strengthen the cohesion between our different coating technologies and the cohesion with the other platforms. We will start reviewing options for our PMMA, Fluorogases and Asia Acrylics business. In today's context, we will not rush any decision but assess and implement the next steps in a thoughtful and disciplined manner in order to optimize the future of the businesses and the respect of the social and industrial dimensions as well as maximize their value. For PMMA, we will review strategic options, which includes a potential sale of the business. Our assets are strong, but the cyclical nature of this business and its position in the middle of the materials pyramid does not fit in our midterm strategy. We will soon be starting that review, but the decision-making process and implementation will, of course, have to take into account the evolution of the global economy following the impact of the COVID-19. For Fluorogases, our strategy is organized around 3 priorities: supporting the strong growth of our own fluoropolymers and continuing to reinforce the competitiveness and the security of our upstream; accelerating innovative fluoro-additives for electronics, batteries and other fluorochemical specialties; investing -- investigating the options, which may be partnerships or merger and global or local, for the emissive application, which means refrigerants and coolants. This product, which represents a larger portion of our Fluorogases business, around 2/3, by their emissive nature and their inherent volatility linked to the regulatory environment despite their strong profitability across the cycle will fit less with the midterm strategy of the group, and we're not necessarily the best owners. Finally, for acrylics in Asia, the approach is different. We built a very competitive platform of acrylic monomers in Asia in the past years. But we have 2 challenges. Our exposure to monomers is too high for the long-term need of the group, and the downstream integration is still to be built. The objective is then to better balance our upstream and downstream capabilities by implementing industrial partnership for our upstream monomers and doing in Asia what we did in Europe and the U.S., which is to reinforce our downstream by organic growth and through selective bolt-on acquisitions. Once these strategies are executed, the remaining non-emissive specialty fluorochemicals in Asia Acrylics business will be integrated in our Specialty Materials platform. I'll now hand it over to our CFO, Marie-José Donsion. Thank you.

Good morning, everyone. Allow me to now go over our cash allocation priorities for the coming years. We are currently going through exceptional times, as you know, so our cash allocation guidelines can only be best estimates at this point. We will keep a cautious approach in 2020 to weather the current crisis. As shown in the chart on the Slide 36, Arkema have defined 3 key cash allocation priorities: exceptional growth CapEx, selective acquisitions while continuing to prune our portfolio and shrink our exposure to intermediate chemicals and increase return to our shareholders. To achieve these priorities, our 2020-2024 plan yields significantly higher cash generation compared to the last 5 years. Based on the current leverage of 1.6x net debt to EBITDA, we anticipate an increase of 25% of cash available to allocate compared to the previous 5-year period. This will allow Arkema to further increase its returns to shareholders. Let me take you through each priority in turn. So first, we will continue to invest in exceptional high-return organic growth CapEx. The major part being represented by the bio polyamide 11 capacity expansion in Asia. We are looking at a total EUR 450 million investment started last year in a greenfield facility that should be completed by 2022 and progressively ramped up over 4 years, reaching a EUR 100 million annual EBITDA contribution at maturity. Our financial discipline is key as an investment criteria in selecting these projects, and we continue to target an internal rate of return after tax above 15%. Then we will continue to put a strong focus on the portfolio transformation to complete the shift to Specialty Materials. The proceeds of divestments of our Intermediates businesses will be reinvested in acquisitions. The priority remains on Adhesive Solutions as we plan to make 2 to 3 annual bolt-on acquisitions for Bostik. We would also potentially consider larger targets. Other bolt-ons may be considered on the other platforms in a very selective way. Yet here again, we will maintain our disciplined financial criteria, screening for targets with strong growth potential and synergies with Arkema. Our target there is to bring down the EV-to-EBITDA ratio after growth and synergies down to around 7x after 4, 5 years. This is fully consistent with what we have achieved in the past. Finally, we are committed to increasing returns to shareholders through dividends, and we propose an opportunistic share buyback when appropriate as a complementary element as shown in the slide. We reiterate our progressive dividend policy with a target of reaching a 40% payout ratio by 2024. We intend to retain our net debt-to-EBITDA ratio around 1.6x, including hybrids, allowing for some occasional flexibility, but not to exceed 2x EBITDA. We believe these allocation priorities are well balanced and fully consistent with our strategy. Of course, our approach is to remain nimble and flexible over time, depending on market conditions and opportunities. On the following slide, we would like to reiterate the key ratios which will continue to define our financial discipline framework: a stable return on capital employed at group level above 10%; a net debt-to-EBITDA ratio below 2x with net debt, including our hybrid bonds; a solid investment-grade rating; recurring CapEx at about 5.5% of sales; and controlled working capital remaining around 14% of sales. I'd like to say, in addition to this financial discipline, Arkema has put a strong focus on corporate social responsibility, delivering material improvements on its nonfinancial indicators and building an ambitious road map for the future. Let me introduce Virginie Delcroix, our CSR Director.

Thank you, Marie-José, and good morning, everyone. Arkema is committed to improve sustainability across its entire value chain together with our suppliers, our partners, employees and customers. This commitment has translated into many initiatives over the years, ranging from responsible sourcing to our strong record on improving safety and diversity for our employees. In the interest of time, I will not mention all our ongoing initiatives and targets at this point, but let me take the opportunity to highlight 2 of our ambitions for the coming years. The first one is being recognized among the best CSR performers. Today, we are ranked as top quartile by all major rating agencies. And based on the most recent publication from Vigeo-Eiris, Arkema ranks #4 among 38 international chemical companies assessed. Building on this, we aim to integrate the Dow Jones Sustainability Index in the near future. The second ambition is the assessment of our sales portfolio regarding the contribution to United Nations Sustainable Development Goals, called SDGs. We use a methodology which is aligned with the WBCSD guidelines. End of 2019, 44% of our portfolio had been assessed, showing that 46% had a significant contribution to SDGs. We aim to cover 80% of the sale portfolio by 2020 and to increase the share of products with significant contribution to SDGs longer term. Let's now take a closer look at our climate and environmental commitments. In 2018, Arkema reached well in advance 3 of its 2025 targets: the greenhouse gas emissions, the volatile organic compounds and the chemical oxygen demand. Rather than stop there, we took the opportunity to set even more ambitious new targets. For the climate, we are committed to the Paris Agreement and the Science Based Target well below 2 degrees heat trajectory. Concretely, we target to be below 3 million tons CO2 equivalent by 2030, a further 38% reduction compared to 2015, after having already reduced greenhouse gas emission absolute values by 37% since 2012. Our action plan includes process optimization as well as breakthrough technologies, energy consumption reduction and energy mix evolution towards greener energy. Arkema's financial and nonfinancial performance would not have been achieved without its more than 20,000 employees. Given the highly technical nature of our businesses, developing expertise and maintaining a high level of engagement is key to meeting today's and tomorrow's business technological, social and environmental expectations. For that, our 4 shared values of performance, accountability, solidarity and simplicity guide our actions across the whole organization and the way we interact with our partners, developing our employees individually and collectively, providing equal opportunities and promoting diversity of daily management actions. We encourage individual creativity and initiative at work as well as in philanthropic actions. Through the Arkema Fund for Education created in 2016 for the 10th anniversary of the company, we support employees' actions across the world. Arkema's employees' engagement and confidence in the group's development is visible in the 80% of active engagement and in the 6.3% shares they own, making them one of the company's leading shareholders. Let me now give the floor back to Thierry again, who will close the call today.

Well, thank you, Virginie. So we've heard a lot in the last hour, and we have reached the end of this presentation. So before starting the Q&A session, I thought it was important to recall the essential points of our strategy as we now enter a new phase for Arkema. As I said at the beginning, first, we are currently focused as all of us are managing the effect of the macro crisis created by the development of the COVID. And as I told you, we are confident to go through this COVID crisis and to exit in a position of strength. But it is also important, and this is why we are here today together, to keep a focus on where we want to take the company medium term. So I was pleased to have this opportunity to share today our vision with you. What is this vision? This vision is to become a pure player in specialty materials. We want to manage this transition with speed and with determination. This vision is now a reality about to become effective. Actually, it implies a further significant transformation of our portfolio, including organic growth from innovation and higher-growth countries, bolt-on acquisition and further important disposals in the field of intermediates. The current context makes it difficult to evaluate the execution parts and calendar, but we are determined, as you know, and we will work on it with strength once the turmoil is behind us. By 2024, we will be a true specialty materials leader with a much simpler and current portfolio characterized by sustained growth, resilience, high profitability, balanced cash allocation. The Board, Executive Committee and I, together, are totally committed to and confident in this new next phase and the value it will generate for employees, our customers and our shareholders. With this in mind, I want to thank you for your attention, and let me then turn it over to your questions. Thank you.

[Operator Instructions] The first one comes from the line of Matthew Yates from Bank of America.

Thank you very much for going ahead with the presentation today under, of course, [indiscernible]. You've presented a very ambitious plan there, essentially addressing about 20% of the portfolio. But can we get a sense on time frame here? If you've got data rooms already open, have you started having conversations with people? And the second question, perhaps for Marie, the -- on Slide 37 around the cash allocation priorities. I'm just a bit confused in my own mind on the buyback. You are, I think, suggesting that any disposal proceeds will be used for M&A rather than buybacks. Have I got that right? Or is there a balance there in terms of also using some of the proceeds for an opportunistic buyback?

Okay. So I will take the first one. And maybe, Marie-José, you take the second one. With regard to -- if we go to Slide 36 first, which was, I think, very useful. With regard to the disposals, clearly, if you go to Slide 36, if we can put it back or -- sorry, here with the team because technically, it's more complicated in the current organization. Okay. So clearly, if we -- let's spend a few minutes on this Slide 36, which is one of the key elements together with organic growth and the bolt-on acquisitions. So clearly, the base plan for MMA/PMMA is disposal, as we mentioned and Marc mentioned. Clearly, in the current context, which is quite complicated, this kind of discussion don't happen. It's obvious. People have -- including ourselves, have other focus, which is quite necessary. Clearly, with regard to contacts, contacts in the industry, since we started and in the recent years, we have always have. I think we are quite known in the industry, and we have a lot of partners, contracts and everything. So we have that. After that, we are -- as I mentioned in conclusion, we are determined. After that, we have to wait up until the crisis is behind us. And this, in terms of timing, which is your question, start with that. When does this crisis finish? And everybody can have a different opinion. But what is clear is that when the word normalize and people come back to normal activities, then it will be time to explore steadily this topic. With regard Fluorogases, you have understood that we have 2 different business in nature. You have the first one, which is specialty segment on Page 36, which is the upstream of our fluoropolymers, which is very important. We need to continue to improve the competitiveness, but it's a very solid asset, as in unique in the segment -- unique in the industry. And we have also a lot of potential in fluoroderivative electronics and batteries. This is a minority part, the specialty segment, EUR 200 million. This one will be back one day once we have executed our strategy back to specialties. But the rest, which is, I would say -- on which we have a strong position, but which is not corporate social responsibility-friendly, which is more volatile, on which we have a lot of partnership, I think we are one of the most known actors in the segment, I think, clearly, we will see what are the possibility and the option for the segment, but which is not midterm fitting our strategy. After that, in terms of what are the option, will it be global option, will be optioned by region, for me, it's more with industrial partners. So I think we need to dig more. And again, in the current period, this kind of discussion cannot happen. So it will have to start after when the strategy -- when the crisis is behind us and then we restart the contact. Now I can pass it over to Marie-José on the question on the cash and the M&A buyback.

Yes, sure. So I think, first of all, I think it's important to emphasize that we indeed included the share buyback in our cash allocation priorities, which I think is a change from what we have done in the past, and I think it clearly reflects our ambition to increase the return to shareholders. There is no direct correlation between the source of the cash and the allocation of the cash. So we said the buyback will be opportunistic, obviously depending on the market conditions and on the cash situation of the company. We cannot give an exact timing and size at this moment. And obviously, the current context of uncertainty caused by the COVID-19 crisis doesn't really -- it doesn't really make sense to have this short term.

So sorry, Marie, just to be absolutely clear. In theory, we could have had an additional bullet point, therefore, on the return to shareholder bucket to also talk about proceeds from the strategic review. Is that correct?

Actually, the proceeds from the strategic review are within the M&A bucket, where you see a net cash allocation in terms of M&A.

I understand. But are you already now using any of those proceeds to return capital to shareholders?

There is no direct correlation, as I said, between the proceeds and the allocation of cash.

Our next question comes from the line of Laurent Favre from Exane.

I've got 2 questions, please. So the first one is on the Adhesives targets, 3% organic growth, 3% margin improvement. I think -- I mean this is more ambitious than what we have seen since Bostik came into the Arkema portfolio. I was wondering if you could tell us a little bit more about where you see the biggest levers, I guess, to get that margin improvement or in the organic growth. And to what extent are you assuming that you could see margin improvement from acquisitions of structurally higher-margin businesses in adhesives? So that's the first question. And the second question -- sorry to be a bit thick this morning. On the 2024 sales target of EUR 10 billion to EUR 11 billion, what exactly is included in that EUR 10 billion to EUR 11 billion when we think about the Intermediates businesses? Should we assume that all of the 3, I guess, asset bases that you've identified out, i.e., the nonstrategic part of fluoro, Asia Acrylics and MMA/PMMA? Sorry if I'm just being a bit thick today.

Okay. Okay, Laurent, for your 2 questions, on the first one, we'll start the answer and maybe Vincent can complete. In fact -- first of all, thank you for recognizing that they're ambitious target. You know that we started at Bostik with a low point, 10.5%. And we had many questions at that time. But we say that it's good because then we have an upside for improvement. And then this would mean that the full journey will be from the start 10.5%, today, 13% and 16%. So it's quite significant. With regard to the organic growth, it's clear that Vincent and his team have spent a lot of time restructuring the portfolio, which means it has -- weighed down the organic growth, but I told them to focus on better mix. And so you had an increase of EBITDA percentage, EBITDA in value, but lower than GDP organic growth. But the Adhesive business is a type of GDP plus because of replacement of mechanical fasteners by adhesives. So 3%, I think, is a good and solid target for Vincent and his team. And regarding the 3 points of increase in margin from 13% to 16%, I would say, 3 parts. 1/3 is coming from operational excellence, and Vincent and his team are working in sort of Phase 2 of this operational excellence plan. The second one is product mix. And the third one, third part is the benefit of acquisition with -- normally, we focus on acquisition with high margin. And on top of that, you add the synergies. So it helped to increase the EBITDA margin of the overall, as it has been for competitors. We are not the only one to do that. This is a very fragmented market, and there is opportunities to get bolt-on acquisition at high margin with strong synergies. Maybe, Vincent, you can complete before I move to the target of EUR 10 billion, EUR 11 billion and what does it mean for Intermediates.

Yes, thank you, Thierry. I'm fully in line. I think it's difficult to complete, but just to support. I think in term -- we have restructured our growth platform through the 2 growth platform in construction that I described, the sealing and bonding, flooring and DIY. And we do it also in high-performance materials in synergies with Arkema, which are now starting to ramp up. So we think this growth platform are in place now, are in place to be global. They benefit also from the M&A we've done. So the growth will come and the growth will come also in synergies with Arkema. Therefore, it will contribute also to the improvement of the EBITDA percentage. We still have room also to work on our operational performance, like I described in my speech, and this will give one point of EBITDA. And M&A, we are looking for M&A, which in potential have higher EBITDA margin than the average of Bostik, but also which have a strong potential of synergies. And in the last 4 years, we -- through M&A, we've generated more than EUR 50 million synergies. And so we have that capability to improve also the company we purchased. And therefore, we are quite confident we can reach the 16% EBITDA.

Thank you, Vincent. So if I go again to this Slide 36, hopefully, we'll not spend the whole Q&A on this Slide 36, but I recognize it's an important one. So not debating against execution, which is, as I mentioned, pretty much linked to the exit of the COVID-19 crisis and the normalization of the situation for all of us, clearly, if you look midterm '24, which is your question, Laurent, so MMA/PMMA, the base plan would be that it has exited. With regard to Fluorogas, we are talking more on the emissive application. We are talking, in fact, focusing for what is disposal on emissive application, which is air conditioning, refrigeration. You know that in terms of scope 3, their level of emission is quite significant. So it's completely consistent with that corporate social responsibility. And in terms of volatility, the specialty segment is quite stable, the 0.2 which is mentioned on the slide. But the emissive application are, in fact, also quite volatile. So this would be this part. And then with regard to Asia Acrylics, it's a completely different matter. It's not a matter of disposal. It's a matter of balance between the upstream and the downstream. As you know, for obvious reason, we wanted to have an acrylic monomer, which is really the backbone of the acrylic downstream. We wanted to have a site in each of the 3 regions. So the best -- in terms, of course, the best approach was to purchase a site in China finally, last year, for very modest sum. So in terms of return on capital employed, it will be quite good in the coming years. We bought the share of our partner. But now the conclusion is that we have too much capacities for what we want in order both to supply our downstream and to supply our long-term partners also. So it's a matter of rebalancing. So rebalancing means 2 things: first, to reduce our upstream exposure, but it will be -- it's more a matter of partnership, capacity reservation. There are plenty of possibilities than any disposals. So maybe a little bit of that can be reduced in the 2024 figure, but it's more incremental compared to what we have discussed before; and on the other side, we want to reinforce the downstream, which will come from organic development. You know that Sartomer, for example, has expanded in China and will continue to expand. So it's not the end of the story. And also bolt-on acquisition, you know that at the beginning of Arkema we made acquisition like Sartomer, like Coatex, so medium-sized acquisition, and it's a way also to reinforce. So at a certain point, this Asia Acrylics, which is really a starting point today, will be completely restructured and will be a base to be integrated in specialty, so maybe not the full of it, but a part of it. So I think with all these comments, I think you have and the auditors, I think, have a good understanding of what could be the estimate. But what is absolutely clear, and this is our determination and we have a lot of ideas for that, Arkema in 2024 will not be 80%, will not be 90%, but will be 100% materials, specialty materials company, which will be not the end of the story by definition, but really the end of this journey we started 15 years ago to become a pure specialty player and a pure specialty materials player. And we are really engaged committing and will -- once the crisis is behind us, we will move rather quickly on the whole scheme.

Our next question comes from the line of Mubasher Chaudhry from Citi.

I just had the 2, please. First of all, I just wanted to understand the growth drivers in the business a little bit more. So taking the midpoint of the EUR 10 billion to EUR 11 billion at about 17% implies about EUR 1.8 billion of EBITDA, which is about 8% per annum to 2024. So could you help us quantify how that growth is split between organic and inorganic? And also -- and then related to that is for the Intermediates. You talk about the Asia Acrylics and the non-emissive parts of Fluorogases coming back into the specialty materials. Are you able to provide what EBITDA levels of those businesses are? Just trying to understand the genuine EBITDA growth of specialty materials from today versus an intercompany transfer. That's first question. And then the second question is on the opportunistic purchase of shares. What are the triggers that would allow that to happen? I mean, arguably, the share price is -- share price does look of good value at the moment. So I just want to understand the thought process around the possibility of a share buyback not announcing an outright share buyback.

Okay, Mubasher. So on the first one, I will start to answer, but I would like that Vincent and Marc give you some -- the opportunity to give you some elements of how they see their growth driver for their businesses. I think it's important. But basically, and this is a strategy of Arkema, we try to be balanced between organic and external growth. So you can -- you will be able to make the math because now you understand what could be disposed. So you have a net of the organic standpoint of what starting portfolio, excluding what could be disposed, and then you see the end points. So depending on which end point you take, EUR 10 billion or EUR 11 billion, EUR 10 billion must be more or less balanced between growth and -- organic growth and external, but if you go to EUR 11 billion, you have more external growth. So as we mentioned and Marie-José mentioned, these are our guidelines. I think in the world of today, you cannot be so precise in figures for now, but it gives you a good direction. And then for everything we do, and the management will come back to that in terms of cash allocation, we really look at the value we can create as we have ever done. So we stay nimble and flexible. But to make the story short, EUR 10 billion would be a sort of balance between organic and external growth, EUR 10 billion, EUR 10.5 billion. But if you have to go to EUR 11 billion, then you need a bit more external growth, which will depend on the opportunities, what will be the M&A market when the crisis is over, so still a meaning question. Maybe Marc and then Vincent, a little bit of flavor on a few examples on the growth driver of the business, if you may.

Okay. Thank you, Thierry. With regards to Advanced Materials, I think we'll be able to deliver this growth partly through expansion of capacity. You're aware of the project we've announced, which will come on stream later in the period, so it will go step by step, and there will be a progressive ramp up, and also, obviously, from all the innovations, which I mentioned, and what -- the diversity of applications, so you can always speculate that one will be faster than the others. But with the, let's say, range of innovation we have, we're quite confident that even if one is not delivering as expected, the other one will offset and that, all in all, we'll be okay to deliver this expected growth. With regards to Coating Solutions, as I mentioned to you, our growth in the last year was much more than the 3%. Part of the reason is that, over the last years, we took a lot of time to optimize our asset grade by shutting down some capacity and improving our EBITDA ratio. Now I think most, if not all, of this asset restructuring is over, and we're quite confident that we'll grow in line with the market with more specifically strong growth driver in emerging economies as well as through the introduction of new product meeting new regulation in terms of sustainable development, for example.

Thank you, Marc. Maybe, Vincent, explain more to our auditors your strategy in high-performance sealants, which is quite impressive, and also your intention in terms of high-performance bonding, which is really supported by lightweight and in which we are building step by step a very strong and promising positions. Could you do that?

Yes, of course. Thank you, Thierry. So when you look at the growth of Bostik, we are committed to grow the business in the coming 5 years by high single digit. 1/3 should be organic, 2/3 should be through M&A. And it's an improvement from what we have done in the past. But already in the past, we have done 6% growth of the business, 1/3 being organic at 2% organic, 2/3 being M&A. And like Thierry was explaining, we have put in place growth platform. This is true in sealant with the acquisition of Den Braven, where we have unique technologies, which we have been able to consolidate in Europe, which are growing faster than the market because they are replacing mechanical fasteners. And so by globalizing this platform all throughout the world, we should be able to increase our growth and our organic growth rate by this 1% that I mentioned, which will bring the overall growth of Bostik to 3% per year. And so this is the one we are putting in place for construction through acquisition, like you say, where we leverage key technology, which is growing faster than the market and which we are capable of globalizing. This is one of the examples. The second example in high-performance bonding for industrial assembly is all the assembly of durable product, where through the acquisition of new platforms like we did with Prochimir, like we did with Afinitica, we are completing our range of technologies, to acquire technologies which are more sustainable, which are growing faster than the market and where we can leverage the historical organization of Bostik to speed up the growth of the historical organization, but on top of this, where we can also leverage the presence of Arkema to the main OEMs, the presence of Arkema in terms of technologies, which will give more opportunities to our customers to buy a full system solution. This is the example that Thierry has shown in batteries, but we have this in the automotive industry. We have this also in filters where, by bringing the historical technologies of Bostik, the one we acquire and the size of Arkema, we bring to the market and to the overall organization a stronger growth potential.

Thank you, Vincent. With regard to the EBITDA of emissive fluorogases and Acrylic Asia so you know we don't give already a lot of information, at least as much as our peers. You know that the EBITDA margin of Intermediate is 21%, 20% if we take out the corporate. And I would say that Fluorogases and PMMA are the most material ones, while Acrylic Asia is still a profitability, is still to be built as this market is still under development. So most of profitability is in PMMA and Fluorogases. And in Fluorogases, I would say that the emissive are at least as profitable over the cycle because, as you know, you have a lot of volatility there, but they are stronger. So PMMA and Fluorogas, they are really in the good average of the Intermediates, and you have the total for Intermediates in the presentation, Page 20. Marie-José, can I ask you to answer on this cash allocation again? Thank you.

Sure. So in terms of priorities for the cash allocation, basically, you've seen that the different split of those priorities and the magnitude of each of them roughly stated in the chart. We have set, I think, the financial framework in which we want to work quite clearly, which is basically to continue to focus on the return on capital employed in excess of 10%, within the current net debt-to-EBITDA ratio, which is at 1.6x. So right now, actually, this is where we stand. Our forecast today is definitely on maintaining a strict working capital monitoring, prioritizing CapEx and optimizing operational expenses to overcome this COVID-19 crisis. We have the payment of the dividend coming next. So this is where we are focusing our attention right now.

Our next question comes from the line of Emmanuel Matot from ODDO.

Three questions for me. First, why have you decided to implement this new organization now and not before? What are the key catalysts of that decision? Second, for specialty businesses, what can we expect in terms of operational excellence for the coming years? Can you do much better compared to what you have done until now? Would you say that productivity gains are significant part of the margin improvement? Should we expect -- or it is more a story of volumes growth and acquisitions. Maybe if you can come back on your return on capital employed by 2024, a target of more than 10%. It was 12% last year, if I'm correct, 11.7% exactly. Why -- what evolution you'd expect for return on capital employed regarding specialties? Is that going to improve by 2024?

Okay. Thank you, Emmanuel, for the question. Why new organization now? I think we explained it from -- at the beginning. Hopefully, it was clear. In fact, for many years -- actually, nearly since the start, we -- even if we had the vision to become a pure specialty materials player at the beginning, we -- because we were working mostly on developing and restructuring and the company changing the profile, et cetera, we kept more or less the organization of the staff. Now we consider that we are at the level of maturity to engage the new step after so much work and transformation in the past years. It could have been last year, it could be this year. I mean -- but I think we work by cycle of 5 years. And so we could split the past 15 years in 3 cycles, starting with restructurings and you had improvement of the performance, and you have a portfolio change with the arrival of Bostik and the disposal of PVC. So now it's a new step. I think it come at the right moment. And we had also feedback in the past 2 years about many questions about the industrial specialty, thiochemicals and H2O2, so what is volatile, not volatile, what is specialty. So we wanted to clarify that once forward. So I think for all these reasons, and I think now we have an organization which is fully aligned with our vision, which is quite good. With regard to specialties, I would say it's a combination of what Vincent and Marc have presented. So you have seen that with Vincent, operational excellence can represent one point. So it's 1/3 of the point for Arkema. So it's not small. Then you know that every year, we -- our guidance is that we cover between variable cost and fixed cost savings, which is typically operational excellence. We cover half of the inflation. Actually, we do more every year. So this, we don't like too much one-off restructuring. We prefer to do it ongoingly. But the intention is to keep this pace of covering, at least with the variable cost and fixed cost, at least half of the inflation and try to do more this year. It's obvious that we will do far more. But in a normalized year, we try to do more. And last year, actually, we cover all inflation. This is explained, also a part of this strong performance of last year. With regard to -- but also product mix is important in the evolution and benefit from synergy of acquisition. So it's really split between these 3 levers that you have mentioned. With regard to ROCE target of 10% plus. In fact, if we go back to this page, Page 20, the slide, Page 20, first of all, it's -- I'm sure you have in mind that to optimize the return on capital employed, which should stay with Intermediates. So -- and our strategy is to be 100% specialty material with a very strong portfolio. So to the extent, by this significant shrink of Intermediates before 2024, it will put pressure on the level of EBITDA margin because Specialty Materials start at 15.8%. So to go back to the 17%, we need actually to improve materially Specialty Materials. And this is the same for ROCE, where in fact, we will be below the current level. But just because Intermediates are very elevated in terms of ROCE, so mechanically, we start from a lower point. But we have, as you know, a very strict discipline in terms of return on capital employed, and we want to stay above 10%. So clearly, this 10% is an average of 3 things and -- because you have Adhesive Solution, where step-by-step, we will increase the ROCE because we're starting with a low point when we bought Bostik and because the goodwill of Bostik was significant at that time. Advanced Materials, it will be impacted negatively, but for good reasons, and it will be value creation by this very significant platform in Singapore with satellites in the rest of Asia for polyamide 11. So you will see that weighing down on the return capital employed. And Coating Solution, we have a good level that we should continue to increase in the coming years. So in a way, we get to mix them. And -- but at the end, we want to stay very disciplined with a return of capital target, which is above 10%.

Our next question comes from the line of Chetan Udeshi from JPMorgan.

Just coming back to the M&A strategy. And I know you guys talk about the multiples post growth and synergies. I wanted to ask the question in a different way. How should we think about the returns in terms of IRR -- so IRR or NPV that you've generated from M&A in the past 6 to 7 years? And the reason I ask that question is if I look at the ROCE numbers that you've given by divisions in the -- based on the new structure, it seems the Adhesive Solutions' ROCE is 7.8%. And as far as I can understand, this is a pretax number. So it's not entirely clear to me whether Adhesive Solutions have created return over the normalized WACC. Maybe that will be the question. And the second question was more on -- again, sorry to come back to the short-term question here. But just to understand, when we talk about the impact from COVID-19 on Q1, is the assumption still that underlying business in Q1 was supposed to be flat and we take the impact from COVID-19 on top?

Okay. On the last one, I can answer quickly, even if it's not the topic of today. But I think we have -- I was very clear when we had the Q1 call. I think that with -- you would expect an underlying business below last year for -- which was strong for at least 2 reason. You had fluorogas, which was at the peak last year still in the first quarter. We're really good in first, started really in the second quarter. So you get this impact still. And normally, mostly, all analysts have a good sense of what it is. And you had also the 10 million of the strike in France, which seems now old story, but it was there in January. And on top of that, you have the COVID. So I think you have -- we were rather clear on all this element. And with regard to the COVID, I would confirm that January and Feb are really what we said when we published the first quarter result. And we are in line with the 40, 50 with the guidance of what we said also at that time. But we had a bit more in Europe. In fact, when we gave the guidance, Europe was not as impacted as it is today, and we had some impact in March that was not yet anticipated when we talked, but we are in the same kind of, same kind of range. On Adhesive, clearly -- and it's a bet that we took and also a decision that we took, which I believe is, long term, very strong for Arkema. And the more we go in the story, the more we got positive comments about this decision, which was to enter the Adhesive platform because there is a very significant value, and hopefully, we will get it also in the multiple of the company to become a pure specialty materials. And with these 3 platform, which are very synergistic and additive, it's clearly a key element of it. So it's overall package, I would say, in terms of financial profitability, return on capital employed, evolution of the share to touch shareholder return with dividends and share buybacks. So it's -- we look at the full package of what we can present to the market. I think this one is very good. It includes Adhesives. So with regard to why is ROCE not increasing so quickly in Adhesives, it's not because of Bostik. It's because on top of Bostik, we continue to make acquisition. So you have a sort of running rate of acquisition, which means that we are still building the platform. The day where we believe that we have the right size with Bostik and we stop significant acquisitions, the return on capital employed of Bostik will exceed the 10% at a certain point. You could see that with Coating Solution, where since now 6 years, our level of acquisition has been significantly reduced, but you see the benefit directly on the return on capital employed with 13.6%. So I think it's more a matter of strategy and a matter of inherent quality of the businesses of what we do. Adhesive is more in a acquisition mode. So as on gas, we are still in this mode. We will get impacted on the return on capital employed, but you have to look at the whole group. And the 2 other segments on which we make less acquisition have superior return on capital employed. So -- and we are very -- frankly speaking, we are very selective in acquisition. You have seen that in the past. Sometime we had the question -- so today, it's not a question in the current crisis. But we had a question in the past, why don't you get quicker in terms of acquisition? And we prefer to do it step-by-step, to be selective in acquisition as in everything else as we do.

So just to confirm, when you say the return on capital employed target of more than 10%, that would include the dilution that will happen from these ongoing acquisitions, especially in the Adhesives?

What I say on Adhesives is that if you go -- you want to go beyond 10%, then you have to stop making medium-size or more significant acquisition by definition. But -- so what you measure when you see 8% today, you don't measure the return on capital employed of the Bostik part. You measure the Bostik part plus the dilution coming from the recent acquisition. But if you stop and you wait 4, 5 years, then you will see that you go above 10%. Okay? But we don't want to stop. We want to continue to make acquisition in Adhesives. But overall, it's part of this return on capital employed discipline and guidance to be above 10% will remain. So we want to have a premium on the cost of capital, which is for Arkema around 7.5%, okay? So we want to stay with a material premium on that. But recognizing that on Adhesives, where we want to take advantage of the fragmentation of the market, to continue to improve the profile of the company, we can be below. Okay?

Our next question comes from the line of François Schott from Dow Jones.

Actually, my question is on Elliott. There have been some market rumors a few weeks ago that Elliott has built a stake in Arkema. Can you confirm this? And if this is the case, did they play a role on today's strategic measures?

Okay. So on -- I think I -- we answered already this question in the past because remarks came, I think, a couple of months ago, and we say that we never comment shareholders present in the capital. This is not our role to do it. And we have never done it, and we'll never do it. It's matter of company policy with regard to what we are presenting today for the one who have known us since the beginning, and we listen to all our shareholders. I think the dialogue with shareholders is very important for us, and we always find interesting ideas everywhere. I think people who know us know that we are listening. And -- but if you look at the strategies that we are presenting, there is a strong consistency with what we started. As I mentioned, we started Arkema 15 years ago with this vision, which we wanted to be a pure specialty materials player. It's a very courageous vision because when you see where we started from, it needed a lot of transformation. And what we presented today is really this vision that we have from the start and how can we get now to the last step, which is to become a pure player. So I think we are quite consistent with what we have ever done. But you see also some acceleration. You see also, with regard to cash allocation, some new levels. I think we try to present something which, after so many discussion with all our shareholders, try to take into account also the good ideas that we can have.

Our next question comes from the line of Martin Roediger from Kepler Cheuvreux.

I have one, please, and this is regarding your margin target. At your Capital Markets Day in 2017, you switched from the -- your focus from the previous recurring EBITDA margin, focus to a recurring EBIT margin target for the midterm horizon. Now you switch back to an EBITDA margin target again. What is the rationale behind these -- this new switch, please?

In fact, the rationale is simple, is that we don't want to be the only one to give guidance in REBITDA. So we changed our targets, but to EBITDA in line with peers. But the trends and the progress, if you look at Specialty Material, which continue to be quite material, do not change when they are expressed as REBITDA. So same trends that you will get for the coming years. And what we did is that we have provided you with the capital intensity of each platform to enable you to estimate the corresponding REBIT ambition. So if you look at the slides, you have the information you need in terms of normalized CapEx in order to help you to define from the EBITDA, the EBIT. But in fact, the 2 are progressing in parallel.

Do I understand it correctly that if you guide for 5.5% CapEx-to -sales ratio, that is certainly also proximate for D&A. So that means the -- at the end of 2024, you might also achieve then this kind of recurring EBIT margin you have envisaged previously.

In fact, between the EBITDA margin and the EBIT margin, you have more or less in terms of D&A, you have the normalized CapEx. You have a little bit of influence of the exceptional CapEx, but not so much. So it's more or less. But on top of that, you should not forget that you have, like now companies, you have 0.5 point coming from IFRS 16, okay, which is not, okay, linked to CapEx. Okay?

There are no further questions in the queue. [Operator Instructions] There are no questions coming through the line, so I'll hand the call back to our speakers to conclude today's conference.

Okay. I would like to thank you very much for your attendance. We were really pleased to present this new vision, new structure, new organization. I think we have a lot of things to do now in the coming weeks, months and years, and we are quite committed. So thank you again for your attention and the team. And in particular, the IR team is ready to follow up and to answer the complementary question in detail that you could need. Thank you very much.

Thank you for joining today's call. You may now disconnect. Hosts, please stay connected and await further instructions.