Arkema S.A.

The stable outlook reflects our expectation that Arkema's adjusted FFO-to-debt will exceed 45% over the next three years. This is supported by the company's diversified and specialized product portfolio, efficient pass-through of raw material prices, and prudent approach to investments and financial policy. We view this level of FFO-to-debt as commensurate with the rating, and do not expect the financial policy to result in credit metrics deviating significantly from our base-case scenario. We could downgrade Arkema if the company undertook a large, debt-funded acquisition, such that FFO-to-debt declined below 45% despite management's discipline in targeting reasonable multiples and synergies. A moderate stream of acquisitions, along with operational headwinds, could also strain credit quality. Ratings upside is fairly limited and would

...Active portfolio management continues to improve Arkema S.A.'s specialty chemicals exposure, while managing leverage impacts in line with the rating. The company continues to target more than 80% specialty chemicals in portfolio by 2023, through portfolio realignments and organic growth investments, from 70% (or 74% pro forma) currently. This year has been active on the acquisition front, including with ArrMaz (in surfactants), Prochimir (adhesives), Lambson (photoinitiators), and the acquisition of its partner's stake in their acrylic monomer JV in China, for a total acquisition budget that we estimate of about 700 million in 2019. Conversely, the company announced the disposal of functional polyolefins (included in the polymethyl methacrylate [PMMA]/industrial specialties segment) for second-quarter 2020. Therefore, S&P Global Ratings continues to view Arkema's portfolio as evolving toward more specialized, higher-margin, and more resilient markets and away from commoditized and cyclical...

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