Arkema: 3rd Quarter 2009 Results

Regulatory News:

Arkema (Paris:AKE):

• 9.2% EBITDA margin at same level as 3^rd quarter 2008 margin
• Excellent performance of Industrial Chemicals: EBITDA margin above 15%
• Significant improvement of Performance Products: EBITDA margin above 10%
• Positive adjusted net income
• +€206 million Free Cash Flow¹ at the end of September 2009
• Net debt down to €359 million and gearing at 20%

At the close of the Board of Directors meeting on November 9^th 2009 which reviewed Arkema’s consolidated accounts for 3^rd quarter 2009, Thierry Le Hénaff, Chairman and CEO of Arkema, stated:

« In a less challenging economic environment, marked by the end of de-stocking in most of our end-markets and by good demand in Asia, Arkema achieved a solid financial performance in the 3^rd quarter, with EBITDA improving by over 40% on the previous quarter, and free cash flow generated in the quarter above €70 million.

The various fixed cost savings initiatives, the new developments on our markets, and the strict control of cash largely contributed to the good results of the quarter, over and above the gradual improvement in demand.»

3^RD QUARTER 2009 PERFORMANCE

EBITDA margin at 9.2% in 3^rd quarter 2009 at same level as last year

Sales stood at €1,103 million, 23.9% down on 3^rd quarter 2008. The volume effect (-13.4%) was lower than in previous quarters (-27% in 1Q’09 vs 1Q’08, and –18% in 2Q’09 vs 2Q’08). De-stocking in Europe and the United States was now essentially over, and volumes were showing encouraging trends in Asia. Arkema continues to increase its sales in that region which now represents around 18%² of its global sales against 13% in 2006. The price effect (-10.7%) reflected a drop in raw material costs in some product lines (PVC and Acrylics). Raw materials reached their highest level in 3^rd quarter 2008. The effects of currency translation (+1.0%) and variation in scope of business (-0.8%) were limited.

Confirming its recovery which started in 2^nd quarter 2009, EBITDA stood at €101 million, 44% up over 2^nd quarter 2009 (€70 million), and against €134 million in 3^rd quarter 2008. During the quarter, Arkema successfully continued to adapt to a tough economic environment. Implementation of restructuring plans and reduction in overhead were in line with the objective to achieve savings of €170 million in fixed costs over the year. The increased presence in Asia in the Industrial Chemicals and Performance Products segments together with the progress made in the field of sustainable development and high performance polymers (photovoltaics, batteries, high temperature polyamides, etc.) also made a positive contribution to EBITDA.

Recurring operating income stood at €36 million after €65 million depreciation and amortization.

Non-recurring items accounted for –€8 million as in last year’s 3^rd quarter.

Adjusted net income was positive again at €8 million in 3^rd quarter 2009 following the losses of the last three quarters.

Net income (Group share) stood at –€3 million (against €40 million in 3^rd quarter 2008), after deduction of a €27 million tax charge reflecting the sharp contrast between the results generated in France and in the rest of the world.

SEGMENT PERFORMANCE

Vinyl Products: NEGATIVE BUT STABLE EBITDA COMPARED TO 2Q’09 DESPITE WEAK SEASONALITY AND FULL IMPACT OF CAUSTIC SODA PRICES COLLAPSE

Vinyl Products sales stood at €248 million against €378 million in 3^rd quarter 2008. Sales volumes remained much lower than before the crisis. The price effect was highly negative, PVC sales prices reflecting a drop in ethylene prices compared to their highest level in 3^rd quarter 2008. The effect of variation in the scope of business (-€15 million) was also negative in the light of divestments completed in the first six months of 2009.

Compared to the previous quarter, EBITDA remained stable at –€8 million (–€7 million in 2^nd quarter 2009) despite the traditional August seasonality in Europe and the further decline in caustic soda prices which reached a low point in August. PVC prices were raised during the quarter to offset the increase in ethylene costs. PVC unit margins remained very low.

The beginning of the 4^th quarter is marked by some increases of caustic soda prices and imports from American PVC reflecting low US natural gas price.

Industrial Chemicals: EXCELLENT PERFORMANCE WITH A 15.3% EBITDA MARGIN, ITS HIGHEST HISTORICAL LEVEL SINCE ARKEMA’S SPIN-OFF

Industrial Chemicals sales stood at €528 million against €661 million in 3^rd quarter 2008. EBITDA stood at €81 million against €86 million in 3^rd quarter 2008 and €75 million in 2^nd quarter 2009. Fluorochemicals, Thiochemicals and Coatex still confirmed their good resilience. Growth in Asia in the segment was sustained by developments in Hydrogen Peroxide and Fluorochemicals. Performance in Methacrylates began to benefit from improved productivity in North America and Europe. In Acrylics, unit margins remained very low.

Performance Products: SIGNIFICANT IMPROVEMENT OF RESULTS, BENEFITING FROM BETTER VOLUMES AND LOWER COSTS

Performance Products sales stood at €324 million in 3^rd quarter 2009 against €410 million in 3^rd quarter 2008. EBITDA stood at €33 million against €44 million in 3^rd quarter of the previous year, and €23 million in 2^nd quarter 2009. Volumes remained very much below those of the previous year but benefited from the end of de-stocking in the automotive and construction markets in Europe. The productivity initiatives launched in Technical Polymers and Functional Additives continued to bear fruit. Finally, various successful developments were achieved in the field of renewable energy and high performance polymers (photovoltaics, batteries, high temperature polyamides, etc.).

EBITDA margin stood at 10.2% against 10.7% in 3^rd quarter 2008 and 6.5% in 2^nd quarter 2009, reflecting a significant improvement in the segment’s results compared to previous quarters.

CASH FLOW AND NET DEBT AT SEPTEMBER 30^TH 2009

Strong cash generation in 3^rd quarter

In 3^rd quarter 2009, Arkema generated strong positive free cash flow³ of +€71 million. Over the first nine months of 2009, Arkema generated very strong free cash flow of +€206 million, against +€7 million over the first nine months of 2008. Over this period, by mobilizing all its operational entities, Arkema reduced its stock value by €244 million. Capital expenditure stood at €182 million, which included capital expenditure related to fluorochemicals and fluoropolymers growth projects in China.

Net debt on September 30^th 2009 stood at €359 million, €136 million down on December 31^st 2008, with gearing thereby decreasing to 20%.

HIGHLIGHTS SINCE BEGINNING OF 3^RD QUARTER 2009

Continuing the in-depth transformation of its portfolio of businesses, Arkema announced a number of major projects in 3^rd quarter:

• The proposed acquisition of the Clear Lake (Texas) acrylic monomer site and some acrylic latex activities from Dow in North America. This transaction is subject to the approval by the US antitrust authorities (FTC), and is expected to close in the 4^th quarter.
• The construction of a Coatex production plant on the Changshu site in China. This project will allow Coatex to take advantage of the growth in the specialty acrylic polymers market in Asia, with a production plant in this region from mid-2011.
• The construction of a 400 ton/year carbon nanotube pilot production plant in Mont (France), due to come on stream beginning of 2011.
• An increase of over 15% in the production capacity of the fluoropolymers production plant in Calvert City (United States), now nearing completion, to respond to growth opportunities in the energy markets, in particular in the photovoltaics and lithium-ion battery sectors.

Furthermore, Arkema confirmed a plan to reorganize its Saint-Auban site (France) entailing the shutdown of vinyl chloride/vinyl acetate copolymer production which should result in the loss of 88 positions⁴. Arkema is also continuing negotiations regarding its Methacrylates restructuring plan⁴ and announced a productivity project in the Mont (France) polyamide plant⁴.

OUTLOOK

The 4^th quarter will reflect the traditional weaker seasonality of volumes at the end of the year, in particular in December. Asia maintains its good momentum, whereas visibility remains more uncertain in Europe and North America where volumes have stabilized at a lower level than before the crisis and customers should continue to carefully manage their inventories at the end of the year.

The group’s priorities set for 2009 remain unchanged, and Arkema confirms its fixed costs savings target of €170 million over the year, and, once more raises its free cash flow⁵ generation target to around +€140 million. Capital expenditure should remain limited to €260 million for the year.

Beyond these objectives, Arkema actively continues its in-depth transformation with the lowering of its breakeven point, the forthcoming closing of the acquisition of some of Dow’s acrylic assets, the strengthening of its presence in Asia and promising developments in new energy and high temperature polyamides. Thanks to this strategy implemented since the 2006 spin-off and its ability to quickly adapt as demonstrated this year, Arkema will be well prepared and positioned for 2010.

FINANCIAL CALENDAR

A global chemical company, Arkema consists of three businesses: Vinyl Products, Industrial Chemicals, and Performance Products. Arkema reported sales of 5.6 billion euros in 2008. Arkema has 15,000 employees in over 40 countries and six research centers located in France, the United States and Japan. With internationally recognized brands, Arkema holds leadership positions in its principal markets.

Disclaimer

The information disclosed in this press release may contain forward-looking statements with respect to the financial conditions, results of operations, business and strategy of Arkema. Such statements are based on management’s current views and assumptions that could ultimately prove inaccurate and are subject to risk factors such as, among others, changes in raw materials prices, currency fluctuations, implementation pace of cost-reduction projects and changes in general economic and business conditions. Arkema does not assume any liability to update such forward-looking statements whether as a result of any new information or any unexpected event or otherwise. Further information on factors which could affect Arkema’s financial results is provided in the documents filed with the French Autorité des marchés financiers.

Balance sheet, income statement, cash flow statement, statement of changes in shareholders’ equity and information by business segment included in this press release are extracted from the consolidated financial statements at September 30^th 2009 reviewed by the Board of Directors of Arkema S.A. on November 9^th 2009.

Quarterly financial information is not audited.

The business segment information is presented in accordance with Arkema’s internal reporting system used by the management.

¹ Cash flow from operating and investment activities excluding the impact of portfolio management.

² On first 9 months of the year.

³ Cash flow from operating and investment activities excluding the impact of portfolio management.

⁴ The implementation of the project is subject to the legal information and consultation process involving the trade unions.

⁵ Cash flow from operating and investment activities excluding the impact of portfolio management.

THIRD QUARTER 2009 PERFORMANCE

EBITDA +44% UP ON PREVIOUS QUARTER
 STRONG POSITIVE FREE CASH FLOW ³

SALES AT €1,103M VS €1,450M IN 3Q’08

• Lower YoY volume decline : -13% in 3Q’09 vs 3Q’08, -18% in 2Q’09 vs 2Q’08 and –27% in 1Q’09 vs 1Q’08.
• Volumes far lower than before the crisis
• End of de-stocking in Europe and North America in most end markets
• Good volumes in Asia.
• Raw material costs at a peak in 3Q’08.

EBITDA MARGIN OF 9.2%, AT THE SAME LEVEL THAN 3Q’08.

• +44% EBITDA vs 2Q’09 despite usual weak seasonality in Europe in August
• Successful adaptation to tough market conditions
• Cost savings from structural restructuring plans and G&A reductions in line with full year 2009 target of €170m fixed cost savings
• Benefits from growth projects in Asia in Industrial Chemicals and Performance Products
• Successful development in renewable energy and high performance polymers (photovoltaic, lithium-ion batteries, high temperature polyamides, etc)

VINYL PRODUCTS: WEAK RESULTS

• Sales at €248m vs €378m in 3Q’08
• Volumes lower than before the crisis
• PVC price evolution reflecting sharp YoY decrease of ethylene cost
• Stable EBITDA vs 2Q’09 despite usual weak seasonality in August in Europe and full impact of collapse of caustic soda prices
• Low unit margins (higher ethylene costs and low caustic soda prices)
• PVC price increased in 3Q’09 vs 2Q’09 in order to offset higher ethylene costs
• Imports from American PVC end of Q3 reflecting low US natural gas prices.

INDUSTRIAL CHEMICALS: EBITDA MARGIN AT 15.3% AT ITS HIGHEST SINCE SPIN-OFF

• EBITDA at €81m in 3Q’09 (€86m in 3Q’08) representing an EBITDA margin of 15.3%
• Excellent performance still confirmed.
• Good resilience of Thiochemicals, Fluorochemicals and Coatex
• Benefits from growth projects in Asia in Hydrogen Peroxide and Fluorochemicals
• Productivity gains in Methacrylates in Europe and North America
• Very low unit margins in Acrylics

PERFORMANCE PRODUCTS: BETTER PERFORMANCE ON HIGHER VOLUMES AND LOWER COST BASE

• EBITDA margin at 10.2% vs 6.5% in 2Q’09 and 10.7% in 3Q’08
• End of de-stocking in automotive and construction but volumes still lower than before the crisis
• Significant contribution from fixed cost savings in Technical Polymers and Functional Additives
• Successful development in renewable energy and high performance polymers (photovoltaic, lithium-ion batteries, high temperature polyamides, etc)

NON RECURRING ITEMS: AT €(8)M IN 3Q’09, AT THE SAME LEVEL THAN 3Q’08

• +€71m free cash flow in 3Q’09 (+€39m in 2Q’09 and +€96m in 1Q’09).
• Working Capital optimization supported by a (24)% reduction of inventory level
• Net debt at September 30^th, 2009 reduced to €359m vs €420m at June 30^th, 2009, €495m at December 31^st, 2008 and €580m at September 30^th, 2008.
• Net debt at 1.3xEBITDA⁶
• Gearing at 20%

OUTLOOK:

• Cautious outlook for 4Q’09
  • Traditional weaker seasonality in December
  • Asia should maintain good momentum
  • Visibility still limited in Europe and North America:

• Volumes stabilized at a lower level than before the crisis
• Strict management of inventories by customers at the end of the year

• Full year 2009 targets
  • Increase Free Cash Flow⁷ target to around +€140m
  • Confirm fixed cost saving target of €170m
  • Capex below €260m
• Continue in-depth transformation and long-term projects
  • Dow acrylic deal⁸ expected to close in 4Q’09
  • Construction of fluorogas and fluoropolymers units in China
  • Promising projects in sustainable development and high performance polymers
• Well prepared and positioned for 2010

HIGHLIGHTS SINCE JULY 1^ST:

• Proposed acquisition of the Clear Lake (Texas) acrylic monomer site and some acrylic latex activities from Dow in North America. This transaction is subject to the approval by the US antitrust authorities (FTC), and is expected to close in the 4^th quarter.
• Announced construction of a Coatex production plant on the Changshu site in China. This project will allow Coatex to take advantage of the growth in the specialty acrylic polymers market in Asia, with a production plant in this region from mid-2011.
• Announced construction of a 400 ton/year carbon nanotube pilot production plant in Mont (France), due to come on stream beginning of 2011.
• Increase of over 15% in the production capacity of the fluoropolymers production plant in Calvert City (United States), now nearing completion, to respond to growth opportunities in the energy markets, in particular in the photovoltaics and lithium-ion battery sectors.
• Confirmation of a plan to reorganize the Saint-Auban site (France) entailing the shutdown of vinyl chloride/vinyl acetate copolymer production which should result in the loss of 88 positions⁹.
• Negotiations of the Methacrylates restructuring plan⁹
• Announced productivity project in the Mont (France) polyamide plant⁹.

¹ Calculated as cash flow from operating activities plus cash flow from investing activities

² Calculated as working capital end of period divided by 4 times quarterly sales

³ Cash flow from operating and investing activities excluding M&A and before dividends

⁴ NR pre spin off items are no longer subject to specific individual monitoring since 01/01/09.

⁵ Cash Flow from operating and investment activities excluding M&A and before dividends

⁶ EBITDA over 12 previous months

⁷ Cash Flow from operating and investment activities excluding M&A and before dividend

⁸ Acquisition of a part of US acrylic assets from Dow

⁹ The implementation of the project is subject to the legal information and consultation process involving the trade unions.