French chemical group Arkema (AKE.FR) Monday swung to a net loss in the second quarter due to a drop in sales on lower demand, but raised its free cash flow guidance for the full year.

Arkema had a EUR114 million net loss for the three months to the end of June, compared with a net profit of EUR60 million a year earlier

The group's sales amounted to EUR1.17 billion in the second quarter, down 23% from EUR1.51 billion a year earlier while earnings before interest, tax, depreciation and amortization fell 56% to EUR70 million from EUR158 million a year earlier.

The group's net debt at the end of June amounted to EUR420 million, down from EUR495 million at the end of December.

Over the first half of this year, Arkema generated EUR135 million of free cash flow compared to a negative cash flow of EUR33 million a year earlier.

Arkema said it will continue its efforts to reduce fixed costs, which should result in savings of EUR170 million in 2009, compared with an initial target to EUR110 million. This represents in total a new target of EUR600 million cumulative fixed-cost savings over the 2006-2010 period.

"The global economic environment halfway through the year remains highly challenging overall despite a few more positive signs, including an improvement in volumes in China and a gradual reduction in destocking at our customers," Arkema Chairman and Chief Executive Thierry Le Henaff said.

In spite of the environment, Arkema said the worst quarters in terms of sales volumes are "behind us" and revised its free cash flow target for this year upward to EUR80 million from a initial forecast of a barely positive free cash flow.

In a separate joint statement with U.S.-based Dow Chemical Co. (DOW), Arkema also said Monday it is acquiring some acrylates and latex assets from Dow Chemical for a fair-value consideration of US$50 million.

Company Web site: www.arkema.com

- By Geraldine Amiel, Dow Jones Newswires; +33 1 40171740; geraldine.amiel@dowjones.com