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Solvay SA : Good Resilience In Second Quarter Operating Result (EUR 164 Million), Up From The First Quarter (EUR 142 Million)



7/30/2009 10:55:38 AM

BRUSSELS, BELGIUM--(Marketwire - July 30, 2009) -

EMBARGO: July 30, 2009 at 7:30 a.m.

REGULATED INFORMATION

Good resilience in second quarter operating result (EUR 164 million), up from the first quarter (EUR 142 million)

- First half operating result (EUR 306 million) down from 2008 (EUR 548 million) due to the economic downturn

- Sales (EUR 4,051 million) down by 14% compared to the first half of 2008. Evolution by Sector is contrasted.

- Operating result:

--Pharmaceuticals (EUR 206 million): down by 16% but distinctly higher than result from the first half of 2008 aside from miscellaneous income (EUR 71 million in the first half of 2008)

--Chemicals (EUR 122 million): Despite weak demand and pressure on some prices, decrease limited (-10%) compared to the first half of 2008; second quarter of 2009 up compared to last year

--Plastics (EUR 8 million): sharply down compared to the first half of 2008 in the context of the global economic crisis that especially affected the major markets in this Sector (construction, automotive and electronics)

- Net income of Group (EUR 181 million), down from the net result of EUR 351 million in the first half of 2008

- Solid financial structure:

--Net debt to equity ratio: 39.5%

--No significant maturity dates for debt reimbursement before 2014

Group sales (EUR 4,051 million) in the first half of 2009 were down by 14% compared to last year. The evolution by Sector is contrasted: Pharmaceuticals: +4%, Chemicals: -8%, Plastics: -31%. The level of activities in the first half remained weak in Chemicals and Plastics since last year, in the context of the global economic crisis. In the second quarter, sales were down by 12% and amounted to EUR 2,067 million.

Group operating result (REBIT (1); EUR 306 million) was down by 44% compared to the first half of 2008. In the second quarter, it amounted to EUR 164 million (-34% compared to last year). The operating result from our industrial activities continued to be affected by the very difficult economic environment, especially in Plastics (EUR 8 million in the first half of 2009). The Chemicals Sector resisted despite low demand and posted a result of EUR 122 million in the first half, down by 10%. The operating result for the Pharmaceuticals Sector from the first half of 2008 included miscellaneous income totaling EUR 71 million linked to the sale of non- strategic products. It explains that the operating result from the first half of 2009 (EUR 206 million) diminished by 16%; aside from this item, the operating result would be up by 18%.

The Group's operating margin (REBIT on sales) was 7.6% in the first half of 2009 compared to 11.6% in the first half of 2008. The decrease was limited through strict cost controls and continued optimizations of structure (adapting production and reducing headcount). With constant perimeter and EUR/USD exchange rate, there were decreases from the first half of 2008 in fixed production costs and in commercial and administrative costs by a total amount of around EUR 75 million. Headcount continued to decrease in 2009 (at constant perimeter: about 1000 people in the first half).

The net income of the Group (EUR 181 million) decreased by 48% compared to the first half of 2008, taking into account the drop in operating result.

REBITDA (2) was EUR 553 million, down by 28% compared to the first half of 2008. In the context of the current crisis, priority was given to generation of cash and maintenance of a sound financial situation. Aside from cost-reduction measures, this priority generated a significant decrease in working capital requirements (EUR 438 million) and capital expenditures (by 25%, in line with the reduction goal set in the budget) compared to the end of June 2008. The net debt to equity ratio reached 39.5% at the end of June 2009 compared to 36.4% at the end of June 2008, after strategic investments made in the second half of 2008 in the amount of approximately EUR 300 million. It should be noted that the first significant maturity for debt reimbursement will not occur until 2014.

Pharmaceuticals Sector sales (EUR 1,292 million) were up by 4% compared to the first half of 2008 (+1% at constant exchange rates). In the second quarter, they increased by 11% (+7% at constant exchange rates). They benefited from the sustained growth of certain drugs (in particular, Androgel® and Creon®) and overall positive exchange rate effects (EUR 37 million). On the other hand, they were negatively impacted by significant pressure from generic competition (impact of EUR -38 million on Marinol®, which became generic in June 2008). Earnings for the fenofibrate franchise in the United States in early 2009 were lower following the significant revenues in December 2008 (EUR 39 million) related to the launch of TrilipixTM after its approval by the FDA. Sales from emerging markets continued to improve, despite the negative effects of exchange rates. The operating result from the first half of 2008 (EUR 246 million) included miscellaneous income totaling EUR 71 million (of which EUR 44 million were in the second quarter), linked to the sale of non- strategic products. For this reason, the operating result from the first half of 2009 (EUR 206 million) declined by 16% compared to last year. Aside from these items, it would be distinctly higher than the first half of last year (+18%). Research and Development expenditures amounted to EUR 221 million, on the same order as those of the first half of 2008 (EUR 227 million).

One of the strategic axes of the Solvay Group consists of an evaluation of its activities at regular intervals in order to determine their capacity to contribute to realization of its objectives. In this context, the Solvay Group is currently conducting an analysis of the different possible strategic options for its Pharmaceutical activities. At this stage, this does not involve any other decision in this respect.

Sales in the Chemicals Sector for the first half of 2009 (EUR 1,406 million) were down by 8% due to a general drop in demand. In the second quarter, the sales volume was, however, slightly higher than the first quarter except in soda ash. Throughout the second quarter, there has been a significant drop in caustic soda prices, as well as increasing prices pressures on the other chemicals products, including soda ash. The operating result for the first half of 2009 (EUR 122 million) decreased by 10% compared to last year (EUR 136 million); in the second quarter (EUR 66 million), it was up by 26% compared to the second quarter of 2008 and by 18% compared to the first quarter of 2009 (EUR 56 million). Strict control on fixed costs at all levels had a positive impact on results. More recently, during the second quarter, added to this was a drop in energy costs, which began to have an impact. It should be noted that on average, the energy costs for the first half of 2009 were higher compared to the first half of 2008.

Plastics Sector sales (EUR 1,353 million) declined by 31% compared to the first half of 2008, in a very degraded global economic context. The impact of the crisis was very significant for the Sector's primary markets, which are automotive and construction, as well as electronics and electricity. Sales for PVC were also affected by significantly lower sales prices compared to last year (even though they have been improving since May, considering the rise in ethylene costs). The operating result from the first half (EUR 8 million, including EUR 4 million in the second quarter) was sharply down compared to the high level of last year (EUR 187 million). The measures taken to reinforce competitiveness of Plastics as well as a policy of sector and geographic diversification over the last few years (especially in Asia and Mercosur) mitigated the impact of the crisis on the result. Priority given to cash generation encouraged maintaining some production at reduced operating rates in order to ensure a strict control of inventories.

As announced, the Pharmaceuticals Sector will achieve in 2009 a higher operating result than last year. The Chemicals and Plastics Sector show good resilience thanks to their competitive positions and to the measures taken, but the market conditions remain difficult. Full year operating result of the Group will be lower than last year.

SOLVAY Group - Summary Financial Information

+-------------------------+-------+-------+-------------+-------+-------+
|Million EUR              |1sthalf|1sthalf|1sthalf 2009/|  2nd  |  2nd  |
+-------------------------+-------+-------+-------------+-------+-------+
|(except for per-share    |   2008|   2009|1st half 2008|quarter|quarter|
|figures in EUR)          |       |       |             |       |       |
+-------------------------+-------+-------+-------------+-------+-------+
|                         |       |       |             |   2008|   2009|
+-------------------------+-------+-------+-------------+-------+-------+
|Sales                    |  4,731|  4,051|         -14%|  2,357|  2,067|
+-------------------------+-------+-------+-------------+-------+-------+
|REBIT                    |    548|    306|         -44%|    249|    164|
+-------------------------+-------+-------+-------------+-------+-------+
|REBIT/Sales              |  11.6%|   7.6%|             |  10.5%|   7.9%|
+-------------------------+-------+-------+-------------+-------+-------+
|Non-recurring items      |    -34|    -34|             |    -43|    -31|
+-------------------------+-------+-------+-------------+-------+-------+
|EBIT (3)                 |    514|    272|         -47%|    206|    133|
+-------------------------+-------+-------+-------------+-------+-------+
|Charges on net           |    -51|    -71|          38%|    -22|    -44|
|indebtedness             |       |       |             |       |       |
+-------------------------+-------+-------+-------------+-------+-------+
|Income from investments  |     10|     -3|             |     10|     -3|
+-------------------------+-------+-------+-------------+-------+-------+
|Earnings before taxes    |    473|    198|         -58%|    194|     86|
+-------------------------+-------+-------+-------------+-------+-------+
|Income taxes             |   -121|    -16|         -86%|    -62|     -2|
+-------------------------+-------+-------+-------------+-------+-------+
|Net income of the Group  |    351|    181|         -48%|    131|     83|
+-------------------------+-------+-------+-------------+-------+--------
+Net income (Solvay share)     335|    168|         -50%|    127|     77|
+-------------------------+-------+-------+-------------+-------+-------+
|Total depreciation       |    246|    262|           6%|    134|    132|
+-------------------------+-------+-------+-------------+-------+-------+
|REBITDA                  |    773|    553|         -28%|    362|    291|
+-------------------------+-------+-------+-------------+-------+-------+
|Cash flow                |    597|    443|         -26%|    265|    215|
+-------------------------+-------+-------+-------------+-------+-------+
|(per share, in EUR)      |   4.02|   2.05|         -49%|   1.53|   0.94|
|Earnings per share (4)   |       |       |             |       |       |
+-------------------------+-------+-------+-------------+-------+-------+
|Net debt to equity ratio |  36.4%|  39.5%|             |       |       |
+-------------------------+-------+-------+-------------+-------+-------+

+-------------------------+-----------------+
|Million EUR              |2nd quarter 2009/|
+-------------------------+-----------------+
|(except for per-share    | 2nd quarter 2008|
|figures in EUR)          |                 |
+-------------------------+-----------------+
|                         |                 |
+-------------------------+-----------------+
|Sales                    |             -12%|
+-------------------------+-----------------+
|REBIT                    |             -34%|
+-------------------------+-----------------+
|REBIT/Sales              |                 |
+-------------------------+-----------------+
|Non-recurring items      |                 |
+-------------------------+-----------------+
|EBIT (3)                 |             -35%|
+-------------------------+-----------------+
|Charges on net           |             103%|
|indebtedness             |                 |
+-------------------------+-----------------+
|Income from investments  |                 |
+-------------------------+-----------------+
|Earnings before taxes    |             -56%|
+-------------------------+-----------------+
|Income taxes             |             -96%|
+-------------------------+-----------------+
|Net income of the Group  |             -36%|
+-------------------------+-----------------+
|Net income (Solvay share)|             -39%|
+-------------------------+-----------------+
|Total depreciation       |              -1%|
+-------------------------+-----------------+
|REBITDA                  |             -20%|
+-------------------------+-----------------+
|Cash flow                |             -19%|
+-------------------------+-----------------+
|(per share, in EUR)      |             -39%|
|Earnings per share (4)   |                 |
+-------------------------+-----------------+
|Net debt to equity ratio |                 |
+-------------------------+-----------------+

Notes on Solvay Group summary financial information

As was the case last year, non-recurring items amounted to EUR -34 million in the first half. They included, among other things, assets write-downs of EUR 10 million in the Organics cluster and EUR 12 million in the Pharmaceuticals Sector as well as income of EUR 9 million related to the sale of the remaining Sofina shares.

Charges on net indebtedness amounted to EUR -71 million at the end of June 2009. They included currency hedging charges related to our commercial pharmaceuticals activities in emerging countries. Financial debt was covered at 100% at an average fixed rate of 5.1% with a duration of 6.6 years; the first significant maturity of the debt will not occur until 2014. In May 2009, the Group issued a 6-year bond in the amount of EUR 500 million at an annual rate of 5%. This issue permitted consolidation of its long-term financing structure, among other things by refinancing the short term commercial paper.

Income taxes amounted to EUR -16 million. The effective tax rate at the end of June 2009 was 8%, due among others to tax credits for research. The net income of the Group (EUR 181 million) declined by 48% compared to the first half of 2008. Interest from third parties amounted to EUR 13 million.

The net result per share amounted to 2.05 EUR (compared to 4.02 EUR in the first half of 2008).

REBITDA amounted to EUR 553 million (down by 28% compared to the same period of last year). Depreciation (EUR 262 million) was slightly higher than in the first half of 2008 (EUR 246 million).

Equity amounted to EUR 4,806 million at the end of June 2009, up by EUR 61 million compared to the end of 2008 (EUR 4,745 million).

The Group set as a major priority the maintenance of a solid financial situation, in particular in the current economic context. At the end of June 2009 the net debt to equity ratio was 39.5% (compared to 36.4% at the end of June 2008). Net debt amounted to EUR 1,899 million compared to EUR 1,597 million at the end of 2008. Working capital (EUR 1,265 million) declined by EUR 438 million compared to the end of June 2008. This decline involved in particular the industrial working capital (down by EUR 333 million); this reflects a strong focus of the management of the Group in this area.

RESULTS BY SEGMENT (5)

+----------------------+--------+--------+---------------+-------+-------+
|                      |1st half|1st half|1st half 2009 /|  2nd  |  2nd  |
+----------------------+--------+--------+---------------+-------+-------+
|Million EUR           |    2008|    2009|   1sthalf 2008|quarter|quarter|
+----------------------+--------+--------+---------------+-------+-------+
|                      |        |        |               |   2008|   2009|
+----------------------+--------+--------+---------------+-------+-------+
|                      |   4,731|   4,051|           -14%|  2,357|  2,067|
+----------------------+--------+--------+---------------+-------+-------+
|GROUP SALES6          |        |        |               |       |       |
+----------------------+--------+--------+---------------+-------+-------+
|Pharmaceuticals       |   1,249|   1,292|             4%|    596|    661|
+----------------------+--------+--------+---------------+-------+-------+
|Chemicals             |   1,528|   1,406|            -8%|    765|    683|
+----------------------+--------+--------+---------------+-------+-------+
|Plastics              |   1,954|   1,353|           -31%|    995|    724|
+----------------------+--------+--------+---------------+-------+-------+
|Corporate and Business|       0|       0|               |      0|      0|
|Support               |        |        |               |       |       |
+----------------------+--------+--------+---------------+-------+-------+
|REBIT GROUP           |     548|     306|           -44%|    249|    164|
+----------------------+--------+--------+---------------+-------+-------+
|Pharmaceuticals       |     246|     206|           -16%|    111|    115|
+----------------------+--------+--------+---------------+-------+-------+
|Chemicals             |     136|     122|           -10%|     53|     66|
+----------------------+--------+--------+---------------+-------+-------+
|Plastics              |     187|       8|           -96%|     97|      4|
+----------------------+--------+--------+---------------+-------+-------+
|Corporate and Business|     -21|     -30|            45%|    -11|    -22|
|Support               |        |        |               |       |       |
+----------------------+--------+--------+---------------+-------+-------+
|REBITDA GROUP         |     773|     553|           -28%|    362|    291|
+----------------------+--------+--------+---------------+-------+-------+
|Pharmaceuticals       |     297|     261|           -12%|    137|    142|
+----------------------+--------+--------+---------------+-------+-------+
|Chemicals             |     213|     205|            -4%|     91|    108|
+----------------------+--------+--------+---------------+-------+-------+
|Plastics              |     278|     112|           -60%|    142|     60|
+----------------------+--------+--------+---------------+-------+-------+
|Corporate and Business|     -16|     -25|            62%|     -9|    -19|
|Support               |        |        |               |       |       |
+----------------------+--------+--------+---------------+-------+-------+

+-------------------------+------------------+
|                         |2nd quarter 2009 /|
+-------------------------+------------------+
|Million EUR              |  2nd quarter 2008|
+-------------------------+------------------+
|                         |                  |
+-------------------------+------------------+
|                         |              -12%|
+-------------------------+------------------+
|GROUP SALES6             |                  |
+-------------------------+------------------+
|Pharmaceuticals          |               11%|
+-------------------------+------------------+
|Chemicals                |              -11%|
+-------------------------+------------------+
|Plastics                 |              -27%|
+-------------------------+------------------+
|Corporate and Business   |                  |
|Support                  |                  |
+-------------------------+------------------+
|REBIT GROUP              |              -34%|
+-------------------------+------------------+
|Pharmaceuticals          |                4%|
+-------------------------+------------------+
|Chemicals                |               26%|
+-------------------------+------------------+
|Plastics                 |              -95%|
+-------------------------+------------------+
|Corporate and Business   |               89%|
|Support                  |                  |
+-------------------------+------------------+
|REBITDA GROUP            |              -20%|
+-------------------------+------------------+
|Pharmaceuticals          |                4%|
+-------------------------+------------------+
|Chemicals                |               19%|
+-------------------------+------------------+
|Plastics                 |              -58%|
+-------------------------+------------------+
|Corporate and Business   |              117%|
|Support                  |                  |
+-------------------------+------------------+

(1) REBIT: measure of operating performance (this is not an IFRS concept as such)

(2) REBITDA: REBIT, before recurring depreciation.

(3) EBIT: results before financial charges and taxes.

(4) Calculated on the basis of the weighted average of the number of shares in the period, after deduction of own shares purchased to cover the stock option programs, or a total of 82,492,238 shares for six months 2008 and 82,134,172 shares for six months 2009

(5) Results by sector include results from the three sectors of the Group, as well as Corporate and business support. 6 These are sales after elimination of inter-sector sales.

The full press release is available on http://www.solvay-investors.com/

This information is provided by HUGIN


Solvay Investor Relations

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