BRUSSELS, BELGIUM--(Marketwire - May 11, 2010) -
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REGULATED INFORMATION
Operating result from the chemicals and plastics activities (EUR 115 million) significantly higher compared to both the first quarter of 2009 (EUR 64 million) and the fourth quarter of 2009 (EUR 89 million)
- Closing of the sale of the pharmaceuticals activities to Abbott on February 15, 2010 with a net capital gain of EUR 1.7 billion
- Sales (EUR 1,912 million): Not including the pharmaceuticals activities, up by 18% compared to the first quarter of 2009, thanks to a more sustained global activity
- Operating result 1 (EUR 146 million):
- Overall, results benefited from efforts to control costs undertaken in 2009 and before
- Chemicals (EUR 67 million): up by 9% compared to the first quarter of 2009 thanks to improvement in sales volumes across all activities
- Plastics (EUR 59 million): clearly improved compared to the first quarter of 2009 (EUR 7 million) thanks to significant increase in sales volumes in Specialties
- Pharmaceuticals (EUR 31 million from January 1 to February 15, 2010) shown as “discontinued operations”
- Net income of Group (EUR 1,732 million) up compared to the first quarter of 2009 thanks to the capital gain realized on the sale of the pharmaceuticals activities (EUR 1.7 billion net of taxes)
- Ongoing study (" Horizon " project) to optimise effectiveness of the Group’s organisation
Group sales for the first quarter of 2010 amounted to EUR 1,912 million. Not including the pharmaceuticals activities, they were up by 18% compared to the first quarter of 2009. In Chemicals (EUR 682 million), the gradual improvement of sales volumes continued in a context of significantly lower prices than those of the first quarter of 2009, in particular in soda ash and caustic soda. Sales from the Plastics Sector (EUR 917 million) clearly improved (+46% compared to the first quarter of 2009), especially thanks to a significant increase in sales volumes in the “Specialties” cluster, which combines Specialty Polymers and Inergy Automotive Systems. Although all regions of the world were involved, this improvement was particularly notable in Asia. Sales prices of Specialty Polymers remained globally stable.
Recurring Group operating result (REBIT 1-2 ) for the first quarter of 2010 amounted to EUR 146 million. In Chemicals, the operating result (EUR 67 million) improved by 9% compared to the first quarter of 2009. It benefited from higher utilization rates in the context of a more sustained global activity and from energy costs similar to those of the first quarter of 2009 despite the significant increase in the quantities sold (+17%). The operating result in the Plastics Sector (EUR 59 million) clearly improved compared to the first quarter of 2009 (EUR 7 million) and the fourth quarter of 2009 (EUR 30 million). This improvement was primarily due to the continued increase in sales volumes of Specialty Polymers (+37% compared to the first quarter of 2009 and +12% compared to the fourth quarter of 2009).
The Group’s operating margin (REBIT on sales), excluding the pharmaceutical activities, was 7.2% in the first quarter of 2010 compared to 4.7% in the first quarter of 2009.
The net income of the Group (EUR 1,732 million) was up compared to the first quarter of 2009 due to the capital gain realized on the sale of the pharmaceuticals activities (EUR 1.7 billion net of taxes).
REBITDA 1-3 of the Group amounted to EUR 249 million. Excluding the pharmaceuticals activities, it improved by 40% compared to the first quarter of 2009.
Following receipt of the payment for the sale of the pharmaceuticals activities on February 15, 2010 and in anticipation of reinvestment of these funds in industrial activities, the Solvay Group is in a net cash surplus situation (EUR 2,637 million, or 37% of equity). The significant efforts made by the Group last year in terms of cost reduction and cash generation have not, however, been stopped. Thus, the Solvay Group works on a study (the " Horizon " project) targeting to optimize the effectiveness of its organization and to prepare it for its future growth. A cost saving potential, internal and external, estimated to reach up to EUR 120 million by the end of 2012, has been identified. Based on established practices, the one-off costs linked to these can be estimated to reach at least one time the yearly savings.
Chemicals Sector sales (EUR 682 million) from the first quarter of 2010 were down by 6% due to the clearly lower sales prices (-23%) than those of the first quarter of 2009. This decrease mainly involved soda ash and caustic soda. Its impact on sales was partially compensated by the significant increase in sales volumes (+17% compared to the first quarter of 2009). These volumes continued to gradually improve across all activities. Operating result for the Sector (EUR 67 million) was up by 9% compared to the first quarter of 2009 (EUR 61 million). It benefited from the better utilization rates in the context of a more sustained global activity and energy expenses that were under control. The strong integration of the Chemicals Sector in raw materials enables it to avoid a material impact from input cost increases
1 The cost of discounting provisions (16 million EUR on March 31, 2009 and 12 million EUR on March 31, 2010) was transferred to financing rather than operating charges in line with IAS19 considering the financial nature of this item.
2 REBIT: measure of operating performance (this is not an IFRS concept as such)
3 REBITDA: REBIT, before recurring depreciation and amortization
Plastics Sector sales (EUR 917 million) are sharply up (+46% compared to the first quarter and +14% compared to the fourth quarter of last year) thanks to the sharp increase in sales volumes in the “Specialties” cluster, especially Specialty Polymers, while prices remained globally stable. Although all regions of the world were involved, this improvement was particularly notable in Asia. In Vinyls and at Pipelife, market conditions remained difficult in Europe at the start of the year, due to the impact of the crisis on the construction sector and the very harsh weather conditions. Some improvement in demand was, however, observed as of March-April 2010. The operating result for the Sector (EUR 59 million) clearly improved compared to both the first quarter of 2009 (EUR 7 million) and the last quarter of 2009 (EUR 30 million). This improvement derived primarily from the “Specialties” cluster. The operating result for Vinyls, although greater than that of the first quarter of 2009, continued to be penalized by the low level of margins in Europe and Mercosur and by the absence of a resumption of demand in construction in Europe. Significant efforts realized by the Sector in terms of cash generation and cost reduction at all levels showed positive effects and were continued in 2010.
The year 2010 started in the context of demand recovery. Should this improvement be confirmed in the next months, it should allow the Chemicals Sector to realize a recurring operating result in line with that of last year, notwithstanding the price decreases; in Plastics, the volume growth should support REBIT expansion. The priority will this year go to the optimal reinvestment after the disposal of the pharmaceuticals activities.
SOLVAY Group - Summary Financial Information
+-------------------------+--------------------+--------------------+ |Million EUR (except for |1st quarter 2009 |1st quarter 2010 | |per-share figures in EUR)|Total4 |Total4 | +-------------------------+--------------------+--------------------+ |Sales | 1,984| 1,912| +-------------------------+--------------------+--------------------+ |REBIT | 158| 146| +-------------------------+--------------------+--------------------+ |REBIT – continuing | 64| 115| |operations | | | +-------------------------+--------------------+--------------------+ |REBIT – discontinued | 94| 31| |operations | | | +-------------------------+--------------------+--------------------+ |REBIT/Sales | 8.0%| 7.6%| +-------------------------+--------------------+--------------------+ |Non-recurring items | -3| -48| +-------------------------+--------------------+--------------------+ |EBIT5 | 155| 98| +-------------------------+--------------------+--------------------+ |Charges on net | -43| -46| |indebtedness6 | | | +-------------------------+--------------------+--------------------+ |Capital gain Pharma | 0| 1,696| +-------------------------+--------------------+--------------------+ |Earnings before taxes | 112| 1,748| +-------------------------+--------------------+--------------------+ |Income taxes | -14| -16| +-------------------------+--------------------+--------------------+ |Net income of the Group | 98| 1,732| +-------------------------+--------------------+--------------------+ |Net income (Solvay share)| 91| 1,725| +-------------------------+--------------------+--------------------+ |Total depreciation | 130| 131| +-------------------------+--------------------+--------------------+ |REBITDA | 278| 249| +-------------------------+--------------------+--------------------+ |Cash flow | 228| 1,863| +-------------------------+--------------------+--------------------+ |Results per share7 | 1.11| 21.05| +-------------------------+--------------------+--------------------+ |Net debt to equity ratio | 37%| -37%| +-------------------------+--------------------+--------------------+ +-------------------------+--------------------+ |Million EUR (except for |1st quarter 2010 | |per-share figures in EUR)|/1st quarter 2009 | +-------------------------+--------------------+ |Sales | -4%| +-------------------------+--------------------+ |REBIT | -8%| +-------------------------+--------------------+ |REBIT – continuing | +80%| |operations | | +-------------------------+--------------------+ |REBIT – discontinued | ns| |operations | | +-------------------------+--------------------+ |REBIT/Sales | ns| +-------------------------+--------------------+ |Non-recurring items | ns| +-------------------------+--------------------+ |EBIT5 | -37%| +-------------------------+--------------------+ |Charges on net | 8%| |indebtedness6 | | +-------------------------+--------------------+ |Capital gain Pharma | ns| +-------------------------+--------------------+ |Earnings before taxes | ns| +-------------------------+--------------------+ |Income taxes | 14%| +-------------------------+--------------------+ |Net income of the Group | ns| +-------------------------+--------------------+ |Net income (Solvay share)| ns| +-------------------------+--------------------+ |Total depreciation | 1%| +-------------------------+--------------------+ |REBITDA | -10%| +-------------------------+--------------------+ |Cash flow | ns| +-------------------------+--------------------+ |Results per share7 | ns| +-------------------------+--------------------+ |Net debt to equity ratio | | +-------------------------+--------------------+
Notes on Solvay Group summary financial information
Non-recurring items amounted to EUR -48 million in the first quarter of 2010. They included among others a charge of EUR 20 million related to the shutdown of the hydrogen peroxide unit in Bitterfeld.
Charges on net indebtedness amounted to EUR -46 million at the end of March 2010 compared to EUR -43 million at the end of March 2009. Charges on borrowing amounted to EUR 36 million. Gross financial debt is covered at 82% at the average fixed rate of 5.2% with a duration of 6.1 years; the first significant maturity for debt reimbursement will not occur until 2014. Interests on cash deposits and investments amounted to EUR 4 million. It should be recalled that the proceeds from the sale of the pharmaceuticals activities are invested in short duration government bonds and highest rated treasury instruments since February 15 2010. Annual average cash yield in the first quarter of 2010 was 0.44%.
The capital gain realized on the sale of the pharmaceutical activities amounted to EUR 1,696 million.
4 Total = ongoing activities and “discontinued operations” as presented in the “Consolidated Income Statement” table
5 EBIT: results before financial charges and taxes
6 The cost of discounting provisions (16 million EUR on March 31, 2009 and 12 million EUR on March 31, 2010) was transferred to financing rather than operating charges in line with IAS19 considering the financial nature of this item.
7 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 program, or a total of 82,135,264 shares at the end of March 2009 and 81,918,872 shares at the end of March 2010
Income taxes amounted to EUR -16 million compared to EUR -14 million in the first quarter of 2009; compared to results before taxes, they are low due to the low tax level of the capital gain realized on the sale of the pharmaceuticals activities. Excluding this capital gain, the effective tax rate at the end of March 2010 amounted to 31%.
The net income of the Group (EUR 1,732 million) greatly improved compared to the first quarter of 2009 thanks to the capital gain realized on the sale of the pharmaceuticals activities (EUR 1.7 billion, net of taxes). Non-controlling interests amounted to EUR 7 million. The net result per share amounted to 21.05 EUR (compared to 1.11 EUR at the end of March 2009).
The Board of Directors agreed on February 17, 2010 to propose to today’s General Shareholders Meeting the payment of a gross dividend of 2.9333 EUR (2.20 EUR net) per share, stable compared to 2009. Based on the closing price of May 10, 2010 (72.16 EUR), this represents a dividend yield of 4.1% gross and 3.0% net. In addition, it should be recalled that the Group’s dividend policy consists of increasing the dividend whenever possible, and, as far as possible, never reducing it. For 28 years, the dividend has gradually increased and has never been reduced.
RESULTS BY SEGMENT 8
+-------------------------+------------------+------------------+ |Million EUR | 1st quarter 2009| 1st quarter 2010| | | | | +-------------------------+------------------+------------------+ |GROUP SALES9 | 1,984| 1,912| +-------------------------+------------------+------------------+ |Chemicals | 723| 682| +-------------------------+------------------+------------------+ |Plastics | 629| 917| +-------------------------+------------------+------------------+ |Sales – continuing | 1,353| 1,599| |operations | | | +-------------------------+------------------+------------------+ |Pharmaceuticals | 632| 312| |–Discontinued Operations | | | +-------------------------+------------------+------------------+ |REBIT GROUP | 158| 146| +-------------------------+------------------+------------------+ |Chemicals | 61| 67| +-------------------------+------------------+------------------+ |Plastics | 7| 59| +-------------------------+------------------+------------------+ |New Business Development | -6| -6| +-------------------------+------------------+------------------+ |Corporate and Business | 2| -5| |Support | | | +-------------------------+------------------+------------------+ |REBIT – continuing | 64| 115| |operations | | | +-------------------------+------------------+------------------+ |Pharmaceuticals | 94| 31| |–Discontinued Operations | | | +-------------------------+------------------+------------------+ |REBITDA GROUP | 278| 249| +-------------------------+------------------+------------------+ |Chemicals | 102| 111| +-------------------------+------------------+------------------+ |Plastics | 56| 116| +-------------------------+------------------+------------------+ |New Business Development | -5| -6| +-------------------------+------------------+------------------+ |Corporate and Business | 4| -3| |Support | | | +-------------------------+------------------+------------------+ |REBITDA – continuing | 156| 218| |operations | | | +-------------------------+------------------+------------------+ |Pharmaceuticals – | 122| 31| |Discontinued Operations | | | +-------------------------+------------------+------------------+ +-------------------------+------------------+------------------+ +-------------------------+--------------------+ |Million EUR |1st quarter 2010 | | |/1st quarter 2009 | +-------------------------+--------------------+ |GROUP SALES9 | -4%| +-------------------------+--------------------+ |Chemicals | -6%| +-------------------------+--------------------+ |Plastics | 46%| +-------------------------+--------------------+ |Sales – continuing | 18%| |operations | | +-------------------------+--------------------+ |Pharmaceuticals | ns| |–Discontinued Operations | | +-------------------------+--------------------+ |REBIT GROUP | -8%| +-------------------------+--------------------+ |Chemicals | 9%| +-------------------------+--------------------+ |Plastics | ns| +-------------------------+--------------------+ |New Business Development | 4%| +-------------------------+--------------------+ |Corporate and Business | ns| |Support | | +-------------------------+--------------------+ |REBIT – continuing | 80%| |operations | | +-------------------------+--------------------+ |Pharmaceuticals | ns| |–Discontinued Operations | | +-------------------------+--------------------+ |REBITDA GROUP | -10%| +-------------------------+--------------------+ |Chemicals | 9%| +-------------------------+--------------------+ |Plastics | ns| +-------------------------+--------------------+ |New Business Development | 4%| +-------------------------+--------------------+ |Corporate and Business | ns| |Support | | +-------------------------+--------------------+ |REBITDA – continuing | 40%| |operations | | +-------------------------+--------------------+ |Pharmaceuticals – | ns| |Discontinued Operations | | +-------------------------+--------------------+ +-------------------------+--------------------+
It should be noted that the “New Business Development” (NBD) segment in 2009 showed a REBIT of EUR -25 million, constituted for the most part of research costs. Included in 2009 in the “Corporate and Business Support” segment, it has been part of specific reporting since January 1, 2010.
The NBD R&D budget in 2010 amounts to about EUR 30 million.
8 Results by segment include results from the five segments of the Group (until February 15 th 2010 for Pharma).
9 These are sales after elimination of inter-company sales.
The full press release is available on http://www.solvay-investors.com/
ERIK DE LEYE Corporate Press Officer erik.deleye@solvay.com PATRICK VERELST patrick.verelst@solvay.com
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