Earnings Release • Oct 29, 2015
Earnings Release
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For comparison purposes and unless otherwise indicated, all historic data are restated for perimeter changes.
Besides IFRS accounts, Solvay also presents Adjusted Income Statement performance indicators that exclude non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia acquisition.
29/10/2015 7:00 AM CET
Solvay delivered a strong performance in the third quarter, evidencing the impact of the Group's transformation. Good organic growth was a result of our broad and global portfolio, our consistent focus on innovation, excellence and in particular sustained pricing power across our businesses, despite continuing weakness in some of the markets we serve. The results also benefited from favorable exchange rates.
Our transformation will continue with the acquisition of Cytec, which we expect to conclude by year end 2015. We are mobilizing for a rapid and effective integration process and synergy realization. We are confident and enthusiastic about the value creation from this combination, which will drive the next phase of our growth.
Results in the fourth quarter are expected to moderate compared to the third quarter due to seasonal factors. Solvay reconfirms its expectation of solid REBITDA growth in full year 2015.
| Key data | Adjusted | IFRS | ||||
|---|---|---|---|---|---|---|
| (in € m) | Q3 2015 | Q3 2014 | % yoy | Q3 2015 | Q3 2014 | % yoy |
| Net sales | 2,714 | 2,585 | 5.0% | 2,714 | 2,585 | 5.0% |
| REBITDA | 524 | 458 | 14% | |||
| REBITDA margin | 19% | 18% | 157bp | |||
| Non-recurring items | (61) | (30) | n.m. | (61) | (30) | n.m. |
| EBIT | 242 | 254 | (4.5)% | 215 | 226 | (5.0)% |
| Net financial charges | (48) | (68) | 29% | (48) | (68) | 29% |
| Result before taxes | 194 | 186 | 4.5% | 167 | 158 | 5.5% |
| Income taxes | (58) | (68) | 14% | (49) | (58) | 16% |
| Result from continuing operations |
136 | 118 | 15% | 118 | 100 | 18% |
| Result from discontinued operations | (3) | 23 | n.m. | (3) | 23 | n.m. |
| Net income | 133 | 141 | (5.9)% | 115 | 123 | (6.5)% |
| Non-controlling interests | (12) | (8) | (46)% | (12) | (8) | (46)% |
| Net income Solvay share | 121 | 133 | (9.0)% | 103 | 115 | (10)% |
| Basic EPS (in €) | 1.46 | 1.60 | (8.8)% | 1.24 | 1.38 | (10)% |
| Free Cash Flow | 188 | 122 | 54% | 188 | 122 | 54% |
| Capex | (231) | (239) | 3.4% | (231) | (239) | 3.4% |
| Capex in continuing operations | (223) | (205) | (8.7)% | (223) | (205) | (8.7)% |
Net sales grew 5% year on year to € 2,714 m thanks to the positive net conversion impact of foreign exchange rate fluctuations resulting mainly from the appreciation of the U.S. dollar versus the euro. The consolidation of Ryton® PPS and Flux in Advanced Materials, had a positive scope impact of 1%. Volumes were down (1)% overall compared to last year, as the significantly reduced demand in Novecare and Acetow outweighed robust growth in Specialty Polymers, and to a lesser extent in Soda Ash & Derivatives, Emerging Biochemicals and Aroma Performance. The sharp contraction in the North American oil & gas exploration industry continued to significantly impact Novecare's sales volumes. On the other hand, a sequential improvement was recorded in sales of acetate tow from the through in the first year half, but destocking in the market still affects the year-on-year comparison. Demand dynamics for Solvay's innovation-driven products remained strong as demonstrated by the continued success of Specialty Polymers. Prices were flat, as price increases in Soda Ash & Derivatives as well as positive transactional forex effects, neutralized the impact of raw material price decreases on pricing in Polyamide and Emerging Biochemicals, as well as Novecare, Coatis and Aroma Performance.
REBITDA increased 14% compared to the third quarter of 2014, reaching € 524 m. The REBITDA margin widened to 19% of net sales, up 157 basis points. The slightly lower volumes had an overall (3)% impact on REBITDA. Scope changes had no material impact. Fixed costs were up € (17) m mainly due to the start-up of new sites in the year. Solvay managed to offset Inflation by operational excellence measures. About half of the increase, i.e. 8%, is linked to the net conversion forex effect of € 37 m, which is lower than in previous quarters as the year-on-year delta on the U.S. dollar exchange rate and to a lesser extent the Chinese yuan lessened. Moreover, the significant devaluation of the Brazilian real and the Russian ruble had a negative impact on conversion. The transactional forex effect, which impacts results with a delay due to Solvay's hedging policy, increased to € 25 m from € 16 m in the second quarter. Net pricing efforts, which include the aforementioned transactional forex effect, had a positive impact on REBITDA of 13% or € 58 m. Solvay's pricing power was evident across all operating segments, and especially in Performance Chemicals and Functional Polymers, as well as in Specialty Polymers, benefiting from lower raw material and energy prices complemented by excellence delivery.
Non-recurring Items were € (61) m versus € (30) m a year earlier, mostly linked to the Cytec acquisition and principally to the structuring of the bridge financing for € (43) m in total, consisting of non-cash contingent hedging costs and underwriting fees. Restructuring expenses were € (13) m, € (3) m more than a year ago.
EBIT on an adjusted basis was down 5% to € 242 m. Besides amortization and depreciation charges of € (183) m, it included € (37) m adjustments mostly related to financial charges of the RusVinyl joint venture, which include forex losses on euro-denominated debt. EBIT on an IFRS basis totaled € 215 m. The difference between IFRS and adjusted figures reflects the Rhodia non-cash purchase price allocation (PPA) depreciation impact of € (27) m.
Net Financial Expenses fell to € (48) m from € (68) m in the same quarter last year. Charges on net debt were stable at € (30) m. The cost of discounting provisions for pension and environmental liabilities decreased to € (18) m from € (38) m a year ago, mainly due to the € 6 m one-off effect on environmental liabilities resulting from higher discount rates in Brazil, whereas last year € (7) m was booked as discount rates reduced in Brazil and the U.K.
Income Taxes on an adjusted basis decreased to € (58) m, from € (68) m in the third quarter of 2014, mainly as a result of prior years-related tax adjustments. Year to date the nominal tax rate including exceptional items was 35%, the underlying tax rate decreased to 29%, in line with the previous quarter, versus 33% for the full year in 2014.
Net result from continued operations on an adjusted basis was € 136 m against € 118 m in the same quarter in 2014. Discontinued operations reported a net loss of € (3) m against a net profit of € 23 m in 2014. Discontinued operations in 2014 included Eco Services, which was sold at end 2014, and the European chlorovinyls business, which is part of INOVYN since July 1, 2015. The remaining activity is the Indupa chlorovinyls business in Latin America, which was affected by adverse market circumstances. The Net Income Solvay Share on an adjusted basis came in at € 121 m compared with € 133 m in 2014. Adjusted basic earnings per share amounted to € 1.46. Net Income Solvay Share on an IFRS basis was € 103 m versus € 115 m in 2014. Net Income Solvay Share excluding exceptional items amounted to € 176 m versus € 180 m in the third quarter of last year (cfr. Factors impacting Net income on page 13).
Interim gross dividend of € 1.36 per share will be payable to shareholders on January 21, 2016. The total dividend, to be announced in February 2016, will be adjusted to reflect the distribution of rights during the contemplated capital increase, as is customary for transactions of this type.
Free Cash Flow rose to € 188 m from € 122 m in the same quarter of 2014. Free Cash Flow from continuing operations increased to € 181 m from € 116 m last year. Higher REBITDA more than offset the increase in capital investments to € (223) m from € (205) m in 2014, linked to forex. The cash outflow from movements in industrial working capital decreased to € (46) m compared to € (53) m the year before. The contribution from discontinued operations remained largely flat at € 7 m.
Other cash flow elements encompassed acquisitions and divestments, which impacted net debt for € 8 m, including the impacts of the creation of INOVYN and expenses related to the Cytec acquisition. Up front net proceeds from INOVYN of € 150 m were adjusted for cash transfers and other financial flows with the joint venture, as well as divestment costs, totaling € (92) m, and also include a payment for the acquisition of minority interest in Solvin. Other elements comprise interest and dividend related cash-outs of € (33) m, and the acquisition of treasury shares for € (65) m to cover outstanding stock options.
Net debt consequently decreased to € 1,473 m, from € 1,608 m at the end of the second quarter.
Solvay's transformation is making a step-change with the planned acquisition of U.S. based Cytec, the world's second largest player in composite materials for the aerospace industry, for an enterprise value of \$ 6.4 bn. With this acquisition, unanimously backed by the boards of both companies, Solvay will extend its applications of lightweighting advanced materials to replace metals and reduce fuel and CO2 emissions in transportation. The acquisition is progressing according to schedule for an expected completion by the end of this year and following regulatory and shareholder approvals. Meanwhile, both companies are actively working on integration plans to facilitate a swift and efficient combination and synergy realization once the acquisition is closed.
Specialty Polymers began producing fluoro-elastomers (FKM), used in sealing applications, at its new plant in Changshu, China, to meet strongly growing demand for its high-tech polymers from Asia's automotive industry and many other high-end markets. At the same site, Specialty Polymers is constructing a polyvinylidene fluoride (PVDF) production unit which will come on stream in early 2017 to supply the Solef® thermoplastic. Solvay's operations at Changshu already include compounding, based on its specialty polymers resins.
Soda Ash & Derivatives launched production at its sodium bicarbonate (BICAR® ) plant at its existing Map Ta Phut Industrial Estate in Thailand. Its production capacity of 100,000 tons per year makes it South-East Asia's largest bicarbonate plant, addressing demand growth for healthcare, food and other consumer goods. It takes Solvay's total number of bicarbonate plants to nine worldwide. The plant uses Solvay's new generation BICAR® production technology which reduces waste, optimizes energy recovery and maximizes yield.
Solvay and Umicore have sold their SolviCore stakes to Japanese chemical company Toray, to focus on their respective upstream fuel cell material businesses. Solvay remains committed to the energy storage market and has a range of specialty materials serving not only fuel cells, but also batteries in electronic and automotive applications.
In addition, Solvay expects to shortly announce the closing of the sale of its European precipitated calcium carbonate (PCC) production sites in Germany, Austria, France and the U.K. to IMERYS.
Solvay and L'Oréal have teamed up in a scalable three-year project to teach and promote sustainable agricultural practices among 1,500 guar bean farmers across ten villages in India's desert region of Bikaner, Rajasthan state. Solvay is a world leader in the supply of guar derivative formulations into a variety of applications such in the food, cosmetics, oil & gas extraction and textile industries.
Solvay and L'Oréal have teamed up in a scalable three-year project to teach and promote sustainable agricultural practices among 1,500 guar bean farmers across ten villages in India's desert region of Bikaner, Rajasthan state. Solvay's initiative aims to empower farmers with the tools and knowledge to cultivate the guar crop through good agricultural practices, resulting in more continuous, high-yield production. NGO Technoserve experts train farmers and show how sustainable farming practices can be practically implemented.
| (in € m) | Q3 2015 | Q3 2014 | % yoy | 9M 2015 | 9M 2014 | % yoy |
|---|---|---|---|---|---|---|
| Net sales | 2,714 | 2,585 | 5.0% | 8,036 | 7,639 | 5.2% |
| Advanced Formulations | 655 | 735 | (11)% | 2,038 | 2,122 | (4.0)% |
| Advanced Materials | 874 | 712 | 23% | 2,522 | 2,041 | 24% |
| Performance Chemicals | 806 | 743 | 8.5% | 2,313 | 2,184 | 5.9% |
| Functional Polymers | 377 | 394 | (4.5)% | 1,158 | 1,291 | (10)% |
| Corporate & Business Services | 3 | 1 | n.m. | 5 | - | n.m. |
| REBITDA | 524 | 458 | 14% | 1,526 | 1,369 | 11% |
| Advanced Formulations | 98 | 107 | (8.3)% | 294 | 317 | (7.3)% |
| Advanced Materials | 236 | 187 | 26% | 651 | 538 | 21% |
| Performance Chemicals | 211 | 194 | 9.0% | 591 | 534 | 11% |
| Functional Polymers | 44 | 21 | n.m. | 119 | 96 | 24% |
| Corporate & Business Services | (66) | (50) | (32)% | (129) | (116) | (11)% |
| REBITDA margin | 19% | 18% | 157bp | 19% | 18% | 107bp |
| Advanced Formulations | 15% | 15% | 41bp | 14% | 15% | (52)bp |
| Advanced Materials | 27% | 26% | 79bp | 26% | 26% | (55)bp |
| Performance Chemicals | 26% | 26% | 12bp | 26% | 24% | 113bp |
| Functional Polymers | 12% | 5.2% | 656bp | 10% | 7.5% | 283bp |
| (in € m) | Q3 2015 | Q3 2014 | % yoy | 9M 2015 | 9M 2014 | % yoy |
|---|---|---|---|---|---|---|
| Net sales | 655 | 735 | (11)% | 2,038 | 2,122 | (4.0)% |
| Novecare | 466 | 525 | (11)% | 1,452 | 1,513 | (4.1)% |
| Coatis | 100 | 127 | (22)% | 318 | 368 | (14)% |
| Aroma Performance | 89 | 82 | 8.5% | 268 | 241 | 11% |
| REBITDA | 98 | 107 | (8.3)% | 294 | 317 | (7.3)% |
| REBITDA margin | 15% | 15% | 41bp | 14% | 15% | (52)bp |
Net Sales decreased (11)% from the same quarter last year and (4)% sequentially to € 655 m. As headwinds in the unconventional oil & gas markets in North America persisted, volumes were down some (15)% year on year, similar to the second quarter. The favorable impact of forex decreased sequentially, however, also as Coatis' sales were impacted by the devaluation of the Brazilian real. Aroma Performance sales were up compared to last year.
REBITDA fell (8)% year-on-year to € 98 m in the quarter, down (2)% sequentially. Supportive forex and net pricing, as well as increased volume at Aroma Performance, were insufficient to compensate for the volume contraction in Novecare's unconventional oil & gas markets.
Novecare sales were down (11)% compared to the third quarter of 2014, with volumes down some (23)%. The year-on-year decrease is higher than in the second quarter of this year, as sales in 2014 peaked in the second half of the year. The oil price volatility further affected the supply chain in the unconventional North American oil & gas markets, and has led to irregular order patterns in the stimulation, drilling and cementing subsectors. Sales of formulations used in the production subsector proved more resilient. The competitiveness actions that Novecare put in place mitigated pressure on price and lowered the fixed cost base.
Business developments in Novecare's other endmarkets were satisfactory. While volumes were overall stable, net pricing supported higher results, especially in the agro, coatings and home & personal care businesses.
Coatis' sales volumes remained stable compared to 2014. Although the activity levels in Brazil remained subdued, the strong devaluation of the Brazilian real had a positive impact on transactional net pricing, and improved competitiveness, as well as lowering pressure from imports.
Aroma Performance sales were well up thanks to volume growth, especially in Solvay's vanillin formulations. Demand also increased in performance solutions, notably for hydroquinone inhibitors. The improvement demonstrates the progress of the business following the production outages experienced in 2014.
Yet another record REBITDA in Q3 at € 236 m, up 26% yoy and 10% sequentially;
Spurred by the strong innovation-driven volume growth especially in Specialty Polymers.
| (in € m) | Q3 2015 | Q3 2014 | % yoy | 9M 2015 | 9M 2014 | % yoy |
|---|---|---|---|---|---|---|
| Net sales | 874 | 712 | 23% | 2,522 | 2,041 | 24% |
| Specialty Polymers | 519 | 392 | 32% | 1,445 | 1,099 | 31% |
| Silica | 129 | 115 | 12% | 388 | 338 | 15% |
| Special Chem | 226 | 205 | 10% | 689 | 603 | |
| REBITDA | 236 | 187 | 26% | 651 | 538 | 21% |
| REBITDA margin | 27% | 26% | 79bp | 26% | 26% | (55)bp |
Net sales totaled € 874 m, an increase by 23% from the third quarter in 2014 and 4% from quarter to quarter. The increase was supported by strong volumes, up 8% year on year, while prices remained stable overall. Favorable foreign exchange developments represented 9%. The remaining 4% is explained by scope effects, with the acquisition of Ryton® PPS and Flux Schweiß- & Lötstoffe at the end of 2014.
REBITDA rose 26% yoy and 10% sequentially to € 236 m, reflecting volume growth in all GBUs and especially in Specialty Polymers. The segment continued to benefit from the supportive forex impact on conversion and on net pricing.
Specialty Polymers reported significant sales growth and a widening of net pricing. The primary growth drivers were sales to smart device manufacturers, which nearly doubled compared to the third quarter last year. This increase reflects the growing demand for Solvay's applications coupled with irregular order patterns that characterizes this sector. Sales volumes were up as well in the automotive and some industrial sectors, illustrating the success of Solvay's broad polymer portfolio. Net pricing increased, as prices of oil-based derivatives decreased and the impact on the GBU comes with a certain delay for more downstream raw materials. The Ryton® PPS integration progressed well. The first phase of the greenfield
fluoropolymers plant in China was finalized and the production of FKM fluoro-elastomers has started.
Silica's performance was steady, with an overall volume increase offset by unfavorable net price effects. Sustained demand growth for energy-efficient tires in North-America and Europe, more than offset volume decreases in Asia, where signs of a slowdown in the automotive sector are evident, especially in China. The new state-of-the-art 85,000 tonnes plant in Poland, started in the second quarter, has been in qualification in the third quarter, to serve the Central and Eastern Europe tire industry from the fourth quarter onwards.
Special Chem recorded good volume growth in mixed rare earths oxides for automotive catalysis, fluor specialties and electronic chemicals, the latter benefiting from the ramp-up of the electronic-grade H2O2 expansion in the U.S. Pressure on prices was mitigated by operational excellence measures. The sale of Solvay's PCC business to IMERYS is nearing completion.
Q3 REBITDA was € 211 m, up 9% yoy, thanks to sustained higher yoy net pricing in Peroxides and Soda Ash & Derivatives especially;
Overall positive foreign exchange developments and lower fixed costs in Acetow and Emerging Biochemicals, resulting from excellence programs, offset the negative yoy volume impact in Acetow.
| (in € m) | Q3 2015 | Q3 2014 | % yoy | 9M 2015 | 9M 2014 | % yoy |
|---|---|---|---|---|---|---|
| Net sales | 806 | 743 | 8.5% | 2,313 | 2,184 | 5.9% |
| Soda Ash & Derivatives | 403 | 352 | 15% | 1,172 | 1,019 | 15% |
| Peroxides | 152 | 135 | 13% | 422 | 380 | 11% |
| Acetow | 138 | 153 | (9.9)% | 395 | 483 | (18)% |
| Emerging Biochemicals | 112 | 103 | 9.5% | 325 | 303 | 7.3% |
| REBITDA | 211 | 194 | 9.0% | 591 | 534 | 11% |
| REBITDA margin | 26% | 26% | 12bp | 26% | 24% | 113bp |
Net sales grew to € 806 m, 9% up year on year and 7% up versus the second quarter of this year. Favorable foreign exchange movements and price increases, for 2% and 4% respectively, more than compensated for lower volumes as the destocking in the acetate tow market persisted, although improving sequentially from a low point in the first year half.
REBITDA came at € 211 m, a 9% increase from the same quarter in 2014 (14% sequentially), thanks to the positive impact of net pricing in Soda Ash & Derivatives and Peroxides versus 2014. Favorable currencies and fixed cost reductions compensated for a negative volume mix impact.
Soda Ash & Derivatives' performance was up year on year, supported by prices well above the levels of 2014. Volume developments were flat overall, as growth for soda ash in Europe and the seaborne market, as well as higher bicarbonate sales, offset lower soda ash sales in North America. Increased commercial pressure of Chinese exporters on the South-East Asian seaborne market had a limited impact on Solvay's sales in the region. Bicarbonate sales were up, reflecting the growing success of Solvay's BICAR® applications. The greenfield bicarbonate plant in Thailand, opened in September, is gradually ramping up production and is in qualification.
Peroxides benefited from net pricing gains, with average sales prices up versus last year and energy prices down. Sales volumes were stable overall, as slightly weaker volumes to the traditional wood pulp market in North America, were balanced by higher throughput in Solvay's HPPO mega plants, which continue to operate at high capacity rates.
Acetow's performance continued to be dampened by the acetate tow market contraction, but showed a significant sequential improvement. Although the yearon-year drop in volumes softened compared to the previous quarter, destocking still remains a feature in the current market, despite the industry adjustments. Pricing effects were net positive, mainly as a result of transactional forex, namely on the Brazilian real and the Russian ruble. Fixed costs came down as a result of excellence measures implemented earlier in the year.
Emerging Biochemicals' performance benefited from higher volumes and favorable forex. Net pricing improved as ethylene prices dropped following the end of the shortage in South East Asia, further supported by forex. Epicerol® volumes and net pricing were stable, despite the difficult market circumstances in the region.
Q3 REBITDA at € 44 m, doubling yoy and in line with Q2, primarily linked to strengthened net pricing in Polyamide;
Favorable market conditions for RusVinyl JV result in higher REBITDA contribution.
| (in € m) | Q3 2015 | Q3 2014 | % yoy | 9M 2015 | 9M 2014 | % yoy |
|---|---|---|---|---|---|---|
| Net sales | 377 | 394 | (4.5)% | 1,158 | 1,291 | (10)% |
| Polyamide | 368 | 382 | (3.6)% | 1,126 | 1,180 | (4.6)% |
| Chlorovinyls | 9 | 13 | (30)% | 32 | 110 | (71)% |
| REBITDA | 44 | 21 | n.m. | 119 | 96 | 24% |
| REBITDA margin | 12% | 5.2% | 656bp | 10% | 7.5% | 283bp |
Net sales fell (4)% to € 377 m, (5)% lower than in the second quarter, mainly as a result of (4)% lower prices and a (2)% impact from conversion forex linked to Fibras, Solvay's polyamide yarn business in Brazil. Volumes were up 1%.
REBITDA came in at € 44 m, more than doubling compared to the € 21 m in the third quarter of 2014 and largely in line with the performance in the second quarter of this year. There was a strong benefit from net pricing, whereas the net volume and mix impacts were neutral. A good contribution was recorded in equity earnings from the RusVinyl joint venture.
Polyamide's operating performance was well up compared to the third quarter of 2014. Net pricing was positive due to the ability of the business to retain part of the benefit of lower raw material prices.
Solid volume growth was recorded for PA 6.6 polymers in Polyamide & Intermediates. Sales of adipic acid, however, were more subdued in an oversupplied market. Volume growth of more downstream Engineering Plastics in Europe was offset by a slowdown in Asia and Latin America. Fibras continued to suffer from poor economic conditions in its home market, but benefited from a reduced cost base following the implementation of operational excellence programs.
Chlorovinyls benefited from the increased net earnings contribution of RusVinyl, Solvay's PVC joint venture in Russia. This was the result of favorable
market conditions in its Russian home market, replacing expensive imports. The year-on-year increase is helped by easy comparables as the plant was in full start-up a year earlier, bearing the related costs.
Since July 1, the European chlorovinyls activities are part of the INOVYN joint venture with INEOS. Solvay will exit this joint venture in three years for an exit fee conditional on reaching certain performance targets. The contribution to Solvay's earnings in these three years will be limited to a mark-to-market valuation of the exit value. No significant impact was registered in the third quarter.
Discontinued operations now only include Indupa, the Latin-American chlorovinyls activities. Indupa's results continued to be affected by the challenging market conditions in its home market. A net loss of € (3) m was recorded in the quarter.
Corporate and Business Services REBITDA at € (66) m, € (16) m more than in 2014 largely as a result of adverse currency effects, and a one-off impairment on CERs.
| (in € m) | Q3 2015 | Q3 2014 | % yoy | 9M 2015 | 9M 2014 | % yoy |
|---|---|---|---|---|---|---|
| REBITDA | (66) | (50) | (32)% | (129) | (116) | (11)% |
Net REBITDA costs widened to € (66) m, € (16) m higher compared to the second quarter of 2014.
Energy Services recorded a negative REBITDA, following a one-off impairment of € (7) m on outstanding carbon emission rights in Brazil, which are now unlikely to be monetized in the future. The contribution from energy and carbon management services was lower year on year as the arbitrage opportunities that the unit benefited from in 2014 did not repeat.
Other Corporate & Business Services at € (58) m on REBITDA level, € (3) m more than last year, reflecting the adverse impact of exchange rates and inflation offset by continued cost reductions.
Solvay has recorded a number of exceptional items that distort the comparability of the Group's underlying performance. Net results excluding such exceptional items are deemed to provide a more complete and comparable indication of Solvay's fundamental performance over the reference periods.
| Net income | ||||||
|---|---|---|---|---|---|---|
| (in € m) | Q3 2015 | Q3 2014 | % yoy | 9M 2015 | 9M 2014 | % yoy |
| IFRS Net income, Solvay share | 103 | 115 | (10)% | 368 | (110) | n.m. |
| Rhodia PPA (after tax) | 18 | 18 | (1.1)% | 54 | 58 | (6.8)% |
| Adjusted Net income, Solvay share |
121 | 133 | (9.0)% | 422 | (53) | n.m. |
| Non-recurring items | 61 | 30 | n.m. | 126 | 106 | 18% |
| M&A related impacts (Chemlogics, Flux, Ryton) |
14 | 10 | 33% | 43 | 34 | 26% |
| Net financial charges (e.g. discount rate changes, debt management impacts) |
- | 6 | n.m. | 10 | 50 | (81)% |
| Adjustments RusVinyl | - | - | n.m. | 20 | - | n.m. |
| Discontinued operations | 4 | 6 | (39)% | 8 | 507 | n.m. |
| Exceptional Tax and Tax related to exceptional items |
(24) | (5) | n.m. | (8) | (47) | 84% |
| Non-controlling interests on exceptional items |
(1) | (1) | 30% | (7) | (48) | 85% |
| Adjusted Net income, Solvay share, excluding exceptionals |
176 | 180 | (2.4)% | 614 | 549 | 12% |
| Adjusted | IFRS | ||||
|---|---|---|---|---|---|
| (in € m) | Q3 2015 | Q3 2014 | Q3 2015 | Q3 2014 | |
| Sales | 2,827 | 2,688 | 2,827 | 2,688 | |
| Revenues from non-core activities | 113 | 103 | 113 | 103 | |
| Net sales | 2,714 | 2,585 | 2,714 | 2,585 | |
| Cost of goods sold | (2,098) | (2,037) | (2,098) | (2,037) | |
| Gross margin | 730 | 651 | 730 | 651 | |
| Commercial & administrative costs | (326) | (303) | (326) | (303) | |
| Research & innovation costs | (67) | (62) | (67) | (62) | |
| Other operating gains & losses | (12) | 6 | (39) | (22) | |
| Earnings from associates & joint ventures accounted for using the equity method |
(21) | (8) | (21) | (8) | |
| Non-recurring items | (61) | (30) | (61) | (30) | |
| EBIT | 242 | 254 | 215 | 226 | |
| Cost of borrowings | (25) | (30) | (25) | (30) | |
| Interest on loans & short-term deposits | 2 | 3 | 2 | 3 | |
| Other gains & losses on net indebtedness | (8) | (2) | (8) | (2) | |
| Cost of discounting provisions | (18) | (38) | (18) | (38) | |
| Result before taxes | 194 | 186 | 167 | 158 | |
| Income taxes | (58) | (68) | (49) | (58) | |
| Result from continuing operations | 136 | 118 | 118 | 100 | |
| Result from discontinued operations | (3) | 23 | (3) | 23 | |
| Net income | 133 | 141 | 115 | 123 | |
| Non-controlling interests | (12) | (8) | (12) | (8) | |
| Net income Solvay share | 121 | 133 | 103 | 115 | |
| Basic EPS from continuing operations (in €) | 1.49 | 1.35 | 1.27 | 1.13 | |
| Basic EPS (in €) | 1.46 | 1.60 | 1.24 | 1.38 | |
| Diluted EPS from continuing operations (in €) | 1.47 | 1.34 | 1.26 | 1.12 | |
| Diluted EPS (in €) | 1.44 | 1.58 | 1.23 | 1.37 |
| Adjusted | IFRS | |||
|---|---|---|---|---|
| (in € m) | 9M 2015 | 9M 2014 | 9M 2015 | 9M 2014 |
| Sales | 8,374 | 7,935 | 8,374 | 7,935 |
| Revenues from non-core activities | 338 | 296 | 338 | 296 |
| Net sales | 8,036 | 7,639 | 8,036 | 7,639 |
| Cost of goods sold | (6,241) | (6,011) | (6,241) | (6,011) |
| Gross margin | 2,133 | 1,924 | 2,133 | 1,924 |
| Commercial & administrative costs | (985) | (889) | (985) | (889) |
| Research & innovation costs | (204) | (181) | (204) | (181) |
| Other operating gains & losses | 8 | 16 | (74) | (66) |
| Earnings from associates & joint ventures accounted for using the equity method |
(8) | 9 | (8) | 9 |
| Non-recurring items | (126) | (106) | (126) | (106) |
| EBIT | 819 | 773 | 737 | 691 |
| Cost of borrowings | (81) | (121) | (81) | (121) |
| Interest on loans & short-term deposits | 7 | 33 | 7 | 33 |
| Other gains & losses on net indebtedness | (27) | (28) | (27) | (28) |
| Cost of discounting provisions | (66) | (124) | (66) | (124) |
| Result before taxes | 652 | 533 | 570 | 451 |
| Income taxes | (232) | (175) | (204) | (148) |
| Result from continuing operations | 420 | 358 | 366 | 302 |
| Result from discontinued operations | 50 | (427) | 50 | (429) |
| Net income | 470 | (69) | 416 | (127) |
| Non-controlling interests | (48) | 16 | (48) | 16 |
| Net income Solvay share | 422 | (53) | 368 | (110) |
| Basic EPS from continuing operations (in €) | 4.63 | 3.96 | 3.98 | 3.29 |
| Basic EPS (in €) | 5.07 | (0.63) | 4.43 | (1.32) |
| Diluted EPS from continuing operations (in €) | 4.59 | 3.93 | 3.95 | 3.26 |
| Diluted EPS (in €) | 5.02 | (0.63) | 4.39 | (1.31) |
| (in € m) | Q3 2015 | Q3 2014 | 9M 2015 | 9M 2014 |
|---|---|---|---|---|
| EBIT (IFRS) | 215 | 226 | 737 | 691 |
| Non-recurring items (-) | 61 | 30 | 126 | 106 |
| Amortization of Rhodia PPA on fixed assets | 27 | 27 | 82 | 82 |
| IFRS depreciation & amortization (recurring) excluding Rhodia PPA |
183 | 163 | 534 | 473 |
| Adjustments of Chemlogics and Ryton inventories at Fair Value (PPA) & holdback payments |
3 | 2 | 9 | 9 |
| Rusvinyl adjustments (in equity earnings) | 34 | 8 | 39 | 7 |
| REBITDA (key performance indicator monitored by management) |
524 | 458 | 1,526 | 1,369 |
The quarterly net adjustment related to Rusvinyl reflects the financial impact resulting from interest on debt and foreign exchange volatility, which combined amounted to € (34) m, impacting the equity value. The year-to-date net adjustment related to Rusvinyl reflects the financial impact resulting from interest on debt and foreign exchange volatility and the adjustment of € (20) m posted in Q1 2015 to reassess the recoverable amount of the investment, which combined amounted to € (39) m, impacting the equity value.
| (in € m) | Q3 2015 | Q3 2014 | 9M 2015 | 9M 2014 |
|---|---|---|---|---|
| Net income | 115 | 123 | 416 | (127) |
| Other comprehensive income | ||||
| Recyclable items | ||||
| Hyperinflation | 7 | 2 | 21 | (14) |
| Gains & losses on available-for-sale financial assets | 2 | 1 | 4 | - |
| Gains & losses on hedging instruments in a cash flow hedge |
(28) | (37) | (22) | (39) |
| Currency translation differences | (168) | 233 | 103 | 270 |
| Non-recyclable items | ||||
| Remeasurement of the net defined benefit liability | 87 | (182) | 285 | (331) |
| Income tax relating to items of other comprehensive income |
25 | 19 | (19) | 48 |
| Other comprehensive income, net of related tax effects | (76) | 37 | 372 | (65) |
| Total Comprehensive income | 39 | 160 | 788 | (191) |
| attributed to Solvay share | 36 | 144 | 728 | (191) |
| attributed to non-controlling interests | 3 | 16 | 60 | - |
| (in € m) | 30/09/2015 | 31/12/2014 |
|---|---|---|
| Non-current assets | 11,985 | 11,529 |
| Intangible assets | 1,480 | 1,543 |
| Goodwill | 3,201 | 3,151 |
| Tangible assets | 5,623 | 5,386 |
| Available-for-sale financial assets | 42 | 43 |
| Investments in joint ventures & associates – equity method | 363 | 380 |
| Other investments | 84 | 121 |
| Deferred tax assets | 710 | 710 |
| Loans & other non-current assets | 482 | 194 |
| Current assets | 5,309 | 6,365 |
| Inventories | 1,521 | 1,420 |
| Trade receivables | 1,575 | 1,418 |
| Income tax receivables | 69 | 52 |
| Dividends receivable | - | 1 |
| Other current receivables – Financial instruments | 89 | 309 |
| Other current receivables – Other | 632 | 500 |
| Cash & cash equivalents | 1,132 | 1,251 |
| Assets held for sale | 291 | 1,414 |
| TOTAL ASSETS | 17,294 | 17,894 |
| Total equity | 7,227 | 6,778 |
| Share capital | 1,271 | 1,271 |
| Reserves | 5,686 | 5,293 |
| Non-controlling interests | 271 | 214 |
| Non-current liabilities | 5,518 | 6,088 |
| Long-term provisions: employees benefits | 2,871 | 3,166 |
| Other long-term provisions | 810 | 854 |
| Deferred tax liabilities | 368 | 378 |
| Long-term financial debt | 1,243 | 1,485 |
| Other non-current liabilities | 227 | 204 |
| Current liabilities | 4,549 | 5,029 |
| Other short-term provisions | 347 | 308 |
| Short-term financial debt | 1,451 | 853 |
| Trade liabilities | 1,354 | 1,461 |
| Income tax payable | 173 | 355 |
| Dividends payable | 3 | 114 |
| Other current liabilities | 933 | 776 |
| Liabilities linked to assets held for sale | 287 | 1,162 |
| TOTAL EQUITY & LIABILITIES | 17,294 | 17,894 |
| Revaluation reserve (fair value) |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Share capital | Issue premiums | Treasury shares | Hybrid bonds | Retained earnings | Currency translation differences |
Available-for-sale financial assets |
Cash flow hedges | Defined benefit pension plans |
Total reserves | Non-controlling interests | Total equity | |
| (in € m) Balance at 31/12/2013 |
1,271 | 18 | (132) | 1,194 | 5,987 | (770) | (5) | 6 | (493) | 5,804 | 378 | 7,453 |
| Net profit for the period |
- | - | - | - | (110) | - | - | - | - | (110) | (16) | (127) |
| Items of OCI | - | - | - | - | (10) | 251 | - | (35) | (288) | (81) | 17 | (65) |
| Comprehensive income |
- | - | - | - | (120) | 251 | - | (35) | (288) | (191) | - | (191) |
| Cost of stock options | - | - | - | - | 8 | - | - | - | - | 8 | - | 8 |
| Dividends | - | - | - | - | (157) | - | - | - | - | (157) | (3) | (160) |
| Hybrid bond dividends | - | - | - | - | (15) | - | - | - | - | (15) | - | (15) |
| Sale (acquisition) of treasury shares |
- | - | (8) | - | - | - | - | - | - | (8) | - | (8) |
| Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control |
- | - | - | - | (10) | - | - | - | - | (10) | (51) | (62) |
| Balance at 30/09/2014 | 1,271 | 18 | (140) | 1,194 | 5,693 | (519) | (5) | (29) | (781) | 5,431 | 323 | 7,025 |
| Balance at 31/12/2014 | 1,271 | 18 | (171) | 1,194 | 5,753 | (527) | (4) | (43) | (926) | 5,293 | 214 | 6,778 |
| Net profit for the period |
- | 265 | 265 | 36 | 301 | |||||||
| Items of OCI | - | - | - | - | 13 | 252 | 2 | 4 | 155 | 426 | 22 | 448 |
| Comprehensive income |
- | - | - | - | 278 | 252 | 2 | 4 | 155 | 691 | 57 | 749 |
| Cost of stock options | - | - | - | - | 5 | - | - | - | - | 5 | - | 5 |
| Dividends | - | - | - | - | (172) | - | - | - | - | (172) | (6) | (178) |
| Hybrid bond dividends | - | - | - | - | (29) | - | - | - | - | (29) | - | (29) |
| Sale (acquisition) of treasury shares |
- | - | 6 | - | - | - | - | - | - | 6 | - | 6 |
| Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control |
- | - | - | - | - | - | - | - | - | - | 6 | 6 |
| Balance at 30/06/2015 | 1,271 | 18 | (166) | 1,194 | 5,834 | (275) | (2) | (39) | (771) | 5,793 | 272 | 7,336 |
| Net profit for the period |
- | 103 | 103 | 12 | 115 | |||||||
| Items of OCI | - | - | - | - | 7 | (159) | 2 | (21) | 104 | (67) | (9) | (76) |
| Comprehensive income |
- | - | - | - | 110 | (159) | 2 | (21) | 104 | 36 | 3 | 39 |
| Cost of stock options | - | - | - | - | 3 | - | - | - | - | 3 | - | 3 |
| Dividends | - | - | - | - | 1 | - | - | - | - | 1 | (1) | - |
| Sale (acquisition) of treasury shares |
- | - | (65) | - | - | - | - | - | - | (65) | - | (65) |
| Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control |
- | - | - | - | (114) | 1 | - | (1) | 32 | (83) | (4) | (87) |
| Balance at 30/09/2015 | 1,271 | 18 | (231) | 1,194 | 5,834 | (434) | - | (61) | (635) | 5,686 | 271 | 7,227 |
| (in € m) | Q3 2015 | Q3 2014 | 9M 2015 | 9M 2014 |
|---|---|---|---|---|
| Net income | 115 | 123 | 416 | (127) |
| Depreciation, amortization & impairments (-) | 210 | 204 | 682 | 1,098 |
| Earnings from associates & joint ventures accounted for using the equity method (-) |
21 | 8 | 8 | (9) |
| Net financial charges & income / loss from available for-sale financial assets (-) |
77 | 76 | 195 | 270 |
| Income tax expense (-) | 45 | 78 | 240 | 199 |
| Changes in working capital | 18 | (29) | (489) | (374) |
| Changes in provisions | (58) | (60) | (150) | (154) |
| Dividends received from associates & joint ventures accounted for using equity method |
5 | 6 | 14 | 13 |
| Income taxes paid | (49) | (41) | (196) | (158) |
| Others | 36 | (2) | 27 | (5) |
| Cash flow from operating activities | 420 | 362 | 746 | 753 |
| Acquisition (-) of subsidiaries | (21) | (34) | (47) | (91) |
| Acquisition (-) of investments - Other | 6 | (16) | (12) | (91) |
| Loans to associates & non-consolidated subsidiaries | (7) | 2 | (5) | 10 |
| Sale (+) of subsidiaries & investments | 43 | (11) | (195) | - |
| Acquisition (-) of tangible assets | (212) | (223) | (676) | (591) |
| Acquisition (-) of intangible assets | (19) | (15) | (57) | (41) |
| Sale (+) of tangible & intangible assets | 7 | 6 | 23 | 13 |
| Income from available-for-sale investments | - | - | - | - |
| Changes in non-current financial assets | (9) | (8) | (25) | (19) |
| Cash flow from investing activities | (212) | (299) | (994) | (810) |
| Acquisition (-) / sale (+) of treasury shares | (65) | (13) | (59) | (8) |
| New borrowings | 40 | 13 | 964 | 581 |
| Borrowings repayment | (24) | (236) | (600) | (1,556) |
| Changes in other current financial assets | (45) | 28 | 231 | 491 |
| Net cash out related to cost of borrowings & interest on lendings & term deposits |
(26) | (13) | (143) | (224) |
| Dividends paid | (7) | (3) | (289) | (270) |
| Hybrid bond dividend | - | - | (29) | (15) |
| Other | (3) | (41) | (31) | (1) |
| Cash flow from financing activities | (130) | (264) | 44 | (1,002) |
| Net change in cash & cash equivalents | 78 | (201) | (204) | (1,059) |
| Currency translation differences | 18 | 7 | 64 | 4 |
| Opening cash balance | 1,040 | 1,111 | 1,275 | 1,972 |
| Ending cash balance1 | 1,136 | 917 | 1,136 | 917 |
| (in € m) | Q3 2015 | Q3 2014 | 9M 2015 | 9M 2014 |
|---|---|---|---|---|
| Free Cash Flow | 188 | 122 | 11 | 114 |
| From continuing operations | 181 | 116 | 22 | 32 |
| From discontinued operations | 7 | 6 | (11) | 82 |
1 Including cash in assets held for sale (€ 4 million at the end of Q3 2015).
| (in € m) | Q3 2015 | Q3 2014 | 9M 2015 | 9M 2014 |
|---|---|---|---|---|
| Cash flow from operating activities | 14 | 39 | 49 | 172 |
| Cash flow from investing activities | (8) | (33) | (60) | (90) |
| Cash flow from financing activities | (2) | (3) | (26) | (14) |
| Net change in cash & cash equivalents | 4 | 3 | (37) | 68 |
Cash flow from operating activities was € 420 m compared to € 362 m last year. Besides net income of € 115 m, it consisted of:
Cash flow from investing activities was € (212) m, and included capital expenditures of € (231) m, including € (7) m in discontinued operations.
Free Cash Flow was € 188 m, and included cash flow from discontinued operations for € 7 m.
Cash flow from operating activities was € 746 m compared to € 753 m last year. Besides net income of € 416 m, it consisted of:
Cash flow from investing activities was € (994) m, and included the tax cash-out from the disposal of Eco Services for € (232) m, as well as capital expenditures of € (733) m, including € (60) m in discontinued operations.
Free Cash Flow was € 11 m, and included cash flow from discontinued operations for € (11) m.
Solvay is a public limited liability company governed by Belgian law and quoted on Euronext Brussels and Euronext Paris.
These consolidated interim financial statements were authorized for issue by the Board of Directors on October 28, 2015.
On April 15, 2015 Solvay has completed the acquisition of ERCA Emery Surfactant B.V. alkoxylation asset, a facility jointly owned by Emery Oleochemicals and ERCA Group in the Moerdijk integrated industrial park in the Netherlands, strengthening its strategy of securing sustainable, large-scale surfactant assets worldwide.
On June 9, 2015, Solvay and INEOS received final approval from the European Commission to form their 50/50 chlorovinyls joint venture, to be known as INOVYN. This follows Commission approval of International Chemical Investors Group's (ICIG) acquisition of the remedy business that is being divested by INEOS as a condition of clearance.
On July 1, Solvay and INEOS created their joint venture INOVYN, which explains the decrease of assets held for sale and liabilities linked to assets held for sale in the statement of financial position.
The finalized terms of the joint venture agreement remain materially unchanged from those announced in June last year. Solvay received upon closing an upfront cash payment of € 150 m – subject to customary adjustments such as actual working capital levels. In addition to contributing their entire European chlorovinyls business, Solvay has transferred liabilities estimated at € 260 m into the joint venture. In three years' time, Solvay will exit INOVYN and receive an additional, performance-based payment targeted to be € 280 m, with a minimum of € 95 m. Thereafter, INEOS will be the sole owner of the business.
Also effective July 1, Solvay acquired BASF's 25% stake in its PVC joint venture SolVin, which decreased equity by € 84 m. In addition, Solvay and INOVYN have agreed to continue supplying basic chemicals to the BASF site in Antwerp.
Solvay has entered into a definitive merger agreement with U.S.-based Cytec to acquire 100% of its share capital for US\$ 75.25 per share in cash. The total cash consideration will amount to US\$ 5.5 bn, corresponding to an enterprise value of US\$ 6.4 bn and representing a 2015 estimated EBITDA multiple of 14.7x and of 11.7x when considering synergies potential linked to the transaction. Cytec's and Solvay's boards of directors have unanimously recommended the transaction. The merger is subject to customary closing conditions, including regulatory approvals and Cytec shareholders' approval.
Cytec is among the world leaders in composite materials and in mining chemicals, recognized by its customers as a consistently successful innovator and provider of high-performance and value-added solutions. In the fastgrowing composite materials sector, which represents two thirds of its sales, its principal market is primary and secondary structures for aircrafts. It is also developing new technological applications for composites in automotive. Cytec is the leader in tailored specialty chemical formulations to enhance mining separation processes.
Through the acquisition of Cytec, Solvay will gain critical scale and immediate customer intimacy in aerospace. In the automotive market, Solvay's strong positions with original equipment manufacturers and tier-one suppliers will help bolster Cytec's growth.
Moreover, Cytec will significantly reinforce Solvay's sustainability profile as its offerings are addressing planet's challenges. With Cytec, Solvay will stand out stronger in reducing CO2 emissions through its lightweighting solutions and in dealing with the increasing scarcity of resources through more efficient and cleaner mining technologies.
Solvay prepares its consolidated interim financial statements on a quarterly basis, in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for the preparation of the annual consolidated financial statements and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2014.
The consolidated interim financial statements for the nine months ended September 30, 2015 were prepared using the same accounting policies as those adopted for the preparation of the consolidated financial statements for the year ended December 31, 2014, except for the adoption of IFRIC 21 Levies, which does not have a material impact on the consolidated financial statements.
Effective January 1, 2013, Solvay is organized into five Operating Segments.
| (in € m) | Q3 2015 | Q3 2014 | 9M 2015 | 9M 2014 |
|---|---|---|---|---|
| Net sales | 2,714 | 2,585 | 8,036 | 7,639 |
| Advanced Formulations | 655 | 735 | 2,038 | 2,122 |
| Advanced Materials | 874 | 712 | 2,522 | 2,041 |
| Performance Chemicals | 806 | 743 | 2,313 | 2,184 |
| Functional Polymers | 377 | 394 | 1,158 | 1,291 |
| Corporate & Business Services | 3 | 1 | 5 | - |
| REBITDA | 524 | 458 | 1,526 | 1,369 |
| Advanced Formulations | 98 | 107 | 294 | 317 |
| Advanced Materials | 236 | 187 | 651 | 538 |
| Performance Chemicals | 211 | 194 | 591 | 534 |
| Functional Polymers | 44 | 21 | 119 | 96 |
| Corporate & Business Services | (66) | (50) | (129) | (116) |
| IFRS depreciation & amortization (recurring) excluding Rhodia PPA |
(183) | (163) | (534) | (473) |
| Adjustments of Chemlogics and Ryton inventories at Fair Value (PPA) & holdback payments |
(3) | (2) | (9) | (9) |
| Rusvinyl adjustments (in equity earnings) | (34) | (8) | (39) | (7) |
| Amortization of Rhodia PPA on fixed assets | (27) | (27) | (82) | (82) |
| Non-recurring items (-) | (61) | (30) | (126) | (106) |
| EBIT | 215 | 226 | 737 | 691 |
| Net financial charges | (48) | (68) | (167) | (240) |
| Result before taxes | 167 | 158 | 570 | 451 |
| Income taxes | (49) | (58) | (204) | (148) |
| Result from continuing operations | 118 | 100 | 366 | 302 |
| Result from discontinued operations | (3) | 23 | 50 | (429) |
| Net income | 115 | 123 | 416 | (127) |
On February 25, 2015 the Board of Directors of Solvay SA decided to grant two long-term incentive plans for part of its key executives:
The details of the stock options plan are as follows:
| Stock option plan | |
|---|---|
| Number of stock options | 328,106 |
| Grant date | 25/03/2015 |
| Vesting date | 01/01/2019 |
| Vesting period | 25/03/2015 to 31/12/2018 |
| Exercise price (in €) | 121.84 |
| Exercise period | 01/01/2019 to 24/02/2023 |
This plan is an equity settled share-based plan. As of September 30, 2015, the impact on the income statement and statement of financial position amounts to € 1 m.
The details of the Performance Share Units plan are as follows:
| Performance share units | |
|---|---|
| Number of PSU | 173,261 |
| Grant date | 25/03/2015 |
| Vesting date | 01/01/2018 |
| Vesting period | 31/3/2015 to 31/12/2017 |
| Performance conditions | 50% of the initial granted PSU are subject to the REBITDA yoy growth % over 3 years (2015, 2016, 2017) 50% of the initial granted PSU are subject to the yoy CFROI % variation over 3 years (2015, 2016, 2017) |
| Validation of performance conditions | By the board of Directors, subject to confirmation by Solvay Statutory Auditors |
The Performance Share Units is a cash settled share-based plan. As of September 30, 2015, the impact on the income statement and statement of financial position amounts to € 5 m.
Compared to December 31, 2014, there are no changes in valuation techniques.
For all financial instruments not measured at fair value in Solvay's statement of financial position, the fair value of those financial instruments as of September 30, 2015 is not significantly different from the ones published in Note 37 of the consolidated financial statements for the year ended December 31, 2014.
In connection with the Cytec acquisition, Solvay has contracted a currency hedge, hedging a portion of the US dollar acquisition cost against euro. Contractually, no settlement is due in case the Cytec acquisition might not close. At September 30, 2015, the fair value of the instrument amounts to € (51) m, of which € (18) m has been recognized in other comprehensive income. The difference of € 33 m corresponds to the contingency settlement premium which has been recognized as a financial expense. As the transaction is deemed highly probable by management, its probability of occurrence, a level 3 input, has an insignificant impact on the fair value of the hedging instrument, of which the fair value is otherwise based on level 2 inputs.
Solvay's exit from INOVYN against receipt of an additional, performance-based payment qualifies as a derivative financial instrument, of which the fair value amounts to € 244 m at September 30, 2015. Its fair value is largely based on level 3 inputs, namely REBITDA multiples, comparing the expected exit price against the fair value of Solvay's 50% equity share held in INOVYN. Any future changes of estimates of REBITDA multiples will impact the fair value of the derivative financial instrument.
For other financial instruments measured at fair value in Solvay's statement of financial position, the fair value of those instruments as of September 30, 2015 is not significantly different from the ones as published in the Note 37 of the consolidated financial statements for the year ended December 31, 2014.
During the nine months ended September 30, 2015, there were neither reclassification between fair value levels, nor significant changes in the fair value of financial assets and liabilities measured based on level 3 inputs, except as mentioned above.
On October 13, 2015, Solvay announced the acquisition of EPIC Polymers' long-fiber thermoplastics technology to complement its offering of high performance lightweighting materials and gain access to metal replacement of larger automotive semi-structural parts.
Jean-Pierre Clamadieu, Chief Executive Officer, and Karim Hajjar, Chief Financial Officer, of the Solvay Group, declare that to the best of their knowledge:
In the context of our appointment as the company's statutory auditor, we report to you on the consolidated interim financial information. This consolidated interim financial information comprises the consolidated statement of financial position as at 30 September 2015, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the period of nine months then ended, as well as selective notes 1 to 7.
We have reviewed the consolidated interim financial information of Solvay SA/NV ("the company") and its subsidiaries (jointly "the group"), prepared in accordance with International Financial Reporting Standard IAS 34 – Interim Financial Reporting as adopted by the European Union.
The consolidated balance sheet shows total assets of € 17,294 m and the consolidated income statement shows a consolidated profit (group share) for the period then ended of € 368 m.
The board of directors of the company is responsible for the preparation and fair presentation of the consolidated interim financial information in accordance with IAS 34 – Interim Financial Reporting as adopted by the European Union. Our responsibility is to express a conclusion on this consolidated interim financial information based on our review.
We conducted our review of the consolidated interim financial information in accordance with International Standard on Review Engagements (ISRE) 2410 – Review of interim financial information performed by the independent auditor of the entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit performed in accordance with the International Standards on Auditing (ISA) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the consolidated interim financial information.
Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial information of Solvay SA/NV has not been prepared, in all material respects, in accordance with IAS 34 – Interim Financial Reporting as adopted by the European Union.
Diegem, 27 October 2015
The statutory auditor
DELOITTE Bedrijfsrevisoren / Reviseurs d'Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL
Represented by Eric Nys
This press release may contain forward-looking information. Forward-looking statements describe expectations, plans, strategies, goals, future events or intentions. The achievement of forward-looking statements contained in this press release is subject to risks and uncertainties relating to a number of factors, including general economic factors, interest rate and foreign currency exchange rate fluctuations, changing market conditions, product competition, the nature of product development, impact of acquisitions and divestitures, restructurings, products withdrawals, regulatory approval processes, all-in scenario of R&I projects and other unusual items.
Consequently, actual results or future events may differ materially from those expressed or implied by such forward-looking statements. Should known or unknown risks or uncertainties materialize, or should our assumptions prove inaccurate, actual results could vary materially from those anticipated. The Company undertakes no obligation to publicly update or revise any forward-looking statements.
Adjusted performance indicators exclusively exclude non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia acquisition.
Adjusted basic earnings per share: Adjusted net income (Solvay share) divided by the weighted average number of shares, after deducting own shares purchased to cover stock option programs.
Adjusted net income (Solvay share): Net income (Solvay share) excluding non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia acquisition.
Adjusted net result: Net result excluding non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia acquisition.
Basic earnings per share: Net income (Solvay's share) divided by the weighted average number of shares, after deducting own shares purchased to cover stock option programs.
bp: basis point or 0.01%.
Debt management impacts: It mainly includes gains/(losses) related to the early repayment or issuance of debt.
EBIT: Earnings before interest and taxes.
Free cash flow: Cash flow from operating activities (including dividends from associates and joint ventures) and Cash flow from investing activities (excluding acquisitions and sales of subsidiaries and other investments and excluding loans to associates and non-consolidated subsidiaries).
GBU: Global business unit.
IFRS: International Financial Reporting Standards.
M&A related impacts: It mainly includes non-cash Purchase Price Acquisition impacts (eg. inventory step-up and amortization of intangibles other than for PPA Rhodia) and retention bonuses relative to Chemlogics and other acquisitions.
Net financial expenses: Net financial expenses comprises cost of borrowings minus accrued interests on lending and short-term deposits, plus other gains (losses) on net indebtedness and costs of discounting provisions (namely related to post-employment benefits and HSE liabilities).
Net pricing: The difference between the change in sales prices and the change in variable costs.
Net sales: Sales of goods and value added services corresponding to Solvay's know-how and core business. Net sales exclude other revenues primarily comprising commodity and utility trading transactions and other revenue deemed as incidental by the Group.
Non-recurring items: It mainly includes provisions for restructuring, environmental costs linked to non-operating sites, major litigation expenses, impairments, capital gains/losses and fees linked to active portfolio management.
OCI: Other Comprehensive Income.
PPA: Purchase Price Allocation (PPA) accounting impacts related to the Rhodia acquisition.
PSU: Performance share unit.
REBITDA: Recurring earnings before interest and taxes, depreciation and amortization. It is defined as EBIT before depreciation and amortization charges, non-recurring items (including from equity-consolidated companies), M&A related impacts (including but not limited to Purchase Price Allocation elements) and major financing-related impacts from equityconsolidated companies (e.g RusVinyl's).
Results on disposals: It includes gains/(losses) from activities consolidated as Discontinued operations.
SO: Stock option.
yoy: Year on year comparison.
FKM: Fluoro-elastomer, polymer type.
HPPO: Hydrogen peroxide propylene oxide, new technology to produce propylene oxide using hydrogen peroxide.
PA: Polyamide, polymer type.
PCC: Precipitated calcium carbonate.
PVC: Polyvinyl chloride, polymer type.
PVDF: Polyvinylidene fluoride, polymer type.
| November 17, 2015 | Extraordinary General Shareholders' meeting |
|---|---|
| January 19, 2016 | Ex-coupon trading date for 2015 interim dividend |
| January 20, 2016 | Registration date for 2015 interim dividend |
| January 21, 2016 | Payment date of 2015 interim dividend |
| February 25, 2016 | Publication of the 4th quarter and full year 2015 results, and announcement of the proposed full year dividend for 2015 |
| May 4, 2016 | Publication of the 1st quarter 2016 results |
| May 10, 2016 | Annual General Shareholders' meeting |
| July 29, 2016 | Publication of the 2nd quarter and 1st half year 2016 results |
Maria Alcón-Hidalgo Investor Relations +32 2 264 1984 [email protected]
Geoffroy Raskin Investor Relations +32 2 264 1540 [email protected]
Bisser Alexandrov Investor Relations +32 2 264 2142 [email protected]
Lamia Narcisse Media Relations +33 1 53 56 59 62 [email protected]
Caroline Jacobs Media Relations +32 2 264 1530 [email protected]
Solvay SA
Rue de Ransbeek 310 1120 Brussels Belgium
T : +32 2 264 2111 F : +32 2 264 3061
As an international chemical group, Solvay assists industries in finding and implementing ever more responsible and value-creating solutions. Solvay generates 90% of its net sales in activities where it is among the world's top three players. It serves many markets, varying from energy and the environment to automotive and aerospace or electricity and electronics, with one goal: to raise the performance of its clients and improve society's quality of life. The group is headquartered in Brussels, employs about 26,000 people in 52 countries and generated 10.2 billion euros in net sales in 2014. Solvay SA SOLB.BE) is listed on Euronext in Brussels and Paris (Bloomberg: SOLB.BB - Reuters: SOLBt.BR).
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