Business and Financial Review • Jul 29, 2015
Business and Financial Review
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All historic data are restated for comparison purposes, unless otherwise indicated. In particular, 2014 Q2 and H1 data are restated for the discontinuation of Eco Services and the re-allocation of Corporate shared services costs
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.
29/07/2015 7:00 AM CET
The breadth of our portfolio and our excellence initiatives contributed to continued progress in operational results, despite persistent poor demand in the oil & gas and acetate tow markets. Many of our businesses delivered robust performance, driven by innovation, particularly at Advanced Materials, as well as pricing power across the board. We continued to benefit from favorable foreign exchange rates. We pressed ahead with our portfolio upgrade to increase our growth, returns and resilience, having sold our refrigerant business and created the INOVYN joint venture.
Solvay remains confident it will generate solid REBITDA growth in 2015, despite the expectation of continued uncertainties in various markets.
| Key data | Adjusted | IFRS | ||||
|---|---|---|---|---|---|---|
| (in € m) | Q2 2015 | Q2 2014 | % yoy | Q2 2015 | Q2 2014 | % yoy |
| Net sales | 2,675 | 2,566 | 4.2% | 2,675 | 2,566 | 4.2% |
| REBITDA | 500 | 463 | 8.1% | |||
| REBITDA margin | 19% | 18% | 66bp | |||
| Non-recurring items | (46) | (46) | 1.3% | (46) | (46) | 1.3% |
| EBIT | 271 | 274 | (0.98)% | 244 | 246 | (1.0)% |
| Net financial charges | (58) | (75) | 22% | (58) | (75) | 22% |
| Result before taxes | 213 | 199 | 6.8% | 185 | 172 | 8.0% |
| Income taxes | (81) | (59) | (37)% | (72) | (52) | (38)% |
| Result from continuing operations |
131 | 140 | (6.0)% | 113 | 119 | (5.1)% |
| Result from discontinued operations | 33 | (470) | n.m. | 33 | (471) | n.m. |
| Net income | 164 | (331) | n.m. | 146 | (352) | n.m. |
| Non-controlling interests | (21) | 39 | n.m. | (21) | 39 | n.m. |
| Net income Solvay share | 143 | (292) | n.m. | 125 | (313) | n.m. |
| Basic EPS (in €) | 1.71 | (3.50) | n.m. | 1.50 | (3.76) | n.m. |
| Free Cash Flow | 167 | 89 | 88% | 167 | 89 | 88% |
| Capex | (240) | (203) | (18)% | (240) | (203) | (18)% |
| Capex in continuing operations | (215) | (177) | (22)% | (215) | (177) | (22)% |
Net sales grew 4% yoy to € 2,675 m as a result of favorable foreign exchange rates for 9%, which benefited all operating segments.
Volumes dropped (4)% overall, as robust demand, especially in Specialty Polymers, Special Chem and Aroma Performance, was insufficient to make up for the significantly reduced activity levels in the acetate tow and oil & gas markets. Demand dynamics remained strong for customized-solution offerings, particularly in Advanced Materials. The contraction in the North American oil & gas industry supply chain, which started in February, deepened in the quarter, impacting Novecare's sales volumes. The substantial destocking in the acetate tow market persisted, resulting in a yoy drop in volumes for Acetow.
Prices were (1)% lower, mostly due to raw material price decreases in Polyamide & Intermediates, as well as Novecare and Coatis.
Sequentially, net sales were slightly up to the € 2,646 m reported in the first quarter of the year, with higher sales in Advanced Materials and Functional Polymers offsetting a decrease in Advanced Formulations.
REBITDA increased 8% yoy to € 500 m, benefiting from supportive currency conversion, while the lower volume impact was mostly offset by pricing power.
Currency developments, in particular the yoy appreciation of the USD and CNY of respectively 24% and 25% against the euro, had a favorable € 55 m conversion impact in the quarter, while Solvay's hedging policy limited the net transactional impact to € 16 m.
The lower volumes had an overall (11)% yoy impact on REBITDA.
The Group benefited from an overall € 57 m positive net pricing effect, including transactional foreign exchange impacts. Moreover, lower raw material and energy prices, triggered by the oil price decline, allowed for stronger margins, notably at Specialty Polymers, Engineering Plastics and at Soda Ash. The sustained pricing power was supported by the relentless focus on operational excellence measures.
Fixed costs were up € (21) m mainly as new sites became operational. Inflation was offset by operational excellence measures.
Solvay's REBITDA margin on net sales improved 66 basis points to 19% in the quarter.
REBITDA was largely in line with the € 502 m reported in this year's first quarter, which included a positive one-off effect from the U.S. post-retirement Medicare insurance policy at the beginning of the year.
Non-recurring Items were € (46) m, unchanged from the second quarter of 2014. They included restructuring expenses of € (10) m, € 3 m lower than a year ago, and an impairment charge of € (26) m related to non-performing Special Chem assets. Other non-recurring costs included environmental liabilities from non-ongoing activities, major litigations and M&A-related elements for € (10) m in total.
EBIT on an adjusted basis decreased slightly to € 271 m from € 274 m in the second quarter of 2014. Besides amortization and depreciation charges of € (177) m, it included € (7) m adjustments related to recent M&A transactions and the RusVinyl joint venture.
EBIT on an IFRS basis totaled € 244 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 € (58) m from € (75) m in the same quarter last year. Charges on net debt stood at € (35) m. The cost of discounting provisions for pension and environmental liabilities decreased to € (23) m from € (43) m a year ago. This was mainly due to last year's € (14) m one-off impact from reduced discount rates on environmental liabilities.
Income Taxes on an adjusted basis rose to € (81) m, from € (59) m in the second quarter of 2014, mainly as a result of prior years-related tax adjustments. Year to date the nominal tax rate including exceptional items was 39%, whereas the underlying tax rate decreased to 29% versus 33% for the full year in 2014.
Net result from continued operations on an adjusted basis was € 131 m against € 140 m in the same 2014 quarter.
The net result from discontinued operations on an adjusted basis was € 33 m against € (470) m in 2014. Discontinued operations include Eco Services (sold end 2014), the Indupa PVC business in Latin America and the European chlorovinyls business. The latter incurred significant impairments last year; since July 1 it is part of the INOVYN 50/50 joint venture with INEOS.
Net Income Solvay Share on an adjusted basis came in at € 143 m compared with € (292) m in 2014. Adjusted basic earnings per share amounted to € 1.71. Net Income Solvay Share on an IFRS basis was € 125 m versus € (313) m in 2014.
Net Income Solvay Share excluding exceptional items amounted to € 209 m versus € 198 m in the second quarter of last year (cfr. "Supplementary information factors impacting net income" on page 15).
Free Cash Flow rose to € 167 m from € 89 m in the same quarter of 2014. Free Cash Flow from continuing operations increased to € 110 m from € 81 m last year, reflecting cash inflow from movements in industrial working capital of € 14 m compared to an outflow of € (79) m the year before, partially reduced by an increase in capital investments of € (39) m. Furthermore, discontinued operations contributed € 57 m compared to € 8 m in 2014 thanks to strong operational results in the European chlorovinyls business.
| Key data | Adjusted | IFRS | ||||
|---|---|---|---|---|---|---|
| (in € m) | H1 2015 | H1 2014 | % yoy | H1 2015 | H1 2014 | % yoy |
| Net sales | 5,322 | 5,054 | 5.3% | 5,322 | 5,054 | 5.3% |
| REBITDA | 1,002 | 911 | 10% | |||
| REBITDA margin | 19% | 18% | 81bp | |||
| Non-recurring items | (64) | (76) | 15% | (64) | (76) | 15% |
| EBIT | 576 | 519 | 11% | 521 | 465 | 12% |
| Net financial charges | (119) | (172) | 31% | (119) | (172) | 31% |
| Result before taxes | 457 | 347 | 32% | 403 | 292 | 38% |
| Income taxes | (174) | (107) | (62)% | (155) | (90) | (72)% |
| Result from continuing operations |
284 | 240 | 18% | 248 | 202 | 23% |
| Result from discontinued operations | 53 | (450) | n.m. | 53 | (452) | n.m. |
| Net income | 337 | (210) | n.m. | 301 | (250) | n.m. |
| Non-controlling interests | (36) | 25 | n.m. | (36) | 25 | n.m. |
| Net income Solvay share | 301 | (186) | n.m. | 265 | (225) | n.m. |
| Basic EPS (in €) | 3.61 | (2.22) | n.m. | 3.18 | (2.71) | n.m. |
| Free Cash Flow | (177) | (8) | n.m. | (177) | (8) | n.m. |
| Capex | (501) | (394) | (27)% | (501) | (394) | (27)% |
| Capex in continuing operations | (449) | (337) | (33)% | (449) | (337) | (33)% |
Net sales grew 5% to € 5,322 m in the first half of 2015, mostly lifted by the favorable impact of foreign exchange rates, especially the appreciation of the USD against the euro, for 9%.
Volumes were down (3)%. Robust demand dynamics for our customized-solution offerings, especially at Advanced Materials, could not make up for the volume drop in Acetow, caused by the ongoing substantial destocking in the acetate tow industry, and for the contraction in the North American oil & gas industry supply chain, which impacted Novecare.
Prices were slightly down overall, as raw materialdriven price decreases were balanced by price increases in businesses of the Performance Chemicals segment, Soda Ash & Derivatives in particular.
REBITDA increased 10% to € 1,002 m from € 911 m in the first half of 2014. Currency conversion impacts, chiefly from the USD, had a favorable impact of 11%, while strong pricing power neutralized the overall decline in volumes and increase in fixed costs.
The volume reduction had a (8)% impact on REBITDA.
The Group benefited from an overall € 90 m positive net pricing effect, notably supported by sustained operational excellence measures. The impact from the oil price decline was mixed. It caused a temporary one-off devaluation of inventories in the first quarter at Coatis, Polyamide and Novecare for a combined € (18) m, but also strengthened margins mainly at Aroma Performance, Specialty Polymers, Engineering Plastics, Soda Ash and Peroxides. The last two business units also benefitted from higher selling prices.
Fixed costs increased by € (29) m, as the business grew and new plants are coming on stream and progressively ramping up. Inflation was largely offset by the outcome of operational excellence measures.
REBITDA included a positive € 12 m net one-off impact recorded in the first quarter. This related to the aforementioned oil-price related inventory adjustments, offset by favorable developments of € 30 m linked to the US post-retirement Medicare insurance policy.
Solvay's REBITDA margin on net sales improved 81 basis points to 19%.
Non-recurring Items of € (64) m compared with € (76) m in the first half of 2014. They included restructuring expenses of € (16) m (€ (18) m in 2014), and an impairment charge of € (28) m related to nonperforming Special Chem assets. Other costs related to environmental liabilities from non-ongoing activities, major litigations and M&A-related elements for € (21) m in total.
EBIT on an adjusted basis rose to € 576 m compared to € 519 m in the first half of 2014. Besides amortization and depreciation charges of € (351) m, it included € (10) m adjustments related to recent M&A transactions (namely Chemlogics) and the RusVinyl joint venture.
EBIT on an IFRS basis totaled € 521 m. The difference between IFRS and adjusted figures reflects the Rhodia non-cash purchase price allocation (PPA) depreciation impact of € (55) m.
Net Financial Expenses fell to € (119) m from € (172) m in the first half of 2014. Charges on net debt widened to € (71) m from € (67) m in 2014. The cost of discounting provisions for pension and environmental liabilities decreased to € (48) m from € (86) m in 2014. This was mainly due to last year's € (27) m impact from lower discount rates on environmental liabilities.
Income Taxes on an adjusted basis rose to € (174) m, compared with € (107) m in the first half of 2014, mainly as a result of prior years-related tax adjustments. The nominal tax rate including exceptional items was 39%, whereas the underlying tax rate decreased to 29% versus 33% for the full year in 2014.
Net result from continued operations on an adjusted basis was € 337 m against € (210) m in 2014.
Net result from discontinued operations on an adjusted basis was € 53 m against € (450) m in 2014. Discontinued operations include Eco Services (sold end 2014), the Indupa PVC business in Latin America and the European chlorovinyls business. The latter led to a significant impairment last year and currently is part of the INOVYN 50/50 joint venture with INEOS as from July 1 2015.
Net Income Solvay Share on an adjusted basis came in at € 301 m compared with € (186) m in 2014. Adjusted basic earnings per share amounted to € 3.61. Net Income Solvay Share on an IFRS basis was € 265 m versus € (225) m in 2014.
Net Income Solvay Share excluding exceptional items amounted to € 438 m, versus € 369 m in the second quarter of last year (cfr. "Supplementary information factors impacting net income" on page 15).
Free Cash Flow was € (177) m compared to € (8) m in 2014, with continuing operations representing € (159) m versus € (85) m a year ago. This decrease reflects higher capital investments for € (449) m, € (112) m higher than in the first half year in 2014, reduced by a lower outflow from movements in industrial working capital of € (288) m, € 46 m less yoy. Furthermore, discontinued operations represented net cash outflows of € (18) m compared to € 77 m net cash inflows a year ago, chiefly in relation to the last milestone payment collected last year for the disposed Pharma business.
Solvay reaffirmed its strategic direction and 2016 financial targets at its Capital Markets Day. Solvay confirmed its target to grow REBITDA by an annual average of 10% for the three years from 2013 and to increase CFROI by at least 100 basis points by 2016. Excellence programs in operations, commercial activities and innovations should add € 800 m to REBITDA in 2016 versus the 2013 base, instead of € 670 m forecast before, an increase by 20% over previous indications.
Solvay and INEOS launched their 50/50 chlorovinyl Joint Venture INOVYN, following European Commission approval. At closing, Solvay received an upfront cash payment of € 150 m (before customary working capital adjustments) and transferred liabilities estimated at € 260 m into the Joint Venture. In three years, Solvay will exit INOVYN and receive an additional, performance-based payment targeted to be € 280 m, with a minimum payment of € 95 m.
Specialty Polymers launched Tegralite™, a family of high-performance materials for the aeronautics industry that speed up the production, refurbishment and maintenance of aircrafts at a lower cost while improving their fuel efficiency by reducing weight. Tegralite™ addresses the significant order backlog in civil aircrafts and rising need to replace metal or heavier plastic parts with lighter high-performance thermoplastic materials able to resist shock, impact, high temperature, fire, chemicals and noise.
Silica began producing Highly Dispersible Silica (HDS) at its new plant in Wloclawek, Poland. With 85,000 tonnes of capacity per year, it will produce the latest and most advanced grades of high performance silica including Efficium® , for energy saving passenger car and truck tire compounds. Efficium® will also be produced in Gunsan, South Korea, where Solvay is building an HDS plant that will be operational in the next two years with an annual capacity of over 80,000 tonnes.
Novecare began production at its new large-scale "on-pipe" alkoxylation facility in Singapore, and acquired an on-pipe facility in Moerdijk, the Netherlands, taking the number of alkoxylation plants to eight worldwide. Located in integrated petrochemical hubs the units receive ethylene oxide via dedicated pipelines, providing a secure supply of this key raw material for a wide range of specialty surfactants for agrochemicals, coatings, home and personal care, industrial and oil and gas markets.
Solvay opened two Research and Innovation laboratories. The biotechnology lab in Paulinia, Brazil, is dedicated to boosting innovations in sustainable chemistry from biomass. The second laboratory in Tokyo, Japan, is dedicated to supporting the needs of Novecare's Japanese customers.
| (in € m) | Q2 2015 | Q2 2014 | % yoy | H1 2015 | H1 2014 | % yoy |
|---|---|---|---|---|---|---|
| Net sales | 2,675 | 2,566 | 4.2% | 5,322 | 5,054 | 5.3% |
| Advanced Formulations | 686 | 725 | (5.4)% | 1,382 | 1,388 | (0.39)% |
| Advanced Materials | 840 | 670 | 25% | 1,648 | 1,329 | 24% |
| Performance Chemicals | 754 | 724 | 4.1% | 1,507 | 1,442 | 4.5% |
| Functional Polymers | 395 | 448 | (12)% | 782 | 896 | (13)% |
| Corporate & Business Services | 1 | (1) | n.m. | 2 | (1) | n.m. |
| REBITDA | 500 | 463 | 8.1% | 1,002 | 911 | 10% |
| Advanced Formulations | 100 | 113 | (12)% | 196 | 210 | (6.9)% |
| Advanced Materials | 214 | 181 | 18% | 415 | 351 | 18% |
| Performance Chemicals | 185 | 169 | 9.3% | 380 | 340 | 12% |
| Functional Polymers | 45 | 36 | 23% | 75 | 75 | (1.2)% |
| Corporate & Business Services | (43) | (37) | (15)% | (63) | (66) | 4.7% |
| REBITDA margin | 19% | 18% | 66bp | 19% | 18% | 81bp |
| Advanced Formulations | 15% | 16% | (111)bp | 14% | 15% | (98)bp |
| Advanced Materials | 25% | 27% | (163)bp | 25% | 26% | (127)bp |
| Performance Chemicals | 25% | 23% | 117bp | 25% | 24% | 163bp |
| Functional Polymers | 11% | 8.1% | 327bp | 9.5% | 8.4% | 113bp |
Q2 2015 REBITDA down (12)% yoy at € 100 m;, as favorable forex rates were insufficient to make up for reduced activity at Novecare's oil & gas business;
Sales and profit improvement at Aroma Performance continued.
| (in € m) | Q2 2015 | Q2 2014 | % yoy | H1 2015 | H1 2014 | % yoy |
|---|---|---|---|---|---|---|
| Net sales | 686 | 725 | (5.4)% | 1,382 | 1,388 | (0.39)% |
| Novecare | 482 | 518 | (6.9)% | 986 | 988 | (0.26)% |
| Coatis | 108 | 121 | (10)% | 218 | 241 | (9.6)% |
| Aroma Performance | 95 | 86 | 10% | 179 | 158 | 13% |
| REBITDA | 100 | 113 | (12)% | 196 | 210 | (6.9)% |
| REBITDA margin | 15% | 16% | (111)bp | 14% | 15% | (98)bp |
Net Sales decreased (5)% from the same quarter last year and (3)% sequentially to € 686 m. Favorable year-on-year forex conversion rates were offset by volume declines at Novecare, for about (20)%, due to headwinds in the unconventional oil & gas markets in North America. Aroma Performance sales grew, with volumes up 14% versus last year, which was impacted by temporary industrial outages.
REBITDA fell (12)% year-on-year to € 100 m in the quarter. Supportive forex as well as increased volume at Aroma Performance could only compensate for part of the contraction in demand at Novecare's unconventional oil & gas markets. Coatis' Brazilian market remained subdued.
Novecare sales dropped further in the quarter due to the continued severe supply chain adjustment in the unconventional North American oil & gas markets, which started in February, triggered by the fall in oil prices. Demand from the stimulation, drilling and cementing activities was most affected, whereas chemicals used in production proved more resilient. The competitiveness actions that Novecare put in place to improve customer offerings and reduce costs mitigated pressure on price.
Business developments in Novecare's other activities were mixed: strong results in the agro and coatings business benefiting from lower raw material prices, whereas demand declined for amines and
phosphorous products. The ramp-up of new plants led to higher fixed costs.
Coatis continued to be impacted by low activity levels in Brazil and strong competition of imports. Costly domestic labor and energy prices continued to erode the competitiveness of the local industry. The business unit benefited, however, from lower raw material prices that strengthened net pricing.
Aroma Performance sales grew compared both to last year and the previous quarter, reflecting strong industrial performance and volume growth spurred by demand in Asia and especially in inhibitors.
Net Sales were largely in line with the first half of 2014, at € 1,382 m, as favorable forex of 13% compensated for a volume decline of (11)%, mainly in Novecare, and price reductions of (2)%.
REBITDA fell (7)% to € 196 m. Supportive forex and higher volumes at Aroma Performance could only partly compensate for the demand contraction in the unconventional oil & gas markets as well as for the negative revaluation of inventories at Coatis and Novecare, which was triggered by sharply lower raw material prices.
New REBITDA record in Q2 at € 214 m, up 18% yoy and 5% sequentially, thanks to strong innovation-driven volume growth and favorable forex;
Good integration and synergies of recent acquisitions.
| (in € m) | Q2 2015 | Q2 2014 | % yoy | H1 2015 | H1 2014 | % yoy |
|---|---|---|---|---|---|---|
| Net sales | 840 | 670 | 25% | 1,648 | 1,329 | 24% |
| Specialty Polymers | 475 | 361 | 32% | 926 | 707 | 31% |
| Silica | 131 | 115 | 14% | 258 | 223 | 16% |
| Special Chem | 234 | 194 | 20% | 463 | 399 | |
| REBITDA | 214 | 181 | 18% | 415 | 351 | 18% |
| REBITDA margin | 25% | 27% | (163)bp | 25% | 26% | (127)bp |
Net sales totaled € 840 m, an increase of 25% from the second quarter in 2014 and 5% from the first quarter this year. Growth was supported by strong volumes up 7%, while prices were largely flat. Favorable foreign exchange developments represented 12%. The remaining 5% is explained by scope effects, with the acquisition of Ryton® PPS and Flux Schweiß- & Lötstoffe at the end of 2014.
REBITDA rose 18% yoy and 5% sequentially to € 214 m, reflecting volume growth in Specialty Polymers and Special Chem. The segment continued to benefit from the supportive forex impact on conversion and, to a lesser extent, on transaction.
Specialty Polymers reported significant sales growth and a widening of net pricing. The primary growth drivers were again smart device, automotive and industrial applications, with increased sales for several products in Solvay's broad polymer portfolio. The integration of Ryton® PPS progressed well, generating cost synergies. Net pricing increased, supported by lower raw material prices.
Silica performance benefited from sustained solid demand from the energy-efficient tire industry in North-America, and demand in Europe picked up after a slower start to the year. Sales of high dispersible silica to Asia remained subdued, however. Early July a new state-of-the-art 85,000 tonnes plant was started up in Poland, to serve the Central and Eastern Europe
tire industry. Earlier in the quarter the construction of a similar-size state-of-the-art plant was launched in Korea to address the growing Asian market. This facility is to become operational in the next two years.
Special Chem recorded good volume growth in mixed rare earths oxides for automotive catalysis, as well as in its fluor and electronic chemicals which are used in the brazing and semiconductor sectors respectively. The Flux Schweiß- & Lötstoffe's aluminum brazing business, which was acquired at the end of 2014, contributed to the results. The sale of the refrigerants activity to Daikin was finalized in May.
Net sales increased 24% to € 1,648 m in the quarter from € 1,329 m in the same period of 2014. Growth was supported by strong volumes for 11%, while prices were largely flat. Favorable foreign exchange developments represented 11%. The scope effect of 5% is attributable to Ryton® PPS and Flux Schweiß- & Lötstoffe, which were acquired at the end of 2014.
REBITDA rose 18% yoy to € 214 m, reflecting volume growth in Specialty Polymers and in Special Chem. The operating segment continued to benefit from supportive forex throughout the first six months of the year.
Q2 REBITDA was € 185 m, up 9% yoy, thanks to solid pricing and positive foreign exchange developments, which more than offset the lower volumes in Acetow;
Strong progress in breakthrough excellence programs.
| (in € m) | Q2 2015 | Q2 2014 | % yoy | H1 2015 | H1 2014 | % yoy |
|---|---|---|---|---|---|---|
| Net sales | 754 | 724 | 4.1% | 1,507 | 1,442 | 4.5% |
| Soda Ash & Derivatives | 385 | 335 | 15% | 769 | 667 | 15% |
| Peroxides | 134 | 123 | 8.4% | 269 | 245 | 9.9% |
| Acetow | 130 | 167 | (22)% | 257 | 330 | (22)% |
| Emerging Biochemicals | 105 | 99 | 6.3% | 212 | 200 | 6.1% |
| REBITDA | 185 | 169 | 9.3% | 380 | 340 | 12% |
| REBITDA margin | 25% | 23% | 117bp | 25% | 24% | 163bp |
Net sales grew 4% yoy to € 754 m, the same level as in the first quarter of this year. Favorable foreign exchange movements of 6% and 4% price increases more than compensated for lower volumes as the destocking in the acetate tow market persisted.
REBITDA came at € 185 m, a 9% increase from the same quarter in 2014, but (5)% lower than in the first quarter of this year. Positive net pricing in Soda Ash & Derivatives, and to a lesser extent in Peroxides, offset the impact of lower yoy volumes in Acetow. Favorable currencies supported REBITDA versus 2014.
Soda Ash & Derivatives' performance was up yoy, supported by higher net pricing. The increase in sales prices, which started in the second half of 2014, was complemented by lower production and logistics costs made possible by the on-going operational excellence programs. Overall sales volumes remained robust. Bicarbonate sales were up, especially in North America and Asia.
Peroxides repeated the strong performance seen in in the previous quarter. The yoy improvement was driven by price increases and volume growth in Europe, underpinned by strong demand in new market segments. Sales volumes in North America and Asia came out lower, however. The Hydrogen Peroxide Propylene Oxide (HPPO) mega plants continued to operate at high capacity rates.
Acetow's performance continued to be dampened by the acetate tow market contraction, with a drop in sales volumes of about (30)% yoy, similar to the first quarter. Destocking appears to have come to an end on the international market, however, as shown by the 5% sequential improvement in volumes. The industry has adjusted to the market drop, as illustrated by Solvay's capacity adjustments end 2014, which allows to protect profitability and favors market shares sustainability.
Emerging Biochemicals' performance benefited from favorable forex. Net pricing in PVC was squeezed as sales prices dropped, whereas raw materials prices increased due to ethylene shortage in South East Asia. Epicerol® volumes and prices were stable.
Net sales grew 5% to € 1,507 m against the first half in 2014, supported by favorable foreign exchange developments for 6% and by price increases of 4%. Volumes fell (5)% linked to Acetow.
REBITDA grew 12% to € 380 m with positive pricing in Soda Ash & Derivatives, Peroxides and Acetow. Favorable currencies more than offset volume decline in Acetow, while continued delivery of excellence programs helped overcome inflation on fixed costs.
Strong increase of Q2 REBITDA, primarily linked to strengthened net pricing, and volume increase in Polyamide & Intermediates;
RusVinyl Joint Venture further ramping up production in good market environment.
| (in € m) | Q2 2015 | Q2 2014 | % yoy | H1 2015 | H1 2014 | % yoy |
|---|---|---|---|---|---|---|
| Net sales | 395 | 448 | (12)% | 782 | 896 | (13)% |
| Polyamide | 383 | 408 | (6.0)% | 759 | 799 | (5.0)% |
| Chlorovinyls | 11 | 40 | (73)% | 23 | 98 | (77)% |
| REBITDA | 45 | 36 | 23% | 75 | 75 | (1.2)% |
| REBITDA margin | 11% | 8.1% | 327bp | 9.5% | 8.4% | 113bp |
Net sales fell (12)% to € 395 m from € 448 m, as a result of (8)% lower prices and following the sale of the Benvic PVC compounding business in the second quarter of 2014, which represented € (29) m in that period. Volumes were down (1)%, while favorable foreign exchange rates contributed 3%.
REBITDA came in at € 45 m, a 23% increase on € 36 m in the second quarter of 2014 and € 15 m up compared to the € 30 m of the first quarter of the year, which had, however, been impacted by one-off inventory write-downs.
Polyamide's operating performance was well up compared to the second quarter of 2014. Net pricing was up thanks to sustained excellence efforts, where a high proportion of the benefit from raw material price decreases could be retained. Solid volume growth for PA 6.6 polymers in Polyamide & Intermediates, and to a lesser extent in Engineering Plastics, was offset by a decline in Fibras, as poor economic conditions in its home market Brazil persisted.
Chlorovinyls was marginally impacted by the loss of the REBITDA contribution from Benvic, which was sold in June 2014. The production ramp-up at RusVinyl was pursued smoothly.
Quarterly net sales of the discontinued European chlorovinyls activities, that is part of the INOVYN joint venture with INEOS since July, and Indupa amounted to € 752 m and REBITDA came in at € 93 m, an increase by € 58 m.
The performance of the European chlorovinyls business benefited from tight market conditions in Europe and favorable forex driving export opportunities. This led to increased net pricing and volume growth.
Indupa's results continued to be affected by the challenging market conditions in Latin America, its home market.
Net sales declined to € 782 m from € 896 m in the first half of 2014. € (75) m of the decrease relates to the sale of the Benvic PVC compounding business in the second quarter of 2014, which was partly offset by foreign exchange rates contributing 4%. The (2)% drop in volumes comes from Fibras, whereas overall pricing was down (6)%.
REBITDA at € 75 m was largely in line with the first half in 2014. Strong net pricing was offset by inventory write-downs and the production issue at Chalampé in the first quarter.
Corporate and Business Services Q2 2015 REBITDA at € (43) m, up versus 2014 due to a more challenging comparison base and the impact of foreign currency fluctuations.
| (in € m) | Q2 2015 | Q2 2014 | % yoy | H1 2015 | H1 2014 | % yoy |
|---|---|---|---|---|---|---|
| REBITDA | (43) | (37) | (15)% | (63) | (66) | 4.7% |
Net REBITDA costs widened to € (43) m € (6) m higher compared to the second quarter of 2014.
Energy Services contributed a REBITDA of € 4 m in the quarter compared to € 1 m last year, mainly as a result of better electricity production and sourcing opportunities.
Other Corporate & Business Services posted negative REBITDA of € (47) m against € (38) m last year. Besides the negative impact of foreign exchange fluctuations on costs, the year-on-year comparison is affected by a back-end loaded distribution of corporate costs in 2014.
Net REBITDA costs narrowed from € (66) m in the first half of 2014 to € (63) m in 2015.
Energy Services' REBITDA fell to € 7 m from € 13 m last year. The Trading conditions in the first quarter of 2014, which is a seasonal high, could not be repeated in 2015.
Other Corporate & Business Services recorded a REBITDA of € (71) m versus € (80) m last year. The improvement is attributable to a favorable one-off impact of € 30 m booked in the first quarter of the current year and linked to the evolution of the postretirement Medicare insurance policy in the United States.
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) | Q2 2015 | Q2 2014 | % yoy | H1 2015 | H1 2014 | % yoy |
| IFRS Net income, Solvay share | 125 | (313) | n.m. | 265 | (225) | n.m. |
| Rhodia PPA (after tax) | 18 | 21 | (15)% | 36 | 40 | (9.4)% |
| Adjusted Net income, Solvay share |
143 | (292) | n.m. | 301 | (186) | n.m. |
| Non-recurring items | 46 | 46 | (1.3)% | 64 | 76 | (15)% |
| M&A related impacts (Chemlogics, Flux, Ryton) |
14 | 10 | 38% | 29 | 24 | 22% |
| Net financial charges (e.g. discount rate changes, debt management impacts) |
6 | 14 | (61)% | 10 | 44 | (79)% |
| Adjustments RusVinyl | - | - | n.m. | 20 | - | n.m. |
| Discontinued operations | - | 497 | n.m. | 4 | 501 | n.m. |
| Exceptional Tax and Tax related to exceptional items |
1 | (23) | n.m. | 16 | (43) | n.m. |
| Non-controlling interests on exceptional items |
- | (54) | n.m. | (6) | (47) | 87% |
| Adjusted Net income, Solvay share, excluding exceptionals |
209 | 198 | 5.8% | 438 | 369 | 19% |
| Adjusted | IFRS | ||||
|---|---|---|---|---|---|
| (in € m) | Q2 2015 | Q2 2014 | Q2 2015 | Q2 2014 | |
| Sales | 2,782 | 2,647 | 2,782 | 2,647 | |
| Revenues from non-core activities | 107 | 81 | 107 | 81 | |
| Net sales | 2,675 | 2,566 | 2,675 | 2,566 | |
| Cost of goods sold | (2,060) | (1,994) | (2,060) | (1,994) | |
| Gross margin | 723 | 653 | 723 | 653 | |
| Commercial & administrative costs | (342) | (299) | (342) | (299) | |
| Research & innovation costs | (71) | (62) | (71) | (62) | |
| Other operating gains & losses | 4 | 8 | (24) | (20) | |
| Earnings from associates & joint ventures accounted for using the equity method |
4 | 20 | 4 | 20 | |
| Non-recurring items | (46) | (46) | (46) | (46) | |
| EBIT | 271 | 274 | 244 | 246 | |
| Cost of borrowings | (27) | (36) | (27) | (36) | |
| Interest on loans & short-term deposits | 3 | 5 | 3 | 5 | |
| Other gains & losses on net indebtedness | (11) | (1) | (11) | (1) | |
| Cost of discounting provisions | (23) | (43) | (23) | (43) | |
| Result before taxes | 213 | 199 | 185 | 172 | |
| Income taxes | (81) | (59) | (72) | (52) | |
| Result from continuing operations | 131 | 140 | 113 | 119 | |
| Result from discontinued operations | 33 | (470) | 33 | (471) | |
| Net income | 164 | (331) | 146 | (352) | |
| Non-controlling interests | (21) | 39 | (21) | 39 | |
| Net income Solvay share | 143 | (292) | 125 | (313) | |
| Basic EPS from continuing operations (in €) | 1.44 | 1.49 | 1.22 | 1.24 | |
| Basic EPS (in €) | 1.71 | (3.50) | 1.50 | (3.76) | |
| Diluted EPS from continuing operations (in €) | 1.43 | 1.47 | 1.21 | 1.23 | |
| Diluted EPS (in €) | 1.70 | (3.47) | 1.49 | (3.72) |
| Adjusted | IFRS | |||
|---|---|---|---|---|
| (in € m) | H1 2015 | H1 2014 | H1 2015 | H1 2014 |
| Sales | 5,547 | 5,247 | 5,547 | 5,247 |
| Revenues from non-core activities | 225 | 193 | 225 | 193 |
| Net sales | 5,322 | 5,054 | 5,322 | 5,054 |
| Cost of goods sold | (4,144) | (3,974) | (4,144) | (3,974) |
| Gross margin | 1,403 | 1,273 | 1,403 | 1,273 |
| Commercial & administrative costs | (658) | (586) | (658) | (586) |
| Research & innovation costs | (137) | (119) | (137) | (119) |
| Other operating gains & losses | 20 | 10 | (35) | (45) |
| Earnings from associates & joint ventures accounted for using the equity method |
13 | 17 | 13 | 17 |
| Non-recurring items | (64) | (76) | (64) | (76) |
| EBIT | 576 | 519 | 521 | 465 |
| Cost of borrowings | (56) | (90) | (56) | (90) |
| Interest on loans & short-term deposits | 5 | 30 | 5 | 30 |
| Other gains & losses on net indebtedness | (20) | (26) | (20) | (26) |
| Cost of discounting provisions | (48) | (86) | (48) | (86) |
| Result before taxes | 457 | 347 | 403 | 292 |
| Income taxes | (174) | (107) | (155) | (90) |
| Result from continuing operations | 284 | 240 | 248 | 202 |
| Result from discontinued operations | 53 | (450) | 53 | (452) |
| Net income | 337 | (210) | 301 | (250) |
| Non-controlling interests | (36) | 25 | (36) | 25 |
| Net income Solvay share | 301 | (186) | 265 | (225) |
| Basic EPS from continuing operations (in €) | 3.14 | 2.61 | 2.71 | 2.15 |
| Basic EPS (in €) | 3.61 | (2.22) | 3.18 | (2.71) |
| Diluted EPS from continuing operations (in €) | 3.12 | 2.58 | 2.69 | 2.13 |
| Diluted EPS (in €) | 3.59 | (2.20) | 3.16 | (2.67) |
| (in € m) | Q2 2015 | Q2 2014 | H1 2015 | H1 2014 |
|---|---|---|---|---|
| EBIT (IFRS) | 244 | 246 | 521 | 465 |
| Non-recurring items (-) | 46 | 46 | 64 | 76 |
| Amortization of Rhodia PPA on fixed assets | 27 | 27 | 55 | 55 |
| IFRS depreciation & amortization (recurring) excluding Rhodia PPA |
177 | 155 | 351 | 310 |
| Adjustments of Chemlogics and Ryton inventories at Fair Value (PPA) & holdback payments |
3 | 2 | 6 | 7 |
| Rusvinyl adjustments (in equity earnings) | 4 | (13) | 4 | (2) |
| REBITDA (key performance indicator monitored by management) |
500 | 463 | 1,002 | 911 |
The net adjustment related to Rusvinyl reflects the financial impact resulting from foreign exchange volatility and interest on debt (combined amounting to € 16 m impacting the equity value) offset by the adjustment to the equity book value € (20) m to reassess the recoverable amount of our investment at the end of March 2015 in line with our valuation method. This valuation is unchanged at the end of June 2015 and is not impacted by short term volatility of the RUB/€ exchange rate.
| (in € m) | Q2 2015 | Q2 2014 | H1 2015 | H1 2014 |
|---|---|---|---|---|
| Net income | 146 | (352) | 301 | (250) |
| Other comprehensive income | ||||
| Recyclable components | ||||
| Hyperinflation | 6 | (2) | 13 | (16) |
| Gains & losses on available-for-sale financial assets | 2 | 3 | 2 | (1) |
| Gains & losses on hedging instruments in a cash flow hedge |
45 | 4 | 6 | (2) |
| Currency translation differences | (261) | 62 | 271 | 37 |
| Non-recyclable components | ||||
| Remeasurement of the net defined benefit liability | 175 | (87) | 198 | (149) |
| Income tax relating to items of other comprehensive income |
(36) | 17 | (43) | 29 |
| Other comprehensive income, net of related tax effects | (69) | (5) | 448 | (102) |
| Total Comprehensive income | 77 | (356) | 749 | (352) |
| attributed to Solvay share | 69 | (337) | 691 | (336) |
| attributed to non-controlling interests | 7 | (19) | 57 | (16) |
| (in € m) | 30/06/2015 | 31/12/2014 |
|---|---|---|
| Non-current assets | 11,885 | 11,529 |
| Intangible assets | 1,530 | 1,543 |
| Goodwill | 3,209 | 3,151 |
| Tangible assets | 5,685 | 5,386 |
| Available-for-sale financial assets | 48 | 43 |
| Investments in joint ventures & associates – equity method | 433 | 380 |
| Other investments | 84 | 121 |
| Deferred tax assets | 680 | 710 |
| Loans & other non-current assets | 217 | 194 |
| Current assets | 6,253 | 6,365 |
| Inventories | 1,571 | 1,420 |
| Trade receivables | 1,504 | 1,418 |
| Income tax receivables | 58 | 52 |
| Dividends receivable | 3 | 1 |
| Other current receivables – Financial instruments | 42 | 309 |
| Other current receivables – Other | 569 | 500 |
| Cash & cash equivalents | 997 | 1,251 |
| Assets held for sale | 1,509 | 1,414 |
| TOTAL ASSETS | 18,138 | 17,894 |
| Total equity | 7,336 | 6,778 |
| Share capital | 1,271 | 1,271 |
| Reserves | 5,793 | 5,293 |
| Non-controlling interests | 272 | 214 |
| Non-current liabilities | 5,658 | 6,088 |
| Long-term provisions: employees benefits | 3,003 | 3,166 |
| Other long-term provisions | 851 | 854 |
| Deferred tax liabilities | 366 | 378 |
| Long-term financial debt | 1,253 | 1,485 |
| Other non-current liabilities | 185 | 204 |
| Current liabilities | 5,144 | 5,029 |
| Other short-term provisions | 323 | 308 |
| Short-term financial debt | 1,394 | 853 |
| Trade liabilities | 1,329 | 1,461 |
| Income tax payable | 154 | 355 |
| Dividends payable | 10 | 114 |
| Other current liabilities | 789 | 776 |
| Liabilities linked to assets held for sale | 1,145 | 1,162 |
| TOTAL EQUITY & LIABILITIES | 18,138 | 17,894 |
| Revaluation reserve (fair value) |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in € m) | 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 |
| 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 |
- | - | - | - | (225) | - | - | - | - | (225) | (25) | (250) |
| Items of OCI | - | - | - | - | (10) | 28 | (1) | (2) | (125) | (110) | 9 | (102) |
| Comprehensive income |
- | - | - | - | (235) | 28 | (1) | (2) | (125) | (336) | (16) | (352) |
| Cost of stock options | - | - | - | - | 5 | - | - | - | - | 5 | - | 5 |
| Dividends | - | - | - | - | (156) | - | - | - | - | (156) | (3) | (158) |
| Hybrid bond dividends | - | - | - | - | (15) | - | - | - | - | (15) | - | (15) |
| Sale (acquisition) of treasury shares |
- | - | 5 | - | - | - | - | - | - | 5 | - | 5 |
| Other | - | - | - | - | (3) | - | - | - | - | (3) | (52) | (55) |
| Balance at 30/06/2014 | 1,271 | 18 | (127) | 1,194 | 5,584 | (743) | (6) | 4 | (618) | 5,306 | 307 | 6,884 |
| 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 |
- | - | - | - | 140 | - | - | - | - | 140 | 15 | 155 |
| Items of OCI | - | - | - | - | 6 | 497 | - | (39) | 17 | 482 | 35 | 517 |
| Comprehensive income |
- | - | - | - | 146 | 497 | - | (39) | 17 | 622 | 50 | 672 |
| Cost of stock options | - | - | - | - | 2 | - | - | - | - | 2 | - | 2 |
| Sale (acquisition) of treasury shares |
- | - | 42 | - | - | - | - | - | - | 42 | - | 42 |
| Other | - | - | - | - | 1 | - | - | - | - | 1 | 7 | 8 |
| Balance at 31/03/2015 | 1,271 | 18 | (129) | 1,194 | 5,903 | (30) | (4) | (82) | (909) | 5,961 | 271 | 7,503 |
| Net profit for the period |
- | 125 | 125 | 21 | 146 | |||||||
| Items of OCI | - | - | - | - | 7 | (245) | 2 | 43 | 138 | (56) | (14) | (69) |
| Comprehensive income |
- | - | - | - | 132 | (245) | 2 | 43 | 138 | 69 | 7 | 77 |
| Cost of stock options | (1) | - | - | - | 3 | - | - | - | - | 3 | - | 2 |
| Dividends | - | - | - | - | (172) | - | - | - | - | (172) | (6) | (178) |
| Hybrid bond dividends | - | - | - | - | (29) | - | - | - | - | (29) | - | (29) |
| Sale (acquisition) of treasury shares |
- | - | (37) | - | - | - | - | - | - | (37) | - | (37) |
| Other | - | - | - | - | (1) | - | - | - | - | (1) | - | (1) |
| Balance at 30/06/2015 | 1,271 | 18 | (166) | 1,194 | 5,834 | (275) | (2) | (39) | (771) | 5,793 | 272 | 7,336 |
| (in € m) | Q2 2015 | Q2 2014 | H1 2015 | H1 2014 |
|---|---|---|---|---|
| Net income | 146 | (352) | 301 | (250) |
| Depreciation, amortization & impairments (-) | 262 | 678 | 472 | 894 |
| Earnings from associates & joint ventures accounted for using the equity method (-) |
(4) | (20) | (13) | (17) |
| Net financial charges & income / loss from available for-sale financial assets (-) |
52 | 85 | 118 | 194 |
| Income tax expense (-) | 109 | 65 | 195 | 121 |
| Changes in working capital | (8) | (36) | (506) | (345) |
| Changes in provisions | (27) | (41) | (92) | (94) |
| Dividends received from associates & joint ventures accounted for using equity method |
6 | 4 | 9 | 7 |
| Income taxes paid | (106) | (93) | (147) | (117) |
| Others | (20) | 2 | (9) | (3) |
| Cash flow from operating activities | 410 | 293 | 326 | 390 |
| Acquisition (-) of subsidiaries | (23) | (54) | (26) | (57) |
| Acquisition (-) of investments - Other | (3) | (47) | (17) | (75) |
| Loans to associates & non-consolidated subsidiaries | 2 | 5 | 2 | 9 |
| Sale (+) of subsidiaries & investments | - | 11 | (238) | 11 |
| Acquisition (-) of tangible assets | (220) | (190) | (464) | (368) |
| Acquisition (-) of intangible assets | (20) | (13) | (38) | (26) |
| Sale (+) of tangible & intangible assets | 4 | 4 | 16 | 7 |
| Changes in non-current financial assets | (7) | (5) | (17) | (11) |
| Cash flow from investing activities | (267) | (289) | (781) | (511) |
| Acquisition (-) / sale (+) of treasury shares | (37) | 3 | 6 | 5 |
| New borrowings | 547 | 523 | 924 | 568 |
| Borrowings repayment | (529) | (828) | (576) | (1,320) |
| Changes in other current financial assets | (1) | 473 | 276 | 462 |
| Net cash out related to cost of borrowings & interest on lendings & term deposits |
(90) | (158) | (117) | (211) |
| Dividends paid | (170) | (171) | (282) | (282) |
| Hybrid bond dividend | (29) | - | (29) | - |
| Other | (21) | 73 | (28) | 40 |
| Cash flow from financing activities | (331) | (85) | 174 | (738) |
| Net change in cash & cash equivalents | (187) | (81) | (281) | (859) |
| Currency translation differences | (37) | (1) | 47 | (3) |
| Opening cash balance | 1,264 | 1,193 | 1,275 | 1,972 |
| Ending cash balance1 | 1,040 | 1,111 | 1,040 | 1,111 |
| Free Cash Flow | 167 | 89 | (177) | (8) |
| From continuing operations | 110 | 81 | (159) | (84) |
| From discontinued operations | 57 | 8 | (18) | 77 |
1 Including cash in assets held for sale (€ 43 million at the end of Q2 2015).
| (in € m) | Q2 2015 | Q2 2014 | H1 2015 | H1 2014 |
|---|---|---|---|---|
| Cash flow from operating activities | 82 | 34 | 35 | 133 |
| Cash flow from investing activities | (25) | (27) | (53) | (57) |
| Cash flow from financing activities | (9) | (4) | (17) | (11) |
| Net change in cash & cash equivalents | 48 | 3 | (35) | 65 |
Cash flow from operating activities was € 410 m compared to € 293 m last year. Besides net income of € 146 m, it consisted of:
Cash flow from investing activities was € (267) m, and included capital expenditures of € (240) m, including € (25) m in discontinued operations.
Free Cash Flow was € 167 m, and included cash flow from discontinued operations for € 57 m.
Cash flow from operating activities was € 326 m compared to € 390 m last year. Besides net income of € 301 m, it consisted of:
Cash flow from investing activities was € (781) m, and included the tax cash-out from the disposal of Eco Services for € (232) m, as well as capital expenditures of € (501) m, including € (52) m in discontinued operations.
Free Cash Flow was € (177) m, and included cash flow from discontinued operations for € (18) 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 July 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.
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 six months ended June 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) | Q2 2015 | Q2 2014 | H1 2015 | H1 2014 |
|---|---|---|---|---|
| Net sales | 2,675 | 2,566 | 5,322 | 5,054 |
| Advanced Formulations | 686 | 725 | 1,382 | 1,388 |
| Advanced Materials | 840 | 670 | 1,648 | 1,329 |
| Performance Chemicals | 754 | 724 | 1,507 | 1,442 |
| Functional Polymers | 395 | 448 | 782 | 896 |
| Corporate & Business Services | 1 | (1) | 2 | (1) |
| REBITDA | 500 | 463 | 1,002 | 911 |
| Advanced Formulations | 100 | 113 | 196 | 210 |
| Advanced Materials | 214 | 181 | 415 | 351 |
| Performance Chemicals | 185 | 169 | 380 | 340 |
| Functional Polymers | 45 | 36 | 75 | 75 |
| Corporate & Business Services | (43) | (37) | (63) | (66) |
| IFRS depreciation & amortization (recurring) excluding Rhodia PPA |
(177) | (155) | (351) | (310) |
| Adjustments of Chemlogics and Ryton inventories at Fair Value (PPA) & holdback payments |
(3) | (2) | (6) | (7) |
| Rusvinyl adjustments (in equity earnings) | (4) | 13 | (4) | 2 |
| Amortization of Rhodia PPA on fixed assets | (27) | (27) | (55) | (55) |
| Non-recurring items (-) | (46) | (46) | (64) | (76) |
| EBIT | 244 | 246 | 521 | 465 |
| Net financial charges | (58) | (75) | (119) | (172) |
| Result before taxes | 185 | 172 | 403 | 292 |
| Income taxes | (72) | (52) | (155) | (90) |
| Result from continuing operations | 113 | 119 | 248 | 202 |
| Result from discontinued operations | 33 | (471) | 53 | (452) |
| Net income | 146 | (352) | 301 | (250) |
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 June 30, 2015, the impact on the income statement and statement of financial position amounts to less than € 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 June 30, 2015, the impact on the income statement and statement of financial position amounts to € 3 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 June 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.
For all financial instruments measured at fair value in Solvay's statement of financial position, the fair value of those instruments as of June 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 six months ended June 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.
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 announced the start-up of their joint venture INOVYN.
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. In addition, Solvay and INOVYN have agreed to continue supplying basic chemicals to the BASF site in Antwerp.
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 June 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 six 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 € 18.138 m and the consolidated income statement shows a consolidated profit (group share) for the period then ended of € 265 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 July 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%.
Cost of Carry: Difference between cost of gross debt and yield on cash financed by debt.
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).
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.
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 equity-consolidated companies (e.g RusVinyl's).
Results on disposals: It includes gains/(losses) from activities consolidated as Discontinued operations.
October 29, 2015 Announcement of the 3rd quarter and the nine months 2015 results and the interim dividend for 2015 (payable in January 2016, coupon n° 97) (at 07:00).
Solvay SA
Rue de Ransbeek 310 1120 Brussels Belgium
T : +32 2 264 2111 F : +32 2 264 3061 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]
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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