Annual Report • Mar 30, 2012
Annual Report
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Group 01 01 Highlights 02 Chairmen's Message 04 Leafl et 06 Strategy 08 Event 10
18
Businesses
Responsibilities
11 Management Report
17 Financial Information per Share
48 Human Resources
52 Sustainable Development 58 Executive Committee and General Managers
Financial Statements part 2
| IFRS | PRO FORMA8 | |||||
|---|---|---|---|---|---|---|
| 2007 | 2008 | 2009 | 20101 | 2011 | 2011 | |
| EUR million | ||||||
| Operating situation | ||||||
| (Net) sales2 | 9 572 | 9 490 | 8 485 | 5 937 | 8 001 | 12 693 |
| REBITDA3 | 1 662 | 1 436 | 1 439 | 930 | 1 208 | 2 068 |
| REBITDA as % of (net) sales | 17% | 15% | 17% | 16% | 15% | 16% |
| REBIT4 | 1 192 | 965 | 969 | 571 | 748 | 1 408 |
| Net result | 828 | 449 | 553 | 1 823 | 296 | 784 |
| Total depreciation and amortization5 | 593 | 417 | 496 | 607 | 455 | 655 |
| Free Cash fl ow6 | 402 | 531 | 789 | 117 | 371 | 656 |
| Capital expenditure | 777 | 1 320 | 567 | 457 | 4 797 | 1 058 |
| Research expenditure | 556 | 564 | 555 | 125 | 156 | 218 |
| Personnel costs | 2 081 | 1 981 | 2 016 | 1 281 | 1 422 | |
| Added value | 3 921 | 3 083 | 3 306 | 3 838 | 2 345 | |
| Financial situation | ||||||
| Shareholders' equity | 4 459 | 4 745 | 5 160 | 6 708 | 6 653 | |
| Net debt7 | 1 307 | 1 597 | 1 333 | -2 993 | 1 760 | |
| Net debt / shareholders' equity | 29% | 34% | 26% | 26% | ||
| Return on equity (ROE) | 18% | 9% | 11% | 27% | 4% | |
| Gross distribution to Solvay shareholders | 240 | 241 | 241 | 240 | 250 | |
| Persons employed | ||||||
| Persons employed at December 31 | 28 340 | 29 433 | 28 204 | 14 720 | 29 121 |
The 2010 fi gures only have been restated to take the changes in joint venture accounting, applied as from 1 January 2011, into account. Joint ventures are now accounted for using the equity method instead of the proportionate method.
Sales in 2007 to 2009 and net sales from 2010.
REBITDA: operating result before depreciation and amortization, non recurring elements,
fi nancial charges and income taxes.
-25 in 2009, -248 in 2010 and +5 in 2011. 6. Cash fl ow from operating activities + cash fl ow from investing activities, excluding acquisitions and sales of subsidiaries and other investments + dividends from associates and JVs.
Liabilities (+) / Assets (-).
The pro forma fi gures show the income statement (1) as if the acquisition of Rhodia had become effective from the 1st of January 2010, (2) harmonizing the accounting rules and (3) eliminating the Purchase Price Allocation (PPA) impacts.
Total capital expenditure & acquisitions by Sector in 2011 (EUR million)
REBITDA 2011 = EUR 2 068 million (including "Corporate & Business Support": EUR -79 million and "New Business Development": EUR -53 million)
Net sales by Sector in 2011
REBITDA* by Sector in 2011
* Excluding "Corporate & Business Support" and "New Business Development".
A global presence
Net sales 2011 = EUR 12 693 million
J Europa: 43% JNorth America: 17% J Latin America: 14% J Asia and rest of the world: 26%
| Consumer goods | 28% |
|---|---|
| Construction | 17% |
| Automobile industry | 15% |
| Electricity and electronics | 7% |
| Energy | 5% |
| Environment | 4% |
|---|---|
| Agriculture, forestry and fi shing | 4% |
| Paper | 2% |
| Other industries | 18% |
Solvay secures the development of its fl uorinated products by acquiring a fl uorite mine in Bulgaria.
SOLEF® PVDF Solvay announces a 50% increase in its SOLEF® PVDF production capacity in response to strongly growing demand.
Solvay and Korea's EWHA University set up a joint research and development center in Seoul.
June 8, 2011 China
Solvay and Tianjin Soda Ash Plant establish a partnership to create a soda ash plant in China.
Solvay announces that it is increasing its FOMBLIN-Y® and GALDEN® production capacity in response to rapidly growing demand.
Specialty polymers Solvay to invest EUR 120 million in the production of high-added-value specialty polymers in China.
July 26, 2011 Plextronics Solvay commits EUR 10 million to support Plextronic's development of innovative technology in organic light-emitting diodes and photovoltaic cells.
July 28, 2011 Saudi Arabia Solvay to form a joint venture with Sadara to build a hydrogen peroxide megaplant in Saudi Arabia.
Fluorine gas Solvay is developing a fl uorine gas production unit that will greatly reduce greenhouse gas emissions in the photovoltaic and
semiconductor industries.
The Group launches the recycling of rare earth from magnets after announcing initiatives to recycle rare earths in energy-saving lamps and rechargeable nickel metal hydride batteries.
Thailand Solvay commissions the world's largest hydrogen peroxide plant in Thailand.
Nicolas Boël Appointment of Nicolas Boël as future Chairman of the Board of Directors of Solvay, effective May 9, 2012.
Eco-effi cient Products and Processes
Inauguration in Shanghai (China) of the Ecoeffi cient Products and Processes laboratory, a mixed research unit with CNRS, ENS Lyon and East China Normal University, dedicated to green chemistry.
eSpheres Solvay creates eSpheres, a spin-out for managing "environment, health and safety" information.
The Solvay group increases its leadership in energy effi ciency and CO2 with the acquisition of Orbeo.
Solvay provides strategic materials for the batteries of the BLUECAR® electric car (Bolloré group).
Wienerberger acquires Solvay's stake in Pipelife, one of the world's leading suppliers of plastic pipe systems.
Solvay announces its intention to create, with Rhodia, a major player in Chemicals and a global leader in its businesses.
April 7, 2011 Solvay fi les its friendly tender offer for Rhodia with the French Financial Markets Authority.
The French Financial Markets Authority approves Solvay's friendly tender offer for Rhodia.
June 14, 2011 Solvay launches its friendly tender offer for Rhodia shares at EUR 31.60 per share.
June 30, 2011 Solvay notifi es its friendly tender offer for Rhodia to the European Commission.
August 5, 2011 The European Commission approves Solvay's acquisition of Rhodia.
August 31, 2011 Solvay's friendly tender offer for Rhodia is a complete success.
September 13, 2011 Initiation of the squeeze-out procedure.
Solvay has just passed through a historic year in which we continued to implement our growth and geographic expansion strategy, taking us out further, towards tomorrow's sources of growth.
We have delivered a profound structural transformation to create an organization that is closer to our markets and to our customers. We have successfully acquired Rhodia. Together we are creating a major player in sustainable chemistry.
In 2008, during one of the periodic strategic reviews designed to give the Group a vision in phase with the world around it, Solvay's Executive Committee decided to project itself far into the future, with the long-term horizon of the Group's 175th anniversary in… 2038. If this future celebration is to crown a history of continuing success, Solvay will need to adapt and align its processes with the major trends that characterize the development of the human community. We set to work with enthusiasm and have come an impressively long way in just a few years.
2011 was a pivotal year for the Group, in which it took a major step in its strategic journey towards a more sustainable Solvay, which began with the sale of the pharmaceutical activities. The successful friendly tender offer for Rhodia has doubled the size of the Group, enriched its portfolio and extended its frontiers.
The integration of the company that is now Solvay's third Sector is under way. The outcome will be a Group that is even more powerful and ambitious than before.
In addition to this undeniable success, Solvay took many other initiatives in 2011, also in line with the strategic criteria that led to the acquisition of Rhodia:
developing its high-added-value activities,
growing in products with reduced environmental and energy footprints, and
The 2011 roll of achievements is even more impressive now that Solvay includes the initiatives of the new Rhodia Sector.
For all Sectors combined, Solvay submitted 322 patents, 199 from the Chemicals and Plastics Sectors – this is an absolute record for the latter – and 123 from the Rhodia Sector. The Group's innovation policy has never been so prolifi c.
On the industrial side, the Group in its new confi guration was involved in no less than fi ve major projects in China. In this way Solvay will be nourished even more by the incredible dynamism and trends that are driving Chinese society. In Thailand, Solvay has commissioned a new hydrogen peroxide megaplant with a capacity of 330 kilotons. An initial agreement has also been signed to create a similar industrial facility, based on Solvay's exclusive technology, in Saudi Arabia.
The Group has continued to develop its high-added-value activities, increasing its fl uoropolymer production capacity at both Spinetta (Italy) and Tavaux (France) and has put into service new production capacity for highly dispersible silica at the Rhodia Sector plant at Chicago Heights, IL (United States).
Solvay made progress in 2011 in its constant search for new sources of sustainable growth. This includes the decision to create a new research and development center, focused on new energy forms and electronics, at the heart of a very highly regarded Korean university campus.
Also in South Korea, Solvay is testing a new fl uorine technology that can reduce greenhouse gas emissions during the manufacture of solar cells and semiconductors.
The Group announced the development of an innovative process for recycling rare earths, in collaboration with Umicore. The Rhodia Sector also launched a new research partnership with the French Centre National de la Recherche Scientifi que (CNRS), Ecole Normale Superieure de Lyon (France) (ENS Lyon) and East China Normal University in Shanghai, focusing on green chemistry.
In terms of fi nancial results, 2011 was a particularly good year.
Pro forma net sales for 2011 amounted to EUR 12 693 million, an improvement of 14%. The economic context remained sustained throughout 2011. The share of sales in fast growing regions is rising strongly. In 2011, Solvay realized 40% of its sales in Latin America, Asia and in the rest of the world.
Pro forma REBITDA for 2011 amounted to EUR 2 068 million compared to EUR 1 862 million in 2010, an increase of 11%.
The improvement in REBITDA in the Plastics Sector (+6% to EUR 590 million) is explained by the record operating performance of Specialty Polymers in a context of very sustained activity.
REBITDA of the Chemicals Sector again improved compared to the preceding period, increasing by 4% to EUR 491 million. The result from Essential Chemicals was up by 9% compared to 2010, buoyed by increased demand in most of its activities and good profi tability.
The Rhodia Sector posted a strong 16% progression to a record EUR 1 119 million REBITDA, illustrating a successful execution of its profi table growth strategy and confi rming the ambitions attached to its acquisition. The Sector benefi ted from its resilient, high quality portfolio, its strong exposure to fast growing regions and its excellent pricing power.
2011 saw the crystallization of many changes introduced as part of the strategic maneuvers to prepare Solvay for the future.
Last April, the Group formally adopted a new operating structure. Lighter, more effi cient and less expensive to run, it brings Solvay closer to its customers and gives greater autonomy to employees in the fi eld. A key goal of this new decentralized and more delegationbased organization is to improve the responsiveness vital in times of crisis. Rhodia had already launched
Christian Jourquin Chairman of the Executive Committee
a similar approach, with objectives that converge with and fundamental principles that are comparable with the Solvay program.
In 2011 the Group also relocated its headquarters activities from its historic Ixelles site to the Solvay campus in the north of Brussels. This site, still in the greater Brussels area, has a strong culture of research and technology. The move serves to reinforce and highlight two essential features of the Group: innovation and operating excellence.
Finally, in late 2011, following the very rapid success of its offer for Rhodia, Solvay went on to launch a powerful and ambitious new project to integrate the two companies, to give birth to a new chemical leader resolutely focused on sustainable development. Implementation of this target will already begin in the fi rst half of 2012.
What emerges is an even more powerful Solvay, with the critical mass and strategic assets to approach with confi dence the troubled times ahead in the global economy. Pooling their talents allows Rhodia and Solvay to be even more ambitious. United, the new Group creates for all its stakeholders a value far greater than the sum of what its component parts could generate by acting alone.
These great prospects are being realized under new talent: already in May of this year, Nicolas Boël and Jean-Pierre Clamadieu take over the reins of this new Group: the fi rst as Chairman of the Board of Directors and the second as Chief Executive Offi cer. We wish them all the brilliant success that Solvay deserves.
Aloïs Michielsen Chairman of the Board of Directors
In September 2011, Solvay acquired Rhodia to become a major player in the chemical industry, with high-added-value products and applications. The new Group ranks among the top ten chemical players worldwide.
AS MAJOR PLAYER IN CHEMISTRY, SOLVAY IS COMMITTED TO SUSTAINABLE DEVELOPMENT AND FOCUSES ON CONTINUOUS IMPROVEMENT, INNOVATION AND OPERATIONAL EXCELLENCE. SOLVAY DEVELOPS HIGH-ADDED-VALUE PRODUCTS AND SOLUTIONS FOR THE FOLLOWING MARKETS: CONSUMER GOODS, CONSTRUCTION, AUTOMOTIVE, ELECTRONICS, ENERGY, ENVIRONMENT AND WATER.
OF SALES ARE FROM PRODUCTS MEETING SUSTAINABLE DEVELOPMENT CHALLENGES
Our research and development projects are consistent with the Group's declared sustainable development objective: providing technology solutions to the major challenges facing society.
FOUNDED IN BELGIUM IN 1863 BY ERNEST SOLVAY
EUR 12.7 BILLION NET SALES
EUR 2.1BILLION REBITDA
Our innovation efforts focus on renewable energy, conserving natural resources, reducing emissions and waste, developing technologies with reduced environmental impact, and advanced materials recycling processes.
29 100 EMPLOYEES
Dual listing in Paris and Brussels
90% OF ITS
WHERE IT IS AMONG THE TOP 3 GLOBAL
17% 25 3 400
EUR 218 MILLION INVESTMENT IN RESEARCH & DEVELOPMENT
LATIN AMERICA
1700 EMPLOYEES IN R&D
12 major research centers across the world
14% 10 3 800
NORTH AMERICA
40% OF SALES FROM HIGH-GROWTH COUNTRIES
55 COUNTRIES AND ON 110
The fi gures in this leafl et are pro forma.
High-Performance Engineering Polymers and Compounds, Fluorinated Polymers, High Barrier Polymers
Silica & Rare Earth Systems High Performance Silicas and Rare Earth-based formulations
Consumer Chemicals Surfactants, Phosphorus Chemistry and Diphenols
Polyamide & Intermediates Polyamide 6.6 and Polyamide 6.6 based Engineering Plastics
Vinyls & Acetow PVC & Cellulose Acetate Tow
For everyday comfort, we develop a wide range of products used in detergents, personal and domestic care products, food, human health, animal nutrition, textiles, artifi cial leather and sports equipment.
28%*
Our products, including blowing agents and fl ame retardants, are used in paints and coatings, thermal insulation, windows, electrical wiring and cabling as well as pipes and fi ttings for heating and cooling systems. 17%*
We offer a wide range of innovative solutions for sustainable mobility: silicas to improve the energy effi ciency of tires, materials for fuel and air intake systems, cooling and heating system components, fl at glass, lubricants and polyamide-based engineering plastics to reduce vehicle weight.
15%*
We offer advanced solutions and products to increase the energy effi ciency or energy storage volume of lithium batteries, for producing energy from solar, wind and other renewable resources, and materials for fuel cells and membranes for gas
Our products help protect the environment in areas of daily life and across industry: air emission control, soil remediation, water supply and treatment, membrane technologies for gas separation, and highperformance polymers for water purifi cation membranes.
We offer high quality products for electricity and mobile electronics: conductive and photovoltaic materials, coatings and coating additives for fl at panel displays, semiconductors, medical imaging, digital cameras, energy-effi cient lighting products and OLEDs, insulation products and
* Percentage of the sales.
Solvay is supporting this technological challenge with funding, engineering know-how and chemistry expertise. 11 Solvay products, 15 applications and more than 6 000 separate parts optimize the aircraft's energy system and ultra-light structure.
ANNOUNCEMENT OF THE PROJECT, FEASIBILITY STUDY (EPFL)
2005-2008 CONCEPT, DESIGN AND CONSTRUCTION 2010 26-HOUR FLIGHT (FIRST NIGHT FLIGHT)
TECHNOLOGY PARTNERSHIP WITH SOLVAY
2009 FIRST "FLEA HOP" FLIGHT
2011 EUROPEAN FLIGHTS (BRUSSELS AND PARIS LE BOURGET)
After its experimental night fl ight in 2010, Solar Impulse entered a new phase in spring 2011 by making its fi rst international fl ights. From its Swiss base it fi rst fl ew to Brussels, and from there to Paris, where it entered the world of aviation as a special guest of the Paris Air Show. In doing so it conveyed important messages about alternative energies for the future of the planet, especially to the European authorities. These fl ights have also proved a true popular success, keenly followed by Group employees, for whom the choice of Brussels as the fi rst landing destination outside Switzerland honored Solvay's commitment to the project.
The Group's contribution, based on research into innovative materials and technical solutions and the study of their behavior in extreme conditions, is vital for Solar Impulse. 11 Solvay products, 15 applications and over 6 000 parts are present in the aircraft: fl uoropolymerbased fi lms (ECTFE HALAR®), used in the photovoltaic panels that capture solar energy that is then stored in the lithium batteries (SOLEF® PVDF, F1EC®). Solvay products and plastics (TORLON® Polyamide-imide, SOLKANE® 365mfc fl uorinated solvent, PRIMOSPIRE® polyphenylene ultra-polymer, etc.) help lighten the overall weight, strengthen the structure and optimize the energy chain. All of these products are also found in everyday applications (computers, cell phones and electric car batteries, solar panels, insulation, consumer electronics and the like).
During the summer, the Solar Impulse HB-SIA prototype made several less publicized fl ights in Switzerland, providing ongoing training for the ground crews and allowing pilots Bertrand Piccard and André Borschberg to continue their preparation for an initial intercontinental fl ight in 2012. These fl ights, which have also demonstrated the validity of Solvay's commitment to this ambitious project, are part of the project to fl y round the world in 2014, a step requiring modifi cations of the aircraft's design in terms of weight and range. Work has started on building a second prototype (HB-SIB), capitalizing on the experience gained so far.
This demonstration project, a true challenge of the future, combines high technology with promotion of behavioral change, both of which are keys to the future of our planet. Solvay's participation has also enabled it to partner with top-fl ight players – including the Federal Polytechnic School of Lausanne (EPFL) – offering it new opportunities for development as part of an open innovation approach.
With the integration of Rhodia, Solvay has become a major world player in chemistry that generates nearly EUR 13 billion of net sales, is a world leader in 90% of the markets it serves, achieves 40% of its sales in high-growth countries and invests EUR 218 million a year in R&D.
Following Solvay's friendly tender offer for Rhodia, supported by the markets, integration of the two companies commenced without delay and is moving ahead at a sustained pace and with a structured approach. Tangible and very concrete achievements were already visible by the end of 2011, foreshadowing many others.
For example, in December 2011 the Executive Committee approved a comprehensive plan that will reduce the Group's annual purchases by approximately EUR 250 million over the next three years. This considerable gain will result from combining efforts already under way with the powerful leverage of the integration of Rhodia into the Solvay group.
On January 1, 2012, Solvay created a new Global Business Unit (GBU), Solvay Energy Services, to provide energy and CO2 related services to the Group and to external customers. This new GBU, which combines the best practices of both companies, has a powerful synergetic potential, identifi ed from the start of the integration of Rhodia and Solvay.
The Group is undertaking in parallel a large number of integration projects, each focused on specifi c operational areas. The mutual familiarization phase, completed in late 2011, has given all Group decision-makers a very good understanding of the characteristics and strengths of both Rhodia and Solvay.
The next step, which started at
the very beginning of 2012, is to develop new organizational options, capitalizing on the qualities of the various components of the Group in its new confi guration. Instead of implementing integration through the sole, discretionary authority of the purchaser, Solvay has opted for a method that is more diffi cult, but that the Group believes will benefi t all stakeholders. The integration is proceeding with respect for the competences of all involved, taking advantage of what is best on both sides. This work has focused initially on a number of key corporate support functions: Finance, Legal, Communications, Public Affairs and Human Resources.
The integration allows rapid outlining of the new Group. New organizations will be established in the fi rst half of 2012, following the usual procedures for informing and consulting with social partners, as required for any such changes.
The employees of the new Solvay are fully involved in – and many of them, very hard at work on – the profound changes that are transforming the Group. Solvay
will continue to evolve – something each employee is fully aware of. To operate the new organization, with its expanded industrial base and new headquarters, Solvay intends to deploy a new management style, in tune with today's world and based on shared core values:
True to its tradition, Solvay has had the strength to change. In just a few years, the transformation has been profound and the steps taken dramatic. The sense of community and cohesion of the Solvay shareholders has made it possible to build, through all the ups and downs, a strong industrial Group resolutely focused on sustainable and profi table growth.
The Executive Committee and the Board of Directors together took the well-thought-out decision to sell the Pharmaceuticals business, the
success of which Solvay could no longer ensure by acting alone, but the sale of which would provide the resources to secure the future of the Group.
Today, the Group is constructing an exciting and ambitious vision of the future, building on the respective qualities of our companies. This vision will be carried by the major trends that prefi gure the world of tomorrow. The megatrends most relevant to the new Group are clearly identifi ed:
and differentiated products and services, in which its core competencies realize their full potential.
The Group's efforts are now tending towards a supreme objective, the creation of a new and winning Solvay, built for geographic expansion and focused on sustainable development.
63rd UN General Assembly. The objective: to emphasize the aspects of life on the planet. Solvay was closely involved in this initiative, especially in the organization of the January 28, 2011 opening at the headquarters of the United Nations Educational, Scientifi c and Cultural Organization (UNESCO) in Paris and of the closing ceremony held in Brussels on December 1, 2011.
Supported by UNESCO, work of Marie Curie and women's
Group companies, both abroad and in Belgium, contributed to the objectives of the International Year of Chemistry. At our Jemeppesur-Sambre (Belgium) site, some 70 staff members answered Essenscia, the Belgian Federation the presentation of the EOLYS POWERFLEX™ diesel fuels additive (ABIQUIM) and the Brazilian Society
If 2011 marked the 100th anniversary
First Solvay Physics and Chemistry Council, attended by Ms. Marie Curie Brussels, 1911.
Goldschmidt / Planck* / Rubens / Lindemann / Hasenohrl / Nernst** / Brillouin / Sommerfeld / de Broglie* / Hostelet / Solvay / Knudsen / Herzen / Jeans / Rutherford** / Lorentz* / Warburg / Wien* / Einstein* / Langevin / Perrin* / Ms. Curie* ** / Poincare / Kamerlingh-Onnes*.
* Nobel prize in Physics ** Nobel prize in Chemistry
Financial Statements part 1
MANAGEMENT REPORT page 11 FINANCIAL INFORMATION PER SHARE page 17
THIS MANAGEMENT REPORT COVERS BOTH THE CONSOLIDATED ACCOUNTS OF THE SOLVAY GROUP AND THE STATUTORY ACCOUNTS OF SOLVAY SA
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 (for example temporary).
1. REBITDA: operating result before depreciation and amortization, non-recurring elements, fi nancial charges and income taxes.
2. The pro forma fi gures show the income statement (1) as if the acquisition of Rhodia had become effective from the 1st of January 2010, (2) harmonizing the accounting rules and (3) eliminating the Purchase Price Allocation (PPA) impacts.
3. Net sales comprise the sales of goods and value-added services corresponding
4. Cash fl ow from operating activities + cash fl ow from investing activities, excluding acquisitions and sales of subsidiaries and other investments + dividends from associates and JVs.
The Management Report for the accounting period ending on December 31, 2011, consisting of pages 11 to 17, 147 to 159 (Management of Risks) and 179 to 207 (Corporate Governance Statement), has been prepared in accordance with article 119 of the Companies' Code and was approved by the Board of Directors on February 15, 2012.
Solvay has created with Rhodia a major player in the chemical industry with sales of EUR 12.7 billion, 40% of which are generated in high growth countries, and a REBITDA of EUR 2.1 billion. This new Group now ranks among the top 10 chemical companies worldwide.
The Group is supported by positions of excellence: 90% of its sales are made in activities where it is among the top three producers worldwide. It is one of the world leaders in high-performance specialty polymers and the world leader in soda ash and hydrogen peroxide. It is also leader in specialty chemicals (silica, rare earth formulations), products for consumer goods markets (surfactants and natural polymers, acetate tow) and polyamide 6.6-based engineering plastics.
The complementary nature of Rhodia's and Solvay's industrial activities gives the new Group exposure to very diverse markets: consumer products, construction, automotive, energy, water, environmental, electronics, etc.
This new Group, listed on NYSE Euronext in Brussels and Paris, is keen to gain recognition as a major worldwide chemical group resolutely committed to sustainable development and focused on innovation and operating excellence.
The integration process is combining Solvay's and Rhodia's strengths and excellence.
Signifi cant actions have already been launched.
Solvay is confi dent in its capacity to deliver the announced
integration synergies of EUR 250 million per year by 2014. These come on top of the Horizon program savings amounting to EUR 120 million per year from the end of 2012. These two optimization programs should together generate more than EUR 100 million in gross savings5 during 2012.
The Rhodia acquisition was closed on September 16, 2011. Only Rhodia's fourth quarter results are included in the consolidated IFRS fi nancial statements of the Solvay group. To give complete and comparable information, Solvay has published pro forma adjusted fi nancial results, in addition to the consolidated IFRS accounts for 2011. All comments below on business progress in 2011 relate to the pro forma fi gures.
Net sales for 2011 amounted to EUR 12 693 million, an improvement of 14%.
The economic context remained sustained throughout 2011 for most activities, as seen in the increased sales volumes in Chemicals (+4%), Plastics (+2%) and Rhodia (+3%).
Activity was particularly dynamic in Specialty Polymers, in Advanced Materials and in Consumer Chemicals, with sales volumes up by 6%, 19% and 6% respectively at constant scope, compared to the already high levels of activity in 2010. Other activities, however, were confronted with a clear slowing of demand during the fi nal months of the year, in particular Vinyls, fl uorinated chemicals and, to a lesser degree, Polyamide Materials.
The share of sales in fast growing regions improved markedly, with the Solvay group realizing 40% of its 2011 sales in Latin America, Asia and in the rest of the world.
REBITDA for 2011 amounted to EUR 2 068 million compared to EUR 1 862 million in 2010, or an increase of 11%. Priority was given to cash generation, especially in the 4th quarter, resulting in a considerable reduction in inventories.
The improvement in REBITDA in the Plastics Sector (+6% to EUR 590 million) is explained by the record operating performance of Specialty Polymers in a context
| EUR Million | IFRS results | Pro forma results | ||
|---|---|---|---|---|
| 2011 | 2011 | 2010 | 2011/2010 | |
| Net sales 6 | 8 001 | 12 693 | 11 095 | +14% |
| Plastics | 3 686 | 3 686 | 3 361 | +10% |
| Chemicals | 2 836 | 2 836 | 2 575 | +10% |
| Rhodia | 1 479 | 6 171 | 5 157 | +20% |
| REBITDA | 1 208 | 2 068 | 1 862 | +11% |
| Plastics | 583 | 590 | 555 | +6% |
| Chemicals | 484 | 491 | 472 | +4% |
| Rhodia | 231 | 1 119 | 9627 | +16% |
| New Business Development | -38 | -53 | -47 | -13% |
| Corporate and Business Support 8 | -51 | -79 | -80 | +1% |
of very sustained activity, with higher sales prices, signifi cantly improved industrial performances and a better product mix taking the REBITDA/net sales margin for this activity to a much improved 29%. Vinyls results came under strong pressure from late summer onwards despite major cost-reduction efforts, with REBITDA down by 4% to give a REBITDA/net sales margin of 9% compared to 10% in 2010.
REBITDA of the Chemicals Sector again improved, rising by 4% to EUR 491 million. For Essential Chemicals it was up by 9%, sustained by increased demand across most activities and a good profi tability, with sales price increases more than compensating the higher costs of energy and some raw materials. Despite a very good fi rst half, the REBITDA of Special Chemicals was down owing to a sharp slowing of activity during the last months of the year.
Rhodia Sector posted a strong 16% progression to a record EUR 1 119 million REBITDA, illustrating the successful execution of its profi table growth strategy and confi rming the ambitions placed in this acquisition. The Sector benefi ted from its high quality, resilient portfolio, its strong exposure to fast growing regions and its excellent pricing power. Overall volumes progressed by 3%. Furthermore, the Feixiang acquisition, consolidated since December 2010, maintained its double-digit growth. In a context of global infl ationary raw material and energy costs, the Sector's pricing power generated a net positive impact on REBITDA of EUR 158 million in the year. By segment, Consumer Chemicals and Advanced Materials were powerful growth engines, with REBITDA growing by over 30% to EUR 364 million and EUR 267 million respectively. REBITDA at Polyamide Materials was down by 23% after a very strong 2010 and a weakened activity in the second half of the year. Acetow & Eco services, operating in more mature businesses segments, saw sustained business dynamics throughout the year. Energy Services remained stable.
REBITDA of New Business Development amounted to EUR -53 million, refl ecting research & development efforts in promising and important areas for development of the Group outside its traditional activities.
REBITDA of Corporate and Business Support was EUR -79 million against EUR -80 million last year.
All comments on other key income statement fi gures below relate to the 2011 IFRS fi gures.
Non-recurring items amounted to EUR -188 million. The main items here are:
Charges on net indebtedness amounted to EUR -208 million, including charges on borrowings of EUR -159 million. The gross fi nancial debt of the Solvay group amounted to EUR 4 168 million at the 6. Following the implementation of the new organization (Horizon), an amount of EUR 272 million of sales was transferred from the Chemicals Sector to the Plastics Sector in the fi gures of the year 2010, without any impact on
end of December 2011. Interest on cash deposits and investments amounted to EUR 39 million. The cost of discounting provisions amounted to EUR -72 million.
Income taxes amounted to EUR -19 million. Note the recognition of EUR 60 million of deferred tax assets linked to an internal sale of the activities of Solvay Advanced Polymers Belgium, a EUR 31 million impairment loss on a deferred tax asset in Belgium and a EUR 47 million reduction of deferred tax liabilities linked to the allocation of the purchase price of Rhodia.
Net income amounted to EUR 296 million. The negative contribution of EUR -38 million from discontinued operations is explained primarily by the EUR -47 million working capital related adjustment subsequent to the sale of the pharmaceuticals activities.
Net income (Solvay share) amounted to EUR 247 million.
Energy costs are an important part of the Group's cost structure. They are estimated at about EUR 1.2 billion (in 2011 on pro forma basis).
The Solvay group has pursued an active energy policy for many years now. In this context it operates an energy production park with a total installed capacity of 1 000 MW.
An important recent event in this context is the creation of the GBU Solvay Energy Services on January 1, 2012, combining the competencies and know-how of Solvay and Rhodia in the energy fi eld, with the mission of optimizing the Group's and third parties' energy bills and carbon emissions. Solvay Energy Services has as its goal to optimize the Group's energy purchases and help all Business Units and production sites with managing energy and carbon emissions.
These various resources are now committed to achieving the Group's target of reducing its energy bill and greenhouse gas emissions by 20% by 2020.
Equity amounted to EUR 6 653 million at the end of 2011, in line with equity at the end of 2010 (EUR 6 708 millions).
The Solvay group evolved from a net cash position at the end of December 2010 (EUR 2 993 million) to a net debt of EUR 1 760 million at the end of December 2011 following the acquisition of Rhodia for a total cash amount of EUR 3 953 million. At the end of 2011, the net debt to equity ratio was 26%, showing the priority that the Solvay group gives to having a sound fi nancial structure.
Solvay's long and short-term ratings are Baa1/P2 (negative outlook) at Moody's and BBB+/A2 (negative outlook) at Standard & Poor's.
Given the success of the tender offer for Rhodia, the 880 766 shares held by Solvay SA, as temporary partial redeployment of the cash from the sale of the Pharmaceuticals activities, were transferred to Solvay Stock Option Management SPRL to cover the stock options pro gram. At February 17, 2012, Solvay Stock Option Mana gement SPRL's shareholding in Solvay amounted to 2.81%.
Pro forma Free Cash Flow from continuing operations was EUR 656 million in 2011.
IFRS Free Cash Flow from continuing operations was EUR 371 million in 2011.
• IFRS Cash fl ow from operating activities (continuing operations) was EUR 838 million. Besides EBIT of 515 million, it consisted of:
The investments in 2011 amounted to EUR 845 million excluding the Rhodia acquisition (EUR 1 058 million on a pro forma basis).
The 2012 investment budget is EUR 862 million. It aims at continuing the strategic investments for sustainable development and capacity increases in high growth potential regions.
Research and Development costs in 2011 were EUR 156 million (EUR 218 million on a pro forma basis).
The 2012 Research and Development budget is EUR 244 million, with major R&D efforts planned for Specialty Polymers, Consumer Chemicals and New Business Development.
The Solvay group employed 29 121 full-time equivalents at 31 December 2011. Compared to the number at the end of 2010 (16 785 full-time equivalents), the evolution is mainly the result of the Rhodia acquisition, which numbered 14 255 full-time equivalents at the end of December 2011.
Solvay SA is a société anonyme created under Belgian law, with its registered offi ce at rue de Ransbeek 310 at 1120 Brussels.
The accounts of Solvay SA are prepared in accordance with Belgian generally accepted accounting principles, and include its French and Italian branches.
The main activities of Solvay SA consist of holding and managing a number of participations in Group companies and of fi nancing the Group from the bank and bond markets. It also manages the research center at Neder-Over-Heembeek (Belgium) and a very limited number of industrial and commercial activities not undertaken through subsidiaries.
The operating result represents the balance of the head offi ce operating costs partially offset by income from industrial and commercial activities not undertaken through subsidiaries.
Current profi t before taxes amounts to EUR 82 million, compared with EUR 211 million in 2010. It includes dividends received from its various shareholdings (EUR 363 million in 2011) and the differential between interest paid and received on its fi nancing activities.
The balance of extraordinary results is EUR 209 million
| EUR million | Investments in 2011 | Research & Development in 2011 | |||
|---|---|---|---|---|---|
| IFRS | Pro forma | IFRS | Pro forma | ||
| With Rhodia | Without Rhodia acquisition | ||||
| Plastics | 409 | 409 | 409 | 67 | 63 |
| Chemicals | 214 | 214 | 214 | 32 | 28 |
| Rhodia | 164 | 164 | 378 | 21 | 75 |
| New Business Development | 28 | 28 | 28 | 37 | 52 |
| Corporate and Business Support | 3 982 | 29 | 29 | 0 | 0 |
| Group | 4 797 | 845 | 1 058 | 156 | 218 |
| EUR Million | 2011 | 2010 |
|---|---|---|
| Profi t for the year available for distribution |
325 | 2 782 |
| Carried forward | 3 447 | 925 |
| Total available to the General Shareholders' Meeting |
3 772 | 3 707 |
| Total | 3 772 | 3 707 |
|---|---|---|
| Carried forward | 3 512 | 3 447 |
| Gross dividend | 260 | 260 |
| Appropriation: |
compared with EUR 2 543 million in 2010. The main item is a EUR 177 million capital gain on an internal sale of Solvay Advanced Polymers Belgium.
The net profi t of Solvay SA amounted in 2011 to EUR 325 million, compared with EUR 2 782 million in 2010.
In the absence of transfers to untaxed reserves, net income for the year of EUR 3 772 million is available for distribution.
The only event worthwhile mentioning between closing date (December 31, 2011) and the approval of this report by the Board of Directors (February 15, 2012) is Solvay's decision, announced on February 15, 2012, to sell its 50% stake in Pipelife to Wienerberger, pending anti-trust approval.
Risk management (processes, risks identifi ed and actions undertaken to reduce them) is described on pages 147 to 159 of the 2011 Annual Report.
The management of fi nancial risks and any use of fi nancial instruments to hedge them are described on pages 129 to 142 of the 2011 Annual Report.
The mission, composition and modus operandi of the Audit Committee are described on pages 201 and 204 of the 2011 Annual Report.
The Corporate Governance Statement is included on pages 179 to 207 of the 2011 Annual Report. This Statement includes among others a description of the legal and shareholding structure of Solvay, its capital and dividend policy, the modus operandi of the Shareholders' Meetings, the composition and modus operandi of Board of Directors and its Committees, the composition and modus operandi of the Executive Committee, the compensation policy and the most recent compensation report, a description of the main characteristics of risk management and internal control systems, the measures taken by Solvay to comply with Belgian rules on insider trading and a description of the Group's Code of Conduct.
The basic earnings per share from continuing operations amounted to EUR 3.51 (compared to EUR 0.62 in 2010).
On February 15, 2012, the Board of Directors decided to propose to the General Shareholders' Meeting of May 8, 2012 payment of a total gross dividend of EUR 3.0667 per share, the same as in 2010. Based on the closing price of February 15, 2012 (EUR 78.40), this represents a gross dividend yield of 3.9%.
This increase is in line with Group's dividend policy of increasing the dividend whenever possible and, as far as possible, never reducing it.
In line with this policy, dividend was never decreased in the last 30 years and increased in some years. Given the interim dividend of EUR 1.20 gross per share (coupon no. 89) paid on January 19, 2012, the balance of the dividend in respect of 2011, equal to EUR 1.87 gross per share (coupon no. 90), will be paid on May 15, 2012. Solvay shares will be traded 'ex-dividend' on NYSE Euronext from May 10, 2012.
| EUR | 2007 | 2008 | 2009 | 2010 | 2011 |
|---|---|---|---|---|---|
| Stockholders' equity | 52.10 | 54.05 | 57.87 | 77.3410 | 75.79 |
| REBITDA | 20.13 | 17.44 | 17.52 | 11.4410 | 14.87 |
| Net income | 9.46 | 4.92 | 6.28 | 21.85 | 3.04 |
| Net income (excluding discontinued operations) | 9.46 | 4.92 | 2.59 | 0.62 | 3.51 |
| Diluted net income | 9.40 | 4.91 | 6.28 | 21.80 | 3.03 |
| Diluted net income (excluding discontinued operations) | 9.40 | 4.91 | 2.59 | 0.62 | 3.49 |
| Number of shares (in thousands) at December 31 |
84 701 | 84 701 | 84 701 | 84 701 | 84 701 |
| Average number of shares (in thousands) for calculating IFRS earnings per share |
82 586 | 82 318 | 82 143 | 81 320 | 81 224 |
| Average number of shares (in thousands) for calculating IFRS diluted earnings per share |
83 054 | 82 447 | 82 186 | 81 499 | 81 546 |
| Gross dividend | 2.93 | 2.93 | 2.93 | 3.07 | 3.07 |
| Net dividend | 2.20 | 2.20 | 2.20 | 2.30 | 2.30 |
| Highest price | 123.2 | 97.9 | 77.8 | 81.9 | 111.6 |
| Lowest price | 92.3 | 51.45 | 42.0 | 67.8 | 61.5 |
| Price at December 31 | 95.7 | 53.05 | 75.6 | 79.8 | 63.7 |
| Price/earnings at December 31 | 10.2 | 10.8 | 12.0 | 3.6 | 21.0 |
| Net dividend yield | 2.6 % | 4.2 % | 3.1 % | 2.9 % | 2.9 %11 |
| Gross dividend yield | 3.5 % | 5.6 % | 4.1 % | 3.9 % | 3.9 %11 |
| Annual volume (thousands of shares) | 57 536 | 94 322 | 71 259 | 47 028 | 63 462 |
| Annual volume (EUR million) | 6 318 | 7 702 | 4 414 | 3 481 | 5 522 |
| Market capitalization at December 31 (EUR billion) | 8.1 | 4.5 | 6.4 | 6.8 | 5.4 |
| Velocity (%) | 71.5 | 113.2 | 85.2 | 56.0 | 77.8 |
| Velocity adjusted by Free Float (%) | 102.1 | 161.7 | 121.7 | 80.4 | 111.2 |
Restated fi gure 2010 to take the changes in joint venture accounting into account.
Based on the closing price at February 15, 2012 (EUR 78.40).
THE CHEMICALS SECTOR CONTINUED ITS EARNINGS GROWTH IN 2011, WHILE EQUIPPING ITSELF TO BETTER MEET FUTURE CHALLENGES. ITS NEW OPERATIONAL ORGANIZATION OFFERS IT GOOD PROSPECTS FOR THE FUTURE.
Bringing our
closer to our
excellence
markets
Vincent De Cuyper GROUP GENERAL MANAGER OF CHEMICALS SECTOR
2011 saw growing sales in all our activities, both in essential chemistry and in specialties, refl ecting improved pricing and higher sales volumes, despite a slowing in certain products towards the end of the year. This growth is the outcome both of strategic projects decided in recent years and of the gradual establishment of a comprehensive approach to excellence across the Group. This dual growth path of the Sector is expected to continue in the future.
The Chemicals Sector is working resolutely, ambitiously and with the necessary resources to develop and grow our fl agship products in order to better meet our customers' needs.
In Thailand in September 2011, the RBU successfully commissioned the world's largest hydrogen peroxide plant. MTP HPJV (Thailand) is Solvay's HP joint venture with Dow and its new plant has a capacity of more than 330 000 tons a year of hydrogen peroxide at 100% concentration.
| IFRS | Pro forma3 | |||
|---|---|---|---|---|
| 2011 | 20101 | 2011 | 2010 | |
| Net sales | 2 836 | 2 5752 | 2 836 | 2 575 |
| REBITDA | 484 | 455 | 491 | 472 |
| REBITDA/net sales | 17% | 18% | 17% | 18% |
| REBIT | 334 | 297 | ||
| Total depreciation and amortization | 153 | 394 | ||
| Capital expenditure and acquisitions | 214 | 166 | ||
| R&D | 32 | 36 | ||
| Full time equivalent | 8 114 | 8 083 |
The 2010 fi gures only have been restated to refl ect the changes in joint venture accounting, applied as from January 1, 2011. Joint ventures are now accounted for using the equity method instead of the proportionate method.
Following the implementation of the new organization (Horizon), an amount of EUR 272 million of sales was transferred from the Chemicals Sector to the Plastics Sector in the fi gures of the year 2010, without any impact on the results.
After adjustments for the harmonisation of Solvay's and Rhodia's accounting rules.
The overall trend has been very positive for the Chemicals Sector, thanks in particular to rising demand. As a result, sales have increased steadily in both volume and price. Even so, a slowdown was recorded in the last quarter, particularly in specialties, but without weakening the results achieved earlier in the year. Operating results are again up from the previous year.
The Group is equipped to face a slowdown in the global economy, thanks to its ability to anticipate and rigorous management of its businesses, focused on cost control, consistent product quality and excellence.
The Chemicals Sector strategy is to increase geographic expansion in high-growth areas through investment in its fl agship essential chemicals products and to accentuate worldwide the growth of its specialty products, particularly in environmental, energy, electronics and hygiene and healthcare markets, while strengthening its competitiveness through operational excellence.
This year the Sector reaped the benefi ts of this approach, based on high-performance products and technologies. By establishing a regional organization, close to its customers, for its essential chemicals products and a global organization, close to its major target markets, for its specialties, the Sector intends to develop products tailored to customer requirements thanks to a better understanding of their needs. Major investments are being made
to strengthen the Group's presence in high-growth markets like Asia, to increase production in response to new demand and to integrate the concept of sustainable development in all its activities.
In addition, the Sector intends to strengthen its competitiveness in the short term through the deployment of a global operating-excellence campaign at all levels, and in the medium term through greater and focused efforts in technological innovation.
Solvay Chemicals offers a wide spectrum of specialties for the pharmaceutical and cosmetic industries.
Europe, the Group's historic market, presented a mixed picture in 2011. With strong demand from the hollow glass industry and improved fl at glass activity, soda ash sales volumes turned out higher than in the year before. Demand was high in Northern and Eastern Europe but lower in Southern Europe.
Moreover, as in other parts of the world, European sales of hydrogen peroxide remained stable, supported by high demand for paper pulp in countries with strong growth. Other markets, particularly the mining industry, chemical industry, food packaging and environmental applications, also performed well.
The uneven development of the European market is pushing Solvay to place particular emphasis on operational excellence to maintain its competitiveness. The Group also plans to continue developing new applications based on proven products.
In terms of competitiveness, Solvay has started sourcing a signifi cant portion of its electricity needs in France via the Exeltium consortium and has begun converting its electrolysis activities at Tavaux (France) to the more effi cient membrane technology. Major energy-saving efforts have also been developed through a Groupwide excellence process, named "Solwatt".
In the global context of 2011, the Asia-Pacifi c region stood out through its progress in many areas, confi rming Solvay's strategy of expanding its presence in the area.
The deployment of EPICEROL®, an innovative and green technology for the production of epichlorohydrin, is making great strides in the Asian market. ABT, a subsidiary of Vinythai, has built a production plant with an annual capacity of 100 000 tons offering substantial advantages over existing technologies in terms of natural-resource use, energy consumption and environmental impact. This plant began operation in early 2012. A second unit based on the EPICEROL® process, also with a capacity of 100 000 tons, is on the drawing board in China to meet the
rapid growth in demand linked to the production of epoxy resin. This new plant would make Solvay the world's leading producer in this activity.
Following the successful commissioning of its 250 000 tons/ year unit at Antwerp (Belgium), the fruit of a joint venture with BASF and Dow, Solvay has also commissioned two new hydrogen peroxide plants in Asia. The fi rst, commissioning of which was announced in October 2011, is located in Thailand and is a joint venture with Dow. Its annual production capacity of 330 000 tons makes it the biggest hydrogen peroxide production facility anywhere in the world. Its production is intended primarily as feedstock for the production of propylene oxide. In this way, Solvay reinforces its leading position in this new captive market. The second plant is located in China
Solvay Chemicals manufactures several detergent ingredients as well as daily hygiene products such as washing powders and liquids.
High performance liquids are applied during the production of solar cells to improve their effi ciency and their durability.
The reuse of water is becoming a top priority. Peracetic acid allows municipal waste effl uent to reach the microbial standards that will allow it to be reused as irrigation water on arable land.
and was built in partnership with the Huatai paper group. This provides hydrogen peroxide for the paper pulp market, along with specialty products for the food packaging industry, using production technology developed by Solvay. With an annual capacity of 50 000 tons, it gives the Group a foothold in this growing market.
In addition, the Group announced in 2011 plans to build a new hydrogen peroxide mega-unit production facility in Saudi Arabia, to provide feedstock for propylene oxide production. The project is scheduled to come online in 2015. Solvay will be partnering with Sadara Chemical Company, a
A variety of Solvay Chemicals products are used for the building and construction industry.
Major hydrogen peroxide expansions in Asia.
330 000 TONS/YEAR CAPACITY IN THAILAND IN PARTNERSHIP WITH DOW. Another 50 000 tons/year in China
in partnership with Huatai.
joint venture between Saudi Aramco and Dow.
On January 1, 2011, Solvay quit ANSAC (American Natural Soda Ash Corporation), the export consortium for US soda ash production. The Group now has more fl exible access to the markets of Latin America, Asia and Africa, giving it a greater presence in these high-growth and high-potential regions. In this way, our American operations continued to benefi t from the high level of soda ash exports to Asia and South America.
The US domestic market for soda ash and hydrogen peroxide has remained strong. Moreover, given its desire to incorporate the sustainable development concept in all its activities, Solvay has developed a process to recover and utilize methane released by its trona extraction activities at Green River. This innovation reduces both greenhouse gas emissions and energy consumption related to the mining of trona and its processing into soda ash.
In addition, the Group is pursuing commercial deployment of its sodium bicarbonate-based SOLVAIR® remediation solutions, which were developed by Solvay in North America.
Blue pigments are a key component in color liquid crystal display (LCD) screens.
South America is a market with great potential that already features strong growth.
In mid-2012, we will increase our hydrogen peroxide production capacity in Brazil to 180 000 tons a year, to meet customer demand and maintain regional leadership.
Caustic soda sales grew particularly strongly, with prices well above those of 2010, in a general context of continuing good global demand.
Moreover, our peracetic acid sales posted double-digit growth, driven by new applications in food, health and agriculture.
The worldwide special chemicals activities have been regrouped in the new Global Business Unit Special Chemicals. In 2011, the fl uoride, precipitated calcium carbonate (PCC) and Ba/Sr carbonate activities continued their sales and earnings recovery, while the life sciences activity was held back by a lack of new product development. Overall, the end of the year saw a
Sodlium Bicarbonate BICAR® Z is incorporated into a wide range of commercial animal feeds – especially for cattle, poultry and swine – thus improving animals' performance and comfort.
slackening in business.
Solvay is continuing to pursue its strategy by focusing on development of products for promising outlets such as electronics, photovoltaics and semiconductors and by increasing its presence in Asia. It is on these fi elds that Solvay's new R&D Center in Korea will be concentrating. During the year, many of Solvay's innovative projects in specialty chemicals took concrete form. A new fl uorinated gases production unit,
which will reduce the environmental footprint of semiconductor and solar cell manufacturing, is right now being installed on the Group's site at Onsan, Korea.
In 2011, GBU Special Chemicals also started up a new activity in cleaning agents for the electronics industry, with a fi rst pilot production of high-purity phosphoric acid in Germany in addition to the existing offering of hydrogen peroxide and hydrofl uoric acid.
The INTEROX® AG products are very low residue, stabilised hydrogen peroxide formulations especially developed for aseptic fi lling equipment.
Bicarbonate is particularly effective in combating deadly bacteria. A study by the Institute of Microbiology of Piacenza University in Italy has highlighted the fact that simply adding 15 g/l of bicarbonate to the water used to wash vegetables helps to improve the effectiveness of washing from 20 to 90%.
The Torrelavega plant, Spain.
FOLLOWING THE REBOUND IN 2010, THE PLASTICS SECTOR CONTINUED ITS MOMENTUM IN 2011 TO REACH RECORD LEVELS IN THE FIRST HALF. WHILE SECOND-HALF RESULTS WERE LESS ROBUST, EARNINGS WERE UP. THIS NEW PROGRESS IS EXPLAINED BY THE SUCCESS OF SOLVAY'S STRATEGIC CHOICES, ESPECIALLY IN SPECIALTY POLYMERS.
Jacques van Rijckevorsel GROUP GENERAL MANAGER OF PLASTICS SECTOR
After a banner year in 2010, the Plastics Sector posted another year of progress, particularly in specialty polymers. Sales in emerging markets reinforced the trend. At the same time, the highly ambitious operating excellence program improved profi tability. Finally, the April launch of the new Global Business Unit named Specialty Polymers encourages creativity, accountability, effi ciency and entrepreneurial dynamism.
Entrepreneurship is innovation. Science and innovative industries must move the world forward.
Solvay is investing EUR 120 million to build a plant at Changshu (China). When operational in early 2014, it will boost the production of specialty polymers.
EUR 120 MILLION INVESTMENT CHANGSHU (CHINA)
| IFRS | Pro forma3 | |||
|---|---|---|---|---|
| 2011 | 20101 | 2011 | 2010 | |
| Net sales | 3 686 | 3 3612 | 3 686 | 3 361 |
| REBITDA | 583 | 538 | 590 | 555 |
| REBITDA/net sales | 16% | 16% | 16% | 17% |
| REBIT | 391 | 344 | ||
| Total depreciation and amortization | 183 | 205 | ||
| Capital expenditure and acquisitions | 409 | 267 | ||
| R&D | 67 | 63 | ||
| Full time equivalent | 5 067 | 4 920 | ||
The 2010 fi gures only have been restated to refl ect the changes in joint venture accounting, applied as from January 1, 2011. Joint ventures are now accounted for using the equity method instead of the proportionate method.
Following the implementation of the new organization (Horizon), an amount of EUR 272 million of sales was transferred from the Chemicals Sector to the Plastics Sector in the fi gures of the year 2010, without any impact on the results.
After adjustments for the harmonisation of Solvay's and Rhodia's accounting rules.
| J Construction | 40% | 1% | |
|---|---|---|---|
| J Consumer goods | 20% | 2% | |
| J Automobile industry | 9% | 2% | |
| J Electricity and electronics | 9% | ||
| J Energy | 4% | 9% | |
| J Environment | 2% | ||
| J Paper | 2% | 9% | |
| J Agriculture, forestry and fi shing | 1% | ||
| J Other industries | 13% | ||
Solvay's strategy in the Plastics Sector is based, as is that of the other activities, on a highly ambitious program of operating excellence, covering both products and industrial and commercial approaches. One goal is to reduce costs to improve competitiveness and profi tability. In this regard, Solvay believes that it is in the top rank of the industry.
The strategy of investing in fastgrowing countries is a priority for the entire Group, and for the Plastics Sector as well. The objective is to develop strong industrial positions in these regions.
Solvay is also maintaining its investment in research and development, particularly in specialty polymers, despite the crisis. The Group believes that R&D – and in particular the contribution of its research centers – will be a key factor for success and growth.
Through innovative R&D, the Plastics Sector is further diversifying its product portfolio and better spreading its risks. It is also working hard to develop new compounds and new technologies.
In 2011, Solvay launched two new R&D centers in India and South Korea. A third center will be established in China, as part of the integration of Rhodia into the Group.
In the fi eld of vinyl products, Solvay is focusing its research efforts on technological excellence to reduce resource consumption in production processes (energy, raw materials, etc.).
Overall, the Plastics Sector signifi cantly improved its profi le during 2011, thanks in particular to good price resilience in specialty polymers, which helped reduce earnings cyclicality.
The strong recovery observed in 2010 continued throughout the year, with the specialty polymers business reaching record levels. Growth was strong early in the year, and remained evident at the end of the year, despite the global crisis. The general trend over twelve months was very positive.
Solvay-produced fi lms and resins provide sustainability, protection and high light transmission to solar panels.
There are several reasons for this development: our specialty polymers are reaping the benefi ts of a particularly dynamic innovation policy, with products and applications developed over the last fi ve years now accounting for 30% of GBU Specialty Polymers sales. Furthermore, our products are aligned with the current global megatrends such as health care, energy, mobility and communication. These elements
help make specialty polymers a business area of structural growth.
As the world leader in high-addedvalue plastics for industry, Solvay markets a range of performance products second to none in the industry. This advantageous position is the result of the Group's strategic choices in respect of specialty polymers. Today the GBU Specialty Polymers product portfolio contains more than 30 brands available in over 1 500 formulations, covering a very wide range of ever more demanding applications.
The real success last year of the new specialties launched in 2010 demonstrates unequivocally the correctness of the Group's strategic choices. In particular, Solvay was chosen to provide several products for the lithium metal polymer (LMP®) batteries of the electric car designed by the Bolloré international transport, logistics and investment group. Solvay has also launched a joint R&D program with the Bolloré group.
Electric cars are an integral part of the Group's sustainable development strategy. For its future in this area,
it is looking to the development of products such as SOLEF® PVDF polyvinylidene fl uoride, which will signifi cantly improve the performance of Li-ion batteries. The qualities of this fl uorinated polymer, which is used in the manufacture of important battery components such as binders and separators, are recognized by many automotive manufacturers.
High-added-value specialty polymers are in growing demand in Asia, owing to the expansion of the Chinese market. In 2011, Solvay began construction of a plant to produce SOLEF® PVDF specialty polymers and TECNOFLON® (FKM) fl uoroelastomers, at an investment cost of EUR 120 million. The latter products are used in sealing applications that can withstand harsh chemical environments or high temperatures and that are essential in the automotive, aerospace and oil industries.
The new plant will be established on Solvay's industrial site at Changshu (China) and will become operational in early 2014. It will signifi cantly increase the overall production capacity of the specialty polymers Group and increase its presence in China.
Solvay is also building a special polymer compounds production unit at Changshu, which should be operational from the second quarter of 2012. The Changshu site will become a strong and integrated industrial base for fl uoropolymers.
With these production capacity increases in China and India, but also on its sites in Europe and the United States, Solvay Specialty Polymers will be able to better respond to customer demand.
With 12 Research & Development centers across the world, Solvay is a major contributor to advancing sustainable development in specialty polymers.
In anticorrosion paints, lubricants, interior plastics or electrical cabling, specialty polymers are ubiquitous in the automotive industry.
In early 2011, global demand for polyvinyl chloride (PVC) was strong, confi rming the recovery observed in 2010. At Group level, the fi rst few months even reached a historic high. However, from the summer onward, a distinct slowdown took place. This had several causes: the usual summer seasonal effect, falling demand in the current context of economic uncertainty and destocking
Garden hoses are one of VINYLOOP® Eco-products, enabling the recycling of composite PVC waste.
VinylPlus Commitment: following the success of the Vinyl2010 project with the recycling of 261 kilotons/year of PVC in Europe, VinylPlus has set itself the target of
by clients. These elements have negatively impacted sales. Also negatively affecting the operating performance of the vinyl activities was the rising cost of ethylene and electricity. Overall, however, vinyls sales were up slightly on 2010 and with a 4% lower REBITDA of EUR 218 million.
Within the general trend, the various regions behaved differently.
Asia did better than the others in 2011. The very good operating performance of Vinythai (Vinyls Asia) improved further over 2010, despite the diffi cult conditions caused by the fl oods hitting South-East Asia, especially Thailand. The Group's technological competitiveness also helped to limit the effect of the decline in profi tability observed in this part of the world due to the pressure of competition from Asia and America.
In Latin America, the operating profi t of Solvay Indupa improved signifi cantly in the fi rst half, but was then affected in the second half of the year by falling international prices, competition from North America, a clear slowdown in demand that became apparent in the fourth quarter and the impact of the biennial shutdown of its Bahia Blanca (Argentina) plant. These are mainly short-term cyclical factors in a growing South American market.
In Europe, SolVin, the leading vinyl producer, covers the entire vinyl chain. After a good start to the year, operating performance came under pressure during the second half, with a greater fall in demand in Europe than in other regions. Similarly, the inability to pass on rising raw material and energy costs, as well as inventory reductions by customers and decreased sales volumes, weighed on margins.
In this context, the Solvay group in 2011 continued action programs to enhance its competitiveness and technological leadership in the vinyls fi eld. Of particular note are the new membrane electrolysis plant currently under construction at Lillo (Belgium) to replace an old mercury electrolysis unit and the deployment of a structured and systematic approach to operational excellence in all plants.
During the year the Group continued its joint venture project in Russia to create a major vinyls producer in partnership with petrochemicals leader and ethylene producer Sibur. The fi nancing was fi nalized in partnership with the fi nancial institutions and the European Bank for Reconstruction and Development (EBRD). Solvay considers this a major achievement and gratefully recognizes the support of Russian authorities, both federal and regional, and the involvement of the Belgian authorities.
Construction is currently underway on this project, which represents a total cost of EUR 1.5 billion. The fi nancing structuring of the project has twice been honored as the "European Petrochemicals Deal of the Year."
Once operational, RusVinyl will be the fi rst world-scale site for the production of vinyl in the heart of a very promising market. It should be able to produce 330 000 tons of PVC per year in 2013, with maximum energy effi ciency and minimized raw materials consumption and waste.
Solvay PVC products carry drinking water to consumers in Latin America, Asia and Europe.
No one will contest SolVin's success in 2011 with its VINYLOOP® technology for recycling waste PVC composites. An externally confi rmed study has clearly demonstrated the small footprint of recycled PVC based on the VINYLOOP® technology as compared to common PVC. This has led to the adoption of a "green strategy" designed to meet the demand for and increasing
requirements of sustainable products. The study notes that VINYLOOP® reduces energy consumption by 46% and the potential impact on climate change by 39%.
Solvay will develop a new tool for its customers to calculate the environmental footprint of applications produced with VINYLOOP®, such as garden hoses and shoe soles. VINYLOOP® customers will in turn be able to communicate this information to consumers. SolVin and VinyLoop made a
strong contribution to the success
of Vinyl2010, which has been recognized by the authorities as an example of successful voluntary engagement by a business sector. VinylPlus is now taking over the baton and will develop other ambitious commitments by the industry.
Construction of the RusVinyl PVC plant at Kstovo (Russia), with a planned production of 330 000 tons of PVC starting in 2013.
* Excluding results from Certifi ed Emmission Reductions (CER).
IN RECENT YEARS, RHODIA PROFILED ITSELF AS A STRONG AND HIGHLY INTERNATIONAL CHEMICALS GROUP, GROWING IN AREAS WHERE IT HELD LEADING POSITIONS WORLDWIDE. THIS IS WHY SOLVAY WAS INTERESTED IN IT. THIS GROWTH STRATEGY, EMBODIED IN A NUMERICAL GOAL OF ACHIEVING EUR 1 BILLION IN REBITDA* BY 2013-2015, WAS BASED ON A MANAGEMENT MODEL AND A DECENTRALIZED ORGANIZATION THAT PROMOTED INDEPENDENCE AND ENTREPRENEURIAL SPIRIT.
Solvay's expertise and innovation help enhance the quality of daily life.
Gilles Auffret GROUP GENERAL MANAGER OF RHODIA SECTOR
Apart from its integration into Solvay, 2011 was an important year for Rhodia, which successfully deployed its new growth strategy and reaped very positive fi rst results.
bases in China, with new diphenols and surfactants capabilities in Zhenjiang and a unit for automotive depollution formulations at Lyang. November 2011 saw the opening of the eco-effi cient laboratory in Shanghai, the fi rst International Joint Unit dedicated to green chemistry.
Rhodia's remarkable progress in recent years, its commitment to sustainable development and its ability to meet the challenges of growth, are all assets that will enable the new Solvay to be even more ambitious, with strong products and an increased presence in high-
| IFRS1 | Pro forma2 | ||
|---|---|---|---|
| 4Q 2011 | 2011 | 20103 | |
| Net sales | 1 479 | 6 171 | 5 157 |
| REBITDA | 231 | 1 119 | 962 |
| REBITDA/net sales | 16% | 18% | 19% |
| REBIT | 120 | ||
| Total depreciation and amortization | 111 | ||
| Capital expenditure and acquisitions | 164 | ||
| R&D | 21 | ||
| Full time equivalent | 14 255 |
Rhodia's income and cash fl ow statements are consolidated only from the 4th quarter of 2011.
The pro forma fi gures show the income statement (1) as if the acquisition of Rhodia had become effective from the 1st of January 2010, (2) harmonizing the accounting rules and (3) eliminating the Purchase Price Allocation (PPA) impacts.
Restated based on the Solvay group's accounting policies.
| J Consumer goods | 30% | ||
|---|---|---|---|
| J Automobile industry | 24% | 19% | |
| J Electricity and electronics | 8% | 3% | 30% |
| J Energy | 7% | 4% | |
| J Agriculture, forestry and fi shing | 5% | 5% | |
| J Environment | 4% | ||
| J Construction | 3% | 7% | 24% |
| J Other industries | 19% | 8% | |
The development of the Sector revolves around three main axes:
The Rhodia Sector bases its ambitions on solid assets: a distinctive positioning in chemistry targeted at sustainable development, a historical presence in emerging markets, and leadership positions in growth markets.
The culture of continuous improvement and operating excellence, guaranteeing the competitiveness of the different activities, is shared by all entities, with the stated goal of being among the world-level benchmarks.
Finally, the commitment to social and environmental responsibility, embodied by the Rhodia Way standards, lies at the heart of all managerial processes.
The activities of the Rhodia Sector are structured into eleven global Business Units grouped into fi ve activity clusters, responding to the logic of its markets.
The offering of the Consumer Chemicals cluster is being developed in response to new
consumption patterns and demand for products that contribute to the better protection of health and the environment. This cluster is one of the most dynamic drivers of growth in the Group. The three levers (organic growth, innovation and targeted acquisitions) have proven their effectiveness and form the basis of the more than 30% increase in profi tability in 2011 compared to 2010. Consumer Chemicals, which
primarily serves the consumer goods market, is a highly resilient activity that should continue to grow profi tably and responsibly.
Novecare is a world leader in high-performance chemicals for key industry segments (personal care, detergents, agrochemicals and oil and gas, paints and industrial applications). The quality of its product portfolio and the success of its latest innovations in the polymers and formulations fi eld explain the high level of organic growth in volumes in 2011. In addition, the successful integration of Feixiang and its continuing high (double digit) rate of sales growth place Novecare among the largest contributors to growth in the Rhodia Sector in 2011.
The most important developments include additives for plant-protection products to serve a highly dynamic agrochemicals market and innovative formulations for the exploitation of shale gas and shale oil.
In the fourth quarter of 2011, Novecare announced the construction of a new surfactants production site at Zhuhai (China), while the guar derivatives technology was strengthened by the acquisition of the Hipro Suzhou unit in China and by capacity expansions and process improvements at the Vernon (Texas) plant. Similarly, a letter of intent was signed with the Russian company Sibur to create a joint venture in specialty surfactants, to meet growing demand in the local market.
Based in Brazil, Coatis is the only Latin American producer of phenol for industrial resins and automotive, wood and construction applications. It is also the market leader in more environmentally friendly oxygenated solvents and has developed a range of solvents, sold under the AUGEO™ brand, that are made from glycerin, a renewable raw material derived from biodiesel.
The company performed well in 2011 despite the unfavorable impact of
the appreciation of the Brazilian real against the euro, which reduced the competitiveness of local industry. Coatis's regional leadership positions and the success of its innovative products explain the double-digit growth in sales and REBITDA from one year to another.
2011 saw an increase of phenol production capacity and the development of the AUGEO™ range.
An alliance was concluded with Cobalt Technologies to develop the bio n-butanol market in Latin America.
Aroma Performance designs fl avors for the food market as well as synthesis intermediates for the perfume, food, pharmaceuticals and electronics markets. The Company holds a world market-leading
In the wake of JAGUAR® biopolymers from guar seed, new polyamides and surfactants from renewable raw materials have recently been brought to market. Leveraging its strong foothold in Brazil, Rhodia has launched AUGEO™ solvents from sugar cane, which are successfully replacing traditional solvents. The production process for RHOVANIL®, the benchmark vanilla fl avor of the food market, brings purity, competitiveness and environmental performance.
Across the world, the Rhodia Sector is helping manufacturers meet the challenges of sustainable mobility, with expert solutions to reduce emissions, vehicle weight and energy consumption and improve vehicle safety.
position in vanilla aroma based on an integrated diphenol chain. In 2011 it obtained FSSC 22000 (Food Safety System Certifi cation) accreditation for the production of vanillin and ethyl vanillin at its Saint-Fons (France) and Baton Rouge (Louisiana) sites. The company has repositioned its vanillin brands RHOVANIL®, RHOVANIL® Natural and RHODIAROME®, now exclusively dedicated to the food market with a high priority on food safety.
Aroma Performance is also the market leader in polymerization inhibitors used by major players in the petrochemical industry. It continues to reposition its product range by signing long-term industrial cooperation agreements with its customers.
The company has strengthened its Zhenjiang (China) industrial platform (diphenols), which centralizes the production of products used in inhibitors markets in agrochemicals and perfumes. Finally, the Company has successfully commercialized LiTFSI lithium salt for the Autolib electric vehicle developed by France's Bolloré group.
Another major growth driver for the Group, Advanced Materials, includes the Silica and Rare Earth Systems businesses, serving industries such as low-energy tires, automotive catalysis and low-energy lighting. The growth of this cluster, faster than the organic growth of the markets it serves, is driven by Sustainable Development issues. The Group's competitive advantage rests on its technological edge, its economies of scale, its global footprint, and its ability to innovate and take advantage of regulatory changes. Both businesses contributed to the excellent performance of the cluster during the year, with exceptional price conditions in the fi eld of rare earths, which gradually normalized after peaking in mid-2011. REBITDA doubled as a result compared with the previous year. This cluster offers very promising potential.
Silica is the world leader in highly dispersible silica, produced from sodium silicate and used mainly by the tire industry, as well as in toothpaste, animal nutrition, battery separators and high-performance rubber products. Rhodia is the inventor of this
technology that was developed in the 1990s.
In 2011, the company fully benefi ted from the production capacity of the Qingdao (China) site, which was operational from the beginning of the year. Silica has, moreover, continued to invest in additional production capacity at its plants at Chicago Heights (Illinois) (started up in the fourth quarter of 2011) and Collonges (France) (startup scheduled for fi rst half of 2012). These investments together will increase the company's worldwide production capacity by 40% in order to support the growth of local and international demand for low-energy tires.
The world leader in formulations based on rare earths, Rare Earth Systems develops innovative solutions for high-added-value applications. Its products are used in energy-saving light bulbs and LCD television screens, as well as the automotive industry where they contribute to reducing emissions. Its leading-edge technology solutions, the rapid development of its production and R&D capacity in Asia and its unique position in China based on long-term partnerships with key customers, including those
outside China as well, give it an unequalled and durable strategic advantage. In a market marked by China's policy on export quotas for rare earths, the company has over many years developed a strategy to secure and diversify its sources of supply, including new recycling processes. In the future, Rare Earth Systems should benefi t from the recycling of rare earths from lowenergy light bulbs, NiMH batteries
and used magnets, which will begin in 2012. In addition, in 2011 Rare Earth Systems formed a strategic alliance with China Rare Metals and Rare Earth Co. covering the supply of rare earths as well as technology and market development, capitalizing on each company's competitive advantages in the value chain.
To support the growth of the local market in China, a new production unit for rare-earth-based compounds for exhaust emissions control was set up at Lyang in 2011.
Finally, Rhodia obtained the Pierre Potier Prize for Innovation in Chemistry for Sustainable Development, awarded by the French Ministry of Industry, for its EOLYS POWER-FLEX™ catalytic additive for particulate fi lters, which is already fi tted to 1.5 million diesel vehicles throughout the world.
Integrated production of the polyamide 6.6 chain gives the Sector a leading position in the most attractive market sectors. In addition, its production integration provides it with a strong, structural, competitive advantage. The polyamide chain activities are grouped into three companies.
In the fi rst half of 2011, the cluster benefi ted from strong demand and an environment marked by an imbalance between supply and demand, resulting in an overall higher pricing
Silica has increased its production capacity by 40% within two years, accompanying new tire labeling regulations. Integration of the entire chain gives the polyamide activity fi rst-class competitiveness.
After pioneering low-energy light bulbs, Rare Earth Systems will shortly begin recycling the rare earths contained in used lamps.
power. However, in the second half, the business suffered a downturn in demand. This, combined with a sharp and sudden fall in prices of key raw materials (butadiene and cyclohexane), resulted in signifi cant pressure on margins over this period.
is number two worldwide in polyamide 6.6 and the global leader in adipic acid-based intermediates. To enhance customer service, reliability improvement programs were introduced at all sites, along with
EMANA® and AMNI® intelligent fi bers guarantee a high degree of user comfort.
capacity increases at the Freiburg (Germany) and Onsan (South Korea) sites.
Engineering Plastics specializes in high-performance engineering plastics marketed under the TECHNYL® brand. These are used in place of metal to achieve signifi cant weight savings, while allowing freedom of design, in high-tech sectors such as the automotive industry, construction, energy, electronics and consumer goods.
In 2011, Engineering Plastics received several certifi cations and made the fi rst sales of its new TECHNYL® eXten partially biosourced polyamide for braking systems. It also concluded a partnership with Faurecia to develop lightweight car-seat frames, using polyamide engineering plastics with high crash resistance. It increased production capacity at its plants in Poland, Brazil and China, and also acquired the engineering plastics business of Indian society PI Industries Ltd. to accelerate its growth.
Fibras is the leading Latin American producer of polyamide 6.6 yarns and fi bers, used in the textile industry (lingerie, sportswear, socks, fashion) and for certain industrial applications (tires, sewing yarn, airbags and abrasives). The company has expertise in producing yarns for smart textiles with anti-UV, antibacterial, and cellulite-reducing properties, marketed under the EMANA® and AMNI® brands.
Acetow and Eco Services operate in very specifi c, mature and stable markets, where partnerships with customers are built on reliability, service quality and security of supply.
The division recorded strong performance in 2011, thanks to its operating excellence and increased competitiveness. In the future, the high resilience of this cluster is expected to continue.
Acetow develops cellulose acetate for cigarette fi lters and textiles. In 2011, it inaugurated a new unit in Freiburg (Germany) to improve the competitiveness of the site and increase capacity.
Eco Services produces and regenerates the sulfuric acid used in North America in gasoline refi ning, chemicals manufacturing and other industrial applications. Under a
pioneering agreement reached with the Environmental Protection Agency in 2007 aimed at reducing sulfur dioxide emissions by 90% by 2014, it continued to install monitoring equipment at several sites.
On January 1, 2012, Solvay created Solvay Energy Services. The mission of this new GBU, which is the fi rst concrete outcome of the integration of the Rhodia and Solvay groups, will be to optimize energy costs and CO2 emissions for the Group and third parties.
At the end of 2011, the Group fi nalized the acquisition of 100% of Orbeo, a major player in the carbon market and previously a joint venture owned equally with Société Générale.
This acquisition, which illustrates Solvay's determination to continue to develop the activities that Rhodia had initiated to reduce greenhouse gas emissions, will strengthen its commitment to combat climate change by expanding its offerings in integrated energy and CO2 emissions management.
In this way, Solvay Energy Services will draw on the combined key skills and expertise of Solvay, Rhodia and Orbeo in order, on the one hand, to optimize the energy purchases of the new ensemble, totaling EUR 1.2 billion a year and, on the other, to support energy and CO2 , management at all Group Business Units and production sites, knowing that Solvay has installed its own energy self-generation capacity of 1 000 MW across the world.
The GBU will also develop activities to help external clients reduce their environmental footprint. These will include energy services, CO2 management and the development of
renewable energies and biofuels.
In 2011, the GBU continued work on its fi rst project to produce energy from biomass in Brazil in partnership with Paraiso. In France, it launched a photovoltaic plant in Lyon, received the fi rst deliveries of electricity via the Exeltium consortium, in which both Solvay and Rhodia have been members from the outset, and entered into a partnership with Vattenfall, the SNCF and Arcelor Mittal to respond to tenders for the renewal of hydropower concessions. In Belgium, the company has
developed the Blue Sky project along with other electricity-intensive industries and GDF Suez to obtain nuclear electricity linked with an investment in building a gas-fi red generation plant. It is also developing the Solwatt energy-effi ciency projects to reduce the energy consumption and carbon footprints of the Group's sites.
In terms of activity, the annual volumes of CER (Certifi ed Emission Reductions) and ERUs (Emission Reduction Units) totaled 14 million tons in 2011, which
is stable compared to last year. Moreover, the long-term hedging strategy has proven its effectiveness in enabling the Group to benefi t from sale prices for its CERs well above the spot price. This strategy also covers a majority of the expected production of CERs in 2012 and 2013.
TARGET: 20% REDUCTION IN GREENHOUSE GAS EMISSIONS BY 2020.
Solvay Energy Services is the fi rst GBU resulting from the integration of Rhodia into Solvay, and will optimize energy management and greenhouse gases emissions across the Group. It is also offering its expertise to help external clients reduce their environmental footprint.
Solvay Annual Report 2011
44
IN 2011, SOLVAY AND RHODIA TOGETHER FILED 322 PATENTS. THE TWO ORGANIZATIONS SHARE COMMON OBJECTIVES, WHICH THE CURRENT INTEGRATION PROCESS WILL ENABLE THEM TO ACHIEVE FASTER TOGETHER.
Solvay has given its Innovation Center, set up in April 2011, three main missions. The fi rst is to strengthen and encourage best practices in managing innovation, improving the innovation culture so that each entity can manage its own projects more effectively. The second is to ensure R&D transversality across the various Group entities, each of which is responsible for its own resources, programs and priorities. The third is to run the four development platforms, which represent nearly 20% of the Group's investment in innovation.
The Innovation Center conducts a strategic review with the Executive Committee of broad scientifi c and technological trends. Solvay's Innovation thrust is focused on sustainable development, the priority being to come up with technology solutions to four key societal challenges: the scarcity of natural resources, environmental issues including global warming, the trend towards generalized digitization and, fi nally, the continuous improvement needs in health and well-being.
With its collaborative approach, the Innovation Center helps ensure consistency of R&D activities and maximize synergies among the various Group entities. This makes it possible to identify and analyze projects that can be speeded up or more heavily resourced, and to support projects to develop new businesses to ensure long-term renewal of the Group's product
portfolio. These businesses are based on four platforms discussed below (Printable Organic Electronics, Renewable Energy, Renewable Chemicals and Nanotechnology).
Just as for the Group's Innovation Center, the task of R&D management in the Rhodia Sector is to identify new areas for growth based on macro trends in society and to promote eco-designed processes ("Process Step Change") using intensive technologies. As the driving force of the entire R&D family in the Sector, it is the guarantor of excellence and optimization of competences. The enterprises within the Sector in turn take direct responsibility for all R&D resources devoted to their innovation projects.
In addition, Solvay has a policy of active corporate venturing, either directly or through venture capital funds in which the Group invests.
This approach is aimed at identifying investment opportunities in emerging and innovative activities that match its sustainable development strategy.
The innovation strategy of the Rhodia Sector is based on numerous external scientifi c collaborations, and in particular on four mixed research units (MRUs) based in France, the United States and, since 2011, in China. The Eco-effi cient Products and Processes laboratory, a collaboration between the Rhodia Sector, the CNRS (France), ENS Lyon (France) and East China Normal University (China) dedicated to green chemistry, was inaugurated on November 4, 2011 in Shanghai. Rhodia Sector teams are also involved in around fi fty collaborative research projects including the birth of partnerships through initiatives of the French government to promote promising industries. These new projects will explore in particular chemistry based on plant oils (the "Woodpecker" project) and the development of increasingly environmentally friendly processes (IDEEL project).
The New Business Development (NBD) activity, managed by the Innovation Center, focuses on the development of future technologies and the development of innovative products with potential for largerscale industrialization.
Since 2008, Solvay has had an internal laboratory at its Neder-Over-Hembeek (Belgium) site, in which thirty researchers are working on the development of new materials and inks for the emerging market of organic electronics. The fi nal applications specifi cally targeted are organic light-emitting diodes (OLED), organic thin-fi lm transistors (OTFTs) and organic photovoltaics (OPV). During the past year, materials developed and patented by Solvay were incorporated into prototypes.
Solvay has strengthened its cooperation with Plextronics, in which it is the main shareholder. This is a major investment. The collaboration focuses on the development of inks for OLEDs, and more particularly for the emission of white light for lighting tiles.
Collaboration with the US company Polyera Corp., in which Solvay has a shareholding, has been stepped up. Polyera is a leader in the development of materials for the printed transistors market (OTFT).
Solvay is collaborating with Imec, a Belgian research center with an international reputation in the fi eld of microelectronics, in developing new architectures for high-performance OPV modules, based on the best materials from the research at Plextronics and Polyera. A module developed by Solvay and Imec has just set a new world record for converting solar energy into electricity. This is a record in the category of inverted-structure OPV cells, of interest because of their stability and improved life. This excellent performance is a critical step in developing the technology, which would constitute a sustainable source of low-cost energy.
The Group and its partners are developing vital components for new sustainable energy solutions, such as fuel cells, photovoltaics, hydrogen storage and new-generation batteries.
In 2011, Solvay continued its partnership with Umicore, the international materials technology group, in the SolviCore joint venture, which has been up and running since 2006. SolviCore is the European leader in the production of membrane electrode assemblies (MEAs). In parallel with this, Solvay, through its Global Business Unit Specialty Polymers, is a world leader in the development of the membranes used in these MEAs.
The Group has stepped up cooperation agreements with the automotive world to develop a fl uorinated membrane and an MEA for the fuel cells of tomorrow's cars. The goal is to create an electric car with a range comparable to today's vehicles when powered by fossil fuels. Solvay has also started development of a stationary fuel
cell, with a capacity of 1 MW, using polymer membrane technology at its site at Lillo (Belgium). This is one of this platform's most advanced projects, and a world fi rst. The teams are working to deploy this technology in a European context. This work is focusing on the development of solutions for transportation and handling activities.
Collaboration has also continued with the British company ACAL Energy which is developing a new generation of fuel cells that are less costly to produce than current technologies.
The initiatives that the Rhodia Sector has launched in this area are consistent with this platform.
Producing solar cells.
The purpose of this platform is to explore in an effective and controlled manner the potential contribution of nanotechnology to the product portfolio of the Group and of its various Business Units. For this, the platform has defi ned, together with the BUs, a series of projects centered on a few main themes: nanostructured surfaces based on specialty polymers (to improve their transparency, cleanability, hydrophilicity and other properties), carbonated particles (for improving the mechanical, electrical or thermal properties of certain polymers), metal oxides (which can potentially improve the "barrier" effect of polymers, or which are used in transparent electrodes), and self-assembled materials.
The platform's teams apply their specifi c expertise both to understanding the innovative potential of nanotechnology and to methods of utilizing nanostructured materials. Particular attention is being paid to understanding the impact of these technologies on health, safety and the environment, as well as to the introduction of relevant regulations.
In 2011 alone, the teams registered some 12 patents in these various areas of nanotechnology.
Similarly, many external collaborations with academic and industrial partners were initiated during the past year.
This platform, which is active at the levels of both the New Business Development activity and the Rhodia Sector, anticipates the development of chemistry based on an increased use of sources of sustainable raw materials and is preparing the evolution in the Group's portfolio of products and processes in response to changing markets and technologies. This work focuses in particular on the future use of renewable bioresources and of industrial biotechnology and the role of these two types of tools in the construction of a new chemical industry.
Solvay is examining the transformation of agricultural resources from different chains (sugar, starch, cellulose, vegetable oils, etc.), with a view to competitive manufacture of chemical intermediates or to creation of new monomers to expand the portfolio of specialty polymers. For this reason
a cooperation agreement has been concluded with the Dutch start-up Avantium, for the use of a biosourced monomer for the polyamides chain. Through the venture capital fund Aster, in which the Rhodia Sector invested in 2011 and the venture capital fund Capricorn in which Solvay had already invested, the Group is helping fi nance this innovative start-up.
The teams are also working on the fractionation of biomass and the development and economic use of the resulting compounds. In this fi eld, the Rhodia Sector has entered into an alliance with Cobalt Technologies in Brazil to develop the market for biobutanol in Latin America.
Another avenue being explored involves the capture and recovery of carbon dioxide (CO2 ) by emerging biosynthesis or catalytic technologies.
To these four platforms have recently been added projects that are specifi c to the Rhodia Sector. These are structured around two main areas. The fi rst is advanced materials and formulations targeted at maintaining a technological lead by strengthening design through modeling. The second is eco-design processes aimed at developing breakthrough innovations in raw materials and energy consumption, cutting waste and in reducing investment.
Solvay Human Resources
THE NEW GROUP STRUCTURE, WHICH WAS FORMALLY IMPLEMENTED IN APRIL 2011, HAS HELPED BRING RESPONSIBILITY CLOSER TO MARKETS.
The new Group structure, which was formally implemented in April 2011, has helped bring responsibility closer to markets. Solvay is keen to consolidate its performance management by strengthening its entrepreneurial culture and fostering behaviors that serve to nourish it. From now on, each employee will be assessed on the basis of individual objectives that are attuned with the Group's strategic objectives. Each employee will be given the appropriate tools and ongoing training to deploy their talents.
The Group's strategy of geographic expansion represents a real challenge in terms of human resource management. To effectively support these changes, the Horizon Plan, which has been in place since April 2011, is pursuing several objectives, including that of transforming the organization of the Group to bring it closer to its markets and customers. This has led to a reorganization of the operating structure into Global Business Units (GBU) and Regional Business Units (RBU) in the Chemicals and Plastics Sectors, to which a third Sector – Rhodia – was added in 2011.
As part of its 'Move for Growth' program, Rhodia had also launched a behavioral campaign. The dynamic of growth thus set in motion makes it possible to develop customer focus and strengthen the capacity for foresight and innovation. The Rhodia and Solvay teams are now working to combine the
specifi cities of the two approaches in the context of the integration process.
These structural changes also met the need to adapt the corporate culture to a rapidly changing world. Within this framework, Human Resources is working hard to promote evolution of employees' behavior and to enhance their performance while ensuring their well-being at work.
Employees all set their own objectives, in line with those of the Group, and are able to assess their progress. After deploying new and advanced tools in recent years and with its focus henceforth on employee behavior, Human Resource management at Solvay is now one of the industry benchmarks.
By acting on individual behavior, Solvay aspires above all to enable all employees to achieve personal development in their work through a thorough understanding of set objectives, a better positioning in their environment and an assessment of progress made toward achieving goals. By focusing on the behavioral component, Solvay intends to empower all employees in their approach to customers, colleagues and the other stakeholders that they meet as part of their professional activity. Similarly, through behavior based on a clear strategy, our employees contribute to the Group's growth and profi tability.
The Change Leadership Model (CLM) is a vehicle by which Solvay intends to change behavior, support the process of change and help its employees accomplish their goals. The CLM reinforces the organizational structure by adapting behaviors to the enterprise environment and, in so doing, contributing to achieving the Group's strategic priorities. The CLM also increases creativity by seeking to share relevant information and encouraging exchanges between heads of entities, adding value in the process of managing employees' performances and careers.
The objectives of growth and profi tability can be achieved only by effective performance management at all levels of the enterprise. To achieve this, the new structure is based on
HR e-Services, the Human Resources portal with a user-friendly, interactive interface, is available to all Group employees. In addition to basic functionalities like time management and assessments, it presents HR news, internal mobility announcements and the like.
the Group's strategic objectives, translated into performance indicators at the GBU and RBU level. These strategic objectives are then broken down into individual objectives that can be measured more rigorously. In this way, each employee contributes effectively to the enhancement of operational performance.
In recent years, various electronic tools based on the Group's intranet have been introduced to support the organization. The latest of these is the new internal e-portal that aims to meet employees' daily and local needs. The e-PDA assessment tool makes it possible to organize, record and share information on personal development objectives in order to help improve individual performance. This is a continuous process divided into three stages: planning, review and assessment. It gives everyone the opportunity to have structured discussions with their supervisors about their performance during the
past year and to identify future goals and career development ambitions.
With the tools that support the development process, the Group knows its employees' expectations in terms of career development. From this perspective, the 'Talent Round Tables' focus on assessing employees' performance and potential. Here entity managers can exchange information so as to take best advantage of the profi les of their executives, while avoiding rigid, unchanging assessments. For non-executive personnel, assessment is based on local conditions at the various entities.
Every two years, a vast survey known as the Solvay People Survey is conducted among all employees worldwide. The purpose is to measure everyone's commitment and to identify potential problem areas. This proactive approach allows everyone to express their
expectations, states of mind, comments and ideas. In the midst of the reorganization process, Solvay was able in 2011 to analyze the results, down slightly but still favorable, which will enable it to take appropriate action to correct potential problems.
The training programs grouped within the Solvay Corporate University cover various themes that assist employees in their development according to their function, performance and potential. The training provided by the Solvay Corporate University is not limited to putting across information, but also focuses on
employees' gain of self-knowledge in order to be fully aware of their capabilities and potential. This training is accompanied by thematic seminars. More specifi c training programs are also offered, in what is a changing business. They are also addressed to all employees, with differing approaches, the goal being to increase their ability to handle change.
The Executive Committee visits Italy, September 2011.
Solvay Corporate University organizes numerous programs for our international talents to develop and share their experiences. Like here in the "Pinnacle" Leadership program.
Solvay Sustainable Development
AS A MEANS OF CREATING LONG-TERM VALUE, SUSTAINABLE DEVELOPMENT IS AN INTEGRAL PART OF THE GROUP'S STRATEGIC AND OPERATIONAL APPROACH.
A complementary document to the Annual Report, entitled "Sustainability indicators and progress 2011" presents externally verifi ed sustainable management indicators for each Sector. It is available on www.solvay.com
This approach takes concrete form in three ways: development of a portfolio of activities within a perspective of sustainable chemistry, responsible management covering the full life cycle of products, and pursuit of dialogue with all stakeholders. Rhodia too had placed sustainable development at the heart of its strategy. The present integration will give even more impetus to this thrust.
The development of a portfolio of sustainable business activities, with optimized exploitation of resources at the production stage and delivery of applications to markets that meet sustainability criteria, is a key objective of the Group.
At the current time, approximately 30% of the sales of the Solvay group (including the Rhodia Sector) are of products and in markets that meet key sustainability requirements. The Rhodia Sector's portfolio shares in this fully, with applications responding to sustainability requirements.
responsibility. Solvay's operating entities have been given greater responsibility for monitoring progress towards the 107 objectives defi ned for 2008-2012, especially in the fi elds of environmental management, safety and health. Solvay uses a structured scorecard of non-fi nancial indicators to facilitate monitoring of these objectives. The Rhodia Way, deployed across all Rhodia entities since 2007, is designed as an aid to performance, aimed at better integrating responsibility criteria into daily business practices. Updated in 2011, this approach conforms with that of ISO 26000, Guidance on Social Responsibility.
Dialogue with institutional investors and with the analysts of non-fi nancial rating agencies is helping to clarify avenues along which the Group can make progress in terms of responsible practices. Weak points are addressed by specifi c actions to perfect strategy development processes, including performance and improvement indicators. In this context, Solvay was honored as one of two fi nalists for the 2011 Belgian best Sustainable Development Report reward.
of one member of the Executive Committee. A Sustainability Council including outside experts is now being created and will advise the Executive Committee directly. All major R&D projects are examined systematically according to sustainability criteria. The deployment of the Rhodia Way reference framework is also
Evaluation excluding Pipelife and Inergy, and without the Rhodia Sector.
| Reducing energy consumption | 13% |
|---|---|
| Improving freshwater management | 4% |
| Reducing of exposure to hazardous and toxic substances | 3% |
| Improving waste management chains | 5% |
| Increasing food production | 3% |
| Total contributing to "aligned" and "stars" solutions | 28% |
The analysis of Solvay activities based on the "SPM" methodology covers the entire portfolio before the integration of Rhodia. The analysis of the portfolio of the Rhodia Sector is planned in 2012. 1. Analysis using the SPM tool based on clearly defi ned and acknowledged sustainability criteria. "Aligned" means the product in its market meets clear consumer expectations as to sustainability. The "Star"category is reached when in addition this market has strong growth potential.
In 2011, Solvay was included in the FTSE4Good and the FTSE KLD Global Sustainability indices. Vigeo and the Carbon Disclosure Project (CDP) placed Solvay very honorably in the "fast followers" category. In 2010, Rhodia, then a publicly traded company, was selected for the global Dow Jones Sustainability Index and the European ASPI Eurozone and Ethibel indices and was evaluated by the CDP. Rhodia was also distinguished by European rating agency Vigeo as a European leader in its profession in terms of Corporate Social Responsibility (CSR).
The various aspects of the management of sustainable development are grouped into six clusters, each under the authority being monitored by Rhodia's senior management. Rhodia was honored in 2011 by the "Responsible Governance Award" in the SBF 120 category in France for its nondiscrimination policy.
Following on the success of the "Vinyl 2010" voluntary commitment by Europe's PVC industry (with targets for waste recycling and substitution of certain additives), Solvay has committed to participating in the new VinylPlus commitment with the goal of recycling 800 000 tons a year of PVC by 2020.
A comprehensive carrier selection program has increased the security and safety of our product distribution. A tool has been developed to quantify and compare the risks associated
with different transport routes and modes.
For several years now, Rhodia has included Social and Environmental Responsibility in its procurement policy. Thus in 2011, Rhodia signed a mediation charter with the French government ensuring fair treatment of suppliers in case of dispute. Rhodia also held last year a forum on innovation in bioprocurement to optimize partnerships in France with suppliers in this area.
Dialogue between Solvay senior management and the Sustainable Development Working Group of the European Works Council, which since 2002 has been a partner of the Group, focused particularly on wellbeing at work, diversity, employability and staff demographics. A seminar on demography was held with a large group of employee representatives attending.
In February 2011, Rhodia and the International Federation of Chemical, Energy, Mine and General Workers' Unions (ICEM) renewed their global social and environmental responsibility agreement for a further fi ve-year period. This incorporates a new joint-dialogue body devoted to global safety issues ("Global Safety Panel"). In 2011, an ICEM delegation conducted assessment missions to Rhodia sites in Russia and China.
Various initiatives have been launched by the Executive Committee to get employees to sign up to the full range of the Group's sustainability goals. These initiatives include seminars on HSE culture and inter-hierarchical forums on sustainable development. Since 2009, the Rhodia Way training module entitled "Acting Responsibly" has been deployed in all countries. 60% of employees had been trained
The largest portion of the economic value generated by the Group is redistributed in the form of salaries and purchases of resources and services.
by the end of 2011. The latest Rhodia Way Trophies, awarded to best practices in the fi eld, honored six projects out of a total of 240.
Since 2011, remuneration policy in the Rhodia Sector has incorporated criteria linked to sustainable development. In this way 10% of the bonus of the Sector's 3 000 executives is directly tied to the social and environmental responsibility objectives of their entities.
and facilities. For Solvay, the "zero accident" objective remains paramount. The Group's "behavioral safety" program now extends to 66% of its plants. This is helping to correct inappropriate attitudes and aims to encourage everyone, regardless of level, to share opinions and recommendations. In addition, the Group's objective of expanding its safety expectations to subcontractors working at its sites is now 98% deployed.
The Solvay group's occupational
safety results remained very good in 2011, with an overall accident frequency rate involving stopping work equal to 0.8. However, despite prevention efforts, the accidental death, in 2011, of a person working on a conveyor belt at our Okorusu (Namibia) site is to be deeply regretted.
The Rhodia Sector has upgraded its safety and environmental management system by validating a new RCMS (Rhodia Care Management System) standards system. Work on taking the human factor into account continues on the French sites through two programs: STOP (directed at all management staff) and VIGILANCE (for all employees and specifi cally directed at human factors). Both programs will be deployed worldwide in 2012.
As part of the ICCA's Global Stewardship commitment, Solvay prepared summary data sheets describing the properties of a series of products for use by a wide audience. In early 2012, 60 of these standardized forms will be available on the ICCA site. The Group is also continuing to prepare the REACH
fi les for registration by June 2013. A major effort has been undertaken to apply the new European and global legislation on harmonized classifi cation and labeling of chemicals, with adapted safety data sheets (SDS) distributed to customers and users in their national languages.
The introduction of a series of projects for meeting our target of a 20% reduction in direct and indirect greenhouse gas emissions and total energy consumption. Following signifi cant gains in energy effi ciency achieved through a series of cogeneration plants installed between 1990 and 2000, the Group has begun examining a new set of cogeneration projects in Europe, Brazil and the United States. Two other initiatives are currently being deployed in the Group. For existing production units, the Solwatt project is intended to identify new energy gains by the end of 2013 (three sites have already been audited). Two new membrane electrolysis units, one at Lillo (Belgium), the other at Tavaux (France) will start operating in 2012 and represent energy savings of around 17%. For its part, in 2011 Rhodia launched several
2011 continues the substantive progress achieved by the action programs focused on subcontractor behaviors and safety. The results of Rhodia, consolidated for all of 2011, also contribute signifi cantly to this year's improvement.
energy-effi ciency projects as part of a fi ve-year environmental plan, targeted at decreasing energy consumption by 8%.
A project to produce energy from biomass at the Solvay site at Dombasle (France) is currently being evaluated by the French authorities. Also in 2011, Rhodia rolled out biogas production units in Asia and is investing in energy production from sugarcane bagasse in Brazil.
Besides action on greenhouse gases, other initiatives are directed at achieving our target of a 20% reduction of global air and water emissions between 2006 and 2020.
The performance evaluation of
sites by reference to 'best available technologies' in environmental matters (BAT) has been completed, with more than 500 evaluations conducted. Solvay has proposed a voluntary soil remediation program, and an original "zero discharge" concept for the new manufacturing site at Panoli (India). In Santo Andre (Brazil) and Bahia Blanca (Argentina), additional new incinerators ensure more effective control of emissions and improved air quality.
Additional progress was made in the management of historical soil contamination, in particular at Spinetta and Rosignano (Italy).
Rhodia has continued work to optimize its sulfur oxides abatement units at its GBU Eco Services sites (USA) and its nitrogen oxides abatement units at Chalampé (France) to bring performance to BAT levels.
Solvay has built the world's largest hydrogen peroxide production unit in Thailand. The production process here utilizes Solvay high performance technology that very signifi cantly reduces energy consumption and wastewater volume. At the Onsan (Korea) site, a new type of fl uorine gas production micro-unit has been conceived, to be built and operated jointly with Air Liquide. The idea is to install these units at customers' (fl at screen and photovoltaic panel
Direct and indirect (purchased energy) consumption related to manufacturing – excl. Rhodia Sector
Like-on-like comparison: evolution taking into account the evolution of the portfolio of plants and of production volumes.
| 2006 2007 2008 2009 2010 2011 | ||||||
|---|---|---|---|---|---|---|
| 1 000 Terajoules | 74.0 | 65.0 | 61.0 | 53.9 | 57.0 | 56.4 |
The Rhodia Sector aims to increase its energy effi ciency (energy consumption per ton produced) by 1.5% a year between 2010 and 2015, or 8% over the period. Between 2010 and 2011, overall energy effi ciency increased by a further 2.9%.
Direct (Scope 1) and indirect (Scope 2) emissions related to manufacturing – excl. Rhodia Sector
CO2 equivalent
The decrease is largely due to the reduction in emissions of non-CO2 greenhouse gases. Like-on-like comparison: evolution taking into account the evolution of the portfolio of plants and of production volumes.
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |
|---|---|---|---|---|---|---|
| 1 000 tons CO2 equivalent |
22 560 | 8 403 | 6 564 | 5 335 | 4 524 | 4 316 |
Rhodia has reduced its emissions by almost 80% since 2005. These reductions have been achieved primarily through investments at four sites, generating around 14 million tons of CERs per year (unit value of the Kyoto Protocol representing one metric ton of CO2 ).
See the assurance report by Ernst & Young and PricewaterhouseCooper published in the complementary document: 'Sustainability indicators and progress 2011' on the website: www.solvay.com/EN/Lit/ Literature.aspx
–
producers) sites. The fl uorine gas, which has a zero climate change effect, would replace gases like CF4 and NF3 , with their heavy greenhouse-gas effect, at the same time as increasing productivity and eliminating the transportation risks associated with this product.
A program has been initiated to better measure and model water fl ow at industrial sites and identify new potential sources of savings, especially in regions of water stress. In terms of biodiversity, the remediation of old dams and quarries owned by Solvay is an ongoing process: to date 8 000 hectares into nature areas of which 1 600 remediated, and in many cases, replanted.
In the Rhodia Sector, 2011 was marked by programs to reduce water usage. Furthermore the majority of sites discharging effl uent into the natural environment have completed an evaluation of their impact on aquatic biodiversity.
Beyond the basic indicators used in this document, a supplement to the Annual Report entitled "Sustainability Indicators and Progress 2011" comments on around 80 extrafi nancial performance indicators. A series of indicators for Rhodia in 2011 will be added separately, prior to full integration in 2012.
Reported fi gures on energy, greenhouse gas emissions and emissions to the environment are subject to an audit process. In 2010, Ernst & Young produced an assurance report on the preparation process of the energy and environmental indicators. In 2011, the audit was extended to include the data themselves. Rhodia's reporting is audited by PricewaterhouseCoopers.
Work is in hand to integrate the data of the Rhodia Sector, which requires the alignment of defi nitions and methods of calculating indicators. Only the people accidents indicator is integrated into the Solvay group fi gures. The fi gures presented are representative of the Group's activities in 2011 and prior years, but the boundaries can vary from one parameter to another. For greenhouse gas emissions and energy in particular, they respect the GRI guidelines which impose operating units as the basic boundaries.
* See Ernst & Young's audit report about the emissions in 2011, not restated to refl ect the changes in consolidation scope.
Jean-Pierre Clamadieu * DEPUTY CHIEF EXECUTIVE OFFICER
Bernard de Laguiche * CHIEF FINANCIAL OFFICER
Jacques van Rijckevorsel * GROUP GENERAL MANAGER OF PLASTICS SECTOR
Vincent De Cuyper * GROUP GENERAL MANAGER OF CHEMICALS SECTOR
Jean-Michel Mesland * GROUP GENERAL MANAGER OF TECHNOLOGY, RESEARCH SERVICES AND PROCUREMENT
Roger Kearns * REGION GENERAL MANAGER ASIA-PACIFIC
Gilles Auffret * GROUP GENERAL MANAGER OF RHODIA SECTOR
Daniel Broens GROUP GENERAL MANAGER HUMAN RESOURCES
Dominique Dussard GROUP GENERAL COUNSEL Michel Defourny GROUP CORPORATE SECRETARY
| MANAGEMENT REPORT | page 11 |
|---|---|
| CONSOLIDATED FINANCIAL STATEMENTS | page 61 |
| – Income statement | page 61 |
| – Statement of comprehensive income | page 62 |
| – Statement of cash fl ows | page 63 |
| – Statement of fi nancial position (balance sheet) | page 64 |
| – Statement of changes in equity | page 65 |
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | page 66 |
| – IFRS accounting policies | page 66 |
| – Critical accounting judgments and key sources of estimation uncertainty | page 88 |
| – General description of the segments | page 89 |
| – Notes to the income statement | page 91 |
| – Notes to the statement of comprehensive income | page 102 |
| – Notes to the statement of cash fl ows | page 104 |
| Rhodia acquisition and pro forma information | page 106 |
| – Notes to the statement of fi nancial position (balance sheet) | page 112 |
| – Notes to the statement of changes in equity | page 144 |
| – Miscellaneous notes | page 145 |
| – Management of risks | page 147 |
| – 2011 consolidation scope | page 160 |
| SOLVAY SA FINANCIAL STATEMENTS SUMMARY | page 174 |
| STATUTORY AUDITOR'S REPORT ON THE CONSOLIDATED | |
| FINANCIAL STATEMENTS | page 176 |
The following fi nancial statements were authorized for issue by the Board of Directors meeting on February 15, 2012. They have been drawn up in accordance with the IFRS accounting policies which are set out in the coming pages. Information on related parties required by IAS 24 can be found in the "Corporate Governance" chapter.
| EUR million | Notes | 2010 | 2011 |
|---|---|---|---|
| Sales | (1) (2) | 5 959 | 8 109 |
| Cost of goods sold | -4 833 | -6 545 | |
| Gross margin | (3) | 1 126 | 1 564 |
| Commercial and administrative costs | (4) | -482 | -660 |
| Research and development costs | (5) | -125 | -156 |
| Other operating gains and losses | (6) | 6 | -60 |
| Earnings from associates and joint ventures accounted for using equity method | (7) | 46 | 61 |
| REBITDA | 930 | 1 208 | |
| REBIT | (8) | 571 | 748 |
| Non-recurring items | (9) | -317 | -188 |
| EBIT | 254 | 560 | |
| Cost of borrowings | (10) | -138 | -159 |
| Interest on lendings and short term deposits | (10) | 22 | 39 |
| Other gains and losses on net indebtedness | (10) | -10 | -16 |
| Cost of discounting provisions | (10) | -52 | -72 |
| Income/loss from available-for-sale investments | 0 | 1 | |
| Result before taxes | 76 | 354 | |
| Income taxes | (11) | 21 | -19 |
| Result from continuing operations | 97 | 334 | |
| Result from discontinued operations | 1 726 | -38 | |
| Net income for the year | (12) | 1 823 | 296 |
| Non-controlling interests | -47 | -50 | |
| Net income (Solvay share) | 1 776 | 247 | |
| Basic earnings per share from continuing operations (EUR) | (13) | 0.62 | 3.51 |
| Basic earnings per share from discontinued operations (EUR) | 21.22 | 0.47 | |
| Basic earnings per share (EUR) | 21.84 | 3.04 | |
| Diluted earnings per share from continuing operations (EUR) | (13) | 0.62 | 3.49 |
| Diluted earnings per share from discontinuing operations (EUR) | 21.18 | 0.47 | |
| Diluted earnings per share (EUR) | 21.80 | 3.03 | |
| RATIOS | |||
| Gross margin as a% of sales | 18.9% | 19.3% | |
| Times charges earned | 4.5 | 5.5 | |
| Income taxes / Result before taxes (%) | -27.9% | 5.5% |
Times charges earned = REBIT / Charges on net indebtedness. Explanatory notes are found after the fi nancial statements
| EUR million | Notes | 2010 | 2011 |
|---|---|---|---|
| Net income for the year | 1 823 | 296 | |
| Gains and losses on available-for-sale fi nancial assets | (15) | -10 | -8 |
| Gains and losses on hedging instruments in a cash fl ow hedge | (15) | 2 | 3 |
| Unrecognized actuarial gains and losses on defi ned benefi t pension plans |
(15) | -183 | -105 |
| Currency translation differences | (15) | 251 | 58 |
| Share of other comprehensive income of associates and joint ventures accounted for using equity method |
(15) | 27 | -30 |
| Income tax relating to components of other comprehensive income | (15) | 52 | 28 |
| Other comprehensive income net of related tax effects | 139 | -54 | |
| Comprehensive income for the year | 1 962 | 242 | |
| attributed to: | |||
| - owners of the parent | 1 876 | 202 | |
| - non-controlling interests | 86 | 40 |
The amounts below include the effect of the discontinued operations.
| EUR million | Notes | 2010 | 2011 |
|---|---|---|---|
| EBIT | 287 | 515 | |
| Depreciation amortization and impairments * | (16) | 607 | 455 |
| Changes in working capital | (17) | -34 | 303 |
| Changes in provisions | (18) | 21 | -187 |
| Income taxes paid | -96 | -163 | |
| Other | (19) | -194 | -128 |
| Cash fl ow from operating activities | 590 | 794 | |
| Acquisition (-) of subsidiaries | (20) | 0 | -3 984 |
| Acquisition of Rhodia's cash | (20) | 0 | 931 |
| Acquisition of Orbeo's cash | (20) | 0 | 67 |
| Acquisition (-) of investments - Other | (20) | -170 | -212 |
| Sale (+) of subsidiaries | (20) | 4 430 | 0 |
| Sale (+) of investments - Other | (20) | 279 | 40 |
| Acquisition (-) of tangible and intangible assets | (20) | -286 | -602 |
| Sale (+) of tangible and intangible assets | (20) | 19 | 17 |
| Income from available-for-sale investments | 1 | 1 | |
| Changes in non-current fi nancial assets | -206 | 60 | |
| Other | 1 | 0 | |
| Cash fl ow from investing activities | 4 068 | -3 681 | |
| Capital increase (+) / redemption (-) | (21) | -27 | 31 |
| Acquisition (-) / sale (+) of treasury shares | (23) | -83 | 10 |
| Changes in borrowings | 12 | -97 | |
| Changes in other current fi nancial assets | -3 701 | 3 278 | |
| Cost of borrowings | -142 | -159 | |
| Interest on lending and short-term deposits | 22 | 39 | |
| Other | -10 | -16 | |
| Dividends received from associates and joint ventures | 32 | 56 | |
| accounted for using equity method | |||
| Dividends paid | -248 | -266 | |
| Cash fl ow from fi nancing activities | -4 144 | 2 877 | |
| Net change in cash and cash equivalents | 515 | -10 | |
| Currency translation differences | 25 | -1 | |
| Opening cash balance | 1 415 | 1 954 | |
| Closing cash balance | (32) | 1 954 | 1 943 |
| Free Cash Flow from continuing operations | 117 | 371 | |
| Free Cash Flow from discontinued operations | 35 | -44 |
* On tangible assets intangible assets and goodwill.
Free cash fl ow = cash fl ow from operating activities + cash fl ow from investing activities excluding acquisition/sale of subsidiaries and other investments + dividends received from associates and joint ventures accounted for using equity method. Explanatory notes are found after the fi nancial statements.
| EUR million | Notes | 2010 | 2011 |
|---|---|---|---|
| Cash fl ow from operating activities | 35 | -44 | |
| Cash fl ow from investing activities | 4 430 | 0 | |
| Cash fl ow from fi nancing activities | 0 | 0 | |
| Net change in cash and cash equivalents | 4 465 | -44 |
| EUR Million | Notes | 2009 | 2010 | 2011 |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | 4 923 | 5 090 | 12 064 | |
| Intangible assets | (24) | 105 | 111 | 1 705 |
| Goodwill | (25) | 71 | 68 | 2 599 |
| Tangible assets | (26) | 3 380 | 3 276 | 5 652 |
| Available-for-sale investments | (27) | 68 | 62 | 80 |
| Investments in associates | (28) | 466 | 346 | 704 |
| Other investments | (29) | 196 | 275 | 125 |
| Deferred tax assets | (11b) | 525 | 631 | 780 |
| Loans and other non-current assets | (33) | 112 | 322 | 420 |
| Current assets | 7 173 | 8 633 | 7 373 | |
| Inventories | (30) | 672 | 761 | 1 578 |
| Trade receivables | (33) | 1 270 | 1 651 | 2 311 |
| Income tax receivables | 8 | 12 | 43 | |
| Dividends receivables | 0 | 1 | 0 | |
| Other current receivables - Financial instruments | (32) | 26 | 3 722 | 464 |
| Other current receivables - Other | 322 | 533 | 938 | |
| Cash and cash equivalents | (32) | 1 415 | 1 954 | 1 943 |
| Assets held for sale - Pharma | 3 408 | 0 | 0 | |
| Assets held for sale | (34) | 53 | 0 | 95 |
| Total assets | 12 096 | 13 723 | 19 437 | |
| EQUITY & LIABILITIES | ||||
| Total equity | 5 024 | 6 708 | 6 653 | |
| Share capital | 1 271 | |||
| 1 271 | 1 271 | |||
| Reserves | 3 347 | 5 017 | 4 885 | |
| Non-controlling interests | 406 | 419 | 497 | |
| Non-current liabilities | 4 549 | 4 692 | 8 179 | |
| Long-term provisions: employee benefi ts | (31) | 1 025 | 1 003 | 2 595 |
| Other long-term provisions | (31) | 763 | 946 | 1 325 |
| Deferred tax liabilities | (11b) | 172 | 163 | 710 |
| Long-term fi nancial debt | (32) | 2 546 | 2 535 | 3 374 |
| Other non-current liabilities | 43 | 46 | 174 | |
| Current liabilities | 2 524 | 2 323 | 4 605 | |
| Short-term provisions: employee benefi ts | (31) | 6 | 78 | 39 |
| Other short-term provisions | (31) | 50 | 58 | 230 |
| Short-term fi nancial debt | (32) | 129 | 148 | 794 |
| Trade liabilities | (33) | 700 | 1 428 | 2 232 |
| Income tax payable | 50 | 62 | 51 | |
| Dividends payable | 100 | 100 | 100 | |
| Other current liabilities | 466 | 450 | 1 159 | |
| Liabilities associated with assets held for sale - Pharma Liabilities associated with assets held for sale |
1 012 11 |
0 0 |
0 0 |
| RATIOS | 2009 | 2010 | 2011 |
|---|---|---|---|
| Return on equity (ROE) | 11.1% | 26.7% | 4.3% |
| Net debt to equity ratio | 24.6% | ns | 26.5% |
ROE = net income of the Group / total equity before allocation of the revaluation reserve directly to equity. Net debt to equity ratio = net debt / total equity.
Net debt = short and long-term fi nancial debt less cash and cash equivalents and other current receivables - Financial instruments. Explanatory notes are found after the fi nancial statements
| Equity attributable to equity holders of the parent | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revaluation reserve (Fair value) | |||||||||||
| EUR Million | Share | Issue | Retained | Treasury | Currency | Available | Cash fl ow | Defi ned | Total | Non | Total |
| capital | premiums | earnings | shares | translation | for-sale | hedges | benefi t | controlling | equity | ||
| differences | investments | pension plan |
interests | ||||||||
| Balance at 31/12/2009 | 1 271 | 18 | 4 272 | -218 | -612 | 21 | 3 | 4 754 | 406 | 5 160 | |
| Balance after | 1 271 | 18 | 4 272 | -218 | -612 | 21 | 3 | -136 | 4 617 | 406 | 5 024 |
| restatement at 01/01/2010 |
|||||||||||
| Net profi t for the period | 1 777 | 1 777 | 46 | 1 823 | |||||||
| Income and expenses | 238 | -10 | 1 | 5 | 235 | 40 | 275 | ||||
| directly | |||||||||||
| allocated to equity | |||||||||||
| Comprehensive | 1 777 | 238 | -10 | 1 | 5 | 2 012 | 86 | 2 098 | |||
| income | |||||||||||
| Cost of stock options | 10 | 10 | 10 | ||||||||
| Dividends | -240 | -240 | -8 | -248 | |||||||
| Acquisitions/sale of | -83 | -83 | -83 | ||||||||
| treasury shares | |||||||||||
| Increase (decrease) | -22 | -22 | -65 | -86 | |||||||
| through changes in | |||||||||||
| ownership interests in | |||||||||||
| subsidiaries that do not | |||||||||||
| result in loss of control | |||||||||||
| Other | -6 | -6 | -6 | ||||||||
| Balance at 31/12/2010 | 1 271 | 18 | 5 791 | -301 | -374 | 11 | 4 | -131 | 6 289 | 419 | 6 708 |
| Net profi t for the period | 247 | 247 | 50 | 296 | |||||||
| Income and expenses | 42 | -8 | 8 | -86 | -44 | -10 | -54 | ||||
| directly allocated to equity |
|||||||||||
| Comprehensive | 247 | 42 | -8 | 8 | -86 | 202 | 40 | 242 | |||
| income | |||||||||||
| Cost of stock options | 9 | 9 | 9 | ||||||||
| Dividends | -250 | -250 | -14 | -263 | |||||||
| Acquisitions/sale of | 10 | 10 | 10 | ||||||||
| treasury shares | |||||||||||
| Increase (decrease) | -100 | -100 | 52 | -48 | |||||||
| through changes in | |||||||||||
| ownership interests in | |||||||||||
| subsidiaries that do not | |||||||||||
| result in loss of control | |||||||||||
| Other | -4 | -4 | -4 | ||||||||
| Balance at 31/12/2011 | 1 271 | 18 | 5 693 | -292 | -332 | 3 | 12 | -217 | 6 156 | 497 | 6 653 |
The main accounting policies used in preparing these consolidated fi nancial statements are set out below:
Solvay (the "Company") is a public limited liability company governed by Belgian law and quoted on NYSE Euronext Brussels and also on NYSE Euronext Paris as of January, 23 2012. The principal activities of the Company, its subsidiaries and its joint ventures (jointly the "Group") are described in note 1 on segment information.
The Group's consolidated fi nancial statements for the year ended December 31, 2011 were prepared in accordance with IFRS (International Financial Reporting Standards) as adopted by the European Union.
These consolidated fi nancial statements are also compliant with the IFRS issued by the IASB (International Accounting Standards Board).
The application of the aforementioned standards interpretations and amendments had no impact on the consolidated fi nancial statement.
According to the Group, the aforementioned standards, interpretations and amendments will have no signifi cant impact on the consolidated fi nancial statements.
From the 1st of January, 2011, Solvay adopted the equity method to recognise its interests in "Jointly controlled entities" instead of the proportionate consolidation method.
The reason for this change is the publication in May, 2011 of the new IFRS 11 – Joint Arrangements which will require the application of the equity method for joint arrangements classifi ed as joint ventures. If endorsed by the European Union, IFRS 11 will supersede IAS 31 as from January 1st, 2013.
The accounting policy related to post-employment benefi ts has been modifi ed as from July 1, 2011. This has led Solvay to eliminate the Corridor approach and recognize all actuarial gains and losses in other comprehensive income (equity). This change in accounting method is in line with the revised IAS 19 which should be applicable as from January, 1st 2013.
• Impact of changes in accounting policies
The following tables summarise the impact of these changes in accounting policies which have been applied retrospectively in accordance with IAS 8:
| EUR million | 2010 | Impact | Impact | 2010 |
|---|---|---|---|---|
| Published | Equity | Actuarial | Restated | |
| Method | G/L | |||
| Sales | 6 796 | -837 | 5 959 | |
| Cost of goods sold | -5 496 | 663 | -4 833 | |
| Gross margin | 1 301 | -175 | 1 126 | |
| Commercial and administrative costs | -560 | 78 | -482 | |
| Research and development costs | -136 | 11 | -125 | |
| Other operating gains and losses | -4 | 10 | 6 | |
| Earnings from associates and joint ventures accounted for using | 1 | 45 | 46 | |
| equity method | ||||
| REBITDA | 1 019 | -89 | 930 | |
| REBIT | 602 | -31 | 571 | |
| Non-recurring items | -328 | 11 | -317 | |
| EBIT | 274 | -20 | 254 | |
| Cost of borrowings | -142 | 4 | -138 | |
| Interest on lendings and short term deposits | 23 | -1 | 22 | |
| Other gains and losses on net indebtedness | -10 | 0 | -10 | |
| Cost of discounting provisions (*) | -52 | 0 | -52 | |
| Income/loss from available-for-sale investments | 0 | 0 | 0 | |
| Result before taxes | 93 | -17 | 76 | |
| Income taxes | 4 | 17 | 21 | |
| Result from continuing operations | 97 | 0 | 97 | |
| Result from discontinued operations | 1 726 | 0 | 1 726 | |
| Net income for the year | 1 823 | 0 | 1 823 | |
| Non-controlling interests | -47 | 0 | -47 | |
| Net income (Solvay share) | 1 776 | 0 | 1 776 |
| 2010 Published |
Impact Equity |
Impact Actuarial |
2010 Restated |
|
|---|---|---|---|---|
| Method | G/L | |||
| Basic earnings per share from continuing operations (EUR) | 0.62 | 0.62 | ||
| Basic earnings per share from discontinued operations (EUR) | 21.22 | 21.22 | ||
| Basic earnings per share (EUR) | 21.84 | 21.84 | ||
| Diluted earnings per share from continuing operations (EUR) | 0.62 | 0.62 | ||
| Diluted earnings per share from discontinuing operations (EUR) | 21.18 | 21.18 | ||
| Diluted earnings per share (EUR) | 21.80 | 21.80 |
| EUR million | 2010 Published |
Impact Equity Method |
Impact Actuarial G/L |
2010 Restated |
|---|---|---|---|---|
| Net income for the year | 1 823 | 1 823 | ||
| Gains and losses on available-for-sale fi nancial assets | -10 | -10 | ||
| Gains and losses on hedging instruments in a cash fl ow hedge |
2 | 2 | ||
| Unrecognized actuarial gains and losses on defi ned benefi t pension plans |
0 | -183 | -183 | |
| Currency translation differences | 278 | -27 | 251 | |
| Share of other comprehensive income of associates and joint ventures accounted for using equity method |
0 | 27 | 27 | |
| Income tax relating to components of other comprehensive income |
-1 | 52 | 52 | |
| Other comprehensive income, net of related tax effects | 269 | 0 | -131 | 139 |
| Comprehensive income for the year | 2 092 | -131 | 1 962 | |
| attributed to: | ||||
| - owners of the parent | 2 006 | -131 | 1 876 | |
| - non-controlling interests | 86 | 86 |
| Published Equity Method Restated EBIT 305 -18 Depreciation, amortization and impairments 717 -110 Changes in working capital -42 8 Changes in provisions 24 -3 Income taxes paid -108 12 Other -198 4 Cash fl ow from operating activities 697 -107 Acquisition (-) of subsidiaries 0 0 Acquisition (-) of investments - Other -172 2 Sale (+) of subsidiaries 4 430 0 Sale (+) of investments - Other 280 -1 Acquisition (-) of tangible and intangible assets -366 80 Sale (+) of tangible and intangible assets 20 -1 Income from available-for-sale investments 1 0 Changes in non-current fi nancial assets -205 -1 Other -13 14 Cash fl ow from investing activities 3 976 92 Capital increase (+) / redemption (-) -26 -1 Acquisition (-) / sale (+) of treasury shares -83 0 Changes in borrowings 5 7 Changes in other current fi nancial assets -3 701 0 Cost of borrowings -146 4 Interest on lending and short-term deposits 24 -2 Other -10 0 Dividends received from associates and joint ventures 0 32 accounted for using equity method Dividends paid -248 -0 Cash fl ow from fi nancing activities -4 185 41 Net change in cash and cash equivalents 488 27 Currency translation differences 29 -4 Opening cash balance 1 486 -71 |
EUR million | 2010 | Impact | 2010 |
|---|---|---|---|---|
| 287 | ||||
| 607 | ||||
| -34 | ||||
| 21 | ||||
| -96 | ||||
| -194 | ||||
| 590 | ||||
| 0 | ||||
| -170 | ||||
| 4 430 | ||||
| 279 | ||||
| -286 | ||||
| 19 | ||||
| 1 | ||||
| -206 | ||||
| 1 | ||||
| 4 068 | ||||
| -27 | ||||
| -83 | ||||
| 12 | ||||
| -3 701 | ||||
| -142 | ||||
| 22 | ||||
| -10 | ||||
| 32 | ||||
| -248 | ||||
| -4 144 | ||||
| 515 | ||||
| 25 | ||||
| 1 415 | ||||
| Closing cash balance | 2 003 | -49 | 1 954 |
| EUR Million | 2009 | 2010 | ||||||
|---|---|---|---|---|---|---|---|---|
| Published | Impact Equity Method |
Impact Actuarial G/L |
Restated | Published | Impact Equity Method |
Impact Actuarial G/L |
Restated | |
| ASSETS | ||||||||
| Non-current assets | 5 075 | -169 | 17 | 4 923 | 5 205 | -129 | 14 | 5 090 |
| Intangible assets | 162 | -57 | 105 | 121 | -10 | 111 | ||
| Goodwill | 76 | -5 | 71 | 73 | -5 | 68 | ||
| Tangible assets | 3 921 | -541 | 3 380 | 3 698 | -422 | 3 276 | ||
| Available-for-sale investments | 68 | 0 | 68 | 62 | -0 | 62 | ||
| Investments in associates | 0 | 466 | 466 | 20 | 326 | 346 | ||
| Other investments | 209 | -13 | 196 | 278 | -3 | 275 | ||
| Deferred tax assets | 487 | -17 | 55 | 525 | 586 | -7 | 52 | 631 |
| Loans and other non-current assets | 152 | -2 | -38 | 112 | 368 | -8 | -38 | 322 |
| Current assets | 7 471 | -298 | 7 173 | 8 809 | -176 | 8 633 | ||
| Inventories | 805 | -133 | 672 | 870 | -109 | 761 | ||
| Trade receivables | 1 373 | -103 | 1 270 | 1 706 | -55 | 1 651 | ||
| Income tax receivables | 19 | -11 | 8 | 12 | 0 | 12 | ||
| Dividends receivables | 0 | 0 | 0 | 1 | -0 | 1 | ||
| Other current receivables - Financial | 0 | 26 | 26 | 3 701 | 21 | 3 722 | ||
| instruments | ||||||||
| Other current receivables - Other | 327 | -5 | 322 | 516 | 17 | 533 | ||
| Cash and cash equivalents | 1 486 | -71 | 1 415 | 2 003 | -49 | 1 954 | ||
| Assets held for sale - Pharma | 3 408 | 0 | 3 408 | 0 | 0 | 0 | ||
| Assets held for sale - Other | 53 | 0 | 53 | 0 | 0 | 0 | ||
| Total assets | 12 546 | -467 | 17 | 12 096 | 14 014 | -305 | 14 | 13 723 |
| EQUITY & LIABILITIES | ||||||||
| Total equity | 5 160 | 0 | -136 | 5 024 | 6 839 | -0 | -131 | 6 708 |
| Share capital | 1 271 | 0 | 1 271 | 1 271 | 0 | 1 271 | ||
| Reserves | 3 483 | 0 | -136 | 3 347 | 5 148 | 0 | -131 | 5 017 |
| Non-controlling interests | 406 | 0 | 406 | 419 | 0 | 419 | ||
| Non-current liabilities | 4 536 | -140 | 153 | 4 549 | 4 636 | -89 | 145 | 4 692 |
| Long-term provisions: employee benefi ts | 895 | -23 | 153 | 1 025 | 871 | -13 | 145 | 1 003 |
| Other long-term provisions | 766 | -3 | 763 | 952 | -6 | 946 | ||
| Deferred tax liabilities | 196 | -24 | 172 | 175 | -12 | 163 | ||
| Long-term fi nancial debt | 2 635 | -89 | 2 546 | 2 590 | -55 | 2 535 | ||
| Other non-current liabilities | 44 | -1 | 43 | 48 | -2 | 46 | ||
| Current liabilities | 2 851 | -327 | 2 524 | 2 540 | -217 | 2 323 | ||
| Short-term provisions: employee benefi ts | 7 | -1 | 6 | 80 | -2 | 78 | ||
| Other short-term provisions | 61 | -11 | 50 | 63 | -5 | 58 | ||
| Short-term fi nancial debt | 185 | -56 | 129 | 212 | -64 | 148 | ||
| Trade liabilities | 828 | -128 | 700 | 1 489 | -61 | 1 428 | ||
| Income tax payable | 66 | -16 | 50 | 67 | -5 | 62 | ||
| Dividends payable | 100 | 0 | 100 | 100 | -0 | 100 | ||
| Other current liabilities | 582 | -116 | 466 | 529 | -79 | 450 | ||
| Liabilities associated with assets held for sale - Pharma |
1 012 | -0 | 1 012 | 0 | 0 | 0 | ||
| Liabilities associated with assets held for sale | 11 | -0 | 11 | 0 | 0 | 0 | ||
| Total equity & liabilities | 12 546 | -467 | 17 | 12 096 | 14 014 | -305 | 14 | 13 723 |
The consolidated fi nancial statements are presented in million of euros, which is also the functional currency of the parent company. The Group's consolidated fi nancial statements were prepared on a historical cost basis, except for investments held for trading and available for sale, which are stated at their fair value. Financial assets which do not have a quoted price in an active market and the fair value of which cannot be reliably measured are carried at cost. Unless explicitly stated, the accounting policies are applied consistently with the previous year.
The preparation of the fi nancial statements requires the use of estimates and the formulation of judgments and assumptions that have an impact on the application of accounting policies and the amounts shown in the fi nancial statements. The areas for which the estimates and assumptions are material with regard to the consolidated fi nancial statements are presented in the note related to "Critical accounting judgments and key sources of estimation uncertainty".
The consolidated fi nancial statements incorporate the fi nancial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. Solvay is presumed to exercise control when it acquires, directly or indirectly, more than 50% of voting rights. To assess this control, potential voting rights that are immediately exercisable or convertible held by Solvay and its subsidiaries are taken into consideration.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition and up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the fi nancial statements of subsidiaries to bring their accounting policies into line with those used by the Group.
All intra-group transactions, balances, income and expenses are fully eliminated.
Non-controlling interests in subsidiaries are identifi ed separately from the Group's equity. The interest of non-controlling shareholders is initially measured at the non-controlling interests' proportionate share of the fair value of the acquiree's identifi able net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity. Total comprehensive income is attributed to noncontrolling interests even if this results in the non-controlling interests having a defi cit balance.
Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to refl ect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity.
When the Group loses control of a subsidiary, the profi t or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognized in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassifi ed to profi t or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.
Acquisitions of subsidiaries are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of acquisition) of assets transferred liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognized in profi t or loss as incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classifi ed as an asset or liability are accounted for in accordance with relevant IFRSs. Changes in the fair value of contingent consideration classifi ed as equity are not recognized.
Where a business combination is achieved in stages, the Group's previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognized in profi t or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassifi ed to profi t or loss, where such treatment would be appropriate if that interest were disposed of.
The acquiree's identifi able assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 (2008) are recognized at their fair value at the acquisition date, except that:
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see next paragraph below), or additional assets or liabilities are recognized, to refl ect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date.
The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum of one year.
An associate is an entity over which the Group has signifi cant infl uence and that is neither a subsidiary nor an interest in a joint venture. Signifi cant infl uence is the power to participate in the fi nancial and operating policy decisions of the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these fi nancial statements using the equity method of accounting, except when the investment is classifi ed as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated statement of fi nancial position at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group's interest in that associate (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate) are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group's share of the net fair value of the identifi able assets, liabilities and contingent liabilities of the associate recognized at the date of acquisition is recognized as goodwill. The goodwill is
included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group's share of the net fair value of the identifi able assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in profi t or loss.
Where a group entity transacts with an associate of the Group, profi ts and losses are eliminated to the extent of the Group's interest in the relevant associate.
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control.
Joint venture arrangements that involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using the equity method of accounting (see 5 Investments in associates).
We refer to note 5 for goodwill arising on the acquisition of the Group's interest in a jointly controlled entity.
Where the Group transacts with its jointly controlled entities, unrealized profi ts and losses are eliminated to the extent of the Group's interest in the joint venture.
Goodwill arising in a business combination is recognized as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred over the share acquired by the Group in the fair value of the entity's net identifi able assets at the acquisition date; The consideration transferred corresponds to the sum of the fair values of the assets transferred and liability incurred by the acquirer to former owners of the acquiree and the equity interests issued by the acquirer.
If, after reassessment, the Group's interest in the fair value of the acquiree's identifi able net assets exceeds the sum of the consideration transferred, the difference is recognized directly in income statement.
Goodwill is not amortized but is reviewed for impairment. Impairment is tested annually and more frequently if there are indications of a loss in value.
For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or group of CGUs) in accordance with IAS36 Impairment of Assets.
A cash-generating unit is the smallest identifi able group of assets that generates cash infl ows that are largely independent of the cash infl ows from other group of assets.
These tests consist in comparing the carrying amount of the assets (or CGUs) with their recoverable amount. The recoverable amount of an asset (CGU) is the higher of its fair value less costs to sell and its value in use.
If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated fi rst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profi t or loss on disposal.
The Group's policy for goodwill arising on the acquisition of a joint venture or an associate is described at 5 above.
The individual fi nancial statements of each Group entity are prepared in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated fi nancial statements, the results
and fi nancial position of each group entity are expressed in Euros (EUR), which is the functional currency of the Company and the presentation currency for the consolidated fi nancial statements.
In preparing the fi nancial statements of the individual entities, transactions in currencies other than the entity's functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the closing rate.
Non monetary items carried at fair value that are denominated in foreign currencies are retranslated at the closing rate when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognized in profi t or loss in the period in which they arise except for:
For the purpose of presenting consolidated fi nancial statements, the assets and liabilities of the Group's foreign operations are expressed in Euros using closing rates. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate) under "currency translation differences".
On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of signifi cant infl uence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassifi ed to profi t or loss. Any exchange differences that have previously been attributed to non-controlling interests are derecognized, but they are not reclassifi ed to profi t or loss.
In the case of a partial disposal (i.e. no loss of control) of a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences is reattributed to non-controlling interests and is not recognized in profi t or loss. For all other partial disposals (i.e. of associates or jointly controlled entities not involving a change of accounting basis), the proportionate share of the accumulated exchange differences is reclassifi ed to profi t or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
The main exchange rates used are:
| Average rate | |||||
|---|---|---|---|---|---|
| 2010 | 2011 | 2010 | 2011 | ||
| 1 Euro = | |||||
| Pound sterling | GBP | 0.8607 | 0.8353 | 0.8579 | 0.8679 |
| US Dollar | USD | 1.3362 | 1.2939 | 1.3258 | 1.3920 |
| Argentinian Peso | ARS | 5.3287 | 5.5770 | 5.1940 | 5.7538 |
| Brazilian Real | BRL | 2.2177 | 2.4159 | 2.3318 | 2.3266 |
| Thai Baht | THB | 40.1700 | 40.9910 | 42.0248 | 42.4295 |
| Yuan Renminbi | CNY | 8.8220 | 8.1588 | 8.9723 | 8.9962 |
| Japanese Yen | JPY | 108.6500 | 100.2000 | 116.2492 | 110.9566 |
The Group's employees are offered various post-employment and other long terms employee benefi ts as a result of legislation applicable in certain countries and the contractual agreements entered into by the Group with its employees. The benefi ts are classifi ed under defi ned benefi t or defi ned contributions plans.
Defi ned contribution plans involve the payment of contributions to a separate entity, thus releasing the employer from any subsequent obligation, as the entity is responsible for paying the amounts due to the employee. Once the contributions have been paid, no liability is shown in the Solvay fi nancial statements. The contributions are recognized in employee benefi t expense when they are due.
Defi ned benefi t plans concern all plans other than defi ned contributions plans. These plans mainly concern:
Taking into account projected fi nal salaries (projected unit credit method) on an individual basis, post-employment benefi ts are measured by applying a method using assumptions involving the discount rate, expected long-term return on plan assets specifi c for each country, life expectancy, turnover, wages, annuity revaluation, medical cost infl ation and discounting of sums payable. The assumptions specifi c to each plan take into account the local economic and demographic contexts.
The amount recorded under post-employment obligations and other long-term employee benefi ts corresponds to the difference between the present value of future obligations and the fair value of the plan assets intended to hedge them, less, where necessary, any unamortized past service cost (except regarding other long-term employee benefi ts for which the past service cost is immediately recognized in profi t or loss).
If this calculation gives rise to a net commitment, an obligation is recoded in liabilities. If the measurement of the net obligation gives rise to a surplus for the Group, the asset recognized for this surplus is limited to the net total of any unrecognized past service cost and the present value of any future plan refunds or any reduction in future contributions to the plan.
Solvay has adopted the policy of recognizing the actuarial gains and losses on commitments or assets relating to postemployment benefi ts and arising from experience adjustments and/or changes in actuarial assumptions directly in equity in the period in which they occur in consideration for the increase or decrease in the obligation. They, as well as changes in the limitation of the asset recognized, are presented in the statement of comprehensive income.
The actuarial gains and losses relating to other long-term benefi ts such as long service awards are fully recognized in profi t or loss from fi nancial items for the period in which they occur.
The interest expenses arising from the reverse discounting of retirement benefi ts and similar obligations and the fi nancial income from the expected return on plan assets are recognized in profi t or loss from fi nancial items.
The amendment or introduction of a new post-employment or other long-term benefi t plan may increase the present value of the defi ned benefi t obligation for services rendered in previous periods, otherwise known as past service cost. The past service cost related to post-employment benefi t plans is recognized in profi t or loss on a straight-line basis over the average period until the corresponding benefi ts are vested by employees. The benefi ts vested upon adoption or amendments of the post-employment benefi t plan, as well as past service costs related to other long-term benefi t plans, are immediately recognized in profi t or loss.
The actuarial calculations of post-employment obligations and other long-term benefi ts are performed by independent actuaries.
Non-recurring items mainly include:
The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from profi t as reported in the consolidated income statement because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t.
Deferred taxes are calculated by tax entity. Deferred tax liabilities are generally recognized for all taxable temporary differences.
Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profi ts will be available against which those deductible temporary differences can be utilized.
The following items do not give rise to the recognition of deferred tax:
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be suffi cient taxable profi ts against which to utilize the benefi ts of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets refl ects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax are recognized as an expense or income in profi t or loss, except when they relate to items that are recognized outside profi t or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognized outside profi t or loss, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in the accounting for the business combination.
Leases are classifi ed as fi nance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classifi ed as operating leases.
Agreements not in the legal form of a lease contract are analyzed with reference to IFRIC 4 to determine whether or not they contain a leasing contract to be accounted for in accordance with IAS 17.
Assets held under fi nance leases are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of fi nancial position (balance sheet) as a fi nance lease obligation.
Assets held under fi nance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.
Lease payments are apportioned between fi nance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profi t or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Group's general policy on borrowing costs (see 17 below). Contingent rentals are recognized as expenses in the periods in which they are incurred.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefi ts from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefi t of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefi ts from the leased asset are consumed.
Intangible assets acquired in a business combination are initially measured at fair value; intangible assets acquired separately or internally developed are initially measured at cost.
After initial recognition, intangible assets are measured at cost or fair value less accumulated amortization and any accumulated impairment losses.
Subsequent expenditure on intangible assets is capitalized only if it increases the future economic benefi ts associated with the specifi c asset. Other expenditure is expensed as incurred.
Intangible assets are amortized on a straight-line basis over the best estimate of their useful lives. The amortization period and method are reviewed at each fi nancial year-end. A change in the useful life of an intangible asset is accounted for prospectively as a change in estimate.
The estimated useful lives are as follows:
Expenditure on acquired licenses, patents, trademarks and similar rights is capitalized and amortized on a straight-line basis over the contractual period, if any, or the estimated useful life, which is normally considered to be not longer than 25 years.
Research costs are expensed in the period in which they are incurred.
Development costs are capitalized if, and only if all the following conditions are fulfi lled:
The capitalized development costs are amortized on a straight-line basis over their useful lives. Capitalized expenditure comprises employee expenses, the cost of materials and services directly attributed to the projects, and an appropriate share of overheads including, and where necessary, the interim interest accrued. It is amortized once the relevant products are sold or the relevant industrial processes are used over the estimated term of the economic benefi ts expected to fl ow from the project. The expenditure is tested for impairment if there is indication of a loss in value and annually for projects in the course of development (see Note 16).
Development expenditure which does not satisfy the above conditions is expensed as incurred.
Other intangible assets mainly include customer lists and other intangible commercial assets, such as brand names, acquired separately or in a business combination. These are amortized on a straight-line basis over their estimated useful life.
With respect to the mechanism set up by the European Union to encourage manufacturers to reduce their greenhouse gas emissions, the Group was granted carbon dioxide (CO2 ) emission allowances for some of its installations. The Group is also involved in Clean Development Mechanism (CDM) and Joint Implementation (JI) projects under the Kyoto protocol. Under these projects, the Group has deployed facilities in order to reduce greenhouse gas emissions at the relevant sites in return for Certifi ed Emission Reductions (CER) or Emission Reduction Units (ERU).
These allowances are granted each year under the national allocation plans with an initial trading period of three years beginning January 1, 2005, and the second trading period of 5 years beginning January 1, 2008. During the second period, the allowances are delivered free of charge and are valid over the entire trading period if not used. Allowances may be freely traded upon allocation and may be purchased or sold, especially if too few or too many allowances are allocated with respect to actual emissions.
In the absence of any IASB standard or interpretation regulating the accounting treatment of CO2 emission rights, the Group applies to the EUAs the 'net approach', according to which:
Under the CDM projects, Solvay has deployed facilities in order to reduce the greenhouse gas emissions at its Onsan (South Korea) and Paulinia (Brazil) sites. Upon verifi cation by independent experts, should these emissions fall below the benchmark levels set by the UNFCCC, Solvay receives Certifi ed Emission Rights (CER) which are freely transferable. As part of the development of Solvay Energy Services and to organize the sale of the CERs arising from the two projects, Solvay has acquired the remaining 50% of Orbéo, the former joint-venture with Société Générale.
Allocated CERs are recognized in inventories at the lower of cost and net realizable value. The cost of allocated CERs mainly corresponds to the amortization of gas emission reduction units.
The CER sales realized between participants in CDM projects and in organized markets are recognized in net sales upon delivery of the CERs, i.e. when they are recorded in the CO2 emissions account of the transferee.
In connection with the JI, Solvay has set up in France similar, but smaller-sized projects aiming at obtaining ERUs. ERU recognition is identical to CER recognition.
In order to manage exposure to future CER price fl uctuations, Solvay has set up forward CER sales contracts, with or without guarantee of delivery. Based on their characteristics, when these contracts represent derivatives within the meaning of IAS 39 Financial Instruments: recognition and measurement, they are recognized and measured according to the rules described in Note 23. Otherwise, they represent off-balance sheet commitments.
In addition to selling CERs, Orbeo is involved in developing CO2 instrument trading, arbitrage and hedging activities, and developing the "Origination" activity. The net income or expense from these activities is recorded, after elimination of intra-Group transactions, in net sales or cost of sales for the "industrial" component, where Orbeo sells the CERs generated by Solvay, as well as for the "trading" component, where Orbeo purchases / sells CERs and EUAs; The margin calls relating to the derivative instruments contracted by Orbeo are recognized in Other current fi nancial assets in respect of guarantee deposits paid, and in Borrowings in respect of guarantee deposits received.
Cash fl ow movements arising from these margin calls have been isolated in a separate line in the Consolidated Statements of Cash Flows under Net cash fl ow from operating activities.
The property, plant and equipment owned by the Group are recognized as assets at acquisition cost when the following criteria are satisfi ed:
Items of property, plant and equipment are carried on the balance sheet at cost less accumulated depreciation and impairment. The cost of an item of property, plant and equipment comprises its purchase or production price and any costs directly attributable to the location and condition necessary for its operation, including, where necessary, the borrowing costs accrued during the construction period.
The components of an item of property, plant and equipment with different useful lives are recognized separately.
Items of property, plant and equipment are derecognized from the balance sheet on disposal or discontinuation. The gain or loss arising from the derecognition of an item of property, plant and equipment is recognized in profi t or loss for the period of derecognition.
Land is not depreciated.
The estimated useful lives, residual values and depreciation method are reviewed at each year-end, with the effect of any changes in estimate accounted for on a prospective basis.
Depreciation/amortization is calculated on a straight-line basis, according to the useful life listed below:
| 30 - 40 years |
|---|
| 3 - 5 years |
| 10 - 20 years |
| 5 - 20 years |
| 2 - 5 years |
| 5 - 20 years |
Depreciation/amortization is included in the income statement under cost of goods sold, commercial and administrative costs, and in R&D costs.
Subsequent expenditure incurred for the replacement of a component of an item of property, plant and equipment is only recognized as an asset when it satisfi es the general criteria mentioned above.
The carrying amount of replaced items is derecognized. Repair and maintenance costs are recognized in the income statement as incurred.
On account of its industrial activity, Solvay incurs expenditure for major repairs over several years for most of its sites. The purpose of this expenditure is to maintain the proper working order of certain installations without altering their useful life. This expenditure is considered as a specifi c component of the item of property, plant and equipment and is amortized over the period during which the economic benefi ts fl ow, i.e. the period between the major repairs.
Dismantling and restoration costs are included in the initial cost of an item of property, plant and equipment if the Group has a legal or constructive obligation to dismantle or restore.
Generally, Solvay does not have any current, legal or constructive obligation to dismantle and/or restore its operating sites in accordance with IAS 37 Provisions, contingent liabilities and contingent assets, as such obligation is only likely to arise upon the discontinuation of a site's activities. To date, Solvay has not therefore set aside any provisions for dismantling costs or recognized the components relating to the dismantling of its operating installations.
However, the costs of dismantling discontinued sites or installations are provided when there is a legal obligation (due to a request or injunction from the relevant authorities), or there is no technical alternative to dismantling to ensure the safety compliance of the discontinued sites or installations.
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identifi ed, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identifi ed. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset for which the estimates of future cash fl ows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profi t or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profi t or loss.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specifi c borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in profi t or loss in the period in which they are incurred.
Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.
Government grants relating to the purchase of property, plant and equipment are deducted from the cost of those assets. They are recognized in the balance sheet at their expected value at the time of initial government approval and corrected, if necessary, after fi nal approval. The grant is amortized over the depreciation period of the underlying assets. Other government grants are recognized as revenue over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate fi nancial support to the Group with no future related costs are recognized in profi t or loss in the period in which they become receivable.
Inventories are stated at the lower of purchasing cost (raw materials and merchandise) or production cost (work in progress and fi nished goods) and net realizable value. Net realizable value represents the estimated selling price, less all estimated costs of making the product ready for sale, including marketing, selling and distribution costs. The cost of inventories is determined by using the weighted average cost or fi rst-in, fi rst-out (FIFO) method. Inventories having a similar nature and use are measured using the same cost formula.
Cost of inventories includes the purchase, conversion and other costs incurred to bring the inventories to their present location and condition.
All fi nancial assets are recognized and derecognized on trade date where the purchase or sale of a fi nancial asset is under a contract whose terms require delivery of the fi nancial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those fi nancial assets classifi ed as at fair value through profi t or loss, which are initially measured at fair value.
A fi nancial asset is classifi ed as current when the cash fl ows expected to fl ow from the instrument mature within one year.
At initial recognition, Solvay classifi es fi nancial assets into one of the four categories provided in IAS 39 Financial Instruments: recognition and measurement according to the purpose of the acquisition. This classifi cation determines the method for measuring fi nancial assets at subsequent balance sheet dates: amortized cost or fair value.
Amortized cost is the amount at which the fi nancial asset is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount.
For instruments quoted in an active market, the fair value corresponds to a market price (level 1). For instruments that are not quoted in an active market, the fair value is determined using valuation techniques including reference to recent arm's length market transactions or transactions involving instruments which are substantially the same (level 2), or discounted cash fl ow analysis including, to a maximum extent, assumptions consistent with observable market data (level 3). However, if the fair value of an equity instrument cannot be reasonably estimated, it is measured at cost.
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those fi nancial assets classifi ed as at FVTPL.
However, the straight-line method is used instead, whenever it is a good approximation to the amortized cost rule i.e. when the difference between both methods is considered as not being signifi cant at Group level.
Financial assets are classifi ed as at fair value through profi t or loss if they are held for trading. Financial assets at FVTPL are stated at fair value, with any resultant gains or losses recognized in profi t or loss. A fi nancial asset is classifi ed in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorized as at FVTPL unless they are designated and effective as hedges.
Debentures with fi xed or determinable payments and fi xed maturity dates that the Group has the positive intent and ability to hold to maturity are classifi ed as held-to-maturity investments. Held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment, with revenue recognized on an effective yield basis.
Non-current available-for-sale assets include investments in entities which were not acquired principally for the purpose of selling in the short term, and which are neither consolidated nor accounted for using the equity method. Assets classifi ed in this category are stated at fair value, with any resultant gains or losses recognized directly in other comprehensive income, except if there exists an impairment loss, in which case the loss accumulated in equity is recycled to the income statement. However, they are stated at cost if they do not have a quoted price in an active market and their fair value cannot be reliably measured by alternative valuation methods.
Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments which are not quoted in an active market. The Group's loans and receivables category comprises cash and cash equivalents, trade receivables and other non-current assets except pension fund surpluses. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, have original maturities of three months or less and are subject to insignifi cant risk of change in value. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables or when the difference with the straight-line method would be immaterial.
The impairment loss of a fi nancial asset measured at amortized cost is equal to the difference between the carrying amount and the estimated future cash fl ows, discounted at the initial effective interest rate. The impairment of an available-for-sale fi nancial asset is calculated with reference to its current fair value. An impairment test is performed, on an individual basis, for each material fi nancial asset. Other assets are tested as
groups of fi nancial assets with similar credit risk characteristics.
Impairment losses are recognized in profi t and loss. With respect to available-for-sale assets, in the event of an impairment loss, the cumulative negative changes in fair value previously recognized in equity are transferred to profi t and loss.
The impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment was recognized. For fi nancial assets measured at amortized cost and available-for-sale fi nancial assets, the reversal is recognized in profi t or loss. For available-for-sale fi nancial assets which represent equity instruments, the reversal is recognized directly in equity. Impairment losses relating to assets recognized at cost cannot be reversed.
Financial liabilities are classifi ed as either 'fi nancial liabilities at fair value through profi t or loss (FVTPL)' or 'fi nancial liabilities measured at amortized cost'.
Financial liabilities are classifi ed as at fair value through profi t or loss if they are held for trading. Financial liabilities at FVTPL are stated at fair value, with any resultant gains or losses recognized in profi t or loss. A fi nancial liability is classifi ed in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorized as at FVTPL unless they are designated and effective as hedges.
Financial liabilities measured at amortized cost, including borrowings, are initially measured at fair value, net of transaction costs. They are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis.
The effective interest method is a method of calculating the amortized cost of a fi nancial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the fi nancial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
The Group's fi nancial liabilities measured at amortized cost category comprises long-term fi nancial debt, other non-current liabilities, short-term fi nancial debt, trade liabilities and dividends payable included in other current liabilities.
The Group enters into a variety of derivative fi nancial instruments to manage its exposure to interest rate, foreign exchange rate risk and commodity risk, including foreign exchange forward contracts and options, interest rate swaps, cross-currency swaps, commodity options and swaps, and energy purchase and sale contracts. Further details of derivative fi nancial instruments are disclosed in note 33.
In addition, in order to manage exposure to future CER price fl uctuations, Solvay has set up forward CER sales contracts, with or without guarantee of delivery (See Note 14).
Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in fi nancial income or expense immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the
recognition in profi t or loss depends on the nature of the hedge relationship. The Group designates certain derivatives as either hedges of the fair value of recognized assets or liabilities or fi rm commitments (fair value hedges), hedges of highly probable forecast transactions or hedges of foreign currency risk of fi rm commitments (cash fl ow hedges), or hedges of net investments in foreign operations.
A derivative with a positive fair value is recognized as a fi nancial asset whereas a derivative with a negative fair value is recognized as a fi nancial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within 12 months. Other derivatives are presented as current assets or current liabilities.
The Group designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, energy risk and CO2 emissions rights, as either fair value hedges, cash fl ow hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange risk on fi rm commitments are accounted for as cash fl ow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash fl ows of the hedged item. Note 33 sets out details of the fair values of the derivative instruments used for hedging purposes.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in profi t or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk are recognized in the line of the income statement relating to the hedged item.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifi es for hedge accounting.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash fl ow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in profi t or loss, and is included in the 'other fi nancial gains and losses' line item.
Amounts previously recognized in other comprehensive income and accumulated in equity are reclassifi ed to profi t or loss in the periods when the hedged item is recognized in profi t or loss, in the same line of the income statement as the recognized hedged item. However, when the forecast transaction that is hedged results in the recognition of a nonfi nancial asset or a non-fi nancial liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-fi nancial asset or non-fi nancial liability.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifi es for hedge accounting. Any gain or loss accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in profi t or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profi t or loss.
Hedges of net investments in foreign operations are accounted for similarly to cash fl ow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognized in other comprehensive income and accumulated in the foreign currency translation reserve. The gain or loss relating to the ineffective portion is recognized immediately in profi t or loss, and is included in the 'other fi nancial gains and losses' line item.
Gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the foreign currency translation reserve are reclassifi ed to profi t or loss in the same way as exchange differences relating to the foreign operation as described in item 8 above.
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a
provision is measured using the cash fl ows estimated to settle the present obligation, its carrying amount is the present value of those cash fl ows.
When some or all of the economic benefi ts required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefi ts expected to be received under it.
A restructuring provision is recognized when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.
Solvay periodically analyzes all its environmental risks and the corresponding provisions. Solvay measures these provisions to the best of its knowledge of applicable regulations, the nature and extent of the pollution, clean-up techniques and other available information.
Changes in discount rates are recognized in profi t or loss from fi nancial items.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker and for which discrete fi nancial information is available. The Solvay group's chief operating decision maker is the Chief Executive Offi cer.
Net sales and other revenue are measured at the fair value of the consideration received or receivable, net of returns, rebates and trade benefi ts granted and sales tax.
Net sales comprise the sales of goods (goods and goods for resale) and value-added services corresponding to Solvay's know-how.
Other revenue primarily includes commodity and utility trading transactions and other revenue deemed as incidental by the Group (e.g. temporary contracts following the sale of businesses)
Net sales and other revenue are recognized when all the following conditions have been satisfi ed:
Non-current assets and disposal groups are classifi ed as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. For a sale to be highly probable, management should be committed to a plan to sell the asset (or disposal group), an active program to locate a buyer and complete the plan should be initiated, and the asset (or disposal group) should be actively marketed at a price which is reasonable in relation to its current fair value, and the sale should be expected to be completed within one year from the date of classifi cation.
A discontinued operation is a component of an entity which the entity has disposed of or which is classifi ed as held for sale, which represents a separate major line of business or geographical area of operations and which can be distinguished operationally and for fi nancial reporting purposes.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classifi ed as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.
Non-current assets (and disposal groups) classifi ed as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. Any excess of the carrying amount over the fair value less costs to sell is included as an impairment loss. Depreciation of such assets is discontinued as from their classifi cation as held for sale. Comparative balance sheet information for prior periods is not restated to refl ect the new classifi cation in the statement of fi nancial position (balance sheet).
Finance costs comprise the interest on borrowings calculated using the effective interest rate method, the systematic amortization of transaction costs relating to credit lines, borrowing prepayment or credit line cancellation costs and the cost of the reverse discounting of non-current non-fi nancial liabilities, the impact of change in discounting rates.
Finance income comprises the expected return on plan assets, cash income and dividends.
Net foreign exchange gains or losses on fi nancial items and the changes in fair value of derivatives are presented respectively in fi nance income or costs, with the exception of changes in fair value of derivatives which are recognized on the same line item as the hedged transaction.
All interest on borrowings is recognized in fi nance costs as incurred, with the exception of interest arising from the acquisition, construction and production of an eligible intangible asset or item of property, plant and equipment that is capitalized in the cost of the asset in accordance with the alternative treatment authorized by IAS 23 Borrowing Costs.
Share options are measured at their fair value at the grant date. This fair value is assessed using the Monte Carlo option pricing model and is expensed on a straight-line basis over the vesting period of these rights, taking into account an estimate of the number of options that will eventually vest.
The policy described above is applied to all share options that were granted after 7 November 2002 and vested after 1 January 2005.
In accordance with IAS 1 Presentation of Financial Statement, an entity can elect to present either a single statement of comprehensive income or two statements, i.e. an income statement immediately followed by a comprehensive income statement. The Group elected to do the latter.
The components of other comprehensive income (OCI) are presented before related tax effects with one amount shown for the aggregate amount of income tax relating to those components.
Contingent assets are not recognized in the fi nancial statements. They are disclosed if the outfl ow of economic benefi ts is probable.
Contingent liabilities are not recognized in the fi nancial statements, except if they arise from a business combination. They are disclosed unless the possibility of a loss is remote.
Events after the reporting period which provide additional information about the group position at the closing date (adjusting events) are refl ected in the fi nancial statements. Events after the reporting period which are not adjusting events are disclosed in the notes if material.
The Group performs annual impairment tests on goodwill and on cash-generating units for which there are indicators that the carrying amount might be higher than the recoverable amount. This analysis requires management to estimate the future cash fl ows expected to arise from the cash-generating units and a suitable discount rate in order to calculate present value.
Further details are provided in notes 25.
The carrying amount of a deferred tax asset is reviewed at each statement of fi nancial position (balance sheet) date. The carrying amount of a deferred tax asset is reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow the benefi t of part or all of that deferred tax asset to be utilized. Any such reduction is reversed to the extent that it becomes probable that suffi cient taxable profi t will be available.
The corporate tax competence center, which has the overview of the Group deferred tax situation, is systematically involved in assessing deferred tax assets.
Further details are provided in note 11b.
The actuarial assumptions used in determining the pension obligation at December 31 as well as the annual cost can be found in note 31. All main employee benefi ts plans are assessed annually by independent actuaries. Discount rates and infl ation rates are defi ned globally by management, the other assumptions (such as future salary increases, expected long-term rates of return on plan assets and expected rates of medical care cost increases) are defi ned at a local level. All plans are supervised by the Group's central human resources department with the help of one central actuary to check the acceptability of the results and assure uniformity in reporting.
HSE provisions are managed and coordinated jointly by an HSE competence center and the fi nance department. The forecasts of expenses are discounted to present value in accordance with IFRS rules.
The discount rates fi xed by geographical area correspond to average risk-free rate on 10-year government bonds plus infl ation. These rates are set annually by Solvay's Finance department and can be revised based on the evolution of economic parameters of the country involved.
To refl ect the passage of time, the provisions are increased each year on a prorated basis at the discount rates defi ned above. Further details are provided in note 31.
All signifi cant legal litigation1 (or threat of litigation) is reviewed by Solvay's in-house lawyers with the support, when appropriate, of external counsels at least every quarter. This review includes an assessment of the need to recognize provisions or adapt existing provisions together with Solvay's Corporate Finance department and the Insurance department. The resulting report is submitted to the Executive Committee by the Group general counsel and thereafter to the Audit Committee and to the Board of directors.
In accordance with IFRS 3 'Business Combinations', the Group remeasures the assets, liabilities and contingent liabilities acquired through a business combination to fair value. Where possible, fair value adjustments are based on external appraisals or valuation models, e.g. for contingent liabilities and intangible assets which were not recognized by the acquiree. Internal benchmarks are often used for valuing specifi c production equipment. All of these valuation methods rely on various assumptions such as estimated future cash fl ows, remaining useful economic life etc.
Further details are provided in notes in note 20. A similar procedure is implemented for tax litigation.
The fi ve segments are Plastics, Chemicals, Rhodia, New Business Development (NBD) and Corporate & Business Support (CBS).
The Plastics segment operates in 2 different clusters:
• Specialty polymers: high and ultra-high performance polymers like fl uorinated polymers, elastomers and fl uids, barrier materials, polyarylamides, polysulfones, high performance polyamides, liquid crystal polymers
The Chemicals segment operates in 2 different clusters:
The Rhodia's segment operates in 5 different clusters:
• Energy optimization and reduction of CO2 emissions
The New Business Development (NBD) segment includes the research activities undertaken outside the Business Units in promising and important areas for the development of the Group.
The Corporate & Business Support (CBS) segment consists of the staff and installations of the various Group headquarters which provide support to the other segments, along with certain sites where industrial operations have been discontinued.
The defi nitions of the Corporate and New Business Development (NBD) segments have been harmonized. From Rhodia's previous Corporate Segment, the following costs have been transferred from October, 1 to the new Group's Corporate segment:
The fi ve segments are extensively described in the general section of this report.
The Chemicals, Plastics, Rhodia and New Business Development (NBD) segments are extensively described in the "businesses" section of this report. The Corporate & Business Support (CBS) segment consists of the staff and installations of the various Group headquarters which are not specifi cally attributable to the other four segments, along with certain sites where industrial operations have been discontinued.
Information per business segment for 2010 is presented below:
| 2010 | EUR million | Chemicals | Plastics | New Business |
Corporate & Business |
Group Total |
|---|---|---|---|---|---|---|
| Income statement items | Development | support | ||||
| Sales | 3 009 | 4 071 | 0 | 0 | 7 080 | |
| - Inter-segment sales1 | -412 | -709 | 0 | 0 | -1 121 | |
| External sales | 2 597 | 3 361 | 0 | 0 | 5 959 | |
| Gross margin | 530 | 596 | 0 | -0 | 1 126 | |
| REBITDA | 455 | 538 | -25 | -37 | 930 | |
| REBIT | 297 | 344 | -26 | -45 | 571 | |
| Non-recurring items | -332 | 93 | 0 | -78 | -317 | |
| EBIT | -34 | 437 | -26 | -123 | 254 | |
| Cash fl ow items | Chemicals | Plastics | New | Corporate | Group Total | |
| (continuing operations) | Business | & Business | ||||
| Development | support | |||||
| EBIT | -34 | 437 | -26 | -123 | 254 | |
| Recurrent depreciation and amortization | 158 | 194 | 0 | 8 | 359 | |
| Impairments | 236 | 11 | 0 | 0 | 248 | |
| items | Changes in provisions and other non-cash | 25 | -162 | 0 | -37 | -173 |
| Changes in working capital | 28 | -70 | 0 | 3 | -38 | |
| Cash fl ow from operating activities before | 413 | 411 | -25 | -149 | 650 | |
| taxes | ||||||
| Capital expenditures | -166 | -267 | -12 | -12 | -457 | |
| Cash fl ow from investing activities | -386 | 20 | -12 | 16 | -363 | |
| Statement of fi nancial position and other | Chemicals | Plastics | New | Corporate | Group Total | |
| items | Business | & Business | ||||
| Development | support | |||||
| Investments2 | 2 002 | 2 157 | 35 | 249 | 4 443 | |
| Working capital3 | 408 | 548 | -0 | 78 | 1 033 | |
| Provisions | 861 | 284 | 0 | 939 | 2 084 | |
| Headcount at Jan. 1 of following year | 7 706 | 5 237 | 0 | 1 777 | 14 720 |
1 Inter-segment transfer prices are based on market prices.
2 Non-current assets with the exception of deferred tax assets and other long-term receivables. 3 Short-term assets and liabilities and other non-current assets and liabilities with the exception of dividends payable.
In 2010, the Group presents the Pharmaceuticals segment as discontinued operations as defi ned by IFRS 5.
Information per business segment for 2011 is presented below:
| 2011 EUR million |
Chemicals | Plastics | Rhodia New Business | Corporate | Group Total | |
|---|---|---|---|---|---|---|
| Income statement items | Development | & Business support |
||||
| Sales | 3 264 | 4 373 | 0 | 0 | 0 | 7 638 |
| - Inter-segment sales1 | -406 | -688 | 1 565 | 0 | 0 | 471 |
| External sales | 2 858 | 3 686 | 1 565 | 0 | 0 | 8 109 |
| Gross margin | 572 | 670 | 323 | 0 | -2 | 1 564 |
| REBITDA | 484 | 583 | 231 | -38 | -51 | 1 208 |
| REBIT | 334 | 391 | 120 | -39 | -58 | 748 |
| Non-recurring items | 15 | -18 | -158 | 0 | -28 | -189 |
| EBIT | 349 | 373 | -38 | -39 | -85 | 560 |
| Cash fl ow items | Chemicals | Plastics | Rhodia New Business | Corporate | Group Total | |
| (continuing operations) | Development | & Business | ||||
| support | ||||||
| EBIT | 349 | 373 | -38 | -39 | -85 | 560 |
| Recurrent depreciation and amortization | 150 | 191 | 111 | 0 | 7 | 460 |
| Impairments | 3 | -8 | 0 | 0 | 0 | -5 |
| Changes in provisions and other non-cash items |
-82 | -30 | -61 | 2 | -106 | -277 |
| Changes in working capital | -53 | 88 | 222 | 0 | 7 | 264 |
| Cash fl ow from operating activities | 367 | 614 | 234 | -36 | -177 | 1 002 |
| before taxes | ||||||
| Capital expenditures | -214 | -409 | -164 | -28 | -3 982 | -4 797 |
| Cash fl ow from investing activities | -219 | -404 | -126 | -38 | -3 893 | -4 679 |
| Statement of fi nancial position | Chemicals | Plastics | Rhodia New Business | Corporate | Group Total | |
| and other items | Development | & Business | ||||
| support | ||||||
| Investments2 | 2 093 | 2 347 | 6 513 | 82 | 210 | 11 246 |
| Working capital3 | 402 | 450 | 518 | -1 | -83 | 1 287 |
| Provisions | 672 | 299 | 2 183 | 0 | 906 | 4 060 |
| Headcount at Jan. 1 of following year | 8 114 | 5 067 | 14 255 | 0 | 1 685 | 29 121 |
1 Inter-segment transfer prices are based on market prices.
2 Non-current assets with the exception of deferred tax assets and other long-term receivables. 3 Short-term assets and liabilities and other non-current assets and liabilities, with the exception of dividends payable.
External sales by cluster are presented below:
| EUR million | 2010 | 2011 |
|---|---|---|
| Plastics | 3 361 | 3 686 |
| Specialty Polymers | 1 143 | 1 251 |
| Vinyls1 | 2 217 | 2 435 |
| Chemicals | 2 597 | 2 858 |
| Essential Chemicals | 2 034 | 2 247 |
| Special Chemicals | 564 | 612 |
| Rhodia | 1 565 | |
| Consumer Chemicals | 617 | |
| Advanced Materials | 218 | |
| Polyamide Materials | 406 | |
| Acetow and Eco Services | 288 | |
| Energy Services | 55 | |
| Other sales | 36 | |
| Accounting rules harmonisation | -55 | |
1 Including vinyls and Plastic Integration
Group sales by market location are as follows:
| EUR million | 2010 | % | 2011 | % |
|---|---|---|---|---|
| Belgium | 314 | 5% | 326 | 4% |
| Germany | 675 | 11% | 851 | 10% |
| Italy | 536 | 9% | 607 | 7% |
| France | 465 | 8% | 749 | 9% |
| Spain | 322 | 5% | 357 | 4% |
| European Union - other | 729 | 12% | 939 | 12% |
| European Union | 3 042 | 51% | 3 829 | 47% |
| Other Europe | 111 | 2% | 177 | 2% |
| United States | 888 | 15% | 1 164 | 14% |
| Canada | 36 | 1% | 60 | 1% |
| North America excluding Mexico | 924 | 16% | 1 224 | 15% |
| Brazil | 419 | 7% | 664 | 8% |
| Argentina | 140 | 2% | 191 | 2% |
| Latin America - other | 100 | 2% | 152 | 2% |
| Latin America | 659 | 11% | 1 007 | 12% |
| Russia | 44 | 1% | 88 | 1% |
| Turkey | 60 | 1% | 89 | 1% |
| China | 122 | 2% | 283 | 3% |
| India | 67 | 1% | 89 | 1% |
| Japan | 180 | 3% | 254 | 3% |
| Egypt | 31 | 1% | 49 | 1% |
| Other | 719 | 12% | 1 020 | 13% |
| Asia and Rest of the World | 1 224 | 21% | 1 872 | 23% |
| Total | 5 959 | 100% | 8 109 | 100% |
Invested capital and capital expenditure by geographical segment are shown below:
| Invested capital | Capital Expenditures | |||||||
|---|---|---|---|---|---|---|---|---|
| EUR million | 2010 | % | 2011 | % | 2010 | % | 2011 | % |
| Belgium | 781 | 14% | 3 083 | 24% | -37 | 8% | -1 056 | 22% |
| Germany | 479 | 9% | 1 372 | 11% | -25 | 6% | -44 | 1% |
| Italy | 691 | 13% | 721 | 6% | -45 | 10% | -67 | 1% |
| France | 470 | 9% | 1 850 | 15% | -47 | 10% | -3 137 | 65% |
| Great Britain | 0 | 0% | 240 | 2% | 0 | 0% | -4 | 0% |
| Spain | 237 | 4% | 168 | 1% | -34 | 7% | -23 | 0% |
| European union - Other | 384 | 7% | 241 | 2% | -11 | 2% | -14 | 0% |
| European Union | 3 042 | 56% | 7 675 | 61% | -199 | 44% | -4 345 | 91% |
| Other Europe | 144 | 3% | -5 | -0% | -125 | 27% | 0 | 0% |
| United States | 1 075 | 20% | 1 747 | 14% | -35 | 8% | -66 | 1% |
| Canada | 0 | 0% | -1 | -0% | 0 | 0% | 0 | 0% |
| North America excluding | 1 075 | 20% | 1 746 | 14% | -35 | 8% | -66 | 1% |
| Mexico | ||||||||
| Brazil | 423 | 8% | 1 008 | 8% | -22 | 5% | -56 | 1% |
| Argentina | 104 | 2% | 106 | 1% | -11 | 2% | -12 | 0% |
| Latin America - other | 25 | 0% | 58 | 0% | -1 | 0% | -1 | 0% |
| Latin America | 551 | 10% | 1 172 | 9% | -34 | 7% | -69 | 1% |
| Russia | 6 | 0% | 376 | 3% | 0 | 0% | -168 | 3% |
| Turkey | 5 | 0% | 4 | 0% | 0 | 0% | 0 | 0% |
| Thailand | 369 | 7% | 456 | 4% | -47 | 10% | -84 | 2% |
| China | 21 | 0% | 504 | 4% | -1 | 0% | -27 | 1% |
| South Korea | 66 | 1% | 183 | 1% | -4 | 1% | -9 | 0% |
| India | 48 | 1% | 90 | 1% | -2 | 0% | -11 | 0% |
| Singapore | 0 | 0% | 237 | 2% | 0 | 0% | -0 | 0% |
| Japan | 27 | 0% | 88 | 1% | -0 | 0% | -1 | 0% |
| Egypt | 90 | 2% | 101 | 1% | -3 | 1% | -13 | 0% |
| Other | 33 | 1% | 8 | 0% | -6 | 1% | -6 | 0% |
| Asia and Rest of the World | 664 | 12% | 2 047 | 16% | -63 | 14% | -318 | 7% |
| Total | 5 476 | 100% | 12 636 | 100% | -457 | 100% | -4 797 | 100% |
Expressed as a percentage of sales, gross margin amounts to 19% in 2011, which is stable versus 2010. Rhodia gross margin is included since October 1 and is close to 21% for the last quarter. It is to be noted that the negative impact of the revaluation to their fair value upon acquisition of Rhodia inventories sold in the last quarter has been reclassed to non recurring expenses.
The Group's commercial and administrative costs increased overall by 37% between 2010 and 2011. Without the Rhodia acquisition, they would have increased by 3%. This shows that although all the savings related to the implementation of Horizon were not already in place in 2011, administrative costs related to continuing operations has not changed signifi cantly after the sale of the Pharma.
Research and development costs increased by 25% between 2010 and 2011. These costs for continuing operations are mainly related to:
| EUR million 2010 |
2011 |
|---|---|
| Start-up, formation and preliminary study costs -9 |
-16 |
| Cost of closures and demolitions -16 |
-19 |
| Costs of trials and tests -3 |
-4 |
| Income from investments and interest on loans to joint ventures and non 7 |
11 |
| consolidated companies | |
| Net gain (+) / loss (-) on fi nancial assets classifi ed as held for trading 8 |
5 |
| Balance of other gains and losses 19 |
-37 |
| Other operating gains and losses 6 |
-60 |
The balance of other gains and losses includes in particular:
From January 1, the Group has moved from the proportionate consolidation to the equity method. The net income of the joint ventures is part of the Group REBIT and amounts to EUR 49 million for Solvay JVs and to EUR 12 million for Rhodia JVs in the last quarter 2011.
REBIT increased by 31% from EUR 571 million to EUR 748 million in 2011. Rhodia REBIT in the last quarter amounted to EUR 120 million (or EUR 149 million after excluding the depreciation during the last quarter 2011 of the step-up on Rhodia intangibles within the framework of the PPA).
The defi nitions of the Corporate and New Business Development (NBD) segments have been harmonized. From Rhodia's previous Corporate Segment, the following costs have been transferred from October, 1 to the new Group's Corporate segment:
This will allow to follow the implementation of corporate synergies at Group level As synergies were still not implemented in the last quarter 2011, this has led to decrease the REBIT for Corporate and
NBD Segments by EUR 15 Million in the 2011 accounts.
REBIT of the Chemicals segment and Plastics segment increased by 17% from EUR 617 million to EUR 725 million in 2011.
Non-recurring items mainly include:
Non-recurring items break down as follows:
| EUR million | 2010 | 2011 |
|---|---|---|
| Impairments | -306 | 5 |
| Purchase price allocation for inventories | 0 | -160 |
| Other expenses and income | -11 | -33 |
| Non-recurring items | -317 | -188 |
In 2011, the PPA impact in non recurring expense (EUR -160 million) is related to the margin on Rhodia inventories sold in Q4 2011 and that were revalued at fair value upon acquisition.
In 2011, the main other non recurring expenses and income were:
In 2010, the impairments for continuing operations were mainly related to:
In 2010, other non recurring expense and income included:
| EUR million | 2010 | 2011 |
|---|---|---|
| Cost of borrowings - Interest expense on fi nancial liabilities at amortized cost | -138 | -159 |
| Interest income on cash and cash equivalents (excluding bonds and treasury bills < 3 months) |
5 | 12 |
| Interest income on bonds and treasury bills < 3 months (held to maturity at amortized cost) |
3 | 14 |
| Interest income on bonds and treasury bills > 3 months (held to maturity at amortized cost) |
9 | 5 |
| Interest income on other current fi nancial assets (available for sale) | 5 | 7 |
| Other gains and losses on net indebtedness | -10 | -16 |
| Cost of discounting provisions | -52 | -72 |
| Charges on net indebtedness | -178 | -208 |
Interest income on fi nancial assets at amortized cost + Interest income on fi nancial assets held to maturity + Interest income on fi nancial assets available for sale = Interest on lending and term deposits (see income statement). The corresponding fi nancial assets are included on the balance sheet under the headings "Other current receivables – Financial instruments" and "Cash and cash equivalents"
Charges on net indebtedness were EUR 208 million at the end of 2011 compared to EUR 178 million at the end of 2010, they include EUR 39 million for 3 months consolidation of Rhodia.
Interest income on available cash amounted to EUR 39 million at the end of 2011 compared to EUR 22 million at the end of 2010; the increase is explained by the 3 months consolidation of Rhodia (EUR 5 million) and the increased interest rate on the available cash at Solvay before (EUR 5.2 billion at the end of August 2011) and after (EUR 2.4 billion at the end of December 2011) the acquisition of Rhodia.
Average interest charges on borrowings (excluding the capitalized interest and the cost of discounting provisions) increased from 5.1% in 2010 to 5.2% in 2011.
Other gains & losses on net debt indebtedness increased from - EUR 10 million at the end of 2010 to - EUR 16 million at the end of 2011; this increase is explained by a loss of EUR 2.4 million at Rhodia (foreign exchange losses related to the integration of the USD 400 million senior note) and a loss of EUR 2.5 million related to the premium paid for an Average Rate Option which matured in 2011. It also included the cost of funding of our development in the Eastern European countries in local currencies, including in Russia and Bulgaria.
The cost of discounting provisions increased from EUR 52 million at the end of 2010 to EUR 72 million at the end of 2011. The amount includes EUR 23 million for 3 months consolidation of Rhodia.
The tax charge breaks down as follows:
| EUR million 2010 |
2011 |
|---|---|
| Current taxes related to current year -89 |
-101 |
| Current taxes related to prior years -27 |
-3 |
| Deferred income tax 213 |
214 |
| Unrecognized deferred tax assets -76 |
-132 |
| Tax effect of changes in the nominal tax rates on deferred taxes 0 |
3 |
| Total 21 |
-19 |
| EUR million 2010 |
2011 |
| Income tax on items allocated directly to equity 0 |
26 |
| Total 0 |
26 |
The effective tax charge has been reconciled with the theoretical tax charge obtained by applying to the pre-tax profi t of each Group entity the nominal tax rate prevailing in the country in which it operates.
| EUR Million | 2010 | 2011 |
|---|---|---|
| Earnings before taxes | 76 | 354 |
| Reconciliation of the tax charge | ||
| Total tax charge of the Group entitites computed on the basis of the respective local nominal rates |
-24 | -89 |
| Weighted average nominal rate | 32 % | 25 % |
| Tax effect of non-deductible expenses | -61 | -125 |
| Tax effect of tax-exempt revenues | 148 | 291 |
| Tax effect of changes in tax rates | 0 | 3 |
| Tax effect of current and deferred tax adjustments related to prior | 34 | 34 |
| years | ||
| Unrecognized deferred tax assets | -76 | -132 |
| Effective tax charge | 21 | -19 |
| Effective tax rate (*) | -28 % | 5 % |
(*) tax charge (+)/ tax credit (-)
The Group's effective tax rate (5%) is lower than the weighted average nominal rate (25%), resulting mainly from the recognition of a deferred tax asset of EUR 60 million on a tax deductible goodwill generated upon an intra-Group sale of business recognized in the statutory books and not in the IFRS reporting and by different tax credits.
The deferred taxes recorded in the statement of fi nancial position (balance sheet) fall into the following categories:
| EUR Million 2010 |
Opening balance |
Recognized in income statement |
Recognized in OCI |
Exchange rate effect |
Reclassifi ed from equity to the income statement |
Acquisition/ disposal |
Other | Closing balance |
|---|---|---|---|---|---|---|---|---|
| Temporary differences | ||||||||
| Employee benefi ts obligations | 189 | 28 | -1 | -3 | 213 | |||
| Provisions other than employee benefi ts | 168 | 11 | 0 | 178 | ||||
| Tangible assets | -126 | 77 | -3 | -52 | ||||
| Intangible assets | -4 | 0 | 4 | 0 | ||||
| Tax losses | 537 | 89 | -10 | 616 | ||||
| Tax credits | 76 | 32 | -1 | 107 | ||||
| Assets held for sale | ||||||||
| Other | -47 | 70 | -1 | -11 | -8 | 2 | ||
| Total (net amount) | 792 | 306 | -1 | 0 | 0 | -22 | -11 | 1 064 |
| Unrecognized deferred tax assets - | -439 | -174 | 17 | -596 | ||||
| Continuing operations | ||||||||
| Unrecognized deferred tax assets - Assets | ||||||||
| held for sale | ||||||||
| Total unrecognized deferred tax assets | -439 | -174 | 0 | 0 | 0 | 17 | 0 | -596 |
| Total | 353 | 132 | -1 | 0 | 0 | -5 | -11 | 468 |
| Deferred tax assets in statement of fi nancial position |
525 | 631 | ||||||
| Deferred tax liabilities in statement of | -172 | -163 | ||||||
| fi nancial position | ||||||||
| EUR Million | Opening | Recognized | Recognized | Exchange | Reclassifi ed | Opening | Other | Closing |
| 2011 | balance | in income statement |
in OCI | rate effect | from equity to the income |
balance sheet of |
balance | |
| Temporary differences | statement | Rhodia | ||||||
| Employee benefi ts obligations | 213 | -1 | 36 | -15 | 234 | |||
| Provisions other than employee benefi ts | 178 | -7 | 172 | |||||
| Tangible assets | -52 | -16 | -68 | |||||
| Goodwill | 60 | 60 | ||||||
| Intangible assets | ||||||||
| Tax losses | 616 | 164 | -103 | 677 | ||||
| Tax credits | 107 | 17 | 123 | |||||
| Assets held for sale | ||||||||
| Other | 2 | -1 | 4 | 3 | 923 | 932 | ||
| Total (net amount) | 1 064 | 217 | 41 | 3 | 923 | -117 | 2 131 | |
| Unrecognized deferred tax assets - | -596 | -132 | -15 | -7 | -1 427 | 117 | -2 061 | |
| Continuing operations | ||||||||
| Unrecognized deferred tax assets - Assets | ||||||||
| held for sale | ||||||||
| Total unrecognized deferred tax assets | -596 | -132 | -15 | -7 | -1 427 | 117 | -2 061 | |
| Total | ||||||||
| Deferred tax assets in statement of fi nancial | 468 631 |
84 | 26 | -4 | -504 | 70 780 |
||
| position | ||||||||
| Deferred tax liabilities in statement of | -163 | -710 | ||||||
| fi nancial position |
The acquisition of Rhodia had a strong impact of the deferred tax situation of the Group, mainly relating to the unrecognized tax assets (EUR -504 million net amount).
The amounts in the column "Other" is mainly explained by the expiration of tax losses.
All the Group's tax loss carry-forwards have generated deferred tax assets (some of which have not been recognized). These carried-forward tax losses generating deferred tax assets are given below by expiration date.
| EUR million | 2010 | 2011 |
|---|---|---|
| Within 1 year | 32 | 2 |
| Within 2 years | 35 | 4 |
| Within 3 years | 63 | 4 |
| Within 4 years | 49 | 4 |
| Within 5 or more years | 101 | 190 |
| No time limit | 603 | 821 |
The net income excluding the results from discontinuing operations increased by EUR 237 million and the main variances are the following:
The results for discontinued operations amounted to EUR 1 726 million in 2010 after the capital gain on the sale of the Pharma business. In 2011, adjustments to the capital gain amounted to EUR -38 million.
The non-controlling interest in this net income fi gure is EUR -50 million compared with EUR -47 million in 2010.
| Number of shares | 2010 | 2011 | ||
|---|---|---|---|---|
| Weighted average number of ordinary shares (basic) (in thousands) | 81 320 | 81 224 | ||
| Dilution effect of subscription rights | 179 | 322 | ||
| Weighted average number of ordinary shares (diluted) (in thousands) | 81 499 | 81 546 | ||
| Basic | Diluted | Basic | Diluted | |
| Net income of the year (Solvay share) including discontinued operations (in thousands) |
1 776 951 | 1 776 951 | 246 769 | 246 769 |
| Net income of the year (Solvay share) excluding discontinued operations (in thousands) |
50 676 | 50 676 | 284 736 | 284 736 |
| Earnings per share (including discontinued operations) (in EUR) | 21.85 | 21.80 | 3.04 | 3.03 |
| Earnings per share (excluding discontinued operations) (in EUR) | 0.62 | 0.62 | 3.51 | 3.49 |
The basic earnings per share amount is obtained by dividing net income by the number of shares
The diluted earnings per share amount is obtained by dividing net income by the number of shares, increased by the number of potentially diluting shares attached to the issue of share options. For the purpose of calculating diluted earnings per share, there were no adjusting elements to net income of the year (Solvay share).
Full data per share, including dividend per share, can be found in the management report on page 10.
The average closing price during 2011 was EUR 84.56 per share (2010: EUR 74.46 per share). The following share options were out of the money, and therefore antidilutive, for the period presented, but could potentially dilute basic earnings per share in the future (see note 23 'Options and acquisition / sale of treasury shares').
| Antidilutive share options | Date granted | Exercise price | Number granted | Number outstanding |
|---|---|---|---|---|
| Share option plan 2005 | 1-Jan-2006 | 97.30 | 516 100 | 455 500 |
| Share option plan 2006 | 1-Jan-2007 | 109.09 | 499 100 | 498 100 |
| Share option plan 2007 | 1-Jan-2008 | 96.79 | 508 800 | 489 700 |
| Total | 1 524 000 | 1 443 300 |
| EUR million 2010 |
2011 |
|---|---|
| Wages/salaries and direct social benefi ts | -771 -947 |
| Employer's contribution for social insurance | -184 -231 |
| Pensions & Insurance benefi ts | -89 -84 |
| Other Personnel expenses | -65 -58 |
| Personnel benefi ts provisions | -172 -103 |
| Total -1 281 |
-1 422 |
(15) Consolidated statement of comprehensive income
| EUR million | 2010 | 2011 |
|---|---|---|
| Net income of the Group | 1 823 | 296 |
| Currency translation differences arising during the year | 222 | 58 |
| Recycling of currency translations differences relating to foreign investments disposed of in the year |
29 | 0 |
| Currency translation differences on foreign operations | 251 | 58 |
| Net change in the fair value of available-for-sale fi nancial assets | -15 | -8 |
| Recycling of available-for-sale fi nancial assets disposed of in the year (*) | 4 | 0 |
| Recycling of available-for-sale fi nancial assets impaired in the year (*) | 1 | 0 |
| Available-for-sale fi nancial assets | -10 | -8 |
| Effective portion of gains and losses on hedging instruments in a cash fl ow hedge |
2 | 5 |
| Recycling to the income statement (*) | 0 | -2 |
| Recycling to the initial carrying amounts of hedged items (*) | 0 | 0 |
| Cash fl ow hedges | 2 | 3 |
| Actuarial gains and losses on defi ned benefi t pension plans | -183 | -105 |
| Recycling to the income statement (*) | 0 | 0 |
| Defi ned benefi t pension plans | -183 | -105 |
| Share of other comprehensive income of associates | 27 | -30 |
| Income tax relating to components of other comprehensive | 52 | 28 |
| income | ||
| Other comprehensive income net of related tax effects | 139 | -54 |
| Comprehensive income | 1 962 | 242 |
| attributed to: | ||
| - owners of the parent | 1 876 | 202 |
| - non-controlling interests | 86 | 40 |
* See note 33 on page 136
| EUR million | 2010 | |||||
|---|---|---|---|---|---|---|
| Before | Tax | Net | Before | Tax | Net | |
| tax | expense(-)/ | of-tax | tax | expense(-)/ | of-tax | |
| amount | benefi t (+) | amount | amount | benefi t (+) | amount | |
| Currency translation differences arising | 222 | 0 | 222 | 58 | 0 | 58 |
| during the year | ||||||
| Recycling of currency translations | 29 | 0 | 29 | 0 | 0 | 0 |
| differences relating to foreign investments | ||||||
| disposed of in the year | ||||||
| Currency translation differences on | 251 | 0 | 251 | 58 | 0 | 58 |
| foreign operations | ||||||
| Gains and losses on remeasuring available | -15 | 0 | -15 | -8 | 0 | -8 |
| for-sale fi nancial assets | ||||||
| Recycling of available-for-sale fi nancial | 4 | 0 | 4 | 0 | 0 | 0 |
| assets disposed of in the year (*) | ||||||
| Recycling of available-for-sale fi nancial | 1 | 0 | 1 | 0 | 0 | 0 |
| assets impaired in the year (*) | ||||||
| Available-for-sale fi nancial assets | -10 | 0 | -10 | -8 | 0 | -8 |
| Effective portion of gains and losses on | 2 | -1 | 1 | 5 | 4 | 9 |
| hedging instruments in a cash fl ow hedge | ||||||
| Recycling to the income statement (*) | 0 | 0 | 0 | -2 | 1 | -1 |
| Recycling to the initial carrying amounts of | 0 | 0 | 0 | 0 | 0 | 0 |
| hedged items (*) | ||||||
| Cash fl ow hedges | 2 | -1 | 1 | 3 | 5 | 8 |
| Actuarial gains and losses on defi ned | -183 | 52 | -131 | -105 | 21 | -84 |
| benefi t pension plans | ||||||
| Recycling to the income statement (*) | 0 | 0 | 0 | 0 | 0 | 0 |
| Defi ned benefi t pension plans | -183 | 52 | -131 | -105 | 21 | -84 |
| Share of other comprehensive income | 27 | 0 | 27 | -30 | 1 | -28 |
| of associates | ||||||
| Other comprehensive income | 87 | 52 | 139 | -82 | 28 | -54 |
Total depreciation, amortization and impairment losses amounted to EUR 455 million, down EUR -152 million on 2010 (EUR 607 million).
For continuing operations:
The change in working capital amounted to EUR +303 million for continuing operations in 2011, which was mainly due to:
This amount (EUR -187 million) includes the uses, additions and reversals reported in note 31 and an increase in pension fund surpluses for continuing operations.
In 2011, the change in provisions (which does not take into account the impact of the changes booked through OCI) is mainly related to the employee benefi ts for EUR -90 million
Apart from this, two provisions were partially reversed:
For 2011, the equity earning for Joint Ventures which is a non cash item (EUR -61 million) and of the cost of discounting provision (EUR -65 million, including EUR +7 million for discontinued operations) account for the non cash items (EUR -128 million).
For 2010, the elimination (EUR -194 million) essentially related to:
| (20) Cash fl ows linked to the acquisition / disposal of assets and investments | |||||
|---|---|---|---|---|---|
| --------------------------------------------------------------------------------- | -- | -- | -- | -- | -- |
| 2010 EUR Million | Acquisitions | Disposals | Total |
|---|---|---|---|
| Subsidiaries | 4 430 | 4 430 | |
| Associates | 0 | ||
| Joint ventures | 268 | 268 | |
| Available-for-sale investments | 0 | ||
| Other | -170 | 12 | -158 |
| Total Investments | -170 | 4 710 | 4 540 |
| Tangible/intangible assets | -286 | 19 | -267 |
| Total | -457 | 4 729 | 4 272 |
| 2011 EUR Million | Acquisitions | Disposals | Total |
| Subsidiaries | -3 984 | 39 | -3 945 |
| Associates | -167 | -167 | |
| Joint ventures | 0 | ||
| Available-for-sale investments | -23 | -23 | |
| Other | -22 | 2 | -20 |
| Total Investments | -4 195 | 40 | -4 155 |
| Tangible/intangible assets | -602 | 17 | -585 |
| Total | -4 797 | 57 | -4 740 |
The acquisition of tangible/intangible assets in 2011 (EUR -602 million) relates to various projects, many of them extending over several years:
On September 7, 2011, Solvay acquired 95.9% of the share capital and of the voting rights of Rhodia, together with 97.51% of the convertible bonds "OCEANE".
On September 15, 2011, Solvay implemented a squeeze-out procedure for the remaining shares (4.1%) and convertible bonds.
Solvay's strategic rationale for completing the transaction comprises several factors, including:
the creation of a new major player in the chemicals industry;
highly complementary businesses, leading to a broader and better balanced business portfolio;
The statement of fi nancial position of Rhodia was consolidated in the Group' fi nancial statements on September 30, 2011. Rhodia's results and cash fl ows have been consolidated as from October 1, 2011.
The acquisition of Rhodia has been accounted for using the acquisition method in accordance with IFRS 3 – Business Combinations. This has lead to: measure Rhodia's identifi able assets and liabilities at fair value, including intangible assets and contingent liabilities which Rhodia had not previously recognized
The initial accounting for the acquisition of Rhodia has only been provisionally determined at the end of the reporting period (acquisition can be completed within 12 months following the acquisition date).
Regarding the squeeze-out of the 4.1% remaining shares, the difference between the price paid to acquire those shares and the carrying amount of 4.1% of Rhodia's net assets measured as described above (EUR -80 million) is recognized against Group's equity, without impact on goodwill and income statement.
The following table summarizes the consideration transferred for the acquisition of the Rhodia group, the fair value of the assets acquired and liabilities assumed at acquisition date:
| EUR Million | Amounts recognized at fair value |
Acquisition of 95.9% of the total shares |
Squeeze-out of the 4.1% remaining |
|---|---|---|---|
| shares | |||
| Cash | 3 816 | 137 | |
| Equity instruments (vested share-based | 60 | ||
| payments) | |||
| Total consideration transferred | 3 876 | 137 | |
| Tangible assets | 2 164 | ||
| Intangible assets | 1 607 | ||
| Joint ventures - equity accounted | 104 | ||
| Loans and other non current assets | 120 | ||
| Working capital | 752 | ||
| Assets held for sale | 34 | ||
| Provisions | -2 045 | ||
| Contingent liabilities | -100 | ||
| Deferred taxes | -504 | ||
| Income tax payable | -15 | ||
| Other non current debt | -72 | ||
| Financial debt | -1 578 | ||
| Cash and cash equivalents | 931 | ||
| Total identifi able net assets | 1 398 | 1 341 | 57 |
| Provisional goodwill | 2 535 | ||
| Reduction of equity | 80 | ||
| Total | 3 876 | 137 |
The working capital consists of trade receivables, trade liabilities and other current receivables and liabilities.
As part of the acquisition, Solvay has signed a liquidity clause for Rhodia benefi ciaries granted with non-vested and vested (but restricted) share-based payments. For vested share-based payments, this liquidity clause has been analyzed as a deferred payment as no future service is being required from the benefi ciaries. This fi nancial liability has been measured at fair value at the acquisition date and included in the consideration transferred. As this fi nancial liability is indexed to the Solvay share price, until the liability is settled, it will be remeasured at the end of each reporting period and at the date of settlement, with any changes in value recognised in the income statement of the period. All adjustments will be recognised in fi nancial result.
The fair value of the intangible assets consists mainly of acquired customer relationships for EUR 696 million and of technologies for EUR 649 million.
Inventories have been revalued for EUR 205 million. the related negative impact on the gross margin in 2011 and 2012 is presented as a non-recurring item.
Contingent liabilities have been recognized for EUR 100 million. They relate to environmental, tax and legal contingent liabilities. As of December 31, 2011 there has been no change in the amount recognized for the liabilities at September 30, 2011, as there has been no change in the range of outcomes or assumptions used to develop the estimates.
The resulting goodwill of EUR 2 535 million has been determined on a provisional basis:
This goodwill arose mainly as a result of synergies expected on corporate functions and procurement (total savings estimated at EUR 250 million / year), as well as future business development. These benefi ts are not recognized separately from goodwill because they do not meet the recognition criteria for identifi able intangible assets.
None of the goodwill is expected to be deductible for income tax purposes.
The acquisition-related costs amounting to EUR 33 million have been recognized as an expense in the current year, within the non-recurring items in the consolidated income statement.
Since acquisition date, Rhodia's total sales amounted to EUR 1 565 million and the Rhodia contribution in the last three months of 2011 to the Group IFRS net income amounted to EUR -41 million, including EUR -142 million of additional expenses linked to the Purchase Price Allocation.
In order to make the P&L 2010 and 2011 comparable, the IFRS P&L for 2010 and 2011 have been restated in order to present a pro forma P&L. The difference between the IFRS net income (EUR +296 million) and the pro forma net income for 2011 (EUR +784 million) amounts to EUR +488 million, which results from the fact that the pro forma 2011 net income:
| If the acquisition had occurred on January 1, 2010, the combined Group's results would have been as follows: | ||
|---|---|---|
| EUR million | Proforma 2010 | Proforma 2011 |
|---|---|---|
| Sales | 11 095 | 12 693 |
| Other revenues | 403 | 386 |
| Cost of goods sold | -9 113 | -10 339 |
| Gross margin | 2 385 | 2 740 |
| Commercial and administrative costs | -1 043 | -1 128 |
| Research and development costs | -202 | -218 |
| Other operating gains and losses | 36 | -63 |
| Earnings from associates and joint ventures accounted for using equity method |
50 | 77 |
| REBITDA | 1 862 | 2 068 |
| REBIT | 1 226 | 1 408 |
| Non-recurring items | -331 | 17 |
| EBIT | 894 | 1 425 |
| Cost of borrowings | -199 | -211 |
| Interest on lendings and short term deposits | 24 | 15 |
| Other gains and losses on net indebtedness | -58 | -21 |
| Cost of discounting provisions | -141 | -133 |
| Income/loss from available-for-sale investments | 0 | 1 |
| Result before taxes | 520 | 1 077 |
| Income taxes | -114 | -251 |
| Result from continuing operations | 406 | 825 |
| Result from discontinued operations (Pharma and Inergy) | 1 721 | -41 |
| Net income for the year | 2 127 | 784 |
The proforma free cashfl ow* amounts to EUR 449 million in 2010 and to EUR 656 million in 2011.
The main difference between the IFRS Free Cash Flow and the proforma free cash fl ow result from:
• the cash fl ow generated by Rhodia on a stand-alone basis in 2010 and during the fi rst nine months of 2011,
• and from the reversal of all the cash-outs generated by the deal between Solvay and Rhodia
*Free cash fl ow = cash fl ow from operating activities + cash fl ow from investing activities excluding acquisition/sale of subsidiaries and other investments + dividends received from associates and joint ventures accounted for using equity method.
On December 30, 2011, Solvay acquired 50% of the share capital and of the voting rights of Orbéo previously owned by Société Générale.
Orbéo is involved in selling Certifi ed Emission Reductions (CER), developing CO2 instrument trading, arbitrage and hedging activities.
The acquisition of the remaining 50% of Orbéo is part of the development of Solvay Energy Services.
Orbéo's opening balance sheet as at December 30, 2011 is subject to the Purchase Accounting (IFRS 3). There was no impact in Solvay's Financial Statements as at December 30, 2011 as this has been measured at fair value in the Purchase Price accounting recorded for Rhodia's acquisition as at September 7, 2011.
The following table summarizes the consideration paid for Orbéo (50%), the fair value of assets acquired and liabilities assumed at acquisition date:
| EUR million | |
|---|---|
| Total consideration transferred | 31 |
| Tangible assets and Intangible assets | 2 |
| Financial instruments | 8 |
| Other fi xed assets | 2 |
| Net cash | 18 |
| Net current assets / liabilities | 0 |
| Total identifi able net assets | 30 |
| Goodwill | 1 |
| Total | 31 |
In 2011, the sale of investments refers mainly to Salicylic business (EUR 39 million). In 2010, other sales of investments (EUR 279 million) were related to Inergy (EUR 268 million) and to non- consolidated investments in the Vinyls cluster (EUR 11 million).
As in 2010, the Solvay group reimbursed in 2011 to minority shareholders a portion of the capital of our natural carbonate activities in the United States (EUR -21 million).
In 2011, a minority shareholder, the BERD, increased the Solvin capital to contribute to the funding of the investment in Rusvinyl (EUR +52 million).
The 2011 cash fl ow from discontinued operations (EUR -44 million) results mainly from post closing adjustment to the capital gain posted in 2010 (EUR 1 703 million).
At the end of 2010, the Group held 3 635 584 treasury shares (of which 880 766 shares in the treasury share investment program – see 23a below), which have been deducted from consolidated shareholders' equity. At the end of December 2011, the Group held 3 499 125 treasury shares to cover the share options offered to Group executives.
Solvay started a treasury share investment program in February 2010.
The extraordinary shareholders' meeting of May 12, 2009 authorized the Board of Directors for a period of fi ve years to acquire on the stock exchange up to a maximum of 16 940 000 of the Group's own shares, at a price between EUR 20 and EUR 150. Within this framework, the Board of Directors decided to initiate an investment program of maximum EUR 5.1 million (6% of the issued capital) of the Group's own shares.
A credit institution has been mandated for a period of one year starting on January 16, 2010 to execute this investment program, which was intended as a temporary investment of the cash resulting from the sale of the Pharmaceutical activities before reinvestment in industrial assets. On December 31, 2010, the investment in Solvay shares since the launch of the program totaled 880 766 shares. In 2011, Solvay S.A. sold the 880 766 shares to Solvay Stock Option Management S.P.R.L Bxl.
This program has been renewed by the Board of Directors up to the end of 2011 for further purchases of up to 1.65 million treasury shares.
As it has in every year since 1999, the Board of Directors renewed the share option plan offered to executive staff (around 215 persons) with a view to involving them more closely in the long-term development of the Group. The majority of the managers involved subscribed the options offered them in 2011 with an exercise price of EUR 65.71, representing the average stock market price of the share for the 30 days prior to the offer.
The 3-year vesting period is followed by a 5-year exercise period, at the end of which any unexercised options expire. The settlement method is in equity.
| Share options | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
|---|---|---|---|---|---|---|---|---|---|---|
| Number of share options granted and still outstanding at 31/12/2010 |
49 500 | 215 100 | 433 400 511 200 498 100 505 500 522 700 555 600 431 900 | |||||||
| Granted share options |
414 750 | |||||||||
| Forfeitures of rights and expiries |
-34 300 | |||||||||
| Share options exercised |
-14 800 | -180 800 | -182 277 | -55 700 | -15 800 | |||||
| Number of share options at 31/12/2011 |
34 700 | 251 123 455 500 498 100 489 700 522 700 555 600 431 900 414 750 | ||||||||
| Share options exercisable at 31/12/2011 |
34 700 | 251 123 455 500 498 100 489 700 | ||||||||
| Exercise price (EUR) |
63.76 | 65.83 | 82.88 | 97.30 | 109.09 | 96.79 | 58.81 | 72.34 | 76.49 | 65.71 |
| Fair value of options at measurement date (EUR) |
9.60 | 9.50 | 7.25 | 10.12 | 21.20 | 18.68 | 14.95 | 19.85 | 15.58 | 13.54 |
| 2010 | 2011 | |||
|---|---|---|---|---|
| Number of | Weighted | Number of | Weighted | |
| share options | average | share options | average | |
| exercise price | exercise price | |||
| At 1/1 | 3 432 400 | 83.43 | 3 723 000 | 83.32 |
| Granted during the year | 431 900 | 76.49 | 414 750 | 65.71 |
| Forfeitures of rights and expiries during the year | -9 200 | 77.33 | -34 300 | 65.83 |
| Exercised during the year | -132 100 | 64.24 | -449 377 | 77.67 |
| At 31/12 | 3 723 000 | 83.32 | 3 654 073 | 82.18 |
| Exercisable at 31/12 | 1 707 300 | 1 729 123 |
The share options resulted in a charge in 2011 of EUR 8.5 million calculated by a third party according to the Monte Carlo model and recorded in the income statement under commercial and administrative costs.
The model places a value on the options taking into account the fact that some of them will be exercised before the option maturity.
The value of the option is based on:
– the price of the underlying asset (Solvay share): EUR 63.66 at December 31, 2011;
– the time outstanding until the option maturity: exercisable from January 1, 2015;
– the option exercise price: EUR 65.71;
– the risk-free return: 2.112%;
– the volatility of the underlying yield: 33.445%.
Weighted average remaining contractual life:
| In years | 2010 | 2011 |
|---|---|---|
| Share option plan 2000 | 1.0 | 0.0 |
| Share option plan 2001 | 2.0 | 1.0 |
| Share option plan 2002 | 2.9 | 1.9 |
| Share option plan 2003 | 1.0 | 0.0 |
| Share option plan 2004 | 2.0 | 1.0 |
| Share option plan 2005 | 5.0 | 4.2 |
| Share option plan 2006 | 5.5 | 4.5 |
| Share option plan 2007 | 6.7 | 5.7 |
| Share option plan 2008 | 6.0 | 5.0 |
| Share option plan 2009 | 6.9 | 5.9 |
| Share option plan 2010 | 8.0 | 7.0 |
| Share option plan 2011 | 0.0 | 8.0 |
(24) Intangible assets
| EUR million | Development costs | Patents and trademarks |
Other intangible assets |
Total |
|---|---|---|---|---|
| Gross carrying amount | ||||
| At December 31 2009 | 98 | 204 | 39 | 342 |
| At January 1 2010 - Restated | 8 | 181 | 29 | 219 |
| Capital expenditures | 0 | 7 | 1 | 8 |
| Disposals | -1 | -0 | 0 | -1 |
| Disposal of consolidated investment | 0 | 0 | 0 | 0 |
| Currency translation differences | 0 | 9 | 1 | 10 |
| Other | 5 | -1 | -6 | -2 |
| Transfer from assets held for sale - PCC | 1 | 0 | 0 | 1 |
| At December 31 2010 | 14 | 195 | 25 | 235 |
| Capital expenditures | 5 | 1 | 7 | 13 |
| Disposals | 0 | -1 | -0 | -1 |
| Increase through business combinations | 0 | 942 | 907 | 1 848 |
| Currency translation differences | -0 | 11 | 6 | 17 |
| Other | -4 | -1 | 1 | -5 |
| Transfer to assets held for sale - Pharma | 0 | 0 | 0 | 0 |
| Transfer from assets held for sale - PCC | 0 | 0 | 0 | 0 |
| At December 31 2011 | 14 | 1 147 | 946 | 2 107 |
| Accumulated amortization | ||||
| At December 31 2009 | -55 | -100 | -25 | -180 |
| At January 1 2010 - Restated | -5 | -89 | -19 | -113 |
| Amortization | -2 | -6 | -0 | -8 |
| Impairments | -0 | -0 | -0 | -0 |
| Reversal of impairments | 0 | 0 | 0 | 0 |
| Disposals and closures | -0 | 0 | 0 | 0 |
| Disposal of consolidated investment | 0 | 0 | 0 | 0 |
| Currency translation differences | -0 | -2 | -1 | -3 |
| Other | 0 | -0 | 0 | -0 |
| Transfer from assets held for sale - PCC | 0 | 0 | 0 | 0 |
| At December 31 2010 | -7 | -96 | -20 | -124 |
| Amortization | -2 | -26 | -22 | -50 |
| Impairments | 0 | -0 | 0 | -0 |
| Reversal of impairments | 0 | 0 | 0 | 0 |
| Disposals and closures | 0 | 1 | 0 | 1 |
| Increase through business combinations | -6 | -205 | -22 | -233 |
| Currency translation differences | 0 | -2 | -1 | -3 |
| Other | 4 | 6 | -4 | 6 |
| Transfer to assets held for sale - Pharma | 0 | 0 | 0 | 0 |
| Transfer from assets held for sale - PCC | 0 | 0 | 0 | 0 |
| At December 31 2011 | -11 | -322 | -69 | -402 |
| Net carrying amount | ||||
| At December 31 2009 | 43 | 104 | 14 | 162 |
| At January 1 2010 - Restated | 3 | 93 | 10 | 105 |
| At December 31 2010 | 6 | 100 | 5 | 111 |
| At December 31 2011 | 3 | 825 | 877 | 1 705 |
| EUR million | Total |
|---|---|
| Gross carrying amount | |
| At December 31 2009 | 76 |
| At January 1 2010 - Restated | 71 |
| Arising on acquisitions | 0 |
| Disposals and closures | -1 |
| Impairments | -11 |
| Currency translation differences | 5 |
| Other | 0 |
| Transfer from assets held for sale - PCC | 4 |
| At December 31 2010 | 68 |
| Arising on acquisitions | 2 535 |
| Disposals and closures | 0 |
| Impairments | 0 |
| Currency translation differences | 0 |
| Other | -4 |
| At December 31 2011 | 2 599 |
In 2011, a provisional goodwill linked to Rhodia acquisition has been posted for EUR 2 535 million.
Apart from this new goodwill, there is no signifi cant change to the other goodwills.
The 2010 impairment loss relates to Alexandria Sodium Carbonate Co in Egypt, which is part of the cash-generating unit covering the activities of Soda Ash in Europe and Egypt and Calcium Chloride. This impairment has brought the value of goodwill in Alexandria Sodium Carbonate Co to zero.
Goodwill acquired in a business combination is allocated on acquisition to the cash-generating units (CGU) that are expected to benefi t from that business combination.
The carrying amounts of goodwill and related impairment have been allocated as follows:
| EUR million | Cash-Generating Units | Impairment | Carrying |
|---|---|---|---|
| Activity clusters | 2010 | amount | |
| 31 Dec 2011 | |||
| Soda ash | Soda ash Europe 1 | -11 | 0 |
| Advanced Functional Minerals | PCC | 4 | |
| Oxygen | H2O2 / Asia | 6 | |
| Fluorinated products | Solvay Fluor Mexico | 7 | |
| Vinyls | PVC Europe | 3 | |
| PVC Mercosur | 2 | ||
| PVC Asia | 2 | ||
| Specialty Polymers | Fluoropolymers, sulfone polymers, | 27 | |
| ultra-polymers, crystalline polymers | |||
| PE compounds | 12 | ||
| Total | -11 | 64 |
The Chemicals and Plastics segments have defi ned 39 cash-generating units
The Rhodia segment has defi ned 11 CGU:
The forecasted cash fl ows for each of the cash-generating units concerned have been discounted to net present value at specifi c rates, based on external references and measuring the risks inherent to the geographic location of the cashgenerating units (value in use). The base discount rate before country risk premium has been fi xed at 8.7%
The provisional goodwill is related to:
The goodwill related to synergies on procurement will be allocated before September 2012 to all the BUs of the Group. The synergies related to the Rhodia BUs will be allocated to the 11 Rhodia CGU listed above. It has consequently been tested for impairment:
| EUR million | Land & | Fixtures & | Other | Properties | Total |
|---|---|---|---|---|---|
| Buildings | Equipment | tangible assets |
under construction |
||
| Gross carrying amount | |||||
| At December 31 2009 | 2 031 | 8 364 | 75 | 377 | 10 848 |
| At January 1 2010 - Restated | 1 805 | 7 512 | 41 | 312 | 9 669 |
| Capital expenditures | 9 | 64 | 1 | 203 | 278 |
| Disposals and closures | -10 | -29 | -1 | -0 | -40 |
| Disposal of consolidated investment | 0 | 0 | 0 | 0 | 0 |
| Currency translation differences | 41 | 251 | 2 | 10 | 303 |
| Other | 72 | 123 | 44 | -273 | -34 |
| Transfer from assets held for sale - PCC | 19 | 94 | 1 | 4 | 117 |
| At December 31 2010 | 1 935 | 8 015 | 88 | 256 | 10 294 |
| Capital expenditures | 15 | 72 | 6 | 501 | 594 |
| Disposals and closures | -14 | -49 | -3 | -0 | -66 |
| Increase through business combinations | 1 278 | 3 957 | 578 | 226 | 6 039 |
| Currency translation differences | 23 | 75 | 4 | 4 | 106 |
| Other | 19 | 150 | 0 | -268 | -98 |
| At December 31 2011 | 3 257 | 12 220 | 673 | 719 | 16 869 |
| Accumulated depreciation | |||||
| At December 31 2009 | -1 086 | -5 784 | -56 | -0 | -6 926 |
| At January 1 2010 - Restated | -995 | -5 262 | -32 | -0 | -6 289 |
| Depreciation | -39 | -311 | -2 | 1 | -351 |
| Impairment | -65 | -137 | -1 | -37 | -240 |
| Reversal of impairment | 1 | 4 | 0 | 0 | 5 |
| Disposals and closures | 5 | 25 | 0 | 0 | 31 |
| Disposal of consolidated investment | 0 | 0 | 0 | 0 | 0 |
| Currency translation differences | -14 | -124 | -2 | -0 | -140 |
| Other | -3 | 82 | -43 | 0 | 37 |
| Transfer from assets held for sale - PCC | -21 | -48 | -0 | -0 | -70 |
| At December 31 2010 | -1 131 | -5 772 | -79 | -37 | -7 018 |
| Depreciation | -46 | -357 | -10 | 2 | -410 |
| Impairment | -1 | -4 | 0 | 0 | -5 |
| Reversal of impairment | 0 | 10 | 0 | 0 | 10 |
| Disposals and closures | 7 | 45 | 2 | 0 | 55 |
| Increase through business combinations | -611 | -2 784 | -479 | 0 | -3 874 |
| Currency translation differences | -10 | -56 | -2 | 0 | -69 |
| Other | 12 | 74 | 9 | 0 | 94 |
| At December 31 2011 | -1 780 | -8 843 | -559 | -34 | -11 217 |
| Net carrying amount | |||||
| At December 31 2009 | 945 | 2 580 | 19 | 376 | 3 921 |
| At January 1 2010 - Restated | 810 | 2 250 | 9 | 312 | 3 380 |
| At December 31 2010 | 804 | 2 243 | 10 | 219 | 3 276 |
| At December 31 2011 | 1 477 | 3 376 | 114 | 685 | 5 652 |
| EUR million | Land and | Fixtures and | Total |
|---|---|---|---|
| buildings | equipment | ||
| Net carrying amount of fi nance leases included in the table above | 1 | 2 | 3 |
| The carrying amount of lease obligations approximates their fair value. |
| EUR million | Minimum lease payments | Present value of minimum | ||
|---|---|---|---|---|
| lease payments | ||||
| Amounts payable under fi nance leases: | 2010 | 2011 | 2010 | 2011 |
| Within one year | 1 | 3 | 1 | 3 |
| In years two to fi ve inclusive | 1 | 3 | 1 | 2 |
| Beyond fi ve years | 0 | 1 | 0 | 1 |
| Less: future fi nance charges | -0 | 1 | -0 | 0 |
| Transfer to assets held for sale - Pharma | 0 | 0 | 0 | 0 |
| Transfer from assets held for sale - PCC | 0 | 0 | 0 | 0 |
| Present value of minimum lease payments of | 1 | 6 | 1 | 6 |
| fi nance leases | ||||
| Less: Amount due for settlement within 12 months | 1 | 3 | ||
| Amount due for settlement after 12 months | 1 | 3 |
| EUR million | 2010 | 2011 |
|---|---|---|
| Total minimum lease payments under operating leases recognized in the | 38 | 65 |
| income statement of the year | ||
| EUR million | 2010 | 2011 |
| Within one year | 33 | 75 |
| In years two to fi ve inclusive | 74 | 229 |
| Beyond fi ve years | 35 | 70 |
| Total of future minimum lease payments under non-cancellable | 143 | 373 |
| operating leases |
Operating leases are mainly related to logistics.
| EUR million | 2010 | 2011 |
|---|---|---|
| Fair value at 1 January | 68 | 62 |
| Acquisition NBD | 8 | 24 |
| Gains and losses on remeasuring available-for-sale fi nancial assets | -13 | -8 |
| Available-for-sale fi nancial assets disposed of in the year | 0 | 0 |
| Available-for-sale fi nancial assets impaired in the year | -1 | 0 |
| Transfer of NBD from other investments | 0 | 0 |
| Other | -0 | 2 |
| Fair value at 31 December | 62 | 80 |
| Of which recognized directly in equity | 11 | 3 |
The loss on remeasuring available-for-sale fi nancial assets (EUR -8 million) is mainly related to the mark-to-market variance for AGEAS (former Fortis). The acquisition is mainly related to Plextronics (EUR 16 million).
| EUR million 2010 |
2011 |
|---|---|
| Fair value at 1 January 466 |
346 |
| Sale of Inergy -131 |
0 |
| Changes in consolidation scope - Rhodia 0 |
86 |
| Full consolidation of Orbéo 0 |
-30 |
| Net income Solvay joint ventures 46 |
49 |
| Net income Rhodia joint ventures 0 |
13 |
| Dividend paid by Solvay joint ventures -32 |
-41 |
| Dividend paid by Rhodia joint ventures 0 |
-16 |
| Transfer Rusvinyl - book value as of Dec 2010 0 |
183 |
| Capital increase in Rusvinyl 0 |
165 |
| Transfer of Pipelife investments to assets held for sale 0 |
-90 |
| Other 0 |
40 |
| Fair value at 31 December 346 |
704 |
| EUR million | 2010 | 2011 |
|---|---|---|
| Carrying amount at 1 January | 196 | 275 |
| Disposed of during the year | -7 | -1 |
| Acquired during the year | 110 | 44 |
| Changes of consolidation method | -28 | -187 |
| Changes in consolidation scope | 0 | 0 |
| Transfer of NBD to available for sale investments | 0 | 0 |
| Liquidations | 0 | 0 |
| Impairments | -11 | -4 |
| Reversal of impairments | 0 | 0 |
| Other | 15 | -1 |
| Carrying amount at 31 December | 275 | 125 |
In 2010, the acquisitions are mainly related to the investment in the PVC entity under construction in Russia (for EUR -90 million) which has been consolidated through equity earning from 2011 onward. Impairments are related to the investments in the Soda Ash cash-generating unit.
| EUR million at December 31 | 2010 | 2011 |
|---|---|---|
| Finished goods | 443 | 899 |
| Raw materials and supplies | 306 | 702 |
| Work in progress | 24 | 44 |
| Other inventories | 7 | 9 |
| Total | 779 | 1 653 |
| Write-downs | -18 | -76 |
| Net total | 761 | 1 578 |
| EUR million | Employee | Health | Litigation | Other | Total |
|---|---|---|---|---|---|
| benefi ts | safety and | ||||
| environment | |||||
| At 31 December 2010 | 1 081 | 459 | 437 | 108 | 2 084 |
| Additions | 59 | 89 | 36 | 12 | 196 |
| Reversals | -18 | -83 | -78 | -12 | -191 |
| Uses | -180 | -41 | -15 | -24 | -260 |
| Increase through time value of money | 50 | 23 | 0 | 0 | 72 |
| Actuarial gains and losses recognized in equity | 99 | 0 | 0 | 0 | 99 |
| Currency translation differences | 25 | 7 | 3 | 2 | 37 |
| Acquisitions and changes in consolidation | 1 522 | 338 | 228 | 69 | 2 156 |
| scope | |||||
| Other (transfer from pension assets) | -4 | 0 | 0 | 0 | -4 |
| At 31 December 2011 | 2 634 | 791 | 611 | 153 | 4 189 |
| Of which current provisions | 39 | 87 | 106 | 37 | 269 |
In total, provisions increased by EUR 2 105 million.
According to IFRS 3, Solvay has recognized on September 30 contingent liabilities for Rhodia even if it is not probable that a payment will be required to settle the related obligations. The following contingent liabilities have been booked:
HSE risks for EUR 41 million;
Tax litigation for EUR 32 million;
Other litigations for EUR 27 million.
The resulting outfl ows of these contingent liabilities are expected to occur in less than fi ve years except for the HSE risks that are longer term.
Management expects provisions to be used (cash outlays) as follows:
| EUR million at December 31, 2011 | up to | between | beyond | Total |
|---|---|---|---|---|
| 5 years | 5 and 10 years | 10 years | ||
| Total provisions for HSE | 376 | 188 | 227 | 791 |
| Total provisions for litigation | 531 | 80 | 0 | 611 |
| Total other provisions | 69 | 21 | 63 | 153 |
| Total | 976 | 289 | 290 | 1 555 |
The end-of-year provisions for employee benefi ts are composed of the following:
| EUR million 2010 |
2011 |
|---|---|
| Employee Benefi ts 1 081 |
2 634 |
| Post-employment benefi ts 884 |
2 431 |
| Other long-term benefi ts 42 |
74 |
| Benefi ts not valued acording to IAS19 10 |
26 |
| Termination benefi ts 145 |
103 |
The 2011 fi gures presented take into account the acquisition of Rhodia as of September 30, 2011. 2010 fi gures have been restated following the changes in accounting principles described in section "IFRS Accounting Policies" (elimination of the corridor approach and recognition of actuarial gains and losses in equity, and adoption of the alternative method authorized by IAS 31 for consolidation of "jointly controlled entities").
Post-employment benefi t plans are classifi ed into defi ned contribution and defi ned benefi t plans.
Defi ned contribution plans are those for which the company pays fi xed contributions into a separate entity or fund in accordance with the provisions of the plan. Once these contributions have been paid, the company has no further obligation.
All plans which are not defi ned contribution plans are deemed to be defi ned benefi t plans. These plans can be either funded via outside pension funds or insurance companies ("funded plans") or fi nanced within the Group ("unfunded plans"). All main plans are assessed annually by independent actuaries.
The net liability results from the net of the provisions and the capitalized pensions assets.
After the integration of Rhodia in 2011, the main results are:
| EUR million 2010 |
2011 |
|---|---|
| Net liability 880 |
2 426 |
| Provisions 884 |
2 431 |
| Capitalized pensions assets -4 |
-5 |
| Operational expense 35 |
26 |
| Financial expense 39 |
50 |
The provisions have been set up primarily to cover post-employment benefi ts granted by most Group companies in line, either with local rules and customs, or with established practices which generate constructive obligations.
Over the last years, the Group has reduced its exposure to defi ned-benefi t plans by converting existing plans into pension plans with a lower risk profi le for future services (hybrid plans, cash balance plans and defi ned contribution plans) or by closing them to new entrants.
The provisions are set up on the basis of the IFRS accounting policies defi ned in item 9 of the present report. Following the acquisition of Rhodia, the accounting policy related to post-employment benefi ts has been aligned. This has led Solvay to eliminate the Corridor approach and recognize actuarial gains and losses in equity (see accounting policies on page 67).
After the acquisition of Rhodia, the largest pension plans in 2011 are in the United Kingdom, France, the United States, Germany and Belgium. These 5 countries represent 93% of the total defi ned benefi t obligation.
| EUR million 2010 |
2011 |
|---|---|
| United Kingdom 8% |
29% |
| France 8% |
24% |
| USA 19% |
16% |
| Germany 30% |
14% |
| Belgium 27% |
10% |
| Other countries 8% |
7% |
The amounts charged to income in respect of these plans are:
| EUR million 2010 |
2011 |
|---|---|
| Service cost: employer 24 |
28 |
| Interest cost 73 |
105 |
| Expected return on plan assets -34 |
-55 |
| Past service cost - recognized in current year -1 |
1 |
| Losses / gains (-) on curtailments / settlements 11 |
-3 |
| Net expense recognized - Defi ned benefi t plans 74 |
76 |
The cost of these benefi t plans is charged variously to cost of sales, commercial and administrative costs, research & development costs, other fi nancial or operating gains and losses and non-recurring items.
Compared to 2010, the net expense is stable. The structural increase coming from the integration of Rhodia (EUR 18 million for the last quarter of 2011) is partially compensated by a one-off settlement cost in 2010 (EUR 11 million) due to the transfer to an insurance company of all the pension obligations of Solvay Chemie NL.
The amounts recorded in the statement of fi nancial position in respect of defi ned benefi t plans are:
| 2009 | 2010 | 2011 | ||
|---|---|---|---|---|
| Group | Held for sale | Total without | ||
| 1 606 | 623 | 982 | 878 | 2 531 |
| -1 239 | -599 | -640 | -601 | -1 818 |
| 367 | 24 | 343 | 277 | 713 |
| 738 | 165 | 574 | 599 | 1 702 |
| 1 105 | 189 | 917 | 876 | 2 415 |
| -314 | -120 | -194 | 0 | 0 |
| 18 | 9 | 9 | 8 | 7 |
| 4 | 0 | 4 | 2 | 4 |
| -6 | 0 | |||
| 813 | 77 | 735 | 880 | 2 426 |
| 945 | 181 | 765 | 884 | 2 431 |
| -133 | -103 | -29 | -4 | -5 |
| Total | (Ph) | Held for sale |
The increase of the defi cit of EUR 1 539 million between 2010 and 2011 is mainly explained by:
an increase of EUR 1 469 million due to the integration of Rhodia at September 30, 2011;
the decrease of the discount rates in the United Kingdom and in the USA
Defi ned benefi t obligations evolved as follows:
| EUR million | 2010 | 2011 |
|---|---|---|
| Defi ned benefi t obligation at beginning of period | 1 503 | 1 477 |
| Service cost: employer | 24 | 28 |
| Interest cost | 73 | 105 |
| Actual employee contributions | 3 | 4 |
| Plan amendments | 1 | -0 |
| Acquisitions / Disposals (-) | 0 | 2 609 |
| Curtailments | -1 | -3 |
| Settlements | -78 | -10 |
| Actuarial loss / gain (-) | 33 | 89 |
| Actual benefi ts paid | -100 | -141 |
| Currency translation differences | 19 | 75 |
| Defi ned benefi t obligation at end of period | 1 477 | 4 233 |
| Defi ned benefi t obligations - funded plans | 878 | 2 531 |
| Defi ned benefi t obligations - unfunded plans | 599 | 1 702 |
The acquisition of Rhodia increased the defi ned benefi t obligations by EUR 2 609 million as of September 30, 2011. The transfer to an insurance company of all the pension obligations of Solvay Chemicals and Plastics Holding has generated a settlement of EUR 10 million in 2011. In 2010, the transfer to the same insurance company of the pension obligations of Solvay Chemie NL generated a settlement of EUR 78 million
The increase in benefi ts paid corresponds to the amounts paid by Rhodia during the last quarter of 2011.
The fair value of plan assets evolved as follows:
| EUR million | 2010 | 2011 |
|---|---|---|
| Fair value of plan assets at beginning of period | 612 | 601 |
| Expected return on plan assets | 34 | 55 |
| Actuarial gain /loss (-) | 24 | -5 |
| Actual employer contributions | 102 | 120 |
| Actual employee contributions | 3 | 4 |
| Acquisitions / Disposals (-) | 0 | 1140 |
| Settlements | -90 | -10 |
| Actual benefi ts paid | -100 | -141 |
| Currency translation differences | 17 | 54 |
| Fair value of plan assets at end of period | 601 | 1818 |
| Actual return on plan assets | 58 | 50 |
The acquisition of Rhodia increases the assets by EUR 1 140 million at September 30, 2011. The total return on plan assets amounts to EUR 50 million.
This relatively good result comes from the better market conditions which impact positively the Rhodia asset portfolio during the last quarter of the year.
The transfer to an insurance company of all the pension obligations of Solvay Chemicals and Plastics Holding has generates a settlement of EUR 10 million in 2011. The transfer to the same insurer of the pension obligations of Solvay Chemie NL generated a settlement of EUR 84 million in 2010.
The Group expects to pay cash contributions (including direct benefi t payments) for the post-employment Defi ned Benefi ts in the amount of about EUR 200 million for 2012, compared with EUR 120 million for 2011. The main categories of plan assets are:
| 2010 | 2011 | |
|---|---|---|
| Bonds | 44 % | 51 % |
| Shares | 49 % | 34 % |
| Property | 1 % | 2 % |
| Other assets | 6 % | 13 % |
With respect to the invested assets, it should be noted that:
These assets do not contain any direct investment in Solvay group shares or in property or other assets occupied or used by Solvay. This does not exclude Solvay shares being included in mutual investment fund type investments;
The expected rate of return is defi ned at local level using the "building block approach" which factors in long-term infl ation and the expected long-term rate of return on each asset category.
Changes in net liability during the period:
| EUR million 2010 |
2011 |
|---|---|
| Net amount recognized at beginning of period 911 |
880 |
| Net expense - Defi ned benefi t plans | 74 76 |
| Actual employer contributions / direct actual benefi ts paid -102 |
-120 |
| Impact of acquisitions / disposals | 1 1 469 |
| Actuarial gains/losses and changes in asset ceiling regognized through OCI |
-8 99 |
| Currency translation differences | 3 22 |
| Net amount recognized at end of period 880 |
2 426 |
The acquisition of Rhodia increases the net liability by EUR 1 469 million at September 30, 2011. The impact of changes in asset ceiling recognized through OCI amount to EUR 2 million. A cumulative amount of EUR 282 million had been recognized through OCI at December 31, 2011
Assumptions used in determining the benefi t obligation at December 31.
These assumptions are not related to a specifi c segment.
| Eurozone | UK | USA | ||||
|---|---|---|---|---|---|---|
| 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | |
| Discount rates | 4.75% | 4.75% | 5.4% | 4.75% | 5,5% | 4,75% |
| Expected rates of future salary increases |
3% - 4.5% | 3% - 4.5% | 3.8% | 3.25% | 4.5% | 4.5% |
| Expected rates of pension growth |
0% - 2% | 0% - 2% | 3.3% | 2.75% | NA | NA |
| Expected rates of medical care cost increases |
0% - 2% | 2% | NA | 6.5% | 5% - 7,5% | 5% - 7.5% |
These assumptions are not related to a specifi c segment
| Eurozone | UK | USA | ||||
|---|---|---|---|---|---|---|
| 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | |
| Discount rates | 5% | 4.75% | 5.7% | 5.4% | 5.75% | 5.5% |
| Expected rates of future salary | 3% - 4.5% | 3% - 4.5% | 4% | 3.8% | 4.5% | 4.5% |
| increases | ||||||
| Expected (long-term) rates of | 5% - 6% | 4.75% - 6% | 5.4% | 6.2% | 7.5% | 7.25% |
| return on plan assets | ||||||
| Expected rates of pension | 0% - 2% | 0% - 2% | 3.5% | 3.3% | NA | NA |
| growth | ||||||
| Expected rates of medical care | 0% - 2% | 0% - 2% | NA | NA | 5% - 8% | 5% - 7.5% |
| cost increases |
Sensitivity to a change of percentage in the discount rates on the defi ned benefi ts obligation is as follows:
| EUR million | 0.25% increase | 0.25% decrease |
|---|---|---|
| Eurozone | -53 | 49 |
| United Kingdom | -51 | 47 |
| USA | -14 | 13 |
| Others | -5 | 4 |
| Total | -123 | 114 |
The assumptions made for medical expenditure have an impact on the amounts recognized in the income statement. Sensitivity to a change of percentage in the expected rates of increase of medical expenses is as follows:
| EUR Million 1% increase |
1% |
|---|---|
| decrease | |
| Effect on the aggregate of the service cost and the interest cost 1 |
-1 |
| Effect on defi ned benefi t obligation 13 |
-11 |
Historical development of defi ned benefi t plans:
| EUR million | 2007(*) | 2008(*) | 2009 (*) | 2010 | 2011 |
|---|---|---|---|---|---|
| Defi ned benefi t obligation | 2 355 | 2 232 | 2 344 | 1 477 | 4 235 |
| Plan assets | -1 341 | -1 049 | -1 239 | -601 | -1 819 |
| Defi cit / surplus (-) | 1 013 | 1 183 | 1 105 | 876 | 2 416 |
| Experience adjustments on plan liabilities | -12 | 6 | 22 | 34 | 44 |
| Experience adjustments on plan assets | 6 | 336 | -95 | -24 | 6 |
(*) Figures not restated following the elimination of the proportional consolidation as it would not have been practical and the impact would not be signifi cant.
Of which historical development of post-employment medical plans:
| EUR million | 2007(*) | 2008(*) | 2009(*) | 2010 | 2011 |
|---|---|---|---|---|---|
| Defi ned benefi t obligation | 142 | 106 | 79 | 75 | 113 |
| Experience adjustments on plan liabilities | 2 | 0 | -1 | 12 | -1 |
These provisions stand at EUR 791 million, compared with EUR 459 million at the end of 2010. These are intended to cover the liabilities and charges of the following main problem areas:
The acquisition of Rhodia has brought provisions linked to various types of pollution (organic, inorganic) coming from miscellaneous specialty chemicals productions; these provisions are mainly covering stopped activities or closed plants; most of these provisions have an horizon of 1 to 20 years.
The estimated amounts are discounted based on the probable date of disbursement. As well as being updated annually, provisions are adjusted every year to refl ect the increasing proximity of such disbursement.
Provisions for litigation stand at EUR 611 million at the end of 2011 compared with EUR 437 million at the end of 2010. This increase mainly comes from the acquisition of Rhodia at September 30th, 2011 for EUR 228 million including contingent liabilities for EUR 59 million.
The main provisions at the end of 2011 serve to cover:
Other provisions, set up to cover specifi c risks such as obligations related to the shutdown or disposal of activities, amount to EUR 153 million, compared with EUR 108 million at the end of 2010. The increase in mainly related to the integration of Rhodia (EUR 58 million).
Solvay's group policy is only to use insurance to cover very large risks, when insurance is required by law as well as whenever insurance represents the best fi nancial solution for Solvay.
The Group maintains and develops appropriate insurance coverage for insurable risks in line with the policy to limit the fi nancial impact of risks that could materialize.
In 2011, the global insurance programs were renewed with improved coverage and at a lower level of premium. The work with consolidating Rhodia risk with the rest of Solvay in common insurance programs was started and continues into 2012. This consolidation leads to improved coverage and lower total premium levels compared to the situation with separate insurance programs.
The Group's net indebtedness is the balance between its fi nancial debts and other current receivables – fi nancial instruments and cash and cash equivalents. It amounted to a net indebtedness of EUR 1 760 million at the end of 2011 compared to a net positive net fi nancial position of EUR 2 993 million (excess treasury) at the end of 2010, mainly resulting from the cash proceeds from the sale of the Pharmaceuticals activities (EUR 4.5 billion) and of Inergy Automotive Systems (EUR 268 million).
| EUR million | 2010 | 2011 |
|---|---|---|
| Financial debt | 2 683 | 4 168 |
| - Other current receivables - Financial instruments | -3 722 | -464 |
| - Cash and cash equivalents | -1 954 | -1 943 |
| Net indebtedness | -2 993 | 1 760 |
Liabilities (+) / Assets (-)
Following the acquisition of Rhodia (for EUR 6.6 billion Entreprise value and EUR 4 billion cash payment) in September 2011, Solvay's long term rating has been confi rmed by two rating agencies: at BBB+ (negative outlook) at Standard and Poors and Baa1 (negative outlook) at Moody's. Solvay took over a Rhodia net debt of EUR 632 million at closing date.
Financial debt increased from EUR 2 683 million at the end of 2010 to EUR 4 168 million at the end of 2011, following the acquisition of Rhodia.
| EUR Million | 2010 | 2011 |
|---|---|---|
| Subordinated loans | 503 | 504 |
| Bonds | 1 481 | 2 400 |
| Long-term fi nance lease obligations | 1 | 0 |
| Long-term debts to fi nancial institutions | 429 | 337 |
| Other long-term debts | 122 | 133 |
| Amount due within 12 months (shown under current liabilities) | 45 | 106 |
| Other short-term borrowings (including overdrafts) | 103 | 688 |
| Total fi nancial debt (short and long-term) | 2 683 | 4 168 |
The largest borrowings maturing after 2011 are:
| EUR million (except where indicated) |
2010 | 2011 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Nominal amount |
Coupon | Maturity | Secured | Amount at amortized cost |
Fair value | Amount at amortized cost |
Fair value |
|||
| EMTN bonds issued by Solvay SA (Belgium) |
500 | 4.99% | 2 014 | No | 496 | 535 | 495 | 525 | ||
| EMTN bonds issued by Solvay SA (Belgium) |
500 | 300 | 4.75% | 2 018 | No | 485 | 541 | 489 | 538 | |
| 200 | (tap) | 5.71% | ||||||||
| Retail | 500 | 5.01% | 2 015 | No | 500 | 542 | 499 | 534 | ||
| European Investment Bank |
300 | 3.90% | 2 016 | No | 300 | 317 | 300 | 330 | ||
| Deeply subordinated debt issued by Solvay Finance SA (France) with support from Solvay SA (Belgium) |
500 | (1) | 6.375% | 2 104 | No | 497 | 512 | 497 | 485 | |
| Senior note Rhodia (3) | 500 | 7.00% | 2 018 | No | 555 | 539 | ||||
| Senior note Rhodia (USD 400 million) (3) |
309 | (2) | 6.875% | 2 020 | No | 362 | 336 | |||
| Solvin | 120 | not disclosed |
2 012 | not disclosed |
120 | 120 | 120 | 120 | ||
| Solvay Indupa do Brazil (BRL 159 million) |
66 | (4) | not disclosed |
2 014 | not disclosed |
66 | 66 | 66 | 66 | |
| Total | 3 295 | 2 464 | 2 633 | 3 383 | 3 473 |
(1) Rating agencies Moody's and Standard & Poors have treated this issue as part equity (50%), part debt (50%). In IFRS, however, it must be treated 100% as debt. This debt is subordinated to the other debts of the Group and is listed in Luxembourg. The coupon carries a fi xed rate for the fi rst ten years. In 2016 the coupon converts to a fl oating rate (3-month Euribor + 335 basis points) until maturity in 2104. Solvay has an option to redeem this issue at par from 2016 onward. The issuer has a coupon nonpayment option governed by the rules of the coupon carry-forward mechanism.
(2) Rhodia senior notes 2018 & 2020 were consolidated in Solvay Group account at their market price at the time of the acquisition (September 2011 – see also section on the Purchase Price Allocation (PPA)) (3) equivalent to 400 MUSD; 1 EUR = 1.2949 USD (Dec. 31, 2011)
(4) equivalent to 159 M BRL; 1 EUR = 2.4159 BRL (Dec. 31, 2011)
At the end of October 2011, Solvay exercised the call on Rhodia's Floating Rate Notes and reimbursed the outstanding nominal amount of EUR 229 million.
There is no default on the above-mentioned fi nancial debt. There are no covenants on Solvay SA, on Rhodia SA and on any of the group's holding fi nancial vehicles.
Both Solvay's and Rhodia's senior unsecured bonds outstanding are 'BBB+', according to S&Ps. According to Moody's, there is one notch difference between the ratings of Solvay's unsecured bonds (Baa1) and Rhodia's unsecured bonds (Baa2).
Management considers that the fair value of the fl oating rate debt (EUR 1 050 million) is not signifi cantly different from its face value (EUR 1 050 million - see also note 33 managing interest rate risk). The fair value is based on the quoted market price at the end of 2011. Long-term debt is measured at amortized cost.
The total cash available, cumulating the "Other current receivables – fi nancial instruments" and "cash and cash equivalents"', amounted to EUR 2 407 million at the end of 2011 (after the acquisition of Rhodia for a total cash amount of EUR 3 953 million) compared to EUR 5 676 million at the end of 2010 (including EUR 4.7 billion from the proceeds of the Pharmaceuticals activities and the sale of Inergy Automotive Systems).
In 2010 and 2011, the proceeds from the sale of the Pharmaceuticals activities and Inergy Automotive Systems were invested in highest rated short duration fi nancial instruments: government bonds (Germany, The Netherlands) and treasury instruments. At the end of 2011, the remaining portion (~EUR 800 million) is still invested according to those criteria in the following instruments:
| EUR Million | Classifi cation | 2010 | 2011 |
|---|---|---|---|
| Money Market Fund (MMF) | Assets available for sale | 1 097 | 392 |
| Bonds and Treasury Bills of more than 3 months | Assets held to maturity | 2 604 | 30 |
| Financial current account | 21 | 25 | |
| Other current fi nancial assets | 0 | 17 | |
| Other current receivables - Financial instruments | 3 722 | 464 |
The underlying instruments in the Money Market Funds (MMF) are valued on a daily basis but the funds are managed in such a way that the overall net asset value of each fund is stable.
Financial current account represents loans from companies fully consolidated to companies consolidated according to the equity method. They are rather stable at the end of 2011 compared to 2010.
The "other current fi nancial assets" mainly includes fi nancial assets at fair value through profi t and loss. The management has opted to consider the bonds and treasury bills of more than 3 months as assets held to maturity, which are therefore not marked to market.
Cash and cash equivalents amounted to EUR 1 943 million at the end of 2011, stable compared to the end of 2010.
| EUR Million | Classifi cation | 2010 | 2011 |
|---|---|---|---|
| Shares | Available for sale | 23 | 274 |
| Fixed-income securities | Available for sale | 8 | 162 |
| Term deposits | Loans and Receivables | 224 | 700 |
| Bonds and Treasury Bills of less than 3 months | Held to maturity | 905 | 0 |
| Cash | Loans and Receivables | 793 | 807 |
| Cash and cash equivalents | 1 954 | 1 943 |
The carrying amount is the fair value of the shares, fi xed income securities and term deposits. Management has opted to classify the bonds and treasury bills of less than 3 months as assets held to maturity, which are therefore not marked to market.
The following table gives an overview of the carrying amount of all fi nancial instruments by class and by category as defi ned by IAS 39 – Financial Instruments: Recognition and Measurement.
| 2010 | 2011 | |
|---|---|---|
| EUR Million | Carrying | Carrying |
| amount | amount | |
| Financial assets classifi ed as held for trading (*) | 0 | 173 |
| Derivative instruments in designated hedge accounting relationships (*) | 3 | 128 |
| Available-for-sale investments - New Business Development / AGS (former Fortis) | 62 | 80 |
| Loans and receivables (including trade receivables, loans and other non-current assets | 1 969 | 2 726 |
| except pension fund surpluses) | ||
| Other current receivables - fi nancial instruments (classifi cation: see previous | ||
| page) | ||
| Money Market Funds (**) | 1 097 | 392 |
| Bonds and treasury bills of more than 3 months (**) | 2 604 | 30 |
| Financial current account (**) | 21 | 25 |
| Other current fi nancial assets (**) | 0 | 17 |
| Cash and cash equivalents (classifi cation: see previous page) | ||
| Cash and cash equivalents - Bonds and treasury bills of less than 3 months (**) | 905 | 0 |
| Cash and cash equivalents excluding bonds and treasury bills of less than 3 months (**) | 1 049 | 1 943 |
| Total Financial assets | 7 710 | 5 514 |
| Financial liabilities classifi ed as held for trading (*) | -7 | -179 |
| Derivative instruments in designated hedge accounting relationships (*) | -1 | -104 |
| Financial liabilities measured at amortized cost (includes long-term fi nancial debt, other | -4 257 | -6 674 |
| non-current liabilities, short-term fi nancial debt, trade liabilities and dividends payable | ||
| included in other current liabilities) | ||
| Financial lease liabilities | -1 | 0 |
| Total Financial liabilities | -4 266 | -6 957 |
(*) Including derivatives on Foreign exchange interest rate, commodity and carbon credit as detailed below (3. Financial instruments measured at fair value in the consolidated fi nancial statements). (**)The total amount corresponds to the "other receivables - fi nancial instrument" in the statement of fi nancial position (EUR 3 722 Million in 2010 and EUR 464 million in 2011) and the "cash & cash equivalents" (EUR 1954 million in 2010 and EUR 1943 million in 2011).
| 2010 | 2011 | |||
|---|---|---|---|---|
| EUR Million | Carrying | Fair | Carrying | Fair value |
| amount | value | amount | ||
| Loans and receivables (including trade receivables, loans and other | 1 969 | 1 969 | 2 726 | 2 726 |
| non-current assets except pension fund surpluses) | ||||
| Other current receivables - fi nancial instruments (classifi cation: | ||||
| see previous page) | ||||
| Bonds and treasury bills of more than 3 months | 2 604 | 2 604 | 30 | 30 |
| Financial current account | 21 | 21 | 25 | 25 |
| Other current fi nancial assets | 0 | 0 | 17 | 17 |
| Cash and cash equivalents (classifi cation: see previous page) | ||||
| Cash and cash equivalents - Bonds and treasury bills of less than 3 months |
905 | 905 | 0 | 0 |
| Cash and cash equivalents excluding bonds and treasury bills of less than 3 months |
1 049 | 1 049 | 1 943 | 1 943 |
| Total Financial assets | 6 548 | 6 548 | 4 741 | 4 741 |
| Financial liabilities measured at amortized cost (includes long-term | -4 257 | -4 426 | -6 674 | -6 765 |
| fi nancial debt, other non-current liabilities, short-term fi nancial debt, | ||||
| trade liabilities and dividends payable included in other current | ||||
| liabilities) | ||||
| Financial lease liabilities | -1 | -2 | 0 | 0 |
| Total Financial liabilities | -4 258 | -4 428 | -6 674 | -6 765 |
Solvay's New Business Development (NBD) activity has built a Corporate Venturing portfolio which is made of direct investments in start-up companies and of investments in Venture Capital funds. All these investments are related to the NBD platforms. They are all valued at fair market value according to the valuation guidelines published by the European Private Equity and Venture Capital Association.
The fair values of fi nancial assets and fi nancial liabilities with standard terms and conditions and traded on active liquid markets are quoted market prices.
The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, a discounted cash fl ow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives
Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts.
Interest rate swaps are measured at the present value of future cash fl ows estimated and discounted based on the applicable yield curves derived from quoted interest rates.
Fixed for fl oating energy price swaps and options are measured using quoted forward energy prices and yield curves derived from quoted interest rates matching the maturities of the swaps.
The fair values of other fi nancial assets and fi nancial liabilities (excluding those described above) are determined in accordance with generally accepted pricing models based on discounted cash fl ow analysis. Specifi cally, signifi cant assumptions used in determining the fair value of the following fi nancial assets and liabilities are set out below.
The following table provides an analysis of fi nancial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
| EUR Million | Level 1 | 2010 Level 2 |
Level 3 | Total |
|---|---|---|---|---|
| Financial assets classifi ed as held for trading | ||||
| - Derivative fi nancial assets | ||||
| ° Foreign exchange contracts and swaps | ||||
| ° Foreign currency options | ||||
| ° Interest rate swaps | ||||
| ° Other interest rate derivatives | ||||
| ° Energy fi xed for fl oating prices swaps | 0 | 0 | ||
| ° CO2 certifi cates swaps and forward contracts |
0 | 0 | ||
| - Non-derivative fi nancial assets | ||||
| Derivative instruments in designated hedge accounting | ||||
| relationships | ||||
| ° Foreign exchange contracts and swaps | 1 | 1 | ||
| ° Foreign currency options | ||||
| ° Interest rate swaps | ||||
| ° Other interest rate derivatives | ||||
| ° Energy fi xed for fl oating prices swaps | 2 | 2 | ||
| Available-for-sale investments | ||||
| - New Business Development | 35 | 35 | ||
| - AGEAS (former Fortis) | 27 | 27 | ||
| - Other current receivables - fi nancial instruments (Money | 1 097 | 1 097 | ||
| Market Funds) | ||||
| Total Financial assets | 1 124 | 3 | 35 | 1 162 |
| Financial liabilities classifi ed as held for trading | ||||
| - Derivative fi nancial liabilities | ||||
| ° Foreign exchange contracts and swaps | -9 | -9 | ||
| ° Foreign currency options | ||||
| ° Interest rate swaps | ||||
| ° Other interest rate derivatives | ||||
| ° Energy fi xed for fl oating prices swaps | 0 | 0 | ||
| ° CO2 certifi cates swaps and forward contracts |
1 | 1 | ||
| - Non-derivative fi nancial liabilities | ||||
| Derivative instruments in designated hedge accounting | ||||
| relationships | ||||
| ° Foreign exchange contracts and swaps | -1 | -1 | ||
| ° Foreign currency options | ||||
| ° Interest rate swaps | ||||
| ° Other interest rate derivatives | ||||
| ° Energy fi xed for fl oating prices swaps | ||||
| Total Financial liabilities | 0 | -8 | 0 | -8 |
| 2011 | ||||
|---|---|---|---|---|
| EUR Million | Level 1 | Level 2 | Level 3 | Total |
| Financial assets classifi ed as held for trading | 0 | |||
| - Derivative fi nancial assets | 0 | |||
| ° Foreign exchange contracts and swaps | 9 | 9 | ||
| ° Foreign currency options | 0 | |||
| ° Interest rate swaps | 0 | |||
| ° Other interest rate derivatives | 0 | |||
| ° Energy fi xed for fl oating prices swaps | 6 | 6 | ||
| ° CO2 certifi cates swaps and forward contracts |
142 | 3 | 145 | |
| ° CO2 options |
13 | 13 | ||
| - Non-derivative fi nancial assets | 0 | |||
| Derivative instruments in designated hedge accounting | 0 | |||
| relationships | ||||
| ° Foreign exchange contracts and swaps | 2 | 2 | ||
| ° Foreign currency options | 1 | 1 | ||
| ° Interest rate swaps | 0 | |||
| ° Other interest rate derivatives | 0 | |||
| ° Energy fi xed for fl oating prices swaps | 0 | |||
| ° CO2 certifi cates swaps and forward contracts |
125 | 125 | ||
| Available-for-sale investments | 0 | |||
| - New Business Development | 61 | 61 | ||
| - AGEAS (former Fortis) | 19 | 19 | ||
| - Other current receivables - fi nancial instruments (Money Market Funds) |
392 | 392 | ||
| Total Financial assets | 424 | 279 | 70 | 773 |
| Financial liabilities classifi ed as held for trading | 0 | |||
| - Derivative fi nancial liabilities | 0 | |||
| ° Foreign exchange contracts and swaps | -17 | -17 | ||
| ° Foreign currency options | 0 | |||
| ° Interest rate swaps | -1 | -1 | ||
| ° Other interest rate derivatives | 0 | |||
| ° Energy fi xed for fl oating prices swaps | -0 | -1 | -1 | |
| ° Energy option | -0 | -0 | ||
| ° CO2 certifi cates swaps and forward contracts |
-133 | -15 | -148 | |
| ° CO2 options |
-7 | -4 | -11 | |
| - Non-derivative fi nancial liabilities | 0 | |||
| Derivative instruments in designated hedge accounting | 0 | |||
| relationships | ||||
| ° Foreign exchange contracts and swaps | -48 | -48 | ||
| ° Foreign currency options | 0 | |||
| ° Interest rate swaps | 0 | |||
| ° Other interest rate derivatives | 0 | |||
| ° Energy fi xed for fl oating prices swaps | -1 | -1 | ||
| ° CO2 certifi cates swaps and forward contracts |
-55 | -55 | ||
| Total Financial liabilities | -7 | -256 | -20 | -283 |
Changes in 2011 compared to 2010 are related to the acquisition of Rhodia.
The category "fi nancial assets held for trading" usually contains fi nancial instruments that are used for treasury management, foreign exchange rate, commodity or carbon instrument risk management, but which are not documented in a way which allows them to be treated as hedging instruments. The change in 2011 relates to the acquisition of Orbeo Climate Care (carbon instruments).
Reconciliation of level 3 fair value measurements of fi nancial assets:
| 2010 | ||||||
|---|---|---|---|---|---|---|
| At fair value through profi t | Available-for-sale | Total | ||||
| or loss | ||||||
| EUR Million | Derivatives | Non | Shares | Other | ||
| derivatives | ||||||
| Opening balance at January 1 | 27 | 27 | ||||
| Total gains or losses | ||||||
| - Recognized in the income statement | ||||||
| - Recognized in other comprehensive income | ||||||
| Acquisitions | 8 | 8 | ||||
| Disposals | ||||||
| Reclassifi cation from investment in associate to | ||||||
| available-for-sale fi nancial assets | ||||||
| Transfers out of level 3 | ||||||
| Derivative instruments in designated hedge accounting | ||||||
| relationships | ||||||
| Closing balance at December 31 | 35 | 35 |
| 2011 | |||||
|---|---|---|---|---|---|
| At fair value through profi t | Available-for-sale | Total | |||
| or loss | |||||
| EUR Million | Derivatives | Non | Shares | Other | |
| derivatives | |||||
| Opening balance at January 1 | 35 | 35 | |||
| Total gains or losses | |||||
| - Recognized in the income statement | -7 | -7 | |||
| - Recognized in other comprehensive income | |||||
| Acquisitions | -4 | 26 | 22 | ||
| Disposals | |||||
| Reclassifi cation from investment in associate to available | |||||
| for-sale fi nancial assets | |||||
| Transfers out of level 3 | |||||
| Derivative instruments in designated hedge accounting | |||||
| relationships | |||||
| Closing balance at December 31 | -11 | 61 | 50 |
Income and expenses on fi nancial instruments break down as follows:
| EUR Million | 2010 | 2011 |
|---|---|---|
| Recognized in the income statement | ||
| Recycling from equity of changes in the fair value of currency cash fl ow hedges (see next table) |
0 | -1 |
| Change in the fair value of currency cash fl ow hedge | -7 | -6 |
| Recycling from equity of changes in the fair value of energy cash fl ow hedges (see next table) |
1 | 2 |
| Change in the fair value of energy cash fl ow hedge | 1 | 15 |
| Recognized in the gross margin | -5 | 10 |
| Interest on loans and receivables | 2 | 3 |
| Changes in the fair value of fi nancial instruments held for trading (energy/ CO2 emission rights) |
-1 | -3 |
| Changes in the fair value of fi nancial instruments held for trading (currency) | 0 | -4 |
| Ineffective portion of the changes in fair value of cash fl ow hedges | 0 | 6 |
| Recognized in other operating gains and losses | 0 | 2 |
| Interest expense on fi nancial liabilities at amortized cost (cost of borrowings) | -138 | -159 |
| Interest income on cash and cash equivalents (including bonds < 3 months) | 8 | 26 |
| Interest income on other current fi nancial assets (incl Money Market Funds and bonds > 3 months) |
14 | 12 |
| Other gains and losses on net indebtedness | -10 | -15 |
| Recognized in charges on net indebtedness | -125 | -136 |
| Income/loss from available-for-sale investments | 0 | 1 |
| Capital gain on available-for-sale investment posted directly to the income statement |
0 | 0 |
| Recycling from equity of unrecognized gain and losses related to disposed of available-for-sale fi nancial assets (see next table) |
0 | 0 |
| Recycling from equity of impairment losses on available-for-sale fi nancial assets (see next table) |
-1 | 0 |
| Net result from equity method | 46 | 61 |
| Total recognized in the income statement | -86 | -61 |
The currency cash fl ow hedge corresponds to forward contracts aimed at hedging forecasted fl ows in currencies, mainly USD, JPY, BRL and KRW .
The change in the fair value of fi nancial instruments held for trading refers to forward exchange contracts related to the net cash position.
The impairment losses on available-for-sale fi nancial assets recycled from equity are related to New Business Development.
| EUR Million | 2010 | 2011 |
|---|---|---|
| Recognized directly in equity | ||
| Net change in the fair value of available-for-sale fi nancial assets |
-15 | -8 |
| Recycling to the income statement of unrecognized gain and losses related to disposed of available-for-sale fi nancial assets |
0 | 0 |
| Recycling to the income statement of impairment losses on available-for-sale fi nancial assets |
1 | 0 |
| Available-for-sale fi nancial assets | -14 | -8 |
| Effective portion of changes in fair value of cash fl ow hedge |
2 | 5 |
| Recycling to the income statement of changes in the fair value of currency cash fl ow hedges |
0 | 1 |
| Recycling to the income statement of changes in the fair value of energy cash fl ow hedges |
-1 | -2 |
| Recycling to the initial carrying amounts of hedged items | 0 | 0 |
| Cash fl ow hedges | 1 | 3 |
| Total | -13 | -5 |
Conventionally, (+) indicates an increase and (-) a reduction in equity.
In 2010 and 2011, the net change in the fair value of available-for-sale fi nancial assets recognized directly in equity relates mainly to the AGEAS (former Fortis) shares.
See item 2 in the Corporate Governance section of this report.
The Group is exposed to market risks from movements in exchange rates, interest rates and other market prices (energy prices, carbon credits and equity prices). The Solvay group uses derivatives to hedge clearly identifi ed foreign exchange, interest rate, energy and carbon credit price risks (hedging instruments). However, the required criteria to apply hedge accounting according to IFRS are not met in all cases. This means that this form of accounting cannot always be applied when the Group covers its economic risks. The Group's foreign exchange risk hedging policy is based essentially on the principles of fi nancing its activities in local currency, systematically hedging transactional (see below) exchange risk at the time of invoicing (risks which are certain) and monitoring and hedging where appropriate exchange rate positions generated by the Group's activities, based on expected cash fl ows.
Furthermore, the Group is also exposed to liquidity risks and credit risks.
The Group does not enter into or trade fi nancial instruments, including derivative fi nancial instruments, for speculative purposes.
See item Foreign exchange risk on page 152 in the Management of Risks section of this report. The Group undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fl uctuations arise. Exchange rate exposures are managed within approved policy parameters utilizing forward foreign exchange contracts or other derivatives like currency options.
The Group's currency risk can be split into two categories: translation and transactional risk.
The translation exchange risk is the risk affecting the Group's consolidated accounts related to subsidiaries operating in a currency other than the EUR (the Group's functional currency), the main other currency being the US dollar, Japanese Yen and Brazilian Real.
During 2011, the Solvay group did not hedge the currency risk of foreign operations.
Exchange rate fl uctuations, particularly of the US dollar and Brazilian Real, can affect earnings. In the course of 2011 the EUR / USD exchange rate moved from 1.3362 at the start of January to 1.2939 at the end of December.
The transactional risk is the exchange risk linked to a specifi c transaction, such as a Group company buying or selling in a currency other than its functional currency.
The Group manages the transactional risk on receivables and borrowings at the level of Solvay CICC in Belgium for the Solvay operations and through Rhodia SA, Brazilian and South Korean affi liates for the Rhodia sector operations.
The choice of borrowing currency depends mainly on the opportunities offered by the various markets. This means that the selected currency is not necessarily that of the country in which the funds will be invested. Nonetheless, operating entities are fi nanced essentially in their own local currencies, with this currency being obtained, where appropriate, by currency swaps against the currency held by the fi nancing company. The cost of these currency swaps is included under the cost of borrowing. These enable us to limit the exchange risk both in the fi nancial company and in the company fi nally using the funds.
In emerging countries it is not always possible to borrow in local currency, either because local fi nancial markets are too narrow or funds are not available, or because the fi nancial conditions are too onerous. In such a situation the Group has to borrow in a different currency. Nonetheless the Group has taken advantage of any opportunities to refi nance its borrowing in emerging countries with local currency debt.
Since Solvay subsidiaries assign their foreign exchange transactions (e.g. customer invoices, supplier invoices) to Solvay CICC, the Group's foreign exchange position is centralized at Solvay CICC. Operating subsidiaries are no longer in charge of exchange risk management. The centralized exchange position is then managed under rules and specifi c limits which have been set by the Group.
Within Rhodia sector, the exposure to short-term fl uctuations in exchange rates is limited by calculating on a daily basis the net exposure to foreign currencies in transactions, including trade payables and receivables, fi nancial items, and by using derivatives to reduce such exposure.
The main fi nancial instruments used are the spot and forward purchase and sale of currencies; forward currency sales and the purchase of options.
The Group hedged its 2011 exposure in an amount of USD 260 million nominal and USD 128 million net (USD 194 million on sales and USD 66 million on purchases) compared to USD 20 million net in 2010. The Group hedged its 2011 exposure in an amount of JPY 5978 million on sales. By using fi nancial instruments to hedge its medium-term currency exchange risk, Solvay is exposed to the risks attached to these foreign currency derivatives. The Group uses derivatives to hedge clearly identifi ed foreign exchange rate risks (hedging instruments). At the end of 2011, the Group had hedged forecasted sales in a nominal amount of USD 679 million on sales and USD 21 million on purchases; and JPY 12327 million via forward foreign exchange contracts.
The following table details the forward exchange contracts outstanding at the end of the period:
| Notional amount | Fair value assets | Fair value liabilites | ||||
|---|---|---|---|---|---|---|
| EUR Million | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 |
| Cash fl ow hedges | ||||||
| - Forward exchange contracts | 99 | 948 | 1 | 2 | -1 | -48 |
| - Average rate options (ARO) | 0 | 0 | 0 | 0 | 0 | 0 |
| - Foreign exchange vanilla options | 0 | 8 | 0 | 1 | 0 | 0 |
| Held for trading | ||||||
| - Forward exchange contracts | 764 | 1 710 | 0 | 9 | -9 | -17 |
| - Average rate options (ARO) | 0 | 0 | 0 | 0 | 0 | 0 |
| - Foreign exchange options with | 0 | 16 | 0 | 0 | 0 | 0 |
| barriers | ||||||
| Total | 863 | 2 682 | 1 | 12 | -10 | -65 |
The following table details the Group's sensitivity in profi t or loss and equity to a 10% increase and decrease in EUR against USD and JPY as well as in BRL against USD.
10% represents the management's assessment of a reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated assets and liabilities and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. It includes also the foreign exchange derivatives (not designated for hedging).
A positive number below indicates an increase in profi t or equity when EUR strengthens 10% against USD or JPY (same for BRL against USD).
For a 10% weakening of EUR against USD or JPY, there would be a comparable impact on the profi t or equity (the balances would be negative) (same for BRL against USD).
| Strengthening of EUR vs USD |
Strengthening of EUR vs JPY |
Strengthening of BRL vs USD |
||||
|---|---|---|---|---|---|---|
| EUR Million | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 |
| Profi t or loss | 0 | 6 | 0 | 0 | 0 | 0 |
| Equity | 1 | 21 | 5 | 12 | 0 | 41 |
See item 'Interest rate risks' on page 152 in the Management of Risks section of this report. Interest rate risk is managed at Group level.
The Group is exposed to interest rate risk because entities in the Group borrow funds at both fi xed and fl oating interest rates. Interest rate risk is managed at Group level by maintaining an appropriate mix between fi xed and fl oating rate borrowings.
At December 31, 2011, around EUR 3.1 billion of the Group's gross debt was at fi xed-rate: mainly
Interest rate exposure by currency is summarized below:
| EUR Million | At December 31, 2010 | At December 31, 2011 | |||||
|---|---|---|---|---|---|---|---|
| Currency | Fixed | Floating | Total | Fixed | Floating | Total | |
| rate | rate | rate | rate | ||||
| Financial liabilities | |||||||
| EUR | -2 300 | -37 | -2 337 | -2 803 | -557 | -3 360 | |
| USD | -1 | -8 | -9 | -311 | -231 | -542 | |
| GBP | 0 | 0 | 0 | -1 | -1 | ||
| BRL | 0 | -122 | -122 | -98 | -98 | ||
| Other | 0 | -215 | -215 | -4 | -163 | -167 | |
| Total | -2 301 | -382 | -2 683 | -3 118 | -1 050 | -4 168 | |
| Cash and cash equivalents | |||||||
| EUR | 905 | 342 | 1 247 | 0 | 1 035 | 1 035 | |
| USD | 0 | 519 | 519 | 0 | 446 | 446 | |
| JPY | 0 | 21 | 21 | 0 | 27 | 27 | |
| BRL | 0 | 18 | 18 | 0 | 135 | 135 | |
| Other | 0 | 149 | 149 | 0 | 301 | 301 | |
| Total | 905 | 1 049 | 1 954 | 0 | 1 943 | 1 943 | |
| Other current fi nancial assets | |||||||
| EUR | 2 604 | 1 118 | 3 722 | 30 | 434 | 464 | |
| USD | 0 | 0 | 0 | 0 | 0 | 0 | |
| JPY | 0 | 0 | 0 | 0 | 0 | 0 | |
| BRL | 0 | 0 | 0 | 0 | 0 | 0 | |
| Other | 0 | 0 | 0 | 0 | 0 | 0 | |
| Total | 2 604 | 1 118 | 3 722 | 30 | 434 | 464 | |
| Total | 1 208 | 1 785 | 2 993 | -3 088 | 1 328 | -1 760 |
* Loans to companies consolidated in equity method included as fl oating (EUR 21 million in 2010 and EUR 25 million in 2011)
75% of fi nancial debt is contracted at an average fi xed rate of 5.59% with a duration of ~5 years; the fi rst signifi cant maturity for debt reimbursement will not occur until 2014.
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and nonderivative instruments at the end of the reporting period. For fl oating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 1% increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management's assessment of the reasonably possible change in interest rates.
Impact of interest rate changes at the end of 2011:
Orbeo Climate Care entered into interest rate swaps not designated for hedging purposes. The following table details the interest rate swaps outstanding at the end of December 2011:
| Notional amount | Fair value assets | Fair value liabilites | ||||
|---|---|---|---|---|---|---|
| EUR Million | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 |
| Held for trading | ||||||
| - interest rate instruments (Swap) | 0 | 39 | 0 | 0 | 0 | -1 |
A sudden 1% fl uctuation in interest rate at the year end would have no material impact on profi t or loss, since the other variables are considered to be constant.
The Group purchases a large portion of its coal and gas needs in Europe and the US based on fl uctuating liquid market indices. In order to reduce the price volatility of coal and gas on production costs, the Group has developed a policy for exchanging variable price against fi xed price through fi nancial swap contracts. Most of these hedging contracts meet the criteria to apply hedge accounting as defi ned by IFRS.
Financial hedging of energy risks is managed centrally by Solvay Energy SA on behalf of the Group entities, which show the residual risk in their accounts.
Solvay hedges future selling prices of CERs (CO2 emissions reduction certifi cates) mainly through forward CER sales via Orbeo Climate Care.
Orbeo Climate Care's policy is to maintain a residual exposure to CER prices close to zero, hence its purchases of CER from Solvay are systematically hedged by forward sales on the same maturity.
Orbeo Climate Care also carry out trading transactions of primary or guaranteed carbon credits, whose residual price exposure is also maintained close to zero.
Notional amount Fair value assets Fair value liabilites EUR Million 2010 2011 2010 2011 2010 2011 Held for trading - Energy swaps, forward and contracts 1 41 0 6 0 -2 - CO2 options 0 193 0 13 0 -11 - CO2 certifi cates swaps and forward contract 9 1 095 0 145 1 -148 Cash fl ow hedges (*) - Energy swaps 7 18 2 0 0 -1 - CO2 certifi cates swaps and forward contract 0 192 0 125 0 -55
Total 17 1 539 2 289 1 -217
The following tables detail the notional principal amounts and remaining terms of energy price swaps and CO2 derivatives outstanding at the end of the reporting period:
* Less than one year.
See item 'Counterparty risk' on page 152 in the Management of Risks section of this report
In 2011, trade receivables represented 62 days' sales. The carrying value of the trade receivables is a good approximation of the fair value at statement of fi nancial position (balance sheet) closing date.
There is no signifi cant concentration of credit risk at Group level to the extent that the receivables risk is spread over a large number of customers and markets.
The ageing of trade receivables, other current receivables - other, loans and other non-current assets is as follows:
| 2010 EUR million | Total | with | of which receivables without write-down | |||||
|---|---|---|---|---|---|---|---|---|
| write | not | less than | between | between | more than | |||
| down | past due | 30 days | 30 & 60 days | 60 & 90 days | 90 days | |||
| past due | past due | past due | past due | |||||
| Trade receivables | 1 651 | 10 | 1 506 | 101 | 17 | 5 | 12 | |
| Other current receivables - other | 533 | 1 | 525 | 2 | 1 | 0 | 4 | |
| Loans and other non-current assets | 322 | 0 | 322 | 0 | 0 | 0 | 0 | |
| Total | 2 505 | 10 | 2 353 | 103 | 18 | 6 | 16 |
| 2011 EUR million | Total | with | of which receivables without write-down | |||||
|---|---|---|---|---|---|---|---|---|
| write | not | less than | between | between | more than | |||
| down | past due | 30 days | 30 & 60 days | 60 & 90 days | 90 days | |||
| past due | past due | past due | past due | |||||
| Trade receivables | 2 311 | 1 | 2 137 | 74 | 12 | 8 | 79 | |
| Other current receivables - other | 938 | 11 | 907 | 3 | 1 | 0 | 17 | |
| Loans and other non-current assets | 420 | 0 | 420 | 0 | 0 | 0 | 0 | |
| Total | 3 669 | 12 | 3 463 | 77 | 13 | 8 | 96 |
'Other current receivables – other' consists essentially of other receivables, deferred charges and accrued income. Other non-current assets consist essentially of pension fund surpluses and other amounts receivable after more than one year. This balance includes a cash deposit made as a guarantee for the good execution of the fi ne imposed by the European Commission in connection with antitrust rules.
The table below shows the evolution of write-downs on trade receivables, other current receivables - other, loans and other non-current assets.
| EUR Million 2010 |
2011 |
|---|---|
| At 1 January -118 |
-20 |
| Net change 98 |
-118 |
| At 31 December -20 |
-139 |
For credit risk regarding other fi nancial assets, we refer to the related notes.
See item "Liquidity risk" on page 152 in the Management of Risks section of this report.
Liquidity Risk relates to Solvay's ability to service and refi nance its debt (including notes issued) and to fund its operations. This depends on its ability to generate cash from operations and not to over-pay for acquisitions.
The Finance Committee gives its opinion on the appropriate liquidity risk management for the Group's short-, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecasted and actual cash fl ows, and by matching the maturity profi les of fi nancial assets and liabilities.
The Group staggers the maturities of its fi nancing sources over time in order to minimize its liquidity risk.
The following tables detail the Group's remaining contractual maturity for its fi nancial liabilities with agreed repayment periods. The tables have been drawn up using the undiscounted cash fl ows of fi nancial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash fl ows. To the extent that interest fl ows are fl oating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Group may be required to pay.
| EUR Million | Total 2010 | on demand | in year two | in years | beyond fi ve |
|---|---|---|---|---|---|
| or within | three to fi ve | years | |||
| one year | |||||
| Outfl ows of cash related to fi nancial liabilities: | 4 769 | ||||
| Other non-current liabilities | 46 | 46 | |||
| Short-term fi nancial debt | 148 | 148 | |||
| Trade liabilities | 1 428 | 1 428 | |||
| Income tax payable | 62 | 62 | |||
| Dividends payables | 100 | 100 | |||
| Other current liabilities | 450 | 450 | |||
| Long-term fi nancial debt | 2 535 | 0 | 72 | 1 479 | 984 |
| Total fi nancial debt (short and long-term) | 2 683 | 148 | 72 | 1 479 | 984 |
| EUR Million | Total 2011 | on demand | in year two | in years | beyond fi ve |
|---|---|---|---|---|---|
| or within | three to fi ve | years | |||
| one year | |||||
| Outfl ows of cash related to fi nancial liabilities: | 7 884 | ||||
| Other non-current liabilities | 174 | 174 | |||
| Short-term fi nancial debt | 794 | 794 | |||
| Trade liabilities | 2 232 | 2 232 | |||
| Income tax payable | 51 | 51 | |||
| Dividends payables | 100 | 100 | |||
| Other current liabilities | 1 159 | 1 159 | |||
| Long-term fi nancial debt | 3 374 | 0 | 97 | 1 844 | 1 433 |
| Total fi nancial debt (short and long-term) | 4 168 | 794 | 97 | 1 844 | 1 433 |
Most of the derivatives mature within 1 year.
In addition to the above-mentioned fi nancing sources, the Group also has access to the following instruments:
Based on the existing commitment at year end between the buyer and Solvay's management to sell the investment in Pipelife, the latter has been reclassifi ed to the heading Assets held for sale. Pipelife is part of the Plastics segment and is present in the Pipes and Fittings market.
According to a sales agreement signed with buyers, Solvay is committed to sell the facilities of Ixelles in 2012 after the decision to transfer the headquarter to Neder-Over-Hembeek. These facilities are almost fully depreciated.
The closing statement of fi nancial position (balance sheet) exchange rate for the US dollar changed from 1,3362 at the end of 2010 to 1.2939 at the end of 2011 and 1,3503 at the end of September when Rhodia started to be consolidated. The stronger US dollar leads to a positive currency translation difference. The total difference amounts to EUR + 35 million of which EUR +42 million for the Group's share, decreasing the balance from EUR -374 million at the end of 2010 to EUR -332 million at the end of 2011.
These differences represent the marking to market of available-for-sale investments and fi nancial derivatives used for hedging purposes.
In 2011, the negative variation of EUR -8 million is mainly related to a decrease in the fair value of the AGEAS (former Fortis) shares.
The fair value differences also include the marking to market of fi nancial instruments accounted for according to IAS 39 as cash fl ow hedges. Only the effective part of the hedge is recognized in equity, with the balance being taken directly into income. The variation in this effective part, recognized among fair value differences, amounted to EUR +8 million at the end of 2011.
When the fi nancial instrument designated as a hedge matures, its value recognized in equity is recycled to the income statement.
Although Rhodia and Solvay Groups evaluate their long-term employee benefi ts according to IFRS standards (IAS19 – Employee benefi ts), they had two different accounting policies. The accounting policies were aligned at the end of the third quarter when consolidated accounts including the employee benefi t obligations of both Groups are published. This led Solvay to align on Rhodia and to recognize changes to actuarial gains and losses outside profi t or loss directly in equity/OCI.
After the restatement in 2010 amounting to EUR -131 million due to the change in accounting policy, an amount of EUR -88 million (of which EUR -85 million for the Group's share) has been recognized in OCI for 2011.
| 2010 | 2011 | |
|---|---|---|
| Shares issued and fully paid in at 1/1/2011 | 84 701 | 84 701 |
| Capital increase | 0 | 0 |
| Shares issued and fully paid in at 31/12/2011 | 84 701 | 84 701 |
| Treasury shares held at 31/12/2011 | 3 636 | 3 499 |
| Shares authorized but not yet issued | 0 | 0 |
| Par value | 15 EUR / share | 15 EUR / share |
Information on the dividend proposed to the Shareholders' Meeting can be found in the Management Report.
See the consolidated data per share in the fi nancial information per share found in the Management report.
| EUR million | 2010 | 2011 |
|---|---|---|
| Commitments for the acquisition of tangible and intangible assets | 55 | 96 |
| of which: Joint ventures | 17 | 4 |
| EUR million 2010 |
2011 |
|---|---|
| Liabilities and commitments of third parties guaranteed by the company 238 |
373 |
| Environmental contingent liabilities 0 |
38 |
| Litigation and other major commitments 7 |
12 |
Within the framework of the annual review of HSE risk, environmental contingent liabilities for a total amount of EUR≈38 million have been identifi ed. The risk related to these contingencies is considered as remote. The liabilities and commitments of third parties guaranteed by the company relate mainly to VAT payment guarantees that have been issued.
The amounts relating to Joint Ventures are included in the table below.
| EUR million 2010 |
2011 | |
|---|---|---|
| Liabilities and commitments of third parties guaranteed by the company | 4 | 4 |
| Litigation and other major commitments | 0 | 0 |
The Joint Ventures are consolidated according to the equity method of accounting. The table below presents the summary balance sheet of the joint-ventures as if they were proportionately consolidated.
| EUR million | 2010 | 2011 |
|---|---|---|
| Non-current assets | 475 | 849 |
| Current assets | 255 | 314 |
| Non-current liabilities | 109 | 490 |
| Current liabilities | 253 | 254 |
| Sales | 892 | 690 |
| Cost of goods sold | -718 | -551 |
Balances and transactions between Solvay SA and its subsidiaries, which are related parties of Solvay SA, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.
| Sale of goods | Purchase of goods | |||
|---|---|---|---|---|
| EUR million | 2010 | 2011 | 2010 | 2011 |
| Joint ventures | 170 | 138 | 143 | 210 |
| Associates | 0 | 3 | 0 | 1 |
| Other related parties | 0 | 2 | 0 | 1 |
| Total | 170 | 143 | 143 | 212 |
| Amounts owed by related parties | Amounts owed to related parties | |||
|---|---|---|---|---|
| EUR million | 2010 | 2011 | 2010 | 2011 |
| Joint ventures | 102 | 31 | 32 | 49 |
| Associates | 0 | 0 | 6 | 0 |
| Other related parties | 0 | 0 | 0 | 0 |
| Total | 102 | 31 | 38 | 49 |
| EUR million 2010 |
2011 |
|---|---|
| Loans to key management personnel | |
| Loans to joint ventures 28 |
25 |
| Loans to associates | |
| Loans to other related parties 48 |
55 |
| Total 76 |
80 |
Compensation of key management personnel See Corporate Governance on this report.
There were no material events after the reporting period.
(40) Policy in respect of capital
See Corporate Governance on this report.
Solvay has adopted the FERMA (Federation of European Risk Management Associations) Risk Management Standard as the framework for its Risk Management activities. The Group develops on all levels of its organization a common approach for risk management and in particular, its risk profi ling method in order to:
A corporate function within Financial Management develops tools, provides advice and proposes strategies to help entities manage their risks more systematically.
Historically, the risk management process implemented within Rhodia aims at:
Since 2009, a common risk management approach (Enterprise Risk Management – ERM method) has been developed at the level of each Entity, Functional Management and Zone to strengthen the global view of the risks at the level of the Rhodia sector.
The similar principles of these two frameworks should facilitate the integration into a single and unique risk management framework for the whole new group. In 2011, each Business Unit of Rhodia and Solvay was requested to analyse the risks which could impact their business objectives, using specifi c tools. The results of the individual analyses have been consolidated to a common Group risk profi le approved by the Executive Committee. The proper application of the tools implies that, for the most signifi cant risks, actions plans should be developed in order to manage the risks at the appropriate level.
We refer to page 199 for a detailed description of the internal control system of the Solvay Group, considering however that this system could change as a result of the new group established by Solvay and Rhodia.
Furthermore, the acquisition of Rhodia in 2011 has modifi ed the risk profi le of Solvay. The exposure of the Group to certain risks has increased as a result of the larger size of the new group. For certain risks however, an increase or a decrease of the risks which is not proportionate to the size of the new group has been observed. For example, the exposure of the Group to certain fi nancial risks, like investments in government bonds or banks, has decreased as a result of using a signifi cant part of the cash for the acquisition of Rhodia. Furthermore, the strategic (market) risk has also decreased as a result of the broadening of the business portfolio and the better diversifi cation of the fi nal markets in which the Group is active. Finally, the risk linked to the integration of Rhodia within the Solvay Group is mainly related to the missing of potential opportunities as a result of this acquisition and represents as such not a major risk for the Group. The integration has not yet been fully completed in certain areas. During the integration period, different processes, but with a similar objective, would be able to coexist. The objective is to align these processes in the context of the governance of the Solvay Group.
While worldwide economic conditions improved in 2010 and part of 2011, uncertainties concerning the sovereign debt of certain European countries have raised concerns of the possibility of a return of recession in at least some parts of the world economy. These uncertainties have contributed to increased levels of market volatility, marked widening in credit spreads, reduced levels of consumer and business confi dence and a softening in overall economic activity in certain regions of the world. Reductions in available cash and liquidity from providers of credit may adversely affect our borrowing costs, and may materially affect our customers' access to capital. It is not possible to predict the effect that a continuation of the sovereign debt crisis and consequent adverse economic conditions could have on Solvay, or on the value of the euro compared to other currencies. No assurances can be given that government responses to fi nancial market disruptions will increase liquidity and the availability of credit.
Solvay has defi ned ten categories of risk:
The purpose of this report is to describe the risks associated with each category and to outline the actions undertaken by the Group to reduce that risk. The order in which these risk categories are listed is not an indication of their importance or probability. The mitigation efforts described are no guarantee that risks will not materialize but demonstrate the Group's efforts to reduce risk exposures in an entrepreneurial way.
In 2011, the Group entered into a reorganization aimed at promoting increased employee empowerment, a new planning process as well as a new organization for its Business Units. The segments Chemicals and Plastics are currently organized in Strategic Development Units (SDU), focusing on strategic option for the business, and in Regional Business Units (RBU) and Global Business Units (GBU), focusing on the activities.
Strategic Risk is Solvay's exposure to adverse developments in our markets or our competitive environment as well as the risk of making erroneous strategic decisions. Examples of such risks are technological leaps allowing the development of substitute products or manufacturing processes, drastic changes in energy prices, the lack of success of a new product, scarcity of key raw materials, reduction of demand in our main markets as a consequence of new legislation, events affecting our most important customers, new entrants in a market, price war, signifi cant imbalances between supply and demand in our markets, and major social crises.
The diverse businesses within the Group generate a variety of risks, some of which could possibly affect the Group as a whole. But diversifi cation contributes to the reduction of the overall risk as the Group's different businesses, processes, policies and structures offset some risks against each other merely through a balanced portfolio of products.
The potential impact of adverse events is managed at Group level, and involves in particular:
The periodic review of the main macroeconomic assumptions, market assumptions and key strategic issues of each Strategic Development Unit (SDU) for the next fi ve years is managed in the strategy and plan process of the Group. The strategy phase focuses on market and competitive environment assumptions and on the strategic options of each SDU. The planning phase focuses for each RBU and GBU on the business plan, scenarios, and on the main projects on which execution of the strategy relies. The strategy and business plans of each SDU are presented by the management of the SDU to the Executive Committee. The 5 year plan of each RBU and GBU is presented by the management of the RBU/GBU to the Executive Committee. After discussion, the strategy is amended (if needed) and approved by the Executive Committee. The same process applies to the 5 year plans.
The Horizon project puts more weight on the strategic planning process, more specifi cally with additional resources dedicated to the analysis of strategic options through the implementation of SDU and a rigorous strategic annual review process between the SDU and the Corporate strategy and development team. In addition to the annual strategic presentations of the SDU and presentations of the RBU and GBU plans, an annual strategic review at Group level focuses on the changes of SDU strategies within the Group strategy. The strategic planning will be submitted to integration aiming at the establishment of a common process that would combine the best practices of Solvay and Rhodia. The Corporate Development department acts as facilitator in the process, cross-checking assumptions between the different business units and with external sources. Corporate Development continuously updates its strategic analysis of the competitive environment. The larger projects are assessed with a tool measuring their alignment with Group strategic targets of profi tability and sustainability as well as their risk profi les. The major strategic orientations are submitted to the Board of Directors, which has the ultimate responsibility for the Group's strategy, including managing the balance of the portfolio of businesses.
Within the Rhodia segment, the coordination of the 11 business units is organized based on a roadmap over 3-5 years which is annually followed up in the business reviews and monthly or quarterly meetings aiming at assessing the shortterm results.
Supply Chain and Manufacturing Risk in production units is Solvay's exposure to risks with raw material, suppliers, production and storage units and transportation, such as risks of major equipment failure or damage, transportation accidents, drastic shortages of raw materials or energy, natural disasters or transportation strikes.
Key risk areas are addressed with policies and risk control programs such as health and safety, process safety, property loss prevention, integrated resource planning and supply chain optimization systems (ERP), emergency response, central and local crisis management, business continuity planning, continuity planning for the case of a pandemic, etc.
Solvay buys insurance to reduce the fi nancial impact of potential events causing extensive damage and consequential interruption of supply above what is covered by the insurance Captive. Our plants are regularly subject to external reviews and in this context the risks of damage to production units and consequential business interruption events are identifi ed and quantifi ed by risk engineering experts from the insurance company. The partnership with a mutual insurance group contributes to improving manufacturing resilience and protection.
The integration project will lead to the adoption of the best practices of Solvay and Rhodia.
The geographic distribution of production units around the world reduces the overall impact of one production unit being damaged or interrupted. Some specialty products are however, only produced in one single plant.
With reference to Raw Materials, in addition to owning several mines and quarries, Solvay reduces the risk of disruption (availability, reliability and price) by a combination of:
In the fi eld of Energy Supply, Solvay has been consistently implementing programs to reduce its energy consumption for many years. While Solvay has energy-intensive industrial activities, particularly in Europe (soda ash, electrolysis), it also operates a range of industrial activities with a relatively low energy consumption, in particular in the GBU Specialty Polymers.
The Group considers the securitization and the reliability of its energy supply to be very important. A number of strategic initiatives are realized by Solvay to reduce the effect of the volatility of energy markets:
On 1 January 2012, Solvay created Solvay Energy Services, a new GBU aiming at optimizing the energy cost and the CO2 emissions for the Group and third parties.
Solvay Energy Services relies on the competencies and the key know-how of Solvay, Rhodia and Orbéo in order to optimize the energy purchases for the new group and to assist all Business Units of the Group in their management of energy and CO2 .
The company will also continue to develop the "Climate Care" solutions as initiated by Rhodia, including the production of renewable energy from biomass and the development of technologies/services aiming at reducing the environmental footprint of its internal and external clients.
As permitted by the specifi c market conditions of each BU, price increases are negotiated to offset the increase of energy costs.
In 2008, Solvay committed to a structured program dedicated to Sustainable Development. It includes objectives to reduce by 2020 Solvay's energy consumption and greenhouse gas emissions by 20% compared to 2006 levels.
Rhodia committed to similar objectives to reduce by 2015 the energy consumption by 8% compared to 2010 levels, and the greenhouse gas emissions by 66% compared to the 2005 levels.
Regulatory Risk is Solvay's exposure to events like government price regulation, taxation, tariff policy, new regulations banning a product, imposing manufacturing, marketing and use restrictions or making it uneconomical to produce, etc. Solvay could be required to incur important costs in case of the adoption of new regulations or government policies, or in case of a more strict interpretation or application of the current regulations by courts or authorities. Legal Risk is the exposure to adverse consequences of non-compliance with regulations (for example anti-trust) or contractual undertakings, or the loss of rights or benefi ts expected from protection by regulation or contract. This includes various areas like product liability, administrative or criminal sanctions, contractual or intellectual property disputes, as well as the potentially adverse outcome of ongoing litigation.
The Group's operations depend partly on the control of its key technologies and on the capacity to innovate. The questioning by third parties regarding the right of Solvay to use certain technologies could have an impact on its operations. Furthermore, the insuffi cient protection by Solvay of its innovations could limit its development perspectives.
Political Risk is Solvay's exposure to, for example, the destruction or loss of control of production means or the unavailability of raw materials, utilities or logistic or transport facilities resulting from political decisions, civil war, nationalization, terrorism or other circumstances where the normal exercise of public authority is disrupted. Solvay must obtain and retain regulatory approval for operating its production facilities, and for selling its products. A signifi cant number of substances manufactured or used in Solvay activities require registration under the REACH Regulation, in addition to the other requirements pre-existing to REACH. At the end of 2010, 159 substances (82 for Solvay and 77 for Rhodia) were successfully registered on schedule with the ECHA (European Chemicals Agency). The products are also subject to the compliance with the new Regulation on classifi cation, labelling and packaging.
Given the international scope of the Group, those regulatory approvals emanate from authorities or agencies in many countries. The withdrawal of any previously granted approval or the failure to obtain an authorization may have an adverse effect on our business continuity and operating results. This concerns both the manufactured products of the Group as
the raw materials purchased from our suppliers. The same could also apply in the case of regulatory changes likely to cause us to incur additional costs.
The geographical spread of the Group around the world is a factor reducing some regulatory and political risks. Solvay has identifi ed the development of the cost of CO2 emissions in Europe expected in the future as a potential risk and is monitoring it carefully.
Proper design of products and their production processes contributes to the management of regulatory and legal risks, as do timely and thorough applications for necessary approvals.
Regulatory and political risk is reduced through the continuous work and interactions with Public Authorities by the Government and Public Affairs department. In addition, in each country outside the European Union, Solvay maintains clear communication links with the political authorities through the local Belgian Embassy.
To manage legal risk Solvay maintains in-house legal and intellectual property and regulatory resources, and relies on additional external professional resources as appropriate. The Group is managing this risk by relying on internal and external resources and by making appropriate fi nancial provisions. Awareness of legal risks is raised by dedicated training, sharing of information, self-assessment procedures and internal auditing. The simple fact of doing business exposes Solvay to disputes and litigation. Adverse outcome of such disputes or litigation is always possible (see note on Important Litigation below).
In order to optimize coverage of these risks, the Group coordinates the activities of the various control functions.
In the chemicals and plastics industries, technological know-how can remain protected by way of trade secret, which is often a good substitute for patent protection and Solvay is, in many cases, a leader in the technological know-how for its production processes. However, Solvay systematically considers patenting new products and processes and maintains continuous efforts to preserve its proprietary information. Solvay implements a dynamic policy to protect its innovations and its knowhow and takes specifi c precautions to protect through its partner choice in R&D and through the localization of its research operations.
In respect of political risks, Solvay's actions include risk-sharing with local or institutional partners as well as monitoring of political developments in sensitive areas.
The risk attached to Internal Procedures is Solvay's exposure to failure to comply with its own Group Code of Conduct, policies and processes. Examples of risks are failed Human Resources strategy, failure to integrate an acquired company, failure to comply with internationally recognized Corporate Governance rules and good practices, etc. Solvay is in particular subject to the Belgian Code for Corporate Governance.
In that context, the integration of Rhodia in the Solvay Group does not bear a signifi cant risk.
In the fi eld of Corporate Governance, Solvay has a comprehensive corporate governance charter (available on www. solvay.com ) and publishes its yearly report on the application of Solvay's Corporate Governance rules. The reference is the Belgian Code for Corporate Governance.
Since 2007 a compliance organization under the leadership of the Group General Counsel has been in place to enhance a Group-wide ethics and compliance-based culture and to promote compliance with applicable laws, Solvay's Group Code of Conduct and corporate values. Compliance Offi cers have been appointed in all four regions in which the Group is active.
Training courses facilitated by the Legal & Compliance departments are organized to ensure that ethical and compliant conduct is embodied in the way business is done at Solvay and to address behavioral risks in certain specifi c areas such as antitrust or corruption. Regular campaigns are organized to train new employees and to maintain the right level of awareness in the whole Group. The compliance function, in collaboration with internal audit, legal department and other departments or functions, is monitoring compliance with applicable laws and Solvay's Group Code of Conduct. Any
violation of this code will lead to sanctions in accordance with prevailing legislation. Reporting of violations is encouraged and various avenues are proposed to employees including through the Compliance Offi cers. In most countries in which Solvay operates, Solvay has introduced the Solvay Ethics Helpline, an external resource where employees can report ethical or compliance concerns in their own language.
Rhodia has similar internal processes based on comparable tools and processes.
Financial Risk is Solvay's exposure to foreign exchange risk, liquidity risk, interest rate risk, counterparty risk (credit risk), failure to fund pension obligations, and tax risks.The main tax risks are compliance risk, transfer pricing risk and litigation risk.
As a result of the acquisition of Rhodia, the Group's treasury, previously invested in government instruments and in banks, has strongly decreased, reducing as such its exposure to government bonds and to bank default risk.
5.1. Liquidity Risk relates to Solvay's ability to service and refi nance its debt (including notes issued) and to fund its operations. This depends on its ability to generate cash from operations and not to over-pay for acquisitions.
The Group is recognized as historically having a prudent fi nancial profi le, as illustrated by its BBB+ rating (S&P BBB+; Moody's Baa1). Its liquidity profi le is strong, mainly supported by long-term bond issuance (for a total of EUR 2.8 billion, with a fi rst signifi cant maturity of EUR 500 million in 2014) and substantial liquidity reserves (cash and committed credit lines, including two syndicated credit facilities of EUR 1 billion and EUR 550 million (refi nanced in November 2011) respectively and a credit line of EUR 300 million with the European Investment Bank). Solvay maintains its objective of net debt to equity ratio not durably exceeding 45% after the acquisition of Rhodia. The fi nancial discipline will remain conservative.
5.2. Solvay is exposed to Foreign Exchange Risk as a consequence of its international activities. In its present structure, the Group's exposure is mainly associated with the EUR/USD risk, as the Group's overall activities generate a net positive USD fl ow. Consequently, a depreciation of the USD will generally result in lower revenues for Solvay.
The geographical diversifi cation of production and sales provides a natural currency hedge because of the resulting combination of an income stream and an expense base in local currency. Furthermore, Solvay closely monitors the foreign exchange market and enters into hedging measures for terms of between 6 and 24 months whenever deemed appropriate. In practice, Solvay enters into forward and option contracts securing the EUR value of cash fl ows in foreign currency during the following months.
5.3. Interest-rate Risk is Solvay's exposure to fl uctuating interest rates.
In its present structure, the Group has locked in the largest part of its net indebtedness with fi xed interest rates. Solvay closely monitors the interest rate market and enters into interest rate swaps whenever deemed appropriate.
5.4. Solvay is exposed to Counterparty Risk in its cash management and in its foreign exchange risk and interest rate risk management as well as in its commercial relationships with customers.
Solvay manages its fi nancial counterparty risk by working with banking institutions of the highest caliber (selection based on major rating systems) and minimizes the concentration of risk by limiting its exposure to each of these banks to a certain threshold, set in relation to the institution's credit rating.
In addition, Solvay places money with highly rated money market funds as well as invest in short term debt securities from highly rated sovereign issuers at the appropriate moments.
Furthermore, 75% of turnover (excluding Rhodia) is assigned to an in-house factoring company, Solvay CICC, which is in charge through a network of credit managers of risk assessment per country / customer and of cash collection. A Risk Committee follows the performance of the customer portfolio and sets credit policy guidelines. Solvay CICC receivables and the default risk of the most critical clients of Rhodia are insured to a large extent on the credit insurance market.
5.5. With regard to the Risk of Funding Pension Obligations, Solvay is exposed to a number of defi ned-benefi t plans. Fluctuations in discount rates, salaries and social security, longevity and asset / liability matching can have a major impact on the liabilities of such pension plans. For funded plans, the risks related to the investment need to be managed, taking into account the risk-return balance. If plans are unfunded Solvay is mostly exposed to infl ation and interest rate risk. As a result of the acquisition of Rhodia, the exposure of the Group to risk of funding pension obligations has increased signifi cantly.
Solvay has defi ned Pension Corporate Governance guidelines in order to maximize its infl uence over local pension fund decisions within the limits provided by local law, in particular, decisions related to investment and funding, selection of advisors, appointments of employer-nominated trustees to local pension fund boards and other cost management decisions.
The Group has reduced its exposure to defi ned-benefi t plans by converting existing plans into pension plans with a lower risk profi le for future services or by closing them to new entrants. Examples of plans with a lower risk profi le are hybrid plans, cash balance plans and defi ned-contribution plans.
Solvay has developed guidelines and processes to better manage the pension risk related to funding, cost or liability values.
As a result of the acquisition of Rhodia, an action plan has been implemented in order to control, limit and reduce the exposure of the Group, the employees and the retirees to this risk.
Studies regarding the management of the plan assets and engagements have been conducted by Rhodia and Solvay in order to determine the allocation of the plan assets to optimize the expected yield and the tolerance to the risk. The exposure to the interest rate risk is managed actively (calendar, investments in instruments with long term interest rates, etc.).
5.6 Tax compliance risk relates to the consequences of failure to comply on time with legal and administrative regulations (complementary assessments, interests and penalties). The tax charge supported by the Group depends from the interpretation of the local tax regulation, the bilateral or multilateral international tax treaties and the administrative doctrine in each jurisdiction.
Solvay stresses the importance of tax compliance with its tax and fi nancial personnel. It monitors its procedures and systems through internal reviews and through audits performed by reputed external consultants.
Tax authorities of all countries wish to ensure that the commercial operations between related entities refl ect the fair prices which would be agreed between independent parties in similar circumstances, especially in cross-border situations. Like all multinational groups, Solvay has to respect detailed transfer pricing regulations and documentation requirements issued by an ever growing number of countries, with specifi c high penalties in case of non-compliance. Transfer pricing issues have become the frequent focus of aggressive tax audits, as they are seen by many authorities as a major source of revenue loss.
Solvay has issued a transfer pricing policy and a procedure aimed at meeting the requirements of the authorities. A detailed documentation is prepared for each business or country with the assistance of internal or external experts and in line with OECD requirements, and updated every year, in order to demonstrate the fairness of cross-company pricing. The existence and timeliness of the documentation are regularly audited by the internal audit department. Internal transfer pricing specialists assist the business in setting intra-group prices compliant with the transfer pricing policy.
Rhodia implements an equivalent transfer pricing policy which is taken into account within the integration of Rhodia within Solvay.
5.8. Litigation risk is the risk that the authorities do not share Solvay's analysis of its factual and tax position, possibly leading to litigation. Changes in tax law, regulations or case law can also lead to litigation.
The prevention and mitigation efforts for the tax litigation risk are based on thorough analysis of mergers, acquisitions and divestments, or proposed changes in the business organization and operations, with the assistance of external experts or law-fi rms when the amounts at stake warrant it. Changes in laws and regulations are also monitored with the aim to adapt to new situations.
6.1. Product Liability Risk is Solvay's exposure stemming from injury or damage to third parties or their property arising from the use of a Solvay product, as well as the resulting litigation. Product liability may arise from out-of-specifi cation products, inappropriate use, previously unidentifi ed effects, manufacturing errors resulting in defective products, product contamination, altered product quality or inappropriate safety and health recommendations. Consequences of a faulty product could be exposure to liability for injury and damage, as well as having to recall a product. Both the product liability risk and product development risk are generally higher for products to be used in healthcare and pharma applications as compared to industrial or technical uses.
Product liability exposure is reduced by quality assurance and control, adequate information and technical assistance to customers and by health and safety programs. The Group supplies information relating to the safe use and handling of its products. For products with signifi cant hazards, which in general are only sold directly to industrial users, the BUs involved have product stewardship programs including safety data sheets and regulatory compliance statements. Solvay is managing the Chemicals and Plastics products applications in healthcare, food or feed in a special process called Healthcare Risk Management. Regulatory watch and intelligence processes are aimed at ensuring product regulatory compliance in each country where a market for a defi ned product is identifi ed.
To address emerging issues where there are regulatory gaps, Solvay is taking care to develop additional expertise within the company and with external stakeholders. Nano-technologies and nano-materials, endocrine disrupters and toxic cocktails are some examples for priority actions.
Solvay is also committed to the Global Product Strategy initiative of ICCA and published 70 Product Safety Summaries available to the general public.
6.2. Product Development Risk is Solvay's exposure to failure to develop new products and technologies or scale up a process. Solvay's operating results depend, among other factors, on the innovation and development of commercially viable new products and production technologies. Because of the lengthy development process, technological challenges and intense competition, Solvay cannot ensure that the products it develops will become market-ready or achieve commercial success. If Solvay is unsuccessful in developing new products and production processes in the future, its competitive position and operating results will be harmed.
Solvay devotes substantial resources to Research and Development. Solvay continuously improves the competitiveness of its essential products over the long term through technological improvements and innovation. Innovation is the cornerstone of the Group's strategy, and Solvay considers that managing the challenges related to product development is more about opportunity than about risk for the company.
Management of R&D through programs and projects that are fully in line with Solvay's strategy enhances R&D performance and reduces the risk of failure. Management by projects, with a conceptual and operational roadmap for moving a new product project from idea to launch, also ensures that resources are used in an optimal way.
New Business Development includes participation in venture capital funds allowing Solvay to remain engaged at the forefront of emerging businesses such as alternative renewable energies and organic electronics.
Risk to People is the exposure of employees, contractors and the public to adverse effects from Solvay's activities and products, for example from plant processes or from transportation of hazardous chemicals. The professional diseases identifi ed by the Group are to a great extent consequences from past exposures. A major accident can injure people, lead to the temporary closing of a plant and ultimately expose Solvay to signifi cant liabilities.
Solvay considers the safety and health of people key aspects in the management of its activities. The Group has consistently developed and implemented stringent safety and health programs. Solvay has a long track record of good safety performance, which will be further sustained by a recently approved program aimed at reinforcing the safety culture of employees and contractors. Rhodia has a similar progress regarding safety and health. The integration process will lead to the adoption of the best practices of both groups. The Group is pursuing the ultimate target of no lost time accidents (LTAR = Lost Time Accident Rate = 0)1 . Rhodia results are consolidated from the beginning of 2011. The Group LTAR score reduced from 1.6 at the end of 2010 to 0.8 (1.0 without Rhodia) at the end of 2011, representing a signifi cant improvement in safety to people during the year. Process safety is also ensured in order to protect people against the consequences of process incidents. Process Safety Management (PSM) supports safety in sites and especially those with major risks. Mandatory in the US, PSM is also used to support safety management systems in other regions, including in Europe where it supports compliance with Seveso Regulation.
Related policies and risk control programs apply to all production units and other facilities, include contractors and newly acquired plants. Safety performance is reported to the Executive Committee on a monthly basis and to the Board of Directors. While many capex investments were postponed during 2008 and 2009, all planned investment in HSE went ahead.
Special attention is given to the report and analysis of process incidents or near misses. Regular distribution of Lesson Learning Events is organized to increase awareness and to avoid repetition of similar events. In order to ensure high standard of health prevention for employees, Solvay started rolling out in 2008 the occupational hygiene and health modules of the Medexis system in order to manage comprehensive hygiene data as well as the data related to medical surveillance in order to standardize and leverage medical surveillance programs. The system is integrated within a broader IT infrastructure delivering substance related data, site structure information, etc
The risk of hazardous chemicals transportation is reduced by optimizing transport routes, relying on selected and audited transporters and worldwide emergency assistance of Carechem in case of accidents. In addition, every effort to operate integrated production units is contributing to minimize the transportation of intermediate hazardous goods. Solvay follows the recommendations of associations like Eurochlor, ECVM or CTEF, and programs like Responsible Care®.
1 LTAR = (number of work accidents with absence from work more than 1 day)/(number of working hours)*106
Environmental Risk is Solvay's exposure stemming from the accidental release of a chemical substance following a plant equipment failure, a transport accident or production problems resulting in exceeding permitted emission levels. Many Solvay and Rhodia sites are covered by regulations concerning major risk installations. Like most other industrial companies, Solvay has to manage and remediate historical soil contamination at some of its sites.
Authorities are increasingly requesting management of the soil and groundwater environmental legacy. In this context, a number of administrative proceedings are under way to defi ne the need and approach for remediation. Furthermore, the Group could be required to incur important costs in case of the adoption of new regulations or government policies, or in case of a more strict interpretation or application of the current regulations by courts or authorities.
Solvay considers environmental protection as a key aspect in the management of its activities. Well-defi ned pollution and accident prevention measures have been in place at Solvay for a long time. Solvay implements environment management systems of ISO type or equivalent in all plants concerned. Policies and risk control programs are applied in all production units and other facilities, and are progressively implemented in newly acquired plants. The Group has, in particular, taken the necessary steps to comply and even go beyond compliance with regulations concerning major risks, which includes detailed accident prevention measures.
The historical soil contamination sites are carefully managed including setting appropriate provisions for monitoring and remediation. The Group has developed internal expertise in soil management. It is Solvay's policy to have risk characterization in all concerned sites. Hydrogeological studies and soil characterizations are conducted to diagnose potential problems, evaluate risks to aquifers and discuss remediation or confi nement actions with the authorities. A number of such actions have been completed or are under way.
The implementation of the crucial management processes (e.g. "Order to Cash", "Procure To Pay", "Report to Record"…) and the cooperation between employees is based to a great extent on Information Technology (IT). The risks related to this usage are mainly:
The majority of the critical information systems are housed and operated by external service suppliers. The choice of suppliers, the contractual conditions and the level of service delivery are reviewed at the moment of renewal of contracts which is typically every 3 to 5 years. This procedure gives access to services of high standards regarding quality, safety and business continuity plans.
Every employee is responsible for the appropriate management and use of information and material which are made available, according to the laws and policies related to information and to the use of IT systems. As a result of the internal certifi cation program, the users are required to answer successfully every two years to a survey on their obligations regarding the information security.
The internal IT organization aims at being certifi ed for insuring the quality of the services rendered to the entities of the Group. The certifi cation has been renewed this year for a broad domain in Asia and North-America (for the activities existing before the acquisition of Rhodia).
Rhodia has similar IT protection systems and managements processes of IT risks. In order to assure that the necessary measures for an optimal IT security are taken, the period for the IT integration will be more important than the integration of other parts.
Reputational risk arises from Solvay's exposure to a deterioration of its reputation among its different stakeholders. Damage may occur due to the materialization of any of the risks described in this section and subsequent publicizing of the outcome. It may also arise from the occurrence of any event or action associated with the Solvay name that would be in breach of ethics, legislation, corporate governance principles and which, more generally speaking, fall short of stakeholder expectations with regard to Solvay.
Damage to corporate reputation can be accelerated and amplifi ed by the Internet and social networking media. Reputation is a key asset. Loss of reputation can result in competitive disadvantage. The reputational risk deals with the subjective, composite perception of a company by its different stakeholders. Trust is a fundamental ingredient to reputation.
Besides overall good management, control practices and systems, effi cient communication (transparent, consistent and timely) and long-term solid relationships, both inside and outside the organization, contribute in the long run to establishing trust, which is a fundamental ingredient to reputation.
In addition to fostering its own good reputation, Solvay participates in specifi c programs implemented by key trade organizations to improve the reputation of the entire chemical industry. Members of the Executive Committee of Solvay have recently been active as presidents of the International Council of Chemical Associations (ICCA), the European Chemical Industry Council (CEFIC) and Plastics Europe.
A study of Solvay's Enterprise Risk Management maturity in 2009 mentioned Reputational Management as one of Solvay's Risk Management strengths.
Solvay has established communication processes, systems, plans and programs to create, develop and maintain a regular fl ow of two-way communication with the main stakeholders: shareholders and the fi nancial community, employees, customers, authorities, local communities and opinion leaders. Tools include a variety of internal and external electronic and print media tailored for internal and external audiences. Solvay maintains active press relations at corporate and local level, with press releases, conferences and visits as well as open doors and other events aimed at local residents around major sites. The Group has also adopted a clear set of guidelines and advice for employee use of social networking media.
Clear values supported by the Code of Conduct, combined with a high level of Corporate Governance, are instrumental in preventing behaviour that could contribute to reputational risk.
Solvay is implementing effective management and communication systems designed to give early warning of developing crises and to ensure an adequate response in the case of unexpected and sudden adverse events that can potentially harm the Group's reputation. Dedicated managers and employees are trained to face such situations. Crisis simulations are organized on a regular basis in the different entities of the Group.
With its variety of activities and its geographical reach, the Solvay Group is exposed to legal risks, particularly in the areas of product liability, contractual relations, antitrust laws, patent disputes, tax assessments and HSE (Health, Safety and Environment) matters. In this context litigation cannot be avoided and is sometimes necessary to defend the rights and interest of the Group.
The outcome of proceedings cannot be predicted with certainty. It is therefore possible that adverse fi nal court decisions or arbitration awards could lead to liabilities (and expenses) that are not covered or fully covered by provisions or insurance and could impact materially our revenues and earnings.
Ongoing legal proceedings involving the Solvay Group (including Rhodia) currently considered to involve signifi cant risks are outlined below. The legal proceedings described below do not represent an exhaustive list.
The fact that litigation proceedings are reported below is without relation with the merit of the case. Solvay is defending itself vigorously and believes in the merits of its defence.
For certain cases in accordance with the accounting rules, Solvay has created reserves/provisions to cover the fi nancial risk and/or defence costs (see section 31).
• The French municipality of Metz has since 2001 fi led several lawsuits against Solvay and Novacarb that discharge of water containing some sodium chloride arising from the soda ash production process into the Meurthe river was generating additional costs (claimed to be about EUR 50 million) for the distribution of drinkable water.
Solvay complies with the operating permits delivered by the authorities and contests vigorously the allegations. Rhodia is as well concerned by this litigation as it guarantees Novacarb in the context of the sale of certain chemicals activities to Bain Capital in 2002.
Solvay and Solvay Specialty Polymers Italy (formerly Solvay Solexis), a subsidiary of Solvay, and legal successor of Ausimont SpA, may be exposed to claims for civil liability in case of a negative outcome of the proceedings.
Suits brought in January 2004 before the Paris Commercial Court by certain shareholders:
Both proceedings were adjourned due to the existence of a criminal investigation conducted by examining magistrates of the fi nancial division of the Paris Court of First Instance concerning the same facts and pursuant to three criminal proceedings instituted in 2003 and 2004 against an unspecifi ed defendant by the same shareholders for misuse of company assets, insider dealings, publication of false or misleading information, fraudulent balance sheet and disclosure of inaccurate accounts. Rhodia decided to join the criminal investigation as a plaintiff claiming damages ("partie civile") on January 25, 2006. The investigation was still in progress as of December 31, 2011.
In the context of the sale of the Pharmaceutical activities in February 2010, the contractual arrangements have defi ned terms and conditions for the allocation and sharing of liability arising out of the activities before the sale.
Subject to limited exceptions, Solvay's exposure for indemnifi cations to Abbott for liabilities arising out of sold activities shall be limited to an aggregate amount representing EUR 500 million and for limited durations.
This includes indemnifi cation against certain potential liabilities for the U.S. hormone replacement therapy (HRT) litigation. Former users of HRT products have brought thousands of U.S. lawsuits against manufacturers of HRT products.
As of December 31, 2010, fewer than 350 plaintiffs had alleged use of Solvay HRT products. This number is not expected to change signifi cantly. No cases involving Solvay products have gone to trial. Solvay will defend itself vigorously.
The Group consists of Solvay S.A. and a total of 422 subsidiaries and associated companies in 61 countries.
Of these, 209 are fully consolidated, 4 are proportionately consolidated and 64 are accounted for under the equity method, whilst the other 145 do not meet the criteria of signifi cance.
In accordance with the principle of materiality, certain companies which are not of signifi cant size have not been included in the consolidation scope. Companies are deemed not to be signifi cant when they do not exceed any of the three following thresholds in terms of their contribution to the Group's accounts:
Companies that do not meet these criteria are, nevertheless, consolidated where the Group believes that they have a potential for rapid development, or where they hold shares in other companies that are consolidated under the above criteria.
Globally, the non-consolidated companies have no material impact on the consolidated data of the Group, their overall impact on the Group net profi t being of the order of 0.1%.
The full list of companies is fi led with the National Bank of Belgium as an attachment to the annual report, and can be obtained from the company head offi ce.
| Country | Company | Sector | Comments |
|---|---|---|---|
| BELGIUM | Carrières les Petons S.P.R.L. | - | meets the consolidation criteria |
| Rhodia Belgium SA | Rh | purchase of Rhodia Group | |
| LUXEMBOURG | Caredor S.A. | Rh | purchase of Rhodia Group |
| NETHERLANDS | Polvom B.V | - | meets the consolidation criteria |
| Rhodia International Holdings B.V. | Rh | purchase of Rhodia Group | |
| FRANCE | Butachimie S.N.C. | Rh | purchase of Rhodia Group |
| Cogeneration Chalampe S.A.S. | Rh | purchase of Rhodia Group | |
| GIE Chime Salindres | Rh | purchase of Rhodia Group | |
| GIE Osiris | Rh | purchase of Rhodia Group | |
| Hexagas S.A.S. | Rh | purchase of Rhodia Group | |
| Orbeo Climate Care S.A.S. | Rh | purchase of Rhodia Group | |
| RHOD V S.N.C. | Rh | purchase of Rhodia Group | |
| RHOD W S.N.C. | Rh | purchase of Rhodia Group | |
| Rhodia Chimie S.A.S. | Rh | purchase of Rhodia Group | |
| Rhodia Energy GHG S.A.S. | Rh | purchase of Rhodia Group | |
| Rhodia Energy S.A.S. | Rh | purchase of Rhodia Group | |
| Rhodia Finance S.A.S. | Rh | purchase of Rhodia Group | |
| Rhodia Laboratoire du Futur S.A.S. | Rh | purchase of Rhodia Group | |
| Rhodia Operations S.A.S. | Rh | purchase of Rhodia Group | |
| Rhodia Participations S.N.C. | Rh | purchase of Rhodia Group | |
| Rhodia S.A. | Rh | purchase of Rhodia Group | |
| Rhodianyl S.A.S. | Rh | purchase of Rhodia Group | |
| Rhodigaz S.A.S. | Rh | purchase of Rhodia Group | |
| ITALY | Rhodia Italia S.p.A. | Rh | purchase of Rhodia Group |
| Solvay Specialty Polymers Management s.r.l. | Pl | meets the consolidation criteria | |
| GERMANY | Projektgesellschaft Untertagedeponie Niederrhein GmbH | - | meets the consolidation criteria |
| Rhodia Acetow GmbH | Rh | purchase of Rhodia Group | |
| Rhodia Deutschland GmbH | Rh | purchase of Rhodia Group | |
| Rhodia GmbH | Rh | purchase of Rhodia Group | |
| Warmeverbundkraftwerk Freiburg GmbH | Rh | purchase of Rhodia Group | |
| SPAIN | Rhodia Iberia S.L., Madrid | Rh | purchase of Rhodia Group |
| SWITZERLAND | Sopargest - Société de participation et de gestion S.A. | Rh | purchase of Rhodia Group |
| GREAT BRITAIN | Holmes Chapel Trading Ltd | Rh | purchase of Rhodia Group |
| McIntyre Group Ltd | Rh | purchase of Rhodia Group | |
| Rhodia Eco Services Ltd | Rh | purchase of Rhodia Group | |
| Rhodia Food Ingredients Lts | Rh | purchase of Rhodia Group | |
| Rhodia Holdings Ltd | Rh | purchase of Rhodia Group | |
| Rhodia HPCII Ltd | Rh | purchase of Rhodia Group | |
| Rhodia Industrial Specialties Ltd | Rh | purchase of Rhodia Group | |
| Rhodia International Holdings Ltd | Rh | purchase of Rhodia Group | |
| Rhodia Limited | Rh | purchase of Rhodia Group | |
| Rhodia Organique Fine Ltd | Rh | purchase of Rhodia Group |
| Rhodia Overseas Ltd | Rh | purchase of Rhodia Group | |
|---|---|---|---|
| Rhodia Pharma Solutions Holdings Ltd | Rh | purchase of Rhodia Group | |
| Rhodia Pharma Solutions Ltd | Rh | purchase of Rhodia Group | |
| Rhodia Reorganisation | Rh | purchase of Rhodia Group | |
| Rhodia UK Ltd | Rh | purchase of Rhodia Group | |
| POLAND | Rhodia Polyamide Polska Sp z.o.o. | Rh | purchase of Rhodia Group |
| Zaklad Energoeloctryczny Energo-Stil Sp. z o.o. | Rh | purchase of Rhodia Group | |
| RUSSIA | Poligran OAO | Pl | meets the consolidation criteria |
| Rusvinyl OOO | Pl | meets the consolidation criteria | |
| Sertow OOO | Rh | purchase of Rhodia Group | |
| UNITED STATES | Alcolac Inc. | Rh | purchase of Rhodia Group |
| Heat Treatment Services Inc. | Rh | purchase of Rhodia Group | |
| Primester | Rh | purchase of Rhodia Group | |
| Rhodia Financial Services Inc | Rh | purchase of Rhodia Group | |
| Rhodia Funding Corporation | Rh | purchase of Rhodia Group | |
| Rhodia Holding Inc | Rh | purchase of Rhodia Group | |
| Rhodia Inc | Rh | purchase of Rhodia Group | |
| Rhodia India Holding Inc. | Rh | purchase of Rhodia Group | |
| CANADA | Rhodia Canada Inc | Rh | purchase of Rhodia Group |
| MEXICO | Rhodia de Mexico SA de CV | Rh | purchase of Rhodia Group |
| Rhodia Especialidades SA de CV | Rh | purchase of Rhodia Group | |
| BRAZIL | Cogeracao de Energia Electricica Paraiso SA | Rh | purchase of Rhodia Group |
| Rhodia Brazil Ltda | Rh | purchase of Rhodia Group | |
| Rhodia Energy Brazil Ltda | Rh | purchase of Rhodia Group | |
| Rhodia Poliamida Brasil Ltda | Rh | purchase of Rhodia Group | |
| Rhodia Poluamida e Especialidades Ltda | Rh | purchase of Rhodia Group | |
| Rhopart-Participacoes Servidos e Comercio Ltda | Rh | purchase of Rhodia Group | |
| VENEZUELA | Rhodia Acetow Venezuela SA | Rh | purchase of Rhodia Group |
| Rhodia Silices de Venezuela C.A. | Rh | purchase of Rhodia Group | |
| URUGUAY | Alaver SA | Rh | purchase of Rhodia Group |
| Fairway Investimentos SA | Rh | purchase of Rhodia Group | |
| Zamin Company S/A | Rh | purchase of Rhodia Group | |
| AUSTRALIA | Rhodia Chemicals Pty Ltd | Rh | purchase of Rhodia Group |
| NEW ZEALAND | Rhodia New Zealand Ltd | Rh | purchase of Rhodia Group |
| JAPAN | Anan Kasei Co Ltd | Rh | purchase of Rhodia Group |
| Rhodia Japan K.K. | Rh | purchase of Rhodia Group | |
| Rhodia Nicca Ltd | Rh | purchase of Rhodia Group | |
| CHINA | Baotou Rhodia Rare Earths Company Ltd | Rh | purchase of Rhodia Group |
| Beijing Rhodia Eastern Chemical Co. | Rh | purchase of Rhodia Group | |
| Guangxi Laibin Bioqi New Energy Co., Ltd | Rh | purchase of Rhodia Group | |
| Liyang Rhodia Rare Earth New Material Co. Ltd | Rh | purchase of Rhodia Group | |
| Qingdao Dongyue Rhodia Chemical Co Ltd | Rh | purchase of Rhodia Group | |
| Rhodia (Shanghai) International Trading Co. Ltd | Rh | purchase of Rhodia Group | |
| Rhodia (Zhenjiang) Chemicals Co., Ltd | Rh | purchase of Rhodia Group | |
| Rhodia China Co., Ltd | Rh | purchase of Rhodia Group | |
| Rhodia Feixiang Specialty Chemicals Co. Ltd | Rh | purchase of Rhodia Group | |
| Rhodia Fine Chemical Additives (Qingdao) Co. Ltd | Rh | purchase of Rhodia Group | |
| Rhodia Hengchang (Zhangjiagang) Specialty Chemical | Rh | purchase of Rhodia Group | |
| Co. Ltd | |||
| Rhodia Hong Kong Ltd | Rh | purchase of Rhodia Group | |
| Rhodia Polyamide (Shanghai) Co. Ltd | Rh | purchase of Rhodia Group |
| Rhodia Silica Qingdao Co. Ltd | Rh | purchase of Rhodia Group | |
|---|---|---|---|
| Rhodia Wuxi Pharmaceutical Co Ltd | Rh | purchase of Rhodia Group | |
| Zhuhai Rhodia Specialty Chemicals Co Ltd | Rh | purchase of Rhodia Group | |
| THAILAND | Rhodia Thai Holdings Ltd | Rh | purchase of Rhodia Group |
| Rhodia Thai Industries | Rh | purchase of Rhodia Group | |
| SINGAPORE | Rhodia Amines Chemicals Pte Ltd | Rh | purchase of Rhodia Group |
| Rhodia Asia Pacifi c Pte Ltd | Rh | purchase of Rhodia Group | |
| MALAYSIA | Biopower Climate Care Holding Sdn Bhd | Rh | new company |
| Biopower Climate Care Sdn Bhd | Rh | purchase of Rhodia Group | |
| INDONESIA | Rhodia Manyar P.T. | Rh | purchase of Rhodia Group |
| INDIA | Hindustan Gum & Chemicals Ltd | Rh | purchase of Rhodia Group |
| Rhodia Polymers & Specialties India Private Limited | Rh | purchase of Rhodia Group | |
| Rhodia Specialty Chemicals India Limited | Rh | purchase of Rhodia Group | |
| SOUTH KOREA | Rhodia Energy Asia Pacifi c Co. Ltd | Rh | purchase of Rhodia Group |
| Rhodia Korea Co. Ltd | Rh | purchase of Rhodia Group | |
| Rhodia Silica Korea Co. Ltd | Rh | purchase of Rhodia Group |
| Country | Company | Sector | Comments |
|---|---|---|---|
| NETHERLANDS | Solvay Finance B.V. | - | liquidated |
| Terlin B.V. | - | liquidated | |
| GERMANY | Projektgesellschaft Untertagedeponie Niederrhein | - | merged into Cavity GmbH |
| GmbH | |||
| Solvay Kali-Chemie Holding GmbH | - | merged into Solvay GmbH | |
| SPAIN | Vinilis S.A. | Pl | merged into Solvin Spain S.L. |
| PORTUGAL | Pipelife Portugal-Sistemas de Tubagens Plasticas Lda | Pl | merged into Pipelife France |
| S.N.C. | |||
| GREAT BRITAIN | Rhodia Eco Services Ltd | Rh | liquidated |
| Rhodia Food Ingredients Lts | Rh | liquidated | |
| Rhodia HPCII Ltd | Rh | liquidated | |
| Rhodia Industrial Specialties Ltd | Rh | liquidated | |
| CHINA | Rhodia Wuxi Pharmaceutical Co Ltd | Rh | sold |
| THAILAND | Rhodia Thai Industries | Rh | sold |
| SOUTH KOREA | Solvay & CPC Barium Strontium Korea Co Ltd | Ch | liquidated |
| Country | Company | Sector | Comments |
|---|---|---|---|
| BELGIUM | BASF Interox H2 O2 Production nv, Brussels |
Ch | equity method |
| Pipelife Belgium SA, Kalmthout | Pl | equity method | |
| NETHERLANDS | MTP HP JV C.V., Weesp | Ch | equity method |
| MTP HP JV Management bv, Weesp | Ch | equity method | |
| Pipelife Finance bv, Enkhuizen | Pl | equity method | |
| Pipelife Nederland bv, Enkhuizen | Pl | equity method | |
| Twebotube bv, Enschede | Pl | equity method | |
| FRANCE | Cogeneration Chalampe S.A.S. , Puteaux | Rh | equity method |
| Orbeo Climate Care S.A.S. | Rh | fully consolidated | |
| Pipelife France S.N.C., Gaillon | Pl | equity method | |
| Rhodigaz S.A.S. , Lyon (Thiers) | Rh | equity method | |
| GERMANY | Pipelife Deutschland Asset Management GmbH, Bad Zwischenahn | Pl | equity method |
| Pipelife Deutschland GmbH & Co KG Bad Zwischenahn, Bad Zwischenahn |
Pl | equity method | |
| Pipelife Deutschland Verwaltungs-GmbH Bad Zwischenahn, Bad Zwischenahn |
Pl | equity method | |
| Solvay & CPC Barium Strontium GmbH & Co KG, Hannover | Ch | equity method | |
| Solvay & CPC Barium Strontium International GmbH, Hannover | Ch | equity method | |
| SPAIN | Pipelife Hispania SA, Zaragoza | Pl | equity method |
| PORTUGAL | Pipelife Portugal-Sistemas de Tubagens Plasticas Lda, Nogueira | Pl | equity method |
| Da Maia | |||
| AUSTRIA | Pipelife International GmbH, Wiener Neudorf | Pl | equity method |
| Pipelife Austria GmbH & Co KG, Wiener Neudorf | Pl | equity method | |
| Solvay Sisecam Holding AG, Wien | Ch | equity method | |
| GREAT BRITAIN | Pipelife UK Ltd, Corby | Pl | equity method |
| IRELAND | Dromalour Plastics Ltd, Cork | Pl | equity method |
| Kenfern Investments Ltd, Cork | Pl | equity method | |
| Quality Plastics (Holding) Ltd, Cork | Pl | equity method | |
| Quality Plastics Ltd, Cork | Pl | equity method | |
| Qualplast Sales Ltd, Cork | Pl | equity method | |
| SWEDEN | Pipelife Hafab A.B., Haparanda | Pl | equity method |
| Pipelife Nordic A.B., Göteborg | Pl | equity method | |
| Pipelife Sverige A.B., Oelsremma | Pl | equity method | |
| NORWAY | Pipelife Norge AS, Surnadal | Pl | equity method |
| FINLAND | Pipelife Finland OY, Oulu | Pl | equity method |
| Propipe OY, Oulu | Pl | equity method | |
| POLAND ROMANIA |
Pipelife Polska SA, Karlikowo Pipelife Romania S.R.L., Bucuresti |
Pl Pl |
equity method equity method |
| SLOVENIA | Pipelife Slovenija, d.o.o., Trzin | Pl | equity method |
| ESTONIA | Pipelife Eesti AS, Tallinn | Pl | equity method |
| LITHUANIA | Pipelife Lietuva UAB, Vilnius | Pl | equity method |
| LATVIA | Pipelife Latvia SIA, Riga | Pl | equity method |
| BULGARIA | Deven AD, Devnya | Ch | equity method |
| Pipelife Bulgaria EOOD, Plovdiv | Pl | equity method | |
| Solvay Sodi AD, Devnya | Ch | equity method | |
| CROATIA | Pipelife Hrvatska Republika d.o.o., Karlovac | Pl | equity method |
| HUNGARY | Pipelife Hungaria Kft, Debrecen | Pl | equity method |
| CZECH | Pipelife Czech s.r.o., Otrokovice | Pl | equity method |
| REPUBLIC |
| Pipelife Slovakia s.r.o., Piestany | Pl | equity method |
|---|---|---|
| Pipelife Serbia d.o.o., Beograd | Pl | equity method |
| Pipelife Hellas SA, Moschato Attica | Pl | equity method |
| Arili Plastik Sanayii AS, Pendik | Pl | equity method |
| Pipelife Russia OOO, Zhukov | Pl | equity method |
| Soligran ZAO, Moskva | Pl | equity method |
| Pipelife Jet Stream, Inc. Siloam Springs, AR | Pl | equity method |
| Solvay & CPC Barium Strontium Monterrey S. de R.L. de C.V., | Ch | equity method |
| Monterrey | ||
| Solvay & CPC Barium Strontium Reynosa S. de R.L. de C.V., | Ch | equity method |
| Reynosa | ||
| Dacarto Benvic SA, Santo André | Pl | equity method |
| Peroxidos do Brasil Ltda, Sao Paulo | Ch | equity method |
| MTP HP JV (Thailand) Ltd, Bangkok | Ch | equity method |
| Rhodia Manyar P.T., Gresik | Rh | equity method |
| Hindustan Gum & Chemicals Ltd, New Delhi | Rh | equity method |
| Solvay & CPC Barium Strontium Korea Co Ltd, Onsan | Ch | equity method |
Indicating the percentage holding, followed by the Segment.
It should be noted that the percentage of voting rights is very close to the percentage holding.
Ch = Chemicals Pl = Plastics Rh = Rhodia - = not allocated
| BELGIUM | |||
|---|---|---|---|
| Carrières les Petons S.P.R.L., Walcourt | 100 | - | |
| Financières Solvay SA, Bruxelles | 99 .9 | - | |
| Peptisyntha SA, Neder-Over-Heembeek | 100 | Ch | |
| Rhodia Belgium SA , Bruxelles | 100 | Rh | |
| Solvay Benvic & Cie Belgium S.N.C., Brussels | 100 | Pl | |
| Solvay Chemicals International SA, Brussels | 100 | Ch | |
| Solvay Chimie SA, Brussels | 100 | Ch | |
| Solvay Coordination Internationale des Crédits Commerciaux (CICC) SA, Brussels | 100 | - | |
| Solvay Energy SA, Brussels | 100 | - | |
| Solvay Nafta Development and Financing SA, Brussels | 100 | - | |
| Solvay Participations Belgique SA, Brussels | 100 | - | |
| Solvay Pharmaceuticals SA - Management Services, Brussels | 100 | - | |
| Solvay Specialties Compounding SA, Brussels | 100 | Pl | |
| Solvay Stock Option Management S.P.R.L., Brussels | 100 | - | |
| Solvic SA, Brussels | 75 | Pl | |
| SolVin SA, Brussels | 75 | Pl | |
| LUXEMBOURG | |||
| Caredor S.A., Strassen | 100 | Rh | |
| Solvay Finance (Luxembourg) SA, Luxembourg | 100 | - | |
| Solvay Luxembourg S.a.r.l., Luxembourg | 100 | - | |
| Solvay Luxembourg Development S.a.r.l., Luxembourg | 100 | - |
| NETHERLANDS | ||
|---|---|---|
| Polvom B.V., Linne-Herten | 100 | |
| Rhodia International Holdings B.V., Den Haag | 100 | Rh |
| Solvay Chemicals and Plastics Holding B.V., Weesp | 100 | |
| Solvay Chemie B.V., Linne-Herten | 100 | Ch |
| Solvay Holding Nederland B.V., Weesp | 100 | - |
| SolVin Holding Nederland B.V., Weesp | 59 4 | Pl |
| FRANCE | ||
| Orbeo Climate Care S.A.S. , Puteaux | 100 | Rh |
| RHOD V S.N.C. , Courbevoie | 100 | Rh |
| RHOD W S.N.C. , Courbevoie | 100 | Rh |
| Rhodia Chimie S.A.S. , Aubervilliers | 100 | Rh |
| Rhodia Energy GHG S.A.S. , Puteaux | 100 | Rh |
| Rhodia Energy S.A.S. , Puteaux | 100 | Rh |
| Rhodia Finance S.A.S. , Courbevoie | 100 | Rh |
| Rhodia Laboratoire du Futur S.A.S. , Pessac | 100 | Rh |
| Rhodia Operations S.A.S. , Aubervilliers | 100 | Rh |
| Rhodia Participations S.N.C. , Courbevoie | 100 | Rh |
| Rhodia S.A. , Courbevoie | 100 | Rh |
| Rhodianyl S.A.S. , Saint-Fons | 100 | Rh |
| Solvay - Carbonate - France S.A.S., Paris | 100 | Ch |
| Solvay - Electrolyse - France S.A.S., Paris | 100 | Ch |
| Solvay - Fluorés - France S.A.S., Paris | 100 | Ch |
| Solvay - Olefi nes - France S.A.S., Paris | 100 | Ch |
| Solvay - Organics - France S.A.S., Paris | 100 | Ch |
| Solvay - Spécialités - France S.A.S., Paris | 100 | Pl |
| Solvay Benvic Europe - France S.A.S., Paris | 100 | Ch |
| Solvay Energie France S.A.S., Paris | 100 | - |
| Solvay Finance France S.A., Paris | 100 | - |
| Solvay Finance S.A., Paris | 100 | - |
| Solvay Participations France S.A., Paris | 100 | Ch |
| Solvay Speciality Polymers France S.A.S., Paris | 100 | Pl |
| Solvin France S.A., Paris | 75 | - |
| ITALY | ||
| Rhodia Italia S.p.A. , Bollate | 100 | Rh |
| SIS Italia S.p.A., Bollate | 100 | - |
| Società Elettrochimica Solfuri e Cloroderivati (ELESO) S.p.A., Bollate | 100 | Ch |
| Società Generale per l'Industria della Magnesia (SGIM) S.p.A., Angera | 100 | Ch |
| Solvay Bario e Derivati S.p.A., Massa | 100 | Ch |
| Solvay Benvic Europe - Italia S.p.A, Ferrara | 100 | Pl |
| Solvay Chimica Bussi S.p.A., Rosignano | 100 | Ch |
| Solvay Chimica Italia S.p.A., Milano | 100 | Ch |
| Solvay Finanziaria S.p.A., Milano | 100 | - |
| Solvay Fluor Italia S.p.A., Rosignano | 100 | Ch |
| Solvay Padanaplast S.p.A., Roccabianca | 100 | Pl |
| Solvay Solexis S.p.A., Milano | 100 | Pl |
| Solvay Specialty Polymers Management s.r.l., Bollate | 100 | Pl |
| SolVin Italia S.p.A., Ferrara | 75 | Pl |
| GERMANY | ||
| Cavity GmbH, Hannover | 100 | - |
| Girindus AG, Hannover | 82 | Ch |
| Horizon Immobilien AG, Hannover | 100 | - | |
|---|---|---|---|
| Rhodia Acetow GmbH , Freiburg | 99 .9 | Rh | |
| Rhodia Deutschland GmbH , Freiburg | 100 | Rh | |
| Rhodia GmbH , Freiburg | 100 | Rh | |
| Salzgewinnungsgesellschaft Westfalen mbH & Co KG, Epe | 65 | Ch | |
| Solvay Chemicals GmbH, Hannover | 100 | Ch | |
| Solvay Fluor GmbH, Hannover | 100 | Ch | |
| Solvay GmbH, Hannover | 100 | - | |
| Solvay Infra Bad Hoenningen GmbH, Hannover | 100 | Ch | |
| Solvay Organics GmbH, Hannover | 100 | Ch | |
| Solvay Specialty Polymers Germany GmbH, Hannover | 100 | Pl | |
| Solvay Verwaltungs-und Vermittlungs GmbH, Hannover | 100 | - | |
| Solvin GmbH & Co KG, Hannover | 75 | Pl | |
| Solvin Holding GmbH, Hannover | 75 | Pl | |
| SPAIN | |||
| Electrolisis de Torrelavega S.L., Barcelona | 100 | Ch | |
| Rhodia Iberia S.L., Madrid | 100 | Rh | |
| Solvay Benvic Europe - Iberica S.A., Barcelona | 100 | Pl | |
| Solvay Ibérica S.L., Barcelona | 100 | - | |
| Solvay Participaciones S.A., Barcelona | 100 | - | |
| Solvay Quimica S.L., Barcelona | 100 | Ch | |
| Solvin Spain S.L., Martorell | 75 | Pl | |
| SWITZERLAND | |||
| Solvay (Schweiz) AG, Bad Zurzach | 100 | Ch | |
| Solvay Vinyls Holding AG, Bad Zurzach | 100 | - | |
| Sopargest - Société de participation et de gestion S.A., Fribourg | 100 | Rh | |
| PORTUGAL | |||
| 3S Solvay Shared Services-Sociedade de Serviços Partilhados Unipessoal Lda, | 100 | - | |
| Carnaxide | |||
| Solvay Interox - Produtos Peroxidados SA, Povoa | 100 | Ch | |
| Solvay Portugal - Produtos Quimicos SA, Povoa | 100 | Ch | |
| AUSTRIA | |||
| Solvay Österreich GmbH, Wien | 100 | Ch | |
| GREAT BRITAIN | |||
| Holmes Chapel Trading Ltd , Watford Reeds | 100 | Rh | |
| McIntyre Group Ltd , Watford Reeds | 100 | Rh | |
| Rhodia Holdings Ltd , Watford Reeds | 100 | Rh | |
| Rhodia International Holdings Ltd , Oldbury | 100 | Rh | |
| Rhodia Limited , Watford Reeds | 100 | Rh | |
| Rhodia Organique Fine Ltd , Watford Reeds | 100 | Rh | |
| Rhodia Overseas Ltd , Watford Reeds | 100 | Rh | |
| Rhodia Pharma Solutions Holdings Ltd, Cramlington | 100 | Rh | |
| Rhodia Pharma Solutions Ltd, Cramlington | 100 | Rh | |
| Rhodia Reorganisation, Watford Reeds | 100 | Rh | |
| Rhodia UK Ltd , Watford Reeds | 100 | Rh | |
| Solvay Chemicals Ltd, Warrington | 100 | Ch | |
| Solvay Interox Ltd, Warrington | 100 | Ch | |
| Solvay Speciality Chemicals Ltd, Warrington | 100 | Ch | |
| Solvay UK Holding Company Ltd, Warrington | 100 | - | |
| IRELAND | |||
| Solvay Finance Ireland Unlimited , Dublin | 100 | - |
| Solvay Chemicals Finland Oy, Voikkaa 100 Ch POLAND Rhodia Polyamide Polska Sp z.o.o. , Gorzow Wielkopolski 100 Rh BULGARIA Solvay Bulgaria EAD, Devnya 100 Ch RUSSIA Sertow OOO, Serpukhov Khimi 100 Rh EGYPT Solvay Alexandria Sodium Carbonate Co, Alexandria 100 Ch UNITED STATES Alcolac Inc., Cranbury 100 Rh American Soda LLP, Parachute, CO 100 Ch Ausimont Industries, Inc., Wilmington, DE 100 Pl Girindus America, Inc., Cincinnati, OH 82 .1 Ch Heat Treatment Services Inc., Cranbury 100 Rh Montecatini USA, Wilmington, DE 100 Pl Peptisyntha, Inc., Torrance, CA 100 Ch Rhodia Financial Services Inc, Wilmington 100 Rh Rhodia Funding Corporation, Cranbury 100 Rh Rhodia Holding Inc, Cranbury 100 Rh Rhodia Inc, Cranbury 100 Rh Rhodia India Holding Inc., Cranbury 100 Rh Rocky Mountain Coal Company, LLC, Houston, TX 100 Ch Solvay Advanced Polymers, LLC, Alpharetta, GA 100 Pl Solvay America Holdings, Inc., Houston, TX 100 - Solvay America, Inc., Houston, TX 100 Pl Solvay Chemicals, Inc., Houston, TX 100 Ch Solvay Finance (America) LLC, Houston, TX 100 - Solvay Fluorides, LLC., Greenwich, CT 100 Ch Solvay Information Services NAFTA, LLC, Houston, TX 100 - Solvay North America Investments, LLC, Houston, TX 100 - Solvay North America LLC, Houston, TX 100 - Solvay Soda Ash Expansion JV, Houston, TX 80 Ch Solvay Soda Ash Joint Venture, Houston, TX 80 Ch Solvay Solexis, Inc., Wilmington, DE 100 Pl CANADA Rhodia Canada Inc, Toronto 100 Rh MEXICO Rhodia de Mexico SA de CV, Mexico 100 Rh Rhodia Especialidades SA de CV, Mexico 100 Rh Solvay Fluor Mexico S.A. de C.V., Ciudad Juarez 100 Ch Solvay Mexicana S. de R.L. de C.V., Monterrey 100 Ch |
FINLAND | |
|---|---|---|
| Solvay Quimica Y Minera Servicios SA de CV, Monterrey 100 Ch |
||
| Solvay Quimica Y Minera Ventas SA de CV, Monterrey 100 Ch |
||
| BRAZIL | ||
| Cogeracao de Energia Electricica Paraiso SA, Brotas 100 Rh |
||
| Rhodia Brazil Ltda, Sao Paolo Aguiar 100 Rh |
||
| Rhodia Energy Brazil Ltda, Paulinia Sao Francisco 100 Rh |
||
| Rhodia Poliamida Brasil Ltda , Sao Paolo Aguiar 100 Rh |
||
| Rhodia Poliamida e Especialidades Ltda, Sao Paolo Aguiar 100 Rh |
||
| Rhopart-Participacoes Servidos e Comercio Ltda, Sao Paolo Aguiar 100 Rh |
| Solvay do Brasil Ltda, Sao Paulo | 100 | Ch | |
|---|---|---|---|
| Solvay Indupa do Brasil SA, Sao Paulo | 69 .9 | Pl | |
| ARGENTINA | |||
| Solvay Argentina SA, Buenos Aires | 100 | - | |
| Solvay Indupa S.A.I.C., Bahia Blanca | 69 .9 | Pl | |
| Solvay Quimica SA, Buenos Aires | 100 | Ch | |
| VENEZUELA | |||
| Rhodia Acetow Venezuela SA, Valencia | 100 | Rh | |
| Rhodia Silices de Venezuela C.A., Barquisimeto | 100 | Rh | |
| URUGUAY | |||
| Alaver SA, Montevideo | 100 | Rh | |
| Fairway Investimentos SA, Montevideo | 100 | Rh | |
| Zamin Company S/A, Montevideo | 100 | Rh | |
| AUSTRALIA | |||
| Rhodia Chemicals Pty Ltd , Sydney | 100 | Rh | |
| Solvay Interox Pty Ltd, Banksmeadow | 100 | Ch | |
| NEW ZEALAND | |||
| Rhodia New Zealand Ltd, Auckland | 100 | Rh | |
| JAPAN | |||
| Anan Kasei Co Ltd, Anan | 67 | Rh | |
| Nippon Solvay KK, Tokyo | 100 | Ch | |
| Rhodia Japan K.K., Tokyo | 100 | Rh | |
| Rhodia Nicca Ltd, Tokyo | 60 | Rh | |
| Solvay Advanced Polymers KK, Tokyo | 100 | Pl | |
| Solvay Solexis KK, Minato Ku-Tokyo | 100 | Pl | |
| CHINA | |||
| Baotou Rhodia Rare Earths Company Ltd, Baotou | 55 | Rh | |
| Beijing Rhodia Eastern Chemical Co., Ltd, Beijing | 60 | Rh | |
| Guangxi Laibin Bioqi New Energy Co., Ltd, Laibin | 100 | Rh | |
| Rh | |||
| Liyang Rhodia Rare Earth New Material Co., Ltd, Li Yang | 96 .3 | ||
| Rhodia (Shanghai) International Trading Co., Ltd, Shanghai | 100 | Rh | |
| Rhodia (Zhenjiang) Chemicals Co., Ltd, Zhenjiang New area | 100 | Rh | |
| Rhodia China Co., Ltd , Shanghai | 100 | Rh | |
| Rhodia Feixiang Specialty Chemicals Co., Ltd, Suzhou | 87 .5 | Rh | |
| Rhodia Fine Chemical Additives (Qingdao) Co., Ltd, Qingdao | 100 | Rh | |
| Rhodia Hengchang (Zhangjiagang) Specialty Chemical Co., Ltd, Zhangjiagang | 70 | Rh | |
| Rhodia Hong Kong Ltd , Hong Kong | 100 | Rh | |
| Rhodia Polyamide (Shanghai) Co., Ltd, Shanghai | 100 | Rh | |
| Rhodia Silica Qingdao Co., Ltd , Qingdao | 100 | Rh | |
| Solvay (Shanghai) Ltd, Shanghai | 100 | Pl | |
| Solvay Speciality Polymers (Changshu) Co. Ltd, Changshu | 100 | - | |
| Zhuhai Rhodia Specialty Chemicals Co Ltd | 78 .8 | Rh | |
| THAILAND | |||
| Advanced Biochemical (Thailand) Company Ltd, Bangkok | 58 .8 | Ch | |
| Rhodia Thai Holdings Ltd, Bangkok | 100 | Rh | |
| Solvay Peroxythai Ltd, Bangkok | 100 | Ch | |
| Vinythai Public Company Ltd, Bangkok | 58 .8 | Pl | |
| SINGAPORE | |||
| Rhodia Amines Chemicals Pte Ltd , Singapore | 100 | Rh | |
| Rhodia Asia Pacifi c Pte Ltd , Singapore | 100 | Rh |
| MALAYSIA | |||
|---|---|---|---|
| Biopower Climate Care Holding Sdn Bhd, Kuala Lumpur | 100 | Rh | |
| Biopower Climate Care Sdn Bhd, Kuala Lumpur | 95 .4 | Rh | |
| INDIA | |||
| Rhodia Polymers & Specialties India Private Limited, Mumbai | 100 | Rh | |
| Rhodia Specialty Chemicals India Limited, Mumbai | 72 .9 | Rh | |
| Solvay Specialities India Private Limited, Mumbai | 100 | Pl | |
| CAYMAN ISLANDS | |||
| Blair International Insurance (Cayman) Ltd, Georgetown | 100 | - | |
| SOUTH KOREA | |||
| Daehan Solvay Special Chemicals Co., Ltd, Seoul | 100 | Ch | |
| Rhodia Energy Asia Pacifi c Co. Ltd , Seoul | 100 | Rh | |
| Rhodia Korea Co. Ltd , Seoul | 100 | Rh | |
| Rhodia Silica Korea Co. Ltd , Incheon | 100 | Rh | |
| Solvay Fluor Korea Co. Ltd, Séoul | 100 | Ch | |
| NAMIBIA | |||
| Okorusu Fluorspar (Pty) Ltd, Otjiwarongo | 100 | Ch | |
| Okorusu Holdings (Pty) Ltd, Windhoek | 100 | Ch |
| FRANCE | ||
|---|---|---|
| Butachimie S.N.C. , Courbevoie | 50 | Rh |
| Hexagas S.A.S. , Puteaux | 50 | Rh |
| GERMANY | ||
| Warmeverbundkraftwerk Freiburg GmbH, Freiburg | 50 | Rh |
| UNITED STATES | ||
| Primester, Kingsport TN | 50 | Rh |
| BELGIUM | ||
|---|---|---|
| BASF Interox H2O2 Production N.V., Bruxelles | 50 | Ch |
| Pipelife Belgium S.A., Kalmthout | 50 | Pl |
| NETHERLANDS | ||
| MTP HP JV C.V., Weesp | 50 | Ch |
| MTP HP JV Management bv, Weesp | 50 | Ch |
| Pipelife Finance bv, Enkhuizen | 50 | Pl |
| Pipelife Nederland bv, Enkhuizen | 50 | Pl |
| Twebotube bv, Enschede | 50 | Pl |
| FRANCE | ||
| Cogeneration Chalampe S.A.S. , Puteaux | 50 | Rh |
| GIE Chime Salindres , Salindres | 50 | Rh |
| Gie Osiris, Roussillon | 34 .8 | Rh |
| Pipelife France S.N.C., Gaillon | 50 | Pl |
| Rhodigaz S.A.S. , Lyon (Thiers) | 50 | Rh |
| GERMANY | ||
| Pipelife Deutschland Asset Management GmbH, Bad Zwischenahn | 50 | Pl |
| Pipelife Deutschland GmbH & Co KG Bad Zwischenahn, Bad Zwischenahn | 50 | Pl |
| Pipelife Deutschland Verwaltungs-GmbH Bad Zwischenahn, Bad Zwischenahn | 50 | Pl |
| Solvay & CPC Barium Strontium GmbH & Co KG, Hannover | 75 | Ch |
| Solvay & CPC Barium Strontium International GmbH, Hannover | 75 | Ch |
| SPAIN | ||
| Pipelife Hispania SA, Zaragoza | 50 | Pl |
| AUSTRIA | ||
| Pipelife Austria GmbH & Co KG, Wiener Neudorf | 50 | Pl |
| Pipelife International GmbH, Wiener Neudorf | 50 | Pl |
| Solvay Sisecam Holding AG, Wien | 75 | Ch |
| GREAT BRITAIN | ||
| Pipelife UK Ltd, Corby | 50 | Pl |
| IRELAND | ||
| Dromalour Plastics Ltd, Cork | 50 | Pl |
| Kenfern Investments Ltd, Cork | 50 | Pl |
| Quality Plastics (Holding) Ltd, Cork | 50 | Pl |
| Quality Plastics Ltd, Cork | 50 | Pl |
| Qualplast Sales Ltd, Cork | 50 | Pl |
| SWEDEN | ||
| Pipelife Hafab A.B., Haparanda | 50 | Pl |
| Pipelife Nordic A.B., Göteborg | 50 | Pl |
| Pipelife Sverige A.B., Oelsremma | 50 | Pl |
| NORWAY | ||
|---|---|---|
| Pipelife Norge AS, Surnadal | 50 | Pl |
| FINLAND | ||
| Pipelife Finland OY, Oulu | 50 | Pl |
| Propipe OY, Oulu | 50 | Pl |
| POLAND | ||
| Zaklad Energoeloctryczny Energo-Stil Sp. z o.o., Gorzow Wielkopolski | 25 | Rh |
| Pipelife Polska S.A., Karlikowo | 50 | Pl |
| ROMANIA | ||
| Pipelife Romania S.R.L., Bucuresti | 50 | Pl |
| SLOVENIA | ||
| Pipelife Slovenija, d.o.o., Trzin | 50 | Pl |
| ESTONIA | ||
| Pipelife Eesti AS, Tallinn | 50 | Pl |
| LITHUANIA | ||
| Pipelife Lietuva UAB, Vilnius | 50 | Pl |
| LATVIA | ||
| Pipelife Latvia SIA, Riga | 50 | Pl |
| BULGARIA | ||
| Deven AD, Devnya | 75 | Ch |
| Pipelife Bulgaria EOOD, Plovdiv | 50 | Pl |
| Solvay Sodi AD, Devnya | 75 | Ch |
| CROATIA | ||
| Pipelife Hrvatska Republika d.o.o., Karlovac | 50 | Pl |
| HUNGARY | ||
| Pipelife Hungaria Kft, Debrecen | 50 | Pl |
| CZECH REPUBLIC | ||
| Pipelife Czech s.r.o., Otrokovice | 50 | Pl |
| SLOVAKIA | ||
| Pipelife Slovakia s.r.o., Piestany | 50 | Pl |
| SERBIA | ||
| Pipelife Serbia d.o.o., Beograd | 50 | Pl |
| GREECE | ||
| Pipelife Hellas SA, Moschato Attica | 50 | Pl |
| TURKEY | ||
| Arili Plastik Sanayii AS, Pendik | 50 | Pl |
| RUSSIA | ||
| Pipelife Russia OOO, Zhukov | 50 | Pl |
| Poligran OAO, Tver | 50 | Pl |
| Rusvinyl OOO, Moscow | 29 .7 | Pl |
| Soligran ZAO, Moscow Aptekars | 50 | Pl |
| UNITED STATES | ||
| Pipelife Jet Stream, Inc. Siloam Springs, AR | 50 | Pl |
| MEXICO | ||
| Solvay & CPC Barium Strontium Monterrey S. de R.L. de C.V., Monterrey | 75 | Ch |
| Solvay & CPC Barium Strontium Reynosa S. de R.L. de C.V., Reynosa | 75 | Ch |
| BRAZIL | ||
| Dacarto Benvic SA, Santo André | 50 | Pl |
| Peroxidos do Brasil Ltda, Sao Paulo | 69 .4 | Ch |
| CHINA | ||
| Qingdao Dongyue Rhodia Chemical Co Ltd, Qingdao | 30 | Rh |
| ARGENTINA | ||
|---|---|---|
| Solalban Energia S.A., Bahia Blanca | 40 .5 | Pl |
| THAILAND | ||
| MTP HP JV (Thailand) Ltd, Bangkok | 50 | Ch |
| INDONESIA | ||
| Rhodia Manyar P.T., Gresik | 50 | Rh |
| INDIA | ||
| Hindustan Gum & Chemicals Ltd, New Delhi | 50 | Rh |
The annual fi nancial statements of Solvay SA are presented in summary format below. In accordance with the Companies Code, the annual fi nancial statements of Solvay SA, the management report and the statutory auditor's report will be deposited with the National Bank of Belgium.
These documents are also available free of charge on the internet or upon request from:
Solvay SA rue de Ransbeek 310 B - 1120 Brussels
| EUR million | 2010 | 2011 |
|---|---|---|
| ASSETS | ||
| Fixed assets | 8 061 | 9 107 |
| Start-up expenses and intangible assets | 83 | 97 |
| Tangible assets | 61 | 57 |
| Financial assets | 7 917 | 8 953 |
| Current assets | 5 613 | 5 260 |
| Inventories | 12 | 12 |
| Trade receivables | 110 | 116 |
| Other receivables | 687 | 4 243 |
| Short-term investments and cash equivalents | 4 778 | 794 |
| Accruals | 26 | 95 |
| Total assets | 13 674 | 14 368 |
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||
| Shareholders' equity | 6 684 | 6 753 |
| Capital | 1 271 | 1 271 |
| Issue premiums | 18 | 18 |
| Reserves | 1 948 | 1 951 |
| Net income carried forward | 3 447 | 3 513 |
| Investment grants | 0 | 1 |
| Provisions and deferred taxes | 324 | 360 |
| Financial debt | 6 122 | 6 641 |
| - due in more than one year | 1 999 | 2 301 |
| - due within one year | 4 123 | 4 340 |
| Trade liabilities | 119 | 152 |
| Other liabilities | 310 | 316 |
| Accruals and deferred income | 115 | 146 |
| Total shareholders' equity and liabilities | 13 674 | 14 368 |
| 2010 | 2011 |
|---|---|
| 903 | 982 |
| 427 | 485 |
| 476 | 497 |
| -973 | -1 178 |
| -70 | -196 |
| 281 | 278 |
| 211 | 82 |
| 2 543 | 209 |
| 2 754 | 291 |
| 28 | 34 |
| 2 782 | 325 |
| - | - |
| 2 782 | 325 |
to the shareholders' meeting on the consolidated fi nancial statements for the year ended 31 December 2011
As required by law and the company's articles of association, we are pleased to report to you on the audit assignment which you have entrusted to us. This report includes our opinion on the consolidated fi nancial statements together with the required additional comment.
We have audited the accompanying consolidated fi nancial statements of Solvay SA/NV ("the company") and its subsidiaries (jointly "the group"), prepared in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. Those consolidated fi nancial statements comprise the consolidated statement of fi nancial position as at 31 December 2011, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash fl ow statement for the year then ended, as well as the summary of signifi cant accounting policies and other explanatory notes. The consolidated statement of fi nancial position shows total assets of 19 437 million EUR and the consolidated income statement shows a consolidated profi t (group share) for the year then ended of 247 million EUR.
The fi nancial statements of several signifi cant entities included in the consolidation scope which represent total assets of 10 223 million EUR and a total profi t of 22 million EUR have been audited by other auditors. Our opinion on the accompanying consolidated fi nancial statements, insofar as it relates to the amounts contributed by those entities, is based upon the reports of those other auditors.
The board of directors of the company is responsible for the preparation of the consolidated fi nancial statements. This responsibility includes among other things: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated fi nancial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.
Our responsibility is to express an opinion on these consolidated fi nancial statements based on our audit. We conducted our audit in accordance with legal requirements and auditing standards applicable in Belgium, as issued by the "Institut des Réviseurs d'Entreprises/Instituut van de Bedrijfsrevisoren". Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated fi nancial statements are free from material misstatement.
In accordance with these standards, we have performed procedures to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated fi nancial statements, whether due to fraud or error. In making those risk assessments, we have considered internal control relevant to the group's preparation and fair presentation of the consolidated fi nancial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the group's internal control. We have assessed the basis of the accounting policies used, the reasonableness of accounting estimates made by the company and the presentation of the consolidated fi nancial statements, taken as a whole. Finally, the board of directors and responsible offi cers of the company have replied to all our requests for explanations and information. We believe that the audit evidence that we have obtained, together with the reports of other auditors on which we have relied, provides a reasonable basis for our opinion.
In our opinion, and based upon the reports of other auditors, the consolidated fi nancial statements give a true and fair view of the group's fi nancial position as of 31 December 2011, and of its results and its cash fl ows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the EU and with the legal and regulatory requirements applicable in Belgium.
The preparation and the assessment of the information that should be included in the directors' report on the consolidated fi nancial statements are the responsibility of the board of directors.
Our responsibility is to include in our report the following additional comment which does not change the scope of our audit opinion on the consolidated fi nancial statements:
• The directors' report on the consolidated fi nancial statements includes the information required by law and is in agreement with the consolidated fi nancial statements. However, we are unable to express an opinion on the description of the principal risks and uncertainties confronting the group, or on the status, future evolution, or signifi cant infl uence of certain factors on its future development. We can, nevertheless, confi rm that the information given is not in obvious contradiction with any information obtained in the context of our appointment.
Diegem, 16 February 2012
The statutory auditor
DELOITTE Bedrijfsrevisoren / Reviseurs d'Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL Represented by Eric Nys
This chapter is an annex to the management report
| Reference code and introduction p. 181 |
||||
|---|---|---|---|---|
| 1. | Legal and shareholding structure of Solvay SA | p. 181 | ||
| 2. | Capital and dividend policy 2.1. Policy in respect of capital 2.2. Dividend policy |
p. 182 | ||
| 3. | Shareholders' Meetings 3.1. Place and date 3.2. Agenda 3.3. Procedure for calling meetings 3.4. Participation in Shareholders' Meetings and appointment of proxies 3.5. Procedure 3.6. Documentation |
p. 184 | ||
| 4. | Board of Directors 4.1. Role and mission 4.2. Modus operandi and representation 4.3. Composition 4.4. Evaluation and training 4.5. Committees |
p. 186 | ||
| 5. | Executive Committee 5.1. Role and Mission 5.2. Delegation of powers 5.3. Composition 5.4. Frequency, preparation and procedure of meetings |
p. 193 | ||
| 6. | Compensation report | p. 195 | ||
| 7. | Chairmen's roles in achieving harmony between the Board of Directors and the Executive Committee |
p. 199 | ||
| 8. | Main characteristics of risk management and internal control systems | p. 199 | ||
| 9. | External Audit | p. 201 | ||
| 10. Code of Conduct | p. 201 | |||
| 11. Preventing insider trading | p. 201 | |||
| 12. Internal organization of the Solvay group | p. 202 | |||
| 13. Relations with shareholders and investors | p. 202 | |||
| Annexes: | ||||
| 1. | Audit Committee Mission Statement | p. 204 | ||
| 2. | Compensation policy for General Managers | p. 205 |
The Solvay group has adopted the 2009 Belgian Corporate Governance Code as its reference code in governance matters. The present report presents the application of the recommendations of this code in accordance with the "comply or explain" principle. The 2009 Belgian Corporate Governance Code is available on the GUBERNA internet site (www.guberna.be).
2011 saw the acquisition of Rhodia on September 16 and the start of the integration of its activities into the Solvay group. The governance of the Solvay group applies to all its activities, including those of the Rhodia Sector. In some areas, the integration is not yet fully realized. During the integration period, different processes, but with similar purposes, will exist side by side, the objective being to align these within the governance framework of the Solvay group.
1.1. Solvay SA is a société anonyme (public limited liability company) created under Belgian law. Its registered offi ce has been transferred from 33, rue du Prince Albert, 1050 Brussels to 310, rue de Ransbeek, 1120 Brussels, Belgium, by decision of the Board of Directors of October 26, 2011.
The company's by-laws can be found on the Solvay internet site: www.solvay.com.
An Extraordinary Shareholders' Meeting of Solvay SA held on May 10, 2011 modifi ed the company's corporate purpose to make it more 'generic', maintaining the primary focus on chemistry-related activities, while adding activities related to natural resources and targeting more clearly the acquisition of participating interests.
1.2. Its shares are registered or dematerialized. Since January 1, 2008, it has no longer been possible to receive paper (bearer) shares. Bearer shares already in a securities fi le have automatically been converted into dematerialized shares. Additionally, following a resolution adopted by the General Shareholders' Meeting of May 8, 2007, all bearer shares issued by the company and not recorded on dematerialized securities accounts or converted into registered shares by July 1, 2011, have been converted as of right into dematerialized shares.
At December 31, 2011, the capital of Solvay SA was represented by 84 701 133 shares. Each share entitles its holder to one vote whenever voting takes place (except for any shares held by Solvay SA or its subsidiaries, the voting rights for which are suspended). All shares are equal and common.
The stock is listed on the NYSE Euronext Brussels. It was also admitted to trading on NYSE Euronext Paris on January 23, 2012. The Solvay share is included in several indexes:
Since February 15, 2007, Solvay Stock Option Management SPRL has appointed the bank Rothschild & Cie., under a liquidity contract, to improve the liquidity of the share on Euronext Brussels. This appointment remained in place in 2011.
1.3. Solvay SA's main shareholder is Solvac SA, a registered company, which at December 31, 2011 held a little over 30% of capital and voting rights in Solvay. Solvac SA has fi led the required transparency declarations every time it has passed a legal or statutory declaration threshold. It has also made the notifi cations required by law with regard to public purchase bids.
Solvac SA is a société anonyme established under Belgian law, the shares of which are admitted to trading on NYSE Euronext Brussels. Its shares, all of which are registered, may be held by physical persons only. The very large majority (around 80%) of its capital is held by members of the Solvay SA founder families.
In addition, at December 31, 2011, Solvay Stock Option Management SPRL held 4.13% of the shares issued by Solvay SA (3 284 625 shares), in particular to cover the Solvay stock options program (see under 2.1. 'Capital'). On February 17, 2012, this shareholding fell below the 3% threshold to 2.81%.
The latest transparency declarations are available on the internet site www.solvay.com.
The remaining shares are held by:
contacts at the many roadshows, by the regular publication of analysts' reports and by the level of trading volumes over recent years (an average daily trading volume on Euronext of 247 000 shares in 2011 and 182 000 shares in 2010).
The company has been informed that certain individual shareholders have decided to arrange to consult together when questions of particular strategic importance are submitted by the Board of Directors to the Shareholders' Meeting. Each of these shareholders, however, remains free to vote as he or she chooses.
1.4. At the May 2010 and May 2011 Shareholders' Meetings, shares were deposited and votes cast in respect of an average 46% of Solvay SA's capital.
1.5. At December 31, 2011, Solvay SA did not hold any shareholding requiring a legal or statutory transparency declaration.
2.1.1. Since being converted into a société anonyme and listed on the Stock Exchange in 1969, the company has not made public calls for capital from its shareholders, instead self-fi nancing out of its profi ts, only a portion of which are distributed (see "Dividend policy" below).
2.1.2. By resolution of the Extraordinary Shareholders' Meeting of May 12, 2009, the Board of Directors was authorized, for a period of fi ve years from that date, to acquire or dispose of, on the stock exchange, company shares representing up to 20% of its capital (i.e. 16 940 000 shares), at a price of between EUR 20 and EUR 150.
Very limited use was made of this facility in 2011 for the requirements of a liquidity contract (see item 1.2. above) and to cover stock option commitments (see item 2.1.3. below) and in the framework of a treasury share investment program introduced in early 2010 and which expired at the end of 2011. The 880 766 own shares purchased by Solvay SA in
this context have been transferred to Solvay Stock Option Management SPRL to cover stock options.
2.1.3. In December 1999, the company introduced a new annual stock option program for Group executives worldwide. This program is covered by own shares purchased by the Solvay group on the stock exchange. Since January 2007, the covering program has been handled by Solvay Stock Option Management SPRL. This covering program was authorized for a 5-year period by the Extraordinary Shareholders' Meeting of May 12, 2009.
At December 31, 2011, Stock Option Management SPRL's holdings of Solvay SA shares represented 4.13% (3 284 625 shares) of the company capital. On February 17, 2012, this shareholding fell below the 3% threshold to 2.81%.
The most recent annual program of stock options (exercisable from January 1, 2015 to December 13, 2019) was offered at the end of 2011 to around 200 Group executives, at an exercise price of EUR 65.71 per share. This price represents the average closing price of the Solvay share on Euronext during the 30 days
| Issue date | Exercise price (in EUR) |
Exercise date | Acceptance rate |
|---|---|---|---|
| 2000 | 58.21 | 02/2004-12/2008 | 98.9% |
| 2001 | 62.25 | 02/2005-12/2009 | 98.6% |
| 2002 | 63.76 | 02/2006-12/2010 | 98.4% |
| 2003 | 65.83 | 02/2007-12/2011 | 97.3% |
| 2004 | 82.88 | 02/2008-12/2012 | 96.4% |
| 2005 | 97.30 | 02/2009-12/2013 | 98.8% |
| 2006 | 109.09 | 02/2010-12/2014 | 97.2% |
| 2007 | 96.79 | 01/2011-12/2015 | 97.6% |
| 2008 | 58.81 | 01/2012-12/2016 | 96.9% |
| 2009 | 72.34 | 01/2013-12/2017 | 98.2% |
| 2010 | 76.49 | 01/2014-12/2018 | 98.1% |
| 2011 | 65.71 | 01/2015-12/2019 | 93.8% |
preceding the offering of options. 93.8% of these stock options were accepted by these executives.
In 2011, stock options representing a total of 480 577 shares were exercised (it should be noted that options are in principle exercisable over a period of fi ve years1 after being frozen for three years). The stock options exercised break down as follows:
Voting and dividend rights attached to these shares are suspended as long as they are held by the company.
As part of the integration of Rhodia
into the Solvay group and in order to harmonize the conditions for the granting of stock options, future stock option plans will be widened to a larger number of benefi ciaries. In addition, owing to this integration, the Board has decided to advance the 2012 plan to the month of March.
Finally it should be mentioned that, under the tender offer by Solvay SA for the shares of Rhodia, liquidity agreements were concluded with employees receiving free shares or options on Rhodia shares to enable these benefi ciaries to retain their rights and to sell their Rhodia shares during a specifi ed period after the close of the tender offer.
2.1.4. At its December 14, 2011 meeting, the Board of Directors implemented its annual stock option plan in favor of around 200 Group executives, including the Members of the Executive Committee. These include Mr. Christian Jourquin and Mr. Bernard de Laguiche, who are also directors. The latter persons therefore abstained, for ethical reasons, from the deliberations of the Board of Directors that concerned
them with respect to stock options.
The Board of Directors noted their declaration of abstention, deeming that their participation in this plan fell under Article 523 §3.2 of the Companies' Code covering routine operations undertaken under normal market conditions and normal market safeguards for operations of the same type. Mr. Christian Jourquin and Mr. Bernard de Laguiche accepted 25 000 and 20 000 options respectively. At his request, the number of options granted in 2011 to the Chairman of the Executive Committee was limited to the number granted the year before.
2.1.5. Independently of the authorization mentioned in paragraph 2.1.2. above and in a defensive context, the company has the ability to buy back its own shares on the stock market, up to 20% of the subscribed capital, with no price fl oor or cap, in the event of a threat of serious and imminent damage, such as, for example, a hostile public takeover bid. This system was renewed in May 2011 for a three-year period by an
Solvay dividend (gross) from 1992 to 2011 (in EUR)
Extraordinary Shareholders' Meeting of the company.
2.2.1. Board policy is to propose a dividend increase to the Shareholders' Meeting whenever possible, and as far as possible, never to reduce it. This policy has been followed for very many years. The graph page 183 illustrates the application of this policy over the past 20 years.
2.2.2. The annual dividend is paid in two installments, in the form of an advance payment (interim dividend) and a payment of the balance. In October 2006, the Board of Directors decided to change the way the advance payment is set. This method includes a guidance of 40% (rounded) of the total previous year's dividend, and takes into account the results for the fi rst nine months of the current year.
In this way, for 2011, an interim dividend of EUR 0.90 net per share (EUR 1.20 gross before Belgian withholding tax in full discharge at 25%) was approved by the Board of Directors on October 26, 2011. This interim dividend (coupon no. 89), which was paid on January 19, 2012, is to be offset against the total dividend for 2011, which was proposed by the Board of Directors on February 15, 2012.
As to the balance, once the annual fi nancial statements have been completed, the Board of Directors proposes a dividend, in accordance with the policy described above, which it submits to the Ordinary Shareholders' Meeting for approval. The second dividend installment, i.e. the balance after deducting the advance payment, is payable in May.
The net dividend for 2011 proposed to the General Shareholders' Meeting of May 8, 2012 is EUR 2.30 net per
share (EUR 3.0667 gross per share), unchanged from the dividend for 2010.
Given the interim dividend payment made on January 19, 2012 (EUR 0.90 net per share – coupon no. 89), the balance of EUR 1.40 net per share will be payable from May 15, 2012 (coupon no. 90).
2.2.3. Shareholders who have opted to hold registered shares receive the interim dividend and the balance of the dividend automatically and free of charge by transfer to the bank account they have indicated, on the dividend payment date. Shareholders owning dematerialized shares receive their dividends via their banks or as they elect and arrange.
Coupons representing the interim dividend and dividend balance are payable at KBC Bank SA and CBC Banque SA:
2.2.4. The company does not have any reduced-tax VVPR shares, given that almost its entire capital was issued before the introduction of this pro-dividend tax regime. The company has not, up to this point, proposed optional dividends to its shareholders, i.e. stock instead of cash dividends. This option does not offer in Belgium any tax or fi nancial benefi t to make it attractive to investors.
It should be noted that the law of December 20, 2010 concerning the exercise of certain rights of shareholders in listed companies has modifi ed the provisions of the Companies' Code concerning the holding of general meetings. The
by-laws of Solvay SA have been adapted accordingly, with the ensuing amendments coming into force on January 1, 2012.
The Ordinary Shareholders' Meeting of Solvay SA, to be held on May 8, 2012, will be organized pursuant to the new legal provisions.
The company's annual Ordinary Shareholders' Meeting is held every year on the second Tuesday of May at 10.30 at the registered offi ce or any other place indicated in the notice of meeting.
The Board tries to organize any necessary Extraordinary Shareholders' Meeting immediately before or after the annual Ordinary Shareholders' Meeting.
The Shareholders' Meeting is convened by the Board of Directors, which also sets its agenda. Shareholders may, however, request the calling of a Shareholders' Meeting and set its agenda where those shareholders together represent 20% of the capital, as required by the Companies' Code.
One or more shareholders owning together at least 3% of capital, may also, under the conditions provided for by the Companies' Code, call for items to be included on the agenda of any shareholders' meeting and submit proposals for decisions concerning the items to be included or already included on the agenda of an already convened Meeting.
The agenda of the Ordinary Shareholders' Meeting as a rule includes the following items:
Extraordinary Shareholders' Meetings are required in particular for all matters affecting the content of the company's by-laws. Every time the Board of Directors prepares a special report in advance of an Extraordinary Shareholders' Meeting, this special report is enclosed with the notice of the meeting and is published on the company's internet site.
The notices convening Shareholders' Meetings set forth the place, date and time of the meeting, the agenda, the reports, proposed decisions on each item to be voted on, and the procedure for taking part in the meeting or for appointing proxies. Holders of registered shares receive notice of the meeting by post offi ce mail at the address they have given, including notifi cation of participation and proxy forms, except where recipients have agreed, individually, expressly and in writing, to receive notice of meetings by another means of communication. Persons owning
dematerialized shares are notifi ed of meetings by announcements in the press. These notices of meetings are published in the offi cial Belgian gazette (Moniteur Belge/ Belgisch Staatsblad) and in the fi nancial press, in particular the Belgian French and Dutch-language newspapers. The major banks established in Belgium also receive the necessary documentation to pass on to Solvay shareholders among their clients.
3.4.1. Since January 1, 2012, the registration procedure is obligatory for participating in and voting at the Shareholders' Meeting. Shareholders must complete the registration of their securities by the 14th calendar day at 24.00 hours (Belgian time) prior to the relevant Shareholders' Meeting.
For holders of registered shares, shares are registered automatically by the fact of being in the company's register of registered shares on the registration date.
Dematerialized shares are registered by the fact of their being recorded in the accounts of a recognized account holder or a clearing organization.
Shareholders are admitted to the Shareholders' Meetings and may exercise their voting rights with the shares which have gone through the legal registration procedure, regardless of the number of shares they hold on the date of the particular Shareholders' Meeting.
3.4.2. Shareholders should also indicate to the company and, where applicable, to the person they have designated to that effect, their desire to take part in the Shareholders' Meeting, no later than the sixth calendar day preceding the date of the Shareholders' Meeting.
Holders of registered shares must send to the company the signed original notice of participation, using the form attached to their notice of meeting.
Holders of dematerialized shares should send the company a certifi cate from the recognized account holder or the clearing organization certifying the number of shares registered in their name in their accounts at registration date and for which the shareholder states he wishes to participate in the Shareholders' Meeting.
More detailed information on arrangements for taking part in the Shareholders' Meeting will be made available to shareholders on the company website (http://www.solvay.com/EN/ Investors/Corporategovernance/ ShareholdersMeetings.aspx).
3.4.3. The exercise of voting rights attached to shares that are jointly owned or the usufruct and bare property rights of which have been separated, or shares belonging to a minor or a legally incapacitated person, follows special legal and statutory rules, a common feature of which is the appointment of a single representative to exercise the voting right. Failing this, the voting right is suspended pending such appointment.
3.4.4. Shareholders vote at Shareholders' Meetings in person or by proxy. The form of proxy is determined by the Board and will be available on the company website once the Shareholders' Meeting in question has been called. Proxies must be received at the location indicated or, where applicable, at the email address mentioned in the notice no later than the 6th calendar day preceding the date of the Shareholders' Meeting.
The mandated agent does not have
to be, as was previously the case, a shareholder of the company.
In the event that certain shareholders exercise their right to add items or proposals for decisions to the agenda of a Shareholders' Meeting, the proxies already notifi ed to the company remain valid for the subjects they cover. Regarding the new items, the reader is referred to the provisions of the Companies Code.
The mandated agent may not deviate from the specifi c voting instructions given to him by a shareholder, except for the exceptions provided by the Companies Code.
In the absence of specifi c instructions on each agenda item, the agent who fi nds himself in a situation of potential confl ict of interest with his principal, within the meaning of Article 547bis, § 4 of the Companies Code, may not vote.
Invalid proxy forms will be excluded from the count. Abstentions formally expressed as such during a vote or on proxy forms are counted as such.
3.4.5. Each shareholder who complies with the formalities for admission to the Shareholders' Meeting is entitled to ask questions in writing concerning the items on the agenda. These questions can be submitted by mail to the registered offi ce or electronically to the email address specifi ed in the notice. Written questions must reach the company no later than the 6th calendar day before the date of the Shareholders' Meeting.
3.5.1. The Shareholders' Meeting is chaired by the Chairman of the Board or, in his absence, by the Vice-Chairman or a Director delegated to this task by his colleagues. The Chairman will preside over the discussions following Belgian practice for deliberative meetings. He will take care to ensure that questions from the Meeting are answered, whilst respecting the agenda and confi dentiality commitments. He will appoint the secretary of the meeting, who as a rule is the Corporate Secretary, and will appoint two shareholders as tellers.
3.5.2. Resolutions in Ordinary Shareholders' Meetings are passed by a simple majority of votes of shareholders present and represented on a "one share, one vote" basis.
3.5.3. In the case of Extraordinary Shareholders' Meetings, the company respects the legal rules governing quorums and majorities.
3.5.4. Voting is, as a general rule, public, by show of hands or by electronic voting. Votes are counted and the results announced immediately.
Provision is made for secret balloting in exceptional cases when a particular person is involved.
This procedure has never been requested to date. This by-law was amended at the Extraordinary Shareholders' Meeting of May 9, 2006 so as to set a threshold of 1% of capital to be reached by one or more shareholders acting in concert, and only when there is more than one candidate for a given offi ce. The minutes of the Shareholders' Meeting are drawn up and adopted by shareholders at the end of the meeting.
They are signed by the Chairman, secretary, tellers and those shareholders who wish to do so. Minutes of Extraordinary Shareholders' Meetings are notarized.
3.5.5. The minutes containing the voting results will be published on the company's internet site (www.solvay.com) no later than the 15th calendar day after the date of the Shareholders' Meeting. Minutes of the most recent Shareholders' Meetings
are also available on the company's internet site (www.solvay.com). Copies or offi cial extracts may be obtained on request by shareholders, in particular under the signature of the Chairman of the Board.
Documentation relating to Shareholders' Meetings (notice of meeting, agenda, proxy and notifi cation of participation forms, special report of the Board of Directors, etc.) is available every year on the Internet site www.solvay.com as from the time of convening of the meeting and at least until the holding of the meeting in question. This documentation is available in French and Dutch (offi cial versions) and in English (unoffi cial translation).
The Board of Directors is the highest management body of the company. The law accords to it all powers which are not reserved, by law or by the by-laws, to the Shareholders' Meeting.
In the case of Solvay SA, the Board of Directors has reserved certain key areas for itself and has delegated the remainder of its powers to an Executive Committee (see below). It has not opted to set up a Management Committee (Comité de Direction/ Directiecomité) as defi ned by Belgian law.
The main key areas which the Board of Directors has reserved for itself are:
• the preparation and approval of the consolidated periodical fi nancial statements and those of Solvay SA (quarterly – consolidated only, semiannual and annual) and the related communications;
convening Shareholders' Meetings and drawing up the agenda and proposals for resolutions to be submitted to them (concerning, for example, company fi nancial statements, dividends, amendments to the by-laws, etc.).
Setting the main policies and general strategic directions of the Group.
Approving the reference frameworks for internal control and for risk management.
Adopting the budget and long-term plan, including investments, R&D and fi nancial objectives.
Appointing the Chairman, Members of the Executive Committee, General Managers and the Corporate Secretary, and setting their missions and the extent of the delegation of powers to the Executive Committee.
Supervision of the Executive Committee and ratifi cation of its decisions, where required by law.
Appointing from among its members a Chairman and a Vice-Chairman, and creating from among its members an Audit Committee, a Compensation Committee, a Nomination Committee and a Finance Committee, defi ning each Committee's mission and determining its composition and its duration.
Major decisions concerning acquisitions, divestitures, the creation of joint ventures and investments. Major decisions are considered to be those involving amounts of EUR 50 million or more.
Setting the compensation of
the Chairman of the Executive Committee, of Executive Committee Members and of General Managers.
In all matters for which it has exclusive responsibility, the Board of Directors works in close cooperation with the Executive Committee, which in particular is responsible for preparing most of the proposals for decisions by the Board of Directors.
4.2.1. Board Members have available to them the information needed to carry out their functions in the form of dossiers drawn up under instructions from the Chairman and sent out to them by the Corporate Secretary several days before each session. They may also receive additional information of any kind that may be of use to them from, depending on the nature of the question, the Chairman of the Board, the Chairman of the Executive Committee or the Corporate Secretary. Decisions to obtain outside expertise, when necessary, are taken by the Board of Directors, for those subjects falling within its authority.
4.2.2. The company is validly represented with regard to third parties by the joint signature of persons with the following capacities: the Chairman of the Board of Directors and/or directors belonging to the Executive Committee. For documents relating to the day-to-day management of the company, the signature of a single director on the Executive Committee is suffi cient. Powers may also be delegated on a case-by-case basis as needs arise.
4.2.3. Subject to what is set out in 2.1.4. (Article 523 of the Companies Code, page 183), the Directors of the company were not confronted in 2011 with confl ict of interest situations requiring the implementation of the legal procedures provided for by the Companies' Code.
On the other hand, and in a very limited number of cases, one or the other member has preferred, for ethical reasons, to abstain from participating in debates and in voting. For example, Directors on the Executive Committee when the Board of Directors was deciding on the renewal of their terms of offi ce.
At December 31, 2011, the Board of Directors consisted of 16 members, as listed on page 189.
4.3.2. During 2011, the Board of Directors was chaired by Mr. Aloïs Michielsen, with Mr. Denis Solvay as Vice-Chairman.
Mr. Aloïs Michielsen, who reached the age limit of 70 years in January 2012, will leave the Board of Directors of Solvay and his presidency after the Ordinary Shareholders' Meeting on May 8, 2012. The Board has decided unanimously to appoint Mr. Nicolas Boël to succeed Mr. Aloïs Michielsen as Chairman of the Board with effect from May 9, 2012.
At the Ordinary Shareholders' Meeting of May 10, 2011:
At the Ordinary Shareholders' Meeting on May 8, 2012, the Board of Directors will propose:
187
Directors are appointed by the Shareholders' Meeting for four years. They may be reappointed.
The age limit for membership on the Board is the annual Shareholders' Meeting following the member's 70th birthday. In this case, the director in question resigns, and is replaced, for his remaining term of offi ce, by a successor appointed by the Shareholders' Meeting.
The Board of Directors applies the following primary criteria when proposing candidates for election to directorships by the Ordinary Shareholders' Meeting:
• ensuring that a substantial majority of directors on the Board are nonexecutive.
At December 31, 2011, 14 out of 16 directors were non-executive, and two belonged to the Executive Committee (Mr. Christian Jourquin and Mr. Bernard de Laguiche);
competences and experience required by the Group's activities;
As required by law, the Board of Directors, consisting of 14 men and 2 women at December 31, 2011, will take care, when mandates are next renew, to respect, within the imparted deadlines, the requirement to have at least one third of women on the Board.
The Chairman of the Board, working together with the Chairman of the Nomination Committee, gathers the information allowing the Board of Directors to verify that the selected criteria have been met at the time of appointment, renewal and during the term of offi ce.
Based on Belgian law, the Board of Directors sets the criteria for determining directors' independence. Each director fulfi lling these criteria is presented to the Ordinary Shareholders' Meeting for confi rmation.
The legal criteria of independence
as contained in article 526ter of the Companies' Code (introduced by the law of December 17, 2008 (art. 16)), are as follows:
| Year of birth |
Year of 1st appointment |
Solvay SA mandates, and expiry date of directorship |
Diplomas and activities outside Solvay | Presence at meetings in 2011 as a function of date of appointment |
|
|---|---|---|---|---|---|
| Mr. Aloïs Michielsen (B) | 1942 | 1990 | Chairman of the Board of Directors and of the Finance, Compensation and Nomination |
Civil engineering degree in chemistry and MA in Applied Economics (Catholic University of Louvain), Business Administration (University of |
8/8 |
| Mr. Denis Solvay (B) | 1957 | 1997 | Committees, until May 8, 2012 inclusive 2014 Director, Vice-Chairman of the Board of Directors until May 8, 2012 inclusive and Member of the Compensation and Nomination Committees |
Chicago). Commercial engineering degree (Free University of Brussels), Director of Eurogentec, Director and Member of the Executive Committee of Abelag Holding. |
8/8 |
| Mr. Christian Jourquin (B) (*) |
1948 | 2005 | Chairman of the Executive Committee, Director, Member of the Finance Committee and guest of the Compensation and Nomination Committees until May 10, 2012 inclusive |
Commercial Engineering degree (Free University of Brussels), ISMP Harvard. |
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| Mr. Bernard de Laguiche (F/BR) (*) |
1959 | 2006 | 2013 Member of the Executive Committee, Director and Member of the Finance Committee |
Commercial Engineering degree, MA in economics HSG (University of St. Gallen, Switzerland). |
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| Mr. Jean-Marie Solvay (B) | 1956 | 1991 | 2012 Director and Member of the Innovation Board |
Advanced Management Programme – Insead, CEO of Albrecht RE Immobilien GmbH & Co. KG., Director |
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| Chevalier Guy de Selliers de Moranville (B) |
1952 | 1993 | 2013 Director Member of the Finance and Audit Committees |
of Heliocentris GmbH & Co. KG (Germany). Civil engineering degree in mechanical engineering, and MA in Economics (Catholic University of Louvain), Executive Chairman of Hatch Corporate Finance (UK), Member of the Supervisory Board and Chairman of the Audit Committee of Advanced Metallurgical Group (Netherlands), Vice-Chairman of the Board Committee of Ageas SA, Chairman of the Board of |
8/8 |
| Mr. Nicolas Boël (B) | 1962 | 1998 | 2013 Director Member of the Nomination Committee From May 9, 2012: Chairman of the Board of Directors, Chairman of the Finance Committee and Chairman of the Compensation Committee |
Ageas UK, and various other mandates in unlisted companies. MA in Economics (Catholic University of Louvain), Master of Business Administration (College of William and Mary – USA) Director of Sofi na. |
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| Mr. Jean van Zeebroeck (B) | 1943 | 2002 | 2014 Independent Director Member of the Compensation and Nomination Committees |
Doctorate of Law and diploma in Business Administration (Catholic University of Louvain), MA in Economic Law (Free University of Brussels), Master of Comparative Law (University of Michigan – USA), General Counsel of 3B-Fibreglass Company. |
8/8 |
| Mr. Jean-Martin Folz (F) | 1947 | 2002 | 2014 Independent Director Member of the Compensation and Nomination Committees From May 9, 2012: Chairman of the Nomination Committee |
Ecole Polytechnique and Mining Engineer (France), former Chairman of PSA Peugeot-Citroën, Chairman of Eutelsat, Director of Saint-Gobain, of Société Générale, of Alstom and of Axa, Member of the Supervisory Board of ONF-Participations. |
7/8 |
| Prof. Dr. Bernhard Scheuble (D) |
1953 | 2006 | 2014 Independent Director Chairman of the Audit Committee |
MSc,Nuclear Physics & PhD, Display Physics (Freiburg University – Germany), Former Chairman of the Executive Committee of Merck KGaA, (Darmstadt) and former Member of the E. Merck OHG Board of Directors. |
8/8 |
| Mr. Anton van Rossum (NL) | 1945 | 2006 | 2014 Independent Director Member of the Audit Committee |
MA in Economics and Business Administration (Erasmus University Rotterdam), Board Member of Crédit Suisse (Zurich), Supervisory Board Member of Munich Re (Munich), Chairman of the Supervisory Board of Royal Vopak (Rotterdam), Chairman of the Supervisory Board of Erasmus University Rotterdam and Chairman of |
6/8 |
| Mr. Charles Casimir Lambert (B/CH) |
1967 | 2007 | 2015 Independent Director Member of the Audit Committee |
the Netherlands Economics Institute (Rotterdam). MBA Columbia Business School (New York)/London Business School (London), Master's degree (lic.oec.HSG) in economics, management and fi nance (University of St.Gallen – Switzerland), Supervision of family's global interests. |
8/8 |
| Ms. Petra Mateos Aparicio Morales (ES) |
N/A | 2009 | 2013 Independent Director Member of the Finance Committee |
PhD in Economics and Business Administration (Universidad Complutense, Madrid – Spain), Executive President of Hispasat (Spain and International); Professor at |
8/8 |
| Baron Hervé Coppens d'Eeckenbrugge (B) |
1957 | 2009 | 2013 Independent Director Member of the Finance Committee |
the University of Business Administration, UNED & CUNEF, Madrid. MA in Law from the University of Louvain-la-Neuve (Belgium), Diploma in Economics and Business, ICHEC (Belgium), Director of companies in the Petercam sa group and Managing Director of Petercam Institutional |
8/8 |
| Mr. Yves-Thibault de Silguy (F) |
1948 | 2010 | 2015 Independent director Member of the Compensation and Nomination Committees |
Bonds sa, Director of Vital Renewable Energy Company LLC (Delaware). MA in Law from the University of Rennes, DES in public law from the Université de Paris I, graduate of the Institut d'Etudes Politiques de Paris and the Ecole Nationale d'Administration, Vice-Chair and Lead Director of the VINCI group, Director of LVMH, Chairman of the Supervisory Board of Sofi sport (France) and Trustee of the International Financial Reporting Standards Foundation (IFRS Foundation). |
6/8 |
| Ms. Evelyn du Monceau (B) | 1950 | 2010 | 2013 Independent director Member of the Compensation and Nomination Committees |
MA in Applied Economics from the Catholic University of Louvain, Member of the Board of Directors of La Financière de Tubize SA, Vice Chair of the Board and Chair of the Remuneration and Nomination Committee of UCB SA, Director of FBNet Belgium, Member of the Fondation Commission Corporate Governance. Member of the Orientation Council of NYSE Euronext Brussels. |
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tenth or more of the capital, or the company equity, or a category of shares of the company;
b) Where the person in question holds ownership rights of under 10%:
a) When these ownership rights are added to those held in the same company by companies over which the independent director has control, these ownership rights may not reach one tenth of the capital, of the company equity, or a category of shares of the company; or
b) The use of these shares or the exercise of the rights attached to the same may not be subject to contract stipulations or to unilateral commitments to which the independent member of the management body has subscribed;
c) Not to represent in any way a shareholder meeting the conditions of this item;
of the management body of another company in which an executive director of the company acts as a non-executive member of the management body or member of the supervisory body, nor maintaining other major connections with the executive directors of the company as a result of functions exercised in other companies or bodies;
At December 31, 2011, 9 out of 16 directors fulfi lled the criteria of independence, as confi rmed by a vote of the Ordinary Shareholders' Meeting of May 10, 2011:
Moranville, having been Directors of the company for over 12 years, are not independent for this reason (criterion no. 2).
The Board of Directors submits directors' appointments, renewals, resignations or dismissals to the Ordinary Shareholders' Meeting for approval. It also submits to it the vote on the independence of the Directors fulfi lling the related criteria, after informing the Works' Council of the same. It also seeks fi rst the opinion of the Nomination Committee, which is tasked with defi ning and assessing the profi le of any new candidate using the criteria of appointment and of specifi c competences set by itself. The Ordinary Shareholders' Meeting decides on proposals made by the Board of Directors in this area by a simple majority. When a directorship becomes vacant during a term of offi ce, the Board of Directors may appoint a new member, subject to ratifi cation by the next following Ordinary Shareholders' Meeting.
The Board of Directors met eight times in 2011 (fi ve ordinary and three extraordinary meetings). Five ordinary meetings are planned in 2012. The dates of ordinary meetings are set by the Board of Directors itself, more than one year before the start of the fi nancial year. Additional meetings can, if needed, be called by the Chairman of the Board of Directors, after consulting with the Chairman of the Executive Committee.
The agenda for each meeting is set by the Chairman of the Board of Directors after consulting with the Chairman of the Executive Committee.
The Corporate Secretary is charged, under the supervision of the Chairman of the Board of Directors, with
organizing meetings, and sending notices of meetings, agendas and the dossier containing the item-by-item information required for decisionmaking.
To the extent possible, he ensures that directors receive notices of meetings and complete fi les at least fi ve days before the meeting. The Corporate Secretary prepares the minutes of the Board meetings, presenting the draft to the Chairman and then to all members.
Finalized minutes that have been approved at the following Board meeting are signed by all Directors having taken part in the deliberations.
The Board of Directors takes its decisions in a collegial fashion by a simple majority of votes. Certain decisions that are considered particularly important by the company's by-laws require a three quarters majority of its members. The Board may not validly transact its business unless half of its members are present or represented. Given the very high level of attendance, the Board of Directors has never been unable to transact its business.
In 2010, the Board of Directors undertook an evaluation, focused primarily on its own composition, modus operandi, information and its interactions with executive management, and the composition and modus operandi of the committees created by it. Board members were invited to express their views on these various points based on a questionnaire drawn up with the help of the Belgian Governance Institute, now named GUBERNA. The Chairman of the Board then met individually with each Board member. In addition to the subjects listed above, the meetings focused on assessing the individual directors' contributions to the Board's work
and, where applicable, the renewal of their directorships.
The improvements decided by the Board at the end of this evaluation process are: increasing the time allotted to questions and answers during executive management's presentation of quarterly results, ex-post evaluation of past policy decisions in order to draw lessons for the future, and also the addition of Human Resources to the list of regular executive management presentations to the Board. It was also decided to add a third meeting of the Nomination Committee to the calendar for 2011.
The next evaluation of the Board will take place in 2013.
An induction program is provided for new Directors, aimed at acquainting them with the Solvay group as quickly as possible. The program includes a review of the Group's strategy and its sectors of activity and of the main challenges in terms of growth, competitiveness and innovation, as well as fi nance, research & development, human resources management, the legal context, compliance and the general organization of operations. This program is open to every Director who wishes to participate. It also includes visiting industrial or research sites.
request of the Board of Directors or Executive Committee. After presentation to the Board of Directors, the Committees' reports are attached to the minutes of the next following Board meeting.
The terms of members of various committees will mature on May 1, 2012. The Board of Directors has decided to extend these until the date of the Ordinary Shareholders' Meeting on May 8, 2012 in order to refl ect the changes ensuing on Mr. Aloïs Michielsen's departure on that date. The Board has further decided to have in future the renewal dates of the Committees coincide with the dates of Ordinary Shareholders' Meetings. The new composition of Committees will therefore take effect on May 9, 2012 for a period of two years, ending on the date of the Ordinary Shareholders' Meeting to be held in May 2014.
In 2011, the Audit Committee was composed of Prof. Dr. Bernhard Scheuble (Chairman), Chevalier Guy de Selliers de Moranville, Mr. Anton van Rossum and Mr. Charles Casimir-Lambert. These are independent non-executive directors, with the exception of Chevalier Guy de Selliers de Moranville. The Secretariat of this Committee is provided by a member
of the Group's internal legal staff.
This Committee met four times in 2011, each time before a Board meeting scheduled to consider the publication of periodical results (quarterly, half-yearly and annual). Participation in Audit Committee meetings was a very high 100%.
The Audit Committee is tasked with monitoring the effectiveness of the internal control of Group and Solvay SA accounting, checking in particular its reliability and compliance with legal and internal accounting procedures. Its mission has been set out in an internal "Terms of Reference" document (see Annex 1). This mission was reviewed in 2009 to integrate the requirements of the legal mission instituted by the law of December 17, 2008.
At each meeting, the Audit Committee hears reports from the Chief Financial Offi cer, the Head of the Group Service Internal Audit and of the Auditor in charge of the External Audit (Deloitte, represented by Mr. Eric Nys). It also examines the quarterly report by the Group General Counsel on signifi cant ongoing legal disputes and reports on tax and intellectual property disputes. It meets alone with the auditor in charge of the external audit whenever it deems such meetings useful. The Chairman of the Executive Committee (Mr. Christian Jourquin) is invited, once a year, to discuss the major risks to which the Group is exposed. The Directors belonging to this Audit Committee fulfi ll the criterion of competence by their training and by the experience gathered during their previous functions (see section 4.3. concerning the composition of the Board of Directors).
In 2011 the Finance Committee consisted of Mr. Aloïs Michielsen (Chairman), Mr. Christian Jourquin (Chairman of the Executive
Committee) and Mr. Bernard de Laguiche (Member of the Executive Committee and Chief Financial Offi cer) and three Directors, Ms. Petra Mateos-Aparicio Morales, Chevalier Guy de Selliers de Moranville and Baron Hervé Coppens. Mr. Michel Defourny is secretary to this Committee.
This Committee met four times in 2011. Participation of the members of the Finance Committee was very high (100%).
The Committee gives its opinion on fi nancial matters such as the amounts of the interim and fi nal dividends, the levels and currencies of indebtedness in the light of interest rate developments, the hedging of foreign exchange and energy risks, the policy of buying in own shares, the content of fi nancial communication, the fi nancing of major investments, etc. It fi nalizes the preparation of the press releases announcing the quarterly results. It may also be called on to give opinions on Board policies on these matters.
Mr. Nicolas Boël has been an invited guest at meetings of the Finance Committee since January 1, 2012 and will became a Member and Chairman from May 9, 2012, replacing Mr. Michielsen. Mr. Jean-Pierre Clamadieu will succeed Mr. Christian Jourquin as a member of the Finance Committee with effect from May 11, 2012 subject to his appointment as a Director of Solvay.
The Compensation Committee consists of Mr. Aloïs Michielsen (Chairman), Messrs. Denis Solvay, Jean van Zeebroeck, Jean-Martin Folz and Yves-Thibault de Silguy, and, from May 10, 2011, Ms. Evelyn du Monceau. A majority of the members of this Committee have independent Director status within the meaning of the law. Mr. Christian Jourquin is
invited to meetings in his capacity as Chairman of the Executive Committee, except for matters that concern him personally. The secretary of this Committee is Mr. Daniel Broens.
This Committee met three times in 2011. Participation of the members of the Compensation Committee was very high (100%).
Directors belonging to both the Compensation Committee and the Nomination Committee do not receive double compensation, but receive a single attendance fee of EUR 2,500 per session.
The Compensation Committee fulfi lls the missions imposed on it by law. In particular it advises the Board of Directors on compensation policy and compensation levels for members of the Board of Directors, the Executive Committee and General Management. It also gives its opinion to the Board of Directors and/or Executive Committee on the Group's main compensation policies (including stock options). It also prepares the report on compensation policy.
The Compensation Committee has the expertise necessary to perform its missions.
Mr. Nicolas Boël has been an invited guest at meetings of the Compensation Committee since January 1, 2012 and will became a Member and Chairman from May 9, 2012, replacing Mr. Michielsen. Mr. Jean-Pierre Clamadieu will succeed Mr. Christian Jourquin as an invited guest of the Compensation Committee from May 11, 2012 subject to his appointment as a Director of Solvay.
4.5.5. The Nomination Committee
The Nomination Committee consists of Mr. Aloïs Michielsen (Chairman), Messrs. Denis Solvay, Nicolas Boël, Jean van Zeebroeck, Jean-Martin
Folz, Yves-Thibault de Silguy and Ms. Evelyn du Monceau. A majority of the members of the Nomination Committee are independent nonexecutive Directors.
Mr. Christian Jourquin is invited to meetings in his capacity as Chairman of the Executive Committee, except for matters that concern him personally.
The secretary of this Committee is Mr. Michel Defourny.
The Committee met four times in 2011. The participation of members of the Nomination Committee was high (93%).
Directors belonging to both the Compensation Committee and the Nomination Committee do not receive double compensation, but receive a single attendance fee of EUR 2 500 per session.
The Nomination Committee gives its opinion on appointments to the Board of Directors (Chairman, Vice-Chairman, new members, renewals and Committees), to Executive Committee positions (Chairmanship and Members) and to General Management positions.
Mr. Jean-Martin Folz will chair this Committee upon the departure of Mr. Aloïs Michielsen. Mr. Jean-Pierre Clamadieu will succeed Mr. Christian Jourquin as an invited guest of the Nomination Committee from May 11, 2012 subject to his appointment as a Director of Solvay.
5.1.1. The Board of Directors defi nes the role and mission of the Executive Committee. The main discussion and decisions on this subject date back to December 14, 1998. There have been no signifi cant changes since then.
5.1.2. The Executive Committee, as a group, has been assigned the following main tasks by the Board of Directors:
– major fi nancial steps that have the effect of modifying the company's fi nancial structure;
– the creation and termination of major activities, including the corresponding entities (branches, subsidiaries, joint ventures); and – the company's fi nancial statements.
The Executive Committee operates on a collegial basis, whilst consisting of members exercising General Management functions.
The execution of Executive Committee decisions and the following up of its recommendations is delegated to the Executive Committee member (or another General Manager) in charge of the activity or of the function corresponding to the decision or recommendation.
At December 31, 2011, the Executive Committee had eight members. It should be emphasized here that Messrs. Jean-Pierre Clamadieu and Gilles Auffret joined the Executive Committee on September 8, 2011 following the acquisition of Rhodia Group, as Deputy CEO and Executive Committee member respectively.
Mr. Jourquin's term of offi ce as Chairman of the Executive Committee will end on May 10, 2012, with Mr. Clamadieu, the Deputy CEO, succeeding Mr. Jourquin from May 11, 2012 subject to his appointment as a Director of Solvay.
Executive Committee members are appointed by the Board of Directors for two-year renewable terms. The Board of Directors has set an age limit of 65 for Executive Committee membership. An exception to this rule was decided by the Board of Directors on December 14, 2011 in favour of Mr. Gilles Auffret, whose mandate has been renewed for a further two-year term. This exception is justifi ed by the transition situation due to the integration of Rhodia into the Solvay Group.
The Executive Committee is a collegial body made up of specialist members, generally from the Group's General Managements. Members must work full-time for the Group. Apart from the Chairman and the Deputy CEO, its members were at the end of 2011 the Chief Financial Offi cer, the Group General Managers of the three Sectors (Chemicals, Plastics and Rhodia), the Group General Manager Technology, Research Services and Procurement, and the Region General Manager Asia-Pacifi c.
All Executive Committee members have employment contracts with the Solvay group, except for the Chairman and the Deputy CEO, who have self-employed status. The post of Chairman of the Executive Committee may not be held concurrently with that of Chairman of the Board of Directors.
The Chairman of the Executive Committee is appointed by the Board of Directors based on a proposal by the Chairman of the Board of Directors and with recommendations by the Nomination Committee and the outgoing Chairman of the Executive Committee.
The other Executive Committee members are also appointed by the Board of Directors, but on the proposal of the Chairman of the Executive Committee in agreement with the Chairman of the Board of Directors and with the concurrence of the Nomination Committee.
Executive Committee members' performance is assessed annually by the Chairman of the Executive Committee. This assessment is undertaken together with the Chairman of the Board and with the Compensation Committee whenever proposals are made for setting variable compensation. The performance of the Chairman of the Executive Committee is assessed annually by the Compensation Committee.
5.4.1. The Executive Committee met 20 times in 2011. Meetings are generally held at the Company's registered offi ce, but can also be held elsewhere at the decision of the Executive Committee Chairman. The Executive Committee sets the dates of its meetings more than a year before the start of the fi nancial year. Additional meetings can be convened by the Chairman of the Executive Committee, who sets the agenda based, inter alia, on proposals from the General Managements.
| Year of birth | Year of 1st appointment |
Term of offi ce ends |
Diplomas and main Solvay activities | Presence at meetings (as a function of date of appointment) |
|
|---|---|---|---|---|---|
| Mr. Christian Jourquin (B) | 1948 | 1996 | May 10, 2012 |
Commercial Engineering degree (Free University of Brussels), ISMP Harvard, Chairman of the Executive Committee. |
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| Mr. Jean-Pierre Clamadieu (F) | 1958 | 2011 | 2013 | Engineering degree from the Ecole des Mines (Paris), Deputy CEO. | 7/7 |
| Mr. Bernard de Laguiche (F/BR) |
1959 | 1998 | 2014 | Commercial engineering degree – MA in economics HSG (University of St Gallen – Switzerland), Executive Committee Member in charge of Finance/ Information Systems. |
20/20 |
| Mr. Jacques van Rijckevorsel (B) |
1950 | 2000 | 2013 | Civil Engineering degree in Mechanics (Catholic University of Louvain). Advanced studies in Chemical Engineering (Free University of Brussels), AMP Harvard, Executive Committee member in charge of the Plastics Sector. |
20/20 |
| Mr. Vincent De Cuyper (B) | 1961 | 2006 | 2014 | Chemical engineering degree (Catholic University of Louvain, Master in Industrial Management (Catholic University of Louvain), AMP Harvard, Executive Committee member in charge of the Chemicals Sector. |
20/20 |
| Mr. Jean-Michel Mesland (F) | 1957 | 2007 | 2013 | Engineering degrees from the Ecole Polytechnique and the Ecole des Mines (Paris) – AMP Harvard. Executive Committee member in charge of Technology, Research Services and Procurement. |
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| Mr. Roger Kearns (US) | 1963 | 2008 | 2014 | Bachelor of Science – Engineering Arts (Georgetown College – Georgetown), Bachelor of Science – Chemical Engineering (Georgia Institute of Technology – Atlanta), MBA (Stanford University). Executive Committee member in charge of Asia-Pacifi c Regional Management. |
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| Mr. Gilles Auffret (F) | 1947 | 2011 | 2014 | Engineering degree from the Ecole Polytechnique, graduate of the Ecole Nationale d'Administration (ENA), the Ecole des Sciences Politiques and the Ecole Nationale de la Statistique et de l'Administration Economique (ENSAE), Executive Committee Member in, charge of the Rhodia Sector. |
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5.4.2. The Corporate Secretary, who acts as secretary to both the Board of Directors and the Executive Committee, is responsible, under the supervision of the Chairman of the Executive Committee, for organizing meetings and sending out notices of meetings, agendas and the dossiers containing the item-by-item information required for decisionmaking.
He makes sure that members receive notices and dossiers – complete whenever possible – at least fi ve days before meetings.
The Corporate Secretary draws up the minutes of Executive Committee meetings and has them approved by the Chairman of the Executive Committee and subsequently by all members. Minutes are formally approved at the following meeting. They are not signed, but the Chairman of the Executive Committee and the Corporate Secretary may deliver certifi ed conformed extracts.
It should be noted that the Executive Committee organized certain meetings in teleconference format, given that one member is physically located in Asia.
5.4.3. The Executive Committee takes its decisions by a simple majority, with its Chairman having a casting vote. If the Chairman of the Executive Committee fi nds himself in a minority he may, if he wishes, refer the matter to the Board of Directors which will then decide on the matter. In practice, however, almost all Executive Committee decisions are taken unanimously, so that the Chairman has never made use of his casting vote.
Attendance at meetings was 100% in 2011. The Executive Committee has not appointed any specialist Committees from among its members. For important projects, however, it does set up ad hoc working teams, led mainly by General Managers chosen on the basis of the competences required. The Executive Committee regularly invites other employees to its discussions on specifi c subjects.
5.4.4. Every two years the Executive Committee, enlarged to include the other General Managers, holds an offsite meeting to discuss the Group's strategic directions. A meeting of this type was organized in 2010. This was devoted to the Horizon project to reorganize the Group, as part of the strategy to make the Group a major player in sustainable chemistry.
a) for Directors :
Directorships of Solvay SA are remunerated with fi xed emoluments, the common basis of which is set by the ordinary Shareholders' Meeting, and any complement thereto by the Board of Directors on the basis of article 27 of the by-laws, which states that "Directors shall receive emoluments payable from overhead costs; the shareholders' meeting shall determine the amount and terms of payment.
That decision shall stand until another decision is taken. The Board of Directors shall be authorized to grant directors with special duties (the Chairman, vicechairmen, directors charged with
day-to-day management, members of the Executive Committee) fi xed emoluments in addition to those provided for in the above paragraph.
Each of the Directors responsible for day-to-day management is also entitled to variable compensation determined by the Board of
Directors on the basis of their individual results and of the consolidated results of the Solvay Group.
The sum referred to in the two preceding sub-sections are also paid out of overhead costs."
b) for Executive Committee members: compensation policy is decided by the Board of Directors based on proposals by the Compensation Committee.
In 2005, based on a proposal by the Compensation and Nomination Committee, the Board of Directors updated its compensation policy for its main senior managers, including the members of the Executive Committee. This policy, which was developed with the help of a specialist outside consultant, is set out in an annex 2 to this document.
Given the acquisition of Rhodia in 2011 and as part of its integration into the Group, it is planned to review this policy in the course of 2012 with the aim of implementing it at the start of 2013.
(i) The June 2005 Ordinary Shareholders' Meeting decided to set Directors' pay, starting from the 2005 fi nancial year, as follows: – on the one hand to grant an annual gross fi xed compensation of EUR 35 000 per Director and, on top of this, an attendance individual fee of EUR 2 500 gross per Board meeting attended; – and on the other hand to confi rm the Audit Committee attendance fees, namely: EUR 4 000 gross for members and EUR 6 000 gross for the Chairman;
– and, lastly, to grant attendance fees, for the Compensation Committee, the Nomination Committees and the Finance Committee, of EUR 2 500 gross
per member and EUR 4 000 gross for the Chairmen of these Committees, on the understanding that a Director belonging to both the Compensation Committee and the Nomination Committee does not receive double compensation; – but with the specifi cation that the Chairman of the Board, the Chairman of the Executive Committee and the Executive Directors do not receive attendance fees for taking part in these Committees.
The Chairman of the Board of Directors is the sole non-executive Director having permanent support provided by the Group (offi ce, secretariat, car). The other non-executive directors receive logistics support from the General Secretariat as and when needed. The company also carries customary insurance policies
covering the activities of Board Members in carrying out their duties.
b) for Executive Committee members: The compensation of the Chairman and the members of the Executive Committee is set as a global gross amount. This includes not only the gross compensation earned at Solvay SA, but also amounts deriving, contractually or as directors' emoluments, from companies throughout the world in which Solvay SA holds majority or other shareholdings. Individual compensation is set by the Board of Directors based on recommendations by the Compensation Committee.
The compensation policy adopted by the Board of Directors in 2005, and which remained valid for the 2011 fi nancial year, is set out in Annex 2 to this document.
This policy contains: the basic compensation principles, indicating the relationship between compensation and performance, including the criteria for assessing the Executive Committee member in relation to the objectives, and the relative importance of various compensation components.
6.3. Amount of the compensation and other benefi ts granted directly or indirectly to Directors (executive and non-executive) by the company or by an affi liated company. (see table opposite)
6.4. Amount of compensation and other benefi ts granted directly or indirectly to the Chairman of the Executive Committee. (see table opposite)
The Chairman of the Executive Committee receives stock options as explained below. He does not, however, receive shares as part of his compensation package. In the area of extra-legal pension rights, given his self-employed status in Belgium, the Chairman of the Executive Committee has his own separate contractual regime, with pension, death-in-service and disability rules that are fi nancially comparable with those applicable, leaving aside any contributions, to his Executive Committee colleagues related to the Pension Regulations for executives in Belgium.
Given that he is aged over 60, any early departure of the Chairman of the Executive Committee would be deemed retirement. This means that no severance indemnity would be owed to him. The Chairman of the Executive Committee would be entitled to his pension capital given his recognized service at the date of departure. In the case of retirement prior to age 65, a reduction of 0.5% by month of anticipation is applied to this capital.
6.5. Global amount of compensation and other benefi ts granted directly or indirectly to the other members of the Executive Committee by the company or an affi liated company.
(see table opposite)
Variable compensation consists of an annual incentive based on the performance of the Solvay group (ROE) and on each Executive Committee member's performance against individual objectives (for further details see the table on page 207). In 2010, the Board did not made use of its discretionary powers to increase the ROE share of variable remuneration, preferring to smooth the ROE fl uctuations resulting from the major changes in the shape of the Group in 2010 and 2011. The variable compensation of Messrs. Clamadieu
| GROSS COMPENSATION AND OTHER BENEFITS GRANTED TO DIRECTORS | ||||||
|---|---|---|---|---|---|---|
| Compensation | 2010 | 2011 | ||||
| Gross amount | Including Board of Directors and Committees attendance fees |
Gross amount | Including Board of Directors and Committees attendance fees |
|||
| A. Michielsen | ||||||
| – Fixed emoluments + attendance fees |
50 000.04 | 15 000.00 | 55 000.04 | 20 000.00 | ||
| – "Article 27" supplement | 231 218.28 | 238 201.07 | ||||
| – Compensation for complementary pension rights |
433 658.74 | 446 755.23 | ||||
| N. Boël | 57 500.04 | 22 500.00 | 62 500.04 | 27 500.00 | ||
| D. Solvay | 52 500.04 | 17 500.00 | 65 000.04 | 30 000.00 | ||
| C. Jourquin | 50 000.04 | 15 000.00 | 55 000.04 | 20 000.00 | ||
| J-M. Solvay | 50 000.04 | 15 000.00 | 55 000.04 | 20 000.00 | ||
| G. de Selliers | 76 000.04 | 41 000.00 | 81 000.04 | 46 000.00 | ||
| Wh. Sadler | 12 607.54 | |||||
| J. van Zeebroeck | 57 500.04 | 22 500.00 | 65 000.04 | 30 000.00 | ||
| J-M. Folz | 55 000.04 | 20 000.00 | 62 500.04 | 27 500.00 | ||
| B. de Laguiche | 50 000.04 | 15 000.00 | 55 000.04 | 20 000.00 | ||
| B. Scheuble | 74 000.04 | 39 000.00 | 79 000.04 | 44 000.00 | ||
| A. Van Rossum | 63 500.04 | 28 500.00 | 66 000.04 | 31 000.00 | ||
| C. Casimir-Lambert | 66 000.04 | 31 000.00 | 71 000.04 | 36 000.00 | ||
| H. Coppens d'Eeckenbrugge | 50 000.04 | 15 000.00 | 65 000.04 | 30 000.00 | ||
| Ms. P. Mateos-Aparicio Morales | 60 000.04 | 25 000.00 | 65 000.04 | 30 000.00 | ||
| Ms. E. du Monceau | 32 392.50 | 10 000.00 | 65 000.04 | 30 000.00 | ||
| Y-T. de Silguy | 32 392.50 | 10 000.00 | 60 000.04 | 25 000.00 | ||
| 1 554 270.12 | 342 000.00 | 1 711 956.94 | 467 000.00 |
| Compensation and other benefi ts granted to the Chairman of the Executive Committee |
2010 | 2011 |
|---|---|---|
| Base compensation | 776 804 | 776 804 |
| Variable compensation | 926 625 | 955 469 |
| Pension and death-in-service and disability coverage (costs paid or provided for) |
250 000 | 229 481 |
| Other compensation components3 | 15 676 | 22 402 |
| Compensation and other benefi ts granted to the other members of the Executive Committee2 |
2010 | 2011 |
| Base compensation | 2 278 519 | 2 648 581 |
| Variable compensation | 1 699 342 | 1 704 062 |
| Pension and death-in-service and disability coverage (costs paid or provided for) |
398 109 | 643 573 |
| Other compensation components3 | 85 597 | 87 884 |
and Auffret for 2011 was set under the rules in force at Rhodia and as a function of their objectives.
The law (Art. 520ter of the Companies' Code) provides that from 2011 onwards, in the absence of statutory provisions to the contrary or express approval by the general meeting of shareholders, at least one quarter of the variable compensation of Executive Committee members must be based on predetermined criteria of performance that are objectively measurable over a period of at least two years, and another quarter at least should be based on predetermined performance criteria that are objectively measurable over a period of at least three years.
Given the signifi cant changes under way in terms of organizational and business scope, the Board has asked the Shareholders' Meeting and received its authorization to continue the current system for 2011 and 2012, given that the current system is already based on predetermined and objectively measurable performance criteria. The policy review in the course of 2012 will refl ect the legal requirements in this area.
Executive Committee members receive stock options as explained below. They do not, however, receive shares as part of their compensation packages.
Executive Committee members' expenses, including those of its Chairman, are governed by the same rules as apply to all Group management staff, that is: the justifi cation of all business expenses, item by item. Private expenses are not reimbursed. In the case of mixed business/ private
expenses (like cars), a proportional
rule is applied in the same way as to all management staff in the same position.
In the area of insurance, the Company subscribes the same type of cover for Executive Committee members as it does for its senior managers.
Pensions and retirement and deathin-service coverage for Executive Committee members are based in principle on the provisions of the schemes applicable to senior executives in their base countries.
The pensions and death in service coverage of Messrs. Clamadieu and Auffret refl ect the conditions they had at Rhodia. In the case of Mr Clamadieu these take the form of a formal undertaking by Solvay SA.
(see table below) In December 2011, the Board of Directors allotted, on the proposal of the Compensation Committee,
stock options to around 200 senior Group managers. The exercise price amounts to EUR 65.71 per option, with a three-year vesting period. Executive Committee members together were granted 109 000 options in 2011, compared with 106 000 in 2010.
The stock option plans, which are not currently considered as part of variable compensation, will be included in the compensation policy review to be held in 2012.
6.7. The most important provisions of their contractual relationships with the company and/or an affi liated company, including the provisions relating to compensation in the event of early departure.
Executive Committee members, including the Chairman, have directorships in Group subsidiaries as a function of their responsibilities. Where such directorships are compensated, they are included in the amounts given above, regardless
| Country | Name | Function | Number of options |
|---|---|---|---|
| Belgium | Jourquin Christian | Chairman of the Executive Committee | 25 000 |
| Belgium | de Laguiche Bernard | Member of the Executive Committee | 20 000 |
| Belgium | van Rijckevorsel Jacques | Member of the Executive Committee | 18 000 |
| Belgium | De Cuyper Vincent | Member of the Executive Committee | 17 000 |
| Belgium | Mesland Jean-Michel | Member of the Executive Committee | 14 000 |
| Thailand | Kearns Roger | Member of the Executive Committee | 15 000 |
| TOTAL | 109 000 |
| Country | Name Options |
held at 31/12/10 |
granted in 12/2011 |
exercised in 2011 |
expired in 2011 |
31/12/11 | ||
|---|---|---|---|---|---|---|---|---|
| held | exercisable | non exercisable | ||||||
| Belgium | Jourquin Christian | 155 000 | 25 000 | 0 | 0 | 180 000 | 105 000 | 75 000 |
| Belgium | de Laguiche Bernard | 108 000 | 20 000 | 0 | 0 | 128 000 | 70 000 | 58 000 |
| Belgium | van Rijckevorsel Jacques |
105 000 | 18 000 | 8 000 | 0 | 115 000 | 61 000 | 54 000 |
| Belgium | De Cuyper Vincent | 77 000 | 17 000 | 3 000 | 0 | 91 000 | 44 000 | 47 000 |
| Belgium | Mesland Jean-Michel | 58 000 | 14 000 | 3 000 | 0 | 69 000 | 28 000 | 41 000 |
| Thailand | Kearns Roger | 54 400 | 15 000 | 2 600 | 0 | 66 800 | 24 800 | 42 000 |
| TOTAL | 557 400 | 109 000 | 16 600 | 0 | 649 800 | 332 800 | 317 000 |
of whether the position is deemed to be salaried or undertaken on a self-employed basis under local legislation.
No Executive Committee member, including the Chairman, will benefi t from any departure indemnity linked to the exercise of their offi ce. If their service ends early, only the legal system applies.
Mr. Jean-Pierre Clamadieu's contract includes a 24 month non-competition clause, but with no more than 12 months' pay.
Executive Committee members' contracts do not contain a clause providing a right of claw-back of variable compensation in case of erroneous fi nancial information.
The Chairman of the Board of Directors and the Chairman of the Executive Committee work together, through constructive dialogue and frequent exchanges, to harmonize the work of the Board of Directors (including its Committees) with that of the Executive Committee. The following measures have been introduced to achieve this:
sure to inform the Chairman of the Executive Committee and the members of the Board of Directors of the same;
• the Chairman of the Executive Committee (along with the Finance Manager, a member of the Executive Committee), is also a member of the Board of Directors, where he presents the Executive Committee's proposals.
The Solvay group has set up an internal control system designed to provide a reasonable assurance that (i) current laws and regulations are complied with, (ii) policies and objectives set by the company are implemented and (iii) fi nancial and non-fi nancial information is reliable. This system has fi ve components: the control environment, the risk management process, the management controls, the internal control supervision, and the disclosure of fi nancial information.
Our control environment is made up of various elements such as a Code of Conduct which is a reference framework for the Group, a management philosophy expressed in Values, a clear organizational and hierarchical structure supported by job descriptions linked, where appropriate, to delegations of power and management bodies (Board of Directors and Committees, Executive Committee, etc.), the workings of which are described in the Corporate Governance Statement. More detailed information on this point is available in the 2011 Annual Report.
Taking calculated risks in compliance with laws and regulations and the Code of Conduct is inherent in the development of the business of the Solvay group. In order to identify, assess and manage opportunities successfully and at the same time limit risks which are potentially signifi cant for the activities of the Group, the Company has set up risk management systems.
Risk management is integrated in the strategic and operational decisionmaking process and is seen as an essential management tool and an aid for making the decisions to achieve the company's short, medium and long term aims.
The Group Service "Risk Management and Insurance" (RMI), headed by the Group Risk Manager, is in charge of setting up global, systematic, coherent management of risks across the Group.
Solvay has adopted the FERMA reference framework for risk management. This framework structures the process of risk management in following phases, taking into account the organization's strategic objectives:
The Group Service RMI assists entities in the process of managing their risks, in particular by providing them with methods and tools and via training sessions.
More information on this topic can be found in the "Risk Management" section of the 2011 Annual Report, in particular with regard to risk management actions recently carried out within the Group, the Group's main risks and the actions taken to prevent or reduce them.
This approach to risk management enables a consistent implementation throughout the organization. It is applied in the decisions and actions of Group staff. It makes it possible to move forward in a clearly defi ned framework, and thus with confi dence.
The management is responsible for internal control in operations.
The Solvay group has set up reporting systems to gather and circulate the information of relevance to the various levels of the company. Such systems are in place in, for example, the fi nancial, operational (production process), human resources, HSE (in particular with regard to safety at work and the environment), commercial, and legal (in particular compliance) areas.
In the fi nancial area, the Solvay group has set up a reporting system based on IFRS standards, common to all its subsidiaries. The information provided every month mainly originates directly from the integrated IT systems (ERP). These ERPs are common to most parts of the Group. We should also emphasize that the IT systems are managed centrally.
The fi nancial data are consolidated monthly and analyzed at every level of responsibility of the company (such as for example the local fi nance manager, the controller and the management of the activity in question, Group Accounting and the Executive Committee) and in various ways such as, for example, variance analysis, plausibility and consistency checks, ratio analysis and comparison with forecasts. The results are also validated quarterly by the Audit Committee, taking into
account the work carried out by the external auditor.
The monitoring of fi nancial data is supported by the use of common ERPs, by an organization based on major fi nancial processes which are managed centrally and integrated, where appropriate, in the Shared Services Centers, and by application of uniform procedures.
The Audit Committee is in charge of monitoring the effectiveness of internal control systems. It supervises the work of the Group Service "Internal Audit" with regard to fi nancial, operational, and compliance monitoring. In particular, it verifi es the scope, programs and results of the internal audit work and ensures that its recommendations are properly implemented. The Mission Statement of the Audit Committee is given in Appendix 1 to this Corporate Governance Statement.
The Group Service "Internal Audit" assesses independently the effectiveness of the internal controls in the fi nancial, IT, and HR areas. In particular, it ensures that:
The internal audit assignments are planned and defi ned in terms of content on the basis of a risk analysis; the controls focus on the areas perceived as having the highest risks.
All the entities within the Group are visited by Internal Audit at least every three years.
The recommendations of the Group Service "Internal Audit" are implemented by management. Other entities carry out activities of the same type in very specifi c areas. For example:
The Solvay group publishes quarterly results. Publication of these results is subject to various checks and validations carried out in advance.
The audit of the company's fi nancial situation, its fi nancial statements and the conformance of the same with respect to the Companies' Code and the by-laws, and of the entries to be recorded in the fi nancial statements, is entrusted to one or more auditors appointed by the Shareholders' Meeting from among the members, either physical or legal persons, of the Belgian Institute of Company Auditors.
The mission and powers of the auditor(s) are those set by the law. The Shareholders' Meeting sets the number of auditors and fi xes their emoluments in accordance with the law. Auditors are also entitled to reimbursement of their travel expenses for auditing the company's plants and administrative offi ces.
The Shareholders' Meeting may also appoint one or more alternate auditors. Auditors are appointed for three-year renewable terms, which may not be revoked by the Shareholders' Meeting other than for good reasons.
The Ordinary Shareholders' Meeting of May 2010 proceeded to appoint the international audit company Deloitte, represented by Mr. Eric Nys, as Effective Auditor and to appoint the international audit company Deloitte, represented by Mr. Franck Verhaegen as Alternate Auditor. These two mandates expire at the end of the 2013 Ordinary Shareholders' Meeting.
The same Shareholders' Meeting also set the yearly emoluments for the Effective Auditor, covering the statutory audits, the consolidated accounts and IFRS reporting, at EUR 354 818 for 2010, EUR 351 270 for 2011 and EUR 351 270 for 2012. As from fi scal year 2011 these amounts will be infl ation adjusted (consumer price index from December to December).
Deloitte received EUR 2 888 000 in supplementary fees in 2011. Over 70% of this amount was linked to the acquisition of Rhodia.
For the entire consolidated Group, the fees received by Deloitte break down as follows:
The Solvay Code of Conduct sets out how Solvay wishes to carry out its business and how it wishes to interact with all its stakeholders in an ethical and compliant manner. The Solvay Code of Conduct is based on its Values that serve as a reference framework for the Group's decisions and actions:
The Code of Conduct is part of the Group's constant effort to maintain and strengthen trust both among all its employees and between the Group and its partners, including its employees, their representatives, shareholders, customers and suppliers, government agencies and all other third parties.
To obtain the widest possible involvement of all employees in implementing this Code, the Group will continue to promote a rich and balanced social dialogue between senior management and social partners.
The Solvay group takes various measures to ensure that this Code is applied, including targeted training programs, in order to minimize the danger of violation and with provision for clear sanctions where necessary.
The Group Functions "Legal and Compliance" contribute to or enhance the compliance culture. They are under the authority of the Group General Counsel. The Group Service "Ethics and Compliance" has the more specifi c objective of strengthening a culture based on ethics and on compliance with the Solvay Values and Code of Conduct. It consists of "Compliance Offi cers" who are present in the four regions. These are assisted by a network of experienced employees tasked, in addition to their other responsibilities, with supporting activities in this area.
The Group encourages its employees to take up any diffi culty or question relating to the application of the Code of Conduct with its hierarchy or other identifi ed interlocutors (Compliance Offi cers, legal staff, human resources). It is also progressively introducing the possibility, in every region, of turning to an Ethics Helpline in the form of an external service to voice any diffi culties or pose questions in complete confi dence. The Ethics Helpline is managed in accordance with applicable legislation and in particular the laws governing data protection.
In the joint ventures, our Board representatives make every effort to have rules adopted that are in line with the Group's Code of Conduct.
The Group has established a policy for preventing insider trading, and a manual containing strict rules of confi dentiality and non-use of "inside information" for both regular and occasional insiders. This policy and manual have been widely circulated within the Group.
The interpretation and oversight of compliance with these rules are entrusted to a Transparency Committee composed of the Group Corporate Secretary (chairman), who is also head of Corporate Communications, the Chief Financial Offi cer, the Group General Counsel and the Group General Manager Human Resources. In particular, this Committee advises the Board of Directors, the Executive Committee and any employee confronted with a diffi cult situation.
This policy is applied equally by the Executive Committee and the Board of Directors.
Moreover, in conformity with the law of August 2, 2002, persons exercising managing responsibilities within the Group, and persons who are closely related to them, that is:
The internal organization of the Solvay group is described in the businesses section of this Annual Report.
The Solvay share is listed on
NYSE Euronext Brussels. It was also admitted to trading on NYSE Euronext Paris on January 23, 2012. On December 31, 2011, its price was EUR 63.7, as against EUR 79.8 at the end of 2010. During 2011, the average price was EUR 84.5 and the highest price was EUR 111.6 (July 7, 2011).
Average daily trading volume as reported by Euronext was 247 000 shares in 2011, compared with 182 000 shares in 2010.
The evolution of the Solvay share in 2011 compared with market indexes is shown opposite.
Throughout the year the Investor Relations Team is ready to meet individual and institutional shareholders and investors, as well as analysts, to answer their questions and to explain to them short- and long-term developments at the Group, with appropriate regard for the equal treatment of all shareholders.
The Group's communication policy is to disseminate, as soon as reasonably possible, information that is of material interest for the market in the form of press releases and/or press conferences.
Solvay SA Investor Relations Rue de Ransbeek, 310 B-1120 Brussels (Belgium) e-mail: [email protected] Internet: www.solvay.com
For many years the Group has maintained very close relations with clubs of individual investors both by taking part in fairs and conferences and by providing regular information on the life of the Group (press releases, the
annual report, etc.) on request.
In 2011, the Solvay group actively continued its meetings with individual investors.
By way of example:
Roadshows and meetings with senior Group managers are organized regularly for international professionals (analysts, portfolio managers, press, etc.).
In 2011, over 500 contacts were established at meetings and events organized in Europe (Brussels, London, Paris, Frankfurt, Geneva, Zurich, Milan, etc.), the United States and Canada.
Conference telephone calls with management are also systematically organized, every quarter, to comment on Group results.
A dedicated internet site, www.solvay.com/investors, provides shareholders and investors with the latest published fi nancial and strategic information from the Group. The site informs investors and shareholders
of many valuable services. It also provides useful contacts with specialist analysts who closely track the Group.
The internet site also offers a way to join a Shareholders' and Investors' Club in order to receive e-mail notifi cation in three languages (French, Dutch, English) of the publication of information of various kinds: agendas of certain meetings, including the annual Shareholders'
Meeting, draft wording of by-law amendments, special reports of the Board of Directors, publication of the annual report, unconsolidated parent company accounts, payment of dividends, etc.
The site was fully updated in early 2011, out of a concern to offer even easier and more user friendly access to the wealth of information contained on it.
The Solvay share compared with the indexes (2011)
Out of a desire to provide ever more fi nely tuned and regular communication, the Group began in 2003 to publish quarterly results in accordance with International Financial Reporting Standards (IFRS).
The Audit Committee consists of a Chairman and at least two other members, all three of whom are non executive directors and at least two of whom are independent directors. The Members of this Audit Committee are competent in this area through training and experience acquired in their previous positions.
The Audit Committee invites the following persons to report to its meetings:
The Audit Committee meets at least four times a year prior to the publication of the annual, semiannual and quarterly results. Additional meetings may be organized to discuss and agree on the scope of audit plans and on audit costs, and to discuss other important fi nancial questions.
a) The Audit Committee ensures that the annual report and accounts, the periodic fi nancial statements and all other important fi nancial communications by the Group conform to generally accepted accounting principles (IFRS for the Group, Belgian accounting law for the parent company). These documents should provide a fair and relevant view of the business of the Group and of the parent company and meet all legal and
stock market requirements.
The Audit Committee checks that internal audit recommendations are properly followed up.
f) The Audit Committee verifi es and monitors the independence of the external auditor, in particular concerning supplementary services requested from the auditor outside its legal mission. In this respect, it is the Audit Committee that proposes the external auditor to the Board of Directors, which will transmit the candidacy for approval and appointment (including
remuneration) by the Ordinary Shareholders' Meeting. Additionally, in consultation with the Chief Financial Offi cer, the Audit Committee participates in the choice of head of the Group Service Internal Audit.
g) The Audit Committee examines areas of risk that can potentially have a material effect on the Group's fi nancial situation. These include, for example, the foreign exchange risk, major legal disputes, environmental questions, product liability issues, etc. During such examination, the Audit Committee examines the procedures in place to identify these major risks and to quantify their potential impact on the Group and the way the control systems work.
As a committee of the Group's Board of Directors, the Audit Committee prepares minutes of each of its meetings and submits them to the Board.
This compensation policy applies to Solvay's General Managers, including the CEO and the members of the Executive Committee. General Managers' compensation is set by the Board of Directors based on the recommendations of the Compensation Committee. The guiding principles of Solvay's compensation policy for its General Managers can be summarized as follows:
• to ensure overall competitive compensation opportunities that will enable Solvay to attract, retain, motivate and reward executives of the highest caliber essential to the successful leadership and effective management of a global chemicals company;
The composition and level of the General Managers' total compensation (fi xed and variable) is reviewed annually.
Compensation refl ects overall responsibility as well as individual experience and performance. It takes into account relevant competitive practice considering the nature and level of the position as well as specifi c characteristics of the business
sectors in which Solvay operates. Other factors that are deemed relevant, such as fairness and balance within the company, are also taken into consideration.
To assess relevant competitive practice, Solvay takes as its frame of reference a selection of European Chemical and industrial manufacturing companies with international operations and annual sales revenues and headcount reasonably close to its own. The composition of this group will be reviewed on a periodic basis to assure that it continues to refl ect the company's strategic orientation.
For executives with a non-European home country and who are based outside Europe, the home country practice (ideally weighted towards the chemicals sectors) constitutes the reference.
For data relating to the international market, the services of internationally recognized compensation consultants are retained.
Solvay's objective is to provide total compensation levels that are at or around the median of the chosen reference market for normal performance and close to the upper quartile level of the market in case of outstanding collective and individual performance.
The compensation of the General Managers comprises base salary, annual incentives (i.e. performance bonuses) and long-term incentives, which constitute the General Managers' total direct compensation. General Managers also enjoy other benefi ts such as, essentially, retirement, death-in-service, disability and medical benefi ts.
Target performance-based and, hence, variable pay represents at a minimum close to 50% of the General Managers' total direct compensation.
Base salary is reviewed – but not necessarily changed – on an annual basis. This review assesses current levels against median levels of the reference market taking into account the responsibilities and scope of the position of the General Manager, as well as individual competencies, relevant professional experience, potential for future development and sustained performance over time.
The incentive levels are related to the full achievement of aIl pre-set performance objectives and range from 50% to 100% of the base salary depending upon position. These percentages have been determined taking into consideration median target bonus levels observed in the chosen reference market and Solvay's policy regarding the target compensation mix and competitive positioning.
Generally speaking, Solvay aims to offer, on average, base salary plus annual incentive opportunities close to the median levels observed in the reference market.
The actual annual bonus amount varies according to the performance of the Solvay group, its various sectors and the individual General Managers' performances. The actual bonus ranges from zero in the case of poor performance up to 150% of the amount corresponding to normal performance in case of outstanding achievement.
The overall business performance is measured in terms of ROE (return on equity of the past year); the individual performance is measured against a set of predetermined region/business sector/function goals as well as other executive-specifi c critical objectives approved by the Board of Directors.
The long-term incentive is delivered through periodic grants of stock options.
Each year, the Board of Directors, upon the recommendation of the Compensation Committee, sets the number of stock options that are granted respectively to the Chairman of the Executive Committee, the members of the Executive Committee and the other General Managers. In determining the actual number of options to be granted to each group of General Managers, the Board is guided by prevailing long-term incentive levels and practices in the reference market.
The option strike price is equal to the average closing price of the Solvay share on Euronext Brussels during the 30 days preceding the start of the offer. The options expire eight years after the date of grant. They vest as from the fi rst day of the year following the third anniversary of the grant and can be exercised during specifi ed "open periods".
The General Managers are entitled to retirement, death-in-service and disability benefi ts, as a rule, on the basis of the provisions of the plans applicable in their home country. Other benefi ts, such as medical care and company cars or car allowances, are also provided according to the rules applicable in the host country.
The nature and magnitude of these other benefi ts are largely in line with the median market practice. The chosen reference market is, as a rule, a blend of some 20 leading Belgian companies and Belgian subsidiaries of foreign-owned organizations generally considered as attractive employers by national and international executive talent and for which the representative
benefi t practices can be regarded as suffi ciently in line with prevailing European standards at executive level.
Other
| of the Executive Committee |
of the Executive Committee |
General Managers |
|||
|---|---|---|---|---|---|
| Actual performance | ROE levels | AS % OF FIX | as % of FIX | as % of FIX | |
| Below threshold | < 4% | 0% | 0% | 0% | |
| At threshold | 4% to < 8% | 15% | 9% | 8% | |
| 8% to < 10% | 30% | 18% | 15% | ||
| ROE | Intermediate (low) | 10% to < 12% | 40% | 24% | 20% |
| On target | 12% to < 14% | 50% | 30% | 25% | |
| Intermediate (high) | 14% to < 16% | 60% | 36% | 30% | |
| Outstanding | 16% to < 18% | 70% | 42% | 35% | |
| Exceptional | >= 18% | At Board | At Board | At Board | |
| discretion | discretion | discretion |
Chairman
Members
| Bonus level | as % of FIX | as % of FIX | as % of FIX | |
|---|---|---|---|---|
| Below | 0% | 0% | 0% | |
| BONUS | Target | 50% | 30% | 25% |
| INDIVIDUAL | Outstanding | 75% | 45% | 37,5% |
| At Board | At Board | At Board | ||
| discretion | discretion | discretion | ||
STOCK OPTIONS
| At target, ROE |
|---|
| and individual bonus |
| represent 50/50. |
Annual and long-term incentive levels
| as % of FIX | as % of FIX | as % of FIX |
|---|---|---|
| 0% | 0% | 0% |
| 100% | 60% | 50% |
| 145% | 87% | 72,5% |
| Stock options | Stock options | Stock options | ||
|---|---|---|---|---|
| If a stock option plan | -20% | 32 000 | 12 000 | 4 000 |
| is agreed by the Board of Directors |
Target | 40 000 | 15 000 | 5 000 |
| +20% | 48 000 | 18 000 | 6 000 |
ABIQUIM: Brazilian Chemical Industry Association ANSAC: American Natural Soda Ash Corporation Ba/Sr: Barium/Strontium BAT: Best available techniques CEO: Chief Executive Officer CER: Certifi ed Emission Reductions CLM: Change Leadership Model CNRS: Centre National de la Recherche Scientifi que CSR: Corporate Social Responsability EBRD: European Bank for Reconstruction and Development ENS: Ecole Normale Supérieure ERU: Emission Reduction Units FSSC: Food Safety System Certifi cation FKM: Fluoroelastomers GBU: Global Business Unit HSE: Health, Safety and Environment ICCA: International Council of Chemical Associations JV: Joint venture MEA: Membrane Electrode Assembly MRU: Mixed Research Units MW: Megawatt NBD: New Business Development OLED: Organic Light Emitting Diodes OPV: Organic photovoltaics OTFT: Organic thin-film transistors PCC: Precipitated calcium carbonate PVC: Polyvinyl chloride PVDF: Polyvinylidene fl uoride R&D: Research and Development REACH: Registration, Evaluation and Authorization of Chemicals RCMS: Rhodia Care Management System SBU: Strategic Business Unit SDS: Safety data sheet SPM: Sustainable Portfolio Management UNESCO: United Nations Educational, Scientifi c and Cultural Organization
ABAF: Belgian Financial Analysts Association (Association Belge des Analystes Financiers) Added value: personnel expenses + total amortizations and depreciations + total taxes + net result Cash fl ow: Net income plus total depreciation, amortization, impairments and other write-downs Corporate & Business Support: Non-allocated items, after larger direct allocations from 2007 onwards Dividend yield (net): Net dividend divided by the closing share price on 31 December Dividend yield (gross): Gross dividend divided by the closing share price on 31 December 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 Earnings per share (excluding discontinued operations): As earnings per share but excluding discontinued operations from the net income fi gure (Solvay's share) Earnings per share (diluted): Net income (Solvay's share) divided by the weighted average number of shares, after deducting treasury shares purchased to cover stock option programs, and adding back other potential sources of dilution (outstanding options, etc) Earnings per share (diluted, excluding discontinued operations): As diluted earnings per share, but excluding discontinued operations from net income (Solvay share) EBIT: Earnings before interests and taxes Equity (per share): Equity divided by the average number of shares for calculating IFRS results. The same denominator is used in calculating cash fl ow and REBITDA per share Free cash fl ow : Cash fl ow from operating activities + cash fl ow from investing activities, excluding acquisitions and sales of subsidiaries and other investments + dividends from associates and JVs. IFRS: International Financial Reporting Standards OCI: Other Comprehensive Income REBIT: Operating result, ie EBIT before non-recurrent items REBITDA: REBIT, before depreciation and amortization ROE: Return on equity Velocity: Total number of shares traded during the year divided by the total number of listed shares, using the Euronext defi nition Velocity adjusted by free fl oat: Velocity adjusted as a function of the percentage of the listed shares held by the public, using the Euronext defi nition
Corporate Governance Notes
May 7, 2012: Announcement of 1st quarter 2012 results (at 18:00)
May 8, 2012: Annual Shareholders' Meeting (at 10:30)
Payment of the balance of the 2011 dividend (coupon no. 90). Trading ex-dividend as from May 10, 2012
Announcement of the 2nd quarter and six months 2012 results (at 07:30)
Announcement of the 3rd quarter and nine months 2012 results and the interim dividend for 2012 (payable in January 2013, coupon no. 91) (at 07:30)
Announcement of full year 2012 results (at 07:30)
Ce rapport est aussi disponible en français. Het jaarverslag is ook beschikbaar in het Nederlands.
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Yannis Argyropoulos, Jean-Michel Byl, Eric Clapot, Benjamin Croupie, Oscar Delgado, Philippe Dureuil/ GDF Suez, Patrick Kovarik, Paul Langrock Agentur Zenit, Frédéric Martin, Jean-Jacques Micheli, Xavier Renaud, Antoine Reyre, © Solar Impulse/Jean Revillard, Solvay, SolVin, SQLI, Studio Pons, BananaStock, Getty Images/Tetra Images, Corbis, Fotolia, Ingimage, Inmagine, iStockphoto, The Brand, ThinkStock, Shutterstock. Cover photo: Naturhome house – info: S. Bodarwe +32 496215756 – Architect: Crahay et Jamaigne www.crahayjamaigne.com
Translation: Lomax S.P.R.L., Brussels Solvay SA
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