Annual Report • Mar 31, 2016
Annual Report
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Our strategy is a virtuous circle in which positive actions interact to create enriching contributions centered around a single goal: creating a future with more potential.
An international chemical and advanced materials company, Solvay assists its customers in innovating, developing, and delivering high-value, sustainable products and solutions that consume less energy and reduce CO2 emissions, optimize the use of resources and improve the quality of life. Solvay serves diversified global end markets including automotive and aerospace, consumer goods and healthcare, energy and environment, electricity and electronics, building and construction, as well as industrial applications. Solvay is headquartered in Brussels with about 30,000 employees spread across 53 countries. It generated pro forma net sales of €12.4 bn in 2015, with 90% made from activities where it ranks among the world's top 3 players. Solvay SA (SOLB.BE) is listed on Euronext in Brussels and Paris (Bloomberg: SOLB.BB – Reuters: SOLB.BR).
The challenge we have set ourselves is to achieve these strategic targets while continuing to drive value creation and profitable growth in a responsible way. We're reshaping our portfolio to include advanced solutions that contribute to sustainable development and help make our customers more competitive. At the same time, we're focused on operational excellence across the organization in areas such as supply chain, purchasing, manufacturing, and capital spending.
We're accelerating the pace of innovation. Sustainable development has been placed at the heart of our business to drive innovation. We focus our attention on a selected number of acquisitions and strategic investments. Finally, we pay special attention to the diversity of our workforce to make sure it reflects the diversity of our customers.
See how we're asking more from chemistry by asking more from ourselves.
More content For even greater insight, please consult the online version of our annual report.
www.annualreport2015.solvay.com
Our markets 22
Spirit of innovation 28
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*Following the acquisition of Cytec at year end 2015 and in order to provide a reference frame for the Group's performance going forward, Solvay presents pro forma information for the year 2015 both on an IFRS and Underlying basis. These unaudited figures represent a situation as if the acquisition had taken place on January 1, 2015.
As of December 31, 2015
REBITDA (in € million)
Free Cash Flow (in € million)
CFROI (as percentage)
Adjusted Net Income, Solvay Share (in € million)
(in €)
2013 8.84 7.26 2015 8.08 2014
Greenhouse gas intensity (Kg CO2 eq. per € REBITDA)
* Recommended to the Ordinary Shareholders' Meeting scheduled on May 10, 2016.
** The 2013 and 2014 historical data have been ajusted for the bonus factor of 0.9398 resulting from Solvay's right issue completed in 2015.
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To achieve our strategy, we're on a permanent quest to upgrade our portfolio, strengthen our growth engines, and enhance our resilience, profitability, and returns. We invest selectively to accelerate our organic growth and innovation capabilities. In 2015, we took major steps to optimize our portfolio and deliver greater operational excellence.
― As the Group's growth engines, Advanced Formulations and Advanced Materials received most of our capital investments in 2015. There were eight new manufacturing sites were commissioned, all of them addressing an increasing demand for high‑addedvalue, sustainable solutions. The plants are chiefly located in growth regions, such as Asia and Eastern Europe.
― The two recent acquisitions, Ryton and Flux, were successfully integrated into Advanced Materials. The new Global Business Unit (GBU), Special Chem, was created to leverage greater scale and innovative power, and its portfolio was upgraded by divesting its refrigerant activities and pharma propellants to Daikin.
― The Cytec acquisition was a step change in our transformation, reinforcing the Group portfolio, most notably in sustainable solutions for lightweighting transportation. The acquisition gave birth to two new Global Business Units. Composite Materials GBU brings together Cytec's aerospace and industrial composite business which is now part of Advanced Materials. Technology Solutions GBU combines Cytec's In Process Separation, polymer additives and formulated resins activities with Solvay's Novecare phosphorusbased intermediates, and is now part of Advanced Formulations.
― In Performance Chemicals, selective investments were made in 2015 to support regional business opportunities. One was Southeast Asia's largest sodium bicarbonate plant, built in Thailand to meet local growing demand. In Saudi Arabia, construction of a new mega plant (the 3rd of this type) is almost completed at the Sadara Chemical Complex. It will produce H2O2 for the production of Propylene Oxide.
― The Functional Polymers Segment continued to deploy ongoing cost competitive optimization strategies. In July 2015, the Inovyn European joint venture between Solvay and Ineos in chlorovinyls started operations. Solvay has announced its intention to exit the joint venture by the end of 2016, earlier than was originally forseen. The Energy Services GBU of the Corporate & Business Services Segment continued to lead the Group-wide effort to optimize energy efficiency by 10% by 2020 and reduce greenhouse gas intensity by 40% by 2025.
* Pro forma 2015, unaudited, including Cytec
In 2015, our transformation continued thanks to dynamic portfolio management, organic growth, innovation for more sustainable chemistry, and a strong culture of excellence.
Becoming a heavyweight in lightweighting
― In December 2015, we successfully completed the acquisition of the U.S.-based company Cytec.
― With this deal, Solvay becomes the world's second largest player in aerospace composite materials. Moreover, it helps us strengthen our Advanced Materials growth engine and push into other markets for composites such as high-end automobiles. Our advanced formulations for the mining industry are significantly strengthened thanks to our on-site support. "Cytec represents a decisive milestone in Solvay's transformation and opens up new horizons for growth and innovation," says CEO Jean-Pierre Clamadieu.
THE ANNUAL GROWTH EXPECTED FOR LIGHTWEIGHT COMPOSITE MATERIALS WITH CYTEC.
ANNUAL SYNERGIES EXPECTED WITHIN THREE YEARS.
A large team of Solvay and Cytec employees has been mobilized to ensure that cost synergies are delivered as quickly as possible.
― The global trend towards CO2 reduction and resource efficiency are driving greater demand for lightweight composite materials. We expect the use of lightweight materials to grow significantly across all industries. The aerospace industry is currently the biggest user, while the automotive industry is massively increasing its lightweighting efforts. Already used in Formula 1 and luxury cars, composites should find their way into other automotive segments in the near future.
― We can now offer our customers the largest range of advanced materials combining composites and specialty polymer technologies to reduce the weight and increase the fuel efficiency of their products without compromising structural strength or safety. Cytec lightweight composite materials are currently used in Airbus A350 and Boeing 787 aircraft. In the aerospace sector alone, we expect annual growth of around 10% for such materials.
― We expect to generate a minimum of € 100 million in annual synergies between Solvay and Cytec within three years. A large team of Solvay and Cytec employees has been mobilized since early October to handle the integration of the two companies and ensure that cost synergies are delivered as quickly as possible.
The job of ensuring that the Solvay and Cytec teams were ready to start working together as soon as the acquisition was finalized fell to the specially created Integration Management Team.
It ensured that there was a clear future-state organization and detailed integration plans to unleash the enormous business and innovation potential from the first day of the integration.
At closing, two Global Business Units were created to merge Cytec's businesses into Solvay's organization. Composite Materials brings together aerospace and industrial composite businesses. Technology Solutions combines specialty mining reagents, phosphine-based chemistry, and solutions for the stabilization of polymers.
― On February 25, our Group presented solid results supported by its programs of excellence and a positive currency effect. In a macro-economic environment characterized by a major slowdown at the end of the year, these solid fundamentals constitute a great help in facing up to the current uncertainties.
― 2015 was marked by the Group's transformation, targeting less cyclical activities that create greater value. In July, Inovyn, the European PVC joint venture established together with Ineos went operational and, thanks to its solid fundamentals, we announced mid-March that we intend to exit the joint venture later in the year. Moreover, Solvay boosted its growth drivers through the acquisition of Cytec, making Solvay the world's No. 2 producer of composite materials for the aerospace industry and a major supplier of reagent solutions for the mining industry. This acquisition and its financing through a capital increase unprecedented in the Group's history were completed in less than five months, demonstrating the continued momentum of our restructuring.
― The new activities contributed by Cytec are helping shape the new face of Solvay, making the Group a world leader in lightweight structures for the aerospace and automotive sectors. In combination with our high‑performance polymers, these ultra-light and ultra-resistant materials have great potential in substituting components up to now made of metal in both aircraft and cars.
― Solar Impulse, a plane with over 50% of its structure designed with Solvay products, is a remarkable illustration of what we can achieve with our combined know-how. Moreover, a new geographical balance is emerging, with greater priority being given to the United States, now one of the Group's top talent pools.
― At the end of 2015, the Group reached a milestone on its way to achieving its sustainable development goal, presenting quantified commitments underlining Solvay's strategic dimension. The Solvay Board of Directors is very much behind these commitments which define an ambitious framework for the Group's future.
― This future is also dependent on the Group's ability to attract young talents from a wide range of backgrounds, reflecting the Group's global presence and the diversity of the customers it serves. Progress in this field is backed by Solvay's diversity policy and its ambitious goal of boosting employee commitment.
― Solvay is continuing its long tradition centred on a positive and committed vision of science at the service of future generations. Awarded for the second time, the Chemistry for the Future Solvay Prize went to Professor Ben Feringa in 2015 for his innovative work on molecular motors.
― The capital increase successfully completed last December allows Solvay to retain its shareholder structure while at the same time pursuing an ambitious growth and restructuring policy. Backed by our shareholders and our solid fundamentals, we are proposing a 3.3% rise in the dividend for 2015 to the General Shareholders' Meeting.
― Rising to the challenges of 2016 with confidence, Solvay is determined to pursue its restructuring policy and affirm its place among the leaders in a changing global chemicals industry.
Nicolas Boël, Chairman of the Board of Directors Jean-Pierre Clamadieu, Chairman of the Executive Committee and CEO
_ Jean-Pierre Clamadieu: The current macro-economic context is very volatile. We also see significant transformation happening in our industry. The pace of innovation is accelerating. And sustainability plays an increasingly important role, both regarding our impact on the planet and the opportunities that it offers in terms of strategy and development.
Our objective is to make our Group much more resilient to the short term uncertainty while making sure we sustainably generate increasing returns and rewards to all our stakeholders, both internal and external.
So what levers are we using to put this strategy in place? The first is portfolio management and this is where Cytec fits in. The acquisition of Cytec significantly upgrades our portfolio by making us a major global player in composites for the aerospace and the automotive sectors. The integration of Cytec is moving very quickly and our top priority is to ensure full success and delivery of synergies. The second lever is operational excellence or continuous improvement in all of our internal processes. And the third is our management model and the quality of our teams.
Jean-Pierre Clamadieu Chairman of the Executive Committee and CEO
_ J-P. C.: We need people who are committed and imaginative, with an entrepreneurial spirit. We need to broaden our skill set. Our workforce already has excellent technical skills, but we need to add people to the organization who are more marketing and customer-oriented. Also, as digital technologies are changing the way in which we work together and do business, we need to develop a digital mindset among our staff. Finally, as the Group is becoming more and more global, we need to make sure that the diversity of our workforce reflects the diversity of the world in which we operate.
_ J-P. C.: Promoting diversity is not about being politically correct. It is about efficiency and performance. The fact is: diverse teams make better decisions. This is true at all levels, from the shop floor to the highest levels of management. As I said earlier, our industry is facing
I do not know many companies in our industry that have made such bold moves to transform their portfolio as we have over the past few years.
some major transformations, some rapidly evolving challenges. We cannot meet them with a homogeneous mindset. We need new ideas, more points of view, more creativity. Diversity is both a source and an accelerator of innovation.
_ J-P. C.: Innovation is a key enabler of our strategy. There is innovation in our management model. There is innovation across all our operational excellence programs. And, of course, there is innovation in new products, new materials, new solutions. This kind of innovation is critical to the success of the company. It allows us to serve our customers and anticipate their needs in a fast moving environment. That is one of the main reasons why we acquired Cytec. It allows us to make a step forward in terms of developing lightweight materials and applications and to better serve the growing needs for more overall efficiency and less CO2 emissions in aerospace and automotive. We have just announced significant step forward in our strategic supplier relationship with a large commercial aircraft manufacturer, leveraging the combined strengths of our composite materials and our high‑performance specialty polymers.
_ J-P. C.: Sustainability is today at the heart of our strategy. We are working to reduce the impact on the planet of our own operations. But we also need to understand what sustainability means for our customers, what type of opportunities it creates. By 2025, we aim to reduce the greenhouse gas intensity of our operations by 40%. To that end, we have started this year applying an internal price for CO2 emissions of € 25/ton to take into account climate challenges in our investment decisions. Talking about opportunities, we have set an ambitious target of 50% of revenues generated from products and solutions with high environmental benefits.
_ J-P. C.: Solvay is a unique company. There are few companies around today that are 150 years old and I do not know of another one of our size that has been supported by the same group of family shareholders for 150 years. This long-term ownership structure has enabled us to make some very important transformations. Also, I do not know many companies in our industries that have made such bold moves to transform their portfolio as we have over the past few years. All this has also been made possible by the quality of our people and by our ability to understand early on the needs of customers and come up with solutions that exactly meet those needs.
_ J-P. C.: We expect 2016 to be another year of growth in an environment which will be as uncertain as it was in 2015. Growth will be driven by the synergies with Cytec, by greater volumes thanks to the eight new plants we started-up in 2015 and the continued success of our innovation. And we will continue to work to upgrade our portfolio of activities.
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INCREASE SUSTAINABLE SOLUTIONS
Double the share of net sales generated by sustainable solutions from 25% to 50%.
EMPLOYEE ENGAGEMENT
Raise the level of employee engagement from 75% to 80%. The main levers are recognition and personal development, while respecting the work-life balance and fostering a culture of openness.
REDUCE THE NUMBER OF ACCIDENTS
Reduce the number of accidents on our sites by 50% thanks to a safety management based on people's involvement and a continuous improvement plan.
SOCIETAL INITIATIVES
X 2
Double the number of employees engaged in activities benefiting society at large by federating existing actions and facilitating employee involvement.
This year, we continue to develop our people, engage with our social partners, and transform our workforce to reflect the diversity of our clients and our geographical presence.
DIVERSE THINKING, SMARTER BUSINESS
― Strengthen our business through diversity and integration. as part of the Executive Committee's decision to build a more diverse workforce in order to bring us closer to our customers. As Jean-Pierre Clamadieu explained to all employees: "A more diverse team makes better decisions, manages business better, and can innovate better and faster." In short, diversity is a competitive advantage in a global economy.
― The Policy will focus on improving talent diversity in four key areas: experience and personal background, gender, geographical origin, and age. Progress will be measured against two clear objectives. First, by 2020 women should hold at least one-fifth of all senior executive positions. Second, the number of senior managers from the Americas and Asia should be doubled in the same period, compared to 2015.
― The Policy sets out a framework for Diversity & Inclusion across the Group. "It is fundamental to the business that our workforce reflects the societies and regions in which Solvay operates," explains Brigitte Laurent, Head of Change, Engagement & Diversity. The Policy will guide the Group as it embeds diversity and inclusion in all relevant HR processes such as recruitment, talent management, and succession planning.
Following the 2015 Employee Survey held in April, Solvay took measures in four key areas of Human Resources. The Group's head of HR explains how these actions support the Group's broader transformation strategy.
Since Solvay is very focused on growth, we must encourage and accompany our employees to grow too.
Cécile Tandeau de Marsac Group General Manager Human Resources
_ Cécile Tandeau de Marsac: The HR strategy serves the global ambitions of the Group. We won't be successful without the full engagement of our employees and our social partners. To see how we were progressing, we conducted an employee survey in April.
_ C.T.d.M.: The results confirmed the need to strengthen the link between the Group's growth objectives and developing people. As of 2015, the annual evaluation process has been updated to ensure that managers place more importance on professional development opportunities for team members during interviews, and don't just take performance into account. We also defined an engagement index to monitor progress. Also, to transform our business, we need managers from different backgrounds, with different points of view, who are able to find innovative solutions to the challenges we face. That was the goal behind the 2-day Transformational Leadership seminar held this year. It took the leaders who participated out of their routine and comfort zone by encouraging interaction with colleagues from different backgrounds.
_ C.T.d.M.: We believe that by fostering diversity and team cohesion we will generate the best solutions for our employees, our customers, and all our stakeholders. To us, diversity encompasses all the traditional criteria, but also convictions, culture, education, and place of origin. Our success and performance are based on our ability to promote diversity and encourage openness and respect. We encourage a culture where employees are valued and involved in the Group's success.
_ C.T.d.M.: It is quite obvious that compensation and recognition are critically important tools. In 2015, a Global Performance Sharing Plan for the Group was developed in consultation with the European Works Council. It allows all employees to share financially in the Group's performance. The quality of social dialogue is crucial to implement successfully a plan of this size at the Group level.
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The Executive Committee is responsible for setting the Group's strategy, ensuring that objectives are realized, and optimizing the allocation of resources among the Global Business Units. It is collectively responsible for Solvay's overall performance and protecting the Group's interests. On December 31, 2015, the Executive Committee consisted of five members, each overseeing a number of GBUs, Functions or Zones.
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The Leadership Team consists of GBU Presidents, General Managers of Functions, and Zone Presidents. In 2015, the Presidents of the two new GBUs created after the acquisition of Cytec joined the Leadership Team.
Dynamic portfolio management and a companywide commitment to sustainable development enable us to provide our customers with innovative and competitive solutions to meet their evolving needs.
Our ecosystem enables us to make bold moves in innovation.
Nicolas Cudré-Mauroux Group Research & Innovation General Manager
Group Research & Innovation General Manager Nicolas Cudré-Mauroux talks about 2015 and how a collaborative, value-driven approach to R&I is boosting Solvay's portfolio of technologies and solutions.
_ Nicolas Cudré-Mauroux: Innovation has always played a critical role in our global strategy. We have the ambition to combine all the technologies at our disposal to create new solutions. We do this not only by investing significantly in Research & Innovation (R&I), but also by seeking out new ideas both inside and outside of the Group.
Solvay's innovation assets consist of strong, focused research teams working in close collaboration with business and marketing teams. Together they create a balanced innovation ecosystem and enable the Group to make bold moves in innovation oriented towards sustainable development. For instance, in 2015 this ecosystem led to a new technology for high-density batteries and to N PROTECT™ for the agriculture. It also contributed to the development of EFFICIUM® for energy-saving tires and salt-free vanillin.
Our innovation ecosystem also extends outside the company. We work with universities, invest in start-ups, and support breakthrough projects like Solar Impulse. We are not afraid to explore new ways of innovation.
SHAPING TOMORROW'S CHEMISTRY
The 2015 Chemistry for the Future Solvay Prize went to Professor Ben Feringa at the University of Groningen, Netherlands, for his groundbreaking work on molecular motors. He manipulates molecules at the nanometer scale and turns them into motors. His design of the first rotary molecular motor sets the stage for a range of future applications such as information storage on a molecular scale, the development of responsive materials, smart catalysts for chemical processes, artificial muscles, and medication that can be switched on and off for precision therapy.
A NEW WAY TO REDUCE FERTILIZER USAGE
Nitrogen is a key nutrient of plants. Farmers supplement the natural supply of nitrogen with fertilizers, and the one most commonly used today is urea fertilizer in granular form.
Combining our expertise in green solvents and agrochemical formulations, we developed N PROTECT™, a liquid stabilizer for urea fertilizer that reduces the amount of nitrogen lost by ammonia volatilization. It allows urea fertilizer to carry more nitrogen and avoids the use of toxic and malodorous solvents. Trials show that N PROTECT™ helps farmers achieve higher crop yields while using less urea fertilizer.
_ N.C.M.: We consider all projects with respect to addressing the challenges of sustainable development. We also use eco-design to integrate environmentally efficient thinking into all our projects from day one. Very tangibly, our work on batteries and energy storage, for example, is contributing to the next generation of electric vehicles and energy storage solutions for better grid management. Our research on lightweighting will decrease the fuel consumption of cars and planes.
_ N.C.M.: In the case of lightweighting solutions, it brings extensive expertise in composite materials which, combined with our expertise in advanced thermoplastics, will help accelerate innovation in cost competitive thermoplastic composites. In the case of Cytec's chemical businesses, they're very complementary, both from a technical and from a market point of view, to several existing Solvay businesses. Beyond that, both businesses bring an amazing level of customer focus that's very visible in the way innovation projects are run. Finally, this acquisition also increases our R&I presence in North America, which remains a world-leading region for research investments and universities.
* Solvay pro forma 2015, unaudited, including Cytec.
—— Chemistry plays a key role in meeting the sustainability challenges that face our world. Megatrends such as demographic shifts, evolving consumer behavior, faster innovation, and resource scarcity are redefining the way people interact, communicate, move around, and shop. Solvay helps our customers turn these challenges into market opportunities thanks to innovative, competitive, and sustainable solutions.
Demographic evolutions such as aging populations in mature economies and the rise of the middle-class in Africa, Asia and Latin America are changing consumer behavior. They want easy-to-use and multifunctional solutions that are tailor-made, safe, and sustainable – and that contribute to their health and well-being.
From smart textiles to personal care, our broad portfolio offers innovative, sustainable, and competitive solutions. We're constantly improving the performance of our products by combining innovation and sustainability, as we have done with EURECO® organic peroxide for detergents, and the recent licensing agreement on encapsulation technology with Revolymer.
We offer a unique range of thermoplastics for implantable and non-implantable medical devices. Our portfolio of advanced medical-grade polymers such as RADEL® PPSU offers a versatile toolbox of solutions for medical instrument designers. We also manufacture BICAR® sodium bicarbonate for effervescent tablets.
Manufacturers have to comply with ever stricter regulations on CO2 and particle emissions while meeting consumer demand for safe, environmentally sustainable travel. Our solutions contribute to cleaner, safer, and more energy-efficient modes of transportation.
We're an integrated player with a comprehensive portfolio of lightweight materials, from high-performance polymers to long-fiber compounds, tapes, foams, and the most advanced composite solutions for semi-structural and structural applications. Our acquisition of Cytec in 2015 considerably strengthened our composite offering for both the aerospace and automotive industries.
Our polymers and fluorinated products provide effective thermal control solutions, optimized acoustic systems, and corrosion protection for automobile powertrains. Our NOCOLOK® Flux brazing product is an industry standard for aluminum heat exchangers.
Our solutions meet the highest requirements in terms of safety, and temperature and chemical resistance. Our new generation of electrolyte additives, salts, binders, and separators improve lithium-ion battery performance.
Our range of highly dispersible silica helps reduce the rolling resistance of tires while lowering fuel consumption and CO2 emissions. Our rare earth catalytic materials reduce polluting emissions such as NOx.
Demand is growing for longer lasting buildings that reduce energy consumption and enhance well-being. Our solutions focus on meeting the ever more stringent accreditation systems that measure environmental performance in passive residential and commercial buildings.
Our solutions are used in energy-saving triple-glazed windows and in foam wall insulation for low-energy housing. HALAR® ECTFE film, with its unique transparency and weatherability, is helping architects come up with more innovative designs.
To meet growing demand for greater safety and longevity in buildings, we provide materials that offer increased resistance to corrosion, UVs and fire. These include a wide range of zero VOC1 and APE2 -free components for water-based architectural paints and coatings, a strong expertise in color solutions, and fire-resistant materials for wires, cables, and appliances.
Our high-performance plastics ensure the robustness of water supply systems and drinking water quality. Our bio-sourced TECHNYL eXten®, for instance, provides an effective alternative to polyamide 12 protective coating for metal pipes.
1_VOC: Volatile Organic Compounds
2_ APE: Alkyl Phenol Ethoxylates
Our miniaturization technology and advanced materials open up new perspectives for manufacturers in terms of design, safety, and technology and energy performance.
Our KALIX® HPPA polyamides make it possible to manufacture slim and stylish smartphones that are also very strong.
Thanks to our polyamide solutions, electrical equipment can offer higher temperature resistance, more efficient fire protection, and user safety. Our TECHNYL® flame-retardant products, for example, meet the latest international electrical safety regulations.
For low-energy solutions, we provide materials for LED lighting. Energy-saving light bulbs using LUMINOSTAR® consume up to seven times less energy than incandescent bulbs.
Electronics require high purity for high technical components. Our INTEROX® PICO hydrogen peroxide is the reference for semiconductor manufacturers.
Agro, feed and food
The growing global population requires greater agricultural yields and better resource management. Solvay offers a unique portfolio of innovative solutions to support customers, from farmers to food processors, to operate responsibly, qualitatively, and sustainably.
Our eco-efficient bio-polymers and RHODIASOLV® Polarclean solvents improve crop protection and yields. Our AGRHO™ solutions promote water and nutrient retention in plants. PROCrop offers an effective and sustainable alternative to conventional pesticides in grain silos.
Our silica and sodium bicarbonate-based solutions meet the quality, food safety, and productivity requirements of this market. A feed supplement for livestock, BICAR® Z sodium bicarbonate helps fight acidosis and thus contributes to animal health. We opened Southeast Asia's largest sodium bicarbonate plant in Thailand in 2015 to meet the region's growing demand.
With the introduction of two new natural VANIFOLIA™ flavor brands and the expansion of our GOVANIL® range, we leverage our unique know-how in vanilla aroma. In 2015, the worldwide production of our vanillin was 100% FSSC 22000 certified. Also, our AMODEL® PPA and KETASPIRE® PEEK polymer solutions earned National Safety Foundation (USA) approval for use in food processing, expanding Solvay's solutions for the packaging industry.
Worldwide demand for energy continues to grow and environmental protection has become the norm. The oil and gas industry is striving to reduce its environmental footprint, while energy companies continue to add renewables to their energy mix. Solvay offers proven solutions and expertise, focusing on environmental protection and CO2 emissions reduction.
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SOLEF® PVDF is used to manufacture pipelines that resist corrosion and high temperatures, and avoid leakage. Our solutions for oil extraction include additives like natural guar derivatives and surfactants that increase yields and limit the environmental impact of drilling.
Our solutions are used in the production and storage of renewable energies. HALAR® ECTFE brings high-performance and UV protection to photovoltaic panels. Our LiTFSI lithium salt makes Li-Ion batteries last up to 20% longer while improving safety and performance. We are a partner in the LIFE+ GLEE project, focusing on alternative technologies for batteries. It was named as "Best in Class-Growth & Sustainability" by the Fondazione Sodalitas (Italy) in 2015.
Our SOLWATT® integrated service is designed to improve energy performance and reduce the CO2 footprint for both Solvay operations and energy-intensive third-party industrial clients.
Our solutions support air and water treatment using filtration, gas separation, absorption, and chemical reactions. For example, UDEL® PSU and ALGOFLON® PTFE ensure better water filtration in membrane processes, while INTEROX® hydrogen peroxide is widely used in drinking water treatment.
Industrial players strive to find the balance between innovation and regulations in order to increase the competitiveness of their products and the efficiency of their production. We develop intermediaries, materials, and processes that help manufacturers get more out of their equipment in a more responsible way.
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In addition to offering a wide range of binders, solvents, and additives, we won the JEC Innovation award (Singapore) in 2015 for EPICEROL®, a 100% bio-based epichlorohydrin used in the production of epoxy resins. Our eco-friendly RHODIASOLV® IRIS biodegradable solvent is used in industrial cleaning, resin clean-up, foundry resins, paint stripping, paints, and coatings.
We offer 3D printing polymers like SINTERLINE® TECHNYL® for prototyping, which is widely used in the aerospace industry.
Our solutions improve the performance of finished products. Our RHODOCLEAN® formulation (industrial cleaning) and the bio-based AUGEO® SL191 solvent (leather processing) are two examples of environmentally responsible solutions.
Our SOLEF® fluoropolymers and TECHNYL® high-performance polyamide offer superior resistance to corrosion, high temperatures, and chemical aggression.
Our recent acquisition of Cytec has made us a leading supplier of chemical reagents, enabling customers to improve productivity and reduce operating costs for the recovery of many metals and minerals, especially copper, alumina, gold, silver, uranium, nickel/cobalt and poly-metallic ores.
EVOLVING DEMOGRAPHY AND CONSUMER BEHAVIOR
INNOVATION ACCELERATION
RESOURCE CONSTRAINTS AND DEMAND FOR SUSTAINABILITY
― For more than 150 years, Solvay has been cultivating a tradition of audacity and a spirit of innovation. It is our way of asking more from chemistry. Our way of looking beyond compounds and molecules to find sustainable, responsible solutions to real-world challenges.
― This spirit is active throughout the company. It is what led us to support the Solar Impulse project over a decade ago. Solar Impulse is a flying test bed and showcases for our state-of-the art materials.
― Our pioneering spirit is what powers the work of our Research & Innovation laboratories around the world. Ever since Ernest Solvay made his technological breakthrough in the ammonia-soda process 150 years ago, we have been developing new concepts such as bio-sourced alternatives to fossil raw materials, silica for energy efficient tires, and high-performance polymers that reduce the weight of cars and airplanes.
― This spirit of innovation extends outside of the company. We currently manage over 100 collaborative "open innovation" projects with customers, academia, start-ups and other companies. It is why we recognize major scientific discoveries through our Chemistry for the Future Solvay Prize, which this year went to groundbreaking work on unidirectional molecular motors.
― It also extends to addressing the challenges facing our planet, thanks to the deep integration of sustainability in our strategy. Our objective is clear: be a source of progress and competitiveness for our clients along the entire value chain.
― Finally, this spirit is driving our push to increase the share of sustainable solutions in the Group's portfolio from 25% currently to 50% by 2025. It is why we decided to acquire Cytec, a leader in composites used in the lightweighting of planes and cars. The spirit of innovation transforms Solvay every day.
Solar Impulse started its Round the World Flight on March 9, 2015 from Abu Dhabi, landing in Hawaii on July 3rd after stopovers in Oman, India, Myanmar, China and Japan. After a technical stop in Hawaii in the winter 2015-16 for maintenance on the batteries, the flight should resume in April 2016 from Hawaii, to the US mainland, then cross the Atlantic ocean for finally close the loop in Abu Dhabi in the summer of 2016.
Corporate governance statement....31
Management of risks....59
Sustainable value creation....73 Financial management report....76 Extra-financial statements....100 Financial statements....127 Auditor's reports....216 Declaration by the persons responsible....220 12
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This chapter is an annex to the management report
| 1 Legal and shareholding | ||
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| 2 | soms_t3num structure of Solvay SA |
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| 3 | soms_t3num 2 Capital and dividend policy |
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| 3 Shareholders' Meetings | 34 | |
| SOMS_T2 4 Board of Directors |
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| 5 Executive Committee | 43 | |
| 1 | soms_t3num 6 Compensation report |
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soms_t3num 7 Chairmen's roles in achieving soms_t3num coordination between the Board of Directors and the Executive Committee 49 |
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| 1 | SOMS_T2 8 Main characteristics of risk management and internal control systems soms_t3num |
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| 2 | 9 External audit soms_t3num |
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| 3 | 10 Code of Conduct soms_t3num |
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| 11 Preventing insider trading | 53 | |
| 12 Internal organization of the Solvay group |
53 | |
| 13 Relations with shareholders and investors |
54 | |
| 14 Annex 1: Audit Committee Mission Statement |
56 | |
| 15 Annex 2: Compensation policy for General Managers |
57 |
| 1 | 1 Main risks soms_t3num |
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|---|---|---|
| 2 | Innovation failure soms_t3num |
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| Transport accident | 61 | |
| 3 | soms_t3num Information protection and cyber risk |
00 61 |
| soms_note_t0 Ethics and compliance |
000 61 |
|
| soms_note_t0 Chemical product usage |
000 62 |
|
| soms_note_t0 Projects selection and management |
000 62 |
|
| soms_note_t0 Industrial safety |
000 62 |
|
| soms_note_t0 2 Emerging risks soms_note_t0 |
000 63 000 |
|
| Climate change soms_note_t0 |
63 000 |
|
| Security soms_note_t0 |
63 000 |
|
| 3 Other risks soms_note_t0 |
000 63 |
|
| soms_note_t0 Market and growth – Strategic risk |
000 63 |
|
| soms_note_t0 Supply chain and manufacturing risk |
000 64 |
|
| Regulatory, political and legal risk | 65 | |
| Financial risk | 66 | |
| Occupational-related diseases | ||
| and pandemic risk | 67 | |
| Environmental risk | 67 | |
| IT risk | 68 | |
| Reputational risk | 68 | |
| Important litigation | 69 |
The Solvay group has adopted the 2009 Belgian Corporate Governance Code as its reference code in governance matters. This report(1) presents the application of the recommendations of that Code in accordance with the "comply or explain" principle. The 2009 Belgian Corporate Governance Code is available on the internet site of the Belgian Corporate Governance Committee (www.corporategovernancecommittee.be).
1.1 Solvay SA is a société anonyme (public limited liability company) created under the Belgian law. The address of its registered offi ce is 310, rue de Ransbeek, 1120 Brussels, Belgium.
The Company's by-laws can be found on the Solvay internet site: www.solvay.com.
1.2 Solvay shares are registered or dematerialized. Since January 1, 2008, it i s no longer possible to receive paper (bearer) shares. Bearer shares in a securities account 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 in dematerialized securities accounts or converted into registered shares by July 1, 2011, were converted automatically into dematerialized shares.
Persuant the law of December 21, 2013, Solvay SA has off ered in July 2015 all the unclaimed Solvay shares (i.e. 33,099 shares) for sale on the stock market. The net proceeds of such sale have been deposited with the State owned Deposits and Consigments Fund (Caisse des Dépôts et Consignations) on August 20, 2015.
At December 31, 2015 , the capital of Solvay SA was represented by 105,876,416 shares.
In the frame of the fi nancing of the Cytec acquisition completed on December 9th, 2015, Solvay SA proceeded with a rights issue for an amount of € 317,629,245 through the issue of 21,175,283 new ordinary Solvay shares, with an issuance premium of € 1,182,216,050.
This rights issue was completed on December 21, 2015. Consequently, the capital of Solvay SA was increased from 84,701,133 shares as of December 31, 2014 to 105,876,416 shares in 2015. 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 Euronext Brussels. It has also been admitted to trading on Euronext Paris since January 23, 2012. The Solvay share is included in several indexes:
In May 2014, Solvay Stock Option Management SPRL appointed Kepler Cheuvreux to improve the liquidity of the share on Euronext under a liquidity contract. Prior to Kepler Cheuvreux, the liquidity contract was managed by the bank Rothschild & Cie.
1.3 Solvay SA's main shareholder is Solvac SA, which at December 31, 2015 held a little over 30% of the capital (32,115,770 shares ) 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 takeover bids.
Solvac SA is a société anonyme established under Belgian law, the shares of which are admitted to trading on Euronext Brussels.
A t December 31, 2015, Solvay Stock Option Management SPRL held 1.989% of the shares issued by Solvay SA (2,105,905 shares), in particular to cover the Solvay stock options program (see under 2.1 "Policy in respect of capital").
JPMorgan Asset Management Holdings Inc. notifi ed Solvay that on August 3, 2015, the total participation of its various affi liates fell below 3% of the total number of shares issued.
Prudential Plc. notifi ed Solvay that on January 7, 2015, the total participation of its various affi liates fell below 3% of the total number of shares issued.
The latest transparency declarations are available on the internet site www.solvay.com.
The remaining shares are held by:
2.1.1 Since being converted into a société anonyme and listed on the Stock Exchange in 1967, the Company has made only once public call for capital from its shareholders, in 2015 in the specifi c context of the acquisition of Cytec.
It fi nances itself out of its profi ts, only a portion of which are distributed (see "Dividend policy" below).
The capital of the Company amounts to € 1,588,146,240 after the capital increase completed on December 21, 2015, in the context of the fi nancing ot the Cytec acquisition.
This capital increase was made after the decision of the Board of Directors acting on the basis on an authorization granted by an Extraordinary Shareholders' Meeting held on November 17, 2015.
2.1.2 In December 1999, the Company introduced an annual stock option program for Group executives worldwide. These programs are covered in part or totally 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.
At December 31, 2015, Solvay Stock Option Management SPRL's holdings of Solvay SA shares represented 1.989% (2,105,905 shares) of the Company capital.
The Company has been informed that certain individual shareholders who hold shares directly in Solvay SA 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. None of these persons, either individually or in concert with others, reaches the initial 3% transparency declaration threshold.
1.4 At the May 12, 2015, Ordinary Shareholders' Meeting, shares were deposited and votes cast in respect of 60.32% of Solvay SA's capital.
1.5 At December 31, 2015, Solvay SA did not hold any shareholding requiring a legal or statutory transparency declaration.
In 2015, stock options representing a total of 563,540 shares were exercised (it should be noted that options are in principle exercisable over a period of fi ve years 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.
Finally it should be mentioned that, under the tender off er 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 off er. The free shares exposure is fully covered.
32
| Exercise price (In €)(1) | Exercise date(2) | Acceptance rate |
|---|---|---|
| 62.25 | 02/2005-12/2009 | 98.6% |
| 63.76 | 02/2006-12/2010 | 98.4% |
| 65.83 | 02/2007-12/2011 | 97.3% |
| 82.88 | 02/2008-12/2012 | 96.4% |
| 91.45 | 02/2009-12/2013 | 98.8% |
| 102.53 | 02/2010-12/2014 | 97.2% |
| 90.97 | 01/2011-12/2015 | 97.6% |
| 55.27 | 01/2012-12/2016 | 96.9% |
| 67.99 | 01/2013-12/2017 | 98.2% |
| 71.89 | 01/2014-12/2018 | 98.1% |
| 61.76 | 01/2015-12/2019 | 93.8% |
| 83.37 | 01/2016-03/2020 | 97.2% |
| 104.33 | 01/2017-03/2021 | 100% |
| 101.14 | 01/2018-02/2022 | 100% |
| 114.51 | 01/2019-0 4/2023 | 100% |
(1) Due to capital increase, e xercise prices for plan from 2005 to 2015 have been adjusted according to Euronext ratio methodology (ratio = 0.93984) as decided by the Board of Directors on December 2, 2015 (see section 6 below).
(2) Increased to eight years in the case of the 1999 to 2002 Stock Options Plans for benefi ciaries in Belgium. Increased to 10 years in the case of the 2005 to 2007 Stock Options Plans for benefi ciaries in Belgium.
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 many years. The graph below illustrates the application of this policy over the past 25 years.
2.2.2 The annual dividend is paid in two instalments, in the form of an advance payment (interim dividend) and a fi nal payment of the remaining balance.
The method to set the advance payment is determined partly by reference to 40% (rounded) of the previous year's total dividend , and takes into account the results for the fi rst nine months of the current year.
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 General Shareholders' Meeting for approval.
The second dividend instalment, i.e. the balance after deducting the advance payment, is payable in May.
In this way, an interim dividend of € 1.33 gross per share (€ 1.00 net after Belgian withholding tax of 25%) was approved by the Board of Directors on November 12, 2014, and was paid on January 22, 2015.
The dividend for 2014, approved by the General Shareholders' Meeting of May 12, 2015 was € 3.40 gross per share (€ 2.55 net per share), i.e. an increase of 6.3% compared with the dividend of previous year. Given the interim dividend paid, the balance of € 2.06 gross per share (€ 1.55 net per share) has been paid on May 19, 2015.
The dividend for 2015 proposed to the General Shareholders' Meeting of May 10, 2016 is € 3.30 gross per share (€ 2.41 net per share (1)). Following Solvay's rights issue completed in December 2015 and in order to render comparable the proposed 2015 dividend to those paid in 2014 and preceding years, the latter need to be restated by application of an adjustment factor. This adjustment factor amounts to 93.98% according to article 6.3 of the Euronext Derivatives Corporate Actions Policy (as explained in section 13 page 54). This means that the proposed 2015 dividend compares with an adjusted 2014 dividend of € 3.20 gross per share (rounded fi gure, adjusted from € 3.40 gross per share value), which represents an increase of 3.3%.
An interim dividend of € 1.36 gross per share was paid on January 21, 2016 to all outstanding shares on registration date of January 20, 2016. Given the interim dividend payment made, the balance of € 1.94 gross per share (€ 1.42 net per share (1)) will be payable from May 17, 2016 , subject to approval of General Shareholders' Meeting of May 10, 2016.
Total dividend adjusted by the bonus factor of 0.9398 (for rights issue)
SOLVAY DIVIDEND (GROSS) FROM 1995 TO 2015 (IN €)
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 has not, up to this point, proposed optional dividends to its shareholders, i.e. stock instead of cash dividends. This option does not off er any tax or fi nancial benefi t in Belgium 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.
The Company's annual Ordinary Shareholders' Meeting is held every year on the second Tuesday of May at 10.30 a.m. 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 aff ecting 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 postoffi 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 and attached documents 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 has been obligatory for participating in and voting at the Shareholders' Meeting.
Shareholders must complete the registration of their securities by 24.00 hours (Belgian time) on the 14th calendar day prior to the relevant Shareholders' Meeting.
For holders of registered shares, shares are registered automatically by virtue of being in the Company's register of registered shares on the registration date.
Dematerialized shares are registered by virtue 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 that 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 eff ect, 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 that are registered in their name in their accounts at the registration date and for which they wish 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/ shareholders-meeting/index.html).
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 sixth calendar day preceding the date of the Shareholders' Meeting.
The appointed agent does not have to be 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 appointed 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 547 bis, § 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 sixth 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 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 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 are published on the Company's internet site (www.solvay.com) no later than the 15th calendar day after the date of the Shareholders' Meeting. 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, annual report, special report of the Board of Directors if any, etc.) is available every year on the i nternet site (www.solvay.com) from the time of giving notice 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 that 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:
2 setting the general strategies and general policies of the Group;
3 approving the reference frameworks for internal control and for risk management;
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 the Chairman of the Board, the Chairman of the Executive Committee or the Corporate Secretary, depending on the nature of the question. 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.
In its meeting of October 24, 2014, the Executive Committee adapted the powers of representation for matters delegated to it as follows:
This delegation of powers of representation is without prejudice to the existence of special powers conferred by the Board of Directors or the Executive Committee.
4.2.3 The Directors of the Company were not confronted in 2015 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.
4.2.4. The terms of reference for the Board of Directors are published on the Solvay website.
At December 31, 2015, the Board of Directors consisted of 15 members, as listed on pages 39 and 40 .
• The directorships of Mr. Charles Casimir-Lambert and Mr. Yves-Thibault de Silguy were renewed for a four-year term.
The resignation of Chevalier Guy de Selliers de Moranville was acknowledged and it was decided not to reassign his mandate;
• Mrs. Marjan Oudeman was appointed as a new independent Director for a four-year term.
At the Ordinary Shareholders' Meeting of May 10, 2016, the Board of Directors will propose the renewal of:
• the directorship of Mr. Jean-Marie Solvay for a four-year term.
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.
The Board of Directors applies the following primary criteria when proposing candidates for election to directorships by the Ordinary Shareholders' Meeting:
In this respect, on December 31, 2015 the independent status of 10 out of 14 non-executive directors has been recognized by the Ordinary Shareholders' Meeting;
Belgian law and the by-laws of the Company permit spontaneous candidacies for the post of director, providing that these are addressed to the Company in writing at least 40 days before the Ordinary Shareholders' Meeting.
The Board of Directors, consisting of 10 men and fi ve women on December 31, 2015 already complies with the requirement of the law that will enter into force on January 1, 2017, that at least one-third of the Board be women.
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 526 ter of the Companies' Code (introduced by the law of December 17, 2008, art. 16) are as follows:
or
c) not representing in any way a Shareholder meeting the conditions of this item;
6 not maintaining, or having maintained during the past fi nancial year, a signifi cant business relationship with the Company or with an affi liated company or person within the meaning of Article 11 of the Companies' Code, either directly or in the capacity of partner, shareholder, member of the management body or of member of senior management, within the meaning of Article 19.2 of the law of September 20, 1948 on the organization of the economy, of a company or a person maintaining such relationship;
In this respect, on December 31, 2015, the independent status of 10 out of 15 directors has been recognized by the Ordinary Shareholders' Meeting.
Mr. Jean-Pierre Clamadieu, Chairman of the Executive Committee and CEO, was not recognized as independent at the time of the renewal of his directorship in 2013 (criterion no. 1).
Mr. Bernard de Laguiche, Member of the Executive Committee till September 30, 2013, was not recognized as independent at the time of the renewal of his directorship in 2013 (criterion no. 1).
Mr. Nicolas Boël, Mr. Denis Solvay and Mr. Jean-Marie Solvay, having been Directors of the Company for over 12 years, are not independent for this reason (criterion no. 2).
Corporate governance statement
| Year of birth |
Year of fi rst appointment |
Solvay SA mandates, and expiry date of directorship |
Diplomas and activities outside Solvay | Presence at Board meetings in 2015 as a function of date of appointment |
|
|---|---|---|---|---|---|
| Mr. Nicolas Boël (B) |
1962 | 1998 2017 Chairman of the Board of Directors, Chairman of the Finance Committee and Chairman of the Compensation Committee Member of the Nomination Committee |
MA in Economics (Catholic University of Louvain), Master of Business Administration (College of William and Mary – USA). Director of Sofi na. |
10/10 | |
| Mr. Jean-Pierre Clamadieu (F)(1) |
1958 | 2012 2017 Chairman of the Executive Committee and CEO, Director and Member of the Finance Committee |
Engineering degree from the École des Mines (Paris). Director of Axa, Faurecia. Chairman of Cytec Industries Inc. |
10/10 | |
| Mr. Bernard de Laguiche (F/BR) |
1959 | 2006 2017 | MA in Economics and Business Administration, Member of the Executive HSG (University of St. Gallen, Switzerland). Committee until September 30, Managing Director of Solvac SA, Chairman of 2013, Director the Board Peroxidos do Brasil Ltda, Curitiba. Member of the Finance Committee and Member of the Audit Committee since May 13, 2014 |
10/10 | |
| Mr. Jean-Marie Solvay (B) |
1956 | 1991 2016 | Advanced Management Programme – Insead. Director CEO of Albrecht RE Immobilien GmbH & Co. Member of the Innovation Board KG., Berlin (Germany), Member of the Board of Directors of Heliocentris Energy Solutions AG. Berlin (Germany), Chairman of the Board of the International Solvay Institutes. |
10/10 | |
| Chevalier Guy de Selliers de Moranville (B) |
1952 1993 Resigned at AGM of May 2015 Director Member of the Finance and Audit Committees |
Civil engineering degree in mechanical engineering, and MA in Economics (Catholic University of Louvain). President and Co-Founder of HCF International Advisers, Vice-Chairman of the Board and Chairman of the Risk and Capital Committee of Ageas SA, Chairman of the Board of Ageas UK, Member of the Board of Ivanhoe Mines Ltd. (Canada), Member of the Supervisory Board and Chairman of the Risk Committee of Advanced Metallurgical Group (Netherlands) and, various other mandates in unlisted companies. |
3/3 | ||
| Mr. Denis Solvay (B) |
1957 1997 2018 Director (Université Libre de Bruxelles). Member of the Compensation and Nomination Committees |
Business engineering – Solvay Business School Director of Eurogentec SA, Abelag Holding, SA, Luxaviation Holding Company. Voluntary Director of the healthcare Institute ANBCT and Queen Elisabeth Musical Chapel. |
10/10 | ||
| Prof. Dr. Bernhard Scheuble (D) |
1953 2006 2018 MSc, Nuclear Physics & PhD, Display Physics Independent Director (Freiburg University – Germany). Chairman of the Audit Committee |
Former Chairman of the Executive Committee of Merck KGaA, (Darmstadt) and former Member of the E. Merck OHG Board of Directors. |
9/10 | ||
| Mr. Charles Casimir Lambert (B) |
1967 | 2007 2019 Independent Director Member of the Audit Committee |
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). Management of family's global interests. |
10/10 | |
| Mr. Hervé Coppens d'Eeckenbrugge (B) |
1957 | 2009 2017 | Independent Director Member of the Finance and Audit Committees |
MA in Law from the University of Louvain-la Neuve (Belgium), Diploma in Economics and Business, ICHEC (Belgium). Until June 30, 2013, Group Director Petercam sa, Director of Vital Renewable Energy Company LLC (Delaware). |
10/10 |
(1) Full-time activity in the Solvay group.
Corporate governance statement
| Year of birth |
Year of fi rst appointment |
Solvay SA mandates, and expiry date of directorship |
Diplomas and activities outside Solvay | Presence at Board meetings in 2015 as a function of date of appointment |
|
|---|---|---|---|---|---|
| Mr. Yves Thibault de Silguy (F) |
1948 | 2010 2019 Independent director Member of the Compensation Committee and Chairman of the Nomination Committee Member of the Finance Committee |
MA in Law from the University of Rennes, DES in public law from the Université de Paris I, graduate of the Institut d'Études Politiques de Paris and the École Nationale d'Administration. Vice-Chairman and Lead Director of the VINCI group, Director of LVMH, Chairman of the Supervisory Board of Sofi sport (France), Director of VTB bank (Moscow), and Chairman of YTSeuropaconsultants. |
9/10 | |
| Mrs. Evelyn du Monceau (B) |
1950 | 2010 2017 Independent director Member of the Compensation and Nomination Committees |
MA in Applied Economics from the Catholic University of Louvain. Vice Chair of the Board and Chair of the Remuneration and Nomination Committee of UCB SA, Member of the Board of Directors of La Financière de Tubize SA, Director of FBNet Belgium, Member of the Commission Corporate Governance. |
9/10 | |
| Mrs. Françoise de Viron (B) |
1955 | 2013 2017 Independent Director Member of the Compensation and Nomination Committees |
Doctorate of Science (UCL, Louvain-la-Neuve). Master in Sociology (UCL, Louvain-la-Neuve). Professor in the Faculty of Psychology and Education Sciences and Louvain School of Management (UCL), Academic Member of the Center of Research Entrepreneurial Change and Innovative Strategies, of Interdisciplinary Group of Research in Socialization, Education and Training, of the Interdisciplinary Research Group in Adult Education at UCL. |
10/10 | |
| Mrs. Amparo Moraleda Martinez (ES) |
1964 | 2013 2017 Independent Director Member of the Compensation and Nomination Committees |
Degree in Industrial Engineering, ICAI (Spain) MBA, IESE Business School (Spain). Former General Manager for IBM Spain, Portugal, Greece, Israel and Turkey. Former Chief Operating Offi cer, International Division (Spain) and Acting CEO, Scottish Power (UK) of Iberdrola. Member of the Boards of the following listed companies: Airbus Group, Faurecia (France), Caixabank (Spain). Member of the Consejo rector of Consejo Superior of Investigaciones Cientifi cas. |
10/10 | |
| Mrs. Rosemary Thorne (UK) |
1952 | 2014 2018 Independent Director Member of the Audit Committee |
Honours Degree in Mathematics and Economics from the University of Warwick. Fellow of Chartered Institute of Management Accountants FCMA and CGMA. Fellow Association of Corporate Treasurers FCT. Former Chief Financial Offi cer for J. Sainsbury, Bradford & Bingley and Ladbrokes. Member of the Board and Chair of Audit Committee of Santander UK (until end June 2015) and Smurfi t Kappa Group (Ireland) First Global Trust Bank (UK). |
10/10 | |
| Mr. Gilles Michel (F) |
1956 | 2014 2018 Independent Director Member of the Finance Committee |
École Polytechnique. École nationale de la statistique et de l'administration économique (ENSAE). Institut d'Études Politiques (IEP). Former CEO "Ceramics & Plastics", Saint-Gobain, France. Former Member of the Management Board, PSA, France. Former CEO, Fonds stratégique d'Investissement (FSI), France. Chairman & CEO, Imerys, France (listed). |
10/10 | |
| Mrs. Marjan Oudeman (NL) |
1958 | 2015 2019 Independent Director Member of the Audit Committee since May 12, 2015 |
Member of the Board of SHV Holdings N.V., the Netherlands. Member of the Board of Royal Ten Cate, Netherlands. Member of the Supervisory Board of Koninklijke Concertgebouw, the Netherlands. Chairman of the Board of Ronald McDonald Children's Fund. Member of the Supervisory Board of the Rijksmuseum, the Netherlands. |
6/6 |
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 fi rst seeks 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 it sets.
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 10 times in 2015. Six ordinary meetings are planned in 2016.
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 decision-making.
To the extent possible, he ensures that directors receive notices of meetings and complete fi les at least six 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 threequarters 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 business.
In 2015, the Board of Directors undertook an external evaluation, focused primarily on its own composition, modus operandi, information and 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 during interviews based on a questionnaire and per-formed by an external consultant.
The evaluation underlines an overall progress of the functioning of the Board and its Committees since previous evaluation in 2013.
The improvements identifi ed at the end of this evaluation are related to the optimisation of the con tent of meetings, visits and trips programmes, the level of detail of the reports of the various Com mittees to Board of Directors and the identifi cation of training needs.
Information sessions are organized 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 activities 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.
In 2015, the Board of Directors visited industrial and research sites in the USA.
All the terms of members of various Committees, will expire on May 10, 2016 at the date of the Ordinary Shareholder's Meeting. They will be renewed for a period of two years. It will take eff ect on May 10, 2016, and will end on the date of the Ordinary Shareholder's Meeting to be held in 2018.
In 2015, the Audit Committee was composed of Prof. Dr. Bernhard Scheuble (Chairman), Chevalier Guy de Selliers de Moranville (until the Ordinary Shareholders' Meeting on May 12, 2015), Mr. Charles Casimir-Lambert, Mr. Hervé Coppens d'Eeckenbrugge, Mr. Bernard de Laguiche and Mrs. Rosemary Thorne. These are independent non-executive directors, with the exception of Bernard de Laguiche and Chevalier Guy de Selliers de Moranville. After the Ordinary Shareholders' Meeting on May 12, 2015, Mrs. Marjan Oudeman was appointed Member of the Audit Committee. The Secretariat of this Committee is provided by a member of the Group's internal legal staff .
This Committee met fi ve times in 2015 including four times before the Board meeting scheduled to consider the publication of periodic results (quarterly, semiannual and annual).
Participation in Audit Committee meetings was very high (99.8%).
The mission of the Audit Committee is set out in a "Terms of Reference" document (see Annex 1, section 14). It integrates the requirements of Article 526 bis of the Corporate law.
The main tasks of the Audit Committee include:
At each meeting, the Audit Committee hears reports from the Chief Financial Offi cer, the head of the Group Service Internal Audit and 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 and CEO (Mr. Jean-Pierre Clamadieu) 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 2015 until the Ordinary Shareholders' Meeting on May 12, 2015, the Finance Committee consisted of Mr. Nicolas Boël (Chairman), Mr. Jean-Pierre Clamadieu (Chairman of the Executive Committee and CEO), Mr. Bernard de Laguiche, Chevalier Guy de Selliers de Moranville (until the Ordinary Shareholders' Meeting on May 12, 2015), Mr. Hervé Coppens d'Eeckenbrugge and Mr. Yves-Thibault de Silguy. After the Ordinary Shareholders' Meeting on May 12, 2015, Mr. Gilles Michel was appointed Member of the Finance Committee.
Mr. Karim Hajjar (Executive Committee member and CFO) is invited to attend the Finance Committee meetings.
The Secretary of this Committee is Mr. Michel Defourny.
This Committee met four times in 2015. 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 hedging policy of the long term incentives plans, 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.
In 2015, the Compensation Committee consisted of Mr. Nicolas Boël (Chairman), Mr. Denis Solvay, Mr. Yves-Thibault de Silguy, Mrs. Evelyn du Monceau, Mrs. Françoise de Viron and Mrs. Amparo Moraleda.
A majority of the members of this Committee have independent Director status within the meaning of the law.
The Chairman of the Executive Committee is invited to meetings, except for matters that concern him personally.
The Secretary of this Committee is Mr. Michel Defourny.
The meetings are prepared by the Group General Manager Human Resources, who attends the meetings.
This Committee met two times in 2015. Participation of the members of the Compensation Committee was very high (100%).
The Compensation Committee fulfi ls 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 and the Executive Committee, and is yearly informed about the compensation of General Management. It also gives its opinion to the Board of Directors and/or Executive Committee on the Group's principal compensation policies (including long term incentive plans). It also prepares the report on compensation.
The Compensation Committee has the expertise necessary to perform its missions.
In 2015 , the Nomination Committee consisted of Mr. Yves-Thibault de Silguy (Chairman), Mr. Nicolas Boël, Mr. Denis Solvay, Mrs. Evelyn du Monceau, Mrs. Françoise de Viron and Mrs. Amparo Moraleda.
A majority of the members of the Nomination Committee are independent non-executive Directors.
The Chairman of the Executive Committee is invited to meetings, except for matters that concern him personally.
The Secretary of this Committee is Mr. Michel Defourny.
The Committee met two times in 2015. The participation of members of the Nomination Committee was very high (100%).
The Nomination Committee gives its opinion on appointments to the Board of Directors (Chairman, new members, renewals and Committees), to Executive Committee positions (Chairmanship and Members) and to General Management positions.
5.1.1 The Board of Directors defi nes the role and mission of the Executive Committee.
The main decision on delegation of powers dates back to November 12, 2014. This decision took eff ect immediately.
The Board of Directors delegates to the Executive Committee the following powers:
5.1.2 The terms of reference of the Executive Committee are published on the Solvay website.
Execution of Executive Committee decisions and following up on 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.
The Board of Directors in its resolution dated November 12, 2014 expanded the right of the Executive Committee to delegate its powers, under its responsibility, and in compliance with procedures and authorization limits set by the Executive Committee, to one or more of its members, the General Managers of the Group and/or heads of Global Business Units and functions. In particular it has delegated to the GBU Managers the power to undertake binding M&A transactions and capital expenditures up to a ceiling of € 10 million.
At December 31, 2015, the Executive Committee had fi ve members.
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.
The Executive Committee is a collegial body made up of executives generally coming from the Group's senior management. Each Executive Committee member is in charge of the supervision of a number of Global Business Units/functions; for the CEO and the CFO, this role is assumed in addition to their respective specifi c responsibilities.
All Executive Committee members have employment contracts with the Solvay group, except for Mr. Jean-Pierre Clamadieu, who has self-employed status.
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. 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 opinion of the Nomination Committee and the Executive 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.
Corporate governance statement
| Year of birth |
Year of fi rst appointment |
Term of offi ce ends | Diplomas and main Solvay activities | Presence at meetings 2015 (as a function of date of appointment) |
|
|---|---|---|---|---|---|
| Mr. Jean-Pierre Clamadieu (F) |
1958 | 2011 | 2017 | Engineering degree from the École des Mines (Paris). Chairman of the Executive Committee and CEO. |
13/13 |
| Mr. Vincent De Cuyper (B) |
1961 | 2006 | 2016 | Chemical engineering degree (Catholic University of Louvain), Master in Industrial Management (Catholic University of Leuven), AMP Harvard. Executive Committee member. |
13/13 |
| Mr. Roger Kearns (US) |
1963 | 2008 | 2016 | Bachelor of Science – Engineering Arts (Georgetown College – Georgetown), Bachelor of Science – Chemical Engineering (Georgia Institute of Technology – Atlanta), MBA (Stanford University). Executive Committee member. |
13/13 |
| Mr. Karim Hajjar (UK) | 1963 | 2013 | 2017 | BSC (Hons) Economics (The City University, London). Chartered Accountancy (ICAEW) Qualifi cation. Executive Committee member and CFO. |
13/13 |
| Mr. Pascal Juéry (F) | 1965 | 2014 | 2016 | Graduate of the European Business School of Paris (ESCP – Europe). Executive Committee member. |
13/13 |
5.4.1 The Executive Committee met 13 times in 2015. 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 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 Executive Committee members.
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 and agendas.
Documents and information relating to the agenda items are made available to the members of the Executive Committee prior to the meetings.
The Corporate Secretary drafts minutes consisting of a list of decisions taken during the meeting. These are read and approved at the end of the meeting. They are immediately distributed.
They are not signed, but the Chairman of the Executive Committee and the Corporate Secretary may deliver certifi ed conformed copies of extracts.
It should be noted that the Executive Committee organized certain meetings in tele- or video-conference format.
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 2015.
The topics submitted to the Executive Committee are presented and discussed in the presence of the heads of the involved entities (GBUs, functions). For important projects, it sets up ad hoc working teams, led mainly by Executive Committee members chosen on the basis of the competences required.
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, vice-Chairmen, 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 sums 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.
The Group has a Compensation policy that is aligned with market practices which reinforces the link between variable pay and business performance. The Compensation policy is set out in Annex 2.
The Short Term Incentive policy (STI) is partly linked to Group economic performances (REBITDA under cash constraint).
The Group has also a long term incentive program (LTI) which is partialy linked to the achievement of pre-defi ned multi-year Group economic performance indicators (REBITDA and CFROI).
The Board is regularly monitoring the challenging character of the performance thresholds imposed under the Compensation policy in order to ensure a robust alignment of the performance metrics with the Solvay business ambitions. Both performance metrics are also managed dynamically to incorporate the evolving management of Solvay's portfolio and apply mechanically within the span decided by the Board.
a) For Directors:
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 compensation received, contractually and arm's length directors' fees, 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 package of the members of the Executive Committee is governed by the Group Compensation policy set out in Annex 2 (section 15).
The compensation package of the Chairman of the Executive Committee is governed by specifi c arrangements given his selfemployed status in Belgium. The level and structure of this compensation package are aligned with market practices for a similar function in a comparable organization and do follow the general design of the Solvay group Compensation policy. It consists of a fi xed compensation and an annual incentive target set at 100% of such base salary, with a maximum of 150%.
Such short-term incentive is based on the achievement of predefi ned individual (weighted at 4 0% of the total short-term incentive) and collective pre-set objectives, themselves divided into economic (REBITDA under cash constraint, weighted at 5 0% of the total short-term incentive) and sustainable development (weighted at 10% of the total short-term incentive) objectives (presence of Solvay in extra-fi nancial indexes and progress on internal sustainable development referential Solvay Way) . He is fi nally entitled to a long-term incentive composed out of a 50/50 mix of stock options and so-called Performance Share Units, with an annual economic value target set at 150% of the base salary and a maximum guidance set at 200% of such base salary, in line with the general design of the generic Solvay long-term incentive plan but subject to the fi nal appreciation of the Board. Solvay's commitment to off er a competitive though challenging reward package to its CEO transpires from his pay mix, since his global variable pay target substantially outweights his base salary.
No major changes in the structure of the compensation package of the Chairman and the members of the Executive Committee are expected in 2016 and 2017. However, in line with the external market, it has been decided to review the short term incentive target from 60% to 70% of base salary for the members of the Executive Committee eff ective January 1st, 2016.
| 2014 | 2015 | |||
|---|---|---|---|---|
| Compensation In € |
Gross amount | Including Board of Directors and Committees attendance fees |
Gross amount | Including Board of Directors and Committees attendance fees |
| N. Boël | ||||
| • Fixed emoluments + attendance fees | 59,000 | 24,000 | 75,000 | 40,000 |
| • "Article 27" supplement | 250,000 | 250,000 | ||
| D. Solvay | 64,000 | 29,000 | 82,500 | 47 ,5 00 |
| J-P. Clamadieu | 59,000 | 24,000 | 75,000 | 40,000 |
| J-M. Solvay | 59,000 | 24,000 | 75,000 | 40,000 |
| G. de Selliers de Moranville(1) | 85,000 | 50,000 | 41,701 | 29 ,000 |
| J-M. Folz(2) | 24,889 | 12,000 | ||
| B. de Laguiche | 69,000 | 34,000 | 99,500 | 64,5 00 |
| B. Scheuble | 89,000 | 54,000 | 101,000 | 6 6,000 |
| A. Van Rossum(2) | 28,889 | 16,000 | ||
| C. Casimir-Lambert | 79,000 | 44,000 | 95,000 | 60 ,000 |
| H. Coppens d'Eeckenbrugge | 89,000 | 54,000 | 103,500 | 6 8,5 00 |
| E. du Monceau | 64,000 | 29,000 | 78,500 | 43,5 00 |
| Y-T. de Silguy | 75,500 | 40,500 | 93,000 | 58 ,000 |
| A. Moraleda | 64,000 | 29,000 | 82,500 | 47,5 00 |
| F. de Viron | 64,000 | 29,000 | 82,500 | 47,5 00 |
| G. Michel | 32,610 | 10,500 | 87,500 | 52,5 00 |
| R. Thorne | 50,110 | 28,000 | 95 ,000 | 6 0 ,000 |
| M. Oudeman(3) | 50,298 | 28 ,000 | ||
| 1, 306,000 | 531,000 | 1,567,500 | 792,500 |
(1) Until May 12, 2015.
(2) Until May 13, 2014.
(3) From May 12, 2015.
46
1. CORPORATE GOVERNANCE
| Compensation and other benefi ts granted to the Chairman of the Executive Committee | ||
|---|---|---|
| In € | 2014 | 2015 |
| Base compensation | 1,000,000 | 1,100,000 |
| Variable compensation (Short Term Incentive) | 1,500,000 | 1,507,000 |
| Pension and death-in-service and disability coverage (costs paid or provided for) | 622,899 | 757,546 |
| Other compensation components(1) | 17,674 | 15,279 |
(1) Company vehicle, correction of 2012 Base Compensation.
Based on the assessment of the achievement of his individual preset objectives by the Board of Directors and the achievement of the Group collective economic and sustainable development indicators, the 2015 compensation package of the Chairman of the Executive Committee was set as follows.
The base salary of the Chairman of the Executive Committee, unchanged since 2012, was increased to € 1, 1 million in 2015 to match the market median of Solvay's peer group. The Annual Incentive target remained set at 100% of such base salary, with a maximum of 150%. In accordance with the Group Compensation policy, Long Term Incentives are composed of a 50/50 mix of stock options and so-called Performance Share Units. The Long Term Incentive target remained set at 150% of the base salary, with a maximum of 200%.
In 2015, the face value of his overall LTI award added up to € 1,6 million in line with his LTI target being 150% of base salary. The gain which will eventually be derived on pay-out date will depend upon achievement of the performance thresholds imposed on his PSU's as well as of the performance of the Solvay shares on the stock market. The resulting numbers of stock options and PSU's are calculated according to the Black Scholes model .
The compensation package of the Chairman of the Executive Committee is in full compliance with Art. 520 ter of the Companies' Code.
The Chairman of the Executive Committee does not receive shares as part of his compensation package.
In the area of extra-legal pension rights, given his self-employed status in Belgium, he has his own separate contractual regime, with pension, death-in-service and disability rules, which refl ect the conditions he had previously at Rhodia.
| Compensation and other benefi ts granted to the other members of the Executive Committee | ||
|---|---|---|
| In € | 2014(1) | 2015(2) |
| Base compensation | 2,453,117 | 2,182,396 |
| Variable compensation | 2,135,155 | 1,648,133 |
| Pension and death-in-service and disability coverage (costs paid or provided for) | 862,463 | 936,092 |
| Other compensation components(3) | 113,107 | 128,057 |
(1) J. van Rijckevorsel (until September 30, 2014), V. De Cuyper, R. Kearns, K. Hajjar, P. Juéry .
(2) V. De Cuyper, R. Kearns, K. Hajjar, P. Juéry .
(3) Representation allowance, luncheon vouchers, company car.
Variable compensation consisted of an annual incentive based on the performance achieved towards pre-set collective Group economic and sustainable development performance objectives, and towards the performance of the manager as measured against a set of pre-determined individual objectives.
The law (Art. 520 ter 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.
The Compensation policy has been reviewed in 2012. The Compensation policy set out in Annex 2 came into eff ect in 2013 and is in full compliance with Article 520 ter of the Companies' Code.
Executive Committee members receive stock options and so-called Performance Share Units 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 death-in-service coverage for Executive Committee members are based in principle on the provisions of the schemes applicable to senior executives in their base countries.
Solvay's Long Term Incentives (LTI) plan is made of two separate components, a plain vanilla stock option plan set in in 1999 on the one hand and a Performance share Unit plan set up in 2013 on the other hand.
The Stock Option program ( SO ) includes the following basic features:
The plan was set up in 1999 to off er a competitive LTI vehicle aligned with Belgian practices. It is aimed at incentivizing Solvay's executive leadership team to work towards achievement of robust sustainable returns for the shareholders while off ering a robust retention tool to the Company. All stock option programs set up annually since 1999 that did expire to date, did not expire without off ering a payout opportunity to the benefi ciaries which is a solid indication of the eff ectiveness of the program.
The Performance Share Unit program (PSU) was set up in 2013 to seek further alignment with the development of market practices, helping Solvay to remain competitive in the market place in order to attract and retain talents while off ering a more performance contingent vehicle to incentivize key executives to pay their tributes towards Solvay's roadmap ambitions.
The PSU includes the following basic features:
• the plan is purely cash based and does not encompass the transfer of shares to benefi ciaries whatsoever;
In 2015, the Board of Directors, on the proposal of the Compensation Committee, allotted stock options to some 70 Group senior executives. The adjusted exercise price amounts to € 114.51(1) per option, with a three-year vesting period. Executive Committee members together were granted 68,991 options in March 2015 compared with 84,535 options in 2014.
In combination with the stock option plan, the Board of Directors granted Performance Share Units to around 450 Group Executives, for a possible pay-out in three years' time if pre-set economic performance objectives (REBITDA and CFROI) are met. Executive Committee members together were granted 14,413 PSU in March 2015 compared with 18,080 PSU in 2014.
Due to the Solvay capital increase in December 2015, the Board of Directors has decided to adjust the exercise price and the number of stock options that were not yet exercised by applying the formula laid down in article 6.2, of the Euronext Derivatives Corporate Actions Policy in order to place the benefi ciaries in a situation which is substantially equivalent to the situation that would exist in the absence of capital increase.
This formula is in line with market practices and compensates the dilution impact for the benefi ciaries of the stock options and PSU plans following the capital increase which included preferential rights granted to existing shareholders.
Consequently, 24,077 additional options were granted to the Executive Committee members for the existing stock options plans 2005-2015. For the same reason, the existing plans 2013-2015 for the Performance Share Unit program have been adjusted. 2,851 additional PSU were granted to the Executive Committee members.
| Country | Name | Function | Number of options(2) | Number of PSU(2) |
|---|---|---|---|---|
| Belgium | Clamadieu, Jean- Pierre |
Chairman of the Executive Committee |
30,663 | 6,405 |
| Belgium | De Cuyper, Vincent | Member of the Executive Committee |
9,582 | 2,002 |
| Belgium | Kearns, Roger | Member of the Executive Committee |
9,582 | 2,002 |
| Belgium | Hajjar, Karim | Member of the Executive Committee |
9,582 | 2,002 |
| Belgium | Juéry , Pascal | Member of the Executive Committee |
9,582 | 2,002 |
| TOTAL | 68,991 | 14,413 |
(2) Number of options for plan from 2005 to 2015 and number of PSU for plan 2013 to 2015 have been adjusted according to the Euronext formula (ratio = 0.93984).
(1) Due to capital increase, exercise prices for plan from 2005 to 2015 have been adjusted according to Euronext ratio methodology (ratio = 0.93984) as decided by the Board of Directors on December 2, 2015.
1. CORPORATE GOVERNANCE Corporate governance statement
| Country | Name | Function | Number of options | Number of PSU |
|---|---|---|---|---|
| Belgium | Clamadieu, Jean- Pierre |
Chairman of the Executive Committee |
10,249 | 1,319 |
| Belgium | De Cuyper, Vincent | Member of the Executive Committee |
3,899 | 421 |
| Belgium | Kearns, Roger | Member of the Executive Committee |
5,672 | 421 |
| Belgium | Hajjar, Karim | Member of the Executive Committee |
1,273 | 269 |
| Belgium | Juéry , Pascal | Member of the Executive Committee |
2,984 | 421 |
| TOTAL | 24,077 | 2,851 |
(1) Number of options for plan from 2005 to 2015 and number of PSU for plan 2013 to 2015 have been adjusted according to the Euronext formula (ratio = 0.93984).
| Options | 31/12/2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Country | Name | Held at 31/12/2014 |
Granted in 2015 |
Exercised in 2015 |
Expired in 2014 |
Held | E xercisable | Non E xercisable |
| Belgium | Clamadieu, Jean-Pierre | 129,434 | 40,912 | 170,346 | 0 | 170,346 | ||
| Belgium | De Cuyper, Vincent | 68,535 | 13,481 | 17,200 | 64,816 | 13,087 | 51,729 | |
| Belgium | Kearns, Roger | 84,535 | 15,254 | 5,500 | 94,289 | 44,688 | 49,601 | |
| Belgium | Hajjar, Karim | 10,309 | 10,855 | 0 | 21,164 | 0 | 21,164 | |
| Belgium | Jué ry, Pascal | 37,035 | 12,566 | 0 | 49,601 | 0 | 49,601 | |
| TOTAL | 329,848 | 93,068 | 22,700 | 400,216 | 57,775 | 342,441 |
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 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 noncompetition 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:
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 General Management are implemented, (iii) fi nancial and non-fi nancial information is reliable, and (iv) internal processes are effi cient, particularly those contributing to the protection of its assets.
A reasonable assurance level means a high, but not absolute, level: any internal control system has limitations linked to human error, wrong decisions or to the choices made in terms of cost/benefi t of control.
This system has fi ve components: the control environment, a risk assessment process, control activities, information and communication, and the internal control monitoring.
The control environment is the foundation of the internal control system, as it promotes the awareness and the compliant behavior of all employees. It is made up of various elements that set up a clear structure of principles, rules, roles and responsibilities, while showing the commitment of General Management.
The Management Book explains the organization and governance of the Group: its guiding principles, the roles and responsibilities of the Executive Committee (Comex), Global Business Units and functions are defi ned, as well as their scope. It also set forth a management framework expressed in the Group's Management and People Models, including accountability and transparency. The Management Book also contains an approval matrix, displaying by which level of authority should major decisions be approved (fi nancial commitments, sales or purchase contracts, capital investments, acquisitions or divestments, legal settlements). Finally, it contains 25 "red lines" that are tackling key risks of the Group. These rules are mandatory for all employees.
The Code of Conduct highlights the principles that should guide employees in their daily activities. It is based on a strong tradition of values that are deeply rooted in the Company's culture. As to the fi nancial reporting, the Code states that employees must ensure that it is accurate and compliant with applicable regulations. More information about the Code of Conduct and how it is promoted and implemented by the Legal and Compliance Department can be found in the s ection 10 of the present report.
An Ethics Helpline, managed by a third party, is being made available to employees to enable them to report potential violations of the Code of Conduct, in case they cannot go through their managers or through the Compliance organization, or wish to report anonymously.
All these documents are accessible widely through the Group intranet and regular trainings on the Code of Conduct are provided to all employees.
Standardized Human Resources processes are in place to allow development, training and appraisal of personnel. The job descriptions for key positions are organized consistently by professional family: Finance has its own referential of job descriptions, covering the key positions that ensure the timeliness, compliance and quality of the fi nancial reporting.
It is an inherent aspect of the business and operations of the Solvay group to deal with risks, while remaining in compliance with laws, regulations and the Code of Conduct, and pursuing its ambitious sustainable development targets.
The Enterprise Risk Management (ERM) policy of Solvay is explained in the Management Book: it states that the Group will identify, quantify, assess and manage all potentially signifi cant business risks and opportunities by applying systematic risk management integrated with strategy, business decisions and operations. Enterprise Risk Management is seen as an essential management tool and aid in making the decisions needed to achieve the Company's short-, medium- and long-term objectives.
The Comex approves the risk management policies and processes used throughout the Group. The Internal Audit & Risk Management Department (IA/RM) is in charge of setting up a global and consistent system of risk management across the Group.
The process of risk management takes into account the organization's strategic objectives and is structured in following phases:
The enterprise risk management eff ort is structured around three mains pillars:
Moreover, the approach to design internal controls on major processes includes a step of risk assessment, to defi ne which are the key control objectives to tackle.
This is particularly the case for processes either at subsidiary, shared service, GBU or Corporate level leading to the production of the fi nancial reporting.
More information on risks can be found in the "Management of risks" section of this annual report, in particular with regard to the Group's main risks and the actions taken to avoid or reduce them.
Solvay uses a systematic approach to design and implement control activities in the most relevant processes. The key responsibilities in this approach are defi ned in Solvay's Management Book. The Corporate Process Owner (CPO) is the top management, Function General Manager, sponsor of processes (and sub processes). The Corporate Process Manager (CPM) is responsible for the defi nition of a standard process for the Group. He should:
The Internal Audit and Risk Management Department assists the Corporate Process Managers to identify the most signifi cant risks in the processes and to design control activities in proportion to the stakes inherent to each process. It also assists them to set up their annual internal control plan (indicating which issues and controls shall be a priority for the coming year, as well as the roll-out plan). This plan is validated each year by an Internal Control Steering Committee chaired by the Group CFO, and gathering all Function General Managers. At each level of the Group (Corporate, Shared Services platforms and GBUs) management operating the various processes is responsible for the execution of the controls.
General controls on the information systems cover both the security aspects, aimed at securing the protection of data, and the quality aspects, aimed at ensuring the best suitability of solutions (management of changes and projects) and services (management of IS operations) to the needs of the users.
With regard to the controls on fi nancial data, these controls are implemented all along the Record-to-Report process. Furthermore, a Financial Reporting Guide explains how the IFRS rules should be applied throughout the Group.
The fi nancial elements are consolidated monthly and analyzed at every level of responsibility of the Company (such as, for example, Solvay Business Services, the Finance Director of the entity, Group Accounting and Reporting 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 Group Communication Function defi nes and ensures the implementation of an External communication policy and Press relations policy. This function validates the external communications with potential impact at the Group level (it is a red line).
The Group maintains extensive communications channels that allow all relevant information to move fl uidly down from top management level and up from operational level.
The communication from top m anagement towards all the employees is supported by a number of tools, such as the Group intranet or electronic newsletters that go along direct presentations by senior management to various teams throughout the world.
Besides the monthly reporting analysis prepared by the Group Controlling, the Comex has quarterly a thorough review of the GBU performance, through the Business Forecast reviews.
The information systems for the whole Group are managed by Solvay Business Services. A large majority of the operations of the Group are supported by a small number of integrated ERP systems. The fi nancial consolidation is supported by a dedicated tool. As to the fi nancial reporting disclosure, Solvay publishes quarterly results. Before each quarterly closing, the Group Accounting and Reporting Department circulates written detailed instructions to all concerned actors.
The publication of the results is subject to various checks and validations carried out in advance:
The Audit Committee is in charge of monitoring the eff ectiveness of internal control systems. It supervises the work of the Internal Audit and Risk Management with regard to fi nancial, operational, and compliance monitoring. In particular, it is informed of the scope, programs and results of the internal audit work and receives the assurance that the audit recommendations are properly implemented. The Mission Statement of the Audit Committee is given in annex 1 to this Corporate g overnance s tatement.
Internal audit is an independent objective assurance and consulting activity designed to add value and improve the Group operations. It helps the Group to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the eff ectiveness of risk management, control and governance processes.
The internal audit assignments are planned and defi ned in terms of content on the basis of a risk analysis; the diligences focus on the areas perceived as having the highest risks. All the consolidated entities within the Group are visited by Internal Audit at least every three years.
The recommendations of Internal Audit are implemented by the management.
Other entities carry out activities of the same type in very specifi c areas. For example:
The audit of the Company's fi nancial situation, its fi nancial statements and the conformance of the statements 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 reason.
The audit mandate of Deloitte Réviseurs d'Entreprises SC s.f.d. SCRL expires at the Ordinary Sharehold ers'Meeting of 2016.
The Board of Directors, based on the proposal of the Audit Committee, proposes to the Ordinary Shareholders' Meeting to be held on 10 May 2016 to renew the audit mandate of Deloitte Réviseurs d'Entreprises SC s.f.d. SCRL, represented by Mr. Michel Denayer, for three years. The Board also proposes to appoint Corine Magnin as alternate representative of Deloitte Réviseurs d'Entreprises SC s.f.d. SCRL for three years.
The yearly 2015 audit fees for Solvay SA are € 1,1 million. They include the audit of the statutory and consolidation accounts of Solvay SA. For Solvay SA, supplementary fees of 0,2 million were paid in 2015.
Additional audit fees for Solvay subsidiaries were € 3,9 million. On top of this, fees related to the audit of the Cytec Opening Balance sheet in group accounts at year-end have been accrued for € 3,2 million. Supplementary non audit fees of 1,0 million were paid in 2015 by Solvay Affi liates.
Commencing with a Message from Solvay's Chief Executive Offi cer, Mr. Jean-Pierre Clamadieu, the Code is identifi ed as the cornerstone of Solvay's Ethics and Compliance Program. The Solvay Code of Conduct sets out how Solvay carries out its business and interacts with its stakeholders in an ethical and compliant manner. It is based on a strong tradition of values that are historically ingrained in the Group's culture. This Code applies to every Solvay employee wherever Solvay operates or conducts its business.
The Solvay Code of Conduct provides general guidance to all employees about how to behave in the workplace, in Solvay's businesses and while representing Solvay in their communities. It is not an exhaustive document anticipating every situation employees may face in their day-to-day business. Rather, the Code highlights the guiding principles that form the basis of the Group's policies.
The current Solvay Code of Conduct received initial executive approval in September 2013 and was the culmination of drafting and vetting by Solvay's Ethics & Compliance Department, review and further input from representatives of Solvay's General Business U nit and function leadership, and fi nal review and input from Solvay's Executive Committee. Upon gaining Board Approval, the Code was presented to and approved by the European Works Councils. In 2014, the approved Code was translated into 14 languages to be directly communicated to Solvay's diverse employee work force. The Code is accessible via the Group's website and is available in booklet form.
The Code of Conduct is part of the Group's constant eff ort 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 the 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 the Code is applied, including targeted training programs and sanctions in case of violation. The Ethics & Compliance team is charged with annually implementing training for the employee work force at the management level. Management is charged with cascading the training to their teams. Each year, a specifi c topic is selected for emphasized training, while training on the entire Code is provided for those employees who have not yet received specifi c training by their management or who are new to the Group. All training emphasizes the right of every employee to Speak Up.
The Legal & Compliance Function under the authority of the Group General Counsel contributes to the compliance culture. The Ethics and Compliance Department has the more specifi c objective of strengthening a culture based on ethics and in compliance with the Solvay v alues and Code of Conduct.
Compliance Offi cers have been appointed in all four geographic zones where the Group is active. They 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 superiors or other identifi ed interlocutors (Compliance Offi cers, legal staff , and human resource representatives).
The Group also operates, on a worldwide basis, an Ethics Helpline (both phone and web), maintained by a private third party and operated in accordance with local law. The Helpline is available for reporting concerns via the internet in 46 specifi c regions as well as in the general category "other locations." Thus, anyone may contact the Ethics Helpline from wherever he or she may be located in the world. In addition, the Ethics Helpline web tool is available in more than 40 languages. The phone line has more than 20 languages available by prompt depending on the number dialed. Toll free access is given to Solvay employees and is available 24 hours a day, 365 days a year. In the joint-ventures , Board representatives make every eff ort 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 Group General Manager Communication, 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:
have been informed and are regularly reminded of their obligation to declare to the Financial Services and Markets Authority every transaction involving Solvay shares.
The internal organization of the Solvay group is described in the Group profi le section of this annual report.
Solvay shares are dually listed on Euronext Brussels – the primary listing – and, since January 2012, on Euronext Paris under the unique mnemonic code of SOLB. Furthermore, Solvay joined the CAC 40 stock index on September 21, 2012. Both these events refl ect the Group's long history in France as well as its economic weight.
In December 2015, Solvay issued a capital raise with preferential rights to partially fi nance the acquisition of Cytec. Every existing share was attributed one right and four rights allowed to buy a new share at € 70.83. The coupon related to this right was detached on December 4. Based on the closing price on December 3 of € 101.30 per share, the theoretical value of this right was € 6.09 per right. The detachment thereby resulted in mechanical adjustement of the shareprice, value by 93.98%.
I n December 31, 2015, its price was € 98.43, as against € 105.64 at the end of 2014 adjusted from € 112.40, to take into account the bonus factor from the rights issue. During 2015 the average price was € 109.41 on an adjusted basis, while the highest price on an adjusted basis was € 132.47 (€ 140.95 prior to adjustment since December 4, 2015 ).
Average daily trading volume as reported by Euronext was 325,619 shares in 2015, compared with 193,011 shares in 2014.
Throughout the year the Investor Relations team has endeavored to communicate in a timely and eff ectively manner with, and present fi nancial and strategically relevant facts about and developments concerning Solvay to various investor groups, equity and credit analysts and other stakeholders, on a worldwide basis. To that end, in the course of the year, the Investor Relations team members have held regular contacts with fi nancial analysts and institutional and retail investors, including updates with facts regarding fi nancial and strategic trends and have organized selected presentations, visits and roadshows.
The Group is very attentive to 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 to the market in the form of press releases and/or press conferences and public presentations available in the Group internet website.
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 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 2015, the Solvay group actively continued its meetings with individual investors. In April 2015 Solvay took part in an "Investors' Event" organized in Brussels by the Netherlander federation of Investments Clubs and Investors, VFB (Vlaamse Federatie van Beleggingsclubs en Beleggers) and attended every year by more than 1,000 participants. On this occasion, Solvay's CFO presented the Group in the presence of about 400 individual investors.
Furthermore, the Group implemented a campaign including Corporate & fi nancial performance messages on fi nancial internet sites in Belgium and in France.
Since 2014 Solvay published a monthly e-newsletter called "Solvay in Action " available in French, Dutch and English that presents key quarterly fi nancial messages as well as stories, videos and images which illustrate the Group evolution through its key strategic levers. It primarily addresses Solvay's Investors' Club but its entire content is available in the Investors section of www.solvay. com. Since the launch of its in September 2014, 1,500 persons are members of the Investors' Club.
Roadshows and meetings with senior Group managers are organized regularly for international fi nancial professionals (analysts, portfolio managers, press, etc.). Solvay is also developing an active dialogue on its Sustainability policy and parameters and multiplies the opportunities of interaction with investors concerned with Corporate Social Responsibility (CSR) values.
In 2015, some 800 contacts were established at meetings and events organized in Europe (Belgium, France, the United Kingdom, Germany, the Netherlands, Switzerland, Ireland, Italy, Sweden, Finland and Denmark) and on other continents (the United States, Canada, Singapore and China).
Conference telephone calls with management are also systematically organized, every quarter, to comment on Group results.
Furthermore, in June 2015, Solvay held its Capital Markets Day in the headquarters of its Specialty Polymers GBU in Bollate, Italy. This event was attended by 38 sell-side and buy-side analysts, as well fund managers, and was made available by live video webcast.
Dedicated internet pages, www.solvay.com/en/investors, provide shareholders and investors with the latest published fi nancial and strategic information from the Group. The site, constantly improved, provides various and valuable services. Furthermore, it is henceforth available in three languages – English, French and Dutch. Based on responsive design, it off ers an optimal viewing experience on any devices.
It especially provides useful contacts with sell-side analysts who closely track the Group. It further off ers the opportunity to join the Investors' Club in order to receive email notifi cations in the three languages concerning information of various kinds: agendas of meetings, including the Annual Shareholders' Meeting, by-laws amendments, special reports of the Board of Directors, publication of the annual report, unconsolidated parent company accounts, payment of dividends, etc. In 2014, a new section dedicated to the shareholders' information has been created. It gathers Solvay in Action , the information program mentioned in the section 13.3 of the present report, practical information concerning shares registration and answers to the most frequent questions.
(1) The Solvay share price prior to December 4, 2015, has been adjusted by a factor of 93.98%, to refl ect the value of the rights distributed during the capital increase.
(2 ) The Solvay share price prior to December 4, 2015, has been adjusted by a factor of 93.98%, to refl ect the value of the rights distributed during the capital increase.
The Audit Committee is composed of at least four members.
The members of the Audit Committee are all non-executive Board members and at least a majority of them are independent Board members as defi ned in article 526 ter C. Soc.
The members of the Audit Committee collectively are competent in the area of activities of the Company, as well as in fi nancial management, fi nancial reporting, accounting and audit through their training and experience acquired over the course of their careers. At least one of them, who is an independent Board member, has special competence in accounting and audit.
The Audit Committee invites the following people to give reports during each of its meetings:
The Chairman of the Executive Committee of Solvay SA is invited once a year to discuss the Group's major risks.
The Audit Committee will meet at least four times per year, before the Board of Directors' meetings that deal with the approval of the annual, semiannual and quarterly results.
Additional meetings may be called to debate year-end closing topics, Risk Management and Internal Control systems, audit costs and to discuss other important fi nancial questions.
a) The Audit Committee ensures that the annual report and the annual accounts, periodic fi nancial statements and all other important fi nancial communications of the Group comply with generally accepted accounting principles (IFRS for the Group, Belgian accounting law for Solvay SA). These documents must refl ect a true and relevant image of the Group's business and of the parent company and must satisfy all statutory and regulatory provisions.
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.
Solvay group Compensation policy has the following objectives:
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 is reviewed on a periodic basis to assure that it continues to refl ect the Company's strategic orientation. It is currently composed out of 17 European-based multinational companies headquartered in six diff erent European countries and active in both the Chemical sector and/or Industrial sector.
For executives with a non-European home country, the home country practice (ideally weighted towards the chemicals sector) 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 the Base Salary (reviewed on an annual basis), Annual Incentives, Long Term Incentives and Other Benefi ts.
The Compensation policy covers the Executive Committee members, the General Managers and the Heads of large Global Business Units.
The Compensation policy is composed of Short Term Incentive (STI) plan providing for annual bonus linked to the Group business performance and Long Term Incentive (LTI) plan to introduce a link with the global Group performance.
STI are partly linked to the Group performance and partly linked to individual performance.
The target annual incentive ranges, according to position level, from 50% (General Managers and Heads of large GBUs) to 7 0% (members of the Executive Committee) of base salary. The target short-term incentive consists of three components weighted as follows:
The actual annual incentive can vary from 0% in case of poor performance up to 200% of target in case of outstanding collective and individual performance.
The Long Term Incentives consist of a 50/50 mix of Stock Options (SOP) and Performance Share Units (PSU).
With respect to stock options, the Board of Directors determines annually the volume of Stock options available for distribution based on their accounting fair value at grant, using the Black Scholes fi nancial formula. The total volume of options available is then allocated to the top executives of the Company based on the importance of their individual contribution/position to the success of the Solvay group.
With respect to PSU s, it is equally the Board's responsibility to determine the envelope available for distribution based on the closing value of the Solvay share at grant date. The total volume of PSU s available is then allocated to the senior managers of the Company based on their expected ability to substantially contribute to the achievement of Solvay's ambitions.
The SO plan is a plan vanilla plan providing each benefi ciary with the right to buy Solvay shares at a strike price corresponding to the fair market value of the shares upon grant. They bear no intrinsic value at that point in time and will only generate a potential gain for the benefi ciaries if the stock price rises. This grant is conceded for a duration of eight years. It cannot be exercised for the fi rst three calendar years following the grant. Options are not transferrable except in case of death. The plan contains a so-called bad leaver clause.
The PSU plan, settled in cash, provides for a possible pay-out in three years' time if a combination of pre-set performance objectives are met (REBITDA and CFROI long-term evolution based on this three year period), with a +/-20% adjustment depending on the actual performance versus the initial pre-set objective. The minimum payout can vary between zero (if the minimum performance required or "threshold" is not met), 80% if the performance minimum "threshold" is met up to 120% for a performance exceeding a predefi ned ceiling performance.
In its sole discretion the Executive Committee (or the Board of Directors for the Executive Committee members) may decide/ recommend individual grants of +/-50% of the target to reward special or unique achievements or circumstances or to acknowledge insuffi cient performance, while respecting the 50/50 split between SOP and PSU grants.
Each annual LTI plan is subject to prior Board approval.
In its sole discretion, the Executive Committee (or the Board of Directors for Executive members) assesses the achievement of the targets and the Executive Committee (or the Board of Directors for Executive members) may also re-evaluate the targets in case of material change of perimeter or other unexpected circumstances.
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.
| Comex | Other General Managers & Heads of large GBUs | |||||||
|---|---|---|---|---|---|---|---|---|
| Split in 3 components | Split in 3 components | |||||||
| Target STI in % of Base Salary |
Individual performance |
Group performance |
Sustainable Development indicator |
Target STI in % of Base Salary |
Individual performance |
Group performance |
Sustainable Development indicator |
|
| 7 0%(1) | 30% | 60% | 10% | 50% | 30% | 60% | 10% |
(1 ) From January 1,st 2016
Actual STI pay-out can vary between 0 and 200%, according to the level of individual or group performance achieved.
| Comex | Other General Managers & Heads of large GBUs | ||
|---|---|---|---|
| Performance | Target Grant | Target Grant | |
| Share Units | € 250,000 | € 200,000 |
The corresponding number of PSU is determined at grant date based on the fair value of the PSU.
Between 0% and 120% of granted PSU number depending on the actual achievement over a 3 years period of the pre set Group performance targets.
| Comex | Other General Managers & Heads of large GBUs | |
|---|---|---|
| Target Grant | Target Grant | |
| Stock Options | € 250,000 | € 200,000 |
The corresponding number of SOP is determined at grant date, based on the accounting fair market value of the SOP.
• Each annual Long Term incentive plan is subject to prior approval by the Board of Directors.
• The Board of Directors may decide individual grants of +/-50% of the target to reward special achievements or circumstances or to acknowledge poor performance, while respecting the split 50/50 between SOP and PSU's grants.
1) Excluding Mr. Clamadieu whose compensation is governed by specifi c agreements.
2) The Board of Directors assesses the achievement of the targets and may also re-evaluate the targets in case of material change of perimeter or other unexpected circumstances.
Risk is the possibility that an event occurs that will have negative impact on people, assets, environment, reputation or strategic objectives of the Group, including foregoing potential opportunities. Taking calculated risks within a pre-established risk appetite endorsed by the Board is an inherent aspect of the business and industrial activities of Solvay. This risk appetite is translated through a number of Group policies approved by the Comex, and specially through the 25 "red lines" set out in the Solvay Management Book.
The Group applies a systematic risk management integrated with strategy, business decisions and operations through the Enterprise Risk Management (ERM) approach, facilitated by the Internal Audit and Risk Management (IA/RM) Department. This approach ensures that Solvay leaders identify, assess and manage all potentially signifi cant business risks and opportunities. Risk management is integrated into strategic and operational decision making; it is seen as an essential management tool and as an important aid in making the decisions needed to achieve the Company's short, medium and long-term objectives. The ERM methodology, has been revised in 2014, then rolled-out across the whole Group in 2015, to include improvements aiming at allowing a better prioritization of relevant risks and a more focused risk response by each GBU, Function, and at Group level.
In a fi rst series of Risk Management exercises, each GBU and Function, with the assistance of the IA/RM team, reviewed and updated its own risk matrix, and also defi ned Risk Owners to lead the risk mitigation of their most critical risks.
Then, at a second level, a risk identifi cation was conducted with the Leadership Council (top senior managers of the Group): capitalizing on an analysis made by IA/RM team of GBU/Function transversal or correlated risks, a list of Group risks was generated, and submitted to an assessment phase.
The Group risks are considered as the most critical risks for the group and are closely monitored by the Group Risk Committee (Executive Committee joined by the General Managers of Functions Industrial, Legal & Compliance, Human Resources and Sustainable Development) . For each Group risk, a Risk Sponsor member of the Comex is appointed, who ensures that those risks are adequately addressed.
The mitigating actions and their status were followed-up and reported by IA/RM team in a Group Risks Dashboard. This Dashboard was issued and formally reviewed by the Group Risk Committee and updated twice during the year both for progress on mitigating actions and for new developments in the risk environment. The Group Risks were also considered on an annual basis by the Audit Committee of the Board of Directors.
Internal control is one aspect of risk management, being a way to address risks existing in the most signifi cant processes. Please refer to section 8 of the Solvay Corporate Governance report Solvay Annual Report for a detailed description of the risk management and internal control system of the Solvay group.
In a context of global economic and political uncertainty, evolving power balances, diff erent growth dynamics, shortening of market cycles, raw-material and energy volatility and quick technological evolution, Solvay believes that eff ective monitoring and management of risks is key to achieve its sustainability objectives.
The purpose of this report is to describe the risks relevant for Solvay and to outline the actions undertaken by the Group to reduce those risks. The mitigation eff orts described are no guarantee that risks will not materialize but the Group's eff orts to manage risk exposures in a pro-active way.
The Group Risk Committee has assessed Group risks' impact and level of control. Four main types of impact were used: economic impact, impact on people, impact on environment and impact on reputation.
The level of control of the risks was assessed by considering the following questions:
Each of these criteria has been rated on a four level scale.
The criticality refers to the combination of both ratings (impact and level of control) of the risk at the time of the assessment.
In the chart hereafter, the trend refl ects the evolution of criticality, taking into account the implementation of mitigating actions in 2015 .
| Criticality | Risk | Trend |
|---|---|---|
| Innovation failure | Â | |
| High | Transport accident | ¼ |
| Information protection and cyber-risk | Â | |
| Ethics and compliance | Â | |
| Moderate to high | Chemical product usage | ¼ |
| Projects selection and management | ¼ | |
| Moderate | Industrial safety | Â |
The Group spends signifi cant amounts on research and development and depends on its development of new, improved, or more cost-eff ective materials, methods, and technologies. An important component of its strategy is to innovate continuously in a sustainable manner to prepare tailor-made solutions for customers. Any failure to successfully develop new products, methods or technologies, or delays in development, may lead to the Group's products or technologies becoming superseded and could cause impairments, could reduce the Group's future sales.
Additionally, to support innovation, determinations of capital expenditure are made in a forward-looking manner according to current understanding of trends and customer demand. The Group may commit errors or misjudgments in its planning and misallocate its resources, or any investment may become non-viable, or may be superseded prior to completion. In addition, the market for a newly developed product may unexpectedly cease to exist. The materialization of any of these risks could have a material adverse eff ect on the Group's business, fi nancial condition, and results of operations.
Furthermore, insuffi cient protection by Solvay of its innovations could limit its development potential.
New products, technologies and activities are developed by R&I activities to address customer needs and attractive opportunities in growing markets like light-weighting materials, crop protection, oil & gas exploration and smart devices. To capture these opportunities Solvay opened its fl agship innovation centers in Singapore and Korea in 2014.
Regarding product development, Solvay devotes substantial resources to R&I. Innovation is a cornerstone of the Group's strategy.
A defi ned process has been implemented in the Group to ensure that best practices for project management are used and that resources are used in an optimal way. This allows moving a new product from idea to market launch in a timely manner.
The New Business Development team within the R&I F unction manages the Group investments in internal and external research projects, start-ups and venture capital funds, allowing Solvay to remain engaged at the forefront of emerging businesses such as alternative renewable energies. It also includes risk-sharing through public-private partnerships or other forms of open innovation for developing breakthrough technologies.
Solvay implements a policy to protect its innovations and its knowhow, including taking specifi c precautions through its choice of partners in R&I and through choosing the locations of its research operations.
The risk of causing injury to neighbors or the public may be a consequence of accident during transport activities.
The risk of an accident in connection with hazardous chemicals transportation is reduced by optimizing transport routes, relying on selected and audited haulers and worldwide emergency assistance in case of accidents through the Carechem service. In addition, every eff ort is made to minimize the number of transportation activities by operating with integrated production units for hazardous intermediates. Solvay follows the safety recommendations of associations like Eurochlor, ECVM (European Council of Vinyl Manufacturers) or CTEF (Comité Technique Européen du Fluor) and programs like Responsible Care®.
Information and cyber risk includes theft, manipulation or destruction of information, inability to ensure continuity of services or to protect confi dential, critical or sensitive information.
A cyber-security and prevention of loss of confi dential information program has been designed. In 2015, this program addressed concrete business requirement around information classifi cation and their appropriate handling, as well as the defi nition of further actions to increase the ability of the Group to respond to this type of threats.
In the frame of this cyber security program, an external assessment and benchmark has been carried out by independant experts. It included penetration tests on several of Solvay's administrative and business sites. The recognition of cyber security at C orporate level, together with an enforced governance at operational and executive management level, has been noticed as strong points of the program. The program will carry on in 2016 and integrate Solvay's I ndustrial F unction.
As e-mails remain a focal attention point to prevent intrusion of malicious code into the Company, a special phishing campaign has been crafted for selected management employees and has been carried out, accompanied by a special e-learning training program. IT employees have received a more detailed training and e-learning program adapted to their specifi c needs. Mails from within the Solvay domain are being authenticated in a way that prevents external fraudsters from impersonating as Solvay employees.
In the domain of fraud management, a pilot solution to detect selected fraud scenarios between diff erent IT-systems has been implemented and is currently being tested. Articles about fraud detection and prevention appear regularly in internal e-magazines and increase operators' vigilance. A Fraud management policy has been fi nalized, formalizing the role a Fraud Committee and a Fraud Offi cer who analyze and investigate suspicious activities that are being brought to their attention.
Solvay buys insurance to reduce the fi nancial impact of a cyber type of event both for the a ssets, b usiness i nterruption and f raud cases.
The risk attached to ethics is Solvay's exposure to failure to comply with the Solvay Code of Conduct and supporting policies and procedures as well as compliance with laws and regulations in the jurisdictions in which Solvay operates. (See the r egulatory, political and legal risk section below for further information of this particular risk).
Examples of potential risks are: failure to implement good governance in a joint-venture , direct or indirect involvement in human-rights violations, intentional misstatement of fi nancial reporting, corruption and by-passing of internal controls.
Group-wide, Solvay has a Code of Conduct and adopts policies and procedures to enhance good governance of the Group.
Solvay's Code of Conduct applies to every Solvay employee wherever Solvay operates or conducts its business. Third parties acting on behalf of Solvay are also expected to act within the framework of the Code. In joint-venture s in which Solvay is a majority partner, the Solvay Code is applied or a separate Code is adopted based on similar principles and values. In joint-venture s in which Solvay holds less than a majority position, Solvay works with its partners to develop acceptable Codes based on principles and values that align with those refl ected in the Solvay Code of Conduct as well as its policies and procedures.
Solvay has a compliance organization in place under the leadership of the Group General Counsel to enhance a g roup-wide ethics- and compliance-based culture and to promote and monitor compliance with applicable laws, the Group Code of Conduct and supporting policies and procedures. Compliance Offi cers have been appointed in all four zones in which the Group is active and work to ensure that the Code is communicated to employees and business partners.
Training courses facilitated by the Legal Function 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, anti-bribery and corruption, human rights, and other aspects of Corporate Social Responsibility. Regular campaigns are organized to train new employees and to maintain the right level of awareness in the whole Group. The Compliance Department, in collaboration with other departments or functions, monitors compliance with applicable laws and Solvay's Code of Conduct. Any violation of the Code will lead to sanctions in accordance with internal regulations and applicable law.
Reporting of violations is encouraged and various avenues are off ered to employees including access to internal resources such as management, Human Resources and Legal and Compliance. Employees can also ask questions, raise concerns or fi le reports through the Solvay Ethics Helpline, an external resource available on the web or by phone and operational via internet in 46 specifi c regions in more than 40 languages and via the phone line in more than 20 languages 24 hours a day, 365 days a year. This g roup-wide Speak Up program is overseen by the Audit Committee of the Board of Directors.
Product-liability risk is Solvay's exposure stemming from injury to third parties or damage to 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 eff ects, 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 recall of a product. Product-liability risk is generally higher for products used in healthcare and food & feed applications compared to other applications. Products with signifi cant potential hazards are in general sold to industrial users with the correct specifi cations and not directly to consumers.
Product-development risk is Solvay's exposure to adverse developments while developing new products and technologies or scaling up a process.
Solvay controls the quality and purity of its manufactured products through quality-assurance and quality-control programs, by controlling industrial processes and by deploying full compositiondata management.
Product liability exposure is reduced by product stewardship programs giving adequate information and technical assistance to customers, ensuring a good understanding of safe use and handling.
First of all, in-house product stewardship experts identify and assess the risks of Solvay products. The Group characterizes and manages risks related to the uses and applications of its products, and prioritizes in relation with the GBUs mitigation actions regarding potential inappropriate uses. Then Solvay manages preparation of Safety Data Sheets (SDS) fully compliant with regulations ensuring a harmonised content of SDS by implementing a common worldwide Environment, Health and Safety SAP system for the Group. Control by SDS shipping allows confi rmation that any product marketed by Solvay is accompanied, whatever the mean, by a compliant SDS. Solvay monitors the discrepancies registered during checks and manages the failures of shipping. Solvay pays particular attention to providing complete and clear information about intended use and potential hazards by means of SDS, labels, regulatory-compliance statements and other documentation. For example, conditions of safe use and handling, hazard levels, fi rst aid emergency measures and emergency phone numbers are provided in the language of its customers. Recall procedures, as described in the product stewardship programs, management systems and the health-care management process, are also developed and deployed.
Solvay buys insurance to reduce the fi nancial impact of a product liability risk including for fi rst and third party product recall.
The allocation of resources to projects (CAPEX, M&A) could be misaligned with Solvay growth strategy, leading to an ineffi cient use of the Group fi nancial resources. Also, a major project could experience diffi culties so that its objectives would not be reached.
The model of governance for the major types of projects has been established and is included in the Solvay Management Book. An Investment Committee (since January 2014) challenges marketing, fi nancial and industrial aspects of investment projects. The Approval matrix indicates which major decisions, including M&A projects, investments or restructuring projects, must be approved by the Comex, and which are to be dealt with at GBU level. Functional boards track and monitor major functions' projects.
To increase the likelihood project objectives are met, the Group has set up processes to manage capital investments, as well as acquisitions. These processes include risk identifi cation, assessment and mitigation steps. They also include post-completion reviews that allow to share the lessons learned and the best practices.
Accidents on industrial sites may cause injury to employees, contractors or also to the public neighboring those sites, especially in the context of major releases of chemical substances.
Accidents to employees or third party individuals on Solvay's sites are generally linked to failure of safety management relating to risks at the workplace. Employees accidents include contact with chemicals (hot, corrosive or toxic) leaking from a vessel, pump or pipe, as well as accidents caused by explosion or falling objects, falls during work at height or work with mechanical or moving equipment.
Accidents to contractors include falls during work at height, in construction and maintenance activities, use of tools and interaction with equipment during maintenance, as well as accidents due to non-compliance with work permit procedures.
Risks of causing injury to the neighbors or the public are mostly a consequence of major process accidents at manufacturing sites or during transport activities.
Occupational safety is the highest priority in the management of activities in Solvay. The Group has a long track record of good safety performance, and the sharing of good practices has allowed signifi cant progress.
The Comex set an ambitious target of 0.5 for MTAR (work accidents with medical treatment/one million working hours) in 2025 and asked for reducing drastically serious accidents (including accidents with irreversible consequences and chemical contact accidents) as well as eliminating fatalities. The MTAR reached a record value of 0.78 at the end of 2015. This represents a continuous and important safety improvement trend over the last four years. These results include registered employees but also contractors and temporary workers. The safety results are presented monthly to the Executive Committee and sent to each GBU.
To achieve that, the HSE (Health, Safety and Environment) Department defi ned a new management system called Solvay Care Management System (SCMS), integrating all the Solvay requirements for HSE and fulfi lling the international standards (ISO9001, ISO14001, OHSAS 18001). After the Safety initiative of 2012, the Solvay Safety Excellence Plan was launched to boost safety performance. This plan is focused on three axis: show clearly management level of expectations, customize action plan through site and GBU roadmap and generate a safety excellence mindset. The most famous initiative of this plan is probably the defi nition and deployment of eight "Life Saving Rules" , addressing the eight highest dangerous activities (as working at height), whose purpose is to protect people's lives and applicable to everybody in the whole Group.
HSE Corporate supports sites and GBUs by continuous development and deployment of Corporate procedures, standards, guidelines and tools to improve risk awareness for preventing the risk of accidents. Corporate collects, validates and distributes Return on Experience, Lessons Learning Bulletins on typical accident scenarios and consequences, safety alert messages with rules and recommendations.
The understanding and management of human and organizational factors are important to safety and the Group provides programs for behavioral safety to increase the safety culture of managers, employees and contractors.
Existing internal and external research, academic or inter-company developments are monitored to identify new safety approaches ICSI (Institut pour une Culture de Sécurité Industrielle), EPSC (European Process Safety Centre) or CEFIC (European Chemical Industry Council) initiatives .
Two new risks were identifi ed in 2015 as becoming potentially signifi cant for the Group. There are presented hereafter.
Climate change increases the occurrences of extreme natural events that could impact signifi cantly Solvay sites and supply chain.
The risk from climate change is a reality, with its potential consequences: sea-level rise, increased frequency and gravity of hurricanes and typhoons, earthquakes, tsunamis and fl ooding. In addition, a number of manufacturing sites are exposed to water scarcity risk.
As regards water-scarcity risk, mitigation approaches include using alternative water sources, recycling and reducing consumption following an identifi cation of sites possibly at risk.
A terrorist attack at a site or during transportation could trigger a major industrial disaster impacting the communities where Solvay operates.
The Group took immediate measures to mitigate this risk in 2015, and a more global program is under implementation.
Strategic risk refers to Solvay's exposure to developments in its markets or its competitive environment as well as the risk of making erroneous strategic decisions. Examples of risks are technological leaps leading to the development of substitute products or more competitive manufacturing processes, economic downturn, drastic changes in energy and raw-material prices and availability, the lack of success of a new product, reduction of demand in the Group's main markets as a consequence of either new legislation or competitive actions, events aff ecting its most important customers, new entrants in a market, price war and signifi cant imbalances between supply and demand in its markets.
The diverse businesses within Solvay generate a variety of risks, some of which could potentially aff ect the Group as a whole. But diversifi cation contributes to the reduction of the overall risk as the Group's diff erent businesses, processes, policies and structures off set some risks against each other merely through a balanced portfolio of products, end- markets, industrial footprint and geographical reach.
The potential impact of adverse events is assessed and managed at both GBU and Corporate levels, and involves in particular:
Sales development is an important driver of opportunities and risks for Solvay. Sales growth in 2015 proved resilient and the Group expects sustainable growth of its sales in the horizon of its strategic planning notably driven by growth from emerging endmarkets and fast-developing regions. This creates opportunities that Solvay wants to seize by expanding its presence in these markets and economies. In 2015, the Group started successfully a vanillin unit and a n ew unit plant in China, a Silica plant in Poland, a alkoxylation plant in Singapore. The Group also progressed in the construction of the announced investments in PVDF and hydrogen peroxide plants in China, a Silica plant in South Korea, a polyetheretherketone (PEEK) and alkoxylation plants in USA, and a hydrogen peroxide joint venture plant in Saudi Arabia. Economic risks in Brazil associated to market trends impacted businesses in the region and motivated the announced streamlining of the Fibras activities.
The acquisition of Cytec enables the Group to expand its presence in North America as well as in fast growing market of composites for Aerospace.
Beyond Cytec, portfolio transformation continued in 2015 reducing cyclical and low-growth businesses - divestment of PCC and Refrigerants and creation of the European joint-venture - Inovyn and strengthening growth engines - acquisition of EPIC Polymers GmbH and ERCA Emery Surfactant B.V. in Netherlands.
Supply chain and manufacturing risk in production units and transportation refers to risks related to raw materials, energy, suppliers, production, storage units and inbound/outbound transportation. Risks include major equipment failure or damage, natural disasters, strikes and drastic shortages of raw material, utilities or critical equipment.
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, produced only in one single plant.
Key risk areas are addressed with relevant dedicated policies and risk-control programs such as the property-loss prevention program, process safety management procedures, the supplier qualifi cation and assessment process, integrated resource planning and supply chain optimization systems, ERP (Emergency Response Plans), corporate and local crisis management procedures, business continuity planning (including for pandemic risk), and networking groups for manufacturing and supply chain managers.
The identifi cation of the supply chain risk is an essential part of the strategic category management, which is an in depth analysis establishing selection matrices and risk profi les. Environmental, social, as well as, security of supply and innovation criteria are taken into account. For each specifi c risk a mitigation action is identifi ed.
These strategic management reviews take place on a regular basis.
Some suppliers are identifi ed as critical based on their strategic importance or because they might represent a business, country or product risk. Those suppliers have to engage themselves in a CSR assessment and in a continuous improvement process of their CSR practices. All critical suppliers also need to formally confi rm that they adhere to principles that are consistent with the principles set out in the Solvay Supplier Code.
To embed CSR in the culture of the buyers, Solvay has set-up the "Every Buyer Every Visit" program. Every buyer during every visit with a supplier will dedicate a part of the discussion to health, safety and environment, CSR, and innovation aspects.
Solvay buys insurance to reduce the fi nancial impact of events potentially causing extensive damage and consequential business interruption. The property-loss prevention program is deployed with the support of a large network of risk engineers assigned by the insurers and focusing on the prevention and mitigation of damage to assets and loss of profi t due to fi re, explosion, accidental chemical release and other sudden adverse events. The program has been reinforced across the Group since January 2012 and includes:
In 2015, a three years Global Property Loss Prevention Road Map – 2015/2018 – has been created. It includes the completion each year of 43% of human element type of recommendations, 15% of physical protection type of recommendations and 15 worldwide large sites targeted to signifi cantly increase in the Chemical Risk Mark Chemical Benchmark of FM Global.
In addition by owning several mines and quarries for extraction of fl uor, trona, limestone, salt and celestite, Solvay reduces the risk of disruption of raw material supply (availability, reliability and price) by integration, when possible, of key suppliers in the property loss prevention program.
In the fi eld of energy supply, Solvay has consistently implemented programs to reduce its energy consumption for many years. While Solvay has industrial activities with high energy consumption, mainly in Europe (synthetic soda ash plants, chlorovinyls, polyamides), it also operates a range of industrial activities with a relatively low energy content as a percentage of sales price, particularly in the fl uorinated polymers business of the Specialty Polymers GBU and in the Novecare GBU. The Group considers secure and reliable energy supplies to be particularly important and has taken the following strategic initiatives:
upstream integration in steam and electricity generation (gas cogeneration, biomass or secondary fuels cogeneration, etc.);
periodic review of conditions of industrial sites' energy assets and connections;
Solvay created Energy Services, aiming at optimizing energy cost and CO2 emissions for the Group and third parties. Energy Services optimizes the energy purchasing and consumption for the Group and assists GBUs in their management of energy and CO2 emissions. The Solvay group is committed to ambitious CO2 reduction targets.
Regarding EU ETS(1) risk, several mitigation actions have been undertaken:
Regulatory risk refers to Solvay's exposure to changes in legislation and regulations. This could include events like governmental price regulations, taxation, tariff policies, trade restrictions or new regulations banning a product or imposing manufacturing, marketing and use restrictions making it unjustifi able to produce. Solvay could be exposed to important cost increases or business interruptions as a consequence of new legislation or regulations, or a more strict interpretation or application of current regulations by courts or authorities.
Solvay must obtain and maintain regulatory approval to operate its production facilities and sell its products. Given the international spread of the Group, these regulatory approvals emanate from authorities or agencies of many diff erent countries. Withdrawal of any previously granted approval or failure to obtain an authorization may have an adverse eff ect on its business continuity and operating results.
For Europe in particular, all chemical substances manufactured, imported or used by Solvay require registration under the REACH Regulation and must meet the deadlines imposed by this regulation. This is in addition to other already existing requirements. By the second REACH registration deadline of June 1, 2013, 175 fi les were successfully registered with the European Chemical Agency; of these, 59 fi les were registered in 2012 and 116 fi les in 2013. The next REACH registration deadline is May 31, 2018 and around 350 substances will have to be registered.
Political risk refers to Solvay's exposure to circumstances where the normal exercise of public authority is disrupted. This could be the consequence of a social crisis, political instability, civil war, nationalization or terrorism in countries where the Group operates or sells products, resulting in delay or failure of delivery of products or unavailability of raw materials, utilities, logistic or transport facilities.
Legal risk refers to the exposure to actual and potential judicial and administrative proceedings. The simple fact of doing business exposes Solvay to disputes and litigation. Adverse outcomes of such disputes or litigation are always possible (see note on Important Litigation below). In the normal course of business the Group is or may become a party to judicial or administrative proceedings. See page 69 for an overview of the ongoing legal proceedings involving the Group that are considered to involve potentially signifi cant risks. The Group is exposed to legal risk, particularly in the areas of product liability, contractual obligations, antitrust laws, patent infringement, tax assessments and environmental matters.
The Group's operations depend on the control of its key technologies and on the capacity to innovate. The questioning by third parties of the right of Solvay to use certain technologies could have an impact on its operations.
The geographic spread of the Group around the world is a factor reducing the impact from adverse regulatory and political developments.
Proper design and testing 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 both within and outside the European Union is reduced through the continuous work of, and interactions with public authorities by, the Government and Public Aff airs Department and through the local Belgian Embassy.
To manage legal risk Solvay maintains in-house legal, intellectual property and regulatory resources, including technical applications in its Business Services Function and relies on additional external professional resources as appropriate. In addition the Group makes appropriate fi nancial provisions. Awareness of legal risks is raised by dedicated training, sharing of information, self-assessment procedures and internal audits.
In the chemical industry, technological know-how can remain protected by way of trade secret, which is often a good substitute for patent protection. However, Solvay patents new products and processes when appropriate and maintains continuous eff orts to protect its proprietary information and its position as leader in technological know-how for its production processes.
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.
Financial risk is Solvay's exposure to liquidity risk, foreign exchange risk, interest-rate risk, counterparty risk (credit risk), failure to fund pension obligations, and tax risk, mainly tax compliance risk and transfer-pricing risk. Financial risks management at Cytec is in line with Solvay fi nancial risks management.
Liquidity risk relates to Solvay's ability to service and refi nance its debt (including notes issued) and to fund its operations, and depends on its ability to generate cash from operations and not to over-pay for acquisitions.
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 euro/US dollar risk, as the Group's overall activities generate a net positive US dollar fl ow. Consequently, a depreciation of the US dollar will generally result in lower revenues for Solvay. To a lesser extent, the Group is also exposed to euro/Japanese yen and Brazilian real/US dollar. A sensitivity analysis to those currencies is provided in the note 37D Financial risk management to the consolidated fi nancial statements of the present document.
Interest-rate risk is Solvay's exposure to fl uctuating interest rates.
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.
With regard to the risk of under-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 investments need to be managed, taking into account the risk-return balance. If plans are under-funded Solvay is mostly exposed to infl ation and interest-rate risk. Further information is provided in the note 35A "Financial instruments and fi nancial risk management" to the consolidated fi nancial statements of the present document.
Financial risks are analyzed, assessed and managed by the Corporate Finance F unction (Treasury and Tax). Loss prevention and mitigating eff orts involve a number of activities, such as:
The Group is recognized as historically having a prudent fi nancial profi le and a conservative fi nancial discipline. After the acquisition of Cytec in December 2015, the rating agencies confi rm the Investment Grade rating of the Group with a Baa2/P2 rating with negative outlook for Moody's and a BBB-/A3 rating with a stable outlook for Standard & Poor's.
The liquidity profi le is strong, mainly supported by capital increase, by exception, as it is the case in 2015 and for the fi rst time in the Group's history with the € 1.5 billion rights issue to partly fi nance the \$ 5.5 billion acquisition of Cytec, by long-term bond issuance (currently € 5.4 billion fi nancial debt of which € 3.7 billion for the fi nancing of the Cytec acquisition and treasury refi nancing € 665 million bonds issued by Cytec prior to the acquisition and € 2.2 billion hybrid bonds, treated as equity under IFRS) and substantial liquidity reserves (cash and committed credit lines, including two syndicated credit facilities of € 1.5 billion and € 550 million), as well as approximate € 300 million bilateral credit facilities with key international banking partners. In addition, the Group has also access to a Belgian Treasury Bill program in an amount of € 1 billion or as an alternative a US commercial paper program in an amount of \$ 500 million. The geographic 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 usually shorter than one year and not exceeding 18 months whenever deemed appropriate. In practice, Solvay enters into forward and option contracts securing the value (in euro and/or US dollar) of cash fl ows in foreign currency during the following months. The Group manages its foreign-exchange risk for receivables and borrowings through CICC (Solvay's in-house bank) in Belgium for all affi liates of the Group where it is possible to enter in such hedging transactions and through local fi nancial affi liates for other regions.
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.
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 investing in short term debt securities from highly rated sovereign issuers at the appropriate moments.
Furthermore, Solvay group manages external-customer risk and cash collection through a strong network of credit managers and cash collectors located in operating regions and countries.
Credit management and collection processes are supported by a set of detailed procedures and managed through Corporate and GBU Credit Committees. These loss mitigation measures have led, over the past years, to a record low rate of customer defaults.
Solvay has defi ned corporate pension-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.
A global ALM (Asset Liability Management) analysis of Group's pension plans representing more than 90% of the Group's pension obligations is performed periodically, the last one being in 2012 to identify and manage corresponding risks on a global basis.
Solvay stresses the importance of tax compliance. It monitors its procedures and systems through internal reviews and through audits performed by reputable external consultants. Internal controls dedicated to tax-compliance processes are in place to limit the occurrence of possible errors or failures.
Solvay has issued transfer-pricing policies and procedures aimed at meeting the requirements of the authorities. Internal controls dedicated to transfer-pricing compliance processes are in place to limit the occurrence of possible errors or failures.
Transfer-pricing documentation is prepared annually for each relevant Group legal entity that requires such documentation in line with local country laws and practices with the assistance of internal or external experts, in order to demonstrate the arm's-length nature 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.
The prevention and mitigation eff orts for the tax litigation risk are based on thorough analysis of internal fi nancing of affi liates, 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 of adapting to new situations.
Solvay, like any other corporate taxpayer, currently faces signifi cant growth in tax audit queries and the introduction of many new tax provisions. Solvay Tax Department pays great attention to the correct interpretation and application of new tax rules to avoid future litigation. Solvay Tax Department also follows with great attention all developments pertaining to the implementation at country level of the G20/OECD Base Erosion and Profi t Shifting (BEPS) recommendations in order to ensure that tax positions remain consistent with changing requirements.
Occupational-related diseases including chronic diseases from exposures to occupational hazards are mostly related to past exposures resulting in health eff ects after a long period of latency, e.g. asbestos-related diseases.
Pandemic risk can aff ect employees, their families and the society at large.
Conservative approaches in risk assessment and management reduce real risk exposure when new hazards are revealed. Such conservative approaches are shared and applied by the worldwide toxicology team and also supported by the internal "Solvay Acceptable Exposure Limit" Committee, chaired by the Corporate Medical Adviser.
Solvay has its own experts within the Company and actively cooperates with external networks. High priority is given to nanomaterials and technology, endocrine disruptors and health-related applications of Solvay products.
For decades, Solvay has had in place worldwide occupationaldisease monitoring and a strong program in industrial hygiene focusing on a comprehensive assessment of compliance with occupational-hygiene standards. In order to ensure a high standard of occupational-health protection for employees, in 2006 Solvay started rolling out the occupational-hygiene module and in 2008 the health module of the MEDEXIS IH-OH 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 principles of the MEDEXIS IH-OH system is progressively extended to the whole Group and shared via a unique and uniform IT tool. It is designed to identify clusters of new possibly occupation-related diseases with multiple underlying causes, with the purpose of improving individual and collective exposure and medical traceability and facilitating the daily work of physicians and hygienists in Solvay.
Solvay has put into place a global pandemic preparedness task force covering all plants and all businesses by means of a sustained network of coordinators prepared to implement regional and local prevention and mitigation activities.
Environmental risk is Solvay's exposure stemming from the sudden or long-term release of a chemical substance following plant-equipment failures or transport accidents, as well as from production problems resulting in exceeding permitted emission levels. Several Solvay sites are governed by regulations concerning major-risk installations.
Exceeding permitted emission levels can lead to administrative or criminal sanctions, adverse outcomes in litigation and the risk of the loss of license to operate.
Like most other industrial companies, Solvay has to manage and remediate historical soil contamination at some sites as well as comply with future changes in environmental legislation. In Europe and elsewhere, environmental liability and the "polluter pays" principle are increasingly embedded in environmental legislation, to prevent and remedy environmental damage. For the fi rst time, environmental damage to land, water, natural habitats and protected species has been brought under the umbrella of a single piece of European legislation.
The legislation introduces an increasingly broader scope of soilremediation legal liabilities than previously seen across Europe, including a requirement for primary remediation, complementary remediation and compensatory remediation. More generally, authorities worldwide are increasingly requiring management of soil and groundwater environmental legacies. The risk for Solvay is in particular that the ELD (European Liability Directive) will lead to increased remediation costs and in this context, a number of administrative proceedings are under way to defi ne the need for and approach to remediation.
Beside the risks mentioned above, Solvay group is exposed to ETS risk in Europe. The same scheme has started in South Korea January 1, 2015.
Solvay considers environmental protection a key aspect in the management of its activities. Well-defi ned measures to prevent pollution and accidents have been in place at Solvay for a long time. Solvay implements ISO 14001 or integrated HSE management systems equivalent to ISO 14001 (Solvay Care Management System ) for the environment 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.
Sites with historical soil contamination are carefully monitored and managed by a dedicated worldwide team. This team receives training in regulatory awareness and undertakes regular updates of appropriate provisions for monitoring and remediation according to a defi ned audit process. The Group has developed internal expertise in soil management. It is Solvay's policy to have a risk characterization approach at all concerned sites. Hydrogeological studies and soil characterizations are conducted to diagnose potential problems, evaluate risks to aquifers and discuss relevant remediation or confi nement actions with authorities. A number of such actions have been completed or are under way.
Compliance with applicable legislation is fully integrated into environmental management systems and is constantly monitored by all Solvay sites. Corrective actions are implemented whenever necessary in close cooperation with environmental authorities to assure that no adverse eff ect on the environment is observed.
Solvay monitors the eff ects of climate change as related risks and opportunities may aff ect the Group's business objectives. The risk is to an extent hedged through the geographic spread of both production units and markets for its products.
Solvay buys insurance to reduce the fi nancial impact in case a environmental risk materialize.
Information and information services related risks for Solvay is the inability to ensure continuity of services or provide information services adapted to the business needs.
The Group uses a dedicated data network and regional internet gateways that are managed by a trusted service provider. The critical data and applications are hosted in a datacenter operating along professional good practices, ensuring recovery capabilities in case of incident.
To ensure that the users of systems do understand and apply the best practices, an end-user information security awareness e-learning is provided to all employees.
In 2015, Disaster Recovery tests have again been realized for the central Solvay datacenter, and Crisis Management tests were carried out for all three global service centers of Solvay's Business Services (SBS) Function, involving diff erent crisis scenarios such as pandemia or social unrest, and in full collaboration with Solvay's Corporate Communication Function.
As an extension to earlier certifi cations of Solvay's Information Services, the whole of SBS has meanwhile successfully undergone the ISO 9001:2008 quality certifi cation exercise by the end of 2015. An even wider and more demanding certifi cation is being investigated for 2016.
At technical level, a Mobile Device Management (MDM) solution has been designed and is being implemented, strongly improving the remote management capabilities of business-provided smart phones. Laptop encryption is gradually being enforced for top-level management personnel and employees carrying sensitive data.
Reputational risk arises from Solvay's exposure to a deterioration of its reputation with its diff erent stakeholders. Damage may occur due to the realization of any of the risks described for the other risk categories in this chapter or any unexpected crisis event, whether real, supposed or alleged, and publication of any unfavorable 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, law or corporate governance principles and which, more generally speaking, would fall short of stakeholder expectations with regard to Solvay.
Damage to corporate reputation can be accelerated and amplifi ed by the i nternet and social networking media.
Reputation is a key asset. Loss of reputation can result in competitive disadvantage and value destruction. Reputational risk deals with the subjective, composite perception of a company by its diff erent stakeholders. Trust is a fundamental ingredient of reputation.
Besides overall good reputation management under the supervision of the Corporate Communication Function, control practices and systems, including crisis anticipation and preparation, effi cient communication (clear, consistent and timely) and long-term solid relationships with key stakeholders, both inside and outside the organization, contribute in the long run to building and consolidating trust, which is a fundamental ingredient of 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. Solvay's CEO is currently active as president of CEFIC (European Chemical Industry Council). Members of the Executive Committee of Solvay have also been active as presidents of ICCA (International Council of Chemical Associations) and Plastics Europe.
Solvay has established communication processes, systems, plans and programs to create, develop and maintain a regular dialogue, including in crisis situations, with its main stakeholders: shareholders and the fi nancial community, employees, customers and suppliers, authorities, local communities and opinion leaders. Tools include a variety of internal and external electronic and printed media tailored for internal and external audiences. Solvay maintains active press relations at the corporate and local levels, through direct contacts, press releases, conferences and visits as well as open-door and other events aimed at local communities around major sites. The Group has also adopted a set of guidelines and advice for employee use of social-networking media.
Clear values and training on practices supported by the Code of Conduct, combined with a high level of Corporate Governance, are instrumental in preventing behavior that could contribute to reputational risk.
Solvay is implementing eff ective management and communication systems designed to give early warning in case of actual or latent 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 diff erent entities of the Group.
With its variety of activities and its geographic 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 matters. In this context litigation cannot be avoided and is sometimes necessary to defend the rights and interests 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 not fully covered by provisions or insurance and could impact materially the revenues and earnings of the Group.
Ongoing legal proceedings involving the Solvay group 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 to the merits of the cases. In all the cases cited below, Solvay is defending itself vigorously and believes in the merits of its defenses.
For certain cases, Solvay has created reserves/provisions in accordance with the accounting rules to cover the fi nancial risk and defense costs (see the note 35D "Provisions for litigation to the consolidated fi nancial statements" of the present document).
In 2006, the European Commission imposed fi nes against Solvay (including Ausimont SpA, acquired by Solvay in 2002) for alleged breaches of competition rules in the peroxygens market, amounting after appeal € 139, 5 million for Solvay SA and € 12, 8 million for Solvay Specialty Polymers Italy SpA. Joint civil lawsuits were fi led before the Court of Dortmund (Germany) in 2009 against Solvay and other producers based on the alleged antitrust violation, claiming damages from the producers on a joint and several basis. The value of the claims is approximately € 240 million (excluding interest) against all six defendants. Several questions on the jurisdiction of the Court of Dortmund have been raised to the European Court of Justice and proceedings before the Court of Dortmund are pending.
In Brazil, Solvay is facing administrative claims related to alleged cartel activities in various markets. CADE (the Brazilian antitrust authority) issued fi nes against Solvay and others in May 2012 related to H202 activity (Solvay's share of the fi nes is € 29, 6 million). Solvay has fi led a claim contesting these administrative fi nes before the Brazilian Federal Court.
In September 2014, the Criminal Court of Appeal of Bologna (Italy) confi rmed the decision of the Criminal Court of Ferrara of April 2012 which had dismissed the case concerning four former employees of Solvay accused of alleged criminal conducts before 1975 in relation to two cases of former PVC workers with diseases allegedly due to exposure to vinyl polyvinyl chloride (VCM). No appeal before the Cassation Court of Rome (Italy) was fi led by the Public Prosecutors and/or by the Civil Parties. Therefore the judgement of September 2014 defi nitely became fi nal in the fi rst half of 2015.
In October 2009, the Public Prosecutor of the Criminal Court of Alessandria (Italy) charged several individuals (including employees and former employees of Solvay, and Ausimont SpA, now Solvay Specialty Polymers Italy) in relation to alleged criminal violations of environmental laws (remediation omission) and public health legislation (intentional poisoning of potable waters). Solvay Specialty Polymers Italy - SSPI (formerly Solvay Solexis and Ausimont), a subsidiary of Solvay and legal successor of Ausimont SpA, called in the trial as Civil Liable Party together with Edison SpA, may be exposed to claims for civil liability in case of a negative outcome of the proceedings. The Civil Parties admitted to the trial have provisionally quantifi ed their civil damages claims in about € 105 million. In December 2015 the Assize Court of Alessandria (Egypt) (i) sentenced three SSPI managers to jail for 2.5 years and (ii) awarded civil damages for about € 400k. This judgement, which is not enforceable as it is not fi nal, will be appealed by all the parties in fi rst half of 2016.
In May 2008, the Public Prosecutors of the Criminal Court of Pescara (Italy) charged several individuals (including former employees of Ausimont SpA acquired by Solvay in 2002; no Solvay's employee was charged) in relation to alleged criminal violation of environmental laws (environmental disaster) and to alleged crimes against the public health (intentional poisoning of potable waters) taken place before 2002 (i.e., before Ausimont SpA's acquisition by Solvay). The Assize Court of Chieti dismissed the intentional poisoning charge and found the Ausimont's former employees guilty of culpable environmental disaster, however declared that this matter was time-barred. The Public Prosecutors and the Civil Parties lodged an appeal against this decision and the case is currently pending before the Cassation Court of Rome (Italy).
In February 2014, the Public Prosecutor Offi ce of the Criminal Court of Pescara (Italy) started secret preliminary investigations regarding seven Solvay managers in relation to alleged violations of environmental laws occurred with reference to the Bussi site remediation activity undertaken by Solvay from May 2002 onward. In March 2015 the Judge of the Preliminary Hearing of the Criminal Court of Pescara (Italy) ordered the fi nal dismissal of these charges for all Solvay defendants and recognized that the remediation interventions put in place by Solvay (i.e., the hydraulic barrier) was adequate and that the serious contamination of the Bussi site found in recent times was exclusively imputable to (Mont) Edison's past management of the same.
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 is limited to an aggregate amount representing € 500 million and is limited in duration.
This includes indemnifi cation against certain potential liabilities for the US hormone replacement therapy (HRT) litigation, re-activated Qui Tam litigation focusing on promotional and marketing practices that allegedly infl uenced sales of the drugs ACEON® , LUVOX® , and ANDROGEL® , as well as more recently fi led testosterone replacement therapy (TRT) litigation also focusing on the drug ANDROGEL® . These claims proceed at varying rates of resolution.
| 1 Towards an integrated thinking, an integrated management and eventually integrated |
|
|---|---|
| reporting | 74 |
| 2 Highlights of 2015 | 74 |
| FINANCIAL MANAGEMENT REPORT |
76 |
| 1 Business performance and analysis |
76 |
| 2 Complementary fi nancial information |
95 |
| 3 Historical fi nancial data | 98 |
| EXTRA-FINANCIAL STATEMENTS |
100 |
| 2015 In order to ensure the reliability and credibility 1 Sustainability management of its extra-fi nancial reporting, |
100 Solvay |
| commissioned one of its statutory auditors, Deloitte, to verify a selection of sustainability 2 Sustainability performance information. This verifi cation process aims at |
107 |
| providing a limited assurance report on the 3 Sustainability performance |
targeted sustainable development indicators and assertions. summary 125
2015 In order to ensure the reliability and credibility of its extra-financial reporting, Solvay commissioned one of its statutory auditors, Deloitte, to verify a selection of sustainability information. This verifi cation process aims at providing a limited assurance report on the targeted sustainable development indicators and assertions.
| 1 Consolidated fi nancial | |
|---|---|
| statements | 127 |
| 2 Notes to the consolidated fi nancial statements |
133 |
| IFRS main accounting policies | 134 |
| Notes to the consolidated income statement |
148 |
| Notes to the consolidated statement of comprehensive income |
158 |
| Notes to the consolidated statement of cash fl ows (continuing |
|
| and discontinued operations) | 159 |
| Notes to the consolidated statement of fi nancial position |
164 |
| Miscellaneous notes | 197 |
| 2015 consolidation scope | 202 |
| List of companies included in the consolidation |
203 |
| 3 Summary fi nancial | |
| statements of Solvay SA | 214 |
| AUDITOR'S REPORTS | 216 |
DECLARATION BY THE PERSONS RESPONSIBLE 220
Solvay believes that innovative chemistry holds solutions for future generations. Throughout Solvay history, sustainable value creation has always included leveraging technologies, continuously innovating and developing ideas that will help solve some of the world's challenges always with a view to secure the future for its people, businesses, the planet and society at large.
To make the seemingly impossible possible, the Group draws its strength from people. One of its key objectives is to ensure that Solvay can attract and develop high-performing talents. Fueled by
agility, collaboration, curiosity and courage, Solvay employees are success-driven and committed to the Group's ambition.
In pursuing its passion for scientifi c and technical progress, Solvay strives to achieve ever more with less: fewer risks, fewer resources and less waste, in order to deliver more sustainable innovation.
For Solvay, "a sking more from c hemistry" means responsible success in the way it acts, innovates and contributes to society .
Sustainable value creation
T he Group is looking at how to more eff ectively integrate and link sustainability into its strategic thinking and the way it manages its businesses and its operations. Solvay is using non-fi nancial metrics in its key decision making processes as well as in performance management processes to evaluate its overall performance in an integrated manner.
Solvay believes the successful company of tomorrow requires an integrated strategic thinking and an integrated management aiming at creating sustainable value, shared with all its stakeholders and society. Solvay is progressively putting in place an integrated management approach, which should lead eventually to an i ntegrated r eporting.
Solvay's sustainability reference framework – "Solvay Way"— has defi ned sustainable value creation for the Group based upon a thorough materiality analysis completed in 2014 and updated in 2015 (please refer to page 102 of the Extra-fi nancial statements section. describing full materiality process, results and feedbacks from Solvay's main stakeholders).
Together with the fi nancial indicators that inform on the operational economic performance of the Group and its comprising businesses, Solvay selected fi ve priorities among the high materiality issues : employee safety, sustainable business solutions, greenhouse gas emissions, employee engagement and wellness as well as societal actions. For each of these material issues, Solvay has long term targets that it is pursuing , and for which it has defi ned appropriate indicators to monitor performance evolution across businesses and for the whole Group. Those indicators are progressively being integrated as part of the balanced dashboard used by corporate and business managers to steer improvement of the Group's capacity to meet its targets and to generate value in the short, medium and long term.
Solvay's ambition is to reinforce the connections between the G roup's strategy, governance, fi nancial performance and the social, environmental and economic context in which the Group operates.
Solvay is presenting its 2013, 2014 and 2015 sustainable value creation indicators. The indicators in 2013 have been restated for:
| Adjusted r esults | |||||
|---|---|---|---|---|---|
| 2015 | 2014 | 2013 | |||
| REBITDA | in € million | 1,955 | 1,783 | 1,611 | |
| REBITDA by Operating S egment | |||||
| • Advanced Formulations | 378 | 426 | 347 | ||
| • Advanced Materials | 836 | 709 | 624 | ||
| • Performance Chemicals | in € million | 789 | 724 | 682 | |
| • Functional Polymers | 141 | 111 | 89 | ||
| • Corporate & Business Services | (189) | (188) | (131) | ||
| Adjusted N et I ncome Solvay share | in € million | 477 | 156 | 378 | |
| Free Cash Flow | in € million | 387 | 656 | 487 | |
| CFROI | % | 6.9 | 6.9 | 6.9 | |
| Dividend (1) | in € | 3.30 | 3.20 | 3.01 | |
| Occupational accidents (MTAR) | Accident per million hours worked |
0.77 | 0.97 | 1.06 | |
| Greenhouse gas emissions intensity | Kg CO2 eq. per € REBITDA |
7.26 | 8.08 | 8.84 | |
| SPM : sustainable solutions | % of net sales | 33 | 25 | 19 | |
| Employee engagement index | % | 75 | - | 72 | |
| Employees involved in societal actions | % | 20 | - | - |
(1) The 2013 and 2014 dividend have been adjusted for the bonus factor of 0.9398 refl ecting the value of the rights following Solvay's capital increase completed on December 21, 2015; the 2015 dividend presented is the one recommended by the Board of Directors at the Ordinary Shareholders' Meeting scheduled on May 10, 2016. A djusted performance indicators exclusively exclude non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia acquisition.
The business scope over the three year period is constant: Solvay's European Chlorovinyls, contributed to In ovyn (50/50 JV with Ineos) with eff ect as from July 1, 2015 and its Eco Services business, sold in December 1st , 2014, are both presented as discontinued businesses over the corresponding reference periods.
Free Cash Flow amounted to € 387 million versus € 656 million in 2014 , chiefl y refl ecting higher capital investments for growth reported high seasonal working capital swings and signifi cant cash infl ows from discontinued operations.
CFROI of 6.9% (prior to Cytec integration), stable versus 2014, with improvements in Functional Polymers, supported by excellence programs, off setting adverse market developments in Advanced Formulations.
The management report for the accounting period ending on December 31, 2015, consisting of pages 31 to 58 (Corporate governance) and 59 to 70 (Management of risks), has been prepared in accordance with Articles 96 and 119 of the Belgian Companies' Code and was approved by the Board of Directors on February 24 , 2016 . It covers both the consolidated accounts of the Solvay group and the statutory accounts of Solvay SA.
In addition to the consolidated IFRS accounts for 2014 and 2015 provided in pages 127 to 215 (Financial statements) in this report, Solvay is disclosing "Adjusted" Profi t & Loss information and analysis in order to provide a more meaningful presentation of the economic and fi nancial performance of the Group and its business segments across periods.
Adjusted Profi t & Loss indicators referring to 2014 and 2015 exclude non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia acquisition.
Furthermore, for its analysis and fi nancial communications, Solvay uses non-GAAP(1) indicators, the defi nitions of which are the following:
non-recurring items mainly include:
- gains and losses on the sale of real estate not directly linked to an operating activity;
- capital i nvested means the value of fi xed assets plus working capital plus the value on our balance sheet of joint ventures accounted for using the equity method;
- recurring capex defi ned as 2% of the replacement value of fi xed assets net of goodwill values;
Solvay believes that these measurements are useful tools for analysing and explaining changes and trends in its historical results of operations, as they allow performance to be compared on a consistent basis. However, they are not subject to audit and are not performance measurements with respect to IFRS. The methods of calculating changes used by Solvay may diff er from those used by other companies.
| IFRS | Adjusted | |||
|---|---|---|---|---|
| In € million | 2015 | 2014 | 2015 | 2014 |
| Sales | 11,047 | 10,629 | 11,047 | 10,629 |
| Other non-core revenues | 470 | 416 | 470 | 416 |
| Net sales | 10,578 | 10,213 | 10,578 | 10,213 |
| Cost of goods sold | (8,289) | (8,070) | (8,289) | (8,070) |
| Gross margin | 2,759 | 2,559 | 2,759 | 2,559 |
| Commercial and administrative costs | (1,327) | (1,225) | (1,327) | (1,225) |
| Research and development costs | (277) | (247) | (277) | (247) |
| Other operating gains and losses | (99) | (94) | 10 | 16 |
| Earnings from associates and joint ventures accounted for using the equity method |
21 | (34) | 21 | (34) |
| Non-recurring items | (245) | (308) | (245) | (308) |
| EBIT | 833 | 652 | 941 | 761 |
| Net income | 454 | 13 | 525 | 89 |
| Non controlling interests | (48) | 67 | (48) | 67 |
| Net income Solvay share | 406 | 80 | 477 | 156 |
| Earnings per share (basic) in € | 4.85 | 0.96 | 5.70 | 1.87 |
| Change in net sales | Net sales | Conversion | Volume | Net sales | ||
|---|---|---|---|---|---|---|
| In € million | 2014 | Scope | forex | and mix | Price | 2015 |
| Solvay group | 10,213 | 29 | 655 | (260) | (59) | 10,578 |
| 0.3% | 6.4% | (2.5)% | (0.6)% | |||
| Advanced Formulations | 2,854 | (14) | 260 | (376) | (71) | 2,652 |
| (0.5)% | 9.1% | (13)% | (2.5)% | |||
| Advanced Materials | 2,762 | 112 | 256 | 178 | 26 | 3,334 |
| 4.1% | 9.3% | 6.4% | 0.5% | |||
| Performance Chemicals | 2,944 | 6 | 115 | (71) | 96 | 3,090 |
| 0.2% | 3.9% | (2.4)% | 3.3% | |||
| Functional Polymers | 1,654 | (75) | 24 | (2) | (111) | 1,490 |
| (4.5)% | 1.4% | (0.9)% | (6.7)% | |||
| Corporate & Business Services | 11 | - | - | - | - | n.m. |
Financial management report
Net sales grew 4% year on year to € 10,578 million thanks to the positive net conversion impact of 6% from foreign exchange rate fl uctuations, caused mainly by the appreciation of the US dollar versus the euro. Volumes were down (3)% overall compared to last year. The sharp contraction of the North American oil and gas exploration industry impacted Advanced Formulations. Furthermore the destocking on the acetate tow market weighed on the volume development of Performance Chemicals. These were only partially off set by robust growth in Advanced Materials, which demonstrate strong demand dynamics for Solvay's innovation-driven products. Prices were only slightly down overall, despite lower raw material prices in Advanced Formulations and Functional Polymers, mainly thanks to price increases in Performance Chemicals. The acquisitions of Ryton and Flux at the end of 2014, and the sale of the r efrigerants and PCC businesses in May and November 2015 respectively, had no material eff ect on scope.
The cost of goods sold amounted to € (8,289) million in 2015, up 3% compared to prior year, driven by foreign exchange rates eff ect on conversion, especially from the US dollar and Asian currencies appreciation versus the euro. This increase was partly off set by lower raw material prices with in general defl ationary context in most businesses and competitiveness improvement based on excellence initiatives.
Commercial and administrative costs of € (1,327) million in 2015 rose € (102) million or (8)% compared to the prior year. This increase is primarily linked to the foreign exchange rates eff ect on conversion ,
to cost infl ation in the diff erent regions where the Group operates and the scope eff ect from the Ryton acquisition.
Research and Innovation costs amounted to € (277) million in 2015, increasing 12% compared to the prior year due to intensifi ed eff orts in the major business units, primarily in Solvay's growth engines, with increase in the Advanced Materials segment, entirely from Specialty Polymers with € 12, 9 million, and Advanced Formulations. The ratio of Research and Innovation cost on net sales increased to 2.5% from 2.3% in 2014.
Other operating gains and losses in 2015 amounted to € 10 million on an adjusted basis, compared to € 16 million in 2014. The variance is essentially due to higher start-up costs in 2015.
On an IFRS basis, other operating gains and losses amounted to € (99) million, or a € (109) million diff erence with the adjusted accounts and corresponding to the depreciation of PPA on fi xed assets relative to Rhodia's acquisition. Please refer to note 5 of the consolidated fi nancial statements.
Earnings from associates and joint ventures accounted for using the equity method amounted to € 21 million in 2015 compared with € (34) million in 2014. This improvement of € 55 million is largely driven by the contribution of the RusVinyl joint venture, which was highly negative in 2014 linked to a Russian ruble exchange loss on euro-denominated debt.
| Changes in REBITDA In € million |
2014 | Scope | Conversion forex |
Volume and mix |
Price | Variable costs |
Fixed costs |
Others including equity earnings |
2015 |
|---|---|---|---|---|---|---|---|---|---|
| Group | 1,783 | (1) | 163 | (147) | (59) | 246 | (48) | 18 | 1,955 |
| (0.1)% | 9.1% | (8.3)% | (3.3)% | 14% | (2.7)% | 1.0% |
REBITDA increased 10% reaching € 1,955 million. Pricing power more than off set the (8)% impact on REBITDA of lower volumes. Solvay's pricing power delivered € 187 million, raising REBITDA by 11%, and was evident across all operating segments, outweighing negatives such as the inventory write-downs of € (8) million at the year start, linked to the sharply reducing commodity prices. This was particularly the case for Performance Chemicals and Functional Polymers, which benefi ted from lower raw material and energy prices, which could be maintained in sales prices, and where some prices could even be raised. The transactional forex eff ect, which is part of the pricing power, was € 70 million. Foreign exchange fl uctuations had a 9% eff ect on conversion and has been gradually decreasing through the year as the year-on-year delta on the US dollar exchange rate and to a lesser extent the Chinese yuan lessened, while the devaluation of the Brazilian real and the Russian ruble had a negative impact on conversion. Fixed costs were up € (48) million mainly due to the start-up of new sites in the year. Scope changes had no material impact. The REBITDA margin widened to 18% of net sales, up 1.0% . Overall excellence measures covering operational excellence, commercial excellence and innovation contributed more than € 300 million to the 2015 REBITDA, refl ected in the innovationdriven volume growth of Advanced Materials, pricing power of Performance Chemicals and Functional Polymers and the mitigation of fi xed cost increases, where infl ation was fully compensated.
In 2015, depreciation and amortization charges amounted to € (733) million on an adjusted basis versus € (641) million in 2014. This increase is mainly linked to the foreign exchange eff ects and to the impact of new units coming on stream especially in Novecare and Specialty Polymers .
Depreciation and amortization charges in 2015 IFRS accounts amounted to € (842) million or a € (109) million diff erence with the adjusted accounts and corresponding to the depreciation of PPA on fi xed assets relative to Rhodia's acquisition.
Non-recurring i tems
Non-recurring items were € (245) million versus € (308) million in 2014. The Cytec acquisition represented € (130) million of this, including professional advisory services for € (48) million, fi nancing and hedging arrangements for € (54) million as well as initial
integration costs for € (19) million. Other restructuring expenses were € (57) million linked to excellence programs in the Corporate and Functions structure, the Latin American businesses and in Novecare. Other costs mainly related to environmental provisions of € (45) million and impairment charges on non-performing investments of € (48) million.
EBIT on an adjusted basis was up 24% to € 941 million. Besides amortization and depreciation charges of € (733) million, it included € (22) million adjustments mostly related to fi nancial charges of the RusVinyl joint venture, and € (13) million adjustments from other than Rhodia PPA eff ects (Chemlogics, Ryton ). EBIT on an IFRS basis totaled € 833 million. The diff erence between IFRS and adjusted fi gures refl ects the Rhodia non-cash purchase price allocation (PPA) depreciation impact of € (109) million.
| Adjusted | Year on year | ||
|---|---|---|---|
| In € million | 2015 | 2014 | evolution |
| Net sales | 10,578 | 10,213 | 3.6% |
| Advanced Formulations | 2,652 | 2,854 | (7.1)% |
| Advanced Materials | 3,334 | 2,762 | 21% |
| Performance Chemicals | 3,090 | 2,944 | 5.0% |
| Functional Polymers | 1,490 | 1,654 | (9.9)% |
| Corporate & Business Services | 11 | - | n.m. |
| REBITDA | 1,955 | 1,783 | 9.6% |
| Advanced Formulations | 378 | 426 | (11)% |
| Advanced Materials | 836 | 709 | 18% |
| Performance Chemicals | 789 | 724 | 8.9% |
| Functional Polymers | 141 | 111 | 27% |
| Corporate & Business Services | (189) | (188) | (0.5)% |
The Advanced Formulations' activities are characterized by their high customer – and applications – driven approach and relatively low capital intensity. Their off erings address major societal trends, meeting ever stricter requirements with respect to the environment and energy savings as well as the challenges of the mass consumer markets.
Novecare develops and produces formulations that alter the properties of liquids. It off ers solutions to the oil and gas industry using the world's largest portolio of chemicals. Novecare also provides specialty solutions for certain industrial applications, agricultural and coatings markets.
Coatis is a provider of glycerine-based sustainable solvents solutions and specialty phenols mainly for the Latin American market. It enjoys an undisputed market leadership position in Brazil for Phenol & Derivatives used in the production of synthetic resins employed in foundries, construction and abrasives.
Aroma Performance is the world's largest integrated producer of vanillin for food, fl avors & fragrances industries and synthetic intermediates used in perfumery .
| Adjusted | Year on year | ||
|---|---|---|---|
| In € million | 2015 | 2014 | evolution |
| Net sales | 2,652 | 2,854 | (7.1)% |
| Novecare | 1,895 | 2,033 | (6.8)% |
| Coatis | 398 | 484 | (18)% |
| Aroma Performance | 360 | 337 | 6.6% |
| REBITDA | 378 | 426 | (11)% |
| REBITDA margin | 14% | 15% | (0.7) pp |
Net Sales decreased (7)% to € 2,652 million. With the signifi cant downturn in the North American unconventional oil and gas markets starting in February, volumes were down some (13)% for the segment and close to (20)% for Novecare alone. The market contraction impacted products to the stimulation, drilling and cementing subsectors, while the production subsector was resilient. Business developments in other Novecare end markets were generally satisfactory. Coatis' sales volumes and prices were aff ected by weak domestic demand in Latin America, where the economy is in recession. Aroma Performance volumes grew, both in performance solutions and in vanillin formulations, demonstrating the progress made following the production outages faced in 2014. On segment level, a favorable 9% impact from foreign exchange rates mitigated the volume drop, while prices were (2)% down.
REBITDA fell (11)% to € 378 million, refl ecting the severe volume contraction in the unconventional oil and gas markets and the degraded Latin American market. Moreover, sharply reduced raw material prices at the start of the year led to write-downs on inventories. Despite sales price pressure, the pricing power was positive, thanks to lower raw material prices, the positive impact of transactional forex and operational excellence measures put in place in those businesses most aff ected by the adverse market conditions. Combined with the positive eff ect of exchange rates on conversion (except for the Brazilian real), these measures helped to mitigate the impact on REBITDA margin, which shrunk by (0.7) pp to 14%.
| Products by GBU | Applications | Markets | Trademarks | Competitors | |
|---|---|---|---|---|---|
| Novecare | |||||
| Surfactants | Dispersion, foaming, conditioning, | Agro, Feed & Food Consumer Goods |
AGRHO®, STARGUAR®, AGHRO® N PROTECT®, SOPROPHOR®, RHODOLINE® |
AKZO Nobel, BASF, Clariant, Croda, |
|
| Amines | surface modifi cation, | & Healthcare | RHODIASOLV® | Dow, Koch, Huntsman, | |
| Synthetic and natural polymers | intermediate, gelling, rheology | Industrial Applications Energy & Environment |
SIPOMER®, MIRACARE®, RHEOMER®, JAGUAR® |
Lamberti Grp Oxiteno, Stepan |
|
| Phosphorous chemistry | MACKAM®, PROBAN®, TIGUAR®, TOLCIDE® |
||||
| Coatis | |||||
| Phenol and derivatives | Synthetic resins & molding compounds (Epoxy, polycarbonate, polyamide, phenolic MMA resins) |
Consumer Goods & Healthcare |
Dow, Ineos, Shell | ||
| Oxygenated solvents, of which: |
Adhesives, cosmetics, mining, | Automotive & Aeronautics Building & Construction |
Arkema, Sasol, | ||
| Ketonic solvents | coating, print inks, wood coating, oilfi eld, cleaners, automotive, |
Industrial Applications | Halterman Celanese, Ineos, |
||
| Acetic solvents | industrial paints, pharma, | Agro, Feed & Food | SOLSYS™ | Eastman, Dow, Shell, Oxiteno, Oxea, Sopo |
|
| Glyceryn-based solvents | solubilization of actives and resins | AUGEO ® |
| Products by GBU | Applications | Markets | Trademarks | Competitors | |
|---|---|---|---|---|---|
| Aroma Performance | |||||
| Cyclopentanone | Fragrances, building block agro, pharma |
Consumer Goods & Healthcare Agro, Feed & Food |
BASF, Nippon Zeon | ||
| Electronics | Industrial Applications | RHODIASOLV® XPT | |||
| Natural vanillin | Flavors | Agro, Feed & Food | RHOVANIL® NATURAL | Shanghai apple, Bestally, Safi sis, Symrise |
|
| Vanillin & ethyl-vanillin, and vanilla fl avors |
Flavors, fragrances, food crop protection |
Agro, Feed & Food Consumer Goods & Healthcare Industrial Applications |
RHOVANIL®, RHODIAROME® RHOVEA®, RHODIAROME® RHOVEA®, VANILTEK®™ GOVANIL®, GOVANIL™ INTENSE, VANIFOLIA™ VANIFOLIA™ BEAN |
Borregaard, Jiaxing,Thrive, Wanglong F&F, Prova |
|
| IBCH | Fragrances | Consumer Goods & Healthcare |
RHODIANTAL® ORIGINAL, RHODIANTAL® CANDALUM® |
Indian & Chinese companies |
|
| Building block for agrochemicals | Agro, Feed & Food | ||||
| Pyrocatechol | Solvent for electronics | Industrial Applications | Camlin, SanJili, UBE | ||
| Building block for drugs synthesis Building block for fragrances |
Consumer Goods & Healthcare |
||||
| Hydroquinone | Inhibitors Building block for dyes Building block for agrochemicals Building block for polymers Building block for rubber anti-oxidants Photography reagent Building block for food anti-oxidants |
Industrial Applications Agro, Feed & Food |
Camlin, Eastman, Mitsui, Ube, Sanjili Goodyear |
||
| Building block for agrochemicals | Agro, Feed & Food | CST | |||
| MeHQ | Inhibitors | Industrial Applications | CST, Seiko, Kawagushi | ||
| TBC | Inhibitors | Industrial Applications | Original TBC, TBC Optima | Camlin, KKPunja, DIC | |
| Veratrole | Building block for agrochemicals | Agro, Feed & Food | |||
| Building block for drugs synthesis | Consumer Goods & Healthcare |
Indian companies | |||
| Solvent for electronics | Industrial Applications | ||||
| Anisole | Building block for agrochemicals | Agro, Feed & Food Indian companies |
|||
| Building block for drugs synthesis | Consumer Goods & Healthcare |
A leader in markets with high entry barriers and strong returns on investment, the Advanced Materials is a major contributor to the Group's performance and growth. Innovation, combined with the segment's global presence and long-term partnerships with customers, provide a compelling competitive edge to industries seeking increased energy effi ciency and use of less polluting alternatives.
With over 1,500 products, Specialty Polymers off ers the widest range of high performance polymers in the world, allowing tailormade solutions such as pushing the limits of metal replacement in the electronics, automotive, aircraft and healthcare industries. The GBU has unparalleled expertise in four technologies: aromatic polymers, high barrier polymers, fl uoropolymers, and cross-linked high-performance compounds.
Special Chem produces fl uor and rare-earth formulations for automotive, semi-conductor and lighting applications. With its industrial know-how, global presence and R&I proximity, Special Chem has positioned itself as a strategic partner for the automotive sector as a producer of materials used in emission control catalysis and aluminum brazing, and as a producer of cleaning and polishing materials for electronics.
Silica focuses on highly dispersible silica , primarly used in fueleffi cient and performance tires. It develops innovative solutions for global tire manufacturers, as well as Silica ranges for many other market segments like toothpaste, food, industrial products, and rubber articles.
| Adjusted | Year on year | ||
|---|---|---|---|
| In € million | 2015 | 2014 | evolution |
| Net sales | 3,334 | 2,762 | 21% |
| Specialty Polymers | 1,901 | 1,490 | 28% |
| Silica | 521 | 451 | 16% |
| Special Chem | 912 | 820 | 11 % |
| REBITDA | 836 | 709 | 18 % |
| REBITDA margin | 25% | 26% | (0.6)pp |
Net sales grew 21% to € 3,334 million, as a result of 6% higher volumes and 1% higher prices, and supported by the positive eff ects of forex and scope of 9% and 4% respectively. The latter includes the acquisitions of Ryton and Flux in 2014, and the sale of the refrigerants and PCC businesses in 2015. The primary growth drivers for Specialty Polymers were strong demand from the smart device industry, as well as from the automotive sector and other high-end applications. Solvay's ability to grow faster than these markets illustrates the success of its broad high-performance polymer portfolio. In smart devices, hovewer, the phasing orders depends on the timing and success rate of the launch of specifi c device, which causes volatility of demand over the quarters. Silica sales benefi tted from both price and volume increases, with demand for energy-effi cient tires in
Europe and North America growing, whereas businesses conditions in Asia were subdued. Special Chem recorded good volume growth in rare earth compounds, mainly for automotive diesel catalysts, as well as in fl uor specialties and electronic materials.
REBITDA came at € 836 million a 18% increase, refl ecting volume growth in all GBUs and especially in Specialty Polymers. The S egment also benefi ted from supportive forex and pricing power. New capacity additions in Silica and Specialty Polymers increased fi xed costs, but had no material impact on volumes for now as these plants are ramping up gradually following lengthy qualifi cation programs. As a result of the scope eff ects, which were net negative, the REBITDA margin shrunk (0.6) pp from 26% to 25% year on year.
Products by GBU Applications Markets Trademarks Competitors Specialty Polymers Biomaterials for implantable devices, sulfone polymers, aromatic polyamides, aromatic polyketones, polyvinylidene chloride Healthcare Consumer Goods & Healthcare SOLVIVA® BIOMATERIALS, RADEL® PPSU, UDEL® PSU, IXEF® PARA, KETASPIRE® PEEK, DIOFAN® PVDC Invibio, Evonik, Victrex, BASF, Sabic Sulfone polymers, aromatic polyamides Consumer goods Consumer Goods & Healthcare RADEL® PPSU, VERADEL® PESU, AMODEL® PPA, IXEF® PARA BASF, Sabic, EMS, Dupont, DSM, Sumitomo Aromatic polyamides, fl uorinated elastomers, aromatic polyketones, fl uorinated fl uids, polyphenylene sulfi de Automotive Automotive & Aeronautics AMODEL® PPA, IXEF® PARA, TECNOFLON® FKM, TECNOFLON® PFR FFKM, KETASPIRE® PEEK, TORLON® PAI, FOMBLIN® PFPE Dupont, Dyneon, EMS, Victrex, Evonik, Mitsui, Kuraray Sulfone polymers, fl uoropolymers, aromatic polyamides, aromatic polyketones, specialty materials Aircraft Automotive & Aeronautics TEGRACORE™ PPSU RADEL® PPSU AND SOLEF® PVDF FOAMS, RADEL® PPSU, VIRANTAGE® PESU, AJEDIUM™ FILMS, IXEF® PARA, AVASPIRE® PAEK, KETASPIRE® PEEK, TORLON® PAI Sabic, Victrex, Evonik, Arkema, Chemours, 3M, Daikin, Sumitomo Aromatic polyamides, sulfone polymers, aromatic polyketones Mobile electronics Electrical & Electronics IXEF® PARA, AMODEL® PPA, KALIX® HPPA, RADEL® PPSU, KETASPIRE® PEEK, AVASPIRE® PAEK, XYDAR® LCP Dupont, EMS, Evonik, BASF, DSM, Kingfa, Sabic, Mitsubishi Fluoropolymers, cross-linkable compounds Wire & cables Electrical & Electronics HALAR® ECTFE, HYFLON® PFA/MFA®, SOLEF® PVDF, POLIDAN® PEX, COGEGUM® XLPO-HFFR DuPont, Daikin, Dyneon, Polyone, AEI, Arkema Aromatic polyketones, polyvinylidene chloride, fl uoropolymers Industrial and protective coatings Industrial Applications TORLON® AI, DIOFAN® PVDC, HALAR® ECTFE, SOLEF® PVDF, HYFLON® PFA/MFA®, KETASPIRE® PEEK DSM, Lubrizol, Arkema, 3M, Dyneon, Victrex, Kureha, Asahi Glass, 3M Fluoropolymers, fl uorinated fl uids Industrial equipment Industrial Applications HALAR® ECTFE, SOLEF® PVDF, HYFLON® PFA/MFA®, FOMBLIN® PFPE Dupont, Arkema, Dyneon, Daikin, Chemours, Chenguang, Dongyue, AsahiGlass Fluorinated fl uids, fl uoropolymers, aromatic polyketones, fl uorinated elastomers Semiconductor Industrial Applications GALDEN® PFPE, SOLEF® PVDF, HALAR® ECTFE, KETASPIRE® PEEK, TECNOFLON® PFR FFKM 3M, Victrex, Arkema, Dupont, Dyneon, Daikin Cross-Linkable compounds, fl uoropolymers, sulfone polymers, aromatic polyamides Plumbing Building & Construction POLIDAN® PEX, SOLEF® PVDF, HALAR® ECTFE, RADEL® PPSU, ACUDEL® MODIFIED PPSU, UDEL® PSU, AMODEL® PPA Basf, Dyneon, Arkema, EMS Fluoropolymers, fl uorinated elastomers, cross-linkable compounds, aromatic polyketones Oil & gas Energy & Environment SOLEF® PVDF, HYFLON® PFA/MFA®, TECNOFLON® FKM, TECNOFLON® PFR FFKM, POLIDAN® PEX, KETASPIRE® PEEK Arkema, Dupont, Daikin, Victrex, Basell Fluoropolymers Li-Ion batteries Energy & Environment SOLEF® PVDF Kureha, Arkema Specialty Materials Fuel cells Energy & Environment AQUIVION® PFSA Dupont Fluoropolymers Photovoltaics Energy & Environment SOLEF® PVDF, HALAR® ECTFE Dyneon, AGC, Dupont, Arkema Sulfone polymers, fl uoropolymers Membranes Energy & Environment RADEL® PPSU, UDEL® PSU, VERADEL® PESU, SOLEF® PVDF BASF, Arkema, Kureha, 3F, Lantian
| Products by GBU | Applications | Markets | Trademarks | Competitors |
|---|---|---|---|---|
| Silica | ||||
| ZEOSIL®, | ||||
| Highly dispersible silica (HDS) |
Energy-effi cient tires | Automotive & Aeronautics |
ZEOSIL® PREMIUM | Evonik, PPG, OSC |
| EFFICIUM® | ||||
| Polymer reinforcement | Automotive & Aeronautics |
ZEOSIL® | Evonik, PPG, OSC | |
| Industrial Applications | ||||
| Precipitated silica | Consumer Goods | JM Huber, PQ | ||
| (conventional) | Oral care (toothpaste) | & Healthcare | TIXOSIL® | Corporation, WR Grace, Evonik, OSC |
| JM Huber, PQ | ||||
| Nutrition | Agro, Feed & Food | TIXOSIL® | Corporation, WR Grace, Evonik, OSC |
|
| Special Chem | ||||
| Hydrogen fl uoride | Refi neries, steel & surface treatment, chemical industry Industrial Applications |
Honeywell, Lanxess, DDF, 3F, Mexichem, China Yingpeng, Zheijang Sanmei, Shandong donuye Group |
||
| High voltage engineering, wet chemicals for chip etching and cleaning, chemicals for Li-batteries |
Electrical & Electronics | for C4F6: SIFREN® | Kemeite, Liming, Henan Huaneng Fluoride and others, HaloPolymer, Asahi Glass, Kanto Denka, Show Denko, Cental Glas, Linde, AirProducts |
|
| Fluor-based compounds | Insulation, energy saving | Building & Construction | SOLKANE®, IXOL® | Honeywell, Arkema, DuPont, Albarnali, Chemtura |
| Brazing Solvents (precision cleaning) |
Automotive & Aeronautics Industrial Applications |
NOCOLOK®, SOLVOKANE® |
Morita, Honeywell, DuPont, Arkema, Central Glass, Asahi, 3M |
|
| TFAC, TFA, TFAH, TFAEt, TFK, | Building blocks in active | Consumer Goods & Healthcare |
Halocarbon, SRF, | |
| ETFBO, Other CF3 | ingredients, intermediates | Agro, Feed & Food | Sinochem, Lantian | |
| Sealant Paint |
Building & Construction SOCAL®, WINNOFIL® | Shiraishi-Omya, SMI Schaefer Kalk |
||
| Plastisol | Automotive | SOCAL®, WINNOFIL® | Cales de Llierca, SMI | |
| Precipitated calcium carbonate (PCC) |
Polymer | Building & Construction | SOCAL®, WINNOFIL® | Shiraishi-Omya, SMI |
| Healthcare & Food | Consumer Goods & Healthcare |
SOCAL® | SMI | |
| Agro, Food & Feed | ||||
| Electronic grade H2O2 Electronic grade HF and NH4F |
Semiconductors, displays, photovoltaic, wet chemicals for chip etching and cleaning |
Electrical & Electronics | INTEROX® PICO, INTEROX® EG-1, INTEROX® EG10, INTEROX® EG-ST |
BASF, MIGAS, Santoku, PeroxChem, Changchun, Dongwoo Finechem Stella Chemifa, Honeywell, Diakin, Morita, Kaisheng |
| Products by GBU | Applications | Markets | Trademarks | Competitors | |
|---|---|---|---|---|---|
| Paints, coatings, batteries, plastics, paper |
Automotive & Aeronautics Electrical & Electronics |
Sachtleben, Chinese producers |
|||
| Barium compounds | Building & Construction | ||||
| Ceramic capacitors, display, ceramics and special glasses |
Electrical & Electronics | Red Star, Jingshan, Sakai Chemicals, Nippon Chemicals |
|||
| Strontrium compounds | Display and photovoltaic glasses, ferrites |
Electrical & Electronics | Red Star, Quimica del Estroncio, Jinshi, Kinglong |
||
| Intermediate for liquid crystal |
Consumer Goods & Healthcare |
Central Glass, Peric, Jiangxi Time |
|||
| Trifl ic acid (TA) | Intermediate for battery electrolyte (LiTA) |
Electrical & Electronics | |||
| Starting raw material for pharma |
Consumer Goods & Healthcare |
||||
| Trifl ic acid anhydride (TAA) | Intermediate for liquid crystal Starting raw material for pharma |
Consumer Goods & Healthcare |
|||
| Antistatic agent | 3M, Mitsubishi Materials, Morita |
||||
| LiTFSI | Electrolyte salt for batteries Ionic liquid |
Electrical & Electronics | |||
| Trifl uoroacectic Acid (TFA) | Intermediate for agro | Agro, Feed & Food | Lantian, SRF, Halocarbon, Asian players |
||
| Intermerdiate for pharma | Consumer Goods & Healthcare |
||||
| ACTALYS® | |||||
| Automotive catalysts | Automotive | ACTALYS® HSA, EOLYS®POWERFLEX® |
DKK, MEL Chemicals, | ||
| & Aeronautics | E-SIS® | Sasol | |||
| Rare earth oxide formulations | OPTALYS®, STABILYS® | ||||
| High performance polishing for glass solutions |
Electrical & Electronics | CEROX® | OST, Treibacher, Ferro | ||
| Energy-effi cient lighting | Electrical & Electronics | LUMINOSTAR® | Nichia | ||
| Inorganic Pigments for high performance polymers |
Electrical & Electronics | NEOLOR® | |||
| Semiconductor polishing | Electrical & Electronics | ZENUS® | Nikki |
Operating in mature, resilient markets, this O perating S egment's success is based on economies of scale, competitiveness and quality of service. Solidly cash-generating, the Performance Chemicals businesses are engaged in programs of excellence to create additional sustainable value.
Soda Ash & Derivatives is the world's largest producer of soda ash and sodium bicarbonate, sold primarily to the fl at and container glass industries but also used in detergents, agro and food industries. It provides resilient profi tability thanks to good pricing, dynamics growing at mid-single digit rate, underpinned by high-quality assets (with 60% "world-class" assets and 40% addressing local markets).
Solvay is the market leader in hydrogen peroxide (H2O2), both in market share and technology as well as leading global supplier of hydrogen peroxide. Hydrogen peroxide (H2O2) is mainly used by the paper industry to bleach pulp. Its properties are also of interest to many markets like chemicals, food, textiles and the environment.
Acetow
Acetow is a global producer of cellulose acetate tow (produced from bio-sourced wood pulp) for cigarette fi lters, the second major component of cigarettes. It operates in very specifi c, mature and stable markets where partnerships with customers are built on reliability, quality of service and dependable supply. Acetow manufactures and markets under the ACCOYA ® acetylation technology license, a process increasing the resistance of wood used outdoors. It develops as well cellulose acetate bio-plastic easy to mold and used in many common consumer products under the OCALIO™ brand.
• 4 industrial sites and 1 R&I centre.
Emerging Biochemicals is a leading PVC and caustic soda producer in southeast Asia, as well a producer of epicholorohydrin from bio-based glycine, commercialiazed as EPICEROL® technology. Created to develop environmental-friendly chlor-alkali chemistry, Emerging Biochemicals operates via the Thai subsidiary Vinythai Public Company LtD., which is responsible for the chlorovinyls and epichlorohydrin activities in Asia.
| Adjusted | Year on year | ||
|---|---|---|---|
| In € million | 2015 | 2014 | evolution |
| Net sales | 3,090 | 2,944 | 5.0% |
| Soda Ash & Derivatives | 1,554 | 1,377 | 13% |
| Peroxides | 558 | 512 | 8.9% |
| Acetow | 542 | 641 | (16)% |
| Emerging Biochemicals | 437 | 413 | 5.6% |
| REBITDA | 789 | 724 | 8.9% |
| REBITDA margin | 26% | 25% | 0.9 pp |
Net sales grew to € 3,090 million, 5% up year on year, thanks to a 4% favorable impact of forex movements and a 3% overall price increase. This refl ects the price increases in most GBUs, in particular at Soda Ash & Derivatives and Acetow. Volumes were overall 2 % lower, however, as the destocking in the acetate tow market persisted, although it improved in the second half of the year from the low point in the fi rst half. The total volume and mix eff ect in Soda Ash & Derivatives as well as Peroxides was largely stable versus 2014. Emerging Biochemicals was the exception as prices came down with lower raw material costs, albeit compensated by higher volumes.
REBITDA totaled € 789 million, a 9% increase versus 2014, underpinned by strong pricing power across the S egment and a positive conversion forex eff ect, which more than off set the volume decrease. Price increases in Soda Ash & Derivatives and to a lesser extent in Peroxides drove margins up in combination with pursued excellence measures. Acetow was supported by transactional forex eff ects. The REBITDA margin grew from 25% in 2014 to 26% in 2015, an increase of 0.9 pp.
| Products by GBU | Applications | Markets | Trademarks | Competitors | |
|---|---|---|---|---|---|
| Soda Ash & Derivatives | |||||
| Flux in fl at glass | Building & Construction Automotive & Aeronautics Energy & Environment |
SODA SOLVAY® DENSE | |||
| Na2CO3 soda ash Na2CO3, NaHCO3, 2H2O trona NaHCO3 sodium bicarbonate CaCl2 calcium chloride Na2SO3 sodium sulfi te Peroxides |
Flux in container glass | Agro, Food & Feed Consumer Goods & Healthcare |
SODA SOLVAY® DENSE | Tata Chemicals, Ciech, Sisecam, Nirma, Bashkim, OCI, Eti-Soda, Novacarb, Tronox |
|
| Water softener in detergents Consumer Goods | & Healthcare | SODA SOLVAY® LIGHT | |||
| Metallurgy | Industrial Applications | SODA SOLVAY® DENSE | |||
| Healthcare | Consumer Goods & Healthcare |
||||
| Flue gas cleaning agent | Energy & Environment | SOLVAir®SELECT 200 SOLVAir®SELECT 150 |
Natronx | ||
| Supplement in animal feed, supplement in food |
Agro, Food & Feed | BICAR®Z, BICAR® Food, BI-PROTEC® |
|||
| Supplement in animal feed, supplement in food |
Agro, Food & Feed | BICAR®Z, BICAR® Food, BI-PROTEC® |
|||
| Flue gas cleaning agent | Energy & Environment Industrial Applications |
BICAR®TEC SOLVAIR® SB0/3 SOLVAir® S300, SOLVAir® S350 |
Church & Dwight, FMC, Natural Soda, Tata Chemicals, Sisecam, |
||
| Active ingredients(API), excipient in eff ervescent formulations, electrolyte in hemodialysis |
Consumer Goods & Healthcare |
BICAR® PHARMA | Ciech, Bashkim, Eti Soda, Novacarb |
||
| Supplement in food, supplement in animal feed, road treatment (de-icing and de-dusting), de-humidifi cation |
Agro, Food & Feed Industrial Applications |
CASO® | Tetra, Nedmag, Zirax | ||
| Flue gas cleaning agent | Energy & Environment Industrial Applications |
INDSPEC | |||
| Pulp (bleaching function) | Consumer Goods & Healthcare |
INTEROX® MyH2O2 |
|||
| Hydrogen peroxides | Chemical intermediates synthesis (HPPO, caprolactam, caprolactone, ESBO, etc.) & mining |
Industrial Applications | INTEROX® MyH2O2™ |
Arkema, Evonik, Peroxychem, Eka, Kemira, OCI |
|
| Sodium percarbonate and hydrogen peroxides |
Home care (bleached powder detergent) & personal care (oral & hair care) |
Consumer Goods & Healthcare |
OXYPER® INTEROX® |
Evonik, Kemira, Peroxychem, OCI |
|
| Hydrogen peroxides | Aquaculture, food safety | Agro, Food & Feed | PARAMOVE® INTEROX®, PROXITANE® |
Eka | |
| and peracetic acid | Water treatment | Energy & Environment | INTEROX®, PROXITANE®, OXYSTRONG® |
Evonik, Kemira, Peroxychem |
|
| Inorganic peroxides and peracetic acid |
Oil & gas | Energy & Environment | IXPER® PROXITANE® |
Evonik, Kemira, Peroxychem |
| Products by GBU | Applications | Markets | Trademarks | Competitors |
|---|---|---|---|---|
| Acetow | ||||
| Cellulose acetate tow | Cigarette fi lters | RHODIA® FILTERTOW | Celanese, Eastman, Daicel/Mitsubishi, Chinese companies (Jinan, Henan, Xinyang) |
|
| Cellulose acetate tow | Consumer Goods & Healthcare |
RHODIA DE-TOW® RHODIA COLOURED TOW® |
||
| Cellulose acetate fl akes/Silica | RHODIA FILTERSORB® | |||
| Cellulose acetate fl akes | Filter tow, yarn, pharma, plastics and cut and tear fi lms |
RHODIA ACETOL® | Celanese, Eastman, Daicel/Mitsubishi, Pacetati, Fergana |
|
| Nitric Acid | Foams, fertilizers, laundry cleaning & bleaching, disinfectant, coatings, adhesives & elastomers, metal treatment, explosives and blasting agents, cetane improver |
Consumer Goods Automotive & Aeronautics Agro, Feed & Food Industrial Applications |
TARANIS® | Yara, Borealis, BASF, Radici, Maxam |
| Cellulose acetate compound | Packaging for cosmetics as well as hair accessories, toys, eyeglass frames, handling tools and consumer electronics |
Consumer Goods Electrical & Electronics |
OCALIO® | Eastman, DuPont, Braskem, Daicel, Pacetati, Mazzucchelli |
| Acetylated wood | Outdoor applications like window frames, exterior doors and shutters, decking, exterior cladding and façades etc. as well as for construction work |
ACCOYA®(1) | No direct competition in acetylated wood but competing with other materials |
|
| Emerging Biochemicals | ||||
| Pipe, fi ttings, profi les, wires, cables |
Building & Construction | SIAMVIC® | Thai Plastic & Chemical PCL |
|
| PVC | Film, sheets | Consumer Goods & Healthcare Industrial Applications |
||
| NaOH caustic soda | Multiple applications | Consumer Goods & Healthcare Industrial Applications Agro, Feed & Food |
AGC Chemicals (Thailand) |
|
| Bio-based epichlorohydrin | Epoxy resins, cationic reagent, surfactants |
Building & Construction Electrical & Electronics Consumer Goods & Healthcare Automotive & Aeronautics |
EPICEROL® | Samsung Fine Chemicals, Dow |
(1) ACCOYA® is a registered trademark of Accsys Technologies.
The Group has refocused the Functional Polymers O perating S egment on the polyamide chain, in line with its optimization strategies and focus on industrial innovation. It gathers polyamiderelated businesses grouped under the Polyamide GBU , which produce polyamide compounds used in high-performance plastics, and polyamide yarn, as well as housing Solvay's participation in its chlorovinyls joint ventures RusVinyl (Russia) and Inovyn (Europe).
The GBU is one of the rare operators in the market to control the entire polyamide chain from upstream (production of intermediates and polymers) to downstream (development of high value-added engineering plastics) serving mainly the automotive, electrical/ electronics and diff erent consumer good markets.
It also includes a downstream business activity in Latin America, which manufactures and commercializes textile and industrial yarns and staple fi bers, based on polyamide 6.6, for fi nal use in clothing and industrial applications.
Chlorovinyls is housing Solvay's remaining PVC and chlor chemicals assets, except for its activities in Thailand which form Emerging Biochemicals within Performance Chemicals . The Latin American chlorovinyls activites are in the process of being sold and are included in discontinued operations since en 2012. The European chlorovinyls activities were also discontinued since mid 2013, and have been integrated in the Inovyn JV since mid 2015, to be exited fully mid 2018. The Russian chlorovinyls activity consists of the RusVinyl JV which started operation in 2014 and is consolidated using the equity method. The net contribution from the Inovyn JV to the Global Busines Unit, is however only refl ecting the variation of the performance-driven exit value of the JV, which is reported in non-recurring elements.
| Adjusted | |||||
|---|---|---|---|---|---|
| In € million | 2015 | 2014 | Year on year evolution |
||
| Net sales | 1,490 | 1,654 | (9.9)% | ||
| Polyamides | 1,448 | 1,536 | (5.7)% | ||
| Chlorovinyls | 41 | 117 | (65)% | ||
| REBITDA | 141 | 111 | 27% | ||
| REBITDA margin | 9.5% | 6.7% | 2.8pp |
Net sales fell (10)% to € 1,490 million. (4)% of the decrease is explained by a scope eff ect with the sale of the Benvic PVC compounding business in the second quarter of 2014. Lower raw material prices, mainly in Solvay's PA 6.6 upstream business, impacted prices by (7)%, as these were passed through to the customer. Volumes were fl at overall. Higher sales of PA 6.6 polymers and intermediates, mostly in Europe, more than off set the signifi cant decrease of yarn sales in the subdued Latin American market. Conversion forex eff ects were slightly positive at 1%.
REBITDA was € 141 million over the year, a 21% increase compared to 2014, despite production issues in its plant in Chalampé (France) and the inventory write-downs in the fi rst quarter. The uplift was primarily the result of a strong positive net pricing refl ecting the benefi ts of the excellence measures implemented in the PA 6.6 upstream businesses, the advantage of lower raw materials prices in the more advanced polyamide Engineering Plastics activity, as well as positive transaction forex eff ects. The volume and mix impact was overall fl at. The ramp-up of RusVinyl joint venture in Russia also contributed positively to the operational result. The REBITDA margin went up 2.8 pp to reach 9.5% over the year.
Financial management report
| Products by GBU | Applications | Markets | Trademarks | Competitors |
|---|---|---|---|---|
| Polyamides | ||||
| Adipic acid | Polyamide 6.6, other products for polyurethane |
Industrial Applications Automotive & Aeronautics |
RHODIACID® | Invista, Ascend, CPEC, CNPC, BASF, Radici, Asahi, Lanxess |
| Hexamethylenediamine | and coating applications, plasticizers |
Consumer Goods & Healthcare Building & Construction Electrical & Electronics |
RHODIAMINE® | Invista, Ascend, BASF, Radici, CPEC |
| Polyamide resin: • PA 6.6 • PA 6.10 |
Polymers for engineering, plastics compounds, industrial yarns (tire, cords, airbags), textile and fi bers applications |
Automotive & Aeronautics Industrial Applications Consumer Goods & Healthcare Building & Construction Electrical & Electronics |
STABAMID® | Invista, Ascend, BASF, Radici, Asahi |
| Polyamide fi bers and polyamide tow |
Yarn for textile and carpet markets, fl ock for clothing and furnishing, automotive, decoration and packaging |
Automotive & Aeronautics Consumer Goods & Healthcare Building & Construction |
PASSOREA® RHODIA® TOW |
Invista, Ascend, EMS, Jiaxing Fuda, Changshu Tehua |
| Polyamide 6.6 compounds | TECHNYL® TECHNYL STAR® |
DuPont, BASF, Radici, Ascend, Invista |
||
| Polyamide 6 compounds | Automotive & Aeronautics |
TECHNYL® TECHNYL STAR® |
BASF, Lanxess, DSM, DuPont, Radici |
|
| Long Chain Polyamide compounds |
Metal replacement, fi re protection, thermal |
TECHNYL EXTEN® | Arkema, Evonik, EMS, UBE, Dupont |
|
| High temperature Polyamide compounds |
management, fl uid barrier | Electrical & Electronics Consumer Goods & |
TECHNYL® ONE | DuPont, EMS, DSM, BASF |
| Recycled Polyamide compounds | Healthcare Energy & Environment Building & Construction Industrial Applications |
TECHNYL® R TECHNYL® ECO TECHNYL® 4EARTH® |
Very fragmented competition |
|
| Polyamide powders | 3D Printing - Laser sintering | SINTERLINE® TECHNYL® POWDERS |
Evonik, Arkema, BASF | |
| Design, simulation, prototyping, part testing services |
Metal replacement, fi re protection, thermal management, fl uid barrier |
MMI TECHNYL® SINTERLINE® TECHNYL® APT® TECHNYL® VALIDATION |
BASF | |
| Textile yarns, fl at and textured |
Apparel | Consumer Goods & Healthcare |
AMNI® EMANA® RHODIANYL® |
Hyosung, Taekwang, Nilit, Acelon, LeaLea, Fujian, Radici, Thailon, Yiwu Huanding Nylon |
| Staple fi ber | Abrasives, fl ocking applications |
Consumer Goods & Healthcare Industrial Applications |
Invista | |
| Industrial yarns | Sewing threads, tire, MRG | Consumer Goods & Healthcare Automotive & Aeronautics Industrial Applications |
Kordsa, Enka, CSM, SRF, Sans Hyosung, Invista |
This Segment includes the Energy Services GBU, which provides energy optimization programs for the Group and for third parties. It als o includes the Corporate Functions .
Solvay Energy Services delivers innovative and sustainable tailormade services designed to improve energy performance and reduce the CO2 footprint of the Solvay group and energy-intensive thirdparty industrial clients. These services range from energy sourcing and energy effi ciency to price risk management and operation of cogeneration plants.
Business Services covers, in a global shared services organization, all the Group's IT services and its main administrative departments (accounting, credit, customer service, customs, payroll and personnel administration and procurement).
| Adjusted | Year on year | ||
|---|---|---|---|
| In € million | 2015 | 2014 | evolution |
| REBITDA | (189) | (188) | (0.5)% |
Net REBITDA costs were € (189) million, in line with 2014. The contribution of Energy Services was € (3) million, € (28) million lower than in 2014, refl ecting diffi cult conditions for investments in biomass-based energy plants as well as the energy and carbon management services in a low commodity price environment. Moreover a € (7) million one-off impairment on outstanding carbon emission rights in Brazil, which are unlikely to be monetized, was booked in the third quarter. Other Corporate & Business Services booked € (186) million, in line with the 2014 overall cost level, if one excludes the one-off benefi t of € 30 million booked in the fi rst quarter of 2015, linked to the evolution of the post-employment Medicare insurance policy in the US. This refl ects continued excellence measures off setting the adverse impact of exchange rates and infl ation.
Energy costs are an important part of the Group's cost structure. Net energy costs represented about € 0.85 billion in 2015, slightly lower comparatively to 2014. Energy sources were spread over electricity and gas (circa 74%), coke, coal and anthracite (circa 20%) and steam and others (circa 6%). Fossil fuels represented circa 70%. More than half of the spend was done in Europe (circa 54%) followed by Asia (circa 26%) and the remaining 20% from the Americas and rest of the world.
The Group has pursued an active energy policy for many years. As a major energy consumer, the Group produces its own electricity through on-site cogeneration plants and steam turbines for a total capacity of circa 1,000 MWe.
Within the Group, Solvay Energy Services focuses on optimizing the Solvay's energy costs and carbon emissions. Furthermore, Solvay Energy Services has continued deploying its operating energy effi ciency excellence initiative called SOLWATT®, which aims at reducing energy consumption and optimizing energy production on industrial sites. For more information, see pages 112- 113 of the report. By the end of 2015, SOLWATT ® has been gradually rolled out and covers almost all the Group's manufacturing sites. As of December 2015, 2,460 actions for a total of € 93 million of savings per annum have been identifi ed after the diagnosis phase. More than half of these actions representing € 40 million and circa 120 kt of CO2 of annual savings have been implemented. The Soda Ash & Derivatives and Specialty Polymers GBUs are among the top benefi ciaries.
The raw materials bill of the Group mounted to circa € 3,230 million in 2015, some 10% lower comparatively to 2014 on lower volumes and prices. The raw materials can be split into several categories: crude oil derivatives circa 43%, minerals derivatives circa 17% (e.g. glass fi ber, sodium silica, calcium silicate, phosphorus, sodium hydroxide…), natural gas derivatives (circa 15%), biochemicals circa 14% (e.g. wood pulp, glycerol, guar, fatty alcohol, ethyl alcohol…), others (circa 10%). The Inovyn's creation in July induced a decrease of the Group's exposure to oil.
| IFRS | Adjusted | ||||
|---|---|---|---|---|---|
| In € million | 2015 | 2014 | 2015 | 2014 | |
| EBIT | 833 | 652 | 941 | 761 | |
| Net fi nancial expenses, of which: | |||||
| • Cost of borrowings | (111) | (151) | (111) | (151) | |
| • Interest on lending and short term deposits | 11 | 36 | 11 | 36 | |
| • Other gains and losses on net indebtedness | (46) | (30) | (46) | (30) | |
| • Cost of discontinued operations | (73) | (163) | (73) | (163) | |
| Income/losss from available-for-sale investments | (8) | (1) | (8) | (1) | |
| Result before tax | 606 | 343 | 715 | 453 | |
| Income tax | (97) | (84) | (135) | (120) | |
| Result from continuing operations | 509 | 259 | 580 | 333 | |
| Result from discontinued operations | (55) | (246) | (55) | (244) | |
| Net Income | 454 | 13 | 525 | 89 | |
| Non controlling interests | (48) | 67 | (48) | 67 | |
| Net Income Solvay share | 406 | 80 | 477 | 156 |
Net fi nancial charges fell to € (226) million from € (309) million in 2014. Charges on net debt were stable at € (146) million. 2015 included € (25) million for the eff ects of hyperinfl ation in Venezuela, as well as € (8) million of initial accrued interests on the senior bonds raised to fi nance the Cytec acquisition, whereas in 2014 a € (21) million one-off was booked primarily from the settlement of interest rate swaps.
The cost of discounting provisions for pension and environmental liabilities decreased to € (73) million from € (163) million a year ago, mainly due to the one-off eff ect from higher discount rates on environmental liabilities of € 14 million in 2015, whereas last year € (35) million of one-off s were booked as discount rates reduced overall. Losses from available for sale investments were € (8) million linked to impairment on certain R&I-related investments.
Income taxes on an adjusted basis rose to € (135) million, from € (120) million a year ago. The increase is due to higher results before taxes. Tax adjustments related to prior years accounted for € 107 million in 2015 , versus € 123 million in 2014. The nominal tax rate was thereby 19%. The underlying tax rate decreased to 30%, versus 35% for 2014.
Net result from continued operations on an adjusted basis was € 580 million against € 333 million in 2014. Discontinued operations reported a net loss of € (55) million against € (244) in 2014. Discontinued operations included Eco Services up to end 2014, when it was sold, and the European chlorovinyls business, which is integrated in the Inovyn joint venture since mid 2015. The remaining activity in discontinued operations is the Indupa chlorovinyls business in Latin America, which was aff ected by adverse markets. At year end the remeasurement to fair value less costs to sell led to an impairment loss of € (88) million. Discontinued operations also included a € (20) million provision related to the pharma activities divested in 2010. In 2014 losses from discontinued operations included impairments on the European chlorovinyls assets prior to the integration in Inovyn . The net income Solvay share on an adjusted basis thereby came in at € 477 million compared with € 156 million in 2014. Adjusted basic earnings per share amounted to € 5.70. The net income Solvay share on an IFRS basis was € 406 million versus € 80 million in 2014. The underlying net income Solvay Share amounted to € 680 million versus € 622 million in 2014.
Gross fi nancial debt increased from € 2,338 million at the end of 2014 to € 6,520 million at the end of 2015.
The increase is mainly due to the new debt (€ 2.25 billion senior € notes and US\$ 1.6 billion senior US\$ notes before debt issuance costs) issued in December 2015 to partly fi nance the acquisition of Cytec and for the early refi nancing of existing short-term and long-term fi nancial debts maturing in 2016 (~€ 1 billion in cash and cash equivalents), the integration of the net fi nancial debt of Cytec (€ 532 million), the increase in commercial paper issuance (+€ 250 million at the end of 2015 compared to the end of 2014) as well as the fi nancing of projects in emerging countries.
In 2015, Solvay also reimbursed the retail bond (€ 500 million) maturing in June.
The net fi nancial debt grew to € 4,379 million at the end of 2015 from € 778 million at the end of 2014.
Financial management report
Equity amounted to € 9,668 million at the end of 2015, compared to € 6,778 million at the end of 2014. It includes the perpetual hybrid bonds, classifi ed as equity under IFRS rules, which grew from € 1.2 billion at the end of 2014, to € 2.2 billion at the end of 2015, following the issuance of € 1.0 billion bonds to partially fund the Cytec acquisition. Solvay also increased its capital though a rights issue of € 1.5 billion to complete this funding.
At the end of 2015, the net debt to equity ratio was 45 %.
Solvay's ratings by two rating agencies are: BBB-/A3 (stable outlook) at Standard and Poors, and Baa2/P2 (negative outlook) at Moody's following the acquisition of Cytec.
Free Cash Flow from continuing operations was € 391 million versus € 511 m last year. The increase in REBITDA was outweighed by higher capital investments of € (969) million, versus € (861) million in 2014. Furthermore, 2015 reported overall cash outfl ows from working capital needs that compared with signifi cant infl ows last year. Free C ash F low from discontinued operations was € (3) million in 2015, compared to € 145 million in 2014, largely linked to the change in scope, namely pharma disposed activities. The total free cash fl ow thereby came at € 387 million, lower than the € 656 million in 2014.
Other cash fl ow elements mainly related to the Cytec acquisition and the subsequent fi nancing. These consisted of the total acquisition consideration of € (5,047) million and non-recurring costs of € 130 million, of which respectively € (4,998) million and € (101) million were paid in the period, totaling € (5,099) million. The € 1.5 billion rights and € 1.0 billion hybrid bond issue resulted in a net infl ow of € 1,477 million and € 991 million respectively. The issue of senior bonds of € 2.25 billion and US\$ 1.6 billion brought in € 3,693 million net. Other cash fl ow elements included among others interest and dividend related cash-outs for € (536) million combined.
| Capital expenditures (continuing operations) | |||||
|---|---|---|---|---|---|
| In € million | 2015 | 2014 | % yoy | ||
| Advanced Formulations | (214) | (166) | (29)% | ||
| Advanced Materials | (340) | (267) | (27)% | ||
| Performance Chemicals | (267) | (275) | 2.8% | ||
| Functional Polymers | (71) | (82) | 14% | ||
| Corporate & Business Services | (77) | (69) | (11)% | ||
| GROUP | (969) | (861) | (13)% |
Besides health, safety & environment and maintenance capital expenditures, the Group selectively invested in a number of strategic projects, with priority given to businesses and geographies with superior and sustainable growth potential. Several growth investments were realized in 2015 in our growth engines and highly resilient businesses. The most signifi cant are :
t he new vanillin production facility in China representing an increase of 40% of Solvay's global production to serve the growing demand in the region;
the fi rst phase of t he fl uoro-polymers plant in China (in Changshu) for Specialty Polymers;
A number of growth projects represented siginifi cant capital expenditures in 2015, but are still under construction:
| In € million | Net Research & Innovation costs in 2015 |
|---|---|
| Advanced Formulations | 56 |
| Advanced Materials | 119 |
| Performance Chemicals | 21 |
| Functional Polymers | 25 |
| Corporate & Business Services | 56 |
| GROUP | 277 |
Net Research & Innovation costs in 2015 were € 277 million. The large majority of Solvay's innovation eff orts are developed at Solvay's growth engines, Advanced Materials and Advanced Formulations, representing close to 80% of the consolidated costs, excluding Corporate & Business Services
| In € million | 2015 | 2014 |
|---|---|---|
| Profi t for the year available for distribution | 1,774 | 550 |
| Carried forward | 4,524 | 4,262 |
| Total available to the General Shareholders' Meeting | 6,298 | 4,812 |
| Appropriation | ||
| Legal reserve | 32 | 0 |
| Gross dividend | 349 | 288 |
| Carried forward | 5,917 | 4,524 |
| TOTAL | 6,298 | 4,812 |
Solvay SA is a société anonyme created under Belgian law, with its registered offi ce at rue de Ransbeek 310 at 1120 Brussels. Solvay SA has two branches: Solvay SA France (25, rue de Clichy, 75009 Paris, France) and Solvay SA Italie (Via Piave 6, 57013 Rosignano, Italy).
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).
The operating result is made of group services invoicing, industrial and commercial activities not undertaken through subsidiaries, less operating charges related to the head offi ce.
Current profi t before taxes amounts to € 1 million in 2015, compared with € 833 million in the previous year. Current profi t includes the operating result amounting to € 94 million, compared with € (204) million in 2014; dividends received from its various participations amounting to € 96 million, compared with € 1,226 million in 2014; and the diff erential between interest paid
and received on its fi nancing activities amounting to € (189) million), compared with an amount of € (190) million in 2014.
The balance of extraordinary gains and losses for 2015 is € 1,754 million, compared with € (307) million in 2014.
The net profi t of Solvay SA amounts in 2015 to € 1,774 million, compared with € 550 million in 2014.
In the absence of transfers to untaxed reserves, carried forward net income of € 6,298 million is available for distribution.
In 2016 Solvay will focus on executing the Group strategy, continuing to deploy the main levers of its transformation through its portfolio upgrade and delivery on excellence, including innovation. The integration of Cytec is running ahead of schedule and a top priority is to ensure full success and delivery of synergies. In parallel, Solvay will intensify its focus on delivering a markedly improved sustainable F ree C ash F low and deleveraging over time.
Financial management report
Since the end of 2015, the Group has observed increased volatility in commodity markets, and inventory adjustments for smart devices applications that are expected to continue in the fi rst quarter of the year. In this environment, and assuming no further deterioration in market conditions, Solvay expects its REBITDA in 2016 to grow by high-single digit compared to the 2015 pro forma REBITDA (1) of € 2,336 million (including Cytec).
Growth this year will likely be back-ended, refl ecting the relatively strong comparables in the fi rst half of 2015, destocking in smart devices, the phasing of our innovations the benefi ts from Cytec synergies and from excellence programs. More specifi cally, growth will be driven by volumes and continued evidence of pricing power as a result of the excellence programs, which are on course to exceed € 800 million cumulative benefi ts to REBITDA by the end of 2016.
With € 20 million of annual cost savings already achieved by January 1, Solvay is confi dent that Cytec integration cost synergies alone will exceed € 100 million p.a. by 2018 . Revenue synergies will be additional to that delivery.
Solvay anticipates pro forma REBITDA growth across all its four operating segments (2) :
REBITDA growth combined with disciplined capital expenditure, should lead to free cash fl ow in excess of € 650 million , more than 30% higher than the prior year pro forma level.
The Group is committed to maintaining its investment grade credit rating .
This 2016 outlook is based on anticipated a number of assumptions, inter alia, world GDP growth of ~3%, on an oil price of US\$ 30/barrel and no recovery in the US oil and gas exploration activities, and on a 1.10 US \$/€ exchange rate.
Risk management (processes, risks identifi ed and actions undertaken to reduce them) is described on pages 59 to 70 of this report.
The management of fi nancial risks and any use of fi nancial instruments to hedge them are described on 66 to 67 and pages 186 to 196 (Note 37 Financial instruments and fi nancial risk management to the consolidated fi nancial statements) of this report.
The mission, composition and modus operandi of the Audit Committee are described on pages 42 and 56 (Point 14, Annex 1: Audit Committee mission statement of the Corporate governance statement) of this report.
The Corporate g overnance s tatement is included on pages 31 to 58 of this report and contains the Compensation policy and the most recent compensation report.
In order to provide a reference framework for evaluating the Group's performance going forward, Solvay publishes unaudited pro forma information for the year 2015. The fi gures represent a situation as if the Cytec acquisition had taken place on January 1, 2015. The detailed basis for preparation in the subsequent pages are an integral part of the pro forma information.
Three sets of consolidated income statements are presented within this report: "IFRS", "Adjusted" and "Underlying".
From the fi rst quarter of 2016, the Group's results will be presented on an IFRS and Underlying basis only . The current defi nition of REBITDA will equate to Underlying EBITDA going forward.
(2) Following the acquisition of Cytec, Solvay has re-organized its segment reporting structure to enhance strategic coherence and improve alignment. The segment organization is eff ective as from January 1, 2016
(1) The current defi nition of REBITDA equates to Underlying EBITDA going foward.
Had Cytec been consolidated as from January 1, 2015, the Group's pro forma consolidated income statement for 2015 would have been as follows:
| Solvay | Cytec | Pro forma | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Pro forma income statement FY 2015 In € million |
IFRS | PPA impact |
Adjusted | IFRS | PPA impact |
Adjusted | Funding Cytec |
IFRS | PPA impact |
Adjusted | Other adjustments & hybrid coupons |
Under lying |
| Sales | 11,047 | - | 11,047 | 1,800 | - | 1,800 | - | 12,847 | - | 12,847 | - | 12,847 |
| Revenues from non-core activities |
470 | - | 470 | - | - | - | - | 470 | - | 470 | - | 470 |
| Net sales [a] | 10,578 | - | 10,578 | 1,800 | - | 1,800 | - | 12,378 | - | 12,378 | - | 12,378 |
| Cost of goods sold | (8,289) | - | (8,289) | (1,317) | 82 | (1,236) | - | (9,606) | 82 | (9,524) | 1 | (9,523) |
| Gross margin | 2,759 | - | 2,759 | 482 | 82 | 564 | - | 3,241 | 82 | 3,323 | 1 | 3,324 |
| Commercial & administrative costs |
(1,327) | - | (1,327) | (221) | - | (221) | - | (1,548) | - | (1,548) | 57 | (1,491) |
| Research & innovation costs |
(277) | - | (277) | (47) | - | (47) | - | (324) | - | (324) | - | (324) |
| Other operating gains & losses |
(99) | 109 | 10 | (144) | 131 | (13) | - | (242) | 240 | (2) | - | (2) |
| Earnings from associates & joint ventures [b] |
21 | - | 21 | - | - | - | - | 21 | - | 21 | 22 | 43 |
| REBITDA [c = g-d-e-f] | 1,955 | 381 | - | 2,336 | - | 2,336 | ||||||
| REBITDA margin [c/a] | 18% | 21% | 19% | 19% | ||||||||
| Depreciation & Amortization (recurring) [d] |
(842) | 109 | (733) | (311) | 213 | (98) | - | (1,153) | 322 | (831) | 45 | (786) |
| Other REBITDA adjustment elements [e] |
(35) | - | - | (35) | 35 | - | ||||||
| Non-recurring items [f] | (245) | - | (245) | (11) | - | (11) | - | (256) | - | (256) | 256 | - |
| EBIT [g] | 833 | 109 | 941 | 59 | 213 | 272 | 892 | 322 | 1,213 | 337 | 1,550 | |
| Financial expenses | (146) | - | (146) | (23) | - | (23) | (66) | (235) | - | (235) | 25 | (210) |
| Coupons on perpetual hybrid bonds (1) |
(112) | (112) | ||||||||||
| Interests and realized foreign exchange losses on RusVinyl (joint venture) [h] |
(27) | (27) | ||||||||||
| Cost of discounting provisions |
(73) | - | (73) | (8) | - | (8) | - | (81) | - | (81) | (14) | (95) |
| Loss from available for-sale fi nancial assets |
(8) | - | (8) | - | - | - | - | (8) | - | (8) | 8 | - |
| Result before taxes [i] | 606 | 109 | 715 | 27 | 213 | 240 | (66) | 568 | 322 | 889 | 216 | 1,105 |
| Income taxes [j] | (97) | (38) | (135) | (3) | (66) | (69) | 37 | (63) | (103) | (166) | (165) | (331) |
| Tax rate [j/(i-b-h)] | 17% | 19% | 12% | 29% | 12% | 19% | 30,5% | |||||
| Result from continuing operations |
509 | 71 | 580 | 24 | 147 | 171 | (29) | 504 | 218 | 723 | 52 | 774 |
| Result from discontinued operations |
(55) | - | (55) | (2) | - | (2) | - | (56) | - | (56) | 115 | 59 |
| Net income | 454 | 71 | 525 | 23 | 147 | 170 | (29) | 448 | 218 | 666 | 167 | 833 |
| Non-controlling interests |
(48) | - | (48) | - | - | - | - | (48) | - | (48) | (17) | (65) |
| Net income Solvay share |
406 | 71 | 477 | 23 | 147 | 170 | (29) | 400 | 218 | 618 | 150 | 768 |
| Basic EPS from continuing operations (in €) |
5.57 | 0.85 | 6.42 | 4.45 | 2.10 | 6.55 | 0.43 | 6.98 | ||||
| Basic EPS (in €) | 4.85 | 0.85 | 5.70 | 3.85 | 2.10 | 5.96 | 1.44 | 7.40 | ||||
| Diluted EPS from continuing operations |
||||||||||||
| (in €) | 5.53 | 0.85 | 6.38 | 4.42 | 2.09 | 6.51 | 0.42 | 6.93 | ||||
| Diluted EPS (in €) | 4.81 | 0.85 | 5.66 | 3.83 | 2.09 | 5.92 | 1.43 | 7.35 |
(1) These perpetual hybrid bonds are classifi ed as equity under IFRS.
The pro forma fi nancial information combines Solvay's consolidated income statement with Cytec's consolidated income statement, both determined on a stand-alone basis, after alignment of accounting policies and purchase price allocation impacts (i.e. amortization of intangible fair value step-ups and recognition in cost of goods sold of the inventory fair value step-up). The pro forma information also takes into account the estimated additional funding costs related to the acquisition.
Besides IFRS accounts, Solvay also presents Adjusted Income Statement performance indicators that exclude non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia acquisition, and now also to the Cytec acquisition.
"Underlying" fi gures aim at adjusting IFRS statements for the non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia and Cytec acquisition, for the coupons of hybrid perpetual bonds, classifi ed as equity under IFRS and for other items that distort the comparability of the Group's underlying performance. Underlying results are deemed to provide a more comparable indication of Solvay's fundamental performance over the reference periods.
The column "Other adjustments and hybrid coupons" shows a total correction of € 167 million, of which € (112) million for coupons of hybrid perpetual bonds (including € (55) million for the Cytec acquisition ) and € 279 million for other adjustments. These other adjustments comprise:
The pro forma Free Cash Flow would have amounted to € 492 million, of which € 105 million for Cytec stand-alone. The pro forma Free Cash Flow from continuing operations would have amounted to € 500 million, of which € 109 million for Cytec stand-alone.
Pro forma capital expenditures would have amounted to € 1,160 million, of which € 123 million for Cytec stand-alone. Pro forma capital expenditures from continuing operations would have amounted to € 1,092 million, of which € 123 million for Cytec standalone.
The following table presents the historical fi gures of the Group as published at the reference date. These data have not been aff ected by possible subsequent restatements due to perimeter changes, IFRS/IAS standards evolution, etc.
Over the reference periods, the following main changes have intervened:
2014: application of IFRS 11. Solvay Indupa, European Chlorovinyls and Eco Services activities presented as discontinued and Chemlogics fully consolidated;
2015: two major changes took place:
| IFRS | ||||
|---|---|---|---|---|
| In € million | 2012 | 2013(1) | 2014(1) | 2015(1) (2) |
| Sales | 12,831 | 10,367 | 10,629 | 11,047 |
| Net sales | 12,435 | 9,938 | 10,213 | 10,578 |
| REBITDA | 2,022 | 1,663 | 1,783 | 1,955 |
| REBITDA as % of sales | 16% | 17% | 17% | 18% |
| Total depreciation and amortization | 794 | 752 | 751 | 842 |
| EBIT | 1,275 | 647 | 652 | 833 |
| Net income, Solvay share | 584 | 270 | 80 | 406 |
| Earnings per share (basic) | 7.10 | 3.25 | 0.96 | 4.85 |
| Research expenditures | 261 | 247 | 247 | 277 |
| Capital expenditures | 826 | 1,809 | 1,399 | 1,037 |
| Free Cash F low | 787 | 524 | 656 | 387 |
| Financial data | ||||
| Shareholder's equity | 6,596 | 7,453 | 6,778 | 9,668 |
| Net debt | 1,125 | 1,102 | 778 | 4,379 |
| Net debt/shareholder's equity | 17% | 15% | 11% | 45% |
| Gross dividend per share (€) | 3, 20 | 3, 20 | 3, 40 | 3,3 0 |
| Gross distribution to Solvay shareholders | 271 | 271 | 288 | 349 |
| Personnel data | ||||
| Persons employed at December 31 | 29,103 | 29,389 | 29,207 | 30,9 00 |
| Personnel costs | 2, 302 | 2, 143 | 1,990 | 2,139 |
(1) Equity includes perpetual hybrid bonds.
(2) Figures ares adjusted for bonus factor.
Adjusted basic earnings per share amounted to € 5.70 in 2015 compared to € 1.87 in 2014.
The Board of Directors decided to recommend to the General Shareholders' Meeting of May 10, 2016, payment of a total gross dividend of € 3.30 per share (€ 2.41 net per share).
As customary for transactions of this type, the total amount of the 2015 dividend was adjusted to refl ect the distribution of rights during the capital increase completed in December 2015. This adjustment factor is 93.98% according to the Euronext Derivatives Corporate Actions Policy. Thus the recommended 2015 dividend compares with an adjusted 2014 dividend of € 3.20 gross per share (rounded fi gure, adjusted from € 3.40 gross per share) and represents an increase of 3.3%.
Given the interim dividend of € 1.36 gross per share (€ 0.99 net per share (1); coupon no. 97) paid on January 21, 2016, the balance of the dividend in respect of 2015, equal to € 1.94 gross per share (€ 1.42 net per share (1); coupon no. 98), which will be paid on May 17, 2016, provided prior agreement by General Shareholders Meeting.
| In € (as published) | 2011 | 2012 | 2013(1) | 2014(1) | 2015(1) (2) |
|---|---|---|---|---|---|
| Stockholder's equity | 75.79 | 80.14 | 85.07 | 79.10 | 115.46 |
| REBITDA | 14.87 | 24.57 | 20.00 | 21.42 | 23.34 |
| Net income | 3.04 | 7.10 | 3.25 | 0.96 | 4.85 |
| Net income (from continuing operations) | 3.51 | 7.08 | 2.47 | 3.32 | 5.6 |
| Diluted net income | 3.03 | 7.06 | 3.22 | 0.96 | 4.82 |
| Diluted net income (from continuing operations) | 3.49 | 7.04 | 2.45 | 3.30 | 5.5 |
| Number of shares (in thousands) at December 31 | 84,701 | 84,701 | 83,171 | 82,982 | 103,865 |
| Average number of shares (in thousands) (basic) for calculating IFRS earnings per share |
81,224 | 82,305 | 83,151 | 83,228 | 83,738 |
| Average number of shares (in thousands) (basic) for calculating IFRS diluted earnings per share |
81,546 | 82,696 | 83,843 | 83,890 | 84,303 |
| Gross dividend | 3.07 | 3.20 | 3.20 | 3.40 | 3. 30 |
| Net dividend | 2.30 | 2.40 | 2.40 | 2.55 | 2. 41 |
| Highest price | 111.6 | 109.80 | 118.90 | 129.15 | 132. 606 |
| Lowest price | 61.50 | 62.11 | 97.44 | 100.15 | 82. 71 |
| Price at December 31 | 63.7 | 108.6 | 115 | 112.4 | 98. 4 |
| Price/earnings at December 31 | 21.0 | 15.30 | 35.42 | 116.59 | 20. 3 |
| Net dividend yield | 2.9% | 2.0% | 2.1% | 2.3% | 2. 4% |
| Gross dividend yield | 3.9% | 2.7% | 2.8% | 3.0% | 3. 4% |
| Annual volume (thousands of shares) | 63,462 | 77,846 | 54,437 | 49,218 | 83,358 |
| Annual volume (in € million) | 5,522 | 6,796 | 5,960 | 5,630 | 9,294 |
| Market capitalization at December 31 (in € billion) | 5.4 | 9.2 | 9.8 | 9.5 | 10.4 |
| Velocity (%) | 78 | 92 | 63 | 58 | 89 |
| Velocity adjusted by Free Float (%) | 111.2 | 131 | 94 | 83 | 127 |
(1) Equity includes hybrid bonds.
(2) Figures are adjusted for the 0.9398 bonus factor .
Solvay's report on high materiality social and environmental issues is now included in the Annual Report. This combined report is a fi rst step in Solvay's evolution towards integrated reporting.
A complementary report structured according to the Global Reporting Initiative G4 framework completes the information presented in this annual report.
Solvay's culture of responsibility is part of its historical identity. The Group has pioneered a number of initiatives that have been benefi cial to workers: internal social security (1878), the eight hours working day (1897), and paid holiday (1913). For the past 150 years Solvay has also been developing a culture of safety and social dialogue. It was one of the fi rst groups to engage in social dialogue at a European and then a global level. This vision is still guiding the way the Group conducts business through Solvay Way, its sustainability approach. Today, its social practices are one of its strengths, positioning the Group as a leading player in Corporate Social Responsibility (CSR).
Solvay has defi ned fi ve priority targets in order to guide each entity on common objectives to reach the Group's sustainability ambition.
Solvay has set voluntary external commitments:
development to their fi nal use.
• For a responsible chemical industry: Solvay is committed to the "Responsible Care®" World Charter. This global chemical industry initiative aims to achieve continuous improvement in the safe handling of chemical substances from their initial
• For human rights: Solvay participates in the UN Global Compact and is committed to upholding its principles, thus contributing to the emergence of a sustainable and inclusive global economy which delivers lasting benefi ts to people, communities and markets.
• ISO 26000
For a global standard in sustainability: Solvay uses the voluntary international standard ISO 26000 on social responsibility as its point of reference. This standard provides guidelines for organizations to operate in a socially responsible manner. Solvay Way incorporates the requirements of this international standard.
• For a responsible dialogue: o n December 17, 2013, Solvay signed a Corporate Social and Environmental Agreement for the whole Group with IndustriALL Global Union. This agreement, one of the fi rst of its kind in the chemical industry, gives tangible expression to Solvay's
determination to ensure that basic labor rights and the Group's social standards in the areas of health, safety and environmental protection are respected on all of its sites. This agreement applies to all Solvay employees. Every year, a Solvay site is assessed to ensure the commitments made by the Group are being applied correctly at a grassroots level, based on International Labor Organization (ILO) standards and the principles of the United Nations Global Compact (UNGC).
To ensure compliance with the IndustriALL Global Union Agreement by all employees, it has been integrated in the Solvay Way reference framework, as an employee practice, and each year Solvay Way assessment evaluates how well it is deployed and understood.
For improving young people's chances of employment: a t the Enterprise 2020 Summit, the European Commission and business leaders including Mr. Jean-Pierre Clamadieu, CEO of Solvay, launched the "European Pact for Youth" to create 10,000 partnerships between business and education to boost young people's chances of employment. The initiative aims to improve the quality of training and skills that young people can acquire including transversal, digital, entrepreneurial, green and soft skills.
Solvay has fully reviewed its materiality analysis in 2014, using the Sustainability Accounting Standards Board (SASB) approach. The SASB approach has been selected because it off ers an initial exhaustive, validated list of material issues and then three tests for issues prioritization: evidence of interest, evidence of fi nancial impact and forward looking impact.
The Sustainable Development Function coordinated the analysis, involving the network of champions in GBUs and Functions. The work was reviewed by experts in the main Corporate Functions; and the full list of material issues was again reviewed with each of the experts. Particular attention was paid to cross-checking the analysis with the work done by the Risk Management Function to ensure consistency with the Group's risk map: eff ective monitoring and management of risks is key to achieve Solvay's sustainability objectives. The list of high materiality issues was again updated to take this review into account. Lastly, the analysis was compared to the SASB's draft "Chemicals Sustainability Accounting Standard"
published in October 2014 and again to the provisional standard published in March 2015.
As a result of this analysis, 12 issues have been identifi ed as highly material and indicators were selected for each high materiality issue.
2 . F I N A N C I A L & E X T R A - FINANCIAL INFORMATION Extra-fi nancial statements
The materiality analysis was revised in 2015 and one additional high materiality issue has been added to ensure consistency with the Group's vision (Community Engagement). The list of priorities now includes fi ve priorities selected from the high materiality issues. New long-term targets have been defi ned for each of the fi ve priorities.
The wording of the material issues has been kept consistent with the SASB Materiality Map™, unless the Group's Executive Committee has made a decision to do otherwise with a view to broadening the scope of some material issues. For example, the high materiality issue labelled "Employee Engagement and Wellness" includes issues that are labelled "Labor Relations" and "Fair Labor Practices" in the SASB Materiality Map™.
BUSINESS
| ENVIRONMENT | SOCIAL CAPITAL | HUMAN CAPITAL | MODEL AND INNOVATION |
LEADERSHIP AND GOVERNANCE |
|
|---|---|---|---|---|---|
| Priority | Greenhouse | Employee health and safety Community development Employee engagement and wellness |
Sustainable business | ||
| topics | gas emissions | solutions | |||
| Air quality | |||||
| Energy management | Management of the legal, ethics and regulatory |
||||
| High materiality topics |
Environmental accidents and remediation |
Customer satisfaction |
framework | ||
| Water and wastewater management |
Process safety, emergency |
||||
| Hazardous materials management |
preparedness and response |
||||
| Fuel management | Access and aff ordability |
Diversity and inclusion |
Environmental, social impacts on assets and operations |
Systemic risk management |
|
| Moderate materiality |
Waste management and effl uents |
Data security and customer privacy |
Recruitment, development and retention |
Product packaging | Regulatory capture and political infl uence |
| topics | Fair disclosure and labelling |
Compensation and | Product quality and | Materials sourcing | |
| Biodiversity impacts | Fair marketing and advertising |
benefi ts | safety | Supply chain managment |
102
As a member signatory of the UN Global Compact, the Group is already implementing the UN Sustainable Development Goals (SDGs) in its daily business with its products and solutions. Solvay's high materiality issues are in line with the SDGs . The SDGs icons indicate important information for the reader. The sections with SDG icons show how they are implemented by Solvay.
In 2015 Solvay focused on stakeholders' engagement, using the Group's existing stakeholders' engagement channels.
The materiality analysis was presented to a specifi c group of investors: descendants of the founding families of the Solvay group,
who currently represent the largest group of investors. Solvay used a dedicated social media platform to present the analysis, submitting a questionnaire that asked them to rank material issues (priorityhigh-moderate-low) as listed by the SASB in their materiality approach. Based on this feedback, the most important materiality issues for this specifi c group of investors are as follows:
Category High materiality issues
Most of the issues listed as high materiality by this group of investors are already included in our own analysis. This feedback will be compared to the feedback from other stakeholders, before being
included in the priority issues selected by the Group.
used as input for the annual updates to the Group's materiality analysis. The questionnaires received from investment funds in 2015 were related to the Group's position on climate and energy policies and to the management of endocrine disruptors. Both topics are already
In 2015, the Belgian Association of Financial Analysts ranked Solvay fi rst in both "Best Non-Financial Information 2015" and "Best Financial Information 2015". The Belgian Institute of Registered Auditors awarded Solvay "Best Belgian Sustainability Report" in the "large corporations" category.
Employees
The materiality analysis of the Group has been presented to the Sustainable Development Commission for the Group's European Works Council. Analysis is still going on at the time of publication of this report.
Feedback from the "Planet" stakeholders (governments and nongovernmental organizations) has been dominated by two main events in 2015: preparation for the COP21 conference and publication of the United Nations Sustainable Development Goals .
The "Community Development" chapter of this report , includes examples of actions initiated locally, around our sites, within the framework of local community engagement.
No engagement actions specifi c to the materiality analysis have been initiated in 2015.
No engagement actions specifi c to the materiality analysis have been initiated in 2015.
Solvay Way is the Group's approach to sustainability. It integrates social, societal, environmental and economic aspects into the
Company's management and strategy, with the objective of creating value. It takes into account society's changing expectations, requiring industry to develop technologies, processes, products, applications and services that are in line with the objectives of sustainable development.
Solvay's commitment to sustainable development and social responsibility applies to all life cycle stages of its products - including design, manufacturing, product applications, end-of-life and use of resources - and the social consequences of their manufacture or use.
Solvay develops and maintains a permanent dialogue with its stakeholders and their representatives, on issues of sustainable development. The discussions are based on the will to innovate and move forward together as well as to develop specifi c partnerships. Contracts are prepared, negotiated and executed by Solvay to refl ect the Group's sustainable development policy. Solvay Way practices are reviewed each year by external partners and the Sustainable Development Function implements the fi ndings and conclusions to achieve progress. Progress of maturity in Enterprise Risk Management is one of the Solvay Way practices.
Coordinated by the Sustainable Development Function, Solvay Way is monitored by a global network of more than 200 "Champions" and "c orrespondents" who ensure its active deployment within the GBUs and the functions. The Sustainable Development Function is responsible for supervising the approach on behalf of the Group. It coordinates the work carried out by this global network and reports directly to the CEO.
105
The Solvay sustainability commitments and objectives are reviewed based on progress, the evolution of standards and the needs of stakeholders and lessons learned from self-assessments, internal and external audits and exchanging ideas about best practices.
Solvay Way is based on a reference framework divided into six stakeholders (customers, employees, investors, suppliers, communities and the planet), to whom the Group has made 22 commitments broken down into 49 associated practices. This reference framework helps each Solvay entity to conduct yearly selfassessments of its practices in order to identify its strengths and weaknesses and to develop an appropriate improvement plan.
Each year, all Solvay production sites, B usiness U nits and research centers, purchasing, fi nance, legal, public aff airs, strategy and human resources departments assess their practices in terms of C orporate S ocial R esponsibility. The network of Solvay Way c hampions and c orrespondents play a key role by ensuring deployment of the process, by motivating their colleagues to fulfi ll precise objectives, and by setting action plans to improve their processes and practices.
The annual self-assessment results, using the Solvay Way analysis grid and scoring system, enable every entities to measure the progress achieved. The Sustainable Development Function consolidates this assessment data and presents the results to the Executive Committee and the Board of Directors.
To learn more, please refer to the 2015 Complementary annual report on Sustainable Development informations
To ensure rapid progress, the Group has integrated the goals of a more sustainable development into all its managerial processes. This is the best approach to ensure the commitment of every employee to fulfi ll the Group's commitment at every stage of the business cycle and in all stakeholder relationships.
| Group dimensions structured by policies or processes |
Integrating sustainability in this way: |
||
|---|---|---|---|
| GROUP CULTURE |
• People and Management model • Code of Conduct |
Is integrated in practices |
|
| PEOPLE MANAGEMENT |
COMPENSATION POLICY |
• 10% of the variable remuneration for the CEO and the 7500 managers of the Group • 10% of the Plan named ''Global Profi t Sharing'' for every employee |
Is linked to results |
| 1 YEAR OUTLOOK |
• Current products (portfolio and processes) • Future spending (innovation, acquisitions) |
Are analyzed by and results are challenged Sustainability integration level is assessed through |
|
| • Control & monitoring | assessments & analysis are audited |
||
| BUSINESS CYCLE |
5 TO 10 | • 5-year business strategic plan | The target and Group's priority targets performance are challenged |
| YEARS OUTLOOK |
• Risk management • Integrated reporting & thinking |
Are integrated in | |
Legend: The CSR bonus structure refl ects both individual and external recognition. The fi rst part is linked to the improvement of the Solvay Way profi le in each entities. The other part depends of the Group's level of recognition by extra-fi nancial rating agencies.
Unless otherwise stated, all social and environmental indicators are reported at the fi nancial perimeter. The extra-fi nancial reporting is fully consistent with the Group's fi nancial consolidation scope which includes 145 sites and 26,350 employees (25,540 full time equivalent). CYTEC is not included in this consolidation scope. The 2015 fi nancial consolidation scope is available from page 202 to 2013 of this report. The Chemlogics entity, acquired in 2013 (3.3% of the turnover in 2015) has not been integrated in the reporting of environment and Energy & CO2 indicators.
For past years (2012-2014), fi gures related to environmental emissions may diff er from fi gures published in Solvay' s 2014 reports. This is due to corrections aimed at improving the fi t with the fi nancial perimeter. In particular, environmental data from SolVin and Chlorchemicals were re-introduced in the 2012 totals, and consolidation of the two plants in Devnya (Deven, Sodi, Bulgaria), were slightly modifi ed for all years.
Where relevant, data are also reported at the operational perimeter, which consolidates all activities under operational control even if not fi nancially consolidated.
Unless specifi cally stated, CYTEC is not included in the indicators reported.
Greenhouse gas (GHG) emissions are reported in accordance with the World Business Council for Sustainable Development "Guidance for Accounting & Reporting Corporate GHG Emissions in the Chemical Sector Value Chain".
| Emissions type | Scope | Defi nition |
|---|---|---|
| Direct emissions | Scope 1 | Emissions from operations that are owned or controlled by the reporting company. |
| Indirect emissions | Scope 2 | Emissions from the generation of purchased or acquired energy such as electricity, steam, heating or cooling, consumed by the reporting company. |
The Sustainable Portfolio Management (SPM) tool is the compass of the Group to set target for more sustainable business, measure the progress, steer the portfolio and inform businesses and top management in their decision making.
For more details on SPM benefi ts, the reader is referred to the 2015 Complementary annual report on Sustainable Development informations.
The SPM methodology was designed in-house in 2009 and developed further with the support of two recognized consultancies, Arthur D. Little and TNO. This methodology provides a fully consistent assessment of the sustainability contribution of our products in their specifi c applications, with a strong Life Cycle Thinking focus. SPM relies on Life Cycle Assessment, with a cradle-to-gate scope measuring the environmental footprint of the manufacturing, and on a detailed and precise questionnaire, with a cradle-to-cradle scope, measuring the alignment with market expectations.
The uniqueness of the SPM tool is to consider both axis:
SPM HEATMAP
The fi rst aspect is pondered through the environmental footprint indicator. It evaluates any potential fi nancial risk posed by the "polluter pays for the damage" principle. The basic evaluation begins with a classic eco-profi le calculation (ISO 14040 to 44). The environmental impacts are monetized, using "shadow prices" refl ecting the long term cost to society of each environmental
impact, as communicated by authoritative sources (TNO, International Energy Agency). The monetized environmental impact of each product is compared to the average sales price in that application. These ratios are then classifi ed by increasing risk, from Very Low Risk to Very High Risk, relative to the average of the Group in 2013.
The other aspect is evaluated through the market alignment indicator. It addresses the sustainability dimension of megatrends in the marketplace. The approach is to anticipate accelerated growth for a product because it is an active component of the sustainable solutions, as the market demands.
To be considered as a part of the "solutions", products must serve in an application that demonstrates a direct, signifi cant and measurable benefi t to the society at large. They must not exhibit any sustainability concern and have a low environmental manufacturing footprint. If a sustainability roadblock is identifi ed, or if its environmental manufacturing footprint is too high, then, the Product-Application Combination (PAC) will be ranked in "challenges".
The result of the SPM analysis are presented by a heatmap showing the revenue breakdown by Solutions, Neutral and Challenges categories.
Market Alignment
The Sustainable Portfolio Management methodology is owned by the Corporate Sustainable Development Function, managed by a small team of experts and deployed in close cooperation with Business and other functions. It serves as a strategic tool to develop fact-based information required for more robust strategies because they incorporate the sustainability dimension in business activities:
By the end of 2015, 88% of the Solvay group's turnover had been assessed with SPM methodology.
SOLVAY'S TURNOVER ASSESSMENT
Legend: SPM penetration rate expressed as the ratio of the turnover assessed with the SPM methodology to the total turnover in perimeter at the given year. Perimeter: The perimeter considered by SPM encompass all companies detained by Solvay, at their detention rate.
Solvay has defi ned new targets for the fi ve priorities selected within high materiality issues, including SPM. The former target was only focusing on the market alignment axis. This new target requires progress on both axis: market alignment and environmental footprint from manufacturing.
• Generate at least 50% of the Group consolidated revenue in Sustainable Solutions.
Legend: Revenue breakdown by SPM Heat Map categories. All fi gures expressed in line with Solvay perimeter on December 31st of the given year. Perimeter: The perimeter considered by SPM encompass all companies detained by Solvay, at their detention rate.
This improvement consists in:
This objective balances the ambitious transformation program of the Group on one hand, and anticipated increasingly more sustainable regulations and buying behaviors from our customers and the consumers, on the other hand.
Solvay's former SPM target, set in 2012, was to achieve 20% of revenue with "Product-Application Combinations" (PACs) in the "Star" category by 2020. The star category, in the Market Alignment axis, represents the PAC for which there are positive signals, in line with sustainability trends in the marketplace, with anticipated double-digit growth. In 2015, the assessed portfolio encompasses 10% of this category.
Over the last two years, in-depth verifi cation of the Market Alignment results covering 291 Product-Applications Combinations (PACs) has bee n carried out by Arthur D. Little, our partner in
110
SOLVAY • 2015 ANNUAL REPORT
developing and improving the SPM methodology. Arthur D. Little reaches:
Agreed results are integrated in the following year. The impact of the correction is negligible.
Solvay co-chairs two coalitions that are instrumental in setting the industry reference framework for Active Portfolio Management:
The human population of the world is expected to reach 8 billion by 2024. One of the biggest challenges society faces is to feed more people with limited resources. To meet the growing demand for food, many consider aquaculture to be the most sustainable way to produce animal protein. Around half of the fi sh consumed in the human food chain today is grown on fi sh farms and this fi gure is expected to grow to 75 percent by 2025.
In salmon farming, there are a number of diseases that can kill the fi sh if left untreated. Solvay off ers the PARAMOVE® system, a solution for the control of sea lice, the main concern of farmers. The main benefi ts of PARAMOVE® are that it quickly removes the parasites leaving only oxygen and water in the environment, and leaves no residue in the fi sh itself. The Aquaculture Stewardship Council (ASC) certifi ed farms are therefore not limited in the number of treatments that can be given, unlike other non-peroxide medicines. Salmon producing companies covering more than 50% of global production have already committed to get their farms ASC certifi ed by 2020 through the Global Salmon Initiative (GSI).
For more details about the ASC, see http://www.asc-aqua.org/
Addressing the climate change issue goes along with a lower demand for energy that still is nowadays massively from fossil origin.
Soda ash use decreases massively the energy that is required to produce glass by lowering signifi cantly the temperature of the melting point. Soda ash is used in the manufacturing of the most prevalent type of glass (90% of glass), namely the soda-lime glass, which is relatively inexpensive, chemically stable, reasonably hard, and extremely workable. This sodalime glass is capable of being resoftened and remelted numerous times, making it the best choice for glass recycling too.
Soda ash halves the demand for energy in glass manufacturing, and glass itself serves as energy saver for housing: until it will be recycled, emission of millions of tonnes of CO2 will have been avoided during the lifetime of double and triple glazing windows (source TNO Report 2008-DR1240/B by TNO Built Environment and Geosciences, Delft, The Netherlands: "… more than 100 million tonnes of CO2 could be achieved annually if all Europe's buildings were fi tted with advanced energy saving glass").
Vehicles are major contributors to air pollution. The largest part of combustion gas is neither toxic nor noxious: n itrogen (N2), water vapor (H2O), and carbon dioxide (CO2), although the later contributes to global warming. A relatively small but still too high part of combustion gas (about 1%) is noxious or toxic: c arbon monoxide (CO), unburnt h ydrocarbons (HC), n itrogen oxides (NOx) and p articulate Matter.
Solvay's OPTALYS® products comprise Cerium (a rare earth) & Zirconium oxides, which enhance the destruction of those pollutants in three-way catalytic converters.
Internal combustion engines cannot be optimized for highest fuel effi ciency and lowest emissions, at the same time. Modern cars operating conditions of the engine are optimized for fuel effi ciency and air pollutants are neutralized in threeway catalytic converters, where OPTALYS® products play their role for the air quality.
In November 2015, Solvay has set a new long-term objective regarding greenhouse gas emissions: to reduce its carbon intensity by 40% by 2025. Furthermore, as of January 1, 2016, Solvay will apply an internal price for CO2 emissions at € 25 per tonne, to take into account climate challenges in its investment decisions.
An externally verifi ed and structured greenhouse gas emission reporting system and the response to rating agencies such as the Carbon Disclosure Project helps the Group to align its eff orts on the eff ectiveness of its greenhouse gas challenges.
The greenhouse gases emissions reported by Solvay correspond to the scope of the Kyoto Protocol and comprise the following compounds or compound families: CO2/N2O/CH4 /SF6/HFCs and PFCs. To calculate the impact on climate change, the greenhouse
gas emissions are converted from tonnes to the CO2 equivalent using the Global Warming Potential (GWP) of each gas as published by the Intergovernmental Panel on Climate Change (IPCC) in its fi fth Assessment Report.
The indicator takes into account:
| 2015 | 2014 | 2013 | 2012 | ||
|---|---|---|---|---|---|
| Direct and indirect CO2 emissions (Scope 1 & 2) | Mt CO2 eq. |
11.6 | 11.7 | 12 | 11.8 |
| Other greenhouse gas emissions according to Kyoto Protocol (Scope 1) |
M t CO2 eq | 2.6 | 2.7 | 2.7 | 2.6 |
| Total greenhouse gas emissions (Kyoto protocol) | Mt CO2 eq. | 14.2 | 14.4 | 14.7 | 14.4 |
| Other greenhouse gas emissions not according to Kyoto Protocol (Scope 1) |
M t CO2 | 0.1 | 0.1 | 0.1 | 0.1 |
Perimeter: related to the manufacturing activities of the companies that are currently consolidated (fully or proportionately), Chemlogics excluded.
• to reduce its greenhouse gas emissions intensity by 40%.
Solvay commits by 2025 to reduce CO2 intensity of its operations by 40%, that is, its greenhouse gas emissions per added value euro (using the REBITDA as proxy of added value).
Perimeter: related to the manufacturing activities of the companies that are currently consolidated (fully or proportionately), Chemlogics excluded. The REBITDA does not take into account C YTEC.
Solvay's former greenhouse gas reduction target was to reduce greenhouse gas emissions by 10% for 2020 at a constant perimeter and volume (baseline 2012). Since 2012, the Group has reduced its GHG emissions by 5 % at a constant activity perimeter.
Key achievements:
Extra-fi nancial statements
To achieve this ambitious objective, Solvay will step up its SOLWATT® energy effi ciency program, continuously optimise its industrial processes, develop clean technologies and increase the share of renewables in its energy production and supply.
Ensuring long-term energy supply is also a constant concern. Diversifying energy sources and developing alternatives to fossil fuels wherever sustainable in ecological, economic, industrial, and social terms is a strategic goal. Concrete steps have been taken in the form of large technical investments such as the recent purchases of two cogeneration units, one in Spinetta (Italy) and one in Massa Carrara (Italy) or the construction of the cogeneration unit in Oldbury (United Kindgom).
Energy consumption is made up of three components:
These three components are converted into primary energy, with the following conventions:
| 2015 | 2014 | 2013 | 2012 | |
|---|---|---|---|---|
| Energy consumption | 175 | 179 | 181 | 179 |
Perimeter: t his indicator shows the primary energy consumption over a given year related to the manufacturing activities of the companies that are currently consolidated (fully or proportionately).
The energy intensity covers primary energy from fuels (coal, natural gas, fuel oil, etc.) and from purchased steam and electricity.
Baseline 100% in 2012
Legend: energy index at constant activity perimeter refl ects the change in energy consumption on a comparable basis after adjusting the historical perimeter to take into account perimeter changes and making adjustments for changes in production volumes from one year to the next.
In 2015, within the SOLWATT® project, energy performance contracts were signed between Solvay Energy Services and the other GBUs to ensure that the fi ndings of the energy audits are implemented. Three parallel approaches are being followed:
For example, in 2015, the Soda Ash & Soda Ash & Derivatives GBU signifi cantly enhanced the energy performances of soda ash plant in Devnya, Bulgaria with its breakthrough competitiveness plan. New cogeneration units as those in Map Tha Phut (Thailand), Ospiate (Italy) and Porto Marghera (Italy) are also being studied.
2.3.3 Air quality
Solvay has committed to improve the air quality at local and regional levels, in close relation with local stakeholders. The monitoring and targets focus on standard pollutants (acidifying gases, Volatile Organic Compounds (VOC), particulates, heavy metals, etc.).
Baseline 100% in 2012
Legend: acidifi cation emissions index at constant activity perimeter, according to ReCiPe v 1.08 - 2013.
Perimeter: Acidifi cation emissions index at constant activity perimeter refl ects the changes in acidifi cation on a comparable basis after correcting the historical perimeter to take into account sites movements and introducing corrections for changes in production volumes from year to year.
Legend: photochemical oxidant formation index at constant activity perimeter, according to ReCiPe v 1.08 - 2013.
Perimeter: Photochemical oxidant formation index at constant activity perimeter (See defi nition above).
| Absolute emissions | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|
| Acidifi cation (tons equ. SO2 ) | 27,330 | 25,405 | 26,848 | 29,852 |
| Photochemical oxidant formation (tons equ. NMVOC) | 19,329 | 20,360 | 18,745 | 19,980 |
The main impact categories (acidifi cation emissions, Photochemical oxidant formation) are internationally recognized and calculated using the characterization factors published by ReCIPe, which is a compendium of legally recognized databases from the International Panel on Climate Change (IPCC), the World Meteorological Organization (WMO) and elsewhere.
A large part of acidifying emissions stem from energy generation. The acidifi cation impact is 114 % of the 2012 baseline, against 106 % of the baseline in 2014. The increase during 2014 is mainly caused by the energy intensive Soda Ash & Derivatives activities, with increases in absolute emissions by + 2557 teq SO2 , + 13.4 % while production volumes increased by only 3.9 %.
Notwithstanding the recent index increases, signifi cant reductions are expected for 2017 and 2018 due to the scheduled start-up of DeSOx and DeNOx units on the boilers of Tavaux (France) and Torrelavega (Spain). These projects should allow to catch up on the foreseen 2020 targets.
Progress since 2012 of the Photochemical oxydant formation index is dominated by the contribution of the Soda Ash & Derivatives business which decreased by - 1518 teq NMVOC (- 14.3 %). By 2020, the index should be brought down to 90 % of the 2012 baseline as several DeNOx units are planned to start-up by end 2018 with targeted NOx cuts by around 2000 t/y (equivalent to 2000 teq NMVOC).
Sites have continued to improve other air quality parameters. For example, local prevention programs targeting nuisances like dust and odors are in place at 99 sites.
Extra-fi nancial statements
The Group's water policy consists of protecting the quality of water resources and limiting the need for fresh water withdrawals as much as possible. A Group 2020 overall target is being pursued that encompasses the site-specifi c targets in water areas. This target focuses on reducing the abstraction of groundwater because such abstraction is not returned to its original environmental source. This target also focuses on reducing the dependency on drinking water still used too often due to the absence of an alternative, lower quality, water source.
In 1,000 m3
| 2015 | 2014 | 2013 | 2012 | |
|---|---|---|---|---|
| Groundwater and drinking water | 194,330 | 186,726 | 198,386 | 242,136 |
| Total water intake | 616,274 | 626,757 | 654,617 | 762,638 |
Water management translates into numerous water-saving and recycling programs. The index for the intake of groundwater and drinking water stands at 84.7 % of the 2012 baseline. By the end of 2013 , the achieved performance indicator for the "sum of drinking and groundwater" used had already reached the level of the Group's 2020 target.
However, progress were largely due to exceptional events such as temporary or permanent shutdowns of production units or small plants and requirements from authorities impacting on the water needs. More structural improvements are expected in the years to come due to water saving programs or business rationalizations. A new target will be defi ned in 2016
• to implement sustainable water management at 100% of sites under water scarcity risk.
Particular eff orts are being made to reduce freshwater withdrawals where there is a risk to water access either for Solvay or for other needs (domestic, agricultural, industrial or environmental). An internal study found there are currently 12 Solvay sites confronted with water scarcity risk.
| 2015 | |
|---|---|
| Sites with a detailed water accounting | 122 |
| Sites with a confi rmed water scarcity risk | 12 |
| Sustainable water management in place in sites with water scarcity risk | 4 (33%) |
Perimeter: Solvay fi nancial perimeter plus all additional manufacturing sites under operational control.
The following sites have programs underway that alleviate water consumption and reduce the dependency of operations on water at times when water is scarce. In particular, there is an action plan:
Legend: water consumption index at constant activity perimeter.
• 100% of sites with a Process safety management system system corresponding to their risk hazard.
All the 132 industrial and R&I sites have or are developing an ad hoc Process Safety Management system (PSM) adapted to their risk level: classifi ed from level 1 (low) to 3 (high), depending on their potential hazards. 96 sites already have a dedicated PSM system corresponding to their risk level, fully in place, representing a 84% compliance level.
Solvay has developed tiered risk analysis method for processes, adapted to the levels of potential hazard. This encompasses in particular a simplifi ed method for conducting risk analysis on sections of chemical processes with low potential hazards. This method has been successfully implemented for s oda a sh processes with identifi cation of low risks with at least seven sites within Solvay. This achievement is due to the high effi ciency of the method, which was thus recognised and implemented by the Soda Ash & Derivatives GBU .
Since 2014, Solvay has classifi ed and reported all process safety incidents resulting in environmental consequences according to a scale based on various criteria (volume of spills, nature of substances, etc.).
| 2015 | |
|---|---|
| Medium | 54 |
| High | 0 |
| Catastrophic | 0 |
Perimeter: Solvay group manufacturing and R&I sites under operational control. The consolidated data for process safety incidents cover 99 sites out of a total of 132 operational sites, including R&I sites .
No signifi cant spills at h igh level occurred in 2015. Reported incidents were mainly due to events that resulted in exceeding the operating permit limit, with non signifi cant or limited eff ects restricted to the immediate vicinity of the sites.
Using the CEFIC defi nition of reportable Process Safety Incidents, which also includes events where the release did not reach the natural environment (events with "Loss of Primary Containment (LoPC)"), 169 incidents took place in 2015.
The corrective actions and more generally the prevention of accidents are undertaken as an intrinsic part of the site's PSM systems. In application of the PSM practices, lessons stemming from the analysis of all serious (or potentially serious) process safety incidents have been shared across the Group in a dedicated monthly newsletter distributed in 15 languages.
Solvay's policy aims to prevent soil contamination, to characterize soil conditions whenever needed in both active and closed sites, to manage past soil contamination from historical or acquired activities, and to manage soil and/or groundwater contamination in the surroundings. Assessing soil conditions and risk is always taken as a key step in selecting the most appropriate management measures.
There are two ongoing Research and Innovation projects with universities, research institutes and other companies:
Both projects will provide more insight on technological performance, under a variety of conditions thus providing guidance for optimal application.
| In € million | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|
| 723 | 713 | 636 | 800 |
Legend: the provisions are reviewed on a quartely basis in accordance with the IFRS norms. The Chemlogics provisions are included.
Solvay manages environmental fi nancial provisions, mainly dedicated to the management of soil contaminations, using a long-term vision. Financial provisions have increased by € 1 0 million in 2015 compared to 2014. This is mainly due to fi nancial factors (discount and exchange rates) and perimeter changes. The increase from 2013 to 2014 was mainly due to the development of new and ongoing projects, some of which were impacted by a change in regulations.
• to further reduce hazardous waste going to landfi ll by 10%.
The Group is committed to further reducing the volumes of industrial waste and in particular hazardous industrial waste . Only 7 % of hazardous waste goes to landfi ll. 65 % of waste is now either recycled or recovered by means of incineration with energy recovery.
Legend: Landfi lled industrial hazardous waste index at constant activity perimeter. Industrial waste is waste generated by the industrial activity on a site, including the packaging and maintenance and excluding construction and demolition waste, waste from mine and quarry activity, domestic and municipal waste.
| 2015 | 2014 | 2013 | 2012 | |
|---|---|---|---|---|
| Landfi lled Industrial Hazardous waste (Tons) | 14 ,591 | 12,327 | 13,283 | 10,743 |
The landfi lled hazardous industrial waste increased between 2014 and 2015 by 2264 tons (+ 31.6% ). This is the resultant eff ect of increases for Specialty Polymers (+ 2064 t ) and Performance Polyamides (+ 1343 t) and improvements for Special Chem (- 699 t) and Soda Ash and Derivatives (- 675 t). Smaller improvements or deteriorations were reported for the other businesses.
Solvay currently manages over 12,000 product grades that are placed in the market . Solvay is committed to get a comprehensive understanding of the hazards, risks and impacts related to products put on the market, from production stage until end of use.
117
Solvay centrally manages product safety information for all hazardous substances. This is key to ensure that hazardous substances are managed adequately both in Solvay operations and along value chains. The following has been in eff ect since September 2015:
Solvay implements a global voluntary approach for "substances of very high concern". The policy regarding SVHCs includes to:
A group-wide reference list for SVHCs was established in 2015. 95 manufacturing sites (78%) have cross-checked their inventory to date. Solvay's SVHC list includes all substances that are either:
• identifi ed, on a case-by-case basis and through scientifi c evidence as probably causing serious eff ects to human health or the environment that is of an equivalent level of concern as those above.
• to complete 100% of risk assessments and analysis of possible safer alternatives when available for marketed products containing SVHC by 2020.
New dedicated rules specifi c to SVHCs defi ne how they are handled in Solvay's industrial operations and how they must be handled by third parties when placed on the market. As regards Solvay's operations, SVHCs are subject to standardized risk assessments.
GBUs are defi ning strategies to ensure proactive management of the SVHCs put on the market, ensuring business continuity while respecting legal duties, Responsible Care® commitment and sustainable development.
In order to anticipate the need to substitute some SVHCs, three categories (black, red and yellow) are used to characterize the level of risk management:
| Number of substances (2015, world perimeter)(2) |
|||
|---|---|---|---|
| SVHCs in products on the market |
for which the SVHCs come from raw materials |
Management | |
| SVHC (list according to REACH regulation – EU Authorization process) | 6 | 3 | Updating risk studies and |
| SVHC (list according to REACH regulation – EU Candidate list)(3) | 14 | 7 | assessing substitution alternatives for substances put on the market in Europe |
| All SVHCs (according to REACH criteria) | 20 | 10 | and extending risk studies for uses outside of Europe |
| % of SVHCs analysed for safer alternatives - world (4) | 5% |
(1) Perimeter: all Solvay products – except Chemlogics – put on the market, that are either manufactured by Solvay or form part of the composition of the products sold. (2) SVHCs manufactured by or forming part of the composition of products sold by Solvay worldwide, currently in Europe's "Candidate List" or "Authorization list" of the REACH process.
(3) The Candidate List includes substances that are also present in the EU restriction process (annex XVII).
(4) Percentage of products containing SVHCs reviewed for potential substitution or safer alternatives through Solvay internal dossiers .
• continue improving Solvay's employees safety by dividing by two the number of accidents recorded on our sites and reaching the MTAR inferior to 0.5.
Currently, Solvay's safety results rank in the top 25% of the global industry. The MTAR already decreased by 7 0% between 2012 and 2015. In order to keep its ranking and commit to safety for its employees, Solvay defi ned a new safety target. To reach this ambitious objective, Solvay plan to manage safety in a responsible way, based on people involvement with the internal Safety Excellence Program, and a continuous improvement plan.
Perimeter: All sites under Solvay's operational control for which the Group manages and monitors safety performance. This represent 180 sites, incl manufacturing, R&I, administrative sites - Solvay employees and contractors working on sites. Legend:
Medical Treatment Accident Rate (MTAR) : number of work accidents leading to medical treatment other than fi rst aid per million working hours.
Lost Time Accident Rate (LTAR) : number of work accidents with lost time (away from work) more than 1 day per million working hours.
The occupational safety performance for employees and contractors working on the Group's sites has signifi cantly improved in the past fi ve years. The MTAR improved to 0.77 in 2015 compared to 0.98 in 2014. MTAR is used as an internal performance indicator because it takes into account the actual severity of the accident, independent of the local legal context or the local practices of adapted work which infl uence the LTAR classifi cation.
The LTAR improved in 2015 reaching 0.75, the lowest level ever for Solvay's operations. The Group's LTAR performance is better than the industry's performance in general and also better than the chemical industry's track record in particular. The chemical industry is generally recognized as safe, with an LTAR of around 4.5 in Europe in recent years.
In particular Solvay succeeded in reducing accidents involving contact with chemicals, from 14 in 2014 to nine accidents in 2015. The number of "accidents with irreversible consequences" remains stable at two in 2015.
No fatal accidents have occured in 2015.
With a view to further preventing accidents, a new Safety Excellence Plan is being deployed by GBU and sites over the 2015-2016 period. It relies on three key action lines:
All GBUs and sites have defi ned an HSE roadmap and implemented good safety practices such as: safety days (114 sites in 2015), a behavioral safety program (102 sites), systematic analysis of near misses, the engagement of all managers in promoting safety, modeling exemplary behavior and visibly implementing safety measures, safety tours, involvement of the entire workforce in all improvement actions, recognition, personal objectives tied to leading indicators, etc.
| 2015 | 2014 | 2013 | |
|---|---|---|---|
| Industrial Hygiene: number of sites trained to new IH standards | 102 | 33 | 4 |
| Health Monitoring: number of sites with health monitoring based on individual exposure profi les according to Solvay standard |
39 | 36 | 36 |
Perimeter: Solvay fi nancial perimeter 2015 plus additional sites under operational control.
• all working units and workstations are controlled and recorded in accordance with Solvay's new Industrial Hygiene standards for all operational employees.
The program is based on four pillars:
• to increase the Engagement Index at 80%.
Engagement of Solvay's workforce was assessed using the "Solvay Employee Survey 2015". More than 22,000 employees from all geographical locations, businesses and levels answered a set of standardized questions regarding their views on employment, management and the activities of the Group as a whole. The rate of engagement, which measures the energy devoted to Solvay's success by the workforce, reached 75% in line with industry general reference benchmarks.
Comprehensive initiatives have been launched at a Group level focusing on:
Engagement is also fostered by regular dialogue between the managers of the Group and the employees. It is part of Solvay culture. Solvay considers that maintaining trusting and constructive relations with employees and their representatives forms the basis for such dialogue. This relationship is built on the Group's commitment to respect employees' fundamental human rights and guarantee their social rights. The agreement with IndustriALL formalises the Group's commitment.
For more details about IndustriALL, the reader is referred to page 101 .
A permanent dialogue on sustainability issues has been established for years between Solvay and its European Works Council (EWC). In 2015, the EWC met in a plenary session for one week, the sustainable development EWC commission met twice and the EWC Secretariat met 10 times with senior Group management, allowing these representative bodies to be part of the evolution of the Group. Subject matters receiving particular attention were: Cytec acquisition, evolution of employment in the Group, strategy of the Group and sustainable development issues.
Trade unions are present on a majority of Solvay sites around the world. Union membership is estimated at 20% in Europe, 30% in South America, 10% in North America and 30% in Asia. In the majority of cases collective agreements are extended to all employees even if not members of a union. Coverage by collective agreements has decreased to 77% worldwide due to perimeter changes. This indicator was established for 2015 without data about the newly acquired company Cytec. It will be updated in 2016 after the integration of Cytec. These data indicate that freedom of association is ensured within the Group and that its practical application provides mutually agreed working conditions for our employees.
Extra-fi nancial statements
• improve c ustomer s atisfaction to reach a Net Promoter Score of 35%.
Within the framework of the commercial excellence program, a systematic biennial assessment of customer satisfaction and loyalty has been rolled out across the entire Group since 2014.
Several GBUs such as Specialty Polymers, Novecare, Acetow, Silica and Performance Polyamides have already been conducting "Voice of the Customer" surveys for more than four years, with the aim of assessing overall customer satisfaction. These initiatives have triggered action plans supported by close monitoring as well as the implementation of regular follow up sessions with business partners.
O ne single corporate indicator has been selected (NPS: Net Promoter Score ) for internal and external benchmarking through consolidation of NPS performance at a Group level.
Although the biennial frequency of the Voice of Customer inquiries is mandatory for all entities, each GBU is empowered to choose the appropriate approach. This ranges from a light survey focusing on a limited number of key accounts to determine the level of satisfaction to an in-depth analysis of customer satisfaction through the distribution of a comprehensive questionnaire covering all aspects of customer experience. The information is gathered either by individual interviews conducted by external advisers or by using an e-survey based on the quality management of the GBU. Those surveys are conducted on either a global or a regional basis.
Each GBU designs its own questionnaire using corporate guidelines but focusing on their specifi c area of business. A chapter dedicated to sustainable development is included in the study.
| 2015 | 2014 | |
|---|---|---|
| Group Net Promoter Score | 24% | 14% |
In 2014, Solvay published a Group NPS of 14% which was compared to a geographically weighted manufacturing industry benchmark of 25%.
In 2015, the Group's performance improved substantially reaching an NPS of 24%. This was thanks to more robust GBU-driven action plans as well as direct involvement of the Executive Committee in monitoring. The Group launched several initiatives to reinforce our customer intimacy (such as Customer Tech Days: a presentation of the Group's activities in one specifi c market) and to foster collaborative innovation.
In parallel with the NPS, a second indicator related to customer loyalty was also put in place (Churn rate: % of Group revenue from customers who had already made a purchase in the preceding year). In 2015, the Group achieved a score of 97%, this remained stable from 2014 translating it into a long-lasting relationship based on reliable services and our capacity for innovation .
Finally, the Group is also deploying a new, state-of-the-art Customer Relationship Management (CRM) cloud-based system across all GBU's to capture and integrate customer insights better in our major decision-making processes and to foster cross-fertilization.
• double the number of employees involved in a societal action from 20% to 40%.
Solvay dedicates time and fi nancial resources at a local and a global level that contribute to improving people's living environment through scientifi c solutions and science education or through solidarity at a local level.
The Group ensures Solvay's entities are integrated within their territories, has open discussions with local communities and aims to contribute to their societal issues and more widely, to off er solutions to society as a whole. This is the Group's sustainability ambition, communicated through Solvay Way to every employee in their day to day work.
Through the Solvay Way approach employees are encouraged to take part in projects that contribute to local development. They are involved in diverse projects worldwide that provide indirect and direct added value for the local economy and employment, as well as supporting local associations and initiatives. Solvay Way correspondents and employees manage their societal approach locally, independently choosing and funding initiatives that meet the needs of their surrounding communities.
Extra-fi nancial statements
Currently these activities are not always documented at corporate level, but an internal survey was conducted in 2015 to start referencing Solvay's societal actions. The main fi ndings showed that a large majority of the societal actions benefi t people as a result of donating employee's time donating equipment, through fi nancial donations or organized local events. In the Asia and Latin America zones, there are more donations of the employee time, while on European and North American sites there are more fi nancial donations.
Zhenjiang Children's Charity House is a place accommodating orphans. Most of them are disabled or have a serious mental disorder, or learning diffi culties. Many will stay in the Charity House until they are 18 or 19 years old. They then have to relocate to a Youth Charity House or have to work in the community. A professional team helps them by off ering psychological guidance.
Solvay Zhenjiang site volunteered to join the professional team providing assistance, when the children get older and are being prepared to leave. 10 Solvay employees volunteered once a month from January to April 2015 to help the children in the Charity House. Under the guidance of the professional team, they talk to the children who are going to leave the charity house and start work. They participate in a wide range of activities including cooking and gardening. The aim of the volunteers is to help the young people become accustomed to the outside world. Last year, thanks to the involvement of the professional team and all of the volunteers, two of these young people were able to fi nd a job outside of the Charity House.
A range of activities have taken place across the 40 sites in the United States. In Alpharetta, Georgia, employees participate in "Habitat for Humanity," helping to build homes for lowincome families. In Houston, Solvay is a major supporter of Junior Achievement, contributing funds and sending an average of about 20 employees per semester to teach sixweek business-related courses to school children. In Cranbury and many other sites, Solvay employees provide a great deal of support to United Way, a national system of volunteers and contributors to local charities. In addition, Solvay's Chemistry Connection® sends employee volunteers to local schools to give science demonstrations using hands-on experiments.
Solvay has noticed there is an ongoing issue with the recruitment of scientists for the public sector and industry. Children need to get excited about science again. The Royal Belgian Institute of Natural Sciences has joined forces with Solvay to develop a tool that can reach young people in all parts of the country and renew their interest in science.
XperiLab is a truck in which an entire school class can carry out real experiments. The truck visits schools across Belgium, hosting more than 10,000 young chemists every year. This initiative has been a great success and is already booked up a full year in advance.
Solvay wanted children to understand the key elements of our environment with a view to developing the right mindset to meet future challenges. This concept has been operating successfully for the past fi ve years and is still going strong.
The se initiatives, among many others, help build the strong community relationships enjoyed by our sites across the globe.
The Group aims to connect its philanthropic eff orts in keeping with the Group's areas of expertise and where its products or activities can deliver added value.
In 1923, Solvay created the Ernest Solvay Fund to honor the founder of the Company who had died the year before. Today, the majority of Solvay's corporate philanthropy goes through the Ernest Solvay Fund. This Fund is managed by the independent King Baudouin Foundation.
Solvay concentrates its philanthropic or funding eff orts at a corporate level through science promotion; science education; and in some circumstances, support to humanitarian initiatives in reaction to certain disasters and/or where our products or services are of particular value.
122
At a worldwide level
The Chemistry for the Future Solvay Prize rewards a major scientifi c discovery that could shape tomorrow's chemistry and aid human progress.
The prize perpetuates the strong support for scientifi c research that was always given by Ernest Solvay. It is intended to endorse basic research and underline the essential role of chemistry, both as a science and an industry, in helping to solve some of the most pressing issues the world is facing.
The € 300,000 prize is awarded every second years.
In 2015, the Chemistry for the Future Solvay Prize was given to Professor Ben Feringa. Professor Feringa's work on unidirectional molecular motors has opened up a new fi eld of research which, for example, paves the way for the development of new therapeutic and technological applications. Within the next twenty to thirty years, his research is likely to lead to the introduction of nanorobots – microscopic robots that can accurately target specifi c molecules during therapeutic treatment. It may also enable a new generation of scientists to design artifi cial muscles or further optimize the storage of information on a molecular scale.
The next Chemistry for the Future Solvay Prize will be awarded in 2017.
Following the legendary 1911 Conseil Solvay on "Radiation and the Quanta" chaired by Nobel Laureate Hendrik Lorentz, the International Solvay Institute for Physics was founded by Ernest Solvay in 1912. The International Solvay Institute for Chemistry was founded a year later, in 1913. The two Institutes merged in 1970 as the International Solvay Institutes for Physics and Chemistry, founded by Ernest Solvay.
The mission of the Solvay Institutes is to support and develop curiosity-driven research in physics, chemistry and associated fi elds with the purpose of "enlarging and deepening the understanding of natural phenomena".
The central activity of the Institutes is the periodic organization of the celebrated Solvay Conferences on Physics and Chemistry ("Conseils de Physique Solvay" and "Conseils de Chimie Solvay"). This support for fundamental science is complemented by the organization of open workshops on specifi c selected topics, international chairs, colloquia and an international doctoral school.
In addition to these activities, the Solvay Institutes also promote the popularization of science through the organization of the annual Solvay public lectures devoted to today's big scientifi c challenges.
Management of the legal and regulatory environment Management of the legal, ethical and regulatory framework has been identifi ed as a high materiality issue in the complete revision of the materiality analysis performed in 2014. In the past, Solvay has reported on the cost of major litigation; work is going on to establish better developed indicators.
The cost of major litigation is developed in the Management of Risks section of the present report.
The Solvay Code of Conduct and other elements relating to compliance are developed in the Corporate Governance sectionof the present report.
In addition to site-specifi c objectives, the Group's overall 2020 targets aim to ensure the integrity of operating systems and processes. Process Safety ensures the integrity of operating systems and processes by applying good design principles alongside best engineering and operating practices. It deals with the prevention and control of Process Safety Incidents (PSI) that have the potential to release hazardous materials or energy into the environment.
In practice the prevention of industrial incidents means:
• 100% of our sites have a risk analysis for every production line updated in the last fi ve years.
This target aims to ensure the integrity of operating systems and processes at all sites. Regular risk analysis is now undertaken according to a new risk scale. This analysis forms the backbone of risk control. Risk scenarios have been defi ned using the Group's standardized matrix in order to identify all potential Risk Sheet 1 situations.
Risk Sheet 1 refers to a technically plausible scenario of explosion, fi re or loss of containment of hazardous material on a manufacturing or storage facility which is not acceptable for Solvay in terms of the severity of its consequences for people and the environment and its probability of occurrence.
Legend: Based on the self-declarations made by the sites
Perimeter: Solvay group manufacturing perimeter under operational control. The consolidated data for process safety risk analysis cover 111 sites out of a total of 132 operational sites.
A key element of Solvay's new program that is now fully underway is the handling of Risk Sheet 1 situations, as prescribed by Solvay's red line on health, safety and environmental risk management. Red lines are essential Solvay rules that must be respected to the extent that they cover issues which constitute major risks for the Group. Employees or organizations not complying with the red lines are liable to be penalized. Requirement was fulfi lled in 2015, with no Risk Sheet 1 situation remaining at the end of 2015 that was over one year old.
| Unit | 2025 targets |
2020 targets |
2015 | 2014 | 2013 | 2012 | ||
|---|---|---|---|---|---|---|---|---|
| Sustainable business solutions | ||||||||
| 2015 Product portfolio assessed | % | - | - | 88 | 79 | 64 | - | |
| 2015 Sustainable solutions | % | 5 0 | - | 33 | 25 | 19 | - | |
| Greenhouse gas emissions | ||||||||
| 2015 | Greenhouse gas intensity | Kg CO2 eq per EUR REBITDA |
4.85 | - | 7.26 | 8.08 | 8.84 | 7.12 |
| 2015 Direct and indirect CO2 emissions (Scope 1 & 2) | Mt CO2 eq. | - | - | 11.6 | 11.7 | 12.0 | 11.8 | |
| 2015 Other greenhouse gas emissions according to Kyoto Protocol (Scope 1) |
Mt CO2 eq. | - | - | 2.6 | 2.7 | 2.7 | 2.6 | |
| 2015 | Total greenhouse gas emissions (Kyoto protocol) | Mt CO2 eq. | - | - | 14.2 | 14.4 | 14.7 | 14.4 |
| 2015 Other greenhouse gas emissions not according to Kyoto Protocol (Scope 1) |
Mt CO2 eq. | - | - | 0.1 | 0.1 | 0.1 | 0.1 | |
| Energy management | ||||||||
| 2015 | Energy consumption | Petajoules Low Heating Value |
- | - | 175 | 179 | 181 | 179 |
| Energy effi ciency index | % | - | 90 | 96 | 99 | 99 | 100 | |
| Air quality | ||||||||
| 2015 Acidifi cation emissions in absolute | Teq SO2 | - | - | 27,330 | 25,405 | 26,848 | 29,852 | |
| Acidifi cation emissions index | % | - | 75 | 114 | 106 | 93 | 100 | |
| 2015 Photochemical oxidant formation in absolute | Teq NMVOC | - | - | 19,329 | 20,360 | 18,745 | 19,980 | |
| Photochemical oxidant formation index | % | - | 90 | 93 | 98 | 90 | 100 | |
| Water management | ||||||||
| 2015 Intake of groundwater and drinking water | 1,000 m³ | - | - | 194,330 | 186,726 | 198,386 | 242,136 | |
| 2015 Total water intake | 1,000 m³ | - | - | 616,274 | 626,757 | 654,616 | 762,639 | |
| Water consumption index | % | - | 90 | 85 | 84 | 87 | 100 | |
| Sites with detailed water balance accounting | Number | - | - | 122 | 79 | - | - | |
| 2015 Sites for which the water scarcity risk was confi rmed | Number | - | - | 12 | 13 | - | - | |
| 2015 Sites with water scarcity risk and a sustainable water management |
% | - | 100 | 33 | 31 | - | - | |
| Environmental accidents and remediation | ||||||||
| Medium incidents | Number | - | - | 54 | 53 | - | - | |
| High incidents | Number | - | 0 | 0 | 2 | 4 | 0 | |
| Catastrophic incidents | Number | - | 0 | 0 | 0 | 0 | 1 | |
| 2015 Environmental provision | € Million | - | - | 723 | 713 | 636 | 800 |
Unit 2025 targets 2020 targets 2015 2014 2013 2012 Hazardous materials management Landfi lled industrial hazardous waste index % - 90 114 102 102 100 2015 Landfi lled industrial hazardous waste Tons - - 14,591 12,327 13,283 10,743 Substance of very high concern present in product put on the market according to REACH regulation - EU Authorization process Number - - 6 8 6 - Substance of very high concern present in product put on the market for which this presence is due to raw materials according to REACH regulation – EU Authorization process Number - - 3 6 10 - Substance of very high concern present in product put on the market according to REACH regulation – EU Candidate list Number - - 14 17 17 - Substance of very high concern present in product p ut on the market for which this presence is due to raw materials according to REACH regulation – EU Candidate list Number - - 7 12 29 - All substance of very high concern according to reach criteria present in products put on the market Number - - 20 25 23 - All substance of very high concern according to reach criteria present in products put on the market for which this presence is due to raw materials Number - - 10 18 39 - 2015 Products containing SVHCs reviewed for potential substitution or safer alternatives through Solvay internal dossiers % - 100 5000 Employee health and safety 2015 Medical Treatment Accident Rate – Employee, contractors and temporary workers (MTAR) Accident per million hours worked 0.5 - 0.77 0.97 1.06 2.59 2015 Lost Time accident Rate – Employee, contractors and temporary workers (LTAR) Accident per million hours worked - - 0.75 0.98 0.80 0.81 2015 Fatal accidents Number - - 0 2 2 0 Sites with health monitoring based on individual exposure profi les according to Solvay standard Number - - 39 36 36 - Sites trained to new hygiene standards Number - - 102 33 4 - Employee engagement and wellness Solvay engagement index % 80 - 75 - 72 - 2015 Coverage by collective agreement % - - 77 82.2 85 85 Societal actions Employees involved in societal actions % 4 0 2 0 - - Customer satisfaction Net Promoter Score % - 35 24 14 - - Process safety, emergency preparedness and response Sites with risk analysis updated in the last 5 years for every production line % - 100 69 64 58 - 2015 Sites with "Risk Sheet 1" s ituations resolved within one year % - - 100 100 100 - 2015 "Risk Sheet 1" situation at the end of the year Number - - 94 217 11 111 2015 "Risk Sheet 1" resolved at the end of the year Number - - 232 23 111 111
Solvay (the "Company") is a public limited liability company governed by Belgian law and quoted on Euronext Brussels and Euronext Paris. The principal activities of the Company, its subsidiaries, joint operations, joint ventures and associates (jointly the "Group") are described in note 1 on segment information.
The consolidated fi nancial statements were authorized for issue by the Board of Directors on February 24, 2016. They have been prepared I n accordance with IFRS accounting policies, which are described on the following pages.
In 2015, two major changes took place.
On July 1, 2015, Solvay sold its chlorovinyls activities to the INOVYN joint venture (50% Solvay, 50% INEOS) (see note 10 Discontinued Operations).
On December 9, 2015, Solvay acquired 100% of the shares of Cytec Industries Inc.
The main impacts of this acquisition are described below:
• Cytec opening balance sheet has been fully consolidated within the Solvay g roup as from December 31, 2015 – see note 26 Goodwill and business combinations - and is based on the following:
| In € million | Notes | 2015 | 2014 |
|---|---|---|---|
| Sales | (1) (2) | 11,047 | 10,629 |
| Revenue from non-core activities | 470 | 416 | |
| Net sales | 10,578 | 10,213 | |
| Cost of goods sold | (8,289) | (8,070) | |
| Gross margin | 2,759 | 2,559 | |
| Commercial and administrative costs | (1,327) | (1,225) | |
| Research and development costs | (277) | (247) | |
| Other operating gains and losses | (5) | (99) | (94) |
| Earnings from associates and joint ventures | (6) | 21 | (34) |
| Non-recurring items | (7) | (245) | (308) |
| EBIT | 833 | 652 | |
| Cost of borrowings | (8) | (111) | (151) |
| Interest on lendings and short term deposits | (8) | 11 | 36 |
| Other gains and losses on net indebtedness | (8) | (46) | (30) |
| Cost of discounting provisions | (8) | (73) | (163) |
| Income/loss from available-for-sale fi nancial assets | (8) | (8) | (1) |
| Result before taxes | 606 | 343 | |
| Income taxes | (9) | (97) | (84) |
| Result from continuing operations | 509 | 259 | |
| Result from discontinued operations | (10) | (55) | (246) |
| Net income for the year | (11) | 454 | 13 |
| Non-controlling interests | (48) | 67 | |
| Net income (Solvay share) | 406 | 80 | |
| Basic earnings per share from continuing operations (€) | 5.57 | 3.32 | |
| Basic earnings per share from discontinued operations (€) | (0.72) | (2.36) | |
| Basic earnings per share (€) | (13) | 4.85 | 0.96 |
| Diluted earnings per share from continuing operations (€) | 5.53 | 3.30 | |
| Diluted earnings per share from discontinued operations (€) | (0.72) | (2.34) | |
| Diluted earnings per share (€) | (13) | 4.81 | 0.96 |
| RATIOS | |||
| Gross margin as a % of sales | 25.0% | 24.1% | |
| Interest coverage ratio | 7.4 | 6.6 | |
| Income taxes/Result before taxes (%) | 16.1% | 24.5% |
Interest coverage ratio = (EBIT excluding non-recurring items)/Charges on net indebtedness.
| In € million | Notes | 2015 | 2014 |
|---|---|---|---|
| REBITDA | (3) | 1,955 | 1,783 |
| Adjusted net income | (12) | 525 | 89 |
| In € million | Notes | 2015 | 2014 |
|---|---|---|---|
| Net income for the year | 454 | 13 | |
| Other comprehensive income | |||
| Recyclable components | |||
| Hyperinfl ation | (14) | 42 | (11) |
| Gains and losses on available-for-sale fi nancial assets | (14) | 3 | 1 |
| Gains and losses on hedging instruments in a cash fl ow hedge | (14) | 15 | (60) |
| Currency translation diff erences | (14) | 186 | 231 |
| Non recyclable components | |||
| Remeasurements of the net defi ned benefi t liability | (14) | 279 | (497) |
| Income tax relating to recyclable and non recyclable components | |||
| Income tax relating to components of other comprehensive income | (14) | (20) | 72 |
| Other comprehensive income, net of related tax eff ects | 505 | (264) | |
| Comprehensive income for the year | 959 | (251) | |
| attributed to: | |||
| • Solvay share | 892 | (167) | |
| • non-controlling interests | 67 | (84) |
The amounts below include the eff ect of the discontinued operations.
| In € million | Notes | 2015 | 2014 |
|---|---|---|---|
| Net income | 454 | 13 | |
| Adjustments to net income | |||
| • Depreciation, amortization and impairments | (15) | 978 | 1,430 |
| • Earnings from associates and joint ventures | (21) | 34 | |
| • Net fi nancial charges and income/ loss from available-for-sale fi nancial assets |
257 | 356 | |
| • Income taxes expense | (16) | 134 | 314 |
| Changes in working capital | (17) | (99) | 236 |
| Changes in provisions | (18) | (302) | (213) |
| Dividends received from associates and joint ventures | 14 | 19 | |
| Income taxes paid (excl. income taxes paid on sale of investments) | (16) | (250) | (217) |
| Other non operating and non cash items | (19) | 223 | (351) |
| Cash fl ow from operating activities | 1,388 | 1,621 | |
| Acquisition (-) of subsidiaries | (20) | (4,934) | (304) |
| Acquisition (-) of investments – Other | (20) | (28) | (107) |
| Loans to associates and non consolidated companies | (20) | 11 | 5 |
| Sale (+) of investments | (20) | 70 | 721 |
| Income taxes paid on sale of investments | (20) | (232) | 0 |
| Acquisition (-) of tangible assets | (20) | (952) | (923) |
| Acquisition (-) of intangible assets | (20) | (85) | (64) |
| Sale (+) of tangible and intangible assets | (20) | 31 | 21 |
| Dividends from available-for-sale fi nancial assets | 1 | 0 | |
| Changes in non-current fi nancial assets | 4 | 1 | |
| Cash fl ow from investing activities | (6,113) | (650) | |
| Capital increase (+)/redemption (-) | (21) | 1,477 | 0 |
| Proceeds from perpetual hybrid bond issuance classifi ed as equity | (21) | 991 | 0 |
| Acquisition (-)/sale (+) of treasury shares | (24) | (59) | (41) |
| Increase in borrowings | (36) | 4,628 | 151 |
| Repayment of borrowings | (36) | (1,219) | (1,365) |
| Changes in other current fi nancial assets | (36) | 225 | 134 |
| Interests paid | (156) | (234) | |
| Perpetual hybrid bonds dividends paid | (21) | (57) | (41) |
| Dividends paid | (323) | (291) | |
| Other | (22) | (31) | (3) |
| Cash fl ow from fi nancing activities | 5,475 | (1,690) | |
| Net change in cash and cash equivalents | 750 | (718) | |
| Currency translation diff erences | 13 | 21 | |
| Opening cash balance | 1,275 | 1,972 | |
| Closing cash balance(1) | (36) | 2,037 | 1,275 |
(1) Including cash in assets held for sale (€ 7 million in 2015 and € 24 million in 2014).
| Notes In € million |
2015 | 2014 |
|---|---|---|
| Free Cash Flow from continuing operations(2 ) | 391 | 511 |
| Free Cash Flow from discontinued operations(2 ) | (3) | 145 |
| TOTAL FREE CASH FLOW | 387 | 656 |
(2 ) Free Cash Flow = Cash fl ow from operating activities (including dividends from associates and joint ventures) + cash fl ow from investing activities (excluding acquisitions and disposals of subsidiaries and other investments and excluding loans to associates and non-consolidated companies).
| Notes In € million |
2015 | 2014 |
|---|---|---|
| Cash fl ow from operating activities | 64 | 272 |
| Cash fl ow from investing activities | (68) | (127) |
| Cash fl ow from fi nancing activities | (33) | (21) |
| NET CHANGE IN CASH AND CASH EQUIVALENTS (23) |
(36) | 124 |
| In € million | Notes | 2015 | 2014 |
|---|---|---|---|
| Assets | |||
| Non-current assets | 18,716 | 11,529 | |
| Intangible assets | (25) | 3,919 | 1,543 |
| Goodwill | (26) | 5,840 | 3,151 |
| Tangible assets | (27) | 6,946 | 5,386 |
| Available-for-sale fi nancial assets | (29) | 34 | 43 |
| Investments in associates and joint ventures | (30) | 398 | 380 |
| Other investments | (31) | 92 | 121 |
| Deferred tax assets | (9) | 1,059 | 710 |
| Loans and other non-current assets | (37) | 427 | 194 |
| Current assets | 6,613 | 6,365 | |
| Inventories | (32) | 1,867 | 1,420 |
| Trade receivables | (37) | 1,615 | 1,418 |
| Income tax receivables | 158 | 52 | |
| Other current receivables – Financial instruments | (37) | 111 | 309 |
| Other current receivables – Other | (33) | 655 | 500 |
| Cash and cash equivalents | (36) | 2,030 | 1,251 |
| Assets held for sale | (34) | 177 | 1,414 |
| Total assets | 25,329 | 17,894 | |
| Equity & liabilities | |||
| Total equity | 9,668 | 6,778 | |
| Share capital | (21) | 1,588 | 1,271 |
| Reserves | 7,835 | 5,293 | |
| Non-controlling interests | 245 | 214 | |
| Non-current liabilities | 11,330 | 6,088 | |
| Long-term provisions: employee benefi ts | (35) | 3,133 | 3,166 |
| Other long-term provisions | (35) | 831 | 854 |
| Deferred tax liabilities | (9) | 1,456 | 378 |
| Long-term fi nancial debt | (36) | 5,628 | 1,485 |
| Other non-current liabilities | 282 | 204 | |
| Current liabilities | 4,331 | 5,029 | |
| Other short-term provisions | (35) | 310 | 308 |
| Short-term fi nancial debt | (36) | 892 | 853 |
| Trade liabilities | (37) | 1,559 | 1,461 |
| Income tax payable | 130 | 355 | |
| Dividends payable | 144 | 114 | |
| Other current liabilities | (38) | 1,022 | 776 |
| Liabilities associated with assets held for sale | (34) | 275 | 1,162 |
| TOTAL EQUITY & LIABILITIES | 25,329 | 17,894 | |
| Ratios (1) | |||
| Net debt to equity ratio | 45.3% | 11.5% |
(1) 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.
| Equity attributable to equity holders of the parent | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revaluation reserve (Fair value) |
||||||||||||
| In € million | Share capital |
Share premiums |
Treasury shares |
Perpetual hybrid bonds |
Retained earnings |
Currency translation diff erences |
Available for-sale fi nancial assets |
Cash fl ow hedges |
Defi ned benefi t pension plan |
Total reserves |
Non controlling interests |
Total equity |
| Balance at December 31, 2013 |
1,271 | 18 | (132) | 1,194 | 5,985 | (768) | (6) | 6 | (494) | 5,804 | 378 | 7,453 |
| Net income for the year |
80 | 80 | (67) | 13 | ||||||||
| Items of Other Comprehensive Income (1) |
(9) | 241 | 1 | (49) | (433) | (249) | (17) | (266) | ||||
| Comprehensive income |
71 | 241 | 1 | (49) | (433) | (169) | (84) | (252) | ||||
| Perpetual hybrid bonds issuance (2) |
0 | 0 | 0 | |||||||||
| Cost of stock options |
11 | 11 | 11 | |||||||||
| Dividends | (266) | (266) | (26) | (292) | ||||||||
| Perpetual hybrid bonds dividends |
(42) | (42) | (42) | |||||||||
| Acquisition/sale of treasury shares |
(39) | (2) | (41) | (41) | ||||||||
| Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control |
(7) | (7) | (54) | (61) | ||||||||
| Balance at December 31, 2014 |
1,271 | 18 | (171) | 1,194 | 5,753 | (527) | (4) | (43) | (927) | 5,293 | 214 | 6,778 |
| Net income for the year |
406 | 406 | 48 | 454 | ||||||||
| Items of Other Comprehensive Income (1) |
35 | 169 | 3 | 15 | 264 | 486 | 19 | 505 | ||||
| Comprehensive income |
441 | 169 | 3 | 15 | 264 | 892 | 67 | 959 | ||||
| Capital increase | 318 | 1,151 | 1,151 | 1,469 | ||||||||
| Perpetual hybrid bonds issuance (2) |
994 | 994 | 994 | |||||||||
| Cost of stock options |
11 | 11 | 11 | |||||||||
| Dividends | (313) | (313) | (40) | (354) | ||||||||
| Perpetual hybrid bonds dividends |
(57) | (57) | (57) | |||||||||
| Acquisition/sale of treasury shares |
(59) | 3 | (56) | (56) | ||||||||
| Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control |
(118) | 5 | (1) | 32 | (82) | 5 | (77) | |||||
| Balance at December 31, 2015 |
1,588 | 1,170 | (230) | 2,188 | 5,720 | (353) | (2) | (28) | (630) | 7,835 | 245 | 9,668 |
(1) Impact on retained earnings following the application of IAS 29 Financial Reporting in Hyperinfl ationary Economies , resulting mainly from the restatement of non-monetary assets (as property, plant and equipment) to refl ect current purchasing power as at year- end using a general price index from the date when they were fi rst recognized. (2) Following the acquisition of Cytec and to strengthen Solvay's capital structure, perpetual hybrid bonds have been issued for a worth of € 1.0 billion. Those bonds qualify as equity
instruments.
| IFRS main | IFRS main accounting policies | 134 | ||
|---|---|---|---|---|
| Critical accounting judgments and key sources Notes to the consolidated income statement |
148 | |||
| NOTE 1 | of estimation uncertainty Financial data by segment (consolidated income statement per segment after reclassifi cation in discontinued operations for Chlorovinyls, General description of the segments Solvay Indupa, and Eco Services) |
148 149 148 |
||
| NOTE 2 | Sales by country and region (continuing operations) | 150 | ||
| NOTE 3 | REBITDA (non IFRS metrics) | 151 | ||
| NOTE 4 | Notes to the income statement Personnel expenses |
150 152 |
||
| NOTE 1 NOTE 5 |
Financial data by segment (Income statement Other operating gains and losses |
152 | ||
| NOTE 6 | per segment after reclassifi cation in discontinued Earnings from associates and joint ventures |
152 | ||
| NOTE 7 | operations for Chlorovinyls, Solvay Indupa, and Eco Services) Non-recurring items |
150 152 |
||
| NOTE 2 NOTE 8 |
Sales by country and region (continuing operations) Net fi nancial charges |
152 153 |
||
| NOTE 3 NOTE 9 |
REBITDA (non IFRS metrics) Income taxes |
153 153 |
||
| NOTE 4 NOTE 5 |
Personnel expenses NOTE 10 Discontinued operations (Chlorovinyls, Solvay Indupa and Eco Services) Other operating gains and losses |
154 155 154 |
||
| NOTE 6 | NOTE 11 Net income Earnings from associates and joint ventures |
156 154 |
||
| NOTE 7 | NOTE 12 Adjusted net income (non IFRS metrics) Non-recurring items |
156 154 |
||
| NOTE 8 | NOTE 13 Earnings per share Net fi nancial charges |
157 155 |
||
| NOTE 9 | Income taxes | 155 | ||
| NOTE 10 Discontinued operations (Pharma, Chlorovinyls, Notes to the consolidated statement Solvay Indupa, and Eco Services) of comprehensive income |
158 158 |
|||
| NOTE 11 Net income NOTE 14 Consolidated statement of comprehensive income NOTE 12 Adjusted net income (non IFRS metrics) |
159 158 159 |
|||
| NOTE 13 Earnings per share 159 Notes to the consolidated statement of cash fl ows (continuing and discontinued operations) 159 |
||||
| Notes to the statement of comprehensive income NOTE 15 Depreciation, amortization and impairments |
160 159 |
|||
| NOTE 14 Consolidated statement of comprehensive income NOTE 16 Income taxes |
160 159 |
|||
| NOTE 17 Changes in working capital | 159 |
Notes to the statement of cash fl ows (continuing and discontinued operations) 161 NOTE 15 Depreciation, amortization and impairments 161 NOTE 16 Income tax 161 NOTE 17 Changes in working capital 161 NOTE 18 Changes in provisions 161 NOTE 19 Other non-operating and non-cash items 161
NOTE 21 Proceeds from bond issuance classifi ed as equity
NOTE 18 Changes in provisions 159 NOTE 19 Other non operating and non cash items 159 NOTE 20 Cash fl ows from investing activities – acquisition/
NOTE 22 Other cash fl ows from fi nancing activities 161 NOTE 23 Cash fl ow from discontinued operations 161 NOTE 24 Share-based payments 161
NOTE 20 Cash fl ows linked to the acquisition/disposal
of assets and investments 162
disposal of assets and investments 160
and capital increase 161
| NOTE 24 Share-based payments NOTE 25 Intangible assets |
163 164 |
|
|---|---|---|
| NOTE 26 Goodwill and business combinations | 165 | |
| NOTE 27 Tangible assets Notes to the statement of fi nancial position |
169 165 |
|
| NOTE 28 Impairment NOTE 25 Intangible assets |
170 165 |
|
| NOTE 26 Goodwill | NOTE 29 Available-for-sale fi nancial assets | 172 166 |
| NOTE 30 Investments in associates and joint ventures NOTE 27 Tangible assets |
172 169 |
|
| NOTE 31 Other investments NOTE 28 Impairment |
173 170 |
|
| NOTE 32 Inventories NOTE 29 Available-for-sale fi nancial assets |
173 171 |
|
| NOTE 33 Other current receivables – Other NOTE 30 Investments in associates and joint ventures |
173 172 |
|
| NOTE 34 Assets held for sale NOTE 31 Other investments |
174 172 |
|
| NOTE 35 Provisions NOTE 32 Inventories |
174 173 |
|
| NOTE 36 Net indebtedness NOTE 33 Other current receivables – Other |
183 173 |
|
| NOTE 37 Financial instruments and fi nancial risk NOTE 34 Assets held for sale management |
173 186 |
|
| NOTE 35 Provisions NOTE 38 Other current liabilities |
174 196 |
|
| NOTE 36 Net indebtedness | 182 | |
| NOTE 37 Financial instruments and fi nancial risk management 184 Miscellaneous notes |
197 | |
| NOTE 38 Other current liabilities NOTE 39 Commitments to acquire tangible and intangible assets |
193 197 |
|
| Notes to the statement of changes in equity NOTE 40 Dividends proposed for distribution but not yet recognized as a distribution to equity holders |
194 197 |
|
| NOTE 41 Contingent liabilities | 197 | |
| Miscellaneous notes NOTE 42 Associates and joint ventures |
195 197 |
|
| NOTE 43 Joint operations NOTE 39 Commitments to acquire tangible and intangible |
199 | |
| assets NOTE 44 Non-controlling interests (continuing operations) |
195 200 |
|
| NOTE 40 Dividends proposed for distribution but not yet NOTE 45 Related parties |
201 | |
| recognized as a distribution to equity holders NOTE 46 Policy in respect of capital NOTE 41 Contingent liabilities |
195 201 195 |
|
| NOTE 42 Joint ventures and associates 2015 consolidation scope |
195 202 |
NOTE 22 Other cash fl ows from fi nancing activities 163 NOTE 23 Cash fl ow from discontinued operations 163
of fi nancial position 164
Notes to the consolidated statement
| NOTE 45 Related parties | 199 |
|---|---|
| List of companies included in the consolidation | 203 |
| NOTE 46 Events after the reporting period | 200 |
The main IFRS accounting policies used in preparing these consolidated fi nancial statements are set out below:
This information was prepared in accordance with European Regulation (EC) 1606/2002 on the application of international accounting standards dated July 19, 2002. The Group's consolidated fi nancial statements for the year ended December 31, 2015 were prepared in accordance with IFRS (International Financial Reporting Standards) as published by the International Accounting Standards Board (IASB), and endorsed by the European Union.
The accounting standards applied in the consolidated fi nancial statements for the year ended December 31, 2015 are consistent with those used to prepare the consolidated fi nancial statements for the year ended December 31, 2014.
No new s tandards, Interpretations or amendments have become applicable as from 2015, which have a material impact on the Group's consolidated fi nancial statements.
No new s tandards, i nterpretations or amendments are applicable as from 2016, which are expected to have a material impact on the Group's consolidated fi nancial statements.
The impact from the application of those Standards and amendments is currently being assessed.
Other s tandards, i nterpretations and amendments applicable after 2016 are not expected to have a material impact on the Group's consolidated fi nancial statements.
The consolidated fi nancial statements are presented in millions of euros, which is also the functional currency of the parent company.
The preparation of the fi nancial statements requires the use of estimates and assumptions that have an impact on the application of accounting policies and the measurement of amounts recognized in the fi nancial statements. The areas for which the estimates and assumptions are material with respect to the consolidated fi nancial statements are presented in the section Critical accounting judgments and key sources of estimation uncertainty.
The consolidated fi nancial statements incorporate the fi nancial statements of the Company, and:
Where necessary, adjustments are made to the fi nancial statements of the investees so as to align their accounting policies with those of the Group.
A subsidiary is an entity over which the Group has control. Control is achieved when the Group has (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to aff ect the amount of the investor's returns. To assess whether the Group has control, potential voting rights are taken into account . Subsidiaries are fully consolidated. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the eff ective date of acquisition and up to the eff ective date of disposal .
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group's equity. Non-controlling interests are initially measured, either at fair value (full goodwill method), or at the non-controlling interests' proportionate share in the recognized amounts of the acquiree's identifi able net assets (proportionate goodwill method). The choice of measurement is made on an acquisition-by-acquisition basis. Subsequent to the 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 non-controlling interests even if this results in the non-controlling interests having a defi cit balance.
Changes in the Group's equity 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 noncontrolling interests are adjusted to refl ect the changes in their relative interests in the subsidiary. Any diff erence 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.
SOLVAY • 2015 ANNUAL REPORT
When the Group loses control of a subsidiary, the profi t or loss on disposal is calculated as the diff erence 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 considered to be the fair value on initial recognition for subsequent accounting in accordance with IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or joint venture in accordance with IAS 28 Investments in Associates and Joint Ventures.
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 and 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, generally through profi t or loss.
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 obtains 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 Business Combinations are recognized and measured at their fair value at the acquisition date, except that:
• assets (or disposal groups) that are classifi ed as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
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 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 aff ected 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 does not exceed twelve months.
Goodwill arising in a business combination is recognized as an asset at the date that control is obtained (the acquisition date). Goodwill is measured as the excess of the sum of:
over the share acquired by the Group in the fair value of the entity's identifi able net assets at the acquisition date.
Goodwill is not amortized but is tested for impairment on an annual basis, and more frequently if there are any impairment triggers identifi ed.
For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) in accordance with IAS 36 Impairment of Assets.
A cash-generating unit (CGU) 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(s) of assets.
These tests consist of comparing the carrying amount of the assets or (groups of) CGUs with their recoverable amount. The recoverable amount of an asset or a (group of) CGU(s) is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of the CGU 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 prorata on the basis of the carrying amount of each asset in the unit. An impairment loss recognized on goodwill shall not be reversed in a subsequent period.
On disposal of an operation within a CGU to which goodwill has been allocated, the goodwill associated with the operation disposed of is included in the determination of the profi t or loss on disposal. It is measured on the basis of the relative values of the operation disposed of and the portion of the CGU retained, unless another method better refl ects the goodwill associated with the operation disposed of.
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 arrangement. 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.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about relevant activities require the unanimous consent of the parties sharing control.
The results, assets and liabilities of associates and joint ventures are incorporated in the consolidated 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, on initial recognition, investments in associates and joint ventures are recognized in the consolidated statement of fi nancial position at cost, and the carrying amount is adjusted for post-acquisition changes in the Group's share of the net assets of the associate or joint venture, less any impairment of the value of individual investments. Losses of an associate or joint venture in excess of the Group's interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate or joint venture) are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.
Any excess of the cost of acquisition over the Group's share of the net fair value of the identifi able assets and (contingent) liabilities of the associate or joint venture recognized at the date of acquisition is 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 and (contingent) liabilities over the cost of acquisition, after reassessment, is recognized in profi t or loss in the period in which the investment is acquired.
Where a Group entity transacts with an associate or joint venture of the Group, profi ts and losses are eliminated to the extent of the Group's interest in the relevant associate or joint venture.
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about relevant activities require the unanimous consent of the parties sharing control. In its consolidated fi nancial statements, the Group recognizes its share of the joint operations' assets, liabilities, revenue and expenses, based on its ownership interest in the joint operations.
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 of the Group's consolidated fi nancial statements.
In preparing the fi nancial statements of the individual entities, transactions in currencies other than the entities' functional currency are recognized at the exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the closing rate.
Non- monetary items carried at fair value that are denominated in foreign currencies are translated at the rate when the fair value was measured. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated at the closing rate.
Exchange diff erences 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 at the end of each reporting period, 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 except when the impact of applying the average rate is materially diff erent from applying the spot rate at the respective transactions' dates, in which case the latter is applied. Exchange diff erences arising, if any, are recognized in other comprehensive income as "currency translation diff erences" .
Currency translation diff erences are reclassifi ed from equity to profi t or loss, on:
• a disposal of the Group's entire interest in a foreign operation, or a partial disposal involving loss of control over a subsidiary that includes a foreign operation. In this case, all of the accumulated exchange diff erences in respect of that operation attributable to the Group are reclassifi ed to profi t or loss. Any exchange diff erences that have previously been attributed to non-controlling interests are derecognized, but they are not reclassifi ed to profi t or loss;
• a partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation, when the retained interest is a fi nancial asset. In this case, the proportionate share of the accumulated exchange diff erences is reclassifi ed to profi t or loss.
In the case of a partial disposal of a subsidiary (i.e. no loss of control) that includes a foreign operation, the proportionate share of accumulated exchange diff erences is reattributed to non-controlling interests and is not recognized in 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 into the Group's presentation currency at the closing rate.
| Year-end rate | Average rate | |||||
|---|---|---|---|---|---|---|
| 2015 | 2014 | 2015 | 2014 | |||
| 1 Euro = | ||||||
| Argentine Peso | ARS | 14.1601 | 10.3879 | 10.2349 | 10.7730 | |
| Brazilian Real | BRL | 4.3117 | 3.2207 | 3.7014 | 3.1211 | |
| Yuan Renminbi | CNY | 7.0608 | 7.5358 | 6.9729 | 8.1876 | |
| Pound Sterling | GBP | 0.7340 | 0.7789 | 0.7259 | 0.8062 | |
| Japanese Yen | JP¥ | 131.0700 | 145.2300 | 134.3069 | 140.3130 | |
| Russian Ruble | RUB | 80.6736 | 72.3370 | 68.1152 | 50.9460 | |
| Thai Baht | THB | 39.2480 | 39.9100 | 38.0270 | 43.1534 | |
| US Dollar | USD | 1.0887 | 1.2141 | 1.1094 | 1.3287 | |
| Venezuelan Bolivar Fuerte | VEF | 6.8626 | 7.6526 | 6.9901 | 8.3740 |
The Group's employees are off ered various post-employment and other long-term employee benefi ts as a result of legislation applicable in certain countries, contractual agreements entered into by the Group with its employees or constructive obligations.
The post-employment benefi ts are classifi ed as defi ned contribution or defi ned benefi t plans.
Defi ned contribution plans involve the payment of fi xed contributions to a separate entity, and release the employer from any subsequent obligation, as this separate entity is solely responsible for paying the amounts due to the employee. The expense is recognized when an employee has rendered service to the Group during the period.
Defi ned benefi t plans concern all plans other than defi ned contribution plans, and include:
Taking into account projected fi nal salaries on an individual basis, post-employment benefi ts are measured by applying a method (projected unit credit method) using assumptions involving discount rate, life expectancy, turnover, wages, annuity revaluation and medical cost infl ation. The assumptions specifi c to each plan take into account the local economic and demographic contexts.
The discount rates are interest rates of high-quality corporate bonds that are denominated in the currency in which the benefi ts will be paid, and that have terms to maturity approximating the terms of the related pension obligation.
The amount recognized under post-employment obligations corresponds to the diff erence between the present value of future obligations and the fair value of the plan assets funding the plan. If this calculation gives rise to a defi cit, an obligation is recognized in liabilities. Otherwise, a net asset limited to the lower of the surplus in the defi ned benefi t plan and the present value of any future plan refunds or any reduction in future contributions to the plan is recognized.
The defi ned benefi t cost consists of service cost and net interest (based on discount rate) on the net liability or asset, both recognized in profi t or loss, and remeasurements of the net liability or asset, recognized in other comprehensive income.
Service cost consists of current service cost, past service cost resulting from plan amendments or curtailments and settlement gains or losses.
The interest expenses arising from the reverse discounting of the benefi t obligations, the fi nancial income on plan assets (determined by multiplying the fair value of the plan assets by the discount rate) as well as interest on the eff ect of the asset ceiling are recognized on a net basis in the net fi nancial charges.
Remeasurements of the net liability or asset consist of:
Other long-term benefi ts such as long service awards are accounted for in the same way as post-employment benefi ts but remeasurements are fully recognized in the net fi nancial charges during the period in which they occur.
The actuarial calculations of post-employment obligations and other long-term benefi ts are performed by independent actuaries.
Non-recurring items mainly include:
The current tax payable is based on taxable profi t of the year. Taxable profi t diff ers 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 for temporary diff erences between the carrying amounts of assets and liabilities in the consolidated fi nancial statements and their corresponding tax bases used in the computation of taxable profi t.
Deferred tax assets are generally recognized for all deductible temporary diff erences to the extent that it is probable that taxable profi ts will be available against which those deductible temporary diff erences can be utilized.
Deferred taxes are calculated at local level. Deferred tax liabilities are generally recognized for all taxable temporary diff erences.
No deferred tax liabilities are recognized following the initial recognition of goodwill.
In addition, no deferred tax assets or liabilities recognized with respect to the initial recognition of an asset or liability in a transaction which is not a business combination and aff ects neither accounting profi t nor taxable profi t.
Deferred tax liabilities are recognized for taxable temporary diff erences associated with investments in subsidiaries, joint operations, joint ventures, and associates, except where the Group is able to control the timing of the reversal of the temporary diff erence and it is probable that the temporary diff erence will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary diff erences 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 diff erences 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 utilized.
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 is 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 off set 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 taxes for the period 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 when they arise from the initial accounting for a business combination. In the case of a business combination, the tax eff ect 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 incidental to ownership. All other leases are classifi ed as operating leases.
Agreements not in the legal form of a lease contract are analyzed in accordance with IFRIC 4 Determining whether an Arrangement contains a Lease to determine whether or not they contain a leasing contract to be accounted for in accordance with IAS 17 Leases.
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 consolidated statement of fi nancial position 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 lease.
Lease payments are apportioned between fi nance expenses and reduction of the lease obligation so as to produce a constant periodic 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 IFRS main accounting policies – 17. Capitalized borrowing costs). Contingent rentals arising under fi nance leases 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.
An intangible asset is an identifi able non-monetary asset without physical substance. It is identifi able when it is separable, i.e. is capable of being separated or divided from the Group, or when it arises from contractual or other legal rights. An intangible asset shall be recognized if, and only if:
Intangible assets acquired or developed internally are initially measured at cost. The cost of an acquired intangible asset comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, and any directly attributable cost of preparing the asset for its intended use. Subsequent expenditure on intangible assets is capitalized only if it is probable that it will increase the future economic benefi ts associated with the specifi c asset. Other expenditure is expensed as incurred.
After initial recognition, intangible assets are measured at cost less accumulated amortization and impairment losses, if any.
Intangible assets are amortized on a straight-line basis over their estimated useful lives, which do not exceed the contractual period, if any. The estimated useful lives, residual values and amortization methods are reviewed at each year-end, and any changes in estimates are accounted for prospectively.
| Patents and trademarks | 2-20 years |
|---|---|
| Software | 3-5 years |
| Development expenditures | 2-5 years |
| Other intangible assets – Customer relationships |
5-29 years |
| Other intangible assets – Technology | 5-20 years |
Amortization expense is included in the consolidated income statement within cost of goods sold, commercial and administrative costs, and research and development costs.
The asset is tested for impairment if there is a trigger for impairment, and annually for projects under development (see IFRS main accounting policies – 16. Impairment of tangible and intangible assets (excluding goodwill), and equity method investees ).
Intangible assets are derecognized from the consolidated statement of fi nancial position on disposal or when no future economic benefi ts are expected from their use or disposal. The gain or loss arising from the derecognition of an intangible asset is recognized in profi t or loss at the moment of derecognition.
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:
Development costs comprise employee expenses, the cost of materials and services directly attributable to the projects, and an appropriate share of directly attributable fi xed costs including, and where applicable, borrowing costs. They are amortized as from the moment they are available for use, i.e. when they are in the location and condition necessary for them to be capable of operating in the manner intended by management. Development costs which do not satisfy the above conditions are expensed as incurred.
Other intangible assets mainly include customer lists, technologies and other intangible commercial assets, such as brand names, acquired separately or in a business combination.
2015 ANNUAL REPORT • SOLVAY
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 rights for some of its installations. The Group is also involved in Clean Development Mechanism (CDM) 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).
In the absence of any IFRS regulating the accounting treatment of CO2 emission rights, the Group applies the Trade/Production model, according to which CO2 emission rights are presented as inventories if they will be consumed in the production process or as derivatives if they are held for trading. Energy Services 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 recognized in other operating income for the industrial component, where Energy Services sells the CO2 emission rights generated by Solvay, as well as for the trading component, where Energy Services acts as a trader/broker with respect to those CO2 emission rights .
Property, plant and equipment are tangible items that:
The items of property, plant and equipment owned by the Group are recognized as tangible assets when the following conditions are satisfi ed:
Items of property, plant and equipment are initially measured at cost. The cost of an item of property, plant and equipment comprises its purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. If applicable, the cost comprises borrowing costs during the construction period.
After initial recognition, items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any.
Items of property, plant and equipment are depreciated on a straightline basis over their estimated useful lives. The components of an item of property, plant and equipment with diff erent useful lives are depreciated separately. Land is not depreciated. The estimated useful lives, residual values and depreciation methods are reviewed at each year-end, and any changes in estimates are accounted for prospectively.
| Buildings | 30-40 years |
|---|---|
| IT equipment | 3-5 years |
| Machinery and equipment | 10-20 years |
| Transportation equipment | 5-20 years |
Depreciation expense is included in the consolidated income statement within cost of goods sold, commercial and administrative costs, and R&D costs.
The asset is tested for impairment if there is trigger for impairment (see IFRS main accounting policies – 16. Impairment of tangible and intangible assets (excluding goodwill), and equity method investees ).
Items of property, plant and equipment are derecognized from the consolidated statement of fi nancial position on disposal or when no future economic benefi ts are expected from their use or disposal. The gain or loss arising from the derecognition of an item of property, plant and equipment is recognized in profi t or loss at the moment of derecognition.
Subsequent expenditure related to items of property, plant and equipment is capitalized only if it is probable that it will increase the future economic benefi ts associated with the specifi c asset. Other expenditure is expensed as incurred. 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 recognition criteria mentioned above. The carrying amount of replaced items is derecognized.
Repair and maintenance costs are recognized in the consolidated income statement as incurred.
Regarding 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 depreciated over the period during which the economic benefi ts are expected to be obtained, i.e. the major repairs' interval.
Dismantling and restoration costs are included in the cost of an item of property, plant and equipment if the Group has a legal or constructive obligation to dismantle or restore. They are depreciated over the useful life of the items to which they pertain.
Generally, Solvay's obligation to dismantle and/or restore its operating sites is only likely to arise upon the discontinuation of a site's activities. A provision for dismantling of discontinued sites or installations is recognized when there is a legal obligation (due to a request or injunction from the relevant authorities), or when there is no technical alternative than to dismantle, so 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 suff ered 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 CGU to which the asset belongs. Where a reasonable and consistent basis of allocation can be identifi ed, corporate assets are allocated to individual CGUs, or otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identifi ed.
The 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 CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) 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 CGU) 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 (net of amortization or depreciation) had no impairment loss been recognized for the asset (or CGU) 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 consolidated statement of fi nancial position at their expected value at the time of initial government approval. The grant is recognized in profi t or loss over the depreciation period of the underlying assets as a reduction of depreciation expense.
Other government grants are recognized as income on a systematic basis over the periods in which the related costs, which they are intended to compensate, are recognized. 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.
Cost of inventories includes the purchase, conversion and other costs incurred in bringing the inventories to their present location and condition. 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.
Inventories are measured 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 completion and the estimated costs necessary to make the sale.
Financial assets include available- for- sale securities, loans and receivables, and derivative fi nancial instruments. 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 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. This classifi cation determines the method for measuring fi nancial assets at subsequent reporting 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 eff ective interest method of any diff erence between that initial amount and the maturity amount, minus any reduction for impairment or uncollectibility. The eff ective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The eff ective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the eff ective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, when appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an eff ective interest basis for debt instruments other than those fi nancial assets classifi ed as at fair value through profi t or loss.
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 that does not have a quoted price in an active market cannot be reliably estimated, it is measured at cost.
Financial assets are measured at fair value with any resulting gains or losses recognized in profi t or loss if they are held for trading. 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 classifi ed as held for trading. In this case, resulting gains and losses are recognized in profi t or loss unless they are designated and eff ective as hedging instruments in a cash fl ow hedge.
Available-for-sale fi nancial assets include equity investments in entities, which were not acquired principally for the purpose of selling in the short term, and which are not subsidiaries, joint operations, joint ventures, or associates. Assets classifi ed in this category are measured at fair value, with any resulting gains or losses recognized in other comprehensive income. If there is objective evidence that the asset is impaired, any cumulative loss that had been recognized in other comprehensive income is reclassifi ed from equity to profi t or loss.
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 receivables 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 from the date of acquisition, and are subject to insignifi cant risk of change in value. Loans and receivables are measured at amortized cost using the eff ective interest method, less any impairment.
The impairment loss of a fi nancial asset measured at amortized cost equals the diff erence between the carrying amount and the estimated future cash fl ows, discounted at the initial eff ective 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 the consolidated income statement.
The impairment loss is reversed if the reversal can be objectively related to an event occurring after the impairment was recognized. For fi nancial assets measured at amortized cost, the reversal is recognized in profi t or loss. After reversal, the carrying amount of the fi nancial asset measured at amortized cost shall not exceed what the amortized cost would have been, had the impairment not been recognized. Impairment losses with respect to an equity instrument classifi ed as available for sale are not reversed through profi t or loss. Impairment losses with respect to debt instruments classifi ed as available for sale are recognized in profi t or loss to the extent of the impairment loss previously recognized in profi t or loss. Impairment losses relating to assets measured at cost cannot be reversed.
Financial liabilities are classifi ed as either "fi nancial liabilities at fair value through profi t or loss" or "fi nancial liabilities measured at amortized cost".
Financial liabilities are measured at fair value with any resulting gains or losses recognized in profi t or loss if they are held for trading. 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 classifi ed as held for trading. In this case, resulting gains and losses are recognized in profi t or loss unless they are designated and eff ective as hedging instruments in a cash fl ow hedge.
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 eff ective interest method, with interest expense recognized on an eff ective yield basis.
The eff ective 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 eff ective 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 comprise long-term fi nancial debt, other current and non-current liabilities, short-term fi nancial debt, trade liabilities and dividends payable.
Derivative fi nancial instruments are fi nancial instruments with all three of the following characteristics:
The Group enters into a variety of derivative fi nancial instruments (forward, future, option, and swap contracts) to manage its exposure to interest rate risk, foreign exchange rate risk and commodity risk (mainly energy and CO2 emission rights price risks). Further details of derivative fi nancial instruments are disclosed in note 37.
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 income or expense, unless the derivative is designated and eff ective as a hedging instrument (see IFRS main accounting policies – 23. Hedge accounting). The Group designates certain derivatives as hedging instruments of the exposure to variability in cash fl ows with respect to a recognised asset or liability or a highly probable forecast transaction (cash fl ow hedges).
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. Derivative instruments (or portions of them) are presented as non-current assets or non-current liabilities if the remaining maturity of the underlying settlements is more than twelve months after the reporting period. Other derivative instruments (or portions of them) are presented as current assets or current liabilities.
The Group designates certain derivatives and embedded derivatives, in respect of foreign currency risk, interest rate risk, energy price risk and CO2 emission rights price risk, as hedging instruments in a cash fl ow hedge relationship.
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 the hedge transaction. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly eff ective in off setting changes in cash fl ows of the hedged item.
Note 37 sets out details of the fair values of the derivative instruments used for hedging purposes.
The eff ective portion of changes in the fair value of hedging instruments that are designated in a cash fl ow hedge is recognized in other comprehensive income. The gain or loss relating to the ineff ective portion is recognized immediately in profi t or loss.
Amounts previously recognized in other comprehensive income 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 consolidated income statement as the recognized hedged item. When the hedged forecast transaction results in the recognition of a non-fi nancial asset or a non-fi nancial liability, the gains and losses previously recognized in other comprehensive income are transferred from other comprehensive income and included in the initial measurement of the cost of the non-fi nancial asset or nonfi 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 other comprehensive income at that time remains in other comprehensive income and will aff ect profi t or loss as described in the paragraph above. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in other comprehensive income is recognized immediately in profi t or loss as a reclassifi cation adjustment. If all or a portion of a loss recognized in other comprehensive income will not be recovered in one or more future periods, the amount that is not expected to be recovered is immediately reclassifi ed into profi t or loss.
Ordinary shares are classifi ed as equity.
Incremental costs directly attributable to the issuance of new share capital are directly recognized in equity as a deduction, net of tax, from the equity issuance proceeds.
The reserves include:
currency translation diff erences from the consolidation process relating to the translation of the fi nancial statements of foreign operations prepared in a functional currency other than the euro;
the impacts of the fair value remeasurement of available-for-sale fi nancial assets;
Those represent the share of non-controlling interests in the net assets and comprehensive income of subsidiaries of the Group. This share represents the interests in subsidiaries that are not held by the Company or its subsidiaries.
Provisions are recognized when (a) the Group has a present obligation (legal or constructive) as a result of a past event, (b) it is probable that the Group will be required to settle the obligation, and (c) 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 the eff ect of the time value of money is material, the amount is the present value of expenditures required to settle the obligation. Impacts of changes in discount rates are generally recognized in the fi nancial result.
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 if the Group settles the obligation.
An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefi ts expected to be received under it. Present obligations arising from onerous contracts are recognized and measured as provisions.
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 aff ected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those aff ected 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 analyzes twice a year 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.
The Venezuelan economy being considered as a hyperinfl ationary economy, the Group has applied the hyperinfl ationary accounting requirements of IAS 29 Financial Reporting in Hyperinfl ationary Economies to its Venezuelan operations. The fi nancial statements are based on the historical cost basis and have been restated to take into account the eff ects of hyperinfl ation.
The index used to refl ect current values is based on the infl ation rate published by Banco Central de Venezuela for the nine fi rst months of 2015 and extrapolated for the last quarter.
| In € million | At 31/12/2015 | At 31/12/2014 |
|---|---|---|
| Index at year end (2002 = 100) | 5,929 | 2,118 |
| Movement of the year | 180.0% | 67.5% |
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. Segment information is further detailed in note 1.
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 and value-added services corresponding to Solvay's know-how.
Revenue from non-core activities primarily includes commodity and utility trading transactions and other revenue deemed as incidental by the Group .
Net sales and other revenue are recognized when all the following conditions have been satisfi ed:
144
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, the asset (or disposal group) should be actively marketed at a price which is reasonable in relation to its current fair value, the sale should be expected to be completed within one year from the date of classifi cation, and actions required to complete the plan should indicate that it is unlikely that signifi cant changes to the plan will be made or that the plan will be withdrawn.
A discontinued operation is a component of the Group which the Group has disposed of or which is classifi ed as held for sale, and:
A component of the Group consists of operations and cash fl ows, which can be clearly distinguished operationally and for fi nancial reporting purposes, from the rest of the Group.
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 recognized as an impairment loss. Depreciation of such assets is discontinued as from their classifi cation as held for sale. Prior period statements of fi nancial position are not restated to refl ect the new classifi cation of a noncurrent asset (or disposal groups) as held for sale.
In the consolidated statement of comprehensive income, the consolidated statement of cash fl ows, and disclosures, discontinued operations are re-presented for prior periods presented.
Finance income and expense are detailed in note 8.
Net foreign exchange gains or losses on fi nancial items and the changes in fair value of derivative fi nancial instruments are presented respectively in fi nance income or expense , with the exception of changes in fair value of derivative fi nancial instruments that are hedging instruments in a cash fl ow hedge relationship, and which are recognized on the same line as the hedged item, when the latter aff ects profi t or loss.
Interest on borrowings is recognized in costs of borrowings as incurred, with the exception of borrowing costs directly attributable to the acquisition, construction and production of qualifying assets (see IFRS main accounting policies – 17. Capitalized borrowing costs).
Solvay has set up compensation plans, including equity-settled and cash-settled share-based compensation plans.
In its equity-settled plans, the Group receives services as consideration for its own equity instruments (share options). The fair value of services rendered by employees in consideration for the granting of equity-instruments represents an expense. This expense is recognized on a straight-line basis in the consolidated income statement over the vesting periods relating to these equityinstruments with the recognition of a corresponding adjustment in equity. The fair value of services rendered is measured in reference to the fair value of the equity-instruments on the grant date. It is not subsequently remeasured. At each reporting date, the Group reestimates the number of share options likely to vest. The impact of the revised estimates is recognized in profi t or loss against a corresponding adjustment in equity.
In its cash-settled plans, the Group acquires services by incurring a liability to transfer to its employees rendering those services amounts that are based on the price (or value) of equity instruments (including shares or share options) of the Group. The fair value of services rendered by employees in consideration for the granting of share-based payments represents an expense. This expense is recognized on a straight-line basis in the consolidated income statement over the vesting periods relating to these share-based payments with the recognition of a corresponding adjustment in liabilities. At each reporting date, the Group re-estimates the number of options likely to vest, with the impact of the revised estimates recognized in profi t or loss. The Group measures the services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the Group remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognised in profi t or loss for the period.
In accordance with IAS 1 Presentation of Financial Statements, the Group elected to present two statements, i.e. a consolidated income statement immediately followed by a consolidated comprehensive income statement.
The components of other comprehensive income (OCI) are presented before related tax eff ects with one amount shown for the aggregate amount of income tax relating to those components. Tax impacts are further disclosed in note 14.
Contingent assets are not recognized in the consolidated fi nancial statements. They are disclosed if an infl ow of economic benefi ts is probable.
Contingent liabilities are not recognized in the consolidated fi nancial statements, except if they arise from a business combination. They are disclosed unless the possibility of an outfl ow of economic benefi ts is remote.
Events after the reporting period which provide evidence of conditions that existed at the end of the reporting period (adjusting events) are recognized in the consolidated fi nancial statements. Events indicative of conditions that arose after the reporting period are non-adjusting events and are disclosed in the notes if material.
Financial statements
Financial communication puts emphasis on two non IFRS metrics:
the understanding of the Group's performance. To prepare this implementation, the unaudited pro forma information including Cytec's fi nancial statements discloses these new non IFRS metrics with the related glossary (see Financial Management Report and glossary);
The Group performs annual impairment tests on (groups of) CGUs to which goodwill has been allocated, and each time there are indicators that their carrying amount might be higher than their recoverable amount. This analysis requires management to estimate the future cash fl ows expected to arise from the CGUs and a suitable discount rate in order to calculate present value.
Further details are provided in note 28.
The carrying amount of the deferred tax assets is reviewed at each reporting date. The carrying amount of a deferred tax asset is reduced to the extent that it is no longer probable that the Group will earn suffi cient taxable profi ts against which the deductions can be utilized. Any such reduction is reversed to the extent that it becomes probable that suffi cient taxable profi ts will be available.
The corporate tax reporting team, which has the overview of the Group deferred tax positions, is involved in assessing deferred tax assets.
Deferred tax assets for tax loss carryforwards are based on fi ve-year revenue forecasts, except with respect to fi nancial companies where ten-year fi nancial revenue forecasts are highly predictable and are consequently used.
Further details are provided in note 9.B.
The actuarial assumptions used in determining the defi ned benefi t obligations at December 31 as well as the annual cost can be found in note 35. All main employee benefi ts plans are assessed annually by independent actuaries. Discount rates and infl ation rates are defi ned centrally by management. The other assumptions (such as future salary increases 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 a central actuary to check the acceptability of the results and ensure consistency in reporting.
Further details are provided in note 35.
Environmental provisions are managed and coordinated jointly by the Environmental Rehabilitation Department and the Finance Department.
The forecasts of expenses are discounted to their present value .
The discount rates fi xed by geographical area correspond to the average risk-free rate on 10-year government bonds. These rates are set annually by the 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 at the discount rates described above.
Further details are provided in note 35.
Any signifi cant litigations (tax and other, including threat of litigation) are 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 and/or remeasure existing provisions together with the Finance Department and the Insurance Department. The resulting report is submitted to the Executive Committee by the Group's General Counsel and thereafter to the Audit Committee and to the Board of Directors.
Further details are provided in note 35.
In accordance with IFRS 3 Business Combinations, the Group measures the identifi able assets acquired and (contingent) liabilities assumed in a business combination at fair value. 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 note 26.
Assets are classifi ed as h eld for sale if their carrying amount will be recovered 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 is available for immediate sale in its present condition. Amongst other conditions, management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classifi cation. However, in some cases, an asset may remain classifi ed as h eld for sale for a period exceeding one year if it remains unsold due to events or circumstances beyond the Group's control.
Solvay is organized into fi ve Operating Segments:
Advanced Formulations: As one of Solvay's growth engines, the businesses grouped under Advanced Formulations stand out for their innovation capacity and relatively low capital intensity. Their off erings address major societal trends, meeting ever stricter requirements to respect the environment and to save energy, and challenges of the mass consumer markets.
Advanced Materials: A leader in markets with high entry barriers and strong returns on investment, the Advanced Materials S egment is a major contributor to the Group's performance and growth. Innovation, its global presence feature and long-term partnerships with customers provide a compelling competitive edge with industries seeking increasingly energy effi ciency and less polluting functionalities.
Chlorovinyls business was classifi ed as a disposal group held for sale in 2013. The transaction closed on July 1, 2015.
On November 12, 2014, the Brazilian competition authority (CADE) notifi ed its decision to reject the intended acquisition of Solvay's 70.59% majority stake in Solvay Indupa by Brazilian chemical producer Braskem. Solvay confi rms that its strategic direction remains unaff ected and that it is examining alternative options to sell its participation in Solvay Indupa. As a disposal within 12 months is considered highly probable, Solvay Indupa remains classifi ed as non-current assets held for sale and discontinued operations at December 31, 2015.
Further details are provided in note 34.
Solvay contributed its chlorovinyls business in the joint venture Inovyn on July 1, 2015.
Solvay's exit from Inovyn against receipt of an additional, performance-based payment qualifi es as a derivative fi nancial instrument, of which the fair value amounts to € 244 million at December 31, 2015. Its fair value is largely based on level 3 inputs, namely REBITDA multiples, comparing the expected exit price against the fair value of Solvay's 50% equity share held in Inovyn . Any future changes of estimates of REBITDA multiples will impact the fair value of the derivative fi nancial instrument.
Further details are provided in note 37.
At December 31, 2015, the carrying amount of the Group's interest in Solvay Indupa has been measured based on last indicative off ers.
Performance Chemicals: Operating in mature resilient markets, this segment's success is based on economies of scale, competitiveness and quality of service. Solidly cash-generating, the Performance Chemicals businesses are engaged in programs of excellence to create additional sustainable value.
Functional Polymers: The key success factors of this segment, which primarily groups the Polyamide activities, are continuous manufacturing optimization and innovation. Solvay is one of few players to operate across the entire polyamide 6.6 chain.
Corporate & Business Services: This segment includes the Solvay Energy Services business which delivers energy optimization programs within the Group as well as for third parties. It also includes the Corporate Functions.
Information per segment for 2015 is presented below:
| 2015 In € million Income statement items |
Advanced Formulations |
Advanced Materials |
Performance Chemicals |
Functional Polymers |
Corporate & Energy |
Cytec | Group Total |
|---|---|---|---|---|---|---|---|
| Net sales (including the inter-segment sales) |
2,656 | 3,341 | 3,126 | 1,541 | 11 | 10,676 | |
| • Inter-segment sales | (4) | (7) | (36) | (52) | 0 | (98) | |
| Net sales | 2,652 | 3,334 | 3,090 | 1,490 | 11 | 10,578 | |
| Gross margin | 608 | 1,107 | 819 | 219 | 5 | 2,759 | |
| Depreciation and amortization | 194 | 265 | 216 | 102 | 64 | 842 | |
| Adjustments for KPI monitored by Management |
13 | 22 | 35 | ||||
| REBITDA | 378 | 836 | 789 | 141 | (189) | 1,955 | |
| Earnings from associates and joint ventures | 9 | 8 | 20 | (14) | (2) | 21 | |
| EBIT | 184 | 517 | 564 | 106 | (539) | 833 | |
| Net fi nancial charges | (226) | ||||||
| Income taxes | (97) | ||||||
| Result from discontinued operations | (55) | ||||||
| Net income | 454 |
| Statement of fi nancial position and other items |
Advanced Formulations |
Advanced Materials |
Performance Chemicals |
Functional Polymers |
Corporate & Energy |
Cytec | Group Total |
|---|---|---|---|---|---|---|---|
| Capital expenditures (continuing operations) |
214 | 340 | 267 | 71 | 77 | 969 | |
| Capital expenditures (discontinued operations) |
68 | 68 | |||||
| Investments (continuing operations) | 23 | 22 | 13 | 4,901 | 4,960 | ||
| Working capital | |||||||
| Inventories | 310 | 651 | 317 | 190 | 19 | 381 | 1,867 |
| Trade receivables | 308 | 378 | 468 | 174 | 54 | 233 | 1,615 |
| Trade liabilities | 277 | 336 | 342 | 189 | 259 | 156 | 1,559 |
Investment Cytec of € 4,901 million includes the total consideration plus acquisition-related expenses of € 5,099 million less cash acquired from Cytec of € 198 million.
Cytec is presented as a separate segment at December 31, 2015.
Information per segment for 2014 is presented below:
| 2014 In € million Income statement items |
Advanced Formulations |
Advanced Materials |
Performance Chemicals |
Functional Polymers |
Corporate & Energy |
Group Total |
|---|---|---|---|---|---|---|
| Net sales (including the inter-segment sales) |
2,859 | 2,770 | 2,970 | 1,756 | 0 | 10,355 |
| • Inter-segment sales | (5) | (8) | (26) | (103) | 0 | (142) |
| Net sales | 2,854 | 2,762 | 2,944 | 1,654 | 0 | 10,213 |
| Gross margin | 639 | 958 | 733 | 181 | 48 | 2,559 |
| Depreciation and amortization | 172 | 200 | 206 | 116 | 57 | 751 |
| Adjustments for KPI monitored by Management |
12 | 60 | 72 | |||
| REBITDA | 426 | 709 | 724 | 111 | (188) | 1,783 |
| Earnings from associates and joint ventures | 13 | 12 | 15 | (71) | (2) | (34) |
| EBIT | 236 | 457 | 459 | (191) | (309) | 652 |
| Net fi nancial charges | (308) | |||||
| Income taxes | (84) | |||||
| Result from discontinued operations | (246) | |||||
| Net income | 13 |
| Statement of fi nancial position and other items |
Advanced Formulations |
Advanced Materials |
Performance Chemicals |
Functional Polymers |
Corporate & Energy |
Group Total |
|---|---|---|---|---|---|---|
| Capital expenditures (continuing operations) |
166 | 267 | 275 | 82 | 69 | 861 |
| Capital expenditures (discontinued operations) |
26 | 101 | 127 | |||
| Investments (continuing operations) | 50 | 231 | 0 | 107 | 23 | 411 |
| Working capital | ||||||
| • Inventories | 334 | 561 | 298 | 206 | 21 | 1,420 |
| • Trade receivables | 342 | 359 | 436 | 186 | 95 | 1,418 |
| • Trade liabilities | 344 | 272 | 363 | 214 | 267 | 1,461 |
The reconciliation between REBITDA and EBIT is shown in note 3.
Capital expenditures are related to tangible and intangible assets.
External net sales by cluster are presented below:
| In € million | 2015 | 2014 |
|---|---|---|
| Advanced Formulations | 2,652 | 2,854 |
| Novecare | 1,895 | 2,033 |
| Aroma Performance | 360 | 337 |
| Coatis | 398 | 484 |
| Advanced Materials | 3,334 | 2,762 |
| Specialty Polymers | 1,901 | 1,490 |
| Silica | 521 | 451 |
| Rare Earth Systems | 0 | 266 |
| Special Chemicals | 912 | 554 |
| Performance Chemicals | 3,090 | 2,944 |
| Soda Ash & Derivatives | 1,554 | 1,377 |
| Peroxides | 558 | 512 |
| Acetow | 542 | 641 |
| Emerging Biochemicals | 437 | 413 |
| Functional Polymers | 1,490 | 1,654 |
| Polyamides | 1,448 | 1,536 |
| Chlorovinyls | 41 | 117 |
| Corporate & Business Services | 11 | 0 |
| Energy Services | 11 | 0 |
| CBS | 0 | 0 |
| TOTAL | 10,578 | 10,213 |
Group sales by country and region are as follows:
| In € million | 2015 | % | 2014 | % |
|---|---|---|---|---|
| Belgium | 155 | 1% | 142 | 1% |
| Germany | 893 | 8% | 877 | 9% |
| Italy | 456 | 4% | 456 | 4% |
| France | 448 | 4% | 494 | 5% |
| Great Britain | 229 | 2% | 226 | 2% |
| Spain | 253 | 2% | 259 | 3% |
| European Union – other | 704 | 7% | 687 | 7% |
| European Union | 3,138 | 30% | 3,141 | 31% |
| Other Europe | 247 | 2% | 300 | 3% |
| United States | 2,311 | 22% | 2,231 | 22% |
| Canada | 102 | 1% | 127 | 1% |
| North America | 2,413 | 23% | 2,358 | 23% |
| Brazil | 750 | 7% | 828 | 8% |
| Mexico | 126 | 1% | 110 | 1% |
| Latin America – other | 191 | 2% | 183 | 2% |
| Latin America | 1,066 | 10% | 1,121 | 11% |
| Russia | 125 | 1% | 151 | 1% |
| Turkey | 71 | 1% | 65 | 1% |
| China | 1,008 | 10% | 823 | 8% |
| India | 216 | 2% | 195 | 2% |
| Japan | 352 | 3% | 321 | 3% |
| South Korea | 385 | 4% | 349 | 3% |
| Thailand | 514 | 5% | 455 | 4% |
| Egypt | 55 | 1% | 57 | 1% |
| Other | 989 | 9% | 875 | 9% |
| Asia and Rest of the World | 3,715 | 35% | 3,292 | 32% |
| TOTAL | 10,578 | 100% | 10,213 | 100% |
Invested capital, capital expenditures and investments by country and region for continuing operations are shown below:
| Invested capital Capital Expenditures and investments |
||||||||
|---|---|---|---|---|---|---|---|---|
| In € million | 2015 | % | 2014 | % | 2015 | % | 2014 | % |
| Belgium | 2,838 | 14% | 2,668 | 22% | (17) | 0% | (76) | 6% |
| Germany | 746 | 4% | 742 | 6% | (59) | 1% | (101) | 8% |
| Italy | 762 | 4% | 758 | 6% | (86) | 1% | (70) | 6% |
| France | 1,952 | 10% | 2,282 | 19% | (160) | 3% | (169) | 13% |
| Great Britain | 205 | 1% | 95 | 1% | (8) | 0% | (8) | 1% |
| Spain | 147 | 1% | 224 | 2% | (17) | 0% | (13) | 1% |
| European Union – other | 678 | 3% | 172 | 1% | (63) | 1% | (71) | 6% |
| European Union | 7,328 | 37% | 6,939 | 57% | (410) | 7% | (509) | 40% |
| Other Europe | 4 | 0% | 3 | 0% | (15) | 0% | 0 | 0% |
| United States(1) | 9,075 | 46% | 2,600 | 21% | (5,126) | 86% | (332) | 26% |
| Canada | 212 | 1% | 3 | 0% | 0 | 0% | 0 | 0% |
| North America | 9,287 | 47% | 2,603 | 21% | (5,126) | 86% | (332) | 26% |
| Brazil | 447 | 2% | 447 | 4% | (49) | 1% | (97) | 8% |
| Argentina | 20 | 0% | 35 | 0% | 0 | 0% | 0 | 0% |
| Latin America – other | 91 | 0% | 164 | 1% | (1) | 0% | (1) | 0% |
| Latin America | 559 | 3% | 645 | 5% | (50) | 1% | (97) | 8% |
| Russia | 141 | 1% | 154 | 1% | (14) | 0% | (99) | 8% |
| Thailand | 424 | 2% | 435 | 4% | (21) | 0% | (25) | 2% |
| China | 869 | 4% | 651 | 5% | (165) | 3% | (90) | 7% |
| South Korea | 230 | 1% | 180 | 1% | (31) | 1% | (18) | 1% |
| India | 230 | 1% | 204 | 2% | (16) | 0% | (10) | 1% |
| Singapore | 80 | 0% | 50 | 0% | (24) | 0% | (18) | 1% |
| Japan | 87 | 0% | 69 | 1% | (2) | 0% | (3) | 0% |
| Egypt | 111 | 1% | 113 | 1% | (1) | 0% | (1) | 0% |
| Other | 229 | 1% | 149 | 1% | (54) | 1% | (69) | 5% |
| Asia and Rest of the World |
2,402 | 12% | 2,005 | 17% | (327) | 6% | (332) | 26% |
| TOTAL | 19,579 | 100% | 12,195 | 100% | (5,927) | 100% | (1,272) | 100% |
(1) The amounts reported include the acquisition of Cytec (see note 26).
Invested capital includes the non-current assets (excluding the deferred taxes), inventories and trade receivables and payables. Capital expenditures and investments include tangible and intangible assets and investments in subsidiaries and other investments.
REBITDA for continuing operations is the non IFRS metrics used by management to monitor segment performance and to allocate resources. REBITDA is computed as follows:
| In € million | 2015 | 2014 |
|---|---|---|
| EBIT IFRS | 833 | 652 |
| Non-recurring items | 245 | 308 |
| RusVinyl adjustments (in equity earnings) | 22 | 65 |
| Adjustment of Chemlogics retention plan | 12 | 8 |
| Adjustment of Chemlogics and Ryton inventories at fair value (PPA) | 0 | 3 |
| Other adjustments | 1 | -5 |
| Recurring IFRS depreciation and amortization | 842 | 751 |
| REBITDA (INCOME STATEMENT KPI MONITORED BY MANAGEMENT) | 1,955 | 1,783 |
Year on year improvement is mainly driven by volumes growth, operational excellence programs off setting fi xed costs infl ation and protecting pricing power.
Non-recurring items are detailed in note 7.
| In € million | 2015 | 2014 |
|---|---|---|
| Wages/salaries and direct social benefi ts | (1,486) | (1,338) |
| Employer's contribution for social insurance | (330) | (305) |
| Pensions & insurance benefi ts | (172) | (240) |
| Other personnel expenses | (151) | (107) |
| TOTAL | (2,139) | (1,990) |
The 11% increase of wages and salaries includes a negative impact of 6% due to USD/EUR exchange rate evolution.
| In € million | 2015 | 2014 |
|---|---|---|
| Start-up, formation and preliminary study costs | (32) | (22) |
| Recurring capital gains/losses on sales of fi xed assets | 19 | 8 |
| Net foreign exchange gains and losses | (5) | (6) |
| Amortization of intangible resulting from PPA Rhodia | (109) | (110) |
| Balance of other gains and losses | 29 | 36 |
| Other operating gains and losses | (99) | (94) |
The net income of the associates and joint ventures amounts to € 21 million in 2015 against € (34) million in 2014. The improvement is mainly due to the RusVinyl operating and fi nancial performance.
Non-recurring items have been defi ned in section IFRS main accounting policies – 10. Non-recurring items.
Non-recurring items for continuing operations include the following:
| In € million | 2015 | 2014 |
|---|---|---|
| Restructuring | (57) | (49) |
| Costs related to non-ongoing activities | (45) | (52) |
| M&A costs and capital gains and losses | 27 | (19) |
| Cytec acquisition costs | (130) | 0 |
| Major litigations | 8 | (29) |
| Impairment | (48) | (160) |
| Non-recurring items | (245) | (308) |
In 2015, the non-recurring items relate to:
In 2014, the non-recurring items related to:
| In € million | 2015 | 2014 |
|---|---|---|
| Net interest expense | (100) | (115) |
| Other gains and losses on net indebtedness | (46) | (30) |
| Charges on net debt | (146) | (145) |
| Cost of discounting provisions | (73) | (163) |
| Income/loss from available-for-sale fi nancial assets | (8) | (1) |
| Net fi nancial charges | (226) | (308) |
Details are included in note 36.
The decrease of net interest expense is mainly explained by the following:
The issuance of new bonds (€ 2,250 million senior € notes and US\$ 1,600 million senior US\$ notes) in December 2015 for the fi nancing of the acquisition of Cytec generated additional fi nancial charges (€ 7 million in December 2015).
The other gains and losses on net indebtedness increased from € (30) million in 2014 to € (46) million in 2015, which is explained by the following:
The lower cost of discounting provision is mainly related to the increase in discount rate which results in a lower present value of the environmental provisions.
The income tax expense includes the following:
| In € million | 2015 | 2014 |
|---|---|---|
| Current taxes related to current year | (146) | (272) |
| Current taxes related to prior years | 46 | 2 |
| Deferred income taxes | 1 | 189 |
| Deferred tax impact of changes in the nominal tax rates | 2 | (3) |
| TOTAL INCOME TAXES RECOGNIZED IN THE INCOME STATEMENT | (97) | (84) |
| In € million | 2015 | 2014 |
|---|---|---|
| Income tax on items recognized in other comprehensive income | (20) | 72 |
| TOTAL | (20) | 72 |
The current taxes related to current year (€ (146) million) include the reversal of provisions for tax risks (€ 66 million).
The current taxes related to prior year (€ 46 million) include mainly true-ups in the United States after signifi cant changes in portfolio.
The eff ective income tax expense has been reconciled with the theoretical tax expense 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.
| In € million | 2015 | 2014 |
|---|---|---|
| Earnings before taxes | 606 | 343 |
| Earnings from associates and joint ventures | 21 | (34) |
| Earnings before taxes excluding earnings from associates and joint ventures | 585 | 377 |
| Reconciliation of the tax charge | ||
| Total tax charge of the Group entitites computed on the basis of the respective local nominal rates | (212) | (145) |
| Weighted average nominal rate | 36% | 38% |
| Tax eff ect of permanent diff erences | 135 | 49 |
| Tax eff ect on distribution of dividends | (4) | (25) |
| Tax eff ect of changes in tax rates | 2 | (3) |
| Tax eff ect of current and deferred tax adjustments related to prior years | 4 | 13 |
| Changes in unrecognized deferred tax assets | (23) | 27 |
| Eff ective tax charge | (97) | (84) |
| Eff ective tax rate | 16% | 24% |
The weighted average nominal rate decreased by 2% in 2015 (compared to 2014) due to the lower weight of earnings before tax in countries with a higher tax rate.
The eff ective tax rate decreased from 24% to 16% mainly due to the positive impact of permanent diff erences (€ 86 million) including the reversal of provisions for tax risks (€ 66 million).
The recognized deferred taxes (net of valuation allowances) in the consolidated statement of fi nancial position include the following:
| 2015 In € million |
Opening balance |
Recognized in income statement |
Recognized in OCI |
Exchange rate eff ect |
Cytec acquisition |
Other acquisition/ Disposal |
Transfer asset held for sale |
Other | Closing balance |
|---|---|---|---|---|---|---|---|---|---|
| Temporary diff erences | |||||||||
| Employee benefi ts obligations | 234 | (13) | (13) | 7 | 97 | (2) | 6 | 11 | 328 |
| Provisions other than employee benefi ts |
136 | (19) | 1 | 3 | 59 | 7 | 13 | (1) | 199 |
| Tangible and intangible assets | (521) | 29 | (7) | (6) | (862) | 1 | 4 | 1 | (1,361) |
| Goodwill | 31 | (8) | 23 | ||||||
| Tax losses | 386 | 1 | (6) | 2 | 0 | (12) | 0 | 373 | |
| Tax credits | 11 | 29 | 1 | 44 | 2 | 86 | |||
| Assets held for sale | 8 | 3 | (14) | 3 | |||||
| Other | 57 | (28) | (1) | 3 | (76) | (2) | 0 | 3 | (44) |
| TOTAL (NET AMOUNT) | 333 | 0 | (20) | 2 | (735) | 7 | 0 | 17 | (396) |
| Deferred tax assets in statement of fi nancial position |
710 | 1,059 | |||||||
| Deferred tax liabilities in statement of fi nancial position |
(378) | (1,456) | |||||||
In 2015, the total of deferred tax assets amounts to € 4,129 million of which € 3,070 million are not recognized.
The unrecognized deferred tax assets result from (i) losses carried forward (€ 7,070 million in holding companies, namely Rhodia SA since 2011) for which relative deferred tax assets (€ 2,283 million) were not recognized and (ii) deferred tax assets on other temporary diff erences (€ 787 million across the Group), mainly on employee benefi ts obligations (€ 502 million mainly in Belgium (€ 70 million), France (€ 333 million) and the United Kingdom (€ 82 million)).
The deferred taxes on tangible and intangible assets relating to the Cytec acquisition are mainly related to the step-up to fair value on intangible assets. The o ther deferred tax liabilities relating to Cytec acquisition are mainly relative to the recognition of deferred tax liabilities on unremitted earnings (€ 68 million).
The deferred tax liabilities, included in O ther, and related to unremitted earnings from Solvay affi liates (excluding Cytec), amount to € 23 million in 2015 (€ 17 million in 2014) :
154
| 2014 In € million |
Opening balance |
Recognized in income statement |
Recognized in OCI |
Exchange rate eff ect |
Acquisition/ Disposal |
Transfer asset held for sale |
Other | Closing blance |
|---|---|---|---|---|---|---|---|---|
| Temporary diff erences | ||||||||
| Employee benefi ts obligations | 172 | 7 | 59 | 9 | 0 | (14) | 2 | 234 |
| Provisions other than employee benefi ts | 119 | 23 | 0 | 8 | 0 | (15) | 0 | 136 |
| Tangible assets | (613) | 53 | 2 | (30) | 28 | 39 | 0 | (521) |
| Goodwill | 39 | (8) | 31 | |||||
| Tax losses | 273 | 107 | 4 | 4 | (2) | 386 | ||
| Tax credits | 12 | 0 | 1 | (2) | 11 | |||
| Assets held for sale | 0 | (9) | 31 | (15) | (6) | |||
| Other | 25 | 15 | 12 | 2 | 0 | 3 | 1 | 57 |
| TOTAL (NET AMOUNT) | 27 | 186 | 72 | (6) | 59 | 0 | (5) | 333 |
| Deferred tax assets in statement of fi nancial position |
501 | 710 | ||||||
| Deferred tax liabilities in statement of fi nancial position |
(473) | (378) |
In 2014, the total of deferred tax assets amounts to € 3,588 million of which € 2,878 million are not recognized.
The unrecognized deferred tax assets result from (i) losses carried forward (€ 6,785 million in holding companies, namely Rhodia SA since 2011) for which relative deferred tax assets (€ 2,180 million) were not recognized and (ii) deferred tax assets on other temporary diff erences (€ 698 million across the Group), mainly on employee benefi ts obligations (€ 562 million mainly in Belgium (€ 72 million), France (€ 364 million) and the United Kingdom (€ 97 million)).
For the majority of the Group's tax loss carryforwards, no deferred tax assets have been recognized. The tax loss carryforwards generating deferred tax assets are given below by expiration date.
| In € million | 2015 | 2014 |
|---|---|---|
| Within 1 year | 8 | 14 |
| Within 2 years | 16 | 20 |
| Within 3 years | 28 | 27 |
| Within 4 years | 32 | 21 |
| Within 5 or more years | 174 | 136 |
| No time limit | 937 | 1,013 |
| Total of losses carried forward which have generated recognized deferred tax assets | 1,194 | 1,231 |
| Losses carried forward for which no deferred tax assets were recognized | 7,070 | 6,785 |
| TOTAL OF LOSSES CARRIED FORWARD | 8,263 | 8,016 |
The tax losses carryforwards (€ 1,194 million) have generated deferred tax assets for € 373 million.
| In € million | 2015 | 2014 |
|---|---|---|
| Sales | 1,494 | 2,680 |
| Breakdown discontinued operations | ||
| Loss recognized as result of remeasurement to fair value less costs to sell | (88) | (476) |
| EBIT | 106 | 159 |
| EBIT Eco Services (capital gain) | 349 | |
| Financial charges | (36) | (49) |
| Tax | (38) | (40) |
| Tax Eco Services (mainly on capital gain) | (190) | |
| TOTAL RESULT FROM DISCONTINUED OPERATIONS | (55) | (246) |
| attributed to: | ||
| • Solvay share | (60) | (196) |
| • non-controlling interests | 6 | (50) |
Financial statements
From September 30, 2013, until June 30, 2015, Solvay presented the associated activities in discontinued operations, following Solvay's and INEOS' intention to combine their European Chlorovinyls activities in a 50-50 joint venture. In June 2014, Solvay remeasured to fair value less costs to sell its European Chlorovinyls activities which led to a loss of € 476 million. On July 1, 2015 Solvay and INEOS created their joint venture Inovyn , which explains the decrease of assets held for sale and liabilities associated to assets held for sale in the consolidated statement of fi nancial position. The joint venture pools both groups' assets across the entire chlorovinyls chain, including PVC, caustic soda and chlorine derivatives. RusVinyl, Solvay's Russian joint venture in chlorovinyls with Sibur, has been excluded from the transaction. The fi nalized terms of the joint venture agreement remain materially unchanged from those announced in June 2014. Solvay received upon closing an upfront cash payment of € 150 million – subject to customary adjustments such as actual working capital levels. In addition to contributing their entire European chlorovinyls business, Solvay has transferred liabilities estimated at € 260 million into the joint venture. Three years after its creation, Solvay will exit Inovyn and receive an additional, performance-based payment targeted to be € 280 million, with a minimum of € 95 million. Thereafter, INEOS will be the sole owner of the business.
On November 12, 2014, the Brazilian competition authority's (CADE) notifi ed its decision to reject the intended acquisition of Solvay's 70.59% majority stake in Solvay Indupa by Brazilian chemical producer Braskem. Solvay confi rms that its strategic direction remains unaff ected and that it is examining alternative options to sell its participation in Solvay Indupa. As a disposal within 12
months is considered highly probable at December 31, 2015, Solvay Indupa remains classifi ed as non-current assets held for sale and discontinued operations at December 31, 2015. The remeasurement to fair value less costs to sell of Solvay Indupa leads to an additional impairment loss of € 88 million in 2015.
On July 30, 2014 Solvay has signed a binding agreement to sell its sulfuric acid virgin production and regeneration Eco Services business to affi liates of CCMP Capital Advisors, LLC. As from the 3rd quarter of 2014, Solvay reports Eco Services businesses under a ssets held for sale and d iscontinued operations. The transaction was completed in the fourth quarter of 2014, which led to a capital gain of € 177 million after taxes (€ 349 million before taxes).
Net income amounts to € 454 million compared to € 13 million in prior year. This increase in net income results mainly from:
Adjusted net income excludes from the IFRS net income the main impact of the Rhodia Purchase Price Allocation related to the amortization of intangible assets (after taxes).
Adjusted net income is computed as follows:
| In € million | 2015 | 2014 |
|---|---|---|
| NET INCOME IFRS | 454 | 13 |
| Adjustments to IFRS net income | ||
| Amortization of PPA on intangible assets | 109 | 110 |
| Tax on adjustments | (38) | (36) |
| PPA amortization on discontinued operations | 0 | 2 |
| ADJUSTED NET INCOME | 525 | 89 |
In 2016, the Group intends to exclude certain items from Adjusted net income, and to extend those other adjustments (below REBITDA) to fi nancial charges, taxes and to discontinued operations. Such will impact Underlying Net Income and Underlying EPS. This will better align Solvay's practice with market standards.
Other adjustments are "income and expenses that are considered by Management as distorting the comparability over time of the Group underlying performance". These items are listed below:
| (In € million) | 2015 | 2014 |
|---|---|---|
| IFRS Net income, Solvay share | 406 | 80 |
| Rhodia PPA (after tax) | 71 | 75 |
| Adjusted Net income, Solvay share | 477 | 156 |
| Coupons on perpetual hybrid bonds | (57) | (57) |
| Other adjustments | ||
| Non-recurring items | 245 | 308 |
| M&A related impacts (Chemlogics, Flux, Ryton) | 58 | 46 |
| Net fi nancial charges (e.g. discount rate changes, debt management impacts) | 19 | 57 |
| Results on disposals (in discontinued operations) | (177) | |
| Adjustments RusVinyl | (5) | 53 |
| Discontinued operations | 114 | 514 |
| Prior years tax and tax related to adjustments | (154) | (175) |
| Non-controlling interests on adjustments | (17) | (104) |
| ADJUSTED NET INCOME, SOLVAY SHARE, EXCLUDING OTHER ADJUSTMENTS | ||
| AND INCLUDING INTERESTS ON PERPETUAL HYBRID BONDS | 680 | 622 |
| Number of shares | 2015 | 2014 | |
|---|---|---|---|
| Weighted average number of ordinary shares (basic) (in thousands) |
83,738 | 83,228 | |
| Dilution eff ect of subscription rights | 565 | 662 | |
| Weighted average number of ordinary shares (diluted) (in thousands) |
84,303 | 83,890 | |
| Basic | Diluted | Basic | Diluted |
| Net income of the year (Solvay share) including discontinued operations (in thousands) 405,835 |
405,835 | 80,239 | 80,239 |
| Net income of the year (Solvay share) excluding discontinued operations (in thousands) 466,232 |
466,232 | 276,665 | 276,665 |
| Earnings per share (including discontinued operations) (in EUR) 4.85 |
4.81 | 0.96 | 0.96 |
| Earnings per share (excluding discontinued operations) (in EUR) 5.57 |
5.53 | 3.32 | 3.30 |
The weighted average number of shares takes into account the shares issued on December 21, 2015 (and that were outstanding for a period of 10 days).
The basic earnings per share are obtained by dividing net income by the number of shares.
The diluted earnings per share is obtained by dividing net income by the number of shares, increased by the number of potentially diluting shares attached to the issuance 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.
The average closing price during 2015 was € 115.08 per share (2014: € 114.84 per share). Based on this average closing price all share options were in the money, and therefore dilutive, for the presented period (see note 24).
| 2015 | 2014 | |||||
|---|---|---|---|---|---|---|
| In € million | Before-tax amount |
Tax expense(-)/ benefi t (+) |
Net-of-tax amount |
Before- tax amount |
Tax expense(-)/ benefi t (+) |
Net-of-tax amount |
| Gains and losses on remeasuring hyperinfl ation | 42 | (7) | 35 | (11) | 2 | (9) |
| Hyperinfl ation | 42 | (7) | 35 | (11) | 2 | (9) |
| Gains and losses on remeasuring available-for-sale fi nancial assets |
3 | 0 | 3 | 1 | 0 | 1 |
| Available-for-sale fi nancial assets (see note 29) | 3 | 0 | 3 | 1 | 0 | 1 |
| Eff ective portion of gains and losses on hedging instruments in a cash fl ow hedge |
(42) | 0 | (42) | (59) | 11 | (48) |
| Recycling to the income statement | 134 | 134 | (1) | (1) | ||
| Basis adjustment | (77) | (77) | ||||
| Cash fl ow hedges (see note 37) | 15 | 0 | 15 | (60) | 11 | (49) |
| Currency translation diff erences arising during the year | 185 | 185 | 232 | 232 | ||
| Recycling of currency translations diff erences relating to foreign investments disposed of in the year |
1 | 1 | (1) | (1) | ||
| Currency translation diff erences on foreign operations |
186 | 0 | 186 | 231 | 0 | 231 |
| Unrecognized actuarial gains and losses on defi ned benefi t pension plans (see note 35.A) |
279 | (13) | 266 | (497) | 59 | (438) |
| Other comprehensive income | 525 | (20) | 505 | (336) | 72 | (264) |
The Venezuelan economy being considered as a hyperinfl ationary economy, since 2013, the Group applies the hyperinfl ationary accounting requirements of IAS 29 Financial Reporting in Hyperinfl ationary Economies to its Venezuelan operations. The fi nancial statements are based on the historical cost basis and have been restated to take into account the eff ects of infl ation (2015: € 35 million after taxes in other comprehensive income, 2014: € (9) million after taxes in other comprehensive income).
The total currency translation diff erences decrease from € (549) million at the end of 2014 to € (314) million at the end of 2015, due to:
The main variances are linked to:
In 2015 total depreciation, amortization and impairment losses amount to € 978 million, of which:
In 2014 total depreciation, amortization and impairment losses amounted to € 1,430 million, of which:
Income tax expense (€ 135 million) includes € 38 million for discontinued operations.
Income tax paid amounts to € 250 million of which € 6 million for discontinued operations.
Income tax expense (€ 314 million) includes € 230 million for discontinued operations (including tax on capital gain Eco Services € 171 million).
Income tax paid amounts to € 217 million of which € 13 million for discontinued operations.
In 2015, the changes in working capital amounted to € (99) million, of which € (49) million for continuing operations and € (50) million for discontinued operations, mainly due to Chlorovinyls business (€ (42) million).
In 2014 the changes in working capital amounted to € 236 million, of which € 105 million for continuing operations and € 131 million for discontinued operations, mainly due to Pharma.
In 2015 the amount (€ (302) million) includes:
In 2014 the amount (€ (213) million) includes:
The other non operating and non cash items for 2015 (€ 223 million) mainly include the non-recurring costs related to the Cytec acquisition (€ 130 million) and the profi t or loss impact from reversals of tax litigations provisions (€ 84 million). In 2014 the other non operating and non cash items amounted to € (351) million and mainly included the gross capital gain on Eco Services.
| 2015 | |||
|---|---|---|---|
| In € million | Acquisitions | Disposals | Total |
| Subsidiaries | (4,934) | 70 | (4,864) |
| Associates and joint ventures | (13) | (13) | |
| Other | (15) | (232) | (247) |
| Total investments | (4,961) | (162) | (5,123) |
| Tangible/intangible assets | (1,037) | 31 | (1,006) |
| TOTAL | (5,998) | (131) | (6,129) |
| 2014 | |||
|---|---|---|---|
| In € million | Acquisitions | Disposals | Total |
| Subsidiaries | (304) | 732 | 428 |
| Associates and joint ventures | (107) | (107) | |
| Other | (11) | (11) | |
| Total investments | (411) | 721 | 310 |
| Tangible/intangible assets | (988) | 21 | (967) |
| TOTAL | (1,398) | 742 | (657) |
The acquisition of subsidiaries (€ (4,934) million) is mainly related to the acquisition of Cytec (€ (4,901) million – see note 26).
The acquisition of associates and joint ventures (€ (13) million) relates to the capital increase in RusVinyl.
The disposal cash-out (€ (232) million) is related to the tax cash-out on Eco Services capital gain.
The other disposal (€ 70 million) relates mainly to Inovyn net cash in (€ 58 million): up front net proceeds from Inovyn of € 150 million adjusted for cash transfers and other fi nancial fl ows with the joint venture, as well as divestment costs, totalling € (92) million.
The acquisition of tangible and intangible assets (€ (1,037) million) relates to various projects:
The acquisition of subsidiaries (€ (304) million) is mainly related to the acquisition of Ryton® PPS (€ (198) million). Other acquisitions are Erca Quimica Brazil, Flux Schweiß- und Lötstoff e GmbH and Solvay Biomass Energy.
The acquisition of associates and joint ventures (€ (107) million) mainly relates to the capital increase in RusVinyl (€ (98) million).
The acquisition of tangible and intangible assets (€ (988) million) relates to various projects:
The acquisition of tangible and intangible assets related to discontinued operations amounts to € (127) million.
To strengthen its capital structure, Solvay issued undated deeply subordinated perpetual bonds ("perpetual hybrid bonds ") of respectively € 1.2 billion in 2013 following the acquisition of Chemlogics and € 1.0 billion (net of issuance costs € 991 million) in December 2015 for the fi nancing of the acquisition of the Cytec g roup.
Both perpetual hybrid bonds are classifi ed as equity absent any unavoidable contractual obligation to repay the principal and interest of the perpetual hybrid bonds, specifi cally:
The coupons related to the perpetual hybrid bonds are recognized as equity transactions and are presented as dividends upon declaration (see consolidated statement of changes in equity):
In December 2015, Solvay has increased its capital by € 1.5 billion (net of equity issuance costs paid at December 31, 2015 € 1,477 million), issuing 21,175,283 new shares at € 70.83 per share with preference rights. This rights issue was launched to complete the fi nancing of the Cytec acquisition.
| 2015 | 2014 | |
|---|---|---|
| Shares issued and fully paid in at January 1 | 84,701 | 84,701 |
| Capital increase | 21,175 | 0 |
| Shares issued and fully paid in at December 31 | 105,876 | 84,701 |
| Treasury shares held at December 31 | 2,106 | 1,719 |
In 2015 the other cash fl ows from fi nancing activities (€ (31) million) include the payments for the liquidity clause related to share- based payments signed as part of the Rhodia acquisition (€ (39) million).
In 2014 the other cash fl ows from fi nancing activities (€ (3) million) include a various number of non signifi cant cash infl ows and outfl ows.
The 2015 cash fl ow from discontinued operations (€ (36) million) results from the total cash fl ow of the Solvay Indupa business in Latin America (€ (53) million), Chlorovinyls (€ 41 million) and Pharma (€ (24) million ).
The 2014 cash fl ow from discontinued operations (€ 124 million) results from the cash in of the ANDROGEL® milestone, related to the disposal of the pharma business (€ 100 million) and the total cash fl ow of the Solvay Indupa business in Latin America (€ (2) million), Chlorovinyls (€ (9) million) and Eco Services (€ 44 million) .
As every year since 1 999, in 2015, the Board of Directors renewed the share option plan off ered to executive staff (about 70 persons) with a view to involving them more closely in the long-term development of the Group. The plan is an equity-settled share- based plan. The majority of the managers involved subscribed the options off ered them in 2015 with an adjusted exercise price of € 114.51, representing the average stock market price of the share for the 30 days prior to the off er. 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.
In 2015, to compensate dilution impact of the capital increase, an adjustment (based on the Euronext ratio of 0.93984) was made for each plan on the spot reference, on the exercise price and on the number of options. Such is refl ected in the tables below and did not impact the Group's profi t or loss.
At the end of December 2015, the Group held 2,105,905 treasury shares, which have been deducted from consolidated shareholders' equity. At the end of 2014, the Group held 1,719,208 treasury shares. Treasury shares are intended to cover the share options off ered to Group executives.
| Share options | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Number of share options granted and still outstanding at 31/12/2014 |
362,436 | 405,716 | 779,847 | 413,250 | 222,200 | 182,900 | 98,750 | 212,850 | 124,200 | 87,540 | |
| Granted share options | 328,106 | ||||||||||
| Granted share options due to capital increase |
21,002 | 22,870 | 25,745 | 49,541 | 9,189 | 8,539 | 9,186 | 4,257 | 5,371 | 5,761 | 4,327 |
| Forfeitures of rights and expiries |
(5,155) | (3,518) | (5,900) | (33,200) | (15,500) | (3,000) | |||||
| Share options exercised | (269,700) | (88,800) | (40,400) | (33,250) | (96,250) | (18,700) | (16,940) | ||||
| Number of share options at 31/12/2015 |
349,108 | 380,151 | 427,943 | 823,488 | 152,739 | 141,939 | 151,686 | 69,757 | 88,771 | 95,761 | 71,927 |
| Share options exercisable at 31/12/2015 |
0 | 0 | 0 | 0 | 152,739 | 141,939 | 151,686 | 69,757 | 88,771 | 95,761 | 71,927 |
| Exercise price (EUR) | 114.51 | 101.14 | 104.33 | 83.37 | 61.76 | 71.89 | 67.99 | 55.27 | 90.97 | 102.53 | 91.45 |
| Fair value of options at measurement date (EUR) |
26.09 | 24.25 | 21.32 | 22.53 | 13.54 | 15.58 | 19.85 | 14.95 | 18.68 | 21.20 | 10.12 |
| 2015 | 2014 | |||
|---|---|---|---|---|
| Number of share options |
Weighted average exercise price |
Number of share options |
Weighted average exercise price |
|
| At January 1 | 2,889,689 | 89.65 | 3,259,353 | 87.97 |
| Granted during the year | 493,894 | 106.54 | 362,436 | 107.61 |
| Forfeitures of rights and expiries during the year | (63,273) | 94.52 | 0 | |
| Exercised during the year | (564,040) | 70.65 | (732,100) | 91.06 |
| At December 31 | 2,756,270 | 96.45 | 2,889,689 | 89.65 |
| Exercisable at December 31 | 772,580 | 928,440 |
The share options resulted in a charge in 2015 of € 11 million calculated by third parties according to the Black-Scholes model and recognized in the consolidated 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:
Weighted average remaining contractual life:
| In years | 2015 | 2014 |
|---|---|---|
| Share option plan 2005 | 3.0 | 2.8 |
| Share option plan 2006 | 4.0 | 1.4 |
| Share option plan 2007 | 5.0 | 2.5 |
| Share option plan 2008 | 1.0 | 2.0 |
| Share option plan 2009 | 1.9 | 2.9 |
| Share option plan 2010 | 3.0 | 4.0 |
| Share option plan 2011 | 4.0 | 5.0 |
| Share option plan 2012 | 4.1 | 5.1 |
| Share option plan 2013 | 5.2 | 6.2 |
| Share option plan 2014 | 6.2 | 7.2 |
| Share option plan 2015 | 7.2 |
The exercise period for share option plans granted from 2005 to 2007 has been extended in 2015.
Since 2013, the Board of Directors renewed a yearly Performance Share Unit P lan, off ered to executive staff with the objective of involving them more closely in the development of the Group, making this part of the long term incentive policy. All the managers involved subscribed the PSU off ered them in 2015 with an adjusted grant price of € 117.39. The Performance Share Units is a cash-settled share-based plan through which benefi ciaries will obtain cash benefi t based upon the Solvay share price, as well performance conditions.
In 2015, to compensate dilution impact of the capital increase, an adjustment (based on the Euronext ratio of 0.93984) was made for each plan on the spot reference and on the number of PSUs. Such did not impact the Group's profi t or loss.
Each plan has a 3- year vesting period, after which a cash settlement will take place, if vesting conditions are met.
| the level of REBITDA at closing Financial Year 2016 |
|---|
| the level of CFROI at closing Financial Year 2016 |
| subject to confi rmation by Solvay Statutory Auditors |
In 2015 the impact on the consolidated income statement regarding PSU amounts to € 18 million, compared to € 19 million in 2014.
| In € million | Development costs | Patents and trademarks |
Other intangible assets |
Total |
|---|---|---|---|---|
| Gross carrying amount | ||||
| At December 31, 2013 | 206 | 907 | 1,199 | 2,310 |
| Additions | 38 | 5 | 22 | 64 |
| Disposals and closures | (5) | (46) | (71) | (122) |
| Increase through business combinations | 0 | 39 | 23 | 62 |
| Currency translation diff erences | 5 | 31 | 58 | 94 |
| Other | 5 | 21 | (5) | 21 |
| At December 31, 2014 | 249 | 956 | 1,226 | 2,430 |
| Additions | 51 | 15 | 20 | 85 |
| Disposals and closures | (5) | (5) | (1) | (11) |
| Increase through business combinations | 0 | 1 | 2,458 | 2,460 |
| Currency translation diff erences | 3 | 5 | 51 | 60 |
| Other | 0 | 16 | (12) | 4 |
| AT DECEMBER 31, 2015 | 298 | 989 | 3,742 | 5,029 |
| Accumulated amortization | ||||
| At December 31, 2013 | (58) | (383) | (248) | (690) |
| Amortization | (27) | (65) | (115) | (207) |
| Disposals and closures | 3 | 19 | 15 | 38 |
| Currency translation diff erences | (1) | (13) | (11) | (25) |
| Other | 0 | 0 | (3) | (4) |
| At December 31, 2014 | (83) | (442) | (362) | (887) |
| Amortization | (25) | (72) | (126) | (223) |
| Disposals and closures | 5 | 5 | 1 | 11 |
| Currency translation diff erences | 0 | (3) | (11) | (14) |
| Other | (1) | (7) | 12 | 4 |
| AT DECEMBER 31, 2015 | (105) | (518) | (487) | (1,110) |
| Net carrying amount | ||||
| At December 31, 2013 | 147 | 523 | 951 | 1,621 |
| At December 31, 2014 | 165 | 514 | 864 | 1,543 |
| AT DECEMBER 31, 2015 | 193 | 471 | 3,255 | 3,919 |
In 2015, the increase through business combinations relates mainly to Cytec for € 2,451 million (customer relationships € 1,721 million and technologies € 730 million). The average useful life of these assets is 17 years.
In 2014 the carrying amount of other intangible assets consisted mainly of acquired customer relationships and of technologies related to Rhodia. The average useful life of these assets is 11 years.
In 2014, the acquisitions of Ryton® PPS and Flux Schweiß- und Lötstoff e GmbH included intangible assets for € 62 million.
| In € million | Total |
|---|---|
| Net carrying amount | |
| At December 31, 2013 | 3,095 |
| Additions | 29 |
| Disposals and closures | (51) |
| Currency translation diff erences | 76 |
| At December 31, 2014 | 3,150 |
| Additions | 2,610 |
| Disposals and closures | (4) |
| Currency translation diff erences | 62 |
| Other | 23 |
| AT DECEMBER 31, 2015 | 5,840 |
The goodwill increased by € 2,690 million mainly due to Cytec acquisition (€ 2,598 million).
Goodwill acquired in a business combination is allocated to the CGU or groups of CGUs (Operating Segments) that are expected to benefi t from that business combination.
| 2014 | 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| In € million | At the beginning of the |
period Transfer | Acquisitions and divestments |
Currency translation diff erences |
At the end of the |
period Transfer Adjustments | Acquisitions and divestments |
Currency translation diff erences |
At the end of the period |
| Groups of CGUs (Operating S egments) |
|||||||||
| Advanced Formulations | 221 | 221 | 8 | (2) | 227 | ||||
| Advanced Materials | 485 | 485 | 8 | 493 | |||||
| Performance Chemicals | 166 | (9) | 157 | 7 | 164 | ||||
| Cytec | 2,598 | 2,598 | |||||||
| Cash generating units | |||||||||
| Novecare | 1,001 | 13 | 71 | 1,085 | 11 | 61 | 1,157 | ||
| Special Chem | 0 | 231 | (3) | 228 | |||||
| Polyamides | 170 | 170 | 170 | ||||||
| Rare Earth Systems | 161 | 161 | (161) | 0 | |||||
| Specialty Polymers | 185 | 3 | 188 | 2 | 4 | 194 | |||
| Acetow | 120 | 120 | 120 | ||||||
| Soda A sh and D erivatives EMEA | 120 | (120) | 0 | 0 | |||||
| Soda A sh and D erivatives NAFTA | 42 | (42) | 0 | 0 | |||||
| Soda A sh and D erivatives | 0 | 162 | 162 | 162 | |||||
| Coatis | 82 | 82 | 82 | ||||||
| Silica | 72 | 72 | 72 | ||||||
| Aroma Performance | 49 | 49 | 49 | ||||||
| Energy Services | 49 | 1 | 50 | 50 | |||||
| Fluorochemicals | 53 | 16 | 1 | 70 | (70) | 0 | |||
| Eco Services | 42 | (42) | 0 | 0 | |||||
| Hydrogen Peroxi de Europe | 20 | 20 | 20 | ||||||
| Emerging Biochemicals | 20 | 20 | 20 | ||||||
| Hydrogen Peroxi de Mercosul | 14 | 14 | 14 | ||||||
| Hydrogen Peroxi de NAFTA | 7 | 1 | 8 | 8 | |||||
| Hydrogen Peroxi de Asia | 10 | 10 | 10 | ||||||
| Precipitated Calcium Carbonate | 4 | 4 | (4) | 0 | |||||
| PVC Mercosur | 2 | 2 | 0 | 1 | |||||
| TOTAL GOODWILL | 3,095 | 0 | (22) | 76 | 3,150 | 23 0 |
2,606 | 62 | 5,840 |
In 2015, the CGUs Fluorochemicals and Rare Earth Systems have been merged into the new CGU Special Chem. The goodwill resulting from the acquisition of Cytec closed on December 9, 2015 is allocated to a separate group of CGUs (Cytec) in the above table as of December 31, 2015. As of January 1, 2016, following the acquisition of Cytec, Solvay has re-organized its segment set-up to enhance strategic coherence and improve alignment. Cytec's former Aerospace Materials and Industrial Materials activities are included in Advanced Materials and its In Process Separation and Additive Technologies activities in Advanced Formulations. Solvay's GBU Coatis is transferred to Performance Chemicals and the GBU Emerging Biochemicals is moved to Functional Polymers.
In 2014, the CGUs Soda Ash and Derivatives EMEA and NAFTA have been merged due to (i) the globalization of export management into one Global Business Unit and to (ii) the implementation of one global management which leads to more interdependent cash fl ows.
On July 29, 2015, Solvay SA entered into a defi nitive merger agreement with U.S.-based Cytec Industries Inc. to acquire 100% of its share capital and of the voting rights, for US\$ 75.25 per share in cash, subject to customary closing conditions, including regulatory approvals and Cytec's shareholders' approval. Following those approvals, the closing of the acquisition took place on December 9, 2015.
The total consideration for the acquisition amounted to € 5,047 million, and was based on the following:
The acquisition-related expenses amounting to € 130 million have been recognized as a non-recurring expense in 2015.
| Non-recurring charges on the Cytec acquisition | |
|---|---|
| In € million | 2015 |
| Professional services | (48) |
| Financial and brokerage advice | (36) |
| Legal advice | (8) |
| Accounting advice | (4) |
| Financing and hedging arrangements | (54) |
| Restructuring charges | (19) |
| Other costs | (10) |
| TOTAL | (130) |
The total cash-out amounts to € 5,099 million in 2015, of which € 5,082 million in the fourth quarter and € 17 million in the third quarter.
Taking into account the cash acquired from Cytec (€ 198 million), which is deducted from the acquisition cash out, € 4,901 million has been paid in 2015. The balance is to be paid over the next years.
Solvay raised € 6.2 billion to fi nance the acquisition as detailed below. Out of this € 6.2 billion, more than € 1 billion was raised, anticipating refi nancing needs.
| In € million | Gross amount funded |
Total amount paid in 2015 |
Cash fl ow fi nancing 2015 |
|---|---|---|---|
| USD Bonds (US\$ 1.6 bn) | 1,470 | (7) | 1,463 |
| EUR Bonds | 2,250 | (20) | 2,230 |
| Perpetual hybrid bond s | 1,000 | (9) | 991 |
| Capital increase | 1,500 | (23) | 1,477 |
| Total net amount funded (a) | 6,220 | (59) | 6,161 |
| Total cash out for Cytec acquisition (b) | (5,099) | ||
| Excess cash available for refi nancing in 2016 (a-b) | 1,062 |
Solvay also assumed Cytec gross debt for € 730 million at December 31, 2015. With the cash acquired of € 198 million, this corresponds to a net debt of € 532 million.
Cytec's opening balance sheet has been fully consolidated within the Solvay g roup as from December 31, 2015.
Accordingly, a provisional valuation of identifi able assets acquired and liabilities assumed has been made as at December 31, 2015.
The following table summarizes:
• the consideration for Cytec of € 5,047 million;
| In € million | Total consideration | Fair values | Fair value adjustments to the carrying amount of acquired identifi able assets and assumed liabilities |
|---|---|---|---|
| TOTAL CONSIDERATION | 5,047 | ||
| Net assets acquired at fair value | 2,449 | ||
| Non-current assets | 4,076 | 2,385 | |
| Intangible assets | 2,451 | 2,283 | |
| Tangible assets | 1,136 | 102 | |
| Investments in associates | 11 | ||
| Other investments | 7 | ||
| Deferred tax assets | 447 | ||
| Loans and other non-current assets | 24 | ||
| Current assets | 926 | 83 | |
| Inventories | 380 | 83 | |
| Trade receivables | 233 | ||
| Income tax receivables | 57 | ||
| Other current receivables – Other | 58 | ||
| Cash and cash equivalents | 198 | ||
| TOTAL ASSETS | 5,002 | 2,468 | |
| Non-current liabilities | 2,189 | 751 | |
| Long-term provisions: employee benefi ts | 215 | ||
| Other long-term provisions | 81 | ||
| Deferred tax liabilities | 1,182 | 768 | |
| Long-term fi nancial debt | 664 | (17) | |
| Other non-current liabilities | 47 | ||
| Current liabilities | 364 | 0 | |
| Other short-term provisions | 37 | ||
| Short-term fi nancial debt | 65 | ||
| Trade liabilities | 156 | ||
| Income tax payable | 8 | ||
| Other current liabilities | 98 | ||
| TOTAL LIABILITIES | 2,553 | 751 | |
| GOODWILL | 2,598 |
The provisional adjustment to fair value of € 2,283 million of intangible assets has resulted in the recognition of acquired customer relationships for a total of € 1,721 million and acquired technologies for a total of € 730 million. Tangible assets have been remeasured to fair value for € 102 million. Inventories have been remeasured to fair value for € 83 million. Assets were fair valued with the assistance of an external independent expert.
The fair value of the trade receivables acquired approximates their gross contractual amounts. Contingent liabilities in connection with environmental risks have been recognized for € 7 million.
A net deferred tax liability of € 768 million on the above adjustments to fair value has been recognized, based on the statutory tax rates when the asset or liability could be allocated to a specifi c legal entity, and on a normalized eff ective tax rate of 30.8% otherwise.
During the 12-month measurement period, the fair values of identifi able assets acquired and liabilities assumed will be further refi ned, however management does not expect any signifi cant adjustments to the values recognized at December 31, 2015.
The resulting provisional goodwill of € 2,598 million arises mainly from business opportunities in advanced light-weighting materials for the aerospace and automotive industries and in specialty chemicals for mining, synergies (estimated at a minimum of € 100 million in annual synergies within three years after the
acquisition), as well as skilled work force. These benefi ts have not been recognized separately from goodwill because they do not meet the defi nition of identifi able intangible assets.
The goodwill is not expected to be deductible for income tax purposes.
Cytec's results and cash fl ows for the period between December 9 and December 31 are not material, except for non-recurring charges. Consequently, Cytec has not contributed to the Group's IFRS net income or cash fl ows in 2015.
Had Cytec's business been consolidated from January 1, 2015, the consolidated income statement of comprehensive income would have included revenue of € 1,800 million and net income of € 23 million. Detailed pro forma information for the full year 2015 can be found in the Financial Management Report.
On December 31, 2014 Solvay completed the acquisition of the Ryton® PPS business from U.S.-based Chevron Phillips Chemical Company. The purchase aims at further strengthening unmatched leadership in Specialty Polymers' solutions.
The following table summarizes the consideration paid for Ryton® PPS and the amounts of identifi able assets and liabilities assumed recognized provisionally at the acquisition date.
| In € million | |
|---|---|
| TOTAL CONSIDERATION TRANSFERRED (CASH) | 198 |
| Recognised amounts of identifi able assets acquired and liabilities assumed | 198 |
| Tangible assets | 116 |
| Intangible assets | 44 |
| Inventories | 38 |
| Non industrial working capital and pension liabilities | 0 |
| GOODWILL | 0 |
The fair value of intangible assets mainly corresponds to trade name and patents.
Had Ryton® PPS business been consolidated from January 1, 2014, the consolidated statement of comprehensive income would have included revenue of € 111 million and operational profi t for € (11) million.
Acquisition costs amounted to € 4 million and are presented in the non-recurring items.
On April 15, 2015 Solvay has completed the acquisition of Erca Emery Surfactant B.V. alkoxylation asset, a facility jointly owned by Emery Oleochemicals and ERCA Group in the Moerdijk integrated industrial park in the Netherlands, strengthening its strategy of securing sustainable, large-scale surfactant assets worldwide, for a cash amount of € 23 million in 2015. The transaction generated a total amount of goodwill of € 1 million. The identifi able net assets acquired amount to € 42 million and mainly consist of tangible assets.
On November 5, 2015 Solvay acquired EPIC Polymers' long-fi ber thermoplastics (LFT ) technology to complement its off ering of high performance lightweighting materials and gain access to metal replacement of larger automotive semi-structural parts for a total cash amount of € 7 million. The transaction generated a total amount of goodwill of € 2 million. The identifi able net assets acquired amount to € 5 million and mainly consist of intangible assets.
During 2014 Solvay completed the acquisition of Erca Química in Brazil, Solvay Biomass Energy in the United States and Flux Schweiß- und Lötstoff e GmbH in Germany for a total cash amount of € 96 million. The transactions generated a total amount of goodwill of € 33 million. The identifi able net assets acquired amount ed to € 63 million and mainly consisted of tangible and intangible assets and inventories.
| In € million | Land and Buildings |
Fixtures and Equipment |
Other tangible assets |
Tangible assets under construction |
Total |
|---|---|---|---|---|---|
| Gross carrying amount | |||||
| At December 31, 2013 | 2,776 | 10,139 | 387 | 600 | 13,902 |
| Additions | 17 | 161 | 10 | 756 | 945 |
| Disposals and closures | (113) | (691) | (40) | (30) | (875) |
| Increase through business combinations | 18 | 108 | 1 | 0 | 127 |
| Currency translation diff erences | 96 | 442 | 17 | 48 | 605 |
| Other | 69 | 362 | 49 | (458) | 22 |
| At December 31, 2014 | 2,863 | 10,521 | 424 | 916 | 14,725 |
| Additions | 63 | 309 | 20 | 619 | 1,011 |
| Disposals and closures | (44) | (253) | (16) | (3) | (315) |
| Increase through business combinations | 277 | 566 | 21 | 320 | 1,183 |
| Currency translation diff erences | 21 | 14 | 2 | 27 | 64 |
| Other | 151 | 560 | 29 | (632) | 110 |
| AT DECEMBER 31, 2015 | 3,332 | 11,718 | 480 | 1,248 | 16,778 |
| Accumulated depreciation | |||||
| At December 31, 2013 | (1,398) | (7,186) | (303) | 0 | (8,887) |
| Depreciation | (79) | (332) | (64) | (475) | |
| Impairment | (288) | (2) | (290) | ||
| Reversal of impairment | 4 | 4 | |||
| Disposals and closures | 60 | 531 | 30 | 621 | |
| Currency translation diff erences | (40) | (269) | (14) | (323) | |
| Other | 0 | 4 | 5 | 8 | |
| At December 31, 2014 | (1,452) | (7,540) | (348) | 0 | (9,339) |
| Depreciation | (85) | (522) | (32) | (640) | |
| Impairment | (1) | (21) | (2) | (23) | |
| Reversal of impairment | 0 | ||||
| Disposals and closures | 31 | 237 | 15 | 283 | |
| Currency translation diff erences | (16) | 14 | (2) | (4) | |
| Other | (6) | (104) | 2 | (109) | |
| AT DECEMBER 31, 2015 | (1,530) | (7,935) | (367) | 0 | (9,832) |
| Net carrying amount | |||||
| At December 31, 2013 | 1,378 | 2,953 | 84 | 600 | 5,015 |
| At December 31, 2014 | 1,412 | 2,982 | 77 | 916 | 5,386 |
| AT DECEMBER 31, 2015 | 1,801 | 3,783 | 113 | 1,248 | 6,946 |
See also note 20 with respect to capital expenditures.
| In € million | Land and buildings | Fixtures and equipment |
Total |
|---|---|---|---|
| Net carrying amount of fi nance leases included in the table above | 2 | 51 | 53 |
| Minimum lease payments | |||
|---|---|---|---|
| In € million | 2015 | 2014 | |
| Amounts payable under fi nance leases: | |||
| • w ithin one year | 10 | 1 | |
| • i n years two to fi ve inclusive | 33 | 3 | |
| • b eyond fi ve years | 84 | 0 | |
| Less: future fi nance charges | (74) | (3) | |
| Present value of minimum lease payments of fi nance leases | 53 | 1 | |
| Amount due for settlement within 12 months | 10 | 1 | |
| Amount due for settlement after 12 months | 117 | 3 |
| In € million | 2015 | 2014 |
|---|---|---|
| Total minimum lease payments under operating leases recognized in the income statement of the year |
81 | 86 |
| In € million | 2015 | 2014 |
| Within one year | 87 | 85 |
| In years two to fi ve inclusive | 261 | 242 |
| Beyond fi ve years | 125 | 97 |
| TOTAL OF FUTURE MINIMUM LEASE PAYMENTS UNDER NON-CANCELLABLE OPERATING LEASES |
474 | 424 |
Operating leases are mainly related to offi ces and warehouses.
In accordance with IAS 36 Impairment of Assets (see IFRS main accounting policies – 7. Goodwill, and 16. Impairment of tangible and intangible assets (excluding goodwill), and equity method investees), the recoverable amount of property, plant and equipment, intangible assets, CGUs or groups of CGUs, including goodwill, and equity method investees corresponds to the higher of their fair value less costs of disposal, and their value in use. The latter equals the present value of the future cash fl ows expected to be derived from each asset, CGU or group of CGUs, and equity method investees and is determined using the following inputs:
of the business plan referred to above, aff ected by a long-term growth rate deemed appropriate for the activity and the location of the assets;
• discounting of expected cash fl ows at a rate determined using the weighted average cost of capital formula.
The discount rate is estimated based on an extensive benchmarking with peers, for it to refl ect the return investors would require if they were to choose an investment in the underlying assets. The weighted average cost of capital used to discount future cash fl ows was set at 7.7% in 2015 (7.7% in 2014).
The long-term growth rate was set between 1% and 3% depending on the CGU. The growth rates are consistent with the long-term average market growth rates for the respective CGUs, and the countries in which they operate.
Other key assumptions are specifi c to each CGU (energy price, volumes, margin, etc.).
Financial statements
Except as disclosed below, the impairment tests performed at December 31, 2015 and 2014 did not lead to any impairment of assets, as the recoverable amounts of the (groups of) CGUs were signifi cantly higher than their carrying amounts. More specifi cally, the diff erence between the (groups of) CGUs' carrying amount and their value in use (excess value) represents in all cases more than 10% of their carrying amount. As such, for those (groups of) CGUs, a reasonable change in a key assumption on which the recoverable amount of the (groups of) CGUs is based, would not result in an impairment loss for the related (groups of) CGUs. In this respect, we note the following:
Impairment losses are recognized as non-recurring items (see note 7).
RusVinyl is a Russian joint venture in chlorovinyls (Operating Segment: Functional Polymers) in which Solvay holds a 50% equity interest, together with Sibur who holds the remaining 50% equity interest. After application of the equity method, the equity investment has been tested for impairment in 2014, based on projections prepared by Solvay. The impairment loss recognized during 2014 amounted to € 110 million.
In 2015 a new business plan provided by RusVinyl to its lenders led to a positive adjustment of RusVinyl equity earnings amounting to € 19 million. The recoverable amount of the investment has been estimated based on a dividend discount model taking into account this new business plan.
The recoverable amount is highly sensitive to the RUB/€ exchange rate. This rate impacts the carrying amount of the investment, the foreign currency losses on the euro denominated debt, and consequently the distributable earnings potential. Sensitivities on exchange rate RUB/€ and infl ation in Russia lead to a range of outcomes varying between € 90 million above and below the recoverable amount.
An impairment charge of € 26 million related to non-performing Special Chem's assets (Operating Segment: Advanced Materials) has been recognized in 2015.
Following conditions specifi c to the Chinese market, during 2014, the Group decided to put on hold the construction of a production asset in Solvay Biochemical (Taixing) (Operating Segment: Performance Chemicals). The resulting impairment test led to the recognition of an impairment loss on property, plant and equipment in the amount of € 34 million in 2014.
This paragraph should be read together with note 34. The impairment loss recognized during 2014 on non-current assets held for sale relates to the discontinued operations of the chlorovinyls contributed to the 50/50 joint venture with INEOS in 2015. The joint venture pools both groups' assets across the entire chlorovinyls chain, including PVC, caustic soda and chlorine derivatives. The assets classifi ed as held for sale were measured at the lower of their carrying amount and their fair value less costs of disposal. This fair value less costs of disposal has been calculated based on the agreement signed with INEOS at the end of the second quarter of 2014. It considered the upfront payment to be received at closing, the transfer of liabilities into the joint venture, as well as Solvay's exit conditions after three years, when it will receive additional cash proceeds adjusted based on the joint venture's average REBITDA performance during this three-year period. As a result the fair value is categorized in level 3 and the key assumption is the average REBITDA performance in the next three years. Based on this, at June 30, 2014, an impairment loss of € 477 million, allocated to goodwill (€ 143 million), and property plant and equipment and accruals for costs of disposal (€ 335 million) has been recognized. The impact on net income/loss Group share amounted to € (422) million, after taking into account the portion attributable to non-controlling interests.
Solvay confi rms that its strategic direction to sell its participation in Solvay Indupa remains unaff ected and that it is examining all options to achieve this objective. As a disposal within 12 months is considered highly probable at December 31, 2015, Solvay Indupa remains classifi ed as non-current assets held for sale and discontinued operations at December 31, 2015. The remeasurement to fair value less costs to sell of Solvay Indupa leads to an additional impairment loss of € 88 million in 2015.
| In € million | 2015 | 2014 |
|---|---|---|
| CARRYING AMOUNT AT JANUARY 1 | 43 | 38 |
| Acquisition of New Business Development ('NBD') | 4 | 4 |
| Impact of capital reimbursement | (8) | |
| Gains and losses on remeasuring available-for-sale fi nancial assets | 2 | 1 |
| Available-for-sale fi nancial assets impaired in the year | (9) | (1) |
| Other | 1 | 1 |
| CARRYING AMOUNT AT DECEMBER 31(1) | 34 | 43 |
| Of which recognized directly in equity | (2) | (4) |
(1) See also note 37.B.
The amounts reported in the table above only include equity instruments classifi ed as available-for-sale.
| In € million | 2015 | 2014 |
|---|---|---|
| CARRYING AMOUNT AT JANUARY 1 | 30 | 19 |
| Acquisition/Disposal | 11 | |
| Increase through business combination | 11 | |
| Net income from associates | 2 | 0 |
| Dividends received from associates | (3) | (2) |
| Currency translation diff erences | 1 | 1 |
| Other | 0 | 1 |
| CARRYING AMOUNT AT DECEMBER 31 | 41 | 30 |
172
| In € million | 2015 | 2014 |
|---|---|---|
| CARRYING AMOUNT AT JANUARY 1 | 350 | 563 |
| Capital increase/decrease | 13 | 97 |
| Net income from joint ventures | 1 | (34) |
| Dividends received from joint ventures | (11) | (15) |
| Impairment (loss)/reversal of RusVinyl | 19 | (110) |
| Transfer from other investments | 9 | |
| Currency translation diff erences | (20) | (154) |
| Other | (3) | 2 |
| CARRYING AMOUNT AT DECEMBER 31 | 357 | 350 |
(1) See note 42.
The capital increase in joint ventures mainly relates to the investment in RusVinyl (2015 € 13 million, 2014 € 96 million).
The currency translation diff erence in joint ventures mainly relates to the depreciation of the Russian ruble and the Brazilian real compared to the euro.
| In € million | 2015 | 2014 |
|---|---|---|
| CARRYING AMOUNT AT JANUARY 1 | 121 | 114 |
| Additions | 1 | 16 |
| Disposals | (13) | (5) |
| Increase through business combination | 7 | |
| Capital increase/decrease | 33 | 3 |
| Changes of consolidation method | (9) | (1) |
| Changes in consolidation scope | (14) | |
| Impairments | (32) | (8) |
| Reversal of impairments | 4 | 2 |
| Other | (6) | 1 |
| CARRYING AMOUNT AT DECEMBER 31 | 92 | 121 |
In accordance with the concept of materiality, certain companies which are not of signifi cant size have not been included in the consolidation scope. For more information, refer to 2015 c onsolidation scope.
| In € million | 2015 | 2014 |
|---|---|---|
| Finished goods | 1,172 | 854 |
| Raw materials and supplies | 702 | 591 |
| Work in progress | 63 | 45 |
| Total | 1,937 | 1,490 |
| Write-downs | (71) | (70) |
| NET TOTAL | 1,867 | 1,420 |
| In € million | 2015 | 2014 |
|---|---|---|
| VAT and other taxes | 290 | 249 |
| Advances to suppliers | 52 | 30 |
| Financial instruments – operational | 90 | 52 |
| Insurance premiums | 22 | 18 |
| Other | 202 | 151 |
| OTHER CURRENT RECEIVABLES – OTHER | 656 | 500 |
Financial instruments – operational include held for trading and cash fl ow hedge derivatives (see note 37.A).
| 2015 | 2014 | |||
|---|---|---|---|---|
| In € million | Solvay Indupa | Chlorovinyls | Solvay Indupa | Total |
| Property, plant and equipment | 55 | 635 | 145 | 780 |
| Goodwill | 0 | 0 | 1 | 1 |
| Other intangible assets | 0 | 4 | 0 | 4 |
| Investments | 8 | 0 | 11 | 11 |
| Inventories | 44 | 166 | 55 | 221 |
| Trade and other receivables | 62 | 315 | 57 | 372 |
| Cash and cash equivalent | 7 | 0 | 24 | 24 |
| Assets held for sale | 177 | 1,120 | 294 | 1,414 |
| Non-current liabilities | 3 | 111 | 5 | 116 |
| Trade and other payables | 271 | 765 | 281 | 1,047 |
| Liabilities associated with assets held for sale | 275 | 876 | 286 | 1,162 |
| NET ASSETS DIRECTLY ASSOCIATED WITH DISPOSAL GROUP |
(98) | 244 | 7 | 251 |
| Included in other comprehensive income | ||||
| Currency translation diff erences(1) | (56) | 0 | (63) | (63) |
| Defi ned benefi t plans | (3) | (49) | (3) | (52) |
| OTHER COMPREHENSIVE INCOME | (59) | (49) | (65) | (114) |
(1) Including € (48) million for the Solvay share in Solvay Indupa CTA in 2015 (€ (53) million in 2014).
In 2015, the fair value of Solvay Indupa has been reviewed, resulting in an additional impairment loss of € 88 million.
In 2014, assets held for sale at year-end include Chlorovinyls net assets held for sale for € 244 million, and result from the diff erence between the fair value of the net assets contributed (€ 404 million), the estimated adjustments (€ (137) million based on year-end balance) for target working capital, excluded assets and liabilities (of which fi nancial debts) and other costs to sell (€ (22) million).
174
| In € million | Employee benefi ts |
Restructuring | Environment | Litigation | Other | Total |
|---|---|---|---|---|---|---|
| At December 31, 2014 | 3,166 | 77 | 713 | 285 | 87 | 4,328 |
| Additions | 84 | 53 | 56 | 60 | 30 | 282 |
| Reversals of unused amounts | (23) | (15) | (33) | (128) | (13) | (212) |
| Uses | (191) | (50) | (88) | (18) | (25) | (372) |
| Increase through discounting | 64 | 11 | 2 | 1 | 78 | |
| Remeasurements | (279) | (279) | ||||
| Currency translation diff erences | 60 | (14) | (10) | 2 | 38 | |
| Acquisitions and changes in consolidation scope | 215 | 33 | 74 | 23 | 345 | |
| Disposals | (16) | (2) | (17) | |||
| Transfer from/to liabilities associated with assets held for sale |
14 | (1) | 7 | 1 | 32 | 53 |
| Other | 38 | (8) | 30 | |||
| AT DECEMBER 31, 2015 | 3,133 | 97 | 723 | 214 | 106 | 4,273 |
| Of which current provisions | 0 | 95 | 111 | 51 | 52 | 310 |
In total, provisions decreased by € 55 million.
The main events of 2015 are:
Eurozone, Great Britain and United States with a positive impact in equity of € 242 million;
The transfer of liabilities from held for sale to continuing mainly corresponds to the reclassifi cation of provision related to adjustment of purchase price for Inovyn . The balance as of December 31, 2015 related to provisions resulting from the closing of the joint venture Inovyn amounts to € 33 million.
Management expects provisions (other than employee benefi ts) to be used (cash outlays) as follows:
| In € million at December 31, 2015 | up to 5 years | between 5 and 10 years |
beyond 10 years | Total |
|---|---|---|---|---|
| Total provisions for environment | 336 | 125 | 262 | 723 |
| Total provisions for litigation(1) | 169 | 7 | 176 | |
| Total other provisions | 149 | 21 | 33 | 203 |
| TOTAL | 654 | 153 | 295 | 1,102 |
(1) Excluding provisions with cash deposit to guarantee the liabilities (€ 38 million).
The provisions for employee benefi ts include the following:
| In € million | 2015 | 2014 |
|---|---|---|
| Post-employment benefi ts | 2,964 | 3,015 |
| Other long-term benefi ts | 115 | 111 |
| Termination benefi ts | 53 | 41 |
| EMPLOYEE BENEFITS | 3,133 | 3,166 |
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.
For defi ned contribution plans, Solvay pays contributions to publicly or privately administered pension funds or insurance companies. For 2015, the expense amounted to € 20 million compared to € 18 million for 2014.
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.
Solvay contributed in the USA to two multiemployer pension plans under collective bargaining agreements that cover certain of its union-represented employees. During 2014 Solvay has withdrawn from the PACE Industry Union-Management pension fund eff ective as of May 1, 2014, pursuant to a collective bargaining agreement. Also, following the divestiture of Eco Services business Solvay no longer contributes to the Western Conference of Teamsters pension fund.
Each of the Multiemployer plans is a defi ned benefi t pension plan. None of the Multiemployer plans provide an allocation of its assets, liabilities, or costs among contributing employers. None of the Multiemployer plans provides suffi cient information to permit Solvay, or other contributing employers, to account for the Multiemployer plan as a defi ned benefi t plan. Accordingly, the company accounts for its participation in each of the Multiemployer plans as if it were a defi ned contribution plan.
For multiemployer plans, during 2015 and 2014, Solvay paid as yearly contributions less than € 1 million.
The net liability results from the net of the provisions and the capitalized pensions assets.
| In € million | 2015 | 2014 |
|---|---|---|
| Provisions | 2,964 | 3,015 |
| Asset plan surplus | (9) | (1) |
| Net liability | 2,955 | 3,014 |
| Operational expense | 30 | 57 |
| Finance expense | 66 | 94 |
Financial statements
Over recent years, the Group has reduced its exposure to defi ned benefi t plan obligations stemming from future services by converting existing plans into pension plans with a lower risk profi le (hybrid plans, cash balance plans and defi ned contribution plans) or by closing them to new entrants.
Solvay contineously monitors its risk exposure, focusing on the following risks:
Equity instruments, though expected to outperform corporate bonds in the long-term, create volatility and risk in the short-term. To mitigate this risk, the global objective for funded schemes is to invest in a balanced portfolio of debt and equity instruments. The allocation to equity instruments is monitored using Assets and Liabilities Management techniques, to ensure it remains appropriate given the respective schemes' and Group's long term objectives.
A decrease in corporate bond yields will increase the carrying amount of the plan's liabilities. For funded schemes this impact will be partially off set by an increase in the fair value of the plan assets.
The defi ned benefi t obligations are linked to infl ation, and higher infl ation will lead to higher liabilities (although, in most cases, caps on the level of infl ationary increases are in place to protect against extreme infl ation). A limited part of the assets are either unaff ected by or only loosely correlated with infl ation, meaning that an increase in infl ation will also increase the defi cit.
The majority of the schemes' obligations are to provide benefi ts for the life of the member. Increases in life expectancy will therefore increase the plans' liabilities.
This risk is limited, as major plans in foreign currency are funded and most of their assets are denominated in the currency in which benefi t payments will take place.
For partly or fully unfunded plans, the Group is exposed to the risk of external funding following regulatory constraints. This should not impact the defi ned benefi t obligation but could expose the Group to a potential signifi cant cash outlay.
For more information about Solvay group risk management, please refer to the "Management of risks" section of the present document.
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.
The largest post-employment plans in 2015 are in the Great Britain , France, the United States, Germany and Belgium. These fi ve countries represent 94% of the total defi ned benefi t obligation.
| In € million | 2015 | 2014 |
|---|---|---|
| Great Britain | 30% | 33% |
| France | 19% | 25% |
| United States | 27% | 15% |
| Germany | 12% | 14% |
| Belgium | 6% | 8% |
| Other countries | 6% | 5% |
Solvay sponsors a few defi ned benefi t plans in the Great Britain . The largest one is the Rhodia Pension Fund. This is a fi nal salary funded pension plan, with entitlement to accrue a percentage of salary per year of service. It was closed to new entrants in 2003 and replaced by a defi ned contribution plan.
Broadly, about 7% of the liabilities are attributable to current employees, 26% to former employees and 67% to current pensioners.
The Fund functions and complies with British legislation under a large regulatory framework. The Pensions Regulator has a risk based approach to regulation and a code of practice which provides practical guidance to trustees and employers of defi ned benefi t schemes on how to comply with the scheme funding requirements. In accordance with British legislation, the Fund is subject to Scheme Specifi c Funding which requires that pension plans are funded.
The Rhodia Pension Fund is subject to a triennial valuation cycle for funding purposes. This valuation is performed by the scheme actuary in line with British regulations and is discussed between the Trustees and the sponsoring employer to agree the valuation assumptions and a funding plan. The last completed valuation was as at January 1, 2015 which established a fi xed contribution rate of pensionable pay for active members plus a defi cit recovery plan which aims to fund the scheme to technical provisions over a period of time. Future contributions were kept at same level as on the previous valuation.
The British Rhodia Pension Fund is governed by a Board of Trustees. They manage the Fund with prudent and fair judgment. The Trustees determine the liabilities used for Statutory Funding Objectives based on prudent actuarial and economic assumptions. Any shortfall or defi cit must be repaired by additional contributions and in a time frame that fi ts with the employer's ability to pay and the strength of covenant or contingent security being off ered.
Solvay sponsors diff erent defi ned benefi t plans in France: the French compulsory retirement indemnity plan but also two closed and one open top hat plans.
The main plan is for all former Rhodia current and retired employees who contributed to the plan prior to its closure in the 1970s. It off ers a full benefi t guarantee based on the end-of-career salary. This plan is unfunded and broadly, about 95% of the liabilities are attributable to current pensioners.
Solvay does not expect to have any cash out impact in France due to the changes in legislation regarding minimum funding requirements.
Till end 2014 Solvay sponsored three diff erent defi ned benefi t pension plans in the US of which two were closed to new entrants since 2003, and one was still open, being a cash balance plan. Since end 2015 this cash balance plan was closed and an opportunity has been given to all plan participants to move from the existing plan to a new defi ned contribution plan. At this moment all defi ned benefi t plans are closed and all these plans are funded.
Solvay's plans are in compliance with local laws regarding audited fi nancial statements, governmental fi lings, and PBGC insurance premiums where applicable. The plans are reviewed and monitored locally by fi duciary committees for purposes of plan investments and administrative matters.
For the US plans, Solvay's contributions take into account minimum (tax-deductible) funding requirements as well as maximum tax deductible contributions, both regulated by the IRS.
Eligible participants may also elect to receive their pension in a single lump sum payment in lieu of a monthly payment.
Broadly, about 29% of the liabilities are attributable to current employees, 14% to former employees for whom benefi t payments have not yet commenced and 57% to current pensioners.
Solvay's acquisition of Cytec leads to an increase of € 207 million of net defi ned benefi t obligations in the United States.
Cytec legacy sponsored three diff erent defi ned benefi t plans in the United States (one qualifi ed plan and two non-qualifi ed plans). The largest one was the qualifi ed plan "Cytec Retirement Plan" which makes up 96% of Cytec's pension liability as of December 31, 2015. All of these plans are closed to new entrants and accruals are frozen. The Cytec Retirement Plan is funded while the two non-qualifi ed plans are unfunded.
Cytec's plans are in compliance with local laws regarding audited fi nancial statements, government fi lings, and Pension Benefi t Guaranty Corp insurance premiums where applicable.
Cytec's contributions take into account minimum (tax-deductible) funding requirements as well as maximum tax deductible contribution rules, both regulated by the Internal Revenue Service.
A lump sum payment option is not available in any plans except for statutory small benefi t cashouts.
Broadly, about 24% of the Cytec liabilities are attributable to current employees, 9% to former employees for whom benefi t payments have not yet commenced and 65% to current pensioners.
Solvay sponsors four diff erent defi ned benefi t plans in Germany, of which two are closed to new entrants and two are open. As commonly in Germany, all these plans are unfunded. Under these plans, employees are entitled to annual pensions on retirement based on their service and fi nal salary.
Broadly, about 58% of the liabilities are attributable to current pensioners.
Solvay sponsors two defi ned benefi t plans in Belgium. These are funded pension plans which are closed for future accrual since end of 2006 for the one in favor of the executives and since end of 2004 for the one in favor of the White and Blue collars. The past service benefi ts provided under these plans continues to be adapted each year considering annual salary increase and infl ation ("Dynamic management"). As often in Belgium, because of favorable retirement lump sum taxation, most benefi ts are paid as lump sum.
Furthermore, Solvay sponsors two open defi ned contribution plans. These are funded pension plans which are open since beginning of 2007 for the one in favor of the executives and since beginning of 2005 for the one in favor of the White and Blue collars. Participants may choose to invest their contributions amongst four diff erent investment funds (from "Prudent" to "Dynamic"). However, regardless of their choices, the Belgian law foresees that the employer must guarantee a return on employer contribution and on personal contribution, creating that way a potential liability for the Company. The return until December 31, 2015 is 3.25% on the employer contribution and 3.75% on the personal contribution. As from January 1, 2016 the return is set on an annual basis with a minimum of 1.75% and a maximum of 3.75%. For 2016 the return is fi xed at 1.75% for both types of contributions. For these plans Solvay has € 104 million of plan assets at December 31, 2015, and paid € 9 million of contributions during 2015. At the end of 2015 there is no material net liability recognized in the balance sheet concerning these plans.
Solvay's plans are administered through two Solvay Pension Funds that operate in compliance with local laws regarding minimum funding, investments principles, audited fi nancial statements, governmental fi lings, and governance principles. Pension Funds are managed through a General Assembly and a Board of Directors delegating day-to-day activities to an operational Committee.
The majority of the obligations relate to pension plans. In some countries (mainly the United States), there are also post-retirement medical plans, which represent 5% of the total defi ned benefi t obligation.
The amounts charged to income in respect of these plans are:
| In € million | 2015 | 2014 |
|---|---|---|
| Service costs | 18 | 48 |
| Current service cost | 51 | 46 |
| Past service cost (including curtailments) | (32) | 2 |
| Net interest | 66 | 94 |
| Interest cost | 149 | 188 |
| Interest income | (83) | (94) |
| Administrative expenses paid | 11 | 9 |
| NET EXPENSE RECOGNIZED IN P&L – DEFINED BENEFIT PLANS | 96 | 151 |
| Remeasurements | (279) | 508 |
| REAMESUREMENTS RECOGNIZED IN OCI | (279) | 508 |
The service costs and administrative expenses of these benefi t plans are charged variously to cost of sales, commercial and administrative costs, research & development costs or operating gains and losses and non-recurring items, and the net interest is reported as a fi nance expense.
In 2015 the Group current service costs amounted to € 51 million, of which € 33 million related with funded plans and € 18 million related with unfunded plans. Past service costs include favo rable impacts refl ecting the evolution of the post retirement Medicare insurance policy in the United States (€ 30 million).
In 2014 the G roup current service costs amounted to € 46 million, of which € 29 million related with funded plans and € 17 million related with unfunded plans.
The amounts recognized in the consolidated statement of fi nancial position in respect of defi ned benefi t plans are:
| In € million | 2015 | 2014 |
|---|---|---|
| Defi ned benefi t obligations – funded plans | 3,648 | 2,907 |
| Fair value of plan assets at end of period | (2,940) | (2,102) |
| DEFICIT FOR FUNDED PLANS | 708 | 805 |
| Defi ned benefi t obligations – unfunded plans | 2,223 | 2,197 |
| DEFICIT/SURPLUS (-) | 2,931 | 3,002 |
| Amounts not recognized as assets due to asset ceiling (recognized in OCI) | 24 | 12 |
| NET LIABILITY (ASSET) | 2,955 | 3,014 |
| Provision recognized | 2,964 | 3,015 |
| Asset recognized | (9) | (1) |
The decrease of the net liability of € 59 million between 2014 and 2015 is mainly explained by the net eff ect of:
• remeasurements mainly due to the increase of discount rates for Eurozone, Great Britain and United States;
• the acquisition of Cytec activities (€ 207 million).
The increase of assets recognized is mainly due to the Cytec acquisition.
Defi ned benefi t obligations evolved as follows:
| In € million | 2015 | 2014 |
|---|---|---|
| DEFINED BENEFIT OBLIGATION AT BEGINNING OF PERIOD | 5,103 | 4,443 |
| Current service cost | 51 | 46 |
| Interest cost | 149 | 188 |
| Employee contributions | 4 | 6 |
| Past service costs (including curtailments) | (32) | 2 |
| Settlements | 1 | 0 |
| Acquisitions/disposals (-) | 986 | (62) |
| Remeasurements in OCI | (324) | 583 |
| Actuarial gains and losses due to changes in demographic assumptions | (77) | 5 |
| Actuarial gains and losses due to changes in fi nancial assumptions | (242) | 570 |
| Actuarial gains and losses due to experience | (5) | 8 |
| Actual benefi ts paid | (270) | (261) |
| Currency translation diff erences | 158 | 199 |
| Reclassifi cation and other movements | 38 | (1) |
| Transfer from/to (liabilities associated with) assets held for sale | 9 | (40) |
| DEFINED BENEFIT OBLIGATION AT END OF PERIOD | 5,871 | 5,103 |
| Defi ned benefi t obligations – funded plans | 3,648 | 2,907 |
| Defi ned benefi t obligations – unfunded plans | 2,223 | 2,197 |
In 2015 the major variation on Solvay defi ned benefi t obligation is the acquisition of Cytec activities which lead to an increase of € 992 million.
In 2014 the classifi cation as "h eld for sale" of Chlorovinyls activities leads to a decrease of € 40 million. Also in 2014 the disposal of Eco Services activities le d to a decrease of the defi ned benefi t obligation by € 62 million.
The fair value of plan assets evolved as follows:
| In € million | 2015 | 2014 |
|---|---|---|
| FAIR VALUE OF PLAN ASSETS AT BEGINNING OF PERIOD | 2,102 | 1,907 |
| Finance income | 83 | 94 |
| Remeasurements in OCI | (33) | 87 |
| Return on plan assets (excl. amounts in net interests) | (33) | 87 |
| Employer contributions | 168 | 180 |
| Employee contributions | 4 | 6 |
| Aquisitions/disposals (-) | 797 | (43) |
| Administrative expenses paid | (11) | (9) |
| Settlements | 1 | 0 |
| Actual benefi ts paid | (270) | (261) |
| Currency translation diff erences | 97 | 142 |
| Reclassifi cation and other movements | 7 | 5 |
| Transfer from/to (liabilities associated with) assets held for sale | (4) | (7) |
| FAIR VALUE OF PLAN ASSETS AT END OF PERIOD | 2,940 | 2,102 |
| Actual return on plan assets | 50 | 181 |
In 2015 the total return on plan assets amounts to € 50 million. 2015 instable market conditions lead to considerable lower returns than in previous years.
The acquisition of Cytec led to an increase of plan assets by € 785 million.
In 2014 the classifi cation as "h eld for sale" of Chlorovinyls activities led to a decrease of plan assets by € 7 million. Also in 2014 the disposal of Eco Services activities le d to a decrease of plan assets by € 43 million.
The Group cash contributions (including direct benefi t payments) for 2015 amounted to € 168 million, of which € 63 million of contributions to funds and € 105 million of direct benefi ts payments.
The Group cash contributions (including direct benefi t payments) for 2014 amounted to € 180 million, of which € 75 million of contributions to funds and € 105 million of direct benefi ts payments.
Except for signifi cant changes in the regulatory environment (see "R egulatory risk" above), the Group cash contributions in 2016 are expected to approximate € 182 million.
The main categories of plan assets are:
| 2015 | 2014 | ||||
|---|---|---|---|---|---|
| Quoted % of t otal |
Non q uoted % of t otal |
Quoted % of t otal |
Non q uoted % of t otal |
||
| Equity | 40% | 0% | 51% | 0% | |
| Bonds | |||||
| Bonds Investment Grade | 55% | 0% | 44% | 0% | |
| Bonds Non Investment Grade | 2% | 0% | 1% | 0% | |
| Properties | 0% | 0% | 1% | 0% | |
| Cash and cash equivalents | 2% | 0% | 3% | 0% | |
| Derivatives | |||||
| Structured debt (LDI) | 0% | 0% | 0% | 0% | |
| Other Derivatives | 1% | 0% | 0% | 0% | |
| Others | 0% | 0% | 0% | 0% | |
| TOTAL | 100% | 0% | 100% | 0% |
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.
Changes in net liability during the period:
| In € million | 2015 | 2014 |
|---|---|---|
| Net amount recognized at beginning of period | 3,014 | 2,536 |
| Net expense recognized in P&L – Defi ned benefi t plans | 96 | 151 |
| Actual employer contributions/direct actual benefi ts paid | (168) | (180) |
| Acquisitions/disposals | 189 | (18) |
| Remeasurements | (279) | 508 |
| Reclassifi cations | 30 | (6) |
| Currency translation diff erences | 61 | 57 |
| Transfer to (liabilities associated with) assets held for sale | 12 | (33) |
| Net amount recognized at end of period | 2,955 | 3,014 |
Changes in assets ceiling during the period:
| In € million | 2015 | 2014 |
|---|---|---|
| Eff ect of the asset ceiling limit at beginning of year | 12 | |
| Variation of the eff ect of the asset ceiling limit | 12 | 12 |
| Eff ect of the asset ceiling limit at end of year | 24 | 12 |
The impact of changes in asset ceiling recognized through OCI amounts to € 12 million compared to € 12 million in 2014. These impacts concern the plans of Brazil, Great Britain , Portugal and Switzerland.
These assumptions are not related to a specifi c segment.
| Eurozone | Great Britain | United States | |||||
|---|---|---|---|---|---|---|---|
| I n % | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |
| Discount rates | 2.25 | 1.75 | 3.75 | 3.50 | 4.25 | 4.00 | |
| Expected rates of future salary increases | 1.75 – 4.00 | 2.25 – 4.25 | 2.15 – 3.25 | 3.35 – 3.50 | 3.00 – 3.75 | 2.75 – 4.25 | |
| Infl ation rates | 1.75 | 1.75 | 3.25 | 3.00 | 2.25 | 2.25 | |
| Expected rates of pension growth | 0.00 – 1.75 | 0.00 – 1.75 | 3.25 | 3.00 | NA | NA | |
| Expected rates of medical care cost increases | 1.75 | 1.75 | 5.5 | 5.5 | 4.50 – 7.50 | 4.25 – 7.75 |
These assumptions are not related to a specifi c segment.
| Eurozone | Great Britain | United States | ||||
|---|---|---|---|---|---|---|
| I n % | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 |
| Discount rates | 1.75 | 3.25 | 3.50 | 4.50 | 4.00 | 4.75 |
| Expected rates of future salary increases | 1.75 – 4.00 | 2.50 – 4.50 | 1.90 – 3.00 | 3.60 – 3.75 | 3.00 – 3.75 | 2.75 – 4.25 |
| Infl ation rates | 1.75 | 2.00 | 3.00 | 3.25 | 2.25 | 2.50 |
| Expected rates of pension growth | 0.00 – 1.75 | 0.00 – 2.00 | 3.00 | 3.25 | NA | NA |
| Expected rates of medical care cost increases | 1.75 | 2.00 | 5.5 | 5.5 | 4.50 – 7.50 | 4.50 – 8.00 |
Actuarial assumptions regarding future mortality are based on recent country specifi c mortality tables. These assumptions translate at December 31, 2015 into an average remaining life expectancy in years for a pensioner retiring at age 65:
| In years | Great Britain | United States | Belgium | France | Germany |
|---|---|---|---|---|---|
| Retiring at the end of the reporting period: | |||||
| Male | 21.2 | 20.1 | 18.1 | 23.9 | 19.5 |
| Female | 23.7 | 21.9 | 21.5 | 27.4 | 23.6 |
| Retiring 20 years after the end of the reporting period: |
|||||
| Male | 22.8 | 20.7 | 18.1 | 26.7 | 22.1 |
| Female | 25.6 | 22.5 | 21.5 | 30.3 | 26.1 |
In some countries such as Great Britain and United States, the mortality assumptions refl ect actual scheme experience and/or Solvay's expectations in terms of future mortality improvements.
The actuarial assumptions used in determining the benefi t obligation at December 31 are based on the following employee benefi ts liabilities durations:
| Eurozone | Great Britain | United States | |
|---|---|---|---|
| Duration in years | 13.1 | 16.4 | 11.6 |
Sensitivity to a change of percentage in the discount rates on the defi ned benefi ts obligation is as follows:
| In € million | 0.25% increase | 0.25% decrease |
|---|---|---|
| Eurozone | (72) | 75 |
| Great Britain | (68) | 71 |
| United States | (41) | 42 |
| Others | (5) | 5 |
| TOTAL | (186) | 193 |
Sensitivity to a change of percentage in the infl ation rates on the defi ned benefi ts obligation is as follows:
| In € million | 0.25% increase | 0.25% decrease |
|---|---|---|
| Eurozone | 68 | (66) |
| Great Britain | 50 | (49) |
| United States | 0 | 0 |
| Others | 1 | (1) |
| TOTAL | 119 | (116) |
Sensitivity to a change of percentage in salary growth rate on the defi ned benefi ts obligation is as follows:
| In € million | 0.25% increase | 0.25% decrease |
|---|---|---|
| Eurozone | 22 | (21) |
| Great Britain | 4 | (4) |
| United States | 1 | (1) |
| Others | 1 | (1) |
| TOTAL | 28 | (27) |
Sensitivity to a change of one year on mortality tables on the defi ned benefi ts obligation is as follows:
| In € million | Age correction +1 y ear Age correction -1 y ear | |
|---|---|---|
| Eurozone | (81) | 83 |
| Great Britain | (59) | 59 |
| United States | (54) | 55 |
| Others | (5) | 5 |
| TOTAL | (199) | 202 |
These provisions amount to € 97 million, compared with € 77 million at the end of 2014.
The main provisions at the end of 2015 relate to:
These provisions amount to € 723 million, compared with € 713 million at the end of 2014, and pertain to:
the discontinuation of mercury electrolysis activities: forecast expenditure is staggered over time as a result of the expected reutilization of the sites, national regulations on the management of contaminated soils and the state of contamination of soils and groundwater. Most of these provisions can be expected to be used over a 10-20 year time horizon;
dikes, dump sites and land: the provisions relate mainly to soda plant dikes, old lime dikes and land and dump sites linked to activities at certain industrial sites. T hese provisions have a horizon of 1 to 20 years;
The estimated amounts are discounted based on the probable date of settlement, and are periodically adjusted to refl ect the passage of time.
Provisions for litigation amount to € 214 million at the end of 2015 compared with € 285 million at the end of 2014. The decrease is mainly explained by the reversal of a provision for tax litigations (€ 84 million).
The main provisions at the end of 2015 relate to tax risks (€ 108 million) and legal claims (€ 105 million).
Other provisions relate to the shutdown or disposal of activities and amount to € 106 million, compared with € 87 million at the end of 2014.
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.
| In € million | 2015 | 2014 |
|---|---|---|
| Financial debt | 6,520 | 2,338 |
| • Other current receivables – Financial instruments | (111) | (309) |
| • Cash and cash equivalents | (2,030) | (1,251) |
| NET INDEBTEDNESS | 4,379 | 778 |
Liabilities (+)/Assets (-)
Solvay's ratings by two rating agencies are: BBB-/A3 (stable outlook) at Standard and Poors, and Baa2/P2 (negative outlook) at Moody's following the acquisition of Cytec.
| In € million | 2015 | 2014 |
|---|---|---|
| Subordinated loans | 500 | 499 |
| Bonds | 4,837 | 491 |
| Long-term fi nance lease obligations | 51 | 2 |
| Long-term debts to fi nancial institutions | 300 | |
| Other long-term debts | 240 | 193 |
| Amount due within 12 months (shown under current liabilities) | 308 | 505 |
| Other short-term borrowings (including overdrafts) | 584 | 348 |
| TOTAL FINANCIAL DEBT (SHORT AND LONG-TERM) | 6,520 | 2,338 |
Gross debt increased from € 2,338 million at the end of 2014 to 6,520 million at the end of 2015.
The increase of the gross debt in 2015 is mainly due to the new debt (€ 2,250 million senior € notes and US\$ 1,600 million senior US\$ notes before debt issuance costs) issued in December 2015 to partly fi nance the acquisition of Cytec and for the early refi nancing of existing short-term and long-term fi nancial debts maturing in 2016 (resulting in an increase in cash and cash equivalents approximating € 900 million), the acquisition of the net fi nancial debt of Cytec (€ 531 million), the increase in commercial paper issuance (€ 250 million at the end of 2015 compared to the end of 2014) as well as the fi nancing of projects in emerging countries. In 2015, Solvay also reimbursed the retail bond (€ 500 million) maturing in June.
It should be also noted that in the context of the acquisition of Cytec, Solvay has arranged committed bridge fi nancing for the transaction that has been partially used (€ 600 million) as from the closing of the acquisition early December and fully repaid just after the € 1.5 billion rights issue later in December.
In 2014, Solvay reimbursed the € 500 million EMTN bond maturing in January and in May, the two Rhodia high yield bonds of respectively € 500 million (fi rst call option) and US\$ 400 million (early redemption).
In addition, as from April 2014, Solvay successfully issued Belgian Treasury Notes (€ 75 million at the end of 2014 and € 324 million at the end of 2015) under its available program of € 1 billion.
The largest borrowings maturing after 2015 are:
| 2015 | 2014 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In € million (except where indicated) |
Nominal amount |
Coupon | Maturity | Secured | Amount at amortized cost |
Fair value |
Amount at amortized cost |
Fair value |
||
| Retail | 500 | 5.01% | 2015 | No | 500 | 510 | ||||
| European Investment Bank | 300 | 3.90% | 2016 | No | 300 | 312 | 300 | 320 | ||
| Floating rate notes € | 1,000 | Euribor 3m + 82 bps |
2017 | No | 995 | 1,004 | ||||
| EMTN bonds issued by Solvay SA (Belgium) |
500 | 300 | 4.75% | 2018 | No | 493 | 551 | 491 | 571 | |
| 200 | (tap) | 5.71% | ||||||||
| Senior US\$ notes (144A) | 735 | 3.40% | 2020 | No | 731 | 730 | ||||
| Senior € notes | 750 | 1.625% | 2022 | No | 741 | 751 | ||||
| Senior US\$ notes (144A) | 735 | 4.45% | 2025 | No | 730 | 730 | ||||
| Senior € notes | 500 | 2.75% | 2027 | No | 494 | 505 | ||||
| Deeply subordinated debt issued by Solvay Finance SA (France) with support from Solvay SA (Belgium) |
500 | (1) | 6.375% | 2104 | No | 500 | 507 | 499 | 525 | |
| Senior US\$ note Cytec Industries Inc (US\$ 82.2 m) |
76 | 8.95% | 2017 | No | 82 | 82 | ||||
| Senior US\$ note Cytec Industries Inc (US\$ 400 m) |
367 | 3.5% | 2023 | No | 347 | 347 | ||||
| Senior US\$ note Cytec Industries Inc (US\$ 250 m) |
230 | 3.95% | 2025 | No | 224 | 224 | ||||
| TOTAL | 6,192 | 5,637 | 5,743 | 1,790 | 1,926 |
(1) Rating agencies Moody's and Standard & Poors have treated this issue partially as equity (50%) and partially as debt (50%). In accordance with 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.
There is no default on the above-mentioned fi nancial debt. There are no fi nancial covenants, neither on Solvay SA, nor on any of the Group's holding companies.
The total cash available, cumulating the "Other current receivables – fi nancial instruments" and "Cash and cash equivalents", amounts to € 2,141 million at the end of 2015 compared to 1,560 million at the end of 2014.
Solvay used part of the available treasury to reimburse in January 2014 the € 500 million EMTN bond, in May 2014 the two Rhodia high yield bonds of respectively € 500 million (fi rst call option) and US\$ 400 million (earlier redemption) and in June 2015 the € 500 million.
Cash also includes the extra fi nancing issued in December 2015 for the early refi nancing of existing short-term and long-term fi nancial debts maturing in 2016 (resulting in an increase in cash and cash equivalents approximating € 900 million) as well as the cash of Cytec (€ 198 million).
| In € million | 2015 | 2014 |
|---|---|---|
| Money Market Funds | 0 | 300 |
| Currency Swaps | 49 | |
| Other marketable securities >3 months | 21 | |
| Other current fi nancial asset | 41 | 9 |
| OTHER CURRENT RECEIVABLES – FINANCIAL INSTRUMENTS | 111 | 309 |
The "Other current receivables – fi nancial instruments" amount to € 111 million at the end of 2015 and include currency swaps, other marketable securities > 3 months (Chinese bank drafts), and other current fi nancial assets (mainly margin calls of Solvay Energy Services). At the end of 2014, it mainly included Money Market Funds.
The decrease from € 309 million to € 111 million largely explains "changes in other current fi nancial assets" in the cash fl ow from fi nancing activities (€ 225 million).
Cash and cash equivalents amount to € 2,030 million at the end of 2015 compared to € 1,251 million at the end of 2014.
| In € million | 2015 | 2014 |
|---|---|---|
| Cash | 1,214 | 754 |
| Term deposits | 815 | 485 |
| Others | 0 | 12 |
| CASH AND CASH EQUIVALENTS | 2,030 | 1,251 |
By their nature, the carrying amount of cash and cash equivalents is equal to, or a very good approximation of, their fair values.
The following table presents the fi nancial instruments by category, split by current and non-current assets and liabilities.
| 2015 | 2014 | |||
|---|---|---|---|---|
| In € million | Classifi cation | Carrying amount | Carrying amount | |
| Non-current assets – Financial instruments | 452 | 237 | ||
| Available for sale fi nancial assets | Available-for-sale | 34 | 43 | See note 29 |
| Loans and other non-current assets (except pension fund surpluses) |
418 | 193 | ||
| • Inovyn derivative fi nancial instrument | Held for trading | 244 | 0 | |
| • Others | Loans and Receivables | 174 | 193 | |
| Current assets – Financial instruments | 3,846 | 3,030 | ||
| Trade receivables | Loans and Receivables | 1,615 | 1,418 | |
| Other current receivables – Financial instruments | 111 | 309 | See note 36 | |
| • Other marketable securities >3 months | Loans and Receivables | 21 | 0 | |
| • Money Market Funds | Available-for-sale | 0 | 300 | |
| • Currency swaps | Held for trading | 49 | 0 | |
| • Other current fi nancial asset | Loans and Receivables | 40 | 6 | |
| • Other current fi nancial asset | Available-for-sale | 0 | 3 | |
| Financial instruments – Operational | 90 | 52 | See note 33 | |
| • Held for trading | Held for trading | 76 | 42 | |
| • Derivative fi nancial instruments designated in cash fl ow hedge relationship |
Cash fl ow hedges | 14 | 10 | |
| Cash and cash equivalents | Loans and Receivables | 2,030 | 1,251 | See note 36 |
| TOTAL ASSETS – FINANCIAL INSTRUMENTS | 4,298 | 3,267 | ||
| Non-current liabilities – Financial instruments | 5,911 | 1,690 | ||
| Long-term fi nancial debt | 5,628 | 1,485 | See note 36 | |
| • Subordinated loans and bonds | Financial liabilities measured at amortized cost |
5,337 | 990 | |
| • Other long-term debts | Financial liabilities measured at amortized cost |
240 | 493 | |
| • Long-term fi nance lease obligations | Financial lease liabilities measured at amortized cost |
51 | 2 | See note 27 |
| Other non-current liabilities | Financial liabilities measured at amortized cost |
282 | 204 | |
| Current liabilities – Financial instruments | 2,730 | 2,516 | ||
| Short-term fi nancial debt | 891 | 853 | See note 36 | |
| • Short-term fi nancial debt (excluding fi nance lease obligations) |
Financial liabilities measured at amortized cost |
890 | 853 | |
| • Short-term fi nance lease obligations | Financial liabilities measured at amortized cost |
2 | 0 | |
| Trade liabilities | 1,559 | 1,461 | ||
| Financial instruments – Operational | 135 | 88 | See note 38 | |
| • Held for trading | Held for trading | 90 | 32 | |
| • Derivative fi nancial instruments designated in cash fl ow hedge relationship |
Cash fl ow hedges | 45 | 57 | |
| Dividends payable | 144 | 114 | ||
| TOTAL LIABILITIES – FINANCIAL INSTRUMENTS | 8,640 | 4,206 |
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.
| 2015 | 2014 | |
|---|---|---|
| In € million | Carrying amount | Carrying amount |
| Fair value through profi t or loss | ||
| Held for trading | 369 | 42 |
| Derivative fi nancial instruments designated in cash fl ow hedge relationship | 14 | 10 |
| Loans and receivables (including cash and cash equivalents, trade receivables, loans and other current/non-current assets except pension fund surpluses) |
3,881 | 2,868 |
| Available for sale fi nancial assets | 34 | 347 |
| TOTAL FINANCIAL ASSETS | 4,298 | 3,267 |
| Fair value through profi t or loss | ||
| Held for trading | (90) | (32) |
| Derivative fi nancial instruments designated in cash fl ow hedge relationship | (45) | (57) |
| Financial liabilities measured at amortized cost (including long-term fi nancial debt, other non-current liabilities, short-term fi nancial debt, trade liabilities) |
(8,308) | (4,001) |
| Dividends payable | (144) | (114) |
| Finance lease obligations measured at amortized cost | (53) | (2) |
| TOTAL FINANCIAL LIABILITIES | (8,640) | (4,206) |
The category "Held for trading" only contains derivative fi nancial instruments that are used for management of foreign currency risk, interest rate risk, energy and CO2 emission rights price risks, but which are not documented as hedging instruments. They also include the Inovyn derivative fi nancial instrument (see detail in section 37.B).
Available-for-sale fi nancial assets pertain to Solvay's New Business Development (NBD) activity: the Group has built a Corporate Venturing portfolio which is made of direct investments in startup companies and of investments in v enture c apital funds. The available-for-sale fi nancial assets are measured at fair value according to the valuation guidelines published by the European Private Equity and Venture Capital Association.
In addition, at December 31, 2014, Money Market Funds (debt instrument) were held (€ 300 million).
Quoted market prices are available for fi nancial assets and fi nancial liabilities with standard terms and conditions that are traded on active markets. The fair values of derivative fi nancial instruments are equal to their quoted prices, if available. In case such quoted prices are not available, the fair value of the fi nancial instruments is determined based on a discounted cash fl ow analysis using the applicable yield curve derived from quoted interest rates matching maturities of the contracts for non-optional derivatives. Optional derivatives are fair valued based on option pricing models, taking into account the present value of probability weighted expected future payoff s, using market reference formulas.
Solvay's exit from Inovyn against receipt of an additional, performance-based payment qualifi es as a derivative fi nancial instrument, of which the fair value amounts to € 244 million at December 31, 2015. Its fair value is largely based on level 3 inputs, namely REBITDA multiples, comparing the expected exit price against the fair value of Solvay's 50% equity share held in Inovyn . Any future changes of estimates of REBITDA multiples will impact the fair value of the derivative fi nancial instrument. A decrease of REBITDA by 10% decreases the fair value of the derivative fi nancial instrument by € 39 million. An increase of REBITDA by 10% increases the fair value of the derivative fi nancial instrument by € 54 million. A decrease/increase of the discount rate by 10% increases/decreases the fair value of the derivative fi nancial instrument by € 6 million.
The fair values of other fi nancial assets and fi nancial liabilities (other than those described above) are determined in accordance with generally accepted pricing models based on discounted cash fl ow analysis.
| 2015 | 2014 | ||||
|---|---|---|---|---|---|
| In € million | Carrying amount | Fair value | Carrying amount | Fair value | Fair value level |
| Non-current assets – Financial instruments | 174 | 174 | 193 | 193 | |
| Loans and other non-current assets (except pension fund surpluses) |
174 | 174 | 193 | 193 | 2 |
| Non-current liabilities – Financial instruments | (5,911) | (6,005) | (1,690) | (1,817) | |
| Subordinated loans and bonds | (5,337) | (5,431) | (990) | (1,097) | 1 |
| Other long-term debts | (240) | (240) | (493) | (513) | 2 |
| Other non-current liabilities | (282) | (282) | (204) | (204) | 2 |
| Long-term fi nance lease obligations | (51) | (51) | (2) | (2) | 2 |
The carrying amounts of current fi nancial assets and liabilities are estimated to reasonably approximate their fair values, such in light of short terms to maturity.
The table "Financial instruments measured at fair value in the consolidated statement of fi nancial position" provides an analysis of fi nancial instruments that, subsequent to their initial recognition, are measured at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable (see IFRS main accounting policies - 20. Financial assets).
In accordance with the Group internal rules, the responsibility for measuring the fair value level resides with (a) the Treasury Department for the non-energy derivative fi nancial instruments, and the fi nancial liabilities, (b) Energy Services business unit for the energy derivative fi nancial instruments and (c) the F inance Department for non-derivative fi nancial assets.
| 2015 | ||||
|---|---|---|---|---|
| In € million | Level 1 | Level 2 | Level 3 | Total |
| Held for trading | 2 | 123 | 244 | 369 |
| • Foreign currency risk | 49 | 49 | ||
| • E nergy risk | 55 | 55 | ||
| • CO2 risk | 2 | 19 | 0 | 22 |
| • Inovyn derivative fi nancial instrument | 244 | 244 | ||
| Cash fl ow hedges | 6 | 8 | 14 | |
| • Foreign currency risk | 8 | 8 | ||
| • Energy risk | 1 | 1 | ||
| • CO2 risk | 6 | 6 | ||
| Available-for-sale fi nancial assets | 34 | 34 | ||
| • New Business Development | 34 | 34 | ||
| TOTAL | 8 | 131 | 278 | 417 |
| Held for trading | (90) | 0 | (90) | |
| • Foreign currency risk | (12) | (12) | ||
| • Energy risk | (46) | (46) | ||
| • CO2 risk | (28) | 0 | (28) | |
| • Solvay share price | (4) | (4) | ||
| Cash fl ow hedges | 0 | (45) | (45) | |
| • Foreign currency risk | (23) | (23) | ||
| • Interest rate risk | (1) | (1) | ||
| • Energy risk | (16) | (16) | ||
| • Solvay share price | (5) | (5) | ||
| TOTAL | 0 | (135) | 0 | (135) |
| 2014 | ||||
|---|---|---|---|---|
| In € million | Level 1 | Level 2 | Level 3 | Total |
| Held for trading | 1 | 41 | 0 | 42 |
| • Foreign currency risk | 11 | 11 | ||
| • Energy risk | 22 | 22 | ||
| • CO2 risk | 1 | 1 | 0 | 1 |
| • Solvay share price | 7 | 7 | ||
| Cash fl ow hedges | 3 | 8 | 10 | |
| • Foreign currency risk | 7 | 7 | ||
| • CO2 risk | 3 | 3 | ||
| • Solvay share price | 1 | 1 | ||
| Available-for-sale fi nancial assets | 300 | 43 | 343 | |
| • New Business Development | 43 | 43 | ||
| • Other current receivables – fi nancial instruments (Money Market Funds) |
300 | 300 | ||
| Cash and cash equivalents | 3 | 3 | ||
| • Marketable securities | 3 | 3 | ||
| TOTAL | 306 | 49 | 43 | 398 |
| Held for trading | (5) | (26) | (1) | (32) |
| • Foreign currency risk | (5) | (5) | ||
| • Energy risk | (3) | (18) | (21) | |
| • CO2 risk | (3) | (3) | (1) | (6) |
| Cash fl ow hedges | (1) | (56) | (57) | |
| • Foreign currency risk | (41) | (41) | ||
| • Interest rate risk | (1) | (1) | ||
| • Energy risk | (13) | (13) | ||
| • CO2 risk | (1) | (1) | ||
| • Solvay share price | (1) | (1) | ||
| TOTAL | (6) | (82) | (1) | (88) |
Reconciliation of level 3 fair value measurements of financial assets and liabilities
| 2015 | |||
|---|---|---|---|
| At fair value through profi t or loss |
Available-for-sale | ||
| In € million | Derivatives | Shares | Total |
| Opening balance at January 1 | (1) | 43 | 43 |
| Total gains or losses | |||
| • Recognized in the income statement | 0 | (9) | (9) |
| • Recognized in other comprehensive income | 3 | 3 | |
| Acquisitions | 244 | 4 | 248 |
| Disposals | (8) | (8) | |
| Closing balance at December 31 | 244 | 34 | 277 |
| 2014 | ||||
|---|---|---|---|---|
| At fair value through profi t or loss |
Available-for-sale | |||
| Derivatives | Shares | Total | ||
| 0 | 38 | 38 | ||
| 0 | (1) | (1) | ||
| 2 | 2 | |||
| 4 | 4 | |||
| (1) | 43 | 43 | ||
| In € million | 2015 | 2014 |
|---|---|---|
| Recognized in the income statement | ||
| Recycling from OCI of derivative fi nancial instruments designated in cash fl ow hedge relationship | ||
| • Foreign currency risk | (112) | 1 |
| • Energy risk | (19) | (6) |
| • CO2 risk | (3) | 0 |
| Changes in the fair value of fi nancial instruments held for trading | ||
| • Energy risk | (2) | (2) |
| • CO2 risk | 4 | 1 |
| Recognized in the gross margin | (132) | (6) |
| Recycling from OCI of derivative fi nancial instruments designated in cash fl ow hedge relationship | ||
| • Foreign currency risk | 0 | 5 |
| Changes in the fair value of fi nancial instruments held for trading | ||
| • Solvay share price | (4) | 0 |
| Ineff ective portion of derivative fi nancial instruments designated in cash fl ow hedge relationship | ||
| • Foreign currency risk | 7 | 2 |
| Operating exchange gains and losses | (5) | (6) |
| Recognized in other operating gains and losses | (2) | 1 |
| Changes in the fair value of fi nancial instruments held for trading | ||
| • Solvay share price | 5 | 1 |
| Ineff ective portion of derivative fi nancial instruments designated in cash fl ow hedge relationship | ||
| • Foreign currency risk | (33) | 0 |
| Recognized in non-recurring gains and losses | (27) | 1 |
| Net interest expense | (100) | (115) |
| Other gains and losses on net indebtedness (excluding gains and losses on hyperinfl ation and other items not related to fi nancial instruments) |
||
| • Foreign currency risk | (2) | 2 |
| • Interest element of swaps | (18) | (21) |
| • Others | 2 | 2 |
| Recognized in charges on net indebtedness | (117) | (132) |
| Income/loss from available-for-sale fi nancial assets investments | (8) | (1) |
| TOTAL RECOGNIZED IN THE INCOME STATEMENT | (286) | (136) |
The foreign currency expense recognized in gross margin of € 112 million is the result of the settlement of derivative fi nancial instruments designated in cash fl ow hedge relationship. Their purpose was to off set a portion of the foreign exchange diff erences on sales. The main currencies hedged by the Group are US dollar, Japanese yen, Brazilian real and South-Korean won.
The foreign currency expense recognized in non-recurring gains and losses of € 33 million is the ineff ective portion (time value) of the derivative fi nancial instrument related to the acquisition of Cytec.
Income and expenses on fi nancial instruments recognized in other comprehensive income include the following:
| In € million | 2015 | 2014 |
|---|---|---|
| Net change in the fair value of available-for-sale fi nancial assets | 2 | 1 |
| Total available-for-sale fi nancial assets | 2 | 1 |
| Recycling from OCI of derivative fi nancial instruments designated in cash fl ow hedge relationship | ||
| • Foreign currency risk | 112 | (7) |
| • Energy risk | 19 | 6 |
| • CO2 risk | 3 | |
| Basis adjustments | ||
| • Foreign currency risk | (77) | |
| Eff ective portion of changes in fair value of cash fl ow hedge | ||
| • Foreign currency risk | (15) | (42) |
| • Energy risk | (19) | (14) |
| • CO2 risk | (3) | |
| • Solvay share price | (5) | (3) |
| Total cash fl ow hedges | 15 | (60) |
| TOTAL | 17 | (59) |
The recycling from OCI (foreign currency risk) of € 112 million is explained above. The amount of € (77) million is the designated portion of the derivative fi nancial instrument (intrinsic value) related to the acquisition of Cytec that has been reclassifi ed to goodwill at acquisition date as a basis adjustment.
See the item 2.1 Policy in respect of capital in the Corporate governance statement section of this report.
The Group is exposed to market risks from movements in foreign exchange rates, interest rates and other market prices (energy prices, CO2 emission rights prices and equity prices). The Solvay group uses derivative fi nancial instruments to hedge clearly identifi ed foreign exchange, interest rate, energy price and CO2 emission rights price risks (hedging instruments). However, the required criteria to apply hedge accounting are not met in all cases.
Furthermore, the Group is also exposed to liquidity risks and credit risks.
The Group does not enter into, nor does trade fi nancial instruments (including derivative fi nancial instruments) for speculative purposes.
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 exchange risk at the time of invoicing (risks which are certain) as well as monitoring and hedging where appropriate exchange rate positions generated by the Group's activities, based on expected cash fl ows. See the item 5 Financial risk in the Management of risks section of this report for additional information on the foreign currency risks management.
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.
In 2015, the currency risk of the Cytec acquisition was partially hedged (see note 26).
The Group's currency risk can be split into two categories: translation and transactional risk.
The translation exchange risk is the risk aff ecting the Group's consolidated fi nancial statements related to investees operating in a currency other than the EUR (the Group's presentation currency). The main other currencies are the US Dollar, Chinese Yuan, Brazilian Real and Russian Ruble.
Exchange rate fl uctuations, particularly of the US Dollar, can aff ect earnings. In the course of 2015 the EUR/USD exchange rate moved from 1.2141 at the start of January to 1.0887 at the end of December. In the course of 2014 the EUR/USD exchange rate moved from 1.3791 at the start of January to 1.2141 at the end of December. During 2015 and 2014, the Solvay group did not hedge the currency risk of foreign operations.
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.
To the largest extent possible, the Group manages the transactional risk on receivables and borrowings at the level of Solvay CICC in Belgium and locally for other affi liates.
The choice of borrowing currency depends mainly on the opportunities off ered 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 within the cost of borrowing. These enable the Group 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 funds are not available in local fi nancial markets, or because the fi nancial conditions are too onerous. In such a situation the Group has to borrow in a diff erent currency. Nonetheless the Group considers opportunities to refi nance its borrowings in emerging countries with local currency debt.
The Group's foreign exchange position is centralized at Solvay CICC. This centralized exchange position is then managed under rules and specifi c limits which have been set by the Group.
The main fi nancial instruments used are the spot and forward purchase and sale of currencies, and the purchase of options.
The Group uses derivatives to hedge identifi ed foreign exchange rate risks. It documents those as hedging instruments unless it hedges a recognized fi nancial asset or liability when generally no cash fl ow hedge relationship is documented.
At the end of 2015 for future exposure, the Group had mainly hedged forecast sales (short position) in a nominal amount of US\$ 665 million (€ 595 million) and JP¥ 11,753 million (€ 88 million).
At the end of 2014 for future exposure, the Group had mainly hedged forecast sales in a nominal amount of US\$ 743 million (€ 594 million) and JP¥ 12,332 million (€ 90 million).
The daily management of the transactional risk is mainly done at Solvay CICC either via spot or forward contracts. Unless documented as hedging instruments (see above), those forward contracts are classifi ed as held for trading.
The following table details the forward exchange contracts outstanding at the end of the period:
| Notional amount | Fair value assets | Fair value liabilites | ||||
|---|---|---|---|---|---|---|
| In € million | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 |
| Held for trading | (1,174) | 298 | 49 | 11 | (12) | (5) |
| Cash fl ow hedges | (683) | (668) | 8 | 7 | (23) | (41) |
| TOTAL | (1,857) | (370) | 57 | 18 | (34) | (46) |
(1) Long/(short) positions.
In comparison to 2014 where the trading position was long by € 298 million, 2015 is short by € (1,174) million mainly due to fi nancing constraints (of which currency swaps held to create a US\$ 900 million synthetic fi nancing wih respect to the Cytec acquisition).
There is no material sensitivity for the Group in profi t or loss and equity to variations in exchange rates.
See the Financial risk in the Management of risks section p. 66 of this report for additional information on the interest rate risks management.
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.
Interest rate exposure by currency is summarized below:
| In € million | At December 31, 2015 | At December 31, 2014 | ||||
|---|---|---|---|---|---|---|
| Currency | Fixed rate | Floating rate | Total | Fixed rate | Floating rate | Total |
| Financial debt | ||||||
| EUR | (2,539) | (1,461) | (4,000) | (1,869) | (138) | (2,008) |
| USD | (2,170) | (74) | (2,244) | 0 | (53) | (53) |
| THB | (43) | (61) | (104) | (41) | (94) | (135) |
| BRL | (20) | (4) | (24) | (30) | (5) | (35) |
| CNY | (103) | 0 | (103) | 0 | (30) | (30) |
| Other | (22) | (23) | (45) | (39) | (39) | (77) |
| Total | (4,897) | (1,623) | (6,520) | (1,978) | (359) | (2,338) |
| Cash and cash equivalents | ||||||
| EUR | 1,083 | 1,083 | 281 | 281 | ||
| USD | 455 | 455 | 525 | 525 | ||
| THB | 99 | 99 | 69 | 69 | ||
| BRL | 74 | 74 | 90 | 90 | ||
| CNY | 40 | 40 | 82 | 82 | ||
| Other | 279 | 279 | 204 | 204 | ||
| Total | 2,030 | 2,030 | 1,251 | 1,251 | ||
| Other current receivables – fi nancial instruments | ||||||
| EUR | 29 | 29 | 306 | 306 | ||
| Other | 83 | 83 | 3 | 3 | ||
| Total | 111 | 111 | 309 | 309 | ||
| TOTAL | (4,897) | 518 | (4,379) | (1,978) | 1,200 | (778) |
At the end of 2015, around € 4.9 billion of the Group's gross debt was at fi xed-rate, including mainly:
• European Investment Bank € 300 million maturing in 2016;
The increase of the fl oating rate debt is explained by the € 1 billion senior notes (carrying amount of € 995 million) maturing in 2017 (Euribor plus 82 bps of margin).
The impact of interest rate volatility at the end of 2015 compared to 2014 is the following:
| Sensitivity to a +100 bp movement in EUR market interest rates |
Sensitivity to a -100 bp movement in EUR market interest rates |
|||||
|---|---|---|---|---|---|---|
| In € million | 2015 | 2014 | 2015 | 2014 | ||
| Profi t or loss | (15) | (1) | 15 | 1 |
In addition, in 2015, the MTP HP joint venture (joint operation 50/50 between Dow and Solvay) in Thailand (HPPO project) has entered into an interest rate swap for hedging purpose (notional amount € 64 million at the end of 2015, 100%); its fair value was € (1) million (compared to € (1) million in 2014), included in the net fi nancial charges (only 50%, Solvay share).
| Notional amount | Fair value assets | Fair value liabilites | |||||
|---|---|---|---|---|---|---|---|
| In € million | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |
| Cash fl ow hedge | 32 | 38 | 0 | 0 | (1) | (1) | |
| TOTAL | 32 | 38 | 0 | 0 | (1) | (1) |
Financial statements
The Group purchases a large portion of its coal, gas and electricity needs in Europe and the United States based on fl uctuating liquid market indices. In order to reduce the cost volatility, the Group has developed a policy for exchanging variable price against fi xed price through derivative fi nancial instruments. Most of these hedging instruments can be documented as hedging instruments of the underlying purchase contracts. Purchases of physical energy at fi xed price contracts qualifi ed as "own use" contracts (not derivatives) constitute a natural hedge, and are not included in this note. Similarly the Group's exposure to CO2 price is partly hedged by forward purchases of European Union Allowance (EUA), which either can be documented as hedging instruments, or qualify as own use contracts.
Finally some exposure to gas-electricity or coal-electricity spreads may arise from the production of electricity on Solvay sites (mostly from cogeneration units in Europe), which can be hedged by forward purchases and forward sales or optional schemes. In this case, cash fl ow hedge accounting is applied.
Financial hedging of energy and CO2 emission rights price risks is managed centrally by Energy Services on behalf of the Group entities.
Energy Services also carries out trading transactions with respect to energy and CO2, for which the residual price exposure is maintained close to zero.
The following tables detail the notional principal amounts and fair values of energy and CO2 derivative fi nancial instru ments outstanding at the end of the reporting period:
| Notional amount | Fair value assets | Fair value liabilites | |||||
|---|---|---|---|---|---|---|---|
| In € million | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |
| Held for trading | 624 | 559 | 76 | 24 | (75) | (26) | |
| Cash fl ow hedge | 73 | 100 | 6 | 3 | (16) | (14) | |
| TOTAL | 697 | 659 | 82 | 26 | (91) | (40) |
See the Financial risk in the Management of risks section, p.66 of this report for additional information on the credit risk management.
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, fi nancial instruments - operational , loans and other non-current assets is as follows:
| O f which receivables without write-down | |||||||
|---|---|---|---|---|---|---|---|
| 2015 In € million |
Total | W ith write-down |
N ot past due |
L ess than 30 days past due |
Between 30 & 60 days past due |
Between 60 & 90 days past due |
M ore than 90 days past due |
| Trade receivables | 1,615 | 102 | 1,389 | 95 | 13 | 2 | 14 |
| Financial instruments – operational | 90 | 90 | |||||
| Loans and other non-current assets | 427 | 35 | 392 | 1 | |||
| TOTAL | 2,133 | 137 | 1,871 | 95 | 13 | 2 | 14 |
| O f which receivables without write-down | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2014 In € million |
Total | W ith write-down |
N ot past due |
L ess than 30 days past due |
Between 30 & 60 days past due |
Between 60 & 90 days past due |
M ore than 90 days past due |
|
| Trade receivables | 1,418 | 77 | 1,229 | 73 | 21 | 4 | 14 | |
| Financial instruments – operational | 52 | 52 | ||||||
| Loans and other non-current assets | 194 | 26 | 167 | 1 | ||||
| TOTAL | 1,665 | 103 | 1,449 | 74 | 21 | 4 | 14 |
Financial statements
See the Financial risk in the Management of risks section p.66 of this report for additional information on the liquidity risk management.
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 forecast 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 limit amounts to be refi nanced each year.
The following tables detail the Group's remaining contractual maturity for its fi nancial liabilities with contractual repayment periods. The tables have been prepared 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 based on a fl oating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period.
| 2015 In € million |
Total | on demand or within one year |
in year two |
in years three to fi ve |
beyond fi ve years |
|---|---|---|---|---|---|
| Outfl ows of cash related to fi nancial liabilities: | 8,640 | ||||
| Other non-current liabilities | 282 | 282 | |||
| Short-term fi nancial debt | 891 | 891 | |||
| Trade liabilities | 1,559 | 1,559 | |||
| Dividends payables | 144 | 144 | |||
| Financial instruments – operational | 135 | 135 | |||
| Long-term fi nancial debt | 5,628 | 1,101 | 1,334 | 3,193 | |
| TOTAL FINANCIAL DEBT (SHORT AND LONG-TERM) | 6,520 | 891 | 1,101 | 1,334 | 3,193 |
| 2014 In € million |
Total | on demand or within one year |
in year two |
in years three to fi ve |
beyond fi ve years |
|---|---|---|---|---|---|
| Outfl ows of cash related to fi nancial liabilities: | 4,206 | ||||
| Other non-current liabilities | 204 | 204 | |||
| Short-term fi nancial debt | 853 | 853 | |||
| Trade liabilities | 1,461 | 1,461 | |||
| Dividends payables | 114 | 114 | |||
| Financial instruments – operational | 88 | 88 | |||
| Long-term fi nancial debt | 1,485 | 811 | 572 | 102 | |
| TOTAL FINANCIAL DEBT (SHORT AND LONG-TERM) | 2,338 | 853 | 811 | 572 | 102 |
In addition to the above mentioned fi nancing sources, the Group also has access to the following instruments:
2015 and 2014. The two programs are covered by back-up credit lines;
| In € million | 2015 | 2014 |
|---|---|---|
| Wages and benefi ts debts | 322 | 287 |
| VAT and other taxes | 136 | 112 |
| Social security | 87 | 94 |
| Financial instruments – operational | 135 | 88 |
| Insurance premiums | 11 | 12 |
| Advances from customers | 23 | 25 |
| Other | 308 | 157 |
| OTHER CURRENT LIABILITIES | 1,022 | 776 |
| In € million | 2015 | 2014 |
|---|---|---|
| Commitments for the acquisition of tangible and intangible assets | 104 | 131 |
The Board of Directors will propose to the " General Shareholders' Meeting" a gross dividend of €3.30 per share, which takes into
account the adjustment for the value of the rights distributed following Solvay's recent € 1.5 billion capital increase completed in December 2015, the adjustment factor being 93.98%.
Taking into account the dividend advance payment distributed in January 2016 of € 1.36 per share, the dividends proposed for distribution, but not yet recognized as a distribution to equity holders amount to € 205 million.
| In € million | 2015 | 2014 |
|---|---|---|
| Liabilities and commitments of third parties guaranteed by the Company | 881 | 1,027 |
| Environmental contingent liabilities | 313 | 246 |
| Litigation and other major commitments | 27 | 35 |
The liabilities and commitments of third parties guaranteed by the Company relate mainly to guarantees given in the framework of:
Within the framework of the annual review of contingent liabilities, environmental contingent liabilities for a total amount of € 313 million have been identifi ed at December 31, 2015 (€ 246 million at December 31, 2014).
The associates and joint ventures not classifi ed as held for sale/discontinued operations are consolidated by applying the equity method of accounting.
| 2015 | 2014 | |||||
|---|---|---|---|---|---|---|
| In € million | Associates | Joint v entures | Total | Associates | Joint v entures | Total |
| Investments in associates and joint ventures | 41 | 357 | 398 | 30 | 350 | 380 |
| Earnings from associates and joint ventures | 2 | 19 | 21 | 0 | (34) | (34) |
The tables below present the summary of the statement of fi nancial position and income statement of the material associates and joint ventures as if they were proportionately consolidated.
| In € million | 2015 | 2014 |
|---|---|---|
| Statement of financial position | ||
| Non-current assets | 67 | 53 |
| Current assets | 35 | 29 |
| Cash and cash equivalents | 8 | 4 |
| Non-current liabilities | 22 | 19 |
| Long-term fi nancial debt | 18 | 16 |
| Current liabilities | 39 | 33 |
| Short-term fi nancial debt | 16 | 10 |
| Investments in associates | 41 | 30 |
| Income statement | ||
| Sales | 90 | 83 |
| Depreciation and amortization | (4) | (3) |
| Cost of borrowings | (1) | 0 |
| Interest on lendings and short term deposits | 0 | 0 |
| Income taxes | (1) | 0 |
| Result from continuing operations | 2 | (1) |
| Result from discontinued operations | 0 | 0 |
| Net income for the year | 2 | (1) |
| Other comprehensive income | (2) | (1) |
| TOTAL COMPREHENSIVE INCOME | 0 | (1) |
| Dividends received | 2 | 2 |
| 2015 | ||||||
|---|---|---|---|---|---|---|
| In € million | RusVinyl OOO | Peroxidos do Brasil Ltda |
Solvay & CPC Barium Strontium |
Shandong Huatai Interox Chemical Co. Ltd |
Hindustan Gum & Chemicals Ltd |
Other |
| Ownership interest | 50% | 69.40% | 75% | 50% | 50% | |
| Operating S egment | Functional Polymers |
Performance Chemicals |
Advanced Materials |
Performance Chemicals |
Advanced Formulations |
|
| Statement of financial position | ||||||
| Non-current assets | 406 | 32 | 12 | 11 | 9 | 6 |
| Current assets | 31 | 40 | 37 | 3 | 146 | 20 |
| Cash and cash equivalents | 7 | 21 | 6 | 1 | 135 | 3 |
| Non-current liabilities | 275 | 6 | 10 | 1 | 1 | 1 |
| Long-term fi nancial debt | 256 | 3 | 0 | 1 | 0 | 0 |
| Current liabilities | 51 | 19 | 13 | 3 | 9 | 8 |
| Short-term fi nancial debt | 35 | 5 | 1 | 0 | 0 | 1 |
| Investments in joint ventures | 112 | 47 | 26 | 10 | 145 | 17 |
| Income statement | ||||||
| Sales | 114 | 69 | 68 | 11 | 48 | 56 |
| Depreciation and amortization | (24) | (3) | (1) | (1) | (1) | (1) |
| Reversal of impairment | 19 | |||||
| Cost of borrowings | (28) | (1) | 0 | 0 | 0 | 0 |
| Interest on lendings and short term deposits |
0 | 2 | 0 | 0 | 7 | 0 |
| Income taxes | 10 | (7) | (1) | 0 | (3) | 0 |
| Result from continuing operations | (16) | 16 | 7 | 3 | 8 | 1 |
| Result from discontinued operations | 0 | 0 | 0 | 0 | 0 | 0 |
| Net income for the year | (16) | 16 | 7 | 3 | 8 | 1 |
| Other comprehensive income | 20 | (9) | (1) | 0 | 7 | (8) |
| TOTAL COMPREHENSIVE INCOME | 5 | 6 | 6 | 4 | 15 | (7) |
| Dividends received | 0 | 7 | 3 | 0 | 2 | 0 |
| 2014 | |||||
|---|---|---|---|---|---|
| In € million | RusVinyl OOO | Peroxidos do Brasil Ltda |
Solvay & CPC Barium Strontium |
Hindustan Gum & Chemicals Ltd |
Other |
| Ownership interest | 50% | 69.40% | 75% | 50% | |
| Operating S egment | Functional Polymers |
Performance Chemicals |
Advanced Materials |
Advanced Formulations |
|
| Statement of financial position | |||||
| Non-current assets | 428 | 36 | 11 | 8 | 9 |
| Current assets | 27 | 43 | 39 | 136 | 30 |
| Cash and cash equivalents | 3 | 22 | 8 | 103 | 6 |
| Non-current liabilities | 284 | 8 | 11 | 1 | 1 |
| Long-term fi nancial debt | 266 | 5 | 0 | 0 | 0 |
| Current liabilities | 47 | 22 | 17 | 12 | 15 |
| Short-term fi nancial debt | 35 | 7 | 8 | 0 | 1 |
| Investments in joint ventures | 124 | 50 | 23 | 131 | 23 |
| Income statement | |||||
| Sales | 24 | 68 | 66 | 96 | 76 |
| Depreciation and amortization | (8) | (4) | (1) | (1) | (1) |
| Cost of borrowings | (25) | 0 | 0 | 0 | 0 |
| Interest on lendings and short term deposits |
1 | 2 | 0 | 7 | 0 |
| Income taxes | 22 | (7) | (1) | (6) | (2) |
| Result from continuing operations | (74) | 14 | 11 | 12 | 3 |
| Result from discontinued operations | 0 | 0 | 0 | 0 | 0 |
| Net income for the year | (74) | 14 | 11 | 12 | 3 |
| Other comprehensive income | (163) | 1 | 0 | 12 | (1) |
| TOTAL COMPREHENSIVE INCOME | (237) | 15 | 11 | 24 | 2 |
| Dividends received | 0 | 10 | 0 | 4 | 1 |
The list of joint operations is available in the List of Companies included in the consolidation (List of joint operations).
Hydrogen Peroxide Propylene Oxide (HPPO) operations/interests in Zandvliet (Belgium), Map Ta Put (Thailand) and the HPPO plant that is being constructed in the Kingdom of Saudi Arabia, all 50% held by Solvay and comprising the following legal entities:
- BASF Interox H2O2 Production NV;
The following subsidiaries, other than those classifi ed as held for sale have material non-controlling interests.
The amounts disclosed below are fully consolidated amounts and do not refl ect the impacts from elimination of intragroup transactions.
| 2015 | |||||
|---|---|---|---|---|---|
| In € million | Zhejiang Lansol |
Vinythai | ANAN Kasei | Solvay Biomas Energy LLC |
Solvay Soda Ash |
| Non controlling ownership interest | 45% | 41% | 33% | 35% | 20% |
| Statement of financial position | |||||
| Non-current assets | 24 | 244 | 19 | 10 | 337 |
| Current assets | 15 | 145 | 30 | 7 | 34 |
| Non-current liabilities | 0 | 47 | 1 | 0 | 14 |
| Current liabilities | 15 | 43 | 15 | 4 | 16 |
| Income statement | |||||
| Sales | 32 | 404 | 83 | 11 | 350 |
| Net income for the year | 0 | 24 | 8 | (12) | 176 |
| Other comprehensive income | 1 | (18) | 3 | 0 | (15) |
| TOTAL COMPREHENSIVE INCOME | 1 | 6 | 11 | (12) | 162 |
| Dividends paid to non controlling interests | 0 | 1 | 3 | 0 | 34 |
| Share of non controlling interest in the net result | 0 | 10 | 3 | (4) | 35 |
| Accumulated non controlling interest | 11 | 123 | 11 | 5 | 67 |
| 2014 | |||||
|---|---|---|---|---|---|
| In € million | Zhejiang Lansol |
Vinythai | ANAN Kasei | SolVin's interest in RusVinyl |
Solvay Soda Ash |
| Non controlling ownership interest | 45% | 41% | 33% | 25% | 20% |
| Statement of financial position | |||||
| Non-current assets | 18 | 260 | 15 | 124 | 291 |
| Current assets | 10 | 128 | 41 | 18 | |
| Non-current liabilities | 0 | 77 | 0 | 14 | |
| Current liabilities | 6 | 24 | 21 | 17 | |
| Income statement | |||||
| Sales | 22 | 378 | 68 | 274 | |
| Net income for the year | 0 | 21 | 9 | 119 | |
| Other comprehensive income | 2 | 2 | 0 | (17) | |
| TOTAL COMPREHENSIVE INCOME | 2 | 23 | 8 | 101 | |
| Dividend paid to non controlling interests | 0 | 1 | 0 | 23 | |
| Share of non controlling interest in the net result | 0 | 9 | 3 | (45) | 24 |
| Accumulated non controlling interest | 10 | 133 | 10 | 32 | 58 |
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 | |||
|---|---|---|---|---|
| In € million | 2015 | 2014 | 2015 | 2014 |
| Associates | 16 | 16 | 8 | 8 |
| Joint ventures | 164 | 18 | 78 | 31 |
| Other related parties | 27 | 18 | 77 | 53 |
| TOTAL | 207 | 51 | 163 | 92 |
| Amounts owed by related parties | Amounts owed to related parties | |||
|---|---|---|---|---|
| In € million | 2015 | 2014 | 2015 | 2014 |
| Associates | 0 | 3 | 0 | 10 |
| Joint ventures | 36 | 2 | 21 | 2 |
| Other related parties | 8 | 2 | 7 | 14 |
| TOTAL | 44 | 7 | 28 | 26 |
| In € million | 2015 | 2014 |
|---|---|---|
| Loans to associates | 2 | 16 |
| Loans to joint ventures | 2 | 0 |
| Loans to other related parties | 1 | 12 |
| TOTAL | 4 | 28 |
Key management personnel is composed of all members of the Board of Directors and members of the Executive Committee.
Amounts due in respect of the year (compensation ) and obligations existing at the end of the year:
| In € million | 2015 | 2014 |
|---|---|---|
| Wages, charges and short-term benefi ts | 2 | 2 |
| Long-term benefi ts | 10 | 15 |
| Cash-settled share-based payments liability | 16 | 13 |
| TOTAL | 28 | 31 |
Expenses of the year:
| In € million | 2015 | 2014 |
|---|---|---|
| Wages, charges and short-term benefi ts | 9 | 8 |
| Long-term benefi ts | 1 | 1 |
| Share-based payments expenses | 5 | 5 |
| TOTAL | 14 | 13 |
Excluding employer social charges and taxes
See the item 2.1 Policy in respect of capital in the Corporate governance statement section of this report.
The Group consists of Solvay SA and a total of 469 investees in 59 countries.
The Group fully consolidates an investee when it controls the investee. Such means that the Group (a) is exposed, or has rights, to variable returns from its involvement with the investee, mainly through its equity interest in the investee, and (b) has the ability to aff ect those returns through its power over the investee.
For a number of investees, the Group holds a majority equity interest, and the majority of the voting rights. However, as key relevant decisions require unanimous consent, the Group exercises joint control and not control over those investees. Vice versa, for a number of investees, the Group holds between 20% and 50% of the voting rights, but as key relevant decisions require unanimous consent, the Group exercises joint control, and not signifi cant infl uence over those investees. Those investees are qualifi ed as joint arrangements.
Of these 469 investees, 235 are fully consolidated (of which an increase of 55 following Cytec acquisition), 11 are proportionately consolidated and 22 are accounted for under the equity method, whilst the other 201 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, during two consecutive years, 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.
In the aggregate, the non-consolidated companies have an immaterial impact on the consolidated data of the Group.
The full list of companies is fi led with the National Bank of Belgium as an attachment to the A nnual R eport, and can be obtained from the Company head offi ce.
| Country | Company | Comments |
|---|---|---|
| AUSTRALIA | Cytec Asia Pacifi c Holdings Pty Ltd, Baulkham Hills | new company |
| Cytec Australia Holdings Pty Ltd, Baulkham Hills | new company | |
| BELGIUM | Cytec Belgium bvba, Diegem | new company |
| BRAZIL | Cytec Comercio de Materiais Compostos E Produtos Quimicos do Brasil Ltda, Sao Paulo | New company |
| Dhaymers Industria E Comércio de Produtos Quimicos Ltda, Sao Paulo | new company | |
| CANADA | Cytec Canada Inc, Niagara Falls Welland | new company |
| CHINA | Cytec Engineered Materials Co. Ltd, Shanghai | new company |
| Cytec Industries Co. Ltd, Shanghai | new company | |
| Shandong Huatai Interox Chemical Co. Ltd, Dongying | meets the consolidation criteria | |
| Suzhou Interox Sem Co. Ltd, Suzhou | meets the consolidation criteria | |
| CHILE | Cytec Chile Ltda, Santiago | new company |
| FRANCE | Cytec Process Materials Sarl, Toulouse | new company |
| GERMANY | Cytec Engineered Materials GmbH, Oestringen | new company |
| EPIC Technologies GmbH, Schotten | new company | |
| GREAT BRITAIN | Advanced Composites Group Holdings Ltd, Heanor | new company |
| Advanced Composites Group Investments Ltd, Heanor | new company | |
| Cytec Engineered Materials Ltd, Wrexham | new company | |
| Cytec Industrial Materials (Derby) Ltd, Heanor | new company | |
| Cytec Industrial Materials (Manchester) Ltd, Heanor | new company | |
| Cytec Industries UK Holdings Ltd, Wrexham | new company | |
| Cytec Industries UK Ltd, Wrexham | new company | |
| Cytec Med-Lab Ltd, Heanor | new company | |
| Cytec Process Materials (Keighley) Ltd, Keighley | new company | |
| Inovyn Limited, Runcorn | new company | |
| Med-Lab International Ltd, Heanor | new company | |
| Umeco Composites Ltd, Heanor | new company | |
| Umeco Ltd, Heanor | new company | |
| INDIA | Cytec India Specialty Chemicals & Materials Private Ltd, Nagpur | new company |
| INDONESIA | PT. Cytec Indonesia, Jakarta | new company |
| IRELAND | C.I.I. Luxembourg Sarl – Irish Branch, Dublin | new company |
| ITALY | Cytec Process Materials S.r.l., Mondovi | new company |
| JAPAN | Cytec Industries Japan LLC, Tokyo | new company |
| LATVIA | Cytec Latvia SIA, Riga | new company |
| LUXEMBOURG | C.I.I. Luxembourg Sarl, Strassen | new company |
| Cytec Luxembourg International Holdings Sarl, Strassen | new company | |
| Solvay Chlorovinyls Holding S.a.r.l., Luxembourg | new company | |
| MEXICO | Cytec de Mexico S.A. de C.V., Jalisco | new company |
| NETHERLANDS | Cytec Industries B.V., Vlaardingen | new company |
| Cytec Industries Europe C.V., Vlaardingen | new company | |
| Cytec Netherlands Holdings B.V., Vlaardingen | new company | |
| Onecarbon International B.V., Utrecht | meets the consolidation criteria | |
| Solvay Solutions Nederland B.V., Klundert | new company | |
| PERU | Cytec Peru S.A.C., Lima | new company |
| SINGAPORE | Cytec Industries PTE Ltd, Singapore | new company |
| SOUTH KOREA | Cytec Korea Inc, Seoul | new company |
| THAILAND | Cytec Specialty Chem (Thailand) Ltd, Bangkok | new company |
Country Company Comments UNITED STATES Cytec Acrylic Fibers Inc., New Jersey new company Cytec Aerospace Materials (ca) Inc., New Jersey new company Cytec Carbon Fibers LLC, New Jersey new company Cytec Engineered Materials Inc., Arizona new company Cytec Global Holdings Inc., New Jersey new company Cytec Industrial Materials (ok) Inc., New Jersey new company Cytec Industries Inc, New Jersey new company Cytec Korea Inc., New Jersey new company Cytec Olean Inc., New Jersey new company Cytec Overseas Corp., New Jersey new company Cytec Plastics LLC, New Jersey new company Cytec Process Materials (ca) Inc., New Jersey new company Cytec Technology Corp., New Jersey new company D'Aircraft Products Inc., California new company Garret Mountain Insurance Co., New Jersey new company IMC Mining Chemicals LLC, New Jersey new company Netherlands Cytec GP Inc., New Jersey new company
| Country | Company | Comments |
|---|---|---|
| BELGIUM | Solvic S.A., Brussels | sold to Inovyn |
| Solvay Nafta Development and Financing S.A., Brussels | merged into Solvay Luxembourg S.a.r.l. |
|
| SolVin S.A., Brussels | sold to Inovyn | |
| Solvay Chlorchemicals S.A., Brussels | sold to Inovyn | |
| Chlorchemicals Trade Services S.A., Brussels | sold to Inovyn | |
| BRAZIL | Erca Quimica Brasil, Itatiba | merged into Rhodia Poliamida e Especialidades Ltda |
| Solvay do Brasil Ltda, Sao Paulo | merged into Rhodia Poliamida e Especialidades Ltda |
|
| Dhaymers Industria E Comércio de Produtos Quimicos Ltda, Sao Paulo | merged into Rhodia Poliamida e Especialidades Ltda |
|
| GERMANY | Solvay Chlorovinyls GmbH, Hannover | sold to Inovyn |
| Solvay Holding GmbH , Freiburg | merged into Solvay P&S GmbH | |
| Solvay Energy Services Deutschland GmbH, Hannover | merged into Solvay P&S GmbH | |
| SolVin GmbH & Co KG, Hannover | merged into Solvay Chlorovinyls GmbH |
|
| GREAT BRITAIN | Solvay Speciality Chemicals Ltd, Warrington | sold to Imerys |
| FRANCE | PVC Tavaux S.A.S. | sold to Inovyn |
| Solvay – Olefi nes – France S.A.S., Paris | sold to Inovyn | |
| Solvay – Spécialités – France S.A.S., Paris | sold to Imerys | |
| Solvay – Electrolyse – France S.A.S., Paris | sold to Inovyn | |
| ITALY | SolVin Italia S.p.A., Ferrara | sold to Inovyn |
| Societa Italiana Del Cloro S.R.L., Bollate | sold to Inovyn | |
| Società Elettrochimica Solfuri e Cloroderivati (ELESO) S.p.A., Bollate | merged into Societa Italiana del Cloro S.R.L |
|
| SIS Italia S.p.A., Bollate | merged into Solvay Chimica IT | |
| LUXEMBOURG | Caredor S.A., Strassen | merged into Solvay Hortensia S.A. |
| MEXICO | Solvay Quimica Y Minera Servicios SA de CV, Monterrey | merged into Solvay Mexicana S. de R.L. de C.V. |
| Solvay Quimica Y Minera Ventas SA de CV, Monterrey | merged into Solvay Mexicana S. de R.L. de C.V. |
|
| Rhodia de Mexico SA de CV, Mexico | merged into Solvay Mexicana S. de R.L. de C.V. |
|
| Rhodia Especialidades SA de CV, Mexico | merged into Solvay Mexicana S. de R.L. de C.V. |
|
| PORTUGAL | Quimicos Da Leziria Unipessoal Lda, Povoa | sold to Inovyn |
| SPAIN | SolVin Spain S.L., Martorell | sold to Inovyn |
| Chloro Vinyls Spain S.L. | sold to Inovyn | |
| SWITZERLAND | Sopargest – Société de participation et de gestion S.A., Fribourg | merged into Rhodia S.A. |
| UNITED STATES | American Soda LLP, Parachute, CO | merged into Solvay Chemicals Inc. |
| Heat Treatment Services Inc., Cranbury NJ | merged into Solvay USA Inc. | |
| URUGUAY | Fairway Investimentos SA, Montevideo | merged into Rhodia Poliamida Brasil Ltda |
Indicating the percentage holding.
T he percentage of voting rights is very close to the percentage holding.
| ARGENTINA | |
|---|---|
| Solvay Argentina SA, Buenos Aires | 100 |
| Solvay Indupa S.A.I.C., Bahia Blanca | 70.6 |
| Solvay Quimica SA, Buenos Aires | 100 |
| AUSTRALIA | |
| Cytec Asia Pacifi c Holdings Pty Ltd, Baulkham Hills | 100 |
| Cytec Australia Holdings Pty Ltd, Baulkham Hills | 100 |
| Solvay Chemicals Pty Ltd , Sydney | 100 |
| Solvay Interox Pty Ltd, Banksmeadow | 100 |
| AUSTRIA | |
| Solvay Österreich GmbH, Wien | 100 |
| BELGIUM | |
| Carrières les Petons S.P.R.L., Walcourt | 100 |
| Cytec Belgium bvba, Diegem | 100 |
| Financière Solvay S.A., Brussels | 100 |
| Solvay Chemicals International S.A., Brussels | 100 |
| Solvay Chimie S.A., Brussels | 100 |
| Solvay Coordination Internationale des Crédits Commerciaux S.A., Brussels | 100 |
| Solvay Energy S.A., Brussels | 100 |
| Solvay Participations Belgique S.A., Brussels | 100 |
| Solvay Pharmaceuticals S.A. – Management Services, Brussels | 100 |
| Solvay Specialty Polymers Belgium SA/NV | 100 |
| Solvay Stock Option Management S.P.R.L., Brussels | 100 |
| BRAZIL | |
| Cogeracao de Energia Electricica Paraiso SA, Brotas | 100 |
| Cytec Comercio de Materiais Compostos E Produtos Quimicos do Brasil Ltda, Sao Paulo | 100 |
| Rhodia Brazil Ltda, Sao Paolo | 100 |
| Rhodia Energy Brazil Ltda, Paulinia | 100 |
| Rhodia Poliamida Brasil Ltda , Sao Paolo | 100 |
| Rhodia Poliamida e Especialidades Ltda, Sao Paolo | 100 |
| Rhopart-Participacoes Servidos e Comercio Ltda, Sao Paolo | 100 |
| Solvay Indupa do Brasil SA, Sao Paulo | 70.6 |
| BULGARIA | |
| Solvay Bulgaria EAD, Devnya | 100 |
| CANADA | |
| Cytec Canada Inc, Niagara Falls Welland | 100 |
| Solvay Canada Inc, Toronto | 100 |
| CAYMAN ISLANDS | |
| Blair International Insurance (Cayman) Ltd, Georgetown | 100 |
| CHINA | |
|---|---|
| Baotou Solvay Rare Earths Company Ltd, Baotou | 55 |
| Beijing Rhodia Eastern Chemical Co., Ltd , Beijing | 60 |
| Cytec Industries Co. Ltd, Shanghai | 100 |
| Cytec Engineered Materials Co. Ltd, Shanghai | 100 |
| Liyang Solvay Rare Earth New Material Co., Ltd, Liyang City | 96.3 |
| Rhodia Hong Kong Ltd , Hong Kong | 100 |
| Solvay (Beijing) Energy Technology Co., Ltd , Beijing | 100 |
| Solvay (Shanghai) Engineering Plastics Co., Ltd | 100 |
| Solvay (Shanghai) International Trading Co., Ltd, Shanghai | 100 |
| Solvay (Shanghai) Ltd, Shanghai | 100 |
| Solvay (Zhangjiagang) Specialty Chemicals Co. Ltd, Suzhou | 100 |
| Solvay (Zhenjiang) Chemicals Co., Ltd, Zhenjiang New area | 100 |
| Solvay Biochemical (Taixing) Co. Ltd, Shanghai | 58.7 |
| Solvay Chemicals (Shanghai) Co. Ltd, Shanghai | 100 |
| Solvay China Co., Ltd , Shanghai | 100 |
| Solvay Fine Chemical Additives (Qingdao) Co., Ltd, Qingdao | 100 |
| Solvay Hengchang (Zhangjiagang) Specialty Chemical Co., Ltd, Zhangjiagang City | 70 |
| Solvay High Performance Materials R&D (Shanghai) Co., Ltd. , Shanghai | 100 |
| Solvay Silica Qingdao Co., Ltd , Qingdao | 100 |
| Solvay Speciality Polymers (Changshu) Co. Ltd, Changshu | 100 |
| Suzhou Interox Sem Co. Ltd, Suzhou | 100 |
| Zhejiang Lansol Fluorchem Co., Ltd, Zhejiang | 55 |
| Zhuhai Solvay Specialty Chemicals Co Ltd, Zhuhai City | 100 |
| CHILE | |
| Cytec Chile Ltda, Santiago | 100 |
| EGYPT | |
| Solvay Alexandria Sodium Carbonate Co, Alexandria | 100 |
| FINLAND | |
| Solvay Chemicals Finland Oy, Voikkaa | 100 |
| FRANCE | |
| Cogénération Chalampe S.A.S., Puteaux | 100 |
| Cytec Process Materials Sarl, Toulouse | 100 |
| RHOD V S.N.C. , Courbevoie | 100 |
| RHOD W S.N.C. , Courbevoie | 100 |
| Rhodia Chimie S.A.S. , Aubervilliers | 100 |
| Rhodia Energy GHG S.A.S. , Puteaux | 100 |
| Rhodia Finance S.A.S. , Courbevoie | 100 |
| Rhodia Laboratoire du Futur S.A.S. , Pessac | 100 |
| Rhodia Operations S.A.S. , Aubervilliers | 100 |
| Rhodia Participations S.N.C. , Courbevoie | 100 |
| Rhodia S.A. , Courbevoie | 100 |
| Rhodianyl S.A.S. , Saint-Fons | 100 |
| Solvay – Carbonate – France S.A.S., Paris | 100 |
| Solvay – Fluorés – France S.A.S., Paris | 100 |
| Solvay Energie France S.A.S., Paris | 100 |
| Solvay Energy Services S.A.S. , Puteaux | 100 |
| Solvay Finance France S.A., Paris | 100 |
| Solvay Finance S.A., Paris | 100 |
| Solvay Participations France S.A., Paris | 100 |
| Solvay Speciality Polymers France S.A.S., Paris | 100 |
| Solvay Tavaux S.A.S. | 100 |
| SolVin France S.A., Paris | 100 |
GERMANY Cavity GmbH, Hannover 100 Cytec Engineered Materials GmbH, Oestringen 100 EPIC Technologies GmbH, Schotten 100 Girindus AG, Hannover 83.1 Horizon Immobilien AG, Hannover 100 Salzgewinnungsgesellschaft Westfalen GmbH & Co KG, Epe 65 Solvay Acetow GmbH , Freiburg 100 Solvay Chemicals GmbH, Hannover 100 Solvay Fluor GmbH, Hannover 100 Solvay Flux GmbH, Hannover 100 Solvay GmbH, Hannover 100 Solvay Infra Bad Hoenningen GmbH, Hannover 100 Solvay Organics GmbH, Hannover 100 Solvay P&S GmbH, Freiburg 100 Solvay Specialty Polymers Germany GmbH, Hannover 100 SolVin GmbH & Co. KG – PVDC, Rheinberg 100 SolVin Holding GmbH, Hannover 100 GREAT BRITAIN Advanced Composites Group Holdings Ltd, Heanor 100 Advanced Composites Group Investments Ltd, Heanor 100 Cytec Engineered Materials Ltd, Wrexham 100 Cytec Industrial Materials (Derby) Ltd, Heanor 100 Cytec Industrial Materials (Manchester) Ltd, Heanor 100 Cytec Industries UK Holdings Ltd, Wrexham 100 Cytec Industries UK Ltd, Wrexham 100 Cytec Med-Lab Ltd, Heanor 100 Cytec Process Materials (Keighley) Ltd, Keighley 100 Holmes Chapel Trading Ltd , Watford 100 McIntyre Group Ltd , Watford 100 Med-Lab International Ltd, Heanor 100 Rhodia Holdings Ltd , Watford 100 Rhodia International Holdings Ltd , Oldbury 100 Rhodia Limited , Watford 100 Rhodia Organique Fine Ltd , Watford 100 Rhodia Overseas Ltd , Watford 100 Rhodia Pharma Solutions Holdings Ltd, Cramlington 100 Rhodia Pharma Solutions Ltd, Cramlington 100 Rhodia Reorganisation, Watford 100 Solvay Chemicals Ltd, Warrington 100 Solvay Interox Ltd, Warrington 100 Solvay Solutions UK Ltd, Watford 100 Solvay UK Holding Company Ltd, Warrington 100 Umeco Composites Ltd, Heanor 100 Umeco Ltd, Heanor 100
| INDIA | |
|---|---|
| Cytec India Specialty Chemicals & Materials Private Ltd, Nagpur | 100 |
| Rhodia Polymers & Specialties India Private Limited, Mumbai | 100 |
| Rhodia Specialty Chemicals India Limited, Mumbai | 99 |
| Solvay Specialities India Private Limited, Mumbai | 100 |
| Sunshield Chemicals Limited, Mumbai | 62.4 |
| IRELAND | |
| C.I.I. Luxembourg Sarl – Irish Branch, Dublin | 100 |
| Solvay Finance Ireland Unlimited , Dublin | 100 |
| INDONESIA | |
| PT. Cytec Indonesia, Jakarta | 100 |
| ITALY | |
| Cytec Process Materials S.r.l., Mondovi | 100 |
| Solvay Bario e Derivati S.p.A., Massa | 100 |
| Solvay Chimica Bussi S.p.A., Rosignano | 100 |
| Solvay Chimica Italia S.p.A., Milano | 100 |
| Solvay Energy Services Italia S.r.l., Bollate | 100 |
| Solvay Solutions Italia S.p.A. , Milano | 100 |
| Solvay Specialty Polymers Italy S.p.A., Milano | 100 |
| JAPAN | |
| Anan Kasei Co Ltd, Anan City | 67 |
| Cytec Industries Japan LLC, Tokyo | 100 |
| Nippon Solvay KK, Tokyo | 100 |
| Solvay Japan K.K., Tokyo | 100 |
| Solvay Nicca Ltd, Tokyo | 60 |
| Solvay Specialty Polymers Japan KK, Minato Ku-Tokyo | 100 |
| LATVIA | |
| Cytec Latvia SIA, Riga | 100 |
| LUXEMBOURG | |
| C.I.I. Luxembourg Sarl, Strassen | 100 |
| Cytec Luxembourg International Holdings Sarl, Strassen | 100 |
| Solvay Chlorovinyls Holding S.a.r.l., Luxembourg | 100 |
| Solvay Finance (Luxembourg) SA, Luxembourg | 100 |
| Solvay Hortensia S.A., Luxembourg | 100 |
| Solvay Luxembourg S.a.r.l., Luxembourg | 100 |
| MEXICO | |
| Cytec de Mexico S.A. de C.V., Jalisco | 100 |
| Solvay Fluor Mexico S.A. de C.V., Ciudad Juarez | 100 |
| Solvay Mexicana S. de R.L. de C.V., Monterrey | 100 |
| NAMIBIA | |
| Okorusu Fluorspar (Pty) Ltd, Otjiwarongo | 100 |
| Okorusu Holdings (Pty) Ltd, Windhoek | 100 |
| NETHERLANDS | |
|---|---|
| Cytec Industries B.V., Vlaardingen | 100 |
| Cytec Industries Europe C.V., Vlaardingen | 100 |
| Cytec Netherlands Holdings B.V., Vlaardingen | 100 |
| Onecarbon International B.V., Utrecht | 100 |
| Rhodia International Holdings B.V., Den Haag | 100 |
| Solvay Chemicals and Plastics Holding B.V., Linne-Herten | 100 |
| Solvay Chemie B.V., Linne-Herten | 100 |
| Solvay Solutions Nederland B.V., Klundert | 100 |
| SolVin Holding Nederland B.V., Linne-Herten | 100 |
| NEW ZEALAND | |
| Solvay New Zealand Ltd, Auckland | 100 |
| PERU | |
| Cytec Peru S.A.C., Lima | 100 |
| POLAND | |
| Solvay Engineering Plastics Poland Sp z.o.o. , Gorzow Wielkopolski | 100 |
| Solvay Advanced Silicas Poland Sp. z o.o. | 100 |
| PORTUGAL | |
| Solvay Business Services Portugal Unipessoal Lda, Carnaxide | 100 |
| Solvay Portugal – Produtos Quimicos S.A., Povoa | 100 |
| RUSSIA | |
| Solvay Vostok OOO, Moscow | 100 |
| Sertow OOO, Serpukhov Khimi | 100 |
| SINGAPORE | |
| Cytec Industries PTE Ltd, Singapore | 100 |
| Rhodia Amines Chemicals Pte Ltd , Singapore | 100 |
| Solvay Fluor Holding (Asia-Pacifi c) Pte. Ltd., Singapore | 100 |
| Solvay Singapore Pte Ltd, Singapore | 100 |
| Solvay Specialty Chemicals Asia Pacifi c Pte. Ltd., Singapore | 100 |
| Vinythai Holding Pte Ltd., Singapore | 58.8 |
| SOUTH KOREA | |
| Cytec Korea Inc, Seoul | 100 |
| Daehan Solvay Special Chemicals Co., Ltd, Seoul | 100 |
| Solvay Chemicals Korea Co. Ltd , Seoul | 100 |
| Solvay Energy Services Korea Co. Ltd , Seoul | 100 |
| Solvay Korea Co. Ltd, Seoul | 100 |
| Solvay Silica Korea Co. Ltd , Incheon | 100 |
| Solvay Specialty Polymers Korea Company Ltd, Seoul | 100 |
| SPAIN | |
| Solvay Energy Services Iberica, S.L., Madrid | 100 |
| Solvay Ibérica S.L., Barcelona | 100 |
| Solvay Quimica S.L., Barcelona | 100 |
| Solvay Solutions Espana S.L. , Madrid | 100 |
| SWITZERLAND | |
| Solvay (Schweiz) AG, Bad Zurzach | 100 |
| THAILAND | |
|---|---|
| Advanced Biochemical (Thailand) Company Ltd, Bangkok | 58.8 |
| Cytec Specialty Chem (Thailand) Ltd, Bangkok | 100 |
| Solvay (Bangpoo) Specialty Chemicals Ltd, Bangkok | 100 |
| Solvay Asia Pacifi c Company Ltd, Bangkok | 100 |
| Solvay Peroxythai Ltd, Bangkok | 100 |
| Vinythai Public Company Ltd, Bangkok | 58.8 |
| UNITED STATES | |
| Cytec Industries Inc, New Jersey | 100 |
| Garret Mountain Insurance Co., New Jersey | 100 |
| D'Aircraft Products Inc., California | 100 |
| Cytec Plastics LLC, New Jersey | 100 |
| Cytec Overseas Corp., New Jersey | 100 |
| Netherlands Cytec GP Inc., New Jersey | 100 |
| Cytec Engineered Materials Inc., Arizona | 100 |
| Cytec Carbon Fibers LLC, New Jersey | 100 |
| Cytec Olean Inc., New Jersey | 100 |
| Cytec Acrylic Fibers Inc., New Jersey | 100 |
| Cytec Industrial Materials (ok) Inc., New Jersey | 100 |
| Cytec Aerospace Materials (ca) Inc., New Jersey | 100 |
| Cytec Process Materials (ca) Inc., New Jersey | 100 |
| Cytec Korea Inc., New Jersey | 100 |
| Cytec Global Holdings Inc., New Jersey | 100 |
| Cytec Technology Corp., New Jersey | 100 |
| IMC Mining Chemicals LLC, New Jersey | 100 |
| Alcolac Inc., Cranbury NJ | 100 |
| Ausimont Industries, Inc., Wilmington, DE | 100 |
| Girindus America Inc., Cincinnati, OH | 83.1 |
| Rhodia India Holding Inc., Cranbury NJ | 100 |
| Rocky Mountain Coal Company, LLC, Houston, TX | 100 |
| Solvay America Holdings, Inc., Houston, TX | 100 |
| Solvay America Inc., Houston, TX | 100 |
| Solvay Biomass Energy LLC,Quitman MI | 65 |
| Solvay Chemicals, Inc., Houston, TX | 100 |
| Solvay Energy Holding LLC, Wilmington DE | 100 |
| Solvay Finance (America) LLC, Houston, TX | 100 |
| Solvay Financial Services INC., Wilmington DE | 100 |
| Solvay Fluorides, LLC., Greenwich, CT | 100 |
| Solvay Holding INC., Cranbury NJ | 100 |
| Solvay Soda Ash Expansion JV, Houston, TX | 80 |
| Solvay Soda Ash Joint Venture, Houston, TX | 80 |
| Solvay Specialty Polymers USA, LLC, Alpharetta, GA | 100 |
| Solvay USA INC., Cranbury NJ | 100 |
| URUGUAY | |
| Alaver SA, Montevideo | 100 |
| Zamin Company S/A, Montevideo | 100 |
| VENEZUELA | |
| Rhodia Silices de Venezuela C.A., Barquisimeto | 100 |
| AUSTRIA | |
|---|---|
| Solvay Sisecam Holding AG, Wien | 75 |
| BELGIUM | |
| BASF Interox H2O2 Production N.V., Brussels | 50 |
| BULGARIA | |
| Deven AD, Devnya | 73.4 |
| Solvay Sodi AD, Devnya | 73.5 |
| FRANCE | |
| Butachimie S.N.C. , Courbevoie | 50 |
| GERMANY | |
| Warmeverbundkraftwerk Freiburg GmbH, Freiburg | 49.9 |
| NETHERLANDS | |
| MTP HP JV C.V., Weesp | 50 |
| MTP HP JV Management bv, Weesp | 50 |
| SAUDI ARABIA | |
| Saudi Hydrogen Peroxide Co, Jubail | 50 |
| THAILAND | |
| MTP HP JV (Thailand) Ltd, Bangkok | 50 |
| UNITED STATES | |
| Primester, Kingsport TN | 50 |
| BRAZIL | |
|---|---|
| Dacarto Benvic SA, Santo André | 50 |
| Peroxidos do Brasil Ltda, Sao Paulo | 69.4 |
| CHINA | |
| Shandong Huatai Interox Chemical Co. Ltd, Dongying | 50 |
| GERMANY | |
| Solvay & CPC Barium Strontium GmbH & Co KG, Hannover | 75 |
| Solvay & CPC Barium Strontium International GmbH, Hannover | 75 |
| GREAT BRITAIN | |
| Inovyn Limited, Runcorn | 50 |
| INDIA | |
| Hindustan Gum & Chemicals Ltd, New Delhi | 50 |
| MEXICO | |
| Solvay & CPC Barium Strontium Monterrey S. de R.L. de C.V., Monterrey | 75 |
| Solvay & CPC Barium Strontium Reynosa S. de R.L. de C.V., Reynosa | 75 |
| RUSSIA | |
| Poligran OAO, Tver | 50 |
| RusVinyl OOO, Moscow | 50 |
| Soligran ZAO, Moscow Aptekars | 50 |
| VIETNAM | |
| Rhodia Nuoc Trong Biogas LLC, Ho Chi Minh City | 75 |
| ARGENTINA | |
|---|---|
| Solalban Energia S.A., Bahia Blanca | 40.9 |
| CHINA | |
| Qingdao Hiwin Solvay Chemicals Co. Ltd , Qingdao | 30 |
| FRANCE | |
| GIE Chime Salindres , Salindres | 50 |
| Gie Osiris, Roussillon | 34.8 |
| GREAT BRITAIN | |
| Penso Holdings Ltd, , Coventry | 20 |
| INDONESIA | |
| Solvay Manyar P.T. , Gresik | 50 |
| MEXICO | |
| Silicatos y Derivados S.A. DE C.V. | 20 |
| POLAND | |
| Zaklad Energoeloctryczny Energo-Stil Sp. z o.o., Gorzow Wielkopolski | 25 |
| UNITED STATES | |
| BTH Quitman Hickory LLC, Quitman Mississippi | 41.4 |
The annual fi nancial statements of Solvay SA are presented in summary format below. In accordance with the Belgian Companies Code, the annual fi nancial statements of Solvay SA, the management report and the statutory auditor's report will be fi led 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
The balance sheet of Solvay SA for the year 2015 presented below is based on a dividend repartition of € 3.30 per share.
| In € million | 2015 | 2014 |
|---|---|---|
| ASSETS | ||
| Fixed assets | 15,974 | 11,769 |
| Start-up expenses and intangible assets | 128 | 131 |
| Tangible assets | 57 | 60 |
| Financial assets | 15,789 | 11,578 |
| Current assets | 3,742 | 772 |
| Inventories | 3 | 1 |
| Trade receivables | 219 | 138 |
| Other receivables | 110 | 595 |
| Short-term investments and cash equivalents | 3,396 | 11 |
| Accruals | 15 | 27 |
| TOTAL ASSETS | 19,716 | 12,541 |
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||
| Shareholders' equity | 10,688 | 7,764 |
| Capital | 1,588 | 1,271 |
| Issue premiums | 1,200 | 18 |
| Reserves | 1,982 | 1,950 |
| Net income carried forward | 5,917 | 4,524 |
| Investment grants | 0 | 1 |
| Provisions and deferred taxes | 331 | 385 |
| Financial debt | 8,040 | 3,748 |
| • due in more than one year | 5,251 | 2,499 |
| • due within one year | 2,789 | 1,249 |
| Trade liabilities | 143 | 153 |
| Other liabilities | 429 | 391 |
| Accruals and deferred income | 86 | 100 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 19,716 | 12,541 |
| In € million | 2015 | 2014 |
|---|---|---|
| Operating income | 1,030 | 956 |
| • Sales | 126 | 305 |
| • Other operating income | 904 | 651 |
| Operating expenses | (936) | (1,160) |
| Operating profi t/loss | 94 | (204) |
| Financial gains/losses | (93) | 1,037 |
| Current profi t before taxes | 1 | 833 |
| Extraordinary gains/losses | 1,754 | (307) |
| Profi t before taxes | 1,755 | 526 |
| Income taxes | 19 | 24 |
| Profi t for the year | 1,774 | 550 |
| Transfer to (-)/from (+) untaxed reserves | 0 | 0 |
| Profi t available for distribution | 1,774 | 550 |
Pursuant to your request and in our capacity of Statutory Auditor of Solvay SA / NV, we hereby present you our limited assurance report on a selection of social, environmental and other sustainable development information disclosed in section "Governance and fi nancial and extrafi nancial information", chapter "2. Financial & extra-fi nancial information", sub-section "Extra-fi nancial statements" of Solvay Group Annual Report for the year ended 31 December 2015 (the "2015 Annual Report"), identifi ed by the symbol 2015 .
This selection of information (the "Information") extracted from the 2015 Sustainable Development Report has been prepared under the responsibility of Solvay Group management, in accordance with internal measurement and reporting principles used by Solvay Group (the "Reporting Framework"). The Reporting Framework consists of specifi c defi nitions and assumptions that are summarized in section "Extrafi nancial statements" of the 2015 Annual Report.
It is our responsibility, based on the procedures performed by us, to express limited assurance on whether the Information identifi ed by the symbol 2015 in the 2015 Annual Report is prepared, in all material respects, in accordance with the Reporting Framework.
We conducted our procedures in accordance with the international standard as defi ned in ISAE (International Standard on Assurance Engagements) 3000. With respect to independence rules, these are defi ned by the respective legal and regulatory texts as well as by the professional Code of Ethics, issued by the International Federation of Account ("IFAC").
We have carried out the following procedures to obtain limited assurance on whether the Information selected by Solvay and identifi ed by the symbol 2015 in the 2015 Annual Report does not contain any material errors that would question its preparation, in all material respects, in accordance with the Reporting Framework. A higher level of assurance would have required more extensive procedures.
We performed the following procedures:
On the basis of the procedures performed by us nothing came to our attention that causes us to believe that the Information identifi ed by the symbol 2015 as included in Solvay Group Annual Report for the year ended 31 December 2015, is not prepared, in all material respects, in accordance with the Reporting Framework.
Without questioning the conclusions of our work, expressed hereinabove, we would like to draw attention to the fact that, as explained in the subsection "Social and environmental consolidation scope" (section "Extra-fi nancial statements"), the entity Chemlogics, acquired in 2013, has not been included in the reporting perimeter for the indicators related to environment, energy and GHG emissions.
Diegem, 15 March 2016
The Statutory Auditor
DELOITTE Bedrijfsrevisoren / Reviseurs d'Entreprises
BV o.v.v.e. CVBA / SC s.f.d. SCRL
Represented by Eric Nys
Environmental information: Greenhouse gas intensity, Direct and indirect CO2 emissions (Scope 1 & 2), Other greenhouse gas emissions according to Kyoto Protocol (Scope 1), Total greenhouse gas emissions (Kyoto Protocol) emissions, Other greenhouse gas emissions not according to Kyoto Protocol (Scope 1), Energy consumption, Acidifi cation emissions in absolute, Photochemical oxidant formation in absolute, Total water intake, Intake of groundwater and drinking water, Sites for which the water scarcity risk was confi rmed, Sites with water scarcity risk and a sustainable water management, Landfi lled Industrial Hazardous waste, Products containing SVHCs reviewed for potential substitution or safer alternatives through Solvay internal dossiers.
Process safety, emergency preparedness and response: Sites with "Risk Sheet 1" situations resolved within one year, "Risk level 1" situation at the end of the year, "Risk level 1" situation resolved during the year.
Sustainable business solutions: Product portfolio assessed (% of turnover), % of sustainable solutions.
Environmental accidents and remediation: Environmental provision.
Employee engagement and wellness: Coverage by collective agreement.
(2 ) Tavaux (France), Rosignano (Italy), Green River (United States), Augusta (United States), Paulinia (Brazil), Torrelavega (Spain), Liyang (China), Zhangijagang Feixang (China), Chalampé (France) for COD, underground water consumption, Nitrogen, and Hazardous industrial waste only, Spinetta Marengo (Italy) for CF4 and R22 emissions only.
(1 ) Employee health and safety: Lost Time Accident Rate – Employee, contractors and temporary workers (LTAR), Medical Treatment Accident Rate - Employee, contractors and temporary workers (MTAR), Number of fatal accidents.
To the shareholders
As required by law, we report to you in the context of our appointment as the company's statutory auditor. This report includes our report on the consolidated fi nancial statements together with our report on other legal and regulatory requirements. These consolidated fi nancial statements comprise the consolidated statement of fi nancial position as at 31 December 2015, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash fl ows for the year then ended, as well as the summary of signifi cant accounting policies and other explanatory notes.
We have audited the 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. The consolidated statement of fi nancial position shows total assets of 25,329 million EUR and the consolidated income statement shows a consolidated profi t (group share) for the year then ended of 406 million EUR.
The board of directors is responsible for the preparation and fair presentation of consolidated fi nancial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium, and for such internal control as the board of directors determines is necessary to enable the preparation of consolidated fi nancial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these consolidated fi nancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. The procedures selected depend on the statutory auditor's 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, the statutory auditor considers internal control relevant to the group's preparation and fair presentation of 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 eff ectiveness of the group's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the board of directors, as well as evaluating the overall presentation of the consolidated fi nancial statements. We have obtained from the group's offi cials and the board of directors the explanations and information necessary for performing our audit.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our opinion.
In our opinion, the consolidated fi nancial statements of Solvay SA/NV give a true and fair view of the group's net equity and fi nancial position as of 31 December 2015, 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 European Union and with the legal and regulatory requirements applicable in Belgium.
The board of directors is responsible for the preparation and the content of the directors' report on the consolidated fi nancial statements.
As part of our mandate and in accordance with the Belgian standard complementary to the International Standards on Auditing applicable in Belgium, our responsibility is to verify, in all material respects, compliance with certain legal and regulatory requirements. On this basis, we make the following additional statement, which does not modify the scope of our opinion on the consolidated fi nancial statements:
• The directors' report on the consolidated fi nancial statements includes the information required by law, is consistent with the consolidated fi nancial statements and is free from material inconsistencies with the information that we became aware of during the performance of our mandate.
Diegem, 4 March 2016
The statutory auditor DELOITTE Bedrijfsrevisoren / Reviseurs d'Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL Represented by Eric Nys
The Board of Directors hereby declares that, to the best of its knowledge:
For the Board of Directors,
Nicolas Boël Jean-Pierre Clamadieu
Chairman of the Board of Directors Chairman of the Executive Committee and CEO Director
Adjusted: Adjusted performance indicators exclusively exclude noncash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia (and Cytec) acquisition.
Basic earnings per share: Net income (Solvay's share) divided by the weighted average number of shares, after deducting own shares purchased to cover stock options program.
Carechem: Carechem 24 is a multilingual telephone advice service providing access to a team of trained responders 24-hours-a-day, 365-days-a-year. Carechem 24 provides companies all over the world with emergency product support during a harzardous materials incident.
CEFIC: European Chemical Industry Council.
CEO: Chief Executive Offi cer.
CFO: Chief Financial Offi cer.
CFROI: Cash Flow Return On Investment.
CGU: Cash-generation unit.
Code of Conduct: Solvay expresses its commitment to responsible behavior and integrity, taking into account the sustainable growth of its business, and its good reputation in the communities in which it operates.
Comex: Executive Committee.
CSR: Corporate Social Responsibility.
Diluted earnings per share: Net income (Solvay's share) divided by the weighted average number of shares adjusted for eff ects of dilution.
Dividend yield (net): Net dividend divided by the closing share price on December 31.
Dividend yield (gross): Gross dividend divided by the closing share price on December 31.
DJ Stoxx: Dow Jones Stoxx is a European stock index composed of the most important 665 European values.
DJ Euro Stoxx: Dow Jones Euro Stoxx is a pan European stock index which includes the most important 326 values of the general Dow Jones index, belonging to eleven countries of the Eurozone.
EBIT: Earnings before interest and taxes .
Environmental Protection Agency: The U.S. Environmental Protection Agency (EPA or sometimes USEPA) is an agency of the United States federal government which was created for the purpose of protecting human health and the environment by writing and enforcing regulations based on laws passed by Congress.
Equity per share: Equity (Solvay share) divided by the number of outstanding shares at year end (issued shares - treasury shares).
Euronext: Global operator of fi nancial markets and provider of trading technologies.
Free Cash Flow: Cash fl ow from operating activities (including dividends from associates and joint ventures) and cash fl ow from investing activities (excluding acquisitions and sales of subsidiaries and other investments and excluding loans to associates and nonconsolidated entities).
FTSEurofi rst 300: The FTSEurofi rst 300 Index tracks the equity performance across the region of the 300 largest companies ranked by market capitalisation in the FTSE Developed Europe Index.
GBU: Global Business Unit.
GHG: Greenhouse gas.
GRI: The Global Reporting Initiative (GRI) is a leading organization in the sustainability fi eld. GRI promotes the use of sustainability reporting as a way for organizations to become more sustainable and contribute to sustainable development.
HBP: High-barrier polymer.
HDS: Highly Dispersible Silica.
HPPA: Polyamide High Performance.
IFRS: International Financial Reporting Standards.
Integrated reporting: it is a process founded on integrated thinking that results in a periodic integrated report by an organization about value creation over time and related communications regarding aspects of value creation.
ISO 9001: The ISO 9001 standard defi nes a set of requirements for the establishment of a system of quality management in an organization, whatever its size and activity.
ISO 14001: The ISO 14001 family addresses various aspects of environmental management. It provides practical tools for companies and organizations looking to identify and control their environmental impact and constantly improve their environmental performance.
ISO 14040: The ISO 14040 standard covers life cycle assessment (LCA) studies and life cycle inventory (LCI) studies.
ISO 26000: The ISO 26000 is a global standard which provides guidelines for organizations to operate in a socially responsible manner. The standard was published in 2010 after fi ve years of negotiations among a large number of stakeholders worldwide. Representatives of governments, NGOs, industry, consumer groups and the world of work were involved in its development. It represents therefore an international consensus.
Loss prevention process: Loss prevention aims at maintaining production fl ow and profi tability of the plants by providing risk mitigation. It also contributes to increase the protection of people and the environment.
LTAR: Lost Time Accident Rate.
LTI: Long Term Incentive.
M&A: Mergers and Acquisitions.
M&A related impacts: It mainly includes non-cash Purchase Price Allocation impacts (eg. inventory step-up and amortization of intangibles other than for PPA Rhodia) and retention bonuses relative to Chemlogics and other acquisitions.
Materiality: Organizations are faced with a wide range of topics on which they could report. The relevant topics are those that may reasonably be considered important for refl ecting the organization's economic, environmental and social impacts, or infl uencing the decisions of stakeholders, and, therefore, potentially merit inclusion in an annual report. Materiality is the threshold at which aspects become suffi ciently important that they should be reported.
MTAR: Medical Treatment Accident Rate.
Natural Currency Hedge: A natural currency hedge is an investment that reduces the undesired risk by matching cash in and outfl ows .
Net Financial Expenses : Net fi nancial charges comprise net interest expense, plus other gains (losses) on net indebtedness, costs of discounting provisions (namely, related to p ost- employment benefi ts and HSE liabilities) and income / loss from available- forsale fi nancial assets.
Net Interest Expense: Net interest expense comprises cost of borrowings minus interest income on cash and cash equivalents and other currents receivables - fi nancial instruments.
OCI: Other Comprehensive Income.
OECD: Organization for Economic Co-operation and Development.
OHSAS 18001: OHASAS 18001 is an international occupational health and safety management system specifi cation.
OLED: Organic Light-Emitting Diode.
Open Innovation: Innovation that is enriched with outside expertise, through partnerships with the academic world and by shareholdings in start-ups, either directly or via investment funds.
Other adjustments: Adjustments made for elements distorting comparability over time of the Group underlying performance. They include non-recurring items, M&A related impacts that include PPA impacts of acquisitions other than Rhodia and Cytec and retention bonus granted at closing date, net fi nancial expense or income related to change in discount rates, hyperinfl ation fi nancial results and debt refi nancing, adjustments of equity earnings for impairment gains or losses and unrealized foreign exchange gains or losses on debt, tax eff ects related to the items listed before, tax expense or income of prior years, all adjustments listed before for continuing operations and impacting discontinuing operations.
PEEK: Polyetheretherketone.
PPA: Purchase Price Allocation (PPA) accounting impacts related to acquisitions.
PSU: Performance Share Unit.
PO: Propylene oxide.
PPS: Polyphenylene sulfi de.
PPSU: Polyphenylsulfone.
Product Stewardship: A responsible approach in managing risks throughout the entire life cycle of a product beginning at the design stage to the end of life.
PVC: Polyvinyl chloride.
PVDF: Polyvinylidene fl uoride.
R&I: Research & Innovation.
REBITDA: Recurring earnings before interest and taxes depreciation and amortization. It is defi ned as EBIT before depreciation and amortization charges, non-recurring items (including from equityconsolidated companies), M&A related impacts (including but not limited to Purchase Price Allocation elements,) and major fi nancing-related impacts from equity-consolidated companies (e.g. RusVinyl's).
REACH: REACH is the European Community Regulation on chemicals and their safe use (EC 1907/2006). It deals with the Registration, Evaluation, Authorisation and Restriction of Chemical substances. The law entered into force on June 1, 2007.
Responsible Care®: Responsible Care® is the global chemical industry's unique initiative to improve health, environmental performance, enhance security, and to communicate with stakeholders about products and processes.
ROE: Return on equity.
Safety Data Sheets: Safety Data Sheets are the main tool for ensuring that manufacturers and importers communicate enough information along the supply chain to allow safe use of their substances and mixtures.
SASB: Sustainability Accounting Standards Board. SASB's mission is to develop and disseminate sustainability accounting standards that help public corporations disclose material, decision-useful information to investors. That mission is accomplished through a rigorous process that includes evidence-based research and broad, balanced stakeholder participation.
Seveso Regulations: The Control of Major Accident Hazards Involving Dangerous Substances Regulations. These regulations (often referred to as "COMAH Regulations" or "Seveso Regulations") give eff ect to European Directive 96/82/EC. They apply only to locations where signifi cant quantities of dangerous substances are stored.
Solvay Way: Launched in 2013 and aligned with ISO 26000, Solvay Way is the sustainability approach of the Group. It integrates social, societal, environmental and economic aspects into the Company's management and strategy, with the objective to create value shared by all of its stakeholders. Solvay Way is based on an ambitious and pragmatic framework serving as a tool of both measurement and progress. Solvay Way lists 49 practices, practices that refl ect the Solvay Way's 22 commitments and are structured on a four level scale (launch, deployment, maturity, performance).
SOP: Stock Option Plan.
SPM: The Sustainable Portfolio Management tool is integrated into the Solvay Way framework (linked to 5 practices). It serves as a strategic tool to develop information on our portfolio and analyze the impacts of sustainability megatrends on our businesses.
STI: Short Term Incentive.
SVHC: Substance of Very High Concern (SVHC) is a chemical substance which utilization within the European Union has been proposed to become subject to legal authorization under the REACH regulation.
Underlying: Underlying fi gures aim at adjusting IFRS statements for the non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia and Cytec acquisition, for the coupons of hybrid perpetual bonds, classifi ed as equity under IFRS, and for other items that distort the comparability of the Group's underlying performance. Underlying results are deemed to provide a more comparable indication of Solvay's fundamental performance over the reference periods.
Velocity: Total number of shares traded during the year divided by the total number of listed shares, using the Euronext defi nition.
VCM: Vinyl chloride.
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.
WBCSD: World Business Council for Sustainable Development.
WCF: World Class Factory.
Announcement of the 1st quarter 2016 results .
Annual Shareholders' Meeting.
Payment of the balance of 2015 dividend of € 1.42 (1) (coupon no.98) .
Announcement of the 2nd quarter and of the six months 2016 results.
Announcement of the 3rd quarter and the nine months 2016 results and the interim dividend for 2016 .
(1) net dividend €1.42, when subject to the Belgian withholding tax.
Ce rapport est aussi disponible en français. Het jaarverslag is ook beschikbaar in het Nederlands.
Publication management:
Solvay Communication
Solvay/Eliana Rodrigues, Marc Forzi, Didier Vanden Bosche, Jean-Michel Byl, GettyImages, Shutterstock, Solar Impulse/ Revillard/Rezo, Fabrice Debatty.
Printed on paper from sustainably managed forests.
Rue de Ransbeek, 310 1120 Brussels Belgium T: +32 2 264 2111 F: +32 2 264 3061
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