Earnings Release • Jul 27, 2012
Earnings Release
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2nd quar ter and firs t hal f year finan cial repor t 2012
regulated information July 27 2012, 7.30 am Brussels time
In the current uncertain environment, the good performance achieved in the quarter highlights the Group's solid fundamentals. Our growth engines continued to deliver strongly, mostly compensating for challenged cycle-sensitive businesses. We reinforced our expansion in high-growth countries, namely in China and India, with the commissionning of new production and R&D facilities. The building of the new Solvay is now well on-track and we are committed to realize our value-creative ambition.
Business dynamics should remain healthy for our growth engines and challenging for our cycle sensitive businesses. Despite the slowing in demand observed in June in some business segments, the ongoing major transformation of the Group combined with our ability to fully deliver on our cost saving targets lead Solvay to reiterate its expectation to achieve a full year REBITDA similar to the strong 2011 pro forma level.
All period changes throughout this document are to be deemed on a year-on-year bases unless otherwise stated.
* Footnote applicable to the entire document: All references to year-on-year (yoy) evolution must be understood on a pro forma basis for 2011, as if the acquisition of Rhodia had become effective from the 1st of January 2011. On a pro forma basis Solvay 2011 historical figures were restated in order to have harmonized accounting policies among the two former Groups, policies that are to be used by the new Solvay going forward. Pro forma results exclude impacts from i) purchase price allocation entries; ii) non-recurring acquisition costs related to the Rhodia transaction and iii) financial revenues on cash deposits and investments. Adjusted Profit & Loss indicators exclude Purchase Price Allocation (PPA) non-cash accounting impacts related to the Rhodia acquisition.
| Key data (in million EUR ) |
Adjusted1 2Q 2012 |
Pro Forma2 2Q 2011 |
YoY evolution (%)/times |
Adjusted1 1H 2012 |
Pro Forma2 1H 2011 |
YoY evolution (%) |
|---|---|---|---|---|---|---|
| Net Sales3 | 3,331 | 3,296 | 1% | 6,570 | 6,440 | 2% |
| REBITDA4 | 565 | 604 | (6)% | 1,088 | 1 178 | (8)% |
| REBIT | 391 | 449 | (13)% | 744 | 860 | (14)% |
| Non-recurring items | 75 | 9 | 8x | 6 | 25 | (75)% |
| EBIT | 466 | 458 | 2% | 750 | 885 | (15)% |
| Net financial expenses | (110) | (84) | 31% | (189) | (165) | 15% |
| Result before taxes | 356 | 376 | (5)% | 559 | 721 | (22)% |
| Income taxes | (99) | (79) | 25% | (179) | (170) | 6% |
| Net result from continuining operations5 | 257 | 297 | (14)% | 380 | 551 | (31)% |
| Net result from discontinued operations | 1 | (45) | 3 | (44) | (106)% | |
| Net income | 258 | 252 | 2% | 383 | 507 | (25)% |
| Non controlling interests | (14) | (22) | 36% | (23) | (37) | 38% |
| Net income, Group share | 244 | 230 | 6% | 360 | 470 | (23)% |
| Free cash flow6 | 138 | 98 | 41% | 190 | 185 | 3% |
Adjusted performance indicators exclude Purchase Price Allocation (PPA) non-cash accounting impacts related to the Rhodia acquisition.
YoY evolution (%) compared with pro forma 2nd quarter 2011
| Key data (in million EUR ) |
Adjusted 2Q 2012 | YoY evolution (%) | Adjusted 1H 2012 | YoY evolution (%) |
|---|---|---|---|---|
| Net sales | 3,331 | 1% | 6,570 | 2% |
| Plastics | 998 | 1% | 1,949 | 0% |
| Chemicals | 760 | 5% | 1,496 | 4% |
| Rhodia | 1,574 | (1)% | 3,125 | 2% |
| REBITDA | 565 | (6)% | 1,088 | (8)% |
| Plastics | 146 | (27)% | 283 | (23)% |
| Chemicals | 139 | 8% | 294 | 10% |
| Rhodia | 318 | 3% | 579 | (5)% |
| New Business Development | (13) | 26% | (21) | 7% |
| Corporate and Business Support | (25) | 8% | (45) | 5% |
Net sales reached EUR 6,570 million, up by 2% versus the first semester 2011. This improvement is reflected in the Chemicals and Rhodia sector, whilst net sales remained stable in Plastics. The (4)% lower volumes were more than compensated by average selling price increases of +3%, favourable currency effects of +2% and scope changes of +1% The volume decline is mainly to be ascribed to the very high last year's comparison basis and to the economic slowdown.
REBITDA amounted to EUR 1,088 million down by (8)% versus the very demanding comparable of last year in the Plastics and Rhodia sector. In Plastics, REBITDA declined by 23% due to the demand decrease and margin squeeze in Vinyls. REBITDA of the Chemicals sector came in at EUR 294 million, a 10% improvement year on year, that was supported by the sustained performance of Essential Chemicals. The (5)% lower REBITDA of the Rhodia sector reflects margin squeeze in Polyamide Materials and exceptionnal situation at Rare Earth in 2011, which was not fully compensated for by the good growth in Consumer Chemicals and Acetow & Eco Services. Group REBITDA margin on net sales amounted to 16.6% compared with 18.3% in the 1st semester of 2011.
REBITDA of New Business Development amounted to EUR (21) million; it reflects the research & development efforts made in promising and important areas for development of the Group outside its traditional activities.
REBITDA of Corporate and Business Support amounted to EUR (45) million.
Solvay inaugurated its new RD&T Centre at Savli, Gujarat State, India. The Centre will focus on the development of high-performance polymers, organic chemistry, nano composites and green chemistry. It will employ over 200 researchers when fully operational.
The Centre has also established three fellowships for research in sustainable chemistry, nano technology and polymer science at the Maharaja Sayajirao University in Vadodara.
| Key data (in million EUR ) |
Adjusted 2Q 2012 | YoY evolution (%) | Adjusted 1H 2012 | YoY evolution (%) |
|---|---|---|---|---|
| Net sales | 998 | 1% | 1,949 | 0% |
| Specialty Polymers | 352 | 9% | 675 | 5% |
| Vinyls | 645 | (3)% | 1274 | (2)% |
| Vinyls Europe | 383 | - | 735 | (4)% |
| Vinyls Asia | 87 | (7)% | 181 | 14% |
| Vinyls South America | 134 | (4)% | 273 | (4)% |
| Plastics Integration | 42 | (15)% | 85 | (11)% |
| REBITDA | 146 | (27)% | 283 | (23)% |
| Specialty Polymers | 105 | 6% | 197 | 1% |
| Vinyls | 41 | (58)% | 85 | (49)% |
Net sales of Specialty Polymers hit a new record in Q2'12 increasing by 9% yoy. Prices increased by 3% and volumes remained stable compared to the same period last year. The 2nd quarter of 2012 benefited also from positive foreign exchange impacts of 7%.
By end-markets, Oil & Gas, Smart Devices, Water, Healthcare and Advanced Transportation were highly dynamic driven by ever-increasing enhanced performance demands. The Consumer, Automotive and Industrial markets remained highly resilient while Construction and Electric/Electronics markets stood subdued. Numerous operational excellence programs have been implemented and have already started to contribute to the results growth. The innovation development pool remains healthy with significant new promising projects to be launched in the coming months.
REBITDA amounted to EUR 105 million up by 6% compared to the 2nd quarter of last year. The REBITDA margin on sales stood at 30%, similar to the high level reached in Q2'11. The profitability of these activities is driven by favourable product mix.
Net sales of Vinyls amounted to EUR 645 million, 3% up sequentially, but down (3)% compared to the high level of 2nd quarter 2011. Total volume dropped by (9)% yoy. In Europe, demand in PVC weakened and stood comparable to the the rock-bottom levels reached in Q2'09. The anticipation of price variations led to volatility. At the same time, demand remained low in Argentina but recovered slightly in Brazil supported by Brazilian government's economic measures and the Real devaluation. In Thailand the production unit of Vinythai runs at full capacity.
REBITDA amounted to EUR 41 million, down (58) % from the strong 2nd quarter 2011. In Europe, SolVin improved its spread versus the historically lowest point of Q1'12. Solvay Indupa's results suffered from fierce price competition in Brazil, preventing any margin expansion despite demand recovery and supportive Brazilian Real devaluation for the domestic industry. Furthemore, activity in Argentina suffered from shortage of ethylene. Vinythai continued to deliver a strong operating result despite some PVC demand slowdown observed lately in North East Asia.
The pecialty polymers compounding plant at Changshu, China, is turned operational in Q2'12 to serve the growing demand for compounds to be used in electronics, automotive, consumer and industrial applications. The plant produces compounds of Amodel® polyphthalamide (PPA), Ixef® polyarylamide (PARA) and Kalix® (modified PARA).
On the same site in Changshu, Solvay is building a specialty polymers production plant for SOLEF® Polyvinylidene Fluoride (PVDF), TECNOFLON® Fluoroelastomers (FKM) and their essential monomer VF2, expected to come on stream in 2014.
| Key data (in million EUR ) |
Adjusted 2Q 2012 | YoY evolution (%) | Adjusted 1H 2012 | YoY evolution (%) |
|---|---|---|---|---|
| Net sales | 760 | 5% | 1,496 | 4% |
| Essential Chemicals | 597 | 7% | 1,176 | 5% |
| EMEA1 | 366 | * | 741 | * |
| North America | 131 | * | 256 | * |
| South America | 42 | * | 74 | * |
| Asia Pacific | 57 | * | 105 | * |
| Special Chemicals | 163 | - | 320 | 3% |
| REBITDA | 139 | 8% | 294 | 10% |
| Essential Chemicals | 120 | 18% | 262 | 22% |
| Special Chemicals | 20 | (25)% | 32 | (35)% |
* Irrelevant due to scope changes among regions
Net sales of Essential Chemical amounted to EUR 597 million, up by 7% compared to the 2nd quarter of 2011
• The demand for soda ash remained overall at a good level. A slowdown for flat glass experienced in Europe at the end of the quarter was compensated by good volumes and favorable mix and volumes in export markets. Demand in China somewhat weakened. Bicarbonate sales increased. Net sales of soda ash and bicarbonate also benefited from price increases, both in Europe and in the USA
• Demand for caustic soda remained satisfactory while supply improved versus 1Q'12. The selling prices decreased but remained at a level well above last year
• Activities in epichlorohydrin were impacted by maintenance activities in Tavaux while the new Epicerol® plant in Thailand progressively increased its operating rates. Epicerol® technology is highly appreciated by customers resulting in sold out activity levels.
• In hydrogen peroxide net sales were similar to those of the 2nd quarter 2011. Volumes remained sustained by good demand from pulp and paper though this industry is slowing down in Europe. The other end markets such as the chemical and the mining industry as well as environmental applications continued to perform well. Selling prices of hydrogen peroxide remained stable qoq but rose yoy, both in Europe and in the United States.
REBITDA amounted to EUR 120 million, up by 18% compared to the 2nd quarter 2011. The higher selling prices in an environment of globally sustained demand, coupled with stabilizing energy costs accounted for the increased operating performance.
Net sales amounted to EUR 163 million, which is in line with the 2nd quarter of 2011,
REBITDA amounted to EUR 20 million, compared to EUR 12 million in the 1st quarter of 2012 and EUR 26 million in Q2'11. Fluorchemicals gradually recovered from the lows posted at the end of 2011. The improvement was supported by the recovery in the fluorspar supply conditions.
Operating results were impacted by the negative performance of the Life Science division.
Solvay's affiliate Vinythai will build a new epichlorohydrin production plant based on Solvay's proprietary bio-based Epicerol® technology in Taixing, China. The Chinese epichlorohydrin market is expected to grow on annual basis by 8% and represent 35% of total world demand in 2016. The 100,000 tons p/a plant requires an investment of EUR 155 million and should become operational in the second half of 2014.
Bio-based epichlorohydrin plant to serve China, the world's The plant will use as feedstock natural glycerin obtained as by-product from the production of biofuels. The Epicerol® technology is protected by 1000 patent titles, many of them already granted in different parts of the world.
| Key data (in million EUR ) |
Adjusted 2Q 2012 | YoY evolution (%) | Adjusted 1H 2012 | YoY evolution (%) |
|---|---|---|---|---|
| Net sales | 1,574 | (1)% | 3,125 | 2% |
| Consumer Chemicals | 631 | 5% | 1,229 | 5% |
| Advanced Materials | 226 | 4% | 464 | 16% |
| Polyamide Materials | 440 | (7)% | 898 | (2)% |
| Acetow & Eco Services | 236 | 10% | 455 | 8% |
| Energy Services | 40 | (18)% | 80 | (21)% |
| REBITDA | 318 | 3% | 579 | (5)% |
| Consumer Chemicals | 156 | 59% | 262 | 38% |
| Advanced Materials | 47 | (33)% | 96 | (22)% |
| Polyamide Materials | 43 | (30)% | 82 | (37)% |
| Acetow & Eco Services | 73 | 41% | 127 | 29% |
| Energy Services | 24 | (40)% | 57 | (32)% |
| Corporate & Others | (26) | 98% | (44) | 133% |
Net sales REBITDA Net sales REBITDA
Compared with pro forma 1st quarter 2011
X XXX million € XXX million € EUR 1,574 million EUR 318 million (1)% +3%
+XX% -X% YoY evolution (%) Compared with pro forma 2nd quarter 2011
Consumer Chemicals reported net sales of EUR 631 million; up by 5% compared to last year.
Novecare continued its strong performance. In addition to guar-based formulations' exceptional dynamics serving the Oil & Gas market, the Home & Personal Care and the Industrial segments contributed to the strong performance of Novecare in the quarter. The ongoing significant demand for guar products allows Novecare to get customers' recognition for its differentiating value proposition concerning guar procurement. Coatis posted stable sales year on year with strong phenol activity despite the slowdown in production related to an industrial incident occurred in Paulinia. Aroma Performance continues implementing its strategic Food Safety repositioning.
REBITDA amounted to EUR 156 million, up by 59% compared to 2nd quarter 2011 mainly driven by Novecare which enjoyed strong volumes and good pricing power. While Aroma was impacted by less favorable conditions, Coatis faces a high reference from 2Q'11. REBITDA margin improved to the exceptionally high level of 25% compared to 16% last year.
Net sales amounted to EUR 226 million, up by 4% year-onyear. Strong pricing and favourable currency developments were partly offset by lower volumes. Volume was reported down by (19)% mostly to be ascribed to Rare Earths, and specifically to its Electronic business reflecting both, global softer demand and a reposition of the business from high volume-low added value segments to higher added value segments. Mixed Oxydes demand for Auto catalysis customers within Rare Earths remained strong. Silica's volume was negatively impacted by slowing demand, particularly in Europe
REBITDA amounted to EUR 47 million, down by (33) % compared to 2nd quarter 2011 due to lower volumes in Electronics served by Rare Earths, mainly explained by peak demand during 1H'11. Pricing power is positive in both Silica and Rare Earths. REBITDA margin reached 21%, and is as anticipated, lower than the 33% margin achieved under last year's exceptional pricing conditions.
Rare Earth Systems has a unique and optimized competitive sourcing which combines presence in China and technological edge recycling know-how.
Rhodia, Valeo and PSA combined their savoir-faire to carry out a multi-criteria analysis on the entire life cycle of the fan and shroud assembly, an important engine cooling component for the new Peugeot 208. Manufactured by Valeo, the part uses recycled Technyl® polyamide (PA) from Rhodia Engineering Plastics.
The study compared the environmental impact of using recycled Technyl® PA with a standard Technyl® grade. It assessed the whole value chain emphasizing on seven key environmental criteria*. The results demonstrate the benefits range from -9% to -28% on those seven criteria when selecting and using recycled Technyl® PA.
* Climate change, the depletion of non-renewable resources, the impact on the diminution of the ozone layer, acidification, eutrophication, the consumption of primary energy and photochemical oxidation
Net sales of EUR 440 million were down by (7) % yoy. Overall volumes were comparable with Q1'12, including the impact from the Force Majeure in Paulina in Adipic Acid but down by (7) % compared to Q2'11. P&I and EP volumes decreased due to slowing demand in Europe and Brazil, whilst Fibras is recovering.
REBITDA decreased to EUR 43 million compared to EUR 62 million last year. Margin erosion and the shutdown in Paulinia are the main factors behind the lower performance compared to the same period last year. The shutdown of our Adipic Acid manufacturing in Paulinia following an explosion adversely impacted the Group REBITDA by EUR (9)million in the quarter. Most of the impact is reported in Rhodia's Corporate & Others due to self-insurance. An equivalent negative effect is expected in the second part of the year.
Acetow & Eco Services reported net sales of EUR 236 million, a 10% increase compared to the 2nd quarter of 2011. Volume decline of (4) % was fully offset by price increases of 6% and favourable foreign exchange of 9%.
Eco Services reported strong activity levels corresponding to the usual high seasonality.
REBITDA amounted to EUR 73 million, up by 41% compared to last year driven by strong pricing power and more favourable mix in both segments. Within the cluster, Acetow benefited from good product mix and the first sales of innovative higher added value coloured tow.
Energy Services reported REBITDA of EUR 24 million compared to EUR 40 million in the 2nd quarter of 2011. A good level of CER sales volumes, well in line with full year production/sales expectations of 14 million tonnes was realized. However, volumes were lower than last year (approx. 35%) because 2nd quarter 2011 had benefited from a faster certification process.
Despite less favorable CO2 market pricing conditions, the year on year effective prices shortfall was limited by the hedging policy. Average CER prices realised over the quarter were 10.5 EUR per ton.
| IFRS | Adjusted1 | |||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | forma2 2011 |
|
| Sales | 3,418 | 1,718 | 3,418 | 3,380 |
| Other non-core revenues | 88 | 6 | 88 | 84 |
| Net sales | 3,331 | 1,713 | 3,331 | 3,296 |
| Cost of goods sold | (2,706) | (1,353) | (2,706) | (2,608) |
| Gross margin | 713 | 365 | 713 | 772 |
| Commercial and administrative costs | (293) | (126) | (293) | (286) |
| Research and development costs | (68) | (31) | (68) | (51) |
| Other operating gains and losses | (52) | (2) | (19) | (6) |
| Earnings from associates and joint ventures accounted for using the equity method |
59 | 13 | 59 | 20 |
| REBITDA | 565 | 304 | 565 | 604 |
| REBIT | 358 | 219 | 391 | 449 |
| Non-recurring items | 75 | 14 | 75 | 9 |
| EBIT | 433 | 233 | 466 | 458 |
| Cost of borrowings | (50) | (36) | (50) | (54) |
| Interest on lendings and short-term deposits | 4 | 11 | 4 | 8 |
| Other gains and losses on net indebtedness | (5) | (3) | (5) | (6) |
| Cost of discounting provisions | (59) | (12) | (59) | (32) |
| Income/loss from available-for-sale investments | (1) | 1 | (1) | 1 |
| Result before taxes | 322 | 195 | 356 | 376 |
| Income taxes | (88) | (19) | (99) | (79) |
| Result from continuing operations | 234 | 176 | 257 | 297 |
| Result from discontinued operations | 1 | (45) | 1 | (45) |
| Net income | 236 | 131 | 258 | 252 |
| Non-controlling interests | (14) | (19) | (14) | (22) |
| Net income Solvay share | 222 | 111 | 244 | 230 |
| Basic earnings per share from continuing operations | 2.67 | 1.93 | 2.94 | 3.38 |
| Basic earnings per share from discontinued operations | 0.02 | (0.55) | 0.02 | (0.55) |
| Basic earnings per share | 2.69 | 1.37 | 2.96 | 2.83 |
| Diluted earnings per share from continuing operations | 2.66 | 1.91 | 2.93 | 3.36 |
| Diluted earnings per share from discontinued operations | 0.02 | (0.55) | 0.02 | (0.55) |
| Diluted earnings per share | 2.68 | 1.36 | 2.95 | 2.81 |
Adjusted figures exclude Purchase Price Allocation (PPA) non-cash accounting impacts related to the Rhodia acquisition.
The 2nd quarter 2011 figures were restated to show the income statement (a) as if the acquisition of Rhodia had become effective from 1st of January 2011, (b) harmonizing the accounting principles and (c) eliminating the Purchase Price Allocation (PPA) impacts.
| IFRS | Adjusted1 | Pro forma2 |
||
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Sales | 6,756 | 3,388 | 6,756 | 6,638 |
| Other non-core revenues | 186 | 11 | 186 | 198 |
| Net sales | 6,570 | 3,377 | 6,570 | 6,440 |
| Cost of goods sold | (5,375) | (2,675) | (5,375) | (5,129) |
| Gross margin | 1,381 | 713 | 1,381 | 1,509 |
| Commercial and administrative costs | (570) | (245) | (570) | (558) |
| Research and development costs | (132) | (63) | (132) | (102) |
| Other operating gains and losses | (93) | (12) | (24) | (22) |
| Earnings from associates and joint ventures accounted for using the equity method |
88 | 22 | 88 | 33 |
| REBITDA | 1,088 | 589 | 1,088 | 1,178 |
| REBIT | 675 | 416 | 744 | 860 |
| Non-recurring items | (39) | (1) | 6 | 25 |
| EBIT | 636 | 416 | 750 | 885 |
| Cost of borrowings | (101) | (71) | (101) | (106) |
| Interest on lendings and short-term deposits | 10 | 20 | 10 | 17 |
| Other gains and losses on net indebtedness | (5) | (5) | (5) | (13) |
| Cost of discounting provisions | (93) | (24) | (93) | (63) |
| Income/loss from available-for-sale investments | (1) | 1 | (1) | 1 |
| Result before taxes | 446 | 336 | 559 | 721 |
| Income taxes | (148) | (62) | (179) | (170) |
| Result from continuing operations | 298 | 274 | 380 | 551 |
| Result from discontinued operations | 3 | (44) | 3 | (44) |
| Net income | 300 | 230 | 383 | 507 |
| Non-controlling interests | (23) | (33) | (23) | (37) |
| Net income Solvay share | 278 | 197 | 360 | 470 |
| Basic earnings per share from continuing operations | 3.35 | 2.98 | 4.36 | 6.33 |
| Basic earnings per share from discontinued operations | 0.03 | (0.54) | 0.03 | (0.54) |
| Basic earnings per share | 3.38 | 2.43 | 4.39 | 5.79 |
| Diluted earnings per share from continuing operations | 3.34 | 2.96 | 4.34 | 6.30 |
| Diluted earnings per share from discontinued operations | 0.03 | (0.54) | 0.03 | (0.54) |
| Diluted earnings per share | 3.37 | 2.42 | 4.37 | 5.76 |
Adjusted figures exclude Purchase Price Allocation (PPA) non-cash accounting impacts related to the Rhodia acquisition.
The 1st semester 2011 figures were restated to show the income statement (a) as if the acquisition of Rhodia had become effective from 1st of January 2011, (b) harmonizing the accounting principles and (c) eliminating the Purchase Price Allocation (PPA) impacts.
The table hereafter reconciles the 2Q 2012 IFRS results (which include PPA impacts) with the 2Q 2012 Adjusted results (which exclude PPA impacts).
| IFRS 2Q 2012 |
PPA impacts |
Adjusted 2Q 2012 |
IFRS 1H 2012 |
PPA impacts |
Adjusted 1H 2012 |
|
|---|---|---|---|---|---|---|
| Net Sales | 3,331 | 3,331 | 6,570 | 6,570 | ||
| REBITDA | 565 | 565 | 1,088 | 1,088 | ||
| REBIT | 358 | (33) | 391 | 675 | (69) | 744 |
| Non-recurring items | 75 | 75 | (39) | (45) | 6 | |
| EBIT | 433 | (33) | 466 | 636 | (114) | 750 |
| Net financial expenses | (111) | (111) | (190) | (190) | ||
| Result before taxes | 322 | (33) | 356 | 446 | (114) | 559 |
| Income taxes | (88) | 11 | (99) | (148) | 31 | (179) |
| Net result from continuining operations | 234 | (22) | 257 | 298 | (82) | 380 |
| Net result from discontinued operations | 1 | 1 | 3 | 3 | ||
| Net income | 236 | (22) | 258 | 300 | (82) | 383 |
| Non controlling interests | (14) | (14) | (23) | (23) | ||
| Net income, Group share | 222 | (22) | 244 | 278 | (82) | 360 |
Non-recurring items amounted to EUR 75 million. They primarily included EUR 115 million capital gains related to disposals of PipeLife and corporate buildings, EUR (25) million related to restructuring and reorganisation actions in the framework of the integration and Horizon deployments and EUR (9) million charges related to the revaluation of financial liabilities linked to share options held by Rhodia employees prior to the acquisition.
Financial charges amounted to EUR (111) million both on an Adjusted and an IFRS basis. The cost of borrowings amounted to EUR (50) million. Gross financial debt (EUR 3,960 million) is for 78.9% covered at a fixed average rate of 5.6% with duration of 4.5 year. Interest on cash deposits and investments amounted to EUR 4 million. The cost of discounting provisions increased to EUR (59) million vs. EUR (32) million in the prior year period. The one time effect caused by the 75 bp decrease in discount rates applicable to HSE provisions versus rates prevailing both at YE'11 and Q1'12 accounted for EUR (22) million.
Income taxes amounted to EUR (88) million in the IFRS accounts. On an Adjusted basis, income taxes totalled EUR (99) million or 28%. The EUR (11) million difference between IFRS and Adjusted figures reflects the tax impact of PPA adjustments.
Adjusted Net income amounted to EUR 258 million. On an IFRS basis, Net Income amounted to EUR 236 million, the difference is explained by the after-tax global PPA impact.
Adjusted net income, Group share amounted to EUR 244 million, resulting in EUR 2.96 Adjusted basic earnings per share.
| 2nd quarter | 1st semester | |||
|---|---|---|---|---|
| Million EUR | 2012 | 2011 | 2012 | 2011 |
| Net income | 236 | 131 | 300 | 230 |
| Gains and losses on available-for-sale financial assets |
0 | (3) | 9 | 3 |
| Gains and losses on hedging instruments in a cash flow hedge |
(33) | (2) | (19) | (1) |
| Actuarial gains and losses on defined benefit pension plans |
(184) | (12) | (247) | (23) |
| Currency translation differences | 109 | (43) | 27 | (196) |
| Share of other comprehensive income of asso ciates and joint ventures accounted for using the equity method |
(5) | (3) | 15 | (14) |
| Income tax relating to components of other com prehensive income |
28 | 5 | 21 | 9 |
| Other comprehensive income, net of related tax effects |
(86) | (58) | (194) | (224) |
| Comprehensive income attributed to | 150 | 72 | 106 | 7 |
| Owners of the parent | 136 | 58 | 82 | (2) |
| Non-controlling interests | 13 | 15 | 24 | 8 |
| Million EUR | June 30, 2012 | December 31, 2011 |
|---|---|---|
| Non-current assets | 12,091 | 12,064 |
| Intangible assets | 1,633 | 1,705 |
| Goodwill | 2,600 | 2,599 |
| Tangible assets | 5,627 | 5,652 |
| Available-for-sale investments | 92 | 80 |
| Investments in joint ventures and associates – equity me thod |
772 | 704 |
| Other investments | 120 | 125 |
| Deferred tax assets | 838 | 780 |
| Loans and other non-current assets | 409 | 420 |
| Current assets | 6,892 | 7,373 |
| Inventories | 1,611 | 1,578 |
| Trade receivables | 2,166 | 2,311 |
| Income tax receivables | 57 | 43 |
| Dividends receivable | 6 | 0 |
| Other current receivables - Financial instruments | 627 | 464 |
| Other current receivables – Other* | 895 | 938 |
| Cash and cash equivalents* | 1,525 | 1,943 |
| Assets held for sale | 5 | 95 |
| TOTAL ASSE TS |
18,983 | 19,437 |
| Total equity | 6,667 | 6,653 |
| Share capital | 1,271 | 1,271 |
| Reserves | 4,927 | 4,885 |
| Non-controlling interests | 470 | 497 |
| Non-current liabilities | 8,576 | 8,179 |
| Long-term provisions: employees benefits | 2,816 | 2,595 |
| Other long-term provisions | 1,309 | 1,325 |
| Deferred tax liabilities | 768 | 710 |
| Long-term financial debt* | 3,496 | 3,374 |
| Other non-current liabilities | 187 | 174 |
| Current liabilities | 3,740 | 4,605 |
| Short-term provisions: employees benefits | 43 | 39 |
| Other short-term provisions | 241 | 230 |
| Short-term financial debt* | 471 | 794 |
| Trade liabilities | 1,886 | 2,232 |
| Income tax payable | 125 | 51 |
| Dividends payable | 19 | 100 |
| Other current liabilities | 955 | 1,159 |
| TOTAL EQUI TY & LIA BILITIES |
18,983 | 19,437 |
*Net debt is the sum of Other current receivables, Cash and cash equivalents, Long-term financial debt and Short-term financial debt
Equity attributable to equity holders of the parent
| Fair value differences |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Million EUR | Share capital | Issue premiums | Retained earnings | Treasury shares | translation diff. Currency |
Available for sale investments |
Cash flow hedges | Defined benefit pension plans |
Total | Non-controlling interests |
Total equity |
| Balance – 31/12/2010 | 1,271 | 18 | 5,791 | (301) | (374) | 11 | 4 | (131) | 6,289 | 419 | 6,708 |
| Net profit for the period | 247 | 247 | 50 | 296 | |||||||
| Income and expenses directly allocated to equity |
42 | (8) | 8 | (86) | (44) | (10) | (54) | ||||
| Comprehensive income | 0 | 0 | 247 | 0 | 42 | (8) | 8 | (86) | 202 | 40 | 242 |
| Cost of stock options | 9 | 9 | 9 | ||||||||
| Dividends | (250) | (250) | (14) | (263) | |||||||
| Acquisition/sale of treasury shares |
10 | 10 | 10 | ||||||||
| Issure of share capital | 0 | 0 | |||||||||
| Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control |
(100) | (100) | 52 | (48) | |||||||
| Other | (4) | (4) | 0 | (4) | |||||||
| Balance – 31/12/2011 | 1,271 | 18 | 5,693 | (292) | (332) | 3 | 12 | (217) | 6,156 | 497 | 6,653 |
| Net profit for the period | 278 | 278 | 23 | 301 | |||||||
| Income and expenses directly allocated to equity |
34 | 9 | (17) | (221) | (195) | 1 | (194) | ||||
| Comprehensive income | 0 | 0 | 278 | 0 | 34 | 9 | (17) | (221) | 82 | 24 | 106 |
| Cost of stock options | 5 | 5 | 5 | ||||||||
| Dividends | (153) | (153) | (21) | (175) | |||||||
| Acquisition/sale of treasury shares |
106 | 106 | 106 | ||||||||
| Issure of share capital | 0 | 0 | |||||||||
| Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control |
2 | 2 | (30) | (28) | |||||||
| Other | 0 | 0 | 0 | 0 | |||||||
| Balance – 30/06/2012 | 1,271 | 18 | 5,824 | (186) | (299) | 12 | (5) | (438) | 6,198 | 470 | 6,667 |
| 2nd quarter | 1st semester | ||||
|---|---|---|---|---|---|
| Million EUR | 2012 | 2011 | 2012 | 2011 | |
| EBIT | 433 | 187 | 637 | 368 | |
| Depreciation, amortization and impairments | 209 | 86 | 415 | 176 | |
| Changes in working capital | (101) | (48) | (321) | (294) | |
| Changes in provisions | (58) | (42) | (59) | (48) | |
| Dividends received from associates and joint ventures accounted for using the equity method |
18 | 10 | 24 | 30 | |
| Income taxes paid | (45) | (45) | (65) | (57) | |
| Others | (212)1 | (23) | (195) | (42) | |
| Cash flow from operating activities | 243 | 125 | 435 | 133 | |
| Acquisition (-) of subsidiaries | 0 | 0 | 0 | ||
| Acquisition (-) of investments - Other | (4) | (35) | (11) | (130) | |
| Sale (+) of subsidiaries | 0 | 0 | 0 | ||
| Sale (+) of investments - Others | 170 | 0 | 173 | ||
| Acquisition (-) of tangible and intangible assets | (180) | (89) | (324) | (141) | |
| Sale (+) of tangible and intangible assets | 57 | 2 | 65 | 5 | |
| Income from available-for-sale investments | 1 | 1 | 1 | 1 | |
| Changes in non-current financial assets | 17 | 34 | 13 | 29 | |
| Cash flow from investing activities | 61 | (88) | (83) | (236) | |
| Capital increase (+) / redemption (-) | (28) | (20) | (28) | (20) | |
| Acquisition (-) / sale (+) of treasury shares | 6 | 29 | 106 | 29 | |
| Changes in borrowings | (348) | 70 | (289) | 50 | |
| Changes in other current financial assets | 28 | 1,557 | (151) | 2,565 | |
| Cost of borrowings | (42) | (42) | (101) | (71) | |
| Interest on lendings and short-term deposits | 4 | 20 | 10 | 20 | |
| Other | 8 | (5) | (60) | (5) | |
| Dividends paid | (171) | (168) | (261) | (267) | |
| Cash flow from financing activities | (544) | 1,441 | (775) | 2,301 | |
| Net change in cash and cash equivalents | (240) | 1,477 | (423) | 2,197 | |
| Currency translation differences | 12 | (2) | 3 | (12) | |
| Others | 2 | 0 | 2 | 0 | |
| Opening cash balance | 1,752 | 2,664 | 1,943 | 1,954 | |
| Closing cash balance | 1,525 | 4,139 | 1,525 | 4,139 | |
| Free Cash Flow2 from continuing operations |
144 | 86 | 99 | 43 | |
| Free Cash Flow2 from discontinued operations |
(6) | (14) | 91 | (16) |
Other operating cash flows include non-cash earnings from equity associates EUR (59) million, reclassification of capital gains (PipeLife and Real Estate disposals) EUR (116) million into investing cash flow, non discounting costs on HSE and pension provisions EUR (58) million and other minor non cash elements EUR 21 million
Cash flow from operating activities (including dividends from associates and joint ventures) + cash flow from investing activities (excluding acquisitions and sales of subsidiaries and other investments).
| 2nd quarter | |||||
|---|---|---|---|---|---|
| Million EUR | 2012 | 2011 | 2012 | 2011 | |
| Cash flow from operating activities | (6) | (14) | 91 | (16) | |
| Cash flow from investing activities | 0 | 0 | 0 | 0 | |
| Cash flow from financing activities | 0 | 0 | (47) | 0 | |
| Net change in cash and cash equivalents | (6) | (14) | 44 | (16) |
Cash flow from operating activities was EUR 243 million compared to EUR 125 million last year. Besides an EBIT of EUR 433 million it consisted of
Cash flow from investing activities was EUR 61 million and capital expenditures amounted to EUR (180) million
Free Cash Flow was EUR 138 million, and included cash flow from discontinued operations for EUR (6) million linked to post-closing adjustments subsequent to the sale of the pharmaceutical activities
| 2nd quarter | 1st semester | ||||
|---|---|---|---|---|---|
| Million EUR | 2012 | 2011 | 2012 | 2011 | |
| Net sales | 3,331 | 1,713 | 6,570 | 3,377 | |
| Plastics | |||||
| Net sales | 1,065 | 1,072 | 2,087 | 2,095 | |
| Inter-segments sales | (67) | (82) | (138) | (152) | |
| External sales | 998 | 990 | 1,949 | 1,944 | |
| Chemicals | |||||
| Net sales | 789 | 746 | 1,551 | 1,483 | |
| Inter-segments sales | (29) | (23) | (55) | (50) | |
| External sales | 760 | 723 | 1,496 | 1,433 | |
| Rhodia | |||||
| Net sales | 1,574 | 3,128 | |||
| Inter-segments sales | (1) | (3) | |||
| External sales | 1,573 | 3,125 | |||
| REBITDA | 565 | 304 | 1,088 | 589 | |
| Plastics | 146 | 200 | 283 | 366 | |
| Chemicals | 139 | 128 | 294 | 265 | |
| Rhodia | 318 | 579 | |||
| New Business Development | (13) | (7) | (21) | (14) | |
| Corporate and business support | (25) | (17) | (45) | (28) | |
| REBIT | 358 | 219 | 675 | 416 | |
| Plastics | 98 | 153 | 187 | 270 | |
| Chemicals | 100 | 92 | 213 | 193 | |
| Rhodia | 200 | 345 | |||
| New Business Development | (13) | (7) | (22) | (14) | |
| Corporate and business support | (27) | (19) | (49) | (32) | |
| EBIT | 433 | 233 | 636 | 416 | |
| Plastics | 164 | 146 | 248 | 257 | |
| Chemicals | 98 | 116 | 208 | 210 | |
| Rhodia | 180 | 245 | |||
| New Business Development | (13) | (7) | (22) | (14) | |
| Corporate and business support | 4 | (21) | (43) | (37) |
The consolidated financial statements were prepared in conformity with IFRS standards as currently adopted in the European Union. The same accounting policies have been implemented as for the latest annual financial statements. The primary variations in scope between the first semester of 2011 and 2012 were due to:
• Treatment of the PipeLife stake in Solvay's accounts until its effective disposal in May 2012: PipeLife stake has been accounted for as an "investment held for sale" as of December 31st, 2011, following the decision to sell the 50% stake in PipeLife to Wienerberger in February 2012.
This results report contains regulated information and is established in compliance with IAS 34. A risk analysis is included in the annual report, which is available on www.solvay.com.
| Closing | Average | ||||||
|---|---|---|---|---|---|---|---|
| 1 Euro | 6 months 2012 |
6 months 2011 |
2011 | 6 months 2012 |
6 months 2011 |
2011 | |
| Pound Sterling | GBP | 0.807 | 0.903 | 0.835 | 0.823 | 0.868 | 0.868 |
| American Dollar | USD | 1.259 | 1.445 | 1.294 | 1.296 | 1.403 | 1.392 |
| Argentine Peso | ARS | 5.703 | 5.954 | 5.577 | 5.701 | 5.688 | 5.754 |
| Brazilian Real | BRL | 2.579 | 2.260 | 2.416 | 2.414 | 2.288 | 2.327 |
| Thai Baht | THB | 39.873 | 44.380 | 40.991 | 40.372 | 42.676 | 42.430 |
| Japanese Yen | JPY | 100.130 | 116.250 | 100.200 | 103.310 | 114.966 | 110.960 |
The accounting treatment of Rhodia's acquisition is subject to Purchase Accounting (IFRS 3). More information about the accounting impacts of that acquisition on Solvay's consolidated accounts can be found in the press release on full year 2011 results.
Purchase Accounting must be completed within the 12 months following the acquisition date (September 7, 2011). Provisional accounting still prevails as:
| 6 months 2012 | 6 months 2011 | 2011 | |
|---|---|---|---|
| Number of shares issued at the end of the period | 84,701,133 | 84,701,133 | 84,701,133 |
| Average number of shares for IFRS calculation of ear nings per share |
81,995,834 | 81,150,522 | 81,223,941 |
| Average number of shares for IFRS calculation of dilu ted income per share |
82,318,495 | 81,586,803 | 81,546,384 |
Jean-Pierre Clamadieu, Chief Executive Officer, and Bernard de Laguiche, Chief Financial Officer, of the Solvay Group, declare that to the best of their knowledge:
Limited review report on the consolidated interim financial information
for the six-month period ended 30 June 2012
To the board of directors
We have performed a limited review of the accompanying consolidated statement of financial position, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated cash flow statement, the consolidated statement of changes in equity and selective notes (jointly the "interim financial information") of Solvay SA/NV ("the company") and its subsidiaries (jointly "the group") for the six-month period ended 30 June 2012. The board of directors of the company is responsible for the preparation and fair presentation of this interim financial information. Our responsibility is to express a conclusion on this interim financial information based on our review.
The interim financial information has been prepared in accordance with international financial reporting standard IAS 34 – Interim Financial Reporting as adopted by the European Union.
Our limited review of the interim financial information was conducted in accordance with international standard ISRE 2410 – Review of interim financial information performed by the independent auditor of the entity. A limited review consists of making inquiries of group management and applying analytical and other review procedures to the interim financial information and underlying financial data. A limited review is substantially less in scope than an audit performed in accordance with the International Standards on Auditing (ISA). Accordingly, we do not express an audit opinion on the interim financial information.
Based on our limited review, nothing has come to our attention that causes us to believe that the interim financial information for the six-month period ended 30 June 2012 is not prepared, in all material respects, in accordance with IAS 34 – Interim Financial Reporting as adopted by the European Union.
Diegem, 26 July 2012 The statutory auditor
DELOITTE Bedrijfsrevisoren / Reviseurs d'Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL Represented by Eric Nys
Basic earnings per share excluding Purchase Price Allocation (PPA) non cash accounting impacts related to the Rhodia acquisition
Net income (Solvay share) excluding Purchase Price Allocation (PPA) non-cash accounting impacts related to the Rhodia acquisition
Net result excluding Purchase Price Allocation (PPA) non-cash accounting impacts related to the Rhodia acquisition
REBIT excluding Purchase Price Allocation (PPA) non-cash accounting impacts related to the Rhodia acquisition
Net income (Solvay's share) divided by the weighted average number of shares, after deducting own shares purchased to cover stock option programs
Earnings before interest and taxes
Cash flow from operating activities + cash flow from investing activities, excluding acquisitions and sales of subsidiaries and other investments, + dividends from associates and joint ventures.
International Financial Reporting Standards
Sales of goods and value added services corresponding to Solvay's know-how and core business. Net sales exclude other revenues primarily comprising commodity and utility trading transactions and other revenue deemed as incidental by the Group
Figures that represent (a) as if the acquisition had become effective from 1st of January 2011, (b) harmonizing accounting principles and (c) eliminating the Purchase Price Allocation (PPA) impacts.
Operating result, i.e. EBIT before non-recurring items
REBIT before depreciation and amortization
October 25, 2012: Announcement of the 3rd quarter and the nine months 2012 results and the interim dividend for 2012 (payable in January 2013, coupon no. 91) (at 07:30)
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E-mail: [email protected]
Investor Relations Tel: +32 2 264 15 40
E-mail: [email protected]
E-mail: [email protected]
SOLVAY is an international chemical Group committed to sustainable development with a clear focus on innovation and operational excellence. It generates over 90% of its sales in markets where it is among the top three leaders. Solvay offers a broad range of products that contribute to improving the quality of life and the performance of its customers in markets such as consumer goods, construction, automotive, energy, water and environment, and electronics. The Group is headquartered in Brussels, employs about 31,000 people in 55 countries and generated EUR 12.7 billion in net sales in 2011. Solvay SA (SOLB.BE) is listed on NYSE Euronext in Brussels and Paris (Bloomberg: SOLB.BB - Reuters: SOLBt.BR).
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