Earnings Release • May 6, 2014
Earnings Release
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REGULATED INFORMATION 06/05/2014 7:30 AM CET
All 2013 data are restated for comparison purposes for the Group's application of IFRS 11 effective January 1st 2014.
Furthermore, Solvay presents Adjusted Income Statement performance indicators that exclude non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia acquisition.
Solvay made a good start to the year thanks to improved demand and benefits from our excellence initiatives. The demand recovery was reflected in higher volumes in most of our businesses, while Chemlogics showed doubledigit operational earnings growth. Results from Group-wide excellence initiatives helped to overcome headwinds from currency swings and one-off effects. As a result, Solvay delivered solid earnings growth and margin expansion in the first quarter. Throughout the year, the Group will continue its profound transformation to create a higher growth, less cyclical and more valuable company.
The encouraging first quarter underpins our confidence that 2014 will show good operating performance. The Group expects high single-digit REBITDA growth at current perimeter and foreign exchange rates, and compared to the 2013 level as restated.
| Key data | Adjusted | IFRS | ||||
|---|---|---|---|---|---|---|
| (in € million) | Q1 2014 | Q1 2013 | % yoy | Q1 2014 | Q1 2013 | % yoy |
| Net sales | 2,552 | 2,516 | 1% | 2,552 | 2,516 | 1% |
| REBITDA | 467 | 422 | 11% | 467 | 422 | 11% |
| REBIT | 290 | 268 | 8% | 261 | 234 | 11% |
| Non-recurring items | (30) | (40) | 25% | (30) | (40) | 25% |
| EBIT | 260 | 228 | 14% | 231 | 194 | 19% |
| Net financial charges | (98) | (83) | (18)% | (98) | (83) | (18)% |
| Result before taxes | 162 | 145 | 12% | 133 | 111 | 21% |
| Income taxes | (52) | (56) | 7% | (42) | (46) | 8% |
| Result from continuing operations |
110 | 89 | 24% | 91 | 65 | 41% |
| Result from discontinued operations |
11 | 12 | (9)% | 11 | 12 | (9)% |
| Net income | 121 | 101 | 20% | 102 | 78 | 31% |
| Non-controlling interests | (14) | (16) | 9% | (14) | (16) | 9% |
| Net income Solvay share | 107 | 86 | 24% | 88 | 63 | 40% |
| Basic EPS (in €) | 1.28 | 1.03 | 24% | 1.05 | 0.75 | 40% |
| Total free cash flow | (97) | (11) | n.m. | (97) | (11) | n.m. |
In the first quarter of 2014, Group net sales grew 1% to € 2,552 m. The increase was driven by volume growth +3% and Chemlogics' contribution +4%, but was held back by unfavorable foreign exchange developments (4)% (primarily US dollar, Japanese yen, Brazilian real and other emerging markets' currencies) and a deflationary raw material environment affecting pricing (1)%. Net sales grew 9% in Advanced Formulations and 3% in Advanced Materials (both supported by demand), stood stable in Performance Chemicals (with volume growth offset by forex) and fell (4)% in Functional Polymers (due to lower raw material prices and unfavorable forex).
REBITDA grew 11% to € 467 m (€ 422 m in 2013) underpinned by volume growth € 36 m or +9% from both a recovery in demand and some restocking. Excluding the impacts from the CER phase out in 2013, volume growth would have had a +12% impact on REBITDA. External growth through Chemlogics contributed € 23 m or +5%. Operating leverage was further enhanced by wide-range excellence measures spanning from manufacturing to innovation, marketing and sales. Those benefits were partly offset by unfavorable foreign exchange rate developments amounting to an overall € (26) m (combining conversion and transaction impacts) and Force Majeure events of € (9) m as industrial issues at Aroma Performance and severe drought in Brazil caused temporary business disruptions. The reduction of selling prices of € (18) m yoy was more than offset by a € 22 m decline in raw material prices resulting in a € 4 m positive net price effect on REBITDA despite the negative € (11) m transaction forex impacts. Performance Chemicals and Functional Polymers benefited from positive pricing thanks to the success of breakthrough operational excellence initiatives at Soda Ash & Derivatives and Polyamide. Inflation in our fixed cost base was fully offset by savings from operational excellence. The negative € (5) m variance yoy in fixed costs primarily relates to stocking/destocking impacts. The Group's REBITDA margin on net sales widened to 18.3% from 16.8% in 2013, a substantial improvement on an underlying basis when taking into account the adverse forex impacts and the CER phase-out between periods.
Non-recurring Items of € (30) m (€ (40)m in 2013) included restructuring expenses of € (5) m (€ (16) m in Q1 2013), as well as other costs primarily linked to environmental, litigation and portfolio management provisions for a combined € (25) m (€ (24) m in the prior year quarter).
Adjusted EBIT grew 14% to € 260 m (€ 228 m in 2013). Besides amortization and depreciation charges of € (160) m, it included € (12) m pre-operational losses related to the ruble devaluation at Rusvinyl and € (5) m adjustment of Chemlogics inventories at fair value and holdback payments. On an IFRS basis, EBIT totaled € 231 m. The difference between IFRS and adjusted figures reflects the Rhodia non-cash purchase price allocation (PPA) depreciation impact of € (29) m.
Net Financial Expenses increased to € (98) m (€ (83) m in 2013). Net charges on net debt fell to € (30) m versus € (42) m in 2013, mainly thanks to the € 500 m EMTN bond repayment at maturity in January 2014 (€ 6 m interest saved) and the decision to redeem early the US\$ 400 m Rhodia HY2020 bonds (€ 4 m). Net financial expenses also included a negative one-off of € (19) m due to the settlement of interest rate swaps. By mid May 2014, Solvay will have repaid the equivalent of €1.3 billion of gross debt, significantly lowering the Group's negative cost of carry. The cost of discounting provisions for environmental and pension liabilities widened to € (43) m from € (37) m in 2013. This was chiefly related to environmental reserves, impacted by a 50 basis-point reduction in Eurozone discount rates in the quarter.
Adjusted Income Taxes amounted to € (52) m (€ (56) m in 2013). The nominal tax rate including non-recurring items was 32%, whereas the underlying tax rate was 33%.
Net result from discontinued operations was broadly flat at € 11 m (€ 12 m in the same 2013 quarter), and related mainly to the net income of the European chlorovinyls activities to be contributed to the JV project with INEOS.
Adjusted Net Income was € 121 m (€ 101 m in 2013). Adjusted Net income Group Share came in at € 107 m and adjusted basic earnings per share at € 1.28. On an IFRS basis, Net income Group Share amounted to € 88 m.
The EU clearance process in the chlorovinyls joint venture project with Ineos is in its final phase. The European Commission has market tested a remedy package that requires the sale of several assets to ease competition concerns. Solvay is still confident that the proposed joint venture will be approved with the EU's final decision expected by May 16th and it is engaged in dialogue with Ineos to put into effect the Letter of Intent the parties agreed on.
In another step that further improves the resilience of its portfolio, Solvay reached an agreement with U.S.-based OpenGate Capital to sell its PVC compound business Benvic Europe. Moreover, the planned divestment of Solvay's 70.59% stake in Indupa to Brazil's leading chemical producer Braskem is well underway.
Solvay and Invista have renewed their Butachimie joint venture agreement for the long term to manufacture adiponitrile (ADN), a key intermediate in the production of Polyamide 6.6. Both parties have agreed that Butachimie would benefit from the latest and best available butadiene-based ADN technology, which is owned exclusively by Invista. The agreement also gives Solvay an option to reserve capacity in the new ADN plant Invista plans to build in China. Butachimie operates the world's largest ADN production facility in Chalampé, France.
Solvay is increasing its annual production capacity of natural soda ash at its Green River plant in Wyoming by 150,000 metric tons as of early next year from more than 2 million metric tons, to meet growing demand of its U.S. export markets. The expansion is part of Solvay's three-year action plan to reinforce its global leadership in soda ash and gradually grow its U.S. trona capacity by 12 percent.
Solvay launched the production of torrefied biomass at an industrial scale in the United States, creating a new business that aims to provide an innovative and renewable energy solution. Torrefied biomass handles and burns similarly to coal. It is produced through torrefaction, a process that modifies the chemical properties of waste wood and biomass. Torrefied biomass can immediately and practically substitute coal, enabling power plants to generate clean energy. This business will be run by the recently created Solvay Biomass Energy joint venture between Solvay and U.S. based New Biomass Energy (NBE).
| (in € million) | Q1 2014 | Q1 2013 | % yoy |
|---|---|---|---|
| Net sales | 2,552 | 2,516 | 1% |
| Advanced Formulations | 663 | 609 | 9% |
| Advanced Materials | 658 | 639 | 3% |
| Performance Chemicals | 783 | 783 | - |
| Functional Polymers | 448 | 468 | (4)% |
| Corporate & Business Services | - | 17 | n.m. |
| REBITDA | 467 | 422 | 11% |
| Advanced Formulations | 102 | 113 | (9)% |
| Advanced Materials | 175 | 156 | 13% |
| Performance Chemicals | 188 | 166 | 14% |
| Functional Polymers | 40 | 34 | 19% |
| Corporate & Business Services | (39) | (46) | 16% |
As one of Solvay's growth engines, the businesses grouped under Advanced Formulations stand out for their innovation capacity and low capital intensity. Their offerings address major societal trends, meeting ever stricter requirements to respect the environment, save energy and challenges of the mass consumer markets.
REBITDA was down (9)% yoy, at € 102 m, as Chemlogics' strong contribution was insufficient to offset temporary unexpected business disruptions due to a manufacturing outage and extreme weather conditions in the U.S. combined with adverse currency developments.
| (in € million) | Q1 2014 | Q1 2013 | % yoy |
|---|---|---|---|
| Net sales | 663 | 609 | 9% |
| Novecare | 471 | 398 | 18% |
| Coatis | 120 | 122 | (2)% |
| Aroma Performance | 72 | 89 | (19)% |
| REBITDA | 102 | 113 | (9)% |
Net Sales at Advanced Formulations grew 9% to € 663m in the quarter (€ 609 m in Q1'13). The integration of Chemlogics contributed +15%, while volumes, at constant perimeter, and prices stood stable. Forex headwinds had an adverse (7)% impact.
REBITDA amounted to € 102 m in the first quarter, or a (9)% decline. Temporary adverse impacts linked to extreme U.S. weather conditions and unexpected production outage at one of Aroma Performance's major sites outweighed strong external growth coming from Chemlogics.
At Novecare the integration of Chemlogics progressed diligently and synergies continued to be captured. Quarterly demand dynamics were globally healthy, in particular at the Oil&Gas market where customers recognize Solvay's broad portfolio and formulation capabilities. Extreme weather conditions in the U.S. in the first part of the quarter,
however, significantly hampered production and the supply chain, resulting in some lower sales especially in the Agro business. The GBU was also impacted by adverse foreign exchange developments.
At Coatis, the drought in Brazil along with an uncompetitive domestic industry weighed on the businesses. Coatis, however, gained market share in solvents with improved margins despite weak phenol and bisphenol demand. Furthermore, savings from the operational excellence programs made up for higher fixed costs.
Aroma Performance declared force majeure as manufacturing at its U.S. plant in Baton Rouge was interrupted for 6 weeks. This limited global production and stock availability in aroma ingredients and inhibitors. Price increases in the hydroquinone business could not compensate for this effect.
A leader in markets with high entry barriers and strong returns on investment, the Advanced Materials segment 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 efficiency and less polluting functionalities.
Advanced Materials delivered a REBITDA record of € 175 m, up 13% yoy, supported by strong innovation-driven volume growth and 35% operational efficiency.
| (in € million) | Q1 2014 | Q1 2013 | % yoy |
|---|---|---|---|
| Net sales | 658 | 639 | 3% |
| Specialty Polymers | 346 | 312 | 11% |
| Silica | 108 | 104 | 4% |
| Rare Earth Systems | 71 | 82 | (14)% |
| Special Chemicals | 133 | 139 | (4)% |
| REBITDA | 175 | 156 | 13% |
Net sales of Advanced Materials increased 3% to € 658 m in the quarter (€ 639 m in 2013). Growth was underpinned by strong volume +8% but partially held back by lower prices (3) % and unfavorable foreign exchange rates (3) %.
REBITDA for Advanced Materials increased 13% to a € 175 m record compared to 2013 and continued to post a strong REBITDA margin. This record was achieved thanks to growing demand and benefiting from further excellence measures. The operating segment's strong performance was reflected in all four businesses with volume recovery in most end markets. The Segment also achieved good pricing power across the board which offset the negative foreign currency effects (mainly U.S. dollar, Brazilian real and Japanese yen). Excellence programs across manufacturing, purchasing and commercial excellence also contributed to this performance.
At Specialty Polymers, volumes grew across all end markets. The Energy market showed good recovery with the end of destocking in Oil&Gas and strong growth in
Photovoltaic demand. Healthcare continued its positive growth trends in Pharma implants and hemodialysis businesses. New applications bolstered the Automotive market and Industrial and Consumer Goods also showed growth.
At Silica, volume growth came from strong demand in both the Original Equipment Manufacturing (OEM) and replacement market in Europe and Asia. Demand was stable in Latin and North America.
At Rare Earth Systems, good volumes and better margins in the catalysis market were boosted by new regulation and innovation. Demand in Electronics remained subdued. Lower yoy prices continued to weigh on Rare Earth Systems but prices remained stable relative to December 2013.
Special Chemicals benefited from good business trends in most of its end markets, especially in Automotive and Semicon & Electronics. Sales were lower following last year Life Sciences strategic divestment.
Operating on 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 new programs of excellence to create additional sustainable value.
Performance Chemicals REBITDA stood at € 188 m, up 14% yoy, thanks to good pricing power and benefits from breakthrough excellence programs.
(*) Excludes Corporate & Business Services
| (in € million) | Q1 2014 | Q1 2013 | % yoy |
|---|---|---|---|
| Net sales | 783 | 783 | - |
| Soda Ash & Derivatives | 332 | 322 | 3% |
| Peroxide | 122 | 118 | 4% |
| Acetow | 163 | 163 | - |
| Eco Services | 64 | 67 | (4)% |
| Emerging Biochemicals | 101 | 114 | (11)% |
| REBITDA | 188 | 166 | 14% |
Net sales of Performance Chemicals were flat at € 783 m (or 4% higher at constant foreign currency rates). The segment benefited from price (up 2%) and volume across all businesses (up 2% overall) except Emerging Biochemicals.
The operating segment's REBITDA increased by 14% to € 188 m. Improved performance in Soda Ash & Derivatives, Peroxides, Acetow and Eco-Services was partially offset by a reduction in Emerging Biochemicals. The REBITDA increase was mainly driven by strong pricing power across most of the GBUs and lower variables costs. The breakthrough competitive program put in place in Soda Ash & Derivatives strongly supported the reduction of fixed costs despite the inflation.
At Soda Ash and Derivatives, Soda Ash volumes increased as demand in Europe and in export markets improved versus easy comparables. Prices were up overall. Bicarbonate benefited from volume and price increases but these benefits were partly offset by the significant negative impact of devaluations of the U.S. dollar and Russian ruble. The targeted € 100 m annual cost saving plan (by year-end 2015) is on track and the closure of the Povoa plant in Portugal was completed in January 2014.
At Peroxides, activities were underpinned by improved demand in Europe from new applications (fish farming) and
good volumes in North America in the pulp & paper industry. HPPO showed resilience but was temporarily impacted by technical issues at one of its major customers.
At Acetow, higher sales prices and lower wood pulp costs helped to deliver strong performance.
At Eco Services, volumes were offset by the conversion impact of the lower U.S. dollar rate on the net sales of this U.S.-based business. Prices fell due to a significant drop in Sulfur prices whilst pricing power was preserved.
At Emerging Biochemicals, overall demand of PVC recovered after the Chinese New Year, but the South East Asian market continued to be weak and the Epichlorohydrin business still suffered from poor demand in epoxy resins.
NB. : The Application of IFRS 11 since January 2014 has led to a change in consolidation scope of the following joint operations, which are now proportionally consolidated (previously accounted for by using the equity method):
- Soda Ash & Derivatives operations/interests in Devnya (Bulgaria), 75% held by Solvay
- HPPO operations/interests in Belgium,Thailand and the HPPO plant that is being constructed in the Kingdom of Saudi Arabia, all 50% held by the Solvay Group.
€ 40 m 8%
Solvay REBITDA*
Q1 2014 REBIDTA The key success factors of this Segment, which primarily groups the Polyamide activities, are continuous manufacturing optimization and innovation. Solvay is one of the few players to operate across the entire polyamide 6-6 chain.
Functional Polymers REBITDA came in at € 40 m, up 19% yoy, supported by improved demand, and strong manufacturing excellence program delivery.
(*) Excludes Corporate & Business Services
| (in € million) | Q1 2014 | Q1 2013 | % yoy |
|---|---|---|---|
| Net sales | 448 | 468 | (4)% |
| Polyamide | 391 | 413 | (5)% |
| Chlorovinyls | 57 | 55 | 3% |
| REBITDA | 40 | 34 | 19% |
Reminder: Following the filing for EU clearance of the Chlorovinyls joint venture project with INEOS, the related activities have been classified as discontinued operations as from September 30, 2013. Chlorovinyls residual businesses are the activities that are not to be contributed to the JV, mainly the PVC compounding business (Benvic) as well as sales activities of the US business.
As from December 31, 2013, Benvic is presented in the Balance Sheet under "Assets Held for Sale", but as continued operations in the Income Statement. A definitive sale transaction was signed with OpenGate Capital on April 9 th .
Functional Polymers reported net sales of € 448 m in the quarter (€ 468 m in 2013). Volume growth of 2% could not compensate for negative price (3)% and foreign exchange rates (4)%.
The REBITDA increased by 19% to € 40 m (against € 34 m in 2013). Polyamide operating performance improved compared to the first quarter of 2013 supported by good volumes in Europe, improved manufacturing yields and pricing power at Engineering Plastics, despite the unfavorable impact from the Force Majeure in Brazil. The profit restoration plan continued to deliver both on fixed and variable costs as well as commercial excellence programs.
Discontinued Operations: Performance of European chlorovinyls business to be contributed to the planned JV with INEOS stood broadly in line with the prior year. In the quarter net sales amounted to € 486 m and REBITDA came in at € 28 m. European PVC demand continued its slow recovery.
€ (39) m
Q1 2014 REBITDA This Segment includes the Solvay Energy Services business which delivers energy optimization programs in the Group and for third parties. It also includes the corporate functions.
Corporate and Business Services REBITDA at € (39) m. Net costs down 16% yoy. CER sales phase-out in 2013 was mitigated by tight cost control and favorable currency impacts on costs.
| (in € million) | Q1 2014 | Q1 2013 | % yoy |
|---|---|---|---|
| Net sales | - | 17 | n.m. |
| Energy Services | - | 17 | n.m. |
| Other Corporate & Business Services | - | 1 | n.m. |
| REBITDA | (39) | (46) | 16% |
Net sales were nil compared to € 17 m in the same period last year. 2013 reported last CER sales, which were completely phased-out over the 1st half of prior year.
REBITDA amounted to € (39) m compared to € (46) m in Q1 2013.
Solvay Energy Services REBITDA amounted to € 10 m in Q1 2014 (€ 11 m in Q1 2013). It related to strong operational delivery of the on-going Solvay Energy Services businesses in Energy and CO2 Management Services as well as the Paraiso bagasse-based cogeneration plant in
Brazil, which has now reached satisfactory operating runrate levels. Q1 2013 included the sale of 1 MT of CERs.
Other Corporate and Business Services expenses stood below prior year. The first quarter benefitted from forex devaluation and expense deferral. Furthermore, tight cost controls compensated for inflationary elements while the Group continued investing in the deployment of best-inclass Business Support Services.
Net costs may change from quarter to quarter depending on the phasing of planned actions and programs.
Factors influencing net sales yoy evolution (% of Q1 2013 net sales)
| Adjusted | IFRS | ||||
|---|---|---|---|---|---|
| (in € million) | Q1 2014 | Q1 2013 | Q1 2014 | Q1 2013 | |
| Sales | 2,665 | 2,664 | 2,665 | 2,664 | |
| Other non-core revenues | 113 | 148 | 113 | 148 | |
| Net sales | 2,552 | 2,516 | 2,552 | 2,516 | |
| Cost of goods sold | (2,027) | (2,049) | (2,027) | (2,049) | |
| Gross margin | 639 | 614 | 639 | 614 | |
| Commercial & administrative costs | (291) | (310) | (291) | (310) | |
| Research & innovation costs | (57) | (55) | (57) | (55) | |
| Other operating gains & losses | 3 | 2 | (26) | (31) | |
| Earnings from associates & joint ventures accounted for using the equity method |
(3) | 16 | (3) | 16 | |
| REBIT | 290 | 268 | 261 | 234 | |
| Non-recurring items | (30) | (40) | (30) | (40) | |
| EBIT | 260 | 228 | 231 | 194 | |
| Cost of borrowings | (55) | (46) | (55) | (46) | |
| Interest on lendings & short-term deposits | 25 | 4 | 25 | 4 | |
| Other gains & losses on net indebtedness | (25) | (4) | (25) | (4) | |
| Cost of discounting provisions | (43) | (37) | (43) | (37) | |
| Income/loss from available-for-sale investments | - | - | - | - | |
| Result before taxes | 162 | 145 | 133 | 111 | |
| Income taxes | (52) | (56) | (42) | (46) | |
| Result from continuing operations | 110 | 89 | 91 | 65 | |
| Result from discontinued operations | 11 | 12 | 11 | 12 | |
| Net income | 121 | 101 | 102 | 78 | |
| Non-controlling interests | (14) | (16) | (14) | (16) | |
| Net income Solvay share | 107 | 86 | 88 | 63 | |
| Basic EPS from continuing operations (in €) | 1.23 | 0.87 | 1.01 | 0.59 | |
| Basic EPS (in €) | 1.28 | 1.03 | 1.05 | 0.75 | |
| Diluted EPS from continuing operations (in €) | 1.22 | 0.86 | 1.00 | 0.59 | |
| Diluted EPS (in €) | 1.27 | 1.02 | 1.05 | 0.74 |
| (in € million) | Q1 2014 | Q1 2013 | % yoy |
|---|---|---|---|
| EBIT IFRS | 231 | 194 | 19% |
| Non recurring items (-) | 30 | 40 | (25)% |
| REBIT IFRS | 261 | 234 | 11% |
| Depreciation of PPA on fixed assets | 29 | 33 | (12)% |
| Adjusted REBIT | 290 | 268 | 8% |
| IFRS Depreciation & amortization (recurring) | 160 | 154 | 4% |
| Adjustments of Chemlogics inventories at FV (PPA) & holdback payments |
5 | - | n.m. |
| Equity Earnings Rusvinyl (pre-operational stage) | 12 | - | n.m. |
| REBITDA (key performance indicator monitored by management) | 467 | 422 | 11% |
| (in € million) | Q1 2014 | Q1 2013 | % yoy |
|---|---|---|---|
| Net income | 102 | 78 | 31% |
| Other comprehensive income | |||
| Recyclable components | |||
| Hyperinflation | (13) | - | n.m. |
| Gains & losses on available-for-sale financial assets | (4) | 7 | n.m. |
| Gains & losses on hedging instruments in a cash flow hedge | (6) | (25) | 76% |
| Currency translation differences | (25) | 146 | n.m. |
| Non recyclable components | |||
| Remeasurement of the net defined benefit liability | (62) | (6) | n.m. |
| Income tax relating to recyclable & non recyclable components | |||
| Income tax relating to components of other comprehensive income | 12 | (11) | n.m. |
| Other comprehensive income, net of related tax effects | (97) | 111 | n.m. |
| Comprehensive income attributed to | 4 | 189 | n.m. |
| Owners of the parent | 1 | 158 | n.m. |
| Non-controlling interests | 3 | 32 | n.m. |
| (in € million) | 31/03/2014 | 31/12/2013 |
|---|---|---|
| Non-current assets | 11,193 | 11,217 |
| Intangible assets | 1,590 | 1,621 |
| Goodwill | 3,092 | 3,096 |
| Tangible assets | 4,994 | 5,015 |
| Available-for-sale investments | 36 | 38 |
| Investments in joint ventures & associates – equity method | 580 | 582 |
| Other investments | 111 | 115 |
| Deferred tax assets | 522 | 500 |
| Loans & other non-current assets | 268 | 250 |
| Current assets | 6,847 | 7,306 |
| Inventories | 1,380 | 1,300 |
| Trade receivables | 1,515 | 1,331 |
| Income tax receivables | 22 | 38 |
| Dividends receivable | 1 | 1 |
| Other current receivables - Financial instruments | 498 | 481 |
| Other current receivables – Other | 541 | 572 |
| Cash & cash equivalents | 1,175 | 1,961 |
| Assets held for sale | 1,713 | 1,621 |
| TOTAL ASSETS | 18,040 | 18,523 |
| Total equity | 7,455 | 7,453 |
| Share capital | 1,271 | 1,271 |
| Reserves | 5,806 | 5,804 |
| Non-controlling interests | 378 | 378 |
| Non-current liabilities | 7,001 | 6,927 |
| Long-term provisions: employees benefits | 2,750 | 2,685 |
| Other long-term provisions | 808 | 793 |
| Deferred tax liabilities | 448 | 473 |
| Long-term financial debt | 2,825 | 2,809 |
| Other non-current liabilities | 170 | 166 |
| Current liabilities | 3,585 | 4,144 |
| Other short-term provisions | 336 | 342 |
| Short-term financial debt | 308 | 775 |
| Trade liabilities | 1,330 | 1,340 |
| Income tax payable | 55 | 21 |
| Dividends payable | 3 | 113 |
| Other current liabilities | 569 | 604 |
| Liabilities linked to assets held for sale | 984 | 949 |
| TOTAL EQUITY & LIABILITIES | 18,040 | 18,523 |
| Revaluation reserve (fair value) |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in € million) | Share capital | Issue premiums | Retained earnings | Hybrid bond | Treasury shares | Currency translation differences |
Available-for-sale investments |
Cash flow hedges | Defined benefit pension plans |
Total reserves | Non-controlling interests |
Total equity |
| Balance at 31/12/2013 | 1,271 | 18 5,987 1,194 | (132) | (770) | (6) | 6 | (494) | 5,804 | 378 7,453 | |||
| Net profit for the period | - | - | 88 | - | - | - | - | - | - | 88 | 14 | 102 |
| Items of OCI | - | - | (8) | - | - | (15) | (3) | (7) | (53) | (86) | (11) | (97) |
| Comprehensive income | - | - | 80 | - | - | (15) | (3) | (7) | (53) | 1 | 3 | 4 |
| Cost of stock options | - | - | 2 | - | - | - | - | - | - | 2 | - | 2 |
| Dividends | - | - | - | - | - | - | - | - | - | - | (1) | (1) |
| Acquisitions/sale of treasury shares | - | - | - | - | 2 | - | - | - | - | 2 | - | 2 |
| Other | - | - | (3) | - | - | - | - | - | - | (3) | (2) | (5) |
| (in € million) | Q1 2014 | Q1 2013 |
|---|---|---|
| Net income | 102 | 78 |
| Depreciation, amortization & impairments (-) | 216 | 208 |
| Earnings from associates & joint ventures accounted for using the equity method (-) |
3 | (16) |
| Net financial charges & income / loss from available-for-sale investments (-) | 109 | 92 |
| Income tax (-) | 56 | 56 |
| Changes in working capital | (310) | (179) |
| Changes in provisions | (54) | (51) |
| Dividends received from associates & joint ventures accounted for using equity method |
2 | 3 |
| Income taxes paid | (24) | (61) |
| Others | (4) | 16 |
| Cash flow from operating activities | 97 | 145 |
| Acquisition (-) of subsidiaries | (3) | - |
| Acquisition (-) of investments - Other | (26) | (12) |
| Loans to associates & non consolidated subsidiaries | 1 | - |
| Sale (+) of subsidiaries & investments | - | - |
| Acquisition (-) of tangible & intangible assets | (190) | (158) |
| Sale (+) of tangible & intangible assets | 3 | 15 |
| Income from available-for-sale investments | - | - |
| Changes in non-current financial assets | (6) | (13) |
| Cash flow from investing activities | (222) | (169) |
| Proceeds from bond issuance classified as equity | - | - |
| Capital increase (+) / redemption (-) | - | - |
| Acquisition (-) / sale (+) of treasury shares | 2 | 30 |
| Changes in borrowings | (446) | 62 |
| Changes in other current financial assets | (11) | (80) |
| Net cash out related to cost of borrowings & interest on lendings & term deposits |
(53) | (48) |
| Other | (32) | (27) |
| Dividends paid | (112) | (104) |
| Cash flow from financing activities | (653) | (167) |
| Net change in cash & cash equivalents | (778) | (190) |
| Currency translation differences | (2) | 18 |
| Opening cash balance | 1,972 | 1,787 |
| Ending cash balance | 1,193 | 1,614 |
| Free Cash Flow | (97) | (11) |
| From continuing operations | (158) | (131) |
| From discontinued operations | 62 | 120 |
| (in € million) | Q1 2014 | Q1 2013 |
|---|---|---|
| Cash flow from operating activities | 86 | 132 |
| Cash flow from investing activities | (24) | (12) |
| Cash flow from financing activities | (7) | 2 |
| Net change in cash & cash equivalents | 55 | 121 |
Additional comments on the cash flow statement of the 1 st quarter 2014
Cash flow from operating activities was € 97 m compared to € 145 m last year. Besides net income of € 102 m, it consisted of:
Cash flow from investing activities was € (222) m, and included capital expenditures which amounted to € (190) m, including € (24) m from discontinued operations
Free Cash Flow was € (97) m, and included cash flow from discontinued operations for € 62m.
Solvay is a public limited liability company governed by Belgian law and quoted on NYSE Euronext Brussels and NYSE Euronext Paris.
These condensed consolidated financial statements were authorized for issue by the Board of Directors on May 5th, 2014.
The following unusual items had an impact on the condensed financial statements or the three months ended March 31st, 2014: the adoption of IFRS 10 Consolidated Financial Statements, 11 Joint Arrangements and 12 Disclosures of Interests in Other Entities (see 2 below).
Solvay prepares its condensed consolidated financial statements on a quarterly basis, in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for the preparation of the annual financial statements and should be read in conjunction with the consolidated financial statements for the year ended December 31st , 2013.
The condensed consolidated financial statements for the three months ended March 31st, 2014 were prepared using the same accounting policies as those adopted for the preparation of the consolidated financial statements for the year ended December 31st, 2013, except for the adoption of IFRS 10 Consolidated Financial Statements, 11 Joint Arrangements and 12 Disclosures of Interests in Other Entities.
In this framework, on April 7th, 2014 Solvay published restated financial figures for 2013.
On February 24th, 2014 the Board of Directors of Solvay SA decided to grant two long-term incentive plans for part of its key executives:
The details of the stock options plan are as follows:
| Stock option plan | |
|---|---|
| Number of stock options | 362,436 |
| Grant date | 24/02/2014 |
| Acquisition date | 01/01/2018 |
| Vesting period | 24/02/2014 to 31/12/2017 |
| Exercise price (in €) | 107.61 |
| Exercise period | 01/01/2018 to 23/02/2022 |
This plan is accounted for as an equity-settled share-based plan. As of March 31st, 2014, the impact on the income statement is immaterial.
The details of the Performance Share Units plan are as follows:
| Performance share units | |
|---|---|
| Number of PSU | 206,495 |
| Grant date | 24/2/2014 |
| Acquisition date | 01/01/2017 |
| Vesting period | 24/2/2014 to 31/12/2016 |
| Performance conditions | 50% of PSU Granted depending upon the level of REBITDA at closing Financial Year 2016 50% of PSU Granted depending upon the level of CFROI at closing Financial Year 2016 |
| Validation of performance conditions | By the board of Directors, subject to confirmation by Solvay Statutory Auditors |
The Performance Share Units is qualified as a cash-settled share-based plan. As of March 31st, 2014, the impact on the income statement and statement of financial position is immaterial.
Compared to December 31st, 2013, there are no changes in valuation techniques.
For all financial instruments not measured at fair value in Solvay's statement of financial position, the fair value of those financial instruments is not significantly different from the ones published in note 34 of the consolidated financial statements for the year ended December 31st, 2013.
For all financial instruments measured at fair value in Solvay's statement of financial position, the fair value of those instruments as of March 31st, 2014 is not significantly different from the ones as published in the note 34 "Financial instruments measured at fair value in the consolidated statement of financial position" of the consolidated financial statements for the year ended December 31st, 2013.
During the three months ended March 31st, 2014, there were neither reclassifications between fair value levels, nor significant changes in the fair value of financial assets and liabilities measured at level 3.
On April 1st, 2014 Solvay has completed the acquisition of the specialty chemical assets of ERCA Química, Ltda. in Brazil, enabling the Group to more than double its surfactant production capacity in the country and to expand its access to one of the world's largest personal care and agrochemicals markets.
In April 2014, Solvay has signed an agreement to sell its polyvinyl chloride (PVC) compound business Benvic Europe to U.S. investment company OpenGate Capital, further improving the resilience of the Group's portfolio. Benvic Europe mixes PVC and additives, pigments and stabilizers to make innovative plastic compounds, which are processed to serve markets ranging from cars and aircrafts to medical applications and construction.
To the extent that any statements made in this presentation contain information that is not historical, these statements are essentially forward-looking. The achievement of forward-looking statements contained in this presentation is subject to risks and uncertainties because of a number of factors, including general economic factors, interest rate and foreign currency exchange rate fluctuations; changing market conditions, product competition, the nature of product development, impact of acquisitions and divestitures, restructurings, products withdrawals; regulatory approval processes, all-in scenario of R&D projects and other unusual items.
Consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements can be identified by the use of words such as "expects," "plans," "will," "believes," "may," "could" "estimates," "intends", "goals", "targets", "objectives", "potential", and other words of similar meaning. Should known or unknown risks or uncertainties materialize, or should our assumptions prove inaccurate, actual results could vary materially from those anticipated. The Company undertakes no obligation to publicly update any forward-looking statements.
Adjusted performance indicators exclusively exclude non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia acquisition.
Adjusted net income (Solvay share) divided by the weighted average number of shares, after deducting own shares purchased to cover stock option programs
Net income (Solvay share) excluding non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia acquisition
Net result excluding non-cash Purchase Price Allocation (PPA) accounting impacts related to the Rhodia acquisition
REBIT excluding non-cash Purchase Price Allocation (PPA) 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
Difference between cost of gross debt and yield on cash financed by debt.
EBIT
Operating results
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).
International Financial Reporting Standards
Net financial expenses comprises cost of borrowings minus accrued interests on lending and short-term deposits, plus other gains (losses) on net indebtedness and costs of discounting provisions (namely, related to Postemployment benefits and HSE liabilities)
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
Operating result, i.e. EBIT before non-recurring items
REBITDA is defined as operating result before depreciation and amortization, non-recurring items, temporary stepup of inventories related to the Rhodia and Chemlogics acquisitions and pre-operational gain/(losses) of Rusvinyl resulting from financial expenses (not capitalized).
The comparative financial statements have been restated to include the effects of IFRS 11 applied by Solvay as of January 1, 2013. The Group's European Chlorovinyls activities planned to be contributed to the JV with INEOS and Indupa's results are presented as discontinued operations.
Maria Alcón-Hidalgo Investor Relations +32 2 264 1984 [email protected]
Geoffroy Raskin Investor Relations +32 2 264 1540 [email protected]
Edward Mackay Investor Relations +32 2 264 3687 [email protected]
Lamia Narcisse Media Relations +33 1 53 56 59 62 [email protected]
Caroline Jacobs Media Relations +32 2 264 1530 [email protected]
Solvay S.A.
1120 Brussels Belgium T: +32 2 264 2111 F: +32 2 264 3061
www.solvay.com
As an international chemical group, Solvay assists industries in finding and implementing ever more responsible and value-creating solutions. Solvay generates 90% of its net sales in activities where it is among the world's top three players. It serves many markets, varying from energy and the environment to automotive and aerospace or electricity and electronics, with one goal: to raise the performance of its clients and improve society's quality of life. The group is headquartered in Brussels, employs about 29,400 people in 55 countries and generated 9.9 billion euros in net sales in 2013. Solvay SA SOLB.BE) is listed on NYSE Euronext in Brussels and Paris (Bloomberg: SOLB.BB - Reuters: SOLBt.BR).
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