Quarterly Report • Nov 5, 2020
Quarterly Report
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Besides IFRS accounts, Solvay also presents alternative performance indicators to provide a more consistent and comparable indication of the Group's underlying financial performance and financial position, as well as cash flows. These indicators provide a balanced view of the Group's operations and are considered useful to investors, analysts and credit rating agencies as these measures provide relevant information on the Group's past or future performance, position or cash flows. These indicators are generally used in the sector it operates in and therefore serve as a useful aid for investors to compare the Group's performance with its peers. The underlying performance indicators adjust IFRS figures for the non-cash Purchase Price Allocation (PPA) accounting impacts related to acquisitions, for the coupons of perpetual hybrid bonds, classified as equity under IFRS but treated as debt in the underlying statements, for impairments and for other elements that would distort the analysis of the Group's underlying performance. The comments on the results made on pages 3 to 9 are on an underlying basis, unless otherwise stated.
| Q3 2020 | Q3 2019 | % yoy |
% organic |
Underlying, (in € million) | 9M 2020 | 9M 2019 | % yoy |
% organic |
|---|---|---|---|---|---|---|---|---|
| 2,103 | 2,578 | -18.4% | -14.3% | Net sales | 6,751 | 7,803 | -13.5% | -11.9% |
| 473 | 601 | -21.4% | -17.3% | EBITDA | 1,481 | 1,796 | -17.5% | -16.0% |
| 22.5% | 23.3% | -0.8pp | - | EBITDA margin | 21.9% | 23.0% | -1.1pp | - |
| 366 | 313 | +17.1% | - | FCF to shareholders from continuing operations |
801 | 345 | n.m. | - |
| 54.8% | 35.3% | +19.5pp | - | FCF conversion ratio (LTM) | - | - | - | - |
"Our relentless focus on cash and cost in this challenging environment resulted in record cash generation of €801 million through the nine month period. Actions taken across the organization to reduce costs strengthened delivery with higher Q3 EBITDA relative to the second quarter despite the continued headwinds in some key end markets. I would like to thank our employees for their mobilization that delivered the strong performance. We have selectively resumed investments and are working closely with our customers to commercialize new innovations," said CEO Ilham Kadri.
Full Year underlying EBITDA is estimated to be between €1,890 million and €1,970 million, and FCF is estimated to be around €900 million, a 50% improvement relative to last year.
[1] Barring further deterioration related to the second wave of Covid-19.
Underlying key figures
| (in € million) | Q3 2020 | Q3 2019 | % yoy | 9M 2020 | 9M 2019 | % yoy |
|---|---|---|---|---|---|---|
| Net sales | 2,103 | 2,578 | -18.4% | 6,751 | 7,803 | -13.5% |
| EBITDA | 473 | 601 | -21.4% | 1,481 | 1,796 | -17.5% |
| EBITDA margin | 22.5% | 23.3% | -0.8pp | 21.9% | 23.0% | -1.1pp |
| EBIT | 277 | 397 | -30.1% | 850 | 1,197 | -29.0% |
| Net financial charges | (71) | (80) | +10.2% | (204) | (246) | +17.0% |
| Income tax expenses | (20) | (61) | +66.4% | (119) | (231) | +48.5% |
| Tax rate | 20% | 26% | -6.3pp | |||
| Profit (loss) from discontinued operations | (1) | 59 | n.m. | 20 | 222 | n.m. |
| (Profit) / loss attributable to non-controlling interests | (8) | (11) | -29.9% | (26) | (31) | -17.0% |
| Profit / (loss) attributable to Solvay shareholders | 176 | 304 | -41.9% | 522 | 911 | -42.8% |
| Basic earnings per share (in €) | 1.71 | 2.95 | -41.9% | 5.06 | 8.84 | -42.8% |
| of which from continuing operations | 1.71 | 2.37 | -27.9% | 4.86 | 6.68 | -27.2% |
| Capex in continuing operations | (116) | (215) | +46.2% | (411) | (570) | +28.0% |
| FCF to Solvay shareholders from continuing operations | 366 | 313 | +17.1% | 801 | 345 | n.m. |
| FCF to Solvay shareholders | 365 | 336 | +8.8% | 796 | 527 | +51.1% |
| FCF conversion ratio (LTM) | 54.8% | 35.3% | +19.5pp | |||
| Net financial debt | (4,279) | (4,279) | ||||
| Underlying leverage ratio | 2.1 | 2.1 |
Net sales for nine months year to date were down 13.5% (11.9% organically) driven by volumes, while pricing was sustained across the group. Sales in the third quarter were down 18.4% (14.3% organically) primarily due to lower volumes and foreign exchange. Demand in the third quarter remained low in July and August, whereas September showed some improvement in certain automotive applications, including tires and EV batteries. Other markets remained resilient, including electronics, healthcare, home & personal care, agro, and coatings, while civil aerospace and oil & gas remained challenged.
Cost savings reached €260 million year to date, of which €130 million are structural savings. In the third quarter, a total of €90 million of cost savings were realized, of which €50 million are structural. Within the structural savings, approximately 50% are related to restructuring actions, 40% from indirect spend, and 10% from productivity and efficiency improvements.
Underlying EBITDA of €1,481 million was down 17.5% (16% organically) in the nine months year to date as a result of the lower sales volumes. Underlying EBITDA in the third quarter of €473 million increased sequentially by 7.7% versus the second quarter 2020, reflecting improvement in the quality of earnings. Underlying EBITDA declined 21.4% (17.3% organically) in the third quarter 2020 versus the third quarter 2019 due mainly to volumes and foreign exchange impact. The EBITDA margin improved to 22.5%, which is a sequential improvement compared to the 20.2% in the second quarter thanks to the acceleration and delivery of cost measures.
Free cash flow to shareholders from continuing operations in the nine months year to date period reached €801 million versus €345 million in 9 month 2019. Free cash flow to Solvay shareholders from continuing operations totalled €366 million in the third quarter, reflecting the continued discipline in working capital management and other value creating elements including reduced cash taxes and pension cash costs totaling €105 million of sustainable operational deleveraging.
Underlying net financial debt decreased by €1.1 billion for the nine months year to date, driven by the closing of the Polyamides sale in the first quarter (€1.2 billion proceeds less voluntary pension contributions of €0.5 billion) and a record free cash flow. Net debt decreased by €350 million at the end of September 2020 (vs the end of June) to €4.3 billion.
Provisions are down by €429 million to €3.3 billion thanks primarily to the €460 million voluntary pension contributions made in the first quarter of 2020 (in addition to the €114m contributions made in December 2019) and to a lesser extent the reduction of environmental liabilities driven mainly by foreign exchange.
| (in € million) | 9M 2019 | Scope | Forex conversion |
Volume & mix |
Price | 9M 2020 |
|---|---|---|---|---|---|---|
| Solvay | 7,803 | 32 | (173) | (949) | 38 | 6,751 |
| Materials | 2,452 | - | (10) | (373) | 7 | 2,076 |
| Chemicals | 2,512 | 32 | (114) | (282) | 35 | 2,184 |
| Solutions | 2,834 | - | (49) | (294) | (4) | 2,487 |
| CBS | 5 | - | - | (1) | - | 5 |
| (in € million) | Q3 2019 | Scope | Forex conversion |
Volume & mix |
Price | Q3 2020 |
|---|---|---|---|---|---|---|
| Solvay | 2,578 | 10 | (136) | (350) | 1 | 2,103 |
| Materials | 818 | - | (28) | (184) | (1) | 606 |
| Chemicals | 845 | 10 | (62) | (78) | 10 | 725 |
| Solutions | 912 | - | (46) | (88) | (9) | 770 |
| CBS | 2 | - | - | (1) | - | 1 |
Nine months 2020 sales were down 15.4% (15.0% organically) as a result of volume declines predominantly in the second and third quarters. Nine month EBITDA was down 20.4% (20.4% organically) with swift cost actions mitigating part of the volume decline, protecting the segment's 27.0% margins.
Third quarter net sales were down 26.0% in the segment, including forex, and down 23.4% organically due to significantly lower volumes, primarily related to demand in the civil aerospace and automotive sectors.
Specialty Polymers sales were down 13.6% in the third quarter, as growth in healthcare and electronics partly offset the demand decline in automotive and other industrial markets. Sales to automotive were down approximately 20% versus Q3 2019 but flat sequentially versus Q2 2020 thanks to growth in batteries for hybrid and electric vehicles which resumed in September.
Composite Materials sales were down 44.3% in the third quarter given the further decline in commercial aircrafts build rates, while sales to the defense sector remained resilient. The business remains on track to deliver its cost savings plan which includes the permanent closure of two manufacturing sites.
As a result, third quarter EBITDA for the segment decreased 30.7% (28.9% organically) driven by volumes. The rapid mitigation response enabled significant fixed cost reduction in the segment which supported an EBITDA margin of 26.6%.
Nine months 2020 sales in the segment were down 13.1% (10.2% organically) due primarily to volume declines, offset partly by price. Nine months 2020 EBITDA was down 14.9% (11.7% organically), as cost mitigation measures supported much of the volume shortfall and preserved 27.8% EBITDA margins.
Third quarter net sales were down 14.2% in the segment including forex and scope, and down 8.5% organically due mainly to lower volumes.
In Soda Ash, sales were down 17.1% driven by lower demand for container glass used in the hospitality industry, which offset increased demand for flat glass used in construction.
Peroxides sales were down by 8.6% in the quarter mainly related to lower volumes in pulp and paper markets, which was partially offset by growth in HPPO to various industrial markets, and further supported by price.
Silica sales rebounded significantly following a low Q2, with sales down 13.6% versus Q3 2019 but up sequentially by 48% versus a low Q2 2020 as demand for tires improved throughout the quarter. Coatis sales also increased sequentially by 29% versus Q2 2020, but were down 12.8% versus Q3 2019 due to volume reduction and currency devaluation.
Third quarter EBITDA in the segment declined 16.7% (10.4% organically) as a result of the lower volumes. Fixed cost reductions and price support mitigated much of the impact, leading to 27.7% EBITDA margins in the quarter.
Nine months sales in the segment were down 12.2% (10.7% organically) due to volume declines largely driven by the challenges in oil & gas. EBITDA was down 16.3% (14.3% organically) while supportive cost measures helped to sustain an EBITDA margin of 17.3%.
Third quarter net sales were down 15.6% including forex, and down 11.1% organically.
Sales in Novecare in Q3 were down 16.8%, as growth in agro, home & personal care and coatings was able to offset a significant part of the oil & gas decline.
Technology Solutions sales were down 16.5% due to low volumes in mining. Special Chem sales dropped by 16.5% related to volume declines in automotive and other industrial applications, whereas electronics remained resilient. Aroma Performance sales decreased by 7.6% following several quarters of strong growth, as demand for vanillin was not able to offset weakness in other industrial markets.
Third quarter EBITDA in the segment was down 15.3% (9.8% organically). Cost control actions and price drove an increase in EBITDA margin of 18.4% in Q3 despite the lower volumes.
In line with our GROW strategy, Solvay began the process of exploring options to sell certain business lines. To date, agreements[1] have been reached to sell our interests in a few business lines, including the sodium chlorate business and related assets in Portugal (part of Peroxides), certain fluorine chemicals and our site in Korea (part of Special Chem) and most recently the process materials product line (part of Composites). Solvay will continue to explore other opportunities to further simplify its portfolio.
[1] All signed agreements are subject to applicable legal and social consultation in the respective countries.
| Segment review | Underlying | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in € million) | Q3 2020 | Q3 2019 | % yoy | % organic |
9M 2020 | 9M 2019 | % yoy | % organic |
||
| Net sales | 2,103 | 2,578 | -18.4% | -14.3% | 6,751 | 7,803 | -13.5% | -11.9% | ||
| Materials | 606 | 818 | -26.0% | -23.4% | 2,076 | 2,452 | -15.4% | -15.0% | ||
| Specialty Polymers | 423 | 489 | -13.6% | - | 1,365 | 1,478 | -7.7% | - | ||
| Composite Materials | 183 | 329 | -44.3% | 711 | 974 | -27.0% | - | |||
| Chemicals | 725 | 845 | -14.2% | -8.5% | 2,184 | 2,512 | -13.1% | -10.2% | ||
| Soda Ash & Derivatives | 350 | 423 | -17.1% | - | 1,090 | 1,250 | -12.7% | - | ||
| Peroxides | 157 | 172 | -8.6% | - | 478 | 515 | -7.1% | - | ||
| Coatis | 119 | 136 | -12.8% | - | 338 | 407 | -16.9% | - | ||
| Silica | 99 | 115 | -13.6% | - | 277 | 340 | -18.7% | - | ||
| Solutions | 770 | 912 | -15.6% | -11.1% | 2,487 | 2,834 | -12.2% | -10.7% | ||
| Novecare | 363 | 436 | -16.8% | - | 1,183 | 1,390 | -14.8% | - | ||
| Special Chem | 174 | 209 | -16.5% | - | 554 | 651 | -14.9% | - | ||
| Technology Solutions | 132 | 159 | -16.5% | - | 414 | 474 | -12.7% | - | ||
| Aroma Performance | 101 | 109 | -7.6% | - | 336 | 319 | +5.2% | - | ||
| Corporate & Business Services | 1 | 2 | -33.8% | - | 5 | 5 | -10.6% | - | ||
| EBITDA | 473 | 601 | -21.4% | -17.3% | 1,481 | 1,796 | -17.5% | -16.0% | ||
| Materials | 161 | 233 | -30.7% | -28.9% | 560 | 703 | -20.4% | -20.4% | ||
| Chemicals | 201 | 241 | -16.7% | -10.4% | 606 | 713 | -14.9% | -11.7% | ||
| Solutions | 142 | 168 | -15.3% | -9.8% | 429 | 513 | -16.3% | -14.3% | ||
| Corporate & Business Services | (31) | (40) | +21.6% | - | (114) | (132) | +13.9% | - | ||
| EBITDA margin | 22.5% | 23.3% | -0.8pp | - | 21.9% | 23.0% | -1.1pp | - | ||
| Materials | 26.6% | 28.4% | -1.8pp | - | 27.0% | 28.7% | -1.7pp | - | ||
| Chemicals | 27.7% | 28.5% | -0.8pp | - | 27.8% | 28.4% | -0.6pp | - | ||
| Solutions | 18.4% | 18.4% | +0.1pp | - | 17.3% | 18.1% | -0.8pp | - |
As announced on June 24, 2020, a non-cash impairment charge of €1.46 billion was recorded in Q2 2020. As a result, the underlying profit/(loss) attributable to Solvay shareholders in 9M 2020 was €522 million, whereas it totaled €(1,038) million on an IFRS basis. Further details are available in the Q2 financial report.
| 9M key figures | IFRS | Underlying | ||||
|---|---|---|---|---|---|---|
| (in € million) | 9M 2020 | 9M 2019 | % yoy | 9M 2020 | 9M 2019 | % yoy |
| Net sales | 6,751 | 7,803 | -13.5% | 6,751 | 7,803 | -13.5% |
| EBITDA | 1,335 | 1,707 | -21.8% | 1,481 | 1,796 | -17.5% |
| EBITDA margin | 21.9% | 23.0% | -1.1pp | |||
| EBIT | (852) | 114 | n.m. | 850 | 1,197 | -29.0% |
| Net financial charges | (112) | (175) | +36.2% | (204) | (246) | +17.0% |
| Income tax expenses | (207) | (7) | n.m. | (119) | (231) | +48.5% |
| Tax rate | 20% | 26% | -6.3pp | |||
| Profit (loss) from discontinued operations | 158 | 208 | -24.0% | 20 | 222 | n.m. |
| (Profit) / loss attributable to non-controlling interests | (26) | (31) | -16.4% | (26) | (31) | -17.0% |
| Profit / (loss) attributable to Solvay shareholders | (1,038) | 110 | n.m. | 522 | 911 | -42.8% |
| Basic earnings per share (in €) | (10.07) | 1.06 | n.m. | 5.06 | 8.84 | -42.8% |
| of which from continuing operations | (11.60) | (0.96) | n.m. | 4.86 | 6.68 | -27.2% |
| Capex in continuing operations | (411) | (570) | +28.0% | |||
| FCF to Solvay shareholders from continuing operations | 801 | 345 | n.m. | |||
| FCF to Solvay shareholders | 796 | 527 | +51.1% | |||
| Net financial debt | (4,279) | (4,279) | ||||
| Underlying leverage ratio | 2.1 |
| Q3 key figures | IFRS | Underlying | ||||
|---|---|---|---|---|---|---|
| (in € million) | Q3 2020 | Q3 2019 | % yoy | Q3 2020 | Q3 2019 | % yoy |
| Net sales | 2,103 | 2,578 | -18.4% | 2,103 | 2,578 | -18.4% |
| EBITDA | 451 | 591 | -23.7% | 473 | 601 | -21.4% |
| EBITDA margin | 22.5% | 23.3% | -0.8pp | |||
| EBIT | 262 | (492) | n.m. | 277 | 397 | -30.1% |
| Net financial charges | (39) | (62) | +36.2% | (71) | (80) | +10.2% |
| Income tax expenses | (4) | 120 | n.m. | (20) | (61) | +66.4% |
| Profit (loss) from discontinued operations | 42 | 58 | -28.0% | (1) | 59 | n.m. |
| (Profit) / loss attributable to non-controlling interests | (8) | (11) | -28.9% | (8) | (11) | -29.9% |
| Profit / (loss) attributable to Solvay shareholders | 252 | (387) | n.m. | 176 | 304 | -41.9% |
| Basic earnings per share (in €) | 2.44 | (3.76) | n.m. | 1.71 | 2.95 | -41.9% |
| of which from continuing operations | 2.04 | (4.32) | n.m. | 1.71 | 2.37 | -27.9% |
| Capex in continuing operations | (116) | (215) | +46.2% | |||
| FCF to Solvay shareholders from continuing operations | 366 | 313 | +17.1% | |||
| FCF to Solvay shareholders | 365 | 336 | +8.8% | |||
| FCF conversion ratio (LTM) | 54.8% | 35.3% | +19.5% | |||
| Net financial debt | (4,279) | (4,279) | ||||
| Underlying leverage ratio | 2.1 |
Solvay measures its financial performance using alternative performance metrics, which can be found below. Solvay believes that these measurements are useful for analyzing and explaining changes and trends in its historical results of operations, as they allow performance to be compared on a consistent basis. Definitions of the different metrics presented here are included in the glossary at the end of this financial report.
| Tax rate | Underlying | ||
|---|---|---|---|
| (in € million) | 9M 2020 | 9M 2019 | |
| Profit / (loss) for the period before taxes | a | 646 | 951 |
| Earnings from associates & joint ventures | b | 55 | 71 |
| Interests and realized foreign exchange gains (losses) on the RusVinyl joint venture | c | (18) | (16) |
| Income taxes | d | (119) | (231) |
| Tax rate | e = -d/(a-b-c) | 20% | 26% |
| (in € million) | Q3 2020 | Q3 2019 | 9M 2020 | 9M 2019 | |
|---|---|---|---|---|---|
| Cash flow from operating activities | a | 495 | 582 | 888 | 1,295 |
| of which additional voluntary contribution related to pension plans | b | - | - | (460) | - |
| Cash flow from investing activities | c | (115) | (253) | 880 | (631) |
| of which capital expenditures required by share sale agreement | d | - | (15) | (14) | (44) |
| Acquisition (-) of subsidiaries | e | (2) | (2) | (11) | (4) |
| Acquisition (-) of investments - Other | f | (13) | (12) | (39) | (15) |
| Loans to associates and non-consolidated companies | g | (5) | 2 | (1) | 4 |
| Sale (+) of subsidiaries and investments | h | (2) | (11) | 1,302 | (18) |
| Recognition of factored receivables | i | (22) | (23) | (22) | (23) |
| Increase/decrease of borrowings related to environmental remediation |
j | 2 | - | 8 | - |
| Payment of lease liabilities | k | (27) | (29) | (80) | (79) |
| FCF | l = a-b+c-d e-f-g-h-i+j+k |
401 | 362 | 942 | 684 |
| FCF from discontinued operations | m | (1) | 23 | (5) | 182 |
| FCF from continuing operations | n = l-m | 402 | 339 | 947 | 502 |
| Net interests paid | o | (11) | (26) | (50) | (65) |
| Coupons paid on perpetual hybrid bonds | p | (24) | - | (92) | (87) |
| Dividends paid to non-controlling interests | q | (1) | - | (5) | (4) |
| FCF to Solvay shareholders | r = l+o+p+q | 365 | 336 | 796 | 527 |
| FCF to Solvay shareholders from discontinued operations | s | (1) | 23 | (5) | 182 |
| FCF to Solvay shareholders from continuing operations | t = r-s | 366 | 313 | 801 | 345 |
| FCF to Solvay shareholders from continuing operations (LTM) | u | 1,063 | 784 | ||
| Dividends paid to non-controlling interests from continuing operations (LTM) |
v | (38) | (38) | ||
| Underlying EBITDA (LTM) | w | 2,007 | 2,327 | ||
| FCF conversion ratio (LTM) | x = (u-v)/w | 54.8% | 35.3% |
| (in € million) | Q3 2020 | Q3 2019 | 9M 2020 | 9M 2019 | |
|---|---|---|---|---|---|
| Acquisition (-) of tangible assets | a | (69) | (195) | (302) | (502) |
| Acquisition (-) of intangible assets | b | (20) | (27) | (61) | (81) |
| Payment of lease liabilities | c | (27) | (29) | (80) | (79) |
| Capex | d = a+b+c | (116) | (251) | (443) | (662) |
| Capex in discontinued operations | e | - | (37) | (33) | (92) |
| Capex in continuing operations | f = d-e | (116) | (215) | (411) | (570) |
| Underlying EBITDA | g | 473 | 601 | 1,481 | 1,796 |
| Cash conversion | h = (f+g)/g | 75.6% | 64.3% | 72.3% | 68.2% |
| Net working capital | 2020 | 2019 | |
|---|---|---|---|
| (in € million) | September 30 |
December 31 |
|
| Inventories | a | 1,301 | 1,587 |
| Trade receivables | b | 1,265 | 1,414 |
| Other current receivables | c | 567 | 628 |
| Trade payables | d | (1,056) | (1,277) |
| Other current liabilities | e | (680) | (792) |
| Net working capital | f = a+b+c+d+e | 1,397 | 1,560 |
| Sales | g | 2,270 | 2,710 |
| Annualized quarterly total sales | h = 4*g | 9,079 | 10,841 |
| Net working capital / sales | i = f / h | 15.4% | 14.4% |
| Year-to-date average | j = µ(Q1,Q2,Q3,Q4) | 15.8% | 15.3% |
| Net financial debt | 2020 | 2019 | |
|---|---|---|---|
| (in € million) | September 30 |
December 31 |
|
| Non-current financial debt | a | (3,286) | (3,382) |
| Current financial debt | b | (459) | (1,132) |
| IFRS gross debt | c = a+b | (3,745) | (4,513) |
| Underlying gross debt | d = c+h | (5,545) | (6,313) |
| Other financial instruments | e | 162 | 119 |
| Cash & cash equivalents | f | 1,104 | 809 |
| Total cash and cash equivalents | g = e+f | 1,266 | 928 |
| IFRS net debt | i = c+g | (2,479) | (3,586) |
| Perpetual hybrid bonds | h | (1,800) | (1,800) |
| Underlying net debt | j = i+h | (4,279) | (5,386) |
| Underlying EBITDA (LTM) | k | 2,007 | 2,322 |
| Adjustment for discontinued operations | l | - | 366 |
| Adjusted underlying EBITDA for leverage calculation | m = k+l | 2,007 | 2,688 |
| Underlying leverage ratio | 2.1 | 2.0 |
As net debt at the end of 2019 does not yet reflect the net proceeds to be received on the divestment of discontinued operations, whereas the underlying EBITDA excludes the contribution of discontinued operations, the underlying EBITDA is adjusted to calculate the leverage ratio. Polyamide's underlying EBITDA was added.
Besides IFRS accounts, Solvay also presents underlying Income Statement performance indicators to provide a more consistent and comparable indication of Solvay's economic performance. These figures adjust IFRS figures for the non-cash Purchase Price Allocation (PPA) accounting impacts related to acquisitions, for the coupons of perpetual hybrid bonds classified as equity under IFRS but treated as debt in the underlying statements, and for other elements to generate a measure that avoids distortion and facilitates the appreciation of performance and comparability of results over time.
| Consolidated income statement Q3 | Q3 2020 | Q3 2019 | |||||
|---|---|---|---|---|---|---|---|
| Adjust | Under | Adjust | Under | ||||
| (in € million) | IFRS | ments | lying | IFRS | ments | lying | |
| Sales of which revenues from non-core activities |
2,270 167 |
- - |
2,270 167 |
2,777 199 |
- - |
2,777 199 |
|
| of which net sales | 2,103 | - | 2,103 | 2,578 | - | 2,578 | |
| Cost of goods sold | (1,670) | - | (1,670) | (2,030) | - | (2,029) | |
| Gross margin | 600 | - | 600 | 748 | - | 748 | |
| Commercial costs | (71) | - | (71) | (92) | - | (92) | |
| Administrative costs | (215) | - | (215) | (225) | 8 | (218) | |
| Research & development costs | (71) | 1 | (70) | (76) | 1 | (76) | |
| Other operating gains & losses | (25) | 40 | 15 | (41) | 46 | 5 | |
| Earnings from associates & joint ventures | 7 | 11 | 19 | 27 | 2 | 29 | |
| Result from portfolio management & major restructuring | 25 | (25) | - | (827) | 827 | - | |
| Result from legacy remediation & major litigations | 12 | (12) | - | (4) | 4 | - | |
| EBITDA | 451 | 21 | 473 | 591 | 10 | 601 | |
| Depreciation, amortization & impairments [1] | (189) | (6) | (196) | (1,084) | 879 | (205) | |
| EBIT | 262 | 15 | 277 | (492) | 889 | 397 | |
| Net cost of borrowings | (28) | - | (28) | (45) | 13 | (31) | |
| Coupons on perpetual hybrid bonds | - | (23) | (23) | - | (24) | (24) | |
| Interests and realized foreign exchange gains (losses) on the RusVinyl joint venture |
- | (8) | (8) | - | (7) | (7) | |
| Cost of discounting provisions | (14) | (1) | (15) | (18) | - | (17) | |
| Result from equity instruments measured at fair value through other comprehensive income |
2 | - | 2 | - | - | - | |
| Profit / (loss) for the period before taxes | 223 | (17) | 206 | (554) | 871 | 317 | |
| Income taxes | (4) | (16) | (20) | 120 | (181) | (61) | |
| Profit / (loss) for the period from continuing operations | 218 | (33) | 185 | (434) | 690 | 256 | |
| Profit / (loss) for the period from discontinued operations | 42 | (43) | (1) | 58 | 1 | 59 | |
| Profit / (loss) for the period | 260 | (76) | 184 | (376) | 691 | 315 | |
| attributable to Solvay shareholders | 252 | (76) | 176 | (387) | 691 | 304 | |
| attributable to non-controlling interests | 8 | - | 8 | 11 | - | 11 | |
| Basic earnings per share (in €) | 2.44 | (0.73) | 1.71 | (3.76) | 6.70 | 2.95 | |
| of which from continuing operations | 2.04 | (0.33) | 1.71 | (4.32) | 6.69 | 2.37 | |
| Diluted earnings per share (in €) | 2.44 | (0.73) | 1.71 | (3.75) | 6.69 | 2.94 | |
| of which from continuing operations | 2.04 | (0.33) | 1.71 | (4.31) | 6.68 | 2.37 | |
[1] The IFRS depreciation, amortization and impairments for Q3 2019 of €(1,084) million included an impairment of €(822) million for the Oil & Gas goodwill and intangible assets.
EBITDA on an IFRS basis totaled €451 million, versus €473 million on an underlying basis. The difference of €22 million is explained by the following adjustments to IFRS results, which are done to improve the comparability of underlying results:
EBIT on an IFRS basis totaled €262 million, versus €277 million on an underlying basis. The difference of €15 million is explained by the above-mentioned €22 million adjustments at the EBITDA level and €(6) million of "Depreciation, amortization & impairments". The latter consist of:
Net financial charges on an IFRS basis were €(39) million versus €(71) million on an underlying basis. The €(32) million adjustment made to IFRS net financial charges consists of:
Income taxes on an IFRS basis were €(4) million, versus €(20) million on an underlying basis. The €16 million adjustment includes mainly the tax effect of the adjustments above.
Discontinued operations generated a profit of €42 million on an IFRS basis and €(1) million on an underlying basis. This mainly relates to the divestment of the polyamide activities.
Profit / (loss) attributable to Solvay shareholders was €252 million on an IFRS basis and €176 million on an underlying basis. The delta of €(76) million reflects the above-mentioned adjustments to EBIT, net financial charges, income taxes and discontinued operations. There was no impact from non-controlling interests.
| 9M consolidated income statement | 9M 2020 | 9M 2019 | ||||
|---|---|---|---|---|---|---|
| (in € million) | IFRS | Adjust ments |
Under lying |
IFRS | Adjust ments |
Under lying |
| Sales | 7,296 | - | 7,296 | 8,517 | - | 8,517 |
| of which revenues from non-core activities | 545 | - | 545 | 713 | - | 713 |
| of which net sales | 6,751 | - | 6,751 | 7,803 | - | 7,803 |
| Cost of goods sold | (5,418) | 1 | (5,417) | (6,214) | 1 | (6,213) |
| Gross margin | 1,878 | 1 | 1,879 | 2,303 | 1 | 2,304 |
| Commercial costs | (234) | - | (234) | (286) | - | (286) |
| Administrative costs | (659) | 12 | (647) | (714) | 24 | (690) |
| Research & development costs | (222) | 2 | (220) | (236) | 2 | (234) |
| Other operating gains & losses | (108) | 127 | 18 | (106) | 138 | 32 |
| Earnings from associates & joint ventures | 31 | 25 | 55 | 76 | (4) | 71 |
| Result from portfolio management & major restructuring | (1,528) | 1,528 | - | (891) | 891 | - |
| Result from legacy remediation & major litigations | (9) | 9 | - | (31) | 31 | - |
| EBITDA | 1,335 | 146 | 1,481 | 1,707 | 89 | 1,796 |
| Depreciation, amortization & impairments [1] | (2,187) | 1,556 | (631) | (1,592) | 993 | (599) |
| EBIT | (852) | 1,702 | 850 | 114 | 1,083 | 1,197 |
| Net cost of borrowings | (84) | - | (84) | (108) | 13 | (95) |
| Coupons on perpetual hybrid bonds | - | (70) | (70) | - | (81) | (81) |
| Interests and realized foreign exchange gains (losses) on the RusVinyl joint venture |
- | (18) | (18) | - | (16) | (16) |
| Cost of discounting provisions | (31) | (4) | (35) | (71) | 13 | (58) |
| Result from equity instruments measured at fair value through other comprehensive income |
3 | - | 3 | 4 | - | 4 |
| Profit / (loss) for the period before taxes | (964) | 1,610 | 646 | (61) | 1,012 | 951 |
| Income taxes | (207) | 88 | (119) | (7) | (224) | (231) |
| Profit / (loss) for the period from continuing operations | (1,171) | 1,698 | 527 | (68) | 788 | 720 |
| Profit / (loss) for the period from discontinued operations | 158 | (138) | 20 | 208 | 14 | 222 |
| Profit / (loss) for the period | (1,013) | 1,560 | 547 | 140 | 802 | 942 |
| attributable to Solvay shareholders | (1,038) | 1,560 | 522 | 110 | 802 | 911 |
| attributable to non-controlling interests | 26 | - | 26 | 31 | - | 31 |
| Basic earnings per share (in €) | (10.07) | 15.12 | 5.06 | 1.06 | 7.77 | 8.84 |
| of which from continuing operations | (11.60) | 16.46 | 4.86 | (0.96) | 7.64 | 6.68 |
| Diluted earnings per share (in €) | (10.07) | 15.12 | 5.06 | 1.06 | 7.76 | 8.82 |
| of which from continuing operations | (11.60) | 16.46 | 4.86 | (0.95) | 7.62 | 6.67 |
[1] The IFRS depreciation, amortization and impairments for 9m 2019 of €(1,592) million included an impairment of €(822) million for the Oil & Gas goodwill and intangible assets.
EBITDA on an IFRS basis totaled €1,335 million, versus €1,481 million on an underlying basis. The difference of €146 million is explained by the following adjustments to IFRS results, which are done to improve the comparability of underlying results:
EBIT on an IFRS basis totaled €(852) million, versus €850 million on an underlying basis. The difference of €1,702 million is explained by the above-mentioned €146 million adjustments at the EBITDA level and €1,556 million of "Depreciation, amortization & impairments". The latter consist of:
Net financial charges on an IFRS basis were €(112) million versus €(204) million on an underlying basis. The €(92) million adjustment made to IFRS net financial charges consists of:
Income taxes on an IFRS basis were €(207) million, versus €(119) million on an underlying basis. The €88 million adjustment includes mainly the tax effect of the adjustments of profit before taxes and valuation allowances on deferred tax assets on losses and other temporary differences.
Discontinued operations generated a profit of €158 million on an IFRS basis and €20 million on an underlying basis. The €(138) million adjustment to the IFRS profit relates to the expected capital gain after taxes (subject to customary post-closing purchase price adjustments) on the divestment of the polyamide activities.
Profit / (loss) attributable to Solvay shareholders was €(1,038) million on an IFRS basis and €522 million on an underlying basis. The delta of €1,560 million reflects the above-mentioned adjustments to EBIT, net financial charges, income taxes and discontinued operations. There was no impact from non-controlling interests.
| Consolidated income statement | IFRS | ||||||
|---|---|---|---|---|---|---|---|
| (in € million) | Q3 2020 | Q3 2019 | 9M 2020 | 9M 2019 | |||
| Sales | 2,270 | 2,777 | 7,296 | 8,517 | |||
| of which revenues from non-core activities | 167 | 199 | 545 | 713 | |||
| of which net sales | 2,103 | 2,578 | 6,751 | 7,803 | |||
| Cost of goods sold | (1,670) | (2,030) | (5,418) | (6,214) | |||
| Gross margin | 600 | 748 | 1,878 | 2,303 | |||
| Commercial costs | (71) | (92) | (234) | (286) | |||
| Administrative costs | (215) | (225) | (659) | (714) | |||
| Research & development costs | (71) | (76) | (222) | (236) | |||
| Other operating gains & losses | (25) | (41) | (108) | (106) | |||
| Earnings from associates & joint ventures | 7 | 27 | 31 | 76 | |||
| Result from portfolio management & major restructuring [2] | 25 | (827) | (1,528) | (891) | |||
| Result from legacy remediation & major litigations | 12 | (4) | (9) | (31) | |||
| EBIT | 262 | (492) | (852) | 114 | |||
| Cost of borrowings | (29) | (37) | (87) | (110) | |||
| Interest on lendings & deposits | 2 | 5 | 6 | 12 | |||
| Other gains & losses on net indebtedness | (1) | (12) | (4) | (11) | |||
| Cost of discounting provisions | (14) | (18) | (31) | (71) | |||
| Result from equity instruments measured at fair value through other | 2 | - | 3 | 4 | |||
| comprehensive income | |||||||
| Profit / (loss) for the period before taxes | 223 | (554) | (964) | (61) | |||
| Income taxes | (4) | 120 | (207) | (7) | |||
| Profit / (loss) for the period from continuing operations | 218 | (434) | (1,171) | (68) | |||
| attributable to Solvay shareholders | 210 | (445) | (1,197) | (99) | |||
| attributable to non-controlling interests | 8 | 11 | 26 | 31 | |||
| Profit / (loss) for the period from discontinued operations | 42 | 58 | 158 | 208 | |||
| Profit / (loss) for the period | 260 | (376) | (1,013) | 140 | |||
| attributable to Solvay shareholders | 252 | (387) | (1,038) | 110 | |||
| attributable to non-controlling interests | 8 | 11 | 26 | 31 | |||
| Weighted average of number of outstanding shares, basic | 103,073,974 | 103,061,938 | 103,153,932 | 103,151,275 | |||
| Weighted average of number of outstanding shares, diluted | 103,073,974 | 103,234,813 | 103,164,084 | 103,359,445 | |||
| Basic earnings per share (in €) | 2.44 | (3.76) | (10.07) | 1.06 | |||
| of which from continuing operations | 2.04 | (4.32) | (11.60) | (0.96) | |||
| Diluted earnings per share (in €) | 2.44 | (3.75) | (10.07) | 1.06 | |||
| of which from continuing operations | 2.04 | (4.31) | (11.60) | (0.95) |
| Consolidated statement of comprehensive income | IFRS | ||||
|---|---|---|---|---|---|
| (in € million) | Q3 2020 | Q3 2019 | 9M 2020 | 9M 2019 | |
| Profit / (loss) for the period | 260 | (376) | (1,013) | 140 | |
| Gains and losses on hedging instruments in a cash flow hedge | 47 | (12) | 8 | (18) | |
| Currency translation differences from subsidiaries & joint operations | (279) | 250 | (396) | 329 | |
| Share of other comprehensive income of associates and joint ventures accounted for using equity method that will be reclassified to profit or loss |
(36) | 11 | (98) | 36 | |
| Recyclable components | (268) | 248 | (486) | 347 | |
| Gains and losses on equity instruments measured at fair value through other comprehensive income |
1 | 2 | (1) | 3 | |
| Remeasurement of the net defined benefit liability [3] | (37) | (70) | (203) | (288) | |
| Share of other comprehensive income of associates and joint ventures accounted for using equity method that will not be reclassified to profit or loss |
(1) | (2) | (1) | (2) | |
| Non-recyclable components | (37) | (70) | (205) | (287) | |
| Income tax relating to components of other comprehensive income | (6) | 19 | 10 | 90 | |
| Other comprehensive income, net of related tax effects | (311) | 197 | (681) | 149 | |
| Total comprehensive income | (51) | (179) | (1,694) | 290 | |
| attributed to Solvay share | (55) | (194) | (1,715) | 255 | |
| attributed to non-controlling interests | 4 | 15 | 22 | 34 |
[1] Reviewed by auditors for 9M only.
[2] 9M 2020 Result from portfolio management & major restructuring mainly relates to the €1.5 billion impairment taken in Q2 2020 largely
attributable to goodwill at Composite Materials (€0.8 billion) and Technology Solutions (€0.3 billion). An additional impairment was recorded on Oil & Gas and some specific assets within Special Chem.
[3] The remeasurement of the net defined benefit liability of €(203) million in 9M 2020 were mainly due to decrease of discount rates applicable to post-employment provisions in the Euro-zone, the UK and US, partly offset by the return of plan assets.
| Consolidated statement of cash flows | IFRS | |||
|---|---|---|---|---|
| (in € million) | Q3 2020 | Q3 2019 | 9M 2020 | 9M 2019 |
| Profit / (loss) for the period | 260 | (376) | (1,013) | 140 |
| Adjustments to profit / (loss) for the period | 207 | 1,053 | 2,497 | 1,965 |
| Depreciation, amortization & impairments (-) | 189 | 1,084 | 2,187 | 1,592 |
| Earnings from associates & joint ventures (-) | (7) | (27) | (31) | (76) |
| Additions & reversals on provisions (-) | 7 | 24 | 156 | 135 |
| Other non-operating and non-cash items [1] | (27) | 1 | (331) | 37 |
| Net financial charges (-) | 41 | 61 | 113 | 176 |
| Income tax expenses (-) | 4 | (89) | 404 | 102 |
| Changes in working capital | 159 | 46 | 127 | (348) |
| Uses of provisions | (95) | (95) | (237) | (291) |
| Use of provisions for additional voluntary contributions (pension plans) | - | (460) | ||
| Dividends received from associates & joint ventures | 7 | 5 | 23 | 21 |
| Income taxes paid (excluding income taxes paid on sale of investments) | (42) | (51) | (49) | (194) |
| Cash flow from operating activities | 495 | 582 | 888 | 1,295 |
| Acquisition (-) of subsidiaries | (2) | (2) | (11) | (4) |
| Acquisition (-) of investments - Other | (13) | (12) | (39) | (15) |
| Loans to associates and non-consolidated companies | (5) | 2 | (1) | 4 |
| Sale (+) of subsidiaries and investments | (2) | (11) | 1,302 | (18) |
| Acquisition (-) of tangible and intangible assets (capex) | (89) | (223) | (363) | (583) |
| of which tangible assets | (69) | (195) | (302) | (502) |
| of which capital expenditures required by share sale agreement | - | (15) | (14) | (44) |
| of which intangible assets | (20) | (27) | (61) | (81) |
| Sale (+) of tangible & intangible assets | 1 | 2 | 7 | 7 |
| Dividends from financial assets measured at fair value through other comprehensive | 2 | - | 4 | 4 |
| income | ||||
| Changes in non-current financial assets | (7) | (9) | (18) | (26) |
| Cash flow from investing activities | (115) | (253) | 880 | (631) |
| Issuance of perpetual hybrid bond | 493 | 493 | ||
| Repayment of perpetual hybrid bond | (500) | - | (500) | (701) |
| Sale (acquisition) of treasury shares | - | 1 | (26) | (4) |
| Increase in borrowings | 3 | 594 | 532 | 1,741 |
| Repayment of borrowings [2] Changes in other current financial assets |
(151) (11) |
(1,307) 16 |
(1,292) (43) |
(1,350) (47) |
| Payment of lease liabilities | (27) | (29) | (80) | (79) |
| Net interests paid | (11) | (26) | (50) | (65) |
| Coupons paid on perpetual hybrid bonds | (24) | - | (92) | (87) |
| Dividends paid | (4) | (1) | (392) | (391) |
| of which to Solvay shareholders | (3) | (1) | (387) | (387) |
| of which to non-controlling interests | (1) | - | (5) | (4) |
| Other [3] | 6 | (9) | 31 | (2) |
| Cash flow from financing activities | (225) | (760) | (1,418) | (986) |
| of which increase/decrease of borrowings related to environmental remediation | 2 | - | 8 | - |
| Net change in cash and cash equivalents | 155 | (431) | 350 | (323) |
| Currency translation differences | (14) | (4) | (55) | 4 |
| Opening cash balance | 963 | 1,219 | 809 | 1,103 |
| Closing cash balance | 1,104 | 784 | 1,104 | 784 |
[1] Other non-operating and non-cash items of €(331) million in 9M 2020 mainly related to Polyamide capital gain before taxes and provisions
[2] Repayment of borrowings of €(1,292) million in 9M 2020 mainly relates to the reimbursement of commercial paper after the cash proceeds on Polyamide disposal.
[3] Other cash flow from financing activities of €31 million mainly relate to margin calls.
| Statement of cash flow from discontinued operations | IFRS | |||
|---|---|---|---|---|
| (in € million) | Q3 2020 | Q3 2019 | 9M 2020 | 9M 2019 |
| Cash flow from operating activities | - | 43 | 15 | 227 |
| Cash flow from investing activities | - | (37) | (34) | (92) |
| Cash flow from financing activities | (1) | 4 | 6 | 1 |
| Net change in cash and cash equivalents | 10 | (13) | 136 |
[1]The cash flow from investing activities of discontinued operations excludes the proceeds received on the divestment of Polyamide. The sale of Polyamide was completed on January 31, 2020.
| Consolidated statement of financial position | 2020 | 2019 |
|---|---|---|
| (in € million) | September 30 |
December 31 |
| Intangible assets | 2,274 | 2,642 |
| Goodwill | 3,313 | 4,468 |
| Tangible assets | 4,812 | 5,472 |
| Right-of-use assets | 401 | 447 |
| Equity instruments measured at fair value through other comprehensive income | 59 | 56 |
| Investments in associates & joint ventures | 488 | 555 |
| Other investments | 47 | 38 |
| Deferred tax assets | 770 | 1,069 |
| Loans & other assets | 330 | 289 |
| Non-current assets | 12,496 | 15,035 |
| Inventories | 1,301 | 1,587 |
| Trade receivables | 1,265 | 1,414 |
| Income tax receivables | 128 | 129 |
| Other financial instruments | 162 | 119 |
| Other receivables | 567 | 628 |
| Cash & cash equivalents | 1,104 | 809 |
| Assets held for sale | 121 | 1,586 |
| Current assets | 4,646 | 6,272 |
| Total assets | 17,142 | 21,307 |
| Share capital | 1,588 | 1,588 |
| Issue premiums | 1,170 | 1,170 |
| Other reserves | 4,688 | 6,757 |
| Non-controlling interests | 129 | 110 |
| Total equity | 7,575 | 9,625 |
| Provisions for employee benefits | 2,356 | 2,694 |
| Other provisions | 701 | 825 |
| Deferred tax liabilities | 500 | 531 |
| Financial debt | 3,286 | 3,382 |
| Other liabilities | 142 | 159 |
| Non-current liabilities | 6,984 | 7,592 |
| Other provisions | 224 | 190 |
| Financial debt [1] | 459 | 1,132 |
| Trade payables | 1,056 | 1,277 |
| Income tax payables | 124 | 102 |
| Dividends payable | 4 | 161 |
| Other liabilities | 680 | 792 |
| Liabilities associated with assets held for sale | 36 | 437 |
| Current liabilities | 2,583 | 4,091 |
| Total equity & liabilities | 17,142 | 21,307 |
[1] The current financial debt (€459 million at the end of September 2020) is composed of short term financing (which include €95 million of short term portion of leases and excludes any commercial paper, fully reimbursed).
| Consolidated statement of changes in equity | Revaluation reserve (fair value) |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in € million) | Share capital |
Share premiums |
Treasury shares |
Perpetual hybrid bonds |
Retained earnings |
Currency translation differences |
Equity instruments measured at fair value through other comprehensive income |
Cash flow hedges |
Defined benefit pension plans |
Total other reserves |
Non controlling interests |
Total equity |
| Balance on December 31, 2018 | 1,588 | 1,170 | (299) | 2,486 | 6,834 | (618) | 9 | (26) | (636) | 7,750 | 117 | 10,624 |
| Adoption IFRS 16 | - | - | - | 8 | - | - | - | - | 8 | - | 8 | |
| Balance on January 1, 2019 | 1,588 | 1,170 | (299) | 2,486 | 6,842 | (618) | 9 | (26) | (636) | 7,758 | 117 | 10,632 |
| Profit / (loss) for the period | - | 110 | 110 | 31 | 140 | |||||||
| Items of other comprehensive income |
- | - | - | - | 360 | 3 | (13) | (204) | 146 | 4 | 149 | |
| Comprehensive income | - | 110 | 360 | 3 | (13) | (204) | 255 | 34 | 290 | |||
| Perpetual hybrid bond repayment | - | (697) | (3) | (701) | (701) | |||||||
| Cost of stock options | - | 9 | 9 | 9 | ||||||||
| Dividends | - | (238) | (238) | (3) | (241) | |||||||
| Coupons of perpetual hybrid bonds | - | (87) | (87) | (87) | ||||||||
| Sale (acquisition) of treasury shares | - | (4) | (4) | (4) | ||||||||
| Other | - | - | - | 4 | - | - | 1 | (5) | - | - | - | |
| Balance on September 30, 2019 | 1,588 | 1,170 | (303) | 1,789 | 6,636 | (258) | 11 | (38) | (846) | 8,162 | 148 | 9,898 |
| Balance on December 31, 2019 | 1,588 | 1,170 | (274) | 1,789 | 6,462 | (454) | 10 | (20) | (756) | 6,757 | 110 | 9,625 |
| Profit / (loss) for the period | - | (1,038) | (1,038) | 26 | (1,013) | |||||||
| Items of other comprehensive income |
- | - | - | - | (490) | - | 8 | (195) | (677) | (4) | (681) | |
| Comprehensive income | - | (1,038) | (490) | - | 8 | (195) | (1,715) | 22 | (1,694) | |||
| Perpetual hybrid bond issuance | - | 493 | 493 | 493 | ||||||||
| Perpetual hybrid bond repayment | - | (497) | (4) | (501) | (501) | |||||||
| Cost of stock options | - | 5 | 5 | 5 | ||||||||
| Dividends | - | (232) | (232) | (3) | (235) | |||||||
| Coupons of perpetual hybrid bonds | - | (92) | (92) | (92) | ||||||||
| Sale (acquisition) of treasury shares | - | (26) | (26) | (26) | ||||||||
| Other | - | - | - | (7) | - | - | - | 6 | (1) | - | (1) | |
| Balance on September 30, 2020 | 1,588 | 1,170 | (300) | 1,785 | 5,095 | (944) | 11 | (13) | (945) | 4,688 | 129 | 7,575 |
9M 2020 Equity is reduced by €490 million due to currency translation differences mainly due to USD, BRL and RUB devaluation against EUR.
Solvay is a public limited liability company governed by Belgian law and quoted on Euronext Brussels and Euronext Paris. These condensed consolidated financial statements were authorized for issue by the Board of Directors on November 4, 2020.
On January 31, 2020, Solvay announced it had formally completed the divestment of its Performance Polyamides activities to BASF and Domo Chemicals. The transaction is based on an enterprise value of €1.6 billion and the expected selling proceeds net of costs of disposals on the combined transaction are estimated to be around €1.3 billion (selling proceeds of €1.5 billion received on January 31, 2020). The expected capital gain after taxes, subject to customary post-closing purchase price adjustments, is €138 million and is expected to be finalized in Q4, 2020.
Solvay has used a portion of the Performance Polyamides sale proceeds to prefund a part of the pension liabilities in France. This additional voluntary contribution amounts to approximately €380 million. In Q1, 2020, Solvay also voluntarily contributed approximately €80 million to the US pension plans.
Solvay has launched since the beginning of the year restructuring plans, hence accelerating the alignment of its worldwide organization with its G.R.O.W. strategy and responding to the challenging economic environment. The plans are leading to ca 1,300 net redundancies, including 620 for the Composite Materials launched in Q2 2020. A provision has been accrued for €113 million in the first nine months.
On August 25, 2020, Solvay announced it successfully issued a perpetual hybrid bond for an aggregate nominal amount of €500 million, to be used for general corporate purposes, including the possible repayment of other indebtedness. The new €500 million hybrid bond has a perpetual maturity with a first call date on December 2, 2025 and will pay a fixed coupon of 2.5% (with corresponding yield of 2.625%) until March 2, 2026 (first reset date) with a reset every five years thereafter. The notes will rank junior to all senior debt and will be recorded as equity (and coupons will be recorded as dividends) in accordance with IFRS requirements.
On August 25, 2020, Solvay Finance SA (subsidiary of Solvay) announced it had launched a cash tender offer to holders of its outstanding €500 million undated deeply subordinated fixed to reset rate perp-NC5.5 bonds which are irrevocably guaranteed on a subordinated basis (ISIN: XS1323897485).
On September 2, 2020, Solvay published the final results of the repurchase operation related to the €500 million 5.118% deeply subordinated perpetual hybrid bonds (ISIN: XS1323897485) which led to the full reimbursement.
At the end of September 2020, the assets and liabilities related to some businesses have been reclassified as "held for sale" (assets for a total amount of €121 million and liabilities for a total amount of €36 million):
Most recently, an agreement (subject to applicable legal and social consultation in the respective countries) has been signed for the sale of the process materials product line (part of Composites). This business line has sales of ca. €80 million in 2020 and operates 6 production sites in the US, France, Italy and the UK. Solvay will continue to explore other opportunities to further simplify its portfolio.
The total net impact of COVID-19 on 9M 2020 EBITDA is estimated at €(375) million, after mitigation actions related to labor costs (including furloughs) and indirect spend. The COVID-19 has triggered some impacts and actions that have been described in detail in the Q2 Financial Report. The updated impacts in Q3 are summarized below:
During Q3 Solvay had most of its production plants running fully to support the increase in sales compared to Q2. Industrial activity was however still lower by about 10% compared to 2019. Administrative sites in Europe, USA and Brazil remained closed to protect employees from the COVID pandemic while locations in Asia (Shanghai, Seoul, Tokyo) reopened.
During Q3 2020, approximately 3,690 employees were on furlough (equivalent to approximately 620 Full Time Equivalents). Solvay has guaranteed to all employees, regardless of their country of employment, 70% of their gross monthly base pay for up to 3 months. To mitigate the impacts of underactivity, Management has ensured that the unit costs in inventory have not been artificially increased by abnormally low levels of production. This analysis was included as part of the global assessment of the COVID-19 impact on EBITDA as mentioned above.
A review was undertaken during Q2, 2020, to assess whether the consequences of COVID-19 indicate that some assets could be impaired. The review confirmed that there was an indication of impairment for CGUs with the lowest impairment headroom at December 31, 2019 (see Note F27 in 2019 Annual report). During Q3, 2020, there were no new indicators of impairment and, as a result, a new impairment test was not performed. The only adjustments to the impairment loss of Q2 result from favorable exchange rate conversion effects and partial reversal of the impairment of certain Special Chem assets.
Solvay prepares its condensed consolidated interim financial statements on a quarterly basis, in accordance with IAS 34 "Interim Financial Reporting" using the same accounting policies as those adopted for the preparation of the consolidated financial statements for the year ended December 31, 2019. They do not include all the information required for the preparation of the annual consolidated financial statements and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2019. The critical accounting judgments and key sources of estimation uncertainty included in the 2019 annual report remain applicable. Relevant updates on specific topics are included in these notes and should be read together with the 2019 annual report.
Solvay is organized in the following operating segments:
| (in € million) | Q3 2020 | Q3 2019 | 9M 2020 | 9M 2019 |
|---|---|---|---|---|
| Net sales | 2,103 | 2,578 | 6,751 | 7,803 |
| Materials | 606 | 818 | 2,076 | 2,452 |
| Chemicals | 725 | 845 | 2,184 | 2,512 |
| Solutions | 770 | 912 | 2,487 | 2,834 |
| Corporate & Business Services | 1 | 2 | 5 | 5 |
| Underlying EBITDA | 473 | 601 | 1,481 | 1,796 |
| Materials | 161 | 233 | 560 | 703 |
| Chemicals | 201 | 241 | 606 | 713 |
| Solutions | 142 | 168 | 429 | 513 |
| Corporate & Business Services | (31) | (40) | (114) | (132) |
| Underlying depreciation, amortization & impairments [1] | (196) | (205) | (631) | (599) |
| Underlying EBIT | 277 | 397 | 850 | 1,197 |
| Non-cash accounting impact from amortization & depreciation of purchase price allocation (PPA) from acquisitions |
(41) | (55) | (141) | (165) |
| Net financial charges and remeasurements of equity book value of the RusVinyl joint venture |
(11) | (2) | (25) | 4 |
| Result from portfolio management & major restructuring | 25 | (827) | (1,528) | (891) |
| Result from legacy remediation & major litigations | 12 | (4) | (9) | (31) |
| EBIT | 262 | (492) | (852) | 114 |
| Net financial charges | (39) | (62) | (112) | (175) |
| Profit / (loss) for the period before taxes | 223 | (554) | (964) | (61) |
| Income taxes | (4) | 120 | (207) | (7) |
| Profit / (loss) for the period from continuing operations | 218 | (434) | (1,171) | (68) |
| Profit / (loss) for the period from discontinued operations | 42 | 58 | 158 | 208 |
| Profit / (loss) for the period | 260 | (376) | (1,013) | 140 |
| attributable to non-controlling interests | 8 | 11 | 26 | 31 |
| attributable to Solvay shareholders | 252 | (387) | (1,038) | 110 |
Reconciliation of segment, underlying and IFRS data
The non-cash PPA impacts can be found in the reconciliation table on pages 13 and 15.
Compared to December 31, 2019, there are no changes in valuation techniques.
For all financial instruments not measured at fair value in Solvay's consolidated statement of financial position, the fair value of those financial instruments as of September 30, 2020, is not significantly different from the ones published in Note F35 of the consolidated financial statements for the year ended December 31, 2019.
For financial instruments measured at fair value in Solvay's consolidated statement of financial position, the fair value of those instruments as of September 30, 2020, is not significantly different from the ones as published in the Note F35 of the consolidated financial statements for the year ended December 31, 2019.
Ilham Kadri, Chief Executive Officer, and Karim Hajjar, Chief Financial Officer, of the Solvay Group, declare that to the best of their knowledge:
In the context of our appointment as the company's statutory auditor, we report to you on the condensed consolidated interim financial information. This condensed consolidated interim financial information comprises the consolidated condensed statement of financial position as at 30 September 2020, the consolidated condensed income statement, the consolidated condensed statement of comprehensive income, the consolidated condensed statement of changes in equity and the consolidated condensed statement of cash flows for the period of nine months then ended, as well as selective notes 1 to 5. We have reviewed the condensed consolidated interim financial information of Solvay SA/NV ("the company") and its subsidiaries (jointly "the group"), prepared in accordance with International Accounting Standard (IAS) The condensed consolidated condensed statement of financial position shows total assets of 17 142 million EUR and the consolidated condensed income statement shows a consolidated loss (group share) for the period then ended of 1 038 million EUR. The board of directors of the company is responsible for the preparation and fair presentation of the condensed by the European Union. Our responsibility is to express a conclusion on this condensed consolidated interim We conducted our review of the condensed consolidated interim financial information in accordance with
34, "Interim Financial Reporting" as adopted by the European Union.
consolidated interim financial information in accordance with IAS 34, "Interim Financial Reporting" as adopted financial information based on our review.
International Standard on Review Engagements (ISRE) 2410, "Review of interim financial information performed by the independent auditor of the entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit performed in accordance with the International Standards on Auditing (ISA) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the condensed consolidated interim financial information.
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial information of Solvay SA/NV has not been prepared, in all material respects, in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union. Zaventem, 4 November 2020 Represented by ____________ ___________ Michel Denayer Corine Magnin
Deloitte Bedrijfsrevisoren/Réviseurs d'Entreprises
Coöperatieve vennootschap met beperkte aansprakelijkheid/Société coopérative à responsabilité limitée Registered Office: Gateway building, Luchthaven Brussel Nationaal 1 J, B-1930 Zaventem VAT BE 0429.053.863 - RPR Brussel/RPM Bruxelles - IBAN BE 17 2300 0465 6121 - BIC GEBABEBB
Additional voluntary contributions related to employee benefits plans: Contributions to plan assets in excess of Mandatory Contributions to employee benefits plans. These payments are discretionary and are driven by the objective of value creation. These voluntary contributions are excluded from free cash flow as they are deleveraging in nature as a reimbursement of debt.
Adjustments: Each of these adjustments made to the IFRS results is considered to be significant in nature and/or value. Excluding these items from the profit metrics provides readers with relevant additional information on the Group's underlying performance over time because it is consistent with how the business' performance is reported to the Board of Directors and the Executive Committee. These adjustments consist of:
Basic earnings per share: Net income (Solvay's share) divided by the weighted average number of shares, after deducting own shares purchased to cover stock option programs.
Capital expenditure (capex): Cash paid for the acquisition of tangible and intangible assets presented in cash flows from investing activities, and cash paid on the lease liabilities (excluding interests paid), presented in cash flows from financing activities. This indicator is used to manage capital employed in the Group.
Cash conversion: Is a ratio used to measure the conversion of EBITDA into cash. It is defined as (Underlying EBITDA + Capex from continuing operations) / Underlying EBITDA.
CFROI: Cash Flow Return On Investment measures the cash returns of Solvay's business activities. Movements in CFROI levels are relevant indicators for showing whether economic value is being added, though it is accepted that this measure cannot be benchmarked or compared with industry peers. The definition uses a reasonable estimate (management estimate) of the replacement cost of assets and avoids accounting distortions, e.g. for impairments. It is calculated as the ratio between recurring cash flow and invested capital, where:
Diluted earnings per share: Net income (Solvay's share) divided by the weighted average number of shares adjusted for the effects of dilution.
Discontinued operations: Component of the Group which the Group has disposed of or which is classified as held for sale, and:
EBIT: Earnings before interest and taxes. Performance indicator that is a measure of the Group's operating profitability irrespective of the funding's structure.
EBITDA: Earnings before interest and taxes, depreciation and amortization. The Group has included EBITDA as an alternative performance indicator because management believes that the measure provides useful information to assess the Group's operating profitability as well as the Group's ability to generate operating cash flows.
Extra-financial indicators: Indicators used that measure the sustainability performance of the company in complement to financial indicators. Based on a materiality analysis, Solvay has selected five indicators on which it has set mid- and long-term targets. These are:
For further definitions, we refer to the last available integrated annual report available on www.solvay.com
Free cash flow: Cash flows from operating activities (excluding cash flows linked to acquisitions or disposals of subsidiaries and cash outflows of Additional Voluntary Contributions related to pension plans, as they are deleveraging in nature as a reimbursement of debt), cash flows from investing activities (excluding cash flows from or related to acquisitions and disposals of subsidiaries and other investments, and excluding loans to associates and non-consolidated investments, and recognition of factored receivables), payment of lease liabilities, and increase/decrease of borrowings related to environmental remediation. Prior to the adoption of IFRS 16, operating lease payments were included within free cash flow. Following the application of IFRS 16, because leases are generally considered to be operating in nature, free cash flow incorporates the payment of the lease liability (excluding the interest expense). Excluding this item in the free cash flow would result in a significant improvement of free cash flow compared to prior periods, whereas the operations themselves have not been affected by the implementation of IFRS 16. It is a measure of cash generation, working capital efficiency and capital discipline of the Group.
Free cash flow to Solvay shareholders: Free cash flow after payment of net interests, coupons of perpetual hybrid bonds and dividends to non-controlling interests. This represents the cash flow available to Solvay shareholders, to pay their dividend and/or to reduce the net financial debt.
Free cash flow conversion: Calculated as the ratio between the free cash flow to Solvay shareholders of the last rolling 12 months (before netting of dividends paid to non-controlling interest) and underlying EBITDA of the last rolling 12 months.
GBU: Global business unit.
HPPO: Hydrogen peroxide propylene oxide, new technology to produce propylene oxide using hydrogen peroxide.
IFRS: International Financial Reporting Standards.
Leverage ratio: Net debt / underlying EBITDA of last 12 months. Underlying leverage ratio = underlying net debt / underlying EBITDA of last 12 months.
Mandatory contributions to employee benefits plans: For funded plans, contributions to plan assets corresponding to amounts required to be paid during the respective period, in accordance with agreements with trustees or regulation, as well as, for unfunded plans, benefits paid to beneficiaries.
Net cost of borrowings: cost of borrowings netted with interest on loans and short-term deposits, as well as other gains (losses) on net indebtedness.
Net financial debt: Non-current financial debt + current financial debt – cash & cash equivalents – other financial instruments. Underlying net debt reclassifies as debt 100% of the hybrid perpetual bonds, considered as equity under IFRS. It is a key measure of the strength of the Group's financial position and is widely used by credit rating agencies.
Net financial charges: Net cost of borrowings, and costs of discounting provisions (namely, related to postemployment benefits and Health Safety and Environmental liabilities).
Net pricing: The difference between the change in sales prices versus the change in variable costs.
Net sales: Sales of goods and value added services corresponding to Solvay's know-how and core business. Net sales exclude Revenue from non-core activities.
Net working capital: Includes inventories, trade receivables and other current receivables, netted with trade payables and other current liabilities.
OCI: Other Comprehensive Income.
Operational deleveraging: Reduction of liabilities (net debt or provisions) through operational performance only, i.e. excluding impacts from acquisitions and divestitures, as well as remeasurement impacts (changes of foreign exchange, inflation, mortality and discount rates).
Organic growth: Growth of Net sales or underlying EBITDA excluding scope changes and forex conversion effects. The calculation is made by rebasing the prior period at the business scope and forex conversion rate of the current period.
PA: Polyamide, polymer type.
pp: Unit of percentage points, used to express the evolution of ratios.
PPA: Purchase Price Allocation (PPA) accounting impacts related to acquisitions, primarily for Rhodia and Cytec.
Pricing power: The ability to create positive net pricing.
PSU: Performance Share Unit.
PVC: Polyvinyl chloride, polymer type.
Research & innovation: Research & development costs recognized in the income statement and as capital expenditure before deduction of related subsidies, royalties and depreciation and amortization expense. It measures the total cash effort in research & innovation, regardless of whether the costs were expensed or capitalized.
Research & innovation intensity: Ratio of Research & innovation / net sales
Results from portfolio management and major restructuring: It includes:
Revenue from non-core activities: Revenues primarily comprising commodity and utility trading transactions and other revenue, considered to not correspond to Solvay's know-how and core business.
ROCE: Return on Capital Employed, calculated as the ratio between underlying EBIT (before adjustment for the amortization of PPA) and capital employed. Capital employed consists of net working capital, tangible and intangible assets, goodwill, rights-of-use assets, investments in associates & joint ventures and other investments, and is taken as the average of the situation at the end of the last 4 quarters.
SOP: Stock Option Plan.
SPM: The Sustainable Portfolio Management tool is integrated into the Solvay Way framework (linked to five practices). It serves as a strategic tool for developing information on our portfolio and analyzing the impacts of sustainability megatrends on our businesses.
Underlying: Underlying results are deemed to provide a more comparable indication of Solvay's fundamental performance over the reference periods. They are defined as the IFRS figures adjusted for the "Adjustments" as defined above. They provide readers with additional information on the Group's underlying performance over time as well as the financial position and they are consistent with how the business' performance and financial position are reported to the Board of Directors and the Executive Committee.
Underlying Tax rate: Income taxes / (Result before taxes – Earnings from associates & joint ventures – interests & realized foreign exchange results on RusVinyl joint venture) – all determined on an Underlying basis. The adjustment of the denominator regarding associates and joint ventures is made as these contributions are already net of income taxes. This provides an indication of the tax rate across the Group.
WACC: Weighted Average Cost of Capital
yoy: Year on year comparison.
Geoffroy d'Oultremont +32 2 264 29 97 Brian Carroll
+32 2 264 36 87
[email protected] Peter Boelaert
Jodi Allen Nathalie Van Ypersele +1 609 860 4608 +32 478 20 10 62 [email protected]
+32 2 264 15 30 Bisser Alexandrov [email protected]
+32 479 30 91 59 [email protected]
This press release may contain forward-looking information. Forward-looking statements describe expectations, plans, strategies, goals, future events or intentions. The achievement of forward-looking statements contained in this press release is subject to risks and uncertainties relating to a number of factors, including general economic factors, interest rate and foreign currency exchange rate fluctuations, changing market conditions, product competition, the nature of product development, impact of acquisitions and divestitures, restructurings, products withdrawals, regulatory approval processes, all-in scenario of R&I projects and other unusual items. Consequently, actual results or future events may differ materially from those expressed or implied by such forward-looking statements. Should known or unknown risks or uncertainties materialize, or should our assumptions prove inaccurate, actual results could vary materially from those anticipated. Solvay undertakes no obligation to publicly update or revise any forward-looking statements.
Solvay is a science company whose technologies bring benefits to many aspects of daily life. With more than 24,100 employees in 64 countries, Solvay bonds people, ideas and elements to reinvent progress. The Group seeks to create sustainable shared value for all, notably through its Solvay One Planet plan crafted around three pillars: protecting the climate, preserving resources and fostering better life. The Group's innovative solutions contribute to safer, cleaner, and more sustainable products found in homes, food and consumer goods, planes, cars, batteries, smart devices, health care applications, water and air purification systems. Founded in 1863, Solvay today ranks among the world's top three companies for the vast majority of its activities and delivered net sales of €10.2 billion in 2019. Solvay is listed on Euronext Brussels (SOLB) and Paris and in the United States, where its shares (SOLVY) are traded through a Level I ADR program. Learn more at www.solvay.com.
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