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Solvay's 2010 Results

Wed, 02/16/2011 - 10:13pm
The Associated Press

REGULATED INFORMATION

Strong growth of the operating result for Chemicals and Plastics activities REBIT for continuing activities up by 75% in the 4(th) quarter of 2010 (EUR 155 million) and by 94% overall for the year (EUR 602 million)

-- Group sales (EUR 7,109 million); sales for continuing activities (EUR 6,796 million) up by 19% compared to 2009, in the context of a more sustained global activity (+14% in the 4(th) quarter) -- Group operating result1 (EUR 633 million2), of which EUR 602 million for continuing activities -- Overall, the operating result benefited from better sales volumes and significant efforts to control costs -- Chemicals (EUR 312 million): up by 16% compared to 2009 thanks to improvement in sales volumes across all activities -- Plastics (EUR 360 million): up by EUR 274 million compared to 2009 especially thanks to significant increase in sales volumes in Specialty Polymers -- Horizon reorganization project: Board approval on February 16(th) 2011; non-recurring charge of EUR 74 million in the 4(th) quarter 2010 -- Net income of Group (EUR 1,823 million) significantly improved thanks to the capital gains realized on the sale of the pharmaceuticals activities and on the sale of Inergy Automotive Systems -- Dividend proposed: EUR 3.0667 gross (EUR 2.3 net) per share (up by 4.5% compared to 2009)

Annual Group sales amounted to EUR 7,109 million. At constant scope3, they improved by 22% both on an annual basis and in the 4(th) quarter. Annual sales in the Chemicals Sector (EUR 3,012 million) improved by 11%; sales volumes, significantly up (+14, compensated for the lower sales prices (-6%). Annual sales in the Plastics Sector (EUR 3,784 million) clearly improved (+33% at constant scope(3)), especially thanks to a significant increase in sales volumes in Specialty Polymers (+36% compared to last year). From a geographic standpoint, Asia's contribution to the Group's total sales strongly improved, going from 10% in 2009 to 14% in 2010.

The recurring Group operating result (REBIT(2-)((4))) amounted to EUR 633 million in 2010. REBIT for continuing activities posted very significant improvement compared to last year, both on a cumulative basis (EUR 602 million, or +94 and on a quarterly basis (EUR 155 million in the 4(th) quarter of 2010, or +75%). In addition to the strong increase in sales volumes, it benefited, overall, from significant cost cutting efforts and energy costs that were under control. It should however be noted that energy costs rise since a few months.

The Group's operating margin (REBIT on sales), excluding the pharmaceuticals activities, was 8.9% in 2010 compared to 5.4% in 2009; it amounted to 9.4% in the 4(th) quarter of 2010.

The annual net income of the Group reaches EUR 1,823 million. It benefited from the capital gain realized on the sale of the pharmaceutical activities (EUR 1.7 billion) and was negatively impacted by non recurring items for an amount of EUR 328 million. These non recurring items include impairments of industrial assets, restructuring charges and the capital gain on the sale of our stake in Inergy Automotive Systems, as already announced previously. In addition, a charge of EUR 74 million linked to the reorganization project "Horizon" was recognized in the 4(th) quarter. This explains the level of the 4(th) quarter net income (EUR 16 million).

The REBITDA(2-)5 of the Group amounted to EUR 1,051 million. Excluding pharmaceuticals activities, it was up by 46% compared to last year. The Group had a net cash surplus of EUR 2,902 million at the end of 2010.

On February 16, 2011, the Board of Directors decided to propose to the General Shareholders' Assembly of May 10, 2011 payment of a total gross dividend of EUR 3.0667 (EUR 2.3 net) per share, up 4.5% compared to 2009. Based on the closing price of February 15, 2011 (EUR 78.95), this represents a gross dividend yield of 3.9% and a net yield of 2.9%. Additionally, it should be recalled that the Group's dividend policy consists of increasing it whenever possible and if possible, not to decrease it. In line with this policy, the dividend has been increased in many years, kept stable in others and has never been reduced for 29 years.

Chemicals Sector annual sales (EUR 3,012 million) improved by 11% compared to last year. Sales volumes increased sharply (+14 overall in the Sector's activities, which compensated for lower sales prices (-6%) - primarily in soda ash. Sales from the 4(th) quarter amounted to EUR 786 million (+21% compared to last year) in the context of continuing sustained global activity. The operating result for the Sector in 2010 (EUR 312 million) was up by 16% compared to last year (EUR 268 million); this increase cut across all activities except for soda ash. In the 4(th) quarter, it amounted to EUR 83 million compared to EUR 73 million last year. In addition to the strong increase in volumes, the operating result benefited from energy expenses that were under control. It should however be noted that energy costs have been rising for a few months.

Plastics Sector sales were significantly up compared to last year; at constant scope6, they improved by 33% on a cumulative basis (EUR 3,784 million for the year) and by 23% on a quarterly basis (EUR 861 million in the 4(th) quarter of 2010). This can be explained by the sharp increase in sales volumes in Specialty Polymers (+36% compared to 2009). Although all regions of the world were involved, this improvement was particularly notable in Asia. In Vinyls, demand improved compared to last year; this improvement, however, was limited by a still-depressed construction market in some countries in Western Europe. The operating result for the Plastics Sector (EUR 360 million at the end of 2010 and EUR 99 million in the 4(th) quarter of 2010) was clearly improved compared to last year (EUR 86 million at the end of 2009 and EUR 30 million in the 4(th) quarter of 2009). This improvement was recorded in Vinyls as well as in Specialty Polymers although the latter showed the most growth in its results. It should be emphasized that Specialty Polymers posted record results in 2010.

A globally sustained activity level, a sound upstream integration and the strict management of its costs which will benefit from the positive impact of Horizon allow Solvay to start 2011 with confidence. The Group pays attention to the significant macro-economic imbalances and the evolution of energy and ethylene costs. The priority continues to go to the optimal reinvestment after the sale of the pharmaceutical activities targeting long term value creation

SOLVAY Group - Summary Financial Information

5/8 5/8 4(th) EUR million 5/8 5/8 4(th) 4(th) quarter of (except for per- 5/82009 2010 2010/20095/8quarter of quarter of 2010/ share figures: 5/8 5/8 2009 2010 4(th) EUR) 5/8 5/8 quarter of 5/8 5/8 2009 ------------------+---------------------+---------------------------------- Sales 5/88,485 7,109 -16% 5/8 2,199 1,648 -25% 5/8 5/8 Sales - continuing5/85,694 6,796 19% 5/8 1,451 1,648 14% operations 5/8 5/8 5/8 5/8 Sales - 5/8 5/8 discontinued 5/82,791 312 ns 5/8 748 0 ns operations 5/8 5/8 5/8 5/8 REBIT 5/8 969 633 -35% 5/8 328 155 -53% 5/8 5/8 REBIT - continuing5/8 310 602 94% 5/8 89 155 75% operations 5/8 5/8 5/8 5/8 REBIT / sales - 5/8 5/8 continuing 5/85.4% 8.9% 5/8 6.1% 9.4% operations 5/8 5/8 5/8 5/8 REBIT - 5/8 5/8 discontinued 5/8 658 31 ns 5/8 239 0 ns operations 5/8 5/8 5/8 5/8 Non-recurring 5/8-105 -328 ns 5/8 -41 -89 ns items 5/8 5/8 5/8 5/8 EBIT7 5/8 864 305 -65% 5/8 287 66 -77% 5/8 5/8 Charges on net 5/8-215 -184 -15% 5/8 -48 -44 -9% indebtedness 5/8 5/8 5/8 5/8 Income/loss from 5/8 5/8 available-for-sale5/8 -5 0 ns 5/8 -2 1 ns investments 5/8 5/8 5/8 5/8 Capital gain 5/8 0 1,703 ns 5/8 0 0 ns Pharma 5/8 5/8 5/8 5/8 Earnings before 5/8 643 1,824 184% 5/8 237 22 -91% taxes 5/8 5/8 5/8 5/8 Income taxes 5/8 -90 -1 -98% 5/8 -38 -6 -85% 5/8 5/8 Net income of the 5/8 553 1,823 230% 5/8 199 16 -92% Group 5/8 5/8 5/8 5/8 Net income (Solvay5/8 516 1,777 245% 5/8 188 -2 -101% share) 5/8 5/8 ------------------+---------------------+---------------------------------- Total depreciation5/8 496 717 45% 5/8 101 104 3% 5/8 5/8 REBITDA 5/81,439 1,051 -27% 5/8 428 253 -41% 5/8 5/8 Cash flow 5/81,049 2,540 142% 5/8 300 120 -60% ------------------+---------------------+---------------------------------- Results per 5/86.28 21.85 5/8 2.28 -0.03 share8 5/8 5/8 ------------------+---------------------+---------------------------------- Net debt to equity5/8 26% ns 5/8 ratio 5/8 5/8 ------------------+---------------------+----------------------------------

Notes on Solvay Group summary financial information

Non-recurring items amounted to EUR -328 million in 2010. They included impairments on industrial assets amounting to EUR 272 million, primarily in soda ash in Europe, the capital gain of EUR 139 million on the sale of our stake in Inergy Automotive Systems, restructuring charges related to the Horizon project (EUR 78 million in 2010 of which EUR 74 million in the 4(th) quarter), an environmental provision of EUR 21 million for remediation and containment works in Spinetta (Italy), a depreciation of assets of EUR 20 million related to the closed hydrogen peroxide unit at Bitterfeld, other restructuring charges on fluorinated products in Germany and in Italy for EUR 20 million and a charge of EUR 13 million from the settlement of a contractual litigation.

Charges on net indebtedness amounted to EUR -184 million compared to EUR -215 million in 2009. Charges on borrowing amounted to EUR -146 million. Gross financial debt is at 82% covered at an average fixed rate of 5.1% with a duration of 5.1 years. Interest on cash deposits and investments amounted to EUR 24 million. It should be recalled that the proceeds from the sale of the pharmaceuticals activities have been invested in short duration government bonds and highest rated treasury instruments. Annual cash yield in 2010 was 0.5%.

The capital gain realized on the sale of the pharmaceuticals activities amounted to EUR 1.7 billion net of taxes.

Income taxes at the end of 2010 amounted to EUR -1 million compared to EUR -90 million last year. The recognition of a deferred tax asset of EUR 68 million on impairments - non cash - of industrial assets (non-recurring charge of EUR 272 million before taxes) should be noted. Aside from this exceptional item and not considering the capital gains realized on the sale of the pharmaceuticals activities and on the sale of the stake in Inergy Automotive Systems, the effective tax rate would be 24%.

The net income of the Group (EUR 1,823 million) was up significantly in 2010. It included the capital gains realized on the sale of the pharmaceutical activities (EUR 1.7 billion net of taxes) and on the sale of Solvay's stake in Inergy Automotive Systems (EUR 130 million after taxes). The "non- controlling interests" amounted to EUR 46 million. The net result per share amounted to EUR 21.85 (compared to EUR 6.28 in 2009).

Total depreciation (EUR 717 million) was clearly higher than in 2009 (EUR 496 million) due to impairments on industrial assets that amounted to EUR 272 million, primarily in soda ash in Europe.

Our strict management of working capital and capital expenditures has allowed us to generate in 2010 a Free Cash Flow from continuing operations9 - thus excluding any return on the reinvestment of the proceeds from the sale of the pharmaceuticals activities - of EUR 208 million. The Cash Flow from operating activities of continuing operations amounted to EUR 662 million; compared to the end of 2009 industrial working capital increased only slightly (+7 in comparison with the strong growth in sales (+19%). The Cash Flow from investment activities of continuing operations amounted to EUR -454 million; it included capital expenditures of EUR 538 million, which is below budget (EUR 673 million), the cash from the sale of our 50% stake in Inergy Automotive Systems (EUR 268 million) and an amount of EUR -206 million related to the substitution of a previously issued guarantee by a prepayment in the first quarter of 2010, of fines imposed in 2006 by the European Commission concerning peroxygen antitrust cases (still in appeal).

INVESTMENTS and RESEARCH & DEVELOPMENT

In 2010, in the context of a still fragile economic recovery in Europe and the United States, the Solvay Group rigorously managed its capital expenditures. They represented EUR 538 million in 2010 compared to EUR 522 million the year before for its continuing operations. It should be pointed out that among other things, investments were made for construction of a new PVC production unit in Russia (RusVinyl), for construction of a high yield mega-plant of hydrogen peroxide in Thailand and for construction, also in Thailand, of a production unit of epichlorohydrin based on natural glycerin.

The 2011 capital expenditures budget amounts to EUR 625 million10, excluding reinvestment of proceeds from the sale of the pharmaceuticals activities. It includes in particular investments related to a limited number of strategic projects in Chemicals and Plastics, oriented in priority to geographic expansion and to the choices made in terms of sustainable development, and investments related to health, safety and the environment.

Research and Development (R&D) expenses for continuing operations amounted to EUR 136 million in 2010. The R&D expenditures budget for 2011 amounts to EUR 145 million, EUR 35 million of which for activities included in the New Business Development segment.

RESULTS BY SEGMENT11 5/8 5/8 5/8 5/8 5/8 5/8 4(th) 5/8 5/8 5/8 5/8 5/8 4(th) 5/8 4(th) 5/8quarter of5/8 EUR million 5/82009 5/82010 5/82010/20095/8quarter of 5/8quarter of5/8 2010/ 5/8 5/8 5/8 5/8 5/8 2009 5/8 2010 5/8 4(th) 5/8 5/8 5/8 5/8 5/8 5/8 5/8quarter of5/8 5/8 5/8 5/8 5/8 5/8 5/8 2009 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ GROUP SALES12 5/88,4855/87,1095/8 -16% 5/8 2,199 5/8 1,648 5/8 -25% 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ Chemicals 5/82,7135/83,0125/8 11% 5/8 649 5/8 786 5/8 21% 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ Plastics 5/82,9825/83,7845/8 27% 5/8 802 5/8 861 5/8 7% 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ Sales - continuing5/85,6945/86,7965/8 19% 5/8 1,451 5/8 1,648 5/8 14% 5/8 operations 5/8 5/8 5/8 5/8 5/8 5/8 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ Pharmaceuticals5/8 5/8 5/8 5/8 5/8 5/8 5/8 - Discontinued 5/82,7915/8 312 5/8 ns 5/8 748 5/8 0 5/8 ns 5/8 Operations 5/8 5/8 5/8 5/8 5/8 5/8 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ REBIT GROUP 5/8 969 5/8 633 5/8 -35% 5/8 328 5/8 155 5/8 -53% 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ Chemicals 5/8 268 5/8 312 5/8 16% 5/8 73 5/8 83 5/8 13% 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ Plastics 5/8 86 5/8 360 5/8 320% 5/8 30 5/8 99 5/8 231% 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ Corporate and 5/8 -19 5/8 -45 5/8 135% 5/8 -7 5/8 -20 5/8 201% 5/8 Business Support 5/8 5/8 5/8 5/8 5/8 5/8 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ New Business 5/8 -25 5/8 -26 5/8 4% 5/8 -8 5/8 -6 5/8 -17% 5/8 Development 5/8 5/8 5/8 5/8 5/8 5/8 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ REBIT - continuing5/8 310 5/8 602 5/8 94% 5/8 89 5/8 155 5/8 75% 5/8 operations 5/8 5/8 5/8 5/8 5/8 5/8 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ Pharmaceuticals - 5/8 5/8 5/8 5/8 5/8 5/8 5/8 Discontinued 5/8 658 5/8 31 5/8 ns 5/8 239 5/8 0 5/8 ns 5/8 Operations 5/8 5/8 5/8 5/8 5/8 5/8 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ REBITDA GROUP 5/81,4395/81,0515/8 -27% 5/8 428 5/8 253 5/8 -41% 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ Chemicals 5/8 436 5/8 499 5/8 15% 5/8 116 5/8 126 5/8 9% 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ Plastics 5/8 298 5/8 583 5/8 96% 5/8 85 5/8 151 5/8 77% 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ Corporate and 5/8 -11 5/8 -37 5/8 ns 5/8 -5 5/8 -18 5/8 Ns 5/8 Business Support 5/8 5/8 5/8 5/8 5/8 5/8 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ New Business 5/8 -24 5/8 -25 5/8 5% 5/8 -8 5/8 -6 5/8 -17% 5/8 Development 5/8 5/8 5/8 5/8 5/8 5/8 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ REBITDA-continuing5/8 699 5/81,0195/8 46% 5/8 188 5/8 253 5/8 34% 5/8 operations 5/8 5/8 5/8 5/8 5/8 5/8 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ Pharmaceuticals - 5/8 5/8 5/8 5/8 5/8 5/8 5/8 Discontinued 5/8 740 5/8 31 5/8 ns 5/8 239 5/8 0 5/8 ns 5/8 Operations 5/8 5/8 5/8 5/8 5/8 5/8 5/8 ------------------+-----+-----+---------+-----------+----------+----------+ ---------------------------------------------------------------------------

1 The cost of discounting provisions (EUR 64 million in 2009 and EUR 52

million in 2010) was transferred to financing rather than operating charges in line with IAS19, considering the financial nature of this item.

2 Includes the operating result of the five segments of the Group (Chemicals, Plastics, New Business Development, Corporate and Business Support and Pharmaceuticals (until February 15, 2010)).

3 The primary variations in scope between 2009 and 2010 are shown on page 16 of this press release.

4 REBIT: measure of operating performance (this is not an IFRS concept as such)

5 REBITDA: REBIT, before recurring depreciation and amortization

6 The primary variations in scope between 2009 and 2010 are shown on page 16 of this press release.

7 EBIT: results before financial charges and taxes

8 Calculated on the basis of the weighted average number of shares in the period, after deduction of treasury shares and own shares purchased to cover the stock option program, or a total of 82,143,247 shares at the end of 2009 and 81,320,011 shares at the end of 2010.

9 Free cash flow cash flow from operating activities + cash flow from investing activities.

10 Calculated using equity method for Joint Ventures

11 Results by segment include results from the five segments of the Group (until February 15, 2010 for Pharma.

12 These are sales after elimination of inter-company sales.

The full press release is available on http://www.solvay-investors.com/ (http://www.solvay-investors.com/)

Press Release: http://hugin.info/133981/R/1489834/425367.pdf (http://hugin.info/133981/R/1489834/425367.pdf)

This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that:

(i) the releases contained herein are protected by copyright and other applicable laws; and

(ii) they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: Solvay S.A. via Thomson Reuters ONE

HUG?1489834

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