Opening New Frontiers

Transcription

1 Opening New Frontiers 3 RD QUARTER 2011 RESULTS REGULATED INFORMATION

2 SOLVAY GROUP 3 RD QUARTER BUSINESS REVIEW 1 Improved operating result in the 3 rd quarter REBITDA (EUR 264 million) improved by 13% compared to the 3 rd quarter of 2010 Favorable pricing power: higher sales prices overall compensated for the increase in energy costs Operating margin REBITDA on sales rose to 16% Overall level of activity sustained despite a gradual slowdown in demand for Vinyls and Special Chemicals Net result of EUR 73 million Closing of Rhodia acquisition in September 1, of which result will be consolidated as from October 2011 Structured implementation program for the integration of Rhodia and the synergies led by the Integration Committee Interim dividend of 0.90 EUR net per share (1.20 EUR gross per share) 1. It was decided to integrate the financial data from the former Rhodia Group in the consolidated accounts of the Solvay Group using the following schedule: (a) Balance sheet: at the end of September 2011 (more information is provided in this regard on pages 22 to 23 of this press release) (b) Results and cash flows: starting October 1, Outlook The Solvay Group is attentive to the macro-economic deterioration and to the need for tight management of its operations. Despite the current softening in some of its markets, Solvay expects as foreseen to improve its operating result both in Chemicals and in Plastics in The previously announced outlook for Rhodia is confirmed (before the accounting impact of purchase price allocation). Quote of the CEO Solvay and Rhodia 1 realised good results in the 3 rd quarter. Thanks to its balanced activity portfolio, its industrial excellence, its permanent focus on competitiveness and its continued conservative financial policy, the new Group is well positioned to leverage the opportunities that will arise. 1. Rhodia s 3 rd quarter results not consolidated in Solvay s consolidated financial statements. Total success of Solvay s recommended tender offer for Rhodia Given the success of Solvay s recommended tender offer for Rhodia, the squeeze-out procedure was implemented in September. This acquisition creates a major player in chemicals with global ambitions and committed to sustainable development. The New Solvay will capitalize on its geographic diversification, the quality and balance of its portfolio of activities, its industrial excellence and the solidity of its financial base to fully capture new growth opportunities, especially in high-growth markets. -2-

3 SOLVAY GROUP 3 RD QUARTER BUSINESS REVIEW (CONTINUED) 3 rd quarter 9 months Key data (in million EUR) 1 Change in % Change in % Sales from continuing operations % % Sales growth excluding forex and scope +8% +15% REBITDA from continuing operations % % REBITDA as a % of sales 16% 15% 17% 16% REBIT from continuing operations % % Result from discontinued operations ns ns Net income (Solvay share) ns ns Basic earnings per share from continuing operations ns ns Cash flow from operating activities from continuing operations Cash flow from investing activities from continuing operations % % ns ns 1. Financial data for the year 2010 were restated to take into account the following change: since January 1, 2011, the Group consolidates joint ventures using the equity method instead of the proportionate method (in line with IAS 31) with a negative impact on the sales of the 3 rd quarter 2010 of EUR 150 million and on the sales of the first 9 months of 2010 of EUR 703 million. More information about this is provided on pages 19 to 21 of this press release. 2. REBITDA: REBIT, before recurring depreciation and amortization 3. REBIT: measure of operating performance (this is not an IFRS concept as such) 4. Data from the results of the pharmaceuticals activities up to February 15, 2010 in the Group accounts are consolidated under a single heading in the income statement: Result from discontinued operations. 5. Calculated on the basis of the weighted average number of shares in the period, after deduction of own shares purchased to cover the stock option program, or a total of shares at the end of September 2010 and shares at the end of September Compared with 3 rd quarter 2010 Sales REBITDA Net income million 264 million 73 million + 5% + 13% -3-

4 SOLVAY GROUP YEAR-TO-DATE BUSINESS REVIEW (9 MONTHS) Key data (in million EUR) 9 months Change in % Sales % Plastics % Chemicals % REBITDA % Plastics % Chemicals % New Business Development % Corporate and Business Support % REBIT % Plastics % Chemicals % New Business Development % Corporate and Business Support % 1. Following the implementation of the new organization, an amount of EUR 192 million of sales was transferred from the Chemicals Sector to the Plastics Sector in the figures of the first 9 months of 2010, without any impact on the results. Business review 9 months 2011 Sales amounted to EUR million, up by 13%. This increase was particularly notable in Asia and Latin America (+12% at the end of September and +5% for the 3 rd quarter); Solvay realized 26% of its sales in those areas during the first 9 months. Sales prices are 10% higher than those from last year. Activity was sustained for the first three quarters of the year, as is seen in the 5% increase in sales volumes. This increase was seen in most of the activities; the very high level of sales in Specialty Polymers (products with high added value) should be noted. However, the third-quarter slowdown in PVC global demand and in fluorinated chemicals should be emphasized. REBITDA amounted to EUR 853 million, up by 22%. The margin - REBITDA on sales - reached 17%, improved in comparison to the first nine months of 2010 (16%). This improvement is explained by sustained capacity utilization rates and by higher average sales prices compared to last year, which overall compensated for the increased costs of energy and some raw materials. The excellent operating performance of Specialty Polymers should be noted (see page 5). REBIT amounted to EUR 594 million, up by 39%. REBIT from New Business Development amounted to EUR 22 million; it focused primarily on the research efforts made in promising and important areas for development of the Group outside its traditional activities. REBIT of Corporate and Business Support amounted to EUR 29 million. Factors influencing sales (% of 9M10 sales) +10% -2% +0% +13% +5% Volume Price Exchange Scope Total New Business Development: The largest fuel cell in the world operating on the SolVin site at Antwerp Solvay is first in the world to start up a fuel cell with a capacity of 1 MW. This unit reconverts hydrogen from electrolysis into electric energy. It enables Solvay and SolviCore (joint venture created by Solvay and Umicore) to validate under industrial conditions the reliability of their membrane-electrode assemblies that constitute the core of this fuel cell. -4-

5 PLASTICS 3 RD QUARTER BUSINESS REVIEW REBITDA up by 13% Excellent profitability of Specialty Polymers - REBITDA on sales: 31% - in a context of sustained global demand Operating performance of Vinyls under pressure, primarily following a slowdown of demand in Europe Key data (in million EUR) 1 3 rd quarter 9 months 2011 Change in % 2011 Change in % Sales 920 5% % Specialty Polymers 305 3% % Vinyls 615 6% % Vinyls Europe 349 5% % Vinyls Asia 94 16% % Vinyls South America 135 4% % Plastics Integration 37-5% 133 9% REBITDA % % Specialty Polymers 93 29% % Vinyls 60-5% % REBIT % % Specialty Polymers 72 37% % Vinyls 34 1% % 1. The 2010 Plastics Sector figures include the results from the first 6 months of 2010 for Inergy Automotive Systems Compared with 3 rd quarter 2010 Sales REBITDA 920 million 153 million + 5% + 13% -5-

6 Specialty Polymers Sales from Specialty Polymers continued to improve in the third quarter of 2011; sales were 3% higher than the very high level attained last year, and this despite the negative impact of exchange rates. This improvement is explained by the increase in sales prices in a context of sustained demand for high and ultra-high performance polymers. In order to meet this very strong demand, Solvay has made significant efforts to optimize the production structure of its existing installations and to build new ones, in particular in the Asian region. Today, Solvay already makes about 30% of its sales of Specialty Polymers in this region. REBITDA amounted to EUR 93 million, up by 29% compared to the third quarter of The margin REBITDA on sales amounted to 31% compared to 24% in the third quarter of Sustained sales volumes, price hikes, a better product mix and strict control of costs explain the excellent profitability of these activities. The improvement in product mix resulted from significant research and innovation efforts in order to develop new applications with high value added. It should be noted in this regard that the portfolio of applications currently being developed is very promising; it includes more than 1,300 active projects and should generate EUR 240 million of additional sales over 3 years. Vinyls Sales for Vinyls amounted to EUR 615 million, up by 6% compared to the third quarter of 2010 thanks to the overall higher price level for PVC and caustic soda. However, sales are lower than those in the preceding quarter, mainly due to the drop in PVC sales in Europe. Aside from the typical seasonal effect during the summer, the PVC market has globally been impacted by a slowdown in demand in the current context of economic uncertainty and inventory depletion of customers. The impact is stronger in Europe. REBITDA amounted to EUR 60 million, down by 5% compared to the third quarter of The margin REBITDA on sales amounted to 10%. The drop in operating result came from Vinyls Europe; aside from a slowdown in demand, the operating performance of this activity was impacted by the higher cost of ethylene and electricity. The operating result of Solvay Indupa (Vinyls South America) was higher than last year; it was, however, impacted by the planned turnaround of the production unit located in Argentina and by the sharp drop in PVC prices due to increased international competition in Latin America. The operating performance of Vinythai (Vinyls Asia), higher than last year, remained very good in the third quarter. Factors influencing sales (% of 3Q10 sales) Factors influencing sales (% of 3Q10 sales) +2% +5% -4% +0% +3% -4% +12% -2% -1% +6% Volume Price Exchange Scope Total Volume Price Exchange Scope Total Solvay is enjoying the benefits of the creation of Solvay Specialty Polymers and its commitment to innovation The Global Business Unit Solvay Specialty Polymers was created in April 2011 in order to capitalize on the growth of the high-performance specialty polymer markets. A systematic approach regarding manufacturing excellence, expertise in research, customer orientation and response to megatrends due to the establishment of platforms were reflected in an optimized production network, exceptional innovation, a better product mix and increased social orientation for markets linked to urbanization, mobility, health, water filtration and alternative energies. -6-

7 CHEMICALS 3 RD QUARTER BUSINESS REVIEW In Essential Chemicals, globally sustained sales volumes and continued high operating margins In Special Chemicals, slowdown in demand and operating margins under pressure Energy costs: high and stable REBITDA up by 1% Key data (in million EUR) 3 rd quarter 9 months 2011 Change in % 2011 Change in % Sales 712 6% % Essential Chemicals % % EMEA % % North America 123-9% 354-8% South America 28 9% 96 50% Asia Pacific 47 24% % Special Chemicals 156 4% 471 9% REBITDA 118 1% % Essential Chemicals % % Special Chemicals 15-36% 64 6% REBIT 80 1% % Essential Chemicals 73 16% % Special Chemicals 8-55% 42 29% 1. Soda ash exports from the USA no longer go through ANSAC but are directly handled by Solvay since January 1, This largely explains the sales drop in North America and the higher sales in Asia and South America. 2. Europe, Middle-East and Africa Compared with 3 rd quarter 2010 Sales REBITDA 712 million 118 million + 6% + 1% -7-

8 Essential Chemicals Sales amounted to EUR 557 million, up by 6% compared to the third quarter of In soda ash, sales were higher than last year due to steady demand from the container glass sector and, except for Southern Europe, an improvement in activity in the flat glass sector. In terms of geography, demand remained high in Northern and Eastern Europe while the American market continued to benefit from the high level of exports to Asia and South America. Sales volumes for bicarbonate remained at a very high level, especially for environmental and medical applications. Aside from sales volumes, the improvement in sales of soda ash and derivatives was explained by the higher level of sales prices. Caustic soda benefited from sales prices appreciably higher than those of last year, despite a slight price decline versus last quarter, in a context of continued good demand. The epichlorohydrin business has been confronted with a slowdown in demand since the 3 rd quarter, which had an impact on both sales volumes and prices. In hydrogen peroxide, sales were comparable to the very high level attained in the third quarter of last year. Sales volumes remained steady in all regions, supported by high demand for paper pulp from countries with strong growth. The other markets, in particular the chemicals industry, mining industry and environmental applications, also continued to perform well. This generated gradual increases in sales prices. REBITDA amounted to EUR 103 million, up by 10%. The margin REBITDA on sales amounted to 19%. That is higher than the third quarter of 2010 (18%) despite the high level of energy costs (coke, steam, electricity). The increase in sales prices and volumes compensated for the rise in these costs. Special Chemicals Sales in the third quarter of 2011 amounted to EUR 156 million, up by 4% compared to last year due to better sales volumes. They were, however, lower than in the preceding quarter. This downturn is explained by a drop in sales of fluorinated chemicals due to a sharp slowdown in demand in electronics and stronger competition in refrigerant applications; sales to the automotive industry continued to be sustained. REBITDA amounted to EUR 15 million, down by 36% compared to the very high level achieved in the third quarter of last year. The profit margin of the fluorinated chemicals was impacted by a drop in sales prices in a less-tight market although the cost of raw materials remained high. It should be noted that the Solvay s upstream integration, through fluorspar extraction, has been especially important in this context. Special Chemicals - Factors influencing sales (% of 3Q10 sales) +5% +1% -2% Volume Price Exchange Scope Total Essential Chemicals - Factors influencing sales (% of 3Q10 sales) +4% +4% -1% +0% +4% -1% +6% Volume Price Exchange Scope Total Significant development of hydrogen peroxide activities in Asia Solvay recently started up two new hydrogen peroxide plants in Asia. Built in Thailand in partnership with The Dow Chemical Company, the first plant has a capacity of tons per year, making it the largest hydrogen peroxide plant in the world. Its production will essentially be destined for propylene oxide production. With this plant, Solvay has reinforced its leadership position in this new captive market. The second new plant is located in China. Built in partnership with the Huatai group and with a capacity of tons per year, it constitutes an opportunity for Solvay to gain a presence at the industrial and commercial level in this important market. -8-

9 RHODIA 3 RD QUARTER BUSINESS REVIEW All performance indicators presented hereafter reflect and result from the application of Rhodia accounting principles and performance definitions outstanding prior to the acquisition and consolidation of former Rhodia group. Former Rhodia group 3r d quarter income statements as at September 30, 2011 presented hereafter are not part of the consolidated income statements of Solvay group as of the same date. The results of the former Rhodia group will only contribute to Solvay net income as of 4 th quarter The sole purpose of this additional information is to enable the understanding of former Rhodia group operating performance in the first 3 quarters of 2011 on a standalone basis. Sales volumes up by 4%, reflecting good business dynamics REBITDA 1 at EUR 273 million, up by 16% year-on-year Sustained strong pricing power: EUR 47 million net positive price impact at EBITDA Key data (in million EUR) 3 rd quarter 9 months 2011 Change in % 2011 Change in % Net sales % % Consumer Chemicals % % Advanced Materials % % Polyamide Materials % % Acetow & Eco Services % % Energy Services % % Corporate & Others % % REBITDA % % Consumer Chemicals % % Advanced Materials % % Polyamide Materials % % Acetow & Eco Services % Energy Services % % Corporate & Others % % 1. Recurring EBITDA before Restructuring and Other operating income/ expenses Compared with 3 rd quarter 2010 Sales REBITDA million 273 million + 23% + 16% -9-

10 Consumer Chemicals Up by 29% year-on-year, net sales amounted to EUR 624 million driven by sustained healthy business dynamics. This important increase mainly stemmed from volume growth, both organic +3% and external +13% (following Feixiang acquisition), and global price increases of 20%, while forex impacts, namely relative to USD and Brazilian Real against Euro, were unfavourable. Within the Cluster, Novecare continued reporting the largest growth driven by its innovative solutions for shale Oil & Gas exploitation, coupled with the highly successful new product developments (like anti-drift and glyphosate solutions) serving a strong Agro market. Coatis also reported volume growth in 3 rd quarter 11. Aroma Performance is implementing a strategic Food Safety repositioning with its vanilla Rhovanil, Rhovanil Natural and Rhodiarome brands dedicated for the food market, and is launching a new Rhovea range customized for perfumery & other markets. Recurring EBITDA amounted to EUR 82 million, up by 14% compared to the year ago quarter. The three GBUs enjoyed good pricing power, succeeding to more than fully compensate increased raw material costs through higher selling prices. REBITDA margin at 13.1% compared to 14.9% in the 3 rd quarter 2010 reflecting adverse forex impacts (accounting for 1.3 pp) and undergoing investments-for-growth. Factors influencing sales (% of 3Q10 sales) +13% +29% +20% -7% Advanced Materials In the 3 rd quarter 2011, Advanced Materials reported net sales of EUR 272 million, nearly doubling last year level. Advanced Materials continued benefiting from a product portfolio well-suited to global market sustainable mega trends and an unmatched competitive positioning. Sales price increases were particularly important (+76% year-on-year), primarily attributable to rare earths cost inflation. Overall volume increased by 26% driven by both Rare Earth Systems, most notably in the Lighting segment, and to a lesser extent, by Silica that remained dynamic. Advanced Materials posted a highest ever REBITDA of EUR 87 million, three times higher than last year period, that translated into a 32% margin versus 20% in the 3 rd quarter Both Silica and Rare Earths Systems benefited from strong pricing. Rare Earth Systems disposes of a unique optimized competitive sourcing that combines presence in China and technological-edge recycling know-how. Furthermore, over the past quarters, this business segment has enjoyed exceptionally high market pricing conditions that should normalize going forward. Factors influencing sales (% of 3Q10 sales) +26% +76% -6% +0% +96% +3% Volume/Mix Price Exchange Scope Total Volume/Mix Price Exchange Scope Total Further progress in Rare Earths sourcing diversification strategy New Rare Earths recycling project in the area of magnets After its low-energy light bulbs and nickel metal hydride (NiMH) rechargeable batteries, Rare Earth Systems announced a new recycling project in the area of magnets, posting a further step in Rhodia s strategy to secure and diversify its sourcing. Additionally, a new production unit was commissioned at Rhodia s Liyang site to manufacture rare earth-based compounds for the Chinese automotive catalysis market. -10-

11 Polyamide Materials Over the quarter, Polyamide Materials demand was affected by the usual summer seasonal pattern coupled with a business slowdown that became noticeable since September. Net sales amounted to EUR 479 million, up by 6% compared to last year quarter, reflecting increased prices of 10%, in a context of higher raw material and energy costs, while volume was globally down by -2%. Engineering Plastics volume increased by 4%, but was more than offset by the persisting decline in Fibras (eroded competitiveness of Brazilian textile manufacturing industry) and, to a lesser extent, by softness in Polymide & Intermediates. Recurring EBITDA amounted to EUR 52 million, representing a -27% decline compared to a demanding last year quarter comparison at peak levels. Weaker business dynamics also translated in margin pressure over the period. Acetow & Eco Services Acetow & Eco Services reported net sales of EUR 219 million, a 5% increased compared to the 3 rd quarter of This was fully due to price increases (+11%) whereas volumes remained resilient at similar levels and forex represented a -6% adverse impact. Acetow reported a robust performance driven by continuous sound demand. Eco Services also benefited from a solid activity corresponding to the usual driving season. Pricing power across both businesses remained satisfactory. However, unfavourable forex evolution and some exceptional one-off expenses impacted earnings. Thus, Recurring EBITDA amounted to EUR 49 million, down compared to EUR 56 million reported in the preceding year quarter. Factors influencing sales (% of 3Q10 sales) +11% -6% Factors influencing sales (% of 3Q10 sales) +0% +0% +5% -2% +10% -2% +1% +6% Volume/Mix Price Forex Scope Total Volume/Mix Price Forex Scope Total Energy Services Energy Services relies on its expertise in energy optimization and the reduction of greenhouse gas emissions to develop Climate Care solutions that help respond to the challenges of sustainable development through the production of renewable energies. In the 3 rd quarter, Energy Services reported REBITDA of EUR 37 million compared to EUR 40 million in the 3 rd quarter of CER volumes sold during the period were higher than last year, but this favourable effect was fully offset by lower average selling prices that went down to 11 EUR per ton from 14 EUR per ton. Factors influencing sales (% of 3Q10 sales) +24% -30% -2% +0% -7% Volume/Mix Price Forex Scope Total For the full year, a large majority of expected 2011 CER production is already hedged at a price close to 12 EUR per ton, reflecting the effectiveness of the Group long-term hedging policy. -11-

12 CONSOLIDATED FINANCIAL STATEMENTS INCOME STATEMENT 1 Million EUR (except for per-share figures in EUR) 3 rd quarter 9 months Sales Combined sales Cost of goods sold Gross margin Commercial and administrative costs Research and development costs Other operating gains and losses Earnings from associates and joint ventures accounted for using the equity method REBITDA REBIT Non-recurring items EBIT Cost of borrowings Interest on lendings and short-term deposits Other gains and losses on net indebtedness Cost of discounting provisions Income/loss from available-for-sale investments Result before taxes Income taxes Result from continuing operations Result from discontinued operations Net income Non-controlling interests Net income Solvay share Basic earnings per share from continuing operations Basic earnings per share from discontinued operations Basic earnings per share Diluted earnings per share from continuing operations Diluted earnings per share from discontinued operations Diluted earnings per share Without consolidation of Rhodia s 3 rd quarter 2011 income statement 2. Combined sales corresponding to sales of consolidated companies plus Solvay s share of sales of joint ventures and associates after intercompany elimination is provided for information purposes to facilitate the transition to the new accounting method for joint ventures using the equity method since January 2011 (see p20) -12-

13 Additional comments on the income statement of the first 9 months of 2011 Non-recurring items amounted to EUR -30 million. They included a partial reversal by EUR 24 million of the existing provision following the decision by the European General Court to reduce the fine imposed on Solvay in 2006 by the European Commission for violations of competition rules in the peroxide market. Solvay has filed a further appeal as it believes that its defence arguments have not been fully accounted for Charges on net indebtedness amounted to EUR -124 million. The charges on borrowings amounted to EUR -108 million. These correspond to the cost of the gross financial debt of the Solvay Group. Interest on cash deposits and investments amounted to EUR 31 million. The cost of discounting provisions amounted to EUR -37 million. Income taxes amounted to EUR -87 million. The effective tax rate at the end of September 2011 was 20%. Net income amounted to EUR 316 million. The negative contribution of discontinued operations of EUR -38 million was explained primarily by the post-closing adjustment of EUR -47 million related to working capital following the sale of the pharmaceuticals activities. Net income Solvay share amounted to EUR 270 million. STATEMENT OF COMPREHENSIVE INCOME 1 Million EUR 3 rd quarter 9 months Net income Gains and losses on available-for-sale financial assets Gains and losses on hedging instruments in a cash flow hedge Actuarial gains and losses on defined benefit pension plans Currency translation differences Share of other comprehensive income of associates and joint ventures accounted for using the equity method Income tax relating to components of other comprehensive income Other comprehensive income, net of related tax effects Comprehensive income attributed to Owners of the parent Non-controlling interests Without consolidation of Rhodia s 3 rd quarter 2011 income statement -13-

14 STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) Million EUR September 30, 2011 December 31, 2010 Non-current assets Intangible assets Goodwill Tangible assets Available-for-sale investments Investments in joint ventures and associates equity method Other investments Deferred tax assets Loans and other non-current assets Current assets Inventories Trade receivables Income tax receivables Dividends receivable 1 1 Other current receivables - Financial instruments Other current receivables Other Cash and cash equivalents Assets held for sale 35 0 TOTAL ASSETS Total equity Share capital Reserves Non-controlling interests Non-current liabilities Long-term provisions: employees benefits Other long-term provisions Deferred tax liabilities Long-term financial debt Other non-current liabilities Current liabilities Short-term provisions: employees benefits Other short-term provisions Short-term financial debt Trade liabilities Income tax payable Dividends payable Other current liabilities Liabilities associated with assets held for sale 6 0 TOTAL EQUITY & LIABILITIES

15 STATEMENT OF CHANGES IN EQUITY Equity attributable to equity holders of the parent Fair value differences Million EUR Share capital Issue premiums Retained earnings Treasury shares Currency translation diff. Available for sale investments Cash flow hedges Defined benefit pension plans Total Non-controlling interests Total equity Balance 31/12/ Net profit for the period Income and expenses directly allocated to equity Comprehensive income Cost of stock options Dividends Acquisition/sale of treasury shares Issure of share capital 0 0 Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control Other Balance 31/12/ Net profit for the period Income and expenses directly allocated to equity Comprehensive income Cost of stock options Dividends Acquisition/sale of treasury shares Issure of share capital 0 0 Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control Other Balance 30/9/ Impact of change of accounting policy of post-employment benefit -15-

16 CASH FLOW STATEMENT 1 Million EUR 3 rd quarter 9 months EBIT Depreciation, amortization and impairments Changes in working capital Changes in provisions Income taxes paid Others Cash flow from operating activities Acquisition (-) of subsidiaries Acquisition (-) of investments - Other Sale (+) of subsidiaries Sale (+) of investments - Others Acquisition (-) of tangible and intangible assets Sale (+) of tangible and intangible assets Income from available-for-sale investments Changes in non-current financial assets Other Cash flow from investing activities Capital increase (+) / redemption (-) Acquisition (-) / sale (+) of treasury shares Changes in borrowings Changes in other current financial assets Cost of borrowings Interest on lendings and short-term deposits Other Dividends received from associates and joint ventures accounted for using the equity method Dividends paid Cash flow from financing activities Net change in cash and cash equivalents Currency translation differences Acquisition of Rhodia s cash Opening cash balance Closing cash balance Free Cash Flow 1 from continuing operations Free Cash Flow 1 from discontinued operations Without consolidation of Rhodia s 3 rd quarter 2011 cash flow statement 2. Free Cash Flow = cash flow from operating activities + cash flow from investing activities -16-

17 CASH FLOW FROM DISCONTINUED OPERATIONS Million EUR 3 rd quarter 9 months Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Net change in cash and cash equivalents Additional comments on the cash flow statement of the first 9 months of 2011: Cash flow from operating activities amounted to EUR 294 million compared to EUR 318 million in the first 9 months of In addition to the operating income, the following items are to be highlighted: Depreciation and amortization of assets of EUR 263 million compared to EUR 513 million at the end of September This difference was explained primarily by the impairments of industrial assets recorded last year in soda ash in Europe, hydrogen peroxide and fluorinated chemicals activities. An increase of the working capital by EUR 203 million (without considering Rhodia) compared to the end of December Cash flow from investing activities amounted to EUR million. The main investment concerns the acquisition of Rhodia for an amount of EUR million. Aside from health, safety and the environment as well as maintenance of industrial assets, the other investments involved a limited number of strategic projects oriented in priority to geographic expansion and to the choices made in terms of sustainable development. The most material investment in the first 9 months of 2011 involved an increase in capital of EUR 152 million in RusVinyl (partnership between SolVin and Sibur for construction of a PVC plant in Russia). The resulting Free Cash Flow of the first 9 months of 2011 amounted to EUR million. Treasury shares Given the success of the tender offer for Rhodia, the shares held by Solvay SA, as temporary partial redeployment of the cash from the sale of the Pharmaceuticals activities, were transferred to the Solvay Stock Option Management SPRL in order to cover the stock options program. -17-

18 RESULTS BY SEGMENT BEFORE ELIMINATION OF INTER-COMPANY SALES Million EUR 3 rd quarter 9 months Sales Plastics Sales Inter-segment sales External sales Chemicals Sales Inter-segment sales External sales REBITDA Plastics Chemicals New Business Development Corporate and Business Support REBIT Plastics Chemicals New Business Development Corporate and Business Support EBIT Plastics Chemicals New Business Development Corporate and Business Support

19 NOTES TO THE ACCOUNTS: 1. Consolidated financial statements The consolidated financial statements were prepared in conformity with IFRS standards as currently adopted in the European Union. The same accounting policies have been implemented as for the latest annual financial statements, except for the elements developed in the note 3 below. The primary variations in perimeter between nine months of 2010 and 2011 involve: The sale of the pharmaceuticals activities on February 15, The reintroduction, during the second quarter of 2010, in the Chemicals sector of the assets and liabilities linked to the precipitated calcium carbonate activity, following the decision to terminate the sale process for this activity. The sale of Inergy Automotive Systems on July 1, The entry of EBRD in the capital of Solvin Holding NL (parent company of Rusvinyl) with effect as from 30 September 2011 (impact on the value of «Investments in joint ventures and associates - equity method»). The acquisition of Rhodia of which the accounting impact is detailed in note Limited review by the auditor Deloitte have reviewed the accompanying interim consolidated financial statements of Solvay SA/NV and its subsidiaries (jointly the Group ), prepared in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. A limited review consists of making inquiries of group management and applying analytical and other review procedures to the interim financial information and underlying financial data. A limited review is substantially less in scope than an audit performed in accordance with the auditing standards on consolidated financial statements. Based on their review nothing has come to their attention that causes them to believe that the interim consolidated financial statements of the group have not been prepared, in all material respects, in accordance with International Financial Reporting Standards as adopted by the EU and with the legal and regulatory requirements applicable in Belgium. 3. Changes in accounting policy Since January 1, 2011, the Solvay Group has consolidated its joint ventures by the equity method and no longer by the proportionate method (in line with IAS 31). Consolidation by the equity method leads to recognize in the consolidated accounts only the Group share of: The joint ventures equity for the statement of financial position (balance sheet); The joint ventures net income at the level of the income statement (included in the Group REBIT); The cash inflows and outflows between the joint ventures and the fully consolidated subsidiaries (primarily the dividends paid by the joint ventures and the investments in the joint ventures) at the level of the cash flow statement. The net financial situation of the joint ventures will no longer be reported. The reasons for applying this new accounting policy are the following ones: The new IFRS 11 requiring the application of the equity method for joint ventures was published in May 2011, with mandatory compliance as from The implementation of the new organizational structure (Horizon) and the repositioning of the Group will lead to significant changes in the financial statements. It is preferable to enact all changes in 2011, including consolidation of the joint ventures by the equity method, and in this way, avoid further modifications in financial reporting when the new IFRS 11 will be adopted. -19-

20 Following the acquisition of Rhodia, the accounting policies for post-employment benefits have been aligned. For long term post-employment benefits provisions (IAS19), this leads Solvay to recognize changes in actuarial gains and losses outside income statement directly in equity (Other Comprehensive Income) instead of keeping the corridor method. This is an anticipation of the revised IAS19 norm which will no longer recognize the corridor method from 2013 onwards. Additionally, the discount rates and mortality tables are harmonized. The following tables summarize the impact of those modifications of accounting methods: a) On the income statement and the total comprehensive income: Million EUR 9 months months 2010 Continuing Operations 1 Continuing Operations 1 Equity method Proportionate method Equity method Proportionate method Sales Gross Margin REBIT EBIT Result before taxes Net income Net income Solvay share Other comprehensive income Comprehensive income No subsidiary is consolidated by the equity method in Discontinued Operations. b) On the cash flow statement: 9 months months 2010 Million EUR Continuing Operations 1 Continuing Operations 1 Equity method Proportionate method Equity method Proportionate method Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities No subsidiary is consolidated by the equity method in Discontinued Operations. -20-

21 c) On the statement of financial position (balance sheet): After Rhodia s acquisition Before Rhodia s acquisition 30/9/ /12/ /12/2009 Million EUR Equity method Proportionate method Equity method after «abandon of corridor» Equity Method before «abandon of corridor» Proportionate method Equity method Proportionate method Non-current assets Current assets including: Assets held for sale Pharma Assets held for sale Other Total assets Total equity Non-current liabilities Current liabilities including: Liabilities associated with assets held for sale - Pharma Liabilities associated with assets held for sale - Other Total equity & liabilities

22 4. Overall description of Rhodia acquisition and its accounting treatment Based on the results of the tender offer, 95.9% of the share capital and of the voting rights of Rhodia were acquired by Solvay on September 7, 2011, together with 97.51% of the convertible bonds OCEANE. Solvay implemented a squeeze-out procedure for the remaining shares (4.1%) and convertible bonds on September 15, Accounting treatment The contributive opening balance sheet of Rhodia was consolidated in the Group accounts on September 30, Rhodia s results and cash flow will be consolidated as from October 1, As a consequence, except for the acquisition costs, Rhodia s acquisition had no impact on Solvay s net profit and earnings per share in the 3 rd quarter Rhodia s opening balance sheet as at September 30, 2011 is subject to the Purchase Accounting (IFRS 3). This will lead to: Assess Rhodia s tangible assets, intangible assets, liabilities at fair value, Recognize at fair value some intangible assets which Rhodia had not previously recognized as assets, Recognize Rhodia s contingent liabilities (not previously recognized by Rhodia on a stand alone basis). Purchase Accounting must be completed within the 12 months following the acquisition date (September 7, 2011). Until its completion, provisional accounting will prevail. For the 3 rd quarter closing, only the contingent liabilities and the financial net debt have been remeasured and booked at fair value. The remeasurement at fair value of the other assets and liabilities is in progress and will retroactively be booked in the opening balance sheet as at September 30 within 12 months from the acquisition. Until the Purchase Accounting is completed, a provisional goodwill is booked for the difference between the price paid to acquire the 95.9% of total shares and the book value in the Group s accounts of 95.9% of Rhodia s net assets under provisional accounting. This provisional goodwill will be reduced to reflect the remeasurement at fair value of assets and liabilities under the Purchase Price Accounting process. Regarding the squeeze-out of the 4.1% remaining shares, the difference between the price paid to acquire those shares and the book value in the Group s accounts of 4.1% of Rhodia s net assets under provisional accounting (EUR -141 million) is recognized against Group s equity, without impact on goodwill and income statement. It should be noted that the remeasurement of stocks at fair value in the 4 th quarter 2011 will be allocated to non-recurring items based on stocks turnover rate since September

23 Amounts recognized in Solvay s balance sheet for major classes of assets and liabilities (IFRS 3 B64 i) Million EUR Purchase Accounting status Fixed assets Initiated Non consolidated subsidiaries 22 Initiated Joint Ventures (excl. Joint Operations) 80 Initiated Loans and other non current assets 126 Initiated Working capital 532 Initiated Assets held for sale 29 Initiated Deferred taxes 95 Initiated Provisions Recorded Income tax payables -35 Recorded Other non current debt -71 Initiated Net financial debt -632 Recorded Net assets -86 Provisional goodwill Acquisition of 95.9% of total shares Squeeze-out of the 4,1% remaining shares Price consideration Vested and non-vested stock options Subtotal Net Assets Purchase Accounting (net of deferred tax assets) Contingent liabilities Financial debt Provisionnal goodwill Reduction of equity Total 1. Net assets as of September, : EUR 144 million EUR 231 million = EUR -86 million Acquisition-related costs The acquisition costs for Rhodia expensed at the end of September 2011 amounted to EUR 25 million and were accounted for as non-recurring items. Pro-forma information Pro-forma figures of the combined Group can be derived from the information contained on page 3 (Solvay) and page 9 (Rhodia). -23-

24 5. Content This results report contains regulated information and is established in compliance with IAS 34. A risk analysis is included in the annual report, which is available on 6. Primary exchange rates Closing Average 1 Euro 9 months months months months Pound Sterling GBP American Dollar USD Argentine Peso ARS Brazilian Real BRL Thai Baht THB Japanese Yen JPY Solvay shares 9 months months Number of shares issued at the end of the period Average number of shares for IFRS calculation of earnings per share Average number of shares for IFRS calculation of diluted income per share Declaration by responsible persons Christian Jourquin, Chairman of the Executive Committee, and Bernard de Laguiche, Chief Financial Officer, declare that to the best of their knowledge: a. The summary financial information, prepared in conformity with applicable accounting standards, reflects a faithful image of the net worth, financial situation and results of the Solvay Group; b. The intermediate report contains a faithful presentation of significant events occurring during the nine first months of 2011, and their impact on the summary financial situation; c. There are no transactions with related parties. -24-

25 Key dates for investors: January 19, 2012 : Prepayment on dividend for 2011 February 16, 2012 : Annual results for 2011 (7:30 AM) For additional information: > Erik De Leye Corporate Press Officer - Solvay Tel: erik.deleye@solvay.com > Patrick Verelst Head of Investor Relations - Solvay Tel: patrick.verelst@solvay.com > Lamia Narcisse Media Relations - Rhodia Tel: +33 (0) lamia.narcisse@eu.rhodia.com > Maria Alcon Hidalgo Head of Investor Relations - Rhodia Tel: 33 (0) maria.alcon-hidalgo@eu.rhodia.com Solvay Investor Relations Tel investor.relations@solvay.com SOLVAY is an international chemical Group committed to sustainable development with a clear focus on innovation and operational excellence. Its recent acquisition of specialty chemicals company Rhodia created a much larger player which is realizing over 90% of its sales in markets where it is among the top 3 global leaders. Solvay offers a broad range of products that contribute to improving quality of life and its customers performance in markets such as consumer goods, construction, automotive, energy, water and environment and electronics. The Group is headquartered in Brussels, employs about 30,000 people in 55 countries and generated EUR 12 billion in sales (pro forma) in Solvay SA is listed on NYSE Euronext (SOLB.BE - Bloomberg: SOLB.BB - Reuters: SOLBt.BR). Dit verslag is ook in het Nederlands beschikbaar Ce rapport est aussi disponible en français -25-