ETRANGER, Feb. 11, 2003 (PRIMEZONE) -- Solvay Group:
-- Significant increase in Plastics and Pharmaceuticals earnings
-- First-year of consolidation of Solvay Solexis (ex-Ausimont)
results
-- Record consolidated net income of EUR 496 million
-- Record consolidated cash flow of more than EUR 1.1 billion
The Solvay Group completed the year 2002 with net current earnings of EUR 496 million, up 23% from the 2001 result of EUR 403 million, despite a difficult world economy.
With EBIT growth of 23%, despite a drop in sales of 9%, the Group strongly improved its EBIT margin on sales, which went from 7.2% in 2001 to 9.7% in 2002. This growth was primarily the result of the implementation of the Group's major strategic decisions, which significantly improved the quality of its portfolio of activities.
EBIT trend varied among the sectors. The results of the Pharmaceuticals Sector increased by 13%. The Plastics Sector recorded a very significant improvement in its results compared to the weak performance of 2001, thanks among others to the contribution of Solvay Solexis and progress in vinyls. The Processing Sector EBIT also increased (by 7%), while the Chemicals Sector EBIT declined 18%, affected primarily by reductions in caustic soda prices.
Geopolitical uncertainties limit the visibility for 2003, and more particularly in the beginning of the year, and it will be necessary to remain vigilant. The greater and greater contribution of Pharmaceuticals and Specialties products, combined with the strengthening of competitiveness in Essential Products, should permit the Solvay Group to be well positioned to face future challenges.
SOLVAY GROUP -- CONSOLIDATED RESULTS
(including minority
interests)
MILLIONS OF EUR 2002 /2001 MILLIONS
(EUR) OF USD (1)
2001 2002 (2) Var% 2002 (2)
Sales 8 725 7 918 -9% 8 304
Gross margin 2 444 2 643 8% 2 772
EBIT 628 772 23% 810
Net debt expenses -90 -68 -24% -71
Current taxes -135 -170 26% -178
Polyethylene -- -38 n.s. -40
-- accounted for under
equity method(3)
Net current
earnings (4) 403 496 23% 520
Net extraordinary items 0 0 -- 0
Net earnings 403 496 23% 520
Depreciation and
amortization 522 611 17% 641
Cash flow 925 1 107 20% 1 161
Capital expenditures 2 627(5) 680 n.s. 713
Research and Development 341 397 16% 416
(1) 1 EUR = 1.0487 USD (December 31, 2002)
(2) Unaudited figures: The financial information contained in
this release has not been certified by the auditor
(commissaire-reviseur).
(3) The Group's interest in the high density polyethylene joint
ventures with BP have been recorded under the equity method in
the 2002 financial statements.
(4) Note that, as the good will from the acquisitions of Ausimont
and BP's specialty polymers business was recorded as a
deduction from shareholders' equity in 2001, these results
contain no amortization of that good will.
(5) Including the acquisition of Ausimont (for EUR 1.3 billion) and
the acquisition, through an asset exchange, of BP's specialty
polymers (with a value of EUR 606 million).
Sales for the year 2002 amounted to EUR 7,918 million, down 9% from 2001. This decrease is primarily due to changes in the perimeter of consolidation - treating the results of the high density polyethylene joint ventures with BP under the equity method and the sale of air-intake systems together accounted for a decrease of sales of EUR 1,392 million. This was not completely compensated for by the inclusion of ex-Ausimont activities (+ EUR 461 million). In addition, variations in exchange rates, particularly the devaluation of the Argentinean peso and, in the second half of 2002, the negative impact of the U.S. dollar, translated into a reduction of 4.4% in sales.
Net debt expenses amounted to EUR 68 million, down 24% from 2001. This decrease resulted, for the most part, from currency gains (EUR 24 million) among others from the sale of a foreign exchange cover in Argentina, which became superfluous with the forced conversion of our U.S. dollar debt in that country into pesos.
Current taxes increased 26%. The average tax rate was 24%.
Regarding the high density polyethylene joint ventures with BP, the results of the Group's share were treated under the equity method. The second half of the year saw an improvement in the U.S. HDPE situation, while European results were very poor. The restructuring carried out in Europe in 2002 should permit the joint venture to better cope with the difficult market conditions.
The negligible balance of extraordinary items is made up on the one hand of exceptional income stemming for the most part from the sale of the American marketing rights to Teveten(R) hypertension medication, the reversals of excess tax accruals and the sale of assets and investments, and on the other hand of extraordinary charges related to amortization of intangible Luvox(R) assets following that product's voluntary withdrawal from the U.S. market, adjustments to provisions for losses on mandatory divestitures required in connection with the Ausimont acquisition, restructurings and extraordinary goodwill amortization (Pipelife included) and depreciation of assets which no longer have economic utility.
Net earnings, like net current earnings, amounted to EUR 496 million, up 23%.
Depreciation and amortization increased 17%, essentially as a result of extraordinary amortization and depreciation. Cash flow reached a record, surpassing one billion EUR (EUR 1,107 million), up 20% from 2001.
Consolidated net leverage remains very healthy at the end of the year, with a 'net debt to equity' ratio lower than 30%.
RESULTS PER SHARE
Performance per share EUR/SHARE 2002/2001 USD/SHARE (1)
2001 2002 (2) Var% 2002 (2)
Net current earnings 4.72 5.53 17% 5.8
Net earnings 4.72 5.53 17% 5.8
Cash flow 10.82 12.72 18% 13.34
Number of shares (000) 84,445 84,610 n.s. 84,610
(1) EUR = 1.0487 USD (December 31, 2002),
(2) Unaudited figures
Minority interests (EUR 29 million) included preferred dividends linked to an EUR 800 million financing for the Ausimont acquisition (EUR 23 million). Net current earnings were 5.53 EUR per share, up 17% from 2001, reflecting the increase in the Group's overall earnings.
THE SOLVAY GROUP'S CHANGE STRATEGY
The earnings of the ex-Ausimont activities, included in the Group's consolidated results from January 1, 2002, surpassed our expectations. Fluoropolymers, elastomers and fluorinated fluids were combined, with Solvay's fluoropolymers, in a new business, Solvay Solexis, a part of the Specialty Polymers Strategic Business Unit in the Plastics Sector. These activities accounted for the largest part of the 2002 earnings from the Ausimont businesses; Earnings from the chemical derivatives and specialty chemicals businesses are included in the appropriate Strategic Business Units of the Chemicals Sector.
Millions of EUR Sales Sales Sales
SECTORS 2001 2002 (1) 2002 / 2001 Var%
Pharmaceuticals 1769 1 863 5%
Chemicals 2751 2 636 -4%
Plastics 2624(2) 1 940 -26%
Processing 1581 1 479 -6%
GROUP 8725 7 918 -9%
Millions of EUR EBIT EBIT EBIT
SECTORS 2001 2002 (1) 2002 / 2001 Var %
Pharmaceuticals 203 230 13%
Chemicals 286 235 -18%
Plastics 70 (2) 234 234%
Processing 68 73 7%
GROUP 628 772 23%
(1) Unaudited figures
(2) In 2001, Solvay's interests in the HDPE joint ventures with BP
recorded sales of EUR 1,221 million and an EBIT of
-EUR 27 million.
PHARMACEUTICALS SECTOR
Results up by 13% in 2002
Intensification of R&D program
-- Pharmaceutical Sector sales increased by 5% in 2002. At constant
exchange rates, sales would have increased by 9%.
-- All therapeutic areas improved (gynecology/andrology by +10%,
gastroenterology by +7% and cardiology by +21%), except for mental
health (down -11%).
American sales continued their growth: up 5% in EUR (up 11% in USD), despite the voluntary withdrawal of LUVOX(R) tablets in April 2002. Sales of Androgel(R) hormone therapy, a patent on the formulation and administration of which was received in 2002, increased 51% in EUR (or +58% in USD). Sales of Prometrium(R) medication grew 9% in EUR (or +15% in USD). Sales of Estratest(R) tablets increased 4% in EUR (10% in USD) over the course of the year. However, sales of this product decreased by 14% in EUR (-3% in USD) during the second half of the year compared to the second half of 2001, following the publication in early July 2002 of two American studies on the long-term effects of certain female hormone therapies not forming a part of the Solvay portfolio. Discussions continue with the FDA regarding the improvement of application procedures.
In other areas of the world, Teveten(R) hypertension medication, commercialized by Solvay outside the U.S., registered a remarkable increase of +49% in sales. Pantoloc(R) , marketed in Canada for heartburn, increased 24% and exceeded EUR 100 million in sales. Export sales increased well (+20%), particularly sales to Central and Eastern Europe, which offset slower growth in Western Europe. Sintofarma in Brazil continued to develop.
In 2002, the Group also intensified its R&D program, increasing expenditures 22% compared to 2001. In particular, Solvay Pharmaceuticals actively pursued Phase III clinical trials of cilansetron, intended for treatment of irritable bowel syndrome. In parallel, other clinical trials were conducted of tedisamil, now in Phase III and intended to treat cardiac arrhythmia, of SLV 306, in Phase II, for hypertension and congestive heart failure, and of DU127090, with Lundbeck, for treatment of psychosis and Parkinson's Disease. In 2002, Solvay also enhanced its R&D portfolio with the acquisition of worldwide rights (excluding Japan) to cetrorelix, in Phase II for the treatment of endometriosis and uterine fibroids as well as benign prostate hypertrophy.
-- The results of the Pharmaceuticals Sector (EUR 230 million)
increased by 13% in EUR. The EBIT on sales margin for the sector
continued to improve.
CHEMICAL SECTOR
Results down 18% from 2001
Satisfactory soda ash performance
Recent recovery of caustic soda after appreciable deterioration in 2002
-- Soda ash activities benefited in 2002 from relatively satisfactory
market conditions. European operations experienced good demand.
American supply and demand gradually came more into balance but
the market remains subject to strong competitive pressures.
-- The results of the electrochemistry and derivative specialties
activities were down following a significant drop in caustic soda
prices in 2002 compared to the high levels of 2001. There has
been, however, an improvement in prices since the end of
2002.
-- Favorable climate conditions and the first synergies from the Esco
joint venture contributed to improvement in results in Salt.
-- Peroxides results remained under pressure, although Europe
experienced slight improvement.
-- Fluorinated Specialty Chemicals experienced unfavorable market
conditions throughout 2002.
-- Barium and strontium carbonates also faced difficult market
conditions.
PLASTICS SECTOR
Results have more than trebled
Integration of Solvay Solexis' fluorinated specialties (polymers, elastomers and fluids)
Improvement in vinyls
-- Vinyls' results improved in 2002 thanks to Solvay Indupa's greater
competitiveness following the devaluation of the Argentine peso
and thanks to satisfactory demand in Europe and Asia.
-- Conditions in the Specialty Polymers market were more difficult in
2002 than in the two previous years, because of weakening in
certain important markets (electronics, telecommunications,
aerospace, etc.). Nevertheless, certain polymers such as PVDC (a
barrier resin) and fluoroelastomers (for high-performance
applications) experienced satisfactory gains in 2002.
-- Performance compounds of PP and HDPE had favorable volumes and
margins, while PVC compounds were under significant pressure as a
result of increases in PVC prices.
PROCESSING SECTOR
7% increase in earnings
-- Inergy Automotive Systems (a 50/50 fuel systems joint venture with
Plastics Omnium) sold more than 11.5 million fuel systems in 2002,
a 9% increase from 2001. In 2002, Inergy multiplied its
initiatives aimed at reinforcing its leadership as a global
supplier of fuel systems meeting the most demanding
specifications.
-- The results of Pipelife (a 50/50 joint venture with Wienerberger
in pipes and fittings) improved thanks to significant
restructuring efforts throughout the world and to a selective
policy of recentering its activities. The pipe business, however,
was under strong competitive pressure in Europe.
-- Industrial films registered satisfactory performance given the
significant increase in raw-material prices, thanks to the
reinforcement of its leadership position in Specialties (such as
films for laminates, printed films for swimming pools and
medical films).
CAPITAL INVESTMENT AND RESEARCH AND DEVELOPMENT
In 2002, investments amounted to 680 million EUR, taking into account a rigorous selection of projects in the various sectors. R&D expenditures were 397 million EUR, including EUR 270 million (68% of the total) for the Pharmaceuticals Sector. The 2003 capital expenditure and R&D budgets are 843 million EUR and 421 million EUR respectively. In 2003, the Pharmaceuticals Sector research effort should represent 69% of the Group's R&D expenditures.
QUARTERLY PUBLICATION OF RESULTS AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
The 2002 Solvay Group financial statements are presented in accordance with Belgian accounting standards (Belgian GAAP). Beginning in 2003, the Solvay Group will publish results under IFRS (International Financial Reporting Standards) and on a quarterly basis. Pro-forma 2002 statements restated under IFRS will be published in the 2002 annual report, available on the Internet (www.solvay-investors.com) at the end of March 2003.
Key financial communication dates during 2003:
-- March 28: final 2002 results
-- End of March: publication of 2002 annual report on the Internet at
www.solvay-investors.com
-- April 30: first quarter results and annual meeting with analysts
and investors
-- June 5: Annual General Meeting of Shareholders
-- July 31: Second quarter results
-- October 31: Third quarter results.