BRUSSELS, Feb. 23, 2005 (PRIMEZONE) -- -- Sales up 4% in 2004 (to EUR 7.9 billion), +6% in 4th quarter of 2004;
-- Increase in operating margin(1) of the Group to 10% for the year 2004;
-- Cash flow up 15% from 2003, to nearly EUR 1 billion (EUR 990 million);
-- Strong growth in Plastics results, (up 76%) thanks to Specialty Polymers and Vinyls. Doubling of 4th quarter 2004 results compared to the same period of 2003;
-- Progressive improvement in Chemicals activities; up 31% in 4th quarter 2004 over the same period of 2003;
-- Pharmaceuticals sector results in line with thoseof 2003 thanks to the conclusion of partnerships with major companies (Wyeth, Bristol Myers Squibb, Quintiles). 4th quarter 2004 results down 35% compared to the same period of 2003, due primarily to generic competition for Rowasa(R) medication in the United States and to costs of validation of new production units (in the Netherlands and France).
Sales reached EUR 7,877 million in 2004, up 4% from 2003. At constant exchange rates, they would have increased by 7%. In the 4th quarter 2004, they increased 6% (in EUR), with strong growth in the Plastics sector (up 15%) and Chemicals sector (up 8%).
REBIT (EUR 789 million) grew 17% in 2004 from 2003, 25% excluding "discontinuing operations(2)". In 2004, the Group achieved an operating margin(1) of 10%, up from that of 2003 (8%). Operating results (REBIT) increased 13% from the 4th quarter of 2003 to the 4th quarter of 2004; also 25% excluding " discontinuing operations."
The net income of the Group for the first time exceeded the half billion (EUR 541 million) and grew 26% from 2003 (EUR 430 million). The comparison of net results for the 4th quarter of 2004 (EUR 125 million) with that of the same period of 2003 (EUR 133 million) does not reflect the improvement in performance because the 4th quarter of 2003 benefited from an Italian tax credit (of EUR 40 million).
Cash flow reached nearly EUR 1 billion (EUR 990 million), up 15%. The financial situation of the Group is very healthy with a ratio of net debt to equity of 21% compared to 32% at the end of 2003.
The Board of Directors has decided to propose to the General Shareholders Meeting of June 2, 2005 the payment of a net dividend of EUR 1.90 per share, up 5.6% from 2003. This increase is in line with the Group's dividend policy, which is to increase the dividend whenever feasible and, if possible, not reduce it. For more than 20 years, the dividend has progressively increased and was never cut during this period.
The Pharmaceuticals sector completed the year 2004 with results in line (down 3%) with those of 2003. Operating margin remained stable in 2004 compared to 2003. On the one hand, the sector benefited from the positive impact of agreements with Wyeth and Bristol Myers Squibb and the compensation from Barr. It was accordingly able to increase its research expenditures to EUR 294 million (17% of sales). On the other hand, it suffered from the reduction in American sales following the renegotiation of contracts with its primary distributors, the weakness of the U.S. dollar, the negative impact of debates over female hormone therapy and pressures on European prices. It should also be noted that preparations for the launch of new products required important commercial efforts. The results of the 4th quarter were affected by, in addition to the other elements described above, generic competition for Rowasa(R) in the United States and costs of validation of a new influenza-vaccine production unit in the Netherlands and a new facility in France for solid forms.
(1) Operating margin is REBIT divided by sales (excluding "discontinuing operations")
(2) The "discontinuing operations" are related to the high-density polyethylene activities in joint ventures with BP and salt activities. As a result of their sale, these two activities will not appear in the results beginning in 2005.
The activities of the Chemicals sector experienced progressive improvement during the course of 2004 thanks to recovery of the markets (for soda ash, caustic soda, etc.) and increases in some prices. The sector's operating margin reflected these developments: 8% for the 2nd half of 2004 compared to 7% for the 1st half. In all, the 2004 results were comparable (-1%) to those of 2003. Market conditions are generally favorable at the beginning of 2005.
With an operating margin of 11% in 2004 (compared to 7% in 2003), the results of the Plastics sector (combining the Plastics and Processing sectors) continued to grow (up 76% in 2004) thanks to strong improvement in Specialty Polymers and Vinyls, major contributors to the Group's results, despite an environment of high raw material and utility costs. Within the Plastics sector, the Processing activities have been subject to pressure on margins from higher costs, but the intensification of competitiveness efforts and the launch of new products has enabled the businesses largely to limit the impact of cost increases. Market conditions are also generally favorable at the beginning of 2005.
Finally, in 2004 the Group actively pursued its objective of improving its productivity in all sectors. In this context, restructuring measures have required charges, most of them non-recurring, on the order of EUR 108 million.
The record results achieved in 2004 are the fruit of a change strategy applied with determination that has translated into significant productivity improvement and the launch of new products. The Group overall has had a good beginning to the year 2005, under the influence of favorable market conditions. In addition, innovation and competitiveness efforts implemented in 2004 are bearing fruit and should continue.
SOLVAY Group
- Summary Financial Information (3)
Millions of EUR
(except for per-share figures, in EUR)
2003 2004 2004/ 2003 4th Q 4th Q 4th Q 04/
in % 2003 2004 4th Q 03
%
Sales 7,557 7,877 +4% 1,87 1,987 +6%
REBIT(4) 673 789 +17% 179 203 +13%
EBIT 662 756 +14% 175 199 +14%
Charges on
net
indebtedness -85 -91 +7% -19 -20 +5%
Income
taxes -114 -129 +13% 1 -42 n.s.
Equity
earnings -48 -10 -79% -24 -10 -58%
Income from
investments 15 15 - 0 0 -
Net income
of the Group 430 541 +26% 133 125 -6%
Net income
(Solvay share) 396 489 +23% 124 109 -12%
Depreciation and
amortization 429 449 +5% 110 113 +3%
REBITDA(5) 1,101 1,215 +10%
Cash flow(6) 859 990 +15% 243 239 -2%
(per share, in EUR)
Earnings
per share(7) 4.78 5.92 +24% 1.49 1.33 -11%
Net dividend 1.80 1.90 +5.6%
Gross dividend 2.40 2.53 +5.6%
Net debt to
equity ratio 32% 21%
(3) Financial statements audited by Deloitte
(4) REBIT : Recurrent Earnings Before Interests and Taxes, recurring operational results
(5) REBITDA : REBIT, including recurring depreciation and amortization
(6) Cash flow is the sum of the net income of the Group and depreciation and amortization
(7) Calculated on the basis of the weighted average number of shares outstanding after deducting shares purchased to cover stock option programs, or a total of 82,748,169 shares in 2003 and 82,520,997 shares in 2004.
Notes on Solvay Group summary financial information
Non-recurring items amounted in 2004 to EUR -33 million, including, on the one hand, the capital gain on the sale of SOFINA shares and on the sales of activities (Solvay's interest in the ESCO salt joint venture and Hedwin Corporation, in the field of industrial films) and, on the other hand, a provision for risks relating a.o. to the current proceedings of the European competition authorities concerning hydrogen peroxide as well as significant provisions for restructuring essentially the closing of the soda ash production unit at Ebensee in Austria and of the pharmaceuticals production site of Foch in France).
Charges on net indebtedness increased to EUR 91 million, up 7% from 2003. These charges include interest paid for the recent issue of long-term bonds that allowed to create a strategic financial reserve at historically low rates.
Income taxes were EUR 129 million, including a tax credit of EUR 63 million recorded in the 3rd quarter of 2004 (in Germany).
Income from investments represents the annual dividends paid by Fortis and Sofina in the 2nd quarter.
Equity earnings from the high density polyethylene activities, although negative (EUR -10 million), improved from 2003 (EUR -48 million). It should be noted that Solvay's interest in the high densitiy polyethylene activities was sold to BP on January 6, 2005, for an amount slightly above EUR 1 billion. This sale will be recorded in 2005 accounts.
Net income of Group was EUR 541 million, up 26% from 2003 (EUR 430 million).
Minority interests in 2004 net income were EUR 52 million, of which EUR 24 million represented preferred dividends(8) linked to the financing of 800 million EUR for the acquisition of Ausimont and EUR 28 million reflected, a.o. the 100% consolidation of Solvay Indupa's activities from July 2004.
Net income per share for 2004 amounted to EUR 5.92, compared to EUR 4.78 in 2003, an increase of 24%.
Depreciation and amortization increased 5% from 2003, following non-recurring depreciation primarily related to the halting of soda ash production at Ebensee, Austria. Cash flow was EUR 990 million, up 15%.
Shareholders equity increased to EUR 3,792 million at the end of 2004, up EUR 282 million compared to the end of 2003. The net indebtedness of the Group at 31 December 2004 (EUR 794 million) was down EUR 326 million from that at 31 December 2003.
The ratio of net debt to equity was 21% compared to 32% in 2003.
Investments, Research and Development
2004 Investments increased to EUR 564 million. Research and Development reached EUR 413 million, of which more than 70% was for the Pharmaceuticals sector. This sector's research effort increased to EUR 294 million (17% of sales) in 2004, up 4% from the previous year.
The 2005 investment and R&D budgets were set at EUR 796 million and EUR 481 million respectively. In 2005, the Pharmaceuticals sector research effort should increase to EUR 353 million (73% of the Group's R&D expenses), before deducting partners' contribution to research expenditure in this sector.
This demonstrates the Group's commitment to pursue its efforts in innovation, competitiveness and growth.
(8) The EUR 800 million preferred shares were reimbursed on 7 January 2005 following receipt of the proceeds from the sale of Solvay's interests in the high density polyethylene joint ventures wtih BP.
RESULTS BY SEGMENT(9)
Millions of EUR
2003 2004 2004/ 2003 4th Q 4th Q 4th Q 04/
in % 2003 2004 4th Q 03
%
GROUP
SALES 7,557 7,877 +4% 1,872 1,987 +6%
Pharmaceuticals 1,832 1,745 -5% 462 441 -5%
Chemicals 2,386 2,433 +2% 585 629 +8%
Plastics(10) 3,215 3,632 +13% 794 915 +15%
Plastics 1,802 2,198 +22% 448 560 +25%
Processing 1,413 1,434 +1% 346 355 +3%
Non allocated
items - - - - - -
Discontinuing
operations 125 67 -46% 32 1 n.s.
GROUP REBIT 673 789 +17% 180 203 +13%
Pharmaceuticals 243 236 -3% 75 49 -35%
Chemicals 182 180 -1% 35 46 +31%
Plastics(10) 225 397 +76% 50 113 +126%
Plastics 155 330 +113% 38 103 +171%
Processing 70 67 -4% 12 10 -17%
Non allocated
items -41 -49 +20% -7 -15 +114%
Discontinuing
operations 63 25 -60% 25 9 -64%
GROUP
REBITDA(11) 1.101 1.215 +10%
Pharmaceuticals 302 299 -1%
Chemicals 354 339 -4%
Plastics(10) 400 585 +46%
Plastics 265 450 +70%
Processing 135 135 0%
Non allocated
items -24 -33 +38%
Discontinuing
operations 68 25 -63%
(9) Results by segment include results of the Group's 4 sectors as well as the "discontinuing operations" related to the high-density polyethylene activities in joint ventures with BP and salt activities. As a result of their sale, these two activities will not appear in the results beginning in 2005.
(10) As of June 1, 2004, the Plastics and Processing sectors were combined into a single new Plastics sector. This gives the Group a more compact structure and more interaction between these activities. Presentation of results in a single sector will begin as of January 1, 2005.
(11) REBITDA : REBIT, including recurring depreciation and amortization
IFRS FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENTS
In millions of EUR
(except for per share figures, in EUR)
2003 2004 4th quarter 4th quarter
2003 2004
Sales 7,557 7,877 1,87 1,987
Cost of
goods sold -5.101 -5.273 -1275 -1358
Gross margin 2,456 2,604 595 629
Commercial and
administrative
costs -1,359 -1,32 -341 -329
Research and
development
costs -404 -413 -96 -84
Other operating
gains & losses -42 -54 3 -15
Other financial
gains & losses 22 -28 18 2
REBIT 673 789 179 203
Non-recurring
items -11 -33 -4 -6
EBIT 662 756 175 199
Charges on
net indebtedness -85 -91 -19 -20
Income taxes -114 -129 1 -42
Equity earnings -48 -10 -24 -10
Income from
investments 15 15 0 0
Net income
of the Group 430 541 133 125
Minority interests -34 -52 -9 -16
Net income
(Solvay share) 396 489 124 109
Earnings per share
(in EUR) 4.78 5.92 1.49 1.33
Diluted income per share
(*) (in EUR) 4.78 5.90 1.49 1.31
(*) calculated on the number of shares diluted by
stock options issued
CONSOLIDATED CASH FLOW STATEMENT
in millions of EUR 2003 2004 Cash flow from operating activities 870 970 EBIT 662 756 Depreciation and amortization 429 449 Changes in working capital -103 -131 Changes in provisions -7 154 Income taxes paid -102 -114 Other non-cash items -9 -144 Cash flow from investing activities -369 -310 Acquisition/sale of investments -67 100 Acquisition/sale of assets -494 -431 Income from investments 15 15 Changes in financial receivables 179 16 Effect of changes in method of consolidation -2 -10 Cash flow from financing activities 291 -445 Increase/Decrease of capital 0 -4 Acquisition/sale of own shares -18 -3 Changes in borrowings 629 -123 Charges on net indebtedness -85 -91 Dividends -235 -224 Net change in cash and cash equivalents 792 215 Currency translation differences -25 -15 Opening cash balance 439 1,206 Ending cash balance 1,206 1,406
CONSOLIDATED BALANCE SHEET
In millions of EUR
At the end of 2003 (*) At the end of 2004
Non-current assets 5,519 5,56
Intangible assets 245 221
Consolidation differences 155 156
Tangible assets 3,459 3,453
Investments -
equity accounting 312 293
Other investments 531 591
Deferred tax assets 528 571
Financial receivables
and other
non-current assets 289 275
Current assets 4,185 4,477
Inventories 1,059 1,132
Trade receivables 1,39 1,453
Income tax receivables 154 117
Other receivables 376 369
Cash and cash equivalents 1,206 1,406
TOTAL ASSETS 9,704 10,037
Total Shareholders'
equity 3,51 3,792
Capital and reserves 2,641 2,882
Minority interests 869 910
Non-current liabilities 3,907 3,863
Long-term provisions 1,796 1,841
Deferred tax liabilities 163 136
Long-term financial debt 1,912 1,85
Other non-current
liabilities 36 36
Current liabilities 2,287 2,381
Short-term provisions 67 180
Short-term financial debt 414 350
Trade liabilities 1,009 1,05
Income tax payable 118 143
Other current liabilities 679 658
TOTAL EQUITY AND
LIABILITIES 9,704 10,037
(*) after minor restatement.
STATEMENT OF CHANGES IN EQUITY
in millions of EUR Capital Issue Reserves Own
premiums shares
Book value at the end of
the previous period 1,269 14 1,.864 -119
(12/31/2003 (*))
Income for the period 489
Distribution -198
Changes in exchange rates
Acquisition/sale of own
shares -3
Adjustment to market value of
financial assets
Other -8
Exchange Direct charges Share- Third Total
differences to holders' Party equity
shareholders' equity
equity
Book value at the end of -422 35 2,.641 869 3,51
the previous period
(12/31/2003 (*) 489 52 541
Income for the period -198 -30 -228
Distribution -85 -85 -4 -89
Changes in exchange rates
Acquisition/sale of own -3 -3
shares
Adjustment to
market value of 46 46 -46
financial assets
Other -8 23 15
Book value at the end of
the previous period -507 81 2,882 910 3,792
(12/31/2004)
(*) after minor restatement of total shareholders' equity on
31 December 2003.
RESULTS BY SEGMENT(12)
The table below gives sales without elimination of inter-sector sales; results by segment include non-recurring items (EBIT).
In millions of EUR
2003 2004 04/03 4Q 2003 4Q 2004 4Q 2004/
% 4Q 03
%
GROUP
SALES 8,101 8,44 4% 1,949 2,118 9%
Pharmaceuticals 1,832 1,745 -5% 462 441 -5%
Chemicals 2,617 2,693 3% 649 693 7%
Plastics(13) 3,528 3,935 12% 807 983 22%
Plastics 2,105 2,485 18% 458 624 36%
Processing 1,423 1,45 2% 349 359 3%
Non-allocated
items - - - - -
Discontinuing
operations 124 67 -46% 31 1 -97%
GROUP EBIT 662 756 14% 175 197 13%
Pharmaceuticals 226 227 0% 63 41 -35%
Chemicals 186 135 -27% 38 54 42%
Plastics(13) 217 382 76% 49 106 116%
Plastics 150 324 116% 38 98 158%
Processing 67 58 -13% 11 8 -27%
Non-allocated
items -41 -46 12% -6 -13 117%
Discontinuing
operations 75 58 -23% 32 9 -72%
(12) Results by segment include results of the Group's 4 sectors as well as the "discontinuing operations" related to the high-density polyethylene activities in joint ventures with BP and salt activities. As a result of their sale, these two activities will not appear in the results beginning in 2005.
(13) As of June 1, 2004, the Plastics and Processing sectors were combined into a single new Plastics sector. This operation gives the Group a more compact structure and more interaction between these activities.
ANNEX TO PRESS RELEASE: COMMENTS ON 2004 RESULTS OF THE SOLVAY GROUP
PHARMACEUTICALS SECTOR
Strategic developments
-- Acceleration of strategic developments in Pharmaceuticals sector: improvement in growth potential thanks to reinforcement of R&D programs with world-class partners, acquisitions and increased operational autonomy
The Pharmaceuticals sector results entered into a transition period in 2004, awaiting the launch of very promising new products.
Solvay currently has a rich R&D portfolio with some 30 molecules to feed the future growth of the sector. Alliances with world-class partners (Wyeth, Bristol Myers Squibb, Quintiles) were concluded in 2004, while crucial steps were taken successfully in the development of new medicines. Of particular note were the registration of Estrogel(R) in the United States and the filing of registration applications for cilansetron in the United Kingdom (in April 2004) and the United States (in June 2004).
Solvay Pharmaceuticals also is pursuing expansion through two recent acquisitions. In one, the Group acquired Italmex, based in Mexico, which will become the Group's second operational base in Latin America after Brazil. In the other, Solvay Pharmaceuticals materialized its development in the field of Parkinson treatment through the acquisition of Neopharma of Sweden, holder of rights to a new treatment (Duodopa(R)) for advanced cases of Parkinson disease. Solvay Pharmaceuticals has also decided to initiate a Phase III program for SLV 308, a molecule from its research intended for treatment of less advanced stages of the disease.
Finally, in 2004 the Group decided to concentrate the strategic management of all pharmaceutical activities in a single entity, Solvay Pharmaceuticals SARL, 100% owned by the Solvay Group. This decision is intended to simplify and better align the structure to the specific needs of the Pharmaceuticals sector. The increased operational autonomy from which the sector will benefit will permit it to take decisions adapted to its future growth.
Key figures
Sales by major products
In millions of EUR (at constant exchange rates)
2003 2004 2004/2003 2004/2003
In millions of EUR (at constant
exchange rates)
PHARMACEUTICALS 1,832 1,745 -5% -2%
SECTOR
CARDIOLOGY 209 205 -2% -1%
Teveten(R) 68 72 +6% +7%
Physiotens(R) 60 58 -3% -3%
Aceon(R) 29 19 -34% -27%
GASTROENTEROLOGY 536 525 -2% 0%
Pantoloc(R) 124 139 +12% +15%
Creon(R) 137 130 -5% -3%
Duphalac(R) 76 78 +3% +3%
GYNECOLOGY/ANDROLOGY 682 598 -12% -7%
Androgel(R) 250 231 -8% +1%
Estratest(R) 131 100 -24% -16%
Prometrium(R) 77 59 -23% -15%
Influvac(R) 68 76 +12% +11%
MENTAL HEALTH 316 319 +1% +3%
Serc(R) 86 96 +12% +12%
Luvox(R) 80 77 -4% -4%
Marinol(R) 70 63 -10% -1%
Pharmaceuticals sales by region
In % of total pharmaceuticals sales
2003 2004
Europe 46% 48%
Nafta 45% 40%
Asia-Pacific and others 9% 12%
Comments
-- Sales of the Pharmaceuticals sector fell by 2% at constant exchange rates. Expressed in EUR, they fell 5% in 2004. Aside from the negative impact of exchange rates, the renegotiation of contracts with the primary American distributors held down sales for several months even though prescriptions continued to follow their expected trends. The negative consequences of the debates over female hormone therapy continued to weigh down sales of those products.
Four products experienced significant growth: Pantaloc(R) treatment for heartburn and stomach ulcers (+12%), Influvac(R) influenza vaccine (+12%), Serc(R) anti-vertigo medication (+12%) and Teveten(R) anti-hypertensive (+6%). Androgel(R) male hormone therapy registered the largest sales (EUR 231 million). Sales and prescriptions of Estratest(R), a female hormone therapy, fell.
NAFTA sales decreased by 5% in U.S. dollars. Sales in Europe remained stable (-1%) despite pressure on prices thanks to a marked increase in sales in, among other markets, Central and Eastern Europe. Asia (Japan, China and India), the Middle East and Latin America continued to improve in 2004.
-- The Pharmaceuticals sector finished the year with results in line (-3%) with those of 2003; operating margins remained stable in 2004 compared to 2003. In addition to the factors cited above, the results of the sector benefited from the positive impact of agreements with Wyeth and Bristol Myers Squibb and a compensation from Barr. In parallel, the sector was able to increase its research expenditures to EUR 294 million (+4%, representing 17% of sales). It should also be noted that preparation for the launch of new products required important commercial efforts.
The results for the 4th quarter of 2004 were affected by, in addition to the elements described above, generic competition for Rowasa(R) enema in the United States and the costs of validation of a new influenza-vaccine production unit in the Netherlands and a new unit in France for production of solid forms.
The debates over hormone therapy, and in particular the publication in July 2002 of the Women's Health Initiative (WHI) study, have given rise in the United States to lawsuits against producers of female hormone therapy products. Even though our specialty products do not contain the same hormones as the products included in the WHI study, Solvay Pharmaceuticals has been named in such suits by several hundreds individual plaintiffs. We believe these claims are without merit.
The continuing discussions with the FDA (Food and Drug Administration) concerning the administrative status of Estratest(R) are being pursued constructively; in parallel, Solvay Pharmaceuticals has been named in three collective lawsuits concerning this status, two in California and the other in Minnesota. The company is taking all appropriate steps to oppose these actions, which it deems without merit. Its position prevailed in a similar, now concluded, litigation in Georgia.
CHEMICALS SECTOR
Strategic developments
-- Continued strengthening of competitiveness through restructurings, rationalization, acquisitions or partnerships.
These measures proved important in improving the margins of the Group's chemicals activities -- particularly for essential products -- which were subjected to intense competitive pressures.
Among the principal actions taken in 2004 were:
- the major agreement planned in soda ash with NCI / Sinopec in China, which has entered its final phase;
- the project for an Antwerp hydrogen peroxide mega-plant in partnership with BASF to supply propylene oxide production by BASF and Dow;
- the announced shutdown of soda ash production at Ebensee, Austria, effective in 2005;
- the sale of our non-strategic interest in Esco (salt) to K+S; and
- the mothballing of the American Soda soda ash plant in the United States and the shutdown of perborate production at Torrelavega in Spain.
Key figures
(in millions of EUR) Sales REBIT
2003 2004 2004/2003 change
% 2004/
2003
CHEMICALS 2.385 2.433 +2% -1%
Minerals cluster(14) 1.045 1.105 +6% -
Electrochemistry and 914 892 -3% +
Fluor chemicals cluster
Oxygen cluster(15) 426 436 +2% +
Comments
-- Progressive improvement in Chemicals activities.
The activities of the Chemicals sector experienced progressive improvement during the course of 2004 thanks to recoveries of markets (for soda ash, caustic soda, etc.) and some price increases. The sector's operating margin reflects this development : 8% in the 2nd half of 2004 compared to 7% in the 1st half.
In all, the 2004 results were comparable (-1%) to those of 2003. Market conditions are generally favorable at the beginning of 2005.
(14) including Soda ash and derivatives, Barium and strontium carbonates, Advanced Functional Minerals SBUs
(15) including Hydrogen peroxide, Detergent and Caprolactones SBUs
Minerals cluster
Soda ash
World market conditions gradually improved in 2004, leading to a saturation of capacities at the end of the year. At the same time, soda ash results suffered the impact of significant increases in energy costs (for coke and gas) and transportation costs. The economic environment became more favorable thanks to actions undertaken to restore margins (restructuring, strengthening of competitiveness, price increases, etc.). Specialized derivatives of soda ash, particularly sodium bicarbonate, continued their growth.
Electrochemistry and Fluor chemicals cluster
Electrochemistry
After a beginning of the year characterized by very difficult market conditions, caustic soda experienced a very significant recovery in the second half, with marked price increases after June 2004.
Fluor Chemicals
The results of fluorine products improved in 2004 thanks to increases in sales of Solkane(R) 365mfc, despite the negative effects of the weakness of the US dollar.
Oxygen cluster
Hydrogen peroxide
The hydrogen peroxide activities experienced sustained improvement in most regions thanks to the strength of the pulp and paper industry. Results improved despite very high energy prices.
In the matter of the inquiry by the European competition authorities in the field of hydrogen peroxide, as previously announced in early February, the Solvay Group has received a statement of objections from the European authorities. It will present its defense in the 2nd quarter. Note that attempted class actions have been initiated in the United States; we believe these claims are without merit.
PLASTICS SECTOR
Strategic developments
-- Enrichment of the portfolio and reorganization of forces :
- Specialties: rapid growth and geographic expansion;
- Vinyls cluster: consolidations, growth and geographic expansion
The Plastics and Processing sectors were combined effective 1 June 2004 to form a single enlarged Plastics sector.
It is characterized, on the one hand, by the development of Specialties : Inergy Automotive Systems, a 50/50 joint venture with Plastic Omnium in fuel systems, and Specialty Polymers. Access to rapidly growing markets and high added value, reinforced by the enrichment of its portfolio of activities of Specialty Polymers, have become among the principal contributors to the results of the Group.
On the other hand, a strong leadership position and continued strengthening of competitiveness remain the priorities for the activities in the Vinyls cluster.
Key figures
(in millions of EUR) Sales REBIT
change
2003
PLASTICS(16) 3,215 3,632 +13% 76%
Vinyls cluster(17) 2,019 2,338 +16% +
Specialty Polymers 1,196 1,294 +8% +
and Inergy Automotive Systems
Comments
-- Sustained growth in Specialty Polymers and vinyls in a context of increased raw-material and utility costs.
With a 2004 operating margin of 11% (compared to 7% in 2003), the results of the Plastics sector (combining the Plastics and Processing sectors) continued their growth (+76% in 2004) thanks to the strong improvement in Specialty Polymers and Vinyls, major contributors to the Group's results despite high raw material and utility costs.
Within the Plastics sector, the Processing activities felt the effect on margins of elevated costs but intensification of competitiveness measures and the launch of new products largely limited their impact.
Market conditions are also generally favorable at the beginning of 2005.
(16) As of June 1, 2004, the Plastics and Processing sectors were combined into a single new Plastics sector. This operation gives the Group a more compact structure and more interaction between these activities.
(17) Including the Vinyls, Performance compounds and Industrial films SBUs and Pipelife (pipes and fittings)
Specialties
Specialty Polymers
Specialty Polymers , one of the principal contributors to the Group's results, experienced favorable growth in volumes (+11% in sales), especially in the United States and Asia, for both high-performance polymers and fluorinated polymers. This came not only from increases in certain markets existing applications usage (in particular the semiconductor market and electronics in general) but equally from development of new, high-valueadded applications, with an increased number of patents (52) applied for in 2004.
Inergy Automotive Systems (50/50 joint venture with Plastic Omnium in fuel systems)
Volumes increased 6% in 2004, a more rapid increase than that of the automotive market, thanks to geographic expansion in recent years in Eastern Europe, Mercosur and with Asian manufacturers. Globally, margins were maintained thanks to programs to increase competitiveness and industrial redeployment to cope with the strong pressure exerted by the automotive market.
Vinyls cluster
Worldwide demand for PVC recorded 5.4% growth from 2003. On the other hand, the worldwide market has tightened, especially for raw materials (ethylene, EDC, VCM, etc.) and utilities (gas, electricity, etc.). This tension has had different repercussions in the various activities.
The significant increase in PVC prices combined with continued improvement in competitiveness led to achievement of appreciably better results and good profitability in the three regions in which Solvay is active (Europe, Asia and Mercosur), in a context of ethylene-price increases. This trend continued in the beginning of 2005.
The results of Performance Compounds were affected by the significant increases in raw-material prices. Efforts at reducing costs and developing Specialties were intensified.
After a first semester of growth in sales in all activities, Industrial Films experienced a second half marked by the negative impact of raw-material price increases (for PVC, plasticizers, etc.) and a reduction of demand in certain markets, which nevertheless were largely compensated by efforts at competitiveness and structural improvements.
Pipelife (a 50/50 joint venture with Wienerberger in pipes and fittings) experienced a good year, benefiting from the growth of its sales in Central Europe and the Baltic countries, the launch of higher-margin products and the restructuring measures of recent years.
REMARKS
With the agreement of the Banking, Finance and Insurance Commission, 2003 and 2004 statements were recorded and presented in IFRS (International Financial Reporting Standards). Also, Deloitte certified the annual consolidated statements as of December 31, 2004 as well as those of the parent company Solvay S.A. without reservation and confirmed that the accounting information shown in this press release does not call for any comments on its part and concurs with the annual consolidated accounts.
Key dates for financial communication
- End of March 2005: annual report 2004 available on Internet
- April 29, 2005: 3-month results 2005 and annual analysts and investors meeting
- June 2, 2005: Ordinary and Extraordinary Shareholders' Meeting
- June 9, 2005: payment of the balance of dividend relating to 2004
- July 29, 2005: 6-month results 2005
- October 28, 2005: 9-month 2005 results
- December 15, 2005: announcement of the interim dividend relating to 2005