BELGIUM, April 30, 2003 (PRIMEZONE) -- The Solvay Group (Other OTC:SVYSY) completed the first quarter of 2003 with consolidated net income of EUR 98 million, up 13% from the earnings of the first quarter of 2002 (EUR 87 million).
These results are explained by the marked growth in the Plastics Sector (up 40%), a result of improvement in the fluorinated fluids of Solvay Solexis and in vinyls; and by the Chemicals Sector's ability to maintain its performance despite increasing pressure in certain markets. Despite the weakness of the US dollar and the intensification of R&D efforts, the Pharmaceuticals Sector recorded results (in EUR) comparable to those of the first quarter of 2002. The Processing Sector was affected by weakness in certain of its markets and declined by 23%.
As indicated in March 2003, the geopolitical context limits the visibility for 2003. It will be necessary to remain vigilant. The growing 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.
M of EUR M of EUR M of EUR M of USD(2)
1Q 2002 1Q 2003 1Q 2003 1Q 2003
3/31/02 3/31/03 vs. 1q 02 3/31/03
var%
Net sales 1983 1906 -4% 2077
REBIT(3) 171 183 7% 199
EBIT 175 181 3% 197
Charges on net
indebtedness -29 -21 -28% -23
Income taxes -44 -47 7% -51
Equity earnings -15 -15 - -16
Net income of the
Group 87 98 13% 107
Net income
(Solvay share) 85 89 5% 97
Depreciation &
Amortization 169 107 -37% 117
recurring
depreciation &
amortization 111 107 -4% 117
Cash flow(4) 256 205 -20% 223
cash flow calculated
on the basis
of the recurring
depreciation &
amortization 198 205 4% 223
R EUR EUR USD
Earnings per share(5) 1.03 1.08 5% 1.18
(1) Figures were subjected to a limited review by the external auditors, Deloitte & Touche.
(2) 1 EUR = 1.0895 USD (at 31 March 2003)
(3) REBIT : Recurrent Earnings Before Interests and Taxes, recurring operational results
(4) Cash flow is the sum of the net income of the Group and the depreciation and amortization
(5) calculated on the basis of the weighted average number of shares outstanding during the quarter, after deducting shares purchased to cover stock option programs, or a total of 83,004,855 shares during the first quarter of 2002 and 82,825,892 actions during the first quarter of 2003.
Sales during the first quarter of 2003 reached EUR 1,906 million, down 4% from the first quarter of 2002. This reduction is primarily due to the negative translation impact of the US dollar, which resulted in a 9% decline in sales partially offset by 5% increase in activity.
Charges on net indebtedness amounted to EUR 21 million, down 28% from the first quarter of 2002.
Income taxes increased by 7%. The average tax rate stands to 29% for the first quarter of 2003, compared to 30% for the first quarter of 2002.
Equity earnings of the high density polyethylene joint ventures with BP (-EUR 15 million) remained at the same level as that of the first quarter of 2002. However, the American market situation improved during the first quarter of 2003 while the European market continued to deteriorate; the situation in Europe remains difficult. It should be noted that the losses accounted for under the equity method were substantially offset by the increase in the value of the put option for our interests in these ventures. Overall, the REBIT of these activities, shown under Discontinuing Operations, amounted to EUR 17 million for the first quarter of 2003 (compared to EUR 15 million for the first quarter of 2002).
The net income of the Group amounted to EUR 98 million, up 13% compared to the first quarter of 2002. Minority interests were EUR 9 million, of which EUR 7 million represented preferred dividends linked to the financing of the EUR 800 million for the Ausimont acquisition. Earnings per share increased 5% to EUR 1.08.
Depreciation and amortization declined by EUR 62 million because of the recording of significant extraordinary depreciation in the first quarter of 2002 (EUR 58 million primarily linked to the sublicense of Teveten(R) anti-hypertensive in the US to Biovail and the voluntary withdrawal of Luvox(R) from the American market). Cash flow amounted to EUR 205 million for the first quarter of 2003, which, after exclusion of non-recurring amortization, represented an increase of 4%.
Compared to the end of 2002, net indebtedness of the Group at the end of the first quarter of 2003 (EUR 1,360 million) increased slightly following an increase in working capital requirements. Shareholders' equity (EUR 3,516 million) declined under the effect of variations in the exchange rate of the US dollar and the revision to market value of financial assets. The net debt to equity ratio at the end of the first quarter of 2003 increased to 39%, as against 37% at the end of 2002.
PRO-FORMA RECURRING RESULTS(1) BY SEGMENT
Compared to previous releases, results by segment will henceforth include the results of the four sectors of the Group as well as 'discontinuing operations' related to the high density polyethylene joint ventures with BP. As required by IFRS, items not allocated to the sectors are presented separately.
The table below presents sales and recurring operational results (REBIT) for the six segments. For the four sectors, recurring operational results are comparable to those (EBIT) presented in annual or six-month releases in prior years, excluding unallocated items.
Sales are presented after elimination of inter-sector transfers and REBIT by segment is operational results less non-recurring items.
In addition, sales by sector without elimination of inter-sector transfers and results by sector including non-recurring items are given in the attachment.
Millions of EUR
Sales1 Sales1 Sales1 (%)
Segments 1Q 2002 1Q 2003 1Q 2003/
(03/31/2002) (03/31/2003) 1Q 2002
Pharmaceuticals
Sector 456 435 -5%
Chemicals Sector 689 652 -5%
Plastics Sector 473 472 0%
Processing Sector 364 347 -5%
Unallocated items - - -
Discontinuing
operations 2 1 n.s.
GROUP 1983 1906 -4%
Millions of EUR
REBIT1 REBIT1 REBIT1
Segments 1Q 2002 1Q 2003 1Q 03 /
(03/31/2002) (03/31/2003) 1Q 02
(%)
Pharmaceuticals
Sector 42 42 -
Chemicals Sector 69 69 -
Plastics Sector 40 56 40%
Processing Sector 22 17 -23%
Unallocated items -18 -18 -
Discontinuing
operations 2 15 17 13%
GROUP 171 183 7%
1)Figures were subjected to a limited review by the external auditors, Deloitte & Touche.
2)Represent the results of our high density polyethylene joint venture. REBIT is positive because it includes the increase in value of Solvay's option to put to BP Solvay's interests in the joint ventures, the results recorded under the equity method, were -EUR 15 million in the first quarter of 2003, identical to the amount for the first quarter of 2002.
Pharmaceuticals Sector
- Sales of the Pharmaceuticals declined 5% in the first quarter of 2003 compared to the first quarter of 2002. At constant exchange rates, there would have been an increase of about 6%. Sales in EUR for Cardiology improved by 15%, while gynecology/andrology remained stable. Gastroenterology and Mental Health declined 7%.
- European sales experienced significant price and prescription-volume pressures.
- American sales declined 2% (in EUR) although increasing 20% in US dollars, following the improvement in sales of Androgel(R) (up 39% in EUR and 66% in US dollars) and Prometrium(R) (up 31% in EUR and 60% in US dollars). Sales of Estratest(R), under competitive pressure and the impact of the Women Health Initiative studies, slipped slightly in US dollars and declined 20% in EUR. The process of regularizing the regulatory status of this product with the FDA is continuing.
- Furthermore, discussions with the FDA in the United States for improving the quality of products registration procedures (AIP) came to a favorable end this quarter.
- In the first quarter of 2003, the Group intensified its R&D program (up 8% in the first quarter of 2003 compared to the first quarter of 2002).
- The results of the Pharmaceuticals Sector (EUR 42 million) were stable (in EUR) despite the weakness of the US dollar and the intensification of the R&D program.
Chemicals Sector
The Chemicals Sector maintained its performance in the first quarter of 2003 thanks to the relative resistance of several Strategic Business Units (SBUs) to the progressive deterioration in the economic climate. These included in particular soda ash, persalts, barium and strontium carbonates and salt; the last benefited from favorable weather conditions. The other SBUs were affected by a drop in demand.
As announced in its press release of 14 April, 2003, Solvay is actively collaborating with an ongoing inquiry by the European competition authorities in the area of hydrogen peroxide activities. The eventual impact of this inquiry was not taken into account in these results.
Plastics Sector
The Plastics Sector recorded strong growth (up 40%) in the first quarter of 2003 even though the sector has recently experienced weakening in its markets. Vinyls improved in all regions (Europe, Mercosur and Asia) compared to the very weak level of the first quarter of 2002 and specialty polymers benefited from the strong performance recorded by Solvay Solexis in fluorinated fluids among other products. HDPE compounds developed favorably while compounds of PVC and PP declined because of raw-material price increases and weak volumes.
Processing Sector
The results of the Processing Sector declined by 23%. Inergy Automotive Systems (fuel systems) continued its growth in volumes thanks to new sites, notably in Asia; its results nevertheless were affected by the weakness of the US dollar and the decrease of its sales in the United States. The results of Industrial Films and Pipelife (pipes and fittings) were affected by the increase in raw-material prices combined with globally weak market conditions and, for Pipelife, by the weakness in winter sales.
Unallocated items
Unallocated items, composed mainly of general and research expenditures at the Group level, were stable in the first quarter of 2003 compared to the first quarter of 2002.
IFRS figures being established on a proforma basis, the following data1 are presented in order to comply with the provisions of the Belgian Accounting Law.
Millions of EUR Millions of USD2
1Q 02 1Q 03 1Q 03 1Q 03
(3/31/02) (3/31/03) vs. 1Q (3/31/03)
02
var %
Sales 1,983 1,906 -4% 2,077
Income before taxes 131 145 11% 158
Net Group income 87 98 13% 107
Solvay's share 85 89 5% 97
(1) Figures were subjected to a limited review by the external auditors, Deloitte & Touche. (2) 1 EUR = 1.0895 USD (at 31 March 2003)
Deloitte et Touche conducted a limited review of the consolidated financial situation as of 31 March 2003. This primarily consisted of analyzing, comparing and discussing financial information and therefore was less extensive than a review intended for the audit of annual statements. This review did not reveal factors that would have required significant correction of the intermediate figures.
Key financial communication dates in 2003 :
- 5 June 2003 : General Shareholders' Meeting - 31 July 2003 : second quarter 2003 results - 31 October 2003 : third quarter 2003 results - early February 2004 : fourth quarter 2003 results and results for the full year 2003
ANNEXES : Proforma IFRS statements for 1st quarter 2002 and 2003
(Statements were subjected to a limited review by the external auditors,Deloitte & Touche)
Preamble
Solvay will publish its annual statements for 2003 under IFRS rules in so far as the 'First Time Application of IFRS' is published by the IASB. In view of this, the information in this release has been prepared utilizing the provisions of the draft rule ED1, 'First Time Application of IFRS,' published by the IASB in July 2002, as if approved without modification. The draft rule not having been finalized, this information cannot be considered as in compliance with IFRS. In effect, to be described as in compliance with IFRS today for the case of first adoption, it would be necessary to apply the current provisions of SIC 8, 'First Time Application of IAS as a Primary Basis of Accounting.' The published information is in substantial conformity with the provisions of the European directives. The same evaluation rules as those employed in the insert to the 2002 annual report have been applied to the quarterly figures. Consolidated Income Statements
in millions of EUR
1Qr 2002 (03/31/2002) 1Q 2003 (03/31/2003)
Net sales 1983 1906
Cost of goods sold -1339 -1271
Gross margin 644 635
Commercial and
administrative
costs -359 -336
Research and development
costs -97 -104
Other operating gains &
losses -21 -17
Other financial gains &
losses 4 5
REBIT 171 183
Non-recurring items 4 -2
EBIT 175 181
Charges on net
indebtedness -29 -21
Income taxes -44 -47
Equity earnings -15 -15
Income from investments - -
Net income of the Group 87 98
Minority interests -2 -9
Net income (Solvay share) 85 89
Earnings per share 1.03 1.08
Diluted income per share
(1) 1.02 1.08
(1) calculated on the number of shares diluted by stock options issued
Consolidated Cash Flow Statement
in millions of EUR
1Q 2002 (03/31/2002) 1Qr 2003 (03/31/2003)
Cash flow from operating
activities 318 128
EBIT 175 181
Depreciation and
amortization 169 107
Changes in working -21 -185
Changes in
provisions 0 4
Income taxes
paid -10 25
Other non-cash
items 5 -4
Cash flow from investing
activities -45 -61
Acquisition/sale of
investments 27 -49
Acquisition/sale of
assets 2 -76
Income from
investments 1 0
Changes in financial
receivables -72 65
Effect of changes in method
of consolidation -3 -1
Cash flow from financing
activities -147 -18
Variation of capital
(increase/decrease) 6 0
Acquisition/sale of
own shares 0 -12
Changes in
borrowings -58 99
Charges on net
indebtedness -29 -21
Dividends -67 -84
Net change in cash
and cash equivalents 126 49
Currency translation
differences 0 -7
Opening cash
balance 630 444
Ending cash
balance 756 486
Consolidated Balance Sheet
in millions of EUR
At end of 2002 At end of 1st quarter 2003
(12/31/2002) (03/31/2003)
ASSETS
Non-current assets 5738 5498
Intangible assets 264 261
Consolidation differences 178 171
Tangible assets 3589 3508
Investments - equity accounting
318 300
Other investments 466 422
Deferred tax assets 477 445
Financial receivables and other
non-current assets 446 391
Current assets 3688 3786
Inventories 1095 1105
Trade receivables 1543 1558
Other receivables 606 637
Cash and cash equivalents 444 486
TOTAL ASSETS 9426 9284
EQUITY AND LIABILITIES
Shareholders' equity 3573 3516
Capital and reserves 2695 2639
Minority interests 878 877
Non-current liabilities 3256 3161
Long-term provisions 1775 1771
Deferred tax liabilities 228 174
Long-term financial debt 1198 1184
Other non-current liabilities 55 32
Current liabilities 2597 2607
Short-term provisions 96 92
Short-term financial debt 565 662
Trade liabilities 1141 1031
Income tax payable 31 86
Other current liabilities 764 736
TOTAL EQUITY AND LIABILITIES 9426 9284
Statement of Changes in Equity
in millions of EUR
Capital Issue premiums Reserves Own shares
Book value at the end of the
previous period
(12/31/2002) 1269 14 1627 -102
Income for the period 89
Changes in exchange
rates
Acquisition/sale of own
shares -12
Adjustment to market
value of financial assets
Book value at the end
of the period
(03/31/2003) 1269 14 1716 -114
in millions of EUR
Exchange rate differences Direct offset against equity
Shareholders' equity
Book value at the end of the previous period
(12/31/2002) -117 4
2695
Income for the
period 89
Changes in exchange
rates -45 -45
Acquisition/sale of
own shares -12
Adjustment to market
value of financial
assets -88 -88
Book value at the end
of the period
(03/31/2003) -162 -84
2639
RESULTS (1) BY SEGMENT
The table below gives sales without elimination of inter-sector sales; results by segment include non-recurring items (EBIT).
Millions of EUR
Sales Sales Sales
Segments quarter 2002 1st quarter 2003 1st quarter 03 /
(03/31/2002) (03/31/2003) 1st quarter 02
(%)
Pharmaceuticals
Sector2 456 435 -5%
Chemicals Sector 734 712 -3%
Plastics Sector 549 577 5%
Processing Sector3 365 350 -4%
Unallocated items - - -
Discontinuing
operations4 - - -
GROUP 1983 1906 -4%
Millions of EUR
EBIT EBIT EBIT
Segments 1st quarter 2002 1st quarter 2003 1st quarter 03 /
(03/31/2002) (03/31/2003) 1st quarter 02
(%)
Pharmaceuticals
Sector2 432 40 -7%
Chemicals Sector 67 68 1%
Plastics Sector 41 58 41%
Processing Sector3 29 16 -45%
Unallocated items -21 -18 -14%
Discontinuing
operations4 16 17 6%
GROUP 175 181 3%
1) Figures were subjected to a limited review by the external auditors, Deloitte & Touche
2) Including the amortization on Teveten(R) and Luvox(R) which have been offset by the result on the sublicense of Teveten(R) to Biovail in the USA.
3) Including non-recurring items related to the automotive air-intake activities , sold on 1 January 2002, which amounted to + EUR 7 million in the first quarter of 2002 and - EUR 1 million in the first quarter of 2003.
4) The results of our high density polyethylene activities. REBIT is positive because it includes the increase in value of Solvay's put option put to BP of Solvay's interests in the joint ventures, the results recorded under the equity method, were - EUR 15 million in the first quarter of 2003, identical to the amount for the first quarter of 2002.