|
(31/07/2008) Operating results for the Solvay Group for the 1st half of 2008: -11% compared to the high level of
The full press release is available on http://www.solvay-investors.com/
EMBARGO: Brussels, July 31, 2008 at 7:30 a.m.
REGULATED INFORMATION
Operating results for the Solvay Group for the 1st half of 2008: -11% compared to the high level of the 1st half of 2007 Sustained level of activities - increased energy and raw materials costs
- Sales (EUR 4,731 million) down by 2% (+4% at constant scope(1) and exchange rates)
- Operating results (EUR 548 million): -11% compared to the high level of the 1st half of 2007
. Pharmaceuticals (+20%):
- Growth in the main products together with miscellaneous income largely compensated for the unfavorable exchange rates and sustained investments in R&D and for the co-promotion of Simcor®(2).
. Chemicals (-28%) and Plastics (-24%) :
- Generally good demand; increase of Specialty Polymers volumes in the 2nd quarter;
- Significant deterioration in margins in the 1st half for the main chemical products and the European vinyls activities, taking into account the continued increase in energy, coal, coke and ethylene prices;
- New selling prices increases under way
. Net income of Group (EUR 351 million, -15%)
Group sales (EUR 4,731 million) in the 1st half of 2008 were down by 2% compared to the 1st half of 2007. Demand for our main products remained good overall but the unfavorable exchange rate weighed on the evolution in sales. At constant scope(1) and exchange rates, sales would have increased by 4%. In the 2nd quarter, Group sales were down by 3% and amounted to EUR 2,357 million (stable at constant scope(1) and exchange rates).
Group operating results (REBIT(3); EUR 548 million) posted a drop of 11% compared to the high level of the 1st half of 2007. Operating results amounted to EUR 249 million in the 2nd quarter (-15% compared to the 2nd quarter of 2007) in view of the pronounced deterioration in margins in the Chemicals Sector and the European vinyls activities. The operating margin (REBIT on sales) was 11.6% compared to 12.8% in the 1st half of 2007.
The net income of the Group (EUR 351 million) dropped by 15% compared to the 1st half of 2007, taking into account the drop in operating results and a temporary increase in charges on net indebtedness in the 1st quarter of 2008.
Cash flow(4) for the 1st half of 2008 amounted to EUR 597 million (-10%) and REBITDA(5) was EUR 773 million (-9%). The Group is implementing its strategy of sustainable and profitable growth and its dividend policy thanks to its sound financial situation. However, the ambitious geographic expansion program and the development of activities have not yet contributed to the Group's results.
The net debt to equity ratio reached 36% at the end of June 2008, compared to 35% at the end of June 2007.
Sales in the Pharmaceuticals Sector (EUR 1,249 million) were stable compared to the 1st half of 2007 (-5% in the 2nd quarter of 2008). At constant exchange rates, sales would have increased by 5% in the 1st half (stable in the 2nd quarter of 2008). Growth in the main products, in emerging countries and in Europe, together with miscellaneous income largely compensated for the negative effects of unfavorable exchange rates, significant pressures resulting from competition from generic drugs, especially in France, and the decrease in prescriptions of Marinol® in the United States. Operating results (EUR 246 million) were up by 20% compared to the 1st half of 2007 (+37% in the 2nd quarter). They also included results (EUR 71 million) from the sale of non-strategic products (Baldrian®, Flammazine® and Alvityl®), which amounted to EUR 44 million in the 2nd quarter of 2008. These factors more than compensated for the unfavorable exchange rates as well as the sustained investments in R&D (18.2% of sales) and in the co-promotion of Simcor® in the United States. In the 1st half, R&D expenses (EUR 227 million) were up by EUR 24 million compared to the 1st half of 2007, in line with the 2008 budget of EUR 430 million focused primarily on the development of molecules for the cardiometabolic and neuroscience franchises.
The Chemicals and Plastics activities in the 1st half of 2008 underwent continued increase in energy, coal, coke and ethylene prices. This translated into a significant pressure on margins, especially in the Chemicals Sector and the European vinyls activities. In this context, Solvay is announcing price increases from 10% to 50% for its primary chemicals and plastics products. These price increases, which will be implemented in function of market conditions and contract periods, should contribute to an improvement of our margins. Measures to control costs and the effects of targeted restructuring (Inspire, fluorinated commodities, etc.) that the Group is pursuing will also contribute to improve margins.
In the 1st half of 2008, sales in the Chemicals Sector (EUR 1,528 million) remained stable due to the continued generally good demand. Operating results (EUR 136 million) were down by 28% in the 1st half of 2008 (-45% in the 2nd quarter of 2008) taking into account the increase in energy, coal, coke and distribution costs as well as additional production and startup costs. The Minerals cluster continued its improvement in sales but its results were affected primarily by costs. The Electrochemistry and fluorinated products clusters were down in the 1st half of 2008; caustic soda sales remained at a good level, and fluorinated products benefited from the first positive effects of restructuring efforts, but the chlorinated derivatives were down sharply. The Oxygen cluster was affected by, on the one hand, pressures on hydrogen peroxide prices in Europe and on the other hand, the scope change linked to the sale of the caprolactones activity in 2007.
Sales (EUR 1,954 million) in the Plastics Sector dropped by 4%, taking into account the scope change linked to sale of Solvay Engineered Polymers in February 2008. Demand remained generally good, both for the Vinyls cluster and the Specialty Polymers, but the weak US dollar had a negative effect on evolution of sales. REBIT (EUR 187 million) was down by 24% compared to the high level in the 1st half of 2007. Results from the 2nd quarter of 2008 improved compared to the 1st quarter of 2008. The increased costs of ethylene, in the vinyls activities, could not be passed along in selling prices in Europe in the 1st half, because of American imports of PVC favored by a weak US dollar. The situation in Asia and Mercosur remained favorable. In addition, the improvement in volumes of Specialty Polymers (+8% in the 1st half of 2008) combined with price increases for some polymers permitted a gradual improvement in the margins of these activities during the 2nd quarter of 2008.
Outlook: " As previously announced, taking into account the current level of the USD as well as the continued high level of energy, coal, coke and ethylene prices, results of the Solvay group for the year 2008 will remain at a sustained level but will not reach the record results of the year 2007. The operating result of the Pharmaceuticals sector should exceed the record level of 2007. "
Solvay Group - Summary Financial Information
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Million EUR | 1st half| 1st half| 1st half 2008/| 2nd quarter| 2nd quarter| 2nd quarter 2008/|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| (except for per-share figures in EUR)| 2007| 2008| 1st half 2007| 2007| 2008| 2nd quarter 2007|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| | | | | | | |
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Sales | 4,808| 4,731| -2%| 2,436| 2,357| -3%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| REBIT | 616| 548| -11%| 291| 249| -15%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| REBIT/Sales | 12.8%| 11.6%| | 11.9%| 10.5%| |
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Non-recurring items | -34| -34| 0%| -25| -43| 68%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| EBIT(6) | 582| 514| -12%| 265| 206| -22%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Charges on net indebtedness | -38| -51| 34%| -19| -22| 14%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Income from investments | 14| 10| -33%| 14| 10| -33%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Earnings before taxes | 559| 473| -15%| 261| 194| -26%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Income taxes | -146| -121| -17%| -66| -62| -6%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Discontinued operations | 0| 0| -| 0| 0| -|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Net income of the Group | 413| 351| -15%| 195| 131| -33%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Net income (Solvay share) | 392| 335| -15%| 183| 127| -31%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Total depreciation | 251| 246| -2%| 128| 134| 5%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| REBITDA | 850| 773| -9%| 410| 362| -12%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Cash flow | 664| 597| -10%| 322| 265| -18%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| (per share, in EUR) | | | | | | |
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Earnings per share(7) | 4.74| 4.02| -15%| 2.22| 1.53| -31%|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| | | | | | | |
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Net debt to equity ratio | 35%| 36%| -| -| -| -|
+---------------------------------------+----------+----------+----------------+-------------+-------------+-------------------+
Notes on Solvay Group summary financial information
Non-recurring items in the 1st half of 2008 (EUR -34 million) were comparable to the 1st half of 2007. They included primarily on the one hand, the capital gains before taxes (EUR 29 million) on the sale of Solvay Engineered Polymers in the United States, and on the other hand, of the restructuring charges for the "INSPIRE" project (EUR 37 million) in the Pharmaceutical sector as well as EUR 12 million for depreciation of assets in the framework of restructuring activities at Girindus (SBU Molecular Solutions) in Germany.
Charges on net indebtedness amounted to EUR 51 million. They were up due to a temporary charge, in the 1st quarter of 2008, resulting from contractually due interest on the milestone paid to the former Fournier shareholders. Aside from this spot charge, the charges on net indebtedness were at the same level as the 1st half of 2007 and the financial debt at the end of June 2008 was covered up to 94%, at a fixed rate of 5.2% and for a duration of 7.3 years.
Income taxes amounted to EUR 121 million in the 1st half of 2008 (EUR 62 million in the 2nd quarter of 2008), reflecting the evolution of results. The effective tax rate as of the 1st half of 2008 was to 26%, in line with 2007.
Net income of the Group (EUR 351 million) dropped by 15% compared to the 1st half of 2007. Minority interests amounted to EUR 16 million compared to EUR 21 million in the 1st half of 2007. Net earnings per share amounted to 4.02 EUR in the 1st half of 2008 (compared to 4.74 EUR in the 1st half of 2007).
Cash flow amounted to EUR 597 million (-10%) and REBITDA amounted to EUR 773 million (-9%). Depreciation (EUR 246 million) was down by 2% compared to 1st half of 2007.
Equity amounted to EUR 4,408 million at the end of June 2008, comparable to the end of December 2007 (EUR 4,459 million). Equity at the end of June 2008 included negative fair value differences of EUR 122 million, mainly linked to the shares held in Fortis. Net indebtedness of the Group at the end of June 2008 (EUR 1,606 million) was up compared to the situation at the end of December 2007 (EUR 1,307 million) taking into account the seasonal effect on working capital. The working capital at the end of June 2008 included receivables on the sale of non strategic pharmaceutical products (Baldrian® and Flammazine®); the working capital on sales ratio at the end of June 2008 is in line with the level of June 2007. The net debt to equity ratio was 36% at the end of June 2008, compared to 35% at the end of June 2007 and 29% at the end of December 2007. This ratio reflects the Group policy of having a sound financial situation, in line with the objective of not persistently exceeding a net debt to equity ratio of 45%, while at the same time ensuring implementation of its growth strategy and dividend policy.
RESULTS BY SECTOR(8)
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Million EUR | 1st half| 1st half| 1st half 2008/| 2nd quarter| 2nd quarter| 2nd quarter 2008/|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| | 2007| 2008| 1st half 2007| 2007| 2008| 2nd quarter 2007|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| | | | | | | |
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| GROUP SALES(9) | 4,808| 4,731| -2%| 2,436| 2,357| -3%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Pharmaceuticals | 1,251| 1,249| 0%| 627| 596| -5%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Chemicals | 1,528| 1,528| 0%| 773| 765| -1%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Plastics | 2,029| 1,954| -4%| 1,037| 995| -4%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Corporate and | | | | | | |
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| | -| -| -| -| -| -|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Business Support| | | | | | |
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| GROUP | | | | | | |
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| REBIT | 616| 548| -11%| 291| 249| -15%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Pharmaceuticals | 205| 246| 20%| 81| 111| 37%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Chemicals | 189| 136| -28%| 96| 53| -45%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Plastics | 245| 187| -24%| 126| 97| -23%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Corporate and | | | | | | |
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| | -23| -21| -11%| -11| -11| 1%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Business Support| | | | | | |
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| GROUP | | | | | | |
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| REBITDA | 850| 773| -9%| 410| 362| -12%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Pharmaceuticals | 256| 297| 16%| 106| 137| 29%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Chemicals | 269| 213| -21%| 137| 91| -33%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Plastics | 342| 278| -19%| 175| 142| -19%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Corporate and | | | | | | |
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
| Business Support| -17| -16| -8%| -8| -9| 8%|
+------------------+----------+----------+----------------+-------------+-------------+-------------------+
(1) Excluding Solvay Engineered Polymers (sold in February 2008) and caprolactones (sold in December 2007).
(2) Simcor®: combined fixed-dose lipid treatment (Niaspan®/simvastatine) developed by ABBOTT.
(3) REBIT : measure of operational performance (not an IFRS concept as such)
(4) Net income plus total depreciation.
(5) REBITDA: REBIT, before recurring depreciation.
(6) EBIT: results before financial charges and taxes.
(7) Calculated on the basis of the weighted average of the number of shares in the period, after deduction of own shares purchased to cover the stock option programs, or a total of 82.,723,341 shares for 6 months 2007 and 83,340,270 shares for 6 months 2008.
(8) Results by sector include results from the three sectors of the Group, as well as Corporate and Business Support.
(9) These are sales after elimination of inter-sector sales
Copyright Hugin
The appendixes relating to the press release are available on:
http://www.hugingroup.com/documents_ir/PJ/CO/2008/141025_88_KOFR_SolvayResultsH108.pdf
[CN#141025]
|
