First Quarter 2006 Results
Full press release (including also IFRS financial statements) is available in the attached PDF file.
Excellent results for the Solvay Group in the 1st quarter of 2006
- Sales of EUR 2,357 million (+20%) and operating results of EUR 293 million (+34%).
- Strong growth in Pharmaceuticals activities; growth in the Chemicals sector and steady performance by the Plastics sector.
- Net income of the Group (EUR 238 million) reflecting much less significant non-operating elements than in the 1st quarter of 2005.
Sales in the 1st quarter of 2006 reached EUR 2,357 million, up by 20% compared to the 1st quarter of 2005. Sales were up in all three sectors: Pharmaceuticals (+56%), Chemicals (+13%) and Plastics (+8%).
REBIT (EUR 293 million) improved by 34% in the 1st quarter of 2006 compared to the 1st quarter of 2005. The operating margin (REBIT on sales) reached nearly 13%, up from the 1st quarter of 2005 (11%). The operating results for the Pharmaceuticals sector tripled, those of the Chemicals sector grew by 7% and the Plastics sector recorded a performance comparable (-2% ) to that of its excellent 1st quarter 2005.
The net income of the Group reached EUR 238 million in the 1st quarter of 2006. It included a net capital gain on the sale of Industrial Foils to Renolit (EUR 103 million) and a negative balance of non-recurring items of EUR 88 million, including EUR 77 million for restructuring costs in connection with implementing steps to achieve the 2010 objectives of the Pharmaceuticals Sector’s “INSPIRE” (1) project. The result from the 1st quarter 2005, which included EUR 445 million in results of discontinued operations and a negative balance of non-recurring items of EUR 322 million.
Cash flow 2 for the 1st quarter of 2006 amounted to EUR 357 million and REBITDA 3 to EUR 406 million. The net debt to equity ratio dropped to 37% at the end of the 1st quarter 2006 compared to 43% at the end of 2005.
Sales for the Pharmaceuticals Sector 4 (EUR 672 million) in the 1st quarter 2006 improved by 56% ; they were up in all therapeutic areas, in particular the “cardiometabolic” area including EUR 114 million for fenofibrate, the blockbuster from Fournier Pharma, which exceeded our expectations. Research expenditures (EUR 108 million; 16% of sales) were up significantly in the 1st quarter of 2006. The operating results for the Pharmaceuticals sector were particularly high in the 1st quarter of 2006 and reached EUR 124 million. For the year 2006 overall, the results and the margins for Solvay Pharmaceuticals will improve compared to 2005. The Pharmaceuticals sector is confident in its capacity to meet the objectives set for the year 2010 in the framework of the “INSPIRE” (1) project.
Sales for the Chemicals sector improved 13%. Results (REBIT of EUR 88 million) increased by 7% in the 1st quarter of 2006 compared to the already high level of the 1st quarter of 2005. This performance was possible thanks to the persistence of a good global balance between supply and demand, a strict control of costs and sales prices that were up in certain activities, in particular soda ash and fluorinated specialties, in an environment of increasing energy costs that reached very high levels.
Sales in the Plastics Sector improved by 8%. Results (REBIT of EUR 104 million) held steady at a level (-2%) comparable to the exceptional results from the 1st quarter of 2005. Specialties (Specialty Polymers and Inergy Automotive Systems) increased compared to the 1st quarter 2005 due to higher volumes, whereas price increases overall limited the impact of the increase in costs. The Vinyls activities were in line with the 4th quarter 2005 but posted a lower performance compared to the exceptional one from the 1st quarter 2005. The resumption in demand observed for PVC, after a more solid demand than expected for the season, should permit a continuation of price hikes while the prices of ethylene are up significantly.
| “The three sectors in the Group have had a very good start in 2006. Overall for 2006, the Solvay group should record higher sales and operating results, taking into account the current macroeconomic conditions.” |
SOLVAY Group – Summary Financial Information 5
|
Millions of EUR |
1st quarter 2005 |
1st quarter 2006 |
1st quarter 2006/ 1st quarter 2005 |
|||
|
Sales |
1,958 |
2,357 |
+20% |
|||
|
REBIT |
218 |
293 |
+34% |
|||
|
Non-recurring items |
-322 |
-88 |
-73% |
|||
|
EBIT |
-104 |
205 |
n.s. |
|||
|
Charges on net indebtedness |
-20 |
-22 |
+10% |
|||
|
Income taxes |
+4 |
-48 |
n.s. |
|||
| “Discontinued operations” |
+445 |
+103 |
-77% |
|||
|
Net income of the Group |
325 |
238 |
-27% |
|||
|
Net income (Solvay share) |
320 |
232 |
-27% |
|||
|
Depreciation & amortization |
109 |
119 |
+9% |
|||
| REBITDA |
314 |
406 |
+29% |
|||
|
Cash flow |
434 |
357 |
-18% |
|||
| (per share, in EUR) | ||||||
|
Earnings per share 6 |
3.86 |
2.80 |
-27% |
|||
|
Net debt to equity ratio |
22% |
37% |
– |
|||
Notes on Solvay Group summary financial information
Non-recurring items in the 1st quarter 2006 showed a negative balance of EUR 88 million, including EUR 77 million for costs of rationalizations under way in order to achieve the objectives of the Pharmaceuticals Sector.
Charges on net indebtedness amounted to EUR 22 million, close to those from the 1st quarter 2005. The financial debt is at 71% fixed rates.
Income taxes amounted to EUR 48 million in the 1st quarter 2006, which is a rate of 25% considering the tax credits in Germany and Spain. This tax amount is not comparable to that of the same period from last year, given the creation in 2005 of significant provisions, some of which are not tax-deductible.
Results from discontinued operations represent:
- In the 1st quarter 2005, the net capital gain (EUR 443 million) from the sale to BP on January 6, 2005, of Solvay’s interests in American and European high-density polyethylene activities, and the net income of the industrial foils activities;
- In the 1st quarter 2006, the net income of Industrial Foils and the net capital gain (EUR 103 million) on the sale in March 2006 of Industrial Foils to Renolit.
The net income of the Group was equal to EUR 238 million. The net earnings per share in the 1st quarter 2006 amounted to 2.80 EUR, compared with 3.86 EUR for the same period in 2005.
Depreciation amounted to EUR 119 million, up 9% compared to the 1st quarter 2005. Cash flow equaled EUR 357 million; it dropped 18% taking into account the evolution of the Group’s net income, which reflected much less significant non-operating items than in the 1st quarter of 2005. REBITDA amounted to EUR 406 million, up 29%.
Shareholders’ equity amounted to EUR 4,175 million at the end of the 1st quarter 2006, up 255 million EUR compared to the end of the year 2005. Net debt for the Group as of March 31, 2006 (EUR 1,534 million) was down by EUR 146 million compared to December 31, 2005. The net debt to equity ratio was 37%, down by comparison with the end of 2005 (43%).
Results by Sector 7
|
In millions of EUR |
1st quarter 2005 |
1st quarter 2006 |
1st quarter 2006/ |
|
Group sales |
1,958 |
2,357 |
+20% |
|
Pharmaceuticals |
430 |
672 |
+56% |
|
Chemicals |
664 |
752 |
+13% |
|
Plastics |
864 |
933 |
+8% |
|
Non-allocated items |
– |
– |
– |
|
Group REBIT |
218 |
293 |
+34% |
|
Pharmaceuticals |
42 |
124 |
+195% |
|
Chemicals |
82 |
88 |
+7% |
|
Plastics |
106 |
104 |
-2% |
|
Non-allocated items |
-12 |
-22 |
+83% |
|
Group REBITDA |
314 |
406 |
+29% |
|
Pharmaceuticals |
56 |
148 |
+164% |
|
Chemicals |
119 |
129 |
+8% |
|
Plastics |
148 |
148 |
– |
|
Non-allocated items |
-9 |
-19 |
+111% |
1 See also comments page 7
2 Net income plus total depreciation
3 REBITDA : REBIT, before recurring depreciation
4 Income from Pharmaceuticals includes results from Fournier Pharma since August 1, 2005.
5 Figures subjected to limited review by Deloitte
6 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 82,816,924 in the 1st quarter 2005 and 82.723.046 in the 1st quarter 2006.
7 Results by sector include the results of the three sectors of the Group as well as non-allocated items.