Nine months 2006 results
The full press release (including also IFRS financial statements) and the full report of the Statutory auditor are in the attached PDF files.
Excellent operating results from the Solvay Group
for the first nine months of 2006,
reflecting further sustained growth in the third quarter
- Growth in sales of 13% (EUR 7,049 million)
- Growth in operating results of 31% (EUR 883 million)
- Growth in all three sectors : Pharmaceuticals, Chemicals and Plastics
- Net income of the Group (EUR 671 million) close to that for the first nine months of 2005, despite much less significant non-operating items
Sales for the first nine months of 2006 posted an increase of 13% (+5% in the third quarter of 2006) and reached EUR 7,049 million. Sales increased in all three sectors in the first nine months of 2006: Pharmaceuticals +24%, Chemicals +9% and Plastics +10%.
REBIT (EUR 883 million) was up by 31% for the first nine months of 2006 compared to the first nine months of 2005 (+15% in the third quarter 2006). Operating margin (REBIT on sales) reached 13%, up from that of the first nine months of 2005, which reached 11%.
The net income of the Group in the first nine months of 2006 reached EUR 671 million. It increased 6% in the third quarter of 2006 to EUR 187 million. For the first nine months of 2006, it included a net capital gain of EUR 103 million (in discontinued activities) on the sale of industrial foils, completed in the first quarter of 2006, and a negative balance of non-recurring items of EUR 119 million (mainly restructuring costs). It should be recalled that the results of the first nine months of 2005 included EUR 454 million of discontinued activities and a negative balance for non-recurring items of EUR 295 million.
Cash flow1 for the first nine months of 2006 amounted to EUR 1,054 million and REBITDA2 to 1,229 million. The net debt to equity ratio was 33% at the end of September 2006 (compared to 43% at the end of 2005).
Sales of the Pharmaceuticals Sector3 (EUR 1,934 million) increased by 24% in the first nine months of 2006. Sales for the third quarter of 2006 were primarily affected by the expiration of the marketing rights for Pantoloc® in May 2006 (sales of EUR 44 million in the third quarter of 2005) and down by 4% compared to the third quarter of 2005. Beyond the significant growth of Cardiometabolic sales for the first nine months of 2006, with EUR 323 million in sales for the blockbuster drug fenofibrate, sales from the primary products of Solvay Pharmaceuticals were up significantly. Research efforts, EUR 306 million (16% of sales), were up significantly (+30%) for the first nine months of 2006. With operating results of EUR 122 million in the third quarter of 2006, the Pharmaceutical Sector’s nine-month results of 2006 were exceptionally high, reaching EUR 365 million. Overall for 2006, the results and margins for Solvay Pharmaceuticals will be significantly up compared to 2005 and in line with the objectives of the « INSPIRE » project4, which the sector is confident it can realize, confirming the success of the integration of Fournier in the Group.
Sales of the Chemicals sector increased by 9% in the first nine months of 2006 (+6% in the third quarter of 2006). Results, REBIT of EUR 255 million, increased by 10% in the first nine months of 2006 compared to the first nine months of 2005 and by 20% in the third quarter of 2006. This performance was due to the persistence of a continued favorable global balance between supply and demand, at a time when energy costs remained at very high levels. Results from the “Minerals” cluster improved while the “Oxygen” cluster continued to achieve good results, especially during the third quarter; the “Electrochemistry” activities (caustic soda) and fluorinated products trended downward, mainly in fluor activities.
Sales of the Plastics Sector increased by 10% in the first nine months of 2006 (+10% in the third quarter 2006). The increase in the “Specialties” cluster (Specialty Polymers and Inergy Automotive Systems) for the first nine months of 2006 enabled the Plastics Sector to post results (EUR 315 million) that increased by 6% compared to the very high level of the first nine months of 2005. In the third quarter of 2006, results were up by 26% due to the strong growth in the “Vinyls” cluster.
| “Overall for 2006, revenue and operating results of Solvay will significantly increase, considering the generally favorable business climate, the enrichment of the portfolio of activities and the continuous efforts to improve its competitiveness.” |
SOLVAY Group – Summary Financial Information5
|
In millions of EUR |
9 months 2005 |
9 months 2006 |
9 months 2006/ |
3rd quarter 2005 |
3rd quarter 2006 |
3rd quarter 2006/ |
|
Sales |
6,238 |
7,049 |
+13% |
2,199 |
2,305 |
+5% |
|
REBIT |
676 |
883 |
+31% |
249 |
286 |
+15% |
|
Non-recurring items |
-295 |
-119 |
-60% |
-14 |
-33 |
+136% |
|
EBIT |
381 |
764 |
+101% |
235 |
253 |
+8% |
|
Charges on net indebtedness |
-60 |
-65 |
+8% |
-22 |
-20 |
-10% |
|
Income taxes |
-115 |
-150 |
+30% |
-48 |
-53 |
+10% |
| Discontinued operations |
+454 |
+103 |
-77% |
+3 |
0 |
n.s. |
|
Income from investments |
+24 |
+19 |
-21% |
+8 |
+7 |
-13% |
|
Net income of the Group |
685 |
671 |
-2% |
176 |
187 |
+6% |
|
Net income (Solvay share) |
665 |
649 |
-2% |
173 |
181 |
+5% |
|
Depreciation and amortization |
335 |
383 |
+14% |
116 |
118 |
+2% |
| REBITDA |
978 |
1,229 |
+26% |
356 |
403 |
+13% |
|
Cash flow |
1,020 |
1,054 |
+3% |
292 |
305 |
+4% |
| (per share, in EUR) | ||||||
|
Earnings per share6 |
8,01 |
7,85 |
-2% |
2,08 |
2,19 |
+5% |
|
Net debt to equity ratio |
46% |
33% |
– |
– |
– |
– |
Notes on Solvay Group summary financial information
Non-recurring items in the first nine months of 2006 showed a negative balance of EUR 119 million. This included:
- The capital gain of EUR 75 million on the second-quarter sale of 49.6 % in Financière Keyenveld S.A. (Sofina S.A. holding) ;
- EUR 106 million of restructuring costs, recorded primarily in the first quarter of 2006, to meet the 2010 objectives of the Pharmaceuticals Sector (the INSPIRE project7);
- EUR 49 million of restructuring costs and additional provisions for miscellaneous litigation, primarily in the chemical sector;
- as well as EUR 37 million for the impairment and reorganization of the barium and strontium carbonate activities which face significant competitive pressures.
Charges on net indebtedness amounted to EUR 65 million. At the end of September 2006, financial debt was almost totally covered at a fixed rate. This resulted mainly from the issue, in May 2006 of EUR 500 million of a hybrid non-dilutive financial instrument carrying a payment at a fixed interest rate for the first 10 years. This issue allowed the Group to reinforce its financial structure while at the same time benefiting from favorable conditions in the capital market.
Income taxes amounted to EUR 150 million for the nine months of 2006, or a rate of 21% taking into account tax credits in Germany and Spain in the first quarter and in France in the third quarter, as well as the non-taxable capital gain on the sale of 49.6% in S.A. Financière Keyenveld in the second quarter. This tax amount is not comparable twith that from the same period last year due to the establishment in 2005 of significant provisions, which in part were not tax-deductible.
In the first nine months of 2006, results from discontinued operations represent the net income and net capital gain (EUR 103 million) on the sale of industrial foils to Renolit in March 2006. It should be recalled that, in the first nine months of 2005, the results from discontinued operations included a net capital gain (EUR 443 million) on the January 6, 2005 sale to BP of Solvay’s American and European interests in the high-density polyethylene activities and the net income of the industrial foils activities.
Income from investments represents the dividends paid by Fortis and Sofina. For Fortis, it is the balance of the dividend from 2005 paid in the second quarter of 2006 as well as the prepayment of the dividend from 2006 paid in the third quarter of 2006.
Net income of the Group amounted to EUR 671 million, or close to that of the first nine months of 2005. The net earnings per share in the first nine of months 2006 amounted to EUR 7.85 (EUR 2.19 in the third quarter 2006), compared to EUR 8.01 for the same period in 2005 (EUR 2.08 in the third quarter of 2005).
Depreciation amounted to EUR 383 million, up 14% compared to that of the first nine months of 2005. Cash flow amounted to EUR 1,054 million and was up by 3%. REBITDA amounted to EUR 1,229 million, up by 26%, given the strong growth in operating results.
Stockholders’ equity amounted to EUR 4,420 million at the end of September 2006, up by EUR 500 million compared to the end of 2005. Net debt of the Group as of September 30, 2006 (EUR 1,454 million) decreased by EUR 227 million compared to December 31, 2005. The net debt to equity ratio was 33%, down in comparison to 43% at the end of 2005.
RESULTS BY SEGMENT8
|
In millions of EUR |
9 months 2005 |
9 months 2006 |
9 months 2006/ |
3rd quarter 2005 |
3rd quarter 2006 |
3rd quarter 2006/ |
|
GROUP SALES |
6,238 |
7,049 |
+13% |
2,199 |
2,305 |
+5% |
|
Pharmaceuticals |
1,556 |
1,934 |
+24% |
639 |
614 |
-4% |
|
Chemicals |
2,077 |
2,255 |
+9% |
704 |
746 |
+6% |
|
Plastics |
2,605 |
2,860 |
+10% |
857 |
945 |
+10% |
|
Non-allocated items |
– |
– |
– |
– |
– |
– |
|
GROUP REBIT |
676 |
883 |
+31% |
249 |
286 |
+15% |
|
Pharmaceuticals |
194 |
365 |
+88% |
118 |
122 |
+3% |
|
Chemicals |
232 |
255 |
+10% |
69 |
83 |
+20% |
|
Plastics |
296 |
315 |
+6% |
78 |
98 |
+26% |
|
Non-allocated items |
-46 |
-52 |
+13% |
-16 |
-17 |
+6% |
|
GROUP REBITDA |
978 |
1,229 |
26% |
356 |
403 |
13% |
|
Pharmaceuticals |
241 |
439 |
+82% |
138 |
146 |
+6% |
|
Chemicals |
349 |
380 |
+9% |
109 |
125 |
+15% |
|
Plastics |
425 |
453 |
+7% |
122 |
146 |
+20% |
|
Non-allocated items |
-37 |
-43 |
+16% |
-13 |
-14 |
+8% |
1 Net income plus total depreciation.
2 REBITDA : REBIT, before recurring depreciation.
3 Results from the Pharmaceuticals sector include results from Fournier Pharma since August 1, 2005.
4 See also comments on page 7.
5 Books were given a limited review by Deloitte
6 Calculated on the basis of the weighted average of the number of shares outstanding after deducting shares purchased to cover stock option program, or a total of 82,983,272 shares for 9 months 2005 and 82,672,658 shares for 9 months 2006.
7 See also comments on page 7.
8 Results by sector include results from the three sectors of the Group as well as non-allocated items.