First half 2006 results
Full press release (including also IFRS financial statements) is available in the attached PDF file.
Excellent operating results for the Solvay group
in the 1st half of 2006,
again reflecting strong growth
- Growth in revenue of 17% (EUR 4,744 million) and operating results of 40% (EUR 597 million).
- Strong growth in Pharmaceutical activities; growth in Chemicals sector and very good performance by the Plastics sector.
- Net income of the Group (EUR 484 million) reflecting much less significant non-operating items than in the 1st half of 2005.
Revenue in the 1st half of 2006 posted an increase of 17% (+15% in the 2nd quarter of 2006) and reached EUR 4,744 million. Revenue increased in the three sectors in the 1st half of 2006: Pharmaceuticals +44%, Chemicals +10% and Plastics +10%.
REBIT (EUR 597 million) was up by 40% in the 1st half of 2006 compared to the 1st half of 2005 (+45% in the 2nd quarter 2006). Operating margin (REBIT on sales) reached 13%, up from 11% in the 1st half of 2005.
The net income of the Group in the 1st half of 2006 reached EUR 484 million (EUR 246 million in the 2nd quarter 2006). It includes a net capital gain of EUR 103 million on the sale of industrial foils business to Renolit, completed in the 1st quarter of 2006, and a negative balance of non-recurring items of EUR 86 million. It should be recalled that the results of the 1st half of 2005 included a net profit of EUR 451 million from discontinued operations and a negative balance of non-recurring items of EUR 280 million.
Cash flow1 for the 1st half of 2006 amounted to EUR 749 million and REBITDA2 to EUR 826 million. The net debt to equity ratio was 38% at the end of the 1st half of 2006.
Revenue for the Pharmaceuticals Sector3 (EUR 1,320 million) in the 1st half of 2006 increased by 44% (+33% in the 2nd quarter of 2006). Beyond the significant growth of Cardiometabolic sales, sales of Solvay Pharmaceuticals’ major products grew strongly. Cardiometabolic sales included EUR 229 million for fenofibrate, a blockbuster drug that exceeds our expectations and is part of the results since August 1, 2005. Research efforts, EUR 217 million i.e. 16% of sales, were up significantly in the 1st half of 2006. The operating results of the Pharmaceuticals sector in the 1st half of 2006 were exceptionally high and reached EUR 243 million (EUR 119 million in the 2nd quarter 2006). Overall for the year 2006, the results and margins for Solvay Pharmaceuticals will be significantly up by comparison to 2005. The Pharmaceuticals sector is confident in its ability to realize the goals announced by 2010 in the context of the “INSPIRE”4 project.
Revenue of the Chemicals sector increased 10% in the 1st half of 2006 (+7% in the 2nd quarter of 2006). Results, REBIT of EUR 172 million, increased by 6% in the 1st half of 2006 compared to the 1st half of 2005 (+2% in the 2nd quarter of 2006). This performance was due to the persistence of a continued favorable global balance between supply and demand, at a time of increasing energy costs that reached very high levels. Results from the “Minerals” cluster improved while the “Oxygen” cluster continued to achieve good results; the “electrochemistry” activities (caustic soda) and fluorinated products trended downward.
Revenue from the Plastics sector increased 10% (+11% in the 2nd quarter 2006). Results, REBIT of EUR 217 million, were maintained at the exceptional levels of the 1st half of 2005 (+2% in the 2nd quarter of 2006). Results from Specialties (Specialty Polymers and Inergy Automotive Systems) increased compared to the 1st half of 2005, while results from Vinyls for the 1st half of 2006 decreased compared to the excellent levels of the 1st half of 2005, due to globally lower spreads.
| “Overall for 2006, Solvay should record increased revenue and operating results, considering the generally favorable business climate, the enrichment of its portfolio of activities and its continuous efforts to improve competitiveness.” |
SOLVAY Group – Summary Financial Information 5
|
In millions of EUR |
1st half 2005 |
1st half 2006 |
1st half 2006 / |
2nd quarter 2005 |
2nd quarter 2006 |
2nd quarter 2006 / |
|
Sales |
4,039 |
4,744 |
+17% |
2,081 |
2,388 |
+15% |
|
REBIT |
427 |
597 |
+40% |
209 |
304 |
+45% |
|
Non-recurring items |
-280 |
-86 |
-69% |
+42 |
+2 |
-95% |
|
EBIT |
147 |
511 |
+248% |
251 |
306 |
+22% |
|
Charges on net indebtedness |
-38 |
-45 |
+18% |
-18 |
-23 |
+28% |
|
Income taxes |
-67 |
-97 |
+45% |
-71 |
-49 |
-31% |
| “Discontinuing operations” |
451 |
103 |
-77% |
6 |
0 |
n.s. |
|
Income from investments |
16 |
12 |
-25% |
16 |
12 |
-25% |
|
Net income of the Group |
509 |
484 |
-5% |
184 |
246 |
+34% |
|
Net income (Solvay share) |
492 |
468 |
-5% |
172 |
236 |
+37% |
|
Depreciation and amortization |
219 |
265 |
+21% |
109 |
146 |
+34% |
| REBITDA |
622 |
826 |
+33% |
308 |
420 |
+36% |
|
Cash flow |
728 |
749 |
+3% |
293 |
392 |
+34% |
| (per share, in EUR) | ||||||
|
Earnings per share6 |
5.93 |
5.66 |
-5% |
2.07 |
2.86 |
+38% |
|
Net debt to equity ratio |
20% |
38% |
|
|
|
|
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 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 program, or a total of 82,987,400 shares in the 1st half of 2005 and 82,660,864 shares in the 1st half of 2006.
Notes on Solvay Group summary financial information
Non-recurring items in the 1st half of 2006 showed a negative balance of EUR 86 million. This included:
- the capital gain of EUR 75 million on the 2nd quarter sale of 49.6% in Financière Keyenveld S.A. (Sofina S.A holding.);
- EUR 101 million of restructuring costs, recorded primarily in the 1st quarter of 2006, to meet the 2010 objectives of the Pharmaceuticals Sector (the “INSPIRE7 project”); and
- EUR 58 million of restructuring costs and additional provisions for miscellaneous litigation, primarily in the chemical sector, notably the reorganization of barium and strontium carbonate activities subjected to significant competitive pressures.
Charges on net indebtedness amounted to EUR 45 million. Financial debt was totally covered at a fixed rate at the end of the 1st half of 2006 thanks to the issue in May 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 97 million in the 1st half of 2006, or a rate of 21%, taking into account tax credits in Germany and Spain and the non-taxable capital gain on the sale, in the 2nd quarter, of 49.6% in S.A. Financière Keyenveld. This tax amount is not comparable to that from the same period last year due to the establishment in 2005 of significant provisions, which in part were not tax-deductible.
Results from discontinued operations represent in the 1st half of 2006, the net income and the net capital gain (EUR 103 million) on the sale of industrial foils to Renolit in March 2006. It should be recalled that, in the 1st half of 2005, the results from discontinued operations included a net capital gain (EUR 443 million) on the sale of Solvay’s American and European interests in the high-density polyethylene activities to BP on January 6, 2005 and the net income of the industrial foils activities.
Income from investments represents the annual dividends paid by Fortis and Sofina. For Fortis, given the dividend prepayment made in the 3rd quarter of 2005, the amount recorded in the 2nd quarter of 2006 represents only the balance of the dividend.
Net income of the Group amounted to EUR 484 million. Net earnings per share in the 1st half of 2006 amounted to EUR 5.66 (EUR 2.86 in the 2nd quarter of 2006), compared with EUR 5.93 for the same period of 2005 (EUR 2.07 in the 2nd quarter 2005).
Depreciation and amortization amounted to EUR 265 million, up 21% compared to the 1st half of 2005. Cash flow amounted to EUR 749 million and was up 3%. REBITDA amounted to EUR 826 million, up 33%, given the strong growth in operating results.
Stockholders’ equity amounted to EUR 4,159 million at the end of the 1st half of 2006, up EUR 239 million compared to the end of 2005. Net debt of the Group as of June 30, 2006 (EUR 1,599 million) decreased by EUR 81 million compared to that of December 31, 2005. The net debt to equity ratio was 38%, down in comparison to 43% at the end of 2005.
RESULTS BY SEGMENT8
|
In millions of EUR |
1st half 2005 |
1st half 2006 |
1st half 2006 / |
2nd quarter 2005 |
2nd quarter 2006 |
2nd quarter 2006/ |
|
GROUP SALES |
4,039 |
4,744 |
+17% |
2,081 |
2,388 |
+15% |
|
Pharmaceuticals |
917 |
1,320 |
+44% |
487 |
648 |
+33% |
|
Chemicals |
1,373 |
1,509 |
+10% |
710 |
757 |
+7% |
|
Plastics |
1,748 |
1,916 |
+10% |
884 |
983 |
+11% |
|
Non-allocated items |
– |
– |
– |
– |
– |
– |
|
GROUP REBIT |
427 |
597 |
+40% |
209 |
304 |
+45% |
|
Pharmaceuticals |
76 |
243 |
+220% |
34 |
119 |
+250% |
|
Chemicals |
163 |
172 |
+6% |
82 |
84 |
+2% |
|
Plastics |
218 |
217 |
– |
111 |
113 |
+2% |
|
Non-allocated items |
-30 |
-35 |
+17% |
-17 |
-12 |
-29% |
|
GROUP REBITDA |
622 |
826 |
+33% |
308 |
420 |
+36% |
|
Pharmaceuticals |
103 |
293 |
+184% |
47 |
145 |
+209% |
|
Chemicals |
240 |
255 |
+6% |
121 |
126 |
+4% |
|
Plastics |
303 |
307 |
+1% |
155 |
159 |
+3% |
|
Non-allocated items |
-24 |
-29 |
+21% |
-15 |
-10 |
-33% |
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.