Nine months 2007 results
See also the attached PDF files :
- full press release (including also IFRS financial statements)
- nine months 2007 key data
- nine months 2007 results presentation
Solvay’s operating results (EUR 925 million) 5% above
the excellent results from the first 9 months of 2006
(+8% in the 3rd quarter)
- Sales (EUR 7,206 million) up 2% (+4% in the 3rd quarter) despite unfavorable currency developments.
- Operating results (EUR 925 million) up 5% (+8% in the 3rd quarter) :
- Continued growth in Chemicals and Plastics ;
- Improved results in Pharmaceuticals : growth of 7% in the 3rd quarter 2007 partly compensating for the weak results in the 2nd quarter.
- Net income of the Group (EUR 646 million) down 4% compared to the first 9 months of 2006 (+25% in the 3rd quarter)
- Interim dividend of 0.85 EUR net per share (1.13 EUR gross per share)
- Confirmation of outlook for operating results 2007 comparable to the results 2006 for the Group as for the Pharmaceuticals sector.
Sales reached EUR 7,206 million for the first 9 months of 2007, up 2% compared to the first 9 months of 2006, despite the currency impact. In the 3rd quarter 2007, they were up 4% and amounted to EUR 2,399 million. At constant exchange rates, they would have increased by 4% (+6% in the 3rd quarter 2007).
REBIT1 (EUR 925 million) was up 5% compared to the first 9 months of 2006. It improved by 8% in the 3rd quarter and reached EUR 309 million. The three sectors contributed to this growth. The Pharmaceuticals sector improved by 7%; the Chemicals (+5%) and Plastics (+7%) sectors continued their growth. The operating margin (REBIT on sales) was 12.8%, compared to 12.5% for the first 9 months of 2006.
The net income of the Group (EUR 646 million) was down by 4% compared to the first 9 months of 2006. It was up 25% in the 3rd quarter 2007, taking into account improvement in the operating results (+8% in the 3rd quarter) and the fact that it included positive non-recurring items of EUR 52 million (compared to the negative items of EUR 32 million in the 3rd quarter 2006). In addition, tax charges were higher in the first 9 months of 2007 taking into account the improvement in results and the one-time effect in the 3rd quarter 2007 of a change in tax rate in Germany (negative “non cash” effect of EUR 44 million).
Cash flow2 for the first 9 months of 2007 amounted to EUR 1,035 million and REBITDA3 to EUR 1,277 million. The net debt to equity ratio was 33% at the end of September 2007, comparable to the situation at the end of September 2006.
On October 25, 2007, the Board of Directors approved, for the current period, the payment an interim dividend amounting to 0.85 EUR net per share (1.13 EUR gross per share).
The operating results of the Pharmaceuticals sector (EUR 336 million), up 7% in the 3rd quarter 2007, improved but remain still down by 8% for the first 9 months of 2007 considering the weak results from the 2nd quarter. In the 3rd quarter, sales increased by 11% despite the unfavorable impact of the USD and the significant pressure on the European pharmaceuticals market, especially in France. These were more than compensated for by the improvement in sales of the principal products, especially the excellent performance of the fenofibrates and flu vaccines, for which the vaccination campaigns in Europe started earlier than in 2006. Research and Development expenses (EUR 119 million) were up in the 3rd quarter 2007 and represented 17% of sales. For the first 9 months of 2007, they are in line with the estimate of 16% of sales for 2007. The “Inspire” savings plan (EUR 300 million by 2010) is continuing as planned. Overall for 2007, prospects for the Pharmaceuticals Sector remain in line with those presented in the first half of 2007 (see page 9).
The Chemicals Sector improved due to the persistence of a continued favorable global balance for our products between supply and demand. Sales (EUR 2,289 million) were up compared to the first 9 months of 2006 (+2%, as in the 3rd quarter). Results (REBIT of EUR 276 million) posted a growth of 8% compared to the first 9 months of 2006 (+5% in the 3rd quarter). The “Minerals” and “Oxygen” clusters as well as the “Electrochemistry” activities (caustic soda) continued to record excellent results, while the fluor chemical commodities remained under heavy pressure.
The Plastics Sector again showed improvement due to the excellent performance of all its activities. Sales (EUR 2,983 million) increased by 4% (+1% in the 3rd quarter). Results (REBIT of EUR 349 million) increased by 11% (+7% in the 3rd quarter) despite the unfavorable effect of the US dollar and Japanese yen exchange rates.
| “Overall for 2007, we confirm that we can achieve the excellent operating results of last year. Obviously, we remain attentive to the evolution of global macroeconomic conditions, energy costs and the EUR/USD exchange rate.” |
SOLVAY Group – Summary Financial Information 4
|
Million EUR |
9 months 2006 |
9 months 2007 |
9 months 2007/ |
3rd quarter 2006 |
3rd quarter 2007 |
3rd quarter 2007/ |
|
Sales |
7,049 |
7,206 |
+2% |
2,305 |
2,399 |
+4% |
|
REBIT |
883 |
925 |
+5% |
286 |
309 |
+8% |
|
REBIT/Sales |
12.5% |
12.8% |
|
12.4% |
12.9% |
|
|
Non-recurring items |
-119 |
+18 |
n.s. |
-32 |
+52 |
n.s. |
|
EBIT |
765 |
944 |
+23% |
254 |
361 |
+42% |
|
Charges on net indebtedness |
-65 |
-60 |
-7% |
-21 |
-22 |
+7% |
|
Income from investments |
19 |
+24 |
+22% |
8 |
+9 |
+21% |
| Earnings before taxes |
719 |
907 |
+26% |
241 |
349 |
+45% |
|
Income taxes |
-150 |
-261 |
+74% |
-54 |
-115 |
+113% |
|
Discontinued operations |
103 |
0 |
n.s. |
0 |
0 |
n.s. |
|
Net income of the Group |
671 |
646 |
-4% |
187 |
233 |
+25% |
|
Net income (Solvay share) |
649 |
610 |
-6% |
181 |
218 |
+20% |
|
Total depreciation |
383 |
388 |
+1% |
118 |
137 |
+16% |
|
REBITDA |
1,229 |
1,277 |
+4% |
403 |
427 |
+6% |
|
Cash flow |
1,054 |
1,035 |
-2% |
305 |
370 |
+21% |
|
(per share, in EUR) |
||||||
|
Earnings per share5 |
7.85 |
7.38 |
-6% |
2.19 |
2.63 |
+20% |
|
Net debt to equity |
33% |
33% |
– |
– |
– |
– |
Notes on Solvay Group summary financial information
Non-recurring items amounted to EUR 18 million for the first 9 months of 2007 compared to EUR -119 million for the first 9 months of 2006. They include, on the one hand, non-recurring income, which are the capital gains on the sale of Sofina shares (EUR 54 million) and the sale of subscription rights to the capital increase of Fortis (EUR 37 million). On the other hand, they include non-recurring charges for restructuring costs in the Pharmaceuticals Sector in the framework of the “INSPIRE6” project (EUR 26 million) and for an impairment of asset in the Pharmaceuticals Sector (odiparcil project) due to a reallocation of R&D priorities.
Solvay chose to sell part of its subscription rights for the capital increase of Fortis in order to be able to finance a partial subscription (about 2.5 million new shares).
Charges on net indebtedness amounted to EUR 60 million. At the end of September 2007, about 94% of the financial debt was covered at a fixed rate of 5.5% with a duration of slightly less than 8 years.
Following a drop in the tax rate in Germany, deferred tax credits were decreased and represent a one-time charge of EUR 44 million in the 3rd quarter, without a cash effect. Due to this one-time charge and the improvement in results, the tax charges greatly increased for the first 9 months of 2007 and amounted to EUR 261 million. It is to be noted that capital gains linked to Fortis and Sofina shares are not taxable. The average tax rate is 29% (compared to 21% for the first 9 months of 2006), in line with our medium term guidance of 30%.
For the first 9 months of 2007, there are no results from discontinued activities , while the item amounted to EUR 103 million before taxes in 2006 following the sale in March of industrial foils.
Net income of the Group amounted to EUR 646 million compared to EUR 671 million for the first 9 months of 2006. Net earnings per share for the first 9 months of 2007 amounted to 7.38 EUR (2.63 EUR in the 3rd quarter 2007) compared to 7.85 EUR for the same period in 2006 (2.19 EUR in the 3rd quarter 2006).
Cash flow amounted to EUR 1,035 million, and REBITDA to EUR 1,277 million. Depreciation (EUR 388 million) is stable (+1%) compared to the first 9 months of 2006.
Total equity amounted to EUR 4,539 million at the end of September 2007, slightly up from what it was in 2006. The net debt of the Group at the end of September 2007 (EUR 1,498 million) was up by EUR 241 million compared to that of December 31, 2006 and was comparable to that of the first 9 months of 2006. Compared to December 31, 2006, the increase in working capital is mainly driven by the seasonality of sales and a decrease in current liabilities connected with the payment during the year of milestones and earn-outs related to the acquisition of Fournier. The net debt to equity ratio was 33% at the end of September 2007, comparable to that at the end of September 2006, while it was 28% at the end of 2006. This situation reflects the Group’s policy of having a sound financial situation, in line with the objective of not persistently exceeding a net debt to equity ratio of 45%.
On October 25, 2007 the Board of Directors approved, for the current period, the payment of an interim dividend in the amount of 0.85 EUR net per share (1.13 EUR gross per share), representing 40% (rounded up) of the total preceding dividend based on the method of calculation decided upon by the Board of Directors in October 2006. This interim dividend (coupon no. 79), which will be paid on January 17, 2008, will be taken into account in the total dividend for 2007 that will be proposed by the Board of Directors on February 14, 2008 for approval by the General Shareholders’ Meeting on May 13, 2008. In addition it is to be noted that the Group’s dividend policy consists of increasing it anytime possible and, if possible, not decreasing it. For 26 years, the dividend has gradually increased and has never been reduced.
RESULTS BY SECTOR 7
|
Million EUR |
9 months 2006 |
9 months 2007 |
9 months 2007/ |
3rd quarter 2006 |
3rd quarter 2007 |
3rd quarter 2007/ |
|
GROUP SALES |
7,049 |
7,206 |
+2% |
2,305 |
2,399 |
+4% |
|
Pharmaceuticals |
1,934 |
1,935 |
+0% |
614 |
683 |
+11% |
|
Chemicals |
2,255 |
2,289 |
+2% |
746 |
761 |
+2% |
|
Plastics |
2,860 |
2,983 |
+4% |
944 |
954 |
+1% |
|
“Corporate et Support activities”8 |
0 |
0 |
– |
0 |
0 |
– |
|
GROUP REBIT |
883 |
925 |
+5% |
286 |
309 |
+8% |
|
Pharmaceuticals |
365 |
336 |
-8% |
122 |
130 |
+7% |
|
Chemicals |
255 |
276 |
+8% |
83 |
87 |
+5% |
|
Plastics |
315 |
349 |
+11% |
97 |
104 |
+7% |
|
“Corporate et Support activities”8 |
-52 |
-35 |
-32% |
-17 |
-12 |
-27% |
|
GROUP REBITDA |
1,229 |
1,277 |
+4% |
403 |
427 |
+6% |
|
Pharmaceuticals |
439 |
411 |
-6% |
146 |
155 |
+6% |
|
Chemicals |
380 |
398 |
+5% |
125 |
129 |
+2% |
|
Plastics |
453 |
495 |
+9% |
145 |
153 |
+5% |
|
“Corporate et Support activities”8 |
-43 |
-27 |
-38% |
-14 |
-10 |
-29% |
1 Operating results, i.e. EBIT before non-recurring items
2 Net income plus total depreciation.
3 REBITDA : REBIT, before recurring depreciation and amortization.
4 Financial statements with limited review by Deloitte
5 Calculated on the basis of the weighted average of the number of shares outstanding after deducting shares purchased to cover stock options, or a total of 82,645,612 share for the first 9 months of 2006 and 82,706,652 shares for the first 9 months of 2007.
6 See also comments on page 7.
7 Results by sector include results from the three sectors of the Group, as well as “Corporate and Business Support”
8 Non-allocated items, after more direct allocations starting 2007.