First quarter 2008 results
See also the attached PDF files :
- full press release (including also IFRS financial statements)
- Q1/08 key data
- Q1/08 results presentation
Operating results for the Solvay Group
in the 1st quarter of 2008 : – 8%
compared to the high level of the 1st quarter of 2007
An increase of 12% compared to the 4th quarter of 2007
Net income of the Group (EUR 220 million) up by 1%
- Sales (EUR 2,374 million) stable (+3% at constant exchange rates): significant impact of the strong euro
- Operating results (EUR 300 million):
-8% compared to the high level of the 1st quarter of 2007 but +12% compared to the 4th quarter of 2007- Pharmaceuticals (+9%): growth of major drugs and miscellaneous income, sustained R&D efforts.
- Chemicals (-11%): sustained demand but price increases do not fully compensate the increase of production costs.
- Plastics (-25%): generally sustained demand but declining spreads in vinyls in Europe.
Group Sales (EUR 2,374 million) in the 1st quarter of 2008 were stable compared to the 1st quarter of 2007. Demand for our main industrial products remained generally good but the unfavorable exchange rate penalized the evolution of sales. At constant exchange rates, sales would have increased by 3%. Sales in the Pharmaceuticals and Chemicals Sectors increased respectively by 4% and 1%; Plastics Sector sales were down by 3%.
Group operating results (REBIT1 ; EUR 300 million) posted a drop of 8% compared to the high level of the 1st quarter of 2007 but were up by 12% compared to the 4th quarter of 2007. The operating margin (REBIT on sales) was 12.6% compared to 13.7% in the 1st quarter of 2007 and 11.3% in the 4th quarter of 2007.
The net income of the Group (EUR 220 million) improved (+1%) compared to the 1st quarter of 2007.
Cash flow2 in the 1st quarter of 2008 amounted to EUR 332 million (-3%) and the REBITDA3 was EUR 411 million (-7%). The net debt to equity ratio amounted to 33% at the end of March 2008, identical to that at the end of March 2007.
Sales in the Pharmaceuticals Sector (EUR 653 million) were up by 4% compared to the 1st quarter of 2007, despite the unfavorable impact of the USD – they would have increased by 10% at constant exchange rates. Sales of the major products, especially the drug Androgel® and the fenofibrates, as well as sales in emerging countries, improved. Operating results (EUR 136 million) were up by 9% compared to the 1st quarter of 2007. They included, on the one hand, higher R&D costs (increase of EUR 26 million; 17.9% of sales compared to 14.6% in the 1st quarter of 2007) and, on the other hand, miscellaneous income (EUR 41 million) resulting from the sale of a non-strategic product and collection of a milestone for Luvox®CR. In the 1st quarter of 2008, Solvay Pharmaceuticals began to commit expenses linked to the marketing of Simcor®4 , as from April 2008, in the framework of the co-promotion of this drug with Abbott in the United States.
Results from the Chemicals Sector in the 1st quarter of 2008 were characterized, on the one hand, by generally sustained demand, and on the other hand, by increases in production and distribution costs partially compensated for by price hikes. Sales (EUR 763 million) were steady (+1%) while operating results (EUR 83 million) were down by 11%. Results from the Minerals cluster improved. In Electrochemistry, caustic soda remained at a good level but the other chlorinated products were significantly down. The fluorinated commodities began to benefit from the effects of restructuring. The Oxygen cluster suffered, on the one hand, from a change in consolidation scope linked to sale of the caprolactone activities in 2007 and, on the other hand, from pressure on prices of hydrogen peroxide in Europe.
Sales (EUR 959 million) in the Plastics Sector in the 1st quarter of 2008 dropped by 3%, part of which was due to a change in consolidation scope linked to the sale of Solvay Engineered Polymers in February 2008. Demand remained generally sustained, both for the vinyls activities and in Specialties, but the weak American dollar penalized the evolution in sales. REBIT (EUR 90 million) was down by 25%, compared to the high level reached in the 1st quarter of 2007. Increased production costs in the vinyls activities in Europe could not be passed along in sales prices due to the American imports of PVC favored by a weak USD.
| Outlook : “The measures taken to improve competitiveness as well as our diversified portfolio, in terms of activities and geographic presence, enable our Group to resist to a less favorable macro-economic environment. In 2008, the operating result of the Pharmaceuticals sector should exceed the record level of 2007; the industrial activities should not reiterate the performances of the preceding year. On the whole for the year 2008 and taking into account the current level of the USD, the Solvay group is unlikely to reach the record results of the year 2007.” |
SOLVAY Group – Summary Financial Information
|
Million EUR |
1st quarter 2007 |
1st quarter 2008 |
1st quarter 2008/ 1st quarter 2007 |
|||
|
Sales |
2,372 |
2,374 |
0% |
|||
|
REBIT |
325 |
300 |
-8% |
|||
| REBIT/Sales |
13.7% |
12.6% |
– |
|||
|
Non-recurring items |
-8 |
+9 |
n.s. |
|||
|
EBIT5 |
317 |
308 |
-3% |
|||
|
Charges on net indebtedness |
-19 |
-30 |
+55% |
|||
|
Income from investments |
– |
– |
– |
|||
| Earnings before taxes |
298 |
279 |
-6% |
|||
| Income taxes |
-79 |
-59 |
-26% |
|||
| Discontinued operations |
– |
– |
– |
|||
|
Net income of the Group |
218 |
220 |
+1% |
|||
|
Net income (Solvay share) |
209 |
208 |
0% |
|||
|
Total Depreciation |
124 |
113 |
-9% |
|||
| REBITDA |
440 |
411 |
-7% |
|||
|
Cash flow |
342 |
332 |
-3% |
|||
| (per share, in EUR) | ||||||
|
Earnings per share6 |
2.53 |
2.49 |
-2% |
|||
|
Net debt to equity ratio |
33% |
33% |
– |
|||
Notes on Solvay Group summary financial information
Non-recurring items amounted to EUR 9 million in the 1st quarter of 2008 compared to EUR -8 million in the 1st quarter of 2007. They mainy included, 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, restructuring charges in the Pharmaceuticals Sector for the ”INSPIRE” project (EUR 13 million).
Charges on net indebtedness amounted to EUR 30 million. They were up due to a one-time financial charge resulting from contractually due interest on the milestone paid to the former Fournier shareholders. Aside from this one-time charge, the charges on net indebtedness were at the same level as the 1st quarter of 2007 and the financial debt at the end of March 2008 was covered up to 93%, at an average fixed rate of 5.4% and for a duration of 7.5 years.
Income taxes amounted to EUR 59 million in the 1st quarter of 2008, reflecting the evolution of results and a tax credit in Italy (EUR 8 million). Consequently the tax rate amounted to 21%.
Net income of the Group (EUR 220 million) improved by 1% compared to the 1st quarter of 2007. Minority interests amounted to EUR 12 million compared to EUR 9 million in the 1st quarter of 2007, taking into account the favorable evolution of activities in which third parties were present. Net earnings per share amounted to 2.49 EUR in the 1st quarter of 2008 (compared to 2.53 EUR in the 1st quarter of 2007).
Cash flow amounted to EUR 332 million (-3%) and REBITDA to EUR 411 million (-7%). Depreciation (EUR 113 million) was down by EUR 9 million compared to the 1st quarter of 2007, which included higher non-recurring depreciation.
Total equity amounted to EUR 4,490 million at the end of March 2008, down by EUR 182 million compared to the end of March 2007, linked to the exchange rate variations. Net indebtedness of the Group at the end of March 2008 (EUR 1,476 million) was down by EUR 86 million compared to the end of March 2007 (EUR 1,561 million). The net debt to equity ratio was 33% at the end of March 2008, identical to that at the end of March 2007. This situation reflects the Group policy of having a sound financial situation, in line with the objective of not consistently exceeding a net debt to equity ratio of 45%.
On February 14, 2008, the Board of Directors decided to propose to the General Shareholders’ Assembly payment of a net dividend of 2.20 EUR per share (2.9333 EUR gross per share), or an increase of 4.8% compared to 2006. Based on the closing price at the end of April 2008 (94.4 EUR), this represents a gross dividend yield of 3.1% and a net dividend yield of 2.3%. This improvement in dividend is in line with the Group’s dividend policy of increasing it anytime possible and, if possible, not decreasing it. Thus, for 26 years, the dividend has gradually increased and never been reduced. It is to be noted that taking into account the prepayment of 0.85 EUR net per share (coupon no. 81), which was paid on January 17, 2008, the remaining balance of the dividend for 2007, or 1.35 EUR net per share (coupon no. 82) will be paid on May 20, 2008.
Results by Sector 7
|
Million EUR |
1st quarter 2007 |
1st quarter 2008 |
1st quarter 2008/ |
|
Group sales8 |
2,372 |
2,374 |
0% |
|
Pharmaceuticals |
625 |
653 |
+4% |
|
Chemicals |
755 |
763 |
+1% |
|
Plastics |
992 |
959 |
-3% |
|
“Corporate and Support activities” |
– |
– |
– |
|
Group REBIT |
325 |
300 |
-8% |
|
Pharmaceuticals |
124 |
136 |
+9% |
|
Chemicals |
93 |
83 |
-11% |
|
Plastics |
120 |
90 |
-25% |
|
“Corporate and Support activities” |
-12 |
-9 |
-22% |
|
Group REBITDA |
440 |
411 |
-7% |
|
Pharmaceuticals |
150 |
160 |
+7% |
|
Chemicals |
132 |
122 |
-8% |
|
Plastics |
167 |
136 |
-19% |
|
“Corporate and Support activities” |
-9 |
-7 |
-24% |
1 Operating results, i.e. EBIT before non-recurring items
2 Net income plus total depreciation.
3 REBITDA : REBIT, before recurring depreciation.
4 Simcor®: combined fixed-dose lipid treatment (Niaspan®/simvastatine) developed by ABBOTT
5 EBIT: results before financial charges and taxes.
6 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 82,787,815 shares in at the end of the 1st quarter of 2007 and 83,769,374 shares at the end of the 1st quarter of 2008.
7 Results by sector include results from the three sectors of the Group, as well as Corporate and Business Support.
8 These are sales after elimination of inter-company sales.