Solvay's chems, plastics profits rise but soda ash market weak

Solvay's chems, plastics profits rise but soda ash market weak

28 October 2010 12:02  [Source: ICIS news]

LONDON (ICIS news)--Solvay's third-quarter underlying profits from ongoing businesses climbed 56.8% to €149m ($204m), with strong earnings growth from chemicals and plastics, the company said on Thursday.

The Belgium-based chemicals and plastics maker reported an 89.6% drop in net income for the period as it took a non-cash impairment charge of €197m, largely on its troubled European soda ash business.

The business was confronted by ongoing weakness in end-use markets, it said, especially in flat glass used in construction.

Solvay has six soda ash production units in Europe, one in Egypt and one in the US. The alkali accounted for about 40% of its chemicals sales in Europe in 2009.

Solvay, like all other European producers, is suffering due to massive regional overcapacity brought on by capacity additions from new producers in Turkey, but global oversupply is an additional problem. Prices are under pressure with end-use markets weak.

“Industrial measures have been taken: capital expenditures have been drastically reduced and will remain at a low level as long as end markets remain sluggish,” Solvay said in its third-quarter earnings statement. “Our commercial policy will be revisited and if insufficient, new industrial measures will be considered.” 

Third-quarter group sales on an as-reported basis were 24.0% lower at €2.24bn but were 14.6% higher for continuing operations.

Solvay sold its pharmaceuticals business in February 2010 and Inergy Automotive Systems in July.

Solvay said that all of its chemicals businesses excluding soda ash had shown an improvement in the first nine months of the year.

Chemicals profits in the third quarter were €83m against €62m in the third quarter of 2009. Recurring operating profits in plastics (recurring EBIT - earnings before interest and tax) were €88m against €42m.

Specialty polymer sales volumes had improved markedly over the nine months, Solvay said, particularly in Asia. Vinyls sales were higher in the third quarter.

The non-cash impairment charge in the third quarter includes €186m after-tax taken against the soda ash activities in Europe and Egypt and on calcium chloride.

($1 = €0.73)

Additional reporting by Amandeep Parmar

For more on soda ash visit ICIS chemical intelligence
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By: Nigel Davis
+44 20 8652 3214

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