Solvay sets 50% profits growth and €3bn 2016 REBITDA target

24 April 2012 11:24  [Source: ICIS news]

SolvayLONDON (ICIS)--Solvay is targeting profits growth of 50%, with recurring earnings before income, tax, depreciation and amortisation (REBITDA) of €3bn ($4bn) by 2016, the Belgium-based specialties producer said on Tuesday.

Growth is expected to be driven by three core businesses and merger-related streamlining.

In 2011 Solvay generated a REBITDA of €2.1bn, with its specialty polymers, consumer chemicals and advanced materials producing nearly half that amount. Pro-forma group sales were €12.7bn. Solvay merged with Paris-headquartered specialty chemicals group Rhodia in 2011.

"After an in-depth analysis of our portfolio, we have developed a clear strategic intent for our different businesses in the light of their intrinsic strengths, their positioning and market dynamics," said Jean-Pierre Clamadieu, CEO of Solvay from 11 May 2012.

Clamadieu expects businesses such as specialty polymers, consumer chemicals and advanced materials (rare earths and silica-based products) to generate most of the targeted growth. Current profit improvement plans are expected to deliver €400m.

Merger-related cost savings are expected from all areas, Solvay said. It is targeting global purchasing and logistics savings of €250m and organisational streamlining savings of €150m. Teams are currently working on supply chain logistics and reducing capital intensity.

Clamadieu called the profits target “challenging but achievable”, adding that seven months after completion of the Solvay/Rhodia merger, management has a clear view of what might be expected from each component of the combined group's portfolio.

"The execution of our strategy will be mainly driven by operational excellence and growth based on innovation, capacity expansion in fast-growing regions and value-adding bolt-on acquisitions,” he said.

 “Marketing and sales excellence will mainly stem from pricing power and cross-selling opportunities across markets and geographies,” said the company.

Clamadieu did not rule out redundancies but said job cuts were not part of the strategic plan.

The company’s research and development (R&D) resources combine those of the merged producers and, according to Solvay, are fully aligned with the “megatrends” that are driving growth in the chemical industry.

Geographically, Solvay looks to growth in Brazil, China, South Korea, Thailand and Russia. Solvay has only a small manufacturing presence in India but it is inaugurating an R&D centre in the country to target megatrends, Clamadieu said. “All the fast-growing economies are quite well covered,” he added.

Solvay said it has the financial flexibility to consider bolt-on acquisitions.

Ahead of its capital markets day with financial analysts in London on Tuesday, it confirmed that overall trading conditions were “significantly better” in the first quarter of 2012 compared with the fourth quarter last year.

The company reports on the first quarter of 2012 on 7 May.

($1 = €0.76)

By: Nigel Davis
+44 20 8652 3214

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