Solvay's shares rise sharply as Q1 earnings beat market estimates

08 May 2012 13:37  [Source: ICIS news]

LONDON (ICIS)--Shares in Belgium-based Solvay rose by nearly 10% on Tuesday after the company’s reported first-quarter earnings late on Monday beat market estimates.

On Monday, Solvay reported that its first-quarter recurring earnings before interest, taxes, depreciation and amortisation (REBITDA) on an IFRS (International Financial Reporting Standards) basis rose by 84% year on year to €523m ($679m) in the first quarter of 2012. This was 17% ahead of Credit Suisse estimates (€447m), and 20% ahead of market consensus (€436m).

Solvay also announced it expects to achieve a full-year REBITDA similar to the 2011 level of €2.07bn on a pro forma basis (as if the acquisition of French specialty chemicals firm Rhodia had become effective from the 1 January) – which is also significantly ahead of market consensus (€1.89bn) and Credit Suisse forecasts (€1.98bn).

“Pleasingly, the earnings beat was driven by all segments. This highlights the earnings power and resiliency of the combined Solvay/Rhodia,” Credit Suisse said on Tuesday.

“Importantly, we believe the business quality will also improve over time – as management recycles cash from the commodity type businesses into higher multiple specialty chemicals,” it added.

At 12:08 GMT Solvay’s shares were trading at €97.12 on the Brussels stock exchange, up 9.68% from the previous close.

Solvay’s decision-makers on Tuesday re-affirmed, at its annual shareholders meeting, plans to grow as a major global chemical producer. 

In April, Solvay announced it was targeting profits growth of 50%, with REBITDA of €3bn by 2016. The group said that growth is expected to be driven by three core businesses and merger-related streamlining.

Jean-Pierre Clamadieu, who will succeed Christian Jourquin as the company’s next CEO on 10 May, at the time said he expects businesses such as specialty polymers, consumer chemicals and advanced materials (rare earths and silica-based products) to generate most of the targeted growth.

Clamadieu had 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 had said.

Alois Michielsen, who on Tuesday ends his term as chairman of the board and will be succeeded by Nicolas Boel on Wednesday, said the company’s objective to increase its presence in Asia, eastern Europe and the Americas, will be helped by the merger of Rhodia.

“With Rhodia, we are now, in the field of chemistry, a stronger group, better able to meet the new challenges of sustainable development and energy supply. This acquisition expands our product range and opens up the way to many new developments and innovations,” he added.

Solvay acquired Rhodia for €3.4bn in August 2011.

($1 = €0.77)

By: Franco Capaldo
+44 (0)20 8652 3214

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