Belgium’s Solvay Q2 underlying net profit grows 38%, sales up 11%

01 August 2017 10:41 Source:ICIS News

LONDON (ICIS)--Solvay’s second-quarter underlying net profit increased 38% year on year to €309m, backed by growth in sales volumes across all business segments, the Belgian producer said on Tuesday.

Sales for the three months to June were up 11% at €3.02bn, with underlying earnings before interest, tax, depreciation and amortisation (EBITDA) up 18% at €705m, the company said in a statement.

"In the second quarter, we continued to deliver volume growth across all segments, which contributed to strong earnings and cash generation. Our delivery is consistent with our mid-term financial and extra-financial objectives,” Solvay CEO Jean-Pierre Clamadieu said.

For the first half of 2017, Solvay posted an underlying net profit of €565m, up 36% from the previous corresponding period, on an 11% increase in sales to €5.99bn, the company said.

Solvay has raised its full-year outlook for underlying EBITDA, which is expected “to grow by high single-digits”.

“Following the announcements in late 2016 of plans to divest the Acetow and Vinythai businesses, these have been reclassified as discontinued operations and as assets held for sale,” Solvay said.

Solvay’s Advanced Materials division posted healthy growth in volumes as its Specialty Polymers segment benefited from high demand in the high-performance polymers sector with automobiles and smart devices as main end markets.

The division sales rose in an underlying basis by 5.7% in the second quarter, year on year, to €1.14bn, while underlying EBITDA rose 22% to €356m.

Within Advanced Materials, Composite Materials posted higher sales in the second quarter “for the first time since 2015” thanks to higher demand from the military industry’s aviation sector.

“Industrial composites sales were down year on year. Special Chem sales were slightly up underpinned by price increases and continued robust demand in the electronics sector. Silica sales were stable with demand from the energy-efficient tyre market in line with last year,” said Solvay.

Higher raw materials costs at the Advanced Materials division were offset by higher sales volumes, mix effects and a €31m one-time synergy benefit on post-retirement obligations related to the former Cytec business, the US composite materials producer Solvay acquired in 2015.

The EBITDA margin at Solvay’s largest division stood at 31% in the second quarter, up 4.1 percentage points from the second quarter in 2016.

The Advanced Formulations division – serving the oil and gas, mining and agricultural and food industries – posted underlying sales of €757m in the second quarter, up 16% year on year, while underlying EBITDA rose by 5.2% to €130m.

“[Segment] Novecare benefited from strong recovery in the North American oil and gas industry in recent quarters, driving sales up 24% from the trough in the second quarter last year,” said Solvay.

“Growth in agricultural applications continued. Sales in Technology Solutions were flat in the quarter, with prior production issues at some customers’ mines still impacting demand.”

Underlying sales in the Performance Chemicals – soda ash and derivatives, peroxides and phenol and derivatives – rose 7.5% in the second quarter, year on year, to €666m, but underlying EBITDA only rose a “modest” 1% to €190m.

“The volume increase effect was offset by the €11m one-time gain realised in 2016, owing to an asset optimisation initiative at that time,” said Solvay.

However, sales in all segments rose strongly during the quarter, with Soda Ash & Derivatives revenue up 4% year on year, Peroxides’ sales up 12% and Coatis – the company’s segment for phenol and derivatives – increased sales by 21% as pricing power increased, albeit flat on volumes.

Functional Polymers posted an increase in underlying EBITDA during the second quarter of 57%, year on year, to €82m, with sales increasing by 24% to €449m, thanks to 6% higher volumes and 18% higher pricing, said the company.

Solvay’s smallest division includes polyamide (nylon) production as well as engineering plastics and its joint venture for the production of polyvinyl chloride (PVC) with Russia’s petrochemical major SIBUR, called RusVinyl.

The joint venture is owned 50:50 by SIBUR and SolVin, the latter firm being a joint venture between Solvay (75%) and Germany’s chemical major BASF (25%).

“Polyamide sales grew 28%, largely linked to price increases triggered by higher raw material prices and sustained strong demand in automotive. Volumes were also up both for polyamide 6.6 [nylon 6.6] intermediates and polymers and for engineering plastics, running at maximum capacity utilisation and compared to a softer quarter in 2016, which was affected by planned and unplanned production stops,” said Solvay.

“In Chlorovinyls the PVC joint venture Rusvinyl continued to operate at the high level already reached in 2016. The 3% decrease in scope is linked to the planned termination of some remaining trading contracts with Inovyn [its former joint venture with European chemical major INEOS].”

(update adds second-quarter divisional performance from paragraph 7)

Additional reporting by Pearl Bantillo

By Jonathan Lopez