The underlying data compares to pro forma 2015, as if Cytec acquisition had taken place on January 1, 2015.
The total of Solvay sales amounted to €2.9 billion (down 6% versus 2015), with average prices down (2)%, this is mainly linked to low raw material costs in a deflationary environment.
Volumes were stable overall, with growth in Advanced Materials and Functional Polymers offset by a drop in other segments. Indeed, Advanced Formulations’ sales volumes declined as a result of persisting oil & gas headwinds, while Performance Chemicals businesses were globally flat.
Solvay ‘s operating earnings before taxes, depreciation and amortization charges improved by 2%, going from €592 million to €602 million. Pricing power, fixed cost reductions and excellence programs - that are looking to use our assets in a more effective and efficient manner– as well as positive foreign exchange impacts, all combined contributed to this success.
Excellence actions across businesses more than compensated for inflation, while quick delivery of Cytec integration synergies of around €10 million were already captured in the first quarter. Overall, the resulting margin at 21% stood at record levels, placing Solvay in the top quartile among its European chemicals peer group.
Solvay also announced supplementary measures intended to enhance competitiveness going forward, such as the soda ash production suspension in Alexandria, Egypt.
EBITDA by Operating Segment
grew 1.4% from €263 million to €267 million, and reported a stronger margin at 25%. Solvay Advance Materials was able to demonstrate the growth thanks to positive developments in multiple segments such as Healthcare, Consumer Goods and Clean Mobility offsetting the ongoing inventory adjustments in smart devices,. In the domain of Clean Mobility, worthy to notice the good dynamics in diesel catalysts and Lithium-ion batteries, the latter especially for hybrid electric vehicles in China. Advanced Materials faced reduced volumes in the Industrial Composites business linked to industrial issues and phasing in certain end-markets. In the Aerospace Composites business, there is a transition period from older legacy aircrafts such as Boeing 747-8, 777 and Airbus 320 towards newer planes with higher composites. Growth in these newer programs is expected to improve in the second half of the year.
EBIDTA fell 10% to €122 million (versus €135 million in the prior year quarter), mainly due to the volume drop linked to the sustained downturn in oil & gas activity. However, margin remained stable at 18%, supported by operational excellence measures taken to enhance competitiveness across segments.
EBITDA increased 7% to €199 million and its margin jumped to 28% (300 basis point higher than last year) due to cost efficiency measures, mostly in Soda Ash, and the recovery in Acetate cable businesses and the contribution of our new bicarbonate plant in Thailand that is ramping up.
EBITDA increased more than 50% driven by positive net pricing and good demand for polymers in Europe, especially for automotive applications. There was also a solid contribution from the RusVinyl Joint Venture, as capacity utilization was maximized.
The net Income (Solvay share) decreased by 5% due to the reduced scope of discontinued operations
, following the transfer of our European chlorovinyls assets to Inovyn Joint Venture in July 2015.
Free Cash Flow
Solvay is strongly focused on improving cash generation, while also striving to limit volatility of its free cash flow
generation through the year. In the first quarter, the Group indeed substantially improved its cash generation, which at €9 million compared to net free cash outflows of € (358) million in the prior year, mainly due to:
- a significant reduction of seasonal working capital needs: all Solvay businesses are actively involved in this working capital discipline, enabling to avoid big swings
- a reduction of capital intensity: over the past 2 years Solvay has undergone important investments, and now it’s the time to harvest.
The focus on cash generation remains top in the agenda going forward and the Group is confident to meet its target of at least €650 million by year end.