+8 - Solvay

Progress by Sector
1. Sales by Sector (EUr million)
Total 2006 sales = EUR 9 399 million
2005 2006 2006/2005
Pharmaceuticals 2 270 2 601 +15 %
Chemicals 2 785 2 998 +8 %
Plastics 3 507 3 800 +8 %
Total 562 9 99 + 0 %
2. rEBiT by Sector (EUr million)
Total 2006 REBIT = EUR 1 099 million
2005 2006 2006/2005
Pharmaceuticals 302 451 +49 %
Chemicals 285 315 +11 %
Plastics 389 409 +5 %
Total * 9 2 099 +2 %
* including “corporate and support activities”:
EUR -63 million in 2005; EUR -76 million in 2006
Pharmaceuticals Sector 3 sales increased by
15% in 2006 and operating results by 49%
(EUR 451 million). The operating margin of 17%,
compared with 13% in 2005, confirms the significant
progress made by Solvay Pharmaceuticals and the
successful integration of Fournier into the Group, in
line with the objectives of the “INSPIRE” 4 project.
As well as the substantial growth of Cardiometabolic
products, with EUR 413 million in revenues from the
blockbuster drug fenofibrate, sales of other primary
Solvay Pharmaceuticals products were up strongly.
Research expenditure in 2006, at EUR 424 million
(16% of sales), was up significantly (+21%) compared
with 2005.
chemicals Sector sales improved by 8% in 2006.
REBIT (EUR 315 million) increased by 11% compared
with 2005. This performance reflects the continued
favourable global balance between supply and
demand, against a background of still very high energy
costs. Results from the “Minerals” cluster showed
strong growth. The “Oxygen” cluster made progress,
as the positive trend which begun in the third quarter
confirmed itself. The “Electrochemistry (caustic soda)
and Fluorinated Products” cluster trended downward,
mainly in fluor chemical commodities.
In the first quarter of 2006 Solvay reached an
agreement with the U.S. Department of Justice
concerning the American anti-trust proceedings
relating to peroxide activities prior to 2001, accepting
to pay a fine of EUR 35 million, reserved for in the
fourth quarter of 2005. Class actions under way since
late 2005 continue, with adequate provisions taken in
the first half of 2006 under “non-recurring items”.
In July 2006 Solvay also appealed against the EUR
193 million fine imposed in April 2006 by the European
Commission in the area of peroxides. This amount is
covered by provisions established in 2004 and 2005.
Plastics Sector sales increased by 8% in 2006.
The increase in the “Specialties” cluster, sustained by
Specialty Polymers, and the strong performance of
the “Vinyls” cluster permitted the operating result
(EUR 409 million) of the Plastics Sector to exceed
(+ 5%) the already strong results of 2005.
Energy context
The Group is particularly attentive to the evolution
of the energy situation, especially for the Chemicals
Sector. Leadership in process technologies, efficient
and flexible industrial infrastructures (including
investments under way in Bulgaria and the conversion
of lime ovens to coal firing that began in late 2006 in
the USA), cogeneration units and medium-to-long
term supply contracts help cushion the impact of rising
energy prices. Participation by Solvay in the Exeltium
consortium, a group of electricity-intensive industries in
France, should assure reliable and competitive energy
supplies to Solvay’s large production sites in France.
A first agreement in principle was signed between
Exeltium and the French national electricity company
EDF at the beginning of 2007. In Belgium, a similar
project is currently being studied. Depending on the
specific market conditions of each SBU, price rises are
negotiated to compensate the rise in energy costs.
2006 was characterized by high energy prices, despite
a slight easing for gas. The Group’s specific energy
policy enabled it to limit the rise in its energy bill to well
below that of market prices. For 2006 energy costs
represent around 8% of sales. In 2007 energy prices
remain very high.
Management Report
Management
Report
3. The results for the
Pharmaceuticals Sector include
those of Fournier Pharma
since August 1, 2005.
4. See also comments on page 19
Solvay Global Annual Report 2006
9