Sales breakdown 2004 - Solvay

Global Annual Report Solvay 2004
68
Actuarial assumptions used in determining the annual cost
Eurozone Europe Other USA Other
2003 2004 2003 2004 2003 2004 2003 2004
Discount rates 5.5% 5.5% 4%-7% 3.75%-7% 6.75% 6.5% 11.3% 11.3%
Expected rates of future
salary increases 2.5%-5% 2.5%-4.75% 3.25%-6% 2%-6% 4.5% 4% 8% 8%
Expected (long-term) rates
of return on plan assets 5.5%-6.5% 5.5%-6.5% 4%-7.3% 3.75%-7.3% 8%-9% 9% 11.3% 11.3%
Expected rates of pension growth 0%-2.5% 0%-2% 0%-2.25% 0%-2.25% NA NA NA NA
Expected rates of medical
care cost increases 2%-3% 2%-3% NA NA 7% 5%-9% 6.6% 6.6%
Health, safety and environment provisions
These provisions have been set up to cover liabilities and charges connected with the mining activities which underlie certain
group products, the growing constraints on the elimination or processing of residues which remain technically inevitable in
certain activities, and with the constant increase in other environmental protection concerns.
The estimated amounts are discounted as a function of the probable date of disbursement. Provisions are increased every year
to reflect the increasing proximity of such disbursement. Such increases cost EUR 11 million in 2004.
The annual examination of the provisions in the Group accounts revealed that certain provisions had been under or overestimated
in the light of the information available at time of the shift to IFRS.
This re-estimation, relating mainly to remaining Group commitments in relation to its former Salt activities, gives a net
balance of EUR 40 million. An amount of EUR 22 million (after offsetting tax assets) was therefore charged to shareholders'
equity in the 2004 opening balance, as provided for in the IAS 8 standard in the event of an error.
The 2004 opening balance is therefore EUR 434 million, as against the EUR 394 million published in the 2003 annual
report.
Provisions for litigation
At EUR 136 million, provisions for litigation are EUR 82 million higher. This rise is due mainly to an additional recognition
to cover various risks, including possible tax liabilities and the outcome of the European competition authorities’ hydrogen
peroxides inquiry. The Solvay Group has received a letter of complaint in this matter from the European authorities, and will
be presenting its defense in the second half of 2005. Certain class actions have also been filed against the Group in the United
States; in our opinion these are unfounded.
Other provisions
Other provisions, at EUR 201 million, are up EUR 68 million. The main reasons behind this increase are:
– a EUR 21 million provision for rehabilitating the closed soda ash production site at Ebensee, Austria;
– a EUR 38 million provision to cover the additional research costs in 2005 and beyond required for accelerating development
of the mental health compounds in the agreement with Wyeth;
– an increase in the technical reserves in the Blair reinsurance subsidiary, following the rise in reinsurance deductibles.