Form 20-F 2005

Risk Factors
You should carefully consider the following risks and other information contained in this Annual Report. The risks described below
are not the only risks facing our Company. Additional risks not presently known to us or which we consider immaterial based on
information currently available to us may also materially adversely affect our Company. If any of the following risks or uncertainties
actually occurs, our business, financial condition and operating results could be materially adversely affected.
This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a result of various factors, including the risks we face as
described below and elsewhere in this Annual Report. See “Cautionary Note About Forward-looking Statements”.
Operational Risks
We are an international group of companies and are exposed to general economic, political and regulatory conditions
and risks in the countries in which we have operations.
We operate in the global market and have customers in many countries. We currently operate facilities in Europe, North America,
Latin America and the Asia/Pacific region, including China, where we are targeting expansion of our operations as a strategic priority.
Many of our principal customers and suppliers are similarly global in scope. Consequently, our business and financial results are
affected directly and indirectly by world economic, political and regulatory conditions.
Conditions such as the uncertainties associated with war, terrorist activities, political instability or the outbreak of major health risks
in any of the countries in which we operate could affect us by causing delays or losses in the supply or delivery of raw materials
and products, as well as increased security costs, insurance premiums and other expenses.
Our international operations expose us to a multitude of local commercial risks, and our overall success greatly depends on our
ability to adapt to changes in economic, social and political conditions. We may not succeed in developing and implementing
policies and strategies that are effective in each location where we do business. Moreover, changes in laws or regulations, such
as changes in regulatory requirements (including with respect to taxation, tariffs and trade barriers, intellectual property regimes
and import/export licensing requirements, among others) as well as varying tax regimes which could adversely affect our results
or cash flows, including regulations relating to transfer pricing and withholding taxes on remittances and other payments by our
subsidiaries and joint ventures, could increase the cost of doing business in these regions. Any of these conditions may have an
adverse effect on our financial condition or results of operations. In addition, a number of companies in the chemicals industry have
come under scrutiny by U.S. and EU regulators in connection with potentially anti-competitive practices. While we are unaware
of any investigations concerning us, we are aware that a number of chemical companies have been subject to both criminal and
civil claims involving a variety of products. Although we believe that we are in compliance with rules and regulations in respect of
anti-competitive practices, regulatory focus on the industry increases the potential that we may become involved in an investigation.
We cannot assure you that we will not become subject to government investigations or third-party claims, or that, in such a
case, our compliance programs in respect of competition laws will have been adequate or that we will not be required to pay
fines or damages.
The cyclicality in some of the industries we serve could have a material adverse effect on our business and financial
condition.
Our results are affected by cyclicality in various industries we serve, either directly or indirectly, including the consumer, automotive,
electronics, construction and textile industries. Although in 2005 we were able to increase prices so as to offset increases in the
price of raw materials and energy our results of operations and financial condition in the past have been adversely affected by a
Form 20 - F 2005 - Rhodia
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