Form 20-F 2005

Engineering plastics are used for their mechanical and thermal properties by the automotive, electrical, and electronics industries,
and in a number of consumer and industrial goods such as sports and recreational equipment, clamps, and tools, etc.
Technical yarns and fibers can be broken down into three categories: functional fibers and micro-fibers and yarns used
for making flocked surfaces and carpets; high-tenacity industrial yarns used for making tires, airbags, ropes, and nets;
and high-performance technical yarns used in filtration, printing, and the automotive industry, as well as fibers used for making
non-woven fabrics.
Textile yarns that we produce in Brazil or by Nylstar N.V., a joint venture with SNIA, are used in hosiery, lingerie, sportswear, and
town garments.
The world market for polyamide applications is estimated at $25 billion and is experiencing an average annual growth rate of around
2.5%. The polyamide market is a consolidated one, with just six manufacturers responsible for 50% of the world’s production of
yarns, fibers, and plastics and for 67% of all intermediate products. This trend toward strong consolidation can be expected to
continue in the coming years, reinforced by significant technological and financial barriers to new entrants.
Polyamide occupies a constantly evolving position in this market, with growth rates greater than the industry average.
In textiles, the situation in Europe has deteriorated continuously since 2001, mainly due to a fall in local demand for fibers caused
by increases in imports of Asian-made garments. This deterioration, linked to the gradual elimination of textile quotas, was
particularly pronounced in 2004, and led Nylstar N.V., our joint venture with SNIA, to undertake a major restructuring program.
As a result of these factors, in 2005 Polyamide announced its intent to withdraw from this business. This withdrawal began by the
signing on November 8, 2005 of a letter of intention for the transfer by us and SNIA to the Italian chemical interest RadiciGroup of
all of our capital shares in the Nylstar N.V. joint venture.
At the same time that it was consolidating its activities, Polyamide was also making efforts to streamline its manufacturing
capacity and increase the competitiveness of its fabrication units, through major investments at its Belle-Etoile (France)
and Onsan (South Korea) facilities.
In the second half of 2005, Polyamide demonstrated its desire to increase its polymerization capabilities, through the purchase of
a polymerization unit in Freiburg (Germany). Lastly, Solsys, responsible for our solvents activity, was merged into the Polyamide
enterprise since the beginning of 2006. The different oxygenated solvents – acetone and acetic and ketonic acid – are manufactured
in large part in Brazil and are used in the automobile industry (paints, linings, adhesives, and leathers) and for consumer
and industrial goods.
Acetow
Acetow recorded sales of €410 million in 2005, representing 8% of our consolidated sales.
Acetow specializes in the production of acetate tow, the raw material used to make cigarette filters. Acetow ranks among the three
leading manufacturers in this sector, alongside Eastman and Celanese.
As result of technical know-how that enables it to provide high quality products, together with client service and the competitiveness
of its manufacturing facilities, Rhodia Acetow has become a favored partner of the tobacco industry.
Over the past few years, Acetow’s aim has been to strengthen its international presence in order to keep up with the geographic
expansion of its multinational clients.
26 Form 20 - F 2005 - Rhodia