Form 20-F 2005

Operating expenses
The following table shows financial data relating to our operating expenses for 2004 and 2005:
For the years ended
(in millions of euros) 2005 2004 % change
Cost of sales (4,620) (4,408) 4.8%
Administrative and selling expenses (574) (513) 12%
Research and development expenditure (124) (138) (10)%
Restructuring costs (87) (169) (49)%
Goodwill impairment (60)
Other operating income/(expenses) (43) (46) (6.5)%
Total (5,448) (5,334) 2%
Cost of sales
Cost of sales increased by €212 million from €4,408 million in 2004 to €4,620 million in 2005. This significant 5% cost increase
reflects oil derivatives, particularly benzene, benzene derivatives and natural gas price trends.
Administrative and selling expenses
Administrative and selling expenses rose by €61 million compared with 2004 mainly due to the following factors:
the appreciation of the Brazilian real by 20% against the euro had an impact of €9 million.
the costs of implementing the global project to improve central information systems for €20 million.
This project is a key factor in improving our performance and efficiency.
the payment by our captive insurance firm of €13 million in compensation for the flooding of the Swiss Emmenbrücke plant.
Sarbanes-Oxley project costs totaled €3 million.
Research and development expenditure
Research and development expenditure fell 10% due to measures to optimize R&D organization and efficiency.
Restructuring costs
Restructuring and reorganization measures continued in 2005, totaling €87 million, and mainly involved industrial streamlining
programs and operating performance improvement plans. This should be compared with the €169 million cost incurred in 2004,
the first year of our recovery plan initiated in October 2003.
The new measures in 2005 essentially correspond to the following:
In France:
closure of a textile production site in Arras at Polyamide;
“horizon” project in order to reorganize our industrial platform in Pont-de-Claix (Isère) at Coatis;
productivity measures on the Saint-Fons site (Rhône) at Silcea.
Form 20 - F 2005 - Rhodia
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