Pharmaceuticals Sector - Solvay

Management Report
New records for SOLVAY in
2005, after excellent results in
2004
· Group net income up 51%, with cash fl ow of EUR
1.28 billion
· Sales (+ 18%) and operating profi t (+ 23%) up
strongly in all three Sectors
· Proposed net dividend of EUR 2.00, up 5.3%
Business progress
Net sales reached EUR 8 562 million in 2005, up 18%
compared to 2004 (+25% in the 4 th quarter). Sales
increased in all three sectors: Pharmaceuticals +30%,
Chemicals +14% and Plastics +13%.
REBIT (EUR 912 million) increased 23% compared
to 2004 (+20% in the 4 th quarter), giving an operating
margin (REBIT on sales) of nearly 11%. Increases were
recorded in all three Sectors: Pharmaceuticals +28%,
Chemicals +58% and Plastics +4%.
Group net income reached EUR 816 million in 2005,
surpassing by 51% the 2004 result (EUR 541 million).
Beyond the increase in operating profi t (REBIT +23%
in 2005), Group net income included a net capital gain
on the sale of interests in the polyethylene activities to
BP (EUR 472 million) and a negative balance of nonrecurring
items of EUR 357 million, consisting primarily
of gains on the sales of buildings (EUR +135 million)
and the recognition of provisions (EUR -432 million).
Net income of the Group (EUR million)
1000
800
600
400
200
0
494
2002
430
2003
541
2004
816
2005
Progress by Sector
1. Net sales by Sector (EUR million)
Total 2005 net sales = EUR 8 562 million
2004 2005 2005/2004
Pharmaceuticals 1 745 2 270 +30%
Chemicals 2 433 2 785 +14%
Plastics 3 093 3 507 +13%
Total 7 271 8 562 +18%
2. REBIT by Sector (EUR million)
Total 2005 REBIT = EUR 912 million
2004 2005 2005/2004
Pharmaceuticals 236 302 +28%
Chemicals 180 285 +58%
Plastics 374 389 +4%
Total * 741 912 +23%
* including non-allocated items: EUR -49 million in 2004 and EUR -64 million in 2005
Earnings in the Chemicals Sector (REBIT = EUR 285
million) were up 58% compared to 2004. Favorable
markets throughout 2005 allowed the confi rmation of
price increases. This, together with strict cost control
and buoyant sales volumes, enabled the Sector to
restore its operating margin to 10% for the whole
of 2005.
Plastics Sector earnings (REBIT = EUR 389 million)
were up 4% compared to 2004, giving an operating
margin of 11%. After declining gradually in the second
quarter of 2005, vinyls margins improved from
September onwards. Specialty Polymers, another
major contributor to Group earnings, recorded
7% sales growth despite weak automotive and
semiconductor markets. Start-up costs for new units
and higher raw material prices prevented this increase
in sales from translating into higher earnings.
The earnings fi gures for the Pharmaceuticals Sector
include since August 1, 2005 the results of Fournier
Pharma, amounting for the 5 months to sales of
EUR 265 million and an operating profi t (REBIT) of
EUR 64 million. The performance of fenofi brate,
Fournier Pharma’s “blockbuster”, was remarkable
and more than met expectations. The Sector’s 2005
sales increased 30% from 2004. Sales were up in
all therapeutic areas and developed well in North
Solvay Global Annual Report 2005
53