Solvay 2020 first half results: Record cash generation and cost reductions help to weather the storm

July 29, 2020 at 7 a.m

Solvay 2020 first half results

Record cash generation and cost reductions help to weather the storm

Highlights

• Strong Free Cash Flow to shareholders from continuing operations of €435 million in the first half, up significantly versus €33 million in the first half 2019, with Q2 contributing €233 million.  The increase was predominantly driven by disciplined working capital management.
• Net Sales of €4,649 million in the first half were down 11% versus first half 2019, with headwinds from aero, auto, oil & gas, and construction markets impacting volumes since April.  More resilient markets, including healthcare, agro/food, home and personal care and electronics helped to offset some of the challenged markets.  Net sales in Q2 were down 18% to €2,175 million as result of the lower volumes.
• Acceleration of cost savings measures in the first half 2020 yielded a total gross savings of €170 million, as the organization acted swiftly to align production to the lower demand levels.
• Underlying EBITDA in the first half of 2020 of €1,008 million was down 15.6% versus first half 2019.  Second quarter underlying EBITDA of €439 million was down 29.5% versus Q2 2019 level, driven by the reduction in volumes while pricing remained positive.
• EBITDA margin was 21.7% for the first half 2020, despite a significant reduction in demand, illustrating the decisive cost actions and sustained pricing. EBITDA margin for Q2 was 20.2%.
• Underlying Net Profit in the first half 2020 was €345 million and in Q2 was €109 million.
• As indicated on June 24, 2020, a non-cash impairment totaling €1.46 billion was taken in the second quarter, mostly related to the goodwill of the Composites business.

CEO Quote

“I am very proud of how Solvay employees are weathering the storm by staying safe and managing what is within our control exceptionally well,” explained CEO Ilham Kadri. “Our steadfast focus on customers, cost and cash resulted in strong delivery of €170 million in cost reduction and record free cash flow generation of €435 million in the first half of 2020. Our leadership positions in major markets and the breadth of our technologies and innovation enabled us to capture new business while protecting margins. We will continue to adapt to the challenges in the months ahead as we resume selective investments for the return to growth in 2021.”

Outlook for 2020

In the context of continued macro uncertainty and limited visibility, Solvay expects market dynamics to remain challenging in Q3 before improving in Q4. Against that backdrop, the focus on cost will continue with an expectation of delivering around €300 million of savings in full year 2020 and free cash flow generation similar to 2019.

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