Accounting policy

An Operating Segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operating decision maker, and for which discrete financial information is available. The Solvay Group’s chief operating decision maker is the Chief Executive Officer.

Net sales comprise the sales of goods and value-added services corresponding to Solvay’s know-how. Net sales and other revenue are measured at the fair value of the consideration received or receivable, net of returns, rebates and trade benefits granted, and sales tax.

Revenue from non-core activities primarily includes commodity and utility trading transactions and other revenue deemed incidental by the Group.

Net sales and other revenue are recognized when all the following conditions have been satisfied:

  • the Group has transferred to the buyer the significant risks and rewards of ownership of the goods or, with respect to the rendering of services, the stage of completion can be measured reliably;
  • the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
  • the amount of revenue can be measured reliably;
  • it is probable that the future economic benefits associated with the transaction will flow to the Group; and
  • the costs incurred or to be incurred in respect of the transaction can be measured reliably.

General

Solvay is organized into five Operating Segments. As of January 1, 2016, following the acquisition of Cytec, Solvay has re-organized its business segments to enhance strategic coherence and improve business alignment. Cytec’s former “Aerospace Materials” and “Industrial Materials” activities are included in Advanced Materials as the GBU “Composite Materials”, while its “In Process Separation” and “Additive Technologies” activities are included in Advanced Formulations, largely as the GBU “Technology Solutions“. Solvay's GBU “Coatis” is transferred to Performance Chemicals.

  • Advanced Materials offers high-performance materials for multiple applications primarily in the automotive, aerospace, electronics, and health markets. In particular, it provides sustainable mobility solutions, reducing weight and improving CO2 and energy efficiency.
  • Advanced Formulations serves primarily the consumer goods, agro and food, as well as energy markets. It offers customized specialty formulations that impact surface chemistry and alter liquid behavior, to optimize efficiency and yield, while minimizing the environmental impact.
  • Performance Chemicals operates in mature and resilient markets with leading positions in chemical intermediates. Success is based on economies of scale and state-of-the-art production technology. It serves mainly the consumer goods and food markets.
  • Functional Polymers produces and sells polyamide and PVC polymers and compounds and has leading positions in different regions, with a focus on excellence initiatives. It mainly serves the automotive, construction, consumer goods, and building markets.
  • Corporate & Business Services includes corporate and other business services, such as the Research & Innovation Center. It also incorporates the GBU Energy Services, whose mission is to optimize energy consumption and reduce CO2 emissions.

Information per segment

2016
In € million
Income statement items

 

Advanced Formulations

 

Advanced Materials

 

Performance Chemicals

 

Functional Polymers

 

Corporate & Energy

 

Group Total

(1)

Underlying EBITDA is a key performance indicator followed by management (see Business Review section).

Net sales (including the inter-segment sales)

 

2,671

 

4,313

 

2,481

 

1,442

 

7

 

10,914

Inter-segment sales

 

(3)

 

0

 

(21)

 

(6)

 

0

 

(30)

Net sales

 

2,668

 

4,313

 

2,460

 

1,436

 

7

 

10,884

Gross margin

 

695

 

1,398

 

724

 

254

 

18

 

3,090

Depreciation and amortization

 

292

 

413

 

250

 

104

 

111

 

1,169

Earnings from associates and joint ventures

 

8

 

8

 

20

 

50

 

(1)

 

85

Underlying EBITDA(1)

 

484

 

1,110

 

695

 

222

 

(227)

 

2,284

EBIT

 

 

 

 

 

 

 

 

 

 

 

962

Net financial charges

 

 

 

 

 

 

 

 

 

 

 

(339)

Income taxes

 

 

 

 

 

 

 

 

 

 

 

56

Profit (loss) for the year from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

(6)

Profit (loss) for the year

 

 

 

 

 

 

 

 

 

 

 

674

2016
In € million
Statement of financial position and other items

 

Advanced Formulations

 

Advanced Materials

 

Performance Chemicals

 

Functional Polymers

 

Corporate & Energy

 

Group Total

Capital expenditures (continuing operations)

 

134

 

435

 

186

 

95

 

79

 

929

Capital expenditures (discontinued operations)

 

 

 

 

 

37

 

14

 

 

 

51

Investments (continuing operations)

 

16

 

4

 

0

 

0

 

44

 

64

Investments (discontinuing operations)

 

 

 

 

 

33

 

 

 

 

 

33

 

 

 

 

 

 

 

 

 

 

 

 

 

Working capital

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

388

 

794

 

279

 

199

 

11

 

1,672

Trade receivables

 

365

 

571

 

417

 

186

 

82

 

1,621

Trade payables

 

293

 

429

 

357

 

213

 

255

 

1,547

Capital expenditures are related to tangible and intangible assets.

In 2016, the investment of € 44 million within Corporate & Energy relates to the Cytec acquisition.

Information per segment for 2015 as presented below takes into account the new organization of the Operating Segments applicable as from 2016.

2015
In € million
Income statement items

 

Advanced Formulations

 

Advanced Materials

 

Performance Chemicals

 

Functional Polymers

 

Corporate & Energy

 

Group Total

(1)

Underlying EBITDA is a key performance indicator followed by management. In the Business Review section, 2015 Underlying EBITDA (€ 2,125 million) is reported on a pro forma basis as if Cytec had been consolidated as from January 1, 2015, which leads to add Cytec 2015 Underlying EBITDA (€ 381 million) to the Underlying EBITDA without Cytec (€ 1,744 million).

Net sales (including the inter-segment sales)

 

2,258

 

3,341

 

2,561

 

1,543

 

11

 

9,715

Inter-segment sales

 

(3)

 

(7)

 

(35)

 

(53)

 

0

 

(99)

Net sales

 

2,254

 

3,334

 

2,526

 

1,490

 

11

 

9,615

Gross margin

 

548

 

1,107

 

686

 

219

 

5

 

2,566

Depreciation and amortization

 

181

 

267

 

165

 

106

 

72

 

791

Earnings from associates and joint ventures

 

9

 

8

 

20

 

(14)

 

(1)

 

21

Underlying EBITDA(1)

 

348

 

836

 

628

 

141

 

(209)

 

1,744

EBIT

 

 

 

 

 

 

 

 

 

 

 

695

Net financial charges

 

 

 

 

 

 

 

 

 

 

 

(222)

Income taxes

 

 

 

 

 

 

 

 

 

 

 

(69)

Profit (loss) for the year from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

51

Profit (loss) for the year

 

 

 

 

 

 

 

 

 

 

 

454

2015
In € million
Statement of financial position and other items

 

Advanced Formulations

 

Advanced Materials

 

Performance Chemicals

 

Functional Polymers

 

Corporate & Energy

 

Group Total

Capital expenditures (continuing operations)

 

204

 

340

 

267

 

81

 

77

 

969

Capital expenditures (discontinued operations)

 

 

 

 

 

0

 

68

 

 

 

68

Investments (continuing operations)

 

23

 

22

 

0

 

13

 

4,901

 

4,960

 

 

 

 

 

 

 

 

 

 

 

 

 

Working capital

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

409

 

892

 

324

 

221

 

21

 

1,867

Trade receivables

 

342

 

540

 

458

 

221

 

54

 

1,615

Trade payables

 

277

 

439

 

356

 

229

 

259

 

1,559

Capital expenditures are related to tangible and intangible assets.

In 2015, the investment of € 4,901 million within Corporate & Energy relating to Cytec. It represented the difference between the total consideration plus acquisition-related expenses (€ 5,099 million) and the cash acquired from Cytec (€ 198 million).

External net sales by cluster

In € million

 

2016

 

2015

(1)

The total amount of the cluster includes residual Acetow sales (2016: € 10 million and 2015: € 16 million)

Advanced Formulations

 

2,668

 

2,254

Novecare

 

1,663

 

1,895

Technology Solutions

 

656

 

0

Aroma Performance

 

350

 

360

Advanced Materials

 

4,313

 

3,334

Specialty Polymers

 

1,922

 

1,901

Composite Materials

 

1,073

 

0

Silica

 

455

 

521

Special Chem

 

862

 

912

Performance Chemicals(1)

 

2,460

 

2,526

Soda Ash & Derivatives

 

1,561

 

1,554

Peroxides

 

542

 

558

Coatis

 

346

 

398

Functional Polymers

 

1,436

 

1,490

Polyamides

 

1,414

 

1,448

Chlorovinyls

 

22

 

41

Corporate & Business Services

 

7

 

11

Energy Services

 

4

 

11

CBS and NBD

 

3

 

0

Total

 

10,884

 

9,615

Sales by country and region

The sales disclosed below are allocated based on the customers’ location.

In € million

 

2016

 

%

 

2015

 

%

Belgium

 

154

 

1%

 

156

 

2%

Germany

 

982

 

9%

 

841

 

9%

Italy

 

555

 

5%

 

452

 

5%

France

 

466

 

4%

 

437

 

5%

United Kingdom

 

302

 

3%

 

223

 

2%

Spain

 

269

 

2%

 

246

 

3%

European Union – other

 

749

 

7%

 

606

 

6%

European Union

 

3,476

 

32%

 

2,961

 

31%

Europe – other

 

108

 

1%

 

239

 

2%

United States

 

2,866

 

26%

 

2,308

 

24%

Canada

 

141

 

1%

 

102

 

1%

North America

 

3,007

 

28%

 

2,409

 

25%

Brazil

 

677

 

6%

 

705

 

7%

Mexico

 

175

 

2%

 

126

 

1%

Latin America – other

 

208

 

2%

 

170

 

2%

Latin America

 

1,061

 

10%

 

1,001

 

10%

Russia

 

62

 

1%

 

56

 

1%

Turkey

 

90

 

1%

 

66

 

1%

China

 

945

 

9%

 

955

 

10%

India

 

185

 

2%

 

171

 

2%

Japan

 

398

 

4%

 

346

 

4%

South Korea

 

393

 

4%

 

352

 

4%

Thailand

 

197

 

2%

 

219

 

2%

Egypt

 

55

 

1%

 

51

 

1%

Other

 

907

 

8%

 

787

 

8%

Asia and rest of the world

 

3,231

 

30%

 

3,004

 

31%

Total

 

10,884

 

100%

 

9,615

 

100%

Invested capital, capital expenditures, and investments by country and region

 

 

Invested capital

 

Capital expenditures and investments

In € million

 

2016

 

%

 

2015

 

%

 

2016

 

%

 

2015

 

%

(1)

In 2015, the amounts reported included the acquisition of Cytec (see note F22 Goodwill and business combinations)

Belgium

 

2,155

 

12%

 

2,838

 

14%

 

(28)

 

3%

 

(17)

 

0%

Germany

 

765

 

4%

 

746

 

4%

 

(46)

 

5%

 

(59)

 

1%

Italy

 

743

 

4%

 

762

 

4%

 

(83)

 

8%

 

(86)

 

1%

France

 

1,922

 

10%

 

1,952

 

10%

 

(188)

 

19%

 

(160)

 

3%

United Kingdom

 

235

 

1%

 

205

 

1%

 

(40)

 

4%

 

(8)

 

0%

Spain

 

142

 

1%

 

147

 

1%

 

(18)

 

2%

 

(17)

 

0%

European Union – other

 

408

 

2%

 

678

 

3%

 

(55)

 

6%

 

(63)

 

1%

European Union

 

6,370

 

35%

 

7,328

 

37%

 

(458)

 

46%

 

(410)

 

7%

Europe – other

 

81

 

0%

 

4

 

0%

 

0

 

0%

 

(15)

 

0%

United States(1)

 

9,008

 

49%

 

9,075

 

46%

 

(309)

 

31%

 

(5,126)

 

86%

Canada

 

212

 

1%

 

212

 

1%

 

(8)

 

1%

 

0

 

0%

North America

 

9,220

 

50%

 

9,287

 

47%

 

(317)

 

32%

 

(5,126)

 

86%

Brazil

 

570

 

3%

 

447

 

2%

 

(37)

 

4%

 

(49)

 

1%

Argentina

 

0

 

0%

 

20

 

0%

 

(2)

 

0%

 

0

 

0%

Latin America – other

 

63

 

0%

 

91

 

0%

 

(3)

 

0%

 

(1)

 

0%

Latin America

 

633

 

3%

 

559

 

3%

 

(41)

 

4%

 

(50)

 

1%

Russia

 

228

 

1%

 

141

 

1%

 

0

 

0%

 

(14)

 

0%

Thailand

 

127

 

1%

 

424

 

2%

 

(4)

 

0%

 

(21)

 

0%

China

 

798

 

4%

 

869

 

4%

 

(66)

 

7%

 

(165)

 

3%

South Korea

 

269

 

1%

 

230

 

1%

 

(69)

 

7%

 

(31)

 

1%

India

 

237

 

1%

 

230

 

1%

 

(8)

 

1%

 

(16)

 

0%

Singapore

 

81

 

0%

 

80

 

0%

 

(3)

 

0%

 

(24)

 

0%

Japan

 

84

 

0%

 

87

 

0%

 

(1)

 

0%

 

(2)

 

0%

Egypt

 

10

 

0%

 

111

 

1%

 

0

 

0%

 

(1)

 

0%

Other

 

266

 

1%

 

229

 

1%

 

(29)

 

3%

 

(54)

 

1%

Asia and rest of the world

 

2,099

 

11%

 

2,402

 

12%

 

(181)

 

18%

 

(327)

 

6%

Total

 

18,404

 

100%

 

19,579

 

100%

 

(997)

 

100%

 

(5,927)

 

100%

Invested capital includes the non-current assets (excluding the deferred taxes), inventories, and trade receivables and payables. Capital expenditures and investments include acquisitions of tangible and intangible assets, investments in subsidiaries, and other investments. Both exclude discontinued operations.