1. Consolidated financial statements
Solvay (the “Company”) is a public limited liability company governed by Belgian law and quoted on Euronext Brussels and Euronext Paris. The principal activities of the Company, its subsidiaries, joint operations, joint ventures, and associates (jointly the “Group”) are described in note F1 Segment information.
The consolidated financial statements were authorized for issue by the Board of Directors on February 27, 2018. They have been prepared in accordance with IFRS accounting policies, details of which are given below.
Main events and changes in consolidation scope during the year
On January 4, 2017, Solvay agreed to sell its formulated resins business to Altana AG’s Elantas PDG Inc. Under the agreement, Solvay’s Global Business Unit Technology Solutions has divested the business line, which generated sales of €17 million in 2016. The divestment includes the formulated resins product portfolio, the manufacturing and R&D facility based in Olean, New York, US, and all associated technical, commercial, and administrative staff. Completion of the transaction was subject to customary closing conditions, including antitrust approvals, and occurred on June 1, 2017. The assets of the business were presented as assets held for sale until completion of the transaction, which had no material impact on the result in the period.
On February 1, 2017, Solvay announced the acquisition of Energain™ Li-Ion high voltage technology from DuPont for €13 million. Energain™ technology and formulations enlarge Solvay Special Chem Global Business Unit's existing portfolio of high performance salts and additives for electrolytes and strengthen its capabilities to develop further innovative high-voltage solutions for Li-ion batteries.
On February 23, 2017, Solvay completed the divestment of its 58.77% stake in its Thai subsidiary, Vinythai PCL (Emerging Biochemicals), to Japanese company AGC Asahi Glass. The assets and liabilities of the business were presented as assets held for sale and associated liabilities in December 2016, following the announcement of the intended divestment. The transaction was based on a total enterprise value of 16.5 billion Thai baht (€435 million), and triggered a capital gain of €24 million, recognized in discontinued operations.
On March 24, 2017, Solvay signed a definitive agreement to sell its 25.1% shares in National Peroxide Limited (BOM:500298) to the Wadia Group, a conglomerate of corporate India and promoter shareholder of National Peroxide Limited. The transaction was closed in March with a capital gain of €13 million.
On March 30, 2017, Solvay signed a definitive agreement to sell its polyolefin cross-linkable compounds business in Italy to family-owned group Finproject SpA. Based in Roccabianca, Parma, the business makes compounds that are used in applications in the wire and cable industry and the pipe industry, generating sales of €82 million in 2016. Finproject is a leading manufacturer of injection molded foam, polyolefin-based compounds and PVC compounds. The transaction was subject to customary closing conditions and closed on June 8, 2017. The assets of the business were presented as assets held for sale until completion of the transaction, which triggered a capital gain of €43 million.
On May 31, 2017, Solvay completed the divestment of its cellulose acetate tow business, Acetow, to private equity funds managed by Blackstone. The assets and liabilities of the business were presented as assets held for sale and associated liabilities in December 2016, following the announcement of the intended divestment. The transaction was based on an enterprise value of around €1 billion, resulting in a net financial debt reduction of €734 million and a capital gain of €180 million recognized in discontinued operations, subject to potential post-closing adjustments.
Solvay has deconsolidated its investment in Venezuela triggered by the political situation in the country, and consequently a loss of €72 million, related mainly to the €(60) million recycling of currency translation adjustments (CTAs), has been recognized in the second quarter.
On July 5, 2017, Solvay agreed to sell its 50% stake in Dacarto Benvic to its joint venture partner who will become the sole owner of the Brazilian PVC compounder. The transaction led to an impairment of €(5) million in the second quarter and €(8) million of CTA recycling and was completed on September 14, 2017.
On September 19, 2017, Solvay announced that it had entered into a binding agreement with German chemical company BASF for the sale of its Polyamides business. Under the proposed terms of the agreement, the transaction is based on an enterprise value of €1.6 billion. The expected net cash proceeds are estimated to be around €1.1 billion. The polyamide business to be divested has been reclassified to assets and liabilities held for sale and discontinued operations at the end of the third quarter. As a result of the discontinuation, the retained Latin American polyamide business incurred an impairment of €(91) million recognized at the end of September. This impairment is expected to be more than compensated by the capital gain on the transaction at the closing. Solvay and BASF aim to close the transaction in the second half of 2018, after customary regulatory approvals have been obtained.
On September 21, 2017, Solvay launched a cash tender offer to repurchase bonds on the following issuances:
- Senior US$400 million debt at 3.5%, due in 2023,
- Senior US$250 million debt at 3.95%, due in 2025,
- Senior €500 million debt at 4.625% due in 2018.
On September 28, 2017, Solvay published the final results of the repurchase operation related to the aforementioned issuances. It committed to repurchasing 51% of the outstanding aggregate principal amount of the US$400 million senior bonds due in 2023 for a total amount of US$204 million, 34.6% of the outstanding aggregate principal amount of the US$250 million senior bonds due in 2025 for a total amount of US$87 million, and 23.6% of the outstanding aggregate principal amount of the €500 million senior bonds due in 2018 for a total amount of €118 million. The repurchase closed on October 2 and resulted in an expense of €(25) million, comprising an accretion (acceleration) amounting to €(10) million and premiums amounting to €(15) million (see note F6 Net financial charges).
On November 7, 2017, Solvay completed the acquisition of European Carbon Fiber GmbH (“ECF”), a German producer of high-quality “precursor” for large-tow (50K) polyacrylonitrile (PAN) carbon fibers.
On November 15, 2017, Solvay agreed to sell its US facility in Charleston, South Carolina, and the phosphorus derivatives-based products made at the plant to German specialty chemicals company Lanxess. Employees at the site will also be transferred. The products at the site are used primarily as intermediates in plastic additives, flame retardants, and agricultural applications. The business represents sales of approximately €65 million. The transaction was completed on February 8, 2018.