Market and growth – Strategic risk
- Strategic risk refers to Solvay’s exposure to developments in its markets or its competitive environment, and the risk of making erroneous strategic decisions.
- Examples of risks:
- Economic downturn, drastic changes in energy and raw material prices and availability
- Reduction of demand in the Group’s main markets as a consequence of either new legislation or competitive actions, or events affecting its most important customers
- New entrants in a market, a price war, or significant imbalances between supply and demand in its markets
- Technological leaps leading to the development of substitute products or more competitive manufacturing processes
- Lack of success of a new product.
Prevention and mitigation
The potential impact of adverse events is continuously assessed and managed at both the GBU and corporate levels. This year, there was a particular focus on:
- Systematic and formal analysis of markets and marketing challenges on investments and innovation project ramp-ups.
- Development of GDP+ growth markets: Automotive & Aerospace, Resources & Environment, Electrical & Electronics and Agro, Feed & Food.
- Development of customized, mission-critical solutions with our key accounts.
- Adaptation of operations to new energy and CO2 markets.
- Stronger focus on cash conversion and generation.
The integration of Cytec has already delivered on its promise in 2016, significantly exceeding targets for synergies and cash generation. The addition has already enabled the Group to expand its presence in the fast-growing advanced aerospace materials market. In 2016 the development of new aircraft platforms with high composite content was offset by lower production rates of older generation aircraft. However, Solvay remains well-positioned for growth as production of new aircraft programs (growth expected on A320neo, B737 MAX, and Joint Strike Fighter) with higher composite content.
The portfolio transformation continued in 2016, with the Group scaling back cyclical and low-growth businesses by selling stakes in Inovyn, Vinythai and Indupa, and by divesting the cellulose acetate business.