- GRI disclosures
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 Revenue and segment information.
On February 26, 2019, the Board of Directors authorized the consolidated financial statements for issuance. They have been prepared in accordance with IFRS accounting policies as endorsed by the European Union, as disclosed hereinafter.
Main events and changes in consolidation scope during the year
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. 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. Transaction was completed on February 8, 2018 for US$ 68 million, leading to a net capital gain before tax of € 22 million. Employees at the site were transferred.
On March 15, 2018, Solvay announced it had agreed to sell its Porto Marghera plant, which produces hydrofluoric acid, to Alkeemia, part of the Italian Fluorsid Group. The hydrofluoric acid is utilized by Solvay as a base chemical for the production of selected specialty polymers. This divestment is in line with Solvay Specialty Polymers’ strategy to focus on specialties, where technology and innovation make the difference, to improve the sustainability of its productions. Fluorsid Group is one of the key players in the hydrofluoric acid and derivatives market at an international level. Alkeemia acquired Solvay Specialty Polymers’ Porto Marghera branch of activities, and the employees at the site have been transferred. The sale was closed on June 1, 2018. In connection with the disposal, an impairment loss of € (23) million has been recognized in the first quarter of 2018.
On March 29, 2018, Solvay announced it is taking a new step in its transformation, putting its customers at the core of its organization to enhance its long-term growth as an advanced materials and specialty chemicals company. Solvay announced plans to simplify its organization, which needs to be adapted to its portfolio – now strongly focused on high-performance materials and tailored solutions – as well as to its changing customer base. The Group launched the relevant information/consultation procedures with employee representatives. These procedures were completed at the end of June. The Group is committed to supporting employees throughout this transformation while limiting job losses as much as possible. The simplification of the organization should lead to around 600 net redundancies, mainly in functional activities. The concentration of the R&I and support activities would involve the transfer to Lyon and Brussels, over four years, of about 500 employees who can rely on comprehensive support from the Group to help them relocate. In connection with the announced transformation, a restructuring provision has been recognized, with a net profit or loss impact of € (177) million. On top of this provision, other costs were already incurred in 2018 for an amount of € (8) million.
On October 16, 2018, Solvay announced that the divestment of its polyamide business to BASF is moving forward, as BASF has offered remedies involving part of the assets originally included in the scope of the acquisition, to address the competition concerns the European Commission has raised following an in-depth Phase II investigation. The European Commission examined these remedies and submitted them to market testing before completing its review procedure. The assets concerned by the remedies include innovation capabilities and manufacturing assets of Solvay’s polyamide intermediate and engineering plastics business in Europe. The activities included in the proposed remedy scope are able to compete as successful stand-alone businesses under third party ownership. For BASF and Solvay this was a further step towards obtaining European Commission clearance for their agreement; this was obtained in January 2019. Both companies will continue to run their businesses separately until completion of the transaction, which is expected in the second part of 2019 after all remaining closing conditions will have been fulfilled.
On November 27, 2018, Solvay successfully issued a perpetual hybrid bond for an aggregate nominal amount of € 300 million, to be used for general corporate purposes, including the possibility to refinance the existing € 700 million hybrid bond with a first call date in May 2019. The € 300 million hybrid bond has a first call date on March 4, 2024 and a coupon of 4.25% until this date, with a reset every five years thereafter. The hybrid bond ranks junior to all senior debt and is classified as equity (and accordingly, coupons will be deducted from equity in accordance with IFRS).
Main events and changes in consolidation scope in prior 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 divested the business line, which generated sales of € 17 million in 2016. The divestment included the formulated resins product portfolio, the manufacturing and R&D facility based in Olean, New York, USA, 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 as from 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 as from 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 post-closing adjustments.
Solvay deconsolidated its investment in Venezuela triggered by the political situation in the country, and recognized a loss of € 72 million, related mainly to the € (60) million recycling of currency translation differences, in the second quarter of 2017.
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 currency translation differences 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. The business planned for divestment has been reclassified to assets and liabilities held for sale and discontinued operations at the end of the third quarter of 2017. As a result of the discontinuation, the retained Latin American polyamide business incurred an impairment of € (91) million recognized at the end of September 2017. This impairment is expected to be more than compensated by the capital gain on the transaction at the closing.
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; and
- 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 was closed on October 2, 2017 and resulted in an expense of € (25) million of which an accretion (acceleration) amounting to € (10) million and premiums amounting to € (15) million.
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.