In € million

 

Employee benefits

 

Restructuring

 

Environment

 

Litigation

 

Other

 

Total

At December 31, 2017

 

2,816

 

62

 

702

 

129

 

180

 

3,890

Additions

 

77

 

198

 

60

 

21

 

35

 

390

Reversals of unused amounts

 

(26)

 

(10)

 

(14)

 

(12)

 

(14)

 

(76)

Uses

 

(218)

 

(64)

 

(76)

 

(16)

 

(21)

 

(395)

Increase through discounting

 

54

 

 

 

22

 

1

 

 

 

78

Remeasurements

 

(33)

 

 

 

 

 

 

 

 

 

(33)

Currency translation differences

 

7

 

 

 

(3)

 

(3)

 

2

 

3

Disposals

 

(1)

 

 

 

 

 

 

 

 

 

(2)

Transfer to liabilities associated with assets held for sale

 

 

 

 

 

 

 

 

 

(2)

 

(1)

Other

 

(6)

 

(1)

 

 

 

1

 

(12)

 

(18)

At December 31, 2018

 

2,671

 

185

 

691

 

121

 

168

 

3,836

Of which current provisions

 

 

 

95

 

97

 

8

 

81

 

281

The use (cash-out) of € 395 million includes € 390 million for continuing operations, of which € 213 million for employee benefits, € 64 million for restructuring plans, and € 76 million for environmental items. The line “increase through discounting” includes € 74 million for increase at constant discount rate and an amount of € 4 million relating to change of discount rate.

The deleveraging corresponds to the net difference between:

  1. cash out (use for € (395) million) on the one hand; and
  2. the sum of the net accruals for new provisions (€ 315 million, being additions less reversals of unused amounts) and the increase through discounting (€ 74 million) at constant discount rate on the other hand.

The deleveraging of Solvay provisions amounts to € 6 million. This amount is lower than in previous years due to the impact of the Group’s simplification plan launched in 2018, for which a provision of € 177 million has been recognized.

The deleveraging of employee benefits obligations amounts to € 113 million, a trend which is explained by the fact that most plans have been closed to new entrants.

Management expects provisions (other than employee benefits) to be used (cash outlays) as follows:

In € million

 

Up to 5 years

 

Between 5 and 10 years

 

Beyond 10 years

 

Total

Provisions for environment

 

317

 

117

 

258

 

691

Provisions for litigation

 

112

 

9

 

 

 

121

Provisions for restructuring and other

 

312

 

26

 

15

 

353

At December 31, 2018

 

741

 

151

 

272

 

1,165

F34.A. Provisions for employee benefits

Accounting policy

General

The Group’s employees are offered various post-employment benefits, other long-term employee benefits, and termination benefits as a result of legislation applicable in certain countries, contractual agreements entered into by the Group with its employees or constructive obligations.

The post-employment benefits are classified as defined contribution or defined benefit plans.

Defined contribution plans

Defined contribution plans involve the payment of fixed contributions to a separate entity and release the employer from any subsequent obligation, as this separate entity is solely responsible for paying the amounts due to the employee. The expense is recognized when an employee has rendered services to the Group during the period.

Defined benefit plans

Defined benefit plans concern all plans other than defined contribution plans and include:

  • post-employment benefits: pension plans, other post-employment obligations and supplemental benefits such as post-employment medical plans;
  • other long-term employee benefits: long-service benefits granted to employees according to their seniority in the Group;
  • termination benefits such as early pension plans.

Taking projected final salaries into account on an individual basis, post-employment benefits are measured by applying a method (projected unit credit method) using assumptions involving discount rate, life expectancy, turnover, wages, annuity revaluation, and medical cost inflation. The assumptions specific to each plan take into account the local economic and demographic contexts.

The discount rates are interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension obligation.

The amount recognized under post-employment obligations corresponds to the difference between the present value of future obligations and the fair value of the plan assets funding the plan, if any. If this calculation gives rise to a deficit, an obligation is recognized in liabilities. Otherwise, a net asset limited to the lower of the surplus in the defined benefit plan and the present value of any future plan refunds or any reduction in future contributions to the plan is recognized.

The defined benefit cost consists of service cost and net interest expense (based on discount rate) on the net liability or asset, both recognized in profit or loss, and remeasurements of the net liability or asset, recognized in other comprehensive income.

Service cost consists of current service cost, past service cost resulting from plan amendments or curtailments, and settlement gains or losses.

The interest expenses arising from the reverse discounting of the benefit obligations, the financial income on plan assets (determined by multiplying the fair value of the plan assets by the discount rate), as well as interest on the effect of the asset ceiling are recognized on a net basis in the net financial charges (cost of discounting of provisions).

Remeasurements of the net liability or asset consist of:

  • actuarial gains and losses on the benefit obligations arising from experience adjustments and/or changes in actuarial assumptions (including the effect of changes in the discount rate);
  • the return on plan assets (excluding amounts in net interest) and changes in the limitation of the net asset recognized.

Other long-term and termination benefits are accounted for in the same way as post-employment benefits but remeasurements are fully recognized in the net financial charges during the period in which they occur.

The actuarial calculations of the main post-employment obligations and other long-term benefits are performed by independent actuaries.

Overview

In € million

 

2018

 

2017

Post-employment benefits

 

2,490

 

2,635

Other long-term benefits

 

132

 

132

Termination benefits

 

50

 

49

Total employee benefits

 

2,671

 

2,816

Post-employment benefits

A. Defined contribution plans

For defined contribution plans, Solvay pays contributions to publicly or privately administered pension funds or insurance companies. For 2018, the expense amounts to € 58 million as against € 55 million for 2017.

B. Defined benefit plans

Defined benefit plans can either be funded via outside pension funds or insurance companies (“funded plans”) or financed within the Group (“unfunded plans”).

The net liability results from the net of the provisions and the asset plan surplus.

In € million

 

2018

 

2017

Provisions

 

2,490

 

2,635

Asset plan surplus

 

(5)

 

(14)

Net liability

 

2,485

 

2,622

Operational expense

 

31

 

31

Finance expense

 

51

 

62

The operating expense includes current service cost for € 47 million.

B.1. Management of risks

Over recent years, the Group has reduced its exposure to defined benefit plan obligations stemming from future services by converting existing plans into pension plans with a lower risk profile (hybrid plans, cash balance plans, and defined contribution plans) or by closing them to new entrants.

Solvay continuously monitors its risk exposure, focusing on the following risks:

Asset volatility

Equity instruments, even though expected to outperform corporate bonds in the long-term, create volatility and risk in the short-term. To mitigate this risk, the allocation to equity instruments is monitored using Assets and Liabilities Management techniques, to ensure it remains appropriate given the long-term objectives of the Group and of the respective schemes.

Changes in bond yields

A decrease in corporate bond yields will increase the carrying amount of the plan’s liabilities. For funded schemes this impact will be offset partially by an increase in the fair value of the plan assets.

Inflation risk

The defined benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). A limited part of the assets are either unaffected by or only loosely correlated with inflation, meaning that an increase in inflation will also increase the plans’ liabilities.

Life expectancy

The majority of the schemes’ obligations are to provide benefits for the life of the member. Increases in life expectancy will therefore increase the plans’ liabilities.

Currency risk

This risk is limited, as major plans in foreign currency are funded and most of their assets are denominated in the currency in which benefit payments will take place.

Regulatory risk

For partly or fully unfunded plans, the Group is exposed to the risk of external funding following regulatory constraints. This should not impact the defined benefit obligation but could expose the Group to a potential significant cash outlay.

For more information about Solvay Group risk management, refer to the "Management of risks" section of the present document.

B.2. Description of obligations

The provisions have been set up to cover post-employment benefits granted by most Group companies, in line either with local rules and customs or with established practices which generate constructive obligations.

The largest post-employment plans in 2018 are in the United Kingdom, France, the United States, Germany, and Belgium. These five countries represent 94% of the total defined benefit obligations.

2018
In € million

 

Defined benefit obligations

 

In %

 

Recognized plan assets

 

Net liability

 

In %

 

Ratio plan assets on defined benefit obligations

United Kingdom

 

1,530

 

31%

 

1,124

 

406

 

16%

 

73%

United States

 

1,271

 

25%

 

981

 

290

 

12%

 

77%

France

 

1,021

 

20%

 

1

 

1,020

 

41%

 

0%

Germany

 

520

 

10%

 

0

 

520

 

21%

 

0%

Belgium

 

385

 

8%

 

242

 

143

 

6%

 

63%

Other countries

 

294

 

6%

 

188

 

106

 

4%

 

64%

Total

 

5,022

 

100%

 

2,536

 

2,485

 

100%

 

51%

2017
In € million

 

Defined benefit obligations

 

In %

 

Recognized plan assets

 

Net liability

 

In %

 

Ratio plan assets on defined benefit obligations

United Kingdom

 

1,645

 

31%

 

1,220

 

425

 

16%

 

74%

United States

 

1,371

 

25%

 

1,056

 

315

 

12%

 

77%

France

 

1,085

 

20%

 

6

 

1,079

 

41%

 

1%

Germany

 

552

 

10%

 

0

 

552

 

21%

 

0%

Belgium

 

393

 

8%

 

247

 

147

 

6%

 

63%

Other countries

 

303

 

6%

 

198

 

105

 

4%

 

65%

Total

 

5,349

 

100%

 

2,727

 

2,622

 

100%

 

51%

It is worth highlighting that unfunded plans – mainly in Germany and France – account for 62% of the 2018 net liability. See comments by countries below.

United Kingdom

Solvay sponsors a few defined benefit plans in the United Kingdom; the largest one is the Rhodia Pension Fund. This is a final salary funded pension plan, with entitlement to accrue a percentage of salary per year of service. It was closed to new entrants in 2003 and replaced by a defined contribution plan.

Broadly, about 8% of the liabilities are attributable to current employees, 27% to former employees, and 65% to current pensioners.

The Fund functions and complies with UK legislation under a large regulatory framework. The Pensions Regulator has a risk-based approach to regulation and a code of practice which provides practical guidance to trustees and employers of defined benefit schemes on how to comply with the scheme funding requirements. In accordance with UK legislation, the Fund is subject to Scheme Specific Funding which requires that pension plans are funded prudently.

The UK Rhodia Pension Fund is governed by a Board of Trustees. They manage the Fund with prudent and fair judgment. The Trustees determine the liabilities used for Statutory Funding Objectives based on prudent actuarial and economic assumptions. Any shortfall or deficit once these liabilities have been deducted from the Fund’s assets must be reduced by additional contributions and in a time frame determined in accordance with the employer’s ability to pay and the strength of covenant or contingent security being offered by the employer.

The Rhodia Pension Fund is subject to a triennial valuation cycle for funding purposes. This valuation is performed by the scheme actuary in line with UK regulations and is discussed between the Trustees and the sponsoring employer to agree the valuation assumptions and a funding plan. The last completed valuation was as at January 1, 2018 which established a fixed contribution rate of pensionable pay for active members plus a deficit recovery plan which aims to fund the scheme’s technical provisions over a period of time. Recovery contributions have been increased so that the plan is expected to be fully funded by the end of 2027 in accordance with local regulations. Under IFRS the plan is expected to be fully funded around 2024.

The guarantee provided by Solvay (£ 550 million) is based on local regulations and exceeds the recognized liability (€ 406 million) – See note F39 Contingent liabilities and financial guarantees.

France

Solvay sponsors various defined benefit plans in France. The largest plans are the French compulsory retirement indemnity plan and two closed and one open top hat plans.

The main plan is for all former Rhodia current and retired employees who contributed to the plan prior to its closure in the 1970s. It offers a full benefit guarantee based on the end-of-career salary. This plan is unfunded and approximately 98% of the liabilities are attributable to current pensioners.

In accordance with French legislation, adequate guarantees have been provided.

United States

As of year-end 2018 Solvay sponsored five different defined benefit pension plans in the United States (two qualified plans and three non-qualified plans).  A qualified plan is an employer-sponsored retirement plan that qualifies for special tax treatment under Section 401(a) of the Internal Revenue Code. At this moment all defined benefit plans are closed to new entrants; newly hired employees are eligible to participate in a defined contribution plan.  Note that the two qualified defined benefit pension plans are funded while the three non-qualified defined benefit pension plans are unfunded.  The qualified plans make up the vast majority of the pension liabilities as of December 31, 2018.

Solvay's plans are in compliance with local laws regarding audited financial statements, governmental filings, and Pension Benefit Guaranty Corporation insurance premiums where applicable.  The plans are reviewed and monitored locally by fiduciary committees for purposes of plan investments and administrative matters.

For the US qualified plans, Solvay’s contributions take into account minimum (tax-deductible) funding requirements and maximum tax deductible contributions, both regulated by the tax authorities.

Certain eligible participants may elect to receive their pension in a single lump sum payment instead of a monthly payment.

Broadly, about 27% of the liabilities are attributable to current employees, 9% to former employees for whom benefit payments have not yet commenced, and 64% to current pensioners.

In 2018, in the United States Solvay contributed to two multiemployer pension plans under collective bargaining agreements that cover certain of its union-represented employees. Each of the multiemployer plans is a defined benefit pension plan. None of the multiemployer plans provides an allocation of its assets, liabilities, or costs among contributing employers. None of the multiemployer plans provides sufficient information to permit Solvay, or other contributing employers, to account for the multiemployer plan as a defined benefit plan. Accordingly, the company accounts for its participation in each of the multiemployer plans as if they were a defined contribution plan. For multiemployer plans, during 2018 and 2017, the annual contributions paid are less than € 1 million.

Germany

Solvay sponsors various defined benefit plans in Germany. The largest plans are a closed final-pay plan and an open cash balance plan. As is common in Germany, all plans are unfunded. Broadly, about 62% of the liabilities are attributable to current pensioners.

Belgium

Solvay sponsors two defined benefit plans in Belgium. These are funded pension plans. The plan for executives has been closed since the end of 2006, and the plan for the white and blue collars has been closed since 2004. The past service benefits provided under these plans continues to be adapted each year considering annual salary increase and inflation (“Dynamic management”). In accordance with market practice in Belgium, because of favorable retirement lump sum taxation most benefits are paid as lump sum.

Furthermore, Solvay sponsors two open defined contribution plans, classified as defined benefit plans for accounting purposes due to the minimum guarantees explained below. These are funded pension plans: the plan for executives opened at the beginning of 2007 and the plan for white and blue collars opened at the beginning of 2005. There are four different investment funds – ranging from “Prudent” to “Dynamic” – in which participants may choose to invest their contributions However, regardless of their choices, Belgian law stipulates that the employer must guarantee a return on employer contribution and on personal contribution, thereby creating a potential liability for the Group. Since 2016 the return has been fixed at 1.75% for both types of contributions, at the minimum of the range provided by law since January 1, 2016 (1.75% to 3.75%). For these plans Solvay has € 127 million of plan assets at December 31, 2018, and paid € 8 million of contributions during 2018. At the end of 2018 net liability recognized in the consolidated statement of financial position concerning these plans is not material.

Solvay’s plans are administered through the Solvay Pension Fund, which operates in compliance with local laws regarding minimum funding, investments principles, audited financial statements, governmental filings, and governance principles. The Pension Fund is managed through a General Assembly and a Board of Directors delegating day-to-day activities to an operational Committee.

Solvay sponsors a few other smaller pension plans. All these plans are insured.

Other plans

The majority of the obligations relate to pension plans. In some countries (mainly the United States), there are also post-employment medical plans, which represent 5% of the total defined benefit obligation.

B.3. Financial impacts

Changes in net liability

In € million

 

2018

 

2017

Net amount recognized at beginning of period

 

2,622

 

2,936

Net expense recognized in P&L – Defined benefit plans

 

82

 

93

Actual employer contributions/direct actual benefits paid

 

(196)

 

(203)

Acquisitions and disposals

 

(8)

 

7

Remeasurements before impact of asset ceiling

 

(25)

 

(93)

Change in the effect of the asset ceiling limit on remeasurements

 

(1)

 

(2)

Reclassifications

 

4

 

(2)

Currency translation differences

 

7

 

(72)

Transfer to (liabilities associated with) assets held for sale

 

 

 

(43)

Net amount recognized at end of period

 

2,485

 

2,622

Remeasurements before impact of asset ceiling in the amount of € (25) million comprise:

  • the negative return on plan assets (excluding interests reported in income statement) for € 184 million;
  • increase in discount rates (€ (195) million) mainly in the United States, United Kingdom, and Eurozone;
  • increase in inflation rate (€ 32 million) for France; and
  • other remeasurements due to changes in the other financial assumptions, demographic and experience effects (€ (47) million).
Net expense

In € million

 

2018

 

2017

Current service costs

 

47

 

51

Past service costs (including curtailments)

 

(26)

 

(31)

Service costs

 

20

 

20

Interest cost

 

135

 

154

Interest income

 

(84)

 

(93)

Net interest

 

51

 

62

Administrative expenses paid

 

11

 

12

Net expense recognized in P&L – Defined benefit plans

 

82

 

93

Remeasurements recognized in other comprehensive income

 

(26)

 

(95)

The service costs and administrative expenses of these benefit plans are recognized within cost of sales, commercial and administrative costs, research & development costs or operating gains and losses and results from legacy remediation, and the net interest is recognized as a finance expense.

In 2018 the Group’s current service costs amount to € 47 million, of which € 31 million relate to funded plans and € 16 million relate to unfunded plans. Past service costs include mainly favorable impacts reflecting the amendment of post-retirement healthcare and death benefit plan in the United States (€ 24 million), a curtailment effect (€ 15 million) mainly in France and in Belgium, compensated by an unfavorable impact of the UK guarantee minimum pension for € 16 million (see Key sources of estimation uncertainty).

In 2017 the Group’s current service costs amounted to € 51 million, of which € 34 million related to funded plans and € 17 million related to unfunded plans. Past service costs include favorable impacts reflecting the amendment of post-retirement healthcare and death benefit plan in the United States (€ 37 million).

Net liability

In € million

 

2018

 

2017

Defined benefit obligations – Funded plans

 

3,200

 

3,402

Fair value of plan assets at end of period

 

(2,542)

 

(2,733)

Deficit for funded plans

 

658

 

669

Defined benefit obligations – Unfunded plans

 

1,822

 

1,947

Deficit/Surplus (–)

 

2,481

 

2,616

Amounts not recognized as asset due to asset ceiling (recognized in other comprehensive income)

 

5

 

6

Net liability (asset)

 

2,485

 

2,622

Provision recognized

 

2,490

 

2,635

Asset recognized

 

(5)

 

(14)

Changes in defined benefit obligations

In € million

 

2018

 

2017

Defined benefit obligation at beginning of period

 

5,349

 

5,739

Current service costs

 

47

 

51

Past service costs (including curtailments)

 

(26)

 

(31)

Interest cost

 

135

 

154

Employee contributions

 

4

 

4

Settlements

 

(8)

 

(14)

Acquisitions and disposals (–)

 

(8)

 

7

Remeasurements in other comprehensive income

 

(209)

 

113

Actuarial gains and losses due to changes in demographic assumptions

 

(45)

 

(23)

Actuarial gains and losses due to changes in financial assumptions

 

(139)

 

106

Actuarial gains and losses due to experience

 

(26)

 

30

Actual benefits paid

 

(296)

 

(300)

Currency translation differences

 

29

 

(310)

Reclassification and other movements

 

4

 

 

Transfer from/to (liabilities associated with) assets held for sale

 

2

 

(64)

Defined benefit obligation at end of period

 

5,022

 

5,349

Defined benefit obligations – Funded plans

 

3,200

 

3,402

Defined benefit obligations – Unfunded plans

 

1,822

 

1,947

Changes in the fair value of plan assets

In € million

 

2018

 

2017

Fair value of plan assets at beginning of period

 

2,733

 

2,811

Interest income

 

84

 

93

Remeasurements in other comprehensive income

 

(185)

 

206

Employer contributions

 

196

 

203

Employee contributions

 

4

 

4

Administrative expenses paid

 

(11)

 

(12)

Settlements

 

(8)

 

(14)

Actual benefits paid

 

(296)

 

(300)

Currency translation differences

 

23

 

(238)

Reclassification and other movements

 

 

 

2

Transfer from/to (liabilities associated with) assets held for sale

 

1

 

(21)

Fair value of plan assets at end of period

 

2,542

 

2,733

Actual return on plan assets

 

(101)

 

299

In 2018 the total return on plan assets, i.e. including interest income, amounts to € (101) million against € 299 million in 2017.

In 2018, the Group’s cash contributions (including direct benefits payments) amount to € 196 million, of which € 95 million of contributions to funds and € 101 million of direct benefits payments.

The Group’s cash contributions (including direct benefit payments) for 2017 amounted to € 203 million, of which € 108 million of contributions to funds and € 95 million of direct benefits payments.

Except for any significant change in the regulatory environment (see “regulatory risk” above), the Group’s cash contributions in 2019 are expected to approximate € 190 million.

Categories of plan assets

 

 

2018

 

2017

 

Quoted

 

Non quoted

 

Quoted

 

Non quoted

Equity

 

36%

 

0%

 

40%

 

0%

Bonds

 

 

 

 

 

 

 

 

Investment Grade

 

55%

 

0%

 

50%

 

0%

Non Investment Grade

 

2%

 

0%

 

6%

 

0%

Properties

 

1%

 

0%

 

1%

 

0%

Cash and cash equivalents

 

2%

 

0%

 

2%

 

0%

Derivatives

 

 

 

 

 

 

 

 

Structured debt (LDI)

 

0%

 

0%

 

1%

 

0%

Other derivatives

 

0%

 

0%

 

1%

 

0%

Others

 

3%

 

0%

 

0%

 

0%

Total

 

100%

 

0%

 

100%

 

0%

With respect to the invested assets, it should be noted that these assets do not contain any direct investment in Solvay Group shares or in property or other assets occupied or used by Solvay. This does not prevent Solvay shares from being included in mutual investment fund type investments.

Changes in asset ceiling

In € million

 

2018

 

2017

Effect of the asset ceiling limit at beginning of period

 

6

 

8

Change in the effect of the asset ceiling limit on remeasurements

 

(1)

 

(2)

Effect of the asset ceiling limit at end of period

 

5

 

6

Actuarial assumptions used in determining the liability

Some of the retirement plans that Solvay has in place provide annuity payments that are adjusted on a regular basis to mitigate the effects for cost of living increases.

The salary growth assumption is used to determine what will be the salary at the end of the career of the individuals, as the defined benefit plans take into account the last salary of the individuals. This assumption includes impacts of both inflation and merit increases.

The pension growth assumption defines the expected future adjustments for these annuity payments. The plan defines how these annuity payments will be adjusted and might be linked to inflation. Pension growth assumptions mainly apply for the defined benefit retirement plans in the United Kingdom, France, and Germany.

Inflation assumption is presented separately as salary growth and pension growth assumptions encompass more variables than inflation.

In %

 

Eurozone

 

United Kingdom

 

United States

 

2018

 

2017

 

2018

 

2017

 

2018

 

2017

Discount rates

 

1.75

 

1.50

 

2.75

 

2.50

 

4.00

 

3.50

Expected rates of future salary increases

 

1.75 – 4.00

 

1.75 – 4.00

 

2.15 – 3.25

 

2.15 – 3.25

 

3.00 – 3.75

 

3.00 – 3.75

Inflation

 

1.75 – 2.00

 

1.50 – 1.75

 

3.25

 

3.25

 

2.25

 

2.25

Expected rates of pension growth

 

0.00 – 2.00

 

0.00 – 1.75

 

3.10

 

3.05

 

NA

 

NA

Actuarial assumptions used in determining the annual cost

In %

 

Eurozone

 

United Kingdom

 

United States

 

2018

 

2017

 

2018

 

2017

 

2018

 

2017

Discount rates

 

1.50

 

1.50

 

2.50

 

2.75

 

3.50

 

4.00

Expected rates of future salary increases

 

1.75 – 4.00

 

1.75 – 4.00

 

2.15 – 3.25

 

2.40 – 3.50

 

3.00 – 3.75

 

3.00 – 3.75

Inflation

 

1.50 – 1.75

 

1.50 – 2.00

 

3.25

 

3.50

 

2.25

 

2.25

Expected rates of pension growth

 

0.00 – 1.75

 

0.00 – 1.75

 

3.10

 

3.30

 

NA

 

NA

Actuarial assumptions regarding future mortality are based on recent country-specific mortality tables. These assumptions translate at January 1, 2018 into an average remaining life expectancy in years for a pensioner retiring at age 65:

In years

 

United Kingdom

 

United States

 

Belgium

 

France

 

Germany

Retiring at the end of the reporting period

Male

 

21

 

20

 

18

 

24

 

20

Female

 

23

 

22

 

21

 

28

 

24

Retiring 20 years after the end of the reporting period

Male

 

22

 

21

 

18

 

27

 

22

Female

 

24

 

23

 

21

 

31

 

26

In some countries such as United Kingdom and United States, the mortality assumptions reflect actual scheme experience and/or Solvay’s expectations in terms of future mortality improvements.

The actuarial assumptions used in determining the employee benefits obligation at December 31 are based on the following employee benefits liabilities durations:

 

 

Eurozone

 

United Kingdom

 

United States

Duration in years

 

12.0

 

15.9

 

10.7

Sensitivities on the defined benefits obligation for the post-employment benefits

Each sensitivity amount is calculated assuming that all other assumptions are held constant. It should be noted that economic factors and conditions often affect multiple assumptions simultaneously.

Sensitivity to a change of percentage in the discount rates:

In € million

 

0.25% increase

 

0.25% decrease

Eurozone

 

(58)

 

60

United Kingdom

 

(57)

 

60

United States

 

(32)

 

33

Others

 

(6)

 

6

Total

 

(153)

 

159

Sensitivity to a change of percentage in the inflation rates:

In € million

 

0.25% increase

 

0.25% decrease

Eurozone

 

54

 

(52)

United Kingdom

 

40

 

(39)

United States

 

 

 

 

Others

 

5

 

(4)

Total

 

99

 

(95)

Sensitivity to a change of percentage in salary growth rates:

In € million

 

0.25% increase

 

0.25% decrease

Eurozone

 

15

 

(14)

United Kingdom

 

3

 

(3)

United States

 

2

 

(1)

Others

 

1

 

(1)

Total

 

21

 

(19)

Sensitivity to a change of one year on mortality tables - The table shows impacts when the age of all beneficiaries increases or decreases by one year:

In € million

 

Age correction +1 year

 

Age correction –1 year

Eurozone

 

(78)

 

80

United Kingdom

 

(57)

 

58

United States

 

(29)

 

30

Others

 

(7)

 

8

Total

 

(171)

 

176

F34.B. Provisions other than for employee benefits

Accounting policy

General

Provisions are recognized when (a) the Group has a present obligation (legal or constructive) as a result of a past event, (b) it is probable that the Group will be required to settle the obligation, and (c) a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount is the present value of expenditures required to settle the obligation. Impacts of changes in discount rates are generally recognized in the financial result.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received if the Group settles the obligation.

Onerous contracts

An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Present obligations arising from onerous contracts are recognized and measured as provisions.

Restructurings

A restructuring provision is recognized when the Group has developed a detailed formal plan for the restructuring and has, by starting to implement the plan or announcing its main features to those affected by it, raised a valid expectation in those affected that it will carry out the restructuring. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.

Environmental liabilities

Twice a year Solvay analyzes all its environmental risks and the corresponding provisions. Solvay measures these provisions to the best of its knowledge of applicable regulations, the nature and extent of the pollution, clean-up techniques, and other available information.

Restructuring provisions

These provisions amount to € 185 million, as against € 62 million at the end of 2017.

The main provisions at the end of 2018 relate to the Group’s simplification program announced in March 2018 (€ 160 million).

Environmental provisions

These provisions amount to € 691 million at the end of 2018, as against € 702 million at the end of 2017, and pertain to:

  • mines and drilling operations to the extent that legislation and/or operating permits in relation to quarries, mines, and drilling operations contain requirements to pay compensation to third parties. Most of these provisions, based on local expert advice, can be expected to be used over a 1-20 year horizon and amount to € 140 million;
  • the dismantling of the last mercury electrolysis activities, which should be completed by the end of 2019. The remaining provisions related to those activities will be used for the management of contamination of soils and groundwater, mostly over the next 20 years;
  • lime dikes (settling ponds related mainly to soda ash plants), dump at sites and third party dump sites (linked to several industrial activities). These provisions have a horizon of 1 to 20 years; and
  • various types of pollution (organic, inorganic) coming from miscellaneous chemical productions; these provisions mainly cover discontinued activities or closed plants. Most of these provisions have a horizon of 1 to 20 years.

The estimated amounts are discounted based on the probable date of settlement, and are adjusted periodically to reflect the passage of time.

Provisions for litigation

Provisions for litigation refer to tax and legal exposures. They amount to € 121 million at the end of 2018 as against € 129 million at the end of 2017. The balance at the end of 2018 relates to tax risks (€ 52 million) and legal claims (€ 69 million).

Other provisions

Other provisions relate to the shutdown or disposal of activities and amount to € 168 million, as against € 180 million at the end of 2017.