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 25, 2020, 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 hereafter.
Main events and changes in consolidation scope during the year
On January 18, 2019, the European Commission cleared the divestment of Solvay’s Polyamides activities to BASF, a key milestone in the completion of Solvay’s transformation into an advanced materials and specialty chemicals company. One of the remaining closing conditions included the divestment of a remedy package to a third-party buyer to address the European Commission’s competition concerns. BASF has offered remedies involving part of the assets originally in the scope of the acquisition. These entail among others the manufacturing assets of Solvay’s polyamide intermediates, technical fibers, and engineering plastics business as well as its innovation capabilities in Europe. On August 14, 2019 Solvay and BASF have reached an agreement with Domo Chemicals whereby Domo Chemicals is to acquire the Solvay Polyamides assets that needed to be divested to a third party as part of the European Commission’s merger control clearance process. Domo is a fully integrated nylon 6 specialist, providing specialized engineering materials solutions to its customers in the automotive, electrical, construction, industrial applications and consumer goods industries. The assets acquired by Domo involve Solvay’s Performance Polyamides facilities at Belle-Etoile and Valence, as well as a stake in a newly created joint venture between BASF and Domo in Chalampé (France). They also involve sites in Gorzow (Poland), Blanes (Spain) and commercial activities in Germany and Italy. BASF acquired all the activities that were not included in the remedy package and that were part of the original agreement between Solvay and BASF signed at the end of 2017. The entire transaction, which is based on an aggregate purchase price of € 1.6 billion on a debt free and cash free basis, was completed on January 31, 2020.
On May 12, 2019, Solvay Finance SA (subsidiary of Solvay) exercised its first call option on its € 700 million hybrid bond (ISIN XS0992293570 / Common Code 099229357). This perpetual deeply subordinated bond, bearing an annual interest rate of 4.199%, was treated as equity under IFRS rules. Its repayment was due on May 12, 2019 at the end of the first 5.5 years. As a result, the overall quantum of hybrid bonds in Solvay’s balance sheet decreased from € 2.5 billion at the end of 2018 to € 1.8 billion at the end of 2019.
On August 30, 2019, Solvay announced that Solvay SA placed senior fixed rate bonds for an aggregate nominal amount of € 600 million paying a coupon of 0.5% and having its maturity date on September 6, 2029. The notes are listed and admitted to trading on the regulated market of the Luxembourg Stock Exchange with ISIN BE6315847804. Meanwhile, Solvay Finance (America), LLC redeemed its outstanding US$ 800 million 3.400% notes due 2020 (CUSIP No. US8344PAA7 (Regulation S Notes) and 834423AA3 (Rule 144A Notes) / ISIN USU8344PAA76 (Regulation S Notes) and US834423AA33 (Rule 144A Notes)) on 30 September 2019.
On September 30, 2019 Solvay and Aquatiq concluded a joint venture agreement regarding Aqua Pharma company, under which Solvay acquired 50% of the shares for an amount of € 21 million. This strengthens their long-term collaboration to serve aquaculture customers. With this alliance, Solvay and Aqua Pharma aim to become a key aquaculture player by offering a wide range of sustainable and efficient solutions for sea lice and Amoebic Gill Disease (AGD) to the salmon industry.
After a strategic review performed in Q3 in the context of deteriorating profitability of the Oil & Gas business, the synergies between this business and the rest of Novecare appear to be too small and future growth opportunities too modest to support the Oil & Gas business being considered as part of one Novecare Cash Generating Unit. As a result, an impairment test was performed at the Oil & Gas business level rather than at Novecare level, which was carried out on September 30, 2019. Taking into account the carrying amount of the assets of the Oil & Gas business as of September 30, 2019 and the present value of future cash flows, an impairment of € 825 million pre-tax and € 658 million post-tax has been recognized.
On October 3, 2019 management decided to adapt the projects unveiled in June and September 2018, which focused on the footprint of its Research and Innovation sites in Lyon and Aubervilliers, the future of its Paris office and the transformation of its headquarters in Brussels. The initial objectives of these projects remain unchanged, namely:
- accelerate growth through innovation for its customers;
- strengthen collaboration between employees, customers, and partners;
- simplify the footprint of Solvay’s administrative and Research & Innovation activities.
Adaption was needed because of the sharp increase in the projects’ cost and the evolution of the economic context. Moreover, the number of employees willing to move to Brussels or Lyon has been considered too low. This could have hampered the continuity of activities at the service of our customers. As a consequence, the planned transfers of the teams based in Paris to Lyon and Brussels have been discontinued and the provision for indemnities resulting from expected refusals to relocate has been reversed (€ 48 million).
Main events and changes in consolidation scope in prior 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 were used primarily as intermediates in plastic additives, flame retardants and agricultural applications. The business represented sales of approximately € 65 million. The 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 closed on June 1, 2018. In connection with the disposal, an impairment loss of € 23 million was recognized in the first quarter of 2018.
On March 29, 2018, Solvay announced it was 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 that needs to be adapted to its portfolio, which is 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.
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 5 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).