Solvay
2019 Annual Integrated Report

Strategy

Our G.R.O.W. strategy

To navigate the changing landscape around us, Solvay’s new strategic roadmap is built around powerful trends. It points us to where we want to be leaders and create value. Our G.R.O.W. strategy will shape our success in the years to come and beyond, unleashing our full potential.

A new way to G.R.O.W. together

Solvay has great foundations to build on: strong market leadership positions and sustainable solutions driven by megatrends, a heritage of innovation, a history of success, proven knowledge, committed and talented employees.

Based on our industrial know-how and our technological and scientific expertise, we have built strong relationships with our customers and we will continue to develop, focusing on their needs and the idea of bringing them tangible value. We will be ever more customer focused.

We must transform the way we operate to better embody our Purpose. In 2019, we initiated a comprehensive business review, which gave us a clear understanding of our strengths and challenges. From this we built G.R.O.W., the strategic roadmap for each business that will inform our resource allocation and allow us to drive profitable growth, create superior value for all our stakeholders while generating resilient cash flow. G.R.O.W. defines our strategy on every single market: investing for growth, focusing on cash or improving value creation. Solvay will operate in three distinct business segments: Materials, Chemicals and Solutions, each with a new, distinct mandate and ambition. Our new common operating model, Solvay ONE, will help us work more efficiently and effectively together, and to leverage synergies across the Group.

Solvay’s G.R.O.W. midterm strategy to drive growth, cash and returns

Differentiated business mandates for the 3 segments

G.Accelerate Growth R.Deliver Resilient cash O.Optimize returns

Enabled by Solvay ONE operating model

W.Solvay ONE to Win

G.

Prioritize investments in high margin MATERIALS businesses with high growth potential, which are also our most sustainable solutions

Materials comprises Specialty Polymers and Composite Materials businesses.

Key assets

Unique high-performance polymers & composites technologies

Strategic intent

Our ambition is to extend our leadership as the #1 pure play advanced materials business, while leveraging synergies between the polymers and composites technologies to create a leading thermoplastic composites platform. Solvay will prioritize investment and innovation in this segment.

Key levers

  • Realign organization around growth opportunities
  • Accelerate innovation with highest-growth customers
  • Reallocate resources to thermoplastic composites and battery platforms to accelerate customer wins
  • Improve operational efficiencies through simplification, order to cash optimization and digitalization

Innovating for a new market

In 2019, we signed an agreement with the energy technology company Baker Hughes to partner on the use of our thermoplastic composite (TPC) materials in offshore flexible pipes and risers in ultra-deep waters for the Oil & Gas industry. This partnership is a landmark in our strategy to expand the use of TPC into new markets, leveraging its lightweight and non-corrodible properties versus metal.

Track record

+7%
EBITDA growth

organic 2014-2019

~28%
EBITDA margin

2019

>25%
Vitality index1

2018

Returns
>WACC2

average 2014-2019

Business trends

Lightweighting

Electrification

Healthcare

IoT/Digitalization

Resource efficiency

1: % of sales coming from newly developed products in last 5 years
2: Weighted Average Cost of Capital

R.

Maximize cash flow generation from our resilient CHEMICALS businesses where we have a competitive advantage

Chemicals comprises the Soda Ash & Derivatives, Peroxides, Silica and Coatis businesses.

Key assets

World-leaders in chemicals that are essential to daily life

Strategic intent

Solvay will continue to focus on delivering resilient cash flows and selectively invest in these businesses to become the #1 cash conversion chemicals player.

Key levers

  • Refocus organization on cash and returns
  • Drive focused productivity and rationalization programs
  • Prioritize Capex to maintenance and invest selectively for compelling cash returns
  • Focus R&I on process innovation

Targeted investments to meet increasing global demand

Solvay will develop 1.4m tons capacity in soda ash and sodium bicarbonate to meet its customers’ needs, while reducing its CO2 footprint and improve further its competitiveness. We will increase our soda ash production capacity by 600,000 tons at our best-in-class, competitive Green River site in the US, and expand our sodium bicarbonate capacity by 200,000 tons at our plant in Devnya, Bulgaria. Additional volumes of soda ash and bicarbonate will result from excellence programs and digitalization. Against a backdrop of growing global demand, these investments will deliver resilient cash and strong returns.

Track record

+9%
cash flow growth

organic 2014-2019

~79%
cash conversion3

2019

~27%
EBITDA margin

2019

Returns
at WACC

average 2014-2019

Business trends

Healthcare

Resource efficiency

3: The free cash flow conversion ratio is calculated as the ratio between the free cash flow to Solvay shareholders (before netting of dividends paid to non-controlling interest) and underlying EBITDA.

O.

Optimize our SOLUTIONS and businesses to unlock value and increase returns

Solutions includes Novecare, Technology Solutions, Aroma Performance and Special Chem.

Key assets

Unique formulation & application expertise

Strategic intent

Solvay will optimize these businesses, leverage its leadership positions, drive better returns and unlock value.

Key levers

  • Innovate and invest selectively in specialty niche markets, focusing on three specific areas:
    • Consumer goods and crop care, where we have leading positions in vanillin and guar for home & personal care
    • Industrial markets such as coatings, where we offer unique solutions for waterborne applications
    • Resources, where we are the leaders in improving the yield of metals and minerals for the mining industry
  • Achieve turnaround in shale oil & gas and other low-return businesses
  • Drive efficiency and address fragmented industrial footprint

Caring for both hair and the planet

With Jaguar® C162, a derivatized cationic guar produced from a bean grown mainly in India, Solvay has developed a non-ecotoxic and vegetable-based ingredient caring for both our ecosystems and damaged hair.

Track record

Returns
>WACC

average 2014-2019

Flat net sales &
EBITDA growth

average 2014-2019

~17%
EBITDA margin

2019

Business trends

IoT/Digitalization

Resource efficiency

Eco-friendly solutions

W.

Create a winning team and operating model to support a performance-driven culture and win with our customers

The way we will win with our Solvay ONE operating model is an equally important element of our value creation. Solvay ONE entails a completely new way of working that will leverage the many strands and competencies across our enterprise and not just within each business, to build a single strong Group and take us from a decentralized model to Enterprise leadership with robust performance management. Our new operating model means targeted and disciplined resource allocation, a tailored approach to customers, and a repeatable cost and cash playbook.