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COVID-19: Solvay announces EUR1.5-billion impairment charge

June 24/2020

MOSCOW (MRC) -- Solvay provided a trading update for the second quarter noting that the COVID-19 pandemic has had a major impact on demand from customer industries. The company has also announced a noncash impairment charge, said Chemweek.

Solvay says that businesses related to oil and gas, automotive, and aerospace were the most significantly impacted, with revenues down about 40%, whereas businesses related to construction and mining were down about 20%. Other key markets such as healthcare, agro/food, home and personal care, and electronics resisted well and helped to offset some of the challenged markets.
Solvays group sales were down 20% in aggregate across April and May versus 2019 levels. Similar demand trends are expected to continue during June. Decisive actions on structural and temporary cost reduction programs and the focus on cash generation help to ease some of the effects and position the group for strong growth when markets rebound, the company says.

An impairment review is currently under way and likely to lead to a noncash impairment charge estimated at around EUR1.5 billion (USD1.7 billion), with the final number depending on exchange and discount rates as at 30 June 2020. Approximately 80% of the impairment charge is associated with the goodwill resulting from the 2015 Cytec acquisition, and the balance is related to various tangible and intangible assets. The company says that the fundamental long-term attractiveness of the composite materials and technology solutions businesses remain unaffected, driven by demand for lightweighting, electrification, and resource efficiency. Solvay will provide additional details when it publishes its first-half results on 29 July 2020. We continue to act decisively to mitigate the effects of COVID-19 and we remain unrelenting in our focus on free cash flow generation, cost reduction, and serving our customers," says Ilham Kadri, CEO. 
On 15 May, Solvay announced a cost reduction program for its composite materials unit in light of reduced activity, particularly from the aerospace industry, due to COVID-19. The company is to cease operations at its plants in Manchester, UK, and Tulsa, Oklahoma. In addition, job reductions are being implemented across the business, and total headcount will likely decrease by approximately 570 positions, or around 20% of the units workforce.

As MRC informed earlier, Solvay SA said it would close two plants making composites for Airbus SE and Boeing Co. in a sign the deepening aerospace crisis is hitting suppliers of even the latest aircraft materials. The Belgian chemical maker is adding to savings achieved in the past year following the grounding of Boeings 737 Max.

As MRC imformed earlier, Russia's output of chemical products rose by 4.4% year on year in May 2020 . Thus, production of basic chemicals increased year on year by 5.4% in the first five months of 2020. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-May.

Solvay is a science company whose technologies bring benefits to many aspects of daily life. With more than 24,100 employees in 64 countries, Solvay bonds people, ideas and elements to reinvent progress. The Group seeks to create sustainable shared value for all, notably through its Solvay One Planet plan crafted around three pillars: protecting the climate, preserving resources and fostering better life. The Groups innovative solutions contribute to safer, cleaner, and more sustainable products found in homes, food and consumer goods, planes, cars, batteries, smart devices, health care applications, water and air purification systems. Founded in 1863, Solvay today ranks among the worlds top three companies for the vast majority of its activities and delivered net sales of 10.2 billion in 2019. Solvay is listed on Euronext Brussels (SOLB) and Paris and in the United States, where its shares (SOLVY) are traded through a Level I ADR program.
Author:Anna Larionova
Tags:petroleum products, petrochemistry, Solvay.
Category:General News
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