Solvay posts lower earnings, sales on COVID-19 impacts, raises cost-savings target

MOSCOW (MRC) -- Solvay reports declines in fourth-quarter and full-year 2020 earnings and sales because of lower demand caused by COVID-19, said Chemweek.

The company, meanwhile, has announced an increase in its cost-savings target and confirmed 500 additional job cuts. The company recorded a 41% decline in underlying fourth-quarter net profit to EUR96 million (USD117 million) compared with the corresponding period of the previous year, on sales down 9.3%, to EUR2.2 billion. Underlying EBITDA was down 11.7% year on year (YOY) in the fourth quarter, to EUR464 million, mainly due to lower volumes and adverse foreign-exchange impacts.

Solvay’s fourth-quarter sales improved 5.3% sequentially versus the third quarter as demand improved in certain markets including automotive and electronics, the company says. Top-line organic growth turned positive in the specialty polymers, peroxides, Coatis, silica, and special chem businesses during the quarter. Solvay’s sales in China increased 5% YOY in the fourth quarter.

Full-year sales fell 12.5%, to just below EUR9.0 billion owing to the impact from COVID-19 on sales volumes to the civil aerospace and oil and gas (O&G) industries, which were moderated by resilient demand in healthcare, consumer goods, personal care, and electronics, Solvay says. Fourth-quarter sales excluding civil aerospace and O&G were up 6% YOY as a result of strong demand in automotive and electronics markets.

Solvay’s full-year underlying EBITDA was EUR1.9 billion, down 16.2%. The company estimates that the total negative impact of COVID-19 on 2020 EBITDA was a net EUR434 million, after mitigation actions related to labor costs, including furloughs.

The company’s underlying EBITDA margin for 2020 was 21.7%, a relatively small decline from 22.7% in 2019. This and the EBITDA figure “illustrate both the quality and resilience of the portfolio, and the delivery of cost-mitigation actions,” Solvay says.

Solvay says it delivered EUR332 million of cost savings in 2020, of which EUR175 million were structural savings. “This result reflects the decisive nature of the group’s response as it also accelerated and deepened the delivery of its strategic cost-reduction programs,” it says.

In January, Solvay launched a new phase in its transformation aimed at further aligning the company’s structure to its G.R.O.W. strategy that was announced in 2019. The move builds on plans announced in 2020 and represents a “profound simplification of all support functions to serve the business more effectively,” Solvay says. The plan will lead to an additional net reduction of approximately 500 jobs by the end of 2022 and incremental cost savings of EUR75 million.

Subject to discussions with employee representatives, the program—together with previously announced plans—will increase Solvay’s medium-term cost savings target from €300 million announced in November 2019, to EUR500 million by 2024, including the EUR175 million of savings delivered in 2020. As a consequence of the accelerated restructuring plan, a non-cash provision of about EUR170 million will be recognized in the first quarter of 2021.

Solvay says it achieved record free cash flow of €963 million in 2020, including about EUR260 million of one-time benefits, “reflecting swift actions taken, including disciplined working capital and effective capex management,” it says.

Solvay expects first-quarter 2021 EBITDA to be EUR520-550 million, and free cash flow to reach EUR600-650 million for the full year. Free cash flow indications reflect the benefits of reduced pension and financial charges, higher restructuring costs, reinvestment in working capital, and capital expenditure, the company says. Additional structural cost savings in 2021 are estimated at EUR150 million, more than offsetting fixed-cost inflation expected to be about EUR75 million. This year’s savings would take cumulative cost reductions over two years to EUR325 million.

As MRC informed earlier, in August, 2020, through the acquisition of the Solvay polyamide (PA) business, BASF enhanced its R&D capabilities in Asia Pacific with new technologies, technical expertise, and upgraded material and part testing services. BASF is planning to integrate the R&D centers from Solvay into its R&D existing facilities in Shanghai, China, and Seoul, Korea. The enhanced capabilities will boost BASF’s position as a solution provider to develop advanced material solutions for key industries.

We remind that BASF-YPC, a 50-50 joint venture of BASF and Sinopec, undertook a planned shutdown at its naphtha cracker on 30 April 2020. The company initially planned to start turnaround at the cracker on April 5, 2020. The plant remained under maintenance until 18 June, 2020. Located in Jiangsu, China, the cracker has an ethylene capacity of 750,000 mt/year and propylene capacity of 400,000 mt/year.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020). Supply of exclusively PP random copolymer increased.
MRC

MOSCOW (MRC) -- Mitsubishi Chemical Corp (MCC) will consolidate its headquarter functions for its global methyl methacrylate (MMA) business in Singapore, and rename its major MMA subsidiaries to Mitsubishi Chemical Methacrylates, effective 1 April, said Chemweek.

The move is aimed at optimising the company's global product supply network by utilising digital technologies that connect regional production, costs and supply and demand.

It will lead to “a stronger MMA operations management base that enables centralised and speedy decision-making, and the appointment and advancement of a diverse workforce,” MCC said.

At the same time, Mitsubishi Chemical Methacrylates Japan Co., Ltd. will be established to strengthen MMA operations in the Japanese domestic market.

Name changes, effective 1 April: Singapore Lucite International Singapore Pte. Ltd. Mitsubishi Chemical Methacrylates Singapore Co., Ltd China Huizhou MMA Co., Ltd Mitsubishi Chemical Methacrylates (Huizhou) Co., Ltd. China Lucite International (China) Chemical Industry Co., Ltd. Mitsubishi Chemical Methacrylates (Shanghai) Co., Ltd. UK Mitsubishi Chemical Lucite Group Ltd. Mitsubishi Chemical Methacrylates Ltd. UK Lucite International UK Ltd. Mitsubishi Chemical UK Ltd. US Lucite International Inc Mitsubishi Chemical America Inc.

As MRC informed earlier, Mitsubishi Chemical has acquired a greenfield property at a large integrated site in Geismar, Louisiana, and plans to advance its feasibility study for the design and construction of a 350,000-metric tons/year methyl methacrylate (MMA) plant. The plant will be the third and largest to employ the Alpha production technology developed by subsidiary Lucite. The company earlier in March this year announced its intent to build the plant.

The main application, consuming approximately 75% MMA, is in the production of polymethyl methacrylate acrylic plastics (PMMA). Methyl methacrylate is also used to produce methyl methacrylate-butadiene-styrene copolymer (MBS), used as a modifier for polyvinyl chloride (PVC).

We remind that Russia's output of chemical products rose in October 2020 by 7.2% year on year. At the same time, production of basic chemicals grew in the first ten months of 2020 by 6.3% year on year, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-October output. October production of polymers in primary form grew to 857,000 tonnes from 852,000 tonnes in September. Overall output of polymers in primary form totalled 8,340,000 tonnes over the stated period, up by 17% year on year.
MRC

MOSCOW (MRC) -- ExxonMobil Corp said it would sell its non-operating interest in its UK and North Sea exploration and production assets to private-equity fund HitecVision for more than USD1 billion, said Hydrocarbonprocessing.

Exxon has been looking to sell its oil and gas assets since late 2019, seeking to free up cash to focus on a handful of mega-projects. The deal includes ownership interests in 14 producing fields operated primarily by Shell as well as interests in the associated infrastructure. Exxon could also receive about USD300 million in contingent payments based on a potential for increase in commodity prices.

Exxon's share of production from these fields was about 38,000 barrels of oil equivalent per day in 2019, the company said. Exxon said it would retain its non-operated share in upstream assets in the southern part of the North Sea as well as its interest in the Shell Esso gas and liquids (SEGAL) infrastructure, which supplies ethane to the company's Fife ethylene plant.

HitecVision, in partnership with Eni, had bought Exxon's Norwegian North Sea assets for USD4.5 billion in 2019.

Initially, Exxon hoped to raise more than USD2 billion from the sale, which was planned for late 2019. In June 2020 sources told Reuters that the portfolio was more likely to fetch USD1 to USD1.5 billion given the oil price weakness last year.

As MRC informed before, earlier this week, ExxonMobil Corp said it will close its 72-year-old Altona refinery in Australia, the country’s smallest, and convert it to a fuel import terminal as refiners struggle with low demand.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased.

ExxonMobil is the largest non-government owned company in the energy industry and produces about 3% of the world"s oil and about 2% of the world's energy.
MRC

MOSCOW (MRC) -- Distributor Univar has reported a fourth-quarter net loss of USD33.7 million, compared with a net loss of USD55.1 million in the year-ago quarter, due mainly to income taxes and a loss on the divestiture of Univar’s Canadian agriculture services business, said Chemweek.

Net sales fell 5.5% year-on-year (YOY), to USD2.04 billion, on lower demand in industrial end markets and some selling-price deflation. Adjusted earnings totaled $45.2 million, or 27 cents/share, down 10.5% YOY but ahead of analysts’ consensus estimate of 25 cents/share, as reported by Refinitiv (New York, New York).

Univar expects improving demand in 2021. "Looking to 2021, although the exact timing of the economic recovery is uncertain, our expected full-year Adjusted EBITDA guidance range of USD630 million to USD650 million reflects underlying performance in our on-going businesses above expected general industrial growth levels in each of our regions to offset the expected softer essential end markets performance," says Univar president and CEO David Jukes.

USA segment sales declined 9.5% YOY, to USD1.22 billion, while segment adjusted EBITDA was down 8.5%, to USD302.1 million. The divestiture of Univar’s environmental services business, as well as lower industrial demand and weakness in the energy market, drove the declines.

EMEA segment sales rose 2.1% YOY, to USD427.8 million, while segment adjusted EBITDA fell 5.5%, to USD29.4 million, chiefly due to lower demand in industrial end markets.

Canada segment sales grew 0.9% YOY, to USD258.5 million, while segment adjusted EBITDA declined 8.4%, to USD20.6 million. The declines were due to lower energy demand, price deflation, and the sale of the agricultural services business.

Latin America segment sales decreased 1.4% YOY, to USD124.2 million, while segment adjusted EBITDA fell 1.9%, to USD10.6 million. The declines were due to negative currency impacts, as demand generally increased.

Univar expects first-quarter 2021 adjusted EBITDA to total USD150-160 million, compared with adjusted EBITDA of USD161.6 million in the first-quarter of 2020.

As MRC wrote previously, in late October, 2020, Univar Solutions Inc. and PVS Chloralkali Inc., a wholly owned subsidiary of PVS Chemicals Inc. (PVS), announced a new agreement where PVS will transfer railcars located in Ohio, Illinois and Virginia and sourcing agreements for Hydrochloric Acid (HCL) to Univar Solutions.

According to MRC's ScanPlast report, Russia's estimated consumption of PS and styrene plastics totalled 454,990 tonnes in the first eleven months of 2020, which corresponds to the last year's figure. November estimated consumption of PS and styrene plastics grew by 4% year on year to 45,830 tonnes.

Univar Solutions is a leading global chemical and ingredient distributor and provider of value added services to customers across a wide range of industries. With the industry's largest private transportation fleet and North American sales force, a vast supplier network, deep market and regulatory knowledge, world-class formulation and recipe development, unparalleled logistics know-how, and industry-leading digital tools, Univar Solutions is a committed ally to customers and suppliers, helping them anticipate, navigate, and leverage meaningful growth opportunities.
MRC

MOSCOW (MRC) -- Americas Styrenics (AmSty; Woodlands, Texas) has announced a price increase for all its grades of polystyrene (PS), effective as of 1 March 2021, said Chemweek.

The rise of 11 cents/pound (cts/lb) supersedes all other previously announced price changes, it says. AmSty increased its PS prices by 3 cts/lb on 1 February this year. No comment on the reason for the increase was given by the company, a 50/50 joint venture of CPChem and Trinseo.

As per MRC, with an end goal of keeping polystyrene products out of landfills through an innovative circular recycling process, AmSty is announcing its commitment that all products designed for foodservice and food packaging applications will contain 25 percent recycled content by 2030. The leading integrated producer of polystyrene and styrene monomer continues to reach milestones toward this goal with its circular recycling process operating commercially at Regenyx LLC, its joint venture with Agilyx Corporation.

Styrene is the main feestock for the production of polystyrene (PS).

According to MRC's ScanPlast report, Russia's estimated consumption of PS and styrene plastics totalled 454,990 tonnes in the first eleven months of 2020, which corresponds to the last year's figure. November estimated consumption of PS and styrene plastics grew by 4% year on year to 45,830 tonnes.

AmSty is a JV between Trinseo and Chevron Phillips Chemical (CPChem).
MRC