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

February 26/2021

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 ˆ300 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 ˆ963 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.


mrcplast.com
Author:Anna Larionova
Tags:petroleum products, PP, PE, neftegaz, petrochemistry, Solvay.
Category:General News
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