EuroBusiness Media (EBM): Solvay, an international chemical group, reports results for the first half. Jean-Pierre Clamadieu welcome, you are the CEO and Chairman of the Executive Committee of Solvay. How would you describe your financial performance in the second quarter?
Jeand-Pierre Clamadieu: A very strong performance. We are publishing today results with a recurring EBITDA of €485 million, a 10% improvement versus last year. And if we take into account the impact of foreign exchange and perimeter – we made an acquisition last year and we have lost the [non recurrent] contribution of our carbon credits – we see an underlying growth trend of 19%. So, indeed, significant, and this is due to both a volume improvement in an environment that is slightly more positive for us, but also the result of our excellence initiatives, which are flowing down our P&L and which are posting results which we can actually see. In terms of segments, our growth engines are faring very strongly, both the Advanced Materials and the Advanced Formulation segments are demonstrating very significant growth, but overall, I would say that all of our businesses are contributing to these good results.
EBM: Could you describe the regional backdrop in the second quarter?
Jean-Pierre Clamadieu: Very similar to what we’ve seen in Q1. Europe is slightly going out of recession – slow growth in Europe, I would say. US is doing very well, especially for the businesses where we have a strong presence there – the ones which are linked to the very favourable energy scenario that we see developing in the US. Asia is doing well for us. The only area where we see significant challenges is Latin America. Mostly Brazil, where we see disappointing growth performance and a number of issues – cost of labour, cost of energies – which are making Brazil today a challenge for us.
EBM: You posted a net loss in the second quarter. How do you explain it?
Jean-Pierre Clamadieu: This is the result of our transformation initiatives. We are exiting our PVC business for the creation of a JV in Europe with Ineos. This leads us to take significant write-downs to prepare for this transaction, and this is the reason why we have posted negative net results during the quarter. If we leave this exceptional impact aside, we would be posting €130 million positive net results [Solvay share].
EBM: How do you explain Solvay’s operating performance? How does it compare to the sector?
Jean-Pierre Clamadieu: I think we compare very well. We are posting this quarter a recurring EBITDA margin of 18.4%, 140 basis points improvement versus last year. And this is, again, the result of the various initiatives that we have taken to transform the Group. I was mentioning the portfolio transformation, but we are also focusing very much on excellence initiatives, which is a way for us to challenge how we do business, to challenge our various operating processes: industrial, supply chain, commercial, innovation…
EBM: How is profit restoration at Polyamide developing? Will this be enough to reach a satisfactory return and what are your strategic options for Polyamide?
Jean-Pierre Clamadieu: The current focus on Polyamide is improving the way the business performs. We have made a significant transformation of our Engineering Plastics business. I think we have really reinvented this business unit, and we are seeing very good results coming out of that. On the Intermediates part, we launched last year a significant cost reduction initiative, but we will see also the consequences of a new agreement that we have signed with Invista. Invista is the co-owner of part of this business, and I think the fact that we have recommitted ourselves long-term with Invista will give us opportunities to make further improvements. At some point in time we might want to look at strategic options, but short-term the focus is clearly on improving the business performance.
EBM: What can we expect on the M&A front? And what will Solvay look like in, say, 5 years from now?
Jean-Pierre Clamadieu: We are continuing the transformation of the company and, clearly, the portfolio initiatives have a significant role to play in this transformation. We are currently working on our Eco Services business. We said at the beginning of this year that we would be looking at strategic options for this business. Since that we’ve done a lot of work and I think we are coming very close to a point where we can explain to the market what will happen with this business. Overall, I think we will continue to look for opportunities. We acquired last year Chemlogics, a very significant player in the field of chemical formulations for the oil and gas industry in the US. This is going very well: the integration is leading to results which are above our expectations, and we will continue to look for opportunities to strengthen our portfolios, especially for the growth engines. So to answer your question on how Solvay will look in five years, I think we will have significantly transformed the company. Our growth engines will represent the majority of our businesses and we will become a less cyclical, more value-added and less capital-intensive company.
EBM: Regarding the competitive energy environment with the US now benefiting from low raw materials, how do you see pricing and returns evolving?
Jean-Pierre Clamadieu: First, we are exposed, and I would like to say positively exposed, to what’s happening in the US. I mentioned a minute ago Chemlogics. We are benefiting from the very, very significant boom that we currently see in Oil and Gas in the US, and that’s very positive. Now, as you said, the US is benefitting from a very strong advantage as far as the cost of energy is concerned, and what’s very important for our global portfolio is to make sure that we don’t create weaknesses due to what’s happening in the US. And for that, we really need to transform the company and make sure that we focus our resources on developing businesses where cost of energy is not a very important element of the equation. And this is exactly what we are doing in our Advanced Materials or Advanced Formulations Businesses.
EBM: What challenges lie ahead?
Jean-Pierre Clamadieu: Short-term, we need to complete the portfolio project that we have started, and the most important one, obviously, is the creation of INOVYN™, the PVC JV with Ineos. We are optimistic that we will be able to close this transaction by year-end, as soon as Ineos has divested the remedies that the European Commission has asked us for. Then, we need to continue to take advantage of the relatively favourable environment that we have seen during the first half of the year. I think longer-term innovation will play a very significant role. We are already seeing in some of our segments, Advanced Formulations and Advanced Materials, a very significant role played by innovation. We are being very successful with our products in some key markets, like Smart Devices or Automotive, or Oil and Gas applications.
EBM: And lastly, what is your outlook?
Jean-Pierre Clamadieu: We expect to continue to benefit until year-end from a more favourable environment, as we did during the first part of the year. We will continue to develop our excellence initiatives throughout the Group to make sure that we identify and seize all improvement opportunities that we can see. I think innovation will continue to deliver. We expect to bring to the market a significant number of new products in the next months. And overall, we can confirm today what we said when we presented our Q1 results, which is the fact that we expect to deliver high single-digit recurring EBITDA growth in 2014 versus 2013, in the current foreign exchange environment.
EBM: Jean-Pierre Clamadieu, CEO and Chairman of the Executive Committee of Solvay, thank you very much.
Jean-Pierre Clamadieu: Thank you.
