Solvay 3Q 2008 operating profit down, but above expectations

Belgium“s Solvay, the world“s leading maker of soda ash, reported a better-than-expected 6% decline in operating profit on 30 October 2008 as earnings from pharmaceuticals and chemicals fell but pla…

Belgium“s Solvay, the world“s leading maker of soda ash, reported a better-than-expected 6% decline in operating profit on 30 October 2008 as earnings from pharmaceuticals and chemicals fell but plastics were surprisingly flat. Recurring earnings before interest and tax (REBIT) amounted to EUR 292 million (USD 372.2 million), compared with an average forecast of EUR 258 million in a Reuters poll of seven analysts. Revenue rose 4% to EUR 2.49 billion, against an average poll forecast of EUR 2.38 billion. Net profit fell 68% to EUR 75 million, versus the average forecast of EUR 153 million. This followed a EUR 92 million writedown on holdings in troubled financial group Fortis which it acquired before World War Two. High energy and raw materials costs squeezed chemical margins, while a weaker dollar to the euro limited sales growth across the company, but Solvay managed to push through prices for caustic soda and vinyls. Bernard Hanssens, analyst at Bank Degroof said: “For 2009, it“s clear the situation should be worse for chemicals and plastics. I see margins equivalent to what we had in 2003. Those are recession margins”, he said. Solvay repeated that overall results would be weaker than those of 2007, but the operating profit of pharmaceuticals should be better. The company increased its interim dividend to a net EUR 0.90 per share from EUR 0.85 a year ago. Chemical earnings fell by 19% to EUR 71 million, above an average expectation of 65 million. Solvay shares have come off heavily since June 2008 and are now down some 27% in the year to date, against a 38% drop of the DJ Stoxx European chemicals index.