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Solvay Delaying Some Investment Decisions as Cash Is Priority

Jan. 23 (Bloomberg) -- Solvay SA, the world’s largest soda-ash maker, is delaying some investment decisions in mature economies as cash is the priority during the Europe’s economic slowdown, Chief Financial Officer Bernard de Laguiche said.

“Some decisions are a bit delayed, except in emerging markets” and countries like China, where Solvay is pressing ahead, the CFO said in an interview in Paris. “Expansion investments are scrutinized in a more critical way at a time when cash is the priority, and as there’s some volatility and lack of visibility in demand.”

Solvay has reduced inventories in its polyvinyl chloride business, which is suffering from a construction slump in Europe, said De Laguiche, who added that the company is sticking to 2011 forecasts provided last year to investors. The Brussels-based company, which has more than 1.5 billion euros ($2 billion) of cash on its balance sheet, is “permanently” reviewing whether it should use some of it to buy back bonds, the CFO said.

Solvay, which completed the purchase of France’s Rhodia SA in September to gain leadership positions in rare earths, silica for car tires and materials used in consumer goods such as detergents, targets a place on France’s benchmark CAC40 Index following its listing in Paris today.

The company isn’t considering a large bond repurchase program, though “it’s an equation that we’re permanently updating and which may change rather rapidly,” the CFO said.

Financial Flexibility

“We must ask ourselves if and when we want to renew short-term borrowings,” de Laguiche said. “That could be done with an early reimbursement to borrow longer term,” he said, adding that the company wants to keep “financial flexibility” to seize potential investment opportunities while maintaining its BBB+ credit rating from S&P.

The company, which is investing cash “extremely conservatively,” has reduced its holding of French Treasury bills “a bit” in advance of France’s Jan. 13 downgrade by S&P to AA+, and has reinvested the money in AAA-rated money market funds, the CFO said. “A weak euro is favorable to Solvay because our cost base is significant” in the area, he said.

PVC in Europe is the “dark spot” in Solvay’s activity at the moment, Chief Executive Officer Christian Jourquin said at a press conference in Paris today. About two-thirds of the group’s businesses are “very resilient,” with Asia “doing very well” and the U.S. picking up slowly, deputy CEO Jean-Pierre Clamadieu said.

To contact the reporter on this story: Francois de Beaupuy in Paris at

To contact the editor responsible for this story: Benedikt Kammel at

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