Solvay SA, which began making soda ash 150 years ago, may consider divesting commodity chemical businesses as incoming Chief Executive Officer Jean-Pierre Clamadieu refocuses the company on specialty plastics for smart phones and ingredients used in shampoos.
The Belgian company, which purchased Rhodia for $6 billion last year, forecasts earnings will rise 45 percent in five years with its new strategy, Clamadieu said today. Soda ash, vinyls and other cyclical businesses will be improved and run for cash, before any strategic decision is made, he said.
“There could be opportunities to grow more quickly in some areas which could lead to the opportunities or the necessity to divest other pieces of the portfolio,” said Clamadieu, who becomes CEO on May 11. “I don’t see today conditions where divesting PVC would create value.”
Clamadieu said the Solvay family, which owns about 30 percent, brought him on board to help refocus the company on more profitable consumer orientated products. The former Rhodia CEO also plans 400 million euros in savings by 2014 to lift earnings before interest, taxes, depreciation and amortization to 3 billion euros ($4 billion) in 2016 from 2.07 billion euros.
Solvay rose as much as 6.7 percent, the most since Feb. 16, and was up 5.3 percent at 90.41 euros at 12:07 p.m., extending the stock’s gain to 42 percent this year
No Arkema-Style Deal
Solvay is targeting annual growth of at least 10 percent for specialty polymers, consumer chemicals and advanced materials. It’s prepared to make smaller acquisitions in emerging markets like China, Brazil and India to accelerate growth, according to the CEO.
“As soon as possible, we will be open to other ideas which might be a bit more transformational,” Clamadieu said on a call. “Cash flow generation will allow the company to be very flexible.”
For PVC and other cyclical areas like polyamides, the priority is to make further improvements to put Solvay in a position to make strategic decisions at the “right time,” Clamadieu said.
“Clearly today we are not in such a position,” he said, adding he doesn’t want to replicate a deal that would mirror Arkema SA’s sale of its vinyls unit. There’s “no pressure to make any streamlining short term.”
Arkema unloaded its vinyls business to investment company Klesch & Co. in November, mirroring Solvay’s move toward higher margin specialty chemicals.
Solvay’s origins date back to 1860s, when philanthropist Ernest Solvay discovered an industrial method to produce soda ash from sea salt, ammoniac and carbonic acids. Soda ash is used in glass manufacturing and water softeners.