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Solvay Earnings Beat Analyst Estimates on Polymers, Guar Gum

Oct. 25 (Bloomberg) -- Solvay SA, the chemicals and plastics maker that bought Rhodia SA last year, reported earnings that beat analyst estimates after adding capacity for specialty polymers and higher guar gum prices compensated for margin erosion in polyamide, vinyls and rare-earth oxides.

Third-quarter earnings before interest, tax, depreciation and amortization, or Ebitda, rose 4 percent to 554 million euros ($721 million), the Brussels-based company said today in a statement. Analysts had projected a decline to 522.3 million euros, the average of nine estimates compiled by Bloomberg. Sales rose 1.1 percent to 3.29 billion euros as currency effects offset lower demand.

Higher prices for guar gum, which Rhodia uses to make gelling agents and conditioners, boosted earnings from the Indian joint venture Hindustan Gum & Chemicals Ltd. by about 40 million euros in the quarter. While sales of specialty polymers increased 18 percent, Solvay faced lower demand for rare-earth oxides used in lamps and silica for car tires. Excess capacity in the polyamide and PVC plastic industries eroded margins.

“The stronger than anticipated Ebitda adds to credibility of the full-year guidance,” Filip De Pauw, an analyst at ING Groep NV in Brussels, wrote in a note. “Cash flow generation was impressive.”

Maintains Forecast

Solvay rose as much as 3.4 percent on Euronext Brussels and traded 74 cents higher at 93.10 euros by 9:48 a.m. local time. The shares have advanced 8.5 percent since Chief Executive Officer Jean-Pierre Clamadieu set a target for 2016 Ebitda excluding some items of 3 billion euros on April 24, outpacing the Stoxx 600 Chemicals Index’s 7.3 percent gain in the period.

Solvay generated 346 million euros of cash not required for reinvestment in the quarter and has reduced net financial debt to 1.53 billion euros from 2.13 billion euros since the acquisition of Rhodia SA 13 months ago.

With net debt now at less than 1 times Ebitda, Solvay’s focus is on add-on acquisitions for its fastest growing units as the integration of Rhodia progresses, Clamadieu said in an interview with Francine Lacqua on Bloomberg Television’s “On the Move.”

The world’s largest soda-ash maker maintained its forecast that Ebitda will be little changed from 2.07 billion euros last year, assuming the Rhodia acquisition had been completed at the start of 2011.

While inventory management by customers and a slowdown in some market segments will have a negative impact on fourth-quarter performance, Solvay forecast on July 27 incremental cost cuts of 75 million euros in the second half. The company didn’t give an update about savings today.

To contact the reporter on this story: John Martens in Brussels at

To contact the editor responsible for this story: Jerrold Colten at

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