Solvay Sees Earnings Drop With No Sign Yet of Europe RecoveryJohn Martens
Solvay SA, the chemical company created 150 years ago to produce soda ash, signaled that a lack of recovery in Europe will hurt earnings this year amid reduced demand for soda ash and plastics and lower sales of carbon credits.
Earnings before interest, tax, depreciation, amortization and one-time items will surpass last year’s 1.88 billion euros ($2.44 billion) which excludes a 190 million-euro windfall from inflated guar prices and larger quantities of emission credits, the Brussels-based company said today in a statement. That compares with analyst projections of 2.01 billion euros, the average of 22 estimates compiled by Bloomberg.
Solvay said it’s not seeing any significant improvement in European demand for the glass-making ingredient soda ash, for polyamide fibers or rare earths used in light bulbs after first-quarter Ebitda fell 12 percent to 454 million euros. Chief Executive Officer Jean-Pierre Clamadieu is making Solvay less cyclical and less reliant on Europe with an agreement to sell the company’s European vinyls and chlor chemicals businesses to Ineos Group Holdings within four to six years after the establishment of a joint venture planned later this year.
“Solvay is likely to have suffered from its exposure to European automotive and construction,” Filip De Pauw, an analyst at ING Groep NV in Brussels, wrote in an investor note last week as he cut his projection for 2013 Ebitda by about 8 percent to 1.94 billion euros.
Net debt rose to 1.31 billion euros as of March 31, a 188 million-euro increase from the end of last year as inventories swelled because Solvay’s plants produced more vinyls in anticipation of scheduled maintenance at large sites later this year.