Sluggish aviation continues to affect Solvay

Sluggish aviation continues to affect Solvay
Sluggish aviation continues to affect Solvay

Solvay posted more gross operating profit than expected in the third quarter, but sales in all divisions were noticeably lower than last year. A record free cash flow was achieved.

Solvay posted sales of EUR 2.1 billion in the third quarter, 18.4 percent less than the same period last year and slightly below analysts’ expectations. In the first nine months, the revenue decline was 13.5 percent and was clocked at 6.7 billion euros.

The decline was due to ongoing problems in the aerospace and automotive sectors, for which Solvay supplies light composites, among others, the sluggish oil and gas market and construction sector. In September, Solvay did see improvements in some automotive applications (products for car tires and batteries for electric cars).

At 473 million euros, gross operating profit in the third quarter was higher than expected – analysts assumed 444 million euros – and higher than in the second quarter. But compared to the third quarter last year, there was a decline of 21 percent. A net profit of 522 million euros was posted in the first nine months of this year. A record cash flow of 801 million euros was achieved.

Solvay has three major divisions. The Materials division – which makes plastics for smartphones and lightweight materials for the automotive and aviation sectors, among others – saw its third-quarter sales drop by a quarter (to 606 million) compared to last year due to declining demand from aviation. and automotive sector. Sales of the composite materials sub-division itself fell by 44 percent as a result of the further decline in commercial aircraft construction, a situation that is likely to persist for some time, said Ilham Kadri in a response. In that department, two production locations are closed. Materials saw its gross operating profit drop by 30 percent.

The Chemicals division, which supplies soda ash for detergents and packaging glass for the catering industry and flat glass for construction and hydrogen peroxide for bleach, was less affected. Here, sales fell by 14 percent (to 725 million) in the third quarter, and gross operating profit by 17 percent. Chemicals is now the most profitable division.

At Solutions – active in chemical applications for industry and consumption (shampoo, ice cream), turnover (770 million) and gross operating profit were 15 percent lower.

Top woman Kadri says in a response that she is ‘very satisfied’ with the results. ‘We achieved record free cash flow and have now already achieved our 2020 targets. Our third quarter gross operating profit is 5 percent higher than consensus. We outperform our competitors in many aspects. The aviation and automotive sectors continue to struggle, but we are nevertheless seeing a recovery underway in China.

Kadri does not want to comment on the impact of the second corona wave. ‘It is too early. That is why we limit our outlook to a range for the underlying gross operating profit somewhere between 1.89 and 1.97 billion euros and free cash flow around 900 million, 50 percent more than last year.

Whether it makes a difference to Solvay whether Biden or becomes the next US president? ‘Not in the short term. But in the longer term, we are of course looking forward to which ‘green deal’ the US will ultimately deliver. America is a big market for us – we have the most employees there – and we are active in different sectors – construction, aviation, food, personal care products. We also continue to grow there. Let’s wait for the results first. Hopefully we will find out soon. The choice of the president can make a difference in future trade relations between the US and Europe or the US and China ”.

Solvay also announced that it has begun to dispose of non-core assets. Kadri: “We have an agreement on the sale of the sodium chlorate business in Portugal and a fluorochemicals business in Korea and there are some more important divestments to follow.”

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