First Quarterly Results of the Solvay Group

Consolidated net income up 13% in the first quarter of 2003 compared to the first quarter of 2002

Paris, FRANCE


BELGIUM, April 30, 2003 (PRIMEZONE) -- The Solvay Group (Other OTC:SVYSY) completed the first quarter of 2003 with consolidated net income of EUR 98 million, up 13% from the earnings of the first quarter of 2002 (EUR 87 million).

These results are explained by the marked growth in the Plastics Sector (up 40%), a result of improvement in the fluorinated fluids of Solvay Solexis and in vinyls; and by the Chemicals Sector's ability to maintain its performance despite increasing pressure in certain markets. Despite the weakness of the US dollar and the intensification of R&D efforts, the Pharmaceuticals Sector recorded results (in EUR) comparable to those of the first quarter of 2002. The Processing Sector was affected by weakness in certain of its markets and declined by 23%.

As indicated in March 2003, the geopolitical context limits the visibility for 2003. It will be necessary to remain vigilant. The growing contribution of Pharmaceuticals and Specialties products, combined with the strengthening of competitiveness in Essential Products, should permit the Solvay Group to be well positioned to face future challenges.


               M of EUR     M of EUR   M of EUR   M of USD(2)
              1Q 2002       1Q 2003     1Q 2003      1Q 2003
               3/31/02       3/31/03     vs. 1q 02  3/31/03
                                          var%  

 Net sales       1983         1906         -4%       2077
 REBIT(3)         171          183          7%        199
 EBIT             175          181          3%        197
 Charges on net
  indebtedness    -29          -21         -28%       -23
 Income taxes     -44          -47           7%       -51
 Equity earnings  -15          -15           -        -16
 Net income of the 
  Group            87           98          13%       107
 Net income
  (Solvay share)   85           89           5%        97
 Depreciation &
  Amortization    169          107         -37%       117
 recurring 
  depreciation &
  amortization    111          107          -4%       117
 Cash flow(4)     256          205         -20%       223
 cash flow calculated
  on the basis
  of the recurring
  depreciation &
  amortization    198          205          4%        223

                                 R         EUR     EUR      USD
 Earnings per share(5)           1.03      1.08    5%      1.18

(1) Figures were subjected to a limited review by the external auditors, Deloitte & Touche.

(2) 1 EUR = 1.0895 USD (at 31 March 2003)

(3) REBIT : Recurrent Earnings Before Interests and Taxes, recurring operational results

(4) Cash flow is the sum of the net income of the Group and the depreciation and amortization

(5) calculated on the basis of the weighted average number of shares outstanding during the quarter, after deducting shares purchased to cover stock option programs, or a total of 83,004,855 shares during the first quarter of 2002 and 82,825,892 actions during the first quarter of 2003.

Sales during the first quarter of 2003 reached EUR 1,906 million, down 4% from the first quarter of 2002. This reduction is primarily due to the negative translation impact of the US dollar, which resulted in a 9% decline in sales partially offset by 5% increase in activity.

Charges on net indebtedness amounted to EUR 21 million, down 28% from the first quarter of 2002.

Income taxes increased by 7%. The average tax rate stands to 29% for the first quarter of 2003, compared to 30% for the first quarter of 2002.

Equity earnings of the high density polyethylene joint ventures with BP (-EUR 15 million) remained at the same level as that of the first quarter of 2002. However, the American market situation improved during the first quarter of 2003 while the European market continued to deteriorate; the situation in Europe remains difficult. It should be noted that the losses accounted for under the equity method were substantially offset by the increase in the value of the put option for our interests in these ventures. Overall, the REBIT of these activities, shown under Discontinuing Operations, amounted to EUR 17 million for the first quarter of 2003 (compared to EUR 15 million for the first quarter of 2002).

The net income of the Group amounted to EUR 98 million, up 13% compared to the first quarter of 2002. Minority interests were EUR 9 million, of which EUR 7 million represented preferred dividends linked to the financing of the EUR 800 million for the Ausimont acquisition. Earnings per share increased 5% to EUR 1.08.

Depreciation and amortization declined by EUR 62 million because of the recording of significant extraordinary depreciation in the first quarter of 2002 (EUR 58 million primarily linked to the sublicense of Teveten(R) anti-hypertensive in the US to Biovail and the voluntary withdrawal of Luvox(R) from the American market). Cash flow amounted to EUR 205 million for the first quarter of 2003, which, after exclusion of non-recurring amortization, represented an increase of 4%.

Compared to the end of 2002, net indebtedness of the Group at the end of the first quarter of 2003 (EUR 1,360 million) increased slightly following an increase in working capital requirements. Shareholders' equity (EUR 3,516 million) declined under the effect of variations in the exchange rate of the US dollar and the revision to market value of financial assets. The net debt to equity ratio at the end of the first quarter of 2003 increased to 39%, as against 37% at the end of 2002.

PRO-FORMA RECURRING RESULTS(1) BY SEGMENT

Compared to previous releases, results by segment will henceforth include the results of the four sectors of the Group as well as 'discontinuing operations' related to the high density polyethylene joint ventures with BP. As required by IFRS, items not allocated to the sectors are presented separately.

The table below presents sales and recurring operational results (REBIT) for the six segments. For the four sectors, recurring operational results are comparable to those (EBIT) presented in annual or six-month releases in prior years, excluding unallocated items.

Sales are presented after elimination of inter-sector transfers and REBIT by segment is operational results less non-recurring items.

In addition, sales by sector without elimination of inter-sector transfers and results by sector including non-recurring items are given in the attachment.


 Millions of EUR 
                  Sales1          Sales1         Sales1       (%)
 Segments          1Q  2002       1Q 2003        1Q 2003/    
                 (03/31/2002)   (03/31/2003)      1Q 2002  
 Pharmaceuticals 
  Sector             456                435                 -5%  
 Chemicals Sector    689                652                 -5%  
 Plastics Sector     473                472                  0%  
 Processing Sector   364                347                 -5% 
 Unallocated items    -                  -                  -  
 Discontinuing
  operations           2                  1                 n.s.  
 GROUP              1983               1906                  -4%

  Millions of EUR
                  REBIT1          REBIT1             REBIT1  
 Segments        1Q 2002          1Q 2003            1Q  03 /
                (03/31/2002)    (03/31/2003)          1Q 02  
                                                      (%)         
 Pharmaceuticals
  Sector            42                 42                  -  
 Chemicals Sector   69                 69                  -  
 Plastics Sector    40                 56                40%  
 Processing Sector  22                 17               -23%  
 Unallocated items -18               -18                  -  
 Discontinuing 
  operations         2                 15     17         13%  
 GROUP             171                183                 7%  

1)Figures were subjected to a limited review by the external auditors, Deloitte & Touche.

2)Represent the results of our high density polyethylene joint venture. REBIT is positive because it includes the increase in value of Solvay's option to put to BP Solvay's interests in the joint ventures, the results recorded under the equity method, were -EUR 15 million in the first quarter of 2003, identical to the amount for the first quarter of 2002.

Pharmaceuticals Sector

- Sales of the Pharmaceuticals declined 5% in the first quarter of 2003 compared to the first quarter of 2002. At constant exchange rates, there would have been an increase of about 6%. Sales in EUR for Cardiology improved by 15%, while gynecology/andrology remained stable. Gastroenterology and Mental Health declined 7%.

- European sales experienced significant price and prescription-volume pressures.

- American sales declined 2% (in EUR) although increasing 20% in US dollars, following the improvement in sales of Androgel(R) (up 39% in EUR and 66% in US dollars) and Prometrium(R) (up 31% in EUR and 60% in US dollars). Sales of Estratest(R), under competitive pressure and the impact of the Women Health Initiative studies, slipped slightly in US dollars and declined 20% in EUR. The process of regularizing the regulatory status of this product with the FDA is continuing.

- Furthermore, discussions with the FDA in the United States for improving the quality of products registration procedures (AIP) came to a favorable end this quarter.

- In the first quarter of 2003, the Group intensified its R&D program (up 8% in the first quarter of 2003 compared to the first quarter of 2002).

- The results of the Pharmaceuticals Sector (EUR 42 million) were stable (in EUR) despite the weakness of the US dollar and the intensification of the R&D program.

Chemicals Sector

The Chemicals Sector maintained its performance in the first quarter of 2003 thanks to the relative resistance of several Strategic Business Units (SBUs) to the progressive deterioration in the economic climate. These included in particular soda ash, persalts, barium and strontium carbonates and salt; the last benefited from favorable weather conditions. The other SBUs were affected by a drop in demand.

As announced in its press release of 14 April, 2003, Solvay is actively collaborating with an ongoing inquiry by the European competition authorities in the area of hydrogen peroxide activities. The eventual impact of this inquiry was not taken into account in these results.

Plastics Sector

The Plastics Sector recorded strong growth (up 40%) in the first quarter of 2003 even though the sector has recently experienced weakening in its markets. Vinyls improved in all regions (Europe, Mercosur and Asia) compared to the very weak level of the first quarter of 2002 and specialty polymers benefited from the strong performance recorded by Solvay Solexis in fluorinated fluids among other products. HDPE compounds developed favorably while compounds of PVC and PP declined because of raw-material price increases and weak volumes.

Processing Sector

The results of the Processing Sector declined by 23%. Inergy Automotive Systems (fuel systems) continued its growth in volumes thanks to new sites, notably in Asia; its results nevertheless were affected by the weakness of the US dollar and the decrease of its sales in the United States. The results of Industrial Films and Pipelife (pipes and fittings) were affected by the increase in raw-material prices combined with globally weak market conditions and, for Pipelife, by the weakness in winter sales.

Unallocated items

Unallocated items, composed mainly of general and research expenditures at the Group level, were stable in the first quarter of 2003 compared to the first quarter of 2002.

IFRS figures being established on a proforma basis, the following data1 are presented in order to comply with the provisions of the Belgian Accounting Law.


                         Millions of EUR      Millions of USD2
                     1Q 02     1Q 03      1Q 03        1Q 03  
                    (3/31/02)   (3/31/03) vs. 1Q      (3/31/03)  
                                           02 
                                          var %                    
 Sales                1,983    1,906       -4%          2,077  
 Income before taxes    131      145       11%            158  
 Net Group income        87       98       13%            107  
 Solvay's share          85       89       5%              97  

(1) Figures were subjected to a limited review by the external auditors, Deloitte & Touche. (2) 1 EUR = 1.0895 USD (at 31 March 2003)

Deloitte et Touche conducted a limited review of the consolidated financial situation as of 31 March 2003. This primarily consisted of analyzing, comparing and discussing financial information and therefore was less extensive than a review intended for the audit of annual statements. This review did not reveal factors that would have required significant correction of the intermediate figures.

Key financial communication dates in 2003 :


 - 5 June 2003 : General Shareholders' Meeting
 - 31 July 2003 : second quarter 2003 results
 - 31 October 2003 : third quarter 2003 results
 - early February 2004 : fourth quarter 2003 results and results
   for the full year 2003

ANNEXES : Proforma IFRS statements for 1st quarter 2002 and 2003

(Statements were subjected to a limited review by the external auditors,Deloitte & Touche)

Preamble

Solvay will publish its annual statements for 2003 under IFRS rules in so far as the 'First Time Application of IFRS' is published by the IASB. In view of this, the information in this release has been prepared utilizing the provisions of the draft rule ED1, 'First Time Application of IFRS,' published by the IASB in July 2002, as if approved without modification. The draft rule not having been finalized, this information cannot be considered as in compliance with IFRS. In effect, to be described as in compliance with IFRS today for the case of first adoption, it would be necessary to apply the current provisions of SIC 8, 'First Time Application of IAS as a Primary Basis of Accounting.' The published information is in substantial conformity with the provisions of the European directives. The same evaluation rules as those employed in the insert to the 2002 annual report have been applied to the quarterly figures. Consolidated Income Statements


 in millions of EUR                   
                   1Qr 2002 (03/31/2002)     1Q 2003 (03/31/2003)  
 Net sales               1983                         1906 
 Cost of goods sold     -1339                        -1271  
 Gross margin             644                            635  
 Commercial and 
  administrative
  costs                  -359                           -336 
 Research and development 
  costs                   -97                           -104  
 Other operating gains &
  losses                  -21                            -17  
 Other financial gains &
  losses                    4                              5  
 REBIT                    171                            183  
 Non-recurring items        4                             -2  
 EBIT                     175                            181  
 Charges on net
  indebtedness            -29                            -21  
 Income taxes             -44                            -47  
 Equity earnings          -15                            -15  
 Income from investments    -                              -  
 Net income of the Group   87                             98  
 Minority interests        -2                             -9  
 Net income (Solvay share) 85                             89  
 Earnings per share         1.03                           1.08  
 Diluted income per share
    (1)                     1.02                           1.08  

(1) calculated on the number of shares diluted by stock options issued

Consolidated Cash Flow Statement


 in millions of EUR   
                      1Q 2002 (03/31/2002)  1Qr 2003 (03/31/2003)  

 Cash flow from operating 
  activities                  318                            128

 EBIT                         175                            181  
 Depreciation and
  amortization                169                            107  
 Changes in working           -21                           -185  
 Changes in
  provisions                   0                              4 
 Income taxes
  paid                       -10                             25  
 Other non-cash
  items                      5                               -4  
 Cash flow from investing
  activities               -45                              -61  
 Acquisition/sale of
  investments               27                              -49  
 Acquisition/sale of
  assets                     2                              -76  
 Income from 
   investments               1                               0  
 Changes in financial 
  receivables              -72                              65  
 Effect of changes in method
  of consolidation          -3                              -1  
 Cash flow from financing 
 activities                -147                            -18  
 Variation of capital 
 (increase/decrease)          6                              0  
 Acquisition/sale of 
  own shares                  0                            -12  
 Changes in 
  borrowings                -58                             99  
 Charges on net 
 indebtedness               -29                            -21  
 Dividends                  -67                            -84  
 Net change in cash 
  and cash equivalents      126                             49  
 Currency translation
  differences                 0                             -7  
 Opening cash 
  balance                   630                            444  
 Ending cash 
  balance                   756                            486  


    Consolidated Balance Sheet
      in millions of EUR    
                At end of 2002   At end of 1st quarter 2003  
               (12/31/2002)                 (03/31/2003)  
 ASSETS               
 Non-current assets           5738                         5498  
 Intangible assets             264                          261  
 Consolidation differences     178                          171  
 Tangible assets              3589                         3508  
 Investments - equity accounting
                               318                          300  
 Other investments             466                          422  
 Deferred tax assets           477                          445  
 Financial receivables and other
  non-current assets           446                          391  
 Current assets               3688                         3786  
 Inventories                  1095                         1105  
 Trade receivables            1543                         1558  
 Other receivables             606                          637  
 Cash and cash equivalents     444                          486  
 TOTAL ASSETS                 9426                         9284  

 EQUITY AND LIABILITIES                        
 Shareholders' equity         3573                         3516  
 Capital and reserves         2695                         2639  
 Minority interests            878                          877  
 Non-current liabilities      3256                         3161  
 Long-term provisions         1775                         1771  
 Deferred tax liabilities      228                          174  
 Long-term financial debt     1198                         1184  
 Other non-current liabilities  55                           32  
 Current liabilities          2597                         2607  
 Short-term provisions          96                           92  
 Short-term financial debt     565                          662  
 Trade liabilities            1141                         1031  
 Income tax payable             31                           86  
 Other current liabilities     764                          736  
 TOTAL EQUITY AND LIABILITIES 9426                         9284  

   Statement of Changes in Equity
         in millions of EUR    
                     Capital  Issue premiums  Reserves  Own shares  
 Book value at the end of the 
 previous period
   (12/31/2002)         1269              14      1627        -102 
 Income for the  period   89              
 Changes in exchange 
  rates                                     
 Acquisition/sale of own
  shares                  -12  
 Adjustment to market          
  value of financial assets
 Book value at the end                                          
  of the period 
   (03/31/2003)          1269              14      1716        -114 

  in millions of EUR    
           Exchange rate differences  Direct offset against equity
                                             Shareholders' equity  
 Book value at the end of the previous period
   (12/31/2002)          -117                             4 
                         2695  
 Income for the
  period                  89  
 Changes in exchange 
  rates                  -45                           -45  
 Acquisition/sale of
  own shares             -12  
 Adjustment to market
  value of financial
   assets               -88                            -88  

 Book value at the end
  of the period 
  (03/31/2003)         -162                           -84
                       2639  

RESULTS (1) BY SEGMENT

The table below gives sales without elimination of inter-sector sales; results by segment include non-recurring items (EBIT).


 Millions of EUR    
                 Sales           Sales             Sales  
 Segments     quarter 2002  1st  quarter 2003  1st quarter 03 /  
             (03/31/2002)       (03/31/2003)    1st quarter 02  
                                                            (%)  

 Pharmaceuticals 
  Sector2              456                435               -5%  
 Chemicals Sector      734                712               -3%  
 Plastics Sector       549                577                5%  
 Processing Sector3    365                350               -4%  
 Unallocated items     -                  -                 -  
 Discontinuing 
  operations4          -                  -                 -  
 GROUP               1983               1906               -4%

 Millions of EUR   
                 EBIT               EBIT              EBIT  
 Segments    1st quarter 2002   1st quarter 2003  1st quarter 03 /
                 (03/31/2002)       (03/31/2003)   1st quarter  02  
                                                       (%)  

 Pharmaceuticals
  Sector2            432                 40               -7%  
 Chemicals Sector     67                 68                1%  
 Plastics Sector      41                 58               41%  
 Processing Sector3   29                 16              -45%  
 Unallocated items   -21                -18              -14%  
 Discontinuing 
  operations4         16                 17                6%  
 GROUP               175                181                3%  

1) Figures were subjected to a limited review by the external auditors, Deloitte & Touche

2) Including the amortization on Teveten(R) and Luvox(R) which have been offset by the result on the sublicense of Teveten(R) to Biovail in the USA.

3) Including non-recurring items related to the automotive air-intake activities , sold on 1 January 2002, which amounted to + EUR 7 million in the first quarter of 2002 and - EUR 1 million in the first quarter of 2003.

4) The results of our high density polyethylene activities. REBIT is positive because it includes the increase in value of Solvay's put option put to BP of Solvay's interests in the joint ventures, the results recorded under the equity method, were - EUR 15 million in the first quarter of 2003, identical to the amount for the first quarter of 2002.



        

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