Solvay Group Results for the First Six-Months 2003

Strengthening of the Euro and Weak Economic Activity Affected Results (-18%); Volumes And Competitiveness Remain Generally Strong

Paris, FRANCE


BELGIUM, July 31, 2003 (PRIMEZONE) -- Solvay Group (Other OTC:SVYSY): the strategy of strengthening Specialties is bearing fruit, in particular the growing share of Specialty Polymers for which the results and the margin are increasing.

Sales of the Solvay Group in the first half of 2003 reached EUR 3,790 million, down 6% compared to the first half of 2002. At constant exchange rates, they increase by 1%.

Consolidated net income (EUR 198 million) declined 18% compared to the first half of 2002 (EUR 241 million). As announced during the General Shareholders' meeting on June 5, 2003, results of the second quarter of 2003 compare unfavorably with the second quarter of 2002 which was particularly good. The EUR continued to strengthen in the second quarter of 2003; in addition, destocking in some markets and slowing of the world economy also affected results.

Recurring operational results (REBIT) of the 4 activity sectors were down compared to the first half of 2002.

- The Pharmaceuticals Sector, although increasing between the first and second quarter of 2003, saw its results affected (-19%), from one half to the other, by the weakening of the USD, by debates in the US over female hormone therapies and increasing pressure on prescription drugs prices and volumes in Europe.

Current forecasts indicate that the results of the second half of 2003 should be above those of the second half of 2002.

- The Chemicals Sector was down 23% due to a slowdown in all the activities, mainly European, of our customers, to the impact of a stronger EUR on our exports and to contraction of the chlor-alkali chain. A drop in sales was also recorded for certain fluorinated gases, mainly Solkane(R) 141b, combined with startup costs of the production unit for its HFC substitute, Solkane(R) 365mfc.

- The Plastics Sector (-23%) was affected by the significant drop in Vinyls in the 2nd quarter of 2003 after a pronounced growth in the first quarter of 2003. Results and margins for Specialty Polymers continue to increase.

- Despite results being up 41% in the second quarter of 2003 compared to the first quarter of 2003, the sluggishness of certain markets explain the first-half drop of 25% in the Processing Sector.

At this stage, there are no clear signs allowing an assertion on changes in the upcoming months. Major uncertainties remain regarding the economic recovery and the evolution of exchange rates between the EUR and the USD. Therefore, the results of the Group for 2003 could be down compared to the record year experienced by the Group in 2002, although a recovery of results could take place in the 4th quarter 2003. KEY FIGURES


 Millions of  EUR
       1st half 2002  1st half 2003  1st half 2003/ 1st  half 2002
                                                          Var%
 Net sales                4,049          3,790             -6%
 REBIT(a)                   419            342            -18%
 EBIT                       387            328            -15%
 Charges on net
  indebtedness              -44            -41             -7%
 Income taxes              -101            -75            -26%
 Equity earnings            -15            -29             93%
 Income from investments     15             15              0%
 Net income of the Group    241            198            -18%
 Net income (Solvay share)  232            181            -22%
 Depreciation &
  Amortization              279            209            -25%
 Recurring depreciation &
  amortization              225            210             -7%
 Cash flow(b)               520            407            -22%
 EUR
 Earning per share(c)         2.79           2.19         -22%


 Millions of  EUR
              2Q 2002    2Q 2003     2Q 2003/2Q 2002   Var%

 Net sales        2,065             1,883                -9%
 REBIT(a)           248               159               -36%
 EBIT               212               148               -30%
 Charges on net
   indebtedness     -15               -20                33%
 Income taxes       -57               -29               -49%
 Equity earnings      0               -13               n.s.
 Income from
  investments        15                15                 0%
 Net income of
  the Group         154               100               -35%
 Net income
  (Solvay share)    146                92               -37%
 Depreciation &
  Amortization      109               102                -6%
 Recurring depreciation &
  amortization      113               103                -9%
 Cash flow(b)       263               202               -23%
 Earnings
  per share(c)        1.76              1.11            -37%

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

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

(c) 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 83,042,244 shares during the first half of 2002 and 82,787,308 shares in the first half of 2003.

COMMENTS ON KEY FIGURES AND BALANCE SHEET IN THE 1st HALF OF 2003

Non-recurring items amounted in the 1st half of 2003 to EUR -14 million. The Group, among other things, provided for the costs related to the announced shutdown of the VCM and PVC unit at Ludwigshafen in Germany. The non-recurring gains recorded by the Group included, among others, the reversal of reserves, no longer needed, following a favorable conclusion of the American AIP procedure in Pharmaceuticals.

Charges on net indebtedness amounted to EUR 41 million, down 7% compared to the first half of 2002.

Income taxes decreased by 26%. The tax rate stands at 26% in the first half of 2003.

Income from investments represents the annual dividends paid by Fortis and Sofina in the 2nd quarter.

Equity earnings of the joint ventures with BP in high-density polyethylene remain very negative (EUR -29 million). The situation for this activity is difficult overall with, however, market conditions in the US that are less unfavorable than in Europe. It should be noted that the losses accounted for under the equity methods 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 the 'Discontinuing Operations' segment, amounted to EUR 33 million in the 1st half of 2003 (compared to EUR 19 million in the 1st half of 2002).

The net income of the Group amounted to EUR 198 million, down 18% compared to the first half of 2002. Minority interests were EUR 17 million, of which EUR 14 million represented preferred dividends linked to financing of EUR 800 million for the acquisition of Ausimont. Earnings per share dropped 22% and were at EUR 2.19.

Depreciation and amortization declined by EUR 70 million compared to the 1st half of 2002 due to the significant non-recurring depreciation (EUR 58 million) in the first quarter of 2002, linked to the sublicense of Teveten(R) anti-hypertensive in the United States to Biovail and the voluntary withdrawal of Luvox(R) from the American market. Cash flow amounted to EUR 407 million for the first half of 2003, down 22%. It more than covers the increase of the working capital requirements and the industrial investments.

The net indebtedness of the Group as of June 30, 2003 (EUR 1,454 million) increased 9% compared to December 31, 2002, following payment of dividends in June and an increase in working capital requirements. Shareholders' equity (EUR 3,511 million) declined slightly due to variations in the exchange rate. The net debt to equity ratio at the end of the 2nd quarter 2003 amounted to 41%, compared to 39% at the end of the 1st quarter in 2003 and 37% at the end of 2002.

RECURRING RESULTS1 BY SEGMENT

Results by segment include the results of the four sectors of the Group as well as 'Discontinuing Operations' related to high-density polyethylene joint ventures with BP. As required by IFRS, items not allocated to the sectors, which mainly include overhead and non-sector research costs as well as miscellaneous income and charges not directly linked to Group activities, 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 presented (EBIT) 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.

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


 Millions of EUR           1st half  1st half   1st half. 2003
                               2002      2003  /1st  half 2002
                                                            Var%
 Group sales                     4,049     3,790              -6%
 Pharmaceuticals                   921       882              -4%
 Chemicals                       1,347     1,273              -5%
 Plastics                          996       909              -9%
 Processing                        782       726              -7%
 Non-allocated items                 0         0             n.s.

 -- Discontinuing operations -- (1)    2         1           -50%

 Group REBIT                       419       342             -18%
 Pharmaceuticals                   110        89             -19%
 Chemicals                         138       106             -23%
 Plastics                          122        94             -23%
 Processing                         55        41             -25%
 Non-allocated items               -26       -21             -19%
 -- Discontinuing operations -- (1)  19        33             74%


 Millions of EUR      2Q 2002        2Q 2003     2Q  2003/2Q 2002
                                                            Var%
 Group sales          2,065             1,883                -9%
 Pharmaceuticals        465               447                -4%
 Chemicals              658               620                -6%
 Plastics               523               437               -16%
 Processing             418               379                -9%
 Non-allocated items      0                 0               n.s.
  -- Discontinuing
      operations -- (1)   1                 1                 0%
 Group REBIT            248               159               -36%
 Pharmaceuticals         68                47               -31%
 Chemicals               69                37               -46%
 Plastics                82                38               -54%
 Processing              33                24               -27%
 Non-allocated items     -8                -3               -63%
 -- Discontinuing
     operations -- (1)    4                16               300%

(1) Represent the results of our high-density polyethylene joint ventures. REBIT is positive because it includes the increase in value of Solvay's put option on its interest in the joint ventures to BP. The results of such joint ventures recorded under the equity method were EUR -29 million in the first half of 2003 compared to EUR -15 million in the first half of 2002.

Pharmaceuticals Sector

Sales in the Pharmaceuticals Sector, at constant exchange rates, increased 6%. Expressed in EUR, they declined 4% in the first half of 2003 compared to the first half of 2002 while there was an increase of 3% between the 1st and 2nd quarters of 2003.

Sales in Cardiology increased 17% compared to the 1st half of 2002, due to growth of the antihypertensive Teveten(R) (+51%). Other therapeutic areas declined : Gynecology/andrology (-7%), Gastroenterology (-4%) and Mental Health (-4%) :

American sales increased 15% in USD (-7% in EUR) following increased sales of the drug Androgel(R) (+49% in USD), of Prometrium(R) (+34% in USD) and Marinol(R) (+70% in USD). Sales of Estratest(R) declined 17% in USD following competitive pressure and debates over hormone therapy and reduction of intermediate stock with distributors. Discussions underway with the FDA (Food and Drug Administration) over the regulatory status of Estratest(R) are continuing constructively.

European sales and results continue to be subject to significant pressure on prescription pricing and volumes.

The Group intensified its R&D program (up 3% in the first half 2003 compared to the first half of 2002). R&D expenditures represents 15% of the Sector's sales. Phase III clinical trials for Calmactin(R) (cilansetron) are continuing with prospects of beginning introduction of registration applications as planned at the end of 2003.

The results of the Pharmaceuticals Sector (EUR 89 million) in the first half 2003 declined 19% - at constant exchange rates, the decline was 3% - compared to the first half of 2002. It is to be noted that results of the first half of 2002 still included royalties linked to co-promotion agreements which ended during this first half of 2002.

Chemicals Sector

While the Soda ash SBU had well resisted the deterioration in the economic climate in the first quarter of 2003, there was a slowdown in demand in Europe in the second quarter of 2003. American demand remained sustained. Other Chemical Minerals products (Barium and Strontium Carbonates and Advanced Functional Minerals) followed identical trends.

Results from the Electrochemistry SBU were characterized by a gradual contraction both of volumes and prices in the chlor-alkali chain, following weak demand and customers inventory reduction under way.

The Fluorides SBU had its results affected by production shutdown, planned and gradual, of Solkane(R) 141b and by costs linked to startup of the production unit for its substitute Solkane(R) 365mfc, a third-generation HFC which has no impact on the ozone layer and is used in insulation foams. This new product will progressively contribute to the results of the SBU. An increasing negative impact linked to the USD is still being seen.

Hydrogen peroxide and Persalts showed improved results. Caprolactones also did better than during the same period in 2002.

In all, results declined 23% for the first half of 2003. No new development occurred in the issue related to the ongoing inquiry by European competition authorities in the area of hydrogen peroxide activities. The possible impact of this inquiry was not taken into account in results from this half.

Plastics Sector

Following the Group's strategy to get stronger in Specialties, the Specialty Polymers SBU is currently a major contributor to the Group's results. As of the first half of 2003, despite weakness of certain segments of the market and the negative conversion impact of the USD into EUR, its results and its margin rate increased slightly. In particular, improvement in high-performance polymer results and the good progress of fluorinated fluids and elastomers are to be noted.

The Vinyls SBU witnessed a significant contraction of its results in the second quarter of 2003, compared to a vigorous second quarter of 2002. A significant downturn took place in the second quarter of 2003 due our customers' destocking and weakness in the European economy, which translated into a gradual drop both in quantities and prices, whereas the price of ethylene remained high. Asia is undergoing some slowdown while activities in Mercosur continue to benefit from competitive advantages.

The Performance Compounds SBU was affected by declining volumes for PP compounds designed especially for the automobile market, and to a lesser degree, in PVC compounds, while HDPE compounds have evolved favorably.

In all, results were down 23% in the first half of 2003.

Processing Sector

Inergy Automotive Systems (fuel systems) continued its growth in volume despite declining automobile markets in the US and France. Its sales and results were, however, affected by the weakness of the USD and strong pressure on its sales prices.

Results from Pipelife (pipes and fittings) were affected by overall unfavorable economic conditions. Their impact, however, was reduced by the effect of restructuring measures and improvement in the product mix.

Industrial Films have declined significantly. Specialties (e.g. swimming pool liners, laminates, ...), however, show a better resistance than the Essentials. Efforts to reposition some fields are intensifying with sustained attention to Innovation.

Results declined 25% in the first half of 2003 despite the results of the second quarter 2003 being up 41% compared to the first quarter of 2003.

With the agreement from the Banking and Finance Commission, the 2003 accounts are being drawn up and presented in IFRS (International Financial Reporting Standards). The 2002 accounts are presented on a pro forma IFRS basis as a means of comparison.

Deloitte & Touche conducted a limited review of the consolidated financial situation as of 30 June 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 :

-- 31 October 2003 : third quarter 2003 results

-- early February 2004 : fourth quarter 2003 results and results for the full year 2003

IFRS FINANCIAL STATEMENTS

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

Consolidated Income Statements


 in millions of EUR                   1st half 2002  1st half 2003
 Net sales                                    4,049          3,790
 Cost of goods sold                          -2,701         -2,555
 Gross margin                                 1,347          1,235
 Commercial and administrative costs           -712           -686
 Research and development costs                -195           -197
 Other operating gains& losses                  -30            -29
 Other financial gains& losses                    9             19
 REBIT                                          419            342
 Non-recurring items                            -32            -14
 EBIT                                           387            328
 Charges on net indebtedness                    -44            -41
 Income taxes                                  -101            -75
 Equity earnings                                -15            -29
 Income from investments                         15             15
 Net income of the Group                        241            198
 Minority interests                              -9            -17
 Net income (Solvay share)                      232            181
 Earnings per share                            2.79           2.19
 Diluted income per share  (1)                 2.78           2.19


 in millions of EUR             2nd quarter 2002  2nd quarter 2003
 Net sales                             2,065             1,883
 Cost of goods sold                   -1,362            -1,284
 Gross margin                            703               600
 Commercial and administrative costs    -352              -350
 Research and development costs          -98               -93
 Other operating gains & losses           -9               -11
 Other financial gains & losses            4                14
 REBIT                                   248               159
 Non-recurring items                     -36               -12
 EBIT                                    212               148
 Charges on net indebtedness             -15               -20
 Income taxes                            -57               -29
 Equity earnings                           0               -13
 Income from investments                  15                15
 Net income of the Group                 154               100
 Minority interests                       -7                -8
 Net income (Solvay share)               146                92
 Earnings per share                     1.76              1.11
 Diluted income per share  (1)          1.76              1.11

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


 Consolidated Cash Flow Statement
 in millions of EUR                   1st half 2002  1st half 2003
 Cash flow from
   operating activities                    230            229
 EBIT                                      387            328
 Depreciation and amortization             279            209
 Changes in working capital               -402           -264
 Changes in provisions                     -13             -9
 Income taxes paid                         -26            -43
 Other non-cash items                        6              7
 Cash flow from investing activities        69           -145
 Acquisition/sale of investments            45            -48
 Acquisition/sale of assets               -106           -185
 Income from investments                    20             19
 Changes in financial receivables           61             71
 Effect of changes in
  method of consolidation                   48             -1
 Cash flow from financing activities      -463             29
 Increase/Decrease of capital              -13              0
 Acquisition/sale of own shares              0            -15
 Changes in borrowings                    -236            282
 Charges on net indebtedness               -44            -41
 Dividends                                -172           -196
 Net change in  cash and
  cash equivalents                        -165            113
 Currency translation differences           -8            -11
 Opening cash balance                      630            444
 Ending cash balance                       458            546

Consolidated Balance Sheet


 in millions of EUR
                          End of 2002         End of 1st half 2003
 ASSETS

 Non-current assets        5,738                            5,521
 Intangible assets           264                              249
 Consolidation differences   178                              167
 Tangible assets           3,589                            3,474
 Investments - equity
   accounting                318                              277
 Other investments           466                              495
 Deferred tax assets         477                              461
 Financial receivables and
  other non-current assets   446                              400
 Current assets            3,688                            3,783
 Inventories               1,095                            1,111
 Trade receivables         1,543                            1,526
 Other receivables           606                              600
 Cash and cash equivalents   444                              546
 TOTAL ASSETS              9,426                            9,304

 EQUITY AND LIABILITIES
 Total Shareholders'
  equity                   3,573                            3,511
 Capital and reserves      2,695                            2,643
 Minority interests          878                              868
 Non-current liabilities   3,256                            3,537
 Long-term provisions      1,775                            1,784
 Deferred tax liabilities    228                              194
 Long-term financial debt  1,198                            1,539
 Other non-current
  liabilities                 55                               20
 Current liabilities       2,597                            2,257
 Short-term provisions        96                               56
 Short-term financial debt   565                              461
 Trade liabilities         1,141                              927
 Income tax payable           31                               84
 Other current liabilities   764                              729

 TOTAL EQUITY AND
  LIABILITIES              9,426                            9,304

  Statement of Changes in Equity

 in millions of EUR     Capital    premiums  Issue  Reserves

 Book value at the end
  of  the previous
  period (12/31/2002)            1,269        14      1,627

 Income for the
  period                                                181

 Distribution                                          -121

 Changes in exchange rates

 Acquisition/sale of own shares

 Adjustment to market value of financial assets

 Book value at the end
  of the period (06/30/2003)     1,269        14      1,687

 in millions of EUR
 Own  Exchange            Direct offset against     shares equity
  rate differences         Shareholders' equity

 Book value at the end of
 the previous
  period (12/31/2002)     -102      -117  4            2,695

 Income for the period                                   181
 Distribution                                           -121
 Changes in exchange rates                   -           -83
 Acquisition/sale of own shares             -15          -15
 Adjustment to market value
  of financial assets                       -14          -14
 Book value at the end of
  the period (06/30/2003) -117       -200   -10         2,643

     RESULTS  BY SEGMENT

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

 Millions d'EUR
          1st half 02  1st half 03  1st half 03/1st half 02  Var%

 Group Sales              4,336          4,114             -5%
 Pharmaceuticals            921            882             -4%
 Chemicals                1,454          1,389             -4%
 Plastics                 1,173          1,112             -5%
 Processing                 786            730             -7%
 Unallocated items            0              0              ns
  -Discontinuing
     operations-1             2              1            -50%
 Group EBIT                 387            328            -15%
 Pharmaceuticals            108             86            -20%
 Chemicals                  117            103            -12%
 Plastics                   119             89            -25%
 Processing                  51             39            -24%
 Unallocated items          -30            -22            -27%
  -Discontinuing
     operations-1           22             33             50%

 Millions d'EUR
                   2Q 2002  2Q 2003  2Q 2003/ 2Q 2002   Var%
 Group Sales       2,353             2,208                -6%
 Pharmaceuticals     465               447                -4%
 Chemicals           720               677                -6%
 Plastics            624               535               -14%
 Processing          421               380               -10%
 Unallocated items     0                 0               n.s.
  -Discontinuing
     operations-1      2                 1               -50%
 Group EBIT          212               148               -30%
 Pharmaceuticals      65                46               -29%
 Chemicals            50                36               -28%
 Plastics             78                31               -60%
 Processing           22                23                 5%
 Unallocated items    -9                -4               -56%
  -Discontinuing
      operations-1     6                16               167%

(1) The results of our high-density polyethylene activities. EBIT is positive because it includes the increase in value of Solvay's put option on its interest in the high-density polyethylene joint ventures to BP. The results of such joint ventures recorded under the equity method were EUR -29 million in the first half of 2003 compared to EUR -15 million in the first half of 2002.

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