SOLVAY: Results of the first six months of 2004 up 19%

Increase of 45% in results for Plastics, due to Specialty Polymers and Vinyls

Paris, FRANCE


BELGIQUE, July 30, 2004 (PRIMEZONE) -- Solvay:

- Pharmaceuticals Sector:

. Acceleration of strategy: major positive impact of agreements with Wyeth and Bristol Myers Squibb, and parallel strengthening of research programs. Filing of registration dossier for cilansetron in the United Kingdom for the European Union and in the United States.

. Temporary negative effects on sales and results of the second quarter from current renegotiations of American distribution contracts.

- Month by month improvement in the Chemicals activities.

The Solvay Group's sales in the first half of 2004 reached EUR 3,831 million, up slightly (+1%) compared to the first half of 2003 and up 4% in the second quarter of 2004. At constant exchange rates, sales would have increased 4% in the first half of 2004 and 6% in the second quarter of 2004.

The Group's net income amounted to EUR 236 million, up 19% compared to the first half of 2003 (EUR 198 million).

Results from the Pharmaceuticals sector increased by 25% in the first half of 2004. As part of an acceleration of its strategy aiming at, among others, the conclusion of partnerships, the sector benefited in the first half of 2004 from the positive impact of the agreements with Wyeth and Bristol Myers Squibb and was thus able to considerably increase (+24%) in parallel its research expenditures. In the second quarter, however, sales and results were affected by the renegotiations now under way for contracts with American distributors, who reduced their purchases and their inventories. The evolution of the numbers of prescriptions was not affected by the renegotiations. This situation is gradually getting back to normal and should not have a persistent negative effect on margins. In addition, Solvay Pharmaceuticals Inc. collected the first instalment (USD 18 million) of compensation from litigation with Barr. Note also that Solvay Pharmaceuticals filed a registration dossier for cilansetron in the United Kingdom for the European Union and in the United States.

Results from the Chemicals sector in the first half of 2004 are still lower than the first half of 2003 (-19%), but trends in both volumes and prices have been improving month by month.

Results

from the Plastics (+45%) and Processing (+5%) improved over the six months, with significant growth in the Specialty Polymers and Vinyls activities in particular.

The Group is actively pursuing its restructuring measures, especially in the Chemicals sector. These measures are part of the program to reduce the sector's principal operating costs by 20% over 3 years.

We believe that the favorable trends noted over the first 6 months of 2004 will continue. The results from the Pharmaceuticals sector for 2004 should be in line with those from 2003. For the Group as a whole, we remain confident that full-year results for 2004 will compare positively with those of 2003.


 KEY FIGURES       1st half 2003  1st half 2004  1st half 2004/  
                                                  1sthalf 2003  
                                                           % 
 Millions of EUR
 Sales                3,790          3,831              1%  

 REBIT(1)               342            367              7%  

 EBIT                   328            367             12%  

 Charges on net
  indebtedness          -41            -47             15%  

 Income taxes           -75            -92             23%  

 Equity earnings        -29             -8            -72%  

 Income from 
  investments            15             16              7%  

 Net income of 
  the Group             198            236             19%

 Net income 
 (Solvay share)         181            218             20%  
 
 Depreciation &
  Amortization          209            217              4%  

 Cash flow(2)           407            453             11%  

 EUR                                 

 Earning
  per share(3)         2.19           2.63             20%  


 KEY FIGURES   
                2nd quarter  2nd quarter  2nd quarter 2004/  
                      2003         2004   2nd quarter 2003  
                                                      var  %  
 Millions of  EUR 

 Sales                1,883        1,954                 4%  

 REBIT(1)               159          166                 4%  

 EBIT                   148          164                11%  

 Charges on
  net indebtedness      -20          -24                20%  

 Income taxes           -29          -33                14%  

 Equity earnings        -13           -4               -69%  

 Income from 
 investments             15           16                 7%  

 Net income 
  of the Group          100          119                19%  

 Net income 
 (Solvay share)          92          109                18%  

 Depreciation &
  Amortization          102          112                10%  

 Cash flow(2)           202          231                14%  

 EUR                                  

 Earning
  per share(3)         1.11         1.32                19%  

COMMENTS ON KEY FIGURES and BALANCE SHEET in the first half of 2004

Non-recurring items in the first half of 2004 individually were not very significant and on balance were negligible.

Charges on net indebtedness amounted to EUR 47 million, up 15% compared to the first half of 2003, following the extension of long-term debt coverage.

Income taxes amounted to EUR 92 million, with a tax rate on average of about 29%.

Income from investments represented the annual dividends paid by Fortis and Sofina in the second quarter.

Equity earnings from the high-density polyethylene activities, despite improvement, remained negative (-EUR 8 million). Net income of the Group was EUR 236 million, up 19% compared to the first half of 2003 (EUR 198 million). Minority interests in the results were EUR 18 million, of which EUR 12 million represented the preferred dividends linked to the financing of 800 million EUR for acquisition of Ausimont. Net earnings per share for the first half of 2004, amounted to 2.63 EUR. Depreciation and amortization increased by EUR 8 million (+4%) compared to the first half of 2003. Cash flow was EUR 453 million, up by 11%. The Group's net indebtedness as of June 30, 2004 (EUR 1,263 million) was up by 13% compared to December 31, 2003, following payment of the dividend in June and a seasonal increase in working capital needs. The net debt to equity ratio at the end of the second quarter of 2004 amounted to 34%, against 32% at the end of 2003 and 41% at the end of the second quarter of 2003.

RECURRING RESULTS BY SEGMENT(4)


              1st half  1st half  1st half. 2004/   2nd quarter  
              2003      2004     1sthalf 2003           2003
                                          % 
 Millions of EUR
 Group sales     3,790     3,831         1%        1,883  

 Pharmaceuticals  882       808         -8%          447  

 Chemicals      1,208     1,185         -2%          599  
 
 Plastics         909     1,043         15%          437  

 Processing       726       729         0%          379  

 Non-allocated 
   items            -         -         -            -  
 - Discontinuing
    operations -   66        66         0%           22  

 Group REBIT      342       367         7%          159  

 Pharmaceuticals   89       111        25%           47  

 Chemicals         97        79       -19%           40  

 Plastics          94       136        45%           38  

 Processing        41        43         5%           24  

 Non-allocated
  items           -21       -23        10%           -3  

 - Discontinuing
    operations -   41        22       -46%           12  


                              2nd quarter  2ndquarter 2004/  
                                    2004  2nd quarter 2003  

                                                    Var % 
 Millions of EUR                                              
 
 Group sales                         1,954                4%  
 
 Pharmaceuticals                       394              -12%  

 Chemicals                             607                1%  

 Plastics                              535               22%  

 Processing                            393                4%  

 Non-allocated items                     -                 -  

 - Discontinuing operations -           24                9%  

 Group REBIT                           166                4%  

 Pharmaceuticals                        18              -62%  

 Chemicals                              45               13%  

 Plastics                               79              108%  

 Processing                             28               17%  

 Non-allocated items                   -10              233%  

 - Discontinuing operations -            6              -50%  

PHARMACEUTICALS SECTOR

- Acceleration of strategy through reinforcement of R&D programs and conclusion of major partnerships for development and commercialization of new products.

Solvay currently has a rich research portfolio of about 30 molecules that will drive future growth of the sector.

In order to accelerate this development, Solvay over the past few months has concluded major partnership agreements enabling it to strengthen its research programs by taking advantage of additional resources and cost sharing.

These include co-development and co-marketing agreements with Wyeth Pharmaceuticals for psychiatric medications including bifeprunox and with Bristol Myers Squibb for SVL319, designed to treat obesity.

Other concrete results have also been obtained recently. A registration dossier was filed for cilansetron in the United Kingdom for the European Union and in the United States; Teveten(R) Plus, a promising medication for treatment of hypertension, was approved in Europe and Canada; Estrogel(R) was launched in the USA for female hormone replacement therapy; the anti-flu vaccine Invivac(R) was approved in Europe; and the marketing territory for Androgel(R) was expanded.

- Results from the Pharmaceuticals sector in the first half of 2004 were up 25%. The sector benefited from the positive impact of the agreements with Wyeth and Bristol Myers Squibb and that allowed it to increase considerably (+24%) its research expenditures (EUR 166 million). Also, the results were strained by the temporary reduction in American sales, primarily in the second quarter, the weakness of the US dollar and the growth of administrative and commercial costs in preparation for launches of products. Finally, Solvay Pharmaceuticals Inc. collected the first instalment (USD 18 million) of compensation from litigation with Barr.

Sales of the Pharmaceutical Sector, expressed in EUR, dropped 8% in the first half of 2004 compared to the first half of 2003. At constant exchange rates, the decrease would have been limited to 5%.

Sales in the United States in the first half of 2004 dropped 15% in US dollars. Like other pharmaceuticals firms, our American subsidiaries are renegotiating their distribution contracts; this translates into a significant reduction of distributor inventories and a readjustment of distributor commissions. This situation is gradually returning to normal and should not have a persistent negative effect on the margins. However, this has resulted in a one-time loss of American sales of about USD 66 million (about 20% of first half sales in the US), was recorded, for the most part in the second quarter, whereas the number of prescriptions for our products was not affected by the renegotiations. Thus, the sales of Androgel(R) and Marinol(R) in the first half of 2004 dropped by 10% and 5%, respectively, whereas the prescriptions recorded during that same period continue going up (+9% and +20%, respectively). Sales of Estratest(R) (USD 62 million, -26%), like prescriptions, have been dropping due to debates on female hormone replacement therapy since 2002, and to competitive pressures.

Sales of pharmaceuticals products in Western Europe continue to be under significant pressure on prescription prices and volumes. This is compensated for by a marked growth of sales in Central and Eastern Europe and Asia.

- As indicated in the General Shareholders' meeting in June, results from the Pharmaceuticals sector are entering a transition phase before the arrival of new products on the market; through the course of the year, the pharmaceuticals sector should show results in line with those from 2003.

The debate over hormone replacement therapy, especially the publication in July 2002 of the study from the Women's Health Initiative (WHI), generated claims in the US against manufacturers of feminine hormone replacement therapies. Even though our specialty products do not have the same hormone compounds as the products included in the WHI study, Solvay Pharmaceuticals Inc is facing an increased number of individual claims. We consider these claims to be without merit.

Discussions under way with the FDA (Food and Drug Administration) on the administrative status of Estratest(R) are continuing on a constructive basis; at the same time Solvay Pharmaceuticals is facing two lawsuits linked to this same status, one in California, the other in Minnesota. Solvay Pharmaceuticals considers these to be without merit and is opposing them vigorously. This position prevailed in a similar lawsuit concluded in Georgia.

CHEMICALS SECTOR

- Continued reinforcement of competitiveness through restructuring, rationalizations, acquisitions or partnerships

These measures are proving to be important in improving the margins of the Group's chemical activities -- especially for the essential products -- which are undergoing intense competitive pressures. Among the actions taken were the closing of the electrochemical unit at Zurzach (Switzerland), the project for a partnership with NCI/Sinopec in China, the reorganization of the American chemical activities and the closure of the perborate unit in Torrelavega (Spain).

- Improvement of Chemicals activities month by month. Results from the second quarter of 2004 exceeded by 32% those of the first quarter of 2004. Results from the first half of 2004 however still remain lower compared to those of the first half of 2003.

. In Soda Ash, results were affected by the strong increase in energy costs (coke and gas) and the increase in transportation costs. In Europe, volumes are increasing since the second quarter. In the USA, soda ash benefits from better volumes and better prices.

. The prices of Caustic Soda remain very low. However market conditions improved in June 2004 and prices are going up.

. The Hydrogen Peroxide activities continue to improve despite the hike in the price of gas. The business is strong in all regions, driven primarily by the paper industry.

. Results of the Fluor activities are improving, despite the negative effects of the weak dollar.

Since there has been no new development in the matter of the European authorities' inquiry concerning the hydrogen peroxide business, the possible financial impact of that inquiry has not been taken into account in recording results.

PLASTICS SECTOR

- Growth of Specialty Polymers, major contributors to the Group's results, and consolidation of the vinyl chain activities

The combination of the Plastics and Processing Sectors, to create effective June 1, 2004 a single new Plastics Sector also dovetails with the Group's desire to increase its competitiveness and efficiency of its structures.

- Results from Plastics showed strong improvement (+45%) in the first half of 2004, due to Specialty Polymers and Vinyls.

. Specialty Polymers, primary contributors to the sector's results, witnessed a significant uptick in volumes following recovery of numerous markets, especially semi-conductors and electronics in general.

. In Vinyls, the globally sustained demand and increase in PVC prices permitted significant improvement in results in the three regions where Solvay is active (Europe, Asia, Mercosur).

. Performance Compounds made progress mainly due to the growth recorded in the Americas.

- Results from Processing were up by 5% compared to the first half of 2003.

. Inergy

Automotive Systems recorded volume growth of 6% compared to the first half of 2003, to 6.5 million fuel systems, thus achieving a performance greater than that of the major American, European and Japanese automakers. Results integrate the startup of a new plant in Japan and the strong pressure exerted on the margins by the automobile market.

. Results of Specialties (swimming pools and medical equipment especially) in Industrial Films showed progress due to a significant increase in sales.

. Pipelife (pipes and fittings) recorded results that were up compared to the first half of 2003 despite the hike in price of PVC. This favorable evolution is the result of restructuring done over the past years and sustained volumes.

With the approval of the Banking, Finance and Insurance Commission, the 2003 and 2004 books have been prepared and presented in accordance with IFRS (International Financial Reporting Standards). Deloitte & Touche have conducted a limited review of the quarterly consolidated situation which closed on June 30, 2004. This consisted principally of analysis, comparison and discussions of financial information and therefore was less extensive than an audit that would be undertaken for annual statements. This review did not disclose any elements that would have required significant corrections in the intermediate statements.

Key dates for financial communication in 2004

- 29 October 2004: Nine-month 2004 results.

- Mid-February 2005: 2004 annual results

To obtain further information, contact Solvay Investor Relations

Tel. 32-2-509-6016, Fax 32-2-509-7240, E-mail: investor.relations@solvay.com,

Web site: www.solvay-investors.com

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 2003  1st half 2004      2Q        2Q
                                               2003       2004

 Sales          3,790          3,831        1,883        1,954  

 Cost of 
  goods sold   -2,555         -2,526       -1,284       -1,339  

 Gross margin   1,235          1,305          600          615  

 Commercial 
  and
  administrative
  costs          -686           -666         -350         -335  

  Research and 
   development   -197           -227          -93          -98  
   costs 

 Other operating
  gains & losses  -29            -35          -11          -12

 Other financial 
  gains & losses   19            -10           14           -4  

 REBIT            342            367          159          166  

 Non-recurring
  items           -14              0          -12           -2  

 EBIT             328            367          148          164  

 Charges on 
  net
  indebtedness    -41            -47          -20          -24  

 Income taxes     -75            -92          -29          -33  

 Equity earnings  -29             -8          -13           -4  

 Income from 
  investments      15             16           15           16  

 Net income of
  the Group       198            236          100          119  

 Minority 
  interests       -17            -18           -8          -10  

 Net income
  (Solvay share)  181            218           92          109  

 Earnings
  per share      2.19           2.63         1.11         1.32  

 Diluted income
  per share      2.19           2.63         1.11         1.32  
  (1)

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

Consolidated Cash Flow Statement


 in millions of EUR
                                    1st half 2003  1st half 2004  
 Cash flow from 
  operating activities                     229            299  

 EBIT                                      328            367  

 Depreciation and
  amortization                             209            217  

 Changes in 
  working capital                         -264           -243  

 Changes in
  provisions                                -9             11  

 Income taxes paid                         -43            -48  

 Other non-cash items                        7             -5  

 Cash flow from
  investing activities                    -145           -153  

 Acquisition/sale 
  of investments                           -48             -1  

 Acquisition/sale of assets               -185           -194  

 Income from investments                    19             16  

 Changes in financial receivables           71             21  

 Effect of changes
  in method of consolidation                -1              5  

 Cash flow from financing activities        29           -232  

 Increase/Decrease of capital                0             -4  

 Acquisition/sale of own shares            -15            -21  

 Changes in borrowings                     282             41 

 Charges on net indebtedness               -41            -47  

 Dividends                                -196           -201  

 Net change in cash and 
  cash equivalents                         113            -86  

 Currency translation differences          -11              5  

 Opening cash balance                       444          1,206  

 Ending cash balance                        546          1,125  

            Consolidated Balance Sheet
 in millions of EUR   
             At the end of 2003    At the end of the 1st half 2004  
 ASSETS
 Non-current assets    5,502                            5,536  

 Intangible assets       245                              258  

 Consolidation 
   differences           155                              157  

 Tangible assets       3,459                            3,488  

 Investments -
  equity accounting      312                              313

 Other investments       531                              556

 Deferred tax assets     511                              498  

 Financial receivables 
  and other
  non-current assets     289                              266 

 Current assets        4,185                            4,318  

 Inventories           1,059                            1,104  

 Trade receivables      1,39                            1,569  

 Income tax
  receivables            154                              129 

 Other receivables       376                              391  

 Cash and
  cash equivalents     1,206                            1,125  

 TOTAL ASSETS          9,687                            9,854  

 EQUITY AND LIABILITIES

 Total 
  Shareholders' equity  3,532                            3,685 

 Capital and reserves   2,666                            2,813  

 Minority interests       866                              872  

 Non-current
  liabilities           3,869                            3,901 

 Long-term provisions   1,759                            1,744  

 Deferred
  tax liabilities         162                              163  

 Long-term 
  financial debt        1,912                            1,958  

 Other non-current 
  liabilities              36                               36  
        
 Current liabilities    2,286                            2,268  

 Short-term provisions     64                              102  

 Short-term
  financial debt          414                              430  

 Trade liabilities      1,009                            1,003  

 Income tax payable       118                              126  

 Other current 
  liabilities             681                              607  

 TOTAL EQUITY 
  AND LIABILITIES       9,687                            9,854

Statement of Changes in Equity


              Capital     Issue  Reserves     Own     Exchange  
                          premiums            shares  differences  
 in millions of EUR

 Book value at the end 
  of the 
  previous period
  (12/31/2003)    1,269        14     1,889    -119         -422  

 Income for the period                  218

  Distribution                         -121                       

 Changes in 
  exchange rates     39  

 Acquisition/sale
  of own shares                                 -21   

 Adjustment to market value 
  of financial assets 

  Other

 Book value at the end of the                               
  previous period 
  (06/30/2004)    1,269        14     1,986    -140         -383  

   Direct charges to       Shareholders'    Third      Total  
  shareholders' equity       equity          Party     equity  

 in millions of EUR

 Book value at the end of the
  previous period 
  (12/31/2003)     35          2,666          866      3,532  

 Income for 
  the period      218             18          236  

 Distribution    -121            -13         -134  

 Changes in 
  exchange rates   39              4           43  

 Acquisition/sale
  of own shares                -21            -21  

 Adjustment to 
  market value of 
   financial assets             32             32         32

 Other                                         -3         -3  

 Book value at the end of the 
  previous period 
  (06/30/2004)     67       2,813             872      3,685

RESULTS BY SEGMENT

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


                   1st half 2004/  
                   1st half 2003  1st half 2004   1st half 2003  
 Millions of EUR                                       %  

 Group Sales        4,114          4,093             -1%  

 Pharmaceuticals      882            808             -8%  

 Chemicals          1,322          1,305             -1%  

 Plastics           1,112          1,177              6%  

 Processing           730            737              1%  

 Unallocated items      -              -               -  

 - Discontinuing
    operations -       66             66              0%  

 Group EBIT           328            367             12%  

 Pharmaceuticals       86            110             28%  

 Chemicals             94             78            -17%  

 Plastics              90            135             50%  

 Processing            39             44             13%  

 Unallocated items    -22            -22              0%  

 - Discontinuing 
    operations -       41             22            -46%  


                2nd quarter  2nd quarter  2nd quarter 2004/  
                      2003         2004   2nd quarter 2003  

                                                         % 

 Millions of EUR

 Group Sales        2,208        2,092                -5%  

 Pharmaceuticals      447          394               -12%  

 Chemicals            655          671                 2%  

 Plastics             535          604                13%  

 Processing           380          399                 5%  

 Unallocated items      -            -                  -  

 - Discontinuing
    operations -       23           24                 4%  

 Group EBIT           148          164                11% 

 Pharmaceuticals       46           19               -59%  

 Chemicals             39           43                10%  

 Plastics              31           79               155%  

 Processing            23           26                13%  

 Unallocated items     -3           -9               200%  

 - Discontinuing
    operations -       12            6               -50%  

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

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

(3) 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 82,787,308 shares during the first half of 2003 and 82,562,387 shares in the first half of 2004.

(4) Results by segment include results of the Group's 4 sectors, non-allocated items as well as the - discontinuing operations - related to the high-density polyethylene activities in joint ventures with BP and salt activities. The latter, shown previously in the Chemicals sector, are now included in - discontinuing operations- due to signature of an agreement to transfer to Kali und Salz (K+S) all of Solvay's shares in ESCO, a joint venture between Solvay and K+S, and which was finalized in July. Note also that as of June 1, 2004, the Plastics and Processing sectors were combined into a single new Plastics sector. This operation gives the Group a more compact structure and more interaction between these activities. Presentation of results in a single sector will begin as of January 1, 2005.


        

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