Solvay Group Nine-Month 2004 Results Up 40%

Paris, FRANCE


BELGIQUE, Belgium, October 29, 2004 (PRIMEZONE) -- Solvay Group


 -- Sales up 4% for the first 9 months of 2004, up 9% for 3rd 
    quarter 2004.

 -- Pharmaceuticals sector results up 11%:

Acceleration of research: major positive impact of agreements with Wyeth, Bristol Myers Squibb and Quintiles/Pharmabio.


 -- Strong growth in Plastics results (+94%) thanks to Special 
    Polymers and Vinyls.

 -- Marked month-to-month improvement in Chemicals activities.

Sales of the Solvay Group for the first 9 months of 2004 reached EUR 5,890 million, up 4% from the same period in 2003. They were up 9% for the 3 rd quarter of 2004, as a result of improvement in all sectors.

Net income of the Group was EUR 415 million, a 40% increase from the results for the first 9 months of 2003 (EUR 297 million). Results for the 3rd quarter of 2004 (EUR 179 million) were up 83%, benefiting from a German tax credit of EUR 63 million.

Pharmaceuticals sector results were up 11% for the first 9 months of 2004. They benefited from the positive impact of agreements with Wyeth and Bristol Myers Squibb. Also noteworthy is the recent signing of a collaboration agreement with Quintinles/Pharmabio that will allow a significant acceleration in the development of new molecules. American sales in the 3rd quarter 2004 were down 2% (in USD) versus 3rd quarter 2003; however agreements were signed with the majority of US distributors at the end of the 3rd quarter which should improve future sales. Prescriptions continued to develop according to expectations.

The Chemicals sector saw a significant increase in Caustic Soda prices starting in June and good recovery in the performance of Hydrogen Peroxide. For the first 9 months of 2004, however results were still down 9% versus 2003 levels, despite month-to-month improvement (+22% between the 2nd and 3rd quarters).

Plastics sector results continued their growth (+94% in the first 9 months of 2004) thanks to strong improvement in Specialty Polymers and vinyls. Results for the Processing sector for the first 9 months of 2004 were generally stable despite pressure on margins and successive price increases for raw materials.

The Group actively pursues its objective of improving its productivity. In this context, restructuring measures, particularly in the Chemicals sector and in Processing, have led to mostly non recurring recording of provisions of about EUR 80 million for the first 9 months of 2004, the most significant of which related to the closing of Soda Ash production at the Ebensee, Austria, site.

Although Group results for the 4 th quarter 2004 should be lower than those for the 3 rd quarter 2004, we confirm that the results for the full year 2004 should reflect good growth compared to those of 2003.

Key Figures


               9 months 2004/                    3rd quarter 2004/

                9 months 9 months  9 months    3rd    3rd       3rd  
                                     2003    quarter quarter  quarter
                    2003     2004  % change   2004  % change   2003
                                     2003
 Millions of EUR
 

 Sales              5,685    5,89       4%   1,896   2,059       9%

 REBIT(1)             493     586      19%     151     219      45%

 EBIT                 487     558      15%     159     191      20%

 Charges on
  net
  indebtedness        -66     -71       8%     -25     -24      -4%

 Income
  taxes              -115     -87     -24%     -40       5     n.s.

 Equity
  earnings            -24      -1     -96%       5       7      40%

 Income from
  investments          15      16       7%       --      --      --

 Net income
  of the
  Group               297     415      40%      98     179      83%

 Net income
  (Solvay
  share)              272     379      39%      91     161      77%

 Depreciation and
  Amortization        319     336       5%     111     119       7%

 Cash flow(2)         616     751      22%     209     298      43%

                                       EUR

 Earning per
  share(3)           3.29    4.59      40%    1.10    1.96      78%

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 82,760,311 shares for the nine months of 2003 and 82,513,146 shares for the nine months of 2004.

COMMENTS ON KEY FIGURES and BALANCE SHEET for the first 9 months of 2004

Non-recurring items for the first 9 months of 2004 amounted to EUR -28 million, with, on the one hand, significant provisions for restructuring (including the closing of soda-ash production at Ebensee, Austria), and, on the other hand, gains on the sale of Solvay's interest in the ESCO salt joint venture and of Hedwin, an Industrial Films company.

Charges on net indebtedness amounted to EUR 71 million, up 8% from the first 9 months of 2003, following the extension of long-term debt coverage.

Taxes fell to EUR 87 million, as a result of tax credits (63 million EUR) in Germany in the 3rd quarter of 2004.

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

Equity earnings from the high density polyethylene activities improved very slightly during the 3 rd quarter of 2004 (with a profit of EUR 7 million). For the first 9 months of 2004, the results remained slightly negative (- EUR 1 million), compared to a EUR 24 million loss in the same period of 2003.

Net income of the Group amounted to EUR 415 million, up 40% compared to the first 9 months of 2003 (EUR 297 million).

Minority interests were EUR 36 million, of which EUR 18 million represented preferred dividends linked to the financing of EUR 800 million for acquisition of Ausimont and EUR 8 million resulted form the consolidation of 100% of the activities of Solvay Indupa from July 2004.

Net income per share for the first 9 months of 2004 amounted to EUR 4.59 compared to EUR 3.29 in 2003.

Depreciation and amortization increased to EUR 17 million (+5%) compared to the first 9 months of 2003 as a result of extraordinary depreciation primarily linked to the closure of Soda Ash production at Ebensee, Austria. Cash flow was EUR 751 million, up 22%.

The Group's net indebtedness at 30 September 2004 (EUR 1,089 million) was down (- EUR 31 million) from that at 31 December 2003. The ratio of net indebtedness to equity at the end of the 3 rd quarter of 2004 was 28% compared to 32% at the end of 2003 and 38% at the end of the 3rd quarter of 2003.

RECURRING RESULTS BY SEGMENT (4)


                 9 months 2004/                 3rd quarter 2004/

                9 months 9 months 9 months  3rd     3rd     3rd 
                                   2003   quarter quarter quarter 2003
                   2003    2004 % change    2003    2004   % change
 Millions of EUR

 Group sales      5,685    5,89       4%   1,896   2,059       9%

 Pharmaceuticals   1,37   1,304     -5%      488     496       2%

 Chemicals        1,801   1,804       0%     594     619       4%

 Plastics         1,354   1,638      21%     446     595      33%

 Processing       1,067   1,079       1%     341     350       3%

 Non-allocated 
  items              --      --      --       --      --      --

 Discontinuing
  operations         93      66    -29%       26       0     n.s.

 Group REBIT        493     586      19%     151     219      45%

 Pharmaceuticals    168     187      11%      79      76      -4%

 Chemicals          147     134     -9%       50      55      10%

 Plastics           117     227      94%      23      91     296%

 Processing          58      57     -1%       17      14     -18%

 Non-allocated 
  items             -34     -34       0%     -13     -11     -15%

 Discontinuing
  operations         38      16    -58%       -4      -6      50%

PHARMACEUTICALS SECTOR

-- Acceleration of strategy through strengthening of R&D programs and conclusion of partnering arrangements of the first rank for development and commercialization of new products.

Solvay currently has a rich R&D portfolio with some thirty molecules to feed the sector's future growth. In order to accelerate development, in recent months Solvay has concluded major partnering agreements, the most recent of which, with Quintiles/Pharmabio, will allow accelerated development of several new molecules from Solvay's research. Under the terms of this agreement, Quintiles/Pharmabio will participate in the costs of Phase II clinical trials in the amount of USD 25 million from 2004 through 2006.

Also notable were the recent filing of Estrogel(R) in the US and the filing of the registration application for cilansetron in the United Kingdom (April 2004) and in the United States (June 2004). The U.S. Food and Drug Administration (FDA) recently granted priority status to the review of this application.

- The Pharmaceutical sector's results for the first 9 months of 2004 improved by 11%.

The sector benefited from the positive impact of agreements with Wyeth and Bristol Myers Squibb and was able, in parallel, to substantially increase (by 11%) its research efforts (241 million EUR; 18% of sales). At the same time, the results were weighed down by a reduction in American sales and the weakness of the US dollar; finally, preparations for product launches required increasing commercial efforts.

Sales of the Pharmaceuticals sector, expressed in EUR, declined 5% for the first 9 months of 2004; at constant exchange rates, this reduction would have been limited to 1%. For the 3 rd quarter of 2004, sales, expressed in EUR, increased 2%, thanks to the growth of certain products: AndroGel(r), Pantoloc(r), Creon(r) and Influvac(r) flu vaccine. In addition, sales of Estratest(r), as well as prescriptions, fell as a result of both debates over female hormone therapy since 2002 and competitive pressure.

4) Results by segment include results of the Group's four 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, 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.

U.S. sales for the first 9 months of 2004 fell by 11% (in USD) as a result of a significant reduction in distributor inventories and a readjustment of distributor commissions, essentially in the 2nd quarter. Agreements were signed with most American distributors at the end of the 3rd quarter of 2004, which permitted American sales to end the quarter with a decrease limited to 2% (in USD) from the 3rd quarter of 2003. Prescriptions continued to develop normally. Note also the launch of Estrogel(r) since a few months. The fourth quarter will be affected by the launch of generics to Rowasa(r).

Sales of pharmaceutical products in Western Europe continued to experience significant pressures on prices and prescription volumes as well as the negative aspect of controversy surrounding female hormone replacement therapy. These negative effects were nevertheless offset by a marked growth in sales in Russia, Central and Eastern Europe and India.

- As indicated before, for the whole year 2004, the Pharmaceuticals sector should show results in line with those from 2003.

Concerning U.S. litigation relating to hormone therapy products and discussions with the FDA on the administrative status of Estratest(r), the situation remains generally the same as that reported in the press release for the first half of 2004.

CHEMICALS SECTOR

- Continuing reinforcement of competitiveness through restructuring, rationalization, acquisitions and partnerships.

These measures have proven important in strengthening margins of the Group's chemical activities -- particularly in essential products -- that are subject to intense competitive pressures. Among the actions decided on recently is the already announced closure of the Soda Ash unit at Ebensee, Austria, effective in 2005.

Negotiations concerning the creation of a soda ash joint venture in China are in final phase.

In addition, Solvay is heartened by its privileged partnering position to furnish hydrogen peroxide (H2O2) in large quantities for the production of propylene oxide by BASF and Dow.

- Month-to-month improvement in Chemicals activities.

3rd quarter 2004 results surpassed by 22% those of the 2nd quarter of 2004; compared to the 3rd quarter of 2003, the improvement was 10%; results of the first 9 months of 2004 still remain below those of the first 9 months of 2003 (-9%). Prospects are encouraging.

Hydrogen Peroxide activities continued their sustained recovery in most regions. Conditions in the Caustic Soda market improved and significant price increases were recorded beginning in June 2004, even though prices remain slightly below those of 2003. Growth in sales of Solkane(r) 365mfc permitted improvement in the results of the Fluor activities despite the negative effects of the weakness of the U.S. dollar. Soda Ash results suffered from the impact of significant increases in energy costs (for both coke and gas) and transportation costs, even though market conditions improved in Europe and the U.S.

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

- Plastics results were up strongly (+94%) for the first 9 months of 2004, thanks to sustained growth in Specialty Polymers and Vinyls. Results for the third quarter were up 296% from the same period in 2003.

Specialty Polymers, largest contributors to the sector's results for the first 9 months of 2004, experienced a strong recovery in volumes, particularly in the United States and Asia, both in high-performance polymers and fluorinated polymers. It should be noted that that this was the result not only of growth in existing applications in certain markets (in particular for use in semi-conductors and electronics in general) but also of the development of new high-added-value applications.

Demand for Vinyls was sustained. The increase in PVC prices allowed an appreciable improvement in results in all three regions in which Solvay is active (Europe, Asia and Mercosur), in an environment of high ethylene prices.

- The results of the Processing sector for the first 9 months of 2004 were stable overall despite an environment of pressure on margins and successive increases in raw-material prices.

Even though volumes at Inergy Automotive Systems (fuel systems) were up 6.5% during the first 9 months of 2004, results were affected by strong pressure on margins from the automotive market. Industrial Films improved thanks to Specialties (swimming-pool liners, medical supplies, technical films and decorative laminates) and a number of structural improvements, while Pipelife (pipes and fittings) benefited from its restructuring measures of recent 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 September 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 interim statements.

Key dates for financial communication in 2004


 -- 16 December 2004: press release about the payment of the interim 
    dividend relating to 2004 (payment on 13 January 2005).

 -- 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

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IFRS FINANCIAL STATEMENTS

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

Consolidated Income Statements


 in millions of EUR           9 months 9 months    3rd      3rd 
                                                 quarter  quarter
                                  2003     2004    2003     2004

 Sales                           5,685     5,89    1,896   2,059

 Cost of goods sold             -3,824   -3,916   -1,269  -1,389

 Gross margin                    1,862    1,974      627     670

 Commercial and
  administrative costs          -1,019     -991     -333    -325

 Research and development
  costs                           -308     -329     -111    -102

 Other operating gains &
  losses                           -44      -38      -16      -3

 Other financial gains &
  losses                             4      -30      -15     -21

 REBIT                             493      586      151     219
 
 Non-recurring items                -6      -28        7     -28

 EBIT                              487      558      159     191

 Charges on net indebtedness       -66      -71      -25     -24

 Income taxes                     -115      -87      -40       5

 Equity earnings                   -24       -1        5       7

 Income from investments            15       16        0       0

 Net income of the Group           297      415       98     179

 Minority interests                -25      -36       -8     -18

 Net income (Solvay share)         272      379       91     161

 Earnings per share               3.29     4.59     1.10    1.96

 Diluted income per share
  (1)                             3.29     4.59     1.10    1.96

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

Consolidated Cash Flow Statement


 in millions of EUR                     9 months 2003   9 months 2004

 Cash flow from operating activities               458            530

 EBIT                                              487            558

 Depreciation and amortization                     319            336

 Changes in working capital                       -274           -271

 Changes in provisions                             -16             31

 Income taxes paid                                 -69            -77

 Other non-cash items                               11            -47

 Cash flow from investing activities              -224           -138

 Acquisition/sale of investments                   -72             90

 Acquisition/sale of assets                       -293           -295

 Income from investments                            19             16

 Changes in financial receivables                  123             55

 Effect of changes in method of 
  consolidation                                     -2             -4

 Cash flow from financing activities              -126           -391

 Increase/Decrease of capital                        0             -4

 Acquisition/sale of own shares                    -16            -20

 Changes in borrowings                             178            -77

 Charges on net indebtedness                       -66            -71

 Dividends                                        -222           -219

 Net change in cash and cash 
  equivalents                                      108              1

 Currency translation differences                  -14              3

 Opening cash balance                              444          1,206

 Ending cash balance                               538           1,21

Consolidated Balance Sheet


 in millions of EUR           At the end of       At the end of 
                                       2003    the 3rd quarter 2004
 ASSETS

 Non-current assets                  5,502             5,572

 Intangible assets                     245               236

 Consolidation differences             155               152

 Tangible assets                     3,459             3,499

 Investments -- equity accounting      312               315

 Other investments                     531               573

 Deferred tax assets                   511               562

 Financial receivables and other 
  non-current assets                   289               235

 Current assets                      4,185             4,498

 Inventories                         1,059             1,128

 Trade receivables                    1,39             1,566

 Income tax receivables                154               141

 Other receivables                     376               453

 Cash and cash equivalents           1,206              1,21

 TOTAL ASSETS                        9,687             10,07

 EQUITY AND LIABILITIES

 Total Shareholders' equity          3,532             3,894

 Capital and reserves                2,666             2,987

 Minority interests                    866               907

 Non-current liabilities             3,869             3,863

 Long-term provisions                1,759             1,761

 Deferred tax liabilities              162               151

 Long-term financial debt            1,912             1,913

 Other non-current liabilities          36                38

 Current liabilities                 2,286             2,313

 Short-term provisions                  64               122

 Short-term financial debt             414               386

 Trade liabilities                   1,009               936

 Income tax payable                    118               165

 Other current liabilities             681               704

 TOTAL EQUITY AND LIABILITIES        9,687             10,07

Statement of Changes in Equity


                                                            Direct   
                      Issue             Own    Exchange   charges to 
             Capital premiums Reserves shares differences shareholders
                                                            equity 
                                                               
 in millions         
  of EUR      
          
 Book value            
  at the end              
  of the               
  previous                        
  period         
  (12/31/2003)  1,269    14     1,889    -119     -422          35  

 Income for  
  the period                      379 
 
 Distribution                    -121 
 
 Changes in  
  exchange 
  rates                                             21 
        
 Acquisition/ 
  sale of own 
  shares                                  -20
              
 Adjustment  
  to market 
  value of 
  financial
  assets                                                        64 
                      
 Other                             -2
                          
 Book value 
  at the end
  of the 
  previous 
  period 
  (09/30/2004)  1,269    14     2,145    -139     -401          99 

                   
                       Shareholders'   Third     Total
                           equity      Party    equity
               
               

 in millions 
  of EUR

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

 Income for 
  the period                  379        36      415

 Distribution                -121       -20     -141

 Changes in 
  exchange 
  rates                        21         2       23

 Acquisition/
  sale of own 
  shares                      -20                -20

 Adjustment 
  to market 
  value of
  financial 
  assets                       64                 64

 Other                         -2        23       21

 Book value 
  at the end 
  of the
  previous 
  period 
  (09/30/2004)              2,987       907    3,894

RESULTS BY SEGMENT

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


                    9 months 2004/             3rd quarter 2004/

              9 months 9 months 9 months   3rd    3rd   3rd quarter
                                  2003   quarter quarter    2003
                  2003    2004  % change   2003    2004   % change

 Millions of EUR

 Group Sales       6,152   6,322       3%    2,04   2,229       9%

 Pharmaceuticals    1,37   1,304     -5%      488     496       2%

 Chemicals         1,968       2       2%     646     695       8%

 Plastics          1,647   1,861      13%     535     684      28%

 Processing        1,074   1,091       2%     344     354       3%

 Unallocated
  items               --      --      --       --      --      --

 Discontinuing
  operations          93      66    -29%       27       0   -100%

 Group EBIT          487     558      15%     159     191      20%

 Pharmaceuticals     163     186      14%      77      76     -1%

 Chemicals           148      81    -45%       54       3    -94%

 Plastics            112     226     102%      22      91     314%

 Processing           56      50    -11%       17       6    -65%

 Unallocated
  items              -35     -33     -6%      -13     -11    -15%

 Discontinuing
  operations          43      48      12%       2      26    1200%

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