SOURCE: SOLVAY

February 16, 2006 02:00 ET

New records for SOLVAY in 2005, after excellent results in 2004

Bruxelles -- (MARKET WIRE) -- February 16, 2006 -- New records for Solvay in 2005, after excellent results in 2004

- Group net income up 51%, with cash flow of EUR 1.28 billion

- Sales (+18 %) and operating earnings (+23%) up strongly in all three sectors

- Proposed net dividend of EUR 2, up 5.3%

Sales reached EUR 8,562 million in 2005, up 18% compared to 2004 (+25% in the 4th quarter). Sales increased in all three sectors: Pharmaceuticals +30%, Chemicals +14% and Plastics +13%.

REBIT (EUR 912 million) increased 23% compared to 2004 (+20% for the 4th quarter) and operating margin (REBIT on sales) was nearly 11%. Increases were recorded in all three sectors: Pharmaceuticals +28%, Chemicals +58% and Plastics +4%.

Group net income reached EUR 816 million in 2005, surpassing by 51% the 2004 results (EUR 541 million). For the 4th quarter of 2005, it increased 4% compared to the same period of 2004.

Beyond the increase in operating results (REBIT, +23% in 2005), Group net income included the net capital gain on the sale of interests in the polyethylene activities to BP (EUR 472 million) and a negative balance of non-recurring items of EUR 357 million primarily for gains on the sales of buildings (EUR 135 million) and provisions of EUR 432 million.

Cash flow (1) for the year 2005 was EUR 1.28 billion and the net debt to equity ratio was 43% at the end of 2005.

The Board of Directors decided to propose to the General Shareholders Meeting of May 9, 2006 the payment of a net dividend of EUR 2 per share, increased by 5.3% compared to that for 2004. This is in line with the dividend policy of the Group, namely to increase the dividend whenever possible, and, if possible, not to reduce it. For 24 years, the dividend has progressively been increased and has never been reduced.

The results of the Chemicals Sector (REBIT of EUR 285 million) in 2005 were up 58% compared to 2004. Favorable markets throughout 2005 allowed the confirmation of price increases. This factor, together with strict cost control, allowed the sector to restore its operating margin to 10% for the whole of 2005. Results improved 15% in the 4th quarter of 2005.

The Plastics Sector results (REBIT of EUR 389 million) were up 4% compared to 2004 and reflected an operating margin of 11%. Results declined 19% in the fourth quarter of 2005 from the very high level of the 4th quarter of 2004, level that was particularly high for vinyls, which peaked at the end of 2004. After gradual decline in the 2nd quarter of 2005, vinyls chain margins improved beginning in September. Specialty Polymers, another major contributor to the Group's results, recorded 7% growth in sales despite weakness of the automotive and semiconductor markets. This increase in sales did not translate into an increase in results, due to the start-up costs for new units and the increase in raw material prices.

The results of the Pharmaceuticals Sector included since August 1, 2005 the results of Fournier Pharma, amounting for the 5 months to sales of EUR 265 million and operating results (REBIT) of EUR 64 million. The performance of fenofibrate, Fournier Pharma's "blockbuster," was remarkable and above our expectations. The sector's 2005 sales increased 30% from 2004 (+62% in the 4th quarter). Sales were up in all therapeutic areas and developed well in North America as well as emerging countries. Operational earnings increased to EUR 302 million. Operating earnings for the 4th quarter of 2005 amounted to 108 million EUR, more than doubling those of the 4th quarter of 2004.

The record results achieved in 2005 and the structural improvement of operating margins are the fruit of our strategy of innovation, leadership and competitiveness as well as the more rapid development of Pharmaceuticals and Specialties. The Group began 2006 in favorable conditions despite the significant increases in energy costs.

SOLVAY Group - Summary Financial Information (2)

+-------------------------+--------+-----+--------------+--------------------+
|In millions of EUR       |2004 (3)|2005 |2005/2004 in %|4th quarter 2004 (3)|
+-------------------------+--------+-----+--------------+--------------------+
|(except for per share    |        |     |              |                    |
|figures, in EUR)         |        |     |              |                    |
+-------------------------+--------+-----+--------------+--------------------+
|Sales                    |   7,271|8,562|           18%|               1,865|
+-------------------------+--------+-----+--------------+--------------------+
|REBIT                    |     741|  912|           23%|                 196|
+-------------------------+--------+-----+--------------+--------------------+
|Non-recurring items      |     -67| -357|          n.s.|                  -5|
+-------------------------+--------+-----+--------------+--------------------+
|EBIT                     |     674|  555|          -18%|                 191|
+-------------------------+--------+-----+--------------+--------------------+
|Charges on net           |     -89|  -85|           -4%|                 -20|
|indebtedness             |        |     |              |                    |
+-------------------------+--------+-----+--------------+--------------------+
|Income taxes             |    -125| -153|           22%|                 -42|
+-------------------------+--------+-----+--------------+--------------------+
|“Discontinued operations”|      66|  476|          n.s.|                  -4|
+-------------------------+--------+-----+--------------+--------------------+
|Income from investments  |      15|   23|           53%|                   -|
+-------------------------+--------+-----+--------------+--------------------+
|Net income of the Group  |     541|  816|           51%|                 126|
+-------------------------+--------+-----+--------------+--------------------+
|Net income (Solvay share)|     489|  789|           61%|                 110|
+-------------------------+--------+-----+--------------+--------------------+
|Depreciation and         |     449|  464|            3%|                 113|
|amortization             |        |     |              |                    |
+-------------------------+--------+-----+--------------+--------------------+
|REBITDA (4)              |   1,145|1,339|           17%|                 298|
+-------------------------+--------+-----+--------------+--------------------+
|Cash flow (5)            |     990| 1,28|           29%|                 239|
+-------------------------+--------+-----+--------------+--------------------+
|(per share, in EUR)      |        |     |              |                    |
+-------------------------+--------+-----+--------------+--------------------+
|Earnings per share (6)   |    5.92| 9.51|           61%|                1.32|
+-------------------------+--------+-----+--------------+--------------------+
|Net debt to equity ratio |     21%|  43%|             -|                   -|
+-------------------------+--------+-----+--------------+--------------------+

+----------------+------------------+
|4th quarter 2005|4th quarter 2005/ |
+----------------+------------------+
|                |4th quarter 2004 %|
|                |                  |
+----------------+------------------+
|           2,324|               25%|
+----------------+------------------+
|             236|               20%|
+----------------+------------------+
|             -62|              n.s.|
+----------------+------------------+
|             174|               -9%|
+----------------+------------------+
|             -25|               25%|
|                |                  |
+----------------+------------------+
|             -38|              -10%|
+----------------+------------------+
|              22|              n.s.|
+----------------+------------------+
|               -|                 -|
+----------------+------------------+
|             131|                4%|
+----------------+------------------+
|             124|               13%|
+----------------+------------------+
|             129|               14%|
|                |                  |
+----------------+------------------+
|             360|               21%|
+----------------+------------------+
|             260|                9%|
+----------------+------------------+
|                |                  |
+----------------+------------------+
|            1.50|               14%|
+----------------+------------------+
|               -|                 -|
+----------------+------------------+
Notes on Solvay Group summary financial information

Non-recurring items for 2005 showed a negative balance of EUR 357 million, of which EUR -62 million in the 4th quarter 2005. For the full year 2005, they included in particular capital gains of EUR 135 million on the sale of buildings and provisions of EUR 432 million, of which EUR 356 million were for various risks in the pharmaceuticals area which were revised downward and the potential consequences of ongoing regulatory proceedings concerning competition in peroxides, as well as EUR 76 million for restructuring at various European and US sites.

Charges on net indebtedness amounted to EUR 85 million, down 4% from 2004, despite the payment at the end of July 2005 of EUR 1.2 billion to acquire Fournier Pharma.

Income taxes were EUR 153 million in 2005. This tax amount is not comparable with that of the previous year, given the significant provisions recorded in 2005, partly non-deductible, and the recording in the 3rd quarter of 2004 of a tax credit (of EUR 63 million) in Germany.

With IFRS standard 5 becoming effective on 1 January 2005, results of discontinued operations are not reflected in a separate segment but are recorded as a net entry, below EBIT, with restatement of the year 2004. These results represent:

- In 2004, the net income related to high-density polyethylene activities, salt activities (transferred to Kali und Salz in July 2004), and the industrial foils activities, the divestiture of which the Group announced in 2005, with rigid sheets being transferred to Ineos and other industrial film activities to Renolit (for an amount of EUR 330 million).

- In 2005, the net capital gain (EUR 472 million) on the sale, on January 6, 2005, of the Group's American and European shares in high-density polyethylene activities to BP after reversal of reserves no longer required, and the net income from the industrial films activities.

Income from investments represented the annual dividends paid by Fortis and Sofina. In 2005, in addition to dividends from 2004 paid in the 2nd quarter, this result was favorably influenced by the payment by Fortis of an interim dividend in the 3rd quarter.

The net income of the Group amounted to EUR 816 million. Net income per share in 2005 was EUR 9.51, compared to EUR 5.92 in 2004.

Depreciation and amortization amounted to EUR 464 million, up 3% compared to that of 2004. Cash flow was EUR 1.28 billion.

Shareholders' equity amounted to EUR 3,920 million at the end of the year, up EUR 128 million compared to the end of 2004, after redemption of preferred shares in the amount of EUR 800 million issued by Solvay Finance Jersey and net income of EUR 816 million.

The net indebtedness of the Group at the end of 2005 (EUR 1,680 million) was up EUR 885 million compared to December 31, 2004, following payment of EUR 1.2 billion for the acquisition of Fournier Pharma. The net debt to equity ratio thus became 43%, compared to 46% at the end of the 3rd quarter of 2005, in line with the objective of not exceeding durably 45%. Moody's and S&P confirmed the long- and short-term ratings for Solvay (respectively A/A2 and A1/P1) after the acquisition of Fournier Pharma.

INVESTMENTS AND RESEARCH & DEVELOPMENT

2005 Investments amounted to EUR 1,930 million, including EUR 1.2 billion for the acquisition of Fournier Pharma. Research and Development expenditures amounted to EUR 472 million, 70% of which were in the Pharmaceuticals Sector. That sector's research effort in 2005, including Fournier Pharma's from August 1, 2005, amounted to EUR 351 million EUR (15% of sales).

The 2006 investment and R&D budgets were set at EUR 872 million and EUR 555 million respectively. In 2006, the Pharmaceuticals Sector research budget will be set at EUR 413 million EUR (74% of R&D expenses).

This evidences the Group's determination to continue its strategy of profitable and sustainable growth

RESULTS BY SECTOR

+-------------------+--------+---------+-----------+--------------------+
|In millions of EUR |2004 (3)|  2005   |2005/2004 %|4th quarter 2004 (3)|
+-------------------+--------+---------+-----------+--------------------+
|                   |        |         |           |                    |
+-------------------+--------+---------+-----------+--------------------+
|GROUP SALES        |   7,271|    8,562|        18%|               1,866|
+-------------------+--------+---------+-----------+--------------------+
|Pharmaceuticals    |   1,745|2,270 (7)|        30%|                 441|
+-------------------+--------+---------+-----------+--------------------+
|Chemicals          |   2,433|    2,785|        14%|                 629|
+-------------------+--------+---------+-----------+--------------------+
|Plastics (8)       |   3,093|    3,507|        13%|                 795|
+-------------------+--------+---------+-----------+--------------------+
|Non-allocated items|       -|        -|          -|                   -|
+-------------------+--------+---------+-----------+--------------------+
|GROUP REBIT        |     741|      912|        23%|                 196|
+-------------------+--------+---------+-----------+--------------------+
|Pharmaceuticals    |     236|     3027|        28%|                  49|
+-------------------+--------+---------+-----------+--------------------+
|Chemicals          |     180|      285|        58%|                  46|
+-------------------+--------+---------+-----------+--------------------+
|Plastics (8)       |     373|      389|         4%|                 115|
+-------------------+--------+---------+-----------+--------------------+
|Non-allocated items|     -49|      -63|        29%|                 -15|
+-------------------+--------+---------+-----------+--------------------+
|GROUP REBITDA      |   1,145|    1,339|        17%|                 298|
+-------------------+--------+---------+-----------+--------------------+
|Pharmaceuticals    |     299|      376|        26%|                  65|
+-------------------+--------+---------+-----------+--------------------+
|Chemicals          |     339|      448|        32%|                  85|
+-------------------+--------+---------+-----------+--------------------+
|Plastics (8)       |     540|      565|         5%|                 159|
+-------------------+--------+---------+-----------+--------------------+
|Non-allocated items|     -33|      -50|        52%|                 -11|
+-------------------+--------+---------+-----------+--------------------+
+-------------------+--------+---------+-----------+--------------------+

+----------------+------------------+
|4th quarter 2005|4th quarter 2005/ |
+----------------+------------------+
|                |4th quarter 2004 %|
+----------------+------------------+
|           2,324|               25%|
+----------------+------------------+
|             714|               62%|
+----------------+------------------+
|             708|               13%|
+----------------+------------------+
|             902|               13%|
+----------------+------------------+
|               -|                 -|
+----------------+------------------+
|             236|               20%|
+----------------+------------------+
|             108|              120%|
+----------------+------------------+
|              53|               15%|
+----------------+------------------+
|              93|              -19%|
+----------------+------------------+
|             -17|               13%|
+----------------+------------------+
|             360|               21%|
+----------------+------------------+
|             135|              108%|
+----------------+------------------+
|              99|               16%|
+----------------+------------------+
|             140|              -12%|+----------------+------------------+
|             -14|               27%|
+----------------+------------------+
+----------------+------------------+
1 Net income plus all depreciation and amortization

2 Financial statements audited by Deloitte & Touche

3 Financial information restated after the effectiveness of IFRS 5 ("discontinued activities") on 1 January 2005.

4 REBITDA : REBIT, before recurring depreciation and amortization.

5 Cash flow is the sum of Group net earnings plus depreciation and amortization.

6 Calculated on the basis of the weighted average of the number of shares for the period, after deducting shares purchased to cover stock option programs, or a total of 82,520,997 shares at the end of 2004 and 83,021,167 at the end of 2005.

7 Including 5 months of Fournier Pharma : sales of EUR 265 million and REBIT of EUR 64 million.

8 Following combination of the Plastics and Processing sectors as of June 1, 2004, results from these two former sectors are presented under a single new Plastics sector as for the years 2004 and 2005.

For more information : Solvay Investor Relations,

Tel. 32-2-509.60.16, Fax. 32-2-509.72.40

E-mail : investor.relations@solvay.com, Website : www.solvay-investors.com

The full press release is available on http://www.companynewsgroup.com

This information is provided by CompanynewsGroup

Contact Information