Solvay uses alternative performance metrics to measure its financial performance, which can be found below:

  • The term “net sales” refers to the sales of goods and value-added services corresponding to Solvay’s know-how and core business. Net sales exclude other revenues primarily comprising commodity and utility trading transactions and other revenues deemed as incidental for the Group;
  • EBITDA = Earnings Before Interest and Taxes, Depreciation and Amortization charges;
  • EBIT = Earnings Before Interest and Taxes;
  • Tax rate = Income taxes / (Result before taxes – Earnings from associates & joint ventures – Interests & realized foreign exchange results on RusVinyl joint venture). The adjustment of the denominator regarding associates and joint ventures is made as these contributions are already net of income taxes;
  • Free cash flow measures cash flow from operating activities, net of investments. It excludes any M&A or financing related activities, but includes elements like dividends from associates and joint-ventures, pensions, restructuring costs, etc. It is defined as cash flow from operating activities (excluding cash flows from expenses incurred in connection with acquisitions of subsidiaries) and cash flow from investing activities (excluding cash flows from acquisitions and disposals of subsidiaries and other investments and excluding loans to associates and non-consolidated investments, as well as related tax elements);
  • Capital expenditure (capex) is cash paid for the acquisition of tangible and intangible assets;
  • Cash conversion is a ratio to measure the conversion of EBITDA into cash. It is defined as (Underlying EBITDA + Capex from continuing operations) / Underlying EBITDA;
  • Net debt = Non-current financial debt + current financial debt – cash & cash equivalents – other financial instrument receivables. Underlying net debt represents the Solvay share view of debt, reclassifying as debt 100% of the hybrid perpetual bonds, considered as equity under IFRS;
  • Leverage ratio = Net debt / Underlying EBITDA of last 12 months. Underlying leverage ratio = Underlying net debt / Underlying EBITDA of last 12 months);
  • CFROI or Cash Flow Return On Investment measures the cash returns of Solvay’s business activities. This uses a reasonable estimate of the replacement cost of assets and avoids accounting distortions, e.g. for impairments. It is calculated as the ratio between recurring cash flow and invested capital, where:
    • Recurring cash flow = Underlying EBITDA + (Dividends from associates and joint ventures – Earnings from associates and joint ventures) + Recurring capex + Recurring income taxes;
    • Invested capital = Replacement value of goodwill and fixed assets + Net working capital + Carrying amount of associates and joint ventures;
    • Recurring capex is normalized at 2% of the replacement value of fixed assets net of goodwill values;
    • Recurring income tax is normalized at 30% of (Underlying EBIT – Earnings from associates and joint ventures);
  • Research & Innovation measures the total cash effort in research and innovation, regardless as to whether the costs were expensed or capitalized. It consists of research & development costs from the income statement before netting of related subsidies and royalties, and where depreciation and amortization are replaced by related capital expenditure;
  • Research & innovation intensity is the ratio of research & innovation to net sales;
  • Net working capital: includes inventories, trade receivables and other current receivables, netted with trade payables and other current liabilities.

These alternative performance metrics are used internally for analyzing the Group's results as well as its business units. They are also used in the calculation of management remuneration. The alternative performance metrics are non-IFRS audited metrics, but are derived from the audited IFRS accounts.