ADDITIONAL VOLUNTARY CONTRIBUTIONS RELATED TO EMPLOYEE BENEFITS PLANS
Contributions to plan assets in excess of Mandatory Contributions to employee benefits plans. These payments are discretionary and are driven by the objective of value creation.
Each of these adjustments made to IFRS results is considered to be significant in nature and/or value. Excluding these items from profit metrics provides readers with relevant additional information on the Group’s underlying performance over time because it is consistent with how the business’ performance is reported to the Board of Directors and the Executive Committee. These adjustments consist of:
- Results from portfolio management and reassessments, and results from legacy remediation and major litigations (see note F5 in Financial Statements);
- Amortization of intangible assets resulting from PPA (see note F4 in Financial Statements) and inventory step-up in gross margin (see note F2 in Financial Statements);
- Net financial results related to changes in discount rates, coupons of perpetual hybrid bonds deducted from equity under IFRS, and debt management impacts (comprising mainly gains/(losses) related to the early repayment of debt) (see note F6 and F31 in Financial Statements);
- Adjustments of equity earnings for impairment gains or losses and unrealized foreign exchange gains or losses on debt;
- Results from equity instruments measured at fair value through other comprehensive income;
- Tax effects related to the items listed above and tax expense or income of prior years (see note F7 in Financial Statements);
- All adjustments listed above apply to both continuing and discontinued operations, and include the impacts on non-controlling interests.
BASIC EARNINGS PER SHARE
Net income (Solvay’s share) divided by the weighted average number of shares, after deducting own shares purchased to cover stock options program.
CAPITAL EXPENDITURE (CAPEX)
Cash paid for the acquisition of property, plant and equipment, and intangible assets presented in cash flows from investing activities, and cash paid on the lease liabilities (excluding interests paid), presented in cash flows from financing activities. This indicator is used to manage capital employed in the Group.
Cash conversion is a ratio used to measure the conversion of EBITDA into cash. It is defined as (Underlying EBITDA + Capex from continuing operations) / Underlying EBITDA.
Carechem 24 is a multilingual telephone advice service providing access to a team of trained responders 24 hours a day, 365 days a year. Carechem 24 provides companies all over the world with emergency product support during a hazardous materials incident.
Cash Flow Return On Investment measures the cash returns of Solvay’s business activities. Movements in CFROI levels are relevant indicators for showing whether economic value is being added, though it is accepted that this measure cannot be benchmarked or compared with industry peers. The definition uses a reasonable estimate (management 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 – Underlying 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 2.3% of the replacement value of fixed assets net of goodwill values;
- Recurring income taxes is normalized at 28% of (Underlying EBIT – Underlying earnings from associates and joint ventures).
CODE OF CONDUCT
Solvay is committed to responsible behavior and integrity, taking into account the sustainable growth of its business and its good reputation in the communities in which it operates.
Corporate Social Responsibility.
Currency Translation Adjustment
DILUTED EARNINGS PER SHARE
Net income (Solvay’s share) divided by the weighted average number of shares adjusted for effects of dilution.
Component of the Group which the Group has disposed of or which is classified as held for sale, and:
- represents a separate major line of business or geographical area of operations
- is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or
- is a subsidiary acquired exclusively with a view to resale.
DIVIDEND YIELD (NET)
Net dividend divided by the closing share price on December 31.
DIVIDEND YIELD (GROSS)
Gross dividend divided by the closing share price on December 31.
Dow Jones Stoxx is a European stock index composed of the 665 most important European shares.
DJ EURO STOXX
Dow Jones Euro Stoxx is a pan-European stock index which includes the 326 most important shares of the general Dow Jones index, belonging to eleven countries of the Eurozone.
Earnings before interest and taxes. Performance indicator that is a measure of the Group’s operating profitability irrespective of the funding’s structure.
Earnings before interest and taxes, depreciation and amortization. The Group has included EBITDA as an alternative performance indicator because management believes that the measure provides useful information to assess the Group’s operating profitability as well as the Group’s ability to generate operating cash flows.
ENVIRONMENTAL PROTECTION AGENCY
The U.S. Environmental Protection Agency (EPA or USEPA) is an agency of the United States federal government which was created for the purpose of protecting human health and the environment by writing and enforcing regulations based on laws passed by Congress.
EQUITY PER SHARE
Equity (Solvay share) divided by the number of outstanding shares at year end (issued shares – treasury shares).
Global operator of financial markets and provider of trading technologies.
FREE CASH FLOW
is calculated as cash flows from operating activities (excluding cash flows linked to acquisitions or disposals of subsidiaries and cash outflows of Additional Voluntary Contributions related to pension plans as they are of deleveraging nature as reimbursement of debt), cash flows from investing activities (excluding cash flows from or related to acquisitions and disposals of subsidiaries and other investments, and excluding loans to associates and non-consolidated investments, as well as related tax elements and recognition of factored receivables) and payment of lease liabilities and increase/decrease of borrowings related to environmental remediation. Prior to the adoption of IFRS 16, operating lease payments were included in the free cash flow. Following the application of IFRS 16, because leases are generally considered to be operating in nature, the free cash flow incorporates the payment of the lease liability (excluding the interest expense). Not including this item in the free cash flow would result in a significant improvement of the free cash flow compared to prior periods, whereas the operations themselves have not been affected by the implementation of IFRS 16.
FREE CASH FLOW TO SOLVAY SHAREHOLDERS
Free cash flow after payment of net interests, coupons of perpetual hybrid bonds and dividends to non-controlling interests. This represents the cash flow available to Solvay shareholders, to pay their dividend and/or to reduce the net financial debt.
FREE CASH FLOW CONVERSION
Calculated as the ratio between the free cash flow to Solvay shareholders (before netting of dividends paid to non-controlling interest) and underlying EBITDA.
Financial Stability Board
The FTSEurofirst 300 Index tracks the equity performance across the region of the 300 largest companies ranked by market capitalization in the FTSE Developed Europe Index.
Underlying net debt / total equity.
The Global Reporting Initiative (GRI) is a leading organization in the sustainability field. GRI promotes the use of sustainability reporting as a way for organizations to become more sustainable and contribute to sustainable development.
Hydrogen peroxide propylene oxide, a new technology to produce propylene oxide using hydrogen peroxide.
International Council of Chemistry Associations
International Financial Reporting Standards.
International Integrated Reporting Council
This is a process founded on integrated thinking, which results in a periodic integrated report by an organization about value creation over time and related communications regarding aspects of value creation.
The ISO 9001 standard defines a set of requirements for the establishment of a system of quality management in an organization, whatever its size and activity.
The ISO 14001 family addresses various aspects of environmental management. It provides practical tools for companies and organizations looking to identify and control their environmental impact and constantly improve their environmental performance.
The ISO 14040 standard covers life cycle assessment (LCA) studies and life cycle inventory (LCI) studies.
The ISO 26000 is a global standard which provides guidelines for organizations that wish to operate in a socially responsible manner. The standard was published in 2010 after five years of negotiations among a large number of stakeholders worldwide. Representatives of governments, NGOs, industry, consumer groups, and the world of work were involved in its development. It therefore represents an international consensus.
Life Cycle Assessment
Net debt / underlying EBITDA of the last 12 months. Underlying leverage ratio = underlying net debt / underlying EBITDA of the last 12 months.
LOSS PREVENTION PROCESS
Loss prevention aims at maintaining production flow and profitability of the plants by providing risk mitigation. It also contributes to increasing the protection of people and the environment.
Lost Time Accident Rate.
MANDATORY CONTRIBUTIONS TO EMPLOYEE BENEFITS PLANS
For funded plans, contributions to plan assets corresponding to amounts required to be paid during the respective period, in accordance with agreements with trustees or regulation, as well as, for unfunded plans, benefits paid to beneficiaries.
Organizations are faced with a wide range of topics on which they could report. The relevant topics are those that may reasonably be considered important for reflecting the organization’s economic, environmental, and social impacts, or influencing the decisions of stakeholders, and therefore potentially merit inclusion in an annual report. Materiality is the threshold at which aspects become sufficiently important that they should be reported.
Medical Treatment Accident Rate.
NATURAL CURRENCY HEDGE
A natural currency hedge is an investment that reduces the undesired risk by matching cash in and outflows.
accident or collision narrowly avoided
NET COST OF BORROWINGS
Cost of borrowings netted with interest on loans and short-term deposits, as well as other gains (losses) on net indebtedness.
NET FINANCIAL DEBT (IFRS)
(IFRS) net debt = Non-current financial debt + Current financial debt – Cash & cash equivalents – Other financial instruments. Underlying net debt reclassifies as debt 100% of the hybrid perpetual bonds, considered as equity under IFRS. It is a key measure of the strength of the Group’s financial position and is widely used by credit rating agencies.
NET FINANCIAL CHARGES
Net cost of borrowings, and costs of discounting provisions (namely, related to post-employment benefits and HSE liabilities).
The difference between the change in sales prices and the change in variable costs.
Sales of goods and value added services corresponding to Solvay’s know-how and core business. Net sales exclude Revenue from non-core activities.
NET WORKING CAPITAL
Net working capital includes inventories, trade receivables and other current receivables, netted with trade payables and other current liabilities.
Other Comprehensive Income.
Organisation for Economic Co-operation and Development.
OHSAS 18001 is an international occupational health and safety management system specification.
Innovation that is enriched with outside expertise, through partnerships with the academic world and by shareholdings in start-ups, either directly or via investment funds.
Reduction of liabilities (net debt or provisions) through operational performance only, i.e. excluding impacts from M&A and scope, as well as remeasurements impacts (changes of foreign exchange, inflation, mortality and discount rates).
Growth of net sales or underlying EBITDA excluding scope changes and forex conversion effects. The calculation is made by rebasing the prior period at the business scope and foreign exchange conversion rate of the current period.
United States Occupational Safety and Health Administration
Unit of percentage points or 1.0%, used to express the evolution of ratios.
Purchase Price Allocation (PPA) accounting impacts related to acquisitions, primarily for Rhodia and Cytec.
The ability to create positive net pricing.
Process safety management
Performance Share Unit.
A responsible approach in managing risks throughout the entire life cycle of a product, from the design stage to the end of life.
RESEARCH & INNOVATION
It measures the total cash effort in research and innovation, regardless of 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
Research & innovation intensity is the ratio of research & innovation to net sales.
REACH is the European Community Regulation on chemicals and their safe use (EC 1907/2006). It deals with the registration, evaluation, authorization, and restriction of chemical substances. The law entered into force on June 1, 2007.
Responsible Care® is the global chemical industry’s unique initiative to improve health, environmental performance, enhance security, and to communicate with stakeholders about products and processes.
RESULT FROM LEGACY REMEDIATION AND MAJOR LITIGATIONS
- The remediation costs not generated by on-going production facilities (shut-down of sites, discontinued productions, previous years’ pollution), and
- The impact of significant litigations.
RESULTS FROM PORTFOLIO MANAGEMENT AND REASSESSMENTS
- Gains and losses on the sale of subsidiaries, joint operations, joint ventures, and associates that do not qualify as discontinued operations
- Acquisition costs of new businesses
- Gains and losses on the sale of real estate not directly linked to an operating activity
- Restructuring charges driven by portfolio management and reassessment, including impairment losses resulting from the shutdown of an activity or a plant and
- Impairment losses resulting from testing of CGUs.
It excludes non-cash accounting impact from amortization and depreciation resulting from the purchase price allocation (PPA) from acquisitions.
REVENUE FROM NON-CORE ACTIVITIES
Revenues primarily comprising commodity and utility trading transactions and other revenue, considered to not correspond to Solvay’s know-how and core business.
Return on Capital employed, calculated as the ratio between underlying EBIT (before adjustment for the amortization of PPA) and capital employed. Capital employed consists of net working capital, tangible and intangible assets, goodwill, rights-of-use assets, investments in associates & joint ventures and other investments, and is taken as the average of the situation at the end of the last 4 quarters.
Return on equity.
SAFETY DATA SHEETS
Safety Data Sheets are the main tool for ensuring that manufacturers and importers communicate enough information along the supply chain to allow safe use of their substances and mixtures.
Solvay Acceptable Exposure Limits
Sustainability Accounting Standards Board. SASB’s mission is to develop and disseminate sustainability accounting standards that help public corporations disclose material, decision-useful information to investors. That mission is accomplished through a rigorous process that includes evidence-based research and broad, balanced stakeholder participation.
Solvay Care Management System
United Nations Sustainable Development Goals
The Control of Major Accident Hazards Involving Dangerous Substances Regulations. These regulations (often referred to as “COMAH Regulations” or “Seveso Regulations”) give effect to European Directive 96/82/EC. They apply only to locations where significant quantities of dangerous substances are stored.
Global tool for industrial hygiene management
Launched in 2013 and aligned with ISO 26000, Solvay Way is the sustainability approach of the Group. It integrates social, societal, environmental, and economic aspects into the Company’s management and strategy, with the objective of creating value shared by all of its stakeholders. Solvay Way is based on an ambitious and pragmatic framework serving as a tool of both measurement and progress. Solvay Way lists 49 practices – practices that reflect the Solvay Way’s 22 commitments and are structured on a four-level scale (launch, deployment, maturity, performance).
Stock Option Plan.
The Sustainable Portfolio Management tool is integrated into the Solvay Way framework (linked to five practices). It serves as a strategic tool for developing information on our portfolio and analyzing the impacts of sustainability megatrends on our businesses.
Substance of Very High Concern (SVHC) is a chemical substance, the utilization of which within the European Union has been proposed to become subject to legal authorization under the REACH regulation.
Task Force on Climate-related Financial Disclosure
UN GLOBAL COMPACT
Voluntary corporate sustainability initiative to support companies to align strategies and operations with universal principles on human rights, labor, environment, and anti-corruption, and take actions that advance broader societal goals.
Underlying results are deemed to provide a more comparable indication of Solvay’s fundamental performance over the reference periods. They are defined as the IFRS figures adjusted for the “Adjustments” as defined above. They provide readers with additional information on the Group’s underlying performance over time as well as the financial position and they are consistent with how the business’ performance and financial position are reported to the Board of Directors and the Executive Committee.
UNDERLYING NET DEBT
Underlying net debt reclassifies as debt 100% of the perpetual hybrid bonds, considered as equity under IFRS.
UNDERLYING TAX RATE
Income taxes / (Result before taxes – Earnings from associates & joint ventures – interests & realized foreign exchange results on RusVinyl joint venture) – all determined on an Underlying basis. The adjustment of the denominator regarding associates and joint ventures is made as these contributions are already net of income taxes.
Total number of shares traded during the year divided by the total number of listed shares, using the Euronext definition.
VELOCITY ADJUSTED BY FREE FLOAT
Velocity adjusted as a function of the percentage of the listed shares held by the public, using the Euronext definition.
World Business Council for Sustainable Development.
Year on year comparison.