2019 Annual Integrated Report

Value creation

2020 Outlook

On April 9, Solvay withdrew its full year guidance for 2020 due to the effects of the heightened uncertainty of the COVID-19 pandemic on key end markets.  

Underlying full year EBITDA is expected to be flat to modestly down (0% to –3%) organically1 compared to €2,322 million in 2019, with growth to be back-ended. Against a backdrop of a strong Q1 2019, first quarter 2020 is expected to be down by high single digit as a combined result of the 737MAX production halt, the impact of the COVID-19 virus, and the increasingly challenging oil and gas market.

Key assumptions:

  • Focus on mitigation including pricing, headcount efficiency and other cost measures, as well as accelerated technology penetration will deliver more resilience in 2020.
  • Solvay assumes Boeing 737MAX production of 200 aircrafts in 2020 compared to close to 600 in 2019. The net impact, after mitigation efforts, is expected to be between –€30 million and –€40 million in 2020.
  • Disruptions related to COVID-19 are uncertain; Solvay expects approximately –€25 million impact in the first quarter and will update its outlook as the situation becomes clearer.
  • Macroeconomic environment headwinds are expected to continue into 2020, with expected improvement in key markets (auto and electronics) in the second half. We expect the oil and gas market to remain significantly challenged again this year.

Free Cash Flow conversion of 28%.

  • Continued focus on working capital and on disciplined capex management will support strong cash generation in 2020.
  • Pension cash-out will reduce by more than €40 million, following voluntary contributions2, and cash-out for financial charges will be about €20 million lower as a result of the reduction and optimization of net financial debt.

ROCE to be stable around 8%.

Efficiency Measures
In 2020, Solvay is accelerating the alignment of its worldwide organization with its G.R.O.W. strategy and is responding to the challenging economic environment, leading to 500 redundancies and 150 new positions to support future growth. The social procedures are launched on February 26 and the savings will commence in the fourth quarter of 2020 and will be fully implemented by the end of 2021. This plan will complement prior measures and raise our mid-term cost reduction target to at least €350 million. Restructuring charges of approximately €70 million will be provisioned in our first quarter financials. It should be noted that, in the fourth quarter of 2019 a provision of €48 million was reversed from the prior program.

Forex sensitivities
Solvay is mostly exposed to the U.S. dollar, with the main sensitivities per US$/€0.10 change:

  • EBITDA sensitivity of about €(125) million based on the average rate in 2019 of US$/€1.15, with some 2/3 on conversion and 1/3 on transaction (excluding hedging).
  • Net debt sensitivity of about €100 million based on the rate at the end of 2019 of US$/€1.12.

1: Organic growth excludes forex conversion and scope effects, as well as the effect from the implementation of IFRS 16. Reported growth compares to the published 2018 pro forma figures, adjusted for the implementation of IFRS 16,
2: Voluntary contributions related to pension plans