Facing the crisis, we took decisive steps to mitigate declining sales by strengthening working capital discipline while improving the phasing of our cash generation, accelerating cost reductions and adapting our investments. We delivered because we changed the way we manage our resources and investment, acting as ONE Group.
“We mobilised with speed and precision to improve liquidity reserves, increase cash generation, to drive temporary cost reductions and also accelerate strategic cost reduction programs. In doing so, we also had an eye towards the future and ensured that in the second half of 2020 we increased investment levels to respond to envisaged customer demand in a rebound. This relentless focus enabled us to set new performance records in 2020 in terms of costs and cash. It positions us well for 2021 and beyond, despite headwinds in some of our key end markets.”Karim Hajjar, Chief Financial Officer, Member of the Executive Committee
Cost savings target raised to €500 million
- Cost savings reached €332 million for full year 2020, of which €175 million are structural savings. Among the latter, approximately 50% are related to restructuring initiatives, 35% from indirect spend, and 15% from productivity and efficiency improvements.
- In January 2021, Solvay launched a new chapter of its strategic transformation aimed at further aligning its structure to its G.R.O.W. strategy. This builds on previous plans announced in 2020, and represents a profound simplification of all support functions to serve the business more effectively. The plan will lead to an additional net reduction of approximately 500 roles by the end of 2022 and incremental cost savings of €75 million. Subject to discussions with social partners, this plan together with previously announced plans will increase the mid-term cost savings target from €410 million to €500 million by 2024, of which €175 million has been delivered in 2020.
Record cash generation of €963 million
We delivered record Free cash flow to shareholders from continuing operations of €963 million in 2020. The main drivers were continued discipline in working capital, effective capex management, cost reductions, adapted investments and lower pension cash, costs and taxes.
- Working capital
In early 2020, our teams quickly adapted the production and inventory levels to the situation. We focused as well on the receivables and payables and, thanks to the strong commitment of the teams all year, we were able to reduce overdues to record levels.
From March 2020, we quickly adapted our capital expenditure plans to the demand by decreasing our investments plans by €250 million while maintaining a level of 40% in growth projects. This contributed to our cash flow improvement and, in the second half, we were able to announce the acceleration of some investment projects.
- Reduction of financial and pension cash costs
In 2020, we made exceptional contributions of €666 million to our pension schemes since December 2019 and we have plans to invest up to €350 million over the next 12 to 18 months. These structural actions de-risk the balance sheet, are highly value accretive and will more than halve pension cash costs to less than €100 million per year.