How To Calculate Solvay'S Financial Results

Transcription

1 SOLVAC SOCIETE ANONYME Rue de Ransbeek B-1120 Brussels Belgium Tel Fax Press Release Embargo, 27 February 2015 at 5:40 p.m. Regulated information Solvac: Stable dividend in 2014 compared to The Solvac cash inflow, fed by the dividends from the investment in Solvay, amounted to EUR 81.9 million versus 85.1 million in 2013, a decrease of 3.7%, while the dividend paid by Solvay has been stable between 2012 and This is explained by the fact that shareholding income of Solvac in 2014 consists of the balance of Solvay 2013 dividend (down 6.6% from the balance in 2012) and the Solvay 2014 interim dividend (the dividend per share is stable with respect to the Solvay 2013 interim dividend, but the number of shares held is slightly higher). After the peak observed in 2013, the 2014 cash inflow is returning to its recurring level: In 2013, Solvac received a double increase of the Solvay dividend (on the 2012 balance and the 2013 interim), representing dividend income of per Solvay share. In 2014, the Solvay dividend income returned to EUR 3.2 per share. EUR million Cash inflow(*) : % Of which is: - Solvay dividend from 2012: 51.1 from 2013 : % balance /share /share - Solvay interim dividend from 2013 : 34.0 from 2014: %(***) /share /share Annual dividend/share /share /share General expenses (including financial expenses) Cash income(**) : (*): Cash inflow means the dividend income net of the investment in Solvay and the interest income. (**): Cash income means the cash inflow reduced by the income charges and other income and expenses (financial/operational) (***): The number of Solvay shares held by Solvac has gone from 25,559,257 in 2013 to 25,578,267 in To the extent that the statutory accounts allow (see under point 3 below), the proposed amount of dividends to be distributed by Solvac is determined by the Board of Directors on the basis of this cash income and after coverage of the costs (mainly financial charges). 2. The Board of Directors reviewed and approved the consolidated financial statements of Solvac on 31 December These financial statements have been submitted to the Statutory Auditor. They are presented in accordance with IFRS standards. CONSOLIDATED INCOME STATEMENT EUR million Income from investments accounted for under the equity method Operating costs -1-1 Capital gain from the sale of Solvay shares 0 0 Interest expenses -5-4 Net income Net earnings per share (EUR), basic and diluted [1] [1] The net earnings per share and the diluted net earnings per share are identical. The number of shares used for the per share calculation is 15,267,881 shares in 2014 as in 2013.

2 On December 31, 2014 Solvac recorded a consolidated net income of EUR 19 million (EUR 1.3 per share) versus EUR 78 million EUR (EUR 5.1 per share) over the same period in The Board of Directors of Solvac SA has issued the following figures for the 2014 statutory accounts: EUR million Recurrent financial income 80,411 77,785 Other recurrent income ,196 Recurrent income 79,495 76,589 Capital gains Profit before taxes 79,495 76,589 Profit after taxes 79,495 76,589 Gross remuneration of capital 72,064 72,064 Balance to be carried forward 7,431 4,525 In the absence of exceptional items in 2013 and 2014, the recurrent income is identical to the profit before taxes. The profit after taxes was EUR 76.6 million in 2014 versus EUR 79.5 million in In accordance with the decision of the Board of Directors to use the retention to reduce the (short-term) debt of the company, the latter has been reduced by EUR 2.0 million at the end of the year and by EUR 3.0 million on average over the year to reach an annual average close to Two interim dividends were paid on 25 September 2014 and 29 December 2014, respectively, the second being, usually, equal to the balance; it will be up to the General Assembly for confirmation. In total, each of the shares received stable gross remuneration in 2014 compared to 2013: EUR Gross dividend per share It is to be noted that the Board of Directors of Solvay decided on 25 February 2015 to pay a dividend on 19 May 2015 representing the balance of the 2014 financial year, which amounts to EUR 2.06(*) gross (EUR 1.55 net) per share. (*) Two point zero six repeating last decimal.

3 NOTES TO THE FINANCIAL STATEMENTS 1. Financial statements Deloitte will certify, without qualification, the annual financial statements to 31 December 2014 and confirms that the accounting information contained in this press release requires no comment on its part and is consistent with said financial statements. The full report of the Statutory Auditor relating to the annual financial information will be included in the 2014 annual report to be published on the Internet ( on 31 March Content This press release contains regulated information and is established in compliance with IAS 34. The risk analysis included in the annual report is available on Internet ( 3. Solvac shares Number of shares issued at the end of the period 15,267,881 15,267,881 Average number of shares for calculating the IFRS 15,267,881 15,267,881 earnings per share Average number of shares for calculating the IFRS diluted earnings per share 15,267,881 15,267, Statement by the responsible persons Mr. JP. Delwart, Chairman of the Board and Mr. B. de Laguiche, Managing Director of Solvac, confirm that to the best of their knowledge: a) the summary financial information, prepared in conformity with applicable accounting standards, reflects a true and fair view of the net worth, the financial situation and results of the Solvac Group and of Solvac S.A. b) the intermediate report contains a faithful presentation of significant events occurring in the 2014 financial year, and their impact on the summary financial information. c) there are no transactions with related third parties. Key dates for financial communications 31 March 2015: Publication of the 2014 annual report at 12 May 2015: Ordinary General Meeting of the Shareholders (2:30 p.m.) 31 July 2015: Results from the first half of 2015 and announcement of the first interim dividend for financial year August 2015: Payment of the first interim dividend for financial year December 2015: Announcement of the second interim dividend for financial year December 2015: Payment of the second interim dividend for financial year 2015 For additional information, please contact: SOLVAC S.A. Courier address: Rue des Champs Elysées, Brussels Tel.: 32/2/ Fax: 32/2/ Mail: Investors.relations@solvac.be Dit persbericht is ook in het Nederlands beschikbaar - Ce communiqué de presse est également disponible en français

4 Solvac Consolidated financial statements The financial statements that follow were approved by the Board of Directors on 27 February They were prepared in compliance with the IFRS accounting standards described on the following pages. Consolidated income statement Eur million Notes Income from investments accounted for under the equity method (1) Operating expenses -1-1 Capital gain from sale of Solvay shares 0 0 Cost of borrowings (2) -5-4 Net income Net earnings and diluted earnings per share (EUR) (1) (3) 5,1 1,3 Statement of total comprehensive income EUR million Notes Net income Other comprehensive income (1) Recyclable items Hyperinflation 9-3 Gains and losses on re-measuring available-for-sale financial assets -7 0 Gains and losses on hedging instruments in a cash-flow hedge Currency translation differences (activities abroad) Non-recyclable items Remeasurements of the net defined benefit liability Tax expenses with respect to recyclable and nonrecyclable items Tax expenses with respect to recyclable and non-recyclable items Other comprehensive income after tax effects Comprehensive income (4) 2-57 (1) Other elements of the comprehensive income come from the statement of changes in equity of Solvay S.A. More information is available in the annual report of Solvay S.A. Explanatory notes are found after the financial statements.

5 Cash flow statement EUR Million Notes Net result Cost of borrowings 5 4 Income from investments accounted for under the equity method Changes in taxes 0 0 Changes in working capital (5) -2-1 Dividends received from Solvay Cash flow from operating activities Acquisition of Solvay shares 0-2 Sale of Solvay shares 0 0 Cash flow from investing activities 0-2 Capital increase 0 0 Acquisition of treasury shares 0 0 Increase in borrowing (6) Repayment of borrowing (6) Interest paid -5-4 Dividends paid (7) Cash flow from financing activities Net change in cash and cash equivalents 0 0 Opening cah balance 0 1 Closing cash balance 1 1 Statement of financial situation EUR million Notes ASSETS Tangible assets 0 0 Non-current assets: investments in associates (1) Goodwill Investments in associates excluding goodwill Current assets: short-term receivables (8) Cash and cash equivalents 1 1 Total assets EQUITY AND LIABILITIES Equity (9) Capital Réserves Non-current liabilities: long term financial debt (2) Current liabilities Short-term financial debts (6) Tax liabilities 8 7 Other current liabilities 3 3 Total equity and liabilities Statement of changes in equity

6 EUR million Capital Issue premiums Hybrid bond Retained earnings Currency translation, fair value differences and defined benefit pension plans Total equity Balance as at 31/12/ Comprehensive income Dividends Hybrid bond Scope and other variations -4-4 Balance as at 31/12/ Comprehensive income Dividends Hybrid bond 0 Scope and other variations Balance as at 31/12/ In 2013, the main change relates to the hybrid bond that corresponds to the Solvac share of hybrid bonds issued by Solvay following the acquisition of Chemlogics and to strengthen its capital structure. This type of security is an equity instrument in that the criteria of IAS 32 are met. Reference is made to the proposed appropriation of profit on page 9 of the management report. Notes to the consolidated financial statements IFRS accounting policies The primary accounting policies used in the preparation of these consolidated financial statements are the following: 1. General information and applicable IFRS standards Solvac ( the Company ) is a public limited company, incorporated under Belgian law and quoted on Euronext Brussels. The Company's main activity is its 31 % shareholding in Solvay. The consolidated financial statements for the financial year ending December 31, 2014 have been prepared in accordance with the IFRS (International Financial Reporting Standards) as adopted by the European Union. Standards, interpretations and amendments to the norms applicable for the annual period beginning from 2014 IFRS 10 Consolidated Financial Statements. IFRS 11 Joint Arrangements. IFRS 12 Disclosures of Interests in Other Entities. IAS 27 Separate Financial Statements. IAS 28 Investments in Associates and Joint Ventures. Amendments to IFRS10, IFRS 12 and IAS 27 Consolidated Financial Statements and Disclosure of Interests in Other Entities - Investment Entities. Amendments to IFRS10, IFRS 11 and IFRS 12 Consolidated Financial Statements, Partnerships and Disclosure of Interests in Other Entities - Transitional provisions.

7 Amendments to IAS 32 Financial Instruments: Presentation Offsetting Financial Assets and Financial Liabilities. Amendments to IAS 36 Impairment of Assets Recoverable Amount Disclosures for Non-Financial Asset. Amendments to IAS 39 Financial Instruments Novation of Derivatives and Continuation of Hedge Accounting. The application of these standards, interpretations or amendments does not have any material impact on the company's consolidated financial statements for the financial year ending 31 December Standards, interpretations and amendments published, but not yet applicable in 2014 IFRS 9 Financial Instruments (applicable for annual periods beginning on or after 1 January 2018, but not yet adopted by the EU). IFRS 14 Regulatory Deferral Accounts (applicable for annual periods beginning on or after 1 January 2016, but not yet adopted by the EU). IFRS 15 Revenue from Contracts with Customers (applicable for annual periods beginning on or after 1 January 2017, but not yet adopted by the EU). Improvements to IFRS ( ) (applicable for annual periods beginning on or after 1 February 2015). Improvements to IFRS ( ) (applicable for annual periods beginning on or after 1 January 2015). Improvements to IFRS ( ) (applicable for annual periods beginning on or after 1 January 2016, but not yet adopted by the EU). Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between the Investor and its Investment in Associated Companies or Joint Ventures (applicable for annual periods beginning on or after 1 January 2016, but not yet adopted by the EU). Amendments to IFRS 11 Joint Arrangements Acquisition of an Interest in a Joint Venture (applicable for annual periods beginning on or after 1 January 2016, but not yet adopted by the EU). Amendments to IAS 16 and IAS 38 Tangible and Intangible assets - Clarification on Acceptable Methods of Depreciation (applicable for annual periods beginning on or after 1 January 2016, but not yet adopted by the EU). Amendments to IAS 16 and IAS 41 Tangible Assets and Biological Assets Producing Plants (applicable for annual periods beginning on or after 1 January 2016, but not yet adopted by the EU). Amendments to IAS 19 Employee Benefits Employee Contributions (applicable for annual periods beginning on or after 1 February 2015). Amendments to IAS 27 Separate Financial Statements Equity method of Accounting (applicable for annual periods beginning on or after 1 January 2016, but not yet adopted by the EU). Amendments to IAS 1 Initiative Concerning Disclosures (applicable for annual periods beginning on or after 1 January 2016, but not yet adopted by the EU). Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception (applicable for annual periods beginning on or after 1 January 2016, but not yet adopted by the EU). IFRIC 21 Levies (applicable for annual periods beginning on or after 17 June 2014). An analysis of the impact of these standards, amendments and interpretations on the company's consolidated financial statements is ongoing. Detailed information with respect to the future application of these arrangements by Solvay can be found in the Solvay Annual Report.

8 2. Consolidation Since the Board of Directors believes that Solvac has a significant influence on Solvay, the shareholding in Solvay S.A. has been integrated into Solvac's consolidated financial statements using the equity method. This method takes into account the Solvac S.A. share in the financial statements of the Solvay Group, prepared on 31 December of the financial year, using Solvay s IFRS accounting standards (cf. Solvay Annual Report). Under the equity method, an investment in an associated company is initially recognised at cost in the consolidated statement of the financial situation and is adjusted thereafter to recognise the Group's share in net income and other comprehensive income of the associated company. 3. Segment information Given the nature of the holding company, there is no need to present segment or geographical information. The data on shareholding in Solvay is available in the Solvay S.A. financial statements. 4. Impairment of assets At the end of each accounting year, the Group reviews the book value of its share for indications of the potential impairment of assets. If such indications exist, the recoverable value of the asset is estimated in order to establish the extent of any impairment loss. 5. Financial instruments Bank loans Bank loans and overdrafts are accounted for in the net amount received. Financial expenses, including any settlement or redemption premiums, are covered for the estimated period of availability.

9 Cash and cash equivalents Cash and cash equivalents consist of cash and demand deposits, short-term investments (less than 3 months) and highly-liquid investments readily convertible into known amounts of cash and subject to an insignificant risk of any change in value. 6. Recognition of revenue Revenue is recognised when it is likely to be acquired and as soon as its value can be reliably measured. Interest earnings are recorded in the income statement on a pro rata basis taking account of the effective interest rate of the investment. 7. Estimates and significant judgements when applying an accounting method Over and above the estimates and significant judgements made by Solvay when applying accounting methods (see Solvay's Annual Report), the key estimate made by the Board of Directors on 31 December 2014 concerns the recoverable value of its holding in Solvay. An impairment test is performed if there is any indication that the investment may be impaired. The impairment test involves comparing the book value of the investment to its market value. In the event of a crisis on the market with excessive price volatility, reference may be made in addition to the "target prices" for Solvay shares, as estimated by financial analysts. As of the close of the financial year, there was no sign of a loss of value. Therefore, no investment impairment test was conducted. 8. Risk management Solvay underlying risk The sole investment of Solvac being its investment in Solvay, the primary risks to which the Company is exposed are similar to those of Solvay. The financial situation and results of Solvac are influenced by the results of Solvay, either through the dividends received (financial statements) or through consolidation using the equity method (consolidated accounts). Valuation risk - Solvac is exposed to market risk (changes in Solvay s share price). Although the share price is subject to market volatility, the Board considers that in the long run, it constitutes a reliable indicator of valuation. The average book value of the Solvay shares on the Solvac balance sheet is EUR 79 per share excluding goodwill (86 EUR in the statutory accounts). Rate risk - Solvac is exposed to an interest rate risk resulting from bank loans at fixed rates. The company monitors this risk through the periodic calculation of the fair market values of these loans. Liquidity risk - Solvac is exposed to liquidity risk, particularly the risk when it has to resort to short-term bank loans. The short-term debt, which was moderate, peaked at year end (EUR 39 million at the end of 2014) and was almost fully repaid in January of the following year upon payment by Solvay of its interim dividend (34 million EUR in January 2015). Not only is short-term debt of short duration, but on average over the year, it is close to zero. Therefore, the Board is confident of the ability of Solvac to raise the funds needed in the short term and repay them with the flow of dividends paid by Solvay. Counterparty risk - This is the bank counterparty risk relating to cash deposits and available assets. The counterparties of Solvac are banks with a minimum rating of A.

10 Notes to the consolidated financial statements (1) Investments accounted for under the equity method These include Solvac's 31% shareholding in Solvay S.A. (after deducting the treasury shares held by Solvay). Solvay S.A. is a société anonyme under Belgian law and quoted on Euronext in Brussels and Paris. The Solvay Group is an international chemical group. The value of the holding under the equity method amounts to EUR 2,365 million (consisting of EUR 342 of goodwill and EUR 2,023 million of value excluding goodwill). Based on the stock-exchange price of 31 December 2014, the value amounts to EUR 2,875 million. Changes in goodwill are as follows: EUR Million Value at 1 January Sold during the year 0 0 Acquired during the year 0 0 Value at 31 December The changes in shareholding using the equity method excluding goodwill are as follows: EUR million Value at 1 January Sold during the year 0 0 Acquired during the year 0 2 Result * Distribution Currency translation and fair value differences Value at 31 December *In 2014, the share of Solvac in the net income of the Solvay Group, excluding minority interests, amounted to EUR 25 million (2013: 83 millions EUR). In 2014, the share of Solvac in the results from discontinued operations amounted to EUR -76 million (2013: EUR 20 million). The value of the investment at December 31 corresponds to Solvay s equity listed in Solvay Shareholders" (*) multiplied by the holding percentage (30.82% in 2014 and 30.73% in 2013). (*) This is the equity of Solvay minus non-controlling interests.

11 The condensed consolidated financial statements of the Solvay group are the following: EUR million Financial position Non-current assets Current assets Cash and cash equivalents Assets Equity Solvay stockholders Non-controlling interests Non-current liabilities Long term financial debt Current liabilities Short term financial debt Equity and liabilities Income statement 0 Sales Amortization and depreciation Cost of borrowing Interest on lending and short term deposits Income taxes Result from continuing operations Result from discontinued operations Net income for the year Non-controlling interests Net income (Solvay share) Comprehensive income Other comprehensive income Total comprehensive income Dividend received (2) Long-term financial debt Debts with maturity of more than one year are stable and amount to EUR 110 million (loans from BNP Paribas Fortis). This represents the structural indebtedness of Solvac: a loan of EUR 50 million EUR (maturing in 2017; fixed rate of 3.85%) and a loan of EUR 60 million refinanced at the end of 2013 (maturing in 2020; fixed rate of 3.20%). The interest on loans longer than one year amounted to EUR 4 million for the financial year Since the close of financial year 2014, Solvac refinanced a portion of its long-term debt on its EUR 50 million loan. A window of opportunity has allowed for refinancing with a maturity of 7 years (in 2022) at a total fixed rate of 2.90%. The total annual average cost of Solvac's fixed debt currently amounts to 3.06 % after refinancing. (3) Net earnings per share

12 Net earnings per share and diluted net earnings per share are identical. The number of Solvac shares was 15,267,881 at the end of 2014 and of (4) Comprehensive income The primary changes are related to the assessment of obligations under defined employee benefit plans in accordance with the revised IAS 19 and the conversion differences. (5) Changes in working capital In 2013, these changes primarily concerned the increase in the Solvay claim (interim dividend in financial year 2013). (6) Short-term liabilities This consists of a straight loan taken out on 24 December 2014 in the amount of EUR 39 million (maturing on 23 January 2015) to finance the balance of the 2014 dividend paid on 29 December 2014 and to reimburse the Solvay current account. (7) Dividend paid The dividends paid (EUR 4.72 gross per share, unchanged with respect to 2013) in this period amount to EUR 72 million including the interim 2014 dividend payable on 25 September 2014 (EUR 42 million) and the balance of the 2014 dividend payable on 29 December 2014 (EUR 30 million). (8) Short-term receivables This primarily consists of the interim dividend to be received from Solvay. (9) Total equity The information relating to the capital and shares is set down in the notes to the statutory accounts. The total equity at the end of 2014 amounted to EUR 2,241 million. In 2013, the total equity included the direct posting in positive shareholder equity of EUR 363 million. This direct posting came primarily from a hybrid bond that was qualified as an equity instrument in accordance with IAS 32. This hybrid bond was issued by Solvay following the acquisition of Chemlogics in order to strengthen its capital structure. (10) Treasury shares In 2014, Solvac did not acquire any treasury shares held for cancellation.

13 (11) Financial instruments EUR Million Loans and receivables (including cash and cash equivalents) Financial liabilities measured at amortized cost (includes trade liabilities) Net carrying Net carrying Fair value amount amount Fair value With respect to loans and receivables, book value is a good approximation of fair market value. With regard to financial liabilities at an amortised cost, the net book value of the long-term financial debt (EUR 110 million, cf. note 2) is less than its fair value (estimated at EUR 119 million). The fair market value of the fixed-rate debt was calculated using the Discounted Cash Flow method. The net book value of other financial liabilities is a good approximation of their fair market value Thus, the determined fair market values are categorised as Level 2 in the fair market value hierarchy. (12) Relations with the directors of the consolidating company Compensation and pensions: since early 2014 the directors are paid a gross appearance fee of 2,000 per meeting for each Director and a gross fee of 4,000 per meeting for the Chairman of the Board. Advances and loans provided by the consolidating company or by an affiliated company: the current account with Solvay S.A. (zero balance at the end of 2014) is compensated at the Solvay Group s internal financing rate. (13) Off-balance-sheet rights and commitments Real coverage by the company on its own assets: collateralization of 1,463,416 Solvay shares in favour of BNP Paribas Fortis for a sum of EUR 164 million. (14) List of consolidated companies The Solvay Group under the equity method