Belgium chemicals group Solvay reported net income of Eur148 million ($191 million) for the third quarter of 2012 Thursday up 3% from Eur143 million in Q3 2011, but down over 64% from Q2 2012 income of Eur244 million. Net sales for the quarter were up 1% to Eur3.29 billion compared to the year before.
In the Plastics business unit, the company reported Q3 2012 EBIT of Eur168 million, up 8% from the year before, on sales of Eur994 million, which was 8% higher. The strong performance in the specialty polymers sector was the main driver for the rise in the unit's earnings before interest and tax, with this sector contributing a record of Eur359 million in sales (up 18%) and earnings of Eur115 million (up 24%). However, sales in its Vinyls sector, which is part of this business unit, saw marginal growth of 3% to Eur635 million, while earnings saw a year-on-year decline of 13% to Eur52 million.
"In Europe, demand for PVC remained low and volatile as a consequence of important ethylene price movements," the company said. "In Latin America, production was impacted by reduced ethylene supplies in Argentina but improved slightly in Brazil. In Thailand, Vinythai operated at full capacity," the company said.
The European monthly ethylene contract price started this year at Eur1,120/mt FD NWE, reaching a high of Eur1,345/mt in April and settled at Eur1,290/mt in October. The contract price in Q3 2012 averaged Eur1,180/mt, Eur72/mt higher than Q3 2011, according to Platts data, highlighting the higher feedstock costs that PVC producers like Solvay have to manage, while balancing weak demand due to the poor global economic conditions.
The Chemicals unit contributed to the positive result, with EBIT at Eur99 million, up 30% from Q3 2011, on net sales of Eur758 million, up 7% from Q3 2011. Caustic soda continued to benefit "from good volumes coupled with slightly higher selling prices," the company said, while soda ash demand "remained satisfactory" as "demand in China stagnated," the company added.
Meanwhile, Solvay's Rhodia unit, which produces polyamide (for nylon) and acetow (for fiber) among othe rproducts, saw EBIT rise 12% in Q3 2012 to Eur210 million, despite a 6% decline in net sales to Eur1.54 billion. The company reported "record results" in its consumer chemicals unit, citing "good demand and continued exceptional earnings contribution from its Indian native-guar JV".
"While differentiated market dynamics by business segments persisted in the third quarter, the breadth and quality of the product portfolio allowed Solvay to post another set of good results," said CEO Jean-Pierre Clamadieu. But looking ahead, the company said the fragile macroeconomic environment "reduces visibility across markets and industries," adding that it expected a seasonal slowdown from some market segments.
