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March 1999

1998 RESULTS1998 RESULTS

GROWTH THROUGH INCREASED GROWTH THROUGH INCREASED COMPETITIVENESS AND INNOVATIONCOMPETITIVENESS AND INNOVATION

©, SOLVAY S.A., 1999SOLVAYSOLVAY 2PPT-4908-2/ALR/03.99

I. I. 1998 RESULTS HIGHLIGHTS1998 RESULTS HIGHLIGHTS

Record level over the last 5 years : Record level over the last 5 years : 98/9798/97Net current earnings : Net current earnings : 377 Mio EUR 377 Mio EUR + 15 %+ 15 %

Net earnings : Net earnings : 378 Mio EUR 378 Mio EUR + 11 %+ 11 %

Cash flow :Cash flow : 885 Mio EUR885 Mio EUR + 5 %+ 5 %

AND ALSO …AND ALSO …

IMPROVED COMPETITIVENESSIMPROVED COMPETITIVENESS


SalesSales 7,7097,709 7,4517,451 - 3% 8,6948,694Gross margin 1,962 2,059 + 5% 2,402

EBIT EBIT (1)(1) 548548 609609 + 11% 711711Net debt expenses - 39 - 54 + 38% - 63Unallocated expenses and income - 7 - n.s. -Taxes (on earnings before extraordinary items) - 175 - 178 + 2% - 208

Net earnings before extraordinary items Net earnings before extraordinary items 327327 377377 + 15% 440440Net extraordinary items + 14 + 1 - 93% + 1Net earningsNet earnings 341341 378378 + 11% 441441Depreciation 498 507 + 2% 591Cash flowCash flow 839839 885885 + 5% 1,0321,032Capital expenditures 743 640 - 14% 747Research and development 284 292 + 3% 341

(1) EBIT : Earnings before net debt expenses, taxes and unallocated items; (2) 1 EUR = 40.3399 BEF, (3) 1 USD = 34.575 BEF (12.31.1998)

Millions of EUR(2)

Consolidated figures Consolidated figures 1998/1998/1997199719981998 19981998(3)(3)

(M USD)(M USD)

RESULTS HIGHLIGHTSRESULTS HIGHLIGHTS

19971997


GROUP EBIT : + 11 %GROUP EBIT : + 11 %in 1998 compared to 1997in 1998 compared to 1997

Millions of EUR

400

598

528548

609

0

100

200

300

400

500

600

700

1994 1995 1996 1997 1998

337

272

264

284

H1H1

H2H2


GROUP NET CURRENT EARNINGSGROUP NET CURRENT EARNINGS Record level over the last 5 yearsRecord level over the last 5 years

172

311 286

327377

0

50

100

150

200

250

300

350

400

1994 1995 1996 1997 1998

+15%Millions of EUR


Millions of EUR885

839819763

667

500

600

700

800

900

1994 1995 1996 1997 1998

+5%

CASH FLOWCASH FLOWRecord level over the last 5 yearsRecord level over the last 5 years

98/94 : + 30 %98/94 : + 30 %


Capitalexpenditures

INVESTMENT PROJECTS AND R&DINVESTMENT PROJECTS AND R&Din all Strategic Business Unitsin all Strategic Business Units

493 511

743640

803

285 293

305 284292

341

694

0

200

400

600

800

1000

1200

1994 1995 1996 1997 1998 1999budget

804804778778

1027102799999911441144

932932

Millions of EUR

R&D expenses

of which 66 % for of which 66 % for PharmaceuticalsPharmaceuticals

of which 66 % for of which 66 % for PharmaceuticalsPharmaceuticals


NET CURRENT EARNINGS PER SHARENET CURRENT EARNINGS PER SHARE1994-19981994-1998

1.98

3.673.32

3.794.38

0

1

2

3

4

5

1994 1995 1996 1997 1998

In EUR/share

+16%


PERFORMANCES PER SHAREPERFORMANCES PER SHARE1994-19981994-1998

1.67

1.23

1.82

1.36

1.82

1.36

1.98

1.49

2.07

1.55

0

0,5

1

1,5

2

2,5

1994 1995 1996 1997 1998

In EUR/share

Gross dividend Net dividend


II. CONCENTRATE ON CORE ACTIVITIESII. CONCENTRATE ON CORE ACTIVITIESin 4 SECTORSin 4 SECTORS

with faster growth in pharmaceuticalswith faster growth in pharmaceuticals

Total : EUR 609 M (USD 711 M)

1998 EBIT1998 EBIT(*)

(*) EBIT : Earnings before net debt expenses, taxes and unallocated items

ProcessingProcessing12 %

(EUR 75 M)

PlasticsPlastics34 %(EUR 205 M)

PharmaceuticalsPharmaceuticals22 %

(EUR 135 M)

ChemicalsChemicals32 %(EUR 194 M)


272

192 194

87

192 205

61 4675

97118

135

0

50

100

150

200

250

300

Total 1998 EBIT : EUR 609 M (+ 11 % versus 1997)(1) E.B.I.T. = Earnings before net debt expenses, taxes and unallocated items

EBIT GROWS IN ALL SECTORSEBIT GROWS IN ALL SECTORS

ChemicalsChemicals PlasticsPlastics ProcessingProcessing PharmaceuticalsPharmaceuticals

Mi ll

ions

of

EU

R

+63%

+1% +7%

+14%

96 97 9896 97 98 96 97 98 96 97 98

Sales EUR 1167 M+ 11 %

SalesEUR 2425 M- 2 %

Sales EUR 2428 M- 12 %

Sales EUR 1431 M+ 1 %

114

80

124

81

44

31

55

80 H2H2

H1H1

EBIT (1)

92

100

89

103

1234 49

69


CHEMICALS SECTORCHEMICALS SECTOR EBIT 98/97 : + 1 %EBIT 98/97 : + 1 %

Key elements of strategy :Key elements of strategy :

To concentrate on 9 Strategic Business UnitsTo concentrate on 9 Strategic Business Units

To maintain world leadershipTo maintain world leadership (soda ash, H2O2,...)

To reinforce our low cost structureTo reinforce our low cost structure

To develop growing activities such as fluorinated products and new To develop growing activities such as fluorinated products and new high added value productshigh added value products (fillers, ultra high purity H2O2, Neutrec process, caprolactones,...)


Major trends in 1998 :Major trends in 1998 :

relatively strong demand both in Europe and in the USA

but lower demand in Asia and Latin America reduced potential US exports to these regions

increasing exports from US to Europe

Integration of SBU Calcium Chloride as of January 1, 1999Integration of SBU Calcium Chloride as of January 1, 1999

SODA ASH SODA ASH (1)(1)(with calcium chloride)(with calcium chloride)

33 % of 1998 chemicals sales 33 % of 1998 chemicals sales


Competitiveness objectives remain priorities for all sitesCompetitiveness objectives remain priorities for all sites

Bulgaria : Bulgaria : Investment program to improve quality and reduce costs continues : start up of a second dense soda ash line, new storage silo, various projects for increasing product quality, process automation and improving environmental protection

Savings on energy costs thanks to cogeneration units Savings on energy costs thanks to cogeneration units at Rosignano, Italy (Q2/97) Torrelavega, Spain (Q3/98) and Dombasle, France (end 98)

USA : USA : start up date of expansion at Solvay Minerals Inc. postponed in phase with world demand

Belgium : Belgium : closure of calcium chloride unit in Couillet and concentration on Rosignano Rosignano unit

SODA ASH SODA ASH (2)(2)(with calcium chloride)

33 % of 1998 chemicals sales


CAUSTIC SODACAUSTIC SODA(with associated chlorine and allyl)

27 % of 1998 Chemicals Sales- European price fluctuation -

Source : TECNON, March 99

EUR/Metric ton (Liquid market)

150

170

190

210

230

97 98 99


unfavorable weather conditions (early 1998) and tough competition

cost reduction measures underway

SALT


Major trends in 1998 :Major trends in 1998 : Cost reduction all over Solvay’s units

Progressive price recovery in EuropeLow prices in USA and rest of the world

Improvement of competitiveness in 1998 :Improvement of competitiveness in 1998 :Further improvement of competitiveness in the USA with the

start-up of a highly competitive 85,000 t/y unit in Deer-Park (USA) and

mothballing of the previous 50,000 t/y unit

HYDROGEN PEROXIDE

40

60

80

100

120

97 98

60

80

100

120

97 98

USAUSA EuropeEurope

Source :Harriman Chemsult

Price index Price index


FLUORINATED PRODUCTS

Key facts in 1998 :Key facts in 1998 :

increase in prices and volumes

further growth expected

decision to build a pilot unit in Tavaux (France) for new HFC substitutes


Key facts in 1998 :Key facts in 1998 :

increase in volumes

pressures in Asia on barium carbonates in a very competitive environment

Germany : expansions in progress in special grade bariumcarbonate for supplying the cathodic screens industry

and in strontium carbonate

China : agreement with XINJI for the marketing of barium carbonate worldwide

BARIUM AND STRONTIUM CARBONATES


PLASTICS SECTORPLASTICS SECTOREBIT 98/97EBIT 98/97 : + 7 % + 7 %

Key elements of strategy :Key elements of strategy : To concentrate on 4 Strategic Business UnitsTo concentrate on 4 Strategic Business Units

In PVC, HDPE and PP : In PVC, HDPE and PP :

competitiveness across the value chain higher added value products selective geographical diversification synergies with downstream integration

In Specialty PolymersIn Specialty Polymers

high added value products reinforcement of PVDC strength


PVC

Major trends in 1998 :Major trends in 1998 : progressive decrease of margins progressive decrease of margins

further cost reductionsfurther cost reductions all over the world

Improvement of competitiveness in 1998 :Improvement of competitiveness in 1998 : plants rationalizationplants rationalization (e.g. closure of Ferrara PVC unit in

Italy) and specializationspecialization (PVC Suspension in Martorell)

strategic alliances strategic alliances for achieving worldwide competitive structure (e.g. joint venture with BASF and industrial

agreement for PVC production with ATOCHEM in Spain)


PVC MARGINS OVER ETHYLENEPVC MARGINS OVER ETHYLENEWestern Europe

(Suspension)


PVC marginsPVC margins

PVC pricePVC price

Ethylene priceEthylene price

EUR/ton

0

200

400

600

800

97 Jul97 98 Jul98 99


POLYOLEFINS

HDPEHDPEgrowth in specialty resins (pipes for gas and water distribution)

in Europe and in Asia

higher average margins in H1/98 versus H1/97 but erosion in H2/98 due to faster price decrease than for ethylene (Europe + USA)

Improvement of competitiveness in 1998 :Improvement of competitiveness in 1998 :

industrial and technological cooperation agreements with PETROFINA

PPPP pressure on margins in Europe and in the US due to overcapacities


HDPE MARGINS OVER ETHYLENEHDPE MARGINS OVER ETHYLENE(injection moulding)(injection moulding)

USAUSA EUR/ton


EUROPEEUROPE

HDPE marginsHDPE margins


HDPE priceHDPE price

USD/ton

HDPE marginsHDPE margins


HDPE price HDPE price

0

200

400

600

800

1000

97 98 990

200

400

600

800

1000

97 98 99


PVC COMPOUNDS

Letter of intent to study the feasability of a Joint Letter of intent to study the feasability of a Joint VentureVenture in Chinain China (for PVC blends and compounds)

SPECIALTY POLYMERS

USA :USA : Joint venture with Dyneon for producing VF2 and PVDF


PROCESSING SECTORPROCESSING SECTOREBIT 98/97 : + 63 %EBIT 98/97 : + 63 %

Key characteristics :Key characteristics :

Benefiting from Solvay's experience in plastics productionBenefiting from Solvay's experience in plastics production

Mastering sophisticated technologies such as coextrusionMastering sophisticated technologies such as coextrusion

Enhancing plastic resins developmentEnhancing plastic resins development


To concentrate on 4 Strategic Business UnitsTo concentrate on 4 Strategic Business Units

To reinforce market shares in very selective market segmentsTo reinforce market shares in very selective market segments


AUTOMOTIVE

strong growth strong growth in sales for the fuel systems in the USA, France and Spain

strengthening presence on new marketsstrengthening presence on new markets through new subsidiaries(Poland, Asia) and Joint Venture in Brazil

INDUSTRIALS FILMS

good results in Europegood results in Europe e.g. for stationery thanks to continuous innovation efforts

further growthfurther growth in Europe with reinforcement of leading positionreinforcement of leading position through acquisition (e.g. Drayfil in waterproofing in Spain)


PIPES AND FITTINGS

sustained growth in 1998 sustained growth in 1998 in Europe in a very competitive context

development of new markets (e.g. Poland, Greece) and new products (co-extruded PVC)

cost reductions

geographical and products diversification through acquisitions of Davinyl A.B. in Sweden and of MABO in

Scandinavia, Poland and Baltic States

DECORATION

sale of the wallpaper sale of the wallpaper activity to the German LPW Group

results affectedresults affected by the Russian crisis (lower exports)

highly competitivehighly competitive environment


SOLVAY CHOOSES PHARMACEUTICALSSOLVAY CHOOSES PHARMACEUTICALS


Non-cyclical and growingNon-cyclical and growing activity smoothing ups and downs of Solvay's Chemicals and Plastics

Specialisation on four therapeutic areas four therapeutic areas : Psychiatry, Gastroenterology, Gynaecology and Cardiology

Faster development especially in the US, Faster development especially in the US, through

growth of existing products portfolio

strong R&D pipeline (66 % of total 99 R&D Budget)

acquisitions of products, product lines and companies


SOLVAY CHOOSES PHARMACEUTICALSSOLVAY CHOOSES PHARMACEUTICALSStrategy for growth throughStrategy for growth through

Existing products in 4 therapeutic areas

Increased globalisation

Specialized R&D program

Acquisitions of products / products lines or companies


1. PHARMACEUTICALS HIGHLIGHTS1. PHARMACEUTICALS HIGHLIGHTSEBIT 98/97 :EBIT 98/97 : + 14 %+ 14 %

with H2/98 vs H2/97 : + 17 %with H2/98 vs H2/97 : + 17 %

1998 Sales :1998 Sales : (in EUR)Europe + Export :Europe + Export : + 5 %+ 5 %

USA + Canada :USA + Canada : + 26 %+ 26 %Total :Total : + 11 %+ 11 %

Market developments :Market developments : New launches of products in the US :

Prometriumfor the Hormone Replacement Therapy and secondary amenorrhea

Estratab in its extention for the prevention of osteoporosis Commercial organisations in Central Europe, Scandinavia,

Greece, China, South Africa, Philippines, … Expansion of US network to Primary Care


GROWTH THROUGH EXISTING PRODUCTS GROWTH THROUGH EXISTING PRODUCTS in 4 therapeutic areasin 4 therapeutic areas

WORLDWORLD (IN EUR)(IN EUR) USAUSA (IN (IN EUR)EUR)

GASTROENTEROLOGYGASTROENTEROLOGY + 10 %+ 10 % + 17 % + 17 %(1998 sales : EUR 407 M)

e.g. e.g. CREONCREON+ 11 %+ 11 % + 22 % ROWASAROWASAmainly in USAmainly in USA + 22 %

PSYCHIATRYPSYCHIATRY + 9 %+ 9 % + 25 % + 25 %(1998 sales : EUR 325 M)

e.g. e.g. LUVOXLUVOX + 12 %+ 12 % + 23 %LITHOBID only in USAonly in USA+ 59 %

GYNAECOLOGYGYNAECOLOGY + 24 %+ 24 % + 43 % + 43 % (1998 sales : EUR 313 M)

e.g. e.g. ESTRATABESTRATAB only in USAonly in USA + 69 % ESTRATESTESTRATEST only in USAonly in USA + 33 %

CARDIOLOGYCARDIOLOGY + + 3 %3 % (1998 sales : EUR 70 M)

e.g.e.g. PHYSIOTENSPHYSIOTENS(mainly sold in Europe) : + 43 % : + 43 % of sales in EUR


2. GROWTH THROUGH GLOBALIZATION2. GROWTH THROUGH GLOBALIZATIONwith faster development especially in the USwith faster development especially in the US

in M EUR in % 1997 1998 (1998)

Europe 610 638 55 %

USA/CanadaUSA/Canada 301301 379379 32 %32 %

Export 139 150 13 %

TOTAL 1,150 1,167 100 %

+ 26 %


Psychiatry 38 %(Depression, Anxiety, Psychosis, “Neurology”)

Gastroenterology 18 %(Pancreatic Exocrine Insufficiency, Irritable Bowel Syndrome, Gastric Emptying)

Gynaecology 15 %(Menopause, Osteoporosis)

Cardiology 29 %(Ischaemic Heart Disease,Congestive Heart Failure,Arrhythmia)

3. GROWTH THROUGH A SPECIALIZED 3. GROWTH THROUGH A SPECIALIZED R&D PROGRAMR&D PROGRAM

R&D 1998 : EUR 175 M


PHARMACEUTICALS DEVELOPMENTSPHARMACEUTICALS DEVELOPMENTSMajor products already launchedMajor products already launched

PsychiatryFluvoxamine Depression in Europe

OCD in the USA (incl. treatment for children and

teenagers) Gastroenterology

Creon Pancreatic exocrine insufficiency (USA, Europe)

GynaecologyEstratab Hormone Replacement Therapy

in the USA and Europe

Osteoporosis in the USAPrometrium Hormone replacement therapy

CardiologyPhysiotens Hypertension in Europe


PHARMACEUTICALS FUTURE DEVELOPMENTSPHARMACEUTICALS FUTURE DEVELOPMENTSMajor R&D projectsMajor R&D projects

Filed Psychiatry Luvox Depression in JapanOCD in JapanDepression in the USA

Phase III Psychiatry Flesinoxan Depression, anxiolytic properties (international development)

Luvox OCD relapse, Pediatric (in the USA)Gastroenterology Creon Pancreatic exocrine insufficiency in Japan

Gynaecology Estrogel Hormone Replacement Therapy in the USA

Estratest Libido loss (in the USA)Combinationtransdermalpatch Hormone Replacement Therapy in the US

Femoston Hormone Replacement Therapy in EuropeContinuous

Cardiology Tedisamil Chronic, stable angina pectoris (international development)Phase II Psychiatry DU 127090 Psychosis

DU 125530 Psychiatric disorders Gastroenterology Cilansetron Irritable Bowel Syndrome

Tarazepide Motility Disorders Creon Diabetes

Cardiology Tedisamil Atrial fibrillation SLV 306 Congestive Heart Failure

Phase I Psychiatry Luvox CR Depression, OCDSLV 308 Depression

Gastroenterology SLV 305 Gastroesophageal Reflux DeseaseCardiology Moxonidine Hypertension

patch


4. GROWTH THROUGH ACQUISITIONS4. GROWTH THROUGH ACQUISITIONS

1997/98 3 Hormone Replacement Products :

Estrogel®

Innovative combi-patch

Prometrium® (already launched in June 98)

1999 + Further acquisitions of products, products lines

or companies


1999 TRENDS

« « Depending on the global economic context,Depending on the global economic context,1999 could be a more difficult year1999 could be a more difficult year

for the Chemicals and Plastics Sectors, for the Chemicals and Plastics Sectors, as it has already been the case as it has already been the case

during the last few months of 1998.during the last few months of 1998.On the other hand, earnings of the Pharmaceuticals On the other hand, earnings of the Pharmaceuticals

Sector should continue to grow favorably.Sector should continue to grow favorably. » »

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Documents

net earnings

mio eur

sales eur

millions of eur rd expenses

net debt expenses

net extraordinary items

taxeson earnings

unallocated expenses