Solvay Investor Update
24 September, 2018 London, Berkeley hotel DISCLAIMER
This presentation may contain forward-looking information. Forward-looking statements describe expectations, plans, strategies, goals, future events or intentions. The achievement of forward-looking statements contained in this presentation is subject to risks and uncertainties relating to a number of factors, including general economic factors, interest rate and foreign currency exchange rate fluctuations, changing market conditions, product competition, the nature of product development, impact of acquisitions and divestitures, restructurings, products withdrawals, regulatory approval processes, all-in scenario of R&D projects and other unusual items.
Consequently, actual results or future events may differ materially from those expressed or implied by such forward-looking statements. Should known or unknown risks or uncertainties materialize, or should our assumptions prove inaccurate, actual results could vary materially from those anticipated. The Company undertakes no obligation to publicly update or revise any forward-looking statements.
Investor update 2018 2 September 24, 2018 CHAPTERS
Introduction Nicolas Boël - Chairman of the Board of Directors 4
OUR STRATEGIC JOURNEY Jean-Pierre Clamadieu - Chairman of the Executive Committee & CEO 6 To a Stronger Solvay ADVANCED MATERIALS Augusto Di Donfrancesco - Member of the Executive Committee 12 Next Generation Mobility ADVANCED FORMULATIONS Improving Resource Efficiency Vincent De Cuyper - Member of the Executive Committee 23 PERFORMANCE CHEMICALS Pascal Juery – Member of the Executive Committee 34 Soda Ash Market Update Positioned for Karim Hajjar - Member of the Executive Committee & CFO 40 FUTURE VALUE CREATION
Conclusion Jean-Pierre Clamadieu - Chairman of the Executive Committee & CEO 52
Annexes 56
Glossary 65
Speakers’ resumes 68
Investor update 2018 3 September 24, 2018 WELCOME BY THE CHAIRMAN
Nicolas Boël Chairman of the Board of Directors
Investor update 2018 4 September 24, 2018 SOLVAY’S EXECUTIVE COMMITTEE
Jean-Pierre Vincent Augusto Clamadieu De Cuyper Di Donfrancesco
Hua Karim Du Hajjar
Pascal Cécile Tandeau Juéry de Marsac
Investor update 2018 5 September 24, 2018 OUR STRATEGIC JOURNEY TO A STRONGER SOLVAY
Jean-Pierre Clamadieu
Chief Executive Officer, Chairman of the Executive Committee
Investor update 2018 6 September 24, 2018 OUR STRATEGIC JOURNEY TO A STRONGER SOLVAY
2012 – 2017 2018 – 2021+
EBITDA sustainable from growth solutions Portfolio segments in portfolio Transformation 70% 50% Organic Growth % % Synergies 22 68 Customer centricity & Innovation & Growth EBITDA cash margin conversion
Investor update 2018 7 September 24, 2018 A MORE RESILIENT, MORE PROFITABLE GROUP Group transformation Key highlights
2012 22.0% 2017 16.5% 7.1% 4.2%
Diversified Focused
Complex Streamlined
Investor update 2018 8 September 24, 2018 INTEGRATING SUSTAINABILITY INTO DECISION-MAKING DRIVES SUPERIOR FINANCIAL VALUE GROWTH
Fully embedded into our decision-making processes
2014 2017
SUSTAINABLE SOLUTIONS 25% 49% M&A 60% CAPEX 80% R&I
60% 43% NEUTRAL Higher volume growth ManufacturingFootprint on average from CHALLENGED 15% 8% sustainable solutions
Market Demand Good for customers, our planet, and our bottom line
Investor update 2018 9 September 24, 2018 INNOVATION AT OUR CORE STRONG CONNECTIONS TO ADVANCE SCIENCE
2012 2017 Progress Research Intensity R&I Spend / Sales 2.4% 3.2% +80bp
Strengthening our R&I capabilities to support strong pipeline of growth opportunities
A worldwide Establishing world class network R&I centers of researchers Brussels Lyon connected to academic partners
Investor update 2018 10 September 24, 2018 ORGANIC GROWTH DRIVEN BY 2 GROWTH SEGMENTS 50% Customer segment intimacy ADVANCED MATERIALS ADVANCED FORMULATIONS & market leadership
Polymer & Surface Composite Chemistry technologies
Innovation Next gen mobility Resource efficiency edge
Electronics Healthcare Aerospace Automotive Oil & Gas Mining Agro
Strong Main end-markets technology represent 2/3 of segments’ sales portfolio
Investor update 2018 11 September 24, 2018 ADVANCED MATERIALS NEXT GENERATION MOBILITY
Augusto Di Donfrancesco Member of the Executive Committee
Investor update 2018 12 September 24, 2018 GLOBAL LEADER IN HIGH-PERFORMANCE MATERIALS WITH SUPERIOR GROWTH & PROSPECTS
ADVANCED MATERIALS
Unmatched portfolio of polymers Innovative & tailor-made solutions Deep application expertise & composite materials for challenging applications & customer intimacy
EBITDA EBITDA CASH R&I Margin Conversion Intensity
2017 € 1,202 27% 70% 3.6%
Investor update 2018 13 September 24, 2018 AIRCRAFT FUNDAMENTALS AERO SUPPORT HIGHER GROWTH IN COMPOSITES 4.5% >8,000 50% 2X Annual growth Record high Weight of composites Number of aircrafts expected in passenger traffic order backlog on new aircrafts vs <15% on legacy to double in 20 years
SURFACE BONDING & COATINGS MULTIFUNCTIONALITY
PRIMARY STRUCTURES
SECONDARY STRUCTURES
INTERIORS & GALLEYS ENGINES
Investor update 2018 14 September 24, 2018 KEY PROGRAM RAMP-UPS AERO PROPEL OUR CURRENT & MID-TERM GROWTH
Resin infusion technology Primary supplier of composite materials Resin infusion technology for the LEAP engine of 737MAX for the F35 Joint Strike Fighter for the LEAP engine of A320neo
Major supplier of primary and Primary structures for 777X Secondary structures, structural secondary structures for A220 adhesives and surfacing films for the 787 Dreamliner
Investor update 2018 15 September 24, 2018 AERO
TECHNOLOGY LEADERSHIP, INNOVATION & PARTNERSHIPS Resin infusion Launch of bonding Thermoplastics Technology Leader technology technology SUPPORT • On key programs today • Potential to eliminate • Supports cost-effective • Gaining momentum on fasteners – reduces cost fabrication FUTURE new programs and weight • Enables higher build rates
GROWTH 2025+ Proprietary programs with global customers • Multiple developments underway in CIVIL and DEFENSE markets
Investor update 2018 16 September 24, 2018 SOLVAY IS UNIQUELY POSITIONED IN THERMOPLASTIC COMPOSITES
Supports more Leveraging the cost-effective fabrication Aerospace best in class portfolio Enables higher of specialty polymers build rates and composite technologies
More efficient part assembly Automotive Outstanding crash Integrated performance
Research & Innovation Lightweight and superior performance Oil & Gas Lower total cost
Investor update 2018 17 September 24, 2018 WE MAKE CARS LIGHTER & MORE EFFICIENT AUTO INCREASED MATERIALS USAGE DRIVES GROWTH 2.4% ~30% CAGR light vehicles CAGR hybrid & plug-in production in 5 years electric vehicles in ten years STRUCTURAL & SEMI-STRUCTURAL PARTS INTERIORS
THERMAL & AIR INSULATION MANAGEMENT SYSTEMS
ENGINE ENERGY-EFFICIENT COMPONENTS TIRES
EMISSIONS CONTROL EXTERIORS & CHASSIS
BRAKING VEHICLE ELECTRIFICATION SYSTEMS
Investor update 2018 18 September 24, 2018 SOLVAY POSITIONED IN ALL AUTO PLATFORMS AUTO OUTPACING THE INDUSTRY GROWTH BY 3X [1]
ICE+ (P)HEV EV
Increasing loading ~ kg ~ kg per car [2] 6 ~12kg 8 Internal combustion engine
Transmission Performance drives
value proposal Electrical engine
Battery
Opportunity for composites Chassis / functional parts
Technology shift Big opportunity for Solvay
Investor update 2018 [1] For Solvay’s polymer & composite technologies [2] Accessible market for Solvay polymer and composite technologies (excluding chassis / functional parts) 19 September 24, 2018 WE ARE A TECHNOLOGY LEADER AUTO FOR MISSION CRITICAL BATTERY MATERIALS
Li-ion battery Solvay technologies enable key
F1EC, F2EC, SA functionalities of the Fluorinated Li-ion battery additives for electrolytes Safer Better energy density Solef® PVDF Binder Better power Lower cost
Solef® PVDF LiTFSI, LiFSI, LiTA Separator coating Lithium salts for electrolytes
Investor update 2018 20 September 24, 2018 AT THE FOREFRONT OF INNOVATION AUTO FOR FUTURE BATTERY
Advanced Breakthrough technologies Li-Ion batteries for Solid-State batteries
OUR INNOVATION: OUR INNOVATION:
Li Li metal Solid Cathode anode Electrolyte
ENERGAIN™ SOLGAIN™ F-Additives Polymer & Fluorinated solvents for PVDF gel Binder enabling inorganic composite high-voltage electrolytes technology Si anode adoption technology
Potential to grow sales to > €500 million in 10 years
Investor update 2018 21 September 24, 2018 NEXT GENERATION MOBILITY DRIVES SIGNIFICANT GROWTH OPPORTUNITIES IN ADVANCED MATERIALS LEADS TO EBITDA GROWTH DRIVEN SOLVAY’S BY KEY TRENDS STRENGTHS POTENTIAL
• Aerospace ramp-up • Unmatched portfolio of and higher composite usage polymers & composite • Automotive technology materials shifts / electrification + • Innovative & tailor-made = +6 to 10% solutions for challenging • Other markets including Advanced Materials healthcare, electronics need applications for high-performing polymers • Deep application expertise & customer intimacy
Investor update 2018 22 September 24, 2018 ADVANCED FORMULATIONS IMPROVING RESOURCE EFFICIENCY
Vincent De Cuyper Member of the Executive Committee
Investor update 2018 23 September 24, 2018 UNIQUE PROVIDER OF SURFACE CHEMISTRIES
ADVANCED FORMULATIONS
Innovative Customer Global Technologies intimacy outreach
EBITDA EBITDA CASH R&I margin conversion Intensity % % % 2017 € 524 m 18 75 2.9
Investor update 2018 24 September 24, 2018 RESOURCE CONSTRAINTS REQUIRE MORE EFFICIENT SOLUTIONS
Doing more with less MINING OIL & GAS AGRO
Higher throughput Maximize cost Targeted use MORE and yield of metals performance and of ingredients for & minerals fracturing efficiency seeds & crops
Reduce impact Reduce Less clean to employees and environmental LESS water usage environment impact
42% of Advanced Formulations sales
Investor update 2018 25 September 24, 2018 STRONGLY POSITIONED MINING IN THE MINING INDUSTRY VALUE CHAIN METALS & MINING COMMINUTION SEPARATION REFINING MINERALS 100%
Open Grinding Mineral Smelting pit mine & size reduction flotation Copper ~60%
Solvent extraction Electro-winning Alumina ~20% Alumina refining
Other metals & minerals ~20%
Global Leader in metal separation technologies with >100 years of developing solutions for the industry
Investor update 2018 26 September 24, 2018 MINING CHEMICALS MINING TO SIGNIFICANTLY OUTGROW MARKET
Profitable Growth
NEW MINES NEW MARKETS INNOVATION
Increasing number of Expand into other Supports penetration new mines starts; plan metals & minerals into new markets to capture >50% Macro trends drive Provides solutions to Enables expansion increased demand productivity and into new geographies sustainability challenges
Market drivers Ore quality decline - Increasing metal demand - Drive for productivity - Sustainability Market CAGR of 3% projected over the next 4 years
Investor update 2018 27 September 24, 2018 ELECTRIFICATION SUPPORTS INNOVATION-DRIVEN MINING GROWTH IN MINING & MINERALS
TREND Copper Lithium / Cobalt / Nickel
• Cu market represents 60% of sales • Lithium represents brand new NEED today opportunities; market demand to increase threefold+ through 2025 [1] • Cu demand in EV’s will increase from 185 thousand tons today to • Cobalt market demand to increase [1]
MARKET MARKET 1.74 million by 2027 by 60% through 2025 & OPPORTUNITY &
• Broad portfolio to address • CYANEX 936 technology for Lithium
increasing needs of Cu producers in solvent extraction, which Electrification light of degrading quality ores significantly reduces production time while improving yield of Lithium Requiring more supply of • Methodologies to enable improved copper, lithium, nickel & cobalt selectivity and higher yields • CYNEX family to improve separation SOLVAY SOLVAY concentration of the cobalt and for batteries INNOVATIONS nickel
Investor update 2018 [1] Source: McKinsey June 2018 28 September 24, 2018 A LEADER IN OILFIELD CHEMICALS PROVIDING OIL & GAS COST EFFICIENT SOLUTIONS FOR STIMULATION
CEMENTING & DRILLING STIMULATION PRODUCTION
% revenues ~10% ~80% ~10%
Cementing additive Friction reducers Defoamers
Surfactants Flocculants
Rheology modifiers Scale Inhibitors
Corrosion inhibitors Demulsifiers
Global leader in chemicals Biocides for Oil & Gas stimulation Solvay’s products are primarily used in stimulation (fracturing) process
Investor update 2018 29 September 24, 2018 OIL & GAS OIL & GAS PILLARS FOR GROWTH Profitable Growth
CUSTOMER FOCUS GEOGRAPHIC INNOVATION & SERVICE MODEL EXPANSION
Customized products Digitalization to Secure partnerships and formulations to meet enhance efficiency and beyond North America industry challenges customer collaboration to enable expansion into new geographies New Sales Ratio of 57% Exceptional customer in 2018, up from 33% in responsiveness; labs 2014 from innovations near all major basins
Market drivers Drive for productivity & efficiency - Reduce fresh water consumption - Sustainable solutions Market CAGR of 4-5% projected in the next 4 years
Investor update 2018 30 September 24, 2018 WATER RE-USE AND RECYCLE SUPPORTS OIL & GAS INNOVATION DRIVEN GROWTH IN OIL & GAS
TREND Salt tolerant products High efficiency products
NEED • Provide equal or better • Enhanced properties needed performance in higher-salt so that less fresh water is
recycled waters consumed MARKET MARKET
& OPPORTUNITY &
Greener • NEW Friction Reducers enable • Next generation of polymers more efficient fracturing while provide better proppant Solutions reducing fresh water placement with less fluid versus consumption conventional systems, offering Improving cost performance SOLVAY greater productivity in oil
and product efficiency while INNOVATIONS reducing fresh water consumption recovery
Investor update 2018 31 September 24, 2018 INNOVATING TO SOLVE AGRO INDUSTRY’S AGRO GREATEST CHALLENGES
TREND Crop protection
NEED • Need more efficient delivery of herbicides to protect crops and improve yield
• Improve weed resistance issues
MARKET MARKET
& OPPORTUNITY &
Greener • STARGUAR™ Innovation for crop protection that maximizes Solutions the on-target application of herbicides by reducing spray drift Seed treatments SOLVAY to almost zero
& nutrients to boost INNOVATIONS germination
Investor update 2018 32 September 24, 2018 RESOURCE EFFICIENCY DRIVES SIGNIFICANT GROWTH OPPORTUNITIES IN ADVANCED FORMULATIONS LEADS TO DRIVEN SOLVAY’S EBITDA GROWTH BY KEY TRENDS STRENGTHS POTENTIAL
• Maximize mining yield as ore • Innovative technologies quality degrades to improve process yield • Greater demand for metals and reduce eco impact related to electrification + • Customer intimacy = to capture market trends +6 to 10% • Improve Oil & Gas productivity Advanced Formulations while reducing eco impact and needs • Agro and other markets need • Global outreach allowing for greener solutions geographical expansion
Investor update 2018 33 September 24, 2018 PERFORMANCE CHEMICALS SODA ASH MARKET UPDATE
Pascal Juéry Member of the Executive Committee
Investor update 2018 34 September 24, 2018 MARKET LEADERSHIP SOLID CASH GENERATION
PERFORMANCE CHEMICALS
Best in class Cost Focus on technologies & processes leadership cash generation
EBITDA EBITDA CASH R&I Margin Conversion Intensity
2017 € 749 m 27% 80% 1.0%
Investor update 2018 35 September 24, 2018 BALANCED SODA ASH MARKET BUT EXPECTED TO TIGHTEN
GLOBAL MARKET MARKET BALANCED WILL TIGHTEN
Robust Turkish capacity Growing at GDP Price increases demand largely absorbed and expected to warranted for tighten reinvestment
Solvay relentlessly improving its competitiveness
Competitive industrial footprint - World-class network
Investor update 2018 36 September 24, 2018 MARKET EXPECTED TO TIGHTEN SIGNIFICANT PRICE INCREASE NECESSARY Soda ash demand Global Utilization Rate % excl. China (Mt/yr) (excl. China, confirmed projects) [1]
2.3% 2.1% 37,1 95 35,6 36,4 2014 2016 33,9 34,8 2019 32,2 33,1 30,5 31,3 31,6
Balanced market 90
85 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 2022
Global demand Market expected to tighten further Significant price increases needed for supply remains robust with Turkish volumes largely absorbed additions to balance supply/demand in coming years
Investor update 2018 [1] Production divided by Nameplate capacity Source: IHS Markit_Chemical Supply & Demand (Spring Edition 2018); Solvay internal estimates 37 September 24, 2018 COST COMPETITIVENESS KEY SUCCESS FACTOR SOLVAY REMAINS WELL POSITIONED
Note: Directional schematic representation of the global soda ash industry "cost curve". Each bar represents the
Solvay Solvay aggregated capacity (x-axis) and average 20152018 Directional Worldwide production and freight-to-FOB costs (y- “Local” “Local” [1] axis) of plants sharing a similar cost profile. Industry Cost Curve assets assets Relative competitiveness may vary locally. Freight & Logistics costs Solvay “World-class” Production costs
assets
Average cost FOB cash Average
tier
st North East Asia
US “Green River” EU 2nd tier (“Solvay” and “Hou” processes)
EU EU 1
Africa Turkey China India Baltics CIS
Freight & logistics costs Natural process Soda ash plants Production costs Synthetic process
Investor update 2018 [1] Source: Solvay estimates based on public information 38 September 24, 2018 LEADERSHIP POSITIONS IN PERFORMANCE CHEMICALS SUPPORT GROWTH LEADS TO DRIVEN SOLVAY’S EBITDA GROWTH BY KEY TRENDS ACTIONS POTENTIAL
• Robust demand in main • Maintaining a competitive markets of flat glass, container industrial footprint & glass, household goods & world class assets packaging + • Price increases = • Tightening of soda ash supply +2 to 6% • Focus on cash Performance Chemicals • Strong demand for Peroxides
Investor update 2018 39 September 24, 2018 POSITIONED FOR FUTURE VALUE CREATION
Karim Hajjar Karim Hajjar Chief Financial Officer, Member of the Executive Committee
Investor update 2018 40 September 24, 2018 FINANCIAL VALUE DELIVERY EVOLVING FROM DIVERSIFIED TOWARDS SPECIALTY
PROFIT CASH RETURNS
22.0%
21.0% 68% 18.5% 7.1% 16.7% 17.5% 6.3% 5.9% 57% 59% 5.5% 52% 50% 5.0%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Solvay Median diversified peers Median specialty peers
• Akzo Nobel • Clariant • Lanxess • Ashland • Johnson Matthey • Arkema • DSM • Croda • Victrex • BASF • Evonik • Hexcel • Umicore
Investor update 2018 41 September 24, 2018 STRONG OPERATIONAL CASH FLOW
Cumulative over 2016-2017 (in € billion) 5 4.3 Growth capex 4 (0.7) Growth funded
3 Legacy covered (1.6) (0.8) 2 Efficiency maintained (0.2) (0.8) 1.0 1 (0.7) 0.3 Compelling reward
EBITDA Capex Provision Working capital, Financing FCF to Dividends Net debt payments Tax, Discontinued payments Solvay deleveraging & other shareholder
Relative to peers
Investor update 2018 42 September 24, 2018 LEGACY OBLIGATIONS FUNDED MODEST DELEVERAGING CONTINUES
Provisions over 2016-2017 (in € billion) (5.0) (4.3) (0.2) 0.2 (3.9) (4.0) (0.4) [1] 0.8 (0.5) (0.4) Other Other factors being constant, (0.7) (0.7) Environmental pensions & environmental (3.0) liabilities decline by ~€0.1 bn/year Employee benefits (2.0) Net deleveraging 1% change in interest rates impact (3.1) ~€0.1bn pensions liabilities (2.8) (1.0) by ~ €0.7bn
December 31 Payments Net new Discounting Changes in scope December 31 2015 provisions & remeasurments 2017 2018 payments expected at ~€0.4 billion • Employees benefits €0.2 billion • Environmental: €0.1 billion
Investor update 2018 [1] Including discontinued operations 43 September 24, 2018 CAPEX DISCIPLINE TO CONTINUE
Sustainable Coherent
value creation capital allocation & &
Total capex
(in € billion) (1.2)
Materials >80% in growth
(1.0) (1.0) [1] 43% segments
IRR > 15% Formulations 36% (0.8) (0.8) Advanded 25% 67% 36% 22% 65% €25 / tonne CO2 19% Selective investments 43% 32% 16% eq. internal costing: 45% Growth
18% 20% Chemicals only
capex Performance Less Risk 15% Maintenance capex Maintenance capex contained
2013 2014 2015 PF 2016 2017 Capex/ 2018 capex from continuing depreciation 1.1x 1.2x 1.4x 1.2x 1.0x operations ~€700m (~1.0x) ratio
Investor update 2018 [1] % in chart represents % of segment growth capex vs total growth capex 44 September 24, 2018 IMPROVED CREDIT STRENGTH FINANCING CHARGES WILL DECLINE FURTHER
Underlying net debt (in € million)
Net debt / EBITDA 2.8x 2.2x More to come: Polyamide divestment 6.6 0.3 0.9 5.3 to reduce leverage down to 1.9x
2018 net cash financing payments ~€250m (4.7%)
December 31 Net debt M&A December 31 2015 deleveraging 2017 More to come: Further reductions from Baa2 Baa2 deleveraging & optimisation Negative outlook Rating upgrade Stable outlook
BBB- BBB Stable outlook Stable outlook
Investor update 2018 45 September 24, 2018 POTENTIAL FOR SUPERIOR GROWTH
2019-2021 potential for organic EBITDA growth [1] Driven by key market positions and innovation
• Next gen batteries for Automotive Advanced +6-10% • Thermoplastics for Aerospace Materials • New applications in healthcare and electronics
• Technologies for improved metal selectivity Advanced • Next generation of O&G products to improve productivity Formulations +6-10% • Innovations to penetrate new markets
• Maintaining world-class assets Performance Chemicals +2-6% • Price increases • Focus on cash
Existing capacity and Customer intimacy Simplification of Operational Investments in SUPPORTED BY selective investments initiatives organization excellence digital capabilities
Investor update 2018 [1] Organic growth excludes forex conversion and scope effects as well as significant macro-economic events 46 September 24, 2018 CONTINUING THE TRANSFORMATION Supporting competitive position MORE CUSTOMER- Customer CENTRIC, AGILE AND intimacy OPPORTUNITY Increase FOCUSED share of wallet
Operational Simplification More cost excellence savings
AcceleratedUpgraded • ~100 proof of concepts Upgraded 100 professionals to support digitalexcellence • 3 priority projects scaling up excellence implementation deploymentcentre centre
Investor update 2018 47 September 24, 2018 MORE GROWTH POTENTIAL
FOR MORE VALUE
2021 All segments will - contribute to growth
potential 2019 Advanced Advanced Formulations All segments growing Materials in value creation zone
EBITDA growth EBITDAgrowth Solvay
Performance
[2] [1] Chemicals Largest portion of cash generation
FUTUREGROWTH POTENTIAL generated by growth engines Organic WACC 2017
0% 5% 10% 15% RETURNS Bubble size representative CFROI 2017 of cash generation: (EBITDA – capex – WC needs)
Investor update 2018 [1] Organic growth excludes forex conversion and scope effects [2] Includes diluting effect of Corporate & Business Services 48 September 24, 2018 49 (EBITDA (EBITDA cash generation:of representativesize Bubble FOR MORE MORE GROWTH POTENTIAL TO SHAREHOLDERS GROWTH SUPERIOR FREE FLOW CASH
FUTURE GROWTH POTENTIAL
September 24, 201824, September 2018 Investorupdate [1] – Organic EBITDA growth potential 2019-2021
capex 0% –
WC WC needs) Solvay [2]
VALUE 5% WACC Underlying Underlying 2017 +6 +6 EBITDA EBITDA RETURNS CFROI 2017
- - 9% 9%
10% depreciation Discipline Discipline Capex 1.0 - 1.2x
15% payments deleveraging Provision Provision Modest Stable
performance Topquartile maintained working working capital Net
contribute to growth All segments will & optimization & deleveraging Financial Financial charges Reduction through
in value creation zone All segments growing
generated by growth engines Largest portion of cash generation
Taxation Around ~26%
+10 [1] deleveraging
shareholders
[2] Net debt Organic growth excludes forex conversion and scope effects scope and forex conversion growth excludes Organic to Solvay to
FCF Includes diluting Services effect & Business Corporate diluting of Includes -
15%
dividend growing Stable to dividend growing Stable to
ABSOLUTE REDUCTION IN GHG EMISSIONS HIGHER GROWTH & REDUCED STRATEGIC RISK
GHG emissions [1]
in Mt CO2 eq. 14 13.8 Raising our ambition Energy efficiency in absolute value [2] 13 12.7 -1MT by 2025 12.3 -20% Energy mix -20% emissions reduction vs no action scenario 12 -1MT Process emissions reduction Coherent and integrated into our operations 11 11.3 Operational - CAPEX: CO2 €25/t
Strategic – SPM: CO2 €75/t Governance – 20% long term incentives 10 Proactive engagement 2014 2017 2025 with key customers
Investor update 2018 [1] Scope 1 & 2 emissions covered by the Kyoto Protocol [2] GHG emissions prior to 2017 were restated for 2017 scope, already excluding Polyamide. 50 September 24, 2018 POTENTIAL FOR FUTURE VALUE CREATION
potential 2019-2021
EBITDA growth +6-9%[1] PROFITS Underlying Equivalent to 10-15% underlying EPS growth at constant scope and forex YoY average
Free cash flow CASH +10-15% Strong cash generation to Solvay shareholder YoY average at constant scope
Continued progress RETURNS CFROI +50-100bp over 3 years in the value creation zone.
PLANET [2] GHG emissions -1MT Demanding ambition – lower emissions In absolute value, at constant scope by 2025 despite growth! -1Mt CO2 eq. by 2025!
Reconfirming 2025 objectives for safety, societal actions, employee engagement and sustainable solutions
Investor update 2018 [1] Guidance does not reflect changes in IFRS requirements. As referred to in the annex, whilst absolutel levels of 51 EBITDA will be impacted by IFRS16, relative growth rates in profitability will not be significantly impacted. September 24, 2018 [2] GHG emissions prior to 2017 were restated for 2017 scope, already excluding Polyamide. CLOSING REMARKS
Jean-Pierre Clamadieu Chief Executive Officer, Chairman of the Executive Committee
Investor update 2018 52 September 24, 2018 CONTINUE THE TRANSFORMATION OF THE CULTURE TO SUPPORT GROWTH
GROWTH
Focus Simplification
CUSTOMER CENTRICITY
Investor update 2018 53 September 24, 2018 SOLVAY PLATFORM FOR STRONG ORGANIC GROWTH
Established leader in New culture materials and being developed formulation platforms Innovation aligned with key secular trends
Strong volume growth Leading to compelling & cash generation shareholder returns
Investor update 2018 54 September 24, 2018 Ready for a GREAT RUN lead by a new CEO …
Investor update 2018 55 September 24, 2018 ANNEXES
Investor update 2018 56 September 24, 2018 SOLVAY POSITIONED IN ALL AUTO PLATFORMS OUTPACING THE INDUSTRY GROWTH BY 3X [1]
Technology shift ICE+ (P)HEV EV
[2] Loading/car ~6kg ~12kg ~8kg
volume value Amodel® PPA ducts, coolant lines, KetaSpire® PEEK insulators, bus-rings, ® ® car volume Engine Ryton PPS water/oil pumps, seals, Amodel PPA power modules, Tecnoflon® FKM sensors, connectors Ryton® PPS terminal housing
Hybridization KetaSpire® PEEK Ryton® PPS rings, bearings, seals, & electrification Transmission Torlon® PAI Fomblin® PFPE slave clutches, ® ® Amodel PPA Tecnoflon FKM spacers, lubricants Big opportunity Solef® PVDF Amodel® PPA separator, binder, Galden® PFPE Ryton® PPS for Solvay Battery electrolytes, cooling fluids, Hyflon® PFA/MFA Composites gasket, casing, structural IXEF® PARA Fluor additives
Car body represents Chassis/ Thermoset composites Thermoplastic composites additional opportunity Functional parts (luxury vehicles)
Investor update 2018 [1] Refers to Solvay’s polymer and composite technologies [2] Accessible market in for Solvay polymer and composite technologies 57 September 24, 2018 BROADEST PORTFOLIO OF ADVANCED MATERIALS DIFFERENTIATING SOLVAY FROM COMPETITION Aromatics Fluoropolymers High Perf Composites
Adhesives & Thermo- Out-of- Thermoset Resin HPPA PPS PEEK PSU PTFE PVDF PFA FKM PFPE Carbon Fiber Surfacing plastic Autoclave Prepreg Infusion films prepreg prepreg
Investor update 2018 58 September 24, 2018 GLOBAL SODA ASH MARKET
16,9 31,0 1,7 EUROPE 1,9 CHINA 1.0 12,4 (in mt/yr) (in mt/yr) NAFTA (Incl. Turkey and Russia) 25,8 (in mt/yr) 15,1 15,4 13,5
6,6 Capacity Demand 13,7
Capacity Demand Capacity Demand
MAIN PRODUCING REGIONS SEA-BORNE (2017 figures) Export (in mt/yr) MARKET from NAFTA: 5.2 Capacity 5.9 Mt from Europe: 1.5 Natural Process Demand 14.1 Mt from China: 1.5 Synthetic Process (Hou) Demand Synthetic Process (Solvay)
Main interregional flows
Investor update 2018 59 September 24, 2018 ON TRACK TO FULLY DELIVER AGAINST PREVIOUS COMMITMENTS
3 year objective Expectations Progress 3 year objective Financial 2016 - 2018 2016-2018[2] 2016-2017 2016 - 2018 Extra-financial
GHG intensity -24% -20% (decrease over period) EBITDA growth[1] Mid-to-high +7.6% (% YoY) average single digit Sustainable 49% 40% solutions PROFIT (in % of sales) PLANET
Accident rate -16% -10% (decrease over period) Free cash flow €2.7bn[3] (cumulative) >€2.4bn Employee 75% 75% engagement CASH (index) PEOPLE
CFROI +50-100bp +90bp 33% 25% Societal actions (increase over period) (% employees involved)
RETURNS SOCIETY
Investor update 2018 [1] At constant scope and forex, as presented in 2016 and 2017 full year results. 60 [2] Based on historic results 2016-2017 and the reconfirmed guidance published on 21 July 2018 September 24, 2018 [3] Overachievement despite divestments of Acetow and Vinythai. TRANSFORMATION AND EXCELLENCE PROFIT DELIVER QUALITY EARNINGS
Underlying EBITDA (in € million) 2,336 Forex & scope Pricing Pricing power Other 2,230 Volume power Other Cytec Forex 381 & scope Volume Volume momentum 1,663 1,955 +9% +3% yoy yoy Pricing power preserved Volumes Pricing power
Underpinned by Excellence
EBITDA EBITDA EBITDA 2013 2015 2017
17% 19% 22% Leading EBITDA margin
Investor update 2018 61 September 24, 2018 STRONG CASH FLOW LEADING TO CONTINUED OPERATIONAL DELEVERAGING
Cumulative over 2016-2017 (in € billion) 5 4.3
4 Growth (0.7) Total operational 0.1(0.1) deleveraging €0.4 bn 3
(1.6) (0.2) 2 1.7 (0.8) (0.6) 1.0 (0.7) 1 0.3
0 EBITDA Capex Provision Working capital, FCF Financing FCF to Dividends Net debt payments Tax, payments Solvay deleveraging Discontinued shareholder & other
(in € million) 4,306 (1,556) (776) (535) 1,747 (755) 992 (694) 298 2016 2,075 (839) (389) (189) 876 (349) 527 (337) 190 2017 2,230 (716) (386) (346) 871 (406) 465 (357) 108
Investor update 2018 62 September 24, 2018 DEBT PROFILE BALANCED MATURITIES ALLOWING FLEXIBILITY
$82 Repaid in Repaid @8.95% in July 2017 October 2017 $87 Major financial debt [1] @3.95% in million $204 $163 @3.50% @3.95%
Repaid in $196 €1,000 @3.50% December 2017 @Euribor €118 +82bp @4.63% €750 €700 $800 $800 @1.63% @4.20% @3.40% @4.45% €500 €500 €500 €500 €382 Repaid in @5.12% @5.43% @5.87% @2.75% June 2018 @4.63%
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Major financial debt [1] December 31, 2017 June 30, 2018 Face Average Face Average Average maturity Average maturity value cost value cost EUR bonds 1,632 5.5 2.67% 1,250 6.5 2.08% EUR perpetual hybrid bonds [2] 2,200 4.1 5.07% 2,200 3.6 5.07% USD bonds 1,634 [3] 5.7 3.88% 1,682 [3] 5.1 3.88% Total major debt 5,465 5.0 4.00% 5,132 4.8 3.95% in € million in years in € million in years
Investor update 2018 [1] Major debt only, excluding cost of currency swaps 63 [2] At first call date September 24, 2018 [3] USD 1,960 million IFRS 16 TO AFFECT EBITDA, P&L & DEBT Pro forma 2017 figures Underlying key figures 2017 IFRS 16 2017 • IFRS 16 implementation (in € million) impact pro forma Capitalizes leases, previously considered as operating EBITDA 2,230 +90 2,320 leases Advanced Materials 1,202 +19 1,221 Taking effect for 2019 accounts Advanced Formulations 524 +8 532 Solvay is opting for a modified retrospective Performance Chemicals 749 +31 780 implementation of 2018, instead of a full restatement Corporate & Business Services (244) +32 (212) • Previous year figures to be presented pro forma EBITDA margin 22% +1pp 23% EBITDA, depreciation, financial charges, capex and net financial debt increase Depreciation & amortization (704) -83 (787) Profit for the period decreases slightly Net financial charges (394) -14 (408) Free cash flow to Solvay shareholders remains Result for the year 992 -6 987 unchanged Capex (of continuing operations) (716) -75 (781) • Earnings and free cash-flow growth potential Free cash flow 871 +14 885 (as described in presentation) not impacted Free cash flow to Solvay shareholders 465 - 465 Net financial debt (5,346) -410 (5,756)
Investor update 2018 64 September 24, 2018 GLOSSARY
Investor update 2018 65 September 24, 2018 GLOSSARY HOLT CFROI Accident rate HOLT CFROI is a proprietary cash flow return on investment Expressed in Medical Treatment Accident Rate (MTAR) or number metric of Credit Suisse calculated as an IRR taking into account i) of accidents requiring medical treatment / million working hours the cash flow generated by a company In the past and prospectively and ii) the amount and estimated lifespan of its operating assets. The metric does not include goodwill and is Business cash generation expressed in real terms (i.e. real returns and not nominal ones). EBITDA-CAPEX-Working Capital changes
Cash conversion Capital expenditure (CAPEX) (Underlying EBITDA – Capex) / underlying EBITDA Cash paid for the acquisition of tangible and intangible assets EBITDA margin CFROI (Solvay definition) Underlying EBITDA / net sales Cash flow return on investment, calculated as the ratio between recurring cash flow and invested capital, where Employee engagement index Index (0%-100%) probing the engagement of Solvay employees • Recurring cash flow = underlying EBITDA + (dividends from associates based on a questionnaire; Index measured biennially and joint ventures – earnings from associates and joint ventures) – recurring capex – tax; Free cash flow (FCF) • Invested capital = replacement value of fixed assets + working capital + Cash flow from operating activities (including dividends from carrying amount of associates and joint ventures; associates and joint ventures and excluding cash flow related to • Recurring capex is normalized at 2% of the replacement value of fixed acquisitions of subsidiaries) and Cash flow from investing assets net of goodwill values; activities (excluding acquisitions and disposals of subsidiaries • Tax is normalized at % of (underlying EBIT – earnings from associates and other investments and excluding loans to associates and and joint ventures), and set at 30% until 2018. non-consolidated investments)
Investor update 2018 MORE INFORMATION CAN BE FOUND IN THE ANNUAL REPORT 66 September 24, 2018 GLOSSARY Greenhouse gas (GHG) intensity Underlying EBITDA Expressed as CO2 equivalent emissions / EBITDA (in kg/€); The Earnings before interest and taxes, depreciation and scope of CO2 equivalent emissions is further defined in the annual amortization (EBITDA), with IFRS figures adjusted to report provide a more comparable indication of Solvay’s fundamental performance over the reference periods. The Net sales adjustments to the IFRS definition are for: Sales of goods and value added services corresponding to Solvay’s • Results from portfolio management and reassessments, know-how and core business. Net sales exclude other revenues • Results from legacy remediation and major litigations, primarily comprising commodity and utility trading transactions and • M&A related impacts, mainly including non-cash Purchase other revenue deemed as incidental by the Group Price Acquisition impacts (e.g. inventory step-up) and retention bonuses relative to Chemlogics and other acquisitions, Societal actions • Adjustments of equity earnings for impairment gains or Expressed as % of Solvay employees involved in societal actions losses and unrealized foreign exchange gains or losses on debt Sustainable Portfolio Management (SPM) Expressed as the % of Group net sales assessed as sustainable Underlying net debt solutions with the SPM methodology. This methodology assesses Non-current financial debt + current financial debt – cash & cash Solvay’s product/application combinations on 2 axes: equivalents – other financial instruments receivables, reclassifying as debt 100% of the hybrid perpetual bonds, • Environmental footprint of production and supply chain considered as equity under IFRS. • Alignment of market with sustainability
Investor update 2018 MORE INFORMATION CAN BE FOUND IN THE ANNUAL REPORT 67 September 24, 2018 SPEAKERS’ RESUME
Investor update 2018 68 September 24, 2018 SPEAKERS’ RESUME Nicolas Boël is responsible for management and oversight of the board and its review of the Group’s performance in meeting objectives in key areas of business performance and corporate social responsibility and in defining the Group’s strategy. He has been a member of the Solvay Board of Directors since 1998. A member of the Solvay family, Nicolas served in a variety of sales and executive positions both in Europe and North America for Corus, one of the world’s largest steel producers and which was acquired by Indian conglomerate, Tata Steel, in 2007. Nicolas began his career at his family’s Belgian steel company Usines Gustave Boël in 1989. He is a Board member of SOFINA and member of their Nomination and Remuneration Committees.
Chairman of the Board of Directors Nicolas Boël was appointed Nicolas, a Belgian national, holds a Chairman of the Board of bachelors degree in economics from Directors for the Solvay Group the University of Louvain-la-Neuve and in May of 2012. earned a masters in business administration from the College of William & Mary in Williamsburg.
Investor update 2018 69 September 24, 2018 SPEAKERS’ RESUME
Jean-Pierre Clamadieu began his career in France in the Ministry of Industry and as a technical advisor to the Minister of Labor. He joined Rhône-Poulenc in 1993 where he held several positions, including President of Rhodia Chemicals Latin America, President of Rhodia Eco Services, Senior Vice-President Corporate Purchasing, and President of the Pharmaceuticals & Agrochemicals Division. He was appointed CEO of the Rhodia Group in 2003 and Chairman & CEO in 2008.
Chief Executive Officer, After the merger with Solvay, he Jean-Pierre Clamadieu, a French ChiefChairman Executive of the Executive Officer Committee Chairman of the became member of the Executive national, holds a degree in engineering Executive Committee Committee in September 2011 and awarded by the Ecole Nationale Chairman of the Executive Supérieure des Mines de Paris. He Committee and CEO in 2012. also holds seats on the Boards of Directors of Faurecia and Axa.
Investor update 2018 70 September 24, 2018 SPEAKERS’ RESUME
Vincent De Cuyper began his career at Solvay in 1987 and has held various positions in production and project management when sent on international assignments in France, Thailand and Argentina. In 1999, he was appointed Manager of the Vinythai plant in Map Ta Put in Thailand and, subsequently, Managing Director of Vinythai PCL. He also became Group General Manager of the Chemicals Sector of Solvay.
Member of the Executive Committee Vincent De Cuyper joined the Executive Vincent De Cuyper, a Belgian Committee of Solvay in 2006. national, holds a degree in Civil Chemical Engineering awarded by the Catholic University of Louvain- la-Neuve
Investor update 2018 71 September 24, 2018 SPEAKERS’ RESUME
Augusto Di Donfrancesco began his Solvay career in 1987 as a process engineer in Rosignano, Italy. He has held multiple roles within the Solvay Group in Production, Technology, Human Resources and Commercial Operations in the Chemicals and Plastics divisions. In 2005 he moved to Buenos Aires, Argentina, to become the General Manager of Solvay’s formerly owned Solvay Indupa. In 2009 he came to Brussels as General Manager of Specialty Polymers, and then returned to Italy in 2011 to become President of the newly created Global Business Unit Solvay Specialty Polymers.
Member of the Executive Committee In 2018, he joined the Augusto Di Donfrancesco, an Executive Committee of Solvay. Italian national, graduated from Pisa University in 1985 with a Bachelor’s degree in Chemical Engineering.
Investor update 2018 72 September 24, 2018 SPEAKERS’ RESUME
Hua Du began his career with Solvay as President of Solvay Rare Earth Systems in 2010. In 2015, he was appointed as the President of the new Global Business Unit Special Chem, which combines the former GBUs Rare Earths Systems and Special Chemicals as well as the fluorine part of the GBU Aroma Performance. He has been appointed Member of the Executive Committee in 2018.
Member of the Executive Committee Chief Executive Officer Before joining Solvay, he worked for Hua Du, a national of Hong Kong SAR, Chairman of the more than 13 years at Rohm & China, graduated in 1990 from Beijing Executive Committee Haas and Dow Chemical in the University with a major in BS Chemistry. electronic materials business. In 1995, he obtained a PhD in Organic Chemistry from the University of Illinois, Urbana-Champaign.
Investor update 2018 73 September 24, 2018 SPEAKERS’ RESUME
Karim Hajjar began his career in 1984 at Grant Thornton Chartered Accountants, where after few years he became a partner. He moved on to Royal Dutch/Shell in 1995 and undertook a number of roles, the last of which was as Deputy Global CFO of Shell Chemicals. Karim Hajjar held the CFO position of Tarmac Group from 2005 to 2009 and its Group Managing Director until 2010.
Chief Financial Officer, Member of the Executive Committee Before joining Solvay as member of Karim Hajjar is a British national and is the Executive and CFO in an Economics graduate from the City Karim Hajjar September 2013, Karim Hajjar was University in London Director Finance and Planning at Imperial Tobacco Group Plc.
Investor update 2018 74 September 24, 2018 SPEAKERS’ RESUME
Pascal Juéry After a first experience in south-Korea, he started his career at the internal audit at Rhône-Poulenc in 1988. After that, he took several responsibilities for Rhodia Novecare. In 2006 he was appointed Rhodia Group Sales Director. In 2008, he returned to the USA to take to head of Rhodia Novecare as Managing Director. Since 2010 Pascal Juéry has been member of Rhodia Executive Committee.
Member of the Executive Committee Since 2014 Pascal Juéry has joined Pascal Juéry , a French national, holds the Executive Committee of Solvay. a bachelor from the Paris European He is also President of the UIC Business School (ESCP-Europe). (Union des Industries Chimiques) in France.
Investor update 2018 75 September 24, 2018 SPEAKERS’ RESUME
Cécile Tandeau de Marsac started her career in Nestlé Group working in the Marketing and Human Resources Functions during 20 years. In 2007, she joined Rhodia and was appointed Human Resources Director for Polyamide and Energy Services GBUs and for the Human Resources Function. She led the growth ambition project Rhodia Move for Growth in 2010. Then she joined, at the very beginning of the integration process with Solvay, the Integration Management Office as IMO partner.
Member of the Executive Committee Chief Executive Officer In September 2012, she was Cécile Tandeau de Marsac is graduate Chairman of the appointed Group General Manager from a Management and Business Executive Committee Human Resources and joined Solvay School –Ecole Supérieure de Executive Committee in 2018. Commerce de Rouen (E.S.C Rouen).
Investor update 2018 76 September 24, 2018 www.solvay.com