Engineering News

Solvay sees strong pharma operating margins
Tue Oct 4, 2005 06:44 AM ET

BRUSSELS, Oct 4 (Reuters) - Belgian chemicals, plastics and drugs company Solvay aims to improve recurring operating margins in its pharma business to 20 percent by 2010, its chief executive officer told an investor meeting on Tuesday.

"We will grow to 20 percent in pharma by 2010," Solvay Chief Executive Officer Alois Michielsen told the meeting.

Solvay, the world's fourth-biggest maker of PVC, is focusing on drugs and specialty chemicals and plastics to boost its profit margins.

Solvay's pharma unit is going through a transition period before the full maturing of its pipeline, which includes potential blockbuster drug bifeprunox for treatment of schizophrenia.

The Belgian company earlier this year also bought French privately held drugmaker Fournier, reaping what Michielsen described as "very impressive" cost benefits. He said he wanted to increase Solvay's drug business in the United States on the back of Fournier's portfolio.

The CEO also said he expected profits in Solvay's chemical unit to remain strong.

"We are confident that the good REBIT (recurring earnings before interest and tax) on sales seen in the chemicals sector for the first six months will go on. We are very confident that margins will remain strong," Michielsen said.

He said Solvay's ability to efficiently manage its energy consumption underpinned those margins.

Shares in Solvay rose 1.96 percent to 98.70 euros by 1023 GMT, after being flat ahead of the meeting.

HAPPY TO BE HYBRID

Michielsen reiterated that Solvay was happy to remain a hybrid, because its structure was paying off for shareholders.

"Up to now it has given a 11 percent (average) return on investment for shareholders ... I still have a lot of confidence that the 11 percent can increase," Michielsen said, adding that some kind of hybrid structure was needed to accomplish that.

"If one day the return goes to 5 percent, I'm not sure we will stay hybrid," he added.

The head of the group, who is retiring as chief executive next year, said the company aimed to expand in Eastern Europe, Asia and the Americas.

Michielsen said the company is currently doubling its specialty polymers capacity in the United States.

Solvay plans to take its time deciding on investing in vinyl production in Russia. It does not plan to have new capacity up and running before 2010-2011, he said.

Source: Reuters

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