Solvay Q4 Results Ahead of Vara Consensus

No-moat Solvay SOLB reported fourth-quarter underlying EBITDA of EUR 736 million, up 19% over 2021 and 5% ahead of Vara consensus. Organic sales growth was up by 15% mainly due to net price benefits of EUR 268 million. Volumes were down 6% due to softer demand in solutions and chemicals. Guidance for 2023 estimates EBITDA to be down between negative 3% to negative 9% compared with 2022, with free cash flow at around EUR 750 million. We don’t expect to make a material change to our EUR 120 fair value estimate. At current levels, the shares look fairly valued.

Materials continued to post strong results with EBITDA up 36% in the quarter, on higher margins, which improved by 210 basis points. Sales in specialty polymers drove growth for the segment mainly due to price measures; volumes contributed as well, but demand in electric vehicles started to slow down. Composite materials evolved positively on the continued recovery in civil aeronautics, particularly for single-aisle aircraft and business jets. In chemicals, EBITDA rose 9%, excluding the EUR 55 million one-time gain from last year. The increase mainly reflects pricing actions in all products, except for coatis where organic sales declined by 19% due to price pressures and lower sales volume. In solutions, EBITDA fell by 11% mainly driven by a decline in volumes in the flavors and fragrance market and a decline in construction demand.

Solvay has delivered EUR 467 million in structural savings since 2019, currently at 93% completion of its EUR 500 million target by the end of 2024. Total structural savings in 2022 were EUR 79 million, including EUR 20 million in the fourth quarter.