Solvay S.A.

Jean-Pierre Clamadieu - Chief Executive Officer Karim Hajjar - Chief Executive Officer

Peter Mackey - Exane Thomas Wrigglesworth - Citi Nathalie Debruyne - Degroof Petercam Peter Clark - Société Générale Mutlu Gundogan - ABN Amro Patrick Lambert - Raymond James Laurent Favre - Evercore Paul Walsh - Morgan Stanley Geoff Haire - UBS

Thank you very much. Hello, everyone.

Thanks for joining us for this Q1 results call. I'm here with Karim, our CFO; and Kimberly, in charge of IR.

I will just make a brief introduction and then turn to Karim for deeper insights in our Q1 results. But clearly, the headline for me is that, this is a good start to 2017.

We've been able indeed to generate significant amount of EBITDA growth driven by volumes. And this is exactly what we are planning to do, but we've seen supportive news or behaviors coming from the market we serve.

So, this allow us to generate a 12% EBITDA growth. Our personal excellence measures offset most of the higher input costs and this allow us to sustain record operating margin of 21%.

Something which for me is very important when I look at these results is our ability to generate a record free cash flow of EUR 160 million for continuing businesses. For the past couple of years, we've made sure that the focus of the whole teams was on cash generation, and we wanted to have a much more stable cash generation along the years.

And indeed, this record level for Q1 demonstrate our ability to control much better than we did in the past our free cash flow generation. Supportive market environment, I was mentioning it, and this is true for the overall economy.

I think in most regions where we operate, with probably the exception of Latin America, we see supportive market environment. But specifically, we've seen some of the headwinds that we have suffered from in the past couple of years turning.

Indeed, oil and gas in North America is in a very different situation than what it was in the past quarters, so we are now starting to see a very significant amount of activities in this area. And something which is very specific to us, smart devices, we are also seeing a very good start of the year and indeed opportunities, which will develop along the course of 2017.

Before turning to Karim, maybe just a word on a different subject regarding our annual report. We've made big changes in the annual report this year focusing on producing, what we call, an integrated annual report.

I really strongly encourage you to spend a bit of time on our website to look at this report. I think it gives a bit of a different picture and once again, a much more integrated pictures putting together both financial and non-financial indicators and the performance at Solvay.

With that, Karim, I turn to you for additional insight in our key financial results.

Thank you, Jean-Pierre. Good afternoon, good morning.

As usual, the numbers I'm going to highlight are on an underlying basis and I will refer to certain slides that are available to you on our website. And I'd like to start with the top line with our sales.

And as you see on slide 9, the fact that our sales were up almost 10% and that is the second consecutive quarter where we've seen sales growth. You recall that Q4 last year showed a 4% improvement in volume driven sales.

This quarter, volumes are up 7.5%. And as you will see in a moment or two, that growth came -- was very broad-based and particularly I'd say automotive, agro, an easing of headwinds in oil and gas, smart devices, contributed to that dynamic.

EBITDA is key clearly and you know the headlines, so if you turn to slide 10, there are three full points I'd like to highlight in general terms. One, volumes, as you'd expect, contributed significantly to the growth.

And this was associated by what you'd expect in terms of the associated fixed cost increases. Pricing power was modestly negative this quarter as our excellence programs couldn't fully mitigate the rapid rise in material input costs.

Foreign exchange contributed favorably this quarter, mainly due to the appreciation of the U.S. dollar and the Brazilian real.

Taking all of these together, our EBITDA margins expanded 0.4% from 20.4% last year to 20.8% in this quarter, so a strong record. As we turn to our segments, I'll look at Advanced Materials and there what you can see is that our EBITDA increased 9%.

Our margins expanded more than 1% to 26%. Two, three things to highlight: Specialty Polymers continued to go from strength-to-strength, strong growth momentum, very broad-based, several markets.

I talked about automotive. Electric vehicle battery market stood out as well as strong drivers of growth.

The composite business showed modest sequential improvement compared to the fourth quarter of last year. As we're now beginning to see good growth in singular aircraft, military related to the Joint Strike Fighter program, helping to partially offset declines in wide-body civil aircraft, rotary and business jets.

Everyone has to be patient to see that inflection come through and we expect that growth dynamic to be more evident towards the second half of this year and into next year. We also saw the strength in automotive markets show through to the bottom line in our Special Chem business and Silica businesses as well.

Turning to Advanced Formulations, what do we see? Clearly, we recognize and welcome the 4% EBITDA growth but we did see some margin pressures as Jean-Pierre highlighted.

As we explained last quarter, we have begun to see activity levels improve in oil and gas markets. Clearly, the rig counts alone are double what they were this time last year.

And the modest sequential improvement continues although we cannot extrapolate that because of the different mix of products. So, for example, strong friction reducers, less guar.

So the mix is changing. Nevertheless, the momentum is very positive.

Novecare also demonstrated and delivered growth in a number of other markets, agro, proteins and other industrials. In our Technology Solutions business, we had some customer-specific issues in mining, which offset – I'm talking about strikes and industry action, and that offset the new business developments that helped to maintain the profitability at a decent level.

Performance Chemicals had another strong quarter. EBITDA, up 12%.

Margins, a record 28%. Soda ash is performing very well with volumes up mainly in sea-borne market.

Bicarbonate continued double-digit growth supported by the fruits of the investment in our new Thailand plant that we made last year. Peroxides benefited from the kicking in of the contract for our new HPPO plant in Saudi Arabia, which is now beginning to take effect and we are entering the mechanical start-up phase of that project.

Our 28% margin also reflects the maturity and the strength of our excellence programs in that segment. Functional Polymers delivered a 34% increase in EBITDA.

And there, we saw strong volume growth in polymers and intermediates, primarily for automotive applications both in Europe and Asia. Here also, excellence programs strongly underpinned the performance and we were able to successfully pass along increases in raw materials.

Turning to slide 11, our net income improved by 33%, EUR 70 million up on last year. And that reflects both the improvement in EBITDA growth as well as the reduction in the underlying tax rate from 31% to 25% last year.

And that's largely driven by the evolution and the geographic mix of our pretax earnings in the quarter. We're not changing our guidance of around 30% at this stage but clearly welcome the performance at this stage.

As Jean-Pierre mentioned, cash is really a feature that we're particularly pleased with. And as you see on page 12, our cash flow was very strong.

In fact, as we mentioned, it's a record. The previous high was EUR 52 million, and you have to go back to Q1 2012.

And so you can see, we're more than a 3x what we did previously there. It's not an accident, it comes from high profits, real attention to CapEx and working capital management, very, very strict, very diligent in delivering that performance.

And we are still targeting an annual spend of about EUR 800 million on CapEx for the full year. And this is approaching parity with depreciation, entirely consistent with what we set out in our strategic roadmap when we spoke in September last year.

So all in all, a strong start to the year, both in terms of profit and cash. And with that, I turn you back to Jean-Pierre.

Thank you, Karim. So just a few comments before opening to Q&A.

Regarding our priorities for 2017, no significant changes, very much in line with what we've shared you in the past similar calls, focused on portfolio optimization. We know that there are still a few things we need to do to continue on the track of upgrading our portfolio of activities, and we are indeed very focused to make sure that we can deliver on this.

Regarding the outlook, as I've mentioned at the beginning, and I think Karim has developed it, we see a strong start of a year, which is good. We are pleased to see that, indeed, volume growth is a key driver for the improvement of our performance, very much in line with our expectation.

But it's good to see that materializing. Cargo functions are indeed doing well.

And all of this gives us confidence that we should be able not only to deliver but probably to exceed on the EBITDA and cash outlook that we've provided some weeks ago. More importantly, probably, we are at the midpoint of the strategic guidance that we gave last year during our Capital Market Day.

And I'm pleased to confirm but at this stage, we are very much on track in every respect in relation to our midterm objectives. And with that, I think it's time to take your questions.

Operator, please, start the Q&A session, please.

Hello there. I've just – well, I've got a few, of course, as ever.

The first question, I wonder -- I'm surprised, you didn't see slightly more negative input cost at the group level. I just wanted to check that, that does include the energy costs.

And also, I wonder if you could give us a little bit of a flavor by division please. It looked like the greatest pressures were in Advanced Formulations.

I just want to confirm that. And secondly, on Advanced Formulations, the margin was pretty disappointing I think in the first quarter.

It's interesting you're talking about seeing some genuine pickup in oil and gas now. We've obviously seen some down trading in oil and gas areas.

I wonder if you could talk a little bit about mix across the whole of the formulations activities please. And then two, hopefully, smaller questions.

In Specialty Polymers, can you give us some idea of the size of your EV battery exposure now, perhaps, in proportion of specialty polymer revenues or something like that to give us an idea of the impact of growth in the EV market? And finally, on the Sadara HPPO project, the – you talked about mechanical startup.

The sort of revenue step-up that we saw in the quarter, is that effectively the full contracted revenue that we should be expecting going forward? Or is there still more to go?

Thanks very much.

Okay. So a lot of pointed questions.

So yes, indeed, input cost includes energy obviously. But when we look at the mix of raw material and energy purchase that we do, we end up with what you see in our numbers.

So don't underestimate the fact that for the portfolio transformation, we are less and less dependent on energy, which means that we buy less and less energy in various forms. So our sensitivity or exposure to energy has changed quite significantly in the past couple of years.

Regarding Advanced Formulation, what I see today is more a bit of a mismatch in terms of timing between what's happening on the input cost and what's happening on the selling prices. I have a feeling that things will improve over the year.

It will improve because we have just renegotiated some contract for our significant -- for some of our significant raw materials, mostly in the oil and chemical area, which will bring significant improvement in terms of competitiveness. And we are starting to see some impact coming from selling price adjustment, which we are doing probably a little bit late in comparison with input costs.

So for me, no reason to worry there, just a bit of a mismatch, which is quite obvious when we look at this quarter margin. On Specialty Polymers, I mean, battery represents only a few percentage point of our total exposure, but it's a market which is growing very significantly.

So yes, indeed, we are quite pleased with the development that we've seen for large batteries, mostly electric vehicle, but also stationary batteries. I'll remind you that we have a new PVDF facility, which will start up in China in the next months, probably during the summer.

We've just finalized the mechanical completion on this plant. And this will give us a much more firepower to follow up on some opportunities that we see in the year linked to electric vehicle development in China.

So a good niche to continue to grow our position in Specialty Polymers. So Sadara, the situation is rather simple.

Two elements, from a practical standpoint, we have produced the first batches in the past few days, so the unit is operating not yet at full capacity, but it's operating, which is good news. I remind you that we are part of a very large and complex industrial set-up.

So we need to make sure that in the next few weeks the whole HPPO chain will be, indeed, up and running and moving up to reach full capacity. And the second element, which took place, is that we started the contractual arrangement, which is basically a take or pay contract, so it takes pay and we – the starting point was December 2016, so it explains why we see actual contribution from Sadara during our Q1 results.

Don't expect big changes over the next quarter regarding Sadara. Our view regarding the – of the plant will operate gives us a feeling that we should continue to see similar levels of contribution for the Sadara project over the next few quarters.

And I think with that, I probably covered all of your question.

Thank you. Just very briefly, I wonder if I could just push the only formulations side.

Sure, fire.

You talked about mismatch in general between selling prices and raw materials. Are there any mix issues or particular areas within Formulations where you've seen that more than others?

No. I mean, as you know that Formulations is a bit of a complex – it's a group of complex businesses.

We are serving a lot of market sub-segments. But I would – generally speaking, I would say that it's probably in home and personal care, where we've seen a bit of – when I say mismatch, don't overplay it, but a situation we're indeed we had to suffer more from input cost increases than what we have passed to our customers in terms of price increases.

If I have to name a segment, it will be among home and personal care, but it's true that, generally speaking, we've seen a spike in some of our raw material prices. And by the way, some of them have already gone down a bit, which explains why we've seen the slight pressure on margin.

Thank you very much.

Thank you, gentlemen. I can’t believe your presentation.

I've got a couple of questions. I think happening less like [indiscernible].

The first one, if I may, just to go back on the variable cost, which you've shown on your bridge at negative 2%. If you took out the operational excellence, what would have been the variable cost inflation in the year?

And second question, just in terms of the fixed costs performance, which is obviously – how much of the Cytec synergies are in that – are part of the negative 35 that's in your EBITDA bridge there? And lastly, on the others line, you mentioned several associated companies and a sale of small surplus assets, could you just elaborate a little bit on what happened in that component?

I mean that swings around quite a bit quarter-by-quarter, but how should we think about the others line on a full year basis? Thank you.

Karim, do you want to take this question?

Sure. Let me take each in turn.

On the variable cost, I don't want to give too much let's say, inordinate information or detail. What I can say to you is excellence and synergies combined deliver more than EUR 50 million in this quarter, predominantly on variable cost but also impacting fixed costs.

So the momentum that we saw last year that helped to build the strong performance last year is continuing. We also had a modest impact from – favorable impact of less than EUR 10 million on foreign exchange that came and helped this quarter into the variable costs.

So I hope that it helps you understand the key drivers that helped to produce the strength of the results in that perspective. When it comes to the others, the other contribution that you saw, fundamentally what we have is this, last year we had some minor restructuring costs and pre-commissioning, preramp-up costs which was more negative last year.

This year, we had the favorable impact with some modest asset sales. We're talking less than EUR 10 million at time, no?

And an increase in joint venture equity earnings and that has quality which was a little bit [indiscernible]. So the recovery, the positive dynamic we see on main businesses, we're seeing in our smaller equity JVs as well and that's a contributor to the result.

Does that help, Thomas?

Yes. And where are we on Cytec synergies?

Sorry, I didn't understand in your answer.

We're not giving this quarter a specific deep-diving on Cytec. What I can say to you is the momentum is continuing.

We're talking – we maintain, we've added a bit but it's within the 50-plus that I highlighted of excellence and synergies.

Okay.

We'll give an update on Cytec and synergies possibly more periodically, more of a strategic update, it kind of makes sense.

We ended the year with EUR 100-odd million of cost synergies run rate.

We're going beyond that.

And we are going beyond that in 2017. So continuing to deliver very strongly.

Okay. Thank you very much.

Thank you.

Hello, Nathalie.

Hello, good afternoon. Well, basically, two question on my side.

First one, if I can try it again. Where are you in terms of synergies with Cytec?

Sorry for the question. I know it's just been asked, but in terms of run rate for the year, are we ahead of your expectations for the time being?

Or should we rather wait until H2 to have a view on how it's evolving? And the second one is on pricing power.

I was expecting it in the first quarter to be a little bit more negative actually. So I am wondering what you anticipate for the full year.

When you look at today's raw materials evolution, the fact that you've been a little bit lagging in terms of price increase in some segments, can we expect that number to be positive by end of the year or rather flat?

On Cytec, as Karim said, I think we'll update you with our Q2 results, but we ended the year at EUR 100 million on hiatus. Our synergies are concerned and we are continuing to make progress with something which is going well.

Pricing power, it's good that you're surprised but I think it shows liquidity of our portfolio. It shows also the fact that we are more and more moving into businesses where, indeed, the input costs are less important component than they used to be in some of the commodity businesses that we have divested.

As I've mentioned, the segment where we've seen some impact is clearly Advanced Formulations. We expect the situation to improve over the year, over the next quarters.

I will be cautious and probably I'm not ready to make a forecast on what will be the overall yearly pricing power impact, but I don't have any sign. But it should be degrading in the next quarter or two, to try to help you get a feeling on where we are.

So probably for the full year, something close to neutral would be a reasonable hypothesis made today. I mean we'll see how things will develop.

By the way, something I've not mentioned when I was answering your previous question on input cost, is the fact as far as synergy is concerned, probably the area where we had the most pressure was coal for our soda ash business. It's clearly an area where we've suffered a bit from some unexpected spike in the price of coal.

But overall, again, a situation where we've been, but we've been able to manage for pricing. I just met with our customers.

All right. And second, maybe a follow-up on oil and gas.

I understood actually from your IR team that what you see today in oil and gas in the U.S. is that a lot of rigs that are being added are basically drilled but not stimulated, which more or less has a negative mix impact on Chemlogics activity or Solvay activities.

How do you see the mix evolving in the coming quarters? Did you already see some switch or some kind of change in your customers' behavior?

Or can we expect the negative mix to persist in the medium term?

Yes, I would just correct a little bit what you said. We are seeing some rigs being made but without the associated stimulation.

It's not the majority of them but some, yes. We are seeing today some slight improvement of the trends.

Let me put that in a different way. The trends are positive as far as mix is concerned, which means that we are seeing people interested in – people getting more and more interested in a higher cost formulation.

We are starting to see interest again around guar based formulation. But it's more a trend than an actual fact.

So trends positive, but I won't quantify our visual present. But what's clear is that since Q4, we've seen very positive trends regarding volume, negative mix effect.

Expectation would be to see this negative mix effect slowing down in the next quarters.

All right. That’s really helpful.

Thanks.

Hello, Peter.

Yeah, good afternoon. Thank you.

Thank you for taking the questions. I've still got a few left, actually.

You're obviously more confident on where the macros coming through with some of these businesses. But on two areas where you saw pretty much double-digit volume growth, soda ash and you mentioned the Asian sea-borne market and the polyamide market.

Just wondering how you see the progression there. They were again – it's pretty soft comps year-on-year, I think, but just how you see that business progressing in those two areas?

And then the inventory revaluation you saw in polyamide, how much did that contribute to the EBITDA? And then, just finally for Karim, actually.

Just a quick clarification on the guidance for full year tax charge, if you can remind me where we're at the moment? Thank you.

So maybe to comments on the first two points and then we let Karim answer the last two questions. Soda ash, we see indeed a good situation regarding volume at the beginning of the year.

Export markets have been quite active, and that's clearly a positive. We all know that the second part of the year will be a bit more difficult for soda ash, because we'll start to see volumes – new volumes coming from our Turkish competition going into some of the markets that we serve.

But once again, we've probably, as well prepared as we can for the situation. And what we've seen in the beginning of the year gives us a good feeling regarding the development.

On functional polymer, dynamic is pretty positive. There is some inventory effect, and Karim will quantify that, but not major.

What we see is a level of demand, which is good, linked to the automotive industry. And the fact that, as usual, some of our competitors are having some production issues here and there and as our plant tends to operate in a very reliable and efficient way, we have the ability to benefit from that.

But again, a reasonably good development expected in front of us. I remind you that for this business, especially, polyamide, raw material and energy inflation usually turns to create a positive environment for us.

I mean if you look back at history, we've always been able to manage reasonably well prices in certain environment. Karim, inventory at polyamide, what does it mean?

What does it represent?

Sure. It's favorable, but it's single-digit millions, with asset pricing power and functional polymers would still be positive, probably the best way I can describe it.

So yes, it's normal business, you get ups and downs, but fundamentally, the pricing power remains strong without that. Does that help, Peter?

Yes, that helps. And sorry, the tax charge for the full year?

I'd say that the previous – the guidance we have of around 30% holds, strategically. Clearly, there are a lot of pluses and minuses.

If I look at, for example, the startup and the impact of our HPPO plant in Saudi Arabia, that doesn't have the same tax charge as a business in Europe. So it's a – as the evolution develops further, let's see, but around 30% still makes sense, and that's something we'll update you with, clearly, when we speak again.

But clearly, it's a good start, and we like to see low tax rates, obviously.

Peter, going back to your first comment regarding growth coming from the non-growth engine businesses. Let me just give you the – let me just go back to this.

We are expecting significant growth coming, indeed, from our growth engines in the remaining part of the year. You should be reminded that there is a number of significant new plants, new capacity, which will start up, especially for specialty polymers.

I already mentioned the PVDF facility in China that will start up during the summer. We have also our peak facility in Augustine, in the U.S., which is currently starting up.

All in all, five new plants in advanced materials, which will start up in the next months, so we really expect the growth to be indeed coming – the coating volumes coming from all of our businesses with a focus on the growth engines.

Yeah, okay, thank you.

Yes, good afternoon. A couple of questions.

First is on the Novecare. Can you tell us how your actual oil and gas fields are developing compared to the recovery that we see in the U.S.

rig count? And the second question is on peroxides or performance chemicals, if you may.

Can you quantify the contribution to sales and EBITDA of the new HPPO plant in the quarter? And then, thirdly, linked to that, the fixed costs, these went up by EUR35 million in the quarter.

How much of that was linked to new capacities? And was that mainly the new HPPO plant?

For oil and gas, overall volume is moving very much in line with what we see in the -- what we see when you look at activity. And again, rig count is not the only metric of activity.

We have increased very significantly our market share over the past couple of years during the crisis, because a number of the small players have disappeared and the supply chains are much more tightly managed, which clearly gives a plus for the largest players. Second phenomenon, mix, as I've mentioned, [indiscernible] are doing very well.

In the past months, we've seen a very few formulation using guar for cost reasons. Expectation is that this could change, at least in terms of trends, in the next quarters, because we see operators gaining confidence and willing to make a high-quality fracking.

So with that, clearly, an opportunity in front of us, with still some uncertainties on how significant this improvement will be. For peroxide and fixed cost, I come to you, Karim.

Sure. On peroxide, you may recall Jean-Pierre's indication back in February that the run rate we expect from the new capacity peroxide both in China and Saudi was in the order of EUR50 million a year.

We are on track, Q1 reflected fair share of that. That's probably the most precise guidance I can give you, and thus confirming what we've said, previously.

On fixed costs, our excellence and our synergies offset largely inflation, so the majority of the increase is related to new capacity to growth as well as changes in personnel provisions and costs, think that bonuses, et cetera. So clearly, we share the successes of the strong performance with our staff, but the majority of that is absolutely related to our growth, Sadara amongst others.

Thank you very much.

Thank you.

Hello, Patrick.

Hi, guys. Thank you very much for taking.

A few questions. First one, I think, again, on advanced formulation margins.

I think, comments from Karim saying that the Cytec business, the mining/additives was mixed in particular on mining. Was it – can you quantify the impact on margins from that lead – the problems in mining?

Was that significant? And most importantly, how it looks over the next few quarters?

Do you think – because I know that was a pretty high margin business. So if you could get the outlook on the strikes, on the copper mining business would be good.

That's the first question. The second question, I was coming back to, again, Cytec, sorry.

Good performance and minus 3 if I put some effects on it, it would be minus, I don't know, 4 or 5 maybe in terms of volumes. Again, could you comment a bit on the order backlog or the order book?

Overall, it seems to have picked up from the Capital Markets Day, especially on the narrow-body planes, if you could comment on that. And how you see your confidence into H2, going back to positive growth?

How the F-35 seems to be helping that? That's, I think – and the last one, a very quick for Karim.

On the EUR21 million of others, are these number basically split around divisions? Or is there one that we should put more into it?

Thank you. That's it.

So, a lot of detailed question. Advanced formulation, yes, technology solution was impacted by what mentioned, strikes in some copper mine.

It stays a very good business in terms of margins and significantly above the group average and very significantly above the cluster average. But we've lost a few percentage point in the R&D situation.

Frankly speaking, in our view, no reason to worry. We are very optimistic on the ability of this business to generate very, very solid margins for the remaining part of the year.

And if I add once again to name one segment where we've suffered a bit, which explained this pressure on margin, it's probably the home and personal care segment of Novecare, a little bit also on the Aroma Performance. I would state, while the situation is relatively clear, if I may say so, narrow-body, our single-aisle planes, order books are filled for both for Boeing and Airbus.

I mean, Airbus, they are not able to deliver on any new – they are not able to take orders for delivery before 2022. Boeing is in a similar situation, so the challenge is really production.

There we are seeing a very steep increase in the number of planes produced. And indeed, the Airbus and Boeing had some production issues.

I mean some of them were made the headlines, so I don't – there's no need to comment, which are slowing down production, actual productions. We are seeing the situation improving, but our understanding is that we are not yet at the level of production, heights that these OEMs would expect.

So there are several opportunities in front of us. A little bit differently from our competitor Excel.

We tend to think that the inventories in the supply chain has been taken care of, so we suffered from that last year, some adjustment along those, in some cases, complex supply chain. We think that this is a 2016 phenomena.

On wide-body, it's where the market is a bit soft. Waiting for new planes coming online, the 777X from Boeing is a good example.

So there we are seeing a little bit of reduced activities compensated by a good development on the military side and the F-45 ramp up rate, which is improving. But clearly, the area where we suffered still in Q1 is the non-aerospace segments, which is a number of very different markets, from wind energy to automotive.

And there, we continue to work to make sure that we can improve the performance of these non-aerospace segment within our composite material. But overall, very optimistic about the development of composite overall for the year, but we are still in an area – we are still in a period where supply chains are adjusting and people are planning to understand how they can increase their rates, which will mean more business in front of us, but challenges short-term.

The non-aerospace, how big is it now if I look at 2016?

It's about quarter of our composite material position, a bit more than a quarter.

Okay.

So far as your other question, Patrick, around what was the impact? You find it mainly in advance formulations and in functional polymers.

That's where you see the majority of the impact.

Thank you.

Thanks, Patrick.

Hi, Laurent.

Hi, good afternoon, everyone. I have three questions.

First one on – just a clarification on what you just said, Jean-Pierre. Have you seen any destocking impact on top of what you were expecting in terms of lower production rates in wide-body on the aerospace side, which clearly was mentioned by one of your peers?

Or is it just what you were – or what we've seen, the decline we've seen is just what you were, I guess, forecasting or expecting internally? Second question is on Silica pricing, which is still down, quite a bit.

Can you talk about the competitive pressure there? Obviously, we've seen more capacity additions from you and your competitors.

But I'm just wondering if there is – if there should be even more pressure as the cycle starts to turn or whether you think that we've seen the worse in terms of pricing? And the third question is a more general one on the auto side, given that you're somewhat exposed to other different parts of the autos value chains.

It looks like your volumes in autos have been broadly up 10% or 11%. Obviously, car sales in Q1 were up only 3%.

Are you not worried about an inventory stocking cycle which will bite us in the rest of the year? Thank you.

Okay. Well, just to clarify on aerospace.

We've seen in 2016 some inventory reduction in the supply chain, which kind of increased the impact of some of the production delays. We think that this is behind us.

And as we entered into 2017, we think that inventories in the supply chain that we serve are at a very normal level. So we don't expect any more impact linked to inventory.

Silica pricing, it's a business where we have some – in most of our contracts, some price inflators, which are linked to energy costs, so there is a bit of a delay in the – as far as the impact of this price inflators or deflators, inflator in this case, so we are suffering from this delay, but we expect the situation to improve in terms of pricing in Q2. We are indeed started seeing some changes in this market, but in the segment where we focus ourselves, which are really the technology, the more technology advanced Silica formulation, we continue to enjoy a very strong position, very good relationship with key customers, and we have the ability that we can continue to enjoy very solid opportunities in these segments.

Auto, we are reasonably confident. I mean, what we understand is that there has been a bit of another production or a bit of another stocking, mostly in China, by the way, linked to the expectation that some new government incentives will be put in place, but we think that the growth in automotive industry is solid.

And I remind you that the difference between the overall automotive industry growth and what we see at Solvay is linked to the fact that we are gaining market shares and continue to gain market share. New cars have more polymers than the older ones, and this explain why we continue indeed to enjoy the solid growth in this segment.

Is this a trend you would say is also supported in polyamide? So is it mostly specialty plastics?

I think it's both. I mean in polyamide we continue to see that, but probably, the trend is stronger on the specialty polymers side of the business.

Okay. Thank you very much.

Thank you very much. Good afternoon, Jean-Pierre, Karim and Kimberly, thanks for taking my questions.

Just two clarifications and then one on the polyketones market, please. So, Karim, just on the write-ups and also some of the smaller land asset sales, I don't know, my math is getting me to something like a EUR20 million benefit in underlying EBITDA for the quarter.

Just wondering if that math is broadly okay? Second question, really back to Laurent around the volume growth, which was fantastic, really, in the first quarter.

And I'm just curious, selling days, restocking, anything like that, that you're worried about? Or are we looking at a run rate which is broadly sustainable?

And then just final question on peak. I think one of the newswires picked up that you were making some positive comments around the peak markets moving through the year.

Is that ahead of new product launches with customers? Is it because the new facility ramps?

Just a bit more information around that would be helpful. Thank you.

I forgot the first part of your question, sorry.

Sorry, too long, it was for Karim.

So your math is absolutely correct, as usual. EUR20 million is a good order magnitude for this quarter.

What I would say though is this, EUR17 million, approximately, is to do with our equity earnings, so very much business as usual. And you've got another EUR3 million, EUR4 million to add on top of that to get to the EUR20-ish million that you get to, which is more incidental asset sales than normal business optimization, let's say.

Okay, clear, thank you.

So on the peak situation, yes, indeed, we are reasonably optimistic. Because, as you know, we've been able to market quite large volumes of peak containing formulations, and – which means that, in some cases, we had to source peak outside of Solvay.

So now we have more capacity available, thanks to the CapEx project that we've done. And yes, we see opportunities in various markets, probably the most significant one being the smartphone, the smart devices market, rich opportunities in front of us.

So, overall a very good dynamic in the peak market for us.

And just on restocking, Jean-Pierre, and sales days? Anything that might flatter the volumes?

No. Frankly speaking, we don't see any phenomena like that.

Now should we take Q1 and consider that it gives a good proxy for volume growth for the remaining of the year, I think we need, obviously, to be prudent because we are exposed to very different market. But I've commented the oil and gas dynamic.

Actually, from the smart device, we are expecting good following quarters in terms of volumes. Sadara, we've told you that we are probably, in terms of contribution, we will have a flat situation in the following quarters.

So our performance will be a combination of all these different building blocks – I forgot to mention batteries, which, again, for specialty polymers, despite the fact that it's still small in terms of percentage of sales, we expect very significant growth. I mean it can double in 2017 versus the previous year.

So yes, overall, as we’ve said when we presented our full year result, we expect 2017 to be a year where volume growth will be the key driver for our EBITDA generation.

Very good. Very good, thank you.

Hi, this is Geoff Haire here, UBS. Thank you for the presentation.

I just have one question I wanted to ask on Sadara. Could you just confirm that are you receiving currently the full payment on the take or pay contract?

Or can we expect that – will that ramp up as you hit full production?

So I think the message, yes, I think for 2017, we are receiving – what we have received in Q1 is probably a good proxy from what we will receive in the next quarters. Now there are opportunities to see the contribution of the spend increasing, but we don't expect to see that in 2017, because it would require all complex to be producing at its full capacity.

So it is fair to assume that the current fee or payment you're getting now is flattering your margins? So as you go towards full production, you head towards a more normalized margin on the plant?

I'm not sure I understand your question or your point. When is it flattering, what does it mean?

Sorry. What I mean is, are you – is the current payment you're getting giving you a much higher margin on sales that you're getting from the plant as before?

As you go towards higher production, that margin will come down towards what you expect the normal margin to be?

No.

No. I think the way we saw that, our contribution is assured, so basically you have the contribution and the fixed costs.

And what you see in Q1, we can take it as a given. We'll see for the rest of this year.

Okay.

There is no distortion because of the contractor arrangements, let's put it this way.

Okay, thank you.

Thanks, Geoff.

Well, good then, probably means that we've answered all of your questions. So thank you very much for participating in this conference call.

Once again, in our view, a very good start for 2017. Volume growth indeed were significant.

We expect the remaining of the year to allow us to continue to demonstrate our ability to generate indeed volume growth, which will support EBITDA growth and cash generation. With that, we'll see each other or we'll talk to each other, once again, at the end of July when we'll present our Q2 results.

Thank you very much, and have a very good day.