Solvay S.A.

Jean-Pierre Clamadieu - Chief Executive Officer Karim Hajjar - Chief Financial Officer Kimberly Stewart - IR

Thomas Wrigglesworth - Citi Alex Stewart - Barclays Martin Roediger - Kepler Cheuvreux Peter Clark - Société Générale Laurent Favre - Evercore Geoff Haire - UBS Chetan Udeshi - JPMorgan Nathalie Debruyne - Degroof Petercam

Thank you, very much. Thanks, everyone, to participate in our call today.

I am here in Brussels with our CFO, Karim and Kimberly, Head of IR, and the objective is obviously to provide with an overview of the full year 2017 results that I will share with you, the outlook for 2018. Q4 as you have seen was strong and it completed the year 2017, which was indeed, at least in my view, a very good year for Solvay.

We delivered fully on our strategic priorities, and I think we are very much on track with our mid-term objectives that we have shared with you in 2016. Regarding portfolio, we have reached what I think was a very important milestone with the divestiture of Polyamide to BASF.

This was really the last but very important part of the current chapter of portfolio upgrade that was started back in 2012. We expect the Polyamide transaction to close in the second part of 2018 and things now are going exactly as planned.

Regarding the operational performance, we have achieved in 2017 a 7.5% increase in EBITDA with all our operating segments contributing to the growth. If we are, however, thinking on an organic basis, which means that excluding foreign exchange and [impact], we grew at almost 10% our EBITDA, which I think is a good achievement and once again very much in line with our strategic objectives.

We have strong EBITDA margin of 22% despite rising raw material and energy prices. We had a specific impact in soda ash, but overall very good ability to sustain margins, which are best in class in the European industry playing field.

Cash generation continued to be a priority for us. We have generated 871 million euros of free cash flows, and you have seen also our earnings per share moving up very significantly.

If I look at the full year guidance that we have shared back in 2016, you see that we are very much in line to achieve or exceed and in most cases exceed our objectives. If I look at cash flow, we expect to deliver on our target of 2.4 billion despite the divestment that took place during the period.

And I will move on [indiscernible] aspect of our objectives, indeed I am very pleased to see that today, what we call sustainable solutions of [indiscernible] 49% to be specific. This is good for the planet, but we are also convinced that this is good for our growth and our bottom line.

With that, I will turn to Karim and ask him to provide additional insights on our past performance and I will get back to you with some comments on what we expect for 2018.

Jean-Pierre, thank you. Good afternoon and good morning.

As usual, I am going to refer to slides that you can access on our website. And everything I will talk about will be on an underlying basis, and clearly restated for the divestments of the Polyamide business, which is now in discontinued activities.

And I start with the sales, and if you turn to Slide 11, you will note that net sales have increased by 6% in 2017 versus 2016. It is worth noting that volumes really drove this.

They were up 8% driven by growth across all our operating segments. Advanced materials, up 5%.

We see that in automotive, where we continued to benefit from the secular trends the growth in the replacements of metal with high-performance polymers, and also growth in smart devices. Composite sales to aerospace ended the year slightly up as the production ramp up of the F-35 program, the LEAP engine, compensated for the continuing and expected declines in the wide-bodied platforms.

Industrial composites sales did decrease sharply in the year, as we experienced demand softness across all industrial markets, be it wind, high-performance auto, and rail to name but a few. And this unfortunately weighed on the overall composites growth.

Advanced formulations volumes up 13% as 2017 marked a recovery for the oil and gas market. Technology solutions ended the year slightly up as well with higher sales of phosphine products sold to the electronics industries.

We also noticed an improvement in mining towards the year-to-date with increased copper and aluminum prices driving higher demand from mining reagents from customers. Performance chemicals volumes up 8% on good growth in soda ash markets, and specialty bicarbonate applications and of course, we continue to benefit from the new HPPO peroxide plant in Saudi Arabia that started up earlier in 2017.

If I get from the top line to the EBITDA, you can see the outcomes in the bridge with Slide 12. The fact is we delivered 7.5% growth in EBITDA although as Jean-Pierre just mentioned, this is after overcoming headwinds in ForEx and accounting for the scope effects, without which EBITDA would have grown nearly 10%.

As I have already indicated, the growth was driven by volume increases across our three business segments. Clearly there is more if you look at the fixed cost line.

[Programs] and synergies have continued to play their part fully to essentially offset the inflationary effect. However, it is important to note that the overall increase in fixed costs also reflects two, three other factors.

Clearly the significant impact of the capacity additions in Saudi, China, US and Italy have contributed to the top line. Clearly we need more resources to support the volume growth.

But additionally we saw the effects of [costs] in the divestments, as well as an increase in the variable remuneration as we share the successes in the progress of Solvay who have contributed to this outcome. Overall, as Jean-Pierre mentioned, we are really pleased to report that we have sustained our industry-leading EBITDA margins of 22% for the year, despite what we saw towards the end of the year, which is the headwinds in the raw material and energy costs that have eroded some of the progress.

It is very, very strong as we see it. But it is really important to us to look at the cash and the cash conversion, and if you turn to Slide 15, the cash flow, we believe is still very positive, $871 million compared to last year, doesn’t tell you the full story because last year we had the beneficial impact of businesses such as Acetow and Vinythai that were within our perimeter, that we sold.

On a comparable basis, and like for like basis, just focusing on our continued businesses, free cash flow was 19% up, as it grew from 658 million last year to 702 million this year. That stems from three factors; higher EBITDA that I have explained; a reduction, which was fully anticipated in capital expenditures, as well as ongoing relentless focus and discipline on working capital.

Now that strong cash flow combined with the effects of the proceeds of divestments funded the debt service cost, the growing dividend and have to reduce the underlying net debt by 1.2 billion euros, which is now down to 5.3 billion euros. Now that represents a leverage of 2.2x and indeed it will reduce further on a pro forma basis once we complete the deal to approximately 1.9x.

You will also remember that during the year, our credit rating was upgraded by both Moody’s and S&P and again another independent appreciation of the improvement in our credit strength. Now clearly there is quite a bit more I could say beyond cash and debt, but I would rather have the conversation when I respond to your questions.

But I will highlight two aspects. One is we have continued to focus on improving our profitability beyond just EBITDA.

If you look at the reduction in our financing charges, you will note the significant reduction in our underlying tax rate. That is why we saw, we have increased our underlying continuing business EPS, earnings per share, by 26%.

Secondly, and really importantly, when you look at value creation to the profits in cash returned as one indicator that we have always recognized; we are keen and really determined to improvement. And our CFROI, which you'll recognize as one of the most demanding cashed metrics has improved by 10%.

We are now back at the levels that we had before the Cytec acquisition two years ago. And indeed if you recall, we had indicated, we will get to this level within three to five years of the acquisition.

So we are essentially one year ahead of expectations on this particular measure. Later but before we do that I will hand it back to Jean-Pierre to take us into the forward looking aspects.

Thank you very much. And if you can look backwards just for a second, clearly the biggest achievement in 2017 was volume growth.

It sank to this very significant volume growth that we have been able to generate improvement in EBITDA and cash that Karim has commented, and indeed this was our priority when we entered into 2017, and I think as you are now aware, we have delivered. For 2018, we remain focused on driving growth.

On an organic basis, it is important to be specific on the wording, which means on constant heavy metal and exchange rate we expect full year underlying EBITDA to grow between 5% and 7%. If you look at page 13 of the financial report, you will see a very detailed presentation relating to this outlook.

In advance materials, we expect double-digit growth, driven by volume improvement both in the specialty polymer and composite part of the equation. We see strong growth coming from automotive.

I would say classical automotive combustion engine, but also electric vehicles. We see opportunities in smart devices.

We see opportunities in aerospace, where indeed the LEAP engine and F-35 programs are now firmly on a growth trajectory, and in a situation where we expect also a significant increase in building rate from the single-aisle jet project. To finish on composite, on the [non-iron ore] part of the business we are also expecting to see significant progress as some high-end automotive programs are starting again.

High single-digit growth in advanced formulations, same driver as last year, the growth from the mining and oil and gas side of the equation. And then in performance chemicals, I know that a lot of you had questions what would be the situation of soda ash, we have been very clear that we [indiscernible], but the situation was under control and we should not expect a catastrophe.

Ash volumes are finding their ways into Europe indeed. We can come to you today telling you we have a strong level of confidence that we expect the impact in our performance chemicals segment that the EBITDA line to be less than 50 million euros.

It is a meaningful impact, but again far from being a catastrophic impact. And we expect the soda ash business to average the bottom of its performance within the current environment.

So this 5% to 7% organic growth will lead us to cash generation, where we expect to maintain the momentum. We are also seeing opportunities in the lower part of the P&L, where a significant improvement, which are still to come on our financing cost.

We expect to gain around $100 million in this part of the gain. So this leaves us with a couple of comments.

The first one about priority. The key priority for Solvay top management in 2018 besides delivering on our financial objectives is creating a more efficient operating structure.

We have been working on this for the last 12 months. We are now about to launch a pretty comprehensive program with one simple objective, making sure that everyone at Solvay is focused on customer.

Making sure that we simplify the processes which needs to be simplified to have an organization, which allow us to deliver with customers, which are more and more demanding. When we sell in aerospace, when we sell in automotive, when we sell in smart devices, we have customers who are expecting Solvay to deliver the best solution at the best level of service, and it is why it is so important for us to make sure that the organization is indeed completely focused on customer.

This is what we will achieve and this will deliver both some efficiency, some short-term operational improvement, but also this is the real objective. This will allow us to generate more solid long-term growth.

Maybe one last comment regarding Solvay, it is the dividend. We had a discussion yesterday at the board and the board of directors recommend a dividend increase of 4.3% to 3.6 euros per share.

This reflects the board’s strong delivery in 2017, but also the confidence in our ability to continue to create even more value for our shareholder. Maybe a personal word before we move into the Q&A, because I just want to make sure that you will understand where I stand.

In fact I was – in the past months I was preparing for the next stage in my career. I did not know when it would happen where I would take non-executive positions because I think it's another and very interesting way to contribute to the development of various companies.

You might have seen, by the way that this morning, I was proposed to become a member of the Board of Airbus, which is, indeed, a very interesting opportunity. But earlier this month came on unexpected offer from the NG Board of Director which offered me to become their Chairman.

I have accepted this with a clear condition that I wanted to be available at Solvay to do two things; one, deliver on the 2018 priorities; and second, make sure that the Board can run without any time pressure the high quality process to identify my successor and make sure there would be indeed time for a smooth transition. So, the Board has decided -- the Board of Solvay has decided to accelerate the identification of my successor.

And our common objective of Board and myself is to conclude this transition by the end of 2018. And I think that this should be seen as a very smooth transition by all of our stakeholders internally and externally.

And in the meantime, although it started independently, but I think it's a good coincidence. I have just made the decision to strengthen our Comex [ph].

We have three new people going into the Comex, while [Indiscernible] is leaving us to go back to a position in the U.S. I think that Augusto, who used to run our Specialty Polymer business; Hua Du, who used to run our Special Chem business, and Cécile Tandeau de Marsac who is Head of HR, we have indeed a very strong Comex, able to deliver on 2018 parties, but also to prepare the next types of transformation for Solvay.

With that, I'm ready to take your question with obviously the support of Karim. Okay.

First question? Hello?

Hi, Tom Wrigglesworth from Citi. Hi, Jean-Pierre, Karim.

Thank you very much for your presentation and Jean-Pierre, congratulations on your new appointments. I was wondering if you could maybe just following on from your comments there, if you could just highlight what you think the core competency should be of the new incoming CEO of Solvay and share your thoughts in terms of what they need to achieve going forwards in the years to come.

I'd be interested to hear on that. With regards to the results, could you -- you obviously talked about this focus on getting close to the customer.

Obviously, following the divestments, your business is now less cyclical. What do you think is that -- how much do you think your under selling the technology that you currently got, i.e.

what do you think the EBITDA margin of the business should be if you were operating at a very maximum? And lastly, pricing in the fourth quarter wasn't a big contributor in your bridge.

And yet I would have thought that cost inflation was probably quite prevalent given what we're seeing in some of the input costs. Is the costs -- are there price increases yet to come through?

Where are we on the price versus costs dynamic starting in 2018 and looking beyond? Thank you.

Okay. Well, on the first point, I will be prudent because this is for the Board to have -- to set the profile of what should be my successor.

Am I out of a discussion we had, including yesterday, with the Board, there is a clear willingness to continue the strategy that we have started from and on which we have deliver. So, clearly, we need something where there is strategic vision and is able to imagine what will be the next steps in Solvay transformation.

On an operational point of view, the exercise that we will start this year to create a much lighter customer-focused organization is also something which needs to be developed. Bringing into the Comex means that we think that Asia indeed is a strong potential growth platform for the group.

We are probably one of the most diversified European-based chemical company in terms of geographical spread. I think we should be in a position to use even more this Asian platform.

And at the end of the day, I think the objective of the Board is just to find the best person possible to take the responsibility for Solvay Executive teams. It could be an internal, it could be external.

But clearly, the objective is to find the best person and I think we have ample time to do this. Regarding our current situation and where do I see -- how do I see our performance in the various clusters.

Advanced Material cluster, we are almost at 30% EBITDA margin. The cluster is earning significantly more than the cost of capital.

So, the challenge there is growth, not much more of an server improvement in profitability. And growth will come from a pretty full pipe of opportunities.

Short-term in specialty polymer where we are indeed a number of business opportunities that we've seen in very different end market. When it come to composite, the short-term opportunities are linked to the fact that some of the key programs where we have taken a position are indeed taking off.

This is the case of F35 LEAP engine. We've seen it already in 2017, but it will be even more of use in 2018.

Increase in building rate for our single line, the arrival of the 777X. And longer term, we see very significant opportunities there.

Advanced Formulation, I think there's a bit of a space for improvement in margins. What we've seen in oil and gas, what we are currently seeing in mining gives us the feeling that, indeed, the profitability could be improved to put this business also firmly in the value creation zone, which leads to a lower EBITDA margins than performance, because we have won Advanced Materials, because we have less capital to remunerate in Advanced Formulation and then growth again is the priority.

On pricing, I think we had a specific situation in soda ash. In fact, the impact of coming from Turkey is not so much of an impact.

It was more a pressure on prices, which makes it difficult for us to fully compensate for the increase in energy costs, mostly coal. Overall, in other businesses, I see a pretty sound situation.

And as you've rightly mentioned, in type of activities where we are, we don't go back to the customer to ask them to increase prices, because energy costs when we increase -- because energy cost is a very small part of our cost. And yes, I see some opportunities looking forward in terms of pricing.

But I remind you that with 22% margin, we are probably best-in-class in the European space as far as margin is concerned. So, we probably have a bit less room than some of our competitors when it comes to demonstrating our pricing power.

Excellent, very clear. Thank you very much.

Hello Alex.

Hi, good afternoon. Thanks for the presentation and congratulations on your appointment.

I've got three quite simple, slightly boring questions, maybe more for Karim. Firstly, the €30 million of scope impact, so I believe in between polymers and technology solutions.

Could you give us some idea what the split was between the two of those? And secondly, towards that additional €20 million post retirement boost to earnings in the second quarter of 2018, is that on top of the €38 million you recorded this year, so is it €58 million in aggregate?

Or do we have to net one-off [Indiscernible] on the other? And then finally, the discontinued line, excluding Vinythai and Acetow, I think I remember reading was only about €2 million.

Why is that so low given that presumably Polyamide is still in there, it's still recorded as a discontinued item? Any light on those will be great.

thank you so much.

Okay. So, three questions.

I'll take the first one and that is to do with the €30 million related to -- can you just remind me, please, Alex? It's just quite a few numbers I mean.

It's the scope effect on the acquisitions.

It's predominantly in Advanced Formulations and the Technology Solutions business. Of course, we keep two-thirds of the €30 million, the rest is Advanced Materials and a very small divestments that we did in specialty polymers.

So, for the second question, on the Cytec related synergy, what we're indicating it is supplementary new opportunity that will crystallize during 2018. First half, second half, let's see, we haven't really finalized yet, so that is in addition.

If you look at it on a comparable basis, what it does mean, it's a lower contribution than we had last year and we see it as an additional source of value creation. So, far as your question on the discontinued businesses, your real question is around the profitability of Polyamide.

Is that what you're looking to understand?

No, sorry. Do correct me if I got this wrong.

But I think to be reading in the release that the discontinued line, if you exclude Acetow and Vinythai, which is now deconsolidated. Perhaps I put it another way, what was the contribution from Polyamide in the discontinued line in the P&L for the full year?

I'll quickly access to the figure just to tell you exactly what it is. It's the full amount is essentially Polyamide.

So, what you see is essentially the 6 -- so it's the €2 million underlying for the year, which is from the scope, where the Q -- yes, that's one, it is the €2 million, that's essentially Polyamide.

So, that was my question. Why is that fairly low?

I would have thought that it would have been a considerably bigger contribution.

Sorry, I'm talking about the quarter. you look at it €159 million for the full year, excuse me, and that is essentially the figure that of that business.

So, €159 million predominantly Polyamide. We only had a couple of months' worth of trading for Acetow.

Vinythai was not significant. Last year, the figures are much higher at €240 million because you had the full year for all the three businesses.

Net-net that is the impact.

Okay. Thank you so much.

Thank you.

So, next question.

Hello Martin.

Hello. I have also three questions, if I may.

First, on Composite Materials. There is a lot of consolidation taking place in the aerospace market Safran/Zodiac, Boeing, Embraer, Airbus, Bombardier.

Do you see the consolidation in your end market as a challenge for you, because customers might have more purchasing power or as an opportunity as you may leverage your business? The second question is on Advanced Formulations.

The volume and mixed effects in Q4 were plus 10% and that sounds quite high to me. Of course, this is triggered by Novecare with double-digit growth in Q4.

Was there any pre-buying in advance of any price hikes you may have announced for the beginning of 2018? And the third question is on your end markets.

With the disposal of the nylon business, your exposure to the end market automotive and aerospace obviously shrinks from around about 28% to around about 22%. I would like to know the split of both end markets, i.e.

is automotive now half of this roughly 22% sales exposure? Thanks.

I'm trying to figure out whether I can answer your to your last question, but let's start with the first one. The consolidation that you're referring to are opportunities for us, always specific situations.

But Bombardier, we have a significant position on this commercial jet. When I say significant position, we are the supplier of composite.

And it's a plane which contains a lot of composite. So, my reading is that the Airbus Bombardier deal will increase quite significantly the probability that this project will be a commercial success.

So far, that's very good. On the Safran, on the Safran/Zodiac, frankly speaking, we have a very good relationship with Safran's LEAP engine.

The relationship with Zodiac was pretty complex. We are not a large user, but we are using some of our materials.

Zodiac was a pretty unconsolidated organizations with a lot of teams working quite independently. My understanding is that Safran will align this in a more systematic way and I think we are well-positioned to benefit from this.

So, overall, I think that this consolidation should play in our favor. On top of that, it's clear that the key issue that the large commercial aircraft producer [Indiscernible] is the organization of their supply chain.

That's something which, in my view, will be improved with the consolidation. And as production rate will increase, we'll see opportunities arising for us.

So, all of this is good news. Advance Formulation, frankly speaking, we don't see any meaningful pre-buying situation.

Yes, volume growth was significant. We see again good development in oil and gas.

You've seen some news coming from there. We show also the development in mining.

Metal prices are back at the level which allows for some projects to move on, so quite a sound situation that we expect to achieve. On your last question, I think it's probably pretty close today.

I would need to make the exact calculation, but I think the automotive and aerospace probably represents around €1 billion each. But again, take that as something directional and we can clarify it.

But it's what I have in mind after the divestiture of Polyamide which will leave the EP business out of our scope. So, a reasonable assessment after Polyamide divestiture is probably 50-50.

Thank you.

Next question.

Yes, good afternoon. Thanks for the questions.

There was two. You mentioned soda ash and potentially some opportunity on price.

I'm just wondering, obviously, the Turkish mine is ramping up still. You made it quite clear you felt the market effects of that was pretty much in.

So, just the risks on 2019 in that business when we're at full ramp on the pricing situation. Do you think there's a risk in the pricing as we go towards 2019 and the pricing for that here?

And then the second question. On the Industrial Composites, you say it's still shrinking in Q4.

You're expecting stability. Just a feel for how much you shrunk since 2015.

I would guess somewhere over 30%. But how much lower could it go before it turns?

And when do you expect returns? Second half or perhaps second quarter?

Thank you.

You want me to use my crystal ball. In Industrial Composite, we think that we hit the bottom.

Industrial Composite, once again, it's a type of rather small project. And when you think automotive, again, it's the Ferraris, Lamborghinis, so these guys produce a few hundred on a given model, and they move to the next one.

Sometime, with a bit of a lag time in between. So, our view today is that we reached the bottom and that we should see some increase as we move into 2018.

And this is what we start to see. It has dropped about 25% since 2015, so a little bit less than what you were implying.

I remind you when we took over the business, it was still in the middle of an SAP or ERP crisis. That's something which has weighed obviously in customer loyalty.

We have solved the situation and we have recovered a much better relationship with our customers. On soda ash, to be absolutely clear, what I said is that due to your -- in a very strong volume situation, what we've enjoyed during the [audio gap] we've been able to weather reasonably well the arrival of the Turkish volumes, arrival of the fact that this volume will be made available during the course of 2018.

The only impact, not meaningful, but the impact is that there were some implicit pressure on prices, which makes it difficult to fully compensate for the increase of the energy costs. And this is the reason why we are pointing to this negative impact on performance chemical, although we feel confident to say that this impact will be less than €50 million.

2019, EBIT-only, but most of the impact of the new Turkish volumes are in 2018. So, I am reasonably confident that we've seen the worst, and that we should see a situation which develops reasonably favorably in the next few years.

Thanks and congratulations.

Next.

It's actually her colleague, Georgia here. Thanks for taking my questions.

The first question is just on the cash flow statement. So, you've guided to restructuring payments of €80 million in 2018, but the comments you suggest that these restructuring opportunities may impact on your spend levels, but not impact the cash generation.

So, just wondering if you could help us to understand a bit more what these payments are related to. And then if it's part of your excellence plan set out with 2016 CMD, or are no additional savings on top of that?

So, just a bit more clarity on that would be good. And then secondly, on the LEAP engine and the F35, can you give us a better sense of the level of composites contained in these projects compared to your current base level?

Thanks.

So, I'll start with the first question, Georgia. The €80 million is an indication.

We've traditionally been of the order of €60 million or so in the past few years. This is really the fact that we are really determined to maintain the cost discipline for the portfolio transformation cost we go, so there elements of restructuring costs.

What we're saying here, as we're looking to prepare the future and really align the organization, we are breaking up cost, modest increase in restructuring costs. Whatever we do, we do two things.

We absolutely look for a very rapid payback. We typically talk of less than two years cash payback on sub-costs.

And secondly, no matter we do, we will continue to focus on the overall free cash flow of the group. It's about making choices and delivering the cash.

That is what we intend there. Does that help?

Yes. Thank you.

The second question, can you just repeat?

On the LEAP engine and F35, just want to get some idea of the composite content and how that relates to your existing base level of composites sales?

On the F35, we have published a number saying that it represent €1 million per plane, so quite [audio gap] published something on LEAP, but no, I'm getting the answer that we have not published a number for the LEAP engine, so I won't comment this. But F35, very significant.

Again, in terms of sales per chipset, we are probably at the highest content of composite or among the highest content of composite.

Okay. Thank you.

Hello Laurent.

Good afternoon Jean-Pierre. Congrats on the way ahead.

Two questions, if I can, one for you, one for Karim. The first question, for you, I guess, is on formulations and net pricing.

I think you've had about a €150 million squeeze on net pricing over the past two years. I was wondering if you could talk about the drivers of that in terms of mix versus like-for-like pricing.

And whether, when you talk about better net pricing in 2018, you're referring to expectations of better mix or I guess something that you control around your pricing initiatives. And the second question is around, I guess, [audio gap] our would you say that you're more looking at a topline exercise rather than a cost exercise?

Thank you.

You take the second one, Karim?

I'll take the second one, sure. I agree with your benchmark, comment you make the €150 million.

The way I'd look at it is this. If you look at, traditionally, what we've done is seeing costs of between the €200 million and €250 million in the last few years.

We have divested the costs, we tackle them, and that's always going to continue to be part of our model. What I would say the benchmark can be simplified as approximately 2% to sales, on top of which, one would typically invest in that we have investment for the future, the corporate R&I investments.

This is a [Indiscernible] €50 million a year. If I take your €150 million and add the €40 million to €50 million of R&I, which is having a good costs, we're very much in the top quartile of those benchmarks and we intend to continue.

The focus, let's say, in preparing this feature, realigning our functions to help serve our customers, there is nothing to the cost motivator, with around the sales growth. But it will have inefficiency impact that will show itself through in the next couple of years.

Well, on your first question, and we are a little bit prudent before giving net pricing information per segment for reasons that you probably understand. We have two impact.

One is indeed mix, overall mix in our analysis is within the volume. The mix was from in oil and gas.

From the expensive guar base formulation to the less-expensive friction reducer, there we've seen a movement in the direction I just mentioned which impacted us negatively in 2016, 2017. We are starting to see guar coming back in the formulation, so that's good news.

And it's part of the volume growth that we expect. In terms of pricing, there has been a pressure here and there.

We are today seeing a situation, both in mining with Technology Solution and in oil and gas business where we have space for price adjustment. That's good.

We have also a situation regarding our purchasing conditions and this impact especially the home and personal care cluster, which have improved significantly in the last part of 2017, we have negotiated and started new contracts for agrochemical with significantly better conditions after the summer period in 2017, and this will have a full year impact next year. So, these are the reasons why we expect some positive impact on margin for Advanced Formulation in 2018.

Thank you. And just going back to the point on the cost center, just so I understand, you're talking essentially of a €50 million potential.

I assumed this is not for 2018. This is more something we should be thinking about for 2019, given that those plans take time, and you haven't actually announced the plan?

I think, overall, in the general guidance, yes. The midterm 2% to sales is absolutely what we consider to be a very appropriate level of corporate costs.

Because essentially, we're trying to lighten it up to make sure we build the strengthen our global business units rather than the corporate center. I'm not going to say that 2019.

That is the direction of travel.

Yes, thank you.

Next question.

Good afternoon. Thank you for the opportunity to ask some questions.

Just two very quick questions. Of the guidance that you've given for both chemicals, a maximum of a €50 million hit to the EBITDA level, could you just split out what your thoughts are between price declines and the rising costs for 2018 to get to that number?

And then secondly, on the free cash flow for 2018, with the guidance you have given, do you believe that you will cover the dividend payment when you include interest payments, so a more normalized cash flow number in 2018?

Karim, you want to take both questions?

Sure. I think on the soda ash, there is a very modest price erosion in 2018 relative to 2017.

But again, the team that we have in soda ash is really doing a lot to mitigate with really raising the bar on excellence, so there's a lot of mitigation to compensate. So, I'd say, operationally, we're maintaining the volume, the leadership positions.

Yes, it's modest price erosion, something to quantify. But net-net, what we can do in the current market conditions and the new capacity is also to overcome the increase in energy costs that we're already seeing.

Essentially, had energy costs been more favorable and going back to say I think we have different expectation despite the significant capacity addition. And that's not by accident because we've been planning and anticipating, getting ready for this two years now.

As far as free cash flow is concerned, I can give you a very simple answer, which is yes. Our free cash flow will exceed financing costs and dividend.

One thing to highlight though is we have been working hard to reducing the tax rate, but also the financial charges and we also indicated that the cash financing charges in 2018 will be lower than 2017 as well. What does that mean?

It means that our cash available to equities, so free cash flow after all financing costs, will be quite a lot higher than we had in 2017. Does that help?

Yes. thank you very much.

Thank you.

Next question.

Yes, hi. Thanks.

Again, a question on free cash flows. In the outlook, you've mentioned that the net cash out for provisions is going to be €390 million.

Is this to be compared to the €190 million that you had for 2017? So, net €200 million increase, is that the right way to think about this increase?

The answer is no, it is not. And just give you some more specific.

The equivalent last year were €367 million, just a modest increase. That's €373 million, to be more precise.

Okay, fine. So, that's clear.

And then the second question was, again, on raw material headwinds. If you look at some of the raw material prices like nitrite, et cetera, have gone up quite a bit starting September of last year, but you don't seem to have seen any impacts from that on your margins.

So, is it because you have some sort of indexing in your contracts? Or are you I mean are you successfully offsetting that to some other cost reduction measures?

Well, for that, I think we've been able to compensate for these years.

So, are you saying to pricing or just normal you call excellence programs?

Well, first, it's a very small part of our course which was not, I mean we've been able for a number of measures, both on the pricing side, but also on the operational efficiency, to compensate for this. So, for all the materials present a significant part of our input costs, which was not -- it was not a huge challenge.

Okay. And Maybe If I can follow-up one question on pension, where are you saying it will be higher.

How to tie this up with the sort of the synergies that you talked about, with €38 million last year associated with Cytec pension provisions and again €20 million additional one-off benefits? So, those benefits doesn't seem to be resulting in reduction in cash.

If anything, we are seeing an increase in pension payments. So, how to tie those two things together?

Thanks.

A couple of things. There are -- the cash service costs of our pension obligations essentially is pretty stable.

We saw modest increase in the U.S. and it very much in line with, let's say, the actuary tables U.K.

and U.S. in particular, nothing untoward here.

What you do see at the end of the year, our pension obligations are lower quite materially, and that's been the trend in the last year or so. And I think I expect that to continue to go in that direction, which actually is very positive from a credit standpoint in our balance sheet.

We're at €2.6 billion, I believe, at year end.

Okay. Thank you.

Thank you.

Next question.

Hi. Good afternoon.

Two questions from my side, if I may add. First one would be on the PVDF plans, about raw materials.

I'm just wondering, I saw that actually the plan is going through the qualification process. When can we expect it to actually start to contribute to the volumes growth this year?

And then, secondly, I know it is still a very small business, but what do you think the potential of it could be? So, in terms of percentages of Specialty Polymers particularly.

So, that is the first one. And then the second one, I would like to have some clarity on your guidance, especially on the currency impact of €125 million at 1.25 exchange rate euro/USD.

Is that full translation impact or is it again like the rule of thumb, you gave two-third of it as transaction -- as translational and one-third transactional being hedged? Thank you.

Okay. On the first one, PVDF, in fact, we are selling to different markets.

We have different qualification times. So, we have -- we were able to receive the first qualifications during the last part of 2017, so we are starting to sell.

But the most important qualification in terms of potential volume will come during the course of 2018. And yes, I mean, we think that this is an investment which is coming at a very good point of time because we see the battery market increasing tremendously.

And when I say tremendously, we could see sales doubling from one year to the next, increasing by 50%, sorry, which is not doubling, increasing by 50%. And at Solvay, from one year to the next, this being said and I don't want to quantify it more specifically, it's still a small business within Solvay, more meaningful in Specialty Polymer.

And yes, we have high expectation, but it's probably too early to give you the ability to measure with our [Indiscernible] present. But we are today supplying all the battery makers, local Chinese player with our new Chinese plan, but also the international players, which are mostly Japanese and Korean guys.

Good news, too, is that we see opportunities to get more out of our current unit in Peru, thanks to manufacturing excellence and the use of some digital tools. So, overall, very good opportunities in front of us in batteries, but a bit early to quality what this could represent.

So, for the foreign exchange part of your question, Nathalie. A bit unclear.

This is only one translation effect, so conversion, as we say. We'll give you sensitivity of €0.10, give you €120 million.

What we've done is we look at the key basket of currencies. So, mainly U.S.

dollars at the beginning of the year, but also some to the other currencies like Japanese yen, the Brazilian real. And based on that package of currencies, we've given you that indication.

So, if you wish to make a hypothesis that what we see beginning of the year continuing, this is an indication of what to integrate into your expectations, but predominantly, U.S. dollars.

And only conversion or the translation to use your word. Transactional effects allows [Indiscernible] team to be competitive in the marketplace.

So, to my mind, this is absolutely a core part of doing business, that we have deliver the margins, and no matter what and that's the kind of the culture. Does that help?

Yes, that's very helpful. Thank you.

Thank you. Thank you very much.

So, maybe last question now.

Hello Danielle.

Hi, good afternoon. Thank you for taking my question.

You've successfully tendered for some of your senior bonds in 2017, and we've recently had a clarification from S&P regarding tendering and reissuing hybrid bonds. Given that, I'm just wondering how you're currently thinking about those bonds within your capital structure.

Thank you.

It's a very interesting and a very important question. I think we recognize there's an opportunity to continue to optimize our balance sheet.

There is some relaxation. The rules and the guidance is quite encouraging.

I think when we are ready, we will make an announcement. We are looking for options to further optimize and essentially reduce a reasonable proportion of our high-grade, whilst maintaining which is really important to us maintaining strong investment-grade rating.

But we see opportunities, and I'd say we're on the case. And in a matter of months, certainly toward early next year, you will see some progress there.

It's my expectation.

Thank you very much. This was the last question that we took, so maybe just a few comments to -- before we conclude.

The first one is that we think that in 2017, we've delivered, thanks to a strong volume growth, and we've delivered on all fronts. When I look back at the various objectives that we set, both in terms of EBITDA growth, but also cash generation, CFROI improvement and even it was not in our objective, but EPS growth is also quite significant, which gives us confidence to raise the dividend as we decided yesterday at the Board.

For 2018, growth will continue to be on the agenda. Growth will accelerate in our core clusters.

Unfortunately, we have two elements that we need to take into account. One is the foreign exchange what we have discussed.

The other one is the situation in soda ash. But there, too, I think we are coming with reassuring news.

The fact that we can come with confidence, telling you that the impact will be less than €50 million. It should show that, indeed, as we've been saying for the last quarters, we think that the situation is manageable and under a reasonable level of control.

On top of that, a key priority for 2018 is to deliver this more focused, more efficient organization. You will see some news coming in the next few weeks on this front.

And overall, reinforced fully aligned and with ability to make 2018 a very good year for Solvay and for reasons that you understood. It's very important for me, too, to make sure that 2018 indeed is a very good year for the group.

With that, I thank you. And we'll talk to each other once again on May 3rd.

Probably we'll see some of you on the road with the mean time. But May 3rd is our first quarter results presentation.

Thank you very much.