Solvay S.A.

Thank you, Karim and hello everyone. Today, we will discuss the outcome of our strategy review and layout our roadmap for unleashing Solvay’s full potential.

Before diving in, I will start with a recap of the actions that we have taken since March 1 that led us to this point, which you will see on Slide 11. First, we streamlined and realigned the executive committee giving them direct hands-on responsibility and accountability for the P&L and free cash flow of the businesses they lead.

Next, we modified the 2019 incentive plan to focus the organization on costs and cash, which is already starting to bear fruit. We also initiated a comprehensive review to better understand the opportunities and the challenges facing each of our businesses.

Finally, the team and I spent a significant amount of time engaging our employees, customers and investors. We gained valuable insights, which have helped support our process to redefine who we are and our sense of purpose.

So that leads me to Slide 12, a summary of our findings. First and foremost, Solvay has a strong foundation from which to build.

Our businesses are closely aligned with the powerful mega trends that drive growth in our end markets. And in those markets, we have the number one or the number two positions: science, innovation and sustainability are part of our DNA, and I’m truly impressed by the passion, the engagements and talents of the people who define Solvay today.

And underpinning everything is our focus on safety as we continue to work hard to reach 0 incidents, because safe companies are good for employees and do better business. I am not going to spend time going through the detail on who we are, but I’ll refer you to Slide 13 through 15 to help you better understand Solvay and our value proposition.

And while we have many strengths we also have a clear understanding of our challenges. The portfolio transformation and the centralized operating model have created organizational complexity and silos that have less to suboptimal capital allocation and inefficiencies.

The plan we are announcing today is not just about what we will do differently strategically, but how we will do it differently, as a team. In addition to changing how we manage our businesses, we have great opportunity ahead to operate more holistically, as one company with a common purpose.

Before looking at the business from the inside out, it’s critical to step back and see things from the outside in. On Slide 17 and 18, we have summarized the external landscape, the key macro drivers shaping our future and our technologies that address these opportunities.

The world becomes more populated, urbanized and prosperous, demand for food, water and energy will continue to rise and the pace at which we are consuming our planet’s resources is not sustainable. At Solvay, we will be part of the solution.

One example I’d like to highlight is thermoplastic composites, where we have a leading position and where we are aligned to mega trends, including lightweighting and resource efficiency. You are all aware that composites used in aircraft significantly improve fuel efficiency.

And for these reasons, the contents, is significantly increasing in new and future aircraft builds. In addition, we are capturing opportunities in new markets.

I’m especially excited about our brand-new agreements with Baker Hughes to partner on the use of Solvay’s thermoplastic composite materials in offshore flexible pipes and risers for the oil and gas industry. In addition to leveraging lightweight and non-corrosive properties versus metals, our technology has demonstrated the ability to reduce their total cost of ownership by approximately 20%, which offers an attractive value proposition to our customers and helps to accelerate the adoption of this technology into a new market.

With that external context in mind, I will shift now to our internal review. As I mentioned earlier, we conducted a bottom-up deep-dive analysis of our businesses to identify where each stands in terms of technology penetration, market consolidation, competitive positioning and growth potential.

For example, both our Specialty Polymer business and Composite Materials business are currently at a low technology penetration rate, given the early stage of shifting to lighter, more fuel-efficient, more sustainable materials. And we are leaders in a very consolidated market.

This means there is an enormous opportunity for growth given the mega trends we highlighted and our leading positions in these areas. On Slide 19, you see that each business has a different market position relative to its life cycle.

And in order to maximize value, we must differentiate how we manage them. This brings me to Slide 21, where I will summarize our new strategy represented by the acronym G.R.O.

W. Moving forward we will continue to operate in three business segments, each with a new distinct business mandate.

We have, therefore, moved some businesses to align with the distinct mandate, as shown on Slide 22. Our Materials segment comprises our high-performance, high-margin Specialty Polymers and composites businesses.

Our ambition is to extend our leadership position as a number one pure-play Advanced Materials business. To realize this, we will accelerate growth.

Our Chemicals segment comprises largely mono-technology businesses, including soda ash, peroxides, Coatis, RusVinyl joint venture, and now we add Silica. Asset management is a key focus in this segment.

These businesses all have demonstrated track record of resilient cash generation. Our ambition is to become a number one cash conversion chemical player in the industry.

Our third segment, Solutions, is a mix of businesses operating in diverse niche markets. It includes Novecare, Technology Solutions, Aroma, and now we add Special Chem.

Solvay will optimize these businesses drive better returns and unlock value. I will now provide further detail on each of the distinct mandate and how we will drive the greatest value from each.

On Slide 23, Materials, we will prioritize investments and innovation in high-margin markets with the highest growth potential. We have a good position from which to build.

The vitality index in the segment or sales of new products in the last 5 years is 30%. To further accelerate growth, we will realign resources from being a product-driven organization to being a market-driven organization, serving aerospace, automotive, health care and electronics markets.

We will double down on investments in innovation and commercial support to focus on attractive, high-growth areas such as thermoplastics and batteries, where we have created common platforms with dedicated teams to leverage our expertise and accelerate innovation. For example, in thermoplastic composites, we recently announced a capacity expansion in our U.S.

on hindsight for the growing aerospace markets. And a few weeks ago, we announced the launch of two innovation centers, one in the U.S.

and one in Europe, batteries for electrification is also a new area for us, but one where we are increasing our focus, our innovation efforts and our resources to accelerate penetration. We have a wide range of polymers for the binding and the coatings and we have additives for electrolytes in current and future generation.

We have also announced several capacity expansions to address the significant increase in demand, which has been growing by double digits for the past several years. What gives us the conviction of growth is our strong record of EBITDA growth, averaging 7% over the past 5 years, a figure that would be even higher, had it not been for the current market headwinds.

Our 28% margins demonstrate our ability to share in the significant value our technologies delivered to our customers. Turning to Chemicals or to the Chemicals segment, Slide 24, in soda ash, peroxides and silica, we operate mono-technology businesses in more stable, mature, resilient markets.

Our focus here will be to maximize our cash flow generation from these resilient businesses, where we have a leadership cost position and competitive advantage. We have established a strong track record in cash generation over the past 5 years, the segment grew by 9% on average, our cash conversion averaged 68% over the same period.

Going forward, we will focus on productivity and simplification and we will be implementing that expertise in our silica business, with the aim to operate with similar performance. So what will be different?

We have to adapt our organization to focus now on delivering cash more than growth. This includes CapEx spend for infrastructure maintenance and focusing R&I spend on process innovation geared towards extending our cost leadership.

We will take a careful look at any investment opportunity, and we will only invest selectively where we expect particularly compelling cash returns, such as our recently announced expansion of soda ash and bicarbonates capacity. Importantly, we view cash generation from chemicals as an effective way to fund our attractive growth opportunities in materials.

Turning now to our Solutions segment on Slide 25, this represents a mix of businesses. Each will have a clear set of priorities and specific goals to improve their value creation.

Some of these businesses are underperforming or not yet optimized and some offer growth opportunities in diverse but specialty niche markets. For example, we see select opportunities in 3 areas: consumer care and food ingredients, where we have leading positions in vanillin and guar for personal care; industrial markets such as coatings, where we offer unique solutions for waterborne applications; and resources, where we are the leader in improving the yield of metals and minerals from the mining industry.

You already know about the challenging situation in the shale, oil and gas, as Karim described earlier. And this is a high priority with the recovery plan that is already underway.

Let me be clear, when we say unlock value, we mean improved returns. We are not happy with the returns in these segments, which are below WACC.

Therefore, the segments will have limited R&I and CapEx prioritized for the right projects. Our distinct business mandates are only part of the story.

Equally important elements of our value creation strategy is how we will win with our Solvay ONE operating model. Solvay ONE entails a completely new way of working, leveraging the many strengths and competencies across our enterprise, not just within each business.

Slide 26 shows the significant departure from the way we have been managing the company, everything from our multiple cultures to our decentralized business structure and our fragmented approach to the market. I recognize that this structure results from a period focused on extensive portfolio transformation with over 50 M&A transactions.

We are a stronger and well positioned group thanks to those portfolio changes, but the opportunities ahead are even greater once we begin to operate as one Solvay organization. The new operating model will impact how we do everything from how we collaborate with our customers who are the center of everything we do, how we are allocating our capital and R&I resources, and finally, our approach to cost and cash management.

Let me give you some examples. We will leverage our expertise and knowledge across businesses.

One example of this relates to our new customer engagement model, shown on Slide 27. We will tailor our service and approach based on customer segmentation to better serve our customers, and will measure the progress using the Net Promoter Score.

We will also deploy talent to the new strategic account roles with clear incentives centered around our most important customers. For example, a leading consumer goods customer shared with me that four different business teams represent Solvay, each selling a different technology.

This led us to form one key accounts management team handling all of their needs across our group, and they saw an immediate benefit. Now we need to do this for all of our top customers, which will facilitate easier collaboration, streamlined resources and increase the share of wallet.

For other accounts, we are introducing a new e-commerce platform that enables order placements and delivery management, and we’ll leverage it across our organization. I am convinced this focused approach will better support our customers.

Another key part of Solvay ONE is that our resources will now be centrally managed, as you will see on Slide 28. We will direct investments in CapEx and R&I to the highest growth opportunities whilst keeping strong discipline over our total investment size, because our focus is to generate more growth, cash and returns.

This is how we will double down investment in materials by making better choices rather than just spending more. Approximately 60% CapEx and more than 50% of R&I will go to materials to support the growth investments, such as in thermoplastic composites, which has an addressable market of €0.5 billion and inventories, which we expect our sales to grow to €0.5 billion in the next 5 years.

As you have seen, our recent news about our soda ash expansion, which is a perfect example of putting our investments into the most attractive opportunities to generate more growth, cash and returns. To be clear, this is a completely different way of operating than what was done in the past when businesses made their own investment decisions with limited consideration of generating the greatest value across Solvay.

Another element of Solvay ONE is creating a repeatable cost and cash playbook. With respect to costs, there are two elements, simplification and synergies, which you see on the left side of Slide 29 and productivity measures, which you will see on the right side.

In total, these two programs would generate structural cumulative gross savings of €300 million to €300 million run rate by 2024. Here is how we will get there.

First, we will fully deliver the simplification program launched in 2018. We will have €50 million left to complete in 2020, and we are targeting up to €300 million more with our new program.

Next, we will launch our new synergy program focused on harmonizing a common structure across Solvay. We will reduce our indirect spend to improve group-wide policies.

We will also implement an order-to-cash program, reducing our logistics and packaging costs. We will also be launching a zero-based budgeting methodology.

I have seen firsthand what results this can bring. While it will take 2-plus years to realize the benefits, I’m confident it will bring new rigor to our efforts.

Together, simplification and synergies will generate €100 million to €150 million of cost savings run rate by 2024. Moving to our productivity measures, we will also focus on operational efficiencies.

Some businesses such as composites will continue their focus on yield improvements. We are starting to see benefits from our operational focus that began last year, such as 20% increase of our historical production on our major lines in the U.S.

We are planning further improvements in these lines and are deploying similar programs as other major industrial sites in composites. We have also begun deployments of digital processes.

We have many initiatives underway. Some are using data analytics and modeling to increase efficiencies of our plants, and others are more customer-focused.

We have launched it in 20 plants already, and we are targeting another 30 sites. These productivity measures are targeted to reach €200 million run rate by 2024.

Moving to Slide 30 and in line with our strategic focus on cash, we are targeting €500 million more cumulative cash from operations in the next 5 years. The focus here is in two areas: liability management, which includes lowering our pension cash service and decreasing our interest payments.

At the closing of the polyamide divestments, we will deploy around €500 million from the proceeds towards pension obligations thereby reducing pension cash service cost for the next few years by over €40 million a year, starting in 2020. This represents a return of around 8% in total, far better than paying down the debt.

The right side of the slide highlights our focus on working capital, which includes the order-to-cash program, driven by a leaner supply chain and more effective inventory management. The €500 million more cumulative cash generation will come from 3 levers: first, reduced pension cash costs starting at €40 million next year, and this will grow over time; second, the financial charges will continue to decrease; three, and finally, the order-to-cash program will release €100 million through more efficient working capital management.

Therefore, we are very energized by the opportunities of Solvay ONE and I look forward to providing updates on our progress. This brings me to our midterm financial commitments shown on Slide 32.

We plan to deliver mid-single-digit EBITDA growth on average from 2020 to 2024, and this assumes that we will resume to historic growth trends in our key markets in late 2020. We expect half our growth to come from Materials and around one-fourth each from Solutions and Chemicals.

Our target for free cash flow conversion is to exceed 30% by 2024 from about 22% today. And our target for return on capital employed is to exceed 11% by 2024 from around 8% today.

As an aside, many investors told us that they didn’t like CFROI because they couldn’t compute it or compare it with other companies. We’ve listened, and we will begin reporting ROCE at the group level, and we will retain CFROI internally.

Looking ahead to 2020, as Karim mentioned, we expect the current challenge in macro environment to continue to impact our profits. Yes, our free cash flow conversion will progress strongly as early as next year.

Therefore, 2020 is a year of transition before our expected inflection in 2021. Turning now to our capital deployment priorities, as you have heard, we will allocate CapEx and R&I to operate each business according to their specific mandates.

We will also focus on reducing liabilities, and we will have a more disciplined approach to M&A as we move forward. We will selectively pursue opportunities aligned with our G.R.O.

W. strategy that enhance value creation in terms of profits, cash and returns.

We will continually assess divestitures and whether Solvay is the highest value owner. As we work to drive enhanced value, we will maintain an open mind.

Ultimately, we do not believe there are any sacred cows in our business. To conclude, the strategic roadmap we’ve laid out today is about maximizing profitable growth and cash generation to drive shareholder returns.

At Solvay, we have a strong foundation, which will reopen with leadership positions and sustainable solutions tied to mega trends. We are backed by heritage and culture of innovation and some of the most talented employees in the industry.

With our new distinct business mandates and our Solvay ONE operating model, we can deliver growth, cash and returns to unleash Solvay’s full potential. Now Karim and I are happy to take your questions.

Thank you, Ilham and Karim. Before we start the Q&A can I calmly ask you to limit yourself to one question only to allow all participants to be heard.

Operator, over to you.

Thanks for taking the question in the presentation. If I limit it to one, can I just ask, in terms of the message you’re trying to send around unlocking value, particularly on assets that you’ve classified in the SOLUTIONS division.

You said towards the end of your speech there that you will look at divestitures. Can you just maybe be a bit more explicit on what you mean by unlocking value, the process and time frame for that, particularly with some of the peripheral parts of the portfolio?

Yes. Well, thank you, hi, Matthew.

Well, first of all, the G.R.O. W.

strategy is about to grow. And what I like with this acronym is more than an acronym, it’s a common denominator across the 3 reporting segments, growth top line in MATERIALS, grow resilient cash in the CHEMICALS and grow the returns in the SOLUTIONS.

First of all, I believe that we have meaningful organic growth opportunities ahead. This is plenty of work to be done.

In terms of M&A, as I’ve said, we will have a more disciplined approach as we move forward. We are definitely raising the bar in terms of our focus on growth, cash and returns.

We will selectively pursue opportunities. It has to be aligned, obviously, with our growth strategy, and it has to enhance the value creation in terms of profits, cash and returns.

And as I outlined, we do see opportunities to unlock value to improve the returns in the SOLUTIONS segment.

Next question.

On the outlook for the composites business, after very good growth in the past few quarters, I hear you’re now kind of hinting for a slowdown in the fourth quarter. Can you maybe elaborate whether that slowdown is entirely and only tied to the 737 MAX reduced to bill rates or are there other reasons to become a bit more cautious?

Can you maybe elaborate on that? Thank you.

Okay. Thank you, Wim.

Well a reminder and I am very pleased to report that this is the fifth quarter in a row with double-digit growth in aerospace. So I really commend the excellent work done by our composite teams.

You may remember, we acquired the composites business back in 2015, took us time to really integrate it. We started and we accelerated the integration since now a few quarters, and we are seeing the results.

The fourth quarter will be lower as our orders to 737 MAX have begun to moderate, plus normal seasonality as we approach the year end.

Okay, understood. Thank you.

Yes, hi. Given that I can ask only one question, I will probably ask one on – can you explain how is the incentive criteria aligned with the new financial targets you presented to us?

Well, I mean indeed incentives are important. An important part of my compensation and the compensation of the Executive Committee is tied to performance.

No one wants the company to succeed more than I do, and more than the executives and the senior leadership do. The senior leadership and the executive committee myself included will also go through the same process as the GBU leaders, because one size doesn’t fit all, and we’re going to align the incentive of the reporting segments and the GBUs to their new mission, strategic mission, and we will align that, and this will be overseen by the Board.

Yes, thank you Karim, Ilham. One clarification question on your targets for mid single-digit EBITDA growth until 2024, that means, on average, 5% growth.

When I look at your cost savings program of €300 million to €350 million, that means half of that earnings growth comes from cost savings, leaving the other half to, let’s say, ordinary volume growth. That sounds a bit conservative.

You mentioned 2020 to be a transition year. So my question is, what is your GDP assumption on average for the next 5 years?

And do you factor in any reduction in some products or any lower retention rate for your cost savings program to come up to that rather conservative assumption?

Martin, maybe, I’ll kick off with an answer, and see if Ilham would like to add. Fundamentally, the cost savings programs we’ve announced, the targets will largely offset inflation and the growth you’re going to see will come from the deployment of this strategy.

It will be organic growth. Half of it will come from Materials, a quarter from Solutions, the other quarter from our Chemicals segment.

It is very high-quality, sustainable growth that will drive this. And bear in mind, obviously, our starting point is one of the highest EBITDA margins.

We look at our peers. So that’s really the context and I’m sure we will always grow.

Okay. Thanks.

Hi, thank you for taking my question. Just a quick one, I guess, on the composite part of the business now, historically, it’s been one that has not seen a great EBITDA drop through it.

But now it’s forming part of the growth business going forward. So I just wanted to find out if the initiatives to improve the EBITDA drop-through are they coming through?

And then what’s kind of what’s the plans for those efficiencies are going forward given that this is a growth engine now?

Thank you for the question. Well, indeed we are – first of all, there are different aspects to the question.

First of all, there is a sustained demand in aerospace, right, and our key customer forecast and market demand of more than 40,000 commercial aircraft with more than 100 seats in the next 20 years. So there is a good underlying fundamental for growth in this business.

That’s number one. Number two, I think what’s happening is that the synergy between Specialty Polymer and composites in the first cluster becoming a pure play.

Advanced Materials is going to also help us to further penetrate the aerospace market. On the yield and productivity improvements, in composites, yes, we see it.

We see leverage between the top line and the bottom line. And this is a great story of leveraging the power of Solvay.

We took one of our best supply chain leader and we exported competencies from legacy Solvay to the Composite Materials business. And now there are five quarters in a row, I can see the impact and they continue cutting waste, and this is part of our growth story, both on the top line and on the bottom line in the material segment.

Thank you.

I just have a question on this Solutions segment. It seems that you have put here more together the kind of troubled areas.

Is that the area where we then also see, let’s say, more harsh restructuring going forward beyond what you have initiated already to reposition the business? And is that also the area where we have to look for portfolio changes?

So could you please a little bit outline in more detail how we have to see the Solutions segment?

Yes, thank you for the question. Well, the way we put all of this together and we regroup the segments, we put GBUs and – global business units that have similar characteristics in terms of market penetration, consolidation and growth potential.

So I’d like to remind you with that. Now, the solution cluster of businesses have different mandates.

The majority of the businesses in that segment are actually resilient and stable businesses. One business, the oil and gas, you heard the story.

It needs significant improvements. We are going to fix it.

It’s underway. And more importantly, we have a number of businesses, they have some leading and differentiated positions, which I like personally that offer attractive growth opportunities.

For example, Technology Solutions is part of that and remains a very attractive business as a leader in – as I said in improving productivity and yield for a top global copper producer, Novecare. In personal care, in agro, Aroma, we had leading technologies in natural vanilla, etcetera etcetera.

So all of this, it’s a good place to be in. Now we are not happy with the returns.

And whenever returns are below or at WACC, we will not be satisfied. So that’s what we are saying.

We will improve the returns, and that’s the key focus. The good news is that we have a path to do so.

And how patient are you for this segment to get to the returns you require, so bringing them above WACC? Could you put a timeline behind that?

Well, I mean, I am not going to – we will take the time we need in order to make the right assessment and give them time to do it. But the focus is definitely shareholder value.

And this will be our guiding post, but that improvement is included by 2024, yes.

Thank you.

Yes thank you. I was just wondering if you could help us with the cost savings of €300 million to €350 million, what’s the cost of those going to be?

Geoff, there are no new restructuring costs associated with that. As we’ve mentioned, this is about accelerating the deliverables announced.

It’s already provided for. It’s already baked in.

And what we have here is the operational efficiency and the real transverse end-to-end programs as part of the Solvay ONE additional, which is really around flowing it through to the bottom line without any associated restructuring costs. It’s not about labor-related costs.

So just to be clear, maybe and to build on it, for 2020, we have €50 million left of the original program, which was launched back in March 2018, and that we are going to be accelerated and completed. And now we are targeting up to €300 million more with this new program.

So we will deliver on the simplification, as I mentioned. We have a new synergy program on harmonizing the common structure across Solvay, that’s good news.

There is room for improvement there. And we will reduce our indirect spend through improved policies and leveraging, again, our scale.

And I’m extremely excited about the order-to-cash program we just started a few weeks ago in reducing our logistics and packaging costs. Not to talk about launching, but this is new, the zero-based budgeting methodology, which is going to take a bit longer time to deliver on it.

So all in all, those are structural type of cost program, and we are extremely pleased with this.

I’m sorry. Can I just follow-up on that?

Also, the move to one supply chain, does that mean that you have to consolidate ERP systems and that there is no costs associated to that?

No. Yes, well, the good news, I didn’t have this all my life in my different experiences is that we have very few SAP systems.

That’s the good news with Solvay. So no worry, there is a very little investments in more SAP systems.

Hi, good afternoon and thank you for taking my question. I would actually just like to go back to the cost savings that you are targeting.

Could you maybe elaborate a bit on the phasing? What can we already expect in 2020 and how is it going to build up towards 2024?

Thank you.

Nathalie, hi, I think, as Ilham said, some of the cost savings will like the zero-based budgeting, will take time to mature and crystallize. I think the best indication I can give you is broadly a linear build toward the run rates we’ve described.

I don’t anticipate any strong peak in any one particular area. Although obviously, as I’m sure you’ll have detected, acceleration is very much part of what we are doing here as well.

So the former program, it was underway, will be accelerated and the second part which is really new and we are starting will be probably – the inception will be in 2021.

Okay, thank you.

Yes good afternoon everyone thank you. Looking at the split of businesses now looks much more sensible, but it does beg the question, certainly for me.

Apart from cash from Chemicals to Materials in the near time frame and maybe going out a few years, the logic of keeping these businesses together, I heard you felt the business was much better as an organization, the opportunities to be stronger, but certainly, in terms of the logic here, certainly, the increased transparency with Materials and Chemicals and then also Solutions the logic of having them all together?

Sorry, I didn’t get the question. Can you repeat, please, Peter?

Well, in terms of – I understand the split of the businesses is much more sensible, I think, than how they were classified before. But in terms of the logic of these three units together, because certainly, aside from the story of cash flow from Chemicals to Materials, looking longer term I cannot see the logic of these three business units together.

Yes. Okay, got it.

Well, I mean, the way I see it is there are synergies of being such a group today. First of all, financially, I mean, you’ve seen it in 2019, our Performance Chemicals businesses, let me go to the old vocabulary, has been holding up us, right, very resilient in 2019 despite the pressure on our automotive and electronics business, part of the material industry.

So at the end of the day, it’s about leveraging the portfolio, financially. As I said, it’s extracting cash and investing it in the growth.

We have also a nice scale, powerful research and innovation at business and corporation level to drive innovation across the company. For Specialty Polymer, you still need organic chemistry, and we find this in the SOLUTIONS segment, right?

That’s number two. Number three, believe it or not, we can still increase the share of wallet of some customers, the anecdote, but it’s more than an anecdote now.

I was telling you in my prepared remarks, when one customer, a leading FMCG company came to Solvay, they wanted to have access to 4 different business units. They were buying solution formulations from Novecare, they were buying soda ash, they were buying Specialty Polymer products.

So all of this, if we can leverage that reach for our customers, it’s great for Solvay to maximize the share of the wallet. And to end with this because the list can be longer, is the supply chain I talked about.

And this is based on similar ERPs, and both in the logistics, in the indirect spend, is bringing us a fabulous opportunity to leverage our scale.

It’s just back on Jeff’s points about the €300 million or the €350 million of savings. No real cost apart from the SAG end of what you have put through already.

And I’m looking at the Solvay ONE initiative, and it’s sort of lots of exciting words deploying talent, incentives, tailoring the service. But I don’t want to be too skeptical, but it’s the same products, really, the same people, the same customers the same plant, it’s the same dynamic.

Could you maybe give us an example, a real life example of how you would hope to achieve these savings within the business?

Well, let me start and maybe Karim can get to the numbers if needed, again. Well, I mean, in any company, you look at the commonalities, the common denominator.

And here, there is an opportunity for us because it was fully decentralized before, and nothing wrong with decentralization, but what I love in this decentralization is the empowerment of our business leaders to deliver on the P&L and the cash, and this will continue. What we are changing here is to centralize what we can better control and prioritize centrally.

And what we are going to do is really build a common structure, wherever it makes sense, right? I talked about the supply chain.

You may remember in quarter 1, we suffered from a peak of inventory because our order-to-cash process was not the best-in-class, and that’s what we are fixing today and improving it. And when you improve it in one GBU or one business, we can repeat it in other businesses.

And that’s the playbook we are building, repeatable cash and cost saving playbook. The zero-based budgeting is another one we’re going to do across businesses, and it’s great to have that opportunity of indirect spends, which had been decentralized and now we are centralizing them.

I mean everything which is not raw material. So we are looking at that and preparing a playbook through group-wide policies, but also leveraging our purchase.

Anything to add, Karim?

Yes. I think maybe to just add a couple of very practical example that I’ve seen in the last few months, that brings it to life, Martin.

One is we changed these centers in the second quarter around cash. And what have I seen, month in, month out, significant, consistent discipline and improvements on day sales outstanding, on my receivables, on payables, on inventories.

And I think it comes through the bottom line now. What’s new is that we see that everywhere, in every business, including composites that had a fantastic time, but previously, if I compared to the past, I’d say those businesses that were doing better than others, were perhaps less focused on that delivery.

Another [indiscernible] is travel and expenses, discretionary costs, one size, one approach across the organization and real focus. And the way I would describe it is a real sense of enterprise-first and partnership between leaders.

We want folks focused on their perimeters. I’m not saying it was bad.

It’s just the bars we set higher. And I really see it as part of the costing effect.

And it’s a repeatable playbook.

Okay, thanks very much.

Yes thank you, good afternoon. Markus Mayer, Baader-Helvea.

A question on the new CapEx discipline. Basically the question is split into two.

So you said €200 million projects have been canceled, that was basically the kind old of CapEx way. Have these projects been already in the billing phase?

And do you expect any kind of impairment there? And the second question is that the soda ash CapEx program is basically an example for new CapEx, new Solvay CapEx, there so to say.

As the other two large players announced significant projects there, do you not fear overcapacities in the year after 2021? Thank you.

Yes. Well, thank you.

I mean, what we are doing in terms of CapEx – and you mentioned the €200 million write-off CapEX – we stopped two projects to [indiscernible]. This is probably a perfect example on how in the new world we are going to invest in better growth returns, right?

So I think you get probably the answer there. We’ve indicated, I think in the past, an economic threshold for our investments, which I like very much around IRR, 15%, right, Karim, which makes the ROCE around probably more than 20%.

And this is it. So any business case, if it’s lower than that don’t come to ex com.

If it’s above that, come with your business case, and we shall see, right? I think that’s a real discipline we are going to have in the company to ensure that it’s in line with the strategic priorities and the mission.

And as you’ve seen, 50% of the growth will come from Materials in the coming 5 years and we need to reallocate the right investments. And on soda ash, I mean, the soft market dynamics you’ve seen this year, still supply is balanced.

We have actually a Brownfield expansion in natural toner. If you look at the investments, which have been announced, we believe we have one of the best lower cost investments in the industry with compelling cash and returns.

Actually, the IRR was more than 17%. So, we are offering security of supply to our customers with technology and cost leadership.

And in the future discussion and negotiation discounts, right for our customers to have a supplier like us who can deliver a consistent supply of goods.

Okay, thank you.

Yes, good afternoon, Ilham and Karim. I have a question on divestments.

You are using the proceeds from Polyamide to de-lever, which you say is creating value with returns above your cost of capital. Now if this is the case, doesn’t it make sense to divest more businesses within the Solutions segment instead of trying to get the returns up?

Great question, Mutlu, I think, fundamentally, we are focused on growing the business, where we know we have €1 billion coming in we are looking for the best way to create value with those proceeds. The fact that we can deploy €0.5 billion to generate return, as you rightly say, well above our WACC, is highly attractive.

And I would say if you look around this is very, very unusual. We are not paying a premium to externalize pension in any of that.

So it’s huge value creation. So we’ll continue to look for opportunities like this.

But I’d say they’re quite exceptional in their variability. And maybe the other point I would highlight is we’re focused really on the free cash flow conversion.

That really is a key piece. Now we know that benchmarks, we look around us, is around the 30% mark.

And so what we’re seeing is in this strategy, we’re going to get there in this planned period, which means, we will have overcome the drag of the very – as you know, very high levels of pensions and environmental liabilities that have been weighing on us. And that, to my mind is really what this is all about as far as the cash equation is concerned.

Yes. And to build on that, I think in the Solutions, you have seen their margins.

So they are on par probably with peers sometimes even better. I think the improvements of return we see a path to do that and this is key.

And when we see that we can create value growing, it’s not only growing the top line. It’s about also growing the return.

And I think the difference now is that these set of businesses, and some of them more than others, are going to be focused on returns, much more than before them growing the top line. And that’s a different mission, and we know they can do it, and now they have a path to go after it.

Thank you.

Hi, thank you for taking my question. Just a quick one on the debt actually.

Regarding the net debt reduction, you talked about the Polyamide sale proceeds, reducing it by €0.6 billion. Will that be to fully repay the hybrids that are callable in 2021 or will that be to repay another senior unsecured without refinancing it?

That’s a great question. I think as you are probably aware, there are certain restrictions as to the levels of hybrid and one’s balance sheet.

They are a permanent part of one’s capital structure. The fact that we managed to reduce it, beginning of the year, I think, is a clear indication of the continued optimization.

I’d say, what I can say is we will continue to look for opportunities to create value in the same way. It’s around really improving the – reducing the financial charges, which, by the way, we’re saying we’re going to reduce by about €35 million run rate over the planned period as well.

I wouldn’t go into further details at this point on the specific as to which debt, which maturities will get us there, but we will continue to look for opportunities to do that.

Got it. Understood.

Thank you.

Thank you.

Hi, thank you so much, Ilham. Just a quick question really on PFOA, sorry to ask you this because this is not a part of your strategy or anything like that, but I just want to ask you on a call like this, in terms of how are you guys dealing with it?

How much provisions have you taken if you have taken any provisions and should we be worried at all about this topic with Solvay or not, because obviously, your name has been mentioned a couple of times in different articles?

It’s fine. All the questions are relevant.

Listen, I’m going to just repeat what I told you in my – at the quarter two, right, earnings call. Solvay never sold short-chain or long-chain PFAS.

In the past, we purchased processing aids containing PFOA and PFNA from other companies, but has not manufactured or sold such as processing aids compared to others. And we will naturally phase out the PFNA and PFOA ahead of the schedule set forth by the EPA in the U.S.

So based on what we know today, we believe that our provisions for environmental risks are adequate. So I’ll just repeat what I said earlier.

Okay, thank you so much.

Well, thank you very much. I really appreciate your time, and I look forward with Karim and the IR team to meet many of you on the road in the next 2 weeks.

So thank you very much.