after a reminder of the names of the officers of the Meeting,
after taking due note that the notifications to attend the Meeting had been drawn up and sent out in due form,
after confirmation that the shareholders present or represented owned together 35,247,181 shares out of the 84,375,930 comprising the registered capital, that is to say 41.77 %,
after the agenda had been read to the Meeting,
The Annual Shareholders' Meeting duly deliberated the different items on the agenda, as recorded in these Minutes.
The Meeting then proceeded to examine the items on the agenda one by one.
1. The Chairman noted that the management reports, annual accounts and the External Auditor's reports had been sent to the registered shareholders and that they had also been delivered to the banks for the attention of the holders of bearer shares and transmitted to those who had requested a copy.
It was noted that the said reports had also been made available to all shareholders at the company's registered office fifteen days before the Meeting, together with a list of government stock and other corporate securities comprising the company's portfolio.
The Meeting accordingly agreed to dispense with the reading of the management reports on the financial year 2000.
Baron Daniel Janssen presented the aims of the Solvay Group's new strategy and the Group's geographical development. He then addressed the question of the return on Solvay shares and the Board's decision to propose to the Meeting to increase the gross dividend from EUR 2.20 to EUR 2.27, that is to say from EUR 1.65 to EUR 1.70 net per fully-paid up share. He ended with the proposals for the appointment of a new Director and a new External Auditor and Substitute External Auditor.
Mr Michielsen gave details of the Group's results in 2000. He then presented the strategy of Innovation, the Group's leadership in its activities and the research and innovative investments program. He then dealt with the protection of Man and the Environment in the framework of sustainable development and ended his presentation by giving the preliminary projections for the results for the year 2001.
Given the wide distribution of the External Auditor's reports, the meeting agreed to dispense with the reading of the said reports.
The minutes of the meetings of the Works Councils of Solvay Corporate Headquarters and of the company's Belgian plants were communicated to the Meeting, in accordance with the requirements of the Royal Decree of November 27, 1973.
The Chairman then handed the floor to shareholders who wanted to address the Meeting or request information.
After answers had been given to the comments and questions received, he declared the discussion closed and invited the Meeting to proceed with its examination of the resolutions to be adopted.
2. As the 916,172 Solvay shares acquired on the stock market since the accounts were closed, with a view to covering the stock options program, and held in the portfolio, are not entitled to the final dividend payment, the Meeting accordingly adjusted the following balance sheet items:
on the one hand, on the liabilities side of the balance sheet: the headings "140 Net earnings carried forward": EUR 308,152 million instead of EUR 307,794 million and "47/48 Other Liabilities": EUR 193,743 million instead of EUR 194,101 million;
on the other hand, under allocations and withdrawals : the headings
"693 Gain to carry forward": EUR 308,152 million instead of EUR 307,794 million and "694 Dividends": EUR 189,576 million instead of EUR 189,934 million.
Subject to those corrections, the Meeting approved unanimously, including the proxy votes, the annual accounts as well as the proposal for the distribution of the profit for the financial year.
Each fully paid-up share will receive a gross dividend of EUR 2.27, that is to say EUR 1.70 net. Having regard to the net interim dividend of EUR 0.70 paid on 11 January 2001, the final dividend will amount to EUR 1.- net, payable on June 14, 2001.
Details of the payment of the final dividend were set out in a circular letter dated March 23, 2001 addressed to shareholders and also in an advice published in the press in the same period.
3. The Meeting granted a discharge to the Directors in office during the financial year 2000 for the operations falling within that period; the motion was approved unanimously, including the proxy votes, except for 3 shareholders representing 183,607 shares who expressly abstained.
The Meeting then granted, by a unanimous vote, including the proxy votes, the discharge of the External Auditor in office during the financial year 2000 for the operations falling within that period.
4a) The Meeting then proceeded to elect a Director to replace Mr Pierre Casimir-Lambert, whose term of office has expired, but who is eligible for a new term of six years.
Mr Pierre Casimir-Lambert was re-elected unanimously, including the proxy votes.
His term of office will expire immediately after the Annual Shareholders' Meeting of June 2007.
b) The Meeting then examined the proposal to increase of the number of Directors from fifteen to sixteen and, in application of that decision, to appoint a new Director.
The proposal to increase the number of Directors from fifteen to sixteen was adopted unanimously, including the proxy votes, less 2 shareholders representing 90 shares who voted against the proposal.
In application of that decision, Mr Whitson Sadler was elected to the Board of Directors, by a unanimous vote, including the proxy votes, less 2 shareholders representing 320 shares who voted against his election and 1 shareholder representing 50 shares who stained.
His term of office of six years will become effective on January 1, 2002 and expire immediately after the Annual Shareholders' Meeting of June 2007.
5a) The meeting proceeded with the election of an External Auditor, to replace Mr André Hoste, whose term of office expires after the Annual Shareholders' Meeting of June, 7 2001.
It was noted that a favourable opinion had been received from the "Commission Bancaire et Financière" concerning the candidature of the international audit firm Deloitte & Touche - represented by Mr Michel Denayer. Moreover, the nomination had been approved unanimously, less one abstention, by a double majority of all the workers' delegates and by the Works Councils at the plenary assembly of March 19, 2001 of the Works Councils of Solvay S.A. Belgium.
The international audit firm of Deloitte & Touche - represented by Mr Michel Denayer - was elected unanimously, including the proxy votes, as External Auditor for a term of office of three years, which will expire immediately after the Annual Shareholders' Meeting of 2004.
b) The Meeting fixed the annual remuneration of the External Auditor at 175,000 EUR, all charges included, (excl. VAT) during his term of office. It was however agreed that the annual remuneration would be reduced to 150,000 EUR when, on the one hand, the transfer of the PVC activity to SolVin S.A. had been completed and, on the other hand, when the salt activity had been transferred to a subsidiary.
That decision was approved unanimously, including the proxy votes, less 1 shareholder representing 70 shares who voted against.
c) The meeting then proceeded to elect a Deputy External Auditor to replace Mr Marcel Van Acoleyen, due to retire at the end of the Annual Shareholder's Meeting of June 7, 2001.
It was noted that a favourable opinion had been obtained from the "Commission Bancaire et Financière" concerning the candidature of the international audit firm Deloitte & Touche - represented by Mr Philippe Roelants. Moreover, the nomination had been approved unanimously, less one abstention, by a double majority of all the workers' delegates and all the Works Councils at the plenary assembly of March 19, 2001 of the Works Councils of Solvay S.A. Belgium.
The international audit firm Deloitte & Touche - represented by Mr. Philippe Roelants - was elected unanimously, including the proxy votes, as Deputy External Auditor for a term of office of three years, which will expire after the Annual Shareholders' Meeting of 2004.
6. The Meeting approved the bilateral clause concerning the change of control contained in the joint venture agreement concluded between Solvay and Plastic Omnium for the creation of Inergy Automotive Systems, whose object is the pooling of the global activities of the two companies in the field of fuel systems. The Meeting approved the clause unanimously, including the proxy votes, less 29 shareholders representing 895,209 shares who voted against and 1 shareholder representing 382 shares who expressly abstained. A copy of the said clause will be annexed to these minutes.
Moreover, the Meeting was informed of the clauses of the same type concluded before the entry into force of the Belgian law of July 18, 1991, namely article 25.1.c) of the joint venture agreement concluded in October, 1989 between Solvay and Wienerberger for the creation of Pipelife in the field of pipes and fittings. A copy of the article in question will be annexed to these minutes.
There being no further business, the main parts of the Minutes were read to the Meeting. The full Minutes were then approved unanimously by the Meeting.
The Chairman closed the Annual Shareholders' Meeting at 12.03 a.m.
Article 25 : Premature Termination
25.1 Subject to the foregoing and the provision set forth in Article 12, 29 and 30, this Agreement shall be terminable forthwith upon the sending of notice in writing upon the occurrence of one or more of the following events :
c) by the other Party, if at any time and in whatsoever manner more than 50 percent of the voting control of either Party becomes directly or indirectly exercisable by one or more persons acting in concert any of whose interests or activities can reasonably be regarded by the other Party as being likely to result in a conflict with those of the other Party in relation to the Joint Venture or any material aspect thereof.
Speech by Mr. Aloïs MICHIELSEN, Chairman of the Executive Committee
OUR STRATEGY FOR CHANGE
Further strategic moves to focus on
faster development of Specialties in Chemicals, Plastics and Pharmaceuticals
strengthening of our Leadership in all our activities
Ladies and Gentlemen,
I join Baron Janssen in thanking you for your presence here at our General Shareholders' Meeting, which once again will allow a constructive dialogue on the future of the Solvay Group. Please know that every employee is making an effort to energize the Group's future, to give our customers the service they expect and to generate for you, the shareholders, a more satisfactory return in this rapidly changing world.
2000 : a year of contrasts
I will not hide it: the year 2000 was not easy; there were exceptional disturbances mid-year when-- as Baron Janssen said-- the price of oil worldwide and the price of natural gas in the USA increased sharply. Prices increased even more in the second half and led to a recession for the US manufacturing industry in the last quarter, preventing us from passing on these increases in our own sales prices. The fact that the year 2000 saw the competitiveness of the American giant brought down by its energy and monetary policies illustrates the significance of the impact. For example, not once since World War II until now had the price of electricity been lower in Europe than in the USA, with considerable consequences, as you can imagine, for all our American activities.
2000 concluded with an increase of 2.4% in Solvay's net earnings per share before extraordinary items, but the contrast between the first and second halves of the year was significant. After an increase of more than 30% in net earnings for the first six months, the second half was very disappointing, for reasons already stated, making it impossible to reach our goal of double-digit growth in 2000.2000 ended with:
An increase in sales: up 13%. Appreciation of various currencies compared to the Euro resulted in an increase of 4.7% in our sales. Variations in the consolidation perimeter explain a reduction in sales of 5.1% on balance. The 13% growth unfortunately was only very partially reflected in earnings. In fact, the gross margin narrowed in the Plastics Sector, following an increase in the price of olefins - especially in the US - and the commercial costs of the Pharmaceuticals Sector increased by 27% following the launch of five new products.
The result was:
An increase in EBIT: up 2%. This is the level of earnings from the Group's current activities, before taking into account interest charges and taxes;
An increase in net earnings: up 2.4%; noteworthy is the reduction in taxes paid, which took considerable effort. Only the very cohesive culture among all our own people enabled us to achieve these results. However, part of the drop in taxes is linked to tax credits and abatement of one-time taxes in 2000.
For the Group, the year 2000 showed that:
due to numerous initiatives, Solvay's chemicals sector became much less vulnerable to fluctuations in energy costs: its EBIT for the second half remained good and in fact was higher than that of the first half despite the energy-cost increase; and
the cyclical aspect of our Plastics Sector remained an important factor; the drop in its EBIT between the first and second halves is very significant in this respect.
hence the efforts made over the past few years to increase the competitiveness of our PVC business. We are reaping the first fruits of this labor today.
hence the BP deal, which profoundly modifies our plastics product mix; the full effect of this will not be seen until 2002.
Proof of the result of these efforts: the EBIT of the Plastics sector, for the entire year, still increased by 15% from 1999 to 2000.
2000 also showed that the Pharmaceuticals Sector made a significant contribution to Group results. Its size, however, is insufficient and is hit hard by the fact that the Pharmaceuticals Sector must, to a great extent, finance its growth from its annual earnings - which had a particular impact in the first half of 2001 - and that development of a commercial network in the US requires considerable expenditures, but constitutes a very significant asset.
I will talk about the Processing sector in just a few minutes.
Let us look at all this a little closer:
Chemicals Sector
The 2000 EBIT for our Chemicals Sector developed favorably, which bodes well for the first half of 2001. As we said, our Chemicals Sector weathered the rise in energy costs due to the Group's 10 cogeneration units; however, this is not the only reason for its good performance. Changes in the product mix and restructuring are also bearing fruit.
Our soda ash activities in Europe in particular took advantage of the cogeneration units. Also, this activity benefited from resumption of consumption in the Eastern countries and sustained demand. All of our European plants -- including our Bulgarian plant-- are operating at full capacity and at the start of 2001, prices increased. In the USA, however, there is excess capacity; but supply is being streamlined there with a recently announced closing of excess units by our competitors. We are leaders, very competitive and innovative.
Electrolysis products also experienced a favorable trend over the course of the year. In particular, the price of caustic soda reached record levels, following -- among other things-- shortages of electricity in the USA. In addition, we took advantage of the liberalization of the European electrical market.
In Hydrogen peroxide, the market is good. Demand is steady, and prices are firm.
In our chemical activities, we are developing specialties that meet the criteria for margins, ROI and higher growth. For example, new, very promising markets in BICAR®, electronic grades of hydrogen peroxide or even barium/strontium carbonates... meet these strict criteria. The Fluorinated products resulting from an intense research program at Solvay have also generated double-digit growth over the past few years and are becoming more and more substantial in our Chemicals portfolio.
Active management of our portfolio of chemical products was also accompanied by restructuring and streamlining in the activities where our competitiveness and growth are no longer ensured, for example in the cases of salt marketed for snow removal or for food, which we are putting in a JV with Kali und Salz, of several chlorinated products which we transferred to third parties, and of small electrolysis units that were shut down.
Plastics Sector
I spoke to you about the cyclical nature of our Plastics Sector and our efforts to remedy it. You can see in the annual evolution of our results that these efforts are paying off. It is encouraging to see that the results from our Plastics Sector increased on an annual basis despite the problems already mentioned.
In PVC, our competitiveness improved considerably. Our agreements with BASF and Atochem gave rise to the shutdown of 4 PVC production units in Europe and enabled us to increase the capacity of the plants at Jemeppe, Rheinberg and Martorell to world scale. Our PVC activity in Asia is also generating very satisfactory returns. However, the situation with Solvay Indupa in Argentina is difficult due to the crisis that country is undergoing.
In Polyolefins our position will change fundamentally after the BP deal. The portion of the sales figure for this SBU in the total sales for the sector had already decreased with deconsolidation of PP. It will decrease even more when we place our HDPE activity in the JV with BP. This new JV will be number 3 in the world, with a very complementary partner, integrated upstream.
The Specialty Polymers are a very high-return and high-growth activity. Their sales will double with the acquisition of the BP activities in this area, going to about 700 MEUR, representing about 20% of the Plastics sales in 2002 compared to the 12% in 2000.
You can see that in the Plastics sector, we are also working on our product mix.
ProcessiSector
Processing is not far removed from the Plastics sector. When Plastics does well, because the sales prices increase, Processing is not going to do as well because its raw materials are more expensive.
Processors need more time to pass along increases in the prices of their raw materials than manufacturers of plastics need. Thus the drop in EBIT for Processing between 1999 and 2000.
Another reason for the drop in EBIT for Processing between 1999 and 2000 comes from the fact that the EBIT of our Automotive SBU was diluted from the second half of 2000 due to the creation of Inergy, a JV between Solvay and Plastic Omnium, a dilution compensated for by our receipt of a balance payment in cash. This JV, present in seventeen countries with thirty-three plants, is the world leader in fuel systems and has a good mix of American, European and Asian customers; this is fortunate in today's difficult context for the American automobile market. Due to this leadership and the very numerous synergies, the prospects for growth for this JV are encouraging.
The other Processing activities are mainly Industrial Foils and Pipes. As before, we also worked in these areas to increase competitiveness and leadership, through restructuring and acquisitions. In the Processing Sector, there were considerable efforts to focus on core activities.
Let's talk now about the Pharmaceuticals sector.
Pharmaceuticals Sector
Over the past 5 years, sales in pharmaceuticals grew nearly 70%, or an annual increase of 15% worldwide. In the US, the annual sales growth was 30%. Results from this same period also show a rapid growth except in 2000 due to very large investments in marketing promotion granted for the launch of five drugs, which are:
The antidepressant Luvox®, which with a growth in sales of 35% in 2000 is having more of a presence on the Japanese market. Success in marketing and distribution agreements signed with Fujisawa and Meiji Seika enable us to foresee other launches in Japan in the medium term, such as with Creon®. This success is welcome to partially compensate for the net drop in sales of Luvox® in the US, which has been facing intense competition from generics since February, following the expiration of its patent in December 2000.
The high-blood-pressure drugs Teveten® and Aceon® whose marketing launch started out more slowly than expected due to the intense competition in the hypertension market. Currently their development from a still-modest base is being confirmed month after month. There is an enormous but very competitive market.
Male hormone replacement therapy AndroGel®, the first gel available in the USA for testosterone replacement for men, was approved by the FDA about a year ago and was launched in the summer of 2000. Its great success is exceeding our expectations and sales forecasts. A co-promotion agreement has been concluded with TAP, a joint venture between Abbott and Takeda, which will further accelerate the commercial presence of this product.
Female hormone replacement therapy Cenestin®, launched in the framework of an alliance with the American company Duramed. This is very complementary to our own portfolio of hormone replacement therapy products.
We are convinced that our pharmaceutical development will continue to be a source of value for our shareholders.
Our goal in this sector is growth through:
Geographical growth of sales in our existing drugs. Our recent acquisition of a pharmaceutical subsidiary in Brazil, Sintofarma, falls into this context.
External growth through alliances, partnerships and acquisitions of products or companies, such as acquisition of two high-blood-pressure medicines, Teveten® and Aceon®, or of Unimed, a company based in Chicago. The acquisition of Unimed was an excellent transaction for Solvay. It brought us new products - Androgel®, the success of which we have just described, and Marinol®.
Research is the third growth factor, in particular with a gastroenterology product whose phase-II testing was successfully completed in August 2000. This product would provide relief for patients with irritable bowel syndrome, a market in which we already have a strong position in Europe. We are also concluding research partnerships, such as the recent one with Lundbeck to develop a compound in phase II for psychosis, or even by outsourcing part of our clinical research to specialized firms. Our goal here is clearly to optimize our research costs and accelerate getting products to market. And here is a scoop for this meeting - we just recorded very positive Phase-II results, for a new molecule whose effectiveness has just been shown for hypertension and congestive heart failure.
However, we need to add that we are facing problems in the USA posed by the "Application Integrity Policy" of the Food and Drug Administration (FDA). This policy comprises a reexamination of past requests for registration for some of our products and reinforcement of quality procedures. It does not question the safety and efficacy of the products involved, but rather focuses on the quality of stability data generated over the years 1985-93. This re-examination is certainly beneficial over time, but it is onerous in application. It also has a delaying effect on registration of our new products in the USA.
Strategy of innovation and leadership in our activities
As you have seen, the Group's product mix is changing profoundly. At the end of 2001, we will hold significant leadership positions worldwide in activities comprising 85% of our sales figures. The agreement with BP will reinforce leadership in HDPE and Specialty Polymers and enabled us to leave Polypropylene, where we had become vulnerable. Likewise, in Pharmaceuticals, we achieved expert positions in world ranking in niches such as hormone replacement therapy- we are second in the USA- or in gastroenterology. We will continue along this path.
Behind this expertise is our innovation program, which again this year awarded numerous prizes, from among more than 600 projects, coming from all regions and businesses. We want to thank our collaborators for this enthusiasm. This spirit of innovation is indispensable because without innovation and competitiveness, there is no leadership.
Investments in innovative research programs, financed by a solid and healthy structure
We have an ambitious program of research and investments. In 2000, the Group maintained its investmentt 1999 levels, which is 1.2 billion EUR. For 2001, the investment and research budget should reach nearly 1.6 billion EUR, of which a large part, about 450 million EUR, are in reality non-cash expenditures representing the acquisition of engineering polymers in the swap of assets with BP.
In phase with its strategy of growth in the pharmaceuticals sector, Solvay dedicated in 1999 and 2000 about 40% of its investment and research budgets to its pharmaceuticals development, or about two times more than in 1997.
In addition, the development of e-business has also captured our attention. We are associated with the world's largest portals in the chemicals and plastics areas.
This proactive policy for growth is possible because the Solvay Group has a solid financial structure, with net debt reaching 29% of the total shareholder equity at the end of 2000, which remains moderate. We received very good long-term financial ratings by Moody's and Standard and Poor, allowing us to refinance our short-term debt of EUR 500 million through European Medium Term Notes.
Sustainable development : protection of people and the environment
The people making up the Group are the key to "sustainable growth". From this conviction comes Solvay's commitment to responsibly and ceaselessly make improvements in the areas of health, safety and the environment.
Three goals have been set:
Conserve resources: That is, produce better by consuming less energy and materials, and think recycling and sustainability of the products.
One example of our commitment: we are building several PVC recycling units.
Better protect people and nature: In other words, reduce the impact of production, use and end-of-life of products on health and the environment.
One example of our commitment: creation in and around our large sites of true industrial parks benefiting from our skills and resources in terms of environment, health and safety.
Better serve society: Solvay's goal is to respond to the needs of society - and to search for and anticipate these needs - by offering useful, efficient and high-performance products.
One example of our commitment: our research on streamlining and improving the performance of batteries for electric cars.
Prospects
What prospects do we see - at this point- for the year 2001?
You will agree with me that the world economic situation does not offer great clarity at the moment. Nonetheless, we are confident.
Chemicals should see an excellent first half for 2001 for almost all of its products. However, as at the end of the year 2000, the first quarter of 2001 was very difficult in Plastics, aside from specialties, especially in the USA. Processing is suffering from the automobile industry crisis, but is holding up due to wise globalization. Finally, growth in sales in Pharmaceuticals is being confirmed even though the immediate results are being held down by research and marketing costs, compliance costs in the USA and reorganization. As announced, results from the first half of 2001 will be lower than the record levels of the first half of 2000. The second half, however, should be higher than the second half of 2000, according to our current estimates, thus indicating an improving trend overall. The complete year 2001, however, could be below the levels reached in 2000 if the American economy does not recover.
Ladies and Gentlemen, I wanted to tell you today that many things are taking place at Solvay, and that we are not reluctant to adapt to a constantly changing world. Please know that our first priority is to fully develop the Solvay Group's advantages and competencies, make them attractive for you, the investors, strong for our customers and sources of personal development for our employees. We assure you that we are continuing our efforts to merit your confidence.
Speech by Baron Daniel Janssen, Chairman of the Board of Directors
Ladies and Gentlemen,
I want to welcome each and every one of you to this General Shareholders' meeting. Your presence here is an important sign of the loyalty and interest you bring to our Group.
The world continued to change very rapidly in the year 2000. The Solvay Group changed as well. Mr. Michielsen and I are going to try to explain and illustrate for you our strategy for change.
Strategy for Change for the Solvay Group
For the past several years, our strategy has been two-fold:
Increase our net earnings before extraordinary items by 10% per year. Growth was 11% per year on average over the past five years, despite growth in 2000 of only 2.4% for reasons which Mr. Michielsen will explain later.
Attain an average ROE of 15 % as soon as possible. This objective is not an easy one to reach. The strength of the dollar works against us here because we have many assets -- especially mining -- in this currency. We only reached 10.9% in 2000. Reaching this difficult goal - which we are determined to do - implies continued restructuring of our portfolio of activities by divesting or streamlining low-yield activities and acquiring specialty activities with high yield and growth.
This two-fold objective leads to the Group's industrial strategy :
Grow in specialties and pharmaceuticals ;
Become the world leader in what we do.
This industrial strategy is the response to change imposed by growing globalization worldwide. Each of our Business Units must have the worldwide potential for growth and profitability.
To achieve this global leadership, we have the listed, industrial and strategic company, Solvay SA, but simultaneously, under Solvay S.A. we will also enter into partnerships if necessary.
We will choose these partners selectively for the competitive advantage they bring to our Business Units. For example :
In Soda Ash, where we are by far the largest world producer, we have an 80% stake in a JV in the USA with our Japanese partner Asahi Glass, and we have 79% in a JV in Bulgaria with our Turkish partner Sisecam.
in Salt, we are keeping the salt production which is indispensable to our own production of carbonates and caustic soda,e remainder of this salt activity will go to a JV with the German Group Kali und Salz where we will hold 40%.
in PVC/VC/Chlorine/Caustic soda, we have 3 large JV's worldwide: SolVin in Europe where we hold 75% and BASF 25%, Solvay Indupa in Brazil and Argentina where we hold 51% with the balance traded on the Buenos Aires Stock Exchange, and Vinythai in Thailand where we hold 46% with the Thai group CP holding 31% and private stockholders 23% on the Bangkok Stock Exchange.
in HDPE, we are joining the British company BP; we will hold 51% in the USA and 50% in Europe.
in plastic fuel tanks for automobiles, we joined with a French family-held company, Plastic Omnium, and put our very complementary assets into a 50/50 JV called Inergy.
in PVC and polyolefin pipes, for water and gas, we have a 50/50 interest in the Pipelife JV with the Austrian Group, Wienerberger.
In all these JV's, we exercise strategic and operational functions either alone or in partnership. Our vocation and our competence are to be good international industrial managers, not just financial shareholders.
Let me talk a little about the major transaction for 2000-2001 between Solvay and BP.
This deal fundamentally modifies three of the four activities in our Plastics sector:
we become a major world player in a high-tech, rapidly growing activity due to acquisition of 100% of BP's engineering polymers activity;
we become, in a JV with BP, one of the world leaders in HDPE and compensate for our lack of integration upstream in this area; and
we are leaving polypropylene-- a commodity in which we have neither the size nor the advantages to compete successfully.
Also, in our agreement with BP, a cash payment will be made to the Solvay Group, as the balance in this vast transaction of exchanges which involves a total of about 2.5 billion USD in assets. We hope to conclude this transaction this upcoming July.
Other opportunities will occur, and we must seize them. We are in an excellent position to do this:
Our pharmaceuticals, chemicals and plastics specialties are growing rapidly;
Our basic chemical products such as carbonates and hydrogen peroxide continue to improve their competitiveness and generate stable and high cash flow
Our financial structure is very solid, enabling us to make major acquisitions when the opportunities arise;
Our quality management teams are able to develop strategies for our SBU's as well as to handle the day-to-day operations of the business or to negotiate international acquisitions-divestments.
The geographic development of the Solvay group
After 138 years in existence, we would like to continue to grow the Solvay Group throughout the world. Today, our sales figures break down to 59% in Europe, with an increasing percentage in Eastern Europe, 35% in the Americas and 6% in Asia Pacific, Africa and the Middle East.
The world economy had an exceptionally good year in 2000. Growth in the USA was excellent, and European growth accelerated. Nonetheless, the middle of the year was marked by a hike in energy prices worldwide. There was a sharp increase in the price of natural gas in North America. Growth in the American economy slowed significantly at the end of the year. Europe and Asia continued to grow rapidly but by the second quarter of 2001, began to feel the impact of the American slowdown.
The IMF is predicting for 2001 a growth of 3.2% for the world's GDP, down from the 4.8% growth posted for 2000. This downturn is seen in all regions of the world and of course most notably in the US, which will probably show a growth of 1.5% in 2001 compared to 5% in 2000. Growth in the former Soviet Union remained at more than 4%, which is above average for the world and the other major economic regions.
Return on the Solvay share
We are committed to offering our shareholders an attractive return. Of the past 10 years from 1990 to 2000, we see that the Solvay share has generated a total average return of 11.8% per year, for an average increase of 2.1%. The annual return is the sum of the increase in percentage of the price on the stock exchange and the return in percentage of the dividend over the price on the stock market.
The price on the stock market which had grown from 1990 to January 2000 (from 25.5 EUR to 85.5 EUR), has dropped since then to arrive today at 61.2 EUR . There are two reasons for this result. First, the stock market has factored in the net slowdown in Solvay's results growth from mid-2000. Secondly, the stock market has inflicted a major technical adjustment on Belgian companies. In fact, since 2000, investors have been massively selling Belgian shares, and the SICAV's listed on the BEL 20 in which they are preponderant, to acquire European shares and thus better reflect the range of shares listed on EURONEXT.
This is temporarily weighing on the Solvay share which represented more than 6% of the BEL 20 and less than 0.3% of the EURONEXT 100. However, foreign investors, especially American and Swiss, have begun to buy shares, which is partly compensating for the impact of adjustment of portfolios in Belgium.
As to our dividend, we have regularly increased it, in accord with our policy of raising it whenever possible and if possible, never decreasing it. Thus the Board of Directors is proposing at the General Shareholders' meeting a net dividend of 1.70 EUR per share (+3% compared to net dividend of 1999 which had been at 1.65 EUR). This puts the gross return at 3.8% and 2.9% net. Remember that at the end of 2000, prepayment of the dividend increased to represent about 40% of the total annual dividend.
Still linked to the Solvay shares and in order to associate a greater number of collaborators with the interests of the Group, the Board of Directors decided in December 2000 to continue, as in December 1999, expansion of the stock option plan at Solvay. These options can be exercised between 2004 and 2008 at an option price of 58.21 EUR. Due to coverage of these options by purchase of its own shares, which was approved at the extraordinary shareholders' meeting of June 2000, the Solvay Group has already purchased as of June 1, 2001, about 916,000 of its shares, an investment of about 58 million EUR, or 1.09% of the capital.
Corporate Governance
Concerning our governancard of Directors is proposing to the General Shareholders' Meeting today to name an American as Board member, taking effect on January 1, 2002, because our Group has almost one-third of its activities in North America. This would mean increasing the number of our board members from 15 to 16. The member we are talking about is Mr. Whitson Sadler, who directed all of Solvay's business in the USA for 25 years and who, at the age of 60, will complete his executive duties with Solvay America on December 31, 2001. Mr. Sadler is a excellent businessman who is greatly appreciated by his peers in American industry, who elected him Chairman of the American Chemical Council. He thus became the first representative from a European chemical group to head this association.
Also, the term of Board Member Pierre Casimir-Lambert will end after this general meeting. Mr. Pierre Casimir-Lambert is eligible for re-election for a term of six years.
Continuing with our corporate governance, Mr. André Hoste's term of auditor ends with this general meeting. Mr. Hoste is taking a well-deserved retirement and will not stand for re-election. It is proposed to this Assembly to elect the international firm of Deloitte & Touche - represented by Mr. Michel Denayer - as the Auditor for a term of three years. We thank Mr. Hoste for his wise advice and active participation in the life of the Group for the past 23 years. Mr. Van Acoleyen, assistant auditor, has chosen to follow Mr. Hoste, and we also thank him warmly for his collaboration of 13 years.
Finally we would like to thank all of our partners, our customers as well as our shareholders, for their confidence. We give special thanks to all of our collaborators for all that has been accomplished thanks to them in the year 2000 and all that, by their loyalty and openness to change, will be accomplished in 2001.
