Belgian chemicals group Solvay has reported strong financial results for Q1 2023, with higher-than-expected net sales and underlying EBITDA. Although lower volumes impacted the company’s shares, Solvay’s ongoing focus on higher pricing in all segments has helped to offset the negative effects of softer demand across several end markets.
Net Sales in Q1 2023 Grew +2.0%
Solvay’s net sales in the first quarter of 2023 grew +2.0% organically to €3.2 billion compared to Q1 2022, driven by higher prices (+14%). However, lower volumes (-12%) due to softer demand across several end markets, including batteries for auto, construction, and consumer-driven industries, impacted the company’s sales. Despite this, Solvay’s pricing measures of €421 million more than offset the €127 million impact from variable cost inflation, resulting in €294 million of net price benefit in Q1 2023.
Underlying EBITDA in Q1 2023 Up +22.0%
Solvay’s underlying EBITDA in Q1 2023 of €839 million was up +22.0% versus Q1 2022 on an organic basis. Growth in Materials (+35%) and Chemicals (+19%) more than offset the decrease in Solutions (-9%). Sequentially, Q1 2023 EBITDA was up +14% versus Q4 2022.
Underlying EBITDA Margin in Q1 2023 Reached a New Record Level
Solvay’s underlying EBITDA margin in Q1 2023 reached a new record level at 26.5%, +320 basis points higher than in Q1 2022. This demonstrates the company’s ongoing focus on profitability, despite lower volumes.
Underlying Net Profit in Q1 2023 Up +24.5%
Solvay’s underlying net profit was €460 million in Q1 2023, up +24.5% compared to Q1 2022. This reflects the company’s strong financial performance, despite the ongoing challenges presented by lower volumes.
Free Cash Flow Generation of €125 Million in Q1 2023 Reflects High Profits
Solvay’s free cash flow generation of €125 million in Q1 2023 reflects the company’s high profits, investments in working capital and capital expenditures, and the benefit of a settlement of litigation. Solvay’s ongoing focus on profitability and efficiency has helped to generate strong cash flows, despite ongoing challenges in the market.
“We have been favoring pricing against volumes so going forward in the second quarter, volumes are not going to recover much compared to quarter one,” CEO Ilham Kadri said.
“We see probably a bit of recovery in the second half of the year from the volume perspective,” Kadri told reporters.