Solvay's core profit beats expectations in the second quarter due to cost-cutting measures

Belgian chemicals group Solvay today reported stronger-than-expected core profit in the second quarter as higher volumes and further improvements in fixed costs offset pressure from negative net pricing.

EBITDA was €272 million, compared with the average analyst estimate of €261 million provided by the company.

Solvay CEO Philippe Kehren said the group's focus on deploying cost-saving initiatives was key, achieving €46 million in structural cost savings so far. Solvay has been cutting costs due to weak demand and a volatile macro and geopolitical environment. The company aims to save €300 million by 2028.

Chemical companies have been under pressure since 2023, forced to reduce inventories due to soaring energy prices and falling demand from industrial customers. Bank analyst Sebastian Bray said earnings were strong despite increased investment in the second half of the year, with full-year free cash flow expectations improving. "It's nice to see businesses outside of soda ash outperforming expectations."

Solvay narrowed its 2024 underlying EBITDA forecast to 10-15% from a previous forecast of a 10-20% decline. The company raised its free cash flow forecast to over 300 million euros from a previous forecast of over 260 million euros.

The company reported second-quarter net sales of 1.194 billion euros, compared with analysts' expectations of 1.203 billion euros.

Solvay saw higher sales in most markets, including basic chemicals and performance chemicals. However, this positive trend was offset by the impact of lower net prices, resulting in a 25.6% decline in core profit for basic chemicals.