Solvay seeks deals, wary on costs

By Aaron Gray-Block

DUSSELDORF (BestGrowthStock) – Belgian chemicals group Solvay (SOLB.BR: ) is seeking bolt-on deals while it hunts for a major acquisition that would provide innovation and growth in emerging markets, its plastics chief said.

Solvay sold its drugs unit in February for 4.5 billion euros ($6.3 billion) but has since shed little light on its hunt for a transformational deal that would spur earnings growth.

“There are two types. There is the acquisition, that is one part. If in parallel we will have smaller acquisitions, then we will have a look at it,” Jacques van Rijckevorsel told Reuters in an interview late on Tuesday.

Van Rijckevorsel, in Dusseldorf for a plastics trade fair, gave no indication as to the size of such bolt-on deals. The firm raised its stake in a fuel cell developer in May and injected 26 million euros this month in a Korean advanced materials investment fund.

In the plastics division, Van Rijckevorsel said he expects specialty polymers to show double-digit sales growth, while the commoditized vinyls business, which produces PVC used for piping in construction, is focused on remaining competitive.

But Van Rijckevorsel also raised concerns about the competitiveness of the European industry, adding that Solvay is preparing for a stronger euro, which would make its products more expensive and potentially curb sales if other currencies weaken in a currency war.

INTERNAL TARGETS

Van Rijckevorsel said that while Solvay has not stated its targets for emerging markets, unlike Dutch peers AkzoNobel (AKZO.AS: ) and DSM (DSMN.AS: ), it has set internal growth objectives and is targeting low-risk countries.

“We have not disclosed figures for targeted growth in China and so on. But we are working very hard on the emerging countries,” he said. “We are very aggressive toward Asia.”

Van Rijckevorsel added that innovation sales made up 27 percent of group revenues last year, while about 30 percent of specialty polymer sales now come from Asia.

“In the specialty polymers we are already an historic growth story. We are underway, it is not an intention, it is a fact,” he said. “We do not have a feeling we are late. But that does not mean we are complacent either.”

Solvay sees infrastructure, bureaucracy and unfamiliar legal systems as challenges to growth in emerging markets.

It also warned that competitiveness could be hurt further by an unequal implementation of emissions laws, if other countries do not match European standards, with Solvay moving to cut emissions by 20 percent by 2020 compared with 2006 levels.

“That is a concern. I cannot hide concern for the extra cost because we will need to invest in order to find that 20 percent and we need to buy emission rights,” Van Rijckevorsel said.

“It is fair if everyone has the same rules, but I am afraid that will not be the case.”

(Reporting by Aaron Gray-Block; Editing by Sara Webb)

($1=.7166 Euro)

Solvay seeks deals, wary on costs