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Topics Materials, Mergers & Acquisitions, Materials Suppliers, Latin America
Companies & Associations Solvay SA
SÃO PAULO, BRAZIL — Belgium’s Solvay SA is revising its portfolio while pursuing organic growth and acquisitions following the integration of Rhodia SA this year. The plan that includes expanding in niche markets in Brazil where it’s strongest, while divesting from local operations like PVC where profits have disappointed.
“We’re getting out of businesses where other companies can do better than Solvay, and boosting our presence in areas where we are, or can be, stronger,” Gilles Auffret, executive committee member of Solvay Group and former chief operations executive at Rhodia, told Brazilian newspaper Valor Economico.
As part of that strategy, Solvay announced in early October a $1.3 billion purchase of U.S.-based Chemlogics, a supplier of chemicals for the oil and gas industry, allowing the group to double its operations in the field. It also put Brazil- and Argentina-based PVC producer Solvay Indupa up for sale earlier this year, and announced plans to set up a joint venture with INEOS in Europe.
The April 2011 purchase of Rhodia for $4.8 billion provided Solvay a stronger presence in Brazil. Its investments in Brazil over the past six years have totaled $360 million, or roughly $60 million per year. That pace should continue in the coming years, Auffret said.
“Rhodia has been present in Brazil for 94 years, we can say that it is almost a French-Brazilian company,” he said. “We are optimistic about the future.”
Use of biomass as a feedstock for chemicals and power generation has “entered the radar” of the group in Brazil, Auffret said. Traditional businesses like textiles and engineering plastics, where Rhodia has a strong market presence, will remain in the local portfolio, he added.
Rhodia announced a deal in August with GranBio to produce biochemicals in Brazil from renewable sources, primarily bio n-butanol, for applications in the paint and solvent industries. That project is still under study, Auffret said, but could start operations by 2015. Rhodia has already invested between $60 million and $70 million in a biomass project in Brotas, São Paulo state.
Solvay Indupa has two PVC plants producing resin for the production of pipes and fittings, based in Santo André, Brazil, and Bahia Blanca, Argentina, with combined production capacity of more than 1 billion pounds per year.
Brazil’s Braskem and Mexico’s Mexichem have confirmed interest in recent months in purchasing the Indupa assets, which could go for between $600 million and $800 million, according to sources cited by Valor Economico.
Latin America represented 10 percent of Solvay Group’s 2012 sales, or 14 percent if Solvay Indupa is included. The group plans to finalize the sale of its 70 percent majority share in Indupa “as soon as possible,” said Auffret, citing progress with interested buyers.
In the company’s third quarter financial report released in October, Solvay noted that results regarding Solvay Indupa were included in the “discontinued operations” segment, a sign that a sale may be near. The decision to sell the South American PVC business is part of the group’s strategy to get out of areas where other companies can do better.
“The PVC business was not as profitable as we expected,” Auffret said.