Solvay S.A. - Company Profile, Information, Business Description, History, Background Information on Solvay S.A.

Rue du Prince Albert, 33
B-1050 Brussels

Company Perspectives:

Our Mission. Building on our scientific, technical and commercial expertise, we responsibly provide innovative products and services related to chemistry and human health to create ever-increasing value to our customers, shareholders and employees. Our Vision. Solvay is an independent and ethical global industrial group with a balanced portfolio of sustainable profitable and growing businesses under careful environmental management: Amongst the world leaders in selected markets and products, either alone or with sound complementary business partners. Valued by its customers as a highly competent, reliable and competitive solution provider. With a clear, motivating organization, developing and empowering people and teams through rewarding and challenging jobs. Acting as a good corporate citizen, caring for the health, safety and environment of its employees and of the community at large.

History of Solvay S.A.

The wide ranging activities of the Belgium chemical firm Solvay S.A. center on four areas: commodity and specialty chemicals, plastics, processed plastic products, and pharmaceuticals. Chemicals account for about one-third of the company's revenues. Solvay is among the world leaders in several commodity chemicals, including soda ash, hydrogen peroxide, persalts, barium and strontium carbonate, and caustic soda, as well as such specialty chemicals as fluorochemicals. In plastics, which account for about one-quarter of overall sales, Solvay produces fluorinated polymers and elastomers, as well as vinyls. About 19 percent of revenues come from plastic processing, including automobile fuel and air intake systems, various films, and swimming pool linings. Solvay's pharmaceutical operations, generating about a quarter of revenues, are relatively small on a global scale, ranking about 37th among the world players in the early 2000s. Drug development efforts focus on four main therapeutic fields: gastroenterology, hormone treatments, cardiology, and mental health. Solvay operates in 50 countries; more than 95 percent of its revenues are generated outside of Belgium, with 45 percent originating outside of the European Union.

Although Solvay was not incorporated as a public company until 1967, its roots go back to the 1860s and the discovery by its founder, Ernest Solvay, of a new industrial process for producing soda ash, an essential element in glassmaking. Under his guidance and that of four generations of Solvays, the firm became one of the largest in Belgium, combining chemical innovation with social projects and cultural programs. Although they are no longer involved in the direct management, members of the Solvay family continue to have a substantial ownership interest in the company through a 26 percent stake held by Solvac S.A., a publicly traded Belgian holding company controlled by the family.

Foundations in Soda Ash: Late 1800s

The foundations of Solvay were laid by Ernest Solvay, who was born in 1838, the son of a quarry master from Rebecq-Rognon, Belgium. In the early 1860s Solvay devised a process for the manufacture of artificial soda ash. At the time, the method in use was that discovered by the French chemist Nicolas Leblanc in 1789. Leblanc's method, while valuable as an industrial process, had serious drawbacks, most prominently its production of large amounts of alkali wastes. Although this fact called for alternative methods, none were available. In 1861 Solvay filed a patent for a method that involved the reaction of ammonium bicarbonate and salt, the product being heated to yield sodium carbonate, or soda ash. Despite his enthusiasm, his "discovery" met with indifferent or negative response on virtually all sides.

On the advice of an attorney, Solvay consulted patent records, only to find that the process was not original after all. It had in fact been proposed half a century earlier, in 1811, by the French physicist Augustin Fresnel. Large-scale implementation of the process, however, was made difficult by the volatility of ammonia. Over the course of those 50 years, many chemists had attempted to devise a way to make the procedure industrially viable. All had met with failure. The propositions of the young Solvay, therefore, were seen as little more than the repetition of old mistakes. While a few encouraged him, most chemists looked with disfavor on his efforts.

The ammonia-soda process may never have achieved its influence had Solvay been inclined to admit defeat. His character, however, had been marked since youth by intense curiosity about scientific questions and by dedicated application to whatever problem was at hand. Although illness had cut short his formal studies, he had maintained this deep-set curiosity and educated himself. The small encouragement he received, added to this dedication, was enough for him to continue his research. Not only would his process eliminate the problem of waste, but he believed that it could drastically lower the price of soda ash, reducing it by three-quarters or more.

In order to continue the work, he and his brother Alfred formed Solvay & Cie in 1863, and embarked on the difficult route to finding a workable procedure. The perfection of the process on a large scale was far more difficult than its invention had been; the setbacks faced by the young firm were enough to drive it to the brink of bankruptcy by late 1865. With their family's help and support, the brothers decided to try one last time. This time, they were successful, producing large amounts of soda ash. The key to their system and Solvay's greatest single achievement was the Solvay carbonating tower, which permitted the important but problematic reaction of carbon dioxide and ammoniacal brine to take place effectively and safely. By 1869, with the implementation of this invention, the Solvays were confident that they would become a strong presence in the market for artificial soda ash.

Having worked out the procedure, Solvay & Cie faced another difficult problem, that is, persuading others that the method was viable. The very novelty of the technique rendered it unfavorable in many eyes, and for a long while Solvay faced intense competition from adherents to the Leblanc process. Even this competition, however, had its benefits; one of its side effects was a reduction in the price of sulfuric acid, employed to treat phosphates for use in agriculture. The end result of this was increased productivity from crops treated with these products, in turn lowering the price of such staples as bread.

Agricultural benefits aside, Ernest Solvay weathered many difficult years attempting to establish his method in the industry. Eventually, however, as it became clear that the Solvay method produced soda ash at a lower cost than the Leblanc process, it became more and more widely accepted. By the turn of the century, Solvay-method production had risen from 300 tons per year in the 1860s to 900,000 tons per year, at a price around three times lower than it had been before Solvay entered the field.

The Solvay method permitted the clean production of inexpensive soda ash, with Ernest Solvay holding patents on all key phases of the process. The market share that this was to give to the company, however, was not enough for him. Ernest knew that no firm could survive by resting on one past achievement, therefore he encouraged diversification into other related areas. Most notable among these, in this phase of the company's history, was the production of chlorine and caustic soda by electrolysis. As early as 1886, Solvay wanted to proceed in the direction of chlorine manufacture. It was not until 1895, however, that the company was able to work electrolysis into its industrial scheme. The production of chlorine eventually led to one of the company's largest modern branches, chlorinated products, including plastics. Caustic soda also combined with soda ash to provide a profitable new product area.

With the success of their first factory, located in Couillet, Belgium, the Solvay brothers began to expand their firm. The initial consideration of international growth, proposed for England, came in 1872. In the following year several British plants were constructed, in addition to one in Dombasle, France. The last two decades of the century saw rapid growth of the firm. In 1881 both the United States and Russia became sites for Solvay works: in the United States the cities of Syracuse and Detroit eventually housed Solvay factories, while three Russian locales were selected. The company continued its international growth in the following years by building in Austria, Hungary, Germany, and, in the early years of the 20th century, Spain and Italy. In all, by the company's 50th anniversary in 1913, there were at least 34 Solvay plants, including an electrolytic plant in Jemeppe-sur-Sambre in Belgium.

As the 19th century progressed, Solvay & Cie was directed toward greater productivity and importance in its market. Despite such impressive growth, the management was not neglecting its workers, a fact about the company's character that should not be overlooked. In addition to his interest in natural science, Ernest Solvay had a strong interest in socioeconomic matters. A proponent of universal suffrage, his social interests led him to the senate in the 1890s; he had an idealistic view of a future when "justice for all" would be a reality. This vision was realized in concrete terms by the institution of many innovative workers' benefits. By the end of the 19th century, workers for Solvay & Cie were able to take advantage of sick pay, compensation for injury, and the eight-hour work day, which was a Solvay innovation at their Russian plants. His social interests also led him to various contributions to the nation during World War I, after which he was named Minister of State.

While chemical projects and social interests were part of daily business, they were not the only things surrounding Ernest Solvay's company. Since his youth, the founder had a strong interest in intellectual questions, which later led to the creation of the Solvay institutes of physiology and sociology. His self-teaching also led him to speculations on such abstract physical principles as mass and energy. His interest in matters such as the nature of the universe led to his initiation of the Solvay conference on physics, which drew the greatest minds of the time together: Albert Einstein, Ernest Rutherford, and Marie Curie were but a few of the names listed at the first meeting in 1911.

Surviving Two World Wars

The company's first major setback came at the end of World War I, when its Russian plants were lost in the aftermath of the revolution. Shortly thereafter, in 1922, Ernest Solvay died. His prominence was marked by a letter of condolence sent by King Albert of Belgium to their mutual friend Charles Lefébure, with whom they shared an interest for mountain climbing. The company was able to overcome these losses, however, by modernizing many of its plants in the next years and making moves into certain other areas, such as the exploitation of potassium mining. In the 1930s and 1940s, increasing efforts were directed towards electrolysis, with new plants established in Italy, Greece, and other countries.

World War II again changed the complexion of the company. Many of its important factories were damaged during the conflict; in addition, several of its plants were lost to the Soviet-dominated Eastern European countries. While rebuilding its facilities, Solvay did not neglect to make new developments, holding to its policy of careful diversification. The company first produced polyvinyl chloride in 1949, at its plant in Jemeppe, Belgium. This move into plastics was to be one of the company's most important decisions, opening up a new and very profitable field that did not diverge significantly from the company's basic product lines.

Postwar Era: New Growth Fields and More Modern Management Structure

In the 1950s and 1960s Solvay continued to grow, building and maintaining its position as a prominent manufacturer of bulk chemicals. The company also expanded the range of plastics it produced by beginning production of high-density polyethylene in 1959. Solvay's first foray into the life sciences field also occurred during the 1950s. The next major changes in the company came in the late 1960s under the direction of Baron Rene Boël. One of the most important changes made by Boël was to place Solvay's shares on the public market, in 1971, for the first time. In addition, he made major structural changes in management. Previously, Solvay & Cie had been organized by a French and Belgian managerial structure known as a "commandité," in which authority was held by a group of five executives. All were required to be members of the Solvay family, into which Boël had married some time earlier. Boël abandoned this form of administration for a more modern corporate structure, paving the way for more clearly defined management responsibility and opening up top management to executives from outside the family. The initial addition of two nonfamily members was enlarged upon in subsequent years. Many European firms have been forced into similar changes by economic necessity, but Solvay managers said they chose their own time, when the changes made were able to provide significant benefits to the company.

During the same time, the company began to make record expenditures in research and development. It also began looking into new fields for growth. An example of this was its move from being a straightforward plastics manufacturer to a plastic processor as well, a development that began in the 1960s. Solvay was eventually involved in a wide range of plastic processing endeavors, including foils, automobile parts, pipes, plastic bottles, and baby seats--thereby successfully entering the consumer market as well as the industrial market. Meantime, on the plastics manufacturing side, Solvay began producing polypropylene in 1976.

The changes in Solvay's management kept the company financially healthy through the late 1970s when, under the leadership of Jacques Solvay, a great-grandson of the founder, it was acknowledged as the European leader in the manufacture of polyvinyl chloride. Production on its oldest line, soda ash and caustic soda, was reduced to approximately 20 percent of the firm's total income. Yet this reliable 20 percent was to provide the next great challenge for Solvay. In 1976 U.S. companies began manufacturing soda ash from a natural source, a rock mined in Wyoming, called trona. Suddenly a process was available that was both less expensive and cleaner than the reliable Solvay process. The situation was not helped by increasing environmental restrictions on chlorine and calcium carbonate. As a result, Solvay-method plants began to close.

In 1978 the European management felt the repercussions of this situation. In the wake of a Solvay price hike on soda ash, designed to offset losses at their oldest plants, Belgian glassmakers signed a letter of intent with the FMC Corporation in the United States. Faced with the loss of their contracts and of some 1,200 jobs, Solvay asked the Belgian government to intercede, while initiating measures to reduce their prices. Although the glassmakers seemed content to return their business to Solvay, FMC was less satisfied. The dispute led to changes in Solvay policy to suit antitrust laws, and helped support the suspicion that, sometime in the future, artificial means of production would be discontinued for this product; Solvay nevertheless remained a profitable presence in the business.

Despite such problems in the oldest branch of the firm, Solvay did not stop looking for new developments. The year 1984 saw the reorganization of its American interests under a new holding company, Solvay America, Inc., in an attempt to increase its profile in the United States. Approximately the same time, the company extended its financial outlays, marking $650 million to be dedicated to capital improvements in the period 1985-87. Another profitable move was the company's acquisition of life sciences firms, which began in 1979. The increasing importance of these life sciences endeavors was shown when the company placed them within a separate Health sector in 1980. Solvay by 1990 was producing a number of drugs and vaccines for human and animal healthcare, in plants located in Europe and in the United States.

Up to 1990 Solvay's more recent history was somewhat embattled, especially in terms of its old mainline products soda ash and caustic soda. Its newer plastics products also experienced a difficult time on the market because of a general decrease in plastics sales throughout Europe. The firm managed to maintain its financial position, however, showing higher sales in 1986 than ever before. In the 1980s Solvay management became increasingly aware of the company's vulnerability because of a reliance on bulk chemicals alone, and its diversification, more varied than ever before, showed a calculated response to this pressure.

1990s: Shedding Stodgy Reputation in a Deal-Making Decade

In 1990 Solvay's profits experienced a drop of 5 percent from the year before, and in 1993 it reported a loss--of $193 million--for the first time in 12 years and for only the second time in its long history. Moreover, throughout the 1990s observers questioned its ability to compete in the pharmaceuticals market given that its major competitors--such as Akzo and Rhône-Poulenc--were themselves pure pharmaceuticals producers. The collapse of the Berlin Wall and the Soviet Union's subsequent disintegration presented Solvay with an opportunity to recover the plants it had lost during World War II and the postwar years. In 1991 it regained ownership of its former East German soda ash and hydrogen peroxide plant, seized by the Nazis in 1939, and announced plans to invest DM 200 million in its renovation.

To improve its wavering profits, Solvay throughout the 1990s sought partnerships with global chemical and chemical end-user companies. In 1990, for example, it joined with the U.S. Dexter Corporation to form a specialty plastics joint venture and partnered with Wienerberger Canalisent L'Europe to acquire pipe manufacturers in Hungary, East Germany, and Greece. The following year it struck a deal with the U.S. pharmaceuticals giant Upjohn Company to comarket some of each other's products and entered into a joint venture with a Japanese company to produce salt in Thailand. Between 1994 and 1996, it also merged its coolant business with Germany's Hoechst, established automotive products and biosciences joint ventures in mainland China and Argentina, and formed an automotive products partnership with the O'Sullivan Corporation of the United States.

It also closed unprofitable operations and sold noncore businesses. Between 1991 and 1996, for example, it sold some of its animal health products line, its feed additive operations, its bioinsecticide business, and--in 1996--its remaining animal health units, to American Home Products. Other significant divestitures included the sale of its catalysts and sorbents businesses, its wood production and special cement operations, its industrial enzymes business, and, in 1997, its Brazilian plastics subsidiary.

Under CEO Baron Daniel Janssen, who was also related to the founding family by marriage, Solvay attempted to dispel its reputation as a stodgy industrial dinosaur by making repeated acquisitions. In 1990-91, for example, it acquired an American blow-molded plastics operation, gained a share in a Spanish polyvinylchloride producer, and broke up its hydrogen peroxide joint venture with Laporte of the United Kingdom in order to gain complete control of that important business. In June 1992 it paid Tenneco Inc. of the United States $500 million for its soda ash operations in Green River, Wyoming. This acquisition marked a historic shift as Solvay gained significant capacity in low-cost, trona-based soda ash; it also shored up the company's position as the global leader in soda ash production. In other deals, Solvay acquired a medical tubing manufacturer in 1994, bought Hoechst's fluorocarbons business and a Bulgarian soda ash plant in 1996, and acquired a Namibian fluorspar mine and a share of a Finnish hydrogen peroxide business in 1997. The company in 1997 also took full control of the U.S. plastics joint venture it had formed with Dexter Corp. Called D&S Plastics International, the Auburn Hills, Michigan-based firm had developed into a leading supplier to the North American automobile industry of polyolefin resins, principally used in the production of car bumpers.

By 1995, Solvay's sales had edged past $9.3 billion--more than a quarter of which was contributed by its U.S. subsidiaries--and in 1996 Janssen announced that Solvay would now concentrate its efforts on five principal sectors: alkalis, peroxygens, plastics, health (including pharmaceuticals), and processing (which included automotive products, industrial sheet and film, and pipes and fittings).

Early 2000s: Shifting Focus to Specialty Chemicals and Pharmaceuticals Under First Nonfamily CEO

In June 1998 Janssen succeeded Boël as chairman of Solvay's board of directors, while Aloïs Michielsen took over Janssen's position of chairman of the executive committee, a position similar to that of chief executive. In a historic development, Michielsen, a 28-year company veteran, became the first person from outside the founding Solvay family to head up the company. The new leader continued--and soon accelerated--the deal-making trend initiated by his predecessor.

During 1999 Solvay became the world's fourth largest producer of polyvinyl chloride (PVC) by acquiring the European PVC business of BASF, which was merged with Solvay's existing PVC business to create Solvin S.A., a 75-25 joint venture between Solvay and BASF headquartered in Brussels. Solvay also acquired Ellay, a leading U.S. producer of PVC films for medical applications, and entered into a joint venture with Phillips Petroleum Company to build two high-density polyethylene (HDPE) plants in North America. In 2000 Solvay and Plastic Omnium of France combined their fuel systems operations into a 50-50, Paris-based joint venture called Inergy Automotive Systems S.A., creating the world's largest manufacturer of plastic fuel tanks, with 3,300 employees and 30 facilities in 15 countries.

An important and complex deal with BP was concluded in October 2001. Solvay swapped its small, money-losing polypropylene business for BP's specialty polymers operations; at the same time, the two companies formed HDPE joint ventures in both North America and Europe. Combined, the joint ventures ranked third in the world in HDPE and had overall revenues of EUR 2 billion ($1.86 billion). The resulting Houston-based entity, BP Solvay Polyethylene North America, also took over Solvay's interest in the two HDPE plants being built with Chevron Phillips Chemical Company (Phillips Petroleum having since combined its chemicals business into a 50-50 joint venture with Chevron Corporation). As part of the deal with BP, Solvay had the right to exit from the joint ventures in late 2004, and industry observers widely expected the company to do just that.

Early in 2002 Solvay partnered with Kali und Salz to create a European salt joint venture called ESCO in which Solvay took a 38 percent stake. The big news that year, however, was Solvay's completion of its largest acquisition ever. In May 2002 Solvay acquired Ausimont S.p.A. from Montedison S.p.A. and Longside International for EUR 1.3 billion ($1.1 billion), gaining a EUR 600 million fluorinated chemicals and polymers business. Part of the funds for the deal were gained through the issuance of EUR 800 million in preferred stock to a financial investor, and Solvay was likely to use the proceeds from the sale of the BP Solvay Polyethylene joint ventures to reimburse the buyer of this stock. At the beginning of 2003, Solvay merged its existing fluoropolymers business with Ausimont to form Solvay Solexis, which was based in Bollate, Italy.

The end result of these transactions was that Solvay was much more highly focused on specialty chemicals and pharmaceuticals at the expense of the commodity chemicals business on which the firm was founded. Solvay was aiming to increase the share of group earnings before interest and tax that derived from its specialty chemical and pharmaceutical operations to 70 percent by 2006, up from 58 percent in 2001. One result of this shift in focus was that the company was better insulated from the cyclical effects of the commodity chemical sector. Overall, the various deals strengthened Solvay in another way. More of the company's businesses--80 to 90 percent of the them in 2002--had leadership positions in their specific sector, compared to less than 50 percent five years earlier.

The changes in the product portfolio also had a very positive on Solvay's bottom line. For 2002, although revenues were down 9 percent, earnings jumped 23 percent, reflecting the acquisition of more highly profitable businesses and the divestiture of less profitable ones. In fact, the company's return on equity hit 13.1 percent, a level not reached in more than ten years, though below Solvay's target rate of 15 percent.

Also boding well for the future was the rapid growth of Solvay's pharmaceutical business, where annual revenue growth was averaging 14 percent in the early 2000s. The company's focus on four main therapeutic areas--gastroenterology, hormone treatments, cardiology, and mental health--was paying off handsomely, with revenues approaching the EUR 2 billion mark. Solvay remained a small player on the global stage, ranking only in the top 40 among the world's pharmaceutical firms, and many questioned the company's continued commitment to this sector, particularly given that the trend was for major chemical groups to withdraw from drugs, as had, for example, BASF and DuPont. But Solvay had some promising products in its drug pipeline, most notably cilansetron, a treatment for irritable bowel syndrome; clinical trials for this drug were nearing completion, and Solvay hoped to launch the product in mid-2004 and was anticipating annual sales of more than EUR 250 million.

Principal Subsidiaries: Alkor Draka S.A.; Solvay BAP S.A.; Mutuelle Solvay S.C.S. (99.9%); Peptisyntha & Cie S.N.C.; Solvay Automotive Management and Research SNC; Solvay Benvic & Cie Belgium S.N.C.; Solvay Coordination Internationale des Crédits Commerciaux (CICC) S.A.; SIFMAR - Solvay Industrial Foils Management and Research S.A.; Solvay Interox S.A.; Solvay Pharma & Cie S.N.C.; Solvay Osterreich AG (Austria); Solvay do Brasil Ltda. (Brazil); Solvay Sodi AD (Bulgaria); Solvay Deutschland GmbH (Germany); Solvay Portugal - Produtos Quimicos S.A.; Solvay Asia Pacific Pte. Ltd. (Singapore); Solvay Iberica S.L. (Spain); Solvay (Schweiz) AG (Switzerland); Solvay UK Holding Co. Ltd.; Solvay America, Inc. (U.S.A.). The company maintains 398 subsidiaries and affiliated companies in 50 countries.

Principal Competitors: FMC Corporation; The Dow Chemical Company; Occidental Chemical Corporation; Shin-Etsu Chemical Co., Ltd.; Formosa Plastics Corporation; PolyOne Corporation; GE Plastics; E.I. du Pont de Nemours and Company; Atofina; DuPont Dow Elastomers LLC; Dyneon, LLC; Ticona; Sumitomo Chemical Company, Limited; GE Specialty Materials; Novartis AG; GlaxoSmithKline plc.


Additional Details

Further Reference

User Contributions:

Comment about this article, ask questions, or add new information about this topic: