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

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Our mission: To provide quality--and cost-effective--chemicals, pharmaceuticals, and related products and services, and in turn to ensure: that company shareholders receive a satisfactory and growing level of dividend and stock value, that employees have the opportunity to develop their full potential, and that the quality of life of an increasing number of human beings is improved.

History of Solvay & Cie S.A.

Although Solvay & Cie S.A. 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, until recently, the management of his family, the firm became one of the largest in Belgium, combining chemical innovation with social projects and cultural programs.

The foundations of Solvay & Cie were laid when Ernest Solvay devised his process for the manufacture of artificial soda ash. At the time, the method in use was that discovered by Nicolas Leblanc in the late 1700s. 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 which 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 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 but 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 deepset 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 which 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 U.S. 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 which 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: Einstein, Rutherford, and Marie Curie were but a few of the names listed at the first meeting in 1911.

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 East 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. This move into plastics was to be one of the company's most important decisions, opening up a new and very profitable field which did not diverge significantly from the company's basic product lines.

In the 1950s and 1960s Solvay continued to grow, building and maintaining its position as a prominent manufacturer of bulk chemicals. 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 non-family 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. Today, Solvay makes plastic bottles and baby seats, and has successfully entered the consumer market as well as the industrial market.

The changes in Solvay's management kept the company financially healthy through the late 1970s when, under the leadership of Jacques Solvay, 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 United States companies began manufacturing soda ash from a natural source, a rock mined in Wyoming, called trona. Suddenly a process was available which 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, although Solvay still keeps a profitable presence in the business during the present time.

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, 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. By 1990 Solvay was producing a number of drugs and vaccines for human and animal health care, in plants located in Europe and in the United States.

Up to 1990 Solvay's 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 due to a general decrease in plastics sales throughout Europe. However, the firm managed to maintain its financial position, showing higher sales in 1986 than ever before. In the 1980s Solvay management became increasingly aware of the company's vulnerability due to a reliance on bulk chemicals alone, and its diversification, more varied than ever before, showed a calculated response to this pressure.

In 1990, Solvay's profits experienced a drop of 5 percent from the year before, and in 1993 it reported a loss--of US$193 million--for the first time in 12 years. Moreover, throughout the 1990s observers questioned its ability to compete in the competitive pharmaceuticals market given that its major competitors--such as Akzo and Rhone-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 DM200 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 to co-market 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 up unprofitable operations and sold off 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, 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 1992 it paid Tenneco of the United States $500 million for its soda ash mines, in 1994 acquired a medical tubing manufacturer, 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 peroxides business in 1997.

By 1995, Solvay's sales had edged past US$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). By 1997, Solvay ranked as the second-largest industrial firm in Belgium, Europe's 12th largest chemicals and pharmaceuticals company, and 22nd largest such firm in the world. As long-time Solvay veteran Alois Michielsen prepared to replace Janssen at the company's helm in 1998, Solvay continued to show every sign of financial stability, and its diversified interests and increasingly aggressive moves into new areas promised a prosperous future.

Principal Subsidiaries: Solvic & Cie SNC; Mutuelle Solvay SCS; Plavina & Cie SNC; Solvay Coordination Internationale des Crédits; Vénilia & Cie SNC; Solvay Chemie BV (Netherlands); Solvay Interox SA (Paris); Solvay Deutschland GmbH (Germany); Solvay Pharmaceuticals GmbH (Germany); Solvay (Schweiz) AG (Switzerland); Solvay Osterreich AG (Austria); Solvay Chemicals Ltd. (U.K.); Solvay America Inc.; Solvay Quimica Y Minera SA de CV (Mexico); Solvay do Brasil S/A (Brazil); Solvay Quimica SA (Argentina); Nippon Solvay KK (Japan); Peroxythai Ltd. (Thailand); Solvay Asia Pacific Pte. Ltd. (Singapore); Solvay Biosciences (China) Ltd. The company maintains 303 subsidiaries and affiliated companies in 41 countries.

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Further Reference

"Belgium's Solvay to Market Certain Drugs with Upjohn," Wall Street Journal, May 22, 1991."Belgium's Solvay Moves with More Elan," Wall Street Journal, May 29, 1992."Solvay to Get Back Factory Taken by the Nazis in 1939," Wall Street Journal, August 21, 1991.

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