Solvay Raises Cash Flow Target and Announces Battery Materials Joint Venture with Orbia

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By Elena Vardon

(Reuters) – Belgian chemicals group Solvay raised its full-year free cash flow forecast on Thursday on better-than-expected earnings and announced a joint venture with Mexico’s Orbia to produce materials for batteries in the United States.

The group, whose products include commodity chemicals such as soda ash and specialty polymers used in batteries, now sees full-year free cash flow of around 1 billion euros ($987 million ), against a previous forecast of 750 million.

Solvay separately announced with Orbia a framework agreement for a joint venture, consisting of an investment of approximately $850 million, of which the US Department of Energy will provide $178 million in the form of a grant.

The companies said the project will create the largest facility in North America for the production of suspension-grade polyvinylidene fluoride (PVDF), used in lithium-ion batteries for electric vehicles, and is expected to be fully operational by 2026. .

Solvay said in a statement that capital investments will reach 1 billion euros this year.

Its third-quarter underlying earnings before interest, tax, depreciation and amortization reached 917 million euros, ahead of its own recently updated guidance of around 900 million euros and consensus estimates of 764 million.

So far, the company has been able to pass on cost inflation to its customers, helped by buoyant demand and price stickiness.

“We have also renegotiated contracts with a number of key customers to put in place automatic energy cost escalation clauses in Europe,” chief financial officer Karim Hajjar told Reuters.

Sales for the July-September period were 3.61 billion euros, up 40% year-on-year, but Hajjar faced challenges next year.

“We have to be very mindful that 2023 is going to be tough,” Hajjar said, adding that Solvay could face a 15% drop in volumes next year as customers reduce inventory.

The CFO confirmed that the split of the group into two independent public companies by the second half of 2023, first announced in March, was on track.

($1 = 1.0136 euros)

(Reporting by Elena Vardon; Additional reporting by Olivier Sorgho; Editing by Leslie Adler)

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