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Rhodia (NYSE:RHA): -- Rhodia's (NYSE:RHA) net sales(1) up 8.4% to 5,085 million euros, led by strong pricing power across all businesses -- Recurring EBITDA(2) up 13.3% to 595 million euros, reflecting the impact of price increases and the delivery of fixed cost reduction objectives -- Positive EBIT of 97 million euros, versus a 188 million euros loss in 2004 -- A net loss of 616 million euros, versus a loss of 641 million euros in 2004, primarily due to the consequences of divesting underperforming businesses, as well as restructuring costs and refinancing costs -- Successful capital increase, consolidated net debt reduced by 11.3% to 2,089 million euros at year-end -- Further refocusing of the portfolio on businesses where the Group holds global leadership positions; divestment of businesses where the Group holds weak or underperforming positions -- UN registration of projects to reduce greenhouse gas emissions at plants in South Korea and Brazil. Rhodia announces today the first steps taken to maximize the value of the related emissions credits over time -0- *T Summary income statement 2004 2004 2005 before impact after impact after impact of of of In million euros, discontinued discontinued discontinued % under IFRS operations operations operations Change ------------------- ------------- ------------ ------------- --------- Net sales(1) 5,458 4,693 5,085 + 8.4% ------------------- ------------- ------------ ------------- --------- Recurring EBITDA(2) 573 525 595 + 13.3% ------------------- ------------- ------------ ------------- --------- Recurring EBITDA margin 10.5% 11.2% 11.7% - ------------------- ------------- ------------ ------------- --------- EBIT (173) (188) 97 - ------------------- ------------- ------------ ------------- --------- Discontinued operations 0 (78) (227) - ------------------- ------------- ------------ ------------- --------- Net income /(loss) (641) (641) (616) - ------------------- ------------- ------------ ------------- --------- "2005 confirms the momentum of our operational recovery plan launched two years ago," said Chief Executive Officer Jean-Pierre Clamadieu. "The Group's strategy has now been clarified and our successful capital increase will enable us to continue improving our balance sheet and undertake a new phase in our development. We remain confident in our ability to meet our 2006 objectives under current market conditions." (1) Excluding other revenues (2) Before restructuring, amortization and depreciation, other operating income and expense, and capital gains and losses on divestments *T 1. Confirmed operational recovery momentum Net sales(1) rose by 8.4% to 5,085 million euros from 4,693 million euros in 2004, as the 7.4% positive impact of the sharp price increases achieved in every business offset the higher cost of raw materials. Recurring EBITDA(2) rose by 13.3% to 595 million euros, led by strong pricing power and the 113 million euros in savings achieved in 2005, in line with the fixed cost reduction target for the year. Recurring EBITDA margin increased to 11.7% from 10.5%(a) the year before. Fourth-quarter recurring EBITDA declined by 5.3%, mainly due to inventory drawdowns and the impact of natural disasters in the United States and Switzerland. EBIT recovered to a positive 97 million euros for the year, from a 188 million euros loss in 2004, on the back of the improved recurring EBITDA(2) and a reduction in restructuring costs. The financial result, a negative 436 million euros versus a negative 267 million euros in 2004, included 79 million euros related to refinancing transactions and a 67 million euros unrealized foreign exchange loss (versus an unrealized gain of 67 million euros in 2004). In addition, financial expenses now include the interest cost on pension obligations, amounting to 33 million euros in 2005, versus 36 million euros the year before. The net loss for 2005 was 616 million euros versus a net loss of 641 million euros in 2004, despite an improved operating performance. This net loss results primarily from the impact of divesting non-strategic and unprofitable operations (227 million euros), restructuring costs (87 million euros) and refinancing costs (79 million euros). 2. Reduction in consolidated net debt after the successful capital increase The Group continued to take a selective approach to capital expenditure, which amounted to 286 million euros for the year. In addition, programs to reduce inventory helped to improve further the ratio of working capital requirement to total sales, to 10.8% at year-end, compared with 12.5% at December 31, 2004. Free cash flow(3) improved to a negative 148 million euros in 2005 including 106 million euros in restructuring costs, from a negative 241 million euros in 2004. Refinancing transactions, coupled with the 604 million euros capital increase, helped to reduce the Group's debt and lengthen its maturity. Consolidated net debt declined by 266 million euros during the year, to 2,089 million euros at December 31. 3. Continued refocusing of the business portfolio During the year, the Group continued to refocus its portfolio on businesses in which it holds global leadership positions, and which now represent two-thirds of its net sales. The Group has continued to divest non-strategic or unprofitable operations. A recent important step has been the signature of a letter of intent with Shasun Chemicals & Drugs Ltd with a view to selling the Pharma Solutions Enterprise's custom synthesis business. -0- *T (1) Excluding other revenues (2) Before restructuring, amortization and depreciation, other operating income and expense, and capital gains and losses on divestments (3) Defined as "net cash provided by operating activities" minus "additions to property-plant and equipment" and minus "other capital investments" (a) Before impact of discontinued operations *T 4. Optimizing the value of greenhouse gas emission credits The two projects launched under the Kyoto Protocol's Clean Development Mechanism to reduce greenhouse gas emissions at the plants in Onsan, South Korea and Paulinia, Brazil have been registered by the Secretariat of the United Nations Framework Convention on Climate Control (UNFCCC). This will allow Rhodia to trade on the emissions credit market 11 to 13 million tons of Carbon Emission Receipts per year, starting in 2007. Today, the Group has announced the first measures to optimize the value of these emission credits in the best interests of Rhodia and its shareholders (see "carbon emissions credits" press release). 5. Outlook Market conditions remain satisfactory at the beginning of 2006, in an environment still shaped by volatile raw material and energy costs. Over the year, the Group will continue to implement its proactive strategy of raising prices and pursue its reorganization and restructuring programs, in line with its fixed cost reduction objectives. Rhodia confirms its 2006 objectives: -- A recurring EBITDA margin of at least 13% -- A positive net income for 2006 -- A ratio of net debt to recurring EBITDA of less than 2.9 times Looking further ahead, the Group, which is now well positioned to drive its future development, reaffirms its medium term objectives: -- A recurring EBITDA margin of at least 15%(b) -- A ratio of net debt to recurring EBITDA of less than 2.2(b) times -0- *T (b) Excluding CO2 credits from CDM projects This press release and a detailed presentation of the 2005 results will be available at www.rhodia.com as of 7:15 am. *T This press release contains elements that are not historical facts including, without limitation, certain statements on future expectations and other forward-looking statements. Such statements are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those anticipated. Rhodia is a global specialty chemicals company recognized for its strong technology positions in Performance Materials, Functional Chemicals and the Organics and Services clusters. Partnering with major players in the automotive, electronics, pharmaceuticals, agrochemicals, consumer care, tires, and paints and coatings markets, Rhodia offers tailor-made solutions combining original molecules and technologies to respond to customers' needs. Rhodia subscribes to the principles of Sustainable Development communicating its commitments and performance openly with stakeholders. Rhodia generated sales of 5 billion euros in 2005 and employs around 19,500 people worldwide. Rhodia is listed on the Paris and New York stock exchanges. -0- *T A. CONSOLIDATED INCOME STATEMENTS For the year ended December 31, -------------------------------------------- ------------------------- (in millions of euros) 2005 2004 -------------------------------------------- ------------ ------------ Net sales 5,085 4,693 -------------------------------------------- ------------ ------------ Other revenue 460 453 -------------------------------------------- ------------ ------------ Cost of sales (4,620) (4,408) Administrative and selling expenses (574) (513) Research and development expenses (124) (138) Restructuring costs (87) (169) Goodwill impairment - (60) Other operating income/(expenses) (43) (46) -------------------------------------------- ------------ ------------ Operating profit/(loss) 97 (188) Financial income 127 121 Finance costs (496) (455) Foreign exchange gains/(losses) (67) 67 Share of profit/(losses) of associates - 3 -------------------------------------------- ------------ ------------ Loss before income tax (339) (452) Income tax expense (49) (102) -------------------------------------------- ------------ ------------ Loss from continuing operations (388) (554) Loss from discontinued operations (227) (78) -------------------------------------------- ------------ ------------ Net loss (615) (632) -------------------------------------------- ------------ ------------ Attributable to: Equity holders of Rhodia SA (616) (641) Minority interests 1 9 -------------------------------------------- ------------ ------------ Loss per share from continuing operations (in euro) - basic and diluted (0.60) (1.19) Weighted average number of shares before and after dilution 645,635,891 471,607,727 -------------------------------------------- ------------ ------------ Loss per share from discontinued operations (in euro) - basic and diluted (0.95) (1.36) Weighted average number of shares before and after dilution 645,635,891 471,607,727 -------------------------------------------- ------------ ------------ B. CONSOLIDATED BALANCE SHEETS Assets At December 31, -------------------------------------------- ------------------------- (in millions of euros) 2005 2004 -------------------------------------------- --------------- --------- Property, plant & equipment 2,135 2,245 Goodwill 244 226 Other intangible assets 154 139 Investments in associates 4 3 Other non-current financial assets 164 226 Deferred tax assets 83 99 -------------------------------------------- --------------- --------- Non-current assets 2,784 2,938 -------------------------------------------- --------------- --------- Inventories 630 701 Income tax receivable 20 14 Trade and other receivables 1,188 1,260 Derivative financial instruments 42 36 Other current financial assets 5 5 Cash and cash equivalents 920 612 Assets classified as held for sale 57 - -------------------------------------------- --------------- --------- Current assets 2,862 2,628 -------------------------------------------- --------------- --------- TOTAL ASSETS 5,646 5,566 -------------------------------------------- --------------- --------- Liabilities and shareholders' equity At December 31, -------------------------------------------- ------------------------- (in millions of euros) 2005 2004 -------------------------------------------- ---------------- -------- Share capital 1,177 628 Additional paid-in capital 570 807 Other reserves 141 12 Deficit (2,580) (1,993) -------------------------------------------- ---------------- -------- Equity attributable to equity holders of Rhodia SA (692) (546) Minority interests 26 25 -------------------------------------------- ---------------- -------- Total equity (666) (521) -------------------------------------------- ---------------- -------- Borrowings 1,975 2,250 Retirement benefits and similar obligations 1,269 1,038 Provisions 297 216 Deferred tax liabilities 34 55 Other non-current liabilities 46 51 -------------------------------------------- ---------------- -------- Non-current liabilities 3,621 3,610 -------------------------------------------- ---------------- -------- Borrowings 1,039 721 Derivative financial instruments 14 49 Retirement benefits and similar obligations 81 74 Provisions 204 237 Income tax payable 31 38 Trade and other payables 1,271 1,358 Liabilities associated with assets classified as held for sale 51 - -------------------------------------------- ---------------- -------- Current liabilities 2,691 2,477 -------------------------------------------- ---------------- -------- TOTAL EQUITY AND LIABILITIES 5,646 5,566 -------------------------------------------- ---------------- -------- C. CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE For the year ended December 31, -------------------------------------------------- ------------------- (in millions of euros) 2005 2004 -------------------------------------------------- ---------- -------- Currency translation differences and other movements 125 (9) Gains / (losses) on cash flow hedges 4 (2) Actuarial gains/(losses) on retirement benefits (248) (1) Tax impact of items taken to equity 13 - -------------------------------------------------- ---------- -------- Net expense directly recognized in equity (106) (12) -------------------------------------------------- ---------- -------- Net loss (615) (632) -------------------------------------------------- ---------- -------- Total recognized income and expense (721) (644) -------------------------------------------------- ---------- -------- Attributable to: Equity holders of Rhodia SA (722) (652) Minority interests 1 8 -------------------------------------------------- ---------- -------- D. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Other reserves -------------------------------- ----------------------------- ------- Cash Additional flow (in millions Share paid-in hedge Translation Legal of euros) capital capital reserve reserve reserve Deficit ------------- ------- ---------- -------- ----------- -------- ------- At January 1, 2004 179 2,513 (7) 0 32 (3,058) ------------- ------- ---------- -------- ----------- -------- ------- Appropriation of earnings (1,706) 1,706 Share capital increase 449 (2) Net loss (641) Income and expense directly recognized in equity (2) (11) 2 Acquisition of minority interests ------------- ------- ---------- -------- ----------- -------- ------- At December 31, 2004 628 807 (9) (11) 32 (1,993) ------------- ------- ---------- -------- ----------- -------- ------- Appropriation of earnings (264) 264 Share capital increase 549 27 Net loss (616) Income and expense directly recognized in equity 4 125 (235) ------------- ------- ---------- -------- ----------- -------- ------- At December 31, 2005 1,177 570 (5) 114 32 (2,580) ------------- ------- ---------- -------- ----------- -------- ------- (in millions Minority of euros) Total interests Total ------------- ------- ---------- -------- At January 1, 2004 (341) 27 (314) ------------- ------- ---------- -------- Appropriation of earnings 0 0 Share capital increase 447 447 Net loss (641) 9 (632) Income and expense directly recognized in equity (11) (1) (12) Acquisition of minority interests (10) (10) ------------- ------- ---------- -------- At December 31, 2004 (546) 25 (521) ------------- ------- ---------- -------- Appropriation of earnings 0 0 Share capital increase 576 576 Net loss (616) 1 (615) Income and expense directly recognized in equity (106) (106) ------------- ------- ---------- -------- At December 31, 2005 (692) 26 (666) ------------- ------- ---------- -------- E. CONSOLIDATED STATEMENTS OF CASH FLOWS For the year ended December 31, --------------------------------------------------- ------------------ (in millions of euros) 2005 2004 --------------------------------------------------- --------- -------- Net loss (616) (641) Adjustments for : Depreciation, amortization and impairment of long- term assets 518 750 Net increase/(decrease) in provisions and employee benefits 25 110 Net increase/(decrease) in financial provisions 133 103 Share of profit/(loss) of associates - 65 Dividends received from associates - - Other income and expense (2) 7 Gain/(loss) on disposal of non-current assets 22 (258) Income tax expense/(income) 20 60 Foreign exchange losses/(gains) 110 (91) --------------------------------------------------- --------- -------- Cash flow from operating activities before changes in working capital 210 105 --------------------------------------------------- --------- -------- Changes in working capital - (Increase)/decrease in inventories and work in progress 91 (52) - (Increase)/decrease in trade and other receivables 62 74 - Increase/(decrease) in trade and other payables (26) (22) - Increase/(decrease) in other current assets and liabilities (199) (98) --------------------------------------------------- --------- -------- Net cash from operating activities 138 7 --------------------------------------------------- --------- -------- Purchases of property, plant and equipment (254) (221) Purchases of other non-current assets (32) (27) Proceeds on disposal of non-current assets 51 652 (Purchases of)/repayments of loans and financial investments 24 (107) --------------------------------------------------- --------- -------- Net cash (used by) / from investing activities (211) 297 --------------------------------------------------- --------- -------- Proceeds from issue of shares, net of costs 576 447 Dividends paid - - New long-term borrowings, net of costs 1,228 980 Repayments of non-current borrowings, net of costs (1,285) (987) Net increase/(decrease) in current borrowings (176) (926) --------------------------------------------------- --------- -------- Net cash (used by) / from financing activities 343 (486) --------------------------------------------------- --------- -------- Effect of foreign exchange rate changes 38 (4) --------------------------------------------------- --------- -------- Net increase/(decrease) in cash and cash equivalents 308 (186) --------------------------------------------------- --------- -------- Cash and cash equivalents at the beginning of the year 612 798 --------------------------------------------------- --------- -------- Cash and cash equivalents at the end of the year 920 612 --------------------------------------------------- --------- -------- *T