Solve AI

SOHN INVESTMENT CONFERENCE

D AV I D E I N H O R N
April 3, 2024

I want to thank the Sohn Investment Conference and Graham for inviting me to speak.

Last year I hoped this conference would be in person. It is much easier to present an idea
and receive immediate audience feedback.

It’s no fun telling corny jokes to a camera and wondering whether anyone laughs.

1
 Disclosures
The information contained herein reflects the opinions, estimates and projections of DME Capital Management, LP d/b/a Greenlight Capital
(collectively with its affiliates and predecessor entity, “Greenlight”) as of the date of publication, which is subject to change without notice
at any time subsequent to the date of issue, and serves as a limited supplement to a verbal presentation. Greenlight does not represent
that any opinion, estimate or projection will be realized. All information provided in this presentation is for informational purposes only
and should not be deemed as investment advice or a recommendation to purchase or sell any specific security. Greenlight has an economic
interest in the price movement of the securities discussed in this presentation, but Greenlight’s economic interest is subject to change
without notice. While the information presented herein is believed to be reliable, no representation or warranty is made concerning the
accuracy of any data presented.
GREENLIGHT® and GREENLIGHT CAPITAL, INC. with the star logo are registered trademarks of Greenlight in the United States, European
Union and other countries worldwide. All other trade names, trademarks, service marks, and logos herein are the property of their
respective owners who retain all proprietary rights over their use. This presentation (a) may not be disclosed, distributed, or reproduced
without the prior written permission of Greenlight and (b) is intended solely for the use of the person to whom the materials have been
delivered by Greenlight.
The specific investments identified and described are not representative of all the positions held, purchased or sold, and in the aggregate,
the information may represent a small percentage of activity. It should not be assumed that any position identified has or will be profitable.
There can be no guarantee that similar investment opportunities will be available in the future or that Greenlight will be able to exploit
similar investment opportunities should they arise. The information presented is intended to provide insight into the noteworthy events, in
the sole opinion of Greenlight. The opinions expressed represent the current, good faith views of Greenlight at the time of publication and
are provided for limited purposes, are not definitive investment advice, and should not be relied on as such.
THESE MATERIALS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY INTERESTS IN ANY FUND
MANAGED BY GREENLIGHT OR ANY OF ITS AFFILIATES. SUCH AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY INTERESTS MAY
ONLY BE MADE PURSUANT TO DEFINITIVE SUBSCRIPTION DOCUMENTS BETWEEN A FUND AND AN INVESTOR.
2

Here are our disclosures.

I’d like to remind everyone that the ideas I’m about to present are existing positions in our
portfolio. We may change our positions at any time.

_____________
Note: All references to EBITDA, EBIT, Net Income and EPS shown (both historic and forecasted) on this
presentation are “underlying” measures, adjusted to exclude restructuring costs, remediation expenses,
unrealized fair value changes and other non-operating items.

2
 Value Investing

The cartoon says, “You have to invest for value these days. And these days I find the best
value in gin and tonic.”

I’ve said the value investing industry is dead. However, value investing and the value
investing industry are two different things.

_____________
Source: www.CartoonStock.com.

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 4

The value investing industry is the thousands of people that used to be employed to
analyze and pick stocks by trying to figure out which ones were undervalued.

Trillions moving from active management to passive have caused these people to be fired
and they are not coming back. This is what I mean by the value investing industry being
dead.

_____________
Source: www.123RF.com.

4
 Value Investing

CartoonStock.com 5

The cartoon says, “Good news – remember all those growth stocks I sold you? They’re now
value stocks.”

With all these unemployed people and their AUM gone, it’s actually a great time to be a
value investor. There is much less competition.

There are cheap stocks that are just much cheaper than they would otherwise be if there
were lots of professionals with capital to deploy trying to identify them.

I will talk about one of those in a couple minutes.

_____________
Source: www.CartoonStock.com.

5
 Value Investment Industry

When I started in the business, everyone said Warren Buffett benefitted by starting his
investment business when few people even read annual reports and few were good at
valuing stocks.

It was a shame that there was so much competition for me. There were thousands of
experienced professionals trying to do the same thing. Well, guess what?

That’s how it feels right now. For the few of us who are left, it’s a great time to be a value
investor.

There is so little competition that the opportunities to buy fine companies with double-
digit cash-on-cash returns are more abundant than at any time in my career, other than at
the bottom of a bear market.

This may be how Mr. Buffett felt in the 1950s.

So, here’s an example…

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 7

The cartoon says, “Mrs. Rothman, will any of this be relevant once AI takes over?”

We find ourselves asking the same thing.

I know everyone is talking about AI, and the title of my talk today is Solve-AI.

At Greenlight we have always thought of ourselves as flexible investors, willing to learn new
things.

AI has been the rage for the last year and we have found a great idea.

_____________
Source: Cartoon by Andy Anderson Cartoons.

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 8

Our idea today is Solve-AI, a European company that most of you have never heard of. I am
very excited to tell you about it.

It is most commonly known as Solv-ay, whose motto is “Mastering the elements essential
to our world.”

Solvay is an essential chemicals company that holds the #1 position across all of its
markets.

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 9

Everyone wants a lesson in computer science. Instead, today we will study chemistry. I’m
sure that thought excites all of you.

Who besides my dad had chemistry as their favorite class?

First chemistry joke: Do you know why you can never trust an atom? They make up literally
everything.

_____________
Source: https://www.reddit.com/r/antimeme/comments/zzpy8g/its_me_i_am_walter_white_ama/.

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 Ticker: SOLB BB
€ 30

€ 28

€ 26

€ 24

€ 22

€ 20

10

Solvay is a 160-year-old Belgian enterprise that trades under the ticker S-O-L-B in Belgium.

The company just went through a corporate restructuring.

_____________
Source: Bloomberg, LP, retrieved April 1, 2024.

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 Spin-off

11

The old Solvay was a chemical conglomerate that in December spun off its “specialty
chemicals” business into a new entity called Syensqo.

The remaining essential chemicals businesses became the new Solvay.

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 2023 NET SALES

€4.9B
COUNTRIES
EMPLOYEES

9,000+ 41
The New Solvay
BRANDS RESEARCH CENTERS

94 7
PRODUCTION SITES

45
12

The new Solvay has 9,000 employees in over 40 countries globally.

It has 7 major research and innovation centers, and has over 90 different branded products
across 5 business segments.

In 2023, Solvay had revenues of €4.9 billion and a 26% EBITDA margin.

_____________
Source: www.Solvay.com.

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 Solvay Segments
Soda Ash and
43% Derivatives

Special Chem
Rare earths for %
19%
auto catalysts Net
Sales
13%
13%
12% Peroxides
Coatis
Solvents
(Latin America)
Silica 13

Solvay is best known for Soda Ash, which makes up around 40% of sales.

It also has four other business segments, all of which have #1 positions in their markets.

While these are all thought of as commodity businesses, they are higher margin and much
more stable than most commodity chemical companies.

_____________
Source: Solvay Full-Year 2023 Results Earnings Presentation, March 13, 2024; Greenlight calculations.

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 14
CartoonStock.com

Next chemistry joke:

I know you all love compound interest…

Today, we are interested in compounds.

There are a few basic facts about soda ash, or sodium carbonate.

_____________
Source: www.CartoonStock.com.

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 Soda Ash and Derivatives
SODA ASH BICAR

Over 50% of global soda ash production is used in glass manufacturing

15

Solvay’s Soda Ash and Derivatives business segment is diversified.

20% is used for flat glass applications; 15% is used in container glass; 10% is used in
detergents and cleaning agents; and 30% is used in industrial applications to produce
sodium silicates and lithium carbonate for EV batteries.

Finally, a quarter of this segment is not soda ash, but a derivative called BICAR, which is
sodium bicarbonate. It’s used in highly value-added pharmaceutical-grade and food
applications.

BICAR can sell for much more than soda ash, particularly for pharmaceutical grade, and its
market is growing twice as fast.

_____________
Source: Solvay Capital Markets Day, November 13, 2023.

15
 16

Soda ash is quite an essential and versatile commodity chemical.

The cartoon says, “It’s a great all purpose cleaner and it makes a nice flavoring for gum!”

That’s actually true.

_____________
Source: www.CartoonStock.com.

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 Soda Ash Production
North America
“Natural” 63%

trona ~30%
based
Other Turkey
6% 22%
China
9%
Soda Ash Chemically
identical
ISC
10%
EMEA
29% Other
“Synthetic” 4%

chemical ~70%
China
process 57%
17
Source: WE Soda 2022 production data

Soda ash can be produced naturally or synthetically.

Natural production, which is around 30% of the market, comes from mining and purifying
trona ore.

The problem is trona is found in remote locations like Mongolia, Turkey and Wyoming,
which individually accounts for over 80% of global reserves.

Like most of us, before this I thought Wyoming was mostly for skiing and rodeos. Who
knew?

Synthetic production, which is around 70% of the market, is more expensive, uses
ammonia and consumes 2-3 times more energy.

Solvay today is 43% natural production and 57% synthetic production.

_____________
Source: WE Soda Presentation, December 2023 (using 2022 production data).

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 CartoonStock.com 18

Next chemistry cartoon to make sure you haven’t fallen asleep – though no shame if you
are fighting it.

The cartoon says, “Wait, wait, before you mix them, you have to say, ‘Pow!’.”

_____________
Source: www.CartoonStock.com.

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 Solvay Soda Ash Share
Solvay,
11.2%
Others, 43.8%

WE Soda, 7.2%

Tata Group, 5.9%

Sisecam,
5.9%

Genesis Alkali, 5.5%

Ciech Soda, 2.7%
Bashkir Soda, 2.9% Nirma, 4.0%
Tangshan Shandong
Sanyou, 3.2% Henan Jindadi, 3.9% Haihua, 4.0%
19
Source: J.P. Morgan Europe Equity Research

Solvay is the largest producer of soda ash globally with about 11% global share.

Its largest competitor in this segment is WE Soda, a Turkish pure-play company that
produces natural soda ash in Turkey and is developing projects in North America.

_____________
Source: J.P. Morgan Europe Equity Research, WE Soda June 7, 2023.

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 Soda Ash Logistics

20
Source: WE Soda (December 2023)

Because soda ash doesn’t cost much, but weighs a lot, transportation adds significant cost.
Transportation can add between 30% and 100% to the cost depending on distance and
number of interchanges.

As a result, the markets are regional instead of global.

Solvay competes in North America and Europe and is mostly independent of China, which
currently produces about 45% of global soda ash for domestic consumption and to export
to Southeast Asia. Shipping it further is not competitive.

_____________
Source: WE Soda Presentation, December 2023; Greenlight estimates and calculations.

20
 Soda Ash Cost Curve
Western Europe

Bulgaria
U.S.

2021

21
Source: Solvay 4Q21 Earnings Presentation

This somewhat dated chart from 2021 illustrates the soda ash market where Solvay
competes.

What is most important is the delivered cost of soda ash to end customers, which includes
production and transportation.

You can see the difference between natural soda ash processing with hash marks, vs.
synthetic processing on the solid bars.

Synthetic is made closer to the end user so it has lower transportation costs, but higher
production costs.

The blue bars represent Solvay’s plants. It has a world-class synthetic production facility in
Bulgaria next to the port, five regional plants in Western Europe next to end users, and
natural production in Wyoming.

_____________
Source: Solvay Fourth Quarter 2021 Webcast, February 23, 2022.

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 Soda Ash Pricing
400
350
300
250
$ per ton

200
150
100
50
0

Western Europe Soda Ash Contract price (delivered)

US Soda Ash price (Domestic FOB Wyoming)
22
Source: J.P. Morgan Europe Equity Research

Soda ash pricing was pretty stable from 2010 to 2021.

During most of that period, Western European soda ash has been around $250 per ton,
while U.S. prices have been lower at around $180 per ton.

You see a spike in 2022 and 2023 related to both COVID distortions that created pent-up
demand, and also passed through higher energy costs in Europe related to the Russia-
Ukraine war.

_____________
Source: J.P. Morgan Europe Equity Research, WE Soda June 7, 2023.

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 Soda Ash Stability
Europe U.S.
80% 80%

60% 60%

40% 40%

20% 20%

0% 0%

-20% -20%

-40% -40%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Western Europe Soda Ash Contract price US Soda Ash price Domestic (FOB Wyoming)
(delivered) YoY change YoY change
Average YoY change of Europe commodities Average YoY change of US commodities
23
Source: J.P. Morgan Europe Equity Research

While soda ash is categorized as a commodity chemical, it is much less volatile than overall
commodity prices.

Here we show the price changes of soda ash over time in orange for both European and
U.S. markets, and how they compare with the prices of a commodity index in blue.

The last couple years, soda ash producers earned excess revenues and profits, which are
normalizing this year.

_____________
Source: J.P. Morgan Europe Equity Research, WE Soda June 7, 2023.

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 Capacity Additions
Capacity Production Production
Region Operator ∆ Type Focus Start
Genesis Alkali +1.0 Natural Export 2023-24

Kazan Soda WE Soda) +0.5 - 0.7 Natural Export 2023-26

Solvay +0.6 Natural Export 2025-26

Berun +6.0 - 7.8 Natural Domestic 2023-28

Jiangsu Debang +1.4 Synthetic Domestic 2023-25

Henan Jindadi +1.5 Synthetic Domestic 2024-25

Other +2.0 Synthetic Domestic 2024

Potential Closures -2.8 Synthetic Domestic 2024-26

Pacific Soda (Sisecam/WE Soda JV) +2.5 - 5.0 Natural Export 2027

West Soda +1.5 - 2.5 Natural Export 2030

Total: +14.2 - 19.7 million mtpa
24
Source: WE Soda (December 2023)

Over the next 7 years, soda ash capacity will grow about 2.5%-3.5% per year.

Most of it will be new trona processing projects in Inner Mongolia and Wyoming. It takes
about 3 years for a new processing plant to ramp up.

Solvay is adding about 7% to its capacity by expanding in Wyoming in 2025 and 2026.

WE Soda has a couple of greenfield projects in Wyoming called Pacific Soda and West Soda,
coming online between 2027 and 2030.

The largest expansion, which the bears are worried about, is from Chinese company Berun,
which is developing a greenfield project in Inner Mongolia.

We don’t think Mongolian supply is all that relevant because the transportation costs to
Europe are prohibitive.

Excluding China, the capacity additions are between 6 and 10 million tons of annual
production, which are only 1.7%-2.7% per year, and most of it is toward the end of the
decade.

_____________
Source: WE Soda Presentation, December 2023; Greenlight estimates and calculations.

24
 European Flat Glass Production
120
110
Index (Jan 2018 = 100)

100
90
80
70
60 COVID

50

25
Source: BNP Paribas Exane Research / Eurostat

This is demand for flat glass used in building construction, which has been the most volatile
key end market for soda ash.

You can see that there was a COVID-related plunge, followed by a recovery, followed by a
weak 2023 due to the European recession.

As we will show in a bit, while 2024 is poised to be a down-profits year, there is certainly
room for volumes to better recover in the next few years as construction rebounds to the
levels seen between 2018 and 2022.

_____________
Source: BNP Paribas Exane Research (Eurostat data).

25
 Soda Ash Capacity Utilization
100,000 90%
Capacity / Demand (’000 tons)

90,000 88%

Capacity Utilization (%)

80,000 86%

70,000 84%

60,000 82%

50,000 80%

40,000 78%

30,000 76%

Total Capacity Total Demand Capacity Utilization %

26
Source: J.P. Morgan Europe Equity Research

COVID had a significant impact. Demand slowed down a bit in 2020, which drove industry
utilization from 87% to under 80%.

It takes years for new supply to come online, so COVID also derailed capacity additions for
several years.

As the global economy reopened, demand returned to trend and utilization jumped to 88%
to try to catch up. The European slowdown and inventory destocking have caused
utilization to return to about 83%.

Over a longer time, soda ash demand has grown with GDP. It is likely to grow above trend
going forward, given soda ash’s importance to renewable energy and EV batteries.

Each ton of lithium produced requires approximately two tons of soda ash.

J.P. Morgan projects that global capacity utilization will rise gradually over the next seven
years, as demand grows a little faster than supply.

_____________
Source: J.P. Morgan Europe Equity Research, WE Soda June 7, 2023.

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 Soda Ash

%
43%
Soda Ash Financials
19% Net
Sales
13%
13%
12%
2,500 35%

2,000 30%

EBITDA Margin (%)

€ Millions

1,500 25%

1,000 20%

500 15%

0 10%
2019 2020 2021 2022 2023 2024E
Revenue EBITDA % Margin
27
Source: Greenlight estimates for EBITDA, EBITDA margin and 2024

In working through the disclosure, this is our best take on soda ash’s historical financial
performance for the last five years and guidance for 2024.

2019 was a below-normal year, and was followed by COVID, which caused an unusual
decline.

This was followed by a strong recovery and higher prices. Pricing has fallen and 2024 is
forecast to look a lot like 2019.

However, this time we believe that this is a trough result, rather than a midcycle result.

Back in 2019, Solvay was dealing with new competitive natural capacity coming from
Turkey, and it took a while for the market to rebalance.

2024 features the back end of a European recession and destocking, which already
impacted 2023.

Management agrees that 2024 should be a trough.

_____________
Source: Solvay annual reports 2019 – 2022; Solvay press release, March 13, 2024; Greenlight
estimates and calculations. Please refer to note on Slide 2.

27
 Peroxides

28

Moving on to the Peroxides segment…

The cartoon says, “A tooth walks into a bar and says, “Baking soda and peroxide and keep
‘em coming!”

The bartender retorts, “Someone must have called him ‘Yellow’ again.”

I think we struck oratorical gold finding a cartoon that covers Solvay’s top two business
segments!

Peroxide is H2O2.

_____________
Source: www.CartoonStock.com.

28
 Peroxides
Global #1 Position
NAM ~10%
LATAM ~15%

APAC ~30%

EMEA ~45%
~17%

Market Capacity Solvay Capacity

Solvay Top 5 Regional Competitors Others

29
Source: Solvay

Solvay has a 17% market share in peroxides.

It is the lowest-cost producer in all regions and has the #1 position globally.

The business is well diversified across all geographies.

_____________
Source: Solvay Peroxides Webinar, October 4, 2022.

29
 Peroxides

HPPO Mega plants for Leading position in

Propylene Oxide eH2O2 for
(polyurethane plastics) semiconductor
65% of global capacity industry
30
Source: Solvay

Peroxides is a high margin business and generates a lot of cash.

40% of revenues are very stable take-or-pay contracts to make propylene oxide, an
essential ingredient in plastics and polyurethane foam.

10% of the segment produces ultra-pure hydrogen peroxide used for semiconductor wafer
manufacturing.

The remaining peroxide business serves the pulp and paper industry, and other bleaching
and disinfecting applications.

Solvay has a competitive moat in peroxides and it is growing above GDP due to its
positioning with HPPO mega plants that provide 65% of global capacity, and its leadership
in semiconductor uses.

_____________
Source: Solvay Capital Markets Day, November 13, 2023.

30
 31

Next chemistry joke:

Two chemists walk into a bar.

One tells the bartender, “I’ll have some H2O.”

The second one says, “Sounds good. I’ll have some H2O, too.”

<pause>

The second chemist dies.

_____________
Source: imgflip.com.

31
19%
%
43%
Peroxides Financials
Net
Sales
13%
12%
13% 900 36%
Peroxides 800 35%
700 34%

EBITDA Margin (%)

600
€ Millions

33%
500
32%
400
31%
300
200 30%

100 29%
0 28%
2022 2023 2024E

Revenue EBITDA % Margin

32
Source: Greenlight estimates for EBITDA , EBITDA margin and 2024

For Peroxides and the rest of the segments we can’t go back five years because the
disclosure does not allow us to estimate EBITDA.

Here are the last two years and the forecast for 2024.

While this segment is small at 13% of revenues, it is very profitable with mid-30’s EBITDA
margins.

_____________
Source: Solvay annual reports 2022; Solvay press release, March 13, 2024; Greenlight estimates and
calculations. Please refer to note on Slide 2.

32
 Silica
Toothpaste

Low Rolling Resistance Tires

~80%

Animal Feed

Highly Dispersible Silica (HDS) 33

Next up is the Silica segment.

Solvay focuses exclusively on highly-dispersible precipitated silica.

Over 80% of the segment goes to low rolling resistance tires, which are more energy-
efficient tires used for electric vehicles, and should drive above-GDP growth in this
business.

The rest of the silica business has applications in toothpaste, food production and animal
feed pellets.

33
 Coatis (Solvents)

34

The cartoon says, “This is him,” referring to a bottle of nail polish.

The acetone replies, “Just so we’re clear, once I clean him… he just disappears – got it?”

Coatis is a standalone Brazil business that makes green solvents and biosurfactants. It offers
alternatives to petrochemical solvents.

We estimate this segment has the lowest EBITDA. Solvay might, and we think should, divest
it at some point.

The segment has industrial uses for inks, paints, varnish and household cleaning products.

_____________
Source: THE ARGYLE SWEATER © Scott Hilburn. Dist. By ANDREWS MCMEEL SYNDICATION.
Reprinted with permission. All rights reserved.

34
 Special Chem

CartoonStock.com 35

Finally, we have the Special Chem segment.

It is a hodgepodge of specialty chemicals that did not go to Syensqo as part of the spin-off.

There is significant potential growth in rare earths used for auto catalysts and permanent
magnets used in wind power and electric vehicles.

This segment also produces elemental fluorine used as a cleaning agent in flat panel and
photovoltaic production that is environmentally friendly. There are barium and strontium
businesses for various industrial uses, and aluminum brazing solutions.

The cartoon says, “Better than changing lead into gold, I’ve transmuted dihydric alcohol
and terephalic acid into polyester.”

O.K. – I have no idea what those are either, but they certainly sound like special chems.

Everyone still awake?

_____________
Source: www.CartoonStock.com.

35
Special
Chem

19%
%
43%
Performance Chemicals
Net
Sales
13%
13%
3,000 20%
12%
Coatis
Silica 2,500 19%

EBITDA Margin (%)

2,000 18%
€ Millions

1,500 17%

1,000 16%

500 15%

0 14%
2022 2023 2024E

Revenue EBITDA % Margin

36
Source: Greenlight estimates for 2024

Silica, Coatis and Special Chem together form the new Performance Chemicals reporting
segment.

Similar to Peroxides, here are the last two years and the forecast for 2024.

These businesses are not as profitable as either Soda Ash or Peroxides, but they provide
stability and diversification.

_____________
Source: Solvay press release, March 13, 2024; Greenlight estimates and calculations. Please refer to
note on Slide 2.

36
 Strategic Priorities

37
Source: Solvay

The new Solvay, a leaner and meaner company, provided qualitative strategic priorities and
quantitative long-term targets.

In terms of its strategic priorities:

• Solvay wants to maintain a #1 position in every market in which it operates, as it gains

scale and further integrates its value chain.
• It plans to continue to improve its processes to drive costs lower and reduce its
environmental impact, manifested in its myH2O2 plants and e-Solvay process.
• It plans to reduce costs by €300 million by 2028.
• Solvay expects to become carbon neutral by 2050, and is quantifying and measuring its
ESG targets. In the last 2 years, it already reduced greenhouse gas emissions by 19%.
And it is fully hedged for carbon emission permits it will need through 2030.
• Finally, it expects to maintain its capital discipline and return significant capital to
shareholders over time.

_____________
Source: Solvay Full-Year 2023 Results Earnings Presentation, March 13, 2024; Solvay Capital Markets
Day, November 13, 2023.

37
 Solvay 2023 Results

Underlying
Net Sales Underlying EBITDA FCF1 ROCE2
Net Debt

€4.9B €1.2B €0.6B €1.5B 20.4%

-12.6% y/y 25.5% EBITDA 45% FCF 1.2x From

margin (record) conversion leverage continuing
operations

1 To
Solvay shareholders from continuing operations
2 Fromcontinuing operations 38
Source: Solvay

2023 suffered from a European slowdown and customer destocking. This affected most
European chemical companies.

Even so, EBITDA was €1.25 billion and benefitted from positive net pricing and lower fixed
costs in an inflationary environment, reflecting strong cost discipline.

The company has an investment grade rating, modest leverage and a high return on capital.

On a pro forma basis for the spin-out, we calculate Solvay earned €5.40 per share.

_____________
Source: Solvay Full-Year 2023 Results Earnings Presentation, March 13, 2024.

38
 Sell-Side

39

New Solvay started trading in December 2023 post-spinoff. There was lots of sell-side
research coverage, which was mostly pretty negative. Most of the research focused on
soda ash, despite that, as we just saw, around 70% of revenues come from other products.

Morgan Stanley started with an underweight rating and a 21.50 target. The report is titled,
“Cautious on Soda Ash” and runs a full 21 pages. It gives great detail on the soda ash
market, its relation to energy prices, supply growth and end-market demand. The report
does not mention any of Solvay’s other product lines other than in a single pie chart.

Bank of America, which rates Solvay neutral, published a 20-page initiation report. The first
10 pages are all soda ash. Page 11 has a pie chart showing the other businesses, which are
not otherwise discussed. The balance of the report discusses CO2 emissions and shows
financial analysis.

The point I’m making is that while there is a reduction in soda ash prices and profits in
2024 which everyone knows about, the rest of the business is less cyclical and more
resilient. The bears seem intent on completely ignoring that reality.

_____________
Source: Source: Morgan Stanley Research, Solvay | Europe, Cautious on Soda Ash, February 8, 2024;
BofA Global Research, Solvay, Flatter Cost Curve Flattens, January 15, 2024.

39
 Solvay Valuation
Share Price (4/1) € 25.30
Fully Diluted Shares (M) 105.9
Market Capitalization (€ M) € 2,679
Net Debt (€ M) 1,489
Retirement/Env/Other (€ M) 1,341
Enterprise Value (€ M) € 5,509
Pro Forma
€ millions 2022 2023 2024E Multiples 2022 2023 2024E
Revenues 5,540 4,880 4,516 EV/Sales 1.0x 1.1x 1.2x
EBITDA 1,236 1,154 930 EV/EBITDA 4.5x 4.8x 5.9x
EBIT 915 833 602 EV/EBIT 6.0x 6.6x 9.2x
Net Income 626 569 384
EPS € 6.01 € 5.40 € 3.62 P/E 4.3x 4.7x 7.0x
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Source: Greenlight estimates for pro forma figures and consensus for 2024

Solvay’s market capitalization is €2.7 billion. Based on 2024 consensus, it has just 1.6 turns
of debt.

Consensus expects earnings of €3.62 per share this year, which is around the middle of
guidance.

We actually think this doesn’t take into account a moderate economic recovery in Europe,
which we believe will keep earnings at about €4 per share, toward the high end of
guidance.

Even so, the P/E is just 7x on what we and management believe to be cyclically depressed
results.

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Source: Bloomberg LP, retrieved April 1, 2024; Solvay press release, March 13, 2024; Greenlight
estimates and calculations. Please refer to note on Slide 2.

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 Cash Flow Use

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Source: Solvay

Ahead of the spin-off, Solvay discussed its going forward use of cash flow.

It expects €4 billion over the next 5 years.

• 1/3 will go to essential CapEx including its environmental goals,

• 1/3 will go to the dividend, and
• 1/3 will go to discretionary investments, deleveraging, or additional shareholder return.

After essential CapEx, Solvay expects in the next five years to earn its entire market cap in
free cash flow.

Just the dividend will return half the market cap or almost 10% per year… and that’s before
you get to the additional shareholder returns part.

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Source: Solvay Capital Markets Day, November 13, 2023.

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 In Solvay’s Own Words

“Capital discipline is key and it’s an area in

which Solvay excels. We have a demonstrated
track record in the art of making prudent and
strategic use of cash and implementing
comprehensive cash allocation strategies.
These considerations will remain at the forefront
of our thinking, helping us safeguard dividends
and create greater value for stakeholders.”
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We believe that Solvay has above-average management for a European chemicals

company.

And we like how Solvay has described its capital discipline as you can see.

How many European industrial companies do you know put this type of mission statement
on their website?

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Source: www.Solvay.com/en/our-company.

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 Long-term Targets

43
Source: Solvay

Solvay’s quantitative long-term targets for the next five years are quite clear and
achievable.

In 2023, Solvay paid a €2.43 dividend, almost a 10% dividend yield, which it forecasts to be
“stable to increasing.”

_____________
Source: Solvay Capital Markets Day, November 13, 2023.

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 2024 vs. 2028 Targets

Pro Forma
€ millions 2022 2023 2024E 2028 Target
Revenues 5,540 4,880 4,516
EBITDA 1,236 1,154 930 1,474
% Margin 22.3% 23.6% 20.6%
EBIT 915 833 602 1,088
Net Income 626 569 384 725
EPS € 6.01 € 5.40 € 3.62 € 6.79

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Source: Greenlight estimates for pro forma figures and consensus for 2024

This is the middle of the 2028 long-term target translated into earnings.

The prior peak earnings were over €6 per share. This year looks to be trough at just about
€4 per share, using our numbers rather than consensus.

If management executes on its growth and cost-cutting targets, normal earnings power
should be in the high €6s per share in 2028.

All told, Solvay is a commodity chemical company, with relatively high and stable margins, a
high return on capital, and a good return of capital.

At 6-7x trough earnings and 3.7x targeted 2028 earnings, with almost a double-digit
dividend yield, it seems too cheap.

At twice the price, it wouldn’t seem expensive. So we think this boring essential chemicals
business will generate an attractive risk-adjusted return.

_____________
Source: Bloomberg LP, retrieved April 1, 2024; Solvay press release, March 13, 2024; Solvay Capital
Markets Day, November 13, 2023; Greenlight estimates and calculations. Please refer to note on Slide
2.

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 CartoonStock.com 45

The cartoon says, “Well, well – this should create a nice little wave of panic and hysteria.”

We hope Solvay creates a nice little wave of dividends and capital appreciation.

_____________
Source: www.CartoonStock.com.

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 46

And if you don’t buy the company’s long-term targets, don’t worry.

Artificial Intelligence could not do any better. I asked ChatGPT for help and it said that it
would be “challenging to provide an accurate forecast for Solvay’s earnings and EBITDA in
2028.”

Maybe after AI solves full self-driving, it can get back to solving financial forecasting.

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Source: ChatGPT at chat.openai.com.

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 47

And a final chemistry joke…

<pause>

Thank you for listening to my pitch today.

_____________
Source: www.CartoonStock.com.

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