Solvay FIRST LOOK: Settlement on PFAS removes a big investor worry
The announced PFAS-related settlement with the New Jersey Department of Environmental Protection will lead to a $250m additional provision in 2Q23 which was already incorporated in our 2023 forecasts as it is part of the €300-400m one-off value creation/derisking costs which Solvay guided for when recently announcing the targeted capital structures of EssentialCo/ SpecialtyCo. While there are still a number of smaller court cases on PFAS ongoing, largely with individual plaintiffs, the NJDEP settlement should largely remove the PFAS risks and also investor worries on this subject. We still believe the upcoming separation will be an important catalyst to unlock shareholder value. With both our DCF and SOTP model yielding a fair value of more than 50% above the current share price, we reiterate our BUY rating and € 155 target price.Solvay is engaged in chemical and plastic businesses worldwide. Co. offers chemical products such as advanced materials, barium strontium, calcium chloride, caustic soda, chlorinated products, fluor, peroxygen products, polyglycerols, precipitated calcium carbonate, soda ash, and sodium bicarbonate. It also provides specialty polymers, such as Spire ultra polymers, Solviva biomaterials, and sulfone polymers. Co. structures its activities around five operating segments: Advanced Formulations, Advanced Materials, Performance Chemicals, Functional Polymers and Corporate & Business Services, each with its own specific business model and each comprised of Global Business Units (GBUs).
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