Rhodia Continues Its Recovery: 28% Increase in EBITDA; 55 Million Euros Positive Operating Income

Business Wire, May 12, 2005

PARIS -- Following a meeting of the Board of Directors on May 11, Rhodia (NYSE:RHA) today reported its financial results for the first quarter of 2005, prepared in accordance with IFRS accounting standards. Highlights for the period include:

A 9.4% increase in net sales, on the same basis (constant structure and exchange rates) 9.3% from price increases, 1.6% from higher volumes and a transactional exchange rate effect of -1.5% .

A strong 28% improvement in recurring(a) EBITDA, compared to the first quarter of 2004, on the same basis (constant structure and exchange rates).

Savings of 35 million euros, in line with the 2005 objective to reduce fixed costs by 114 million euros.

Operating income of 55 million euros compared to 1 million euros for the first quarter of 2004.

Faster implementation of action plans concerning less profitable businesses.

Consolidated net debt stood at 2,616 million euros due to a seasonal increase in working capital requirements.

Liquidity (cash marketable securities unused confirmed lines of credit) totaled approximately 680 million euros as of the end of March, 2005.

A new 300 million euros syndicated bank line.

Simplified Income Statement for first quarter 2005 (non audited)
In millions of euros, under IFRS

   Q1 2004       Q1 2004                                  Q1 2005
    Actual     Restate (b)
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    1,316         1,333     Net sales                      1,458
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     121           121      Recurring(a) EBITDA             154
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     9.2%          9.1%     Recurring EBITDA margin        10.6%
----------------------------------------------------------------------
     99            100      EBITDA                          150
----------------------------------------------------------------------
     7.5%          7.5%     EBITDA margin                  10.3%
----------------------------------------------------------------------
      6             1       Operating income                55
----------------------------------------------------------------------
     -92            NA      Net loss Group share            -72
----------------------------------------------------------------------

(a) recurring: before restructuring costs and other gains and losses

(b) on the same basis (constant structure and exchange rates)

Strong improvement in operating performance

--Net sales stood at 1,458 million euros, a 9.4% growth* on the same basis (constant structure and exchange rates), reflecting the significant impact of price increases (9.3%) with an increase of 1.6% in volumes and a transactional exchange rate effect of -1.5%. For the first quarter, price increases more than offset higher raw materials prices.

--The fixed cost reduction program continued to deliver results, with first quarter savings of 35 million euros (before inflation) in line with the targeted 114 million euros reduction over the full year.

--Recurring EBITDA rose by 28%(a) and recurring EBITDA margin increased to 10.6% from 9.1% compared with the first quarter of 2004 on the same basis (constant structure and exchange rates).

--Operating income stood at 55 million euros, versus 1 million euros in the first quarter of 2004.

--Net financial result totaled - 115 million euros, including 17 million euros in non-recurring costs related to the February 2005 refinancing, a 31 million euros unrealized foreign exchange loss (conversion of US dollar-denominated debt) to be put in perspective of a 64 million euros unrealized forex gain booked in 2004, primarily in the fourth quarter. Interest expense (58 million euros) and securitization costs (6 million euros) were unchanged from the prior-year period.

--Accounting for the above items, the net loss for the period came to - 72 million euros, compared with - 92 million euros in the first quarter of 2004.

Faster implementation of action plans concerning less profitable businesses

--The Silicones business is improving its operating performance, while the signature of a Memorandum Of Understanding marks a new step in the creation of its strategic alliance with Blue Star.

--The Pont-de-Claix TDI unit has been running reliably since the end of 2004, enabling the business to restore its margins.

--Organics (Perfumery & Agro) repositioning on a limited number technologies continues, as expected, through divestitures and announced workshop closures.

--The signature of a letter of intent with Radici is the first step in the withdrawal from the European textile fibers business (Nylstar).

--The results of the Pharma business do not show the expected signs of improvement.

Increase in consolidated net debt due to seasonal changes in working capital requirements

--Capital expenditure totaled 58 million euros for the period. As expected due to its seasonal nature, working capital requirements rose by 219 million euros compared with year-end 2004. Compared with the first quarter of 2004, working capital requirements as a percentage of net sales improved from 16.4% to 15.4%.