Rhodia's Third Quarter 2005 Results: EBITDA increases by 13% confirming Rhodia's operational recovery

Business Wire, Nov 9, 2005

PARIS -- Rhodia (NYSE:RHA):

--Net sales(a) stable like for like at 1,238 million euros, versus 1,249 million euros in the third-quarter 2004. This reflects the Rhodia Group's (NYSE:RHA) pricing power in a context of slightly lower volumes in comparison with the strong third quarter 2004.

--13% increase in like for like recurring EBITDA(b) versus the third-quarter 2004 despite the impact of natural disasters. This increase results from an assertive strategy to raise prices, from our restructuring plans and efficient cost control.

--Effective cash management drives the reduction in consolidated net debt by 113 million euros from June 30, 2005.

--Continuous refocusing of the Group's portfolio.

--Greenhouse gas emission reduction projects in South Korea and Brazil are in the final UNFCCC (UN) approval phase.

Summary income statement for third-quarter 2005 (unaudited)
In millions of euros, under IFRS

                                    Q3 2004       Q3 2004
                                   Historical   Restated(c)   Q3 2005
----------------------------------------------------------------------
Net sales (a)                        1,213         1,249        1,238
----------------------------------------------------------------------
Recurring EBITDA (b)                    94            92          104
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Recurring EBITDA margin                7.7%          7.4%         8.4%
----------------------------------------------------------------------
Operating income/(loss)                (32)          (32)           2
----------------------------------------------------------------------
Net income /(loss)                     (45)            -         (122)
----------------------------------------------------------------------

The 2004 and 2005 results of businesses sold or in a process of being
sold (mainly sulfuric acid and phosphate operations in Rieme and the
Latex business) have been reclassified as "discontinued operations".

"Rhodia's operational recovery is now well underway," says Chief Executive Officer Jean-Pierre Clamadieu. "Our assertive strategy of raising prices and our fixed-cost reduction plans are continuing to deliver benefits and enabling us to improve our margins. For the first 9 months of the year, the recurring EBITDA increased like-for-like by 18% versus the same period in 2004.

"We can confirm that 2005 will see a substantial increase in our recurring EBITDA compared with 2004, with improved fundamentals and a largely refocused business portfolio."

(a) Excluding services and other revenues

(b) Before restructuring costs, amortizations and other gains and
    losses

(c) At constant scope and currency conversion

--Improved operating performance

In a quarter traditionally impacted by seasonal swings, net sales(a) held firm at 1,238 million euros like-for-like, versus 1,249 million euros in third-quarter 2004. Business levels remained generally firm over the period, despite a slight 3.4% decline in volumes in comparison with an especially strong third-quarter 2004. For the fifth straight quarter, the Group enjoyed the positive impact of the price increases applied across all businesses (up 4.9%), which more than offset higher raw materials costs.

With gross savings of 27 million euros (before inflation) for the quarter, the Group is on track to meet its objective of reducing fixed costs by 114 million euros in 2005.

Recurring EBITDA(b) rose by 13% to 104 million euros like for like for the period. The impact of Hurricane Katrina and the flooding of the Emmenbrucke site in Switzerland are estimated at 10 million euros for the period, with a similar impact expected in the last quarter of this year. The recurring EBITDA margin improved to 8.4% in the third quarter, from 7.4% for the same quarter in 2004.

Operating income amounted to 2 million euros, versus an operating loss of 32 million euros in third-quarter 2004, primarily reflecting a reduction in restructuring costs.

Net financial expenses amounted to 78 million euros, versus 41 million euros in the prior-year period. It included 59 million euros in interest expense and 9 million euros in unrealized foreign exchange losses (versus 18 million euros in unrealized exchange gains in third-quarter 2004).

Net Income amounted to a loss of 122 million euros, versus a loss of 45 million euros in third-quarter 2004. Discontinued operations contributed a loss of 39 million euros, compared to income of 53 million euros a year earlier due to capital gains on disposals.

--Net debt reduced by 113 million euros thanks to efficient cash management

Capital expenditure totaled 77 million euros in the third quarter. The Working capital requirements were reduced by 120 million euros during the quarter and the ratio of working capital requirement to net sales continued to improve, decreasing to 13.9% from 16.6% in third-quarter 2004.

Free cash flow(c) amounted to 101 million euros for the quarter.

Consolidated net debt totaled 2,533 million euros, a 113 million euros decrease on June 30, 2005.