Annual Results: 2005 Confirms Rhodia's Recovery Momentum

Business Wire, March 1, 2006

PARIS -- 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

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

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.