By Marine Strauss
BRUSSELS, July 29 (Reuters) - Solvay on Thursday raised its free cash flow and core profit guidance for the full year as the Belgian chemicals group beat second-quarter earnings expectations.
Strong demand from automotive and electronics customers and continued cost cuts helped earnings.
The company, which makes lithium derivatives for batteries among other products, now expects free cash flow this year of around 750 million euros ($883.73 million) compared to its previous guidance of 650 million.
It also sees its full-year earnings before interest, tax, depreciation and amortization (EBITDA) between 2.2 billion euros and 2.3 billion euros, increased from 2.0 billion euros to 2.2 billion euros.
Chief Executive Officer Ilham Kadri told Reuters in an interview sales for batteries in hybrid and electric vehicles were extremely strong, growing 82% in the second quarter compared with the same period last year.
"Since quarter four last year we've seen a fabulous growth ... We see really good demand for EV continuing from quarter four and on," Kadri said.
Kadri said the group is considering another large investment in Europe that would be launched by the first quarter next year.
Solvay, whose products range from base chemicals such as soda ash to speciality polymers, said it is also raising its forecast for cost inflation to between 200 million euros to 250 million euros, from 150 million euros to 200 million previously.
"Clearly, inflationary cost pressures are significant and logistic challenges persist. We are fully mobilised to overcome these challenges," Chief Financial Officer Karim Hajjar told Reuters.
Solvay’s second-quarter revenue of 2.46 billion euros was also slightly above a consensus forecast of 2.39 billion euros. Excluding composites, oil and gas, revenue had organic growth of 22% year over year. Demand for composites, oil and gas has not recovered from the pandemic's impact on aircraft manufacturing the company said.
Second-quarter EBITDA grew 47.4% from a year earlier to 602 million euros, above a company-compiled consensus of 568 million euros. ($1 = 0.8487 euros) (Reporting by Marine Strauss; Editing by Cynthia Osterman)