FIRST QUARTER 2008 RESULTS VOLUME GROWTH
AND PRICE INCREASES IN A CHALLENGING RAW MATERIAL
AND FOREIGN EXCHANGE ENVIRONMENT

Key highlights                                                        

• Net Sales of €1,186 million, up 3.8 % like for like(1)
• Solid demand with volumes up 2.4% like for like
• Price rises of 4.8% like for like in local currency offset almost all raw material and energy cost increases
• Recurring EBITDA(2) down 11% like for like due mainly to negative Forex impact
• Net Profit of €42 million, benefiting from reduced financing costs
• Isocyanates divestment completes portfolio refocusing

”Healthy levels of demand across all businesses have allowed us to increase prices and offset successfully most raw material and energy cost increases," commented Rhodia Chairman and Chief Executive Officer Jean-Pierre Clamadieu. "Foreign exchange rates and raw material & energy costs are set to remain the key challenges in 2008 but we remain confident in the pricing power of our businesses which benefit from strong leadership positions in dynamic markets. 

Summary income statement

• Like for like : at constant scope and currency conversion
• Before restructuring and other operating income and expenses
• Defined as “net cash provided by operating activities” plus “non recurring refinancing cash costs” minus Capital Expenditure
  

1. A solid first quarter
Net Sales amounted to €1,186 million, unchanged versus the first quarter of 2007. Like for like Net Sales grew by 3.8% driven by good demand levels across all businesses, with 2.4% volume growth and a 4.8% positive impact from price increases in local currency. The negative transactional foreign exchange impact was 3.4%.
Recurring EBITDA totaled €168 million, versus €196 million in the first quarter of 2007. On a like for like basis recurring EBITDA amounted €189 million down by 11% due essentially to the negative transactional foreign exchange impact (€19 million). In local currency, price rises amounted to
€55 million and offset almost entirely the € 57 million impact of raw material and energy cost increases.

Operating Profit amounted to €93 million versus €125 million for the first quarter of 2007 which benefited from a €20 million one off capital gain. On a like for like basis Operating Profit was down
by 6%.

The Financial Result improved to €(42) million from €(118) million in the first quarter of 2007 which was impacted by a €(62) million one off refinancing charge. The recurring financial result improved from €(56) million to €(42) million benefiting from 35% savings in financial charges following the refinancing initiatives in 2007.

The Net Profit Group Share for the first quarter 2008 totaled €42 million, versus €59 million in the first quarter 2007 which benefited from exceptional items of around €36 million.
Earnings per Share declined to € 0.41 from €0.59 a year earlier.

• Improved Free Cash Flow

Operating Cash Flow totaled €127 million in the first quarter 2008.
Seasonally negative Free Cash Flow improved to €(47) million in the first quarter of 2008, versus €(95) million in the first quarter of 2007, in particular due to good Working Capital management, lower restructuring cash expenses and closely monitored capital expenditure.
Consolidated Net Debt totaled €1,529 million on March 31, 2008, versus €1,484 million on December 31, 2007.

3. Overview by Enterprise

Polyamide

The Polyamide Enterprise registered good volume growth in Engineering Plastics and Intermediates, especially in Asia. Price rises covered about three-quarters of the raw material and energy cost increases. Some increases were however limited by US competitors, benefiting from favorable currency and natural gas costs and available volumes due to the slowdown in the US market. The decline in the US Dollar against the Brazilian Real and the Euro led to a negative transactional foreign exchange impact of €13 million.
Throughout 2008, good volumes are expected to continue particularly across Asian and Latin American markets.

Novecare

Novecare saw strong growth for Agrochemicals and solid volumes in Home & Personal Care markets. Industrial Formulation volumes were flat, with Asian growth offsetting a slowdown in the US market. Price rises offset the increase in raw material and energy costs. Fixed costs increased mainly due to growth projects.
2008 market trends remain positive in Agrochemicals, Home & Personal Care and Oilfield chemicals.

Silcea

Silcea now includes the diphenols business from the former Organics Enterprise.
Price rises are now in place to offset significant raw material and energy cost increases after a timelag in Q1 impacted recurring EBITDA. Volumes were temporarily affected by price rises.Strong demand is expected to continue with significant EBITDA improvement as soon as Q2.

Energy Services

€39 million of recurring EBITDA was generated from CERs. 90% of the 2008 CER expected volumes (13 Mt) has been secured at €15/t. Forward sales have been secured for 25% of 2009-2012 CER volumes at c.€15/t.

Acetow

Recurring EBITDA is stable despite €(4) million of negative transactional foreign exchange impact. In 2008, positive trends have returned with good dynamics in volumes and prices. The Enterprise’s competitiveness plan is well under way with a positive impact coming in H2.

Eco Services

Strong pricing more that offset raw material and energy cost increases. Volume growth was driven by growth in the sulfuric acid market.
In 2008, significant price increases will continue to pass through sulfur costs.

4. Outlook

In the second half of the year, demand levels should remain satisfactory with the third quarter expected to be traditionally lower reflecting the usual seasonality in continental Europe of Polyamide and Silcea, as well as CER sales phasing.
The rise in raw material costs is expected to continue. Rhodia will pursue its policy to give priority to prices over volumes, to defend the profitability of all its businesses.
Current conditions prevailing, the Group is confirming its 2008 full year objectives:

• Recurring EBITDA should be within 5% of the level achieved in 2007
• Earnings per Share should increase versus 2007

In addition, solid generation of Free Cash Flow in the second half of 2008 and the disposal of the Isocyanates business will allow Rhodia to further reduce its Net Debt versus the end
of 2007.

This press release and a detailed presentation are available at www.rhodia.com

This press release contains elements that are not historical facts including, without limitation, certain statements on future expectations and other forward-looking statements. Such statements are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those anticipated.

Rhodia is an international chemical company resolutely committed to sustainable development. As a leader in its businesses, the Group aims to improve its customers’ performance through the pursuit of operational excellence and its ability to innovate. Structured around six Enterprises, Rhodia is the partner of major players in the automotive, tire, electronics, perfume, health & beauty and home care markets. The Group employs around 15,000 people worldwide and generated sales of
€4.8 billion in 2007. Rhodia is listed on Euronext Paris.

View our 2008 Second Quarter Results

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