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Solutia: Flexsys restructuring complete

In its earnings call for 1Q 2011, Solutia’s management has indicated that the company’s restructuring of Flexsys’s rubber chemicals portfolio is essentially complete, though they left the door open to further divestments should the opportunity arise.

Here is a transcript of the call from Seeking Alpha.

In his remarks to analysts, Jeff Quinn, Solutia’s Chairman, President and Chief Executive Officer, said,

During the quarter, since we completed the promised reshaping of the other rubber chemical businesses by selling our DTC and Santoweb and Vocol businesses, these businesses combined would have accounted for about $40 million of revenue, last year with EBITDA about $7 million and EPS of about a nickel per share. What remains left in the Other Rubber Chemicals businesses is only about $15 million in revenue. So essentially we are done with the promised reshaping of that portion of our portfolio.

In his prepared remarks, Jim Sullivan, Executive Vice President and Chief Financial Officer, also discussed the transfer of the company’s European headquarters following the divestitures.

During the quarter, we recognized gains totaling $17 million on the sale of Other Rubber Chemicals businesses, which were partially offset by charges, mostly non-cash in nature, related to the relocation of the company’s European regional office to Zaventem, Belgium. As we have exited nine core positions in Europe over the past couple of years, the space occupied at our Louvain-la-Neuve, Belgium was no longer a good fit. The new facility in Zaventem is centrally located near the Brussels Airport and will reduce the company’s facility operating cost in the region going forward.

Finally, in response to an analyst’s question, Jim Sullivan indicated that Solutia may sell its remaining product lines in the Other Rubber Chemicals businesses should the opportunity arise.

Lucy Watson – Jefferies & Co. This is Lucy Watson on for Laurence today. A question on the — or two questions on the 2011 outlook. Have you factored in divestiture of the remaining $15 million of sales from Other Rubber Chemicals businesses in your new outlook? James Sullivan No. Lucy, on that, really the $15 million, they’re there but it’s like that’s a very low maintenance little slug of revenue. We kind of groomed this portfolio to the point that some of the dilutions from doing it offset by the closing costs and the proceeds we brought in, all of that was in the segment of management time and focus and all of those kind of things was a net-net win for us. This all $15 million quite frankly, it’s one of those things that we’ll just kind of continue along. And if something really opportunistic happened and somebody came to us, we might do something with it. But it’s really not a big issue at all for us at this point. It’s just a real low maintenance little slug of revenue.

With these divestitures, Flexsys’s activities within the rubber chemicals market consist of CRYSTEX insoluble sulfur and SANTOFLEX antidegradants.

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