Solutia Announces Second Quarter 2008 Results

Date: 1 August 2008

Highlights  - Net sales increased to $1,095 million from $911 million over the same period last year  - Strong international growth continues to positively impact results  - Adjusted EBITDA increased to $118 million from $84 million over the same period last year, in spite of over $100 million of increased raw materials and energy costs  - Adjusted EPS of $.28 for second quarter 2008  - Increasing Adjusted EBITDA guidance for the year to $400M - $425M Solutia Inc. (NYSE:SOA) on  July 28, 2008 reported net sales of $1,095 million for the second quarter of 2008, a 20% increase over net sales of $911 million for the same period in 2007.

Approximately 8% of this increase is attributable to the consolidation of Flexsys sales beginning on May 1, 2007, following Solutia's acquisition of the remaining 50% share of its former joint venture. On a pro forma basis, adjusting 2007 second quarter sales to include Flexsys, sales increased 14% over the prior year.



Solutia had a consolidated loss of $16 million for the second quarter 2008 compared to income from continuing operations of $27 million for the same period in 2007. Solutia's results were impacted by certain events affecting comparability totaling an after-tax loss of $33 million in 2008 and an after-tax gain of $10 million in 2007. After consideration of these special items in both periods, income held steady at $17 million in the second quarter of 2008 or $.28 per share, despite increased depreciation and amortization expense, higher interest cost and higher stock compensation expense.



"We are pleased to report solid second quarter growth, driven by strong volumes and price increases across our businesses," said Jeffry N. Quinn, chairman, president and chief executive officer of Solutia Inc. "Importantly, even though the escalation of raw materials accelerated in the second quarter compared to the first, our focused pricing actions and strong market positions allowed us to recover a significant percentage of this cost increase. We also continued to benefit from our geographically diverse business, as international growth -- particularly in China -- more than offset softening domestic markets."



Quinn added, "In addition to producing strong results during the second quarter, we announced two important strategic developments which will have the potential to further enhance our transformation to a high-margin pure play specialty chemical company. We retained HSBC to review strategic alternatives for the Nylon business, and laid the foundation for a key longer-term growth opportunity by establishing our Saflex Photovoltaic business."



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