Rhodia Reports 2006 Annual Results; Successful Turnaround Shows First Positive Net Income Since 2000

Specialty chemical producer Rhodia (NYSE:RHA) has exceeded its ambitious recovery targets set three years ago: 14.2% Recurring EBITDA margin on Net Sales, versus 11.3% in 2005 (2006 target: above 13%) Net Income of 62 million euros, versus a loss of €616 million in 2005 (2006 target: positive Net Income) Net Debt on Recurring EBITDA ratio of 2.4(1) times (2006 target: below 2.9 times) Strong operating performance in 2006: Recurring EBITDA(2) up 33% to 683 million euros, versus 513 million euros in 2005, driven by strong pricing, solid market demand and reduced fixed costs Sharp rise in Operating Profit of 359 million euros, versus 66 million euros in 2005 Q4 2006 Recurring EBITDA up 65% to 195 million euros, compared to Q4 2005, due to solid volumes, strong pricing and first CER sales 2007 outlook: Satisfactory market conditions at the beginning of the year Strong growth in Recurring EBITDA expected Positive Free Cash Flow Summary Income Statement In million euros, under IFRS 2005(3) 2006(3) Variation Net Sales 4,521  4,810  + 6.4% Recurring EBITDA(2) 513  683  + 33% Recurring EBITDA margin on Net Sales 11.3% 14.2% -  Operating Profit 66  359  + 444% Income/ (Loss) from continuing operations (419) 111  -  Net Income /(Loss) Group Share (616) 62  -  "2006 marks the successful delivery of Rhodia’s recovery plan. We have beaten the ambitious targets that we set three years ago and are pleased to announce the first positive Net Income since 2000. Today Rhodia is stronger, leaner, more agile and profitable,” said Chief Executive Officer Jean-Pierre Clamadieu. "The Group has recovered full flexibility, with a portfolio focused on businesses in which we enjoy solid leadership positions, with a streamlined organization and rigorous financial discipline. We have demonstrated the strength of our operating performance and are in a good shape to continue on our route of profitable growth.” 1. Return to positive Net Income with a very strong improvement in operating performance Net Sales rose by 6.4% to 4,810 million euros from 4,521 million euros in 2005, driven by a 2.9% volume growth and a 4.8% positive impact of price increases to offset the rise in the costs of raw materials and energy. Recurring EBITDA increased significantly by 33% to 683 million euros, reflecting the impact of sustained pricing power, improved industrial performance and further fixed costs savings. All businesses showed a strong improvement of their operating performance in 2006 in comparison with 2005. Fourth-quarter Recurring EBITDA of 195 million euros was up 65% compared to the same period the year before, due to solid volumes, strong pricing and first CER sales. Recurring EBITDA margin 2006 increased to 14.2% from 11.3% in 2005. Operating Profit stood at 359 million euros, versus 66 million euros in 2005, on the back of the improved recurring EBITDA and a reduction in restructuring costs. The Financial Results saw strong improvement at a negative 305 million euros, versus a negative 432 million euros in 2005, due to reduced interest expenses and despite 77 million euros of non recurring refinancing charges. The foreign exchange gains amounted to 10 million euros (versus an unrealized foreign exchange loss of 69 million euros in 2005). Net Income Group Share for 2006 was 62 million euros, versus a Net Loss of 616 million euros in 2005. 2. Further Net Debt reduction Operating Cash Flow(4) was 394 million euros. Working Capital Requirements increased by 142 million euros; this is essentially due to the return to a more sustainable inventory level after an exceptionally low level end of 2005. The ratio of Working Capital Requirement on total sales stood at 12.3% compared with 10.8% the year before. Capital Expenditure amounted to 311 million euros for the year, versus 286 million euros in 2005. After taking into account 80 million euros in restructuring cash costs, Free Cash Flow(5) was negative at 139 million euros in 2006. A successful 1.1 billion euros refinancing initiative with the issue of Floating Rate Notes in October 2006, coupled with the reimbursement of the most expensive debt, helped to improve the Group’s debt structure, gain greater flexibility, lengthen debt maturity and reduce interest expenses. Consolidated Net Debt decreased from 2,089 million euros in December 2005, to 1,949 million euros in December 2006. The Net Debt on Recurring EBITDA ratio was 2.8 times. After including the cash proceeds from the Silicones divestiture, which was closed on January 31, 2007, the Net Debt was down on a pro forma basis to 1,657 million euros, which resulted in a Net Debt on Recurring EBITDA ratio of 2.4 times. 3. A quality business portfolio Over the last three years, the Group refocused very significantly its business portfolio and realized 1.4 billion euros of divestments. The Group pursued this strategy with the divestment of the European Industrial Fibers, the Silicones activities, and its stake in Nylstar. Today, 80% of the Rhodia's sales are in businesses in which it holds strong leadership positions. Based on this strong portfolio, the Group will pursue its profitable growth, with an ongoing focus on its development in Asia. 4. Well on track to benefit from greenhouse gas emissions projects The two projects under the Kyoto Protocol’s Clean Development Mechanism to reduce greenhouse gas emissions at the plants in Onsan, South Korea and Paulinia, Brazil are up and running. The first emissions reductions were audited, and 1.6 million tonnes of Carbon Emission Reduction Credits (CER) were issued and sold in Q4 2006. From 2007 until 2013, Rhodia should dispose of 11 to 13 Mt per year of CERs. The trading platform Orbeo, joint venture between Rhodia and Société Générale was created in 2006 to optimize the value of the CERs. 5. Outlook Market conditions remain satisfactory at the beginning of 2007, with solid volumes and a pricing power that remains strong, in an environment still influenced by high raw material and energy costs. 2007 will be a year of investment to support growth, while at the same time focusing on maximizing cash flow generation, with the objective of generating positive Free Cash Flow. Rhodia is confident that it will generate in 2008 a Recurring EBITDA margin above 15% for the chemical business. The Group will establish and maintain a sound financial structure with a Net Debt on Recurring EBITDA ratio below 2. (1) Pro forma after completion of Silicones divestment (2) Before restructuring and other operating income and expenses (3) After reclassification of discontinued operations (4) Before Working Capital, restructuring, and "non recurring refinancing cash costs" (5) Defined as "net cash provided by operating activities" plus "non recurring refinancing cash costs" minus Capital Expenditure" This press release and a detailed presentation of the 2006 results 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 a global specialty chemicals company recognized for its strong technology positions in Performance Materials, Functional Chemicals and the Organics and Services clusters. Partnering with major players in the automotive, electronics, pharmaceuticals, agrochemicals, consumer care, tires, and paints and coatings markets, Rhodia offers tailor-made solutions combining original molecules and technologies to respond to customers’ needs. Rhodia subscribes to the principles of Sustainable Development communicating its commitments and performance openly with stakeholders. Rhodia generated sales of €4.8 billion in 2006 and employs around 16,000 people worldwide. Rhodia is listed on the Paris and New York stock exchanges. Results Fact Sheet: Q4 & FY 2006 Income Statement Million euros Q4(a) 2005 Q4(a) 2006 Variation FY 2005 FY 2006 Variation Net Sales 1 185  1 217  2,7% 4 521  4 810  6,4% Other revenue 140  129  (7,9)% 435  451  3,7% Recurring EBITDA 118  195  65,3% 513  683  33,1% Recurring EBITDA Margin (c) 10,0% 16,0%   11,3% 14,2%   Depreciation & Amortization (88) (78) (323) (304) Other Gains and Losses (32) (22) (42) 1  Restructuring Costs (40) (7)   (82) (21)   Operating Profit (42) 88    66  359    Financial Results (118) (134)   (432) (305)   Income/(loss) before income tax (160) (46)   (366) 54    Income tax (15) (53) 57  Income/(loss) from continuing operations (175) (46) (419) 111  Income/(loss) from discontinued operations (49) (2) (196) (45) Net Income/(loss) (224) (48)   (615) 66    Net Income/(loss) (Group Share) (225) (49)   (616) 62    Minority interests 1  1    1  4    Q4 Net Sales Recurring EBITDA Operating Profit Million euros Q4(a)2005 Q4(a) 2006 Variation Q4(a) 2005 Q4(a) 2006 Variation Q4(a) 2005 Q4(a) 2006 RHODIA 1 185  1 217  2,7% 118  195  65,3% (42) 88  POLYAMIDE 444  501  12,8% 52  81  55,8% 24  43  ACETOW 109  117  7,3% 23  24  4,3% 14  16  NOVECARE 242  222  (8,3)% 20  27  35,0% 10  18  SILCEA 96  108  12,5% 11  16  45,5% 0  9  ECO SERVICES 51  55  7,8% 10  19  90,0% 5  14  ORGANICS 254  201  (20,9)% 11  22  100,0% (26) 13  ENERGY SERVICES 24  15  33  120,0% 12  27  CORPORATE & Others (11) (1) (11) (1) 0% (24) (27) (12,5)% (81) (52) FY Net Sales Recurring EBITDA Operating Profit Million euros FY 2005 FY 2006 Variation FY 2005 FY 2006 Variation FY 2005 FY 2006 RHODIA 4 521  4 810  6,4% 513  683  33,1% 66  359  POLYAMIDE 1 710  1 922  12,4% 243  284  16,9% 135  172  ACETOW 410  447  9,0% 100  108  8,0% 65  78  NOVECARE 935  936  0,1% 96  110  14,6% 53  76  SILCEA 393  412  4,8% 45  61  35,6% 2  33  ECO SERVICES 209  230  10,0% 57  79  38,6% 36  58  ORGANICS 912  875  (4,1)% 34  74  117,6% (23) 31  ENERGY SERVICES 25  25  60  140,0% 13  76  CORPORATE & Others (48) (1) (37) (1) 22,9% (87) (93) (6,9)% (215) (165) (1) including intercompany sales elimination Net Financial Debt December 31. 2005 Sept 30. 2006 Dec. 31. 2006 Dec. 31. 2006 proforma 2 089  1 921  1 949  1 657  2006  2008  Targets Delivered Targets Recurring EBITDA margin(c) > 13 % Recurring EBITDA margin(c) = 14.2 % Recurring EBITDA Margin(c) > 15% for the Chemical business     Establishing & maintaining a sound financial structure with a Net Debt / Recurring EBITDA ratio below 2 Positive Net Income Net Income group share = 62m euros Net Debt / Recurring EBITDA < 2.9x Net Debt / Recurring EBITDA = 2.8 before silicones(b) Net Debt / Recurring EBITDA = 2.4 after silicones(b) (a) Unaudited (b) 2.8x before silicones: includes recurring EBITDA and debt before discontinued operation treatment. 2.4x after completion of silicones divestment (c) Calculated as Recurring EBITDA / Net Sales Results Fact Sheet: Q4 2006 (all figures are in million euros after discontinued operations) POLYAMIDE Solid volume growth for all nylon intermediates and engineering plastics Strong pricing more than offsets raw material and energy cost increases ACETOW Stable volumes Good pricing trends offset raw material and energy cost increases NOVECARE Performance driven by good volume growth and favourable pricing in most markets Buoyant Industrial Additives & Oilfield Chemicals market Further benefits from fixed cost savings SILCEA Good volume growth in all activities Favourable pricing trends notably in Silica systems ECO SERVICES Positive impact of price indexation mechanism Good volumes driven by increased demand for regeneration compared to Q405 ORGANICS Good pricing trends offset raw material and energy cost increases Fixed cost reduction drives margin growth ENERGY SERVICES First emissions reduction at South Korean abatement plant audited & 1.6mt of CERs issued by UNFCCC 1.6mt of CERs sold for €22m Brazilian abatement plant up and running € million Net Sales Q4(a) 2005 Scope Foreign Exchange conversion Volume & mix Selling Price Foreign Exchange transaction effect Net Sales Q4(a) 2006 RHODIA 1 185  (25) (31) 31  77  (20) 1 217  POLYAMIDE 444  (2) (6) 22  53  (10) 501  ACETOW 109  0  (2) 7  5  (2) 117  NOVECARE 242  (8) (10) (5) 4  (1) 222  SILCEA 96  4  (3) 4  8  (1) 108  ECO SERVICES 51  0  (4) 3  5  0  55  ORGANICS 254  (24) (5) (21) 3  (6) 201  ENERGY SERVICES 0  0  0  24  0  0  24  CORPORATE & Others including intercompany sales elimination (11) 5  (1) (3) (1) 0  (11) Million euros Recurring EBITDA Q4(a) 2005 Scope Foreign Exchange conversion Volume & mix Selling Price** Raw materials& Energy Fixed Costs Recurring EBITDA Q4(a)2006 Recurring EBITDA Margin(c) Q4(a) 2006 RHODIA 118  0  (5) 47  54  (18) (1) 195  16,0% POLYAMIDE 52  (3) (1) 13  41  (20) (1) 81  16,2% ACETOW 23  0  (1) 0  3  (1) 0  24  20,5% NOVECARE 20  (2) (2) 6  2  (4) 7  27  12,2% SILCEA 11  0  0  3  7  (2) (3) 16  14,8% ECO SERVICES 10  (1) (1) 3  4  3  1  19  34,5% ORGANICS 11  0  (1) (6) (2) 3  17  22  10,9% ENERGY SERVICES 15  0  0  23  0  2  (7) 33  CORPORATE & Others (24) 6  1  5  (1) 1  (15) (27)   (a) Unaudited (b) Including foreign exchange transaction effect   (c) Calculated as recurring EBITDA / Net Sales Results Fact Sheet: FY 2006 (all figures are in million euros after discontinued operations) POLYAMIDE Good volumes (+6%) driven by Asia & Latin America Proven pricing (+6%) in a high & volatile raw material and energy cost environment ACETOW Raw material & energy cost increases offset by solid pricing Favourable USD hedging NOVECARE Successful price management allows for full offset of raw material & energy cost increases Operational performance & fixed cost reduction supports margin momentum SILCEA Growing demand from tyre, emission control & electronics markets Price rises to increase value creation ECO SERVICES Record margins driven by price indexation mechanism (sharp fall in natural gas prices in the USA) Incremental volume demand due to regulation change in 2005 (MTBE) ORGANICS Restructuring & reorganisation delivers fixed cost reduction Improved industrial reliability drives performance Continued portfolio pruning ENERGY SERVICES Successful start up of abatement facilities ahead of plan Set to benefit fully from 11-13mt of CERs in 2007 Million euros Net Sales FY 2005 Scope Foreign Exchange conversion Volume & mix Selling Price Foreign Exchange transaction effect Net Sales FY 2006 RHODIA 4 521  (69) 79  130  219  (70) 4 810  POLYAMIDE 1 710  (10) 78  102  103  (61) 1 922  ACETOW 410  0  4  13  20  0  447  NOVECARE 935  (33) (1) 10  27  (2) 936  SILCEA 393  (18) 1  17  23  (4) 412  ECO SERVICES 209  0  (2) 0  23  0  230  ORGANICS 912  (33) 1  (30) 28  (3) 875  ENERGY SERVICES 0  0  0  25  0  0  25  CORPORATE & Others including intercompany sales elimination (48) 25  (2) (7) (5) 0  (37) Million euros Recurring EBITDA FY 2005 Scope Foreign Exchange conversion Volume & mix Selling Price(a) Raw materials& Energy Fixed Costs Recurring EBITDA FY 2006 Recurring EBITDA Margin(b) FY 2006 RHODIA 513  (2) 10  97  141  (101) 25  683  14,2% POLYAMIDE 243  (12) 13  45  40  (37) (8) 284  14,8% ACETOW 100  0  0  2  19  (14) 1  108  24,2% NOVECARE 96  (8) 0  5  24  (23) 16  110  11,8% SILCEA 45  1  1  11  18  (13) (2) 61  14,8% ECO SERVICES 57  1  (1) 3  20  1  (2) 79  34,3% ORGANICS 34  (10) 0  (5) 23  (15) 47  74  8,5% ENERGY SERVICES 25  12  0  31  0  (4) (4) 60  CORPORATE & Others (87) 14  (3) 5  (3) 4  (23) (93)   (a) Including foreign exchange transaction effect (b) Calculated as recurring EBITDA / Net Sales Results Fact Sheet: Quarterly results RHODIA Q1(a) 2005 Q1(a) 2006 Q2(a) 2005 Q2(a)2006 Q3(a) 2005 Q3(a) 2006 Q4(a) 2005 Q4(a) 2006 (Million Euros) Net Sales 1 096  1 203  1 161  1 211  1 079  1 179  1 185  1 217  Recurring EBITDA 150  161  145  167  100  160  118  195  % Sales(b) 13,7% 13,4% 12,5% 13,8% 9,3% 13,6% 10,0% 16,0% Operating Profit 66  69  34  90  8  112  (42) 88                    POLYAMIDE (Million Euros) Net Sales 419  464  441  478  406  479  444  501  Recurring EBITDA 74  57  71  77  46  69  52  81  % Sales(b) 17,7% 12,3% 16,1% 16,1% 11,3% 14,4% 11,7% 16,2% Operating Profit 52  32  38  51  21  46  24  43  ACETOW (Million Euros) Net Sales 92  109  105  113  104  108  109  117  Recurring EBITDA 23  30  27  26  27  28  23  24  % Sales(b) 25,0% 27,5% 25,7% 23,0% 26,0% 25,9% 21,1% 20,5% Operating Profit 15  21  18  21  18  20  14  16  NOVECARE (Million Euros) Net Sales 228  246  239  239  226  229  242  222  Recurring EBITDA 28  29  28  26  20  28  20  27  % Sales(b) 12,3% 11,8% 11,7% 10,9% 8,8% 12,2% 8,3% 12,2% Operating Profit 19  21  20  17  4  20  10  18  SILCEA (Million Euros) Net Sales 93  103  104  103  100  98  96  108  Recurring EBITDA 11  15  12  17  11  13  11  16  % Sales(b) 11,8% 14,6% 11,5% 16,5% 11,0% 13,3% 11,5% 14,8% Operating Profit 5  7  3  11  (6) 6  0  9  ECO SERVICES (Million Euros) Net Sales 48  56  55  60  55  59  51  55  Recurring EBITDA 11  14  18  23  18  23  10  19  % Sales(b) 22,9% 25,0% 32,7% 38,3% 32,7% 39,0% 19,6% 34,5% Operating Profit 6  7  12  19  13  18  5  14  ORGANICS (Million Euros) Net Sales 229  232  225  229  204  213  254  201  Recurring EBITDA 18  17  8  21  (3) 14  11  22  % Sales(b) 7,9% 7,3% 3,6% 9,2% (1,5)% 6,6% 4,3% 10,9% Operating Profit 6  4  (6) 8  3  6  (26) 13  ENERGY SERVICES (Million Euros) Net Sales 1  24  Recurring EBITDA 2  22  7  3  1  2  15  33  Operating Profit (5) 17  5  3  1  29  12  27  CORPORATE & OTHERS (Million Euros) Sales & intercompany sales elimination (13) (7) (8) (11) (16) (8) (11) (11) Recurring EBITDA (17) (23) (26) (26) (20) (17) (24) (27) Operating Profit (32) (40) (56) (40) (46) (33) (81) (52) (a) Unaudited (b) Calculated as recurring EBITDA / Net Sales Results Fact Sheet: Semester and FY results RHODIA H1* 2005 H1* 2006 H2* 2005 H2* 2006 FY 2005 FY 2006 (Million Euros) Net Sales 2 257  2 414  2 264  2 396  4 521  4 810  Recurring EBITDA 295  328  218  355  513  683  % Sales(a) 13,1% 13,6% 9,6% 14,8% 11,3% 14,2% Operating Profit 100  159  (34) 200  66  359                POLYAMIDE (Million Euros) Net Sales 860  942  850  980  1 710  1 922  Recurring EBITDA 145  134  98  150  243  284  % Sales(b) 16,9% 14,2% 11,5% 15,3% 14,2% 14,8% Operating Profit 90  83  45  89  135  172  ACETOW (Million Euros) Net Sales 197  222  213  225  410  447  Recurring EBITDA 50  56  50  52  100  108  % Sales(b) 25,4% 25,2% 23,5% 23,1% 24,4% 24,2% Operating Profit 33  42  32  36  65  78  NOVECARE (Million Euros) Net Sales 467  485  468  451  935  936  Recurring EBITDA 56  55  40  55  96  110  % Sales(b) 12,0% 11,3% 8,5% 12,2% 10,3% 11,8% Operating Profit 39  38  14  38  53  76  SILCEA (Million Euros) Net Sales 197  206  196  206  393  412  Recurring EBITDA 23  32  22  29  45  61  % Sales(b) 11,7% 15,5% 11,2% 14,1% 11,5% 14,8% Operating Profit 8  18  (6) 15  2  33  ECO SERVICES (Million Euros) Net Sales 103  116  106  114  209  230  Recurring EBITDA 29  37  28  42  57  79  % Sales(b) 28,2% 31,9% 26,4% 36,8% 27,3% 34,3% Operating Profit 18  26  18  32  36  58  ORGANICS (Million Euros) Net Sales 454  461  458  414  912  875  Recurring EBITDA 26  38  8  36  34  74  % Sales(b) 5,7% 8,2% 1,7% 8,7% 3,7% 8,5% Operating Profit 0  12  (23) 19  (23) 31  ENERGY SERVICES (Million Euros) Net Sales 25  25  Recurring EBITDA 9  25  16  35  25  60  Operating Profit 0  20  13  56  13  76  CORPORATE & OTHERS (Million Euros) Sales & intercompany sales elimination (21) (18) (27) (19) (48) (37) Recurring EBITDA (43) (49) (44) (44) (87) (93) Operating Profit (88) (80) (127) (85) (215) (165) (a) Unaudited (b) Calculated as recurring EBITDA / Net Sales Consolidated income statements as of December 31, 2006   (in millions of euros)   For the year ended December 31,     2006    2005    2004  Net sales   4 810    4 521    4 184  Other revenue   451    435    424  Cost of sales (4 261) (4 139) (3 941) Administrative and selling expenses (518) (523) (455) Research and development expenses (103) (104) (116) Restructuring costs (21) (82) (168) Goodwill impairment -  -  (16) Other operating income/(expenses)   1    (42)   (47) Operating profit   359    66    (135) Financial income 133  133  121  Finance costs (448) (496) (449) Foreign exchange gains/(losses) 10  (69) 68  Share of profit/(losses) of associates   -    -    3  Income/(loss) before income tax   54    (366)   (392) Income tax expense 57  (53) (98) Income/(loss) from continuing operations 111  (419) (490) loss from discontinued operations   (45)   (196)   (142) Net Income/(loss)   66    (615)   (632) Attributable to: Equity holders of Rhodia SA 62  (616) (641) Minority interests   4    1    9  Income/(loss) per share from continuing operations (in euro) – basic and diluted   0.05    (0.95)   (1.36) Income/(loss) per share (in euro) – basic and diluted   0.05    (0.95)   (1.36) Consolidated balance sheets as of December 31, 2006   Assets   At December 31, (in millions of euros)   2006    2005    2004  Property, plant & equipment 1 760  2 135  2 245  Goodwill 225  244  226  Other intangible assets 178  154  139  Investments in associates 4  4  3  Other non-current financial assets 121  164  226  Deferred tax assets   183    83    99  Non-current assets   2 471    2 784    2 938  Inventories 620  630  701  Income tax receivable 23  20  14  Trade and other receivables 1 082  1 188  1 260  Derivative financial instruments 34  42  36  Other current financial assets 19  5  5  Cash and cash equivalents 467  920  612  Assets classified as held for sale   437    57    -  Current assets   2 682    2 862    2 628  TOTAL ASSETS   5 153    5 646    5 566  Liabilities and shareholders’ equity   At December 31, (in millions of euros)   2006  2005  2004  Share capital 1 204  1 177  628  Additional paid-in capital 23  570  807  Other reserves 109  141  12  Deficit   (1989)   (2 580)   (1 993) Equity attributable to equity holders of Rhodia SA (653) (692) (546) Minority interests   25    26    25  Total equity   (628)   (666)   (521) Borrowings 2 022  1 975  2 250  Retirement benefits and similar obligations 1 227  1 269  1 038  Provisions 306  297  216  Deferred tax liabilities 32  34  55  Other non-current liabilities   43    46    51  Non-current liabilities   3 630    3 621    3 610  Borrowings 413  1 039  721  Derivative financial instruments 34  14  49  Retirement benefits and similar obligations 98  81  74  Provisions 147  204  237  Income tax payable 41  31  38  Trade and other payables 1 178  1 271  1 358  Liabilities associated with assets classified as held for sale   240    51    -  Current liabilities   2 151    2 691    2 477  TOTAL EQUITY AND LIABILITIES   5 153    5 646    5 566  Consolidated statements of cash flows as of December 31, 2006     For the year ended December 31, (in millions of euros) 2006  2005  2004  Net loss (Group Share) 62  (616) (641) Adjustments for : Minority interests 4  1  9  Depreciation, amortization and impairment of long-term assets 339  518  750  Net increase/(decrease) in provisions and employee benefits (98) 25  110  Net increase/(decrease) in financial provisions -  133  103  Share of profit/(loss) of associates -  -  65  Other income and expense 27  (3) (2) Gain/(loss) on disposal of non-current assets 15  22  (258) Income tax expense/(income) (97) 20  60  Foreign exchange losses/(gains) (8) 110  (91) Cash flow from operating activities before changes in working capital 244  210  105  Changes in working capital - (Increase)/decrease in inventories and work in progress (112) 91  (52) - (Increase)/decrease in trade and other receivables (22) 62  74  - Increase/(decrease) in trade and other payables 1  (26) (22) - Increase/(decrease) in other current assets and liabilities (9) (199) (98) Net cash from operating activities 102  138  7  Purchases of property, plant and equipment (263) (254) (221) Purchases of other non-current assets (48) (32) (27) Proceeds on disposal of non-current assets 140  51  652  (Purchases of)/repayments of loans and financial investments 1  24  (107) Net cash (used by) / from investing activities (170) (211) 297  Proceeds from issue of shares, net of costs 36  576  447  Dividends paid (2) -  -  New long-term borrowings, net of costs 1086  1228  980  Repayments of non-current borrowings, net of costs (1 402) (1 285) (987) Net increase/(decrease) in current borrowings (94) (176) (926) Net cash (used by) / from financing activities (376) 343  (486) Effect of foreign exchange rate changes (9) 38  (4) Net increase/(decrease) in cash and cash equivalents (453) 308  (186) Cash and cash equivalents at the beginning of the year 920  612  798  Cash and cash equivalents at the end of the year 467  920  612