I - Inventories: General principles

2. Content

RAW MATERIALS and OTHER

Raw materials:

• All products that are incorporated into the products manufactured for sale.
  E.g.: Limestone, salt, rasorite, etc…
  Rem: Technical items are not included in this group (general store, spare parts, piping and building materials).
  Notes:

• • Coke, anthracite when needed, fuel and natural gas consumed in a lime kiln (FCH) are considered as raw materials. Their carbon (C) enter in the composition of light soda (SL), condensed soda (SD), carbonate of precipitated calcium (CCP), etc...
  • Raw materials also include other combustible and energy.
  • They also cover utilities.
    Examples of utilities: High power electrical energy, cooling water, de-mineralized water used for the H2O2 concentrations, caustic soda lye, PVC batches, etc…
    Remark: The utilities provided as services, i.e. not consumed, do not pass through inventories. Purchases of utilities as services are expensed.
• Emission allowances and purchases. Depending on the company's economic models, inventories will be consumed in the production process or hold for sales and accounted for differently.
  Related instruction note: EUA/CERs - IFRS Accounting Treatment.
• Raw materials in transit
  
  

Consumables and supplies

• Are consumables all products purchased to a third party and that are used in the manufacturing process as they are, i.e. that were not modified by us, in which case they become utilities.
  E.g.: High power electrical energy, coke, fuel, etc…
  Remark: Unlike raw materials, which are processed, the consumables are consumed.
• Are included in here:
  • General and technical and general items , i.e. items that are not yet at their final shape such as tubes, bolts, steel sheets, steel sections, etc... especially used for maintenance and construction. These items include a whole range of standard factory supplies generally used for consumption (e.g.: small office supplies).
  • Packaging : All items being used as container for the packaging of products manufactured or purchased and ready for sale.
    E.g.: bags, covers, octabins, pallets, etc…
    Remarks:
    • Containers can be both returnable and non-returnable. The returnable containers are received by customers on loan or on consignment and should in principle be returned by them. The non-returnable containers are sold to the customer and their value is included in the price of the content.
    • The inventory of returnable packaging only includes drums, cylinders, barrels, wooden and iron boxes, etc., i.e. items of relatively low value. On the other hand, heavy packaging and having big value such as freight containers, tanks, movable tanks, chlorine tubes, etc., are recorded as fixed assets (rolling materials).
  • Spare parts less than or equal to 15 kEUR (If their value exceeds 15 kEUR, they should be capitalized):
    • Is considered here the acquisition value.
    • There will be no transfer of the specific spare part to fixed assets in order to apply depreciation. Should the value be overestimated at a certain point in time, a write-down will be made.
    • Costs of dismantling, assembly and repair are always expensed for spare parts in inventory.
• The consumables and supplies do not include:
  • Fixed assets purchases are recorded under « constructions in progress » and are not accounted for as inventory.
  • The first-time loads (e.g.: catalysts), i.e. materials that enter into the manufacturing process without forming part of the product manufactured. They are not accounted for as inventory. They are capitalized under « plant, machinery and equipment » without being subject to depreciation. The cost of re-inputting materials to compensate losses or to regenerate materials is directly expensed.

WORK-IN-PROGRESS

Goods and work in progress

• Goods and work in production or processing at closing which are not recorded in any stores account.
• Goods not yet approved by production control and those between production phases (e.g. tubes).
• Sundry preparatory work: quarry clearance and development, drilling of boreholes, etc.
• Certain types of goods: limestone stored at the plant after blasting and sorting (quarrying).
• Goods being processed in the machines.
• Sundry services in progress: services for other establishments or third parties.

Orders in progress

• Work in progress ordered specifically by a third party and not yet delivered.
  E.g.: Custom assembly under subcontract.
• Goods in progress specifically ordered by a customer and not yet legally considered to have been delivered (not received or not approved).
• Services in progress ordered by a third party and not yet delivered (not finished, i.e. not ready to be invoiced).

Wastes and trashes

i.e. waste materials and production trashes that cannot be used or normally sold but may still be of value as second-rate raw materials or products to be sold on recycling markets. By extension, this heading also includes warehouses containing disassembled machinery and scrap iron.

Downpayments paid on cavities

FINISHED and SEMI-FINISHED GOODS

Finished goods manufactured

• All goods manufactured by the Group, as part of an entity's regular activity, and intended for sale.
  Are included in this group, the "preload" items for storage before being commercialized, as well as the intermediate products that are intended for sale. The turnover is reported under net sales.
  E.g.: All the range of Solvay products manufactured and intended for sale.
  Remark: A finished good manufactured by the Group and sold to another Business must be considered as raw material by the consuming plant.
• Note: The intermediate products (intended for sale) are all goods having reached a determined stage of completion and that can be sold as such without further processing.

Finished goods purchased (merchandises)

• Goods commercialized by the Group and that are intended for resale as purchased or with minor packaging. The turnover is also reported under net sales.
  Ex: Sulphuric acid.
• Note: They can relate to purchase/resale between Group subsidiaries or towards third parties.

Finished goods in transit

Could be

• finished goods purchased for which purchase invoices have been recorded before good receipts or goods resale (in the case of direct deliveries)
• finished goods shipped but not yet invoiced

Semi-finished goods

• Products that have already undergone primary processing (possibly in another production center), but are not ready yet for sale.
• Note: Semi-finished goods (e.g.: PVC monomers), physically in inventory, should not be confused with work in progress in the machines.
  Nevertheless, semi-finished goods that can be sold to third parties, as they are in their initial state, are treated as "Finished Goods inventory", as they can be considered as having achieved their ultimate stage of production.