Second quarter 2008 results News release

Paris – July 30, 2008

Second quarter 2008 results:
Rhodia demonstrates again its strong pricing power in a challenging environment
Full year objectives confirmed

Key highlights

• Strong pricing power confirmed : +8.1%(1) price increases more than offsetting the sharp increase in raw materials and energy costs

• Stability of volumes reflecting priority given to prices

• Recurring EBITDA(1) stable at €187 million, despite significant transactional Forex impact

• Substantial increase in Net Profit to €35 million

• Full year objectives confirmed

“Once again, Rhodia’s strong pricing power has allowed us to more than offset the unrelenting increases in raw material and energy costs," commented Rhodia Chairman and Chief Executive Officer Jean-Pierre Clamadieu. "On the back of satisfactory demand levels, we will continue to give priority to pricing. We remain therefore confident in the performance of our businesses despite the challenging feedstock environment and the strong Forex headwinds we are facing."

Summary income statement

(1) Like for like: at constant scope and currency conversion

(2) Before restructuring and other operating income and expenses

(3) Defined as “net cash provided by operating activities” plus “non recurring refinancing cash costs” minus Capital Expenditure

1. Strong pricing fully offsets cost increases

The 5% (1) increase in Net Sales was driven by a 8.1% positive impact from strong pricing in local currency. In a satisfactory demand environment, volumes were stable as Rhodia effectively gave priority to prices over volumes. The transactional foreign exchange impact was a negative (3.5)%.

Recurring EBITDA(1) was stable. €95 million of price rises more than compensated for a €(78) million increase in raw material and energy costs. The transactional foreign exchange impact amounted to €(23) million. Fixed costs were under control and decreased by €7 million.

Operating Profit(1) was up by 16% versus the second quarter of 2007 and amounted to €115 million.

The Financial Result improved to €(56) million from €(84) million in the second quarter of 2007 which was impacted by a one-off financial restructuring charge of €(34) million. Net financial charges improved from €(38) to €(33) million.

The Net Profit Group Share increased from €3 million in the second quarter of 2007 to €35 million in the second quarter of 2008.

Earnings per Share rose to € 0.35 from €0.03 a year earlier.

2. Free Cash Flow affected by temporarily negative Working Capital variance

Due to the continuous disciplined management of investments, Capital Expenditure amounted to €65 million versus €76 million in the second quarter of 2007.

Working Capital stood at 12.4% of Total Sales versus 12.9% a year earlier. However, Working Capital increased by €64 million versus the end of the first quarter of 2008, reflecting the impact of price increases and the temporary effect of the deployment of a new SAP based system in Rhodia’s USA operations.

The temporary increase in Working Capital weighed on the Free Cash Flow which amounted to €(15) million.

At €1,570 million on June 30, 2008, Consolidated Net Debt is nearly stable compared to €1,529 million on March 31, 2008.

3. Overview by Enterprise

Polyamide

The Polyamide Enterprise registered stable volumes, reflecting the Group’s policy to give priority to prices. New price initiatives were implemented in order to fully cover raw materials and energy cost increases. US competitors with available volumes due to the slowdown in the US market benefited from favorable currency and natural gas costs.

The decline in the US Dollar against the Brazilian Real and the Euro led to a negative Forex impact of €(13) million.

In the second half of the year, new price increases are underway to compensate for continuous raw material cost inflation, in particular for Butadiene.

(1) Like for like: at constant scope and currency conversion

Novecare

Novecare saw solid demand across all segments. Industrial Formulation volumes were flat, with growth in Asia and Latin America compensating for the slowdown in the US market. Strong price rises more than offset raw material and energy cost increases.

The Enterprise was impacted by a €(5) million negative non cash Forex conversion effect.

Market trends are expected to remain positive throughout 2008, allowing for further price increases.

Silcea

As expected, Silcea saw a significant 30% improvement in recurring EBITDA versus the first quarter of 2008, reflecting new price increases, especially in Silica and Rare Earths. Fixed costs were up versus the second quarter of 2007 resulting from growth projects and the new diphenols facility in China.

Silcea was impacted by a €(5) million negative Forex effect.

The Enterprise sees an overall good level of demand continuing.

Energy Services

€32 million of recurring EBITDA was generated from Carbon Emissions Reduction credits (CERs) versus €29 million in the second quarter of 2007. The cogeneration business is traditionally slow in the second quarter.

For the full year 2008, Rhodia expects to produce 13 million tons of CERs. 92% of these credits have been secured at €15.2/ton.

Acetow

Price rises more than offset the increases in raw material and energy costs. The business was impacted by a substantial negative € (7) million Forex impact.

Current initiatives are expected to deliver a significant recurring EBITDA improvement starting in the third quarter of the year.

Eco Services

Eco Services’ strong price rises more than offset rapidly increasing raw material (sulfur in particular) and energy costs. The non cash negative Forex conversion was €(4) million.

In the coming months, Rhodia’s strong pricing power should continue allowing sulfur cost increases to be fully offset.

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 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.

Contacts

Media Relations
Rita Hillig +33 (0)1 53 56 64 04

Investor Relations
Loic Harrari +33 (0)1 53 56 64 80

FINEO
Anne Guimard/ François-José Bordonado +33 (0)1 53 56 64 59

Results Fact Sheet : Q2-H1 2008

(1) Recurring EBITDA margin excluding CERs 13.1% vs 14.1% in Q2 07 and 12.3% vs 14.2% in H1 07

⁽¹⁾ including intercompany sales elimination

* Unaudited
** Reviewed by auditors

Results Fact Sheet : Q2 2008

* Unaudited

Results Fact Sheet : H1 2008

** Reviewed by auditors

Results Fact Sheet : Quarterly results