Eramet Sa · EURONEXT:ERA
Eramet Sa — Debt Investor Presentation (November 2019)
63 slides from Eramet Sa's debt investor presentation, Nov 4, 2019
Slide 1: Investor Presentation 4 November 2019
INVESTOR PRESENTATION 4 November 2019
Slide 2: Disclaimer
Disclaimer This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any offer or sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful under the securities laws of any such juri
Slide 3: Summary
Summary 1– Introduction to Eramet 2– Solid business fundamentals: focus on the Group’s assets and markets 3– A company geared to deliver value-accretive growth through the cycle 4– Focused strategy and targeted growth plans 5– Conclusion Appendix 3
Slide 4: Introduction to Eramet
LE Introduction to Eramet ~ A eraMer,T
Slide 5: A global and diversified mining and metallurgical leader
A global and diversified mining and metallurgical leader ERAMET IN NUMBERS IN 2018 SALES BREAKDOWN BETWEEN 2 MAIN DIVISIONS Diversified and balanced business model €3.8bn sales 22% EBITDA margin High Mining and 13,000 employees €581m operating income Performance Metals Alloys Division Division Prese
Slide 6: World-class mining assets: long life, first quartile cash cost and scalable
World-class mining assets: long life, first quartile cash cost and scalable Gabon: 269 Mt resources, >40 years remaining life All weather cash generative > High-grade oxide commercial ore Cycle proof cash generation > Fully de-risked activity: operated for 50 years Long life, 1st quartile production
Slide 7: A long-term strategy supported by a strong shareholding structure
A long-term strategy supported by a strong shareholding structure SHAREHOLDING STRUCTURE AS OF JUNE 30TH, 2019 ADDITIONAL FLEXIBILITY GRANTED BY SHAREHOLDERS Family and state-owned group APE (French State) > French State: shareholder for 40 years (25.6%) Sorame + CEIR 25,6% (Duval family) 36,9% > Du
Slide 8: An experienced leadership with an established track-record
An experienced leadership with an established track-record EXECUTIVE COMMITEE PROVEN MANAGEMENT TRACK-RECORD 1 Christel BORIES granted the "Prix des 100 jours" award Christel BORIES Kléber SILVA Jérôme FABRE 2 Chairman and CEO Deputy CEO in charge of Deputy CEO in charge of Thomas DEVEDJIAN is a
Slide 9: An increasingly more committed, contributive and recognized corporate citizen
An increasingly more committed, contributive and recognized corporate citizen 1 Societal engagement aligned with strategic vision A 2018-2023 CSR roadmap to structure and set the pace for our action plans Compliant with the United Nations’ Sustainable Development Goals 2 Contribute to the communitie
Slide 10: Key credit strengths
Key credit strengths 1 Strategy focused on cash generation and diversification (metals, markets and • Developing additional cash generative countries) assets 2 Strategy supported by world-class mining deposits of high grade ore and long • Focus on 1st quartile mining assets with life resources remai
Slide 11: Solid business fundamentals: focus on the Group's assets and markets
Solid business fundamentals: focus on the Group’s assets and markets
Slide 12: Two main divisions; five business units
Two main divisions; five business units Global Sales Network and Group Innovation, Mining and Metals High Performance Research and Development Division Alloys Division Li Forged/Rolled Products High Speed Steels & Closed-die Forged & Recycling Manganese Mineral Sands Nickel Lithium Parts BU BU BU BU
Slide 13: Mining and Metals Division
LE Mining and Metals Division ~ A eraMer,T
Slide 14: Manganese
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Slide 15: Manganese BU: world-class competitiveness
Manganese BU: world-class competitiveness Key features 1 A highly competitive manganese mine in Gabon (Moanda), operated by Comilog Extraction of > High-grade oxide ore 44% Eramet’s activities manganese ore in > First quartile cash cost order to… Two units of local transformation in Gabon for high g
Slide 16: Manganese ore prices decreasing from H1 2019 high levels
Manganese ore prices decreasing from H1 2019 high levels MONTHLY CHANGE IN MANGANESE ORE AND MEDIUM-CARBON FERROMANGANESE (REFINED) PRICES1 $/dmtu €/t 9 1 800 Quick price 8 recovery further to production cuts 1 600 from key suppliers 7 1 400 6 1 200 1 000 5 Depressed economic 800 4 outlook 600 3 400
Slide 17: Further to H1 record in steel production, ore supply expected to adjust
Further to H1 record in steel production, ore supply expected to adjust to new demand environment DEMAND: GLOBAL CARBON STEEL PRODUCTION SUPPLY: GLOBAL MANGANESE ORE PRODUCTION1 +4.4% China Rest of the world +15.6% 1,802 1,726 20.0 +11.9% +3.2% 17.3 1,354 1,397 16.4 50% 52% 14.7 Mt Mt 50% 54% 50% 48
Slide 18: Manganese BU – financial overview
Manganese BU – financial overview €m (unless otherwise stated) 2016 2017 2018 1H18 1H19 Sales 1 439 1 919 1 857 928 904 ● Production (in Kt) 3 413 4 163 4 330 1 995 2 117 Ore and sinter ● Pricing * 4,3 6,0 7,2 7 6 (in $/dmtu) ● Production (in Kt) 703 716 719 356 376 Manganese alloys ● Pricing ** 1 1
Slide 19: Nickel
Nickel
Slide 20: Nickel BU: a thorough transformation underway
Nickel BU: a thorough transformation underway Key features 1 Implementation of new business model in New Caledonia with 5 operated mines and one Extraction of nickel ore in order to… pyrometallurgical plant Eramet’s activities Ramp up of Weda Bay nickel > One of the world's largest undeveloped nicke
Slide 21: Nickel best performing base metal YTD after Indonesian ore export ban
Nickel best performing base metal YTD further to the Indonesian ore export ban announcement NICKEL SPOT PRICE VS. AVAILABLE STOCKS LME Nickel price Nickel stocks USD/lb USD/tonne (tonnes) Government of Indonesia 9.1 20 000 announces ore 600 000 exports ban 8.2 18 000 500 000 7.3 16 000 400 000 6.4 1
Slide 22: Solid supply/demand equilibrium prospects
Solid supply/demand equilibrium prospects GLOBAL SUPPLY/DEMAND BALANCE VS. TOTAL MARKET STOCKS 200 25 160 150 116 121 September 4th 2019 108 20 100 50 34 15 0 -5 -18 -25 10 -50 -40 -47 -53 -100 -82 5 -150 -154 -157 -200 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Balance
Slide 23: Nickel BU – financial overview: a new business model being implemented
Nickel BU – financial overview: a new business model being implemented €m (unless otherwise stated) 2016 2017 2018 1H18 1H19 Sales 595 644 738 365 346 ● Production (in Kt) 56 57 54 27 24 Ferronickel ● Pricing * (in $/lb) 4,4 4,7 5,9 6,3 5,6 EBITDA (24) (44) (18) 22 (25) EBITDA margin (%) n.m n.m n.m
Slide 24: Mineral sands
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Slide 25: Mineral Sands BU: world-class mining operations in Senegal and Norway
Mineral Sands BU: world-class mining operations in Senegal and downstream operations in Norway 1 Key features Sand mining TiZir Senegal: and > Extraction of heavy mineral rich sands ~700-750kt separation… per annum with the world largest single dredge 2 Eramet’s activities mineral sands operation >
Slide 26: Favourable long-term perspectives for titanium products
Favourable long-term perspectives for titanium products with slight price erosion after increase in H1 2019 MONTHLY CHANGE IN CP GRADE TITANIUM DIOXIDE SLAG PRICES1 USD/ton 850 800 750 700 650 600 550 500 Jan-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18 Aug-18 Jan-19 Jun-19 GROWTH OF PIGMENT MARKET – 90% O
Slide 27: Solid zircon products market environment despite slowdown in Q3 2019
Solid zircon products market environment despite slowdown in Q3 2019 MONTHLY ZIRCON PREMIUM PRICES1 USD/ton 1 800 1 600 1 400 1 200 1 000 800 Jun-16 Nov-16 Mar-17 Aug-17 Dec-17 May-18 Sep-18 Feb-19 Jul-19 SUPPLY/DEMAND BALANCE FOR ZIRCON EXPECTED TO BE SLIGHTLY IN EXCESS IN 2019, WITH A STRUCTURAL F
Slide 28: Mineral Sands BU – financial overview
Mineral Sands BU – financial overview €m (unless otherwise stated) 2017 2018 1H18 1H19 Sales 100 212 58 139 ● Production 725 774 374 378 Heavy Mineral (in Kt) Concentrates ● Pricing (Zircon) * $/tonne 742 1 146 1 025 1 225 ● Production 181 189 85 101 CP grade titanium dioxide (in Kt) slag ● Pricing
Slide 29: High Performance Alloys Division
High Performance Alloys Division
Slide 30: High Performance Alloys: a key supplier with unique know-how
High Performance Alloys: a key supplier with unique know-how dedicated to strategic industries High Performance Alloys 1,020 M€ Special steels, nickel-based superalloys and Turnover in 2018 High-speed steels aviation grade titanium alloys producer producer Forged Closed-die High-speed Long products
Slide 31: Aubert & Duval operational issues and action plan
Aubert & Duval recent operational issues clearly identified and strict action plan being rolled out On December 8th Eramet announces taking corrective actions as part of a quality process review within its Alloys division Situation overview Measures taken Non compliant processes were terminated imme
Slide 32: High performance alloys Division – financial overview
High performance alloys Division – financial overview Alloys €m (unless otherwise stated) 2016 2017 2018 1H18 1H19 Sales 949 1 087 1 020 520 423 EBITDA 74 84 46 43 (5) EBITDA margin (%) 8% 8% 5% 8% n.m Current operating income 27 32 (8) 10 (27) Capex 55 59 63 31 26 Stable and solid aerospace marke
Slide 33: A company geared to deliver value-accretive growth through the cycle
A company geared to deliver value-accretive growth through the cycle
Slide 34: Resilient performance through the cycle with recently improved margins
Resilient performance through the cycle with recently improved margins following optimization program SALES EVOLUTION BY BUSINESS (€M): ABILITY TO MAINTAIN SALES LEVEL AT OR ABOVE €3.0BN In €m 3,825 3,652 2,984 27% 2,762 2,703 30% 32% 134 195 18% 19% 759 615 20% 544 562 50% 49% 48% 1,325 1,331 2016
Slide 35: Recurring cashflow generation
Recurring cashflow generation NET OPERATING CASHFLOW – ABILITY TO MAINTAIN POSITIVE CASHFLOWS EXCLUDING ONE-OFFS In €m 687 2017-2018 variation includes ~EUR250m €(107)m one-off impact swings in WC of A&D quality review of 449 which €70m working capital increase to be unwound 173 121 100 107 -7 2016
Slide 36: Appropriate toolbox to preserve a strong financial profile
Appropriate toolbox to preserve a strong financial profile GROUP CAPEX EVOLUTION 2012 – 2018: C. €150M RECURRING CAPEX ONLY In €m Growth Recurring Productivity HSE/CSR Sustaining 641 587 339 286 346 268 281 217 230 243 140 150 302 301 138 129 38 26 29 30 103 29 25 45 59 38 16 47 57 2012 2013 2014 20
Slide 37: A strong balance sheet and high liquidity
A strong balance sheet and high liquidity EQUITY AND GEARING RATIO TRACK RECORD OF STRONG LIQUIDITY LEVELS Gearing 2,806 Ratio: 47% 19% 38% 23% 51% 2,602 In €bn In €m 2,468 2,0 2,0 1,9 2,244 1,8 1,8 1,825 1,501 1,698 1,367 1,143 * 981 981 981 981 120 120 120 2016 2017 2018 H1 2018 H1 2019 2016 2017
Slide 38: A back ended debt repayment profile with no major upcoming maturity
A back ended debt repayment profile with no major upcoming maturity pro-forma of ongoing refinancing DEBT MATURITY PRO-FORMA TO 2020 MATURITY REFINANCING, AS OF JUNE 30, 2019 In €m 689 620 Of which 2020 10 Eramet notes refinanced 118 hereby Proforma refinancing €300m notes offered hereby (refinancin
Slide 39: Strict investment framework applied in all our investment decisions
Strict investment framework applied in all our investment decisions to deliver value-accretive growth KEY PILLARS DRIVING OUR WELL DEFINED AND CAUTIOUS INVESTMENT DECISION PROCESS 1 2 3 4 5 6 Selection of In line Attractive Fully de- partners for Minimum Appropriate with market and risked larger sca
Slide 40: Prudent and strict financial policy
Prudent and strict financial policy 1 Maintain significant liquidity at all time Conservative financial Maintain minimum covenant headroom of at least 20% policy Anticipate debt repayment 2 Ongoing action plans to deliver productivity gains in 2019 Capital expenditure monitoring > Flexibility to adj
Slide 41: Focused strategy and targeted growth plans
Focused strategy and targeted growth plans
Slide 42: Group strategic transformation: increasing cash generation and diversification
Group strategic transformation: increasing cash generation and portfolio diversification 2 GROWING in our attractive businesses 1 Manganese ore: growth in volumes in Gabon FIX / REPOSITION through dry process and opening of new plateau our least performing assets Mineral sands: successful takeover b
Slide 43: SLN action plan: decisive breakthroughs for two levers already achieved
1 SLN action plan: decisive breakthroughs for two levers already achieved NO FURTHER CASH INVESTMENT FROM ERAMET, CURRENTLY POSITIVE CASH CONTRIBUTION TO THE BUSINESS Existing ore supply to Donimabo plant to New business produce FeNi •4 Mt / year export license granted by NC government ✔ model Expor
Slide 44: Sandouville plant: on its way to deliver nameplate capacity
1 Sandouville plant: on its way to deliver nameplate capacity and capitalize on demand momentum Improved operating rate thanks to support of experts’ task force since the start of the year… High purity nickel production more than tripled to 4kt in H1 2019, above FY 2018 production; high purity nicke
Slide 45: Aubert & Duval reasserts itself as a strategic European supplier
Aubert & Duval reasserts itself as a strategic European supplier 1 for sovereignty industries (aerospace, nuclear, defense…) Our ambition Recover competitiveness through development of products for strategic markets and users Pursue the securitization of the strategic materials supply Bring innovati
Slide 46: 2019 targets confirmed: Mining and Metals Division establishing new records
2 2019 targets confirmed: Mining and Metals Division establishing new records YTD September 2019 Record production in Record1 nickel ore H1 record production from manganese ore: production from SLN: TiZir: 3.5 Mt of ore produced at 3.3 Mt of nickel ore, +12% 378 kt of HMC2 (zircon & Comilog in Gabon
Slide 47: COMILOG 2020: Extract full potential of our manganese asset in Gabon
2 COMILOG 2020: Extract full potential of our world-class manganese asset in Gabon WHAT IS MOANDA? RECENT TOPICS MOANDA IN 2023 A highly competitive mine operated by Enhance production in Bangombé 7 Mt manganese ore production in 2023: Comilog for 50 years +50% vs 2018 Development of Okouma plateau:
Slide 48: Attractive growth opportunity: the Centenario lithium project in Argentina
Attractive growth opportunity: the Centenario Project 3 a world-class lithium project in Argentina under study KEY PROJECT HIGHLIGHTS ATTRACTIVE METRICS Long life low cost and scalable project, c.10 Mt LCE1 Payback IRR drainable resources, c. 50 years of resources 3 to 5 years 17% to 25% Battery gra
Slide 49: The Mine 4.0 and Open Innovation: new productivity levers
The Mine 4.0 and Open Innovation: new productivity levers Targeted Innovation is spreading to create value Production control in real time investment Topographic measurements Railway operations optimization OEE in real time, Digital Twin, Integrated ~ 10 % Drones, platforms, edge computing Remote Ce
Slide 50: Conclusion
LE Conclusion ~ A eraMer,T
Slide 51: Key Investment Highlights
Key Investment Highlights World class mining assets with competitive mines and significant resources (long life, almost all first quartile cost and scalable) A WORLD LEADER… World leading position in all divisions Strategy focused on cash generation and diversification Solid long term prospects in a
Slide 52: Summary term sheet
Summary term sheet Issuer ERAMET Rating Unrated Notional Amount EUR 300m+ Issue Type Fixed Status of the Notes Senior, Unsecured, Unsubordinated Form of the Notes Bearer dematerialized Maturity Long 5 to 6 year Standalone / Change of Control / Make Whole Call / 3 month par call / Clean-Up Call Docum
Slide 53: A socially responsible, committed and contributive corporate citizen
Committed to women and men Committed to our planet A socially responsible, committed and contributive corporate citizen A responsible economic player
Slide 54: Appendix – Business Model and Strategy
Appendix – Business Model and Strategy
Slide 55: Industrial setup in France, global reach
Industrial setup in France, global reach 12 industrial sites in France 4 000 employees 14 9 sales points 4 distribution industrial (commercial presence in 42 countries) centers sites 55
Slide 56: Lithium main growth drivers: energy storage, including Li-ion EV battery
Lithium main growth drivers: energy storage, including Li-on EV battery Key features 1 Energy storage market: mainly driven by Li rich brine extraction from environmental regulations, EV sales and mobility development Eramet’s activities salar… Lithium carbonate and lithium hydroxide enter the compo
Slide 57: A booming lithium market over the next years
A booming lithium market over the next years FORECAST LITHIUM DEMAND1 (IN KT LCE) 603 22% Others Others Batteries 30% EV Batteries 230 102 49% 48% 57% 34% 43% 17% 2010 2018 2025e 20181 2025 Consumer Consumer Glass & electronics & electronics 11% 11% Glass Greases Mass energy 22% 25% 3% storage 8% Ot
Slide 58: Appendix - Financials
LE Appendix - Financials ~ A eraMer,T
Slide 59: Sensitivities in H1 2019
Sensitivities in H1 2019 SENSITIVITIES CHANGE (+/-) ANNUAL IMPACT ON COI (+/-) Manganese ore prices +$1/dmtu ~€130m Manganese alloys’ prices +$100/t ~€70m Nickel prices +$1/lb ~€100m Exchange rates +$/€0.1 ~€105m Oil price per barrel +$10/bbl ~€(16)m 59
Slide 60: Group income statement
Group income statement €m H1 2019 H1 2018 Sales 1,809 1,813 EBITDA 307 432 % Sales 17% 24% Current operating income 169 294 % Sales 9% 15% Other operating income and expense (25) (1) Operating income 144 293 Financial result (54) (51) Pre-tax income 90 242 Share of income of equity affiliates (4) (0
Slide 61: Cash-flow table
Cash-flow table €m H1 2019 H1 2018 FY 2018 Operating activities EBITDA 307 432 843 Cash impact on items under EBITDA (142) (160) (345) Cash from operating activities 165 272 498 Change in WCR (172) (99) (49) Net cash generated by operating activities (1) (7) 173 449 Investment activities CAPEX (131)
Slide 62: Group Balance Sheet at 30 June, 2019
Group Balance Sheet at 30 June, 2019 3,956 3,956 3,646 3,646 1,547 1,605 3,106 289 3,030 303 1,081 995 17 26 850 1,022 616 717 31/12/2018 30/06/2019 31/12/2018 30/06/2019 Fixed assets Equity-Group share Provisions and net deferred tax Net debt WCR Minority interests Financial instruments 62
Slide 63: Reconciliation Group reporting and published accounts
Reconciliation Group reporting and published accounts Half Year Half year Half Year Half year Joint-venture Joint-venture €m 2019 contribution 2019 2018 contribution 2018 Published1 Reporting Published1 Reporting2 Sales 1,809 - 1,809 1,735 78 1,813 EBITDA 307 - 307 415 17 432 Current operating incom