Elkem Asa · OSL:ELK
Elkem Asa — Q4 2023 Earnings Presentation
43 slides from Elkem Asa's earnings presentation, Feb 8, 2024
Slide 1: Fourth quarter results 2023
Elkem Fourth quarter results 2023
Slide 2: Agenda
Agenda Business update By CEO Helge Aasen Financial performance By CFO Morten Viga Outlook By CEO Helge Aasen
Slide 3: Highlights
Highlights Fourth quarter concludes a challenging year, signs of recovery = Elkem’s EBITDA was NOK 632 million in the fourth quarter 2023 = Silicones delivering positive EBITDA in challenging markets, as internal improvement programmes take effect = Silicon Products negatively impacted by lower cont
Slide 4: Elkem celebrates anniversary as 120 years young company
Elkem celebrates anniversary as 120 years young company = Elkem celebrates its 120 years anniversary in 2024, having grown from a Norwegian industrial start-up into a position as one of the world's leading providers of advanced silicon-based materials = Our focus is always on the future - Elkem’s mo
Slide 5: Environmental, Social & Governance
Environmental, Social & Governance Strong ESG performance Green leadership = Elkem has been awarded A score from CDP on Forests and A- on Climate and Water Security for 2023 = In December 2023, an agreement was reached with reindeer district 7 (Rakkonjarga) for the expansion of Elkem’s quartz mining
Slide 6: Fire at the Salten plant
Fire at the Salten plant = A fire broke out at the Salten plant in Norway on 10 December 2023. The plant has three furnaces and a total capacity of 80 kt/p.a. = The fire started in a building housing raw materials, including carbon materials = The fire was under control and mostly extinguished withi
Slide 7: Weak macro-economic sentiment, signs of recovery
Weak macro-economic sentiment, signs of recovery = The macro-economic sentiment has been weak in 2023, characterised by high inflation, interest rate hikes, slow recovery in China, and geopolitical uncertainties. Markets also impacted by Chinese exporters discounting prices to get over slump in dema
Slide 8: EBITDA improvements and capex reductions targets 2024
EBITDA improvements – Target 2024 > BNOK 1.5 ▪ ▪ ▪ Capex reductions – Target 2024 > BNOK 2.0 ▪ ▪ ▪ ▪ ▪
Slide 9: Sales by region
▪ ▪ Europe China ▪ North America India ▪ South America Rest of Asia Africa & Middle East Pacific 9 9
Slide 10: Well managed financing position
Well managed financing position = Scope affirmed the BBB issuer rating of Elkem in December 2023 and changed the outlook from stable to negative = Elkem has a good liquidity position as at 31 December 2023 = Available cash BNOK 6.4 = Available undrawn credit lines BNOK 6.3 = Well managed debt profil
Slide 11: China real estate and light vehicle production
Growth rate of investment in real estate development in China in 2023 ▪ ▪ Source: China National Bureau of Statistics ▪ Europe and North America – Light vehicle production (million units) Source: CRU
Slide 12: DMC reference price China
▪ DMC reference price China (KCNY/mt) ▪ ▪ ▪ DMC reference prices are based on quotes incl. VAT and transportation. Quotes may not always reflect accurate sales prices.
Slide 13: CRU silicon and ferrosilicon prices EU
CRU silicon 99 price EU (EUR/mt) ▪ ▪ ▪ CRU ferrosilicon 75 price EU (EUR/mt) ▪
Slide 14: Crude steel production
▪ Crude steel production (million mt) ▪ ▪ ▪
Slide 15: Elkem group
Elkem group Challenging markets, but signs of recovery and Silicones back to positive EBITDA Total operating EBITDA (MNOk) 33% 32% income (MNOK) 11,876 p22) biaga 3.975 3,924 29% 9,934 : plckaicla 3,302 * Down 19% from pe 7 8,436 = Down 65% from 4Q-2022, and up tear 4Q-2022, and up 16 % 6% 7% from t
Slide 16: Elkem Group overview financial ratios
Elkem Group Overview financial ratios = EBITDA MNOK 632 = Segment Other included realised currency hedging losses of MNOK -85 = Other items MNOK 84 " Mainly consisting of gains on power and currency derivatives MNOK 165, partly offset by currency loss on working capital items MNOK -33 and restructur
Slide 17: Silicones: operating income, EBITDA and sales volume
Total operating income ▪ EBITDA and margin ▪ ▪ ▪ ▪ Sales volume ▪ Share of operating income from Share of EBITDA ex. external customers ex. Other Other and Eliminations
Slide 18: Silicon Products: operating income, EBITDA and sales volume
Total operating income ▪ EBITDA and margin ▪ ▪ ▪ ▪ Sales volume ▪ Share of operating income from Share of EBITDA ex. external customers ex. Other Other and Eliminations
Slide 19: Carbon Solutions: operating income, EBITDA and sales volume
Total operating income ▪ EBITDA and margin ▪ ▪ ▪ ▪ ▪ Sales volume Share of operating income from Share of EBITDA ex. external customers ex. Other Other and Eliminations
Slide 20: Earnings per share and equity ratio
Earnings per share (EPS) ▪ ▪ ▪ Equity ratio ▪ ▪
Slide 21: Net interest-bearing debt and maturity profile
Net interest-bearing debt (NIBD) ▪ ▪ ▪ Maturity profile ▪ ▪ ▪ ▪
Slide 22: Cash flow from operations and investments
Cash flow from operations ▪ ▪ Investments ex. M&A ▪ ▪ ▪
Slide 23: Delivering good results over the business cycle
Delivering good results over the business cycle = Lower earnings in 2023 due to challenging market conditions and weak macro-economic sentiment = Elkem is well positioned to benefit from an economic recovery due to good cost positions and robust financials = Elkem delivering on its financial targets
Slide 24: Outlook for the first quarter 2024
Outlook for the first quarter 2024 = Markets still challenging going into the first quarter. Elkem focusing on extraordinary EBITDA improvements to counter weak demand = Silicones markets expected to remain challenging in the first quarter and impacted by Chinese New Year. Demand in China expected t
Slide 25: Important notice
Important notice Any statement, estimate or projection included in this presentation (or upon which any of the conclusions contained herein are based) with respect to anticipated future performance (including, without limitation, any statement, estimate or projection with respect to the condition (f
Slide 26: Appendix
2 Elkem Appendix 26
Slide 27: We are Elkem
We are Elkem Advanced silicon-based materials shaping a better & more sustainable future iz tee D/A re Yt — wT Silicones Silicon Products Carbon Solutions 2 Elkem
Slide 28: Elkem celebrating its 120 years anniversary
Elkem celebrating its 120 years anniversary = Elkem celebrates its 120 years anniversary in 2024, having grown from a Norwegian industrial start-up into a position as one of the world's leading providers of advanced silicon-based materials = Elkem started as a Norwegian company founded in 1904 by Sa
Slide 29: Sustainable business model delivering good results
Sustainable business model delivering good results Low cost sustainable input factors é Quartz Coal Biocarbon Power High temperature/chemical production processes ey Silicones Silicon, ferrosilicon, foundry products and microsilica Carbon solutions Examples of high value applications and markets Inf
Slide 30: Elkem operates through three divisions
Elkem operates through three divisions: All with global scale, leadership positions and global footprint Silicones Silicon Products Fully integrated silicones manufacturer Global producer and provider of silicon, with focus on specialities ferrosilicon and specialties 40% 49% of operating of operati
Slide 31: Elkem's portfolio is well-balanced
Elkem’s portfolio is well-balanced oJ E Carbon Solutions 11% Silicone: Il Production sit A 40% Bh Sates oftice f He Asia Th Silicon 9 BO Products 49% jEtkem — 3t
Slide 32: Environmental, Social & Governance
Environmental, Social & Governance Elkem is committed to reduce emissions and contribute in line with Paris agreement aim of well below 2°C warming We aim to contribute to a better climate through three key levers: By 2031: Reducing absolute emissions* by 28% from 2020-2031 while growing the busines
Slide 33: Emission reduction pathway to 2031 and 2050
▪ ▪ ▪ (Illustrative) A B C D -39% Net zero 2020 Biomass More China Low-carbon 2031 CCS at CCU, recycle, 2050 baseline in smelters renewables supply chain target smelters other target * Total global fossil CO2 emissions, scope 1 and 2 ** Main products average fossil CO2 emissions, scope 1-3
Slide 34: Power prices in EUR/MWh
▪ < 50 EUR/MWh 50 – 75 EUR/MWh > 75 EUR/MWh ▪ ▪
Slide 35: Total production capacity, product properties, market positions
Total production capacity Product properties Market positions → → → → → → Rising middle class Digitalisation Ageing population Mobility Decarbonisation Industry players - examples Industry players - examples Industry players – examples Industry players – examples Industry players – examples 35
Slide 36: Silicones division end markets
Healthcare & Personal Silicones Division 2019-22 Consumer & packaging Silicones Division 2019-22 Chemicals Silicones Division 2019-22 Care → Leading position in Release → Intermediates (silicones ▪ Medical adhesives, long term coatings for food & label polymers) sold to chemical implants, medical de
Slide 37: Silicon: raw materials, products, industry players
of division’s sales Raw materials Products Industry players** End markets Quartz Silicones (50%) Consumer goods Construction Coal and biocarbon Total production capacity Aluminium (30%) 205.000* mt in Norway and China → 175.000* mt silicon grades → 20.000 mt Silgrain® Automotive → 10.000 mt Silgrain
Slide 38: Ferrosilicon: raw materials, products, industry players
of division’s sales Raw materials Products Industry players* End markets Quartz Electrical steel (40%) Construction Coal and biocarbon Total production capacity Stainless steel (20%) Consumer goods → 185.000 mt in Norway and Iceland → 40% High Purity grades → 35% Refined grades → 25% Standard grades
Slide 39: Foundry alloys: raw materials, products, industry players
of division’s sales Raw materials Products Industry players* End markets** Ferrosilicon Ferrosilicon Iron foundries Automotive (50%) Total production production capacity capacity Engineering (35%) Total Alloying elements Alloying elements → 190.000 mt globally → 60% FSM → 20% Low potent inoculants →
Slide 40: Microsilica: raw materials, products, industry players
of division’s sales Raw materials Products Industry players* End markets Before Construction (30%) Construction and infrastructure Total capacity → 300.000 mt microsilica globally (40% Refractories (30%) Refractories and ceramics After sourced externally) → 35.000 mt other specialty materials Proper
Slide 41: Currency sensitivity
——USDNOK —EURNOK EURUSD CNYNOK 1.70 Currency sensitivity 1250 1.60 x 11.50 150 S faa 140 3 i 10.50 wo a 1.30 x fo Z 950 1.20 ° 110 8.50 1.00 = The result and cash flow are exposed to currency fluctuations. 750 0.90 The main currencies are EUR, USD and CNY 2020 2021 2022 2023 = EUR - exposure approx.
Slide 42: Other financial sensitivities
Other financial sensitivities POWER = Electric power is a key input factor in Elkem’s production. The normal consumption is around 6.5 TWh of which approx. 3.6 TWh is in Norway. Near term exposure to spot power prices is limited = Norway, hedging programme mainly consisting of long-term contracts co
Slide 43: Delivering your potential
« Elkem Delivering your potential