Eramet Sa · EURONEXT:ERA
Eramet Sa — H1 2020 Earnings Presentation
69 slides from Eramet Sa's earnings presentation, Jul 30, 2020
Slide 1: 2020 half-year results
2020 half-year results Christel BORIES Chairman and CEO 30 July 2020
Slide 2: Disclaimer
Disclaimer Certain information contained in this presentation including any information on Eramet’s plans or future financial or operating performance and any other statements that express management’s expectations or estimates of future performance, constitute forward-looking statements. Such state
Slide 3: Contents
Contents Introduction 1– Safety 2– Financial results 3– Operational performance 4– Strategic transformation Conclusion and outlook 3 Eramet – 2020 half-year results
Slide 4: Strong impact of the crisis on end markets: drop in metal prices and aerospace crisis
Strong impact of the crisis on the Group's end markets: drop in metal prices and aerospace crisis (~€350m EBITDA impact) Deteriorated price environment, o/w: -22% on average for manganese ore1 prices -10% on average for ferronickel’2 prices, due to significant discount ~-€280m to LME in H1 2020 (zer
Slide 5: Excellent operating performance of the mining activities in H1 2020
Excellent operating performance of the mining activities in H1 2020, confirming the success of the organic growth strategy c.€120m of intrinsic progress in H1 2020 vs H1 2019, despite the sanitary crisis 2.8 Mt of manganese 2.2 Mwmt of nickel 371 kt of mineral Start-up of the 4 ore produced in ore p
Slide 6: EBITDA drop; net income penalised by impairment charges
EBITDA drop ; net income further penalised by impairment charge due to crisis (€284m) & lithium project mothballed (€142m) High Performance Mining and Metals Alloys Division Erasteel Division 20% 5% 80% Sales €1,687m Aubert & Duval -7% vs H1 2019 15% €1,687m Mineral Sands BU Manganese BU 8% 50% Ni
Slide 7: Covid-19: swift adaptation to ensure business continuity at mines and plants
Covid-19: swift adaptation to ensure business’ continuity at mines and plants Eramet fully mobilised to face the Covid-19 situation Protecting employees and their families as well as local communities: Group’s top priority Strict application of sanitary protocols, Specific sanitary expenses in Gabon
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Slide 9: Safety
1 Safety
Slide 10: Further strong decline in accident frequency rate in H1 2020
Further strong decline in accident frequency rate in H1 2020, but still too many severe accidents Eramet accident frequency rate (FR21,2) 22 20 20.0 18 17.3 16.8 16 14 13.6 13.4 12 10.9 10 ~-50% 8 8.3 vs 2018 6 5.4 4 4.3 2 -20% vs 2019 0 2012 2013 2014 2015 2016 2017 2018 2019 H1 2020 Continued push
Slide 11: Financial results
2 Financial results
Slide 12: Robust contribution of Manganese and Mineral Sands activities in H1 2020
Robust contribution of Manganese and Mineral Sands activities in H1 2020 Group EBITDA -61% 1 €307m Despite price drop, continued solid €120m EBITDA contribution from Manganese BU €316m -26% 2 1 €234m Mineral Sands BU driven by robust M&M operational performance €52m -15% €44m 2 Division1 €208m 3 -
Slide 13: EBITDA strongly affected by decline in metal prices and aerospace crisis
EBITDA strongly affected by decline in metal prices and aerospace crisis, despite significant operating progress in mining activities €m H1 2020 H1 2019 Sales 1,687 1,809 EBITDA 120 307 % Sales 7% 17% Current operating income (32) 169 % Sales n.a. 9% Net income – Group share (623) (37) €m 30/06/2020
Slide 14: Net income penalised by a non-recurring expense of €459m
Net income further penalised by the accounting of a non- recurring expense of €459m €m H1 2020 H1 2019 Sales 1,687 1,809 Current operating income (32) 169 Other operating income and expenses (459) (25) o/w Provisions on asset impairment tests 1 (381) (0) Lithium project 2 (45) (11) Financial result
Slide 15: Income highly sensitive to metal prices
Income highly sensitive to metal prices Annual impact on EBITDA SENSITIVITIES Change (+/-) Manganese ore prices (CIF China 44%) +$1/dmtu c.€175m1 Manganese alloys’ prices +$100/t c.€60m1 Nickel prices (LME) +$1/lb c.€100m1 Nickel ore prices (CIF China 1.8%) +$10/wmt c.€15m1 Exchange rates -$/€0.1 c.
Slide 16: Intrinsic operating performance offset by lower prices and Covid impact
Positive intrinsic operating performance more than offset by lower prices and Covid impact on operations -€231m (€m) 9 2 Other external factors -21 -8 1 2 -48 145 3 -25 -10 307 4 -236 +€127m ~-€80m Intrinsic operating performance Covid 120 16 -20 impact on -44 57 operations 5 -4 5 6 H1 2019 Mn Ni vo
Slide 17: Decrease in current capex by -15% in H1 2020
Decrease in current capex by -15% in H1 2020 Industrial cash capex (€m) Strict control over capex as part of 450 2020 cash control plan 427 Current Capex down -15% at €98m 400 81 o Safety & environment (19%), Productivity (28%) 350 51 o Maintenance (59%) of industrial 300 equipment 281 1 250 57 199
Slide 18: Stable operating WCR in days at Group level
Stable operating1 WCR (in days) at Group level thanks to efficient cash control plan, balancing aerospace crisis impact Operating1 WCR (M€) -4% 1,003 964 Cash control plan Aerospace crisis -11% 596 530 +10% 440 399 HPA division Eramet M&M division H1 2020 Operating1 WCR: H1 2020 Operating1 H1 2020 O
Slide 19: H1 2020 M&M FCF break-even, including lithium FCF impact
H1 2020 M&M FCF break-even, including lithium FCF impact GCO1 28 SLN2 TTI 19 -68 SDV One-off -20 €78m 119 -80 Eramet FCF -€165m H1 2020 -9 - €210m3 FCF FCF Mineral FCF FCF M&M FCF lithium Manganese Sands BU Nickel BU excl. FCF BU lithium Erasteel -156 Group strategic transformation key to cash-flow
Slide 20: Increase in net debt, reflecting A&D's negative FCF
Increase in net debt, reflecting A&D's negative FCF despite significant cash generation efforts 1 3 2020 early capex (€58m) and cash expenses related to lithium project (€23m) Proceeds from sale of TTI plant estimated at $250m1, still subject to regulatory approvals ; not 2 included in Net Debt as o
Slide 21: High cash position at €1.9bn
High cash position at €1.9bn Drawn down lines as of 30th June 2020: Group financial liquidity (€m) Revolving credit facility ("RCF") 2,500 > €981m RCF maturing 2024 2,245 2,299 Term loan 2,000 1,941 > €350m loan granted in December with a 2-year maturity and an option to extend to 848 January 2024 a
Slide 22: No major debt maturity within the next 3 years
No major debt maturity within the next 3 years Group gross debt at €3,477m at 30 June 2020 Average maturity of Group’s debt : 3 years; c. 80% at a fixed rate Tizir Bond maturity anticipated in 2020 (subject to transaction completed by year-end) vs initial maturity in 20221 €1,1Md€ in 2024 include re
Slide 23: Operational performance
3 Operational performance
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Slide 25: Mining and Metals division
Le Mining and Metals division eramMerT
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Slide 27: Manganese BU
he & Sa q eramMerT
Slide 28: Pandemic strongly affecting global carbon steel market and manganese demand
Pandemic strongly affecting global carbon steel market, and consequently manganese ore and alloys demand 1 2 Global carbon steel production sharply down in Significant decrease in global manganese ore H1 2020, resulting from lower global production, owing to temporary closure of demand, Europe and U
Slide 29: Mn ore prices temporarily supported by mine lockdowns in Q2
Mn ore prices temporarily supported by mines’ lockdown at key industry players in Q2; prices down to ~USD 4/dmtu in July 1 2 Average price of manganese ore CIF China 44% at c.5.0 $/dmtu in H1 2020 Average manganese alloys prices down in H1: Inventories at Chinese ports ~9 weeks of MC FeMn at 1,420 €
Slide 30: Manganese ore volumes produced in Gabon up 31% to 2.8 Mt
Manganese ore volumes produced in Gabon up +31% to 2.8 Mt in H1 Setrag’s outstanding performance Boosted by significant operating performance milestones Volumes transported up +42% to 2.9 Mt, at a pace of 5.7 Mt/yr External sales volumes up ~+50% to 2.4 Mt Comilog & Setrag : fast cash value-creation
Slide 31: Decrease in manganese alloys production limited in H1
Decrease in Eramet manganese alloys production limited in H1, thanks to new market share gains Manganese alloys production down in a declining steel market, particularly Europe and the US (lower demand -17% and -16%, respectively) Limited decrease in sold volume (-6%) thanks to new market share gain
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Slide 33: Nickel BU
ickel BU Lt N
Slide 34: Historical decline of global stainless steel production from the pandemic
Historical decline of global stainless steel production resulting from the pandemic 1 2 Historical shock to global stainless-steel Production sharply down in H1 2020 (-11.8%) World primary nickel production slightly up, incl. -6.0% in China supported by continued development of nickel ferroalloy pro
Slide 35: Current LME prices do not reflect market fundamentals
Current LME prices do not reflect market fundamentals, hence discount in FeNi selling price 1 LME and SHFE inventories up vs. low levels at end-2019 to reach 260 kt at end-June (~9 weeks of consumption) Lower demand and stable production resulting in 2 oversupply of around 110kt of H1 2020 average L
Slide 36: SLN rescue plan being challenged, but achievable
SLN rescue plan being challenged, but achievable if all conditions are met SLN rescue plan based on 3 requirements to reduce cash cost 1 3 4Mwmt/year ✔ Government 4Mwmt/year authorisations on Reducing energy costs: of nickel ore exports: least competitive cost in nickel ✔ Societal acceptance is key
Slide 37: Average cash-cost down 7% in H1 2020
Average cash-cost down 7% in H1 2020, commitment of all stakeholders still critical SLN’s cash-cost (USD/lb) 6.05 0.05 -0.27 Impact of ore -0.27 0.38 exports -0.12 -0.17 5.65 Exports volume Societal disruptions 5.39 impact & other one-offs at mines H1 2019 Ni ore Productivity FeNi vol. & other Other
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Slide 39: Mineral sands BU
Mineral sands BU
Slide 40: Zircon prices down 15% in H1 2020
Zircon prices down 15 % in H1 2020 1 Average price of zircon reached USD 1,355/t in H1 2020, down -15 % Global demand for zircon down reflecting trends in ceramics market, strongly impacted by pandemic Strong decrease in production resulting in supply/demand balance in oversupply Monthly premium zir
Slide 41: Robust CP slag prices in H1 despite pandemic
Robust CP slag prices in H1, despite pandemic affecting pigment end-markets 1 Average price of CP1 grade titanium slag up +7% at USD 798/t in H1 2020 Nevertheless, global demand for Tio2 pigments, the main end-market for titanium products2, also contracted sharply, impacted by the pandemic As global
Slide 42: Strong operational performance of mineral sands activity
Strong operational performance of mineral sands activity 1 2 Strong operational performance at GCO in Senegal, confirmed over the past 3-yr (OEE rate + 11%) Titanium slag production level at TTI in Norway in line with plant Production level still impacted by lower grade of the deposit area nominal c
Slide 43: High Performance Alloys division
High Performance Alloys division
Slide 44: Aerospace consensus forecasts return to 2019 volumes by 2025 only
After brutal market impact in H1, current consensus for aerospace forecasts a return to 2019 volumes by 2025 only Aerospace: ~70% of A&D sales Global aerospace market down ~50% in 2020, incl. pre-Covid Boeing 737 production cuts 186 187 187 187 187 181 -48% 169 169 171 159 159 157 162 Others 152 148
Slide 45: Huge impact of the crisis on A&D financials
Huge impact of the crisis on A&D financials, already weakened by quality non-conformities A&D Sales by segment Q2 aero sales down -50 % on 2018 quarterly average before impact of quality non-conformities 792 -13% A&D quarterly aero sales 642 147 121 114 558 -50% 75 484 307 268 104 223 189 70 130 35
Slide 46: Erasteel: crisis impact mitigated in H1 by cash action plan
Erasteel: crisis impact mitigated in H1 thanks to specific action plan on cash Erasteel sales by segment Sales down -34 % affected by downturn in automotive -34% market, accounting for ~ 50 % of sales: 227 Resilience of order intake of high-end products made out of 205 powder metallurgy, Erasteel be
Slide 47: Strategic transformation
4 Strategic transformation 1st metal tapping at Weda Bay’s nickel ferroalloys plant
Slide 48: Acceleration of recovery or repositioning of least performing assets
Acceleration of recovery or repositioning of least performing assets critical in light of current crisis: ongoing strategic review including A&D possible divestment No cash outflows in the Significant cash return short term To be accelerated 2 3 1 EXPAND our portfolio in FIX / REPOSITION our least G
Slide 49: CSR commitment: ongoing improvement of performance
CSR commitment: ongoing improvement of performance CSR strategy: moving forward on the 2018-2023 Roadmap 13 medium-term objectives monitoring with results published on annual basis Significant progress recognised by Global Compact ‘Advanced-level Communication on Progress’ Improved non-financial rat
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Slide 51: Conclusion & outlook
Conclusion & outlook eramMerT
Slide 52: Acceleration of strategic transformation more essential than ever
Acceleration of strategic transformation more essential than ever to go through the crisis Still a highly volatile and uncertain environment, all sectors of activity combined In order for the Group to bounce back as soon as the global economic situation becomes more favourable: Strict cash control O
Slide 53: Q&A
Q&A Weda Bay’s nickel mines, island of Halmahera, Indonesia
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Slide 55: Appendices
Appendices
Slide 56: New modular approach for brownfield expansion of Moanda manganese ore operations
New modular approach for brownfield expansion of Moanda manganese ore operations A HIGHLY COMPETITIVE MINE IN GABON A NEW MODULAR EXPANSION Operated by Comilog for 50 years Enhance production of the Bangombé plateau through dry processing Strong quality high-grade oxide commercial ore > €51m of earl
Slide 57: Weda Bay: highly competitive nickel ferroalloys production in Indonesia
Weda Bay: highly competitive nickel ferroalloys production in Indonesia, 4 production line operational since May MINING & METALS BUSINESS MODEL ATTRACTIVE METRICS Weda Bay Nickel business model balanced Production Production in 2 activities: mining and metallurgy target - Ore target 6 Mwmt1/year 35
Slide 58: Agreement for the sale of TiZir's Norwegian plant
Agreement for the sale of TiZir’s Norwegian plant, announced on May 14th, regulatory approvals still ongoing STRENGTHENING OF ERAMET’S BALANCE SHEET CONTINUED DEVELOPMENT OF THE UPSTREAM BUSINESS IN MINERAL SANDS Sale agreement signed on mid-May with Control of GCO by Eramet maintained2 Tronox, one
Slide 59: Lithium project in Argentina: currently mothballed
Lithium project in Argentina: currently mothballed HIGHLY VALUE-ACCRETIVE PROJECT STATUS UPDATE: PROJECT MOTHBALLED Long life low cost and scalable project, c.10 Mt April 2020: decision not to engage the LCE1 drainable resources, c.50 years of resources construction of the lithium production plant B
Slide 60: Manganese BU – Key figures
Manganese BU – Key figures In €m H1 2020 H1 2019 Sales 839 904 EBITDA 234 316 COI 179 271 Cash Capex 82 91 Operating cash flow 137 154 FCF 119 40 53 Eramet – 2020 half-year results
Slide 61: Nickel BU – Key figures
Nickel BU – Key figures In €m H1 2020 H1 2019 Sales 366 346 EBITDA (70) (25) COI (114) (70) Cash Capex 18 10 Operating cash flow (45) (48) FCF (88) (77) 54 Eramet – 2020 half-year results
Slide 62: Mineral sands BU – Key figures
Mineral sands BU – Key figures In €m1 H1 2020 H1 2019 Sales 139 139 EBITDA 44 51 COI 23 30 Cash Capex 6 4 Operating cash flow 51 41 FCF 34 22 1 Full consolidation of Mineral Sands activity as of 1st July 2018, following the acquisition of shares in Mineral Deposits Limited, an Australian company tha
Slide 63: High Performance Alloys Division - Key figures
High Performance Alloys Division - Key figures A&D and Erasteel In €m H1 2020 H1 2019 Sales 345 423 EBITDA (66) (5) COI (93) (27) Cash Capex 26 29 Operating cash flow (134) (85) FCF (164) (76) 56 Eramet – 2020 half-year results
Slide 64: CRU price trends in manganese alloys in Europe
CRU price trends in manganese alloys (refined and standard) in Europe CRU price trends for manganese alloys in Europe between January 2015 and June 2020 €/t 2,000 1,500 FY = -7.3% H = -8.3% 1,000 H = -8.0% FY = -4.2% 500 H = -2.8% FY = -5.5% 0 42000 42500 43000 43500 44000 Medium-carbon ferromangane
Slide 65: Cash-flow table
Cash-flow table €m H1 2020 H1 2019 FY 2019 Operating activities EBITDA 120 307 630 Cash impact on items under EBITDA (178) (142) (420) Cash from operating activities (57) 165 210 Change in WCR 67 (172) (124) Net cash generated by operating activities (1) 10 (7) 86 Investment activities CAPEX (162) (
Slide 66: Group Balance Sheet at 30 June 2020
Group Balance Sheet at 30 June 2020 4,054 4,054 3,691 3,691 1,398 757 225 241 3,294 2,870 1,132 1,091 14 20 1,536 1,304 687 760 134 27 31/12/2019 30/06/2020 31/12/2019 30/06/2020 Fixed assets Equity-Group share Financial instruments WCR Minority interest Net debt Asset held for sale Provisions and n
Slide 67: Bond maturities
Bond maturities Amount at Initial €m Currency Initial amount 30/06/2020 Maturity Coupon (in m) date 2013 bond issue € 525 234 Nov-2020 4.50% 2016 ODIRNAN bond issue € 100 97 perpetual 4.00% TiZir bond renewal - July 2017 USD 300 270 July-2022 9.50% February September 2017 bond issue € 500 500 4.20%
Slide 68: Shareholding at 30 June 2020
Shareholding at 30 June 2020 Other float SORAME + CEIR 32.1% (Duval Family) 36.9% Number of shares issued 26,635,887 1.3% BRGM** 4.0% STCPI* 25.6% APE * STCPI (Société Territoriale Calédonienne de Participation Industrielle): entity owned by the New Caledonian provinces ** BRGM (Bureau de Recherches
Slide 69: Contacts
CONTACTS Executive VP Strategy & Innovation – Investor Relations Philippe GUNDERMANN philippe.gundermann@eramet.com Investor Relations Manager Sandrine NOURRY-DABI sandrine.nourrydabi@eramet.com