Elkem Asa · OSL:ELK
Elkem Asa — Q2 2020 Earnings Presentation
30 slides from Elkem Asa's earnings presentation, Jul 17, 2020
Slide 1: Second quarter results 2020
Second quarter results 2020 «Elkem
Slide 2: Agenda
Agenda Business update By CEO Michael Koenig Financial performance By CFO Morten Viga Outlook By CEO Michael Koenig
Slide 3: Strong competitive position demonstrated in weak markets
Strong competitive position demonstrated in weak markets Elkem had high capacity utilisation and good sales volumes in the second quarter despite very challenging market conditions EBITDA was NOK 644 million in the second quarter 2020, including a one-off gain of NOK 61 million from an arbitrati
Slide 4: Environment, Social and Governance A key priority
Environment, Social and Governance A key priority Safety Environment Ambition zero injuries Fossil CO2 emissions in Norway reduced by 18% by use of biocarbon Ambition 40% biocarbon by 2030 NOx emissions down 13% since 2015 Ambition 10% reduction in 2020 83 % share of renewables of 2019 total electri
Slide 5: Biocarbon strategy for environmental sustainability
Biocarbon strategy for environmental sustainability The production of silicon and ferrosilicon require use of carbon materials Carbon is used as a reducing agent in the smelting process to remove oxygen from the quartz, resulting in CO2 emissions The strategy is to reduce the use of fossil coa
Slide 6: Covid-19 impacting global markets
Covid-19 impacting global markets Elkem has generally strong sales volumes in the second quarter despite weak market conditions impacted by Covid-19 In the third quarter, capacity utilisation will on average be reduced to around 90% across all divisions due to maintenance and weak demand. Howeve
Slide 7: Productivity improvement programme ahead of plan
Productivity improvement programme ahead of plan The Productivity Improvement Programme was launched in 2020 with an identified potential of more than MNOK 350 in annual improvements Permanent savings related to personnel costs The programme will be finalised by the end of 2021 The programme
Slide 8: New corporate structure improving operational excellence
New corporate structure improving operational excellence With effect from 1 July, Elkem has gone from four to three business divisions Elkem is changing the corporate structure by merging the Silicon Materials and Foundry Products into Silicon Products The merger will improve and sharpen the c
Slide 9: Strategically positioned in the Chinese silicones market
Strategically positioned in the Chinese silicones NEW PRODUCT LAUNCHES market PuresilTM • Elkem recently made the acquisition of Basel Chemie, a Elkem has leading positions in the Chinese silicones market company which has developed a comprehensive range of China has more than 50% of the world’s
Slide 10: Robust financial position strengthened with new loan facility
Robust financial position strengthened with new loan facility Elkem’s financing position is robust with a strong liquidity position and well distributed maturity profile The financial markets are however volatile and Elkem has therefore decided to address the loan maturities in 2021 well ahead o
Slide 11: Group results stable in weak markets
Group results stable in weak markets Good operational performance and sales secure stable results in challenging markets One-off of NOK 61 million from arbitration settlement included in 2Q-2020 Financial items and other items negatively impacted by currency changes Equity and leverage ratio
Slide 12: Silicones low visibility, but China is picking up
Silicones low visibility, but China is picking up The global silicones market is negatively impacted by the Covid-19 situation Automotive and construction are generally weak Consumer products are generally holding up well DMC prices in China were at low levels, but recovered towards the end
Slide 13: Silicon weak market development
Silicon weak market development CRU EU reference prices for silicon were holding up for most of 2Q-2020 However, reference prices were lagging the underlying market development The delayed impact was reflected in a clear downturn in reference prices at the end of the quarter CRU silicon 99 pri
Slide 14: Ferrosilicon low demand driving prices down
Ferrosilicon low demand driving prices down Market prices for ferrosilicon (FeSi) have dropped significantly in the second quarter Weak ferrosilicon demand impacted by low steel consumption, which has been largely driven by weakness in automotive and construction Low European price level for f
Slide 15: Elkem group stable operating income and EBITDA
Elkem group stable operating income and EBITDA Total operating income EBITDA ‒ Operating income up ‒ In line with 2Q-2019 2% compared to 2Q- 2019 ‒ Increase driven by ‒ Lower result in Silicones and Silicon Silicones offset by Materials Silicon Materials and Carbon 15 Second quarter results 2020
Slide 16: Elkem group currency losses in financial items and other items
Elkem group Consolidated key figures currency losses in financial items and other items (NOK million, except where specified) 2Q 2020 2Q 2019 YTD 2020 YTD 2019 FY 2019 Total operating income 5,879 5,736 11,677 11,569 22,668 EBITDA 644 647 1,234 1,499 2,656 EBIT 212 300 409 815 1,189 Other items -107
Slide 17: Silicones high volumes but low prices
Total operating income Silicones NOK million high volumes but low prices Total operating income of MNOK 3,106, up 11% from second quarter last year EBITDA and margin Increased operating income mainly explained by higher sales volumes and NOK million and % the consolidation of Polysil, partly off
Slide 18: Silicon Materials strong result supported by one-off
Total operating income Silicon Materials NOK million strong result supported by one-off Total operating income of MNOK 1,842, up 15% compared to second quarter EBITDA and margin 2019 NOK million and % Higher operating income explained by higher prices and positive currency impact EBITDA of MNO
Slide 19: Foundry Products weak steel and automotive markets
Total operating income Foundry Products NOK million weak steel and automotive markets Total operating income of MNOK 944, down 21% from second quarter last year EBITDA and margin Explained by lower sales volumes for both specialty alloys and ferrosilicon NOK million and % EBITDA of MNOK 80, in
Slide 20: Carbon another strong quarter
Total operating income Carbon NOK million another strong quarter Total operating income MNOK 480, in line with corresponding quarter last year EBITDA and margin Better pricing and favourable currency compensating for lower sales NOK million and % volumes EBITDA MNOK 119, up 38% from second qua
Slide 21: Elkem group lower EPS, equity ratio affected by currency
Elkem group Earnings per share (EPS) lower EPS, equity ratio NOK per share affected by currency Earnings per share (EPS) EPS amounted to NOK -0.02 in the second quarter Negatively impacted by losses in other items and foreign exchange losses in financial items Total equity amounted to BNOK 1
Slide 22: Elkem group higher net debt due to acquisition
Elkem group Net interest-bearing debt (NIBD) higher net debt due NOK billion to acquisition Net interest bearing debt (NIBD) amounted to BNOK 8.1 as at 30 June 2020 Leverage ratio of 3.4 based on LTM EBITDA of BNOK 2.4 Increase in leverage ratio compared to previous quarter explained by divide
Slide 23: Elkem group cash flow impacted by working capital
Elkem group Cash flow from operations cash flow impacted NOK million by working capital Cash flow from operations(1) was MNOK 363 in the second quarter, down from the corresponding quarter last year 2Q-2019 contained a significant reduction of working capital Investments ex. M&A amounted to MN
Slide 24: Outlook for the third quarter
Outlook for the third quarter Markets characterised by low visibility due to Covid-19 effects Elkem’s competitive position is strong, based on good cost positions, diversified product and geographic positions and robust financial structure Silicones demand in China is good, driven by governmen
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
Appendix
Slide 27: Currency sensitivity
Currency sensitivity Currency development The cash flow is exposed to operating income and costs in different currencies. The main currencies are EUR and USD EUR - net cash flow approx. MEUR 350 USD - net cash flow approx. MUSD 100 Current cash flow hedging programme 90% hedging of net cas
Slide 28: Other financial sensitivities
Other financial sensitivities POWER SALES PRICES Electric power is a key input factor in Elkem’s production. Total consumption for Changes in sales prices could significantly affect operating income and EBITDA the group was 6.0 TWh in 2019. Near term exposure to spot power prices is 1% margin
Slide 29: Value chains
Value chains Carbon Foundry products value chain value chain Silicon materials Silicones value chain value chain 29 Second quarter results 2020
Slide 30: Elkem
«Elkem