Elkem Asa · OSL:ELK
Elkem Asa — Q1 2018 Earnings Presentation
27 slides from Elkem Asa's earnings presentation, May 8, 2018
Slide 1: Elkem First Quarter Results 2018
ELKEM FIRST QUARTER RESULTS 2018 8 May 2018
Slide 2: Agenda
Agenda • Helge Aasen, CEO - Highlights - Strategic update - Outlook • Morten Viga, CFO - Financial performance and market update 2
Slide 3: Highlights 1Q 2018
Highlights 1Q 2018 • Elkem successfully completed listing at Oslo Stock Exchange on 22 March 2018 • The acquisition of Xinghuo Silicones and Yongdeng Silicon Materials was completed in connection with the listing • Strong first quarter with total operating income of NOK 6,447 million, up 41% from fi
Slide 4: Health and safety – our main priority
Health and safety – our main priority • Elkem has a zero harm philosophy when it comes to health and safety. The target is zero H1 & H2 incidents • In 1Q-2018 Elkem had 3 H1 and 2 H2 injuries - All recorded incidents were in February, while there were no recordable incidents in January and March • T
Slide 5: Elkem's competitive strengths
Elkem’s competitive strengths Leader in Material presence in fundamentally the fast-growing attractive markets Chinese market Experienced and proven management Low cost integrated team with long-term position shareholder support Leading R&D Enhanced financial capabilities for performance and further
Slide 6: Leader in fundamentally attractive markets
Leader in fundamentally attractive markets COMMENTS REVENUE DISTRIBUTION • The GDP development is generally good in all major regions. All EU countries are now growing at a good rate. Growth in China remains high • This gives strong market conditions for all of Elkem’s business segments, especially
Slide 7: Material presence in the fast growing Chinese market
Material presence in the fast growing Chinese market • The acquisition of Xinghuo and Yongdeng completed Silicones consumption (USD/capita) in connection with the IPO 12 United States Taiwan • An integration plan is in place with coordination of South Korea Germany 10 sales organisations and focus o
Slide 8: Strategic initiatives to maintain low cost position
Strategic initiatives to maintain low cost position • Energy recovery project at the Salten plant approved. The project will recover approx. 275 GWh of electricity - JV with 50% ownership of Elkem - Total investment is approximately NOK 1 bn. Elkem’s direct investment is estimated to NOK 100 million
Slide 9: Further specialisation and market expansion
Further specialisation and market expansion • Completed bolt-on acquisition of UK company Tennant to strengthen market position within specialised silicon and foundry products • The new ferrosilicon plant in Paraguay has commenced production Planned expansion into foundry alloys next year • New foun
Slide 10: Consolidated key figures
Consolidated key figures COMMENTS (NOK million, except where indicated otherwise) 1Q 2018 1Q 2017 FY 2017 • Other gains and losses include inter alia Total operating income 6,447 4,573 21,368 EBITDA - Change in fair value of power contracts NOK -114 1,450 441 3,154 million due to lower long-term pow
Slide 11: Elkem group - Total operating income and EBITDA
Elkem group - Total operating income and EBITDA • Total operating income for the group was NOK 6,447 million in the first quarter, strongly up compared to 1Q-2017. The improvement is mainly driven by higher sales prices, higher sales volumes and production records at the Xinghuo plant • EBITDA for 1
Slide 12: Market update – Silicones
Market update – Silicones • General market conditions are strong, supporting overall margin improvements. In addition, specialisation strategy is paying off with double digit growth across the business areas • Raw materials prices relatively stable in Europe, with silicon metal and methanol levellin
Slide 13: Financial update - Silicones
Financial update - Silicones • Total operating income of NOK 3,209 million, strongly up compared to 1Q-2017, mainly driven by higher sales prices and higher sales volumes, especially in China • EBITDA for 1Q-2018 was NOK 783 million, a significant improvement from previous quarters, driven by higher
Slide 14: Market update – Silicon Materials
Market update – Silicon Materials • Overall demand is strong in all main end-user segments, aluminium, chemicals and polysilicon • Market prices for silicon metal have been slightly up during the first quarter 2018 • Elkem’s sales volumes are lower than 1Q-2017, due to relining of one furnace at the
Slide 15: Financial update - Silicon Materials
Financial update - Silicon Materials • Total operating income of NOK 1,687 million, up from NOK 1,492 million in first quarter last year, mainly due to higher sales prices • EBITDA of NOK 341 million, up from NOK 103 million in the corresponding quarter last year, mainly driven by higher sales price
Slide 16: Market update – Foundry Products
Market update – Foundry Products • Strong markets for specialised products, especially driven by engineering and automotive segments • Sales volumes have increased compared to first quarter 2017, driven by strong market demand • Continued price increases for ferrosilicon related products in 1Q-2018
Slide 17: Financial update - Foundry Products
Financial update - Foundry Products • Total operating income was NOK 1,324 million, an increase from NOK 1,020 million in 1Q-2017. Higher revenue is mainly explained by higher sales prices and higher sales volumes • EBITDA of NOK 306 million, up from NOK 139 million in 1Q-2017, mainly as a result of
Slide 18: Market update - Carbon
Market update - Carbon • Still strong markets for the division's main products, electrode paste, ElGraph and ramming paste • Sales prices have increased on the back of higher raw material prices • Sales volumes in line with 1Q-2017 18
Slide 19: Financial update - Carbon
Financial update - Carbon • Total operating income was NOK 442 million, up from NOK 383 million in first quarter last year, mainly due to higher sales prices and better sales of speciality products • EBITDA is slightly down compared to 1Q-2017, mainly as a result of price increases for key raw mater
Slide 20: Cash flow and investments
Cash flow and investments CASH FLOW FROM OPERATIONS INVESTMENTS • Cash flow from operations shows strong improvement • Elkem expects reinvestments of approx. NOK 1.0 billion for 2018 compared to 1Q-2017 - Reinvestments in 1Q-2018 is NOK 180 million, in line with plan - Cash flow from operations(1) i
Slide 21: Financial position – EPS and equity
Financial position – EPS and equity ADJUSTED EARNINGS PER SHARE (EPS) – NOK PER SHARE EQUITY RATIO • Steady increase in EPS reflecting underlying profitability • Equity increased by NOK 2.0 billion from 4Q-2017 due to IPO improvements proceeds and generated net profit • The payment for Xinghuo Silic
Slide 22: Financial position – net interest bearing debt
Financial position – net interest bearing debt NET INTEREST BEARING DEBT (NIBD) (1) NEW LOAN FACILITIES AGREEMENT • Net interest bearing debt amount to NOK 5.4 billion, giving a • Elkem signed a new loan facilities agreement 13 February 2018. leverage of 1.3x based on LTM EBITDA NOK 4.2 billion The
Slide 23: Currency and currency sensitivity
Currency and currency sensitivity CURRENCY CURRENCY DEVELOPMENT • Cash flow is exposed to revenues and costs in different • Compared to 1Q-2017 the NOK is 7% weaker against EUR and currencies. The main currencies are EUR and USD 7% stronger against the USD - EUR - net cash flow approx. EUR 375 milli
Slide 24: Other financial sensitivities
Other financial sensitivities POWER SALES PRICES • Electric power is a key input factor in Elkem’s production. • Changes in sales prices could significantly affect revenue Total consumption for the group was 6.4 TWh in 2017. and EBITDA Near term exposure to spot power prices is limited - Norway, hed
Slide 25: Outlook
Outlook • Market sentiment still strong for all divisions, particularly Silicones • The result for 2Q-2018 is expected to be in line with 1Q-2018 • Going forward market prices for silicones, silicon and ferrosilicon are expected to soften as supply will likely increase, particularly in China - Based
Slide 26: 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 27: Delivering your potential
DELIVERING YOUR POTENTIAL EOP ESP eee: