Slide 1: 2018 half-year results
25 July 2018 2018 half-year results Christel BORIES Chairman and CEO
Slide 2: Content
CONTENT 1 Safety 2 2018 half-year results 3 Operating performance 4 Strategic orientations 5 Conclusion & outlook
Slide 3: Disclaimer
DISCLAIMER Group 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
Slide 4: Strong fundamentals in H1 2018 (1/2)
Strong fundamentals in H1 2018 (1/2) Group Alloys Manganese 29% Sales €1,813m €1 813m 51% ⇗ + 1% vs. H1 2017 20% Nickel Current operating income (COI) Net income Group share €294m €94m ⇗ + 15% vs. H1 2017 ⇗ + 16% vs H1 2017 Net debt Gearing1 23% €449m ⇗ + €73m vs. end-2017 ROCE2 22% ERAMET – 2018 Ha
Slide 5: Strong fundamentals in H1 2018 (2/2)
Strong fundamentals in H1 2018 (2/2) Group Results up in H1 2018 • Well oriented mining activities, driven by an increase in metals prices, but penalised by the decrease in the US dollar versus the euro (-12%) and the increase in brent prices (+32%) • Slight decrease in results for the Manganese div
Slide 6: Successful takeover in the attractive mineral sands sector
Successful takeover in the attractive mineral Group sands sector Successful takeover for our partner in mineral sands, MDL* • 98% interest acquired on 23 July. • Extended for a last period of time until 03 August; squeeze-out procedure initiated for minority interests in shareholders’ equity • Offer
Slide 7: Safety
Group 1 Safety ERAMET – 2018 Half-year results 7
Slide 8: 17% reduction in accident frequency rate in H1
17% reduction in accident frequency rate in H1 Group 2018 • Roll-out of a « STOP PLANT » day in March 22 20.0 2018: 20 17.3 c. 8,000 employees mobilised 18 16.8 16 13.6 13.2 14 • Participation in World Day for Health and 12 10.3 Safety at Work in April 2018: 10 8.5 On-site sessions and workshops
Slide 9: 2018 half-year Financial results
Group 2 2018 half-year Financial results ERAMET – 2018 Half-year results 9
Slide 10: Current operating income up 15% in H1 2018
Current operating income up 15 % in Group H1 2018 €m H1 2018 H1 2017 Sales 1,813 1,797 EBITDA 432 389 % Sales 24% 22% Current operating income 294 256 % Sales 16% 14% Net income Group share 94 81 Net debt (net cash) 449 664 Net debt-to-equity ratio 23% 36% ROCE (current operating income / capital em
Slide 11: Net income Group share up 16%
Net income Group share up 16% Group €m H1 2018 H1 2017 Sales 1,813 1,797 Current operating income 294 256 Other income and operating expenses (1) (28) o/w Development projects (11) 6 Provisions/Reversal on asset impairment tests (133) 0 Gain or loss on disposal 162 (2) Other items (19) (32) Financia
Slide 12: Increase in current operating income, due to Nickel division, driven by price increases
Increase in current operating income, due to Group Nickel division, driven by price increases 500 €m 400 H1 2018 COI 300 200 €m H1 2018 H1 2017 100 Manganese 331 346 0 Nickel (22) (104) -100 Alloys 10 32 -200 Holding (26) (18) Group 294 256 Nickel Alloys Manganese Group SENSITIVITIES Variation (+/-)
Slide 13: Strong margin squeeze impact for manganese alloys
Strong margin squeeze impact for manganese Group alloys • Margin squeeze impact on manganese alloys: several months lag between the price of ore consumed (from COMILOG or third party) and the selling price of alloys (impact on price variations and input costs). Change in current operating income (€m
Slide 14: Stable industrial CAPEX
Stable industrial CAPEX Group • Mainly focused on industrial maintenance, transgabonese railway renovation (SETRAG), and SLN’s port unloading equipment replacement. In €m* 350 346 Growth Maintenance / EHS / Productivity 300 268 +5% 250 230 217 200 150 107 112 100 50 0 2014 2015 2016 H1 2017 2017 H1
Slide 15: Positive Free Cash Flow at €42m, after €118m in liquidation of tax debt
Positive Free Cash Flow* at €42m, after Group €118m in liquidation of tax debt Positive Free Cash Flow in the last 4 half-years • The €144m reduction in FCF excluding asset disposals in H1 2018 vs. H1 2017 is mainly due to: a €87m increase in operating cash flow cash consumption of €202m, due to
Slide 16: Net debt impacted by dividends payment
Net debt* impacted by dividends payment Group Net debt increase of €73m in H1 2018 • Strong contribution from operating cash flow. • Negative impact of the WCR due to corporate tax debt liquidation. • Strict and targeted CAPEX management. • Payment of dividends to ERAMET and COMILOG shareholders In
Slide 17: Liquidity still high to support Group ambitions
Liquidity still high to support Group Group ambitions Group financial liquidity (€m) 3,000 2,806 • Revolving credit facility («RCF») : January 2018: full repayment of 2,482 the balance of the entire 2,500 drawdown made in early 2016 (€250m) 2,000 1,946 1,698 1,825 RCF extended in February 2018 1
Slide 18: Debt maturity of c. 3.5 years (excl. RCF)
Debt maturity of c. 3.5 years (excl. RCF) Group • Group gross debt ended at €1,951m at 30 June 2018. • Group debt (excl RCF) is c. 80% based on fixed rates. Maturity in 30 June 2018 (€m) 665 Bonds (ERAMET / TiZir at 50%) French Government SLN loan Commercial papers, bank debt and operating debt 516
Slide 19: H1 2018 Operating performance
Group 3 H1 2018 Operating performance ERAMET – 2018 Half-year results 19
Slide 20: Manganese
Manganese 2nd global producer of high-grade manganese ore. 2nd global producer of manganese alloys. 1st global producer of refined manganese alloys. Mn ERAMET – 2018 Half-year results 20
Slide 21: Sustained global production levels in manganese ore in a context of carbon steel production
Sustained global production levels in manganese ore in a Mn context of carbon steel production that is still favourable • Global carbon steel production up 4.7% vs. H1 2017 (+3.6% vs. H2 2017), particularly driven by China (+6.6%). Slight downturn posted in Europe (-1.7%). • Sustained manganese ore
Slide 22: Increase in manganese ore prices in H1 2018, erosion in manganese alloys prices
Increase in manganese ore prices in H1 2018, erosion Mn in manganese alloys prices • Increase in spot prices for manganese ore of 29% on average in H1 2018 vs. H1 2017 and 18% vs. H2 2017. Decrease in prices since May, remaining at high levels. • Erosion in prices for manganese alloys in H1 2018 vs.
Slide 23: High level of manganese ore production at COMILOG. Annual target at 4 Mt confirmed
High level of manganese ore production at COMILOG. Mn Annual target at 4 Mt confirmed • High level of ore produced and transported by COMILOG at 1.85 Mt in H1 2018 (-3% vs. H1 2017, given the derailment of an ore train in February). • Decrease in alloys production for manganese by 1.5%, due to maint
Slide 24: Solid performance of TiZir in H1 2018
Solid performance of TiZir* in H1 2018 Other metals Mine in Senegal (Grande Côte Operations) • +8% in heavy mineral concentrate production in H1 2018 (374 kt) vs. H1 2017. • After railway track construction works on the outskirts of Dakar that weighed on ilmenite shipments at the start of the year,
Slide 25: Nickel
Nickel 1st global producer of high-grade ferronickel. One of the global producers of high-purity nickel salts. Ni ERAMET – 2018 Half-year results 25
Slide 26: Continued growth in global stainless steel production in H1 2018
Continued growth in global stainless steel production Ni in H1 2018 • Growth in global stainless steel production: 6.5% in H1 2018 vs. H1 2017. • Global primary nickel production up 6.8%, with sharp growth in NPI production from Indonesia and China (+33%). GLOBAL STAINLESS STEEL PRODUCTION GLOBAL PR
Slide 27: Sharp increase in nickel prices at the LME in H1 2018
Sharp increase in nickel prices at the LME in H1 2018. Ni Significant decline in inventories • Half-year average in nickel prices at the LME at USD 13,871/t (USD 6.30 /lb) in H1 2018, up 42% vs. H1 2017 (USD 9,761/t and USD 4.43/lb on average) and 26% vs. H2 2017 (USD 11,052/t and USD 5.01/lb on ave
Slide 28: Global production in the Nickel division down 3%
Global production in the Nickel division Ni down 3% • SLN production down 2% at 27 kt in H1 2018 vs. H1 2017: deteriorated weather conditions vs. 2017 and delay in implementing increase in mine working hours. • Sandouville ramp-up progressing, 40% nameplate capacity in June. NICKEL PRODUCTION -2.9%
Slide 29: SLN low operating performance in H1 2018
SLN low operating performance in H1 2018 Ni • Usual negative seasonal effect, amplified by even more unfavourable weather conditions in H1 2018. • H1 2018 penalised by these weather conditions vs. 2017, a labour union context delaying the implementation of organisational changes and difficulties in
Slide 30: Euro-US dollar exchange rate and brent prices weighed on SLN cash-cost in H1 2018
Euro-US dollar exchange rate and brent prices Ni weighed on SLN cash-cost in H1 2018 • SLN Cash-cost at USD 5.95/lb at real economic conditions in H1 2018, up 15% vs. H1 2017, penalised by the impact of the euro-US dollar exchange rate (-12%) and the increase in brent prices (+32%). SLN CASH-COST &
Slide 31: Alloys
All Alloys 2nd global producer of high-power closed-die forged parts. One of the global leaders in gas atomised powder metallurgy. A leading producer of high-performance special steels. ERAMET – 2018 Half-year results 31
Slide 32: Lower sales in an unfavourable market environment for A&D
Lower sales in an unfavourable market All environment for A&D H1 2018 SALES Aerospace BY SECTOR • 10% decline in sales particularly penalised by a slowdown in the production rate of several wide bodies 9% programs. Energy 9% • Sharp decrease in land turbine sector in H1 2018; low order backlogs of m
Slide 33: Decrease in COI with contrasting business trends
Decrease in COI with contrasting business All trends Under-performance of Aubert & Duval • Impact of lower activity with less absorption of fixed costs. Negative impact of the euro-US dollar exchange rate variation. • + €7m of non-recurring income from hedging in H1 2018. Improved performance of Era
Slide 34: Strategic orientations
Group 4 Strategic orientations ERAMET – 2018 Half-year results 34
Slide 35: Group strategic and managerial transformation underway in H1 2018, boosted by digital transformation
Group strategic and managerial transformation Group underway in H1 2018, boosted by digital transformation Significant transformation Strategic Managerial: Digital transformation TITRE DE–LA ERAMET 2018 Half-year results PRÉSENTATION 35 35
Slide 36: Acceleration in the Group's strategic transformation
Acceleration in the Group’s strategic Group transformation Review of strategic options underway 1 targeting a sustainable recovery in our activities FIX / REPOSITION OUR LEAST PERFORMING ASSETS Organic growth: • Mobilisation of the team responsible for the Detailed Feasibility Study SLN Aubert & D
Slide 37: Conclusion and outlook
Group 5 Conclusion and outlook ERAMET – 2018 Half-year results 37
Slide 38: ERAMET group: a strategic and managerial transformation with strong fundamentals
ERAMET group: a strategic and managerial Group transformation with strong fundamentals • Results up in H1 2018 with consolidated COI at €294m (+15% versus H1 2017). • A first step in achieving the strategic roadmap with the success of the takeover offer for MDL. • A managerial transformation that is
Slide 39: Appendices
Group Appendices ERAMET – 2018 Half-year results 39
Slide 40: Manganese division – Key figures
Manganese division – Key figures Mn €m H1 2018 H1 2017 Sales 928 920 EBITDA 390 403 COI 331 346 Industrial CAPEX 43 36 ERAMET – 2018 Half-year results 40
Slide 41: Nickel division – Key figures
Nickel division – Key figures Ni €m H1 2018 H1 2017 Sales 365 312 EBITDA 22 (59) COI (22) (104) Industrial CAPEX 32 42 ERAMET – 2018 Half-year results 41
Slide 42: Alloys division – Key figures
Alloys division – Key figures All €m H1 2018 H1 2017 Sales 520 564 EBITDA 43 61 COI 10 32 Industrial CAPEX 31 27 ERAMET – 2018 Half-year results 42
Slide 43: CRU price trends in manganese alloys (refined and standard) in Europe
CRU price trends in manganese alloys (refined Mn and standard) in Europe CRU PRICE TRENDS FOR MANGANESE ALLOYS IN EUROPE BETWEEN JANUARY 2014 AND JUNE 2018 2,000 1,500 €/t 1,000 500 2014 2015 2016 2017 0 Jan.14 Jul.14 Jan.15 Jul.15 Jan.16 Jul.16 Jan.17 Jul.17 Jan.18 High-carbon ferromanganese Silico
Slide 44: Growth strategy in manganese ore production in Moanda
Growth strategy in manganese ore Mn production in Moanda • Bangombé plateau, currently operated: Ongoing studies regarding an alternative processing route for part of the ore to increase incrementally short-term production. • Okouma plateau: Ongoing Detailed Feasibility Study (DFS) to increase t
Slide 45: Bringing value to the Weda Bay Nickel deposit
Bringing value to the Weda Bay Nickel Ni deposit • May 2018: implementation of partnership with Tsingshan, No. 1 global stainless steel producer, after waiving preliminary conditions in the agreement. • Shareholder structure: ERAMET 43% / Tsingshan 57%. • One of the largest nickel oxidised deposits
Slide 46: Reconciliation Group reporting and published accounts
Reconciliation Group reporting and published Group accounts (€ million) 1st half year Joint-venture 1st half year 1er semestre Joint-venture 1st half year Exercice Joint-venture Full year 2018 contribution 2018 2017 contribution 2017 2017 contribution 2017 Published (1) Reporting (2) Published (1) R
Slide 47: Reconciliation Group reporting and published accounts
Reconciliation Group reporting and published Group accounts €m H1 2018 H1 2017 Sales 1,813 1,797 EBITDA 432 389 % Sales 24% 22% COI 294 256 % Sales 16% 14% Other operating income and expense (1) (28) Operating income 293 228 Financial result (51) (52) Pre-tax income 242 176 Share of income of equity
Slide 48: Cash-flow table
Cash-flow table Group €m H1 2018 H1 2017 Operating activities EBITDA 432 389 Cash impact on items under EBITDA (160) (204) Cash from operating activities 272 185 Change in WCR (99) 94 Net cash generated by operating activities (1) 173 279 Investment activities Industrial CAPEX (112) (107) Other inve
Slide 49: Group Balance Sheet at 30 June 2018
Group Balance Sheet at 30 June 2018 Group Assets - €m Liabilities - €m 31/12/2017 30/06/2018 31/12/2017 30/06/2018 3,269 3,290 3,269 3,290 1,694 1,699 2,710 2,656 286 273 903 856 559 634 376 449 0 0 10 13 Fixed assets Equity-Group share Net debt Working capital requirement Minority interests Financi
Slide 50: Bond maturities
Bond maturities Group Initial Amount on Maturity Currency amount 30/06/18 Interest rate date (in €m) (in €m) 2013 bond issue € 525 460 2020 4.5% 2014 ODIRNAN bond issue € 100 97 perpetual 4% TiZir bond renewal - July 2017 USD 300 300 Jul 22 9.50% Bond issue – Sept 2017 € 500 500 Feb-24 4.20% ERAMET
Slide 51: Shareholding on 30 June 2018
Shareholding on 30 June 2018 Group Duval family: SORAME + CEIR Others 36.93% 32.14% BRGM2 1.34% STCPI1 4.02% APE 25.57% Numbers of shares issued: 26,635,856 Notes 1 STCPI (Société Territoriale Calédonienne de Participation Industrielle): entity owned by the New Caledonian provinces 2 BRGM (Bureau de
Slide 52: Contact
CONTACT Executive Vice-President Strategy and Innovation, Investor Relations Philippe Gundermann - philippe.gundermann@erametgroup.com Investor Relations Manager Sandrine Nourry-Dabi - sandrine.nourrydabi@erametgroup.com SEE YOU ONLINE DOWNLOAD SEE YOU www.eramet.com OUR FINANCE APP ON LINKEDIN