Elkem Asa · OSL:ELK
Elkem Asa — Q2 2022 Earnings Presentation
26 slides from Elkem Asa's earnings presentation, Jul 19, 2022
Slide 1: Second quarter and half year results 2022
Second quarter and half year results 2022
Slide 2: Agenda
Agenda Business update By CEO Helge Aasen Financial performance By CFO Morten Viga Outlook By CEO Helge Aasen 2
Slide 3: Another record result
Another record result ▪ Elkem has delivered the 7th consecutive quarter with improved EBITDA results, again reaching a new all-time high ▪ Continued strong demand in all major business segments ▪ Elkem successfully refinanced and increased its bank facilities in 2Q-2022 with Total operating income E
Slide 4: ESG – a key priority
Environmental, Social & Governance ESG – a key priority A clear focus on ESG Safety Environment Ambition: Zero injuries ▪ 22% biocarbon in production ▪ Awarded Platinum sustainability rating ▪ > 80% of electrical consumption from EcoVadis for 2022 from renewable energy ▪ Mapping process for taxonomy
Slide 5: Vianode achieving international recognition
Vianode – advanced battery materials Vianode achieving international recognition ▪ Elkem’s project for advanced battery materials production has received international recognition for its potential to contribute to the development With full-scale plant: Improving >1,000,000 electric vehicles/year of
Slide 6: A robust and integrated value chain securing cost competitiveness
Elkem’s strategy – integrated value chain A robust and integrated value chain securing cost competitiveness Silicon metal (cost distribution based on industry average) Siloxane (cost distribution based on industry average) Predominately long-term contracts Power ~35% securing low prices, combined wi
Slide 7: Continuous focus on cost improvements
Elkem’s strategy – continuous improvement Continuous focus on cost improvements ▪ Strong and robust cost positions and a continued focus on cost improvements Digitalisation driving cost improvements through the value chain ▪ Power is a significant cost factor in the upstream production of silicon an
Slide 8: Specialisation, a key strategy
Elkem’s strategy – specialisation Specialisation, a key strategy ▪ Focus on innovation and specialisation are key elements in Elkem’s strategy ▪ Elkem Silicones has leadership positions in Release Coatings, Textile Coatings and Healthcare. More than 25% of sales are generated from products < 5 years
Slide 9: Automotive continues to decline, but attractive growth in EV
General markets Automotive continues to decline, but attractive growth in EV ▪ Global sales of light vehicles were around 80 million in 2021, which was 13% below pre-covid level Light vehicles sales (in million) ▪ Global light vehicle sales YTD-2022 continuing down 10% from YTD-2021 ▪ In Europe, lig
Slide 10: Stable prices and good demand in EMEA and US, China impacted by Covid restrictions
Silicones market Stable prices and good demand in EMEA and US, China impacted by Covid restrictions ▪ The demand for specialty products is strong, particularly in Europe and US, but also in China the demand is good from EV and healthcare DMC reference price China (CNY/mt) ▪ Prices for specialties in
Slide 11: Continued strong price momentum
Silicon and ferrosilicon markets Continued strong price momentum CRU silicon 99 price EU (EUR/mt) ▪ Market prices for silicon and ferrosilicon have remained at attractive levels in the second quarter ▪ Increasing cost pressure for raw materials going forward, mainly coal and coke ▪ Still high energy
Slide 12: Strong product demand
Carbon market Strong product demand ▪ Global steel production estimated to decrease by 4% in 2Q-2022 compared Steel production (million mt) to 2Q-2021, but increase by 7% compared to last quarter ▪ Steel production in Europe and US has been stable over the last quarters, but down by 5% and 3% respec
Slide 13: Another strong quarter driven by Silicon Products
Elkem group Another strong quarter driven by Silicon Products Total operating EBITDA income ▪ New all-time high ▪ Another record driven by high sales quarter prices ▪ Increased revenue ▪ Mainly driven by generation in all Silicon Products. divisions New all-time high for Carbon Solutions 13
Slide 14: Overview financial ratios
Elkem Group Consolidated key figures Overview financial ratios (NOK million, except where specified) 2Q 2022 2Q 2021 YTD 2022 YTD 2021 FY 2021 Total operating income 12,326 7,332 24,201 14,525 33,717 EBITDA 3,924 1,371 7,798 2,602 7,791 EBIT 3,428 841 6,827 1,646 5,899 Other items 334 18 311 -44 -11
Slide 15: Good quarter, but impacted by maintenance stop
Total operating income Silicones NOK million Good quarter, but impacted by maintenance stop ▪ Total operating income of MNOK 5,211, up 45% from the second quarter last EBITDA and margin year NOK million and % ▪ Increased operating income driven by higher sales prices and higher sales volumes ▪ EBITD
Slide 16: Another strong quarter
Total operating income Silicon Products NOK million Another strong quarter ▪ Total operating income of MNOK 6,517 up 94% from the second quarter last EBITDA and margin year NOK million and % ▪ Increased operating income driven by high sales prices ▪ EBITDA of MNOK 2,965, up 341% from second quarter
Slide 17: Record results driven by good operations and strong markets
Total operating income Carbon Solutions NOK million Record results driven by good operations and strong markets ▪ Total operating income MNOK 906, up 79% from the second quarter last EBITDA and margin year NOK million and % ▪ Operating income reached all-time high, explained by high sales prices and
Slide 18: Strong EPS and robust equity
Earnings per share (EPS) Elkem Group NOK per share Strong EPS and robust equity ▪ Earnings per share (EPS) amounted to NOK 4.67 in the second quarter ▪ EPS was all-time high, explained by strong results ▪ EPS YTD of NOK 8.87 providing for an attractive dividend yield for 2022 Equity ratio In percent
Slide 19: Low leverage, refinancing of bank facilities
Net interest-bearing debt (NIBD) Elkem Group NOK billion Low leverage, refinancing of bank facilities ▪ Net interest-bearing debt (NIBD) of BNOK 4.1 as at 30 June 2022 ▪ Leverage ratio of 0.3x based on LTM EBITDA of BNOK 13.0 Maturity profile NOK billion ▪ Refinancing of bank facilities to secure lo
Slide 20: Strong cash flow generation
Cash flow from operations Elkem Group NOK million Strong cash flow generation ▪ Cash flow from operations(1) was MNOK 2,809 in the second quarter ▪ Strong cash flow generation explained by high operating profit ▪ Increase in working capital mainly explained by higher inventories Investments ex. M&A
Slide 21: Outlook for the third quarter 2022
Outlook for the third quarter 2022 ▪ The market sentiment is impacted by macro-economic uncertainty, with inflation pressure and higher interest rates, but Elkem continues to see robust demand going into the third quarter ▪ Silicones demand in China is expected to gradually improve as Covid- restric
Slide 22: 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 23: Appendix
2 Elkem Appendix 23
Slide 24: Currency sensitivity
Currency sensitivity ▪ The result and cash flow are exposed to currency fluctuations. The main currencies are EUR, USD and CNY ▪ EUR - exposure approx. MEUR 430 in 2022 ▪ USD - exposure approx. MUSD 250 in 2022 ▪ CNY - exposure approx. MCNY 1,700 in 2022 ▪ Current cash flow hedging programme ▪ 90% h
Slide 25: Other financial sensitivities
Other financial sensitivities POWER SALES PRICES ▪ Electric power is a key input factor in Elkem’s production. The normal consumption is ▪ Changes in sales prices could significantly affect operating income and EBITDA around 6.5 TWh of which approx. 3.7 TWh is in Norway. Near term exposure to spot ▪
Slide 26: Delivering your potential
~ Elkem Delivering your potential