Elkem Asa · OSL:ELK
Elkem Asa — Elkem Asa Ord — Q1 2024 Earnings Presentation
43 slides from Elkem Asa's earnings presentation, Apr 18, 2024
Slide 1: First quarter results 2024
Elkem First quarter results 2024
Slide 2: Agenda
Agenda Business update By CEO Helge Aasen Financial performance By CFO Morten Viga Outlook By CEO Helge Aasen 2 Elkem
Slide 3: Highlights
Highlights EBITDA improvement from modest levels = Elkem’s EBITDA was NOK 721 million in the first quarter 2024 " The Silicones division has experienced weak market conditions, particularly before Chinese New Year. Weak demand for specialities = Silicon Products delivered better results compared to
Slide 4: Environmental, Social & Governance
Environmental, Social & Governance Strong ESG performance Green leadership = Total CO2 emissions reduced by 8.3% in 2023, with reductions in scope 1,2 &3 = Grant received from Enova of MNOK 17 for carbon capture pre-study in Rana. The project is set to capture 95% of the CO2 = Well positioned to ben
Slide 5: Strong focus on profitability improvements
Strong focus on profitability improvements = Elkem has introduced a comprehensive programme to counter EBITDA improvement programme (in Nok billion) the current challenging market conditions, particularly in Silicones cS = The target is to improve EBITDA by > BNOK 1.5 in 2024. The initiatives are or
Slide 6: Concentrating on core business – reducing investment levels
Concentrating on core business — reducing investment levels Reinvestments and strategic capex = Elkem’s target is to reduce capex by > BNOK 2.0 compared to 2023 Target 2024 - reduction by > BNOK 2.0 vs. 2023 * Reinvestment target approx. BNOK 2.0 (80-90% of D&A) = Strategic capex target approx. BNOK
Slide 7: Silicones expansion project in China coming on stream in May
Silicones expansion project in China coming on stream in May Silicones project in France Silicones project in China Capacity increase: +25% / +20 ktpa Capacity increase: +50% / +120 ktpa Total capacity: 100ktpa Total capacity: 360 ktpa Start-up: 3Q-2024 Start-up: May 2024 Investment =0.4 BNOK Invest
Slide 8: A key silicones supplier to EVs
A key silicones supplier to EVs * Electric vehicles (EV) represent an attractive growth potential for BEV & PHEV sales and growth (in1,000 units) Elkem as silicones are used for battery systems, cables, connector seals, and safety & lighting systems +36% " Sales of EVs, including hybrids, solidly in
Slide 9: Energy cost positions: new long-term power contract in Norway
Energy cost positions New long-term power contract in Norway = Inthe first quarter 2024, Elkem signed a new power contract in Norway. The new contract is for 9 years and expire end of 2035 = The total volume is 220 GWh per year, in price area NO4 = Elkem is well-positioned with long-term power contr
Slide 10: General markets: Modest macro economic outlook
General markets Modest macro economic outlook = Elkem’s sales generally linked to GDP growth, particularly in Silicones = The recent macro-economic sentiment has been weak, characterised by high inflation, interest rate hikes, and geopolitical uncertainties = Growth projections from OECD do not indi
Slide 11: General markets: China market update
General markets China market update - signs of improvement = In China, silicon production YTD-February 2024 was 597kt, up 22% compared to the same period in 2023, while the silicones production was 357kt, up 11% = Silicon spot prices in China dropped in March. The DMC price was increasing early Marc
Slide 12: Silicones market
Silicones market Signs of demand recovery, but significant uncertainty = Silicones markets generally weak, negatively impacted by DMC reference price China (KCNY/mt) construction, and weak automotive markets in EU and US 70,000 = Demand for most specialty grades remain low in EU and US, but 60,000 s
Slide 13: Silicon and ferrosilicon markets
Silicon and ferrosilicon markets Prices in Europe have recovered from the trough CRU silicon 99 price EU (EUR/mt) 9,000 7,000 (\ 5,000 | = Prices for silicon and ferrosilicon have recovered in Europe despite ] oll weak market conditions 3,000 i = Silicon prices in EU up more than 30% from the bottom
Slide 14: Carbon market
Carbon market Stable markets with some signs of demand improvement = Demand for carbon products varies across regions driven by steel, Crude steel production (million mt) ferroalloys, and aluminium Europe ml North America 60 = Global steel production in first quarter 2024 was in line with the first
Slide 15: Elkem group
Elkem group Challenging markets, but improved EBITDA compared to last two quarters = Down 18% from 1Q- 2023, in line with previous two quarters = Reduction across all divisions compared to 10-2023 Total operating income (MNOk) 9,755 9,044 7,961 7,831 8,131, 1Q 2Q 3Q 4Q 9755 |_| “811 | | 268 -973 -27
Slide 16: Elkem Group: Overview financial ratios
Elkem Group Overview financial ratios EBITDA MNOK 721 = Segment Other included realised currency hedging losses of MNOK -39 Other items MNOK -198 = Consisting of losses on power and currency derivatives MNOK -217 and restructuring expenses MNOK -'13, partly offset by currency gains on working capita
Slide 17: Silicones
Silicones First quarter hampered by Chinese seasonality " Total operating income of MNOK 3,349, down 19% from the first quarter last year = Mainly explained by lower sales prices and lower sales volume = EBITDA was MNOK -103, down MNOK 73 from first quarter last year = Explained by lower sales price
Slide 18: Silicon Products
Silicon Products Higher sales prices improved results " Total operating income of MNOK 4,015, down 20% from the first quarter last year = Lower operating income mainly explained by lower sales prices = EBITDA of MNOK 677, down 46% from the first quarter last year = Reduction in EBITDA was mainly exp
Slide 19: Carbon Solutions
Carbon Solutions Strong performance despite lower sales " Total operating income MNOK 834, down 25% from the first quarter last year = Mainly explained by lower sales volume and lower sales prices = EBITDA of MNOK 249, down 33% from the first quarter last year = Mainly explained by lower sales volum
Slide 20: Elkem Group: Weak EPS, robust equity position
Elkem Group Weak EPS, robust equity position = Earnings per share (EPS) amounted to NOK -0.69 in the first quarter = EPS in the first quarter impacted by negative mark-to-market effects = Total equity amounted to BNOK 24,7 as at 31 March 2024, up BNOK 0.3 from year-end 2023, mainly explained by curr
Slide 21: Elkem Group: Consolidating the financing position
Elkem Group Consolidating the financing position =" Net interest-bearing debt (NIBD) of BNOK 10.2 as at 31 March 2024 = Increased NIBD partly explained by currency translation effects = Leverage ratio of 3.5x based on LTM EBITDA of BNOK 2.9 " Good financing position = Well managed and distributed de
Slide 22: Elkem Group: Stable cash flow generation
Elkem Group Stable cash flow generation, significantly lower investments " Cash flow from operations“ was MNOK 759 in the first quarter 2024 = The cash flow was improved from the corresponding quarter last year, mainly explained by positive working capital changes = Investments ex. M&A of MNOK 6165
Slide 23: Outlook for the second quarter 2024
Outlook for the second quarter 2024 = Signs of recovery in the first quarter, but still significant uncertainty = Demand for silicones in Europe and US show signs of picking up. Improved demand also in China but price development hampered by overcapacity. Elkem’s expansion in China will come on stre
Slide 24: 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 25: Appendix
2 Elkem Appendix 25
Slide 26: We are Elkem
We are Elkem Advanced silicon-based materials shaping a better & more sustainable future cy TI X = foo JAN va . AD TM “AB KYRS ; Gl ; Silicones Silicon Products Carbon Solutions
Slide 27: Elkem celebrating its 120 years anniversary
Elkem celebrating its 120 years anniversary = Elkem celebrates its 120 years anniversary in 2024, having grown from a Norwegian industrial start-up into a position as one of the world's leading providers of advanced silicon-based materials = Elkem started as a Norwegian company founded in 1904 by Sa
Slide 28: Corporate strategy
Corporate strategy Strategy remains firm - dual-play growth & green leadership Profitable growth: Top 3 in silicones worldwide Number 1 in silicon products and carbon solutions in the West Dual-play growth 2 ~ Balanced between geographic regions (East & West) > Balanced across the value chain (Upstr
Slide 29: Sustainable business model delivering good results
Sustainable business model delivering good results Low cost sustainable input factors é Quartz Coal Biocarbon Power High temperature/chemical production processes ey Silicones Silicon, ferrosilicon, foundry products and microsilica Carbon solutions Examples of high value applications and markets Inf
Slide 30: Delivering good results over the business cycle
Delivering good results over the business cycle = Lower earnings in 2023 due to challenging market conditions and weak macro-economic sentiment = Elkem is well positioned to benefit from an economic recovery due to good cost positions and robust financials = Elkem delivering on its financial targets
Slide 31: Elkem operates through three divisions
Elkem operates through three divisions: All with global scale, leadership positions and global footprint 40% 49% of ° perating of operating income , income End markets 14 main plants End markets 10 main plants = Construction = Automotive = Automotive = Construction/industrial = Chemical formulators
Slide 32: Elkem's portfolio is well-balanced
Elkem’s portfolio is well-balanced : S45 F a, oo a f bi Revenue split- by geography [ame Revenue split - by division Me \ al I L Carbon EMEA Solutions { & Amienteee 1% Silicones Be Petucion site 60% 40% Bi S2ecotce ; mre ] Asia Th Silicon 9 Oo Products 49% 2Elkem - 32
Slide 33: Environmental, Social & Governance
Environmental, Social & Governance Elkem is committed to reduce emissions and contribute in line with Paris agreement aim of well below 2°C warming We aim to contribute to a better climate through three key levers: By 2031: Reducing absolute emissions* by 28% from 2020-2031 while growing the busines
Slide 34: Emissions reduction pathway (illustrative)
▪ ▪ ▪ (Illustrative) A B C D -39% Net zero 2020 Biomass More China Low-carbon 2031 CCS at CCU, recycle, 2050 baseline in smelters renewables supply chain target smelters other target * Total global fossil CO2 emissions, scope 1 and 2 ** Main products average fossil CO2 emissions, scope 1-3
Slide 35: Silicones: Solutions to global megatrends
Silicones Solutions to global megatrends > 80,000 mt in France (exp. to 100,000 mt in 2024) > 240,000 mt in China (exp. to 360,000 mt in 2024) > Downstream specialty plants : 7 in EMEA/AMs and 4 in APAC Release coating Personal Care Processing aids Themo-conductive potting Semiconductors assembly Mo
Slide 36: Silicones - Sales distribution
Silicones - Sales distribution Serving attractive end-markets with advanced technologies Healthcare & Personal Consumer & Care packagi > Leading position in > Medical adhesives, Release coatings for long term implants, food & label == > Intermediates medical devices etc. industries (silicones polyme
Slide 37: Silicon Products - Business lines: Silicon
Silicon Products - Business lines 30% Silicon — attractive cost position and downstream ee integration ee —> Oc > Oc > es Coal and biocarbon Electricity Total production capacity 208.000* mt in Norway and China > 175.000* mt silicon grades > 20.000 mt Silgrain® > 10.000 mt Silgrain® specialties Prop
Slide 38: Silicon Products - Business lines: Ferrosilicon
Silicon Products - Business lines 25% Ferrosilicon — high quality products to specialty steel sacra. Electricity Total production capacity > 185,000 mt in Norway and Iceland > 40% High Purity grades > 35% Refined grades > 26% Standard grades > Flexibility to switch grades Properties > Deoxidising st
Slide 39: Silicon Products - Business lines: Foundry Alloys
Silicon Products - Business lines 30% Foundry Alloys — global leader into cast iron metal staves treatment a —> Oc > A > Iron foundries Automotive (50%) Ferrosilicon Engineering (35%) Total production capacity Alloying elements > 190.000 mt globally | > 60% FSM > 20% Low potent inoculants > 20% High
Slide 40: Silicon Products - Business lines: Microsilica
Silicon Products - Business lines Microsilica — tailor made products to wide range of specialty applications -Rewmeterils Products Industry players => End markets > Elkem pioneered the development to collect and process the off-gas of silicon and ferrosilicon, and is now the world’s leading supplier
Slide 41: 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 550 = USD - exposure approx. MUSD 100 = CNY - exposure approx. MCNY 200 = Current cash flow hedging programme = 90% hedging of net cash flows o
Slide 42: Other financial sensitivities
Other financial sensitivities POWER = Electric power is a key input factor in Elkem’s production. The normal consumption is around 6.5 TWh of which approx. 3.6 TWhis in Norway. Near term exposure to spot power prices is limited = Norway, hedging programme mainly consisting of long-term contracts cov
Slide 43: Delivering your potential
« Elkem Delivering your potential