Elkem Asa · OSL:ELK
Elkem Asa — Q3 2021 Earnings Presentation
30 slides from Elkem Asa's earnings presentation, Oct 27, 2021
Slide 1: Third quarter results 2021
@ Elkem Third quarter results 2021
Slide 2: Agenda
Agenda Business update By CEO Helge Aasen Financial performance By CFO Morten Viga Outlook By CEO Helge Aasen
Slide 3: Record results in extraordinary markets
Record results in extraordinary markets Helge Aasen will continue as permanent CEO of Elkem, after serving as interim CEO since June 2021 Elkem is delivering its best quarterly result ever, benefitting from a strong business model and attractive market positions Strong market demand while supply has
Slide 4: Environment, Social & Governance
Environment, Social & Governance ESG - a key priority A clear focus on ESG = Elkem received an A rating from CDP in 2020, ranking Elkem in the world’s top 5% on climate = Elkem received Gold sustainability rating from EcoVadis in 2020 = Elkem has launched a new ambitious climate strategy leading the
Slide 5: Our climate ambitions
Our climate ambitions Elkem is committed to ambitious climate targets in line with the Paris agreement We aim to contribute through three key levers: * By 2031: Reducing absolute emissions* by 28% from Reducing our emissions 2020-2031 while growing the business, delivering a Achieving fully climate
Slide 6: Our climate actions
Our climate actions A. Changing to biomass in production * Production of silicon and ferrosilicon require a carbon source R ed uC j n g t h e car bo n as reduction material (to reduce oxygen from the quartz) + Elkem’s strategy is to reduce scope 1 emissions through fo ot p ri nt 3 O% by 2 O 31 repla
Slide 7: Vianode - enabling efficient, sustainable energy storage for a cleaner world
Vianode - enabling efficient, sustainable energy storage for a cleaner world = Vianode developing as a newly established company and brand for production of sustainable anode materials = Environmentally friendly and cost competitive process/location reducing total emissions by ~94% = Industrial pilo
Slide 8: Energy market development
Energy market development Renewable, stable energy, a key competitive advantage = Current challenges in global energy markets and stricter climate policies to reduce CO, emissions demonstrate the importance of stable, renewable energy = In Europe, power prices and CO, costs are already high. CO, reg
Slide 9: Elkem's power situation
Elkem’s power situation Well positioned with long-term renewable energy contracts = Norway - long-term reliable access to renewable power, short term hedging ratio > 85% =~ Iceland - reliable access to renewable power, long-term fixed pricing contract = Canada - reliable access, captive renewable po
Slide 10: China power market
China power market Challenging power situation The Chinese power market is challenging due to a combination of steadily increased consumption, instability of clean power and record high coal prices This has resulted in power curtailments in several provinces impacting industrial production Chinese a
Slide 11: Supply situation silicones
Supply situation silicones Force majeure in silicones market = Large parts of the silicones industry have experienced challenging raw material markets and issued force majeure letters related to availability of siloxane-based materials = Elkem has maintained normal production and continues to see a
Slide 12: Silicones expansion in France
Silicones expansion in France ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪
Slide 13: General markets
General markets Semiconductors hampering automotive, EV sales up = Post-pandemic strong demand from construction sector in all major regions. Risk that activity may slowdown in China from next year = Automotive markets impacted by lack of semiconductors, constrained transportation capacity and covid
Slide 14: Silicones market
Silicones market Extraordinary conditions resulting in significant price spike = Strong demand has led to a tight supply-demand balance in all regions = Supply disruptions due to challenging power situation and low availability of silicon metal have further tightened the markets = In China, prices h
Slide 15: Silicon and ferrosilicon markets
Silicon and ferrosilicon markets Strong demand, prices reaching all-time high = Strong demand for silicon and ferrosilicon across several sectors, e.g. solar, chemicals, aluminium and steel = Market prices have risen to new record levels in the third quarter both for silicon and ferrosilicon = Suppl
Slide 16: Carbon market
Carbon market Strong demand, increasing raw material prices Steel markets and ferroalloys are key demand drivers for carbon products China is restricting steel production as a measure to reduce energy consumption and CO, emissions = Estimated production is down 11% in third quarter 2021 compared to
Slide 17: Elkem group
Elkem group New record levels for operating income and EBITDA Total operating income = All-time high operating income =... driven by record prices for silicones, silicon and ferrosilicon 2 Elkem 8,796 7A93 7,332 7129 5798 5,879 5,886 19 2Q 3Q 4Q 1,095 108, 8 1,627 5,886 3Q-2020 Silicones Si. Prod. 8
Slide 18: Elkem Group
Elkem Group Good EBITDA and strong financial ratios EBITDA MNOK 2,131 = Segment Other included realised currency hedging gains of MNOK 10 The Productivity Improvement Programme continues according to plan = By end of 3Q-2021 the annualised run-rate was MNOK 304 versus target of MNOK 350 by end of 20
Slide 19: Silicones
Silicones Strong result in extraordinary markets = Total operating income of MNOK 4,849, up 50% from the third quarter 2020 " The increase in operating income was largely explained by higher sales prices, but also higher sales volumes = EBITDA of MNOK 1,168, up 235% from the third quarter last year
Slide 20: Silicon Products
Silicon Products Benefitting from excellent market positions " Total operating income of MNOK 3,558 up 44% from the third quarter last year * Mainly explained by higher sales prices, with contribution from slightly higher sales volumes = EBITDA of MNOK 858, up 513% compared to third quarter last yea
Slide 21: Carbon Solutions
Carbon Solutions Record results and strong volumes = Total operating income MNOK 560, up 24% from the third quarter last year = Higher operating income due to higher sales volumes and higher sales prices, partly offset by currency = EBITDA of MNOK 140, up 26% from third quarter last year * Improved
Slide 22: Elkem Group
Elkem Group Excellent EPS and robust equity = Earnings per share (EPS) = EPS amounted to NOK 2.16 in the third quarter and NOK 4.34 YTD-2021 = EPS YTD-2021 clearly up from YTD-2020 due to strong improvement in results = Total equity amounted to BNOK 17.5 as at 30 September 2021, up by BNOK 4.9 from
Slide 23: Elkem Group
Elkem Group Financing position further improved * Net interest-bearing debt (NIBD) of BNOK 5.4 as at 30 Sept. 2021 = Leverage ratio of 1.0x based on LTM EBITDA of BNOK 5.7 = Reduction in leverage ratio driven by improved LTM EBITDA and capital increase in April 2021 = Maturity profile further improv
Slide 24: Elkem Group
Elkem Group Strong cash flow — higher strategic investments = Cash flow from operations was MNOK 1,886 in the third quarter, up from MNOK 182 in the third quarter last year = The improvement was mainly driven by record high operating profit and improved working capital = Investments ex. M&A amounted
Slide 25: Outlook for the fourth quarter 2021
Outlook for the fourth quarter 2021 = Strong underlying demand for Elkem’s products going into the fourth quarter. Industry supply hampered by energy and raw material constraints = Elkem well positioned to benefit from current market conditions despite inflationary pressure, due to its integrated va
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: Appendix
2 Elkem Appendix 27
Slide 28: Currency sensitivity
Currency sensitivity = The result and cash flow are exposed to currency fluctuations. The main currencies are EUR and USD = EUR - net exposure approx. MEUR 300 = USD - net exposure approx. MUSD 150 = Current cash flow hedging programme = 90% hedging of net cash flows occurring within 0-3 months = 45
Slide 29: Other financial sensitivities
Other financial sensitivities POWER = Electric power is a key input factor in Elkem’s production. Total consumption for the group was 6.4 TWh in 2020 of which 3.7 TWh is in Norway. Near term exposure to spot power prices is limited = Norway, hedging programme mainly consisting of long-term contracts
Slide 30: Delivering your potential
~ Elkem Delivering your potential