Alro S.a. · BVB:ALR
Alro — Investor Presentation (June 2018)
87 slides from Alro's investor presentation, June 2018
Slide 1: Alro Group Presentation
Alro Group Presentation
Slide 2: Overview of Alro
Section 1 Overview of Alro vimetco alro
Slide 3: One of the largest vertically integrated aluminium producers in Europe
One of the largest vertically integrated aluminium producers by production capacity in Europe Overview Divisional / group structure Vertically integrated primary and processed aluminium (Flat Rolled Ownership Fondul Freefloat Conef Vimetco Product "FRP" and extrusion) producer Proprietatea Advan
Slide 4: Fully integrated business with global distribution
Fully integrated business with global distribution 1 Bauxite is mined in Sierra Leone mine 3 Primary Aluminium (wire rods, slabs, billets, ingots) is produced and sold internationally¹: – Majority is sold to Alum – Alumina producer – and – Romania 34% – Western Europe 13% satisfies 100% of group n
Slide 5: Alro has consistently improved costs and product mix
Alro has consistently improved costs and product mix Significant investment in technology and strategic acquisitions to streamline operations are now reflected in the company's performance Continuous investment in technology through the cycle … 2004 2011 Increase fumes Acquired Sierra 2017 Significa
Slide 6: Strategic focus to increase higher margin downstream exposure
Strategic focus to increase higher margin downstream exposure whilst keeping costs down Focus on HVAP Diversifying Permanent focus Factory of the future product mix on cost Circular economy: waste Increase FRP production Adapt output production Improve capacity and reduction through to 120kt
Slide 7: Airbus case study
Airbus case study Overview of case Alro’s end products Delivery of High margin products reach various Airbus • Currently Alro is delivering these plates in A380 aircrafts thickness range of 15 to 100 mm to Airbus and its Enabled Suppliers Direct contract with end customer • Alro has entered into an
Slide 8: Superior margin and returns with lower earnings volatility than peers
Superior margin and returns delivered, with lower earnings volatility than peers Alro’s 10-yr EBITDA margin and ROCE is higher than its peers 10-yr avg. 10 yr EBITDA std EBITDA margin(2) deviation(2) EBITDA margin 17A ROCE 17A(3) 18% 31% 21% 25% Inte-grated 11% 41% 11% 10% 15% 18% 16% 10% 12% 18% Do
Slide 9: Key investment highlights
Section 2 Key investment highlights
Slide 10: Key investment highlights
Key investment highlights 1 Supportive aluminium market fundamentals and attractive end market growth 2 Significant growth driven by focus on high value added products High margin business and limited capex requirements to sustain growth and generate 3 strong cash flows 4 Full vertical integration s
Slide 11: Supportive aluminium market fundamentals and attractive end market growth
Supportive aluminium market fundamentals and 1 attractive end market growth Key market drivers Aluminium price outlook 2,800.0 Historic performance CRU market forecast1 Reduction in supply as restrictions on Chinese aluminium continue 2,500.0 2,200.0 Recovery from Aluminium (US$/t) Recent freeze
Slide 12: Supportive aluminium market fundamentals (cont'd)
Supportive aluminium market fundamentals and 1 attractive end market growth (cont'd) Alro's expertise lies within the largest and fastest growing pocket of the Aluminium market Global aluminium plates consumption Global flat rolled products demand and growth by applications (KMT) by end-use sector A
Slide 13: Significant growth driven by focus on high value added products
Significant growth driven by focus on high value 2 added products within FRPs Content focus on increase in high value added products1 … … with exceptionally attractive product mix today1 100 Revenue mix (%, FY17) Coils 7% Sheets Wire rod 11% 32% 28 31 80 41 44 44 44 2017A 45 45 Rev. Total: Plates To
Slide 14: High margin business and limited capex requirements
High margin business and limited capex requirements 3 to sustain growth and generate strong cash flow EBITDA margin 13% 13% 21% 400 354 350 300 250 218 (RONm) 204 200 174 150 118 102 100 50 0 2015A 2016A 2017A EBITDA-Capex Capex Source: Company information 13
Slide 15: Full vertical integration secures supply and optimize costs
Full vertical integration secures supply and 4 optimize costs End markets Primary and Processed Aluminium Alumina Primary aluminium – The only producer of primary aluminium in Romania, with a capacity Alro is net long alumina of 265kt of electrolytic aluminium and 340kt of cast aluminium1 Bauxite
Slide 16: Strong commitment to superior capital returns to shareholders
Strong commitment and focus to deliver superior 5 capital returns to shareholders Dividends distributed(a) (RONm) Key commentary Attractive dividend distribution track-record aimed at maximizing the value creation for shareholders, without affecting Payout ratio (b) 94.0% 97.7% the development pla
Slide 17: State of the art asset base supports environmental compliance
State of the art asset base supports commitment 6 to environmental compliance Key commitments from Alro Environmentally-friendly aluminium production (%) All that has been listed has a degree of achievement at this Reaching best-in-class efficiency (measured as distance-to-target per plant) time, ra
Slide 18: Experienced management team with exceptional record of delivery
Experienced management team with exceptional 7 record of delivery First class leadership of Alro … Marian Nastase Gheorghe Dobra Genoveva Nastase Chairman CEO CFO 16 16 34 34 16 16 … supported by an outstanding management team William Berger Marin Cilianu Serghei Gheorghe Chief Executive Officer Ope
Slide 19: Industry overview
Section 3 Industry overview vimetco alro
Slide 20: Current market dynamics
Current market dynamics Promising Aluminium price… 3,000 US government sanctions-driven increase 2,425 2,470 2,500 2,500 2,400 2,301 Coupled with tariffs imposed, though durability yet to be confirmed LME cash (US$/t) 1,969 2,000 1,605 To bring China and World ex-China markets together 1,500 –
Slide 21: Key FRP drivers by region
Key FRP drivers by region FRP consumption (kt) Growth from the automotive led transport sector will outpace growth in other sectors Global trends 40,000 32,076 26,404 Developing regions growth in beverage can sheet demand will be the main driver of FRP demand, followed by demand for building she
Slide 22: Key barriers to entry guarantee core player growth
Key barriers to entry guarantee core player growth Strong R&D focus is required, with contracts based on long-term 1 relationships Significant production line, meaning solid suppliers and buyers are 2 needed to have production visibility Advanced technical knowledge and capabilities are required giv
Slide 23: Overview of assets
Section 4 Overview of assets
Slide 24: Bauxite
Section 4.A vimetco alro
Slide 25: SMHL – Asset overview
SMHL – Asset overview Overview Asset location Sierra Mineral Holdings 1 Limited (“SMHL”) operates a bauxite mine in Sierra Leone – acquired by Alro Group in May 2011 (99.4% ownership) SMHL consists of several deposits in the Gondama and Mokanji area SMHL has a concession area of 322 km 2 Sierr
Slide 26: Overview of infrastructure
Overview of infrastructure Ore transportation Mining (100% owned) Ore transported via outsourced trucks to maximise efficiency and minimise risk Main deposits Gbonge, Jenega, Wunde, Konta, 1–22 KM S-Series, Mokanji Divided between high grade and medium grade Bauxite Washing and Drying Washing Dr
Slide 27: SMHL – Key production and sales metrics
SMHL – Key production and sales metrics Bauxite mined (mt) Commercial bauxite production (mt) • SMHL increased bauxite mined by 80% 3.4 52% 60% 51% 2.8 1.8 compared to 2014 2.7 1.3 1.4 driven by the 1.9 1.2 equipment upgrade 47% used in bauxite: – excavation 2014A 2015A 2016A 2017A 2014A 2015A 2016A
Slide 28: SMHL – Key cost and capex metrics
SMHL – Key cost and capex metrics Main factors contributing Full cost Investment projects (US$000) to the company’s US$000 2014 2015 2016 2017 improvement in cost 156.2 132.7 Screens / WP spares 1,789 – 29 557 position: 129.9 124.8 Laboratory 75 87 45 12 • Improved bauxite 38.8 39.0 Centex pump 30 1
Slide 29: Alumina
Section 4.B vimetco alro
Slide 30: Alumina—overview of assets
Alumina—overview of assets Overview Alumina production (kt) 600 Wholly-owned alumina refinery located in Tulcea on Danube river 500 484.2 467.0 472.6 414.1 414.4 404.8 391.0 400 362.6 Current capacity of c.600kt alumina per annum 300 200 Alum needs approx. 2.85t of the bauxite currently proces
Slide 31: Growth in special products
Growth in special products Alum's refinery currently has a capacity of 600k tonnes per year of calcined alumina production Special products' profitability drivers Special products (kt) From current production ~15% is marketed in - Aluminium hydroxide with a moisture content of less than 90 82 6% 8
Slide 32: Continued cost optimisation
Continued cost optimisation Energy—consumption reduced at Alum by 44% over last 12 years Energy specific consumption on Power House (fuel GJ/t Al2O3) Energy specific consumption from National Grid (kWh/t Al2O3) 12.0 280 262.2 10.0 9.3 9.3 224.9 8.6 220 203.3 7.7 7.8 8.0 165.0 157.2 160 143.4 4.0 100
Slide 33: Primary Aluminium
Section 4.C Primary Aluminium
Slide 34: One of the largest vertically integrated aluminium producers in Europe
One of the largest vertically integrated aluminium producers in Europe by production capacity Overview Simplified flow Secure supply Total capacity of 265kt of electrolytic aluminium and 340kt of cast source • Coke aluminium • Pitch Alumina • State-of-the-art Slatina production facility includes
Slide 35: Alro's anode plant generate cost reductions
1 Alro’s anode plant generate cost reductions Key highlights Selected facilities • Paste plant's capacity of 32t/h Paste plant vibro-compactor • Complete automation of paste plant • Installation of new Outokumpu vibro-compactor in 2004 • 3 out of 6 existing baking furnaces were equipped with
Slide 36: Primary Aluminium Smelter has driven efficiencies
Primary Aluminium Smelter has driven 2 efficiencies Key highlights Selected facilities Total capacity of 265ktpa with 5 out of 6 potrooms in operation In total 790 pots, out of which 632 are in operation Two dry scrubbing units Production increased, driven by amperage increase from 85kA to 1
Slide 37: Casthouse with best-in-class technology
3 Casthouse with best-in-class technology Key highlights Selected facilities Melting furnaces with 28t / 40t / 60t capacity Wagstaff Air-slip casting machine for billets Two slabs Wagstaff machines one is for hard alloys, in special for aerospace alloys slabs Homogenization furnace for hard
Slide 38: Eco Recycling Facility allows waste minimization
4 Eco Recycling Facility allows waste minimization Key highlights Selected facilities At end of 2013, started the aluminium scrap melting facility with a capacity of 32ktpa, which offers: Recycling of scraps Reduction of fabrication cycle of aluminium products Reduces Alro's dependency on hi
Slide 39: Key products and output evolution
Key products and output evolution Total Revenue Product Design and Specs Main end-markets contribution (FY17)1 1 Highest premium Diameters: 9.5, 12, primary Al. product 15, 19 and 25mm Wire rods Aluminium alloy wire rod: 6xxx alloys Power cables 70.2% 2 Diameters: 6”, 7”, 8”, 9”, 10”, 11”, 1
Slide 40: Alro's competitive advantage in the wire rod market
Alro's competitive advantage in the wire rod market Strong position within competitive wire rod market • Overall consumption of aluminium alloyed wire rods in Europe of c. 550kt – only c. 10 - 15% of the overall European wire rod market • The market is highly concentrated • Main challenge consists i
Slide 41: Ongoing resource consumption improvements has driven cost optimisation
Ongoing resource consumption improvements has driven cost optimisation Smelting plant efficiencies 13,900 95.96 97 95.60 95.63 95.67 95.88 95.70 95.30 13,600 13,499 95 (kwh/tAl) (%) 13,343 13,293 13,275 13,281 13,284 13,284 13,300 93 13,000 91 2011 2012 2013 2014 2015 2016 2017 D.C. (kwh/tAl) Curren
Slide 42: Processed Aluminium: Flat Rolled Products (FRP)
Section 4.D Processed Aluminium Flat Rolled Products (FRP)
Slide 43: FRP – overview of assets
FRP – overview of assets Overview Processing facilities Flat rolled products plant located beside smelter in Slatina Facilities comprise of rolling mill shops in the processed division and an extrusion company in separate areas within the processing division Slabs produced by smelter fed into
Slide 44: FRP sales extension to 120k by 2022
FRP sales extension to 120k by 2022 During the strong sales increase from 2009 to 2017 the FRP client Large worldwide diversified existing FRP portfolio has been developed to reach around 300 clients customer base Alro's key production targets are in line with key clients' future Existing FRP cl
Slide 45: Key products
Key products Total Revenue Product Design and specs Main end markets contribution (FY17)1 1 16.1% Transportation Building & Coils Thickness: 0.3 mm – 6.0 mm Construction Consumer durables 2 Transportation Thickness: 0.3 mm – 6.0 mm Industrial & Sheets Machinery 25.8% Thickness: 1.5 mm – 5.0 mm
Slide 46: Growth in high value added FRP
Growth in high value added FRP Alro's Golden Status Project aims to continue the focus on HVAP, with clear milestones to be reached by 2022 Continued increase in FRP production … Evolution of HVAP and VHVAP vs. Total FRP (ktpa) 100 2017–22 should be considered as the growth period for the 82.4 AGS
Slide 47: Strategic shift towards VHVAP boosted revenues and margins
Strategic shift towards VHVAP within the growing FRP production boosted revenues and margins Infrastructure investment Increase in overall production Targeted production 2006–09 2010–17 2017 onwards Critical investment projects which laid the Capex started to pay off as the Within that segment
Slide 48: Delivering improved operational efficiency
Delivering improved operational efficiency Material reduction in energy and gas utilisation at Alro 1,200 984 1,000 874 867 794 762 800 664 607 587 582 581 571 558 565 600 505 417 400 253 200 191 182 128 200 113 104 109 108 102 102 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 E
Slide 49: Alro remains focused on long term focus on HVAPs and VHVAPs
Alro remains focused on its long term focus on HVAPs and VHVAPs The main investments for the next five years are strongly correlated with this focus… Increase the recycling capacity in total value of 16.84 mil US$ for the period 2018-2020 Increase the production of FRP whose profitability is higher
Slide 50: Alro's competitive advantage in the processed aluminium market
Alro's competitive advantage in the processed aluminium market Successful positioning as a niche player in a highly competitive market for processed aluminium and extrusion … High technical competence on a wide range of product alloys and specifications Fast and professional client service dedicated
Slide 51: Processed Aluminium: Vimetco Extrusion
Section 4.E Processed Aluminium Vimetco Extrusion
Slide 52: Vimetco Extrusion—company overview
Vimetco Extrusion—company overview Overview Facilities overview Extrusion operation located in FRP plant in Slatina Established in 2003 Extrusion press Billet diameter Maximum Width (mm) Yearly capacity Operates 2 extrusion presses with total production capacity of 25ktpa P 2 1650 ton ᶲ 7 inch
Slide 53: Sales evolution at Vimetco Extrusion
Sales evolution at Vimetco Extrusion Vimetco extrusion has constantly increased overall production, with a significant increase in VHVAP products Evolution of HVAP and VHVAP vs. Total extrusion (ktpa) 30 25.1 24.0 25 22.9 22.8 22.5 22.2 21.8 21.7 21.3 21.1 20.9 20.0 20 17.9 17.8 15 10 5 2.3 1.8 1.6
Slide 54: Products and services
Products and services Products overview Revenue by end-user (FY17)1 Focusing its production and sales on 6xxx alloys series, in conformity with Construction EU standards, Vimetco Extrusion's products are sold to a variety of Solar industry (Direct) applications throughout Europe 6% 6% From flat,
Slide 55: Vimetco Extrusion—added value products
Vimetco Extrusion—added value products Overview Key operational statistics (2017A) Vimetco Extrusion concentrates on one stop shop solutions The fabrication workshop was inaugurated in 2011 and since then was permanently developed, according to market demands. Range of offerings: 1,739 Tons –
Slide 56: Continuous energy optimisation
Continuous energy optimisation c. 9% decrease of electricity and c. 13% decrease of gas consumption at Vimetco Extrusion driven by investments in new equipment such as ageing ovens, dies ovens, extrusion press and capital repairs of old equipment Gas consumption (per tonne) Electricity consumption (
Slide 57: Power
Section 4.F vimetco alro
Slide 58: Power management
Power management C. 1% to 11% power and energy reduction p.a. in Alum and Process Al, whilst primary Aluminium has managed to keep energy consumption stable Alum energy consumption over time Energy specific consumption on Power House Energy specific consumption from National Grid (fuel GJ/t Al2O3) (
Slide 59: Power supply
Power supply Alro sources its power from various suppliers, ensuring no overdependence and competitive pricing Key considerations Source of power by supplier (current) Alro has a 362 MW baseload consumption in Romania Supplier 10 Supplier 11 1% 11% Supplier 1 Supplier 9 17% 1% 2018 Power consump
Slide 60: Overview of Romanian electricity market
Overview of Romanian electricity market Market fundamentals Electricity market—healthy short term outlook Energy costs (electricity and gas) for EU producers are considerably higher than those 250 PZU 365 days moving average vs. OTC Y+1. Forecast incurred by extra-EU competitors… 240 • availability
Slide 61: Sales & Marketing
Section 5 Sales & Marketing
Slide 62: Key customers
Key customers More established primary aluminium business has greater direct sales to end users Primary products FRP¹ Sales by client type (kt) Sales by client type (kt) 27 21 23 20 19 23 95 100 102 57 58 59 2015 2016 2017 2015 2016 2017 End user Others2 Service Center Others³ Largest clients by qua
Slide 63: Geographical break down of sales
Geographical break down of sales Whilst primary products are being sold in Europe with c.80% of sales, the distribution of processed products targets a global customer base Primary products sales evolution FRP sales evolution Sales per year (kt) Sales per year (kt) 18% 30% 34% 2017 45% 37% 36% 26% 3
Slide 64: Pricing of products
Pricing of products Pricing is based on London Metal Exchange (LME) prices plus a premium, with inter-company Bauxite and Alumina pricing based on market prices Primary products pricing Processed products pricing Base-case for several products Similarly to primary products, pricing is based on LME
Slide 65: Environmental & Social
Section 6 Environmental & Social
Slide 66: Environmental strategy
Environmental strategy Full commitment to a green future on several assets through the value creation chain Energy efficiency increase Reduction of industrial water Reduction of specific power consumption consumption Installation and commissioning of Audit performed by best in class technology
Slide 67: Exceptional carbon emissions performance
Exceptional carbon emissions performance Comparison 2007/08 vs. 2013/14 with the same 20 plants 2.6 2.4 2.2 Emissions (tCO2 / tAI) 2.0 Alro 2007–08 Alro 1.8 2013–14 1.6 1.4 0 10 20 30 40 50 60 70 80 90 100 % of cumulated production Average 2007–08 Average 2013–14 BM 2007–08 (1,514 tCO2 / tAI) BM 201
Slide 68: Key local regulatory bodies for Alro
Key local regulatory bodies for Alro Ministry of labour and Ministry of Ministry of water and forests National office of the trade registry social protection transport & construction Develops and implements the Oversees legislation of labour Provides Aluminium metallurgy Oversight of conduct
Slide 69: Local community relationships
Local community relationships Alro is highly committed towards local community support SMHL Community Development Agreement Established for the sole purpose of financing sustainable community development initiatives that will improve the socio-economic and infrastructural conditions in five bauxite
Slide 70: Health and safety
Health and safety Significant spend in key measures US$38.5m Capex spent 2002 to 2017 on health & safety Part of the company strategy … Improving the prevention of specific occupational diseases in Alro by further studies and monitoring Increasing the safety of workers by purchasing an automatic
Slide 71: Financials
Section 7 Financials vimetco alro
Slide 72: Financials snapshot
Financials snapshot Revenue (RONm) Key commentary 2,423 41 2,303 31 2,726 30 In 2017, revenue increased by 18.4% YoY driven by: 182 222 635 265 633 555 1,390 – 18.0% increase in processed products sales 1,273 1,178 1,956 1,870 2,187 – 13.0% increase in primary products sales (excl. inter-segment)
Slide 73: Segment breakdown (value terms)
Segment breakdown (value terms) Sales & Gross profit breakdown (FY17) Key commentary Sales to 3rd parties Gross Profit Processed products contribute 51% to the 2017 sales, followed by Others Bauxite Alumina Processed Others Bauxite <1% 3% products 1% 11% primary products (42%) 4% 20% Alumina 7%
Slide 74: Cost evolution and drivers
Cost evolution and drivers COGS (RONm) Key commentary % of sales 83.3% 84.0% 74.8% In 2017 the two main components of COGS, electricity and alumina costs, increased at a slower pace than sales 210 207 176 120 110 118 170 115 192 205 116 COGS as % of sales decreased to a level of 75% due to an ef
Slide 75: Hedging strategy
Hedging strategy Aluminium sales to 3rd parties (kt) Key commentary Hedging strategy Manage the price risk through natural hedging when possible, and 218 227 230 financial hedging through derivatives 118 127 123 Aluminium scrap example Aluminium is indefinitely recyclable and recycling it requir
Slide 76: Taxation and royalties
Taxation and royalties Evolution of eco-taxes (RONm) Key commentary Between 2015-2017 eco-taxes decreased by RON52m mainly due to lower costs with green certificates In 2017 eco-taxes as a proportion of EBITDA decreased to 9% 110 Romania Income tax 57 65 58 – 16% 19 – 2017: RON1.1m payment 19
Slide 77: Capex and working capital
Capex and working capital Capex evolution1 (RONm) Key commentary Total Capex / Sales 4.2% 5.1% 7.9% In 2017 the Capex of RON213m (ex. intangibles) comprised of: – Capex at Alro S.A. level of US$35.5m (RON144m), mainly 218 used to increase: the share of high value added products in the portfolio (i
Slide 78: Debt position
Debt position Debt and leverage evolution (RONm) Key commentary Net debt / (Equity + Net debt) 48% 45% 32% Leverage decreased down to a level of 0.99x Net Debt / EBITDA Net Debt / EBITDA 1,200 2.51x 2.51x 0.99x Between 2015-2017 net debt decreased due to the strong operating 1,055 cash generatio
Slide 79: Dividends
Dividends Dividends distributed(a) (RONm) Key commentary Attractive dividend distribution track-record aimed at maximizing the value creation for shareholders, without affecting Payout ratio (b) 94.0% 97.7% the development plans of Alro Dividend yield (c) 6.6% 15.8% In 2018, Alro proposed to pay
Slide 80: Additional information
Appendix Additional information
Slide 81: Financials
Appendix 1 Financials vimetco alro
Slide 82: Financials – basis of preparation
Financials – basis of preparation Alro Group entities Basis of financials The financials of Alro Group and its subsidiaries are prepared in accordance with IFRS and have been audited by Ernst & Young Alro S.A. Primary aluminium Processed aluminium Alro Group figures for FY15 - FY17 are consolida
Slide 83: Alro Group Financial summary (1/2)
Alro Group Financial summary (1/2) Income Statement (RONm) Cashflow Statement (RONm) Dec-15 Dec-16 Dec-17 Dec-15 Dec-16 Dec-17 Profit / (loss) before income taxes 11 81 412 Revenues 2,423 2,303 2,726 Adjustments for: Cost of revenues (2,017) (1,935) (2,038) Depreciation and amortisation 119 126 127
Slide 84: Alro Group Financial summary (2/2)
Alro Group Financial summary (2/2) Assets (RONm) Liabilities and shareholders’ equity (RONm) % of % of Dec-15 Dec-16 Dec-17 total assets Dec-15 Dec-16 Dec-17 total assets Non-current assets Current liabilities Property, plant and equipment 953 946 1,015 40% ST and CPLT of bank loans 142 813 67 3% In
Slide 85: Bauxite
Appendix 2 Bauxite vimetco alro
Slide 86: Mineral Resource base
Mineral Resource base Gondama pit Mokanji pit Mokanji pit (un-washed) COG: AI203>45.0, SI02 <5.5 COG: AI203>45.0, SI02 <5.5 COG: AI203>40.0, SI02 <9.0 Grade (%) Grade (%) Grade (%) No Deposit Tonnage (t) [AI203] [SIO2%] [Fe203] No Deposit Tonnage (t) [AI203] [SIO2%] [Fe203] No Deposit Tonnage (t) [A
Slide 87: Cautionary statement
Cautionary statement These materials are being supplied to you solely for your information and may not be reproduced in any form, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, by any medium or for any purpose. Failure to comply with this r