Eramet Sa · EURONEXT:ERA
Eramet Sa — H1 2023 Earnings Presentation
70 slides from Eramet Sa's earnings presentation, Jul 27, 2023
Slide 1: 2023 Half-year results
2023 Half-year results Christel BORIES, Chair & CEO Nicolas CARRÉ, CFO July 27th, 2023
Slide 2: Disclaimer
Disclaimer 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 stat
Slide 3: Contents
Contents Introduction 1– Financial performance 2– Operational performance 3– Progressing on our energy transition projects Conclusion and outlook 3 Eramet – H1 2023 results
Slide 4: Introduction
Introduction
Slide 5: A very challenging environment in H1: strong decline in selling prices and still high input costs
A very challenging environment in H1: strong decline in selling prices and still high input costs H1 price down External impact of vs. H1 2022 record levels -€749m4 on Group adjusted EBITDA -23% Manganese ore price index1 -€724m -€48m Adjustment of Mn alloys Price production (to adapt to market cond
Slide 6: Operational performance adversely impacted by major logistics incidents in Gabon, now fully resolved
Operational performance adversely impacted by major logistics incidents in Gabon, now fully resolved A mixed operational performance amongst activities Manganese ore Manganese alloys Production down due to non- Production adapting to market recurring incidents conditions -27% -18% Manganese ore prod
Slide 7: H1 2023 performance driven by declining prices and operational challenges
H1 2023 performance driven by declining prices and operational challenges, but a strong contribution from Weda Bay’s mining activity Action plan to adjust to economic Adjusted FCF Net environment: EBITDA generation debt €339m -€120m €712m Cost reduction & Incl. Weda Bay Incl. Weda Bay cash savings c
Slide 8: Further key milestones in Eramet's CSR journey
Further key milestones in Eramet’s CSR journey Safety as #1 priority €3.3bn in 2022 Economic contributions in Launch of the the main regions in which FR2 at Top 3 independent assessment Eramet operates performer 1.0 According to at GCO >127k benefited from the 2023 target: <4 (Senegal) ICMM1 Group’s
Slide 9: Staying the course and progressing on our strategic roadmap
Staying the course and progressing on our strategic roadmap Progressing on energy Shaping our portfolio for the transition projects future Phase 1: start of production Stepping up lithium brine Lithium (24kt p.a. LCE) confirmed for Lithium exploration & business Q2 2024; $400m secured brines develop
Slide 10: Financial performance
1 Financial performance Unless otherwise specified, financial figures are presented in accordance with IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations - in line with Eramet’s new scope
Slide 11: H1 2023 significantly lower compared to a record-high H1 2022
H1 2023 significantly lower compared to a record-high H1 2022 €m H1 2023 H1 2022 Adjusted sales1 1,901 2,816 Sales 1,604 2,635 Adjusted EBITDA1 339 1,170 EBITDA 93 982 Current operating income -10 853 Net income – Continuing operations 52 783 Net income – Discontinued operations 14 -13 Net income –
Slide 12: Strongly deteriorating price environment is the main driver for EBITDA reduction
Strongly deteriorating price environment is the main driver for EBITDA reduction; intrinsic performance affected by logistic issues in Gabon €(749)m (€m) 1 170 1 External factors 63 -10 3 19 982 188 -2 2 -38 -6 21 -5 -117 -124 €(724)m -381 Price impact €(77)m Intrinsic operating performance -201 51
Slide 13: Net income Group share of €98m, incl. €174m of share in income from PT Weda Bay
Net income Group share of €98m, incl. €174m of share in income from PT Weda Bay €m H1 2023 H1 2022 1 Sales 1,604 2,635 o/w asset depreciation (-€13m) and development projects (-11m) Current operating income -10 853 Other operating income and expenses 1 -34 -3 2 Financial result -63 -56 Eramet share
Slide 14: Capex of €263m, excl. €93m related to Centenario Lithium project
Capex of €263m, excl. €93m related to Centenario Lithium project financed by Eramet’s partner in the JV 1 Industrial cash capex (€m) – IFRS 5 Increase in current capex, in line with our capex requirement to sustain our operations 400 356 Strict capex management 350 Fully funded by Tsingshan 300 2 14
Slide 15: Much lower working capital in H1 2023
Much lower working capital in H1 2023 Mining & Metals operating WCR (€m) €74m 885 of cash generation at Group level1 in H1 2023 685 588 726 724 Cash generation was mainly driven by: 688 a decrease in trade receivables, mostly resulting 606 from the sharp decline in selling prices 373 308 partly offs
Slide 16: Ongoing cost reduction & cash savings plan to adjust to the challenging economic environment
Ongoing cost reduction & cash savings plan to adjust to the challenging economic environment Cost reduction Productivity and and cash savings optimisation of production Fixed cost reduction & operational Volumes, mix, grades, shipments cost savings and OEE maximisation Tight capex monitoring Continu
Slide 17: Net debt up to €712m, incl. €188m of dividends paid
Net debt up to €712m, incl. €188m of dividends paid to Group & minority interest shareholders (€m) FCF €(120)m -374 -344 103 30 93 -356 2 -712 3 152 -31 -136 97 -102 93 -42 -187 1 -52 2022 Net debt 2022 EBITDA Change Cash capex Other cash Weda Bay Net interest Tax paid Net proceeds Disc. Op. FCF Tsi
Slide 18: Continued proactive management of Eramet's debt profile; very high liquidity
Continued proactive management of Eramet’s debt profile; very high liquidity to address future maturities Debt maturity at 30 June 2023 (€m) Group financial liquidity (€m) Undrawn line: RCF & term loan Commercial papers, banks French govt. loan to SLN 551 Available cash & operating debts 2,596 37 2,
Slide 19: Extending the debt maturity of the Group, while securing its major projects' financing
Extending the debt maturity of the Group, while securing its major projects’ financing Successful inaugural issue of Joint marketing agreement of lithium sustainability-linked bonds (SLB) carbonate from Centenario2 €500m 2028 7.0% $400m 50kt LCE c.5yrs (5 years) Amount Advance Contractual Commercial
Slide 20: Disciplined capital allocation remains Eramet's priority
Disciplined capital allocation remains Eramet’s priority 1 2 3 Deleveraging Growth capex Dividends Target leverage1 of < 1x on Disciplined investment Rewarding our average through the cycle policy shareholders for their long- term commitment Primary focus on organic Maintain strong balance growth an
Slide 21: Operational performance
2 Operational performance
Slide 22: Operations impacted by non-recurring incidents & maintenance shutdowns; continued ramp-up of Weda Bay
Operations impacted by non-recurring incidents & maintenance shutdowns; continued ramp-up of the Weda Bay mine 25 28 22 40 Organic growth constrained Exceptional growth by non-recurring logistics Mineral performance incidents sands Manganese Weda 16.4 Mwmt1 GCO & ETI 2.6 Mt Bay ore sold Ore ore prod
Slide 23: Steep decline for manganese and nickel market prices in H1 23
Steep decline for manganese and nickel market prices in H1 23 Manganese ore (CIF China 44%) Nickel ore H1 H2 = -14% H1 H1 = -26% H1 H2 = +2% H1 H1 = -23% SLN nickel ore (CIF China 1.8%) Weda Bay nickel ore (HPM – Indonesia) H1 H2 = +10% H1 H1 = +2% H1 2022 H2 2022 H1 2023 H1 2022 H2 2022 H1 20
Slide 24: Trend reversal in input cost prices, not yet fully reflected in Eramet's cost base
Trend reversal in input cost prices, not yet fully reflected in Eramet’s cost base 100 basis Reductants consumption prices €/t Lower energy and reductant purchase prices in H1 2023; 300 550 not fully reflected in the Group’s cost base due to lag 250 H1 H2 = -20% between purchase and consumption 500
Slide 25: Freight costs normalization in H1
Freight costs normalization in H1, after historically high levels reached over 2021-2022 Freight costs ($/t)1 H1 H1 = -38% Freight costs include: H1 H1 = -49% chartering costs, based on Routes time charter rate2 60 transportation fuel costs3 50 Routes rate decrease offset by fuel costs sharp increas
Slide 26: Manganese BU
—|Mnj =o Manganese BU Se eramMer
Slide 27: Non-recurring incidents in Gabon and a very unfavourable price environment for Mn alloys
Non-recurring incidents in Gabon and a very 25 unfavourable price environment for Mn alloys EBITDA Ore EBITDA down €189m, -77% o/w: €m 831 -€124m one-off logistic incidents 343 +€19m volume impact 488 193 -€117m price1 impact 154 38 H1 2022 H1 2023 FCF Manganese ore Manganese alloys Alloys EBITDA do
Slide 28: Global carbon steel production down, sharp decline in alloys prices
Global carbon steel production down, no signs of rebound; sharp 25 decline in alloys prices, whereas ore price slid at a lower pace China stable despite slowdown in construction sector Supply/demand balance in slight surplus Decline in production in ROW (-5%), particularly in Europe (-13%), Downward
Slide 29: H1 operations strongly penalized by non-recurring logistics incidents, now resolved
H1 operations strongly penalized by non-recurring logistics 25 incidents, now resolved Ore production volumes (Mt) Ore Transported volumes (Mt) Production capacity -27% -16% 8 Mt > 0.7 c.80% 7.5 7.2 > 7.0 3.6 c.80% 3.4 0.7 4.3 2.6 4.0 2.8 >7.0 June H2 2023 monthly … 2022 average 2018 2023e H1 2022 H
Slide 30: Manganese alloys' margin squeeze mostly sales price-driven
25 Manganese alloys’ margin squeeze mostly sales price-driven Sales volumes down 9% to 310 kt, as well as production (down 18% at 311 kt) mainly to adjust to market conditions, but also due to furnace relining program Slightly improved product mix in H1 2023 H1 2023 margin significantly down vs. H1
Slide 31: Nickel BU
-Nic Wy aad eramMer
Slide 32: Performance bolstered by Weda Bay, in a declining market environment strongly weighing on SLN
Performance bolstered by Weda Bay, in a declining 28 market environment strongly weighing on SLN Adjusted EBITDA Eramet’s share in WB EBITDA €m -43% up €58m, o/w: 306 174 +€63m volume impact 188 5 246 -€24m price impact 113 -2 +€12m costs reduction & productivity -70 impact H1 2022 H1 2023 FCF -13%
Slide 33: Global primary nickel demand up, driven by batteries; sharp decline of Ni class II
Global primary nickel demand up, driven by batteries; 28 sharp decline of Ni class II & nickel ore exports prices in H1 Global stainless steel production down 2% in H1 2023: H1 2023 average nickel ore prices at $92/wmt in China (CIF China up close to 5% compared to low levels in H1 2022, but China 1
Slide 34: Very strong performance at Weda Bay, the world largest nickel mine
28 Very strong performance at Weda Bay, the world largest nickel mine Weda Bay1 nickel ore sold volumes (Mwmt) Weda Bay1 ferroalloys production (kt-Ni) >352 c.2.8 -6% -21% +c.80% 39.0 19.6 > 2x 36.6 c.35.0 20.9 16.4 15.7 21.1 3.2 1.3 3.9 9.1 8.2 9.9 1.7 3.4 14.0 14.0 7.5 6.9 6.6 2021 2022 2023e H1 2
Slide 35: SLN operations adversely impacted by lower selling prices and social disruptions
SLN operations adversely impacted by lower selling prices, 28 as well as social and societal continued disruptions SLN ore production (Mwmt) SLN ferronickel production (kt-Ni) 5.4 5.4 +5% +18% >45.0 39.0 40.9 2.9 20.4 20.3 2.4 2021 2022 H1 2022 H1 2023 2021 2022 2023e H1 2022 H1 2023 SLN ore exports
Slide 36: Mineral Sands BU
22 40 Mineral Sands BU
Slide 37: EBITDA down, reflecting lower volumes & HMC grade at GCO and furnace relining at ETI
EBITDA down, reflecting lower volumes & HMC grade 22 40 at GCO and furnace relining at ETI EBITDA €m -49% EBITDA down €48m, o/w: 97 49 -€38m volume impact o/w: major equipment breakdown in January and expected decline in H1 2022 H1 2023 average grade in the area mined FCF at GCO €m x3.5 schedule
Slide 38: Favourable price environment in H1 despite oversupply for zircon and TiO2 pigments
Favourable price environment in H1 despite oversupply for 22 40 zircon and TiO2 pigments; decline in prices expected in H2 Growth in global demand for TiO2 pigments since Q4 2022 Slowdown in global demand for Zircon in H1 2023 amid massive destocking, but still below H1 2022; increase in challenging
Slide 39: Decrease in volumes driven by operating issues in Senegal and maintenance shutdown in Norway
Decrease in volumes driven by operating issues in Senegal 22 40 and maintenance shutdown in Norway GCO HMC1 production (Senegal, kt) ETI Titanium dioxide production (Norway, kt) -8% -21% -10% ~in line 804 386 209 742 with 2022 188 306 -68% 100 32 2021 2022 2023e H1 2022 H1 2023 2021 2022 H1 2022 H1
Slide 40: Progressing on our energy transition projects
3 Progressing on our energy transition projects
Slide 41: Centenario: a world-class asset poised to enter the market at the right time
Centenario: a world-class asset poised to enter the market 3 at the right time Forecasted lithium market demand1 (in kt LCE2) Li2CO3 CIF Asia (in US$/kg LCE2) 2,800 90 2,600 80 2,400 2,200 70 2,000 60 July 2023: 1,800 c.$40k/t 1,600 50 1,400 40 1 1,200 1 30 1,000 800 20 $15-20k/t 2 600 10 400 200 0
Slide 42: Centenario: a sustainable & competitive battery-grade DLE technology project
Centenario: a sustainable & competitive battery-grade DLE 3 technology project; progressing on schedule on Phase 1… Phase 11 CSR H1 End-June Q1 Q2 By 2022 2023 2024 2024 mid-2025 60% Process water Start of c.60% Plant Start of Full ramp-up at recycling rate construction commissioning production Cons
Slide 43: Centenario: unlocking Phase 2 & signing a joint marketing agreement
Centenario: …while unlocking Phase 2 & signing a joint 3 marketing agreement of 50kt lithium carbonate from Phase 1 Phase 21 Additional Advance payment c.$90m FID c.30kt LCE 2023 early Expected by of $400m2 per yr, capex, of which 2023 year- battery-grade 49.9% supported end for 1st Joint marketing
Slide 44: Conclusion & outlook
Conclusion & outlook
Slide 45: Sluggish market outlook, but better operational performance expected in H2
Sluggish market outlook, but better operational performance expected in H2 2023 prices forecast H1 challenging market environment to continue weighing on all the Group’s activities in H2 unless a rebound in demand materialises, particularly from China Manganese Mn alloys selling prices well below 20
Slide 46: The Group forecasts close to €900m of Adjusted EBITDA in 2023
The Group forecasts to deliver close to €900m of Adjusted EBITDA in 2023, supported by a strong intrinsic performance in H2 2023 Key operational metrics 2023 Key financial metrics Close to Adjusted >7.0 Mt Manganese ore €900m EBITDA transported Capex1 c.€550m revised down c.35 Mwmt1 Nickel marketabl
Slide 47: Our First Capital Market
a efraMer,r Our First Capital Market
Slide 48: Q&A
Q&A “ Become a reference for the responsible transformation of the Earth’s mineral resources, for living well together ”
Slide 49: Appendices
a A EfraMeT Appendices
Slide 50: Group FCF reflecting higher investments combined with adverse market conditions
Group FCF reflecting higher investments combined with adverse market conditions; c.€150m contribution from Weda Bay (€m) Manganese -20 Ore -93 Alloys 73 o/w c.-€100m of income tax payment, notably reflecting 2022 income tax balance Nickel -86 SLN1 -67 Weda Bay 153 Mineral Sands 14 o/w: Lithium -149
Slide 51: A CSR commitment and performance recognized by rating agencies
A CSR commitment and performance recognized by rating agencies A- Climate change B- 73/100 B- Prime Water security Gold medal Among the best in Among the best in Top 3% in the M&M sector the industry the industry 27.11 66/100 Advanced 2nd decile 13/186 3/44 in the M&M sector in the M&M sector in the
Slide 52: Manganese ore historical CRU index price trends
25 Manganese ore historical CRU index price trends H1 H2 = +2% H1 H1 = -23% Monthly change in manganese ore prices1 $/dmtu Mwmt 9 8 7 6 5 4 3 2 1 2016 2017 2018 2019 2020 2021 2022 2023 Manganese ore H1 H2 H1 2023 vs. H2 2022 price change H1 H1 Manganese ore half-year average price H1 2023 vs. H1 20
Slide 53: Manganese alloys CRU index price trends
Manganese alloys (refined and standard in Europe) CRU index 25 price trends H1 H2 = -9% H1 H1 = -37% Monthly change in manganese alloys prices1 H1 H2 = -22% H1 H1 = -48% €/t 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2016 2017 2018 2019 2020 2021 2022 2023 H1 H2 H1 2023 vs. H2 2022 price change
Slide 54: Nickel LME historical price
28 Nickel LME historical price H1 H2 = +2% H1 H1 = -12% Monthly change in Nickel LME prices Ktons $/t 35 000 500 30 000 25 000 400 20 000 300 15 000 200 10 000 100 5 000 0 0 2016 2017 2018 2019 2020 2021 2022 2023 Nickel LME half-year average price H1 H2 H1 2023 vs. H2 2022 price change Nickel LME H
Slide 55: Nickel ore historical price
28 Nickel ore historical price H1 H2 = -14% H1 H1 = -26% Monthly change in Nickel ore prices1 Mwmt $/t 160 20 140 18 16 120 14 100 12 80 10 60 8 6 40 4 20 2 0 0 2016 2017 2018 2019 2020 2021 2022 2023 Nickel ore half-year average price H1 H2 H1 2023 vs. H2 2022 price change Nickel ore CIF China 1.8%
Slide 56: Zircon premium historical market price
22 40 Zircon premium historical market price H1 H2 = -2% H1 H1 = +3% Monthly change in zircon premium price1 $/t 2 400 2 000 1 600 1 200 800 400 0 2016 2017 2018 2019 2020 2021 2022 2023 Zircon half-year average price H1 H2 H1 2023 vs. H2 2022 price change Zircon premium price H1 H1 H1 2023 vs. H1 2
Slide 57: CP slag historical market price
22 40 CP slag historical market price H1 H2 = +8% H1 H1 = +9% Monthly change in CP grade titanium dioxide slag price1 $/t 1 000 900 800 700 600 2016 2017 2018 2019 2020 2021 2022 2023 CP slag half-year average price H1 H2 H1 2023 vs. H2 2022 price change CP grade titanium dioxide slag price H1 H1 H1
Slide 58: 2021-2022-H1 2023 Global manganese ore production
25 2021-2022-H1 2023 Global manganese ore production Global manganese ore production (manganese content) -2% Mt 22 21.3 20.6 20 5.4 18 5.1 16 14 3.1 2.9 12 10.4 4.2 10.2 3.7 10 2.5 2.4 0.7 0.5 8 1.4 1.4 6 2.0 1.8 4 8.0 0.2 8.4 0.4 2 4.3 4.2 0 2021 H1 2022 2022 H1 2023 Others Australia Gabon Brazil S
Slide 59: Global stainless steel and primary nickel production
2021-2022-H1 2023 Global stainless steel and primary nickel 28 production Global stainless steel production1 Global primary nickel production1 (excl. recycling) Kt -2% Kt +8% 60,000 57,696 3,500 54,743 3,105 50,000 3,000 2,677 916 2,500 40,000 57% 58% 900 2,000 408 30,000 28,182 27,645 1,607 430 1,4
Slide 60: Group Adjusted EBITDA sensitivity to market prices
Group Adjusted EBITDA sensitivity to market prices Annual impact Sensitivities Change on Adjusted EBITDA Manganese ore prices (CIF China 44%) +$1/dmtu c.€245m1 Manganese alloy prices +$100/t c.€60m1 Ferronickel selling prices – SLN +$1/lb c.€90m1 Nickel ore prices (CIF China 1.8%) SLN exports +$10/w
Slide 61: Continuing activities (IFRS 5) – Key figures
Continuing activities (IFRS 5) – Key figures H1 2023 Holding company, Total from eliminations, operations In €m Manganese Nickel Mineral sands Lithium restatements continuing and other entities (IFRS 5) Sales 946 518 136 - 4 1,604 EBITDA 193 -72 49 -9 -68 93 Current Operating Income 138 -92 26 -9 -7
Slide 62: Cash-flow table (IFRS 5)
Cash-flow table (IFRS 5) €m H1 2023 H1 2022 Operating activities EBITDA 93 982 Cash impact of below EBITDA items -71 -220 Cash-flow from operations 22 762 Change in WCR 26 -273 Net cash generated by operating activities (1) 48 489 Investing activities Industrial investments -291 -240 Other investmen
Slide 63: Bond maturities
Bond maturities Amount at Initial €m Currency Initial amount 31/12/2022 Maturity date Coupon (in m) May November 2019 bond issue € 300 300 5.88% 2025 May 2023 bond issue € 500 500 May 2028 7.00% 63 Eramet – H1 2023 results
Slide 64: A strategic roadmap based on 2 pillars, supported by strong CSR commitments
A strategic roadmap based on 2 pillars, supported by strong CSR commitments Grow in metals supporting Sustainably develop critical global economic development metals for the energy transition Resilient markets Fast-growing markets MANGANESE ORE & ALLOYS LITHIUM NICKEL NICKEL/COBALT FOR BATTERIES MIN
Slide 65: Eramet positioned to be a key player in the battery value chain
Eramet positioned to be a key player in the battery value chain Eramet provides a unique solution to sustainably secure the metal supply for the battery industry Upstream Downstream 1 HPAL: High Pressure Acid Leach 65 Eramet – H1 2023 results 2 CAM: Cathode Active Material
Slide 66: Sonic Bay: partnering with BASF to consolidate our position on the battery value chain
Sonic Bay: partnering with BASF to consolidate 28 27 our position on the battery value chain FID pending 2026 Project bound on a large c.60 kt/year3 c.6 kt/year3 Timing could be limonitic deposit in Halmahera Expected start Battery-grade Battery-grade postponed to island (Indonesia) of production2 n
Slide 67: Lithium project in Alsace: partnering with Électricité de Strasbourg
Lithium project in Alsace: partnering with Électricité de 3 Strasbourg to sustainably develop lithium in Alsace Equivalent to PFS End-of-decade c.10kt/year 15-20%2 starting Expected start of LCE1 production of French needs in 3 production Li Two geothermal power plants Partnership with Électricité d
Slide 68: ReLieVe: partnering with SUEZ in battery recycling
ReLieVe: partnering with SUEZ to become a player in the battery recycling value chain in Europe PFS completed c.€80m Up to 50k/year Subsidies awarded to of battery modules DFS starting Eramet1 recycled Innovative closed-loop process fully piloted in 2020-2021 within Eramet Research & Innovation Cent
Slide 69: Shareholding at 30 June 2023
Shareholding at 30 June 2023 STCPI* Sorame + CEIR (Duval Family) 4% 37.1% Number of shares issued1 APE 27.1% 28,755,047 Other float 31.8% *STCPI (Société Territoriale Calédonienne de Participation Industrielle): entity owned by the New Caledonian provinces 69 Eramet – H1 2023 results 1 Capital and n
Slide 70: CONTACTS
CONTACTS Director of Investor Relations Sandrine NOURRY-DABI sandrine.nourrydabi@eramet.com Investor Relations analyst Fabien PONT fabien.pont@eramet.com