Elkem Asa · OSL:ELK
Elkem Asa — Elkem Asa Ord — Q2 2024 Earnings Presentation
44 slides from Elkem Asa's earnings presentation, Jul 12, 2024
Slide 1: Second quarter results 2024
Second quarter results 2024
Slide 2: Agenda
Agenda Business update Financial performance Outlook
Slide 3: Highlights: Profitability improvements driven by enhanced operating performance
Highlights Profitability improvements driven by enhanced operating performance we * Elkem’s EBITDA was NOK 1,030 million in the second quarter 2024 a = Improved profitability driven by strong operational performance as part of Elkem’s comprehensive improvement programme * The Silicones markets remai
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 = Elkem’s groundbreaking Sicalo project could eliminate direct CO, emissions from silicon production. Enova granting MNOK 31 toa medium scale pilo
Slide 5: EBITDA improvement programme ahead of plan
EBITDA improvement programme ahead of plan = Elkem’s EBITDA improvement programme reached realised effects of BNOK 0.6 YTD 30 June 2024. The full year effect is estimated to BNOK 1.3, versus the target of BNOK 1.5 = The programme is particularly focusing on the Silicones division, which has generate
Slide 6: Investment levels reduced according to plan
Investment levels reduced according to plan = Elkem’s target is to reduce capex by > BNOK 2.0 compared to 2023 * Reinvestment target approx. BNOK 2.0 (80-90% of D&A) = Strategic capex target approx. BNOK 1.2 = Capex YTD 2Q-2024 was BNOK 1.3, well on path to reach target = The Silicones expansion pro
Slide 7: Successful start-up of the silicones project in China
Successful start-up of the silicones project in China = The Silicones expansion project in China has been successfully concluded on time and on budget = Commercial production started in May, with expected ramp up in 2024 = The project will improve Elkem’s cost position, environmental performance, an
Slide 8: Continued focus on innovation and specialisation
Continued focus on innovation and specialisation = Elkem has an ambitious innovation strategy to accelerate growth through specialisation = Elkem being recognised and winning awards for product development, e.g. the 2024 Ringier Innovation Award for its newly developed silicone rubber, and the 2024
Slide 9: Limited new capacity additions in China beyond 2024
Limited new capacity additions in China beyond 2024 " The silicones capacity in China has increased significantly over the Estimated production capacity siloxane (in million tonnes) past years, leading to current oversupply = Nameplate capacity additions in 2024 is estimated to 0.6 million tonnes. A
Slide 10: General markets: Macro-economic outlook is improving
General markets Macro-economic outlook is improving = Elkem’s sales assumed to be closely linked to GDP growth = The recent macro-economic sentiment has been weak, due to tighter financial conditions and other adverse factors, such as the war in Ukraine and conflicts in the Middle East = OECD’s Econ
Slide 11: General markets: China market update
General markets China market update — construction still weak = The construction market in China is still weak. Statistics show new housing projects YTD-May 2024 at 301 million m2, down 24% compared to the corresponding period last year = China automobile production in YTD-May 2024 was 11.4 million
Slide 12: Silicones market
Silicones market Commodity grades hampered by overcapacity, specialty grades improving = Silicones markets generally weak, negatively impacted by construction, and still weak automotive markets in EU and US = Demand for specialty grades gradually recovering, but at a moderate rate = DMC prices have
Slide 13: Silicon and ferrosilicon markets
Silicon and ferrosilicon markets Stable prices in EU for most grades, prices up in the US CRU silicon 99 price EU (EUR/mt) 9,000 7,000 f\ 5,000 = Prices for silicon and ferrosilicon recovered in Europe late 2023 and } ——~\ | early 2024, but market conditions remain weak and silicon 3,000 _— — refere
Slide 14: Carbon market
Carbon market Stable markets supported by specialties = Demand for carbon products varies across regions driven by steel, ferroalloys, and aluminium = Global steel production in second quarter 2024 in line with second quarter last year. Low but stable production in Europe and North America "Carbon S
Slide 15: Elkem group: Continued EBITDA improvements
Elkem group Continued EBITDA improvements Total operating income (MNOk) = Down 6% from 2Q- 9,785 ¢,044 2023, but slightly up 7,961 8,400 Rey 8,131 from the previous three quarters 1Q 2Q 3Q 4Q 9.044 345 = Higher operating : = = - 3.490 income for Silicones 83 more than offset by the other divisions 2
Slide 16: Elkem Group: Overview financial ratios
Elkem Group Overview financial ratios = EBITDA MNOK 1,030 = Segment Other included realised currency hedging losses of MNOK 21 = D&A and Impairment losses = After finalisation of the silicones project in China, D&A per quarter will increase by approx. MNOK 60. Impairments included write downs of MNO
Slide 17: Silicones: Operational improvements in weak markets
Silicones Operational improvements in weak markets " Total operating income of MNOK 3,769, up 10% from the second quarter last year = Mainly explained by higher sales volume, partly countered by lower sales prices = EBITDA of MNOK 45, up from MNOK -374 in the second quarter last year = Explained by
Slide 18: Silicon Products: Stable development, challenging markets
Silicon Products Stable development, challenging markets = Total operating income of MNOK 4,100, down 14% from the second quarter last year = Lower operating income mainly explained by lower sales prices = EBITDA of MNOK 742, down 34% from the second quarter last year = Reduced EBITDA mainly explain
Slide 19: Carbon Solutions: Strong performance and higher sales volume
. Total operating income Carbon Solutions NOK million Strong performance and higher sales volume *" Total operating income MNOK 1,007, down 13% from the second EBITDA and margin quarter last year NOK million and % = Mainly explained by lower sales prices 34% = EBITDA of MNOK 331, down 6% from the se
Slide 20: Elkem Group: Improved EPS and robust equity
Elkem Group Improved EPS and robust equity = Earnings per share (EPS) amounted to NOK 1.35 in the second quarter = EPS positively impacted by tax effects = EPS YTD-2024 was NOK 0.65 = Total equity amounted to BNOK 25.4 as at 30 June 2024, up BNOK 0.9 from year-end 2023 * Equity to total assets (equi
Slide 21: Net interest-bearing debt (NIBD)
Net interest-bearing debt (NIBD) Elkem Group Well managed financing position ‘6 10.2 95 B41 " Net interest-bearing debt (NIBD) of BNOK 10.3 as at 30 June 2024 = Leverage ratio of 3.5x, unchanged from last quarter, based on r r T LTM EBITDA of BNOK 2.9 29-23 3Q-23 40-23 19-24 29-24 Maturity profile m
Slide 22: Positive cash flow generation, investments significantly lower
Elkem Group Positive cash flow generation, investments significantly lower " Cash flow from operations“ was MNOK 375 in the second quarter 2024 = The cash flow was weaker than the corresponding quarter last year, explained by negative working capital changes = Investments ex. M&A of MNOK 701 in the
Slide 23: Outlook for the third quarter 2024
Outlook for the third quarter 2024 = The market sentiment is relatively weak, but showing signs of gradual improvement = Silicones expects improved demand in Europe and US, but the Chinese market is still hampered by overcapacity. Elkem’s focus on EBITDA improvements and the new production line expe
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 and more sustainable future eA 6 Silicones Silicon Products Carbon Solutions 2 Elkem
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 = Elkem delivering on its financial targets over the cycle v¥_ Operating income CAGR 13% vs target of > 5% per year v_ EBITDA margin 18% vs target of 15 - 20% v Leverage ratio 1.6x vs target of 1.0 - 2.0x @ Elkem Figures in NOK billion unless otherwise
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 13 main plants End markets 12 main plants = Construction = Automotive = Automotive = Construction/industrial = Chemical formulator
Slide 32: Elkem's portfolio is well-balanced
Elkem’s portfolio, is well-balanced _ | LT pn t.S sel eee S A XN if 3 f “hs, (i Revenue split - by division ‘ ) | \ ir = Carbon \ \ / “ EMEA Solutions 4 : { & Americas a 11% Silicones Cea ) \ 60% : @ 40% Bh Sties office Mito \ <e \ 5 Asia an ) Silicon : 9 aoe Products 49% 2 Elkem 32
Slide 33: Energy cost positions
Energy cost positions Well-positioned with long-term power contracts 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 lon
Slide 34: 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 35: CO2 emissions reduction path
▪ ▪ ▪ (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 36: Silicones: Solutions to global megatrends
Silicones Solutions to global megatrends > 80,000 mt in France (exp. to 100,000 mt in 2024) > 360,000 mt in China Downstream specialty plants : 6 in EMEA/AMS and 4 in APAC Release coating Personal Care Processing aids Themo-conductive potting Semiconductors assembly Moisture & shock protection Indus
Slide 37: 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-termimplants, food & label =. > Intermediates medical devices etc. industries Sllicones polymers
Slide 38: 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 39: 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 40: 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 41: Silicon Products - Business lines: Microsilica
y 15% of division’s sales Silicon Products - Business lines Microsilica — tailor made products to wide range of specialty applications a —> Oc > > > Elkem pioneered the development to collect and process the off-gas of silicon and ferrosilicon, and is now the world’s leading supplier of microsilica
Slide 42: Currency sensitivity
1.70 Currency sensitivity “ 160 yw 1.50 1.50 6 é 1.40 im 10.50 z oO 130 O x wb 2 ra G 9.50 120 8 g S ~ 110 6 8.50 1,00 . 7.50 0.90 = The result and cash flow are exposed to currency fluctuations. The main currencies are EUR, USD and CNY 2020 2021 2022 2023 2024 «EUR - exposure approx. MEUR 550 ——USD
Slide 43: 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 TWh is in Norway. Near term exposure to spot power prices is limited = Norway, hedging programme mainly consisting of long-term contracts co
Slide 44: Delivering your potential
« Elkem Delivering your potential