Elkem Asa · OSL:ELK
Elkem Asa — Q3 2023 Earnings Presentation
41 slides from Elkem Asa's earnings presentation, Oct 25, 2023
Slide 1: Third quarter results 2023
Third quarter results 2023
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 Weak profitability due to weak markets and one-offs = Elkem’s EBITDA was NOK 535 million in the third quarter 2023 = Still weak results for Silicones, due to depressed commodity prices and low demand in all regions = The result for Silicon Products was negatively impacted by NOK 220 milli
Slide 4: Environmental, Social & Governance
Environmental, Social & Governance Strong ESG focus and performance Green leadership = Elkem’s ESG report rated A+ by Position Green’s assessment of the 100 largest companies on OSE. A+ is awarded to the top 5% = S&P Global has ranked Elkem’s ESG performance in the top 6% for 2023 = In August, Elkem
Slide 5: Challenging macro-economic environment affecting our markets
Challenging macro-economic P environment affecting our markets = Weak macro-economic sentiment ... = High inflation and interest rate hikes = Slower than expected recovery in China = Weak demand and destocking effects = Geopolitical uncertainties = ... is significantly impacting Elkem’s market condi
Slide 6: Comprehensive programme for cost and capex reductions
Comprehensive programme for cost and capex reductions = Elkem has introduced a comprehensive programme to counter the current challenging market conditions, particularly in Silicones = Immediate short-term initiatives organised along several 2024 targets dimensions: " freezing new hires, organisatio
Slide 7: Accelerating maintenance and improvements in Iceland
Accelerating maintenance and improvements in Iceland = Elkem will accelerate maintenance and improvement projects at the ferrosilicon plant in Iceland in the fourth quarter 2023 Iceland - maintenance and improvement project = One of the plant’s three furnaces will be out for approximately 10 weeks,
Slide 8: Expanding production and improving the cost position in China
Expanding production and improving the cost position in China " The expansion at the Xinghuo plant in China is on track, both with regards to cost and time = The expansion project will increase the plant’s production capacity by 50%, equivalent to 120,000 tonnes of siloxane, and provide improved pro
Slide 9: Proposed changes to CO2 compensation in Norway
Proposed changes to CO, compensation in Norway 4, = The Norwegian government has proposed changes to the CO, mS; compensation in the state budget for 2024 >= a4 sa /. = The proposal is to raise the deductible element (“kvoteprisgulvet”) = 2 i in the scheme from NOK 200 to NOK 375 | “ = If finally ap
Slide 10: About Bo Li
About Bo Li ▪ • Master of science in chemical engineering from Dalian University of Technology ▪ • From 2001, various executive positions Sinochem, the parent company of Bluestar ▪ • Bo Li is now chair of the board ▪ of Bluestar
Slide 11: Construction and China EV production
Construction - Global annual growth in new building projects (YOY, % change) ▪ ▪ Source: Oxford Economics China – EV production volumes YTD-August (in 1,000) ▪ ▪ Source: CAAM
Slide 12: DMC reference price China
▪ DMC reference price China (CNY/mt) ▪ ▪ ▪ DMC reference prices are based on quotes incl. VAT and transportation. Quotes may not always reflect accurate sales prices.
Slide 13: CRU silicon and ferrosilicon prices EU
CRU silicon 99 price EU (EUR/mt) ▪ ▪ CRU ferrosilicon 75 price EU (EUR/mt) ▪ ▪
Slide 14: Crude steel production
▪ Crude steel production (million mt) ▪ ▪ ▪
Slide 15: Elkem group
Elkem group Third quarter results impacted by weak markets and one-offs Total operating income (MNOK) = Total operating income down 30% from 3Q-2022 = Mainly explained by lower sales prices and lower sales volumes 2 Elkem 12,326 11,876 Fagp3 —_ Ones 9,258 : 12 2Q 3Q 4Q 11,293 “1,469 99 7917 “1,959 -
Slide 16: Elkem Group overview financial ratios
Elkem Group Overview financial ratios EBITDA MNOK 535 = Segment Other included realised currency hedging losses of MNOK -77 Other items MNOK -158 = Mainly consisting of currency loss on working capital items MNOK -139 and loss on power & currency derivatives MNOK -19 Net finance income (expenses) MN
Slide 17: Silicones: operating income, EBITDA, sales volume
Total operating income ▪ EBITDA and margin ▪ ▪ ▪ ▪ Sales volume Share of operating income from Share of EBITDA ex. external customers ex. Other Other and Eliminations
Slide 18: Silicon Products: operating income, EBITDA, sales volume
Total operating income ▪ EBITDA and margin ▪ ▪ ▪ ▪ Sales volume ▪ Share of operating income from Share of EBITDA ex. external customers ex. Other Other and Eliminations
Slide 19: Carbon Solutions: operating income, EBITDA, sales volume
Total operating income ▪ EBITDA and margin ▪ ▪ ▪ ▪ Sales volume Share of operating income from Share of EBITDA ex. external customers ex. Other Other and Eliminations
Slide 20: Earnings per share and equity ratio
Earnings per share (EPS) ▪ ▪ Equity ratio ▪ ▪
Slide 21: Net interest-bearing debt and maturity profile
Net interest-bearing debt (NIBD) ▪ ▪ Maturity profile ▪ ▪ ▪ ▪
Slide 22: Cash flow from operations and investments
Cash flow from operations ▪ ▪ ▪ Investments ex. M&A ▪ ▪ ▪ ▪
Slide 23: Outlook for the fourth quarter 2023
Outlook for the fourth quarter 2023 = The market sentiment is still weak going into the fourth quarter. Elkem well positioned when market conditions improve, due to attractive market positions and a good asset base = Silicones prices in China improved late third quarter, but development going forwar
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 iz tee D/A re Yt — wT Silicones Silicon Products Carbon Solutions 2 Elkem
Slide 27: A strong track record since 1904
A strong track record since 1904 — with our focus on the future = Elkem started as a Norwegian company founded in 1904 by Sam Eyde, representing strong industrial traditions and continuous improvement = The chemical business in France was integrated in 2015 adding a strong culture for specialisation
Slide 28: 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 29: Elkem operates through three divisions
Elkem operates through three divisions: All with global scale, leadership positions and global footprint Silicones Fully integrated silicones manufacturer with focus on specialities Silicon Products Global producer and provider of silicon, ferrosilicon and specialties 42% 50% of operating of operati
Slide 30: Elkem's portfolio is well-balanced
Elkem’s portfolio is well-balanced oJ E Carbon Solutions 8% Silicone: Il Production sit A 42% Bh Sates oftice f He Asia Th Silicon 9 BO Products 50% jEtkem — 30)
Slide 31: 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 32: Emissions reduction pathway to 2050
▪ ▪ ▪ (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 33: Power prices by region (EUR/MWh)
▪ < 50 EUR/MWh 50 – 75 EUR/MWh > 75 EUR/MWh ▪ ▪ ▪
Slide 34: Silicones division end markets
Healthcare & Personal Silicones Division 2019-22 Consumer & packaging Silicones Division 2019-22 Chemicals Silicones Division 2019-22 Care → Leading position in Release → Intermediates (silicones ▪ Medical adhesives, long term coatings for food & label polymers) sold to chemical implants, medical de
Slide 35: Silicon: raw materials, products, industry players
of division’s sales Raw materials Products Industry players** End markets Quartz Silicones (50%) Consumer goods Construction Coal and biocarbon Total production capacity Aluminium (30%) 205.000* mt in Norway and China → 175.000* mt silicon grades → 20.000 mt Silgrain® Automotive → 10.000 mt Silgrain
Slide 36: Ferrosilicon: raw materials, products, industry players
of division’s sales Raw materials Products Industry players* End markets Quartz Electrical steel (40%) Construction Coal and biocarbon Total production capacity Stainless steel (20%) Consumer goods → 185.000 mt in Norway and Iceland → 40% High Purity grades → 35% Refined grades → 25% Standard grades
Slide 37: Foundry alloys: raw materials, products, industry players
of division’s sales Raw materials Products Industry players* End markets** Ferrosilicon Ferrosilicon Iron foundries Automotive (50%) Total production production capacity capacity Engineering (35%) Total Alloying elements Alloying elements → 190.000 mt globally → 60% FSM → 20% Low potent inoculants →
Slide 38: Microsilica: raw materials, products, industry players
of division’s sales Raw materials Products Industry players* End markets Before Construction (30%) Construction and infrastructure Total capacity → 300.000 mt microsilica globally (40% Refractories (30%) Refractories and ceramics After sourced externally) → 35.000 mt other specialty materials Proper
Slide 39: Currency sensitivity
——USDNOK —EURNOK EURUSD CNYNOK 1.70 Currency sensitivity 1250 1.60 x 11.50 150 S faa 140 3 i 10.50 wo a 1.30 x fo Z 950 1.20 = The result and cash flow are exposed to currency fluctuations. g 440 The main currencies are EUR, USD and CNY 850 = EUR - exposure approx. MEUR 550 1.00 = USD - exposure app
Slide 40: 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 41: Delivering your potential
« Elkem Delivering your potential