Umicore SA · EURONEXT:UMI
Umicore SA — FY2004 Earnings Presentation
52 slides from Umicore SA's earnings presentation, February 2005
Slide 1: Solid results, Sharper focus for Umicore, Strong foundations for Cumerio
Solid results Sharper focus for Umicore Strong foundations for Cumerio
Slide 2: Results 2004
© umicore materials fora etter lefe Results 2004
Slide 3: Solid results
Solid results € million 2003 2004 Revenues 1,358.0 1,901.5 +40% (+9% proforma) EBIT recurring Post goodwill amortization 145.9 291.6 +100% Pre goodwill amortization 154.1 301.8 +96% EBITDA 277.4 485.8 +75% Net recurring result Group 97.8 192.1 +96% share (pre goodwill) EPS adjusted 4.28 7.56 3
Slide 4: Overall Group highlights
Overall Group highlights • Significant growth in Advanced Materials businesses • Strong performance in Precious Metals Products and Catalysts • More difficult supply situation in Precious Metals Services • Improvements in Zinc driven by higher zinc price combined with currency hedges • Copper turnar
Slide 5: Advanced Materials
Advanced Materials Highlights € million* 2003 2004 • Outstanding growth in cobalt businesses esp. Rechargeable Batteries and Tool Materials Revenue** 221.2 306.3 • Cobalt refining revenues boosted by high cobalt price Recurring EBIT 37.3 69.9 • Germanium businesses pick up. EBITDA 53.6 98.5 Recovery
Slide 6: Advanced Materials: growth in all segments
Advanced Materials: growth in all segments Indexed sales volumes of Li-Co Indexed sales volumes of all cobalt products 1200 140 1000 120 100 800 80 600 60 400 40 200 20 0 0 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 Indexed sales volumes of germanium products Cobalt refining output - tonnes 1
Slide 7: Synthetic Diamonds
Synthetic Diamonds Highlights • Sales volumes up 23% on 2003 € million* 2003 2004 • Continued price pressure Contribution to • Profitability affected by weakness of Group EBIT: USD vs Rand and Euro • One-off adjustments due to IFRS Total 1.70.5 switch Recurring 12.84.6 Non-recurring (11.1)(4.0) 7
Slide 8: Precious Metals Products & Catalysts
Precious Metals Products & Catalysts Highlights • Good performance of automotive € million 2003* 2004 catalysts despite slowing auto industry growth Revenue 286.9 698.0 • Promising reception for palladium technology for light duty diesel Recurring EBIT 42.9 120.3 • Strong volume growth especially in
Slide 9: Precious Metals Products and Catalysts: ready for new developments
Precious Metals Products and Catalysts: ready for new developments The new The new production facility in Suzhou, China is test centre nearing completion. Production is due to start in in Hanau, the second half of 2005 opened on 16 February 2005, will further improve Umicore’s ability to position it
Slide 10: More stringent legislation
More stringent legislation: 2004 2005 2006 2007 2008 2009 2010 Heavy Duty EU 4 EU5 Europe US 2004 US 2007 US 2010 US Passenger Cars and Light-duty Trucks US LEV1/ ULEV1 TIER 2 EPA BINS (phase-in starting 2004) California LEV II Emission Standards for LEV/ ULEV/ SULEV Passenger Cars EU3 EU4 EU5 Europ
Slide 11: Precious Metals Services
Precious Metals Services Highlights € million 2003 2004 • Completion of restructuring at Hanau improves H2 performance • Tough supply conditions for Revenue 214.7 204.9 industrial by-products • Improvements in supplies of end-of- Recurring EBIT 45.7 33.3 life materials eg e-scrap and spent EBITDA 71
Slide 12: Production in tonnes
Precious Metals Services Source of materials Production expressed in treatment and refining charges (Au, Pt, Pd, Rh only) 8% 40 4% 35 12% 39% 30 Production in tonnes 10% 25 20 11% 16% 15 10 Zinc and lead industry Precious metals industry 5 Copper industry Electronic scrap Catalysts Preprocessing 0 O
Slide 13: Zinc
Zinc Highlights € million 2003 2004 • Stronger USD zinc price (combined with currency hedge) drives higher results for zinc smelting Revenue 440.6 481.4 • Tight TC market persisted and electricity prices increased although Recurring EBIT 28.4 78.6 H2SO4 market improved EBITDA 64.2 132.7 • Stable pro
Slide 14: Zinc sales volumes
Zinc Zinc sales volumes 800 700 '000 tonnes Zinc 600 500 77% added value products 400 300 200 100 0 2000 2001 2002 2003 2004 Commodity zinc Zinc Alloys for Galvanising Zinc Alloys for Die Casting Building Products Zinc Oxide, Powders and other semis 14
Slide 15: Copper
Copper Highlights • Strengthening underlying € million 2003 2004 performance • Record smelter production Revenue 194.5 210.9 • Cathode production up 7% Recurring EBIT 0.9 20.7 • Significant improvements in market conditions only to be felt as from 2005 EBITDA 28.1 50.2 • Overall sales in product cat
Slide 16: Copper sales volumes and production
Copper Copper sales volumes Copper production 600,000 450 400 500,000 350 400,000 300 '000 tonnes Tonnes 250 300,000 200 200,000 150 100,000 100 50 0 0 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 Wirerod Shapes Refined copper Copper anodes Pirdop 16
Slide 17: Corporate and Investments
Corporate and Investments Highlights • Increased R&D spend € million 2003 2004 100 90 80 70 Recurring EBIT (22.0) (35.8) € m illions 60 50 EBITDA (4.4) (18.5) 40 30 20 10 Ave. Cap. Empl. 214.6 81.5 0 2000 2001 2002 2003 2004 Capex 14.1 6.3 • Sustained efforts in Fuel Cells • Significant Traxys contr
Slide 18: Financial review
Financial review
Slide 19: Income statement (recurring)
Income statement (recurring) € million 2003 2004 Operating profit 128.0 263.9 • Earnings improvement beyond the effect of Financial costs (33.6) (49.9) full-year inclusion of Income from associates 18.0 27.7 PMG Tax (12.6) (44.8) • Recurring net Group share up by 103% Net result 99.7 197.0 Minority
Slide 20: Non-recurring income 2004
Non-recurring income 2004 € million TOTAL Operational (3.0) Equity companies (4.1) Tax 2.9 Financial investments (10.2) Minority interests (0.8) Total (13.6) • Operational non-recurring refers to the positive insurance indemnification offset by palladium inventory adjustments and asset impairments i
Slide 21: Cash flow statement
Cash flow statement € million 2003 2004 Net cash from operating activities 241.1 282.9 Capital expenditure (142.0) (164.9) Acquisitions (644.2) 16.1 Disposals 7.0 13.3 Loans 10.3 (9.5) Net cash from investing activities (768.9) (144.9) Change in debts 452.5 (33.6) Treasury shares 44.7 (4.6) Dividend
Slide 22: Net financial debt
Net financial debt 1000 907 • Net financial debt of €562m 900 800 773 • Gearing ratio of 30% (d/d+e) Net debt in € million 700 619 600 562 500 400 289 300 261 200 133 100 0 End July 2001 2002 2003 2004 End June End June 2003 2003 2004 22
Slide 23: Hedging summary
Hedging summary • Effective dollar rate for 2004 was USD / EUR 0.96 compared to an average USD / EUR exchange rate during the year of 1.24 • Umicore estimates that the reduction in the coverage of its US dollar exposure in 2005 combined with the positive effect of its zinc price hedges would lead to
Slide 24: Relative performance
Relative performance Umicore (Jan 2003 - 18 Feb 2005) 90 Umicore/ Umicore/ 80 70 Bel 20 Stoxx600sml 60 50 2000 +14% +6% 40 30 2001 +20% +25% 20 Umicore vs DJSC (base 100 : Jan 2003) 130 2002 +27% +30% 125 120 2003 +22% +6% 115 110 105 2004 -5% +4% 100 95 90 2005 +6% +5% 85 80 24
Slide 25: A sharper focus for Umicore
© umicore materials fora etter lefe A sharper focus for Umicore
Slide 26: Consistent programme to sharpen Umicore's focus
Consistent programme to sharpen Umicore’s focus and give Copper the opportunity to realise its potential • Umicore is taking leave of the Copper business after having turned it around • Demerger option avoids value leakage for Umicore shareholders and optimises the development potential for Cumerio
Slide 27: Taking leave of the Copper business after having turned it around
Taking leave of the Copper business after having turned it around • In 2004, Copper generated already €20m EBIT post-hedging, despite record low contract TC/RCs • Significant upside in 2005 and beyond on TC/RCs and in 2005 on producer premium (largely outweighing the negative impact from currencies)
Slide 28: Demerger avoids value leakage for Umicore shareholders
Demerger avoids value leakage for Umicore shareholders • Copper has an attractive growth strategy, which is difficult to realise fully within Umicore • Sale for cash unlikely to lead to full value recognition • Limited partnership opportunities, share-based deals problematic • Demerger leads to full
Slide 29: Demerger optimises Copper's development potential
Demerger optimises Copper ’s development potential • Focused and motivated management team now in charge of its own destiny • Copper can now use its free cash flow for further organic growth and can also use equity for strategic moves • Consolidation strategy will not emphasise Northern & Western Eu
Slide 30: Further focusing of Zinc business group
Further focusing of Zinc business group • Umicore’s strategic goal is to further consolidate its world leadership position in Zinc Specialties and zinc recycling • In line with this strategy, but also bearing in mind the impact of exchange rates and rising electricity price, Umicore will accelerate
Slide 31: Impact of zinc production reduction
Impact of zinc production reduction Social impact • 216 people affected in France (Auby & Calais) • Consultations with employee representatives have started Market impact • Annualised production cut of 130,000 t to take effect in second half 2005 • 300,000 tonnes reduced concentrate intake • Almost
Slide 32: Overall programme would reduce Umicore's EBIT sensitivity to external factors
Overall programme would reduce Umicore’s EBIT sensitivity to external factors • From 2005 the copper demerger will fully eliminate sensitivity to copper TC/RCs and copper price. It will also lead to a reduction in the sensitivity to USD / EUR exchange rate of €0.6 million per US1¢ change* • As from
Slide 33: Post demerger balance sheets would allow for further growth
Post demerger balance sheets would allow for further growth • Umicore’s 2004 FCF generation allows both companies to start with strong balance sheets allowing them sufficient flexibility to grow • Umicore:Net Debt: €442m* Debt / Debt + Equity approx. 30% • Copper: Net Debt: €120m Debt / Debt + Equit
Slide 34: Strong dividend commitment maintained
Strong dividend commitment maintained: Umicore Board to propose to shareholders a dividend of €1.65 per Umicore share at the AGM on 13 April 2005 First Cumerio dividend of €0.30 per share will be proposed at EGM, payable in June 2005 1.95 2.10 1.90 EUR 0.3 per share 1.70 +22% 1.50 1.30 1.10 1.60
Slide 35: A new European copper company
A new European copper company
Slide 36: A new European copper company with:
A new European copper company with: Unique geographic positioning State-of-the-art assets Well placed for future growth Solid balance sheet and strong cash flow generation Dynamic and internationally-minded management 36
Slide 37: Unique geographic positioning: a pan-European player
Unique geographic positioning A pan-European player New Boliden NA KGHM Atlantic Copper Cumerio 37
Slide 38: Proximity to mines in Black Sea region
Unique geographic positioning Proximity to mines in Black Sea region: Copper mines (‘000 >1 million tonnes available tonnes concentrates) Bulgaria 488 Cumerio - Pirdop Turkey 207 Armenia 113 Serbia 107 Romania 89 Georgia 63 Macedonia 44 Albania 18 38 Source: Umicore and Brook Hunt 2004
Slide 39: State-of-the-art asset base
State-of-the-art asset base OLEN: Refinery 345 kT Wirerod 280 kT Shapes 150 kT Spec.Rod 16 kT 494 people PIRDOP: Smelter 227 kT Refinery 55 kT 940 people AVELLINO: Production facilities Wirerod 170 kT Wire 8 kT 8% stake in Non-Ferrous International 120 people 39 Commercial Offices
Slide 40: Smelter at the top end of the cost league
State-of-the-art asset base Smelter at the top end of the cost league Bor - Serbia 70 Copper Smelter Direct Cash Costs in 2003 60 50 Costs (c/lb copper) Excludes sulphur credits KGHM - Legnica Codelco - Chuquicamata Boliden - Ronnskar Atlantic Copper - Huelva 40 KGHM - Glogow I Boliden - Harjavalta
Slide 41: Refining operations are also cost leaders
State-of-the-art asset base Refining operations are also cost leaders Copper Refinery Direct Cash Costs in 2003 Bor - Serbia 16 14 World Class in Olen 12 Labour and Energy Cost advantage in Pirdop Atlantic Copper - Huelva costs in c/lb cathode Codelco - Chuiquicamata 10 Boliden - Pori Boliden - Ronn
Slide 42: Intensity of copper demand growth is shifting
Well placed for future growth Intensity of copper demand growth is shifting Average copper consumption growth 2004-2008 EU: +1.0% CAGR Black Sea Region: +2.8% CAGR 42 Source: Brook Hunt 2004
Slide 43: Positive fundamentals - upside consensus
Well placed for future growth Positive fundamentals - upside consensus Japanese long-term TC/RC (in current $) 30 25 20 cent / lb 15 10 Cumerio sensitivity of $4.5m per 1 cent per pound of copper contained in concentrates move in 5 TC/RCs 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Average o
Slide 44: Strong cash flow generation
Well placed for future growth Strong cash flow generation Historical investments and depreciation 140 140 120 120 100 100 € millions 80 Recurring capex set to 80 be below depreciation 60 60 40 40 20 20 0 0 1997 1998 1999 2000 2001 2002 2003 2004 Capex Purchase Pirdop Depreciation 44
Slide 45: A solid balance sheet (preliminary)
Well placed for future growth A solid balance sheet (preliminary) € million Non-current assets 249,7 Good gearing ratio of 29% = Current assets 417,9 financial flexibility of which cash and equivalents 95 Debt level less than 2x EBITDA Total assets 667,6 Limited environmental and Shareholders'
Slide 46: Demerger overview
© umicore Demerger overview 46
Slide 47: Summary
Summary Partial split: tax and P&L neutral All shareholders of one Umicore share to receive one Cumerio share (incl. VVPR strips) Umicore to retain stake corresponding to treasury shares - with one year lock-up Proposed dividend equal to €0.30 per Cumerio share 47
Slide 48: Timings
Timings Early April: prospectus available Early April: Capital markets day (Belgium) April: investor meetings 13 April: Umicore’s first EGM 28 April : Umicore’s second EGM 29 April: expected Cumerio listing on Euronext Brussels June 2005: dividend payment 48
Slide 49: Outlook
Outlook Excluding effect of the less favourable hedging contribution vs 2004, overall business environment to be stable in H1 2005 Advanced Materials expected to see further customer destocking in first half but to resume growth track thereafter Precious Metals Services and Precious Metals Pro
Slide 50: Q&A
Q&A © umicore 50
Slide 51: Disclaimer
Disclaimer This document does not constitute any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe to, any shares or any other securities of Umicore or Cumerio or any options thereon or rights therein. This document is made available solely for informati
Slide 52: Glossary
Glossary • EBIT - Operating profit (loss) of fully consolidated companies + Group share in net profit (loss) of companies accounted for under equity method • Non-recurring EBIT - Includes non-recurring items related to income or expenses arising from events or transactions that are clearly distinct