Elkem Asa · OSL:ELK
Elkem Asa — Q2 2018 Earnings Presentation
29 slides from Elkem Asa's earnings presentation, Aug 17, 2018
Slide 1: Second Quarter Results 2018
ELKEM SECOND QUARTER RESULTS 2018 17 August 2018
Slide 2: Agenda
Agenda • Helge Aasen, CEO - Highlights - Business update - Outlook • Morten Viga, CFO - Financial performance and market update 2
Slide 3: Highlights 2Q 2018
Highlights 2Q 2018 • Strong earnings, particularly driven by the Silicones division • Total operating income of NOK 7,120 million, up 38% from second quarter last year - All divisions report revenue growth compared to 2Q-2017 • EBITDA reaching NOK 1,970 million, up 143% from second quarter last year
Slide 4: Health and safety – our main priority
Health and safety – our main priority • Elkem has a zero harm philosophy when it comes to health and safety. The target is zero H1 & H2 incidents • In 2Q-2018 Elkem had 4 H1 and 4 H2 injuries - Most injuries are low severity • The total recordable injury rate YTD 2018 is 2.0, which is a weakening fr
Slide 5: Elkem's competitive strengths
Elkem’s competitive strengths Leader in Material presence in fundamentally the fast-growing attractive markets Chinese market Experienced and proven management Low cost integrated team with long-term position shareholder support Leading R&D Enhanced financial capabilities for performance and further
Slide 6: Leader in fundamentally attractive markets
Leader in fundamentally attractive markets Silicones market is still strong • Global silicones demand remains strong • In addition, global supply remains tight - Approximately 10% of Chinese upstream silicones capacity is closed, potential restart uncertain due to environmental and safety issues - G
Slide 7: Leader in fundamentally attractive markets
Leader in fundamentally attractive markets Market conditions generally good also for other divisions • The spot market prices for silicon metal are down - High capacity utilisation and seasonally higher production in China - Lowered Chinese PV feed-in tariff quote for 2018 is expected to reduce poly
Slide 8: Material presence in the fast-growing Chinese market
Material presence in the fast-growing Chinese market Integration of Xinghuo and Yongdeng progressing well • Integration of Xinghuo Silicones and Yongdeng Silicon Materials progresses according to plan • Key focus areas - Operational excellence according to Elkem Business System (EBS) - Organisationa
Slide 9: Investments to enhance low cost position, growth and specialisation
Investments to enhance low cost position, growth and specialisation Projects strengthening Elkem’s market position UPGRADES GROWTH SPECIALISATION • Elkem is undertaking significant • Elkem has growth projects which • Elkem is successfully pursuing its upgrades to ensure quality and will strengthen t
Slide 10: Leading R&D capabilities for further specialisation
Leading R&D capabilities for further specialisation Examples of new product launches FIRST SALE OF 3D PRINTED MATERIAL LSR SELECT LEATHER TREATMENT EMULSION • Elkem has developed the • LSR select is an on line blending • Leather treatment solution for experience and capability to system which gives
Slide 11: Elkem group – Strong financial development
Elkem group Strong financial development CONSOLIDATED KEY FIGURES COMMENTS CONSOLIDATED KEY FIGURES (NOK million, except where specified) 2Q 2018 2Q 2017 YTD 2018 YTD 2017 FY 2017 • Other items NOK -153 million Total operating income 7,120 5,158 13,571 9,732 21,402 - Change in fair value of power co
Slide 12: Elkem group – Strong growth, particularly driven by Silicones
Elkem group Strong growth, particularly driven by Silicones • Total operating income for the group was NOK 7,120 million in the second quarter, a significant increase from 2Q-2017. The improvement is mainly driven by higher sales prices and volume growth from the Silicones division • EBITDA for 2Q-2
Slide 13: Silicones – Market update
Silicones – Market update Strong market conditions • Continued tight market for silicone intermediate products - Price increases for commodities are driving prices across all segments • Elkem’s sales volumes of speciality products continue to develop favourably • Prices for raw materials are fairly
Slide 14: Silicones – Financial performance
Silicones – Financial performance Excellent growth in revenue and margins MNOK • Total operating income of NOK 3,898 million, a significant increase compared to 2Q-2017, driven by higher sales prices and volume growth • EBITDA for 2Q-2018 of NOK 1,357 million, generating an EBITDA-margin of 34.8%. T
Slide 15: Silicon Materials – Market update
Silicon Materials – Market update Prices somewhat down in 2Q • Spot market prices for silicon metal are somewhat down in all major markets during 2Q-2018 • Prices expected to continue down in 3Q-2018. Increased supply in China during wet-season • Stable sales volumes – however, the relining of one f
Slide 16: Silicon Materials – Financial performance
Silicon Materials – Financial performance Stable financial performance MNOK • Total operating income of NOK 1,754 million, up from NOK 1,603 million in 2Q-2017, mainly due to higher sales prices compared to last year • EBITDA of NOK 309 million in 2Q-2018, up from NOK 229 million in the correspondin
Slide 17: Foundry Products – Market update
Foundry Products – Market update Markets remain good but prices are down • The demand for ferrosilicon and foundry alloys is still strong, both in engineering and automotive segments • Spot market prices for ferrosilicon are down during 2Q-2018, but still at attractive levels • Price development for
Slide 18: Foundry Products – Financial performance
Foundry Products – Financial performance Good financial performance MNOK • Total operating income was NOK 1,305 in 2Q-2018, up from NOK 1,056 million in 2Q-2017, mainly due to higher sales prices • EBITDA of NOK 263 million, up from NOK 192 million in 2Q- 2017. The result is mainly impacted by highe
Slide 19: Carbon – Market update
Carbon – Market update Improved sales of specialty grades • Sales volumes increased slightly compared to 2Q-2017 • Standard electrode paste is stable while other product grades show good volume growth • Still some upward pressure on raw material prices in the quarter 19
Slide 20: Carbon – Financial performance
Carbon – Financial performance Improved EBITDA - margins trending upwards MNOK • Total operating income was NOK 445 million, up from NOK 382 million in 2Q-2017, due to higher sales prices and slightly higher volumes • EBITDA is NOK 80 million, up from NOK 72 million in 2Q- 2017, mainly as a result o
Slide 21: Elkem group – Strong equity and EPS
Elkem group Strong equity and EPS EARNINGS PER SHARE (EPS) – NOK PER SHARE EQUITY RATIO • Increased EPS reflect underlying profitability improvements • Equity amounts to NOK 12.2 billion by end of 2Q-2018, which gives a ratio of equity to total assets of 44% - EPS YTD 2018 is NOK 3.53 per share • Du
Slide 22: Elkem group – Low leverage provides financial flexibility
Elkem group Low leverage provides financial flexibility NET INTEREST BEARING DEBT (NIBD) (1) REFINANCING OF XINGHUO AND YONGDENG • Net interest bearing debt amounts to NOK 4.5 billion, giving a • Refinancing of Xinghuo Silicones and Yongdeng Silicon leverage of 0.8x based on LTM EBITDA NOK 5.4 billi
Slide 23: Elkem group – Strong cash flow generation, investments in line with plan
Elkem group Strong cash flow generation, investments in line with plan CASH FLOW FROM OPERATIONS INVESTMENTS • Cash flow from operations shows strong improvement • Reinvestments in 2Q-2018 are NOK 292 million, in line with plan compared to 2Q-2017 - Expected reinvestments for 2018 is approx. NOK 1.0
Slide 24: Outlook
Outlook • The market sentiment is still good, but likely to soften somewhat compared to second quarter - Silicones prices are levelling off towards end of 2Q and likely to soften - Market prices for silicon metal and ferrosilicon will likely decline during 3Q-2018, partly due to seasonally higher pr
Slide 25: 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 26: Appendix
Appendix 26
Slide 27: Currency and currency sensitivity
Currency and currency sensitivity CURRENCY CURRENCY DEVELOPMENT • Cash flow is exposed to revenues and costs in different • Compared to 2Q-2017, NOK is 2% weaker against the average currencies. The main currencies are EUR and USD EUR rate and 6% stronger against the average USD rate - EUR - net cash
Slide 28: Other financial sensitivities
Other financial sensitivities POWER SALES PRICES • Electric power is a key input factor in Elkem’s production. • Changes in sales prices could significantly affect revenue Total consumption for the group was 6.4 TWh in 2017. and EBITDA Near term exposure to spot power prices is limited - Norway, hed
Slide 29: Delivering your potential
DELIVERING YOUR POTENTIAL EOP ESP eee: