Elkem Asa · OSL:ELK
Elkem Asa — Q2 2019 Earnings Presentation
37 slides from Elkem Asa's earnings presentation, Sep 2, 2019
Slide 1: Presentation and second quarter results 2019
Elkem ASA Presentation and second quarter results 2019
Slide 2: Agenda
Agenda Brief Introduction Strategy Results for 2nd quarter 2019 Odd-Geir Lyngstad odd-geir.lyngstad@elkem.no Mobile +47 976 72 806
Slide 3: Brief Introduction
Brief Introduction 3
Slide 4: More than 110 years of history as a technology provider
Elkem More than 110 years of history as a technology provider Founded in 1904 by Sam Eyde Listed on Oslo stock exchange since March 2018 Total operating income EBITDA EBITDA margin NOK NOK Employees worldwide 27 plants worldwide >400 R&D people Headquarter in Norway 25.9 bn mill. 5.8 bn mill. 22% %
Slide 5: Four strong business areas
Four strong business areas Silicones Silicon Materials Foundry Products Carbon BNOK 13.1 BNOK 6.6 BNOK 5.1 BNOK 1.9 50% of 23% of 20% of 7% of group sales group sales group sales group sales End-markets End-markets End-markets End-markets • Paper & Film Release • Chemicals • Automotive • Ferroalloys
Slide 6: Our products are vital for modern societies
Our products are vital for modern societies WINDMILLS INFRASTRUCTURE QUARTZ SILICON AND AIRBAGS MICROSILICA COAL SILICONES AUTOMOTIVE SOLAR COOKING UTENSILS BIOCARBON FOUNDRY PRODUCTS RELEASE COATING POWER CARBON PRODUCTS ELECTRONICS LOW COST SUSTAINABLE HIGH TEMPERATURE / CHEMICAL EXAMPLES OF HIGH
Slide 7: Strategy
Strategy 7
Slide 8: Continue transition into a specialty chemicals company
Strategy Continue transition into a specialty chemicals company Building blocks of continued profitable growth Enhance growth Stable margins Reduce cyclicality Leverage platform (synergies) Leverage technologies to enhance specialisation Solidify local presence and market positions Acc
Slide 9: Silicones providing strong growth potential
Silicones providing Silicones - demand forecast strong growth potential The global demand for silicones is expected grow by more than 5% CAGR from 2018 to 2023 More than 60% of the growth will be in China, India and rest of Asia Elkem is well positioned to capitalise on expected growth opportu
Slide 10: Silicones optimising the value chain
Silicones optimising the value chain Estimated industry EBITDA margins 0 – 15% 15 - 25% > 25% Pricing volatility High Low/Medium Low Upstream Intermediates Downstream Volume Value Siloxane Core products specialties specialties Siloxane is generally not Core products/intermediates Volume specialities
Slide 11: Technology driven acquisition of Basel Chemie
Technology driven acquisition of Basel Chemie • Established in 1999 • Technology driven downstream silicones producer with a high-end speciality portfolio for skin care and colour cosmetic applications, and water repellents for the construction industry Elkem has entered into a SPA to acquire the
Slide 12: EV batteries and cables uniquely positioned to develop and supply solutions
EV batteries and cables Carbon Graphite for anodes – developing large scale uniquely positioned to industrial production to meet market growth • 100 years experience as a supplier of carbon solutions develop and supply solutions • High temperature process understanding • Raw material know-how • Sust
Slide 13: Well positioned to develop silicones market opportunities
Well positioned to develop silicones market opportunities Expanding silicones offering in the Americas Further specialisation Elkem well positioned as a fully integrated, qualified producer across most Significant opportunities in specialised products for battery insulation and industrial ma
Slide 14: Operational improvements proceeding as planned
Operational improvements proceeding as planned The accelerated improvement programme was initiated early 2019 to counter weaker market conditions The target is to realise effects of MNOK 500 in 2019 The programme is progressing according to plan and realised effects Realised effects (MNOK) by
Slide 15: Financial targets
Financial targets Target metric Targets Comment Grow faster than market through Revenue growth 5 – 10% specialisation, organic growth and acquisitions Target average margin through the EBITDA margin (%) 15 – 20% economic cycle Ensure appropriate and disciplined Reinvestments % of D&A 80 – 90% capita
Slide 16: Results for 2nd quarter 2019
nd Results for 2 quarter 2019 16
Slide 17: Market downturn gives lower earnings
Market downturn gives lower earnings Generally weak market conditions, particularly in automotive and construction Additional US tariffs on Chinese imports implemented from 10 May triggered a rapid decline in the Chinese silicones market Maintenance stop and delayed start-up in Silicones Franc
Slide 18: Environment, social and governance our key priorities
Environment, social and governance our key priorities Elkem has a zero harm philosophy For health and safety, the target is zero recordable injuries (H1 & H2) For environment, the strategy is to work towards our goal of zero emissions The total recordable injury rate as at 30 June 2019 was 2
Slide 19: Weak market conditions driven by automotive and construction
Weak market conditions Growth rates automotive driven by automotive and construction Global car sales down YTD-2019 The sharpest sales decline was in China, but also other markets are down Weak automotive markets impacts silicones (gaskets, hoses etc.), silicon metal (aluminium alloys) and fer
Slide 20: Silicones additional US tariffs triggering decline
Silicones additional US tariffs triggering decline Additional US tariffs triggered another steep decline in DMC prices in China All silicones from China to the US are taxed 28% In addition, many other products containing silicones are affected The tariffs have created increased uncertainty a
Slide 21: Silicon still weak market sentiment
Silicon still weak market sentiment Market prices declined further in second quarter from already low levels Positive demand development from solar and electronics Chemical segments (silicone) is rather stable but somewhat impacted by US/China trade tensions CRU silicon 99 price EU (EUR/mt)
Slide 22: Ferrosilicon weak markets; Carbon stable markets
Ferrosilicon weak markets Continued market price decline in the second quarter Prices negatively impacted by low EU steel market and high ferrosilicon imports Indications of lower EU ferrosilicon imports from Brazil and Malaysia towards the end of the second quarter Weak market sentiment wit
Slide 23: Elkem group earnings down due to weak market conditions
Elkem group earnings down due to weak market conditions Total operating income EBITDA ‒ down from record ‒ reduced considerably levels in the compared to second corresponding quarter quarter last year last year ‒ mainly explained by ‒ due to weaker market lower revenue for the conditions, especially
Slide 24: Elkem group strong balance sheet
Elkem group Consolidated key figures strong balance sheet (NOK million, except where specified) 2Q 2019 2Q 2018 YTD 2019 YTD 2018 FY 2018 Total operating income 5,882 7,121 11,889 13,572 25,887 EBITDA 647 1,971 1,499 3,424 5,793 EBIT 300 1,655 815 2,805 4,522 Other items MNOK 25 Other items 25 -15
Slide 25: Silicones impacted by US tariffs and production problems
Total operating income Silicones NOK million impacted by US tariffs and production problems Total operating income down 28% from second quarter last year EBITDA and margin NOK million and % EBITDA of MNOK 333, down 75% from a record level last year Lower operating income and EBITDA were mainly
Slide 26: Silicon Materials low prices and slow demand recovery
Total operating income Silicon Materials NOK million low prices and slow demand recovery Total operating income down by 8% compared to second quarter last year EBITDA and margin NOK million and % EBITDA down 48% compared to second quarter last year Lower operating income and EBITDA mainly expl
Slide 27: Foundry Products lower prices and reduced sales of specialties
Foundry Products Total operating income NOK million lower prices and reduced sales of specialties Total operating income down by 8% from second quarter last year EBITDA and margin NOK million and % EBITDA down 69% due to lower ferrosilicon prices and lower speciality sales volumes Prices for s
Slide 28: Carbon stable earnings
Total operating income Carbon NOK million stable earnings Total operating income up 8% from second quarter last year EBITDA and margin NOK million and % EBITDA up 8% to MNOK 86 from the corresponding quarter last year Stable sales volumes have provided stable operating income and EBITDA Sales
Slide 29: Elkem group strong equity, but lower EPS
Elkem group strong equity, but Earnings per share (NOK) lower EPS Earnings per share (EPS) EPS amounted to NOK 0.25 in the second quarter EPS YTD 2019 was NOK 1.09 Total equity amounted to BNOK 12.6 as at 30 June 2019 Equity ratio in % Equity ratio of 44% Equity down by BNOK 1.1 from 31
Slide 30: Elkem group low leverage
Elkem group low leverage Net interest-bearing debt (NIBD) MNOK Net interest bearing debt (NIBD) of BNOK 5.1 as at 30 June 2019 NIBD has increased by BNOK 1.8 from 31.12.2018 mainly due to dividend payment of BNOK 1.5 and recognition of lease liabilities BNOK 0.4 in accordance with IFRS 16 Leve
Slide 31: Elkem group good cash flow, investments according to plan
Elkem group good cash flow, investments Cash flow from operations MNOK according to plan Cash flow from operations(1) was MNOK 645 in the second quarter, down from the corresponding quarter last year due to lower operating profit Lower operating profit has been partly offset by positive working
Slide 32: Outlook for the third quarter
Outlook for the third quarter A continued weak market sentiment creates uncertainty going forward Silicones demand is expected to pick-up seasonally in China Silicon metal demand is expected to remain weak, primarily in the aluminium segment. There are signs of a recovery, but the impact is ex
Slide 33: 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 34: Appendix
Appendix
Slide 35: Currency sensitivity
Currency sensitivity Currency development The cash flow is exposed to operating income and costs in different currencies. The main currencies are EUR and USD EUR - net cash flow approx. MEUR 360 USD - net cash flow approx. MUSD 120 Current cash flow hedging programme 90% hedging of net cas
Slide 36: Other financial sensitivities
Other financial sensitivities POWER SALES PRICES Electric power is a key input factor in Elkem’s production. Total consumption for Changes in sales prices could significantly affect operating income and EBITDA the group was 6.2 TWh in 2018. Near term exposure to spot power prices is 1% margin
Slide 37: Elkem
«Elkem