Elkem Asa · OSL:ELK
Elkem Asa — Q4 2019 Earnings Presentation
27 slides from Elkem Asa's earnings presentation, Feb 13, 2020
Slide 1: Fourth quarter results 2019
Fourth quarter results 2019 « Elkem
Slide 2: Agenda
Agenda Business update Financial performance Outlook
Slide 3: Results still hampered by weak markets, new acquisition supporting specialisation
Results still hampered by weak markets, new acquisition supporting specialisation Elkem’s result for the fourth quarter was weighed down by weak market conditions and operational issues Total operating income was NOK 5,559 million in the fourth quarter, down 9% from the corresponding quarter las
Slide 4: ESG a key priority
ESG a key priority Elkem has a zero harm philosophy For health and safety, the target is zero recordable injuries For environment, the strategy is to work towards our goal of zero emissions The total recordable injury rate as at 31 December 2019 was 2.1 Total recordable injury rate This re
Slide 5: Delivering on the key strategic building blocks
Delivering on the key strategic building blocks Buliding blocks of continued profitable growth Successful completion of the accelerated cost improvement programme in 2019 Specialisation initiatives ongoing – R&D capabilities strengthened and new speciality silicone products successfully launched
Slide 6: Bolt-on acquisition of Polysil
Bolt-on acquisition Polysil of Polysil Strategic rationale for the Polysil acquisition Access to advanced technology, especially in Liquid Silicone Rubber (LSR) & Pressure Sensitive Adhesives (PSA) Increase market share in specialties in China Downstream captive use of materials from Xinghuo
Slide 7: Long-term implants positioning Elkem in the medical silicones market
Long-term implants positioning Elkem in the medical silicones market Elkem continues to strengthen its position in the medical silicones market Investing in production of ultra-high purity silicone raw materials to meet specialty life science market demand Utilising ISO 8 and 7 certified clean
Slide 8: Delivering on the specialisation strategy
Delivering on the specialisation strategy securing higher and more stable margins Margins Price volatility Margins Price volatility Margins Price volatility Est. industry EBITDA margins / Price volatility 0-15 % High 15-25 % Low/medium > 25 % Low Upstream Intermediates Downstream Siloxane Core produ
Slide 9: Improvement programme realised improvements exceeding target
Improvement programme realised improvements exceeding target The accelerated improvement programme was initiated early 2019 to counter weaker market conditions The target was to realise effects of MNOK 500 in 2019 Realised effects under the programme was MNOK 596 by end of 4Q-2019 All plants
Slide 10: Silicones stable, but low prices
Silicones stable, but low prices DMC prices in China declined early fourth quarter, mainly explained by seasonal downturn in construction and generally soft market conditions Prices in China picked up towards the end of fourth quarter, mainly due inventory build up from downstream producers ahea
Slide 11: Silicon prices up from historic lows
Silicon prices up from historic lows Market prices started to recover in the fourth quarter CRU EU reference price increased by 13% from third to fourth quarter CRU silicon 99 price EU (EUR/mt) Price increases driven by significant production curtailments combined with stabilised demand Auto
Slide 12: Ferrosilicon production curtailments drive higher prices
Ferrosilicon production curtailments drive higher prices Market prices have started to recover CRU EU reference price up by approx.10% from third to fourth quarter Higher market prices primarily driven by tighter supply, i.e. lower production and reduced import EU steel production still weak
Slide 13: Elkem group results hampered by weak markets
Elkem group results hampered by weak markets Total operating income EBITDA ‒ Down 9% compared to ‒ Down 47% compared the corresponding to fourth quarter last quarter last year year ‒ Weaker market ‒ Mainly explained by conditions impacting all lower market prices divisions and operational issues 13
Slide 14: Elkem group key figures impacted by weak markets
Elkem group Consolidated key figures key figures impacted by weak markets (NOK million, except where specified) Total operating income EBITDA 4Q 2019 5,559 4Q 2018 6,093 YTD 2019 22,668 YTD 2018 25,230 FY 2018 25,230 517 974 2,656 5,793 5,793 EBIT 92 639 1,189 4,522 4,522 Other items MNOK -16 Othe
Slide 15: Silicones impacted by lower prices and extra start-up costs
Silicones Total operating income NOK million impacted by lower prices and extra start-up costs Total operating income of MNOK 2,824, down 3% from fourth quarter last year EBITDA and margin Lower operating income was mainly due to lower sales prices in China NOK million and % EBITDA of MNOK 313
Slide 16: Silicon Materials good operations and strong cost position
Silicon Materials Total operating income NOK million good operations and strong cost position Total operating income of MNOK 1,607, down 4% compared to fourth quarter EBITDA and margin last year NOK million and % The reduction was mainly due to lower sales prices for silicon and slightly lower s
Slide 17: Foundry Products low prices and operational issues
Foundry Products Total operating income NOK million low prices and operational issues Total operating income of MNOK 1,038, down 15% from fourth quarter last year EBITDA and margin Lower operating income mainly explained by lower sales prices NOK million and % Steel and automotive markets stil
Slide 18: Carbon impacted by lower volumes
Carbon Total operating income NOK million impacted by lower volumes Total operating income MNOK 461, down 12% from fourth quarter last year EBITDA and margin NOK million and % EBITDA MNOK 71, down 13% from the corresponding quarter last year Lower total operating revenue and EBITDA explained b
Slide 19: Elkem group stable equity, low EPS
Elkem group Earnings per share (EPS) stable equity, low EPS NOK per share Earnings per share (EPS) EPS amounted to NOK 0.03 in the fourth quarter EPS YTD 2019 was NOK 1.47 Proposed dividend NOK 0.60 per share, 41% of net profit Total equity amounted to BNOK 13.0 as at 31 December, stable E
Slide 20: Elkem group stable debt level but increased leverage
Elkem group Net interest-bearing debt (NIBD) stable debt level but NOK billion increased leverage Net interest bearing debt (NIBD) of BNOK 5.7 as at 31 December 2019 Leverage ratio of 2.2x based on LTM EBITDA of BNOK 2.7 NIBD and leverage will likely increase in the next quarters due to divide
Slide 21: Elkem group stable cash flow generation
Elkem group Cash flow from operations stable cash flow NOK million generation Cash flow from operations(1) was MNOK 464 in the fourth quarter, down from the corresponding quarter last year Reduced cash flow was mainly due to lower operating profit Good cash conversion Investments amounted to
Slide 22: Outlook for the first quarter
Outlook for the first quarter During the fourth quarter 2019 market prices recovered from historic low levels. The price trend has continued upwards for silicon and modestly up for ferrosilicon. Silicone prices are expected to remain stable First quarter 2020 will be impacted by Chinese New Year
Slide 23: 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 24: Appendix
Appendix
Slide 25: 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 350 USD - net cash flow approx. MUSD 100 Current cash flow hedging programme 90% hedging of net cas
Slide 26: 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 6.0 TWh in 2019. Near term exposure to spot power prices is 1% margin
Slide 27: Elkem
« Elkem