Elkem Asa · OSL:ELK
Elkem Asa — Q4 2018 Earnings Presentation
26 slides from Elkem Asa's earnings presentation, Feb 12, 2019
Slide 1: Elkem Fourth Quarter Results 2018
ELKEM FOURTH QUARTER RESULTS 2018 12 February 2019
Slide 2: Agenda
Agenda • Helge Aasen, CEO - Highlights - Business update - Outlook • Morten Viga, CFO - Financial performance 2
Slide 3: Fourth quarter concludes an extraordinary year
Fourth quarter concludes an extraordinary year • Elkem completes a strong 2018, but fourth quarter earnings hampered by weaker market sentiment • Total operating income of NOK 6,265 million, in line with fourth quarter 2017 • EBITDA of NOK 974 million, down 10% from fourth quarter 2017, mainly due t
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 • Health and safety performance also tend to correlate with operational performance • The total recordable injury rate in 2018 is 2.2 - 15 H1 injuries and
Slide 5: Delivering on strategy – 2018 highlights
Delivering on strategy – 2018 highlights • Strong growth in 2018 – operating income up 21% Leader in attractive Material presence in • Leading positions in China – silicones capacity further markets the Chinese market increased and strengthened positions in specialty markets • Foundry Products with
Slide 6: Growth and specialisation
Growth and specialisation Elkem continues to pursue its strategy for growth and specialisation within all product areas • High focus on R&D with more than 80 new products launched by the Silicones division in 2018. New R&D centre to be built in Lyon • Several silicones specialisation projects ongoin
Slide 7: Operational efficiencies and synergies
Operational efficiencies and synergies • Accelerated improvement programme initiated to counter weaker market conditions - Cost initiatives based continuous improvement methodology - Strict prioritisation of reinvestments and other investments • Step wise debottlenecking project evaluated in Xinghuo
Slide 8: Silicones - market update
Silicones - market update SHARP DECLINE IN CHINESE DMC PRICES IN 4Q-2018 RESPONSE TO CHANGING MARKET CONDITIONS • DMC prices in China down by more than 30% since end of 3Q-2018 • Elkem continues its focus on specialisation - Annual contracts for downstream specialities closed at same or • DMC prices
Slide 9: Silicon and ferrosilicon – market update
Silicon and ferrosilicon – market update SILICON – PRICES EXPECTED TO STABILISE FERROSILICON – PRICES DOWN FROM GOOD LEVELS • Reference price for silicon (Si99) of EUR 1,845 by end of 4Q-18 • Reference price for ferrosilicon (FeSi75) EUR 1,262 by end of 4Q-18 - Average prices down by 5% from previou
Slide 10: Elkem group - Good quarter in challenging markets
Elkem group - Good quarter in challenging markets OPERATING REVENUE IN LINE WITH 4Q LAST YEAR ... SLIGHTLY LOWER EBITDA AND EBITDA MARGIN … … SILICONES PARTLY OFFSET BY OTHER DIVISIONS … DUE TO LOWER VOLUMES AND SPECIAL ITEMS (*) Waterfall based on external sales 10
Slide 11: Elkem group – 2018 an extraordinary year
Elkem group – 2018 an extraordinary year OPERATING INCOME INCREASED BY 21% FROM 2017 … RECORD HIGH EBITDA AND EBITDA MARGINS … … MAINLY EXPLAINED BY SILICONES AND FOUNDRY … MAINLY DUE TO HIGHER SALES PRICES AND VOLUMES 11
Slide 12: Elkem group - Excellent financial position
Elkem group - Excellent financial position CONSOLIDATED KEY FIGURES COMMENTS (NOK million, except where specified) 4Q 2018 4Q 2017 YTD 2018 YTD 2017 FY 2017 Total operating income 6,265 6,364 25,887 21,403 21,403 • Other items NOK -112 million EBITDA 974 1,078 5,793 3,188 3,188 - Mainly consist of n
Slide 13: Silicones – Weaker market sentiment
Silicones – Weaker market sentiment • Sales revenue down 11% compared to 4Q last year due to lower sales of core products in China • Lower sales prices for core products partly compensated by higher prices for specialities • Positive effects from lower raw material prices in China 13
Slide 14: Silicon Materials – Good result in declining market
Silicon Materials – Good result in declining market • Stable revenue and EBITDA compared 4Q to last year • Lower sales volumes due to Yongdeng upgrade • Realised sales prices higher than 4Q last year despite lower reference prices • Generally higher raw material costs 14
Slide 15: Foundry Products – Affected by special items
Foundry Products – Affected by special items • Stable operating income compared to 4Q last year • Sales prices and volumes fairly stable compared to 4Q last year • EBITDA in 4Q negatively impacted by special items and one-offs of MNOK 45 15
Slide 16: Carbon – Best year ever
Carbon – Best year ever • The division’s best year ever, record high revenue and EBITDA • Revenue growth driven by higher sales prices, partly offset by increased raw material costs • EBITDA in 4Q negatively impacted by special items and one-offs of MNOK 10 16
Slide 17: Elkem group - Dividend in line with policy
Elkem group - Dividend in line with policy EARNINGS PER SHARE (EPS) – NOK PER SHARE EQUITY RATIO • EPS per share amount to NOK 0.64 in 4Q-2018 • Equity amounts to NOK 13.7 billion by end of 4Q-2018 - EPS YTD 2018 is NOK 5.74 - Increase of NOK 5.2 billion from IPO proceeds and net profit • Proposed d
Slide 18: Elkem group – Low leverage and financial flexibility
Elkem group – Low leverage and financial flexibility NET INTEREST BEARING DEBT (NIBD) (1) MATURITY PROFILE • Net interest bearing debt of NOK 3.3 billion by end of 4Q-18 • New 3-year bond loan NOK 1,750 million in the Norwegian market and EUR 215 million in the Schuldschein market on 3 to 7-year mat
Slide 19: Elkem group - Solid cash flow generation
Elkem group - Solid cash flow generation CASH FLOW FROM OPERATIONS INVESTMENTS • Cash flow from operations(1) was NOK 1,349 million in 4Q-2018, up • Reinvestments of NOK 389 million in 4Q-18 from the corresponding quarter last year - Reinvestments in 2018 of NOK 1,064 million, 84% of depreciations •
Slide 20: Elkem meeting its financial targets
Elkem meeting its financial targets Target metric Financial target Performance LTM 4Q-2018 Revenue growth 5 - 10% 21% EBITDA margin (%) 15 - 20% 22% Reinvestments % of DA 80 - 90% 84% Debt leverage ratio 1.0 - 2.0x 0.6 Dividend target 30 - 50% of net profit NA • Strong revenue growth in 2018, explai
Slide 21: Outlook
Outlook • Elkem’s fundamental position continues to be strong based on favourable market positions and strong financials • Current market sentiment is weak, partly due to seasonality e.g. in construction • Market prices have stabilised and are likely to increase after first quarter • 1Q-2019 expecte
Slide 22: 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 23: Appendix
Appendix 23
Slide 24: Currency and currency sensitivity
Currency and currency sensitivity CURRENCY CURRENCY DEVELOPMENT • Cash flow is exposed to revenues and costs in different • The NOK has been relatively stable against the major currencies. The main currencies are EUR and USD currencies in 2018 - EUR - net cash flow approx. EUR 360 million • Compared
Slide 25: 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 26: Delivering your potential
DELIVERING YOUR POTENTIAL SEORD OO 2 Oe e eee.