Elkem Asa · OSL:ELK
Elkem Asa — Investor Presentation (April 2021)
47 slides from Elkem Asa's investor presentation, Apr 26, 2021
Slide 1: Investor presentation
Investor presentation 26 April 2021
Slide 2: Disclaimer (I/II)
Disclaimer (I/II) By reading this presentation or attending any meeting or oral presentation held in relation thereto, you (the "Recipient") agree to be bound by the following terms, conditions and limitations. These materials have been prepared by Elkem ASA (the "Company" and together with its dire
Slide 3: Disclaimer (II/II)
Disclaimer (II/II) None of the Company, the Joint Managers or any of their affiliates accepts or will accept any responsibility, duty of care, liability or obligation for providing any Recipient with access to additional information, for updating, modifying or otherwise revising these materials or a
Slide 4: Summary of key risk factors
Summary of key risk factors An investment in the Company, thus the Offer Shares, involves inherent risk. Prospective investors should carefully consider the risk factors contained in this presentation before making an investment decision. The risks and uncertainties described below are the assumed m
Slide 5: Elkem to further strengthen its Silicones position in Asia
Elkem to further strengthen its Silicones position in Asia ▪ Brownfield expansion of silicones capacity in China representing a +50% net annual capacity increase with significantly higher quality and improved efficiency & sustainability ▪ Clear link to Elkem’s strategy by strengthening its fully int
Slide 6: Elkem is a market leader in silicon-based advanced material solutions
Elkem is a market leader in silicon-based advanced material solutions – with a global, integrated production footprint Elkem in brief Revenue split Overview of business segments and key initiatives Silicones Silicon Products Carbon Solutions Fully integrated silicones manu- Global producer and provi
Slide 7: Proven track-record of integration and downstream specialisation
Proven track-record of integration and downstream specialisation in recent years – continued focus going forward ✓ Proven track-record of successfully expanding up-and downstream, organically, and through targeted downstream M&A Integration and ✓ Focus to ensure a robust, quality upstream position t
Slide 8: Investment strengthens Elkem's strategy to be a leading integrated silicones provider
Investment strengthens Elkem’s strategy to be a leading integrated silicones solutions provider Xinghuo Building blocks for an integrated player Key success factors for an integrated player expansion R&D and technology platforms enabled in order to further drive specialisation ✓ R&D and tech platfor
Slide 9: Sustainable production investment
New capacity depicting very strong economics and a substantial improvement in environmental performance Profitability +35% EBITDA margin investment Attractive Capacity expansion 50% capacity increase Energy use ~57% reduction Sustainable production Raw materials ~11% reduction use Solid waste ~30% r
Slide 10: Elkem's competitive strengths
Elkem’s competitive strengths 1 2 Leading Strong positions in presence in the attractive fastest growing segments markets 6 3 Integrated Strong financial value chain position and and leading cost outlook positions 5 4 ESG focused strategy & R&D capabilities production for focused footprint specialis
Slide 11: Update on Elkem – the global, integrated leader
▪ Update on Elkem – the global, integrated leader in silicon-based advanced material solutions ▪ Strategic capacity expansion to position Silicones for further profitable growth ▪ Concluding remarks ▪ Appendix 11
Slide 12: Leading positions across all segments with a large global footprint
Leading positions across all segments with a large global footprint driving scale benefits Top positions across the entire value chain1 Large & diversified footprint to drive scale benefits Silicones Silicon Products Carbon #3 #2 #3 #1 #1 Globally China Globally Globally Globally ex. China ex. China
Slide 13: Elkem benefits well from a multitude of global megatrends
Elkem benefits well from a multitude of global megatrends underpinning a higher and increasingly diversified demand Several global megatrends… ….driving demand for silicones across a range of end-markets Sustainability Health & Personal Care Chemicals Growing energy 4% 2% 1% demand 10% Rapid 35% urb
Slide 14: Elkem continues to develop its global integrated silicones position
Elkem continues to develop its global integrated silicones position with a clear stronghold in the fastest-growing market Focus on strengthening silicones position Particular stronghold in the fastest growing market Market size (BUSD) and CAGR (‘20-23E) Largest silicones companies (net capacity)1 ~8
Slide 15: Strong silicones cost position improved with expansion
Strong silicones cost position improved with expansion enhancing cost competitiveness, quality & specialisation Current Xinghuo Expansion Post expansion Indexed comparison of variable cost (base = current Xinghuo cash cost) ~100% ~90% ✓ Competitive cost position across the value chain from silicon m
Slide 16: Significant investments in R&D capabilities and downstream silicones
Significant investments in R&D capabilities and downstream silicones to accelerate specialisation Organic projects (examples) Downstream M&A ▪ Consumer goods products for tissue softening, hygiene and labels ▪ Tech driven downstream silicones producer ▪ Power & Mobility products for ▪ High-end speci
Slide 17: Clear integrated strategy and proven ability to drive volumes in downstream silicones
Clear integrated strategy and proven ability to drive volumes in downstream silicones Focused strategy to enhance silicones growth and profitability Silox consumed by downstream Upstream Intermediaries Downstream silicones (ktpa) Silox Core Products Specialty silicones Large total market, addressabi
Slide 18: Elkem holds a leading industry sustainability profile
Elkem holds a leading industry sustainability profile, with further focus on improving its performance Ranked as top 5% of 5,800+ companies by CDP – no other major silicones players on the list Recognised as industry leader in sustainable production ~83% Focus on renewable renewable energy usage ene
Slide 19: Electrification constitutes an important growth area for Elkem
Electrification constitutes an important growth area for Elkem and a significant green value creation opportunity Elkem Advanced Battery Materials – shaping the future of batteries Key highlights Large, untapped market opportunity in battery materials Sustainable, energy efficient production process
Slide 20: Update on Elkem – the global, integrated leader
▪ Update on Elkem – the global, integrated leader in silicon-based advanced material solutions ▪ Strategic capacity expansion to position Silicones for further profitable growth ▪ Concluding remarks ▪ Appendix 20
Slide 21: Strategic investment to fortress and grow production footprint
Strategic investment to fortress and grow production footprint and accelerate specialisation Overview of expansion Key selected highlights ✓ Sustainable platform for long-term growth Total MNOK ~3,8001 ~2/3 of the total investment expected to be evenly distributed ▪ Significant capacity expansion to
Slide 22: A highly modern facility integrated into Xinghuo Silicones
A highly modern facility integrated into Xinghuo Silicones – state-of-the-art process technology 22
Slide 23: Supportive fundamentals as the world needs more silicones
Backdrop: Supportive fundamentals as the world needs more silicones – Elkem is preparing for profitable growth Supply demand balance to remain balanced Expansion improving over-the-cycle margins Estimated ‘000 tonnes of silox equivalent1 DMC Index in China (‘000 RMB / mt)2 | Annual average Supply Ch
Slide 24: Capacity expansion enables Elkem to increase its addressable market
Capacity expansion enables Elkem to increase its addressable market and position in high-value specialties Upstream Downstream Selected end-markets Key product characteristics Silanes M1 Specialty & standard Fumed silica New facility enabling Methyl chloride specialisation through: ▪ High quality an
Slide 25: Elkem to build volumes in high-value segments
Elkem to build volumes in high-value segments Improved quality creating downstream opportunities Visible pipeline of downstream projects Personal care project High purity of Products towards more ✓ finished product demanding customers Low-volatiles for the personal care industry; 8 ktpa replaces pro
Slide 26: Clear pipeline of downstream projects to offtake additional upstream production
Clear pipeline of downstream projects to offtake additional upstream production Active and advanced strategy for offtake upstream offtake Key takeaways 2020 - 2026 Upstream volume available including capacity expansion ramp-up (China) (cyclics / linears) ▪ Increased production of linears allows for
Slide 27: A new and sustainable technology with higher efficiency and lower emissions
A new and sustainable technology with higher efficiency and lower emissions Strong improvement in environmental impact compared to current footprint and industry levels Energy consumption Raw materials consumption Solid waste Raw materials consumption kWh / ton product Ton raw materials / ton produc
Slide 28: Project schedule with planned production start-up in H1 2024
Project schedule with planned production start-up in H1 2024 Project timeline Highlights from evaluation1 2019 2020 2021 2022 2023 2024 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Execution FEL1,2 FEL3 Approval long lead (CWS) Detail design Project approval Procurement /
Slide 29: Update on Elkem – the global, integrated leader
▪ Update on Elkem – the global, integrated leader in silicon-based advanced material solutions ▪ Strategic capacity expansion to position Silicones for further profitable growth ▪ Concluding remarks ▪ Appendix 29
Slide 30: Strategic silicones expansion plays to Elkem's strengths
Strategic silicones expansion plays to Elkem’s strengths Platform for ▪ Key for growing silicones market position in the fastest growing market downstream growth ▪ Add captive supply to drive growth in downstream specialties 1 2 3 Leading positions in Enhanced cost ▪ Significant reduction in cost pe
Slide 31: Update on Elkem – the global, integrated leader
▪ Update on Elkem – the global, integrated leader in silicon-based advanced material solutions ▪ Strategic capacity expansion to position Silicones for further profitable growth ▪ Concluding remarks ▪ Appendix 31
Slide 32: Management
Management Michael Koenig Morten Viga Katja Lehland Asbjørn Søvik CEO CFO SVP of Human Resources SVP of Business development ■ With Elkem since: 2019 ■ With Elkem since: 2001 ■ With Elkem since: 2006 ■ With Elkem since: 1995 (chairperson since 2016) ■ Prev. experience: Financial ■ Prev. experience:
Slide 33: Board of Directors
Board of Directors Hao Zhigang Dag J. Opedal Olivier de Clermont-Tonnerre Yougen Ge Anja-Isabel Dotzenrath Caroline Sainte-Marie Chairperson (representing Deputy Chair (independent) Board Member Board Member (representing Board Member (independent) Board Member (independent) major shareholder) (repr
Slide 34: Elkem history
Elkem history Foundation Expansion Internationalisation Growth & specialisation ▪ Sam Eyde establishes Elkem ▪ Producer of aluminium ▪ International expansion; steel ▪ Bluestar acquired Rhodia and ferroalloys Silicones, BSI established ▪ Development of electro- ▪ Partner with Alcoa in 2007 metallurg
Slide 35: P&L financials – Group
P&L financials – Group MNOK 2017A 2018A 2019A 2020A Sales revenue 20,715 24,969 22,246 24,025 Other operating revenue 236 244 392 631 Share of profit from equity accounted companies 35 18 31 35 Total operating income 20,985 25,230 22,668 24,691 Raw material and energy for smelting -10,407 -11,367 -1
Slide 36: P&L summary financials – Segments
P&L summary financials – Segments MNOK 2017A 2018A 2019A 2020A Total operating Income Silicones 10,026 13,059 11,274 12,680 Silicon Products 10,557 11,587 10,933 11,578 Carbon Solutions 1,586 1,895 1,839 1,870 Other 488 449 539 476 Eliminations -1,671 -1,759 -1,916 -1,913 Total 20,985 25,230 22,668
Slide 37: Balance sheet – Group
Balance sheet – Group MNOK 2017A 2018A 2019A 2020A Assets Property, plant and equipment 11,950 12,445 13,202 14,131 Right-of-use assets 0 0 580 875 Goodwill 326 342 466 919 Other non-current assets 1,718 1,687 1,444 2,090 Total non-current assets 13,995 14,474 15,692 18,015 Inventories 4,099 5,467 5
Slide 38: Cash flow statement – Group
Cash flow statement – Group MNOK 2017A 2018A 2019A 2020A Operating profit (loss) 1,971 4,142 1,384 827 Amortisation, depreciation and impairment 1,261 1,270 1,467 1,727 Changes in working capital 47 -712 649 232 Equity accounted companies -9 14 -4 -7 Changes in fair value of commodity contracts -79
Slide 39: Risk factors (I/VIII)
Risk factors (I/VIII) An investment in the Company, thus the Offer Shares, involves inherent risk. Prospective investors should carefully consider the risk factors contained in this presentation before making an investment decision. The risks and uncertainties described below are the assumed most re
Slide 40: Risk factors (II/VIII)
Risk factors (II/VIII) 2.1.6 Elkem operates in a highly competitive industry The markets for silicones, silicon materials and silicon-based alloys are global, capital intensive and highly competitive. Elkem faces competition on a range of factors within all of the markets in which it operates, both
Slide 41: Risk factors (III/VIII)
Risk factors (III/VIII) 2.1.10 Elkem’s operations are subject to the inherent hazards, disruptions to its business and other risks associated with silicones and metals manufacturing and the associated chemical production processes, as well as mining, which in turn could result in materially increase
Slide 42: Risk factors (IV/VIII)
Risk factors (IV/VIII) 2.1.13 Anti-dumping duties and laws for silicon and ferrosilicon imposed by the EU and the U.S. may expire or be further extended to the disadvantage of Elkem The EU has had anti-dumping duties on imported Chinese silicon since 1990. The level is currently at 16.8% for most of
Slide 43: Risk factors (V/VIII)
Risk factors (V/VIII) 2.1.18 Elkem receives each year substantial amounts under the EU’s CO2 quotas compensation scheme which may be phased out Carbon dioxide is one of the main emissions resulting from Elkem's production operations. Elkem's European operations are therefore subject to the EU's CO2
Slide 44: Risk factors (VI/VIII)
Risk factors (VI/VIII) 2.1.24 Elkem may have difficulty accessing credit in sufficient time, on acceptable terms, or at all, and is vulnerable to interest rate increases The industries in which Elkem operates are cyclical and highly capital intensive and Elkem is exposed to risks related to the avai
Slide 45: Risk factors (VII/VIII)
Risk factors (VII/VIII) 2.1.30 Elkem’s joint arrangements partners may have interests that differ from Elkem’s and may take actions that adversely affect Elkem Elkem currently participates in several joint arrangements, and may enter into other joint arrangements or co-investment projects with third
Slide 46: Risk factors (VIII/VIII)
Risk factors (VIII/VIII) 2.2 Risks related to the Shares 2.2.1 China National Chemical Corporation has significant voting power China National Chemical Corporation (“ChemChina”), through its subsidiary, Bluestar Elkem International Co.Ltd S.A ("Bluestar"), control more than 50% of the Shares. Accord
Slide 47: Delivering your potential
« Elkem Delivering your potential