Eramet Sa · EURONEXT:ERA
Eramet Sa — H1 2021 Earnings Presentation
64 slides from Eramet Sa's earnings presentation, Jul 29, 2021
Slide 1: 2021 half-year results
2021 half-year results Christel BORIES Chair and CEO 29 July 2021
Slide 2: Disclaimer
Disclaimer Certain information contained in this presentation including any information on Eramet’s plans or future financial or operating performance and any other statements that express management’s expectations or estimates of future performance, constitute forward-looking statements. Such state
Slide 3: Contents
Contents Introduction 1– CSR commitments 2– Financial results 3– Operational performance 4– Strategic transformation Conclusion and outlook 3 Eramet – 2021 half-year results
Slide 4: Introduction
Introduction _ ————— aT . 7 ai ~~
Slide 5: Significant improvement of all financials in H1 leading to a reduction in net debt
Significant improvement of all financials in H1 leading to a reduction in net debt vs 2020 High-Performance Mining & Metals Alloys division Erasteel division 18% 5% 82% Sales €1,878m Aubert & Duval +11% vs H1 2020 (€1,687m) 13% €1,878m Mineral Sands BU Manganese BU 7% 47% Nickel BU EBITDA €293m 27
Slide 6: H1 Group results significantly up mainly thanks to strong intrinsic performance
H1 Group results significantly up mainly thanks to strong intrinsic performance of operations Solid intrinsic performance, despite particularly poor weather conditions in New Caledonia; volume growth and adjustment of A&D’s cost structure c.+€110m EBITDA impact vs H1 2020 Strong rebound of Eramet's
Slide 7: Favourable price environment partially offset by higher freight costs and currency impact
Favourable price environment overall, partially offset by significantly higher freight costs and negative currency impact ➔ Flat Mn ore prices CIF China 44% (+2% in $, -7% in €) Strong rise in Mn alloys prices Favourable price +€64m environment (+33% for MC FeMn Europe vs H1 2020) Mn Alloys price
Slide 8: +€63m of intrinsic progress in the Mining & Metals division in H1 2021
+€63m of intrinsic progress in the Mining & Metals division in H1 2021, despite more adverse seasonality Manganese BU Nickel BU Mineral Sands BU SLN Weda Bay Continued organic Particularly poor Swift ramp-up of 362 kt of mineral growth at Moanda weather conditions, mining operations at sands produce
Slide 9: CSR commitments
1 CSR commitments « Become a reference for the responsible transformation of the Earth's mineral resources, for living well together »
Slide 10: A corporate citizen committed to a sustainable future
A corporate citizen committed to a sustainable future Commitment to Commitment to people Commitment to the planet responsible economy Embedded into Eramet’s management system ➔ Good progress on the 13 objectives of the CSR roadmap ➔ CSR roadmap targets integrated for the second year in the Long-Term
Slide 11: Significant improvement in safety for 5th year in a row
Significant improvement in safety for 5th year in a row… Eramet accident frequency rate (FR21,2) 14 13 13.4 12 Divided by ~6 11 since 2016 10 10.9 9 8.3 8 7 6 5.4 5 4.1 4 3 2.4 -40% over H1 2021 2 vs H1 2020 1 0 2016 2017 2018 2019 2020 H1 2021 … But still severe accidents and fatalities among the G
Slide 12: H1 2021 CSR achievements: delivering on our roadmap and raising the bar
H1 2021 CSR achievements: delivering on our roadmap and raising the bar Climate ISO14001 On-track to achieve our 2023 reduction target in products’ CO2 intensity1 certification for 100% of the In H1 2021, SBTi approval on climate targets mining sites set in 2020: > 40% reduction of absolute scope 1
Slide 13: Eramet CSR performance recognised by the Extra-Financial rating agencies
Eramet CSR performance recognised by the Extra-Financial rating agencies 2021 MSCI Corporate rating 2020 ISS ESG Corporate rating • Score A (BBB in 2020) • Prime status • Among top 30% of Mining and Metals • 1st decile in ISS ESG Mining & Metals panel • Score B- (C in 2017) 2020 CDP Climate change 2
Slide 14: Financial results
2 Financial results
Slide 15: H1 2021 Group financial results up strongly
H1 2021 Group financial results up strongly €m H1 2021 H1 2020 Sales 1,878 1,687 EBITDA 293 120 % Sales 16% 7% Current operating income 159 (32) % Sales 8% n.a. Net income – Group share 53 (623) €m 30/06/2021 31/12/2020 Net debt (1,244) (1,333) Shareholders’ equity 1,059 997 Gearing for covenant pur
Slide 16: H1 Group EBITDA at €293m: significant improvement of least performing assets
H1 Group EBITDA at €293m: significant improvement of least performing assets of Eramet’s portfolio €293m 1 Manganese BU strong performance €120m > +60% driven by the ore organic growth and the sharp increase of alloys prices €280m 1 2 €337m Steady performance for Mineral Sands €234m M&M division BU
Slide 17: Positive intrinsic operating performance; price impact partially offset by input costs and currency
Positive intrinsic operating performance; positive price impact partially offset by input costs and currency 9 +€112m -55 (€m) Intrinsic operating performance 117 -24 6 o/w c.+€63m M&M division 7 -45 293 c.+€52m HPA division -5 63 5 48 4 22 -11 7 3 120 46 2 1 +€61m Other external factors H1 2020 Mn
Slide 18: Net income – Group share of €53m, incl. €77m from Weda Bay
Net income – Group share of €53m, incl. €77m of share in income from Weda Bay €m H1 2021 H1 2020 Sales 1,878 1,687 Current operating income 159 (32) Other operating income and expenses 1 (27) (459) Financial result (82) (82) Share in income from associated companies 2 77 7 Pre-tax result 127 (566) I
Slide 19: Decrease in current cash capex in H1 resulting from strict control on investments
Decrease in current cash capex in H1 resulting from strict control on investments in 2020 1 Industrial cash capex (€m) H1 growth Capex to support fast-paced cash 450 contributive organic growth, o/w: 427 €23m related to manganese ore volume 400 growth at Comilog 81 362 €13m related to Setrag Renovat
Slide 20: Strong Free Cash-Flow generation driven by M&M division
Strong Free Cash-Flow generation driven by M&M division, and HPA division strong cash burn reduction (€m) Manganese BU 157 M&M FCF GCO1 (+€45m) H1 2021 Mineral Sands BU 58 TTI (+€13m) €222m €78m in H1 2020 €70m excl. lithium project Weda Bay Nickel BU 7 FCF A&D2 (-€38m) Erasteel (-€9m) HPA division
Slide 21: Decrease in net debt reflecting strong M&M cash generation
Decrease in net debt reflecting strong M&M cash generation, o/w +€70m from Weda Bay (€m) 5 -90 -10 -14 -15 57 -60 -27 337 1 -59 2 -33 3 4 -1,244 -1,333 2020 Net EBITDA Change Cash capex EBITDA Change Cash capex Op. CF Weda Bay Net interest Tax paid Other H1 2021 Debt 1 in WCR in WCR Holding 3 divide
Slide 22: High cash position enabling early repayment
High cash position enabling early repayment Group financial liquidity (€m) Proforma financial liquidity at 30 June 2,000 1,944 2021: 1,856 1,733 211 Proforma RCF > €981m RCF maturing 2024, drawn down 1,500 500 in March 2020 as a precaution following health crisis > €500m early repayment in July 2021
Slide 23: No major debt maturity until 2024 on a pro-forma basis
No major debt maturity until 2024 on a pro-forma basis Group pro forma1 gross debt including IFRS 16 equal to €2,477m at 30 June 2021 €243m maturing in 2021 out of which €154m of WC financing debt, commercial papers and overdrafts to be rolled over Average maturity of Group’s debt: 3.4 years About 8
Slide 24: Operational performance
Operational 3 performance
Slide 25: Mining and Metals division
Mining and Metals division
Slide 26: Manganese BU
Manganese BU
Slide 27: Global carbon steel production significantly up together with manganese demand
Global carbon steel production significantly up together with manganese ore and alloys demand Global carbon steel production up +13% due to Global manganese ore consumption up +10% at strong economic recovery 10.5 Mt due to the rise in steel production China up +12% thanks to dynamic automotive Glob
Slide 28: Manganese alloys market prices surged in H1
Manganese alloys market prices surged in H1, with very positive impact on Q2-Q3 Group sales, while ore prices flat (in $) 1 2 Strong rise in average Mn alloys prices as demand Mn ore CIF China 44% at c.$5.1/dmtu in H1 2021, outpaces supply in H1 2021: MC FeMn at €1,886/t stable vs H1 2020 (+2% in $/
Slide 29: Organic growth in manganese ore production up 13% in H1 2021
Organic growth in manganese ore production up 13% in H1 2021, tension on rail transport being adressed Continued strong operational performance at Moanda mine Manganese ore production up +13% to 3.1 Mt thanks to ramp-up at Okouma plateau Volumes transported at 2.9 Mt, stable vs particularly high lev
Slide 30: Higher cost of freight weighs significantly on manganese ore activity
Higher cost of freight weighs significantly on manganese ore activity Freight cost for manganese ore includes chartering costs (based on S5 Route time charter rate1 ) and fuel costs H1 2021 manganese ore freight costs surged by more than 60% vs H1 2020, pushed by the exceptional rise in chartering c
Slide 31: Manganese alloy production up in H1, with a favourable mix
Manganese alloy production up in H1, with a favourable mix Manganese alloy production up +7% with a higher share of refined alloys (55%) Sales volumes up +3% to 357 kt Strong increase in manganese alloy margins reflecting higher selling prices(+€64m) , stable consumption prices (manganese ore), and
Slide 32: Nickel BU
ickel BU Lt N
Slide 33: Strong recovery in stainless steel production and nickel consumption
Strong recovery in stainless steel production and nickel consumption; Indonesian NPI still on the rise Strong growth in stainless steel production in Primary nickel production up 12% to 1.3 Mt-Ni H1 2021 (+28%) vs H1 2020 hard hit by the Rapid growth in Indonesian NPI production pandemic (+81% at 43
Slide 34: LME price at high levels in H1 2021
LME price at high levels in H1 2021 1 H1 2021 average LME price at $7.93/lb, up 40% vs H1 2020. High price driven by rising demand from stainless steel sector and strong growth perspectives for nickel in EV batteries Ferronickel price up 43% (+31% in €) in H1 2021 2 LME and SHFE inventories at 239 k
Slide 35: FeNi / NPI trade at a discount vs LME since H2 2019
FeNi / NPI trade at a discount vs LME since H2 2019 Discounts increased in 2020 due to weak demand caused by the crisis and large NPI supply growth from Indonesia In H1 2021, despite growing more than 40%, NPI prices still suffered from a c.10% discount vs LME FeNi / NPI discounts are expected to re
Slide 36: Nickel ore price at high levels as global ore supply limited in H1
Nickel ore price at high levels as global ore supply limited in H1 due to seasonality 1 1.8% nickel ore price at high levels in H1 2021 at $95/wmt, up 39% vs H1 2020 Tight nickel ore market due to unfavorable seasonality limiting ore supply from the Philippines and New Caledonia 2 Ore stocks in Chin
Slide 37: Low production at the plant and unfavourable €/$ FX rate impacted SLN cash cost
Low production at the plant and unfavourable €/$ FX rate negatively impacted SLN cash cost Mine production volumes (Mt) Plant production volumes (kt-Ni) +16% +1% 5.4 54.3 4.7 +5% 47.4 47.8 4.0 -22% 2.2 2.3 23.8 18.5 2018 2019 2020 H1 H1 2018 2019 2020 H1 H1 2020 2021 2020 2021 Slown down by blocade
Slide 38: Fully securing all rescue plan levers critical to a sustainable future for SLN
Fully securing all rescue plan levers critical to ensuring a sustainable future for SLN At stake in H2: 1 Continue to increase ore exports, for a total capacity up to 6 Mwmt/year × Additional 2 Mwmt/year government authorisation still to be granted 2 Long-term solution for Doniambo’s power Need to r
Slide 39: Weda Bay: record mining production and contribution of €70m to Group FCF
Weda Bay: record mining production and significant contribution of €70m to Group FCF in H1 Exceptional mine ramp up and full capacity Mining production > 12.0 (Mwmt) at ferroalloys plant in H1 7 Mwmt of nickel ore produced in H1 (c.4,000 people employed on mine site) ~ x4 4.2 Mwmt of ore sold to oth
Slide 40: Mineral Sands BU
Mineral Sands BU
Slide 41: Zircon prices down 1% overall in H1, but 6% increase in Q2 vs Q1
Zircon prices down 1% overall in H1, but 6% increase in Q2 vs Q1 supported by rebounding demand Robust global demand for zircon in H1 2021 thanks to strong consumption in ceramics market in China and Europe Zircon production increased at a slower pace, leading to a market deficit in H1 Average price
Slide 42: Strong demand for TiO2 pigments, tight feedstock market
Strong demand for TiO2 pigments, tight feedstock market to reflect positively on prices in H2 Strong global demand for TiO2 pigments in H1 2021, driven by global economic growth Significant demand for CP1 grade titanium slag however not yet reflected on prices in H1: -6% (-13% in €) at $753/t in H1,
Slide 43: Strong operational performance in Senegal and high titanium slag sales in Norway
Strong operational performance in Senegal and high titanium slag sales in Norway Strong operational performance at GCO in Senegal: sharp Titanium slag production level at increase in OEE rate (+12% since 2018), compensating lower TTI in Norway in line with plant grade of the deposit nominal capacity
Slide 44: High-Performance Alloys division
High-Performance Alloys division
Slide 45: Continued aerospace market crisis in 2021
Continued aerospace market crisis in 2021 Aerospace: 58% of A&D sales Global air traffic scenarios2 (vs c.70% in H1 2020) Others1 42% €245m 58% Aerospace 1 Incl. Defense and Energy market sales Global air traffic still down c.65%3 vs pre-crisis levels, despite improvements recently Aircraft producti
Slide 46: Significant improvement at A&D reflecting cost adjustments
Significant improvement at A&D reflecting cost adjustments to lower level of activity H1 2021 aerospace sales down -24% as sales of numerous parts A&D1 Sales by segment penalized by aerospace crisis 642 -9% Energy and Defense sales up +74% 539 2018-2021 Aerospace sales H1 2021 monthly flexed expendi
Slide 47: Recovery at Erasteel: €3m EBITDA in H1 2021
Recovery at Erasteel: €3m EBITDA in H1 2021 Erasteel sales by segment High-speed steel sales up +17%, back above pre-crisis levels thanks to renewed economic growth, particularly in automotive 205 sector, and market share gains +20% Recycling activity continued to grow (€10m vs €6m in H1 2020) 141 Y
Slide 48: Strategic transformation
4 Strategic transformation
Slide 49: 2021: continued strategic repositioning towards profitable growth
2021: continued strategic repositioning towards profitable growth Good progress Strong cash-generating growth No cash outflows in the 2021 critical outcome short term 1 2 3 EXPAND our portfolio in FIX / REPOSITION our GROW in our attractive metals for the energy least performing assets businesses tr
Slide 50: Conclusion & outlook
Conclusion & outlook
Slide 51: Good momentum in H1, well oriented markets supporting strong H2 performance
Good momentum in H1, well oriented Mining & Metals markets and favourable seasonality supporting strong H2 performance Growth ramp-up and favourable seasonality will boost mine production in H2 Weda-Bay should continue delivering high production and cash-flows Manganese alloys will operate at very h
Slide 52: Q&A
Q&A
Slide 53: Appendices
Appendices
Slide 54: Manganese BU – Key figures
Manganese BU – Key figures In €m H1 2021 H1 2020 Sales 887 839 EBITDA 280 234 Current Operating Income 219 179 Cash Capex 71 82 Operating cash flow1 218 152 FCF 157 119 54 Eramet – 2021 half-year results 1 Sum of EBITDA, Cash capex, Change in Op. WCR and Change in other WCR
Slide 55: Nickel BU – Key figures
Nickel BU – Key figures In €m H1 2021 H1 2020 Sales 515 366 EBITDA 10 (70) Current Operating Income (30) (114) Cash Capex 12 18 Operating cash flow1 (19) (42) FCF 7 (88) 55 Eramet – 2021 half-year results 1 Sum of EBITDA, Cash capex, Change in Op. WCR and Change in other WCR
Slide 56: Mineral Sands BU – Key figures
Mineral Sands BU – Key figures In €m H1 2021 H1 2020 Sales 138 139 EBITDA 47 44 Current Operating Income 25 23 Cash Capex 8 6 Operating cash flow1 53 50 FCF 51 34 56 Eramet – 2021 half-year results 1 Sum of EBITDA, Cash capex, Change in Op. WCR and Change in other WCR
Slide 57: High-Performance Alloys division - Key figures
High-Performance Alloys division - Key figures A&D and Erasteel In €m H1 2021 H1 2020 Sales 337 345 EBITDA (10) (66) Current Operating Income (18) (93) Cash Capex 15 26 Operating cash flow1 (40) (124) FCF (47) (164) 57 Eramet – 2021 half-year results 1 Sum of EBITDA, Cash capex, Change in Op. WCR an
Slide 58: CRU price trends in manganese alloys in Europe
CRU price trends in manganese alloys (refined and standard) in Europe CRU price trends for manganese alloys in Europe between January 2015 and June 2021 €/t 2,500 H = +33% 2,000 FY = -8% H = +25% 1,500 H = +26% 1,000 500 FY = -8% FY = -4% 0 2015 2016 2017 2018 2019 2020 2021 Medium-carbon ferromanga
Slide 59: Group EBITDA sensitivity to market prices
Group EBITDA sensitivity to market prices SENSITIVITIES Change Annual impact on EBITDA Manganese ore prices (CIF China 44%) +$1/dmtu c.€210m1 Manganese alloy prices +$100/t c.€60m1 Nickel prices (LME) +$1/lb c.€80m1 Nickel ore prices (CIF China 1.8%) +$10/wmt c.€30m1 Exchange rates -$/€0.1 c.€160m O
Slide 60: Cash-flow table
Cash-flow table €m H1 2021 H1 2020 Operating activities EBITDA 293 120 Cash impact on items under EBITDA (128) (177) Cash from operating activities 165 (57) Change in WCR (10) 67 Net cash generated by operating activities (1) 155 10 Investment activities CAPEX (110) (163) Other investment flows 66 (
Slide 61: Group Balance Sheet at 30 June 2021
Group Balance Sheet at 30 June 2021 3,485 3,487 3,485 3,487 764 816 233 243 3,003 2,999 1,154 1,183 0 1 1,333 1,244 475 4881 7 31/12/2020 30/06/2021 31/12/2020 30/06/2021 Equity-Group share Derivatives Fixed assets WCR Derivatives Minority interest Net debt 1 H1 2021 WCR: €786m (operating WCR) - €29
Slide 62: Bond maturities
Bond maturities Amount at Initial €m Currency Initial amount 30/06/2021 Maturity Coupon (in m) date 2016 ODIRNAN bond issue € 100 87 perpetual 4.00% February September 2017 bond issue € 500 500 4.20% 2024 November 2019 bond issue € 300 300 May-2025 5.88% 62 Eramet – 2021 half-year results
Slide 63: Shareholding at 30 June 2021
Shareholding at 30 June 2021 Other float SORAME + CEIR 32.4% (Duval Family) 36.8% Number of shares issued 26,741,376 1.3% BRGM** 4.0% STCPI* 25.5% APE * STCPI (Société Territoriale Calédonienne de Participation Industrielle): entity owned by the New Caledonian provinces ** BRGM (Bureau de Recherches
Slide 64: Contacts
CONTACTS Director of Investor Relations Sandrine NOURRY-DABI [email protected]