Eramet Sa · EURONEXT:ERA
Eramet Sa — FY2020 Earnings Presentation
67 slides from Eramet Sa's earnings presentation, Feb 17, 2021
Slide 1: 2020 results
2020 results Christel BORIES Chair and CEO 17 February 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– Financial results 2– Operational performance 3– Strategic transformation Conclusion and outlook 3 Eramet – 2020 results
Slide 4: Introduction
Introduction
Slide 5: Outstanding operational achievements in 2020, in a major global crisis environment
Outstanding operational achievements in 2020, in a major global crisis environment Eramet's end-markets hard hit by pandemic in 2020, with a drop in metal prices, mainly manganese ore (-19% vs. 2019), and A&D penalised by aerospace crisis c.- €540m EBITDA impact In such a disrupted and difficult env
Slide 6: 4th consecutive year of significant safety improvements
4th consecutive year of significant safety improvements Eramet accident frequency rate (FR21) 14 13 13.4 12 11 10.9 10 9 -24% 8 8.3 vs 2019 7 6 5 5.4 4 FR2 divided by 3 4.1 3 2 vs 2016 1 0 2016 2017 2018 2019 2020 Strong Group mobilisation towards Tackling the pandemic safety Strict sanitary protoco
Slide 7: Strong impact of the pandemic on Group end-markets
Strong impact of the pandemic on the Group end-markets: drop in metal prices and aerospace crisis (c.-€540m EBITDA impact) Deteriorated price environment -19% on average for manganese ore1 prices ~- €360m -10% on average for ferronickel2 prices, due to significant LME discount in 2020 EBITDA impact
Slide 8: Excellent operating performance in 2020, confirming organic growth strategy
Excellent operating performance in 2020, confirming the success of the organic growth strategy €250m of intrinsic progress in 2020 vs 2019, o/w €210m in the Mining & Metals (“M&M”) division with limited impact of pandemic on mining operations 5.8 Mt of manganese 5.4 Mwmt of nickel 762 kt of mineral
Slide 9: Significant increase in EBITDA in H2, together with reduction in net debt
Significant increase in EBITDA in H2, together with a reduction in net debt vs H1 Sales €3,553m High-Performance Alloys Division Erasteel Mining and Metals Division 4% -3% vs 2019 19% 81% Aubert & Duval +11% in H2 vs H1 15% €3,553m Mineral Sands BU Manganese BU 8% 48% EBITDA €398m Nickel BU -3
Slide 10: Financial results
1 Financial results
Slide 11: 2020 Group EBITDA at €398m, driven by M&M division
2020 Group EBITDA at €398m, driven by resilient contribution of M&M division (€554m) Group €630m EBITDA 1 -37% €398m Continued solid EBITDA contribution from €560m Manganese BU, despite price drop, thanks to M&M significant increase in ore volumes division1 €442m 1 2 Mineral Sands BU driven by robus
Slide 12: EBITDA sensitive to seasonality in mining operations
In addition to metal prices, EBITDA highly sensitive to seasonality in mining operations, strengthened by organic growth High seasonality of key mining operations... 3-yrs average ore production (Mwmt) …and increasing share of mining business in Eramet’s portfolio +17% +35% Ore production volumes (1
Slide 13: EBITDA strongly affected by pandemic in 2020
EBITDA strongly affected by pandemic in 2020, despite significant operating progress in mining activities €m 2020 2019 Sales 3,553 3,671 EBITDA 398 630 % Sales 11% 17% Current operating income 106 341 % Sales 3% 9% Net income – Group share (675) (184) €m 31/12/2020 31/12/2019 Net debt (1,333) (1,304
Slide 14: Net income deeply affected by impairment
Net income deeply affected by impairment (€498m) on poor performing assets, closure or project mothballed; €50m contribution of Weda Bay €m 2020 2019 Sales 3,553 3,671 Current operating income 106 341 Other operating income and expenses (561) (118) o/w Provisions on asset impairment tests 1 (498) (2
Slide 15: Record intrinsic operating performance offset by lower prices and Covid
Record positive intrinsic operating performance more than offset by lower prices and Covid impact on operations 14 1 19 20 -52 - €305m (€m) 2 3 4 5 -106 Other external factors 246 -48 -21 630 1 -326 - €175m c.+ €250m Covid impact -14 398 79 -5 Intrinsic operating performance on operations -38 -1 6 o
Slide 16: Strict cash control in 2020
Strict cash control in 2020 1 2 Cash preservation Investment discipline -€272m improvement of WCR at Group level, Strict control over capex: i.e. -31 days of sales: 1) -€67m decrease in current cash capex in 2020 1) Decrease in inventories’ level, notably (-26% vs 2019) manganese and at A&D 2) Lithi
Slide 17: Significantly lower operating WCR at Group level
Significantly lower operating WCR at Group level, balancing aerospace crisis impact Operating1 WCR (€m) 31 Dec. 2019 30 June 2020 Aerospace crisis -4 days -27 days 31 Dec. 2020 1,003 964 -17 days -103 days -13 days 712 +98 days 596 530 440 396 399 322 M&M division HPA division Eramet2 20/19: c.-30
Slide 18: Strict control over capex: current capex down 26%
Strict control over capex as part of 2020 cash control plan: current capex down by -26% in 2020 Industrial cash capex (€m) Less than €200m of current capex: 450 427 o Safety & environment (17%), Productivity (22%) 400 81 362 o Renewal of industrial equipment, 350 maintenance (50%) 54 1 Below the €28
Slide 19: Group Free Cash-Flow close to break-even in 2020
Group Free Cash-Flow close to break-even in 2020: strong contribution of M&M offset by lithium and A&D (€m) Manganese BU 285 M&M FCF FY2020 Mineral Sands BU 68 GCO1 (+€45m) +€330m2 TTI (+€23m) o/w +€265m in H2 Nickel BU 1 Lithium Mothballed -109 HPA FCF Erasteel -21 FY2020 -€174m A&D -153 o/w -€9m i
Slide 20: Stable net debt, driven by strong H2 cash generation
Stable net debt, driven by strong H2 cash generation (€m) -3 -28 53 0 -21 38 1 19 142 1 -128 1 Lithium -199 1 one-off -1,304 -6 2 -81 322 +€57m 3 -1,333 Weda Bay Lithium -137 H2 FCF one-off 2 3 -1,535 2019 H1 Op. H1 Op. H1 WB H1 Op. H1 Op. H1 One H1 H1 H2 Op. H2 Op. H2 WB H2 Op. H2 Op. H2 One H2 202
Slide 21: High cash position at €1.9bn
High cash position at €1.9bn Incl. reimbursement of €233m of 2020 Eramet bond Drawdown lines as of 31 December 2020: Group financial liquidity (€m) Revolving credit facility ("RCF") 2,468 > €981m RCF maturing 2024 2,500 2,299 Term loan 1,941 2,000 1,856 > €350m loan granted in December with a 2- 848
Slide 22: No major debt maturity until 2024
No major debt maturity until 2024 Group gross debt including IFRS16 equal to €3,189m at 31 December 2020 €278m maturing in 2021 out of which: > €106m of bond repayment > €124m of WC financing debt, commercial paper and overdrafts to be rolled over Average maturity of Group’s 3-year debt More than 80
Slide 23: Operational performance
2 Operational performance
Slide 24: Mining and Metals division
Le Mining and Metals division eramMerT
Slide 25: Manganese BU
Manganese BU
Slide 26: Global carbon steel market down; manganese ore and alloys demand
Global carbon steel market down due to the pandemic, and consequently manganese ore and alloys demand 1 2 Global carbon steel production down -1.5%, Global manganese ore production affected in H1 resulting from lower global demand (temporary closure of South African mines), but Large drop in Europe
Slide 27: Mn ore prices down 19% in 2020
Mn ore prices down by 19% in 2020 with a drop in H2 due to oversupply; current price up to c.$5/dmtu 1 2 Average price of manganese ore CIF China 44% Average manganese alloys prices down in 2020: at c.$4.6/dmtu in 2020, down 19% vs 2019 MC FeMn at €1,366/t; SiMn at €910/t Inventories at Chinese port
Slide 28: Manganese ore production up +22% in 2020
Manganese ore production up +22% in 2020 Comilog & Setrag fast-cash growth dynamic Volumes produced up +22% to 5.8 Mt; volumes transported up +30% to 6.0 Mt Opening and start of production at the new Okouma plateau in October Moanda mine largest source of high-grade Mn ore worldwide, c.13% of world’
Slide 29: Limited slowdown in manganese alloys production
Limited slowdown in Eramet manganese alloys production as new market share gains counter weak demand Very weak demand from European and US steel market in 2020 (lower demand -14% and -17% respectively) Manganese alloys production down only -6% Sold volume slightly down (-2%) thanks to new market sha
Slide 30: Nickel BU
Nickel BU
Slide 31: Stainless steel production and nickel consumption down in 2020
Stainless steel production and nickel consumption down in 2020, but a strong rebound in China in H2 1 2 Stark fall for global stainless steel production in 2020 (-3.8%) Global primary nickel production up 5.2% in 2020 China-led recovery in H2 (+29% vs H1; +3.0% Losses in traditional production and C
Slide 32: LME prices surged in H2, discounts in FeNi selling price
LME prices surged in H2, discounts in FeNi selling price 1 2020 average LME prices at $6.25/lb ($13,773/t), down ~-1% Prices up, driven by Chinese demand and batteries perspectives Strong oversupply of c.180 kt Ferronickel prices down -10% in 2020, reflecting an LME in 2020, o/w c.110 kt in H1 disco
Slide 33: Stark rise in ore prices as supply shrinks
Stark rise in ore prices as supply shrinks 1 1.8% nickel ore prices surged in H2 as Chinese producers began to feel the effects of the Indonesian ban on their ore supply Prices rose +36% in 2020 to c.$80/t 2 Ore stocks in Chinese ports at 7.6 Mwmt by end-December, a low-level equivalent ~2 months of
Slide 34: €34m FCF at SLN in H2, proving relevance of rescue plan
€34m1 FCF at SLN in H2, proving the relevance of the rescue plan SLN’s cash-cost ($/lb) Continued impact of ore -9.5% exports, favourable 5.91 seasonality (dry season) -0.46 0.02 0.24 -0.40 5.35 Ni ore Export 0.04 4.78 Societal disruptions impact & other one-offs at mines 2019 cash-cost Ni ore FeNi
Slide 35: SLN rescue plan at risk: 2 Mwmt additional ore export critical
SLN rescue plan at risk: 2 Mwmt of additional ore export critical to success A plan based upon 3 requirements for a sustained cash generation 1 2 ✔ 4 Mwmt/year government 6 Mwmt/year authorisations Reducing energy costs: of nickel ore exports least competitive cost in nickel industry ✔ 2authorisatio
Slide 36: Success of swift ramp-up at Weda Bay in Indonesia
Success of swift ramp-up at Weda Bay in Indonesia: c.€60m contribution to Group FCF in H2 Weda Bay Nickel balanced business Mining production > 6.0 (Mwmt) model: mining and metallurgy > 76% First mining production started in October 3.4 2019 to supply several metallurgical plants on Halmahera island
Slide 37: Mineral sands BU
Mineral sands BU
Slide 38: Zircon prices down 15% in 2020 due to overproduction
Zircon prices down 15% in 2020 due to overproduction 1 Average price of zircon at $1,333/t in 2020, down -15% Global demand for zircon down -16%, reflecting trends in ceramics market, strongly impacted by pandemic In parallel, strong drop in production of -11%, supply/demand balance still in oversup
Slide 39: CP slag prices remained high
CP slag prices remained high, driven by robust high-grade feedstock demand, although in an oversupplied market 1 After a sharp contraction in H1 due to the pandemic, rebound of global demand for TiO2 pigments, overall stable in 2020 (-1% vs 2019) Average price of CP1 grade titanium slag up +5% at $7
Slide 40: Solid operational performance of mineral sands activity
Solid operational performance of mineral sands activity helped weather the crisis 1 2 Solid operational performance at GCO in Senegal, confirmed over the past 3-yr (OEE rate +12%) Titanium slag production level at TTI in Norway up +5%; historical Production volumes up +4% to 762 kt in 2020, despite
Slide 41: High-Performance Alloys division
High-Performance Alloys division
Slide 42: Brutal slump in aerospace market 2020 following pandemic
Brutal slump in aerospace market 2020 following pandemic Aerospace: c.70% of A&D sales Global air traffic down c.80% since mid-March 2020 Average monthly aircraft production rate down -43%2 in 2020 12,000 11,000 Pre-COVID forecast 10,000 Others 9,000 32% 8,000 7,000 6,000 68% 5,000 4,000 Aerospace c
Slide 43: A&D financials impacted by the aerospace crisis
A&D financials largely impacted by the aerospace crisis; strong adjustment measures resulting in H2 FCF breakeven A&D sales by segment A&D sales down c.-16% in 2020, o/w: -16% o Aerospace sales down -24% 642 o Energy and defense sector up +47% 539 2018-2020 Aerospace sales A&D flexed 2020 monthly ex
Slide 44: Crisis impact at Erasteel mitigated by action plan
Crisis impact at Erasteel mitigated by specific action plan on operations and cash Sales down -31% affected by downturn in automotive market, Erasteel sales by segment accounting for ~50% of sales -31% 205 Production adjusted with less impact for high-quality products (resilience of powder metallurg
Slide 45: Strategic transformation
3 Strategic transformation
Slide 46: Major milestones of strategic roadmap achieved in 2020
Major milestones of strategic roadmap achieved in 2020; 2021 critical for SLN and A&D 2021 critical outcome Significant cash return No cash outflows in the 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 47: CSR commitment in 2020: responsible crisis management
CSR commitment in 2020: responsible crisis management Moving forward on the 2018-2023 CSR Roadmap High CSR Performance in 2020: > 13 medium-term objectives monitored with results published on annual basis > Index 102 (target 100) with a good momentum since 2018 New climate targets > -40% Reduction t
Slide 48: ESG performance progress confirmed
ESG performance progress confirmed 2020 ISS ESG Corporate rating 2020 CDP Climate change Prime status for first time Overall rating of B (D in 2019) First decile in the ISS ESG, Mining & Metals Among the leading companies in its industry group: business sector > Overall rating of B- (C in 2017) 48 E
Slide 49: Conclusion & outlook
Conclusion & outlook
Slide 50: Strengthening Eramet to further bounce back post-crisis
Strengthening Eramet to further bounce back post-crisis Favourable short-term outlook for the Mining & Metals division’s markets, continuing aerospace crisis affecting High-Performance Alloys division Further organic growth of the Mining & Metals activities in 2021, with Comilog and Weda Bay mining
Slide 51: 2021 outlook
2021 outlook 2021 volume target > 7 Mt ore manganese produced (+20% vs 2019) thanks to growth capex with very quick payback > More than 3.5 Mwmt (> 40%) of nickel ore exports at SLN > More than 6 Mwmt (> 76%) of nickel ore produced at Weda Bay Based on current metal prices consensus*, forecast EBITD
Slide 52: Q&A
Q&A
Slide 53: Appendices
Appendices eramMerT
Slide 54: New modular approach for brownfield expansion of Moanda
New modular approach for brownfield expansion of Moanda manganese ore operations A HIGHLY COMPETITIVE MINE IN GABON A NEW MODULAR EXPANSION Operated by Comilog for 50 years Enhance production of the Bangombé plateau through dry processing Strong quality high-grade oxide commercial ore > €51m of earl
Slide 55: Lithium project in Argentina: currently mothballed
Lithium project in Argentina: currently mothballed HIGHLY VALUE-ACCRETIVE PROJECT STATUS UPDATE: PROJECT MOTHBALLED Long life low cost and scalable project, c.10 Mt April 2020: decision not to engage the LCE1 drainable resources, c.50 years of resources construction of the lithium production plant B
Slide 56: 2019-2020 Net debt bridge (by nature)
2019-2020 Net debt bridge (by nature) (€m) 163 -134 -115 Lithium 19 17 -119 -43 one-offs 77 -33 -78 550 Weda Bay -109 FCF -120 -75 -4 -25 -1,304 -1,333 2019 EBITDA Change Current Growth Weda WB EBITDA Change HPA Op. CF Other Li Financial Taxes Change Other 2020 in op. capex capex Bay shareholder HPA
Slide 57: Manganese BU – Key figures
Manganese BU – Key figures In €m 2020 2019 Sales 1,699 1,765 EBITDA 442 560 COI 339 459 Cash capex 188 218 Operating cash flow 349 309 FCF 285 (8) 57 Eramet – 2020 results
Slide 58: Nickel BU – Key figures
Nickel BU – Key figures In €m 2020 2019 Sales 905 778 EBITDA 21 38 COI (79) (58) Cash capex 46 39 Operating cash flow 21 (3) FCF 1 (70) 58 Eramet – 2020 results
Slide 59: Mineral sands BU – Key figures
Mineral sands BU – Key figures In €m 2020 2019 Sales 276 286 EBITDA 91 106 COI 44 64 Cash capex 16 13 Operating cash flow 106 79 FCF 43 45 59 Eramet – 2020 results
Slide 60: High-Performance Alloys Division - Key figures
High-Performance Alloys Division - Key figures A&D and Erasteel In €m 2020 2019 Sales 680 847 EBITDA (119) (26) COI (153) (68) Cash capex 43 56 Operating cash flow (86) (90) FCF (174) (144) 60 Eramet – 2020 results
Slide 61: 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 alloys prices +$100/t c.€60m1 Nickel prices (LME) +$1/lb c.€95m1 Nickel ore prices (CIF China 1.8%) +$10/wmt c.€30m1 Exchange rates -$/€0.1 c.€135m
Slide 62: 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 January 2021 €/t 2,000 FY = -7.9% H = -7.8% 1,500 FY = -7.9% 1,000 H = -8.9% FY = -4.1% 500 H = -8.3% 0 2015 2016 2017 2018 2019 2020 2021 Medium-carbon ferr
Slide 63: Cash-flow table
Cash-flow table €m 2020 2019 Operating activities EBITDA 398 630 Cash impact on items under EBITDA (383) (420) Cash from operating activities 15 210 Change in WCR 294 (124) Net cash generated by operating activities (1) 309 86 Investment activities CAPEX1 (342) (455) Other investment flows1 (3) 11 N
Slide 64: Group Balance Sheet at 31 December 2020
Group Balance Sheet at 31 December 2020 4,054 4,054 3,485 3,485 1,398 764 241 233 3,294 3,003 1,091 1,154 20 0 1,304 1,333 760 4751 0 7 31/12/2019 31/12/2020 31/12/2019 31/12/2020 Fixed assets WCR Financial instruments Equity-Group share Financial instruments Minority interest Net debt 1 2020 WCR: €
Slide 65: Bond maturities
Bond maturities Amount at Initial Initial amount Currency 31/12/2020 Maturity Coupon (in m) (in m) date 2016 ODIRNAN bond issue € 100 96 Perpetual 4.00% TiZir bond renewal - July 2017 USD 300 255 July-2022 9.50% February September 2017 bond issue € 500 500 4.20% 2024 November 2019 bond issue € 300 3
Slide 66: Shareholding at 31 December 2020
Shareholding at 31 December 2020 Other float SORAME + CEIR 32.1% (Duval Family) 36.9% Number of shares issued 26,636,005 1.3% BRGM** 4.0% STCPI* 25.6% APE * STCPI (Société Territoriale Calédonienne de Participation Industrielle): entity owned by the New Caledonian provinces ** BRGM (Bureau de Recher
Slide 67: Contacts
CONTACTS Executive VP Strategy & Innovation – Investor Relations Philippe GUNDERMANN [email protected] Investor Relations Manager Sandrine NOURRY-DABI [email protected]