Aperam S.a. · EURONEXT:APAM
Aperam — Q3 2019 Earnings Presentation
63 slides from Aperam's earnings presentation, Nov 6, 2019
Slide 1: Q3 2019 results
Q3 2019 results 6 November 2019 The sustainable top yielding company in Euro Materials 1
Slide 2: Content
Content 1. Q3 2019 highlights page 5 2. Financial results page 13 3. Value Strategy page 18 4. ESG page 27 5. Business Overview page 38 • Group Segments & corporate structure page 39 • Stainless & Electrical Steel Europe page 45 • Stainless & Electrical Steel South America page 49 • Services & Solut
Slide 3: Disclaimer
Disclaimer Forward-Looking Statements This document may contain forward-looking information and statements about Aperam and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with re
Slide 4: Health & Safety Performance
Health & Safety Performance Health & Safety frequency rate of 2.2 in Q3 2019 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1Q 07 3Q 07 1Q 08 3Q 08 1Q 09 3Q 09 1Q 10 3Q 10 1Q 11 3Q 11 1Q 12 3Q 12 1Q 13 3Q 13 1Q 14 3Q 14 1Q 15 3Q 15 1Q 16 3Q 16 1Q 17 3Q 17 1Q 18 3Q 18 1Q 19 Q3 19 Health & Safety is our prime ob
Slide 5: Q3 2019 Operational highlights
Q3 2019 Operational highlights Normal seasonality from a low base. New trade measures have been initiated Q3 2019 key developments Solid free cash flow despite seasonal trough quarter and nickel price spike Leadership Journey© gains on track with EUR16m additional annualized gains in Q3 (cum. total
Slide 6: Q3 2019 Financial highlights
Q3 2019 Financial highlights Solid cash generation and stable net debt despite seasonally lower EBITDA and higher nickel price Normal seasonal decline in an unchanged adverse environment Q3 key comments • Normal seasonal drop in shipments EURm Q3 19 Q2 19 qoq Q3 18 yoy from a low base Sales 972 1,09
Slide 7: EU Safeguard update
EU Safeguard update Imports maintained a disproportionate EU market share ahead of the safeguard revision Extreme HR import pressure continues… …and market share of imports remains at peak 150,000 75% 450,000 40% 50% Hot rolled (t) 100,000 400,000 25% 30% 0% 350,000 50,000 -25% 20% 300,000 0 -50% Q1
Slide 8: EU trade action update
EU trade action update Further actions against unfair trade have been initiated in addition to the existing Safeguard NEW Safeguard Anti-dumping (AD) Countervailing duties (CVD) • Maintain traditional trade flows • Duty on imports that are priced below • Neutralize effect of subsidies that Aim fair
Slide 9: Environment and markets
Environment and markets The nickel price spike did not trigger restocking due to elevated inventory days Nickel: spike due to Indonesia ore export ban Stainless steel price rises slightly due to higher alloy prices 22,500 3,500 20,000 17,500 3,000 15,000 12,500 2,500 10,000 7,500 5,000 2,000 Jan-14
Slide 10: Leadership Journey update
Leadership Journey© update Leadership Journey© is on track to defend Aperam’s position as lowest cost producer in Europe Progress & target phase 3 (recurring annualized gains) Target savings composition 200 180 Leadership Journey gains (EURm) matic Sche- 160 Cumulated 140 Variable costs EUR105m 19 1
Slide 11: Outlook
Outlook Q4 2019 guidance & other forward looking items Financial outlook Q4 2019: EBITDA is expected to increase slightly versus EUR79m in Q3 2019 – Seasonal recovery in Europe compensates for persistent weak demand, high imports, low international prices and Brazil’s low seasonality Net financi
Slide 12: Corporate Access
Corporate Access Post Q3 2019 schedule • 11.11 Milano Roadshow Bank of America • 13.11 London Conference Goldman Sachs • 14.11 Paris ESG conference Societe Generale • 27.11 Paris Conference Exane BNP Paribas • 02.12 Cologne/DUS Roadshow HSBC • 04.12 Madrid Roadshow Degroof Petercam • 9/10.01 Lyon Co
Slide 13: Financial Results
Financial Results = 9peoul
Slide 14: Financial results Q3 2019: Normal qoq seasonality
Financial results Q3 2019: Normal qoq seasonality with weak demand in Europe and Brazil. YoY comparison vs record Q3-18 Stainless & Electrical Steel Services & Solutions Alloys & Specialties 225 88 1,558 180 1,290 54 142 42 1,084 EBITDA* EBITDA* EBITDA* (EURm) (EURm) (EURm) 101 16 a djusted a djuste
Slide 15: Financial results Q3 2019: Pronounced volume and EBITDA decrease
Financial results Q3 2019: Pronounced volume and EBITDA decrease due to seasonal factors, destocking and import pressure Weak demand, destocking and imports weigh on Q3 adj. EBITDA reflects seasonal trough volumes and shipments temporarily higher iron ore costs 12.3% 517 11.7% 11.6% 508 11.2% 501 11
Slide 16: Financial results Q3 2019: All three segments seasonal
Financial results Q3 2019: All three segments with normal seasonal performance versus a low base Upstream faces pressure. Normal downstream EPS reflects seasonal EBITDA decrease 1.22 0.99 0.99 0.94 0.87 0.69 0.65 79 103 0.47 85 80 57 72 0.30 53 57 49 37 25 16 9 12 12 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4
Slide 17: Financial results Q3 2019: Solid cash generation
Financial results Q3 2019: Solid cash generation in seasonal trough quarter. Marginally lower net debt qoq despite higher nickel price Net financial debt increased YTD due to one-off items Good FCF due to high cash conversion (11) 35 200 One-off & 132 99 () 0 0descretionary items 172 0 48 (255) 107
Slide 18: Value Strategy
Value Strategy © Adobe Stock 18
Slide 19: Investment case & value strategy
Investment case & value strategy Guiding principle: Being a sustainable safe and profitable company Aperam foundation Lowest cost footprint Industry leading in Europe cash flow & & sole producer financial discipline in S. America Strong balance sheet & highest dividend Self help strategy (Leadership
Slide 20: Financial policy
Investment case & value strategy Financial policy: Strong balance sheet, investment in long term growth & sustainability and solid cash returns to shareholders Financial Policy 2019 ~EUR90m maintenance Company Sustainability, Upgrade and Transformation ~EUR20m Leadership Journey© ~EUR40m capex in Ge
Slide 21: Leadership Journey
Investment case & value strategy Leadership Journey© Self help has turned Aperam into a resilient, profitable and cash generative company Phase 1 (USD350m): Phase 2 (USD225m): Phase 3 (EUR200m): 2011-13 Restructuring 2014-17 Asset upgrade 2018-20 Transformation Realized cost savings Number of produc
Slide 22: Track record
Investment case & value strategy Track record: Aperam a solid performer even in challenging times Solid operating performance despite market headwind From net loss to fast growing net income since 2013 12.5% 4.00 3.39 2.47 11.8% 1.99 10.0% 10.6% 10.8% 0.91 320 286 559 5.7% 504 -1.08 -0.96 193 451 45
Slide 23: Resilience: Strong balance sheet
Investment case & value strategy Resilience: Strong balance sheet, high liquidity and low maintenance capex Low maintenance capex + solid investment A strong balance sheet for a volatile industry* in growth improvement 3.7 200 2.3 175 150 84 1.2 47 125 60 0.6 0.5 0.5 0.3 0.2 100 44 34 619 501 442 -0
Slide 24: Shareholder focus
Investment case & value strategy Shareholder focus: We care about investors and can support it due to a high & stable FCF Solid cash generation through the cycle High profitability 126% 354 377 374 69% 295 45% 78% 83% 212 Low cash taxes* 152 184 67% 59% 2012 2013 2014 2015 2016 2017 2018 Low cash in
Slide 25: Portfolio improvement: Top line strategy
Investment case & value strategy Portfolio improvement: Top line strategy Constant innovation to shift portfolio into attractive growth / margin segments New products in sales 130 125 120 Niches Growth 115 Index 2015=100 Margin management / 110 demand driven 105 100 95 New Asian 90 competition 85 80
Slide 26: ESG excellence
Investment case & value strategy ESG excellence: Take a look at Aperam from an ESG perspective Our mission is to produce reliable, 100% recyclable, green stainless steel Products Non toxic, long lifespan and 100% indefinitely recyclable without loss of quality Climate change We have the lowest CO2 f
Slide 27: ESG
ESG Aperam produces the greenest stainless steel globally 27
Slide 28: ESG is core at Aperam and starts at the top
ESG summary ESG is core at Aperam and starts at the top We take E, S and G seriously Governance & Stakeholders Social • Our high ethical standards are reflected • Our people are colleagues with whom we share in our robust corporate governance and values and a common future – Their safety is our non-
Slide 29: Our products are environmentally friendly
ESG summary Our products are environmentally friendly Our mission is to produce reliable, 100% recyclable, green stainless steel • Our stainless & alloy products are 100% recyclable - without any loss of quality • Our products have a very long useful life – they support and enable a sustainable glob
Slide 30: Aperam produces sustainably and responsibly
ESG summary Aperam produces sustainably and responsibly Our mission is to produce reliable, 100% recyclable, green stainless steel Renewable energy Recycling In our BioEnergia unit, based in Brazil, we produce charcoal from our FSC-certified sustainably cultivated eucalyptus forests in Minas Gerais
Slide 31: Aperam supports the UN Sustainable Development Goals
ESG summary Aperam supports the United Nations’ Sustainable Development Goals We take broad responsibility: our Products and Environmental and Social action Gender balance is ranked In our forestry, located on highly on our priority list as hydric-stressed areas like from 2017 and has received our o
Slide 32: Social: Our people are our asset
ESG summary Social: Our people are our asset Criteria 2020 Target Aperam 2018 status Steel industry 2017* Lost-time injury frequency rate <1 1.43 ! 2.93 Employee satisfaction1 N/A 86% 78% Women 12% of staff Diversity Increase 20% of exempts Training hours/FTE Increase 34 Absenteeism 2.0 2.29 At Ap
Slide 33: Environment: A best in class footprint
ESG summary Environment: A best in class footprint² Criteria Target** Aperam 2018 status Steel industry 2017 Energy intensity 12.2 GJ/t -10% vs 2012 12.5 GJ/t -8% CO2 intensity* 0.49 t/t -35% vs 2008 0.49 t/t -35% 0.95 t/t² Water consumption 5.6 m3 /t -43% vs 2015 9.9 m3 /t -1% ! Dust intensity
Slide 34: Environment: convincing track record and targets
ESG summary Environment: Aperam has a convincing environmental track record and clear improvement targets* CO2 emissions (t/t crude steel)** Energy consumption (GJ/t crude steel) 0.78 0.72 0.75 0.70 14.7 0.61 0.58 14.0 0.500.48 0.54 13.814.013.613.6 0.48 0.49 0.49 0.49 13.012.812.8 12.412.5 12.2 200
Slide 35: Environment: Bio Energia & recycling
ESG summary Environment: Bio Energia & recycling give Aperam a best in class climate change footprint Aperam energy mix 2018 Aperam’s has the smallest CO2 footprint in the industry CO2 t/t scope 1+2 2% 1.0 30% 33% 0.5 Aperam Stainless Industry 1% CO2 t/t scope 1+2+3 34% Factor 4-5x >8 Charcoal Natur
Slide 36: Governance: Our leadership team
ESG summary Governance: Our leadership team Key facts & compensation A diverse & experienced team • Entrusted with day-to-day management of the Company • Appointed by the Board of Directors • Experience and industry know how • Average age: 48 / 6 Nationalities • CEO: responsible for Aperam’s sustain
Slide 37: Governance: Board of directors and shareholder structure
ESG summary Governance: Board of directors and shareholder structure Principles of our board Shareholder structure ● Responsible for strategic direction and oversight of the business, as well as for appointing senior management ● Election subject to shareholder approval. Directors are 8% elected for
Slide 38: Business overview
Business overview Musée des Confluences, Lyon - France COOP HIMMELB(L)AU © Sergio Pirrone Executed using grade 316L - microblasted finish 38
Slide 39: Group segments & corporate structure
Group segments & corporate structure 39
Slide 40: Group: Segments & corporate structure
Business overview Group: Segments & corporate structure* Stainless & Electrical Steel Services & Solutions Alloys & Specialties 2.5mt production capacity 40 kt production capacity 1.9mt of gross shipments 819kt of gross shipments 36kt of gross shipments 83% of group EBITDA 8% of group EBITDA 9% of g
Slide 41: Group: Segments & corporate structure II
Business overview Group: Segments & corporate structure II Production assets in Europe and South America Châtelet, Belgium Genk, Belgium Gueugnon, France Isbergues, France Timóteo, Brazil Imphy, France Location & facts Location & facts Location & facts Location & facts Location & facts Location & fa
Slide 42: Group: Segments & corporate structure III
Business overview Group: Segments & corporate structure III Aperam’s value chain Slabs Hot rolling Cold rolling / Finishing Service Isbergues Direct Châtelet 0.35Mt Sale 1.0Mt Service Center Châtelet Genk Stainless 2.8Mt 0.7Mt flat Direct Genk Sale End customers 1.0Mt Gueugnon Service Steel service
Slide 43: Group: A balanced risk profile and customer structure
Business overview Group: A balanced risk profile and customer structure Shipment split by segment 2018* EBITDA contribution by segment 2018* 8% 29% S&E Europe 9% S&E Europe 46% S&E S. America S&E S. America 51% A&S A&S 1% 32% S&S S&S 24% Revenue by region 2018 Revenue by customer industry Asia & Bra
Slide 44: Group: Substantial improvement in KPIs over time
Business overview Group: Substantial improvement in KPIs over time as self-help supports earnings EBITDA by segment (EURm) Shipment by segment (kt) 600 559 504 451 455 500 368 1,972 400 1,917 1,936 1,886 300 220 168 1,813 200 1,728 100 1,683 - 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2
Slide 45: Stainless & Electrical Steel Europe
Stainless & Electrical Steel Europe 45
Slide 46: S&E Steel Europe: Self-help measures yield robust performance
Business overview S&E Steel Europe: Self-help measures yield a robust operational performance Major EBITDA contributor 2018 Robust profitability capitalizing on restructuring 12.8% 11.1% 8.8% 9.1% 8% 6.7% 352 9% S&E Europe 2.7% 258 260 S&E S. America 0.5% 220 51% A&S 153 32% 12 57 S&S 2012 2013 2014
Slide 47: S&E Steel Europe: Leverage Aperam's unique position
Business overview S&E Steel Europe: Leverage Aperam’s unique position European stainless steel industrial footprint Aperam key competitive advantage Finishing line Steel making • The only integrated upstream Sourcing Sourcing operations in the heart of Europe • Superior access to scrap supply Outoku
Slide 48: S&E Steel Europe: EU measures against unfair trade
Business overview S&E Steel Europe: European Union measures against unfair trade Definitive safeguards run from 2 Feb 2019 – 30 June 2021 EU hot rolled import / domestic split Avg. 2015 - 2017 import level 100% Quota Growing by 3% pa 80% Country Country based quota is allocated yearly 60% quota1 Tap
Slide 49: Stainless & Electrical Steel South America
Stainless & Electrical Steel South America 49
Slide 50: S&E Steel South America: A flexible, agile and profitable asset
Business overview S&E Steel South America: A flexible, agile and highly profitable asset A significant EBITDA contributor 2018 despite Earnings recovered post the recession demanding conditions 17% 19% 17% 13% 14% 13% 8% 176 167 162 9% S&E Europe 8% S&E S. America 120 113 118 51% A&S 32% 82 S&S 2012
Slide 51: S&E Steel South America: Our Brazil asset is unique
Business overview S&E Steel South America: Our Brazil asset is unique – the only stainless steel producer in South America Aperam South America footprint Upstream integration Caracas (Venezuela) Cost competitive & environmentally Cost competitive & environ-mentally friendly charcoal from own Bio Ene
Slide 52: S&E Steel South America: Brazil can switch flexibly
Business overview S&E Steel South America: Brazil can switch flexibly between products and markets to maximize profitability Key pillars Aperam’s asset optimization in South America • A wide range of products and geographical Flexible product mix Flexible regional mix sales enables further optimizat
Slide 53: S&E Steel South America: Brazil growth opportunity
Business overview S&E Steel South America: Brazil offers ample opportunity for both cyclical and structural growth Brazil consumes substantially below the global trendline Brazil opportunities Short term: reviving the normal investment cycle in the economy. Large scale infrastructure & energy proj
Slide 54: S&E Steel South America: Brazilian protections
Business overview S&E Steel South America: Brazilian protections against unfair market behaviour Type of products Import duties status Anti-dumping status China, Taiwan Stainless Steel Flat Normal import duties are 14% AD duties starting October 4th, 2019 for 5 years Products China USD175/t
Slide 55: Services & Solutions
Services & Solutions 55
Slide 56: Services & Solutions: stronger partnership with customers
Business overview Services & Solutions: stronger partnership with customers enhances margins A significant EBITDA contributor 2018 despite trough A profitable Services & Solutions thanks to its focus on conditions service oriented customers 21,000 8% 90 104 9% 17,000 S&E Europe 86 S&E S. America 13,
Slide 57: Services & Solutions: Adding value downstreams
Business overview Services & Solutions: Adding value downstreams Services & Solutions value chain Input - - - - - - Service Centers - - - - - - Hot rolled coil / Cutting/ Polishing Packaging Logistics Customer Cold rolled coil Slitting Brushing & Slit Slit / deburred Machined deburred Square Round -
Slide 58: Alloys & Specialties
Alloys & Specialties 58
Slide 59: Alloys & Specialties: attractive niche market with high margins
Business overview Alloys & Specialties: attractive niche market with high margins High profitability due to end products & end user Aperam’s high value added segment 2018 orientation 1,264 1,407 1,278 1,191 1,219 1,147 8% 864 9% S&E Europe 43 44 44 46 46 39 S&E S. America 51% 26 A&S 32% S&S 2012 201
Slide 60: Alloys & Specialties: global top player in nickel alloys
Business overview Alloys & Specialties: attractive niche market with high margins Aperam is global top player in nickel alloys and strong in Aperam Alloys & Specialties geographical footprint long products (kt) Rescal Amilly Imhua Wire The magnetic parts drawing company n n nnn n n n Imphy ICS (JV)
Slide 61: Alloys & Specialties: Specialty alloys add stability
Business overview Alloys & Specialties: Specialty alloys add stability and profitable growth element Innovation is key for premium …to cater for highly sophisticated …yielding growth opportunities and specialties… and evolving needs… margin stability R&D intensive industry High growth end market app
Slide 62: Appendix
Appendix 62 Résidence Hôtelière du Rail, Montparnasse station, Paris - France - aasb_agence d‘architecture suzelbrout - Executed using grade 304L, with Uginox Mat finish
Slide 63: Key stainless product categories by alloy content
Appendix Key stainless product categories by alloy content Martensitic Ferritics (400 series) Austenitics (300 series) <0.1% <0.1% <0.1% 17% 16-21% 10.5- 30% <1.5% 6-26% <4.5% <7% Car exhausts, conveyor chains, cooking utensils, Boiler, aeronautics, electronic components, Cutlery, cutting tools, con