Q1 2020 results
6 May 2020
The sustainable top yielding company in Euro Materials
1
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 respect to future operations, products and services, and statements regarding future performance. Forward-looking statements may be identified by the words "believe," "expect," "anticipate," "target" or similar expressions. Although Aperam's management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of Aperam's securities are cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the control of Aperam, in particular, the length and severity of the recent COVID-19 (coronavirus) outbreak, including its impacts in the sector, macroeconomic conditions and in Aperam's principal local markets, that could cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in Aperam's filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de Surveillance du Secteur Financier). Aperam undertakes no obligation to publicly update its forward-looking statements or information, whether as a result of new information, future events, or otherwise.
2
Content
1. | Q1 2020 highlights | page | 4 | |
2. | Financial results | page | 11 | |
3. | Value Strategy | page | 16 | |
4. | ESG | page | 25 | |
5. | Business Overview | page | 37 | |
• Group Segments & corporate structure | page | 38 | ||
• Stainless & Electrical Steel Europe | page | 44 | ||
• Stainless & Electrical Steel South America | page | 48 | ||
• | Services & Solution | page | 54 | |
• | Alloys & Specialties | page | 57 | |
• | Appendix | page | 61 | |
Musée des Confluences in Lyon, France. Architect: Coop Himmelb(l)au © |
Sergio Pirrone. Stainles steel used: Aperam 316L/1.4404 with Uginox Met
3
Health & Safety
Performance
Health & Safety frequency rate of 1.9 in Q1 2020
4.0 | ||||||||||||||||||||||||||
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1.5 | ||||||||||||||||||||||||||
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0.5 | ||||||||||||||||||||||||||
0.0 | ||||||||||||||||||||||||||
07 1Q | 07 3Q | 08 1Q | 08 3Q | 09 1Q | 09 3Q | 10 1Q | 10 3Q | 11 1Q | 11 3Q | 12 1Q | 12 3Q | 13 1Q | 13 3Q | 14 1Q | 14 3Q | 15 1Q | 15 3Q | 16 1Q | 16 3Q | 17 1Q | 17 3Q | 18 1Q | 18 3Q | 19 1Q | 19 Q3 | 20 1Q |
Health & Safety of our people is our prime objective
4
Q1 2020 Operational highlights
Q1 was a seasonally normal quarter till the second half of March when COVID related disruptions resulted in extra costs
Q1 2020 key developments
adj EBITDA was impacted by COVID related costs and higher inventory valuation effects. Solid cash flow despite seasonal increase in working capital
All major plants are operational post the Q1 stop for the
H&S upgrade. Capacity is fully aligned with demand
Leadership Journey© gains are on track with EUR23m additional annualized gains in Q1 (cum. total EUR146m)
Anti-dumping duties on HR from China, Indonesia and
Taiwan since April. Countervailing duty case progesses
Stainless prices remained under pressure despite the seasonal volume increase
Order book started to reflect COVID induced demand drop towards the end of the quarter
Aperam is fully prepared to master the COVID impact
5
Q1 2020 Financial highlights
Inventory devaluation and COVID costs caused qoq adj EBITDA decrease
Solid free cash flow despite seasonally higher working capital
EURm | Q1 20 | Q4 19 | qoq | Q1 19 | yoy | ||
Sales | 1,049 | 1,000 | 5% | 1,178 | -11% | ||
adj. EBITDA | 70 | 85 | -18% | 81 | -14% | ||
EBITDA | 70 | 102 | -31% | 81 | -14% | ||
Basic EPS (EUR) | 0.36 | 0.36 | -1% | 0.30 | 20% | ||
Steel shipments (000t) | 438 | 402 | 9% | 501 | -13% | ||
adj EBITDA/tonne (EUR) | 160 | 211 | -24% | 162 | -1% | ||
adj EBITDA margin | 6.7% | 8.5% | -21% | 6.9% | -3% | ||
Operating cash flow | 63 | 162 | -61% | 71 | -11% | ||
CAPEX | -45 | -52 | -13% | -47 | -4% | ||
Other investing CF** | 0 | 30 | NM | 0 | NM | ||
Free cash flow* | 18 | 140 | -87% | 24 | -25% | ||
Dividends paid | -32 | -35 | -9% | -33 | -3% | ||
Net financial debt | 108 | 75 | 44% | 106 | 2% | ||
Q1 key comments
- Seasonal pick up in shipments was supported by full import quotas
- Adj EBITDA decreases qoq due to neg inventory valuation and COVID related production disruptions
- Stable EPS qoq due to a EUR26m deferred tax asset impairment in Q4
- Strong operating cash flow with 90% EBITDA cash conversion despite seasonal working capital build
- Q1 CAPEX in line with the guidance. Genk project is on track
- Very strong balance sheet with 0.3x NFD/EBITDA despite slight increase in net financial debt
- Comfortable liquidity position ~EUR600m (~50% cash / 50% RCF)
Reliable strong cash generator in the sector with a strong balance sheet
*before dividend and share buyback | 6 |
**divestment of Gerdau stake in Q4-19 |
Aperam is a resilient company
Our solid balance sheet forms the basis for weathering the pandemic
Convincing financial scorecard
- Solid balance sheet with 0.3x NFD/EBITDA
- No earnings related covenants in any financing arrangement
- First major debt redemption in 2023 only
- Liquidity on hand ~EUR600m end of Q1
- Progressive dividend policy was confirmed by the AGM
- Share buyback postponed by 6 months
Aperam was FCF positive in every year since 2008
500 | 10% | 9% | 8% | 12% | |||||||
400 | |||||||||||
6% 6% | 6% 5% | ||||||||||
300 | 4% | 281 | |||||||||
71 | |||||||||||
200 | |||||||||||
EURm | 85 | 241 | 260 | 211 | |||||||
100 | 163 | 190 | |||||||||
106 | |||||||||||
30 | 108 | ||||||||||
0 | 58 | ||||||||||
-100 | |||||||||||
-200 | |||||||||||
-300 | |||||||||||
-400 | |||||||||||
2008 | 2010 | 2012 | 2014 | 2016 | 2018 | ||||||
Capex | ∆ WC | FCF | FCF yield | ||||||||
Balance sheet has been cleaned up
2.1 10.9
2.6
1,018 | 984 | 799 | 2.4 | 3.7 | 501 | 442 | 290 | |||||
679 | 619 | 48 | 75 | 108 | ||||||||
2.3 | 1.1 | 0.6 | 0.3 -0.1 | 0.1 | 0.2 | 0.3 | ||||||
147 -63 | ||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 20 Q1 |
Net debt (m€) | Net debt / LTM EBITDA |
High liquidity on hand and favorable debt maturity profile
700
600
500No credit arrangement contains
400any earnings related covenant
300
200
100
0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
EIB loan | Leasing & other | Schuldschein |
Com. Paper & other | Cash & equiv. | RCF |
7
Environment & markets
Market share of imports has contracted but remains elevated. Inventory and price premium versus Asia are both in normal range
Market share of imports drops to 24.6% - stable CR, clearly lower HR
450,000 | 40% | |||||||||
350,000 | 20% | |||||||||
tonnes | 250,000 | 0% | ||||||||
150,000 | ||||||||||
50,000 | -20% | |||||||||
-50,000 | 16-Q3 | 17-Q1 | 17-Q3 | 18-Q1 | 18-Q3 | 19-Q1 | 19-Q3 | 20-Q1 | -40% | |
16-Q1 | ||||||||||
Indonesia | All other | YoY % | Market share % |
Nickel spike has completely reversed and stainless price followed
3,500 | ||||||||||||
17,000 | 3,000 | |||||||||||
12,000 | 2,500 | |||||||||||
7,000 | 2,000 | |||||||||||
Jan14 | Jul14 | Jan15 | Jul15 | Jan16 | Jul16 | Jan17 | Jul17 | Jan18 | Jul18 | Jan19 | Jul19 | Jan20 |
Nickel LME (USD/t) | CR 304 Europe (USD/t, RHS) |
Inventory in (t) is seasonally normal and | Stainless price premium vs Asia is in the normal range | |
inventory days have normalized | ||
90,000 | 90 | |||||||||||||||
85,000 | 85 | |||||||||||||||
80 | ||||||||||||||||
80,000 | ||||||||||||||||
75 | ||||||||||||||||
75,000 | 70 | |||||||||||||||
70,000 | 65 | |||||||||||||||
60 | ||||||||||||||||
65,000 | ||||||||||||||||
55 | ||||||||||||||||
60,000 | 50 | |||||||||||||||
16 Q1 | 16 Q2 | 16 Q3 | 16 Q4 | 17 Q1 | 17 Q2 | 17 Q3 | 17 Q4 | 18 Q1 | 18 Q2 | 18 Q3 | 18 Q4 | 19 Q1 | 19 Q2 | 19 Q3 | 19 Q4 | 20 Q1 |
German distributors inventory (t) | Days |
800
600
400
200
0
Jan14 | Jul14 | Jan15 | Jul15 | Jan16 | Jul16 | Jan17 | Jul17 | Jan18 | Jul18 | Jan19 | Jul19 | Jan20 |
CR304 Europe vs Asia (USD/t)
Source: Bloomberg, Metal Bulletin, Edelstahlhandelsvereinigung, Eurofer | 8 | |
*Countries with a SS Hot Rolled quota: China, S. Korea, Taiwan, USA | Countries with a SS CR quota: S. Korea, Taiwan, India, USA, Turkey, Malaysia, Vietnam | |
all other countries if not exempt fall under the residual quota |
Outlook & COVID response
Quick & decisive action has been taken
Operational & financial measures
- Health & safety measure in all plants to keep our employees safe
- Capacity is aligned with demand. All production plants are operating without bottlenecks
- Raw material supply is fully secured
- Maximum of costs are being variablized (temp. unemployment in all plants & headquarter / termination of temp. contracts). Fixed cost reduction in line with volume development
- All non-essential & discretionary expenses have been frozen
- Capex has been frozen. New 2020 guidance ~EUR100m (was EUR110-120m) of which half is for Genk and the Leadership Journey
Q2 2020 outlook
- Q2 2020 shipments are expected to further contract by up to 25% qoq. Order book is holding up well considering the environment.
- Adj EBITDA is expected to decrease and to include again a negative inventory valuation effect
- Net financial debt is expected to increase slightly despite positive free cash flow
Aperam is prepared to withstand a worse than GFC scenario
9
Corporate Access
Post Q1 2020 schedule
• | 12. May | Investor calls France | Oddo |
• | 12. May | 2020 Global Metals, Mining and Steel conf. | Bank of America |
• | 13. May | 2020 Global Metals, Mining and Steel conf. | Bank of America |
• | 14. May | Investor calls France | Oddo |
• | 15. May | Investor calls UK & Ireland | JP Morgan |
• | 18. May | Investor calls Germany, Switzerland & Italy | Exane |
• | 19. May | Investor calls Benelux & Spain | Degroof Petercam |
• | 28. May | SG Nice conference | Societe Generale |
We are looking forward to keep up the dialogue with you
10
Financial Results
Middle East Training Center, Beirut Rafic Hariri International Airport, Lebanon - Khatib & Alami Executed using grade316L with Uginox Méca 8ND fini
11
Financial results
Q1 2020: Negative inventory valuation and COVID costs conceal a good start to the year
Stainless & Electrical Steel | Services & Solutions | Alloys & Specialties | ||
177 | |||
124 | |||
109 | adj EBITDA* | ||
(EURm) | |||
71 | adj EBITDA/t | ||
52 | 53 | ||
(€) | |||
Q1 19 | Q4 19 | Q1 2020 |
- Shipments increased seasonally qoq from a low base despite of soft demand and destocking in Europe & Brazil
- QoQ: Europe adj EBITDA reflects higher volumes and a margin expansion that overcompensated by inventory valuation losses and COVID costs. Brazil declined seasonally
- YoY: comparable adj EBITDA as a price/ cost expansion compensated for COVID costs and lower volumes
75 | |||
48 | |||
28 | adj EBITDA* | ||
(EURm) | |||
16 | adj EBITDA/t | ||
9 | (€) | ||
4 | |||
Q1 19 | Q4 19 | Q1 2020 |
- Shipments increased seasonally qoq and full quotas turned distributors towards domestically produced material
- QoQ higher adj EBITDA qoq reflects increasing volumes that more than compensated for a neg valuation effect and COVID costs
- YoY: lower adj EBITDA due to lower volumes and COVID related costs
1,489 | |||
1,237 | |||
989 | |||
adj EBITDA* | |||
(EURm) | |||
12 | 14 | adj EBITDA/t | |
(€) | |||
9 | |||
Q1 19 | Q4 19 | Q1 2020 |
- Shipments remained stable qoq
- QoQ & YoY: lower adj EBITDA was driven by significant COVID related costs and negative inventory valuation effects
Adj. EBITDA of 160 EUR/t in Q1 2020 flat yoy due to COVID-19 related costs
* Difference with total Aperam's quarterly adj EBITDA due to Others & Eliminations line
12
Financial results
Q1 2020: Volumes rebound seasonally but price pressure remained high and COVID shutdown added costs
Shipments rebound seasonally and benefitted
Q1 adj. EBITDA reflects negative inventory valuation
517
from quota restrictions
508501
480
467465
438
418
402
and COVID-19 related costs
12.3%
11.6%
150 11.0%
141
123 | 8.7% | 8.5% |
8.0% | 8.1% | |
6.9% | 95 | 6.7% |
90 | ||
81 | 85 |
79 | |
70
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20
Shipments (thousand metric tonnes)
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20
Adj. EBITDA (m€) | Adj. EBITDA as % of Sales |
Q1 2020 underlying profitability improved qoq
13
Financial results
Q1 2020: Upstream reflects COVID related plant shutdown costs and neg valuation. S&S benefits from higher volumes
One-off items hide a good start to the year | EPS: taxes balanced lower EBITDA | |
adj. EBITDA (EURm)
0.99
0.94
0.99 |
0.87 |
0.69 |
71 | 0.47 | ||||||
53 | 85 | 80 | 72 | 0.36 | 0.36 | ||
0.30 | |||||||
57 | |||||||
49 | |||||||
25 | 37 | 29 | 29 | |||||||
9 | 14 | 9 | ||||||||
4 | Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 | |||||||||
Q4 19 | Q1 2020 | Q4 19 | Q1 2020 | Q4 19 | Q1 2020 | |||||
S&E | S&S | A&S | Net result (m€) | EPS (€) | ||||||
Pricing remained below the historic seasonal average
*Q4 2018: Financial results includes a EUR18m gain related to the convertible bond due to the expiry of put option by bondholders
*Q1 2019: Financial results includes a EUR11m charge related to the convertible bond due to accelerated amortization of the premium (reversal of the Q4-18 gain)14
*Q4 2019: Income tax expense contains a EUR26m impairment of the deferred tax asset
Financial results
Q1 2020: Solid cash generation with 90% cash conversion. Seasonally higher working capital in line with higher volumes
Solid FCF despite volume driven working capital build
EURm | ||||
200 | 140 | |||
100 | ||||
72 | ||||
62 | 35 | |||
45 | ||||
0 | 15 | 24 | 18 | |
-100 | ||||||||
-4 | ||||||||
-200 | ||||||||
18 Q1 | 18 Q2 | 18 Q3 | 18 Q4 | 19 Q1 | 19 Q2 | 19 Q3 | 19 Q4 | 20 Q1 |
Change in working capital | Capex | Free Cash Flow |
Minor net debt increase due to increase in working capital
and dividend payment
Aperam's dividend rests on a solid balance sheet and a structurally high FCF generation
* Includes interest, taxes and other items
15
Value Strategy
Adobe stock
16
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
yield
(Leadership Journey©)
Solid cash generation with strong shareholders' return.
New projects and Leadership Journey© will further improve Aperam's profitability
17
Investment case & value strategy
Financial policy: Strong balance sheet, investment in long term growth & sustainability and solid cash returns to shareholders
Financial Policy | 2020 | |
Company Sustainability, Upgrade and Transformation
Value accretive growth & M&A
min IRR 15%
~EUR50m maintenance
~EUR15m Leadership Journey©
~EUR35m capex in Genk
new CRM & APL
Sequence
Dividend
Dividend of EUR 1.75
=ෝ EUR140m
base dividend, anticipated to progressively increase over time*
Maintain a strong balance sheet consistent with Investment Grade ratios
Target NFD/EBITDA ratio of <1x (through the cycle)
Utilize remaining excess cash in most optimal way
Share buyback
up to
EUR100m / 3.8m shares
Well positioned for value accretive opportunities while maintaining a solid financial policy
with attractive cash payout to shareholders
*Base dividend review in the (unlikely) event that NFD/EBITDA exceeds 1x.
18
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 production lines | Headcount | |||
700 | EURm |
600 | |
500 | |
400 | |
300 | |
200 | |
100 | |
0 |
-26%
2011 | 2019 | |
Base price | Adj EBITDA | |
EURm
-32%
368340
-9%
2011 | 2019 |
Free cash flow
EURm
165%
281
106
2014 | 2019 | 2014 | 2019 | 2014 | 2019 |
Source: CRU (base price), Aperam accounting data
19
Investment case & value strategy
Track record: Aperam a solid performer even in challenging times
Solid operating performance despite market headwind | Transformation yields a positive net income even | |||||||||||||||
in a recessionary market environment | ||||||||||||||||
11.8% | 12.7% | 2.47 | 4.00 | 3.39 | ||||||||||||
10.6% | 10.8% | 1.99 | 1.82 | |||||||||||||
0.91 | ||||||||||||||||
8.9% | 567 | 8.0% | ||||||||||||||
320 | ||||||||||||||||
5.7% | 504 | 286 | ||||||||||||||
455 | -1.08 | -0.96 | 193 | |||||||||||||
451 | 155 | 148 | ||||||||||||||
4.1% | 368 | 71 | ||||||||||||||
340 | ||||||||||||||||
-86 | -74 | |||||||||||||||
168 | 220 | |||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||
Adj. EBITDA (m€) | adj. EBITDA margin | Net result (m€) | EPS (€) | |||||||||||||
A strong balance sheet is corporate policy
26% | 23% | |||||
20% | ||||||
14% | ||||||
6% | 2% | 3% | ||||
619 | -2% | |||||
501 | 442 | |||||
290 | 147 | -63 | 48 | 75 | ||
2012 2013 2014 2015 2016 2017 2018 2019
Net debt (m€) | Gearing (%) |
2019 volumes reflect soft real demand in both EU and Brazil
and trade war induced imports
1,683 | 1,728 | 1,813 | 1,886 | 1,917 | 1,936 | 1,972 | 1,786 |
2012 2013 2014 2015 2016 2017 2018 2019
Aperam shipments (kt)
20
Investment case & value strategy
Resilience: Strong balance sheet, high liquidity and low maintenance capex
A strong balance sheet forms a solid base | Low maintenance capex + solid investment | ||||||||||||||||||||||||||||
in a volatile industry* | in growth improvement | ||||||||||||||||||||||||||||
3.7 | 200 | ||||||||||||||||||||||||||||
2.3 | 175 | ||||||||||||||||||||||||||||
1.1 | 150 | 47 | 84 | ||||||||||||||||||||||||||
0.6 | 125 | 61 | |||||||||||||||||||||||||||
0.3 | |||||||||||||||||||||||||||||
619 | 0.1 | 0.2 | 100 | 44 | 34 | ||||||||||||||||||||||||
501 | -0.1 | ||||||||||||||||||||||||||||
442 | 75 | ~50 | |||||||||||||||||||||||||||
117 | |||||||||||||||||||||||||||||
290 | 108 | ||||||||||||||||||||||||||||
48 | 75 | 50 | 75 | 84 | 90 | ||||||||||||||||||||||||
147 | |||||||||||||||||||||||||||||
-63 | |||||||||||||||||||||||||||||
25 | ~50 | ||||||||||||||||||||||||||||
0 | |||||||||||||||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | 2020e | ||||||||||||||||||||||||
Net debt (m€) | Net debt | / LTM EBITDA | Replacement capex (EURm) | Growth / Improvement | |||||||||||||||||||||||||
Balanced maturity profile & ample liquidity | Flexible mix and broad range of financing instruments2 | ||||||||||||||||||||||||||||
Com. Paper & | |||||||||||||||||||||||||||||
700 | |||||||||||||||||||||||||||||
other | |||||||||||||||||||||||||||||
600 | |||||||||||||||||||||||||||||
500 | No credit arrangement contains | Leasing & | |||||||||||||||||||||||||||
400 | Schuldschein | other | |||||||||||||||||||||||||||
any earnings related covenant | |||||||||||||||||||||||||||||
300 | |||||||||||||||||||||||||||||
200 | |||||||||||||||||||||||||||||
100 | |||||||||||||||||||||||||||||
0 | |||||||||||||||||||||||||||||
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 | |||||||||||||||||||||||||||||
EIB loan | Leasing & other | Schuldschein | EIB loan | ||||||||||||||||||||||||||
Com. Paper & other | Cash & equiv. | RCF | |||||||||||||||||||||||||||
*Aperam intends to maintain a strong balance sheet that is consistent with investment grade ratios | 2Financing documentation is in line with investment grade standards and |
contains no pledges of assets or earnings covenants | 21 |
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
Low cash taxes*
Low cash interest
126% | 85% | 112% | |||||
69% | 78% | 67% | |||||
59% | |||||||
45% | |||||||
354 | 377 | 374 | 400 | ||||
295 | |||||||
212 | 152 | 184 | |||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Cash-flow from operations (m€) | Cash flow conversion |
Solid average 8% free cash flow yield*
500 | 10% | 9% | 8% | 12% | |||
400 | |||||||
6% | 6% | 6% | 5% | ||||
300 | |||||||
281 | |||||||
200 | |||||||
EURm | 85 | 241 | 260 | 211 | |||
100 | |||||||
58 | 106 | 108 | |||||
0 | |||||||
-100 | |||||||
-200 | |||||||
-300 | |||||||
-400 | |||||||
2012 2013 2014 2015 2016 2017 2018 2019 | |||||||
Capex | ∆ WC | FCF | FCF yield | ||||
Best in class cash distribution to shareholders
(EURm) | ||||
70 | 93 | 100 | ||
90 | ||||
87 | 106 | 130 | 142 | 140 |
2016 | 2017 | 2018 | 2019 | 2020e |
Dividends | Share buy backs | |||
*at year end 2019 the recognized deferred tax asset on tax losses amounted to EUR144m and the unrecognized deferred tax asset amounted to EUR438m
22
Investment case & value strategy
Portfolio improvement: Top line strategy
Constant innovation to shift portfolio into attractive growth / margin segments
Growth
New products in sales | |||||
130 | |||||
125 | |||||
120 | |||||
Niches | 2015=100 | 115 | |||
Margin management / | 110 | ||||
demand driven | 105 | ||||
Index | 100 | ||||
95 | |||||
New Asian | 90 | ||||
competition | 85 | ||||
Margin | 80 | ||||
2015 | 2016 | 2017 | 2018 |
Guiding principle: strengthen product & service differentiation
- Increase competitiveness against other materials by improving existing solutions
- Innovate and apply existing solutions to new target markets
- Develop innovative new products
- Optimize product & customer mix
- Redefine distribution channels
Aperam product areas (size indicates volumes)
23
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 footprint in the stainless industry globally |
Environment | We are recycling champion and 33% of our energy intake is renewable |
Process | We have ambitious ESG targets and a convincing track record |
Social | We value our diverse workforce, invest in training & 86% rate us a good employer |
Governance | The majority of our board is independent |
Compliance | We have a robust compliance framework and a zero tolerance policy |
Please find our complete ESG presentation & report at: www.aperam.com/sustainability
24
ESG
Silène luminaris sive Muflier de Borges, Miguel Chevalier Fondation Clément, Le François, Martinique - France Fabrication : Serrurerie La Parette, Roquefort-la Bédoule
Aperam stainless steel used : Aperam 316 Hot Rolled
Aperam produces the greenest stainless steel globally
25
ESG summary
ESG is core at Aperam and starts at the top
Governance & Stakeholders
- Our high ethical standards are reflected in our robust corporate governance and structured compliance program with a zero tolerance policy for non compliant behavior
- our Board of directors is composed of a majority of independent directors
- Board Committees are independent members only
- We aim to be a partner of choice for our customers and suppliers
- Our Corporate Responsibility is reflected by local programs and stakeholder engagement
We take E, S and G seriously
Social
- Our people are colleagues with whom we share values and a common future
- Their safety is our non-negotiable priority
- Their motivation and creativity is our greatest asset
- Their development is a key to our success.
- We actively promote diversity
- We believe in a positive dialogue and have collective labour agreements in place throughout Aperam
Environment
- As an energy-intensive company, we consider environmental consciousness as a necessary prerequisite to our sustainable profitability
- Recycle: Our products are infinitely recyclable and our main input in Europe is recycled scrap
- We have an industry leading CO2 footprint with the greenest" stainless steel globally due to our FSC-certified forest in Brazil
- We have clear targets in place to improve our environmental performance and are a member of Responsible Steel®
26
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 global development
- Our products are non toxic in production and usage
- We are the only stainless steel mill using 100% charcoal instead of coal based coke in our BFs
- Our European production is predominantly based on scrap recycling: >80% of raw material
-
Our product is 'Green Steel' because it is produced from a clean and renewable energy source
By doing so, we maintain a relationship of respect with the surrounding environment
Recycling | Mechanical | Resistance | Corrosion | Cleanability | Aesthetics |
properties | to fire | resistance |
Steel is an alloy of iron and carbon. Stainless steel additionally contains at least 10.5% chromium. Stainless steels' corrosion resistance and mechanical properties can be further enhanced by adding other elements, (eg nickel, molybdenum, titanium, niobium, manganese, etc) and through mechanical & thermal treatment
27
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-certifiedsustainably cultivated
eucalyptus forests in Minas Gerais
Charcoal is used in our steel-making process as a natural and renewable substitute for fossil fuels (coke). We managed to eradicate entirely the use of coal based coke in our blast furnaces which gives us a sector leading CO2 footprint
In Europe, our main input is recycled scrap (>80%). We truly believe in and work to promote the circular economy
We are true promoters of the circular economy, with a 100%-owned Recyco unit dedicated to the recycling of melting shop dust and sludges in Europe
Best practice forest management, recognized by the Forest Stewardship Council's (FSC®) certification, which standards and principles conciliate ecological protection (flora and fauna, but also water reserves) with social benefits and economic feasibility. Our forests are made of selected cloned saplings which are considered among the best on the market 28 and they are separated by firewalls and strips of natural vegetation to take into account both fire-prevention, biodiversity preservation and local development (beekeeping).
ESG summary
Aperam supports the United Nations' Sustainable
Development Goals
We take broad responsibility: our Products and Environmental and Social action
Health & Safety is Aperam's primary concern and the priority in all our proceedings
More than 30% of Aperam's energy comes from renewables as biomass
(charcoal) and, via pilot projects, wind and solar
Aperam is a recycling champion: We use the maximum amount of
recycled material (not only scrap) in our production and also take good care to leverage wastes and byproducts in line with our zero-waste target
Gender balance is ranked highly on our priority list as from 2017 and has received
a special commitment from management, who decided to set up specific objectives for creating more gender balance in our workforce
Research & Development and innovation are top priorities for Aperam. We
also help our customers adapt their own processes (welding, stamping, etc.) to make the most of their tools
Our BioEnergia cultivated forest produces charcoal which prevents use of met
coal & coke and acts as a FSC certified carbon sink. Our plants are constantly reducing their energy consumption and participate in our climate action plan
In our forestry, located on hydric-stressed areas like our other plants, lowering
water consumption and improving the quality of discharge are key elements of our environmental strategy
Aperam is committed to a sustainable cohabitation with our neighboring
communities, allowing host cities to
thrive and addressing inhabitants' legitimate requests
Ethics are a key component
to Aperam's values. We
comply with all applicable regulations, interact transparently with authorities and support the fight against corruption, money laundering and anti-competitive practices - among others
Environment | Social | Governance | 29 |
ESG summary
Social: Our people are our asset
Criteria | 2020 Target | |
Lost-time injury | <1 | |
frequency rate | ||
Employee satisfaction1 | N/A | |
Diversity | Increase | |
Training hours/FTE | Increase | |
Absenteeism | 2.0 | |
Aperam 2019 statusSteel industry 2017*
1.7 | ! | 2.93 |
86% | 78% |
Women 12% of staff 20% of exempts
35.5
3.1
Safety always comes first at Aperam. We rely on our people to transform our company from a
traditional industry into a connected, agile and innovative organization
* Heavy manufacturing, Worldsteel | 1 For the seventh consecutive year, Aperam S America was selected as one of the best companies to work for by Guia Você S/A, in | 30 |
recognition of our work on employee health and wellbeing |
ESG summary
Environment: A best in class footprint²
CriteriaTarget 2030Aperam 2019 statusSteel industry 2017
Energy intensity* | 12.1 GJ/t -5% vs 2015 | 13.3 GJ/t +4% ! | ||
CO2 intensity** | 0.45 t/t | -15% vs 2015 | 0.48 t/t | -11% | 0.95 t/t² | |||
Water consumption | 5.9 m3 /t -40% vs 2015 | 11.8 m3 /t +16% ! | ||
Dust intensity | 70 g/t | -70% vs 2015 | 84 g/t | -65% | ||
Zero Waste target | >97% reused / recycled | 94.3% | +0.8pp | ||
Lower production volumes hurt some KPI's in 2019
We aim to exceed environmental legislation and are committed to continuous improvement
*amounts to -11% on electricity & natural gas | **Scope 1+2. An internal CO2 | price of €30/t is applied to all investments. We review and adjust this if necessary to maintain | |
the incentive for CO2 savings | ²per ton of slab | 31 |
ESG summary
Environment: Aperam has a convincing environmental track
record and clear improvement targets. Low volumes impacted 2019
CO2 emissions (t/t crude steel)*
0.78
0.70 0.72
0.61
0.58 | ||||||||||||||||
0.50 | 0.48 | 0.54 | 0.49 0.49 0.48 | |||||||||||||
0.48 | 0.45 | |||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2030 |
Energy consumption (GJ/t crude steel)
14.7 | ||||||||||||
14.0 | 13.8 14.0 13.6 13.6 | 13.0 12.8 | 13.3 | |||||||||
12.8 | ||||||||||||
12.4 | 12.5 | |||||||||||
12.1 | ||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2030 |
Dust emissions (g/t crude steel) | Water intake (m3/t) | |
211 | 213 | 240 | 242 | 11.5 10.7 10.2 10.1 10.1 | 9.9 | 11.8 | |||
153 | 5.9 | ||||||||
89 | 84 | 70 | |||||||
2013 2014 2015 2016 2017 2018 2019 | 2030 | 2013 2014 2015 2016 2017 2018 2019 | 2030 | ||||||
target | Actual | *scope 1 & 2 | 32 | ||||||
ESG
Aperam's CO2 footprint: Aperam has a industry leading CO2 footprint and produces the greenest stainless steel globally
CO2 t 47.0 | Europe |
/t* | |
Aperam has a convincing track record and clear improvement targets set for 2030
Raw materials | Electricity | EU Taxonomy** | ||||||||
Threshold 0.352 t/t | EU ETS (= scope 1) | |||||||||
Stainless scrap | ||||||||||
APAM 0.28 t Co2 / t | ||||||||||
Ferronickel | Consumables: | Electricity | ||||||||
Ferrochrome | Graphide Electrode | Nat. gas | Electricity | Electricity | ||||||
Other alloys | Natural gas | Nat. gas | ||||||||
Electric Arc | Molten | Slab | Slab | Furnace | Slab | Hot | HR | Cold | CR | Annealing & |
Furnace | metal | Caster | rolling | band | rolling | band | Pickling | |||
Brazil /t* CO2 t 40.0
Raw materials | |||||||||||||||
FSC certified | Raw materials | ||||||||||||||
Iron ore | SS scrap | Consumables | |||||||||||||
forest | |||||||||||||||
Limestone | Ferronickel | Graphite Electrode | |||||||||||||
Wood | |||||||||||||||
Ferrochrome | |||||||||||||||
Electricity | |||||||||||||||
Other alloys | |||||||||||||||
Charcoal | Charcoal | Blast | Electric Arc | ||||||||||||
burning | Furnace | Furnace | |||||||||||||
Co2 neutral | ironPig | Molten metal | Nat. gas | Electricity | Electricity | Nat. gas | ||||||
Electricity | ||||||||||||
Stainless | Raw materials | Metallurgy | metal | Caster | rolling | band | rolling | band | & Pickling | |||
Other alloys | ||||||||||||
Ferronickel | ||||||||||||
Ferrochrome | Second | Molten | Slab | Slab | Furnace | Slab | Hot | HR | Cold | CR | Annealing | |
Electrical | Raw materials | |||||||||||
Silicon | Second | Molten | Slab | Slab | Furnace | Slab | Hot | HR | Cold | CR | Decarb. | |
Metallurgy | metal | Caster | rolling | band | rolling | band | Annealing | |||||
Nat. gas
Electricity
High temp. Annealing
Scope 1 | Scope 2 | Scope 3 | Product | Process / | Scope 1 - All Direct Emissions from the activities of an organisation or under their control. Scope 2 - Indirect Emissions from electricity purchased and used by the | |||
organisation. Scope 3 - All Other Indirect Emissions from activities of the organisation, occurring from sources that they do not own or control*per tonne of slab, scope 1 + 2 | 33 | |||||||
emissions | emissions | emissions | equipment | |||||
based on ISO14404 **EU Taxonomy* requires 0.352 t CO2/t scope 1+2 or 90% scrap | ||||||||
ESG summary
Environment: Bio Energia & recycling give Aperam a best in class climate change footprint
Aperam energy mix 2019
2%
29%37%
1%
31%
Aperam's has the smallest CO2 footprint in the industry*
CO2 t/t scope 1+2
1.0
0.5
Aperam | Stainless Industry |
CO2 t/t **
Factor
4x
~2
>8
Charcoal | Natural Gas | Coke | |||
Electricity | Other | ||||
EU industry | NPI based producers |
Our sustainably cultivated forest in Brazil is a unique asset
Source: Aperam estimates & calculation, ISSF data, CRU | *Data is for austenitic HR steel, scope 1+2 |
**scope 1+ 2 + total raw material emissions and transport | 34 |
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: 49 / 6 Nationalities
- CEO: responsible for Aperam's sustainability performance and compliance
- CTO, is also Head of Health, Safety & Environment
- Compensation aligned with long term interest of the Company and its stakeholders
- Multiplier for performance related bonus includes H&S factors (1 year plan)
- Long term incentive plans based on EPS and TSR evolution (3 year plan) vs relevant peers and index
*
Aperam benefits from the experience and industry know-how of its Leadership Team
*also responsible for environmental & industrial risk on a group wide basis
35
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 elected for 3 year terms
- Chairman: Mr. Lakshmi N. Mittal
- 7 members with a majority of independent directors (4 independent directors out of 7)
- 2 Board Committees composed of 100% of independent directors and reporting to the Board of Directors:
- Audit and Risk Management Committee covering also ESG matters; Chair: Ms. Bernadette Baudier
- Remuneration, Nomination and Corporate Governance Committee; Chair: Mr. Alain Kinsch
8% | |
19% | 7% |
4% | |
5% | 8% |
6% | |
4% | |
39% |
N America | France | Benelux |
UK | Other Europe | Spain |
Mittal Family | Treasury shares | Not identified |
Diverse skills, backgrounds, knowledge, experience, geographic locations, nationalities and
gender are reflected on our board and ensure effective governance
Source: IPREO, Bloomberg May 2019
36
Business overview
Musée des Confluences in Lyon, France. Architect: Coop Himmelb(l)au © Sergio Pirrone. Stainles steel used: Aperam 316L/1.4404 with Uginox Me
37
Group segments & corporate structure
Business overview
Group: Segments & corporate structure*
Stainless & Electrical Steel
2.5mt production capacity
1.7mt of gross shipments
73% of group adj EBITDA
One of the largest global producers of stainless steel**
Europe:
2 Electric Arc Furnaces use scrap as major input material
Stainless steel flat product output South America:
2 blast furnace use iron ore and charcoal produced from own forests
2 EAF use recycled scrap
Stainless flat products & electrical steel
Services & Solutions
706kt of gross shipments
13% of group adj EBITDA
Aperam sells and distributes its products through the S&S segment, which provides value added and customized steel solutions through further processing to meet specific customer requirements. S&S core activities:
- direct sale of Aperam products to end users
- distribution of Aperam and third party material
- transformation services, according to specific customer requirements
Alloys & Specialties
40 kt production capacity 36kt of gross shipments 14% of group adj EBITDA
Fourth largest producer of nickel alloys globally
Aperam specializes in nickel alloys and specific stainless steels
Our products take the form of bars, semis, cold-rolled strips, wire and wire rods, and plates, and are offered in a wide range of grades
High value items that are often sold on a kg basis
Aperam covers the complete stainless value chain with industry leading assets
in Europe and Brazil
*gross shipments and adj EBITDA are before eliminations | 39 |
** By production capacity |
Business overview
Group: Segments & corporate structure II
Production assets in Europe and South America
Châtelet, Belgium | Genk, Belgium |
Location & facts | Location & facts |
Melt shop | Melt shop |
Hot rolling mill | Cold-rolling mill |
Finishing |
Capacity | Capacity | ||
Slabs | 1,000 kt Slabs | 1,000 kt | |
HSM | 2,800 kt | 2 m wide capacity | |
316 and duplex | |||
grades | |||
Cold-rolling | 700 kt |
Gueugnon, France
Location & facts Cold-rollingmill Finishing
Capacity | |
Finished | 400 kt |
Specialized in Bright Annealing (BA) products and stabilized ferritics.
Isbergues, France
Location & facts Cold-rollingmill Finishing
Capacity | |
Finished | 350 kt |
LC2i: integrated line
Timóteo, Brazil | Imphy, France |
Location & facts | Location & facts |
Melt shop | Melt shop |
Cold-rolling mill | Cold-rolling mill |
Finishing | Finishing |
Capacity* | Capacity | ||||
Slabs | 900kt | EAF | 60kt | ||
Stainless finished | 1 VIM, 2 VAR, | ||||
350kt | Rotary continuous | ||||
Electrical CR: | Caster for long | ||||
Grain oriented | 60kt | products | |||
Non GO | 170kt | Wire hot rolling mill: | |||
SP Carbon | 200kt | ||||
40kt | |||||
*some | lines | are | flexibly | 6 Cold rolling mills | |
used | for | different | |||
products
40
Business overview
Group: Segments & corporate structure III
Aperam's value chain | ||||||
Slabs | Hot rolling | Cold rolling / Finishing | ||||
Isbergues | ||||||
Châtelet | 0.35Mt | |||||
1.0Mt | ||||||
Châtelet | Stainless | |||||
Genk | ||||||
2.8Mt | 0.7Mt | flat | ||||
Genk | ||||||
1.0Mt | Gueugnon | |||||
0.4Mt | ||||||
Electrical | ||||||
Timoteo | Timoteo | 0.18Mt | Electrical flat | |||
0.9Mt | 0.88Mt | Stainless | Stainless flat | |||
0.35Mt | ||||||
Imphy | Chatelet | Ni alloys & | ||||
Imphy | ||||||
0.06Mt | specialties | |||||
Imphy
Service | |
Direct | |
Sale | |
Service | |
Center | |
Direct | |
Sale | |
Service | Steel service |
Center | centers |
Transformation | |
Direct | |
Sale | |
Service | |
Center | |
Direct | |
Sale | |
Service | |
Center |
customers End
Stainless & Electrical Steel Europe | Alloys & Specialties | ||
Stainless & Electrical Steel South America}Stainless & Electrical Steel | Services & Solutions | 41 | |
Business overview
Group: A balanced risk profile and customer structure
Shipment split by segment 2019* | Adj EBITDA contribution by segment 2019* |
13% | |||||||||
29% | S&E Europe | S&E Europe | |||||||
45% | S&E S. America | 14% | 42% | S&E S. America | |||||
1% | A&S | A&S | |||||||
S&S | S&S | ||||||||
25% | 31% | ||||||||
Revenue by region 2019
Asia & | Brazil | |
7% | Africa | US |
Europe | Other Americas | |
66% | Germany | |
27% | Italy | |
Americas | France | |
Other Europe
Revenue by customer industry 2019
5% | Building & Construction | |||
12% | 24% | Catering & Appliances | ||
General Industry | ||||
16% | Automotive | |||
22% | Energy & Chemicals | |||
21% | Transport | |||
* Calculated on segmental data before eliminations
42
Business overview
Group: Self help has transformed the group. Higher cash generation and profitability even in adverse market conditions
Adj EBITDA by segment (EURm) | Shipment by segment (kt) | |
600 | 559 | 504 | ||||||
451 | 455 | |||||||
500 | ||||||||
368 | ||||||||
400 | 340 | |||||||
300 | 168 | 220 | ||||||
200 | ||||||||
100 | ||||||||
- | ||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |
S&E | A&S | S&S | Group Adj. EBITDA |
1,886 | 1,917 | 1,936 | 1,972 | ||||
1,813 | 1,786 | ||||||
1,683 | 1,728 | ||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
S&E | A&S | S&S | Group Net Shipments |
Adj EBITDA/t (EUR)
1,500 | |||||||
1,000 | 289 | ||||||
237 | 256 | ||||||
203 | 239 | ||||||
190 | |||||||
500 | 127 | ||||||
100 | |||||||
- | |||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
S&E | A&S | S&S | Group Adj. EBITDA/t |
Adj EBITDA margin
11.8% | 12.5% | ||||||
10.6% | 10.8% | ||||||
8.9% | 8.0% | ||||||
5.7% | |||||||
4.1% | |||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
S&E | A&S | S&S | Group adj EBITDA margin |
43
Stainless & Electrical Steel
Europe
Business overview
S&E Steel Europe: Self-help measures yield a robust operational performance despite a price and volume squeeze
Major adj EBITDA contributor 2019 | Robust profitability capitalizing on restructuring | |
13% | ||
S&E Europe | ||
14% | 42% | S&E S. America |
A&S | ||
S&S | ||
31% |
11.1% | 12.8% | ||
9.1% | |||
8.8% | 352 | ||
6.7% | 6.0% | ||
2.7% | 258 | 260 | |
0.5% | 220 | ||
153 | 150 |
12 57
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Adj. EBITDA (m€) | Adj. EBITDA margin (%) |
European shipments reflect import pressure, destocking
and weak real demand
European stainless steel demand came under cyclical pressure in 2019
6.0
4.0
Pre-crisis level (2007)
994 1,004 1,082
1,190 1,241 1,253 1,267 1,113
2.0
0.0
2012 2013 2014 2015 2016 2017 2018 2019
EU S&E Shipments (kt)
2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Stainless European ap. consumption (mt - slab equivalent)
45
Business overview
S&E Steel Europe: Leverage Aperam's unique position
European stainless steel industrial footprint | Aperam key competitive advantage | |
Finishing line
Steel making
Sourcing
Outokumpu
• The only integrated upstream | |
operations in the heart of Europe | |
• | Superior access to scrap supply |
• | Best location to serve the biggest |
consumption areas of Europe |
Aperam
AcerinoxTerni
Logistics
Production
• Efficient logistics between sites |
results in industry leading working |
capital management |
• Full range of products with flexible |
capacity |
• Increase scrap recycling to minimize |
environmental impact |
• Aim to become cost leader in the key |
products |
Located in the heart of European scrap generation and stainless consumption
46
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) | |
affected
Countries Impact MeasureAim
- Maintain traditional trade flows
- Volume focused
- All countries globally (if not explicitly exempt)
- Effective since February 2019 (Indonesia included from 1 Oct. 2019)
- HR quota 354kt pa* CR quota 836kt pa*
- Largest importers have a country quota. A residual quota for all others
- 25% duty for shipments > quota
- HR imports: FY 2018: 470 kt
FY 2019: 499 kt
- CR imports: FY 2018: 1,044 kt FY 2019: 931 kt
- Duty on imports that are priced below fair market value**
- Price focused
- Hot rolled: preliminary duties set against China, Indonesia, Taiwan
- since 8 April 2020
- Hot rolled duty on every tonne entering the European market
• China: 14.5% - 18.9%
- Indonesia: 17.0%
- Taiwan: 6.0% - 7.5%
- LTM HR share of imports: China 59%, Indonesia 13%, Taiwan 8%
- Q1 2020 HR imports from affected countries - 76% qoq
- Neutralize effect of subsidies that benefit certain imports
- Price focused
- Hot rolled: Case opened by EU commission in October 2019 against China, Indonesia
- Decision expected by mid 20202
- Hot rolled: duty to be determined according to unfair advantage granted
- Registration of HR imports from China & Indonesia since 25 Jan
- HR: impact to be determined
- LTM HR share of imports: China 59%, Indonesia 16%
Existing AD on cold rolled against China (25.3% duty) and Taiwan (6.8% duty) since 2015:
China CR import share dropped from 32% in 2014 to negligible post AD was imposed
We expect new measures against unfair trade to become effective during Q2
*Effective quota from 1 July 2019 to 30 June 2020. Quota relaxes by 3% on 1 July 2020 / annual for country quotas, quarterly for residual / SS Hot Rolled country quotas: | 47 | |
China, S. Korea, Taiwan, USA | SS CR: country quotas S. Korea, Taiwan, India, USA, Turkey, Malaysia, Vietnam **could be difference between domestic market price | |
and export price or cost based | 2preliminary duties |
Stainless & Electrical Steel
South America
Business overview
S&E Steel South America: A flexible, agile and highly profitable asset
A significant adj EBITDA contributor 2019 despite | Earnings reflect weak domestic economic environment | |
demanding conditions | ||
13% | ||
S&E Europe | ||
14% | 42% | S&E S. America |
A&S | ||
S&S | ||
31% |
17% | 19% | 14% | 17% | ||||
13% | 176 | 13% | 13% | ||||
167 | |||||||
162 | |||||||
8% | |||||||
120 | 113 | 118 | 109 | ||||
82 | |||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Adj. EBITDA (m€) | Adj. EBITDA margin (%) |
Stable shipments due to mix of domestic and exports
Weak economic growth continues to weigh on stainless steel consumption in Brazil
617 | 649 | 654 | 652 | 656 | 638 | 656 | 610 |
0.5
0.4
0.4
0.3
0.3
0.2
Pre-crisis level (2014)
2012 2013 2014 2015 2016 2017 2018 2019
Brazil A&S shipments (kt)
2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Stainless BRA ap. consumption (mt - slab equivalent)
49
Business overview
S&E Steel South America: Our Brazil asset is unique - the only stainless steel producer in South America
Aperam South America footprint
Caracas (Venezuela)
Colombia
Ecuador
Peru
Timoteo
Sumaré
Campinas
Ribeirão Pires
Caxias do Sul
Montevideo (Uruguay)
Buenos Aires (Argentina)
Melt shop, Hot/Cold rolling
Service Centers
Tubes mills and Cutting centers
Rep offices, sales agencies
Upstream integration
Cost competitive & environmentally
friendly charcoal from own
Bio Energia cultivated forests is used to heat the blast furnace
Range of products
A complete range of stainless steel
Stainless Steel grades (austenitics, ferritics, duplex, martensitics)
Grain oriented | Grain oriented electric steel* for |
use eg in stationary machines eg | |
electrical steel | |
transformers | |
Non grain | Non-grain oriented electric steel** |
oriented | for use in electric motors and |
electrical steel | generators |
Special | Alloyed, high, medium & other |
special carbon steel are completing | |
carbon steel | |
product portfolio | |
The sole flat stainless steel producer in South America
with a complete range of products, and a flexible production set-up
*Grain oriented steel (GO & HGO) has the magnetic properties optimized in one direction during hot rolling. | 50 |
**Non-grain oriented steel (NGO) has identical magnetic properties in all directions |
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 | |
Portfolio management
Domestic share gains
Cost competitive
- A wide range of products and geographical sales enables further optimization of capacity utilization and product mix
- Upgrade product portfolio: Develop new grades with higher value added (stainless substitution, HGO)
- Preferred supplier plan with best in class deliveries
- Performant logistics with integrated service centers
- Support stainless steel usage in S. America
- Sustain the cost benchmark in its main markets
- Leadership Journey® on-going to improve productivity
- Continuous improvement to at least compensate the inflation
Flexible product mix | Flexible regional mix | ||||
Exports | |||||
meltTimoteoshop | capacity900kt | •Stainless steel | (incl S America) | ||
•Electrical steel | |||||
• Non grain oriented | Brazilian | ||||
• Grain oriented | |||||
• High grain oriented | share gains | ||||
•Special Carbon | |||||
- Running Brazilian asset at optimal utilizationrate
- On-goingdebottleneckingof the cold rolling operations
- UpgradeGrain Oriented products via the development of HGO
- Continuous margin optimization between product mixand deliveries in South America
Sustained solid double digit adj EBITDA margin proves the flexibility & agility
of our operations in Brazil
51
Business overview
S&E Steel South America: Brazil offers ample opportunity for both cyclical and structural growth
Brazil consumes substantially below the global trend line
10 | China | |||||
(kg) | ||||||
per capita | 8 | |||||
Poland | ||||||
consumption | 6 | EU | ||||
Vi etnam | ||||||
Asia | ||||||
Thailand | World | |||||
4 | Turkey | N America | ||||
CR | ||||||
Malaysia | ||||||
Stainless | 2 | S. Africa | ||||
India | S.E Asia | Mexico | ||||
S. Asia | Indonesia | Brazil | Russia | |||
Egypt | L America | Romania | ||||
UkraineIran | Middle East | |||||
0 | Africa | Argentina | ||||
1,000 | 6,000 | 11,000 | 16,000 | |||
GDP per capita (USD) |
Brazil opportunities
- Short term: reviving the normal investment cycle in the economy. Large scale infrastructure & energy projects have been missing
- Medium term: Tax reform, followed by a change of import duties Reforms that put our customers in a position to compete on a global level will drive volume and yield a positive mix effect
- Long term: Higher standard of living will drive stainless steel consumption. Currently Brazil at 1.4kg / capita vs China >9kg/capita and a GDP implied consumption of >3.5kg/capita
Examples of stainless steel solutions in the Agrobusiness:
Equipment for the | Equipment for | Slats of metallic | |||||
transport and | washing gases | conveyor belt for | |||||
sterilization of Palm | from biomass | the transport of | |||||
fruits | burning | sugarcane | |||||
Largest global producer of: | Largest global exporter of: | ||||||
• | Coffee | Orange | • | Meat | Poultry | ||
• | Sugarcane and sugar | • | Sugar | Ethanol | |||
Brazil has tremendous potential for volume & mix improvement
Source: IMF, CRU, Aperam
52
Business overview
S&E Steel South America: Brazilian protections against unfair market behaviour
Type of products | Import duties status | Anti-dumping status | |
Stainless Steel Flat | China, Taiwan | ||
Normal import duties are 14% | AD duties starting October 4th, 2019 for 5 years | ||
Products | |||
China USD175/t - USD629/t, Taiwan USD93/t - USD705/t | |||
China and Taiwan: AD duties since July 29th, 2013 for 5 years and up | |||
Stainless Steel | | Normal import duties are 14% | to USD911/t. Renewal investigation launched on July 16th, 2018 |
Welded Tubes | Malaysia, Thailand and Vietnam: AD duties starting June 13, 2018, for | ||
5 years from USD367/t up to USD888/t | |||
China, South Korea, Taiwan, Germany: AD duties from 15 July 2019 | |||
Electrical steel - | | Normal import duties are 14% | for 5 years from USD90/t - USD166.3/t |
Non Grain Oriented | Re-evaluation after 12 months | ||
Electrical steel - | | Normal import duties are 14% | |
Grain Oriented | |||
Tariff measures to support fair market environment in Brazil | |||
Sources: SBB/Platts, Steelfirst |
53
Services & Solutions
Business overview
Services & Solutions: stronger partnership with customers enhances margins
A significant adj EBITDA contributor 2019 despite trough | A profitable Services & Solutions thanks to its focus on | ||||||||||||||
conditions | service oriented customers | ||||||||||||||
100 | 19,000 | ||||||||||||||
13% | 80 | 17,000 | |||||||||||||
83 | |||||||||||||||
15,000 | |||||||||||||||
S&E Europe | 65 | ||||||||||||||
60 | 70 | ||||||||||||||
13,000 | |||||||||||||||
14% | |||||||||||||||
42% | S&E S. America | 40 | |||||||||||||
43 | 45 | 11,000 | |||||||||||||
A&S | 38 | ||||||||||||||
20 | 9,000 | ||||||||||||||
16 | |||||||||||||||
S&S | |||||||||||||||
0 | 7 | 7,000 | |||||||||||||
31% | |||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | ||||||||
EBITDA €m | Nickel LME price (RHS) | ||||||||||||||
Increasing focus on downstream value added services
and solutions
A majority of "in house" exposure to end users to best serve their needs and provide best services & solutions
799 | 818 | 819 | |||||||||||||
721 | 746 | 706 | Aperam | ||||||||||||
679 | Stainless | Aperam | |||||||||||||
661 | |||||||||||||||
End- | |||||||||||||||
& | |||||||||||||||
Services & | |||||||||||||||
users | |||||||||||||||
Solutions | |||||||||||||||
Electrical | |||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | Steel | |||||||
Independent | |||||||||||||||
S&S shipments (kt) | distributors | ||||||||||||||
and other | |||||||||||||||
55
Business overview
Services & Solutions: Adding value downstream
Services & Solutions value chain | |||
Input | - - - - - - Service Centers - - - - - - | ||
Hot rolled coil / | Cutting/ | Polishing | Packaging |
Cold rolled coil | Slitting | Brushing | |
& | Slit | Slit / | Machined | Square | |
deburred | deburred | ||||
- - - - - - - Tube making - - - - - - - | |||||
Forming | Expanding | ||||
Hot rolled coil / | Welding | ||||
Cutting | Packaging | ||||
Cold rolled coil | Pickling | ||||
Bending | |||||
Annealing | |||||
Logistics Customer
Round
Logistics Customer
56
Alloys & Specialties
Business overview
Alloys & Specialties: attractive niche market with high margins
Aperam's high value-added segment 2019
13% | ||
S&E Europe | ||
14% | 42% | S&E S. America |
A&S | ||
S&S | ||
31% |
High profitability due to end products & end user
orientation
1,191 | 1,219 | 1,264 | 1,147 | 1,407 | 1,278 | 1,385 | |
43 | 44 | 44 | 864 | 46 | 46 | 50 | |
39 | |||||||
26 | |||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Adj. EBITDA (m€) | Adj. EBITDA/t | ||||||
Stable shipments but markedly improved mix
36 | 36 | 35 | 34 | 30 | 33 | 36 | 36 |
A&S shipments (kt)
Nickel Alloys a growing and premium niche market
400 | |||||||||||||||||
350 | CAGR 2.7% pa | ||||||||||||||||
300 | |||||||||||||||||
250 | |||||||||||||||||
kt | 200 | ||||||||||||||||
150 | |||||||||||||||||
100 | |||||||||||||||||
50 | |||||||||||||||||
0 | |||||||||||||||||
1990 | 1992 | 1994 | 1996 | 1998 | 2000 | 2002 | 2004 | 2006 | 2008 | 2010 | 2012 | 2014 | 2016 | 2018 | |||
Source: SMR, Aperam
58
Business overview
Alloys & Specialties: attractive niche market with high margins
Aperam is global top player in nickel alloys and strong in
long products (kt)
Aperam Alloys & Specialties geographical footprint
Rescal | Amilly | |
Imhua | ||
Wire | The magnetic parts | |
company | ||
drawing | ||
n | ||
n | ||
n | ||
n | n | |
Imphy | ICS (JV) | |
Melt shop, wire rod mill, | Diversification into |
cold rolling,bars, R&D | industrial clads |
Alloys & Specialties sales by industry 2019
Marine | |||
6% | 18% | Oil & Gas | |
16% | Chemical industry / | ||
welding / environment | |||
Aerospace | |||
6% | |||
33% | E&E | ||
19% | Automotive / | ||
Transportation | |||
Others | |||
Major products
Downstream Upstream
Source: SMR, Aperam | 59 |
*PCC (Special Metals) NYK (Nippon Yakin Kogyo) |
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 applications | Less exposed to commodity cycles | ||||
| Substantial market entry barriers | | "Kilogram" market: unique products | Cost of raw materials passed through to | ||
| Benchmark customers in advanced | designed to enable precision and high- | customers | |||
industries require tailored, certified and | tech solutions globally | Long-standing client relationships | ||||
highly sophisticated solutions | | Highly diversified end-markets | Good visibility on volumes with high | |||
proportion of recurring revenue | ||||||
Key R&D figures (based on 2019)
Cooperation contracts | 26 |
Total registered patents | 341 |
Sales of new products | 14% |
Key end-markets / application types
Heating | LNG tankers, | ||
resistance, | |||
special welding | |||
watches | |||
Gearbox, | |||
fasteners, | Gas turbines, | ||
turbo | |||
heat | |||
chargers | |||
exchangers | |||
Smart | Fasteners, | ||
phones, | |||
landing gears, | |||
LED TV, | Electrical | ||
turbine | |||
seals | |||
safety, | |||
engines | |||
sensors | |||
EBITDA margins by Aperam division
14% 12% 10% 8% 6% 4% 2% 0%
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
S&S | A&S | S&E |
A very profitable, growing and stable niche market
60
Appendix
Résidence Hôtelière du Rail, Montparnasse station, Paris - France - aasb_agence d'architecture suzelbrout - Executed using grade 304L, with Uginox Mat finish
Appendix
Key stainless product categories by alloy content
Martensitic | Ferritic (400 series) | |
<0.1% | <0.1% |
17% | 10.5- |
30% |
<1.5%
<4.5%
Car exhausts, conveyor chains, cooking utensils, | ||
Cutlery, cutting tools, construction tools… | boilers, electrical appliances, trim, dishware, | |
heating, tanks, tubes… |
Austenitic (300 series)
<0.1%
16-21%
6-26%
<7%
Boiler, aeronautics, electronic components, railway equipment, tubes, chemical tanks, food vats, marine applications, furnace, heating…
Austenitic with Manganese (200 series)
4-16%<1%
15-19%
1-6%
<2%
Asphalt tankers, tubes, food containers, silos,
conveyor chains, safety soles…
Austeno-ferritics (Duplex)
<1%
21-26%
1-7% <4%
Oil & gas equipment, papermaking, pulp,
desalination sector, chemical plants…
By weight Iron Molybdenum, Al, Cu Nickel
Chromium
Manganese Carbon
62
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Aperam SA published this content on 06 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 May 2020 05:23:01 UTC