Aperam S A : February 11, 2022 – Full year and fourth quarter 2021 results

Full year and fourth quarter 2021 results1

"Closing out a record year with a successful entry into Recycling"

Luxembourg, February 11, 2022 (07:00 CET) - Aperam (referred to as "Aperam" or the "Company") (Amsterdam, Luxembourg, Paris, Brussels: APAM, NYRS: APEMY), announced today results for the three months and full year ended December 31, 2021.

Highlights

• Health and Safety: LTI frequency rate of 2.3x in 2021 compared to 1.5x in 2020
• Steel shipments of 1,819 thousand tonnes in 2021, 8.5% increase compared to steel shipments of 1,677 thousand tonnes in 2020
• EBITDA of EUR 1,186 million in 2021, including an exceptional gain of EUR 126 million, compared to an EBITDA of EUR 343 million in 2020, including a net exceptional gain of EUR 50 million
• EBITDA of EUR 462 million in Q4 2021, including an exceptional gain of EUR 117 million2, compared to EUR 159 million in Q4 2020, including a net exceptional gain of EUR 50 million
• Net income of EUR 968 million in 2021, compared to EUR 175 million in 2020
• Basic earnings per share of EUR 12.21 in 2021, compared to EUR 2.19 in 2020
• Cash flow from operations amounted to EUR 550 million in 2021, compared to EUR 303 million in 2020
• Free cash flow before dividend and share buy-back of EUR 367 million in 2021, after EUR (30) million paid for the acquisition of ELG, compared to EUR 195 million in 2020
• Net financial debt of EUR 466 million, added from the ELG acquisition as of December 31, 2021, compared to EUR 67 million as of December 31, 2020

Strategic initiatives

• Leadership Journey​®3 Phase 4:​Gains reached EUR 7 million in Q4 2021. Aperam realized cumulative gains of EUR 40 million in the first year of the program. This compares to cumulative target gains of EUR 150 million over the period 2021 to 2023

Cash deployment

In coherence to is Financial Policy, Aperam is announcing:

• 2022 Dividend: increase from €1.75 per share to €2.00 per share (subject to AGM approval)
• 2022 Share Buyback: up to €100 million

Prospects

• Q1 2022 adj. EBITDA is expected at a slightly higher level versus the record Q4 2021 base
• We guide for slightly higher Q1 2022 net financial debt

Timoteo Di Maulo, CEO of Aperam, commented:

"In the fourth quarter we realized the fourth record results in a row. This is a reflection of the positive market environment, but also proof of the substantial improvements that we have realized over the past years. We have opened the next chapter in Aperam's transformation with the acquisition of ELG - a leading recycling company for stainless steel scrap and superalloys. Looking ahead, our long order book signals a good first half. This allows us to invest in realizing Aperam's growth & improvement strategy to 2025 and sustaining attractive shareholder returns at the same time."

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Financial Highlights (on the basis of financial information prepared under IFRS)

(in millions of Euros, unless otherwise stated)	Q4 21	Q3 21	Q4 20	12M 21	12M 20
Sales	1,396	1,257	916	5,102	3,624
Operating income	426	241	118	1,042	199
Net income attributable to equity holders of the parent	438	201	101	968	175
Basic earnings per share (EUR)	5.56	2.53	1.26	12.21	2.19
Diluted earnings per share (EUR)	5.53	2.53	1.26	12.16	2.19
Free cash flow before dividend and share buy-back	132	90	88	367	195
Net Financial Debt (at the end of the period)	466	59	67	466	67
Adj. EBITDA	345	278	109	1,060	293
Exceptional items	117	-	50	126	50
EBITDA	462	278	159	1,186	343
Adj. EBITDA/tonne (EUR)	814	660	253	583	175
EBITDA/tonne (EUR)	1,090	660	369	652	205
Steel shipments (000t)	424	421	431	1,819	1,677

Health & Safety results

Health and Safety performance based on Aperam personnel figures and contractors' lost time injury frequency rate was 2.1x in the fourth quarter of 2021 compared to 1.8x in the third quarter of 2021. For 2021 the lost time injury frequency rate was 2.3x after 1.5x in 2020.

Financial results analysis for full year period to December 31, 2021

Sales for the year ended December 31, 2021 increased by 40.8%, at EUR 5,102 million compared to EUR 3,624 million for the year ended December 31, 2020, mainly due to higher shipments and higher prices. Steel shipments in 2021 increased by 8.5% at 1,819 thousand tonnes compared to 1,677 thousand tonnes in 2020.

EBITDA reached EUR 1,186 million for the year ended December 31, 2021 (including exceptional gains of EUR 126 million made of a bargain gain on ELG acquisition of EUR 117 million and PIS/Cofins tax credits related to prior periods recognized in Brazil for EUR 9 million), compared to EUR 343 million for the year ended December 31, 2020 (including net exceptional gains of EUR 50 million made of PIS/Cofins tax credits related to prior periods recognized in Brazil for EUR 65 million, partly offset by social costs and restructuring charges related to asset optimization in Europe for EUR (15) million). Group Adjusted EBITDA increased by 262% as higher demand supported a pricing recovery in both Europe and South America. Additional contributions were realized from inventory valuation gains. Phase 4 of the Leadership Journey® - the Transformation Program - realized EUR 40 million gains in 2021.

Depreciation, amortization and impairment was EUR (144) million for the year ended December 31, 2021.

Aperam had an operating income for the year ended December 31, 2021 of EUR 1,042 million compared to an operating income of EUR 199 million for the year ended December 31, 2020.

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Financing costs including the FX and derivatives result for the year ended December 31, 2021 were positive at EUR 2 million, including cash cost of financing of EUR (7) million and exceptional interest income of EUR 6 million in Brazil for PIS/Cofins tax credits related to prior periods.

Income tax expense for the year ended December 31, 2021 was EUR (74) million.

The Company recorded a net income of EUR 968 million for the year ended December 31, 2021.

Cash flows from operations for the year ended December 31, 2021 were positive at EUR 550 million, despite a working capital increase of EUR 485 million. CAPEX for the year ended December 31, 2021 was EUR (152) million.

Free cash flow before dividend and share buy-back for the year 2021 amounted to EUR 367 million.

As of December 31, 2021, total equity amounted to EUR 2,953 million and net financial debt was EUR 466 million, of which EUR

499 million net financial debt was added from the acquisition of ELG. Gross financial debt as of December 31, 2021 was EUR 990 million. Cash & cash equivalents were EUR 524 million.

Total cash returns to shareholders in 2021 amounted to EUR 245 million, consisting of EUR 105 million of share buy-back4 and EUR 140 million of dividend (of which EUR 1 million paid to non-controlling interests).

The Company had liquidity of EUR 932 million as of December 31, 2021, consisting of cash and cash equivalents of EUR 524 million and undrawn credit lines5 of EUR 408 million.

Financial results analysis for the three-month period to December 31, 2021

Sales for the fourth quarter of 2021 increased by 11.1% to EUR 1,396 million compared to EUR 1,257 million for the third quarter of 2021. Steel shipments increased from 421 thousand tonnes in the third quarter of 2021, to 424 thousand tonnes in the fourth quarter of 2021.

EBITDA increased during the quarter to EUR 462 million (including an exceptional gain of EUR 117 million related to the bargain gain on ELG acquisition) from EUR 278 million for the third quarter of 2021. The underlying improvement was mainly driven by higher volumes and higher prices that outweighed higher energy costs compared to the previous quarter.

Depreciation, amortisation and impairment was EUR (36) million for the fourth quarter of 2021.

Aperam had an operating income for the fourth quarter of 2021 of EUR 426 million compared to an operating income of EUR 241 million for the previous quarter.

Financing costs, net, including the FX and derivatives result for the fourth quarter of 2021 were EUR (6) million, including cash cost of financing of below EUR 1 million.

Income tax benefit for the fourth quarter of 2021 was EUR 19 million.

The Company recorded a net income of EUR 438 million for the fourth quarter of 2021.

Cash flows from operations for the fourth quarter of 2021 were positive at EUR 219 million, despite a working capital increase of EUR 71 million. CAPEX for the fourth quarter was EUR (58) million.

Free cash flow before dividend and share buyback for the fourth quarter of 2021 amounted to EUR 132 million.

During the fourth quarter of 2021, the cash returns to shareholders amounted to EUR 34 million, consisting fully of dividend.

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Operating segment results analysis

Stainless & Electrical Steel (1)

(in millions of Euros, unless otherwise stated)	Q4 21	Q3 21	Q4 20	12M 21	12M 20
Sales	1,249	1,065	774	4,369	2,897
Adjusted EBITDA	318	226	89	896	227
Exceptional items	-	-	50	-	50
EBITDA	318	226	139	896	277
Depreciation, amortisation & impairment	(31)	(31)	(34)	(122)	(118)
Operating income	287	195	105	774	159
Steel shipments (000t)	432	409	432	1,796	1,639
Average steel selling price (EUR/t)	2,806	2,525	1,723	2,360	1,705

1. Amounts are shown prior to intra-group eliminations

The Stainless & Electrical Steel segment had sales of EUR 1,249 million for the fourth quarter of 2021. This represents a 17.3% increase compared to sales of EUR 1,065 million for the third quarter of 2021. Steel shipments during the fourth quarter were 432 thousand tonnes, an increase of 5.6% compared to shipments of 409 thousand tonnes during the previous quarter. Volumes in Europe increased seasonally while volumes in Brazil decreased seasonally quarter on quarter. Average steel selling prices for the Stainless & Electrical Steel segment increased by 11.1% compared to the previous quarter.

The segment recorded EBITDA of EUR 896 million (of which EUR 459 million were generated in Europe and EUR 437 million in South America) for the year 2021 compared to EUR 277 million (of which EUR 88 million from Europe, including EUR (13) million of social costs in France related to asset optimization and EUR 189 million from South America, including EUR 64 million due to PIS/Cofins tax credits related to prior periods and EUR (1) million of social costs in Brazil) for the year 2020. Adjusted EBITDA improved by 295% as both regions benefited from higher prices, higher volumes, inventory valuation gains and the successful implementation of the Top Line strategy and Leadership Journey®.

The segment generated EBITDA of EUR 318 million for the fourth quarter of 2021 compared to EUR 226 million for the third quarter of 2021. Profitability increased due to higher prices and higher volumes which compensated higher input costs.

Depreciation, amortisation and impairment was EUR (31) million for the fourth quarter of 2021.

The Stainless & Electrical Steel segment had an operating income of EUR 287 million for the fourth quarter of 2021 compared to an operating income of EUR 195 million for the third quarter of 2021.

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Services & Solutions(1)

(in millions of Euros, unless otherwise stated)	Q4 21	Q3 21	Q4 20	12M 21	12M 20
Sales	578	561	381	2,212	1,513
Adjusted EBITDA	51	53	14	199	38
Exceptional items	-	-	1	9	1
EBITDA	51	53	15	208	39
Depreciation & amortisation	(3)	(3)	(3)	(12)	(13)
Operating income	48	50	12	196	26
Steel shipments (000t)	158	171	163	726	646
Average steel selling price (EUR/t)	3,471	3,167	2,224	2,922	2,242

1. Amounts are shown prior to intra-group eliminations

The Services & Solutions segment had sales of EUR 578 million for the fourth quarter of 2021, representing an increase of 3.0% compared to sales of EUR 561 million for the third quarter of 2021. For the fourth quarter of 2021, steel shipments were 158 thousand tonnes compared to 171 thousand tonnes during the previous quarter. The Services & Solutions segment had higher average steel selling prices during the period compared to the previous period.

The segment recorded EBITDA of EUR 208 million for the year 2021, including EUR 9 million in Brazil due to PIS/Cofins tax credits related to prior periods, compared to EUR 39 million for the year 2020, including EUR 1 million in Brazil due to PIS/Cofins tax credits related to prior periods. The higher result was mainly attributable to higher shipments, higher prices and inventory valuation gains.

The segment generated EBITDA of EUR 51 million for the fourth quarter of 2021 compared to EBITDA of EUR 53 million for the third quarter of 2021. Higher prices and higher inventory valuation gains did not fully compensate for seasonally lower volumes.

Depreciation, amortisation and impairment was EUR (3) million for the fourth quarter of 2021.

The Services & Solutions segment had an operating income of EUR 48 million for the fourth quarter of 2021 compared to an operating income of EUR 50 million for the third quarter of 2021.

Alloys & Specialties(1)

(in millions of Euros, unless otherwise stated)	Q4 21	Q3 21	Q4 20	12M 21	12M 20
Sales	149	112	103	518	511
EBITDA	19	11	15	58	45
Depreciation & amortisation	(2)	(2)	(2)	(8)	(9)
Operating income	17	9	13	50	36
Steel shipments (000t)	8	7	7	30	31
Average steel selling price (EUR/t)	17,464	16,745	15,122	16,600	16,061

1. Amounts are shown prior to intra-group eliminations

The Alloys & Specialties segment had sales of EUR 149 million for the fourth quarter of 2021, representing an increase of 33.0% compared to EUR 112 million for the third quarter of 2021. Steel shipments increased by 26.2% during the fourth quarter of 2021 at 8 thousand tonnes. Average steel selling prices were higher during the quarter.

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