Aperam S A : July 30, 2021 – Second quarter 2021 results

Second quarter 2021 results1

"Another set of record earnings and a positive outlook for the second half"

Luxembourg, July 30, 2021 (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 ended June 30, 2021.

Highlights

• Health and Safety: LTI frequency rate of 2.3x in Q2 2021 compared to 2.6x in Q1 2021
• Steel shipments of 481 thousand tonnes in Q2 2021, 2% decrease compared to steel shipments of 493 thousand tonnes in Q1 2021
• Adj EBITDA of EUR 262 million in Q2 2021, compared to EUR 175 million in Q1 2021
• Net income of EUR 213 million in Q2 2021, compared to EUR 116 million in Q1 2021
• Basic earnings per share of EUR 2.67 in Q2 2021, compared to EUR 1.45 in Q1 2021
• Cash flow from operations amounted to EUR 115 million in Q2 2021, compared to EUR 106 million in Q1 2021
• Free cash flow before dividend and share buy-back of EUR 87 million in Q2 2021, compared to EUR 58 million in Q1 2021
• Net financial debt of EUR 1 million as of June 30, 2021, compared to EUR 56 million as of March 31, 2021

Strategic initiatives

• Leadership Journey​®2 Phase 4:​Gains reached EUR 15 million in Q2 2021. Aperam realized cumulative gains of EUR 22 million in the first 6 months of the program. This compares to cumulative target gains of EUR 150 million over the period 2021 to 2023
• Preparing for the next phase of growth and specialization: Investment in Brazil Hot Rolling Mill to drive growth in high value stainless products

Prospects

• Adj EBITDA in Q3 2021 is expected at a comparable level versus Q2 2021
• We guide for comparable free cash flow in Q3 2021 despite higher working capital
• Shareholder returns: share buyback program of up to EUR 100 million

Timoteo Di Maulo, CEO of Aperam, commented:

"I am delighted to report again a record result in the second quarter for which Brazil and S&S were major drivers by achieving the best quarter ever. Europe also improved significantly as the price environment has now fully normalized on the back of the economic recovery and more effective protection against dumping. While restocking driven demand, stretched global supply chains and positive effects from higher raw material prices will eventually fade, we expect the positive environment to persist during the second half of the year. This coupled with the continued improvement and higher flexibility achieved through our Leadership Journey® puts us in a position to project the best second half in Aperam's history."

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

(in millions of Euros, unless otherwise stated)	Q2 21	Q1 21	Q2 20	H1 21	H1 20
Sales	1,272	1,177	818	2,449	1,867
Operating income	235	140	14	375	48
Net income attributable to equity holders of the parent	213	116	21	329	50
Basic earnings per share (EUR)	2.67	1.45	0.27	4.12	0.63
Diluted earnings per share (EUR)	2.66	1.44	0.27	4.10	0.63
Free cash flow before dividend and share buy-back	87	58	34	145	52
Net Financial Debt (at the end of the period)	1	56	123	1	123
Adj. EBITDA	262	175	49	437	119
Exceptional items	9	-	-	9	-
EBITDA	271	175	49	446	119
Adj. EBITDA/tonne (EUR)	545	355	130	449	146
EBITDA/tonne (EUR)	563	355	130	458	146
Steel shipments (000t)	481	493	376	974	814

Health & Safety results

Health and Safety performance based on Aperam personnel figures and contractors' lost time injury frequency rate was 2.3x in the second quarter of 2021 compared to 2.6x in the first quarter of 2021.

Financial results analysis for the three-month period ending June 30, 2021

Sales for the second quarter of 2021 increased by 8% to EUR 1,272 million compared to EUR 1,177 million for the first quarter of 2021. Steel shipments decreased from 493 thousand tonnes in the first quarter of 2021, to 481 thousand tonnes in the second quarter of 2021.

EBITDA increased during the quarter to EUR 271 million (including exceptional gains of EUR 9 million made of PIS/Cofins tax credits related to prior periods recognised in Brazil) from EUR 175 million for the first quarter of 2021. Brazil delivered its best quarter ever on the back of an excellent demand environment and a positive seasonality and Europe benefited from a normalizing price environment. Positive inventory valuation effects remained at a comparable level.

Depreciation and amortisation was EUR (36) million for the second quarter of 2021.

Aperam had an operating income for the second quarter of 2021 of EUR 235 million compared to an operating income of EUR 140 million for the previous quarter.

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Financing costs, net, including the FX and derivatives result for the second quarter of 2021 were EUR (6) million, including cash cost of financing of EUR (3) 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 second quarter of 2021 was EUR (16) million, including the recognition of additional deferred tax assets on tax losses carried forward of EUR 32 million.

The Company recorded a net income of EUR 213 million for the second quarter of 2021.

Cash flows from operations for the second quarter of 2021 were positive at EUR 115 million, despite a working capital increase of EUR 118 million. CAPEX for the second quarter was EUR (27) million.

Free cash flow before dividend and share buyback for the second quarter of 2021 amounted to EUR 87 million.

During the second quarter of 2021, the cash returns to shareholders amounted to EUR 36 million, consisting fully of dividend (of which EUR 1 million paid to non-controlling interests).

Operating segment results analysis

Stainless & Electrical Steel (1)

(in millions of Euros, unless otherwise stated)	Q2 21	Q1 21	Q2 20	H1 21	H1 20
Sales	1,078	977	632	2,055	1,459
EBITDA	212	140	43	352	96
Depreciation & amortisation	(30)	(30)	(28)	(60)	(58)
Operating income	182	110	15	292	38
Steel shipments (000t)	472	483	364	955	790
Average steel selling price (EUR/t)	2,209	1,969	1,678	2,087	1,785

(1) Amounts are shown prior to intra-group eliminations

The Stainless & Electrical Steel segment had sales of EUR 1,078 million for the second quarter of 2021. This represents a 10% increase compared to sales of EUR 977 million for the first quarter of 2021. Steel shipments during the second quarter were 472 thousand tonnes, a decrease of 2% compared to shipments of 483 thousand tonnes during the previous quarter. Volumes in Europe remained at a comparable level in a seasonally stronger quarter versus a restocking induced high base in Q1. Brazil demand continued to be at a stable high level and shipments increased seasonally. Average steel selling prices for the Stainless & Electrical Steel segment increased by 12% compared to the previous quarter.

The segment generated EBITDA of EUR 212 million for the second quarter of 2021 compared to EUR 140 million for the first quarter of 2021. Profitability increased due to higher prices, a better mix and tight cost control.

Depreciation and amortisation expense was EUR (30) million for the second quarter of 2021.

The Stainless & Electrical Steel segment had an operating income of EUR 182 million for the second quarter of 2021 compared to an operating income of EUR 110 million for the first quarter of 2021.

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Services & Solutions(1)

(in millions of Euros, unless otherwise stated)	Q2 21	Q1 21	Q2 20	H1 21	H1 20
Sales	542	531	310	1,073	760
Adjusted EBITDA	50	45	5	95	14
Exceptional items	9	-	-	9	-
EBITDA	59	45	5	104	14
Depreciation & amortisation	(3)	(3)	(4)	(6)	(7)
Operating income	56	42	1	98	7
Steel shipments (000t)	189	208	132	397	318
Average steel selling price (EUR/t)	2,761	2,448	2,212	2,597	2,281

(1) Amounts are shown prior to intra-group eliminations

The Services & Solutions segment had sales of EUR 542 million for the second quarter of 2021, representing an increase of 2% compared to sales of EUR 531 million for the first quarter of 2021. For the second quarter of 2021, steel shipments were 189 thousand tonnes compared to 208 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 generated EBITDA of EUR 59 million, including EUR 9 million in Brazil due to PIS/Cofins tax credits related to prior periods, for the second quarter of 2021 compared to EBITDA of EUR 45 million for the first quarter of 2021. Higher prices and the exceptional PIS/Cofins gain were the main drivers for the higher EBITDA.

Depreciation and amortisation was EUR (3) million for the second quarter of 2021.

The Services & Solutions segment had an operating income of EUR 56 million for the second quarter of 2021 compared to an operating income of EUR 42 million for the first quarter of 2021.

Alloys & Specialties(1)

(in millions of Euros, unless otherwise stated)	Q2 21	Q1 21	Q2 20	H1 21	H1 20
Sales	132	125	142	257	297
EBITDA	16	12	11	28	20
Depreciation & amortisation	(2)	(2)	(1)	(4)	(4)
Operating income	14	10	10	24	16
Steel shipments (000t)	8	7	9	15	18
Average steel selling price (EUR/t)	15,039	17,330	16,038	16,077	16,311

(1) Amounts are shown prior to intra-group eliminations

The Alloys & Specialties segment had sales of EUR 132 million for the second quarter of 2021, representing an increase of 6% compared to EUR 125 million for the first quarter of 2021. Steel shipments increased by 20% during the second quarter of 2021 at 8 thousand tonnes. Average steel selling prices were lower during the quarter.

The Alloys & Specialties segment achieved EBITDA of EUR 16 million for the second quarter of 2021 compared to EUR 12 million for the first quarter of 2021. The increase in EBITDA was driven by higher volumes and tight cost control.

Depreciation and amortisation expense for the second quarter of 2021 was EUR (2) million.

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The Alloys & Specialties segment had an operating income of EUR 14 million for the second quarter of 2021 compared to an operating income of EUR 10 million for the first quarter of 2021.

Recent developments during the quarter

• On May 10 and May 25, 2021, Aperam announced shareholding notifications by M&G plc for respectively crossing downwards and upwards the 5% voting rights threshold with reference to Transparency Law.
• On June 8, 2021, Aperam announced that the Annual General Meeting of shareholders held on June 8, 2021 approved all resolutions on the agenda by a large majority. 83% of the voting rights were represented at the General Meeting.

New developments

• On July 30, 2021, Aperam announced a share buyback program of up to EUR 100 million, and a maximum of 2.45 million shares under the authorization given by the annual general meeting of shareholders held on 7 May 2019. The details of the program are available in a separate Press Release.
• On July 30, 2021, Aperam published its Half-Year Report for the six month period ended June 30, 2021. The report is available in the Luxembourg Stock Exchange's electronic database OAM on www.bourse.lu and on www.aperam.com under Investors >Reports & Presentations > Annual reports.

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