Aperam S A : May 6, 2022 – First quarter 2022 results

First quarter 2022 results1

"Another Record Quarter Despite Market Turmoil"

Luxembourg, May 6, 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 ended March 31, 2022.

Highlights

• ■ Health and Safety: LTI frequency rate of 2.4x in Q1 2022 compared to 2.1x in Q4 2021

• ■ Shipments of 673 thousand tonnes, including the addition of Recycling & Renewables in Q1 2022. Comparable

  shipments of 452 thousand tonnes in Q1 2022 versus 424 thousand tonnes in Q4 2021

• ■ Adjusted EBITDA of EUR 363 million in Q1 2022, compared to Adjusted EBITDA of EUR 345 million in Q4 2021

• ■ Adjusted Net income of EUR 219 million in Q1 2022, compared to EUR 244 million in Q4 2021

• ■ Adjusted Basic earnings per share of EUR 2.83 in Q1 2022, compared to EUR 3.10 in Q4 2021

• ■ Cash flow used by operations amounted to EUR (57) million in Q1 2022, compared to cash flow from operations of

  EUR 219 million in Q4 2021

• ■ Free cash flow before dividend and share buy-back of EUR (103) million in Q1 2022, compared to EUR 132 million in

  Q4 2021

• ■ Net financial debt of EUR 666 million, as of March 31, 2022, compared to EUR 466 million as of December 31, 2021

Strategic initiatives

■

Leadership Journey®2 Phase 4: Gains reached EUR 7 million in Q1 2022 and a cumulative EUR 47 million compared to target gains of EUR 150 million over the period 2021 to 2023. Additional gain of EUR 7 million from Brazil electrical steel investment by accelerating the Leadership Journey® Phase 5 within the 2025 growth plan.

Cash deployment

In coherence to its Financial Policy, Aperam is announcing:

■ 2022 Share Buyback increased by up to another EUR 100 million for a total of up to EUR 200 million. EUR 100 million completed on April 19, 2022.

Prospects

• ■ Q2 2022 Adj. EBITDA is expected at a higher level versus the record Q1 2022 base

• ■ We guide for slightly lower Q2 2022 net financial debt

Timoteo Di Maulo, CEO of Aperam, commented:

"Q1 was the fifth adjusted EBITDA record in a row and we are aiming for another record in Q2 to make good on our promise of a strong first half. Strong balance sheets will be a cornerstone in the current environment and Aperam is pleased to increase the 2022 share buyback by another EUR 100 million. I am proud that our 2021 ESG report confirms Aperam's best in class CO2 footprint, which includes an added sustainability value dimension of our FSC certified forest. Aperam is further significantly investing into growing this unique strategic asset."

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

(in millions of Euros, unless otherwise stated)	Q1 22	Q4 21	Q1 21
Sales	2,265	1,396	1,177
Operating income	266	426	140
Net income attributable to equity holders of the parent	187	438	116
Basic earnings per share (EUR)	2.41	5.56	1.45
Diluted earnings per share (EUR)	2.40	5.53	1.45
Free cash flow before dividend and share buy-back	(103)	132	58
Net Financial Debt (at the end of the period)	666	466	56
Adj. EBITDA	363	345	175
Exceptional items	(53)	117	-
EBITDA	310	462	175
Adj. EBITDA/tonne (EUR)	539	814	355
EBITDA/tonne (EUR)	461	1,090	355
Shipments (000t)	673	424	493
Health & Safety results

Health and Safety performance based on Aperam personnel figures and contractors' lost time injury frequency rate was 2.4x in the first quarter of 2022 compared to 2.1x in the fourth quarter of 2021.

Financial results analysis for the three-month period ending March 31, 2022

Sales for the first quarter of 2022 increased by 62% to EUR 2,265 million compared to EUR 1,396 million for the fourth quarter of 2021. Shipments increased from 424 thousand tonnes in the fourth quarter of 2021, to 673 thousand tonnes in the first quarter of 2022, thanks to seasonally strong stainless sales in Europe and the addition of Recycling & Renewables.

EBITDA decreased during the quarter to EUR 310 million (including an exceptional loss of EUR (53) million related to the reversal of the inventory step-up of EUR (48) million recognized in the 2021 bargain purchase gain on ELG acquisition and a final bargain purchase gain adjustment on this acquisition for EUR (5) million) from EUR 462 million (including an exceptional gain of EUR 117 million related to the preliminary bargain purchase gain on ELG acquisition) for the fourth quarter of 2021. Q1 2022 Adjusted EBITDA improved to EUR 363 million from EUR 345 million in Q4 2021. Higher realized prices, higher inventory valuation gains and higher volumes were the main drivers.

Depreciation and amortization expense was EUR (44) million for the first quarter of 2022.

Aperam had an operating income for the first quarter of 2022 of EUR 266 million compared to an operating income of EUR 426 million for the previous quarter, including a bargain gain reversal of EUR (53) million compared to a bargain gain income of EUR 117 million for the previous quarter.

Financing costs, net, including the FX and derivatives result for the first quarter of 2022 were EUR (24) million, including cash cost of financing of EUR (5) million.

Income tax expense for the first quarter of 2022 was EUR (55) million.

The Company recorded a net income of EUR 187 million for the first quarter of 2022.

Cash flows used by operations for the first quarter of 2022 were negative at EUR (57) million, including a working capital increase of EUR 369 million. CAPEX for the first quarter was EUR (46) million.

Free cash flow before dividend and share buyback for the first quarter of 2022 amounted to EUR (103) million.

During the first quarter of 2022, the cash returns to shareholders amounted to EUR 113 million, consisting of EUR 74 million of share buy-back and EUR 39 million of dividend.

Operating segment results analysis

Stainless & Electrical Steel (1)

(in millions of Euros, unless otherwise stated)	Q1 22	Q4 21 (2)	Q1 21 (2)
Sales	1,523	1,243	978
EBITDA	272	305	135
Depreciation, amortization & impairment	(25)	(25)	(23)
Operating income	247	280	112
Steel shipments (000t)	445	432	483
Average steel selling price (EUR/t)	3,355	2,806	1,969

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

• (2) Due to the transfer of the entity Aperam Bioenergia from the segment 'Stainless & Electrical Steel' to the segment 'Recycling & Renewables' starting Q1 2022, segmented figures for Q4 2021 and Q1 2021 have been recast for the sake of comparison.

The Stainless & Electrical Steel segment had sales of EUR 1,523 million for the first quarter of 2022. This represents a 23% increase compared to sales of EUR 1,243 million for the fourth quarter of 2021. Steel shipments during the first quarter were 445 thousand tonnes, an increase of 3% compared to shipments of 432 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 20% compared to the previous quarter.

The segment generated an EBITDA of EUR 272 million for the first quarter of 2022 compared to EUR 305 million for the fourth quarter of 2021. EBITDA declined slightly due to seasonally lower volumes in Brazil and the input cost spike in Europe. These were not fully compensated by higher sales prices and higher inventory valuation gains.

Depreciation and amortization expense was EUR (25) million for the first quarter of 2022.

The Stainless & Electrical Steel segment had an operating income of EUR 247 million for the first quarter of 2022 compared to an operating income of EUR 280 million for the fourth quarter of 2021.

Services & Solutions(1)

(in millions of Euros, unless otherwise stated)	Q1 22	Q4 21	Q1 21
Sales	845	578	531
EBITDA	73	51	45
Depreciation & amortization	(3)	(3)	(3)
Operating income	70	48	42
Steel shipments (000t)	199	158	208
Average steel selling price (EUR/t)	4,084	3,471	2,448

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

The Services & Solutions segment had sales of EUR 845 million for the first quarter of 2022, representing an increase of 46% compared to sales of EUR 578 million for the fourth quarter of 2021. For the first quarter of 2022, steel shipments were 199 thousand tonnes compared to 158 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 an EBITDA of EUR 73 million for the first quarter of 2022 compared to an EBITDA of EUR 51 million for the fourth quarter of 2021. Higher prices and higher inventory valuation gains were the main drivers.

Depreciation and amortization expense was EUR (3) million for the first quarter of 2022.

The Services & Solutions segment had an operating income of EUR 70 million for the first quarter of 2022 compared to an operating income of EUR 48 million for the fourth quarter of 2021.

Alloys & Specialties(1)

(in millions of Euros, unless otherwise stated)	Q1 22	Q4 21	Q1 21
Sales	148	149	125
EBITDA	21	19	12
Depreciation & amortization	(2)	(2)	(2)
Operating income	19	17	10
Steel shipments (000t)	7	8	7
Average steel selling price (EUR/t)	20,064	17,464	17,330

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

The Alloys & Specialties segment had sales of EUR 148 million for the first quarter of 2022, representing a decrease of 1% compared to EUR 149 million for the fourth quarter of 2021. Steel shipments decreased by 14% during the first quarter of 2022 at 7 thousand tonnes. Average steel selling prices were higher during the quarter.

The Alloys & Specialties segment achieved EBITDA of EUR 21 million for the first quarter of 2022 compared to EUR 19 million for the fourth quarter of 2021. The EBITDA increase was mainly driven by higher inventory valuation gains.

Depreciation and amortization expense for the first quarter of 2022 was EUR (2) million.

The Alloys & Specialties segment had an operating income of EUR 19 million for the first quarter of 2022 compared to an operating income of EUR 17 million for the fourth quarter of 2021.

Recycling & Renewables 3

(in millions of Euros, unless otherwise stated) (1)	Q1 22	Q4 21 (2) (3)	Q1 21 (2) (3)
Sales	735	582	493
Adjusted EBITDA	14	19	34
Exceptional items	(53)	117	-
EBITDA	(39)	136	34
Depreciation & amortization	(13)	(11)	(11)
Operating income / (loss)	(52)	125	23
Shipments (000t)	395	372	443
Average selling price (EUR/t)	1,861	1,565	1,113

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

• (2) Due to the transfer of the entity Aperam Bioenergia from the segment 'Stainless & Electrical Steel' to the segment 'Recycling & Renewables' starting Q1 2022, segmented figures for Q4 2021 and Q1 2021 have been recast for the sake of comparison.

(3) Pro Forma information including ELG for the sake of comparison.

The Recycling & Renewables segment had sales of EUR 735 million for the first quarter of 2022, representing an increase of 26% compared to EUR 582 million pro forma sales for the fourth quarter of 2021. Shipments increased by 6% during the first quarter of 2022 at 395 thousand tonnes. Average selling prices were higher during the quarter.

EBITDA decreased during the quarter to EUR (39) million due to a bargain gain reversal of EUR (53) million compared to an EBITDA of EUR 136 million in Q4 2021 including a bargain purchase gain of EUR 117 million. The Recycling & Renewables segment achieved Adjusted EBITDA of EUR 14 million for the first quarter of 2022 compared to pro forma Adjusted EBITDA of EUR 19 million for the fourth quarter of 2021. The EBITDA decrease was mainly due to one-off costs related to the nickel price volatility in March.

Depreciation and amortization expense for the first quarter of 2022 was EUR (13) million.

The Recycling & Renewables segment had an operating loss of EUR (52) million for the first quarter of 2022 compared to a pro forma operating income of EUR 125 million for the fourth quarter of 2021.

Recent developments during the quarter

• ■ On March 24, 2022, Aperam announced the publication of its Annual Report 2021 (Link).

• ■ On April 4, 2022, Aperam announced the publication of the convening notice for its Annual General Meeting and Extraordinary General Meeting of shareholders to be held on May 4, 2022.

• ■ On April 19, 2022, Aperam announced the completion of its share buyback program announced on February 11, 2022 (hereafter the "Program"). In aggregate, 2,311,849 shares were bought under this Program, representing an equivalent amount of EUR 100 million.

• ■ On May 4, 2022, Aperam announced that the Annual and Extraordinary General Meetings of Shareholders of Aperam held on May 4, 2022 approved all resolutions on the agenda by a large majority.

New developments

■ On May 6, 2022, Aperam announced an additional share buyback program of up to EUR 100 million (for a total of up to EUR 200 million in 2022, with EUR 100 million completed on April 19, 2022), and a maximum of 3.5 million shares under the authorization given by the annual general meeting of shareholders held on May 4, 2022. The details of the program are available in a separate Press Release.