2020 half-year results
Christel BORIES
Chairman and CEO
30 July 2020
Disclaimer
Certain information contained in this presentation including any information on Eramet's plans or future financial or operating performance and any other statements that express management's expectations or estimates of future performance, constitute forward-looking statements. Such statements are based on a number of estimates and assumptions that, while considered reasonable by management at the time, are subject to significant business, economic and competitive uncertainties. Eramet cautions that such statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of Eramet to be materially different from the company's estimated future results, performance or achievements expressed or implied by those forward-looking statements.
Past performance information given in this presentation is solely provided for illustrative purposes and is not necessarily a guide to future performance. No representation or warranty is made by any person as to the likelihood of achievement or reasonableness of any forward-looking statements, forecast financial information or other forecast. Nothing contained in this presentation is, or shall be relied upon as, a promise, representation, warranty or guarantee as to the past, present or future performance of Eramet.
Nothing in this presentation should be construed as either an offer to sell or a solicitation to buy or sell securities nor shall there be any offer or sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful under the securities laws of any such jurisdiction.
2 Eramet - 2020 half-year results
Contents
Introduction | |
1 - | Safety |
2 - | Financial results |
3 - | Operational performance |
4 - | Strategic transformation |
Conclusion and outlook |
3 Eramet - 2020 half-year results
Strong impact of the crisis on the Group's end markets: drop in metal prices and aerospace crisis (~€350m EBITDA impact)
Deteriorated price environment, o/w:
-22% on average for manganese ore1 prices
-10% on average for ferronickel'2 prices, due to significant discount to LME in H1 2020 (zero in H1 2020)
~-€280m
EBITDA impact
vs H1 2019
-8% and -3% on average for refined and standard manganese alloys'1 prices, respectively
A&D hard hit by aerospace crisis
in the aerospace business | ~-€50m | ||
Cancellation of 33% orders | |||
FCF of -€156m in H1 2020 | EBITDA impact | ||
vs H1 2019 | |||
European and US steel decline | -€25m | ||
Swift adjustment of manganese alloys plants production (-20% to | |||
30% in May-June) | EBITDA impact | ||
vs H1 2019 |
4 Eramet - 2020 half-year results
- CRU index: manganese ore CIF China 44% ; MC FeMn (Europe) ; SiMn (Europe)
- Eramet calculation based on average LME prices
Excellent operating performance of the mining activities in H1 2020, confirming the success of the organic growth strategy
c.€120m of intrinsic progress in H1 2020 vs H1 2019, despite the sanitary crisis
- Mt of manganese ore produced in Gabon, +31% vs H1 2019
- Mt of ore transported, +42%
2.2 Mwmt of nickel ore produced in New Caledonia, +12%
1.1 Mwmt of ore exports, +120%
371 kt of mineral sands produced in Senegal, despite lower grade of deposit
OEE1 at a high level
Start-upof the 4 production lines at Weda Bay in May
1.6 Mwmt of nickel ore produced since Oct. 2019
4.2 kt2 of nickel ferroalloys produced
5 Eramet - 2020 half-year results
- Overall Equipment Efficiency of the mine
- In nickel content
EBITDA drop ; net income further penalised by impairment charge
due to crisis (€284m) & lithium project mothballed (€142m)
Sales €1,687m
- -7%vs H1 2019
EBITDA €120m
- vs H1 2019 (€307m)
Net income - Group share
-€623m
- vs H1 2019 (-€37m)
High Performance | Erasteel | Mining and Metals |
Alloys Division | Division | |
20% | 5% | 80% |
Aubert & Duval | ||
15% |
€1,687m
Mineral Sands BU | Manganese BU |
8% | |
50% | |
Nickel BU | |
22% |
FCF -€210m
Net debt €1,536m
Gearing1 before impairment
113%
Covenant holidays for H1
and H2 2020
6 Eramet - 2020 half-year results
1 Net debt-to-equity ratio, incl. IFRS 16 impact
Covid-19: swift adaptation to ensure business' continuity at mines and plants
Eramet fully mobilised to face the Covid-19 situation
Protecting employees and their families as well as local communities: Group's top priority Strict application of sanitary protocols,
Specific sanitary expenses in Gabon, Senegal and France
Eramet solidarity plan
c.€10m to fund combat against the spread and pandemic consequences in all Eramet locations Consistent with Eramet's strategy for local communities (€13m/yr spent on average) Transgabonese railway pivotal in supporting local communities in Gabon
Solidarity action towards local populations, Setrag, Gabon
7 Eramet - 2020 half-year results
1
Safety
Further strong decline in accident frequency rate in H1 2020, but still too many severe accidents
Eramet accident frequency rate (FR21,2)
22 | ||||||||||
20 | 20.0 | |||||||||
18 | 17.3 | 16.8 | ||||||||
16 | ||||||||||
14 | 13.6 | 13.4 | ||||||||
12 | ||||||||||
10.9 | ||||||||||
10 | ~-50% | |||||||||
8.3 | ||||||||||
8 | vs 2018 | |||||||||
6 | 5.4 | |||||||||
4 | 4.3 | |||||||||
2 | -20% | |||||||||
vs 2019 | ||||||||||
0 | ||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | H1 2020 |
Continued push of management in daily operations for safety routines:
Focus on risk analysis, prior to any
action
1 fatal accident at subcontractors in H1 2020:
Continued roll-outof Essential Safety Requirements to avoid severe accidents, particularly at subcontractors
9 Eramet - 2020 half-year results
- FR2 = number of lost time and recordable injury accidents for 1 million hours worked
- Including employees and subcontractors since 2016
2
Financial results
Robust contribution of Manganese and Mineral Sands activities in H1 2020
Group EBITDA
€307m -61%
€316m
-26%
€120m
€234m | 1 |
1 |
Despite price drop, continued solid EBITDA contribution from Manganese BU
2 |
Mineral Sands BU driven by robust
M&M | |||||
€52m | -15% | €44m | 2 | Division1 | |
∑ | €208m | ||||
-€25m | -180% | ||||
-€5m | -€70m | ||||
-€31m | 3 | ||||
SDV | |||||
H1 2019 | -€61m | (-€21m) | |||
-€66m | 4 | ||||
Erasteel | |||||
(-€15m) |
-€22m
operational performance
3 |
Nickel BU impacted by a depressed
stainless-steeland Sandouville's markets
4
High Performance Alloys Division contribution hard hit by aerospace and automotive crisis
H1 2020 | ||
Manganese BU | High Performance Alloys division | |
Mineral Sands BU | Holding & other | |
Nickel BU | ||
11 Eramet - 2020 half-year results | 1 Excl. Lithium project (-€2m) included in Holding & other |
EBITDA strongly affected by decline in metal prices and aerospace crisis, despite significant operating progress in mining activities
€m | H1 2020 | H1 2019 |
Sales | 1,687 | 1,809 |
EBITDA | 120 | 307 |
% Sales | 7% | 17% |
Current operating income | (32) | 169 |
% Sales | n.a. | 9% |
Net income - Group share | (623) | (37) |
€m | 30/06/2020 | 31/12/2019 | ||
Net debt (Net cash) | 1,536 | 1,304 | ||
Shareholders' equity | 982 | 1,639 | ||
Gearing before impairment (Net debt-to-equity ratio, incl. IFRS 16 | 113% | 78% | ||
impact) | ||||
ROCE (COI / capital employed1 for previous 12 rolling months) | 12% | |||
n.a. | ||||
12 Eramet - 2020 half-year results
1 Sum of shareholders' equity, net debt, provisions for site rehabilitation, restructuring and other social risks, less financial fixed assets, excluding Weda Bay Nickel capital employed. ROCE at 30 June is calculated based on 12 rolling months
Net income further penalised by the accounting of a non- recurring expense of €459m
€m | H1 2020 | H1 2019 |
Sales | 1,687 | 1,809 |
Current operating income | (32) | 169 |
Other operating income and expenses | (459) | (25) |
o/w | Provisions on asset impairment tests | 1 | (381) | (0) | |
Lithium project | 2 | (45) | (11) | ||
Financial result | 3 | (82) | (54) | ||
Share in income from associated companies | 7 | (4) | |||
Pre-tax result | (566) | 90 |
Income tax | 4 |
Net income
(73)(101)
(639)(16)
o/w Minority interests' share | (16) | 21 |
Net income - Group share | (623) | (37) |
1 |
Sandouville
€53m
2 |
3 |
In addition to €97m of impairment, non-recurring expenses (€45m) related to costs to terminate contracts and mothball project
Lithium €97m | €197m A&D | -€28m vs H1 2019, of which -€12m increase in interest charges |
€34m | 4 |
Erasteel
-€28m decrease, mainly related to taxes in Gabon and Norway
13 Eramet - 2020 half-year results
Income highly sensitive to metal prices
SENSITIVITIES | Change | Annual impact on EBITDA | ||
(+/-) | ||||
Manganese ore prices (CIF China 44%) | +$1/dmtu | c.€175m1 | ||
Manganese alloys' prices | +$100/t | c.€60m1 | ||
Nickel prices (LME) | +$1/lb | c.€100m1 | ||
Nickel ore prices (CIF China 1.8%) | +$10/wmt | c.€15m1 | ||
Exchange rates | -$/€0.1 | c.€140m | ||
Oil price per barrel | +$10/bbl | c.€(20)m1 |
14 | Eramet - 2020 half-year results | 1 For an exchange rate of $/€1.13 |
Positive intrinsic operating performance more than offset by lower prices and Covid impact on operations
(€m) | 9 | 2 | -21 | -8 | |
145 | 1 | 2 | 3 | ||
307 | |||||
+€127m | |||||
Intrinsic operating performance |
-€231m | |||||||
Other external factors | |||||||
-48 | |||||||
-25 | -10 | ||||||
4 | |||||||
~-€80m | -236 | ||||||
Covid | 16 | -20 | 120 | ||||
impact on | -44 | 57 | |||||
5 | |||||||
operations | -4 | ||||||
5 | 6 | ||||||
H1 2019 | Mn | Ni volumes TiZir | HPA | Other Aerospace | EU & | Other Mn price* | Ni price Other price | Input | Currency | Other H1 2020 |
EBITDA | volumes | volumes | volumes | crisis | US steel | Covid costs | impact | costs* | EBITDA | |
decline |
1 | o/w additionnal nickel ore exports contribution |
(+€8m) | |
2 | A&D volumes decrease vs H1 2019, not related |
to aero crisis (slowdown of 737 Max and GE9X | |
programs' production rate) | |
3 | o/w increase in fixed costs due to higher |
transportation cost in Gabon (-€6m) |
4 | Swift adaptation of production at manganese |
alloys' plants: reduction of ~20-30% in May/June | |
5 | o/w squeeze impact on manganese alloys margin |
(-€13m) | |
6 | o/w decrease in cost of coke & fuel oil (+€22m), |
decrease in manganese ore purchased externally | |
(+€15m) |
15 Eramet - 2020 half-year results
- Manganese alloys' margin squeeze: -€52m included in Mn price impact, +€39m in Input costs
Decrease in current capex by -15% in H1 2020
Industrial cash capex (€m)
450 | 427 | |||||
400 | 81 | |||||
350 | ||||||
51 | ||||||
300 | 281 | |||||
250 | 57 | |||||
199 | ||||||
1 | ||||||
156 | 58 | 2 | ||||
150 | 14 | 295 | ||||
27 | ||||||
43 | -15% | |||||
100 | 224 | |||||
50 | 115 | 98 | ||||
0 | 2018 | H1 2019 | 2019 | H1 2020 | ||
Lithium project | Growth | Current |
Strict control over capex as part of 2020 cash control plan
Current Capex down -15% at €98m
o Safety & environment (19%), Productivity (28%)
- Maintenance (59%) of industrial equipment
1 |
Q1 early capex related to Lithium project mothballed in April (€58m)
2 |
H1 growth Capex to support fast pace cash contributive organic growth, o/w:
€25m related to manganese ore volume growth at Comilog
€14m related to Setrag Renovation 2016- 2023 programme
16 Eramet - 2020 half-year results
Stable operating1 WCR (in days) at Group level thanks to efficient cash control plan, balancing aerospace crisis impact
Operating1 WCR
(M€)
Cash control plan
-11%
596
530 |
Aerospace crisis
+10% | |
399 | 440 |
-4%
1,003 964
M&M division | HPA division | Eramet | ||||
H1 2020 Operating1 WCR: | H1 2020 Operating1 | |||||
H1 2020 Operating1 | ~+100 days of sales | WCR: | ||||
WCR: | ||||||
o/w ~+135 days at | -4 days of sales | |||||
~-15 days of sales | ||||||
A&D | ||||||
Operating1 FY 2019 | Operating1 FY 2020 | |||||
17 Eramet - 2020 half-year results | 1 Sum of accounts receivables, Inventories and accounts payable |
H1 2020 M&M FCF break-even, including lithium FCF impact
GCO1 | 28 | SLN2 | |||||
TTI | 19 | -68 | |||||
SDV | One-off | ||||||
-20 | €78m | ||||||
119 | |||||||
-80 | |||||||
Eramet FCF | |||||||
-€165m | H1 2020 | ||||||
FCF | FCF Mineral | FCF | FCF M&M | FCF lithium | -9 | - €210m3 | |
FCF | |||||||
Manganese | Sands BU | Nickel BU | excl. | ||||
Erasteel | |||||||
BU | lithium | ||||||
-156 |
Group strategic transformation key to cash-flow | |
generation | FCF A&D FCF AHP |
18 Eramet - 2020 half-year results
- Incl. BU Holding FCF, excl.TiZir bond interest charge)
- Incl. BU Holding FCF
- Incl. -€31m of Group Holding FCF and -€13m of Tizir Bond interest charge
Increase in net debt, reflecting A&D's negative FCF despite significant cash generation efforts
1 | 2020 early capex (€58m) and cash expenses | 3 |
Proceeds from sale of TTI plant estimated at | ||
related to lithium project (€23m) | ||
$250m1, still subject to regulatory approvals ; not | ||
2 | ||
included in Net Debt as of 30 June 2020 | ||
o/w €23m drawdown of Eramet shareholder's loan to | ||
holding company of PT Weda Bay Nickel |
(€m) | |||
46 | -63 | Lithium | |
-43 | |||
one-offs | |||
202 | |||
-128 | -€81m | ||
-1,304 | -6 | -12 | -29 |
-81 |
M&M 2 operating CF HPA 3operating CF | 1 | -60 | ||
€142m | -€134m | -25 | 21 | |
2019 | EBITDA Change in | Current | Growth | Op. CF | Op. CF | Op. CF | Other inc. | Li | Financial Taxes | Change |
Net | op. WCR | capex | Capex | A&D | Erasteel | Holding | & exp., | mothballing | cost | in non- |
Debt | excl Li | impact | op. WCR | |||||||
impact | ||||||||||
-47 | -7 |
2 | -1,536 |
Other IFRS 16 | H1 2020 |
(non- | Net |
cash) | Debt |
3 |
19 Eramet - 2020 half-year results
- After deconsolidation of cash on TTI's balance sheet at the end of 2020
- Mining & Metals division
- High Performance Alloys division
High cash position at €1.9bn
Drawn down lines as of 30th June 2020:
Revolving credit facility ("RCF")
- €981m RCF maturing 2024
Term loan
-
€350m loan granted in December with a
2-year maturity and an option to extend to January 2024 at Eramet hand - Intended for general purposes and investment
European Investment Bank ("EIB") financing
- €120m loan maturing in 2030
- Intended to support R&D expenditure, modernisation and digital transformation
Gearing "Covenant holidays":
June and December 2020
Group financial liquidity (€m) | |||
2,500 | 2,299 | ||
2,245 | |||
2,000 | 1,941 | ||
848 | |||
1,144 | |||
1,500 | 120 | ||
350 | |||
1,000 | 120 | ||
981 | 981 | ||
500 | 30 Jun. 2019 | 31 Dec. 2019 | 30 Jun. 2020 |
Available cash
Drawndown line in H1 2020: BEI
Drawndown line in H1 2020: Term Loan Drawndown line in H1 2020: RCF
20 Eramet - 2020 half-year results
No major debt maturity within the next 3 years
Group gross debt at €3,477m at 30 June 2020
Average maturity of Group's debt : 3 years; c. 80% at a fixed rate
Tizir Bond maturity anticipated in 2020 (subject to transaction completed by year-end) vs initial maturity in 20221
€1,1Md€ in 2024 include repayment of credit lines draw down in H1 2020
1,830
1,141
626
121
500
258
241 | 140 | 164 | 170 | ||||||||||||||||||||||||||||
41 | 180 | ||||||||||||||||||||||||||||||
152 | 161 | ||||||||||||||||||||||||||||||
85 | |||||||||||||||||||||||||||||||
14 | 12 | 9 | 9 | ||||||||||||||||||||||||||||
6 | |||||||||||||||||||||||||||||||
2020 | 2021 | 2022 | 2023 | 2024 |
Debt maturity at 30 June 2020 (€m)
Commercial papers, banks & operating debts
Eramet bonds
TiZir bond
French State Loan to SLN
IFRS 16
341
32
300 | 123 | ||||||||||||||||||||||||||||
30 | 27 | 26 | |||||||||||||||||||||||||||
108 | |||||||||||||||||||||||||||||
21 | |||||||||||||||||||||||||||||
21 | 21 | ||||||||||||||||||||||||||||
9 | 9 | 15 | |||||||||||||||||||||||||||
6 | 5 | ||||||||||||||||||||||||||||
2025 | 2026 | 2027 | 2028 | >2028 |
21 | Eramet - 2020 half-year results | 1 Tizir bond is callable upon closing of TTI disposal and cashed-in |
3
Operational performance
Mining and Metals division
Manganese BU
Pandemic strongly affecting global carbon steel market, and consequently manganese ore and alloys demand
1 |
Global carbon steel production sharply down in H1 2020, resulting from lower global demand, Europe and US particularly affected (-17% and -16%, respectively) ; China +1%
2 |
Significant decrease in global manganese ore production, owing to temporary closure of South African mines, in particular
Global carbon steel production | 1 |
-6.1% | |||
Mt | 3.6% | ||
2,100 | 1,867 | ||
1,802 | |||
1,800 | |||
1,500 | 53% | ||
51% | |||
1,200 | 938 | ||
900 | 881 | ||
600 | 53% | 57% | |
49% | 47% | ||
300 | 47% | 43% | |
0 | |||
2018 | H1 2019 | 2019 | H1 2020 |
China | Rest of the world |
Global manganese ore production | 2 |
(manganese content) |
-9.5% | |||
Mt | +5.9% | ||
20.3 | |||
22 | 19.2 | ||
20 |
18
16
14
12 | 9.9 | 9.0 | |
10 | |||
8 | |||
6 | |||
4 | |||
2 | |||
0 | |||
2018 | H1 2019 | 2019 | H1 2020 |
25 Eramet - 2020 half-year results
Source: Worldsteel Association, Eramet estimates)
Mn ore prices temporarily supported by mines' lockdown at key industry players in Q2; prices down to ~USD 4/dmtu in July
1 | Average price of manganese ore CIF China 44% at | 2 |
c.5.0 $/dmtu in H1 2020 | Average manganese alloys prices down in H1: |
Inventories at Chinese ports ~9 weeks of | MC FeMn at 1,420 €/t ; SiMn at c.950 €/t |
consumption |
$/dmtu | Monthly change in manganese ore and medium-carbon ferromanganese (refined) prices1 1 | 2 | €/t |
Mwmt | |||
9 | 1,900 | ||
8 | 1,800 | ||
1,700 | |||
H = -8.3% | |||
7 | 1,600 | ||
6 | 1,500 | ||
5 | 1,400 | ||
1,300 | |||
4 | 1,200 | ||
3 | H = -22.3% | 1,100 | |
1,000 | |||
2 | |||
900 | |||
1 | 800 |
Janv.-2015Juil.-2015Janv.-2016Juil.-2016Janv.-2017Juil.-2017Janv.-2018Juil.-2018Janv.-2019Juil.-2019Janv.-2020Juil.-2020
H | H H1 2020 vs H1 2019 price variation | Manganese ore | HY Manganese ore price average | ||
Medium-carbon Ferromanganese (Europe) | Ore inventories in China | ||||
26 Eramet - 2020 half-year results
1 Manganese ore: CRU CIF China 44%
Medium-carbon FerroMn: CRU Western Europe spot price
Manganese ore volumes produced in Gabon up +31% to 2.8 Mt in H1
Setrag's outstanding performance
Boosted by significant operating performance milestones
Volumes transported up +42% to 2.9 Mt, at a pace of 5.7 Mt/yr
External sales volumes up ~+50% to 2.4 Mt
Comilog & Setrag : fast cash value-creation growth dynamic
Limited additionnal Capex to support further growth options (€85m estimated for 2020, o/w €25m in H1)
+€120m of FCF over the past 18 months, thanks to increasing manganese ore volumes
7.0 | |||||
Production volumes (Mt) | +15% | ||||
+12% | >5.5 | 5.7 | |||
4.8 | |||||
4.1 | 4.3 | >+0.7 | |||
+0.2 | +0.5 | ||||
2017 | 2018 | 2019 | 2020e | H1 2020 pace | LT target |
27 Eramet - 2020 half-year results
Decrease in Eramet manganese alloys production limited in H1, thanks to new market share gains
Manganese alloys production down in a declining steel market, particularly Europe and the US (lower demand -17%and -16%,respectively)
Limited decrease in sold volume (-6%) thanks to new market share gains outside Europe
Swift response in production adjustment at plants (Norway, USA, Gabon and France)
Manganese alloys' production
kt | -9% | ||
800 | |||
720 | |||
698 | |||
397 | 386 | |||||
400 | 376 | |||||
230 | ||||||
264 | 229 | |||||
109 | ||||||
83 | ||||||
59 | ||||||
0 | 37 | |||||
342
183 Refined alloys (incl. Mn Metal)
Sillicomanganese standard
115 High-carbon
44 Ferromanganese
2018 | H1 2019 | 2019 | H1 2020 |
28 Eramet - 2020 half-year results
Nickel BU
Historical decline of global stainless steel production resulting from the pandemic
1
Historical shock to global stainless-steel Production sharply down in H1 2020 (-11.8%) incl. -6.0% in China
Primary nickel demand down -13.1%
Global stainless steel production1 | 1 | |
China | Rest of world |
-11.8% | ||||
Kt | +4.2% | |||
60,000 | 51,717 | |||
49,636 | ||||
50,000 | ||||
40,000 | 53% | 57% | ||
30,000 | 25,578 | 22,569 | ||
20,000 | 55% | 59% | ||
47% | 43% | |||
10,000 | 45% | |||
0 | 41% | |||
2018 | H1 2019 | 2019 | H1 2020e |
30 Eramet - 2020 half-year results
2 |
World primary nickel production slightly up, supported by continued development of nickel ferroalloy production in Indonesia (~+60%1 ), which more than offset the decline in traditional production
Global primary nickel production1 (excl. recycling) | 2 |
Ni Class I* | Ni Class II - NPI Indonesia | |
Ni Class II - NPI China | NI Class II - High-grade Ferronickel & others | |
Kt | +9.5% | +2.2% | |||||||||||||||||||||
2,345 | |||||||||||||||||||||||
2,500 | |||||||||||||||||||||||
2,142 | |||||||||||||||||||||||
2,000 | |||||||||||||||||||||||
952 | |||||||||||||||||||||||
1,500 | 941 | ||||||||||||||||||||||
1,123 | 1,147 | ||||||||||||||||||||||
1,000 | 590 | ||||||||||||||||||||||
468 | 442 | ||||||||||||||||||||||
464 | |||||||||||||||||||||||
344 | NPI | ||||||||||||||||||||||
500 | 248 | 281 | 253 | ||||||||||||||||||||
153 | 241 | 494 kt | |||||||||||||||||||||
0 | 485 | 225 | 459 | 211 | 43% | ||||||||||||||||||
2018 | H1 2019 | 2019 | H1 2020e | ||||||||||||||||||||
* Class I: product with nickel content of 99% or more
1: Eramet estimates
Current LME prices do not reflect market fundamentals, hence discount in FeNi selling price
Lower demand and stable production resulting in oversupply of around 110kt of
nickel in H1 2020
1
LME and SHFE inventories up vs. low levels at end-2019to reach 260 kt at end-June(~9 weeks of consumption)
2
H1 2020 average LME prices at $5.65/lb ($12,455/t), up ~+1%
Ferronickel prices down -10% in H1, reflecting a discount to
LME (zero in H1 2019)
LME Nickel price | 2 |
USD / lb | USD/tonne |
1 | Nickel Stocks | |||
LME Stocks | SHFE Stocks | Ni price | (tonnes) | |
9.1
8.2
7.3
6.4
5.4
4.5
3.6
2.7
20 000 | 600 000 | |||||||||||||||||||||||||||||||||||||
FY=+6.1% | 570 000 | |||||||||||||||||||||||||||||||||||||
18 000 | 540 000 | |||||||||||||||||||||||||||||||||||||
510 000 | ||||||||||||||||||||||||||||||||||||||
480 000 | ||||||||||||||||||||||||||||||||||||||
16 000 | 450 000 | |||||||||||||||||||||||||||||||||||||
420 000 | ||||||||||||||||||||||||||||||||||||||
390 000 | ||||||||||||||||||||||||||||||||||||||
14 000 | 360 000 | |||||||||||||||||||||||||||||||||||||
330 000 | ||||||||||||||||||||||||||||||||||||||
300 000 | ||||||||||||||||||||||||||||||||||||||
12 000 | 270 000 | |||||||||||||||||||||||||||||||||||||
240 000 | ||||||||||||||||||||||||||||||||||||||
210 000 | ||||||||||||||||||||||||||||||||||||||
10 000 | 180 000 | |||||||||||||||||||||||||||||||||||||
H = +1.1% | ||||||||||||||||||||||||||||||||||||||
150 000 | ||||||||||||||||||||||||||||||||||||||
120 000 | ||||||||||||||||||||||||||||||||||||||
8 000 | 90 000 | |||||||||||||||||||||||||||||||||||||
60 000 | ||||||||||||||||||||||||||||||||||||||
30 000 | ||||||||||||||||||||||||||||||||||||||
6 000 | - | |||||||||||||||||||||||||||||||||||||
Jan-15 | Jul-15 | Jan-16 | Jul-16 | Jan-17 | Jul-17 | Jan-18 | Jul-18 | Jan-19 | Jul-19 | Jan-20 | Jul-20 | |||||||||||||||||||||||||||
31 Eramet - 2020 half-year results | H | H1 2020 vs H1 2019 price variation FY | FY 2019 vs FY 2018 price variation |
SLN rescue plan being challenged, but achievable if all conditions are met
SLN rescue plan based on 3 requirements to reduce cash cost
1 |
4Mwmt/year | ✔ Government authorisations on |
of nickel ore exports: | 4Mwmt/year |
Societal acceptance is key as | |
✔ well as support of the Provinces |
2 | Agreements signed with |
✔ | |
unions1 | |
Improving productivity: | Societal disruption strongly |
✔ impacting FeNi production |
Nickel exports (Mwmt) | 6.0 | ||||
6 | |||||
5 | 4.0 | ||||
4 | |||||
3 | 2.5 | ||||
2 | 1.2 | 1.6 | |||
1 | |||||
0 | |||||
2018 | 2019 | 2020e | 2021e | Target |
3 |
Reducing energy costs:
least competitive cost in nickel industry
- 1/3 of target reached
Additional +2Mwmt/yr of export needed
o Critical to achieve cash cost reduction of $1.3/lb
o Application submitted to local authorities for approval
+1Mwmt = -$0,2/lb
cash cost decrease
32 | Eramet - 2020 half-year results | 1 In particular mining activity 7/7 and 21/24h |
Average cash-cost down 7% in H1 2020, commitment of all stakeholders still critical
SLN's cash-cost (USD/lb) | ||||
6.05 | 0.05 | |||
-0.27 | -0.27 | Impact of ore | ||
exports | ||||
0.38 | ||||
-0.12 | -0.17 | 5.65 | ||
Exports volume | ||||
Societal disruptions | 5.39 | |||
impact & other one-offs | ||||
at mines |
H1 2019 | Ni ore | Productivity | FeNi vol. & other Other | Fuel oil, | €/$ FX | H1 2020 | June exit |
cash-cost | exports | (mines & plant) | one-offs at mines | coke, others | rate impact | cash-cost | rate |
Cash-cost :USD 5.65 /lb on average in H1 2020 ; breakeven cost at USD 6.19/lb
At end-June,only €74m remaining undrawn out of the €525m in loans granted by Eramet and the French govt. in 2015 and 2016
Speed-up of SLN rescue plan critical, together with commitment of all stakeholders
33 Eramet - 2020 half-year results
1 Incl. CAPEX & financial expenses ; H1 2020 CAPEX related to 2020 tonnage; financial costs booked in SLN's company financial statements
Mineral sands BU
Zircon prices down 15 % in H1 2020
1 |
Average price of zircon reached USD 1,355/t in H1 2020, down -15%
Global demand for zircon down reflecting trends in ceramics market, strongly impacted by pandemic
Strong decrease in production resulting in supply/demand balance in oversupply
Monthly premium zircon prices1 | 1 |
1,600 | ||||||||||||||||||
$ | /t | |||||||||||||||||
1,500 | ||||||||||||||||||
FY | = +7.4% | |||||||||||||||||
1,400 | ||||||||||||||||||
1,300 | ||||||||||||||||||
1,200 | ||||||||||||||||||
H | = -14.5% | |||||||||||||||||
1,100 | ||||||||||||||||||
1,000 | ||||||||||||||||||
500 | ||||||||||||||||||
Janv.-16 | Juil.-16Janv.-17Juil.-17 | Janv.-18Juil.-18Janv.-19 | Juil.-19Janv.-20 | Juil.-20 | ||||||||||||||
H | H1 2020 vs H1 2019 price variation | FY | FY 2019 vs FY 2018 price variation |
35 | Eramet - 2020 half-year results | 1 Source Zircon premium: FerroAlloyNet.com, Eramet analysis |
Robust CP slag prices in H1, despite pandemic affecting pigment end-markets
1 | |
Average price of CP1 grade titanium slag up +7% at USD 798/t in H1 2020 | |
Nevertheless, global demand for Tio2 pigments, the main end-market for titanium products2, | |
also contracted sharply, impacted by the pandemic | |
As global production remained strong in H1, oversupply is expected in 2020 | |
Monthly change in CP grade titanium dioxide slag prices3 | 1 |
840 | H = +6.9% | ||
770
700
FY = +9.8%
630
560
Janv.-16Juil.-16Janv.-17Juil.-17Janv.-18Juil.-18Janv.-19Juil.-19Janv.-20Juil.-20
- Q1 2020 vs Q1 2019 price variation
FYFY 2019 vs FY 2018 price variation
36 Eramet - 2020 half-year results
- For the production of pigments through chloride process
- Titanium dioxide slag, ilmenite, leucoxene and rutile
- Source CP slag: Market consulting, Eramet analysis
Strong operational performance of mineral sands activity
1
Strong operational performance at GCO in Senegal, confirmed over the past 3-yr(OEE rate + 11%)
Production level still impacted by lower grade of the deposit area currently mined
Sales volume up +13% at 33 kt reflecting robust demand for GCO products
HMC production1 | 1 | OEE2 |
(GCO, Senegal) | (GCO, Senegal) |
2 |
Titanium slag production level at TTI in Norway in line with plant nominal capacity
Sales volume slightly up +3% at 100 kt
Titanium dioxide production | 2 |
(TTI, Norway) |
in kt | -3% |
in kt | -2% | ||
800 | 735 | ||
400 | 378 | 371 | |
0 | H1 2019 | 2019 | H1 2020 |
in t/hour | +11% | ||||||
5 000 | 4 590 | 4 602 | |||||
4 134 4 347 | |||||||
4 000 | 3 568 | ||||||
3 160 | |||||||
3 000 | |||||||
2 000 | 1 995 | ||||||
0 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | H1 |
2020 |
200189
101 | 98 | |
100 | ||
0 | ||
H1 2019 | 2019 | H1 2020 |
37 Eramet - 2020 half-year results
- HMC: Heavy Mineral Concentrates
- Overall Equipment Efficiency of the mine
High Performance Alloys division
After brutal market impact in H1, current consensus for aerospace forecasts a return to 2019 volumes by 2025 only
Aerospace: ~70% of A&D sales
Others
29%
71%
Aerospace
Global aerospace market down ~50% in 2020,
incl. pre-Covid Boeing 737 production cuts
181 | 186 | 187 | 187 | 187 | 187 | ||||
169 | 169 | 171 | |||||||
159 159 | -48% | 157 | 162 | ||||||
152 | 148 | ||||||||
143 | |||||||||
131 | |||||||||
126 | |||||||||
104 | |||||||||
83 | |||||||||
2019 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 2028 |
Average monthly aircraft production rate1 per year, including single aisles, wide-bodies and regional jets
Pre-CovidPost-Covid
39 | Eramet - 2020 half-year results | 1 Source: Eramet analysis based on aerospace sector analysts consensus |
Huge impact of the crisis on A&D financials, already weakened by quality non-conformities
A&D Sales by segment
792 | -13% | |||||||||||
642 | ||||||||||||
558 | ||||||||||||
484 | ||||||||||||
307 | 268 | |||||||||||
104 | 223 | 70 | 189 | |||||||||
35 | ||||||||||||
130 | 88 | 42 | 37 | |||||||||
49 | ||||||||||||
Q2 aero sales down -50% on 2018 quarterly average before impact of quality non-conformities
A&D quarterly aero sales
147 | |||
121 | 114 | -50% | |
75 | |||
2018 Q average | 2019 Q average | Q1 2020 | Q2 2020 |
2018 H1 2019 2019 H1 2020
Aerospace Energy & Defense Others
36 A&D EBITDA
-4 | -€48m | ||||||
-27 | |||||||
* o/w -€48m aero crisis impact | -52* | ||||||
2018 H1 2019 2019 H1 2020
EBITDA significantly down at -€52m,reflecting cost structure (~60% of fixed costs)
FCF at -€156m (affected by brutal slowdown of aerospace supply chain leading to higher operating WC)
Specific action plan to limit cash burn: substantially reduce raw material supplies, cut temporary workers (-50% already achieved), obtain partial unemployment compensation (€9m), deliver more effective collection of overdue trade receivables….
~-20% decrease in A&D sales expected in 2020
Significant overstaffing at A&D that needs to be addressed
40 Eramet - 2020 half-year results
Erasteel: crisis impact mitigated in H1 thanks to specific action plan on cash
Erasteel sales by segment
Sales down -34% affected by downturn in automotive
227
-34%
205
market, accounting for ~ 50 % of sales:
Resilience of order intake of high-end products made out of powder metallurgy, Erasteel being market leader
213 | 116 | ||||||||||||
189 | |||||||||||||
76 | |||||||||||||
109 | |||||||||||||
70 | |||||||||||||
16 | |||||||||||||
14 | |||||||||||||
7 | 6 | ||||||||||||
2018 | H1 2019 | 2019 | H1 2020 | ||||||||||
High-speed steels, | Recycling | ||||||||||||
Tooling & Specialties |
EBITDA significantly down at -€15m,despite swift action
plan to mitigate crisis effect:
Specific commercial action to limit order cancellation or postponement
Most costs flexed to lower volumes including staff and maintenance costs
Lower raw materials consumption, following adjustment of melting activity
10 EBITDA
1 | |
-2 | -€13m |
Shutdown of recycling business until mid-May
FCF at -€9m,reflecting operating WC improvement (-29days in terms of number of sales).
-15
2018 H1 2019 2019 H1 2020
41 Eramet - 2020 half-year results
4
Strategic transformation
1st metal tapping at Weda Bay's
nickel ferroalloys plant
Acceleration of recovery or repositioning of least performing assets critical in light of current crisis: ongoing strategic review including A&D possible divestment
No cash outflows in the | |||||
To be accelerated | Significant cash return | short term | |||
3 | |||||
2 | |||||
1 | |||||
EXPAND our portfolio in | |||||
GROW in our attractive | |||||
FIX / REPOSITION our least | metals for the energy | ||||
businesses | |||||
performing assets | transition | ||||
A&D | Manganese ore | Lithium | |||
> | Ongoing strategic review, | > +15% production target in 2020 | > | Project mothballed | |
including A&D possible | Weda Bay Nickel (Indonesia) | Nickel and cobalt salts | |||
divestment | |||||
SLN | > Mine start-up in Q4 2019 | > | Weda Bay diversification | ||
towards battery products | |||||
> New business model based on | > | 1st tonnes melted in April 2020 | |||
ore exports and metallurgy | Mineral sands | Li-ion battery recycling | |||
> | R&D programme | ||||
> | New Caledonia support | > Focus on mine with high | |||
needed | potential | ||||
Sandouville | > Agreement signed in May to sell | ||||
> At cross-roads | TTI | ||||
Erasteel | |||||
> Cash and customer-focused | |||||
> | Ongoing strategic review | ||||
43 | Eramet - 2020 half-year results | ||||
CSR commitment: ongoing improvement of performance
CSR strategy: moving forward on the 2018-2023 Roadmap
13 medium-termobjectives monitoring with results published on annual basis
Significant progress recognised by Global Compact 'Advanced-level Communication on Progress'
Improved non-financial ratings in FY19, confirmed by new 2020 ISS ESG Rating
ISS ESG Corporate rating - June 2020
Awarded Prime status for first time
First decile in the ISS ESG Mining and Metals industry group
Overall rating of B- compared with 2017 rating of C
44 Eramet - CEE 2020
Conclusion & outlook
Acceleration of strategic transformation more essential than ever to go through the crisis
Still a highly volatile and uncertain environment, all sectors of activity combined
In order for the Group to bounce back as soon as the global economic situation becomes more favourable:
Strict cash control
Options of organic growth with short term payback in mining activities Strategic review of least performing assets, including possible A&D divestment
EBITDA guidance for 2020 still suspended
46 Eramet - 2020 half-year results
Q&A
Weda Bay's nickel mines, island of
Halmahera, Indonesia
Appendices
New modular approach for brownfield expansion of Moanda manganese ore operations
A HIGHLY COMPETITIVE MINE IN GABON
Operated by Comilog for 50 years
Strong quality high-grade oxide commercial ore 46%
Deep reserves of 269 Mt representing several decades, allowing a long term target of 7Mt production
Strong cash flow generation
Manganese ore capacity
(in Mt)
7.0
A NEW MODULAR EXPANSION
Enhance production of the Bangombé plateau through dry processing
- €51m of early works cashed out in 2019
New modular approach with progressive and
flexible development
Upcoming opening of new Okouma plateau, boosted by dry processing
- production capacity up c.25% to c.6 Mt
- €85m cash capex estimated in 2020, o/w €25m already expensed in H1
>5.5 | 6.0 | Continuing railway line renovation: already | ||||
4.8 | +25% | +70% transport capacity achieved since end- | ||||
4.3 | ||||||
2016 | ||||||
Strong commitment to E&S: employment, | ||||||
biodiversity, water | ||||||
2018 | 2019 | 2020e > 2020 | LT |
49 Eramet - 2020 half-year results
Weda Bay: highly competitive nickel ferroalloys production in Indonesia, 4 production line operational since May
MINING & METALS BUSINESS MODEL
Weda Bay Nickel business model balanced in 2 activities: mining and metallurgy
One of the largest nickel oxidised deposits in the world
First mining production started in October 2019 to supply several metallurgical plants on Halmahera island, o/w JV plant
1.6 Mwmt of nickel ore produced since Oct. 2019
Ongoing nickel ferroalloys JV plant ramp- up, ahead of schedule
Key milestone: 1st metal tapping in April
Gradual ramp-up: target to reach nominal capacity in H2
No capex for plant construction for Eramet
ATTRACTIVE METRICS
Production | Production | ||
target - Ore | |||
target | |||
6 Mwmt1/year | |||
2 | /year | ||
35 kt | |||
Eramet | |||
43%5 | |||
Nickel | Tsingshan4 | Eramet | |
resources | 57%5 | ||
off-take |
600 Mt3 ore | 15 kt2/year |
9 Mt Ni | |
HIGHLY COMPETITIVE NICKEL FERROALLOYS PRODUCTION IN INDONESIA
50 Eramet - 2020 half-year results
1 Mwmt: million of wet metric tons | 3 Mt: million of dry metric tons | 5 % held in Strand MineralsPte Ltd, |
(production) | (resources) | which owns 90% of PT Weda Bay |
2 In nickel content in nickel | 4 #1 global stainless steel producer | Nickel (see 2019 URD) |
ferroalloys |
Agreement for the sale of TiZir's Norwegian plant, announced on May 14th, regulatory approvals still ongoing
STRENGTHENING OF ERAMET'S BALANCE SHEET | CONTINUED DEVELOPMENT OF THE UPSTREAM BUSINESS | |
IN MINERAL SANDS |
Sale agreement signed on mid-May with Tronox, one of the main producers of pigments and titanium dioxide
Realization of the full value of TiZir's
Norwegian plant
100% | EBITDA |
of TTI shares | multiple |
sold | ~ 8x1 |
Sale price | LT supply |
contract to | |
300 M$ | TTI |
(ilmenite) |
Operation subject to the satisfaction of certain conditions including regulatory approvals
Strengthening of the Group's balance sheet with significant debt reduction: approx. $250m
Control of GCO by Eramet maintained2
A world-class deposit, located in Senegal, a very stable country:
- More than 50 years of resources (35 Mt of mineral sands)
- 735 kt of mineral sands produced in 2019 : principally zircon and ilmenite
Integrated processing and logistics facilities
CSR : a model in terms of relationship with host communities
Development opportunities in the mining business, in line with the Group's strategy:
- Continued improvement of operational performance
- Debottlenecking options under review
51 Eramet - 2020 half-year results
- TTI's EBITDA calculated on the basis of exchange rates of May 12th 2020
- At 90%, 10% being hold by the Senegalese State
Lithium project in Argentina: currently mothballed
HIGHLY VALUE-ACCRETIVE PROJECT
Long life low cost and scalable project, c.10 Mt LCE1 drainable resources, c.50 years of resources
Battery grade lithium carbonate production (24 kt LCE1)
1st quartile cash-cost ($3.5k/t) amongst the best in the industry
Pilot plant on site (operating in real conditions since December 2019) to continue its activity in order to finish collecting the process results
Eramet lithium yield vs competition 90%
70-75% | |
Evaporation process | |
50-55%50-55%
Comp. 1 | Comp. 2 | Comp. 3 | Eramet |
STATUS UPDATE: PROJECT MOTHBALLED
April 2020: decision not to engage the
construction of the lithium production plant
- Considerable uncertainty in the global economy due to current crisis
- In such context, cash preservation measures to be strengthened and accelerated
As a result, in 2020:
- Expense of c. €142m, incl. an asset impairment charge (€97m)
- Cash outflows of c. €80m, incl. cash capex (€58m)
All measures taken to allow a restart in the best conditions when possible
(Comp: competitor)
Direct extraction process
52 Eramet - 2020 half-year results
1 LCE = Lithium Carbonate Equivalent
Manganese BU - Key figures
In €m | H1 2020 | H1 2019 |
Sales | 839 | 904 |
EBITDA | 234 | 316 |
COI | 179 | 271 |
Cash Capex | 82 | 91 |
Operating cash flow | 137 | 154 |
FCF | 119 | 40 |
53 Eramet - 2020 half-year results
Nickel BU - Key figures
In €m | H1 2020 | H1 2019 |
Sales | 366 | 346 |
EBITDA | (70) | (25) |
COI | (114) | (70) |
Cash Capex | 18 | 10 |
Operating cash flow | (45) | (48) |
FCF | (88) | (77) |
54 Eramet - 2020 half-year results
Mineral sands BU - Key figures
In €m1 | H1 2020 | H1 2019 |
Sales | 139 | 139 |
EBITDA | 44 | 51 |
COI | 23 | 30 |
Cash Capex | 6 | 4 |
Operating cash flow | 51 | 41 |
FCF | 34 | 22 |
55 Eramet - 2020 half-year results
1 Full consolidation of Mineral Sands activity as of 1st July 2018, following the acquisition of shares in Mineral Deposits Limited, an Australian company that held a 50% stake in TiZir.
High Performance Alloys Division - Key figures
A&D and Erasteel
In €m | H1 2020 | H1 2019 |
Sales | 345 | 423 |
EBITDA | (66) | (5) |
COI | (93) | (27) |
Cash Capex | 26 | 29 |
Operating cash flow | (134) | (85) |
FCF | (164) | (76) |
56 Eramet - 2020 half-year results
CRU price trends in manganese alloys (refined and standard) in Europe
CRU price trends for manganese alloys in Europe
€/t
between January 2015 and June 2020
2,000 | |||||
1,500 | |||||
FY= -7.3% | H = -8.3% | ||||
1,000 | |||||
FY= -4.2% | H | = -8.0% | |||
500 | H | = -2.8% | |||
FY= -5.5% | |||||
0 | |||||
42000 | 42500 | 43000 | 43500 | 44000 |
H | Medium-carbon ferromanganese | High-carbon ferromanganese | Silicomanganese | |||||
H | H H1 2020 vs H1 2019 price variation | |||||||
FY | FY | FY FY 2019 vs FY 2018 price variation |
88 | Eramet - 2020 half-year results | Source: CRU spot Prices Western Europe |
Cash-flow table
€m | H1 2020 | H1 2019 | FY 2019 |
Operating activities | |||
EBITDA | 120 | 307 | 630 |
Cash impact on items under EBITDA | (178) | (142) | (420) |
Cash from operating activities | (57) | 165 | 210 |
Change in WCR | 67 | (172) | (124) |
Net cash generated by operating activities (1) | 10 | (7) | 86 |
Investment activities | |||
CAPEX | (162) | (131) | (455) |
Other investment flows | (56) | (27) | 11 |
Net cash from investment activities (2) | (220) | (158) | (444) |
Free Cash Flow (1) + (2)* | (210) | (165) | (358) |
Cash from equity operations | (3) | (45) | (117) |
Impact of changes in exchange rates and in accounting methods | (17) | (1) | (6) |
(Increase) / Reduction in net debt | (230) | (211) | (493) |
(Adjusted net debt) at start of period1 | (1,304) | (811) | (811) |
(Net debt) at close of period | (1,533) | (1,022) | (1,304) |
58 | Eramet - 2020 half-year results | 1 Restated for the 1st application of IFRS 16 as of January 1st, 2019 |
Group Balance Sheet at 30 June 2020
4,054 | 4,054 | ||
3,691 | 3,691 | ||
1,398 | 757 | ||
225 | |||
3,294 | 241 | ||
2,870 | |||
1,132 | |||
1,091 | |||
14 | |||
20 | |||
1,304 | 1,536 | ||
687 | |||
760 | |||
134 | 27 | ||
31/12/2019 | 30/06/2020 | 31/12/2019 | 30/06/2020 |
Fixed assets | Equity-Group share | Financial instruments | ||
WCR | Minority interest | Net debt | ||
Asset held for sale | Provisions and net deferred tax | Liabilities associated with assets held for sale | ||
59 Eramet - 2020 half-year results
Bond maturities
€m | Amount at | Initial | |||
Currency | Initial amount | 30/06/2020 | Maturity | Coupon | |
(in m) | date | ||||
2013 bond issue | € | 525 | 234 | Nov-2020 | 4.50% |
2016 ODIRNAN bond issue | € | 100 | 97 | perpetual | 4.00% |
TiZir bond renewal - July 2017 | USD | 300 | 270 | July-2022 | 9.50% |
September 2017 bond issue | € | 500 | 500 | February | 4.20% |
2024 | |||||
November 2019 bond issue | € | 300 | 300 | May-2025 | 5.88% |
60 Eramet - 2020 half-year results
Shareholding at 30 June 2020
Other float | SORAME + CEIR |
32.1% | |
(Duval Family) | |
36.9% | |
Number of shares issued |
26,635,887
BRGM** 1.3%
4.0%
STCPI*
25.6%
APE
61 Eramet - 2020 half-year results
- STCPI (Société Territoriale Calédonienne de Participation Industrielle): entity owned by the New Caledonian provinces
- BRGM (Bureau de Recherches Géologiques et Minières): the French Geological Survey Office
CONTACTS
Executive VP Strategy & Innovation - Investor Relations
Philippe GUNDERMANN
philippe.gundermann@eramet.com
Investor Relations Manager
Sandrine NOURRY-DABI
sandrine.nourrydabi@eramet.com
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Disclaimer
Eramet SA published this content on 30 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 July 2020 08:40:18 UTC