Elkem

Earnings Release • Oct 25, 2023

Third quarter 2023: Weak profitability due to weak markets and one-offs

Third quarter 2023: Weak profitability due to weak markets and one-offs

Oslo, 25 October 2023

Elkem's profitability in the third quarter 2023 was impacted by weak markets and

negative one-off effects, including changes to the CO2 compensation scheme in

Norway. Relevant measures are taken to reduce costs and adjust investment plans

to reflect the weak market conditions. Elkem is well positioned when market

conditions improve, based on attractive positions and a strong asset base.

Elkem's total operating income for the third quarter 2023 was NOK 7,917 million,

which was down from the corresponding quarter in 2022, mainly explained by lower

sales prices and lower sales volumes. Earnings before interest, taxes,

depreciation and amortisation (EBITDA) amounted to NOK 535 million in the

quarter, compared NOK 3,302 million in third quarter last year. Earnings per

share (EPS) was NOK -0.72 in the quarter and NOK 0.84 year-to-date.

"The challenging macro-economic environment is also affecting our markets. This

is impacting Elkem's results in the third quarter, and we will evaluate

reductions in our cost base as well as our investment plans accordingly. In

addition, we are surprised and disappointed by the Norwegian government's

proposal for changes in the CO2 compensation scheme. If finally approved, this

significantly reduces the attractiveness of future investments in Norway

compared to other parts of the world. The lack of dialogue has also added

uncertainty related to important framework conditions. We now have to evaluate

what this means for investment plans at our production sites in Norway. The

longer-term trends of the green and digital transitions remain strong, driving

demand for advanced materials shaping a better and more sustainable future,"

says Elkem's CEO, Helge Aasen.

The result for the Silicones division was still weak, mainly due to depressed

prices on silicones commodities, combined with low demand in all regions. Weak

demand also included speciality products. Silicon Products delivered weaker

results due to lower sales prices and weak demand. The result was also

negatively impacted by NOK 220 million related to changes in the CO2

compensation scheme in Norway and inventory write downs. The result for the

Carbon Solutions division was good, despite weaker demand following reduced

production in the metal markets.

Elkem is introducing a comprehensive programme to counter the weak market

conditions. A cost reduction programme has been initiated across all of Elkem's

divisions to reduce fixed and variable costs. In addition, all investment plans

will be carefully evaluated and adjusted to reflect the weaker market

conditions. The target is to reduce costs and capital expenditures

significantly.

Elkem is well positioned based on attractive market positions and a strong asset

base and will complete investments that further improve the group's competitive

position. In the fourth quarter, Elkem will accelerate maintenance and

improvements at the ferrosilicon plant in Iceland. Elkem will invest around NOK

100 million in maintenance and upgrading of the plant to improve efficiency and

enable lower production costs.

In addition, Elkem is in the process of expanding and upgrading its Silicones

plant in China. This investment is on track, both with regards to cost and time,

and is expected to be finalised during the first half of 2024. The expansion

project will increase the plant's production capacity by 50%, equivalent to

120,000 tonnes of siloxane, and provide improved product quality for downstream

specialisation. The project will deliver significant cost improvements, mainly

through lower energy and raw material consumption and is expected to be on level

with the current lowest cost producers in China.

The group's equity as at 30 September 2023 amounted to NOK 25,254 million, which

gave a ratio of equity to total assets of 48%. Net interest-bearing debt was NOK

8,107 million, which gave a ratio of net interest-bearing debt to EBITDA of

1.6x. Elkem had cash and cash equivalents of NOK 7,905 million as at 30

September 2023 and undrawn credit lines of more than NOK 6,000 million.

The market sentiment is still weak going into the fourth quarter. Elkem is

however, well positioned when market conditions improve, due to its attractive

market positions and a good asset base. Silicones prices in China improved late

third quarter, but the development going forward is uncertain. The markets in

EMEA and Americas are still weak, although there are signs of improvement in

some segments. The reference prices for silicon and ferrosilicon declined in

third quarter and this will impact contract prices in the fourth quarter. One

furnace in Iceland will be out for approximately 10 weeks due to planned

maintenance stop, which is expected to negatively impact EBITDA by NOK 50

million. The silicon market prices have increased recently. Carbon Solutions

facing weak demand due to lower metals production in key markets.

For further information, please contact:

Odd-Geir Lyngstad

VP Finance & Investor Relations

Tel: +47 976 72 806

Email: odd-geir.lyngstad@elkem.com

Fredrik Norman

VP Corporate Communications & Public Affairs

Tel: +47 918 66 567

E-mail: fredrik.normann@elkem.com

About Elkem

Elkem is one of the world's leading providers of advanced silicon-based

materials shaping a better and more sustainable future. The company develops

silicones, silicon products and carbon solutions by combining natural raw

materials, renewable energy and human ingenuity. Elkem helps its customers

create and improve essential innovations like electric mobility, digital

communications, health and personal care as well as smarter and more sustainable

cities. With a strong track record since 1904, its global team of more than

7,300 people has a joint commitment to stakeholders: Delivering your potential.

In 2022, Elkem achieved an operating income of NOK 45.9 billion and CDP ratings

of A- on climate and forest. Elkem is listed on the Oslo Stock Exchange (ticker:

ELK), where the company is also included in the ESG Index. www.elkem.com