Elkem

Earnings Release • Oct 25, 2023

Third quarter results 2023

Agenda

Business update

By CEO Helge Aasen

Financial performance By CFO Morten Viga

Outlook

By CEO Helge Aasen

@ Elkem

Highlights

Weak profitability due to weak markets and one-offs

• Elkem's EBITDA was NOK 535 million in the third quarter 2023
• Still weak results for Silicones, due to depressed commodity prices and low demand in all regions
• The result for Silicon Products was negatively impacted by NOK 220 million related CO2 compensation and inventory write downs
• Carbon Solutions delivered a good result despite of lower demand
• Elkem is taking action to address the current weak market conditions and is well positioned for demand recovery based on attractive market positions and a strong asset base
• Elkem will call for an extraordinary general meeting (EGM) in November, due to a board level change for the majority shareholder

Total operating income MNOK 7,917

EBITDA MNOK 535

EBITDA margin 7%

Strong ESG focus and performance

Green leadership

• Elkem's ESG report rated A+ by Position Green's assessment of the 100 largest companies on OSE. A+ is awarded to the top 5%
  • S&P Global has ranked Elkem's ESG performance in the top 6% for 2023
• In August, Elkem issued its inaugural green bond loan of NOK 1,000 million
• Elkem is a key supplier to the green transition with silicon defined as a critical material in EU and the US

Safety

Ambition: Zero injuries

Total injury rate (per million working hours)

Rated among the world's leading companies

Challenging macro-economic environment affecting our markets

• · Weak macro-economic sentiment ...
  • High inflation and interest rate hikes
  • · Slower than expected recovery in China
  • Weak demand and destocking effects
  • · Geopolitical uncertainties
• ... is significantly impacting Elkem's market conditions
  • DMC prices in China reached 10-year low in August 2023
  • · Silicon and ferrosilicon prices in EU have fallen approximately 60% since year-end 2021

@ Elkem

Comprehensive programme for cost and capex reductions

• Elkem has introduced a comprehensive programme to counter the current challenging market conditions, particularly in Silicones
• Immediate short-term initiatives organised along several dimensions:
  • freezing new hires, organisation optimisation, reduce third party services, lowering logistics and warehousing costs
  • working capital improvements to improve cash flow
  • focus on operational efficiencies and capacity optimisation
  • review of investment plans to significantly reduce capital expenditures

2024 targets

Strategic capex reductions More than BNOK 2.0

Ongoing and new cost improvement programmes BNOK ~1.5

Accelerating maintenance and improvements in Iceland

• Elkem will accelerate maintenance and improvement projects at the ferrosilicon plant in Iceland in the fourth quarter 2023
• One of the plant's three furnaces will be out for approximately 10 weeks, utilising a period of low market demand to bring forward maintenance and improvement work and position for the future
• = Elkem will invest around NOK 100 million in maintenance and upgrading of the plant to improve efficiency and enable lower production costs once stronger market conditions return
• The maintenance stop is estimated to have a negative EBITDA impact of NOK 50 million in the fourth quarter

lceland - maintenance and improvement project

Total investment amount ~MNOK 100

One furnace out for approx. 10 weeks

Expanding production and improving the cost position in China

• The expansion at the Xinghuo plant in China is on track, both with regards to cost and time
• 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
• In addition, the project will deliver significant cost improvements, mainly through lower energy and raw material consumption
• The new production line is expected to be on level with the current lowest cost producers in China

Estimated capex BCNY 3.1

Additional capacity ~120,000 tonnes

Effective from 1H-2024

Proposed changes to CO2 compensation in Norway

• = The Norwegian government has proposed changes to the CO2 compensation in the state budget for 2024
• The proposal is to raise the deductible element ("kvoteprisgulvet") in the scheme from NOK 200 to NOK 375
• If finally approved, this will have a negative, annual effect of NOK 220 million compared to 2022 level
• The framework for the CO2 compensation scheme has been set out to avoid carbon leakage, i.e. that European industry is shut down and moved to countries with no CO2 costs
• Industry organisations have initiated a dialogue with the government to change the proposal, but Elkem has found it appropriate to adjust the third quarter results by NOK 170 million to reflect the proposal

ට Elkem

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About Bo Li

• Master of science in chemical engineering from Dalian University of Technology
• From 2001, various executive positions Sinochem, the parent company of Bluestar
• Bo Li is now chair of the board of Bluestar

Construction - Global annual growth in new building projects (YOY, % change)

China – EV production volumes YTD-August (in 1,000)

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DMC reference price China (CNY/mt)

DMC reference prices are based on quotes incl. VAT and transportation. Quotes may not always reflect accurate sales prices.

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CRU silicon 99 price EU (EUR/mt)

CRU ferrosilicon 75 price EU (EUR/mt)

▪ Crude steel production (million mt)

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Elkem group

Third quarter results impacted by weak markets and one-offs

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Total operating income (MNOK)

Total operating ■ income down 30% from 3Q-2022

Mainly explained ■ by lower sales prices and lower sales volumes

Weak market . conditions affecting all divisions

3Q

29 %

3,302

18 %

1,825

4Q

7%

535

a Elkem

Elkem Group

Overview financial ratios

• · EBITDA MNOK 535
  • Segment Other included realised currency hedging losses of MNOK -77
• Other items MNOK -158
  • Mainly consisting of currency loss on working capital items MNOK -139 and loss on power & currency derivatives MNOK -19
• Net finance income (expenses) MNOK -115
  • Consisting of net interest expenses MNOK -154 and other financial expenses of MNOK -4, partly offset by currency gains of MNOK 43
• Tax MNOK -95
  • · Tax expenses of MNOK -95 despite negative profit before tax. Positive results in most countries more than offset by negative results in France and China where losses are not capitalised as deferred tax assets

Consolidated key figures

(NOK million, except where specified)	30 2023		3Q 2022 YTD 2023 YTD 2022		FY 2022
Total operating income	7,917	11,293	27,109	35,494	45,898
EBITDA	535	3,302	3,139	11,101	12,925
EBIT	(1) -18	2,804	1,476	9,631	10,898
Other items	-158	1,384	432	1,936	2,151
Net finance income (expenses)	-115	5	-406	41	-161
Profit (loss) before income tax	-338	3,884	1,302	11,058	12,236
lax	-95	-818	-691	-2,340	-2,594
Profit (loss) for the period	(2) -456	3,046	533	8,667	9,561
Key ratios
EPS (NOK per share)	-0.72	4.81	0.84	13.68	15.09
Equity ratio (%)	48 %	54 %	48 %	54 %	55 %
Net interest bearing debt (NIBD) (3)	8,107	2,845	8,107	2,845	2,615
Leverage ratio	1.6	0.2	1.6	0.2	0.2
Reinvestments % of D&A	107 %	56 %	99 %	61 %	84 %
ROCE (annualised) (%)	0%	37 %	6%	47 %	39 %

(1) Operating profit before other items and hedge adjustments

(2) Owners of the parent's share of profit (loss)

(3) Excluding non-current restricted deposits and interest-bearing financial assets

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Total operating income

Sales volume

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Total operating income

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Total operating income

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Equity ratio

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Net interest-bearing debt (NIBD)

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Cash flow from operations

Outlook for the fourth quarter 2023

• The market sentiment is still weak going into the fourth quarter. Elkem well positioned when market conditions improve, due to attractive market positions and a good asset base
• Silicones prices in China improved late third quarter, but development going forward is uncertain. Still weak in EMEA and Americas, although signs of improvement in some segments
• · Declining reference prices for silicon and ferrosilicon in third quarter will impact contract prices in fourth quarter. One furnace in Iceland out for maintenance stop, negatively impacting EBITDA by NOK 50 million. Silicon market prices have increased recently
• Carbon Solutions facing weak demand due to lower metals production in key markets

@ Elkem

Important notice

Any statement, estimate or projection included in this presentation (or upon which any of the conclusions contained herein are based) with respect to anticipated future performance (including, without limitation, any statement, estimate or projection with respect to the condition (financial or otherwise), prospects, business strategy, plans or objectives of the company and/or any of its affiliates) may prove not to be correct.

No representation or warranty is given as to the completeness or accuracy of any forward-looking statement contained in this presentation or the accuracy of any of the underlying assumptions. Nothing contained herein shall constitute any representation or warranty as to the future performance of the company, any financial instrument, credit, currency rate or other market or economic measure.

Information about past performance given in this presentation should not be relied upon as, and is not, an indication of future performance.

Appendix

㊣ Elkem

We are Elkem

Advanced silicon-based materials shaping a better & more sustainable future

Silicones

@ Elkem

Silicon Products

Carbon Solutions

B

A strong track record since 1904 - with our focus on the future

• · Elkem started as a Norwegian company founded in 1904 by Sam Eyde, representing strong industrial traditions and continuous improvement
• The chemical business in France was integrated in 2015 adding a strong culture for specialisation, innovation and R&D
• Our presence in China was significantly expanded in 2017, adding to the dynamic and agile business perspective, and positioning for the Asian market

Sustainable business model delivering good results

Elkem operates through three divisions: All with global scale, leadership positions and global footprint

Silicones

Fully integrated silicones manufacturer with focus on specialities

Silicon Products

Global producer and provider of silicon, ferrosilicon and specialties

Carbon Solutions

Leading producer of electrode paste and specialty products

8%

of operating

income

End markets

• Construction
• Automotive
• Chemical formulators
• Personal care
• Healthcare
• Paper & film release
• Silicone rubber
• Textile

14 main worldwide

50%

End markets

• Automotive
• = Construction/industrial equipment
• Electronics
• Specialty steel
• Solar & wind turbines
• Refractories
• Oil & gas

End markets

• = Ferroalloys
• Silicon
• Aluminium
• Iron foundries

7 main plants (from 2023)

ම Elkem

Environmental, Social & Governance Elkem is committed to reduce emissions and contribute in line with Paris agreement aim of well below 2°C warming

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1

We aim to contribute to a better climate through three key levers:

Reducing our emissions Achieving fully climate neutral production throughout our value chain

Supplying to the transition Providing the advanced material solutions required to enable the green transition

Enabling circular economies Enabling more circular activities in our operations, products and markets

• · By 2031: Reducing absolute emissions* by 28% from 2020-2031 while growing the business delivering 39% improvement in product footprint**
• · By 2050: Achieving fully carbon neutral production (zero fossil emissions) globally
• · Grow supplies of advanced materials to green markets such as better buildings, electric vehicles and renewable energy
• · Build new business in green markets such as battery materials, biomass and energy recovery
• · Increase recycling in our own operations
• · Increase recycling with our customers
• · Develop the eco-design of innovative products

Elkem Climate Roadmap : Elkem's actions: Reducing our emissions

Elkem will reduce fossil CO2 emissions in line with the Paris agreement: We will contribute to limiting long-term temperature according to Paris agreement

By 2031:

• Reducing absolute emissions* by 28% from 2020-2031
• = Delivering 39% improvement in product footprint**

By 2050:

· Achieving fully carbon neutral production (zero fossil emissions) globally

Our roadmap to climate neutral products

Changing to biomass as reduction material

Increasing share of bio-based materials from wood waste as reduction material in our smelters

Low-carbon supply chain

Actively pursue long-term sourcing of renewable-based silicon metal as well as emission-free logistics

Shifting to renewable power also in China

Future decarbonisation of China's power mix will support Elkem's low carbon transition

Exploring potential of more CCS at smelters

Exploring both Carbon Capture & Utilisation (CCU) and Carbon Capture & Storage (CCS) at our smelters

Elkem

(Illustrative)

Energy cost positions

Well covered by long-term power contracts

• Elkem is well-positioned with long-term power contracts in Norway with more than 80% of the electricity supply secured at competitive rates until 2026. After 2026, the hedging ratio is gradually declining
• Elkem is continuously evaluating the market conditions for new longterm contracts
• In first quarter 2023, Elkem secured competitive access to power by entering into new contracts for up to 11 years, totaling 520 GWh p.a.
  • These contracts are covering the plants in Bremanger, Rana and Salten in price area NO3 and NO4

Location of Elkem's plants in price areas

@ Elkem

Silicones - Sales distribution

Serving attractive end-markets with advanced technologies

Coal and biocarbon

Electricity

Quartz

of division's sales

of division's sales

of division's sales

Currency sensitivity

• · The result and cash flow are exposed to currency fluctuations. The main currencies are EUR, USD and CNY
  • · EUR exposure approx. MEUR 550
  • USD exposure approx. MUSD 100
  • CNY exposure approx. MCNY 200
• · Current cash flow hedging programme
  • 90% hedging of net cash flows occurring within 0-3 months
  • 45% hedging of forecasted net cash flows within 4-12 months
• Before hedging activities, a 10% strengthening or weakening of NOK versus all other currencies would have an EBITDA effect of approx. MNOK 800 over the coming 12 months. CNY is not hedged

Currency development

• · As of 30 September 2023, the NOK closed 4% stronger against the EUR, 1% stronger against USD, and 2% stronger against CNY compared to 30 June 2023
• · In 3Q-2023, the NOK was on average 13% weaker against EUR, 5% weaker against USD, and 1% stronger against CNY compared to 3Q-2022

2 Elkem

EURUSD

CNYNOK&

Other financial sensitivities

POWER

• Electric power is a key input factor in Elkem's production. The normal consumption is around 6.5 TWh of which approx. 3.6 TWh is in Norway. Near term exposure to spot power prices is limited
  • Norway, hedging programme mainly consisting of long-term contracts covering around 80% of full capacity consumption until 2026. After 2026, Elkem has a high but gradually declining hedging ratio in line with its long-term hedging strategy
  • Outside Norway, power prices are mostly based on long term contracts or regulated power tariffs

SALES PRICES

• Changes in sales prices could significantly affect operating income and EBITDA
  • 10% price change on silicon metal is expected to affect result by approx. MNOK 80 per year(*)
  • 10% price change on ferrosilicon is expected to affect result by approx. MNOK 375 per year(*)

^(*) Sensitivities are on group level and based on annual sales volumes. Sales prices are based on LTM CRU prices.

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