Elkem

Earnings Release • Feb 13, 2020

Results still hampered by weak markets, new acquisition supporting specialisation

Results still hampered by weak markets, new acquisition supporting specialisation

Oslo, 13 February 2020: Elkem's result for the fourth quarter of 2019 was

hampered by weak markets. Prices for silicon metal and ferrosilicon have

however, started to recover from their historic lows. Operational issues have

also impacted the result negatively. On 30 December 2019, Elkem announced the

acquisition of Polysil. The acquisition will strengthen Elkem's position in

selected silicones segments in China and constitute an important part of the

growth and specialisation strategy.

Total operating income for the fourth quarter 2019 was NOK 5,559 million, which

was down 9% compared to fourth quarter 2018. EBITDA amounted to NOK 517 million

in the quarter, compared to NOK 974 million in the corresponding quarter last

year. Earnings per share (EPS) was NOK 0.03 in the quarter.

The board of directors has proposed a dividend of NOK 0.60 per share for 2019,

representing a dividend pay-out ratio of 41% of net profit.

- Market prices for silicones in China were mainly stable in fourth quarter but

picked up towards year-end, mainly due to inventory build-up among downstream

producers ahead of Chinese New Year. Prices for silicon and ferrosilicon have

recovered from historic low levels, as significant production curtailments have

started to have effect, says Michael Koenig, CEO of Elkem.

In addition to weak market conditions, the result for the fourth quarter was

negatively impacted by operational issues. As previously announced, the

production stop and subsequent start-up issues in connection with the National

Day in China resulted in extra costs of approx. NOK 60 million. Operational

issues in the Foundry Products division also impacted the result negatively by

approx. NOK 60 million.

The realised effect of the accelerated improvement programme was NOK 596 million

by the end of fourth quarter, which exceeded the target of NOK 500 million. All

plants and divisions have worked systematically to reduce costs and enhance

operations. The effects have however, been countered by further market

deterioration during 2019. Elkem will continue its focus on operational

improvements and cost optimisation.

Elkem entered into an agreement to acquire all of the shares in Polysil on 30

December 2019. Polysil is a leading Chinese silicone elastomer & resins material

manufacturer with strong positions in baby care and food grade silicones, as

well as silicone products for the electronics and medical markets.

- Acquiring Polysil will strengthen Elkem's position in selected specialised

silicones segments in China. Elkem and Polysil's complementary product and

market positions provide a solid platform for further specialisation and growth

in China and globally, says Koenig.

The group's equity as of 31 December 2019 amounted to NOK 12,952 million, which

gave a ratio of equity to total assets of 45%. Net interest-bearing debt was NOK

5,722 million, which gave a ratio of net interest-bearing debt to EBITDA of 2.2

times. Elkem had cash and cash equivalents of NOK 4,496 million as at 31

December 2019. The financial position is strong.

The outlook for the first quarter is mixed. Market prices recovered from

historic low levels during fourth quarter.

- The price trend has continued upwards for silicon and modestly up for

ferrosilicon. Silicone prices are expected to remain stable, says Koenig.

The first quarter will be impacted by Chinese New Year and slower activity due

to the coronavirus. The silicones market is mixed with stable prices for

specialties, but prices for core products are still low. The expected demand

pick-up after Chinese New Year may be delayed due to the coronavirus. The demand

for silicon metal seems to have normalised with destocking effects levelling

out. Ferrosilicon and foundry alloys still hampered by weakness in steel and

automotive. Demand outlook for carbon products expected to be in line with

preceding quarters.

For further information:

Odd-Geir Lyngstad, VP Finance & Investor Relations

Tel: +47 976 72 806

Email: odd-geir.lyngstad@elkem.no

Fredrik Norman, VP Corporate Communications and Public Affairs

Tel: +47 918 66 567

Email: fredrik.norman@elkem.no

Founded in 1904, Elkem is one of the world's leading suppliers of silicon-based

advanced materials with operations throughout the value chain from quartz to

specialty silicones, as well as attractive market positions in specialty

ferrosilicon alloys and carbon materials. Elkem is a publicly listed company on

the Oslo Stock Exchange (ticker code: ELK) and is headquartered in Oslo. The

company has more than 6,300 employees with 29 production sites and an extensive

network of sales offices worldwide. In 2018 Elkem had revenues of NOK 25.9

billion. To learn more, please visit www.elkem.com