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Befesa S.A.
Quarterly Report • Nov 27, 2019
6215_10-q_2019-11-27_ae892a36-79f7-4a8b-b7f9-a14e87052181.pdf
Quarterly Report
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Statement for the Third Quarter 2019
BEFESA
BEFESA AT A GLANCE
KEY FIGURES – 9M/Q3 2019
(€ million, unless specified otherwise)
| 9M 2019 | 9M 2018 | Change | Q3 2019 | Q3 2018 | Change | |
|---|---|---|---|---|---|---|
| Key operational data | ||||||
| Steel dust throughput (tonnes) | 488,758 | 536,804 | (9.0) % | 171,014 | 175,961 | (2.8) % |
| Waelz oxide (WOX) sold (tonnes) | 163,166 | 178,688 | (8.7) % | 58,481 | 59,907 | (2.4) % |
| Salt slags and Spent Pot Linings (SPL) recycled (tonnes) | 366,297 | 378,816 | (3.3) % | 113,145 | 113,974 | (0.7) % |
| Secondary aluminium alloys produced (tonnes) | 133,004 | 126,682 | 5.0 % | 39,009 | 31,500 | 23.8 % |
| LME zinc average price (€ / tonne) | 2,313 | 2,523 | (8.3) % | 2,112 | 2,182 | (3.2) % |
| Blended zinc price (€ / tonne) | 2,282 | 2,168 | 5.3 % | 2,203 | 2,006 | 9.8 % |
| Aluminium alloy average market price (€ / tonne) | 1,426 | 1,783 | (20.0) % | 1,356 | 1,689 | (19.7) % |
| Key financial data | ||||||
| Revenue | 496.6 | 539.1 | (7.9) % | 147.6 | 156.7 | (5.8) % |
| EBITDA | 117.1 | 128.9 | (9.2) % | 37.0 | 40.0 | (7.5) % |
| EBITDA margin (% over revenue) | 23.6 % | 23.9 % | (0.3) p.p. | 25.1 % | 25.5 % | (0.5) p.p. |
| EBIT | 92.1 | 107.3 | (14.2) % | 28.6 | 33.0 | (13.4) % |
| EBIT margin (% over revenue) | 18.5 % | 19.9 % | (1.4) p.p. | 19.4 % | 21.1 % | (1.7) p.p. |
| Financial result | (12.5) | (11.8) | 5.4 % | (4.2) | (4.4) | (5.2) % |
| Profit before taxes and minority interests | 79.6 | 95.5 | (16.6) % | 24.4 | 28.6 | (14.7) % |
| Net profit attributable to shareholders of Befesa S.A. | 60.7 | 62.9 | (3.4) % | 18.8 | 18.0 | 4.5 % |
| EPS (in €) based on 34,066,705 shares | 1.78 | 1.85 | (3.4) % | 0.55 | 0.53 | 4.5 % |
| Total assets (i) | 1,068.2 | 1,086.1 | (1.7) % | 1,068.2 | 1,086.1 | (1.7) % |
| Capital expenditures | 52.0 | 29.1 | 78.4 % | 22.6 | 11.2 | >100 % |
| Cash flow from operating activities | 47.7 | 46.0 | 3.8 % | (1.0) | 9.3 | (111.0) % |
| Cash and cash equivalents at the end of the period | 100.7 | 105.6 | (4.7) % | 100.7 | 105.6 | (4.7) % |
| Net debt (ii) | 438.9 | 417.5 | 5.1 % | 438.9 | 417.5 | 5.1 % |
| Leverage (ii) | x 2.7 | x 2.4 | x 2.7 | x 2.4 | ||
| Number of employees (as of end of the period) | 1,163 | 1,122 | 3.7 % | 1,163 | 1,122 | 3.7 % |
(i) 2018 figure is as of 31 December
(ii) From 1 January 2019 onwards, implemented IFRS 16 amendment affecting accounting for renting & leasing results in €15.3 million higher debt or ~0.1 higher leverage compared to year-end 2018
KEY HIGHLIGHTS
- Operational performance as expected at high utilisation rates, Turkey back in production in August: Steel Dust throughput was 489 thousand tonnes in 9M 2019 (-9% year-on-year) due to the scheduled downtime in Turkey to expand the plant capacity as well as more scheduled plant maintenance shutdowns performed during the first nine months of 2019 vs. 2018. Salt Slags volumes reached 366 thousand tonnes in 9M 2019 at similar high utilisation levels compared to last year (-3% year-on-year); Aluminium alloys volumes also at very high utilisation levels at 133 thousand tonnes in 9M 2019 (+5% year-on-year) due to 2018 high efficiency furnace upgrade in Secondary Aluminium delivering results. Normalised for Turkey capacity upgrade, plants in both core businesses run at high utilisation rates above 90%.
- Financial performance impacted by unfavourable metal prices; Treatment charges, LME zinc and aluminium alloy FMB prices:
- o 9M 2019 EBITDA at €117 million (-9% year-on-year) as anticipated per sensitivities provided in April, mainly driven by lower volume in Steel Dust Recycling Services due to Turkey upgrade (back into operation in August after seven months down), unfavourable zinc treatment charges, low zinc and aluminium alloy market prices, partially offset by better zinc hedges and recovered Stainless operations
- o 9M profitability continues at solid 24% EBITDA margin, stable year-on-year
- o Cash on hand amounted to €101 million at Q3; Operating cash flow LTM (Last Twelve Months) at €106 million; Leverage of x2.7
- Full year earnings guidance updated to reflect latest metal prices environment: FY 2019 expected at around €160 million EBITDA (vs. initial guidance provided in April: €182 to €185 million). The variance is mainly impacted by the latest unfavourable metal prices:
- o ~€-14 million from LME zinc prices, at ~€2,230-2,260 per tonne (vs. initial ~€2,522 per tonne)
- o ~€-5 million from alu alloy FMB prices, at ~€1,410 per tonne (vs. initial ~€1,650 per tonne)
- Execution of organic growth projects on track:
- o Plant capacity expansion in Turkey completed in August
- o Final phase to upgrade the Secondary Aluminium furnaces in Barcelona (Spain) is scheduled for ramp-up in November
- o New Waelz Oxide (WOX) washing plant in South Korea scheduled for ramp-up in December
- o China: Driving progress as planned at both sites Plant #1 (Jiangsu province): Broke ground in April 2019, construction progressing and ramp-up planned by end of 2020; Plant #2 (Henan province): Ground breaking scheduled for mid-November 2019 and ramp-up during H1 2021
BUSINESS OVERVIEW
RESULTS OF OPERATIONS, FINANCIAL POSITION & LIQUIDITY
Revenue
Consolidated revenue decreased by 7.9% to €496.6 million in 9M 2019 (9M 2018: €539.1 million) and by 5.8% to €147.6 million in Q3 2019 (Q3 2018: €156.7 million). The development was mainly driven by reduced volumes in Steel Dust Recycling Services due to the scheduled plant downtime in Turkey to expand its capacity, unfavourable zinc treatment charges and LME zinc prices, as well as lower aluminium alloys prices. The revenue decrease was partially offset by the recovery of Stainless operations and the improved blended zinc prices thanks to better hedges in place.
EBITDA & EBIT
In 9M 2019, EBITDA decreased by €11.8 million to €117.1 million. Similarly, EBIT declined by €15.2 million to €92.1 million. In Q3 2019, EBITDA decreased by €3.0 million to €37.0 million and EBIT declined by €4.4 million €28.6 million.
Financial result & net profit
In 9M 2019, the consolidated financial result amounted to €-12.5 million compared with €-11.8 million in 9M 2018. Main factor driving this development was an unfavourable decrease of €2.2 million in net exchange differences partly offset by a favourable reduction in financial expenses driven by lower interest rates (Euribor+250 bps in Q3 2019 vs. Euribor+275 bps in Q3 2018) due to the improved leverage ratio (2019: Below x2.25 ratchet, at x2.20 in Q1 and at x2.23 in H1; 2018: Above x2.25 ratchet, at x2.32 in Q1 and at x2.38 in H1).
9M 2019 consolidated net profit attributable to the shareholders decreased by €2.1 million to €60.7 million (9M 2018: €62.9 million). Q3 2019 consolidated net profit attributable to the shareholders increased by €0.8 million to €18.8 million (Q3 2018: €18.5 million). EPS increased from €0.53 in Q3 2018 to €0.55 in Q3 2019.
Financial position & liquidity
Financial indebtedness compared to year-end 2018 increased by €12.1 million, to €539.6 million as of 30 September 2019 mainly due to a €15.3 million increase in non-current financial indebtedness after implementing the IFRS 16 amendment affecting accounting for renting and leasing from 1 January 2019 onwards.
Compared to year-end 2018, net debt has increased in 2019 by €62.1 million to €438.9 million at the end of Q3.
The following table reconciles net debt to the relevant balance sheet line items:
Net debt
(€ million)
| 30 September | 31 December | ||
|---|---|---|---|
| 2019 | 2018 | ||
| Non-current financial indebtedness | 530.5 | 520.2 | |
| + Current financial indebtedness | 9.1 | 7.3 | |
| Financial indebtedness | 539.6 | 527.5 | |
| - Cash and cash equivalents | (100.7) | (150.6) | |
| - Other current financial assets (i) | (0.1) | (0.1) | |
| Net debt (ii) | 438.9 | 376.8 | |
| EBITDA LTM | 164.2 | 176.0 | |
| Leverage ratio (ii) | x 2.7 | x 2.1 |
(i) Other current financial assets adjusted by hedging valuation (ii) From 1 January 2019, implemented IFRS 16 amendment affecting accounting for renting & leasing results in €15.3 million higher net debt or ~0.1 higher leverage compared to year-end 2018
9M 2019 operating cash flow amounted to €47.7 million, 3.8% up year-on-year (9M 2018: €46.0 million). Operating cash flow LTM at €105.6 million (FY 2018: €103.8 million). 9M 2019 operating cash flow was mainly impacted by the working capital trend: Receivables and payables were impacted from seasonality and scheduled plant upgrades.
Cash position at Q3 2019 closed at €100.7 million, after paying during 9M 2019 interests of €17.7 million (which includes the two bi-annual interest payments in January and July), taxes of €17.2 million, capital expenditures of €51.2 million (to fund Turkey expansion, China plants, WOX washing plant in Korea, secondary aluminium furnace upgrade in Barcelona, as well as recurrent maintenance capex) and €45.0 million dividend paid in July.
Q3 2019 closed at a leverage of x2.7 EBITDA (30 September 2018: x2.4) and Befesa continues to be compliant with all debt covenants.
SEGMENT INFORMATION
Steel Dust Recycling Services
Steel dust recycling volumes processed in 9M 2019 amounted to 488,758 tonnes, representing a decrease of 9.0% year-on-year (9M 2018: 536,804 tonnes). In Q3 2019, 171,014 tonnes of crude steel dust were recycled, down 2.8% year-on-year (Q3 2018: 175,961 tonnes). These decreases are driven mainly by the seven-month scheduled downtime of the plant in Turkey (from the end of January to mid-August 2019), to expand the plant capacity from previous 65,000 tonnes to current 110,000 tonnes. The project was successfully completed on time and on budget, with the plant managing high throughput volumes already in September.
The European plants as well as the plant in South Korea operated at high utilisation levels. Overall, with these volumes and normalising the installed capacity for the Turkish shutdown, steel dust recycling plants have been running at an average load factors of 89.5% and 93.7% in 9M and Q3 2019, respectively (9M 2018: 92.0%; Q3 2018: 89.5%). As a result, the volume of Waelz oxide (WOX) sold decreased by 8.7% to 163,166 tonnes in 9M 2019 (9M 2018: 178,688 tonnes) and by 2.4% to 58,481 tonnes in Q3 2019 (Q3 2018: 59,907 tonnes).
The revenue development (-3.2% year-on-year to €275.0 million in 9M 2019, and -1.1% year-on-year to €87.9 million in Q3 2019) was primarily due to the decrease in WOX volume sold as explained, as well as unfavourable zinc treatment charges referenced at around \$245 per tonne in 2019 (compared to \$147 per tonne in 2018). The revenue decrease was partially offset by a) better zinc hedges in place improving the average effective zinc prices (blended rate between hedged volume and non-hedged volume), which improved during 9M by 5.3% year-on-year to €2,282 per tonne (9M 2018: €2,168 per tonne) and by 9.8% year-on-year to €2,203 per tonne in Q3 2019 (Q3
2018: €2,006 per tonne), and b) higher sales from the recovered Stainless operations.
EBITDA decreased by 9.4%, to €91.8 million in 9M 2019 (9M 2018: €101.3 million) and by 4.3%, to €30.2 million in Q3 2019 (Q3 2018: €31.6 million). EBITDA margins decreased from 35.7% in 9M 2018 to 33.4% in 9M 2019, and from 35.5% in Q3 2018 to 34.4% in Q3 2019. Similarly, EBIT declined by 12.5% to €79.3 million in 9M 2019 (9M 2018: €90.7 million) and by 7.0% to €26.0 million in Q3 2019 (Q3 2018: €28.0 million). EBIT margins also declined from 31.9% in 9M 2018 to 28.8% in 9M 2019, and from 31.5% in Q3 2018 to 29.6% in Q3 2019.
Aluminium Salt Slags Recycling Services Salt Slags subsegment
Salt slags and SPL recycled volumes in 9M 2019 amounted to 366,297 tonnes, down by 3.3% compared to the same period in the previous year. In Q3 2019, the Salt Slags subsegment recycled 113,145 tonnes of salt slags and SPL, which represents a slight decrease of 0.7% yearon-year. On average, capacity utilisation levels remained above 90% during the first nine months of the year.
The revenue development in the Salt Slags subsegment (-2.2% year-on-year to €60.7 million in 9M 2019, and +5.6% year-on-year to €18.4 million in Q3 2019) was primarily impacted by the slight reduction in volumes.
EBITDA in the Salt Slags subsegment decreased by 16.4%, to €16.1 million in 9M 2019 (9M 2018: €19.3 million), and by 24.6% to €4.1 million in Q3 2019 (Q3 2018: €5.4 million). EBITDA margins decreased to 26.5% (9M 2018: 31.1%), and to 22.3% (Q3 2018: 31.2%). Similarly, EBIT in 9M 2019 declined to €9.7 million (9M 2018: €14.0 million), and to €1.9 million in Q3 2019 (Q3 2018: €3.8 million). EBIT margins reached 16.0% in 9M 2019 (9M 2018: 22.6%), and 10.2% in Q3 2019 (Q3 2018: 22.1%). The decline of earnings in the Salt Slags subsegment was mainly driven by the lower aluminium alloy market prices.
Secondary Aluminium subsegment
Aluminium alloy production volumes in 9M 2019 improved by 5.0% to 133,004 tonnes. In Q3 2019, 39,009 tonnes of aluminium alloys were produced, which represented a 23.8% increase year-on-year. These increases are mainly driven by the more efficient furnace upgraded last year at the Bilbao plant (Spain) as well as the solid operations at the Bernburg plant (Germany), offsetting the expected reduced volumes at the Barcelona plant (Spain) to upgrade the furnace during Q3 2019.
The revenue decrease in the Secondary Aluminium subsegment (16.1% year-on-year to €189.7 million in 9M 2019, and 16.5% year-on-year to €50.1 million in Q3 2019) was primarily driven by lower aluminium alloy average prices (-20.0% in 9M, from €1,783 per tonne in 2018 to €1,426 per tonne in 2019; -19.7% in Q3, from €1,689 per tonne in 2018 to €1,356 per tonne in 2019) partially offset by higher aluminium alloys produced in 2019 compared to 2018.
EBITDA in the Secondary Aluminium subsegment grew by 18.9% to €8.6 million in 9M 2019 (9M 2018: €7.3 million). In Q3 2019, EBITDA slightly decreased by €0.5 million yearon-year to €2.0 million (Q3 2018: €2.5 million). EBITDA margins improved to 4.5% in 9M 2019 from 3.2% in 9M 2018. Q3 EBITDA margin remained flat at prior year level of 4%. Similarly, EBIT in 9M 2019 improved by €0.8 million to €3.4 million (9M 2018: €2.6 million) and decreased by €0.7 million to €0.3 million in Q3 2019 (Q3 2018: €1.0 million). The increase in 9M earnings was primarily driven by higher margins due to the more efficient furnaces upgraded in H2 2018 which are delivering results. These improvements offset the lower prices for aluminium alloys. The decrease in Q3 earnings was mainly due to the scheduled downtime to upgrade secondary aluminium furnace in Barcelona.
STRATEGY
Hedging
A key element of Befesa's business model is its hedging strategy to manage the zinc price volatility and increase the visibility of its earnings and cash flow going forward.
The hedging currently in place provides Befesa with improved pricing visibility through 2019, 2020 and up to October 2021. The average hedged prices and volumes for each of the periods are approximately as follows:
| Period | Average hedged price (€ / tonne) |
Zinc content hedged (tonnes) |
|---|---|---|
| 2017 | €1,876 | 73,200 |
| 2018 | €2,051 | 92,400 |
| 2019 | €2,310 | 92,400 |
| 2020 | €2,250 | 92,400 |
| 9M 2021 | €2,200 | 57,300 |
Befesa will continue its hedging strategy, targeting stability even if foregoing short-term upside from higher zinc prices. Opportunities are constantly being monitored and re-evaluated when closing existing hedges in light of the current zinc market environment. Befesa's strategy is to hedge ~60% to ~75% of the volume of payable zinc contained in the Waelz oxide (WOX) for a period of one to four years going forward. Furthermore, hedges are primarily denominated in Euro. Befesa does not provide any collateral for the hedging book in place – as such hedge prices listed are shown net after any applicable e.g. forward risk, foreign exchange and / or credit line discounts.
Befesa has hedged for the last 15 years and its hedging strategy has proven to be a key element in improving earnings stability and visibility across different moments in the economic cycle.
With regards to the blended zinc average price estimated for the year 2019: Assuming LME zinc average prices in Q4 are similar to Q3 average prices (~€2,100 to €2,200 per tonne), the 2019 full year LME zinc average price would amount to ~€2,230-€2,260 per tonne for the unhedged portion (~30% of the total zinc equivalent payable output). The resulting 2019 blended zinc average price would amount to ~€2,285-€2,300 per tonne, or ~€117-€132 per tonne higher than last year (2018: €2,168 per tonne) thanks to the higher hedges in place during 2019 (~€2,310 per tonne in 2019 vs. €2,051 per tonne in 2018).
Organic growth projects
Befesa continues to execute its organic growth project roadmap to maintain its leadership position in Europe and to expand operations in Turkey, South Korea as well as entering China.
In the Steel Dust Recycling Services business, Befesa is investing in two organic growth projects in Turkey and South Korea during 2019. Firstly, Befesa has completed the capacity expansion of its Turkish plant from 65,000 tonnes to 110,000 tonnes per year, building on the increased demand for steel dust recycling services. After a sevenmonth construction period, the Turkish plant successfully came back into operations in August 2019 – on budget and within the envisioned timeline –, running in September already at solid throughput levels. Secondly, Befesa is building a washing plant in South Korea to offer washed WOX to its customers, similar to its European operations. The construction of the new WOX washing plant in South Korea –which started at the end of 2018– is progressing on time and budget and is scheduled for ramp-up in December 2019.
In the Secondary Aluminium subsegment of the Aluminium Salt Slags Services business, Befesa is finalising the execution of an operational excellence project to apply the best-in-class furnace technology proven at Befesa's Bernburg plant to its other secondary aluminium production plants in Spain (Bilbao and Barcelona). These projects are resulting in higher efficiencies and unlock capacity to meet additional demand for external salt slags
Market zinc prices vs. zinc hedges (€ per tonne)
services. The project in Bilbao was successfully completed in H2 2018 and is delivering positive results in 2019. Regarding the furnace upgrade at the plant in Barcelona, the first phase of this project concluded in 2018, whereas the second and final phase is scheduled to ramp-up in mid-November 2019 as planned.
In the Salt Slags subsegment of the Aluminium Salt Slags Services business, Befesa continues working on expanding the capacity of its existing salt slags recycling plant in Hanover (Germany) by ~40,000 tonnes. In 2019 the focus has been on obtaining required permits. The improved capacity will help to meet the increase in existing and new customer demand.
China update
The expansion of the Steel Dust Recycling Services operations into China is progressing on track, in both provinces – Jiangsu and Henan.
In April 2019, Befesa broke ground at the first EAF steel dust recycling plant in China, in the province of Jiangsu. The construction of the plant is progressing as planned with the ramp-up of operations expected by end of 2020.
Additionally, Befesa signed an agreement with the Changge Dazhou Industrial Cluster in XuChang City in April 2019 to develop the first EAF steel dust recycling plant in the Chinese province of Henan. This facility will represent Befesa's second EAF steel dust recycling plant in the country.
Similar to Befesa's first development in the province of Jiangsu, the plant under development in the province of Henan is designed to recycle 110,000 tonnes of EAF steel dust per year. The ground breaking is scheduled for mid-November 2019, with the ramp-up of operations expected during H1 2021.
OUTLOOK 2019
From an operating point of view Befesa continues to experience solid demand for its recycling services. During the last quarter of the year, Befesa expects to increase its volume of steel dust treated driven by the Turkish plant with its expanded capacity. Higher volumes of aluminium alloys are also expected to be produced during Q4 as the upgraded furnace in Barcelona is scheduled to ramp up in mid-November. Thus, the volume of its core businesses, steel dust and aluminium salt slags recycled, and expected utilisation levels continue to be approximately in line with guidance assumptions.
Concerning commodity market prices, the situation during Q3 and beginning of Q4 is still unfavourable to the one experienced in Q1, when Befesa provided the initial guidance for the full year 2019. The sensitivities to metal price variances remain unchanged. With ~70% of zinc volume hedged, the remaining sensitivity after hedging, to a +/- €100 per tonne zinc price deviation from the initially assumed price level of ~€2,520 per tonne is equivalent to approximately €4.5 million EBITDA full-year impact. Similarly, the sensitivity to a +/- €100 per tonne aluminium alloy FMB price deviation from the initially assumed price level of ~€1,650 per tonne is equivalent to approximately €2 million EBITDA full-year impact.
The volatile and low environment of market prices witnessed since the end of Q2 leads to the adjustment of the full year earnings guidance: Assuming Q4 market prices in line with Q3 average prices, the full year 2019 EBITDA is expected to be around €160 million (vs. initial guidance of €182 to €185 million provided in April).
From a strategic and growth roadmap point of view, the projects, including the expansion in China, have progressed satisfactorily during 9M 2019 and for the remainder of the year are expected on time and on budget, in line with guidance. In mid-November, the upgraded secondary aluminium furnace in Barcelona will be back in production and Befesa will break ground at the second EAF steel dust recycling plant in China (Henan province). In December, Befesa will ramp up its first WOX washing plant in Asia (South Korea). Befesa's growth roadmap is well supported by its recently refinanced capital structure.
CONSOLIDATED FINANCIAL STATEMENTS as at 30 September 2019
BALANCE SHEET
Assets
| (€ thousand) | 30 September 2019 | 31 December 2018 |
|---|---|---|
| 335,564 | 335,564 | |
| Non-current assets: Intangible assets Goodwill Other intangible assets, net Property, plant and equipment, net Property, plant and equipment in use Property, plant and equipment under construction Right of use asset Non-current financial assets Investments in subsidiaries and associates Other non-current financial assets Deferred tax assets Total non-current assets Inventories Trade and other receivables Trade receivables from related companies Accounts receivables from public authorities Other receivables |
86,948 | 87,104 |
| 422,512 | 422,668 | |
| 222,082 | 236,366 | |
| 65,164 | 25,148 | |
| 287,246 | 261,514 | |
| 18,311 | - | |
| 118 | 558 | |
| 13,647 | 45,960 | |
| 13,765 | 46,518 | |
| 70,355 | 57,399 | |
| 812,189 | 788,099 | |
| Current assets: | ||
| 45,816 | 46,049 | |
| 68,998 | 59,695 | |
| 742 | 924 | |
| 13,032 | 9,231 | |
| 15,121 | 10,807 | |
| Other current financial assets | 11,584 | 20,668 |
| Cash and cash equivalents | 100,717 | 150,648 |
| Total current assets | 256,010 | 298,022 |
| Total assets | 1,068,199 | 1,086,121 |
BALANCE SHEET
Equity and liabilities
| (€ thousand) | 30 September 2019 | 31 December 2018 |
|---|---|---|
| Equity: | ||
| Parent Company | ||
| Share capital | 94,576 | 94,576 |
| Share premium | 263,875 | 263,875 |
| Hedging and revaluation reserves | 13,524 | 46,240 |
| Other reserves | (113,756) | (158,918) |
| Translation differences | (5,013) | (2,759) |
| Net profit / (loss) for the period | 60,725 | 90,189 |
| 313,931 | 333,203 | |
| Non-controlling interests | 14,196 | 9,426 |
| Total equity | 328,127 | 342,629 |
| Non-current liabilities: | ||
| Long-term provisions | 7,348 | 6,422 |
| Financial debt | 518,940 | 520,091 |
| Lease payables | 11,592 | 78 |
| Deferred tax liabilities | 55,907 | 65,991 |
| Other non-current liabilities | 10,039 | 9,084 |
| Total non-current liabilities | 603,826 | 601,666 |
| Current liabilities: | ||
| Financial debt | 5,279 | 7,269 |
| Lease payables | 3,823 | 60 |
| Trade payables to related companies | 1,073 | 1,432 |
| Trade and other payables | 82,536 | 100,191 |
| Short-term provisions | 233 | 231 |
| Other payables | ||
| Accounts payable to public administrations | 26,427 | 15,067 |
| Other current liabilities | 16,875 | 17,576 |
| 43,302 | 32,643 | |
| Total current liabilities | 136,246 | 141,826 |
| Total equity and liabilities | 1,068,199 | 1,086,121 |
INCOME STATEMENT
| (€ thousand) | 9M 2019 | 9M 2018 | Change | Q3 2019 | Q3 2018 | Change |
|---|---|---|---|---|---|---|
| Revenue | 496,605 | 539,098 | (7.9) % | 147,578 | 156,709 | (5.8) % |
| +/- Changes in stocks of finished products | ||||||
| and work in progress | 5,838 | 1,869 | >100 % | 1,978 | (3,544) | >(100) % |
| Procurements | (220,753) | (259,159) | (14.8) % | (60,971) | (64,718) | (5.8) % |
| Other operating income | 4,093 | 3,215 | 27.3 % | 1,695 | 1,296 | 30.8 % |
| Staff costs | (56,998) | (55,553) | 2.6 % | (17,668) | (17,737) | (0.4) % |
| Other operating expenses | (111,728) | (100,600) | 11.1 % | (35,615) | (31,993) | 11.3 % |
| Amortisation/depreciation, impairment and provisions | (24,978) | (21,592) | 15.7 % | (8,421) | (7,010) | 20.1 % |
| Operating profit (EBIT) | 92,079 | 107,278 | (14.2) % | 28,576 | 33,003 | (13.4) % |
| Financial income | 217 | 141 | 53.9 % | 74 | 80 | (7.5) % |
| Financial expenses | (13,592) | (15,154) | (10.3) % | (4,824) | (5,063) | (4.7) % |
| Net exchange differences | 906 | 3,187 | (71.6) % | 560 | 562 | (0.4) % |
| Finance income/(loss) | (12,469) | (11,826) | 5.4 % | (4,190) | (4,421) | (5.2) % |
| Profit/(loss) before tax | 79,610 | 95,452 | (16.6) % | 24,386 | 28,582 | (14.7) % |
| Corporate income tax | (14,165) | (28,984) | (51.1) % | (3,961) | (10,038) | (60.5) % |
| Profit/(loss) for the period | 65,445 | 66,468 | (1.5) % | 20,425 | 18,544 | 10.1 % |
| Attributable to: | ||||||
| Shareholders of Befesa S.A. | 60,725 | 62,860 | (3.4) % | 18,839 | 18,034 | 4.5 % |
| Non-controlling interests | 4,720 | 3,608 | 30.8 % | 1,586 | 510 | >100 % |
| Earnings/(losses) per share attributable | ||||||
| to shareholders of Befesa S.A. | ||||||
| (in €) | ||||||
| Basic earnings per share | 1.78 | 1.85 | (3.4) % | 0.55 | 0.53 | 4.5 % |
CASH FLOW STATEMENT
| (€ thousand) | 9M 2019 | 9M 2018 | Q3 2019 | Q3 2018 |
|---|---|---|---|---|
| Cash flow from operating activities | ||||
| Profit / (loss) for the period before tax | 79,610 | 95,452 | 24,386 | 28,582 |
| Adjustments due to: | 37,601 | 33,998 | 12,283 | 12,566 |
| Depreciation and amortisation charge | 24,978 | 21,592 | 8,421 | 7,010 |
| Changes in long-term provisions | 926 | 1,374 | (35) | 1,374 |
| Interest income | (217) | (141) | (74) | (80) |
| Finance costs | 13,592 | 15,154 | 4,824 | 5,063 |
| Other profit / (loss) | (772) | (794) | (293) | (239) |
| Exchange differences | (906) | (3,187) | (560) | (562) |
| Change in working capital | (34,569) | (47,988) | (25,049) | (18,443) |
| Trade receivables and other current assets | (14,768) | (20,874) | (13,406) | 3,063 |
| Inventories | 233 | (1,238) | (784) | 463 |
| Trade payables | (20,034) | (25,876) | (10,859) | (21,969) |
| Other cash flows from operating activities | (34,915) | (35,468) | (12,644) | (13,431) |
| Interest paid | (17,689) | (12,577) | (8,757) | (8,224) |
| Other payments | - | (6,705) | - | - |
| Taxes paid | (17,226) | (16,186) | (3,887) | (5,208) |
| Net cash flows from operating activities (I) | 47,727 | 45,994 | (1,024) | 9,273 |
| Cash flows from investing activities | ||||
| Investments in intangible assets | (1,957) | (960) | (138) | (191) |
| Investments in property, plant and equipment | (46,065) | (26,240) | (22,476) | (7,702) |
| Payments for Right of use assets | (3,180) | - | (16) | - |
| Collections from disposal of Group and associated companies, net of cash | 81 | - | - | - |
| Investments in other current financial assets | (87) | (57) | - | (8) |
| Interests received | - | - | - | - |
| Net cash flows from investing activities (II) | (51,208) | (27,257) | (22,630) | (7,901) |
| Cash flows from financing activities | ||||
| Cash bank inflows from bank borrowings and other liabilities | 1,841 | - | 88 | - |
| Cash bank outflows from bank borrowings and other liabilities | (2,674) | (658) | (1,265) | (134) |
| Dividends paid | (44,968) | (29,387) | (44,968) | 0 |
| Net cash flows from financing activities (III) | (45,801) | (30,045) | (46,145) | (134) |
| Effect of foreign exchange rate changes on cash and cash equivalents (IV) | (649) | (631) | 171 | (17) |
| Net increase in cash and cash equivalents (I+II+III+IV) | (49,931) | (11,939) | (69,629) | 1,221 |
| Cash and cash equivalents at the beginning of the period | 150,648 | 117,582 | 170,346 | 104,422 |
| Cash and cash equivalents at the end of period | 100,717 | 105,643 | 100,717 | 105,643 |
ADDITIONAL INFORMATION
SEGMENTATION OVERVIEW – KEY METRICS
STEEL DUST RECYCLING SERVICES
| 9M 2019 | 9M 2018 | Change | Q3 2019 | Q3 2018 | Change | |
|---|---|---|---|---|---|---|
| Key operational data (tonnes, unless specified otherwise) | ||||||
| Steel dust throughput (i) | 488,758 | 536,804 | (9.0) % | 171,014 | 175,961 | (2.8) % |
| Waelz oxide sold | 163,166 | 178,688 | (8.7) % | 58,481 | 59,907 | (2.4) % |
| Blended zinc price (€ / tonne) | 2,282 | 2,168 | 5.3 % | 2,203 | 2,006 | 9.8 % |
| Total installed capacity (ii) | 825,300 | 780,300 | 5.8 % | 825,300 | 780,300 | 5.8 % |
| Utilisation (%) (ii) | 79.2 % | 92.0 % | (12.8) p.p. | 82.2 % | 89.5 % | (7.3) p.p. |
| Total installed capacity normalised (iii) | 729,883 | 780,300 | (6.5) % | 724,467 | 780,300 | (7.2) % |
| Normalised utilisation (%) (iii) | 89.5 % | 92.0 % | (2.4) p.p. | 93.7 % | 89.5 % | |
| Key financial data (€ million, unless specified otherwise) | ||||||
| Revenue | 275.0 | 284.0 | (3.2) % | 87.9 | 88.9 | (1.1) % |
| EBITDA | 91.8 | 101.3 | (9.4) % | 30.2 | 31.6 | (4.3) % |
| EBITDA margin % | 33.4 % | 35.7 % | (2.3) p.p. | 34.4 % | 35.5 % | (1.1) p.p. |
| EBIT | 79.3 | 90.7 | (12.5) % | 26.0 | 28.0 | (7.0) % |
| EBIT margin % | 28.8 % | 31.9 % | (3.1) p.p. | 29.6 % | 31.5 % | (1.9) p.p. |
ALUMINIUM SALT SLAGS RECYCLING SERVICES
Salt Slags subsegment
| 9M 2018 | Change | Q3 2019 | Q3 2018 | Change | |
|---|---|---|---|---|---|
| 366,297 | 378,816 | (3.3) % | 113,145 | 113,974 | (0.7) % |
| 630,000 | 630,000 | 0.0 % | 630,000 | 630,000 | 0.0 % |
| 92.4 % | 95.6% | (3.2) p.p. | 84.7 % | 85.3% | (0.6) p.p. |
| 60.7 | 62.0 | (2.2) % | 18.4 | 17.4 | 5.6 % |
| 16.1 | 19.3 | (16.4) % | 4.1 | 5.4 | (24.6) % |
| 26.5 % | 31.1 % | (4.5) p.p. | 22.3 % | 31.2 % | (8.9) p.p. |
| 9.7 | 14.0 | (30.9) % | 1.9 | 3.8 | (51.4) % |
| 16.0 % | 22.6 % | (6.6) p.p. | 10.2 % | 22.1 % | (12.0) p.p. |
| 9M 2019 |
Secondary Aluminium subsegment
| 9M 2019 | 9M 2018 | Change | Q3 2019 | Q3 2018 | Change | |
|---|---|---|---|---|---|---|
| Key operational data (tonnes, unless specified otherwise) | ||||||
| Secondary aluminium alloys produced | 133,004 | 126,682 | 5.0 % | 39,009 | 31,500 | 23.8 % |
| Aluminium alloy average market price (€ / tonne) (v) | 1,426 | 1,783 | (20.0) % | 1,356 | 1,689 | (19.7) % |
| Total installed capacity (vi) | 205,000 | 205,000 | 0.0 % | 205,000 | 205,000 | 0.0 % |
| Utilisation (%) (vi) | 86.7 % | 82.6 % | 4.1 p.p. | 75.5 % | 61.0 % | 14.5 p.p. |
| Total installed capacity normalised (vii) | 177,500 | 173,000 | 2.6 % | 144,500 | 141,000 | |
| Normalised utilisation (%) (vii) | 100.2 % | 97.9 % | 2.3 p.p. | 107.1 % | 88.6 % | |
| Key financial data (€ million, unless specified otherwise) | ||||||
| Revenue | 189.7 | 226.3 | (16.1) % | 50.1 | 60.0 | (16.5) % |
| EBITDA | 8.6 | 7.3 | 18.9 % | 2.0 | 2.5 | (21.1) % |
| EBITDA margin (% over revenue) | 4.5 % | 3.2 % | 1.3 p.p. | 3.9 % | 4.2 % | (0.2) p.p. |
| EBIT | 3.4 | 2.6 | 28.9 % | 0.3 | 1.0 | (74.8) % |
| EBIT margin (% over revenue) | 1.8 % | 1.2 % | 0.6 p.p. | 0.5 % | 1.7 % | (1.2) p.p. |
Note: Segment splits and revenue and earnings contributions not taking into account corporate and inter-segment eliminations
(i) Steel dust throughput does not include stainless steel dust volumes
(ii) Total installed capacity in Steel does not include 174,000 tonnes per year of stainless steel dust recycling capacity;
Utilisation represents crude steel dust processed against annual installed capacity
(iii) Installed capacity and corresponding utilisation rates in 2019 are normalised for the capacity upgrade in Turkey, from 65kt to 110kt
(Plant in Turkey was shutdown seven months, from end of January to mid of August)
(iv) Utilisation represents the volume of salt slags & SPL recycled by Befesa's plants against annual installed capacity (not including the 100,000 tonnes of capacity at Töging, Germany, currently idle)
(v) Aluminium Scrap and Foundry Ingots Aluminium pressure diecasting ingot DIN226/A380 European Metal Bulletin Free Market Duty paid delivered works
(vi) Utilisation represents the volume of secondary aluminium produced against annual installed capacity
(vii) Installed capacity and corresponding utilisation rates in 2019 are normalised for the furnace upgrade in Barcelona (plant was shutdown three months, from 2nd week of Aug to 2nd week of Nov) Installed capacity and corresponding utilisation rates in 2018 are normalised for the furnace upgrade in Bilbao (plant was shutdown three months, from 2nd week of Jun to 3rd week of Sep)
FINANCIAL CALENDAR
| Thursday, 26 March 2020 | Annual Report 2019 & Analyst Call |
|---|---|
| Thursday, 30 April 2020 | Q1 2020 Statement & Analyst Call |
| Thursday, 18 June 2020 | Annual General Meeting in Luxembourg |
| Wednesday, 29 July 2020 | H1 2020 Interim Report & Analyst Call |
| Thursday, 29 October 2020 | Q3 2020 Statement & Analyst Call |
Notes: Befesa's financial reports and statements are published at 7:30 am CET Befesa cannot rule out changes of dates and recommends checking them in the Investor Relations / Investor's Agenda section of its website www.befesa.com
IR CONTACT
Rafael Pérez
Director of Investor Relations & Strategy Phone: +49 (0) 2102 1001 340 email: [email protected]
Published: 31 October 2019
You can find this and other publications online in the Investor Relations / Reports and Presentations section of Befesa's website www.befesa.com
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Disclaimer
This report contains forward-looking statements and information relating to Befesa and its affiliates that are based on the beliefs of its management, including assumptions, opinions and views of Befesa and its affiliates as well as information cited from third party sources. Such statements reflect the current views of Befesa and its affiliates or of such third parties with respect to future events and are subject to risks, uncertainties and assumptions.
Many factors could cause the actual results, performance or achievements of Befesa and its affiliates to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others: changes in general economic, political, governmental and business conditions globally and in the countries in which Befesa and its affiliates do business; changes in interest rates; changes in inflation rates; changes in prices; changes to national and international laws and policies that support industrial waste recycling; legal challenges to regulations, subsidies and incentives that support industrial waste recycling; extensive governmental regulation in a number of different jurisdictions, including stringent environmental regulation; management of exposure to credit, interest rate, exchange rate and commodity price risks; acquisitions or investments in joint ventures with third parties; inability to obtain new sites and expand existing ones; failure to maintain safe work environments; effects of catastrophes, natural disasters, adverse weather conditions, unexpected geological or other physical conditions, or criminal or terrorist acts at one or more of Befesa's plants; insufficient insurance coverage and increases in insurance cost; loss of senior management and key personnel; unauthorised use of Befesa's intellectual property and claims of infringement by Befesa of others' intellectual property; Befesa's ability to generate cash to service indebtedness changes in business strategy and various other factors.
Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or targeted. Befesa and its affiliates do not assume any guarantee that the assumptions underlying forward-looking statements are free of errors nor do they accept any responsibility for the future accuracy of the opinions expressed herein or the actual occurrence of the forecasted developments. No representation (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein or otherwise resulting, directly or indirectly, from the use of this document.
This report is intended for information only and should not be treated as investment advice. It is not intended as an offer for sale, or as a solicitation of an offer to purchase or subscribe to, any securities in any jurisdiction. Neither this report nor anything contained therein shall form the basis of, or be relied upon in connection with, any commitment or contract whatsoever. This report may not, at any time, be reproduced, distributed or published (in whole or in part) without prior written consent of Befesa.
9M/Q3 2019 figures contained in this report have not been audited or reviewed by external auditors.
This report includes Alternative Performance Measures (APMs), including EBITDA, EBITDA margin, EBIT, EBIT margin, net debt and capital expenditures which are not measures of liquidity or financial performance under International Financial Reporting Standards (IFRS). EBITDA is defined as operating profit for the period (i.e. EBIT) before the impact of amortisation, depreciation, impairment and provisions. EBITDA margin is defined as EBITDA divided by revenue. EBIT is defined as Operating profit for the year. The Company uses EBIT to monitor its financial return after both operating expenses and a charge representing the cost of usage of both its property, plant and equipment and definite‑life intangible assets. EBIT margin is defined as EBIT as a percentage of revenue. These non-IFRS measures should not be considered in isolation or as an alternative to results from operating activities, cash flow from operating, investing or financing activities, or other financial measures of Befesa's results of operations or liquidity derived in accordance with IFRS. Befesa believes that the APMs included in this report are useful measures of its performance and liquidity. Other companies, including those in the industry in which Befesa operates, may calculate similarly titled financial measures differently than Befesa does. Because all companies do not calculate these financial measures in the same manner, Befesa's presentation of such financial measures may not be comparable to other similarly titled measures of other companies. These APMs are not audited.
Befesa S.A. 46, Boulevard Grande-Duchesse Charlotte L 1330 Luxembourg, Grand Duchy of Luxembourg www.befesa.com