Elkem — Earnings Release 2019

Oct 22, 2019

Robust results in challenging markets

Robust results in challenging markets

Oslo, 22 October 2019: Elkem's result for the third quarter of 2019 was

relatively strong given the challenging market conditions. Macro-economic

uncertainty, trade conflicts and the downturn in automotive have negatively

impacted the market for Elkem's products and resulted in lower sales volumes for

specialty products and declining market prices for commodity products. The

relatively strong result reflects Elkem's good cost positions, as well as

attractive and leading market positions.

Total operating income for the third quarter 2019 was NOK 5,540 million, which

was down 5% compared to third quarter 2018. EBITDA amounted to NOK 640 million

in the quarter, compared to NOK 1,395 million in the corresponding quarter last

year. Earnings per share (EPS) was NOK 0.35 in the quarter.

"Market prices for silicones in China picked up in the third quarter, mainly

explained by seasonally higher demand from construction combined with lower

utilisation rates for main producers. Prices for silicon and ferrosilicon have

dropped to historic lows due to lower demand and subsequent excess supply.

Market prices are now believed to be at unsustainable low levels as many

competitors are estimated to be loss making. Significant production curtailments

have been announced both for silicon and ferrosilicon and markets are expected

to improve", says Helge Aasen, CEO of Elkem.

Elkem closed the acquisition of Basel Chemie by the end of the third quarter.

The acquisition was part of Elkem's specialisation strategy and will give access

to leading technologies for silicones to high-end cosmetics and construction and

provide a strong platform for further development and growth.

The realised effect of the accelerated improvement programme was NOK 387 million

by the end of third quarter, which was ahead of plan. The target for the full

year is NOK 500 million. Based on the persistent weak market conditions Elkem

will continue its focus on operational improvements and cost optimisation. The

target is to optimise the current organisation to facilitate growth initiatives

in strategic areas without increasing the cost base. The result in the third

quarter was negatively impacted by NOK 42 million due to changed revenue

periodisation of Norwegian CO2 compensation.

The group's equity as at 30 September 2019 amounted to NOK 13,044 million, which

gave a ratio of equity to total assets of 44%. Net interest-bearing debt was NOK

5,573 million, which gave a ratio of net interest-bearing debt to EBITDA of 1.8

times. Elkem had cash and cash equivalents of NOK 5,071 million as at 30

September 2019. The financial position is strong.

The outlook in main market segments continue to be weak due to macro-economic

uncertainty. The price for silicones in China improved during third quarter but

has had a declining trend beginning of fourth quarter and the demand from

construction is expected to be seasonally lower. In addition, Elkem has had

reduced silicones production early fourth quarter due to government-imposed

production restrictions in connection with the People's Republic of China's 70th

years anniversary and subsequent delayed start-up. The negative EBITDA impact is

estimated to NOK 60 million. Silicon metal and ferrosilicon prices in Europe are

at very low levels but expected to recover following significant production

curtailments. The accelerated improvement programme combined with lower raw

material costs are expected to partly mitigate negative market impact.

For further information:

Odd-Geir Lyngstad, VP Finance & Investor Relations

Tel: +47 976 72 806

Email: odd-geir.lyngstad@elkem.no

About Elkem ASA

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 and is headquartered in Oslo. The company has 6200

employees with 27 production sites and sales offices in a total of 28 countries

worldwide. In 2018 Elkem had revenues of 25.9 billion NOK. To learn more, please

visit www.elkem.com