Third quarter results
Agenda
Business update
By CEO Helge Aasen
Financial performance By CFO Morten Viga
Outlook
By CEO Helge Aasen
ZEIkem
Strong third quarter results, despite weaker market conditions
- Solid third quarter results, demonstrating Elkem's robust business model
- Challenging energy markets, particularly in EU, has resulted in lower steel and aluminium production affecting the demand for several of Elkem's products
- Elkem's plants continue to operate at full capacity, despite challenging markets
- Closing of agreement with Hydro and Altor, reducing Elkem's $\blacksquare$ ownership in Vianode to 40%. Decision to build phase 1 production plant at Herøya
- Earnings per share (EPS) of NOK 4.81 in 3Q-2022 and NOK 13.68 YTD-2022 providing for an attractive dividend yield
Total operating income MNOK 11,293
EBITDA MNOK 3,302
EBITDA margin 29 %
EBITDA last four quarters
@Elkem
Environmental, Social & Governance
ESG - a key priority
A clear focus on ESG
- Awarded Platinum sustainability $\blacksquare$ rating from EcoVadis for 2022
- Ranked A in 2022 for ESG reporting ٠ by Position Green's assessment of the top listed Norwegian, Danish and Swedish companies
- Elkem is ranked in the 90 percentile ٠ by S&P Global's Corporate Sustainability Assessment for 2022
PLATINUM $202.$ ecovadis Sustainability
Safety
Ambition: Zero injuries
Social
- Human rights impact assessment to be finalised in 40-2022
- Focus on diversity, equality & inclusion (DEI) - implementing new global strategy
Environment
- 22% biocarbon in production
-
80% of electrical consumption from renewable energy
- Report prepared, describing Elkem's scope 3 emissions
Governance
- Supplying the green transition, 26% of revenue from products contributing to reduced carbon emissions
- New suppliers screened against environmental and social criteria
Growth & specialisation
New medical grade silicones facility in the US
- In September, Elkem celebrated the grand opening of its new specialised silicones facility in York, S.C.
- The facility will produce high purity silicone materials meeting the strict requirements in medical implantable and pharmaceutical applications
- Elkem aims to be a leading silicone supplier to the healthcare industry and the new facility opens a potential BNOK 3 high margin market
- Elkem is the only fully integrated silicone supplier in this space, providing a strong platform based on technology and raw material access
$E$ Elkem
Global EV* sales forecast by drivetrain (in million)
Global EV* sales forecast by region (in million)
▪
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.
▪
CRU silicon 99 price EU (EUR/mt)
▪
CRU ferrosilicon 75 price EU (EUR/mt)
Crude steel production (million mt)
▪
Elkem group
Silicon Products and Carbon Solutions deliver in unstable markets
• Driven by higher sales prices for upstream products
EBITDA
Up 55% compared to 3Q-2021
• Strong result for Silicon Products and new all-time high for Carbon Solutions
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Elkem Group
Overview financial ratios
- EBITDA MNOK 3,302
- Segment Other included realised currency hedging losses of MNOK-9
- Other items MNOK 1,075
- Mainly explained by gain on power contracts MNOK 651 and currency gain on working capital items MNOK 320
- Net finance income (expenses) MNOK 5
- Consist of net interest expenses MNOK -57, other financial expenses of MNOK-3, offset by currency gains of MNOK 65
- $\blacksquare$ Tax MNOK -818
- " Resulting in a tax rate of 21% for the third quarter 2022
- Tax rate YTD-2022 was 21%
Consolidated key figures
| (NOK million, except where specified) |
3Q 2022 |
3Q 2021 |
|
YTD 2022 YTD 2021 |
FY 2021 |
| Total operating income |
11,293 |
8,796 |
35,494 |
23,321 |
33,717 |
| EBITDA |
3,302 |
2,131 |
11,101 |
4,733 |
7,791 |
| EBIT |
2,804 |
1,666 |
9,631 |
3,313 |
5,899 |
| Other items |
1,075 |
16 |
1,386 |
$-29$ |
$-114$ |
| Net finance income (expenses) |
5 |
$-10$ |
47 |
$-23$ |
6 |
| Profit (loss) before income tax |
3,884 |
1,675 |
11,058 |
3,289 |
5,827 |
| Tax |
$-818$ |
$-295$ |
$-2,340$ |
$-599$ |
$-1,163$ |
(1)
Profit (loss) for the period |
3,046 |
1,371 |
8,667 |
2,664 |
4,628 |
| Key ratios |
|
|
|
|
|
| EPS (NOK per share) |
4.81 |
2.16 |
13.68 |
4.34 |
7.49 |
| Equity ratio (%) |
54 % |
46 % |
54 % |
46 % |
47 % |
| Net interest bearing debt (NIBD) (2) |
2,845 |
5,421 |
2,845 |
5,421 |
4,827 |
| Leverage ratio |
0.2 |
1.0 |
0.2 |
1.0 |
0.6 |
| Reinvestments % of D&A |
56 % |
83 % |
61% |
73 % |
91% |
| ROCE (annualised) (%) |
37 % |
31% |
47 % |
21 % |
27 % |
(1) Owners of the parent's share of profit (loss)
(2) Excluding receivables from related parties, loans to external parties, accrued interest income and non-current other restricted deposits
Total operating income
Total operating income
Total operating income
Net interest-bearing debt (NIBD)
Investments ex. M&A
Outlook for the fourth quarter 2022
- Market sentiment impacted by high energy prices in Europe, macroeconomic uncertainty and slower growth
- Silicones market in China is weak going into the fourth quarter. Demand and prices holding up for specialties in EMEA and the US
- Demand for silicon and ferrosilicon negatively impacted by closures in aluminium and steel industries, but Elkem capitalising on superior cost positions
- Carbon Solutions will likely see lower demand and possibly margin pressure due to closures in steel however, from a high level in the third quarter
ZEIkem
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.
ZEIkem
Appendix
@Elkem
Currency sensitivity
- The result and cash flow are exposed to currency fluctuations. The main currencies are EUR, USD and CNY
- EUR exposure approx. MEUR 430 in 2022 ٠.
- USD exposure approx. MUSD 250 in 2022
- CNY exposure approx. MCNY 1,700 in 2022
- 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 900 over the coming 12 months. CNY is not hedged
Currency development
- As of 30 September 2022, the NOK closed 2% weaker against the EUR, 9% weaker against USD, and 3% weaker against CNY compared to 30 June 2022
- In 3Q-2022, the NOK was on average 3% stronger against EUR, 14% weaker against USD, and 8% weaker against CNY compared to 3Q-2021.
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Other financial sensitivities
POWER
- Electric power is a key input factor in Elkem's production. The normal $\blacksquare$ consumption is around 6.5 TWh of which approx. 3.7 TWh is in Norway. Near term exposure to spot power prices is limited
- Norway, hedging programme mainly consisting of long-term contracts covering more than 80% of the expected power consumption until 2025. After 2025, 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 $\blacksquare$ 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 230 per year $(*)$
- 10% price change on ferrosilicon is expected to affect result by approx. MNOK 690 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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