Earnings Release • Jul 30, 2014
Earnings Release
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Paris, July 30th, 2014
ERAMET group's results for 1st half 2014
The data presented and commented on are adjusted data from the Group's reporting, which consolidates joint ventures under the equity method. Reconciliation with published financial statements is presented in appendix 4 (cf. page 8).
| (€ millions) | H1 2013 | H2 2013 | H2 2014 |
|---|---|---|---|
| Turnover | 1 613 | 1 549 | 1 534 |
| ERAMET Manganese | 777 | 785 | 683 |
| ERAMET Nickel | 368 | 336 | 381 |
| ERAMET Alloys | 473 | 431 | 474 |
| Holding company & eliminations | (5) | (3) | (4) |
| EBITDA | 129 | 102 | 157 |
| Current operating income | (9) | (36) | 14 |
| Net income, Group share | (32) | (338)* | (59) |
*asset impairment according to IAS 36, - 296 M€
Global economic activity improved slightly in the 1st half of 2014. China succeeded in keeping its growth above 7% with the support of its government's economic policy, despite a slowdown in the construction sector. In some of the Group's businesses, inventory reduction limited the effects of that positive growth on market and price trends.
Furthermore, in this context of moderate growth, market and price trends are heavily influenced, metal by metal, by the development pace of the production capacity projects begun in previous years.
The ERAMET group's turnover was on a par with the 2nd half of 2013, at 1,534 M€.
The Group's current operating income became positive again, at 14 M€ in the 1st half of 2014, an improvement of 23 M€ on the 1st half of 2013 and 50 M€ on 2nd half 2013. These results were affected by nickel prices, which were very low early in the year before picking up in the 2nd quarter. As regards manganese-related activities, results were affected by maintenance operations in Gabon and Norway in the 1st quarter, an exceptional railway incident in Gabon and the drop in manganese ore prices (around 15% in 1st half 2014 vs. 1st half 2013).
The Group's share of net income for the 1st half of 2014 totalled -59 M€, taking into account the effect of expenditure for several project studies, foremost among which the Maboumine niobium– rare earths project in Gabon, and the higher tax charge in the 1st half of 2014.
Productivity gains in the 1st half of 2014 represented 42 M€.
Capital expenditure was reduced by 37% to 175 M€ in the 1st half of 2014 compared with the same period in 2013, in line with the target of a total amount below 400 M€ for 2014.
The Group's net debt remained moderate as of the end of June 2014, at 473 M€, corresponding to 16% of shareholders' equity.
As of June 30th, 2014, ERAMET kept a very satisfactory amount of liquidity.
ERAMET Manganese's current operating income totalled 61 M€ in the 1st half of 2014, compared with 109 M€ in 1st half 2013.
Global production of carbon steel grew 2.5% in the 1st half of 2014 compared with the 1st half of 2013, mainly driven by developed countries (European Union, USA) and China.
Prices for manganese ore 44% CIF China (source: CRU) fell in the 1st half of 2014 by around 15% compared with the same period in 2013. They have however levelled out since May.
Despite lower prices for manganese ore, manganese alloy prices remained stable overall in the 1st half of 2014 compared with 1st half 2013.
Turnover by TiZir (titanium dioxide for white pigments, high-purity pig iron for foundries) decreased 24% in the 1st half of 2014 compared with the same period in 2013, to 28 M€ (for the 50% held by ERAMET), mainly because of lower prices for titanium dioxide slag.
On the other hand, the Grande Côte project in Senegal operated by TiZir, a 50/50 joint venture by ERAMET and the Australian company Mineral Deposits Limited, began to ramp up production and is making satisfactory progress.
ERAMET Manganese's capital expenditure totalled 110 M€ in the 1st half of 2014, a 37% reduction compared with the same period in 2013.
Global production of stainless steel increased 10% in the 1st half 2014 compared with the 1st half of 2013, driven by all of the main producing countries.
In this context and thanks to improved operating performance and higher nickel prices in the 2nd quarter, ERAMET Nickel's turnover increased in the 1st half of 2014 compared with the same period in 2013 to total 381 M€. Current operating income recovered over the same period, going from -94 M€ to -27 M€.
Metallurgical production of nickel in Doniambo (New Caledonia) rose 6% to 27,100 tons in the 1st half of 2014, compared with 25,500 in the 1st half of 2013. Over the same period nickel sales grew 9%.
Thanks to the upturn in the 2nd quarter, LME nickel prices rose 3% in the 1st half of 2014 compared with the 1st half of 2013 to 7.51 USD/lb. In the past few weeks they have been around 8.7 USD/lb.
ERAMET Nickel's capital expenditure was reduced by 33% to 42 M€ in the 1st half of 2014, compared with the corresponding period in 2013.
The aerospace sector grew 6% in the 1st half of 2014 compared with the same period the previous year, without however completely making up for the 33% fall in turnover with the energy sector. Over the same period, the turnover achieved with the tooling market (mainly high-speed steels) remained stable at an insufficient level. ERAMET Alloys' turnover was 12% higher in the 2nd quarter of 2014 than in the 1st quarter 2014.
ERAMET Alloys' current operating income was at the break-even point in the 1st half of 2014.
ERAMET Alloys' capital expenditure totalled 23 M€ in the 1st half of 2014, a 34% reduction compared with the same period in 2013.
Aubert & Duval continued to implement its general expenses reduction programme. A majority agreement was signed for that purpose with trade unions in early July.
Following ERAMET's Board of Directors meeting, Patrick BUFFET, ERAMET group Chairman & CEO, stated:
"Manganese ore production in Moanda in Gabon will increase significantly in the 2nd half of 2014 compared with the 1st half.
Moanda Metallurgical Complex (a silicomanganese plant and a manganese metal plant) will start up in the 2nd half of 2014.
All the Group's business units will step up the implementation of its operating performance improvement plans.
Given the current outlook for the nickel market and thanks to the operating improvements achieved in all activities:
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The presentation of the 1st half 2014 results will be webcast at 10am (Paris time) today in French with English interpreting.
To sign up please click the link on the Group's website: www.eramet.com
ERAMET is a leading global producer of:
ERAMET is also studying or developing major projects in new activities with high growth potential, such as mineral sands (titanium dioxide and zircon), lithium, niobium and rare earths, as well as in recycling.
The Group employs approximately 14,000 people in 20 countries. ERAMET is part of Euronext Paris Compartment A.
Head of Investor Relations and Economic Studies Philippe Joly Tel: +33 (0)1 4538 4202
Investor Relations and Economic Analyst David Fortin Tel: +33 (0)1 4538 4286
For more information: www.eramet.com
| Turnover (M€) | Q1 2013 | Q2 2013 | Q1 2014 | Q2 2014 |
|---|---|---|---|---|
| ERAMET Manganese | 388 | 389 | 326 | 357 |
| ERAMET Nickel | 181 | 187 | 166 | 215 |
| ERAMET Alloys | 231 | 242 | 224 | 250 |
| Holding company & eliminations | (3) | (2) | (2) | (2) |
| ERAMET Group including joint ventures |
797 | 816 | 714 | 820 |
| Share of joint ventures | (18) | (19) | (14) | (16) |
| ERAMET Group IFRS published statements1 |
779 | 797 | 700 | 804 |
1 Application of IFRS 11 "Joint Arrangements" as of 1/1/2014, with retrospective impact on 2013.
Following application of IFRS 11 "Joint Arrangements" as of January 1, 2014, proportionally consolidated companies (Ukad and the TiZir sub‐group) in the financial statements to December 31, 2013 are consolidated according to the equity method from FY 2014, with retrospective impact on 2013.
To reflect the economic reality of the Group's companies, the operating performance of jointly controlled companies continue to be proportionally consolidated in the Group's internal reporting, which is used by senior management and the Board of Directors as the basis for monitoring activity.
As a result, in accordance with IFRS 8 "Operating Segments", segment information included in the consolidated financial statements will be aligned with this internal information. As of 2014, the Group's financial reporting will be based on this operational financial information, which is also reconciled with the financial statements reported under IFRS.
| Tonnes | H1 2013 | H2 2013 | H1 2014 |
|---|---|---|---|
| Manganese ore and sinter production | 1,767,300 | 1,935,600 | 1,644,100 |
| Manganese alloy production | 385,400 | 360,800 | 338,300 |
| Manganese alloy sales | 393,800 | 370,600 | 352,900 |
| Nickel production* | 25,480 | 27,535 | 27,078 |
| Nickel sales** | 25,280 | 27,130 | 27,627 |
* Ferronickel and matte
** Finished products
| (€ million) | Nickel | Manganese | Alloys | Holding & eliminations |
Total Joint-venture contribution |
Published | |
|---|---|---|---|---|---|---|---|
| 1st half year 2014 | |||||||
| External sales Inter-division sales |
380 1 |
681 2 |
473 1 |
- (4) |
1 534 - |
(30) - |
1 504 - |
| Sales | 381 | 683 | 474 | (4) | 1 534 | (30) | 1 504 |
| EBITDA | 20 | 124 | 31 | (18) | 157 | (3) | 154 |
| Current operating profit (loss) | (27) | 61 | - | (20) | 14 | - | 14 |
| Operating profit (loss) | - | - | - | - | (29) | - | (29) |
| Cash generated from operations | 15 | 77 | 16 | (31) | 77 | (2) | 75 |
| Net cash generated by operating activities | - | - | - | - | (68) | (21) | (89) |
| Industrial capital expenditure (intangibles assets, property, plant & equipment) |
42 | 110 | 23 | - | 175 | (33) | 142 |
| Closing net cash (debt) position | - | - | - | - | (473) | 93 | (380) |
| 1st half year 2013 | |||||||
| External sales Inter-division sales |
365 3 |
775 2 |
471 2 |
2 (7) |
1 613 - |
(37) - |
1 576 - |
| Sales | 368 | 777 | 473 | (5) | 1 613 | (37) | 1 576 |
| EBITDA | (49) | 172 | 30 | (24) | 129 | (15) | 114 |
| Current operating profit (loss) | (94) | 109 | 3 | (27) | (9) | (11) | (20) |
| Operating profit (loss) | - | - | - | - | (35) | (11) | (46) |
| Cash generated from operations | (65) | 124 | 18 | (21) | 56 | (12) | 44 |
| Net cash generated by operating activities | - | - | - | - | 65 | (19) | 46 |
| Industrial capital expenditure (intangibles assets, property, plant & equipment) |
63 | 176 | 35 | 2 | 276 | (71) | 205 |
| Closing net cash (debt) position | - | - | - | - | 127 | 56 | 183 |
| Full year 2013 | |||||||
| External sales | 700 | 1 558 | 901 | 3 | 3 162 | (77) | 3 085 |
| Inter-division sales | 4 | 4 | 3 | (11) | - | - | - |
| Sales | 704 | 1 562 | 904 | (8) | 3 162 | (77) | 3 085 |
| EBITDA | (130) | 350 | 49 | (38) | 231 | (20) | 211 |
| Current operating profit (loss) | (222) | 218 | 4 | (45) | (45) | (14) | (59) |
| Operating profit (loss) | - | - | - | - | (548) | (14) | (562) |
| Cash generated from operations | (150) | 257 | 20 | (53) | 74 | (13) | 61 |
| Net cash generated by operating activities | - | - | - | - | 161 | (27) | 134 |
| Industrial capital expenditure (intangibles assets, property, plant & equipment) |
172 | 346 | 64 | 5 | 587 | (128) | 459 |
| Closing net cash (debt) position | - | - | - | - | (218) | 80 | (138) |
| (€ million) | France | Europe | North America |
Asia | Oceania | Africa | South America |
Total Joint-venture contribution |
Published | |
|---|---|---|---|---|---|---|---|---|---|---|
| Sales (destination of sales) | ||||||||||
| 1st half year 2014 | 204 | 521 | 312 | 428 | 10 | 40 | 19 | 1 534 | (30) | 1 504 |
| 1st half year 2013 | 256 | 510 | 328 | 443 | 13 | 40 | 23 | 1 613 | (37) | 1 576 |
| Full year 2013 | 414 | 1 004 | 642 | 949 | 27 | 76 | 50 | 3 162 | (77) | 3 085 |
| Capital expenditure (intangibles and property, plant & equipment) | ||||||||||
| 1st half year 2014 | 26 | 14 | 5 | 10 | 30 | 89 | 1 | 175 | (33) | 142 |
| 1st half year 2013 | 44 | 11 | 9 | 38 | 20 | 154 | - | 276 | (71) | 205 |
| Full year 2013 | 82 | 35 | 20 | 86 | 77 | 286 | 1 | 587 | (128) | 459 |
| (€ million) | 2014 Published (1) |
1st half year Joint-venture 1st half year contribution |
2014 Adjusted (2) |
2013 Published (1) |
1st half year Joint-venture 1st half year contribution |
2013 Adjusted (2) |
2013 Published (1) |
Full year Joint-venture contribution |
Full year 2013 Adjusted (2) |
|---|---|---|---|---|---|---|---|---|---|
| Sales | 1 504 | 30 | 1 534 | 1 576 | 37 | 1 613 | 3 085 | 77 | 3 162 |
| EBITDA | 154 | 3 | 157 | 114 | 15 | 129 | 211 | 20 | 231 |
| Current operating profit (loss) | 14 | - | 14 | (20) | 11 | (9) | (59) | 14 | (45) |
| Operating profit (loss) | (29) | - | (29) | (46) | 11 | (35) | (562) | 14 | (548) |
| Profit (loss) for the period - attributable to equity holders of the parent |
(59) | - | (59) | (32) | - | (32) | (370) | - | (370) |
| Net cash generated by operating activities | (89) | 21 | (68) | 46 | 19 | 65 | 134 | 27 | 161 |
| Industrial capital expenditure | (142) | (33) | (175) | (205) | (71) | (276) | (459) | (128) | (587) |
| Net cash (debt) position | (380) | (93) | (473) | 183 | (56) | 127 | (138) | (80) | (218) |
| Shareholders' equity - attributable to equity holders of the parent |
2 473 | - | 2 473 | 2 905 | - | 2 905 | 2 532 | - | 2 532 |
(1) Financial statements prepared under IFRS applicable as of 01/01/2014, with joint venture accounted under equity method. See 2014 condensed interim consolidated financial statements on the ERAMET Group website (www.eramet.com).
(2) Group reporting, with joint venture accounted under proportional consolidation method.
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