Refocused and more robust, Eramet stays the course in a challenging
market environment
Paris, 26 July 2023, 6:30 p.m.
PRESS RELEASE
Refocused and more
robust, Eramet stays the course
in a challenging market
environment
- Adjusted
EBITDA1,2 at €339m, down significantly
compared to a record H1 in 2022:
- Strong
decline in selling prices for all of the Group's markets,
notably manganese alloys (refined alloys down nearly 50%) and class
II nickel (ferronickel down more than 30%)
- Major
logistical incidents in Gabon,
now resolved, resulting in a significant decline in
volumes of manganese ore produced (-27% at 2.6 Mt)
- Strong
growth in nickel ore volumes in Indonesia
(+79% at 16.4 Mwmt)
-
Input costs at high levels,
particularly reductants
- Implementation of a
cash saving and cost reduction action plan, in
addition to productivity actions and the optimisation of
production (volume, grade)
- Net income,
Group share positive at €98m
- Negative Free
Cash-Flow in a context of growth capex, resulting in net
debt of €712m and adjusted
leverage3 of 0.7x;
extension of the maturity with
the successful inaugural rated issue of sustainability-linked
bonds
- Start of
lithium production in Argentina in Q2 2024 confirmed, with
a completion rate for the construction of the plant at 60% at
end-June 2023
- Final
Investment Decision expected in H2 2023 for the first stage of
Phase II of the Centenario project
(representing additional 30 kt-LCE)
- Signature
in July of a joint marketing agreement for lithium
carbonate from 2025, enabling to secure an advance payment of $400m
from 20234
- Further
progress in CSR, with a commitment made by Eramet to have
all of its mining sites assessed by 2027, including Weda Bay
(Indonesia), complying with the Initiative for Responsible Mining
Assurance (IRMA) standard
- The outlook
for 2023 is set against the background of a persisting
difficult macroeconomic context. Adjusted EBITDA
is revised downwards to close to
€900m in 2023, factoring in:
- the
downward revision of the consensus for
manganese ore prices ($5.15/dmtu vs. $5.4/dmtu
previously)
- a more
significant trend reversal in class II
nickel and nickel ore
prices
- only partly offset
by the upward revision of marketable nickel ore volumes at
Weda Bay (+5 Mwmt5 low-grade, to approximately
35 Mwmt)
Christel Bories, Group Chair and CEO:
-
Our first half-year results were penalised by unfavourable prices
and logistical incidents that are now resolved. However, on the
back of the transformations achieved in recent years, we are
staying the course and continue our development in metals for the
energy transition, supported by a more robust financial structure
and an ambitious CSR roadmap.
Looking ahead to the second half of the year, we
remain focused on our operational performance and the strict
control of our costs. We continue to make progress in the Group's
strategic projects and confirm the start of our lithium production
in Argentina in the second quarter of 2024.
In H1 2023, the Group continued its excellent
safety performance, with a FR2 at 1.0 for Eramet’s
new scope (vs 1,1 in 2022), significantly below the target in the
CSR roadmap for 2023 (FR2 < 4) and among the Top 36 based on the
ICMM Safety Performance Report 2022 published in July 2023.
During the first half of the year, the Group
continued to implement the Initiative for Responsible
Mining Assurance (IRMA) standard, with the launch of the
first independent audit at its Grande Côte Opérations (GCO) site,
in Senegal. This external audit performed by third party audit firm
will enable Eramet to be among the first mining groups to
demonstrate its public commitment to the IRMA process. The Group
has also reaffirmed its commitment to auditing all its mining sites
by 2027, which includes the PT Weda Bay Nickel joint venture (in
which Eramet owns a 38.7% interest), according to this Responsible
Mining standard.
Eramet has become the first mining group in the
world to establish a transnational labour relations body
encompassing all Group entities – the Eramet Global
Forum (EGF) – reflecting the Group's diversity.
Established through an agreement signed in May between employee
representatives and Group management, this new body is tasked with
strengthening and developing constructive labour relations that are
inclusive and respectful of local cultures. It brings together
representatives from the Group's main countries, with the aim of
negotiating agreements applicable to all employees in areas such as
social protection, quality of life at work, diversity and
inclusion, as well as parental issues.
Eramet also announced its partnership with
International Women in Mining (IWiM), a global
organisation that works towards achieving gender equality, the
advancement of women, as well as their access to opportunities and
leadership positions in the mining industry. This partnership will
enable the Group to share best practices in diversity and
inclusion.
Lastly, in June, the Group published details of
its economic contributions in the main regions in which it operates
in respect of 20227, with an overall contribution of €3.3bn which
was almost twice higher than the previous year.
-
Financial rating and financing
In April, Moody's and Fitch awarded Eramet
long-term credit ratings of Ba2 and BB+ respectively, with a stable
outlook.
Against this backdrop, and after refinancing the
bank term loan at end-January for an amount of €515m, in early May,
Eramet completed the successful inaugural issue of
sustainability-linked bonds for an amount of €500m. The bond issue,
with a five-year maturity and an annual coupon of 7%, is linked to
two sustainability performance targets. These will be measured on
31 December 2025, against 2019
levels:(i) 35% reduction in the
annual Scope 1 and Scope 2 greenhouse gas emissions intensity of
the Group, and,
(ii) increase
to 67% in the share of its suppliers and customers (by emissions)
with decarbonisation targets that are consistent with the
well-below 2° Celsius scenario of the Paris Agreement.
Parallel to this, in June, Eramet repurchased
its outstanding bonds due in February 2024 (for an amount of
€429.7m), enabling the Group to continue proactively managing its
debt profile and to extend its average maturity. At 30 June 2023,
the average maturity was nearly 3 years (compared with 2.2 years at
31 December 2022).
Finally, in July, Eramet agreed with Glencore on
a $400m prepayment agreement, ahead of the future and joint
marketing of 50 kt of lithium carbonate from Phase I of the
Centenario-Ratones project (approximately equivalent to a five-year
commercial contract). The commercial advance will be used in
particular to finance the Group's growth projects in energy
transition metals. The agreement is subject to the satisfaction of
the usual conditions precedent for this type of transaction.
-
Eramet group key figures (in accordance with the
IFRS 5 standard)
Millions of euros1 |
H1 20232 |
H1 20222 |
Chg. (€m) |
Chg.3(%) |
Adjusted turnover4 |
1,901 |
2,816 |
(915) |
-32% |
Turnover |
1,604 |
2,635 |
(1,031) |
-39% |
Adjusted EBITDA4 |
339 |
1,170 |
(831) |
-71% |
EBITDA |
93 |
982 |
(889) |
-91% |
Current operating income (COI) |
(10) |
853 |
(863) |
n.a. |
Net income from continuing operations |
52 |
783 |
(731) |
-93% |
Net income from discontinued operations |
14 |
(13) |
+27 |
n.a. |
Net income, Group share |
98 |
677 |
(579) |
-86% |
|
|
|
|
|
Group Free Cash-Flow |
(120) |
429 |
(549) |
n.a. |
|
|
|
|
|
Millions of euros1 |
30/06/232 |
31/12/222 |
Chg. (€m) |
Chg.3(%) |
Net debt (Net cash) |
712 |
344 |
+368 |
+107% |
Shareholders’ equity |
2,134 |
2,245 |
(111) |
-5% |
Adjusted leverage4 (Net
debt-to-adjusted EBITDA
ratio5) |
0.7 |
0.2 |
+0.5 pts |
n.a. |
Leverage (Net debt-to-EBITDA ratio5) |
1.1 |
0.2 |
-0.9 pts |
n.a. |
Gearing (Net debt-to-Shareholders’ equity
ratio) |
33% |
15% |
+18 pts |
n.a. |
Gearing within the meaning of bank
covenants6 |
18% |
2% |
+16 pts |
n.a. |
ROCE (COI/capital employed7 for the previous
year) |
13% |
51% |
-38 pts |
n.a. |
1 Data rounded to the nearest million.2
Excluding Aubert & Duval, Sandouville and Erasteel, which in
accordance with the IFRS 5 standard, are presented as operations in
the process of being sold in 2023 and 2022. See reconciliation
tables in Appendix 1.3 Data rounded to higher or lower %.4 Adjusted
turnover, adjusted EBITDA and adjusted leverage are defined in the
financial glossary in Appendix 8.5 Calculated on a 12-month rolling
basis at 30 June.6 Net debt-to-Shareholders’ equity ratio,
excluding IFRS 16 impact and French state loan to SLN.7 Total
shareholders' equity, net debt, site restoration provisions,
restructuring and other social risks, less long-term investments,
excluding Weda Bay Nickel capital employed.
N.B. 1: all the commented changes in H1 2023 are
calculated with respect to H1 2022, unless otherwise specified.
N.B. 2: all the commented figures for H1 2023
and H1 2022 correspond to figures in accordance with the IFRS 5
standard as presented in the Group’s consolidated financial
statements, unless otherwise specified.
N.B. 3: mentions of Q1, Q2, Q3 and Q4 refer to
the four quarters of the financial year.
The Group's adjusted
turnover1 including the proportional
contribution of Weda Bay amounted to €1,901m in H1
2023, down 32% (-34% at constant scope and exchange rates8, with
+2% of currency effect). This decrease mainly reflects a negative
price effect (-27%) in a depressed market environment compared to
high price levels in H1 2022, notably regarding manganese ore and
alloys as well as ferronickel at SLN.
Group EBITDA amounted
€93m.
Adjusted EBITDA1,2 (including
the proportional contribution of Weda Bay) amounted to
€339m, a strong decline (-71% vs. H1 2022), mainly
reflecting:
- The
negative impact of external factors of around
€749m, including
an unfavourable price effect (-€724m, of which -€498m for manganese
and -€225m for nickel), an unfavourable volume effect (-€48m) on
manganese alloys production in order to adapt to a sharply
declining market, as well as higher input costs and other (up by
€43m) vs. H1 2022). These impacts were partly offset by a decrease
in freight costs (+€51m) and a favourable currency effect
(+€33m),
- A
negative intrinsic performance of
€77m, mainly reflecting
the decline in manganese ore volumes sold related to non-recurring
incidents on the railway (-€124m), as well as the zircon and CP
slag volumes (-€38m). The organic growth in nickel ore at Weda Bay
(+€63m), as well as actions to reduce fixed costs and productivity
gains (+21M€), partly offset this decline.
Net profit for
discontinued operations amounted to
€14m.
Net income, Group share for H1
2023 was €98m, including the share of income in
Weda Bay (€174m).
Capex accounted for
€356m, including the share of the Lithium project
financed by Tsingshan (via a capital increase by our Argentine
subsidiary. Investments supported by the Groupe amount to €263m and
include €136m in organic growth capex, mainly in Gabon (€81m) and
in Argentina (€51m); current capex amount to €127m in H1 2023.
Free Cash-Flow (“FCF”) totalled
-€120m, including a contribution from Weda
Bay of €153m.
Net debt stood at
€712m on 30 June 2023, with no material impact in
the first half from the sale of Aubert & Duval and Erasteel.
The change in net debt includes dividends paid to Eramet
shareholders (-€100m) and Comilog minority shareholders (-€87m) in
respect of the 2022 financial year.
The leverage ratio was 1.1x.
The Group’s capital allocation policy continues to focus primarily
on deleveraging, to maintain leverage9 below 1x on average through
the cycle, while allocating capex to its growth projects and
rewarding its shareholders.
As of 30 June 2023, Eramet's
liquidity, including undrawn credit lines, remains
high at €2.5bn.
- Key
figures by activity2 – continuing
operations (IFRS 5)
Millions of euros1 |
H1 2023 |
H1 2022 |
Change (€m) |
Change2 (%) |
MANGANESE |
Turnover |
946 |
1,647 |
(701) |
-43% |
|
EBITDA |
193 |
831 |
(638) |
-77% |
Manganese ore activity3,4 |
Turnover |
471 |
747 |
(276) |
-37% |
|
EBITDA |
154 |
343 |
(189) |
-55% |
Manganese alloys activity3 |
Turnover |
475 |
901 |
(426) |
-47% |
|
EBITDA |
38 |
488 |
(450) |
-92% |
NICKEL |
Adjusted Turnover5 |
815 |
943 |
(128) |
-13% |
|
Adjusted EBITDA5 |
174 |
306 |
(132) |
-43% |
MINERAL SANDS |
Turnover |
136 |
224 |
(88) |
-39% |
|
EBITDA |
49 |
97 |
(48) |
-49% |
LITHIUM |
Turnover |
0 |
0 |
n.a. |
n.a. |
|
EBITDA |
(9) |
(8) |
(1) |
n.a. |
1 Data rounded to the nearest million.2 Data
rounded to higher or lower %.3 See financial glossary in Appendix
8.4 Turnover linked to external sales of manganese ore only,
including €24m linked to Setrag transport activity other than
Comilog's ore (vs. €41m in H1 2022). 5 Adjusted turnover, adjusted
EBITDA and adjusted leverage are defined in the financial glossary
in Appendix 8.
Manganese
Factoring in a H1 that was strongly
disrupted by logistical incidents in Gabon, and a particularly
favourable price environment in H1
2022, the Manganese activity posted EBITDA that was down
very significantly to €193m (-77%).
In H1 2023, manganese
ore produced and transported volumes
were down, respectively by
27% to 2.7 Mt and 16% to 2.8
Mt, due to the suspension in
traffic in January, following the landslide at end-2022, and in
early April.
As a result, EBITDA for the manganese
ore activity was down to €154m10
(-55%), mainly reflecting an unfavourable price environment
as well as the decline in volumes sold externally
(-16%).
EBITDA for the manganese alloys activity
was down very significantly to €38m (-92%). The latter mainly
reflects the normalisation of selling prices after the historic
records reached in H1 2022. Volumes sold also declined by
9%.
Market trends11 & prices12
Global production of carbon steel, the main
end-product for manganese, was down by 2% in H1 2023 to 944 Mt
compared to the same period last year.
Production in China, which accounts for more
than 50% of global production, remained stable versus H1 2022, in
the context of a significantly lower than expected rebound in the
Chinese economy, and a downturn in the construction sector.
Production declined in the rest of the world (-5%), notably in
Europe (-13%) where the real estate sector was strongly impacted by
economic situation and high interest rates. Among the major
markets, India was the only exception with a 7% increase in
production.
As a result, manganese ore consumption decreased
by nearly 2% to 10.1 Mt in H1 2023, as did global manganese ore
production (-2%) which totalled 10.2 Mt. The production decreases
in Gabon (nearly -10%) and South Africa (-2%), were partly offset
by the growth in supply in Brazil (+81%), with the restart of
former mining sites.
In this context, the supply/demand balance
remained in slight surplus in H1 2023 and Chinese port ore
inventories stood at 6.5 Mt at end of H1, an increase compared to
2022.
The average CIF China 44% manganese ore price
index stood at $5.2/dmtu in H1 2023, down 23% from H1 2022, in line
with the reduced demand.
The price index (CRU) for refined alloys in
Europe (MC Ferromanganese) declined by nearly 50% in H1 2023, as
did that for standard alloys (Silicomanganese), down 37%. Manganese
alloys benefitted in H1 2022 from exceptionally high prices due to
a strong post-Covid recovery in the construction sector and
tensions on supply linked to the conflict in Ukraine.
Activities
The expansion programme in Moanda, which is the
world's largest manganese mine, as well as
operational improvement continue at Comilog, in Gabon. However,
operations were strongly disrupted in the first half by logistical
incidents at the start of the year (landslide at end-2022, breach
of civil engineering structure in early April), which are now
resolved.
Due to a lack of downstream logistics and the
absence of fuel and parts deliveries required for mining
operations, production at the mine was halted for the whole of
January and was also severely disrupted in April. As a result,
manganese ore production volumes
were down 27% to 2.6 Mt in H1 2023. Factoring in a destocking
at Moanda, the transported ore volumes and ore volumes sold
externally declined to a lesser extent, by 16% and 18%
respectively, ending the period at 2.8 Mt and 2.4 Mt.
The return to normal traffic enabled the
transportation of nearly 700 kt of manganese ore in June, at an
annual pace of 7.0 Mt in 2023 factoring in the H1 performance.
As a result of the disruptions, deliveries
scheduled for January were postponed to February and March
(invoiced on the basis of the CIF China 44% index in December
2022), and Comilog did not benefit from the rise in market prices
in January and February.
The FOB cash cost13 of manganese ore activity
was $2.7/dmtu, up 21% compared to H1 2022. The latter is mainly
linked to the negative impact of the decrease in volumes, partially
offset by the decrease in sales taxes as well as a favourable
exchange rate impact.
Sea transport costs per tonne decreased by
around 30% to $0.9/dmtu, mainly reflecting the decline in freight
prices on average over the first half.
Manganese alloys production
declined by 18% to 311 kt in H1 2023. This decrease if related to
the slowdown in production in order to adapt to market conditions
and to limit the impact of energy price increases, as well as the
scheduled relining programme of several furnaces.
Sales amounted to 310 kt (-9%) with a slightly
more favourable mix over the period compared to H1 2022. The
manganese alloys margin declined further in H1 2023, driven by the
continued decrease in selling prices and input costs which remained
at a high level. Thus, the decrease in the cost to purchase
metallurgical coke has not yet been reflected in the price of
consumed reductants14; in addition, since supplies from Russia were
cut off at the start of the conflict, the Group's supply mix
includes Ultra Low Phos coke from Colombia, whose price remains
more than 10% higher than that of metallurgical coke.
Outlook
In H2 2023, steel production is expected to
continue declining given the unfavourable seasonality. Production
levels should remain stable compared to H2 2022. The rising
interest rates continue to penalise the construction sector at the
global level, although India is expected to post growth again.
As a result, demand for manganese ore could
decline over the year. Although supply is also slightly decreasing,
the market consensus, which is currently set around $5.2/dmtu,
expects a drop of nearly 15% in the average CIF China 44% manganese
ore price index in 2023 compared with 2022.
Demand for manganese alloys is expected to
strongly decline in 2023, particularly in Europe. With inventories
still high for most products, particularly standard alloys, and
margins that are strongly contracting, supply should also decrease.
Demand for alloys in H2 is expected to follow the trend for steel
and decrease as a result of seasonality.
In 2023, alloys invoiced selling prices could
stabilise on average to the level of mid-2023 and therefore remain
significantly below the average prices for 2022, notably with a
very strong decline in North America.
In Gabon, the targets for
transported ore volumes are
maintained at more than 7.0 Mt, factoring in the logistical
incidents of H1, which are now resolved. The production will be
adjusted according to the level of volumes transported, as was
already done in April. The successful start of modular washing
facilities and an electric conveyor commissioned in H1 on the
Okouma plateau enable to expect a production capacity of around 8
Mt per year, as well as lower production and ore transport costs.
Cash cost is expected to decrease from H2, reflecting a
structurally more favourable seasonality in the second half of the
year, as well as improved ore grade.
The multi-year rehabilitation programme for
manganese alloys furnaces started with an initial
shutdown in H1. The programme, which includes a second shutdown at
year-end, will have a downward impact on alloys production over the
year, as will adaptation to market conditions.
Nickel
In H1 2023, the Weda Bay mine in
Indonesia, which is the world's largest nickel mine, continued its
ramp-up with an increase of nearly 80% in ore volumes
sold.
Adjusted
EBITDA2 for the Nickel activities
totalled €174m (-43%), including the strongly positive proportional
contribution of Weda Bay which offset the loss made by
SLN.
As a result, Weda Bay’s
contribution to EBITDA (38.7% owned by the Group)
was up 31% to €246m, thanks to excellent
operational performance in the mine, both in terms of volumes and
ore quality, with a positive impact on selling prices.
EBITDA for
SLN15 strongly declined, however,
with a loss of €70m, reflecting a sharply
deteriorated price and the subsidiary's persistent
difficulties.
Market trends16 & prices
Global stainless-steel production, which is the
main end-market for nickel, was down by 2% to 27.7 Mt in H1
2023.
Production in China, which accounts for more
than 50% of global production, was up by nearly 5% from the low
levels in H1 2022 (Winter Olympic Games, Covid-19) and by 4%
compared to H2 2022, reflecting a recovery in the Chinese economy.
Conversely, production in the rest of the world declined by 11%,
with a notable decrease in Indonesia (-18%), and a decline in
Europe due to sluggish demand.
In parallel, the batteries sector continued to
post very sustained growth (+28%). Global demand for primary nickel
therefore continued to grow, increasing by 4% in H1 2023 to 1.5
Mt.
Global primary nickel production grew by more
than 8% to reach 1.6 Mt in H1 2023. This growth is supported by the
NPI supply in Indonesia (+19%), as well as the strong ramp-up in
new projects (+74%), notably HPAL17 and Matte. Conversely, NPI
production18 in China and traditional production were down by 9%
and 4% respectively.
The nickel supply/demand balance (class I and
II19) was therefore slightly in surplus in H1 2023. Nickel
inventories at the LME and SHFE20 remained low (42 kt at end-June);
they are, however, progressively less representative as the market
for LME products (pure nickel cathodes and briquettes) now only
represents around 19% of the global market.
In H1 2023, the LME price
average (price of class I nickel) was $24,236/t, down versus H1
2022 (-12%) which was at a particularly high level, but slightly up
compared to H2 2022 (+2%).
The average for the NPI21 price
index as sold at Weda Bay was $15,368/t, significantly down versus
H1 2022 (-26%) and also down compared to H2 2022 (-9%).
The spot price of ferronickel
as produced by SLN (class II nickel) was set, as expected, at a
level very significantly below the LME and approached prices for
NPI (also class II nickel), posting a strong decline of 31% in H1
(-10% in H1 vs. H2).
Nickel ore
prices (1.8% CIF China), as exported by SLN, averaged
$92/wmt in H1 2023, a significant decline versus H1 2022 (-26%) and
H2 2022 (-14%). The nickel ore price has significantly corrected
since April and currently stands at $80/wmt.
In Indonesia, the official domestic
price index for high-grade nickel ore (“HPM Nickel”) was
approximately $57/wmt22, an increase compared to H1 2022 (+2%) and
H2 2022 (+10%). As a reminder, the HPM Nickel price formula is
indexed to LME, with a lag of about 1 month.
Activities
In Indonesia, the Weda Bay mine
continued its exceptional ramp-up with the sale of 16.4 Mwmt in H1
2023 (for 100%), an increase of nearly 80%.
External ore sales (at the plants on the
industrial site other than the JV plant) doubled (to 15.1 Mwmt)
with the sale of 6.9 Mwmt in high-grade ore and 8.2 Mwmt in
low-grade ore; internal consumption for nickel ferroalloys
production amounted to 1.3 Mwmt.
Production at the plant reached 15.7 kt-Ni of
NPI in H1 2023 (on a 100% basis), a decline of 21%, due to
difficulties in electricity supply at the industrial park in Q1
2023. The volumes sold by Eramet as part of the off-take contract,
representing 7.0 kt-Ni (-18%), contributed €102m to Group turnover
in H1 2023, down 36%, owing to the decline in volumes and an
unfavourable price environment.
The operational performance of Weda Bay was
again reflected in a substantial contribution to Group FCF over the
period of €153m.
In New Caledonia, mining
production amounted to 2.9 Mwmt in H1 2023, up 18%, reflecting
improved weather conditions, despite social (ongoing restructuring
plan in Kouaoua) and societal difficulties that disrupted
operations and the loading of vessels. The continued unauthorised
access to certain deposits prevented the subsidiary from taking
full advantage of the good weather conditions, notably leading to a
reduction in activity at the Poum site. Low-grade nickel ore
exports therefore decreased 5% to nearly 1.4 Mwmt, while the plant
benefitted from improved supply in terms of grade but was also
impacted by social conflicts at the start of the year.
Ferronickel production remained stable, at 20.3
kt-Ni (vs. 20.4 kt-Ni in H1 2022). Volumes sold were slightly up,
to 20.3 kt-Ni in H1 23 (+2%).
Cash cost23 of ferronickel production amounted
to $8.7/lb on average in H1 2023 (vs. $8.1/lb in H1 2022),
reflecting a decrease in export margins in a depressed market
environment as well as reduced operational efficiency at the plant,
resulting in costs linked to the start of the Temporary Offshore
Power Plant.24 These effects were partly offset by a favourable
currency impact as well as increased mining operational
efficiency.
As a result, SLN generated at a local level a
negative Free-Cash Flow of -€70m for the half-year, with entity’s
net debt now totalling €564m.
In order to address its difficulties, which have
recently worsened due to the strong decline in selling prices for
ore and ferronickel, the Group's New Caledonia subsidiary continues
to implement its plan to reduce costs and preserve cash, notably
through the reduction of its investments and fixed costs.
Outlook
In H2 2023, demand for primary nickel is
expected to continue growing despite a sluggish market for
stainless-steel in Europe, notably thanks to the resilient demand
in the batteries sector.
Primary nickel production is also expected to
continue increasing over the period, thanks to the growth of NPI
and new projects (Matte and HPAL) for batteries in electric
vehicles, increasing the market surplus for 2023.
In Indonesia, the Weda Bay mine
should continue its exceptional ramp-up, with a marketable target
(on a 100% basis) revised upwards to approximately 35 Mwmt5 in
2023, of which approximately 20 Mwmt in low-grade ore.
In New Caledonia, in light of
its financial situation which remains critical, and in order to
meet its short-term cash requirements, SLN is expected to draw a
second tranche of €20m in July from the loan granted by the French
State at the beginning of the year (for a total amount of
€60m).
Assuming a normal functioning of operations,
ferronickel production for the plant is confirmed at above 45 kt-Ni
in 2023. Conversely, the nickel ore export target has been revised
downwards to more than 3.0 Mwmt taken into account that the Poum
site will be put into “Care & Maintenance” from mid-July, as a
consequence of the absence of operating permits being issued by the
Northern Province.
Strategic growth projects
In H1 2023, Eramet and BASF have continued
studies related to the Sonic Bay
project, the hydrometallurgical project
(HPAL18) intending to produce
battery-grade nickel and cobalt intermediate products,
using laterite ores extracted from the Weda Bay mine. The
investment decision could be postponed to 2024, subject to project
execution and funding strategy.
In addition, the Group continues its exploration
and business development activity targeting nickel limonites, with
a particular emphasis on Indonesia. To this end, Eramet has
recently participated in the formation of a consortium seeking to
develop a Responsible Green Electric Vehicle hub
("RGEV") in Indonesia.
Mineral Sands
EBITDA for Mineral Sands activities was
down 49% to €49m in H1 23, reflecting a decrease in volumes, mainly
linked to the maintenance shutdown of the furnace at the Norway
plant during the first half, and the passage of
the GCO dredge through a complex and low-grade zone. This
phase is currently weighing on the mine's operating costs, given
the infrastructure relocations and community costs in a denser
area, as well as the difficulty of operating.
Zircon prices remained at high levels
which offset the decrease in volumes in Senegal, factoring in the
operating difficulties combined with a lower content in the area
mined over the period.
Market trends & prices25
In an unfavourable macroeconomic context for the
ceramics sector, global demand for zircon slowed throughout the
first half of the year. In parallel, zircon production was up over
the period due to the start of new capacity. In this context, the
supply/demand balance was slightly in surplus in H1 2023, following
a slight deficit in 2022.
Zircon market prices therefore averaged $2,100/t
FOB, down more than 2% vs. H2 2022, albeit up by 3% vs. H1
2022.
Global demand for TiO226 pigments, the main
end-market for titanium-based products27, grew since the
large-scale destocking at end-2022, albeit remaining below the
sustained levels reached in H1 2022. Driven by the demand for
chloride pigments in China, the production of high-grade
titanium-based products increased. Against this background, the
market is in surplus.
The average market price for CP titanium dioxide
slag, as produced by Eramet in the ETI plant in Norway, remained in
H1 at very high levels at $930/t.
Activities
In Senegal, following a major
equipment breakdown in January and factoring in the expected
decline in average grade in the area mined, mineral sands
production volumes declined by 21% to 306 kt.
Zircon volumes produced decreased by 20% to 24
kt and sale volumes were down 26% to 23 kt.
In Norway, with the scheduled
ten-yearly maintenance shutdown of the plant starting in Q1 2023,
titanium slag production was limited to 32 kt in H1 2023, down 68%.
These works were completed during Q2 and the production ramp-up was
successfully completed. Prior to the shutdown, the furnace capacity
was reduced to limit the impact of rising energy prices.
As a result, sales volumes decreased by 59% to
39 kt over the semester.
Outlook
Demand for zircon is expected to decrease in H2,
factoring in macroeconomic difficulties (inflation, construction
market at half-mast, notably in China), leading to an overall
decline over the year. The market could be in surplus, which would
result in the normalisation of prices for the rest of 2023, after a
2022 record year.
Demand for titanium-based products is also
expected to decrease in H2, impacted by the soft demand for
pigments linked to the construction market. Demand over the year is
set to decrease, leading to a surplus and an average price level in
2023 that is lower than that observed in 2022.
In Senegal, mineral sands
production in 2023 is confirmed at a level equivalent to that of
2022, with the lower content over the year offset by the
commissioning of the dry mining unit at end-2022.
In Norway, H2 production should
run at a quicker pace than that of 2022 which was impacted by the
reduced capacity linked to energy prices. Works during the H1
shutdown targeted an increase in the plant's capacity by 7% a year
from 2024.
In July, Eramet received a unilateral offer from
a strategic player to acquire 100% of the shares in Eramet Titanium
& Iron (“ETI”). The proposed enterprise value is $245m. The
offer is currently under review.
Lithium
Lithium carbonate prices averaged $52,192/t
LCE28,29 in H1 2023, down 21% versus H1 2022, mainly due to
destocking among producers of Cathode Active Material (CAM30) over
the half year. Prices reached approximately $68,000/t LCE in Q1
2023 before adjusting to the current price of around $40,000/t
LCE.
In Argentina, the construction
of the Centenario lithium plant (Phase I), launched in 2022, is
continuing and has achieved a 60% completion rate at 30 June 2023.
Current estimates forecast, that production should start in Q2 2024
and the achievement of a full ramp-up in production, to 24 kt LCE
battery grade (100% basis), is expected by mid-2025.
Capex linked to Phase I of the project in 2023,
estimated at around $310m, will mainly be financed by
Tsingshan.
In collaboration with Tsingshan, its partner in
Phase I, Eramet is continuing the feasibility study into a Phase II
expansion project in order to eventually reach an annual total
production capacity of more than 75 kt-LCE per year via two
stages. An investment decision for a first stage of additional
30 kt-LCE should be taken during H2. Early capex related to
this stage is estimated at around $90m (at 100%) and will be cashed
out mainly in the second half of the year, including 49.9% which is
financed by Tsingshan.
Building on its experience in Argentina and in
the interests of diversifying and expanding its asset portfolio,
the Group is stepping up its efforts to explore and develop its
business in lithium brine, in Chile. A local
office, Eramet Chile, was set up in June to support this strategy
and to position the Group in the country's lithium development
ecosystem.
Battery recycling in France
In France, Eramet recently completed the
pre-feasibility studies as expected, prior to potentially
conducting a feasibility study, for its ReLieVe project in
partnership with SUEZ, which is now entering the
feasibility study phase. A pilot plant, designed to test and
validate the continuous refining process on a pre-industrial scale,
is currently under construction at the Group's research center in
Trappes. Start-up is scheduled for H2 2023.
This project would strengthen Eramet's position
in the electric battery value chain, with a presence upstream and
downstream, from the collection and dismantling of end-of-life
batteries to their recovery in the form of recyclable metal
salts.
In accordance with the IFRS 5 standard –
“Non-current assets held for sale and discontinued operations”, the
Aubert & Duval, Erasteel and Sandouville entities are presented
in the Group’s consolidated financial statements as operations in
the process of being sold for the 2022 and 2023 financial
years:
-
At end-April, Eramet finalised the sale of Aubert & Duval to
the consortium formed by Airbus, Safran and Tikehau Capital.
-
At end-June, following the fulfilment of all conditions precedent,
Eramet finalised the sale to Syntagma Capital of 100% of the shares
in its subsidiary Erasteel.
The divestment thus finalised for the entire
High-Performance Alloys Division (Aubert & Duval et Erasteel)
has a non-material impact on the Group's net debt at end-June
2023.
The climate of geopolitical and macroeconomic
uncertainties and the inflationary context continue to weigh on all
of the Group’s markets.
The rebound initially expected in China is yet
to materialise in 2023, despite the 5% growth target announced by
the Chinese authorities. The downturn in the construction sector
continues to weigh on the Group's business, in China but also in
Europe and North America. Demand across all the underlying markets
for our products remains sluggish, reflecting the continued
downward trend in prices observed throughout the first half of the
year, unless a rebound in demand materialises, particularly from
China.
In parallel, freight rates strongly decreased
over the period to levels significantly below the 2022 average. A
stabilisation is expected in H2. The price of reducing agents and
energy costs, down in H1 2023 compared to 2022, remain however at a
historically high level which continues to weigh on the performance
of metallurgical activities and their markets. However, the Group’s
smelters benefit from long-term supply contracts that cover
approximately 80% of their electricity needs.
Volume targets over the year are now raised
to:
- Around
35 Mwmt5 of marketable nickel ore at Weda Bay, of which
approximately 20 Mwmt of low-grade ore,
- More
than 7.0 Mt of manganese ore transported in Gabon, given
the non-recurring logistical incidents in H1.
Invoiced selling prices for manganese alloys
should remain significantly below 2022 on average for the year,
particularly in North America, while the consensus for average
manganese ore prices is slightly down at
$5.15/dmtu (vs. $5.4/dmtu previously).
In addition, the trend reversal in class II
nickel prices was considerably more marked than anticipated in H1
2023. The price of ferronickel should therefore be set at a level
very slightly above the SMM NPI 8-12% index31. Domestic prices
for nickel ore sold in Indonesia are indexed to the LME of which
consensus is $21,250/t for 202332, and change accordingly.
The €/$ exchange rate remains expected at
1.1033
for the year.
Based on the above-mentioned volumes targets and
price forecasts, the Group’s guidance on adjusted
EBITDA1 is revised
downwards close to €900m
in 2023, including the proportional contribution of Weda Bay.
Capex is revised downwards from previously
communicated guidance, given the need for strict management to deal
with the difficult environment. However, it includes €40m of
preliminary capex financed by Eramet as part of phase II of the
lithium project. The Group is thus expected to invest
around
€550m in capex in
2023 (excluding the operations sold in H1 and excluding
the share of the Lithium project financed by Tsingshan).
Calendar
27.07.2023: Presentation of 2023 half-year results
A live Internet webcast of the 2023 half-year
results presentation will take place on Thursday 27 July 2023 at
10:30 a.m. (Paris time), on the website: www.eramet.com.
Presentation material will be available at the time of the
webcast.
26.10.2023: Publication of 2023 Group third-quarter turnover
13.11.2023: Eramet's first Capital Markets Day
– "A New ERA"
ABOUT ERAMET
Eramet transforms the Earth’s mineral resources
to provide sustainable and responsible solutions to the growth of
the industry and to the challenges of the energy transition.
Its employees are committed to this through
their civic and contributory approach in all the countries where
the mining and metallurgical group is present.
Manganese, nickel, mineral sands, lithium, and
cobalt: Eramet recovers and develops metals that are essential to
the construction of a more sustainable world.
As a privileged partner of its industrial
clients, the Group contributes to making robust and resistant
infrastructures and constructions, more efficient means of
mobility, safer health tools and more efficient telecommunications
devices.
Fully committed to the era of metals, Eramet’s
ambition is to become a reference for the responsible
transformation of the Earth’s mineral resources for living well
together.
www.eramet.com
INVESTOR
CONTACTDirector of Investor
RelationsSandrine Nourry-DabiT. +33 1 45
38 37 02 sandrine.nourrydabi@eramet.com |
PRESS
CONTACTMedia relations
managerFanny
Mounierfanny.mounier@eramet.comT. +33 7 65 26 46
83Image 7Marie ArtznerT. +33 1 53
70 74 31 | M. +33 6 75 74 31 73martzner@image7.fr |
Appendix 1: Reconciliation tables
H1
2023 reported
reconciliation table before IFRS 5
|
|
|
|
|
|
|
|
|
|
|
(in millions of
euros) |
|
H1 |
|
Aubert & Duval CGU |
Erasteel CGU |
Sandouville GCU |
Restatements and eliminations |
Total discontinued operations |
|
H1 |
|
|
2023 |
|
|
2023 |
|
|
Before IFRS 5 treatment |
|
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover |
|
1,950 |
|
217 |
129 |
- |
- |
346 |
|
1,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
operating income |
|
92 |
|
(19) |
6 |
- |
7 |
(6) |
|
93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
(16) |
|
(8) |
12 |
- |
(6) |
(3) |
|
(10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
Net
income from discontinued operations |
|
|
|
(13) |
5 |
- |
(4) |
14 |
|
14 |
|
|
|
|
|
|
|
|
|
|
|
H1
2022 reported
reconciliation table before IFRS 5
|
|
|
|
|
|
|
|
|
|
|
(en millions
d'euros) |
|
H1 |
|
Aubert & Duval CGU |
Erasteel CGU |
Sandouville GCU |
Restatements and eliminations |
Total discontinued operations |
|
H1 |
|
|
2022 |
|
|
2022 |
|
|
Before IFRS 5 treatment |
|
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover |
|
3,063 |
|
278 |
138 |
11 |
|
427 |
|
2,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
operating income |
|
843 |
|
(36) |
11 |
(2) |
17 |
(10) |
|
853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
845 |
|
(14) |
(21) |
13 |
18 |
(4) |
|
850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
Net
income from discontinued operations |
|
|
|
(18) |
(27) |
13 |
19 |
(13) |
|
(13) |
|
|
|
|
|
|
|
|
|
|
|
Appendix 2: Quarterly turnover (IFRS
5)
€ million1 |
Q2 2023 |
Q1 2023 |
Q4 2022 |
Q3 2022 |
Q2 2022 |
Q1 2022 |
|
|
|
|
|
|
|
Manganese |
505 |
440 |
630 |
873 |
926 |
722 |
Manganese ore activity2 |
262 |
209 |
315 |
465 |
439 |
308 |
Manganese alloys activity2 |
244 |
231 |
316 |
407 |
487 |
414 |
Nickel |
228 |
290 |
331 |
300 |
409 |
352 |
Adjusted
Nickel3,4 |
356 |
459 |
464 |
357 |
514 |
428 |
Mineral Sands |
93 |
44 |
142 |
99 |
134 |
90 |
Lithium |
0 |
0 |
0 |
0 |
0 |
0 |
Holding, elim. and others |
3 |
1 |
4 |
0 |
1 |
1 |
Eramet group published financial statements |
828 |
775 |
1,107 |
1,272 |
1,470 |
1,165 |
Eramet group
adjusted3,4 |
956 |
944 |
1,241 |
1,328 |
1,576 |
1,240 |
1 Data rounded to the nearest million.2 See
financial glossary in Appendix 8.3 Adjusted turnover defined in the
financial glossary in Appendix 8.4 Adjusted turnover restated for
2022 and Q1 2023, following update of indicator definition.
Appendix
3: Productions and
shipments
In thousands of tonnes |
Q2 2023 |
Q1 2023 |
Q4 2022 |
Q3 2022 |
Q2 2022 |
Q1 2022 |
H1 2023 |
H1 2022 |
|
|
|
|
|
|
MANGANESE |
Manganese ore and sinter production |
1,543 |
1,097 |
1,854 |
2,061 |
1,862 |
1,762 |
2,640 |
3,624 |
Manganese ore and sinter transportation |
1,489 |
1,359 |
1,734 |
2,048 |
1,765 |
1,620 |
2,848 |
3,385 |
External manganese ore sales |
1,325 |
1,158 |
1,753 |
1,840 |
1,535 |
1,409 |
2,483 |
2,944 |
Manganese alloys production |
160 |
151 |
132 |
164 |
193 |
188 |
311 |
381 |
Manganese alloys sales |
170 |
140 |
166 |
190 |
186 |
156 |
310 |
342 |
|
|
|
|
|
|
NICKEL |
Nickel ore production (in thousands of wet
tonnes) |
|
|
|
|
|
|
|
|
SLN |
1,405 |
1,482 |
1,490 |
1,460 |
1,290 |
1,154 |
2,887 |
2,444 |
Weda Bay Nickel (100%) – marketable production
(high-grade) |
3,802 |
3,958 |
3,539 |
3,485 |
3,552 |
4,563 |
7,760 |
8,115 |
Ferronickel production – SLN |
9.7 |
10.6 |
11.0 |
9.5 |
10.5 |
9.9 |
20.3 |
20.4 |
Low-grade nickel ferroalloys production –
Weda Bay Nickel (kt of Ni content – 100%) |
7.9 |
7.8 |
8.1 |
8.9 |
9.6 |
10.0 |
15.7 |
19.6 |
Nickel ore sales (in thousands of wet
tonnes) |
|
|
|
|
|
|
|
|
SLN |
734 |
657 |
982 |
576 |
830 |
632 |
1,391 |
1,462 |
Weda Bay Nickel (100%) |
7,753 |
7,318 |
7,581 |
2,931 |
3,576 |
3,875 |
15,071 |
7,451 |
Ferronickel sales – SLN |
10.1 |
10.2 |
10.7 |
10.6 |
10.8 |
9.2 |
20.3 |
20.0 |
Low-grade nickel ferroalloy sales– Weda Bay
Nickel/Off-take Eramet (kt of Ni content) |
3.9 |
3.1 |
3.2 |
4.1 |
4.2 |
4.3 |
7.0 |
8.5 |
|
|
|
|
|
|
MINERAL SANDS |
Mineral Sands production |
194 |
112 |
186 |
170 |
188 |
198 |
306 |
386 |
Zircon production |
15 |
9 |
13 |
14 |
15 |
15 |
24 |
30 |
Titanium dioxide slag production |
13 |
19 |
40 |
48 |
48 |
52 |
32 |
100 |
Zircon sales |
14 |
9 |
14 |
14 |
16 |
15 |
23 |
31 |
Titanium dioxide slag sales |
26 |
13 |
44 |
39 |
52 |
40 |
39 |
92 |
Appendix 4: Price and index
|
H1 2023 |
H2 2022 |
H1 2022 |
Chg. H1 2023 – H1 20226 |
Chg. H1 2023 – H2 20226 |
MANGANESE |
|
|
|
|
|
Mn CIF China 44% ($/dmtu)1 |
5.22 |
5.14 |
6.79 |
-23% |
+2% |
Ferromanganese MC - Europe
(€/t)1 |
1,682 |
2,158 |
3,254 |
-48% |
-22% |
Silicomanganese - Europe
(€/t)1 |
1,100 |
1,205 |
1,739 |
-37% |
-9% |
|
|
|
|
|
|
NICKEL |
|
|
|
|
|
Ni LME ($/t)2 |
10.99 |
10.75 |
12.51 |
-12% |
+2% |
Ni LME ($/lb)2 |
24,236 |
23,702 |
27,575 |
-12% |
+2% |
SMM NPI Index ($/t)3 |
15,368 |
16,837 |
20,778 |
-26% |
-9% |
Ni ore CIF China 1.8%
($/wmt)4 |
92.2 |
107.1 |
124.8 |
-26% |
-14% |
HPM5 Nickel prices
1.8%/35% ($/wmt) |
57 |
52 |
56 |
+2% |
+10% |
|
|
|
|
|
|
MINERAL SANDS |
|
|
|
|
|
Zircon ($/t) 6 |
2,100 |
2,150 |
2,035 |
+3% |
-2% |
CP grade titanium dioxide ($/t)
7 |
930 |
865 |
850 |
+9% |
+8% |
1 Quarterly average for market prices, Eramet
calculations and analysis.2 LME (London Metal Exchange) prices.3
SMM NPI 8-12%.4 CNFEOL (China FerroAlloy Online), “Other mining
countries”. 5 Official index for domestic nickel ore prices in
Indonesia.6 Market and Eramet analysis (premium zircon).7 Market
analysis, Eramet analysis.8 Eramet calculation rounded to the
nearest decimal place.
Appendix 5: Performance indicators of continuing
operations (IFRS 5)
€ million1 |
H1 2023 |
H1 2022 |
FY 2022 |
Change (€m) |
Change2 (%) |
|
|
|
|
|
|
|
MANGANESE |
Turnover |
946 |
1,647 |
3,151 |
(701) |
-43% |
|
EBITDA |
193 |
831 |
1,402 |
(638) |
-77% |
|
COI3 |
138 |
765 |
1,255 |
(627) |
-82% |
|
FCF |
(20) |
395 |
835 |
(415) |
n.a. |
Activity |
Turnover |
471 |
747 |
1,527 |
(276) |
-37% |
Mn ore4 |
EBITDA |
154 |
343 |
722 |
(189) |
-55% |
|
FCF |
(93) |
71 |
371 |
(164) |
n.a. |
Activity |
Turnover |
475 |
901 |
1,624 |
(426) |
-47% |
Mn alloys4 |
EBITDA |
38 |
488 |
680 |
(450) |
-92% |
|
FCF |
73 |
324 |
464 |
(251) |
-77% |
NICKEL |
Adjusted Turnover5 |
815 |
943 |
1,763 |
(128) |
-13% |
|
Turnover |
518 |
762 |
1,392 |
(244) |
-32% |
|
Adjusted EBITDA5 |
174 |
306 |
430 |
(132) |
-43% |
|
EBITDA |
(72) |
118 |
86 |
(190) |
n.a. |
|
COI3 |
(92) |
78 |
14 |
(170) |
n.a. |
|
FCF |
86 |
99 |
148 |
(13) |
-13% |
MINERAL |
Turnover |
136 |
224 |
465 |
(88) |
-39% |
SANDS |
EBITDA |
49 |
97 |
184 |
(48) |
-49% |
|
COI3 |
26 |
76 |
140 |
(50) |
-66% |
|
FCF |
14 |
4 |
105 |
+10 |
n.a. |
LITHIUM |
Turnover |
0 |
0 |
0 |
n.a. |
n.a. |
|
EBITDA |
(9) |
(8) |
(12) |
(1) |
n.a. |
|
COI3 |
(9) |
(8) |
(13) |
(1) |
n.a. |
|
FCF |
(149) |
(64) |
(175) |
(85) |
n.a. |
|
|
|
|
|
|
|
Holding, elim. |
Turnover |
4 |
2 |
6 |
+2 |
n.a. |
and others |
EBITDA |
(68) |
(55) |
(107) |
(13) |
n.a. |
|
COI3 |
(73) |
(58) |
(116) |
(15) |
n.a. |
|
FCF |
(52) |
(5) |
(89) |
(47) |
n.a. |
|
|
|
|
|
|
|
GROUP TOTAL |
Adjusted Turnover5 |
1,901 |
2,816 |
5,385 |
(915) |
-32% |
(IFRS5) |
Turnover |
1,604 |
2,635 |
5,014 |
(1,031) |
-39% |
|
Adjusted EBITDA5 |
339 |
1,170 |
1,897 |
(831) |
-71% |
|
EBITDA |
93 |
982 |
1,553 |
(889) |
-91% |
|
COI3 |
(10) |
853 |
1,280 |
(863) |
n.a. |
|
FCF |
(120) |
429 |
824 |
(549) |
n.a. |
1 Data rounded to the nearest million. 2 Data
rounded to higher or lower %.3 Current operating income (COI). 4
See financial glossary in Appendix 8.5 Adjusted turnover, adjusted
EBITDA and adjusted leverage are defined in the financial glossary
in Appendix 8.
Appendix 5b: Performance indicators of operations in the
process of being sold (IFRS 5)
€ million1 |
H1 2023 |
H1 2022 |
FY 2022 |
Change (€m) |
Change2 (%) |
|
|
|
|
|
|
|
Erasteel and Aubert &
Duval |
Turnover |
346 |
416 |
826 |
(70) |
-17% |
EBITDA |
(8) |
(18) |
(24) |
+10 |
n.a. |
|
COI3 |
(13) |
(25) |
(27) |
+12 |
n.a. |
|
FCF |
(41) |
(127) |
(234) |
+86 |
n.a. |
Sandouville |
Turnover |
n.a. |
11 |
11 |
n.a. |
n.a. |
|
EBITDA |
n.a. |
(2) |
(2) |
n.a. |
n.a. |
|
COI3 |
n.a. |
(2) |
(2) |
n.a. |
n.a. |
|
FCF |
n.a. |
3 |
3 |
n.a. |
n.a. |
1 Data rounded to the nearest million. 2 Data
rounded to higher or lower %.3 Current operating income (COI).
Appendix 6: Sensitivities of Group adjusted
EBITDA
Sensitivities |
Change |
Impact on adjusted EBITDA |
Manganese ore prices (CIF China 44%) |
+$1/dmtu |
c.€245m1 |
Manganese alloys prices |
+$100/t |
c.€60m1 |
Ferronickel prices – SLN |
+$1/lb |
c.€90m1 |
Nickel ore prices (CIF China 1.8%) – SLN |
+$10/wmt |
c.€30m1 |
Nickel ore prices (HPM nickel, 1.8%, 35% moisture)
– Weda Bay |
+$10/wmt |
c.€125m1 |
Exchange rate |
-$/€0.1 |
c.€165m |
Oil price per barrel (Brent) |
+$10/bbl |
c.€(15)m1 |
1 For an exchange rate of $/€1.10.
Appendix 7: Performance indicators
Operational performance by
division
|
|
|
|
|
Holding and other éliminations, and others |
Total of continuing operations |
Erasteel and Aubert & Duval |
|
|
Total of continuing and discontinued
operations |
(in millions of
euros) |
Operations Department |
|
|
|
Manganese |
Nickel |
Sand |
Lithium |
Sandouville |
Eliminations |
|
|
|
Minerals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half
year 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover |
946 |
518 |
136 |
- |
4 |
1,604 |
346 |
- |
|
1,950 |
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
193 |
(72) |
49 |
(9) |
(68) |
93 |
(8) |
- |
7 |
92 |
|
|
|
|
|
|
|
|
|
|
|
Current
operating income |
138 |
(92) |
26 |
(9) |
(73) |
(10) |
(13) |
- |
7 |
(16) |
|
|
|
|
|
|
|
|
|
|
|
Net cash flow
generated by operating activities |
127 |
(29) |
64 |
(5) |
(109) |
48 |
(71) |
- |
2 |
(21) |
|
|
|
|
|
|
|
|
|
|
|
Industrial
investments (intangible assets and property, plant &
equipment) |
151 |
8 |
50 |
74 |
8 |
291 |
24 |
- |
- |
315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half
year 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover |
1,647 |
762 |
224 |
- |
2 |
2,635 |
416 |
11 |
- |
3,063 |
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
831 |
118 |
97 |
(8) |
(55) |
982 |
(18) |
(2) |
17 |
979 |
|
|
|
|
|
|
|
|
|
|
|
Current
operating income |
765 |
78 |
76 |
(8) |
(58) |
853 |
(25) |
(2) |
17 |
843 |
|
|
|
|
|
|
|
|
|
|
|
Net cash flow
generated by operating activities |
548 |
26 |
30 |
(31) |
(85) |
488 |
(92) |
5 |
(11) |
390 |
|
|
|
|
|
|
|
|
|
|
|
Industrial
investments (intangible assets and property, plant &
equipment) |
144 |
37 |
26 |
28 |
5 |
240 |
22 |
- |
- |
262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial year 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover |
3,151 |
1,392 |
465 |
- |
6 |
5,014 |
826 |
11 |
- |
5,851 |
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
1,402 |
86 |
184 |
(12) |
(107) |
1,553 |
(24) |
(2) |
37 |
1,564 |
|
|
|
|
|
|
|
|
|
|
|
Current
operating income |
1,255 |
14 |
140 |
(13) |
(116) |
1,280 |
(27) |
(2) |
37 |
1,288 |
|
|
|
|
|
|
|
|
|
|
|
Net cash flow
generated by operating activities |
1,124 |
- |
157 |
(23) |
(142) |
1,116 |
(146) |
5 |
16 |
991 |
|
|
|
|
|
|
|
|
|
|
|
Industrial
investments (intangible assets and property, plant &
equipment) |
273 |
85 |
52 |
109 |
11 |
530 |
63 |
- |
- |
593 |
|
|
|
|
|
|
|
|
|
|
|
Turnover and investments by
region
|
|
|
|
|
|
|
|
|
|
(in millions
of euros) |
France |
Europe |
North |
China |
Other |
Oceania |
Africa |
South |
Total |
|
|
|
America |
|
Asia |
|
|
America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
(destination of sales) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half
year 2023 |
30 |
338 |
225 |
442 |
464 |
43 |
34 |
28 |
1,604 |
|
|
|
|
|
|
|
|
|
|
Half year
2022 |
168 |
718 |
138 |
453 |
331 |
372 |
89 |
366 |
2,635 |
|
|
|
|
|
|
|
|
|
|
Financial year
2022 |
313 |
1,215 |
294 |
1,057 |
1,261 |
76 |
128 |
670 |
5,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial investments (intangible assets and property,
plant & equipment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half
year 2023 |
14 |
43 |
21 |
- |
1 |
7 |
131 |
74 |
291 |
|
|
|
|
|
|
|
|
|
|
Half year
2022 |
6 |
15 |
4 |
- |
- |
37 |
150 |
28 |
240 |
|
|
|
|
|
|
|
|
|
|
Financial year
2022 |
9 |
50 |
13 |
1 |
- |
84 |
263 |
110 |
530 |
|
|
|
|
|
|
|
|
|
|
Consolidated performance indicators –
Income statement
|
|
|
|
|
(in millions
of euros) |
Half-year |
Half-year |
Financial year |
|
|
2023 |
2022 |
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover |
1,604 |
2,635 |
5,014 |
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
93 |
982 |
1,553 |
|
|
|
|
|
|
|
|
|
|
|
Amortisation
and depreciation of non-current assets |
(114) |
(130) |
(271) |
|
Provisions for
liabilities and charges |
11 |
1 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
Current operating income |
(10) |
853 |
1,280 |
|
|
|
|
|
|
|
|
|
|
|
(Impairment of
assets)/reversals |
(7) |
(2) |
(221) |
|
Other
operating income and expenses |
(27) |
(1) |
(34) |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
(44) |
850 |
1,025 |
|
|
|
|
|
|
|
|
|
|
|
Financial
income (loss) |
(63) |
(56) |
(89) |
|
Share of
income from associates |
174 |
147 |
258 |
|
Income
taxes |
(15) |
(158) |
(264) |
|
|
|
|
|
|
|
|
|
|
|
Net
income from continuing operations |
52 |
783 |
930 |
|
|
|
|
|
|
|
|
|
|
|
Net income
from discontinued operations (1) |
14 |
(13) |
(156) |
|
|
|
|
|
|
|
|
|
|
|
Net
income for the period |
66 |
770 |
774 |
|
|
|
|
|
|
|
|
|
|
|
- Attributable
to non-controlling interests |
(32) |
93 |
34 |
|
-
Attributable to Group share |
98 |
677 |
740 |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
per share (in euros) |
3.44 |
23.54 |
25.81 |
|
|
|
|
|
|
|
|
|
|
|
(1) Pursuant to IFRS 5 “Non-current assets held for sale and
discontinued operations”, Erasteel and Aubert & Duval CGUs are
shown as discontinued operations. |
Consolidated performance indicators –
Net financial debt flow table
|
|
|
|
|
(in millions
of euros) |
Half year |
Half year |
Financial year 2022 |
|
|
2023 |
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
EBITDA |
93 |
982 |
1,553 |
|
Cash impact of
items below EBITDA |
(71) |
(220) |
(326) |
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from operations |
22 |
762 |
1,227 |
|
|
|
|
|
|
Change in
WCR |
26 |
(273) |
(111) |
|
|
|
|
|
|
|
|
|
|
|
Net
cash flow generated by operating operations (A) |
48 |
489 |
1,116 |
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
Industrial
investments |
(291) |
(240) |
(530) |
|
Other
investment cash flows |
123 |
180 |
238 |
|
|
|
|
|
|
|
|
|
|
|
Net
cash flows from investing activities of continuing operations
(B) |
(168) |
(60) |
(292) |
|
|
|
|
|
|
|
|
|
|
|
Net
cash flows from financing activities of continuing
operations |
(94) |
(55) |
80 |
|
|
|
|
|
|
|
|
|
|
|
Impact of
fluctuations in exchange rates and others |
(16) |
(10) |
(49) |
|
Acquisition of
IFRS 16 rights of use |
(6) |
(14) |
(26) |
|
|
|
|
|
|
|
|
|
|
|
Change
in the net financial debt of continuing operations before taking
into account flows with discontinued operations |
(236) |
350 |
829 |
|
|
|
|
|
|
|
|
|
|
|
Net cash flow
from continuing operations carried out with discontinued
operations(1) (2) |
(133) |
(161) |
(236) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in net financial debt of continuing operations |
(369) |
189 |
593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in net financial debt of discontinued operations before taking into
account flows with continuing operations |
(101) |
(138) |
(213) |
|
|
|
|
|
|
|
|
|
|
|
Net cash flow
from discontinued operations carried out with continuing operations
(1) (2) |
133 |
161 |
236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in net financial debt of discontinued operations |
31 |
23 |
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)/Decrease in net financial debt |
(337) |
212 |
616 |
|
|
|
|
|
|
|
|
|
|
|
Opening (net financial debt) of continuing
operations |
(344) |
(936) |
(936) |
|
Opening (net financial debt) of discontiued
operations |
(31) |
(54) |
(54) |
|
|
|
|
|
|
Closing (net financial debt) of continuing
operations |
(712) |
(748) |
(344) |
|
Closing (Net financial debt) of discontinued
operations |
- |
(30) |
(31) |
|
|
|
|
|
|
|
|
|
|
|
Free
Cash Flow (A) + (B) |
(120) |
429 |
824 |
|
|
|
|
|
|
|
|
|
|
|
(1) Pursuant to IFRS 5 – "Non-current assets held for sale and
discontinued operations”, Erasteel and Aubert & Duval CGUs are
shown as discontinued operations. |
(2)
The amounts relate mainly to financing cash flows from discontinued
operations by the continuing operations |
|
Consolidated performance indicators –
Balance sheet
|
|
|
|
(in millions
of euros) |
30 june |
31 December |
|
|
2023 |
2022 |
|
|
|
|
|
|
|
|
|
Non-current assets |
3,350 |
3,122 |
|
|
|
|
|
|
|
|
|
Inventories |
688 |
724 |
|
Customers |
319 |
369 |
|
Suppliers |
(439) |
(424) |
|
Simplified Working Capital Requirements (WCR) |
568 |
669 |
|
Other items of
WCR |
(117) |
(201) |
|
|
|
|
|
|
|
|
|
Total
Working Capital Requirements (WCR) |
451 |
468 |
|
|
|
|
|
|
|
|
|
Derivatives |
21 |
62 |
|
|
|
|
|
|
|
|
|
Assets
held for sale (1) |
- |
714 |
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS |
3,822 |
4,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions
of euros) |
30 june |
31 December |
|
|
2023 |
2022 |
|
|
|
|
|
|
|
|
|
Shareholders’
equity – Group share |
1,705 |
1,781 |
|
Non-controlling interests |
429 |
464 |
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
2,134 |
2,245 |
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents and other current financial assets |
(1,387) |
(1,660) |
|
Loans |
2,099 |
2,004 |
|
|
|
|
|
|
|
|
|
Net
financial debt |
712 |
344 |
|
|
|
|
|
Net financial
debt/shareholders’ equity (gearing) |
33% |
15% |
|
|
|
|
|
Employee-related liabilities and provisions |
801 |
814 |
|
|
|
|
|
|
|
|
|
Net
deferred tax |
175 |
226 |
|
|
|
|
|
|
|
|
|
Liabilities associated with assets held for
sale(1) |
- |
737 |
|
|
|
|
|
|
|
|
|
TOTAL
PASSIF |
3,822 |
4,366 |
|
|
|
|
|
|
|
|
|
(1) Pursuant to IFRS 5 “Non-current assets held for sale and
discontinued operations”, the assets and liabilities of Aubert
& Duval and Erasteel CGUs were shown in the consolidated
balance sheet at 31 December 2022 as assets held for sale. As of 30
June 2023, as Aubert & Duval and Erasteel were sold during the
first semester, assets and liabilities of these two CGUs are not
part of the balance sheet. |
Appendix 8: Financial
glossary
Consolidated performance indicators
The consolidated performance indicators used for
the financial reporting of the Group's results and economic
performance and presented in this document are restated data from
the Group's reporting and are monitored by the Executive
Committee.
Turnover at constant scope and exchange
rates
Turnover at constant scope and exchange rates
corresponds to turnover adjusted for the impact of the changes in
scope and the fluctuations in the exchange rate from one financial
year to the next. The scope effect is calculated as follows: for
the companies acquired during the financial year, by eliminating
the turnover for the current period and for the companies acquired
during the previous period by integrating, in the previous period,
the full-year turnover; for the companies sold, by eliminating the
turnover during the period considered and during the previous
comparable period. The exchange rate effect is calculated by
applying the exchange rates of the previous financial year to the
turnover for the year under review.
Adjusted turnover
Adjusted turnover is presented to provide a better understanding
of the underlying operating performance of the Group's activities.
Adjusted turnover corresponds to turnover including Eramet's share
of the turnover of significant joint ventures accounted for using
the equity method in the Group's financial statements, restated for
the off-take of all or part of the business activity.
As of 30 June 2023, turnover was adjusted to
include the contribution of PT Weda Bay Nickel, a company in which
Eramet owns a 38.7% indirect interest. Eramet owns a 43% interest
in Strand Minerals Pte Ltd, the holding which owns 90% of PT Weda
Bay Nickel and is booked in the Group’s consolidated financial
statements under the equity method. An off-take agreement for
nickel ferroalloys production (NPI) is in place with Tsingshan,
with Eramet holding a 43% interest, and Tsingshan 57%.
A reconciliation with Group turnover is provided
in Note 3 to the Group's consolidated financial statements.
EBITDA (“Earnings before interest,
taxes, depreciation and amortisation”)
Earnings before financial revenue and other
operating expenses and income, income tax, contingencies and loss
provision, and amortisation and impairment of property, plant and
equipment and tangible and intangible assets.
Adjusted EBITDA
Adjusted EBITDA is presented to provide a better
understanding of the underlying operating performance of the
Group's activities. Adjusted EBITDA corresponds to EBITDA including
Eramet's share of the EBITDA of significant joint ventures
accounted for using the equity method in the Group's financial
statements.
As of 30 June 2023, EBITDA was adjusted to
include the proportional EBITDA of PT Weda Bay Nickel, a company in
which Eramet owns a 38.7% indirect interest. Eramet owns a 43%
interest in Strand Minerals Pte Ltd, the holding which owns 90% of
PT Weda Bay Nickel and is booked in the Group’s consolidated
financial statements under the equity method.
A reconciliation with Group EBITDA is provided
in Note 3 to the Group's consolidated financial statements.
Adjusted leverage
Adjusted leverage is defined as net debt (on a
consolidated basis) to adjusted EBITDA (as defined above), as PT
Weda Bay did not have any external debt during the 2022 and 2023
financial years.
However, in the future, should other significant
joint ventures restated for adjusted EBITDA have external debt, net
debt will be adjusted to include Eramet's share in the external
debt of the joint ventures (“adjusted net debt”). Adjusted leverage
would then be defined as adjusted net debt to adjusted EBITDA, in
compliance with a fair and economic approach to Eramet’s debt.
Manganese ore activity
Manganese ore activity corresponds to Comilog's
mining activities (excluding the activity of the Moanda
Metallurgical Complex, “CMM”, which produces manganese alloys) and
Setrag's transport activities.
Manganese alloys activity
Manganese alloys activity corresponds to the
plants that transform manganese ore into manganese alloys. It
includes the three Norwegian plants comprising Eramet Norway
(“ENO”, i.e., Porsgrunn, Sauda, and Kvinesdal), Eramet Marietta
(“EMI”) in the United States, Comilog Dunkerque (“CDK”) in France
and the Moanda Metallurgical Complex (“CMM”) in Gabon.
Manganese ore FOB cash cost
The FOB (“Free On Board”) cash cost of manganese
ore is defined as all production and overhead costs (R&D
including exploration geology, administrative expenses, sales
expenses, overland transport expenses), which cover all stages of
ore extraction through to shipping to the port of shipment and
loading, and which impact the EBITDA in the company's financial
statements, over tonnage sold for a given period. This cash cost
does not include sea transport or marketing costs. Conversely, it
includes the mining taxes and royalties from which the Gabonese
state benefits.
SLN’s cash cost
SLN’s cash cost is defined as all production and
overhead costs (R&D including exploration geology,
administrative expenses, logistical and commercial expenses), net
of by-products credits (including exports and nickel ore) and local
services, which cover all the stages of industrial development of
the finished product until delivery to the end customer and which
impact the EBITDA in the company’s financial statements, over
tonnage sold.
Appendix 9: Footnotes
1 In accordance with the IFRS 5 standard – “Non-current assets
held for sale and discontinued operations”. See reconciliation
tables in Appendix 12 The definition of adjusted EBITDA, a new
Alternative Performance Indicator, is presented in the financial
glossary, in Appendix 83 The definition of adjusted leverage,
a new Alternative Performance Indicator, is presented in the
financial glossary, in Appendix 84 Subject to satisfaction of the
usual preconditions for this type of transaction5 Assuming
administrative approvals by the Indonesian government6 Compared to
similar or larger-sized companies, i.e., companies (employees and
subcontractors) that worked more than 65 million hours7 See press
release of 22 June 2023 (PR - Contributing indicators 2022 - June
2023)8 See financial glossary in Appendix 89 Net debt to adjusted
EBITDA10 Includes €29m linked to Setrag transport activity other
than Comilog’s ore (€37m in 2021)11 Unless otherwise indicated,
market data corresponds to Eramet estimates based on World Steel
Association production data12 Unless otherwise indicated, price
data corresponds to the average for market prices, Eramet
calculations and analysis; manganese ore price index: CRU CIF China
44% spot price; manganese alloys price indices: CRU Western Europe
spot price13 See financial glossary in Appendix 8. Cash cost
calculated excluding sea transport and marketing costs 14 With a 3
to 5-month lag on the purchase price15 SLN, ENI and others16 Unless
otherwise indicated, market data corresponds to Eramet estimates17
High Pressure Acid Leach18 Nickel Pig Iron19 Class I: produced with
a nickel content above or equal to 99%; Class II: produced with a
nickel content below 99%20 LME: London Metal Exchange; SHFE:
Shanghai Futures Exchange21 SMM NPI 8-12% index 22 For nickel ore
with 1.8% nickel content and 35% moisture content. Indonesian
prices are set according to domestic market conditions, but with a
monthly price floor based on the LME, in compliance with a
government regulation published in April 2020.23 See financial
glossary in Appendix 824 Commissioning at full capacity in early
January 2023, replacing the old plant, whose phase-out became
effective in Q1 202325 Unless otherwise indicated, price data
corresponds to the average for market prices, Eramet calculations
and analysis; Source Zircon premium (FOB prices): Market and Eramet
analysis; Source CP slag (FOB prices): Market and Eramet analysis26
c.90% of titanium-based end-products27 Titanium dioxide slag,
ilmenite, leucoxene and rutile28 LCE: Lithium Carbonate equivalent,
battery grade29 Source: Fastmarkets – Battery-grade Lithium
Carbonate price CIF Asia30 CAM: Cathode Active Material31 For
reference, the 10% NPI stands at $14,690/t in 2023 according to
Macquarie's current forecasts.32 Consensus of main market
analysts33 Bloomberg forecast consensus as of 31/01/2023 for the
year 2023
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