2006 HALF YEAR ACTIVITY AND RESULTS

Transcription

1 2006 HALF YEAR ACTIVITY AND RESULTS September 2006 SHIFTING BORDERS TOGETHER 1

2 TABLE OF CONTENTS 2 The Group 15 Eramet Nickel 28 Eramet Manganèse 41 Eramet Alliages 51 Outlook 62 Appendices SHIFTING BORDERS TOGETHER 2

3 1st HALF 2006 RESULTS SHIFTING BORDERS TOGETHER 3

4 GROUP EXCELLENT RESULTS IN 1st HALF 2006 Strong results in the first half 2006 thanks to the ramp-up of new capacity and an improved performance by Eramet Alloys As a result, the decline in results compared with the first half 2005, which was exceptional, was limited Current operating income increased compared with the second half 2005, and the outlook for the second half 2006 is positive The acquisition of Weda Bay Minerals in May 2006 is an important new stage in the group s development 4

5 GROUP Consolidated key figures for the 1st half 2006 STRONG RESULTS Turnover: % to EUR million Current operating income: EUR 260 million (- 24 %) Current operating margin: 17 % Attributable net income: EUR 121 million Attributable EPS: EUR 4.73 / action 5

6 GROUP Consolidated key figures for the 1st half 2006 AN EXCELLENT FINANCIAL SITUATION Net cash: EUR 223 million Gross ROCE: 31.3 % 6

7 GROUP 1st half 2006 Turnover A BALANCED COMPOSITION BY ACTIVITYAND GEOGRAPHICAL AREA Alloys 30% Manganese 37% Europe 47% Asia 28% Other Nickel 33% North America 4% 21% By division By geographical area 7

8 GROUP Current operating income A GOOD 1st HALF, BETTER THAN THE 2nd HALF 2005 M H H H H H H H Group Nickel Manganese Alloys Contribution of divisions to current operating income* * Including eliminations 8

9 GROUP Current operating income COI BENEFITS FROM RAMP-UP OF NEW CAPACITY H H (M ) 0 H SALES PRICE VOLUME EXCHANGE RATE PRODUCTIVITY PURCHASING PRICING OTHER H Analysis of the change in current operating income 9

10 GROUP Consolidated income statement GROUP NET EARNINGS: 121 M In millions of euros H H H2 2005* TURNOVER EBITDA CURRENT OPERATING INCOME Other operating income and charges (2) (2) 114* OPERATING INCOME Cost of net debt 2 0 (3) Other financial income and expenses (11) (5) (4) Share in net income of equity accounted affiliates INCOME TAX (76) (75) (51) TOTAL CONSOLIDATED NET INCOME Minority interests (53) (65) (77) GROUP NET INCOME NET INCOME PER SHARE ( /share) ,09 * Including effect of mining indemnity/ Poum of EUR 124 million (non-taxable) 10

11 GROUP Change in net cash (EUR m) VERY HIGH NET CASH, DESPITE ACQUISITION OF WEDA BAY MINERALS NET CASH OPERATING CASH OPERATING WCR CAPITAL DIVIDENDS ACQUISITION OF OTHER NET CASH 31/12/2005 FLOW EXPENDITURE WEDA BAY* 30/06/2006 * Net of Weda Bay cash 11

12 GROUP Capital expenditure AND FURTHER SUBSTANTIAL INDUSTRIAL INVESTMENTS M H Nickel Manganese Alloys Total Group Intangibles and property, plant & equipment 12

13 GROUP Economic consolidated balance sheet A FINANCIAL STRUCTURE ALLOWING FOR MAJOR INVESTMENT ASSETS 31/12/ /12/ /6/ LIABILITIES 30/6/ /12/ /12/ FIXED ASSETS WORKING CAPITAL REQUIREMENTS NET CASH Economic consolidated balance sheet at 30 June 2006 (M ) SHAREHOLDERS' EQUITY MINORITY INTERESTS PROVISIONS MINING INDEMNITY HEDGING INSTRUMENTS (IAS 32/39) 13

14 GROUP Return on capital employed (pre-tax) GROUP ROCE STILL VERY HIGH M H H Year 2005 Nickel 69.1% 74.8% 59% Manganese 25.6% 87.6% 66% Alloys 9.5% 9.0% 8% Total 31.3% 49.5% 39% ROCE = Current operating income Fixed assets excluding financial investments + working capital provisions [at beginning of the period] 14

15 ERAMET NICKEL STRATEGIC EXPANSION WITH THE ACQUISITION OF WEDA BAY MINERALS, IN A CONTEXT OF EXCEPTIONALLY HIGH PRICES SHIFTING BORDERS TOGETHER 15

16 NICKEL WORLD LEADERSHIP POSITIONS World n 1 producer of ferronickel Market: stainless steel World n 1 producer of nickel chloride Markets: plating, chemicals One of the three producers of high purity nickel in the world Markets: alloys (aerospace, power generation) 16

17 NICKEL Nickel market EXPECTED REBOUND IN AUSTENITIC STEEL PRODUCTION IN 1st HALF 2006 x 000 tm % vs H H H H World stainless steel production 17 Source : Eramet estimation

18 NICKEL Nickel market A BALANCED MARKET IN 1st HALF 2006 x 000 t S S S Balance Supply Demand x 000 t Source : Eramet estimation

19 NICKEL LME Nickel prices RECORD PRICES SINCE THE 2nd QUARTER LME* US Dollar per pound Average H : 7.88 USD/lb Average H : 6.17 USD/lb Average H : 7.20 USD/lb LME* US Dollar per tonne *Settlement quaterly average

20 NICKEL 1 st half 2006: group actions RAMP-UP OF PRODUCTION AND DELIVERIES Production and deliveries increased Production: 33,524 t, % vs. 1H 2005 Deliveries: 34,957 t, % vs. 1H 2005 Pursuit of the 75,000 t programme, with the construction of the ore enrichment plant at Tiebaghi 20

21 NICKEL Turnover for the 1st half % VS 1H 2005 THANKS TO THE RAMP-UP OF NEW CAPACITY Turnover: 495 m (+ 25% vs H1 2005) Stainless steel 79% 600 M 500 Tooling (Eurotungstène) 400 5% 300 Chemicals, Plating, Other 6% Nickel alloys (aerospace, power generation, electronics, coinage) 10% H H H H H H H H H Turnover by main market Half year turnover 21

22 NICKEL 1 st half 2006 NICKEL HEDGING POLICY Record prices in a market in slight surplus The group has launched a hedging programme for nickel Turnover in the first half includes hedging of about 10,000 t of nickel at an average price of about USD 14,500/t (USD 6.58/lb) The hedging programme for nickel will apply in the second half 2006 to about 60% of deliveries at an average price of about USD 15,000/t (USD 6.80/lb) 22

23 NICKEL Current Operating Income INCREASE IN INCOME THANKS TO RISING VOLUMES H H (en M ) H SALES PRICE VOLUME EXCHANGE RATE PRODUCTION PURCHASE PRICING OTHER H Analysis of the change in current operating income 23

24 NICKEL 2006 AN EXCELLENT YEAR Tiébaghi Sea-loading of ore 24

25 NICKEL Nickel prices VERY HIGH PRICES IN 2006 Nickel stocks in weeks'consumption Constant USD LME Settlement Ni price USD/lb Average 8 months LME stocks Other stocks Current USD LME Constant USD LME Nickel price average (Settlement) USD/lb

26 NICKEL Actions of the Group PURSUIT OF DEVELOPMENT IN 2006 Faster production ramp-up About 67,000 t ( %) t.m Reconstruction of a furnace Industrial action A year of substantial investment (EUR 120 million) ,000 t programme Enrichment plant at Tiebaghi Other major investments Mobile machinery on mines Renovation of a rotary furnace at the Doniambo plant P Metallurgical production (t.m. nickel content) 26

27 NICKEL Nickel market in 2006 RETURN TO EQUILIBRIUM EXPECTED IN 2006, AFTER A SURPLUS IN m.t forecast Change Stainless steel production % Total nickel consumption % Nickel supply % Supply-demand balance Nickel stocks in weeks of consumption Source : Eramet forecast 27

28 ERAMET MANGANESE GRADUAL RECOVERY ON A MARKET WITH LONG- TERM GROWTH POTENTIAL SHIFTING BORDERS TOGETHER 28

29 MANGANESE WORLD LEADERSHIP POSITIONS World n 2 producer of high grade manganese ore Markets: manganese alloys, chemicals World n 1 in manganese based-chemical products Markets: electronic, other World n 2 in manganese alloys Market: steel industry World n 1 in refined manganese alloys Market: steel industry The world leader in spent catalyst recycling Market: oil refining 29

30 MANGANESE Manganese market in 1st half 2006 PRICES DOWN, BUT SOME ENCOURAGING FACTORS On average, realised prices were down by about 20-25% in the 1st half 2006 compared with the 1st half 2005 for ore and alloys. But Acceleration in global production of carbon steel (+ 9 % in 1st half) Manganese alloys: gradual recovery in prices Manganese ore: prices stabilised at the end of the 1st half, acceleration in demand 30

31 MANGANESE Ore COMILOG: RAMP-UP CONTINUES x 1,000 t Forecast Comilog : ore and sinter production 31

32 MANGANESE Transgabon railway GOOD INTEGRATION OF TRANSGABON RAILWAY CONCESSION Since November 2005, the concession for the Transgabon railway has been integrated with Comilog s business via its subsidiary Setrag Staff have been incorporated and operational performance has been satisfactory Strategic objective met The operation makes the transportation of ore between the mine at Moanda and the port of Owendo secure, and ensures a good rampup of volumes shipped 32

33 MANGANESE 2006 half year turnover SLIGHT DECLINE IN TURNOVER (-5.5 %) Turnover: 563 m (- 5.5% vs H1 2005) Steel industry (Mn ore and alloys) 57% M Recycling of metals (Mo, Vn) and other 32 % Chemicals (ore and Mn products) 11% H H H H H H H H H Turnover by main market Half year turnover 33

34 MANGANESE Current operating income DECLINE IN INCOME AS EXPECTED DUE TO MANGANESE PRICES H SALES PRICE VOLUME EXCHANGE RATE 2 H H (in M ) PURCHASE PRICING Analysis of the change in current operating income (M ) -2 OTHER H

35 MANGANESE Current operating income BUT COI RESISTS VERY WELL IN THE 1st HALF M Operating marging 12 % 50 0 H H H H H H H

36 2006 POSITIVE OUTLOOK FOR 2nd HALF 36 MANGANESE

37 MANGANESE Demand for manganese in the steel industry STRONGER GROWTH IN 2006 IN GLOBAL STEEL PRODUCTION 2006 / 2005 = % millions t % % World % % China World carbon steel production (crude steel equivalent) 37

38 MANGANESE Manganese alloy prices 2006: ALLOY SPOT PRICES CONTINUE TO RECOVER / t MCFeMn SiMn HCFeMn 0 Jan.1996 Jan.1997 Jan.1998 Jan.1999 Jan.2000 Jan.2001 Jan.2002 Jan.2003 Jan.2004 Jan.2005 Jan.2006 EUROPE 38

39 janv-04 mars-04 mai-04 juil-04 sept-04 nov-04 janv-05 mars-05 mai-05 juil-05 sept-05 nov-05 janv-06 mars-06 mai-06 juil-06 Ore ACCELERATION IN CHINESE DEMAND x.000 t.m July 2006 year to date : 3210 KT Manganese ore imports to China MANGANESE

40 MANGANESE Chemicals and recycling PURSUIT OF INVESTMENT PROGRAMMES GCMC (recycling of oil catalysts) In the 1st half 2006, land was purchased for the implantation of the future Canadian plant for the calcination of catalysts from refineries processing oil sands Start-up scheduled for September 2007 China: new plant for electrolytic manganese bioxide for alkaline batteries Works continued Start-up scheduled for January 2007 CHONGZUO SITE 40

41 ERAMET ALLOYS INCREASED PROFITABILITY AND STRONG GROWTH DUE TO AERONAUTICS SHIFTING BORDERS TOGETHER 41

42 ALLOYS WORLD LEADERSHIP POSITIONS World n 1 in high speed steels Markets: cutting tools and tooling World n 2 in forged parts Markets: aeronautics, power generation One of the World leaders for high performance specialty steels and superalloys Markets: aeronautics, power generation, tooling, medical, automotive, other.. 42

43 ALLOYS 1st half 2006 ACTIONS Reduction of WCR / T ratio Policy of passing on raw materials costs to sale prices continued Erasteel: development of products with high added value (powders) and increased selectivity in orders specialisation of sites with a concentration of traditional smelting at Commentry and power metallurgy in Sweden Aubert et Duval: forging of first parts on new 40,000 t press at Pamiers 43

44 ALLOYS 1st half 2006 ACTIONS Forging of first parts on the new 40,000 t press at Pamiers 44

45 ALLOYS 2006 half year turnover INCREASE IN TURNOVER THANKS TO STRONG AERONAUTICS ACTIVITY Turnover: 456 m (+ 11% vs H1 2006) Aeronautics and defence 36% Cutting tools and tooling 34% Power generation M 8% 100 Other (automotive, medical, transportation, mechanical engineering) 0 H H H H H H H H H H H % Turnover by main market Half year turnover 45

46 ALLOYS Current operating income INCREASE IN COI DESPITE RISING RAW MATERIALS PRICES (M ) H SALES PRICE VOLUME EXCHANGE RATE PRODUCTIVITY PURCHASE PRINCING OTHER H Analysis of the change in current operating income (M ) 46

47 ALLOYS Current operating income CONTINUING RECOVERY IN RESULTS 40 M H H H H H H H H H H H

48 ALLOYS 2006 A YEAR OF STRONG GROWTH FOR THE AERONAUTICS MARKETS 48

49 Aeronautics market ANOTHER YEAR OF STRONG GROWTH IN AIRCRAFT DELIVERIES Boeing Airbus Total + 23 % + 10 % Source : Airbus - Boeing ALLOYS Number of delivered aircrafts

50 ALLOYS 2006 ACTIONS Aubert et Duval: further ramp-up of production in response to demand in the aeronautics sector Erasteel: in September, first stage in establishing an inventory centre 50

51 SOLID OUTLOOK FOR 2006 SHIFTING BORDERS TOGETHER 51

52 GROUP POSITIVE OUTLOOK FOR THE 2ND HALF 2006 Eramet Nickel: nickel prices on the LME volatile, but remaining very high Eramet Manganese: continued improvement in manganese prices Eramet Alloys: strong increase in activity The group s current operating income in the 2nd half 2006 should be greater than in the 2nd half In the event that nickel prices remain at their current high level, the group s current operating income in the 2nd half 2006 will be substantially greater than in the 2nd half

53 NICKEL GROUP WEDA BAY MINERALS A NEW DIMENSION FOR THE ERAMET GROUP 53

54 GROUP ERAMET S SUCCESSFUL FRIENDLY TAKEOVER OF WEDA BAY MINERALS When the offer ended (1 May 2006), Eramet took final delivery of 95% of the shares On 30 June 2006, Eramet had acquired 97% of the shares and began the process of purchasing the remainder The new cost of the acquisition for 100% of the capital is about EUR 167 million, taking into account the cash held by Weda Bay Minerals The acquisition was carried out according to plan 54

55 GROUP The Weda Bay deposit at Halmahera (Indonesia) ONE OF THE BIGGEST UNEXPLOITED NICKEL DEPOSITS IN THE WORLD Weda Bay Deposit 55

56 GROUP Rationale of the operation A GREAT OPPORTUNITY: EVENTUAL DOUBLING OF NICKEL OUTPUT One of the biggest unexploited nickel deposits in the world This deposit will allow Eramet Nickel eventually to almost double its production, after the construction of a hydrometallurgical plant with capacity of about 60,000 t/year. 56

57 GROUP Rationale of the operation AN OPERATION WHICH ACCORDS PERFECTLY WITH ERAMET S STRATEGY Seeking new growth drivers Aiming to strengthen the nickel business, where Eramet already has global leadership positions Geographical diversification, to complement the group s development in New Caledonia A project at an upstream stage, allowing for the full use of Eramet s expertise 57

58 GROUP An ambition of growth in nickel A STRATEGIC DIMENSION: INDUSTRIAL IMPLEMENTATION OF HYDROMETALLURGY Ore at Halmahera, which is oxidised, will be processed in a plant using a hydrometallurgical process studied at Eramet s research centre in Trappes Oxidised ore that can be exploited using this type of process is the world s main nickel resource of the future. Eramet strengthens its capacity for developing other deposits using hydrometallurgical processes 58

59 GROUP Financing by Eramet A STRATEGIC OPERATION FULLY COMPATIBLE WITH ERAMET S FINANCIAL POLICY Acquisition of Weda Bay Minerals financed with the group s equity capital Initial research spending: USD million The range of investment will be finalised during studies, but could be USD 1.5bn-2bn, mainly spread over 3 years. A financial position that allows Eramet to look at other opportunities for growth 59

60 GROUP Weda Bay A NEW DIMENSION FOR ERAMET An eventual doubling of nickel production, which will enhance even further Eramet s position as a key player on the nickel market in the long-term Increased geographical diversification and a substantial presence in Indonesia, a key country for the nickel industry Technological and human development which opens the way to other options for growth in laterites, possibly in New Caledonia 60

61 GROUP CONCLUSION Success of the group s strategic choices All investments are growth drivers The group s exceptional financial situation will allow it to finance an ambitious programme of expansion SHIFTING BORDERS TOGETHER 61

62 SHIFTING BORDERS TOGETHER 62

63 GROUP EBITDA* M H Nickel Manganese Alloys Holding (3) (8) (4) (3) Total Groupe % / Turnover % / Turnover % / Turnover ,7 % /Turnover * EBITDA = Current operating income + depreciation + operating provisions 63

64 NICKEL ROCE % (1) S (1) 1999 : calculated with the proforma operating income and the year end capital 64

65 MANGANESE ROCE 90 % (1) * 2004* 2005 S (1) 1999 : calculated with the proforma operating income and the year end capital * excluding provisions for restructuring 65

66 ALLOYS ROCE 20 % (1) * 2004* 2005 S (1) 1999 : calculated with the proforma operating income and the year end capital * excluding provisions for restructuring 66

67 GROUP 2006 RECORD CAPITAL EXPENDITURE IN 2006 M E Nickel Manganese Alloys Intangibles and property, plant & equipment 67

68 GROUP 1st half 2006 BREAKDOWN OF THE TURNOVER Stainless steel 26 % Aeronautics 13 % Tooling Carbon steel 12 % 21 % Energy Other 4 % 24 % Turnover by main market 68

69 GROUP OPERATING CASH FLOW (1) M H Nickel Manganese Alloys Holding 2 (6) 1 (3) Total Group * (*) Of wich mining indemnity ( 124 m) (1) Operating cash flow, after tax, before change in working capital 69

70 NICKEL Nickel market BALANCED IN m.t Estimation 2006 Forecast Change 2006/2005 Stainless steel production % Austenitic ratio* 78.4 % 76.9 % 73.7 % 75.3 % Primary nickel ratio 56.4 % 54.3 % 52.2 % 53.0 % Nickel consumption : -Stainless other Nickel apparent consumption % Nickel supply % Supply-demand balance Nickel stocks in weeks of consumption * Including «series 200»

71 MANGANESE Alloys production STABILITY, BUT AN INCREASING PROPORTION OF REFINED PRODUCTS Kt Mn MANGANESE ALLOY PRODUCTION OF ERAMET MANGANESE HCFeMn SiMn FeMn affiné 71

72 MANGANESE Market STRONG INCREASE OF WORLD CARBON STEEL PRODUCTION x.000 t.m China World China Jan Jul. Jan Jul. Jan Jul. Jan Jul. Jan Jul. Jan Jul. Jan.2003 Jul. Jan.2004 Jul. Jan.2005 Jul. Jan.2006 Jul. World World excluding China China Source: IISI 72

73 MANGANESE 4,5 4,0 Manganese ore prices 2006: DECREASE IN ORE PRICES Benchmark price negotiated early % Benchmark price negotiated end ,5 3,0 2, % - 25% 2,0 1,5 1,0 0,5 0, Contractual price of manganese ore exported to Japan for use in steel manufacturing USD per 1 % of manganese content Australian FOB 73

74 MANGANESE Market MANGANESE ALLOY PRICES IN UNITED STATES USD/t MCFeMn SiMn HCFeMn Jan.1996 Jan.1997 Jan.1998 Jan.1999 Jan.2000 Jan.2001 Jan.2002 Jan.2003 Jan.2004 Jan.2005 Jan.2006 USA 74

75 $40 $35 $30 $25 $20 $15 $10 $5 $0 75 juin janv févr mars avr mai juin juil août sept oct nov déc janv févr mars avr mai juin juil août sept oct nov déc janv févr mars avr mai juin juil août sept oct nov déc janv févr mars avr mai juil $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Vanadium and Molybdenum A MARKED DECREASE IN 1st HALF 2006 COMPARED TO EXCEPTIONAL LEVELS IN 1st HALF 2005 VANADIUM V2O5 as v MOLYBDENE RN WORLDWIDE OXIDE MEAN janv févr mars avr mai juin juil août sept oct nov déc janv févr mars avr mai juin juil août sept oct nov déc janv févr mars avr mai juin juil août sept oct nov déc janv févr mars avr mai juin juil Vanadium contained - $/lb Molybdenum contained - $/lb MANGANESE

76 The Eramet Share A NEW INCREASE Number of shares traded Eramet share price (monthly average) in euros 140 Eramet shares is eligible for the Deferred Settlement Service since March 28, Share price Number of shares traded GROUP January 1994 April July October January 1995 April July October January 1996 April July October January 1997 April July October January 1998 April July October January 1999 April July October January 2000 April July October January 2001 April July October January 2002 April July October January 2003 April July October January 2004 April July October January 2005 April July October January 2006 April July

77 GROUP 2005 SHAREHOLDERS AT 31 DECEMBER 2005 Other % Sorame + CEIR Treasury shares % 0.59 % BRGM 1.38 % STCPI 5.13 % Areva % Number of shares :

78 GROUP 2005 WORKFORCE AT THE END OF THE YEAR Manganese 47% Nickel 19% Holding 1% Alloys 33% Total workforce: 13,691 78