ERAMET GROUP 2001 Activity and results. Presentation to Investors March 2002

Transcription

1 ERAMET GROUP 2001 Activity and results Presentation to Investors March

2 2001 highlights THE GROUP World economic slowdown: marked impact on the nickel and manganese markets Very brisk business in the Alloys division (aeronautics( and gas turbines) Slower than expected ramp-up of new manganese facilities, problems with the Transgabonais railway, rise in costs Progressive implementation of synergies in Manganese and Alloys,, major potential for the future Positive results thanks to a good balance between activities, the financial situation remains healthy despite a significant rise in working capital requirement New stage of development initiated, the plan to expand the nickel and alloys activities has been launched 2

3 Responding to an uncertain THE GROUP Cost reduction programmes are underway in all three divisions and savings measures have been introduced throughout the Group Improvements in customer services and the reduction of delays are priorities in Alloys Programmes to reduce working capital requirements have been implemented, with a particular emphasis on Manganese and Alloys The reporting systems of the three divisions have been adapted: selection of the most significant indicators, rapid detection of any deviation from the plan, immediate application of corrective measures. while preparing for the future 3

4 . preparing for the future THE GROUP Continue to implement synergies and reinforce the Group's management structures Realize as planned the major expansion programmes approved in 2001 Nickel: gradual increase in production capacity to reach 75,000 t in 2006 ( 200 m) Alloys: : construction of a production unit for aircraft engine and structural parts ( 100 m) including a 40,000 t press, with a start-up at the end of 2004 Complete the ramp-up of new facilities in the Manganese division in order to have all the industrial and commercial potential in place, as planned Take advantage of the combining of Aubert & Duval, Fortech and Tecphy: : a unique grouping in the sales, industrial and R&D fields, with greater competitiveness on the global markets Mobilise all the Group's competencies, be prepared to take advantage of all development opportunities Eramet is pursuing its development programme and is holding its course 4

5 Consolidated key figures for 2001* THE GROUP Turnover: 2,228 m (-( 3%) excl. Special Metals Corp.. (SMC) Group net earnings before provision on SMC : 48 m (2000: 107 M ) 1.98 per share (2000: 4.42 ) Group net earnings after 51m. provision net of taxes on SMC: loss (3)m (0.13) per share * Change compared to 2000 Operating profit: 96 m (2000: 301 M ) excl. Special Metals Corp. Profitability ROCE before tax: : 6.5% (2000: 21%) ROE: 4.8% (2000: 11%) before provision on SMC Net dividend proposed at Shareholders' Meeting: 1.14 per share (2000: 1.30) to be paid for 0.60/share in cash, and 0.54/share either in cash or in new Eramet share, at the option of the Shareholder 5

6 Consolidated balance sheet at 31 December 2001 THE GROUP The Group's healthy financial situation allows it to pursue development Millions of Euros Fixed assets Current assets Cash and cash * equivalent Assets Liabilities Shareholders equity Minorities 306 Provisions Financial debts (including mining indemnity 126 m.) Other debts Net financial debts: 380 m, including mining indemnity of 126 m in the financial debts Net financial debts / total equity: 28% including mining indemnity, 19% excluding mining indemnity in the debt * excluding unrealised capital gain net of payables taxes at : 29 m (end 2000: 28 m) Value of SMC shares in Eramet balance sheet at : nil, SMC loan at : nil after provision 6

7 Breakdown of the turnover for 2001* THE GROUP by division (comparison with 2000) Nickel Alloys - 14 % + 6 % 22% 41% Manganese 3 % 37% by geographical area by main market Steel industry 28 % Other 22 % Stainless Steel 15 % Aeronautics 13 % Tooling Power generation 11 % 11 % Europe excluding France 35% North America 27% France 17% * Excluding SMC Other 4% Asia 17 % 7

8 Contribution to EBIT for 2001* THE GROUP Millions of euros Nickel Manganese Alloys Holding & elimination (2.8) 67.0 (8.8) (4.6) Change - 75% n.s. - 17% n.s proforma (9.2) Eramet Group % * excluding SMC 8

9 Evolution of the EBITDA (M ) THE GROUP Sales price Exchange rates Volume & mix Costs & CIM & HF7 Other 2001 performances Costs & delays (excluding CIM & HF7) * excluding SMC 9

10 Return on capital employed : ROCE (pre( pre-tax)* THE GROUP Eramet Nickel Eramet Manganèse Eramet Alliages* Eramet Group* ROCE = * excluding SMC % (- 0.4%) 12.3% 6.5% ROCE brut % 11 % 16 % 21 % 1999 Pro forma 5 % 4 % 14 % 7 % Operating profit (EBIT) Fixed assets excluding financial investments + working capital - provisions (beginning of the period) 10

11 THE GROUP Operating cash flow million Group's operating cash flow* Nickel & Holding Alloys Manganese LME Nickel price Group's operating cash flow LME price USD/tonne** pro * Operating cash flow, after tax, before change in working capital forma ** Average LME Settlement price

12 / share 5.0 The policy of regular dividends has been maintained despite the sharp fall in earnings THE GROUP Dividend per share excluding tax credit Net result per share Tax credit Result before provision on SMC before provision 12

13 ERAMET NICKEL The world's leading producer of ferronickel for stainless steel One of the three producers in the world of high purity nickel for the aerospace industry 13

14 2001 highlights Declining market: NICKEL Lower stainless steels production, particularly in the 2nd half, fall in electronics and nickel plating, rise in superalloys (aeronautics, energy) Surplus nickel supply: sharp fall in the nickel price World consumption* * : - 1.6% World production* : + 4.1% Average nickel price : - 31% Eramet's sales positions reinforced Deliveries of 59,944 t (+ 8%) Efficient sales network * Including China, Russia, Cuba 14

15 2001 highlights Increase in SLN production: 58,973 t (+ 3%) Rise in production costs in euros (+ 4%): mining cost, maintenance, electricity, despite the increase in productivity NICKEL Cost in US dollars stable (rise( in the value of the USD) Good performance at Sandouville and decrease in production costs (- 10%) Production + 6 % Increase in productivity Net earnings for nickel remained positive in the 2nd half of 2001, earnings were around break-even even in Q4 Launch of the 75,000 tpy expansion project 15

16 Key figures for 2001* Turnover : 485 m. (-( 14%) NICKEL Stainless Steel 70% 9% 12% 9% Tooling Chemicals, (eurotungstene) Nickel alloys Plating (aerospace, Other power generation, electronics coinage) Operating profit (EBIT) 41 m. (2000: 165m.) Capital expenditure 36 m. (+ 50%) ROCE brut 15% (2000 : 47%) * Comparison with

17 Nickel price : significant decrease in the second half 2001 Average decrease 2001/2000 : - 31% LME* Strong recovering 1st Q 2002/ 4th Q : + 22% LME* US dollar per pound US dollar per tonne NICKEL Q1 Est. * Settlement quarterly average

18 Evolution of the EBITDA (M ) 250 NICKEL Sales price USD parity Volume & mix Costs & performances 85 Other

19 Actions underway and objectives for 2002 Cost reduction programme Action on mining and maintenance costs, utilization rate of equipment Objective: - 5% on costs compared to 2001 at unchanged economic conditions (USD, fuel oil price, hydroelectricity,,.) NICKEL Objectives for 2002 Production at SLN: 61,500 t (2001: 58,973 t): + 4% Stocking of 1,500 t if the FD 10 furnace is shutdown at the end of 2003 for refurbishment in line with the expansion programme Eramet deliveries: : +/- 60,000 t Ni, depending on market conditions and the date of the furnace shutdown for refurbisment 75,000 t expansion project ( 200 m) Tenders to be completed in the 2nd half 2002 Approval of fiscal conditions in New Caledonia and France (finalisation) Submission of the requested information for the operating permit Pilot tests to continue for the Tiébaghi enrichment process and the Doniambo dust control system 19

20 ERAMET MANGANESE The world leader in manganese alloys for the steel industry The world leader in manganese-based chemical products The world n 2 producer of high grade manganese ore 20

21 2001 highlights MANGANESE A difficult year for the division, but the means of improving industrial performance are being put in place Markets in decline Significant slowdown in steel production excluding China Continued growth of production in China Fall in manganese alloys demand and in prices expressed in US dollars A more significant slowdown in refined alloys Slight increase in prices of HCFeMn and SiMn in the 4th quarter Manganese-based products for the chemical industry: depressed batteries and electronics markets,, stable business in agrochemicals 21

22 2001 highlights (continued) MANGANESE A difficult year for the division, but progress is being made Manganese alloys: deliveries down 7%, production down 9% Problems operating the Transgabonais railway in early 2001 Recovery in 2nd half: : maintenance of the track still needs to be improved Decline in sales of ore in 1st half, improvement in 2nd half Delays with ramp-up of new facilities CIM (Gabon): enrichment is satisfactory / agglomeration needs improvement HF7 (Boulogne): fine tuning of equipment during the year / a higher percentage of sinter in the feed still to be achieved Rise in costs due to production lower than forecast Savings and cost reduction programme stepped up in 2nd half Rationalisation / specialisation of alloy plants: good results Sharp rise in working capital requirement Disappointing financial results due to the market context and delays 22

23 Key figures for 2001* MANGANESE Turnover: 920 m. (- 3%) 19% Environmental services Carbon black Other Steel industry (Mn ore and alloys) 68% 13% Chemicals (Ore and Mn products) Operating profit (EBIT) - 3 m. (2000: 61 M ) Capital expenditure 93 m. (-( 26 %) ROCE (pre( pre-tax) % (2000: 11%) * Comparison with

24 MANGANESE Slowdown in world steel production Millions of tonnes 2001/2000 : - 0.3% Prévision 2002/2001 : - 1.5% Jan.1996 Jan.1997 Jan.1998 Jan.1999 Jan Jan.2001 Jan

25 Manganese alloy prices MANGANESE / t.m. 900 EUROPE EUROPE MC Fe Mn Si Mn HC Fe Mn 300 Jan.1996 Jan.1997 Jan.1998 Jan.1999 Jan.2000 Jan.2001 Jan.2002 Source: CRU 25

26 Evolution of the EBITDA (M ) MANGANESE Sales price Exchange rates Volume & mix Costs & performances (excluding CIM & HF7) - 40 Lower tonnages CIM & HF Other

27 Actions underway MANGANESE Marketing drive to boost ore sales, encouraging outlook in China Savings and cost reduction programme across the division Transgabonais: further improve the maintenance of the track, progress being made Improvement in the performance of new facilities Continue ramp-up in production capacity CIM (Gabon): modification of some equipment (screening), increase the production of sinter to produce more at Boulogne (France) HF 7 furnace (Boulogne): continue process adjustments with sinter feed, increase reliability, reorganisation of Comilog France Norway: good start-up of equipement totreat treat furnace gases, allows an increase in consumption of Comilog ore versus purchased ore Decrease in working capital requirement,, objective: 10 m reduction 27

28 ERAMET ALLIAGES World n 1 in high speed steels World n 1 in superalloys and nickel alloys One of the world leaders for high performance specialty steels World n 2 in forged parts for aerospace and power generation 28

29 2001 highlights ALLOYS Very strong activity in aeronautics and industrial gas turbines Significant increase in new orders over 9 months, reversal of the trend in the 4th quarter compounded by the September events Delays in deliveries because of the saturation of some plant equipment Decline in margins Pressure on prices due to concentration among the biggest clients Rise in costs of supplies, subcontracting and temporary workers expenses due to the high level of activity Order book still strong at the end of 2001, but Airbus and Boeing announced a drop in aircraft deliveries for

30 2001 highlights (continued) ALLOYS Marked slowdown in cutting tools in 2nd half Erasteel deliveries down 10% (23,234 t) but positions in Asia reinforced Results are still satisfactory, although clearly down Increase in working capital requirement for the division The Aubert & Duval/Fortech Fortech/Tecphy grouping is completed, the new entity confirms its strong growth potential Decision to build a plant for the manufacture of aircraft engine and structural parts, including a 40,000 t open-die forging press Project team in place Invitation to tender launched Financing study underway 30

31 Key figures 2001* Turnover: 827 m. (+ 6%) ALLOYS Aeronautics Cutting tools and aerospace and tooling 26% 31% 26% 17% Other Power (automotive, generation Defence, medical, transportation, mechanical engineering) Operating profit (EBIT) 67 m. (2000: 80m.) Operating margin 8.1% (2000: 10.3%) Capital expenditure 36 m. (+ 4%) ROCE pre tax 12.3% (2000: 16%) * Comparison with 2000 ( excluding SMC) 31

32 Evolution of the EBITDA (M )* EBITDA ALLOYS Sales price Volume Exchange rates Costs increase 2001 * Excluding SMC 32

33 Action underway Catching-up with delays in deliveries / improvement of customer services Further rationalisation of manufacturing, transfers between plants, optimisation of the use of equipment between the 3 companies ALLOYS Preparation for the slowdown in activity in aeronautics forecast for the 2nd half, cutbacks in temporary employees, reduced subcontracting,,... Development of non-aeronautics sales (engineering sector, speciality products,, etc.) to see effects in 2nd half 2002 and 2003 Reduction in working capital requirement,, objective for 2002: a 70m. fall Take advantage of the new structure in term of sales efficiency, procurements and R & D, to get through the slump in activity Continue to implement the 40,000 t press/pamiers plant project A combination of industrial,, commercial and R&D resources that are unique in the world 33

34 Special Metals Corp : operating improvements in 2001, but 2002 will be a difficult year A return to profit at EBIT level: : 9 months 2001: USD 13.8 M (9 m. 2000: loss of USD 26 m) But a very fragile financial situation, in a declining market S M C A sharp drop in activity for aeronautics in the USA is expected in 2002 and the higher nickel price will weight on margins The very low capex level should not be maintained much longer and R&D expenses should be stepped-up to prepare for the future The recovery is difficult because of the very high interest expenses due to a high debt level Eramet has decided,, as a precautionary measure,, to account a provision relating to SMC of 51 m. net of taxes. Its loan to SMC is therefore fully written-off. The equity value of SMC is already reduced to nil in Eramet accounts since the end of 2000, and the results of SMC no longer impact Eramet results since Eramet said several times in the past that a permanent financial restructuring of SMC was the only way to ensure the viability of the Company and made certain proposals in this direction 34

35 Eramet Group : outlook 35

36 Strategies Nickel THE GROUP Increase production capacity in a growing market Improve competitiveness to perform better during cyclical through Continue to develop sales network in expanding markets (China) Manganese Take full advantage of a World leading position, a comprehensive and well-targeted range of products and production facilities undergoing modernisation Complete rationalisation and the implementation of synergies Concentrate activities in markets where the division could develop a competitive edge 36

37 Strategies Alloys THE GROUP Gain leading positions on the main global markets thanks to cutting-edge production facilities Continue to grow in line with the long-term trend in aeronautics and power generation,, in fast-growing regions (Asia,, ) Participate in the consolidation of the sector The Group Focus on higher value-added added products in all three divisions Develop R&D and synergies in manufacturing and sales within the Group Keep a moderate gearing ratio to help finance regular growth Be a significant player in all high-potential regions Study all opportunities for external growth 37

38 Outlook for the 1st half 2002 THE GROUP Cautious optimism thanks to a better balance between activities Nickel Start of the upturn in the stainless steel market Recovery of the nickel price Good level of deliveries in 1st quarter 2002, good outlook for 2nd quarter Manganese World steel production still low (excluding China) and demand for manganese alloys has not picked up Slight improvement in alloy prices Growth in sales of ores Start of a recovery in manganese-based products for the chemical industry 38

39 Outlook for the 1st half 2002 Alloys THE GROUP Business still strong in aeronautics and energy but a decline is clearly expected in the 2nd half Erasteel activity remains at a low level,, but is set to take off again as world industrial production recovers (2nd half?) The Group With the better balance between businesses,, if the world economic conditions continue to improve and particularly if the nickel price remains at its current level the first half results should be clearly positive 39

40 Appendix 40

41 Sensitivity of earnings per share* THE GROUP Eramet Nickel (for t, USD/t,, 1 / 1 USD) to the nickel price +/- 100 USD / t.ni +/- 2.3 million / 0.09/share +/ USD/lb Ni +/- 5.1 million / 0.20 /share/ to the US dollar parity +/ / 1 USD +/- 1.4 million / /share Eramet Manganèse (for 1 EUR /1 USD) to Alloys prices +/- 10 USD / t. alloys +/ million / 0.14 / share * estimates, non audited, excluding currency hedging 41

42 Evolution of the turnover* (millions of ) THE GROUP Sales price Exchange rates Market volume & CIM & HF effects 2228 Other 2001 * excluding SMC 42

43 Return on capital employed before tax THE GROUP Millions of Eramet Nickel Eramet Alliages * Eramet Manganèse Holding & eliminations Eramet Group Capital employed At n.s Operating profit (2.8) (8.8) 96.5 ROCE 15.2% 12.3% (-0.4%) 6.5% ROCE = * excluding SMC Operating profit (EBIT) Fixed assets excluding financial investments + working capital - provisions beginning of period 43

44 Operating margins* THE GROUP Nickel Alliages Manganèse % 8.1% (0.3%) % 10.3% 6.4% Eramet Group 4.3% 13.2% * Operating profit / Turnover 44

45 Operating cash flow* THE GROUP M Eramet Nickel Eramet Alliages* Eramet Manganèse Eramet Holding Eramet Group* (5.2) * excluding SMC 45

46 Depreciation and operating provisions* THE GROUP M Eramet Nickel Eramet Alliages * Eramet Manganèse Eramet Holding Eramet Group* (3.5) (1.0) * excluding SMC 46

47 EBITDA* THE GROUP M Eramet Nickel Eramet Alliages ** Eramet Manganèse Eramet Holding Eramet Group ** (5.5) (5.6) * EBITDA = (EBIT) + depreciation of fixed assets + operating provisions ** excluding SMC 47

48 Capital expenditure* THE GROUP M Eramet Nickel Eramet Alliages * Eramet Manganèse Eramet Holding Groupe Eramet* , forecast * excluding SMC 48

49 Workforce at December 31, 2001* THE GROUP Nickel Holding 1% 18% 41% Manganese 40% Alloys * * excluding SMC Total workforce : * 49

50 Shareholders at December 31, 2001 THE GROUP SORAME + CEIR 37.4 % AREVA / BRGM 27.6 % Float 29.9% STCPI 5.1 % (New Caledonia) Number of shares at 31/12/2001 : 24,723,360 50

51 Evolution of the turnover (millions of ) MANGANESE Sales price Exchange rates Volume Lower tonnages Transgabonais CIM - 31 Lower tonnages Boulogne (HF7, HF5) + 8 Consolidation basis Mexico Other

52 World steel production : Change / month year n-1 MANGANESE % / 2000 : - 0.3% Forecast 2002 / 2001 : - 1.5% February -20 Jan.1997 Jan.1998 Jan.1999 Jan Jan.2001 Jan

53 MANGANESE 1000 Evolution of manganese alloy prices USD/m.t USA MC Fe Mn Si Mn HC Fe Mn 300 Jan.1996 Jan.1997 Jan.1998 Jan.1999 Jan.2000 Jan.2001 Jan.2002 Source: CRU 53

54 Evolution of the turnover (millions of ) 600 NICKEL Prix USD parity Volume

55 Nickel market outlook (Western world) X.000 m.t Est for.. Change 2002/2001 NICKEL Stainless steel production Austenitic ratio Primary nickel ratio Primary nickel demand Nickel production Net imports from Russia/Cuba 18, % 52.8% 1, , % 54.5 % , % 56.4% 1, ? % % % Total nickel supply , % Nickel balance

56 World nickel market outlook NICKEL X.000 m.t. World nickel production World apparent nickel demand Balance ,109 1, Est. 1, for. 1,190 / 1,200 1,160 / 1, / + 20 Change 2002/ / +4% +5 / +6% 56

57 Evolution of the turnover (millions of )* ALLOYS Sales price Volume & mix Exchange rates Other 2001 * excluding SMC 57

58 The aircraft market: deliveries Number of aircraft 700 Airbus and Boeing deliveries ALLOYS Airbus Boeing Boeing Airbus AirbusBoeing F F F F Source : Boeing-Airbus Airbus January

59 The aircraft market: : new orders Orders ALLOYS Est. Boeing Airbus 59

60 Car registrations in Europe ALLOYS Monthly production % change year on year February -30 Jan.1998 Jan.1999 Jan.2000 Jan.2001 Jan

61 Orders millions of euros Change ALLOYS Aubert & Duval Holding forged parts long products and specialty products Erasteel sub-total % + 7.2% % % Total Alloys division % 61