ERAMET GROUP 2002 Half year results and activity

Transcription

1 1 ERAMET GROUP 2002 Half year results and activity Presentation to Investors September 2002

2 Highlights of the 1st half 2002 THE GROUP Weak economy worldwide, excluding China Marked impact of US events (11 September, Enron, etc.) on the Group Contrasting market and business environments across the three divisions Nickel: substantial upturn in demand and prices good industrial and sales performance Manganese: : low level of demand, weak prices, although the market picked up at the end of the period technical problems in Boulogne (France) and Norway improved performance in Gabon Alloys: sharp slowdown underway, affecting margins marked decline in orders (aeronautics and especially gas turbines), the tooling market remained depressed 2

3 3 Highlights of the 1st half 2002 (continued) THE GROUP Results in nickel are up substantially from the 2nd half 2001, in i manganese they have not yet recovered and are still negative, while in alloys results are sharply down. Group: 1st half results are significantly down on the year-earlier earlier period. The Group s financial position remains nonetheless solid, with net n financial debt down by 67 M. Implementation of programmes to reduce costs and working capital requirement, as announced in March. Implementation of the programme of investments as planned (nickel, alloys), the main orders have been or are being placed.

4 Consolidated key figures for the 1st half 2002* GROUP Turnover: m (1st H : m) - 3% (2nd H m) EBITDA 106 m (1st H.2001: 166 m) (2nd H.2001: 86 m) Operating profit: 31 m (1st H. 2001: 73 m) (2nd H. 2001: 23m) THE Group net earnings: 4 m (1st H. 2001: 33.2 m.) Profitability ROCE before tax: 4% (1st H. 2001: 10%) 0.16/share (1st H. 2001: 1.37 ) ROE 0.4% (1st H 2001: 7%) * Since 1 January 2002, the results and financial position of SMC have no impact on Eramet s results 4

5 5 THE GROUP Consolidated balance sheet at 30 June 2002 Net financial debt is down 67 M. The Group s solid financial position allows it to pursue development. Millions of Euros Fixed assets Current assets Cash and cash * equivalent Assets Liabilities Shareholders equity Minorities 320 Provisions Financial debts (including mining indemnity 123 m.) Other debts Net financial debt: 310 m, including mining indemnity of 123 m in financial debts Net financial debt / total equity: 24% including mining indemnity, 14% excluding mining indemnity in the debt * excluding unrealised capital gain net of payables taxes at : 26 m (end 2001: 25 m) Value of SMC shares in Eramet balance sheet at : nil, SMC loan at : nil after provision

6 Breakdown of the turnover : 1st half THE GROUP by division (comparison with 1st H. 2001) Nickel Alloys - 2% - 5% 23% 41% Manganese 1% North America 27% 36% by geographical area by main market Steel industry 28% Other 21% Stainless Steel 17% Aeronautics 13% Tooling Power generation 10% 11% Europe excluding France 32% France 19% Other 4% Asia 18%

7 7 Contribution to EBIT THE GROUP M Nickel Group Alloys Manganese -20 1st H nd H st H 2002

8 8 Contribution to the decrease in net debt LE GROUPE M Eramet Nickel Eramet Alliages Eramet Manganèse Eramet Holding Eramet Group 1st half Net consolidated debt at June 30, 2002 : 187 M * (for reference December 31, 2001 : 254 M ) * i.e. 310 m. including the mining indemnity of 123 m.)

9 9 Change in EBITDA (M ) THE GROUP s t half Sales price Exchang e rates Vo lume & mix Co s t s & performances (excluding HF 7 & Norway) HF 7 & Norway costs/delays other 1st half 2002

10 10 Return on capital employed : ROCE (pre( pre-tax) THE GROUP Eramet Nickel Eramet Manganèse Eramet Alliages Eramet Group ROCE = 1 st st Half % (-4%) 2% 4% ROCE brut 1 st st Half % 2% 12% 10% Year % (- 0.4%) 12.3% 6.5% Operating profit (EBIT) Fixed assets excluding financial investments + working capital - provisions (beginning of the period) )

11 11 ERAMET NICKEL The world's leading producer of ferronickel for stainless steel One of the three producers in theworld of high purity nickel for theaerospace industry

12 12 Highlights of the 1st half 2002 Significant recovery of the stainless steel market and increase in the nickel price Production of stainless steel: 1st half 2002 / 2nd half 2001: +8% + (est.) NICKEL depressed superalloys market (aeronautics / gas turbines) nickel alloys for electronics: recovery World demand for nickel was very close to supply low availability in nickel scrap,, high demand for ferronickel, exports of Russian nickel: sharp increase (availability of inventory as loan collateral is uncertain) Average nickel price (LME cash): 1st half 2002 / 2nd half 2001: +25% Eramet Nickel deliveries: 30,527 t (+1.5%) Average price in euros: 1st half 2002 / 2nd half 2001: +15% Continued progression of sales in Asia

13 13 Highlights of the 1st half 2002 (continued) Relatively good industrial performance, high level of activity relating to the expansion project CKEL NI SLN production: 28,898 t (+1%) SLN production costs stable Sandouville: : reduced production due to superalloys market (aeronautics, land-based gas turbines) Upturn in operating profit and ROCE from 2nd half ,000 t expansion project: orders placed for main equipment (plant) Fiscal approvals received

14 14 Key figures for the 1st half 2002* Turnover : 257 m. (- 2%) NICKEL Stainless Steel 72% 11% 10% 7% Chemicals, Nickel alloys Plating (aerospace, Other power generation, electronics coinage) Tooling (eurotungstene) Operating profit (EBIT) 37 m. (1st H. 2001: 36 m.) (2nd H.2001: 5m) Capital expenditure 14 m. (1st H. 2001: 15m.) ROCE brut 28% (1st H. 2001: 27%) * Comparison with the 1st Half 2001

15 15 World balance : nickel supply-demand Stock in 000 mt Supply-Demand in 000 mt NICKEL CHINA+CUBA STOCKS RUSSIAN PRODUCERS' STOCKS TRADERS LME STOCKS PRODUCERS 'STOCKS CONSUM PTION SUPPLY (e) 2003(f)

16 16 Change in EBITDA (M ) NICKEL s t half 2001 Sales price Exchange rates Vo lume & mix 1s t half 2002

17 17 Action underway and objectives for the 2nd half 2002 Produce at full capacity Forecast for year 2002: 60, t (2001: 58,973 t) NICKEL Reduce production costs Improve margins, develop products with higher added-value 75,000 t project: completion of planned orders and detailed studies optimise production in 2003 / 2004 taking into account the temporary shutdown to upgrade one of the 3 electrical furnaces

18 18 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

19 19 Highlights of the 1st half 2002 MANGANESE Very depressed markets at the beginning of the year, improvement since June Steel World steel production, excluding China, slightly down on that of 1st half 2001 (-0.5%),( marked recovery underway China: continued increase in steel production Manganese alloys: low level of demand (excluding China), depressed prices Improvement in June, confirmed in 3rd quarter. Chemicals Depressed markets and prices due to weak global economy Batteries: inventory reduction downstream, improvement starting in May Ferrites (electronic): fall in demand Agro-chemicals and other industries: stable

20 20 Highlights of the1st half 2002 (continued) MANGANESE Technical problems slowed production and sales of alloys, marked improvement in Gabon. Technical problems in Boulogne (France) and Norway (Sauda( Sauda) Lower production of HCFeMn and refined alloys Substantial increase in unit costs despite lower fixed costs Slight decline in deliveries of alloys (excl. trading ing): -2% Gabon: increased capacity and improved quality of sinter Transgabonais: : operating satisfactorily Sharp increase in ore sales (+75%) Negative effects of the increase in the Norwegian krone / euro Operating loss in 1st half 2002, working capital requirement is being reduced as planned

21 21 Key figures for the 1st half 2002* MANGANESE Turnover: 467 m. (-1%) Environmental services Carbon black Other Steel industry (Mn ore and alloys) 66% 20% 14% Chemicals (Ore and Mn products) Operating profit (EBIT) -14 m. (1st H. 2001: 6 m) (2nd H.2001: - 9 m) Capital expenditure 17 m. (1st H.2001: 51 m.) ROCE (pre( pre-tax) (- 4%) (1st H. 2001: 2%) * Comparison with the 1st Half 2001

22 22 Recovery of the world steel production MANGANESE Millions of tonnes 2001/2000 : - 0.3% Forecast 2002/2001 : + 3.3% July World Excluding CEI and China 40 Jan. 96 Jan.97 Jan.98 Jan.99 Jan.00 Jan.01 Jan.02

23 Upturn in manganese alloy prices MANGANESE / t.m. EUROPE August 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 23

24 24 Change in EBITDA (M ) MANGANESE st half 2001 S ales price Exchange rates Volume & mix HF 7 & Norway costs/delays 1st half 2002

25 25 MANGANESE Action underway and objectives for the 2nd half 2002 Manufacturing: improve technical performance Boulogne: restart of HF7 end-september after technical adjustments Return to normal operating levels / continue to cut fixed costs Gabon: achieve ramp-up in capacity (quantity and quality) in 4th quarter Transgabonais: : prepare partnership/shareholding as planned Norway: return to normal operations in 4th quarter Speed up cost-cutting cutting plan following increase in NOK / Sales: assert position as world leader in manganese alloys Ore: maintain high delivery levels Alloys: return to a delivery level in line with clearly improved demand and prices (4th quarter) China: seize development opportunities Improve profitability: return to operating profit (4th quarter), capitalise on the improved market outlook, optimise choice of sales regions/products oducts

26 26 ERAMET ALLIAGES World n 1 in high speed steels One of the world leaders for high performance specialty steels and superalloys World n 2 in forged parts for aerospace and power generation

27 27 Highlights of the 1st half 2002 Marked slowdown in the division s key markets ALLOYS The very high level of orders registered in 2001 and the need to catch up with the delay in processing orders ensured sustained activity y at the beginning of the year, but a very significant decline is now underway Aeronautics: drop in new orders, as expected, but the situation seems to have stabilised Gas turbines: very marked decrease in new orders (economic slowdown in the US, effects of Enron, etc.), some orders have been postponed or cancelled Cutting tools / tooling: world market still depressed, offshore relocations and changes in sales practices (US) Recovery expected with international industrial activity Order book sharply down Plan to adapt to new market conditions

28 28 GE Power systems forecast shipments Forecast shipments of land based gas turbines From Greenville plant (US) From European plants ALLOYS For reference 1998 US 2001 F2002 F2003 F2004 EUROPE Source : GE Power Systems (Financial Times June 10, 2002)

29 29 New Orders / deliveries ALLOYS New orders Aubert & Duval Holding Erasteel Division Erasteel deliveries (tonnes) 1st half 2002 / 1st half % -25% -51% -28% 1st half 2002 / 2nd half % -13% -30% unchanged Organise a major scaling down of operations in ADh plants Prepare for future recovery at Erasteel

30 30 Key figures 2001* ALLOYS Turnover: 407 m. (- 5%) Aeronautics and aerospace 34% 15% 24% Other (automotive, Defence, medical, transportation, mechanical engineering) Cutting tools and tooling 27% Power generation * Comparison with 1st Half 2001 Operating profit (EBIT) 8 m. (1st H. 2001: 33m.) (2nd H.2001: 34 m.) Operating margin 2% (1st H. 2001: 7.7%) (2nd H.2001: 8.6%) Capital expenditure 18 m. (1st H. 2001: 15 m.) ROCE pre tax 2% (1st H. 2001: 12%)

31 31 Change in EBITDA (M ) 70 EBITDA 60 ALLOYS st half 2001 Sales price Exchange rates Volume & mix Costs & performances other 1st half 2002

32 32 Action underway and objectives for the 2nd half 2002 ADh : with the processing delays now eliminated, reorganise rapidly to adapt to the decline in activity ALLOYS Accelerate the application of the plan to adapt to the lower level el of orders and implement cost-cutting cutting measures: action on temporary staff, subcontracting, overtime, implement reduced workweek, reduce purchasing expenses,, etc Further reduce working capital requirement (reduce inventory of raw materials and intermediate products) Continue to improve customer services Speed up development in sectors other than aeronautics and power generation

33 33 ALLOYS Action underway and objectives for the 2nd half 2002 (continued) Production capacity expansion programme: new unit for forged parts in Pamiers (Ariège,, France) Order for the 40,000 t press in 3rd quarter 2002 Ground work to begin in 4th quarter 2002 Production start-up: 1st half 2005 Erasteel: : activity began to decline in 2nd half 2001 Most action to adapt operations was undertaken in 1st half 2002 Prepare for the recovery expected in 1st half 2003 Accelerate development of products with higher added-value (ASP, bi-metal, etc.) Continue geographic expansion: Asia, South America, etc.

34 Eramet Group : outlook 34

35 35 Group strategy THE GROUP The Group s key strategic trends were indicated in March Development strategy based on 3 complementary divisions, each with specific characteristics (growth, competition, etc.) Accelerate implementation of synergies between the 3 divisions Pooling of experience and best practices Independent management of divisions together with efficient reporting Reinforce/achieve positions of global leadership Cost cutting Development of sales positions / customer services Control working capital requirement

36 36 Group strategy (continued) GROUP THE Geographic optimisation of margins / products with higher added-value / efficiency of the Eramet International network Step up R&D programme Programme to modernise and expand production facilities These strategic trends are currently being implemented Nickel: expansion (SLN 75,000 t) Alloys: expansion (40,000 t press) Manganese: modernisation (Gabon, Boulogne) )

37 37 Group strategy (continued) THE GROUP 2. Continue efforts aimed at Group expansion Maintain a sound financial structure Examine opportunities in related sectors and be ready to seize themt Provide suitable funding for external growth: free cash flow, shareholding, debt, partnerships, etc. Dispose of non-strategic minor businesses To sum up: Pursuit of long-term objectives as planned, correcting errors to stay on target and preserving the Group s potential for growth, in order to increase profitability

38 38 Outlook for the 2nd half 2002 THE GROUP Nickel: good market prospects If the nickel price and the dollar / euro exchange rate remain close c to their current levels, the operating result should remain satisfactory (however there is still uncertainty about Russian exports) Manganese: start of an upturn The difficulties encountered with the ramp-up in capacity at Boulogne should gradually lessen, and with the favourable outlook on the manganese alloys market, the operating result for the 2nd half should s be slightly improved, with a substantially higher objective for 2003

39 39 Outlook for the 2nd half 2002 THE GROUP Alloys: manage the significant slowdown, but prepare for the long term Activity will continue to decline due to the slowdown in aeronautics and power generation. Erasteel can expect some improvement if international industrial production recovers.. The division s operating result will not improve compared to that of 1st half The Group: confirmed capacity to recover Building on its 3 complementary divisions which operate in different economic environments, the Group should keep a positive 2nd half net result near that of 1st half 2002, and a more favourable year in 2003 can be envisaged if the world economy picks up.

40 Appendix 40

41 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

42 42 Change in turnover (millions of ) THE GROUP st half 2001 Sales price Exchange rates Volume & mix Volume effect Comilog France HF7 other 1st half 2002

43 43 Contribution to EBIT THE GROUP Millions of euros Nickel Alloys Manganese Holding & elimination st H st H Change 1 st H 02/1 st H % -76% n.s nd H Eramet Group % 23.1

44 44 Return on capital employed before tax THE GROUP Millions of Eramet Nickel Eramet Alliages Eramet Manganèse Holding & eliminations Eramet Group Capital employed At (8.0) Operating profit 1 st H (13.7) ROCE % 28.1% 2.4% (3.7%) n.s 3.7% ROCE = Operating profit (EBIT) Fixed assets excluding financial investments + working capital - provisions beginning of period

45 45 Operating margins* THE GROUP Nickel Alloys Manganese 1st H % 2.0% (2.9%) 1st H % 7.7% 1.3% Eramet Group 2.7% 6.3% * Operating profit / Turnover

46 46 Operating cash flow* THE GROUP M Eramet Nickel Eramet Alliages Eramet Manganèse Eramet Holding Eramet Group 1st H (0.9) * Operating cash flow, after tax, before change in working capital

47 47 Depreciation and operating provisions THE GROUP M Eramet Nickel Eramet Alliages Eramet Manganèse Eramet Holding 1st H (3.5) Eramet Group

48 48 EBITDA* THE GROUP M Eramet Nickel Eramet Alliages Eramet Manganèse Eramet Holding Eramet Group 1 st st H (5.5) * EBITDA = (EBIT) + depreciation of fixed assets + operating provisions

49 49 Capital expenditure THE GROUP M Eramet Nickel Eramet Alliages Eramet Manganèse Eramet Holding Eramet Group Est forecast

50 50 Workforce at December 31, 2001 THE GROUP Nickel Holding 1% 18% 41% Manganese 40% Alloys Total workforce :

51 51 Shareholders at December 31, 2001 THE GROUP SORAME + CEIR 37.4 % AREVA / BRGM 27.6 % Au 30 juin? Float 29.9% STCPI 5.1 % (New Caledonia) Number of shares at 31/12/2001 : 24,723,360

52 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** st H 2002 * Operating cash flow, after tax, before change in working capital annualized ** Average LME Settlement price 0 52

53 53 Change in turnover (millions of ) MANGANESE st half 2001 Sales price Market & mix Volume effect Comilog France HF 7 other 1st 2002

54 54 MANGANESE World steel production : Change / month year n-1 % / 2000 : - 0.3% Forecast 2002 / 2001 : + 3.3% Jan.1997 Jan.1998 Jan.1999 Jan Jan.2001 Jan.2002 July

55 55 MANGANESE Evolution of manganese alloy prices USD/t.m. USA Si Mn Jan.1996 Jan.1997 Jan.1998 Jan.1999 Jan.2000 Jan.2001 Jan.2002 Source: CRU MC Fe Mn HC Fe Mn August

56 56 Contract price of manganese ore exported to Japan for metallurgical uses MANGANESE US dollar per 1% of manganese content FOB Australia

57 57 Change in turnover (millions of ) NICKEL st half 2001 Sales price Exchange rate s "Market" Volume Other 1s t half

58 Nickel price : significant recovery LME* Average 1st H nd H. 2001: + 25% Average 1 H / 1 H. 2001: - 0.5% LME* US dollar per pound US dollar per tonne NICKEL July + August * Settlement quarterly average 58

59 59 Nickel market outlook (Western world) X.000 m.t Est. Change 2002/ For. Stainless steel production 17,710 18, % 19,500 NICKEL Austenitic ratio Primary nickel ratio Primary nickel demand Nickel production Net imports from Russia/Cuba 76.6 % 54.4 % % 56.8% 1, * % % 77.5% 56.7% 1,070 / 1, / / 230 Total nickel supply 981 1,101 1,060 / 1,100 Nickel balance / + 62* - 10 / + 10 * Of which around 60 Kt of nickel, transferred from inventories in Russia, considered as collateral to the bank loans granted to Norisk Nickel

60 60 World nickel market outlook NICKEL X.000 m.t. World nickel production World apparent nickel demand Balance ,156 1, Est. 1,191 1, Change 2002/ % +6.1% 2003 For. 1,200 / 1,220 1,210 / 1, / - 20

61 61 Change in turnover (millions of ) ALLOYS st half 2001 Sales price Exchange rates "Market" Volume Change in consolidated basis & other 1st half 2002

62 62 The aircraft market: deliveries Number of aircraft 700 Airbus and Boeing deliveries ALLOYS Boeing 527 Boeing 380 Airbus 325 Airbus Airbus Boeing ? F F F Source : Boeing-Airbus July 2002

63 63 The aircraft market: : new orders Orders 800 ALLOYS Airbus 300 Boeing Est. Boeing Airbus

64 64 GE Power systems Orders for land based gas turbines in GW ALLOYS For reference F2002 Source : GE Power Systems (Financial Times June 10, 2002)

65 65 World and US orders for land based gas turbines in GW ALLOYS to 10 GW F2002 WORLD US Source : Industry forecast (Financial Times 10 juin 2002)

66 66 Car registrations in Europe ALLOYS Monthly production % change year on year Jan.1998 Jan.1999 Jan.2000 Jan.2001 Jan.2002 July

67 Special Metals Corporations (USA) On 27 March 2002, Special Metals Corp. (USA) filed for protection under chapter 11 of the United States law M. USD 1st Q. 2nd Q. 3rd Q. 4th Q. 1st Q. 2nd Q. 3rd Q. 4th Q. ALLOYS. Net sales Operating income (loss) (6.7) (8.7). Net income (loss) (3.9) (2.7) 1.8 2,9 (12.6) (10.8). Accumulated preferred stocks dividends (1.7) (1.7) (1.8) (1.8) (1.8) -. Net income (loss) attributable to (5.6) (4.4) (14.4) (10.8) shareholders. USD Parity in M. Eramet share of SMC net income (loss). Provision for nickel price fluctuations. Cancellation of SMC deferred tax credit. Contribution of SMC to Eramet results (10.0) 1.1 (25.1) (3.8) - - (51,0)* * Exceptional provision of 79 M (51 M after taxes) relating to SMC booked in Eramet s 2001 accounts. Eramet s loan to SMC is now fully written-off. The value of SMC s shares in Eramet s accounts had already been reduced to nil at the end of 2000 due to the company s losses. Since 1 January 2002, the results and financial position of SMC have no impact on Eramet s results (4.3) 1.4 (0.9) 67