A sustainable top yielding stock in Euro Materials - Q1 2019 results 8 May 2019
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Q1 2019 results
8 May 2019
A sustainable top yielding stock in Euro Materials
1Disclaimer
Forward-Looking Statements
This document may contain forward-looking information and statements about Aperam and its subsidiaries. These
statements include financial projections and estimates and their underlying assumptions, statements regarding
plans, objectives and expectations with respect to future operations, products and services, and statements
regarding future performance. Forward-looking statements may be identified by the words “believe,” “expect,”
“anticipate,” “target” or similar expressions. Although Aperam’s management believes that the expectations
reflected in such forward-looking statements are reasonable, investors and holders of Aperam’s securities are
cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many
of which are difficult to predict and generally beyond the control of Aperam, that could cause actual results and
developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-
looking information and statements. These risks and uncertainties include those discussed or identified in
Aperam’s filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de
Surveillance du Secteur Financier). Aperam undertakes no obligation to publicly update its forward-looking
statements or information, whether as a result of new information, future events, or otherwise.
2Health & Safety
Performance
Health & Safety frequency rate of 1.07 in Q1 2019
4
3
2
1
0
Health & Safety is our prime objective
3Q1 2019 Operational highlights
Cost saving progress and first market improvement
Q1 2019 key developments
Resilient EBITDA despite weak market
environment in Europe and seasonally
weak Brazil
Safeguard started curbing imports,
price improvement started late March
Leadership journey© gains on track at
additional annualized EUR34m in Q1
2018 ESG report - Aperam produces the
greenest stainless steel globally*
Elevated working capital despite lower
inventory
The outlook is steadily improving
*see our 2018 ESG report at: https://www.aperam.com/documentation#1_sustainability_report
4Q1 2019 Financial highlights
Aperam successfully navigated the market trough
Solid financials despite trough market conditions Key comments
• Seasonal increase in shipments
but softer economic environment
EURm Q1 19 Q4 18 qoq Q1 2018 yoy and weaker automotive yoy
Sales 1,178 1,120 5% 1,216 -3% • Q1 EBITDA impacted by low base
prices & alloy-price induced
EBITDA 81 90 -10% 141 -43% negative inventory valuation
Basic EPS (EUR) 0.30 0.59 -50% 0.99 -70% effect
• EPS: convertible Bonds effects
Steel shipments (000t) 501 480 4% 517 -3% Q1–EUR0.09 vs Q4 +EUR0.17
EBITDA/tonne (EUR) 162 188 -14% 273 -41% • Good operating cash flow with
EBITDA margin 6.9% 8.0% -14% 11.6% -41% 88% cash conversion but still
elevated working capital
Operating cash flow 71 88 -19% 42 69%
• Net debt remains on a low level
CAPEX -47 -55 -15% -47 0% despite accounting effects from
IFRS 16 (EUR29m) & convertible
Free cash flow* 24 35 -31% -4 NA
bond repurchase (EUR 16m)
Dividends paid -33 -34 -3% -28 18% • Convertible repurchase impact
P&L: Q1 –EUR11m
Net debt 106 48 121% -32 NA
Debt: Q1 +EUR16m Q2 +EUR9m
Q1 2019 marked
XXXthe low point
*before dividend and share buyback
5EU Safeguard update
Low prices in Europe, destocking and uncertainty about the
safeguard mechanism have reduced imports in Q1
Definitive safeguards run from 2 Feb 2019 – 30 June 2021 Imports have decreased in Q1
Avg. 2015 - 2017 import level
Quota
Growing by 5% pa vs preliminary
Country Country based quota is allocated yearly
quota1 Taps residual quota in Q4 if country quota is filled
Residual Allocated quarterly / unused portion is transferred
quota2 to next quarter
Tariff 25% for volumes above the quota
Certain developing countries remain exempt (eg
Exemption Indonesia / S. Africa), no “on the water clause”
Country based and quarterly quota
25% deposit when quota is at 90%
EU Commission reacts to new data: Inclusion of
Thailand
Next review is due in July 2019 question of YTD 2018 YTD 2019
exempt countries needs to be addressed
Flat HR Flat CR
Despite decrease of imports safeguard still needs to address developing countries and relaxation
Source: Eurofer, Aperam 1 SS Hot Rolled : China, S. Korea, Taiwan, USA SS CR: S. Korea, Taiwan, India, USA, Turkey, Malaysia, Vietnam
2 all other countries if not exempt
6Environment and markets
Stainless steel prices are recovering driven by rising alloy
prices and improving base prices
Nickel: moving sideways post the early Q1 bounce Stainless steel price is recovering
22,500 3,500
20,000
17,500 3,000
15,000
12,500
10,000 2,500
7,500
5,000 2,000
Jan.14
May.14
Sep.14
Jan.15
May.15
Sep.15
Jan.16
May.16
Sep.16
Jan.17
May.17
Sep.17
Jan.18
May.18
Sep.18
Jan.19
Jan 14
Jul 14
Jan 15
Jul 15
Jan 16
Jul 16
Jan 17
Jul 17
Jan 18
Jul 18
Jan 19
Nickel LME (USD/t) CR304 Europe (USD/t)
European SS cold rolled stocks have normalized Stainless price premium versus China has widened
80
700
70
500
60 300
50 100
-100
40
Jan 14
May 14
Sep 14
Jan 15
May 15
Sep 15
Jan 16
May 16
Sep 16
Jan 17
May 17
Sep 17
Jan 18
May 18
Sep 18
Jan 19
Q1 14
Q2 14
Q3 14
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Q3 16
Q4 16
Q1 17
Q2 17
Q3 17
Q4 17
Q1 18
Q2 18
Q3 18
Q4 18
Q1 19
German CR inventory (days of consumption) CR304 Europe vs China (USD/t)
Source: Bloomberg, Metal Bulletin
7Leadership Journey update
Good progress on accelerated Leadership Journey© to defend
Aperam’s position as lowest cost producer in Europe
Progress Phase 3 Target Composition
EURm EURm
Variable costs
Fixed cost
67
200 Raw. Materials &
other purchasing
30 33
24 Distribution &
13 Top line strategy
33
Q1 Q2 Q3 Q4 Q1
Actual 2018 Target 2019 Target 2020
2018 2018 2018 2018 2019
With total capex of EUR100m
New technology Innovation Leaner Value added services Procurement
Automation / robotics / New applications & Digitized, connected & One stop shop + supply General procurement /
sensors solutions collaborative chain efficiency Raw material
Q1 2019 cumulated gains at 67m vs total target EUR 200 million gain by end of 2020
8Outlook
Q2 2019 guidance & other forward looking items
Financial outlook Q2 2019:
EBITDA is expected to increase versus Q1 2019
– Safeguard started curbing imports and base prices recovering
– Seasonally stronger quarter in Brazil
Net financial debt to remain at a low level
Other items:
2019 group capex guidance confirmed at EUR175m
Includes Leadership Journey© capex
Genk downstream capex
Leadership Journey© Phase 3: EUR200m savings target by end of 2020
2019 IFRS 16: net debt: +EUR29m, EBITDA: +EUR8m/y, Depreciation: -EUR7m/y
We expect the recovery that started late in Q1 2019 to continue
9Corporate Access
May / June 2019 schedule
• 09.05 London Conference Goldman Sachs
• 09.05 Paris Roadshow JP Morgan
• 13.05 Madrid Roadshow Degroof Petercam
• 14/15.05 Barcelona Conference Bank of America
• 20.05 New York Roadshow ING
• 21.05 Boston Roadshow Citi
• 22.05 Chicago Roadshow Citi
• 29.05 Nice Conference Societe Generale
• 04.06 Scandinavia Roadshow Morgan Stanley
• 05.06 Berlin Conference Deutsche Bank
• 11.06 Milan Roadshow Citi
• 18.06 Dublin Roadshow Baader / Alphavalue
We are looking forward to meet you there
10Financial results
Pôle Multiculturel, Isbergues – France © Coulon
Aperam 304 Uginox Top, Mat & Bright (façades) + K41 Patina (chéneaux encaissés)
11Financial results
Q1 2019: EBITDA reflects a soft seasonal improvement, the
base price trough in Europe
Stainless & Electrical Steel Services & Solutions Alloys & Specialties
224 91 1,458
75 1,237
185
EBITDA* EBITDA* 805 EBITDA*
109 (EURm) (EURm) (EURm)
21
a djusted 16 a djusted 14 a djusted
111 (17) 12
87 EBITDA/t (€) EBITDA/t (€) EBITDA/t (€)
52 7
-3
Q1 2018 Q4 2018 Q1 2019 Q1 2018 Q4 2018 Q1 2019 Q1 2018 Q4 2018 Q1 2019
• Strong shipment increase qoq despite • Shipments improve seasonally qoq. • Shipments improve seasonally
softer European economy and Higher nickel price and lower import
• EBITDA increases qoq due to higher
seasonally weak Brazil pressure facilitate destocking
volumes, a positive price/mix effect
• Europe EBITDA missed the seasonal • EBITDA improves qoq due to higher and lower negative inventory valuation
upturn qoq due to lagging base price volumes and normalizing market
• The yoy EBITDA decline is largely due
effects and negative inventory conditions as the European inventory
to unfavourable inventory valuation
valuation while Brazil EBITDA declines overhang reduces
effects. Underlying EBITDA was flat
for seasonal reasons qoq
• EBITDA declines yoy mainly due to yoy
• Significantly lower prices, lower lower volumes and negative inventory
volumes and negative inventory valuation effects
valuation explain the yoy EBITDA drop
Adj. EBITDA of 162 EUR/t in Q1 2019 is due to trough base prices & negative inventory valuation effects
* Difference with total Aperam’s quarterly EBITDA due to Others & Eliminations line
12Financial results
Q1 2019: Seasonal shipment increase in a softer demand
environment and lag effects yield trough earnings
Seasonal shipment growth qoq but weak Q1 adj. EBITDA reflects base price trough
EU economy yields yoy decline and inventory valuation*
13.4% 13.4%
517 12.3%
11.7% 11.6%
11.2% 11.0%
508
501
160
495 154 150
141 8.0%
486 130 6.9%
123
115
478 480
477
90
81
467
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Total Adj. EBITDA (m€) Adj. EBITDA as % of Sales
Shipments (thousand metric tonnes)
Q1 2019 marks the trough
13Financial results
Q1 2019: S&E most hit by base price drop and valuation
effects while S&S and A&S normalize
…which together with cost of convertible buy back
Segment EBITDA reflect lag effects from Q4 import flood
is also reflected in EPS*
1.22
87 0.99
0.94
1.00
0.87
0.65
0.59
52 103
85 80
76 72
0.30
53 49
16 25
12
-3 7
Q4 2018 Q1 2019 Q4 2018 Q1 2019 Q4 2018 Q1 2019 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
S&E S&S A&S
Net result (m€) Basic EPS (EUR)
Self-help measures only partly compensates for weak market conditions
*Q4 2018: Financial results includes a EUR18m gain related to the convertible bond due to the expiry of put option by bondholders
*Q1 2019: Financial results includes a EUR11m charge related to the convertible bond due to accelerated amortization of the premium (reversal of the Q4-18 gain) 14Financial results
Q1 2019: IFRS 16 & convertible buy back add to net debt
Still elevated working capital despite successful destocking
Strong balance sheet FCF dragged down by temporarily elevated working capital
200
132
206 206
100
106
29 62
98 55 35
16 40 24
64 61 0 15
48
20
-32
-63 -100
-4
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
-200 -16
Q1 17
Q2 17
Q3 17
Q4 17
Q1 18
Q2 18
Q3 18
Q4 18
Q1 19
Net debt €m Convertible
IFRS 16 Working capital €m Change in working capital Capex Free Cash Flow (m€)
Continued solid balance sheet and cash generation
15Value Strategy
© Adobe Stock
16Investment case & value strategy
Guiding principle: Being a sustainably safe and profitable
company
Cost leading Cash generation and
Self help strategy
footprint financial discipline
Leadership Journey® Optimized and sustainable Strong cash generation
European asset base through the cycle
Phase 1: Restructuring
Phase 2: Asset upgrade Only flat stainless steel Strongest balance sheet in
Phase 3: Transformation producer in South America industry
Top Line strategy Lean organization Progressive dividend
Leading industry margins Strong shareholder returns
End-user & service focus
and returns (payout 50-100%)
Value accretive opportunities
(Genk CRM, M&A)
Solid cash generation with strong shareholders’ return.
New projects and self help strategy to further improve Aperam’s profitability
17Investment case & value strategy
Financial policy: Strong balance sheet, investment in long
term growth & sustainability and value accretion for shareholders
Financial Policy 2019
Company Invest in sustaining and upgrading the company’s assets base Group capex EUR 175 m
Sustainability Fund the Transformation Program and Top Line Strategy (incl ~EUR100m maintenance)
Value
accretive Compelling long term growth and M&A opportunities with
growth &3 high hurdle rate
M&A
A base dividend, anticipated to progressively increase over time*
Dividend Target NFD/EBITDA ratio ofInvestment case & value strategy
Track record: Aperam a solid performer even in challenging
times
Solid operating performance despite market headwind From net loss to fast growing net income since 2013
12.5% 4.00 3.39
2.47
11.8% 1.99
10.0% 10.6% 10.8%
0.91 320
286
559
5.7% 504 -1.08 -0.96 193
451 455 155
4.1% 368 71
220 -86 -74
168
2012 2013 2014 2015 2016 2017 2018
2012 2013 2014 2015 2016 2017 2018
Total Adj. EBITDA (m€) adj. EBITDA margin Net result (m€) EPS
Strong balance sheet Permanent volume growth since 2012
26%
23%
20%
14%
6%
2% 1,886 1,917 1,936 1,972
-2% 1,728 1,813
1,683
619 501 442
290 -63 48
147
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Net debt (m€) Gearing (%) Shipments (thousand metric tonnes)
19Investment case & value strategy
Self help: Leadership journey® has a clear and visibly
positive impact
Aperam Mission Aperam’s continuously reinforced Leadership Journey®
Total target
gains
LJ Phase 1 – Restructuring USD
1 Be a sustainably safe company 1 2011-2013 350m
LJ Phase 2 – Asset upgrade USD
2 Deliver best in class profitability 2 2014-2017 225m
and returns
LJ Phase 3 – Costs & EUR
3 Be the preferred Supplier 3 2018 – 2020 Transformation 200m
Transform the company to achieve the next structural profitability improvement
20Investment case & value strategy
Resilience: Strong balance sheet and low maintenance
capex
The right balance sheet for a volatile industry Bloomberg implied CDS spread signals high quality
26% 300
23%
20% 250
14%
200
6%
2% 150
-2%
619 100
501 442
290 -63 48 50
147
0
Jan 12
Jul 12
Jan 13
Jul 13
Jan 14
Jul 14
Jan 15
Jul 15
Jan 16
Jul 16
Jan 17
Jul 17
Jan 18
Jul 18
Jan 19
2012 2013 2014 2015 2016 2017 2018
Net debt (m€) Gearing (%)
Low CAPEX need and high descretion Bondholder perspective
Rating Outlook
Worki ng
Ca pi tal
Safety Moody’s: Baa3 stable
Buffer S&P: BBB- stable
EBITDA Dividend
2018
Dividend Aperam intends to maintain a strong balance
! !
CAPEX
2018
sheet consistent with investment grade
Min Capex financial ratios
21Investment case & value strategy
Shareholder focus: We care about investors and can afford
it due to a high & stable FCF
Consistent operating cash flow through the cycle Solid re-investments and attractive cash returns
(EURm)
377 Others (incl Δ cash)
374
354 14 70
295 Share buyback 90
130
106
212 Dividend 47 92
184
152 117 100
Growth/improvement
Capex -97
Replacement Capex
2012 2013 2014 2015 2016 2017 2018
Cash-flow from operations (m€) 2017 2018
Solid average 7% free cash flow yield* Best in class cash distribution to shareholders
51% 53% 57% (EURm)
26% 29% 38%
260
241 21% 100
10%6% 211 70
6% 5% 90
9% 8% 6%
130 ~140
106 108 87 106
85 58
2016 2017 2018 2019e
2012 2013 2014 2015 2016 2017 2018
Dividends Share buy backs
Free Cash Flow (m€) FCF conversion FCF Yield
*FCF temporarily impacted by working capital consumption
22Investment case & value strategy
S&E South America: recovery momentum in Brazil
Brazil economy recovers,
Solid margins even during economic slowdown*
weak FX improves competitiveness
17% 19% 17% 10% 4.00
13% 14% 13% 8% 3.50
176
167 162 5%
8% 3.00
3%
120 118 2.50
113 0%
-3% 2.00
82
-5% 1.50
2012 2013 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Adj. EBITDA (m€) Adj. EBITDA margin (%) GDP Brazil (%) Inflation Brazil (%) BRL/USD
S. America adj. EBITDA margin consistently beats peers** Brazil Stainless steel demand in recovery mode post crisis
17% 19% 17% 110
14% 13% 100 China 9.2
kg/ capita
90
Global Trendline
80 implied
8% 7% ~3.8kg/capita
6% 6%
3% 70
2014 2015 2016 2017 2018 Brazil 1.3kg/
2014 2015 2016 2017 2018 capita
Peers Adj. Ebitda margin (%) Stainless steel apparent
APERAM South America Adj. Ebitda margin (%) 2018
consumption 2014=100
*In 2014, €43m related to the sale of electricity surplus have been excluded from Adjusted EBITDA of Stainless & Electrical Steel South America
Source: GDP and inflation: IMF **Peers being average of Outokumpu and Acerinox (total) 23Investment case & value strategy
Portfolio improvement: New investment projects to further
transform Aperam’s European footprint
Genk cold rolling and annealing & pickling line
A total ~EUR130 m CAPEX for Genk improvements with planned completion during 2020*
Investment in a new Cold Rolling, Annealing and Pickling Line is progressing
– This investment project drives the further transformation of Aperam
– state of the art technology upgrades our product range to the most demanding applications
– improves lead-time and flexibility to the market demand,
– increases efficiency and cost competitiveness
– enhances our health, safety and environmental impact
Capex spend underpins cost efficiency and top line program
*ramping up in 2021
24Investment case & value strategy
ESG excellence: Take a look at Aperam from an ESG
perspective
Our mission is to produce reliable, 100% recyclable, green stainless steel
Products Non toxic, long lifespan and 100% recyclable without loss of quality
Climate change We have the lowest CO2 footprint in the industry globally
Environment We are recycling champion and 33% of our energy intake is renewable
Process We have ambitious ESG targets and a convincing track record
Social We value our diverse workforce, invest in training & 94% rate us a good employer
Governance The majority of our board is independent
Compliance We have a robust compliance framework and a zero tolerance policy
Please find our complete ESG presentation & report at: www.aperam.com/sustainability
25ESG
Aperam produces the greenest stainless steel globally
26ESG summary
ESG is core at Aperam and starts at the top
We take E, S and G seriously
Governance & Stakeholders Social
• Our high ethical standards are reflected • Our people are colleagues with whom we share
in our robust corporate governance and values and a common future
– Their safety is our non-negotiable
structured compliance program with a
priority
zero tolerance policy for non compliant
behavior – Their motivation and creativity is our
• our Board of directors is composed of a greatest asset
majority of independent directors – Their development is a key to our
• Board Committees are independent success.
members only • We promote diversity
• We aim to be a partner of choice for our • We believe in a positive dialogue and have
customers and suppliers collective labour agreements in place throughout
• Our Corporate Responsibility is Aperam
reflected by local programs and
stakeholder engagement
Environment
• As an energy-intensive industry, we consider environmental consciousness as a necessary prerequisite to our sustainable
profitability
• Recycle: Our products are infinitely recyclable and our main input in Europe is recycled scrap
• We have an industry leading CO2 footprint with the greenest” stainless steel globally due to our FSC-certified forest in Brazil
• We have clear targets in place to improve our environmental performance
27ESG summary
Our products are environmentally friendly
Our mission is to produce reliable, 100% recyclable, green stainless steel
• Our stainless & alloy products are 100% recyclable - without any loss of quality
• Our products have a very long useful life – they support and enable a sustainable global
development
• Our products are non toxic in production and usage
• We are the only stainless steel mill using 100% charcoal instead of coal based coke in our BFs
• Our European production is predominantly based on scrap recycling: >80% of raw material
• Our product is ‘Green Steel’ because it is produced from a clean and renewable energy source
By doing so, we maintain a relationship of respect with the surrounding environment
Recycling Mechanical Resistance Corrosion Cleanability Aesthetics
properties to fire resistance
Steel is an alloy of iron and carbon. Stainless steel additionally contains at least Steel Stainless Steel
10.5% chromium. Stainless steels’ corrosion resistance and mechanical O2 Chromium oxide =
Iron oxide = rust
properties can be further enhanced by adding other elements, (eg nickel, passive film
molybdenum, titanium, niobium, manganese, etc) and through mechanical & Fe + C Fe + C + Cr ≥ 10.5%
thermal treatment
28ESG summary
Aperam produces sustainably and responsibly
Our mission is to produce reliable, 100% recyclable, green stainless steel
Renewable energy Recycling
In our BioEnergia unit, based in Brazil, we produce charcoal from our FSC-certified sustainably cultivated
eucalyptus forests in Minas Gerais
Charcoal is used in our steel-making process as a natural and renewable substitute for fossil fuels (coke). We
managed to eradicate entirely the use of coal based coke in our blast furnaces which gives us a sector leading CO2
footprint
In Europe, our main input is recycled scrap (>80%). We truly believe in and work to promote the circular economy
Our forest management is based upon the best practices, recognized by the Forest Stewardship Council’s (FSC®) certification, which standards and principles conciliate
ecological protection (flora and fauna, but also water reserves) with social benefits and economic feasibility. Our forests are made of selected cloned saplings which are 29
considered among the best on the market and they are separated by firewalls and strips of natural vegetation to take into account both fire-prevention, biodiversity preservation
and local development (beekeeping).ESG summary
Aperam supports the United Nations’ Sustainable
Development Goals
We take broad responsibility: our Products and Environmental and Social action
Gender balance is ranked In our forestry, located on
highly on our priority list as hydric-stressed areas like
from 2017 and has received our other plants, lowering
Health & Safety is Aperam’s primary a special commitment from water consumption and improving
concern and the priority in all our management, who decided to set up the quality of discharge are key
proceedings specific objectives for creating more elements of our environmental
gender balance in our workforce strategy
More than 30% of Aperam’s Research & Development Aperam is committed to a
energy comes from and innovation are top sustainable cohabitation
renewables as biomass priorities for Aperam. We with our neighbouring
(charcoal) and, via pilot projects, also help our customers adapt their communities, allowing host cities to
wind and solar own processes (welding, stamping, thrive and addressing inhabitants’
etc.) to make the most of their tools legitimate requests
Aperam is a recycling Our BioEnergia cultivated Ethics are a key component
champion: We use the forest produces charcoal to Aperam’s values. We
maximum amount of which prevents use of met comply with all applicable
recycled material (not only scrap) in coal & coke and acts as a FSC regulations, interact transparently
our production and also take good certified carbon sink. Our plants are with authorities and support the fight
care to leverage wastes and by- constantly reducing their energy against corruption, money laundering
products in line with our zero-waste consumption and participate in our and anti-competitive practices -
target climate action plan among others
Environment Social Governance 30ESG summary
Social: Our people are our asset
Criteria 2020 Target Aperam 2018 status Steel industry 2017*
Lost-time injury
frequency rateESG summary
Environment: A best in class footprint
Criteria 2020 Target** Aperam 2018 status Steel industry 2017
Energy intensity 12.2 GJ/t -10% vs 2012 12.5 GJ/t -8%
CO2 intensity* 0.49 t/t -35% vs 2008 0.49 t/t² -35% 0.9 t/t²
Water consumption 9.5 m3 /t -5% vs 2015 9.9 m3 /t -1% !
Dust intensity 211 g/t -12% vs 2015 89 g/t -63%
Zero Waste target 100% reused or recycled 93.3% !
We aim to exceed environmental legislation and are committed to continuous improvement
*An internal CO2 price of €30/t is applied to all investments. We review and adjust this if necessary to maintain the incentive for CO2 savings **2030 targets for dust emissions
70g/t, for water consumption 5.6 m3 /t, 2030 CO2 target and energy intensity target is currently in preparation ²Scope 1+2 32ESG summary
Environment: Aperam has a convincing environmental track
record and clear improvement targets (2030 targets are drafted**)
CO2 emissions (t/t crude steel)* Energy consumption (GJ/t crude steel)
0.78
16
0.75 0.72 14.7
0.70 15
0.61 0.58 14.0
0.500.48 0.54 13.814.013.613.6
0.48 0.49 0.49 0.49 14
13.012.812.8
13 12.412.5 12.2
12
11
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2020
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2020
Dust emissions (g/t crude steel) Water intake (m3/t)
213 240 242 11.5 10.7 10.2 10.1
211 10.1 9.9
151 5.9
89 70
2013 2014 2015 2016 2017 2018 2030 2013 2014 2015 2016 2017 2018 2030
Target Actual *scope 1 & 2
33ESG summary
Environment: Bio Energia & recycling give Aperam a best in
class climate change footprint
Aperam energy mix 2018 Aperam’s has the smallest CO2 footprint in the industry
CO2 t/t scope 1+2
2%
30% 33%
1% 1.0
34%
0.5
Charcoal Natural Gas Coke
Electricity Other Aperam Stainless Industry
Our sustainably cultivated forest in Brazil
is a unique asset
Source: Aperam estimates & extrapolations, ISSF data, CRU
*Data is for austenitic HR steel 34ESG summary
Governance: Our leadership team
Key facts & compensation A diverse & experienced team
• Entrusted with day-to-day management of the Company
• Appointed and dismissed by the Board of Directors
• Experience and industry know how
• Average age: 48 / 6 Nationalities
• CEO: responsible for Aperam’s sustainability
performance and compliance
• CHRO, Head of Communication and Sustainability:
responsible for steering the Sustainability Strategy via
discussions with the rest of the Leadership Team
• Compensation aligned with long term interest of the
Company and its stakeholders
Multiplier for performance related bonus includes
H&S factors (1 year plan)
Long term incentive plans based on EPS and TSR
evolution (3 year plan) vs relevant peers and index
Aperam benefits from the experience and industry know-how of its Leadership Team
35ESG summary
Governance: Board of directors and shareholder structure
Principles of our board Shareholder structure
● Responsible for strategic direction and oversight of the
business, as well as for appointing senior management
● Election subject to shareholder approval. Directors are
elected for 3 year terms 19
● Chairman: Mr. Lakshmi N. Mittal
● Lead Independent Director: Mr. Romain Bausch
2 40
● 7 members with a majority of independent directors
(4 independent directors out of 7) 8
● 2 Board Committees composed of 100% of
independent directors and reporting to the Board of
Directors: 6
▬ Audit and Risk Management Committee
covering also ESG matters ; Chair: Ms. 10 5
Laurence Mulliez 10
▬ Remuneration, Nomination and Corporate
Governance Committee ; Chair: Mr. Romain
Bausch Mittal Family N. America France UK
Benelux Other EU Treasury Unidentified
Diverse skills, backgrounds, knowledge, experience, geographic locations, nationalities and gender
are reflected on our board and ensure effective governance
Source: IPREO, Bloomberg April 2019
36Business overview
Musée des Confluences, Lyon - France COOP HIMMELB(L)AU © Sergio Pirrone Executed using grade 316L - microblasted finish
37Group segments &
corporate structure
38Business overview
Group: Segments & corporate structure*
Stainless & Electrical Steel Services & Solutions Alloys & Specialties
2.5mt production capacity 40 kt production capacity
1.9mt of gross shipments 819kt of gross shipments 36kt of gross shipments
83% of group EBITDA 8% of group EBITDA 9% of group EBITDA
One of the largest global producers of Aperam sells and distributes its products Fourth largest producer of nickel alloys
stainless steel** through the S&S segment, which provides globally
Europe: value added and customized steel
Aperam specializes in nickel alloys and
solutions through further processing to
2 Electric Arc Furnaces use scrap as specific stainless steels
meet specific customer requirements. S&S
major input material
core activities: Our products take the form of bars,
Stainless steel flat product output semis, cold-rolled strips, wire and wire
• direct sales of Aperam products to end
South America: rods, and plates, and are offered in a
users
2 blast furnace use iron ore and charcoal wide range of grades
• distribution of Aperam and third party
produced from own forests material High value items that are often sold on a
2 EAF use recycled scrap • transformation services, according to kg basis
Stainless flat products & electrical steel specific customer requirements
Aperam covers the complete stainless value chain with industry leading assets in Europe and Brazil
*gross shipments and EBITDA are before eliminations
** By production capacity 39Business overview
Group: Segments & corporate structure II
Production assets in Europe and South America
Châtelet, Belgium Genk, Belgium Gueugnon, France Isbergues, France Timóteo, Brazil Imphy, France
Location & facts Location & facts Location & facts Location & facts Location & facts Location & facts
Melt shop Melt shop Cold-rolling mill Cold-rolling mill Melt shop Melt shop
Hot rolling mill Finishing Finishing Finishing Finishing Finishing
Capacity Capacity Capacity Capacity Capacity* Capacity
Slabs 1,000 kt Slabs 1,000 kt Finished 400 kt Finished 350 kt Slabs 900kt EAF 60kt
HSM 2,800 kt 2 mm wide capacity Specialized in Bright LC2i: integrated line Stainless finished 1 VIM, 2 VAR,
316 and duplex Annealing (BA) 350kt Rotary continuous
grades products and Electrical CR: Caster for long
stabilized ferritics. Grain oriented 60kt products
Cold-rolling 700 kt
Non GO 170kt Wire hot rolling mill:
40kt
SP Carbon 200kt
*some lines are flexibly
6 Cold rolling mills
used for different
products
40Business overview
Group: Segments & corporate structure III
Aperam’s value chain
Slabs Hot rolling Cold rolling / Finishing Service
Isbergues Direct
Châtelet 0.35Mt Sale
1.0Mt Service
Center
Châtelet Genk Stainless
2.8Mt 0.7Mt flat
Direct
Genk Sale
End customers
1.0Mt Gueugnon Service Steel service
0.4Mt Center centers
Transformation
Electrical Direct
0.18Mt Electrical flat Sale
Timoteo Timoteo
0.9Mt 0.88Mt Service
Stainless Stainless flat
0.35Mt Center
Chatelet Direct
Imphy Ni alloys & Sale
Imphy
0.06Mt specialties
Imphy Service
Center
Stainless & Electrical Steel Europe
}
Stainless & Electrical Steel South America Stainless & Electrical Steel
Alloys & Specialties
Services & Solutions 41Business overview
Group: A balanced risk profile and customer structure
Shipment split by segment 2018* EBITDA contribution by segment 2018*
8%
29% S&E Europe 9% S&E Europe
46% S&E S. America S&E S. America
51%
A&S A&S
1%
32%
S&S S&S
24%
Revenue by region 2018 Revenue by customer industry
Asia & Brazil
Building & Construction
6%
Africa US 8%
26% Catering & Appliances
Europe Other Americas
18% General Industry
Germany
Automotive
Italy
Energy & Chemicals
France 18% 24%
Americas Transport
Other Europe
* Calculated on segmental data before eliminations
42Business overview
Group: Substantial improvement in KPIs over time as
self-help supports earnings
EBITDA by segment (EURm) Shipment by segment (kt)
600 559 504 2,500
451 455
500 2,000
368 1,972
400 1,917 1,936
1,500 1,886
300 220
168 1,813
1,000
200 1,728
100 500 1,683
- -
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
S&E A&S S&S Group Adj. EBITDA S&E A&S S&S Group Net Shipments
EBITDA/t (EUR) EBITDA margin
1,500 12.5%
11.8%
10.6% 10.8%
289 8.9%
1,000 256
237
203 239 5.7%
4.1%
500 127
100
-
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
S&E A&S S&S Group Adj. EBITDA/t S&E A&S S&S Group EBITDA margin
43Stainless & Electrical Steel
Europe
44Business overview
S&E Steel Europe: Self-help measures yield a robust
operational performance
Major EBITDA contributor 2018 Robust profitability capitalizing on early restructuring
12.8%
11.1%
8.8% 9.1%
8% 6.7% 352
9% S&E Europe
2.7% 258 260
S&E S. America 0.5% 220
51%
A&S 153
32% 12 57
S&S
2012 2013 2014 2015 2016 2017 2018
Adj. EBITDA (m€) Adj. EBITDA margin (%)
European shipments have grown by more than 3% pa European stainless steel demand continues to grow
6.0
5.0 Pre-crisis level (2007)
4.0
3.0
1,190 1,241 1,253 1,267 2.0
994 1,004 1,082
1.0
0.0
2012 2013 2014 2015 2016 2017 2018
Shipments (kt) Flat Stainless European ap. consumption (mt - slab equivalent)
45Business overview
S&E Steel Europe: Leverage Aperam’s unique position
European stainless steel industrial footprint Aperam key competitive advantage
Finishing line
Steel making • The only integrated upstream
Sourcing
Sourcing operations in the heart of Europe
• Superior access to scrap supply
Outokumpu
• Best location to serve the biggest
Logistics consumption areas of Europe
Logistics • Performant logistics between sites
Aperam results in industry leading working
capital management
• Full range of products with flexible
capacity
Acerinox Terni Production • Increase scrap recycling to minimize
Production
environmental impact
• Aim to become cost leader in the key
products
Closest location to major scrap generating regions as well as major stainless consumers in Europe
46Business overview
S&E Steel Europe: European Union measures against unfair
trade since 2014
Anti-dumping development in Europe Commissioner for Trade Cecilia Malmström
“The US tariffs on steel products are causing trade
• March 25, 2015: Provisional anti-dumping duties of 24-25% for China and diversion, which may result in serious harm to EU
10-12% for Taiwan steelmakers and workers in this industry. We are left with
no other choice than to introduce provisional safeguard
• August 27, 2015: Definitive anti-dumping duty rates of up to 25.3% on
measures to protect our domestic industry against a
SSCR imports from China, and up to 6.8% on imports from Taiwan
surge of imports. These measures nevertheless ensure
• On April 11, 2017, the European Commission confirmed the duties that the EU market remains open, and will maintain
against Taiwan until at least August 2020 after initiating an absorption traditional trade flows.”
investigation on August 11, 2016
July 18, 2018
Safeguard measures in Europe
• February, 2019: Definitive safeguard measures on stainless steel imports (both Hot rolled and Cold rolled)
• Quota has been set equivalent to the average 2015 - 2017 imports + 5%, growing by another 5% in July 2019 and July 2020
respectively
• 25% tariffs are imposed for imports exceeding the quota, anti dumping measures remain in place
• The quota is split – an annual country specific quotas have been set for SS HR (China, S. Korea, Taiwan, USA) and SS CR (S.
Korea, Taiwan, India, USA, Turkey, Malaysia, Vietnam) and a residual quarterly quota for all other countries
• Unused portions of the residual quota automatically transfer to the next quarter and can be used in Q4 by countries with fully filled
country quotas
• Certain developing countries (eg Indonesia & South Africa) have been exempt
• Once the quota is 90% utilized, importers have to pay a 25% deposit
• Measures are subject to review in case of a change in circumstances. Next review is due in July 2019
The safeguard measures demonstrate the European will to fight against unfair trade behavior
and reacts to significant changes in import flow
Definitive safeguard measures are drafted at the moment and will come into force at the beginning of February 2019
47Stainless & Electrical Steel
South America
48Business overview
S&E Steel South America: post the trough and on the way
up again
A significant EBITDA contributor 2018 despite trough
Earnings recovery has already started
conditions
17% 19% 17%
13% 14% 13%
8% 176
167 162
9% S&E Europe 8%
S&E S. America 120 113 118
51%
A&S
32%
S&S 82
2012 2013 2014 2015 2016 2017 2018
Adj. EBITDA (m€) Adj. EBITDA margin (%)
Stable shipments due to mix of domestic and exports S. America EBITDA margin consistently above peers
17% 19% 17%
14% 13%
649 654 652 656 638 656
617
8% 7%
6% 6%
3%
2012 2013 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Peers Adj. Ebitda margin (%)
Shipments (kt) APERAM South America Adj. Ebitda margin (%)
49Business overview
S&E Steel South America: Brazil is a unique asset base
Aperam South America footprint Upstream integration
Caracas (Venezuela) Cost competitive & environmentally
Cost competitive & environ-mentally
friendly charcoal from own
Bio Energia friendly charcoal from own cultivated
Colombia
cultivated forests is used to heat
forests is used to heat blast furnace
the blast furnace
Ecuador
Range of products
A complete range of stainless steel
Peru
Stainless Steel grades (austenitics, ferritics,
Timoteo duplex, martensitics)
Sumaré
Campinas
Ribeirão Pires Grain oriented electric steel* for
Grain oriented
use eg in stationary machines eg
Caxias do Sul electrical steel
transformers
Montevideo (Uruguay)
Buenos Aires (Argentina)
Non grain Non-grain oriented electric steel**
oriented for use in electric motors and
Melt shop, Hot/Cold rolling electrical steel generators
Service Centers
Tubes mills and Cutting centers
Alloyed, high, medium & other
Rep offices, sales agencies Special
special carbon steel are completing
carbon steel
product portfolio
The sole flat stainless steel producer in South America
with a complete range of products, and a flexible production set-up
*Grain oriented steel (GO & HGO) has the magnetic properties optimized in one direction during hot rolling.
**Non-grain oriented steel (NGO) has identical magnetic properties in all directions 50Business overview
S&E Steel South America: Brazil flexibility and agility to
increase profitability
Key pillars Aperam’s asset optimization in South America
• A wide range of products and geographical Product mix Geographical mix
sales enables further optimization of capacity
Exports
Portfolio utilization and product mix Timoteo
management • Upgrade product portfolio: Develop new meltshop
grades with higher value added (stainless 900kt capacity
substitution, HGO)
• Stainless steel
• Electrical steel Brazilian
• Preferred supplier plan with best in class
• Non grain oriented
deliveries share gains
Domestic • Grain oriented
• Performant logistics with integrated service • High grain oriented
share gains centers
• Special carbon
• Support stainless steel usage in S. America
• Sustain the cost benchmark in its main • Running Brazilian asset at optimal utilization rate
markets
• On-going debottlenecking of the cold rolling operations
Cost • Leadership Journey® on-going to improve
• Upgrade Grain Oriented products via the development of HGO
competitive productivity
• Continuous margin optimization between product mix and
• Continuous improvement to at least
deliveries in South America
compensate the inflation
Sustained solid double digit EBITDA margin proves that flexibility & agility has enabled to
largely offset the negative impacts of the economic downturn since 2015
51Business overview
S&E Steel South America: Brazil offers ample opportunity
for both cyclical and structural growth
Brazil consumes substantially below the global trendline Brazil opportunities
Short term: reviving the normal investment cycle in the economy.
Large scale infrastructure & energy projects have been missing
China Medium term: Tax reform, followed by a change of import duties
9
Reforms that put our customers in a position to compete on a
global level will drive volume and yield a positive mix effect
Stainless CR consumption per capita (kg)
8
Poland
7 Long term: Higher standard of living will drive stainless steel
EU
consumption. Currently Brazil at 1.4kg / capita vs China
6 Vi etnam >9kg/capita and a GDP implied consumption of >3.5kg/capita
5 Asia Turkey
Thailand N Ameri ca
Hungary Examples of stainless steel solutions in the Agrobusiness:
4
World
3 Mexi co
Ma laysia
S. Africa
2 India S.E Asia Equipment for the Equipment for Slats of metallic
Russia
S. Asia Brazil transport and washing gases conveyor belt for
1 Egypt Indonesia Iran L America Romania sterilization of Palm from biomass the transport of
Ukraine Argentina Mi ddle East fruits burning sugarcane
0 Africa
1,000 6,000 11,000 16,000 Largest global producer of: Largest global exporter of:
GDP per capita (USD) • Coffee Orange • Meat Poultry
• Sugarcane and sugar • Sugar Ethanol
Brazil has tremendous potential for volume & mix improvement
Source: IMF, CRU, Aperam
52Business overview
S&E Steel South America: Brazilian protections against
unfair market behaviour
Type of products Import duties status Anti-dumping status
14% import duties AD duties starting October 4th, 2013 for 5 years
Duties range from 236 USD/t to 1,077 USD/t for CR 304 and 430, in
Stainless Steel Flat thicknesses between 0.35mm and 4.75mm from China, Finland, Germany,
Products South Korea, Taiwan and Vietnam.
Renewal investigation launched on October 3, 2018. Existing duties remain
in place until the review has been completed
14% of Import duties Stainless Steel AD duties starting July 29th, 2013 for 5 years and up to 911USD/t for imports
Stainless Steel Welded welded tubes. from China and Taiwan. Renewal investigation launched on July 16th, 2018
Tubes AD duties starting June 13, 2018, for 5 years from U.S.$367/t up to
U.S.$888/t for imports from Malaysia, Thailand and Vietnam.
14% import duties on NGO AD duties starting July 17th 2013 for 5 years from 133 USD/t to 567 USD/t for
imports from China, South Korea and Taiwan.
On August 15, 2014, Camex released NGO AD partially, giving 45Kt of
imports in the next 12 months without AD penalties.
Electrical steel –
Non Grain Oriented On November 4, 2015, Brazilian authorities decided to end up the existing
quota of imports without AD and fixed the AD duties from 90 USD/t to 132,5
USD/t
Renewal investigation launched on July 16, 2018. An investigation has also
been launched against Germany on May 09, 2018.
14% import duties on GO
Electrical steel –
Grain Oriented
Tariff measures to support fair market environment in Brazil
Sources: SBB/Platts, Steelfirst
53Services & Solutions
54Business overview
Services & Solutions: stronger partnership with customers
enhances margins
A significant EBITDA contributor 2018 despite trough A profitable Services & Solutions thanks to its focus on
conditions service oriented customers
21,000
8% 90 104
9% 17,000
S&E Europe 86
S&E S. America 13,000
51% 51 53
A&S
9,000
32% 24
S&S
10
5,000
2012 2013 2014 2015 2016 2017 2018
S&S EBITDA €/t (LHS) Nickel LME €/t (RHS)
Increasing focus on downstream value added services A majority of “in house“ exposure to end users to best
and solutions serve their needs and provide best services & solutions
819
Apera
799 818
m
721 746 Aperam End
679 Stainle
Stainless
661 ss&& Aperam -
End-
Services &
user
users
Solutions
Electrical
Electric s
Steel
2012 2013 2014 2015 2016 2017 2018
al
Steel Independent
distributors
S&S Shipments (kt) and other
55Business overview
Services & Solutions: Adding value downstreams
Services & Solutions value chain
Input - - - - - - Service Centers - - - - - -
Hot rolled coil / Cutting/ Polishing
Packaging Logistics Customer
Cold rolled coil Slitting Brushing
Slit / Machined
& Slit
deburred deburred Square Round
- - - - - - - Tube making - - - - - - -
Forming
Expanding
Hot rolled coil / Welding
Cutting Packaging Logistics Customer
Cold rolled coil Pickling
Bending
Annealing
56Alloys & Specialties
57Business overview
Alloys & Specialties: attractive niche market with high margins
High profitability due to end products & end user
Aperam’s high value added segment 2018
orientation
1,264 1,407 1,278
1,191 1,219 1,147
8%
864
9% S&E Europe 43 44 44 46 46
39
S&E S. America
51% 26
A&S
32%
S&S
2012 2013 2014 2015 2016 2017 2018
Adj. EBITDA (m€) Adj. EBITDA/t
Stable shipments but markedly improved mix Nickel Alloys a growing and premium niche market
350
300
250
200
36 36 36 150
35 34 30 33
100
50
0
2012 2013 2014 2015 2016 2017 2018
Shipments (kt)
Source: SMR, Aperam
58Business overview
Alloys & Specialties: Aperam is a leading player already
Aperam is global top player in nickel alloys and strong in
Aperam Alloys & Specialties geographical footprint
long products (kt)
Rescal Amilly
Imhua
Wire The magnetic parts
drawing company
n
n Transformation
nnn workshop
n
n
n
Imphy
ICS (JV)
Meltshop, wire rod mill, Diversification into
cold rolling, bars, R&D industrial clads
Alloys & Specialties sales by industry 2017
Major products
Marine Wire rod ~40% Plates ~5% Strips ~40% Bars ~15%
Upstream
5% Energy / Oil & Gas
14% 27%
Chemical industry / [Picture] [Picture] [Picture] [Picture]
welding / environment
6% Aerospace
E&E
Downstream
19%
27% Automotive /
Transportation
Others
Source: SMR, Aperam
*PCC (Special Metals) NYK (Nippon Yakin Kogyo) 59Business overview
Alloys & Specialties: Specialty alloys add stability and
profitable growth element
Innovation is key for premium …to cater for highly sophisticated …yielding growth opportunities and
specialties… and evolving needs… margin stability
R&D intensive industry High growth end market applications Less exposed to commodity cycles
Substantial market entry barriers “Kilogram” market: unique products Cost of raw materials passed through to
Benchmark customers in advanced designed to enable precision and high- customers
industries require tailored, certified and tech solutions globally Long-standing client relationships
highly sophisticated solutions Highly diversified end-markets Good visibility on volumes with high
proportion of recurring revenue
Key R&D figures (based on FY17) Key end-markets / application types EBITDA margins by Aperam division
Heating LNG tankers,
resistance, special welding
watches
Cooperation contracts 37 Gearbox,
fasteners, Gas turbines,
turbo
Total registered patents 188 chargers
heat
exchangers
Smart
Sales of new products 9% phones, Fasteners,
LED TV, landing gears,
Electrical
seals turbine
safety,
engines
sensors
A very profitable, growing and stable niche market
60Appendix
61
Résidence Hôtelière du Rail, Montparnasse station, Paris - France
- aasb_agence d‘architecture suzelbrout - Executed using grade 304L, with Uginox Mat finishAppendix
Key stainless product categories
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