A sustainable top yielding stock in Euro Materials - Full year & fourth quarter 2018 - Aperam
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Full year & fourth quarter 2018
February 6th 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 0.8x in Q4 2018
4
3
2
1
0
Health & Safety is our prime objective
Source: Bloomberg
3Operational & financial highlights
Solid results despite an extremely challenging market
environment
Operational highlights Financial highlights
Leadership Journey 2018 earnings
– EUR33m gains in 2018 – Solid earnings – significant improvement in Brazil
– 2020 target raised to EUR200m. – Substantial impact from market turmoil in Europe
– CAPEX reduced from EUR 150m to EUR 100m due to the ineffective safeguard
– Substantial alloy price induced inventory
Genk investment valuation effects
– Cold rolling, annealing and pickling line
investment on track Cash flow & balance sheet
– AOD converter project has been put on hold – Solid 2018 cash flow despite sliding alloy prices
slowing destocking progress
Safeguard measures – Solid balance sheet with almost no net debt
– should have positive impact from Q2 19
– Smoothen and reduce imports Shareholder cash returns
– EU reacts to changes in flows which limits – 2017/2018 about EUR 200m (Dividend + Buyback)
opportunities for exempt countries
– 2019 EUR 240m (Dividend ~140m, Buyback 100m)
Outlook Q1 2019
– Unchanged market environment during Q1
2019 - further destocking Other items
– EBITDA comparable to Q4 2018 – Convertible bond outstanding has almost been
– Debt to remain at a low level halved (USD164.6m) out of USD300m issued
Aperam is well positioned with strong operational and cash return performance
4Environment and markets
Bodega Irius, Barbastro, Huesca - Spain J. Marino Pascual y Asoc. Arquitectura
© Adriana Landaluce Executed using grade 316L with Uginox Top finish
5Environment and markets
Stainless steel prices are under pressure from lower raw
material cost and high imports
Nickel: Sliding price reached low at year end Stainless steel price reflects lower alloy costs & base price
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 remain seasonally elevated Stainless price premium versus China has narrowed
80 1000
70
500
60
0
50
-500
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
Q4 13
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
German inventory (days) CR304 Europe vs China (USD/t)
Source: Bloomberg, Metal Bulletin,
6Leadership Journey update
More ambitious targets to be realized with less capex
Initial Plan Improvements Updated Leadership Journey
EURm
200
EURm
33
Actual 2018 Target end of Target end of
2019 2020
Reduce Raise
150
Widen capex savings
scope
100 -50m +50m Variable costs
33 Fixed cost
Actual 2018 Target end of Target end of
Raw. Materials &
2019 2020
other purchasing
Distribution &
Top line strategy
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
Leadership Journey being accelerated to address a challenging market environment
EUR 200 million savings – Capex EUR100 million
7EU Safeguard update
Definitive safeguard should yield some improvement
Definitive safeguards run from 2Feb 2019 – 30 June 2021 Quotas should have a positive effect
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”
Less volatility: Country based and quarterly quota
Effective stop: 25% deposit when quota is at 90%
5% quota growth >> expected demand growth
Exemption of certain countries esp Indonesia
EU Commission reacts to new data: Inclusion of
Thailand
Next review is due in July 2019
We expect a difficult market environment to persist during Q1 2019
Source: EU Commission, 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 *2019 Quota versus 2018e imports from countries falling under the quota 8Outlook
Musée des Confluences, Lyon - France COOP HIMMELB(L)AU
9
© Sergio Pirrone Executed using grade 316L - microblasted finishOutlook
Q1 2019 guidance & other forward looking items
Financial outlook:
EBITDA in Q1 2019 is expected on a comparable level versus Q4 2018
– Continued high import pressure and associated low base prices
– Further destocking in Q1 but safeguard effect to be felt from Q2
– Soft seasonal upturn in Europe + seasonally weak quarter in Brazil
Net financial debt to remain at a low level in Q1 2019
Other items:
Leadership Journey Phase 3: savings target raised to EUR 200 million by end of 2020
to be achieved with reduced capex (EUR100 m versus EUR150 m previously)
2019 Capex guidance EUR 175 million
Investment in a Cold Rolling and Annealing and Pickling Line in Genk is on track (~EUR130 m capex). The
investment in an AOD converter has been put on hold
Aperam announces cash returns of EUR240 million for 2019
– Dividend EUR 1.75 (~EUR140 million)
– Share buyback EUR100 million (up to 3.7m shares)
The market remains at trough with improvements expected from Q2 2019
10Financial results
Media library, Isbergues - France Dominique Coulon © D. Coulon
Executed using grade 304L with Uginox Bright / Top / Mat finishes and K41 Patina
11Financial results
Highlights: Strong balance sheet and decent cash flow
support reinvestments and cash returns to shareholders
2018 EBTIDA and cash flow reflect market turmoil Key comments
• Shipment growth yoy despite
EURm 2018 2017 yoy Q4 18 yoy challenging market
Sales 4,677 4,481 4% 1,120 1% • Q4 EBITDA impacted by base
prices pressure & alloy-price
EBITDA 504 559 -10% 90 -31% induced inventory valuation
Basic EPS (EUR) 3.39 4 -15% 0.59 -52% effects despite a strong
0
contribution from Brazil and
Steel shipments (000t) 1,972 1,936 2% 480 -3% leadership journey gains
EBITDA/tonne (EUR) 256 289 -11% 188 -29% • Solid operating cash flow but
hampered by slow destocking
EBITDA margin 10.8% 12.5% -14% 8.0%
0 -32% progress due to market
Operating cash flow 295 374 -21% 88 -55% conditions
• EUR200m cash return to
CAPEX -192 -164 17% -55 -11%
shareholders via dividend and
Free cash flow* 108 211 -49% 35 -73% share buy-back
Dividends paid -130 -106 23% -34 26% • Convertible 2021 outstanding
cut to USD165m**
Share buyback -70 -90 -22% 0
0 NA
Net financial debt 48 -63 -176% 48 -176%
Solid earnings and strong balance sheet
XXXgive flexibility in a challenging market
*before dividend and share buyback
** Option premium on bonds now amortized till 2021 as not all bondholders used their put option right in December 2018 12Financial results
Q4 2018: Effect of a soft seasonality, high import pressure
due to ineffective safeguard and negative valuation effects
Soft seasonal increase in shipments Q4 adj. EBITDA impacted by market turmoil in Europe*
13.4%
517 12.3%
11.7% 11.6%
11.2% 11.0%
508
495 154 150
141 8.0%
130
123
115
478 480
477
90
467
Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18
Total Adj. EBITDA (m€) Adj. EBITDA as % of Sales
Shipments (thousand metric tonnes)
Solid operating performance in a difficult market environment
[1] Adjusted EBITDA excludes EUR 8 million one-off charge mainly related to indirect taxes amnesty settlements in Brazil in Q3 2017
13Financial results
Q4 2018: Profitability impacted by negative valuation effects
and a normalized tax rate affects EPS
Segment EBITDA reflect challenging market environment …which is also reflected in EPS*
1.22
101
0.99
87
0.94
1.00
0.87
0.65
0.59
103
85 80
76 72
53 49
8 9 7
-3
Q3 2018 Q4 2018 Q3 2018 Q4 2018 Q3 2018 Q4 2018
Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18
S&E S&S A&S
Net result (m€) Basic EPS (EUR)
Self-help only partly compensates for temporary external pressure
*Net Result Q4 2017 include one off positive effect due to reduction in deferred tax expenses from reduction in country tax rates in some jurisdictions
14Financial results
Q4 2018: Temporary higher working capital due to slowdown
affects FCF
Strong balance sheet FCF dragged down by temporarily elevated working capital
300
260
200 241
206 206 85 211
100
106 108
0 58
98
-100
64
48
20 -200
-32
-63
-300
-400
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
-500
2012 2013 2014 2015 2016 2017 2018
Net debt €m 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 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 Capex
Sustainability Fund the Transformation Program and Top Line Strategy EUR 175 m
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
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%
0.91 286
320
5.7% -1.08 -0.96
155 193
4.1% 559 71
451 455 504
368 -86 -74
168 220
2012 2013 2014 2015 2016 2017 2018
2012 2013 2014 2015 2016 2017
Total Adj. EBITDA (m€) adj. EBITDA margin Net result (m€) EPS
Strong balance sheet Permanent volume growth since 2012
26%
23%
20% 25%
14%
15%
6%
2% 1,886 1,917 1,936 1,972
-2% 5% 1,728 1,813
1,683
619 501 442 -5%
290 -63 48
147
-15%
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
3 EUR
Be the preferred Supplier 3 LJ Phase 3 – Costs &
200m
2018 – 2020 Transformation
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% 23% 350
20% 25% 300
14% 250
15%
6% 200
2%
-2% 5% 150
619 501 100
442 -5%
290 -63 48
147 50
-15% 0
2012 2013 2014 2015 2016 2017 2018
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
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
sheet consistent with investment grade
2018
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)
377 374 Others (incl Δ cash)
354 14 70
295 Share buyback 90
130
106
212 Dividend 47 92
184
144 152 117 100
Growth/improvement
Capex -97
2011 2012 2013 2014 2015 2016 2017 2018 Replacement Capex
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 90 70
6% 5%
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: strong recovery potential in Brazil
Brazil economy recovers,
Continued solid margins despite economic slowdown*
weak FX improves competitiveness
17% 19% 17% 10% 4.00
13% 176 14% 13% 8%
167 3.50
162
8% 5%
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
19% 17% 110
14% 13% 100
12% China 8.7
kg/capita
90
80
8% 7%
6% 6% Brazil
3% 70
2014 2015 2016 2017 2018 1.2kg/
2014 2015 2016 2017 2018 capita
Peers Adj. Ebitda margin (%) Stainless steel apparent
APERAM South America Adj. Ebitda margin (%) 2017
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) using 2018 consensus 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 ~EUR 200 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
Investment in an Argon Oxygen Decarburization (AOD) converter, auxiliaries & utilities
– strengthens cost competitiveness including energy, yield
– Improves productivity and flexibility
Capex spend underpins cost efficiency and top line program
24Investment case & value strategy
Sustainability: Fully embedded in Aperam’s Strategy
Social Environment Governance
Our People are our We provide the We lead by example
greatest asset. “greenest steels” and and maintain constant
Their Safety is our priority, constantly reduce our engagement with all our
their development is a key production costs and Stakeholders in quest of
to our success. impacts. mutually beneficial solutions.
• LITFR : 1.42 (vs. 1.46 in 2016) - target • CO2 intensity[2] reduction >34% - • Best practice in Corporate
at 1 (all employees). almost at target to -35% by 2020 vs. 2007, Governance reflected in our:
thanks to maximal usage of own > Board composition
• 84% of our employees recommend > Risk management approach
charcoal.
Aperam as a good place to work, > Extensive Compliance plan
which confirms our rating among Brazilian • Energy intensity[2] reduction: >8%
top employers. [1] • Strong Customer & Innovation
(from 6% in 2016) - on track towards our
focus with +20 pt in % of sales in
target at -10% by 2020 vs. 2012
• Absenteeism: 2.19 (as in 2016) - new products vs. 2015
target at 2. • 93% reuse/recycle performance • CSR indicators cascaded within the
- target at 100%. entire organisation.
• 2017 Performance review: 99% of
Exempts, 84% of White collars, 68%
• 95.3% of water in closed circuits • Leadership/Excellence level 2017
(stable vs. 2015) ESG ratings
of Blue collars - target at 100%.
• Steep decrease in Dust emissions
• 2017 Training hours +4% (vs. 2016)
>22% vs. 2015 due to a strong action plan.
[1] For the seventh consecutive year, Aperam South America was selected as one of the best companies to work for by Guia Você S/A, in recognition of our work on employee
health and wellbeing. [2] Per ton of crude steel 25Investment case & value strategy
Aperam’s Leadership Team
26Business overview
Musée des Confluences, Lyon - France COOP HIMMELB(L)AU © Sergio Pirrone Executed using grade 316L - microblasted finish
27Group segments &
corporate structure
28Business 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 29Business 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
30Business 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 31Business 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
32Business overview
Group: Substantial improvement in KPIs over time as
self-help supports earnings
EBITDA by segment (EURm) Shipment by segment (kt)
600 559 2,500
504
451 455
500 2,000 1,972
368 1,936
400 1,917
1,500 1,886
300 220 1,813
168 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
33Stainless & Electrical Steel
Europe
34Business 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)
35Business 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
36Business 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
37Stainless & Electrical Steel
South America
38Business 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% 176 14% 13%
8% 167 162
9% S&E Europe
8%
S&E S. America 120 118
113
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*
19% 17%
14% 13%
12%
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 (%)
*2018 consensus
39Business 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 40Business 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
41Business overview
S&E Steel South America: Brazil offers ample opportunity for
both cyclical and structural growth
Brazil market recovery Brazil opportunities
Automotive: strong growth of 7% pa expected** surpassing 3m
0.5 vehicles - Aperam is closely linked with majors car makers
Pre-crisis level (2014)
0.4 White Goods: good growth potential due to very low penetration
0.4 level
0.3 Capital Goods: high growth potential. Eg O&G, Energy, Pulp &
Paper, Sugar Industry
0.3
Agrobusiness: Bright Spot with Growth above GDP expected
0.2 until 2022
Largest global producer of: Largest global exporter of:
Stainless BRA ap. consumption (mt - slab equivalent) • Coffee • Meat
• Orange • Poultry
• Sugarcane and sugar • Sugar
High growth potential for Brazilian domestic stainless • Second in soy beans • Ethanol
steel consumption
Examples of stainless steel solutions in the Agrobusiness:
10
8
Growth
5
potential
3 Equipment for Equipment for Slats of metallic
the transport and washing gases conveyor belt for
0 sterilization of from biomass the transport of
Palm fruits burning sugarcane
Brazil (kg/year) China (kg/year)
Sources: CRU, Aperam estimates, World bank data
**Anteva forecast 42Business 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
43Services & Solutions
44Business 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
45Business 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
- - - - - - Tube making - - - - - -
Forming
Expanding
Hot rolled coil / Welding
Cutting Packaging Logistics Customer
Cold rolled coil Pickling
Bending
Annealing
46Alloys & Specialties
47Business 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 35 34 33 36 150
30
100
50
2012 2013 2014 2015 2016 2017 2018 0
Shipments (kt)
Source: SMR, Aperam
48Business 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
6% Energy / Oil & Gas
15% 27%
Chemical industry / [Picture] [Picture] [Picture] [Picture]
welding / environment
7% Aerospace
E&E
Downstream
20%
24% Automotive /
Transportation
Others
Source: SMR, Aperam
*PCC (Special Metals) NYK (Nippon Yakin Kogyo) 49Business 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
Cooperation watches
37 Gearbox,
contracts
fasteners, Gas turbines,
turbo heat
Total registered chargers exchangers
188
patents
Smart
phones, Fasteners,
Sales of new LED TV, landing gears,
9% Electrical
products seals safety,
turbine
engines
sensors
A very profitable, growing and stable niche market
50Appendix
51
Back cover: Résidence Hôtelière du Rail, Montparnasse Bahnhof, Paris - France -
aasb_agence d‘architecture suzelbrout - Executed using grade 304L, with Uginox Mat finishProducts
Key stainless product categories
Martensitic Ferritics (400 series) Austenitics (300 series)
11.5 - 10.5 -
>0.1% 30% 16 -
17%
21%You can also read
