Eramet Group: ERAMET group's results for 1st half 2014

Wed Jul 30, 2014 1:02am EDT

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Paris, July 30th, 2014

PRESS RELEASE

ERAMET group's results for 1st half 2014

  • Positive current operating income restored in 1st half 2014, improving on the two previous halves.
     
    • All the Group's business units will step up the implementation of its operating performance improvement plans
    • Improvement in nickel prices and ERAMET Nickel's operating performance in 1st half 2014
    • At the end of 1st half 2014, Manganese ore prices levelling out, with production recovering towards
    • Group's current operating income expected to improve in 2nd half of 2014 compared with 1st half 2014

                                                                                           

The data presented and commented on are adjusted data from the Group's reporting, which consolidates joint ventures under the equity method. Reconciliation with published financial statements is presented in appendix 4 (cf. page 8).

(€ millions) H1 2013 H2 2013 H2 2014
Turnover 1 613 1 549 1 534
 ERAMET Manganese 777 785 683
ERAMET Nickel 368 336 381
ERAMET Alloys 473 431 474
Holding company & eliminations (5) (3) (4)
EBITDA 129 102 157
Current operating income (9) (36) 14
Net income, Group share (32) (338)* (59)

Global economic activity improved slightly in the 1st half of 2014. China succeeded in keeping its growth above 7% with the support of its government's economic policy, despite a slowdown in the construction sector. In some of the Group's businesses, inventory reduction limited the effects of that positive growth on market and price trends.

Furthermore, in this context of moderate growth, market and price trends are heavily influenced, metal by metal, by the development pace of the production capacity projects begun in previous years.

The ERAMET group's turnover was on a par with the 2nd half of 2013, at 1,534 M€.

The Group's current operating income became positive again, at 14 M€ in the 1st half of 2014, an improvement of 23 M€ on the 1st half of 2013 and 50 M€ on 2nd half 2013. These results were affected by nickel prices, which were very low early in the year before picking up in the 2nd quarter. As regards manganese-related activities, results were affected by maintenance operations in Gabon and Norway in the 1st quarter, an exceptional railway incident in Gabon and the drop in manganese ore prices (around 15% in 1st half 2014 vs. 1st half 2013).

The Group's share of net income for the 1st half of 2014 totalled -59 M€, taking into account the effect of expenditure for several project studies, foremost among which the Maboumine niobium- rare earths project in Gabon, and the higher tax charge in the 1st half of 2014.

Productivity gains in the 1st half of 2014 represented 42 M€.

Capital expenditure was reduced by 37% to 175 M€ in the 1st half of 2014 compared with the same period in 2013, in line with the target of a total amount below 400 M€ for 2014.

The Group's net debt remained moderate as of the end of June 2014, at 473 M€, corresponding to 16% of shareholders' equity.

As of June 30th, 2014, ERAMET kept a very satisfactory amount of liquidity.

  • ERAMET Manganese: turnover down 12% from 1st half 2013. 

ERAMET Manganese's current operating income totalled 61 M€ in the 1st half of 2014, compared with 109 M€ in 1st half 2013.

Global production of carbon steel grew 2.5% in the 1st half of 2014 compared with the 1st half of 2013, mainly driven by developed countries (European Union, USA) and China.

Prices for manganese ore 44% CIF China (source: CRU) fell in the 1st half of 2014 by around 15% compared with the same period in 2013. They have however levelled out since May.

Despite lower prices for manganese ore, manganese alloy prices remained stable overall in the 1st half of 2014 compared with 1st half 2013.

Turnover by TiZir (titanium dioxide for white pigments, high-purity pig iron for foundries) decreased 24% in the 1st half of 2014 compared with the same period in 2013, to 28 M€ (for the 50% held by ERAMET), mainly because of lower prices for titanium dioxide slag.

On the other hand, the Grande Côte project in Senegal operated by TiZir, a 50/50 joint venture by ERAMET and the Australian company Mineral Deposits Limited, began to ramp up production and is making satisfactory progress.

ERAMET Manganese's capital expenditure totalled 110 M€ in the 1st half of 2014, a 37% reduction compared with the same period in 2013.

  • ERAMET Nickel: turnover up 3.5% compared with 1st half 2013 due to rising nickel prices since March 2014

Global production of stainless steel increased 10% in the 1st half 2014 compared with the 1st half of 2013, driven by all of the main producing countries.

In this context and thanks to improved operating performance and higher nickel prices in the 2nd quarter, ERAMET Nickel's turnover increased in the 1st half of 2014 compared with the same period in 2013 to total 381 M€. Current operating income recovered over the same period, going from -94 M€ to -27 M€.

Metallurgical production of nickel in Doniambo (New Caledonia) rose 6% to 27,100 tons in the 1st half of 2014, compared with 25,500 in the 1st half of 2013. Over the same period nickel sales grew 9%.

Thanks to the upturn in the 2nd quarter, LME nickel prices rose 3% in the 1st half of 2014 compared with the 1st half of 2013 to 7.51 USD/lb. In the past few weeks they have been around 8.7 USD/lb.

ERAMET Nickel's capital expenditure was reduced by 33% to 42 M€ in the 1st half of 2014, compared with the corresponding period in 2013.

  • ERAMET Alloys: turnover stable compared with 1st half 2013, up 10% compared with 2nd half 2013

The aerospace sector grew 6% in the 1st half of 2014 compared with the same period the previous year, without however completely making up for the 33% fall in turnover with the energy sector. Over the same period, the turnover achieved with the tooling market (mainly high-speed steels) remained stable at an insufficient level. ERAMET Alloys' turnover was 12% higher in the 2nd quarter of 2014 than in the 1st quarter 2014.

ERAMET Alloys' current operating income was at the break-even point in the 1st half of 2014.

ERAMET Alloys' capital expenditure totalled 23 M€ in the 1st half of 2014, a 34% reduction compared with the same period in 2013.

Aubert & Duval continued to implement its general expenses reduction programme. A majority agreement was signed for that purpose with trade unions in early July.

·         Highlights

-          During the 1st half of 2014, the ERAMET group successfully carried out three bond issues with institutional investors and by private investment ("Euro PP") for a total amount of 225 M€, bringing the total amount of bond issues to 625 M€, and set up a 3-year bank facility for 100 M€ to fund ERAMET Nickel's working capital requirement. These operations enable it to benefit from advantageous terms on the credit market in a context of low interest rates, continue diversifying its sources and extend the average duration of its debt.

-          As part of ERAMET's performance improvement programmes, a study was undertaken on the ways and means to reduce costs corresponding to corporate structures and support services across the Group.
             
-          On March 27th, 2014, the ERAMET group announced that the Grande Côte mineral sand (ilmenite and zirconium) beneficiation facility, operated in Senegal by TiZir, its 50/50 joint venture with the Australian company Mineral Deposits Limited, was now in the start-up phase.

-          On April 5th, 2014, the ERAMET and VALE groups, together with New Caledonia's Southern Province, signed a general agreement protocol for the exploration, followed by the study and beneficiation, of the Prony and Pernod deposits in the south of New Caledonia.

Following ERAMET's Board of Directors meeting, Patrick BUFFET, ERAMET group Chairman & CEO, stated:

"Manganese ore production in Moanda in Gabon will increase significantly in the 2nd half of 2014 compared with the 1st half.

Moanda Metallurgical Complex (a silicomanganese plant and a manganese metal plant) will start up in the 2nd half of 2014.

All the Group's business units will step up the implementation of its operating performance improvement plans.

Given the current outlook for the nickel market and thanks to the operating improvements achieved in all activities:

  • cash requirements should decrease significantly in the 2nd half of 2014.
     
  • the ERAMET group's current operating income in the 2nd half of 2014 should be higher than in the 1st half."

-oo0oo-

WEBCAST OF PRESENTATION OF FIRST-HALF RESULTS

The presentation of the 1st half 2014 results will be webcast at 10am (Paris time) today in French with English interpreting.

To sign up please click the link on the Group's website: www.eramet.com


ABOUT ERAMET

ERAMET is a leading global producer of:

  • alloying metals, particularly manganese and nickel, used to improve the properties of steel,
  • high-performance special steels and alloys used in industries such as aerospace, power generation and tooling.

ERAMET is also studying or developing major projects in new activities with high growth potential, such as mineral sands (titanium dioxide and zircon), lithium, niobium and rare earths, as well as in recycling.

The Group employs approximately 14,000 people in 20 countries. ERAMET is part of Euronext Paris

Compartment A.

CONTACT

Head of Investor Relations and Economic Studies

Philippe Joly

Tel: +33 (0)1 4538 4202

Investor Relations and Economic Analyst

David Fortin

Tel: +33 (0)1 4538 4286

For more information: www.eramet.com


APPENDIX

Appendix 1: Turnover

Turnover (M€) Q1 2013 Q2 2013 Q1 2014 Q2 2014
ERAMET Manganese 388  389  326 357
ERAMET Nickel 181  187  166 215
ERAMET Alloys 231  242  224 250
Holding company & eliminations (3)  (2)  (2) (2) 
ERAMET Group

including joint ventures
797  816  714 820 
Share of joint ventures (18) (19) (14) (16)
ERAMET Group

IFRS published statements1
779 797 700 804

Following application of IFRS 11 "Joint Arrangements" as of January 1, 2014, proportionally consolidated companies (Ukad and the TiZir sub-group) in the financial statements to December 31, 2013 are consolidated according to the equity method from FY 2014, with retrospective impact on 2013.

To reflect the economic reality of the Group's companies, the operating performance of jointly controlled companies continue to be proportionally consolidated in the Group's internal reporting, which is used by senior management and the Board of Directors as the basis for monitoring activity.

As a result, in accordance with IFRS 8 "Operating Segments", segment information included in the consolidated financial statements will be aligned with this internal information. As of 2014, the Group's financial reporting will be based on this operational financial information, which is also reconciled with the financial statements reported under IFRS.

Appendix 2: Production and deliveries

Tonnes H1 2013 H2 2013 H1 2014
Manganese ore and sinter production 1,767,300 1,935,600 1,644,100
Manganese alloy production 385,400 360,800 338,300
Manganese alloy sales 393,800 370,600 352,900
Nickel production* 25,480 27,535 27,078
Nickel sales** 25,280 27,130 27,627

*     Ferronickel and matte

**   Finished products


Appendix 3: Segment reporting

Segment reporting - by division

(€ million) Nickel  Manganese  Alloys  Holding &  Total  Joint-venture Published
     eliminations    contribution  
1st half year 2014
External sales 380  681  473  1 534  (30) 1 504 
Inter-division sales (4)
Sales 381  683  474  (4) 1 534  (30) 1 504 
EBITDA 20  124  31  (18) 157  (3) 154 
Current operating profit (loss) (27) 61  (20) 14  14 
Operating profit (loss) (29) (29)
Cash generated from operations 15  77  16  (31) 77  (2) 75 
Net cash generated by operating activities (68) (21) (89)
Industrial capital expenditure (intangibles assets, property, plant & equipment) 42  110  23  175  (33) 142 
Closing net cash (debt) position (473) 93  (380)
1st half year 2013        
External sales 365  775  471  1 613  (37) 1 576 
Inter-division sales (7)
Sales 368  777  473  (5) 1 613  (37) 1 576 
EBITDA (49) 172  30  (24) 129  (15) 114 
Current operating profit (loss) (94) 109  (27) (9) (11) (20)
Operating profit (loss) (35) (11) (46)
Cash generated from operations (65) 124  18  (21) 56  (12) 44 
Net cash generated by operating activities 65  (19) 46 
Industrial capital expenditure (intangibles assets, property, plant & equipment) 63  176  35  276  (71) 205 
Closing net cash (debt) position 127  56  183 
        
Full year 2013        
External sales 700  1 558  901  3 162  (77) 3 085 
Inter-division sales (11)
Sales 704  1 562  904  (8) 3 162  (77) 3 085 
EBITDA (130) 350  49  (38) 231  (20) 211 
Current operating profit (loss) (222) 218  (45) (45) (14) (59)
Operating profit (loss) (548) (14) (562)
Cash generated from operations (150) 257  20  (53) 74  (13) 61 
Net cash generated by operating activities 161  (27) 134 
Industrial capital expenditure (intangibles assets, property, plant & equipment) 172  346  64  587  (128) 459 
Closing net cash (debt) position (218) 80  (138)

Segment reporting - by geographic region

(€ million) France  Europe  North  Asia  Oceania  Africa  South  Total  Joint-venture Published
    America      America    contribution  
Sales (destination of sales)
1st half year 2014 204  521  312  428  10  40  19  1 534  (30) 1 504 
1st half year 2013 256  510  328  443  13  40  23  1 613  (37) 1 576 
Full year 2013 414  1 004  642  949  27  76  50  3 162  (77) 3 085 
Capital expenditure (intangibles and property, plant & equipment)
1st half year 2014 26  14  10  30  89  175  (33) 142 
1st half year 2013 44  11  38  20  154  276  (71) 205 
Full year 2013 82  35  20  86  77  286  587  (128) 459 

Appendix 4: Reconciliation of Group reporting and published financial statements

(€ million) 1st half year  Joint-venture 1st half year  1st half year  Joint-venture 1st half year  Full year  Joint-venture Full year 
  2014  contribution 2014  2013  contribution 2013  2013  contribution 2013 
Published (1) Adjusted (2) Published (1) Adjusted (2) Published (1) Adjusted (2)
Sales 1 504  30  1 534  1 576  37  1 613  3 085  77  3 162 
EBITDA 154  157  114  15  129  211  20  231 
Current operating profit (loss) 14  14  (20) 11  (9) (59) 14  (45)
Operating profit (loss) (29) (29) (46) 11  (35) (562) 14  (548)
Profit (loss) for the period - attributable to equity holders of the parent (59) (59) (32) (32) (370) (370)
Net cash generated by operating activities (89) 21  (68) 46  19  65  134  27  161 
Industrial capital expenditure (142) (33) (175) (205) (71) (276) (459) (128) (587)
Net cash (debt) position (380) (93) (473) 183  (56) 127  (138) (80) (218)
Shareholders' equity - attributable to equity holders of the parent 2 473  2 473  2 905  2 905  2 532  2 532 
(1) Financial statements prepared under IFRS applicable as of 01/01/2014, with joint venture accounted under equity method.    
See 2014 condensed interim consolidated financial statements on the ERAMET Group website (www.eramet.com).     
(2) Group reporting, with joint venture accounted under proportional consolidation method.      




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The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Groupe Eramet via Globenewswire

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