DJ Aperam S.A.: Second quarter 2019 results
Aperam S.A. / Key word(s): Quarter Results
Aperam S.A.: Second quarter 2019 results
31-Jul-2019 / 07:00 CET/CEST
"Improved quarterly operational results in a challenging market environment"
Luxembourg, July 31, 2019 (07:00 CET) - Aperam (referred to as "Aperam" or
the "Company") (Amsterdam, Brussels, Luxembourg, Paris: APAM and NYRS:
APEMY), announced today results for the three month period ending June 30,
2019
Highlights
? Health and Safety: LTI frequency rate of 1.2x in Q2 2019
compared to 1.1x in Q1 2019.
? Steel shipments of 465 kt in Q2 2019, a 7% decrease compared
to steel shipments of 501 kt in Q1 2019.
? EBITDA of EUR 95 million in Q2 2019 versus EUR 81 million in
Q1 2019. H1 2019 EBITDA EUR 176 million, -40% yoy.
? Net income of EUR 57 million in Q2 2019, compared to EUR 25
million in Q1 2019.
? Basic earnings per share of EUR 0.69 in Q2 2019, compared to
EUR 0.30 in Q1 2019.
? Cash flow from operations amounted to EUR 97 million in Q2
2019, compared to EUR 71 million in Q1 2019.
? Free cash flow before dividend and share buy-back of EUR 72
million in Q2 2019, compared to EUR 24 million in Q1 2019.
? Cash returns to shareholders amounted to EUR 132 million in
Q2 2019, consisting of EUR 93 million of share buy-back and
EUR 39 million of dividend.
? Net financial debt of EUR 176 million as of June 30, 2019,
compared to EUR 106 million as of March 31, 2019.
Strategic initiatives
? Transforming our footprint with state of the art
equipment: CAPEX Guidance 2019 updated to EUR 150
million from EUR 175 million before. Genk cold
rolling and annealing & pickling line with a total
investment of EUR 130 million between 2018 and 2020
on track.
? Leadership Journey(R)2 (Phase 3 - Transformation
Program Target EUR 200 million annualized gains by
2020): Gains reached EUR 89 million cumulated at end
Q2 2019 with good progress on all pillars.
? Completion of the 2019 share-buyback: 3.7 million
shares have been bought back for EUR 92.6 million.
New number of shares outstanding as of June 30, 2019
is 79.8 million shares.
Prospects
? EBITDA in Q3 2019 is expected to decrease compared to Q2
2019, due to the seasonal slowdown in Europe, rising imports,
declining demand and low international prices.
? Net financial debt to remain stable at a low level in Q3
2019.
Timoteo Di Maulo, CEO of Aperam, commented:
"Aperam delivered an improved operational performance this quarter despite a
challenging global market environment. Imports start increasing once again
commanding a disproportionate market share and put extreme pressure on
pricing. The measures put in place by the European Commission are
ineffective so far, as Indonesia continues to remain exempted and import
quotas have been increased while demand has dropped.
Looking ahead, to counter these challenges our ability to realize further
gains via the Leadership Journey(R) will be key. We are also confident in
our ability to generate cash flow and rely on a solid balance sheet. We
continue to take all the necessary measures to weather a challenging market
environment."
Financial Highlights (on the basis of financial information prepared under
IFRS)
(in millions of Euros, unless Q2 19 Q1 19 Q2 18 H1 19 H1 18
otherwise stated)
Sales 1,090 1,178 1,218 2,268 2,434
Operating income 59 46 115 105 221
Net income attributable to equity 57 25 80 82 165
holders of the parent
Basic earnings per share (EUR) 0.69 0.30 0.94 0.99 1.93
Diluted earnings per share (EUR) 0.69 0.30 0.73 0.99 1.57
Free cash flow before dividend 72 24 62 96 58
Net Financial Debt (at the end of 176 106 20 176 20
the period)
EBITDA 95 81 150 176 291
EBITDA/tonne (EUR) 204 162 295 182 284
Steel shipments (000t) 465 501 508 966 1,025
Health & Safety results
Health and Safety performance based on Aperam personnel figures and
contractors' lost time injury frequency rate was 1.2x in the second quarter
of 2019 compared to 1.1x in the first quarter of 2019.
Financial results analysis for the three-month period ending June 30, 2019
Sales for the second quarter of 2019 were EUR 1,090 million, down from EUR
1,178 million for the first quarter of 2019. Steel shipments decreased from
501 thousand tonnes in the first quarter of 2019 to 465 thousand tonnes in
the second quarter of 2019.
EBITDA was EUR 95 million for the second quarter of 2019 compared to EUR 81
million for the first quarter of 2019. The sequential EBITDA increase was
mainly due to a partial recovery in base prices and a positive seasonality
in Brazil while the previous quarter additionally suffered from negative
inventory effects. Significantly lower volumes in Europe and temporarily
higher input costs in Brazil had negative effects, partly offset by Phase 3
of the Leadership Journey(R), which continued to progress over the quarter
with annualized gains of EUR 22 million to EBITDA. The cumulative annualized
savings for Phase 3 now stand at EUR 89 million.
Depreciation and amortisation was EUR (36) million for the second quarter of
2019.
Aperam had an operating income for the second quarter of 2019 of EUR 59
million compared to an operating income of EUR 46 million for the previous
quarter.
Net interest expense and other financing costs for the second quarter of
2019 were EUR (5) million. Realized and unrealized foreign exchange and
derivative losses were EUR (1) million for the second quarter of 2019.
Income tax result for the second quarter of 2019 was an income tax benefit
of EUR 4 million mainly due to a tax benefit amounting to a total of EUR 15
million applicable as from 2018.
The Company recorded a net income of EUR 57 million for the second quarter
of 2019.
Cash flows from operations for the second quarter of 2019 were positive at
EUR 97 million, with a working capital decrease of EUR 32 million. CAPEX for
the second quarter was EUR (26) million.
Free cash flow before dividend and share buy-back for the second quarter of
2019 amounted to EUR 72 million.
During the second quarter of 2019, the cash returns to shareholders amounted
to EUR 132 million, consisting of EUR 93 million of share buy-back and EUR
39 million of dividend. Total cash returned to shareholders during the first
semester 2019 amounted to EUR 165 million consisting of EUR 93 million of
share buy-back and EUR 72 million of dividend.
During the second quarter of 2019, the Company repurchased Convertible Bonds
2021 with a nominal amount of USD 137 million (EUR122 million) for a total
consideration of EUR131 million.
As of June 30, 2019, shareholders' equity was EUR 2,387 million and net
financial debt was EUR 176 million (as of June 30, 2019, gross financial
debt was EUR 365 million and cash and cash equivalents were EUR 189
million).
The Company had liquidity of EUR 489 million as of June 30, 2019, consisting
of cash and cash equivalents of EUR 189 million and undrawn credit lines3 of
EUR 300 million.
Operating segment results analysis
Stainless & Electrical Steel (1)
(in millions of Euros, unless Q2 19 Q1 19 Q2 18 H1 19 H1 18
otherwise stated)
Sales 842 931 1,016 1,773 2,010
EBITDA 79 52 123 131 234
Depreciation and amortisation (30) (30) (31) (60) (61)
Operating income 49 22 92 71 173
Steel shipments (000t) 440 479 499 919 995
Average steel selling price 1,856 1,871 1,976 1,864 1,963
(EUR/t)
(1) Amounts are shown prior to intra-group eliminations
The Stainless & Electrical Steel segment had sales of EUR 842 million for
the second quarter of 2019. This represents a 9.6% decrease compared to
sales of EUR 931 million for the first quarter of 2019. Steel shipments
during the second quarter were 440 thousand tonnes compared to 479 thousand
tonnes during the previous quarter. The weak economic environment led to
contraction of demand in Europe while Brazil saw the benefit of a seasonally
stronger quarter. Overall, average steel selling prices for the Stainless &
Electrical Steel segment slightly decreased compared to the previous quarter
due to a lower nickel price and mix effects.
The segment had EBITDA of EUR 79 million for the second quarter of 2019
compared to EUR 52 million for the first quarter of 2019. The increase in
profitability was primarily driven by partially recovering base prices in
Europe and the seasonal improvement in Brazil while the previous quarter
additionally suffered from negative inventory effects. The Leadership
Journey(R) contributed positively but significantly lower volumes in Europe
and temporarily higher costs in Brazil burdened the result meaningfully.
The Stainless & Electrical Steel segment had an operating income of EUR 49
million for the second quarter of 2019 compared to an operating income of
EUR 22 million for the first quarter of 2019.
Services & Solutions(1)
(in millions of Euros, unless Q2 19 Q1 19 Q2 18 H1 19 H1 18
otherwise stated)
Sales 453 520 548 973 1,110
EBITDA 16 16 17 32 38
Depreciation and amortisation (4) (2) (1) (6) (4)
Operating income 12 14 16 26 34
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DJ Aperam S.A.: Second quarter 2019 results -2-
Steel shipments (000t) 182 214 217 396 447
Average steel selling price 2,374 2,313 2,428 2,341 2,389
(EUR/t)
(1) Amounts are shown prior to intra-group eliminations
The Services & Solutions segment had sales of EUR 453 million for the second
quarter of 2019 compared to EUR 520 million for the first quarter of 2019.
For the second quarter of 2019, steel shipments were 182 thousand tonnes
compared to 214 thousand tonnes during the previous quarter. The Services &
Solutions segment had higher average steel selling prices during the period
compared to the previous period.
The segment had EBITDA of EUR 16 million for the second quarter of 2019,
compared to EUR 16 million for the first quarter of 2019. Lower volumes were
compensated by lower costs and the absence of inventory valuation effects.
The Services & Solutions segment had an operating income of EUR 12 million
for the second quarter of 2019, compared to EUR 14 million for the first
quarter of 2019.
Alloys & Specialties(1)
(in millions of Euros, unless Q2 19 Q1 19 Q2 18 H1 19 H1 18
otherwise stated)
Sales 156 153 149 309 280
EBITDA 12 12 16 24 30
Depreciation and amortisation (2) (2) (1) (4) (3)
Operating income 10 10 15 20 27
Steel shipments (000t) 9 10 9 19 19
Average steel selling price 16,122 15,303 15,220 15,705 14,082
(EUR/t)
(1) Amounts are shown prior to intra-group eliminations
The Alloys & Specialties segment had sales of EUR 156 million for the second
quarter of 2019 compared to EUR 153 million for the first quarter of 2019.
Steel shipments during the second quarter of 2019 were at 9 thousand tonnes
compared to 10 thousand tonnes during the first quarter of 2019. Average
steel selling prices increased over the quarter.
The Alloys & Specialties segment achieved an EBITDA of EUR 12 million for
the second quarter of 2019 compared to EUR 12 million for the first quarter
of 2019. Lower volumes were compensated by a price/mix improvement.
The Alloys & Specialties segment had an operating income of EUR 10 million
for the second quarter of 2019 compared to an operating income of EUR 10
million for the first quarter of 2019.
Recent developments
? On June 13, 2019, Aperam announced that it has requested to be withdrawn
from the credit rating services of S&P Global Ratings and Moody's Investor
Service, while reaffirming to maintain investment grade financial ratios:
? On June 27, 2019, Moody's Investors Service withdrew the 'Baa3'
long-term issuer rating with stable outlook of Aperam S.A.
? On July 15, 2019, S&P Global Ratings withdrew its 'BBB-' long-term
issuer credit rating with stable outlook of Aperam S.A.
? On June 27, 2019, Aperam announces the completion of its share buyback
program announced on 6 February 2019. In aggregate, 3,700,000 shares were
bought under this Program, representing an equivalent amount of EUR 92.6
million.
New developments
? On July 18, 2019, 1,800,0000 shares acquired under the 2018 share
buyback program were cancelled in line with the announced purpose of the
program. The total number of shares outstanding (Net of Treasury Shares
3,899,921) as of July 18, 2019 is 79,796,359 shares.
? On July 31, 2019, Aperam published its Half-Year Report for the six
month period ended June 30, 2019. The report is available in the
Luxembourg Stock Exchange's electronic database OAM on www.bourse.lu and
on www.aperam.com under Investors > Investors Essentials > Financial
Reports section.
? On July 31, 2019, Aperam announced the resignation of Mrs. Laurence
Mulliez for personal considerations effective August 1, 2019. Mrs. Mulliez
joined the Board in May 2011 and chaired its Audit and Risk Management
Committee since May 2013. The members of the Board of Directors extended
their warmest gratitude and appreciation for Mrs. Mulliez's valuable
contribution to the Board. Mrs. Bernadette Baudier will replace Mrs.
Mulliez as Chairperson of the Audit and Risk Management Committee.
Investor conference call
Aperam management will host a conference call for members of the investment
community to discuss the second quarter of 2019 financial performance at the
following time:
Date New York London Luxembourg
Wednesday, 08:00 am 13:00 pm 14:00 pm
July 31, 2019
The dial-in numbers for the call are: France (+33 (0) 1767 00794); USA (+1
631 510 7495) and international (+44 (0) 2071 928000). The participant
access code is: 6091614#.
A replay of the conference call will be available until August 7, 2019:
France (+33 (0) 170950348); USA (+1 (917) 677-7532) and international (+44
(0) 3333 009785). The participant access code is 6091614#.
Contacts
Corporate Communications / Laurent Beauloye: +352 27 36 27 103
Investor Relations / Thorsten Zimmermann: +352 27 36 27 304
About Aperam
Aperam is a global player in stainless, electrical and specialty steel, with
customers in over 40 countries. The business is organised in three primary
operating segments: Stainless & Electrical Steel, Services & Solutions and
Alloys & Specialties.
Aperam has 2.5 million tonnes of flat Stainless and Electrical steel
capacity in Brazil and Europe and is a leader in high value specialty
products. Aperam has a highly integrated distribution, processing and
services network and a unique capability to produce stainless and specialty
from low cost biomass (charcoal). Its industrial network is spread in six
production facilities located in Brazil, Belgium and France.
In 2018, Aperam had sales of EUR 4,677 million and steel shipments of 1.97
million tonnes.
For further information, please refer to our website at www.aperam.com
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.
APERAM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in million of EURO) June 30, March 31, June 30,
2019 2019 2018
ASSETS
Cash & cash equivalents (C) 189 342 217
Inventories, trade receivables and 747 773 702
trade payables
Prepaid expenses and other current 84 86 89
assets
Total Current Assets & Working 1,020 1,201 1,008
Capital
Goodwill and intangible assets 491 494 486
Property, plant and equipment (incl. 1,598 1,605 1,506
Biological assets)
Investments in associates, joint 34 33 31
ventures and other
Deferred tax assets 163 160 172
Other non-current assets 80 97 130
Total Assets (net of trade payables) 3,386 3,590 3,333
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion 190 272 235
of long-term debt (B)
Accrued expenses and other current 303 267 295
liabilities
Total Current Liabilities (excluding 493 539 530
trade payables)
Long-term debt, net of current 175 176 2
portion (A)
Deferred employee benefits 146 148 155
Deferred tax liabilities 129 130 133
Other long-term liabilities 56 65 106
Total Liabilities (excluding trade 999 1,058 926
payables)
Equity attributable to the equity 2,383 2,528 2,403
holders of the parent
Non-controlling interest 4 4 4
Total Equity 2,387 2,532 2,407
Total Liabilities and Shareholders' 3,386 3,590 3,333
Equity (excluding trade payables)
Net Financial Debt (D = A+B-C) * 176 106 20
* Increase in Net Financial Debt by EUR128 million from EUR48 million as of
December 31, 2018 to EUR176 million as of June 30, 2019 primarily due to
accounting effects (+EUR56 million out of which IFRS 16 Leases +EUR29
million and Convertible Bonds 2021 repurchases +EUR27 million), share
buyback (+EUR93 million), dividend paid (+EUR72 million) and other items
(+EUR3 million), partly offset by free cash-flow generated during the first
six months (-EUR96 million).
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APERAM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in million Three Months Ending Six Months Ending
of EURO)
June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
Sales 1,090 1,178 1,218 2,268 2,434
EBITDA (C = 95 81 150 176 291
A-B)
EBITDA 8.7% 6.9% 12.3% 7.8% 12.0%
margin %
Depreciation (36) (35) (35) (71) (70)
and
amortisation
(B)
Operating 59 46 115 105 221
income (A)
Operating 5.4% 3.9% 9.4% 4.6% 9.1%
margin %
Result from - - 1 - 1
other
investments
and
associates
Net interest (5) (16) (5) (21) (10)
expense and
other net
financing
costs
Foreign (1) 2 (3) 1 1
exchange and
derivative
gains /
(losses)
Income 53 32 108 85 213
before taxes
Income tax 4 (7) (28) (3) (48)
benefit /
(expense)
Effective -8.0% 22.8% 25.7% 3.7% 22.6%
tax rate %
Net income 57 25 80 82 165
attributable
to equity
holders of
the parent
Basic 0.69 0.30 0.94 0.99 1.93
earnings per
share (EUR)
Diluted 0.69 0.30 0.73 0.99 1.57
earnings per
share (EUR)
Weighted 81,583 83,536 84,990 82,554 85,151
average
common
shares
outstanding
(in
thousands) *
Diluted 82,644 83,774 92,931 82,895 93,326
weighted
average
common
shares
outstanding
(in
thousands)
* Number of shares outstanding as of June 30, 2019 (in thousands): 79,796
(85,496 issued shares, net of 5,700 treasury shares)
APERAM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions Three Months Ending Six Months Ending
of Euros)
June 30, March 31, June 30, June 30, June 30,
2018
2019 2019 2019 2018
Operating 59 46 115 105 221
income
Depreciation 36 35 35 71 70
&
amortisation
Change in 32 (19) (18) 13 (134)
working
capital
Income tax - 2 (18) 2 (21)
(paid) /
refund
Interest (2) (1) (1) (3) (2)
paid, (net)
Other (28) 8 (12) (20) 9
operating
activities
(net)
Net cash 97 71 101 168 143
provided by
operating
activities
(A)
Purchase of (26) (47) (41) (73) (88)
PPE,
intangible
and
biological
assets
(CAPEX)
Other 1 - 2 1 3
investing
activities
(net)
Net cash (25) (47) (39) (72) (85)
used in
investing
activities
(B)
Proceeds (91) 154 (27) 63 (26)
(payments)
from payable
to banks and
long term
debt
Purchase of (93) - (55) (93) (55)
treasury
stock
Dividend (39) (33) (35) (72) (63)
paid
Finance (2) (2) - (4) -
lease
payments
Net cash (225) 119 (117) (106) (144)
used in
financing
activities
Effect of - - (2) - (3)
exchange
rate changes
on cash
Change in (153) 143 (57) (10) (89)
cash and
cash
equivalent
Free cash 72 24 62 96 58
flow before
dividend and
share
buy-back (C
= A+B)
Appendix 1a - Health & Safety statistics
Health & Safety Three Months Ending
Statistics
June 30, March December 31, 2018
31,
2019
2019
Frequency Rate 1.2 1.1 0.8
Lost time injury frequency rate equals lost time injuries per 1,000,000
worked hours, based on own personnel and contractors.
Appendix 1b - Key operational and financial information
Quarter Ending Stainless & Services & Alloys & Others & Total
June 30, 2019 Electrical Solutions Specialt eliminati
Steel ies ons
Operational
information
Steel Shipment 440 182 9 (166) 465
(000t)
Average steel 1,856 2,374 16,122 2,272
selling price
(EUR/t)
Financial
information
(EURm)
Sales 842 453 156 (361) 1,090
EBITDA 79 16 12 (12) 95
Depreciation & (30) (4) (2) - (36)
amortisation
Operating 49 12 10 (12) 59
income / (loss)
Quarter Ending Stainless & Services & Alloys & Others & Total
March 31, 2019 Electrical Solutions Specialt eliminati
Steel ies ons
Operational
information
Steel Shipment 479 214 10 (202) 501
(000t)
Average steel 1,871 2,313 15,303 2,272
selling price
(EUR/t)
Financial
information
(EURm)
Sales 931 520 153 (426) 1,178
EBITDA 52 16 12 1 81
Depreciation & (30) (2) (2) (1) (35)
amortisation
Operating 22 14 10 - 46
income
Appendix 2 - Terms and definitions
Unless indicated otherwise, or the context otherwise requires, references in
this earnings release report to the following terms have the meanings set
out next to them below:
Average steel selling prices: calculated as steel sales divided by steel
shipments.
Cash and cash equivalents: represents cash and cash equivalents, restricted
cash and short-term investments.
CAPEX: relates to capital expenditures and is defined as purchase of
tangible assets, intangible assets and biological assets.
EBITDA: operating income before depreciation, amortisation and impairment
expenses.
EBITDA/tonne: calculated as EBITDA divided by total steel shipments.
Free cash flow before dividend and share buy-back: net cash provided by
operating activities less net cash used in investing activities.
Gross financial debt: long-term debt plus short-term debt.
Liquidity: Cash and cash equivalent and undrawn credit lines.
LTI frequency rate: Lost time injury frequency rate equals lost time
injuries per 1,000,000 worked hours, based on own personnel and contractors.
Net financial debt: long-term debt, plus short-term debt less cash and cash
equivalents.
Net financial debt/EBITDA or Gearing: Refers to Net financial debt divided
by last twelve months EBITDA calculation.
Shipments: information at segment and group level eliminates inter-segment
shipments (which are primarily between Stainless & Electrical Steel and
Services & Solutions) and intra-segment shipments, respectively.
Working capital: trade accounts receivable plus inventories less trade
accounts payable.
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1 The financial information in this press release and Appendix 1 has been
prepared in accordance with the measurement and recognition criteria of
International Financial Reporting Standards ("IFRS") as adopted in the
European Union. While the interim financial information included in this
announcement has been prepared in accordance with IFRS applicable to interim
periods, this announcement does not contain sufficient information to
constitute an interim financial report as defined in International
Accounting Standard 34, "Interim Financial Reporting". Unless otherwise
noted the numbers and information in the press release have not been
audited. The financial information and certain other information presented
in a number of tables in this press release have been rounded to the nearest
whole number or the nearest decimal. Therefore, the sum of the numbers in a
column may not conform exactly to the total figure given for that column. In
addition, certain percentages presented in the tables in this press release
reflect calculations based upon the underlying information prior to rounding
and, accordingly, may not conform exactly to the percentages that would be
derived if the relevant calculations were based upon the rounded numbers.
This press release also includes Alternative Performance Measures ("APM"
hereafter). The Company believes that these APMs are relevant to enhance the
understanding of its financial position and provides additional information
to investors and management with respect to the Company's financial
performance, capital structure and credit assessment. These non-GAAP
financial measures should be read in conjunction with and not as an
alternative for, Aperam's financial information prepared in accordance with
IFRS. Such non-GAAP measures may not be comparable to similarly titled
measures applied by other companies. The APM's used are defined under
Appendix 2 "Terms & definitions".
2 The Leadership Journey(R) is an initiative launched on December 16, 2010,
and subsequently accelerated and increased, to target management gains and
profit enhancement. The third phase of the Leadership Journey(R) - the
Transformation Program - was initially targeting EUR 150 million of
additional EBITDA gains per year by end of 2020. In February 2019, the
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