DJ Aperam S.A.: Third quarter 2019 results: Solid free cash flow despite a seasonal trough and challenging market conditions
Aperam S.A. / Key word(s): 9 Month figures
Aperam S.A.: Third quarter 2019 results: Solid free cash flow despite a
seasonal trough and challenging market conditions
06-Nov-2019 / 07:00 CET/CEST
Third quarter 2019 results1
"Solid free cash flow despite a seasonal trough and challenging market
conditions"
Luxembourg, November 6, 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 September
30, 2019
Highlights
? Health and Safety: LTI frequency rate of 2.2x in Q3 2019
compared to 1.2x in Q2 2019.
? Steel shipments of 418kt in Q3 2019, a 10% decrease compared
to steel shipments of 465kt in Q2 2019.
? EBITDA of EUR 79 million in Q3 2019 versus EUR 95 million in
Q2 2019 and down from EUR 123 million in Q3 2018.
? Net income of EUR 37 million in Q3 2019, compared to EUR 57
million in Q2 2019.
? Basic earnings per share of EUR 0.47 in Q3 2019, compared to
EUR 0.69 in Q2 2019.
? Cash flow from operations amounted to EUR 70 million in Q3
2019, compared to EUR 97 million in Q2 2019.
? Free cash flow before dividend and share buy-back of EUR 45
million in Q3 2019, compared to EUR 72 million in Q2 2019.
? Cash returns to shareholders amounted to EUR 35 million in
Q3 2019, consisting of dividend.
? Net financial debt of EUR 172 million as of September 30,
2019, compared to EUR 176 million as of June 30, 2019.
Strategic initiatives
? Transforming our footprint with state of the art
equipment: CAPEX Guidance 2019 at EUR 150 million.
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 105 million cumulated at end
Q3 2019 with good progress on all pillars.
Prospects
? EBITDA in Q4 2019 is expected to increase slightly compared
to EUR 79 million in Q3 2019.
? Net financial debt is expected to decrease in Q4 2019.
Timoteo Di Maulo, CEO of Aperam, commented:
"Despite the normal Q3 seasonal downturn, intensified import pressure and
market softness we delivered solid results and managed to maintain net debt
at a low level. This underlines the resilience of our business model.
Looking ahead, we expect demand conditions to remain challenging. Further
actions against unfair trade have been initiated this quarter with aim to
restore a level playing field. Meanwhile we continue to strengthen our
operations through ramping up EUR 200 million gains through Phase 3 of the
Leadership Journey(R)."
Financial Highlights (on the basis of financial information prepared under
IFRS)
(in millions of Euros, unless Q3 19 Q2 19 Q3 18 9M 19 9M 18
otherwise stated)
Sales 972 1,090 1,123 3,240 3,557
Operating income 43 59 88 148 309
Net income attributable to equity 37 57 72 119 237
holders of the parent
Basic earnings per share (EUR) 0.47 0.69 0.87 1.46 2.80
Diluted earnings per share (EUR) 0.47 0.69 0.87 1.46 2.46
Free cash flow before dividend and 45 72 15 141 73
share buy-back
Net Financial Debt (at the end of 172 176 64 172 64
the period)
EBITDA 79 95 123 255 414
EBITDA/tonne (EUR) 189 204 263 184 277
Steel shipments (000t) 418 465 467 1,384 1,492
Health & Safety results
Health and Safety performance based on Aperam personnel figures and
contractors' lost time injury frequency rate was 2.2x in the third quarter
of 2019 compared to 1.2x in the second quarter of 2019.
Financial results analysis for the three-month period ending September 30,
2019
Sales for the third quarter of 2019 were EUR 972 million, down from EUR
1,090 million for the second quarter of 2019. Steel shipments decreased from
465 thousand tonnes in the second quarter of 2019 to 418 thousand tonnes in
the third quarter of 2019.
EBITDA was EUR 79 million for the third quarter of 2019 compared to EUR 95
million for the second quarter of 2019. The sequential EBITDA decrease was
mainly due to seasonally lower volumes in Europe, partly balanced by a
positive price / mix effect. Brazil realized a seasonally higher EBITDA
despite temporarily higher iron ore costs. The Leadership Journey(R)
contributed EUR 16 million annualized gains to EBITDA. The cumulative
annualized savings for Phase 3 now stand at EUR 105 million.
Depreciation and amortisation was EUR (36) million for the third quarter of
2019.
Aperam had an operating income for the third quarter of 2019 of EUR 43
million compared to an operating income of EUR 59 million for the previous
quarter.
Net interest expense and other financing costs for the third quarter of 2019
were EUR (4) million. Realized and unrealized foreign exchange and
derivative gains were EUR 3 million for the third quarter of 2019.
Income tax result for the third quarter of 2019 was an income tax expense of
EUR (6) million.
The Company recorded a net income of EUR 37 million for the third quarter of
2019.
Cash flows from operations for the third quarter of 2019 were positive at
EUR 70 million, with a working capital decrease of EUR (2) million. CAPEX
for the third quarter was EUR (26) million.
Free cash flow before dividend and share buy-back for the third quarter of
2019 amounted to EUR 45 million.
During the third quarter of 2019, the cash returns to shareholders amounted
to EUR 35 million, consisting of EUR 35 million in dividends. Total cash
returned to shareholders during the first nine-months of the year 2019
amounted to EUR 200 million consisting of EUR 93 million of share buy-back
and EUR 107 million in dividends.
As of September 30, 2019, shareholders' equity was EUR 2,394 million and net
financial debt was EUR 172 million (as of September 30, 2019, gross
financial debt was EUR 529 million and cash and cash equivalents were EUR
357 million).
The Company had liquidity of EUR 657 million as of September 30, 2019,
consisting of cash and cash equivalents of EUR 357 million and undrawn
credit lines3 of EUR 300 million.
Operating segment results analysis
Stainless & Electrical Steel (1)
(in millions of Euros, unless Q3 19 Q2 19 Q3 18 9M 19 9M 18
otherwise stated)
Sales 771 842 917 2,544 2,927
EBITDA 57 79 101 188 335
Depreciation and amortisation (29) (30) (31) (89) (92)
Operating income 28 49 70 99 243
Steel shipments (000t) 401 440 449 1,320 1,444
Average steel selling price 1,861 1,856 1,983 1,863 1,969
(EUR/t)
(1) Amounts are shown prior to intra-group eliminations
The Stainless & Electrical Steel segment had sales of EUR 771 million for
the third quarter of 2019. This represents a 8.4% decrease compared to sales
of EUR 842 million for the second quarter of 2019. Steel shipments during
the third quarter were 401 thousand tonnes compared to 440 thousand tonnes
during the previous quarter. Seasonal factors, continued high imports into
Europe and weak demand in both Europe and Brazil explain the difference.
Average steel selling prices for the Stainless & Electrical Steel segment
remained stable compared to the previous quarter.
The segment had EBITDA of EUR 57 million for the third quarter of 2019
compared to EUR 79 million for the second quarter of 2019. The decrease in
profitability was primarily driven by lower volumes in Europe. Positive
price/cost and mix effects and positive contributions from the Leadership
Journey(R) were not sufficient to balance the headwind.
The Stainless & Electrical Steel segment had an operating income of EUR 28
million for the third quarter of 2019 compared to an operating income of EUR
49 million for the second quarter of 2019.
Services & Solutions(1)
(in millions of Euros, unless Q3 19 Q2 19 Q3 18 9M 19 9M 18
otherwise stated)
Sales 418 453 489 1,391 1,599
EBITDA 9 16 8 41 46
Depreciation and amortisation (2) (4) (2) (8) (6)
Operating income 7 12 6 33 40
Steel shipments (000t) 166 182 191 562 638
Average steel selling price 2,397 2,374 2,436 2,358 2,403
(EUR/t)
(1) Amounts are shown prior to intra-group eliminations
The Services & Solutions segment had sales of EUR 418 million for the third
quarter of 2019 compared to EUR 453 million for the second quarter of 2019.
For the third quarter of 2019, steel shipments were 166 thousand tonnes
compared to 182 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 9 million for the third quarter of 2019,
compared to EUR 16 million for the second quarter of 2019. Lower costs did
not offset seasonally lower volumes and negative valuation effects.
The Services & Solutions segment had an operating income of EUR 7 million
for the third quarter of 2019, compared to EUR 12 million for the second
quarter of 2019.
Alloys & Specialties(1)
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(in millions of Euros, unless Q3 19 Q2 19 Q3 18 9M 19 9M 18
otherwise stated)
Sales 128 156 136 437 416
EBITDA 12 12 9 36 39
Depreciation and amortisation (3) (2) (2) (7) (5)
Operating income 9 10 7 29 34
Steel shipments (000t) 8 9 8 27 27
Average steel selling price 16,018 16,122 15,521 15,796 14,522
(EUR/t)
(1) Amounts are shown prior to intra-group eliminations
The Alloys & Specialties segment had sales of EUR 128 million for the third
quarter of 2019 compared to EUR 156 million for the second quarter of 2019.
Steel shipments during the third quarter of 2019 were at 8 thousand tonnes
compared to 9 thousand tonnes during the second quarter of 2019. Average
steel selling prices decreased over the quarter.
The Alloys & Specialties segment achieved an EBITDA of EUR 12 million for
the third quarter of 2019 compared to EUR 12 million for the second quarter
of 2019. Lower volumes were compensated by lower costs and positive
valuation effects.
The Alloys & Specialties segment had an operating income of EUR 9 million
for the third quarter of 2019 compared to an operating income of EUR 10
million for the second quarter of 2019.
Recent developments
? On September 27, 2019 Aperam S.A. closed a "Schuldscheindarlehen" loan
agreement for a total aggregate amount of EUR 190 million.
? On October 1, 2019, Aperam S.A. announced its intention to redeem its
U.S.$300 million 0.625 per cent. Net Share Settled Convertible and/or
Exchangeable Bonds due 2021, exchangeable into ordinary registered shares
of Aperam, of which U.S.$27.6 million in aggregate principal amount
remained outstanding. All of the outstanding Bonds were repaid at their
principal amount plus any accrued interest on November 4, 2019.
Investor conference call
Aperam management will host a conference call for members of the investment
community to discuss the third quarter of 2019 financial performance at the
following time:
Date New York London Luxembourg
Wednesday, 04:00 am 09:00 am 10:00 am
November 6, 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: 9179044#.
A replay of the conference call will be available until November 13, 2019:
France (+33 (0) 170950348); USA (+1 (917) 677-7532) and international (+44
(0) 3333 009785). The participant access code is 9179044#.
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) September 30, June 30, September 30,
2019 2019 2018
ASSETS
Cash & cash equivalents (C) 357 189 169
Inventories, trade 742 747 753
receivables and trade
payables
Prepaid expenses and other 98 84 81
current assets
Total Current Assets & 1,197 1,020 1,003
Working Capital
Goodwill and intangible 483 491 480
assets
Property, plant and 1,593 1,598 1,518
equipment (incl. Biological
assets)
Investments in associates, 29 34 36
joint ventures and other
Deferred tax assets 155 163 174
Other non-current assets 81 80 141
Total Assets (net of trade 3,538 3,386 3,352
payables)
LIABILITIES AND
SHAREHOLDERS' EQUITY
Short-term debt and current 164 190 227
portion of long-term debt
(B)
Accrued expenses and other 285 303 290
current liabilities
Total Current Liabilities 449 493 517
(excluding trade payables)
Long-term debt, net of 365 175 6
current portion (A)
Deferred employee benefits 145 146 153
Deferred tax liabilities 131 129 130
Other long-term liabilities 54 56 113
Total Liabilities 1,144 999 919
(excluding trade payables)
Equity attributable to the 2,390 2,383 2,429
equity holders of the
parent
Non-controlling interest 4 4 4
Total Equity 2,394 2,387 2,433
Total Liabilities and 3,538 3,386 3,352
Shareholders' Equity
(excluding trade payables)
Net Financial Debt (D = 172 176 64
A+B-C) *
* Increase in Net Financial Debt by EUR 124 million from EUR 48 million as
of December 31, 2018 to EUR 172 million as of September 30, 2019 primarily
due to accounting effects (+EUR 56 million out of which IFRS 16 Leases +EUR
29 million and Convertible Bonds 2021 repurchases +EUR 27 million), share
buyback (+EUR 93 million), dividend paid (+EUR 107 million) and other items
(+EUR 9 million), partly offset by free cash-flow generated during the first
nine months (-EUR 141 million).
APERAM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in million Three Months Ending Nine Months Ending
of EURO)
September June September September September
30, 30, 2018 30, 2019 30, 2018
30, 2019
2019
Sales 972 1,090 1,123 3,240 3,557
EBITDA (C = 79 95 123 255 414
A-B)
EBITDA margin 8.1% 8.7% 11.0% 7.9% 11.6%
%
Depreciation (36) (36) (35) (107) (105)
and
amortisation
(B)
Operating 43 59 88 148 309
income (A)
Operating 4.4% 5.4% 7.8% 4.6% 8.7%
margin %
Result from 1 - - 1 1
other
investments
and
associates
Net interest (4) (5) (7) (25) (17)
expense and
other net
financing
costs
Foreign 3 (1) (2) 4 (1)
exchange and
derivative
gains /
(losses)
Income before 43 53 79 128 292
taxes
Income tax (6) 4 (7) (9) (55)
benefit /
(expense)
Effective tax 13.0% (8.0)% 8.4% 6.8% 18.7%
rate %
Net income 37 57 72 119 237
attributable
to equity
holders of
the parent
Basic 0.47 0.69 0.87 1.46 2.80
earnings per
share (EUR)
Diluted 0.47 0.69 0.87 1.46 2.46
earnings per
share (EUR)
Weighted 79,804 81,583 83,546 81,628 84,610
average
common shares
outstanding
(in
thousands) *
Diluted 80,801 82,644 84,232 81,888 92,258
weighted
average
common shares
outstanding
(in
thousands)
* Number of shares outstanding as of September 30, 2019 (in thousands):
79,822 (83,696 issued shares, net of 3,874 treasury shares)
APERAM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions Three Months Ending Nine Months Ending
of Euros)
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