DJ Third quarter 2020 results: 'Earnings improve on the back of tight cost control, our flexible multi-product business in Brazil and some economic recovery in Europe'
Aperam S.A. / Key word(s): Quarter Results
Third quarter 2020 results: 'Earnings improve on the back of tight cost
control, our flexible multi-product business in Brazil and some economic
recovery in Europe'
04-Nov-2020 / 07:00 CET/CEST
Luxembourg, November 4, 2020 (07:00 CET) - Aperam (referred to as "Aperam"
or the "Company") (Amsterdam, Luxembourg, Paris, Brussels: APAM and NYRS:
APEMY), announced today results for the three months ending September 30,
2020.
Highlights
? Health and Safety: LTI frequency rate of 2.2x in Q3 2020
compared to 0.6x in Q2 2020
? Steel shipments of 432 thousand tonnes in Q3 2020, 15%
increase compared to steel shipments of 376 thousand tonnes in
Q2 2020
? EBITDA of EUR 65 million in Q3 2020, compared to EUR 49
million in Q2 2020
? Net income of EUR 24 million in Q3 2020, compared to EUR 21
million in Q2 2020
? Basic earnings per share of EUR 0.30 in Q3 2020, compared to
EUR 0.27 in Q2 2020
? Cash flow from operations amounted to EUR 77 million in Q3
2020, compared to EUR 57 million in Q2 2020
? Free cash flow before dividend of EUR 55 million in Q3 2020,
compared to EUR 34 million in Q2 2020
? Net financial debt of EUR 111 million as of September 30,
2020, compared to EUR 123 million as of June 30, 2020
Strategic initiatives
? Leadership Journey?(R)2 Phase 3:? The annualized gains
reached EUR 13 million in Q3 2020. Aperam realized cumulative
annualized gains of EUR 184 million at the end of Q3 2020,
compared to the target of EUR 200 million by the end of 2020
? Leadership Journey?(R) Phase 4: Target of EUR 150 million
gains for the period 2021 - 2023 via a combination of cost,
growth and mix improvement measures
Cash deployment
? Share buy back program: Considering the remaining
exceptional COVID related uncertainties, the Board of
Directors has decided to cancel the 2020 share buy back
program
Prospects
? EBITDA in Q4 2020 is expected to increase versus Q3
2020
? Net financial debt is expected to decline in Q4 2020
Timoteo Di Maulo, CEO of Aperam, commented:
"Business took a first step returning towards normalization in
Q3 which we utilized as all our plants were fully operational.
Our results improved due to a strict cost discipline across all
segments, a flexible product mix management in Brazil and with
higher volumes in Europe. Still, a challenging competitive
environment persists combined with the threat of another COVID
related slowdown and continued price pressure in Europe.
Although we expect an improvement in Q4 some positive drivers
might only prevail for the short term. We have used the crisis
to sketch out phase 4 of our Leadership Journey(R)? which will
support and accelerate the recovery to a historic normal level."
Financial Highlights (on the basis of financial information prepared under
IFRS)
(in millions of Euros, unless Q3 20 Q2 20 Q3 19 9M 20 9M 19
otherwise stated)
Sales 841 818 972 2,708 3,240
Operating income 33 14 43 81 148
Net income attributable to equity 24 21 37 74 119
holders of the parent
Basic earnings per share (EUR) 0.30 0.27 0.47 0.93 1.46
Diluted earnings per share (EUR) 0.30 0.27 0.47 0.93 1.46
Free cash flow before dividend and 55 34 45 107 141
share buy-back
Net Financial Debt (at the end of 111 123 172 111 172
the period)
EBITDA 65 49 79 184 255
EBITDA/tonne (EUR) 150 130 189 148 184
Steel shipments (000t) 432 376 418 1,246 1,384
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 2020 compared to 0.6x in the second quarter of 2020.
Financial results analysis for the three-month period ending September 30,
2020
Sales for the third quarter of 2020 increased by 3% to EUR 841 million
compared to EUR 818 million for the second quarter of 2020. Steel shipments
increased from 376 thousand tonnes in the second quarter of 2020, to 432
thousand tonnes in the third quarter of 2020.
Volumes in both Europe and Brazil improved from their Q2 lows on the back of
the economic recovery.
EBITDA increased during the quarter to EUR 65 million from EUR 49 million
for the second quarter of 2020 driven by higher volumes, strict cost control
and our flexible multi-product business in Brazil. Prices in Europe remained
under pressure and amplified by rising raw material costs. This was only
partly compensated by the absence of negative inventory valuations.
Depreciation and amortization was EUR (32) million for the third quarter of
2020.
Aperam had an operating income for the third quarter of 2020 of EUR 33
million compared to an operating income of EUR 14 million for the previous
quarter.
Financing costs including the FX and derivatives result for the third
quarter of 2020 were EUR (4) million, including cash cost of financing of
EUR (3) million.
Income tax expense for the third quarter of 2020 was EUR (5) million.
The Company recorded a net income of EUR 24 million for the third quarter of
2020.
Cash flows from operations for the third quarter of 2020 were positive at
EUR 77 million, with a working capital decrease of EUR 42 million. CAPEX for
the third quarter was EUR (22) million.
Free cash flow before dividend for the third quarter of 2020 amounted to EUR
55 million.
During the third quarter of 2020, the cash returns to shareholders amounted
to EUR 35 million, consisting fully of dividend.
Operating segment results analysis
Stainless & Electrical Steel (1)
(in millions of Euros, unless Q3 20 Q2 20 Q3 19 9M 20 9M 19
otherwise stated)
Sales 664 632 771 2,123 2,544
EBITDA 42 43 57 138 188
Depreciation & amortisation (26) (28) (29) (84) (89)
Operating income 16 15 28 54 99
Steel shipments (000t) 417 364 401 1,207 1,320
Average steel selling price 1,536 1,678 1,861 1,699 1,863
(EUR/t)
(1) Amounts are shown prior to intra-group eliminations
The Stainless & Electrical Steel segment had sales of EUR 664 million for
the third quarter of 2020. This represents a 5% increase compared to sales
of EUR 632 million for the second quarter of 2020. Steel shipments during
the third quarter were 417 thousand tonnes, an increase of 15% compared to
shipments of 364 thousand tonnes during the previous quarter. Volumes
benefitted from the economic recovery in Europe and our flexible
multi-product business in Brazil. Average steel selling prices for the
Stainless & Electrical Steel segment decreased by 8% compared to the
previous quarter.
The segment generated EBITDA of EUR 42 million for the third quarter of 2020
compared to EUR 43 million for the second quarter of 2020. The benefit of
higher volumes quarter on quarter and the absence of negative inventory
valuation was consumed by pricing pressure in Europe and higher raw material
costs.
Depreciation and amortisation expense was EUR (26) million for the third
quarter of 2020.
The Stainless & Electrical Steel segment had an operating income of EUR 16
million for the third quarter of 2020 compared to an operating income of EUR
15 million for the second quarter of 2020.
Services & Solutions(1)
(in millions of Euros, unless Q3 20 Q2 20 Q3 19 9M 20 9M 19
otherwise stated)
Sales 372 310 418 1,132 1,391
EBITDA 10 5 9 24 41
Depreciation & amortisation (3) (4) (2) (10) (8)
Operating income 7 1 7 14 33
Steel shipments (000t) 165 132 166 483 562
Average steel selling price 2,184 2,212 2,397 2,248 2,358
(EUR/t)
(1) Amounts are shown prior to intra-group eliminations
The Services & Solutions segment had sales of EUR 372 million for the third
quarter of 2020, representing an increase of 20% compared to sales of EUR
310 million for the second quarter of 2020. For the third quarter of 2020,
steel shipments were 165 thousand tonnes compared to 132 thousand tonnes
during the previous quarter. The Services & Solutions segment had lower
average steel selling prices during the period compared to the previous
period.
The segment generated EBITDA of EUR 10 million for the third quarter of 2020
compared to EBITDA of EUR 5 million in the second quarter of 2020. EBITDA
increased mainly due to a significant 25% increase in volumes quarter on
quarter.
Depreciation and amortisation was EUR (3) million for the third quarter of
2020.
The Services & Solutions segment had an operating income of EUR 7 million
for the third quarter of 2020 compared to an operating income of EUR 1
million for the second quarter of 2020.
Alloys & Specialties(1)
(in millions of Euros, unless Q3 20 Q2 20 Q3 19 9M 20 9M 19
otherwise stated)
Sales 111 142 128 408 437
EBITDA 10 11 12 30 36
Depreciation & amortisation (3) (1) (3) (7) (7)
Operating income 7 10 9 23 29
Steel shipments (000t) 7 9 8 24 27
Average steel selling price 16,320 16,038 16,018 16,314 15,796
(EUR/t)
(1) Amounts are shown prior to intra-group eliminations
The Alloys & Specialties segment had sales of EUR 111 million for the third
quarter of 2020, representing a decrease of 22% compared to EUR 142 million
for the second quarter of 2020. Steel shipments decreased by 24% during the
third quarter of 2020 at 7 thousand tonnes. Average steel selling prices
were higher during the quarter.
The Alloys & Specialties segment achieved EBITDA of EUR 10 million for the
third quarter of 2020 compared to EUR 11 million for the second quarter of
2020. The slightly lower EBITDA was driven by lower volumes. A better mix,
strict cost management and a less negative inventory valuation loss partly
compensated for this.
Depreciation and amortisation expense for the third quarter of 2020 was EUR
(3) million.
The Alloys & Specialties segment had an operating income of EUR 7 million
for the third quarter of 2020 compared to an operating income of EUR 10
million for the second quarter of 2020.
Recent developments
? On August 11 and August 18, 2020, Aperam announced shareholding
notifications by M&G plc for crossing the 5% voting rights threshold with
reference to Transparency Law.
? On September 14, 2020, Aperam announced a change in the organization of
the Leadership Team, effective from September 14, 2020. Ines Kolmsee, CEO
of the segment Services & Solutions decided to leave the Company to pursue
other career opportunities. Nicolas Changeur was nominated as CEO of the
segment Services & Solutions. Nicolas Changeur is a member of the
Leadership Team, and Chief Marketing Officer for the Group since November
2014.
? On 29 September 2020, 3,700,0000 shares acquired under the 2019 share
buyback program were cancelled in line with the announced purpose of the
program. The total number of issued shares as of 29 September 2020 amounts
to 79,996,280.
? On September 30, 2020, Aperam strengthened its liquidity profile with
the signature of a top-up financing contract where the EIB will make
available to Aperam an amount of EUR 75 million, in addition to the
outstanding loan of EUR 100 million, in relation to the financing of
advanced stainless steel manufacturing technologies.
New developments
? On November 4, 2020, Aperam announced Phase 4 of its Leadership
Journey?(R) with a target of EUR 150 million gains for the period 2021 -
2023 via a combination of cost, growth and mix improvement measures.
? On November 4, 2020, Aperam announced that considering the remaining
exceptional COVID related uncertainties, the Board of Directors has
decided to cancel the 2020 share buy back program.
? On November 4, 2020, Aperam announced that the Board of Directors of
Aperam has decided to co-opt Mr. Sandeep Jalan (53 years) as director
until Aperam's next general meeting of shareholders, where Mr. Jalan's
election will be submitted for confirmation to the shareholders. This
decision follows the resignation of Mr. Philippe Darmayan from the Board
for personal considerations effective November 3, 2020. Mr. Lakshmi N.
Mittal, Chairman of the Board of Directors, commented "I would like to
express my warmest gratitude and appreciation for Philippe's contribution
to Aperam as CEO during the early years of Aperam, and as a member of the
Board of Directors over the last 6 years. I am also very pleased to
welcome Sandeep to the Board of Directors. He will be a valuable addition
due to his extensive industrial knowledge, and former CFO role at Aperam."
Investor conference call / webcast
Aperam management will host a conference call / webcast for members of the
investment community to discuss the third quarter 2020 financial performance
at the following time:
Date New York London Luxembourg
Wednesday, 08:00 am 01:00 pm 02:00 pm
November 4, 2020
Link to the webcast:
https://channel.royalcast.com/aperam/#!/aperam/20201104_1 [1]
The dial-in numbers for the call are: international +44 (0) 20 3003 2666;
USA +1 212 999 6659. The conference password is Aperam.
A replay of the conference call will be available for one year at
https://channel.royalcast.com/aperam/#!/aperam/20201104_1 [1]
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 a flat Stainless and Electrical steel capacity of 2.5 million
tonnes in Brazil and Europe and is a leader in high value specialty
products. In addition to its industrial network, spread over six production
facilities in Brazil, Belgium and France, Aperam has a highly integrated
distribution, processing and services network and a unique capability to
produce stainless and special steels from low cost biomass (charcoal made
from its own FSC-certified forestry).
In 2019, Aperam had sales of EUR 4,240 million and steel shipments of 1.79
million tonnes with an average carbon footprint of 0.48 tons of CO2 per ton
of slabs, making it the world's lowest CO2 footprint stainless steel
producer.
For further information, please refer to our website at www.aperam.com [2].
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. In
particular, the length and severity of the recent COVID-19 (coronavirus)
outbreak, including its impacts in the sector, macroeconomic conditions and
in Aperam's principal local markets may cause our actual results to be
materially different than those expressed in our forward-looking statements.
APERAM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in million of EURO) September 30, June 30, September 30,
2020 2020 2019
ASSETS
Cash & cash equivalents (C) 335 263 357
Inventories, trade 608 662 742
receivables and trade
payables
Prepaid expenses and other 78 81 98
current assets
Total Current Assets & 1,021 1,006 1,197
Working Capital
Goodwill and intangible 426 435 483
assets
Property, plant and 1,502 1,524 1,593
equipment (incl. Biological
assets)
Investments in associates, 4 4 29
joint ventures and other
Deferred tax assets 116 121 155
Other non-current assets 51 58 81
Total Assets (net of Trade 3,120 3,148 3,538
Payables)
LIABILITIES AND
SHAREHOLDERS' EQUITY
Short-term debt and current 77 18 164
portion of long-term debt
(B)
Accrued expenses and other 282 347 285
current liabilities
Total Current Liabilities 359 365 449
(excluding Trade Payables)
Long-term debt, net of 369 368 365
current portion (A)
Deferred employee benefits 145 145 145
Deferred tax liabilities 120 122 131
Other long-term liabilities 41 43 54
Total Liabilities 1,034 1,043 1,144
(excluding Trade Payables)
Equity attributable to the 2,082 2,101 2,390
equity holders of the
parent
Non-controlling interest 4 4 4
Total Equity 2,086 2,105 2,394
Total Liabilities and 3,120 3,148 3,538
Shareholders' Equity
(excluding Trade Payables)
Net Financial Debt (D = 111 123 172
A+B-C)
APERAM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in million Three Months Ended Nine Months Ended
of EURO)
September June September September September
30, 2020 30, 30, 2019 30, 2020 30, 2019
2020
Sales 841 818 972 2,708 3,240
EBITDA (C = 65 49 79 184 255
A-B)
EBITDA 7.7% 6.0% 8.1% 6.8% 7.9%
margin %
Depreciation (32) (35) (36) (103) (107)
&
amortisation
(B)
Operating 33 14 43 81 148
income (A)
Operating 3.9% 1.7% 4.4% 3.0% 4.6%
margin %
Result from - - 1 - 1
associates
and other
investments
Financing (4) 9 (1) (2) (21)
costs, (net)
Income 29 23 43 79 128
before taxes
Income tax (5) (2) (6) (5) (9)
expense
Effective 16.0% 8.3% 13.0% 5.7% 6.8%
tax rate %
Net income 24 21 37 74 119
attributable
to equity
holders of
the parent
Basic 0.30 0.27 0.47 0.93 1.46
earnings per
share (EUR)
Diluted 0.30 0.27 0.47 0.93 1.46
earnings per
share (EUR)
Weighted 79,816 79,816 79,804 79,816 81,628
average
common
shares
outstanding
(in
thousands)
Diluted 80,125 80,218 80,801 80,125 81,888
weighted
average
common
shares
outstanding
(in
thousands)
APERAM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in million Three Months Ended Nine Months Ended
of EURO)
September June September September September
30, 2020 30, 30, 2019 30, 2020 30, 2019
2020
Operating 33 14 43 81 148
income
Depreciation 32 35 36 103 107
&
amortisation
Change in 42 (37) (2) (16) 11
working
capital
Income tax (2) 2 (1) (3) 1
(paid) /
refund
Interest (4) (1) (1) (6) (4)
paid, (net)
Other (24) 44 (5) 38 (25)
operating
activities
(net)
Net cash 77 57 70 197 238
provided by
operating
activities
(A)
Purchase of (22) (23) (26) (90) (99)
PPE,
intangible
and
biological
assets
(CAPEX)
Other - - 1 - 2
investing
activities
(net)
Net cash (22) (23) (25) (90) (97)
used in
investing
activities
(B)
Proceeds 59 (22) 160 (8) 223
(payments)
from payable
to banks and
long term
debt
Purchase of - - - - (93)
treasury
stock (share
buy back)
Dividends (35) (37) (35) (104) (107)
paid
Other (2) (3) (1) (7) (5)
financing
activities
(net)
Net cash (22) (62) 124 (119) 18
provided by
(used in)
financing
activities
Effect of (6) (6) (1) (29) (1)
exchange
rate changes
on cash
Change in 71 (34) 168 (41) 158
cash and
cash
equivalent
Free cash 55 34 45 107 141
flow before
dividend and
share
buy-back (C
= A+B)
Appendix 1a - Health & Safety statistics
Health & Safety Statistics Three Months Ended
September 30, June 30, March 31,
2020 2020 2020
Frequency Rate 2.2 0.6 1.9
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
Electrical Solutions Specialt Eliminati
Steel ies ons
September 30,
2020
Operational
information
Steel Shipment 417 165 7 (157) 432
(000t)
Average steel 1,536 2,184 16,320 1,890
selling price
(EUR/t)
Financial
information
(in million of
EURO)
Sales 664 372 111 (306) 841
EBITDA 42 10 10 3 65
Depreciation & (26) (3) (3) - (32)
Amortisation
Operating 16 7 7 3 33
income
Quarter Ending Stainless & Services & Alloys & Others & Total
Electrical Solutions Specialt Eliminati
Steel ies ons
June 30, 2020
Operational
information
Steel Shipment 364 132 9 (129) 376
(000t)
Average steel 1,678 2,212 16,038 2,113
selling price
(EUR/t)
Financial
information
(in million of
EURO)
Sales 632 310 142 (266) 818
EBITDA 43 5 11 (10) 49
Depreciation & (28) (4) (1) (2) (35)
Amortisation
Operating 15 1 10 (12) 14
income / (loss)
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.
Financing costs: Net interest expense, other net financing costs and foreign
exchange and derivative results.
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.
=---------------------------------------------------------------------------
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 fourth phase of the Leadership Journey(R) is
targeting EUR 150 million gains for the period 2021 - 2023 via a combination
of cost, growth and mix improvement measures.
Dissemination of a Financial Wire News, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
1145227 04-Nov-2020 CET/CEST
1: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=412c550e3225d6f6d6780ea7327184ab&application_id=1145227&site_id=vwd&application_name=news
2: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=1bef17cfdce443865842e74d363dc480&application_id=1145227&site_id=vwd&application_name=news
(END) Dow Jones Newswires
November 04, 2020 01:01 ET (06:01 GMT)
