Second quarter 2020 results: Resilient results despite the COVID induced demand drop
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Aperam S.A. / Key word(s): Quarter Results Second quarter 2020 results: Resilient results despite the COVID induced demand drop
Luxembourg, July 29, 2020 (07:00 CET) - Aperam (referred to as "Aperam" or the "Company") (Amsterdam, Luxembourg, Paris, Brussels: APAM, NYRS: APEMY), announced today results for the three months ending June 30, 2020. Highlights
Strategic initiatives
Prospects
Financial Highlights (on the basis of financial information prepared under IFRS)
Health & Safety results
Health and Safety performance based on Aperam personnel figures and contractors' lost time injury frequency rate was 0.6x in the second quarter of 2020 compared to 1.9x in the first quarter of 2020.
Financial results analysis for the three-month period ending June 30, 2020 Sales for the second quarter of 2020 decreased by 22% to EUR 818 million compared to EUR 1,049 million for the first quarter of 2020. Steel shipments decreased from 438 thousand tonnes in the first quarter of 2020, to 376 thousand tonnes in the second quarter of 2020.
EBITDA decreased during the quarter to EUR 49 million from EUR 70 million for the first quarter of 2020. Volumes in both Europe and Brazil were substantially impacted by the COVID induced demand drop. Prices remained under pressure. Lower raw material prices caused negative inventory valuation effects. The gains from the Leadership Journey(R) were not sufficient to offset these negative factors.
Depreciation and amortization was EUR (35) million for the second quarter of 2020.
Aperam had an operating income for the second quarter of 2020 of EUR 14 million compared to an operating income of EUR 34 million for the previous quarter.
Financing costs including the FX and derivatives result for the second quarter of 2020 were positive at EUR 9 million, including cash cost of financing of EUR (2) million and exceptional interest income of EUR 15 million in Brazil for PIS/Cofins tax credits related to prior periods.
Income tax expense for the second quarter of 2020 was EUR (2) million.
The Company recorded a net income of EUR 21 million for the second quarter of 2020. Cash flows from operations for the second quarter of 2020 were positive at EUR 57 million, with a working capital increase of EUR 37 million. CAPEX for the second quarter was EUR (23) million.
Free cash flow before dividend for the second quarter of 2020 amounted to EUR 34 million.
During the second quarter of 2020, the cash returns to shareholders amounted to EUR 37 million, consisting fully of dividend.
Operating segment results analysis
Stainless & Electrical Steel (1)
(1) Amounts are shown prior to intra-group eliminations
The Stainless & Electrical Steel segment had sales of EUR 632 million for the second quarter of 2020. This represents a 24% decrease compared to sales of EUR 827 million for the first quarter of 2020. Steel shipments during the second quarter were 364 thousand tonnes, a decrease of 15% compared to shipments of 426 thousand tonnes during the previous quarter. The COVID induced demand drop caused volumes in Europe to decline substantially despite lower import pressure. The COVID crisis also negatively impacted volumes in Brazil in a seasonally stronger quarter. Average steel selling prices for the Stainless & Electrical Steel segment decreased by 11% compared to the previous quarter.
The segment generated EBITDA of EUR 43 million for the second quarter of 2020 compared to EUR 53 million for the first quarter of 2020. The negative volume impact was not fully compensated by a less negative inventory valuation effect from raw material pricing and Leadership Journey(R) gains.
Depreciation and amortisation expense was EUR (28) million for the second quarter of 2020. The Stainless & Electrical Steel segment had an operating income of EUR 15 million for the second quarter of 2020 compared to an operating income of EUR 23 million for the first quarter of 2020.
Services & Solutions(1)
(1) Amounts are shown prior to intra-group eliminations
The Services & Solutions segment had sales of EUR 310 million for the second quarter of 2020, representing a decrease of 31% compared to sales of EUR 450 million for the first quarter of 2020. For the second quarter of 2020, steel shipments were 132 thousand tonnes compared to 186 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 5 million for the second quarter of 2020 compared to EBITDA of EUR 9 million in the first quarter of 2020. EBITDA decreased mainly due to a significant 29% drop in volumes quarter on quarter that was not compensated by a less negative inventory valuation effect and Leadership Journey(R) gains.
Depreciation and amortisation was EUR (4) million for the second quarter of 2020.
The Services & Solutions segment had an operating income of EUR 1 million for the second quarter of 2020 compared to an operating income of EUR 6 million for the first quarter of 2020.
Alloys & Specialties(1)
(1) Amounts are shown prior to intra-group eliminations
The Alloys & Specialties segment had sales of EUR 142 million for the second quarter of 2020, representing a decrease of 8% compared to EUR 155 million for the first quarter of 2020. Steel shipments were stable during the second quarter of 2020 at 9 thousand tonnes. Average steel selling prices were lower during the quarter.
The Alloys & Specialties segment achieved EBITDA of EUR 11 million for the second quarter of 2020 compared to EUR 9 million for the first quarter of 2020. The increase in EBITDA was due to a combination of stable volumes, a less negative raw material induced inventory valuation effect and the disappearance of COVID related costs from temporary plant closures that impacted the previous quarter.
Depreciation and amortisation expense for the second quarter of 2020 was EUR (1) million.
The Alloys & Specialties segment had an operating income of EUR 10 million for the second quarter of 2020 compared to an operating income of EUR 6 million for the first quarter of 2020.
Recent developments
New developments
Investor conference call / webcast
Aperam management will host a conference call / webcast for members of the investment community to discuss the second quarter 2020 financial performance at the following time:
Link to the webcast: https://channel.royalcast.com/webcast/aperam/20200729_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/webcast/aperam/20200729_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
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
APERAM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
APERAM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Appendix 1a - Health & Safety statistics
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
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 third phase of the Leadership Journey(R) - the Transformation Program - is targeting cumulated annualized EBITDA gains of EUR 200 million by year end of 2020.
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1104491 29-Jul-2020 CET/CEST