Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Elkem ASA (ELKEF, Financial) reported an EBITDA of slightly above NOK1 billion, resulting in an EBITDA margin of 12%.
- The Silicones division showed improved results compared to both the second quarter last year and the first quarter this year.
- Carbon Solution delivered strong quarterly results with favorable cost development and good sales volumes.
- Elkem ASA (ELKEF) received recognition for its strong ESG performance, including an A+ rating from Position Green.
- The company has ambitious innovation strategies, with significant contributions from new products developed within the last five years.
Negative Points
- Market conditions remain challenging with relatively weak demand and low sales prices, particularly for silicones in China.
- The overall market sentiment is still weak, impacting profitability.
- The Silicones division, despite improvements, is still facing an oversupplied market and pressure on sales prices.
- The Silicon Products division experienced a reduction in operating income due to lower sales prices for silicon and ferrosilicon.
- The Carbon Solutions division saw a reduction in sales prices, which impacted overall revenue.
Q & A Highlights
Q: You mentioned regarding the Chinese expansion project, that you will have about NOK1.5 billion of revenue but you also had limited financial impact until the plant is fully running. Does that mean limited EBITDA impact through 2024?
A: Yes.
Q: Shin-etsu has announced a global price increase of 10%, as mentioned in the presentation. So the question is, if there are any plans for Elkem to follow on that?
A: I think we will follow the market development very closely and expect to participate in any positive developments.
Q: There is also a question regarding dividend for '24. As we had a positive EPS after this quarter, can we expect Elkem to pay a dividend for '24?
A: Well, that of course remains to be seen what the Board will decide, but I think it's reasonable to expect that Elkem will pay dividends in line with our communicated policy.
Q: More on outlook and price picture going forward and expectations for silicon and ferrosilicon prices, where are they heading?
A: So I think as mentioned, we see some positive signs, but we're also moving into a quarter with seasonally lower activity, so I think we'll see a pretty stable picture.
Q: You also said in your presentation that there were no new projects coming stream in China in '25 and '26. What do you think about the supply demand balance in China in the next few years?
A: Of course, very much dependent on macroeconomics and how -- because there's a very close correlation on the demand for silicones and an overall GDP but based on what we see today, I think we will continue to see an oversupplied market in 2025. And then things could turn into a more balanced situation in 2026. But of course, a lot of uncertainty here. But I think the positive thing is that I think the very aggressive capacity expansion that we have seen so far seems to be -- now to be stopped.
Q: And what about the EBITDA going forward? What is your expectations for the third quarter?
A: That was a very good question. And as you know, we don't give any quantitative financial guiding but clearly we have guided on the market development that we see, which seems to be quite stable. And I should say quite limited further downside to put it that way. And then we have seen that our EBITDA improvement program, has given already good results in Q2 and we also believe to expect to see good results from that going forward.
Q: We also have a question here regarding the operating leverage in silicones and with volumes up 15% quarter over quarter and the benefits from the EBITDA improvement program. Why wasn't the result even better?
A: Because we still see quite weak or I should say weak market demand both in China or in Asia Pacific for commodity products, and we also see quite weak volume demand for specialties in the Western world. So we think it's quite good to have a pretty significant improvement in results, both versus Q1 and of course, also versus Q2 last year in a weak market sentiment. But this is not due to market improvement that's due to, let's say, internal operational improvement. And that will also be our focus going forward to further improve our internal performance, our total cost position, and we will also be helped by the expansion project in China when that is being fully ramped up in that respect.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
