Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Umicore SA (UMICF, Financial) reported a strong performance in its Catalysis business with impressive margins of 25% and a return on capital of 40%.
- The recycling business continues to perform well with EBITDA margins of 36.5% and a return on capital close to 70%, despite lower PGM prices and a maintenance shutdown.
- The Efficiency for Growth program is on track, expected to yield EUR70 million in savings for 2024, with more than half already achieved.
- Umicore SA (UMICF) maintains a strong balance sheet with a resilient debt maturity profile and a leverage ratio of 1.7.
- The company reconfirmed its adjusted EBITDA outlook for 2024, expecting it to be in the range of EUR760 million to EUR800 million.
Negative Points
- The battery materials business is facing significant challenges, with a EUR1.6 billion non-cash impairment mostly related to property, plant, and equipment and non-current inventory in Asia.
- The battery materials EBIT is expected to remain negative or below breakeven in 2025 and 2026.
- Revenues for the first half of 2024 were down 13% compared to the same period last year, amounting to EUR1.8 billion.
- The adjusted EBITDA for the first half of 2024 was EUR393 million, EUR125 million below the same period last year.
- The recycling business saw a 30% decline in revenues and a 16% decline in EBITDA due to a less favorable precious metals environment and a planned maintenance shutdown.
Q & A Highlights
Q: Can you explain the strong margins in your auto catalyst business? Are there any unique, specific one-offs that supported the numbers? Also, what do you see in the business as we look into the third quarter?
A: The strong margins are due to structural improvements in pricing, procurement, and efficiency measures. We have factored in some slowdown in auto sales for the second half of the year, but we still see potential upside if consumers start buying new cars again.
Q: Regarding battery materials, it seems like you are adjusting to the new reality but not taking dramatic actions. Is the strategy to wait for the market to recover?
A: We are taking stock of what we have and building a base scenario. This is not the endpoint; we are exploring many opportunities and will provide conclusions in Q1 2025. The current projections do not include any further actions we might take.
Q: Have you retested your take-or-pay agreements in the current market scenario?
A: Yes, these contracts are in full force, and there are no ongoing discussions to alter these mechanisms. The contracts provide a level of security for our investments.
Q: What should we make of the recent press articles regarding IONWAY scoping new sites in Canada and Spain?
A: We continue to see strong trends and positive conversations with our joint venture partner, PowerCo. Any future developments will come on top of our current base model.
Q: Can you give more specifics on the positive one-offs in battery materials last year?
A: The one-offs last year were driven by lithium margin effects and valorization of scraps containing lithium. This year, we have a positive one-off of EUR50 million.
Q: How are you supporting the employee base given the struggles in battery materials?
A: We see enormous resilience and passion among our employees. They are united and committed to facing these challenges head-on.
Q: Why do you think the European battery materials assets may not face similar impairments as the Asian ones?
A: The impairment exercise was based on current volume commitments and projections. The European assets have strong contracts underpinning them, and we see potential for future growth.
Q: How much of a drag is the China plant on your EBIT for battery materials?
A: We typically do not share specific operational details, but the low utilization of the China plant is part of our strategic review. We are exploring options to make better use of this asset.
Q: Can you provide more details on the split between CapEx and inventory adjustments in the impairment?
A: Out of the EUR1.6 billion impairment, EUR1 billion is related to property, plant, and equipment, and EUR400 million is related to non-current inventory, mainly due to overvaluation of cobalt and lithium.
Q: Are all options on the table for the strategic review, including a complete exit from the battery materials business?
A: We are open to all options, including partnerships along the value chain. We are conducting a structured review and will share our conclusions in Q1 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
