Full Year 2020 Umicore SA Earnings Press Conference
Globally, and I'm sure the grateful to my 11,000 colleagues for their exceptional engagement during these challenging times.
Depending on the resulting lockdown measures caused a huge downturn in the automotive industry, which is one of our main and markets in catalysis. We have seen extreme opposite movements during the year in the spring. We were confronted with the closure by our customers of Boost Car assembly lines and interned we had to temporarily shut down most of our capitalist plants in contrast. We saw a sharp recovery in demand which started in China in the second quarter took shape. In other regions over the summer months and gathered space through the fourth quarter while the performance in catalysis was impacted to a significant extent by these temporary shut off in the first-half. We benefited in a disproportionate manner from the recovery in demand in the second half due to our leading positions in gasoline Technologies in particular job.
In China and Europe in energy and Surface Technologies market demand was also severely affected by the pandemic in editions in addition a free market conditions in the EV battery supply chain remained depressed due to the overcapacity in China and the the presence of excess inventories off-loading inventory effects. You recall sales volumes of Catholic materials for EVS grew broadly in line with the EV battery demand, which confirms you make calls very strong position in a Catholic materials space it recycling we achieved a record performance. We nearly doubled earnings compared to 2019 with metal prices and strong trading conditions by far the largest contributors to the increase overall umicore achieved record earnings in 2020. And this goes to show the merits of birth.
Strategy which Builds on the complementarity of our activities. It also shows the resilience and Agility of our teams in the face of unprecedented conditions off. The good news really is that the patterns we observed in the second half of last year continue to support our business today and I can already say that we are off to a very strong start in 2021. We should not get carried away though as the visibility on market demand remains extremely limited the pandemic is unfortunately not behind this and the experience of last year has shown that things can change very rapidly. If we assume for a moment that the pandemic gets gradually under control and will not cause more disruptions to the economy or to Yume course operations in 2021. We should see again an acceleration in our growth trajectory with authors.
business groups contributing to the growth
In catalysis, we expect to keep benefiting from or a leading position in gasoline in particular in Europe and China in a automotive Market which according to projection a projection by industry experts should keep recovering in addition. We expect to benefit from the initial impact of the introduction of China six standards for a heavy duty diesel applications, and we should also benefit from the full-year impact of cost improvements which we carried out in 2020 in energy and service Technologies. We see good Market traction for Catholic materials, and we project substantial growth in our sales volumes for V's. This volume growth should allow us to reserve or earnings Rose in 2021 in line with the current market consensus. And this despite some fifty million euros of additional fixed costs linked to our growth investment Club.
Ends with margins continuing to reflect pricing pressure.
It recycling we expect moderate volume growth and a continued very favorable Supply mix in addition metal prices could once again boost or performance package will have seen that certain metal price has continued to search since the end of last year and if metal prices were to stay at their current elevated levels throughout 2021 recycling earnings with the increased very significantly from the record levels of 2020.
Already enrolled current trends do both. Well, however, it is a bit too early in the year and let's bear in mind that the degree of uncertainty remains High.
Despite the pandemic or perhaps because of the pandemic we have seen support for greener policies increasing weather related to cleaner Mobility or the need for circular economy. This was evidenced for instance by the green recovery plan in Europe or by the step-up of the new electric new energy Vehicles penetration targets wage in China, in other words, the regulatory drivers, which underpin our growth strategy continue to get stronger against this backdrop or motivation to maintain the Strategic course of action is very high in particular. We have pursued the construction of or Catholic materials plant in Poland and it will start production towards the end of the year. This additional capacity will come in timely to serve the growing demand for V's in Europe and the growing needs of our customers.
We'd have also pursued the ramp-up of our fuel cell Catalyst production in Korea and the expansion of capitalist production capacity in China for both light and heavy duty applications and recycling the focus of our investments in the short and mid-term is to keep improving the environmental and safety performance of the Hoboken plant 5 a.m. We have continued to increase our research and development efforts in clean Mobility materials and in recycling both in terms of product and process Technologies.
At the same time, of course, I believe that we have responded most effectively to the challenges caused by the pandemic outbreak as I mentioned in my introduction. The priority is to keep everyone that you may go healthy and I would like once again to thank our medical staff for having ensured saved safe working conditions, and I would like to thank all, you record for having swiftly adopted the required precautions.
Let's now turn to the business review the slide which we project now Recaps the key figures for 2020. These are commented in full detail in our press release. So I proposed to turn immediately to catalysis.
The automotive Market was severely hit by the Cava. Break and Global car production contracted by 18% in 2020. The graph showed the market development month by month against 2019 and you can clearly see how deep the production of cats. We're in the first half across regions. The graph showed that the recovery started earlier and was most pronounced in China against this backdrop of an eighteen percent Market contraction you make or change a tremendous resilience resilience, sorry and or revenues in catalysis decreased by only 7% This outperformance is due to our leading Market positions, which allows you to benefit in a disproportionate manner from the market recovery in the second half in China and in Europe in particular you may recall that I mentioned the year ago that you'll be dead.
Become the leading supplier of light duty Catalyst in China and the benefits thereof are increasingly visible in Europe. We continue to benefit from the decline of diesel cars sales in the mix.
Turning out your TV's we see that the battery demand expressed in jigawa tours, which by the way is the relevant metric to look at for battery materials suppliers wage grew by 17% in 2020. This market growth was driven by increasing demand in Europe where the new CO2 regulations are supporting a family or penetration of electrified Vehicles. The number of new easy models being lounged in the region or which are in the pipeline is truly impressive. It is also worth noting that plug-in hybrids remain very popular in Europe where they make up half of TV sales in China battery demand remains subdued off during the better part of 2020 and so an improvement at the end of the year only.
After years of strong growth and the doubling of battery demand for V's in 2018. The market in China is more or less stagnated in 2019 and 20,000 like anticipated. You recall sales volumes of capital materials for easy grew broadly in line with the market despite is somewhat unfavorable wage form makes this performance was supported by strong demand in Europe where we doubled or sales volumes in 2020 or beat from a small base wage in contrast the growth in in contrast with the growth in applications Capital materials demand for energy storage systems and portable Electronics was very long.
margins in
The energy and Surface Technologies were affected by the underutilization of or cathode materials capacity in China and pricing pressure as well as higher fixed costs following recent and ongoing extension programs.
Or recycling activities did benefit in 2020 from an exceptionally supportive metal price environment, especially for Platinum Group Metals. You can see the graphs that rhodium and Palladium price had a great run in 2020 despite lower demand from the automotive industry in the first part of the year new and more stringent emission Norms do require higher PGM loadings and the shift from diesel to gasoline is somewhat exacerbating the tension for rhodium and Palladium also observed that new Supply sources for PGM can hardly kept keep up. Sorry with a higher market demand and the recovery of Automotive demand has pushed prices to new highs for the same reasons price volatility was extremely high in 2020, which has resulted in a remarkably High contribution from or trading activity finally wage.
And for gold and silver investment products has remained very high probably due in part to the crisis context as these Metals continue to be seen by investors as a safe-haven. I would also like to point out that metal prices are even higher today and in certain cases much higher than the average prices of 2028 and these metal price is constituted the largest factor behind the increase in revenues and earnings in recycling in 2020. We also performed well volume-wise despite the operating constraints aimed at preventing the virus from entering or spreading in our sights.
Finally, the precious metals management unit benefited from high price volatility and generated exceptionally High earnings.
After the continuing to talk about the to speak about the recycling activity, but now focusing a little bit more on the environmental performance of the Hoboken plant and after the unexpected the unexpected increase in lead in blood readings of the children living close to the recycling plant in Hoboken in July 2020. The recent October test showed a clear reduction in the levels with an average lead again below the norm of five micrograms per liter of blood so which is very good news the root cause analysis of the increase showed a combination of external factors such as the exemption of the weather conditions and the increased exposure due to the COVID-19 lockdown measures. We have taken additional measures to return to the positive trend of recent years suck.
extra cleaning inside
The north side of the plant redesigning storage of raw materials and upgrading ventilation systems in addition to these measures and although the root cause investigation has shown no major source of lead emissions in the plant you make or has booked a 50 million-euro provision to cover costs related to an offer which we made to buy houses catharsis to the plant in order to create a green zone and thereby increase the distance between the residential area and the site all of this in concern in consultation with authorities and the residents, of course before opening the line to your questions. I would like to recap the key messages of this morning's release and presentation wage. I will not rehash. However, how the COVID-19 outbreak as complicated or lives and affected the global economy. I am simply happy that the precautions we have taken place.
Enough have proven very effective at protecting the health of my colleagues that you medical. I'm proud that we have equally well managed to keep serving our customers and that we have generated or best-ever financial performance and I expect an even better performance across businesses in 2021 fraud also to have maintained the Strategic course of action and successfully demonstrated the merits of our Horizon 20/20 strategy. Everything is now in place for the company to keep thriving and the board and I felt this would be an officious moment to start preparing for my succession with this. I would like to open the floor to your questions and I hand over the call back to our moderator of an area
Thank you very much. We will start now the Q&A session. Please note that we kindly request that you've taken the following guidelines into account. Please ask only one question for a person to give me the opportunity to ask questions to ask a question. Please use the race hand button at the top menu of the teams window keep your microphone muted until I call your name, then you will be able to unmute your microphone and ask the question directly in this call. We will ask the journalists with questions in English to go first, please go ahead.
If we have maybe questions from the phone, you can unmute yourself too and ask the question to unmute yourself on the phone. You can use the S6.
Hi, can I go ahead? Yes, go ahead please. Hello, everyone. Sorry. I've been bounced around on different companies this morning, you know, if it's not too personal or anything. I just why is it for your stepping down now Mark?
Good morning, Andrew and well as I've mentioned the I have carried out a very profound transformation of the company over the past twelve plus years. It's actually almost thirteen years now that I took over as long as CEO. I have together with my teams transferred to transform the company into a clear leader in clean technology materials and recycling with a strong Market positions with a great Innovation Pipeline with the great teams dedicated and talented teams around the globe and and we ready to take the next step and so the board and I felt that the completion of or Horizon 2020 or strategic plan was a good moment to to pass the wage.
Button to somebody to the next CEO to bring the company yet to the next stage of of development and I see that as as an auspicious moment because I really proud of what I've been able to achieve with my teams that at unique or bearing in mind that I took over in 2018 during a pretty severe financial crisis at the time of the the Lehman collapse and that we have gone through a number of different choices. Then we had the 2011 financial crisis then the crisis last year but despite all of this crisis what remains is that? We have managed that you need to put a different imprint on the company shape a different strategy with a clear focus on the high-growth high-tech businesses as I mentioned in clean mode off.
The in Electrify the vehicles in recycling and maintain the Strategic course of action through thick and thin and multiplied the value of the company, factor of approximately 7 in twelve years time. So I think it's it's it's probably on those precious moment to to consider such a movement.
Okay. Thanks for calling about 6 questions, but I'll stick to the rules and just keep it at one thing. Thank you. Is there any other English question on the phone, please? Press the * 6.
We have a question from Greenfield Michael. Please let yourself go ahead by they're ruining everyone just a quick question on the pricing pressure that you're seeing in China assisting Chinese capacity overcapacity. Sorry. I just wanted to get a little bit deeper on that and I'm not exactly where you're seeing that I cover the Cobalt marking market and for past markets and we were seeing you know, the whole Cobalt product complex improved significantly in terms of pricing and get demand for those materials. So just wanted to get a little bit more uh deeper on to that and see what exactly in the call was seeing that please.
A good morning. Actually I can.
Your reservation. So we see demand picking up in in China and unlike in Europe. It started much later in 2020. We we saw retraction four v's in Europe throughout 2020 while in China. This is the market started only to recover towards the very end of 2028, but the trend is indeed pretty favorable in that respect. And so I would definitely share your observations about the Cobalt demand picking up with this being said in in China, very significant. The capacity was built starting in 2018 on the back of I would say, I'm very optimistic projections of continued growth growth that fifty plus percent per annum was projected until the I would say Thursday.
In 2018 Ford 2019-2021 etcetera. And unfortunately, this has not made this growth has not materialized the market had a downturn in China in 2019 and has stagnated ever since and in the meantime, the the capacity that had been built in anticipation of of continue. The fast growth has been utilized and it will take probably another couple of years for that to excess capacity to to to be to to actually be to to be fully utilized and to be out of the way.
So that's all or observations today. And that's why in in our space the Catholic materials materials as we continue to see pricing pressure in in that market.
Thank you. If there are any other questions in English on the phone, please press * 6.
If not, we will move to the question from like Daryl, please unmute yourself.
We definitely agree dragons Nathan Stella. They can invest. Yeah remember that was it need to talk to the boss. Thank you. Well, I'm looking do you accept that there's not enough focus on that little better. Thursday is also also but I have on phone mail process lawsuit letter of the co-authors of context where that is. Yeah, you can and Quest even the directors to you and you really talk that ameco open and transparent with the the other belong happened the the communication just found it on reflecting and Oak alignment on the table. Does that
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What Hoboken is is is on your business? And the the the Hoboken fabric then the business office this XO the nuclear in builder in welcome at that Hoboken and factors or then on a brief on a better half the world and in taking a potential that it's okay. He can't disclose that was structural order yesterday afternoon in Hoboken the problematic of impact wage of and if I break up and he'll want to get money and respect belong happened and
Okay. Well, thank you. Our next question is coming from the computer itself. Hello everyone. My name is Lila and I work for us markets recovered sector. I was wondering what your view on the red lithium prices. What's your outlook for this and that would does it fit this price increase in your company strategy? Thanks. Good morning. So a little bit similar to the the the question which was raised on the Cobalt. I think the the legion price is is naturally react to the recovery in demand from the the the battery industry the EZ battery industry and in particular. We see very good traction for EVS back up. So that's a natural. I would say Evolution the legion price as had ups and downs in the past few years. It was moving up very wage.
Clean 2017-18 when?
The market was growing extremely fast and especially in China and then it dropped almost like a stone with the downturn of demand in China a 2019 twenty twenty twenty and now it's following again. The again the EV Trent and recovering pretty pretty pretty swiftly for us later on Price is is a pass-through customers. So in a way it is not so much influencing or or margins or and because wage pass through the the price to to our customers, whether it's low or high and yeah, I would expect that if the current trends demand Trends in v-space continue to be favorable them. So yeah, there may be a a a sustained I would say support for a legion prices and that fundamentals may may may
Can you to look good?
Great. Thank you.
Thank you. Is there are any more questions space used to erase hand button in teams, or press * 6.
Hi Sandra, and it's okay. I wanted to ask if how quickly you make might make up for the lost time due to COVID-19.
We're working as as fast and as hard as as humanly and technically possible in order to start up the plan commission the plant and start up, uh, industrial-scale promotion towards the end of the year, but unfortunately the cover the impact is of six months is is there and this being said in the meantime, we may continue to serve the European demand for more Korean plans. So that's the good news is that we had this multi-regional configuration which allowed us to properly Thursday or or customers now regarding the second part of your question. We don't see much more or many more projects than the Catholic materials project starting up in Europe. You recall will be the first player to produce Catholic materials for V's in Europe. There are a couple of wage
projects
Which have been announced that actually not not much at all. And you mentioned LG chem and perhaps you mentioned another name which came to my mind. Now. These are customers of ours are not competitors of oars what they are building and expanding in Europe. Is there battery cell production capacity so which is great news because that's battery capacity will be required by the the car makers in Europe and will require or materials. So that is in a way very good news off the the the the the the value chain is building capacity in sync.
Oh, yeah, you're right. I should have said that byd. It looks like they're going to build in in Europe from what I understand. Sorry about that. So I'm looking at the facts and figures and again, I can only repeat my answer that today. There are there isn't much happening beyond our own construction. Yeah. Could I pull you up on one thing? You said earlier? I'm probably reading too much into it. But you were speaking about LST. And and I kind of sent me that you are a little bit more. Um
You felt a little bit more that there is the possibility for to come to Europe and even though and and you made the point that it would be just sort of small Journey cheap, But before you always said I'll LST will stay in China because of the excess capacity there and the sort of vagaries of that market and but it seems like you're open to the idea that you could come to Europe to Thursday to fill a certain segment of that market. Yes indeed. Although this remain highly hypothetical because if I look at the LSD cars are being marketed and sold in China. I don't see a lot of of a market potential for a similar vehicles in the European or North American markets or or or elsewhere. I cannot rule that out. So that's what I meant, sir in a way and you sensed that correctly. I cannot rule that out, but it remains highly wage.
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and sorry be quiet. It's just in terms of you know European agency and it will be sold at a premium to the Chinese material and how well will it be sold at a premium to the Chinese material even if it's sort of five 10% how will you age?
How would you like to come that?
What do you mean by overcome the differential? I mean, I understand it, you know in Europe because of the page. There'll be a certain premium on the price of locally-made nmc where it compared to sort of Chinese material or can you can you program a key or sell it parity with the Chinese while we don't see a Chinese nmc's being sold in Europe Chinese an MCS and despite the overcapacity the excess capacity that exist in China. It is not economical to import from China to to Europe because there is no FDA. There is no free trade agreement between these two regions. So you see you have Imports in Europe of material out of Korea or Japan competing with and we also import from Korea Club.
Please into Europe.
But there are no directories no direct direct competition between Chinese and and European materials for for Europe off and just lastly. I mean if it's a frivolous question really but you know in the years that you've been CEO, I mean there's there's been so many thoughts dramatic shifts, uh, you know, in what were some of the most memorable moments. I'm thinking perhaps when PGM prices sort of
Triple think a percentage gains. And how did you deal with that? I'm sort of trying to what I'm trying to get at is what you see is the main challenges for the new incoming CEO and you know, do they need a pretty strong Constitution to deal with, you know, some of the things you've seen the over the course of your checks in now so you you will need to give me some more time to to make a selection of the most memorable moments in life because there have been so many of those and every day has been has been different. So you will lead to to bear with me in that respect. This being said, yes, I can only agree that you need a pretty solid Constitution. You need to have a pretty high degree of resilience and and Surreal Life in order to to be able to I would say not get carried away when things go extremely well and and not panicking when the going wage.
Stuff and as I've mentioned previously I've in a way let this company through a number of Crisis and despite those have maintained the Strategic course of action during thirteen years and and being able to achieve a very profound transformation of the company for the better. I believe and off and it to the benefit of all stakeholders. That's what I meant by for the better. The key challenge of of my successor will be to actually capture the formidable growth potential which exists for us and you make or is in is in in an amazing shape and an amazing position. We have great teams, very talented and dedicated teams. We have a very promising Innovation pipeline. We have strong Market positions. We have very supportive megatrends dead.
We have a strong balance sheet. So in place actually for the company to grow and in the markets where we have positioned umicore off in a very distinctive manner, whether it's the the market the Catalyst Market the recycling markets the potential for growth is is gigantic. I mean if you just take the easy Market as an example where today at five six seven eight percent of electrification, so there is ninety plus percent to go home and there will be an acceleration in that respect. I mean pretty soon coming on us and so the challenge will be able to to to suck cease to capture that amazing growth potential and bring yumiko to the to its next stage of of development.
Okay, great.
Thanks for the debates and access over the years and I'm sure you'll be heading out on the bike. So enjoy that better. Thank you. Any more questions, please raise your hands or press * 6.
Unless next question comes from done killing my speakers on mute yourself.
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Okay.
Is there any more questions, please? Press * 6 or raise your hands?
Thank you. All we're going to conclude the Q&A session and I hand over to Mark Greenberg for his final conclusions. Thank you, and I would like again like to thank you for joining this press conference this morning. If you have a follow-on questions, please feel free to reach out to my Olan or media relations manager who will be happy to follow up with you and I'm pretty sure we'll have a chance to talk again in the near future. And in the meantime, enjoy the rest of your day the rest of your week and keep safe. Thank you and
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That's well. Thank you for participating you may disconnect now.