Full Year 2021 Umicore SA Earnings Press Conference
Yeah.
Okay.
Good morning.
Welcome to pick because three years with thousands of new vehicles.
Please note that this conference is being recorded.
Your line radically muted.
Have we kind of keep the muted during each injection.
We will tweak your questions after the presentation.
And I will now turn the conference over to our CEO Mark <unk>.
Good morning, and welcome for joining my first earnings call as CEO of you recall I'm now since almost five months in this role and I'm, leaving the company that I think is a really special and before we dive into the details of our 2020.
<unk> record results I would like to share with you some of my own insights and due diligence about umicore as I saw it when entering as a company I truly believe that Umicore is the leader in terms of lean materials and recycling a pioneer in sustainability.
In the mobility sector. So a combination that can be not as unique as you see a tier three business groups that are perfect imaging together, E&S tea energy and surface technology catalysis, as well as recycling together with the DNA of <unk>, which is a DNA.
Of transformation, so what company could be better prepared for the challenges that lie ahead of us in terms of electrification. So we have made already significant progress I think.
To prepare Umicore for this next stage of growth and we are further strengthening all of our competitive positions in the different value chains and I am very confident that with the approach that we have taken and the strategies that we are currently developing and that we will be sharing an hour to come to the data.
During our capital market day in June that with those strategies Umicore will be a clear net beneficiaries in the revolution of electrification that is ahead of us and with this spectrum I would like to give you now more details about our 2021 results and maybe.
Sure.
On the agenda. So first I will talk about the results that would go in detail on our different business groups talk a bit about ESG and then.
Fiscal two zero activity give you an outlook on 2022 and also some insights on what to expect on our capital markets day going forward in June So let's go through the results of 2021.
Especially yes. So as you can see this result has been record results. We have built by far our 2020 results with over 20% increase in revenue and nearly doubling our operating income our EBIT, which is really outstanding.
Lending and see more outstanding thing even is that this is coming strongly from operational performance. There was also an impact of precious metals or precious metal prices I will come to that also in the second you know that Umicore has a unique business model that is dealing very well with this with this element of our.
Our business, but even outside of that outside of this precious metal impact in all of the three business groups, we had strong operational performance.
Going forward, the cash flow as well reached record levels with being close to 1 billion, but this of course helps us to prepare the balance sheet of the company to reduce our net debt and to make us even stronger looking to the challenges that lie ahead of us as I just said in terms of.
Kitchen, so I would like to give you more details on the next page on the elements of this strong operational performance and as you can see.
We have approximately gained.
<unk> $160 million in adjusted EBIT versus 2022, what we call business performance. This business performance is on the one side and increase of our revenue through market share gains and being more successful.
On the market on the other side. It is also an improvement of our operational efficiency, because we have been growing more than our turnover growth.
On the other hand, you see the $270 million, which is what we call the precious metal price effect, so to understand that the precious metal.
<unk> precious metals are integral part of our business. Our explained this in the section for the different business groups.
The very unique <unk> business model is very well staged to generate a maximum benefit from precious metals from favorable precious metal prices and this is what we have been doing.
In terms of 2020, we also has been very active too.
Minimized volatility and implement strategic hedges for those precious metals hedges.
As you know means to secure the pricing level of this precious metals, which we can do to a large extent, except rhodium, where this is only partially possible.
Now I would like to give you more insights on the different business groups of Umicore and I would like to start with the competitive business groups of competitive business group.
<unk>.
Providing several products catalysts to different industries.
The most prominent one is for sure the automotive catalysts business, but also precious metals chemistry, and a fuel cell in stationary catalyst as part of that.
The underlying market is the automotive market for this business group and as we all know 'twenty 'twenty was not a good year for the global economy due to the Covid crisis, but also not for the automotive market it might be surprising that the year 2021, if you compare.
In terms of automotive production was not better.
It was about the same level than 2020.
The first half started promising but then the second half was severely impacted by what is already known.
We were as the semiconductor crisis that drove down the abilities of the car manufacturers to produce cost even though the demand was there. So comparing both years roughly to 22019, you can see that around 16% of the market.
60% decrease of the market versus 2019 pre COVID-19 levels. So for sure 2021 was not an easy year for the global automotive industry. When we go through the details of our catalysis business group now it is even more impressive.
The team we have been also been able to post strong operational results. The revenues grew one quarter, while our EBIT our profitability more than doubled this is really.
An outstanding result, as we think and this is coming.
Several factors first of all in the automotive catalysts business, we have been very successful to gain market shares.
We have one segment, where we are specifically strong because as the light duty segment. So this is actually passenger cars and small.
Commercial vehicles and in the light duty segment. The majority of our revenue is in the gasoline.
Platform. So these are these are the platforms that are there to stay longest indeed struggled for electrification and here, we have been able to grow our business more than 10% in Europe and in China, while at the same time those markets the markets for combustion engine cars, including hybrids where.
Dropping by between 5% and 6%. So you can see it's a significant market share. The other segment, where we are very proud of and very successful as the heavy duty segments of the trucks, where which make today around 20% of our revenue in automotive catalysts and also here we have been tremendously increasing.
Our market performance growing by over 30% in Europe , and China again, much faster than those markets, which works in Europe up 15% and in China even decreased.
China, There was a special effects.
And for sprint.
Sprint to what's called the China five so that's the previous emissions legislation.
Vacations before mid of the year, China six was nationwide mandatory so even that was a positive one time effect, we see across the board very good performance in the market share, but also on the on the profitability side on the bottom line side, we have seen over the last two years already.
During our automotive catalysts business by optimizing our footprint of manufacturing plants optimizing the way we manufacture to be most cost competitive. So we are very.
Confident that with this cost position as well as with the technologies and our market share gains we see as a proof that our customers like our technology is very much.
Well prepared for the euro seven or any other upcoming emission legislation too to benefit from that for the markets that we're in which are repeats are the markets that are most long long living if you want which is the heavy duty diesel market as well as the passenger car gasoline.
Market.
Another thing I wanted to highlight here is the fuel cell business, it's a very attractive business for us because it's participating in the hydrogen economy, we are market leader in catalysts for <unk>.
<unk>.
Shield sales so fuel cells as you know.
The instruments to convert hydrogen.
<unk> electricity completely cotwo neutral so we have a high market share, but also we have been able to double our sales year over year in 2021.
Starting from a stronger demand of existing customers, but we're also very happy to report that we could win a significant amount of new customers, especially in China that is also a very important market for the hydrogen economy.
So now let's go to the next business group, which we call the NASD business energy and surface technology on the next slide you will see the business units, which are inside this group rechargeable battery materials rechargeable battery materials with our product is what is called the cast.
So the active material, Ken which is probably the most important single component in a lithium ion battery.
Cobalt and special materials that.
As the name says doing special materials for cobalt and nickel chemicals and also the tool to industry.
And the metal deposition solutions in electro optic materials.
In rechargeable battery materials, our volumes for the electric vehicle castles were well up although regionally difference or in Europe , we have.
Which is the most important market today for electrification, we have a strong market position and we have been able to grow with the market that was growing a little bit less than 50%. So we have been able to follow that to confirm our strong position in Europe .
In China. However, we have been slowed a little bit slower than we have been not been able to.
Follow the market growth and this is two two.
An unfavorable.
Platform and customer mix that was hampered due to market performance and disruptions that were happening on those platforms. So we.
At the same time, however has been able to enter into.
Advanced qualifications with a couple of for US in this case the new customers.
Mainly on the technology of high nickel cathode active material and.
We are very happy about this because it will help us to accelerate on the high nickel share of our.
Turnover of our sales of our revenues and we were going into launching these platforms already with significant volume in the second half of 2023 cobalt and special materials also were very successful, especially comparing to 2020 that was severely impacted by COVID-19 and metal depot.
It solutions and electro optic materials, but also significantly positively contributing to our results I wanted to give you a little bit more details about our battery business cathode active material business.
Because it is for sure.
A very dynamic environment out there so to share more data.
It is important also from our side if you look to 2021, our installed capacity and we measure this in gigawatt hours. So the capacity that the delivered materials will enable to store energy in the battery 65 gigawatt hours just to give you a comparison.
It's a little bit more maybe than 1 million electric vehicle.
And we have been having.
Having this capacity two thirds in Korea, one third in China going forward, we are growing nearly doubling this capacity. Our plan is to reach about 120 gigawatt hours in 2024 than you see with a much better regional split.
More and more equal regional split because it is showing the going on stream of our European capacities. Our plant in his opponent data will also mentioned.
In the second.
We are.
Ramping this capacities up mainly focusing on the high nickel technologies that is the mainstream in the market right now.
Yeah.
Our capacities are flexible capacities are.
Very well on track to be adjusted to reach about 75% of our anticipated sales volume in 2024.
So that we are fully on track to deliver this to our customers I want to also mentioned that this volume projection does not include the potential expansion in North America. We've seen North America is not yet represented in our Pie chart. So we are currently investigating that and also it is not including the <unk>.
Capacities that will be added through our joint venture that we are currently forming with fork swag and I'll also mention in a second so first a short update on our Giga factory in Nissan.
Which is the <unk>.
First Giga factory for cathode active materials that will go live in Europe . We are very proud of this achievement mid of the year to start the production in a factory that will reach.
Around 40 gigawatt hours in 2024, but the plot the location itself is capable to host more than 200 gigawatt hours, so very well prepared for the future.
And also it's important to mention that 100% of the energy used there of the electricity is green electricity.
From the start of the production and together with the very unique and proprietary manufacturing process that as our customers tell us is the industry standard in terms of quad.
Quality in terms of purity, which probably is the most important characteristic of cathode active materials purity and Noncontrolling nation.
With disk drives the performance and the safety of such product. So we are industry, leading and we're very proud of this achievement and also our customers are very favorable on this location talking about customers.
Wanted to talk about <unk> as well, we have announced in December that we are in the process process to sign.
<unk> joint venture with Volkswagen the content of this joint venture is to create an entity that would provide folks wagon with gaslog active material.
Note that flex Martin themselves have decided to produce to a large extent the batteries that are using.
In the electric vehicles themselves. It talks about is putting in place giga factories.
Around the world starting in in Europe , and they have chosen us to be the partner to deliver those giga factories with Catherine active material.
We have been doing that because.
They see our technology is leading including our high nickel.
Technologies that we have they also see us as somebody that Ken.
Scalar to large volumes.
Very high quality as I said before which is the key.
Element of cathode active materials, we have proven that in the giga factories that we have already put in place in Korea and in China and they have also chosen us because umicore because of its history has a very strong exposure and knowledge about the upstream what we call the upstream.
So the raw material industry the mining industry.
And this of course security of supply of raw materials is at the essence of every electrification strategy. So the principles of <unk> JV.
First of all for us.
<unk> provides a very big growth opportunity. It is securing a significant part of the European electric vehicle market because <unk> is the most.
The biggest player but also the what we think.
Very dynamic.
Dynamic one in this case.
We will substantially.
Benefit from economies of scale, we also will be able to valorize our.
Technological innovations.
While this is very protecting very important while protecting the IP and knowhow of Umicore.
So as we already said upstream on the raw material side. The partnership is bringing together the knowhow and intelligence of Jimmy cohort with the.
Buying power folks want and I think this is a unique partnership that will create and also opportunities that both partners alone could not have.
It is important to mention.
The investments.
And Gino cathode active material plants.
Giga factories, a rather big investments those are shared between the partners and dose.
Our investments have been also agreed to be value creative for both partners and just to remind you value creative for unique cummins to be well above the cost of capital in terms of <unk> and also we have said already that this partnership intends to stretch out into battery recycling.
To be really close loop in terms of.
Sustainability and also again, securing the supply of raw materials. So finalizing the details on folks walking I just wanted to highlight that it's a dimension of it again the ambition is to go to 160 gigawatt hours by 2030.
It's a it's a number that maybe is quite abstract, but if you compare it with what I. Just told you that we have 65 gigawatt hour capacity today, it would need to add another three times of that capacity to.
To the Umicore.
Overall production. So this is very significant and we believe that is very important element for our growth forward.
Finally, let's talk about recycling.
Our business group that is profiting most from the precious metal environment as you can see on the next page.
There was an old term.
With time high record level in revenues up.
Over one third in nearly 60% in EBIT.
It would be easy to say that this is just a windfall profit that is coming because of higher metal prices. It is absolutely true that this has a major impact but through our unique business model and operational excellence in our plant in Hoboken, we are able to extract maximum of that so it is not something that is.
Easily be easy.
Is it really to be copied and where we are proud of this specific setup that we have in the value chain that is I think truly daily.
Failure before us and that we are also using this know how to transfer this into the next stage of refining of rate of recycling you know that today. Our recycling is mainly focusing on electronics, representing spent automotive catalyst industrial byproduct with transforming this knowhow into battery risk.
Cycling, we also have made a press release about it.
While ago partnering with ACC and other important a battery manufacturer and partner of us.
To scale this up not to really close the loop for the upcoming battery ecosystem and we're very confident to play a major role with the technologies that we have here.
The other units jewelry and industrial metrics and precious metals management contributed very well to the.
Our record results.
We're looking forward to continue our strong performance in this sector talking about strong performance. It is a good lead over to our let's go for zero.
Update let's go for zero. This is Owen name of implementing the <unk> strategy for Umicore, the ambition to be <unk> neutral by 2035, and we have announced in mid of last year. A lot has happened since that we have been.
Able to put several of Ppas in place to secure the scope three emissions with Green energy we have joined.
SPT I and cfd initiatives to be better able to communicate and also measure of the targets that we put in place we've broken down those targets in the whole organization and put in place.
Ray restructured governance to make sure we reach our ambitious target for Umicore ESG has a special meaning because we have a true DNA of sustainability from our history from all what we're doing from our closed loop.
Aspect that that we are putting forward. So this is at the heart of our activities not just commit.
Our commitment to a target that is reflecting our ambition that we have towards supporting.
Our planet at the end of the day with what we do.
In our.
Economic and technical advancements.
Now I would like to share with you the outlook for 2022, so I have to be.
A little bit strict here and I will just read to you what is our official guidance for the year of 'twenty two.
So we expect again, a strong underlying performance in 2022 across all of the business groups. Despite cost inflation and of course provided that geopolitical developments. The pandemic our supply chain constraints will not result in additional material disruptions to the economy or Jimmy cost operation.
Assuming that current metal prices prevail.
For the remainder of the year earnings, including the effect that I had mentioned of strategic hedging, which still include a significant precious metal price uplift versus 22, a bit below the $270 million uplift that we've seen in 2021.
So with this call.
Positive outlook as we think for 2022, maybe some words again on the capital markets day as I said in the beginning it is.
Very important time for Umicore, we are shaping currently our strategy forward into 2030, we have a capital market day is scheduled at the 20 <unk> of June where we will talk about our key markets our growth prospects in that how we are positioning our rechargeable battery materials strategy to be.
Ah benefiting over proportionately from the growth in this area. How we are positioning our automotive catalysts business in terms of value creation. We will also show how resilient umicore can be in an environment of less favorable precious metal environments and also we will focus on.
Additional new growth opportunities that we see that the more maybe a little bit more far out Nevertheless, with a high growth vectors like the solid state batteries like battery recycling all the already mentioned.
Cell catalysts and also we will give more update on the let's go for zero <unk> in our ESG trajectory. So finally to wrap up the message that I wanted to give you today before we go into a question and answer session.
2021 wasn't outstanding operational performance across all business groups and heavily driven by.
Fundamental performance improvements supported by precious metal prices, but the underlying operational performance was very strong in all aspects of our business for 2022, we give guidance for another strong underlying performance ahead of us benefiting from the system sustainability of the measures that we have implemented.
We have prepared umicore already significantly.
Significantly in terms of the next chapter of growth that is ahead of US we will share this plan forward with.
All of you in our capital markets day on June 22nd, but as I said already the insights that I had now into umicore the quality of the technology portfolio. The high motivation of the people makes me very confident that umicore will be a net beneficiary of the unfolding.
<unk> vacation revolution. Thank you very much and I'm now very happy to answer any questions you might have on top of it.
Okay.
Thank you.
It wasn't a Q&A.
Please ask only one question per person and you asked the question Phase III.
Patrick.
The menu in Swindon.
Keep your microphone muted until I call. Your name and then you were able to Unutilized microphone and ask your question directly after that question Keith knowing your hand again.
A Q&A session will end at 915 follow up questions can be sent to the media inbox and we will make sure to get back to you soon.
And then just.
For the first question.
And the first question comes from NGL.
Good morning, Andrew Please go ahead.
Hi, Good morning can you hear me okay.
That's very well okay.
Difficult difficult choice to.
Just to stick to one question, but.
The first well I'll ask you about.
Johnson Matthey and their view on the.
Cathode market that is becoming commoditized. When you saw that announcement did your jaw drop or did you.
Did you understand the decision and see some lessons learned and I think I just wanted to try and understand.
You know if you source.
If you saw it coming or.
Is there anything that umicore can take away from that decision and in our view on commoditized on the market becoming commoditized.
Yeah. Thank you very much Andrew.
Excellent question, because it's a very relevant for our market now of course, you understand that we will comment.
Strategies of our competitors I just can give you some insights.
Insights on what we think about that so first of all success in the market of cathode active materials. This is is actually not so complicated it is.
Like every industrial business a matter of the right technologies.
Being implemented at the right time with a good cost position versus the demands of the customer and what we think about Umicore. You'll recall was one of the if not the pioneer in cathode active materials. So started a decade or more than a decade ago already with that and with that we're now putting in place our fourth Eagle factory.
Into action.
We are discussing a joint ventures with big customers going forward and.
The economies of scale that are available for us make us very confident that this as we said will be a value creative business for for Umicore I think I'm.
Im pointing towards timing timing is important to be early to the market to have also the lessons learnt the learning curve that we have been going through the feedback we get from our customers about our strong technological performance.
Product side, but also want to repeat on processes to produce cathode active materials is that you have to imagine it is like a chemical plant from the outset from the dimensions and in the inside from the precision its pharmaceutical.
The company that you see in the combination of both to do that at.
At high volumes and the quality that you want at the cost that you need.
Is difficult we think we can do it very well that's the feedback from our customers that's shown in our market success.
Wanted to comment on on on competitors on that but yes of course, we noticed that.
That oh.
<unk>, but it does not disturb us in our own confidence on the business.
Okay, there's a heartfelt plant going cheap in Poland, if you're interested.
Yeah as I told you we have a lot of expansion capacity for our own plant yet. So we believe that's a better choice right now.
Hey.
And you and the next question comes from Sara Morland from writer.
Sarah Good morning. Please go ahead.
And I was wondering if you could tell us how much metals, you think how much slack netease pushing okay that into next year, and also which customer segments.
Okay.
Thanks Keith.
A quick update asking to repeat the question. The first part was a little bit cutoffs.
And so much metals do you think are most likely to support U S. Yes.
And which customer segments.
Yeah talking about metals is is is always difficult to predict what what different metals will do for sure but I can tell you what it metals are important for our business is right now and actually we have two groups of metals right we have.
Our precious metal side, where for sure everybody is looking to the rhodium price today, because this is a big driver of.
The catalyst business and the demand in catalysis.
The uptake of the production of combustion engine cars is.
Going up as we think we see signs of relief on the on the microchip shortage and latest in the second half, we see that going better so for sure our customers.
We'll look to VSAT and then on the other side of course metals play a major role in the battery materials side as well so metals like nickel.
Metals lack of cobalt, but also other materials like lithium. So if you ask me what are the things to watch from outside on the one side with watching we are of course watching the rhodium on the other side.
Nickel lithium cobalt.
Most of our discussions with our customers.
Thank you are there any other questions in the call.
And Andrew I would say that you still raise your hand do you have an additional question maybe.
Yes.
Hi, yes that dynamic that'd be great.
Yeah.
It just I guess.
One of the questions is.
Could you talk a little bit I guess, you want to unveil more of your capital markets day, but you mentioned North America that you are looking into that situation.
I guess that means in a potential for another plant.
And.
Just any any thoughts on sort of the German E battery ecosystem that seems to be forming you've got.
And you've got cloud Castle BSS.
You seem to be gravitating towards Germany and Poland.
Poland in your case they offered some quiet.
Encouraging terms to go there but.
But I suppose.
Do you have any thoughts about how strong that ecosystem will be and whether it will impact what you can do in Europe . It just seems odd that everybody's sort of caught in one area and.
Yeah, Yeah. So so let me elaborate a little bit on that so of course, North America first because as you have seen in our capacity expansion.
<unk> today in North America, we don't have.
Plant yet that nevertheless, the market is picking up quite fast for the North American Oems than the new entrants, but also.
The Europeans that they are coming and we have discussions with several areas right.
It was a local ones, but also with the Europeans that let's go over now it is possible to it is possible to supply across continents. We do that right now we deliver from our Korean plants into Europe , the catalog to material, but for US. This is only a transition Terry.
Wait because.
Ultimately, what we wanted to reduce cotwo with this whole exercise right. So if we're carrying across continents and a large amount of materials doesn't make sense. So we have to have a footprint in each of the of the regions in North America of course.
It's important to find the right spot the right spot in terms of proximity to the customers, but also availability of energy which is <unk>.
Not an easy math in North America and.
And not any energy, but clean and Green energy. This is a big driver of that and you can see here the debate between U S and Canada.
Who has the better location and everybody is giving arguments and we are in the process tools to elaborate on that now going to Europe .
Uh huh.
Again, I don't want to comment on competitors' strategies I think that.
Ultimately the cathode material business is new it's something that we have to get used to as an industry, but at the end of the date, we'll follow the same mechanisms.
As every industry every automotive part that is produced where after the high percentage you want to be the location, where you have the best availability of of workforce, we have low.
Low cost base, and where you have a good logistic interaction so for us.
Perfect choice and you should just recap the past.
2030, 40 years of what the automotive industry has done with with you putting in place is east European manufacturing footprint.
I think why should this not be applicable here. So I think we are set up very well with.
Absolutely we have put together the last piece that is missing is now North America and we hope in the next months to come to also announce something on that front.
Okay.
Oh, sorry.
One additional question from that from Sarah Morland from Reuters Good morning, Sarah again.
Please go ahead.
Hi, again, thanks, and I just had a follow up question on <unk>.
Nicole.
We have enough customers on D C on softness in customers and in the shift towards high nickel cathodes.
So just repeating your question was if we think that customers will shift to high nickel cathodes that was your question do you see yourself needs now to competition in achieving honest it yet.
I think.
In the presentation of the charter escape I mentioned, the fact that we are currently in 2021 was quite successful for us to enter in qualifications and advanced qualifications with multiple customers in Europe and also in Asia, especially in China.
High nickel cathode material qualifications and I think this will help us to catch up quite quickly with first production volumes already starting 'twenty three as I said significant volumes.
Second half of 'twenty, three and then really scaling up.
To reach 75% of our of our revenue in 2024, so I see a good momentum right now.
Yes, it may be we have been a little bit.
You know <unk>.
ROA in the years before to jump on the train but.
I think that's not relevant.
In the end game, because the big markets are unfolding right now so the businesses that have the high volumes are actually given now for a launch in 'twenty, four and beyond and we feel ourself.
Well positioned and that's also the feedback we get from from our customers and I think we will be able to.
Post some news along the next months to one year that.
That will give even more confirmation on.
On that front.
And have you lost any customers DTD shaft.
No we didn't lose any customers.
Actually we are.
I have just seen that the.
Product and platform mix that we have been so strong for those customers that we haven't we didn't lose any.
It was not as successful on the market as they thought as we thought and then there were several disruptions, but these are the effects that repurchasing.
Thank you.
As there are no further questions.
We'd like to thank you and then any other questions can be sent to the media mailbox that its media at Umicore Dot com.
We're going to conclude this Q&A session and I would like to thank you for participating you may all disconnect now thank.
Thank you very much have a good day.
Okay.
This meeting is no longer being recorded or transcribed.