Half Year 2022 Umicore SA Earnings Call
With that as group CFO , we were quite very much to see him go.
He has been one of the architects of the human cost that we see to date, including being very instrumental in the development of the Umicore 2030 rise strategy also personally want to thank Philip for.
At the time that we have been working together S. Substantially has meet to onboard to Umicore I understand the insights and structures of the businesses.
Now as sad as I am as I am to see him leave I'm very happy that we have found with vantiv to fill an excellent success on.
That will take the baton from Philippines to Umicore as CFO towards the successful implementation of our <unk> strategy.
<unk> has been able to develop a deep understanding of human cause activities spending over 10 years in group and various group into Bu controlling functions.
To finance, our mission and for the past five years <unk> has collected a very important experience being in various general management roles for the group, combining finance with commercial and to Prairie aspects. So Phillip and wireless will work closely together until end of September .
Ensuring a smooth transition and hand over and then you also listening to this call time, but time will have the chance to meet one is to get to know him and to.
Understand even more about his background.
So we're happy that even after the periods Filipe has agreed to stay connected to the group in an advisory role to further support the transition in Chile for sure will address more to this point in his own section.
Now, let's review the highlights of the first half of 2022 for sure one of the highlights for US was the capital market day that we held in London.
With the introduction of our Umicore 2030 rise strategy a strategy that is based on the strong belief that we are positioned on the mega trends that really matter in the next decade, and beyond and Mega trends of mobility transformation into growing.
Need for advanced materials, we have a portfolio of businesses that are not only strong individually, but especially by the complementarity in many dimensions business maturity in terms of cash flow. Some of them are growing some of them are in need for cash.
Circularity metals and for sure automotive that is more and more an important end market for us, but there is one.
<unk> threat, which is the purpose for system. Its sustainability that this really at the core of Umicore and with the rise we have created an instrumental and I want to highlight again for everybody who could not join our capital market day rise stance for the ambition to rise above previous.
Levels, but also each letter has no meaning.
<unk> stands for the reliable transformation partner that we will be with our customers I is the ambition to continue to be the innovation leader in the field that were active that's for sure.
As for sustainability champion, which is which is at the heart of Unicorn E is the excellence in execution and would that strategy with the positioning we are very confident that we will be able to grow the group.
Two more than doubling its revenues until 2030 with a strong profitability above 20% EBITA margin and a rosy of 15% and with that we can combine the attributes of a startup company fast growth with the ones of an established one to deliver returns.
The beginning from day, one over the whole period and this really as we think sets us apart and this ambitious and as we think realistic strategy is carried by the full conviction and commitment from.
The complete unit cost senior management, and we share the belief that umicore will be a net beneficiary of the unfolding electrification resolution.
Now there are other highlights that I want to mention first on the financial performance, we will detail that.
This presentation very good results that we achieved in the first half of the year were again driven by a strong performance across all of our business groups. Despite severe market disruptions as we all know rising cost inflation and the volatile precious metal price environment. This is the second highest performance achieved in Umicore history only outlet.
By the very exceptional record performance in the first half of last year of 'twenty 'twenty. One so I don't go into details of the business groups. We will do that in a second but you will see that catalysis again has proven a strong market position and profitability in E&S T. There is a very good momentum in terms of.
Earnings driven by <unk>.
CSM saw equivalent, especially materials, but also by the rechargeable battery materials, there's a certain lithium impacts that I will detail out later and recycling with the second highest performance in its history with strong operational cash flows and a lower working capital increase then.
Expected now on the implementation of the rise strategy. We also can report good progress we didn't start with the implementation.
Only when announcing it we of course have stock started much earlier than we have been able to see.
Some key.
Milestones there like the announcement of our plans too.
We'll go into the local production of cathode materials in North America with a partnership with the Canadian government going forward with the.
With the strategy I would come to that in a second.
Further good progress in building out what we think we are pioneering and doing customer partnerships towards creating an ecosystem that will be successful in the battery material area, we've announced some of them already and we will as we said in the capital market day over the course of the year.
Additional news to share on that aspect.
We also have made quite some progress and probably we don't talk about it enough.
On our R&D roadmap on our innovation and technology plant with inaugurated our new state of the art.
Global battery material R&D Center in Korea.
And we are moving along our roadmap of.
Product and process innovation, we talked about high nickel, but especially also <unk> technologies and more and more we're moving into solid state technologies you might have seen the announcement that we are joining forces here with what we think is the leading player in solid state Electrolyzed Intermezzo from Japan too.
Jointly work on a new battery material a combination that could have the name Castle Lite.
On top of that we have been working very hard on our site.
Fight against <unk>.
Two emissions, what we really want as you know is <unk> also from the supply chain and I come in the second slide to that to give you. Some details on our scope three ambition is that we have.
Set out over the course of the Caribbean.
Now over the next three to four slide some examples here you can see the picture siding Z a supply agreement with ACC.
In April which has the ambition to grow at least 246 gigawatt hours in Europe by 2030 on the next one.
C from the signing ceremony of.
The Mou for the strategic innovation fund with the with the government of Canada.
The strategy of Canada is very.
Very strong they want to position themselves and I think they will be successful as the leader in the North American space to have the battery.
Battery materials value chain in place from mine through all the processing and we are involved Theyre, then finally into the batteries and the.
Battery materials, so we have.
Our secured.
Land, there and we are now working.
On the value creative.
Creative customer contracts and I can tell you after we have announced that they are.
My phone has been ringing quite a lot with our customers to work on joint plants. How we can use this capacity that we have.
Planning to bid on the next slide you can see our plant in Indonesia. We have last time said that we have a plan to start production mid of the year. We can confirm now that we have done that successfully start of production in Asia, which then will be ramped up as we said.
And further we are already working on the further expansion that we will follow our business success and in Europe .
Last special page again on the scope three targets. This is really something when we think umicore can play a unique role in really decarbonize the supply chain of electric vehicles, because we are.
Only player that has positioned really from mine to battery without being in the main business, nor the battery business and we have all it takes to work with our supply chain partners to bring down.
The C O two emissions scope three once you see 42% that's based on the scope of.
Umicore, but if you drill it down to the battery materials and.
Compared to see today's industry average.
Is a target of reducing by 75% until 2030.
This is we do this because we see our responsibility our.
Purpose that we have to contribute to the better off the planet, but also.
Strongly believing that this would be a very big competitive advantage for us going forward that will set us apart from our competitors that cannot offer such a low cotwo footprint.
Now, let's go through the business results. So the results for the group.
Strong.
We are.
Accounting $2 1 billion of revenues and the EBITDA of 601 million euro or <unk> of 28% and it's also very important with the plans that we have going forward theres strong balance sheet with a stable and adept at 955 million Euro and a net debt to EBITDA ratio.
Or is there a 0.88, so filipe will go much more in detail on that and I would like to give you now some more insights on our business groups. So first on catalyst as the underlying market one of the important market is the automotive market.
We all know probably that the first half of 2022 proved to be another challenging time for the automotive industry shortage in semiconductors, increasing global logistic difficulties COVID-19 research in China and of course, the tragedy in Ukraine has caused severe disruptions.
Yeah.
And also the demand.
For the ice production was was down or let's say the production of ICP was down by $6 seven.
So this I remind you. This is not the car production is the sub market of the.
Internal combustion engines.
We're down six 7% that's the reference reference market for our catalysis business and in particular, the Chinese and the European market both were around 13%.
Hit and this is really a.
Not easy and.
When you compare this.
<unk> eight <unk> hundred 2022 is still around 20% below those pre COVID-19 levels of 2019 with this in mind this very.
Difficult business environment, let's now look to the business performance of.
Catalysis and this performance stands quite strong with revenues almost flat year over year, just remember what we just said about the market and the adjusted EBIT in catalysis for each one amounted to 170 million well up compared to the second half of last year, although below the record performance of the first half.
<unk> 2001 to EBITA margin with 23% continues to be strong versus historical levels. Thanks to strict cost management, our ability to pass through cost inflation price.
As well a beneficial mix and with this.
If you have followed our raised 2030 strategy. We are convinced that this is one first steppingstone that proves that we are on track with our strategy to make a significant step up in this business versus our historical margins and to deliver strong cash flows forward to support and finance.
Our 2013 rise strategy. So some details by by business unit.
<unk>.
The market as we said was around 13% down in Europe , and China, which are key markets for Umicore Umicore outperformed.
The market in both of those markets most of the global market, but especially I want to put it.
Our focus on China, where as we set a 12, 5% decline in volumes in our ice gasoline market and <unk> been able to increase by 5%. So.
Close to 20% differential which helped us to significantly gain market shares and strong confirmation that umicore.
Can increase its competitive position in difficult market conditions precious metals chemistry contributed as well with strong revenues in yourself.
Stationery catalysts, where.
Hit by the COVID-19, Lockdown that China is a key market for the future.
So customer orders have been postponed and the revenues have been temporarily dampen that.
Now, let's move to the next segment.
Energy and surface technology, one important element of that is of course, the environment for battery materials and battery metals.
As we all know it's certain use the metrics that are needed for battery materials have significantly increased the price versus 2021.
However, what is new is the level of volatility and fluctuation compared to previous years, especially visible through the price developments of lithium.
How does it affect our business or where do we stand so.
Energy <unk> surface technologies.
Lending with revenues and earnings were up versus <unk> last year, 21% and 44% respectively. The main drivers of this are.
Very strong performance.
CSM cobalt <unk> specialty materials that come to that in the point with it with again, a very strong <unk> and IBM, which had a special effect from the lithium spike that we saw in the pitch before so rechargeable battery materials, we have to clearly say that theres no change in the situation that we.
Has announced in December last year, and reconfirmed into Q1 update.
In terms of the volume situation for our business in 2022 and 2023.
And we confirm again that the year of growth with the right chemistry mix will start end of 'twenty three and then full swing 24, we are very well on track with the advanced customer qualifications that we have mentioned already some of them have already been transformed into.
Business awards that we cannot yet.
Speak about but would it be probably later the year end.
That we are very confident that what we have said in the two previous meetings is fully on track you'll see the results are high also.
So because of a positive contribution from lithium caused by a timing effect between lower priced lithium supply and the exceptional spike in lithium that had been in page one this year.
Cobalt and special materials again, another strong half year as I already said driven by strong market demand.
A favorable cobalt and nickel.
Cobalt and nickel price environment in each one.
Metal deposit solution in electro optic materials stable to slightly higher revenues with good contribution to the business group results through both business.
Business units.
We're looking to.
The recycling business unit, the relevant metrics to look at the PGM group metals.
Especially odeon and Palladium and it was also a volatile environment, but especially here with lower price levels versus 'twenty, 'twenty, one, especially for audio with significant.
Gap between today and the exceptional developments in 2021 the business group recycling has nevertheless, a very strong performance. The second best H, one umicore history lower results versus <unk> 2021, reflecting mainly the lower precious metal prices.
As we just have seen the pitch before but also caused by the disruption of the of the industry is less favorable supply mix.
Well as of course cost inflation that had to be content.
Precious metal refining so the our recycling activity has a very robust operational performance as the throughput of the materials. So the sheer amount of processed materials.
<unk> at stable levels versus each one's different one however, as we said earlier the content the mix of the in seat was was different.
And a good ability has been shown to absorb this high volatility in Phoenix and.
And to react quickly on changes caused by global logistic disruptions jewelry and industrial metals had a strong performance in all product lines with strong demand, especially in platinum engineered materials and industrial products.
Precious metal management, a unit that is.
As the name says managing all of our precious metal streams has also a strong performance, but behind the exception of 'twenty, one through less favorable trading conditions, especially in rhodium. So now after this business review I will come back to you for the outlook and some summary, and I will hand over now.
Now to Phil.
Thank you Matteo and good morning, everyone.
Going to the first slide so when we consolidate the performance of the different business groups that Mathias already presented we get to the group numbers as shown here.
The common thread is that with the exception of revenue as the performance of the first half of the year was below the record numbers of the first half of last year, but went up compared to the second half.
As well as compared to any other periods before 2021.
Revenues were stable year on year, which is obviously a combined effects from the underlying demand trends in the different units, but also including a positive forex effect across the group and a lithium price effect in rechargeable battery materials.
Our cash flows were strong and resulted in stable net financial debt compared to the end of 'twenty, one which is better than what we guided for earlier in the year.
With an adjusted return on capital employed of 28%, we obviously remain well in value creation territory.
On a stable year on year average capital employed base.
The next slides blocks, the adjusted EBIT, and EBITDA and corresponding margins over the last four years.
And distribution lines, just how exceptionally strong last year's first half performance was which is today's basis for comparison.
Now looking through that the graph shows that the positive margin trends that started quite some years ago continues into the first half of this year.
In terms of absolute contribution adjusted EBIT was down 26% year on year, but up 33% compared to the second half of last year for.
The adjusted EBITDA percentages, respectively, 21% down 23% up.
As you know results are particularly important to <unk> group margins given the contributes in a quite direct way to the bottom line.
Switching now to cash flows.
Approximately half of the 673 million euros of cash flows from operation was converted into 320 million euros of operating free cash flow.
Net working capital increased 152 million euros with an increase in <unk>, partly offset by a decrease in catalysis and recycling.
This net working capital increase is less than the more material increase we guided for earlier in the year.
This outperformance reflects a continued internal focus on working capital management lower metal prices towards the end of June than we had assumed in our earlier guidance and some temporary cash ins also in June .
For the second half of the year, we expect a further increase of net working capital obviously, depending on metal prices.
Cash spent on Capex and capitalized development costs amounted to 201 million euros with energy <unk> surface technologies accounting for approximately two thirds of group Capex driven mainly by rechargeable battery materials expansion.
In catalysis and recycling Capex spending was stable year on year as we continue to focus on capital efficiency of our existing facilities.
This is being set for the second half, we do expect to see a higher capex than in the first half and currently we would guide to some 500 million euros of Capex for the full year with obviously the bulk of the increase in rechargeable battery materials.
Moving to the net debt bridge.
Operating free cash flow of 320 million euros covered the non operational cash outs translating into a stable net financial debt below 1 billion euros.
The corresponding leverage ratio of <unk>.
88 times, the adjusted EBITDA is a reflection of unit cost very strong balance sheet.
Looking at the full P&L, we think already covered the operational lines. So passing to the net financial costs. These were lower year on year due to lower Forex related costs tax charges were also down reflecting the combination of lower taxable base and a lower effective tax.
Eight of 22, 8% compared to 24, 9% a year ago.
This resulted in an adjusted net result in adjusted EPS earnings per share of 321 million euros, and 134 cents respectively.
Lee of.
Which twenty-five jure sense will be paid out as interim dividend in August in line with our policy.
We recorded total adjustments to EBIT of minus 20 million euros, mainly linked to a increase in environmental provisions.
That concludes the numbers, but before I hand back to Matteo side.
I'd like to take the opportunity to say a few including non financial words, if you allow me.
As you've seen from this morning's announcement. This is my last earnings call as CFO of Umicore.
Still vividly remember my first call close to 10 years ago.
I would say the tremor in my voice back then was due to nerves and if you hear any today, it's from different emotions and gratitude is definitely one of them.
I would like to thank you for the many interactions we've had over those 10 years. They were definitely part of what made the CFO role so rewarding and enriching.
This decision is based on my conviction that this is the right time to pass the baton to new and younger talent.
With the Rice 2030 strategy now clearly articulated umicore is starting a new chapter in his long and rich history, and this deserves to be shaped and owned by a CFO , who with a fresh pair of eyes will lead as teams to the next 10 years.
As can count on my full support to system in the succession.
I sincerely. Thank all of you and wish you all the best.
And now I'll hand back over to Marcus.
Thank you very much Philip.
I think nothing to add to that and one thing I think you will see.
In talking to all of the people on the line that they for sure. We'll Miss you probably as much as you will miss them. So now talking about the future we talk about our new CFO and we talk about the outlook for 'twenty 'twenty. Two so looking ahead now to the continuation of the.
Year, we expect another strong performance in 2022 for the group across all business groups. Despite the severely disrupted external market context.
Based on the performance in the first half of the yen assuming precious metal prices remain at current levels for the remainder of the year. We expect adjusted EBIT for the full year 2022 to be somewhat above consensus which stands at $828 million to date. This includes some $220 million.
Lift from precious metal prices versus 2020, and I'll remind you the number last year that we can always compared to 2020 was 217 million euros.
Yes.
If we.
Looking out to the different business groups, we start with catalysis and here. It is anticipated that the car production will remain impacted by the ongoing supply disruptions.
Notwithstanding the related limited visibility, we expect to continue to benefit from our strong market position, especially in gasoline applications and taking into account the strong performance in the first half of the year. The current assumptions on volumes for 2022 adjusted EBIT in catalysis for the full year is expected to be close.
As to the record levels of 2021 and with that somewhat above the current consensus despite the impact of cost inflation.
Energy on surface technologies based on the first half performance and anticipating a normalization in the.
Cobalt <unk> specialty materials business Umicore expects adjusted EBIT in energy <unk> surface technologies for the full year 'twenty two to be above the levels of the previous year and with that above current consensus expectations.
For recycling, we expect that the adjusted EBIT for the full year 2022 will be in line with current consensus. This is based on the assumption that the current precious metal prices will continue to prevail. In this also takes into account a somewhat improved supply mix in precious metals refining compared.
Through the first half and also as we have announced previously.
The corporate costs are expected to continue to increase above inflation in 2022, as we are committed to our longer term innovation and digitalization plans and are preparing our organization and systems for the plant business expansion and actually growth that we are projecting through our raised 2013.
<unk> strategy now locked.
Topic for before we go into the Q&A is short wrap up so if you would remember only three things from the presentation that slipped and myself have given you today it would be the following three points.
2022, each one was the second highest performance in the history of you recall, despite very challenging market context, and secondly, the outlook is confirmed to have a strong overall performance for the remainder of the year last but at least we are.
Making good progress in the implementation of the Umicore 2030 strategy key milestones have been achieved.
More to come in the second half of the year. Thank you very much.
Now it's time for the Q&A.
Thank you we will now begin the question and answer session. If you wish to ask a question you May press star followed by the number one.
Mute your phone and record your name and company name when prompted your name.
Company name is required to introduce your question.
Press Star two to cancel your request again star one to ask a question.
Our first question comes from Jason <unk>.
Your line is now open.
Yes, hi, Chetan from Jpmorgan.
My first question was on E&S D. Now of course, there are a lot of moving parts.
Can I understand this lithium.
Lithium price movement is it can we think of it more like a revaluation gain so you know the lithium prices today are.
Hi.
Sort of valued business at a higher pricing in the lithium prices go down.
In the future then you will have a similar negative impact with that first.
And second question was.
I know you guys haven't disclosed this in the past, but clearly with the mixed Simeon SD changing quite a bit I'm curious if you can give us something.
Tier on.
On.
How big is the.
IBM revenue within the USD broadly speaking.
Range could be could be useful for us so we know.
How we should think about the ramp up going forward and the last question on.
Catalysis, clearly continuing outperformance there versus the auto production.
Is there any it's still a material benefit from the PGM prices in the first half earnings.
In catalysis.
EBIT or is that now more or less negligible given given the decline in rhodium prices that we saw in first half. Thank you.
Good morning, Justin I'll take the first one on lithium the reason why we talk about lithium. This morning is really because of the exceptional increase in the price. So the average lift comprised I think quadrupled.
Year on year, and so while we normally have this pass through mechanism. The fact that you have this kind of a spike means that the combination of let's say.
A number of our supply.
Agreements in combination with a number of <unk>.
Sales agreement means that we have indeed, a positive contribution from the factor of lithium so kind of.
The delay effect to your question of going forward.
<unk>.
Variability may continue.
Probably will continue in the second half and May actually extend to 2023, because it's really related to the.
Existing customer base.
That we have anything going beyond that.
That we are in the strategic more long term agreements, which are which are somewhat different but so it's really the.
Yes, the exceptional spike in the lithium that has that has created this should I take the last question immediately modules.
So on your last question on the.
The impact of <unk> processing catalysis quickly that was yes, indeed, we still have a.
Tailwind from that so if we say we only do it for half the full year, sorry, so $20 million to $220 million increase or let's say.
<unk> for the group of the precious metal prices indeed.
Part is definitely still for catalysis and that was also the case in the first half of the year.
Let's say the relative proportions.
Given last year are more or less still the case or relevant for this year, which was as you know the bulk being in recycling.
And the rest in catalysis and also the importance of the wholesale price is also something that we see.
<unk> of this year.
Yeah, and maybe I'll just cover the middle ones. The question can we disclose the RPM.
Wait in the business group.
I mean, we are not changing our policy in that regard, but you can be sure and if you look to the to the mid and long term view obviously.
<unk> growth trajectory is coming from the IBM segment, so and with that as more time goes by the higher of course, the way it will be in the business group.
Thank you.
Thank you.
Our next question comes from Geoff Haire from UBS. Your line is now open.
Yes, Hi, I was wondering if I could ask two questions first of all on the <unk>.
Look could you sort of help us understand what you mean by somewhat higher.
Is that more than 10% less than 10%.
So would you be willing to quantify the benefit of lithium within es without within RPM.
And if thats clearly a financial question.
With the last one.
No, Jeff sorry will not.
Too difficult for us commercially to to.
Defined but I mean, it is important to mention that in that is that.
On August one.
More to the connected somewhat progression.
Yes, I think it's somewhat is below 10% I would say.
Okay. Thank you.
Just come back is the lithium benefit quanta in the $300 million.
Metal benefit that you talk about or is that is that in addition, lithium in addition to that.
Yes. That's an addition, so the two 'twenty is really precious metals only okay. We haven't.
Yes.
Thank you Mr. Geoff Haire from UBS. Our next question comes from Sebastian Bray from Greenberg.
Line is now open David I'll get back to you.
Good morning, and thank you for taking my questions I would have two please the both related to earnings outlook for 2022.
Firstly, if you net out the impact of what are going to be higher volumes in 2000, 22020 for rechargeable battery materials versus the potential reversion in cobalt or lithium.
Think it's a reasonable assumption to have energy in surface Tech EBIT flat year on year in 2023.
And likewise for catalysis could you please remind us of how much precious metals impacts us in 2022.
And once these market share gains annualize out if you'd expect to see any growth in 2020 free.
Sure.
Let me take the first one.
One on <unk> in the second flip if you could take that.
The.
The situation on IBM actually has not changed what we have said semi stated before by 2000.
2023.
Yes.
Our years of preparation for our growth that will start end of 'twenty three.
And when they're going to default, but what.
For sure.
You can see that in the second half of this year as we as we have said earlier.
The business group, the cobalt <unk> specialty materials business unit will decrease.
Versus each one because it was an exceptional performance that was DSO was that I hope you can make.
The overall balance and in regards to the second question.
Second question on the precious metals, so last year we.
We had $270 million impact back then we said that.
More than two thirds was related to recycling and the rest in catalysis. So if you apply again more or less those same proportions to the $2 20.
I think that's a good basis to start.
If that's if that answer your question questions Sebastian.
That is helpful and thank you Philip.
Australia and most of you Nicole.
Thank you.
Thank you.
Our next questions come from <unk> <unk> from Bank of America. Your line is now open.
Hi, good morning.
Thank you for taking my questions.
So my first question is with regards to the Capex outlook can you. Please give us an indication of what proportion of that one 5 billion.
And North American plant is going to be funded by the Canadian government and do you expect any funding.
Back provincial level as well.
And then my second question is.
Again, I cant put a strategy to secure offtake with Oems and <unk>.
We have announced a set of partnerships in the last few weeks with south coming on pads.
Ducks out until 2025, so I just want to understand your strategy.
G.
With regards to.
Got preferential.
Thanks.
Yes. Thank you very much for the question, let me take that one.
North America, Canada. So the Canadian government has declared that there is a strategic interest for the country too.
Develop the battery value chain because they have.
Beneficial situation, the only North America, where you have supply of our access to the raw materials to the mines to nickel and cobalt.
And then also traditionally in the past automotive industry and with that establishing the battery materials supply chain.
It's kind of a strategy to reindustrialize, the country and bring back the automotive industry into Canada.
As the name says we have signed an Mou for a strategic innovation fund that is a fund that is.
Entitled to.
First in.
Projects that support this strategic Tiger so.
And we have signed an Mou.
In that regard so.
While I cannot disclose but I think you can make your own math around this and in regards to.
Ontario, So I can give you in general.
Explanation of how it works normally as far as I know the system in Canada. There is always the federal portion like the strategic innovation fund and there is a provincial caution that in most of the cases is it.
Equivalent to the federal part so and with that in mind I think you can.
You can make.
Your your conclusions out of that but for us I have to repeat that.
The reason to go to Canada was mainly driven by the fact that it's the best combination of.
Mailable renewable energy energy prices, but also access to raw materials and last but not least.
So the talent pool that we have available that we where we are today. So altogether, we think a very winning.
Solution if there is.
A place to be I think at this pace second question regarding the North American market, a success and how do we think we could.
Play a role with the announcements have been made the good thing is that this market is a very big market. It is a fast growing market, which also lifts from.
The fact that those Oems and Norway, and even <unk> with whom we are working together is putting all their eggs in one basket. So.
The ability to get volumes.
Outside of the partnership that have been announced activity there we have several of them.
In.
In the works if you want so and by the way that was also not a big surprises I mean it was.
What was announced is more following the logic at least from our point of view that we have seen in the market already but that does that does not.
This surplus in the conviction that we will get our fair share out of that.
I mean with the with what you have just said, but on top of that of course, there are the non American non U S. Players.
That also have a need and an altogether.
With the capacities that we are planning we are.
In the right range because as we said what is important for us in our capital market day is not unlimited growth, but value creative growth to have the contracts with the right conditions with the right customers, where we can contribute with our unique position in the value chain and in North America. This is absolutely given.
And.
Big part of our growth strategy. Despite the announcements have been made.
Yeah.
Okay. Thank you I just have one quick follow up if that's okay and that's on the energy headwinds.
But can you quantify would you say, it's not only less than $150 million.
160 million previously can you guys. Please on your assumptions underpinning of reduction.
The guidance <unk> given.
The energy comes from power prices.
Any escalation.
Thanks.
Yes, so on the inflation you've seen that we have not changed the guidance, which is that we expect the total gross gross inflation impact cost inflation impact of less than 150.
Euros.
I would say is that.
I mean, the energy portion compared to when we previously made that statement.
I would say has gained ground and unfortunately, and that's really related to.
To Europe .
Where we see most of.
The impact.
In terms of the split maybe that's another way to give you some insights of the $150. There's two big buckets, which is D raw materials costs, which is something which is more global.
And then the energy costs, which again is more focused on on Europe , and those let's say relatively similar size and then.
The rest you have the labor cost inflation.
And logistical costs. So that's a bit the elements that are below that energy cost definitely is Easter.
An important headwinds for us and again, that's mostly related to Europe , and I would say, even specifically related to obviously.
Belgian operations.
Okay got that thank you.
Thank you Maria.
Our next question comes from Ronald <unk> from Citi. Your line is now open.
Hi, good morning, everyone.
Three from me. Please if you deadlines so firstly.
I missed it could you. Please give an idea of the scale of the temporary working capital benefits.
At the end of the half.
The second question is similar.
Curious about the impact of higher cobalt nickel prices and the benefit of that.
S T.
The past you provided I think.
Guidance.
With respect to guidance from the scale of that.
Could you do the same or at least sort of.
Provide.
Relative guidance could patches the lithium benefits.
And the third question is just around the timing of future.
So the supply agreements and partnerships and I was wondering if you could just help set expectations slightly better for the timeline of those and when we should be looking out for them.
Very much.
Good morning.
The first two questions. So on the temporary working capital is not too material.
Like a 150 million euros, we just wanted to provide that.
The disclosure if we then talk and at the end of the year in working capital that you have a bit of a view for the moving pieces is basically related to some timing of deliveries and payments.
Because ultimately you take a picture of the <unk>.
June and there was some temporary effects.
Reverse basically and will have reverse in July so nothing too material, but we just wanted to.
To give that transparency the second question.
Cobalt.
Nickel prices. So the fact that there were higher so that impact is really focused on.
In terms of.
The earnings and performance in <unk>, because thats really scratching the context in which the business operates in which indeed was was a positive one strong one having said this you've seen that cobalt and nickel prices have come.
Come down and let's say the last.
A months so that that context is changing which is also why.
We've highlighted that we do not expect the same very strong performance of sales in the second half of <unk>.
Of the year quantified, we never I think really quantified the sensitivity to that so I'm afraid.
And not be able to do that but it's really related to two <unk> and again.
Please be mindful of the seasonality for this year for the second half.
Yes.
Third part of your question regarding the additional.
Market success, I would call it I would say the.
Two big areas. The one of course is to finally close the joint venture where.
Where we had signed an Mou with <unk> as we said in our capital market day. That's we're on track, but we do not want to put timing considerations over the quality of the of the of the JV agreements.
It's a very big.
And over that we do the multibillion Euro company that we are creating into the future and that takes some time, but there is no.
No.
There is no delay.
The delay in open material thoughts so we will as we said in the course of the second half year.
Announced that together with with folks walking when the time is right.
And then there is the other part where we are working on additional things that we didn't say yet that we had already some some progress but we're.
We're not ready to do.
We'll talk more about that.
But you could think that probably at the.
Yes, I think in Q4, we should be able to have.
At least one more additional announcement.
Okay. Thank you very much.
Thank you. Our next question comes from Jamie Rollo from Credit Suisse. Your line is now open.
Good morning, and thank you for them.
Questions.
The first one just a very quick one I hope I didn't miss.
This information earlier in the call did you quantify how much benefit.
How much tem tell them, who you had.
In the first part of the year and the second question is.
About your guidance I understand that your shipments and prices.
Constant for the rest of the year.
I also understand that you have a sense of the quantum of disclosing it could be commercially sensitive.
So could you help me understand what is it.
Specifically about lithium.
Commercially sensitive.
And other PGM.
Yes, you could just clubs lithium.
Alongside the PGM, one, but it seems that you decided you decide.
Do you want to.
And my third question is.
I'd like to understand.
How you have yourself.
Surprised by.
The impacts of the lithium spike on new members and the reason why I'm asking because from memory I can't remember that.
<unk> talked about.
Hum.
The potential of having a material impact to you to your regularly so.
There is an element of surprise and monitoring.
Would you consider it sure.
We're really a one off.
That means that you have going on.
Some change in policy with regards to hedging.
<unk> procurement contract et cetera, Thank you very much.
I'll take the first and maybe the last one.
So the first one on the.
220 million.
Precious metals impact or no.
It's really a guidance for the.
One indication for the full year, we haven't given that for the half year last year. This year, what I would say is that the most important.
Part of that will be in the first half. If you look just at the assumed metal prices and again that volume is an important part of the volume has come down quite a quite a bit.
In recent months, so if you compare that to.
2020.
Really the most important part of the $2 20.
In the first half, but we haven't.
Quantified.
As such.
Related to maybe the last question on the surprise of lithium lithium.
If you look historically last couple of years lithium has been relatively.
Stable.
So again when we're talking about this lithium is because this was really a spike something the surprise indeed came from.
The metal price.
Evolution of lithium and if you have this kind of an evolution than indeed.
Let's say normal mechanisms can result in.
Unexpected increases I think your question is important in terms of.
Going forward and how do you manage that indeed.
If you look at the growth that RPM has in front of them in terms of volumes.
Clearly any kind of volatility related to metal prices, we want to minimize so yes, indeed related to lithium we are also.
Definitely going in the direction too.
To minimize whether it's through our contracts or through the way we treat.
Internally think about hedging.
We really.
In a way learning lessons from this one and changing the system so that going forward.
Looking at the important growth of IBM, we do not have this kind of sensitivity or at least not to the same extent.
Yes, let me take the second one on the commercial sensitivity of lithium why we're not disclosing that while we are discussing with you. Jim This is a fundamental business the PGM.
Impacted mainly coming from our recycling operations, where it's very transparent any way to our customers.
What are the market prices of the of the different.
The metrics that we are.
Our processing recycling and refining so it's less commercial sensitive while the lithium as part of our battery material business that is the automotive world where.
You don't want to give too much transparency on the on your kind of bill of materials. We also do not disclose what is our labor cost what is our energy costs. What is the cost of secondary materials et cetera, because that's of course part of the overall equation. So there is a much higher sensitivity in the business field where lithium.
As relevant rather than the PGM side, where the majority is in the.
The recycling and refining.
Okay.
Very much so.
Good luck for your future endeavors, and thank you so much.
Thank you.
Thank you, let me remind our participants if you wish to ask a question.
Press Star one just please remember to record your name and company name is that as important to introduce your question.
Now we'll proceed with another question it comes from Geoff Haire from UBS. Your line is now open.
Alright, thanks for the opportunity to ask.
Two more questions.
Just wondering.
If you could comment hustle.
Has the removal of Mr. Dice, the previous CEO of VW has that sort of caused any issues with the negotiations around the JV going forward and then secondly, just to sort of try and.
Look at the lithium point and yes slightly different way if you stripped out the benefit of the spike to EBIT with EBIT up or down on last year.
So I will take the first one and get the second one to two Phillips so regarding the changes in management folks one of course, we will not comment on any changes.
Changes or personal topics of our of our customers and partners, but I can give you some.
Some general.
Points to think about so first of all.
You might have followed also the announcement of <unk> first Giga factory Suski guidance has get aware also.
The head of the works Council folks wagon Mrs. Kabbalah was speaking and she was actually highlighting that all since over 10 years that the works Council flex one is behind the plants.
<unk> two.
Have a make in batteries in order to secure jobs and the relevant changes and everybody who knows sportswear.
Note that this means that this part of the strategy is deeply embedded now in the.
The way going forward and product for that you need the battery materials secondly.
My personal judgment only if you look to Mr. Bloomers.
The new CEO as you know <unk> track record in pasta, where he is driving electrification even to an 80% electrification rate target, except the Porsche 911.
And then you can see that it might be even a strong advocate of electrification, but it's only my judgment and then.
What I also by coincidence Red is the.
Q2 <unk>.
The announcement of flex volume there.
When is the analyst said that there is no change in the strategy of <unk> in the major terms and electrification will be driven forward now will there be.
Technical delay in the supervisory board.
That is also relevant in these kind of decisions I cannot tell you but I.
I'm personally not expecting any material change in our direction forward.
Thank you.
Now the question on lithium.
I think we don't want to go any further in terms of FERC quantification, but can we start to.
Triangulate and thick metals out so.
Suffice to say that it was it wasn't important contribution and also I would again like to repeat that CSM is also still there an ESP and <unk> had also a very strong performance. So if we start with the ship out things then we need to look at the different drivers. So Unfortunately, we'll leave it there.
Thank you.
Yes.
Thank you Josh that is our final question for today. Thank you all for participating.
Have a great day.
Thank you very much have a great day and hopefully a good holiday soon thanks everybody.
Okay.
Okay.
Yeah.