Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Elkem ASA (ELKEF, Financial) reported its highest EBITDA since Q1 2023, reaching NOK1.2 billion, despite weak market conditions.
- The silicones division showed significant improvement, driven by higher sales volumes and operational enhancements.
- The new production line in China contributed positively with an EBITDA of NOK75 million in the quarter.
- Elkem ASA (ELKEF) successfully raised NOK1.5 billion in new bond loans to refinance maturing loans, improving liquidity and extending maturity profiles.
- The company received a platinum rating from EcoVadis and was rated in the 98th percentile by S&P Global, highlighting strong ESG performance.
Negative Points
- Market conditions remain challenging, particularly in China, with weak demand in construction and automotive sectors.
- The silicones market is under pressure due to overcapacity and weak economic activity, leading to uncertain price developments.
- Elkem ASA (ELKEF) faces high tax expenses, with a tax rate of 57% for the quarter.
- The company booked restructuring expenses of NOK54 million due to the closure of a smaller silicon facility in Germany.
- Cash flow from operations was low at NOK32 million, impacted by negative working capital changes and increased inventory levels.
Q & A Highlights
Q: How much more effective can the improvement program be in the fourth quarter?
A: Morten Viga, CFO, stated that they are ahead of plan with an annual run rate of NOK1.4 billion. While they continue to find new opportunities, significant additional changes beyond the NOK1.5 billion target should not be expected with only two months remaining.
Q: How much more EBITDA can be expected from the new production line in China in the fourth quarter?
A: Morten Viga, CFO, mentioned that the new production line is currently at 80% utilization, contributing NOK75 million EBITDA in Q3. It is expected to increase in Q4 with higher production, but future EBITDA will depend on market prices.
Q: Is the Q3 strategic investment level representative of what can be expected in 2025?
A: Morten Viga, CFO, explained that reinvestments will be between 80% to 90% of depreciation, equating to slightly over NOK2 billion per year. Strategic investments will be kept at a relatively low level.
Q: How much of the EBITDA increase in silicones was due to company-specific factors versus market conditions?
A: Helge Aasen, CEO, clarified that the improvement was primarily due to internal improvements, as prices were down but compensated by lower raw material costs. There was no direct positive market impact.
Q: How is Elkem positioning itself in response to US tariffs on Brazilian, Malaysian, and Russian ferrosilicon and silicon metals?
A: Helge Aasen, CEO, confirmed that Elkem is positioning to increase sales in the US market, leveraging their ferrosilicon plant in Iceland for flexibility in directing materials to the most profitable markets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
