First Quarter Report - Bolideninvestors.boliden.com/afw/files/press/boliden/Boliden_q1_2009.pdf ·...
Transcript of First Quarter Report - Bolideninvestors.boliden.com/afw/files/press/boliden/Boliden_q1_2009.pdf ·...
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First Quarter ReportJanuary – March 2009
Lennart EvrellPresident & CEO
Johan FantCFO
2009-04-29
First Quarter 2009Market
Global Copper and Zinc demand down more than 15%*Supply cut by mines and smeltersHigher imports of base metals to ChinaZinc and Copper prices in recent reboundStronger Silver and Gold pricesWeak sulphuric acid market impacts smelter industryWeak SEK
* Source: CRU data
2 2009-04-29
First Quarter 2009
BolidenReduced smelter production, zinc -5%, copper -22%Mine production down, zinc -8%, copper -1%Sales to industrial customers decreasedGearing 52% (31%)Revenues 5,879 MSEK (9,303)
– Lower metal prices and reduced smelter volumes
Operating profit 788 MSEK (1,231)– Re-valuation of process inventory 519 MSEK (305)
3 2009-04-29
The Market
4 2009-04-29
Construction activity lowerSegment of global demand: 35% in copper, 49% in zinc*
Construction market and industry indicators
Year over year (%) Q4 08 Jan-09 Feb-09
China Commercial buildings under construction (cumulative) 16 16 14
Euro Zone Construction production -10 -9 -11
USA Construction spending, total -6 -10 -12
USA Construction spending, non-residential 6 0 -1
Lower construction activity in mature economiesLower growth in China vs first half 2008
Source: Brook Hunt, CRU
5 2009-04-29
Automotive production sharply downSegment of global demand (transport): 11% in copper, 23% in zinc*
Automotive production
Year over year (%) Q3 08 Q4 08 Q1 09*
China Cars 3 -6 -2Japan Cars 6 -17 -50South Korea Motor vehicles -5 -29 -36Germany Cars 3 -24 -19USA Automobiles and light duty trucks 9 -25 -48* Japan, South Korea, change Jan-FebSource: Reuters Ecowin
Western world car sales weakGlobal car production in sharp decline
Source: Brook Hunt, CRU
6 2009-04-29
Lower demand for zinc and copperGlobal Zinc and Copper demand growth
-20
-15
-10
-5
0
5
10
Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109
Per c
ent
Copper demand Zinc demandSource: CRU
7
Zinc average price flat from Q4 08 Zinc price (LME average)
USD/t Q1-09 vs. period
Q1 2008 2,426 - 52%
Q2 2008 2,115 - 44%
Q3 2008 1,773 - 34%
Q4 2008 1,189 - 1%
Q1 2009 1,174 -
s
2009-04-29
Quarterly average
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Tonnes
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
USD/Tonne
2003 2004 2005 2006 2007 2008 20091,0001,1001,2001,3001,4001,5001,6001,7001,8001,900
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
USD/tonne
Zinc price - daily Zinc price - quarter average
8
Zinc price above 90th percentile cash cost
Zinc
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
USD/Tonne
Zinc price 90th percentile of cash costs (C1 Normal costing)Source: Brook Hunt cash cost league data
2001 2002 2003 2004 2005 2006 2007 2008 2009
9 2009-04-29
Zinc mine closures/cuts 7%Zinc mineclosures and cuts
ktpa reductionsMines closed our production cut in:Q1 2008 103Balmat-Pierrepont USA Put on care and maintenace 60Blaiken Sweden Closed 23Zyryanovsk Kazakhstan Closed 20Q2 2008 203Duddar Palistan Delayed start up now late 2008Broken Hill Australia Production downsized in response to lower prices 55Endeavour Australia High grading but unchanged productionHellyer Australia Taiullings recovery put on care and maintenace 30Pillara (Lennard Shelf) Australia Put on care and maintenace 70Monte Cristo Brazil Put on care and maintenace 12El Brocal Peru Put on care and maintenace 16Galmoy Eire Closure planned for 2011 20Aljustrel Portugal Production plan revised down 30% 0Q3 2008 44Rau-Rapu Philippines Production halted, Chapter 11 protection 14Iscaycruz/Glencore Peru Closure 2011, one year earlierRosaura/Glencore Peru Closure 2009, one year earlier, closed Nov 08 15Golden Grove Australia Reduced production 15Q4 2008 436Tennessee zinc mines USA Put on care and maintenace 57Caribou Canada Put on care and maintenace as of Nov 28th 59Restighouche Canada Put on care and maintenace as of Nov 28thMyra Falls Canada temporary closed 31Langlois/Grevet Canada temporary closed 27Kagara Australia reduced production 12,5% 5Endeavor CBH Australia reduce production by 30% 34Aljustrel Portugal Put on care and maintenance 80Neves Corvo Portugal Zinc production cloaed and replaced by Cu 25Dalpolimetall Russia Suspends production 18Nuevi Monte Mexico Shuts down local mineArehada Inner Mongolia temporary closed mine production 15Dimov Doe Bulgaria to shut down 20081117 5Centuray Australia reduces output and investment cut of $495mn 20Macarthr River Australia Xstrata reduces output by 20% 32Pend Oreille/Teck USA Suspends operation from January 09 28
Total 2008 786Global mine production in 2008 11,760 - closures and cuts as per cent 6.7Source: Brook Hunt Executive Zinc Report, International Zinc and Lead Study Group
Data ex. China
10 2009-04-29
Zinc TC and spot premiums down
Zinc treatment charge (TC)
0
100
200
300
400
500
600
USD per tonne of concentrate
Realised TC (incl.price participation) Spot TC - AsiaSource: Brook Hunt, CRU
Indicative benchmark level of
194.5 (300) according to CRU
2006 2007 2008 2009
Zinc metal price premium
0
50
100
150
200
250
300
350
400
USD per tonneof metal
US Midwest Delivered Europe ex-works Far East (Western)Source: CRU, Brook Hunt
2005 2006 2007 2008 2009
Increased demand for concentrates in ChinaPremiums lower in EuropeLess sales to industrial buyers
11 2009-04-29
Copper average price lower than Q408Copper price (LME average)
USD/t Q1-09 vs. period
Q1 2008 7,763 - 56%
Q2 2008 8,448 - 59%
Q3 2008 7,693 - 55%
Q4 2008 3,940 - 13%
Q1 2009 3,435 ─
2009-04-29
Boliden copper metal price hedge contracts – Coverage rate approx. 65%*– USD prices 5,864 and 7,606 in 2009 and 2010 respectively
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
Tonnes
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
USD/Tonne
2003 2004 2005 2006 2007 2008 2009
1,0002,0003,0004,0005,0006,0007,0008,0009,000
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
USD/tonne
Copper price - daily Copper price - quarter average
Quarterly average
* Of outstanding metal positions in 2009-2010 based on forecasted production
12
Copper price above 90th percentile
Copper
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
USD/Tonne
Copper price 90th percentile of cash costs (C1 Normal costing)Source: Brook Hunt cash cost league data
2001 2002 2003 2004 2005 2006 2007 2008 2009
13 2009-04-29
Copper industry closures/cutsCopper smelter cutbacks in 2009
ktpaSmelter Country CutsSaganoseki Japan 50Tamano Japan 30Toyo Japan 40Noshima/Onahama Japan 40Onsan South Korea 55Balkash/Zhezkazgan Kazakhstan 80Khetri India 16Yunnan Copper China 30Nkana Zambia 95Harjavalta/Rönnskär Finland/Sweden 68Kyshtym Russia 50Novgorod Russia 20Hayden/Amarillo USA 30Kidd Creek Canada 20La Oroya Peru 12Total announced cuts impacting 2009 636World refined production 2008 (primary and secondary) 18,472 - cutbacks as per cent of global production 3.4Source: CRU Analysis, International Copper Study Group
Smelter closures/cuts 3.4% of global productionMine closures/cuts 4.2% of global production
14 2009-04-29
Copper spot TC/RC down, premiums upCopper treatment charge
0
20
40
60
80
100
120
USD per tonne of concentrate
TC spot China buying terms TC benchmark
Indicative level for 2009
Source: CRU
2006 2007 2008 2009
Copper metal price premium
0
40
80
120
160
200
USD per tonneof metal
Spot Copper premium CIF W. Europe Benchmark CIF Europe
Source: CRU, Brook Hunt
2005 2006 2007 2008 2009
Smelter industry production reduced, weak sulphur acid marketShortage of high grade scrap and blister in Q109 Higher demand in China drives spot premiums up and TC/RC down
15 2009-04-29
SEK weaker to the USD and EUR
5
6
7
8
9
10
11
12
13
2003 2004 2005 2006 2007 2008 2009
USD/SEKEURO/SEK
EUR/SEK EURO/SEK annual average USD/SEK USD/SEK annual average
USD/SEKUSD/SEK Q1-09 vs. period
Q1 2008 6.29 + 34%
Q2 2008 5.99 + 40%
Q3 2008 6.31 + 33%
Q4 2008 7.79 + 8%
Q1 2009 8.40 ─
USD/SEK hedge contracts (forward) 2009 and 2010
16 2009-04-29
17
Segment Smelters
2009-04-29
Zinc smelters’ approximate revenue distributionTC, free metal and premiums down
Q1 2009
TC53%
Free metal21%
Premiums7%
By-products
19%
Q1 2008
TC51%
Free metal26%
Premiums13%
By-products
10%
18 2009-04-29
0
50 000
100 000
150 000
200 000
250 000
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009
Zinc feed, tonnes
0
20 000
40 000
60 000
80 000
100 000
120 000
Zinc metal prod, tonnes
Zinc feed, total Zinc metal production
Zinc metal production down 6%
Odda– Metal production +2%– Efficient production with reduced
capacity
Kokkola– Metal production -9%– Reduced production, higher March
utilisation versus January-February
Comments on Q1 2009 versus Q4 2008
19 2009-04-29
Copper smelters’ approx. revenue distributionTC/RC unchanged, by-products down
Q1 2009
TC/RC53%
Free metal26%
Premiums3%
By-products
18%
Q1 2008
TC/RC49%
Free metal19%
Premiums4%
By-products
28%
20 2009-04-29
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009
Copper feed, tonnes
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
100 000
Copper cathode prod, tonnes
Copper feed, total Copper cathode production
Copper Smelters cut production
Rönnskär– Cathode production -17%– High e-scrap availability, shortage
of high grade Cu scrap
Harjavalta– Cathode production -24%– Total feed -31%
Bergsöe (lead)– Lower availability of recycled
batteries
Comments on Q1 2009 versus Q4 2008
21 2009-04-29
Segment Mines
22 2009-04-29
0
200
400
600
800
1 000
1 200
1 400
1 600
Q1 2008 Q2 2008 Q3 2008 Q4-08 Q1 2009
Milled ore, ktonnes
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
100 000
Zinc metal content, tonnes
Milled ore Zinc metal content
Mines’ zinc production increased
Tara– Higher grades, metal content +10%
Garpenberg– Unchanged production levels from a
strong Q4 2008
Boliden area– Unchanged production (+1%)
Comments on Q1 2009 versus Q4 2008
23 2009-04-29
0
1 000
2 000
3 000
4 000
5 000
6 000
Q1 2008 Q2 2008 Q3 2008 Q4-08 Q1 2009
Milled ore, ktonnes
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
Copper metal content, tonnes
Milled ore (Aitik) Copper metal content
Mines’ copper production lower
Aitik– Lower grades– Metal content -23% from a
strong Q4 2008
Boliden area– Mill production from inventory,
metal content +6%
Comments on Q1 2009 versus Q4 2008
24 2009-04-29
Financials
25 2009-04-29
Financial summary
SEK m Q1 09 Q1 08 ChangeRevenues 5,879 9,303 -37 %Operating profit (EBIT) 788 1,231 -36 %EBIT margin, % 13 13Free cash flow (before financing activities)
-1,811 1,198 n.a.
Earnings per share, SEK 2.06 4.62 -55%Gearing 52% 31%
26 2009-04-29
Group EBIT Q1 2009 versus Q1 2008Q1 2009 Q1 2008
EBIT, (MSEK) 788 1 231whereof:Iron stock revaluation 519 305EBIT excl Iron stock 269 926DEVIATION -657
Specification of deviations:Volume -26Prices & Terms -1233
Metal prices and terms -1452
Metal hedge,190 (-218) 408
TC/RC terms -19
Premiums -181
MAMA, 30 (19) 11Costs 24Others -4Currency 582DEVIATION -657
27 2009-04-29
Group EBIT Q1 2009 versus Q4 2008Q1 2009 Q4 2008
EBIT, (MSEK) 788 -491whereof:Iron stock revaluation 519 -702EBIT excl Iron stock 269 211DEVIATION 58
Specification of deviations:Volume -328Prices & Terms 93
Metal prices and terms -143
Metal hedge, 190 (174) 16
TC/RC terms 35
Premiums -16
MAMA, 30 (-171) 201Costs 211Others -8Currency 90DEVIATION 58
28 2009-04-29
Operating costs impacted by weaker SEK
Energy19%
Consumables17%
Personnel29%
Transports7%
External services
16%
Depreciation & other12%
Change in operating costs
Q1 2009 vs. Q1 2008
Energy +14%
Consumables +4%
Personnel +4%
Transports +26%
External services -7%
Depreciation & other
+10%
Operating costs -1% in local currency, +6% in SEK versus Q108Operating costs -8% in local currency, -4% in SEK versus Q408
29 2009-04-29
Cash flow
SEK m Q1 09 Q1 08
Op profit before depreciation (EBITDA)* 1,170 1,592
Cash flow from changes in working capital* -1,745 213
Capital expenditure 1,019 617
Free cash flow (before financing activities) -1,811 1,198
Net debt 8,229 4,299* Includes valuation of process inventory
Inventory value increased by 1,376 MSEK from Q4 2008Aitik 36 capital expenditure of 618 MSEK in Q1 2009Process inventory re-valuation included in EBITDA and working capital
30 2009-04-29
Capital structure on March 31 2009
37%39%
52%
31%
39%
0%
10%
20%
30%
40%
50%
60%
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009
SEK bnUnless otherwise stated
31 March 2009
31 March 2008
Balance sheet turnover 31.4 27.2
Capital employed 26.2 19.4
Shareholders’ equity1 15.9 13.7
Net debt 8.2 4.3
Gearing, % 52 31
Equity/assets ratio, % 50 50
Average maturity in years 4.5 4.88
Average interest rate, % 3.85 5.18
Liquidity reserves2 6.4 4.8
Gearing
31%
39%37%
39%
52%
1. Shareholders’ equity includes the value of outstanding hedge contracts
2. Defined as unutilised credit lines and cash less outstanding commercial papers
31 2009-04-29
Sensitivity analysis on March 31 2009Change in metal prices, +10%
EBIT effect,
SEK mChange in USD, +10%
EBIT effect,
SEK m
Change in TC/RC, +10%
EBIT effect,
SEK m
Zinc 385 USD/SEK 605 TC Zn 40
Copper 225 EUR/USD 275 TC/RC Cu 70
Lead 70 USD/NOK 75 TC Pb -10
Gold 95
Silver 75
Estimate of the 12-month effect on Group EBIT on March 31 2009, based on planned production volumes. Effects of hedging, contracted TC/RC or stock exposures are not taken into account.
32 2009-04-29
To summarize Q1 2009Market
End-user segments remained very weakHigher imports of base metals into ChinaMetal price rebound
BolidenSmelter production cutMine copper production lower from a strong Q408Process inventory valuation 519 MSEKOperating costs lower but impacted by weak SEK
33 2009-04-29
Going forwardSmelter production cuts continueCost reductions
– Reduction of workforce– Procurement project– Cost reduction programme in Tara
Capital expenditure to peak 2009Metal price hedges in SEK
34 2009-04-29
Aitik 36
TargetsMine production from 18 m tonnes to 36 m tonnes annuallyMetal production to increase by 50% from 2014
Time plan33 m tonnes from March 201036 m tonnes from 2014
Forward-looking statementsCertain statements in this presentation are forward-looking, and the actual outcome could be materially different. Such forward-looking statements are based on Boliden’s present plans, estimates, assumptions, projections and expectations and are subject to risks and uncertainties. In addition to the factors explicitly discussed, other could have a material effecton the actual outcome. Such factors include, but are not limited to, general economic or political conditions, fluctuations in exchange rates, interest rates and in metal prices, production disruptions, technological issues, interruptions in supply, actions of courts, regulators, government agencies, competitors, customers, suppliers, employees and other third parties.
36 2009-04-29
Boliden produces metals that make modern life work