MORGAN STANLEY INDUSTRIALS & NATURAL RESOURCES SUMMIT …€¦ · DISCLAIMER 2 ERAMET - MORGAN...

MORGAN STANLEY INDUSTRIALS

& NATURAL RESOURCES SUMMIT

08 & 09 September 2016

DISCLAIMER

ERAMET - MORGAN STANLEY INDUSTRIALS & NATURAL RESOURCES SUMMIT – 08 & 09 SEPTEMBER 2016 2

This document and the materials appended to it (together, the “materials”) may include certain forward-

looking statements, beliefs or opinions, including statements with respect to ERAMET’s business, financial

condition and results of operations. These statements reflect ERAMET’s beliefs and expectations and involve

risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.

No representation is made that any of these statements or forecasts will come to pass or that any forecast

results will be achieved.

Forward-looking statements speak only as at the date of the relevant materials and ERAMET and their

advisers expressly disclaim any obligations or undertaking to release any update of, or revisions to, any

forward-looking statements in the materials. No statement in the materials is intended to be a profit forecast.

As a result, you are cautioned not to place any undue reliance on such forward-looking statements.

Nothing in these materials constitutes any offer or invitation to sell or issue, or any solicitation of any offer to

purchase or subscribe for sale, any securities in the United States or any other jurisdiction where it is or may

be unlawful to do so. ERAMET has not and does not intend to register any securities under the U.S.

Securities Act of 1933, as amended (the “Securities Act”), or under the applicable laws of any other

jurisdiction and no such securities may be offered or sold within the United States or to, or for the account or

benefit of, U.S. Persons, each as defined in Regulation S under the Securities Act, except in transactions

exempt from such registration.


ERAMET: A GLOBAL LEADER IN MINING AND

METALLURGY

Manganese - Gabon:

40+ years resources

#2 high-grade Mn ore

worldwide

Mine

Zircon and Ilménite –

Senegal:

25+ years ressources

A GLOBAL LEADER WITH STRONG POSITIONS IN ALL THE

RAW MATERIAL VALUE CHAIN


From Mining to Metallurgy

Nickel – New Caledonia:

50+ years ressources

#2 Manganese alloys

producer worldwide

#1 refined manganese alloys

producer worldwide

#1 FeNi producer worldwide

Extractive Metallurgy

#1 manganese chemical

derivatives producer

worldwide

≠1 nickel chloride producer

worlwide & ≠3 high grade

nickel producer worldwide

#2 closed-die forging parts

producer worldwide

≠1 gas-atomized powders

producer worldwide

Elaboration & transformation

A GLOBAL GEOGRAPHIC PRESENCE (21 COUNTRIES)


Senegal

Ilmenite and zircon mine

Gabon

Manganese mine

Manganese alloys and metal

plants

New-Caledonia

Nickel mines and

ferronickel plant

France / Europe

High speed steels and metals

powders

USA

Manganese chemicals and

recycling

France / Europe/USA

Manganese alloys

Main operations:

France / Europe

Closed-die forging

Production of alloys & superalloys

http://www.ville-gravelines.fr/var/ptic/storage/images/media/images/annuaire/entreprise/comilog/126157-1-fre-FR/Comilog.jpg

http://www.google.fr/url?url=http://olympiadesscientifiquesnc.unblog.fr/page/2/&rct=j&frm=1&q=&esrc=s&sa=U&ei=IQOQVOXVEeu07gbXnYDgDA&ved=0CBoQ9QEwAg&usg=AFQjCNEE3Q3opIFwr6-imYJsJ4LT82tyOQ

http://www.ville-gravelines.fr/var/ptic/storage/images/media/images/annuaire/entreprise/comilog/126157-1-fre-FR/Comilog.jpg

Carbon steel 34%

Stainless steel 16%

Other Ni 6%

Aerospace 19%

Tooling 6%

Energy 4%

Other Alloys 3%

Other Mn 5%

Mineral sands/ pigments

2%

Batteries 2%

Chemistry 3%

DIVERSIFIED MARKETS


ERAMET sales breakdown by end-market (2015)

Steels: 50%

€3,109

million


A STRATEGY FOCUSED ON CASH GENERATION

NICKEL AND MANGANESE PRICES HIT A RECORD LOW IN Q1 2016


STRONG METALS CRISIS IMPACTED THE RESULTS IN 2015

AND H1 2016

€ million H1 2016 H2 2015 H1 2015

Sales 1,373 1,483 1,626

EBITDA 56 14 78

COI (91) (137) (70) 0

2

4

6

8

10

12

14

2010 2011 2012 2013 2014 2015 2016

US

D/lb

or

US

D/d

mtu

Nickel and manganese ore prices

Ni prix LME (USD/lb) Mn ore 44% (CRU CIF Chine)

Strong financial liquidity:

€1.28 billion

Net debt:

€1.16 billion

GROUP STRATEGY GIVES PRIORITY TO CASH FLOW

GENERATION

Focus our efforts on our core businesses.


Suspension of

major projects

Projects

Restriction of

capital

expenditure

CAPEX

2016-2017

programme

Asset disposals

Increase competitiveness to strengthen our market positions.

€360 million(1) in cost

reduction and productivity

improvement

Operational plan

for 2014-2017

The performance

improvement plan has been

stepped up:

target USD 4.5/lb (2)

ERAMET Nickel - SLN

(1) annual impact on current operating income relative to 2013

(2) on an annual basis, to the end of 2017, based on economic conditions at the start of 2016.

INDUSTRIAL INVESTMENTS LIMITED TO SAFETY AND

MAINTENANCE


0

50

100

150

200

250

300

350

400

450

500

550

600

650

< 250

2015

267

2014

346

2013

587

2012

641

2011

492

2010

326

85 132

H1 2016 2016 H1 2015

-36%

Investment cut by 36% relative to H1 2015

Target of less than €250 million for FY 2016.

ERAMET Manganese

ERAMET Nickel

ERAMET Alloys

€ million

A GROUP FIRMLY COMMITTED TO THE COST REDUCTION AND

PRODUCTIVITY IMPROVEMENT PROGRAM


2014

2015

Total:

€360

million (1) 2014-2017

2016

(1) annual impact on current operating income relative to 2013

2014 - 2017 PLAN STEPPED UP

SLN: 2016 – 2017 plan to reduce cash cost to

USD 4.5/lb (2)

COMILOG: Specific intensification of

performance plan in 2016 – 2017

ERAMET Norway: Specific intensification of

performance plan in 2016 – 2017

TiZir: cost cutting measures introduced in 2016 -

2017

Erasteel: acceleration of productivity gains in

2016

FURTHER MEASURES

IN 2016

(2) At end-2017, annual impact, based on economic

conditions at the start of 2016


ERAMET NICKEL: UNPRECEDENTED

PERFORMANCE PLAN

ERAMET NICKEL: STRENGTHS AND CHALLENGES


5 nickel mining deposits in New-Caledonia

Estimates: more than 4.4 Mt of Ni content (measured,

indicated, inferred)

Nickel production: about 55 kt per year. 2018 target: 60 kt

per year

SLN FeNi produced mostly appreciated by our clients

SOCIÉTÉ LE NICKEL (SLN) LEADERSHIP POSITIONS

Competitiveness of SLN in New Caledonia.

Current operating income strongly impacted

CHALLENGES

Ferronickel produced by SLN

SLN PERFORMANCE AND PRODUCTIVITY PLAN - CASH COST

TARGET: USD 4.5/lb END-2017*


4,5

5,46,0

7,4

8,3

H1 2016 2013 2014 2015 End-2017

-25%

*Annual rate, based on economic conditions at the start of 2016

** Cash-cost C1 Wood MacKenzie

Objective

SLN cash cost (USD/lb)

*

**

**

**

The average cash cost for H1 2016 has already been reduced by 10% compared with 2015.

SLN PERFORMANCE AND PRODUCTIVITY PLAN - CASH COST

TARGET: USD 4.5/lb END-2017*


Mining

projects

• Grade optimisation

• Lean in mining operations

Plant

projects

• Focus on FeNi production

• Technical productivity

• Maintenance / reliability

• Slag valorisation

Lean Supports

• Productivity in support functions

• Purchasing gains

… to USD 4.5/lb*

From USD 6/lb…

*Annual rate, based on economic conditions at the start of 2016


ERAMET MANGANESE: BOOSTING

COMPETITIVNESS


ERAMET MANGANESE : STRENGTHS AND CHALLENGES

• 2nd quartile

• 3rd quartile

• 1st quartile

• 4th quartile

P

Australia

South-Africa

2015 cash-cost position (ore)

• Estimates: more than 111 Mt of Mn content (measured,

indicated, inferred)

• FY2015 worldwide production (Mn content): 15.5 Mt

FY 2015 Production ERAMET (Mn content) : 1.6 Mt

COMILOG LEADERSHIP POSITIONS

Strong South-African competition

World steel production declining in 2015 and

in H1 2016

CHALLENGES

http://www.google.com/url?url=http://www.envass.co.za/assmang&rct=j&frm=1&q=&esrc=s&sa=U&ei=5Rh2VZK0A4vpUtLAAQ&ved=0CBYQ9QEwAA&usg=AFQjCNGRxCfErFh6df0j_gkuchTejhbYRg

http://www.google.com/url?url=http://umk.co.za/&rct=j&frm=1&q=&esrc=s&sa=U&ei=GiHTVInPLImE7QbQgoH4Bw&ved=0CBYQ9QEwAA&usg=AFQjCNFVE00oOGRPrnHvpWXwLgA_wBfTdw


ERAMET MANGANESE : COST REDUCTION AND PRODUCTIVITY

IMPROVEMENTS

COMILOG – Mn ORE

Specific intensification of cost reduction plan

SETRAG (GABONESE RAILWAY)

ERAMET NORWAY & MARIETTA (ALLOYS)

Increasing industrial performance

Specific intensification of cost reduction plan

Increase of the railway’s transportation capacity

Boost of safety, reliability and availability

Pro

du

ctiv

ity

imp

rovm

ents

at

each

sta

ge


TIZIR: AN INTEGRATED PLAYER IN TITANIUM DIOXIDE AND

ZIRCON

TIZIR: AN INTEGRATED PLAYER IN TITANIUM

DIOXIDE AND ZIRCON MARKETS


TiZir Titanium and Iron (TTI)

Tyssedal, Norway

Grande Côte Operations (GCO)

Diogo,Senegal

TiZir:

JV with Mineral Deposits Limited (Australia)

2 sites: GCO in Senegal and TTI in Norway

Upstream: Grande Côte Operations (GCO)

GCO: a new major player in the mineral sands production:

Ilmenite primarily used as a feedstock for TTI upgrading facility

Zircon for the ceramic industries

Downstream: TiZir Titanium and Iron (TTI)

TTI is producing upgraded titanium dioxide feedstock for the

pigment industry and high purity pig iron.

Refurbished furnace

First commercial shipments of titanium dioxide slag for chloride

processes


ERAMET ALLOYS: STRENGTHENING POSITIONS AND RESTRUCTURING PLANS

ERAMET ALLOYS: UNIQUE TECHNOLOGIES AND STRONG

MARKET ROOTS / CHALLENGES


Aerospace 65%

Energy 10%

High-speed steels & tooling 17%

Other 8% AUBERT & DUVAL AND ERASTEEL

LEADERSHIP POSITIONS

CHALLENGES

Cutting edge industrial equipment

Close-die forging presses (65, 40 kt)

Powder metallurgy

Positioning over a wide range of

metals and products:

Titanium

Superalloys, High performing alloys

Aluminum alloys

Strong market roots:

Leading level of customers

Innovative developments, service quality

Working capital

Need for permanent multiple

skills at the cutting edge of

technology

Simplification of the industrial

set-up

CONTINUED PERFORMANCE IMPROVEMENT AT AUBERT &

DUVAL


Current operating income - Aubert & Duval in H1 2012-

2016 (in millions of €):

Aubert & Duval is well positioned in the promising aerospace sector.

Dynamic operating performance on the ground.

24

20

6

10

-1

H1 2012 H1 2013 H1 2014 H1 2015 H1 2016

Aero engine

Landing gear

ERASTEEL RESTRUCTURING PLAN


Erasteel's current operating income in H1 2012 - 2016 (in millions of €):

Turnaround plan:

Industrial reorganisation of recycling activities

Industrial and commercial optimisation of high-speed steels

Operating performance methods extended throughout Erasteel

-11

-5-6

-7

6

H1 2012 H1 2013 H1 2014 H1 2015 H1 2016

Cutting tools

Specialties

25

STRUCTURING OF THE EUROPEAN AEROSPACE-GRADE

TITANIUM SUPPLY CHAIN

ERAMET - MORGAN STANLEY INDUSTRIALS & NATURAL RESOURCES SUMMIT – 08 & 09 SEPTEMBER 2016

Forging of billets, wires bars,

and sheets from ingots

Recovery of scrap and chips

Parts sent to the manufacturer

Machining

Titanium sponges Ingot production

Treatment of scrap and

chips

Ingot production

Titanium ore

Transformation –

Production of semi-

finished parts


CONCLUSION

FURTHER MEASURES TO RETURN TO

POSITIVE FREE CASH-FLOW


Intensification of performance plans:

2014-2017 cost reduction and productivity improvement plan: accelerated in 2016

Actions to reduce cash consumption were decided in 2015:

• Industrial investments limited to safety and maintenance.

• Suspension of major projects

New plans were introduced in first-half 2016:

Additional plan to reduce SLN's cash cost (target: USD 4.5/lb)

Plan to reduce costs and improve productivity in COMILOG, ERAMET Norway, TiZir and

Erasteel

Financing measures decided in 2016:

€200 million French government loan and €325 million loan to SLN

State guarantee for financing the power plant in New Caledonia

Decision in principle to issue in autumn 2016 a perpetual convertible bond

CONTACT

Vice President Strategy and Financial Communication Philippe Gundermann

Tel: +33 (0)1 45 38 42 78 Strategy and Financial Communication Analyst Ludovic Donati Tel: +33 (0)1 45 38 42 88


APPENDICES

A PROACTIVE SUSTAINABLE DEVELOPMENT POLICY


ERAMET has put sustainable development at the centre of its

strategy

To protect as a priority the health and safety of its employees.

To develop industrial processes in compliance with environmental

regulation.

To reduce the environmental impacts of its activities, especially regarding

biodiversity

To develop product stewardship ("license to market").

To intensify sustainable use of resources and to promote recycling.

To sustain a trusting relationship with its stakeholders

ERAMET's sustainable development policy covers all its activities

and is implemented through:

An Environnemental Charter.

A Biodiversity Policy formalized in 2015.

An Ethical Charter updated in 2015.

A Responsible Purchasing Charter.

An Energy Policy.

EXAMPLE OF TARGET PROJECT IN DEVELOPMENT: LITHIUM

ERAMET IS CONTINUING TO ASSESS THE ECONOMIC VIABILITY OF A LITHIUM PROJECT IN ARGENTINA


Lithium: an extremely dynamic market

Projected deficit at the end of 2016 due to a strong upward

trend in demand, supported by the Lithium-ion battery market

Increase in prices

Quality deposits

An innovative process developed using internal Group

skills

10 registered patents

ERAMET aims to enter this market alongside a partner

ERAMET Deposit

Antofagasta

ERAMET FINANCE MOBILE APP

Have essential information on ERAMET at your fingertips with the

ERAMET Finance mobile app

Available for tablets and smartphones, from the Apple Store and Google Play

32 ERAMET - MORGAN STANLEY INDUSTRIALS & NATURAL RESOURCES SUMMIT – 08 & 09 SEPTEMBER 2016

MORGAN STANLEY INDUSTRIALS & NATURAL RESOURCES SUMMIT …€¦ · DISCLAIMER 2 ERAMET - MORGAN...

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