Half year results 2023
Strong margins in a volatile market environment
Umicore posted a solid performance in the first half of 2023, despite a less favorable precious metal price environment, subdued macro-economic growth and cost inflation. Group revenues for the first 6 months amounted to € 2.1 billion, in line with the levels achieved in the first half of 2022 and 2021, demonstrating business resilience in a context of increasingly challenging market conditions since end 2022.
Adjusted EBIT of the Group amounted to € 373 million and adjusted EBITDA to € 519 million, below the levels of the first half of 2022, reflecting the less favorable precious metal price environment, cost inflation and increased spending on innovation and growth in the framework of Umicore’s 2030 RISE Strategy. The Group’s adjusted EBITDA margin amounted to 25.1%, well in line with Umicore’s 2030 RISE ambition[1].
Free cash flow from operations stood at € 60 million, reflecting a significant step-up in capital expenditures to prepare the accelerated growth in Rechargeable Battery Materials. Net financial debt increased to € 1.4 billion, resulting in a leverage ratio of 1.30x LTM adjusted EBITDA which is well within the 2.5x investment grade scope targeted by Umicore’s 2030 RISE Strategy.
Catalysis delivered another outstanding performance, recording revenues and earnings above the levels seen in the first half of 2022. Sales volumes and revenues of Automotive Catalysts increased, benefiting from growth in light-duty ICE production as well as a gradual recovery in Chinese HDD production. Revenues in Fuel Cell & Stationary Catalysts were well up, reflecting in particular high demand for stationary catalysts and a favorable product mix. This positive revenue evolution, in combination with cost discipline and high operational efficiency, led to an adjusted EBITDA of € 227 million in the business group.
Revenues in Energy & Surface Technologies were, as anticipated, below the level of the previous year, reflecting a normalization in Cobalt & Specialty Materials compared to an exceptionally strong first half of 2022. Rechargeable Battery Materials’ revenues and earnings were in line with the first half of 2022 despite increased spending on growth preparation and R&D. Adjusted EBITDA of the business group amounted to € 132 million.
The Recycling business group delivered a robust performance in the first half of 2023, albeit below the exceptional performance of the first half of last year. Revenues were in line with the level achieved in the same period of the previous year, with a strong performance of Precious Metals Management compensating lower revenues in the other business units. Adjusted EBITDA amounted to € 204 million, reflecting the lower PGM price environment and the impact of cost inflation.
Key figures
Revenues of € 2.1 billion (0%)
Adjusted EBITDA of € 519 million (-14%)
Adjusted EBIT of € 373 million (-19%)
EBIT adjustments of - € 13 million
ROCE of 15.2%
(compared to 20.8% in first half 2022)
Adjusted net profit (Group share) of € 233 million and adjusted EPS of € 0.97
Cashflow from operations of € 409 million, including a € 26 million increase in working capital requirements; free cashflow from operations of € 60 million
Capital expenditure amounted to € 335 million (+77%)
R&D expenditures of € 147 million (+4%)
Interim dividend of € 0.25 per share on 22 August 2023
Net debt / LTM adj. EBITDA ratio of 1.30x with net debt at € 1,390 million
During the first half of 2023 Umicore made further progress with the execution of its 2030 RISE Strategy, designed to deliver value creative growth. The Rechargeable Battery Materials business unit closed a new long-term battery materials supply agreement for the Chinese market, while the Catalysis and Recycling business groups continued to demonstrate a strong performance, operational excellence and an ability to generate solid cash flows in a challenging market context. Umicore also announced changes in its leadership team and a new organizational structure with responsibilities aligned to execute and deliver on its 2030 RISE strategy (see next section: “Introduction of a new organization and reporting structure”).
“Umicore has demonstrated once more the ability to achieve a robust business performance despite significant market headwinds. At the same time, we remained focused on the execution of our 2030 RISE Strategy. We announced a new organizational structure that will support the significant growth ahead in Battery Materials and have put in place a leadership team with responsibilities aligned to execute and deliver on the key pillars of our strategy. We stepped-up investments related to innovation and growth while maintaining our commitment to financial discipline and return on investment. I would like to thank all Umicore employees for their continued energy and dedication and I am very confident that we are on the right trajectory to achieve our 2030 RISE ambitions, while creating shareholder value and benefits for all our stakeholders.”
Mathias Miedreich, CEO of Umicore
2023 Outlook
Based on the solid performance in the first half of the year and assuming precious metal prices remain at current levels for the remainder of the year and all else equal, Umicore expects its adjusted EBITDA for the full year 2023 to be in the range of € 960 million to € 1,020 million.
In Catalysis, Umicore expects to continue to benefit from its strong market position in gasoline catalyst applications and a further gradual recovery of the Chinese heavy-duty diesel market. In this context, adjusted EBITDA in 2023 is expected to be somewhat above the record levels of 2022. It is anticipated, however, that revenues and earnings in the second half of the year will reflect the lower PGM price environment versus the first half across the business units.
In Energy & Surface Technologies, it is anticipated that the 2023 adjusted EBITDA of Rechargeable Battery Materials will be above the level of the previous year. Taking into account the normalized performance of Cobalt & Specialty Materials in 2023 compared to the exceptional profitability in 2022, adjusted EBITDA of the business group in 2023 is anticipated to be somewhat below the level of 2022.
In Recycling, Umicore expects the performance of the business group to reflect the decline in PGM prices and a related, less supportive supply environment for PGM-rich recyclables. Assuming current metal prices were to prevail and taking into account the current outstanding strategic metal hedges, it is expected that the 2023 adjusted EBITDA of the business group will be below the level of 2022, however, still well above historical pre-2020 levels. It is also anticipated that revenues and earnings in the second half of the year will be below the level of the first half, reflecting the further recent decline of PGM prices.
As announced previously, Corporate costs for the full year 2023 are expected to remain broadly in line with the level of 2022. It is also anticipated that capital expenditures will increase to up to € 800 million for the full year 2023, in line with current consensus, mainly reflecting investments in the expansion of the European footprint of Rechargeable Battery Materials. At current metal prices, net working capital is expected to remain stable in the second half of the year. Taking these elements into account, net debt is expected to remain roughly in line with the level seen at the end of June.
Introduction of a new organization and reporting structure
Since the introduction of the 2030 RISE Strategy in June 2022, Umicore has strengthened its governance structure by aligning it with its ambitious growth plan towards 2030. As a next step, a new organizational structure is put in place to support the significant business growth in Rechargeable Battery Materials. Umicore’s business units will be housed in four, instead of currently three, business groups based on important synergies and common characteristics while at the same time bringing increased focus on the different business activities.
The former business unit Rechargeable Battery Materials (RBM) will be reported as the new business group Battery Materials, led by Ralph Kiessling, currently Executive Vice President Energy & Surface Technologies. This set-up will provide the needed focus and structure to support the anticipated strong growth of the battery material business and will provide additional transparency and insights into the business group’s performance.
The business units Cobalt & Specialty Materials (CSM), Electro-Optic Materials (EOM) and Metal Deposition Solutions (MDS), now part of Energy & Surface Technologies, will be grouped in a 4th business group under the leadership of Geert Olbrechts as responsible EVP.
In addition, Geert will become Chief Technology Officer of the Group as of August 1st, 2023 and will, in that capacity, also be in charge of the Corporate Research & Development activities in close collaboration with the R&D teams of the business units. They will work hand in hand with the New Business Incubation and Open Innovation teams.
External reporting according to this new organizational structure will be implemented as from the fiscal year 2024. There is no change in the perimeters of Catalysis and Recycling.
In addition to those changes and in order to reflect the importance of people and talent for Umicore, the role of EVP People and Organization has been created. Ana Fonseca Nordang has been appointed to take this role from September 1st , 2023 and will complete the Umicore Management Board.
“I am very pleased to welcome Ana in our Management Board. Her international and broad experience in human resources will further strengthen our people strategy to ensure we remain an employer of choice in all the regions where we operate. Inviting Ana to join the Management Board underpins the importance of our people and the role they play in achieving our ambitious 2030 RISE growth plan. Our people, with their skills, experience and energy, are vital to our success.”
Mathias Miedreich, CEO of Umicore
Ana brings over 20 years of international experience in various executive human resources roles and has spent the largest part of her career at Equinor, previously Statoil, where she most recently served as Senior Vice President Renewables. Prior to that, she acted as the group’s Chief Human Resources Officer. Ana will continue to ensure, together with the other Management Board members, that the people strategy is kept at the heart of Umicore’s thinking and planning going forward.
At the level of the Supervisory Board, two new committees, the Investment and Sustainability Committees, were introduced. The committees focus on overseeing the Group’s capital expenditures that support the growth linked to the 2030 RISE Strategy on the one hand, and on delivering on the Let’s Go for Zero ambitions, on the other.
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[1] In June 2022, Umicore launched “2030 - RISE”, its new strategic plan designed to accelerate profitable growth with constant value creation towards 2030 and beyond (adjusted EBITDA margins > 20% throughout the period): read full article.
Note
All references to revenues in this document refer to revenues excluding metals (i.e. all revenue elements less the value of the following purchased metals: Au, Ag, Pt, Pd, Rh, Co, Ni, Pb, Cu, Ge, Li and Mn)
