Eramet Sa Unsp/Adr

Good morning, everyone, and welcome to Ehamet's half-year 2025 results. It is a great pleasure for me to be here, and once again, thank you for coming. Today, we will start, as always, with talking about safety. As you know, I mean, I've joined Ehamet just over two months ago, and since my arrival, I have been very positively impressed with the safety performance of the company. What we share with you there is a historical TRIFR since 2017. I just wanted to highlight this first half year result of 0.6, which continues to be very strong and well below the acceptable limit that we have set up in our CSR roadmap of one. We will continue to work We'll continue to work on the safety side because not only it is our first and most important value, but also because we strongly believe that having safety working, we will, of course, have very efficient operations. So to start our conversation today, I think I want to share with you that the performance for this first half was not at all in line with our ambitions. Thank you. operating performance varied a lot across the portfolio. I mean, if you look at manganese ore, we are slightly, we are pretty much in line, sorry, pretty much slightly below first half 2024, but we have seen improvements in Q2. I think you remember that in Q1, we had logistical challenges. I mean, so during the first half, we have suffered this impact, but we see very good trend during Q2, and we'll cover that in a minute. Very good results from mineral sands, improved from the first half in 2024. And this is within the plan where we now starting to enjoy better grades, very much in line with plan. At Centenario, we have met a number of very important milestones, understanding better and better system, resolving a number of challenges that we had with certain pieces of equipment that of course you've been following since the last quarter. At Weather Bay, we have started operations in new and more distant sites, more remote sites, remote pits. And if you remember, the restrictions that we had with operating licenses from late last year have impacted in our operation for this first year, have impacted in nickel grades, and as a consequence, also in costs with higher, longer hauling distances. And again, we'll talk more about that. We are still operating under a challenging environment. We all know about the situation in the steel industry in China. Exchange rates has also played a role in our results. But going forward in June, we are confident that we will leverage from Q2 trends that I just mentioned with you. I will also go through with you a very important piece that we started reviewing all our assets across the board, the performance review that we're doing so that we can build a plan to start working forward during the second half. A little bit of detail on EBITDA. at 190, just over 190 million euro. Again, clearly not in line with our ambitions, but it's important to highlight that 60% of this variance, it is related to intrinsic performance. and related to the variances that I shared with you on Weather Bay operation. The remaining 37 million, the other 40%, are related to non-controllable items, mostly input costs and, as I mentioned, exchange rates. Moving to free cash flow and, of course, the consequence in net debt, we have reduced operating cash flows in the region of 25 million euros, and the reduced cash flow, $25 million, added to the continued use of CapEx, as we see there, $215 million, have resulted, of course, in reduced free cash flows and impacting net debt. Net debt at the moment sits at $1.8 billion, and you see there the adjusted leverage as a consequence of that. Very quickly, just to talk a little bit about CapEx, 215 million of the 266 there relates to the CapEx increase for the first half. Sharing with you a bit of Centenario, I briefly mentioned that we have been posting strong developments and improvements along the way. We continue to learn more and more about the process. We have now established a very good understanding of the system. You remember it's technology that developed. We continue to progress. We are using the DLE technology at industrial scale in a new region like Argentina. We have, however, suffered some late commissioning. I think you remember from the last time we had results, the forced evaporator unit that impacted on our ability to bring up the ramp up. But the good news is that we have continued to see improved results as from June. And it is a journey. I mean, in my experience in ramp-ups, there is a lot of learning. We expect to continue in this journey. For the end of this year, we expect to get more results. And towards mid-next year, we expect to reach design capacity. Important to mention that these kind of operations typically take time. I mean, I've been involved with many of these ramp ups. So if we deliver on what we're saying, and we believe we will, we will be very well placed looking at other operations of this same sort. Before handing over to Nicolas and going through the detail of financials and operations, I just wanted also to update you on a CSR roadmap. Again, as it was the case with safety, I was very positively impressed by the work that the Ahamed team has been doing, resulting from the Act for Positive Mining. And... And we continue on the journey. I mean, I mentioned the strong results in safety as an important springboard. And we shared with you a few examples there. The Alhamet Global Care, which is work around preventive health, the biodiversity education efforts as well, and the Women for Future that we launched in 2025. I will now ask Nicolas to take over, talk with you about the detailed results financially and operationally, and then I'll come back and talk a little bit about what is it that we expect for the second half. Thank you.

Thank you, Paolo, and good morning, everyone. So I will now go through the details of our financial performance in the first half, as well as the detailed operational performance corresponding to this. As Paolo has mentioned in his introduction, the first half has been clearly challenging for different reasons, first one being that we remain in a very challenging market environment. I will come back to that. as well as diverse performance in terms of operations. And it was leading to a sharp decrease of our adjusted EBITDA excluding SLN, leading to a €191 million performance altogether, which is clearly a sharp decrease versus last year. And also, accordingly, a negative net income, group share, and excluding SLN for minus 101 million euros. One thing I would like to remind is, as you know, our performance, our seasonality is very much towards H2, meaning that usually we have a much stronger performance in H2 in terms of operations, especially in Gabon, as well as in Asia and Africa. and also in New Caledonia due to the rainy season in most of these regions in H1. So that's something to keep in mind when you look at the absolute value in H1. Second thing to highlight here is linked to the significant increase of debt we have had last year linked to the strategic move we had acquiring the full ownership again of our asset in Argentina, of Centenario. We have also linked to the cash consumption that Paolo was mentioning in his introduction. Now a leverage which is reaching 2.7 times the adjusted EBITDA, which is clearly an increase, and this is also the reason why we have launched this asset review, which has been described by Paolo, and we'll come back to that later on. Last thing to be highlighted, we are still within our covenant in terms of gearing. So here it's the covenant we have with our main banks, and it is at 94%. So this is indeed significantly increasing in H1, linked one to the increase of debt, as just mentioned. The other thing to be also highlighted, FX has actually impacted two things. It has impacted our financial performance of the year, and I will describe it a bit more. At this stage, not so much, but it's something which is expected to increase in H2. But what has been the main impact in H1 is actually the impact on our equity because some of our assets are denominated in dollars. And given the sharp decline of the dollar we have seen in the first half, it has led to a significant decrease of our equity. So that's one of the drivers also of this increase of gearing covenant. Moving now to the details of our adjusted EBDA. So this is the usual variance analysis between H124 and H125. As already said, clearly the main driver, and that's something we deeply acknowledge, is the intrinsic performance that we control to a certain extent. Why do I say that it's something we control to a certain extent? is because out of that we have clearly a sharp impact, a strong impact coming from the reduction of grade, which is natural out of the deposit in Ueda Bay. And Ueda Bay, as already Paolo was mentioning, represents a significant portion of this negative intrinsic performance. So as you can see here, it's minus 83 out of 117. So it means that it's two-thirds of the overall negative intrinsic performance. It doesn't mean that we didn't have other issues, and I will come back to that. The good thing is on these issues, we have made really good progress and a strong resolution in Q2, which should give positive effects in the second half. And that's something also important I would like to convey today. When I said that the overall market environment is not helping, so here, of course, the impact, if we look back, H1 to H1 is not that strong. It's minus 37 million euros, so we can say that it's not the main impact by definition, but we need to keep in mind that we have had very strong negative impacts already in 23, continued in 24. So we are having a low starting point and still seeing a negative evolution of external factors is clearly a concern. So that's also leading to the overall absolute value of adjusted EBDA we have seen in the first half. One last comment I would like to make here is I said that the FX impact has not been that significant in H1. This is here, as you can see, just minus 11 million euros out of the minus 26 you see on the right hand side. And the reason why it is limited is because let's keep in mind Q1 was actually seeing a pretty strong FX rate. It was in the range of 1.02, 1.04. And it has started to decline significantly for the dollar in April after the announcement of Liberation Day. So that was leading to this negative evolution through the first half and overall a slight negative effect. I'm just mentioning this because we can expect, unfortunately, a sharper impact in H2. So... I will just come back quickly to that. So this is detailing our overall evolution of the net income. One thing I would like to precise here is that it's actually putting or evidencing what is the overall impact of WDB. This is the line in the middle. Clearly, the negative variance in terms of EBITDA falls into this line of sharing income from associated companies. So this is reduced by 62 million euros overall. And this is one of the main reasons why we have seen a negative evolution of our performance of our net income in H1-25 versus H1 of last year. As already mentioned by Paolo in his introduction, we have still invested, but we have really ensured that we control significantly our investments in this challenging environment. And we'll see later on that we keep our commitments in terms of guidance for the full year. In the first half, what have we done in terms of investments? We have kept low, very low, the sustaining capex. That's something we focus on a permanent basis to ensure that we just spend the strict minimum to ensure the adequate continuity of our operations. On top of that, we have kept investing into a few items to sustain the growth we have generated in the past. As we have said a few times in our previous presentations, we kept investing on the logistics for the Morganisor business, and it's on both sides. Here, the €27 million mentioned Morganisor. This is actually primarily the rolling stock, which is owned by our subsidiary Comilog. as well as the necessary investment to upgrade the loading capacity at the port. And that's something important because that's also something which will enable us to strengthen our operation at the port, which has been one of the issues we faced in the first half. Second portion is also the continuous program of renovation for the Trans-Germany in Gabon, which amounted to 30 million euros. That's something which started more than five years ago, and that's something, as we have mentioned already a few times, which is expected to continue for the next three to four years. Last, also is at least in this box too, we have spent money for our business in Senegal of mineral sands to further the bottleneck our plants which is extracting the sand. So that's the dredge to make sure that we can get a higher capacity of extraction going forward. The last piece here I would like to highlight is, as said already, we have now fully finalized our capex for the first plant of lithium in Argentina in our deposit of Centenario. And this is a portion of spent which we announced should be done in H1 with a term of 64 million euros. With all of that, as already said, clearly with this disappointing adjusted EBITDA performance, as well as with this CAPEX program that we have continued to support our future activities, our free cash flow has been negative for minus €266 million. leading to an increase of our debt to 1.8 billion. And I also want to always be clear on that one. So why do we mention 1.8? It was the same situation at the end of June than the one we had at the end of last year with financing going to SLN, financed fully once again by the French state. which came at the end of the semester to finance the future needs of SLN for the second half. So this is the €90 million you can see on the right-hand side. And this means that from a pure accounting standpoint, we have a net debt of €1.7 billion, but for the same reasons than the P&L, adjusted EBITDA, net income performance, given the specific status and the specific nature of SLN right now. We are reporting all our numbers for the better understanding of our investors without the SLN impacts negative in the P&L or positive, as you can see here, with the cash which was available. All together, with this clear tension and pressure we have on our balance sheet, we have continued to ensure that we proactively manage our balance sheet. And we have done that in the last couple of years. Maybe no need to remind, but I will still do it, that we have issued two bonds in the last two years, one in May 23, one in May 24. And on that one, actually, what we have done in May of this year, so we love the month of May to make bond issues, so we have issued a tap of 100 million euros on this last bond of 24, which increased it to 600 million euros altogether. And just for the sake of clarity, this new bond issue or this tap of 100 million euros was leading to an effective new money of 75 million euros after the necessary reimbursement of our term loan. That's something we did already in the past for the previous bonds. We have to ensure a reimbursement of 25% of the raised value. That's what we have done also to ensure that we stay, despite this increasing level of debt, with a strong level of financial liquidity. Of course, it decreases linked to this free cash flow evolution, and it has decreased significantly at the end of last year with the buy of... The purchase of the shares of Stingchan within Eramine, within Centenario in Argentina. But despite that, we are still having 1.7 billion euros of liquidity at the end of June. Let's now move to the operating performance for the half year. As I've already said, the macroeconomic environment remains very challenging with a lot of uncertainties all over the place. I won't come back in the details for the reasons why. You know them by heart and it's not a purpose. But this is unfortunately the way it's weighing on our markets. As I said, the evolution year over year is not so dramatic. But unfortunately, it's starting with a low point. I will start quickly with manganese. As you can see, it has decreased year over year by 4%. The point being that we have seen a pretty good Q1 with an increase progressively, the price reaching again a mark above $5 per DMTU at the beginning of Q2. But it has again started to reduce for the rest of the second quarter. Why? Because of a couple of things. The first one is the Chinese steel market remains pretty depressed. There could be some positive evolution we have seen in the last few weeks with some announcement out of the Chinese government. This being said, it remains pretty challenging. Second, we have seen still a pretty strong supply out of South Africa for the manganese oil business, especially in Q2, which was leading to this decrease of price. And the trend has continued because of the third driver, which is Jemco, our competitor in Australia, which came back as it was expected in operations at the end of May. And we should be, again, full speed in Q3. So currently the price is, the index is around $4.2 per the MTU. We would expect this to remain in the same region going forward, if not slightly lower. Again, all will depend how potentially the Chinese steel market will evolve going forward. Nickel also has been pretty depressed in terms of prices. One thing to highlight, though, is given the constraint of permitting in Indonesia, leading to, again, the need to supply, for example, ore out of the Philippines, it was leading to significant premiums in the first half. So these premiums have been now reaching a mark above $25 per tonne. Just for the sake of explanation and clarity, this means that the premium today of this ore is close to the floor value which is defined by this governmental formula. So that's just to highlight how sharp is indeed the premium, and it highlights also the need overall of the Indonesian market and the Indonesian ferro-nickel NPI producers as well as nickel class 1 producers to get additional possibilities of supplied ore out of the country. So I will come back to that because this explains why we have obtained this additional permit which is currently focusing on limonite. Nothing really I would like to focus on MineralSense other than to say that it's followed the evolution we have seen for the other businesses with a continued decline in the cost of H1. We don't expect nothing really better for the second half. And the last piece, lithium, has clearly seen again a strong reduction. But, and I think it's important to highlight, we don't see that in the screen because it's stopping on H1, but beginning of H2 has shown a pretty strong rebound because there has been some stuff of production out of China for the lepidolite production. which explains why now this surplus of supply, which has been the case for the last few periods, is, I would say, progressively decreasing. And we could see this positive trend on the last few weeks continuing for the rest of H2, more to come. No certainty at this stage. It remains a pretty young market, but at least we have seen some positive news out of there. Let's move now to our operating performance in H1. As Paolo was saying at the beginning, it is far to be at the level of our ambitions. We need to face it. And I will come back operation by operation about the drivers. But the key message I would like to share here is that the evolution we have seen has been positive in Q2. And this is something important to highlight because, yes, H1 has been a challenging period for the group. But the trend is positive, and we are building on this positive trend to make sure that we'll deliver a stronger H2. If I move now to Morganese, so I've already explained the situation of the market, so I won't spend too much time on this one. And just mentioning that, as I said, today's index is at 4.2, and we don't expect it to move quickly further up, as I said before. So that's why the H1 mark, which is an average 4.64, is clearly something we don't expect to continue altogether for H2. We expect an H2, which should be lower, even if when we look at the consensus of the analysts, we could say that it will continue, but we don't think it will be the case given the market dynamic I described before. With Gemco coming back, it should normalize clearly the market. And why do we say that $4 or $4.2 mark is usually what we see as the inflection point is still linked to this cash cost curve? which shows that the third and fourth quartile producers are more in the range of 4.5 and above. So that's why when we reach the kind of price we have seen in the last few weeks, it's usually the time the price rebounds because we see these producers stopping their production. The big difference we likely see this year is this rebound will take more time given the fact that Jemco is coming back. So that's why we don't anticipate this rebound to be as quickly. But that's something which we could actually expect maybe to take place later on in the year or at the latest at the beginning of next year. If I move to the overall production and transportation performance, so production has been strong. It's been in line with what we have been able to deliver in H1 of last year, which was already a strong half year. So this is a sustainable, strong performance, and nothing more to say. It's a positive area. Transportation has been more challenging because it has been constrained at the beginning of the year, so it's been almost the case for the entire Q1, not directly actually for the transportation reasons, but because there was a bottleneck at the port, and that's why I mentioned earlier it was important to make sure that we further invest there. And we have had continuous issues through the first quarter, which have been progressively solved in the second quarter. So that's why overall the performance has been slightly negative. Minus 5% is not a small number, but at the end of Q1, it was closer to 12% to 13%. So it means that Q2 was actually more or less in line with the performance we delivered in Q2 of last year. So this is giving some optimism. But just due to the fact that we have had this negative performance in Q1, We have had to consider to revise our guidance for the full year because we are missing the volumes we didn't deliver in the first quarter. Just to provide also some positive evolution, June we transported 600,000 tons. The trend of July is very similar to that. This means that 600,000 tons, it's a pace to be with around 3.6 million tons in the second quarter, in the second half. This is something we have already delivered in the past, and we are confident to deliver, especially, again, keeping in mind that H2 is usually more supportive than in terms of weather conditions and that's why we are really confident to achieve this number just just another thing i would like to highlight here is concerning the cash