Boliden AB

Ladies and gentlemen, I'd like to welcome you to Boliden's Q1 2022 results presentation. My name is Olof Grenmark and I'm head of investor relations. Today, we will have a results presentation led by our president and CEO, Mikael Staffass, and our CFO, Håkan Gabrielsson. Mr. Staffass, welcome.

Thank you, Olof. Thank you, Rolf. Hello, everybody. It's great to see you all out there. I'm talking to you from a very nice Skellefteå today with a nice sunny weather, and we are going to have our AGM later today. First of all, it's, of course, a big pleasure to stand here and present the biggest or the best results that Bolin has ever done in the history of their company. That was, of course, not surprising. Everybody knew that we've had prices and terms that are the best ones that we've seen in a very, very long time or that we'd rather ever have seen. If you look at the key highlights of what we're going to talk about today, we have strong prices and terms, but we also have strong prices and terms in the other end, i.e. our suppliers are also increasing prices. We'll come and talk a little bit more detail around that. However, which is important for us, so far we have a positive balance with a better price better development of our prices than of our costs. We have a higher mill volume in general. We have slightly lower grades in mines, which I think was very well communicated beforehand. And we have a stable and a good production quarter in the smelter. We have, as you said, a record result of almost 4.5 billion Swedish kronor in EBIT, excluding the process inventory valuation. We have a free cash flow, which is also good, given the consideration that when prices go up, also the amount of working capital goes up with it. So we're tying in reserves in our working capital. Håkan will come back and talk a little bit more about that. And we've also invested about a billion and a half in the first quarter, which is slightly lower than our going rate. But that's typical. We're typically slow in the beginning of the year to get the investments going. On the project side, well, the Aitik Dam we spoke about just two weeks ago that we have had and we're going to have to do going forward has been announced. The Odda and Kristineberg expansions are going according to plan. The ramp up in Harjavata and the recovery in Tara after the incidents that happened back in Q4 has been slower in the quarter than we had initially hoped, but there is clearly progress and it looks very good going forward. In terms of the profit in the quarter, I mean, just looking at this graph tells you right away that we are looking at a very good quarter. In general, we've had good results in both of our business areas this quarter. On the ESG side, let's start with the health side. We have had a higher absenteeism than we have ever seen before. COVID in this quarter was by no way over. Both January, February, but even March was very high sick leave quarters. And even though things went back to normality in the sense that people did not get extremely sick, we had a very high level of absenteeism. And that hurt us in places like Ithaca, for example. In terms of the LTI frequency, we've had a good development in this quarter. We had a better result both in the same quarter last year or in the Q4 last year. And we're having a good development, I think, in general. What you don't see here, but what I can tell you also, that when we look at the severity of the injuries that we have, that is also going the right direction. We have fewer average sick days for every injury that we do record. And the amount of what we call risk class 3 incidents, which are incidents, either somebody getting hurt or nobody getting hurt, but incidents that somebody could have gotten really hurt, those number of incidents are also going down significantly. The CO2 intensity is going down, which is good. It's the right direction. And it's coming the way that we are. And our CO2 abatement program is moving on according to plan as well. Well, the big thing this quarter is what you see here on this exhibit is, of course, the very good prices and terms. And it's driven by very good metal prices, which everybody will have known beforehand. It's also interesting enough, typically when we have strong metal prices, we also have currencies going the other way. We don't have this at this time. The currencies are... helpful to us, actually also giving us a little push and helping us with the total index as it's seen here. But when you combine the metal prices and the exchange rates, we have a very good situation. Now, it's not only us who have a good situation. I think that you've seen this exibit beforehand many times, but you can just once again make the notice around this that in zinc, copper, and now also nickel, we have market prices which are way above. the cost level of the industry. Now, these cost levels in the industry have a little bit of a lag. We'll talk about inflation for us. And of course, lots of our competitors also have inflation. And I'm pretty sure that we're going to see in these graphs as we move forward that the cost level in the industry will also go up Because of this inflation, it hasn't shown yet in the numbers. But even with that, of course, it's a very nice profit level in the industry in copper, zinc and, of course, in nickel, which has seen a very strong price increase during this quarter, which is, of course, very nice for us. Then we had the issues during March where we didn't even have an LME price increase. for certain days so it's difficult for us to make a point about what was actually the highest nickel price that might not be so important but as you look in detail on this one we have not stated an exact max price during the quarter for nickel as it was fluctuating on high levels but not really any trade on the mine side well we've had a I would say a solid situation. I think the throughput is down a little bit and, of course, not quite where we want it to be. But given the fact that it is winter and also given the fact that we had so high sick leaves, especially in the beginning of the quarter, we're still pleased with the throughput that we had. And we've had a copper grade, which is even slightly above what we had guided for for the whole year. Also good, strong production, although you can see it's a little bit lower. We've had quite a lot of maintenance in Garpenberg during this quarter, both in the shaft and in other parts of the milling system, which has slowed us down a little bit. But we were likely to come back and recover those few lost tons as we move forward. In Kevica, also good throughput. This is a 10 million per year speed that we're having in the first quarter, which is good. The grades are down, which I think was well communicated beforehand that that's what's happening right now. In the Bulletin area and also in, well, Bulletin area is pretty strong production generally. Tara, the recovery from the water event has been slightly slower than we had anticipated and slightly slower than I think we guided, but we're heading back again also in Tara towards fuller production. Smelters, a strong production in general. The zinc smelters, if we start there, have had good production in general. We've had also good production in Rönnskär. Harjavalta has had issues with the nickel line, but apart from the nickel line, basically doing relatively good, apart from the fact that we had a four-day strike in Harjavalta due to labor discussions in February that, of course, brought down the production. coming with it. In Paris, we do have some challenges with the emissions of sulfur that has putting some constraint to production. We have actually asked by speaking today, as of last week, managed to get an adjustment of the permit that we have there so that we will be able to start producing more relatively soon. So with that, I leave it over to you, Håkan, to give us a little bit of the financial numbers.

So good morning and thank you, Michael. I'm just going to start by echoing what Michael just said. It's a pleasure to be here and to talk about what is in fact our strongest result in a quarter so far financially. EBITDA reached 6.5 billion, just shy of 6.5 billion. EBIT, excluding process inventory revaluations, was $4.5 billion. Both of these numbers are about $2 billion up year on year. CapEx is $1.5 billion in the quarter. That is slightly lower than our run rate for the full year that we expect. We do see both the ODA project and our investments in ITIC picking up over the later part of the year. Free cash flow, 674 millions. With this strong price development, we tie some capital in working capital, and I'll come back to that shortly. looking by business area we do see improvements in all areas. Mines are up to 3.1 billion, smelters just shy of 1.4 billion and other eliminations is about zero in the quarter. Typically when we have price increases we see a negative number in internal profit adjustments. This is a timing adjustment as i think most of you know by now we have been able to release some inventories to to keep that that number close to zero looking then a bit deeper into the profit development year on year quarter one this year compared to quarter two to quarter one last year we have been helped by a very strong price development. We're up 2.3 billion as a result of prices. It's mainly base metal prices that have had a strong development during the year, but we also see the current situations with a stronger dollar helping us a good deal as well. Volumes, the net effect is positive. There is a mixed picture there. We have on the positive side higher mill volume in our mines. And we've also been able to release some internal stock that's primarily copper cons from ITIC, which means that we have a positive volume effect from the internal profit elimination. But on the negative side, lower grades in Kavitsa and lower volumes in Harjavalt are connected to the issues that we talked about in Q4. So the net effect is plus 176 million. And then on the cost side, we do have the inflation that Michael touched upon. This is about a 10% increase of costs. This is primarily energy and consumables costs. But there is clearly an inflation in the system. I'll come back to that in a while as well. Looking at quarter one comparing to quarter four, again, the story is the same on prices and currencies. Good development. Volumes is, again, slightly positive. There's a higher production in smelters. We have been able to release... Inventory volumes, that has a positive impact on the internal profit elimination. But we have lower mill volume and grades in the mines. And in particular, in the open pit mines, Q4 was a very strong quarter. Costs sequentially is actually down. We have a positive 147 here. We did have some maintenance stops in Q4 in smelters, and we also took 60 million of one-offs connected to reclamation costs in Q4, which we haven't done repeated in Q1. Continuing then with the cash flow. Strong EBITDA of 5.8, and then we have tied 3 billion Swedish krona in working capital. Most of our working capital is very much connected to metals. There is inventories, there is accounts receivables and payables, which is fluctuating with the metal prices. And in a period of price increases, we have the weighted price increase in the quarter is about 20%. That has a direct impact that we initially tie working capital. So that explains the full number that we see here, 3 billion. Moving over then to our capital structure, again, obviously a strong balance sheet. We have a net cash position of 1.5 billion Swedish kronor and a net payment capacity of close to 18 billion Swedish kronor. We have done some financing activities in the quarter, and we added a slide just to give a brief update on that. We took a loan from the Nordic Investment Bank back in February, and in April, after the closing of the books, we refinanced our revolving credit facilities agreement. That's our liquidity reserve, if you like. We increased the amount from 770 million euros to 850 million euros. And you can see the details in the report. And of course, we're happy with our robust financing and we're happy with the support of our core banking group. Just a few words on inflation before I hand over to Michael again. We do see inflationary pressure in the system right now. I think many of our peers have talked about the same thing. The areas where we feel it the most is mainly energy, bulk, consumables and transports. And in here you have, of course, the diesel cost that has a big impact on transports and so on. Looking at our run rate year on year, we're slightly above 10% in inflation, and that is then excluding wage and salary costs. At the same time, we have also seen a tendency to get extended lead times on the incoming purchases. And we have managed so far without any impacts on production. And we see the inflation and the lead times also visible in the investment projects. So with that, I hand over again to Michael.