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Umicore profits shrink on automotive crisis impact; revenue, earnings beat estimates

August 04/2020

MOSCOW (MRC) -- Umicore (Brussels, Belgium) says its net profits for the first half of 2020 fell by 38%, to EUR91 million (USD107 million) from EUR148 million in the same period of the previous year, said Chemweek.

Sales declined by approximately 4% year on year (YOY), to EUR1.57 billion, beating analysts' consensus estimate by 8.1%. Adjusted EBIT and adjusted EBITDA increased slightly compared with the first half of 2019, to EUR243 million—beating analysts' estimates by 8.5%—and ˆ376 million, respectively, it says. The company's performance was hurt by the impact of COVID-19, especially on the automotive industry, which affected mostly its catalysis, and energy and surface technologies businesses, the company says. The strong performance posted by Umicore’s recycling business was not able to offset the overall impact of COVID-19. Second-quarter figures have not been disclosed.

Sales of the company’s catalysis business dropped by almost 20% YOY, to EUR571 million, due to the company having to stop production at the majority of its automotive catalyst plants for several weeks, following car OEMs' assembly-line shutdowns caused by the pandemic, Umicore says. However, the company says that the reduction in catalysis revenue was less than the contraction of the worldwide car market, as Umicore continued to outperform the market in China.

The energy and surface technologies business recorded an 8% YOY decline in sales, to EUR557 million, attributed mainly to a contraction of the worldwide electric vehicle market as well as lower activity levels in other key end-markets, the company says. However, the increased activity levels, higher metal prices, and favorable trading conditions boosted revenue at its recycling business, to EUR440 million compared with EUR313 million in the first half of 2019.  

"Despite the brutal effects on society and industry of the COVID-19 pandemic, Umicore showed great resilience and turned in a solid performance in the first half of 2020, demonstrating the complementarities of our businesses and showing the agility and determination of our workforce," says Marc Grynberg, CEO at Umicore.

The company’s free cash flow from operations at the end of June 2020 was EUR108 million, up from EUR50 million a year earlier, Umicore says. Capital expenditure (capex) plans were adjusted at the beginning of the pandemic and first-half capex spend amounted to EUR152 million, EUR89 million less than a year earlier, it says.

"Umicore has ensured healthy and safe working conditions for its personnel and protected the financial health of the company with cost savings, reassessment of our industrial footprint, and increased liquidity. Our long-term strategic drivers remain intact and I am confident we will return to growth in clean mobility and recycling as we emerge from the pandemic,” Grynberg says.

The company issued EUR500 million in convertible bonds due 2025 and concluded an 8-year loan agreement with the European Investment Bank for an amount of EUR125 million. Umicore says it “has ample liquidity with EUR1.2 billion of cash and equivalents on the balance sheet at 30 June 2020 and approximately EUR1 billion of additional committed undrawn credit lines from core relationship banks.” Its long-term debt profile has no material maturities prior to 2023, the company says.

As a response to the disruption caused by COVID-19 in several of its key end-markets, Umicore says that it “is reassessing its production footprint as well as the carrying value of certain assets.” As a result, Umicore consolidated its North American automotive catalyst production activities at Burlington, Ontario, Canada, and discontinued its automotive catalyst production at Tulsa, Oklahoma. Umicore has also impaired certain tangible and intangible assets, the company says.

Umicore says it is still unable to provide a detailed outlook for 2020, due to the ongoing COVID-19 uncertainty. Nevertheless, it “continues to expect its full-year adjusted EBIT to be below the levels reached in 2019, with the adjusted EBIT in catalysis, and energy and surface technologies well below the levels of 2019 and adjusted EBIT in recycling well above the levels of 2019,” the company says.   

Umicore notes that worldwide car production is expected to be down by approximately 25% for the whole of 2020. In this scenario, the company’s revenue and adjusted EBIT in catalysis in the second half would be well above first-half levels, it says. Energy and surface technologies’ adjusted EBIT in the second half is likely to be below levels seen in the first half, the company says. Analysts estimate that a four-week scheduled maintenance turnaround at the company's Hoboken, Belgium, plant will lead to weaker earnings sequentially for recycling, with adjusted EBIT decreasing 5% in the second half.

As MRC informed earlier, Umicore (Brussels, Belgium) says it has launched an offering of senior unsecured bonds of EUR500 million (USD563 million), maturing in June 2025 and convertible into Umicore ordinary shares.

Besides, in December 2012, materials technology group Umicore and the Evonik Group subsidiary Evonik Litarion GmbH announced a business relationship for the supply of lithium-ion cathode materials.

We also remind that Dow and Evonik have recently entered into an exclusive technology partnership. Together, they plan to bring a unique method for directly synthesizing propylene glycol (PG) from propylene and hydrogen peroxide to market maturity.

Propylene is the main feedstock for the production of polypropylene (PP).

As per MRC's ScanPlast, Russian producers reduced their total PP production in June to 149,400 tonnes from 162,900 tonnes a month earlier, ZapSibNeftekhim reduced its capacity utilisation. Russia"s overall PP production reached 904,800 tonnes in the first six months of 2020, compared to 732,000 tonnes a year earlier. Four out of eight producers increased their capacity utilisation, with a new producer -ZapSibNeftekhim - accounting for the main increase in the output.

Author:Anna Larionova
Tags:PP, PP block copolymer, homopolymer PP, PP random copolymer, Dow, Evonik.
Category:General News
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