A recovery strategy which gives the expected results: a strong improvement in the ERAMET group performance in 2016

2016 was a year of stark contrast in the metals markets. 2015 trends continued into the first half of 2016, with prices at historic 15-year lows, especially for nickel and manganese, against the backdrop of the worst crisis in this industry in decades. In contrast, the second half of the year 2016 saw nickel prices nudge upward, followed by a strong rise in manganese prices at the end of the year. In this environment the ERAMET group financial liquidity remained high at €1.7 billion at 31 December 2016 and Free Cash-Flow turned positive at €226 million in the second half of 2016.

 

Turnover since 2010 (in € millions)

 Turnover since 2010 (in € millions)

 

 

The Group's sales fell 4% in 2016 to €2,984 million, affected by the very low prices in the first half of the year.

 

 
 

 

 

 

 

 

Turnover distribution by Division

 

 Turnover distribution by Division

 

ERAMET Manganese accounts for the largest share of the Group’s turnover (48%). This figure is stable compared with 2015, despite a fall in manganese ore production.

ERAMET Nickel’s turnover decreased 13% compared with 2015, reflecting the current nickel market crisis. 

ERAMET Alloys’ turnover decreased in 2016, despite good sales in the aviation sector (64% of the Division’s revenue) where demand trends remain healthy.

 

 

Current operating income (in € millions)

 Current operating income (in € millions)

 

 

The Group current operating income was positive at €84 million, from a distinctly negative position in the first half of the year, proving the effectiveness of its cost reduction and productivity improvement drive and helped by the recovery in commodities prices.

 

 

 

 

 

 

Capital expenditure (in € millions)

Capital expenditure (in € millions) 

 

 

The Group set a target of less than €250 million in industrial investments for 2016 as part of its strict cash management policy. ERAMET achieved and exceeded this target, with industrial investments of €217 million in 2016, down almost 20% on 2015.

 

 

 

 

 

Net income (Group share) (in € millions)

 Net income (Group share) (in € millions)

 

 

Net income, Group share before depreciation was -€43 million, a big improvement on 2015. After depreciation, net income, Group share was -€179 million including €104 million in asset impairments and €32 million in non-recognition of deferred tax assets.

 

 

 

 

 

 

 

Consolidated net cash position (in € millions)

  Consolidated net cash position (in € millions)

 

 

The Group moved forcefully to minimise cash consumption in 2016 as much as possible. Group-wide measures helped to contain net debt, which fell year-on-year to €836 million. This improvement in net debt, combined with the issue in September 2016 of net share settled undated bonds convertible into new shares (ODIRNAN) reduced the Group’s gearing ratio (net debt on equity ratio) slightly to a satisfying level of 47%.

 

 

 

 

 

Cost reduction and productivity improvement plan

 

The cost reduction and productivity improvement actions were stepped up considerably in 2016 with the engagement of all Group teams. As a result, the Group is in a position to give a new and very positive outlook.

The initial target cumulative impact of these plans in the period from 2014 to 2017 was an annual impact on current operating income of €360 million at the end of the plan period, amounting to a 13% reduction in the Group's total costs, compared with 2013. As the crisis in the metals markets deepened at the start of 2016, ERAMET intensified efforts and not only introduced new specific plans in COMILOG, ERAMET Norway, Erasteel and TiZir, but also amplified existing measures. The recurring gains in terms of annual impact on current operating income stood at €306 million at the end of 2016. As a result of stepping up these measures, the Group announces that it is upping its target to €400 million from €360 million, to aim for €40 million in additional recurring gains by the end of 2017.

> Download the presentation of ERAMET’s 2016 annual results (24/02/2017)


NB: Consolidated data for the Group and by Division is adjusted data resulting from the Group’s reporting, with joint ventures accounted for on a proportional consolidation basis.

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