Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Eramet SA (ERMAY, Financial) reported a strong operational performance with significant production increases: 33% in manganese ore in Gabon and 40% in nickel ore production in Weda Bay.
- The company has commissioned its first lithium plant in Argentina, with production expected to start in November 2024, positioning it as the first European company to produce battery-grade lithium carbonate at an industrial scale.
- Eramet SA (ERMAY) has maintained a robust balance sheet with a limited increase in net debt despite a challenging pricing environment and significant investments.
- The company has launched a new CSR roadmap, 'Act for Positive Mining,' focusing on safety and employee social protection, achieving a frequency rate of 0.8, which is a 20% improvement over the previous year.
- Eramet SA (ERMAY) has extended its debt maturity by another year, maintaining strong liquidity with a robust balance sheet, enabling confidence in future growth potential.
Negative Points
- The company faced a challenging pricing environment, particularly in nickel, which negatively impacted its financial performance.
- Eramet SA (ERMAY) reported a negative cash flow for the period due to low Weda Bay dividend distribution, sustained CapEx, and higher working capital requirements.
- The SLN operations contributed negatively to the adjusted EBITDA by EUR109 million, significantly impacting the company's financials.
- The company experienced delays in obtaining permits for low-grade saprolite ore sales in Indonesia, affecting external sales.
- The lithium market is currently experiencing low prices, which could impact future profitability despite the company's strong cost position.
Q & A Highlights
Q: Could we see a significant rise in manganese prices once small producers' inventories are depleted, given GEMCO's export issues?
A: Nicolas Carre, CFO, explained that while small producers have temporarily stabilized prices by releasing inventories, the long-term need for high-grade ore remains. Christel Bories, CEO, added that manganese alloy producers require high-grade ore for furnace stability, suggesting potential price increases if Chinese demand strengthens.
Q: What is the outlook for the lithium market, considering current low prices?
A: Nicolas Carre, CFO, noted that despite current low prices, Eramet's lithium operations remain profitable due to low cash costs. Christel Bories, CEO, emphasized the long-term demand growth for lithium, expecting the market to double every five years, which should eventually support higher prices.
Q: What caused the reduced production at Weda Bay's nickel operations, and what is the outlook for nickel surplus?
A: Nicolas Carre, CFO, clarified that the reduced production was due to maintenance, not ore shortages. Christel Bories, CEO, acknowledged a current surplus in nickel, particularly in ferronickel, but expects market adjustments and demand growth to balance the market in the coming years.
Q: What are Eramet's plans for battery-grade nickel and the situation in New Caledonia?
A: Nicolas Carre, CFO, stated that Eramet is exploring options in Indonesia for battery-grade nickel but did not confirm any specific partnerships. Christel Bories, CEO, mentioned the unpredictable political situation in New Caledonia, making it difficult to foresee the future of the nickel industry there.
Q: What is the expected impact of working capital changes and manganese ore price increases on Eramet's financials?
A: Nicolas Carre, CFO, expects a mechanical increase in working capital due to higher manganese prices, but this is seen as a positive issue reflecting strong cash generation. He also noted a short-term margin increase in manganese alloys due to price lags, with potential reversal later in the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
