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Aluminium
for the world
INVESTOR RELATIONSPRESENTATION
2018
DISCLAIMER
2
This document has been prepared and issued by and is the sole responsibility of Aluminium Bahrain B.S.C. (the“Company”). The document is being supplied to you solely for your information and for use at the Company’s presentation.No information made available to you in connection with the presentation may be passed on, copied, reproduced, in wholeor in part, or otherwise disseminated, directly or indirectly, to any other person. This document and its contents aredirected only to the intended audience. It is being made on a confidential basis and is furnished to you solely for yourinformation. By accepting this material the recipient confirms that he or she is a relevant person. This document must notbe acted on or relied on by persons who are not relevant persons. Any investment activity to which this document relatesis available only to relevant persons and will be engaged in only with relevant persons. If you are not a relevant person youshould not attend the presentation and should immediately return any materials relating to it currently in your possession.Forward-looking statements speak only as at the date of this presentation and Aluminium Bahrain B.S.C. expresslydisclaims any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in thispresentation. No statement in this presentation is intended to be a profit forecast. As a result, you are cautioned not toplace any undue reliance on such forward-looking statements. You should not base any behaviour in relation to financialinstruments related to the Company’s securities or any other securities and investments on such information until after it ismade publicly available by the Company or any of their respective advisers. Some of the information is still in draft formand has not been legally verified. The Company, its advisers and each of their respective members, directors, officers andemployees are under no obligation to update or keep current information contained in this presentation, to correct anyinaccuracies which may become apparent, or to publicly announce the result of any revision to the statements madeherein except where they would be required to do so under applicable law, and any opinions expressed in them are subjectto change without notice. No representation or warranty, express or implied, is given by the Company, its undertakings oraffiliates or directors, officers or any other person as to the fairness, accuracy or completeness of the information oropinions contained in this presentation and no liability whatsoever for any loss howsoever arising from any use of thispresentation or its contents otherwise arising in connection therewith is accepted by any such person in relation to suchinformation.
Aluminium
for the world
3
CONTENTS
01IndustryHighlights
02ALBAHighlights
032018Results
04IndustryPerspectivesin 2019
052019ALBA Priorities
Aluminium
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Aluminium
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01INDUSTRY HIGHLIGHTS1
1Industry Highlights are based on CRU Analysis
Industry Highlights – 2018
World consumption at ~66 million Metric Tonnes (MT) (+3% YoY )
MENA demand hit double-digit growth for another year in a row (+13% YoY) backed by major infrastructure spending in Saudi Arabia (+28% YoY)
Demand in Asia up by 4% YoY led by slow consumption in China (+4% YoY)
Europe consumption rose by 3% YoY supported by sound demand in the construction and automobile sectors
Demand in North America up by 2% YoY driven by the auto and aerospace sectors
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Global Physical Demand Continue to Grow
5
Industry Highlights – 2018
World production up by 1% YoY (~64 million MT) World market in deficit with China (-1.8 million MT ) and in deficit w/o China (-2.2 million MT)
Higher alumina and power prices drove Chinese smelters’ closure translating into flat production growth
Production in North America down by 4% YoY due to production cut in ABI smelter in Canada
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Global Production Almost Flat
6
Industry Highlights – 2018
LME inventories at ~1.3 million MT in December (+16% YoY)
Q4 2018 Cash-average was $1,971/t with LME ranging between $1,869/t on December 31 and $2,243/t on October 4
Physical premiums prices continue to soften ($/t) as USA lifted the previous imposed sanctions on UC Rusal
Aluminium
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LME & Premiums
7
Major Japanese Ports (MJP) US Midwest DDP Rotterdam
0
225
Q42017
Q12018
Q22018
Q32018
Q42018
156 168202
158134
0
250
500
Q42017
Q12018
Q22018
Q32018
Q42018
208305
480 455 485
0
75
150
Q42017
Q12018
Q22018
Q32018
Q42018
95 103129 132
103
Industry Highlights – 2018
Aluminium
for the world
Alumina Prices Closed Higher in 2018 Averaging at US$473/t
8
100
200
300
400
500
600
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
339295
337
445
384
526 540
441
CRU Alumina Price Index
2017 AVG: US$354/t 2018 AVG: US$473/t
Aluminium
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02ALBA HIGHLIGHTS
Alba improved its Safety performance by recording a 50% drop in Lost Time Injuries YoY. Alba launched ‘Think Orange, Think Line 6 Safe Start-up’ Campaign to coincide with the commissioning of Line 6
Amongst 1 Million-Club metric tonnes (MT) smelter, Alba’s Production topped 1,011,101 MT (+3% YoY) while Sales volume reached 1,012,548 MT (+3.5% YoY)
Value-Added Sales at 60% in 2018 [up from 57% in 2017]
Line 6 Expansion Project milestones:
- Alba Power Expansion Project achieves First Fire Milestone
- Alba commissions Line 6 ahead of schedule
- Alba starts Casthouse 4 - the biggest furnace in its history
- Line 6 Smelter [overall progress > 80%]
- Power Expansion Project [PS 5 & PDS overall progress: 83% & 96%]
Operational Highlights & Achievements
10
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Alba Highlights – 2018
Aluminium
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Safety in Focus: 50% Reduction in LTIs and Focus towards Zero Injuries
11
Alba Major Highlights - 2018
2
5
8
2014 2015 2016 2017 2018
56
3
6
320
50
80
2014 2015 2016 2017 2018
57
6964
57
32
Lost Time Injury (LTI) Trend Total Recordable Injuries
Alba Highlights – 2018
Aluminium
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Sales Breakdown by Geographic Footprint Diversified Customer-Base With Emphasis on US and MENA
12
Bahrain41%
MENA12%
Asia12%
Europe23%
Americas12%
20182017
Bahrain34%
MENA17%
Asia14%
Europe20%
Americas15%
Alba Highlights – Q4 & FY 2018
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Financial Key Performance Indicators
13
1 Free-Cash Flow excluding Line 6 CAPEX spending
EBITDA impacted by higher Alumina prices
Q4: US$ 7 million down by 94% YoY
FY: US$ 330 million down by 24% YoY
Net Income (Loss) down due to higher Alumina prices
Q4: US$ (47) million down by 176% YoY
FY: US$ 159 million down by 35% YoY
Free-Cash Flow1 unfavourable due to Line 6 inventory ramp-up in Q4 & favourable thanks to good Cash-Flow management
Q4: US$ (70) million down by 489% YoY
FY: US$ 415 million up by 295% YoY
Alba Highlights – 2018
Aluminium
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14
2018 Target
101
60
Project Titan III - US$ per MT
*Savings from Project Titan represent the annual US$ cost per mt improvement once all projects are fully implemented
Project Titan - Phase III: Improve Cash-Cost Structure by US$ 60/MT Full-Year 2018: Achieved Savings of US$101/MT
Alba Highlights – 2018
Aluminium
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Alba Share Price (ALBH) Trend
610 605
550
560
610
630
635 600
595 590
600
450
500
550
600
650
700
Fils
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
15
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16
2017 2018
2,7003,186
664
7483,364
3,934
Total Head Count External Internal
2017 2018
560609
57%
60%
2017 2018
5647
2017 2018
105110
Alba Highlights – 2018
Operational Excellence
Head Management Count Value-Added Sales (MT’000) as a % of Total Sales
Account Receivable Days Inventory Days Trend
Aluminium
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17
Cash, Net Debt & Net Debt to EBITDA
-100
400
900
1400
1900
2400
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
184-71 -39
1,059
2,012
179309 177
206
276
0.4 -0.22-0.12
2.42
6.10
Net Debt Cash Net Debt to EBITDA
Alba Highlights – 2018
Net Debt to EBITDA Ratio
Aluminium
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032018 RESULTS
2018 Full-Year ResultsUC Rusal Sanction & Trade-Tensions Behind Increased Volatility in LME Prices
Aluminium
for the world
19
800
1,200
1,600
2,000
2,400
Metal Sales2017
LME Product Mix PricingPower
Volume Metal Sales2018
2,095
2,373
1548 42
74
2018 vs. 2017 - Metal Sales Bridge (US$M)
Sales Bridge Analysis: 2018 vs. 2017 Higher Metal Sales Thanks to Higher LME Prices and Premiums
Aluminium
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20
2018 vs. 2017 - Sales by Product Line Bridge (MT’000)
Premium Above LME Trend US$ Per MT
850
950
1050
Sales2017
ValueAdded
LiquidMatel
Commodity Sales2018
9781,013
48
8 5
100
150
200
250
2017 2018
185
234
2018 Full-Year ResultsUC Rusal Sanction & Trade-Tensions Behind Increased Volatility in LME Prices
Higher Sales Volume Denominated by Favourable Shift in Product Mix
Aluminium
for the world
21
2018 vs. 2017 - Direct Cost Bridge (US$M)
1,400
1,800
2,200
Direct Cost2017
RMPrice
RMConsumption
EnergyPrice
OtherRM
AluminaSales Cost
InventoryChange
PlantSpending
Direct Cost2018
1,807
2,034
339
5231
6
37
12143
Cost Analysis 2018 vs. 2017: Higher Alumina Prices
2018 Full-Year ResultsUC Rusal Sanction & Trade-Tensions Behind Increased Volatility in LME Prices
Aluminium
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Favourable Management Performance Offset by Higher Alumina Prices
22
2018 vs. 2017 - EBITDA Bridge (US$M)
0
400
800
EBITDA2017
Metal Sales Other Sales Direct Cost SellingExpenses
EBITDA2018
437
330
EBITDA 19.1%
278
EBITDA 13.6%
140
228
17
2018 Full-Year ResultsUC Rusal Sanction & Trade-Tensions Behind Increased Volatility in LME Prices
Aluminium
for the world
23
Free Cash-Flow (US$M)
-800
-400
0
400
800
CashBalance
2017
CFfrom
Operations
WCChanges
CAPEXSpent
Line 6CAPEX
LoanDrawdown
Paymentto
Shareholders
CashBalance
2018
206 276
328
221
1,014
98
134
1,261
0
250
500
2017 2018
105
415
Operating & Investing Cash Flow excluding LINE 6 Capex
Cash Flow Bridge: 2017 to 2018 Maintain Cash-Flow Trend and Good Cash Position
2017 to 2018 Cash-Flow Bridge (US$M)
2018 Full-Year ResultsUC Rusal Sanction & Trade-Tensions Behind Increased Volatility in LME Prices
Aluminium
for the world
24
2018 Highlight: Increased Volatility in LME Price & Higher Alumina Price
2018 Full-Year ResultsUC Rusal Sanction & Trade-Tensions Behind Increased Volatility in LME Prices
Financial Summary Q4 2018 Q4 2017 FY 2018 FY 2017
Average Cash LME (US$/MT) 1,971 2,101 2,111 1,968
Average Alumina Price (US$/MT) 441 445 473 354
Total Sales (US$M) 559 684 2,430 2,293
EBITDA (US$M) 7 110 330 437
EBITDA% 1.3% 16.2% 13.6% 19.1%
Net Income/ (Loss) (US$M) (47) 62 159 246
Net Income% (6.7)% 8.5% 6.2% 10.8%
Aluminium
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04INDUSTRY PERSPECTIVES IN 2019
Industry Perspectives in 2019
Aluminium
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Physical Demand to Remain Healthy
26
Key factors to be observed:
LME price is set to fluctuate on the back of UC Rusal sanction’s relief, stronger US$ and shaky global economic outlook
Demand in North America on firm footing led by automotive and aerospace sectors
China unveils stimulus to boost aluminium demand
Physical premiums to soften with the lifting of imposed sanctions on UC Rusal
LME price to range between US$ 1,900/t – US $2,000/t
Industry Perspectives in 2019
Aluminium
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27
Alumina prices expected to soften on the back of Alunorte refinery full restart in 2019 & EGA Al Taweelah ramp-up
Green Petroleum Coke prices to ease in 2019 due to balance in market fundamentals across the world
Liquid Pitch & Aluminium Fluoride prices to remain at the higher range on the back of limited supply
Raw Materials Price Trends
Aluminium
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052019 ALBA PRIORITIES
2019 Alba Priorities
Aluminium
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29
Continuous focus on Safety with new ‘Safety Gateway’ initiative
Deliver on Project Titan - Phase IV: reduce cash-cost of US$ 100 million by the end of 2020 [2019: US$ 40 million & 2020: US$ 60 million]
Leverage on Value-Added Sales
Focus on Future Upstream Opportunities
Ramp-up Line 6 safely and on time
Alba On Set To Be World’s Largest Smelter With Line 6
Aluminium
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06APPENDIX
Sales Bridge Analysis: Q4 2018 vs. Q4 2017 Unfavourable LME Prices Coupled With Lower Sales Volume
Aluminium
for the world
31
250
450
650
Metal Sales4Q17
LME Product Mix Pricing Power Volume Metal Sales4Q18
636
559
5 148
35
4Q18 vs. 4Q17 - Metal Sales Bridge (US$M)
Q4 2018 ResultsAluminum Industry Impacted by Higher Alumina Prices and Lower LME Prices
Aluminium
for the world
32
120
220
320
278262
15 1516
4Q18 vs. 4Q17 - Sales by Product Line Bridge (MT’000)
Premium Above LME Trend US$ Per MT
120
220
4Q17 4Q18
178
201
Sales 4Q17
ValueAdded
Sales 4Q18
LiquidMetal
Commodity
Lower Sales Volume & Higher Premiums
Q4 2018 ResultsAluminum Industry Impacted by Higher Alumina Prices and Lower LME Prices
Aluminium
for the world
33
300
500
700
Direct Cost4Q17
RMPrice
RMConsumption
EnergyPrice
OtherRM
AluminaSales Cost
InventoryChange
PlantSpending
Direct Cost4Q18
557 541
73
4226
92
4 8
21
4Q18 vs. 4Q17 - Direct Cost Bridge (US$M)
Cost Analysis Q4 2018 vs. Q4 2017: Higher Alumina Prices
Q4 2018 ResultsAluminum Industry Impacted by Higher Alumina Prices and Lower LME Prices
Aluminium
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Management Performance Double-Hit With Higher Alumina Prices & Lower LME Prices
34
0
75
150
EBITDA4Q17
MetalSales
SellingExpenses
DirectCost
OtherSales
EBITDA4Q18
110
7
77
516
47
EBITDA 16.2%
EBITDA 1.3%
4Q18 vs. 4Q17 - EBITDA Bridge (US$M)
Q4 2018 ResultsAluminum Industry Impacted by Higher Alumina Prices and Lower LME Prices
Aluminium
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Cash Flow Bridge – Q3 2018 to Q4 2018 Maintain Cash-Flow Trend and Good Cash Position
35
3Q18 to 4Q18 Cash-Flow Bridge (US$M) Free Cash-Flow (US$M)
-70
-35
0
35
4Q 2017 4Q 2018
18
-70
Operating & Investing Cash Flow(Excluding L6 CAPEX)
-120
0
120
240
360
CashBalance
3Q18
CFfrom
Operations
WCChanges
CAPEXSpent
Line 6Capex
LoanDrawdown
Paymentto
Shareholders
CashBalance
4Q18
156
168
358 2767 9
68
0
Q4 2018 ResultsAluminum Industry Impacted by Higher Alumina Prices and Lower LME Prices
36
Alba4World alba4world user/Alba4World photos/alba4world
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