q2 interim report 2016 - bolidenir.boliden.com/sites/default/files/report/q2_2016...q2 interim...
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Q2 Interim Report 2016
Lennart Evrell President & CEO
Håkan Gabrielsson CFO
High production by Mines
2016-07-19 Boliden Group Q2 2016
* PIR=Process Inventory Revaluation
• Revenues 9,596 (10,373) MSEK • EBIT ex PIR* 901 (1,257) MSEK
‒ EBIT 912 (1,090) MSEK • Free Cash Flow -4,794 (1,557)
MSEK, ‒ 1,148 MSEK excluding acquisition
• High production Mines with
variations • Maintenance shutdowns in
Smelters -210 MSEK • EBIT includes reclamation costs
and items affecting comparability • Market terms improved towards
end of quarter
2
0
800
1 600
2 400
3 200
4 000
4 800
5 600
6 400
7 200
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2
2012 2013 2014 2015 2016
R4Q,MSEK
MSEK
Quarterly EBIT excl PIR* Rolling 4Q EBIT Rolling Q EBIT excl PIR*
Special items
MSEK Wind-up of defined benefit pensions in Tara 248 Acquisition-related costs, Kevitsa -39 Items affecting comparability 209 Increased provisions for reclamation of closed mines -87 Total Mines 122
Maintenance, Smelters -210
Kevitsa impact in Q2 is mainly on the Balance Sheet
2016-07-19 Boliden Group Q2 2016 3
Market – demand improved, divergence in supply
Macro • Low global industrial production growth Base metals markets • Metals demand growth in China higher • Few re-starts of closed mines • Zn mine production down, concentrate
stocks down, spot TCs down • Copper mine production up, spot TCs turned
upwards in quiet market • Nickel metal market deficit but large stocks • Zn, Ni and precious metal prices up, Cu
unchanged from Q2
2016-07-19 Boliden Group Q2 2016 4
1 400
1 600
1 800
2 000
2 200
2 400
2 600
apr-15 jul-15 okt-15 jan-16 apr-16 jul-16
USD/t
Zinc price
2016-07-19 Boliden Group Q2 2016
Average price in Q2 vs. period
Q1-16 Q4-15 Q3-15 Q2-15
14% 19% 4% -12%
5
Q2 Q3 Q4 Q1
0
400
800
1 200
1 600
2 000
0
1 000
2 000
3 000
4 000
5 000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016LME inventory Shanghai inventory Price Price Q avg
Zinc price, USD/t KTonnes Q2
Note: Prices until 12 July 2016
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Copper price
2016-07-19 Boliden Group Q2 2016 6
0
400
800
1 200
1 600
2 000
2 400
0
2 000
4 000
6 000
8 000
10 000
12 000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
LME inventory COMEX inventory Shanghai inventory Price Price Q avg
Copper price, USD/t KTonnes
4 000
4 500
5 000
5 500
6 000
6 500
7 000
apr-15 jul-15 okt-15 jan-16 apr-16 jul-16
USD/t
Average price in Q2 vs. period
Q1-16 Q4-15 Q3-15 Q2-15
1% -3% -10% -22% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Note: Prices until 12 July 2016
Q2 Q3 Q4 Q1 Q2
Nickel price
2016-07-19 Boliden Group Q2 2016 7
Average price in Q2 vs. period
Q1-16 Q4-15 Q3-15 Q2-15
4% -7% -16% -32%
6 000
7 000
8 000
9 000
10 000
11 000
12 000
13 000
14 000
15 000
apr-15 jul-15 okt-15 jan-16 apr-16 jul-16
USD/t
0
100
200
300
400
500
600
0
10 000
20 000
30 000
40 000
50 000
60 000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016LME inventory Price Price Q avg
Nickel price, USD/t KTonnes
Note: Prices until 12 July 2016
Q2 Q3 Q4 Q1 Q2
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Gold price, USD/troy oz.
Gold, silver and lead prices
2016-07-19 Boliden Group Q2 2016
Lead Gold
Silver Average price in Q2 vs. period
Q1-16 Q4-15 Q3-15 Q2-15
Gold 7% 14% 12% 6%
Silver 13% 14% 13% 2%
Lead -1% 2% 0% -11%
8
0500
1 0001 5002 0002 5003 0003 5004 0004 5005 000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Lead price, USD/t
0
10
20
30
40
50
60
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Silver price, USD/troy oz.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Note: Prices until 12 July 2016
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Zinc and copper prices
2016-07-19 9 Boliden Group Q2 2016
Normal C1 – Zinc Normal C1 – Copper USD/ton USD/ton
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
Zn average price Zn max price Zn min price
50th perc 75th perc 90th perc
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
11 000
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
11 000
Cu average price Cu max price Cu min price
50th perc 75th perc 90th perc
Source: Wood Mackenzie June 2016, Thomson Reuters Datastream
0
20
40
60
80
100
120
140
Metal pr ice/ TC index (USD) Currency index
0
20
40
60
80
100
120
140
W eighted Index
Boliden market term index
2016-07-19 Boliden Group Q2 2016 10
Mines
2016-07-19 Boliden Group Q2 2016 11
Mines – high production with variations
2016-07-19 Boliden Group Q2 2016 12
0
1 200
2 400
3 600
4 800
0
400
800
1 200
2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2
2012 2013 2014 2015 2016
R4Q, MSEKMSEK
Quarterly EBIT Rolling 4Q EBIT
• EBIT 621 (657) MSEK ‒ 242 MSEK in Q1 2016
• Capex 572 (594) MSEK
• Kevitsa acquired June 1 • Metal prices higher than Q1, lower
than LY
• Pensions Tara 248 MSEK • Acquisition related costs -39 MSEK • Reclamation -87 MSEK
0
5
10
15
20
25
30
0
2
4
6
8
10
12
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2014 2015 2016
Metal content, kt
Milled ore, mt Copper
Milled ore Metal content Metal content pro forma**
0,0
0,5
1,0
1,5
2,0
2,5
3,0
0
400
800
1 200
1 600
2 000
2 400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2014 2015 2016
Metal content, kt
Milled ore, kt Nickel
Milled ore pro forma* Milled ore Metal content pro forma** Metal content
2016-07-19 Boliden Group Q2 2016 13
0
20
40
60
80
100
0,0
0,4
0,8
1,2
1,6
2,0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2014 2015 2016
Metal content, kt
Milled ore, mt Zinc
Milled ore Metal content
Mines – Production
• High production with variations
• Aitik – low crusher availability
• Garpenberg & Kylylahti – strong production
• Boliden Area – very high ore production
• Tara – stable production
• Kevitsa – as expected
(*) Milled ore incl Kevitsa (**) Metal content incl Kevitsa
Kevitsa
• Acquired June 1
• Integration started
• June ‒ EBITDA 40 MSEK ‒ EBIT -12 MSEK
• Acquisition related costs -39 MSEK
• Consideration 5,979 MSEK
• Bridge financing fees -39 MSEK
2016-07-19 Boliden Group Q2 2016 14
Smelters
2016-07-19 Boliden Group Q2 2016 15
2016-07-19 Boliden Group Q2 2016
* PIR=Process Inventory Revaluation
16
• EBIT ex PIR* 397 (604) MSEK ‒ 655 MSEK in Q1 2016
• Capex 384 (281) MSEK
• Maintenance shutdowns 210 (180) MSEK, plan 165 MSEK
• Lower TC, full impact Q2 • Higher metal prices than Q1
Smelters – good production considering shutdowns
-300
300
900
1 500
2 100
2 700
3 300
-100
100
300
500
700
900
1 100
2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2
2012 2013 2014 2015 2016
R4Q, MSEKMSEK
Quarterly EBIT excl PIR* Rolling 4Q EBIT Rolling 4Q EBIT excl PIR*
0
30
60
90
120
150
0
50
100
150
200
250
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2014 2015 2016
Metal production,
ktTotal feed,
ktZinc
Feed, total Metal production
0
15
30
45
60
75
90
105
120
0
50
100
150
200
250
300
350
400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2014 2015 2016
Metalproduction,
ktTotal feed,
ktCopper
Feed, total Metal production
Smelters – Production
• Maintenance shutdowns in Rönnskär and Harjavalta
• Maintenance shutdown in Kokkola
• High production in Odda
2016-07-19 Boliden Group Q2 2016 17
Financials
2016-07-19 Boliden Group Q2 2016 18
Q2 2016 – High production by Mines
2016-07-19 Boliden Group Q2 2016 19
MSEK Q2 2016 Q2 2015 Q1 2016
Revenues 9 596 10 373 8 849
EBITDA 1 940 1 970 1 788
EBIT 912 1 090 888
Process inventory revaluation (PIR) 11 -167 119
EBIT ex PIR 901 1 257 769
Investments 956 877 799
Acquisitions 5 979 - -
Free cash flow -4 794 1 557 210
Earnings per share, SEK 2,26 2,96 2,40
Net debt / equity ratio 43 28 21
Financial development
Q2 vs. Q1, High production by Mines, special items
2016-07-19 Boliden Group Q2 2016 20
Kevitsa -88 MSEK Reclamation -87 MSEK Maintenance Smelters
Higher metal prices and lower TC
MSEK Q1 2016 769
Specification of deviation Volumes 301
Prices and Terms (incl. hedges) 80
Whereof currency effects -27
Costs -327
Depreciation -128
Items affecting comparability 209
Other -3
Deviation 133
Q2 2016 901
Higher production Mines Kevitsa 135 MSEK Maintenance shutdowns Smelters
EBIT excl. PIR Q2 vs. Q1
Kevitsa -52 MSEK
Pensions Tara 248 MSEK Acquisition costs -39 MSEK
Q2 vs. Q2, Lower metal prices than last year
2016-07-19 Boliden Group Q2 2016 21
Lower metal prices and TC
MSEK Q2 2015 1,257
Specification of deviation Volumes 418
Prices and Terms (incl. hedges) -586
Whereof currency effects 4
Costs -228
Depreciation -150
Items affecting comparability 209
Other -19
Deviation -355
Q2 2016 901
Higher production Mines Kevitsa 135 MSEK
EBIT excl. PIR Q2 2016 vs. Q2 2015
Kevitsa -88 MSEK Reclamation -87 MSEK
Kevitsa -52 MSEK
Pensions Tara 248 MSEK Acquisition costs -39 MSEK
0
8
16
24
32
40
48
0
2 000
4 000
6 000
8 000
10 000
12 000
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2012 2013 2014 2015 2016
%MSEK Net debt Gearing
Balance sheet
2016-07-19 22 Boliden Group Q2 2016
SEK bn (Unless otherwise stated)
30 Jun 2016
31 Mar 2016
Total Assets 50.4 43.7
Capital employed 40.6 35.6
Shareholders' equity 26.2 26.5
Net debt 11.2 5.6
Gearing, % 43 21
Loan duration, years 3.6 2.2
Average interest rate, % 1.2 1.3
Interest duration, years 0.4 0.3
Net payment capacity 5.1 6.8
Cash flow
2016-07-19 Boliden Group Q2 2016 23
MSEK Q2 2016 Q2 2015 Q1 2016
EBITDA excluding PIR 1 929 2 138 1 669
Changes in working capital 837 396 -449
Inventories 368 678 -284
Payables 701 -165 -8
Receivables -233 -119 -155
Other 0 3 -2
Cash flow from investments -944 -875 -799
Cash flow from acquisitions -5 943 - -
Financial items* -95 -62 -51
Tax paid -308 -81 -153
Other -269 41 -7
Free cash flow -4 794 1 557 210 Free cash flow excl. Kevitsa acquisition 1 148 1 557 210
Free cash flow
* Q2 2016 includes -39 MSEK cost for Kevitsa bridge financing
Update external process inventories
2016-07-19 24 Boliden Group Q2 2016
• Kevitsa acquisition reduces external copper
• Revised zinc valuation
• No nickel process inventory, faster process
External Process Inventory New Former Copper, tonnes 28 000 28 500
Zinc, tonnes 13 000 15 000
Lead, tonnes 0 0
Gold, kg 2 200 2 200
Silver, kg 60 000 60 000
Palladium, kg 500 500
Going forward
• Well positioned in the metal market
• Metal prices - good momentum and low macro visibility
• Mines ‒ Aitik: volatile production, Cu 0.21% (2016)
‒ Garpenberg: Zn 4.5%, Ag 120 g/ton (until FY 2017)
‒ Boliden Area: maintenance in Renström (Q3 2016), Maurliden ore replacing
‒ Kevitsa acquired 1 June 2016
• Smelters ‒ Maintenance: -50 MSEK (Q3 2016)
‒ Odda P200: test runs Q3, ramp-up starting Q4
• Capex ‒ 2016: slightly above 4 BSEK
‒ 2017: 5 BSEK
2016-07-19 Boliden Group Q2 2016 25
Disclaimer
• This presentation has been prepared by Boliden for information purposes only and as per the indicated date. Boliden does not undertake any obligation to correct or update the information or any statements made therein. Certain statements in this presentation are forward-looking and are subject to risks and uncertainties.
• Nothing contained herein shall constitute any representation or warranty as to accuracy or completeness. Boliden has not made any independent verification of the information obtained from third parties.
• Nothing in this material shall be construed as an offer or solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction.
• Boliden does not accept any liability whatsoever arising from or in connection with the use of this information.
• Save as by prior approval in writing, this material may not be copied, transmitted or disclosed, whether in print, electronic or any other format. All rights to the material are reserved.
2016-07-19 Boliden Group Q2 2016 26
2016-07-19 27 Boliden
Appendix
2016-07-19 Boliden Group Q2 2016 28
Market balance
2016-07-19 Boliden Group Q2 2016
Source: CRU June, July 2016, Boliden calculations
29
Zinc – global market Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Metals demand, kt 3324 3324 3321 3357 3329 3344 3320 3415 Year on year change 1% 0% -1% -1% 0% 1% 0% 2% Smelter production, kt 3360 3531 3367 3515 3416 3469 3265 3360 Year on year change 4% 6% 7% 7% 2% -2% -3% -4% Mine production, kt 3 197 3 346 2 881 3 329 3 252 3 026 2 631 2 895 Year on year change 1% 9% 4% 4% 2% -10% -9% -13% Metal balance, kt 36 207 46 158 87 125 -55 -55 Concentrate balance, kt 70 9 -267 47 90 -130 -349 -236 Copper – global market Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Metals demand, kt 5460 5526 5015 5499 5524 5697 5076 5547 Year on year change 4% 3% 0% 1% 1% 3% 1% 1% Smelter production, kt 5536 5586 5386 5514 5521 5662 5564 5679 Year on year change 7% 7% 4% 3% 0% 1% 3% 3% Mine production, kt 3650 3696 3597 3828 3806 3960 3876 3930 Year on year change -1% -3% 1% 6% 4% 7% 8% 3% Metal balance, kt 75 60 372 15 -3 -34 488 132 Concentrate balance, kt -110 -85 -147 47 -75 -44 -98 -79
Economic development
2016-07-19
Industrial production, year on year %
Boliden Group Q2 2016
Source: Thomson Reuters Datastream, Boliden calculations for world data
30
-6
-4
-2
0
2
4
6
8
10
12
14
J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D
2012 2013 2014 2015 2016
EU28 USA China World
-15
-10
-5
0
5
10
15
20
25
30
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
2012 2013 2014 2015 2016
EU USA China
Construction – largest segment for Cu and Zn
2016-07-19
Activity, year on year %
Source: Reuters Datastream
Boliden Group Q2 2016
China: year on year based on cumulative investments at each point
31
2016-07-19
Source: LMC Automotive
Boliden Group Q2 2016
Automotive
32
Production of light vehicles, year on year, quarterly data
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012 2013 2014 2015 2016
Europe USA China World
China – metals demand and economic growth
Source: CRU Ltd, Thomson Reuters Datastream
2016-07-19 Boliden Group Q2 2016 33
Year on year growth %
-2
0
2
4
6
8
10
12
14
16
18
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012 2013 2014 2015 2016
Zinc demand Copper demand GDP Industrial production
Zinc TC and premiums
• Concentrate market tighter • Spot TCs in China down • Higher Zn price, realized contract TC up
• Stable premias
2016-07-19 Boliden Group Q2 2016
Source: CRU June, July 2016
34
0
50
100
150
200
250
300
2012 2013 2014 2015 2016
US$/t concentrate Treatment charges
Realized TC - European contract
Spot TC, China imports
0
50
100
150
200
250
2012 2013 2014 2015 2016
US$/t metal Metal premia
Delivered Premia US Midwest Ex-Works Premia EuropePremia Far East - Western
Copper TC and premiums
• Mine production ramp-up • Spot TCs higher
• Spot premia stable
2016-07-19 Boliden Group Q2 2016
Source: CRU June, July 2016
35
Contract benchmark according to market sources including CRU Contract benchmark according to market sources including CRU
0
20
40
60
80
100
120
140
2012 2013 2014 2015 2016
US$/t concentrate Treatment charges
Contract TC - annual and mid-year benchmark
Standard grade spot TC
0
20
40
60
80
100
120
140
160
2012 2013 2014 2015 2016
US$/t metal Metal premia
CIF Average European spot premia
CIF European benchmark premia
2016-07-19 36 Boliden