Imerys reports resilient profitability and strong cash generation in first half 2023
- First half revenue at €1,982 million1, down 5.6% like-for-like2 vs. last year, impacted by continued customer destocking, macro-economic weakness in most end-markets and high comparatives
- Resilient current EBITDA2 margin at 16.7%, as a result in particular of cost discipline and positive price-cost balance
- Strong cash generation with net current free operating cash flow at €135 million before strategic capital expenditures versus €48 million in first half 2022, benefitting from working capital actions
- Significant progress on lithium roadmap with the joint venture with British Lithium. Further advance in decarbonation agenda with new greenhouse emission reduction objectives
In the first half of 2023, Imerys delivered a solid performance with a current EBITDA margin close to 17% and a strong cash generation. This performance was achieved thanks to the excellent cost management work of our teams, which effectively mitigated the impact of tough market conditions and continued customer destocking. As we enter the second half of the year with limited visibility into our end-markets, we expect to benefit from additional savings and lower input costs such as energy and transportation. Building on this solid basis, the Group will continue to seize long-term growth opportunities by investing in mineral solutions for green energy, sustainable construction and consumer goods.
First half 2023 highlights
Imerys and British Lithium announce a strategic partnership to accelerate development of UK’s largest lithium deposit
On June 29, 2023, Imerys and British Lithium formed a joint venture with the objective of creating the United Kingdom’s first integrated producer of battery-grade lithium carbonate. Imerys contributes its lithium mineral resources, land and infrastructure for an 80% stake in the joint venture, whilst British Lithium brings its bespoke lithium processing technology, its technical team and its lithium pilot plant for the remaining 20%. As part of the agreement, Imerys will provide a large lithium deposit: 161 million tonnes of inferred resources at 0.54% lithium oxide content, indicating a life of mine exceeding 30 years. Drilling programme and pre feasibility study (PFS) are in progress. Cornwall would become the leading lithium hub in the UK, with target annual production of 20,000 tonnes of lithium carbonate equivalent, enough to equip 500,000 electric cars per year, by the end of the decade. The mine will adhere to the highest social and environmental standards and follow the Initiative for Responsible Mining Assurance (IRMA) Standard – the most demanding global benchmark for responsible mining.
This joint venture will reduce the UK’s and Europe’s dependence on critical raw materials imports, thus contributing to the achievement of the European and British climate change targets and the creation of the first fully integrated regional electrical vehicle value chain. The combination of this and the EMILI project in France would make Imerys the largest integrated lithium producer in Europe, representing more than 20% of the announced European lithium output by 2030.
Successful laboratory production of lithium for EMILI in France
The scoping study for the EMILI project in France has been completed, confirming its economic viability. The pre-feasibility study is currently in progress along with the permitting process for the construction of the pilot plant. Imerys has applied to the CNDP (Commission Nationale du Débat Public) to hold a public consultation before summer 2024.
Imerys managed to produce at laboratory scale the first battery-grade lithium hydroxide from the Beauvoir granite. Imerys' technology and process are validated by these encouraging results, which pave the way for the next steps in this key project.
Capacity expansion and new energy recovery plant to turn syngas into electricity at Willebroek, Belgium
As per plan, Willebroek third production line of carbon black for mobile energy was commissioned in the first semester. The construction of a fourth line is well underway at the same location.
Imerys signed a multi-year contract with E.On, one of Europe's largest operators of energy networks and energy infrastructure, in May 2023 to valorize waste syngas and generate electricity in Willebroek, Belgium. The majority of the energy produced will be supplied to the local grid to satisfy the yearly consumption of approximately 40,000 households. The installation of this energy recovery plant will represent a major milestone in Imerys roadmap to reduce its GHG emissions by 42% by 2030, and to enable a more sustainable carbon black production.
Long-term partnership with TotalEnergies for renewable power
Imerys has partnered with TotalEnergies to bring renewable energy to one of its major US production sites, in Lompoc, California. As part of a long-term energy service contract, TotalEnergies will install and operate solar panels and energy storage systems for Imerys under a 25-year power purchase and storage service agreement. The solar-plus-storage system is expected to meet 50% of the Lompoc industrial site's current electrical energy needs and reduce CO2 emissions by 7,000 metric tons annually.
New GHG emission reduction targets approved by the SBTi
In line with the commitments of the Paris Agreement, Imerys has set transparent objectives and concrete actions to significantly reduce the carbon emissions of its operations and within its value chain and develop low carbon products for its customers.
The Group disclosed new emission targets in absolute value, with a reduction of 42% of scope 1 and Scope 2, and 25% of scope 33 by 2030 with 2021 as a base year. These new targets have been approved by the SBTi.
The macroeconomic environment remains challenging in all main regions. The recovery in China is proceeding slowly and the weakness in the construction market continues to weigh on the industry. With limited visibility into customer demand, still impacted by ongoing destocking, the Group will focus on cost reduction measures and cash generation. Pricing is likely to remain stable at present levels. Based on current trading, current EBITDA is expected to be in the range of €630 to 650 million for the full year 2023 at current perimeter.
The Group remains confident that it should achieve its medium term objectives announced during its Capital Markets Day in November 2022 as a result of the Group's global geographic footprint and diversified market exposure, as well as ongoing strategic capital expenditures.
Revenue was €985 million, down -10.0% year-on-year at constant scope and exchange rates in the second quarter of 2023. Group sales volumes were down 13.7%, reflecting the destocking impact, especially in Europe and weaker construction and industrial markets.
In the second quarter, Imerys’ price effect was positive thanks to the carry-over effect of price increases implemented last year.
In the first semester, revenue included a negative currency effect of €13 million (-0.6%), primarily as a result of the depreciation of the U.S. dollar against the euro. Recent divestitures had a negative scope effect of €28 million.
In spite of volume shortfalls, current EBITDA5 was resilient in the second quarter of 2023. The price effect compensated for the increase in variable and fixed costs (+€22 million), and current EBITDA generation was supported by the dividend contribution of joint ventures and associates.
Current operating income reached €113 million for the second quarter of 2023, a 16.9% decrease compared with last year.
Current net income from continuing operations
In the second quarter, current net income from continuing operations amounted to €72 million, down 20.6% vs. last year.
In the first semester, net financial result was negative at €-26 million, current net income from continuing operations reached €139 million, down 7.1% vs.last year, i.e. €1.64 per share.
The net income in the second quarter includes €5 million of net income from discontinued activities, and €36 million of net operating expenses related to disposal and reorganization activities.
In the first half of 2023, net income from continuing operations, Group share reached €101 million, and net income, Group share, totaled €145 million.
Net current free operating cash flow
The strong net current free operating cash flow in the first half of 2023 reflects several actions implemented to improve operating working capital. The Group pursued its strategic capital expenditures efforts.
As of June 30, 2023, net financial debt totaled €1,198 million, which corresponds to a net financial debt to current EBITDA ratio of 1.7 x, significantly lower than at December 31, 2022, thanks to the disposal of HTS at the end of January.
The Group's financial strength is demonstrated by the "investment grade" ratings confirmed by Standard and Poor's (November 29, 2022, BBB-, stable outlook) and Moody's (March 13, 2023, Baa3, stable outlook).
Commentary by business activity
Performance Minerals (67% of consolidated revenue)
Revenue generated by the Performance Minerals segment was down 8.7% like-for-like in the second quarter of 2023. On a reported basis, revenue was down 11.2% and includes a negative currency effect of €-12 million (-1.6%).
Revenue in the Americas was down 11.0% at constant scope and exchange rates in the second quarter of 2023. In the second quarter of 2023, the decline in the paper market and construction industry accelerated. Prices, however, have been largely maintained.
Revenue in Europe, Middle East and Africa decreased by 11.0% at constant scope and exchange rates in the second quarter of 2023. Automotive followed a positive trend, while ceramics and paper were still impacted by destocking and mill downtimes.
Revenue in Asia-Pacific was down 6.0% at constant scope and exchange rates in the second quarter of the year. Volumes were impacted by a slow recovery in China and the downturn in the construction sector, both locally and for export markets, and by the decline in the paper sector.
High Temperature Materials & Solutions (33% of consolidated revenue)
Revenue in the Refractory, Abrasives & Construction business area was down 13.6% at constant scope and exchange rates in the second quarter of 2023. The sharp drop was largely due to Europe and a consequence of customer destocking, weak industrial activity and increased competition from Asia for energy-intensive businesses. The Indian market performed well and above expectations. The lower level of profitability for the segment relates to lower volumes.
1According to IFRS 5, HTS is accounted for as a discontinued operation and reported under ‘Net income from discontinued activities’ in 2022 and 2023 (its revenue, expenses and pre-tax profits are not presented in the consolidated income statement).
2The definition of alternative performance measures can be found in the glossary at the end of the press release.
3Scope 3 emissions covered by this target include: purchased goods and services, capital goods, fuel and energy related activities, upstream and downstream transportation and distribution, waste generated in operations, business travel, employee commuting, and investments.
4including 12 months of the current EBITDA of the assets serving the paper markets expected to be disposed of by the end of the year.
5The definition of alternative performance measures can be found in the glossary at the end of the press release.
First semester 2023 results webcast
The press release is available on the Group’s website www.imerys.com. The Group will hold a live webcast to discuss the first semester 2023 results at 18.30 am (CET) on July 27, 2023, which can be accessed on the Group’s website www.imerys.com.
October 30, 2023: 3rd quarter 2023 results
These dates are subject to change and may be updated on the Group’s website https://www.Imerys.com/finance.
The world’s leading supplier of mineral-based specialty solutions for industry with €4.3 billion in revenue and 14,000 employees in 2022. Imerys delivers high value-added, functional solutions to a great number of sectors, from processing industries to consumer goods. The Group draws on its understanding of applications, technological knowledge and expertise in material science to deliver solutions by beneficiating its mineral resources, synthetic minerals and formulations. Imerys’ solutions contribute essential properties to customers’ products and their performance, including heat resistance, hardness, conductivity, opacity, durability, purity, lightness, filtration, absorption and water repellency. Imerys is determined to develop responsibly, in particular by fostering the emergence of environmentally-friendly products and processes.
More comprehensive information about Imerys may be obtained from its website (www.imerys.com) in the Regulated Information section, particularly in its Registration Document filed with the French financial markets authority (Autorité des marchés financiers, AMF) on March 22, 2023 under number D.23-0127 (also available from the AMF website, www.amf-france.org). Imerys draws investors’ attention to chapter 2 “Risk Factors and Internal Control” of its Registration Document.
Disclaimer: This document contains projections and other forward-looking statements. Investors should be aware that such projections and forward-looking statements are subject to various risks and uncertainties (many of which are difficult to predict and generally beyond the control of Imerys) that could cause actual results and developments to differ materially from those expressed or implied.
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