47
ALLOYS, ORES & PEOPLE. ERAMET presentation October 2013 Strictly private and confidential
ALLOYS, ORES & PEOPLE.
ERAMET presentation
October 2013
Strictly private and confidential
Disclaimer
This document and the materials appended to it (together, the “materials”) may include certain forward-looking statements, beliefs or opinions, including statements with respect to ERAMET’s business, financial condition and results of operations. These statements reflect ERAMET’s beliefs and expectations and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. No representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved.
Forward-looking statements speak only as at the date of the relevant materials and ERAMET and their advisers expressly disclaim any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in the materials. No statement in the materials is intended to be a profit forecast. As a result, you are cautioned not to place any undue reliance on such forward-looking statements.
Nothing in these materials constitutes any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for sale, any securities in the United States or any other jurisdiction where it is or may be unlawful to do so. Eramet has not and does not intend to register any securities under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or under the applicable laws of any other jurisdiction and no such securities may be offered or sold within the United States or to, or for the account or benefit of, U.S. Persons, each as defined in Regulation S under the Securities Act, except in transactions exempt from such registration.
2
3
Table of contents
ERAMET at a glance
Solid business fundamentals
End-markets displaying attractive growth prospects
Sound financial profile
Focused strategy and profitable growth prospects
Conclusion
1
2
3
4
5
6
4
ERAMET AT A GLANCE 1
5
A diversified mining and metallurgical Group with world leading positions
Sales breakdown by division (2012)
ERAMET Manganese
45%
ERAMET Alloys
29%
ERAMET Nickel
26%
Note
1 Fonds Stratégique d’Investissements (French sovereign fund)
French mining and metallurgical group active through 3 business divisions
• ERAMET Manganese:
• #2 high-grade manganese ore worldwide
• #1 refined manganese alloys producer worldwide
• ERAMET Nickel:
• #2 ferronickel producer worldwide
• ERAMET Alloys:
• #2 closed-die forging parts producer worldwide
Key financials (2012)
• Sales: c. €3.5bn
• EBITDA: €407m (12% margin)
• Limited gross debt and positive net cash position
Listed on Euronext Paris, with a market capitalization of c.€2bn as of October, 2013
• Controlled by long-term shareholders, the Duval family (37%) and the FSI1(26%), with strong anchorage in the French public sector
6
SOLID BUSINESS FUNDAMENTALS 2
Positioning
Mn
#2 high-grade manganese ore worldwide
#1 refined manganese alloys producer worldwide
#1 manganese chemical derivatives producer worldwide
Integrated manganese producer
• Operation of a manganese mine in Gabon (COMILOG)
• 90% of manganese ore production, transformed into manganese alloys within the Group (plants in Norway, China and France) or by third parties
• 10% remaining ore production used in a large range of chemical applications
Integrated producer of titanium dioxyde (TiZir JV)
ERAMET Manganese at a glance 2012 sales: €1.6bn (45% of Group sales)
7
Activity overview Main applications
Main competitors
> 90% worldwide manganese production used in carbon steel
• Non substitutable element in carbon steel
• Contributes to improve hardness, abrasion resistance, elasticity…
• Key component in a large range of industries, mainly construction (> 50% worldwide consumption) and automotive
Main manganese chemical applications:
• Disposable alkaline batteries
• Fertilizers and animal feed
• Pigments
Main clients
ERAMET Nickel at a glance 2012 sales: €0.9bn (26% of Group sales)
8
Ni
Positioning
#2 ferronickel producer worldwide
One of the three worldwide
producers of high purity nickel
Integrated ferronickel producer
• Operation of nickel mines in New Caledonia (SLN)
• ~80% of nickel ore production transformed into ferronickel in New Caledonia and sold directly to stainless steel producers
• ~20% of nickel ore production transformed into nickel matte in New Caledonia, and then into high purity nickel and nickel salts in the Group’s plant in France
Activity overview Main applications
Main competitors
~ 65% worldwide nickel production used in stainless steel
• Essential alloying element providing resistance to atmospheric corrosion, resistance to high temperatures…
• Alloy displaying excellent hygienic properties
Extensive use of stainless steel in a wide range of industries
• Household equipment, domestic appliances, food industry and pharmaceutical production tools, surgical equipment…
Other main applications of nickel: aerospace, nuclear and petrochemical industries
Main clients
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ERAMET Alloys at a glance 2012 sales: €1.0bn (29% of Group sales)
9
Al
Positioning
#2 closed-die forging parts producer
worldwide
Leading player in powder
metallurgy
Producer of highly technological advanced steel products
• Conversion of special steel and superalloys into closed-died forging parts (Aubert & Duval)
• Hot-forming metal with a press or a ram, using tooling specially-produced for the manufacture of each part
• Producer of aluminum and titanium forged parts for aircraft structures
• Producer of special steels, tool steels, high-speed steels and superalloys (Erasteel)
Activity overview Main applications
Main competitors Main clients
Use of advanced steels in a wide range of industries given high technological specificities
• High mechanical strength at high temperatures for the aerospace industry (engine parts and parts of landing gears)
• Power generation: gas turbines, nuclear power
A history spanning over more than 100 years, with continuous diversification into new mining and metallurgical activities
10
2010 1995-97 1989-91 1880
Diversification into manganese, with the acquisition of 61% of COMILOG in Gabon
Shar
eh
old
ing
stru
ctu
re
1974 1985 1994 2006 2011 2012 1999 1983
Incorporation of Le Nickel (operations of nickel mines in New Caledonia)
Le Nickel becomes SLN, with Elf Aquitaine (French State) holding 50% of the company
Acquisition by ERAP (French State) of 70% of SLN
Set up of ERAMET-SLN
Acquisition of Erasteel (high speed steel producer)
Acquisition of 51% of Eurotungstène (cobalt and tungstene powder producer)
Diversification into closed-died forging and special steels, following contribution by the Duval family of Aubert & Duval (now ERAMET Alloys) to ERAMET
The Duval family becomes shareholder of ERAMET, through the
contribution of Aubert & Duval
Transfer of ERAP stake to Cogema, subsequently absorbed into AREVA
Transfer of AREVA 26% stake to FSI
€3.5bn
Set-up of TiZir in Senegal (ilmenite
and zircon project)
Agreement with the Gabonese Republic for a phased increase of its shareholding in COMILOG (up to 35%)
Acquisition of Weda Bay Nickel (nickel project) in Indonesia
€3.1bn
€382m
€1.2bn
Div
ers
ific
atio
n o
f ac
tivi
tie
s
ERAMET Group sales
Listing of ERAMET
Acquisition of a 59% stake in Tinfos (manganese alloys, titanium dioxyde)
2008
11
Support from long-term shareholders, with a strong anchorage in the French public sector
Shareholding as of December 31st, 20121 Stable and long-term shareholder base
Notes
1 Based on share capital
2 STCPI (Société Territoriale Calédonienne de Participation Industrielle): New Caledonian
provinces owned entity
3 BRGM (Bureau de Recherches Géologiques et Minières): French public entity
Strong support from the Duval family, ERAMET’s family shareholder since 1999, and the French State, ERAMET’s shareholder for 40 years
Group jointly controlled by a family and the French State
• French State: shareholder for 40 years (currently through FSI, the French sovereign investment vehicle)
• Duval family: shareholder since 1999
Stability supported by the shareholders agreement signed between the two main shareholders in 1999 and still ongoing
Controlling shareholders with a long-term investment approach in ERAMET, aligned with the Group’s strategy
Duval family37.1%
FSI (French State)25.7%
Treasury shares1.0%
Carlo Tassara12.8%
STCPI4.0%
BRGM1.3%
Other18.1%
3
2
A worldwide and diversified geographic presence with an expanding footprint in emerging countries
12
Sales breakdown by geography (2012)
Manganese chemicals and recycling
SLN-Nickel mines and ferronickel
plant (New Caledonia)
Weda Bay nickel project
(Indonesia) – (under study)
Manganese alloys plant (China)
Alloys powder and transformation plants
Manganese alloys and titanium dioxyde
TiZir (Senegal) – ilmenite and zircon mine (under construction)
ERAMET Nickel ERAMET Manganese ERAMET Alloys ERAMET presence
Manganese mine project (under study)
High purity nickel and alloys melting and transformation plants
Manganese mine Manganese alloys and metal plants (under construction) Maboumine project - niobium and rare earths (under study)
Europe46%
North America
20%
Asia29%
Rest of the World
5%
World-class deposits (high grade/long life) in critical metals for China
Manganese imports in Chinese consumption
Manganese:
Nickel:
Zircon and Ilmenite:
Nickel imports in Chinese consumption
3 world-class deposits under operation
3 world-class deposits under study (no investment decision taken yet)
Nickel:
Manganese:
Niobium and rare earths:
World-class deposits in metals that are scarce in China
Gabon - COMILOG
New Caledonia - SLN
Senegal - TiZir (under construction)
40+ year resources1
30+ year resources1
20+ year resources1
Indonesia - Weda Bay project (under study)
South Africa - mine project (under study)
Gabon - Maboumine project (under study)
75 year resources1
Imports87%
Local production
13%
Imports72%
Local production
28%
13
Zircon imports in Chinese consumption
Imports90%
Local production
10%
Source Custom statistics Note
1 Resources correspond to certain reserves based on their geologic certainty and economic value. Resources of ERAMET mining deposits are detailed in ERAMET annual report (section 2.8.2)
ERAMET Manganese mine in Gabon: one of the most competitive manganese mines worldwide
14
Note
1 FOB cash cost
ERAMET COMILOG
Competitive position: • High grade ore • Open pit • Integrated logistics
(railway, mineral port)
Nsuta
Groote Eylandt Moanda Azul Nchwaning / Gloria
MOIL Mines
Woodie Woodie
Bootu Creek
Cumulative production (Kt Mn content)
Hotazel
400
350
300
250
200
150
100
50
0
0
36
5
73
0
1,0
95
1,4
60
1,8
26
2,1
91
2,5
56
2,9
21
3,2
87
3,6
52
4,0
17
4,3
82
4,7
48
5,1
13
5,4
78
5,8
43
6,2
09
6,5
74
6,9
39
7,3
04
7,6
70
8,0
35
8,4
00
8,7
65
9,1
31
9,4
96
Main manganese producers: cash costs1 and production (2011)
($ cents /dmtu)
450
Swing producers
Source Roskill
Mn
(2)
0
2
4
6
8
10
12
14
16
(4)
ERAMET Nickel: competitiveness supported by unique nickel ore bodies and continuous improvement plans at SLN
15
Integrated nickel producers: cash cost and production (2013e)
SLN 2019
Source Brook Hunt Wood MacKenzie (Q3 2013) Note
1 At 2013 economic conditions, and assuming full capacity of the new power plant
($ /lb)
Cumulative production (KT nickel content) (Band width reflecting production capacity)
Ni
SLN 2013e
New productivity plan and replacement of power plant: 2.0$/lb cash cost
reduction from 2019 onwards1
A business model relying on long-term partnerships with local public stakeholders
16
Stability of ERAMET business model comforted by the presence of public stakeholders in the share capital of subsidiaries…
…combined with appropriate corporate governance
• Group cash centralized and cash management at holding level
Long-term relationship strengthened by the significant contribution of ERAMET to local economies
• Major employer in Gabon and New Caledonia
• Strong focus on social and environmental issues
COMILOG
Others Republic of Gabon
COMILOG
ERAMET
7% 29%
64%
SLN
Nisshin Steel
STCPI1
SLN
ERAMET
10% 34%
56%
TiZir
Rep. of Senegal
Mineral Deposits
TiZir
ERAMET
10%
50% 50%
Weda Bay project
Antam2
Strand Minerals
ERAMET
10% 30%
67%
Weda Bay
Mitsubishi Corporation
Pamco
3%
90% Eramet
Titanium & Iron Grande Côte3
90% 100%
ERAMET’s partnerships with local stakeholders
4%
Notes
1 STCPI (Société Territoriale Calédonienne de Participation Industrielle): New Caledonian provinces owned entity
2 Antam: listed entity controlled by the Republic of Indonesia
3 Under construction
17
Solid business fundamentals
World leadership positions in critical and niche applications
A history spanning over more than 100 years, with continuous diversification into new mining and metallurgical activities
Worldwide and diversified geographic presence with an expanding footprint in emerging countries
World-class deposits (high grade/long life) in critical metals
Competitive asset base with further improvement potential thanks to continuous implementation of optimization programs
A business model relying on long-term partnerships with local stakeholders
Support from long-term and powerful shareholders, with a strong anchorage in the French public sector
18
END-MARKETS DISPLAYING ATTRACTIVE GROWTH PROSPECTS
3
Carbon steel 33%
Stainless and alloy steels 22%
Other 4%
Aerospace 14%
Tooling 8%
Energy 4%
Other 3%
Other 3% Pigments
2%
Batteries 3%
Specialty chemicals
4%
Diversified and attractive end-markets
19
Steel: 55%
ERAMET sales breakdown by end-market (2012)
Aeronautics and Aerospace:
14%
Diversified end-markets displaying long-term growth outlooks
20
ERAMET Manganese
ERAMET Nickel
Carbon steel demand driven by development of urbanization / construction and industrialization
Stainless steel demand, driven by evolution of consumption trends and industrialization (e.g. white goods)
ERAMET Alloys Aeronautics, driven by world air traffic and aircraft deliveries
Activity Main end-market Geography World
demand outlook
Demand mainly driven by China and emerging economies
Demand driven by emerging economies, mainly China and India
Fleet renewal in OECD countries to achieve fuel savings Fleet acquisitions in emerging countries
2003-12 CAGR
+5.3% (Carbon steel
production)
+5.1% (Stainless
steel
production)
+8.9% (Aircraft
deliveries)
Manganese demand driver: steady growth of world carbon steel production
21
CAGR 12-18e
World production of carbon steel Manganese production and demand
Carbon steel accounts for approximately 70% of ERAMET Manganese revenue Steady growth of carbon steel production, primarily driven by China, combined with limited new manganese mines entering into production, will support manganese demand and prices
(MT manganese) (MT)
Source Macquarie Research Source Macquarie Research
Mn
0
2
4
6
8
10
12
14
16
18
20
2008 2009 2010 2011 2012 2013e2014e2015e2016e2017e2018e
Manganese production Demand
831657
793 835 833869 894 917 940
959 980
500
574
640695 715
750773 797
814 8348521,331
1,231
1,433
1,530 1,5481,619
1,6671,714
1,7541,793
1,832
2008 2009 2010 2011 2012 2013e 2014e 2015e 2016e 2017e 2018e
World excl. China China
2.8%
3.0%
2.7%
In Q4 2008, drop of worldwide carbon steel production causing a strong drop in demand and manganese prices. After a period of massive destocking, carbon steel production resumed again at the end of the 1st semester of 2009
Manganese prices will remain attractive, driven by growth of world carbon steel demand and balanced offer-demand manganese market
22
Manganese ore price
($ / dmtu)
Acceleration of the worldwide carbon steel
production growth between 2000 and 2007 leading to a
sharp manganese price increase that started in
2004 and reached a peak in 2008
Market recovery boosted by emerging markets demand
Stabilization at an equilibrium price higher than the historical price
Manganese long-term prices (CIF, real): CVA: 6.0$/dmtu
Macquarie: 5.0$/dmtu
Mn
0
2
4
6
8
10
12
14
16
18
20
Dec-02 Jun-04 Dec-05 Jun-07 Dec-08 Jun-10 Dec-11 Jun-13
FOB Australia CIF China
Source CRU
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2008 2009 2010 2011 2012 2013e2014e2015e2016e2017e2018e
Nickel production Demand
23
Nickel demand driver: production of stainless steel
Stainless steel accounts for about 70% of ERAMET Nickel revenue Despite very solid growth of stainless steel production, nickel prices negatively
impacted by excess of capacity in the short-term
World production of stainless steel
(MT) CAGR 5.6% 2012-2018 production growth (+13.6 MT) is driven by China (54% of production growth). In 2018, China will represent 43% of world production
Nickel production and demand
Source Macquarie Research Source Macquarie Research
(MT nickel)
Short-term oversupply
Ni
19.616.6
19.8 20.721.7 22.9
24.2 25.526.2 27.3 28.0
7.09.5
12.413.0
13.915.1
16.217.3
18.520.0
21.2
26.6 26.1
32.233.7
35.6
38.1
40.4
42.844.7
47.249.2
2008 2009 2010 2011 2012 2013e 2014e 2015e 2016e 2017e 2018e
World excl. China China
2
4
6
8
10
12
14
16
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e
Nickel prices expected to recover in the mid-term, with market cycle to hit a high point around 2020
Over-capacity Under-capacity
Progressive absorption of new capacities
• New offers linked to first wave of projects
• « Spineless » prices: investment decisions are delayed
• High point in the cycle
• Acceleration of projects pipeline
Under-capacity
• Supply deficit
• Incentive price for new capacities
24
Long-term prices (real) Brook Hunt: c.10 $/lb Macquarie: c.11 $/lb
Nickel price ($/lb, nominal)
Current nickel price ~6-7 $/lb
Nickel market cycles and associated price trends
Source Macquarie and Brook Hunt Wood Mackenzie long-
term prices forecasts, ERAMET analysis
• Second wave of projects with new hydro-metallurgy and pyro-metallurgy operations
Ni
Key nickel price drivers • Depletion of existing mines and
significant costs of new project development
• Increasing production costs • New mining laws restricting export of
ore • Urbanization and industrialization in
emerging countries (China)
2016 prices (real) Macquarie: 9.1 $/lb
↗
↗
↗
↗
802852
684
553605
668
832894 858
979 9721,011
1,189
1,3051,400
1,4291,4561,493 1,493
2000 2002 2004 2006 2008 2010 2012 2014e 2016e 2018e
0
2
4
6
8
10
12
14
1970 1980 1990 2000 2010 2020 2030
ERAMET Alloys key end-market, aeronautics, displays steady growth outlook in the short and long run
25
Demand in new aircraft driven by • World traffic growth (4.7% p.a. over 2011-2031e) • Aircraft deliveries growth (5.7% p.a. over 2011-2018e) • Strong demand from emerging countries • Fleet renewal / reengineering to achieve fuel savings
ERAMET Alloys division is involved in both Airbus and Boeing new programs
Worldwide air traffic (trillions passengers / year)
Source IATA
Aircraft deliveries Number of commercial aircraft (Airbus and Boeing)
Air traffic will double in the next 15 years
Aeronautics accounts for over 50% of ERAMET Alloys revenue, with an increasing contribution to the division’s activities expected in the coming years
Source Airbus and Boeing
Oil Crisis
Gulf crisis
Financial crisis
Asian crisis
WTC attacks
Limited impact of crisis on air traffic, huge growth prospect
Al
26
SOUND FINANCIAL PROFILE 4
27
Resilient historical financial performance
Group ERAMET - Summary consolidated financials1
ERAMET is currently impacted by low nickel prices. Historically, the Group has been able to recover its pre-crisis levels of performance
Over the last 5 years, ERAMET has self-financed €2.2bn of industrial investments to secure mid-term growth objectives while maintaining a solid cash position
Notes
1 Consolidated financials including ERAMET Manganese, ERAMET Nickel, ERAMET Alloys and ERAMET Holding
2 Recurring operating income excluding exceptional
3 Net income + non-cash / non-operating items – change in operating working capital – change in other assets and liabilities
4 Net operating cash flow – capital expenditure
5 Dividends paid to ERAMET shareholders and to minority shareholders
FYE 31/12, €m 2008 2009 2010 2011 2012 H1 2012 H1 2013
Sales 4,346 2,689 3,576 3,603 3,447 1,735 1,613
EBITDA 1,505 59 971 789 407 204 129
EBITDA margin 35% 2% 27% 22% 12% 12% 8%
Current operating income2 1,321 (163) 739 554 153 85 (9)
Net Income - Group share 694 (265) 328 195 9 21 (32)
Net operating cash flow3 1,140 112 727 591 217 51 65
Capital expenditure (419) (286) (326) (492) (641) (265) (276)
Free cash flow4 721 (174) 401 99 (424) (214) (211)
Dividends5 (205) (164) (152) (186) (287) (70) (92)
O/w dividends paid to minority shareholders (51) (27) (105) (94) (260) (11) (58)
Cash (+) / Net Debt (-) 1,133 946 1,295 1,153 448 825 127
ERAMET Manganese: very solid performance
28
ERAMET Manganese - Summary financials
Sales supported by continuous increase in production, despite pressure on manganese alloys prices
Sustained profitability
Significant investments made over 2011-2013 to increase production capacity and develop new projects
Positive outlook driven by:
• Further increase in manganese ore production (c.+17% in 2013 and +c. 14% in 2014/2015) up to 4MT (vs. 3MT in 2012)
• Ramp-up of a new manganese refined alloys plant in China and commissioning of 1 manganese alloys plant and 1 manganese metal plant in Gabon
• Commissioning of the TiZir plant in Senegal
FYE 31/12, €m 2008 2009 2010 2011 2012 H1 2012 H1 2013
Turnover 2,348 1,289 1,858 1,713 1,560 753 777
EBITDA 1,163 72 656 499 357 142 172
Current operating income 1,088 (27) 548 388 240 91 109
Capital expenditure (145) (110) (130) (245) (399) (157) (176)
Mn
ERAMET Manganese strategy: strengthen positions as a leading highly profitable manganese producer
29
Increase production capacity
Develop organically
Objectives Actions
Increase of manganese ore production capacity at COMILOG to 4MT (vs. 3.0MT in 2012) by 2014-2015
Ongoing ramp-up of a new refined manganese alloys plant in China
Construction of 1 manganese alloys plant and 1 manganese metal plant in Gabon (Moanda Metallurgy Complex), with production planned to start in 2014
Develop into new geographies and fast growing profitable new market segments
Pursue diversification
TiZir
• Ilmenite (titanium dioxyde feedstock) and zircon plant in Senegal under construction
• Production to start in H1 2014
Maboumine
• Niobium and rare earths project (under study)
Manganese mine project in South Africa (under study)
Improve overall competitiveness of ERAMET Manganese
Focus on asset portfolio streamlining
Closure and downsizing of underperforming assets (former manganese alloys plant at Guanxi in China)
Productivity plan in Gabon
Mn
30
ERAMET Nickel: short-term performance impacted by temporary nickel oversupply
ERAMET Nickel - Summary financials
In the short-term, nickel prices penalized by temporary market excess of supply over demand and excessive global inventories of nickel (i.e. China) …
… but positive medium-term outlook thanks to growth in demand and constrained offer as well as need for new capacities
Ongoing efforts to further improve profitability at SLN in New Caledonia
FYE 31/12, €m 2008 2009 2010 2011 2012 H1 2012 H1 2013
Turnover 897 655 965 989 898 460 368
EBITDA 239 13 269 269 53 54 (49)
Current operating income 169 (62) 194 189 (38) 12 (94)
Capital expenditure (189) (107) (124) (141) (146) (58) (63)
Ni
31
ERAMET Nickel strategy: continuous focus on competitiveness improvement
Modernize and optimize existing assets
Modernize and leverage existing assets with brownfield developments
Secure and enhance access to resources in the long-term
Objectives Actions
Ferronickel production increase up to 60-65KT per year
• Ongoing modernization plan at Doniambo plant
Review of opportunities to fully develop / value deposits and mining rights
• Development of hydrometallurgical process
Increase competitiveness
Objective to reduce cash cost by 2$/lb by 20191 (represents annual savings of €200m2)
• Improve competitiveness
• Reduce power costs
New action plan 2013-2018
Construction of a new power plant
• Replacement of existing fuel oil power plant by end of 2018
Notes
1 At 2013 economic conditions, and assuming full capacity of the new power plant
2 Impact at EBITDA level, before depreciation and financing costs
Ni
ERAMET Alloys: positive growth dynamics of main end-markets
ERAMET Alloys - Summary financials
Excellent outlook on its main end-markets, particularly in aeronautics, supporting sales growth
Implementation of strong operating improvement programs to meet the Group’s 2015 targets along with the completion of the ramp-up of recently started strategic equipment
32
Al
FYE 31/12, €m 2008 2009 2010 2011 2012 H1 2012 H1 2013
Turnover 1,102 750 764 910 997 526 473
EBITDA 122 (5) 76 57 40 30 30
Current operating income 86 (49) 29 16 (5) 5 3
Capital expenditure (83) (67) (69) (100) (84) (44) (35)
ERAMET Alloys strategy: improving efficiency and performance
33
2013- 2015 efficiency and strategy plan
10% operating margin (vs. 1.6% on average
over 2010-2012)
15% pre-tax return on capital employed
More selective growth, refocused on the division’s core business
Improve productivity: 5% direct cost cutting per year until 2015 and 15% SG&A decrease in 2015 vs. 2012
Improve cash generation through: higher profitability, lower working capital and more selective capital expenditure
Strategy 2015 targets
As of June 30, 2013, ERAMET Alloys was well on track to achieve its 2015 cost reduction targets
Al
34
Strong financial flexibility
Flexibility to reduce and delay capex
Additional flexibility through asset disposals
Solid balance sheet with limited indebtedness and significant liquidity
Significant decrease in the Group’s industrial capex planned for 2014 and 2015
Group ERAMET capex evolution (2008 - H1 2013)
Capex reduction of €180m (vs.
initial budget)
Major project
development capex1
and studies2
Recurring capex
Notes
1 CMM (manganese alloys and metal plants in Gabon), New Guilin (manganese alloys plant in China), TiZir
2 Weda Bay
3 Excluding SLN new power plant investment to be financed by a dedicated project financing
(€m)
35
Major industrial investments already incurred over 2010-2013 with operations currently being launched or ramping-up and EBITDA contribution from 2014 onwards
Significant capex decrease planned for 2014 and 2015, with annual capex below €400m3
419
286
326
492
641 641
276
2008 2009 2010 2011 2012 2012 H1 2013
ERAMET Alloys ERAMET Manganese ERAMET Nickel
800 981
990
868
365 224
31/12/2012 30/06/2013
2,1552,073
36
Robust liquidity position
RCF line • c. €1.0bn multi-currency facility • Fully undrawn • Maturity: January 20181
• Borrower: ERAMET SA • Covenant: net borrowings/Shareholders’
equity2 < 1.0 • Spread in line with an Investment Grade rating
Notes
1 Excluding €85m maturing in January 2017
2 As of June 30, 2013, Group ERAMET total shareholders equity amounted to €3,523m
ERAMET Liquidity (€m)
Commercial papers • €400m total amount • Drawn amount: €176m as of June 30, 2013 • Borrower: ERAMET SA
800 981
990 868
365 224
31/12/2012 30/06/2013
Undrawn commercial paper Gross cash
Revolving credit facility
2,1552,073
42 29 27 22
79
18 18 152
7
15
34
9 13 13
11
10 5 22
242
32 58
85
326
70
40 35
175
24
75
16 9 2
19
2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e +10 ans
896
925
37
Long-maturity debt profile
Financial debt maturity profile as of June 30, 2013
(€m)
Of which €144m of commercial papers
(rolled over) and €75m of repo financing
€32m commercial papers (rolled over)
€896m RCF line (undrawn)
€85m RCF line (undrawn) 0
50100150200250300
2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e +10 ans
ERAMET Holding
ERAMET Manganese
ERAMET Nickel
ERAMET Alloys
Group ERAMET
Net cash / (net debt): €127m
External financial debt: €(734)m
FOCUSED STRATEGY AND PROFITABLE GROWTH PROSPECTS
38
5
39
Primary focus on profitability improvement and strengthening the Group’s positions
SLN: new action plan (new power plant to reduce energy costs, new productivity plan)
ERAMET Alloys: ongoing strategic and industrial action plan (increase of production capacities, expansion of product offering in fast growing segments, improvement of productivity through direct costs cuttings and SG&A reduction)
COMILOG: ongoing direct costs productivity plan
Permanent focus on competitiveness
Senegal: TiZir, ilmenite and zircon deposit (under construction)
Under study and not decided yet
• Indonesia: Weda Bay, exploitation project of world-class nickel deposit
• South Africa: manganese mine project
Enhance the Group geographic diversification
40
Strict financial discipline
Flexibility for the Group to postpone investments depending on market conditions
Selection of investments depending on strict financial criteria such as target IRR, set-up of financing structure through partnerships and maximum leverage
Growth strategy conducted in compliance with a strict
financial policy
Continuous efforts to improve profitability and
cash generation
Minimum EBITDA margin of 18% over a cycle
Target working capital of 110 days of sales
Conservative financial policy
Maintain large headroom over covenants
Moderate dividend policy Pay out ratio of less than 30% on average since 2000
41
Profitable growth prospects in all ERAMET divisions
ERAMET Nickel
ERAMET Alloys
ERAMET Manganese
Strong growth potential driven by demand in emerging countries, mainly China • Urbanization / construction, industrialization • Structural deficit of China, the major carbon steel consumer worldwide,
in manganese
ERAMET geared to seize market growth thanks to important organic growth projects about to become fully operational (ramp-up of additional capacities, both manganese ore and alloys)
Growth drivers for ERAMET End-markets outlook
Product offering dedicated to fast growing industries: aeronautics and powder metallurgy
Ongoing action plan well on track to improve profitability
Strong growth potential driven by demand in emerging countries, mainly China and India • Change in consumption trends, industrialization • Structural deficit of China, the major stainless steel consumer
worldwide, in nickel
Mid-term rebound of nickel prices supported by rebalancing of supply/demand
Competitiveness improvement at ERAMET Nickel thanks to productivity and energy costs reduction (new power plant) plans
↗↗
↗↗
↗↗↗
42
CONCLUSION 6
43
Conclusion
World class mining deposits with high grade ore and significant resources (long life)
World leading positions in all divisions with a focus on high-end metals
Solid long-term growth prospects in all ERAMET main end-markets (stainless steel, carbon steel, aeronautics)
Significant capex plan already incurred to support ERAMET organic growth and enhance its market positioning
Diversified mining and metallurgical Group with global presence and strong exposure to emerging economies
Key business strengths
Solid balance sheet with limited financial debt and strong liquidity profile
Strong financial flexibility: possibility to reduce or postpone capex, and additional flexibility through asset disposals
Moderate dividend policy with pay-out < 30% on average since 2000
Support from long-term shareholders, with a strong anchorage in the French public sector
Key financial strengths
44
APPENDICES
45
Group ERAMET debt and cash location as of June 30, 2013
Debt and cash location as of June 30, 2013
ERAMET Nickel
External financial debt: €(22)m
ERAMET Manganese
External financial debt: €(278)m
ERAMET Alloys
External financial debt: €(101)m
ERAMET Holding
Net cash / (net debt): €385m
External financial debt: €(333)m
Group ERAMET
Net cash / (net debt): €127m
External financial debt: €(734)m
Details of main debt facilities by division as of June 30, 2013
46
ERAMET Holding main debt facilities
ERAMET Manganese main debt facilities
ERAMET Nickel main debt facilities
Borrower Type MaturityType of
amortizingCurrency Rate
Outsanding
amount (€m)
Eramet SA Schuldschein 2020 In fine EUR Variable 58
Eramet SA Commercial paper 2013/14 (to be rolled over) In fine EUR Fixed 177
Metal Securities Repo financing 2013 (to be rolled over) In fine EUR Variable 76
Total 311
Borrower Type MaturityType of
amortizingCurrency Rate
Outsanding
amount (€m)
Comilog SA Buyer credit for CMM project 2022 Amortizing USD Variable 90
Comilog SA Bank debt for CMM project 2023 Amortizing USD Variable 17
Comilog SA Bank debt for CMM project 2023 Amortizing USD Variable 17
Tizir Ltd (50 %) Bond 2017 In fine USD Fixed 57
Setrag Bank debt 2019 Amortizing XAF Fixed 17
Total 198
Borrower Type Maturity Type of
amortizing Currency Rate
Outsanding
amount (€m)
Weda Bay Minerals Credit > 2023 In fine USD Variable 15
Details of main debt facilities by division as of June 30, 2013
47
ERAMET Alloys main debt facilities
Borrower Type Maturity Type of
amortizing Currency Rate
Outsanding
amount ( €m )
Airforge Finance leases 2018 Amortizing EUR Variable 28
Aubert & Duval Bank debt 2021 Amortizing EUR Variable 24
UKAD / UKTMP (50 %) Credit facility 2019 Amortizing EUR Variable 19
Total 71
