The sustainable top yielding company in Euro Materials - Q2 2019 results 31 July 2019
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Q2 2019 results
31 July 2019
The sustainable top yielding company in Euro Materials
1Disclaimer
Forward-Looking Statements
This document may contain forward-looking information and statements about Aperam and its subsidiaries. These
statements include financial projections and estimates and their underlying assumptions, statements regarding
plans, objectives and expectations with respect to future operations, products and services, and statements
regarding future performance. Forward-looking statements may be identified by the words “believe,” “expect,”
“anticipate,” “target” or similar expressions. Although Aperam’s management believes that the expectations
reflected in such forward-looking statements are reasonable, investors and holders of Aperam’s securities are
cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many
of which are difficult to predict and generally beyond the control of Aperam, that could cause actual results and
developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-
looking information and statements. These risks and uncertainties include those discussed or identified in
Aperam’s filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de
Surveillance du Secteur Financier). Aperam undertakes no obligation to publicly update its forward-looking
statements or information, whether as a result of new information, future events, or otherwise.
2Health & Safety
Performance
Health & Safety frequency rate of 1.19 in Q2 2019
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1Q 07
3Q 07
1Q 08
3Q 08
1Q 09
3Q 09
1Q 10
3Q 10
1Q 11
3Q 11
1Q 12
3Q 12
1Q 13
3Q 13
1Q 14
3Q 14
1Q 15
3Q 15
1Q 16
3Q 16
1Q 17
3Q 17
1Q 18
3Q 18
1Q 19
Health & Safety is our prime objective
3Q2 2019 Operational highlights
Earnings improvement despite persistent market headwind
Q2 2019 key developments
Sequential EBITDA improvement driven by seasonality
and a partial base price recovery
Leadership journey© gains on track with EUR22m
additional annualized gains in Q2 (cum. total EUR89m)
2019 share buyback completed (3.7m shares /
EUR92.6m) 79.8m shares outstanding*
Slow economic growth in Europe and Brazil causes
weak demand
Rising imports create a challenging pricing
environment
The competitive environment remains very challenging
4Q2 2019 Financial highlights
Earnings, cash flow and shareholder returns improve
despite market headwind
Key financial metrics demonstrate resilience in an adverse environment Q2 key comments
• Noticeable sequential drop in
EURm Q2 19 Q1 19 qoq Q2 18 yoy shipments
Sales 1,090 1,178 -7% 1,218 -11% • EBITDA benefits from a partial
EBITDA 95 81 17% 150 -37%
recovery in base prices and lack
of neg. inventory effects. Brazil
Basic EPS (EUR) 0.69 0.30 131% 0.94 -27% faces higher input costs 2019
Steel shipments (000t) 465 501 -7% 508 -8% • EPS increases qoq due to higher
earnings, positive tax rate (tax
EBITDA/tonne (EUR) 204 162 26% 295 -31% benefit for prior period)**
EBITDA margin 8.7% 6.9% 27% 12.3% -29% • Good operating cash flow with
102% cash conversion due to
Operating cash flow 97 71 37% 101 -4% first release of working capital
CAPEX -26 -47 -45% -41 -37% • 2019 capex guidance lowered to
Free cash flow* 72 24 200% 62 16% EUR150m. Genk project is on
track
Dividends paid -39 -33 18% -35 11%
• Strong balance sheet. Net fin.
Share buyback -93 0 NA -55 69% debt increase due to share
buyback (3.7m shares /
Net financial debt 176 106 66% 20 NM EUR92.6m)
Reinforced cost control and XXX
cash generation remain in focus
*before dividend and share buyback
**Q1-19 EPS included a negative EUR9c impact from the convertible tender offer 5EU Safeguard update
Imports continue to flood and demand weakness pushes
import share to a very high level
HR imports are flooding into Europe … …and market share of imports is back to the peak
80,000 90% 180,000 60.0%
Hot rolled (t)
60,000 60%
160,000 50.0%
30%
40,000
0% 140,000 40.0%
20,000 -30%
0 -60% 120,000 30.0%
Jan.18
Mar.18
May.18
Jul.18
Sep.18
Nov.18
Jan.19
Mar.19
May.19
100,000 20.0%
tonnes
80,000 10.0%
Indonesia All other countries Imports yoy (RHS)
60,000 0.0%
120,000 40%
Cold rolled (t)
40,000 -10.0%
100,000
20%
80,000 20,000 -20.0%
60,000 0%
40,000 0 -30.0%
-20%
20,000
Jan.17
Apr.17
Jul.17
Oct.17
Jan.18
Apr.18
Jul.18
Oct.18
Jan.19
Apr.19
0 -40%
Jan.18
Mar.18
May.18
Jul.18
Sep.18
Nov.18
Jan.19
Mar.19
May.19
Indonesia All other countries
import market share (RHS) Imports yoy (RHS)
Indonesia All other imports YoY %
Safeguard urgently needs to address developing countries and quota relaxation
Source: Eurofer, Aperam
Countries with a SS Hot Rolled quota: China, S. Korea, Taiwan, USA Countries with a SS CR quota: S. Korea, Taiwan, India, USA, Turkey, Malaysia, Vietnam 6
all other countries if not exempt fall under the residual quotaEnvironment and markets
Q2 brought higher base prices and low inventory for this
time of year but demand has been very soft
Nickel: moving in a rather narrow range Stainless steel price is weakening
22,500 3,500
20,000
17,500 3,000
15,000
12,500
2,500
10,000
7,500
5,000 2,000
Jan.14
Jul.14
Jan.15
Jul.15
Jan.16
Jul.16
Jan.17
Jul.17
Jan.18
Jul.18
Jan.19
Jul.19
Jan.14
Jul.14
Jan.15
Jul.15
Jan.16
Jul.16
Jan.17
Jul.17
Jan.18
Jul.18
Jan.19
Jul.19
Nickel LME (USD/t) CR304 Europe (USD/t)
Weak demand drives up European SS cold rolled
Stainless price premium versus Asia has narrowed
days of consumption
80
70 700
500
60
300
50 100
40 -100
Jan.14
Jul.14
Jan.15
Jul.15
Jan.16
Jul.16
Jan.17
Jul.17
Jan.18
Jul.18
Jan.19
Jul.19
Q1 14
Q2 14
Q3 14
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Q3 16
Q4 16
Q1 17
Q2 17
Q3 17
Q4 17
Q1 18
Q2 18
Q3 18
Q4 18
Q1 19
Q2 19
German CR inventory (days of consumption) CR304 Europe vs E Asia (USD/t)
Source: Bloomberg, Metal Bulletin, Edelstahlhandelsvereinigung
7Leadership Journey©
Self help has turned Aperam into a resilient, profitable and
cash generative company
Phase 1 (USD350m) : Phase 2 (USD225m): Phase 3 (EUR200m):
Restructuring Asset upgrade Cost & Transformation
700 EURm
600 Realized annual cost savings
500
400
300
200
100
0
2011 2012 2013 2014 2015 2016 2017 2018 2019e 2020e
Base Price Adj. EBITDA Free cash flow
EURm EURm
-27%
214
405%
96
176
19
H1-14 H1-19 H1-14 H1-19 H1 14 H1 19
Source: CRU (base price), Aperam accounting data
8Leadership Journey© update
Very good progress on accelerated Leadership Journey© to
defend Aperam’s position as lowest cost producer in Europe
Progress & target phase 3 (recurring annualized gains) Target savings composition
200
180
Leadership Journey gains (EURm)
matic
Sche-
160
Cumulated
140 Variable costs
EUR89m 19
matic
120 Sche-
Fixed cost
100
80 22 EUR200m Raw. Materials &
60 other purchasing
EUR33m 34
40 Distribution & Top
20 11 line strategy
13
0
2018 2019 2020
Total capex of EUR100m /
Q1 Q2 Q3 Q4 EUR73m spent already
New technology Innovation Leaner Value added services Procurement
Automation / robotics / New applications & Digitized, connected & One stop shop + supply General procurement /
sensors solutions collaborative chain efficiency Raw material
Q2 2019 cumulated annualized gains at EUR89m vs total target of EUR 200 million by end of 2020
9Outlook
Q3 2019 guidance & other forward looking items
Financial outlook Q3 2019:
EBITDA is expected to decrease versus Q2 2019
– Seasonally weaker quarter in Europe
– Weak demand, high imports and low international prices
– Negative valuation effects induced by sliding FeCr price
Net financial debt to remain stable at a low level
Other items:
2019 capex has been revised to ~EUR150m from EUR175m
Includes Leadership Journey© capex
Genk downstream capex (project on track)
Leadership Journey© Phase 3: EUR200m savings target by end of 2020
We continue to take all necessary measures to withstand a very challenging 2019
10Corporate access
August / September 2019 schedule
• 01.08 Paris Roundtable Oddo
• 03.09 Zurich Roadshow Baader / Alphavalue
• 05.09 Frankfurt ESG Roadshow HSBC
• 09.09 London Conference Credit Suisse
• 10.09 London Conference JP Morgan
• 12.09 Paris Conference Kepler Cheuvreux
• 23.09 Brussels Roadshow Degroof Petercam
• 26./27.09 Munich Conference Baader / Alphavalue
• 30.09 Netherlands Roadshow ING
We are looking forward to meet you there
11Financial results
12Financial results
Q2 2019: EBITDA recovery driven by partial base price
recovery but capped by soft demand
Stainless & Electrical Steel Services & Solutions Alloys & Specialties
1,702
88
246 78 75
1,237 1,290
180
EBITDA* EBITDA* EBITDA*
(EURm) (EURm) (EURm)
109 16
123 a djusted a djusted a djusted
12 12
EBITDA/t (€) 17 16 16 EBITDA/t (€) EBITDA/t (€)
79
52
Q2 2018 Q1 2019 Q2 2019 Q2 2018 Q1 2019 Q2 2019 Q2 2018 Q1 2019 Q2 2019
• Unusual large qoq drop in shipments • Shipments suffer from weak demand • Shipments decline seasonally qoq
due to soft economy in Europe & Brazil
• EBITDA remains at good Q1 level as • Flat EBITDA qoq due to a positive
• Europe with soft seasonal EBITDA normalizing market conditions and lack price/mix effect but lower volume
upturn qoq due to weak demand and of valuation effects compensate for
• The yoy EBITDA decline is largely due
only a partial recovery of base prices lower volumes
to higher costs and inventory effects
• Brazil’s seasonal EBITDA increase is • EBITDA declines marginally yoy mainly
• Underlying EBITDA was flat yoy
impacted by temporarily higher input due to lower volumes
costs
• The yoy drop in EBITDA despite lower
costs is due to substantially lower
volumes and lower prices
Adj. EBITDA of 204 EUR/t in Q2 2019 reflects higher imports paired with soft demand
* Difference with total Aperam’s quarterly EBITDA due to Others & Eliminations line
13Financial results
Q2 2019: Seasonally unusual drop in shipments due to
weak demand. Base price recovery benefits EBITDA
Weak European economy and imports weigh on Q2 adj. EBITDA increases due to the partial base price
shipments recovery and the lack of valuation effects
13.4%
517 12.3%
11.7%
508 11.2% 11.6%
501 11.0%
154
495 150
141
8.7%
130 8.0%
480 123
478 477 115
6.9%
467 465 95
90
81
Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19
Shipments (thousand metric tonnes) Total Adj. EBITDA (m€) Adj. EBITDA as % of Sales
Q2 2019 with a comparatively soft seasonal improvement
14Financial results
Q2 2019: S&E benefits from higher base price and absence
of valuation effects - S&S and A&S with normal performance
Unusual soft seasonal improvement & from very low base EPS benefits from higher EBITDA and a favorable tax rate
1.22
1.00 0.99
0.99
0.94
0.87
0.69
0.65
79
103
85 80 0.30
76 72
52
53 57
49
25
16 16
12 12
Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19
Q1 2019 Q2 2019 Q1 2019 Q2 2019 Q1 2019 Q2 2019
A&S Net result (m€) Basic EPS (EUR)
S&E S&S
Both pricing and volumes are clearly below the historic seasonal average
*Q4 2018: Financial results includes a EUR18m gain related to the convertible bond due to the expiry of put option by bondholders
*Q1 2019: Financial results includes a EUR11m charge related to the convertible bond due to accelerated amortization of the premium (reversal of the Q4-18 gain) 15Financial results
Q2 2019: Successful release of working capital - Share
buyback and accounting effects adds to net financial debt
Net financial debt increases due to one-off items FCF benefits from working capital release
(13) 23
200
One-off & 132
73 ()
descretionary items
176
}
0 0 ()
72 0 100
21 72
48 (176)
55 62
93 40 35
() 15 24
0
29 0
27
-100
Net debt Dec-18
H1 Ebitda
Convertible buyback*
IFRS 16**
Share buyback
H1 Dividend
H1 Capex
H1 Working Capital
Other CF***
Net debt Jun-19
0 -4
-200
Q2 17
Q3 17
Q4 17
Q1 18
Q2 18
Q3 18
Q4 18
Q1 19
Q2 19
Change in working capital Capex Free Cash Flow (m€)
Solid balance sheet and cash generation
* Of which EUR18m were non cash **non cash item
*** Includes interest, taxes and other items 16Value Strategy
© Adobe Stock
17Investment case & value strategy
Guiding principle: Being a sustainably safe and profitable
company
Cost leading Cash generation and
Self help strategy
footprint financial discipline
Leadership Journey® Optimized and sustainable Strong cash generation
European asset base through the cycle
Phase 1: Restructuring
Phase 2: Asset upgrade Only flat stainless steel Strongest balance sheet in
Phase 3: Transformation producer in South America industry
Top Line strategy Lean organization Progressive dividend
Leading industry margins Strong shareholder returns
End-user & service focus
and returns (payout 50-100%)
Value accretive opportunities
(Genk CRM, M&A)
Solid cash generation with strong shareholders’ return.
New projects and self help strategy to further improve Aperam’s profitability
18Investment case & value strategy
Financial policy: Strong balance sheet, investment in long term
growth & sustainability and solid cash returns to shareholders
Financial Policy 2019
~EUR90m maintenance
Company Sustainability, Upgrade and Transformation ~EUR20m Leadership Journey
~EUR40m capex in Genk
3 Value accretive growth & M&A new CRM & APL
min IRR 15%
Sequence
Dividend of EUR 1.75
Dividend EUR142m
base dividend, anticipated to progressively increase over time***
Maintain a strong balance sheet consistent with Investment Grade ratios
Target NFD/EBITDA ratio ofInvestment case & value strategy
Track record: Aperam a solid performer even in challenging
times
Solid operating performance despite market headwind From net loss to fast growing net income since 2013
12.5% 4.00 3.39
2.47
11.8% 1.99
10.0% 10.6% 10.8%
0.91 320
286
559
5.7% 504 -1.08 -0.96 193
451 455 155
4.1% 368 71
220 -86 -74
168
2012 2013 2014 2015 2016 2017 2018
2012 2013 2014 2015 2016 2017 2018
Total Adj. EBITDA (m€) adj. EBITDA margin Net result (m€) EPS
Strong balance sheet Attractive volume growth since 2012
26%
23%
20%
14%
6%
2% 1,886 1,917 1,936 1,972
-2% 1,728 1,813
1,683
619 501 442
290 -63 48
147
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Net debt (m€) Gearing (%) Shipments (thousand metric tonnes)
20Investment case & value strategy
Self help: Leadership journey® has a clear and visibly
positive impact
Aperam Mission Aperam’s continuously reinforced Leadership Journey®
Total target
gains
LJ Phase 1 – Restructuring USD
1 Be a sustainably safe company 1 2011-2013 350m
LJ Phase 2 – Asset upgrade USD
2 Deliver best in class profitability 2 2014-2017 225m
and returns
LJ Phase 3 – Costs & EUR
3 Be the preferred Supplier 3 2018 – 2020 Transformation 200m
Transform the company to achieve the next structural profitability improvement
21Investment case & value strategy
Resilience: Strong balance sheet, high liquidity and low
maintenance capex
Low maintenance capex + solid investment
A strong balance sheet for a volatile industry*
in growth improvement
3.7 200
2.3 175
150 84
1.2 47
125 60
0.6 0.5
619 0.3 0.1 0.2 100 44 34
501 -0.1 75
442 117
290 50 108 90
75 84
147 106 176 25
48
-63 0
2015 2016 2017 2018 2019e
Replacement capex (EURm) Growth / Improvement
Net debt (m€) Net debt / LTM Adj. EBITDA
Low CAPEX need, spending discipline and high flexibility Flexible mix and broad range of financing instruments**
Bonds
Worki ng 7%
Ca pi tal CP/ Money
Safety Leasing &
Buffer market others
EBITDA 41% 9%
Dividend
2018
Dividend
CAPEX
2018 Loans
Min Capex
43%
*Aperam intends to maintain a strong balance sheet that is consistent with investment grade ratios
**Financing documentation is in line with investment grade standards and contains no pledges of assets or earnings covenants 22Investment case & value strategy
Shareholder focus: We care about investors and can afford
it due to a high & stable FCF
Solid cash generation through the cycle
High profitability 126%
354
377 374
69% 295
45% 78% 83%
212
Low cash taxes* 152
184 67%
59%
2012 2013 2014 2015 2016 2017 2018
Low cash interest payment Cash-flow from operations (m€) Cash flow conversion
Solid average 7% free cash flow yield* Best in class cash distribution to shareholders
300 10% 6% 6% 9% 8% 6% 5% (EURm)
200 260
85 241 211 93
100 70
106 108 90
EURm
0 58
-100
130 142
-200 87 106
-300
-400 2016 2017 2018 2019e
2012 2013 2014 2015 2016 2017 2018
Dividends Share buy backs
Capex ∆ WC FCF FCF yield
*at year end 2018 the recognized deferred tax asset amounted to EUR186m and the unrecognized deferred tax asset amounted to EUR365m
23Investment case & value strategy
Portfolio improvement: Top line strategy
Constant innovation to shift portfolio into attractive growth / margin segments
New products in sales
130
125
120
Growth
Niches
Index 2015=100
115
Margin management / 110
demand driven 105
100
95
New Asian 90
competition 85
80
Margin 2015 2016 2017 2018
Guiding principle: strengthen product & service differentiation
• Increase competitiveness against other materials by improving existing solutions
• Innovate and apply existing solutions to new target markets
• Develop innovative new products
• Optimize product & customer mix
• Redefine distribution channels
Aperam product areas (size indicates volumes)
24Investment case & value strategy
ESG excellence: Take a look at Aperam from an ESG
perspective
Our mission is to produce reliable, 100% recyclable, green stainless steel
Products Non toxic, long lifespan and 100% indefinitely recyclable without loss of quality
Climate change We have the lowest CO2 footprint in the stainless industry globally
Environment We are recycling champion and 33% of our energy intake is renewable
Process We have ambitious ESG targets and a convincing track record
Social We value our diverse workforce, invest in training & 94% rate us a good employer
Governance The majority of our board is independent
Compliance We have a robust compliance framework and a zero tolerance policy
Please find our complete ESG presentation & report at: www.aperam.com/sustainability
25ESG
Aperam produces the greenest stainless steel globally
26ESG summary
ESG is core at Aperam and starts at the top
We take E, S and G seriously
Governance & Stakeholders Social
• Our high ethical standards are reflected • Our people are colleagues with whom we share
in our robust corporate governance and values and a common future
– Their safety is our non-negotiable
structured compliance program with a
priority
zero tolerance policy for non compliant
behavior – Their motivation and creativity is our
• our Board of directors is composed of a greatest asset
majority of independent directors – Their development is a key to our
• Board Committees are independent success.
members only • We promote diversity
• We aim to be a partner of choice for our • We believe in a positive dialogue and have
customers and suppliers collective labour agreements in place throughout
• Our Corporate Responsibility is Aperam
reflected by local programs and
stakeholder engagement
Environment
• As an energy-intensive industry, we consider environmental consciousness as a necessary prerequisite to our sustainable
profitability
• Recycle: Our products are infinitely recyclable and our main input in Europe is recycled scrap
• We have an industry leading CO2 footprint with the greenest” stainless steel globally due to our FSC-certified forest in Brazil
• We have clear targets in place to improve our environmental performance
27ESG summary
Our products are environmentally friendly
Our mission is to produce reliable, 100% recyclable, green stainless steel
• Our stainless & alloy products are 100% recyclable - without any loss of quality
• Our products have a very long useful life – they support and enable a sustainable global
development
• Our products are non toxic in production and usage
• We are the only stainless steel mill using 100% charcoal instead of coal based coke in our BFs
• Our European production is predominantly based on scrap recycling: >80% of raw material
• Our product is ‘Green Steel’ because it is produced from a clean and renewable energy source
By doing so, we maintain a relationship of respect with the surrounding environment
Recycling Mechanical Resistance Corrosion Cleanability Aesthetics
properties to fire resistance
Steel is an alloy of iron and carbon. Stainless steel additionally contains at least
10.5% chromium. Stainless steels’ corrosion resistance and mechanical
properties can be further enhanced by adding other elements, (eg nickel,
molybdenum, titanium, niobium, manganese, etc) and through mechanical &
thermal treatment
28ESG summary
Aperam produces sustainably and responsibly
Our mission is to produce reliable, 100% recyclable, green stainless steel
Renewable energy Recycling
In our BioEnergia unit, based in Brazil, we produce charcoal from our FSC-certified sustainably cultivated
eucalyptus forests in Minas Gerais
Charcoal is used in our steel-making process as a natural and renewable substitute for fossil fuels (coke). We
managed to eradicate entirely the use of coal based coke in our blast furnaces which gives us a sector leading CO2
footprint
In Europe, our main input is recycled scrap (>80%). We truly believe in and work to promote the circular economy
Best practice forest management, recognized by the Forest Stewardship Council’s (FSC®) certification, which standards and principles conciliate ecological protection (flora and
fauna, but also water reserves) with social benefits and economic feasibility. Our forests are made of selected cloned saplings which are considered among the best on the market 29
and they are separated by firewalls and strips of natural vegetation to take into account both fire-prevention, biodiversity preservation and local development (beekeeping).ESG summary
Aperam supports the United Nations’ Sustainable
Development Goals
We take broad responsibility: our Products and Environmental and Social action
Gender balance is ranked In our forestry, located on
highly on our priority list as hydric-stressed areas like
from 2017 and has received our other plants, lowering
Health & Safety is Aperam’s primary a special commitment from water consumption and improving
concern and the priority in all our management, who decided to set up the quality of discharge are key
proceedings specific objectives for creating more elements of our environmental
gender balance in our workforce strategy
More than 30% of Aperam’s Research & Development Aperam is committed to a
energy comes from and innovation are top sustainable cohabitation
renewables as biomass priorities for Aperam. We with our neighbouring
(charcoal) and, via pilot projects, also help our customers adapt their communities, allowing host cities to
wind and solar own processes (welding, stamping, thrive and addressing inhabitants’
etc.) to make the most of their tools legitimate requests
Aperam is a recycling Our BioEnergia cultivated Ethics are a key component
champion: We use the forest produces charcoal to Aperam’s values. We
maximum amount of which prevents use of met comply with all applicable
recycled material (not only scrap) in coal & coke and acts as a FSC regulations, interact transparently
our production and also take good certified carbon sink. Our plants are with authorities and support the fight
care to leverage wastes and by- constantly reducing their energy against corruption, money laundering
products in line with our zero-waste consumption and participate in our and anti-competitive practices -
target climate action plan among others
Environment Social Governance 30ESG summary
Social: Our people are our asset
Criteria 2020 Target Aperam 2018 status Steel industry 2017*
Lost-time injury
frequency rateESG summary
Environment: A best in class footprint²
Criteria Target** Aperam 2018 status Steel industry 2017
Energy intensity 12.2 GJ/t -10% vs 2012 12.5 GJ/t -8%
CO2 intensity* 0.49 t/t -35% vs 2008 0.49 t/t -35% 0.95 t/t²
Water consumption 5.6 m3 /t -43% vs 2015 9.9 m3 /t -1% !
Dust intensity 70 g/t -20% vs 2018 89 g/t -63%
100% reused, recycled
Zero Waste target
or stored
93.3% !
We aim to exceed environmental legislation and are committed to continuous improvement
*Scope 1+2. An internal CO2 price of €30/t is applied to all investments. We review and adjust this if necessary to maintain the incentive for CO2 savings **2030 targets for
dust emissions and water consumption, 2020 CO2 target and energy intensity target. 2030 targets are currently in preparation ²per ton of slab 32ESG summary
Environment: Aperam has a convincing environmental track
record and clear improvement targets
CO2 emissions (t/t crude steel)* Energy consumption (GJ/t crude steel)
0.78 0.72
0.75 0.70 14.7
0.61 0.58 14.0
0.500.48 0.54 0.49 0.49 0.49 13.8 14.0 13.6 13.6
0.48 13.0 12.8 12.8
12.4 12.5 12.2
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2020
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2020
Dust emissions (g/t crude steel) Water intake (m3/t)
213 240 242 11.5 10.7 10.2 10.1
211 10.1 9.9
153
5.9
89 70
2013 2014 2015 2016 2017 2018 2030 2013 2014 2015 2016 2017 2018 2030
Target Actual *scope 1 & 2
33ESG summary
Environment: Bio Energia & recycling give Aperam a best in
class climate change footprint
Aperam energy mix 2018 Aperam’s has the smallest CO2 footprint in the industry
CO2 t/t scope 1+2
2%
1.0
30% 33% 0.5
Aperam Stainless Industry
1%
CO2 t/t scope 1+2+3
34% Factor
4-5x
>8
Charcoal Natural Gas Coke ~2
Electricity Other EU industry NPI based producers
Our sustainably cultivated forest in Brazil is a unique asset
Source: Aperam estimates & calculation, ISSF data, CRU
*Data is for austenitic HR steel 34ESG summary
Governance: Our leadership team
Key facts & compensation A diverse & experienced team
• Entrusted with day-to-day management of the Company
• Appointed by the Board of Directors
• Experience and industry know how
• Average age: 48 / 6 Nationalities
• CEO: responsible for Aperam’s sustainability
performance and compliance
• CHRO, Head of Communication and Sustainability
• Compensation aligned with long term interest of the
Company and its stakeholders
Multiplier for performance related bonus includes
H&S factors (1 year plan)
Long term incentive plans based on EPS and TSR
evolution (3 year plan) vs relevant peers and index
Aperam benefits from the experience and industry know-how of its Leadership Team
35ESG summary
Governance: Board of directors and shareholder structure
Principles of our board Shareholder structure
● Responsible for strategic direction and oversight of the
business, as well as for appointing senior management
● Election subject to shareholder approval. Directors are 8%
elected for 3 year terms 20%
10%
● Chairman: Mr. Lakshmi N. Mittal
● Lead Independent Director: Mr. Romain Bausch
7%
● 7 members with a majority of independent directors
(4 independent directors out of 7) 4%
● 2 Board Committees composed of 100% of
independent directors and reporting to the Board of
10%
Directors:
▬ Audit and Risk Management Committee 41%
covering also ESG matters ; Chair: Ms.
Bernadette Baudier*
▬ Remuneration, Nomination and Corporate
Governance Committee ; Chair: Mr. Romain N America France UK Benelux
Bausch Other Europe Mittal Family Not identified
Diverse skills, backgrounds, knowledge, experience, geographic locations, nationalities and gender
are reflected on our board and ensure effective governance
Source: IPREO, Bloomberg July 2019
*Mrs Laurence Mullier untill 1 August 2019 36Business overview
Musée des Confluences, Lyon - France COOP HIMMELB(L)AU © Sergio Pirrone Executed using grade 316L - microblasted finish
37Group segments &
corporate structure
38Business overview
Group: Segments & corporate structure*
Stainless & Electrical Steel Services & Solutions Alloys & Specialties
2.5mt production capacity 40 kt production capacity
1.9mt of gross shipments 819kt of gross shipments 36kt of gross shipments
83% of group EBITDA 8% of group EBITDA 9% of group EBITDA
One of the largest global producers of Aperam sells and distributes its products Fourth largest producer of nickel alloys
stainless steel** through the S&S segment, which provides globally
Europe: value added and customized steel
Aperam specializes in nickel alloys and
solutions through further processing to
2 Electric Arc Furnaces use scrap as specific stainless steels
meet specific customer requirements. S&S
major input material
core activities: Our products take the form of bars,
Stainless steel flat product output semis, cold-rolled strips, wire and wire
• direct sales of Aperam products to end
South America: rods, and plates, and are offered in a
users
2 blast furnace use iron ore and charcoal wide range of grades
• distribution of Aperam and third party
produced from own forests material High value items that are often sold on a
2 EAF use recycled scrap • transformation services, according to kg basis
Stainless flat products & electrical steel specific customer requirements
Aperam covers the complete stainless value chain with industry leading assets in Europe and Brazil
*gross shipments and EBITDA are before eliminations
** By production capacity 39Business overview
Group: Segments & corporate structure II
Production assets in Europe and South America
Châtelet, Belgium Genk, Belgium Gueugnon, France Isbergues, France Timóteo, Brazil Imphy, France
Location & facts Location & facts Location & facts Location & facts Location & facts Location & facts
Melt shop Melt shop Cold-rolling mill Cold-rolling mill Melt shop Melt shop
Hot rolling mill Finishing Finishing Finishing Finishing Finishing
Capacity Capacity Capacity Capacity Capacity* Capacity
Slabs 1,000 kt Slabs 1,000 kt Finished 400 kt Finished 350 kt Slabs 900kt EAF 60kt
HSM 2,800 kt 2 mm wide capacity Specialized in Bright LC2i: integrated line Stainless finished 1 VIM, 2 VAR,
316 and duplex Annealing (BA) 350kt Rotary continuous
grades products and Electrical CR: Caster for long
stabilized ferritics. Grain oriented 60kt products
Cold-rolling 700 kt
Non GO 170kt Wire hot rolling mill:
40kt
SP Carbon 200kt
*some lines are flexibly
6 Cold rolling mills
used for different
products
40Business overview
Group: Segments & corporate structure III
Aperam’s value chain
Slabs Hot rolling Cold rolling / Finishing Service
Isbergues Direct
Châtelet 0.35Mt Sale
1.0Mt Service
Center
Châtelet Genk Stainless
2.8Mt 0.7Mt flat
Direct
Genk Sale
End customers
1.0Mt Gueugnon Service Steel service
0.4Mt Center centers
Transformation
Electrical Direct
0.18Mt Electrical flat Sale
Timoteo Timoteo
0.9Mt 0.88Mt Service
Stainless Stainless flat
0.35Mt Center
Chatelet Direct
Imphy Ni alloys & Sale
Imphy
0.06Mt specialties
Imphy Service
Center
Stainless & Electrical Steel Europe
}
Stainless & Electrical Steel South America Stainless & Electrical Steel
Alloys & Specialties
Services & Solutions 41Business overview
Group: A balanced risk profile and customer structure
Shipment split by segment 2018* EBITDA contribution by segment 2018*
8%
29% S&E Europe 9% S&E Europe
46% S&E S. America S&E S. America
51%
A&S A&S
1%
32%
S&S S&S
24%
Revenue by region 2018 Revenue by customer industry
Asia & Brazil
Building & Construction
6%
Africa US 8%
26% Catering & Appliances
Europe Other Americas
18% General Industry
Germany
Automotive
Italy
Energy & Chemicals
France 18% 24%
Americas Transport
Other Europe
* Calculated on segmental data before eliminations
42Business overview
Group: Substantial improvement in KPIs over time as
self-help supports earnings
EBITDA by segment (EURm) Shipment by segment (kt)
600 559 504
451 455
500
368 1,972
400 1,917 1,936
1,886
300 220
168 1,813
200 1,728
100 1,683
-
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
S&E A&S S&S Group Adj. EBITDA S&E A&S S&S Group Net Shipments
EBITDA/t (EUR) EBITDA margin
1,500 12.5%
11.8%
10.6% 10.8%
289 8.9%
1,000 256
237
203 239 5.7%
4.1%
500 127
100
-
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
S&E A&S S&S Group Adj. EBITDA/t S&E A&S S&S Group EBITDA margin
43Stainless & Electrical Steel
Europe
44Business overview
S&E Steel Europe: Self-help measures yield a robust
operational performance
Major EBITDA contributor 2018 Robust profitability capitalizing on restructuring
12.8%
11.1%
8.8% 9.1%
8% 6.7% 352
9% S&E Europe
2.7% 258 260
S&E S. America 0.5% 220
51%
A&S 153
32% 12 57
S&S
2012 2013 2014 2015 2016 2017 2018
Adj. EBITDA (m€) Adj. EBITDA margin (%)
European shipments grew by more than 3% pa European stainless steel demand has recovered
6.0
5.0 Pre-crisis level (2007)
4.0
3.0
1,190 1,241 1,253 1,267 2.0
994 1,004 1,082
1.0
0.0
2012 2013 2014 2015 2016 2017 2018
Shipments (kt) Flat Stainless European ap. consumption (mt - slab equivalent)
45Business overview
S&E Steel Europe: Leverage Aperam’s unique position
European stainless steel industrial footprint Aperam key competitive advantage
Finishing line
Steel making • The only integrated upstream
Sourcing
Sourcing operations in the heart of Europe
• Superior access to scrap supply
Outokumpu
• Best location to serve the biggest
Logistics consumption areas of Europe
Logistics • Efficient logistics between sites
Aperam results in industry leading working
capital management
• Full range of products with flexible
capacity
Acerinox Terni Production • Increase scrap recycling to minimize
Production
environmental impact
• Aim to become cost leader in the key
products
Closest location to major scrap generating regions as well as major stainless consumers in Europe
46Business overview
S&E Steel Europe: European Union measures against
unfair trade
Definitive safeguards run from 2 Feb 2019 – 30 June 2021 EU hot rolled import / domestic split
Avg. 2015 - 2017 import level 100%
Quota
Growing by 5% pa vs preliminary
80%
Country Country based quota is allocated yearly 60%
quota1 Taps residual quota in Q4 if country quota is filled 40%
Residual Allocated quarterly / unused portion is transferred 20%
quota2 to next quarter
0%
2015 2016 2017 2018 2019
Tariff 25% for volumes above the quota
Domestic Imports
Certain developing countries remain exempt (eg
Exemption Indonesia / S. Africa), no “on the water clause” EU cold rolled import / domestic split
Country based and quarterly quota 100%
25% deposit when quota is at 90% 80%
60%
EU Commission reacts to new data: Inclusion of
Thailand 40%
Review to be completed by Sep 2019 (country 20%
exemption & quota needs to be addressed) 0%
2015 2016 2017 2018 2019
Anti-dumping duty of 25.3% on SSCR imports from
China, and 6.8% on Taiwan remain in place3 Domestic Imports
The safeguard measures and anti-dumping duties demonstrate that the EU fights against unfair
trade behavior and reacts to significant changes in import flow
Source: Eurofer, Aperam 1 SS Hot Rolled : China, S. Korea, Taiwan, USA SS CR: S. Korea, Taiwan, India, USA, Turkey, Malaysia, Vietnam
2 all other countries if not exempt 3since 2015
47Stainless & Electrical Steel
South America
48Business overview
S&E Steel South America: A flexible, agile and highly
profitable asset
A significant EBITDA contributor 2018 despite
Earnings recovered post the recession
demanding conditions
17% 19% 17%
13% 14% 13%
8% 176
167 162
9% S&E Europe 8%
S&E S. America 120 113 118
51%
A&S
32% 82
S&S
2012 2013 2014 2015 2016 2017 2018
Adj. EBITDA (m€) Adj. EBITDA margin (%)
Stable shipments due to mix of domestic and exports S. America EBITDA margin consistently above peers
17% 19% 17%
14% 13%
649 654 652 656 638 656
617
8% 7%
6% 6%
3%
2012 2013 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Peers Adj. Ebitda margin (%)
Shipments (kt) APERAM South America Adj. Ebitda margin (%)
49Business overview
S&E Steel South America: Our Brazil asset is unique –
the only stainless steel producer in South America
Aperam South America footprint Upstream integration
Caracas (Venezuela) Cost competitive & environmentally
Cost competitive & environ-mentally
friendly charcoal from own
Bio Energia friendly charcoal from own cultivated
Colombia
cultivated forests is used to heat
forests is used to heat blast furnace
the blast furnace
Ecuador
Range of products
A complete range of stainless steel
Peru
Stainless Steel grades (austenitics, ferritics,
Timoteo duplex, martensitics)
Sumaré
Campinas
Ribeirão Pires Grain oriented electric steel* for
Grain oriented
use eg in stationary machines eg
Caxias do Sul electrical steel
transformers
Montevideo (Uruguay)
Buenos Aires (Argentina)
Non grain Non-grain oriented electric steel**
oriented for use in electric motors and
Melt shop, Hot/Cold rolling electrical steel generators
Service Centers
Tubes mills and Cutting centers
Alloyed, high, medium & other
Rep offices, sales agencies Special
special carbon steel are completing
carbon steel
product portfolio
The sole flat stainless steel producer in South America
with a complete range of products, and a flexible production set-up
*Grain oriented steel (GO & HGO) has the magnetic properties optimized in one direction during hot rolling.
**Non-grain oriented steel (NGO) has identical magnetic properties in all directions 50Business overview
S&E Steel South America: Brazil can switch flexibly between
products and markets to maximize profitability
Key pillars Aperam’s asset optimization in South America
• A wide range of products and geographical Flexible product mix Flexible regional mix
sales enables further optimization of capacity
Exports
Portfolio utilization and product mix
management • Upgrade product portfolio: Develop new
Timoteo meltshop
grades with higher value added (stainless •Stainless steel
900kt capacity
substitution, HGO)
• Electrical steel
• Non grain oriented
• Grain oriented Brazilian
• Preferred supplier plan with best in class
• High grain oriented
deliveries share gains
Domestic
• Performant logistics with integrated service
share gains • Special carbon
centers
• Support stainless steel usage in S. America
• Sustain the cost benchmark in its main • Running Brazilian asset at optimal utilization rate
markets
• On-going debottlenecking of the cold rolling operations
Cost • Leadership Journey® on-going to improve
• Upgrade Grain Oriented products via the development of HGO
competitive productivity
• Continuous margin optimization between product mix and
• Continuous improvement to at least
deliveries in South America
compensate the inflation
Sustained solid double digit EBITDA margin proves the flexibility & agility
of our operations in Brazil
51Business overview
S&E Steel South America: Brazil offers ample opportunity
for both cyclical and structural growth
Brazil consumes substantially below the global trendline Brazil opportunities
Short term: reviving the normal investment cycle in the economy.
Large scale infrastructure & energy projects have been missing
China Medium term: Tax reform, followed by a change of import duties
9
Reforms that put our customers in a position to compete on a
global level will drive volume and yield a positive mix effect
Stainless CR consumption per capita (kg)
8
Poland
7 Long term: Higher standard of living will drive stainless steel
EU
consumption. Currently Brazil at 1.4kg / capita vs China
6 Vi etnam >9kg/capita and a GDP implied consumption of >3.5kg/capita
5 Asia Turkey
Thailand N Ameri ca
Hungary Examples of stainless steel solutions in the Agrobusiness:
4
World
3 Mexi co
Ma laysia
S. Africa
2 India S.E Asia Equipment for the Equipment for Slats of metallic
Russia
S. Asia Brazil transport and washing gases conveyor belt for
1 Egypt Indonesia Iran L America Romania sterilization of Palm from biomass the transport of
Ukraine Argentina Mi ddle East fruits burning sugarcane
0 Africa
1,000 6,000 11,000 16,000 Largest global producer of: Largest global exporter of:
GDP per capita (USD) • Coffee Orange • Meat Poultry
• Sugarcane and sugar • Sugar Ethanol
Brazil has tremendous potential for volume & mix improvement
Source: IMF, CRU, Aperam
52Business overview
S&E Steel South America: Brazilian protections against
unfair market behaviour
Type of products Import duties status Anti-dumping status
China, Taiwan, South Korea, Vietnam, Finland, Germany
Stainless Steel Flat AD duties starting October 4th, 2013 for 5 years
Normal import duties are 14%
Products Renewal investigation launched on 3 October 2018. Existing AD duties
remain in place during the investigations
China and Taiwan: AD duties since July 29th, 2013 for 5 years and up to
Stainless Steel Welded USD911/t. Renewal investigation launched on July 16th, 2018
Normal import duties are 14%
Tubes Malaysia, Thailand and Vietnam: AD duties starting June 13, 2018, for 5
years from USD367/t up to USD888/t
China, South Korea, Taiwan, Germany: AD duties from 15 July 2019 for 5
years from USD90/t – USD166.3/t
Electrical steel – Normal import duties are 14%
Non Grain Oriented Re-evaluation after 12 months
Electrical steel – Normal import duties are 14%
Grain Oriented
Tariff measures to support fair market environment in Brazil
Sources: SBB/Platts, Steelfirst
53Services & Solutions
54Business overview
Services & Solutions: stronger partnership with customers
enhances margins
A significant EBITDA contributor 2018 despite trough A profitable Services & Solutions thanks to its focus on
conditions service oriented customers
21,000
8% 90 104
9% 17,000
S&E Europe 86
S&E S. America 13,000
51% 51 53
A&S
9,000
32% 24
S&S
10
5,000
2012 2013 2014 2015 2016 2017 2018
S&S EBITDA €/t (LHS) Nickel LME €/t (RHS)
Increasing focus on downstream value added services A majority of “in house“ exposure to end users to best
and solutions serve their needs and provide best services & solutions
819
Apera
799 818
m
721 746 Aperam End
679 Stainle
Stainless
661 ss&& Aperam -
End-
Services &
user
users
Solutions
Electrical
Electric s
Steel
2012 2013 2014 2015 2016 2017 2018
al
Steel Independent
distributors
S&S Shipments (kt) and other
55Business overview
Services & Solutions: Adding value downstreams
Services & Solutions value chain
Input - - - - - - Service Centers - - - - - -
Hot rolled coil / Cutting/ Polishing
Packaging Logistics Customer
Cold rolled coil Slitting Brushing
Slit / Machined
& Slit
deburred deburred Square Round
- - - - - - - Tube making - - - - - - -
Forming
Expanding
Hot rolled coil / Welding
Cutting Packaging Logistics Customer
Cold rolled coil Pickling
Bending
Annealing
56Alloys & Specialties
57Business overview
Alloys & Specialties: attractive niche market with high margins
High profitability due to end products & end user
Aperam’s high value added segment 2018
orientation
1,264 1,407 1,278
1,191 1,219 1,147
8%
864
9% S&E Europe 43 44 44 46 46
39
S&E S. America
51% 26
A&S
32%
S&S
2012 2013 2014 2015 2016 2017 2018
Adj. EBITDA (m€) Adj. EBITDA/t
Stable shipments but markedly improved mix Nickel Alloys a growing and premium niche market
350
300
250
200
36 36 36 150
35 34 30 33
100
50
0
2012 2013 2014 2015 2016 2017 2018
Shipments (kt)
Source: SMR, Aperam
58Business overview
Alloys & Specialties: attractive niche market with high margins
Aperam is global top player in nickel alloys and strong in
Aperam Alloys & Specialties geographical footprint
long products (kt)
Rescal Amilly
Imhua
Wire The magnetic parts
drawing company
n
n
nnn
n
n
n
Imphy
ICS (JV)
Meltshop, wire rod mill, Diversification into
cold rolling, bars, R&D industrial clads
Alloys & Specialties sales by industry 2017
Major products
Marine
Upstream
5% Energy / Oil & Gas
14% 27%
Chemical industry /
welding / environment
6% Aerospace
E&E
Downstream
19%
27% Automotive /
Transportation
Others
Source: SMR, Aperam
*PCC (Special Metals) NYK (Nippon Yakin Kogyo) 59Business overview
Alloys & Specialties: Specialty alloys add stability and
profitable growth element
Innovation is key for premium …to cater for highly sophisticated …yielding growth opportunities and
specialties… and evolving needs… margin stability
R&D intensive industry High growth end market applications Less exposed to commodity cycles
Substantial market entry barriers “Kilogram” market: unique products Cost of raw materials passed through to
Benchmark customers in advanced designed to enable precision and high- customers
industries require tailored, certified and tech solutions globally Long-standing client relationships
highly sophisticated solutions Highly diversified end-markets Good visibility on volumes with high
proportion of recurring revenue
Key R&D figures (based on FY17) Key end-markets / application types EBITDA margins by Aperam division
14%
Heating 12%
LNG tankers,
resistance, special welding 10%
watches 8%
Cooperation contracts 37 Gearbox, 6%
fasteners, Gas turbines,
turbo
4%
Total registered patents 188 chargers
heat
exchangers
2%
0%
Smart
Sales of new products 9% phones, Fasteners,
LED TV, landing gears,
Electrical
seals turbine S&E S&S A&S
safety,
engines
sensors
A very profitable, growing and stable niche market
60Appendix
61
Résidence Hôtelière du Rail, Montparnasse station, Paris - France
- aasb_agence d‘architecture suzelbrout - Executed using grade 304L, with Uginox Mat finishAppendix
Key stainless product categories by alloy content
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