Eramet’s "new era"

On the occasion of yesterday’s first-ever Capital Markets Day, the group presented its strategy and elaborated on the new growth investments for the years to come. Some of these are under way, the outcome of which will have to be evaluated in terms of opportunity and risk. That said, we remain a bit cautious in the short-term on manganese and nickel, where prices are still depressed owing to the tough macro environment.

Trading statement: a rather poor Q3 and yet another profit warning.

The trading statement for the Q3 23 showed the expected sharp contraction in sales, leading to yet another reduction in the group’s guidance (the fourth in a row). No uptick in prices is expected for Q4. Lower input costs are helping, but the fall in profits is spectacular. We will not change our estimates materially (at least for FY23) since we had expected this negative development. In our view, there is room to improve the group’s communication.

Caught up in geopolitics

A military coup is going on in Gabon, a key country for Eramet This is where the group mines…100% of its manganese, its biggest segment The outcome of the coup is obviously uncertain, but the negative impact could be massive In any case, expect at least disruptions for this business We will put a discount on the segment, implying a significantly reduced target price given its size

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A weak H123 calls for a substantial downwards revision to our numbers.

The H1 23 results were significantly below market expectations. Prices were the main trigger for these weak numbers, even if volumes were also down. The FY23 “adjusted EBITDA guidance has, again, been revised downwards despite the strong performance in Weda Bay (38.7% held) which hides a pretty tough year for the rest of the business”. We will revise downwards our numbers for FY23 substantially, as well as going forward in all likelihood.

Q1 23 trading statement: the good times are a bit behind...

As expected, revenues in Q1 23 were significantly down on both a yoy and sequential basis. This is mainly due lower prices and somewhat lower volumes in manganese. As a result and considering the current price levels, the group has revised its FY23 EBITDA guidance downward by some 9% on an adjusted basis. We still do not appreciate the new reporting of the group (i.e. adjusted vs reported) which does not help transparency in our view.

A great FY22 (as expected) and a less favourable context going forward

Eramet released an expected set of results for FY22, which showed a higher level of profitability and a significant decrease in indebtedness. Looking forward, the context is less favourable due to declining prices but no one expected such operating conditions to last forever. The outlook suggests that our numbers are too high and we will amend these at least for FY23 while we will integrate the first benefits of the Lithium project, whose commissioning is expected in FY24.

Q322 revenues: some pressure on prices, as expected.

The group’s revenues were firmly up in Q3 on a yoy basis. They nonetheless showed a significant slowdown qoq, mainly due to prices, which should remain under pressure in Q4, leading the group to lower its EBITDA guidance for FY22. We will fine-tune our numbers and valuation to the downside, even if the group’s new projects look promising.

Strong H1 22, as expected

The group released a strong set of results for H1 22 These were supported by volumes, but most of all prices The latter should be less favorably oriented in H2 The group marginally increased its FY EBITDA target (from €1.5bn to €1.6bn) We will fine-tune our numbers, with no big changes expected Our TP may look optimistic given the less favorable momentum on commos writ large, even if we feel comfortable with our recommendation

Strong Q1 revenues. Our FY22 numbers are too low.

Prices were strong across the board in Q1. The operational performance was also satisfactory. The group has raised its FY22 guidance. We will upgrade our numbers and price target after this release.

FY21 well in line; sound FY22 prospects

The FY21 results came in rather above the group’s guidance. The production of manganese ore, the exports of nickel ore and the production in Weda Bay have all steadily increased. The disposal of Aubert&Duval is good news. Including ongoing disposals, net debt would be a mere €388m. The outlook is unsurprisingly bullish, even if it may be adjusted throughout the year, with current nickel and manganese prices currently very supportive.

A further diversification of the group’s portfolio of businesses

Eramet will proceed with the Lithium project in Argentina The group will join forces with Chinese Tsingshan First production is due in FY24 We appreciate the group’s diversification, particularly in “green” raw materials

Q321 trading statement: the group’s guidance movers higher

The Q3 trading statement shows a pretty strong rebound in activity. The pricing situation remains favorable in most of the group’s segments. Eramet upgraded its EBITDA guidance for the full year to “close to €1bn”. We will also upgrade our numbers on the back of these solid Q3 revenues.

A much improved H1 21

The H1 21 results were significantly up on volumes (manganese) and prices Current prices suggest a further improvement in profitability Seasonality should also give it a boost The group raised its FY EBITDA guidance We will revise our forecasts upwards

Q1 21 trading statement: sound

The increase in prices and volumes translates into a sound top-line growth for Q1 21 The group confirms its FY guidance A solution is still sought for Aubert&Duval We will upgrade our target price to account better for the momentum in the group’s activities

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Morning Note – 4 December 2023

Hartshead Resources - Fully Funded Solution

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New Debt Facility – Lowering TRR Cost of Capital

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Southern Energy - 3Q Results and Comprehensive Update Note

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Strong second half trading

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Morning Note – 28 November 2023