Strong battery plans come closer to execution

Umicore has taken a huge step by adding fresh orders for battery material of 35GWh for the North American market to the order book by 2027. By signing the contract with AESC, Umicore improved its global customer footprint and overfulfills its plan to deliver battery material volumes of 230 GWh by 2030.

A soft year

Umicore broadly confirmed our cautious view by providing a soft full guidance as H2 will be weaker than H1. Catalysis should see some volume progression, whereas Energy & Surface Technologies will be negatively impacted by the normalisation in cobalt prices. Lower pgm prices and less available scrap is likely to dampen Recycling’s performance. The outlook provided by management fits with ours. Profitability for the full year will depend on how pgm prices evolve for the rest of the year.

A fairly decent start, but profitability might have suffered

As usual, Umicore provided only qualitative comments about the business performance for the first three months and also provided a qualitative outlook, Despite the management’s ambition to be supportive, some more transparency is needed. Making reference to the current consensus is not that helpful as the consensus lacks divisional details.

After strong growth …

… profitability took a break and is set to soften in 2023. Umicore reported in-line figures, but the management issued a moderate outlook for 2023 as some of the positives are expected to leave the stage while cost inflation will remain. We see 2023 as a transition year as the global battery materials business becomes more regional, thereby helping car manufacturers to keep up with the targets for their fleets.

Competing with some very strong comparables

At first sight, Umicore’s H1 results look odd, but from a multi-year semester perspective they are far from it. H1 22 was the second most profitable half year in the company’s history after the even-stronger H1 21. For the second half, the management was upbeat although we do not fully share this optimism given the ongoing constraints. H1 sales came in €6m above consensus, but the adjusted EBITDA fell short by -2.4%.

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A quite good ending at adjusted levels

Umicore reported a mixed set of figures, which did not miss consensus on the adjusted metrics (top line: -1.2%; adjusted EBIT: -0.3%). As usual, the one-offs summed together for the miss, with EBIT 5.6% below our expectations and -3.8% below consensus. Management points towards the same direction as our figures. We very much like the new CEO’s ambition to provide a higher degree of transparency and hope to see this at the Investors day on 22/06/2022.

On the back of greener mobility

The higher volatility in pgm prices helped Umicore’s profitability, which was already expected by the market. Management lifted profitability’s bar a bit, but wiped this out immediately by guiding for a weaker H2 compared to H1. Business-wise, the company benefits from the strong trend in the electrification of mobility and the tightening legislation around emission control around the globe. The reported figures were broadly in line with our expectations, but beat consensus (sales: +1.9%; pr

Precious start

Like other chemicals companies with a link to automotives or precious metals, Umicore also had a good start into the year. This and the positive development of precious metal prices made management confident enough to give a very strong FY guidance reflecting the pgm price triggered boom. Unfortunately, the company did not provide any figures relating to the Q1 performance.

A tidy-up year?

Against the backdrop of 2020’s turmoil, Umicore’s FY figures look mixed but not too bad as the adjusted figures broadly fit with consensus. The idea of a tidy-up came into our minds as the ‘adjustments’ were stronger than guided and there are plans to find a successor for the long-term CEO. Management showed quite strong confidence in profitable growth at today’s analysts call.

Prepared for weathering the storm?

Umicore’s H1 figures were a notch above our expectations, but the divisional pattern has led us to remain cautious. As expected, automotive was the party-pooper in many perspectives. Sales of combustion cars as well as electric vehicles were more than subdued and the recovery will be highly linked to consumers’ confidence. And this will be function of how the pandemic evolves. Earnings came in 21% below consensus, which has to be revised downwards.

With some external help

Despite the more than difficult business environment in automotive, (including e-mobility), Umicore was in a position to manage its business better than expected, partly helped by higher precious metal prices and favourable legislation. Nevertheless, profitability suffered a bit. The outlook presented is quite cautious given the current business uncertainties. This view is clearly supported by the unchanged dividend. As we had been quite cautious, Umicore’s figures beat them and were above conse

Decoupling from automotive's negative trend

Umicore’s H1 report was balm for the recently heavily-punished shareholders. Despite being more or less in line with the consensus, the provided insights made the tone more positive (e.g. the positive development in China). Our expectations were more than fulfilled.

Fostering the supply

Umicore has extended and broadened the ‘path’ from the cobalt mine to battery materials with the supply agreement of the essential transitional metal cobalt, which we value very positively.

Come back in 2020!

Profit warning due to postponed growth momentum Umicore seems to be between a rock and a hard place as the overall automotive industry (combustion and electrical mobility) deteriorated since demand for both types of power train has come down, especially in China and Europe. Management’s clarification of the FY guidance is a confession of lower profitability on a recurring level as midpoint guidance is below 2018 recurring EBIT.

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Morning Note – 16 April 2024

Morning Note – 15 April 2024

Oil & Gas - Cavendish sector note

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PROGRESSIVE: Pharos Energy: Delivering on operations and balance sheet

Pharos Energy reported FY23 results on 27 March. Group net production of 6,508 boepd (FY22: 7,166 boepd) was in line with guidance, assisted by successful development drilling in Vietnam and exploration successes in Egypt. Pharos’s strong cash generation resulted in a stronger balance sheet, with net debt reduced to US$6.6m (from US$28.9m at the end of 2022) and cash balances totalling US$32.6m. This left the group free to return more cash to shareholders, including a 10% increase in dividends,

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Kouroussa progress moving slowly

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On Track in Stronger Markets

Tharisa has released its Q2 and interim production report for FY2024. Generally the production numbers were flat for both PGMs and Chrome and slightly below our forecast. In the case of PGMs this was due to lower recoveries due to ore type and in Chrome the company executed a routine maintenance programme on the plant. The company has maintained guidance for the full year however so we expect a robust second half followed by low risk growth in output as we head into FY25. Meanwhile Chrome pric