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Photo courtesy of Umicore
Umicore, which describes itself as a leading circular materials technology company with expertise in material science, chemistry and metallurgy, has reported lower revenues for the first half of 2024 relative to the same period in 2023.
The Brussels-based company's 1.8 billion euros ($19.6 billion) in revenues through the first half of this year were more than 15 percent lower than the 2.1 billion euros ($22.8 billion) it reported in the first half of 2023. Its adjusted earnings totaled 241 million euros ($261.8 million), while adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the consolidated company were 393 million euros ($427 million), down 36 percent and 24 percent, respectively, compared with the first half of 2023.
Umicore saw revenues across its four business groups—Battery Materials, Automotive Catalysts, Specialty Materials and Recycling—decline in the first half of 2024, but Battery Materials experienced the most pronounced decline, down 33 percent year over year, prompting the company to begin a strategic review of this business group.
“In recent months, short- and medium-term growth projections for the electric vehicles (EV) market have been scaled back substantially, significantly affecting Umicore’s Battery Materials business," Umicore CEO Bart Sap says. "Today, we share the elements of how we are adjusting to this new reality. The large impairment of our Battery Materials assets is painful and reflects the changed situation as we see it today. In the coming months, we will continue to thoroughly reassess our Battery Materials activities, with energy and an open mind, always in close alignment with our customers and partners.”
Umicore will share the outcomes of this review during its Capital Markets Day in the first quarter of 2025.
“In these challenging times, we must focus on what we need to adjust while not forgetting the strong fundamentals on which we stand,” Sap continues. “Our foundation businesses continue to provide strong cash flows and returns, evidenced by their robust performance over the first half of this year. This solid base enables us to bridge the current headwinds while we reposition to seize new opportunities.”
Battery Materials
The Battery Materials group reported lower revenues than the first half of 2023, primarily reflecting the absence of a nonrecurring lithium effect in the year-on-year comparison, Umicore says. Cathode materials sales remained broadly flat compared with last year, and adjusted EBITDA in the first half of the year was close to break even.
The year-on-year decrease in adjusted EBITDA was because of lower revenues, costs related to the greenfield investments in Poland and Canada and an unfavorable comparison with the first half of 2023 that benefited from a substantial positive effect related to lower costs of mass production test runs and the valuation of battery production scrap.
Despite the recent slowdown in the global EV sales, the long-term clean mobility trend remains as was recently illustrated by the reconfirmation of the Green Deal in Europe, the company adds.
However, Umicore updated its 2024 outlook for the Battery Materials business June 12, following the recent significant slowdown in short- and medium-term EV growth projections affecting its activities. The group is taking a number of measures in response to the situation in addition to launching a strategic review of the business beyond 2024:
- strict capital allocation discipline, with group capital expenditures to be less than 650 million euros ($706.2 million) through year-end; and
- efficiency and cost measures in addition to Umicore’s Efficiency for Growth program, which was launched in 2023 and is already well on track to deliver at least 70 million euros ($76 million) in EBITDA anticipated for 2024 (included in the 2024 outlook), with more than half achieved over the first half of 2024.
The company has developed a scenario to realign its operations to the new market reality, which is based on the following assumptions:
- at least 18 months delay in the ramp-up of its customer contracted volumes;
- substantially reduced volume projections reflecting current offtake commitments at take-or-pay thresholds in line with currently confirmed investment waves;
- more prudent assumptions on operational cost evolution; and
- minimized further expansion of the existing footprint in Europe and Korea, which implies lower capex spending.
This scenario results in a well-utilized capacity in the last years of this decade, except for the Chinese CAM assets which Umicore assumes to remain underutilized, the company says.
According to an impairment exercise based on the above assumptions, Umicore will reduce Battery Materials’ capital deployment by 1.60 billion euros ($1.74 billion). The impairment relates to property, plant and equipment (PPE) and noncurrent inventories across Battery Materials’ activities, mainly in Asia. Therefore, the remaining capital employed for this business amounts to 1.51 billion euros ($1.63 billion) as of June 30.
Within this scenario, Umicore says it anticipates that Battery Materials’ EBIT will remain below break-even levels in 2025 and 2026, and returns above the cost of capital are expected to be achieved in the last years of this decade.
The strategic review will explore opportunities on top of the current scenario and will be developed in close engagement with Umicore’s stakeholders, in particular its downstream industry partners, the company says.
Automotive Catalysts
The Automotive Catalysts group had lower revenues than in the first half of 2023, while return on capital employed (ROCE) was 40 percent. Sales volumes for the group decreased as a result of less favorable customer mix in the light-duty car segment and a more difficult market context in Europe and Asia for the heavy-duty diesel segment, Umicore says.
Precious Metals Chemistry’s revenues declined significantly, while Fuel Cells & Stationary Catalysts’ revenues were slightly below the level of the previous year.
Earnings were supported by strict cost discipline and efficiency measures, Umicore says, and only slightly below the level of the previous year.
Going forward, this business group will further maximize business value based on its strong technology positioning, high process efficiency and operational agility, the company says, unlocking attractive EBITDA margins and substantial cash flow toward 2030.
Recycling
Recycling revenues were down compared with the first half of 2023, mainly driven by a less supportive precious metal price environment in Precious Metals Management and Precious Metals Refining.
ROCE was 69 percent, while adjusted EBITDA reflected a substantially lower contribution from Precious Metals Management’s trading activity, partly mitigated by higher earnings in Precious Metals Refining and Jewelry & Industrial Metals as a result of efficiency measures in the framework of the Efficiency for Growth program.
Umicore says its Precious Metals Refining activity demonstrated once more its unique ability to generate strong returns and substantial cash flows at all points in the metal price cycle. With its leadership in sustainable and complex recycling, Precious Metals Refining is ideally positioned to respond to society’s growing need for metal recycling, unlocking significant future value and cash flows for the group.
Specialty Materials
Revenues in Specialty Materials were slightly lower compared with the first half of last year, and ROCE was 8 percent.
Earnings were affected by lower refining and distribution margins in Cobalt & Specialty Materials as a result of competitive pressure and a lower cobalt price. Although the refining and recycling activities in the Business Group can bring a certain metal price sensitivity to its performance, its business units are active in appealing niche segments with attractive return profiles, Umicore says.
2024 outlook
Based on the performance in the first half of the year and assuming precious metal prices remain at current levels for the remainder of the year, Umicore reconfirms it anticipates 2024 group adjusted EBITDA to be within a range of 760 million euros to 800 million euros ($825 million to 868.4 million).
As a result of recent demand projections from its customers, Umicore’s Battery Materials volumes for the full year 2024 are anticipated to be equal to, or slightly below, last year’s, with adjusted EBITDA expected to be around break-even.
It is anticipated that Automotive Catalysts will continue to benefit from its strong market position in gasoline applications and further progress on efficiency improvements. Taking into account the current outstanding strategic metal hedges and the impact of efficiency measures, it is expected that the adj. EBITDA of the Catalysis group will be in line with the level of the previous year, despite the lower platinum group metals price environment, Umicore says.
Following the completion of the planned maintenance shutdown in the first half of the year, it is anticipated that Precious Metals Refining will post a solid underlying performance in the second half, the company says. Assuming that current metal prices continue to prevail throughout the year and taking into account the current strategic metal hedges, it is expected that the 2024 adjusted EBITDA of the Recycling business group will be below the level of the previous year, in line with current market expectations.
Anticipating that the revenues and earnings of the Cobalt & Specialty Materials business unit will continue to be affected by the challenging market environment, Umicore expects adjusted EBITDA for the full year to be below the level of the previous year and below current market expectations.
A slide presentation of Umicore's first-half 2024 results can be found here.
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