BELGIUM, March 4, 2004 (PRIMEZONE) -- Umicore (Other OTC:UMICF):
- Full year recurring EBIT reached E 145.9 million, up by 50% on 2002.
- Net result before non-recurring items (Group share) reached E 89.6million, up 41 % on 2002.
-Net debt at 31 December brought back to E 619 million - correspondingto a gearing of 34%.
- PMG acquisition earnings accretive in 2003.
- Proposed gross dividend of E 1.60 per share (up 14%)
- Operations:
-- Advanced Materials: record performance driven foremost by growth inbattery materials
-- Precious Metals Services: continued robust performance and swiftintegration of PMG refining activities
-- Precious Metals Products and Catalysts: Strong profit contribution,in line with acquisition plan
-- Zinc: Improving performance driven by strengthening zinc market insecond half
-- Copper: Unsatisfactory copper concentrates supply conditionscontinued to impact results
- Growth:
-- New growth investments launched in 2003 in Germany, USA, South Koreaand China
- IFRS
-- Transition to IFRS accounting norms for 2003 accounts and recast of2002
-- The basis of preparation and recast of 2002 statements are detailedon pages 18-19
Key Figures:
(E million) 2002 2003
Turnover 3,160.6 4,677.1
Revenue (excluding metal) 1,036.0 1,358.0
Recurring EBIT 97.5 145.9
Non-recurring EBIT -24.8 -39.4
Total EBIT 72.7 106.5
EBITDA 227.8 277.1
Net consolidated profit (loss), Group share 32.9 60.1
Net consolidated profit (loss)
before non-recurring items, Group share 63.4 89.6
Net consolidated profit (loss)
before non-recurring items and
goodwill amortisation, Group share 69.3 97.7
Capital Expenditure 152.7 148.3
Consolidated Net Financial Debt 131.3 619.1
Capital Employed (End of Period) 1,347.6 2,071.2
EPS declared (E / share) - basic 1.45 2.63
EPS adjusted (E / share) - basic 3.06 4.27
Return on Capital Employed (ROCE) 6.5% 8.3%
CONTRIBUTION TO RECURRING EBIT1:
Belgian GAAP Belgian GAAP Belgian GAAP Belgian GAAP
(amounts in million E )
1999 2000 2001 2002
Advanced
Materials 11 25.4 31.5 20.9
Synthetic
Diamonds 11.6 8 5.4 10.1
Copper 1.7 25 13 9.7
Precious
Metals
Services -1.5 30.6 50.3 52.5
Precious Metals Products
and Catalysts2 - - -
Zinc 84 85.8 50.7 16.5
Corporate
and
Investments -18.4 -11.4 -16.8 -16.9
Total EBIT 88.4 163.4 134.1 92.8
Including Group share in net profit (loss)
from associates 15.8 13.5 13.0 15.1
IFRS IFRS
(amounts in million E ) 2002 2003
Advanced Materials 17.6 37.3
Synthetic Diamonds 13.8 12.8
Copper 8.7 0.9
Precious Metals Services 53.2 45.7
Precious Metals Products and Catalysts2 - 42.9
Zinc 17.8 28.4
Corporate and Investments -13.6 -22.0
Total EBIT 97.5 145.9
Including Group share in
net profit (loss) from associates 13.0 18.0
(1) New EBIT definition applied from 1999 - please see glossary offinancial definitions
(2): For five months of 2003 only (except Thin Film Products - 12months)
Recurring EBIT by division in %(excluding Corporate and Investments;former PMG activities five months only)
Advanced Materials 22% Synthetic Diamonds 7% Precious Metals Services 27% Precious Metals Products and Catalysts 26% Zinc 17% Copper 1%
General Overview 2003
Umicore's recurring EBIT for 2003 increased by almost 50% to E 145.9million. The strong second half results benefited from theconsolidation of PMG as of 1 August, from further improvements in theAdvanced Materials division, as well as from an improved contributionfrom the zinc business.
Notwithstanding the higher financing charges, the net result beforenon-recurring items (Group share) for 2003 also increased by 41% to E89.6 million. Net result (Group share), after taking into considerationnon-recurring charges -- mostly related to the various restructuringprogrammes launched during the year -- amounted to E 60.1 million, anincrease of 83% on the 2002 results.
It is to be noted that Umicore has adopted IFRS, as endorsed by theEuropean Commission, for the preparation of its 2003 accounts, twoyears ahead of the deadline. Figures for 2002 have consequently beenrestated using these standards while previous years have not beenrestated.
The integration process following the acquisition of PMG made goodprogress. Working capital reductions reached E 80 million by the end of2003 and a programme was finalised for the integration of the Hobokenand Hanau refineries. Various new growth investments were decidedduring the year. These included the acquisition of germanium operationsin the US, a new technology centre for automotive catalysts in Germany,the expansion of the lithium cobaltite operations in South Korea, thebuilding of a new automotive catalyst plant in China and the buildingof a facility for optical assemblies for car night vision systems.Umicore also entered into two new joint ventures in China.
Net debt at 31 December 2003 stood at E 619 million. The debt level hasthus been reduced considerably since the PMG acquisition throughoperating cash flow generation, the sale of own shares in July and theproceeds of the equity offering.
Overview by Division
ADVANCED MATERIALS
( amounts in million E ) Belgian GAAP
1999 2000 2001
EBIT - Recurring 11.1 25.4 31.5
EBIT - Non Recurring n/a n/a n/a
EBIT - Total 11.1 25.4 31.5
EBITDA 28.1 46.7 56.8
Turnover 358.3 434.5 364.8
Revenue (excluding metal) 158.4 202 216
Average Capital Employed 212.2 226.9 232.6
Recurring ROCE 4.40% 10.00% 13.80%
Capital Expenditure 11.4 27 33.9
Workforce 965 1,034 1,100
(amounts in million E ) IFRS IFRS
2002 2003
EBIT - Recurring 17.6 37.3
EBIT - Non Recurring -3.8 -2.7
EBIT - Total 13.7 34.7
EBITDA 44.1 53.6
Turnover 354.1 354.9
Revenue (excluding metal) 213.2 221.2
Average Capital Employed 239.5 203
Recurring ROCE 7.10% 18.10%
Capital Expenditure 18.8 17.9
Workforce 1,383 1,337
Recurring EBIT more than doubled in 2003 to E 37.3 million. Theperformance of the cobalt-related businesses was the main factor behindthis improvement. Return on capital employed was 18%. Non-recurringEBIT was E -2.7 million, which was the aggregate of impairment chargesfor the closure of the nickel hydroxide plant in Canada, a goodwillwrite down and write backs on cobalt inventory.
SYNTHETIC DIAMONDS
(amounts in million E ) Belgian GAAP
1999 2000 2001
Contribution to Umicore EBIT:
Recurring 11.6 8 5.4
Non Recurring n/a n/a n/a
Total 11.6 8 5.4
(amounts in million E ) IFRS
2002 2003
Contribution to Umicore EBIT:
Recurring 13.8 12.8
Non Recurring - -11.1
Total 13.8 1.7
The contribution of the Megapode synthetic diamond activities toUmicore's recurring EBIT was down 7% to E 12.8 million. The netcontribution of these activities was impacted by a non-recurring chargeof E 11.1 million related to pension adjustments and restructuringcosts.
Engineered Metal Powders
Sales of materials to the hard metal sector exceeded those of theprevious record year of 2000 as demand increased from the company'smajor customers. This was driven by improved conditions in theelectronics, oil drilling and wood cutting sectors. Umicore built onits strong reputation as a reliable supplier of high quality productsand customer service over a wide range of locations -- a positionreinforced through the acquisition in October of a 40% equity stake inGuangzhou Hongsheng Metallurgical and Chemical Company. This strength,coupled with the ability to recycle cobalt-containing residues, meantthat market share gains were recorded through the year, especially inAsia and the US.
In products for diamond tools the situation was less buoyant butsatisfactory nonetheless. The construction sector in South Korea wasvery active while the European markets were stable.
The cobalt refining activities were affected by the low activity levelsat the Olen site. This was primarily brought about by the low cobaltprice. However, in view of the steep rise in the cobalt price towardsthe end of 2003 Umicore decided to make use of the flexibility in itsoperations by increasing its refinery output in 2004. In 2003 Umicoresecured contracts to ensure enough feed is available to reach asignificantly increased target production of some 3,000 tonnes.
Sales of zinc powders for primary batteries were affected by increasedcompetitive pressure in the US market. In the Chinese market localproducers were able to benefit in the short term from the availabilityof cheaper zinc metal in their pipeline thereby applying downwardpressure on prices. Umicore announced a doubling of the capacity of thecompany's Shanghai plant in the first half of the year.
Specialty Oxides and Chemicals
Umicore's materials for rechargeable batteries had an excellent yearwith volumes some 50% up on the previous year. Sales were driven byhigh demand for Umicore's lithium cobaltite - the key material inlithium-ion batteries, which are the battery of choice for mobile phoneand laptop computer producers. Further inroads were made in the Chinesemarket.
Umicore decided to double the capacity of its lithium cobaltite plantin Cheonan, South Korea, to 2,000 tonnes. This expansion was on-streamby late 2003. In view of the increased customer demand Umicore decidedto go ahead with a further capacity expansion at its Cheonan which willboost capacity to in excess of 3,000 tonnes. This expansion will alsoprovide the necessary flexibility for the company to meet likelycustomer demand for new generations of battery materials containingless cobalt.
In view of the growth in the Chinese market, Umicore decided to build anew cobalt oxide production facility and also set up a joint venturefor the production of spherical nickel hydroxide. In this contextUmicore decided to close its nickel hydroxide operations in Canada.
Umicore also delivered some 25% more cobalt-containing materials thanin 2002 to the ceramics and chemicals market. This was primarily areflection of increased market shares, better geographic positioningand a more diversified product portfolio brought about through therecently-acquired facilities in the US and the Philippines. The salesof nickel sulphate were satisfactory although premiums continued to beunder pressure.
Electro-Optic Materials
Sales volumes of germanium substrates for space solar cells were 30%lower than 2002 as the result of reduced activity levels in the world'ssatellite programmes. However, there was a significant improvement indemand from customers during the second half of the year.
Umicore's substrates were used on both NASA Mars Explorer Rovers --Spirit and Opportunity -- as part of the solar cells and panelsprovided by Spectrolab (a Boeing company).
The pace of new product development for germanium substrates continuedto increase in 2003 with initial commercial deliveries for use in solidstate lighting (LEDs). Development work in engineered substrates formicro-electronics also shifted into a higher gear.
Deliveries of germanium tetrachloride for the fibre optics industrywere up by 50% on the extremely poor levels of 2002. Umicore began theprocess of integrating its US production and sales capabilities intoits Quapaw plant - acquired from EaglePicher Technologies during 2003.The overall integration of the Quapaw plant (which covers the opticsand high purity chemicals sectors) made good headway with synergiesidentified for implementation in 2004.
Sales volumes for thermal imaging optics materials improved althoughincreased competition led to pressure on prices throughout the year.Demand continued to increase for Umicore's chalcogenide glass and forautomotive night vision systems in particular. In late 2003 Umicoreconcluded a four-year agreement with Autoliv to supply opticalassemblies -- a key component in car night vision systems -- to theautomotive industry. A dedicated plant to produce these opticalassemblies for this new application will be built in Quapaw. Fullproduction is expected to be reached in mid-2005. This project is aworld first in the large scale production of infra-red optics for acommercial application and will support new opportunities for thismaterial in different high-volume infra-red markets.
On the development front, Umicore developed and qualified several newproducts in a number of materials for laser optics equipmentmanufacturers. The increased optics range was further complemented bythe introduction of silicon and copper mirrors.
Synthetic Diamonds
Sales volumes of synthetic diamonds increased by 18% during 2003. Thiswas due to the continued combination of market share gains intraditional market regions, successful entry into new markets andincreased substitution of conventional abrasives. Despite price erosionof some 20% in grits, Megapode managed to increase revenues by 6%.Polycrystalline products showed very healthy revenue growth of some 28%where the main drivers were the machining industry and the oil & gasdrilling industry.
Umicore recorded a non-recurring charge of E 11 million as a result ofpension adjustments and restructuring costs within Megapode.
PRECIOUS METALS SERVICES
(amounts in million E ) Belgian GAAP
1999 2000 2001
EBIT - Recurring -1.5 30.6 50.3
EBIT - Non Recurring n/a n/a n/a
EBIT - Total -1.5 30.6 50.3
EBITDA 20.8 50.9 71.4
Turnover 777.8 739.7 764.3
Revenue (excluding metal) 147.7 189.2 199.3
Average Capital Employed1 221 176.5 176
Recurring ROCE -0.70% 17.40% 28.60%
Capital Expenditure 10.4 14.6 17.9
Workforce 1,215 1,226 1,179
(amounts in million E ) IFRS
2002 2003
EBIT - Recurring 53.2 45.7
EBIT - Non Recurring 0 0
EBIT - Total 53.2 45.7
EBITDA 78.2 71.3
Turnover 768.8 1,717.0
Revenue (excluding metal) 201 214.7
Average Capital Employed1 166.6 240.6
Recurring ROCE 32.00% 19.00%
Capital Expenditure 36.3 23.2
Workforce 1,160 1,180
1: Average of PMG activities calculated for 5 month period
Recurring EBIT in 2003 amounted to E45.7 million, representing a ROCEof 19%. This reflects the integration of the loss-making refiningoperations in Hanau and also the tighter supply situation forindustrial by-products and end-of-life materials. The results for 2003included a positive five-month contribution from the PMG MetalsManagement activity.
The Hoboken activities were affected by the reduced availability of rawmaterials. In particular, the availability of industrial residues suchas tankhouse slimes from the copper industry and residues from lead /zinc smelters were down leading to increased competition in the marketfor these raw materials. Against this backdrop Umicore was, however,able to increase its intake of materials from the zinc industry largelythrough its ability to treat zinc flotation residues from zinc smeltingoperations. The reduced availability of end-of-life materials wasbrought about in part by the lower price of certain key metals such aspalladium and rhodium. Also, the general economic situation worldwidein the past couple of years has meant that consumption of newelectronic equipment -- and therefore availability of old electronicequipment -- has been gradually declining. Supplies of spent catalysts-- both automotive and industrial -- were stable compared with 2002.Overall, the flexibility of Umicore's flow sheet meant that the companywas able to deal pro-actively with the changed supply situation.
Continued improvements in productivity and process efficiency (thelatter leading to reductions in working capital) again provided apositive counterweight to the prevailing market conditions. The newleaching and electrowinning facility was commissioned ahead of scheduleand performed according to expectations.
The integration of the Hanau refining operations, which had beenloss-making for a number of years, enabled the combined entity toidentify and realise a number of synergies. The integration processmade rapid progress and a restructuring plan was announced to theworkforce at the Hanau plant. Some activities will be closed whileothers will focus on providing support to the development ofadded-value products in Hanau such as organo-metallic chemicals andcatalysts. The integration of the Hanau operations should give accessto new materials on the recycling market.
The newly configured precious metals management activities noweffectively support all of Umicore's precious-metals-related businessesand in 2003 they met the planned level of contribution to the resultsof the Precious Metals Services activities.
PRECIOUS METALS PRODUCTS AND CATALYSTS
(amounts in million E ) IFRS
2003(1)
EBIT - Recurring 42.9
EBIT - Non Recurring 0
EBIT - Total 42.9
EBITDA 62.7
Turnover 646
Revenue (excluding metal) 286.9
Average Capital Employed 538.3
Recurring ROCE 17.50%
Capital Expenditure 13.7
Workforce 3,156
(1) : Five months for ex PMG activities and 12 months for Thin FilmProducts (previously in Advanced Materials)
Recurring EBIT of these activities (which mainly consist of former PMGactivities) reached E42.9 million, corresponding to a return on capitalemployed of 17.5%.
Automotive Catalysts
Sales volumes for passenger cars in Europe and North America weresomewhat lower than in 2002, although higher than expected due to toaggressive customer incentive schemes implemented by the automobilemanufacturers and dealers.
Umicore's automotive catalyst business continued on its growth path,exceeding the planned volumes and performance levels forecast for theyear. A major factor in this growth has been the success of thedevelopment plans in the US market. In this context the plant atBurlington in Canada gradually ramped up its production and deliverylevels. Sales to the rapidly growing Chinese market were strong withthe demand being met by Umicore's South Korean joint venture.
During the year the company also began its entry into the promisingmarket for heavy duty diesel catalysts. Umicore is capitalizing on itsleadership in catalyst technology for diesel engines to develop apresence in the retrofit segment for existing trucks and other heavyvehicles, whilst also positioning itself for the emergingheavy-duty-diesel original equipment market. In many countries thesevehicles require catalysts to be fitted in order to conform withexisting or planned legislation on emissions.
Following the completion of the PMG acquisition Umicore decided to goahead with three projects that are key to the continuing growth andsuccess of the Automotive Catalyst business:
The introduction of new catalyst technology for diesel particulatefilters (DPFs) was announced in August. This product, which wasintroduced in DaimlerChrysler's C-class and E-class models withfour-cylinder diesel engines, enables further reductions in harmfulemissions from diesel engines compared to conventional filters withoutcatalysts. In December, Umicore also announced plans for a newautomotive catalyst test centre in Hanau, Germany, which will beoperational by January 2005. The construction of a new productionfacility in Suzhou, China, was also decided. This production facility,which will be operational in the second half of 2005, will greatlyenhance Umicore's ability to serve the Chinese market. China has beenintroducing more stringent emission regulations and is also producingever-greater numbers of passenger cars as its domestic market expands.
Technical Materials
Despite weak economic conditions the technical strength of thisbusiness helped generate overall growth in sales volumes year-on-year.Overall performance was better and competitiveness strengthened becauseof improvements made in the cost base. Sales of platinum engineeredmaterials were driven by the increased demand from LCD glass producersfor whom Umicore provides essential equipment. Sales of platinum gauzecatalysts improved, particularly in Asia, even though end user marketswere subdued. In electronic packaging materials demand in the Asianmarket improved in the fourth quarter of the year due to the upturn inthe electronics market. Sales of electrical contact materialsindirectly benefited from the positive evolution in the Chinese marketwhile a constant business performance in brazing alloys in a difficultmarket, coupled with the implementation of efficiency measures, had apositive effect .
Jewellery and Electroplating
Sales volumes of jewellery and industrial metals were up some 7%compared with 2002. General demand for jewellery was down in Europe butthe jewellery business (which is served by the Allgemeine group basedin Pforzheim, Germany) benefited from increased demand from itscustomers -- mainly large branded jewellery manufacturers -- for higherquality materials. The company improved its competitive position insilver medal blanks and sales of other silver-based products were grownsuccessfully in Europe. The sales levels and performance inelectroplating showed a slight improvement compared with 2002 and thebusiness was able to expand its strong position in Asia.
Precious Metals Chemistry
Overall sales volumes in the Precious Metals Chemistry segment weredown compared with those of 2002. However, sales of organo-metallicchemicals and catalysts increased and a significant capacity expansionfor these products was completed in Hanau, becoming operational in thefourth quarter of the year. Sales of precursors for heterogeneouscatalysts -- primarily for environmental applications -- were lower in2003.
Thin Film Products
Strong sales to the optics and electronics sectors were achieved in2003, compensating for lower sales to the optical data storage sector.
Sales of display materials were driven by strong sales of chrometargets in Taiwan, while in indium tin oxide a noticeable upswing tookplace in the fourth quarter and new business was secured in Asia andEurope.
As part of the integration process with former PMG activities apartnership was developed with Umicore's subsidiary in Pforzheim -Allgemeine Gold- und Silberscheideanstalt AG. Allgemeine's silvertargets business will be integrated into Thin Film Products and new,joint sales and marketing initiatives initiated.
ZINC
(amounts in million E ) Belgian GAAP
1999 2000 2001
EBIT - Recurring 84 85.8 50.7
EBIT - Non Recurring n/a n/a n/a
EBIT - Total 84 85.8 50.7
EBITDA 121.1 128.2 86.6
Turnover 841.5 971.8 817.9
Revenue (excluding metal) 399.4 439.1 443.5
Average Capital Employed 347.1 333.2 290.5
Recurring ROCE 24.20% 26.70% 17.00%
Capital Expenditure 17.9 25.3 41.6
Workforce 2,440 2,448 2,691
(amounts in million E ) IFRS
2002 2003
EBIT - Recurring 17.8 28.4
EBIT - Non Recurring -16.7 -9
EBIT - Total 1.1 19.3
EBITDA 52.7 64.2
Turnover 754 803.6
Revenue (excluding metal) 425 440.6
Average Capital Employed 236.2 264.5
Recurring ROCE 6.50% 10.00%
Capital Expenditure 43.4 45
Workforce 2,860 2,863
Recurring EBIT increased by 60% in 2003 to E28.4 million. Thisimprovement was primarily due to a better zinc price in 2003 comparedwith 2002. Return on capital employed rose to 10%. Non-recurring EBITwas E-9 million, which related primarily to the restructuring programmein zinc smelting.
Zinc Smelting
The zinc industry benefited in 2003 from the closure of three smelters.This rationalisation helped to address part of the supply / demandimbalance on the market. The average zinc price improved in 2003,reaching an average of $828 per tonne compared with $778 per tonne in2002. The improvement was most noticeable in the fourth quarter of theyear and the end of year price of $1,008 per tonne was some 35% higherthan at the end of the previous year. It should be noted, however, thatin Euro terms this improvement was only 12%.
Umicore's production of zinc slabs reached a record for 2003, with morethan 500,000 tonnes being produced for the first time on an annualbasis. The market for concentrates remained tight and although somebalance was restored to the market in Europe, market treatment chargesremained poor. Umicore was, however, able to profit from its long-termcontracts. The rise in sulphuric acid prices during 2003 enabledUmicore to derive increased benefit from sales of this by-product.
Energy costs at the Balen plant rose as a result of higher electricityprices and increased levels of taxation on energy consumption. Lowertaxation of electricity in France positively impacted the Auby plantand offset the situation in Balen to some extent.
A significant breakthrough in the treatment of zinc flotation residuesfrom the Balen plant was announced during the year. The process wasextended to the Auby facility towards the end of the year. This hasenabled Umicore to reduce its waste stream by up to 25,000 tonnes intotal residues per year. Another breakthrough came in the technologyfor the storage of goethite residues. This development has thepotential to significantly extend the life of the storage ponds.
The rise in the zinc price (denominated in US dollars) during the yearwas less significant in Euro terms as the dollar weakened. Umicore was,however, able to benefit from its dollar hedging programme, whichenabled the company to realise the full value of the zinc price rise -a benefit not available to many of its competitors.
In order to safeguard its competitiveness Umicore announced arestructuring of its European zinc smelting operations in January 2004.This restructuring involves the reduction of the combined workforces atAuby and Balen by 136 people. The planned cost savings of E14 millionper year will take full effect as from 2006.
Padaeng
Production at Padaeng Industry reached 113,700 tonnes for the year - anincrease of 8% on the level of 2002. The company's results felt theimpact of poor treatment charges, a lower US dollar and higherelectricity costs. Despite this the company posted a slight profit in2003 compared with a loss in 2002. Concerted efforts were made toincrease the proportion of the cheaper silicate ores in the feedthereby improving the cost position. In this context a new flotationplant was commissioned towards the end of 2003. The gradual reductionof import tariffs on zinc coming into Thailand affected margins inPadaeng Industry's home market.
Zinc Alloys and Chemicals
The galvanizing business line benefited from improved sales volumes - aconsequence of the closure of two European competitors. Combined saleswere up by some 15% year-on-year for all products. The increase insales of specialty products was, however, less significant. Premiumsalso firmed up, especially in base products for the steel industry.Umicore's subsidiary Galva 45, based in France, successfully started upa new line for the galvanizing of automotive parts for the French carindustry.
Sales of Umicore's diecasting alloys in the main European market werestable in 2003 - an encouraging sign given the poor economic backdropthat prevailed during much of the year. Sales to Eastern Europeimproved while the Asian market was characterised by very toughcompetition and reduced premiums.
In fine zinc powders Umicore benefitted from its world-wide network ofproduction facilities. During the year the Asian market, particularlyChina, continued to demonstrate high levels of demand. In response tothis, a first capacity increase is being implemented in the Chineseoperations and will be on-stream by the first quarter of 2004. TheEuropean market remained at levels that were comparable with 2002.
The zinc oxide operations performed well. Despite the low level of theaverage zinc price in 2003, the recycling activities at Rezinal wereable to live up to expectations and increased the delivery volumes ofzinc ashes to the Zolder and Eijsden plants of Umicore.
Building Products
Performance in this business remained at a high level. Overall saleslevels were slightly down on 2002 although the business was able toretain its competitive edge and benefit from improved margins.
Sales in the French market were satisfactory but below the levels seenin 2002. The situation elsewhere in Europe remained as difficult as ithad been in the previous year although there were encouraging signstowards the end of 2003 that the decline in the German market had beenhalted.
The development of new geographical markets gave mixed results in 2003.The overall picture is in line with expectations, however, and theEastern European market proved particularly successful. In terms of newproduct areas, Umicore's growing presence in multi-metal transformationserved the business well.
COPPER
(amounts in million E ) Belgian GAAP
1999 2000 2001
EBIT - Recurring 1.7 25 13
EBIT - Non Recurring n/a n/a n/a
EBIT - Total 1.7 25 13
EBITDA 25.2 54.4 43.5
Turnover 791.7 1,154.5 1,036.2
Revenue (excluding metal) 159.8 205.3 199.4
Average Capital Employed 366.9 399.7 417.3
Recurring ROCE 0.50% 6.20% 2.90%
Capital Expenditure 24 38.1 77.3
Workforce 2,282 2,087 2,120
(amounts in million E ) IFRS
2002 2003
EBIT - Recurring 8.7 0.9
EBIT - Non Recurring -1.4 -5.9
EBIT - Total 7.3 -5
EBITDA 39.5 28.1
Turnover 926.5 928.1
Revenue (excluding metal) 196.8 194.5
Average Capital Employed 422.8 427.7
Recurring ROCE 1.80% 0.00%
Capital Expenditure 43.3 34.5
Workforce 1,809 1,734
Recurring EBIT decreased to E0.9 million. This stemmed largely from thecontinued worsening of treatment and refining charges in 2003.Non-recurring EBIT of E-5.9 million was related to the restructuring atthe Olen site in Belgium.
The copper price averaged $1,775 per tonne during 2003, with a strongincrease during the second half of the year. Of more direct relevanceto Umicore's copper operations, however, was the persisting tightnesson the world's concentrates market which resulted in market treatmentand refining charges (TC / RCs) reaching new historical lows during2003. Market TC / RCs continue to be distorted by various governmentsupport mechanisms in various Asian countries. The availability ofscrap materials was also tight, although the situation eased towardsthe end of the year.
Umicore's smelting operation at Pirdop in Bulgaria produced 213,000tonnes of anodes, thereby exceeding the planned annual output by 3,000tonnes. This was the first year that the operations were able to fullybenefit from the capacity increase that had been completed in late2002. This improved performance enabled the facility to offset most ofthe decrease in treatment and refining charges for concentratescompared with 2002.
Refined copper production at the Olen facility in Belgium reached325,000 tonnes, 2% up on the level of 2002. This was the result ofimproved efficiency at the Olen tankhouse and despite the difficulty inobtaining supplies, specifically of scrap material.
The market situation for Umicore's copper products remained lacklustrein 2003. Sales of copper wire rod were stable compared with 2002 levelsalthough premiums suffered from a combination of overcapacity in Europeand slack demand from the key automotive and construction sectors. Thiswas particularly the case in the German market. Umicore's market sharesremained stable. Sales of vertically cast products were slightly up inwhat were difficult market conditions and premiums and market sharewere defended successfully through the year.
CORPORATE & INVESTMENTS
(amounts in million E ) Belgian GAAP
1999 2000 2001
EBIT - Recurring -18.4 -11.4 -16.8
EBIT - Non Recurring n/a n/a n/a
EBIT - Total -18.4 -11.4 -16.8
EBITDA -0.9 -1.7 -4.5
Average Capital Employed 184 153 207.2
Capital Expenditure 16.6 6 7.4
Workforce 1,163 1,097 1,147
(amounts in million E ) IFRS
2002 2003
EBIT - Recurring -13.6 -22
EBIT - Non Recurring -2.9 -10.7
EBIT - Total -16.5 -32.7
EBITDA -0.5 -4.5
Average Capital Employed 250.9 214.6
Capital Expenditure 10.8 14.1
Workforce 1,126 1,200
The scope of Corporate and Investments segment changed during 2003 withthe inclusion of the Fuel Cells venture, the corporate function of PMGand the Venture Unit. Also Umicore's marketing structure has beenreorganised. Recurring EBIT fell to E-22 million from E-13.6 millionlargely as a result of these changes in scope. The non-recurring EBITwas E-10.7 million reflecting restructuring charges at UmicoreEngineering and corporate functions, impairment charges in the VentureUnit and environmental provisions.
UMS and Traxys
The sales networks of UMS and the former PMG were amalgamated and themove to common premises will be completed in most locations by the endof the first quarter of 2004.
Umicore Marketing Services and Arcelor International agreed to combinetheir third party non-ferrous and ferro-alloys marketing activitiesinto a trading and distribution joint venture named Traxys. Thebackdrop of improving conditions in the ferro-alloys and minor metalsmarkets benefited Traxys in its launch year and the US market provedthe main axis of growth. The new company was able to produce goodreturns in its first year of operations.
Research Development and Innovation (RDI)
In the course of 2003 the size and scope of Umicore's R&D capabilitieshas expanded significantly. Annual R&D expenditure for the combinedgroup will increase to some E75 million.
The main projects undertaken in 2003 included developingnext-generation products and solutions in areas of powder metallurgy,precious metals chemistry, battery materials, automotive catalysts anddiverse alloys and improving processes in galvanochemistry, diecasting,contact materials and target materials. Studies to further reduceresidues from the zinc smelting process and further improvements in therecycling flow-sheet for precious metals, were also undertaken.
In the Venture Unit the electronic powders project was mature enough tobe transferred to the business unit Engineered Metal Powders during2003. Although much technological progress was made in compoundsemiconductors, the market for these materials weakened in 2003 and inearly 2004 it was decided that the company should pursue otherdevelopment avenues such as engineered substrates and that an exitscenario be developed for this project.
An important long-term development platform for Umicore is the FuelCell unit. Fuel cells are forecast to grow in importance as a moresustainable power source in portable, stationary and automotiveapplications. In 2003 Umicore continued to work in conjunction with itsdevelopment partners in fine-tuning its technology and exploringcommercial opportunities. In 2004 further work will be carried out inanalysing market potential and future development paths.
ENVIRONMENT HEALTH AND SAFETY
Umicore continued to make good progress in improving the health andsafety performance throughout the Group. In 2003 the frequency rate of7.6 was well down on the previous year's figure of 11.7 - the seventhyear in a row that the rate has been reduced. Similarly the severityrate fell from 0.41 to 0.24 - this represents a 74% improvement since1997.
Umicore participated in the Belgian Climate Change initiatives bytaking part in the voluntary agreements with the regional governmentsof Flanders and Wallonia. Energy efficiency enhancement projects havebeen developed in the relevant sites.
In Flanders, Umicore is continuing its discussions with the competentauthorities. There is currently a common understanding of the risksrelated to the contamination on the sites and Umicore and theauthorities are close to a common understanding on what type ofclean-up actions should be undertaken. The company is the finalnegotiating stage with the Flemish Ministry of Environment and theFlemish Regional Waste Authority (OVAM), to complement the existingcovenant of 1997. In France, Umicore has initiated an in-depth riskassessment exercise under the guidance of the competent authorities. InViviez, Umicore initiated a voluntary risk assessment, however,involving the authorities closely in the process.
In view of all these developments, as well as taking into account thereduction in provisions for the covering of the goethite ponds, Umicorehas added a net amount of E3.4 million to its environmental provisions.As far as can be assessed today, provisions in the balance sheet as at31 December 2003, including those related to constructive obligationsrecorded in the IFRS opening balance sheet, should be sufficient toadequately address the remediation of all substantive risks related tohistorical pollution.
Financial matters
Dividend: A gross dividend of E1.60 will be proposed by the Board atthe Annual General Meeting.
Financial costs were E36 million, up E12.8 million on 2002 due tohigher indebtedness as a result of the PMG acquisition and a E2.4million net impairment charge on financial assets. The impact of ahigher debt level was partly offset by lower interest rates.
Debt: net debt stood at E619 million at the end of 2003, correspondingto a gearing ratio of 34% The debt level was up by E330 millioncompared with the end of June 2003 but was reduced by E274 millionsince the acquisition of PMG due to the capital increase, the sale ofone million treasury shares and cash flows from operations includingworking capital reductions. In January 2004 Umicore successfullylaunched its first ever Eurobond issue for E150 million, with amaturity period of eight years.
Currency hedging: About 85% of the US dollar exposure for 2004 has beenhedged at an average rate of 0.91 USD / EUR and 25% of the exposure for2005 hedged at an average rate of 0.98 USD / EUR.
Own shares: Umicore owned 689,274 of its own shares as at 29 February2004, representing 2.7% of the outstanding equity.
Outlook
Umicore expects that recurring EBIT for 2004 will register anothersignificant increase, driven by the consolidation of the acquired PMGactivities for a full twelve months, the further improvement in thecontribution of Advanced Materials and a better overall zinc market.The contribution of the other businesses is, at present, expected to bebroadly in line with the 2003 performance.
For Advanced Materials the positive market development for rechargeablebatteries looks set to continue in 2004 with Umicore well placed tobenefit from its increased production capabilities. The Electro-OpticMaterials businesses are likely to benefit from any further uplift inthe telecommunications sector as witnessed towards the end of 2003.
The synthetic diamond business is expected to face a more difficultmarket environment.
In Precious Metals Services, the tight supply situation for by-productsfrom the non-ferrous sector is likely to persist into 2004. The WEEEdirective, which obliges electronic goods producers to take backend-of-life products, is expected to already lead to improvedavailability of volumes for recycling in 2004. The supplies of spentcatalysts should see an improvement as Umicore benefits from a broadersupply base.
The automotive catalyst business is expected to continue to grow, buthigher R&D charges will be incurred as the unit is preparing for futuremarket opportunities. There is no major change in the short termoutlook for the other business units of Precious Metals Products andCatalysts.
The improved supply / demand balance in the zinc industry worldwide,reflected in the first instance by higher zinc prices, seems to pointto a clear improvement for the Zinc business in 2004.
Despite the strength of the copper price, treatment and refiningcharges have continued to fall due to a tight concentrates market.However, there is no expectation that this market situation will affectUmicore's production levels. A recovery in the smelting and refiningsector is not anticipated before 2005.
For more information: n.v. Umicore s.a.: Investor Relations : Mrs Isabelle MICHOTTE Tel. +32 2 227 71 47 - isabelle.michotte@umicore.com Press: Mr Eddy CORNELIS Tel. +32 2 227 70 64 - +32 475 84 00 94 eddy.cornelis@umicore.com
Annexes
Adoption of IFRS: basis of preparation
Umicore has adopted International Financial Reporting Standards(IFRS)(1) to prepare and report its consolidated financial statements,in accordance with the Belgian Royal Decree of 4 December 2003, whichdefines the conditions for early adoption. The provisions of thisDecree are in line with European Commission regulation No 1725 / 2003to endorse all International Accounting Standards existing on 14September 2002, with the exception of IAS 32 and 39 and the relatedinterpretations of the IAS Board Standing Interpretations Committee.Umicore has also followed the guidance of IFRS 1 for first timeapplication. Those matters for which no international standard had beenendorsed at the balance sheet date were treated in accordance withBelgian accounting norms, as in prior years. These matters includefinancial instruments, the cost of equity transactions and theclassification of own shares in the balance sheet.
(1) As per the standards and interpretations published by theInternational Accounting Standards Board (IASB) and the IASB's StandingInterpretations Committee (SIC) respectively.
The adoption of IFRS entailed restating the 2002 financial statementsin line with the new accounting rules, thereby making this datastrictly comparable with that of 2003. As part of this exercise, a newopening balance sheet was prepared as at January 1st 2002, whichcaptures, through retained earnings, the effect of measurement broughtabout by the application of IFRS at that date. As a result of thisrestatement the Group's equity increased by E20 million, reflectingmainly the following differences:
E million
E million
recognition of deferred tax assets 70
recognition of constructive obligations -65
provision for major repairs 33
de-recognition of intangibles -33
other effects, incl. reclassifications 15
20
IFRS have also brought a certain number of changes to the incomestatement and to its presentation. The most notable change relates tothose items which were previously reported as extraordinary but willhenceforth be treated as operating items. However, in order to improvethe readability of the income statement, results which are of anon-recurring nature will be identified separately. The restatement ofthe 2002 income statement is shown below:
Million E
Original IFRS IFRS IFRS
2002 2002 2002 2002
Recurring Non-recurring Total
Profit from
operations 77.6 84.5 -24.8 59.7
Finance cost -16.6 -22.9 0 -22.9
Income from
financial
investments n.a. 0 -0.3 -0.3
Income from
Associates 15.1 13 0 13
Extraordinary
results -19.6 n/a n/a n/a
Tax -3.2 -6 -5.4 -11.4
Net result 53.3 68.7 -30.5 38.2
Minority share -4.9 -5.3 0 -5.3
Net result, group
share 48.4 63.4 -30.5 32.9
Net income decreased by E15.1 million as a result of the restatement,mainly reflecting higher tax charges (E8.2m) and a one-time effect oninventories (E6m). The higher tax charge includes the effect of thereduction in corporate income tax rate (E5.4m) on deferred tax assets.This is reported as non-recurring. Other non-recurring items includerestructuring costs and impairment of assets, previously reported asextraordinary result.
Key Figures:
(amounts in E million)
Belgian GAAP
1999 2000 2001
Turnover 3,180.2 3,834.7 3,511.2
Revenue
(excluding metal) 865.3 1,035.7 1,058.3
Recurring EBIT 88.4 163.4 134.1
Non-recurring EBIT - - -
Total EBIT 88.4 163.4 134.1
EBITDA 207.5 307.8 276.3
Net consolidated
profit (loss),
Group share 69.3 136.1 116
Net consolidated
profit (loss) before
non-recurring items,
Group share 60.2 140 105.2
Net consolidated profit (loss) before
non-recurring items
and goodwill amortisation,
Group share 69.7 152.8 117.3
Capital Expenditure 80.4 111 178.1
Cash Flow before
Financing 183.5 226.2 59.7
Consolidated
Net Financial Debt 334.7 184.3 261.5
Capital Employed
(End of Period) 1,508.3 1,464.8 1,514.7
Total shares outstanding
(end of period) 25,617,515 25,617,515 22,600,000
Average number of
shares - basic eps n/a n/a n/a
Workforce at
end of period 8,065 7,892 8,237
EPS declared (E / share)
- Basic 2.7 5.31 5.13
EPS declared (E / share)
- Fully Diluted - - -
EPS adjusted (E / share)
- Basic (1) 2.72 5.96 5.19
EPS adjusted (E / share)
- Fully Diluted - - -
Net debt / Equity
(end of period) 24% 14% 19%
Return on Capital
Employed (ROCE) 6.00% 11.70% 9.50%
IFRS IFRS
(amounts in E million) 2002 2003
Turnover 3,160.6 4,677.1
Revenue (excluding metal) 1,036.0 1,358.0
Recurring EBIT 97.5 145.9
Non-recurring EBIT -24.8 -39.4
Total EBIT 72.7 106.5
EBITDA 227.8 277.1
Net consolidated profit (loss),
Group share 32.9 60.1
Net consolidated
profit (loss) before
non-recurring items,
Group share 63.4 89.6
Net consolidated profit (loss)
before non-recurring items
and goodwill amortisation, Group share 69.3 97.7
Capital Expenditure 152.7 148.3
Cash Flow before Financing 180.6 -527.8
Consolidated Net Financial Debt 131.3 619.1
Capital Employed (End of Period) 1,347.6 2,071.2
Total shares outstanding (end of period) 22,600,000 25,420,175
Average number of shares - basic eps 22,600,000 22,865,537
Workforce at end of period 8,338 11,470
EPS declared (E / share) - Basic 1.45 2.63
EPS declared (E / share) - Fully Diluted 1.45 2.62
EPS adjusted (E / share) - Basic (1) 3.06 4.27
EPS adjusted (E / share) - Fully Diluted 3.06 4.25
Net debt / Equity (end of period) 11% 34%
Return on Capital Employed (ROCE) 6.50% 8.30%
(1) for 1999 - 2001 'EPS adjusted' = previously reported 'EPS adjusted
before metal inventory write-downs and goodwill amortization.'
Consolidated income statement
IFRS IFRS IFRS
(amounts in E million) 2002 2002 2002
Recurring Non Total
Recurring
Turnover 3,160.6 3,160.6
Result from operations (1) 84.5 -24.8 59.7
Finance Cost -22.9 0 -22.9
Income from financial investments 0 -0.3 -0.3
Income from associates 13 0 13
Profit (loss) before tax 74.7 -25.1 49.5
Income tax expense -6 -5.4 -11.4
Profit (loss) after tax 68.7 -30.5 38.2
Minority interests 5.3 0 5.3
Net profit (loss) for the period 63.4 -30.5 32.9
(1) of which depreciation and 117.8
impairment loss Goodwill amortisation 5.9 0 5.9
(in operations and associates)
IFRS IFRS IFRS
(amounts in E million) 2003 2003 2003
Recurring Non Total
Recurring
Turnover 4,667.1 4,677.1
Result from operations (1) 128 -28.3 99.7
Finance Cost -33.6 0 -33.6
Income from financial investments 0 -2.4 -2.4
Income from associates 18 -11.1 6.9
Profit (loss) before tax 112.3 -41.8 70.5
Income tax expense -12.6 10.1 -2.5
Profit (loss) after tax 99.7 -31.7 68
Minority interests 10.1 -2.2 7.9
Net profit (loss) for the period 89.6 -29.5 60.1
(1) of which depreciation and 136.2
impairment loss Goodwill amortisation 8.1 2.4 10.5
(in operations and associates)
Consolidated Balance sheet:
IFRS IFRS
Amounts in E million 31 Dec '02 31 Dec '03
Non current assets 1,107.1 1,412.5
Intangible assets 52.5 120
Property, Plant & Equipment 774.5 950.8
Investments in Associates 162.3 194.5
Financial assets 53.2 56.2
Other non-current assets 5 9
Deferred tax assets 59.6 82
Current assets 1,152.9 1,696.2
Inventories 650.3 905.6
Trade and other receivables 324.1 637.6
Current Investments 72.5 24
Cash & cash equivalents 106 129.1
TOTAL ASSETS 2,260.0 3,108.7
Group shareholders' equity 1,024.3 1,129.4
Minority interests 64.8 62.6
Non current liabilities 380.1 462.9
Provisions Employee Benefits 135.3 192.7
Financial debt 87.8 35.5
Trade debt and other payables 5.5 5
Deferred tax liabilities 12.7 39.9
Provisions for liabilities & charges 138.8 189.8
Current liabilities 790.8 1,453.8
Financial debt 222 736.7
Trade debt & other payables 556.4 668.4
Provisions for liabilities & charges 12.5 28.7
TOTAL LIABILITIES 2,260.0 3,108.7
-- The statutory auditor, PricewaterhouseCoopers Reviseursd'Entreprises SCCRL, represented by Robert Peirce and Luc Discry, haveconfirmed that their audit work, which is substantially complete, hasnot revealed any significant matters requiring adjustments to the 2002and 2003 accounting information included in this press release.'Consolidated statement of cash flows:
Belgian GAAP
(amounts in E million) 1999 2000 2001
Operating cash flow 146.3 274.6 151.5
Change in working capital requirements 39.7 25.7 -12.1
Net cash from operating activities 186 300.3 139.4
Capital Expenditures -80.4 -104.4 -178
Acquisitions -8.5 -40.9 -45.6
Disposals 89.1 70.2 143.3
Loans -2.7 1.1 0.6
Net cash from investing activities -2.5 -74.1 -79.7
Change in debts -82.4 -98 0.7
Treasury Shares -7.7 -65.3 -83.9
Dividends -38.9 -31.7 -34.6
Interests -10.8 -24.2 20.9
Capital increase / subsidies 0.3
Net Cash from financing activities -139.5 -219.1 -97
Change in cash 44 7.1 -37.3
IFRS IFRS
(amounts in E million) 2002 2003
Operating cash flow 173.4 190.6
Change in working capital requirements 179.3 50.6
Net cash from operating activities 352.7 241.1
Capital Expenditures -151.3 -142
Acquisitions -46.6 -644.3
Disposals 6.1 7
Loans 19.7 10.3
Net cash from investing activities -172.1 -768.9
Change in debts -77.6 452.5
Treasury Shares -40.2 44.7
Dividends -31.8 -68.3
Interests -17.4 -18.7
Capital increase / subsidies 0.6 144.8
Net Cash from financing activities -166.3 555.1
Change in cash 14.4 27.3
Glossary financial definitions:
EBIT (new definition applied to the full period 99 - 2003)
Operating profit (loss) of fully consolidated companies + Group sharein net profit (loss) of companies accounted for under equity methodAsfrom 2002, non recurring items are shown separately:
Non-recurring EBIT:
Includes non-recurring items related to restructuring measures,impairment of assets, and other income or expenses arising from eventsor transactions that are clearly distinct from the ordinary activitiesof the company. Metal inventory write-downs are part of thenon-recurring EBIT of the business groups.
EBITDA:
EBIT + (depreciation and amortisation + increase in provisions -provisions write-backs + inventory write-downs - inventory write-backs)of fully consolidated companies
Revenue excluding metals:
All revenue elements - value of purchased metals
Return on Capital Employed (ROCE):
Recurring EBIT / average capital employed, where EBIT is adjusted forcertain financial items such as securitisation costs
Capital Employed:
Total equity + net interest-bearing debt
Capital expenditure:
Investments in tangible and intangible assets
Cash-Flow before Financing:
Net Cash provided by Operating Activities + Net cash provided byInvesting Activities
Net financial debt:
Non current financial debt + current financial debt - cash and cashequivalents - current investments
EPS
For the period 1999 - 2001, EPS is computed based on the total numberof outstanding shares at the end of the period. EPSdata for 2002 and2003 are described below. Treasury shares are included in the totalnumber of outstanding shares.
EPS declared - basic:
Net earnings, Group share / average number of outstanding shares
EPS declared - fully diluted:
Net earnings, Group share / (average number of outstanding shares +number of potential new shares to be issued under the existing stockoption plans).
EPS adjusted - basic:
Net recurring earnings before goodwill amortisation, Group share /total number of outstanding shares
EPS adjusted - fully diluted
Net recurring earnings before goodwill amortisation, Group share /(average number of outstanding shares + number of potential new sharesto be issued under the existing stock option plans).
Forward looking statements
This presentation contains forward-looking information that involvesrisks and uncertainties, including statements about Umicore's plans,objectives, expectations and intentions. Readers are cautioned thatforward-looking statements include known and unknown risks and aresubject to significant business, economic and competitive uncertaintiesand contingencies, many of which are beyond the control of Umicore.Should one or more of these risks, uncertainties or contingenciesmaterialize, or should any underlying assumptions prove incorrect,actual results could vary materially from those anticipated, expected,estimated or projected. As a result, neither Umicore nor any otherperson assumes any responsibility for the accuracy of theseforward-looking statements.
PROFILE
Umicore is an international metals and materials group. Its activitiesare centred on five business areas : Precious Metals Services, PreciousMetals Products and Catalysts, Advanced Materials, Zinc and Copper.Each business area is divided into market-focused business units.
Umicore focuses on application areas where it knows its expertise inmaterials science, chemistry and metallurgy can make a real difference,be it in products that are essential to everyday life or those at thecutting edge of exciting, new technological developments. Umicore'soverriding goal of sustainable value creation is based on this ambitionto develop, produce and recycle metals in a way that fulfils itsmission: materials for a better life.
The Umicore Group has industrial operations on all continents andserves a global customer base; it generated a turnover of EUR 4.7billion in 2003 and currently employs some 11,500 people.
A webcast of the analysts' meeting can be viewed on www.umicore.com asfrom 4 March 2004. Audio streaming will be available separately in caseof technical access restrictions.The financial statements and slidesused for the presentation of the results to the press and analysts arealso available on the website.