interim report - boliden – metals for modern life...interim report january – march 2011 lennart...
TRANSCRIPT
Interim ReportJanuary – March 2011
Lennart EvrellPresident & CEO
Håkan GabrielssonDirector Group Control
Q1 Summary
Market Industrial activity continued to improve Good metal demand Precious metals – strong price
development Volatile macro environment
Boliden Revenues MSEK 10,158 (8,316) EBIT ex PIR* MSEK 1,500 (1,043)
‒ Operating profit MSEK 1,359 (1,230) Free Cash Flow MSEK 448 (-52) Stronger SEK offsets price increases
in USD
Lower terms for smelters Aitik ramp-up continued
‒ Low availability of equipment in Q1 E-scrap expansion on plan Decision to start Kankberg gold mine Decision to expand Garpenberg
2011-05-03Boliden Group 2
* PIR=Process Inventory Revaluation
Group EBIT Development
2011-05-033Boliden Group
*Process Inventory Revaluation
-500
0
500
1 000
1 500
2 000
2 500
Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111
MSEK
Quarterly EBIT
Quarterly EBIT excl PIR*
The Market
2011-05-03Boliden Group 4
Metal markets – first quarter 2011
Demand‒ Continued growth in zinc and copper demand
‒ Copper demand in China lower in Q1‒ Good industrial demand in Europe
Supply‒ Lower growth in metals production‒ Zinc concentrate market in deficit, copper in balance mid quarter, surplus in
March‒ Low activity short term among Chinese smelters
Prices‒ Average USD prices up – offset by stronger SEK for Boliden‒ Silver price, strong development + 23% in Q1
Concentrate market‒ Zinc TC 226* (264) USD/t concentrate‒ Copper TC up to 56.5* (46.5) USD/t concentrate‒ Several copper contracts on 2-3 years average TC terms‒ Free metals minimized
2011-05-03Boliden Group 5
* Based on comments by external research companies
-10
-5
0
5
10
15
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Year on year %
World China USA EU
Source: Reuters Datastream, IMF, Boliden calculation of world GDP
World: Countries accounting for approx.80% of world GDP
Global GDP development
2011-05-03Boliden Group 6
Continued robust global growth China , continued strong development
2005 2006 2007 2008 2009 2010 2011
Construction Market
No sign of slowdown in China USA still weak Europe mixed
2011-05-03Boliden Group 7
-20
-10
0
10
20
30
40
Year on year %
China-residential investments cumulative value
USA-total construction spending value
EU construction production
Source: Reuters Datastream
China
EU
USA
2006 2007 2008 2009 2010 2011
Automotive Market
Europe and North America
‒ High growth in USA
‒ Germany somewhat slower
‒ Export lead production in Europe
‒ Production level still well below last peak in mature economies
2011-05-03Boliden Group 8
0.0
1.0
2.0
3.0
4.0
5.0
Million units
Car production - Quarterly
China USA W.Europe Japan
Source: CRU (www.crumonitor.com), JD Powers
2005 2006 2007 2008 2009 2010 2011
Metal Market
2011-05-03Boliden Group 9
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
6,0
mt Zincglobal metal market balance
Balance Metals production Metals demand
2009 2010 2011
Source: © CRU (www.crugroup.com)
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
6,0
mtCopper
global metal market balance
Balance Metals production Metals demandSource: © CRU (www.crugroup.com)
2009 2010 2011
Metals demand growth Q110 Q210 Q310 Q410 Q111
Global 24% 22% 11% 8% 5%
-Asia 26% 18% 9% 8% 5%
-RoW 23% 25% 13% 8% 5%
Metals demand growth Q110 Q210 Q310 Q410 Q111
Global 10% 7% 9% 7% 2%
-China 18% 12% 12% 10% -5%
-RoW -8% -5% -3% -3% 7%
Zinc Price and Inventories
2011-05-03Boliden Group 10
Zinc price (LME average)
USD/tQ1-11 vs period
Q1 10 2,288 + 5%
Q2 10 2,018 + 19%
Q3 10 2,013 + 19%
Q4 10 2,315 + 3%
Q1 11 2,393 -
Price decreased in the quarter by 5% Inventories up 9% in Q1
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
2003 2004 2005 2006 2007 2008 2009 2010 2011
USD/t Tonnes
Shanghai inventory LME Inventory Cash Price LME Quarterly average
Zinc – treatment charges and premiums
2011-05-03Boliden Group 11
0
100
200
300
400
500
600
USD/t conc. Zinc treatment charge
Realised TC (including price participation)Spot TC - outturn
Source: © CRU (www.crugroup.com)
2006 2007 2008 2009 2010 2011
Benchmark TC down – approx 230 USD/ton at 2,500 USD
Stable spot TC but well below contract TC
0
50
100
150
200
250
300
350
400
USD/t metal Zinc metal price premium
Europe ex-works US Midwest DeliveredFar East (Western)
Source: © CRU (www.crugroup.com)
2005 2006 2007 2008 2009 2010 2011
European premium up
Copper Price and Inventories
2011-05-03Boliden Group 12
Copper price (LME average)
USD/tQ1-11 vs period
Q1 10 7,243 + 33%
Q2 10 7,013 + 38%
Q3 10 7,242 + 33%
Q4 10 8,634 + 12%
Q1 11 9,646 -
Price decreased in the quarter by 4%
Inventories up 21% in Q1
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
1 600 000
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
11 000
2003 2004 2005 2006 2007 2008 2009 2010 2011
TonnesUSD/tCOMEX Inventory Shanghai inventory LME Inventory LME Cash Price Quarterly average
Copper – treatment charges and premiums
2011-05-03Boliden Group 13
0
20
40
60
80
100
120
140
160
180
USD/t metal Copper metal price premium
Spot Copper premium CIF W. EuropeBenchmark CIF Europe
Source: © CRU (www.crugroup.com)
2005 2006 2007 2008 2009 2010 2011
Benchmark TC/RC up – 46.5 to 56.5 USD/ton
Spot TC/RC down to contract level in Jan-Feb, up sharply in March
European premium sharply down
0
20
40
60
80
100
120
140
160
USD/t conc. Copper treatment charge
Standard grade TC Cif spot mine/trader USD/tTC Annual contract benchmark
Source: © CRU (www.crugroup.com)
2006 2007 2008 2009 2010 2011
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
0500
1 0001 5002 0002 5003 0003 5004 0004 5005 000
2003 2004 2005 2006 2007 2008 2009 2010 2011
USD/t TonnesLME Inventory LME Cash Price Quarterly average
Gold, Silver and Lead prices
2011-05-0314Boliden Group
Silver
Lead
Gold
Average prices Q1 2011 vs period
Q1-10 Q4-10
Gold + 25% + 1%
Silver + 88% + 21%
Lead + 17% + 9%
0
5
10
15
20
25
30
35
40
45
2003 2004 2005 2006 2007 2008 2009 2010 2011
USD/oz
0
200
400
600
800
1 000
1 200
1 400
1 600
2003 2004 2005 2006 2007 2008 2009 2010 2011
USD/oz
Business Area Mines
2011-05-0315Boliden Group
Mines - Production
Metal production -7% vs Q4 Lower grades in Boliden area and
Garpenberg
2011-05-03Boliden Group 16
0
4 000
8 000
12 000
16 000
20 000
24 000
0
2 000
4 000
6 000
8 000
Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Metal content, tonnes
Milled ore, ktonnes
Copper
Milled ore (Aitik) Metal content
0
20 000
40 000
60 000
80 000
100 000
0
300
600
900
1 200
1 500
Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Metal content, tonnes
Milled ore, ktonnes Zinc
Milled ore Zinc metal content
Metal production -4% vs Q4 Low production in Aitik
‒ Low availability on crushers Volumes up sharply in Boliden area
Mines - Financial Summary Q1
2011-05-0317Boliden Group
EBIT– MSEK 1,156 (800) in Q1– MSEK 1,217 in Q4 2010
Volumes down Low crusher availability in
Aitik Costs slightly higher
excluding Q4 one-offs0
200
400
600
800
1 000
1 200
1 400
MSEK
Quarterly EBIT
Aitik Expansion - update
2011-05-03Boliden Group 18
Capacity Reliability
Mine and logistics √
Crushers √Conveyors √Mills √ √Flotation √ √
Ramp-up period Mine and logistics
‒ Action plan, improved truck availability
Crushers‒ All ore through new crushers Q1-
Q2‒ Availability not yet satisfactory‒ Crusher 165 (old) disconnected,
to be reconnected end Q2 Grade decline late Q2 36 Mtonnes 2014
Garpenberg Expansion - update
Project‒ Capex: SEK 3.9 billion‒ Ore production from 1.4 to 2.5
million tonnes‒ Production starts 2014 , full
production end 2015‒ New concentrator and
underground infrastructure‒ Production through 2030
Hedging‒ Zinc, copper, lead, gold and silver ‒ Approx 1/3 of Group's metal price
risk‒ Corresponding exchange rate risk‒ Refers to 2011, 2012 and 1H 2013
2011-05-03Boliden Group 19
Kankberg - update
Project‒ Capex: MSEK 475‒ High rate of return‒ Life of mine - 2020‒ Start mid 2012‒ Production (yearly average):
‒ Ore 320 ktonnes‒ Gold 1,150 kg1) (high yearly
variations)‒ Tellurium 41 tonnes1)
Hedges and contracts‒ Gold production hedged, 80% at
1,460 USD/tr oz‒ Tellurium sales, long term contract
at 280 USD/kg
2011-05-03Boliden Group 20
1) Metal in concentrate
Business Area Smelters
2011-05-0321Boliden Group
Smelters - Production
Strong YoY but lower than Q4 Lead alloys -15 % compared to Q4
Kokkola -4 % compared to Q4 Odda +5 % compared to Q4
2011-05-0322Boliden Group
0
20 000
40 000
60 000
80 000
100 000
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Cathode production,
tonnes
Total feed, tonnes Copper
Copper feed, total Copper cathode production
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
0
50 000
100 000
150 000
200 000
250 000
Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Metal production,
tonnes
Total feed, tonnes
Zinc
Zinc feed, total Zinc metal production
Smelters – Financial Summary Q1
EBIT excl. PIR*‒ MSEK 226 (256) in Q1‒ MSEK 530 in Q4 2010
Lower volumes of free metals Unfavourable feed mix Lower zinc TCs
2011-05-0323Boliden Group
* Process Inventory Revaluation
-500
-300
-100
100
300
500
700
900
1 100
1 300
MSEK
Quarterly EBIT
Quarterly EBIT excl PIR*
Update E-scrap expansion
Increased recycling capacity for electronic scrap from 45,000 to 120,000 tonnes/year
New recycling plant –Capex 1.3 billion
Start 2011/2012 On plan
2011-05-03Boliden Group 24
Financials
2011-05-0325Boliden Group
Financial Summary
2011-05-0326Boliden Group
MSEK Q1 2011 Q4 2010 Q1 2010
Revenues 10 158 10 120 8 316
Operating profit (EBIT) 1 359 1 942 1 230
EBIT excl Process Inventory Revaluation 1 500 1 445 1 043
EBIT excl PIR margin 15% 14% 13%
Free cash flow 448 1 850 -52
Capex 664 1 025 598
Earnings per share, SEK 3,51 5,17 3,21
Gearing 21% 24% 43%
MSEK Q1 2011 Q1 2010 Q4 2010EBIT 1 359 1 230 1 942Process Inventory revaluation -142 187 496EBIT excl Process Inventory Revaluation
1 500 1 043 1 445
Deviation 457 55
Specification of deviationVolume 529 -238Costs -464 144Prices & Terms 819 400
Metal prices and terms 1 045 411
Realised Metal- & Currency hedge* -184 45
TC/RC terms -80 -68
Premiums 34 47
Definitive pricing (MAMA)* 4 -35
Currency effects -426 -239w hereof translation effects -33 -11
Others -1 -12
Deviation 457 55
*Result for respective periodRealised Metal- & Currency hedge 12 196 -33Definitive pricing (MAMA) -10 -14 25
Group EBIT Q1 2011 versus Q1 2010
2011-05-0327Boliden Group
Higher Copper production in Aitik
Copper USD/ton +33%Zinc USD/ton +5%
USD/SEK -10 %EUR/SEK -11 %
Aitik expansionHigher energy
costs
MSEK Q1 2011 Q1 2010 Q4 2010EBIT 1 359 1 230 1 942Process Inventory revaluation -142 187 496EBIT excl Process Inventory Revaluation
1 500 1 043 1 445
Deviation 457 55
Specification of deviationVolume 529 -238Costs -464 144Prices & Terms 819 400
Metal prices and terms 1 045 411
Realised Metal- & Currency hedge* -184 45
TC/RC terms -80 -68
Premiums 34 47
Definitive pricing (MAMA)* 4 -35
Currency effects -426 -239w hereof translation effects -33 -11
Others -1 -12
Deviation 457 55
*Result for respective periodRealised Metal- & Currency hedge 12 196 -33Definitive pricing (MAMA) -10 -14 25
Group EBIT Q1 2011 versus Q4 2010
2011-05-0328Boliden Group
One-off reclamation costs Q4Higher personnel
costs in Q4
Lower production volume in Aitik Lower grades in
both Boliden and AitikLower free metals
in Rönnskär
Copper USD/ton +12 %Zinc USD/ton +3%
USD/SEK -4 %EUR/SEK -4 %
Cash Flow
Tax payment of MSEK 908 in Q1 Capex in 2011 approx. SEK 4-5 billion
2011-05-03Boliden Group 29
MSEK Q1 11 Q4 10 Q1 10Op profit before depreciation (EBITDA)* 1 833 2 397 1 632
Changes in working capital* 171 483 -1 274
Capital expenditure -664 -1 025 -598
Free cash flow 448 1 850 -52*Includes Process Inventory Revaluation
Capital Structure
2011-05-0330Boliden Group
1. Shareholders’ equity includes the value of outstanding hedge contracts
46%43%
46%
37%
24%21%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Q409 Q110 Q210 Q310 Q410 Q111
GearingSEK bnUnless otherwise stated
31 Mar2011
31 Dec2010
Total Asset 35,1 35,1
Capital employed 26,8 27,2
Shareholders' equity1 19,6 18,8
Net debt 4,1 4,6
Gearing % 21 24
Equity/asset ratio, % 56 54
Duration of committed credit facilities, years 3,9 4,2
Average interest rate, % 3,34 3,29
Interest duration, years 1,7 2,0
Net payment capacity 11,154 10,728
Sensitivity Analysis
2011-05-0331Boliden Group
Changein metalprices,+10%
EBITeffect, SEK m
Change inUSD, +10%
EBITeffect, SEK m
Change inTC/RC,+10%
EBITeffect,SEK m
Copper 475 USD/SEK 1 060 TC Zn 40
Zinc 530 EUR/USD 395 TC/RC Cu 45
Lead 105 USD/NOK 75 TC Pb -10
Gold 115
Silver 185
Summary
Low mine production in quarter Lower volumes of free metals and lower zinc TC put pressure on smelter
profits Aitik ramp-up:
‒ Crusher availability still low‒ Old crusher reconnected end of Q2‒ Grades decline late Q2‒ 36 Mton/year 2014
E-scrap expansion in Rönnskär – 2011/2012 Kankberg gold mine 2012 Garpenberg expansion 2014 and new hedge program
Maintenance stops in Q2 will effect EBIT by 170 MSEK, lower in Q3
2011-05-0332Boliden Group
Disclaimer
This presentation has been prepared by Boliden for information purposes only. Nothing in this material shall be construed as an offer or solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction.
This presentation has been prepared as per the indicated date and Boliden does not undertake any obligation to correct or update the information or any statements made therein. Views that may have been expressed may be subject to change without notice.
Certain statements in this presentation are forward-looking and are based on plans, estimates, assumptions, projections and expectations and are subject to risks and uncertainties. In addition to the factors explicitly discussed, other circumstances may also have a material effect on the actual outcome. Such factors include, but are not limited to, general economic or political conditions, fluctuations in exchange or interest rates or metal prices, technological factors, interruptions in supply or production, actions of courts, regulators, governmental agencies, competitors, customers, suppliers, employees or other third parties.
Nothing contained herein shall constitute any representation or warranty as to the accuracy or completeness and Boliden accepts no responsibility or liability as to the accuracy or completeness of the information contained herein. The material may include information from third party sources believed to be reliable. However, Boliden has not made an independent verification of the information provided.
Save as by prior approval in writing, this material may not be copied, transmitted or disclosed, whether in print, electronic or any other format. All rights to the material are reserved.
Boliden does not accept any liability whatsoever for any direct, indirect, consequential or other loss arising from or in connection with any use of this information.
This material has not been reviewed, registered or approved by any authority under any applicable laws.
Boliden Group 2011-05-0333
Boliden producerar metaller för det moderna samhället