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Elkem Annual Report 2019.Pdf DELIVERING YOUR POTENTIAL Annual report 2019 About Elkem | Highlights | CEO’s letter | The business | The Elkem share | Board of directors’ report | Board and management | Corporate governance | Sustainability report | Financial statements | Contact Elkem at a glance Who we are Contents and what we do About Elkem ............................................................ 2 Established in 1904, Elkem is one of Highlights .................................................................4 the world's leading companies for environmentally responsible manufacturing CEO’s letter ..............................................................6 of metals and materials. Elkem is a fully- The business ............................................................8 integrated producer with operations throughout the silicon value chain from Silicones ...............................................................................11 quartz to silicon and downstream silicone Silicon Materials ................................................................ 13 Foundry Products ............................................................ 15 Production site specialities, as well as speciality ferrosilicon Sales oce Carbon ..................................................................................17 HQ alloys and carbon materials. The Elkem share ................................................... 20 Elkem has 6,370 employees and consists of four business areas: Silicones, Silicon Board of directors’ report .................................22 Materials, Foundry Products and Carbon. Board and management ....................................34 Headquartered in Oslo, the company's 29 production sites and extensive network of Corporate governance .......................................38 sales offices and agents around the world Statement of corporate governance .........................38 ensure proximity to customers and access to Risk management ...........................................................49 attractive end markets. Elkem was re-listed on the Oslo Stock Exchange in March 2018. Sustainability report ...........................................52 Total operating income EBITDA Number of employees NOK million NOK million Full time equivalent 5,973 Elkem's total operating income in 2019 Financial statements ........................................ 100 25,230 amounted to NOK 22,668 million, with an Consolidated financial statements ...........................102 22,668 6,022 6,113 6,280 6,370 21,403 EBITDA of NOK 2,656 million. Notes to the consolidated financial statements .. 108 Financial statements – Elkem ASA .......................... 188 16,946 3,188 Notes to the financial statements – Elkem ASA ....191 2,656 Declaration by the board of directors......................219 1,559 Independent auditor’s report ................................... 220 Alternative Performance Measures (APMs) ..........224 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 Contact ................................................................ 228 2 HIGHLIGHTS ELKEM ANNUAL REPORT 2019 ELKEM ANNUAL REPORT 2019 HIGHLIGHTS 3 About Elkem | Highlights | CEO’s letter | The business | The Elkem share | Board of directors’ report | Board and management | Corporate governance | Sustainability report | Financial statements | Contact Elkem – key figures and highlights Key figures Highlights 2019 Metric 2019 2018 2017 2016 ■ Elkem Limpio, Paraguay milestone: production based on 100% biocarbon Total operating income NOK million 22,668 25,2301 20,985 16,594 Realised cost and hydro power Operating income growth % (10) 202 26 improvements of ■ EBITDA NOK million 2,656 5,793 3,188 1,559 NOK 596 million, Elkem Fiskaa, Norway to establish surpassing battery graphite pilot plant EBTIDA margin % 12 22 15 9 2019 goal. EBIT NOK million 1,189 4,522 1,927 264.0 ■ Elkem awarded gold rating by business sustainability rating company EcoVadis Profit (loss) for the year NOK million 897 3,367 1,249 (268.0) Cash flow from operations NOK million 2,140 4,030 2,336 1,051 ■ Elkem Silicones expand product offering Reinvestments of D&A % 80 84 72 57 in Mexico and India Total assets NOK million 29,004 31,129 25,507 23,092 ■ Construction start of Elkem’s largest Net interest-bearing debt NOK million 5,722 3,264 8,111 9,502 energy recovery project so far at Elkem NOx emissions Debt leverage Net debt/LTM EBITDA3 2.2 0.6 2.5 6.1 Salten, Norway reduced by 13% Equity NOK million 12,952 13,722 8,565 5,830 since 2015 ■ Elkem acquires Basel Chemie, a Equity % 45 44 34 25 leading Korean producer of specialty silicones gels ROCE % 7 28 13 2 Earnings per share NOK 1.47 5.74 2.08 (0.52) ■ Construction start of new R&D center in Number of employees Full time equivalent 6,370 6,280 6,113 6,022 Lyon, France Total recordable injury rate H1+H2 Injuries per million working hours 2.1 2.2 3.1 5.3 ■ Michael Koenig new CEO of Elkem ASA NOx emissions Tonnes 7,068 7,109 7,309 6,718 Female ■ Elkem acquires Polysil, a leading Chinese CO2 emissions Million tonnes 2.15 2.54 1.77 1.49 participation in Elkem’s leadership silicone elastomer and resins company Energy consumption TWh 6.01 6.23 5.28 4.40 training programmes increased to 32% 1) 2018 figures have been restated, see note 13 Changes in accounting policies. in 2019. 2) Figures for 2018 to 2016 is restated as a result of Elkem’s change in accounting principles for presentation of sale of power. For more information se note 35 in Consolidated financial statements. The restatement of 2016 and 2017 figures are unaudited. 3) Last twelve months earnings before interest, taxes, depreciation and amortization. 4 KEY FIGURES AND HIGHLIGHTS ELKEM ANNUAL REPORT 2018 ELKEM ANNUAL REPORT 2018 KEY FIGURES AND HIGHLIGHTS 5 About Elkem | Highlights | CEO’s letter | The business | The Elkem share | Board of directors’ report | Board and management | Corporate governance | Sustainability report | Financial statements | Contact Letter from the CEO Steady course in stormy seas After an extraordinary 2018, with solid markets and the strongest financial results in the compa- ny’s history, 2019 has been more challenging. Elkem’s growth ambitions remain firm, supported by global trends that will drive demand for our products. The weaker macro climate has taken its toll and shows finan- We are improving production processes, managing energy cial impact, but it also reveals the robustness and advantageous recovery initiatives and further developing our bio carbon strat- cost positions of Elkem. egy to improve our environmental footprint. While we are continuing our growth strategy, we have also In Paraguay, our plant produced ferrosilicon based on 100% started a cost reduction programme that will make us stronger. sustainable biocarbon and hydro power in 2019. We must improve further, as the difficult times do not seem to The construction of our new energy recovery facility at Elkem be over. The market environment has changed, ongoing geopoliti- Salten is one of Elkem’s largest ongoing projects. The facility will cal trade conflicts have created tensions and we have seen the low- position the silicon plant as one of the most environmentally est prices on silicon and ferrosilicon since before the financial crisis. friendly in the world, recovering energy equal to 15,000 Nor- wegian households. Global megatrends like urbanisation, digitalisation, increased standards of living and the rising demand for renewable energy By applying new technology at several of our furnaces, Elkem’s drive growth in demand for Elkem’s products. NOx emissions have been reduced by 18% since 2015. In 2020, We want to grow faster than the market by combining acqui- two additional furnace upgrades will be completed and further sitions, organic growth projects and specialisation. reduce Elkem’s NOx emissions. Elkem’s silicones business is already capturing on the exponen- Our environmental projects are important, not only in com- tial growth in the market for electric vehicles (EV), as the average bating climate change and in aligning our business with the EV contains approximately four times more silicones than a con- United Nations Sustainable Development Goals, but also because ventional car. By 2030 one out of three cars sold could be an EV, of increased attention in the financial markets. More and more which will fuel the demand for battery technology and capacity. investors find that management of sustainability is a proxy for Elkem has decided to build a pilot plant for battery graphite general management. located at Fiskaa, Elkem’s industrial site in the southern part of Norway. Our ambition is to qualify products and evaluate full- We strive every day towards our goal of zero accidents. Regret- scale industrial production. fully, the Xinghuo plant in China had a fatality in February 2019. We also strengthen our focus on R&D. With the opening of the The incident has been thoroughly investigated and corrective new R&D centre in Saint Fons, France we are investing to assure actions have been implemented. The event was a tragic reminder that our high value-added silicone specialities will remain at the that health and safety must remain our number one priority. very forefront also in the future. Hard work and dedication is key and I would really like to thank In addition to organic projects, Elkem made two acquisitions all our colleagues in all divisions and locations for their strong in 2019. efforts throughout the year. We are fully committed to create Korea based Basel Chemie will strengthen Elkem’s
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