Annual Report 2020 Annual Report 2020 Table of contents 10 Years Aperam Journey 4 Message from the Chairman of the Board of Directors 5 Message from the Chief Executive Officer 7 Glossary 9 Management Report 11 Group overview 11 Introduction 11 Business model: how we create value 12 Our history 13 Our operational organisation and facilities 13 Market analysis 17 Market environment 17 Competition 19 Developments regarding trade measures 20 Raw materials and energy 28 Impact of exchange rate movements 29 COVID-19: health and safety, business and accounting review 30 Operational review and liquidity 32 Operational Review 32 Liquidity 39 A strong focus on self-help measures 46 Principal strengths and risks 49 Principal strengths 49 Principal risks and uncertainties related to the Company and the stainless steel and specialty industry 53 Corporate responsibility and Governance 56 Social responsibility 56 Corporate Governance and stakeholder relationships 58 Corporate citizenship 59 Composition of the Board of Directors 61 Composition of the Leadership Team 66 Corporate governance practices 70 Luxembourg Takeover law disclosure 80 Articles of association 82 Compensation 83 Remuneration Policy 83 Remuneration Report 92 Business ethics 97 Environmental responsibility 100 Share capital 104 2 Annual Report 2020 Related Party Transactions 106 Shareholder information 108 Financial Statements 2020 111 Responsibility statement 113 Consolidated Financial statements as of and for the year ended December 31,2020 114 Annual Accounts of the Parent Company as of and for the year ending December 31, 2020 193 Proposed allocation of the 2020 results 215 Disclaimer - Forward Looking Statements In this Annual Report Aperam has made certain forward-looking statements with respect to, among other topics, its financial position, business strategy, projected costs, projected savings, and the plans and objectives of its management. Such statements are identified by the use of forward-looking verbs such as 'anticipate', 'intend', 'expect', 'plan', 'believe', or 'estimate', or words or phrases with similar meanings. Aperam's actual results may differ materially from those implied by such forward-looking statements due to the known and unknown principal risks and uncertainties to which it is exposed, including, without limitation, the risks described in this Annual Report. Aperam does not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved. Please refer to the 'Principal risks and uncertainties related to Aperam and the stainless and specialty steel industry'' section of this report. Such forward-looking statements represent, in each case, only one of many possible scenarios and should not necessarily be viewed as the most likely to occur or standard scenario. Aperam undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events or otherwise. Unless indicated otherwise or the context otherwise requires, references in this Annual Report to 'Aperam', the 'Group' and the 'Company' or similar terms refer to Aperam, 'société anonyme', having its registered office at 12C, Rue Guillaume Kroll, L-1882 Luxembourg, Grand Duchy of Luxembourg, and to its consolidated subsidiaries. Cover: Aperam BioEnergia FSC®-certified forestry in Brazil © Daniel Mansur 3 Annual Report 2020 EMPLOYEE SATISFACTION Second all-employee survey shows 86% 10 Years Aperam Journey satisfaction – up from 71% in 2011. RESPONSIBLE STEEL™ BIOENERGIA REBORN Aperam joins the industry’s first Planting new trees, Aperam global, multi-stakeholder standard renews its eucalyptus forest. and certification program. CARBON NEUTRALITY BEL20 2030 environmental objectives, APERAM CREATION SAFE TRAINING and objective of carbon neutrality by 2050. With safety being our #1 priority, Aperam listed on Euronext 25 January: ArcelorMittal Brussels, and enters Bel20 Index. shareholders approve spin-off Aperam starts providing new award- proposal at a General Meeting. winning SAFE training to all employees. RECYCO TURNS 10Y Aperam listed on Amsterdam, Paris, Our efficient waste-to-value service provider Luxembourg stock exchange and created INVESTMENT GRADE Recyco expands scope. with a strong governance framework. Company earns first Investment Grade (Baa3) rating from Moody’s. SCRAP METAL Genk facility produces austenitic stainless steels LEADERSHIP JOURNEY® DIVIDENDS PRIME RATING containing over 89% scrap. Announcement of Phase 1 Payment stopped in Company gets first enquiries of the Leadership Journey®. 2013 to accelerate from ESG Analysts and earns €90 MILLION net debt reduction. Prime rating from Oekom. First share buyback €93 MILLION completed in June. Third share buyback completed in June. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 CHARCOAL POWER ETHICS EUROPEAN RENEWABLE ENERGY IMPHYTEK Brazilian furnaces start running & COMPLIANCE INVESTMENT BANK Genk facility installs windmills and POWDERS completely on charcoal produced Launch of our program A contract with the EIB dedicates Châtelet facility turns to solar energy. Our joint venture with from our own forest operations. and local network. €50 million to R&D and facility upgrades. Tekna gets clearance from European Commission. SUSTAINABILITY 20 YEARS OF DIVIDENDS EMPLOYER OF CHOICE ECOVADIS REPORT ACESITA FOUNDATION Aperam resumes its Long recognized in Brazil, Aperam is The Aperam Group Aperam publishes its first payment of dividends. named a ‘Best Employer’ in France too. receives Gold rating from annual Sustainability Report. the EcoVadis business sustainability assessment. DUPLEX GOCORE UPPING OUR ETHICS CDP First big desalination project. Aperam South America New Code of Conduct, whistleblower CDP The CDP gave Aperam a introduces a new portfolio policy, and Ethics & Compliance “B” (or management) level 10 Years KPI of grain and super-oriented steels. Academy launched. rating for climate change NET RESULT BUSINESS HAS NEVER €70 MILLION Aperam turns from negative to BEEN SO SIMPLE! Second share buyback t18 %72 €1.6 positive net result. e-aperam, our intuitive, 24/7 online completed in July. MILLION BILLION shopping platform, goes live. Shipments of Stainless Total Shareholder Total Free Cash Flow Steel Products. Return. after €1.3 billion of CAPEX. ‘WE ARE PROUD 2019 & WE ARE ALL APERAM’ Aperam Services & Solutions €679 VS 67 €732 €-0.56 VS €2.19 0.48 launches first internal communication campaign. MILLION MILLION TONS PER TON OF SLABS Net Financial Debt Leadership Journey® Change in EPS Aperam achieves the world’s lowest 2011 vs 2020. gains. 2011 vs 2020. carbon footprint in the sector. 4 Annual Report 2020 Message from the Chairman of the Board of Directors Dear Shareholders, When Aperam was created ten years ago, the logic was to establish an independent company which would benefit from higher market visibility, pursue its growth strategy and enhance its competitiveness through a programme of self-help initiatives. The stainless steel industry has undergone dramatic change over the past decade, with the global competitive landscape being fundamentally reshaped by the emergence of major players in Asia who have disrupted global trade flows. Despite these challenges, Aperam has established itself as a leading player in its industry. We have improved our asset base and our cost competitiveness, strengthened our balance sheet, innovated to serve sustainable markets of the future, invested in our workforce, and set ambitious goals to further reduce our environmental impact. Aperam has become a much stronger company, capable of delivering value in the most challenging of market conditions. And last year was, of course, the most challenging we have faced since our formation. The global health crisis resulting from the COVID-19 pandemic had a profound impact on the global economy, our daily lives, and had tragic consequences for millions of people across the world. In this environment, we focused all our efforts to provide a safe and healthy working environment for our employees. I am pleased to report that thanks to a deeply embedded health and safety culture we were able to swiftly implement strict sanitary protocols, protect our people and continue to serve our clients with only temporarily halts to our operations in the first quarter of 2020. While our plants were back to being fully operational within the second quarter 2020, the prolonged shutdown in several European countries and the temporary closure of key customer industries caused a considerable drop in the demand for our products. In response, we aligned our production quickly to this lower level of demand, adapted our cost base, and reduced all non-essential capital expenditure. This work built on our ongoing efforts to improve our structural cost competitiveness. Our internal operational excellence plan, the “Leadership Journey®”, launched in 2017, continued to progress well and reached €223 million in accumulated gains at the end of 2020, exceeding our initial goal of €200 million. These actions helped to mitigate the impact of the pandemic on our profitability levels. As a result EBITDA reached €343 million in 2020, only marginally below the level we achieved in 2019 (2019: €357 million). Our free cash flow generation of €195 million (2019: €281 million) was robust, materially exceeding the cost of dividend payments even in a year affected by COVID-19. And the company continues to benefit from a strong balance sheet, with net debt at the end