UMICORE Equity Report 19/06/2017 Urban Mining and Cleantech Gold Fever Summary : Share Price 62.33 EUR Number of shares 109.3 m Fair Value 59.00 EUR Market Cap 6813 mEUR Upside -5% Enterprise Value 7066 mEUR Symbol ENXTBR:UMI Credit Rating NA Ising Code BE0003884047 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sales 9,691 14,481 12,548 9,819 8,828 9,698 10,445 11,115 11,617 12,024 Growth 39.7% 49.4% -13.3% -21.7% -10.1% 9.9% 8% 6.4% 4.5% 3.5% EBITDA 431 537 483 421 345 411 441 537 631 706 Margin 4.4% 3.7% 3.9% 4.3% 3.9% 4.2% 4.2% 4.8% 5.4% 5.9% EPS 2.20 2.87 2.09 1.61 1.58 1.56 1.20 2.21 2.46 3.38 P/E 13.8 11.4 18.3 23.0 21.5 24.9 37.9 28.3 25.4 18.4 EV/EBITDA 8.8 7.4 9.3 10.3 11.5 11.1 12.0 13.3 11.3 9.8 Dividend 0.80 1.00 1.00 1.00 1.00 1.20 1.30 1.35 1.40 1.45 Dividend Yield 2.6% 3.1% 2.6% 2.7% 2.9% 3.1% 2.9% 2.2% 2.2% 2.3% Analyst Wim Lewi, CFA Valuescan.be [email protected] FOR QUALIFIED INVESTORS ONLY, Please see inside front cover for important disclosures THIS DOCUMENT MAY NOT BE DISTRIBUTED TO PERSONS WITHIN THE US, AUSTRALIA, CANADA OR JAPAN. I. Company Description Activities Umicore N.V. (formerly Union Minière) is a multinational materials technology company headquartered in Brussels, Belgium. The company currently groups its activities into four business areas: recycling, catalysis, energy materials and performance materials. Umicore is globally active with over 14.000 employees and 86 industrial sites. The history of Umicore goes back to the creation of Union Minière in 1989 by the merger of four companies in the mining and smelting industries. Umicore has since reshaped itself into a more technology-focused business encompassing such areas as the refining and recycling of precious metals and the manufacture of specialised products from precious metals, cobalt, germanium, zinc and other metals. To symbolise this trend of moving away from mining and the production of commodities and base metals, the group Union Minière changed its name to Umicore in 2001. In 2005, its copper smelting activities were spun off in Cumerio and in 2007, the zinc smelting activities were also listed opportunistically in 2007 into the Nyrstar vehicle. The company has been a component of Belgium's benchmark BEL20 stock market index since its 1991 inception. Umicore is play on the emerging ‘cradle to cradle’ mentality. The company has made a successful switch from metal processor to an ‘urban mining’ company that gains precious metals and other rare materials from waste. Umicore also invests into promising technologies like materials for electric vehicle batteries and recycling techniques. However the early ‘cleantech’ excitement has cooled and we probably need another major natural disaster before governments become serious again and use their stretched budgets to stimulate change. The company share buy-back price level of around 33 Euro also supports market sentiment. GBL is also steadily increasing its stake. Risks The decline of precious metals as part of the global metals correction has hurt the recycling activity. The gold price has proven resilient over 2015-2016, compared to most industrial metals that suffer from overcapacity and slower demand (China). Competition for waste and industrial scrap could increase as competitors are attracted by the high ROI of recycling. Higher waste acquisition costs can eat into the profit margin of Umicore and its clients. THIS DOCUMENT MAY NOT BE DISTRIBUTED TO PERSONS IN THE US, AUSTRALIA? CANADA OR JAPAN 1 B. Activities Sales EBIT Elimin./Disc Elimin./Disc Energy ont. ont. Materials -6% Energy -2% 12% Materials 23% Recycling 36% Catalysis Recycling 24% 58% Catalysis 39% Recycling treats complex waste streams containing precious and other non -ferrous metals. The operations can recover some 20 from a wide range of input materials ranging from industrial residues to end-of-life materials. The business group is organized in six business units: Precious Metals Refining, Battery Recycling, Jewellery & Industrial Metals, Precious Metals Management, Technical Materials and Platinum Engineered Materials. The Umicore's precious metals facility in Hoboken, Belgium has become the flagship of the group. Umicore is often called an ‘urban or above-ground mining company’ as it derives its metals and mining products from objects that have been in use in industrial or consumer products. Precious Metals Refining Umicore is the world's largest recycler of precious metals. Most of the materials (around 66% in terms of refining charges) put through the refining process are by-products from the production of non-ferrous metals, such as dross, matte and speiss from the zinc smelting industry and anode sludge built up during electrolysis. Other sources of materials used for recycling include slag, spent fuel cells, automotive and industrial catalysts and scrap electronic equipment. Battery Recycling Battery Recycling is a second business unit, focused on the recycling of spent rechargeable batteries from laptops, mobile phones and hybrid electric vehicles. Jewellery and Industrial Metals produces semi-finished precious metals-based products, for jewellery and industrial applications and is a major recycler of scrap and residues from the jewellery industry. Precious Metals Management The Recycling segment also encompasses a management unit, which sells precious metals in ingot form to industrial clients and offers access to related financial instruments for hedging purposes. The unit is based in Hanau, Germany. This division delivers typically to large gold and silver investors that store physical commodities for clients, like gold ETF’s, central banks, etc… THIS DOCUMENT MAY NOT BE DISTRIBUTED TO PERSONS IN THE US, AUSTRALIA? CANADA OR JAPAN 2 Technical Materials The Technical Materials Business Unit is one of the leading suppliers of functional materials for high-tech industries. The material solutions, semi-finished products and building components are key components for many production processes. Technical Materials is divided into two business lines: BrazeTec and Contact & Power Technology Materials. BrazeTec materials are used to manufacture products like spectacle frames, cooking ware, cutting tools, mills, radiators and air conditioning equipment. Umicore is also a leading manufacturer of high-quality materials for metallic contacts for use in electrical engineering. Platinum Engineered Materials This unit manufactures platinum-based components for the chemical industry and the glass industry. Applications in the chemicals industry include chemical intermediates, emission trading, animal feeding, fertilizers, explosives and transparent plastics. Applications in the glass industry include display glass, technical glass, chrystal glass, fiber glass and optical glass. The Energy and Surface Technologies division manufactures a range of specialised metal products like oxides and salts of cobalt, lithium and nickel for use in the production and storage of clean energy including rechargeable batteries and photovoltaics. The metals are also used for a range of other applications like glass and ceramics. The division also produces and markets products of germanium, both in compounds for doping optical fibres and in semiconductor wafers. Energy Materials is headquartered at the company's plant in Olen near Antwerp, with production and commercial facilities in a number of countries worldwide. The business group is composed of four business units - Cobalt and Specialty Materials, Electro-Optic Materials, Rechargeable Battery Materials and Thin Film Products. Cobalt and Specialty Materials Umicore Cobalt & Specialty Materials produces a variety of cobalt- and nickel-based chemicals for the following application areas: the production of rubber tyres, pigments for ceramics, catalysts for paint drying, plastic production and nickel chemicals for surface treatment. Umicore also produces cobalt and pre-alloyed powders for the production of diamond tools and hard metal applications such as stone cutting, construction and wear parts. Besides, the unit offers a range of recycling services such as the recovery of cobalt from customers in the petrochemical and hard metals industries and the recovering of rhenium from super alloys. Electro-Optic Materials The main markets for this unit are thermal imaging and opto-electronic applications, for which Umicore supplies germanium wafers, infrared lenses and optics, and germanium-based chemicals. Umicore’s Infrared Optics for thermal imaging provides innovative optical solutions for automotive night vision, thermography and security and surveillance, firefighting and many others. Germanium wafers are used in terrestrial solar cells (CPV), space solar cells, high brightness LEDs, and various semiconductor applications. Umicore produces the highest quality of GeCl4 available in the industry. THIS DOCUMENT MAY NOT BE DISTRIBUTED TO PERSONS IN THE US, AUSTRALIA? CANADA OR JAPAN 3 Rechargeable Battery Materials Rechargeable Battery Materials provides cathode active material for a range of applications. One in five Li- ion batteries ever produced for portable electronics contains Umicore materials. These are also used in the hybrid automotive industry. Electric vehicles are recognized by the market as being the biggest growth area for Li-ion batteries for the years to come. Umicore materials can be found in more than 15 electrified cars that are on the market today. Another application is stationary storage. Umicore focuses on grid stabilization, on back-up power and on home energy storage systems for domestic solar panel applications. A fourth application are handheld electrical tools which increasingly need higher power and come with more demanding weight restrictions. Thin Film Products Umicore Thin Film Products is one of the leading producers of source materials (evaporation materials and sputtering targets) for vacuum deposition of thin films. The unit is active in the business fields of optics (anti reflective coatings), optical data storage, wear protection & decorative coatings (door handles, turning tools,..), electronics & semiconductors, displays, photovoltaic cells, and architectural glass.