Q3 Interim Report 2016 - Bolidenir.boliden.com/sites/default/files/report/q3_2016... · Q3 Interim...

Q3 Interim Report 2016

Lennart Evrell President & CEO

Håkan Gabrielsson CFO

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2011 2012 2013 2014 2015 2016

R4Q,MSEK

MSEK

Quarterly EBIT excl PIR* Rolling 4Q EBIT Rolling Q EBIT excl PIR*

Strong earnings and high mine production

2016-10-20 Boliden Group Q3 2016

* PIR=Process Inventory Revaluation

• Revenues 9,733 (9,764) MSEK • EBIT ex PIR* 1,318 (1,055) MSEK

‒ EBIT 1,529 (880) MSEK • Free Cash Flow 91 (953) MSEK

• Improved market terms • High production Mines • Production disturbances zinc smelters • Maintenance shutdowns in Smelters

-50 (-85) MSEK • Higher inventories Smelters

2

Market – Slow demand growth, supply driven market

Macro • Low industrial production growth Base metals markets • Cu, Zn demand growing slowly • Stronger Ni demand

• Zn mine supply down, smelter supply down

slightly • Continued growth in Cu mine supply • Ni supply down

2016-10-20 Boliden Group Q3 2016 3

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jul-15 okt-15 jan-16 apr-16 jul-16 okt-16

USD/t

Zinc price


Average price in Q3 vs. period

Q2-16 Q1-16 Q4-15 Q3-15

18% 34% 40% 22%

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Q3 Q4 Q1 Q2

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016LME inventory Shanghai inventory Price Price Q avg

Zinc price, USD/t KTonnes Q3

Note: Prices until 11 October 2016

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Copper price

2016-10-20 Boliden Group Q3 2016 5

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Copper price, USD/t KTonnes

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USD/t


Q2-16 Q1-16 Q4-15 Q3-15

1% 2% -2% -9% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Q3 Q4 Q1 Q2 Q3

Nickel price

2016-10-20 Boliden Group Q3 2016 6


Q2-16 Q1-16 Q4-15 Q3-15

16% 21% 9% -3%

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016LME inventory Price Price Q avg

Nickel price, USD/t KTonnes


Q3 Q4 Q1 Q2 Q3

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Zinc, copper and nickel prices

Normal C1 – Zinc Normal C1 – Copper USD/ton USD/ton

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Zn average price Zn max priceZn min price 50th perc75th perc 90th perc

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Cu average price Cu max priceCu min price 50th perc75th perc 90th perc

Source: Wood Mackenzie October 2016, Thomson Reuters Datastream

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Ni average price Ni max priceNi min price 90th perc75th perc 50th perc

Normal C1 – Nickel USD/ton

2016-10-20 Boliden Group Q3 2016 7

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Gold price, USD/troy oz.

Gold, silver and lead prices


Lead Gold

Silver Average price in Q3 vs. period

Q2-16 Q1-16 Q4-15 Q3-15

Gold 6% 13% 21% 19%

Silver 17% 32% 33% 32%

Lead 9% 7% 11% 9%

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Lead price, USD/t

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Silver price, USD/troy oz.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Boliden market term index

2016-10-20 Boliden Group Q3 2016 9

Mines

2016-10-20 Boliden Group Q3 2016 10

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2011 2012 2013 2014 2015 2016

R4Q, MSEKMSEK

Quarterly EBIT Rolling 4Q EBIT

Mines – Strong quarter with high production

2016-10-20 Boliden Group Q3 2016 11

• EBIT 804 (260) MSEK ‒ 621 MSEK in Q2 2016

• Capex 748 (563) MSEK

• Higher metal prices • High production in most mines • Kevitsa positive EBIT • Good cost control

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2013 2014 2015 2016

Metal content, kt

Milled ore, kt Nickel

Milled ore pro forma* Milled ore Metal content pro forma** Metal content

2016-10-20 Boliden Group Q3 2016 12

Mines – Production

• High production

• Aitik – low crusher availability

• Boliden Area – high milling, less favorable ore mix

• Garpenberg – stable and high production

• Kevitsa – high milled volume

• Kylylahti – record milled production

• Tara – stable production, high milled volume

(*) Milled ore incl Kevitsa (**) Metal content incl Kevitsa

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2013 2014 2015 2016

Metal content, kt

Milled ore, mt Copper

Milled ore Metal content pro forma** Metal content

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2013 2014 2015 2016

Metal content, kt

Milled ore, mt Zinc

Milled ore Metal content

Smelters

2016-10-20 Boliden Group Q3 2016 13

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3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3

2011 2012 2013 2014 2015 2016

R4Q, MSEKMSEK

Quarterly EBIT excl PIR* Rolling 4Q EBIT Rolling 4Q EBIT excl PIR*


* PIR=Process Inventory Revaluation

14

• EBIT ex PIR* 613 (825) MSEK ‒ 397 MSEK in Q2 2016

• Capex 280 (315) MSEK

• Improved market terms • Higher Zn TC vs Q2 • Production disturbances zinc smelters • Maintenance shutdowns -50 (-85) MSEK

‒ -210 MSEK in Q2 • Higher inventories

Smelters – Production disturbances at zinc smelters

Smelters – Production

• Stable processes at Harjavalta • Maintenance shutdowns at Rönnskär

• Production disturbances • Lower recoveries at Kokkola • High feed in Odda • Odda P200 test runs, project ahead of

plan

2016-10-20 Boliden Group Q3 2016 15

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Metal production,

ktTotal feed,

ktZinc

Feed, total Metal production

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Metalproduction,

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Feed, total Metal production

Financials

2016-10-20 Boliden Group Q3 2016 16

Strong earnings

2016-10-20 Boliden Group Q3 2016 17

MSEK Q3 2016 Q3 2015 Q2 2016

Revenues 9 733 9 764 9 596

EBITDA 2 653 1 746 1 940

EBIT 1 529 880 912

Process inventory revaluation (PIR) 211 -175 11

EBIT ex PIR 1 318 1 055 901

EBIT ex PIR pro forma 1 067 885

Investments 1 028 880 956

Acquisitions - - 5 979

Free cash flow 91 953 -4 794

Earnings per share, SEK 4,15 2,36 2,26

Net debt / equity ratio 40 24 43

Financial development

Q3 vs. Q3, Higher metal prices & production Mines

2016-10-20 Boliden Group Q3 2016 18

Higher metal prices

MSEK Q3 2016 1,318

Q3 2015 - pro forma 1,067

Deviation 251

Specification of deviation Volumes 164

Prices and Terms (incl. hedges) 509

Whereof currency effects 23

Costs -183

Depreciation -222

Items affecting comparability -

Other -18

Deviation 251

Higher milled volume Mines Production disturbances Smelters Lower free metals

EBIT excl. PIR pro forma*

Higher volume Mines Production disturbances Smelters

Higher volume Mines Aitik capital intensive areas Kevitsa

*The comparison period includes Kevitsa that was acquired 1 June 2016

Q3 vs. Q2, Higher metal prices and lower costs

2016-10-20 Boliden Group Q3 2016 19

Seasonally lower costs Less maintenance Smelters Higher reclamation previous quarter

Higher metal prices

MSEK Q3 2016 1,318 Q2 2016 - pro forma 885

Deviation 433

Specification of deviation Volumes -145

Prices and Terms (incl. hedges) 597

Whereof currency effects 89

Costs 306

Depreciation -90

Items affecting comparability -209

Other -26

Deviation 433

Less favorable ore mix Boliden Area Internal profit elimination

EBIT excl. PIR pro forma*

Kevitsa

Pensions Tara Q2 Acquisition costs Kevitsa Q2

*The comparison period includes Kevitsa that was acquired 1 June 2016

Free cash flow impacted by inventory build-up

2016-10-20 Boliden Group Q3 2016 20

MSEK Q3 2016 Q3 2015 Q2 2016

EBITDA excluding PIR 2 442 1 921 1 929

Changes in working capital -1 117 36 837

Inventories -807 -500 368

Payables -152 443 701

Receivables -151 92 -233

Other -7 1 0

Cash flow from investments -981 -879 -944

Cash flow from acquisitions 0 0 -5 943

Financial items* -75 -51 -95

Tax paid -125 -69 -308

Other -54 -5 -269

Free cash flow 91 953 -4 794 Free cash flow excl. Kevitsa acquisition 91 953 1 148

Free cash flow

* Q2 2016 includes -39 MSEK cost for Kevitsa bridge financing

Balance sheet

2016-10-20 21 Boliden Group Q3 2016

SEK bn (Unless otherwise stated)

30 Sep 2016

30 Jun 2016

Total Assets 51.7 50.4

Capital employed 42.1 40.6

Shareholders' equity 27.6 26.2

Net debt 11.1 11.2

Gearing, % 40 43

Loan duration, years 3.4 3.6

Average interest rate, % 1.2 1.2

Interest duration, years 0.2 0.4

Net payment capacity 5.5 5.1

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%MSEK Net debt Gearing

Going forward

• Well positioned in the metal market

• Metal prices – low macro visibility

• Mines ‒ Aitik: volatile production, Cu 0.21% (2016),

0.25% (2017-2019)

‒ Garpenberg: Zn 4.5%, Ag 120 g/ton (until FY 2017)

‒ Tara: lower Zn grade in Q4 vs Q3

‒ Kevitsa & Boliden Area: soft ore Q3

• Smelters ‒ No planned maintenance Q4

‒ Odda P200: ahead of plan, ramp-up continues Q4

• Capex ‒ 2016: slightly above 4 BSEK

‒ 2017: 5 BSEK

2016-10-20 Boliden Group Q3 2016 22

Disclaimer

• This presentation has been prepared by Boliden for information purposes only and as per the indicated date. Boliden does not undertake any obligation to correct or update the information or any statements made therein. Certain statements in this presentation are forward-looking and are subject to risks and uncertainties.

• Nothing contained herein shall constitute any representation or warranty as to accuracy or completeness. Boliden has not made any independent verification of the information obtained from third parties.

• 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.

• Boliden does not accept any liability whatsoever arising from or in connection with the use of this information.

• 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.

2016-10-20 Boliden Group Q3 2016 23

2016-10-20 24 Boliden Group Q3 2016

Appendix

2016-10-20 Boliden Group Q3 2016 25

Market balance – zinc and copper


Source: CRU September, October 2016, Boliden calculations

26

Zinc – global market Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Metals demand, kt 3 316 3 306 3 361 3 316 3 329 3 345 3 420 3 380 Year on year change 0% -1% -1% 0% 0% 1% 2% 2% Smelter production, kt 3 514 3 349 3 489 3 396 3 453 3 270 3 380 3 335 Year on year change 5% 7% 7% 1% -2% -2% -3% -2% Mine production, kt 3 349 2 881 3 328 3 252 3 014 2 632 2 901 2 916 Year on year change 9% 4% 4% 2% -10% -9% -13% -10% Metal balance, kt 198 43 128 80 124 -75 -40 -45 Concentrate balance, kt 82 -231 85 113 -188 -394 -222 -159 Copper – global market Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Metals demand, kt 5 539 5 020 5 489 5 529 5 708 5 067 5 583 5 585 Year on year change 3% 0% 0% 1% 3% 1% 2% 1% Smelter production, kt 5 584 5 406 5 518 5 558 5 631 5 567 5 671 5 684 Year on year change 7% 4% 3% 0% 1% 3% 3% 2% Mine production, kt 3 424 3 599 3 828 3 793 3 936 3 869 4 050 3 958 Year on year change -2% -1% 4% 2% 15% 8% 6% 4% Metal balance, kt -75 297 -51 -73 -180 350 38 99 Concentrate balance, kt -359 -145 45 -78 -65 -95 36 -37

Market balance – nickel and lead

2016-10-20 Boliden Group Q3 2016 27

Nickel - global market Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316

Metals demand, kt 451 476 479 465 471 487 515 492

Year on year change -3% 0% -3% -1% 4% 2% 7% 6%

Smelter production, kt 511 473 497 486 493 468 488 473

Year on year change -4% -5% 3% -5% -3% -1% -2% -3%

Mine production, kt 452 452 545 558 492 448 519 548

Year on year change -34% 5% 4% 4% 9% -1% -5% -2%

Metal balance, kt 59 -3 18 22 23 -19 -27 -18

Lead - global market Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316

Metals demand, kt 2 852 2 705 2 734 2 818 2 934 2 775 2 808 2 866

Year on year change 1% 0% 0% 2% 3% 3% 3% 2%

Smelter production, kt 2 852 2 705 2 734 2 818 2 934 2 775 2 808 2 866

Year on year change 0% -1% -1% 2% 3% 3% 3% 2%

Mine production, kt 1 314 1 045 1 186 1 266 1 276 1 051 1 139 1 215

Year on year change 1% -4% -1% 1% -3% 1% -4% -4%

Metal balance, kt 17 0 -2 12 24 12 18 7

Concentrate balance, kt 119 -131 16 133 139 -187 -67 43

Source: CRU September, October 2016, Boliden calculations

Economic development

2016-10-20

Industrial production, year on year %

Boliden Group Q3 2016

Source: Thomson Reuters Datastream, Boliden calculations for world data

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J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D

2012 2013 2014 2015 2016

EU28 USA China World

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EU USA China

Construction – largest segment for Cu and Zn

2016-10-20

Activity, year on year %

Source: Reuters Datastream


China: year on year based on cumulative investments at each point

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2016-10-20

Source: LMC Automotive


Automotive

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Production of light vehicles, year on year, quarterly data

-15%

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2012 2013 2014 2015 2016

Europe USA China World

China – metals demand and economic growth

Source: CRU Ltd, Thomson Reuters Datastream

2016-10-20 Boliden Group Q3 2016 31

Year on year growth %

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Zinc demand Copper demand GDP Industrial production

Zinc TC and premia

• Concentrate market tight, metal market fairly balanced

• Spot TCs in China down • Higher Zn price, realized contract TC up

• Stable premia in Europe


Source: CRU September 2016

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US$/t concentrate Treatment charges

Realized TC - European contract

Spot TC, China imports

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US$/t metal Metal premia

Delivered Premia US Midwest Ex-Works Premia EuropePremia Far East - Western

Copper TC and premia

• Mine production ramp-up • Spot TCs stable

• Spot premia up slightly from low level


Source: CRU September 2016

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Contract benchmark according to market sources including CRU Contract benchmark according to market sources including CRU

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USD tonne

2016-10-20 34 Boliden Group Q3 2016

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