Imerys posts record sales and strong performance in the first half of 2022
- Record revenue of €2,563 million, with +18.7% year-on-year growth reflecting strong pricing actions (+16.1%) to address inflationary pressures
- Significant increase in current EBITDA to €445 million (+11.2% vs. last year)
- Net income from current operations up 19.7% to €189 million
- Increased capital expenditures in the fast-growing green mobility market
- Imerys in exclusive negotiations to divest the High Temperature Solutions business area
Alessandro Dazza, Chief Executive Officer, said:
“Imerys delivered record sales of €2,563 million and a double-digit increase in revenue, pricing, current EBITDA and net income in the first half of 2022. I am very proud of the outstanding performance of our teams in such a challenging economic and political context, characterized by rising inflation, logistics and labor difficulties. Though I expect growth to decelerate in the second half of the year due to dropping consumer confidence and tightening monetary policy, I remain confident in the capacity of Imerys to deliver an EBITDA improvement year-on-year in 2022. The divestiture of our High Temperature Solutions business would be an important milestone in the Group’s focusing efforts towards its core, high-growth specialty minerals business. With this in mind we look forward to presenting our 2023-2025 growth strategy during a Capital Markets Day in the fourth quarter 2022.”
1The definition of alternative performance measures can be found in the glossary at the end of the press release.
2Weighted average number of outstanding shares: 84,688,000 in H1 2022 compared with 84,709,730 in H1 2021.
Active portfolio management to sustain the Group’s long-term growth strategy
Imerys has entered today into exclusive negotiations to sell to Platinum Equity, a global investment firm operating companies in a broad range of markets, its High Temperature Solution business (HTS), for an enterprise value of approx. €930 million. HTS is a leading global provider of refractory solutions serving more than 6,000 customers in the iron & steel, thermal and foundry markets. The business, which generated a revenue of €801 million in 2021, employs 2,800 people across 36 industrial sites in 16 countries.
The contemplated transaction is in line with Imerys’ active portfolio management, long term development strategy and value-creation ambitions. It would allow the Group to focus on specialty minerals solutions and provide additional financial resources to pursue its development strategy, in particular in markets such as green mobility, sustainable construction and natural solutions for consumer goods.
This proposed transaction, which is subject to the fulfillment of customary closing conditions, including the information and consultation of works councils and other regulatory approvals, is expected to be completed by the end of the year.
Geopolitical tensions, a tighter monetary policy, restrictions in China and potential gas curtailments in Europe are expected to impact consumer confidence and business activity in the second half of 2022.
However, Imerys’ global geographic footprint and diversified market exposure, the continuous growth of the electric vehicle (EV) market, strategic capital expenditures coming on stream and its ability to pass through inflation on costs should allow Imerys to continue on its path of profitable growth and current EBITDA improvement year-on-year, albeit at a slower pace in the second half. For full year 2022, Imerys expects current EBITDA of €810-840 million, assuming no significant market disruptions in the second part of the year and excluding the impact of the contemplated HTS divestiture.
The divestiture of our High Temperature Solutions business would be an important milestone in the refocusing of the Group’s activities around its core, high-growth specialty minerals business. The 2023-2025 development plan of the Group will be presented to the financial community during a Capital Markets Day in the fourth quarter of 2022.
COMMENTARY ON THE FIRST QUARTER 2022 RESULTS
Revenue was €2,563 million, up 14.8% year-on-year at constant scope and exchange rates in the first half 2022. Group sales volumes were down 1.3%, reflecting the impact of the Ukrainian crisis and the international economic sanctions against Russia, as well as local lockdowns in China following the resurgence of the Covid-19 pandemic and the weakness of the automotive industry.
In a highly inflationary environment, Imerys’ price effect accelerated from +11.9% in the first quarter of 2022 to +20.1% in the second quarter, averaging 16.1% in the first half.
Revenue included a positive currency effect of €101 million (+4.7%), primarily as a result of the appreciation of the U.S. dollar against the euro. The scope effect was €26 million negative, related to recent divestitures.
Current EBITDA fully benefited from higher selling prices, which became effective in the second quarter of 2022. The strong price effect (€365 million) in the first half of 2022 compensated for the significant and rapid increase in variable costs, fixed costs and overheads, a consequence of extremely high inflation on all input factors. The currency effect was positive at €26 million.
Current operating income reached €293 million for the first half of 2022, a 19.5% increase compared to the first half of last year.
Net income from current operations
Net income from current operations, Group share, totaled €189 million, up 19.7% vs. last year. Net financial result was negative at €(17) million. The income tax expense of €(74) million corresponds to an effective tax rate of 27.0%. Net income from current operations, Group share, per share, was up 19.7% to €2.24.
Net income, Group share, totaled €192 million in the first half 2022. Other income and expenses, after tax, includes restructuring costs related to Russia and Ukraine compensated by a capital gain on the natural graphite disposal and a gain on the net monetary position of Haznedar (hyperinflation in Turkey in accordance with IAS 29). Excluding the latter, other income and expenses, after tax, represent a €15 million charge, in line with previous year.
Net current free operating cash flow
The net current free operating cash flow reflects strategic capital expenditures for new expansion projects (booked capital expenditures on strategic projects were €32 million) and the increase in value of inventories driven by strong activity and inflation. Change in operating working capital remains consistent with revenue trend. The Group expects cash generation to improve in the second half of 2022.
As of June 30, 2022, net financial debt totaled €1,531 million, which corresponds to a net financial debt to current EBITDA ratio of 1.9 x, stable vs December 31, 2021 and lower than at June 30, 2021 (2.1x).
The Group's financial structure is solid, as evidenced by the "investment grade" ratings confirmed by Standard and Poor's (September 14, 2021, BBB-, stable outlook) and Moody's (March 11, 2022, Baa3, stable outlook).
Performance Minerals (54% of consolidated revenue)
Revenue generated by the Performance Minerals segment was up 11.4% like-for-like in the first half of 2022. On a reported basis, revenue was up 15.5% after a positive currency effect of €68 million (+5.6%) and a negative perimeter effect of €23 million (-1.9%).
Revenue in the Americas was up 10.3% at constant scope and exchange rates. Despite persistent logistics issues creating order backlog (unavailability of containers, congestion at US ports), the activity was good overall during the second quarter of 2022.
Revenue in Europe, Middle East and Africa increased by 12.3% at constant scope and exchange rates. While demand from the automotive industry remained weak, growth in the second quarter of 2022 was largely driven by a robust sales momentum in ceramics in Europe.
Local lockdowns in China weighed on the performance in Asia-Pacific where revenue rose by 9.4% at constant scope and exchange rates. During the second quarter of 2022, sales to the mobile energy sector continued to grow. Specialty minerals (i.e. ceramics, paints, coatings, and filtration) and paper and board also performed well.
High Temperature Materials & Solutions (46% of consolidated revenue)
Revenue generated by the High Temperature Materials and Solutions segment was up 18.4% in the first half of 2022 at constant scope and exchange rates. On a reported basis, revenue increased by 23.2% with a favorable currency effect of €42 million (+4.4%) and a negative scope effect of €3 million (-0.3%).
Revenue in High Temperature Solutions, which serves the iron & steel, thermal and foundry markets, increased by 19.2% year-on-year at constant scope and exchange rates, supported by strong activity and price increases. The business continued to benefit from various commercial initiatives and well oriented underlying markets. Haznedar, a high-grade refractory monolithics and bricks manufacturer in Turkey acquired in December 2020, achieved a record semester.
Revenue in the Refractory, Abrasives & Construction business area was up 17.6% at constant scope and exchange rates, driven by price hikes on all market segments, necessary to offset rising inflation especially on energy. Building and infrastructure held well while refractory and abrasive volumes experienced some softness in the second quarter of 2022 due to Russia and Ukraine, yet comparing favorably with market trends. In India, the new greenfield plant in Vizag, which produces refractories and specialty binders, continued to ramp up.
Update on Chapter 11 process of North American talc entities
The stakeholders in the chapter 11 process are still engaged in a court-approved mediation (with a recently extended timeline) to reach a revised plan of reorganization. The Group continues to consider that the balance of the provision in the financial statements as of the end of June 2022 is appropriate to cover the expected financial impact on Imerys of the Chapter 11 process.
First half 2022 results webcast
The press release is available on the Group’s website www.imerys.com. The Group will hold a live webcast to discuss the first half 2022 results at 18:30 AM (CET) on July 28, 2022, which can be accessed on the Group’s website www.imerys.com.
- November 2, 2022: 3rd quarter 2022 results
These dates are subject to change and may be updated on the Group’s website https://www.Imerys.com/finance.
The world’s leading supplier of mineral-based specialty solutions for industry with €4.4 billion in revenue and 17,000 employees in 2021. Imerys delivers high value-added, functional solutions to a great number of sectors, from processing industries to consumer goods. The Group draws on its understanding of applications, technological knowledge and expertise in material science to deliver solutions by beneficiating its mineral resources, synthetic minerals and formulations. Imerys’ solutions contribute essential properties to customers’ products and their performance, including heat resistance, hardness, conductivity, opacity, durability, purity, lightness, filtration, absorption and water repellency. Imerys is determined to develop responsibly, in particular by fostering the emergence of environmentally-friendly products and processes.
More comprehensive information about Imerys may be obtained from its website (www.imerys.com) in the Regulated Information section, particularly in its Registration Document filed with the French financial markets authority (Autorité des marchés financiers, AMF) on March 22, 2022 under number D.22-0131 (also available from the AMF website, www.amf-france.org). Imerys draws investors’ attention to chapter 2 “Risk Factors and Internal Control” of its Registration Document.
Disclaimer: This document contains projections and other forward-looking statements. Investors should be aware that such projections and forward-looking statements are subject to various risks and uncertainties (many of which are difficult to predict and generally beyond the control of Imerys) that could cause actual results and developments to differ materially from those expressed or implied.
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