Thank you, Valeria. Good morning, everyone, and welcome to today's presentation. I will first comment on our performance in
2020 and the outlook for
That I'm physically fit and according to my entrepreneurial beliefs mentally as well. When I took over as CEO back in 2008, My mandate was to bring you in close to the next stage of development. Over the past 12 years, We have now successfully completed the execution of our Horizon 2020 growth strategy And everything is in place for Umicore to keep driving. We have talent for teams. We have a promising technology pipeline.
So the call and I felt this would be an auspicious moment to prepare for my succession. And I would be pleased to ensure a smooth transition in We have also gone the extra mile to continue serving our customers globally and I'm truly grateful to my 11,000 colleagues In Catalysis, we have seen extreme opposite movements during the year. In the spring, we were confronted with the closure by our customers Of most car assembly lines and in turn had to temporarily shut down most of our capital spends. In contrast, We saw a sharp recovery in demand, which started in China in the second quarter, took shape in other regions over the summer months and gathered pace through the Q4. While the performance in Catalysis was impacted to a significant extent By the temporary shutdowns in the first half, we benefited in a disproportionate manner from the recovery demand in the second half Due to our leading positions in Gasoline Technologies, particularly in China and Europe.
In addition, market conditions in the EV battery supply chain remain depressed due to the overcapacity in China and the presence of excess inventories. Excluding inventory effects, Which confirms Umicore's strong competitive position in the capital materials space. In Recycling, we achieved a record performance. We nearly doubled earnings compared to 2019 With high metal prices and strong trading conditions, by far the largest contributors to the increase. Overall, Uniper achieved record earnings in 2020 and this goes to show the merits of our strategy, Which builds on the complementarity of our activities.
It also shows the resilience and agility of our teams in the face of unprecedented conditions. The good news really is that the patterns which we observed in the And the experience of last year has shown that things can change very rapidly. If To Umicore's operations in 2020 2021, we should see again an acceleration in our growth trajectory with all business groups contributing to the growth. In Catalysis, we expect to keep benefiting from our leading position in According to projections by industry experts, it should keep recovering. In addition, we expect to benefit from the initial impact of Which we carried out in 2020.
In Energy and Surface Technologies, we see good market traction For capital materials, we project substantial growth in our sales volumes for EVs. This volume growth to resume earnings growth in 2021 in line with the current market consensus. And this despite some €50,000,000 of additional fixed costs linked to our growth investment and with margins continuing to reflect pricing pressure. In Recycling, we expect moderate volume growth And a continued very favorable supply mix. In addition, metal price could once again boost our performance.
You will have seen that certain metal prices have continued to surge since the end of last year. And if metal prices were to stay Overall, at their current elevated levels throughout 2021, recycling earnings would increase very significantly from the record levels This was evidenced, for instance, by the Green Recovery Plan in Europe or by the step up of the NAB penetration targets in China. In other words, the regulatory drivers which underpin our growth strategy continue to get stronger. Against this backdrop, our motivation to maintain strategic course of action is very high. In particular, We have pursued the construction of our capital materials plant in Poland and it will start production towards the end of the year.
This additional capacity will come in timely to serve the growing EV demand in Europe and the growing needs of our customers. We have also pursued the ramp up of our fuel cell catalyst production in Korea and the expansion of catalyst production capacity in China, for light and heavy duty applications. In Recycling, the focus of our investments in the short and mid term At the same time, of course, I believe that we have responded most effectively to the challenges caused by the pandemic outbreak. As I mentioned in my introductory remarks, the priority is to keep everyone at Umicore healthy. And I would like once again to thank our medical staff for having ensured safe working conditions, And I would like to thank all colleagues for having swiftly adopted the required precautions.
We have also managed to diversify our source of funding and increase the value of cash. Philip will comment on that later. Finally, the pandemic has forced us to adjust to rapidly changing market dynamics, which resulted in a streamlining of operations and the impairment of certain assets. Let's now turn to the business review. This slide recaps our key figures for 2020, which are actually commented in full detail in our press release And global car production contracted by 18% in 2020.
The graphs show the market development month by month against 2019 and you can clearly see how deep the production cuts were in the 1st half across regions. The graphs also show that the recovery started earlier and was most pronounced
In China,
against the backdrop of an 18% market contraction, Our revenues in Catalysis decreased by only 7% as our leading positions in GasLink Technologies China and benefits thereof are increasingly visible. In Europe, we continue to benefit from the decline of diesel car sales in the mix. On the other hand, the stationary catalyst business, which is mainly a project driven business, The business unit for Automotive Catalyst showed tremendous resilience. It's revenues and adjusted EBIT for the whole year the second half of twenty twenty. Turning now to EVs, we see that battery demand expressed In GLP dollars, which by the way is the relevant metric to look at for flash material suppliers, grew by 17% 2020.
This market growth was driven by increasing demand in Europe where the new CO2 regulations are supporting a Faster penetration of electrified vehicles. The number of EV models being launched in the region or the pipeline It is also worth noting that plug in hybrids remain very popular in Europe Where they make up half of EV sales. In China, battery demand remained subdued during the better half of twenty twenty and saw an improvement at the end of the year only. The Chinese EV market has shown very limited growth in 2019 2020, unlike what was anticipated. The Uncatrol Materials Industry grew somewhat less than the 17% decrease in gigawatt hours or GVs And this was due to the excess inventories in the value chain.
We believe that these excess inventories have now been completed. Taking into account the impact of inventory corrections, we estimate that Umicore sales volumes of cathode materials for EVs This performance was supported by strong demand in Europe where we doubled our sales volume in 2020, albeit from a small base. In contrast with the growth in EV applications, capital materials demand for energy storage systems and portable electronics was very low. We recorded lower revenues in the Cobalt and Specialty Materials activities due to the plant damage And the electronic materials due to low demand for our products used in fiber optics or satellites. Margins in the E and ST were affected by the underutilization of our capital materials capacity in China and pricing pressure Our recycling activities did benefit in 2020 from an exceptionally supportive metal price environment, especially for PGMs.
You can see on the graphs that rhodium and palladium prices had a great run-in 2020 Despite lower demand from the automotive industry in the 1st part of the year, new and more stringent emission norms Due effectively required higher PGM loadings and the shift from diesel to gasoline is exacerbating the tension for rhodium and palladium. We also observed that new supply sources can hardly keep up with the high market demand And the recovery of automotive demand has pushed prices to new heights. For the same reasons, price volatility was extremely high In 2020, which has resulted in a remarkably high contribution from our trading activity. Finally, demand for gold and silver investment products has remained very high, probably due in part to the crisis context as these matters continue to be seen by investors as a safe haven. I would also like to point out That metal price are even higher today and in certain cases much higher than the average prices of 2020.
In addition, certain hedges that were entered into before 2020 and which meant that we did not We also performed well volume wise despite the operating constraints aimed at preventing the virus from entering Auto spreading in our size. We had a higher availability of the whole business matter, which The supply environment also continued to be favorable with ample input of recycled materials in particular PGN bearing and spent catalysts. Finally, the Precious Metals Management Business Unit benefited from high price volatility
Yes. Thank you, Mark, and good morning to everyone. So, Mark has already provided you with the group's key financials. This slide puts the adjusted operating earnings in a historic perspective. Despite the challenging business context and in particular the downturn in the automotive sector in the first half of the year, managed to generate record adjusted earnings and margins due to its diversified and unique business portfolio.
As has been the case
in the past economic crisis, the Recycling Business Group and its metal price sensitivity once again demonstrated its countercyclical characteristics With its stellar performance more than offsetting lower earnings in Catalysis and Energy and Surface Technologies. The effect from higher metal and trading results in recycling pushed group margins to a new record. When focusing on the second half performance, next to recycling also Catalysis contributed to year on year growth and even exceeded pre COVID margins on the back of cost savings and a strong volume recovery. Operating cash flows here as adjusted EBITDA reflect the same trends. When stripping out the €24,000,000 year on year increase in depreciation charges, Adjusted EBITDA increased 7% to reach a new high.
In our first half year release, we referred to the particularly pronounced operating leverage effects at play. Then a negative factor in Catalysis and Energy and Surface Technologies and a positive driver in Recycling. In the second half of the year, the leverage effect in Catalysis reversed and turned positive through a combination of business recovery and cost savings effects, including some initial benefits from the restructuring measures of the first half. As Marc mentioned, these underlying earnings drivers are expected to persist going into 2021. By contrast, in Energy and Surface Technologies, the negative lever effect accelerated in the second half.
And finally, in recycling, the margin tailwinds of the first half continued into the second half increasing overall group margins. Reviewing Umicore's full P and L, the 5% higher adjusted operating result translated into a 3% higher adjusted net group result. Continuing the trend of the first half, finance costs increased on a full year basis, Mostly on the back of higher gross financial debt. For example, the interest due on the €390,000,000 U. S.
Private placement debt payable as from September 2019 was now accounted for a full year. Also the financial charge related to the 500,000,000 euros convertible bond that we issued in June and which consists of the discounted value of the implied conversion rights and the amortized transaction cost was newly accounted for. The adjusted tax rate was stable at 24.2% resulting in flat adjusted tax charges year on year despite some substantial changes in the underlying regional result distribution. The most significant impact on the full P and L comes from the €237,000,000 adjustments to EBIT. This includes the €72,000,000 of charges already recognized in the first half, leaving €165,000,000 for the second half, which is Somewhat higher than the previous guidance of some €150,000,000 This next slide provides some detail on these adjustments.
While in the first half of the year these charges were concentrated in Catalysis, the second half year items mostly relate to the Energy and Surface Technologies and Recycling segments. Most of these adjustments find their origin in Umicore's response to the COVID-nineteen crisis and the resulting changes in business context in some business units. Over half of the charges are restructuring related As we consolidate activities on fewer sites in the Automotive Capitalists and Cobalt and Specialty Materials Business Units. Close to the full charge in recycling consists of a €50,000,000 provision to establish a green zone neighboring the Hoboken plant as already A consultation with the city and the residents continues. This best estimate may be updated going forward.
In Energy and Surface Technologies, the bulk of the charges relate to the before mentioned restructuring in Cobalt and Specialty Materials, Including a non cash value impairment following the sale of part of the unit's rightsized permanent cobalt inventory. Of the total full year EBIT adjustment of €237,000,000 close to €150,000,000 has a non cash nature and most of the remaining €90,000,000 will be cashed out in future years. After accounting for tax effects, the impact of these adjustments on Umicore's net profit amounted to €192,000,000 Now despite the challenging business context in 2020, Umicore's operating cash flows were the highest in years. Cash flow from operations before changes in working capital were up 13% to €707,000,000 As is plotted on the top line on this top graph. Cash working capital further increased in the second half, Growing to €104,000,000 over the full year, driven by higher metal prices and PGM prices in particular.
Catalysis saw the highest increase in working capital with an acceleration in the second half. Working capital in Recycling also grew but to a much lesser extent than in Catalysis, while Energy and Surface Technologies reduced its working capital needs. The working capital trend for the current year will also depend to a large extent on the prevailing metal prices. Cash spent on CapEx and capitalized development costs amounted to €435,000,000 compared to €588,000,000 of the same period in 2019. This reduction reflects the decision following the COVID-nineteen outbreak to restrict spending on non strategic projects.
As in 2019, Energy and Surface Technologies accounted for approximately 2 thirds of CapEx With rechargeable battery materials greenfield plant in Poland as a key project. For 2021, we would currently guide for an increase in Group CapEx from the 2020 level. Finally, these combined flows resulted in a positive net free operating cash flow of €168,000,000 compared to a net cash out of €39,000,000 in 2019. As you can see from the chart on this next slide, this free operating cash flow was sufficient to fund the financial and tax cash outs as well as the interim dividend payout, resulting in a roughly stable net financial debt compared to the end of 2019. And this stable net financial debt corresponds to a solid leverage ratio of 1.8 times adjusted EBITDA for the full group.
Now next to stabilizing the absolute level of net indebtedness, we took the opportunity in 2020, as you know, to further strengthen and diversify our sources of funding, amongst others by securing 2 important new long term funding instruments, an 8 year loan with the European Investment Bank of €125,000,000 And a €500,000,000 5 year convertible bond. This concludes my section and I hand back over to you, Marc.
Thank you, Philippe. Before opening the line to your questions, I would like to recap these messages of this morning's presentation. We will also to have maintained the strategic course of action and successfully demonstrated the merits This would be a suspicious moment to start preparing for the succession. And with this, I would like to open the floor to your questions
We will now start the Q and A session. Please note that we kindly request that you take the following guidelines into account. Please ask only one question per person to give everybody the opportunity to ask questions. To ask your question, please use For those connected via phone For those that do not have the raise hand functionality in their settings, please send an e mail with your questions to the irumigore.com mailbox. And the first question comes from Sebastian Bray.
Please unmute yourself and go ahead.
Good morning and thank you for taking my question. It's on the CapEx plan. If Unicore is moving back So a more volume centric strategy in China. Is the greenfield expansion that was stopped in 2020 back on the menu? And where are these incremental volumes primarily going to be coming from in the year 2021?
Is there still Capacity in Korea, will it have to come from China? Thank you. Hello. Good morning. Can you hear me?
Sorry, we have a technical problem. You have to bear with us for a second. Okay. Can you does it work now? Can you hear me well?
Perfect, Marc.
Okay, good. Thank you. Sorry for the technical hiccup. So let me then restart because I don't know exactly how much of my answer you have already heard. So the strategy is not changing.
The fact is that we expect much better volumes in 2021 Because of the fact that the models that we serve are showing very good traction now. From a regional distribution point of view, the volume growth is going to be spread across Europe, China and Korea. Korea to a more limited extent because there we have some, I would say lower available capacity. We expect quite a bit of recovery in China in terms of Demand for our products and in terms of sales, but not to an extent where the capacity we will be able the full capacity in China. And finally, we see continued excellent traction in Europe.
And towards the end of the year, our new plant in Europe will also come on stream and start producing for the European market.
Thank you. Just to clarify, is the China greenfield now happening again? Or is the expansion still
The next question comes From Adam Collins, please ask your question.
Yes. Hello, Hello, everybody. First of all, can I congratulate Mark on 25 years of service to Uniminiere and Umicore? The business has certainly been transformed during this period. So I'd like to offer you my full thanks for some great service.
I have one question in relation to the structural issues in the non automotive area of cathode materials. This is sort of a quick 2 parter. So firstly, on stationary applications. Does NMC have a future in utility scale? And then on the Portable Electronics side, again, could you address whether LCO is a commoditized space now?
Adam, can you hear me?
I can hear you now.
Have you heard Mark?
No.
Okay. We're still having technical problems. So what I propose is that we take a break. We try to fix things here,
And we'll start the call
up in 5 minutes. I think that's better than Continuing to struggle. Our apologies for that.
That's fine, Kalei. I'm wondering what's
Yes. I think we'll it's for us to fix things on our end. So If we could maybe reconvene in 5 minutes,
if that's okay with you.
Of course, yes. No problem.
Our apologies again. We'll try to fix things
Hello?
Yes, Mark. We heard you well. Okay. Can you I think now you can hear us. We apologize for the inconvenience.
We will restart the Q and A. I believe Adam Collins was asking a question. Please go ahead and unmute yourself.
Okay. Mark, I don't know, did you hear the question originally? Would you like me to repeat it?
I did hear the question, Adam.
Just go ahead then, please.
Yes. And so first of all, I would like to thank you for your kind words, which preceded your questions. They went straight to my heart. Thank you. So let me start with the RCO, which indeed, as You pointed out is a commoditizing product, commoditizing market.
And we have clearly deemphasized LCO in our development programs as well as in our capacity allocation Plans as our focus clearly has moved to automotive applications where there is more room for Differentiation today in portable electronics. In terms of the stationary applications, So for energy storage applications, the picture is somewhat different. NMC has a role to play there. It is one of the technologies which is being utilized, one of the mainstream technologies in ESS, And we expect that it will continue to be the case. However, it's a project driven business with Weather patterns can be somewhat erratic indeed.
So I wouldn't extrapolate too much from The fact that it was very low in 2020 compared to prior years, I think It's a business that will continue to have ups and downs and that is for us a good business, a good application. And again, NMC has definitely a role to play there.
Okay. May I just clarify the first point about the portable electronics? So LCO is challenged. Do you have an NMC play into portable electronics? Or is that also a market you're going to deemphasize because that's challenged too?
That's it's LMCs for portable electronics or portable applications Has a long time ago been one of the outlets for Umicore products, but that's something that Has been emphasized already a longer while ago because of the focus clearly shifting To automotive applications and the developments in automotive require a lot of resources and We want to be sure that we have the right critical mass and the right focus.
Okay. Thank you, Mao.
Our next question is coming from the IR inbox from Charlie Webb from Morgan Stanley. Mark, the question is How sustainable do you believe the H2 margins in Catalysis are? Would you expect some normalization from this very high level in 2021?
Good morning, Charlie. The it's a bit earlier in the year To tell about to talk about the margins in any business because there is still quite the level of uncertainty Regarding demand patterns, however, I would say that, again, if the pandemic does not cause new disruptions To the market, I would expect indeed the high levels of margins, which we achieved in the second half Of last year to be more or less sustainable. Why did we have such an improvement? 1st of all, because we have had operations successful operational excellence initiatives. So you have cost improvements, which are definitely sustainable.
And secondly, we have a very supportive mix effect, which indeed is today set to continue throughout 2021. So I would say, again, with the caveat that I've mentioned about the uncertainty and the limited visibility that we have today, I would say that more or less, yes, These margins are sustainable.
He also has a second question. In Energy and Surface Technologies, can you help us better understand what you're seeing in the underlying cathode and EV markets around pricing, technology and the increased use of LFP And demand, in particular, what do you expect from Europe in 2021?
So that's a very comprehensive question covering many basis and many important aspects of The market evolution in battery materials. So first of all, I expect the continued strong traction in Europe. There is little doubt about that, given the amazing efforts that are being Carried out by automotive makers to bring new electrified models to the market, The impact of the more stringent CO2 regulations, the change in consumer mindsets as well. So I expect very strong traction in Europe and strong growth. And that's why I mentioned in my remarks That the our new capacity in Poland will actually come in timely To serve the growing needs of our customers in the region.
You will also recall that we serve, to a certain extent, The European market through our facility in Korea, so that will have to continue for a while. In terms of other market dynamics, I would say that I expect no change in 2021 in terms of pricing Environment, so pricing pressure continues to be very much present indeed. I expect no real change in terms of margin configuration. I mean, give or take a few Basis points, which are somewhat difficult to predict ahead of time. But other than that, I expect a certain continuation In terms of both pricing and margin context, and the real difference for us will come from the additional volumes.
Also in terms of margin, you have to bear in mind that we're adding we continue to add Significant fixed cost to our cost base as we continue to expand. I mean, the construction of a new plant, the start up of a new plant imply additional D and A charges, imply significant start up and qualification costs. And we thought it would be Useful to quantify those, and that's why we have mentioned the some €50,000,000 of additional fixed costs To be taken into account. Now let me say a few words about the technology development The technology evolution. Actually, what we described a year or 2 years ago already is clearly materializing.
There is a gradual trend to increase nickel content in the cathode chemistry. Today, the vast majority of the market is what we call a mid nickel chemistry market, But higher nickel compositions are starting to take a greater proportion of the market. And this gradual evolution continues along the lines that we had anticipated a year or 2 ago. LSP is gaining somewhat ground in China, clearly. You have seen that some of the best selling models In China, in the course of 2020, where low speed, low range, low cost cars Using LFP?
So I think that, as I mentioned a year ago that or Even more recently that LFP will have a role to play. It's I see that as a niche Chemistry in a way because of the intrinsic limitation it has in terms of Weight in terms of range, in terms of overall performance. But clearly, for lower cost The cars with low range requirements and low speed requirements, that's certainly a chemistry that can be considered. Now this being said, and sorry to offer a long answer to your question. This being said, please bear in mind that Today, the LFP chemistry It's mostly using idle capacity, spare capacity, which exists in China.
So that may also distort somewhat The cost or the price comparisons and if at certain point in time, New capacity would have to be built to produce LFP. This may have an impact on the price comparisons. And we remain convinced I remain convinced that NMCs Tees and higher nickel NMCs will continue to be the mainstream, whether it's NMCs or NCA or NCMAs. I mean, this family of technology Will remain the mainstream because it offers a unique trade off between cost Performance, range, safety and all the parameters which are important For the electric vehicles to be successful.
The question comes from Wim Hofze. You can unmute yourself.
Yes. Good morning. I would I'd like to spend my question on rhodium, please. You appear to have made some hedges on rhodium, While in the past, there has not been a paper market for that, can you maybe elaborate on, yes, who's the counterparty? Was it just a financial party or someone Who had some spare rhodium?
And is there yet the establishment of a rhodium hedging pool market For you now going forward, can you maybe elaborate on that?
It's Filippo. I'll take that question. So unfortunately, we cannot go into too much of details. I think the important thing is that Yes. We felt we should say that we have indeed hedged a minor part.
I have to emphasize a minor part Of the volume exposure in 2022, 2023 through, I would say, forward contracts. So this is with individual Parties indeed. I think the importance in a way is that you have counterparties that at today's record Volume prices are willing to step into forward contracts for 20222023. So a minor part of that exposure is hedged. You're right.
We typically in the past, we have not Entered into hedges for rhodium, but obviously given the current pricing context, we felt that was appropriate. Again, emphasizing that it's only a minor part of Expected exposure, but on the details, unfortunately, we cannot provide you with more
information. Okay. Thank you. Yes.
This being said, I would like to add that we're talking about physical hedges. So it's not The paper hedges, there is still no paper market for hedging. So the counterpart is an industrial user of the metal.
The next question comes from Jean Baptiste Rolland.
Good morning, Marc, and good morning, Philippe. I wanted To better understand in terms of the guidance that you're providing in Energy and Surface Technologies And especially the fact that you're basically comfortable with consensus for next year. I'd like to understand if there is what sort of cobalt what sort of assumptions around Cobalt or nickel, you have made around that guidance as we have seen that it is It can be a pretty substantial part of or bring at least some benefits. And given where the prices are today, that would It would be helpful if that's something that you could clarify. Thank you very much.
Jean Baptiste. I would say we are using What we I'd say the best assumption that we can use is the current pricing in a way, which is Should reflect everything that the market knows about possible developments on the supply and demand side. And so that's what we're using. It's based on the current what we currently see in the market.
Can I just follow-up on whether just a quick one follow-up on the rechargeable battery In China, as you mentioned, continued pricing pressure? There are also a couple of data points that we're seeing Pointing towards price increases. However, it's a little bit unclear whether that's completely related to increase in raw materials or whether there is So an improvement in the underlying dollar margin. And I was just curious to see if this is something that you're Given development in volumes, etcetera, that you're benefiting from?
That's a good observation, and I can Clarify that the price developments are related to the metal price content And not the underlying, I would say, what we call technology premium, which remained pretty much unchanged compared to 2020. So it's more, I would say, related to the cost of the raw materials. So no benefit really for us Or possibly for others because typically we pass that through to our customers.
Very clear. Thank you very much, Marc, and best wishes for the future.
Thank you. Appreciate it.
The next question comes from Mubasher Chaudhry.
Mark. Hi, Philip. Thank you for taking my questions. Just a quick one around the time line for the succession plan. Just some comments around how long that slide should take and whether you're looking for candidates internally or externally.
Just some comments around that would be helpful. And just to follow-up on one of the questions from earlier, how are you thinking about that greenfield capacity in China? Is that still planned? Or and when do you plan to get to the previously announced target of 100 Of gigawatt hours of capacity. The sum for turnaround would be really helpful.
Good morning, Mubasher. And So on the timing of your succession is not yet known. Otherwise, we would have communicated about it. And Today, we have just started the process and the search for a successor. So difficult for me to estimate today how long it will take For the Board to appoint a successor and for the successor to be in place, really difficult to estimate, but we're We're not talking in days.
I would think we're talking in months, but how many months It's absolutely difficult to estimate today. Will internal candidates be considered? Yes. It is meant to be run as a dual track process. And so yes, it will be open to internal candidates As well.
In terms of capacity, I'm not sure I got the full Extent of your question. The in China, so our greenfield in China is going to be better utilized In 2021 than it was in 2020, clearly so. However, it will not yet reach full capacity utilization. So the market in China is only starting to recover as shown here the first sign of recovering at the very end Of 2020 and is still trailing a little bit compared to the levels of traction that We see in Europe, at least for the models that we do serve in that region. So it will take a bit longer for us and will take just beyond 2021 To reach a much more optimal capacity utilization in that greenfield site.
Now on the overall Gigamatara's target, I would prefer to wait until we provide some more quantified guidance typically at the end of April to update the market on this specific aspect.
The next question comes from JD Batya, please unmute yourself and go ahead.
Thanks and best wishes to Marc. You did Deliver better than what you said in 2015 for 2020, so well done. Just a very simple question, which is what is Umicore's defense strategy? So you've now announced that you want to step down. There is no 2020 beyond 2020 sort of midterm target.
So if There is a takeover offer or there is a, let's say, hostile takeover offer. How do you defend yourself with In an interim CEO situation and no midterm targets.
So good morning, Jaydeep, and Yes. Thank you for the kind words. I would like to maybe clarify that I don't see myself as an interim CEO. It may be a little bit of a weird situation of announcing a succession process Without the successor being announced. But actually, it's our duty to make this announcement so early in the process.
It's, in my opinion, a legal obligation. If a company launches such a process, actually, we have a duty of informing the market. It's a matter of sound governance and plus it is also the tradition of Umicore to communicate openly with its stakeholders on important decisions and important moments about the company. This being said, I don't see myself as an interim CEO. We have a growth plan that is still in place, And we have enough on our agenda in terms of growth investments, research programs, Qualification programs.
So Horizon 2020 has reached a milestone in terms of completion because 2020 which is the spectacular growth in clean mobility materials and in recycling continues to be exactly what we are pursuing today. And in a way, the best of that is yet to come. If you look at the electrification of the car industry, We're still at, let's say, 5%, 6%, 7%, 8% of penetration, which means that there is still more than 90% to go for the industry. So we know exactly what we have to do in the coming weeks, in the coming months, in the coming years. Now of course, it would be, yes, best if we could also Spell out how this translates into financial targets for the midterm, and you will have to bear with us a little while, A little longer in that respect.
Just a follow-up. There's been a lot of changes on your divisional level as well. So I mean, considering that obviously what your announcement like, should we worry at all or because obviously there's been changes on recycling, You've shuffled your chairs around in terms of division heads as well. So your comment about internal and external search, how is that going to fit when Lot of the new leadership in divisions is also relatively new basically.
Yes. So I've just realized, J. D, before I go there that I I forgot to answer your question about defense. So our defense has always been at Umicore to make What we do, what our potential is of growth, of profitability, and I think this is, in a way, The best defense that a company or the first line of defense that the company needs to have is to be properly valued. So That means that that implies for us having a compelling strategy, having a compelling execution of the strategy And having a clear and open communication to the financial markets To support all of that.
Is there a risk more of a risk Today for a hostile approach than in the past, yes, difficult for me to gauge. In a way, We've had that question time and again, and we've had that question also at times when the share price was much lower than where it is today. So difficult for me to offer a different or a better answer than the answer we have always given, which is We need to make sure we have the best strategy in place that we thrive, we deliver and that we are correctly valued. Now in terms of management changes, no, there is nothing to be worried about in a way Because the people around I mean, first of all, reshuffling of responsibilities is something we do Once in a while or at regular intervals, whatever you call that. And if you look at the people around the table, the average tenure It's pretty long.
And in Recycling and in Energy and Surface Technologies, we have Umicore executives now taking over with a very long and deep experience and knowledge of the business. So there is absolutely nothing to be worried about. And bringing also some new talent And fresh talent to the management board, as we have also recently announced, It's a good thing for the company. I mean, it's part of a constant rejuvenation process that a leadership team needs to go through. And I have to say that at Umicore, over the past 20 years, without willing to sound presumptuous, We have managed to combine, I would say, energy rejuvenation with experience By bringing people early in their career to high levels of responsibility, which means that by the time They reach the age of 45 or 50.
They have already accumulated a long leadership experience And a deep knowledge of our markets and our businesses. So I'm not worried, and I'm actually quite proud About the manner in which I have shaped the management team, the leadership team at Umicore and continue to do so. And so no worry, we're all in good shape. We know what we have to do, and we're all extremely engaged And passionate about what we do at Umicore. Thanks a lot.
Thank you. And then the next question comes from Chetan Udeshi. You may now
Mark, can you give some color on what have you assumed in terms of volume growth in cathode business To offset some of the headwinds you mentioned, that would be the first question. And second question was? And a more related question to that would be based on what your shipments
in the I'm sorry, may
I interrupt you? I got the first question, but then you may have moved away from the microphone, but it was not possible to Understand the your second question.
Okay. Can you hear me well now?
Yes.
Yes. So second question was more on these recent announcements by auto OEMs that they are cutting productions
Semiconductor shortages. So
can you maybe comment a bit on what you or do you see any impact from that yet in your Volumes and a related question would be based on what you might have shipped in Q4 in the Catalysis business, Do you believe there was a bit of restocking by OEMs ahead of the actual maybe reduction by them? And can you quantify that at all? Thank you.
So Chetan, on the volume assumptions in cathode materials, I don't want to be Specific and offer a figure or a percentage at this point in time. I prefer just to Stick to what we wrote that it's going to be a substantial volume growth indeed. But basically, yes, we are well positioned. The market is showing good signs of traction And so is other volumes for Umicore indeed. So but I prefer to Not be more specific than that at this point in time.
It's going to be substantial in a way to be able to offset some of the Headwinds and additional costs that I've mentioned. And that's why I thought that's another reason why we thought that it would be useful to quantify These additional costs so that you can also appreciate how much more volumes we need to sell and how much revenues we need to generate to grow the earnings. In terms of the semiconductor Issues or shortages which are affecting the car build rates. Yes, clearly, this is a factor in this first part of the year. Can I please ask everybody to go on mute because we have a lot of background noise?
Thank you. So there are some disruptions which are cutting some of The volumes, the car build rates of some of our customers. But in a way, this is relatively Marginal compared to the overall recovery, which we see in the automotive industry and which took shape In the 2nd part of last year, except in China, where it took shape in Q2 already of last year. And Our volumes continue to be strong. I mean, we had very strong volumes in Q4.
And so the two questions that you have raised about Restocking and disruptions are a little bit related because in a way, I don't think there has been a lot of restocking Because the volumes continue to be strong for now. And so it doesn't look like the Q4 Trend was, I would say, an isolated event because of restocking And the semiconductor disruptions are not causing a major disruption to us. And we continue to see a significant growth in 2021 in that business.
Understood. Thanks.
Thank you. And the next question comes from Ranulf Orr. You may now unmute yourself. Please go ahead.
Firstly, I just have one question on Pricing in NMC. I'm just wondering if you could be a bit more specific as to how that effect is coming through. Are you seeing Broadly, average price declines across your entire book of business? Or is it sort of really explicitly Related to some of your shorter term contracts in China, or is it creeping into the long term contracts too? And then my second question, if I may, is just on the rest of EST, excluding RBM.
If you were to sort of lump CSM and the rest of it together, what kind of profit growth sort of are you expecting for next year? Thank
you. Good morning, Ranulf. So first of all, on the pricing, yes, clearly, Some of the shorter term exposure, in particular in China, is indeed, yeah, pinching. I mean, that continues To have a to affect the overall mix of our margins. So that's I don't see improvement in the short term in that respect because the overcapacity in China continues to be there and is probably likely to affect The market for another couple of years.
So I don't see imminent improvement in that respect. Next to that, clearly, The automotive industry is putting pressure on prices across the value chain As part of the drive to make to reduce the cost per kilowatt hour and make electrified vehicles more affordable. So that's a long term trend, which doesn't come as a surprise, which was anticipated And is indeed materializing in the I would say, in the mid- and long term contracts And up to us, up to the industry to figure out through technology improvements, process improvements, etcetera, How to mitigate those effects and make up for that margin wise. But these are two Trends that indeed are playing out in the cathode material space as in the rest Of, I would say, the battery materials value chain. And Sorry, there was you had the second question, but I'm
Yes.
Sorry. So these units I mean, some of these units had a hard time in 2020. CSM, clearly, Electro Optic Materials as well. And so these units are set to do better In 2021, in line, I would say, with the overall market recovery, the overall economy.
Great. Thank you. And just one quick follow-up, if I may. Just going back to pricing, do you see Sort of technological advancements and a move to higher grade nickel materials and more sophisticated materials as A reasonable offset to price deflation over the medium term?
Well, first of all, there is always a move to more sophisticated and higher and higher grade materials also in the mid nickel chemistries. So as I've explained in the past, it's Not because you increased the nickel that you moved to higher grade, you moved to higher nickel. Within each Type of chemistry, you have higher grade and lower grade materials with more sophistication, more properties, etcetera. And There is a high degree of customization for each type of chemistry. Sorry, one moment.
Can you repeat the question because
Yes. Sorry, I was just wondering whether the sort of advancements to more sophisticated cathode materials will provide So an offset to underlying price inflation over the medium term?
Yes. Sorry, yes, I had lost my train of thoughts. It may in some cases, but actually the path that we pursue, which is most important in terms Of margin or pricing. Margin improvement in a way is continued process improvements on one side
Thank you. We're going to conclude the Q and A session, and I hand over to Marc Greenberg for his final conclusions.
Yes. Thank you, Valeria. Yes, I suppose that there will be that there are more questions and that there will be more questions in the following hours and days. And we'll be happy To follow-up with you and to take your questions offline or don't hesitate to reach out to our Investor Relations team as usual. Yes, I apologize again for the technical hiccups, which have probably prevented us from taking 1 or 2 more questions this morning, but we'll have a chance to reconnect in the next Few days and continue the dialogue.
In the meantime, I would like to thank you for attending the call this morning. Wish you well for the rest of the day, the rest of the week, and talk to you soon. Thank you, and bye bye.
Thank you for participating. You may all disconnect now.