Good morning to all. Thank you for standing by and welcome to Umicore's conference call. Please note that this conference call might be recorded today. Your lines are automatically muted and we kindly request that you keep them that way during the introduction and we will then open it for Q and A session. We will repeat these guidelines again at the start of the Q and A session.
But now, I'll turn over the conference to Marc Greenberg.
Thank you, Valeria, and good morning, everyone. Welcome to today's presentation. I will first comment on our performance in 2020 and the outlook for 2021 before reviewing the major achievements in each Business Group. I will then wrap up before handing the call over to you for any questions you may have. Before commenting on Umicore's performance though, please allow me to say a few words about the process we have just launched to prepare my succession.
In case you are concerned, I would like to reassure you that I'm physically fit and according to my entourage at least mentally as well. One second please, because we have a lot of
Sorry, can we ask everyone in the call please to have their lines muted? Thank you.
Thank you. Sorry, so I would like to say a few words about the succession process, which has just been launched. And So when I took over as CEO in 2008, my mandate was to bring Umicore to the next stage of development. Over the past 12 years, we have streamlined the portfolio of activities to create more focus. We have amplified research programs.
We have accelerated growth investments. Together with my teams, we have transformed Umicore into a global leader in clean mobility materials And Recycling, with a market cap, which is today 6 to 7 times what it was back in 2,008. We have now also successfully completed the execution of our Horizon 2020 growth strategy, and everything is in place And highly supportive megatrends, and we have strong financials to support our growth ambitions. So the Board and I felt this would be an auspicious moment to prepare for my succession, and I will be pleased to ensure a smooth transition in the future. Enough said about me.
Let's review the highlights of 2020. The pandemic has dramatically redefined my agenda since the beginning of 2020 with a clear priority to protect to the best possible extent The health of all Umicore employees. The COVID outbreak has required the introduction of strict hygiene measures and medical protocols, And I have to say we've been quite successful in preventing the virus from spreading in our sites. We have also gone the extra mile to continue serving our customers globally, and I'm truly grateful to my 11,000 colleagues The pandemic and the resulting lockdown measures caused a huge downturn in the automotive industry, which is one of our main end markets. 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, we had to temporarily shut down most of our catalyst plants. 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 space through the Q4. While the performance in Catalysis was impacted to a significant extent By these temporary shutdowns in the first half, we benefited in a disproportionate manner from the recovery in demand in the second half Due to our leading positions in Gasoline Technologies, in particular in China and Europe. In Energy and Surface Technologies, market demand was also severely affected by the pandemic. In addition, market conditions in the EV battery supply chain remained depressed Due to the overcapacity in China and the presence of excess inventories.
Excluding inventory effects, Umicore sales volumes of cathode materials for EVs grew broadly in line with the EV battery demand, Which confirms Umicore's very strong position in the cathode materials space. In Recycling, we achieved a record performance. We nearly doubled earnings compared to 2019 with metal prices and strong trading conditions by far the largest contributors to the increase. Overall, Umicore 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 we observed in the second half of last year Continue to support our business today, and I can already say that we are off to a very strong start in 2021. We should not get carried away though as the visibility on market demand remains extremely limited. The pandemic is unfortunately not yet behind us, and the experience of last year has shown that things can change very rapidly. If we assume for a moment that the pandemic gets gradually under control and will not cause more disruptions to the economy Or to Umicore's operations in 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 gasoline, In particular, in Europe and China, in an automotive market, which according to projections by industry experts, Should keep recovering.
In addition, we expect to benefit from the initial impact of the introduction of China 6 standards For heavy duty diesel applications and we should also benefit from the full year impact of cost improvements, Which we carried out in 2020. In Energy and Surface Technologies, we see good market traction for cathode materials And we project substantial growth in our sales volumes for EVs. This volume growth should allow us 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 investments and with margins continuing to reflect pricing pressure. At Recycling, we expect moderate volume growth and a continued very favorable supply mix. In addition, metal prices 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 at their current elevated levels throughout 2021, Recycling earnings would increase very significantly from the record levels of 2020. All in all, current trends do bode well. However, it is a bit too early in the year and let's bear in mind that the degree of uncertainty remains high. Despite the pandemic or perhaps because of the pandemic, we have seen support for greener policies increasing, whether related to cleaner mobility or the need for a circular economy. This was evidenced, for instance, By the green recovery plan in Europe or by the step up of the new electric new energy vehicles 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 the strategic course of action is very high. In particular, We have pursued the construction of our cathode 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 demand for EVs 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 both light and heavy duty applications.
In Recycling, the focus of our investments in the short and midterm Is to keep improving the environmental and safety performance of the Hoboken plant. Finally, we have continued to our research and development efforts in clean mobility materials and in recycling, both in terms of product and process technologies. 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 introduction, 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 at Umicore For having swiftly adopted the required precautions.
Let's now turn to the business review. The slide which we project now recaps the key figures for 2020. These are commented in full detail in our press release, So I propose to turn immediately to Catalysis. The automotive market was severely hit By the COVID outbreak 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 first half across regions.
The graphs also show that the recovery started earlier And was most pronounced in China. Against this backdrop of an 18% market contraction, Umicore has shown tremendous resilience, sorry, and our revenues in Catalysis decreased by only 7%. This outperformance is due to our leading market positions, which allowed us to benefit in a disproportionate manner From the market recovery in the second half in China and in Europe in particular. You may recall that I mentioned a year ago That Yumiko had become the leading supplier of light duty catalysts in China and the benefits thereof are increasingly visible. In Europe, we continue to benefit from the decline of diesel car sales in the mix.
Turning now to EVs. We see that the battery demand expressed in gigawatt hours, which by the way is the relevant metric to look at The number of new EV models being launched in the region or which are in the pipeline is truly impressive. 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 part of 2020 and saw an improvement at the end of the year only. After years of strong growth and a doubling of battery demand for EVs in 2018, The market in China has more or less stagnated in 2019 2020, unlike anticipated.
Umicore sales volumes of cathode materials or EV grew broadly in line with the market despite A somewhat unfavorable platform mix. This performance was supported by strong demand in Europe, Where we doubled our sales volumes in 2020, albeit from a small base. In contrast, the growth in EV applications, Cathode Materials demand for Energy Storage Systems and Portable Electronics was very low. Margins in Energy and Surface Technologies were affected by the underutilization of our cathode materials capacity in China and pricing pressure as well as higher fixed costs Following recent and ongoing expansion programs. Our recycling activities did benefit in 2020 From an exceptionally supportive metal price environment, especially for platinum group metals.
You can see on the graphs That rhodium and palladium price 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 do require higher PGM loadings, and the shift from diesel to gasoline Is somewhat exacerbating the tension for rhodium and palladium. We also observed that the new supply sources for PGM can hardly Keep up, sorry, with the higher market demand and the recovery of automotive demand has pushed prices to new highs. 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 That metal prices are even higher today and in certain cases, much higher than the average prices of 2020.
And these metal prices constituted the largest factor behind the increase in revenues and earnings in Recycling in 2020. We also performed well volume wise despite the operating constraints aimed at preventing the virus from entering or spreading in our sites. Finally, the Precious Metals Management Unit benefited from high price volatility and generated exceptionally high earnings. After the and I'm continuing to talk about the to speak about the recycling But now focusing a little bit more on the environmental performance of the Hoboken plant. And after the unexpected increase in lead in blood readings of the children living close to the recycling plant In Hoboken in July 2020, the recent October test showed a clear reduction in the levels With an average lead, again, below the norm of 5 micrograms per deciliter Of blood, so which is very good news.
The root cause analysis of the increase showed a combination of external factors Such as the exceptional weather conditions and the increased exposure due to the COVID-nineteen lockdown measures. We have taken additional measures to return to the positive trend of recent years, such as extra cleaning inside and outside of the plant, Redesigning storage of raw materials and upgrading ventilation systems. In addition to these measures And although the root cause investigation has shown no major source of lead emissions in the plant, Umicore has booked a €50,000,000 provision To cover costs related to an offer, which we made to buy houses closest to the plant in order to create a green zone and thereby increase the distance between the residential area and the site. All of this in consultation with the authorities and residents of course. Before opening the line to your questions, I would like to recap the key messages of this morning's release and presentation.
I will not rehash, however, how the COVID-nineteen outbreak has complicated our lives and affected the global economy. I am simply happy that the precautions we have taken early enough Have proven very effective at protecting the health of my colleagues at Umicore. I'm proud that we have equally well managed to keep serving our customers And that we have generated our best ever financial performance, and I expect an even better performance across businesses in 2021. Proud also to have maintained the strategic course of action and successfully demonstrated the merits of our Horizon 2020 strategy. Everything is now in place for the company to keep thriving, and the Board and I felt this would be an auspicious moment to start preparing for my succession.
With this, I would like to open the floor to your questions, and I hand over the call back to our moderator, Valeria.
Thank you very much. We will start now the Q and A session. Please note 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. Then you will be able to unmute your microphone and ask the question directly.
In this call, we will ask the journalist with questions in English to go first. Please go ahead. Today. You can use the asterisk
6. Hi, it's Sam Shinobu Akbar. Can I go
ahead? Yes, go ahead please.
Thanks. Hello, everyone. Sorry, I've been jumping around on different companies this morning. If it's not too personal or anything, I just Why is it that you're stepping down now, Marc?
Good morning, Andrew. And well, As I've mentioned, I have carried out a very profound transformation of the company over the past 12 plus years. It's actually almost 13 years now that I took over as CEO. I have, together with my teams, transformed the company into a clear leader in clean technology materials And Recycling with very strong market positions, with a great innovation pipeline, with great Teams, dedicated and talented teams around the globe and we're ready to take the next step. And so the Board and I felt that the completion of our Horizon 2020 strategic plan Was a good moment to pass the baton to somebody to the next CEO to bring the company yet to the next And I see that as an auspicious moment because I'm really proud of What I've been able to achieve with my teams at Umicore, bearing in mind that I took over in 2008 during a pretty severe financial crisis at the time of the Lehman collapse And that we have gone through a number of different crises than we had the 2011 financial crisis, Then the COVID crisis last year, but despite all of this crisis, what remains is that we have managed To put a different imprint on the company, shape a different strategy with a clear focus on high growth, high-tech Businesses, as I mentioned, in clean mobility, in electrified vehicles, in recycling and maintain the strategic course of action Through thick and thin and multiplied the value of the company by a factor of approximately 7 In 12 years' time.
So I think it's probably an auspicious moment to consider such a movement. Okay.
Thanks for the call about 6 questions, but I'll stick to the rules and just keep it at 1. Thanks.
Thank you. If there's any We have a question from Greenfield Michael. Please unmute yourself. Go ahead.
Hi, there. Good morning, everyone. Just a quick question on the pricing pressure that you're Seeing in China due to persisting Chinese capacity overcapacity. So I just wanted to get a little bit deeper on that and understanding exactly where you're Seeing that, I cover the cobalt market and for fast markets, and we are seeing the whole cobalt product Complex improved significantly in terms of pricing and good demand for those materials. So I just wanted to get a little bit more deeper onto that and What exactly you're in the call we're seeing now, please?
Good morning. Actually, I can confirm your observations. So we see demand picking up In China and unlike in Europe, it started much later in 2020. We saw Good traction for EVs in Europe throughout 2020, while in China, the market started only To recover towards the very end of 2020. But the trend is indeed pretty favorable in that respect.
And So I would definitely share your observations about the cobalt demand picking up. This being said, in China, very significant capacity was built starting in 2018 on the back of, I would say very optimistic projections of continued growth. Growth at 50 plus Percent per annum was projected until, I would say, back in 2018 for 2019, 2020, 2021, etcetera. And unfortunately, this growth has not materialized. The market had a downturn in China in 20 2019 and has stagnated ever since.
And in the meantime, the capacity that had been built in anticipation Of continued fast growth has been unutilized, and it will take probably another couple of years For that excess capacity to be to actually be To be fully utilized and to be out of the way. So that's our observations today and that's why in our space, the cathode materials space, we continue to see Pricing pressure in that market.
Thank you. If there are any other questions in English on the phone, If not, we will move to the question from Mike de Rohe. Please unmute yourself.
Thank you. To order that is, yes, Oaken and Christiv on Degrook Bastyr. And you may talk that Umiko and Tradicie from And what is the Blangirex On the Auto Industry, you put flag fund the Circular Economy. We have the US technology, below the technology in the pipeline. We have a Sterke Mark Posisis.
We have a Talent, we're all trade and 2. We're all trade. Allo Businesses in Allo Businesses have a concurrent and that At Rotterberg, Meredith is on Marktoy, at Proy Potential. Is he hand his coat and technology chart and On the SKAGEN factor 11 and regarding ONS, yes, potential of the Flakfang Technologies on trickling, Benuten, Volop Benuten, a Monster on the Skjerdens and yes, very successful to Tigrayan in Demart. Erichs, Dorelken vers Nelling, Opcom's Medelekrafikasi.
Your host It's Hikant Dischrode and Technologie Gott and Credit Suhrld are in Spain. Luciek Magme here in Zorg and that fact that concurrency today. Nordex Sansain, on Monobologer Identificer and one year that the Opvolger, yes, this The timing is And my focus is direct 100 percent OPIMICOR ZOALS at KEVALISCOIST in the large Anders, Zoic, Niall CEO, Knoeblief, Funchoernheren. This is fantastic, but I have a fantastic semester. What Hoboken is in fund Business and the Hoboken Fabric, then Hualdeer Businesses, Thank you, Val.
Thank you. Our next question is coming from Dalila Uerghi. Please unmute yourself.
Hello, everyone. My name is Dalila Werge, and I work for Fast Markets. I cover the lithium sector. I was wondering what's your view on the rally in lithium price So what's your outlook for this? And does it fit this price increase in your company strategy?
Thanks.
Good morning. So a little bit similar to the question which was raised on cobalt. I think the lithium price It's naturally reacting to the recovery in demand from the battery industry, the EV battery industry. And in particular, we see very good traction for EVs in Europe. So that's a natural, I would say, Evolution, the lithium price has had ups and downs in the past few years.
It was Moving up very quickly in 2017, 2018, when the market was growing extremely fast And especially in China. And then it dropped almost like a stone with the downturn of EV demand in China in 2019, twenty 2020. And now it's following again the EV trend and recovering pretty swiftly. For us, lithium price is a pass through to our customers. So in a way, it is not So much influencing our margins or and because we pass Through the price to our customers, whether it's low or high.
And yes, I would expect that if the current trends, Demand trends in the EV space continue to be favorable that, yes, there may be a sustained, I would say support for lithium prices and that fundamentals may continue to look good.
Great. Thank you.
Thank you.
Hi, it's Andrew again, if it's okay. I wanted to ask if how quickly you might make up for the lost Time due to COVID with the Poland plant, I think it was around 6 months. And in terms of Europe, do you see more competition with The foreign LG Chem and all the others that are building In Europe, as a result, would you perhaps is there some chance of nationalism a bit In terms of your position in being a European player?
So let me start with the construction of The Poland plant, no, unfortunately, we cannot make up for the 6 months delay caused by COVID. The I mean, we're working as fast and as hard as humanly and technically possible In order to start up the plant, commission the plant and start up industrial scale production towards the end of the year, But unfortunately, the COVID impact is of 6 months is there. And This being said, in the meantime, we continue to serve the European demand for more Korean plants. So that's the good news is that We had this multi regional configuration, which allowed us to properly serve our customers. Now regarding the second part of your question, we don't see much more Or many more projects, cathode materials project starting up in Europe.
Yumiko will be the 1st Player to produce cathode materials for EVs in Europe. There are a couple of other projects Which have been announced, but actually not much at all. And you mentioned LG Chem, and perhaps you mentioned another name, which escaped my mind. Now these are customers of ours. They are not competitors of ours.
What they are building and expanding in Europe is their battery cell production capacity, so which is great news because that battery capacity Will be required by the carmakers in Europe and will require our materials. So That is in a way very good news that the value chain is building capacity in sync.
Yes, you're right. I should have said BYD. It looks like they're going to build in Europe from what I understand. Sorry about that.
Yes. No, I'm looking at facts and figures. And again, I can only repeat My answer that today there isn't much happening beyond our own construction.
Yes. Could I pull you up on one thing you said earlier? I'm probably reading too much into it, but you were speaking about LFP. And I kind of sense that you were a little bit more You felt a little bit more that there is the possibility for LFP to come to Europe, even though and you made the point that it Just sort of small journey cheap cars, but before you always said, oh, LFP will stay in China because of the excess capacity there and the So the vagaries of that market, but it seems like you're open to the idea that LFP could come to Europe to fill a certain segment of that market?
Yes, indeed, although this remains highly hypothetical because if I look at the LFP Cars which are being marketed and sold in China, I don't see a lot of market potential for similar vehicles In the European or North American markets or elsewhere. So I cannot Rule that out. So that's what I meant in a way, and you sensed that correctly. I cannot rule that out, But it remains highly hypothetical for the reason I've just mentioned.
Yes. And sorry, I will Be quiet if there's other people. I just don't want it to end. In terms of the European NMC, and it will be sold at a premium to the Chinese material. How Well, will it be sold at a premium to the Chinese material even if it's sort of 5%, 10%, how will you or How will you overcome
that? What do you mean by overcome the differential?
I mean, as I understand it, in Europe, because of the costs, there'll be a certain premium on the prices locally made NMC Well, compared to the sort of Chinese material, so or can you produce a parity or sell a parity with the Chinese?
Well, we don't see Chinese NMCs being sold in Europe. Chinese NMCs and despite the overcapacity, The excess capacity that exists in China, it is not economical to import from China To Europe because there is no FTA, there is no free trade agreement between these two regions. So You see, you have imports in Europe of material out of Korea or Japan, competing with and we also import from Korea currently Into Europe, but there are no direct there is no direct competition Between Chinese and European Materials for Europe.
And just lastly, I mean, if it's A frivolous question really. But in the years that you've been CEO, I mean, there's been so many sort of dramatic shifts in what were some of the most memorable moments? I'm thinking perhaps When PGM prices sort of triple figure percentage gains and how did you deal with that? I'm sort of Trying to what I'm trying to get at is what do you see as the main challenges for the new incoming CEO? And do they need a pretty strong constitution to deal with Some of the things you've seen over the course of your tenure?
Yes. So you will need to give me some more time to make a selection of the most Memorable moments because there have been so many of those and every day has been different. So you will need to bear with me in that respect. This being said, yes, I can only agree that you need a pretty Solid constitution, you need a pretty high degree of resilience and serenity In order to be able to, I would say, not get carried away when things go extremely well And not panicking when the going gets tough. And as I've mentioned previously, I've In a way, led this company through a number of crisis and despite those have maintained a strategic course of action During 13 years and been able to achieve a very profound transformation of the company for the better, I believe.
And it to the benefit of all stakeholders, that's what I meant by for the better. The key challenge My successor will be to actually capture the formidable growth potential, which Exists for us and Umicore is in an amazing shape and an amazing position. We have great teams, very talented and dedicated teams. We have a very promising innovation pipeline. We have strong market positions.
We have very supportive megatrends. We have a strong balance sheet, so In place actually for the company to grow. And in the markets where we have positioned Umicore In a very distinctive manner, whether it's the EV market, the catalyst market, the recycling markets, The potential for growth is gigantic. I mean, if you just take the EV market As an example, we're today at 5%, 6%, 7%, 8% of electrification. So there is 90% plus to go.
And there will be An acceleration in that respect, I mean, pretty soon coming on us. And so the challenge will be able To actually seize to capture that amazing growth potential and bring Umicore to its next Stage of development.
Okay, great. And thanks for all the debates and access Over the years and I'm sure you'll be heading out on the bike. So enjoy that.
Yes, thank you.
Thank you. The next question comes from Dan Killemas. Please unmute yourself.
Yes. This is on The Fabrique, the new one at Bausen in Poland is marked as the Farzavanda project. And was there a number of comments in the NABE 2 Comst So, best morgue, Trachten, the investorings project at Synchronizer, met de Heriel Evoluci Zain, this is Michael Lecker in an Mathieu Industry on Zone Synchrony's RC to Alt American Dan Inan Snellgrove in the Pfizer Van Antuekeling, Zohr Stratvenu in Elekrissevoorte in
Thank you all. We're going to conclude the Q and A session, and I hand over to Marc Greenberg for his final conclusions.
Thank you, Valeria, and I would like again to thank you for joining this press conference This morning, if you have follow on questions, please feel free to reach out to Mario Lain, our media relations And the management team will be happy to follow-up with you. And I'm pretty sure we'll have a chance to talk again in the Near future. And in the meantime, enjoy the rest of your day, the rest of your week, and keep safe. Thank you. Yes.
Yes. Sorry, I cannot brag that you need to need And Vermeltepp and the Verruck deser Morgan Vermelteppen. This is
Thank you all for participating. You may disconnect now.