Earnings Call: H1 2021

Jul 29, 2021

Welcome to this presentation of our half year results for H1 2021. Our performance is robust and promising, running on the back of excellent operating performance and a stronger price environment. So we're optimistic when it comes to the next few months. So about this presentation, I will start with a short introduction. Then I will share with you the progress that we've made in terms of our CSR road map. Corporate social responsibility is gaining pride of place in terms of our general roadmap. Our CFO, Thomas de Vigyan, will present our financial performance and then I will be back to discuss our operating performance as well as the inroads we have made in terms of our strategic roadmap and then the conclusion. By way of introduction? Obviously, let us zoom in on the performance of our first half. Strong performance. Revenue is up 11%, so close to €1,900,000,000 So 80 percent of that revenue comes from M and M Mining and Metals. Manganese accounts for 47% of that business. EBITDA is up strongly. So 2.5 times what EBITDA was in H1 2020. So close to €300,000,000 Our operating income close to €160,000,000 euros Net income group share is €53,000,000 And our free cash flow is really good. As you know, there is an unfavorable seasonal effect in terms of our mining operations in Q1. And despite that, there was excellent cash generation. So EUR111,000,000 in cash generation. This means we've been able to reduce our net debt. And we're now back on our bank covenants. And within the meaning of our covenants, our gearing has been brought down to 92%. So excellent performance, as I said, which is first and foremost the result of our inroads. The inroads we have made in house, our intrinsic performance accounts for over 2 thirds of our improved EBITDA. As you can see, our intrinsic performance exceeds €110,000,000 and this mostly ties in with the growth in volumes and also cost adjustments, particularly within A and D. And this is true despite the extremely poor operating conditions in H1 in New Caletonia. So by and large, we've made excellent inroads within the group. So markets have kicked back up, which means that prices have kicked back up in most of the countries where we operate, but not all. And this is one specific feature of our group. As you will see, manganese ore prices have not increased. So the economic recovery has also led to a strong increase in the price of some of our inputs including freight costs. And obviously, this has weighed down our cost structure and also the dollar has depreciated against the euro, which has affected us. So by and large, our external factors have improved our EBITDA only to the tune of €60,000,000 €60,000,000 is something, but it's not as much as the progress we've made in house. As I said, positive free cash flow of €111,000,000 with a high contribution from M and M, Mining and Metals division. And also, this is due to the fact that our HPA divisions has strongly reduced its cash burn relative to last year. So cash burn has dropped by more than 3 fold. So net debt is €1,200,000,000 And also we have continued to make significant inroads in terms of our CSR roadmap, which is really important to the group. Now getting back to our economic circumstances, it's important that we drill down on that. We have enjoyed a favorable price environment this half year, except for manganese ore, which as you know is the most important commodity for our group. So flat manganese ore prices relative to H1 2020. So plus 2% in dollars, but minus 7% in euros because the dollar depreciated over the period. However, we have a strong rise in manganese alloys prices over the half year. I'll get back to that later, but the increase range is between 20% 30%. And if we look at Manganese alloys alone, the impact is in excess of €64,000,000 So manganese prices are up. And also nickel ore, because there's a shortage of nickel ore on the market at the moment, prices are up significantly, up 40%. So by and large, the press environment has had a positive impact to the tune of €190,000,000 which is a considerable impact despite the fact that manganese and oil prices stayed flat. Also input costs have increased significantly, including freight unit costs. We're talking €55,000,000 and we're expecting this trend to continue to go up significantly over the next few months. Other input costs such as raw materials and energy, so those input costs are higher to the tune of €24,000,000 and also there's an unfavorable ForEx impact €45,000,000 So when you add it all up, the impact of net external factors is favorable, but only €60,000,000 over the half year. As you will see in our forecasts, we expect a much higher impact, a much more positive impact of external factors in H2. Now in terms of our different businesses, M and M is still on an upward track. Operating performance is improving except in New Caledonia. Very poor weather conditions. There are difficult operating performance or difficult operating conditions earlier this year. If we zoom in on manganese, organic growth continues at a steady pace. I'm referring to the Moanda mine in Gabon, so up 13%. We're talking 3,100,000 ton of ore produced in Gabon. However, we shipped only 2,900,000 ton of ore out of the 3,100,000 tons and this compares with a very high level of shipping or transport, we actually reduced inventories by transporting a lot in H1 2020. This year, passenger traffic resumed. I'll get back to that in a minute. And we also had railway problems in Q2, which means the transport was impacted. Like I said, the baseline that we're comparing ourselves with is very high. So manganese alloys drove this trend up 16% and the product mix is much more favorable. In terms of nickel, there are 2 very different situations. Ouida Bay on the one hand is in top form, enjoying remarkable growth. In H1. The mine produced 7,000,000 tons of nickel ore, which is twice as much as what we produced over the full year last year. So a huge ramp up, an extraordinary ramp up of mining operations at Ouire Bay. And the plant is operating at full capacity. The plant developed 20,000 tons of NPI or nickel pig iron in each one this year. This is in line with its nominal capacity. Now the situation is very different for SLN. You may remember that SLN started the year in very difficult circumstances. The mines were blocked earlier this year and at the end of last year at a time when we're supposed to put together inventories at the plant for the dry season. So because of those blockades, we have been unable to replenish the inventories necessary to cope with the rainy season. And this was true for all Caledonian operators. The rainy season was the rainy season was extremely unfavorable. Rainfall was twice as it usually is and the rainy season lasted twice as long as it usually does up until June. So operating conditions were very difficult. This means we weren't able to increase mining production as much as we wanted, but it's still up 5% despite the poor weather conditions. Exports are slightly up, so up 2%. It's mostly the plant that suffered quite a bit because it was purely fueled and supply was poor, inventories were low. So, ferronickel production is down 22%. Now in terms of mineral sands, we still operate at a very high level hitting operating performance records at GCO. So by increasing efficiency, we're now able to maintain a production despite the lower grade of deposits and also operational performance is strong at GCO. And we're producing quite a bit of CP slag at TTi in Norway. So we're also making inroads in terms of our corporate social responsibility roadmap, which is very, very important. It is core to our model. And it's also very much in line with our new corporate purpose, which has now been enshrined in our statutes, in our articles of association. So CSR has long been at the heart of our roadmap. And our roadmap is based on 3 main pillars. We are a corporate citizen committed to a sustainable future. So we have a commitment to people, to the planet and to responsible economy. So 13 objectives for these three pillars. With quantitative operational indicators, we have made a lot of inroads, made a lot of progress in terms of these 13 indicators. For 2 years now, we have on boarded the indicators of this roadmap into our LTIP or long term incentive plan for the group's executives. Also, we recently onboarded 2 CSR indicators or targets in our bank documents. I'm referring to CO2 intensity and the need to reduce it and also the need to reduce our LTIR. So I'm now going to review every single one of these 13 targets. What's really important is safety, safety of our employees and of our contractors. We're still getting better on this front. So the TRIR has dropped by 40% relative to last year. And since 2016, there's been a 6 fold reduction in the TRIR. So the dynamics are really good. This is true for all of our peers and it's kind of a difficulty for the entire sector. We're still experiencing severe accidents, sometimes even fatal accidents among our contractors. So we have a strong focus. Our management is strongly focused on daily operations for safety routines. So we pay close attention to the safety of all our employees as well as all of our external providers and contractors operating on-site. And this is quite a challenge because we have a lot of subcontractors. And in those countries where our safety standards are always upheld, we need to move forward and make things better. And that's going to be a challenge for the group over the next few months. Now if we look at our other key performance indicators in terms of our CSR roadmap, but let me say a few words about the climate. We're not just on track. We are ahead of schedule in terms of achieving our 2018, 2023 CSR roadmap. We were planning to reduce our products' CO2 intensity. And last year, we increased our climate related targets. And these targets have just been approved by the SBTI, the Science Based Target initiative. So we have received validation from SBTI. We have a credible roadmap. So we're planning to reduce by 40% our Scope 1 into CO2 emissions in absolute terms by 2,035 and also achieve carbon neutrality by 2,050. Now in terms of the communities we have made a lot of progress. We have set up 2 CSR funds working together with Gabonese authorities and they are working really well in H1. They focus quite a bit on infrastructure such as access to water, roads, etcetera. And we also broke ground on the very first biodiversity foundation in Gabon. It is called the Lekedi Biodiversity Foundation and ARIMET Foundation. Also, we try to maximize our positive impact on local communities. We create jobs around our activities and we also make positive contributions to healthcare and education. These are strategic priorities in our CSR roadmap. I'd like to remind you that 100% of our mining sites enjoy ISO 14,000 certification. Now our CSR performance has been recognized by non financial rating agencies and our ratings are improving year on year. We always stand on the podium. Look at our different ratings, we have achieved a score A with the MSCI corporate rating. This means we rank among the top 30% of mining and metals operators. In terms of ISS, ESG, we ensure a prime status. We are part of the first decile in ISS, ESG Mining and Metals. We ensure a square B, but we also rank among the leading companies in this sector. I'm referring to the Carbon Disclosure Project, Climate Change targets and also VGO. We also stand on the podium here. We are 3rd out of 44 companies in this panel. We have achieved an advanced level. So we have a score of 66 out of 100, and we are very proud to have received external recognition for the progress we have made. Once again, making such progress is so important to us. It is part of our strategic model, it's part of our management priorities. Now our financial performance, handing over to our CFO, Thomas de Viglion. Thank you, Christel. Good morning. To all, now results that are strongly up versus H1 last year, as Christel indicated, you see, first of all, sales up 11%, EBITDA risen of over 150%, close to €300,000,000 is against €120,000,000 last year. Income group share positive €53,000,000 Last year, we had a major depreciation net debt down by just €100,000,000 and our gearing covenant. We asked for 2 waivers in June December last year from our banks, and our gearing under the definition of our documentation falls below 100 percent, so no need for a waiver. ROAD check goes from 3% to 11%. So these are metrics that are all improving. Group EBITDA is sharply improved. We have both Mining and Metals divisions that is up strongly, €337,000,000 EBITDA alone. We were at just over €200,000,000 last year. So first off, we have manganese production up sharply, and also the price of manganese alloys that are rising sharply is set to continue and we're going to benefit fully from that effect in H2. Very strong performance of mineral sands, our mine in Senegal and our plant in Norway. On the nickel front, we're sharply reducing the nickel loss primarily thanks to improved nickel prices, even if we suffered, as Christel said, from particularly poor weather conditions this half with exceptional rainfall in New Caledonia and lastly, our High Performance Allies division, that is to say, Aubert and Duval Aeras Diehl, dividing its loss by 6, we go from minus to minus €10,000,000 EBITDA loss. That's a strong improvement. This EBITDA improvement comes twothree from our internal performance and 1 third to external performance. Internal performance shows an improvement across our businesses except for SLN, where ferronickel volumes are down. But if we leave aside that drop in ferronickel, We're up across the board with volumes that are growing. Aubert and Duval, significant cost reduction and activity improvement, the external factors. Well, in manganese, essentially an increase in the price of manganese alloys, and we have this strong increase in nickel price. But however, we are suffering from the increase in cost of freight across our seaborne operations, maritime transport costs a lot more than sharply up. So that deteriorates our EBITDA by €55,000,000 and the slide in the dollar acts in our disfavor because we went from about €1.13 to €1.23 rate. So that penalizes us for about €45,000,000 negatively on EBITDA. So net income grew share €53,000,000 last year. We booked asset import performance for €426,000,000 and the lithium mothballing costs this year In terms of one off events, we have the cost cutting reduction plan at Aubert in Duval with a charge of some €20,000,000 on that and the benefit, and that's consolidated at Equity. The performance of Wider Bay that impacts us very favorably, very positively. That's share in income from associated companies plus €77,000,000 on the half. And of course, we have our taxes paid in Gabon and Norway and the minority interests, Comilogue positive and SLN negative. Turning to our Industrial CapEx that really under control in 2020. We slowed the pace of CapEx, and that was felt fully in Q1. We had a reduction in CapEx of through H1 'twenty one. On growth CapEx, and I exclude lithium here that was stopped last year. We're about on a par with last year's level with a split between the growth of Comi Log to increased Comi Log volumes we need to invest and, of course, the renovation of the railway in Gabon. Once we transport we produce the ore, we need to transport it. And so we have an investment plan on the railway. Current CapEx down 32%, and there will almost certainly be a catch up significantly in H2 where we'll return to more normal CapEx levels. This leads us to revise our CapEx guidance down. We were at 5 €100,000,000 at the start of the year. We're revising our CapEx guidance down to between €400,000,000 €450,000,000 The strong free cash flow generation over the half, €111,000,000 to be compared with a cash burn in the first half of last year of €210,000,000 is obviously due to the strong performance of the Mining and Metals division, but the sharply improved performance of assets that underperformed last year. That's to say SLN and to a far lesser extent, Saint Duville SLN, essentially thanks to price improvements. And on the High Performance Alloys front, we divided the cash by more than €3,000,000 and we have about €50,000,000 of cash burn on HPA, whereas last year, we're €160 5,000,000, so a sharp improvement there. And of course, the major contributors remain manganese and the mineral sands to a lesser extent. And lastly, we see appearing a 3rd big cash generation engine, which is Weta Bay, that generates €70,000,000 of free cash flow over the half. So our growth plans as well as addressing difficult assets is paying off, and it's reflected in the free cash flow level. So where does the improved net debt situation come from? Of course, 1st and foremost, from the improved operating performance, The Mined and Metals division generated GBP 250,000,000 operating cash flow, whereas the High Performance Allies division consumed some £40,000,000 in operating cash flow. So on the both divisions, significant improvements have been recorded. And then next, we have the weather bed dividends because we're a minority shareholder to the tune of 43% and a company that holds Weda Bey at 80% because we have an Indonesian partner. So we're redistributing the results generated by Wedu Be between shareholders on a very regular basis. That's the bulk of the improvements recorded. Our cash position remains very strong. We were at over 1,000,000,000 €8,000,000,000 at the end of December. And at the end of June, we're over 1 point €9,000,000,000 gross cash in July. We did 2 things, given this improved cash position. We seized the possibility of an early repayment of the TSE bond, a coupon of 9.5%, very costly. We reimbursed it a year early, so we reimbursed $240,000,000 in debt that was costly. And furthermore, we reimbursed over half the drawing of our RCF line that was drawn in total at €980,000,000 In July, we repaid €500,000,000 of that. So the pro form a liquidity of this line that remains drawable is at over 1.7 €1,000,000,000 to date. No major debt maturity short term given the Tissier bond early repayment. The major milestones are in 20 4, so no significant maturity before then. Our net debt is, including IFRS 16, is of the order of €2,500,000,000 at June 30 and at about 80%, of which at a fixed rate, excluding the RCF. Back to Christelle. Thank you, Thomas. Now let's look at our operational performance, starting with Mining and Metals, M and M and our biggest business, which is Maenk, Genese. Now the underlying factors include carbon steel And output in H1 boomed up 13%. Around the world in H1. This ties in with the strong recovery in the economy, so up 12% in China, which accounts for close to 60% of global carbon steel output. That's because the automotive and construction sectors in China have been extremely dynamic. And Europe and the U. S. Are up between 16% 18%. Starting from really low levels, they have yet to return to pre crisis levels, but the recovery is extremely strong there. So the downstream segment is extremely dynamic. So global manganese ore consumption is up 10%, so 10,500,000 tons. And manganese ore output followed not necessarily at the same level. It is up 9%. So we're talking 9,800,000 tons. So as you can see, there's a slight shortfall between ore production or output and ore consumption. Now in gray and blue on this curve, you see the ore inventories, which reached record highs. And as a result, the deficit had very little impact on prices. So manganese ore prices remained relatively flat. So that's the blue line on the graph. So $5.1 per DMTU in Q1. So barely 2% more in dollars than last year and plus 7% in euros. Inventories are slightly down but remain relatively high, so 11 weeks of consumption. On this side, however, you see that the red line, that's the manganese alloys prices, soared because of strong demand and shortage in supplies. Problems with capacity due to COVID and inventories went down throughout the value chain, it's hard to get the entire chain working again. So the market is under supplies, which has pushed prices up. And as I said before, refined products, prices are up 30%. The commodity prices are up about 25%. So what do we expect? We expect prices to remain very high over the next half year. I'll get back to that in a minute. Price levels have already been established in Q3 and they look really promising for Q4. If we look at our own performance, as I said before, we're still growing our manganese ore output, so up 13% in Gabon. I talked about the transport situation, which was slightly more difficult, but remained higher than last year. While last year's baseline was relatively high because of COVID passenger traffic was brought to a standstill, which freed up a lot of capacity for freight transport on the TG railway. So our baseline was already high and there were railway problems in Q2. As a result, the only 9,000,000 tons were produced or rather were shipped. Now in terms of the railways, significant works are being done at set track level in order to improve reliability of the tracks and increase transport. The seasonal impact is getting better. This is the dry season at the moment in Gabon. And as a result of our modular investments into the mine, which will improve output levels due to the favorable seasonal impact and also progress at Zetrack. Our ore production target is 7,000,000 tons for the mine. And at the very minimum, we're targeting 6,500,000 tons of transported and shipped volumes. Now volumes transported and shipped by Setrak. As you can see, we're already seeing improvement in transport levels in June July. Now there is one aspect that had a significant impact on our ore business, freight. At this juncture, freight is up significantly. And these are the fundamentals of our own transport costs. I'm talking about freight costs per se and fuel costs. These are the two aspects that we need to address in terms of our shipping costs. As you can see, the blue line is up. So fuel cost is up 22% and freight costs themselves, If we have to ship by road, so West Africa to China, this is up 153%. And so you can see the curve, the line is growing throughout the half year. So levels will remain high in Q3 and the impact on H2 will be significant. Regarding H1, by and large, when we factor in these two aspects, transport costs are up 60%. Now if we look at manganese alloys, There are 2 positive impacts. 1st of all, price stability in terms of manganese ores and also selling prices have surged. And obviously, this is good for our profit margin when it comes to our alloy businesses. And we're going to maximize that by improving output. Our capacity we usually operate at full capacity, but we've been able to improve output by 7% from 1 half year to the other. We've also been able to improve the most profit margin has jumped from 49% to 65% of the total. So that's a 20% improvement from half year to half year when it comes to manganese alloys. And as you can see, we're seeing on the right hand side the price of alloys that is soaring and the price of order remains relatively flat. And this trend continues into Q3. We've already saw the volumes in Q3 and prices are very high and Q4 is looking pretty good. So we expect this maximum margin impact to continue. We hit a record level at the end of Q2. Now, nickel. Again, the market fundamentals are excellent. Stainless Steel output has soared across the world, up 28%, which is amazing. It is true that stainless steel was hard hit by the COVID pandemic in H1 2020. So demand for primary nickel is up by 28% and primary nickel output is up by only 12%. 12% isn't bad, but only 12%. This is mostly driven by the rapid growth in Indonesian and PIA nickel pig iron at Pozzo, up 81%. So by and large overall throughout the world if we look at Indonesia and China NPI accounts for 50% of nickel output globally, which is huge share. And the fact that demand is so strong and the fact that output is keeping up, but not at the same level, is a 66,000 ton shortfall in the first half of the year and this has led to a 40% increase in nickel prices LME prices and also a reduction in listed inventories. Now ferronickel prices are also Now ferronickel prices are also increasing by 43%. Now in terms of LME and SHFE inventories, we're talking more than 9 weeks consumption declining. There's something you need to bear in mind. For about a year now, ferronicos or ferronicol alloys have been sold at a discount relative to LME prices because there's a glut. There's a glut of ferronickels on the market, so much NPI is available. And even though ferronickel prices have gone up, there's a discount and you can see it on the screen. So the blue line is the LME nickel price and the red line does the NPI price, that's a listed index. So we're able to report it. As you can see, there's a significant discount even though they follow the same trend, but there's still a gap between the two lines. Now this discount was particularly strong. See the growing gap in Q1. We're expecting this discount to wane in H2, but we believe this trend is going to continue for some time still. So nickel ore, nickel ore is also at high levels growing from one half year to another, so up 40% almost. So very high levels, dollars 100 approximately per ton. This level was reached late last year. Ore stores in Chinese ports have reached historically low levels. This is due to the unfavorable seasonal impact both in the Philippines and in New Caledonia. Now we bought the brunt of that, but at the moment there is a shortage of nickel ore on the free market. And today inventories come to 1 month consumption, which is very low. And this is why prices are up that way. Unfortunately, we at SLN didn't fully enjoy those benefits, As I said by way of introduction, SLN was severely impacted by the blockades in December 2020 in early January 2021, which is when we put together inventories and we increase our stocks to cope with the rainy season. So we started with very low inventory levels on this now and the season was disastrous and everybody suffered. As a result, our mining output is up by only 5%, up 5% versus 16% last year. So it's still an increase, but much lower than last year. And also this affected plants, which received very little ore and low grade ore. So output, plant output volumes are down 22%. Obviously, this exploded the cash cost. And as a result, the drop in foreign echos, we're talking €17. And also a negative ForEx impact. So the dollar depreciated relative to the euro and this accounted for 0.50 in terms of cash flow deterioration. So the situation is currently improving. Finally, the dry season has arrived. So since the last 2 weeks of July, SLN has been operating pretty much normally and we're expecting the cash cost to significantly improve in H2. This being said, the future of SLN is still undetermined that all things we still need to secure. 1st of all, the export authorization. As you know, we have a permit to export 4,000,000 tons of ore and we're close to saturation this year. If it hadn't been for the disruptions, we have been pretty close to 4,000,000. So right now, we're maintaining 3,500,000 tons in exports, and we're authorization yet for about 5 months. So since February well, the previous government fell. And the new government was put together only mid July. So now finally New Caledonia has a government that can approve that additional export capacity. So we have resubmitted our request. So we have called upon the new government's sense of responsibility because this request is absolutely vital in terms of Esalen's future. Also, reduction in electricity costs, that's something we need to do. We have plans to build a new power plant for Donianbo. The consultation process is underway. Things are proceeding at pace. And we are expecting firm bids that we will look at in Q4 2021. I would like to remind you that when it comes to export authorizations, considering current prices, 1,000,000 WMT of nickel ore means an additional contribution of €30,000,000 to EBITDA. So nickel is very successful, thanks to the market conditions looking up. So, Uribe, we're very happy with our nickel business in Uribe. We beat record mining production levels. And I would like to remind you that AirMed operates this line, this mine as part of a JV with Xinjiang, a Chinese group. So IRAMED operates the mine and the plant is operated by Xinjiang. So it's a joint venture. So we're maintaining record production levels, the 7,000,000 WMTs of nickel ore produced in H1. So we're supplying not just our own plant, but all of the other plants that are currently being built. There are 6 of them now that are part of the Wieder Bay Industrial Park downstream from the mine. So these are operations that are extremely competitive with high contributions. Metallurgical operations as well, the plant is operating at full capacity. And needless to say, considering this excellent performance, we are revising our guidance, 12,000,000 tons for the year. We already secured 7,000,000 in H1, but Indonesia is in the middle of the rainy season, which may slow down production a little bit. But we're pretty confident that we will exceed the 12,000,000 tons over the full year. I'd like to remind you that cash flow from Uribe is 57,000,000 euros as Thomas said, in terms of dividends paid. And the rest is the trading business because demand for zircon output increases at a slower pace than demand. This leads to a market deficit in H1. This was not really felt in this H1 because the baseline last year was very high. It's a market in which you negotiate prices on a quarterly basis and sometimes on a half year basis with some customers. So there is a lag between market price in Q3. So we're looking forward to excellent zircon business in H2. Same thing for TiO2, titanium dioxide manufactured in our plant in Norway. Here again, prices do not reflect the market's positive trend. They are expected to increase in H2. Demand is good. Supply does not match demand. And our operations are working really well. I won't get back to that. GCO is beating records year on year in terms of OEE, overall equipment, efficiency. And this is an opportunity to largely offset the fact that well, obviously, when a mine starts operating, it starts operating the richest deposit and then moves on to less rich areas or deposits and output is good, production is good at TTi in Norway. So we fully feel the positive impact of favorable market conditions. Moving on to HPA, high performance alloys. The market conditions for A and D is obviously very different. We're still bearing the brunt of the aerospace crisis. There's a huge decline on the aerospace market. Air traffic is only 60% of what it was prior to the COVID crisis. In H1 last year, 70% of A and D sales were aerospace, and now it's only 58% in H1 2021. And despite the good news regarding single aisle aircraft, well, that's good news for the future. It's not yet reflected in our order book. So there may be good news in terms of single aircraft, the long range aircraft accounts for 70% of our A and D Aerospace sales. And as you know, long range aircraft are struggling. So we're not seeing any recovery anytime soon. And then defense, nuclear and energy, those markets are improving. And this helped offset the aerospace crisis. If we look at what this means in terms of sales and EBITDA for A and D, there's a strong contrast between Aerospace sales, which are down 24%. So 52% actually when you compare it with H1 2018. So it's a very strong drop. And again, a 24% drop between H1 2021. The beginning of the year wasn't impacted by the crisis yet in H1 this year. However, energy and defense sales are up 74%. So but in large, sales are down by 9%. The division has worked really hard to address the cost structure. This is starting to pay off. So a 35% decrease in commodity costs. Personnel costs are down 15%. And this has led to €33,000,000 in savings on labor costs. By and large, EBITDA is still in negative territory, but much less so than last year. So minus €40,000,000 versus minus €52,000,000 last year. Free cash flow is still negative territory. So minus €38,000,000 and this includes the sale of a small affiliate, a small A and D affiliate called Brown Europe. So there was a positive impact to that sale of €13,000,000 A and D suffered from the need to upgrade quality processes. This was extremely time consuming. This hampered production. But we're finally seeing the light at the end of the tunnel. And by the end of the year, we're hoping to be done with that. We're hoping to be done with this quality processes review process. So hopefully by the end of the year, we will be out of the woodwork. When it comes to Aero Steel, strong momentum in terms of sales. This is due to the market, but other factors as well. Sales are up 20% from one half to the other. The underlying markets, mostly automotive, increased less than that. So there's an underlying market on the one hand, but also shareholding acquisitions and this means a significant increase in sales. So EBITDA is back in positive territory. Free cash flow is still in negative territory, but this is due to the very strong increase in sales, which has increased the working capital requirement despite strong efforts to reduce the number of days of revenue. So the reduction is 38 days, okay, despite the minus 38 days of sales improvement. So strong momentum in terms of aero steels recovery, and we're confident when it comes to what will happen in the next few months. So, so much for our operating performance. Let me say a few words about our strategic roadmap. We're still making inroads. There are 3 pillars in our CSR roadmap. So pillar number 1, as you well know, we need to reposition or fix our least performing assets. As Thomas rightly said, we have made progress in terms of improving EBITDA of such assets in H1. We have almost reached pretty given point. That's not our final target, but we are on track. SLN, I talked about it, but SLN's business model has proved relevant in H2 last year and the prices weren't what they were today and yet SLN made money. But we need to manage to operate SLN properly. Now New Caledonian authorities hold all the cards. The ball is in their court. Management has done its job. Erin Met has supported its leadership team, its business model. It has funded this subsidiary. And for some time now, we said that we would not reinvest into SLN. SLN is defend for itself. It needs to secure its own future and we hope that the new Caledonian government will give SLN the wherewithal that it needs in order to implement this new model, which is fully efficient. When it comes to A and D, selling this asset remains the preferred option and we are currently working to make this happen. This is something that we are focusing our efforts on. And in parallel, of course, we're adjusting A and D's cost structure to match the market situation so as to improve its performance and reduce its cash burn. The Sondeville refinery, a decision has been made to divest this asset. We discussed this in February already. We are in the advanced stages of negotiation with a potential buyer, and we're hoping that the divestment will be finalized sometime soon. And when it comes to Aerosteal, I talked about the recovery process, the strategic review. We need to see how we can reposition AERUSTL outside the group. And obviously, that's not our top priority right now. When it comes to the middle pillar, cash generation and the need to grow our most attractive businesses. Now this is fully in line with our road map. We're actually ahead of schedule. Manganese ore is up. Manganese ore output is up. Ouider Bay is beating all output records and all are exceeding expectations. And Mineral Sands are on track to meeting their targets. We've made a lot of inroads regarding the cash generation priority. And when it comes to pillar number 3, expansion, expanding our portfolio to include metals for the energy transition. Last year, we mothballed the lithium project. We're currently looking at how we can restart that project because the strong demand for lithium and prices have increased significantly in terms of battery. But we need to do this in a way that won't weigh down our balance sheet. So no decision has been made yet when it comes to the lithium project, but clearly this is an excellent project for the group. And if we are able to restart that project without weighing down the group's balance sheet, we will do so. And we are moving forward in terms of our partnership with BASF. Pre feasibility study is underway in terms of diversifying WIDIB operations to include the cobalt salts in particular and also lithium ion battery recycling. Time for repositioning our pillars. We will continue to make progress until the end of the year. We've made excellent inroads in terms of pillar number 2. So this has much improved the financial situation, so that gradually we can restart working on pillar number 3 once all the conditions have been met. So by way of conclusion, thank you for your patience. I know these are long with explanations. So we created strong momentum in H1. Market conditions are positive. Prices are up pretty much across the board in H2. There's a favorable seasonal impact in H2. So we expect to deliver excellent performance throughout the year. We our plans for organic growth and the favorable seasonal impact are expected to boost the mining output in H2. Wille Bay is expected to continue delivering high output and cash flows. Manganese alloys will operate at excellent margin levels in H2. Pillar 1, that's something that we are currently addressing, as I said before. And as a result, we have confirmed our volume targets for ore manganese, so 7,000,000 tons to be produced and also 3,500,000 wet metric tons of nickel ore exports at SLM. We have increased our output targets for Ouide Bay. So over 12,000,000 wet metric tons of nickel ore produced at Ouida Bay. So our EBITDA target is above €850,000,000 in 2021 considering this buoyant price environment both in terms of market conditions and operations. So that's about it for us. And of course, we are now on hand should you have any questions. We'll take our first question from the room. There's a question there in the center. So my question, you have €27,000,000 of non recurring costs. Could you detail the utilization? I also had a question on Weddabe to know how far you can go in terms of mining production without having major investments. And then far more forward looking on the battery, replacing nickel and cobalt with manganese. There are batteries based on manganese. You're working on that. Well, that's a great many questions. I hope Thomas jotted those down because I didn't have my pen with me. So first question, because the microphone wasn't switch on in the first part of your so first question was on Manganese alloys production lower than in Q1 versus Q2. There are two reasons for that. We stopped a furnace. I mean, that was programmed, that furnace because we have to realign our furnaces on a regular basis. There was a program furnace shutdown that occurred in Q2. And then the mix is important. That's to say that last year early in the year, we did a lot of commodities. That's a lot of volume, not necessarily margins. Refined alloys, perhaps a little less volume, but more margin. We really want here to push when we can the mix to refined alloys that generate far more than commodities. So that's in response to your first question. 2nd question concerned how far we can go. On Okuma without using the track oh, sorry. So that's without the washing unit, can Kleber, can you speak to that? Well, for Okuma, actually, there's no laddies. That is, we can continue to have the dry pricing and the wet treatment goes with it. That's the strategy that delivers the £7,000,000 And going forward, dry 1st dry treatment that is maintained, that really is the bulk of our increase in the modular washing units that will come on stream the first at the end of 2022. Well, in fact, we can ship everything that is dry processed, store what has to be washed, but there are limits to what we can score. When the washing units are there, we process the portent that must be concentrated and wet process. There was a question for Thomas. Yes. There was a question on the nonrecurring costs, if I understood the question here. Other operating income and expenses, the minus GBP 27,000,000 is that what you're referring to precisely? So the detail is essentially, as is put in the note, the Aubert Duval adjustment plan for just over €20,000,000 And there are the remaining costs of the lithium project. That's the bulk of it. And then there was a question on Weddoba, how far we can go without expanding major CapEx. Well, we can go quite far is the answer to that. I mean, it's a mine opening, so the CapEx is building roads, exploring mining, planning, etcetera. We're going to continue to make progress without major investment, especially given the size of Weddabe. I mean, they're really quite minor investments. Just to follow-up on that point. The fine thing is that, as Christel said, the investments are marginal. It's marginal. It's they have a huge it's a huge mine reserve with a profile very close to the surface that is that these mines that give tonnage, it would not, big increase in coverage rates and huge investments. So we can go quite far. Excellent quality, very good source of reserves and the associated costs. I mean, the profile is very, very, very good. The final question on the batteries. Battery technology today. So I think we have Philippe in the room with us who'll be able to Philippe is our Head of Strategy, Business Development Innovation, so he's really on top of these. The various battery technologies, there are a lot of R and D worldwide, and there are lithium ion batteries, lithium. On lithium, the takeaway number is between 2025. We take into account the various battery technologies. Global lithium consumption will increase 5 fold. And then for the cathode material, nickel, cobalt, iron, manganese, we plan a mix of various battery technologies depending on the utilization capacities and the performance batteries. LFP, lithium ion that's developed a lot in China for buses, for e bikes. And conversely, in Europe, we're seeing the NMC nickel manganese cobalt technology, but little lithium manganese alone for reasons of battery techs into 2,030, nickel consumption will increase 6 fold between 20 30. Cobalt consumption, with a very cautious assumption on cobalt, will increase fourfold. So let me reassure everyone, it's not time 6 global nickel consumption. It's nickel consumption in batteries. Steel will continue to represent a bulk of that. So just to conclude on this, we do factor in, in our forecast, in the various players, the OEMs, automotive or up the stream for critical the metals for that we take kind of all these mixes for various batteries. I think we've answered all your questions. There's another question in the room, yes? Yes. Alain William from ODDO. I have 3 questions, if I may. The first, I'd like to know the procedure of Amecol settlement from SLN. Do you have an update for us on that? The second concern, the reduced CapEx guidance, that's pretty significant. Just wanted to know where it comes from. And also, what is the level of maintenance CapEx of the group to distinguish the 2 buckets? And then the third question on Aubert Duval, I'd like to know why you rejected the first offer and the press states that discussions have resumed. What's changed? And can we expect a deal by the end of the year? I'll answer about the amicable settlement. And on Aubert de Duvalen, Thomas will speak to the CapEx. Amicable settlement, I mean, stopped. It was halted in May because an amicable settlement is limited in time. It lasts 4 months. And in fact, it started at the end of January aimed at attempting to move the dial in terms of the local authorities because the conciliators clearly saw that the real drivers to improve the SLN situation wasn't really in the hands of management, but rather in what authorizations via power and conciliators were faced with an absence of government throughout the amicable period. So they closed it in May without really I mean, there was an ad hoc mandate where a diagnosis was made. Everything was shared with the locals, but the amicable settlement procedure was unable to unfold because of absence of negotiating partners. It doesn't mean it won't be resumed. The price has risen. SLN, even if it's burned some cash, with all its problem, the cash burn wasn't that significant, thanks to the nickel price. So the financial situation isn't alarming to date, but problems are unresolved. So their conciliation is over and can be resumed at any point in time if SLN deems that necessary. Now part of the answer that Thomas will give you is that in our CapEx, we had ramp up CapEx for the 6,000,000 tonnes at SLN. And these CapEx, we didn't get the green light. We're not doing those. So some of the SLN CapEx that haven't happened and are part of the reduced CapEx guidance. But, Tom, I'll let you answer the other points. Maybe there's a slide we can return to the CapEx slide. Yes. So on CapEx, we've said that we would do €500,000,000 in 2021, and we're going to deliver between £400,000,000 £450,000,000 As I indicated last year, we gave stricter cash rules, so that kicked in Cash containment rules that impacted fully the first and then the 6,000,000 tons of SLN, we don't commit CapEx in than the first in terms of CapEx commitment. In than the first in terms of CapEx commitment. That's fairly straightforward. And the bulk of our growth CapEx, as I said, are on Comilogue to support its ramp up and to support the rail transport that goes with that. In terms of split, it's a marked majority of maintenance CapEx, that's what I can say. Well, on this slide, as shown on screen, you have the slip because what we have the recurring CapEx, well, they are essentially the maintenance CapEx, etcetera. And not necessarily these CapEx that have the most delayed. On Aubert and Duval, I'm not going to give you all the details as you'll, of course, well appreciate, but we rejected the office because it really wasn't satisfactory and not just for questions of valuation. There were a great many terms and conditions in the offer that didn't that were unacceptable to us. Quite simply, simply put, it doesn't, of course, prevent us from working to resolve a number of the outstanding issues reflected in the offer. That's why I'm saying we're working on the conditions of the disposal of the divestment so that we can have a divestment in better conditions over the coming months. If there are no further questions from the room, we can take questions on the web. Yes, first question on Manganese alloys, what are the sectors that are driving demand and prices? Well, on manganese alloys, well, manganese alloys are sold in steel, carbon steel. So that's in steel, notably. I mean, you saw the very sharp production increases of steel output in the U. S. And Europe, and it's the areas where we sell 80% of our manganese alloys. So we're very geared. I mean, our plants are in Norway, in France, in the U. S. And a small plant in Gabon. So we're essentially selling in European and North American markets, and these are markets that have boomed with local players who had more difficulties than we did to get started against our Aramid is truly seen as a very reliable supplier for manganese alloys and really the benchmark supplier of steel producers of Europe and U. S. So we benefited strongly from the strong restocking of Europe and the U. S. On manganese or given the health situation in South Africa, are we going to face supply issues problems from South Africa? Answer on the face of it, no. But Klebert, maybe you can speak to supply. I don't believe well, we're very vigilant on port loading, but you've seen that South Africa has significantly upped its output. We're not in a situation that we're at during COVID where ports were totally shut down. There were a few days of disruption of loadings, but to my knowledge, we haven't had problems of supply of our Norwegian plants from South Africa the past few months. I'm confirmed that, that is indeed the case. Do you have any more specific guidance on the cash cost of SLN and on the contribution of wider bed to Q2 as compared to Q1. Thomas, would you like to answer those questions? So on the cash, we weren't any more specific than that. You must realize that we've carefully calibrated our guidance and will add the cash cost for SLN is obviously very linked to the output volume and should improve significantly in H2. That's our target because output volumes are also set to rise in H2 and on Weddabe. We also expect an increase. Your debt began to decline in H1. What's your debt your deleveraging target at the end of the year? Have you begun to consider your dividend policy? Our net debt, well, we haven't given any guidance on that. We said that we would do in excess of €800,000,000 EBITDA and between €400,000,000 €450,000,000 in CapEx. That gives you a first idea about cash generation, EBITDA. You add the free cash flow generation from Werder Bay, so I'll let you estimate that on the basis of everything I just said. In light of all that, one can expect a reduction in net debt. That's fairly logical. We won't give any more guidance than that. And then the question of the dividend, well, we'll start off by looking at the results at the end of the year and the balance sheet situation is really to consolidate it before asking that sort of question, I believe. Concerning your Saint Du Ville business, can we hope for a disposal between now and the end of the year? Possibly, we could indeed, is the answer to that. Thank you. No further questions on the web. Very good. If there are no further questions in the room, I'd like to thank you all very much for your attention. And for those of you who are going on holiday, have a great summer. Thank you.