Hello. A very warm welcome to Elkem's First Quarter Results Presentation. My name is Michael Konig will, as usual, take us through the business update on Elkhem before Morten Vega will take us through the financials. Then Michael Konig will take us through the outlook for the Q2. And at the end, we will take questions from the audience.
So with that, I'll leave the screen or line to you, Mikael.
Good morning to everybody, to the presentation of what is one of the best quarters in the newer history of Elkem. If we could go to the first chart, please. So in the Q1, we have truly delivered on our plans on growth and profitability. Operating revenue and EBITDA have been at almost all time high with the truly best quarterly result our position in the fastest growing silicones market and also with that investment support our specialization strategy. Strong improvements in environmental impact has been a key criteria for the new investment decision in China, We have received an A rating from the Carbon Disclosure Project, which makes us ranking in the world's top 5 Touching on a few other aspects, we have reached our target to replace 20% of our fossil CO2 emissions with biocarbon by 2020.
And we have reduced our NOx emissions by 24% since 2015. Just to give you a number that equals 470,000 diesel cars with average driving range. In terms of governance, we do adhere to the Norwegian Code of Practice for corporate governance. And we will, in 2021, implement the TCFD framework for Climate Risk Management. Now let me go on the next chart into our investment in China that the Board investment in our plant in Tsinghua in China, which is going to further strengthen our already very strong and leading position as a fully integrated silicones producer.
We will increase the capacity at We expect to commission this plant in the first half of twenty twenty four. This 35 kt of Xyloxane in 2020, and it employs 16 50 very skilled employees that are among the best professionals in the Chinese silicones industry. Going to the next chart, a bit more about the strategic rationale to pursue this capacity expansion. The industry fundamentals are very strong and support our strategy. We see global annual growth of 4.5% going forward, expecting growth of 6.5 percent, going forward in the Chinese market.
And we expect an increasing need for specialized products with higher purities and higher qualities. The scale and the higher quality Support our specialization strategy. As I mentioned already, it gives us high purity products. And those are products Lineas would substitute cyclics. And with this new facility, we will be perfectly prepared for that.
It gives an improved shelf life our products, which helps us and enables us to do more long distance logistics also across continents. On the next chart, we see how this investment will improve our financial and our environmental performance. Inves. And if you then look at the environmental performance, it is actually quite spectacular. We will have a 57% reduction on energy use.
We will have a better raw material yield and by that, an 11% reduction in raw materials use, and we will reduce our solid waste by NOK of new equity to further strengthen our financial situation and use this new project as a growth platform also for downstream projects. The subscription price yesterday was NOK33.5 per share and was determined through bookbuilding after close of trading in Oslo yesterday. Not just this project, but also downstream projects to come. The post offering ownership of China National Bluestar will remain as a long term strategic majority shareholder in the company. So that's about the new investment and the share issue.
On my next chart, I would like to update you on the battery And we are progressing in this project according to plan. Just as a reminder, we aim to establish a leading position In this very fast growing market for battery and node materials, our technology is significantly more environmentally friendly The pilot plant in Christiansand is now starting industrial scale production, and we are already in qualification processes in Norway as the site for the industrial plant, and we are still expecting a final investment decision fantastic growth and the amazing opportunities that come from that. On the next chart, we see some information about continued recovery in our key markets, in particular in the automotive segment. Global Automotive Markets have continued to recover in Q1. Even though there are strong regional differences, there are some constraints, as you all know, on semiconductors.
Silicon and ferrosilicon, alloys. In general, there is upward pressure on commodities and raw materials. Economic stimulus packages in the aftermath of the COVID-nineteen crisis to sustain growth, Silicones demand in particular was very strong in all regions during the Q1. And All major suppliers have announced significant price increases in the range of 10% to 20% for all product categories. In particular, in China, we have seen very strong markets following Chinese New Year.
Spot prices have soared even though peak spot levels are probably not representative for the main trading volumes, but volumes and prices are very good. And you see on the right hand side, the DMC reference price, On the silicon and ferrosilicon markets, a similar but more steady development. Prices continued to rise during the Q1. We see strong demand, mainly driven by steel and automotive. Hampered by supply chains, by low container availability and other products other problems.
In addition, on specialty products. We see very good recovery due to improvements in automotive, as I already talked about continued strong prices also during Q2. With that, I would leave it On the carbon market, we continue to see strong fundamentals. Steel markets and ferroalloys are key demand drivers, and these markets are very strong. Global steel production has shown recovery since the Q2 of 2020.
And this higher steel production is driving demand and also higher sales prices for ferroalloys. With that, I hand it over to Morten for the financials.
Thank you very much, Mikael, and good morning, everybody. It certainly is a pleasure to present the financial results where the headline is strong results driven by good markets and operational excellence. So our total operating income for the quarter reached an all time high level of almost NOK 7,200,000,000 And we also have a good increase from Silicon Products. Having said that, we should also bear in mind that Q1 last year was a very weak quarter due to the outbreak of the COVID-nineteen pandemic, which hit us particularly hard in the Chinese Silicones business. Our EBITDA amounts to NOK1.00 or more than NOK1.2 billion, representing an EBITDA margin of 17%.
That is also a good improvement versus Q4 last year, and it's a more of a doubling versus Q1 last year. So here also, we have seen a tremendous improvement in silicones, so almost NOK 400,000,000 versus last year and also silicon products NOK 150,000,000 and Carbon 19. And you will also note that there is a significant improvement in elimination other mainly due to profits on our FX hedging program. For your benefit, we have, as always, included the main numbers from our P and L and also some KPIs from our financials. The other has turned positive, and that's mainly due now to positive results from our FX hedging program.
I'm very happy to announce that our productivity improvement program continues to be ahead of our plan. We have targets as per year end of NOK 350,000,000 in permanent sustainable cost reductions, Other items for the quarter amounts to minus NOK 63,000,000 that mainly consists of negative effects interest elements in the embedded derivatives in the power contracts, which makes up minus NOK 40,000,000 and negative currency effects NOK 38,000,000 from working capital items. It's a stronger NOK causing that. Then on net the net financial items for the quarter are positive of NOK 57,000,000. The normal interest costs NOK 123,000,000 due to positive translation effects on our euro loans.
The The tax cost for the quarter amounts to NOK133,000,000. That gives an effective tax rate for the quarter So let's look at the divisional results. And for silicones, we clearly see strong markets in all major regions. The operating income amounted to NOK 3,700,000,000. That's a very solid improvement 48% up from Q1 last year.
It's basically a strong improvement in markets, particularly in China, where we had the pandemic situation last year. But it's also very good operational excellence, enabling good sales volumes to meet the strong demand. Our EBITDA amounted NOK 587,000,000 and that's up more than 200% versus last year. This is also mainly explained by higher sales volumes, but also clearly positive impact from higher sales prices. And the sales volume amounted to 107,000 tons.
That's in line with Q4 last year, And it's a significant improvement versus Q1 last year. And it basically reflects a good demand in most segments and in most regions. Also strong improvements in Silicon Products, where we've had good operations and also attractive market conditions. Our operating income amounted to more than NOK3.1 billion. That's a good improvement versus previous quarter.
And also here, we are talking about higher sales volumes and higher sales prices. Our EBITDA amounted to NOK 526,000,000 representing an EBITDA margin of 7%. That's a very solid improvement versus Q4 last year, and it's also a 41% improvement versus Q1 last year. Also here, both positive development on sales prices and on sales volumes. And we're also very happy that there is a positive mix impact where we have clearly seen a good recovery in Specialty segments, particularly Automotive.
So the sales volumes amounted Q1 last year. Carbon Solutions, as always, delivers excellent and stable result. That's based on a very good business model and very stable operations at a very high level. The operating income amounted NOK 486,000,000. That was 2% up versus the same quarter last year, basically somewhat higher volumes, while we have had a negative impact from And this is basically explained by high sales volumes and also here a constant improvement in the product mix.
We're selling more specialty products. So the sales volumes amounted to 70,000 tonnes for the quarter, And that reflects an improvement in the demand from particularly steel and ferroalloys. Having said that, we are still not running at full capacity utilization in our Carbon Solutions divisions. The quarter also implied a very strong earning per share. The EPS amounted to NOK1.70 Norwegian kroner that we have seen through the quarter.
We have a rock solid balance sheet, and the total equity amounted NOK13.4 billion. That is an improvement of NOK800 million from the last quarter or from year end 2020. Our partial refinancing of the debt that is maturing later this year. So we delivered on a successful bond issue in February. And we have seen an improved leverage ratio in the quarter.
So the leverage ratio is now 2.3x last 12 month EBITDA, which is a reduction from 3x as per year end. And the improvement that we have seen is a result of both an improvement or a reduction in the net interest bearing debt with 3 5 years maturity. And that will partly then refinance the maturities that we're having later in 20 in 2021. As you may recall, we signed up for a facility of NOK 2,000,000,000 last year to really enable us to optimize the refinancing process. This year.
We have now scaled down this facility by NOK 1,250,000,000. Good cash flow generation in Q1. The cash flow from operations amounted NOK590,000,000, which is a very solid improvement versus the same quarter last year. And the improvement is mainly due to the underlying EBITDA improvement. The investments excluding mergers and acquisitions amounted to NOK 443,000,000 in the first quarter.
That is in line with the same quarter in 2020. Reinvestments, NOK259 million for the quarter, which equals 62% of depreciation and amortization as somewhat lower than the target of 80% to 90%, while our strategic investments amounted to NOK 184,000,000 And this is primarily going to various silicones growth and development projects, very much in line with our strategic direction. And with that, I would
We have reason to we can look very confident also into the Q2 of 2021. We have positive market sentiment for all divisions, and we will continue to develop our market positions and our focus on sustainable growth. And I think that besides the positive market sentiment, we also see some of the measures that we have taken last year with regard to operational excellence, now coming into fruition and supporting the growth and the profitability that Elkem is showing. Attractive levels also in the Q2. And we will, in addition, in the Q2, see the effect of some global price increases that will gradually become effective.
The results of the silicones division, however, will be impacted by maintenance stops that we will have in April May, in China and in France, which gives a combined negative EBITDA effect I expected to level out in Q2 on a fairly high level, but realized contract prices our successful performance that we have demonstrated during the Q1 of 2021. Investors. Thank you very much for your attention. And I would now give it back to Otger to moderate us into the questions.
Very much for that, Mikael, and thank you very much, Morten. We will now take some questions, and I will start with one question regarding sales mix. The question is the sales rates on new products to existing products, but I think more it's probably about the specialization compared to more Commodities. So maybe if you, Michael or Martin, could share a few comments on that.
Maybe I start and then You can complement it. We are striving for a healthy mix of downstream products versus upstream products in silicones, and we are striving for a healthy mix of specialties and commodities in our silicon products division. And we have a permanent effort of increasing our specialization rate, And we will continue on this effort. Morten, you want to put some more flavor to it?
No, I think that's a good summary. I know that Some people are looking for, let's say, a very precise KPI on specialization versus commodity products. We believe that, that could easily be very misleading as there is no clean-cut. What we are talking about is really the degree of specialization where we at all time, we try to move our portfolio from, let's say, commodity into more and more specialized product segments. And we have delivered on that through a lot of, let's say organic initiatives in recent years and we have delivered on that also by the acquisitions that we have done
investors. Thank you. As expected, we get some questions regarding the announced expansion project in China. So there is a question here from Andreas Barthesen in Kepler. He says that you expect EBITDA margin of the new brownfield at 35%.
What is your price assumption? Not sure if you can answer that, but I'll give it a try to you.
I can certainly not answer More concrete?
Yes. Just to build on what you just said, Mikael, we will see a significant cost reduction with the new facility versus our existing facility in Xingu. We're talking about approximately 25% cost reduction. And of course, given the fact that we already have a very good cost position We are very confident that we will generate very good margins, and we have communicated minimum 35% EBITDA margins also going forward at modest prices.
And then maybe one last word just to emphasize that again. In terms of technology and cost efficiency, this new project is a step change.
Then there is another question on the project. It comes from Charlie Webb in Morgan Stanley. How does your upstream expansion fit into the big picture of sizable upstream silicones additions in China?
We see a balanced supply demand situation in the years to come in China. Of course, there are a number of projects that have been announced. There is some projects that are under construction, but there is also strong growth. So from everything we can see going forward, there will be a balanced supply demand scenario, and we don't expect any disruptive situation in the years to come.
And that, of As we said, this new plant will give us a significantly better cost position and it will also enables us to speed up our specialization strategy because the upstream product qualities that we will produce from the new plant will be significantly better fit for new Specialty Products than the existing production in China.
And then another question from Charlie Webb, more on environmental side, which is very important to the new project. It's interesting that you flag plant efficiency measures you're making at Tsinghua and CO2 footprint. And the question, is there more regular regional regulatory scrutiny around these metrics in China. What are the implications of this for the industry more broadly?
It is, of course, hard to comment on that and speculate on that. But clearly, emissions, but also on other aspects of ESG. And with this facility, we are setting a trend.
Very good. Follow-up with a question from Thomas Rigelworth in Citi. Is your planned new capacity at INVERSHINGHO inspired by the silicone and node opportunity.
No, there is no relationship between those 2.
Another question from Andreas Barthesen on the capital that was raised. If we have any comment why Bluestar did not participate in the private placement?
Investar in this. Obviously, Bluestar was very supportive to this issuing new shares, and we had full support of Bluestar. They have decided to not join, but they remain our majority and anchor shareholder.
Very good. And then there is a last question to wrap up this Session. It comes from Thomas Regelworth in Citibank. It's more on the outlook. Spot prices for DMC in China are now around RMB 28 RMB1,000 per tonne.
Do you see this as a fair representation of ElkChem's realized prices for the Q2?
No, I don't think we can do that. I mean, the spot prices are a good indication of where
Invesen. And then I would like to thank everyone for participating. And thanks to Mikael and Morten for taking us through the presentation. Have a nice day. Thank you.