QA
Henk: Working capital reversal in Q4. Bit higher than expected. Clarify?
Partial reversal in Q1?
- Part seasonal, part is contract we signed with Glencore which enables us to sell more finished goods.
Henk: Gross profit margins for Technologies. Exclude 7.5M one off in 2018.
Margin 23% versus 27% 2018. Due lower Titanium or market aerospace components pricing pressure?
- All due to lower Titanium prices. No price pressure in Engineering. Only past trough metal prices.
Henk: Restructuring Brazil. Surprise.
Looks like permanent measure to do headcount reduction.
Lithium customer. Gives relief?
- Jackson: Reduces production Q4 2019 / Q1 2020 because back-up inventory in China in Li.
We will deliver the expected amount rebalanced over 2020. Is win-win. Prices are low.
Extra focus on cost of production process.
Henk: Guidance. In past EBITDA, now profit.
- You can replace EBITDA with profitability.
Henk: Price expectation in forecast? Partially based on V price moving upward.
- We expect a slight price correction from present prices. That already happened for Silicon Metal.
Profound increase. Expecting price correction for Vanadium. +60% of Vanadium in the world is happening in China.
We feel that the large steel mills are operating in China, therefor demand regards to rebar is not massively changed.
Certain supply difficulties occur or are occurring. No Vanadium coming out of China at the moment.
World relies on China.
Also, we expect good results on Engineering, reflects backlog.
Stijn: First question on Technologies. You Mentioned issues regarding 737MAX.
Will you see actual impact in 2020? Explanation on weak performance in Q4?
- It's Boeing, not 737MAX. Yes, we expect impact on Ti Alloy. Regarding Leap engine
Reduction. Material impact.
- Due to weak Ti prices. No time effect due to volatility in Q1 2020.
Stijn: Lithium. YOY volumes.
Do you expect to compensate in the remainder of the year in 2020?
Current market situation in Lithium with oversupply mainly in Aus spodumene.
Does this impact plans Lithium expansion?
- Litihium expansion: Is focused on the hydroxide plant in Germany. Quality consolidator of diversified supply.
Also element in financing of expansion of Brazil into Chemicals. Sophistic project finance structure.
Certain imports into Germany provided by that plant.
The whole thing start with that German plant to be the necessary condition of this whole thing to work.
It's a broader question, not only spodumene. Risk management in Brazil.
Stijn: Recent announcements regarding vanadium, like spent catalyst contract renewal and Glencore.
Could you elaborate on how these actions de-risk vanadium expansion.
When to see benefit?
- Main parameter for profitability is foremost the recycling fees.
Recycling fees provide base cashflow. 3 other cashflows: Vanadium, Molybdenum and [...]
Is conctractional fee. Vanadium process show up in our cashflow.
De-risking is massive. We experienced the volatility build up of inventory in 18/19.
The customer watch upward spike, delayed deliveries and therefor inventory build-up.
Contract eliminates risk, whatever is produced is sold once produced.
Contractional index prices do apply.
70M EBITDA drop in 19 would never occurred with contract in place.
De-risking supply side: working complementing very large contract book on feed.
Seeking new catalysts. Spent catalysts seeking home.
Martijn: Regarding IPO Technologies. Can you elaborate timing? Shall we still think 2020?
Regards use of proceeds. Would that build to the German conversion plant or looking for other projects (eg V redux batteries)?
- Timing is ABN AMRO quote. Bad time to make guidance statements on capital market events in aerospace markets. Boeing situation is fluid.
We need to have predictability in this area. When we see stabilization and predictability.
But in the interim we make this company very sellable and attractive. It's a beneficial exercise anyway.
- Redux: We are very aware of market opportunities in Vanadium area. Distinct opportunity.
Prominent candidate for stationary batteries, grid stabilization for net in eg Germany.
Where renewable energy grows is marching ahead especially in solar and where necessary growth to make that happen economically is market size multiples!
We are heavenly involved in study V redux batteries.
That is also related to our future ability to produce V2O5. Strategic element.
You need price predictability (main hurdle) and we are low cost producer.
When people sum up advantages they come to the major disadvantage of Vanadium volatility.
Our strategic objective is to remove that bottleneck.
Martijn: High cost producers exiting vanadium market. Expectation or actually seeing?
- Stone coal producers in China, environmental implications,. They go in and they go out.
Our expectation is that this will; vanish as a mixture of environmental policies and emission controls.
It's unsustainable as regard to the true sense of this word.
Martijn: So expectation?
- Nobody sees anything in China right now :).
Exports have been going down dramatically quarter by quarter.
Reduction in exports is reduction in production.
Martijn: Fluid Boeing situation.
Expecting production stop till June/July?
- No production stop. We are not Ti Alloys delivering particularly to one party.
We are delivering engines for many planes.
You get the letter and then you reduce production.
Martijn: Impact of reduction?
- Impact is not material.
Martijn: German lithium conversion plant. Subsidy?
- Looks progressive. We have customer discussions in a broad way, using our new laboratory.
Martijn: Guidance on spending in 2020
- 250M: 200M Zanesville and 50M rest of company.