Umicore, a global materials technology and recycling group based in Brussels, says its financial results for the first three months of the year were ahead of the first three months of 2019. According to the company’s first-quarter 2020 earnings report, its recycling business unit performed strongly.
Umicore reports that its Precious Metals Refining business unit benefited from supportive supply conditions and metals prices in the first quarter of 2020. In its Precious Metals Management business unit, trading conditions for precious and certain platinum group metals were favorable, while the company’s Jewelry & Industrial Metals business unit benefited from strong demand for gold investment products and gold recycling services.
Based on the assumption that global automotive production in 2020 will be down about 25 percent year over year, Umicore says it anticipates that the recurring earnings before interest and taxes (EBIT) of its Catalysis and Energy & Surface Technologies business unit will be below the levels it achieved in 2019. In its Recycling business unit, based on a strong performance in the first quarter of 2020 and the expectation of continued favorable supply conditions, the recurring EBIT in 2020 is expected to be above the levels of 2019, assuming metals prices remain at their current levels.
With the uncertainty of how much impact COVID-19 will have on the global economy, Umicore says it is unable to provide a reliable quantified outlook for its financial performance in 2020. The company says it expects recurring EBIT to be below the level it achieved in 2019.
“The COVID-19 pandemic is causing unprecedented challenges to all of us, and my first thoughts go out to people who are hardest hit and to everybody fighting the pandemic on the front lines,” says Marc Grynberg, CEO of Umicore. “Today more than ever, our priority is the health and safety of all Umicore employees. We have the ability to navigate these trying times, and I am confident that Umicore will resume its superior growth trajectory once this crisis will be overcome as the world needs to move towards a more sustainable development path. Finally, I would like to express once more my sincere gratitude and recognition to all Umicore employees for keeping the workplace safe and healthy and for their engagement to keep our operations running and serve our customers.”
COVID-19 impact on automotive markets, Umicore operations
While performance in the company’s Catalysis and Energy & Surface Technologies business unit experienced a good start to the year, the Automotive Catalysts and Rechargeable Battery Materials business unit felt “the impact of COVID-19 in February in China and as from mid-March in other key regions such as Europe and the U.S.,” Umicore states in its first-quarter 2020 earnings report.
According to Umicore, the automotive industry has been “severely hit” by the COVID-19 pandemic globally “with car production down 25 percent” year over year in the first quarter of 2020. In China, the market slowly picked up car production in March, down 45 percent year over year that month after a drop of 80 percent in February. In other parts of the world, COVID-19 is still peaking, and car original equipment manufacturers (OEMs) have shut down their assembly lines in key markets outside China, South Korea and Japan since mid-March. In Europe and the U.S., car production in March was down 45 percent and 30 percent, respectively, year over year.
In Europe, assembly lines are gradually restarting production, and the same is expected to occur in North America around mid-May, Umicore states in its latest earnings report. However, demand from end consumers is anticipated to remain “fragile” as consumers’ likelihood of purchasing cars may decrease in light of the economic impact of the pandemic on their purchasing power. Umicore currently assumes that global car production for the full year will be down by about 25 percent compared with levels reported in 2019.
Production at Umicore’s automotive catalysts and battery materials plants in China was impacted at the time of the Lunar New Year holidays and the following weeks. Umicore reports that production levels have picked up slightly since then. The company says overall demand for vehicles in this region remains fragile.
Outside of China, South Korea and Japan, Umicore reports that it has stopped production at its automotive catalyst plants following the widespread shutdown of assembly lines of its automotive customers. While the impact of COVID-19 in the first quarter on the company’s automotive activities remained mostly limited to Asia, the full impact on the performance in Catalysis and Energy & Surface Technologies will be felt in the second quarter, Umicore says.
In the Recycling business unit, the Hoboken plant in Belgium and Umicore’s other recycling facilities have continued operations while complying with strict sanitary standards and precautionary measures.
Additionally, Umicore says several measures were launched to reduce costs, optimize working capital and delay certain investments to mitigate the impact COVID-19 would have on financial results. The company has adjusted its production capacity where needed and has furloughed 10 percent of its workforce. It also is delaying certain investments and expects capital expenditures for 2020 to be in a range of 400 million to 450 million euros (or about $440 million to $495 million), which is below levels reported in 2019.
Safety response to COVID-19
In response to the COVID-19 pandemic, Umicore shares in its first-quarter 2020 earnings report that it introduced “strict hygiene and other precautionary measures … in its facilities in Asia at the end of January and later in the rest of the world.” Measures implemented include social distancing, working at home wherever possible and systematic disinfection of the workplace as well as strict medical protocols to address any suspected cases. The company also reports that it has a dedicated task force managing its response to COVID-19 globally on a daily basis that is focused on protecting employees’ health and helping to contain a further spread of the virus. Due to the company’s early implementation of comprehensive protection measures, the number of infected employees is limited.