ERAMET S.A. (ERA) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to this presentation for the 2020 results for the ERAMET Group. Once again, due to the public health crisis situation, we are going to have to hold this meeting remotely. And we wish we didn't have to do things this way. 2020, as I'm sure you've heard many times during the company announcement period for their results, has been a time of great upheaval, probably one of the most chaotic periods that we've experienced for a very long time. The pandemic that struck at the beginning of 2020 brutally upended not only our markets, but also our production systems. Our logistics systems were also affected, and it has led to a significant drop-off of the prices of our raw materials and the collapse of some of our markets, such as the aeronautics sector. However, despite this very hostile environment, ERAMET has been able to hold firm. We've been able to protect our employees and our communities. We've been able to guarantee across the board the continuity of our operations, which was not something that was easy, and we were able to deliver on our operational targets. Thanks to our demanding road map that we started now 3 years ago, and also, thanks to the great involvement and agility of our teams during this difficult period, we have been able to record remarkable results in our mining operations, and we've also been able to seize some opportunities as they presented themselves on the market, thanks to, once again, being able to maintain operations. Our strict controls of cash has been able -- has enabled us to maintain good debt levels. And given the strong impact of the first semester, at the end of the year, we were able to hold up the same debt level as at the end of 2019. So today, we are stronger moving into 2021. So to start things off, let me just give you a couple of figures to illustrate exactly what I just said. Starting with the first, maybe the most important, which is the impact of the public health crisis on our results. As you can see on the slide in front of you, the impact of the raw material prices on the one hand, the drop-off of our markets on the other, especially the aeronautics sector, impacted our results for EUR 540 million last year, a EUR 540 million impact. That is 85% of the EBITDA we had in 2019. So if we had just held firm, which would have already been very good given the environment, our EBITDA would have dropped of 85%. Thankfully, we didn't just hold firm, we were able to push forward significantly in 2020 on safety, first and foremost. As you know, this is very important to me with our accident rate, which dropped off a further 24% in 2020 versus 2019. We were also able to greatly improve our operating performance during this year with continuous organic growth that we're seeing in our mining operations and also thanks to our increases in productivity. This accounts for a positive impact on our bottom line in 2020 for EUR 250 million. This is the best increase we have ever seen in the history of ERAMET. The biggest uptick in the past was EUR 100 million. Mining and Metals alone was able to post EUR 554 million EBITDA in 2020, which shows the great resilience of that business. The third figure that I wanted to share with you is our debt, EUR 1.3 billion, which has remained stable versus the end of 2019. This has been thanks to a strong cash control plan, thanks to also a strong improvement in our WCR requirements and significant discipline in our investment policies on top of the cost control that we've been implementing throughout the year. So given the very chaotic 2020 that we've experienced and despite the public health crisis, we have been able to keep our debt under control. Let's start things off with safety. As you know, we always start our results presentations with safety. We see this as a core value for us and also an advanced indicator of our operating management. As you can see, our frequency rate has further improved this year by an extra 24%. Over 4 years, we've been able to slash that rate threefold. We started with a frequency rate that was quite high, and we have now been able to pull it down to a level which is much more in line with the best performance in the industry. That doesn't mean that we are resting on our laurels. We remain mobilized to identify any risk situation in all of our business lines so that we can push forward to that target, which is a 0 frequency rate, and 2021 is starting well in that regard. We, of course, remain very vigilant on health concerns and the sanitary protocols that we are implementing throughout the year because, of course, the pandemic remains present this year as well. As I said, we have seen a significant impact of the public health crisis on our results. We'll come back to it as it is the major factor of 2020. We've also seen a drop-off in the prices for some of our major materials, such as manganese, which dropped 20%. Ferronickel prices dropped 10% because of the significant drop in the demand for this product with the weak [indiscernible] prices in 2020. Manganese alloys dropped between 5% to 8%. Overall, the impact of the price drops was EUR 360 million on our EBITDA versus the previous year. A significant drop-off of aerospace, with 43% of orders that were canceled in that space that had an impact on A&D for EUR 110 million, Aubert & Duval. And also a drop-off of steel in Europe and in America, which are key markets for manganese alloys had an impact of EUR 50 million, which were -- we were able to offset to some degree, thanks to extra market share in some other markets. Finally, we did have costs directly related to the COVID crisis, the health measures that we implemented and all of the help that we provided to our communities to help protect them during this difficult period, and that cost a further roughly EUR 20 million to the group. Luckily, as I said, our commitment and also the agility of our management model that we implemented over the last 4 years enabled us to, in part, offset the negative impacts of the crisis through excellent operating performance and also record levels of production. The group, over this period, generated EUR 250 million in intrinsic performance. We were able to break through any of our previous records in the mining sector, producing 5.8 million tonnes of manganese in Gabon, that's an increase of 22% versus 2019. So despite COVID, with the logistics issues and the other issues that we had, we were able to increase by 22% with 6 million tonnes transported. As you know, for a very long time, the railway network in Gabon has been our bottleneck, and that is no longer the case, thanks to the improvements we've implemented working with Setrag. In the nickel industry, we produced 5.4 million tonnes of nickel in New Caledonia, an increase of 16% versus the previous year. And we were also able to achieve an increase of 55% of our ore exports. As you know, that is a key component of the new SLN model, 2.5 million tonnes there despite all of the issues that we had in New Caledonia throughout 2020. For mineral sands, we were able to maintain our production at a high level, slightly up versus the previous year as well. This is true of our mineral sands business in Senegal and also our Norway business line. And a great success story for the year was the quick kickoff and extremely successful startup of Weda Bay. So this is our Indonesian mine and plant. From its very first year of production, the mine was able to produce 3.4 million tonnes of nickel ore. And the plant, which started business just in April, has already produced 23.5 kilo tonnes of nickel pig iron. That was in 2020 and is already at a production level currently of 35,000 tonnes per year. This is a huge success story for us in Weda Bay. And as you can see in our 2021 outlook, we are expecting to continue this trend and continue to develop that business line. And what does this all mean for our finances? So let me give you some key figures before I hand over to our Financial Director to get into more detail. The combination of the 2 factors, the huge impact of the COVID crisis and our good operating management, has led to sales being relatively stable year-on-year with 2 halves that are heavily contrasted: a significant impact in the first one and then a bounce back in the second half. Our mining production and other operating production have almost been able to offset the drop in the raw material prices. Now because the prices affect directly our profit, which is not the case for the volume produced, EBITDA is down 37%, but only 37% versus 2019. Again, with the 2 halves that are heavily contrasted with a strong second half, EUR 278 million in the second half, which is a strong uptick versus the previous half. COI is at EUR 106 million, current operating income. Net income is heavily negative, minus EUR 675 million, but that does reflect the EUR 500 million of assets impairment that were booked in the first half. We already expected that for the first half in any case, which was at EUR 623 million negative in the first half and is only a further EUR 52 million negative with the second half with further impairment as well that was booked. Free cash flow is slightly in the red, minus EUR 36 million, but with a significant, again, impact of the crisis in the first half and they bounce back with cash generation at EUR 174 million positive in the second half. And net debt has remained stable over the period, as I said, versus 2019. Our gearing for covenant purpose is 106%. And as you already know, we have been able to obtain some waivers, some covenant holidays for the calculations, and this will be applied for June and December for 2020. So there you go, that was the introduction. I would now like to give the floor to Thomas Devedjian, who is our Financial Director, who's going to drill down a little bit into the further results.

Thank you, Christel. Good morning to you all. So to begin with 2020 group EBITDA, as you can see EBITDA, almost EUR 400 million, driven by the very resilient contribution of the Mining and Metals division, EUR 554 million alone, whereas High Performance Alloys delivers negative results. Firstly, of course, we have a very strong contribution, the manganese business unit EBITDA, thanks to a significant increase in volumes from manganese ore and also very good resistance of manganese ore that we're able to gain market share in an adverse steel market. Operating performance of mineral sands BU is particularly robust, delivering a significant contribution. And lastly, on the nickel front, we have positive EBITDA from SLN, thanks to a second half a lot better than the first, just under EUR 50 million EBITDA, whereas at Sandouville for nickel, we have a far more challenging market and operating conditions that remain challenging with an EBITDA coming in at minus EUR 31 million. High Performance Alloys division delivers a negative contribution full year; Aubert & Duval, minus EUR 87 million; ERASTEEL, minus EUR 32 million. Hard hit by the aerospace crisis for Aubert & Duval and also the automotive crisis for our high performance steel EBITDA of the order of EUR 400 million. More than previously we're exposed to the seasonality of our operations shown here on this slide comparing H1 and H2 average ore production, manganese ore, nickel ore and mineral sands to a lesser extent. You see that, traditionally, H2 is a lot better than H1. H2 is a dryer season, where H1 is a wet season with less production. And as a consequence, we have results far better in H2 than H1. That was the case this year, and that's what to be expected. This trend strengthened by the increased share of our mining business that has increased by almost 50% over 4 years, and therefore, strengthened that sensitivity. Moving now to the key financials. Sales down 3%, just over EUR 3.5 billion. EBITDA down 37%, coming in at EUR 400 million. Current operating income positive to the tune of just over EUR 100 million. Net income group share significantly negative, as Christel said, minus EUR 675 million. Now turn to the impairments. Net debt, almost flat. Free cash flow of minus EUR 36 million, going from EUR 1.34 billion to -- EUR 1.304 billion to EUR 1.33 billion of net debt. Good performance due to various items, work on the working capital that we did in H2, in particular. However, given the impairments, obviously, shareholders' equity is sharply down, going from just over EUR 1.6 billion to around EUR 1 billion, whereas net debt is pretty stable, accounts for the increase in our net debt-to-equity ratio, which goes from 80% to 134%. If we take the definition under the banking documentation of this gearing ratio, net debt-to-equity, it increases from 63% to 106%. This difference in definition stems from the exclusion of 2 items in our banking contracts, IFRS 16, the lease contracts and the French government loans to SLN, which are both excluded in the calculation. Given the deterioration of our current operating income, our ROCE COI on capital employed is down, going from 12% to 3% on the year. Reverting to the main items of net income. You see that we suffered impairments for some EUR 500 million. That's the biggest impact on net income. Impacts that were booked in H1 for the most part, I won't return to that, Aubert & Duval for about EUR 200 million of the impairments booked in H1. The halting of the lithium project, which led to impairments on the lithium project for EUR 113 million. The only major change in H2 being the impairment that we booked on the electrolysis assets of a metallurgic center Moanda because we halted that electrolysis activity that was losing money consequently. We impaired the corresponding assets. Without that impairment, net income group share in H2 would have been slightly positive. To that, of course, we can add the cost of debt for about EUR 120 million. So we have a debt of over EUR 3 billion and a cost of debt that corresponds to that. Worth noting is the good contribution of Weda Bay. It's the first year that we can indeed benefit from that contribution of close on EUR 80 million positive contribution, a reduction in our taxes. There are 2 countries where we pay taxes, Gabon and Norway. And the tax expense is down in those 2 countries, of course, in line with a decrease in income linked to the business climate. And then change in EBITDA between 2019 and 2020, we were at EUR 630 million in '19. We dropped to about EUR 400 million. On the one side, we need to stress the exceptional internal performance that we delivered during these adverse conditions. The bulk coming from, and it's worth stressing of, increased manganese volumes as Christel stated, over 20% increase in manganese ore. 6 million tonnes of manganese transported, remarkable unprecedented performance that made a significant contribution to improved internal performance. We also increased our nickel ore exports. And obviously, if we discard the COVID effect that had a significant impact, High Performance Alloys has become to resolve a number of logistic problems and made productivity efforts that led to an improvement in that internal performance. And then the aerospace crisis, of course, had a major impact. The total COVID impact is estimated EUR 175 million on our overall performance. We suffered significant price impacts, the main being, of course, the drop in the price of manganese ore and a negative impact over EUR 300 million and that of external factors of the order of EUR 300 million and accounts for the bulk of the drop in our EBITDA. We put in place a strict cash control plan back in 2020 in the face of the crisis that we face. We monitored our cash fortnightly and very rigorously. We, of course, began by working -- by addressing our working cap. And as you can see, the efforts expended on WCR led to an improvement in cash generation by EUR 272 million full year. It's obviously not a number that we're going to be able to replicate going forward, but it's nevertheless a figure that we believe to be sustainable that has allowed us to improve a number of days of sales, our WCR, by 1/3. That is by some 30 days of sales. Obviously, a work on inventories, major decrease in inventories, notably at Aubert & Duval that had overstocked because of the crisis, was able to reduce that inventory level significantly. But also in manganese and other divisions, we're able to reduce the inventories to our operations. And lastingly, payment conditions, payment terms, we also optimized our payment terms with customers and suppliers, whilst respecting our contracts that is never seeking to deliberately pay anyone late. And more rigorously, we managed customers' overdues and that reaped benefits. On the CapEx front, we were extremely vigilant. We reduced by 26% versus last year our current cash Capex. That's obviously a challenging exercise but conducted in the interest of operations. As you will recall, we mothballed our lithium project that necessarily reduced the amount of announced CapEx for the year, and we limited our growth CapEx essentially in Gabon. We limited our growth CapEx to investment with very swift payback. Purchasing performance was also boosted, a EUR 54 million decrease at group level with a systematic hard challenge of all our purchases, renegotiations and optimization of carbon tax that also generated upside. Labor costs, lastly, we generated savings. The High Performance Alloys, we cut by 25% these labor costs at Aubert & Duval, thanks notably to the short-time working conditions. Productivity was boosted 10% at COMILOG, thanks to an increase in our volumes and better amortizing our cost base. A focus on working capital, as I indicated, EUR 272 million positive impact on cash generation, significant contribution there, 1/3 improvement as a proportion of WCR. You see the Mining and Metals division outperformed the group overall with an improvement of 42%. And High Performance Alloys, essentially Aubert & Duval, reversed the trend in the second half after a first half that saw a deterioration in WCR. Our CapEx were under strict control. You see a drop of 26% of current CapEx. We're at minus EUR 200 million of current CapEx. Let me remind you that our depreciation stands at EUR 281 million asset depreciation. And current CapEx, we've invested less than our asset depreciation. We were particularly vigilant on the CapEx front. And obviously, over the long term, that we'll be able to remain -- renew our investments at such a low level. The lithium project, as I indicated, generated EUR 54 million in CapEx before we halted it, but it's mothballing led to a reduction in CapEx. And lastly, on growth CapEx, EUR 115 million, of which EUR 72 million related to manganese ore volume growth. We see the full impact of that this year in '21. And the renovation of Setrag for EUR 32 million, vital to transporting the manganese ore that we produce. And if we produce more, we need a railway that operates efficiently. Free cash flow at group level, which is pretty much at breakeven, is split in a contrasted fashion. We have the contribution of manganese, which is the strongest in free cash flow, just under EUR 300 million, then you have mineral sands contributing to the tune of EUR 70 million. Lithium, which had an impact between the CapEx that were completed in 2020 and then the discontinuation cost, just over EUR 100 million. ERASTEEL, about EUR 1 million in cash because of a challenging auto sector. Aubert & Duval consumed EUR 153 million full year. We need to stress the very good performance of Aubert & Duval cash generation in H2 because there's practically no cash consumption by A&D in H2 after an H1 where there was consumption above EUR 150 million. Holding costs, lastly, essentially, the financial expense for the debt giving negative cash generation of minus EUR 36 million. As you can see, our net debt having increased quite significantly in H1 to over EUR 1.5 billion once again dropped sharply to come in at just over EUR 1.3 billion, returning to the end of '19 level. Worth noting is a very significant increase of the Mining and Metals division half to half. That's a seasonality impact mentioned earlier, the contribution of Weda Bay that becomes markedly positive in H2. There are 2 impacts. Firstly, the commercialization margin on our share of the production of ferronickel that is shipped by Weda Bay. The -- one of the 2 shareholders, the offtake on that. And secondly, the reimbursement of loans that we contracted for the investment. And now given the cash generation of Weda Bay, allowed the company to reimburse the shareholder loans that were put in place. The contribution on the operational front of the HPA, you see that in the second half it's positive. And free cash flow, it obviously stands pretty much at 0, and then the last impacts of the lithium project. Our cash position remains extremely high at almost EUR 1.9 billion. As you know, we've drawn all our lines early in 2020, which generates this very strong cash position. Our revolving credit facility maturing in 2024 for just under EUR 1 billion, our term loan for EUR 350 million and the EIB loan for EUR 120 million. No covenant problems at the end of June and December because we secured from our banks a covenant waiver, given the good debt maintenance. We're slightly above our covenants at 106%. Worth noting that this liquidity position, of course, takes into account the fact that we reimbursed EUR 233 million of the bond maturing in November 2020. We did a swap on the other part of that bond previously. The debt maturity, you see no major debt maturity before 2024. EUR 278 million maturing in 2021, of which about EUR 100 million of various bond repayments, EUR 124 million of working capital financing debt set to be rolled over without any difficulty during the course of the year. So the debt is above EUR 3 billion. Its average maturity is in the order of 3 years, and over 80% of that debt, excluding RCF, is at a fixed rate. That's it for me. Back to Christel.

Thank you very much for that, Thomas. I'd now like to talk about our operational performance, group wide, and I'm also going to be presenting the situation with regards our strategic road map and the outlook for 2021. Starting off with Mining and Metals. This is the largest business unit, being manganese, within Mining and Metals. As you know, the main manganese market is carbon steel. That's the big output direction. And carbon steel as a market heavily suffered in 2020 as many other markets did. It dropped off. This is the first time since 2009, we have seen a drop-off of the carbon steel worldwide market, 1.5% negative. However, we have seen significant differences depending on the market, a heavy drop-off in the U.S. and in Europe, around minus 15%. However, China experienced a drop in the first half, but bounced back spectacularly in the second half with plus 11% in the second half with a plus 5% total versus 2019 for 2020 on its carbon steel production. This has meant that China has become even more important in worldwide production. They account for 57% of carbon steel production worldwide now. On the supply side, we've also seen some pretty big differences between the 2 halves. The manganese ore supply was affected in the first half by the discontinuation of some of the mines and also some of the logistics issues in South Africa. However, they were able to open quickly in the second half and produced plus 27% in the second half versus the first half. Overall production in 2020 is slightly down, minus 2.7%. But overall, the market is experiencing a slight product float, which drove up stocks and inventory over the year. All of this means that the manganese prices are going down. They dropped off 19% versus 2019, but a significant difference in the second half. There was an increase in the first half with the closures in -- the temporary closures in South Africa, and then things went back up in the second half. For manganese alloys, this is the orange line you can see on the chart. Given the drop in the markets, we also saw a drop in manganese alloys, their prices, about 8% there. And this was heavily felt in the second half of 2020 as well. The beginning of 2021, this is the part of the chart that you can see on the slide right now, is better. Today, we are seeing prices start to rise again. For ore, we're looking at about $5 per unit, with the average being at about $4.6 last year. And the end of the year was actually near or below $4. And we're seeing the same kind of effects on the manganese alloys. So the beginning of the year is looking pretty good and quite encouraging for manganese alloys. So what did ERAMET, COMILOG and Setrag do? As I said, we have a strong organic growth dynamic, plus 22% in production, plus 30% in volumes transported opening and start-up of the Okouma plateau in October. This will enable us to continue pushing the growth trend and to target the 7 million tonne mark in 2021, and we are on target to achieve that. This means that from 2020, we are looking at having the largest manganese mine in the world. And that should be even more true in 2021 with the production and delivery figures that we expect. For manganese alloys now, as I said, the markets are mainly the U.S. and European markets because that's where our production facilities are situated. The market collapsed to about 15% across both of them, 14% in Europe and 17% in the U.S. Thanks to extra market share in other markets than our legacy markets, we were able to contain the drop-off to just minus 6%, and that shows the huge agility of our sales teams and also how our plants have been able to adapt to the environment. As it stands, we are in a good position to leverage the bounce back that we are seeing in these markets at the beginning of 2021. We should note that in Gabon, we have mothballed our lithium business, which was permanently ended in September and had been systemically cash negative for a while now. For nickel, which is the main output for nickel and ferronickel that we produce, significantly suffered in 2020. The worldwide market dropped off 3.8%. It was a very dynamic market in the previous years, increasing maybe 5% or 6% year-on-year. China again led the recovery, ending the year with production being up and a huge bounce back in the second half of 29% versus the first half. Overall, the market, however, is negative for the year, with a primary nickel demand down minus 3.6%. Faced with this drop off, global primary nickel production continued to increase, 5% last year. And this was thanks to the boom that we saw in the NPI production in Indonesia. This is something that we expected. We saw plus 69% in 2020 versus 2019. As it stands, Indonesia is now the largest producer of nickel pig iron, has overtaken China. And nickel pig irons account for more than 1 million tonnes of nickel production, 44% of worldwide production today. And this is true in China and Indonesia. Because of this high level of production for ferronickel, the market ended up with a surplus of 180,000 tonnes. This weighed down prices at the beginning of the year. As is often the case with nickel, the prices are all over the place with a drop-off in the first half and then a significant bounce back in the second half, driven in part by demand in China and also with the nickel outlook for the battery market. As you know, electric vehicles are looking very good in 2020 and 2021. LME prices remained relatively stable, $6.5 (sic) [ $6.25 ]. However, ferronickel and NPIs, so all of the ferronickel products, suffered due to discounts because there was high availability of the product on the market. So we did see discounts of about 10% versus the LME price. Stocks for LME and SHFE remained relatively stable since the second half of last year, about 9 weeks of consumption stock levels. You can see that on the orange line on the chart. Something that we take more and more into account, given our exports in Caledonia and the Weda Bay activity, is of course the state of the ore market for nickel. Given the situation of the Indonesian ban, there was a lack of availability on the market. Once the Chinese stocks in their harbors and ports have been exhausted, we saw prices start to rise again. So the prices did heavily increase in the second half of the year, plus 32.4%. So that is the price of the ore, 1.8%, that we export with SLN. So plus 36% for the entire year, mainly driven by the second half with 32.4%. Stocks in the Chinese ports at the end of December were very low, 7.6 million tonnes. That's less than 2 months of stock. And importantly for us, Caledonia became the main source of 1.8% ore, which is in high demand by the market. So thanks to the new model and the ore exports, SLN is now back cash positive in the second half after suffering from price drops and cash situation issues in the first half. The cash cost dropped off 9.5% over the year and is even lower with the second -- with the end of the year with the exports and favorable seasonality, so the dry season. This performance shows that when we can work normally, as was the case during most of the second half, with the exception of December, the new model that has been implemented for SLN works well and gives tangible results. At the end of December, SLN, after having reconstituted part of its liquidity situation, was looking good with EUR 110 million in available liquidity at the end of the year from non-drawn credit lines and the cash generated over the second half. However, as you know, SLN did suffer from repeated blockages throughout December, and that has continued into the first part of January, which had a negative impact on production. The stock level is quite low, which has meant that they've had to adjust their plant production. And these blockages have, once again, even though we have overcome them now and our minds are open for business again and running normally, do show the fragility of the Caledonian system, and this requires that all of the stakeholders become involved in the recovery plan for SLN, which has shown that when everything is going well, they perform very well. Now where is the rescue plan at? First of all, ore export, which is the second part of their business model, we got 4 million tonnes authorized and that was what we needed to target for 2021. As you can see, we are on target to achieve that. And for 2021, we are targeting between 3.5 million tonnes and 4 million tonnes of exported ore. That will depend on our capacity to run our mines normally. So with Caledonia, we are remaining conservative and keeping a pretty wide margin. But we are on track to fulfill that 4 million authorization for 2021, and we're targeting 6 million tonnes after that, which would enable us to balance everything else given the good prices for ore at the moment and to get SLN back in the black from this year. The second very important pillar to their business model is the reduction of energy cost for the plant. As you know, we were able to slightly improve our contract terms with our local energy supplier. The important thing now is to build the new plant, and that will enable us to further draw down our energy costs. The tender is out. The offers are in. We're currently working on them. And we hope -- we expect if this process continues to go smoothly, that we will be able to achieve in the next 3 years a plant that is operated with relatively low, so as to say, more competitive energy prices for SLN. Thirdly, but not least, we want to achieve normal operations in Caledonia. We've done everything to achieve this. We have our new production setting with reworking of the opening times for our mines. So everything on SLN side is now ready to go. What we need to do now is make sure that we calm come down all of the chaotic factors in Caledonia to make sure that the rescue plan is seen through. The big success story is Weda Bay for nickel. As I said earlier, we opened them for business ahead of the time line. The mine, which is run by ERAMET, started up very quickly and produced 3.4 million tonnes of ore in its very first year of operation, and we are targeting more than 6 million tonnes per year, with ore exports to the other Indonesian plants from 2021 onwards. So we're seeing excellent trends at Weda Bay. The plant is running very smoothly. The first metal tapping was in April. They were nominal just a few months after that. And currently, we are looking at metallurgical production, given the volumes of the plant at 40,000 tonnes of nickel for 2021. So that is beyond our initial predictions. And mining production, which will then feed the plant, but not just will also be sent to the other plants around Indonesia. So the mining production there should break through 6 million tonnes this year. Another thing that I forgot to mention, the contribution from the very first year of operation of Weda Bay to the cash flow for the company was remarkable with a positive cash flow contribution over the year, very positive in the second half. In the second half, Weda Bay contributed EUR 60 million in cash to ERAMET from our share in Weda Bay. Turning now to mineral sands. Well, you probably know we have several markets. The zircon market that is a market essentially for ceramics that, of course, suffered with the pandemic, so demand was down 16%. Zircon production worldwide also dropped by 11%, with a slight oversupply, which impacted prices, which were down 15% in 2020, but they leveled off in the second half. On CP slag prices, which serves the markets for TiO2 pigments, there the global demand for TiO2 remained stable, thanks to a strong H2. Prices are slightly up on that market, demonstrating the relevance of the model that we have at TTI, the operation that we have -- that we kept following the failure of the sale that we initiated in H1. When we look at operations, they performed well, both in Senegal, where in spite of the fact that we were entering part of the production with lower grades, the production is, nevertheless, up by almost 4% linked to the very good efficiency of the mine that is still increasing in Senegal. Zircon sales up 7%. At the Norwegian plant, we achieved a production record, up 5% and historical high, sales volume up 8% on the year. So much for the Mining and Metals division, very strong dynamic in spite of the widespread market disruption. Turning now to High Performance Alloys division. It's without a doubt that where markets was most affected by the crisis, starting with aerospace that represents a significant portion of Aubert & Duval sales. The market collapsed. As you see, global air traffic down by almost 80% since mid-March. Aircraft production rate down 43% with, obviously, a collapse in order books across the production chain for aerospace. And unfortunately, you see the forecast here that we're not going to see a return to '19 -- 2019 volumes and ore forecasts today would seem to indicate that we won't return to those volume levels before '24 or even '26, depending on the forecast. Aubert & Duval was obviously heavily impacted by this precipitous fall after year 2019 already affected by the dysfunctions in quality management. So Aubert & Duval, down minus 16% in 2020, minus 24% aerospace. But energy and defense sector up by 47%, but that's not the largest portion of A&D sales. Over 2 years, with the 2019 crisis, aerospace sales of A&D are down 37%. So that's a very significant impact. Fortunately, the division responded very rapidly after the collapse in markets in H1, a very strong impact that it generated on division cash flow that burned EUR 156 million in cash during the first half of that year. We responded rapidly by, of course, reducing all our supplies. Raw material purchasing versus Q1 were down by 50%. Other nonmaterial purchases down 30%. Labor costs down 25%. Overall, that's a decrease of the cost base, including fixed costs of 24% versus Q1 2020. That's a considerable effort. Expended also a major effort on working capital that enabled the division to return to slightly positive free cash flow, Aubert & Duval, in H2 with notably a significant improvement in inventory levels because they were down 136 days WCR improvement versus H1. ERASTEEL, that's the other part of the division, also suffered significantly on its markets as a result of the crisis impacted by the auto crisis. ERASTEEL sales down 31% versus '19. ERASTEEL, that was on a good restructuring trend, and in 2019 for the first time, for many years, ERASTEEL was free cash flow breakeven. That was the first stage in this restructuring. The turnaround continue. We also responded rapidly by reducing costs across the board. EBITDA down, going from minus EUR 27 million last year to minus EUR 32 million this year. So quite a small drop compared to the drop in sales. Free cash flow came in at minus EUR 21 million, reflecting an operating working cap improvement, that decrease by 45 days in 2020 versus its 2019 more flexible costs and continued restructurings with the closure of a number of facility sites with flexible head count, allowing ERASTEEL to be far better positioned for an upturn in the markets. So much for the operating performance of the 2 divisions. What I'd now like to do is, of course, to briefly review our strategic road map. You know that this road map was launched 3 years ago now, and significant progress has been achieved. It was, of course, disrupted by the crisis. A crisis of such an unprecedented scale necessarily had an impact on the road map, but major milestones were reached in 2020, as I indicated. And if we look at the first pillar, which was entailed turning around or repositioning our least-performing assets. Regarding as SLN, to begin with, as I said, we demonstrated the relevance of the new business model based on greater exports of ore. The new conditions are now in place. And with them as part of amicable settlement, we're trying to achieve all the necessary conditions to deliver the rescue plant. Aubert & Duval, as you know, we've initiated discussion on its divestment. We're looking currently for the best solutions to arrive at a satisfactory offer. This is an asset that is strategic for aerospace and also for defense. And we will, therefore, assure ourselves that we have a solid future and a satisfactory offer for Aubert & Duval in 2021. As to Sandouville and ERASTEEL, in parallel with the turnaround, we're looking at the various strategic options and a possible exit from the group's portfolio. Organic growth, no need to return to that. These are all the objectives that I mentioned earlier, strong organic growth dynamic that continues, fueled with growth investments. And it's this Pillar 2 is the major success of the group these past few years with targeted investments today with a very swift cash paybacks. And as to our expansion projects in the energy transition, they are currently on the back burner, but we're working on the future development, the future development of Weda Bay in batteries with BASF, with whom we've signed partnership agreement at the end of 2020, and we're prepared to resume investments in lithium, when the climate and the group situation allows it. I'd also like to say a word about our CSR road map. You know that this road map is important for us. The central pillar of ERAMET's strategy is to be a company that is committed in this field, and that's to set the example to be a standard setter is a key component of our plan, as called for by our stakeholders, our consumers. We've made significant progress on this ambitious CSR road map. 13 objectives, that I won't recall, were fully in line since 2018 with these targets. Like to cite you have below a number of key figures for 2020, but let me just cite the progress on carbon intensity. We'd set as a target minus 26% of carbon intensity for 2023. We're almost at minus 25.4% decrease in carbon intensity, close to the 2023 target of minus 26%. We, therefore, set the ambition of doing a lot better. And we've taken new commitments on the climate, notably one of reduction of our carbon emissions in absolute terms of 47% by 2030 -- 40% in 2035 and to achieve carbon neutrality on scopes 1 and 2 by 2050. And that was the subject to publications a few weeks ago. This CSR performance was hailed by the markets, and we improved our ESG ratings across all the indices that track us. I'd like to mention 2. We obtained the prime status for the very first time in the ISS ESG Corporate Rating, which places us in the top decile in our industry for Mining and Metals. Amongst the leading companies, amongst our peers and also in the 2020 CDP Climate Change, we obtained an overall rating of B. We were rated D previously placing us amongst the leaders in our business sector. So in conclusion and with some words about the outlook, I believe I can say that ERAMET has demonstrated great resilience in the crisis. And in spite of the disruptions, has managed to deliver the best operational progress in its history, the best underlying progress, and those are the fruits of the transformation initiated 4 years ago now demonstrating the full relevance of the model that we're putting in place. The year 2021 is looking quite good short term for the Mining and Metals division with quite dynamic demand with materials prices trending upwards. We continue to see a very degraded market in aerospace impacting the performance of High Performance Alloys division, notably Aubert & Duval. We will continue the organic growth trend in mines division at COMILOG, Weda Bay with major expansions at SLN. This will, of course, allow us to deliver a lot of cash, very virtuous growth. Of course, we're focusing on the rescue plan for SLN that we hope to consolidate in the coming months. We will continue to keep a strong control on cash. We're in an environment that remains highly volatile, uncertain. We've acquired a great deal of agility, flexibility, and we continue to inject flexibility in our costs, notably in the HPA division where it's necessary in the face of challenging markets. We plan to continue to invest in our organic growth that's very profitable. We demonstrated that today. So we expect to invest about EUR 200 million in this organic growth in 2021 in manganese, in particular, that generates a lot of profit, as you know, and to consolidate our current CapEx at breakeven point of around EUR 300 million. And we're looking at the best solutions for the future of Aubert & Duval without undue pressure because we're seeking to arrive at a solution that is both good for the industry, good for Aubert & Duval and for ERAMET. So for 2021, the targets for volume, well, you know what, there are 7 million tonnes of ore produced at COMILOG, plus 20% versus 2019, thanks to the growth CapEx. More than 3.5 million tons of exports at SLN. We'll try and do better, but it depends on operating conditions. And over 6 million tonnes of nickel ore produced at Weda Bay, which in all cases represented significant growth in our mining activity. Based on current metal price consensus, we took $4.5 MTU for manganese and nickel price of $7.50 per pound. We estimate that our EBITDA should land at around EUR 600 million in 2021, significantly higher than in 2020 with a considerably more favorable seasonality that needs to be borne in mind. That is to say, H2, always better than H1. That's what I wish to say by way of conclusion on the results and outlook. We're now happy to take your questions.

Okay. We can move on to the Q&A part of this presentation. ERAMET would like to thank all of the numerous people who have logged in to listen to us this morning. [ Laurent Puansu ] from [ Inmarsat ] will be monitoring the questions and putting them in categories. As a reminder, in the press kit that was published last night after closing, we published our guidance for 2021. There may be some other very precise questions on other guidance elements for 2021 that we will not be able to answer at this point. Mr. [ Puansu ], first question.

First of all, on manganese ore, you say you want to achieve that 7 million tonnes of production. Will that be possible without investing in more facilities?

That's an excellent question. We actually have members of Excom here. We've got Kléber Silva, who is the Head of M&M for ERAMET, who can answer that question.

Yes. Thank you, Christel. That is actually one of the effects of our very virtuous model that we have at ERAMET. We are able to increase production with dry production techniques with a very low cost, and then we can do washing cycles after that. This is the kind of model that we already presented in the past. And using the dry techniques, we can achieve 7 million, and then we can do the concentration through the washing techniques after that. So what we can do dry, we do dry, and then we use wet techniques when we need to.

Yes, so we can get 7 million without using washing methods. However, after that, we will need to wash the ore to be able to sell some of the ore that isn't sellable otherwise. So the figures aren't sustainable without using washing techniques, but we have already thought about a modular system for the ramping up of washing techniques and plants, which should enable us to achieve that concentration in the second phase.

Questions about SLN. You said there were issues with energy for the kilns. Is there a risk that the kilns will get shut off?

Well, there always is a risk for the SDN kilns and that's why we need to be very careful. During the blockages in December and early January, we ramped down the the consumption of the kilns to use less ore. And this meant that we could keep them running. You can't shut them off and restart them though, they need to keep running. Otherwise, you need to basically start from scratch again. So we need to be able to continue to melt the ore, but we can pull down the energy consumption for less production, but they need to keep running. And this is why it is absolutely key that we have a plant that remains open and running nominally to keep everything fed.

New Caledonia has a new government as of this morning. Do you still expect to get that 2 million export authorization to achieve that 6 million target?

Yes, we still expect that extra 2 million tonnes. It is true that New Caledonia has experienced a lot of political changes, which haven't helped quick political decisions. A new government, but we don't have a new president. We don't know who's going to lead the government yet. We're not really into politics at ERAMET. And we dare to hope that given the size of the investment that we have been making, especially in the north of the island where most of our mines are situated with the job creation that comes with that. Because remember, the ramp-up of our business means jobs in the mines, means investment around the mines, and we hope that common sense will win out. Because at the end of the day, as SLN ramps up with its rescue plan, if it -- as it survives and as it ramps up, we are expecting to see very good impact on wealth and jobs in New Caledonia. So I hope that no matter what government they have, they will see common sense.

So there's a conciliation process going on with SLN. What is that going to mean? And will that lead to recapitalization?

So that is a framework for the discussions between stakeholders to secure the moving parts of the rescue plan. And that's what we're looking for. We're looking for strong, relatively formal commitments from all of the relevant stakeholders so that we can implement the rescue plan for SLN with the permits, the new plant and everything else. Recapitalization of SLN may be part of a second phase. Once SLN has become sustainable, then that's something we could consider. But that's not really the challenge we're faced with right now. Right now, we're looking at liquidity, we're looking at the rescue plan. As I've said, liquidity does improve when the plant can operate. So, so long as the company is running, so long as they can function normally, given the current market circumstances, they will generate cash and that would put us in a much better standing than what we've seen in the past, and then we can look forward.

On Weda Bay, what is the Weda Bay contribution exposure to nickel prices for their contribution to free cash flow?

Exposure to nickel prices for $1 NPI Weda Bay, about $30 million.

For the energy transition, there are lots of giga factory plans for battery. Beyond nickel and manganese, do you have ore that's pure enough in the right technology to work with these new battery factories?

In Gabon, we did start a manganese oxide production line. That is the product that is required for battery production. But for manganese, the battery market is still very small versus the very high volumes that are being traded and used for the steel industry. So it's certainly a market that we're looking at. We're trying to position ourselves on it, but it remains a relatively minor part of the manganese market. Nickel is a different story. We do have the right types of ore, especially in Weda Bay. We have the technology. And this is why BASF is working with us, in fact, on this matter. We're working together to do the right studies and to develop maybe a cobalt and nickel refinery plant based on the Weda Bay Indonesia ore.

For Aubert & Duval, what's the range of scenarios that are being considered for A&D, especially for cash flow?