Umicore’s 1H12 results were below our and consensus forecasts on the recurring EBIT level. Revenue (excluding metal) was up 8% y/y to € 1,240.6m (KBCS € 1,203m, css € 1,204m). Recurring EBIT declined by 11% to € 191.5m (KBCS € 206.2m, css € 203.9m). Net result decreased by 27% to € 128.1m (KBCS € 148.8m, css € 144.3m).
Catalysis revenue grew by 16% to € 452.8m (KBCS and css € 435.7m) and recurring EBIT was up 7% to € 48.7m (KBCS € 50.9m, css € 47.5m). Umicore outperformed the global car market – light duty vehicle production was up 8% in 1H12 – but the changed regional mix (Europe car production down 5% with high share of profitable diesel segment) affected profitability. Umicore expects global car production to keep growing in 2H12, with North America and Asia continuing to outperform Europe and South America.
Energy Materials revenue grew by 2% to € 183.6m (KBCS € 208.5m, css € 209.1m) as strong growth in Rechargeable Battery Materials was offset by a decline in the other business units. Recurring EBIT was down by 33% to € 14.4m (KBCS € 20.0m, css € 19.8m) as better results in Rechargeable Battery Materials were offset by lower results in Cobalt & Specialty Materials (increased competition and lower cobalt/nickel prices), Electro Optic Materials (lower premiums) and Thin Film Products. Umicore hinted that the patterns observed in the first half should be broadly unchanged in 2H12.
Performance Materials saw revenue decline by 1% to € 267.2m (KBCS € 248.1m, css € 250.0m) as growth in Electroplating was offset by lower revenues in Building Products (lower volumes, mainly in South and Central Europe) and Zinc Chemicals (lower sales volumes and reduced recycling contribution). Recurring EBIT was down 20% to € 30.8m (KBCS € 33.0m, css € 35.8m). Besides the usual seasonality Umicore expects similar underlying market patterns in the second half of the year.
Recycling grew revenue by 10% to € 342.0m (KBCS € 310.4m, css € 311.8m) and recurring EBIT was down 8% to € 121.9m (KBCS € 127.3m, css € 126.0m). Umicore commented that while supply conditions remained buoyant, processed volumes were somewhat lower, due to a maintenance shutdown at Hoboken (Belgium). Results were negatively impacted by lower spot prices for tellurium, rhodium, ruthenium and indium. The slightly lower spot prices for platinum and palladium were mostly compensated for by the existing LT contracts. Umicore expects to continue to benefit from a buoyant supply environment in the second half of the year and expects to post another strong performance, despite the impact from lower metal prices.
Outlook : Umicore anticipates profitability in the second half to be in line with the first half. The group stated that it expects FY recurring EBIT to be in the lower half of the previously guided range of € 370-410m – the new guidance is below our and consensus forecasts (KBCS € 399m, css € 398m).
Conclusion:
Umicore posted a lower than expected 1H12 result, with not only Recycling but also the other divisions posting somewhat lower than expected results. We will lower our forecasts following the 1H results + outlook statement. We stick to our Accumulate rating as we still believe in the attractive LT growth prospects of the company, but decided to slightly lower our target price (from € 43 to € 41).