Weakened Chinese market impacts Elkem results

2019-02-28

Feb. 27, 2019 - Elkem Silicones was hit by weak market sentiment, particularly in China, in the fourth quarter of 2018.

Operating income for the quarter ending Dec. 31 was nearly even that of the prior year at $724 million, the Norwegian silicones company said in a financial report released Feb. 12.

EBITDA for the quarter amounted to $93 million, down from $126 million in the corresponding quarter last year.

The company attributed the flat results in part to sales prices and volumes in China, which were affected by "lower demand and maintenance shutdowns."

"Weaker market conditions in China have resulted in lower sales prices and lower volumes for core silicone products," explained Helge Aasen, CEO of Elkem ASA. As a result, he added, Elkem subsidiary Xinghuo Silicones operated below full capacity rate in the quarter.

Elkem's Yongdeng Silicon Materials also completed technical upgrades of two furnaces, which resulted in lower production and sales.

The higher average sales prices were offset by higher raw material costs and lower sales during the final quarter of last year.

Elkem raised new financing of $204 million in the Norwegian bond market and$245 million in the German Schuldschein market during the fourth quarter. The new loans have been used to refinance local bank debt in China.

For the first quarter 2019, Elkem expects weaker results mainly due to "temporary production curtailments." The company expects subsequent quarters in 2019 to improve based on expected higher sales volumes, price recovery and lower raw material costs.