Umicore S.A.

Thank you, Valeria. Good morning, everyone, and welcome to today's presentation.

I will first comment on our performance in 2020 and the outlook for 2021 before reviewing the major achievements in each business unit. I will then hand over to Filip, who will take you through the financials.

And finally, I will wrap up before handing the call over to you for any questions. Before commenting on Umicore's performance though, please allow me to say a few words about the process which we have just launched in order to prepare for my succession.

In case you were concerned, I would like to reassure you that I'm physically fit and according to my entourage at least, mentally as well. When I took over as CEO back in 2008, my mandate was to bring Umicore to the next stage of development.

Over the past 5 years, we have streamlined the portfolio of activities to create more focus, we have amplified research programs and we have accelerated growth investments. Together with my teams, we have transformed Umicore into a global leader in clean mobility materials and recycling, with a market cap which is 6 to 7x, what it was actually in 2008.

We have now successfully completed the execution of our Horizon 2020 growth strategy. And everything is in place for Umicore to keep driving.

We have talented teams, we have a promising technology pipeline. We have a strong market position and highly supported mega trends as well as strong financials to support our growth ambitions.

So the Board and I felt this would be an auspicious moment to prepare for my succession. And I will be pleased to ensure a smooth transition in due course.

Enough said about me, let's now review the highlights of 2020. The pandemic has dramatically redefined my agenda since the beginning of 2020, with the clear priority to protect, to the best possible extent the health of all Umicore employees.

The COVID outbreak has required the introduction of strict hygiene measures and medical protocols. We have been quite successful in preventing the virus from spreading in our sites.

We have also gone the extra mile to continue serving our customers globally, and I'm truly grateful to my 11,000 colleagues for their engagement during these challenging times. The pandemic and the resulting lockdown measures caused a huge downturn in the automotive industry, one of our main end markets.

In Catalysis, we have seen extreme of positive movements during the year. In the spring, we were confronted with the closure by our customers of most car assembly lines, and in turn, had to temporarily shutdown most of our catalyst plants.

In contrast, we saw a sharp recovery in demand, which started in China in the second quarter, to shape in other regions over the summer month and gathered pace through the fourth quarter. While the performance in Catalysis was impacted with significant extent by the temporary shutdowns in the first half, we benefited in a disproportionate manner from the recovery in demand in the second half due to our leading positions in gasoline technologies, particularly in China and Europe.

In Energy & Surface Technologies, market demand was also severely affected by the pandemic. In addition, market conditions in the EV battery supply chain remain depressed due to the overcapacity in China and the presence of excess inventories.

Excluding inventory effects, Umicore sales volumes of cathode materials for EVs grew broadly in line with the EV battery demand, which confirms Umicore's strong competitive position in the cathode materials space. In Recycling, we achieved a rapid performance.

We nearly doubled earnings compared to 2019, with high metal prices and strong trading conditions by far the largest contributors to the increase. Overall, Umicore achieved record earnings in 2020, and this goes to show the merits of our strategy, which builds on the complementarity of our activities.

It also shows the resilience and agility of our teams in the face of unprecedented conditions. The good news really is that the patterns which we observed in the second half of last year continue to support our business today, and I can already say that we are off to a strong start in 2021.

We should not get carried away, though, as the visibility on market demand remains extremely limited. The pandemic is not yet behind us, and the experience of last year has shown that things can change very rapidly.

If we assume for a moment that the pandemic gets gradually under control and will not cause more disruptions to the economy or to Umicore's operations in 2020 -- '21, sorry, we should see, again, an acceleration in our growth trajectory, with all business groups contributing to the growth. In Catalysis, we expect to keep benefiting from our leading position in gasoline technology, particularly, in Europe and China, even though in an automotive market, which, according to projections by industry experts, should keep recovering.

In addition, we expect to benefit from the initial impact of the introduction of China VI standards for heavy-duty diesel applications as well as the full year impact of cost improvements, which we carried out in 2020. In Energy & Surface Technologies, we see good market traction for cathode materials, and we project substantial growth in our sales volumes for EVs.

This volume growth should allow us to resume earnings growth in 2021, in line with the current market consensus. And this, despite some €50 million of additional fixed costs linked to our growth investment and with margins continuing to reflect pricing pressure.

In Recycling, we expect moderate volume growth and a continued, very favorable supply mix. In addition, metal price could once again boost our performance.

You will have seen that certain metal prices have continued to surge since the end of last year. And if metal prices were to stay, overall, at their current elevated levels throughout 2021.

Recycling earnings will increase very significantly on the record levels of 2020. All in all, current trends have certainly bode well.

However, it is early in the year, and let's bear in mind that the degree of uncertainty remains high. Despite the pandemic -- or perhaps because of the pandemic, we have seen support for greener policies increasing, whether related to cleaner mobility or the need for a circular economy.

This was evidenced, for instance, by green recovery plan in Europe or by the step-up of the LED penetration targets in China. In other words, the regulatory drivers which underpin our growth strategy continue to get stronger.

Against this backdrop, our motivation to maintain the strategic course of action is very high. In particular, we have pursued the construction of our cathode materials plant in Poland, and it will start production towards the end of the year.

This additional capacity will come in timely to serve the growing EV demand in Europe and the growing needs of our customers. We have also pursued the ramp-up of our fuel cell catalyst production in Korea and the expansion of catalyst production capacity in China for light and heavy-duty applications.

In Recycling, the focus of our investments in the short and midterm is to continue improving the environmental and safety performance of the Hoboken plant. Finally, we have continued to increase our research and development efforts in clean mobility materials and in recycling, both in terms of product and process technologies.

At the same time, of course, I believe that we have responded most effectively to the challenges caused by the pandemic outbreak. As I mentioned in my introductory remarks, the priority is to keep everyone at Umicore healthy and I would like, ask again, to thank our medical staff for having ensured safe working conditions and I would like to thank all colleagues for having swiftly adopted the required precautions.

We were able to manage to diversify our source of funding and increase available cash, Filip will comment on that later. Finally, the pandemic has forced us to adjust to rapidly changing market dynamics, which resulted in a streamlining certain operations and an impairment certain assets.

Let's now turn to the business review. This slide recaps the key figures for 2020, which are actually commented in full detail in our press release and, I therefore, propose to turn immediately to Catalysis.

The automotive market as severely hit by COVID outbreak and global car production contracted by 18% in 2020. The graphs show the market development month-by-month against 2019.

And you can clearly see how deep the production cuts were in the first half across regions. The graphs also show that the recovery started earlier and was most pronounced in China.

Against the backdrop of an 18% market contraction, our revenues in Catalysis increased by almost 7%, as our leading positions in gasoline technologies allowed us to benefit in a disproportionate manner from the market recovery in the second half in China and Europe in particular. You may recall that I mentioned a year ago that Umicore had become the supplier of light-duty catalyst in China.

And the benefits thereof are increasingly traceable. In Europe, we continue to benefit from the decline of diesel car sales mix.

Our revenues were also supported by strong demand for our heavy-duty catalyst and demand for our fuel cell catalysts. On the other hand, the stationary catalyst business, which is really a project driven business suffered from delays due to the pandemic.

Within the Catalysis segment, I would like to underline that the business reached automotive catalysts showed tremendous resilience. It's revenues and adjusted EBIT for the whole year were only moderately below the levels of 2019.

Also our performance in the first half, which reflect the big impact of the pandemic, the market recovery and our out performance, combined with the effect of cost savings, allowed us to achieve record revenues in early -- in second half of 2010. Turning now to EVs.

We see that the battery demand expressed in gigawatt hours, which, by the way, is the relevant metric to look at for battery material suppliers grew by 17% in 2020. This market growth was driven by increasing demand in Europe, where the new CO2 regulations are supporting a faster penetration of electrified vehicles.

The number of EV models being launched in the region or the pipeline is truly impressive. It is also worth noting that plug-in hybrids remain very popular in Europe, where they make up half of EV sales.

In China, battery demand remained subdued during the better part of 2020 and saw an improvement at the end of the year on, after years of strong growth in China and a doubling of battery demand for EVs in 2018. The Chinese EV market has shown strong, very limited growth in 2019 and 2020, unlike what was anticipated.

The cathode materials industry grew somewhat less than the 17% increase in gigawatt hours or GBs. And this was due to the excess inventories in the value chain.

We believe that these excess inventories have now been completed, taking into account the impact of inventory corrections, we estimate that Umicore's sales volumes of cathode materials for EVs grew broadly in line with the market, despite a somewhat unfavorable platform mix. This performance was supported by a strong demand in Europe, where we doubled our sales volume in 2020, all be from a small base.

In contrast, with the growth in EV applications, cathode materials demand for energy storage systems and portable electronics was very low. We recorded lower revenues in the Cobalt & Specialty Materials activities due to the pandemic and in Electro-Optic Materials due to COVID and for all the products used in fiber optics or satellites.

The Electroplating activity, now renamed Metal Deposition Solutions benefited from good demand levels from the electronics industry. Margins in E&ST were affected by the underutilization of our cathode materials capacity in China and by pricing pressure as well as higher fixed costs following recent and ongoing expansion programs.

Our Recycling activities did benefit in 2020 from an exceptionally supported metal price environment, especially for PGMs. You can see on the graph that rhodium and palladium prices had a great run in 2020, despite lower demand from the automotive industry in the first part of the year.

New and more stringent emission norms do effected -- effectively require higher PGM loadings and the shift from diesel to gasoline is exacerbating attention for rhodium and palladium. We also observe that new supply sources can hardly keep up with the higher market demand and the recovery of automatic demand has pushed prices to newer highs.

For the same reasons, price volatility was extremely high in 2020, which has resulted in a remarkably high contribution from our trading activity. Finally, demand for gold and silver investment products has remained very high, probably during part of the crisis context, as these metals continue to be seen by investors as a safe haven.

I would also like to point out that metal prices are even higher today. And in certain cases much higher than the average prices of 2020.

In addition, certain hedges that were entered into before 2020, and which meant that we did not fully benefit from the price, while in 2020, had rolled off in the meanwhile. Metal prices constituted the largest factor behind the increase in revenues and earnings in Recycling in 2020.

We also performed well, volume wise, despite the operating constraints aimed at preventing the virus from entering or spreading in our sites. We had a higher availability of Hoboken smelter, which underwent a regular maintenance shutdown in 2020 compared with an extended shutdown in 2019.

The supply environment also continued to be favorable, with ample input of recycling materials, in particular, PGM bearings and it's catalysts. Finally, the Precious Metals Management business unit benefited from high price volatility and generated exceptionally high earnings.

At this point, I would like to hand over to Filip, who will cover the financials.

Yes. Thank you, Marc, and good morning to everyone.

So Marc has already provided you with the Group's key financials. This slide puts the adjusted operating earnings in a historic perspective.

Despite the challenging business context, and in particular, the downturn in the automotive sector in the first half of the year, managed to generate record adjusted earnings and margins due to its diversified and unique business portfolio. As has been the case in the past economic crisis, the Recycling business group and its metal price sensitivity once again demonstrated its countercyclical characteristics, with its stellar performance more than offsetting lower earnings in Catalysis and Energy & Surface Technologies.

The effect from higher metal and trading results in Recycling pushed group margins to a new record. When focusing on the second half performance, next to recycling, also Catalysis contributed to year-on-year growth and even exceeded pre-COVID margins on the back of cost savings and a strong volume recovery.

Operating cash flows, expressed here as adjusted EBITDA, reflect the same trends. When stripping out the €24 million year-on-year increase in depreciation charges, adjusted EBITDA increased 7% to reach a new high.

In our first half year release, we referred to the particularly pronounced operating leverage effects at play, then a negative factor in Catalysis and Energy & Surface Technologies and a positive driver in recycling. In the second half of the year, the leverage effect in Catalysis reversed and turned positive through a combination of business recovery and cost savings effects, including some initial benefits from the restructuring measures of the first half.

As Marc mentioned, these underlying earnings drivers are expected to persist going into 2021. By contrast, in Energy & Surface Technologies, the negative lever effect accelerated in the second half.

And finally, in Recycling, the margin tailwinds of the first half continued into the second half, increasing overall group margins. Reviewing Umicore's full P&L.

The 5% higher adjusted operating result translated into a 3% higher adjusted net group results. Continuing the trend of the first half, finance costs increased on a full year basis, mostly on the back of higher gross financial debt.

For example, the interest due on the €390 million U.S. private placement debt, payable as from September 2019, was now accounted for a full year.

Also, the financial charge related to the €500 million convertible bond, that we issued in June, and which consists of the discounted value of the implied conversion rights and the amortized transaction costs was newly accounted for. The adjusted tax rate was stable at 24.2%, resulting in flat adjusted tax charges year-on-year despite some substantial changes in the underlying regional result distribution.

The most significant impact on the full P&L comes from the €237 million adjustments to EBIT. This includes the €72 million of charges, already recognized in the first half, leaving €165 million for the second half, which is somewhat higher than the previous guidance of some €150 million.

This next slide provides some detail on these adjustments. While in the first half of the year, these charges were concentrated in Catalysis, the second half year items mostly relate to the Energy & Service Technologies and Recycling segments.

Most of these adjustments find their origin in Umicore's response to the COVID-19 crisis and the resulting changes in business context in some business units. Over half of the charges are restructuring-related, as we consolidate activities on fewer sites in the automotive catalyst and Cobalt & Specialty Materials business units.

Close to the full charge in Recycling, consists of a €50 million provision to establish a green zone neighboring the Hoboken plant, as already explained by Marc. A consultation with the city and the residents continues.

This past estimate may be updated going forward. In Energy & Surface Technologies, the bulk of the charges relate to the before mentioned restructuring in Cobalt & Specialty Materials, including a noncash value impairment, following the sale of part of the units rightsized permanent Cobalt inventory.

Of the total full year EBIT adjustment of €237 million, close to €150 million has a noncash nature and most of the remaining €90 million will be cashed out in future years. After accounting for tax effects, the impact of these adjustments on Umicore's net profit amounted to €192 million.

Now despite the challenging business context in 2020, Umicore's operating cash flows were the highest in years. Cash flow from operations before changes in the working capital were up 13% to €707 million, as is plotted on the top line on this top graph.

Cash working capital further increased in the second half, growing to €104 million over the full year, driven by higher metal prices and PGM prices in particular. Catalysis saw the highest increase in working capital, with an acceleration in the second half.

Working capital in Recycling also grew, but to a much lesser extent than in Catalysis. While Energy & Surface Technologies reduced its working capital needs.

The working capital trends for the current year will also depend, to a large extent, on the prevailing metal prices. Cash spent on CapEx and capitalized development costs amounted to €435 million compared to €588 million over the same period in 2019.

This reduction reflects the decision, following the COVID-19 outbreak to restrict spending on nonstrategic projects. As in 2019, Energy & Surface Technologies accounted for approximately 2/3 of CapEx, with rechargeable battery materials greenfield plant in Poland as a key project.

For 2021, we would currently guide for an increase in group CapEx from the 2020 level. Finally, these combined flows resulted in a positive net free operating cash flow of €168 million compared to a net cash out of €39 million in 2019.

As you can see from the chart on this next slide, this free operating cash flow was sufficient to fund the financial and tax cash outs as well as the interim dividend payout, resulting in a roughly stable net financial debt compared to the end of 2019. And this table, net financial debt corresponds to a solid leverage ratio of 1.8x adjusted EBITDA for the full group.

Now next to stabilizing the absolute level of net indebtedness, we took the opportunity in 2020, as you know, to further strengthen and diversify our sources of funding, amongst others, by securing 2 important new long-term funding instruments, an 8-year loan with the European Investment Bank of €125 million and a €500 million 5-year convertible bond. This concludes my section.

And I hand back over to you, Marc.

Thank you, Filip. Before opening the line to your questions, I would like to recap these messages of this morning's presentation.

I would love to rehash, all the COVID-19 outbreak has complicated our lives and affected the global economy. I'm simply happy that the precautionary measures which we have taken early enough have proven very effective at protecting the health of our employees at Umicore.

I'm proud that we have equally well managed to keep serving our customers and generated our best ever financial performance. And I expect an even better performance across businesses in 2021.

Proud also to have maintained the strategic course of action and successfully demonstrated the merits of our Horizon 2020 strategy. Everything is in place for the company to keep thriving.

And the Board and I felt this would be an auspicious moment to start preparing for my succession. And with this, I would like to open the floor to your questions.

And I hand over the call to our operator, Valeria.

It's on the CapEx plan. If Umicore is moving back to a more volume-centric strategy in China, is the greenfield expansion that was stopped in 2020, back on the menu?

And where are these incremental volumes primarily going to be coming from in the year 2021? Is there still spare capacity in Korea?

Or will it have to come from China? Can you hear me?

Sorry. We have a technical a problem you have to bear with us for a second.

Okay. Can you -- does it work now?

Can you hear me well?

Perfect, Marc.

Okay. Good.

Thank you. Sorry for the technical hiccup.

So let then restart because I don't know exactly how much of my answer you have already heard. So the strategy is not changing.

The fact is that we expect much better volumes in 2021 because of the fact that the models that we serve are showing very good traction now. From a regional distribution point of view, the volume growth is going to be spread across Europe, China and Korea.

Korea, to a more limited extent, because there, we have some, I would say, lower available capacity. We expect quite a bit of recovery in China in terms of demand for our products and in terms of sales.

But not to an extent where the capacity -- we will be able to utilize the full capacity in China. And finally, we see continued excellent traction in Europe.

And towards the end of the year, our new plant in Europe will also come on stream and start producing for the European market.

Just to clarify. Is the China greenfield now happening again?

Or is the expansion is still stopped?

Yes. First of all, can I congratulate Marc on 25 years of service at Umicore.

The business has certainly been transformed during this period. So I'd like to offer you my thanks for some great service.

I have one question in relation to the structural issues in the non-automotive area of cathode materials. This is sort of a quick 2-parter.

So firstly, on stationary applications, does NMC have a future in utilities now? And then on the portable electronics side, again, could you address whether LCO is a commoditized space now?

And so let me start with -- yes, as you have [Technical Difficulty].

Adam, can you hear me?

I can hear you now.

Have you heard Marc?

No.

Okay. We're still having technical problems.

So what I propose is that we take a break. We try to fix things here.

And we start the call up in 5 minutes. I think that's better than continuing to struggle.

Our apologies for that. Yes, I think we'll -- it's for us to fix things on our end.

So if we could maybe reconvene in 5 minutes, if that's okay with you?

Of course, yes. No problem.

Our apologies again. We'll try to fix things here.

[Technical Difficulty].

Hello.

Yes, Marc. we heard you well.

Okay. Can you -- I think now you can hear us.

We apologize for the inconvenience. We will restart the Q&A.

I believe Adam Collins was asking a question.

Okay. Marc, I don't know.

Did you hear the question originally? Would you like me to repeat it?

I did hear the question, Adam.

Just go ahead then, please.

Yes. And so first of all, I would like thank you for your kind words, which preceded your questions.

They go -- they went straight to my heart. Thank you.

So let me start with the LCO, which, indeed, as you pointed out, is a commoditizing product, commoditizing market. And we have clearly deemphasized LCO in our development programs as well as in our capacity allocation plans, as our focus clearly has moved to automotive applications where there is more room for differentiation than today in portable electronics.

In terms of the stationary applications. So for energy storage applications, the picture is still somewhat different.

NMC has a role to play there. It is one of the technologies which is being utilized, one of the mainstream technologies in ESS.

And we expect that it will continue to be the case. However, it's a project-driven business with the -- where the patterns can be somewhat erratic indeed.

So I wouldn't extrapolate too much from the fact that it was very low in 2020 compared to prior years. I think it's a business that will continue to have ups and downs.

And -- but it's, for us, a good business, a good application. And again, NMC has definitely a role to play there.

Okay. May I just clarify the first point about portable electronics?

So LCO is challenged. Do you have an NMC play into portable electronics?

Or is that also a market you're going to deemphasize because that's challenged, too?

It's NMCs for possible electronics or portable applications has a long time ago, been one of the outlets for Umicore products, but that's something that has been deemphasized already a longer a while ago because of the focus clearly shifting to automotive applications. And the developments in automotive require a lot of resources.

And we want to be sure that we have the right critical mass and the right focus.

Charlie, the -- it's a bit early in the year to tell about -- to talk about the margins in any business, because there is still quite the level of uncertainty regarding demand patterns. However, I would say that, again, if the trend going to caveat -- that if the pandemic does not cause new disruptions to the market, I would expect, indeed, the higher levels of margins which we achieved in the second half of last year to be more or less sustainable.

Why did we have such an improvement? First of all, because we have -- had operations -- successful operational excellence initiatives.

So you have cost improvements, which are definitely sustainable. And secondly, we have a very supportive mix effect, which, indeed, is today set to continue throughout 2021.

So I would say, again, with the caveat that I've mentioned about the uncertainty and the limited visibility that we have today, I would say that, more or less, yes, these margins are sustainable.

So that's a very comprehensive question covering many, many bases and many important aspects of the market evolution in battery materials. So first of all, I expect the continued strong traction in Europe.

There is little doubt about that, given the amazing assets that are being carried out by automotive makers to bring new electrified models to the market, the impact of the more stringent CO2 regulations, the change in consumer mindsets as well. So I expect very strong traction in Europe and strong growth.

And that's why I mentioned in my remarks that the -- our new capacity in Poland will actually come in timely to serve the growing needs of our customers in the region. You will also recall that we serve, to a certain extent, the European market through our facility in Korea.

So that will have to continue for a while. In terms of other market dynamics, I would say that I expect no change in 2021 in terms of pricing environment.

So pricing pressure continues to be very, very much present indeed. I expect no real change in terms of margin configuration.

I mean, give or take, a few basis points, which are somewhat difficult to predict ahead of time. But other than that.

I expect a certain continuation in terms of both pricing and margin context. And the real difference for us will come from the additional volumes.

Also, in terms of margin, you have to bear in mind that we're adding -- we continue to add significant fixed cost to our cost base as we continue to expand. I mean the construction of a new plant, the start-up of a new plant imply additional D&A charges, imply a significant start-up and qualification costs.

And we thought it would be useful to quantify those, and that's why we have mentioned the -- some €50 million of fixed costs to be taken into account. Now let me say a few words about the technology development or the technology evolution.

Actually, what we described a year or 2 years ago, already, is clearly materializing. There is a gradual trend to increase nickel content in the cathode chemistry.

Today, the vast majority of the market is what we call a mid-nickel chemistry market, but the higher nickel compositions are starting to take a greater proportion of the market. And this gradual evolution continues along the lines that we had anticipated a year or 2 ago.

LFP is gaining somewhat ground in China, clearly. You have seen that some of the best-selling models in China in the course of 2020 were low speed, low range, low-cost cars using LFP.

So I think that, as I mentioned a year ago, that -- or even more recently, that LFP will have a role to play. It's -- I see that as a niche chemistry in a way because of the intrinsic limitation it has in terms of weight, in terms of range, in terms of overall performance.

But clearly, for lower cost cars with low range requirements and low speed requirements, that's certainly a chemistry that can be considered. Now this being said, I'm sorry to offer a long answer to your question.

This being said, please bear in mind that today, the LFP chemistry is mostly using idle capacity, spare capacity which exists in China. So that may also distorts somewhat the cost or the price comparisons.

And if at certain point in time, new capacity would have to be built to produce LFP, this may have an impact on the price comparisons. And we remain convinced, I remain convinced that NMCs and higher nickel NMCs will continue to be the mainstream, whether it's NMCs or NCAs or NCMAs, I mean this family of technology will remain the mainstream because it offers a unique trade-off between cost, performance, range, safety and all the parameters which are important for the electric vehicles to be successful.

Yes. I would spend -- like to spend my question on rhodium, please.

You appear to have made some hedges on rhodium, while in the past, there has not been a paper market for that. Can you maybe elaborate on -- yes, who's the counterparty?

Was it just a financial party or someone who had some spare rhodium? And is there yet the establishment of a rhodium hedgeable market for you now going forward?

Can you maybe elaborate on that?

It's Filip. I'll take that question.

So unfortunately, we cannot go into too much of details. I think the important thing is that we felt we should say that we have indeed hedged a minor part, I have to emphasize the minor part of the rhodium exposure in 2022, 2023, through, I would say, forward contracts.

So this is with the individual parties indeed. I think the importance in a way is that you have counterparties that at today's record rhodium prices are willing to step into forward contracts for 2022 and 2023.

So a minor part of that exposure is hedged, you're right. We -- typically, in the past, we have not entered into hedges for rhodium.

But obviously, given the current pricing context, we felt that was appropriate. Again, emphasizing that is only a minor part of our expected exposure.

But on the details, unfortunately, we cannot provide you with more information.

Yes. This being said, I would add that we're talking about physical hedges, so it's not paper hedges.

There is still no paper market for hedging. So the counterparties and industrial user of the metal.

I wanted to better understand in terms of the guidance that you're providing in Energy & Surface Technologies, and especially the fact you're basically comfortable with consensus for next year, I'd like to understand if there is -- what sort of a cobalt -- what sort of assumptions around cobalt or nickel, you have made around that guidance as we have seen that it is -- it can be a pretty substantial part of -- or bring at least some benefits. And given where the prices are today, that would be helpful if that's something that you could clarify.

Jean-Baptiste, I would say we are using what we -- I'd say the best assumption that we can use is the current pricing in a way, which is -- should reflect everything that the market knows about possible developments on the supply and demand side. And so that's what we're using.

It's based on the current -- what we currently see in the market.

Okay. Can I just follow-up on whether -- just a quick one, a follow-up on the rechargeable battery materials.

In China, as you mentioned, continued pricing pressure. There are also a couple of data points that we're seeing pointing towards price increases.

However, it's a little bit unclear whether that's completely related to increase in raw materials or whether there is also an improvement in the underlying dollar margin. And I was just curious to see if this is something you're -- given development in volumes, et cetera, that you're benefiting from.

That's a good observation. And I can clarify that the price developments are related to the metal price content and not the underlying, I would say, what we call technology premium, which remain pretty much unchanged compared to 2020.

So it's more, I would say, related to the cost of the raw materials. So no benefit really for us or possibly for others because, typically, we pass that through to our customers.

Just a quick one around the timeline for the succession plan. Just some comments around how long that's likely to take and the way you're looking for candidates internally or externally.

Just some comments around that would be helpful. And just to follow-up on one of the questions from earlier.

How are you thinking about the greenfield capacity in China? Is that still planned?

Or -- and when do you plan to get to the previously announced target of 100 gigawatts of gigawatt hours of capacity. Just some thoughts around that would really helpful.

Mubasher, so on the timing of the succession is not yet known. Otherwise, we would have communicated about it.

And today, we have just started the process and the search for a successor. So it is difficult for me to estimate today how long it will take for the Board to appoint a successor and for the successor to be in place, really difficult to estimate, but we're not talking in days.

I would think we're talking in month, but how many months is absolutely difficult to estimate today. Will internal candidates be considered?

Yes, it is meant to be run as a dual-track process. And so yes, it will be open to internal candidates as well.

In terms of capacity, I'm not sure I got the full extent of your question. The -- in China, so our greenfield in China is going to be better utilized in 2021 than it was in 2020, clearly so.

However, it will not yet reach full capacity utilization. So the market in China is only starting to recover, has shown the first sign of recovering at the very end of 2020 and is still trailing a little bit compared to the levels of traction that we see in Europe, at least for the models that we do serve in that region.

So it will take a bit longer for us and it will take just beyond 2021 to reach a much more optimal capacity utilization in that greenfield site. Now on the overall gigawatt hours target, I would prefer to wait until we provide some more quantified guidance, typically at the end of April, to update the market on this specific aspect.

Best wishes to Marc. You did deliver better than what you said in 2015 for 2020.

So well done. Just a very simple question which is, what is Umicore's defense strategy?

So you've now announced that you want to step down. There is no 2020 -- beyond 2020 sort of midterm targets.

So if there is a takeover offer or there is a, let's say, hostile takeover offer, how do you defend yourself with -- in an interim CEO situation and no midterm targets?

Yes, thank you for the kind words. I would like to maybe clarify that I don't see myself as an interim CEO.

It may be a little bit of a weird situation of announcing a succession process without the successor being announced. But actually, it's our duty to make this announcement so early in the process.

It's, in my opinion, a legal obligation. If a company launches such a process, actually, we have a duty of informing the market.

It's a matter of sound governance. And plus, it is also the tradition of Umicore to communicate openly with its stakeholders on important decisions and important moments about the company.

This being said, I don't see myself as an interim CEO. We have a growth plan that is still in place.

And we have enough on our agenda in terms of growth investments, research programs, qualification programs. So Horizon 2020 has reached a milestone in terms of completion because 2020 is behind us, by definition.

However, the underlying content of Horizon 2020, which is the spectacular growth in clean mobility materials and in recycling, continues to be exactly what we're pursuing today. And in a way, the best of that is yet to come.

If you look at the electrification of the car industry, we're still at, let's say, 5%, 6%, 7%, 8% of penetration, which means that there is still more than 90% to go for the industry. So we know exactly what we have to do in the coming weeks, in the coming months, in the coming years.

Now of course, it would be best if we could also spell out how this translates into financial targets for the midterm, and you will have to bear with us a little while, a little longer in that respect.

And just a follow-up. There's been a lot of changes on your divisional level as well.

So I mean considering that, obviously, what your announcement like, should we worry at all? Or -- because, obviously, there's been changes on recycling.

You've shuffled your chairs around in terms of division heads as well. So your comment about internal and external search, how is that going to fit when a lot of the new leadership in divisions is also relatively new basically?

Yes. So I've just realized, Jaideep, before I go there, that I forgot to answer your question about defense.

So our defense has always been at Umicore to make sure that we are properly valued. And though our valuation reflects what we do, what our potential is of growth of profitability.

And I think this is in a way the best defense that a company -- or the first line of defense that the company needs to have is to be properly valued. So that means that, that implies for us having a compelling strategy, having a compelling execution of the strategy, and having a clear and open communication to the financial markets to support all of that.

Is there a risk -- more of a risk today for a hostile approach than in the past? Yes, difficult for me to gauge.

In a way we've had that question time and again and we've had that question also at times when the share price was much lower than where it is today. So difficult for me to offer a different or a better answer than the answer we have always given, which is we need to make sure we have the best strategy in place that we thrive, we deliver and that we are correctly valued.

Now in terms of management changes. No, there is nothing to be worried about in a way because the people around -- I mean, first of all, reshuffling of responsibilities is something we do once in a while or at regular intervals, whatever you call that.

And if you look at the people around the table, the average tenure is pretty long. And in Recycling and in Energy & Surface Technologies, we have Umicore executives now taking over with a very long and deep experience and knowledge of the business.

So there is absolutely nothing to be worried about. And bringing also some new talent and fresh talent to the management board as we have also recently announced is a good thing for the company.

I mean it's part of a constant rejuvenation process that a leadership team needs to go through. And I have to say that, at Umicore, over the past 20 years, without willing to sound presumptuous, we have managed to combine, I would say, energy rejuvenation with experience by bringing people early in their career to high levels of responsibility, which means that by the time they reach the age of 45 or 50, they have already accumulated a long leadership experience and a deep knowledge of our markets and our businesses.

So I'm not worried. And I'm actually quite proud about the manner in which I have shaped the management team, the leadership team at Umicore, and continue to do so.

And so no worry. We're all in good shape.

We know what we have to do. And we're all extremely engaged and passionate about what we do at Umicore.

Marc, can you give some color on what have you assumed in terms of volume growth in cathode business to offset some of the headwinds you mentioned? That would be the first question.

And second question was, there is a lot of use of at these announcements from OEMs that they're cutting production in Q1, which also semiconductor shortages. Similarly [indiscernible] of what you are seeing?

Or are you seeing an impact for that [indiscernible]. And a more related question to that could be, based on what your sort of shipment in the fourth quarter...

Chetan, I'm sorry, may I interrupt you? I got the first question, but then you may have moved away from the microphone, but it was not possible to understand the -- your second question.

Okay. Can you hear me well now?

Yes.

Yes. So second question was more on these recent announcements by auto OEMs that they are cutting productions because of semiconductor shortages.

So if anybody comment a bit on what you -- or do you see any impact from that yet in your volumes? And the related question would be, based on what you might have shipped in Q4 in the Catalysis business, do you believe there was a bit of restocking by OEMs ahead of the actual maybe production by them?

And can you quantify that at all?

So Chetan, on the volume assumptions in cathode materials, I don't want to be specific and offer a figure or a percentage at this point in time. I prefer just to stick to what we wrote, that it's going to be a substantial volume growth indeed.

But basically, yes, we are well positioned. The market is showing good signs of traction and so is other volumes for Umicore, indeed.

So -- but I prefer to not be more specific than that at this point in time. It's going to be substantial in a way to be able to offset some of the headwinds and additional costs that I have mentioned.

And that's why I thought -- that's another reason why we thought that it would be useful to quantify these additional costs so that you can also appreciate how much more volumes and -- we need to sell and how much more revenues we need to generate in order to grow the earnings. In terms of the semiconductor issues or shortages which are affecting the car build rates.

Yes, clearly, this is a factor in this first part of the year. Can I please ask everybody to go on mute because we have a lot of background noise.

Thank you. So there are some disruptions which are cutting some of the volumes, the car build rates of some of our customers.

But in a way, this is relatively marginal compared to the overall recovery which we see in the automotive industry and which took shape in the second part of last year, except in China, where it took shape in second quarter already of last year. And our volumes continue to be strong.

I mean we had very strong volumes in Q4. And so the two questions that you have raised about restocking and disruptions are a little bit related because, in a way, I don't think there has been a lot of restocking because the volumes continue to be strong for now.

And so it doesn't look like the Q4 trend was, I would say, an isolated event because of restocking. And the semiconductor disruptions are not causing a major disruption to us.

And we continue to see a significant growth in 2021 in that business.

Firstly, just one question on pricing in NMC. I'm just wondering if you could be a bit more specific as to how that effect is coming through?

Are you seeing broadly average price declines across your entire book of business? Or is it sort of really sort of explicitly related to some of your shorter-term contracts in China, or is it creeping into the long-term contracts, too?

And then my second question, if I may, is just on the rest of EST, excluding RBM. If you were to sort of lump CSM and the rest of it together, what kind of profit growth sort of are you expecting for next year?

So first of all, on the pricing, yes, clearly, the -- some of the shorter-term exposure, in particular, in China is indeed, yes, pinching. I mean it continues to have a -- to affect the overall mix of our margin.

So that's -- I don't see improvement in the short run in that respect because the overcapacity in China continues to be there, and it's probably likely to affect the market for another couple of years. So I don't see imminent improvement in that respect.

Next to that, clearly, the automotive industry is putting pressure on prices across the value chain as part of the drive to make -- to reduce the cost per kilowatt or and make electrified vehicles more affordable. So that's a long-term trend which doesn't come as a surprise, which was anticipated, and is indeed materializing in the, I would say, in the mid and long-term contracts.

And up to us, up to the industry to figure out through technology improvements, process improvements, et cetera how to mitigate those effects and make up for that margin-wise. But these are 2 trends that, indeed, are playing out in the cathode material space as in the rest of, I would say, the battery materials value chain.

And sorry, there was -- you had the second question, but I'm -- yes. Yes.

Okay. Yes.

Sorry. So the -- these units -- I mean some of these units had a hard time in 2020, CSM clearly, Electro-Optic Materials as well.

And so these units are set to do better in 2021, in line, I would say, with the overall market recovery, the overall economy.

Great. And just one quick follow-up, if I may.

Just going back to pricing. Do you see sort of technological advancements and a move to higher grade nickel materials and more sophisticated materials as a reasonable offset to price deflation over the medium term?

Well, first of all, there is always a move to a more sophisticated than higher grade materials, also in the mid-nickel chemistries. So as I've explained in the past, it's not because you increased the nickel that you move to a higher grade, you moved to higher nickel within each type of chemistry, you have higher grade and lower grade materials with more sophistication, more properties, et cetera, and there is a high degree of customization for each type of chemistry.

The -- sorry, one moment. Can you repeat the question?

Because...

Yes. Sorry, just wondering whether the sort of advancements to more sophisticated cathode materials will provide an offset to underlying price inflation over the medium term.

Yes. Sorry.

Yes. I had lost my train of thoughts.

It may, in some cases, but actually, the path that we pursue, which is most important in terms of margin or pricing. Margin improvement in a way, is continued process improvement on one side and scale effects.

Yes. Thank you, Valeria.

Yes. I suppose that there will be -- that there are more questions and that there will be more questions in the following hours and days.

And we'll be happy to follow-up with you and to take your questions offline or -- don't hesitate to reach out to our Investor Relations team as usual. Yes.

I apologize, again, for the technical hiccups which have probably prevented us from taking 1 or 2 more questions this morning. But we'll have a chance to reconnect in the next few days and continue the dialogue.

In the meantime, I would like to thank you for attending the call this morning. Wish you well for the rest of the day, the rest of the week, and talk to you soon.

Thank you, and bye, bye.