Umicore shutters catalyst operations outside Asia

New York — European special chemicals and recycling company Umicore Thursday said it is suspending most of its autocatalyst production outside Asia after its operations were hit by the coronavirus pandemic.

The auto sector has been one of the hardest hit industries as coronavirus tears it way across the globe, closing down whole swathes of the economy in its wake.

Carmakers throughout Europe and the US recently shuttered car production because of the pandemic, slashing demand for steel and aluminum as well as the autocatalysts Umicore produces. Many of the stoppages now appear long term due to government-imposed lockdowns, and carmakers are responding to a new call -- government demands to switch to manufacturing ventilators and masks for hospital use.

"While Umicore's activities were off to a strong start this year, the virus outbreak caused a serious slowdown in Umicore's automotive catalyst and battery materials activities in Asia at the time of the Lunar New Year holidays and in the following weeks. Demand and production levels for both automotive catalysts and battery materials in Asia are now gradually picking up," the company said in a statement.

China is widely believed to have now stopped the virus, for now, in its tracks by extensive and evasive lockdown measures. Yet as China's cases slow, rest of world is in the midst of turmoil.

"As the contagion of the virus spread to the rest of the world, the automotive industry has been forced to shut down most of its assembly lines outside Asia, in many cases for an undefined period of time. Until automotive OEMs restart production again, Umicore is temporarily shutting down most of its catalyst production capacity outside Asia and is resorting to temporary unemployment where applicable. Umicore has adjusted the inflow of raw materials accordingly and is reducing other costs," it added.

Umicore has invested massively in the energy transition and electric vehicles as well as producing catalysts for conventional engines.

In response to the changed business context, Umicore is also delaying certain capital expenditure programs.

"The pandemic is causing unprecedented challenges to all of us and my first thoughts go out to the people who are hardest hit in these difficult times. This crisis in no way changes the need for the world to move towards a more sustainable development path. Umicore's technological capabilities in this respect are more relevant than ever, and we remain confident that, when this crisis will eventually be overcome, the company will resume its superior growth trajectory," CEO Marc Grynberg said:

In the face of the pandemic investors have been reshuffling portfolios, seeking out those with strong balance sheets.

Umicore has what it described as "ample" reserves, with Eur1 billion ($1.08 billion) of immediate cash availability, of which around half is cash on balance sheet and the other half corresponds to the unused portion of its committed syndicated loans.

In addition, Umicore has over Eur500 million of unused, uncommitted credit lines with its core relationship banks, it said.

"Next to significant liquidity, Umicore has a well-balanced debt structure with no material maturities prior to 2023 and has ample headroom compared to its credit covenants. In recent years it secured Eur1.1 billion of medium- and long-term, fixed-rate private placement debt with a phased maturity profile between 2023 and 2031. Its two syndicated loan facilities from a total of twelve banks expire in 2022 and 2025," it added.

Still, the company withdrew previous 2020 guidance in the wake of the coronavirus pandemic as well as well as halving its dividend to 37.5 euro cent a share.

"It is impossible at present to predict [the full] impact [of the virus] on the automotive market and Umicore's activities," the statement added.

Umicore's share price was 8.5% lower at 0900 GMT, spot bid at around Eur31.