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1. Company Snapshot

1.a. Company Description

Elkem ASA manufactures and sells metals and materials in Norway, the United Kingdom, Germany, France, Italy, Poland, Spain, the Netherlands, and othe European countries.It operates through three segments: Silicones, Silicon Products, and Carbon Solutions.The Silicones segment produces and sells various silicone-based products across various sub-sectors, including release coatings, engineering elastomers, healthcare products, specialty fluids, emulsions, and resins.


The Silicon Products segment produces various grades of metallurgical silicon, ferrosilicon, foundry alloys, and micro silica for use in various end applications.The Carbon Solutions segment produces carbon electrode materials, lining materials, and specialty carbon products for metallurgical processes to produce various metals.Elkem ASA also engages in the generation and sale of hydroelectric power, as well as supplies heat in the form of steam and hot water.


The company was incorporated in 1904 and is headquartered in Oslo, Norway.Elkem ASA is a subsidiary of Bluestar Elkem International Co., Ltd.S.A.

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1.b. Last Insights on ELK

Elkem ASA's recent performance was driven by a proposed cash dividend of NOK 0.30 per share, indicating a commitment to returning value to shareholders. The company has also initiated a strategic review of its Silicones division, aiming to streamline operations and allocate capital to accelerate growth in other divisions. Additionally, Scope has put Elkem's BBB- issuer rating under review for a possible upgrade, reflecting the company's creditworthiness. The upcoming annual general meeting on April 30, 2025, will provide further insight into Elkem's strategy and direction.

1.c. Company Highlights

2. Elkem's Q3 Results: A Mixed Bag

Elkem's third-quarter financial performance was a mixed bag, with revenues coming in at NOK 7.5 billion, down 7% compared to the same quarter last year. The EBITDA margin for the group was 11%, below the long-term target of 15% to 20%. However, the company's EPS beat estimates, coming in at 0.135 compared to expectations of -0.02. The reported EBITDA was NOK 829 million, with the Specialty segment, including Foundry alloys and Microsilica, delivering improved results.

Publication Date: Oct -28

📋 Highlights
  • Q3 EBITDA Performance:: EBITDA reached NOK 829 million with an 11% group margin, below the long-term target of 15-20%.
  • Segment Results:: Silicones improved EBITDA YoY, while Carbon Solutions faced lower sales impacting operating income.
  • Financial Decline:: Operating income fell to NOK 7.5 billion (-7% YoY), with Silicon Products EBITDA at NOK 389 million (12% margin).
  • Strategic Review Progress:: Ongoing transaction process expected to conclude by Q2 2026, with plans to deleverage in early 2025.
  • Trade Barriers Impact:: EU safeguard assessments on silicon/ferrosilicon and U.S. countervailing duties pose risks, though Norway-based equal treatment ruling aids competitiveness.

Segmental Performance

The Silicon Products division reported an EBITDA margin of 12%, supported by good operating performance, while the Silicones division reported an EBITDA margin of 7%, driven by cost improvements and better sales volume. The Carbon Solutions segment continued to deliver good margins, but operating income and EBITDA were impacted by lower sales. As CEO Helge Aasen noted, "the Specialty segment delivered improved results," which was a positive highlight in an otherwise challenging quarter.

Market Outlook

Elkem's markets are expected to remain challenging, with the automotive sector being an important driver of demand, particularly in China. However, the company is uncertain about the outcome of the EU's safeguard measures for ferrosilicon and ferroalloys. The company's strong cost and market positions in Silicon Products and Carbon Solutions are expected to help it navigate these challenges.

Valuation

Elkem's valuation metrics suggest that the company is trading at a discount to its peers, with a P/E Ratio of -36.41 and a P/B Ratio of 0.68. The EV/EBITDA ratio is 5.97, which suggests that the company's enterprise value is reasonable compared to its EBITDA. Analysts estimate next year's revenue growth at 8.0%, which could help drive the stock higher.

Debt and Cash Flow

Elkem's financing position is well managed, but the interest-bearing debt has increased, and the current leverage is above the target level of 1-2x EBITDA. The company plans to deleverage during the first half of next year and has a plan to preserve cash flow despite market weaknesses. The Free Cash Flow Yield is -7.24%, which suggests that the company's cash flow generation is a concern.

3. NewsRoom

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Elkem introduces new biocompatible, electro conductive SILBIONE™ Liquid Silicone Rubber for advanced healthcare devices

Oct -23

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Elkem: Third quarter 2025 - Results supported by strong operational performance and cost improvements

Oct -23

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Elkem (OB:ELK): Evaluating Valuation Following Recent Share Price Momentum

Oct -06

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Elkem ASA - Elkem enters exclusive sales process for Silicones division

Sep -18

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Norwegian Ministry of Climate and Environment concludes in favour of Elkem in EU ETS free emission allowances allocation complaint

Jul -09

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Elkem ASA - Ex dividend NOK 0.30 today

May -02

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Elkem ASA (STU:1DP) Q1 2025 Earnings Call Highlights: Resilience Amid Market Challenges

May -01

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Elkem ASA - Minutes from the annual general meeting 2025

Apr -30

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.37%)

6. Segments

Silicon Products

Expected Growth: 8%

Elkem ASA's Silicon Products segment growth is driven by increasing demand for solar panels and electric vehicles, which rely on silicon-based materials. Additionally, the growing need for energy-efficient solutions and renewable energy sources contributes to the segment's growth. Furthermore, Elkem's strategic expansion into the Chinese market and investments in production capacity also support the segment's 8% growth.

Silicones

Expected Growth: 7%

Elkem ASA's Silicones segment growth is driven by increasing demand for sustainable and eco-friendly products, growth in the renewable energy sector, and rising adoption in the automotive and construction industries. Additionally, the company's strategic expansion into new markets and investments in R&D have contributed to its 7% growth.

Carbon Solutions

Expected Growth: 6%

Elkem ASA's Carbon Solutions segment growth is driven by increasing demand for sustainable materials, government incentives for carbon reduction, and growing adoption of electric vehicles. Additionally, Elkem's expansion into new markets, investments in R&D, and strategic partnerships contribute to its 6% growth rate.

Other

Expected Growth: 5%

Elkem ASA's 'Other' segment growth is driven by increasing demand for specialized foundry products, growth in the global silicones market, and expansion into new markets. Additionally, the company's focus on sustainability and energy efficiency, as well as its strategic partnerships and acquisitions, contribute to its growth.

7. Detailed Products

Silicones

Elkem's silicones are used in a wide range of applications, including construction, electronics, and personal care. They offer a variety of silicone products, including silicone fluids, emulsions, and resins.

Silicon Metals

Elkem's silicon metals are used in the production of aluminum, steel, and other metals. They offer a range of silicon metal products, including silicon metal alloys and silicon metal powder.

Foundry Products

Elkem's foundry products are used in the production of iron and steel castings. They offer a range of foundry products, including ferrosilicon, silicon metal, and inoculants.

Microsilica

Elkem's microsilica is a by-product of silicon metal production and is used as a supplementary cementitious material in concrete.

Carbon Products

Elkem's carbon products are used in the production of aluminum, steel, and other metals. They offer a range of carbon products, including electrodes, cathodes, and recarburizers.

8. Elkem ASA's Porter Forces

Forces Ranking

Threat Of Substitutes

Elkem ASA operates in the silicones and specialty materials industry, which has a moderate threat of substitutes. While there are some substitutes available, they are not perfect and have their own limitations.

Bargaining Power Of Customers

Elkem ASA has a diverse customer base, and no single customer accounts for a significant portion of its revenue. This reduces the bargaining power of customers.

Bargaining Power Of Suppliers

Elkem ASA relies on a few key suppliers for raw materials, which gives them some bargaining power. However, the company's size and scale of operations also give it some negotiating power.

Threat Of New Entrants

The silicones and specialty materials industry has high barriers to entry, including significant capital requirements and regulatory hurdles. This makes it difficult for new entrants to join the market.

Intensity Of Rivalry

The silicones and specialty materials industry is highly competitive, with several established players competing for market share. Elkem ASA faces intense competition from companies like Dow, Wacker Chemie, and Shin-Etsu.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 39.25%
Debt Cost 11.18%
Equity Weight 60.75%
Equity Cost 11.18%
WACC 11.18%
Leverage 64.60%

11. Quality Control: Elkem ASA passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Elkem

A-Score: 5.0/10

Value: 8.8

Growth: 2.6

Quality: 3.2

Yield: 5.6

Momentum: 7.5

Volatility: 2.7

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Victrex

A-Score: 4.7/10

Value: 6.1

Growth: 1.9

Quality: 6.4

Yield: 8.1

Momentum: 1.5

Volatility: 4.3

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Elementis

A-Score: 4.0/10

Value: 5.1

Growth: 1.7

Quality: 3.8

Yield: 1.2

Momentum: 6.5

Volatility: 5.7

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Essentra

A-Score: 3.5/10

Value: 4.0

Growth: 1.3

Quality: 3.6

Yield: 6.2

Momentum: 1.0

Volatility: 5.0

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Zotefoams

A-Score: 3.5/10

Value: 3.7

Growth: 5.4

Quality: 3.8

Yield: 3.1

Momentum: 4.0

Volatility: 1.0

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LANXESS

A-Score: 3.1/10

Value: 8.3

Growth: 1.4

Quality: 1.9

Yield: 2.5

Momentum: 1.5

Volatility: 2.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

27.92$

Current Price

27.92$

Potential

-0.00%

Expected Cash-Flows