Chairman & CEO review


Mathias Miedreich, Thomas Leysen and former CEO Marc Grynberg at Umicore's site in Hoboken, Belgium

As we reflect on yet another year that was challenging for so many, we see the mark of Umicore’s resilience, and the agility, creativity and commitment of Umicore colleagues globally, by posting impressive results.

In the first half of 2021, Umicore benefited from a sharp recovery of demand for its clean mobility materials from the automotive industry after the severe downturn caused by the COVID-19 pandemic in 2020, as well as a strong boost from record precious metal prices. Despite the disruption in global car production in the second half of the year as a result of the semiconductor shortage, Umicore posted record revenues and earnings for the full year. This achievement reflects strong underlying growth and operational performance across business groups.

Revenues increased by more than 20% in 2021, while profitability nearly doubled. Excluding the year-on-year precious metal price effect, our 2021 operating profit increased byabout 160 million compared to 2020, 30% growth achieved through operational business performance and volume growth. This meant that margins increased substantially for our three Business Groups.

Revenues in Catalysis strongly outperformed the car market as a result of market share gains in the European and Chinese light-duty gasoline markets, a favorable platform mix and strong demand for Umicore’s heavy-duty diesel and fuel cell catalysts. Revenues in Energy & Surface Technologies increased, reflecting higher sales volumes of cathode materials for EVs in Rechargeable Battery Materials, an exceptionally strong demand in Cobalt & Specialty Materials and in Metal Deposition Solutions. Recycling posted record revenues and earnings, significantly above the previous record levels of 2020, driven by robust operational performance in the various business units, strong contribution from the trading activities and peaking precious metals prices.

Our operations generated cashflows of over 1.4 billion, up from 603 million in 2020. Our free cash flow from operations grew to close to €1 billion. This allowed us to reduce our net debt and our gearing ratio. Our balance sheet is strong with net financial debt of 960 million, down from around 1.4 billion at the end of 2020, corresponding to a 0.77 net debt/LTM adj. EBITDA ratio.

Strategic growth projects continued in 2021 and Energy & Surface Technologies accounted for close to 60 % of Group capital expenditures, driven by Rechargeable Battery Materials’ European expansion investments.

In December, Umicore and Volkswagen AG announced their intention to create a joint venture for the production of precursor and cathode materials in Europe to supply Volkswagen AG’s European battery cell production. This partnership will further diversify Umicore’s customer base and will support VW in their ambitious electrification strategy. The JV will be a contributor to the ambitions of the European Green Deal, including the establishment of a European sustainable battery supply chain.

The launch of our Let’s Go For Zero strategy (Zero GHG emissions, Zero Harm, Zero Inequality) in the course of 2021 was an important milestone in our long sustainability journey. We unveiled our new ambitions and announced explicit targets for 2030 and beyond. Since then, we have implemented a new ESG governance organization that will allow us to steer the progress in achieving our ESG targets. This year’s integrated annual report structure and contents are designed to provide additional visibility and clarity on the impact and value Umicore contributes to society.

In terms of climate action, Umicore has set a target for Net Zero scope 1+2 GHG emissions by 2035, with intermediate milestones of a 20% reduction by 2025 and a 50% reduction by 2030. Umicore also committed to setting a scope 3 target in 2022. In 2021, Umicore concluded a long-term power purchase agreement to supply our greenfield plant in Nysa, Poland with renewable electricity – making it the first cathode materials production plant in Europe to be carbon neutral as of start of production. Since April 2021, Umicore has been supporting the Task Force on Climate-Related Financial disclosure (TCFD) and since then, we have defined key milestones for our TCFD implementation and conducted a qualitative scenario analysis. Umicore committed to the Science Based Targets initiative (SBTi) in October 2021.

The wellbeing and safety of our people is the focus of the Zero Harm ambition we announced. In light of the ongoing COVID-19 pandemic, strict health and safety precautionary measures remained implemented at all Umicore sites in 2021. Unfortunately, our 2021 safety performance was disappointing with 73 lost time accidents compared to 49 in 2020. Over the course of the year, Umicore continued with the roll-out of programs aimed at creating a more prominent safety culture with a focus on growing the safety mindset and lowering the risk tolerance level. We are also further reinforcing processes and safety standards, in particular in those business units and sites where the safety performance was unsatisfactory. Umicore is committed to ensuring the highest level of occupational safety in all its facilities.

Our Zero Harm ambition is also linked to our continued commitment to sustainably and ethically sourced raw materials. Beyond our long-standing approach to ethical cobalt sourcing, and in light of the accelerating transition to electromobility, it is crucial to secure reliable supply of raw materials that is also environmentally and socially responsible. We signed long-term sustainable lithium supply agreements in October 2021. Umicore maintained its Platinum EcoVadis rating in 2021, placing us among the top 1% of our industry peers in the EcoVadis global network of over 65,000 rated companies. The growing added value of our sustainable business is demonstrated by over 54% of secondary and end-of-life materials in our input mix. Future sourcing for catalysts, fuel cells and batteries alike will only be possible by sustainably closing the loop and recovering the scarce metals used in these products when they reach end of life.

Finally, minimizing environmental impact is also an important part of our Zero Harm ambition. Umicore committed to minimizing all emissions with a target of -25% diffuse emissions by 2025. As a result, we accelerated investments in the Hoboken plant: taking additional actions to further reduce diffuse emissions and to create a green zone to increase the distance between the residential area and our operations. Umicore also committed to defining a target on water use in 2022.

The Zero Inequality ambition we announced confirms our firm belief that diversity of thought leads to more innovation. We will further promote diversity and inclusion, by seeking broader cultural representation in management teams and increasing the number of women in management. Umicore has set a target of gender parity in management with an intermediate milestone of at least 35% women in management by 2030. In 2021, the number of Umicore employees in the fully consolidated companies rose to 11,050 from 10,859 in 2020. The most significant increase relates to the further development of the cathode materials production site in Poland. In 2021, the share of women recruited into management positions increased to 45%, up from 30% in 2020.

Technology and innovation remain central to our strategy, and consequently R&D expenditure has been increased by 10% vs. 2020 to 245 million. This increase is related to new product and process technologies for next generation Lithium Ion Battery Materials, Solid State Batteries and Fuel Cell Catalysts, increased effort on Battery Recycling and advanced technology development related to decarbonization and emission reduction programs to meet our ambitious sustainability targets. Umicore also increased efforts in corporate mid- to long-term technology development and open innovation collaboration programs. The R&D spend represented 6% of Umicore’s 2021 revenues and capitalized development costs accounted for 28 million of the total.

We are proud of our performance and results in 2021 and again expect a strong underlying performance in 2022 across all Business Groups, despite cost inflation and provided that geopolitical developments, the pandemic or supply-chain constraints do not result in additional material disruptions to the economy or to Umicore’s operations.

At the time of writing this, a bitter war is raging in Ukraine. Together with Umicore colleagues, we are engaging in humanitarian support initiatives in response to the human tragedy unfolding in Europe. It is too early to assess the medium and long term impacts on Umicore's business. It is clear, however, that Umicore's products and services will be needed more than ever.

On June 22, 2022 we will host a Capital Markets Day to set out Umicore’s strategic roadmap, with mid- to long-term considerations for our businesses, that build on our leadership positions in clean mobility materials, in recycling, and in sustainability.

As we close this review, we would again like to express our thanks to all our stakeholders for their contribution to our record-breaking performance in 2021, most especially to the Umicore colleagues. A special word of thanks goes to Marc Grynberg, who led Umicore as CEO for almost 13 years and brought the company to its present level of success. It is his legacy on which we will further build. We are looking forward to further progress in 2022 and we firmly believe that Umicore is in a strong position to creating value for all our stakeholders.

Finally, we are closely monitoring the crisis in Ukraine. Umicore strongly condemns all acts of war and violence. Together with Umicore colleagues, we are engaging in humanitarian support initiatives in response to the human tragedy unfolding in Europe.