CEO & Chair Review
2022 was a challenging year for the world. We were beginning to recover slowly from the COVID-19 pandemic when the war in Ukraine broke out, resulting in a new humanitarian crisis, exposing the fragile interdependencies of our economies and inflaming geopolitical tensions. The devastating effects of climate change also became more pronounced, affecting nature and human lives in every part of the world.
Umicore demonstrated good resilience in its 2022 financial performance and at the same time, we articulated an ambitious growth strategy for the years ahead — Umicore 2030 RISE. Our role in supporting the pressing need for a more circular economy and mobility transformation from combustion engine cars to electric vehicles worldwide has come clearly to the fore.
In terms of financial results, the Group’s intrinsically robust foundations, our agility and delivery on operational excellence, meant we could again deliver a strong performance in 2022. Adjusted EBITDA was the second highest in our history at € 1.2 billion, slightly below our record in 2021 due, on the one hand, to the cost inflation environment and slightly less favorable precious metal prices and, on the other, our increased spending on innovation and growth preparation, in line with the implementation of our 2030 RISE Strategy. Operational free cash flow remained healthy at € 344 million. Net financial debt stood at € 1.2 billion giving a leverage ratio of 0.96x LTM adjusted EBITDA. Return on capital employed for the Group amounted to a high of 19.2%.
Our Catalysis Business Group reached record levels in revenues and earnings. Operational excellence and the ability to pass through cost inflation led to a record adjusted EBITDA of € 419 million with a margin of 23.6%. The Automotive Catalysts Business Unit confirmed its leadership position, outperforming the global car market and winning market share thanks to its favorable platform and customer mix in light-duty applications.
Revenues and earnings in the Energy & Surface Technologies Business Group grew substantially, with adjusted EBITDA at € 290 million. Cobalt & Specialty Materials benefited from exceptionally strong demand and supportive cobalt and nickel prices in the first half of the year, which returned to normal in the second half. While the Rechargeable Battery Materials Business Unit was favorably exposed to higher lithium prices, sales volumes of cathode active materials remained subdued, in line with our previously announced expectations.
The Recycling Business Group again delivered an excellent performance with revenues similar to 2021. The adjusted EBITDA of € 532 million was lower in 2021 due to cost inflation and less favorable precious metal price levels compared with 2021. The Precious Metals Refining Business Unit benefited from solid volumes and an overall supportive supply environment. Higher revenues in the Jewelry & Industrial Metals Business Unit offset a slightly lower contribution from the trading activity in Precious Metals Management.
The year was eventful with multiple announcements supporting our ambitious, growth plan strategy for the coming years. In June, Umicore unveiled its 2030 RISE Strategy, which builds on our strong foundations, unique portfolio and our early identification of today’s intensifying global megatrends: the mobility transformation; the growing need for advanced materials; and the circularity for critical metals. Our 2030 RISE Strategy is our roadmap to grow, scale and speed up our unique value proposition to our customers and all our stakeholders, to more than double our revenues by the end of the decade at adjusted EBITDA margins exceeding 20%.
For Umicore, 2022 was a year of defining "firsts”
We made significant progress on the customer side in closing secure, value-creative contracts in our battery materials where we are unlocking new ways of establishing strategic partnerships. Among the most prominent examples of customer agreements supporting the electric vehicle industry, is the creation of Europe’s first battery materials joint venture with Volkswagen’s battery company PowerCo. This partnership is a recognition of our product technology and process expertise and a benchmark for future agreements. We inaugurated Europe’s first “Gigafactory” for battery materials in Nysa, Poland, which from the start of production runs on renewable electricity only. And with this, we became the first company in Europe to have rolled out a complete battery materials supply chain – from the intake of battery metals to their refining, their conversion into precursors and ultimately ultra-pure cathode active materials.
Together with Prime Minister Justin Trudeau, we announced our plans to build Canada’s first Gigafactory for precursor and cathode active materials, filling the missing link in the country’s battery value chain from natural resources to electric mobility.
2030 RISE strategy
The four pillars of our 2030 RISE Strategy are based on the acronym that RISE represents and our vision of what Umicore stands for.
“R” for Reliable transformation partner: We listen to the voice of our customers and focus on solving their issues. Our automotive customers for example can rely on our 50-plus years’ automotive experience, starting in catalysis for combustion engines through to the last 20 years in rechargeable battery materials for electric vehicles (EVs) and fuel cell catalysis
“I” represents Umicore’s Innovation and technology power, which is at the heart of what we do. Umicore’s future success is closely linked to our technological edge and leadership in all of our activities. In our Rechargeable Battery Materials business, our researchers are diligently working on new technologies to further improve battery performance and thereby electric cars. Umicore recently announced the industrialization of manganese-rich HLM batteries, which will complement our broad portfolio of NMC battery materials for high-performance, long-range EVs. In our new global R&D center in Korea, we’re working on next-generation technologies for solid-state batteries. The upcoming global, stringent emission standards (EU7/CN7/US27), continue to drive the need for innovative catalyst technologies for light and heavy-duty internal combustion engine (ICE) applications. Our cutting-edge innovations for light-duty gasoline applications help our customers meet the most stringent emission standards while balancing cost and performance with the optimized usage of platinum (Pt), palladium (Pd), and rhodium (Rh).
The “S” stands for Umicore as a Sustainability champion. Umicore lives this purpose and contributes to the planet through its embedded Let’s Go for Zero ambitions. We are helping in decarbonizing electromobility with our local-for-local supply chains. This includes using 100% renewable energy with each new investment as well as increasing the share of renewable energy in our existing operations through long-term Power Purchase Agreements. In 2022, we reduced our Scope 1+2 GHG emissions by 13% compared to our 2019 baseline and increased the share of renewable electricity to 35%, up from 17% in 2021. We also announced our ambitious Scope 3 target to reduce the carbon intensity of purchased materials by 42% by 2030 (vs. our 2019 baseline). In addition, the Science Based Target initiative (SBTi) validated our 2030 GHG reduction targets as science-based and aligned with the Paris Agreement.
However, in terms of safety, our lost time accidents were below expectations in 2022 and we will need to step up to achieve our ambition on zero injuries. We continue to support the principles of the UN Global Compact and we report our progress, including our progress related to the impact on the Sustainable Development Goals in this integrated annual report.
“E” as the final letter of the RISE acronym is about Excellence.Whether it’s excelling in operations, in quality, in talent, in ESG or in innovation, we want to excel in all aspects of our business to deliver on our strategic roadmap and on our promises to our customers. We are convinced that the Umicore team has what it takes to deliver.
In 2023 we will have to continue to face some headwinds in terms of inflation and lower precious metals prices. At the same time, we will be focused on the delivery of the RISE 2030 strategy and expect to deliver a number of important milestones.
In closing, we would like to thank our customers and business partners for their continued support and all our talented and extremely hard-working colleagues for their continued commitment. We look forward to continuing our journey together.