Elkem evaluating costs reductions, investment plans

Oslo – Elkem SA is evaluating reductions in its cost-base and reviewing its investment plans in response to reverses in its third quarter results.

The Norwegian silicon and silicone products supplier saw sales fall 30% year-on-year to NOK7.9 billion (€667 million) during the third quarter.

The company also reported a loss of NOK456 million for the three months to end of September, against a profit of NOK3 billion reported the year before.

Sales were down mainly due to lower sales prices and volumes, with silicones market remaining depressed due to low demand in all regions, Elkem reported 25 Oct.

Earnings for the silicones division went into negative territory at NOK268 million, against a positive development of NOK511 million reported for the quarter last year.

Sales at the silicones division fell 31% year-on-year to NOK3.2 billion, reflecting reduced volumes and a drop-off in demand across all regions.

Demand for speciality silicones in the EU and the US was impacted by “continued weak macroeconomic sentiment,” according to Elkem.

Demand in China for these products also declined, largely due to a downturn in construction and lower export sales.

Furthermore, noted Elkem, capacity additions in the Chinese market have resulted in oversupply, with prices in the country reaching a 10-year low in August.

Given the weak third quarter and proposed changes to Norway’s CO2 compensation scheme, Elkem said it is now evaluating its investments plans.

The Sinochem-owned manufacturer said it was introducing “a comprehensive programme” to counter current business conditions.

“A cost-reduction programme has been initiated across all of Elkem’s divisions to reduce fixed and variable costs,” stated the company.

In addition, said the Oslo-based company, “all investment plans will be carefully evaluated and adjusted to reflect the weaker market conditions.”

The target, it added, is to reduce costs and capital expenditures “significantly”.

However, Elkem said the plan would not affect an ongoing project to expand and upgrade its Xinghuo Silicones plant in China. (ERJ report)

“This investment is on-track, both with regards to cost and time, and is expected to be finalised during the first half of 2024,” the company emphasised.

The project will increase the plant’s annual production capacity by 50%, equivalent to 120,000 tonnes of siloxane, and enhance product quality for downstream specialisation.

The project is also expected to deliver “significant cost improvements”, mainly through lower energy and raw material consumption – matching the current lowest cost producers in China.