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Performance Materials

Economic performance

Revenues in Performance Materials were 3% lower year on year. Recurring EBIT was at the same level as 2012 with the benefits of the cost reduction measures that were introduced during the year counterbalancing the economic headwinds experienced in several business units. Capital expenditures were at similar levels to 2012 while R&D spending was down slightly.

Sales volumes and revenues in Building Products were flat year on year. Sales started particularly slowly in the first part of the year due mainly to the long and harsh winter in Umicore’s main European markets. Although there was some improvement in certain markets, activity levels in the European building industry remained subdued. Demand for zinc building materials in the newer markets outside Europe showed further growth. The share of surface-treated products in the mix grew further and construction of the new plant in Viviez, France, for surface-treated products neared completion. Measures to reduce costs and improve competitiveness were implemented through the business in late 2013.

In Electroplating, revenues were stable with higher sales volumes in all product categories compensating for pressure on premiums in some segments. Sales for decorative applications such as fashion jewellery were up and the market remained supportive throughout the year. Sales of electrolytes used in the manufacture of printed circuit boards were well above those of 2012 while sales of non-precious metals based products for wear protection applications also increased. Competitive price pressure was most evident in the market for less complex precious metals based compounds. Sales of Umicore’s silver plating solutions for LEDs continued to benefit from growing customer demand, particularly in Asia (see case study).

In Platinum Engineered Materials, revenues were flat while the business unit benefited from the cost reduction measures and production efficiency improvements. Demand for glass industry applications was at a similar level to 2012 with an uplift in revenues in the second half, particularly in the technical glass market. Revenues for performance catalysts remained at a high level, driven by a solid demand for platinum-based ammonia oxidation catalyst gauzes and getters used in the fertilizer and chemical intermediates industries.

In Technical Materials, revenues were up slightly year on year and the business unit benefited from cost reduction measures implemented during the year. Overall demand for brazing alloys remained subdued. This was primarily due to the recession in Europe and intensified competition from local players in China. Sales of contact and power technology materials were stable and there was little change to demand patterns from the electrical equipment industry. Order levels for sealing materials used in medium voltage applications as well as materials used in energy-efficient lighting picked up during the year. The business unit implemented a streamlining of its product offering in China towards the end of the year.

Zinc Chemicals’ revenues were at similar levels to the previous year. The availability of zinc containing residues remained low and, in combination with a lower zinc price, this led to lower recycling margins. Demand for fine zinc powders used in anti-corrosive paint was lower and the regional mix was less supportive to margins. Sales of materials for chemical applications were flat. In Europe, sales volumes for zinc oxide were down due to lower order levels from the tyre and chemical industries. This was partly compensated by higher sales for feed-grade materials and ceramics applications. Sales volumes of zinc powders used in primary batteries increased. The production facility in Australia was closed in December with production capacity in Malaysia being increased to cater for demand from customers in Asia Pacific.

In Element Six Abrasives (a 40% associate) sales volumes and revenues were lower year-on-year. In Hard Materials, challenging conditions persisted in the markets for mining and wear parts. Revenues for Oil & Gas were ahead of the previous year with the uplift being driven mainly by the introduction of new products while revenues for Advanced Materials improved in the second half as a result of a pick-up in sales of products used in precision machining. In 2013, Element Six Abrasives closed its Advanced Materials plant in South Africa and opened the world’s largest and most sophisticated synthetic diamond research and development facility - the Global Innovation Centre (GIC) at Harwell, near Oxford.