Elkem Q2 2025 slides: Cost management stabilizes results amid persistent market weakness

Introduction & Market Context

Elkem ASA (OB:OL:ELK) presented its second quarter 2025 results on July 11, revealing how the company has maintained relatively stable financial performance despite continued challenging market conditions across most of its business segments. The Norwegian silicon-based materials producer reported an EBITDA margin of 10% for the group including Silicones, as weak demand and price pressure in key markets persisted.

The company’s stock closed at 24.64 NOK on July 10, down 2.07% ahead of the results presentation, reflecting ongoing investor concerns about market conditions. This follows a 3.35% drop after Q1 results were announced earlier this year, indicating continued pressure on the company’s valuation.

CEO Helge Aasen emphasized the company’s resilience: "Elkem continues to face weak market conditions, but its strong cost position and solid operational performance ensure stable financial results."

Quarterly Performance Highlights

For Q2 2025, Elkem reported total operating income of MNOK 7,982 including the Silicones division (which is now classified as discontinued operations), with an EBITDA of MNOK 803 and an EBITDA margin of 10%. For continuing operations alone, the company posted operating income of MNOK 4,325, EBITDA of MNOK 547, and a higher EBITDA margin of 13%.

The company’s financial results show the impact of challenging market conditions, with EBITDA down 22% compared to Q2 2024, primarily due to lower sales prices in the Silicon Products division.

As shown in the following financial overview, Elkem’s performance has been significantly impacted by price pressure despite maintaining strong operational efficiency:

The earnings per share (EPS) for Q2 2025 came in at NOK -0.49, deteriorating from the NOK -0.33 reported in Q1 2025. This negative result was primarily attributed to challenges in the Silicones division, which is currently under strategic review.

Despite these challenges, Elkem maintained a robust equity position with an equity ratio of 50% as of June 30, 2025, and a leverage ratio of 2.8x based on the last twelve months’ EBITDA of BNOK 4.1.

Segment Analysis

Elkem’s three business segments showed varying performance in Q2 2025, with Silicones showing improvement while Silicon Products and Carbon Solutions faced significant headwinds.

The Silicon Products division was heavily impacted by weak commodity markets, reporting total operating income of MNOK 3,550, down 13% from Q2 2024. EBITDA fell sharply by 54% to MNOK 345, primarily due to lower sales prices. The division continues to face challenging market conditions with silicon prices in the EU reduced by around 20% at the end of June, while Chinese silicon prices continued to drop due to overcapacity.

The following chart illustrates the financial performance of the Silicon Products division:

Carbon Solutions delivered relatively stable results despite challenging markets, with total operating income of MNOK 854, down 15% year-over-year. EBITDA decreased by 27% to MNOK 242. The division’s performance was affected by both lower sales volumes and prices, reflecting the 2% decrease in global steel production during Q2 2025.

In contrast, the Silicones division showed significant improvement, with total operating income of MNOK 3,876, up 3% from Q2 2024. EBITDA improved substantially from the same period last year, reaching MNOK 247. Sales volume increased by 22% compared to Q2 2024, demonstrating operational improvements despite continued price pressure in commodity silicones markets.

Strategic Initiatives

Elkem highlighted several strategic initiatives aimed at strengthening its long-term competitive position. A key development was securing a new long-term power contract for 300 GWh/yr in Norway’s NO4 price area, supporting the company’s plant in Salten from 2028 to 2037. Additionally, Elkem signed contracts for 610 GWh/yr in price areas NO3 and NO4, ensuring stable and competitive energy costs for its Norwegian operations.

The company’s energy hedging strategy is illustrated in the following chart:

Elkem also emphasized its strong ESG performance, maintaining top ratings from EcoVadis (Platinum) and CDP, and being included in CDP’s Supplier Engagement Assessment A-list. The company received NOK 33 million from Innovation Norway for green products and reaffirmed its sustainability targets, including a 25% reduction in CO2 emissions by 2030 and net zero CO2 emissions by 2050.

A strategic review of Elkem’s business portfolio is currently underway, with a target to conclude before year-end. This review, which was first mentioned during the Q1 2025 results, is particularly focused on the Silicones division, which has been classified as discontinued operations.

Outlook & Forward-Looking Statements

Looking ahead to Q3 2025, Elkem expects market conditions to remain subdued across its business segments. Silicon Products will continue to face challenging markets, while Carbon Solutions is expected to benefit from good cost positions. Silicones markets are anticipated to remain stable at low levels.

The company identified strategic opportunities in sustainable global infrastructure, industrial AI, and advanced defense technologies. Norway’s investment of NOK 1 billion in six national AI centers and NATO allies’ commitment to increase defense spending to 5% of GDP could create new opportunities for Elkem as a supplier of critical materials.

In summarizing the key takeaways from the presentation, Elkem emphasized its strong cost and market positions despite ongoing market uncertainty and geopolitical volatility:

Elkem’s focus on cash generation and disciplined capital spending remains central to its strategy, with cash flow from operations at MNOK 308 in Q2 2025 and investments (excluding M&A) of MNOK 464. The company’s ability to maintain relatively stable financial results despite significant market headwinds demonstrates its operational resilience, though continued price pressure and weak demand present ongoing challenges for the remainder of 2025.

Full presentation:

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