Letter from the CEO

Elkem continued to benefit from exceptionally strong markets in 2022. However, the all-time high results were also largely a result of strong cost and market positions, built-up over time through continuous improvement and strategic choices. We have secured access to low-cost and sustainable input factors and been able to maintain and deliver high productivity and quality, despite supply chain challenges and trade restrictions.

Our record results and current solid balance sheet will enable an attractive dividend to shareholders and secure continued investments in growth, driven by global megatrends like the green transition and digitalisation.

Good operational performance

I am impressed by how our entire global team in Elkem has delivered excellent operational performance throughout a challenging year. The restrictions related to the coronavirus pandemic (Covid-19) continued but were eased significantly in most countries during the year.

Russia’s invasion of Ukraine has significantly influenced market dynamics, primarily through the impact on energy prices. At the outbreak, Elkem did not have any manufacturing or own employees in Ukraine or Russia and these countries accounted for a very limited part of our revenue. We continuously monitor and comply with all sanctions on Russia relevant to our operations.

At the end of the year, we decided to partially curtail production at two plants in Norway due to high power prices. This enabled us to optimise value creation and contribute to increased flexibility in a tight power market for households and businesses in Norway.

Focus on safety improvement

Regrettably, we have had two high-severity incidents involving contractors during the year, and in general experienced a setback during the pandemic with a high number of low-severity incidents both in 2021 and 2022.

A new and reinforced system for Health, Safety and the Environment (HSE) improvement is now being rolled out globally in Elkem in order to reverse the trend.

Prepared for the future

In the near term, we expect a slowdown in global economic activity and that market prices will come down to more normal levels. However, there is significant uncertainty on how macroeconomic development and inflationary pressure will impact demand, and continued volatility in our markets is likely.

In the longer term, global megatrends remain strong, and the critical raw materials are increasingly important in building a sustainable future. Strong growth in Asia combined with reindustrialisation in the western part of the world will create opportunities for Elkem. In the green transition, we have a particular focus on the fastgrowing electric mobility segment. An electric vehicle typically contains four times more silicones than a conventional car.

Geopolitical tensions are on the rise, and increasing trade barriers create risks, but also opportunities. Elkem is among very few companies with complete and integrated value chains in different regions, making us less vulnerable to disruptions in supply chains and trade flows.

A strategy of dual-play growth and green leadership

It is on this basis we have set out specific growth ambitions for Elkem: We aim to become among the top three players in the silicones industry worldwide, and to be the number one player in silicon products and carbon solutions in the West.

This means growing not just with the markets we are in, but faster. We aim to grow by more than five per cent per year, but also to do so profitably, with an EBITDA margin of at least fifteen per cent per year.

We have a good balance between Eastern and Western markets, with around 60% of our revenues in the West and 40% in the East. This balance provides more stability in revenue and earnings. As we have seen during the pandemic, weakness in one region has largely been offset by a more positive development in other regions. In addition, the pandemic showed the vulnerability of global supply chains.

We have experienced that Elkem’s integrated value chain provides significant competitive advantage and margin protection.

Green leadership: One of the winners in the green transition

Elkem aims to be part of the solution to combat climate change – and to be one of the winners in the green transition. We will do this through three key levers:

• Reducing our emissions: we already have a strong position with 83% of our energy consumption being renewable. Our target is to reduce overall CO₂
  emissions by 28% within
  2031. In December, Elkem was awarded double A- scores from CDP for the company’s efforts on climate and forests.
• Supplying to the transition: Elkem aims to grow its supplies of advanced materials to green markets such as better buildings, electric vehicles and renewable energy. Our largest single customer across Elkem globally is now a globally recognised producer of electric vehicles.
• Enabling circular economies: we continue to work closely with customers and researchers to increase recycling within our own
  operations, as well as developing the ecodesign of innovative products.

Unprecedented volatility – but also opportunity

For us in Elkem, and our entire global team, across geographies and divisional lines, from top management to front-line workers, we are aligned around a clear mission: To provide advanced silicon-based materials shaping a better and more sustainable future. This describes what we do, but also why we do it and why it is so important.

I have been in Elkem’s top management for twentytwo years, and now more than twelve years as CEO.

I have never seen such volatility in markets combined with inflationary pressure and uncertainty regarding future economic activity as now. At the same time, I also see an unprecedented opportunity for Elkem given our diversity geographically and culturally, our broad product range, and good positions to take part in the green transition.

This gives me confidence that we will be able to continue to deliver value for all our stakeholders – in line with our purpose: Delivering your potential. Not just in 2022, which has been an exceptional year, but in many years to come.

Helge Aasen

CEO, Elkem ASA