Mytilineos — Synergies and solar delivering growth

Metlen Energy & Metals (ASE: MYTIL)

Last close As at 18/06/2024

EUR35.76

0.12 (0.34%)

Market capitalisation

EUR5,110m

More on this equity

Research: Industrials

Mytilineos — Synergies and solar delivering growth

Mytilineos (MYTIL) is continuing to deliver on its transformation into a simpler structure based on two pillars, Energy and Metals. Its strategy is focused on realising synergies in the group and building its renewable energy sources (RES) business, with its existing industrial assets providing a solid platform for growth. In our view, €1bn/year in EBITDA looks achievable in FY23 and would reset earnings at a higher level. We are increasing our valuation from €36/share to €45/share, in part due to the growth of its RES business, partly funded by its asset rotation strategy.

Written by

Andrew Keen

MD - Head of Content, Energy & Resources, Industrials

Mytilineos_resized

Industrials

Mytilineos

Company update

General industrials

15 November 2023

Price

€34.50

Market cap

€4,775m

Net debt (€m) at end-September

1,372

Shares in issue

138.4m

Free float

70.5%

Code

MYTIL

Primary exchange

ASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.6

(0.9)

106.0

Rel (local)

(4.7)

2.7

50.1

52-week high/low

€38.3

€16.9

Business description

Mytilineos is a leading industrial company with an international presence in all five continents. The company is active in Energy and Metals (integrated aluminium smelting). Its renewable energy business is growing strongly organically, with a pipeline of 13GW in solar capacity.

Next events

FY23 results

January/February 2024

Analysts

Andrew Keen

+44 (0)20 3077 5700

Harry Kilby

+44 (0)20 3077 5724

Mytilineos is a research client of Edison Investment Research Limited

Mytilineos (MYTIL) is continuing to deliver on its transformation into a simpler structure based on two pillars, Energy and Metals. Its strategy is focused on realising synergies in the group and building its renewable energy sources (RES) business, with its existing industrial assets providing a solid platform for growth. In our view, €1bn/year in EBITDA looks achievable in FY23 and would reset earnings at a higher level. We are increasing our valuation from €36/share to €45/share, in part due to the growth of its RES business, partly funded by its asset rotation strategy.

Synergies and solar delivering growth

Year end

EBITDA
(€m)

Net income* (€m)

EPS**
(€)

DPS***
(€)

P/E
(x)

Yield
(%)

12/22

823

466

3.42

1.20

4.6****

7.6****

12/23e

1,026

633

4.59

1.61

7.5

4.7

12/24e

1,117

669

4.83

1.70

7.1

4.9

12/25e

1,173

717

5.18

1.82

6.7

5.3

Note: *Reported. **Number of shares is adjusted for the company’s ongoing buyback scheme. ***Final distributed dividend per share. ****At average share prices in 2022.

Renewables heading to around a quarter of EBITDA

We estimate that RES will account for 28% of EBITDA in 2024 (a fourfold increase over the last couple years), forming a base for further growth as solar capacity is built out. At end of the first nine months of FY23 (9M23), MYTIL’s total solar pipeline and operating capacity was 13.7GW (more than six times the current operating and construction capacity of its RES business). At H123, its pipeline was up 4.2GW (c 46%) year-on-year. Of this, 6.2GW is in the early stages of development and we believe MYTIL is likely to continue its asset rotation strategy, whereby it develops/ de-risks projects and divests them to recycle capital. We have remodelled MYTIL's RES business to reflect its relatively capex-light, self-funded model and the ability to execute on its growth options relative to peers.

EBITDA of €1bn/year in sight

In March, we argued that MYTIL was heading to a sustainable level of more than €1bn/year from 2024. The €1bn milestone looks likely to be achieved in FY23, even in an environment of softer gas, electricity and aluminium prices, underlining the structural rather than cyclical uplift in earnings. Q1–Q3 EBITDA of €723m is 78% of our previous full year forecast and we increase our FY23 EBITDA forecast from €931m to €1,026m. We also raise our FY24 forecasts slightly and introduce FY25 estimates (with EBITDA growing towards €1.2bn/year).

Valuation: Increases from €36/share to €45/share

With RES set to account for c 25% of FY24 earnings and a net 10-year CAGR of 23%, we believe MYTIL should trade at earnings multiples that better reflect its earnings and growth mix. We have raised our discounted cash flow (DCF) based valuation from €36/share to €45/share based on remodelling long-term earnings and asset rotation. This is similar to our peer multiple cross-check (€48/share), which is based on an EV/EBITDA multiple of 7.6x for the group (9.1x for RES, 5.1x for metals and 7.9x for power generation, distribution and trading). MYTIL is trading on a P/E multiple of 7.5x in FY24e.

Solar options bring growth

MYTIL’s diverse range of activities (aluminium production, power production, gas supply, electricity supply and power projects) is highly synergistic. There are natural industrial linkages between power intensive industries, such as aluminium, and power generation and in turn sourcing and supply of natural gas.

Solar is part of MYTIL’s RES business, M Renewables, which is part of the Energy division. MYTIL develops solar plants from early-stage planning through to full operation, sometimes retaining the assets or alternatively selling the assets once they are fully operational and de-risked (effectively recycling the capital into further growth). Unlike some renewables focused developers, MYTIL has an existing asset base of cash generative assets to assist its growth. M Renewables is still at a relatively early stage of a significant period of growth. We forecast EBITDA from M Renewables to reach €311m in 2024 and €340m in 2025.

We estimate that c 10% of earnings is currently from engineering, procurement and construction (building solar plants for others) and around one-third is from generation, with the balance from asset rotation (ie divesting RES projects that have been developed from scratch, resulting in a greater return on capital versus returns on operating assets). MYTIL has a total pipeline of 13GW of solar capacity (discussed in detail below) and we have remodelled this pipeline, allowing for 10–11GW of construction over the next decade (we have conservatively allowed for some delays to the early-stage pipeline), with rotation of some finished projects. We estimate an operating base of c 5GW by the end of this period. Naturally, the mix of growth and retention will depend on market conditions but, given the strong structural growth in demand and MYTIL’s skill and experience as a builder and operator of power generation assets, we expect both construction and operation to be drivers of earnings. Capital spending for building 10–11GW of solar capacity could total €7–7.5bn over 10 years, but we estimate that 70–75% of this total could come from asset sales over the same period, with asset disposals of the projects that have been constructed either from project finance (PF) or a combination of PF and de-risked providing the majority of funding for this buildout in retained capacity.

Exhibit 1: New versus old forecasts

Edison new

Edison old

Difference (%)

New

€m

2023e

2024e

2023e

2024e

2023e

2024e

2025e

Metals

253

255

262

274

-3%

-7%

248

Energy

752

836

648

728

16%

15%

899

of which M Renewables

242

311

203

253

19%

23%

340

Construction/concessions subcontracts/other

21

26

21

46

1%

-44%

26

Group EBITDA

1,026

1,117

931

1,048

10%

7%

1,173

Net income

633

669

520

595

22%

12%

717

Reported EPS (€)

4.58

4.83

3.77

4.31

21%

12%

5.18

Source: Edison Investment Research

During H123, MYTIL entered into bilateral electricity supply agreements (‘green’ power purchase agreements) between RES producers and final consumers for three of its Australian solar projects with the following: Zen Energy (23MW), SmartestEnergy (53MW) and Telstra and Australia’s National Broadband Network (150MW).

A growing pipeline

One of the challenges facing solar developers is the ability to raise capital, particularly as some listed developers have begun to trade at discounts to net asset value (NAV) in response to rising interest rates and the comparative attractiveness of other risk-free assets (such as fixed income). MYTIL is well placed compared to some of its competition for a variety of reasons, particularly in a high interest rate environment. It is not dependent on new capital raisings to fund growth as it has existing cash-generative industrial assets. It is also well funded (with net debt/EBITDA of 1.5x and a borrowing cost <4%) and can use asset rotation and power generation to also boost development capex spending.

Given that end-use is still growing strongly (see below), this gives MYTIL an opportunity to continue to expand aggressively into a growing market, when others may be finding this difficult. It can use a relatively capex light approach and use its other industrial assets and relative financial strength to continue to advance and develop its pipeline. As this is built, it provides further opportunities for cash funding of growth, either through operation or through asset rotation. In these ways, MYTIL as a significant scale developer of solar assets should be able to maintain or accelerate its solar business.

MYTIL’s global RES portfolio continues to expand and now covers all five continents. At end Q323, the portfolio’s total pipeline capacity exceeded 13GW (see breakdown in Exhibit 2 below). At H123 MYTIL’s total portfolio capacity had seen a total increase of 4.6GW (c 46%) year-on-year from H122. During the third quarter of 2023, MYTIL’s RES pipeline continued to expand with a 0.4GW increase in early-stage projects, mainly in Romania and Poland.

Exhibit 2: Global RES portfolio as at end Q323

Source: Mytilineos, Edison Investment Research. Note: *Project ready to be built (RTB) or will reach RTB stage within the next six months.

Approximately one-third of the increase in MYTIL’s global RES portfolio is attributed to the acquisition of a 1.4GW portfolio of five utility solar photovoltaic (PV) projects located in Alberta, Canada. The capex for this investment is estimated at €1.16bn, but this is a gross capex estimate, which could be reduced up to 30% due to Canadian government incentives. This value however excludes battery energy storage systems (BESS) equipment.

The total capex investment will be disbursed throughout the various phases of the Alberta projects’ development and construction, except for the advanced payment, with completion expected in 2026–27. The capex investment is expected to be equally distributed over a four-year period. These five solar projects will be able to generate more than 2TWh per year in total. All the projects have applied for and/or have been permitted for the installation and use of BESS, having a total anticipated combined storage capacity of 1,200MWh for the portfolio. The purchase price in respect of each special purpose vehicle is based on the relevant project’s actual installed maximum solar PV direct capacity, while being subject to standard working capital and debt adjustments and adjustments in the event that interconnection costs exceed estimates. The government of Alberta announced a six-month pause in approvals for new projects in early August so it can review grid infrastructure and end-of-life provisions. However, we do not foresee any long-term issues relating to the development of these projects as approximately half of the projects are in a ready to build stage and are unaffected, and the balance are relatively early stage and likely to be approved outside of this window. Alberta is particularly well suited for solar production and, in any case, we have only modelled the completion of 10–11GW of MYTIL’s current 13GW pipeline.

MYTIL is also active in energy storage projects in Greece and Italy, both at an early stage of development, having a maximum capacity of c 1.3GW.

MYTIL’s total power production from M Renewables, with a total installed capacity of 626MW, amounted to 725GWh for the first nine-months of 2023, of which 436GWh was produced from RES in Greece and the balance 289GWh from international RES.

Solar in the energy transition landscape

The very significant amount of growth in both MYTIL’s own capacity and recycling capacity for other end users needs to be seen in the context of a rapidly expanding global renewable energy market. The shift towards renewable power is an obvious and significant part of energy transition. The general consensus of most reputable studies indicates that significant advancements need to be made in energy efficiency as well as significant scaling up of a wide range of clean energy technologies in the 2020s to drive down demand for fossil fuels. Arguably, the shift towards renewables is being driven by three forces:

Emission reduction: the need to cut global CO2 and other greenhouse gas emissions to reduce the impact on global warming is now consensus and the political (and therefore, ultimately, policy) environment will continue to focus on headline goals to reduce CO2 emissions. Examples of headline goals include:

Net zero by 2050: national and corporate goals are gravitating towards a net zero target for emissions by 2050. For example, the European Commission’s Green Deal targets climate neutrality across the continent by 2050.

The EU adopted the Fit for 55 set of proposals in July 2021, which sets targets to reduce net emissions by at least 55% by 2030, compared to 1990 levels.

1.5 degrees Celsius (ie limiting the rise in median global temperatures from pre-industrialisation levels to 1.5 degrees). According to the International Energy Agency (IEA), to keep 1.5% in sight, renewable power generation will need to triple by 2030 as only this will enable coal-fired power (which is the largest source of energy-related CO2 emissions) to halve from 2022 levels by 2030.

Energy security: the war in Ukraine has created significant concerns over energy independence and energy security. The easiest path towards cutting emissions for many countries has been to shift from coal to gas as a fuel source for electricity generation and this will continue to be the case in many markets. Gas prices have eased from their peaks, but long-term security of energy supply is still a significant long-term issue and, as such, most national policy remains focused on diversifying energy sources. According to the European Commission, at the start of the Ukraine war the EU imported 90% of its gas consumption, with more than 40% of this provided by Russia, and there is likely to be a strategy to reduce this reliance in the future.

Economics: as renewables have gained in industrial scale, they have become competitive as power sources in their own right. We expand on this below.

Renewable power grew by an 11% CAGR from 2015–22, with 13% growth in 2022, and the IEA expects it to jump by one-third in 2023. Wind and solar power generation technologies have developed significantly over the last 20 years and costs have reduced substantially. Even before the recent energy price surges, the economics for solar PV and onshore wind compared favourably, on average, with other power generation technologies globally, without government support.

Exhibit 3 shows the global weighted average levelized cost of energy for a variety of technologies in 2010 and 2021. The outstanding change is in solar PV, where scale and technology advances have enabled an 88.4% drop in utility-scale cost of energy, bringing solar on par with hydropower. The costs of other technologies have also fallen (notably onshore and offshore wind) and the gap between RES and the low-end range for fossil fuels of c $60/MWh (corresponding to combined cycle gas turbine, CCGT) has now largely closed. These are global averages and naturally the economics of a particular technology will depend on locational factors, but it is reasonable to say that the economic gap has closed.

Exhibit 3: Global weighted average utility-scale levelized cost of energy ($/MWh)

Source: Edison Investment Research, IRENA Renewable Cost Database

Solar powers ahead

MYTIL’s focus on solar reflects a wider shift in energy production to renewable sources globally. MYTIL’s growth pipeline reflects end-use demand for solar energy production and its 13.7GW potential pipeline is quite small in relation the overall size of global market demand and investment requirements.

Solar has benefited from reductions in battery costs, as the combination of energy storage and solar has made projects more attractive to end users. This reduction in battery costs is due to scale effects and technology advances (see Exhibit 5 below). Solar is naturally an intermittent power source, so the continued development (in terms of scale, software and capital market/installer capabilities) of BESS (for more detail, see our report) has helped solar shift and manage its power generation and therefore become a more commercially viable source of power.

Exhibit 4: Average prices for selected technologies, 2014–22

Exhibit 5: Global distributed solar PV net additions per year, 2017–24e

Source: IEA, Paris https://www.iea.org/data-and-statistics/charts/average-prices-for-selected-technologies-2014-2022, IEA. Licence: CC BY 4.0

Source: IEA, Paris https://www.iea.org/data-and-statistics/charts/global-distributed-solar-pv-net-additions-per-year-2017-2024, IEA. Licence: CC BY 4.0

Exhibit 4: Average prices for selected technologies, 2014–22

Source: IEA, Paris https://www.iea.org/data-and-statistics/charts/average-prices-for-selected-technologies-2014-2022, IEA. Licence: CC BY 4.0

Exhibit 5: Global distributed solar PV net additions per year, 2017–24e

Source: IEA, Paris https://www.iea.org/data-and-statistics/charts/global-distributed-solar-pv-net-additions-per-year-2017-2024, IEA. Licence: CC BY 4.0

9M23 results (RES and Energy)

We have revised our earnings estimates slightly to reflect both six-month and nine-month results releases, which gave us confidence that €1bn in EBITDA in 2023 looks achievable.

In the first nine months of 2023 (9M23) net profit saw a 48% increase after minorities to €462m (€312m in 9M22) with earnings per share at €3.336, which was a 46% increase to the comparable period in 2022.

EBITDA rose by 36% to €723m in 9M23 (€533m as of the same period in 2022), resulting in a 6pp point increase to a 17.7% EBITDA margin.

Turnover fell from €4,573m in the 9M22 to €4,088m at 9M23; this decrease was attributed to the consequences of the de-escalation of energy prices.

Net debt stood at €1,372m (on an adjusted basis, excluding €231m of non-recourse debt) at 30 September. Adjusted net debt to EBITDA stood at 1.37x, which is at the level of or better than investment grade companies. This is reflected to some extent in the yields of MYTIL’s bonds, with the most recent successful issuance of a 7-tear Common Bond Loan amounting to €500m with an interest rate of 4.0%.

Following upgrades by Fitch and S&P, MYTIL is now included in the ESG leaders of the MSCI index with an ‘AA’ rating.

MYTIL’s asset rotation plan in the first nine months of 2023 saw the sale of four PV parks in Romania with a total capacity of 211MW, which are in an advanced stage of development and will look to be commercially operational within the next two years. MYTIL also sold a 56MW PV park in Southern Spain. MYTIL’s asset rotation plan allows it to continue the profitable development of its self-sufficient M RES growth model, despite the current interest rate environment.

Electricity production

MYTIL recorded its highest quarterly profitability performance in its history, led by the Energy sector, despite the significant reduction in energy and metal prices. A key contributor in achieving this record was the recovery of power generation activity, especially during summer, which is a period of high demand, by the new H-Class 826MW plant.

For 9M23, MYTIL’s three combined cycle gas turbine (CCGT) plants along with the high-efficiency combined heat and power (CHP) plant collectively generated roughly 4TWh. This sum represents 10.5% of the total demand of the interconnected system and 33.9% of the production from natural gas units (27% for the same period in 2022). MYTIL’s total electricity production within Greece, from both thermal and renewable units, was 4.41TWh, which is equivalent to 11.7% of the total demand for Greece.

Despite the scheduled maintenance of the Agios Nikolaos (Protergia) plant in the first quarter of 2023, MYTIL managed to maintain total production levels from thermal units during the 9M23 at similar levels to the previous period in 2022. This was due to the significant contribution of the new CCGT unit, which contributed for the first time, producing 826MW, roughly 40% of MYTIL’s overall thermal production in the third quarter. The new CCGT plant commenced its operating life during a period of increased demand due to high summer temperatures, decisively contributing to supporting Greece’s transition towards an energy mix with a significantly lower carbon footprint. Due to the expected demand increase throughout winter months combined with the high efficiency and flexibility of MYTIL’s units, as well as the supply of natural gas at competitive prices, management expects that the plant will significantly boost MYTIL’s profitability not only in 2023 but also in the years to come.

M&A activity

MYTIL has recently completed a range of bolt-on acquisitions to grow its power distribution and upstream aluminium businesses. We have incorporated the effect of the following transactions in our modelling.

MYTIL acquired 100% of the share capital of UNISON Facility Services, one of the largest companies in the facility management sector, in order to further accelerate the creation of a groundbreaking platform that will improve its ability to provide long-term energy solutions and services to its customers.

MYTIL has also acquired both Volterra and EfaEnergy, further enhancing the company’s synergies in their retrospective business lines. The integration of Volterra (following WATT+VOLT in 2022) into MYTIL’s M Energy Customer Solutions business has increased the company’s market share of the Greek electricity market to 13% and is expected to reach 20–25% in 2024. The integration of EfaEnergy has further strengthened MYTIL’s M Energy sector and subsector M Energy Customer Solutions, with a focus area of natural gas supply, by increasing its market share with an additional 11,000 customers. This has widened MYTIL’s natural gas basket price, which in turn will improve profitability.

The acquisition of Imerys Bauxite means that MYTIL will become fully integrated (ie self-sufficient) in bauxite supply to feed its alumina, and ultimately aluminium production, leaving MYTIL with the only fully integrated aluminium production chain in the EU. This acquisition will allow MYTIL to improve its profitability within its M Metals business. MYTIL could potentially invest up to €100m in the reserve and resource expansion of existing and new deposits, although this latter commitment depends in part on the provisions of the EU Critical Raw Materials Act.

Recent announcements

Enhanced synergies and exposure to the UK

MYTIL’s consortium was named the preferred supplier for energy transmission project in the UK. It will work alongside GE Vernova as the preferred supplier of two high-voltage direct current (HVDC) converter stations for the Eastern Green Link 1, which is a 525kV, 2GW HVDC subsea transmission link from East Lothian in Scotland to County Durham in England. The project is being delivered by a joint venture of National Grid Electricity Transmission and SP Transmission, part of SP Energy Networks (SPEN). MYTIL has also recently signed an EPC contract for the largest solar park in the UK (373MW solar park).

MoU between Mytilineos and SK E&S

On 16 October 2023, MYTIL announced a memorandum of understanding (MoU) with SK E&S, an international company that can organically connect renewable energy, clean hydrogen, energy solutions and its LNG business, in order to explore means of cooperation in the energy sector. Through this MoU, MYTIL is strongly positioned and committed to expand its presence in the Asia-Pacific energy and RES market.

The key sectors that both companies have agreed to cooperate in are:

business opportunities in the gas value chain, including LNG trading and gas-to-power projects,

renewable energy business opportunities, and

opportunities in the energy sector according to their respective strengths and capabilities, with the aim of optimising synergies.

Valuation: Should reflect further EBITDA growth

Our primary valuation method is a 10-year DCF analysis. Key assumptions include a weighted average cost of capital (WACC) of 7.5% and a 1% terminal growth rate for Metallurgy, Power & Gas (P&G) and Sustainable Engineering Solutions (SES), and 2% for Renewables & Storage Development (RSD). We assume terminal capex (included in terminal cash flow) for the P&G and Metallurgy divisions at 1.5x depreciation. These assumptions are unchanged from our last review.

We have increased our longer-term organic growth forecasts for RES to reflect MYTIL’s growth ambitions, summarised in this note. We have also rolled forward our model and base our comparisons on FY24 earnings. Our revised earnings estimates yield a DCF valuation of €45/share, which implies a 2024e EV/EBITDA multiple of 7.2x (compared with 6.4x 2023e in our last note).

This represents a 22% increase on our previous valuation of €36.0/share and implies 30% upside to the current stock price of €34.50. We do not blend valuation approaches, but cross-check against divisional-based DCFs (sum-of-the-parts based, see Exhibit 8) and a peer-group multiple-based valuation on EV/EBITDA. These yield similar results (€43/share and €48/share respectively).

Our DCF valuation for MYTIL’s M Renewables business suggests a 2024e EV/EBITDA multiple of 9.6x, which is roughly in line with our peer group multiple of 9.1x.

Exhibit 6: DCF valuation

Components

Edison new EV (€m)

Per share
(€)

EBITDA 2024e (€m)

Implied EV/EBITDA (x)

Edison old EV (€m)

Per share (old) (€)

Difference old vs new (%)

Per share difference (€)

Mytilineos

8,089

58.4

1,117

7.2x

5,992

43.2

35%

35%

Net cash/(debt) at end FY23e

(1,631)

(11.8)

(716)

(5.2)

128%

-6.6

Other adjustments*

(229)

(1.7)

(223)

(1.6)

3%

-0.1

Total equity value

6,228

45.0

5,053

36.4

23%

8.6

Number of shares (m)

138.4

138.7

0%

Value per share (€) (rounded)

45

36.0

25%

Source: Edison Investment Research. Note: *Includes associates, minority interests and employment benefits. 

Exhibit 7: Divisional DCF valuation (cross-check)

Components

Edison new EV (€m)

Per share
(€)

EBITDA 2024e (€m)

Implied EV/EBITDA (x)

Edison old EV (€m)

Per share
(old) (€)

Difference old vs new (%)

Per share difference (€)

Energy

5,852

42.3

836

7.0x

4,079

29

43%

44%

of which M Renewables

2,970

21.5

311

9.6x

1,804

13

65%

65%

Metals

1,875

13.6

255

7.3x

1,763

12.7

6%

7%

Construction/Conc. Subs./Other**

153

1.1

26

6.0x

150

1

2%

0%

Enterprise value

7,880

56.9

1,117

7.1x

5,992

43.2

32%

32%

Net cash/(debt) at end FY23e

(1,631)

(11.8)

(716)

(5.2)

128%

-6.6

Other adjustments *

(229)

(1.7)

(223)

(1.6)

3%

-0.1

Total equity value

6,020

43.5

5,053

36.4

19%

7.1

Number of shares (m)

138.4

138.7

0%

Value per share (€) (rounded)

43

36.0

21%

Source: Edison Investment Research. Note: *Includes associates, minority interests, employment benefits. Note. ** Construction, concessions, subcontracts and other.

Exhibit 8: Peer group multiple analysis (cross-check)

EV
(€m)

Per share
(€)

Market multiple
2024

EBITDA 2024e
(€m)

Energy

6,974

50.4

8.3x

836

of which Generation/Supply/Distribution

4,147

30.0

7.9x

525

of which M Renewables

2,827

20.4

9.1x

311

Metals

1,302

9.4

5.1x

255

Construction/Conc. Subs./Other

164

1.2

6.4x

26

Enterprise value

8,440

61.0

7.6x

1,117

Net cash/(debt) at end FY23e

(1,631)

Other adjustments *

(229)

Total equity value

6,580

Number of shares (m)

138.4

Value per share (€) (rounded)

48

Source: Edison Investment Research, Refinitiv. Note: *Includes associates, minority interests and employment benefits. Prices as at 13 November 2023.

Exhibit 9: Sensitivities of DCF valuation (€/share) to WACC and terminal growth rate assumptions

Share valuation (€/share)

WACC

6.00%

6.50%

7.00%

7.50%

8.00%

8.50%

9.00%

Terminal growth rate

0.0%

57.4

50.4

44.4

39.3

34.8

30.9

27.5

0.5%

62.2

54.3

47.6

41.9

37.0

32.8

29.1

1.0%

68.1

58.9

51.4

45.0

39.6

34.9

30.9

1.5%

75.2

64.5

55.8

48.6

42.5

37.3

32.9

2.0%

84.2

71.3

61.1

52.8

45.9

40.1

35.2

2.5%

95.7

79.9

67.6

57.9

50.0

43.4

37.9

3.0%

111.0

90.8

75.8

64.1

54.8

47.3

41.0

Source: Edison Investment Research

Exhibit 10: Financial summary

€m

2020

2021

2022

2023e

2024e

2025e

Year end 31 December

PROFIT & LOSS

 

 

Revenue

 

1,899

2,664

6,306

5,425

7,715

7,771

Cost of Sales

(1,559)

(2,299)

(5,341)

(4,207)

(6,390)

(6,379)

Gross Profit

339

365

965

1,218

1,325

1,392

EBITDA

 

315

359

823

1,026

1,117

1,173

Operating profit (before amort. and excepts.)

 

225

279

734

923

955

985

Exceptionals

Operating Profit

225

279

734

923

955

985

Other

(34)

1

(9)

1

1

1

Net Interest

(18)

(41)

(90)

(90)

(80)

(60)

Profit Before Tax (norm)

 

172

239

635

834

876

926

Profit Before Tax (reported)

 

172

239

635

834

876

926

Tax

(28)

(41)

(133)

(172)

(178)

(185)

Profit After Tax (norm)

144

198

507

662

698

741

Profit After Tax (FRS 3)

144

198

502

662

698

741

Minority interests

(14)

(18)

(34)

(26)

(29)

(24)

Discontinued activities

(1)

(1)

(2)

(2)

0

0

Average Number of Shares Outstanding (m)

141.2

136.0

138.4

138.4

138.4

138.4

Net income (normalised)

130

180

473

636

669

717

Net income (FRS3)

129

180

466

633

669

717

EPS - normalised (€)

 

0.92

1.33

3.42

4.59

4.83

5.18

EPS - normalised fully diluted (€)

 

0.92

1.33

3.42

4.59

4.83

5.18

EPS - reported (€)

 

0.91

1.19

3.37

4.58

4.83

5.18

Final distributed dividend per share (€)

0.38

0.42

1.20

1.61

1.70

1.82

Gross Margin (%)

17.9

13.7

15.3

22.5

17.2

17.9

EBITDA Margin (%)

16.6

13.5

13.1

18.9

14.5

15.1

Operating Margin (before GW and except.) (%)

11.8

10.5

11.6

17.0

12.4

12.7

BALANCE SHEET

Fixed Assets

 

1,881

2,188

2,480

3,294

3,924

4,467

Intangible Assets

446

446

461

478

491

502

Tangible Assets

1,161

1,429

1,686

2,483

3,100

3,631

Right of use assets

45

48

59

59

59

59

Investments/Other

227

266

274

274

274

274

Current Assets

 

2,111

2,901

4,422

4,626

5,601

5,696

Stocks

290

469

840

922

1,157

1,166

Debtors

1,319

1,818

2,427

2,550

3,240

3,264

Cash

493

603

1,060

1,060

1,109

1,172

Other

9

12

95

95

95

95

Current Liabilities

 

(1,117)

(1,786)

(2,726)

(3,237)

(4,389)

(4,541)

Creditors

(1,042)

(1,704)

(2,552)

(2,147)

(3,299)

(3,451)

Short term borrowings

(76)

(82)

(174)

(1,090)

(1,090)

(1,090)

Long Term Liabilities

 

(1,302)

(1,682)

(1,955)

(1,688)

(1,688)

(1,688)

Long term borrowings

(955)

(1,324)

(1,602)

(1,335)

(1,335)

(1,335)

Other long term liabilities

(348)

(358)

(353)

(353)

(353)

(353)

Net assets (ex-minority)

 

1,572

1,621

2,222

2,997

3,449

3,935

CASH FLOW

Operating Cash Flow

 

316

277

966

388

1,314

1,269

Net Interest

(27)

(23)

(31)

(80)

(70)

(50)

Tax

(36)

(33)

(43)

(133)

(172)

(178)

Capex

(155)

(380)

(716)

(924)

(803)

(743)

Acquisitions/disposals

(20)

8

(9)

0

0

0

Financing

(56)

(32)

2

0

0

0

Dividends*

(50)

(52)

(70)

(166)

(222)

(235)

Other

(41)

20

50

0

0

0

Net Cash Flow

(69)

(214)

150

(915)

47

63

Opening net debt/(cash)**

 

421

538

803

716

1,631

1,585

HP finance leases initiated

(48)

(51)

(63)

0

0

0

Other

0

0

(0)

0

(0)

0

Closing net debt/(cash)**

 

538

803

716

1,631

1,585

1,521

Source: Edison Investment Research, Mytilineos accounts. Note: *Edison estimates for dividend distribution 2023–25. **Excludes non-recourse debt.

General disclaimer and copyright

This report has been commissioned by Mytilineos and prepared and issued by Edison, in consideration of a fee payable by Mytilineos. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Mytilineos and prepared and issued by Edison, in consideration of a fee payable by Mytilineos. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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