Elkem reviews investment plans after challenging Q3

OSLO, Norway—Elkem S.A. 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 percent year-on-year to about $706 million during the third quarter.

The company also reported a loss of about $40.7 million for the three months to end of September. Sales were down mainly due to lower sales prices and volumes, with silicones market remaining depressed due to low demand in all regions, Elkem said Oct. 25.

Earnings for the silicones division went into negative territory at around $22 million, against a positive development of $45.7 million reported for the quarter last year.

Sales at the silicones division fell 31 percent year-on-year to about $286 million, reflecting reduced volumes and a drop-off in demand across all regions.

Demand for specialty silicones in the European Union and the U.S. 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. Elkem also said 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 plan, Elkem said it is evaluating its investments plans. The Sinochem-owned manufacturer said it was introducing "a comprehensive program" to counter current business conditions.

"A cost-reduction program has been initiated across all of Elkem's divisions to reduce fixed and variable costs," the company said.

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 "significantly" reduce costs and capital expenditures.

Elkem said the plan would not affect an ongoing project to expand and upgrade its Xinghuo Silicones plant in China.

"This investment is on-track, both with regards to cost and time, and is expected to be finalized during the first half of 2024," the company said.

The project will double the plant's annual capacity, equivalent to 120,000 metric tons of siloxane, and enhance product quality for downstream specialization. The project is also expected to deliver "significant cost improvements," mainly through lower energy and raw material consumption, allowing Elkem to remain competitive in the Chinese market.