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Economic review

Profits were lower due to the effect of lower metal prices and currency headwinds.

Overview

While most business units posted a positive performance during the year, this was not enough to offset the impact of lower metal prices on recycling revenues and margins. Recurring EBIT was lower year-on-year due to a combination of this metal price effect, currency headwinds and higher depreciation costs linked to our Vision 2015 growth initiatives.

Revenues, earnings & returns

Revenues were up 1% compared to 2013, reaching € 2.4 billion. An increase in Catalysis and Energy Materials offset a decrease in Recycling and Performance Materials.

Turnover (which includes metal values) was 10% lower year-on-year. This was due to the decrease in the prices of a number of metals during the course of the year. For Umicore, revenue is a more meaningful metric of “top-line” performance than turnover as it excludes the price of metals passed through to customers.

Recurring EBIT was 10% lower than in 2013 at € 274 million. This primarily reflected the impact of lower precious metals prices, currency headwinds and higher depreciation charges. In Catalysis, recurring EBIT was up by 13%, driven by the ramp-up in catalyst production for heavy duty vehicles in Europe and China and higher sales for catalysts used in passenger cars. Revenues in Energy Materials grew strongly, driven by the acquisitions in Cobalt & Specialty Materials as well as volume growth in all business units and efficiency improvements. Recurring earnings in Energy Materials were up by 59%. In Performance Materials, although revenues were down 3%, recurring EBIT increased by 12% reflecting a higher contribution from Element Six Abrasives and as a result of cost reduction measures that were initiated in 2013. Recycling revenues and recurring EBIT were down 10% and 30% respectively mainly due to the impact of lower metal prices. Lower demand in certain end markets of the business units Jewellery & Industrial Metals and Precious Metals Management also had a negative impact on the revenues and profitability of the business group. Net recurring corporate costs were at the same level as those of 2013 at € 48 million. For a full discussion of segment economic performance see pages the business group review.

Non-recurring items had a negative impact of € 22 million on EBIT. The majority of the restructuring charges related to the closure of Element Six Abrasives’ plant in Sweden, cost-reduction measures in corporate & support functions and adjustments to the production configurations of a number of business units. Umicore also booked environmental provisions of € 7 million related to the remediation of historical pollution. Reversals of impairments on permanently tied-up metal inventories, resulting from an increase in metal prices towards year-end, accounted for a positive impact of
€ 8 million. The impact of non-recurring charges on the net result (Group share) amounted to € 22 million.

Depreciation charges on property, plant & equipment and intangible assets totalled € 169 million compared to € 159 million in 2013. This was due to the completion of more new growth investments in 2014. Overall recurring EBITDA decreased by 4% to € 442 million.

Average capital employed was almost exactly at the same level as in 2013. Umicore generated a return on capital employed (ROCE) of 12.2% compared to 13.6% in 2013. This was below our Vision 2015 target of generating a return on capital employed of above 15%.