Orano: Positive Results Despite a Loss-Making Back End Sector

Outlook for 2021 maintained in an uncertain context

Improvement in results in the first half-year

• Revenue of €1,883 million, up +5.6% (LFL) compared to the first half of 2020
• EBITDA stable at €415 million (compared with €413 million in the first half of 2020) marked, on the one hand, by the continuation of the effects of Covid on the Canadian mining sites until the beginning of May and difficulties within the Back End Recycling activities and, on the other hand, by the ramp-up of the conversion activity in the Front End
• Operating cash flow of €526 million (vs.€178 million in the first half of 2020)

Positive net income attributable to owners of the parent, driven by the rebound in financial markets

• Net income attributable to owners of the parent improved to +€316 million (compared to -€212 million in the first half of 2020), benefiting from a better return on earmarked end-of-lifecycle assets
• Adjusted net income attributable to owners of the parent¹ was -€26 million (compared with +€17 million in the first half of 2020), still penalized by the effects of Covid on Canadian mining sites

Increase in positive net cash flow and continuation of deleveraging

• Net cash flow of +€334 million compared to +€46 million in the first half of 2020
• Net debt down to €1.79 billion compared to €2.15 billion at end-2020

Financial outlook maintained for 2021²

• Revenue growth
• EBITDA to revenue rate between 23% and 26%
• Positive net cash flow

_________________

¹ See definition in Appendix 2.

² Compared to those communicated on February 26, 2021 and subject to the development of the pandemic.

CHÂTILLON, France–(BUSINESS WIRE)–Regulatory News:

The Orano Board of Directors met yesterday and approved the financial statements closed on June 30, 2021. When asked about the results, Philippe Knoche, Chief Executive Officer, stated:

“Despite the continuation until early May of the effects of the Covid crisis on our mining activities in Canada and difficulties in Recycling, the group generated positive net cash flow, enabling it to continue its deleveraging and to consider development paths for the future. This performance confirms the resilience of our group as a recognized and responsible industrial player. In a context of climate emergency, we are committed alongside our customers to meeting the major energy and environmental challenges of the coming decades.”

I. Analysis of group key financial data

The impacts of the Covid crisis continued from January to early May in the Mining sector. In Canada, the Cigar Lake mine and the McClean Lake ore processing plant were shut down in order to protect the northern communities employed on these sites from an upsurge in the epidemic. At the end of the half-year, all of these facilities were back in operation.

At the end of June 2021, the Covid crisis had not affected the value of the group’s industrial assets but had adversely affected the results for the period in the Mining sector only. In addition to this impact, there were operational and profitability difficulties in the Back End Recycling activities, which restricted the group’s performance. Between the two periods, EBITDA remained stable despite an increase in revenue.

Lastly, the generation of cash flow accelerated the group’s deleveraging and net income was positive thanks to the return on earmarked assets covering end-of-lifecycle commitments over the half-year.

Table of key financial data

In millions of euros	H1 2021	H1 2020	Change
Revenue	1,883	1,782	+€101 M
Operating income	198	158	+€40 M
EBITDA	415	413	+€2 M
Adjusted net income attributable to owners of the parent	(26)	17	-€43 M
Net income attributable to owners of the parent	316	(212)	+€528 M
Operating cash flow (*)	526	178	+€348 M
Net cash flow from company operations	334	46	+€288 M
In millions of euros	June 30, 2021	Dec. 31, 2020	Change
Backlog	26,260	26,994	-€734 M
(Net debt) / Net cash	(1,793)	(2,146)	+€353 M

^{(*) Operating cash flow for the first half of 2020 has been restated for the reconstitution of a receivable on the research tax credit regularizing a non-cash tax flow, with no impact on the net cash flow from Company operations in 2020.}

The financial indicators are defined in the financial glossary in Appendix 2 – Definitions.

Backlog

Orano’s backlog amounted to €26.3 billion as of June 30, 2021, slightly down compared to December 31, 2020 (€27 billion), as the renewal of significant multi-year contracts does not occur every year. The backlog represents close to seven years of revenue.

Order intake for the first half of 2021 amounted to €952 million, of which nearly two-thirds for the Mining and Front End segments.

Revenue

Orano’s revenue reached €1,883 million at June 30, 2021 compared to €1,782 million at June 30, 2020 (+5.7%; +5.6% LFL. This amount remains in line with the group’s expectations in terms of backlog flows and the absence of adverse effects from Covid on sales, which had particularly impacted the activities of the Back End sector in the first half of 2020. However, this increase was offset by production delays in 2021 in Recycling.

The revenue share from international customers was 43.1% over the first six months of 2021 compared with 43.9% in the first half of 2020. The share of revenue with Asian customers represented 16.1% of sales.

• Mining sector revenue amounted to €662 million, up 5.8% compared to June 30, 2020 (+5.9% like-for-like). This change is due to a more favorable distribution of the backlog volume over the period.
• Front End revenue totaled €436 million, a decrease of -2.7% compared to the first half of 2020 (-5.6% like-for-like). This decline is consistent with the backlog flow, with a seasonal effect between the two half-years.
• Back End revenue, which includes Recycling, Nuclear Packaging and Services, Dismantling and Services, as well as Projects, amounted to €778 million, up +10.5% compared to June 30, 2020 (+12.3% like-for-like). The increase in this indicator remains moderate despite the absence of Covid impacts, which had severely disrupted activities in 2020. Sales for the first half of the year were hampered in Recycling by difficulties at the Melox plant and less favorable seasonality at the La Hague plant. Over the period, Dismantling and Services activities were more important both in France and in the United States; they included the KSE group specializing in industrial maintenance, which entered the scope on July 1, 2020.
• Corporate and other operations revenue, consisting primarily of OranoMed, was €8 million compared with €5 million at June 30, 2020.

Operating income

Orano operating income was €198 million, an increase of €40 million compared with June 30, 2020. This change can be analyzed, by activity, as follows:

• A decrease of -€26 million in operating income for the Mining segment, which totaled €183 million, compared with €209 million at June 30, 2020 This decrease in operating income is attributable to a less favorable price/mix effect on volumes sold in the backlog and to the prolongation of the negative impacts of the Covid crisis on activities, with production interruptions in Canada from January to early May 2021. These impacts were partially offset by an increase in volumes sold.
• An improvement in Front End operating income, which stood at €69 million, compared with €44 million in the first half of 2020. This increase is mainly due to the ramp-up of conversion activities at the Philippe Coste plant.
• A difference of +€28 million in the Back End, which recorded an operating income of -€49 million compared with -€77 million at June 30, 2020, which had been significantly impacted by Covid, notably with production stoppages. In the first half of 2021, difficulties at the Melox plant and, more broadly, profitability in Processing and Recycling weighed on the sector’s results. The positive contribution of the Nuclear Packaging and Services and Decommissioning and Services activities partially offset the deficit for the period.
• An improvement of +€14 million in operating income for Corporate and other activities, which stood at -€5 million at the end of June 2021 compared to -€19 million at end-June 2020. This change is mainly due to higher purchases of Covid protective equipment in the first half of 2020.

Adjusted net income attributable to owners of the parent

Adjusted net income attributable to owners of the parent reflects Orano’s industrial performance independently of the impact of the financial markets on the return on earmarked assets (which must be appreciated over the long term), of regulatory changes and of discount rates related to end-of-lifecycle commitments. The definition of adjusted net income attributable to owners of the parent is provided in Appendix 2 of this document.

Adjusted net income attributable to owners of the parent was -€26 million as of June 30, 2021, compared with +€17 million as of June 30, 2020.

Based on the operating income described above and restated for the share of the results of the joint ventures for €5 million and the share of non-controlling interests in the result for the period for €34 million, adjusted net income attributable to owners of the parent is obtained by adding the following main elements:

• Adjusted net financial income, which reached -€181 million as of June 30, 2021, compared with -€117 million as of June 30, 2020. This deterioration is due exclusively to the impact of the decrease in the discount rate net of inflation over the half-year on provisions for completion of long-term works (compared to an increase in the first half of 2020).
• The adjusted net tax expense was -€14 million, compared with -€15million in the first half of 2020.

Net income attributable to owners of the parent

Net income attributable to owners of the parent was +€316 million as of June 30, 2021 compared with -€212 million for the same period in 2020. This favorable development is mainly due to a positive return on earmarked end-of-lifecycle assets in the first half-year 2021 due to the rise in financial markets anticipating the end of the crisis, while the same return was negative in the first half of 2020 with the sharp decline in the markets in the first months of the health crisis. This improvement was partly offset by the impact of the decrease in the discount rate net of inflation over the half-year on provisions for end-of-cycle commitments (compared to an increase in the first half of 2020).

The following table reconciles net income attributable to owners of the parent with reported net income attributable to owners of the parent, by reintegrating the financial impacts related to end-of-lifecycle commitments:

In millions of euros	June 30, 2021	June 30, 2020	Change
Adjusted net income attributable to owners of the parent	(26)	17	-€43 M
Unwinding expenses on end-of-lifecycle liabilities	(133)	(142)	+€9 M
Impact of changes in end-of-lifecycle operation discount rates	(65)	177	-€242 M
Return on earmarked assets	555	(264)	+€819 M
Tax impact of adjustments	(15)	0	-€15 M
Reported net income attributable to owners of the parent	316	(212)	+€528 M

Operating cash flow

Orano’s EBITDA as of June 30, 2021 amounted to €415 million, stable compared with June 30, 2020 when it stood at €413 million. EBITDA by activity is presented in Appendix 1.

The change in operating WCR stood at +€359 million, up +€388 million compared to the first half of 2020, mainly due to (i) the continued decline in inventories in mining activities in connection with the shutdown of Canadian facilities until early May, and (ii) the pre-financing of export contracts combined with seasonal effects between the two periods in the Back End sector within the Nuclear Packaging and Services and Recycling activities.

Net investments were up +€42 million to reach €247 million as of June 30, 2021, compared with €205 million as of June 30, 2020, with the resumption of projects, particularly in the Back End segment, following the disruption caused by the health crisis in the first half of 2020.

Orano’s operating cash flow was thus positive at €526 million in the first half of 2021, up sharply by +€348 million compared with the first half of 2020.

Net cash flow from company operations

Based on the operating cash flow, the net cash flow from the Company’s activities is obtained by adding:

• The cash cost on financial transactions for -€115 million, slightly higher than at end-June 2020 (-€109 million), taking into account the effects of seasonality of the net cost of debt between the two half-years;
• Cash consumption linked to end-of-lifecycle operations of -€1 million (compared with -€9 million as of June 30, 2020);
• Tax-related cash of -€19 million (compared to +€50 million in the first half of 2020, given the repayment of a tax overpayment in 2019);
• Other items totaling -€57 million, slightly lower than at end-June 2020 (-€64million), mainly attributable to the absence of payment of dividends in Mining in the first half-year 2021.

Net cash flow from company activities thus comes to +€334 million in the first half of 2021, compared to +€46 million in the first half of 2020.

Net financial debt and cash

As of June 30, 2021, Orano had €1.61 billion in cash, consisting of €1.17 billion in cash and cash equivalents, plus €0.44 billion in cash management financial assets.

This cash position is strengthened by an undrawn syndicated credit facility of €940 million, obtained with 11 banking partners in early 2019.

The group’s total net financial debt stands at €1.79 billion at June 30, 2021, a sharp decrease compared to December 31, 2020.

II. Events since the last publication

• On March 4, the Orano group and the Daher group signed an agreement for the acquisition by Orano Nuclear Packages and Services (“Orano NPS”) of the nuclear activities of Daher in Germany (Daher Nuclear Technologies Gmbh – “DNT”) and its subsidiary in North America (TLI Inc. – “TLI”). The entities will thus benefit from complementary know-how and facilities, particularly in Germany and the United States in the transportation of nuclear materials and waste storage.
• On March 31, 2021, the Akouta mine in Niger operated by Cominak ceased production after more than 40 years of service and 75,000 metric tons of uranium extracted. The social and societal transition began immediately. The redevelopment work, which will take a little less than ten years, will be followed by a period of environmental monitoring.
• On April 27, 2021, Orano presented its purpose. Through its action, Orano intends to contribute to the fight against global warming, the preservation of resources and health, major challenges of the century and is placing them at the heart of its purpose. To meet each of its commitments, Orano has set targets by the year 2030, a 10-year timeframe compatible with the transformation that the group wishes to carry out.
• In July 2021, Orano announced that it was partnering with recognized partners – Paprec, MTB Manufacturing, Saft and the CEA – to test an innovative process for recycling the metals contained in electric vehicle batteries. Two industrial pilots will be built at the new facilities of the CIME (Center for Innovation in Extractive Metallurgy) at the Orano site in Bessines-sur-Gartempe in the Limousin region. This project meets the criteria of the recovery plan initiated by the government as well as the roadmap for projects supported by the Nouvelle Aquitaine Region.
• On July 21, 2021, Orano Med inaugurated the extension of the Maurice Tubiana Laboratory and its Research & Development Center in Bessines-sur-Gartempe (Limousin) dedicated to the manufacture of Lead-212, a rare isotope used for the development of targeted alpha-therapy treatments for cancers with limited therapeutic options. These new facilities are a crucial step in the development of clinical trials for this new means of fighting cancer.

III. Financial outlook for 2021

The financial outlook for 2021 communicated on February 26 is maintained, in an uncertain context.

Orano is targeting:

• Revenue growth;
• An EBITDA rate between 23% and 26%;
• Positive net cash flow.

This outlook does not include significant recycling contracts abroad, including the planned used fuel processing and recycling plant in China.

It also remains dependent on the development of the pandemic in France and in the countries where the group operates, particularly in the mining sector.

About Orano

As a recognized international operator in the field of nuclear materials, Orano delivers solutions to address present and future global energy and health challenges.

Its expertise and mastery of cutting-edge technologies enable Orano to offer its customers high value-added products and services throughout the entire fuel cycle.

Every day, the Orano group’s 16,500 employees draw on their skills, unwavering dedication to safety and constant quest for innovation, with the commitment to develop know-how in the transformation and control of nuclear materials, for the climate and for a healthy and resource-efficient world, now and tomorrow.

Orano, giving nuclear energy its full value.

Upcoming events

July 30, 2021 – 9:00 a.m. CEST Webcast and conference call

2021 Half-year results

To access the results presentation, which will be held today at 9:00 am (Paris time), please follow the links below:

French version: https://channel.royalcast.com/landingpage/orano-fr/20210730_1/

English version: https://channel.royalcast.com/landingpage/orano-en/20210730_1/

Note

Status of the 2021 half-year financial statements with regard to the audit:

The review of the consolidated half-year financial statements has been completed and the limited review report is in the process of being issued.

Important information

This document and the information it contains do not constitute an offer to sell or buy or a solicitation to sell or buy Orano’s debt securities in the United States or in any other country.

This document contains forward-looking statements relative to Orano’s financial position, results, operations, strategy and outlook. These statements may include indications, forecasts and estimates as well as the assumptions on which they are based, and statements related to projects, objectives and expectations concerning future operations, products and services or future performance. These forward-looking statements may generally be identified by the use of the future, the conditional or forward-looking terms such as “expect”, “anticipate”, “believe”, “plan”, “could”, “predict”, or “estimate”, as well as other similar terms. Although Orano’s management believes that these forward-looking statements are based on reasonable assumptions, bearers of Orano shares are hereby advised that these forward-looking statements are subject to numerous risks and uncertainties that are difficult to foresee and generally beyond Orano’s control, which may mean that the expected results and developments differ significantly from those expressed, induced or forecast in the forward-looking statements and information. These risks include those that are developed or identified in Orano’s public documents, including those listed in Orano’s 2020 Annual Activity Report (available online on Orano’s website at: www.orano.group), as well as the risks related to epidemics such as Covid-19. The attention of bearers of Orano shares is drawn to the fact that the realization of all or part of these risks is likely to have a significant unfavorable impact on Orano. Thus, these forward-looking statements do not constitute guarantees as to Orano’s future performance. These forward-looking statements can be assessed only as of the date of this document. Orano makes no commitment to update the forward-looking statements and information, except as required by applicable laws and regulations.

Appendix 1 – EBITDA by sector or activity

Orano’s EBITDA as of June 30, 2021 amounted to €415 million, stable compared with June 30, 2020 when it stood at €413 million. This change breaks down as follows:

• A decrease of -€25million in the Mining sector (€252 million compared to €277 million as of June 30, 2020) in connection with a less favorable price/mix effect on backlog sales and production stoppages at the Canadian sites between January and early May 2021 related to Covid. These impacts were partially offset by an increase in volumes sold.
• An increase of +€13 million in the Front End (€135 million compared with €122 million as of June 30, 2020) under the effect of an increase in production volumes in conversion linked to the ramp-up of the Philippe Coste plant.
• A decrease of -€8 million in the Back End (€20 million compared to €28 million as of June 30, 2020) reflecting production and profitability difficulties in Recycling despite the absence of adverse Covid effects that had a significant impact on this indicator in the first half of 2020.
• An improvement of +€22 million in “Corporate and other activities” (+€8 million compared with -€14 million as of June 30, 2020), mainly from higher purchases of Covid protective equipment in the first half of 2020 and a seasonal effect between the two periods.

Appendix 2 – Definitions

• Like-for-like (LFL): at constant exchange rates and consolidation scope.
• Net operating working capital requirement (Net operating WCR):

Operating WCR represents all of the current assets and liabilities related directly to operations. It includes the following items:

• net inventories and work in progress;
• net trade accounts receivable and related accounts;
• contract assets;
• advances paid;
• other accounts receivable, accrued income and prepaid expenses;
• less: trade payables and related accounts, contract liabilities and accrued liabilities.

Note: Operating WCR does not include non-operating receivables and payables such as income tax liabilities, amounts receivable on the sale of non-current assets, and liabilities in respect of the purchase of non-current assets

• Backlog:

The backlog is determined on the basis of firm orders, excluding unconfirmed options, using the contractually set prices for the fixed component of the backlog and, for the variable component, the market prices based on the forecast price curves prepared and updated by Orano. Orders in hedged foreign currencies are valued at the rate hedged. Non-hedged orders are valued at the rate in effect on the last day of the period. With respect to contracts for which revenue is recognized in advance, the amount included in the backlog corresponds to the difference between the revenue of the contract at completion and the revenue already recognized for the contract, it therefore includes financial components, indexation hypothesis and contract price revision assumptions taken into account by the group to value the revenue at completion.

• Net cash flow from company operations:

Net cash flow from company operations is equal to the sum of the following items:

• operating cash flow;
• cash flow from end-of-lifecycle operations;
• change in non-operating receivables and liabilities;
• financial income;
• tax on financial income;
• dividends paid to minority shareholders of consolidated subsidiaries;
• net cash flow from operations sold, discontinued and held for sale, and cash flow from the sale of those operations;
• acquisitions and disposals of current and non-current financial assets, with the exception of bank deposits held for margin calls on derivative instruments or collateral backed by structured financing and cash management financial assets.

The net cash flow from the Company’s activities corresponds to the change in net debt (i) with the exception of transactions with the shareholders of Orano SA, accrued interest not yet due for the financial year and translation differences, and (ii) including accrued interest not yet due for financial year N-1

• Operating cash flow (OCF):

Operating cash flow (OCF) represents the amount of cash flows generated by operating activities before corporate taxes and taking into account the cash flows that would have occurred in the absence of offsetting between the payment of income taxes and the repayment of the research tax credit receivable.

Contacts

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[email protected]

Investor Relations
Marc Quesnoy

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