2016 INTERIM FINANCIAL REPORT

Transcription

1 2016 INTERIM FINANCIAL REPORT (Article L III of the French Monetary and Financial Code and Article et seq. of the AMF s General Regulation) Table of contents Statement by the person responsible for the Interim financial report p. 2 Interim management report for 2016 p. 3 Condensed consolidated financial statements at June 30, 2016 p. 11 Statutory Auditors report on the 2016 interim financial report p. 46 This 2016 Interim Financial Report is a free translation of the official Rapport Financier Semestriel 2016 issued in French language and is made available for information purposes only. In case of any discrepancy between this 2016 Interim Financial Report and the Rapport Financier Semestriel 2016, the latter will prevail. 1

2 STATEMENT BY THE PERSON RESPONSIBLE FOR THE 2016 INTERIM FINANCIAL REPORT I hereby certify that to the best of my knowledge the condensed financial statements for the six-month period have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and results of operation of the Company and of all the undertakings included in the consolidation, and that the accompanying interim management report includes a fair review of the significant events that occurred during the first six months of the year, their impact on the financial statements, the main related-party transactions and a description of the main risks and uncertainties in the remaining six months of the financial year. Suresnes, September 15, 2016 Yves Roche Chairman and Chief Executive Officer 2

3 MANAGEMENT REPORT - FIRST HALF OF 2016 Interim 2016 results (consolidated financial statements) At its meeting on September 15, 2016, the Board of Directors of Recylex SA reviewed and approved the condensed consolidated interim financial statements for the six months to June 30, 2015 of the Recylex Group (hereinafter the Group ). Key figures ( million) Six months to June 30, 2016 Six months to June 30, 2015 Change in millions of Sales EBITDA 1 IFRS (0.1) (2.8) +2.7 EBITDA 1 restated Operating income before non-recurring items (IFRS) (3.2) (7.4) +4.2 Restated operating income before nonrecurring (0.7) +0.8 items Net income (IFRS) (4.2) (8.8) +4.6 ( million) At June 30, 2016 At December 31, 2015 Change in millions of Cash and cash equivalents Net cash 3 (5.0) (5.0) NS Equity (27.1) (20.1) Operating income before non-recurring items and before additions to and reversals from amortization, depreciation, provisions and impairment losses. 2 To assess the performance of its Lead segment, the Group uses the LIFO method ( Last in first out, not permitted under IFRS) in its internal reporting to measure inventories for its main lead smelter in Nordenham. When assessing the performance of the Zinc segment, the Group continues to consolidate its investment in Recytech SA proportionately, which is not permitted under IFRS. See Note 4 to the condensed consolidated financial statements at June 30, Cash net of bank overdraft facilities. Consolidated sales in the first six months of 2016 came to million, down 15% compared with the same period of In the first half of 2016, consolidated EBITDA under IFRS moved back to breakeven point, posting a very small loss of 0.1 million. This represented a very significant improvement on the first half of 2015, when it recorded a loss of 2.8 million. Over the same period, restated consolidated EBITDA came to 3.7 million in positive territory, down from 4.5 million in the first half of Despite the significant drop in lead and zinc prices in the first half of 2016 compared with the first half of 2015, the Group s operating performance recorded a clear improvement. It benefited from a favorable base of comparison in both its major businesses as no scheduled maintenance shutdowns occurred in the first half of 2016 at the Weser-Metall GmbH lead smelter and the electric arc dust recycling furnace at Harz-Metall GmbH s plant in the Zinc segment. It also benefited from the pursuit of the selective purchasing strategy in the Lead segment. The Group recorded an operating loss before non-recurring items under IFRS of 3.2 million in the first half of 2016, a sharp improvement on the operating loss before non-recurring items of 7.4 million in the first six months of

4 The restated 2 operating loss before non-recurring items was close to breakeven point at 0.1 million, compared with a loss of 0.7 million in the same period of The Zinc segment s strong business performance did not fully offset the operating loss recorded by the Lead segment and the other activities (holding company). Even so, the Lead segment s performance improved. This primarily reflected a favorable base of comparison since the Weser-Metall GmbH smelter shut down for maintenance in the second quarter of 2015 (no maintenance shutdown took place in the first half of 2016). The Group s financial result came to a loss of 1.7 million in the first half of 2016, down from a 1.0 million loss in the same period of The key factors behind the increase were the rise in debt and thus in interest expense resulting from the two successive drawdowns on the loan facility granted in 2014 to Recylex SA. These were chiefly intended to cover the final two installments under its continuation plan. Accordingly, Recylex s consolidated net loss attributable to equity holders of the parent came to 4.2 million in the first half of 2016, compared with a loss of 8.8 million in the first six months of The Group s net cash position (after deduction of bank overdraft facilities) stood at negative 5.0 million at June 30, 2016, stable compared with December 31, Gross cash rose slightly to 4.1 million at June 30, 2016 up from 3.8 million at December 31, The effectiveness of the measures taken to preserve cash and optimize capital expenditure were the main factors contributing to this increase. The 4.7 million in positive cash flow generated by operating activities helped to cover capital expenditures and interest expense in the first half of The Group s credit lines totaled 10.2 million at June 30, 2016, 9.1 million of which were drawn down. The Group s credit lines totaled 10.2 million at December 31, 2015, 8.8 million of which were drawn down at the same date. Group cash position and external financing The Group s net cash position (after deduction of bank overdraft facilities) stood at negative 5.0 million at June 30, 2016, the same level as at December 31, The main factors contributing to this change in the cash position were the 4.7 million in positive cash flows generated by operating activities that helped to cover capital expenditures and interest expense in the first half of The Group s credit lines totaled 10.2 million at June 30, 2016, 9.1 million of which was drawn down at same date. The Group s credit lines totaled 10.2 million at December 31, 2015, 8.8 million of which was drawn down. Activities and key events of the first half of 2016 Market conditions during the first half of 2016 The average lead price in the first half of 2016 came to 1,552 per tonne, a decrease of 8% compared with the first-half average of 2015 and a decline of 4% compared with the annual average for The average zinc price in the first half of 2016 was 1,611 per tonne, a fall of 16% compared with the first-half average of 2015 and a decline of 7% compared with the annual average for Average lead and zinc prices during the first six months of the year were as follows: ( per tonne) 1 st half st half 2015 FY 2015 Lead price 1,552 1,680 1,608 Zinc price 1,611 1,913 1,737 4

5 Business activities of the Group s companies during the first half of 2016 From sales to operating income before non-recurring items (1) In millions of euros Sales Restated operating income before nonrecurring items 1 Restatements 2 Operating income before nonrecurring items (IFRS) First-half 2016 First-half 2015 First-half 2016 First-half 2015 First-half 2016 First-half 2015 First-half 2016 First-half 2015 Lead (3.8) (3.4) (2.3) (4.0) (6.1) (7.4) Zinc (4.4) (2.1) Special Metals (0.8) (0.3) (0.8) (0.3) Plastics Other (2.1) (2.2) (2.1) (2.2) TOTAL (0.7) (2.2) (6.7) (6.1) (7.4) (8.3) 1 When assessing the performance of its Lead operating segment, the Group uses the LIFO ( Last in first out ) method in its internal reporting to measure inventories for its main lead smelter in Nordenham, which is not permitted under IFRS. When assessing the performance of the Zinc operating segment, the Group continues to consolidate its investment in Recytech SA proportionally. Note 4 to the condensed consolidated financial statements shows the effects of these restatements. 2 Differences arising from use of the AWC rather than the LIFO method to measure Lead segment inventories and from continued use of the proportionate consolidation method for its investment in Recytech SA in the Zinc segment. Note 4 to the condensed consolidated financial statements shows the effects of these restatements. The Lead segment generated 71% of the Group s consolidated sales, Zinc 19%, Special Metals 5% and Plastics 5%. Lead segment(71% of the Group s consolidated sales) ( million) Six months to June 30, 2016 Six months to June 30, 2015 Sales Operating income before non-recurring items (IFRS) Restated 2 operating income before non-recurring items (4.1) (6.1) (3.9) (3.8) The Lead segment s first-half 2016 sales totaled million, down 15% compared with the first half of Despite a favorable base of comparison given that no maintenance shutdowns occurred in the first half of 2016, contrary to the first six months of 2015, the segment was hit by the fall in lead prices (-8%) and by lower production volumes (-7%) given the reduced availability of materials for recycling. The recycling plants in France and Germany processed a total of 53,000 tonnes of scrap batteries, a fall of 19% on the 65,500 tonnes processed in the first six months of This decline was attributable to the continued pursuit of the selective purchasing strategy for materials for recycling. This is intended to restore margins in the segment, given the persistently very high levels of scrap batteries and their limited availability (owing to the mild weather conditions over the winter). In this context, the Group made adjustments to its purchasing mix in the first half of 2016 to protect Weser-Metall GmbH s cash resources pending significant progress in negotiations aimed at securing financing for the Group s operations in Germany. The shortage of scrap batteries for recycling was thus offset partially through the use of lead concentrates (with a lower lead content than the secondary materials from scrap batteries) as part of the tolling arrangements introduced by Weser-Metall GmbH since the second half of Taking these factors into account, production at the Weser-Metall GmbH smelter totaled 52,011 tonnes in the first half of 2016, down 7% from 55,771 tonnes in the first half of 2015 despite a favorable base of comparison given that no maintenance shutdowns occurred in the first half of 2016, unlike in the same period of The segment s restated operating loss before non-recurring items under IFRS came to 4.1 million in the first half of 2016, a significant improvement on the loss of 6.1 million in the same period of Despite the fall in lead 5

6 prices, this increase was chiefly attributable to a favorable base of comparison owing to the absence of a scheduled maintenance shutdown in the first half of 2016 (one shutdown took place in the first half of 2015) and to the positive impact of industrial and commercial measures taken concerning the segment s supply chain. The restated operating loss before non-recurring items for the same period came to 3.9 million, stable compared with an operating loss of 3.8 million in the first half of With the higher volumes of lead concentrates processed under the tolling arrangements in the first half of 2016 generating a reduction in inventories, the impact of the LIFO restatement was smaller given the reduction in inventories, since the measurement of inventories under the WAC method in line with IFRS was closer to the measurement under the LIFO method. In addition, the Group continued to work hard to satisfy all the conditions attached to the loan proposal received by the Group s German subsidiaries. The aim is to secure the release of the funds during the fourth quarter of This financing package covers the capital expenditures planned by the Group s German subsidiaries, chiefly consisting of Weser-Metall GmbH s new reduction furnace. The goal is to return the Group s Lead segment to profitability by recovering a larger proportion of the lead contained in input materials. Zinc segment (19% of consolidated sales) ( million) Six months to June 30, 2016 Six months to June 30, 2015 Sales Operating income before non-recurring items (IFRS) Restated 2 operating income before non-recurring items The Zinc segment s sales came to 32.3 million in the first half of 2016, down 12% from 36.9 million in the first half of Restated to include the Group s share of 50%-owned Recytech SA s sales, the segment s sales came to 39.9 million, down an identical 13% compared with the same period of This decline was chiefly attributable to the strong decline in zinc prices compared with the first half of 2015, partly offset by higher production. In electric arc furnace dust recycling, Recytech SA in France and Harz-Metall GmbH in Germany processed 83,535 tonnes of dust during the first half of 2016, compared with 73,900 tonnes in the first half of This increase was largely attributable to the fact that no maintenance shutdowns took place at Harz-Metall GmbH in As a result, total Waelz oxide production at the two plants rose 9% to 34,884 tonnes in the first half of 2016 from 32,132 tonnes in the same period of The scrap zinc recycling business was also impacted by the fall in zinc prices over the period, which took its toll on selling prices. Against a persistently very challenging context in terms of its purchases of materials for recycling, Norzinco GmbH processed 10,906 tonnes of zinc-rich materials, compared with 10,940 tonnes in the first six months of 2015, and zinc oxide production edged up (+3%) to 11,714 tonnes in the first half of 2016, from 11,417 tonnes in the same period of The Zinc segment recorded operating income before non-recurring items of 2.5 million in the first half of 2016, compared with a positive figure of 1.5 million in the equivalent period of This increase despite the strong decline in zinc prices was primarily achieved thanks to the very strong performance by Harz-Metall GmbH against a favorable base of comparison. Adjusted for the impact of IFRS 10 and 11, restated 2 operating income before non-recurring items* came to 5.6 million in the first half of 2016, compared with 5.9 million in the first six months of This small decline was attributable mainly to lower zinc prices. 6

7 Special Metals segment (5% of consolidated sales) ( million) Six months to June 30, 2016 Six months to June 30, 2015 Sales Operating income before non-recurring items (IFRS) 0.2 (0.8) The Special Metals segment s first-half 2016 sales totaled 8.0 million, down 29% on their level in the first half of In spite of a slight increase in high-purity arsenic sales, this strong contraction was chiefly attributable to lower germanium sales volumes, coupled with the ramp-up in tolling for this metal, the steep decline in indium prices and, to a lesser extent, lower gallium sales. Despite this top-line decline, the segment s operating income before non-recurring items reached breakeven point. It totaled 0.2 million in the first half of 2016, compared with a loss of 0.8 million in the corresponding period of This profitability improvement was driven primarily by adjustments made to PPM Pure Metals GmbH s industrial strategy, with the ramp-up in tolling for germanium and no inventory writedowns. Plastics segment (5% of consolidated sales) ( million) Six months to June 30, 2016 Six months to June 30, 2015 Sales Operating income before non-recurring items (IFRS) The Plastics segment s first-half 2016 sales totaled 8.4 million, down 12% on the level recorded in the first half of During the first six months of 2016, the segment s total production of recycled polypropylene dropped 15% to 8,058 tonnes from 9,433 tonnes in the first half of With persistently tough conditions caused by the low level of oil prices, C2P in France recorded a modest decline in its sales volumes. Even so, its selling prices held up well thanks to its strategy of diversifying its business portfolio and of moving its products upscale. Conversely, C2P in Germany posted a decline in its sales volumes owing to the reduced appeal of recycled materials compared with primary materials at the current level of prices. The segment s first-half 2016 operating income before non-recurring items came to 0.2 million, a small increase on the 0.1 million recorded in the first six months of In spite of the adverse conditions, the changes made to C2P s marketing strategy in France helped to make up for the substantial decline in volumes, particularly in Germany, owing to the current appeal of primary rather than secondary materials. Latest developments in legal proceedings concerning Recylex SA* Legal proceedings concerning Metaleurop Nord SAS The document summarizing developments in proceedings concerning Recylex SA and Metaleurop Nord SAS is available from the Recylex Group s website ( - News - Legal proceedings schedule). On June 27, 2016, the Conseil d État overturned the Douai Administrative Court s decision on July 21, 2015, pursuant to which Metaleurop Nord s Noyelles-Godault plant was included on the list of facilities eligible for the ACAATA early retirement allocation for asbestos workers for the period from January 1, 1962 until December 31,

8 The case was sent back to the Douai Administrative Court, with different judges to reexamine and rule on both the admissibility and merits of the request to include it on the list. European Commission inquiry into the lead recycling sector On June 24, 2015, the Directorate General for Competition of the European Commission sent a statement of objections to Recylex SA and its subsidiaries purchasing scrap lead batteries. In the first half of 2016, the Company and its subsidiaries involved in these proceedings received requests for additional information from the European Commission, to which they responded by the allotted deadline. * See Note 1, Section D of the condensed consolidated financial statements at June 30, Search for financing German scope of the Recylex Group** On July 6, 2016, the Recylex Group s German subsidiaries received a conditional loan offer from a banking pool. The arrangement of this financing is of paramount importance because it will enable the Group s German subsidiaries to refinance their existing credit lines, to cover their working capital requirement and Weser-Metall GmbH s major investment in Nordenham, the key to restoring the Lead segment s profitability. The consequences of any failure to arrange this financing would be very serious for the Group s German perimeter and thus for the entire Group given the close ties that exist, firstly, between the German subsidiaries and, secondly, between Recylex SA and its Weser-Metall GmbH subsidiary. This indicative offer covers the full amount of the 67 million financing package. It is intended to cover: o the working capital requirements of the Group s German subsidiaries amounting to 17 million ( 10 million to refinance existing credit lines, 5 million to extend the maturity of these lines and 2 million to renew the bank guarantees required for their industrial activities), o the 50 million in investment spending planned by the Group s German subsidiaries, which is key to keep their activities on a sustainable footing, chiefly including Weser-Metall GmbH s new reduction furnace for approximately 40 million. The financing offer provides for various conditions precedent, including: o establishment of security interests in borrowing companies assets, o the award by the Lower-Saxony regional authorities of a specific guarantee covering 80% of the financing for the projected investment spending, o arrangement of a guarantee mechanism (German-law security trust) intended to ensure that the investments required to build Weser-Metall GmbH s planned new reduction furnace are carried out properly, and that obligations with respect to the loan are met, o award of the amended operating permit allowing the installation of Weser-Metall GmbH s new reduction furnace which includes a public consultation and the involvement of several administrative and local authorities, o Recylex SA s commitment to do its utmost to cover the cost of any penalty imposed on the Group in connection with the European Commission s ongoing inquiry concerning the scrap lead battery recycling sector, o a commitment by Glencore International AG, a member of the group to which Recylex SA s main shareholder belongs, to finance: any overrun of the budget for Weser-Metall GmbH s new reduction furnace, subject to a cap of 10 million, any liquidity requirement arising for the German subsidiaries over a period of 12 months after the start-up of the new furnace due in 2018, subject to a maximum amount of 14 million. 8

9 Discussions regarding the financing project are continuing with all the concerned parties and include the refinancing of a 3 million credit line provided by a bank that does not intend to join the future banking pool. The Recylex Group s priority is to conclude this financing and to satisfy all its conditions in order to obtain the funds during the fourth quarter of ** See Note 1 Sections E and F of the condensed consolidated financial statements at June 30, 2016, Note 32 to the consolidated financial statements of the year ended December 31, L Estaque site Following the deferral until December 31, 2018 of the deadline for remediation work at the inactive L Estaque site, Recylex SA has continued to study dedicated solutions for completing remediation and redevelopment of the site. Outlook for the second half of 2016 Commodity prices, especially metals, have picked up significantly since the beginning of the second half of At August 31, 2016, lead and zinc prices stated in US dollars have reached a record high since June 2015, respectively at $ 1,875 per tonne and $ 2,328 $ per tonne. Average prices between July and August 2016 have reached $ 1,836 per tonne for lead and $ per tonne for zinc, above the 2015 average. Lead segment The segment s second-half 2016 financial performance will depend on the direction of lead prices over the period. In this context of strong demand for scrap lead batteries, the Group s strategic priorities are to continue pursuing the selective purchasing policy and to implement the plan to install the new production tool at Weser-Metall GmbH s smelter. Zinc segment In the Zinc segment s two businesses, second-half 2016 financial performance will depend on the direction of zinc prices over the period. In Waelz oxide production, provided that the availability of materials for recycling remains comparable to the situation in the first six months of 2016, Harz-Metall GmbH s and Recytech SA s industrial performance should improve in the second half of 2016 by comparison with the first half of In zinc oxide production, Norzinco GmbH will continue in the second half of 2016 its initiatives to develop and diversify its sources of supply. It also plans to make improvements to its manufacturing base to achieve its aim of restoring its margins. Special Metals segment Whether the Special Metals segment recovers in the second half of 2016 will be determined by the strength of demand from the semiconductor industry and to a lesser extent by trends in the euro/yen exchange rate. PPM Pure Metals GmbH will continue to pursue its expansion strategy for the recycling business and its initiatives to improve the production performance, and it aims to reverse trends in its selling prices in a fiercely competitive environment. Plastics segment Given the high oil price volatility, the Plastics segment s performance in the second half of 2016 will hinge on its ability to pass on the effects of these tough conditions, primarily by paying lower input costs, and to shift its business portfolio towards customers with a preference for recycled materials so that it can keep its margins at the same level. 9

10 As every year, the annual maintenance shutdowns took place at the Group s two plants in July and August Principal related-party transactions The principal related-party transactions are shown in Note 9 to the condensed consolidated financial statements at June 30, 2016, accompanying this report. Statement of changes in equity Changes in equity are shown in the condensed consolidated financial statements at June 30, 2016 accompanying this report. 10

11 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AT JUNE 30, 2016 STATEMENT OF FINANCIAL POSITION 13 CONSOLIDATED INTERIM INCOME STATEMENT 14 STATEMENT OF COMPREHENSIVE INCOME 15 STATEMENT OF CHANGES IN EQUITY AT JUNE 30, CONSOLIDATED CASH FLOW STATEMENT 17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 18 NOTE 1: INFORMATION ON THE COMPANY AND SIGNIFICANT EVENTS OF THE FIRST HALF New standards Estimates 26 NOTE 3: SCOPE OF CONSOLIDATION 26 NOTE 4: OPERATING SEGMENTS 26 NOTE 5: NOTES TO THE INCOME STATEMENT 33 Note 5.1. External costs 33 Note 5.2. Depreciation, amortization and impairment losses 33 Note 5.3. Other non-recurring operating income and expense 33 Note 5.4. Net interest expense 34 Note 5.5. Other financial income and expense 34 Note 5.6. Income taxes 34 Note 5.7. Earnings per share 36 NOTE 6: INFORMATION ON THE FINANCIAL POSITION 36 Note 6.1. Intangible assets, property, plant & equipment, and goodwill 36 Note 6.2. Impairment testing 37 Note 6.3. Other non-current financial assets 37 Note 6.4. Inventories 37 Note 6.5.Trade receivables 38 Note 6.6. Other current assets 38 Note 6.7. Cash and cash equivalents 39 Note 6.8. Equity 39 Note 6.9. Interest-bearing borrowings 41 Note Provisions 42 Note Other current and non-current liabilities 42 Note Other financial instruments 43 NOTE 7: CONTRACTUAL OBLIGATIONS, COMMITMENTS AND CONTINGENCIES 44 NOTE 8: LITIGATION AND CONTINGENT LIABILITIES 45 11

12 NOTE 9: RELATED-PARTY TRANSACTIONS 45 NOTE 10: SUBSEQUENT EVENTS 45 12

13 STATEMENT OF FINANCIAL POSITION At June 30, 2016 Assets Notes June 30, 2016 December 31, Non-current assets Property, plant and equipment ,862 42,179 Intangible assets Financial assets Derivatives Other non-current assets ,653 2,775 Investments in associates... 5,674 7,807 Deferred tax assets ,732 4,634 56,164 59,006 Current assets Inventories ,144 33,678 Trade receivables ,657 19,085 Current income tax assets Other current assets ,530 6,766 Derivatives Cash and cash equivalents ,137 3,845 71,037 63,379 Non-current assets held for sale ,037 63,379 TOTAL ASSETS 127, ,385 Equity and liabilities 6.8 Issued capital... 31,827 31,827 Share premiums Reserves attributable to equity holders of the parent... (56,953) (14,867) Net income attributable to equity holders of the parent... (4,253) (39,363) Translation adjustments... 1,426 1,426 Share premiums and reserves attributable to equity holders of the parent... (27,084) (20,108) Non-controlling interests Total equity (27,084) (20,108) Non-current liabilities Interest-bearing borrowings ,511 11,285 Provisions ,598 25,873 Employee benefits ,994 34,574 Other non-current liabilities ,787 11,787 Deferred tax liabilities ,890 83,519 Current liabilities Interest-bearing borrowings ,752 10,543 Provisions ,700 14,788 Employee benefits ,263 2,253 Trade payables... 30,564 22,871 Current tax liabilities Derivatives Other current liabilities ,116 7,775 69,395 58,974 Liabilities associated with non-current assets held for sale - - Total liabilities 154, ,493 TOTAL EQUITY AND LIABILITIES 127, ,385 13

14 CONSOLIDATED INTERIM INCOME STATEMENT For the six months ended June 30, 2016 Notes First-half 2016 First-half Sales of goods and services , ,135 Total sales 167, ,135 Purchases used... (124,990) (144,949) Staff costs... (22,032) (22,432) External costs (18,762) (22,088) Taxes other than on income... (809) (914) Depreciation, amortization, additions to/(reversals from) provisions and 5.2 impairment losses... (3,102) (4,649) Changes in work-in-progress and finished goods... (2,507) (10,810) Other operating income and expense... 1, Operating income before non-recurring items (3,222) (7,413) Other non-recurring operating income and expense (1,279) (3,796) Share in income of associates... 1,976 2,678 Operating income (2,525) (8,531) Interest income from cash and cash equivalents Gross interest expense... (1,851) (1,061) Net interest expense 5.4 (1,841) (1,047) Other financial income and expense Income taxes (13) 744 Net income before non-controlling interests (4,253) (8,814) Non-controlling interests... Net income attributable to equity holders of the parent... (4,253) (8,814) Earnings per share: (in euros) (in euros) - basic (0.18) (0.37) - diluted (0.17) (0.36) 14

15 STATEMENT OF COMPREHENSIVE INCOME For the six months to June 30, 2016 First-half 2016 First-half 2015 Net income... (4,253) (8,814) Translation adjustments Cash flow hedges Deferred tax on cash flow hedges Actuarial gains and losses on pension liabilities Deferred tax arising from adoption of the revised IAS Income and expenses recognized directly in equity Total other comprehensive income to be reclassified subsequently in net income Actuarial gains/(losses) (*)... (3,854) 1,387 Deferred taxes on actuarial gains/(losses)... 1,115 (401) Share of associates in items not to be reclassified in net income, net of tax... Total other comprehensive income not to be reclassified in net income... (2,739) 986 Comprehensive income... (6,976) (7,824) Of which: Attributable to equity holders of the parent (6,976) (7,824) Non-controlling interests - - (*) This amount reflects recognition of the impact of the change in the actuarial rate (from 2% at December 31, 2015 to 1.29% at June 30, 2016). The provisions for employee benefits shown on the statement of financial position were thus adjusted by this amount. 15

16 STATEMENT OF CHANGES IN EQUITY AT JUNE 30, 2016 (in thousands of euros, except per share data) Number of shares Share capital Share premiums Reserves potentially reclassifiable in profit or loss Consolidated reserves Total equity, attributable to eq. holders of parent Total equity Equity at January 1, ,110,982 48, (12,499) (18,596) 17,996 17,996 Net income for the year (8,814) (8,814) (8,814) Other comprehensive income Change in hedging reserves net of tax Changes in translation adjustments Actuarial gains and losses on pension liabilities net of tax Total other comprehensive income Comprehensive income for the period (8,810) (7,824) (7,824) Share-based payment Increase/reduction in capital - (16,395) , Equity at June 30, ,110,982 31, (11,513) (11,011) 10,171 10, Equity at January 1, ,110,982 31, (11,251) (41,553) (20,108) (20,108) Net income for the year (4,253) (4,253) (4,253) Other comprehensive income Change in hedging reserves net of tax Changes in translation adjustments Actuarial gains and losses on pension liabilities net of tax Total other comprehensive income (2,739) 16 (2,723) (2,723) Comprehensive income for the period (2,739) (4,238) (6,976) (6,976) Share-based payment Increase/reduction in capital Equity at June 30, ,110,982 31, (13,990) (45,791) (27,084) (27,084) (2,739) (2,728) 5 (2,728) 16

17 CONSOLIDATED CASH FLOW STATEMENT For the six months to June 30, 2016 First-half 2016 First-half 2015 Income from recurring operating activities (3,223) (7,413) Depreciation, amortization, additions to/(reversals from) provisions and impairment losses 3,102 4,649 EBITDA (121) (2,764) Change in recurring working capital requirement 3,860 7,364 - Inventories (902) 12,638 - Trade receivables (3,500) Trade payables 7,692 (6,776) - Other current assets and liabilities 1, Provision for employee benefit obligations (1,002) Recurring non-cash expenses Elimination of stock option impacts Gains or losses on disposals of non-current assets (42) 11 - Employment liabilities Cash flow from recurring operating activities before tax 4,277 4,761 Income tax paid (527) (402) Cash flow from recurring operating activities after tax 3,751 4,359 Other non-recurring operating income and expense (1,187) (149) Other income and expense relating to rehabilitation of sites (745) (695) Change in non-recurring working capital requirement Other financial income and expense (248) (228) Currency gains and losses Factoring costs (476) (378) Other financial income and expense (26) (24) Change in liabilities under the continuation plan Dividends received 3,000 3,719 Cash flow from operating activities 4,693 7,077 Changes in the scope of consolidation - - Purchases of property, plant and equipment and of intangible assets (2,424) (1,992) Change in financial assets Disposals of property, plant and equipment and of intangible assets Cash flow from investing activities (1,994) (1,633) Issue of borrowings - - Repayment of borrowings (834) (832) Other items relating to financing activities - - Interest income/(expense) on financial assets (1,845) (1,025) Other movements in the share capital - - Cash flow from financing activities (2,679) (1,858) Impact of changes in accounting methods - - Change in cash and cash equivalents 20 3,587 Opening cash and cash equivalents (4,993) (3,692) Closing cash and cash equivalents (*) (4,973) (106) Change in cash and cash equivalents 20 3,587 (*) see Note

18 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the six-month period ended on June 30, 2016 NOTE 1: INFORMATION ON THE COMPANY AND SIGNIFICANT EVENTS OF THE FIRST HALF A. Information on the company With operations in France, Germany and Belgium, Recylex is a European group specialized in lead and plastics recycling (mainly from automotive and industrial batteries), zinc recycling (from electric arc furnace dust and scrap zinc) and the production of very high-purity special metals. The Group has close to 680 employees (including the headcount of 50%-owned Recytech SA) and posted 385 million in consolidated sales in Recylex SA is a Société Anonyme (joint-stock corporation) registered in France and listed on Euronext Paris (RX - ISIN code: FR ). On September 15, 2016, the Board of Directors approved and authorized publication of Recylex SA s condensed consolidated interim financial statements for the six-month period ended on June 30, B. Significant events during the first half of 2016 The average lead price in the first half of 2016 came to 1,552 per tonne, a decline of 8% compared with the firsthalf average of 2015 and a fall of 4% compared with the annual average for The average zinc price in the first half of 2016 was 1,611 per tonne, a decline of 16% compared with the first-half average of 2015 and a fall of 7% compared with the annual average for Average lead and zinc prices during the first six months of the year were as follows: Average ( per tonne) First-half 2016 First-half 2015 FY 2015 Lead price 1,552 1,680 1,608 Zinc price 1,611 1,913 1,737 C. Consolidated first-half 2016 results by sector of activity (excluding holding companies and environment) The Lead segment generated 71% of the Group s consolidated sales, the Zinc segment 19%, the Special Metals segment 5% and the Plastics segment 5%. In the first half of 2016, consolidated EBITDA under IFRS moved back to breakeven point, posting a very small loss of 0.1 million. This represented a very significant improvement on the first half of 2015, when it recorded a loss of 2.8 million. Over the same period, restated consolidated EBITDA 1 came to 3.7 million in positive territory, down from 4.5 million in the first half of Despite the significant drop in lead and zinc prices in the first half of 2016 compared with the first half of 2015, the Group s operating performance recorded a clear improvement. It benefited from a favorable base of comparison in both its major businesses as no scheduled maintenance shutdowns occurred in the first half of 2016 at the Weser-Metall GmbH lead smelter and the electric arc dust recycling furnace at Harz-Metall GmbH s plant in the Zinc segment. It also reaped the benefit of the continued pursuit of the selective purchasing strategy in the Lead segment. 1 Using the LIFO method to measure the lead inventories (not permitted under IFRS) and continuing to consolidate its investment in Recytech SA proportionately. (Note 4 to the condensed consolidated financial statements) 18

19 Lead segment The Lead segment s first-half 2016 sales totaled million, down 15% compared with the first half of Despite a favorable base of comparison given that no maintenance shutdowns occurred in the first half of 2016, contrary to the first six months of 2015, the segment was hit by the fall in lead prices (-8%) and by lower production volumes (-7%) given the reduced availability of materials for recycling. The plants in France and Germany processed a total of 53,000 tonnes of scrap batteries, a fall of 19% on the 65,500 tonnes processed in the first six months of This decline was attributable to the continued pursuit of the selective purchasing strategy for materials for recycling. This is intended to restore margins in the segment, given the persistently very high levels of scrap batteries and their limited availability (owing to the mild weather conditions over the winter). Against this backdrop, the Group made adjustments to its purchasing mix in the first half of 2016 to protect Weser-Metall GmbH s cash resources pending significant progress in negotiations aimed at securing financing for the Group s sub-group in Germany. The shortage of scrap batteries for recycling was thus offset partially through the use of lead concentrates (with a lower lead content than the secondary materials in scrap batteries) as part of the tolling arrangements introduced by Weser-Metall GmbH since the second half of Taking these factors into account, production at the Weser-Metall GmbH smelter totaled 52,011 tonnes in the first half of 2016, down 7% from 55,771 tonnes in the first half of 2015 despite a favorable base of comparison given that no maintenance shutdowns occurred in the first half of 2016, unlike in the same period of The segment s restated operating loss before non-recurring items under IFRS came to 4.1 million in the first half of 2016, a significant improvement on the loss of 6.1 million in the same period of Despite the fall in lead prices, this increase was chiefly attributable to a favorable base of comparison owing to the lack of a scheduled maintenance shutdown at the smelter in the first half of 2016 (one shutdown took place in the first half of 2015) and to the positive impact of industrial and commercial measures taken concerning the segment s supply chain. The restated operating loss before non-recurring items (measuring inventories using the LIFO method) for the same period came to 3.9 million, stable compared with an operating loss of 3.8 million in the first half of With the higher volumes of lead concentrates processed under the tolling arrangements in the first half of 2016 generating a reduction in inventories, the impact of the LIFO restatement was smaller given the reduction in inventories, since the measurement of inventories under the AWC method in line with IFRS was closer to the measurement under the LIFO method. In addition, the Group continued to work hard to satisfy all the conditions attached to the loan proposal received by the Group s German subsidiaries. The aim is to secure the release of the funds during the fourth quarter of To recap, the financing package covers the investment spending planned by the Group s German subsidiaries, chiefly consisting of Weser-Metall GmbH s new reduction furnace. The goal is to return the Group s Lead segment to profitability by recovering a larger proportion of the lead contained in input materials. Zinc segment* The Zinc segment s sales came to 32.3 million in the first half of 2016, down 12% from 36.9 million in the first half of Restated to include the Group s share of 50%-owned Recytech SA s sales, the segment s sales came to 39.9 million, down an identical 13% compared with the same period of This decline was chiefly attributable to the steep decline in zinc prices compared with the first half of 2015, partly offset by higher production. In electric arc furnace dust recycling, Recytech SA s two plants in France and Harz-Metall GmbH in Germany processed 83,535 tonnes of dust during the first half of 2016, compared with 73,900 tonnes in the first half of This increase was largely attributable to the fact that no maintenance shutdowns took place in As a result, total Waelz oxide production at the two plants rose 9% to 34,884 tonnes in the first half of 2016 from 32,132 tonnes in the same period of The scrap zinc recycling business was also held back by the fall in zinc prices over the period, which took its toll on selling prices. Against a persistently very challenging backdrop in terms of its purchases of materials for recycling, Norzinco GmbH processed 10,906 tonnes of zinc-rich materials, compared with 10,940 tonnes in the first six months of 2015, and zinc oxide production edged up (+3%) to 11,714 tonnes in the first half of 2016, from 11,417 tonnes in the same period of The Zinc segment recorded operating income before non-recurring items of 2.5 million in the first half of 2016, compared with a positive figure of 1.5 million in the equivalent period of This increase despite the steep 19

20 decline in zinc prices was primarily achieved thanks to the very strong performance by Harz-Metall GmbH against a favorable base of comparison. Adjusted for the impact of IFRS 10 and 11, restated operating income before non-recurring items* came to 5.6 million in the first half of 2016, compared with 5.9 million in the first six months of This small decline was attributable mainly to lower zinc prices. *The Group s holding in Recytech SA (50%-owned by Recylex), previously consolidated under the proportionate method (a method not applicable since January 1, 2014), will now be accounted for under the equity method (see Note 2). As a result, the Group s consolidated financial statements no longer reflect the interest held in Recytech, except for the Share in income from associates and Investments in associates lines. That said, the Group decided to continue using the proportionate consolidation method for Recytech SA in the segment information presented for the Zinc segment, which merely comprises income statement items (See Note 4). This shows the Zinc segment s business and industrial performance in line with the data analyzed in its internal reporting. Special Metals segment The Special Metals segment s first-half 2016 sales totaled 8.0 million, down 29% on their level in the first half of In spite of a slim increase in high-purity arsenic sales, this hefty contraction was chiefly attributable to lower germanium sales volumes, coupled with the ramp-up in tolling for the metal, the steep decline in indium prices and, to a lesser extent, lower gallium sales. Despite this top-line decline, the segment s operating income before non-recurring items reached breakeven point. It totaled 0.2 million in the first half of 2016, compared with a loss of 0.8 million in the corresponding period of This profitability improvement was driven primarily by adjustments made to PPM Pure Metals GmbH s industrial strategy, with the ramp-up in tolling for germanium and no inventory writedowns. Plastics segment The Plastics segment s first-half 2016 sales totaled 8.4 million, down 12% on the level recorded in the first half of During the first six months of 2016, the segment s total production of recycled polypropylene dropped 15% to 8,058 tonnes from 9,433 tonnes in the first half of Amid persistently tough conditions caused by the low level of oil prices, C2P in France recorded a modest decline in its sales volumes. Even so, its selling prices held up well thanks to its strategy of diversifying its business portfolio and of moving its products upscale. Conversely, C2P in Germany posted a decline in its sales volumes owing to the reduced appeal of recycled materials compared with primary materials at the current level of prices. The segment s first-half 2016 operating income before non-recurring items came to 0.2 million, a small increase on the 0.1 million recorded in the first six months of In spite of the adverse conditions, the changes made to C2P s marketing strategy in France helped to make up for the substantial decline in volumes, particularly in Germany, owing to the current appeal of primary rather than secondary materials. D. Legal proceedings Legal proceedings concerning Metaleurop Nord SAS The claims lodged against Recylex SA by former employees of Metaleurop Nord SAS a Recylex SA subsidiary in liquidation and also concerning the liquidators of Metaleurop Nord SAS are still ongoing. A document summarizing the developments in claims against Recylex SA and Metaleurop Nord SAS can be found on the Group s website ( News Legal proceedings schedule). To recap, on July 21, 2015, the Douai Administrative Appeal Court confirmed the inclusion of Metaleurop Nord SAS site in Noyelles-Godault on the list of those eligible for the ( ACAATA ) early retirement allocation for asbestos workers. However, it shortened the eligibility period from January 1, 1962 until December 31, 1989, rather than until December 31, 1996, as was previously the case. Recylex had lodged an appeal with the Conseil d État against this decision. On June 27, 2016, the Conseil d Etat cancelled the order by the Douai Administrative Appeal Court of July 21, 2015 insofar as it related to Metaleurop Nord s site in Noyelles-Godault being classified on the list of facilities entitling asbestos workers to ACAATA early retirement benefits for the period from January 1, 1962 to December 31, The matter was sent back to the Douai Administrative Court, with different judges to re-examine and rule on both the admissibility and merits of the classification request. 20

21 Following the decision on July 21, 2015 to include the site on the list, a provision for contingencies totaling 4.3 million was set aside in the financial statements at December 31, 2015 in view of the claims for damages for the prejudice of anxiety and disruption to their livelihood lodged by 532 former Metaleurop Nord SAS employees. Recylex is challenging both the admissibility and merits of these claims. European Commission inquiry into the lead recycling sector On June 24, 2015, the Directorate General for Competition of the European Commission sent a statement of objections to Recylex SA and its subsidiaries purchasing scrap lead batteries. A statement of objections is a preliminary stage in official inquiries by the Directorate General for Competition of the European Commission, which informs the relevant parties in writing of the complaints made against them. The fact that a statement of objections has been sent does not prejudge the final outcome of the procedure, as the decision is made after a review of the responses made by the parties to which it is sent. The Group responded to the European Commission s statement of objections by the allotted deadline. The hearings for the companies that received the statement of objections to present the arguments were held on November 17 and 18, Pursuant to Article 23 of Regulation (EC) no. 1/2003, the final amount of any fine may not in any event exceed 10% of the total sales recorded during the financial year preceding the European Commission s decision, i.e. 38,539,616 based on consolidated sales in the year ended December 31, 2015, prior to application of any reductions that may be requested under the European Commission rules. Given the tremendous uncertainty concerning the eventual size of any fine that Recylex may ultimately receive at the end of this procedure, Recylex did not set aside any provisions for contingencies in its financial statements at June 30, In the first half of 2016, the Company and its subsidiaries involved in these proceedings received requests for additional information from the European Commission, to which they responded within the allotted deadline. E. Group s cash position and external financing Group s cash position The Group s net cash position (after deduction of bank overdraft facilities) stood at negative 5.0 million at June 30, 2016, the same level as at December 31, The main factors contributing to this change in the cash position were the 4.7 million in positive cash flows generated by operating activities that helped to cover capital expenditures and interest expense in the first half of The Group s credit lines totaled 10.2 million at June 30, 2016, 9.1 million of which was drawn down at same date. The Group s credit lines totaled 10.2 million at December 31, 2015, 8.8 million of which was drawn down. - Presentation of the refinancing proposal On July 6, 2016, the Recylex Group s German subsidiaries received a conditional loan offer from a banking pool. This indicative offer covers the full amount of the desired 67 million financing package. It is intended to cover: - the working capital requirements of the Group s German subsidiaries amounting to 17 million ( 10 million to refinance existing credit lines, 5 million to extend the maturity of these lines and 2 million to renew the bank guarantees required for their industrial activities) - the 50 million in investment spending projected by the Group s German subsidiaries, which is key to keep their activities on a sustainable footing, chiefly including Weser-Metall GmbH s new reduction furnace for approximately 40 million. The goal is to return the Group s Lead segment to profitability by recovering a larger proportion of the lead contained in input materials. The financing offer provides for various conditions precedent, including: - establishment of security interests in borrowing companies assets - the award by the Lower-Saxony regional authorities of a specific guarantee 80% of the financing for the projected investment spending - arrangement of a guarantee mechanism (German-law security trust) intended to ensure that the investments required to build Weser-Metall GmbH s planned new reduction furnace are carried out properly, and that obligations with respect to the loan are met 21