Elkem Company Overview and Financials

Risk factors (IV/VIII) 2.1.13 Anti-dumping duties and laws for silicon and ferrosilicon imposed by the EU and the U.S. may expire or be further extended to the disadvantage of Elkem The EU has had anti-dumping duties on imported Chinese silicon since 1990. The level is currently at 16.8% for most of the Chinese production companies. The rates imposed by the European anti-dumping scheme were extended by the European Commission in July 2016 for a period of five years. By the end of July 2021 it will become clear whether the EU producers of silicon ask the EU Commission to extend the anti-dumping duties on Chinese material for a new five year period. The U.S. has had anti-dumping duties for silicon in place since 1998. The anti-dumping duties in the U.S. for Chinese silicon were last reviewed in 2019 and are currently 139.5%. Furthermore, in 2020, the U.S anti-dumping duty on Russian silicon was extended (61.6%-87.1%). From April 2021 anti-dumping duties are collected on U.S silicon imports origination in Iceland (37.8%-47.5%) and in Bosna and Herzegovina (21.4%), and countervailing duties are collected on silicon from Kazakhstan (160%). Canada and Australia also have anti-dumping duties on silicon of Chinese origin. The EU has imposed anti-dumping duties on ferrosilicon from China, Russia and certain other countries with effect from 2008. These were last reviewed in July 2020 and the anti-dumping measures in force are 31.2% ad valorem for the majority of Chinese suppliers and 17.8-22.7% for the Russian suppliers of ferrosilicon to the EU market. As a result of Elkem's global business model, the anti-dumping measures described above have had and likely will continue to have both positive and negative impacts on Elkem's business. Although such measures have the effect of protecting domestic producers, including Elkem's production companies in those markets, from lower-cost competition, as the case may be, such measures also impose costs on exports to those markets, if any. In addition, the expiration of anti-dumping duties could affect European silicon/ferrosilicon prices negatively, as the prices within the EU and the U.S are especially sensitive to expiration of EU or U.S. anti-dumping duties. Any such reduction of European or U.S. sales prices could in turn have a material adverse effect on Elkem's business, results of operations, financial condition and prospects. Even if such duties are extended or increased, continuing the protection of Elkem's operations in those markets, it is likely that Elkem's exports to those markets could be disadvantaged. 2.1.14 The Chinese market has significant excess production capacity for silicon and ferrosilicon In China, there is, and has been for more than a decade, idle production capacity for silicon and ferrosilicon. Such idle capacity is a result of several factors, including stricter environmental laws and regulations and government intervention designed to take excess production off the market. In addition, some Chinese production facilities are located in regions without a stable supply of electricity, as a result of which that production capacity can only be utilised periodically or at certain times of year (for example during the wet season for regions reliant on hydropower) and remains idle during the other periods. In addition, the siloxanes production capacity in China is expected to continue to grow in the coming years. An oversupply of siloxanes overcapacity in China may compensate for undersupply in other regions of the world, but depending on demand level, trade barriers and other restrictions, periods with oversupply of siloxanes may result in lower sales prices for commodity silicones, which could have a material adverse effect on Elkem's business, results of operations, financial condition and prospects. Any significant utilisation of such idle capacity, for example due to a change of government environmental policy or improved access to electricity in affected areas, would substantially increase the supply of silicon and ferrosilicon in the market, which could have a material adverse effect on the market price of such products and, in turn, on Elkem's business, results of operations, financial condition and prospects. 2.1.15 The Group may be unable to remit funds out of or inject capital into China due to exchange controls The Group has significant operations in China and plans to further expand its capacity at the Xinghuo Silicones plant. The Chinese government has implemented exchange controls requiring filing procedures to move capital in and out of China. Accordingly, foreign companies trying to repatriate profits, pay dividends, repay loans and remit proceeds from assets, products or services sold in China may experience difficulties on their outbound transfers, which may be disruptive to those foreign companies' operations in China. The restrictions are not always clear, especially in relation to requirements and process time, and may vary based on the companies' locations in China. The Group may be affected by the aforementioned restrictions, in particular to the extent it desires to refinance certain indebtedness in China, and may therefore experience difficulty and uncertainty in relation to its Chinese operations which may in turn have a material adverse effect on the Group's business, financial condition and results of operations. 2.1.16 Elkem may make acquisitions in the future that prove unsuccessful or divert the Group's resources Elkem may in the future consider making additional strategic acquisitions, particularly in the silicones business, to support future growth and profitability. Successful growth through acquisitions is dependent upon the Group's ability to identify suitable acquisition targets, conduct appropriate due diligence, negotiate transactions on favourable terms, obtain required licenses and authorisations and ultimately complete such acquisitions and integrate acquired entities into the Group. There can be no assurance that acquisition opportunities will be available on acceptable terms or at all or that Elkem will be able to obtain necessary financing or regulatory approvals to complete potential acquisitions. If the Group makes acquisitions, it may be unable to generate expected margins or cash flows, or realise the anticipated benefits of such acquisitions, including growth or expected synergies. Elkem's assessment of and assumptions regarding acquisition targets may prove to be incorrect, and actual developments may differ significantly from expectations. The Group may not be able to integrate acquisitions successfully and integration may require greater investment and time than anticipated. Additionally, the acquisitions may result in unintended consequences, for example, if significant liabilities are not identified during due diligence or come to light after the expiration of any applicable warranty or indemnity periods. The process of integrating acquisitions may also be disruptive to the Group's operations, as a result of, among other things, unforeseen legal, regulatory, contractual and other issues and difficulties in realising operating synergies, which could cause the Group's results of operations to decline. Moreover, any acquisition may divert management's attention from day to day business and may result in the incurrence of additional debt. Should any of the above occur in connection with an acquisition, there could be a material adverse effect on Elkem's business, results of operations, financial condition and prospects. Elkem is exposed to exchange rate fluctuations 2.1.17 Elkem is exposed to translation risk in respect of exchange rate fluctuations. As Elkem reports its consolidated results in NOK, the value of the NOK relative to its foreign operating subsidiaries' functional currencies will affect its combined income statement and combined statement of financial position as the operating results of those subsidiaries are translated into NOK for reporting purposes. Elkem 42