RECYLEX SA: FULL-YEAR 2017 RESULTS

• Strong improvement in the Group's performance owing to the rise in metals prices and to very good levels of production which offset the maintenance shutdowns
• Further profitability improvement in the Lead and Zinc segments, a stable performance in the Plastics segment at breakeven, and a smaller loss in the Special Metals segment
• Restated² EBITDA¹ up +€14.2 million to €33.5 million, restated² operating income before non-recurring items of €25.0 million and net income of €18.0 million, all indicators improving from one half to another in 2017
• Increase in debt mainly to finance capital expenditures and following conversion of provisions into debt
• Construction work continuing on schedule on the reduction furnace, with commissioning planned at the end of the first half of 2018

Suresnes, April 13, 2018: Recylex S.A. is publishing its consolidated full-year results for 2017, as approved today by its Board of Directors.
The 2017 Annual Financial Report, filed today with the Autorité des Marchés Financiers, may be consulted on the Company's website at www.recylex.fr (Shareholders/Investors - Regulated Information - Annual Financial Report).

Sebastian Rudow, Chairman and Chief Executive Officer of the Recylex Group, commented:
"There was a strong improvement in the Recylex Group's results in 2017. While the rise in metal prices was a key driver, our high production levels largely counterbalanced the major maintenance shutdowns in the Lead and Zinc segments. While facing tough conditions the Plastics segment held up well especially in France, and the Special Metals segment ended up with a significant smaller loss. Our Group's performance in 2017 genuinely reflects an important step of our recovery, the strength of our roots in the European circular economy and our teams' commitment throughout the year. In parallel, the Group's debt increased significantly, primarily to build for our future. Today, Recylex has to be bold and act with convictions in order to renew itself, enhance its performances and expand. The commissioning of the new reduction furnace in Germany, scheduled for the end of the first half of 2018, will mark a major step of our industrial overhaul. Thanks to this renewed enthusiasm, all our teams will be tasked with keeping this tremendous momentum going and pursuing further modernization."

1. Consolidated financial data (audited)

2. Trend in metals prices in Euros in the year to December 31, 2017⁴

3. 2017 key figures at December 31, 2017

• Consolidated statement of income

The Group's 2017 sales came to €450.3 million, a strong 18% increase on 2016. Restated² sales totaled €476.5 million in 201, a 19% increase compared with 2016.

2017 operating income before non-recurring items came to €14.5 million under IFRS, a strong increase on the breakeven performance recorded in 2016. Restated² operating income before non-recurring items came to €25.0 million compared with €9.0 million in 2016, a comparable improvement as for the IFRS figures.
Thanks to a supportive environment due to the rise in metals prices and despite an unfavorable base of comparison linked to the major maintenance shutdowns in the Lead and Zinc segments in 2017 (no shutdowns in 2016), this increase in the Group's financial performance chiefly reflected:

• The improvement in the Lead segment's operating income before non-recurring items to €7.3 million, after returning positive in 2016 at €3.7 million,
• The strong improvement in the Zinc segment's operating income before non-recurring items to €16.4 million from €6.9 million in 2016,
• Although the Plastics segment's operating income before non-recurring items remained almost stable (at breakeven point in 2017, a very small contraction vs. 2016), the Special Metals segment's loss fell to €1.9 million, compared with a loss of €3.3 million in 2016.

2017 consolidated net income came to €18.0 million. The key contributors were:

• Operating income before non-recurring items of €14.5 million,
• A positive contribution of €1.6 million from other operating income and expenses, which primarily reflects the €1.3 million proceeds from the sale of the FMM S.A. site in Belgium,
• The €10.6 million share in income from equity affiliates,
• €9.9 million in net financial expense compared with net expense of €0.9 million in 2016, comprising:
  • €6.2 million in interest expense, up €2.0 million compared with 2016 owing to the increase in debt,
  • A €3.7 million charge under Other financial income and expenses, including a €2.3 million related to the unwinding in 2017 of the derivative financial instruments recognized at December 31, 2016 (see note 33 to the 2017 consolidated accounts) and €1.3 million in factoring costs,
• A €1.2 million tax benefit reflecting the capitalization of deferred tax assets in Germany.

Net income came back positive in 2017 after recording a loss of €10.1 million in 2016, representing the second successive annual increase. This strong improvement of +€28.1 million compared with 2016 was attributable to:

• The improvement in the operational profitability of the Group (+€14.6 million) and of companies accounted for under the equity method (+€4.0 million),
• The impact in 2016 of the provision for the European Commission's fine (+€26.7 million),
• The increase in financial expense (-€9.0 million),
• The reduction in deferred tax assets recognized (-€3.8 million),
• The decline in reversals of provisions for impairment (-€3.3 million),
• The -€0.4 million difference between the amounts of the indemnities paid to former Metaleurop Nord employees and of the reversal of the related provisions.

• Key consolidated statement of financial position headings

Thanks to a very strong improvement in EBITDA to €22.9 million in 2017 from €9.3 million in 2016, cash flow generated by the Group's production activities before non-recurring items remained in positive territory at €0.9 million compared with €10.8 million in 2016. Despite the significant improvement in the profitability of the Lead and Zinc segments and the increase in dividends received from equity affiliates, this decline was chiefly attributable to the €23.0 million increase in the Group's working capital requirement as a result of expansion in the business in  2017 which led to:

• The significant increase in the value of materials inventories (€11.0 million) owing to higher lead and zinc prices, as well as volume growth,
• The increase in trade receivables (€6.0 million) and the decline in trade payables (€5.5 million).

In addition, the €39.8 million in cash generated by financing activities helped to cover in full the cash used in investing activities (€36.6 million in 2017, a significant increase compared with €6.7 million in 2016), and a portion of the cash used in non-recurring operating activities, which chiefly comprised:

• Payment of €8.2 million to former Metaleurop Nord employees pursuant to the rulings handed down by the Douai Appeal Court on January 31, 2017 and the €1.4 million paid to the European Commission under the staggered payment plan for the fine imposed to the Group on February 8, 2017,
• €2.0 million in environmental expenses.

For all these reasons, the Group's net cash position, after deducting the credit lines used, totaled negative €9.5 million at December 31, 2017 compared with negative €7.0 million at December 31, 2016. The cash consumption remained moderate given the high level of activity in 2017 compared with 2016, combined with the rise in metals prices, the pick-up in investments, the impact of the major maintenance shutdowns in 2017 and significant non-operating expenses.

Consolidated equity at December 31, 2017 stood at negative €4.2 million, a major improvement of €26.8 million from negative €31.0 million at December 31, 2016. This strong progress was chiefly attributable to:

• The recognition of €18.0 million in net income in 2017,
• The €6.9 million in capital raised under the equity line⁴,
• The recognition of €1.1 million in actuarial gains net of deferred taxes concerning provisions for pensions and post-retirement obligations.

The Group's net debt totaled €93.1 million at December 31, 2017, compared with €27.1 million at December 31, 2016. This strong increase was chiefly attributable to:

• The €32.2 million drawdown on the bank borrowings arranged in Germany in December 2016 to finance investments for the German subsidiaries, chiefly including construction work on the Lead segment's new reduction furnace,
• Conversions of existing provisions into debt, including €25.9 million linked to the European Commission's fine,
• The €7.5 million drawdown on the loan facility⁵ arranged by Recylex S.A. in 2014; the entire amount of the €16.0 million loan facility has now been used.

Consolidated debt with a maturity of over five years at December 31, 2017 stood at €46.6 million. In addition, available credit lines totaled €15.0 million at December 31, 2017, compared with €13.2 million at December 31, 2016, and were used in full.

4. Results by segment in the year to December 31, 2017 (excluding holding company)

• Lead segment (72% of 2017 sales)

Thanks to a favorable environment in 2017 (strong rise in lead prices and improved availability of scrap batteries), the Group continued to pursue its policy of maintaining margins and the lead smelter's purchasing mix shifted in favor of secondary materials. In addition, lead concentrates tolling volumes were reduced owing to the less attractive commercial conditions.
The Group's treatment plants recycled 137,100 tonnes of scrap lead-acid batteries (up 24%) and the Weser-Metall GmbH smelter produced 122,600 tonnes of lead ingots (up 5%) despite a major maintenance shutdown in the first half of 2017 (no shutdowns in 2016).

For all these reasons, the Lead segment achieved another improvement in its performance. It recorded IFRS operating income before non-recurring items of €7.3 million in 2017, a solid increase on the €3.7 million it generated in 2016. The Lead segment's restated² 2017 operating income before non-recurring items rose to €7.3 million from €3.2 million in 2016.
The slight slowdown in the second half of 2017 compared with the first half of 2017 was chiefly attributable to less supportive commercial conditions for lead concentrates, as well as, to a lesser extent, to a short maintenance shutdown at the Nordenham smelter in the fourth quarter.

Given the segment's performance and better outlook, the Group reversed €2.3 million in provisions for asset impairment.

• Zinc segment (22% of 2017 sales)

With 178,200 tonnes of electric arc furnace dust processed (vs. 173,700 tonnes in 2016), Waelz oxide production at the Group's two plants (Harz-Metall GmbH in Germany and 50%-owned Recytech S.A. in France), totaled 73,270 tonnes, up from 72,600 tonnes in 2016. That represented a 1% increase despite the major scheduled maintenance shutdown at the Harz-Metall GmbH plant in the first half of 2017.
In addition, with 22,600 tonnes of waste recycled (compared with 22,300 tonnes in 2016), zinc oxide production at the Norzinco GmbH subsidiary in Germany totaled 23,800 tonnes, which was stable compared with 2016.

The Zinc segment IFRS operating income before non-recurring items stood at €16.4 million, a substantial increase on the €6.9 million recorded in 2016. Restated² operating income before non-recurring items came to €32.2 million, up from €16.6 million in 2016.
As a result, the Zinc segment's performance improved compared with 2016 and in the second half of 2017 compared with the first half of 2017. The key factors at work were the sensitivity of its earnings to zinc prices, which rallied significantly in 2017 (to reach yearly highs in the second half of 2017) and the solid levels of production, which helped to make up completely for Harz-Metall GmbH's major scheduled maintenance shutdown in the first half of 2017 (vs. no such shutdowns in 2016).

• Special Metals segment (3% of 2017 sales)

The segment's operating loss before non-recurring items came to €1.9 million in 2017, compared with a loss of €3.3 million in 2016.

Despite persistently tough conditions, this improvement was generated by solid arsenic sales volumes, sales and marketing initiatives during 2017 to restore margins on germanium sales, efforts to diversify the metals portfolio and cost-cutting measures.

As a result, an additional asset impairment loss of €0.5 million was recognized.

•  Plastics segment (3% of 2017 sales)

The Group's two subsidiaries (C2P SAS in France and C2P-Germany GmbH) produced 13,260 tonnes of recycled polypropylene, down 10% on the 14,830 tonnes recorded in 2016.
Operations were again heavily affected by the reduced competitiveness of recycled materials compared with virgin polypropylene and weak demand from the automotive sector, especially in Germany.

Despite these tough conditions, the segment's operating income before non-recurring items remained positive at €0.1 million in 2017, compared with €0.3 million in 2016.

5. On going proceedings

• Legal proceedings concerning Metaleurop Nord S.A.S.⁶

The April 12^th, 2018 update summarizing the proceedings concerning Metaleurop Nord SAS and Recylex S.A. is available from the Recylex Group's website at www.recylex.fr - News - Legal proceedings schedule.

Key developments during 2017 included:

• All the damages payable in accordance with the 187 rulings handed down on January 31, 2017 by the Douai Appeal Court were paid by Recylex S.A. on December 1, 2017 to the former Metaleurop Nord S.A.S. employees. Its principal amount totaled €7,759,800. Recylex S.A. has lodged an appeal against these decisions before the Cour de Cassation which examined this appeal at its hearing on April 10, 2018. Its decisions will be issued on May 24^th, 2018.
   
• Furthermore, on March 2, 2017, the Douai Administrative Appeal Court ruled in Recylex S.A.'s favor, deciding to enjoin the French ministry of labor to cancel the order of November 5, 2013 placing the Metaleurop Nord facility in Noyelles-Godault on the list of asbestos manufacturing, flocking and insulating plants eligible for the early retirement allocation for asbestos workers ("ACAATA allocation"). Pursuant to this now definitive judgment, a ministerial decree repealing the classification orders was issued on December 19, 2017. On February 19, 2018, a claim for annulment of this ministerial decree has been lodged by two former employees of Metaleurop Nord S.A.S..
   
• Concerning anxiety damages claims brought by 13 former employees of Metaleurop Nord S.A.S. represented by the CGT union, on March 30, 2018, the Lens Labor Court decided to order Recylex S.A. to pay to each of them an amount between €3,000 and €24,000 as damages, along with €500 under article 700 of the Civil Procedure Code, totaling €186,500. Recylex S.A. will appeal against these decisions, which will thereby suspend their enforcement.
   
• On April 11, 2018, the Arras Commercial Court ruled in favor of Recylex S.A. The claim from the liquidators of Metaleurop Nord S.A.S. was considered inadmissible as being time-barred since March 21, 2013 on the one hand, and for not having been declared within the scope of the judicial recovery procedure of Recylex S.A. whilst their alleged receivable was born before its opening, on the second hand.

• European Commission decision concerning the scrap lead car battery sector⁷

On February 8, 2017, the European Commission fined several European companies active in the scrap lead car battery sector. That included a fine of €26.7 million for the Recylex Group. Recylex and its relevant subsidiaries decided to appeal the European Commission's decision.
After discussions with the European Commission and the Group's main financial partners, a global agreement was reached comprising a staggered payment plan for the fine (with payment of a large proportion of the fine being deferred over the medium to long term), the deferred repayment of existing debt and no changes to existing financing arrangements in France and Germany.
Pursuant to this agreement, Recylex S.A. makes the principal and interest payments due in respect of this fine in line with the schedule outlined in the staggered payment plan.

6. Environmental rehabilitation work by Recylex S.A.⁸

Recylex S.A. resumed rehabilitation work at the L'Estaque site during the second half of 2017 at a cost of €1.2 million. Provisions totaling €9.9 million cover the total cost of the work still to be performed at December 31, 2017, and Recylex S.A. would bear these costs.
The search launched in 2013 for financing or specialized partnerships dedicated specifically to rehabilitation work at the L'Estaque site did not reach any successful conclusion.

7. Other key developments

Following the warrant exercises by Kepler Cheuvreux within the scope of the equity line since it was arranged in December 2016 to cover Recylex S.A.'s cash requirements arising from its continuing activities in France, 1,320,000 new shares (exercise price of between €3.75 and €14.10) were issued as at  March 31, 2018, generating a total net cash flow of €7,932,120 for Recylex S.A..
Consequently, a shareholder who held 1% of Recylex S.A.'s share capital at December 31, 2016 (on the basis of 24,110,982 shares) would have had his/her stake decrease to 0.9481%.

8. Outlook for 2018

• Trends in metals prices and €/$ exchange rate

After an uptrend in 2017, mainly in the second half of the year, metals prices began 2018 at the same levels as in December 2017 despite higher volatility that triggered a slight correction since the middle of the first quarter of 2018. While the outlook for metals prices remains positive given their good fundamentals, consolidation during the year remains a possibility.

In addition, the euro has gained further ground against the US dollar (USD) since beginning of January 2018 as it did throughout 2017. Trends in the euro/US dollar exchange rate (USD) will be a key influence on the Group's economic environment because the current high level of the euro relative to the US dollar and its future trends may drag down metals prices in euros and could impact the Group's performance were the trend to continue or even to gain strength.

• Lead segment

According to industry analysts, the global lead industry experienced a very small supply shortfall in 2017 since consumption was slightly higher than production. They forecast another small shortfall in 2018 followed by a small surplus by 2020. Global lead demand is expected to continue growing at a modest pace over the period (average increase rate of 2%). In parallel, the reopening - either in progress or currently planned - of mines is likely to have a medium-term impact on production levels. As a result, a relative shortfall of lead concentrates is also forecasted in the global market in 2018, leading to unfavorable commercial conditions for smelters as opposed to miners.
The trend in lead prices and in commercial conditions in 2018 compared with 2017 will be a key factor influencing the segment's performance over the year.

The average lead price in Euros during the first quarter of 2018 was equal to the average for the full-year 2017, despite a slight correction in the middle of the quarter. It is however slightly below the average for the first quarter of 2017(-4%).

Construction work continues on Weser-Metall GmbH's new reduction furnace, which is due to be commissioned at the end of the first half of 2018, in line with the initial schedule.
The smelter's production has slowed down during the first quarter of 2018. Its major four-week scheduled maintenance shutdown has been done. During this shutdown, the new reduction furnace was connected to the current furnace.
In the Lead segment, strategic priorities are to pursue the protection of its margins within the current context of good availability of materials for recycling and to ramp up Weser-Metall GmbH's new reduction furnace following its commissioning.

• Zinc segment

The global zinc market recorded a significant supply shortfall in 2017 as a result of strong global demand, the impact of mine closures and capacity reductions by major players in 2016. Accordingly, zinc prices rose sharply in 2017.
Given the new mine openings and reopenings currently underway, as well as new mining projects triggered by the high level of zinc prices at present, industry analysts forecast a renewed supply surplus from 2019 onwards, since these new volumes of zinc concentrates are likely to come onto the market only gradually. Although zinc prices could experience greater volatility during 2018, the outlook is still positive for 2018, despite a smaller forecast supply shortfall than in 2017.
The trend in zinc prices in 2018 compared with 2017 will be a key factor influencing the segment's performance over the year.

The average zinc price in Euros during the first quarter of 2018 was 8% higher compared to the full year 2017 average, despite a slight correction at the end of the quarter. It is also 6% higher compared to the average for the first quarter of 2017. Zinc prices currently remain at close to 10-year highs.

In zinc oxide production, Norzinco GmbH will continue its initiatives in 2018 to develop and to diversify its sources of supply in order to meet the increased demand from customers and improve its margins.
In Waelz oxide production, the next major maintenance shutdown of the Harz-Metall GmbH facility is scheduled for the third quarter of 2018. The previous major maintenance shutdown took place in the first half of 2017. Aside from this shutdown, the Group aims to continue operating at full capacity in 2018.

• Special Metals segment

Trends in the Special Metals segment during 2018 will depend on the strength of demand in the semiconductors sector and on the direction of the euro/yen exchange rate.

Concerning the arsenic business, the outlook seems to be improving in 2018. PPM Pure Metals GmbH's priorities for 2018 are to restore its margins as well as to improve its industrial and commercial efficiencies, especially in the germanium business.

• Plastics segment

Given tough market conditions, the Plastics segment's priorities are to develop sales and to diversify its business portfolio.

C2P France's priority will be to develop new made-to-measure high value-added products to capitalize on its unique and longstanding expertise in polypropylene compound, with the objective to restore its margins. C2P-Germany GmbH aims to focus on margins and develop sales volumes.

9. Financial agenda

• Next report

• Next event

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Regenerating the urban mines
With operations in France and Germany, Recylex is a European group specialized in lead, plastics and zinc recycling, as well as a producer of special metals. A key player in the circular economy with long-standing expertise in urban waste recovery, the Group has more than 660 employees in Europe and generated consolidated sales of €450 million in 2017. For more information about Recylex Group: www.recylex.fr and on twitter: @Recylex

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Press/Investor contact:
Gabriel ZEITLIN
+ 33 (0)1 58 47 29 89
gabriel.zeitlin@recylex.fr

¹ Operating income before non-recurring items and before additions to and reversals from amortization, depreciation, provisions and impairment losses (non-IFRS indicator).

² To assess the performance of its Lead segment, the Group uses the LIFO ("Last in first out", not permitted under IFRS) method in its internal reporting to measure inventories for its main lead smelter in Nordenham. To assess the performance of the Zinc segment, the Group also releases restated financial data including the contribution from 50%-owned Recytech S.A. consolidated proportionately, even though this method is not permitted under IFRS. See Note 19 to the 2017 consolidated financial statements.

³ Cash net of bank overdraft facilities and credit lines used.
⁴ Source: London Metal Exchange 2018 - See the press release dated February 15, 2018.
⁵ see Note 13 to the 2017 consolidated financial statements.
⁶ See Note 1 to the 2017 consolidated financial statements.
⁷ See the press releases dated February 8, 2017 and May 18, 2017, plus Note 1 to the consolidated financial statements for 2017.

⁸ See Note 38 to the 2017 consolidated financial statements.

Disclaimer: This press release may contain forward-looking statements that do not constitute forecasts regarding results or any other performance indicator, but rather trends or targets. These statements are by their nature subject to risks and uncertainties as described in the Company's annual report available on its website (www.recylex.fr). Further information about Recylex is available on its website (www.recylex.fr). Unless otherwise indicated, all comparisons made in this press release are on a year-on-year basis (2017/2016).