6-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2021

Commission File Number: 001-40007

 

 

Atotech Limited

(Exact name of Registrant as specified in its charter)

 

 

Bailiwick of Jersey

(Jurisdiction of incorporation)

William Street, West Bromwich

West Midlands, B70 0BG

United Kingdom

(address of principal executive offices)

 

 

Indicate by check mark whether the registrant files, or will file annual reports under cover Form 20-F or Form 40-F.    

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

 

 

 


Table of Contents

TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION

     1  

Item 1. Unaudited Interim Condensed Consolidated Financial Statements

     1  

Unaudited Interim Consolidated Statements of Comprehensive Income/(Loss)

     1  

Unaudited Interim Consolidated Statements of Financial Position

     2  

Unaudited Interim Consolidated Statements of Cash Flows

     3  

Unaudited Interim Consolidated Statements of Changes in Shareholders’ Equity

     4  

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

     5  

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations

     20  

Item 3. Quantitative and Qualitative Disclosure about Market Risk

     36  

Item 4. Certain Relationships and Related Party Transactions

     37  

PART II — OTHER INFORMATION

     38  

Item 1. Legal Proceedings

     38  

Item 1A. Risk Factors

     38  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     38  

Item 3. Defaults Upon Senior Securities

     38  

Item 5. Other Information

     38  

SIGNATURES

     39  


Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Interim Condensed Consolidated Financial Statements

 

1.

Unaudited Interim Condensed Consolidated Financial Statements

 

1.1

Unaudited Interim Consolidated Statements of Comprehensive Income1

 

($ in millions), except earnings per share

   Note   Six months
ended Jun. 30,
2021
    Three months
ended Jun. 30,

2021
    Six months
ended Jun. 30,
2020
    Three months
ended Jun. 30,
2020
 

Revenue

   (1)     729.7       376.6       543.6       260.9  

Cost of sales, excluding depreciation and amortization

       (352.9     (185.9     (241.4     (121.7

Depreciation and amortization

   (2)     (88.4     (43.8     (360.6     (319.2

Selling, general and administrative expenses

       (129.6     (61.3     (126.9     (59.4

Research and development expenses

       (25.5     (13.2     (23.6     (11.2

Restructuring benefit (expenses)

       0.5       0.6       (1.7     (1.7
    

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

  

 

    133.9       72.9       (210.6     (252.3
    

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense

       (100.4     (14.5     (71.9     (36.3

Other income (expense), net

       (40.9     (4.1     (13.6     18.6  
    

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  

 

    (7.4     54.3       (296.1     (269.9
    

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

   (3)     (34.5     (24.6     (26.7     (13.0
    

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net income (loss)

  

 

    (41.9     29.7       (322.8     (282.9
    

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share

          

Basic earnings (loss) per share

   (4)     (0.32     0.15       (4.27     (3.47

Diluted earnings (loss) per share

   (4)     (0.32     0.15       (4.27     (3.47
    

 

 

   

 

 

   

 

 

   

 

 

 

 

($ in millions)

   Note      Six months
ended Jun. 30,
2021
    Three months
ended Jun. 30,
2021
    Six months
ended Jun. 30,
2020
    Three months
ended Jun. 30,
2020
 

Consolidated net income (loss)

  

 

 

 

     (41.9     29.7       (322.8     (282.9
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

           

Actuarial gains and losses

        10.5       (0.9     (9.2     (7.2

Tax effect

        (3.1     0.3       2.7       2.1  
     

 

 

   

 

 

   

 

 

   

 

 

 

Items not potentially reclassifiable to statement of income

  

 

 

 

     7.4       (0.7     (6.5     (5.1
     

 

 

   

 

 

   

 

 

   

 

 

 

Currency translation adjustment

        (35.8     27.2       (42.8     36.4  

Hedge reserve

        (0.3     (0.4     0.7       (4.0

Thereof: Income (cost) of Hedging (OCI II)

        2.0       0.7       (2.2     (1.8
     

 

 

   

 

 

   

 

 

   

 

 

 

Items potentially reclassifiable to statement of income (loss), net of tax

  

 

 

 

     (36.1     26.8       (42.1     32.4  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss), net amount

  

 

 

 

     (28.8     26.2       (48.6     27.3  
     

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

  

 

 

 

     (70.7     55.8       (371.4     (255.6
     

 

 

   

 

 

   

 

 

   

 

 

 

 

1 

The notes are an integral part of these consolidated financial statements.

 

1


Table of Contents
1.2

Unaudited Interim Consolidated Statements of Financial Position2

 

($ in millions)

   Note   As of Jun. 30,
2021
     As of Dec. 31,
2020
 

Assets

       

Non-current assets

       

Property, plant and equipment

       341.2        359.4  

Intangible assets

       1,410.8        1,471.0  

Goodwill

       796.9        804.1  

Right-of-use assets

       95.5        104.1  

Other financial assets

   (5)     5.8        70.3  

Other non-financial assets

   (5)     3.6        2.7  
    

 

 

    

 

 

 

Total non-current assets

  

 

    2,653.9        2,811.6  
    

 

 

    

 

 

 

Current assets

       

Inventories

       172.9        145.4  

Trade receivables

       258.5        262.0  

Other financial assets

   (5)     18.4        24.9  

Other non-financial assets

   (5)     34.2        24.1  

Tax assets

       50.5        46.4  

Cash and cash equivalents

       249.4        320.1  
    

 

 

    

 

 

 

Total current assets

  

 

    783.9        822.9  
    

 

 

    

 

 

 

Total assets

  

 

    3,437.8        3,634.5  
    

 

 

    

 

 

 

Liabilities & shareholders’ equity

       

Shareholders’ equity

   (6)     

Common shares and preferred shares

       19.5        102.1  

Paid-in surplus and retained earnings

       772.0        261.6  

Currency translation adjustment and other reserves

       91.2        120.0  
    

 

 

    

 

 

 

Total shareholders’ equity

  

 

    882.7        483.7  
    

 

 

    

 

 

 

Non-current liabilities

       

Borrowings

   (8)     1,560.7        2,065.7  

Deferred tax liabilities

       324.6        340.8  

Employee benefits

       161.2        176.2  

Provisions

       13.4        13.2  

Lease liabilities

       61.1        67.7  

Other financial liabilities

       0.0        1.5  
    

 

 

    

 

 

 

Total non-current liabilities

  

 

    2,120.9        2,665.1  
    

 

 

    

 

 

 

Current liabilities

       

Borrowings

   (8)     7.3        0.5  

Trade payables

       216.3        221.0  

Tax liabilities

       87.3        99.2  

Lease liabilities

       13.7        13.8  

Other financial liabilities

   (9)     18.5        38.5  

Other non-financial liabilities

   (9)     74.5        89.7  

Provisions

       16.5        23.0  
    

 

 

    

 

 

 

Total current liabilities

  

 

    434.1        485.8  
    

 

 

    

 

 

 

Total liabilities & shareholders’ equity

  

 

    3,437.8        3,634.5  
    

 

 

    

 

 

 

 

 

2 

The notes are an integral part of these consolidated financial statements.

 

2


Table of Contents
1.3

Unaudited Interim Consolidated Statements of Cash Flows3

 

($ in millions)

   Six months ended
Jun. 30, 2021
    Six months ended
Jun. 30, 2020
 

Operating activities

    

Consolidated net loss

     (41.9     (322.8

Adjustments to reconcile net loss to cash provided by operating activities:

    

Depreciation and amortization

     88.4       360.3  

Income taxes and changes in non-current provisions

     31.0       20.4  

(Gains)/losses on disposals of assets

     0.5       0.2  

Net (gain)/loss on financial instruments at fair value

     40.8       10.1  

Accrued financial interest costs

     44.9       64.4  

Amortization of deferred financing cost, including original issuance discounts

     55.4       7.5  

Interest paid

     (43.1     (64.5

Taxes paid

     (64.6     (28.8

Other

     (5.7     0.8  

(Increase)/decrease in inventories

     (30.0     (33.1

(Increase)/decrease in trade receivables

     3.3       35.9  

Increase/(decrease) in trade payables

     0.9       (20.9

Changes in other assets and liabilities

     (43.4     (20.6
  

 

 

   

 

 

 

Cash flow provided by operating activities

     36.8       8.8  
  

 

 

   

 

 

 

Investing activities

    

Intangible assets and property, plant and equipment additions

     (22.1     (22.7

Increase in non-current loans

     (0.1     (0.0

Proceeds from disposals of intangible assets and property, plant and equipment

     3.3       0.1  

Repayments of non-current loans

     0.1       0.2  
  

 

 

   

 

 

 

Cash flow used in investing activities

     (18.8     (22.4
  

 

 

   

 

 

 

Financing activities

    

Issuance of shares

     473.4       —    

Issuance of non-current debt

     130.1       175.0  

Repayment of non-current debt

     (678.9     (83.0

Increase (decrease) in current borrowings and bank debt

     2.1       (1.4

Increase (decrease) in current financial assets and liabilities

     (0.2     (0.3

Payment of lease liabilities

     (7.8     (7.2

Payment of deferred finance costs

     —         (9.2
  

 

 

   

 

 

 

Cash flow provided by/(used in) financing activities

     (81.3     73.9  
  

 

 

   

 

 

 

Net (decrease)/increase in cash and cash equivalents

     (63.3     60.3  
  

 

 

   

 

 

 

Effect of exchange rates

     (7.3     (3.7

Cash and cash equivalents at the beginning of the period

     320.0       302.7  
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

     249.4       359.3  
  

 

 

   

 

 

 

 

 

3 

The notes are an integral part of these consolidated financial statements.

 

3


Table of Contents
1.4

Unaudited Interim Consolidated Statements of Changes in Shareholders` Equity4

 

($ in millions, except share data)

   Common
Shares
     Preference
Shares
     Paid-in
surplus and
retained
earnings
    Currency
translation
adjustment
    Hedge
reserve
    Other     Total
share-
holders’
equity
 

As of Jan. 1, 2020

     9.1        92.9        550.7       51.5       (17.8     (13.9     672.5  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss for the period

     —          —          (322.8     —         —         —         (322.8

Other comprehensive loss

     —          —          —         (42.8     0.7       (6.5     (48.6
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive loss

     —          —          (322.8     (42.8     0.7       (6.5     (371.4
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Share-based payments

     —          —          0.2       —         —         —         0.2  

Other

     —          —          0.8       —         —         —         0.8  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of Jun. 30, 2020

     9.1        92.9        228.9       8.8       (17.1     (20.4     302.1  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

($ in millions, except share data)

   Common
Shares
     Preference
Shares
    Paid-in
surplus and
retained
earnings
    Currency
translation
adjustment
    Hedge
reserve
    Other     Total
share-
holders’
equity
 

As of Jan. 1, 2021

     9.1        92.9       261.6       166.4       (31.2     (15.2     483.7  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss for the period

     —          —         (41.9     —         —         —         (41.9

Other comprehensive loss

     —          —         —         (35.8     (0.3     7.4       (28.8
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive loss

     —          —         (41.9     (35.8     (0.3     7.4       (70.7
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Conversion of preference shares

     7.4        (92.9     85.5       —         —         —         —    

Issuance of shares

     2.9        —         495.4       —         —         —         498.3  

Transaction costs

     —          —         (30.5     —         —         —         (30.5

Share-based payments

     —          —         1.9       —         —         —         1.9  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of Jun. 30, 2021

     19.5        —         772.0       130.6       (31.5     (7.8     882.7  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

4 

The notes are an integral part of these consolidated financial statements.

 

4


Table of Contents
2.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

 

2.1

Basis of Preparation

 

2.1.1

General and Description of the Business

Initial public offering

Atotech Limited is a public company incorporated in Bailiwick of Jersey with its registered seat in 3rd floor, 44 Esplanade, St Helier, JE4 9WG, Jersey and the address of its registered head office in William Street, West Bromwich, West Midlands, B70 OBG, United Kingdom. Atotech Limited is listed on the New York Stock Exchange under the ticker symbol “ATC”.

On Jan. 25, 2021, the Atotech Group commenced its initial public offering (“IPO”). In connection with the consummation of the IPO, Atotech Limited issued 64,997,558 additional common shares on a pro rata basis to all existing common shareholders (an additional 2.4851 shares for each existing share), increasing the number of common shares from 26,154,998 to 91,152,556. The effect of this share issuance was reflected on a retrospective basis for the year ended Dec. 31, 2020 and all 2020 interim periods.

On Feb. 3, 2021, all outstanding preferred shares of Atotech Limited were converted to common shares with all accrued interest on the preferred shares capitalized and paid out as additional common shares substantially concurrently with the reduction in number of preferred shares to an amount that allowed for a one for one exchange of preferred shares for common shares based on the IPO offering price of $17.00 per common share. The number of common shares issued per preferred share was 0.0799 common shares per preferred share, resulting in the issuance of 74,243,600 additional common shares.

On Feb. 4, 2021, Atotech Limited has priced its initial public offering of 29,268,000 of its common shares at $17.00 per share on the New York Stock Exchange. The offering was closed on Feb. 8, 2021, subject to customary closing conditions. The proceeds from the offering were approximately $472.7 million, after deducting the underwriting discount and before deducting offering expenses. Following the consummation of the IPO, the number of common shares outstanding amounted to 194,664,156.

Business

The Company is a leading global provider of specialty electroplating solutions delivering chemistry, equipment, and service for high growth technology applications. The Company’s solutions are used in a wide variety of end markets, including smartphones, communication infrastructure, big data infrastructure, and automotive and automotive electronics.

The Company has two operating and reportable segments which are the Electronics (“EL”) segment and the General Metal Finishing (“GMF”) segment. The EL segment supplies chemistry, production equipment and comprehensive services to the electronics industry, especially to the printed circuit board manufacturers, package substrate makers and semiconductor companies. Its products and technologies serve the main electronics end-markets, including communication, computer, automotive, industrial, medical, aerospace and military industries. The GMF segment supplies chemistry, production technology and comprehensive services to the surface finishing industries in all areas of application. Its products and technologies serve the main surface finishing end-markets, including the automotive, consumer electronics, construction, sanitary, white goods and oil & gas industries.

 

2.1.2

Basis of Presentation

The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied for all periods presented, unless otherwise stated. The financial statements were authorized for issue by the Company´s board of directors on Aug. 5, 2021.

The consolidated financial statements of the Group are presented in U.S. dollars. Unless otherwise indicated, all amounts are shown in millions of U.S. dollars rounded to one decimal place in accordance with standard commercial practice, which may result in rounding differences and percentage figures presented may not exactly reflect the absolute figures they relate to. Values of 0.0 indicate that the rounded value is equivalent to zero while an em dash (“—“) is used when no value is available.

The preparation of the consolidated financial statements in accordance with IFRS (as issued by the IASB) requires management to exercise judgement and to make estimates and assumptions that affect the application of policies, reported amounts of revenues, expenses, assets, liabilities, and disclosures. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

5


Table of Contents

As of Dec. 31, 2020, the new balance sheet captions “Other non-financial assets” and “Other non-financial liabilities” were created. “Other non-financial assets” was added because of accrued IPO related costs. These new captions also led to reclassifications of transactions from other financial positions. To enhance comparability, these changes were also applied retrospectively to the quarters of the financial year 2020. For further information on the content of these positions, please refer to note (5) and (9).

New standards and interpretations adopted by the Group

The accounting standards and interpretations adopted in the preparation of the consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended Dec. 31, 2020, except for the adoption of new standards effective as of Jan. 1, 2021:

 

   

Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IFRS 7, IFRS 4 and IFRS 16)

 

   

COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16)

The new standards and interpretations shown above do not have a material impact on the consolidated financial statements of the Group.

New standards and interpretations not yet adopted by the Company

A number of new accounting standards, amendments and interpretations have been published that are not mandatory for reporting periods ended Jun. 30, 2021 and have not been early adopted by the Group. The following standards, amendments, and interpretations not yet effective are not expected to have a significant impact on the Group’s consolidated financial statements:

 

   

IFRS 17 “Insurance Contracts”

 

   

Amendments to:

 

   

IAS 1 “Presentation of Financial Statements”: Classification of liabilities as current or non-current

 

   

IAS 1 “Presentation of Financial Statements”: Disclosure of Accounting Policy

 

   

IAS 8: “Accounting Policies, Changes in Accounting Estimates and Errors”: Definition of Accounting Estimate

 

   

IAS 16 “Property, Plant and Equipment”: Proceeds before Intended Use

 

   

IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”: Onerous Contracts – Cost of Fulfilling a Contract

 

   

Annual Improvements to IFRS Standards 2018-2020

 

   

IFRS 3 “Business Combinations”: Reference to the Conceptual Framework

 

   

IFRS 17 “Insurance Contracts”

 

2.1.3

Summary of Significant Accounting Policies

Significant accounting policies used by the Group are disclosed in the Notes to the consolidated financial statements of Atotech Limited as of Dec. 31, 2020.

 

6


Table of Contents
2.2

Notes to the Unaudited Interim Consolidated Statements of Comprehensive Income

 

(1)

Revenue

Set out below is the disaggregation of the Group’s revenue from contracts with customers:

 

($ in millions)

   Six months ended
Jun. 30, 2021
     Six months ended
Jun. 30, 2020
 

Type of goods or service

     

Chemistry revenue

     642.3        499.5  

Equipment revenue

     87.3        44.1  
  

 

 

    

 

 

 

Total revenue from contracts with customers

     729.7        543.6  
  

 

 

    

 

 

 

Geographical market

     

Asia

     509.1        389.6  

Europe

     159.8        106.3  

Americas

     60.8        47.7  
  

 

 

    

 

 

 

Total revenue from contracts with customers

     729.7        543.6  
  

 

 

    

 

 

 

Timing of revenue recognition

     

Recognized at a point in time

     650.9        521.9  

Recognized over time

     78.8        21.7  
  

 

 

    

 

 

 

Total revenue from contracts with customers

     729.7        543.6  
  

 

 

    

 

 

 

Regarding the geographical markets, the revenue mainly relates to the following countries for the six months ended Jun. 30, 2021 and Jun. 30, 2020: China (2021: $267.3 million, 2020: $192.3 million), Taiwan (2021: $64.5 million, 2020: $62.4 million) and Germany (2021: $84.2 million, 2020: $48.2 million).

 

(2)

Depreciation and amortization

Depreciation and amortization contain the following:

 

($ in millions)

   Six months
ended Jun. 30,
2021
     Three months
ended Jun. 30,
2021
     Six months
ended Jun. 30,
2020
     Three months
ended Jun. 30,
2020
 

Depreciation of tangible assets

     (31.6      (15.2      (27.9      (13.4

Amortization of intangible assets

     (57.6      (28.9      (53.4      (26.7

Impairment / reversal of impairment of tangible and intangible assets

     0.8        0.3        (0.3      (0.1

Impairment of Goodwill

     —          —          (279.1      (279.1
  

 

 

    

 

 

    

 

 

    

 

 

 

Total depreciation and amortization

     (88.4      (43.8      (360.6      (319.2
  

 

 

    

 

 

    

 

 

    

 

 

 

 

7


Table of Contents
(3)

Income Taxes

In accordance with IAS 12, Income Taxes, current and deferred income taxes are recognized for the purpose of the interim financial statements taking into consideration local tax requirements. Income taxes are determined using the separate tax return approach under the assumption that the entities and tax groups of Atotech constitute separate taxable entities.

The Group calculates the period income tax expense using the tax rate that would be applicable to the expected total annual earnings. The major components of income tax expense in the interim condensed consolidated statement of income are:

 

($ in millions)

   Six months ended
Jun. 30, 2021
     Six months ended
Jun. 30, 2020
 

Current income tax

     (49.8      (34.9

Therof prior year adjustments

     1.7        2.5  
  

 

 

    

 

 

 

Deferred income tax benefits

     15.3        8.2  

Therof prior year adjustments

     (2.0      (4.5
  

 

 

    

 

 

 

Total tax expense

     (34.5      (26.7
  

 

 

    

 

 

 

During the first quarter of 2021, the Group was able to close a significant number of pending tax litigation cases in India regarding tax recognition of intercompany service charges. As a result, the Group reversed provisions for income tax litigations in the amount of $7.3 million, which consist of interest income of $3.5 million presented under “Other income (expense), net” as well as an income tax benefit of $3.8 million presented under “Income tax expense” in the consolidated statement of comprehensive income.

 

(4)

Earnings per Share

Basic earnings per share are determined by dividing the net income for the period attributable to the ordinary shareholders of Atotech Limited by the basic weighted average number of ordinary shares outstanding during the period.

Basic earnings per share are calculated as follows:

 

($ in millions, except share data and earnings per share)

   Six months
ended Jun. 30,
2021
     Three months
ended Jun. 30,
2021
     Six months
ended Jun.
30, 2020
     Three months
ended Jun.
30, 2020
 

Net income/(loss) for the period

     (41.9      29.7        (322.8      (282.9

Interest accrued on preference shares

     (14.3      —          (66.5      (33.2
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income/(loss) attributable to shareholders

     (56.2      29.7        (389.3      (316.2
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic weighted average number of ordinary shares outstanding

     175,067,387        194,682,257        91,152,556        91,152,556  
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic earnings/(loss) per share

     (0.32      0.15        (4.27      (3.47
  

 

 

    

 

 

    

 

 

    

 

 

 

During the period ended Jun. 30, 2021, the following transactions affected the basic weighted average number of ordinary shares outstanding:

 

   

Conversion of all outstanding preferred shares of Atotech Limited to common shares, resulting in the issuance of 74,243,600 additional common shares

 

   

Initial public offering (“IPO”) of 29,268,000 common shares on the New York Stock Exchange

 

   

Issuance of 31,676 common shares from the company’s share reserve

As of Jun. 30, 2021, the number of common shares outstanding amounted to 194,695,832. Please also refer to note (6) for more information on common shares as well as the transactions described above.

Interest accrued on preferred shares refers to the 12% compounded annual dividend on preferred shares prior to any dividend distributions made to holders of common shares. Following the conversion of the preferred shares to common shares on Feb. 3, 2021, the preference dividend described above also ceases to accrue.

Diluted earnings per share are determined by dividing the net income for the period attributable to the ordinary shareholders by the diluted weighted average number of shares outstanding during the period. In the period ended Jun. 30, 2021 as well as in all other presented periods, ordinary shares with a dilutive effect (stock options) were excluded, because the effect would be anti-dilutive. Hence, the basic earnings per share correspond to diluted earnings per share for all periods presented in the table above.

 

8


Table of Contents
2.3

Notes to the Unaudited Interim Consolidated Statements of Financial Position

 

(5)

Other current financial and non-financial assets

Other current financial and non-financial assets are presented in the following table:

 

($ in millions)

   As of Jun. 30,
2021
     As of Dec. 31,
2020
 

Other current financial assets

     18.3        24.9  

Fair value of current derivatives – assets

     0.0        8.7  

Factoring related assets

     2.7        2.6  

Notes receivable

     12.5        11.4  

Other receivables

     3.1        2.3  
  

 

 

    

 

 

 

Other current non-financial assets

     34.2        24.1  

Assets held for sale

     —          3.2  

Contract assets, net of valuation allowance

     19.9        8.9  

Prepaid expenses

     10.2        8.8  

Prepayments

     4.2        3.2  

Please refer to note (10) for further information on derivative financial instruments.

As of Jun. 30, 2021, the Assets held for sale which mainly comprised land and buildings in India were sold for approximately $3.2 million.

As of Dec. 31, 2020, $3.5 million of transaction costs related to the IPO were deferred and recorded as prepaid expenses. As of Jun. 30, 2021, this amount has been de-recognized against paid-in surplus in equity. Please also refer to note (6).

 

(6)

Shareholders’ Equity

On Jan. 25, 2021, the Atotech Group commenced its initial public offering (“IPO”). In connection with the consummation of the IPO, Atotech Limited issued 64,997,558 additional common shares on a pro rata basis to all existing common shareholders (an additional 2.4851 shares for each existing share), increasing the number of common shares from 26,154,998 to 91,152,556. The effect of this share issuance has been reflected on a retrospective basis for the year ended Dec. 31, 2020.

On Feb. 3, 2021, all outstanding preferred shares of Atotech Limited were converted to common shares with all accrued interest on the preferred shares capitalized and paid out as additional common shares substantially concurrently with the reduction in number of preferred shares to an amount that allowed for a one for one exchange of preferred shares for common shares based on the IPO offering price of $17.00 per common share. The number of common shares issued per preferred share was 0.0799 common shares per preferred share, resulting in the issuance of 74,243,600 additional common shares.

On Feb. 4, 2021, Atotech Limited has priced its initial public offering of 29,268,000 of its common shares at $17.00 per share on the New York Stock Exchange under the ticker symbol “ATC”. The offering was closed on Feb. 8, 2021, subject to customary closing conditions. The proceeds from the offering were approximately $472.7 million, after deducting the underwriting discount and before deducting offering expenses. As of Jun. 30, 2021, the Group recognized transaction costs accounted for as a deduction from equity in the amount of $30.5 million. These costs, directly attributable to the primary offering, have been deducted from paid-in surplus.

On May 10, 2021, Atotech Limited issued 31,676 shares in connection with the Matching Share Plan (“MSP”) from the company’s share reserve. The total proceeds from this transaction were approximately $0.7 million. For more information on the MSP, please refer to note (7).

As of Jun. 30, 2021, Atotech Limited’s share capital consists of 194,695,832 common shares (nominal value of $0.10) and zero preference shares (nominal value of $0.10) as all preference shares were converted to common shares as described above. Common shares have standard voting rights while preference shares used to have no voting rights but were entitled to a 12% compounded annual dividend prior to any dividend distributions made to holders of common shares. Following the conversion of the preference shares, the preference dividend also ceases to accrue.

 

9


Table of Contents

Shareholders’ equity is as follows:

 

($ in millions)

   As of Jun. 30,
2021
     As of Dec. 31,
2020
 

Shareholders’ equity

     

Common Shares

     19.5        9.1  

Preference Shares

     —          92.9  

Paid-in surplus and retained earnings

     772.0        261.6  

Currency translation adjustment and other reserves

     91.2        120.0  
  

 

 

    

 

 

 

Total shareholders’ equity

     882.7        483.7  
  

 

 

    

 

 

 

The currency translation adjustment comprises the cumulative gains and losses arising from translating the financial statements of foreign operations that use functional currencies other than U.S. dollar. It also includes cumulative gains and losses from translating the already repaid Term Loan B-3 from RMB into U.S. dollars (see note (8)). Other reserves comprise the hedging reserve of the subsidiaries and actuarial gains and losses relating to defined benefit obligations. The hedging reserve consists of the effective portion of the gains and losses on hedging instruments related to hedged transactions that have not occurred yet.

 

(7)

Share-Based Payment Plans

The total grant-date fair value of the share based compensation issued during the period ended Jun. 30, 2021 was $1.9 million (period ended Jun. 30, 2020: $0.2 million), of which $1.9 million (period ended Jun. 30, 2020: $0.2 million) was recognized as personnel expense in the statement of profit and loss. The share-based payment programs of the Group are accounted for as equity-settled share-based payments.

Long-term Incentive Plan

Share options to purchase Common Shares were granted beginning in May 2017 to certain employees of the Group pursuant to the Long-term Incentive Plan (“LTIP”). Options were granted with an exercise price that was fixed at the date of the grant. The contractual life and exercise terms of the options are dependent upon an Exit Event, which is defined further in the LTIP agreement. Options were valued using on the basis of an option pricing model, and an estimate of approximate Exit Event timing. The Group has no legal or constructive obligation to repurchase or settle obligations in cash.

The fair value of the awards at the date of grant has been measured using an option pricing model. During the period ended Jun. 30, 2021, no new options were issued.

As of Jun. 30, 2021 and 2020 no share options were exercisable. As of Jun. 30, 2021, a total of 2,042,527 options were outstanding and unvested under the LTIP.

Dissolvement of Management Equity Plan

At the time of the acquisition of Atotech by Carlyle, the Group implemented an equity participation program to enable certain management of the Group to participate in any success of the Group. For this purpose, certain managers acquired interests in three pooling vehicles (the Pooling Vehicles). The three Pooling Vehicles are limited partnerships, with management representing the limited partners (the Participants) and their participation represented by a limited partnership interest in the Pooling Vehicles. The limited partnership interests held by the Participants correspond with the underlying Common Shares held by the Pooling Vehicles. The limited partnership interest of each Participant vests over time in accordance with the partnership agreement.

Since Jan. 31, 2017, the Pooling Vehicles purchased approx. 8.127 million Common Shares and all related expenses were recognized in profit or loss of the Group in the respective years until Dec. 31, 2020. In connection with the consummation of the IPO, the Management Equity Plan was successfully dissolved in accordance with the applicable Investment and Shareholders’ Agreement. Certain Pooling Vehicles were thereby dissolved and a total of approx. 8.127 million common shares were transferred between the remaining Pooling Vehicles and the respective (former) MEP participants.

Matching Share Plan

The Matching Share Plan (“MSP”) is a voluntary employee share plan under which eligible employees have the opportunity to purchase common shares of the Company from their net pay up to two times each year; provided, however, that no employee may contribute over $25,000 to the MSP in one calendar year or, if less, 10% of their gross annual salary. For every four shares an employee purchases under the MSP, the Company adds one matching share at no cost to the employee after a one-year holding period. The program is available to the majority of the Group’s global workforce.

As of Jun. 30, 2021, a total of 36,280 restricted share units were awarded and are still outstanding and unvested under the MSP.

 

10


Table of Contents

Performance Restricted Share Unit Plan

Performance Restricted Share Units (PSUs) were granted in June 2021 to certain employees of the Company pursuant to the Performance Restricted Share Unit Plan (PRSU). Each PSU represents the right to receive one common share of the Company. The PSUs were granted without an exercise price and will be earned based on the Company’s achievement of defined performance conditions. Thereby, a defined amount of PSUs per participant will be earned based on a performance condition related to the Company’s market value while the remaining amount of PSUs per participant will be earned based on a performance condition related to the Company’s operating profitability.

As of Jun. 30, 2021, a total of 201,543 PSUs were awarded and are still outstanding and unvested under the PRSU.

Restricted Share Unit Plan

Restricted Share Units (RSUs) were granted in June 2021 to certain employees of the Company pursuant to the Restricted Share Unit Plan (TRSU). Each RSU represents the right to receive one common share of the Company. The RSUs were granted without an exercise price and will vest at the completion of defined service periods.

As of Jun. 30, 2021, a total of 366,927 RSUs were awarded and are still outstanding and unvested under the TRSU.

Phantom Share Plan

A total of 30,383 Phantom Shares were granted to two non-executive directors of Atotech. Each Phantom Share represents the right to receive one common share of the Company. The Phantom Shares were granted without an exercise price and will be earned based on a performance condition related to the Company’s market value as well as a service condition related to the completion of a defined service period. In case the defined target market value is not met, each participant will be treated as if they had been granted a number of Phantom Shares equal to a value of $0.5 million.

As of Jun. 30, 2021, a total of 30,383 Phantom Shares are still outstanding and unvested under the Phantom Share Plan.

 

(8)

Non-current and current Borrowings

 

($ in millions)

   As of Jun. 30,
2021
     As of Dec. 31,
2020
 

Other non-current financial borrowings

     1,560.7        1,422.4  

Opco Notes

     —          425.0  

Holdco Notes

     —          218.3  
  

 

 

    

 

 

 

Non-current borrowings

     1,560.7        2,065.7  
  

 

 

    

 

 

 

Current portion of non-current financial borrowings

     7.3        0.5  
  

 

 

    

 

 

 

Current borrowings

     7.3        0.5  
  

 

 

    

 

 

 

Total borrowings

     1,568.0        2,066.2  
  

 

 

    

 

 

 

The following is a summary of the Company’s current and non-current borrowings:

 

($ in millions)

   As of Jun. 30,
2021
     As of Dec. 31,
2020
 

Senior Secured Credit Facilities:

     

Term Loans

     1,577.6        1,438.5  

6.25% Opco Notes

     —          425.0  

8.75%/9.50% Holdco Notes

     —          219.0  

Less – Deferred financing costs

     (16.9      (16.8
  

 

 

    

 

 

 

Total non-current borrowings

     1,560.7        2,065.7  
  

 

 

    

 

 

 

Senior Secured Credit Facilities:

     

Term Loans

     10.1        16.2  

Short-term financing costs

     (2.8      (15.8
  

 

 

    

 

 

 

Total current borrowings

     7.3        0.5  
  

 

 

    

 

 

 

Total borrowings

     1,568.0        2,066.2  
  

 

 

    

 

 

 

On Feb. 12, 2021, the IPO proceeds were used to repay borrowings (Opco Notes and Holdco Notes) in the amount of $644.0 million. For this purpose, the Group elected to draw down an additional $100.0 million from the existing revolving credit facility (“RCF”). Due to the repayment of the borrowings, an early repayment fee in the amount of $8.8 million was incurred. In total, the Group recorded expenses of $75.6 million during the period ended Jun. 30, 2021 in the consolidated statement of profit or loss, whereby only the early repayment fee was cash-effective. This amount includes the de-recognition of capitalized financing costs and embedded derivatives connected with the borrowings. Please also refer to note (10).

 

11


Table of Contents

Effective on Mar. 18, 2021, the existing RCF was replaced by a new RCF which provides for revolving loans and letters of credit pursuant to commitments in an aggregate principal amount of $250.0 million due in Mar. 2026. Borrowings under the RCF bear interest at a floating rate of 2.00% + IBOR* (floor 0.0%) per annum. For undrawn amounts, a commitment fee of 0.25% – 0.375% per annum accrues, depending on the net leverage ratio of the Group determined in accordance with the credit agreement. At Jun. 30, 2021 the Group had $232.5 million out of $250.0 million of available borrowings under its RCF due to the use of $17.5 million of Ancillary Facilities.

Effective on Mar. 18, 2021, the Group completed the early refinancing of its debt. The Term Loans B-1 and B-3 were replaced by a new senior secured term loan structure with a $1,350.0 million tranche (Term Loan B-1: “TL B-1”) and a €200.0 million tranche (Term Loan B-2: “TL B-2”). The terms and conditions of the Term Loans are as follows:

 

Loan

       Currency       

Nominal interest rate
p.a.

   Maturity date   

Repayment of
principal

  

Payment of interest

TL B-1    USD    2.50% + IBOR* (0.5% floor)    Mar. 2028    0.25% of principal per quarter    end of interest period*
TL B-2    EUR    2.75% + IBOR* (0.0% floor)    Mar. 2028    on maturity    end of interest period*

 

*

The Group can elect interest periods of one, three or six months. Depending on the interest period chosen, the IBOR is amended to this term

Quarterly repayments of the principal of TL B-1 start at the end of Q3’2021 while payments of interest for both TL B-1 and TL B-2 start at the end of Q2’2021.

Due to the early refinancing of the Group’s debt, capitalized financing costs were de-recognized through profit or loss. Please refer to note (10).

The term loans are collateralized by a material amount of assets of the Group and include covenants that define a maximum net leverage ratio. However, the net leverage ratio is only applicable when the amount drawn is higher than 40% of the total commitment. As of Jun. 30, 2021, no amounts have been drawn on the facility. Hence, the Group was in compliance with all financial covenants through the period to Jun. 30, 2021.

For more information on the refinancing, please also refer to the respective documents filed with the SEC.

 

(9)

Other current financial and non-financial liabilities

The following table shows other current financial and non-financial liabilities:

 

($ in millions)

   As of Jun. 30,
2021
     As of Dec. 31,
2020
 

Other current financial liabilities

     18.5        38.5  

Accrued interest on financial debt

     0.0        13.4  

Current bank debt

     6.1        4.1  

Fair value of derivatives - current liabilities

     4.9        14.8  

Factoring related liabilities

     0.5        0.7  

Other

     7.0        5.6  

Other current non-financial liabilities

     74.5        89.7  
  

 

 

    

 

 

 

Contract liabilities

     19.8        19.1  

Payables to personnel and social organizations

     54.7        65.1  

Deferred income

     0.0        5.5  

Please refer to Note (10) for the position fair value of derivatives.

During the period ended Jun. 30, 2021, a government grant in China in the amount of $5.6 million presented under “deferred income” was fully de-recognized through profit or loss as a gain as the conditions of the grant were fulfilled.

 

12


Table of Contents
2.4

Other Notes

 

(10)

Financial Instruments

The following values for derivative financial instruments were recognized in the balance sheet as of Jun. 30, 2021 and Dec. 31, 2020.

 

($ in millions)

   As of Jun. 30,
2021
     As of Dec. 31,
2020
 

Derivatives included in non-current financial assets

     1.9        66.1  

Embedded Derivatives

     —          65.7  

Interest rate cap

     1.9        0.4  
  

 

 

    

 

 

 

Derivatives included in current financial assets

     0.0        8.7  

Foreign exchange contracts (Forwards)

     —          8.7  
  

 

 

    

 

 

 

Derivatives included in current financial liabilities

     4.9        14.8  

Foreign exchange contracts (Collars)

     2.9        4.3  

Foreign exchange contracts (Forwards)

     2.1        10.5  

The following table presents information on gains and losses on derivative instruments which are recorded in “Other income (expense), net” on the statement of profit or loss:

 

($ in millions)

   Six months ended
Jun. 30, 2021
     Six months ended
Jun. 30, 2020
 

Embedded Derivatives

     (43.9      (13.1

Foreign exchange contracts

     (12.1      2.7  
  

 

 

    

 

 

 

Total

     (56.0      (10.5
  

 

 

    

 

 

 

The carrying amounts of the financial instruments were derived as follows as of Jun. 30, 2021:

 

($ in millions)

   Classification
pursuant to
IFRS 9
   Carrying
amount as per
statement of
financial
position
     Measured at
amortized cost
     Measured at
fair value
 

Trade receivables

   FAAC      258.5        258.5        —    

Cash and cash equivalents

   FAAC      249.4        249.4        —    

Other financial assets

   FAAC      22.2        22.2        —    

Interest rate cap

   FAFV      1.9        —          1.9  
     

 

 

    

 

 

    

 

 

 

Total financial assets

  

 

     532.1        530.2        1.9  
     

 

 

    

 

 

    

 

 

 

Non-current borrowings

   FLAC      1,560.7        1,560.7        1,587.7  

Current borrowings

   FLAC      7.3        7.3        —    
     

 

 

    

 

 

    

 

 

 

Total debt

  

 

     1,568.0        1,568.0        1,587.7  
     

 

 

    

 

 

    

 

 

 

Trade payables

   FLAC      216.3        216.3        —    

Lease liabilities

   FLAC      74.8        74.8        —    

Other financial liabilities

   FLAC      13.7        13.7        —    

Foreign exchange contracts not designated as hedging instrument

   FLFV      1.7        —          1.7  

Foreign exchange contracts designated as hedge of an investment in a foreign operation (“Forwards”)

   No class      2.1        —          2.1  

Foreign exchange contracts designated as hedge of an investment in a foreign operation (“Collars”)

   No class      1.2        —          1.2  
     

 

 

    

 

 

    

 

 

 

Total financial liabilities

  

 

     1,877.6        1,872.7        1,592.6  
     

 

 

    

 

 

    

 

 

 

FAAC    =     Financial Assets at amortized Cost

FAFV    =     Financial Assets at Fair value through profit or loss

FLFV    =     Financial Liability at Fair value through profit or loss

FLAC    =     Financial Liabilities at amortized Cost

 

13


Table of Contents

The carrying amounts of the financial instruments were derived as follows as of Dec. 31, 2020:

 

($ in millions)

   Classification
pursuant to
IFRS 9
   Carrying
amount as per
statement of
financial
position
     Measured at
amortized
cost
     Measured at
fair value
 

Trade receivables

   FAAC      262.0        262.0        —    

Cash and cash equivalents

   FAAC      320.1        320.1        —    

Other financial assets

   FAAC      20.4        20.4        —    

Embedded Derivatives

   FAFV      65.7        —          65.7  

Foreign exchange contracts not designated as hedging instrument

   FAFV      8.7        —          8.7  

Interest rate cap

   FAFV      0.4        —          0.4  
     

 

 

    

 

 

    

 

 

 

Total financial assets

  

 

     677.3        602.6        74.8  
     

 

 

    

 

 

    

 

 

 

Non-current borrowings

   FLAC      2,065.7        2,065.7        2,194.2  

Current borrowings

   FLAC      0.5        0.5        —    
     

 

 

    

 

 

    

 

 

 

Total debt

  

 

     2,066.2        2,066.2        2,194.2  
     

 

 

    

 

 

    

 

 

 

Trade payables

   FLAC      221.0        221.0        —    

Lease liabilities

   FLAC      81.5        81.5        —    

Other financial liabilities

   FLAC      25.3        25.3        —    

Foreign exchange contracts designated as hedge of an investment in a foreign operation (“Forwards”)

   No class      10.5        —          10.5  

Foreign exchange contracts designated as hedge of an investment in a foreign operation (“Collars”)

   No class      4.3        —          4.3  
     

 

 

    

 

 

    

 

 

 

Total financial liabilities

  

 

     2,408.7        2,393.9        2,209.0  
     

 

 

    

 

 

    

 

 

 

FAAC    =     Financial Assets at amortized Cost

FAFV    =     Financial Assets at Fair value through profit or loss

FLAC    =     Financial Liabilities at amortized Cost

As in the prior year, no financial assets have been reclassified from one category to another in 2021.

Net gains and losses of financial instruments for each measurement category breaks down as follows.

 

($ in millions)

   Six months ended
Jun. 30, 2021
     Six months ended
Jun. 30, 2020
 

FAAC

     0.8        (4.4

FLAC

     (100.4      (71.9

FAFV/FLFV

     (54.1      (13.1

No class

     (1.9      2.6  
  

 

 

    

 

 

 

Total

     (155.5      (86.7
  

 

 

    

 

 

 

The net loss for the FLAC category is included in interest expense in the consolidated statement of comprehensive income while the net gains or losses of the other categories are shown in other income or expense.

The net result of the FAAC measurement category contains impairment losses and reversals on trade receivables. The net result of the FAAC measurement category also includes interest income. The net result of the FLAC measurement category includes interest expenses for ongoing debt service as well as the result from loan amortization, which is also included in interest expense. For the period ended Jun. 30, 2021, it also includes the de-recognition of deferred financing costs in the amount of $(54.7) million connected with the repayment of Opco and Holdco Notes in Feb. 2021 as well as the refinancing of the Group’s debt in Mar. 2021. Please also refer to Note (8).

 

14


Table of Contents

As of Jun. 30, 2021, Atotech has classified its financial instruments into the three levels of the fair value hierarchy prescribed by IFRS 13 “Fair Value Measurement” as follows:

 

As of Jun. 30, 2021

                                  

($ in millions)

   No Level      Level 1      Level 2      Level 3      Total  

Trade receivables

     258.5        —          —          —          258.5  

Cash and cash equivalents

     249.4        —          —          —          249.4  

Other financial assets

     22.2        —          —          —          22.2  

Foreign exchange contracts not designated as hedging instrument

     —          —          0.0        —          0.0  

Interest rate cap

     —          —          1.9        —          1.9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

     530.2        —          1.9        —          532.1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-current borrowings

     —          —          1,587.7        —          1,587.7  

Current borrowings

     7.3        —          —          —          7.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt

     7.3        —          1,587.7        —          1,595.0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Trade payables

     216.3        —          —          —          216.3  

Lease liabilities

     74.8        —          —          —          74.8  

Other financial liabilities

     13.7        —          —          —          13.7  

Foreign exchange contracts not designated as hedging instrument

     —          —          1.7        —          1.7  

Foreign exchange contracts designated as hedge of an investment in a foreign operation (“Forwards”)

     —          —          2.1        —          2.1  

Foreign exchange contracts designated as hedge of an investment in a foreign operation (“Collars”)

     —          —          1.2        —          1.2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial liabilities

     312.0        —          1,592.6        —          1,904.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of Dec. 31, 2020

                                  

($ in millions)

   No Level      Level 1      Level 2      Level 3      Total  

Trade receivables

     262.0        —          —          —          262.0  

Cash and cash equivalents

     320.1        —          —          —          320.1  

Other financial assets

     20.4        —          —          —          20.4  

Embedded Derivatives

     —          —          65.7        —          65.7  

Foreign exchange contracts not designated as hedging instrument

     —          —          8.7        —          8.7  

Interest rate cap

     —          —          0.4        —          0.4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

     602.6        —          74.8        —          677.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-current borrowings

     —          —          2,194.2        —          2,194.2  

Current borrowings

     0.5        —          —          —          0.5  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt

     0.5        —          2,194.2        —          2,194.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Trade payables

     221.0        —          —          —          221.0  

Lease liabilities

     81.5        —          —          —          81.5  

Other financial liabilities

     25.3        —          —          —          25.3  

Foreign exchange contracts designated as hedge of an investment in a foreign operation (“Forwards”)

     —          —          10.5        —          10.5  

Foreign exchange contracts designated as hedge of an investment in a foreign operation (“Collars”)

     —          —          4.3        —          4.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial liabilities

     328.2        —          2,209.0        —          2,537.2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

15


Table of Contents

The following table presents the changes in level 2 items (embedded derivatives) for 2021 and 2020:

 

     Six months ended Jun. 30, 2021      Year ended Dec. 31, 2020  

($ in millions)

   Opco Notes      Holdco Notes      Opco Notes      Holdco Notes  

Balance at the start of the period

     53.6        12.1        27.8        6.0  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gains/losses recognized in income statement

     (38.8      (5.1      25.9        6.1  
  

 

 

    

 

 

    

 

 

    

 

 

 

De-recognition against Opco/Holdco Notes

     (14.8      (6.9      —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance at the end of the period

     —          —          53.6        12.1  
  

 

 

    

 

 

    

 

 

    

 

 

 

As of Jun. 30, 2021, the embedded derivatives relating to Opco and Holdco notes were fully de-recognized due to the repayment of the Opco and Holdco notes. Please also refer to note (8).

Offsetting and Transfers of Financial Assets

In cases where the Company has a legally enforceable right to offset financial liabilities and financial assets, and has the intention to settle these financial instruments on a net basis, Atotech offsets these financial instruments and reports the net amount on the balance sheet. As of Jun. 30, 2021 and Dec. 31, 2020, no financial instruments were subject to offsetting.

The Group held no collateral of financial or non-financial assets as of Jun. 30, 2021 and Dec. 31, 2020 that it is permitted to sell or repledge in the absence of default by the owner.

 

16


Table of Contents
(11)

Segment Reporting

The Group identifies an operating segment as a component: (i) that engages in business activities from which it may earn revenues and incur expenses; (ii) whose operating results are regularly reviewed by the Chief Operating Decision Maker (CODM) as defined under IFRS 8 “Operating Segments” to make decisions about resources to be allocated to the segment and assess its performance; and (iii) that has available discrete financial information.

The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. The Group’s CODM is identified as Geoffrey Wild, CEO and member of Board of Directors, because he has final authority over performance assessment and resource allocation decisions. The Group’s segments are based on the type and concentration of customers served, service requirements, methods of distribution and major product lines.

The EL segment services the electronics supply chain, with specialty chemicals used in the plating process for PCBs embedded in smartphones, computing hardware, tablets, semiconductor packing, other electronic devices and production equipment which are a critical element of the electronics value chain.

The GMF segment supplies specialty plating chemicals for functional and decorative surface finishing applications to a diverse set of customers, including automotive, building products, heavy machinery, household fixtures, decorative hardware as well as production equipment.

The CODM assesses the performance of the operating segments based on Segment Adjusted EBITDA. This measure is defined as EBITDA (consolidated net income (loss) before interest, taxes, depreciation and amortization, excluding impairment charges) adjusted for certain items which management believes do not reflect the core operating performance of the operating segments. Such adjustments described below in more detail include non-cash effects of non-operating costs such as share-based compensation and impairments, foreign currency transaction losses, net, restructuring costs, the impact of discontinued activities, certain costs related to business combinations, and management fees paid to Carlyle.

No segment asset or liability measures are reported to the CODM, and such measures are not used for purposes of assessing performance or allocating resources. The following tables summarize selected financial information by segment:

 

     Six months ended Jun. 30, 2021      Six months ended Jun. 30, 2020  

($ in millions)

   EL      GMF      Total      EL      GMF      Total  

Revenue

     473.1        256.6        729.7        357.8        185.8        543.6  

thereof Chemistry revenue

     390.0        252.3        642.3        318.6        180.9        499.5  

thereof Equipment revenue

     83.1        4.3        87.3        39.2        4.9        44.1  

Segment Adjusted EBITDA

     160.6        67.9        228.4        117.2        39.0        156.1  
     Three months ended Jun. 30, 2021      Three months ended Jun. 30, 2020  

($ in millions)

   EL      GMF      Total      EL      GMF      Total  

Revenue

     247.5        129.0        376.6        185.7        75.3        260.9  

thereof Chemistry revenue

     197.9        127.4        325.3        163.8        74.3        238.1  

thereof Equipment revenue

     49.7        1.6        51.3        21.8        1.0        22.8  

Segment Adjusted EBITDA

     84.9        33.2        118.1        62.5        9.8        72.3  

 

17


Table of Contents

Reconciliation of Segment Adjusted EBITDA to consolidated net income is as follows:

 

($ in millions)

   Six months
ended Jun. 30,
2021
     Three months
ended Jun. 30,
2021
     Six months
ended Jun. 30,
2020
     Three months
ended Jun. 30,
2020
 

EL Segment Adjusted EBITDA

     160.6        84.9        117.2        62.5  

GMF Segment Adjusted EBITDA

     67.9        33.2        39.0        9.8  

Non-cash adjustments(a)

     (56.3      1.4        (290.1      (257.2

Foreign exchange gain/(loss)(b)

     11.0        (5.3      (2.4      (3.1

Restructuring(c)

     0.5        0.6        (1.7      (1.7

Transaction related costs(d)

     (6.0      (1.5      (2.1      (1.6

Management fee(e)

     (0.9      (0.5      (1.8      (1.2

COVID-19 adjustment(f)

     (0.4      (0.3      (1.5      (1.3

Interest expense, net

     (94.6      (14.2      (71.3      (36.0

Income taxes

     (34.5      (24.6      (26.7      (13.0

Depreciation and amortization (excluding impairment charges)

     (89.2      (44.1      (81.3      (40.1
  

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated net income (loss)

     (41.9      29.7        (322.8      (282.9
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a)

Eliminates the non-cash impact of (1) share-based compensation, (2) losses on the sale of fixed assets, (3) impairment charges and (4) mark-to-market adjustments related to our foreign currency derivatives entered into in connection with certain redenomination transactions not linked to underlying individual transactions as well as the de-recognition of bifurcated embedded derivatives related to certain redemption features of the Opco Notes and Holdco Notes, and (5) valuation adjustments from the revaluation of the earn-out liability initially recognized in 2019.

(b)

Eliminates net foreign currency transactional gains and losses.

(c)

Eliminates charges resulting from restructuring activities principally from the Group’s cost reduction efforts.

(d)

Reflects an adjustment to eliminate (1) IPO related costs, linked to the existing equity and (2) professional fees paid to third party advisors in connection with the implementation of strategic initiatives.

(e)

Reflects an adjustment to eliminate fees paid to Carlyle. The consulting agreement pursuant to which management fees are paid to Carlyle will terminate on the earlier of (i) the second anniversary of the IPO and (ii) the date upon which Carlyle ceases to own more than ten percent of the outstanding voting securities of the Company.

(f)

Eliminates charges in connection with masks, sanitizers, and other COVID-19 related expenses at certain plant and office locations.

Non-current assets by country were as follows5:

 

($ in millions)

   As of Jun. 30,
2021
     As of Dec. 31,
2020
 

China

     870.6        881.7  

Germany

     775.5        816.1  

Other countries

     1,002.9        1,044.7  
  

 

 

    

 

 

 

Total

     2,649.1        2,742.5  
  

 

 

    

 

 

 

 

(12)

Related Parties

Atotech identified related parties in accordance with IAS 24. Atotech had transactions with related parties in the reporting period in the ordinary course of business.

The Group entered into a consulting agreement with the Sponsor under which the Company, or its subsidiaries, will pay the Sponsor an annual fee of $1.8 million for consulting services to the Group. The annual fee is payable on a quarterly basis. For the period ended Jun. 30, 2021, the Group paid the Sponsor $0.9 million for consulting services and $0.0 million for expense reimbursements.

As of Jun. 30, 2021, trade receivables from related parties amounted to $0.3 million (Dec. 31, 2020: $0.5 million).

 

5 

Excluding financial instruments, deferred tax assets, post-employment benefit assets, and rights arising under insurance contracts.

 

18


Table of Contents

Transactions with Key Management Personnel

Key management personnel consist of a total of nineteen individuals as of Jun. 30, 2021, who constitute people having authority and responsibility for planning, directing, and controlling the Company’s activities. For the period ended Jun. 30, 2021, key management personnel compensation related to share-based payments was $0.7 million. See note (7) for further details regarding the share-based payment plans offered to employees.

As of Jun. 30, 2021, the key management personnel of the Company consist of the members of the Senior Management Team (CEO, CFO, COO, two Presidents, and four Vice Presidents) and the Board of Directors.

Compensation of the Company’s key management personnel includes salaries, short- and long-term benefits as well as post-employment benefits. Additionally, the entire key management personnel participate in the Company’s Performance Shares Program.

 

($ in millions)

   Six months ended
Jun. 30, 2021
     Six months ended
Jun. 30, 2020
 

Short-term employee benefits

     6.0        3.7  

Post-employment benefits

     0.2        0.1  

Share-based payments

     0.7        0.0  
  

 

 

    

 

 

 

Total

     6.8        3.8  
  

 

 

    

 

 

 

 

(13)

Subsequent Events

On Jul. 1, 2021, MKS Instruments, Inc. (NASDAQ: MKSI) (“MKS”) and Atotech Limited announced that they have entered into a definitive agreement pursuant to which MKS will acquire Atotech for $16.20 in cash and 0.0552 of a share of MKS common stock for each Atotech common share. The transaction, expected to be implemented by way of a scheme of arrangement of Atotech under the laws of Jersey, has been unanimously approved by the MKS and Atotech boards of directors and is subject to Atotech shareholder approval, approval of the Royal Court of Jersey, regulatory approvals, and other customary closing conditions.

 

19


Table of Contents

Item 2. Management´s Discussion and Analysis of Financial Conditions and Results of Operations

The following discussion summarizes the significant factors affecting our operating results, financial condition, liquidity, and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the unaudited interim condensed financial statements and related notes thereto of Atotech Limited included elsewhere in this report.

Special Note Regarding Forward-Looking Statements

Many statements made in this report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies and trends we expect to affect our business. These statements often include words such as “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast,” and other similar expressions. We base these forward-looking statements or projections on our current expectations, plans, and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments, and other factors we believe are appropriate under the circumstances and at such time.

As you read and consider this report, you should understand that these statements are not guarantees of future performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties, and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. Factors that may materially affect such forward-looking statements and projections include, but are not limited to:

 

   

the uncertainty of the magnitude, duration, geographic reach, impact on the global economy of the COVID-19 pandemic, as well as the current and potential travel restrictions, stay-at-home orders, and other economic restrictions implemented to address it;

 

   

uncertainty, downturns, and changes in our target markets;

 

   

foreign currency exchange rate fluctuations;

 

   

reduced market acceptance and inability to keep pace with evolving technology and trends;

 

   

loss of customers;

 

   

increases in costs or reductions in the supplies of raw materials that may materially adversely affect our business, financial condition, and results of operations;

 

   

our ability to provide products and services in light of changing environmental, health and safety, product liability, financial, and other legislation and regulation;

 

   

our failure to compete successfully in product development;

 

   

our ability to successfully execute our growth initiatives, business strategies, and operating plans;

 

   

whether the secular trends we expect to drive growth in our business materialize to the degree we expect them to, or at all;

 

   

material costs relating to environmental and health and safety requirements or liabilities;

 

 

20


Table of Contents
   

underfunded defined benefit pension plans;

 

   

risk that the insurance we maintain may not fully cover all potential exposures;

 

   

failure to comply with the anti-corruption laws of the United States and various international jurisdictions;

 

   

tariffs, border adjustment taxes, or other adverse trade restrictions and impacts on our customers’ value chains;

 

   

political, economic, and legal uncertainties in China, the Chinese government’s control of currency conversion and expatriation of funds, and the Chinese government’s policy on foreign investment in China;

 

   

regulations around the production and use of chemical substances that affect our products;

 

   

the United Kingdom’s withdrawal from the European Union;

 

   

weak intellectual property rights in jurisdictions outside the United States;

 

   

intellectual property infringement and product liability claims;

 

   

our substantial indebtedness;

 

   

our ability to obtain additional capital on commercially reasonable terms may be limited;

 

   

risks related to our derivative instruments;

 

   

our ability to attract, motivate, and retain senior management and qualified employees;

 

   

increased risks to our global operations including, but not limited to, political instability, acts of terrorism, taxation, and unexpected regulatory and economic sanctions changes, among other things;

 

   

natural disasters that may materially adversely affect our business, financial condition, and results of operations;

 

   

the inherently hazardous nature of chemical manufacturing that could result in accidents that disrupt our operations and expose us to losses or liabilities;

 

   

damage to our brand reputation;

 

   

the ability of affiliates of The Carlyle Group Inc. (“Carlyle”) to control our common shares;

 

   

any statements of belief and any statements of assumptions underlying any of the foregoing;

 

   

other factors disclosed in this report; and

 

   

other factors beyond our control.

We operate in an evolving environment. New risk factors and uncertainties emerge from time to time, and it is not possible for our management to predict all risk factors and uncertainties, nor are we able to assess the impact of all of these risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

 

21


Table of Contents

We qualify all of our forward-looking statements by these cautionary statements. For additional information, refer to the risk factors discussed under Item 3.D. “Risk Factors” in our Annual Report on Form 20-F for year ended December 31, 2020 and in our other filings with the U.S. Securities and Exchange Commission (“SEC”).

You should read this discussion and analysis completely and with the understanding that our actual future results may be materially different from our expectations.

Investors and others should note that we announce material financial information to our investors using our Investor Relations website (investors.atotech.com), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media, to communicate with our users and the public about our company, our services, and other issues. It is possible that the information we post on these channels could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the channels listed on our Investors website.

Basis of Presentation

In this report, unless the context otherwise requires, references to “Company,” “we,” “us,” “its,” “our,” “Company,” and “Atotech” refer to Atotech Limited and its consolidated subsidiaries.

On January 25, 2021, we commenced our initial public offering (the “IPO”). In connection with the consummation of the IPO, we issued 64,997,558 additional common shares to existing holders of common shares on a pro rata basis. On February 3, 2021, all outstanding preferred shares of Atotech Limited were converted to common shares with all accrued interest on the preferred shares capitalized and paid out as additional preferred shares substantially concurrently with the reduction in number of preferred shares to an amount that allowed for a one-for-one exchange of preferred shares for common shares based on the IPO offering price of $17.00 per common share (collectively, the “Preferred Conversion”). The number of common shares issued per preferred share was 0.0799 common shares per preferred share, resulting in the issuance of 74,243,600 additional common shares. On February 8, 2021, we completed our IPO and issued 29,268,000 common shares to public shareholders. Following the consummation of the IPO, we had 194,664,156 common shares outstanding.

On February 12, 2021, the net proceeds from the IPO, along with $100.0 million of borrowings under a revolving credit facility, were used to repay all $425.0 million aggregate principal amount of our outstanding 6.250% Senior Notes due 2025 (the “Opco Notes”) at a price of 101.563% of the principal amount thereof and all $219.0 million aggregate principal amount of our 8.75%/9.50% Senior PIK Toggle Notes (the “Holdco Notes”) at a price of 101.000% of the principal amount thereof (collectively, the “Redemptions”). The Redemptions resulted in the incurrence of early repayment fees in the amount of $8.8 million and the de-recognition of capitalized financing costs and embedded derivatives connected with the indebtedness. In total, we recorded expenses of $75.6 million in the first quarter of 2021 in the consolidated statement of profit or loss, of which only the early repayment fee is cash-effective.

On March 18, 2021, we refinanced (the “Refinancing”) our previous senior secured first lien term loan facility (the “old term loan facility”) that consisted of a tranche denominated in U.S. dollars (the “Old USD Term Loan Facility”) and a tranche denominated in the currency of China (“RMB”) (the “Old RMB Term Loan Facility” and, together with the Old USD Term Loan Facility, the “old term loan facilities”) as well as our previous senior secured first lien multi-currency revolving credit facility (the “old revolving credit facility” and, together with the old term loan facilities, the “old senior secured credit facilities”). As a result of the Refinancing, we entered into a new credit agreement, which provides for (i) a U.S. dollar-denominated senior secured term loan facility in an initial aggregate principal amount of $1.35 billion (the “USD Term Loan Facility”), (ii) a Euro-denominated senior secured term loan facility in an initial aggregate principal amount of €200.0 million (the “EUR Term Loan Facility” and, together with the USD Term Loan Facility, the “Term Loan Facilities”) and (iii) a senior secured multi-currency revolving credit facility that provides for revolving loans, letters of credit and ancillary facilities in an aggregate principal amount of up to $250.0 million (the “Revolving Credit Facility” and, together with the Term Loan Facilities, the “Senior Secured Credit Facilities”). The Refinancing and the Redemptions resulted in the de-recognition of capitalized financing costs in the amount of $54.7 million, which impacted our statements of comprehensive income/(loss), but was not cash-effective.

 

 

22


Table of Contents

Overview

We are a leading chemicals technology company with significant exposure to several high growth secular trends and a strong presence in electronic materials, including specialty electroplating solutions which deliver chemistry equipment, service, and software for high-growth technology applications. We are a crucial enabler in the “information age” value chain and our technology is essential to the manufacture of electronics and other critical products. Our solutions are used in a wide variety of attractive end-markets, including smartphones, communication infrastructure, cloud computing, big data and consumer electronics, automotive electronics, and automotive surface finishing, as well as in numerous industrial and consumer applications such as heavy machinery and household appliances. We benefit from various secular growth trends such as digitalization, increasing data volumes and processing speed requirements, the growth of the consumer class in emerging markets, increasing environmental regulations, and rising product quality and durability standards. We expect these trends to not only increase demand for our customers’ end-products that use our plating chemistry, but also increase the amount and value of plating chemistry used in each end-product, allowing our growth to outpace underlying end-market volume growth.

We are the only major company in our industry that provides chemistry, equipment, service, and software, which we sell through both of our reporting segments: Electronics (“EL”) and General Metal Finishing (“GMF”). Our comprehensive systems and solutions approach leverages our unique offering of chemistry, equipment, service, and software. We believe this business model creates a sustainable competitive advantage that helps us achieve deep customer intimacy and allows us to continue to grow our market share and capitalize on positive market growth trends. This approach is supported by our 16 state-of-the-art global technology centers, which allow us to provide local service around the world and to respond in real-time to customer needs. The combination of our comprehensive systems and solutions approach, expansive global manufacturing and sales footprint, customer-driven investments in research and development (“R&D”), and superior technical expertise makes us an ideal electroplating and surface finishing solutions partner for our diverse customer base. This drives long-lasting relationships and an industry-leading financial profile, with fiscal 2020 EL and GMF Segment Adjusted EBITDA margins of 32.5% and 24.0%, respectively, and EL and GMF Segment Adjusted EBITDA margins for the six months ended June 30, 2021 of 33.9% and 26.5%, respectively.

Impact of COVID-19 on Our Business

For the six months ended June 30, 2021, the COVID-19 pandemic impacted our operating results. We believe market conditions will continue to improve in 2021 for both our EL and GMF segments from COVID-19 impacted conditions experienced since 2020. Additionally, as of the date hereof, COVID-19 has not had a material impact on our capital and financial resources and there has been no change in our ability to comply with our debt covenants and other financial obligations. We have not taken any material reserves in connection with the COVID-19 pandemic, but we continue to evaluate our reserve position on a quarterly basis and any change in such reserves would be driven by the depth and duration of the pandemic, potential government responses, the speed and manner of the recovery and the expected impact of these events on our financial results.

Although various jurisdictions are lifting restrictions that were introduced as a result of the COVID-19 pandemic, it is difficult to predict the speed and impact of any economic recovery. It is similarly difficult to predict the impact of a potential resurgence of COVID-19 and the re-imposition of travel and social distancing restrictions.

In our EL segment, we experienced continued growth as the impacts of COVID-19 have been much less severe than in other parts of our business for the six months ended June 30, 2021. In fact, 5G infrastructure and smartphone growth, along with communication infrastructure, cloud computing, and semiconductor packaging drove increased demand for our chemistry, as well as for greater overall chemistry value per unit.

In our GMF segment, greatly improved automotive and other industrial markets drove a significant increase in chemistry sales and Adjusted EBITDA for the six months ended June 30, 2021 compared to the prior year period. This increase primarily reflects a recovery in the global automotive markets, as well as the household appliance and sanitary end-markets, as compared to the prior year period, which was more severely impacted by the COVID-19 pandemic.

 

23


Table of Contents

We are closely monitoring the continuing COVID-19 pandemic situation and have established a task force that convenes on a regular basis with the senior management team. The mandate of this task force is to protect the health and safety of our employees, their families, and the communities in which we operate while preserving our operations, mitigating business risks, and otherwise assessing and reacting quickly to changing conditions.

Despite temporary closures of some of our facilities in 2020, all business operations as well as financial reporting and internal control systems have maintained full operations during the six months ended June 30, 2021. As of the date hereof, all technology centers, manufacturing facilities, and all other facilities are open and operating at full capacity. Consumer-facing activities, such as sales and other services that cannot occur on-site or in-person due to COVID-19-related restrictions, have been transitioned to digital channels, which we believe has enabled us to maintain market share and largely mitigate the impact of travel restrictions.

Key Factors Affecting the Components of Our Results of Operations

The following discussion sets forth certain components of our statement of operations and certain factors that impact those items:

Revenues

We generate revenues from the sale of chemistry and equipment across all major geographic areas. Revenues exclude sales taxes and are presented net of discounts, rebates, and reductions. Our revenues are impacted by the following key factors and trends:

 

   

broad macroeconomic trends and factors, including general economic conditions, the impacts of the COVID-19 pandemic and governmental responses thereto, economic conditions in the markets in which we operate, consumer preferences, and rising costs of labor;

 

   

technological advancements in our EL end-markets, including the advanced packaging evolution, alternative powertrains, rollout of 5G infrastructure, the adoption of next-generation mobile devices and EVs, the proliferation of big data and cloud computing, and the increasing use of Internet of Things (“IoT”) connected devices;

 

   

secular trends in our GMF end-markets, including increased plating content per unit as a result of vehicle lightweighting, increasing quality requirements, and premiumization;

 

   

increasingly stringent environmental regulations;

 

   

our ability to pass through changes in the price of raw materials, in particular, palladium, to our customers;

 

   

our ability to successfully develop and launch new solutions;

 

   

the discontinuance of any of our products in the future in an effort to optimize our offering to our customers;

 

   

seasonality in both our segments, which generally experience their strongest revenue in the second half of each fiscal year, mostly driven by consumption trends during the holiday season, and their lowest revenue in the first quarter of each fiscal year, mostly driven by the slowdown in production in China as a result of the Chinese New Year, which can result in a sequential decline in our revenues in the first quarter of a fiscal year relative to the fourth quarter of the prior fiscal year; and

 

   

fluctuations in foreign currency exchange rates.

 

 

24


Table of Contents

Cost of sales, exclusive of depreciation and amortization (“Cost of sales”)

Cost of sales principally consists of the price paid for raw materials, unfinished and finished products, compensation and benefit costs for employees involved in our manufacturing operations, and other cost of sales. Raw materials are valued at their respective purchase prices, net of discounts and rebates, including transportation costs and ancillary expenses.

The key factors that impact our cost of sales as a percentage of our revenues include:

 

   

changes in the price of raw materials, in particular, palladium;

 

   

the impact of wage inflation;

 

   

the mix of products sold during any period; in particular the mix of our revenues between chemistry and equipment;

 

   

the impact of our operational improvement initiatives;

 

   

freight and material expenses; and

 

   

inventory allowances.

Depreciation and amortization

Depreciation and amortization consists of capitalized costs incurred in connection with the ownership and operation of all tangible assets, including the depreciation and amortization expense related to the increased carrying value of our fixed assets and identifiable definite-lived intangible assets related to our acquisition by Carlyle. The main tangible assets that are depreciated over their useful lives are our recently completed technology centers, our R&D equipment, and our production facilities. The principal intangible items that are amortized over their useful lives include our developed technology, customer relationships, and trade name portfolio. Additionally, depreciation and amortization includes impairment losses of goodwill.

Selling, general, and administrative expenses (“SG&A”)

SG&A expenses consist principally of expenditures incurred in connection with the sales and marketing of our products, third-party logistics, as well as administrative costs for support functions such as finance, information technology, human resources, and legal. Research and development expenses (“R&D”)

R&D expenses principally consist of costs incurred to develop new products and equipment, processes, and technologies, or to generate improvements to existing products, equipment, or processes.

Restructuring benefit (expenses)

Restructuring expenses mainly consist of expenditures in relation to organizational changes and severance payments. Restructuring benefit reflects the release in subsequent fiscal periods of restructuring provisions.

Interest expense

Interest expense consists of interest on our financial obligations as well as the amortization of debt issuance costs and debt discounts associated with our senior secured credit facilities, Opco Notes, and Holdco Notes, the Redemptions, and the Refinancing. The majority of our interest expense is not deductible for income tax purposes because we have primarily incurred indebtedness in jurisdictions where we have only immaterial taxable profits from operations.

Other income (expense), net

Other income (expense), net principally consists of gains or losses from foreign currency fluctuations; gains or losses on disposal of property, plant, and equipment; mark-to-market adjustments of our derivatives; and interest income.

 

25


Table of Contents

Income taxes

Income taxes include (a) deferred tax, consisting of amounts of income taxes payable or recoverable during future fiscal years for taxable or deductible timing differences and carry-forward of unused tax losses, and tax credits and (b) the payable amount of corporate tax, estimated on the basis of the tax rules in force in applicable jurisdictions, and distribution tax on dividends received, or withholding tax, as applicable, including provisions for tax litigations and disputes. We and our subsidiaries are subject to income tax in the various jurisdictions in which we operate. Changes to the debt and equity capitalization of our subsidiaries, and the realignment of the functions performed and risks assumed by the various subsidiaries are among the factors that will determine the future book and taxable income of the respective subsidiary and the Company as a whole.

A. Operating Results

The following discussion should be read in conjunction with the information contained in the accompanying unaudited interim condensed financial statements and related footnotes included elsewhere in this report. Our results of operations set forth below may not necessarily reflect what will occur in the future.

The following table was derived from our unaudited interim consolidated statements of comprehensive income/(loss) for the six months ended June 30, 2021 and 2020 included elsewhere in this report.

 

($ in millions)

   Six months
ended June

30, 2021
     Six months
ended June

30, 2020
 

EL Chemistry revenues

   $ 390.0      $ 318.6  

EL Equipment revenues

     83.1        39.2  

Total EL Segment revenues

     473.1        357.8  

GMF Chemistry revenues

     252.3        180.9  

GMF Equipment revenues

     4.3        4.9  

Total GMF Segment revenues

     256.6        185.8  

Revenues

     729.7        543.6  

Cost of sales, excluding depreciation and amortization

     (352.9      (241.4

Depreciation and amortization

     (88.4      (360.6

Selling, general, and administrative expenses

     (129.6      (126.9

Research and development expenses

     (25.5      (23.6

Restructuring income (expenses)

     0.5        (1.7

Operating profit/(loss)

     133.9        (210.6

Interest expense

     (100.4      (71.9

Other income (expense), net

     (40.9      (13.6

Income (loss) before income taxes

     (7.4      (296.1

Income tax expense

     (34.5      (26.7

Consolidated net income (loss)

   $ (41.9    $ (322.8

Six months ended June 30, 2021 compared to six months ended June 30, 2020

Revenues

Revenues increased $186.1 million, or 34.2%, to $729.7 million for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020, primarily reflecting a significant increase in revenues in our EL and GMF segments. EL segment revenues increased by $115.3 million, or 32.2%, to $473.1 million, while GMF segment revenues increased by $70.8 million, or 38.1%, to $256.6 million compared to the prior year period. With regards to product mix, chemistry revenues increased by $142.8 million, or 28.6%, to $642.3 million for the six months ended June 30, 2021, while equipment revenues of $87.3 million increased by $43.2 million, or 98.0%. Chemistry revenues for the six months ended June 30, 2021 were positively impacted by fluctuations in palladium prices, which increased revenues by $11.2 million compared to the six months ended June 30, 2020, and by a favorable exchange rate effect, which increased revenues by $38.3 million. Excluding the impact of these items, our chemistry revenues increased by $93.3 million, or 18.7%, for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. For additional information on the key factors driving the changes in our chemistry revenues within our segments, see “—Selected Segment Information” in this Item 2.

 

26


Table of Contents

Cost of sales, excluding depreciation and amortization

Cost of sales, excluding depreciation and amortization, increased $111.5 million, or 46.2%, to $352.9 million for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020, which corresponded to an increase in cost of sales as a percentage of revenues from 44.4% to 48.4% for the applicable years. This increase primarily reflected changes in palladium prices and higher freight and material expenses related to global supply chain disruptions, as well as product mix effects from higher equipment sales.

Depreciation and amortization

Depreciation and amortization decreased $272.2 million, or 75.5%, to $88.4 million for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. This decrease is primarily attributable to the GMF goodwill impairment recognized in the prior year period.

Selling, general, and administrative expenses

SG&A expenses increased $2.6 million, or 2.1%, to $129.6 million for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. This increase was largely attributable to a normalization of travel expenses in some markets, inflation and unfavorable exchange rate translation, partly offset by efficiency gains.

Research and development expenses

R&D expenses increased $1.9 million, or 8.1%, to $25.5 million for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. This increase was attributable to increased R&D activity in the second quarter of 2021.

Restructuring income (expenses)

Restructuring expenses decreased $2.3 million, or 131.4%, to an income of $0.5 million for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020, mainly related to the utilization of provisions in Germany in the second quarter of 2021.

Interest expense

Interest expense increased $28.5 million, or 39.6%, to $100.4 million for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. This increase was primarily attributable to the Refinancing and the Redemptions in the first quarter of 2021, which resulted in the de-recognition of capitalized financing costs in the amount of $54.7 million, partially offset by lower interest expenses in the second quarter of 2021 due to the decrease in our indebtedness as well as the lower interest rate after the refinancing activities in the first quarter of 2021.

Other income (expense), net

Other expense increased $27.3 million, or 200.4%, to $40.9 million for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The increase resulted from the de-recognition of positive market values from bifurcated embedded derivatives in our debt instruments, as well as changes in fair value of our other derivatives in the amount of $45.5 million in connection with the repayment of debt, both of which were partially offset by an increase in profit on foreign transactions of $13.6 million largely related to the revaluation of intercompany loans and receivables, as well as from increased interest income of $5.2 million mainly relating to a tax litigation and from a $1.5 million earn-out liability revaluation, which was initially recognized in 2019.

 

 

27


Table of Contents

Income tax expense

Income tax expense increased $7.8 million, or 29.3%, to $34.5 million for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. This increase resulted primarily from a higher taxable income which led to higher income tax expenses.

The following table was derived from our unaudited interim consolidated statements of comprehensive income/(loss) for the three months ended June 30, 2021 and 2020 included elsewhere in this report.

 

($ in millions)

   Three months
ended June 30,
2021
     Three months
ended June 30,
2020
 

EL Chemistry revenues

   $ 197.9      $ 163.8  

EL Equipment revenues

     49.7        21.8  

Total EL Segment revenues

     247.5        185.7  

GMF Chemistry revenues

     127.4        74.3  

GMF Equipment revenues

     1.6        1.0  

Total GMF Segment revenues

     129.0        75.3  

Revenues

     376.6        260.9  

Cost of sales, excluding depreciation and amortization

     (185.9      (121.7

Depreciation and amortization

     (43.8      (319.2

Selling, general, and administrative expenses

     (61.3      (59.4

Research and development expenses

     (13.2      (11.2

Restructuring income (expenses)

     0.6        (1.7

Operating profit/(loss)

     72.9        (252.3

Interest expense

     (14.5      (36.3

Other income (expense), net

     (4.1      18.6  

Income (loss) before income taxes

     54.3        (269.9

Income tax expense

     (24.6      (13.0

Consolidated net income (loss)

   $ 29.7      $ (282.9

Three months ended June 30, 2021 compared to three months ended June 30, 2020

Revenues

Revenues increased $115.6 million, or 44.3%, to $376.6 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, primarily reflecting a significant increase in revenues in our EL and GMF segments. EL segment revenues increased by $61.8 million, or 33.3%, to $247.5 million, while GMF segment revenues increased by $53.8 million, or 71.5%, to $129.0 million compared to the prior year period. With regards to product mix, chemistry revenues increased by $87.2 million, or 36.6%, to $325.3 million for the three months ended June 30, 2021, while equipment revenues of $51.3 million increased by $28.4 million, or 124.6% compared to the prior year period. Chemistry revenues for the three months ended June 30, 2021 were positively impacted by fluctuations in palladium prices, which increased revenues by $7.4 million compared to the three months ended June 30, 2020, and a favorable exchange rate effect, which increased revenues by $21.5 million compared to the prior year period. Excluding the impact of these items, our chemistry revenues increased by $58.3 million, or 24.5%, for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. For additional information on the key factors driving the changes in our chemistry revenues within our segments, see “—Selected Segment Information” in this Item 2.

 

28


Table of Contents

Cost of sales, excluding depreciation and amortization

Cost of sales, excluding depreciation and amortization, increased $64.2 million, or 52.8%, to $185.9 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, which corresponded to an increase in cost of sales as a percentage of revenues from 46.6% to 49.4% for the three months ended June 30, 2021 as compared to the prior year period. This increase primarily reflected changes in palladium prices and higher freight and material expenses related to global supply chain disruptions, as well as effects on product mix resulting from higher equipment sales.

Depreciation and amortization

Depreciation and amortization decreased $275.4 million, or 86.3%, to $43.8 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. This decrease is primarily attributable to the GMF goodwill impairment recognized in the prior year period.

Selling, general, and administrative expenses

SG&A expenses increased $2.0 million, or 3.3%, to $61.3 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. This increase was largely attributable to a normalization of travel expenses in some markets, inflation and unfavorable exchange rate translation, partly offset by efficiency gains.

Research and development expenses

R&D expenses increased $2.0 million, or 18.2%, to $13.2 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. This increase was primarily attributable to increased R&D activity in the second quarter of 2021.

Restructuring income (expenses)

Restructuring expenses decreased $2.4 million, or 136.5%, to an income of $0.6 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, mainly related to the utilization of provisions in Germany.

Interest expense

Interest expense decreased $21.8 million, or 60.0%, to $14.5 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. This decrease related to the decreased interest expenses attributable to the Redemptions, as well as the lower interest rate after the refinancing activities in the first quarter of 2021.

Other income (expense), net

Other expense increased $22.7 million, or 122.1%, to $4.1 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. This increase mainly resulted from changes in fair value of our other derivatives in the amount of $18.7 million in connection with the repayment of debt, a loss on foreign transactions of $2.0 million largely related to the revaluation of intercompany loans and receivables, as well as increased expense of $1.6 million related to the equity share programs.

Income tax expense

Income tax expense increased $11.7 million, or 89.9%, to $24.6 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. This increase primarily resulted from a higher taxable income, which led to higher income tax expenses.

 

29


Table of Contents

Selected Segment Information

Six months ended June 30, 2021 compared to six months ended June 30, 2020

The following table presents revenues by segment and Segment Adjusted EBITDA for the six months ended June 30, 2021 and 2020:

 

($ in millions)

   Six months
ended June

30, 2021
    Six months
ended June

30, 2020
 

EL

    

EL Chemistry revenues

   $  390.0     $  318.6  

EL Equipment revenues

     83.1       39.2  

EL Segment revenues

     473.1       357.8  

EL Segment Adjusted EBITDA(1)

     160.6       117.2  

EL Segment Adjusted EBITDA margin

     33.9     32.7

GMF

    

GMF Chemistry revenues

   $ 252.3     $ 180.9  

GMF Equipment revenues

     4.3       4.9  

GMF Segment revenues

     256.6       185.8  

GMF Segment Adjusted EBITDA(1)

     67.9       39.0  

GMF Segment Adjusted EBITDA margin

     26.5     21.0

 

(1)

For additional information regarding Segment Adjusted EBITDA, see note 10 to the unaudited interim condensed consolidated financial statements included elsewhere in this report.

Electronics Segment Revenues

EL revenues were $473.1 million for the six months ended June 30, 2021 compared to $357.8 million for the six months ended June 30, 2020, an increase of $115.3 million, or 32.2%. This increase reflects higher chemistry revenues, which increased $71.5 million, or 22.4%, and higher equipment revenues, which increased $43.8 million, or 111.7%. Chemistry revenues benefited from a strong demand to growth in 5G infrastructure buildout, advanced semiconductor packaging, 5G smartphone replacement cycles, and automotive electronics from improved end-market demand. Chemistry revenues were also favorably impacted by an increase in palladium prices of $9.4 million, which we pass through to our customers, and by a favorable currency translation effect of $24.6 million. Excluding these items, our chemistry revenues increased by $37.5 million, or 11.8%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, mainly reflecting continued demand for our EL chemistry. Equipment revenues reflected a substantial increase in orders, driven by the accelerated technology cycle and a more complex chip packaging technology.

Electronics Segment Adjusted EBITDA

EL Segment Adjusted EBITDA increased $43.4 million, or 37.0%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, driven by higher chemistry volumes and the successful implementation of several cost savings initiatives. EL Segment Adjusted EBITDA margin increased from 32.7% in the six months ended June 30, 2020 to 33.9% during the six months ended June 30, 2021. This increase was primarily driven by significantly higher organic revenue and continued cost discipline, and partially offset by product mix.

General Metal Finishing Segment Revenues

GMF revenues were $256.6 million for the six months ended June 30, 2021 compared to $185.8 million for the six months ended June 30, 2020, an increase of $70.8 million, or 38.1%. This reflects an increase in chemistry revenues of $71.4 million, or 39.5%, partially offset by a decrease in equipment revenues of $0.6 million or 12.0%, and was primarily attributable to the recovery from the trough of the COVID-19 pandemic as well as improving global automotive markets, continued constructive sanitary markets, and growing interest in our sustainability-focused suite of solutions. The decline in equipment revenues was primarily driven by delayed capital investment decisions by our customers. Chemistry revenues were positively impacted by an increase in palladium prices of $1.8 million, and by favorable currency translation effects of $13.7 million. Excluding these items, our GMF chemistry revenues increased by $55.9 million, or 30.9%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

 

30


Table of Contents

General Metal Finishing Segment Adjusted EBITDA

GMF Segment Adjusted EBITDA increased $28.9 million, or 74.3%, for the six months ended June 30, 2021 as compared to the prior year period, driven by rapidly improving global automotive markets and the recovery from the trough of the COVID-19 pandemic. Despite increasing freight expenses, GMF Segment Adjusted EBITDA margin increased from 21.0% for the six months ended June 30, 2020 to 26.5% for the six months ended June 30, 2021, benefitting from improved operating leverage and continued cost controls.

Three months ended June 30, 2021 compared to three months ended June 30, 2020

The following table presents revenues by segment and Segment Adjusted EBITDA for the three months ended June 30, 2021 and 2020:

 

($ in millions)

   Three
months
ended June

30, 2021
    Three
months
ended June

30, 2020
 

EL

    

EL Chemistry revenues

   $  197.9     $  163.8  

EL Equipment revenues

     49.7       21.8  

EL Segment revenues

     247.5       185.7  

EL Segment Adjusted EBITDA(1)

     84.9       62.5  

EL Segment Adjusted EBITDA margin

     34.3     33.6

GMF

    

GMF Chemistry revenues

   $ 127.4     $ 74.3  

GMF Equipment revenues

     1.6       1.0  

GMF Segment revenues

     129.0       75.3  

GMF Segment Adjusted EBITDA(1)

     33.2       9.8  

GMF Segment Adjusted EBITDA margin

     25.8     13.1

 

(1)

For additional information regarding Segment Adjusted EBITDA, see note 10 to the unaudited interim condensed consolidated financial statements included elsewhere in this report.

Electronics Segment Revenues

EL revenues were $247.5 million for the three months ended June 30, 2021, compared to $185.7 million for the three months ended June 30, 2020, an increase of $61.8 million, or 33.3%. This increase reflects higher chemistry revenues, which increased $34.0 million, or 20.8%, and higher equipment revenues, which increased $27.8 million, or 127.4%. Chemistry revenues benefited from a strong growth in 5G infrastructure buildout, advanced semiconductor packaging, 5G smartphone replacement cycles, and automotive electronics from improved end-market demand. Chemistry revenues were also favorably impacted by an increase in palladium prices of $6.8 million, which we pass through to our customers, and by a favorable currency translation effect of $13.1 million. Excluding these items, our chemistry revenues increased by $14.2 million, or 8.6%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, mainly reflecting continued demand for our EL chemistry. Equipment revenues reflected the sustained increase in demand, driven by the accelerated technology cycle particularly for advanced semiconductor packaging.

 

31


Table of Contents

Electronics Segment Adjusted EBITDA

EL Segment Adjusted EBITDA increased $22.1 million, or 35.4%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, driven by higher chemistry volumes and cost discipline. EL Segment Adjusted EBITDA margin increased from 33.6% in the three months ended June 30, 2020 to 33.8% during the three months ended June 30, 2021. This increase was primarily driven by significantly higher organic revenue, partially offset by a product-mix effect.

General Metal Finishing Segment Revenues

GMF revenues were $129.0 million for the three months ended June 30, 2021 compared to $75.3 million for the three months ended June 30, 2020, an increase of $53.8 million, or 71.5%. This reflects an increase in chemistry revenues of $53.2 million, or 71.6% and an increase in equipment revenues of $0.6 million or 61.9%, and was primarily attributable to the annualization of the quarter most impacted by COVID-19, as well as improving global automotive markets and constructive sanitary markets. Chemistry revenues were positively impacted by an increase in palladium prices of $0.6 million, and by favorable currency translation effects of $8.4 million. Excluding these items, our GMF chemistry revenues increased by $44.2 million, or 59.4%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

General Metal Finishing Segment Adjusted EBITDA

GMF Segment Adjusted EBITDA increased $23.4 million, or 237.8%, for the three months ended June 30, 2021 as compared to the prior year period, driven by operating leverage on higher volumes, offset by higher freight costs as a result of supply chain disruptions. GMF Segment Adjusted EBITDA margin increased from 13.1% for the three months ended June 30, 2020, to 25.8% for the three months ended June 30, 2021, benefitting from improved operating leverage and continued cost controls.

Non-IFRS Measures

To supplement our financial information presented in accordance with International Financial Reporting Standards (“IFRS”), we use the following additional non-IFRS financial measures to clarify and enhance our understanding of past performance: EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance and allows investors to better assess our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business and including certain items that reflect current and future operating performance. We use certain of these financial measures for business planning purposes and for measuring our performance relative to that of our competitors. We utilize Adjusted EBITDA as the primary measure of consolidated financial performance.

EBITDA consists of consolidated net income (loss) before interest expense, net, income taxes, and depreciation and amortization. Adjusted EBITDA consists of EBITDA adjusted for (i) non-operating income or expense and (ii) the impact of certain non-cash or other items that are included in net income and EBITDA that we do not consider indicative of our ongoing operating performance.

We believe these financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the terms EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin may vary from that of others in our industry. These financial measures should not be considered as alternatives to operating profit, operating profit margin, consolidated net income (loss), earnings per share, or any other performance measures derived in accordance with IFRS as measures of operating performance.

EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under IFRS. Some of these limitations are that EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin:

 

   

do not reflect the significant interest expense on our debt, including the old senior secured credit facilities, the Opco Notes, the Holdco Notes and the Senior Secured Credit Facilities;

 

32


Table of Contents
   

eliminate the impact of income taxes on our results of operations;

 

   

exclude depreciation and amortization, which are non-cash charges, and assets being depreciated and amortized will often have to be replaced in the future, and EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin do not reflect any expenditures for such replacements; and

 

   

may be calculated differently by other companies, which limits their usefulness as comparative measures.

We compensate for these limitations by using EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin along with other comparative tools, together with IFRS measurements, to assist in the evaluation of operating performance. Such IFRS measurements include operating profit, operating profit margin, net income (loss), earnings per share, and other performance measures.

In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in this presentation. Our presentation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin should also not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

The following table reconciles consolidated net income (loss) to EBITDA and Adjusted EBITDA for the periods presented:

 

($ in millions)

   Six months ended
June 30, 2020
     Six months ended
June 30, 2021
     Three months
ended
June 30, 2020
     Three months
ended
June 30, 2021
 

Consolidated net income (loss)

   $ (322.8    $ (41.9    $ (282.9    $ 29.7  

Interest expense, net

     71.3        94.6        36.0        14.2  

Income taxes

     26.7        34.5        13.0        24.6  

Depreciation and amortization (excluding impairment charges)

     81.3        89.2        40.1        44.1  
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     (143.5      176.4        (193.9      112.6  

Non-cash adjustments(a)

     290.1        56.3        257.2        (1.4

Foreign exchange loss, net(b)

     2.4        (11.0      3.1        5.3  

Restructuring(c)

     1.7        (0.5      1.7        (0.6

Transaction related costs(d)

     2.1        6.0        1.6        1.5  

Management fee(e)

     1.8        0.9        1.2        0.5  

COVID-19 Adjustment(f)

     1.5        0.4        1.3        0.3  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 156.1      $ 228.4      $ 72.3      $ 118.1  

 

(a)

Eliminates the non-cash impact of (1) share-based compensation, (2) losses on the sale of fixed assets, (3) impairment charges and (4) mark-to-market adjustments related to our foreign currency derivatives entered into in connection with certain redenomination transactions not linked to underlying individual transactions as well as the de-recognition of bifurcated embedded derivatives related to certain redemption features of the Opco Notes and Holdco Notes, and (5) valuation adjustments from the revaluation of the earn-out liability initially recognized in 2019. The dollar value of these non-cash adjustments for each period presented above is set forth below:

 

($ in millions)

   Six months
ended
June 30, 2020
     Six months ended
June 30, 2021
     Three months
ended
June 30, 2020
     Three months
ended
June 30, 2021
 

Share-based compensation

   $ 0.2      $ 1.9      $ 0.1      $ 1.7  

Losses on the sale of fixed assets

     0.2        0.6        0.0        0.4  

Impairment charges

     279.3        (0.8      279.1        (0.3

Mark-to-market adjustments

     10.5        56.0        (22.0      (3.3

Valuation adjustment

     —          (1.5              
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-cash adjustments

   $ 290.1      $ 56.3      $ 257.2      $ (1.4

 

(b)

Eliminates net foreign currency transactional gains and losses on balance sheet items.

(c)

Eliminates charges resulting from restructuring activities principally from the Company’s cost reduction efforts.

 

33


Table of Contents
(d)

Reflects an adjustment to eliminate (1) IPO-related costs linked to the existing equity and (2) professional fees paid to third-party advisors in connection with the implementation of strategic initiatives.

(e)

Reflects an adjustment to eliminate fees paid to Carlyle. For a description of the consulting agreement with Carlyle, see Item 7.B. “Major Shareholders and Related Party Transactions—Related Party Transactions” in our Annual Report on Form 20-F.

(f)

Eliminates charges in connection with masks, sanitizers, and other COVID-19 related expenses at certain plant and office locations.

B. Liquidity and Capital Resources

Our liquidity requirements are principally related to funding our operating expenses, making interest payments under our indebtedness, meeting working capital requirements, and funding capital expenditures. Our capital expenditures during the six months ended June 30, 2021 and 2020 were $22.1 million and $22.7 million, respectively.

We anticipate that the cash flows from operations, cash on hand, and availability under the Revolving Credit Facility, and our local lines of credit will be sufficient to fund our liquidity requirements. We may also pursue strategic acquisition opportunities, which may impact our future cash requirements and require additional issuances or incurrences of debt. From time to time, we may establish new local lines of credit or utilize existing local lines of credit. We will manage our global cash balances by utilizing available cash management strategies, which may include intercompany agreements, permitted dividends, and hedging. However, our ability to fund our liquidity requirements will depend on our ability to generate and access cash in the future. This is subject to general economic, financial, contractual, competitive, legislative, regulatory, and other factors, some of which are beyond our control, as well as the factors described in Item 3.D. “Risk Factors” in our Annual Report on Form 20-F and in our other filings with the SEC, including our ability to access cash generated in China as described in Item 3.D. “Risk Factors—Risks Related to our Business—The Chinese government’s control of currency conversion and expatriation of funds may affect our liquidity” in our Annual Report on Form 20-F.

We or our affiliates, may from time to time seek to purchase, repurchase, redeem or otherwise retire our loans through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, tender offers or otherwise. Such purchases, repurchases, redemptions, exchanges or retirements, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material.

Historical Cash Flows

The following table summarizes our primary sources and uses of cash for the periods indicated:

 

($ in millions)    Six months
ended
June 30,
2021
     Six months
ended
June 30,
2020
 

Net cash provided by (used in):

     

Operating activities

   $ 36.8      $ 8.8  

Investing activities

   $ (18.8    $ (22.4

Financing activities

   $ (81.3    $ 73.9  

Six months ended June 30, 2021 compared to six months ended June 30, 2020

Operating activities

Net cash provided by operating activities was $36.8 million for the six months ended June 30, 2021 compared to $8.8 million for the six months ended June 30, 2020, an increase of $27.9 million. This increase is primarily the result of the increased business activities in the second quarter of 2021.

Investing activities

Net cash used in investing activities was $18.8 million for the six months ended June 30, 2021 compared to $22.4 million for the six months ended June 30, 2020, a decrease of $3.7 million, primarily attributable to proceeds from disposals recognized during the six months ended June 30, 2021.

 

34


Table of Contents

Financing activities

Net cash used in financing activities was $81.3 million for the six months ended June 30, 2021 compared to net cash provided by financing activities of $73.9 million for the six months ended June 30, 2020, a decrease of $155.2 million. This change was primarily due to the issuance of common shares in connection with our IPO, the repayment of our old term loan facilities and the issuance of new borrowings as part of the Refinancing.

Debt Agreements

Our liquidity requirements are significantly impacted by the cash expense associated with servicing our indebtedness. As of June 30, 2021, our aggregate principal amount of indebtedness outstanding was $1,591.7 million (including $4.0 million of local lines of credit and excluding short term and long term deferred financing costs of $19.7 million and $74.8 million of lease liabilities). The following table details our borrowings outstanding as of June 30, 2021 and the associated interest expense, including amortization of debt issuance costs and debt discounts, and average effective interest rates for such borrowings for the six months ended June 30, 2021:

 

($ in millions)    Principal balance
as of
June 30, 2021
     Average interest rate, for
the three months ended
June 30, 2021
    Interest expense for
the three months
ended
June 30, 2021
 

USD Term Loan Facility

   $  1,350.0        3.0   $ 12.3  

EUR Term Loan Facility(1)

   $ 237.7        2.75   $ 1.9  

 

(1)

Reflects currency exchange rate in effect at period end.

Senior Secured Credit Facilities

Following the Refinancing, our Senior Secured Credit Facilities consist of our USD Term Loan Facility, our EUR Term Loan Facility, and our Revolving Credit Facility. Our Revolving Credit Facility provides revolving loans and letters of credit pursuant to commitments in an aggregate principal amount of $250.0 million, with borrowing capacity of $232.5 million as of June 30, 2021, after giving effect to $17.5 million of ancillary facilities for local lines of credit and guarantee obligations.

The Revolving Credit Facility matures in March 2026 and the Term Loan Facilities mature in March 2028. The USD Term Loan Facility amortizes in quarterly installments of 0.25% starting with the fiscal quarter ending September 30, 2021 until maturity, whereby the final installment of the USD Term Loan Facility will be paid on the maturity date in an amount equal to the aggregate unpaid principal amount. The EUR Term Loan Facility does not amortize and will be paid in full on the maturity date.

Borrowings under the USD Term Loan Facility (the “USD Term Loans”) bear interest at a rate equal to, at our option, either: 1.50% plus a base rate determined by reference to the higher of the prime lending rate quoted by the administrative agent, the LIBOR rate for an interest period of one month plus 1.00% and the federal funds rate plus 0.50%; or 2.50% plus a LIBOR rate on deposits in U.S. dollars for one-, two-, three- or six-month periods (or twelve-month or shorter periods if, at the time of the borrowing, available from all relevant lenders). The LIBOR rate USD Term Loans (as defined in the Credit Agreement) are subject to a 0.50% floor and the base rate USD Term Loans are subject to a 0.00% floor.

Borrowings under the EUR Term Loan Facility (the “EUR Term Loans”) bear interest at a rate equal to, at our option, either: 1.75% plus a base rate determined by reference to the higher of the prime lending rate quoted by the administrative agent, the EURIBOR rate for an interest period of one month plus 1.00% and the federal funds rate plus 0.50%; or 2.75% plus a EURIBOR rate on deposits in U.S. dollars for one-, two-, three- or six-month periods (or twelve-month or shorter periods if, at the time of the borrowing, available from all relevant lenders). The EURIBOR rate is subject to a 0.00% floor and the base rate is subject to a 0.00% floor. When the first lien net leverage ratio is equal to or less than 3.40x, the applicable margin on the EUR Term Loan may be reduced to 1.50% for base rate loans and 2.50% for EURIBOR rate loans.

 

35


Table of Contents

When the first lien net leverage ratio is above 3.40x, the applicable margin on the Revolving Credit Facility is 1.00% for base rate loans and 2.00% for LIBOR rate loans. When the first lien net leverage ratio is equal to or less than 3.40x and above 2.90x, the applicable margin on the Revolving Credit Facility is 0.75% for base rate loans and 1.75% for LIBOR rate loans. When the first lien net leverage ratio is equal to or less than 2.90x and above 2.40x, the applicable margin on the Revolving Credit Facility is 0.50% for base rate loans and 1.50% for LIBOR rate loans. When the first lien net leverage ratio is equal to or less than 2.40x and above 1.90x, the applicable margin on the Revolving Credit Facility is 0.50% for base rate loans and 1.25% for LIBOR rate loans. When the first lien net leverage ratio is equal to or below 1.90x, the applicable margin on the Revolving Credit Facility is 0.50% for base rate loans and 1.00% for LIBOR rate loans. As of the date hereof, the applicable margin for the Revolving Credit Facility is 1.00% for base rate loans and 2.00% for LIBOR rate loans. The LIBOR rate borrowings under the Revolving Credit Facility are subject to a 0.00% floor and the base rate borrowings under the Revolving Credit Facility are also subject to a 0.00% floor. We will also pay the lenders a commitment fee on the unused commitments under the Revolving Credit Facility, which will be payable quarterly in arrears. The commitment fee is subject to change depending on our first lien net leverage ratio. As of June 30, 2021, the commitment fee is 0.375%.

Letters of credit issued under our Revolving Credit Facility are subject to a $75.0 million sublimit. We may use future borrowings under our Revolving Credit Facility to fund working capital and for other general corporate purposes, including permitted acquisitions and other investments. Our ability to draw under our Revolving Credit Facility or issue letters of credit thereunder will be conditioned upon, among other things (including the covenants governing our other indebtedness), delivery of required notices, accuracy of the representations and warranties contained in the credit agreement governing our senior secured credit facilities and the absence of any default or event of default under our Senior Secured Credit Facilities, subject to certain exceptions.

Local Lines of Credit

We have a local line of credit in India and, from time to time, may have lines of credit in other jurisdictions. As of June 30, 2021, we had INR 300.0 million ($4.0 million) outstanding under the local line of credit in India, which in total represents our current bank debt.

C. Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements entered into in the ordinary course of business.

D. Critical Accounting Policies and Estimates

We describe our significant accounting policies in note 2.1.33, “Summary of Significant Accounting Policies,” to our unaudited interim condensed consolidated financial statements included elsewhere in this report. The preparation of our unaudited interim condensed consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of some assets and liabilities and, in many instances, the reported amounts of revenue and expenses during the applicable reporting period. A change in estimates and assumptions could have a material impact on our results. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the audited financial statements.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 20-F.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Our business and financial results are affected by fluctuations in world financial markets, including interest rates and foreign currency exchange rates. We may in the future utilize derivative financial instruments (including LIBOR swap or cap arrangements), among other methods, to hedge some of these exposures. We do not use derivative financial instruments for speculative or trading purposes.

 

36


Table of Contents

Interest Rate Risk

We are subject to the risk that the fair value of future cash flows will fluctuate as a result of changes in prevailing market conditions. As of June 30, 2021, our aggregate principal amount of indebtedness outstanding was $1,591.7 million (including $4.0 million of local lines of credit and excluding short-term and long-term deferred financing costs of $19.7 million and $74.8 million of lease liabilities), of which none bore interest at a fixed rate. In connection with the Redemptions, on February 10, 2021, we incurred $100.0 million of indebtedness under our old revolving credit facility, which was refinanced in connection with the Refinancing.

Additionally, we may, from time to time, engage in interest rate hedging transactions to manage our interest rate exposure. For example, on March 27, 2020, we entered into an interest rate cap derivative instrument to manage exposure related to the movement in interest rates. The derivative is designated as a cash flow hedge and was entered into with the intention of reducing the risk associated with the variable interest rates on our indebtedness. We do not use derivative financial instruments for speculative trading purposes.

An increase in interest rates of 100 basis points would result in additional interest expense in the amount of $2.4 million per quarter.

Foreign Currency Exchange Rate Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates relative to the U.S. dollar, the currency in which we prepare our financial statements. This is because when we generate revenues and cash flows in a currency other than the U.S. dollar, these amounts must be translated into U.S. dollars for purposes of preparing our financial statements. Accordingly, our reported financial results will generally benefit when the U.S. dollar is weak relative to other currencies and will generally be adversely affected when the U.S. dollar is strong relative to other currencies. Because the majority of our non-U.S. dollar revenues are denominated in Euros and RMB, we are particularly impacted by changes in the price of these currencies relative to the U.S. dollar. For the six months ended June 30, 2021, approximately 19%, 36%, and 39% of our revenues were denominated in Euros, RMB and other non-U.S. dollar currencies, respectively.

In addition to this translational risk, we are subject to foreign currency transaction risk when we or any of our subsidiaries enter into transactions denominated in currencies other than the functional currency of the applicable entity. Specifically, we and our subsidiaries face the risk of adverse movements in the price of the applicable foreign currency relative to the applicable functional currency between the time a transaction is originally entered into and the time that it is settled.

To mitigate our foreign currency translational risk, we may from time to time engage in translation exposure hedging. To mitigate our foreign transaction risk, we generally try to have our subsidiaries transact in their respective functional currencies and may from time to time enter into hedging arrangements. However, we do not manage our foreign currency exposure in a manner that eliminates all the effects of changes in foreign currency exchange rates on our revenues, cash flows, or the fair values of our assets and liabilities and as a result, changes in foreign currency exchanges rates may adversely affect us.

Commodity Price Risk

We currently have effective contractual arrangements with nearly all of our customers for passing through changes in the cost of palladium to them. Should these arrangements no longer be in place or effective in the future, we may need to hedge these costs and our results could be adversely affected.

Item 4. Certain Relationships and Related Party Transactions

There have been no material changes to our related party transaction or related policies as compared to those described in Item 7.B. “Major Shareholders and Related Party Transactions—Related Party Transactions” in our Annual Report on Form 20-F.

 

37


Table of Contents

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time subject to various claims, lawsuits and other legal proceedings. Some of these claims, lawsuits and other legal proceedings involve highly complex issues and often these issues are subject to substantial uncertainties. Accordingly, our potential liability with respect to a large portion of such claims, lawsuits and other legal proceedings cannot be estimated with certainty. Management, with the assistance of legal counsel, periodically reviews the status of each significant matter and assesses potential financial exposure. We recognize provisions for claims or pending litigation when it determines that an unfavorable outcome is probable and the amount of loss can be reasonably estimated. Due to the inherent uncertain nature of litigation, the ultimate outcome or actual cost of settlement may materially vary from estimates. If management’s estimates prove incorrect, current reserves could be inadequate and we could incur a charge to earnings which could have a material adverse effect on its results of operations, financial condition, net worth, and cash flows.

Item 1A. Risk Factors

Part I, Item 3.D. “Risk Factors” in our Annual Report on Form 20-F includes a discussion of our risk factors. There have been no material changes to our risk factors since those reported in our Annual Report on Form 20-F.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 5. Other Information

MKS Acquisition

As previously disclosed in greater detail in the Reports of Foreign Private Issuer on Form 6-K, each filed on July 1, 2021, we entered into a definitive agreement (the “Implementation Agreement”) with MKS Instruments, Inc., a Massachusetts corporation (“MKS”), providing for, subject to the terms and conditions of the Implementation Agreement, our acquisition by MKS, which is expected to be implemented by means of a scheme of arrangement under the laws of Jersey.

Financial and Operating Results for the Second Quarter Ended June 30, 2021

On August 11, 2021, we issued a press release announcing our financial and operating results for the second quarter ended June 30, 2021. A copy of the press release and accompanying earnings presentation are furnished as Exhibits 99.1 and 99.2 hereto.

Exhibits

 

Exhibit
No.

  

Description

99.1    Press Release, dated August 11, 2021, issued by Atotech Limited.
99.2    Atotech Limited Earnings Presentation, dated August 11, 2021.

 

38


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Atotech Limited
By:  

/s/ Peter Frauenknecht

Name:   Peter Frauenknecht
Title:   Chief Financial Officer

Date: August 11, 2021

***

 

39

EX-99.1

Exhibit 99.1

 

LOGO

Atotech Reports Second Quarter 2021 Results and Raises 2021 Full Year Guidance

 

   

Generates second quarter revenue of $377 million, an increase of 44% over the prior year period, including chemistry organic revenue growth of 24%

 

   

Reports net income of $30 million, compared to a net loss of $283 million in Q2 2020, the latter caused by Covid-19 pandemic-related impairment charges

 

   

Delivers a record Adjusted EBITDA of $118 million, a 63% increase over the prior year period

 

   

Reduces net leverage to 3.2x

 

   

Raises guidance for full year 2021 organic revenue growth, which is now expected to be in the range of 13% to 14%, including full year chemistry organic revenue growth of approximately 10%

 

   

Increases guidance for full year 2021 Adjusted EBITDA1, which is now anticipated to be in the range of $435 million to $450 million, an increase of $18 million over the prior guidance at the mid-point

BERLIN, Germany – August 11, 2021 – Atotech (NYSE: ATC), a leading specialty chemicals technology company and a market leader in advanced electroplating solutions, today reported record financial results for the second quarter of 2021 and raised its revenue and Adjusted EBITDA guidance for the full year 2021. Chemistry organic revenue growth, a key performance indicator for the Company, increased 24% over the second quarter of 2020. Chemistry organic revenue growth reflects chemistry revenue growth excluding the impact of foreign exchange translation (“FX”) and palladium pass-through (“palladium”).

Management Commentary

Geoff Wild, Atotech’s Chief Executive Officer said, “We are very satisfied by our outstanding second quarter performance. As anticipated, our exposure to secular growth trends and the continuing economic recovery from the Covid-19 pandemic have led to a strong recovery of our revenues. Our robust business model, which combines a lean cost structure and strong operating leverage, allowed us to translate our excellent revenue growth into record Adjusted EBITDA and strong Free Cash Flow.”

“The supportive trends we have witnessed since the beginning of this year, including the build-out of 5G smartphone production and demand for new solutions in advanced semiconductor packaging, continue to build momentum. Atotech’s comprehensive systems and solutions approach, combining leading R&D capabilities and global reach allows us to leverage that demand.”

“As expected, in Q2 we saw higher freight costs from the disruption of global supply chains. However, over the course of the quarter, these began to improve and we feel confident in our ability to contain these costs in the second half of 2021.”

 

1 

Adjusted EBITDA is a non-IFRS financial measure. Adjusted EBITDA should be considered in addition to, but not as a substitute for, the information provided in accordance with IFRS. A reconciliation for adjusted EBITDA to the most directly comparable IFRS financial measure is provided in the Reconciliation of Adjusted EBITDA to Consolidated Net Income (Loss) table. We are not able to forecast Consolidated net income (loss) on a forward-looking basis without unreasonable efforts due to the high variability and difficulty in predicting certain items that affect Consolidated net income (loss), including, but not limited to, Income taxes, Interest expense, and Foreign exchange income (loss).


Second-quarter 2021 Results

Total revenue was $377 million for the second quarter of 2021, an increase of 44% over the prior year period. Total organic revenue, which reflects total revenue excluding the impact of FX and palladium, increased 32%. FX was a 9% tailwind and palladium increased total revenue by 3% for the quarter. These strong quarterly results were driven by organic growth in chemistry revenue of 24%, reflecting double-digit increases in both the Electronics (“EL”) and General Metal Finishing (“GMF”) segments.

Adjusted EBITDA was $118 million for the second quarter of 2021, a 63% increase over the prior year period, reflecting strong chemistry organic volume growth, stable pricing, and FX tailwinds, partially offset by increased costs associated with supply chain inefficiencies.

Diluted earnings per share was $0.15 for the period ended June 30, 2021, and Adjusted EPS was $0.29.

Adjusted EBITDA margin was 31% for the second quarter of 2021, an increase of 370 basis points. The improvement reflects the revenue recovery from the second quarter of 2020, most pandemic-affected quarter last year and operating leverage on chemistry organic revenue, partially offset by the impact of palladium pass-through, the product mix of chemistry versus equipment, and supply chain inefficiencies.

Second-quarter 2021 Segment Highlights

Electronics: Revenue for the second quarter of 2021 in our Electronics segment was $248 million, an increase of 33% over the prior year period. Total organic revenue grew 21%, consisting of 9% chemistry organic growth and a 115% increase in equipment organic revenue. Palladium pass-through increased revenue by 4% and FX was an 8% tailwind for the quarter.

The Electronics organic revenue increase was driven by sustained high demand for the Company’s advanced semiconductor packaging and IC substrate solutions. End-market demand for computing applications and widespread 5G handset adoption continued to gain momentum in the second quarter. Similarly, the demand for our equipment continued to accelerate as PCB and semiconductor manufacturers worldwide increased their production capacity and upgraded their technology.

Adjusted EBITDA for our Electronics segment was $85 million for the second quarter of 2021, a 36% increase over the prior year period, primarily driven by strong chemistry volume growth. Adjusted EBITDA margin increased by 70 basis points to 34.3%, reflecting operating leverage on chemistry organic growth, offset by a product-mix effect from lower gross margin equipment revenues.

General Metal Finishing: Revenue for the second quarter of 2021 in our GMF segment was $129 million, an increase of 71% over the prior year period. Total organic GMF revenue increased 59%, consisting of 59% chemistry organic revenue growth and a 48% increase in organic revenue for equipment. Palladium and FX added 1% and 11% to revenue for the quarter, respectively.

Chemistry organic revenue growth was primarily a function of recovery from the pandemic-depressed markets of the prior-year quarter, supported by the continued end-market recovery, especially automotive and construction.

Adjusted EBITDA for our GMF segment was $33 million, a 238% increase over last year, reflecting operating leverage on chemistry volume growth, partially offset by supply chain inefficiencies. Adjusted EBITDA margin increased by nearly 13 percentage points to 25.8% driven by the same effects.

Full Year 2021 Guidance

Regarding the Company’s 2021 outlook, Peter Frauenknecht, Atotech’s Chief Financial Officer said, “As a result of our very strong first half and our improved outlook for the second half of the year, we are raising our revenue and Adjusted EBITDA guidance. We now expect full year 2021 total organic revenue growth to be in the range of 13% to 14%, including full year organic growth in chemistry revenue of approximately 10%, which excludes the impact of FX and palladium pass-through. Additionally, we now expect full year 2021 adjusted EBITDA to be in the range of $435 million to $450 million, which represents a $18 million improvement over our prior guidance, at the mid-point.”


MKS Transaction

On July 1, 2021, MKS Instruments, Inc. (“MKS”), a global provider of technologies that enable advanced processes and improve productivity, and Atotech Limited announced that they entered into a definitive agreement pursuant to which MKS will acquire Atotech for $16.20 in cash and 0.0552 of a share of MKS common stock for each Atotech common share (the “MKS Transaction”). The transaction was unanimously approved by the MKS and Atotech boards of directors and is subject to Atotech shareholder approval, approval of the Royal Court of Jersey, regulatory approvals, and other customary closing conditions, and is expected to close by the fourth quarter of 2021.

Conference Call

The Company will host a conference call today at 8:00 a.m. Eastern time to discuss the second quarter results only. There will be no discussion of the MKS Transaction. A link to the live audio webcast, and associated presentation materials will be available on the Company website at Events & presentations | Atotech. If you would like to ask a question, the dial-in number is: +1 833 714-3263 (United States/Canada toll-free) or +1 270 823-1866 (International toll), using conference ID 4774516.

Cautionary Statement Regarding Forward-Looking Statements

This communication contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” and similar expressions and variations or negatives of these words.

These forward-looking statements, which are subject to risks, uncertainties, and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies, and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, and such differences could be material. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances.

More information on potential factors that could affect Atotech’s financial results is available in “Forward-Looking Statements”, the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within Atotech’s most recent Annual Report on Form 20-F, and in other documents that we have filed with, or furnished to, the U.S. Securities and Exchange Commission (the “SEC”), and such factors include, but are not limited to: the uncertainty of the magnitude, duration, geographic reach, impact on the global economy of the COVID 19 pandemic, as well as the current and potential travel restrictions, stay at home orders, and other economic restrictions implemented to address it; uncertainty, downturns, and changes in our target markets; foreign currency exchange rate fluctuations; reduced market acceptance and inability to keep pace with evolving technology and trends; loss of customers; increases in costs or reductions in the supplies of raw materials that may materially adversely affect our business, financial condition, and results of operations; our ability to provide products and services in light of changing environmental, health and safety, product liability, financial, and other legislation and regulation; our failure to compete successfully in product development; our ability to successfully execute our growth initiatives, business strategies, and operating plans; whether the secular trends we expect to drive growth in our business materialize to the degree we expect them to, or at all; material costs relating to environmental and health and safety requirements or liabilities; underfunded defined benefit pension plans; risk that the insurance we maintain may not fully cover all potential exposures; failure to comply with the anti-corruption laws of the United States and various international jurisdictions; tariffs, border adjustment taxes, or other adverse trade restrictions and impacts on our customers’ value chains; political, economic, and legal uncertainties in China, the Chinese government’s control of currency conversion and expatriation of funds, and the Chinese government’s policy on foreign investment in China; regulations around the production and use of chemical substances that affect our products; the United Kingdom’s withdrawal from the European Union; weak intellectual property rights in jurisdictions outside the United States; intellectual property infringement and product liability claims; our substantial


indebtedness; our ability to obtain additional capital on commercially reasonable terms may be limited; risks related to our derivative instruments; our ability to attract, motivate, and retain senior management and qualified employees; increased risks to our global operations including, but not limited to, political instability, acts of terrorism, taxation, and unexpected regulatory and economic sanctions changes, among other things; natural disasters that may materially adversely affect our business, financial condition, and results of operations; the inherently hazardous nature of chemical manufacturing that could result in accidents that disrupt our operations and expose us to losses or liabilities; damage to our brand reputation; Carlyle’s ability to control our common shares; risks relating to the proposed MKS Transaction, including that such transaction may not be consummated, any statements of belief and any statements of assumptions underlying any of the foregoing; and other factors beyond our control.

Additional Information and Where to Find It

This communication does not constitute a solicitation of any vote or approval. In connection with the proposed MKS Transaction, Atotech plans to provide to its shareholders a circular containing information on the anticipated scheme of arrangement vote regarding the proposed MKS Transaction (the “Scheme Circular”). Atotech may also file other documents with the SEC regarding the proposed MKS Transaction. This document is not a substitute for the Scheme Circular or any other document that may be filed by Atotech with the SEC.

BEFORE MAKING ANY VOTING DECISION, ATOTECH’S SHAREHOLDERS ARE URGED TO READ THE SCHEME CIRCULAR IN ITS ENTIRETY WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS FILED BY ATOTECH WITH THE SEC IN CONNECTION WITH THE PROPOSED MKS TRANSACTION OR INCORPORATED BY REFERENCE THEREIN BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED MKS TRANSACTION BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MKS TRANSACTION AND THE PARTIES TO THE PROPOSED MKS TRANSACTION.

Any vote in respect of resolutions to be proposed at Atotech shareholder meetings to approve the proposed MKS Transaction, the scheme of arrangement or related matters, or other responses in relation to the proposed MKS Transaction, should be made only on the basis of the information contained in Atotech’s Scheme Circular. Shareholders may obtain a free copy of the Scheme Circular and other documents Atotech files with the SEC (when available) through the website maintained by the SEC at www.sec.gov. Scheme Circular makes available free of charge on its investor relations website at investors.atotech.com copies of materials it files with, or furnishes to, the SEC.

No Offer or Solicitation

This communication is for information purposes only and is not intended to and does not constitute, or form part of, an offer, invitation or the solicitation of an offer or invitation to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the proposed MKS Transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law.

The proposed MKS Transaction will be implemented solely pursuant to the scheme of arrangement, subject to the terms and conditions of the definitive agreement between MKS and Atotech, dated July 1, 2021, which contains the full terms and conditions of the proposed MKS Transaction.

Non-IFRS Financial Measures

This communication contains certain non-IFRS financial measures designed to complement the financial information presented in accordance with IFRS because management believes such measures are useful to investors. However, our use of these non-IFRS financial measures may vary from that of others in our industry. Our non-IFRS metrics have limitations as analytical tools, and you should not consider them in isolation or as alternatives to consolidated net income (loss) or other performance measures derived in accordance with IFRS as measures of operating performance, operating cash flows or liquidity. The Company believes that these measures are important and supplement discussions and analysis of its results of operations and enhances an understanding of its operating performance. See the Appendix for a reconciliation of the non-IFRS financial measures.


About Atotech

Atotech is a leading specialty chemicals technology company and a market leader in advanced electroplating solutions. Atotech delivers chemistry, equipment, software, and services for innovative technology applications through an integrated systems-and-solutions approach. Atotech solutions are used in a wide variety of end-markets, including smartphones and other consumer electronics, communications infrastructure, and computing, as well as in numerous industrial and consumer applications such as automotive, heavy machinery, and household appliances.

Atotech, headquartered in Berlin, Germany, is a team of 4,000 experts in over 40 countries generating annual revenues of $1.2 billion (2020). Atotech has manufacturing operations across Europe, the Americas, and Asia. With its well-established innovative strength and industry-leading global TechCenter network, Atotech delivers pioneering solutions combined with unparalleled on-site support for over 9,000 customers worldwide. For more information about Atotech, please visit us at atotech.com.

Contacts:

Sarah Spray

+1 803 504 4731

sarah.spray@atotech.com

Susanne Richter

+49 30 349 85 418

press@atotech.com


Financial Statement Tables

ATOTECH LIMITED

Income Statement

 

     Three months ended
(unaudited)
 
($ in millions), except earnings per share    June 30,
2021
    June 30,
2020
 

Revenue

   $ 376.6     $ 260.9  

Cost of sales, excluding depreciation and amortization

     (185.9     (121.7

Depreciation and amortization

     (43.8     (319.2

Selling, general and administrative expenses

     (61.3     (59.4

Research and development expenses

     (13.2     (11.2

Restructuring benefit (expenses)

     0.6       (1.7

Operating profit (loss)

     72.9       (252.3

Interest expense

     (14.5     (36.3

Other income (expense), net

     (4.1     18.6  

Income (loss) before income taxes

     54.3       (269.9

Income tax expense

     (24.6     (13.0

Consolidated net income (loss)

   $ 29.7     $ (282.9

Earnings per share

    

Basic earnings (loss) per share

     0.15       (3.47

Diluted earnings (loss) per share

     0.15       (3.47

 

     Three months ended
(unaudited)
 
($ in millions)    June 30,
2021
    June 30,
2020
 

Consolidated net income (loss)

   $ 29.7     $ (282.9

Other comprehensive income (loss)

    

Actuarial gains and losses

     (0.9     (7.2

Tax effect

     0.3       2.1  

Items not potentially reclassifiable to statement of income

     (0.7     (5.1

Currency translation adjustment

     27.2       36.4  

Hedge reserve

     (0.4     (4.0

Thereof: Income (cost) of Hedging (OCI II)

     0.7       (1.8

Items potentially reclassifiable to statement of income (loss), net of tax

     26.8       32.4  

Total other comprehensive income (loss), net amount

   $ 26.2     $ 27.3  

Comprehensive loss

   $ 55.8     $ (255.6


ATOTECH LIMITED

Condensed Consolidated Balance Sheets

 

     As of  
($ in millions)    June 30,
2021
(unaudited)
     Dec. 31,
2020
(audited)
 

Assets

     

Non-current assets

     

Property, plant and equipment

   $ 341.2      $ 359.4  

Intangible assets

     1,410.8        1,471.0  

Goodwill

     796.9        804.1  

Right-of-use assets

     95.5        104.1  

Other financial assets

     5.8        70.3  

Other non-financial assets

     3.6        2.7  
  

 

 

 

Total non-current assets

     2,653.9        2,811.6  
  

 

 

 

Current assets

     

Inventories

     172.9        145.4  

Trade receivables*

     258.5        262.0  

Other financial assets*

     18.4        24.9  

Other non-financial assets*

     34.2        24.1  

Tax assets

     50.5        46.4  

Cash and cash equivalents

     249.4        320.1  

Total current assets

     783.9        822.9  

Total assets

   $ 3,437.8      $ 3,634.5  
  

 

 

 

Liabilities & shareholders’ equity

     

Shareholders’ equity

     

Common shares and preferred shares

     19.5        102.1  

Paid-in surplus and retained earnings

     772.0        261.6  

Currency translation adjustment and other reserves

     91.2        120.0  
  

 

 

 

Total shareholders’ equity

     882.7        483.7  
  

 

 

 

Non-current liabilities

     

Borrowings

   $ 1,560.7      $ 2,065.7  

Deferred tax liabilities

     324.6        340.8  

Employee benefits

     161.2        176.2  

Provisions

     13.4        13.2  

Lease liabilities

     61.1        67.7  

Other financial liabilities

     0.0        1.5  

Total non-current liabilities

     2,120.9        2,665.1  
  

 

 

 

Current liabilities

     

Borrowings

     7.3        0.5  

Trade payables

     216.3        221.0  

Tax liabilities

     87.3        99.2  

Lease liabilities

     13.7        13.8  

Other financial liabilities

     18.5        38.5  

Other non-financial liabilities

     74.5        89.7  

Provisions

     16.5        23.0  
  

 

 

 

Total current liabilities

     434.1        485.8  
  

 

 

 

Total liabilities & shareholders’ equity

   $ 3,437.8      $ 3,634.5  
  

 

 

 


ATOTECH LIMITED

Consolidated Statement of Cash Flows

 

     Six months ended
(unaudited)
 
($ in millions)    June 30, 2021     June 30, 2020  

Operating activities

    

Consolidated net income (loss)

   $ (41.9   $ (322.8

Adjustments to reconcile net income (loss) to cash provided by operating activities:

    

Depreciation and amortization

     88.4       360.3  

Income taxes and changes in non-current provisions

     31.0       20.4  

(Gains)/losses on disposals of assets

     0.5       0.2  

Net (gain)/loss on financial instruments at fair value

     40.8       10.1  

Accrued financial interest costs

     44.9       64.4  

Amortization of deferred financing cost, including original issuance discounts

     55.4       7.5  

Interest paid

     (43.1     (64.5

Taxes paid

     (64.6     (28.8

Other

     (5.7     0.8  

(Increase)/decrease in inventories

     (30.0     (33.1

(Increase)/decrease in trade receivables

     3.3       35.9  

Increase/(decrease) in trade payables

     0.9       (20.9

Changes in other assets and liabilities

     (43.4     (20.6
  

 

 

 

Cash flow provided by operating activities

     36.8       8.8  
  

 

 

 

Investing activities

    

Intangible assets and property, plant and equipment additions

     (22.1     (22.7

Increase in non-current loans

     (0.1     (0.0

Proceeds from disposals of intangible assets and property, plant and equipment

     3.3       0.1  

Repayments of non-current loans

     0.1       0.2  
  

 

 

 

Cash flow used in investing activities

     (18.8     (22.4
  

 

 

 

Financing activities

    

Issuance of shares

     473.4       —    

Issuance of non-current debt

     130.1       175.0  

Repayment of non-current debt

     (678.9     (83.0

Increase (decrease) in current borrowings and bank debt

     2.1       (1.4

Increase (decrease) in current financial assets and liabilities

     (0.2     (0.3

Payment of lease liabilities

     (7.8     (7.2

Payment of deferred finance costs

     —         (9.2

Cash flow used in financing activities

     (81.3     73.9  
  

 

 

 

Net decrease in cash and cash equivalents

     (63.3     60.3  
  

 

 

 

Effect of exchange rates

     (7.3     (3.7

Cash and cash equivalents at the beginning of the period

     320.0       302.7  
  

 

 

 

Cash and cash equivalents at the end of the period

   $ 249.4     $ 359.3  
  

 

 

 


ATOTECH LIMITED

Revenue Data

 

     Three months ended
(unaudited)
 
($ in millions)    June 30, 2021      June 30, 2020  

Type of goods or service

     

Chemistry revenue

   $ 325.3      $ 238.1  

Equipment revenue

     51.3        22.8  
  

 

 

 

Total revenue from contracts with customers

     376.6        260.9  
  

 

 

 

Geographical market

     

Asia

     271.3        202.7  

Europe

     75.3        41.9  

Americas

     29.9        16.4  
  

 

 

 

Total revenue from contracts with customers

   $ 376.6      $ 260.9  
  

 

 

 

ATOTECH LIMITED

Segment Data

 

     Three months ended
(unaudited)
 
     June 30, 2021      June 30, 2020  
($ in millions)    EL      GMF      Total      EL      GMF      Total  

Revenue

   $ 247.5      $ 129.0      $ 376.6      $ 185.7      $ 75.3      $ 260.9  

thereof Chemistry revenue

     197.9        127.4        325.3        163.8        74.3        238.1  

thereof Equipment revenue

     49.7        1.6        51.3        21.8        1.0        22.8  

Segment Adjusted EBITDA

     84.9        33.2        118.1        62.5        9.8        72.3  


ATOTECH LIMITED

Reconciliation of Adjusted EBITDA to Consolidated Net Income (Loss)

 

     Three months ended
(unaudited)
 
($ in millions)    June 30, 2021      June 30, 2020  

Consolidated net income (loss)

   $ 29.7      $ (282.9

Interest expense, net

     14.2        36.0  

Income taxes

     24.6        13.0  

Depreciation and amortization (excluding impairment charges)

     44.1        40.1  

EBITDA

   $ 112.6      $ (193.9

Non-cash adjustments(a)

     (1.4      257.2  

Foreign exchange loss(b)

     5.3        3.1  

Restructuring(c)

     (0.6      1.7  

Transaction related costs(d)

     1.5        1.6  

Management fee(e)

     0.5        1.2  

COVID-19 adjustment(f)

     0.3        1.3  

Adjusted EBITDA

   $ 118.1      $ 72.3  
  

 

 

 

thereof EL Segment Adjusted EBITDA

   $ 84.9      $ 62.5  
  

 

 

 

thereof GMF Segment Adjusted EBITDA

   $ 33.2      $ 9.8  
  

 

 

 

 

(a)

Eliminates the non-cash impact of (1) share based compensation, (2) losses on the sale of fixed assets, (3) impairment charges and (4) mark to market adjustments related to our foreign currency derivatives entered into in connection with certain redenomination transactions not linked to underlying individual transactions and bifurcated embedded derivatives related to certain redemption features of the 6.250% Senior Notes due 2025 (the “Opco Notes”) and 8.75%/9.50% Senior PIK Toggle Notes (the “Holdco Notes”), and (5) valuation adjustments from the revaluation of the earn-out liability initially recognized in 2019. The dollar value of these non-cash adjustments for each period presented above is set forth below:

 

     Three months ended
(unaudited)
 
($ in millions)    June 30, 2021      June 30, 2020  

Share based compensation

   $ 1.7      $ 0.1  

Losses on the sale of fixed assets

     0.4        0.0  

Impairment charges

     (0.3      279.1  

Mark-to-market adjustments

     (3.3      (22.0

Valuation adjustments

     —          —    

Non-cash adjustments

   $ (1.4    $ 257.2  

 

(b)

Eliminates net foreign currency transactional gains and losses on balance sheet items.

(c)

Eliminates charges resulting from restructuring activities principally from the Company’s cost reduction efforts.

(d)

Reflects an adjustment to eliminate (1) IPO related costs, linked to the existing equity and (2) professional fees paid to third party advisors in connection with the implementation of strategic initiatives.

(e)

Reflects an adjustment to eliminate fees paid to Carlyle. The consulting agreement pursuant to which management fees are paid to Carlyle will terminate on the earlier of (i) the second anniversary of the IPO and (ii) the date upon which Carlyle ceases to own more than ten percent of the outstanding voting securities of the Company. Management does not view these fees as indicative of the Company’s operational performance and the removal of these fees from Adjusted EBITDA is consistent with the calculation of similar measures under our old senior secured credit facilities and our new credit agreement as well as the indentures that previously governed the Holdco Notes and Opco Notes. For a description of the consulting agreement with Carlyle, see Item 7.B. “Major Shareholders and Related Party Transactions—Related Party Transactions” in our Annual Report on Form 20-F.

(f)

Eliminates charges in connection with masks, sanitizers, and other COVID-19 related expenses at certain plant and office locations.


ATOTECH LIMITED

Organic Revenue Growth Reconciliation

 

     Three months ended June 30, 2021
(unaudited)
 
     Reported
Revenue
Growth
    Impact of
Currency
    Palladium
Pass-
Through
    Organic
Growth

Electronics

     33     (8 %)      (4 %)      21

General Metal Finishing

     71     (11 %)      (1 %)      59
  

 

 

 

Total

     44     (9 %)      (3 %)      32
  

 

 

 
EX-99.2

Slide 1

August 11, 2021 Atotech Q2 2021 Earnings Presentation Geoff Wild, CEO Peter Frauenknecht, CFO Exhibit 99.2


Slide 2

Legal Disclaimer Forward-Looking Statements  This presentation and the oral remarks made in connection herewith may contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any forward-looking statements involve risks, uncertainties and assumptions. Although we believe that the assumptions and analysis underlying these statements are reasonable as of the date hereof, investors are cautioned not to place undue reliance on these statements. Forward-looking statements include information concerning our liquidity and our possible future results of operations, including descriptions of our business strategies, plans, goals, prospects, future events and the cost savings and other benefits we expect to achieve as a result of the acquisition discussed herein. These statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “target,” “project,” “forecast,” “seek,” “will,” “may,” “should,” “could,” “would,” or similar expressions. These statements are based on certain assumptions that we have made in light of our experience in the industry and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances as of the date hereof. We do not have any obligation to and do not intend to update any forward-looking statements included herein. You should understand that these statements are not guarantees of future performance or results. Actual results could differ materially from those described in any forward-looking statements contained herein as a result of a variety of factors, including known and unknown risks and uncertainties, many of which are beyond our control.  This presentation has been prepared by Atotech Limited (“the Company”) and includes information from other sources believed by the Company to be reliable, and, while reasonable care has been taken to ensure that the facts stated herein are accurate and that the opinions and expectations contained herein are fair and reasonable, no representation or warranty, express or implied, if made as to the fairness, accuracy or completeness of any of the opinions and conclusions set forth herein based on such information. More information on potential factors that could affect the Company’s financial results is available in Item 3.D. “Risk Factors” and Item 5. “Operating and Financial Review and Prospects” sections within the Company’s most recent annual report on Form 20-F, and in other documents that we have filed with, or furnished to, the U.S. Securities and Exchange Commission. Unless otherwise indicated, the information contained herein speaks only as of the date hereof and is subject to change, completion or amendment without notice. The Company undertakes no obligation to update or revise any of the forward-looking statements contained herein, whether a result of new information, future events or otherwise. The contents of this presentation are not to be construed as legal, regulatory, business, accounting or tax advice. You should consult your own attorney, business advisor, accountant and tax advisor as to legal, regulatory, business, accounting and tax advice. Under no circumstances is this presentation or the information contained herein to be construed as a prospectus, offering memorandum or advertisement, and neither any part of this presentation nor any information or statement contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This presentation is not, and is not intended to be, an offer to sell, or a solicitation of an offer to purchase, any securities or any other interest in the Company. This presentation has been prepared by the Company solely for informational purposes and exclusively for the benefit and internal confidential use of the recipient. The Company and its affiliates, officers, directors, employees, professional advisors and agents do not accept responsibility or liability for this presentation or its contents (except to the extent that such liability cannot be excluded by law). Non-IFRS Financial Measures The historical financial information included herein includes financial information that is not presented in accordance with International Financial Reporting Standards and related interpretations as issued by the IASB and adopted by the European Union (“IFRS”), including EBITDA and Adjusted EBITDA. We believe EBITDA and Adjusted EBITDA are measures commonly used by analysts and investors to evaluate the performance of companies in our industry. Our use of the terms EBITDA and Adjusted EBITDA may differ from that of others in our industry. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income (loss), operating income or any other performance measures derived in accordance with IFRS as measures of operating performance or operating cash flows or as measures of liquidity. EBITDA and Adjusted EBITDA have important limitations as analytical tools and should be considered in conjunction with, and not as substitutes for, our results as reported under IFRS. This presentation includes a reconciliation of certain non-IFRS financial measures with the most directly comparable financial measures calculated in accordance with IFRS.  Rounding Certain monetary amounts, percentages and other figures included in this presentation have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them. Organic Sales Organic sales growth is calculated as net revenue growth excluding the impact of foreign exchange and palladium price fluctuations. Defined Terms All capitalized terms contained within this presentation have been previously defined in our filings with the U.S. Securities and Exchange Commission.


Slide 3

Q2 Highlights Sustained revenue growth above robust end-markets Electronics chemistry organic growth of 9%1 driven by continued 5G and computing demand trends  Electronics Equipment organic revenue1 +115% following high order intake GMF chemistry organic revenue up 59%1 as the Q2 2020 trough pandemic quarter is annualized and high-end automobile markets strengthen Adj. EBITDA2 rose 63% to $118m given operating leverage on strong volume growth, despite supply chain inefficiencies  Adjusted Free Cash Flow2 from operations before debt service at $87m Net Leverage reduced to 3.2x as we annualize the trough quarter of the COVID-19 pandemic Sustainability Initiatives: Covertron: combination of chemistry and new auxiliary equipment improves value proposition for first Cr (VI) free process  Fumalock: PFAS-free mist supressant for fully compliant Cr(VI) hard chrome processes Digitalization: IIOT hardware and software applications to improve customer experience and reduce carbon footprint Record quarter driven by sustained end-market demand  Demand Environment Profitability & Cash Flow Key Initiatives Organic revenue: Net chemistry revenue +/- impact of FX and +/- impact of palladium, Net Equipment revenue +/- impact of FX See appendix for definitions as well as a reconciliation to the most closely comparable IFRS measure 


Slide 4

Consolidated Results – Q2 2021 Robust revenue growth and operating leverage 32% organic growth reflects strong and accelerating demand in Electronics and recovery in GMF from the COVID-19 demand trough Adjusted EBITDA growth of 63% as a result of operating leverage on strong volumes and lean cost structure, partially offset by supply chain inefficiency  Pro-forma EPS comparison with prior year quarter on Q2 2021 share count basis, to show true increase in profitability   Adjusted EPS of $0.29 reflecting same adjustments as Adjusted EBITDA plus adjustment for reversal of amortization expense Organic sales: Net sales +/- impact of FX and +/- impact of palladium See appendix for definitions of EBITDA and Adjusted EBITDA as well as a reconciliation to the most closely comparable IFRS measure Pro-forma Adjusted EPS: Adjusted Net Income from continuing operations divided by # of shares as of 30.06.21. See Appendix for reconciliation Revenue bridge 3% 9% 32% $ in millions Q2 % Change 2021 2020 Total Organic(1) Electronics $248 $186 0.33 0.21 GMF $129 $75 0.71 0.59 Net Revenue $377 $261 0.44 0.32 Electronics $85 $62 0.36 GMF $33 $10 2.38 Adjusted EBITDA(2) $118 $72 0.63 Adj. EBITDA Margin 0.314 0.27700000000000002 + 370 bps Fully diluted EPS $0.15 $-3.47 Pro-forma Adjusted EPS(3) $0.28999999999999998 $0.01


Slide 5

Electronics Results – Q2 2021 Strong chemistry and equipment demand drive organic growth Chemistry organic revenue growth of 9%, driven by strong underlying demand, optimal market positioning and exposure to high-growth trends Equipment organic revenue grew 115%, supported by multiple drivers including transition to 5G, increased computing demands (WfH, Cloud Computing, AI) and sustainability initiatives Adjusted EBITDA growth as a result of organic volume and efficiency gains Margin expansion reflects operating leverage on chemistry revenue, offset by product mix and Pd pass-through Revenue bridge Organic sales: Net sales +/- impact of FX and +/- impact of palladium See appendix for definitions of EBITDA and Adjusted EBITDA as well as a reconciliation to the most closely comparable IFRS measure 4% 8% 21% $ in millions Q1 % Change 2020 2019 All-in Organic (1) Electronics $172.1 $149.9 0.14799999999999999 5.5% GMF 110.5 133.80000000000001 -0.17399999999999999 -0.184 Net Sales $282.60000000000002 $283.70000000000005 -0.4% -5.8% Electronics $54.7 $50.2 8.9641434262948197 Consolidated GMF 29.1 35 -0.16857142857142854 Adjusted EBITDA $83.800000000000011 $85.2 -1.6% Adj. EBITDA Margin 0.29653220099079974 0.30031723651744796 - 30 bps $ in millions Q2 % Change 2021 2020 Total Organic (1) Chemistry $198 $164 0.21 0.09 Equipment $50 $22 1.27 1.1499999999999999 Net Revenue $248 $186 0.33 0.21 Electronics Adj. EBITDA(2) $85 $62 0.36 Adj. EBITDA Margin 0.34300000000000003 0.33600000000000002 + 70 bps $ in millions Q1 % Change 2020 2019 All-in Organic (1) Chemistry $106.7 $113.9 -6.3% -7.6% Equipment 3.9 20 -0.80600000000000005 -0.8 GMF Net Sales $110.60000000000001 $133.9 -0.17399999999999999 -0.184 Adj. EBITDA $29 $35 -0.17142857142857143 Adj. EBITDA Margin 0.26220614828209765 0.26138909634055263 + 10 bps


Slide 6

GMF Results – Q2 2021 Results reflect recovery from Covid-19 trough in Q2 2020 59% chemistry organic revenue growth reflects recovery of demand after Q2 2020 pandemic trough and above-market growth in a broad range of high-end applications for automotive and other industries  Sustainability-focused solutions experience high demand: Multiple innovative processes including Covertron for Cr(VI) free decorative plating, and anode membrane technology for efficiency gains in ZnNi plating  Adjusted EBITDA rebound to $33M reflects strong operating leverage off higher chemistry volumes, partially offset by higher freight costs  Margin recovery to 25.8% reflects improvement towards normalized level Revenue bridge Organic sales: Net sales +/- impact of FX and +/- impact of palladium See appendix for definitions of EBITDA and Adjusted EBITDA as well as a reconciliation to the most closely comparable IFRS measure 1% 11% 59% $ in millions Q1 % Change 2020 2019 All-in Organic (1) Electronics $172.1 $149.9 0.14799999999999999 5.5% GMF 110.5 133.80000000000001 -0.17399999999999999 -0.184 Net Sales $282.60000000000002 $283.70000000000005 -0.4% -5.8% Electronics $54.7 $50.2 8.9641434262948197 Consolidated GMF 29.1 35 -0.16857142857142854 Adjusted EBITDA $83.800000000000011 $85.2 -1.6% Adj. EBITDA Margin 0.29653220099079974 0.30031723651744796 - 30 bps $ in millions Q1 % Change 2020 2019 All-in Organic (1) Chemistry $154.69999999999999 $129.19999999999999 0.19800000000000001 8.7% Equipment 17.399999999999999 20.7 -0.161 -0.14699999999999999 Net Sales $172.1 $149.89999999999998 0.14799999999999999 5.5% Electronics Adj. EBITDA $54.7 $50.2 8.9641434262948197 Adj. EBITDA Margin 0.31783846600813481 0.33488992661774525 - 170 bps $ in millions Q2 % Change 2021 2020 Total Organic (1) Chemistry $127 $74 0.72 0.59 Equipment $2 $1 0.62 0.48 GMF Net Revenue $129 $75 0.71 0.59 Adj. EBITDA(2) $33 $10 2.38 Adj. EBITDA Margin 0.25800000000000001 0.13100000000000001 + 1270 bps


Slide 7

Liquidity & Capital Structure Strong balance sheet – current net debt leverage 3.2x Q2 adj. free cash flow from operations of $87M before debt service, reflecting strong operating profit and return strong EBITDA conversion as well as good working capital management and efficient capex  $478M of liquidity, including net cash of $245M and borrowing capacity of $232.5M(2) under RCF provides ample financial flexibility Net leverage at 3.2x at quarter-end supported by solid Adjusted EBITDA and annualization of trough pandemic quarter Q2 2021 Capitalization table Net of local lines of credit Includes revolver with commitments of $250.0M and borrowing capacity of $232.5M, after giving effect to ancillary facilities of $17.5M Excluding short term and long term deferred financing costs of $20.4 million Reflects application of IFRS 16, Leases $ in millions Q1 % Change 2020 2019 All-in Organic (1) Electronics $172.1 $149.9 0.14799999999999999 5.5% GMF 110.5 133.80000000000001 -0.17399999999999999 -0.184 Net Sales $282.60000000000002 $283.70000000000005 -0.4% -5.8% Electronics $54.7 $50.2 8.9641434262948197 Consolidated GMF 29.1 35 -0.16857142857142854 Adjusted EBITDA $83.800000000000011 $85.2 -1.6% Adj. EBITDA Margin 0.29653220099079974 0.30031723651744796 - 30 bps $ in millions divided by LTM Amount Adj. EBITDA $ in millions Q1 % Change Cash & Cash equivalents (1) 245 2020 2019 All-in Organic (1) Chemistry $154.69999999999999 $129.19999999999999 0.19800000000000001 8.7% Revolving credit facility (2) 0 Equipment 17.399999999999999 20.7 -0.161 -0.14699999999999999 Term loans (3) 1588 Net Sales $172.1 $149.89999999999998 0.14799999999999999 5.5% Electronics Capitalized leases (4) 75 Total senior secured debt 1662 3.8119266055045871 X Adj. EBITDA $54.7 $50.2 8.9641434262948197 Net senior secured debt 1417 3.2 X Equipment 3.9 20 -0.80600000000000005 -0.8 GMF Net Sales #REF! #REF! -0.17399999999999999 -0.184 Common equity 883 Total capitalization 2300 Adj. EBITDA $29 $35 -0.17142857142857143 Q2 2021 LTM Adjusted EBITDA Adj. EBITDA Margin #REF! #REF! + 10 bps Adjusted EBITDA 436 Cash & Cash Equivalents (1) Revolving Credit Facilities (2) Term Loans


Slide 8

2021 Financial Guidance Strong growth in both segments leads to 22% adj. EBITDA growth at mid-point  Total Revenue Growth(1) Capex Income Tax Rate Adjusted EBITDA Chemistry Organic Revenue Growth Interest Expense 13-14% 4.5% - 5% of total revenue $70m - $74m(2) 30% - 31%(3) $435m - $450m   7-8%   12-13%    ~ 10% EL:   GMF:   Total: Assumptions: Market growth rates based on internal market model, (data derived from key consultancy firms (e.g. IHS, IDC)) and continued recovery from Covid-19 pandemic leading to 6% global GDP growth (IMF) Adjusted EBITDA - Guidance assumes FX rates as per June 30, 2021 Includes chemistry organic growth and equipment excluding FX effects Excludes roughly $59M in one-time costs connected with early extinguishment of Holdco and Opco notes and financing fee amortization, which was recognized in Q1 2021  Includes approximately 25% - 26% income tax rate and 5% withholding tax rate. Tax rate is generally applicable to operating profit (before interest expense), and does not include any tax litigation reserves we may take


Slide 9

Appendix


Slide 10

Adjusted EBITDA Reconciliation ( )


Slide 11

Adjusted EPS Reconciliation


Slide 12

Adjusted Free Cash Flow Before Debt Service (1) Capex is presented net of proceeds from disposals of intangible assets and property, plant, and equipment OWC = Operating working capital and includes trade receivables and inventories less trade payables Following our IPO in February 2021, we redeemed in full all $425.0 million of our 6.250% Senior Notes due 2025 and all $219.0 million of our 8.75%/9.50% Senior PIK Toggle Notes.


Slide 13

Thank you Sarah Spray Global Head of Investor Relations & Communications sarah.spray@atotech.com +1 803 504 4731