Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — AvestaPolarit — Investor Day (May 2002)
46 slides from Outokumpu Oyj's investor day presentation, May 27, 2002
Slide 1: AvestaPolarit – Best in stainless
AvestaPolarit – Best in stainless Capital Markets Day, 27-28 May 2002 Ossi Virolainen Chief Executive Officer Ian Cooper Chief Financial Officer
Slide 2: Contents
Contents AvestaPolarit – company structure AvestaPolarit Qtr 1 2002 results The stainless steel industry and globalisation AvestaPolarit’s strategic direction
Slide 3: A leading stainless steel producer
A leading stainless steel producer New world-class company with focus on expansion in the attractive, fast-growing stainless steel market. Formed on 22 January 2001 through the merger of Avesta Sheffield and Outokumpu Steel. Combining a broad product range and extensive distribution network with cos
Slide 4: We focus exclusively on stainless steel – fastest growing metal by demand
We focus exclusively on stainless steel – fastest growing metal by demand Index 1980 = 100 300 • Stainless steel CAGR +5.5% 250 200 • Copper • OECD industrial End use 150 production segments • Aluminium • Carbon steel 100 Other Process Construction industry 50 5% 10% Welded 0 29% tubes 80 82 84 86 8
Slide 5: Operating with three business areas
Operating with three business areas Corporate management Net sales 9% Coil Products Special Products 26% 65% Integrated mills • Ferrochrome • Tornio • Hot Rolled Plate • Avesta • Long Products Cold rolled • Tubes • Sheffield • Fittings • Nyby/Kloster • Precision Strip North America Local manufacturi
Slide 6: AvestaPolarit in the world
AvestaPolarit in the world - main production in Finland, Sweden, UK and North America USA UK Sweden Finland Other (361 people) (1697 people) (3286 people) (2635 people) countries Sheffield Avesta Kemi (1025 people) Panteg Degerfors Tornio Nyby Pietarsaari Kloster Sorsakoski Fagersta Örnsköldsvik Tot
Slide 7: The largest stainless steel producers and the European coil market - 2001
The largest stainless steel producers and the European coil market - 2001 Million tonnes melting Slabs Slabs capacity per year 2002 2004 Estimate Thyssenkrupp Stainless 2.21 2.88 Arcelor Thyssen- Arcelor 1) 2.50 2.85 25% krupp AvestaPolarit 1.75 2.75 33% Acerinox 2) 2.50 2.50 Acerinox POSCO 1.25 1.7
Slide 8: Ownership structure
Ownership structure PRINCIPAL SHAREHOLDERS ON 22 May 2002 Shareholder % Outokumpu Oyj Finland 52.4% Corus UK Limited UK 23.2% Pension Insurance Company Ilmarinen Ltd. Finland 1.6% The Finnish State Finland 1.2% Odin Norden Sweden 1.0% Varma-Sampo Mutual Pension Insurance Company Finland 0.8% Alecta
Slide 9: Best in Qtr 1 2002 results
Best in Qtr Qtr 11 2002 2002 results results
Slide 10: Qtr 1 profitability markedly improved
Qtr 1 profitability markedly improved Market conditions improved slightly during the quarter. Average European cold rolled base prices 7% higher than during Q1 2001. Net sales reduced by 7% compared with Q1 2001 and amounted to EUR 769 million (830). Operating profit for Q1 2002 totalled EUR 75 mill
Slide 11: European cold rolled shipments
European cold rolled shipments '000 tonnes 900 800 700 600 500 400 300 1995 1996 1997 1998 1999 2000 2001 2002 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Source: Eurofer
Slide 12: Some price increases during the quarter
Some price increases during the quarter Stainless steel market showed some recovery during the quarter. European conversion margins started to rise towards the end of the quarter Cold rolled stainless steel prices (Germany) (EUR/tonne) 2400 2200 Total transaction price 2000 Alloy element 1800 1600 B
Slide 13: Ferrochrome
Ferrochrome USc/lb 85 75 65 55 45 35 25 92 93 94 95 96 97 98 99 00 01 02 Ferrochrome prices continued to fall during the quarter but some price increases expected from Q3 2002. Reduced stainless scrap supply led to increased consumption of primary chrome units. Substantial production cutbacks, marke
Slide 14: Nickel
Nickel USD/lb 5 4,5 4 3,5 3 2,5 2 1,5 92 93 94 95 96 97 98 99 00 01 Nickel market oversupplied during the quarter but decline in exports from Russia balanced the market. Demand improved, market almost in balance. Average nickel prices were 23% up in Q1 2002 compared with Q4 2001 but 5% down compared
Slide 15: Capital projects
Capital projects Capital spending in 2002 estimated at EUR 450 million. Tornio expansion (EUR 790 million) approaching completion. The project proceeding to plan The melt shop commissioning from August and the cold rolling mill from December 2002 Full production capacity will be reached during 2004
Slide 16: Capital projects
Capital projects Board approved the project to increase the capacity of the Tornio hot rolling mill Capacity increase from 1 mtpa to 1.7 mtpa total cost EUR 170 million, commissioning in 2004 Gives capacity to process the slab into hot band. Creates good platform for further growth and development T
Slide 17: Key figures
Key figures Pro forma Jan-Mar Jan-Mar Jan-Dec EUR million 2002 2001 2001 Net sales 769 830 2 977 Operating profit 75 34 141 Profit before extraordinary items 72 32 131 Profit for the financial period 59 23 112 Earnings per share, EUR 0.17 0.07 0.19 Return on capital employed, % 14.0 7.2 7.0 Net inte
Slide 18: Operating profit by quarter
Operating profit by quarter Pro forma EUR million 200 150 100 50 0 -50 -100 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 1998 1999 2000 2001 2002
Slide 19: Short term outlook for stainless market positive
Short term outlook for stainless market positive Global economic development still uncertain, although some positive indications witnessed. The apparent consumption of stainless steel is expected to improve in 2002. European and US stock levels are normal. Price increases announced for Q2 2002. The
Slide 20: The stainless steel industry and globalisation
Best in The The stainless stainless steel steel industry industry and and globalisation globalisation
Slide 21: Main stainless steel grades
Main stainless steel grades Austenitic most widely used grade with a chromium content of at least 16% and a nickel content of at least 6% good formability and weldability, non magnetic range of applications includes houseware, containers, industrial piping and vessels, architectural and construction
Slide 22: Apparent coil consumption by region in 2001
Apparent coil consumption by region in 2001 Cold rolled = 9.95 million tonnes Hot rolled = 2.50 million tonnes 7.3 % 9,3 % 30.5 % 18.9 % 14,4 % 33,2 % 9,6 % 15.7 % 14.9 % 14,5 % 19,0 % 12.7 % W Europe N America Japan China Other Asia RoW Source: CRU International
Slide 23: World apparent consumption of cold rolled stainless steel
World apparent consumption of cold rolled stainless steel Mt 5 4 3 Western Europe North America China Rest of Asia 2 1 0 1996 2001 2006 Source: CRU International
Slide 24: CR trade flows between main regions
CR trade flows between main regions Cold rolled, estimated 2001 in 000 tonnes Europe 121,7 North America 16 From Japan 50,7 425,2 Japan 374,2 to USA 39,4 Fro Mexico to USA m Asia (incl. China) E& SE A sia Brazil South Africa Sources: Europe export & import, Eurofer EU (15), Pariser
Slide 25: A stainless world
AvestaPolarit mine Building and architecture * Architects have long favoured stainless timeless elegance and its ability to reflect the lights anc ings. This corrosion resistant Chemicals, pulp and paper The containment of gases and ids hy market for stainless tanks, pipes, pu Stainless stee! can be
Slide 26: Stainless steel bridge in Bilbao, Spain
Stainless steel bridge in Bilbao, Spain Designed for both function and architectural appeal Reliable service over a long period with minor maintenance
Slide 27: Art
AvestaPolarit cracminne
Slide 28: Lowry Centre
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Slide 29: Prinox
Prinox A unit within AvestaPolarit developing business by: utilising ultra high strength steel for customer specific applications working with lightweight designs and manufacturing methods reducing environmental impact already at design stage a virtual company, networking in close co-operation with
Slide 30: Stainless steel global issues (1)
Stainless steel global issues (1) What do we mean by ‘global’ in context of stainless steel? global customers? Not really, except for ferritics, so does this justify major overseas investment? customers tend to be small and national or regional customers do not request a global presence dumping impl
Slide 31: Stainless steel global issues (2) – Arcelor
Stainless steel global issues (2) Industry consolidation: carbon steel 17% world prod’n – Arcelor 5% automotive 70% world prod’n household appliances 60% world prod’n stainless steel flat products 60% world prod’n – Arcelor 14% Four ‘European’ producers account for about 50% of world slab melting ca
Slide 32: Stainless steel global issues (3)
Stainless steel global issues (3) Producers’ new capacity expansions are increasing, to benefit from economies of scale : melt shops increased from 400 ktpa capacity to 800 ktpa in last 10 years and cold rolling mills increased from 100 ktpa capacity to 350 ktpa Resources required for such investmen
Slide 33: China and stainless
China and stainless Chinese production and demand are important in the global context. In 2001 China consumed 2.3 mt of stainless, of which 1.7 mt was imported. Consumption of stainless steel in China expected to grow by over 50% in next 5 years; 30% growth in 2001. Entry into WTO by China should su
Slide 34: New capacity coming on-stream
New capacity coming on-stream Over 4m tpy of New Meltshop Capacity Expected On-Stream (2002 to 2006) 800 600 400 200 0 -200 Source: CRU -400 AS I Z um l o an o ta l i a i SS y s M rit ha ee rn AL sc m bu nd en si S N iy la Te st Po ng ito ce a gh Ji Ta o di du aP ha um A S le In ol In A Al st S C S
Slide 35: Growth in meltshop capacity
Growth in meltshop capacity Slab meltshop capacity expansions 2002-2006, ‘000 tonnes 4 SKS +500,000 tpy Baosteel +600,000 tpy 3 Fafer +130,000 tpy Posco +463,000 tpy Columbus Acesita +116,000 tpy +37,000 tpy India SS +150,000 tpy 2 Jindal +50,000 tpy NAS ALZ +600,000 tpy +700,000 tpy Av. Plt (Fi) +1
Slide 36: World capacity utilisation
World capacity utilisation 95 Source: CRU 90 85 80 75 CR Slab 70 65 1995 1997 1999 2001 2003 2005
Slide 37: AvestaPolarit's strategic direction
Best in AvestaPolarit’s AvestaPolarit’s strategic strategic direction direction
Slide 38: AvestaPolarit has all the ingredients to become "Best in stainless"
AvestaPolarit has all the ingredients to become ”Best in stainless” Focus on Coil Products as the main business area. Value creating growth from Special Products. Effective implementation of current investment programme to create world’s best manufacturing system. Create AvestaPolarit culture and wa
Slide 39: AvestaPolarit's financial targets
AvestaPolarit’s financial targets Average minimum return on capital employed of 15% over a business cycle. Average growth in earnings of at least 10% per annum. Maximum debt to equity ratio (gearing) of 40%. Not to exceed 70% during the large expansion phase Dividend distribution of, on average, at
Slide 40: Strong growth is the biggest challenge in the coming years
Strong growth is the biggest challenge in the coming years The big investment programme being completed to plan: The Tornio expansion (EUR 790 million) commissioning by the end of 2002 and full capacity coming on stream gradually in 2002-04. Investment programmes totalling EUR 90 million at the Aves
Slide 41: Tornio – The world's most efficient production plant
Tornio – The world’s most efficient production plant The largest production plant for stainless steel in the world. A fully integrated production line on one site. New cold rolling mill, a fully integrated RAP line (Rolling, Annealing, Pickling) which uses the latest technology to achieve maximum ef
Slide 42: Increase in slab and cold rolling capacity comes mainly from Tornio expansion
Increase in slab and cold rolling capacity comes mainly from Tornio expansion Slab capacity Coil capacity Million tonnes Million tonnes EUR 250m EUR 520m 2.75 New capacity 1.9 1.75 Tornio New Capacity 1.2 Tornio Current After investments Current After investments 2002-2004 2002-2004
Slide 43: Main material flows after investments and restructurings
Main material flows after investments and restructurings Melt shops Hot rolling Cold rolling Tornio Tornio Ms Tornio Steckel cold rolling mill 1 650 kt 1700 kt 1200 kt Customers Sheffield cold rolling mill 305 kt Nyby/Kloster cold rolling mill 195 kt Avesta Ms Avesta Steckel Avesta 600 kt 1000 kt KB
Slide 44: Increased specialisation to improve productivity
Increased specialisation to improve productivity Hot rolled 120 plate Coil Products Avesta Thickness mm Tornio Sheffield Nyby Kloster Precision strip 0.025 3,200 Width, mm 300 Productivity improvements that could not be realised by the individual companies - 25% reduction in conversion cost.
Slide 45: What after the current expansion program
What after the current expansion program The current investment program is a strong platform for further growth and development. Strategic questions: Expansion outside Europe (greenfield, acquisitions, partnerships) Expansion to new product areas (e.g. ferritics and bright annealed products) Focus o
Slide 46: Best in stainless
AvestaPolarit