Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Q1 2019 Earnings Presentation
34 slides from Outokumpu Oyj's earnings presentation, May 7, 2019
Slide 1: Q1 2019 results
Q1 2019 results CEO Roeland Baan CFO Pia Aaltonen-Forsell May 7, 2019
Slide 2: Disclaimer
Disclaimer This presentation contains, or may be deemed to contain, statements that are not historical facts but forward-looking statements. Such forward-looking statements are based on the current plans, estimates and expectations of Outokumpu’s management based on information available to it on th
Slide 3: Speakers
Speakers Roeland Baan Pia Aaltonen-Forsell Tommi Järvenpää President & CEO CFO Vice President, Investor Relations 3 | May 7, 2019
Slide 4: Best value creator in stainless steel by 2020
OUR VISION Best value creator Adjusted EBITDA of €750 million in stainless steel by 2020 through ROCE of 12% customer orientation and efficiency Gearing of <35% 4 | May 7, 2019
Slide 5: Becoming the best value creator in stainless steel
Becoming the best value creator in stainless steel Shareholders Employees Customers Total shareholder return since Organizational health index2 Absolutely and very satisfied beginning of 20161 customers3 1. quartile Outokumpu Outokumpu 2. 37% quartile 3. 63% Acerinox quartile 9% Competitors Aperam 4
Slide 6: First quarter reflects challenging markets
First quarter reflects challenging markets Group adjusted EBITDA, EUR million Adjusted EBITDA quarter-on-quarter comparison1, EUR million Seasonally Insurance claim higher and lower deliveries benchmark price Mainly currency derivative losses 133 136 128 Lower base prices offset by improved raw 89 m
Slide 7: Base prices didn’t provide support in Q1
Base prices didn’t provide support in Q1 European US Nickel price, Ferrochrome price, average base price, average base price, USD/tonne USD/lb EUR/tonne* USD/tonne 796 1,492 1.24 730 1,433 12,369 11,516 1.12 Q4/18 Q1/19 Q4/18 Q1/19 Q4/18 Q1/19 Q4/18 Q1/19 * According to the CRU, they have been no lo
Slide 8: The EU’s permanent safeguards have proven to be effective…
The EU’s permanent safeguards have proven to be effective… Third-country cold rolled imports1 into Europe, Third-country cold rolled imports2 into the US, 1,000 tonnes 1,000 tonnes 30% 100 50 50 50 80 21% 40 40 40 19% 19% 60 30 30 30 40 20 20 20 20 10 10 10 0 0 0 0 From rest of world From China From
Slide 9: …but European prices have remained at low levels
…but European prices have remained at low levels European base prices1 (Germany)*, US base prices1, Transaction prices 304 stainless, EUR/tonne USD/tonne USD/tonne 1,200 1,550 4,000 1,100 1,450 1,000 3,000 1,350 900 1,250 800 2,000 700 1,150 600 1,050 1,000 Europe USA China 1. 2mm sheet cold rolled
Slide 10: Key figures
Key figures Q1/19 Q1/18 Q4/18 Stainless steel deliveries 1,000 tonnes 621 644 534 Sales EUR million 1,715 1,671 1,586 Adjusted EBITDA EUR million 54 133 89 EBITDA EUR million 40 140 92 Net result EUR million -39 49 27 Earnings per share EUR -0.09 0.12 0.07 Operating cash flow EUR million 39 39 43 Ne
Slide 11: Increasing market share and seasonally higher deliveries in Europe
Increasing market share and seasonally higher deliveries in Europe Europe adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million EUR million Seasonally Loss of €12 million higher from currency derivatives, deliveries as well as German pension plan adjustment in Q4/18 83 73 Lowe
Slide 12: Americas had a weak quarter caused by high inventories of expensive raw materials
Americas had a weak quarter caused by high inventories of expensive raw materials Americas adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million EUR million Improved product and raw material mix partly offset by lower spot price 10 13 -6 -22 -18 Net of Pricing timing Q1/18 Q2
Slide 13: Softening demand and US steel tariffs impacted Long Products’ profitability
Softening demand and US steel tariffs impacted Long Products’ profitability Long Products adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million EUR million UK pensions changes in Q4/18 13 9 4 -3 -1 Net of Pricing timing Q1/18 Q2 Q3 Q4 Q1/19 Q4/18 Deliveries Costs Others Q1/19
Slide 14: Ferrochrome deliveries remained at high level, costs increased
Ferrochrome deliveries remained at high level, costs increased Ferrochrome adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million EUR million Insurance claim in Q4/18 Mainly higher 83 coke price 42 46 39 30 FeCr Q1/18 Q2 Q3 Q4 Q1/19 Q4/18 Deliveries Costs Others Q1/19 price 1)
Slide 15: Operating cash flow developed favorably thanks to increased focus on working capital
Operating cash flow developed favorably thanks to increased focus on working capital Cash flow, EUR million CAPEX estimate 2019, EUR million 250 32 -33 200 150 Expansion, digitalization & other 40 39 -35 Kemi mine 3 Annual maintenance 100 Provisions, Net cash Working Operating Cash EBITDA pensions,
Slide 16: Net debt increased purely due to the IFRS16 impact
Net debt increased purely due to the IFRS16 impact Net debt, EUR billion Net debt/LTM adjusted EBITDA IFRS 16 impact* EUR 131 million <1.0 1.61 1.24 1.09 1.24 1.37 9.8 4.0 1.7 2.6 3.4 2015 2016 2017 2018 Q1/19 2015 2016 2017 2018 Q1/19 2020 target * Implementation impact on Jan 1, 2019 16 | May 7, 2
Slide 17: Outlook for Q2 2019
Outlook for Q2 2019 • No significant changes expected in the stainless steel markets in Q2 Adjusted EBITDA • Deliveries expected to remain at a similar level to Q1 is expected to be higher than in • Positive impact from higher ferrochrome contract price partly offset by planned maintenance work in Q
Slide 18: Appendix
Appendix
Slide 19: Becoming the best value creator
Becoming the best value creator Vision Best value creator Must- Safety in stainless steel by Win High performing 2020 through customer battles organization orientation and efficiency Operational excellence* Commercial excellence Americas Digital transformation** Strengths Strong market position Worl
Slide 20: Our path to deliver an adjusted EBITDA of €750 million in 2020
Adjusted EBITDA, € million Our path to +110 deliver an +100 -100 +160 adjusted EBITDA +320 of €750 million in 2020 2015 Efficiency Commercial gains growth Market 2018 Efficiency Commercial gains growth 2020 target Approximate figures, based on management estimates 20 | May 7, 2019
Slide 21: How to close the gap to €750 million by 2020
How to close the gap to €750 million by 2020 Gains by Europe Americas Other Europe 20201 €150 million in total Commercial growth €50 €60 €110 • Higher deliveries • Value-added products • Customer & product mix • Market share in Mexico million • Service solutions • New products €110 million from comm
Slide 22: Fully integrated production asset base
Fully integrated production asset base Europe Americas Long Products Total Avesta + Krefeld + Tornio Degerfors Calvert Mexinox Sheffield Richburg Degerfors Fagersta 1,000 tonnes Nyby Dillenburg Finland Sweden USA Mexico UK USA Sweden Sweden Sweden Germany Melting 1,450 450 900 450 3,250 Hot rolling
Slide 23: We focus on growth segments
We focus on growth segments Consumer goods, automotive, architecture, building and construction Distributors End-customers Consumer goods & medical • Long term contracts • Spot contracts 9% Chemical, petrochem. and energy • Large quantities • Standard products and 2% Automotive grades 12 % • Special
Slide 24: Broadest product portfolio globally
Broadest product portfolio globally Outokumpu stainless steel deliveries by product form Chrome is the single most important raw Stainless steel is not a single material used in stainless steel product and there are thousands of Cold rolled 70% production. Outokumpu has its own different grades and
Slide 25: Continued cost efficiency improvements
Continued cost efficiency improvements Operative cost components* SG&A costs, € million SG&A (excl. personnel and D&A) Our target is to achieve further 354 342 D&A total €160 Other cost of 331 307 sales 275 Energy and consumables million Personnel from efficiency gains by 2020 2014 2015 2016 2017 20
Slide 26: Decreasing short-term financing is a key priority
Decreasing short-term financing is a key priority Debt structure*, % Debt maturity profile*, EUR million 17% 800 34% 600 16% 400 0% 4% 200 14% 15% 0 2019 2020 2021 2022 2023+ Bonds Convertible bonds Current debt Long-term loans Pension loans Non-current debt Finance leases Short-term loans Unutilize
Slide 27: We are the world leader in sustainable steel production...
We are the world leader in sustainable steel production... Recycled content, % Our 89 ferrochrome 85 87 87 87 84 operations’ CO2 footprint is only Estimated global recycled 42% content in stainless steel of industry average* 2013 2014 2015 2016 2017 2018 * Source: ICDA LCI 27 | May 7, 2019
Slide 28: ...and we have ambitious targets
...and we have ambitious targets CO2 emissions intensity, tonnes per stainless steel 2 1.5 1 0.5 0 2014- 2017 2018 2023 2016 target Upstream Indirect Transport & travel Direct 28 | May 7, 2019
Slide 29: Stainless steel demand is growing
Stainless steel demand is growing Heavy industries Other +11% +20% Other Heavy industries Architecture, Building & Construction Architecture, Building Global +35% Expected global & Construction stainless steel stainless steel real demand in 2018 real demand in 2024 43.2 +20% Automotive million tonne
Slide 30: 3% demand growth expected for 2019
3% demand growth expected for 2019 Global Americas Europe APAC 5% 3% 2% 2% 4% 5% 4% 2% 2% 0% 2% 4% 4% 3% 1% 1% 0% 2% 3% 2% 2% 6% 3% 2% 2% 4% 5% 4% 18 19f 20f 21f 22f 23f 24f 18 19f 20f 21f 22f 23f 24f 18 19f 20f 21f 22f 23f 24f 18 19f 20f 21f 22f 23f 24f USA Other Americas Other EMEA China Other APA
Slide 31: Demand expected to develop strongly in Q2
Demand expected to develop strongly in Q2 EMEA total stainless steel real demand1 Americas total stainless steel real demand1 +5% +4% 2,200 1,000 2,100 900 2,000 1,900 800 1,800 700 1,700 600 1,600 1,500 500 1) Total stainless = rolled & forged products, excl. 13Cr tubes, profiles 31 | May 7, 2019 S
Slide 32: Low capacity utilization in China, on healthier level in Europe and Americas
Low capacity utilization in China, on healthier level in Europe and Americas Asia Europe Americas [CR, Mtonnes] [CR, Mtonnes] [CR, Mtonnes] 5.0 4.9 4.8 4.9 4.9 4.9 29.4 3.3 3.3 5.0 5.1 3.2 3.2 3.2 3.2 27.1 4.2 4.2 3.0 4.1 3.0 25.0 3.8 3.9 2.8 23.9 3.7 2.7 2.7 22.8 21.9 22.7 3.5 3.5 2.5 2.5 2.5 21.3
Slide 33: Raw materials - price development
Raw materials - price development Nickel1, USD / tonne Ferrochrome2, USD / lb 17,000 2 European contract price European spot price 15,000 Q2/19 1.5 1.20 USD/lb 13,000 11,000 18 Apr 19 1 18 Apr 19 0.91 USD/lb 9,000 12,630 USD/t 7,000 0.5 Jan'17 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan'18 Feb M
Slide 34: For more information, call Outokumpu Investor Relations or visit www.outokumpu.com/investors
For more information, call Outokumpu Investor Relations or visit www.outokumpu.com/investors Tommi Järvenpää Vice President – Investor Relations Phone +358 9 421 3466 Mobile +358 40 576 0288 E-mail: tommi.jarvenpaa@outokumpu.com Aki Vesikallio Investor Relations Manager Mobile: +358 50 544 8925 E-ma