Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — AvestaPolarit — Corporate Update (August 2001)
14 slides from Outokumpu Oyj's corporate update, Aug 28, 2001
Slide 1: Plan for restructuring AvestaPolarit melting activities
Plan for restructuring AvestaPolarit melting activities 28 August 2001
Slide 2: Background to restructuring decision
Background to restructuring decision Overall objective of merger between Avesta Sheffield and Outokumpu Steel in January 2001: To secure a significant and sustained increase in value for AvestaPolarit’s shareholders by creating an independent, world-class, focused, profitable and growth-orient
Slide 3: Strategy for value creation
Strategy for value creation Key drivers in creating value were at the time of the merger identified to include: An effective combination of the two companies and their complementary strengths to exploit economies of scale in production, sales and distribution, R&D, purchasing and administration.
Slide 4: Preparations for Board decision on melting shop restructuring
Preparations for Board decision on melting shop restructuring A full, detailed strategic plan for the Group was prepared during the spring months 2001. It included a thorough analysis of melting capacity requirements and restructuring alternatives. Plan discussed by the Board at several meetin
Slide 5: Board decision August 22, 2001
Board decision August 22, 2001 Restructure to improve overall cost efficiency of the Group’s melting activities. Establish strong platform for further development of Long Products. Plan for phased closure of Degerfors Stainless melting and billet rolling activities by mid-2003. Initiate nego
Slide 6: Key issues and rationale
Key issues and rationale AvestaPolarit today operates four steel melting shops Tornio 650 to 1650 kton/a Avesta 600 kton/a Sheffield 600 kton/a Degerfors 230 kton/a Ongoing major expansion at Tornio gives excess melting capacity from 2003 onwards. Need to rationalise the Group’s melting shop
Slide 7: Thorough analysis of options
Thorough analysis of options Thorough analysis of melting shop restructuring options, performed in connection with the review of overall Group strategy, covered projected development of total melting capacity and demand up to 2010. Three alternatives studied 1: Closure of Degerfors 2: Closur
Slide 8: Clear outcome of the analysis
Clear outcome of the analysis The alternative to close Return on investment of Degerfors is the best the three alternatives option. IRR, % Best financial return 35 Lowest production costs 30 Good base for further growth 25 If SMACC would be closed, 20 larger investments in new melting capa
Slide 9: Improved overall profitability
Improved overall profitability The Degerfors melting shop closure simplifies the Group structure Tornio and Avesta are the principal melting shops in the coil system – the Group’s core business. The main role of SMACC will be to feed Long Products and Hot Rolled Plate (HRP), with minor volume
Slide 10: Long Products able to establish a strong platform for further development
Long Products able to establish a strong platform for further development Success in the long products market is becoming increasingly dependent on access to competitive feedstock. Economies of scale at SMACC can secure world-class cost-efficiency for billet production. Improved cost base will b
Slide 11: Current profitability of Degerfors Stainless not indicative of sustainable performance
Current profitability of Degerfors Stainless not indicative of sustainable performance Financials by individual business units within AvestaPolarit are not reported in public Not calculated on comparable or true commercial terms Degerfors Stainless past performance records dependent on numerou
Slide 12: Implications at Degerfors site
Implications at Degerfors site - Slide 1 Closure of the Degerfors Stainless operations planned to be concluded by mid-2003. Degerfors will continue to be the base for the Group’s Hot Rolled Plate business unit. It will continue to develop its business to maintain its position as the world’s le
Slide 13: Implications at Degerfors site
Implications at Degerfors site - Slide 2 Closure plan for Degerfors Stainless operations will result in a loss of 330 jobs out of a current 700 at the site. Personnel at both Degerfors Stainless and Hot Rolled Plate business units are affected by the closure, due to the shared-site operations.
Slide 14: Onward process at Degerfors
Onward process at Degerfors Important to handle closure responsibly and in good cooperation with local authorities. Objective must be to make period of continuing uncertainty about consequences on both individual employee and broader community level as short as possible. Prompt MBL-negotiation