Slide 1: Interim Report Q3 2014
Interim Report Q3 2014 CEO Mika Seitovirta CFO Reinhard Florey November 5, 2014
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: Today's attendees of Outokumpu
Today‘s attendees of Outokumpu Johanna Henttonen Mika Seitovirta Reinhard Florey SVP – Investor CEO CFO Relations November 5, 2014 3
Slide 4: Contents
Contents 1. Third quarter 2014 overview and strategic priorities 2. Financial performance 3. Outlook and guidance November 5, 2014 4
Slide 5: Q3 2014 in brief
Q3 2014 in brief EBIT excl. NRI (EUR million) 1, 2) Underl. • EBIT excl. NRI positive for the first time since merger EBIT -82 -87 -118 -90 -377 -45 -6 -28 3 • Positive EUR 23 million operative cash flow as a result of -3 focused net working capital management -85 -89 -48 -125 -133 • Net debt stable
Slide 6: Continued growth for stainless steel globally
Continued growth for stainless steel globally AMERICAS EUROPE APAC +12% +8% +9% +5% +7%+6% +6% +3% +4% +4% +2% +4% +3% +5% +1% +2% +2% -0% 12 13 14 15f 16f 17f 12 13 14 15f 16f 17f 12 13 14 15f 16f 17f +19% +12% +8% +8% +8% +7% +6% +6% +5% +6% +7% +4% +4% +4% +5% +4% +4% +4% +5% +4% +4%+4% +5%+4% +3
Slide 7: Stable base prices during Q3 but still low at historical standards
Stable base prices during Q3 but still low at historical standards Transaction prices 304 stainless steel (USD) 1) Base prices 304 stainless steel (EUR) 1) 5,000 1,300 4,500 Europe Germany 1,250 4,000 USA China 1,200 3,500 3,000 1,150 2,500 1,100 2,000 1,050 1,500 1,000 1,000 Jan Jan Jan Jan Jan Jan
Slide 8: Clear drop in nickel price since beginning of September
Clear drop in nickel price since beginning of September USD/ton 8 Sept 14 22,000 19,740 USD/t 21,000 20,000 19,000 18,000 3 Nov 14 15,575 USD/t 17,000 16,000 15,000 14,000 13,000 2014 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Data source: 1) Nickel Cash LME Daily Official November 5, 2014 8
Slide 9: EBITDA development per business area
EBITDA development per business area Coil EMEA Coil Americas EBITDA excl. NRI (EUR million) EBITDA excl. NRI (EUR million) • Clear YTD improvement vs • Ramp-up of the Calvert mill 110 85 -193 2013 despite lower volumes progressing driven by synergies and cost 1 • Q3 negatively impacted by 66 59 redu
Slide 10: Contents
Contents 1. Third quarter 2014 overview and strategic priorities 2. Financial performance 3. Outlook and guidance November 5, 2014 10
Slide 11: Q3 key financials overview
Q3 key financials overview Group key figures • Stainless steel deliveries down by 4.6% to 644 kt in Q3/14. Thus, underlying EBIT EUR million III/13 II/14 III/14 seasonally weaker than Q2 but Stainless steel deliveries, kt 635 675 644 significantly improved y-o-y Sales 1,609 1,753 1,799 Underlying EB
Slide 12: Good progress in cost saving programs
Good progress in cost saving programs Cumulative savings 2014-2017 and related cash costs (EURm) • Expansion of cost savings programs EMEA restructuring Synergy savings P250 announced in September 2014 530 550 • Synergies: to be completed 2 years +24 470 80 100 ahead of schedule already in 2015 20 3
Slide 13: Coil EMEA
Coil EMEA EMEA key figures • Q3 deliveries down due to seasonality EUR million III/13 II/14 III/14 • Base prices up by about 20 EUR/t Stainless steel deliveries, kt 423 443 413 • Redundancy provisions of EUR -11 million in Q3 (Q2/14: EUR -7 million) Ferrochrome deliveries, kt 57 25 23 Sales 1,104 1,
Slide 14: Coil Americas
Coil Americas Americas key figures • Deliveries flat at 147 kt EUR million III/13 II/14 III/14 • EBITDA (excl. NRI) at EUR -12 million Stainless steel deliveries, kt 129 143 147 • Base prices up about 80 USD/t Sales 251 291 316 • Maintenance and repair measures EBITDA excl. NRI -50 1 -12 in Calvert
Slide 15: APAC
APAC APAC key figures • Turbulent market environment EUR million III/13 II/14 III/14 continued in Q3 Stainless steel deliveries, kt 56 58 60 • Market prices for commodity grades on Sales 111 118 124 downward trend EBITDA excl. NRI 4 4 2 EBIT excl. NRI 0 1 -2 • Deliveries slightly up driven by SKS Ca
Slide 16: Quarto Plate
Quarto Plate Quarto Plate key figures • Overall challenging market environment EUR million III/13 II/14 III/14 in Q3 Deliveries, kt 18 25 24 • Project business continues slow after holiday period Sales 82 114 113 • Price pressure in Europe and the EBITDA excl. NRI -2 -5 -1 US EBIT excl. NRI -7 -9 -5
Slide 17: Long Products
Long Products Long Products key figures • Healthy market environment in the US EUR million III/13 II/14 III/14 with stable prices Deliveries, kt 49 80 60 • In Europe, rebound after summer subdued Sales 120 203 171 • Price pressure in Europe and Asia EBITDA excl. NRI -3 16 10 remains EBIT excl. NRI -
Slide 18: Operating cash flow
Operating cash flow III/13 II/14 III/14 EUR million Net cash from operating activities 43 -257 23 Net cash from investing activities -39 -69 -13 Free cash flow 4 -327 10 Net cash from financing activities 113 -396 225 Net change in cash and cash equivalents 118 -722 235 • Positive operating cash flo
Slide 19: EUR 67 million NWC release in Q3
EUR 67 million NWC release in Q3 Cash flow from working capital change 1) Net working capital/sales ratio 3) EUR million 400 30 26% 27% 351 48 25% 300 300 248 20 17% 219 15% 15% 13% 67 Peer group average: 12% 10 0 2013 I/14 II/14 III/14 Reduction 2014 2015 I/13 II/13 III/13 IV/13 I/14 II/14 III/14 2
Slide 20: Contents
Contents 1. Third quarter 2014 overview and strategic priorities 2. Financial performance 3. Outlook and guidance November 5, 2014 20
Slide 21: Nickel price decline puts pressure on demand forecast
Nickel price decline puts pressure on demand forecast EMEA total stainless steel real demand1) Americas total stainless steel real demand1) 1.000 tonnes 1.000 tonnes 1,950 1,000 1,900 950 1,850 900 1,800 850 1,750 800 1,700 1,650 750 1,600 700 1,550 650 1,500 600 1,450 550 1,400 500 Q1 Q2 Q3 Q4 Q1 Q
Slide 22: Business and financial outlook for Q4 2014
Business and financial outlook for Q4 2014 • Outokumpu estimates that the overall stainless steel operating environment will be lackluster in the fourth quarter driven by the recent decline in the nickel price, which is negatively impacting demand in the distributor sector as well as the general eco
Slide 23: Key building blocks for Outokumpu turnaround
Key building blocks for Outokumpu turnaround Good progress in ramp-up despite production issues in cold rolling mill Coil Americas Delivery and EBITDA break even target confirmed, indicating significant y-o-y improvement Full capacity and potential in place by the end of 2016 Profitability improveme
Slide 24: Q&A
Q&A November 5, 2014 24
Slide 25: Appendix
Appendix November 5, 2014 25
Slide 26: Outokumpu balance sheet
Outokumpu balance sheet Assets (MEUR) 30.09.14 30.06.14 Non-current assets Intangible assets 569 565 Property, plant and equipment 3,142 3,105 Investments in associated companies 71 71 and joint ventures Other financial assets 26 25 Deferred tax assets 52 36 Trade and other receivables 19 18 Total n
Slide 27: Outokumpu balance sheet
Outokumpu balance sheet Equity and liabilities (MEUR) 30.09.14 30.06.14 Total equity 2,143 2,234 Non-current liabilities Increase mainly reflects the bond issue Long-term debt 1,852 1,627 in September 2014 Other financial liabilities 13 16 Deferred tax liabilities 44 38 Provisions1) 586 546 Trade
Slide 28: Debt maturity profile improved following the issue of notes in September
Debt maturity profile improved following the issue of notes in September Debt maturity profile, September 30, 2014 • Proceeds from the new bond used for EUR million the 2015 notes cash tender offer and to 2,500 Unutilized facilities repay certain loans maturing in Q4/2014 Long-term debt 2,064 2,000
Slide 29: Cost analysis 2013
Cost analysis 2013 Operative cost components 1) 2) Comments • Raw materials account for around 60% of the total operative costs of the Group • Share of Ni from total raw material cost is around 60% • Energy and other consumables account for some 10-15% of the total operative costs • Personnel expens
Slide 30: Headcount reductions
Headcount reductions Total headcount reduction 1) Personnel per BA at the end of Q3 2014 2) 362 (3%) 14,000 -766 617 781 -176 EMEA (5%) (6%) 12,000 653 Americas 2,141 (5%) APAC 10,000 (17%) 7,831 (63%) Quarto Plate 8,000 Long Products 6,000 Other operations 2012 2013 Sep 14 2017e • 2014 reduction ta
Slide 31: Capacities and production flow following restructuring
Capacities and production flow following restructuring Coil EMEA Quarto Plate (QP) Long Products (LP) [kt p.a.] [kt p.a.] [kt p.a.] MELTING TORNIO AVESTA SHEFFIELD (SMACC) (FIN) (SWE) (UK) 1,450 450 450 Slabs, Blooms, Billets, Ingots ROLLING TORNIO AVESTA HOT (FIN) (SWE) 1,450 900 PLATE & DEGERFORS
Slide 32: Capacities and production flow ('to be' state)
Capacities and production flow (‘to be’ state) Coil Americas APAC TOTAL Group capacity [kt p.a.] [kt p.a.] MELTING CALVERT (US) 900 3.3m tonnes CALVERT ROLLING (US) HOT 870 3.2m tonnes PLATE & LONG 0.3m tonnes rolled + HBW) GOODS (Cold FINISHED CALVERT SL POTOSI SHANGHAI (US) (MEXICO) (CHINA) 350+15
Slide 33: Balanced customer base across industries
Balanced customer base across industries Sales by customer segment 1) Sales by end-customer segment 1) Healthy balance between end-customer segments across both investment and consumer driven industries Other Consumer Distributors 5% goods & 45% Medical Heavy 21% industries 24% Automotive 18% Metal
Slide 34: Broadest product portfolio across stainless steel
Broadest product portfolio across stainless steel Deliveries by product grade 1) • New Outokumpu has a broad product portfolio to serve all customers 2) Other • Significantly higher share of ferritic grades Duplex 3% 3% leads into reduced sensitivity to Nickel price volatility Ferritic • Outokumpu p
Slide 35: Balanced customer base and comprehensive service center network in Europe
Balanced customer base and comprehensive service center network in Europe Total stainless market size in 2013 2) Nordic 430 Total Europe: 5,450 Eskilstuna Coil EMEA sales by customer segment 1) Outokumpu core market UK Outokumpu non-core Distributors market 250 39% 32% 46% Sheffield Germany 1460 Dab
Slide 36: Industrial production as the major driver for stainless growth
Industrial production as the major driver for stainless growth… Growth p.a. Economic Index 2010=100 Industrial Production 2014 - 2017 Growth Prospects 140 Fundamental APAC 120 100 +4% growth 80 2010 2011 2012 2013 2014 2015 2016 2017 120 Recovery from Americas +3% 110 economic crisis 100 and continu
Slide 37: Growing stainless consumption mainly in APAC
… leads to growing stainless consumption mainly in APAC, and to some extent in Americas and EMEA [Total stainless steel real demand in million tonnes] Ø Growth p.a. 42.8 2014-2017 41.0 38.9 37.0 34.9 32.7 29.9 27.3 30.9 29.4 27.7 +5.8% 26.1 24.5 22.5 20.0 APAC 18.5 3.6 3.7 3.9 4.0 +3.1% 3.1 3.3 3.4
Slide 38: Nickel price development
Nickel price development 60,000 450 [Ktonnes] [USD/t] LME stocks (rhs) 400 50,000 LME cash price (lhs) 350 40,000 300 250 30,000 200 20,000 150 100 10,000 50 0 0 2005 2005 2007 2008 2009 2010 2011 2012 2013 2014 o Prices rallied 58% from January to highs of ~$21,000/t in May, as Indonesia banned ore
Slide 39: Raw materials - price development
Raw materials - price development 22,000 Nickel1 1.4 Ferrochrome2 21,000 3 Nov 14 European contract price U 15,575 USD/t U 1.3 Q4/14 20,000 European spot price 1.15 USD/lb S S 19,000 1.2 D D 18,000 / / 1.1 t 17,000 l o 16,000 b 1 30 Oct 14 n 15,000 0.85 USD/lb 0.9 14,000 13,000 0.8 2013 Feb Mar Apr
Slide 40: Change in the definition of underlying profitability from Q1/14 onwards
Change in the definition of underlying profitability from Q1/14 onwards • Change in underlying definition Net following the change in Reported Non- Operating Metal Realized realizable EBIT/EBITDA profit recurring derivatives timing value Outokumpu’s metal hedging policy items in the beginning of 201
Slide 41: Good performance and successful ramp-up of the Ferrochrome business
Good performance and successful ramp-up of the Ferrochrome business Outokumpu ferrochrome production • Unique low cost position as Europe’s only 600 ferrochrome producer with access to the 500 (1,000 tonnes) only known chromite reserves in the EU – 400 the Kemi mine 1). 300 • The ramp-up of new capa
Slide 42: For more information, call Outokumpu Investor Relations
For more information, call Outokumpu Investor Relations or visit www.outokumpu.com/investors Johanna Henttonen Senior Vice President – Investor Relations Phone +358 9 421 3804 Mobile +358 40 5300 778 E-mail: johanna.henttonen@outokumpu.com Simone Cujai Manager – Investor Relations Phone +49 203 488
Slide 43: outokumpu
outokumpu working towards a world that lasts forever