Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Q3 2023 Earnings Presentation
29 slides from Outokumpu Oyj's earnings presentation, Nov 7, 2023
Slide 1: Order book strengthening in Europe, initial signs of recovery
Order book strengthening in Europe, initial signs of recovery Outokumpu Q3 2023 results Heikki Malinen, President & CEO Pia Aaltonen-Forsell, CFO November 7, 2023
Slide 2: Disclaimer
2 November 7, 2023 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 av
Slide 3: The third quarter of 2023 reflects the cyclical nature of the stainless steel business
3 November 7, 2023 The third quarter of 2023 reflects the cyclical nature of the stainless steel business Heikki Malinen, President & CEO
Slide 4: Solid performance in Americas compensated for the challenging market in Europe
4 November 7, 2023 Solid performance in Americas compensated for the challenging market in Europe • Stainless steel deliveries decreased, in line with the seasonal pattern Adjusted EBITDA totaled • Market environment in Europe was even more EUR 51 million challenging than during the pandemic • Solid
Slide 5: Lower market prices burdened profitability in Q3/23, European stainless prices bottomed in June
5 November 7, 2023 Significant headwinds resulting from lower market prices burdened profitability in Q3/23, European stainless prices bottomed in June Transaction prices 304 stainless, USD/tonne* Nickel LME cash, USD/tonne September September 8000 30000 6000 25000 20000 4000 15000 2000 10000 0 5000
Slide 6: Imports into Europe have remained at a low level in spite of weak demand in Asia
6 November 7, 2023 Imports into Europe have remained at a low level in spite of weak demand in Asia Third-country cold rolled imports1 into Europe, • Anti-circumvention investigation 1,000 tonnes Import penetration initiated by the EU (in %) kt ◦ Targeted countries are Taiwan, 40 Turkey and Vietnam
Slide 7: Uniquely positioned to capture competitive advantage from EU's CBAM
7 November 7, 2023 We are uniquely positioned to capture competitive advantage from EU's Carbon Border Adjustment Mechanism (CBAM) Total CO2 emissions (scopes 1, 2, 3), • We are the only stainless steel company in Europe producing global average vs. Outokumpu ferrochrome with a low CO2 footprint and
Slide 8: European market weaker than during the pandemic, resulting in low profitability
8 November 7, 2023 European market weaker than during the pandemic, resulting in low profitability Deliveries, kt Adjusted EBITDA quarter-on-quarter comparison1, EUR million 605 Stainless steel deliveries 571 586 560 decreased by 11% 546 550 523 505 502 488 491 450 449 Realized prices for stainless
Slide 9: Prompt actions to secure European competitiveness – streamlining operations and planning restructuring
9 November 7, 2023 Prompt actions to secure European competitiveness – streamlining operations and planning restructuring measures in Germany • Planned measures would include transferring precision strip operations from Dahlerbrück to Dillenburg and centralizing advanced materials production in Germ
Slide 10: Strong sustainability performance, intensive focus on energy efficiency
10 November 7, 2023 Strong sustainability performance, intensive focus on energy efficiency Safety performance, TRIFR 8.7 Highlights in Q3/23 4.4 4.1 • World-class safety performance continued, focus 3.2 2.4 2 1.8 1.6 remains on digitalization and AI • Recycled material content remained high at 94%
Slide 11: Expanding collaboration with CRONIMET to take circularity to new heights
11 November 7, 2023 Expanding collaboration with CRONIMET to take circularity to new heights 10% share will be acquired of CRONIMET Northeastern business Multiple partnerships established to accelerate decarbonization • Scrap: 10% share will be acquired of CRONIMET Northestern business in Europe • N
Slide 12: Feasibility study ongoing - hot rolling arrangements and cold rolling capacity expansion
12 November 7, 2023 Feasibility study ongoing - exploring options for hot rolling arrangements and cold rolling capacity expansion to achieve commercial ambitions in North America One option under consideration is to build own hot rolling mill • Increasing readiness to make an investment decision •
Slide 13: Strongest balance sheet in the industry and good liquidity will carry us through the cycle
13 November 7, 2023 Strongest balance sheet in the industry and good liquidity will carry us through the cycle Pia Aaltonen-Forsell, CFO
Slide 14: Focus remains on profitability improvements and cost saving measures
14 November 7, 2023 Focus remains on profitability improvements and cost saving measures • Net debt EUR 29 million • Liquidity reserves remained at EUR 1.2 billion • Extension of the EUR 700 million revolving credit facility by one year, maturity in 2027 • Strong cost mode and restructuring • Pruden
Slide 15: Tight cash and cost control in current market environment
15 November 7, 2023 Tight cash and cost control in current market environment Key figures Q3 2023 Q3 2022 Q2 2023 Continuing operations Stainless steel deliveries 1,000 tonnes 449 491 502 Sales EUR million 1,531 2,339 1,911 Adjusted EBITDA EUR million 51 304 190 • Net result Net result EUR million -
Slide 16: Strategy phase 2 proceeding: EBITDA run-rate improvement did not compensate for price declines
16 November 7, 2023 Strategy phase 2 proceeding: significant EBITDA run-rate improvement did not compensate for exceptional price declines Transformation journey Phase 1 Phase 2 200 Projects contributing to EBITDA run-rate improvement in Q3/23 EBITDA run-rate • Energy efficiency improvements improve
Slide 17: Energy efficiency improvements are crucial in terms of decarbonization and cost management
17 November 7, 2023 Energy efficiency improvements are crucial in terms of decarbonization and efficient cost management Ambitious aim to improve energy Energy efficiency improvement, efficiency by 8% until end of 2024* GWh 600 • Over 20% of the target reached, resulting in savings of EUR 9 million
Slide 18: BA Europe
18 November 7, 2023 Europe’s stainless steel deliveries, 1,000 tonnes BA Europe 450 Very challenging market environment 401 410 414 resulted in a negative adjusted EBITDA 400 370 372 369 356 355 349 338 350 322 322 316 • Distributor inventories below historical 300 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q
Slide 19: BA Americas
19 November 7, 2023 Americas’ stainless steel deliveries, 1,000 tonnes BA Americas 192 194 200 185 Solid result generation continued 176 180 177 167 148 147 142 150 136 132 125 • Market environment more favorable than in Europe, but started to weaken 100 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Dist
Slide 20: BA Ferrochrome
20 November 7, 2023 Ferrochrome production, 1,000 tonnes BA Ferrochrome Decrease in profitability was mostly 150 127 131 131 128 125 129 128 125 118 driven by lower ferrochrome sales 112 104 prices 100 69 70 50 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 • Ferrochrome market remained weak 2020 2020 2021
Slide 21: Strong focus on cash control and efficient net working capital management continues
21 November 7, 2023 Strong focus on cash control and efficient net working capital management continues Q3/23 cash flow, EUR million Annual capex, EUR million NWC decreased in line with normal seasonality Annual capex limited to EUR 170 million 200 29 -52 18 -6 -11 -13 -24 160 EBITDA Working Income
Slide 22: Navigating through turbulent conditions
22 November 7, 2023 Navigating through turbulent conditions Heikki Malinen, President & CEO
Slide 23: Risk outlook
23 November 7, 2023 Risk outlook Positives • Market environment recovering slowly in Europe • Inflationary pressure easing in Europe • Scrap market tightening further • Low distributor inventories, restocking to begin? • Growing demand for Circle Green Uncertainties • Potential risk of hard landing
Slide 24: Outlook for Q4 2023
24 November 7, 2023 Outlook for Q4 2023 Group stainless steel deliveries in the fourth quarter are expected to increase by 0-10% compared to the third quarter as we see some recovery in Europe. The planned maintenance break in business area Ferrochrome is expected to have an approximately EUR 10 mil
Slide 25: Thank you! Questions & answers
25 November 7, 2023 Thank you! Questions & answers Our efforts in sustainability have been globally recognized
Slide 26: BA Europe's adjusted EBITDA was EUR -29 million in Q3
26 November 7, 2023 BA Europe’s adjusted EBITDA was EUR -29 million in Q3 Adjusted EBITDA, EUR million Adjusted EBITDA quarter-on-quarter comparison1, EUR million Seasonal decrease in stainless steel deliveries 128 Significantly lower 122 realized prices for stainless steel 69 52 52 -29 -29 Q3/2022
Slide 27: BA Americas' adjusted EBITDA was EUR 53 million in Q3
27 November 7, 2023 BA Americas’ adjusted EBITDA was EUR 53 million in Q3 Adjusted EBITDA, EUR million Adjusted EBITDA quarter-on-quarter comparison1, EUR million Stainless steel deliveries decreased by 10% 135 110 110 68 53 53 23 Q3/2022 Q4/2022 Q1/2023 Q2/2023 Q3/2023 Q2/23 Deliveries Pricing & mi
Slide 28: BA Ferrochrome's adjusted EBITDA was EUR 21 million in Q3
28 November 7, 2023 BA Ferrochrome’s adjusted EBITDA was EUR 21 million in Q3 Adjusted EBITDA, EUR million Adjusted EBITDA quarter-on-quarter comparison1, EUR million Decrease in profitability mostly driven by lower ferrochrome sales prices 36 21 34 36 21 14 16 Q3/2022 Q4/2022 Q1/2023 Q2/2023 Q3/202
Slide 29: In Q3, import share was 23% in Europe and 24% in the U.S.
29 November 7, 2023 In Q3, import share was 23% in Europe and 24% in the U.S. Third-country cold rolled imports1 into Europe, Third-country cold rolled imports2 into the US, 1,000 tonnes 1,000 tonnes Import penetration Import penetration (in %) (in %) kt kt 40 40 150 35 40 30 24% 30 100 23% 20 25 20