Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Q3 2019 Earnings Presentation
38 slides from Outokumpu Oyj's earnings presentation, Oct 31, 2019
Slide 1: Q3 2019 results
Q3 2019 results CEO Roeland Baan CFO Pia Aaltonen-Forsell October 31, 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 | October 31, 2019
Slide 4: Best value creator in stainless steel by 2020
OUR VISION Best value creator in stainless steel by 2020 through customer orientation and efficiency 4 | October 31, 2019
Slide 5: Challenging quarter due to a weak market and a sharp increase in the nickel price
Challenging quarter due to a weak market and a sharp increase in the nickel price Group adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million EUR million Gains from Lower FeCr derivatives and Improved cost efficiency emission benchmark and lower input costs allowance sales pri
Slide 6: Unfavorable raw material price development...
Unfavorable raw material price development... European US Average nickel price, Ferrochrome average base price, average base price, USD/tonne benchmark price, EUR/tonne* USD/tonne USD/lb. 790 820 1,433 1,433 15,540 1.20 12,258 1.04 0% Q2/19 Q3/19 Q2/19 Q3/19 Q2/19 Q3/19 Q2/19 Q3/19 * According to th
Slide 7: ...led to margin squeeze
...led to margin squeeze European base prices1 (Germany)*, US base prices1, Transaction prices 304 stainless, EUR/tonne USD/tonne USD/tonne 1,200 1,500 3,400 1,100 1,400 2,900 1,000 900 1,300 2,400 800 1,200 1,900 700 600 1,100 1,400 Europe USA China 1. 2mm sheet cold rolled 304 grade. CRU October 2
Slide 8: Imports to Europe continued to surge
Imports to Europe continued to surge Third-country cold rolled imports1 into Europe, Third-country cold rolled imports2 into the US, 1,000 tonnes 1,000 tonnes 100 50 50 50 31% 34% 80 40 40 40 23% 60 30 30 30 16% 16% 15% 40 20 20 20 20 10 10 10 0 0 0 0 From rest of world From China From rest of world
Slide 9: Key figures Q3/19
Key figures Q3/19 Q3/18 Q2/19 Stainless steel deliveries 1,000 tonnes 533 582 584 Sales EUR million 1,590 1,733 1,701 Adjusted EBITDA EUR million 45 128 91 EBITDA EUR million 45 128 91 Net result EUR million -27 29 6 Earnings per share EUR -0.06 0.07 0.01 Operating cash flow EUR million 12 61 177 Ne
Slide 10: Weak demand and increased imports led to low deliveries in Europe
Weak demand and increased imports led to low deliveries in Europe Europe adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million EUR million Higher raw material cost, partly compensated by better product mix Seasonally lower personnel cost 73 60 42 33 33 Net of Q3/18 Q4 Q1 Q2 Q3
Slide 11: Americas' renewed commercial strategy started to show benefits
Americas’ renewed commercial strategy started to show benefits Americas adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million EUR million Better raw material mix 13 -8 -11 -22 -18 Net of Pricing timing Q3/18 Q4 Q1 Q2 Q3/19 Q2/19 Deliveries Costs Others Q3/19 & mix and hedging
Slide 12: Long products affected by inventory destocking and decrease in end-user demand
Long products affected by inventory destocking and decrease in end-user demand Long Products adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million EUR million 13 6 -3 -1 -9 Net of Pricing timing Q3/18 Q4 Q1 Q2 Q3/19 Q2/19 Deliveries Costs Others Q3/19 & mix and hedging 1) Indi
Slide 13: Ferrochrome's excellent operational performance continued
Ferrochrome’s excellent operational performance continued Ferrochrome adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million EUR million Lower coke price and seasonally lower personnel cost 83 46 30 31 19 FeCr Q3/18 Q4 Q1 Q2 Q3/19 Q2/19 Deliveries Costs Others Q3/19 price 1) In
Slide 14: Abruptly spiking nickel price created a negative hedging result
Abruptly spiking nickel price created a negative hedging result Underlying Exposure Hedging position • Exposure to nickel price changes Committed1 Short 100% • Volume and timing mismatch sales • Changes in pricing mechanisms of sales and purchases Committed2 Long 100% purchases Base stock Long Balan
Slide 15: Net working capital reduction target of €150 million reached ahead of plan
Net working capital reduction target of €150 million reached ahead of plan Q3/19 cash flow1, EUR million CAPEX estimate 2019, EUR million EUR 25 million 300 capex reduction 250 200 Expansion, digitalization & other 150 Kemi mine Annual maintenance 100 50 Provisions, 0 Net cash Cash EBITDA Working pe
Slide 16: Focus on net debt reduction remains unwavering
Focus on net debt reduction remains unwavering 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 1.31 1.34 9.8 4.0 1.7 2.6 3.4 3.6 4.8 2015 2016 2017 2018 Q1 Q2 Q3 2015 2016 2017 2018 Q1 Q2 Q3 Target 16 | October 31, 2019 * Implementatio
Slide 17: New term loan drawn in October
New term loan drawn in October Debt structure*, % Debt maturity profile*, EUR million EUR 400 million term loan 17% 1000 32% 800 600 17% 400 3% 3% 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 loa
Slide 18: Outlook for Q4 2019
Outlook for Q4 2019 • The stainless steel market is expected to be subdued • Deliveries are expected to be lower than in Q3/19 Adjusted EBITDA • The planned annual maintenance work at the Tornio stainless steel mill is expected to have up to €15 is expected to be million negative impact on BA Europe
Slide 19: We continue our rigorous efficiency actions
We continue our rigorous efficiency actions Additional actions to keep our competitive position in all market circumstances include: Over 10% Capacity • • Melting limitation Maintenance optimization reduction in variable costs • Further inventory reduction Productivity Cash flow • Capex reduction of
Slide 20: Outokumpu CMD 2020
OUTOKUMPU CMD 2020 March 18 London
Slide 21: Appendix
Appendix
Slide 22: 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 23: 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 23 | October 31, 2019 Approximate figures, based on management estimates
Slide 24: 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 25: We have a solid presence in key regions
We have a solid presence in key regions Avesta* Fagersta Tornio* Integrated melt shop, hot and cold rolling Degerfors Kemi Other mills Sheffield Nyby Krefeld* Helsinki Mine Richburg Dillenburg Service centers Calvert Dahlerbrück San Luis Potosí Headquarters in Helsinki, Finland * R&D centers 25 | Oc
Slide 26: 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 27: 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, petrochemical and energy • Large quantities • Standard products and 2% Automotive grades 11% • Speci
Slide 28: Broadest product portfolio globally
Broadest product portfolio globally Outokumpu stainless steel deliveries by product form Stainless steel is not a single Chrome is the most important raw product and there are thousands of material used in stainless steel different grades and product forms. Cold rolled 70% production. Outokumpu has
Slide 29: 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 30: We are the world leader in sustainable steel production...
We are the world leader in sustainable steel production... Tonnes of CO2 per tonne Recycled content, % crude steel Our 10 84 87 87 87 89 ferrochrome operations’ 8 CO2 footprint 6 is only 4 2 Estimated global recycled content in stainless steel 42% of industry 0 average Outokumpu 2014 2015 2016 2017
Slide 31: ...and we have ambitious targets
...and we have ambitious targets CO2 emissions intensity, tonnes per stainless Outokumpu’s emissions forecast under SBT steel conditions, tonnes of CO2 per tonne steel 1) 2 2.5 20% reduction by 2023 2.0 1.5 50% reduction 1.5 1 1.0 0.5 0.5 34% reduction 0 0.0 2014- 2017 2018 2023 2014- 2020 2025 2030
Slide 32: Stainless steel demand is growing
Stainless steel demand is growing Heavy industries Other +10% +31% Other Heavy industries Architecture, Building & Construction Architecture, Building Global +36% Expected global & Construction stainless steel stainless steel real demand in 2018 real demand in 2024 43.2 +21% Automotive million tonne
Slide 33: 2% demand growth expected for 2019
2% demand growth expected for 2019 Global Americas Europe APAC 5% 2% 2% 3% 4% 4% 4% 2% -1% -1% 2% 4% 4% 3% 1% -4% 1% 3% 3% 3% 2% 6% 3% 3% 3% 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
Slide 34: Real demand is expected to continue to decrease in Europe
Real demand is expected to continue to decrease in Europe EMEA total stainless steel real demand1 Americas total stainless steel real demand1 2,500 1,000 2,000 750 0% 0% 1,500 500 1,000 250 500 0 0 1) Total stainless = rolled & forged products, excl. 13Cr tubes, profiles 34 | October 31, 2019 Source
Slide 35: 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] 28.5 [CR, Mtonnes] [CR, Mtonnes] 26.7 5.0 4.8 4.9 4.9 4.9 25.3 4.9 24.3 3.2 3.3 3.3 5.0 5.1 3.2 3.2 3.2 23.1 22.8 4.1 4.2 3.0 21.7 21.9 4.0 3.0 20.7 3.8 3.9 3.7 2.7 2.7 2.7 19.6 19.5 3.5 3
Slide 36: Raw materials - price development
Raw materials - price development Nickel1, USD / tonne Ferrochrome2, USD / lb. 21,000 2 European contract price European spot price 19,000 17,000 Q4/19 1.5 1.02 USD/lb. 15,000 13,000 14 Oct 19 14 Oct 19 1 11,000 17,405 USD/t 0.73 USD/lb. 9,000 7,000 0.5 Jan'17 Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Slide 37: Balance sheet
Balance sheet Assets (EUR million) Q3/19 Q2/19 Equities and liabilities (EUR million) Q3/19 Q2/19 Non-current assets Equity attributable to the equity holders of the Company 2,602 2,624 Intangible assets 595 595 Non-current liabilities Property, plant and equipment 2,790 2,754 Non-current debt 653 7
Slide 38: Thank you!
For more information, call Outokumpu Investor Relations or visit www.outokumpu.com/investors Thank you! Tommi Järvenpää Päivi Laajaranta Vice President – Investor Relations Executive Assistant Phone +358 9 421 3466 Phone +358 9 421 4070 Mobile +358 40 576 0288 Mobile +358 400 607 424 E-mail: tommi.j