Slide 1: Interim Report Q2 2013
Interim Report Q2 2013 CEO Mika Seitovirta July 24, 2013
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 Kari Parvento Kari Tuutti Mika Seitovirta Esa Lager President – BA EVP – Marketing, CEO CFO Americas Communications and IR 7/24/2013 3
Slide 4: Contents
Contents 1. Q2 overview 2. 2013 priorities 3. Market environment 4. Q3 outlook 7/24/2013 4
Slide 5: H1 2013 overview
H1 2013 overview Headwinds • Weak economy and stainless steel demand • 20% decline in nickel price • Inventory related issues with the Americas business Tailwinds • Ferrochrome ramp-up • Synergy and P150 related savings • Tornio performance 7/24/2013 5
Slide 6: Continued growth for stainless steel globally – Europe will decline in 2013
Continued growth for stainless steel globally– Europe will decline in 2013 +25% +7% +1% +8% +5% +5% +5% +3% EMEA -2% +10% APAC AMERICAS +4% +3% Orange = Change 2010-2011 Green = Change 2011-2012 TOTAL WORLD Blue = Forecast 2013 Data source: SMR, July 2013 Real demand for total stainless (rolled & fo
Slide 7: Q2 overview
Q2 overview • Q2 2013 stainless steel deliveries declined Q2/12 by 7% to 656,000 tonnes compared to Q1 EUR million Q2/13 Q1/13 comparable 2013 Stainless steel 656 703 720 • Q2 underlying EBIT was EUR -80 million; in deliveries 1) line with expectations Sales 2,064 2,221 2,551 • Q2 EBIT includes EUR
Slide 8: LME nickel prices and net timing impacts
LME nickel prices and net timing impacts EUR million USD/tonne Timing gain/loss (EUR million) LME Nickel (USD/tonne) 60 22,000 Total timing effect impacted also by 40 EUR/USD rate and changes in prices of 20,000 other metals 20 18,000 0 16,000 -20 14,000 -40 12,000 -60 10,000 Q1/12 Q2/12 Q3/12 Q4/12
Slide 9: Sales and deliveries by Business Areas
Sales and deliveries by Business Areas Q2 2013 external sales by BA 1) Q2 2013 external stainless deliveries by BA 1,2) Group sales EUR 2.1 billion Group deliveries 656,000 tonnes EMEA 44% Americas 12% EMEA 54% Americas 18% APAC 11% HPSA 31% APAC 10% HPSA 18% 1) Split by BA are based on management e
Slide 10: EBITDA and EBIT by Business Areas
EBITDA and EBIT by Business Areas EBITDA excl. NRI 1) per Business Area EBIT excl. NRI 1) per Business Area EUR million EUR million 36 26 20 17 14 5 4 3 0 0 -1 -0 -5 -12 -28 -20 -27 -38 -58 -59 -55 -44 -87 -70 EMEA Americas APAC HPSA EMEA Americas APAC HPSA Q4/12 Q1/13 Q2/13 1) NRI= Non-recurring it
Slide 11: Operating cash flow impacted by Calvert ramp-up and BA EMEA
Operating cash flow impacted by Calvert ramp-up and BA EMEA Q2/13 Q1/13 EUR million Net cash from operating activities -160 -46 Net cash from investing activities -54 -186 Net cash from financing activities 256 295 Net change in cash and cash equivalents 42 63 • Negative operating cash flow of EUR 1
Slide 12: Capital structure
Capital structure Q2/13 Q1/13 EUR million Net interest-bearing debt 3,041 2,891 Equity 2,522 2,799 Equity-to-assets ratio, % 26.2 28.0 Debt-to-equity ratio (gearing), % 120.6 103.3 • Net interest-bearing debt increased to EUR 3,041 million leading to a gearing of 120.6%. Increase was driven by the l
Slide 13: Contents
Contents 1. Q2 overview 2. 2013 priorities 3. Market environment 4. Q3 outlook 7/24/2013 13
Slide 14: New Outokumpu Strategy Roadmap
New Outokumpu Strategy Roadmap Restructuring + Growth = Perfor- mance New Transform Ensure Full integration Deliver on Ramp-up Expand Leverage Develop efficiency company financial and new synergies US presence Ferrochrome HPSA APAC projects structure stability culture Mill closures P150 project New
Slide 15: Update synergy savings – EUR 39 million achieved in H1 2013
Update synergy savings – Deliver on synergies EUR 39 million achieved in H1 2013 Synergy savings over time (cumulative) • EUR 39 million synergy savings achieved 250 Max in H1 2013 200 Min • Annual synergy savings expected to 150 exceed EUR 50 million in 2013 100 50 39 50 • Contributions by raw mate
Slide 16: Ramp-down of Krefeld melt shop is on plan
Ramp-down of Krefeld melt shop Deliver on synergies is on plan Krefeld melting swaps – cumulative ktonnes per month • Significant volumes successfully transferred to Bochum melt shop • Transfers to Tornio progressing according to plan and to reach 130kt during 2013 • Shift reductions: October 2012 f
Slide 17: Headcount reduction progresses according to plan
Headcount reduction progresses according Deliver on synergies to plan Personnel at the end of reporting period 1) • Target is to reduce headcount by 20,000 2,500 between 2013-2017 18,000 • H1 2013 headcount reduction: -339 339 positions 16,000 • Target to reduce headcount by 14,000 770 in 2013 16,70
Slide 18: P300: Target to reduce net working capital of EUR 300 million by end of 2014
P300: Target to reduce net working capital New efficiency programs of EUR 300 million by the end of 2014 Cash flow from working capital change 1) Inventory development (1,000 tonnes) 300 1,000 250 200 950 300 150 300 900 100 850 150 50 800 0 -50 -17 -70 750 2013 2014 700 Q1/13 Q2/13 Jan Feb March Ap
Slide 19: Update: Remedy divestment process and VDM strategic review
Ensure Update: Remedy divestment process and financial stability VDM strategic review Terni remedy process • The Terni divestiture continues with an extended time frame that the European Commission has granted • Discussions continue with a number of interested parties. In addition, Terni has instiga
Slide 20: Update: US ramp-up
Ramp-up US presence Update: US ramp-up • The ramp-up of the Calvert mill missed Key profitability levers for Americas business profitability targets mainly due to large inventory write-offs related to the weakening of nickel price 1. Expanding product portfolio and customer base • The ramp-up of the
Slide 21: Update: Ferrochrome operations
Expand Ferrochrome Update: Ferrochrome operations • Unique low cost position as Europe’s only Outokumpu ferrochrome production ferrochrome producer with access to the only known chromite reserves in the EU 600 (1,000 tonnes) • Ferrochrome production of at least 400,000 500 tonnes expected for 2013 (
Slide 22: Contents
Contents 1. Q2 overview 2. 2013 priorities 3. Market environment 4. Q3 outlook 7/24/2013 22
Slide 23: Further decrease in transaction and base prices
Further decrease in transaction and base prices Transaction prices 304 stainless steel (USD) 1 Base prices 304 stainless steel (EUR) 1 5,000 1,300 4,500 Europe Germany 4,000 USA 1,250 3,500 China 1,200 3,000 1,150 2,500 1,100 2,000 1,500 1,050 1,000 1,000 Jan Jan Jan Jan Jan Jan 2011 2012 2013 2011
Slide 24: Market to remain weak in Q3 2013
Market to remain weak in Q3 2013 EMEA total stainless steel real demand1) Americas total stainless steel real demand1) 1,000 tonnes 1,000 tonnes 2,000 1,000 2012 2013f 2012 2013f 1,900 950 1,800 900 1,700 850 1,600 800 1,500 750 1,400 700 1,300 650 1,200 600 1,100 550 1,000 500 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 25: Raw materials – last 6 months
Raw materials – last 6 months 19,000 Nickel1 1.3 Ferrochrome2 European contract price Q3’2013 U 18,000 U 1.125 USD/lb S 22 Jul S 1.2 European spot price 17,000 14 055 USD/t D D / 16,000 / 1.1 t l o 15,000 b 19 Jul 1.0 0.92 USD/lb n 14,000 13,000 0.9 2013 Feb Mar Apr May Jun Jul 2013 Feb Mar Apr May
Slide 26: Contents
Contents 1. Q2 overview 2. 2013 priorities 3. Market environment 4. Q3 outlook 7/24/2013 26
Slide 27: Business outlook – Third quarter 2013
Business outlook – Third quarter 2013 • Outokumpu lowers its expectation of improvements in underlying EBIT during the second half of 2013. This is due to the continued deterioration of the nickel price, the weak market demand, especially in Europe, in a seasonally sluggish quarter and weaker perfor
Slide 28: Key targets updated
Key targets updated Capital expenditure is expected to decline to approximately EUR 350 million in 2013 Capex Unchanged (FY 2012: EUR 8211 million). Ferrochrome production targeted to grow to approximately 400,000 tonnes in 2013 (FY 2012: Ferrochrome 230,000 tonnes). Synergy savings connected with t
Slide 29: Transformation of Outokumpu – good progress but more work to be done
Transformation of Outokumpu – good progress but more work to be done On solid path • Synergy savings (EUR 150 million in 2014 and EUR 200 million by 2017) o Restructuring of European production and sales network • P150 program (cost savings of EUR 150 million by end of 2014) • Ferrochrome ramp-up •
Slide 30: Q&A Thank you for your attention!
Q&A Thank you for your attention! 7/24/2013 30
Slide 31: Appendix
Appendix 7/24/2013 31
Slide 32: Outokumpu balance sheet
Outokumpu balance sheet Assets (MEUR) 30.6.13 31.12.12 • Goodwill is at EUR 479 million Non-current assets (including the Inoxum transaction Intangible assets 623 629 goodwill of EUR 7 million). Property, plant and equipment 3,605 3,697 • Assets held for sale and liabilities Interest bearing assets
Slide 33: Outokumpu balance sheet
Outokumpu balance sheet Equity and liabilities (MEUR) 30.6.13 31.12.12 Total equity 2,522 2,952 • The total non-current interest Non-current liabilities bearing liabilities of EUR 2,786 million include the IB1) liabilities 2,786 2,974 ThyssenKrupp loan note of Deferred tax liabilities 85 90 EUR 1,25
Slide 34: Outokumpu global production overview Dec. 31, 2012
Outokumpu global production overview Dec. 31, 2012 - healthy balance between hot and cold with planned closures Thousand tonnes 5,000 4,500 1,400 Capacity reduction 4,000 Balance for 3,500 hot and cold 3,000 325 Plate & Long 2,500 Cold rolled 1) 2,000 Melting 2) 3,500 1,500 2,795 1,000 500 0 Melting
Slide 35: Overcapacity of melting capacity prior to planned Bochum melt shop closure
Overcapacity of melting capacity in stainless production– prior to planned Bochum melt shop closure (July 2013) EMEA Coil HPSA Americas Coil APAC Total Finland Germany 1) Sweden UK & USA Calvert Shanghai San Luis Potosí Melting 2) 4,300 1,600 800 500 500 900 3,970 HR 1,600 800 700 870 3,055 CR 750 8
Slide 36: Balanced stainless production structure after Bochum melt shop closure
Balanced stainless production structure – after the planned Bochum melt shop closure (July 2013) EMEA Coil HPSA Americas Coil APAC Total Finland Germany 1) Sweden UK & USA Calvert Shanghai San Luis Potosí Melting 2) 3,500 1,600 500 500 9006 3,170 HR 1,600 700 870 3,055 CR 750 865 425 105 350 270 290
Slide 37: Balanced customer base across industries
Balanced customer base across industries Sales by customer segment Sales by end-customer segment Healthy balance between end-customer segments across both investment and consumer driven industries Other Consumer Distributors 12% goods & Medical 41% Heavy 17% industries 8% Automotive 9% Architecture,
Slide 38: Cost analysis Q2 2013
Cost analysis Q2 2013 Operative cost components 1) 2) Comments • Raw materials account for around 60-65% of the total operative costs of the Group • Share of Ni from total raw material cost is around 60% • Share of Cr from total stainless raw material cost is around 15-20%, but due to the captive su
Slide 39: Broadest product portfolio across stainless steel
Broadest product portfolio across stainless steel Deliveries by product grade 1) • New Outokumpu has a broad product High portfolio to serve all customers 2) Performan Other ce Alloys 5% • Significantly higher share of ferritic grades 2% leads into reduced sensitivity to Nickel price Duplex 3% Auste
Slide 40: Continued strong Ferritics capabilities for new Outokumpu in EMEA
Continued strong Ferritics capabilities for new Outokumpu in EMEA Ferritic competence today Ferritic options for the future Possible bottlenecks from closure of Bochum can be counterbalanced by Tornio and Krefeld/Benrath Melting today done at Terni, Tornio, Bochum and • Melting will continue at Boch
Slide 41: Industrial production as the major driver for stainless growth
Industrial production as the major driver for stainless growth… Growth p.a. Economic Index 2005=100 Industrial Production 2013 - 2017 Growth Prospects 200 180 Fundamental APAC 160 140 120 +6% growth 100 2011 2013 2015 2017 140 Recovery from Americas 120 +4% economic crisis and continued growth 100 2
Slide 42: Growing stainless consumption mainly in APAC
… leads to growing stainless consumption mainly in APAC, and to some extent in Americas and EMEA [Total stainless real demand in million tonnes] Ø Growth p.a. 36.0 2013-2015 34.0 32.5 31.4 30.2 27.5 +6% 25.0 23.6 21.2 22.3 20.2 APAC 18.7 +4% 3.7 Americas 2.5 3.1 3.3 3.4 3.5 EMEA 6.4 6.8 6.9 6.8 7.0
Slide 43: Liquidity and maturity profile of debt
Liquidity and maturity profile of debt Debt maturities June 30, 2013, MEUR 1400 1200 1000 Unutilized facilities 800 Long-term 600 Short-term 400 200 0 2013 2014 2015 2016 2017 2018 2019 2020 7/24/2013 43
Slide 44: Liquidity reserves
Liquidity reserves Definition Cash and cash equivalents + Available long term syndicated credit facilities + Available short term credit facilities Change vs. previous definition + Available Finnish pension loans + Other agreed and undrawn loans = Total liquidity reserves 7/24/2013 44