Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Q2 2015 Earnings Presentation
42 slides from Outokumpu Oyj's earnings presentation, Jul 23, 2015
Slide 1: Interim report Q2 2015
Interim report Q2 2015 CEO Mika Seitovirta CFO Reinhard Florey July 23, 2015
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 July 23, 2015 3
Slide 4: Contents
Contents 1. Q2/15 overview and strategic priorities 2. Financial performance 3. Outlook and guidance July 23, 2015 4
Slide 5: Q2 2015 in brief
Q2 2015 in brief Underlying EBIT (EUR million) 1) EBIT excl. NRI • Coil EMEA profitability continued to improve -48 -3 3 -9 8 -26 2 • Import pressure in Europe eases -6 -9 • Small base price increases in Europe -28 -25 -45 • Bochum melt shop closed at the end of June I/14 II/14 III/14 IV/14 I/15 II/
Slide 6: Coil EMEA continues on track
Coil EMEA continues on track Coil EMEA underlying EBIT, EUR million • Overall healthy demand, import pressure eases but low nickel impacting 42 • Profitability improvement driven by restructuring 28 and saving benefits, as well as improved mix 21 15 15 • EMEA restructuring on track: Bochum closed in
Slide 7: Getting Coil Americas back on track
Getting Coil Americas back on track Coil Americas underlying EBIT, EUR million • High import pressure, elevated inventories and declining prices 6 • Poor volume development and profitability • Weak H1 impacting FY2015 -25 • Commercial ramp-up delayed by 1 year -33 -28 -40 -50 Q1/14 Q2/14 Q3/14 Q4/14
Slide 8: Continued growth for stainless steel globally
Continued growth for stainless steel globally AMERICAS EUROPE APAC +13% +8% +9% +7%+5% +5% +5% +5% +4% +4% +4% +3% +2% +2% +3% +1% -0% +2% 12 13 14 15f 16f 17f 12 13 14 15f 16f 17f 12 13 14 15f 16f 17f +19% +12% +8% +8% +8% +8% +7% +5% +5% +5% +5% +6% +5% +4% +5%+5% +3% +3% +3%+3% +4% +3% +3% +4% +4
Slide 9: Stainless steel base prices slightly up in Europe but sharply down in the US
Stainless steel base prices slightly up in Europe but sharply down in the US European base prices (EUR) 1) US base prices (USD) 1) €/t $/t 1,300 1,500 Germany USA 1,200 1,400 1,100 1,300 1,000 1,200 Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Source: CRU
Slide 10: Nickel price development and stock levels
Nickel price development and stock levels Nickel price and stocks 1) 60,000 500 [Ktonnes] [USD/t] 450 50,000 400 40,000 350 300 30,000 250 LME stocks (rhs) 200 LME cash price (lhs) 20,000 150 10,000 100 50 ,0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1) Source: nickel cash LME daily o
Slide 11: Imports into Europe eased further in Q2. Import pressure in the US remains strong
Imports into Europe eased further in Q2. Import pressure in the US remains strong Third-country imports into Europe Third-country imports into the US Total market size 3.7 million tonnes in 2014* Total market size 1.6 million tonnes in 2014* CR, kt CR, kt Imports from Asia High import levels decreas
Slide 12: Contents
Contents 1. Q2/15 overview and strategic priorities 2. Financial performance 3. Outlook and guidance July 23, 2015 12
Slide 13: Q2 key financials overview
Q2 key financials overview Group key figures • Stainless steel deliveries at similar EUR million II/15 I/15 II/14 2014 level with Q1 Stainless steel deliveries, kt 616 620 675 2,554 o Stable in EMEA, Coil Americas down Sales 1,694 1,768 1,753 6,844 11.9% EBIT -26 -10 -10 -243 • Underlying EBIT decli
Slide 14: Good progress in cost saving programs
Good progress in cost saving programs Cumulative savings 2013-2017 and • EUR 13 million savings in Q2 related cash costs (EURm) EMEA restructuring Synergy savings P250 • Total savings EUR 433 million vs. 550 2012 530 470 100 420 433 80 20 385 • Additional savings of ~EUR 37 million 198 200 200 200 1
Slide 15: Coil EMEA
Coil EMEA EMEA key figures • Demand overall healthy, import pressure from China and Taiwan eases EUR million II/15 I/15 II/14 2014 Stainless steel deliveries, kt 415 411 438 1,666 • Base price up EUR 10/t, low nickel price Ferrochrome external 23 22 25 133 deliveries, kt • Improved profitability Sal
Slide 16: Coil Americas
Coil Americas Americas key figures • Operating environment continued difficult • Weak demand from the distributor sector EUR million II/15 I/15 II/14 2014 • US imports >32% in April-May • Base prices down by 80 USD/tonne in Q2 Stainless steel deliveries, kt 111 126 143 541 driven by sharp decline in
Slide 17: APAC
APAC APAC key figures • Market continued weak in APAC region in line with slowing GDP growth in China EUR million II/15 I/15 II/14 2014 Stainless steel deliveries, kt 61 52 58 220 • Stainless steel prices further down in Sales 129 112 118 444 China; low nickel price, capacity EBIT excl. NRI -5 -2 1
Slide 18: Quarto Plate
Quarto Plate Quarto Plate key figures • Weak operating environment due to depressed investment climate and low EUR million II/15 I/15 II/14 2014 nickel price Stainless steel deliveries, kt 31 26 25 98 Sales 133 122 114 450 • Intense price pressure in Europe and EBIT excl. NRI -2 0 -9 -26 the US Unde
Slide 19: Long Products
Long Products Long Products key figures • Weak demand driven by low nickel price and slow project activity EUR million II/15 I/15 II/14 2014 Stainless steel deliveries, kt 62 52 80 248 • Sluggishness of the European market Sales 159 149 203 651 impacted by weakness of the euro and EBIT excl. NRI 5 4
Slide 20: Operating cash flow
Operating cash flow • Negative EUR 41 million operating EUR million II/15 I/15 II/14 2014 cash flow • Cash outflow mainly related to Net cash from operating -41 -62 --257 -126 provisions and pension obligations activities • Capex at moderate level Net cash from investing • Quarterly financing costs
Slide 21: Targeting net debt of below EUR 1.5 billion by the end of 2017
Targeting net debt of below EUR 1.5 billion by the end of 2017 Net debt and gearing, EUR million and % Debt maturity profile, EUR million 4,000 188 200 2,000 3,000 150 1,500 96 93 91 1,000 2,000 100 3,556 1,000 1,974 2,034 2,116 50 500 1,500 0 0 0 2013 2014 Q1/15 Q2/15 end- 2015 2017 2019 2021 2017
Slide 22: Targeting cumulative EUR 400 million release in 2015 from net working capital
Targeting cumulative EUR 400 million release in 2015 from net working capital Cash flow from working capital change 1) Inventory days development 2) EUR million Ø 2013: 100 398 Ø 2014: 102 Ø 2015 28 400 target: 86 3) 75 351 48 248 133 119 67 109 107 112 97 100 97 102 89 76 2013 I/14 II/14 III/14 IV/
Slide 23: Contents
Contents 1. Q2/15 overview and strategic priorities 2. Financial performance 3. Outlook and guidance July 23, 2015 23
Slide 24: Less pronounced Q3 decline in demand in EMEA expected, Americas stable
Less pronounced Q3 decline in demand in EMEA expected, Americas stable EMEA total stainless steel real demand1) Americas total stainless steel real demand1) 1.000 tonnes 1.000 tonnes 2,000 -7% 1,000 +1% 1,950 950 1,900 900 1,850 850 1,800 800 1,750 750 1,700 700 1,650 650 1,600 600 1,550 550 1,500 5
Slide 25: Business and financial outlook for Q3 2015
Business and financial outlook for Q3 2015 Stainless steel end-user demand Outokumpu estimates expected to remain relatively Somewhat lower delivery volumes healthy in Q3 q-on-q with seasonal decline in Europe European markets seasonally slow and gradual increase in Americas during the summer months
Slide 26: Clear priorities for second half of 2015
Clear priorities for second half of 2015 1. Turning Coil Americas back on track 2. Further progress in Coil EMEA 3. Continued progress in savings programs 4. Additional commercial and operational improvements in all business areas 5. NWC management and cash flows 6. Debt reduction and keeping financ
Slide 27: Q&A
Q&A July 23, 2015 27
Slide 28: 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 Tommi Järvenpää Manager – Investor Relations Phone +358 9 42
Slide 29: Appendix
Appendix July 23, 2015 29
Slide 30: Outokumpu balance sheet
Outokumpu balance sheet Assets (MEUR) 30.6.15 31.3.15 Non-current assets Intangible assets 572 576 Property, plant and equipment 3,138 3,237 Investments in associated companies 81 79 and joint ventures Other financial assets 35 28 Deferred tax assets 62 53 Defined benefit plan assets 40 39 Trade and
Slide 31: Outokumpu balance sheet
Outokumpu balance sheet Equity and liabilities (MEUR) 30.6.15 31.3.15 Total equity 2,195 2,223 Non-current liabilities Non-current debt 1,576 1,732 Other financial liabilities 12 16 Deferred tax liabilities 39 36 Defined benefit and other long-term 332 392 employee benefit obligations Provisions 113
Slide 32: Cost analysis Q2 2015
Cost analysis Q2 2015 Operative cost components 1) Comments • Raw materials account for around 59% of the total operative costs of the Group • Energy and other consumables account for some 10-15% of the total operative costs • Personnel expenses some 10% of the total operative costs • Other cost of
Slide 33: Headcount reductions
Headcount reductions Total headcount reduction 1) Personnel per BA at the end of Q2/15 13,327 302 766 (3%) 792 668 577 (7%) (6%) EMEA 436 (5%) Americas 301 APAC 159 2,149 7,177 Quarto Plate (18%) (62%) Long Products 1,815 Other operations 9,850 2012 2013 2014 I/15 II/15 2015- 2017e 2016e • Overall t
Slide 34: 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 (FIN) (SWE) (UK) 1,450 450 450 Slabs, Blooms, Billets, Ingots ROLLING TORNIO AVESTA HOT (FIN) (SWE) 1,450 900 PLATE & DEGERFORS NEWCASTL
Slide 35: 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 36: 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 Consumer Other goods & Distributors 17% Medical 45% (48%) (14%) 16 % (18%) Automotive 17 % (18%)
Slide 37: Broadest product portfolio across stainless steel
Broadest product portfolio across stainless steel Deliveries by product grade 1) • Outokumpu has a broad product portfolio to serve all customers Other 3% • Significantly higher share of ferritic grades Duplex (2%) leads into reduced sensitivity to nickel price 7% (4%) volatility2) Austenitic Ferrit
Slide 38: 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 2015 2) Nordic 441 Total Europe: 6.091 Eskilstuna Coil EMEA sales by customer segment 1) Outokumpu core market UK Outokumpu non-core Distributors market 285 41% 33 % 44 % Sheffield Germany 1.642
Slide 39: Despite slowing from ~8% p.a. in 2011-2015, APAC still to be fastest growing region
Despite slowing from ~8% p.a. in 2011-2015, APAC still to be fastest growing region [Total stainless steel real demand in million tonnes] Ø Growth p.a. 2015-2017 42,1 40,3 38,5 37,0 35,0 32,7 29,9 30.3 +5.3% 27.3 28.8 26.1 24.5 22.5 APAC 20.0 3.9 +2.4% Americas 3.3 3.5 3.7 3.7 3.8 3.1 EMEA 6.8 6.9 7
Slide 40: Nickel price development
Nickel price development 60,000 500 [Ktonnes] [USD/t] LME stocks (rhs) 450 50,000 400 LME cash price (lhs) 40,000 350 300 30,000 250 200 20,000 150 10,000 100 50 ,0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 o The Nickel price staged some recovery from mid-April on weakening US dollar
Slide 41: Raw materials - price development
Raw materials - price development 22,000 Nickel1 1.4 Ferrochrome2 European contract price U 20,000 U 1.3 European spot price Q3/15 S 14 Jul 15 S 1.2 18,000 11,385 USD/t 1.08 USD/lb D D 1.1 / 16,000 / t l 1 o 14,000 b 0.9 n 14 Jul 15 12,000 0.8 0.76 USD/lb 10,000 0.7 Jan'14 Feb Mar Apr May Jun Jul Au
Slide 42: July 23, 2015
July 23, 2015 42