Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Investor Day (May 2013)
35 slides from Outokumpu Oyj's investor day presentation, May 22, 2013
Slide 1: Business Area EMEA – Introduction and Challenges
Business Area EMEA–Introduction and Challenges Outokumpu Experience Dr. Ulrich Albrecht-Früh 2013 President – Stainless Coil EMEA Business Area May 22-23, 2013 Old Billingsgate, London, UK
Slide 2: Outline
Outline 1. Business Area EMEA at a glance 2. EMEA market environment 3. EMEA Strategy – opportunities and challenges BA EMEA introduction and challenges, Dr. Ulrich Albrecht-Früh 5/22/2013 2
Slide 3: BA EMEA at a glance
BA EMEA at a glance As of May 2013 • Business area EMEA produces high-volume and tailored stainless steel grades Tornio Kemi • Extensive sales network with 13 service centers, 11 sales offices, 5 sales agents across the EMEA region • Highly cost competitive Tornio stainless steel mill with integrate
Slide 4: BA EMEA financial highlights
BA EMEA financial highlights • Stainless Coil EMEA is the largest of EUR million Q1/13 Q4/ 2012 Q1/12 2012 Outokumpu’s business areas, and comparable comparable comparable accounts for more than half of group Stainless steel 447 408 474 1,752 sales deliveries 1) • Q1 2013 stainless steel deliveries
Slide 5: BA EMEA product portfolio and capacities
BA EMEA product portfolio and capacities 1,000 tonnes Melting Hot rolling Cold rolling Slab Hot rolled black & Cold rolled Precision Role of the production facility Product white strip strip 2B/BA 1) strip Production facility Key melt shop for Europe, austenitic and ferritic, Tornio 1,600 1,600 750
Slide 6: Tornio works: Highly competitive cost position
Tornio works: Highly competitive cost position • Tornio is the most integrated stainless steel plant in the world • Highly efficient through large economies of scale • Own chrome ore – safe supply and stable ferrochrome quality • State-of-the-art technology (RAP line producing new 2E semi CR product
Slide 7: Most integrated stainless steel mill
Most integrated stainless steel mill FeCr Production Stainless Production • Ferrochrome production onsite with molten Ferrochrome charged directly Kemi Mine • No need to crush or reheat, saving energy and minimizing Ferrochrome Works Ferrochrome transportation costs Raw Materials Steel Melting Shop
Slide 8: Ferrochrome – competitive advantage
Ferrochrome – competitive advantage Outokumpu ferrochrome production • Unique low cost position as Europe’s only (1,000 tonnes) ferrochrome producer with access to the 600 only known chromite reserves in the EU 500 400 • Mineral resources to last for roughly 40 years 300 200 • Q4 2012: finalization
Slide 9: Ferrochrome – competitive advantage
Ferrochrome – competitive advantage Ranking of major ferrochrome smelters for 2013 in order Ferrochrome market price development 2) of increasing total direct operating cost 1) US¢/lb contained Cr USD/lb 1.3 100 1.3 80 1.2 Q2’2013 1.27 USD/lb 1.2 60 1.1 40 1.1 1.0 Apr 23 20 1.06 USD/lb 1.0 0 0.9 Sep
Slide 10: Outline
Outline 1. Business Area EMEA at a glance 2. EMEA market environment 3. EMEA Strategy – opportunities and challenges BA EMEA introduction and challenges, Dr. Ulrich Albrecht-Früh 5/22/2013 10
Slide 11: Continued growth for stainless steel globally – EMEA will decline in 2013
Continued growth for stainless steel globally– EMEA will decline in 2013 +7% +19% +8% -3% +6% +4% +4% -1% +3% EMEA APAC AMERICAS +9% +4% +2% Orange = Change 2010-2011 Green = Change 2011-2012 TOTAL WORLD Blue = Forecast 2013 Data source: SMR, Apr 2013, Real demand for total stainless (rolled & forge
Slide 12: EMEA's demand is characterized by stagnant demand and overcapacities
EMEA‘s demand is characterized by stagnant demand and overcapacities 7,000 EMEA cold rolled stainless steel demand [tonnes] EMEA cold rolled stainless steel capacity [tonnes] 6,190 6,190 5,995 6,045 6,057 5,860 5,883 5,918 5,895 5,830 5,855 6,000 5,756 5,755 3.8% 5,000 Stagnant demand 4,580 4,476 20
Slide 13: Since 2007 cheap imports from Asia are impacting the European market
Since 2007 cheap imports from Asia are impacting the European market Cold rolled imports from 3rd countries into EU27 tonnes March 2013: 100,000 20% import share from Asia from Rest of World 80,000 60,000 40,000 20,000 0 Oct Oct Oct Oct Oct Oct Oct Oct Oct Apr Apr Apr Apr Apr Apr Apr Apr Apr 2004 20
Slide 14: Decrease in transaction prices
Decrease in transaction prices Average transaction prices for 2mm cold rolled 304 stainless steel sheet USD/t USD/t 2011 2012 Q1 13 Europe 3,998 3,304 3,283 China 3,264 2,641 2,587 5,000 Europe-China 734 663 696 4,000 3,000 2,000 1,000 Jan Jan Jan 11 12 13 Transaction price Europe Transaction price
Slide 15: Raw materials – last 6 months
Raw materials – last 6 months 19,000 Nickel1 1.3 Ferrochrome2 U U European contract price S 18,000 S 1.2 Q2’2013 Apr 23 European spot price D D 1.27 USD/lb 15 085 USD/t / 17,000 / 1.1 t l o b 16,000 1.0 n Apr 23 1.06 USD/lb 15,000 0.9 Sep Oct Nov Dec 2013 Feb Mar Apr Sep Oct Nov Dec 2013 Feb Mar Apr
Slide 16: Facing the new reality
Facing the new reality I Stagnant demand and overcapacities in Europe II Increasing imports from non-European countries III Decreasing prices and volatile raw material markets IV Significant losses for all European producers in recent years Inoxum acquisition was starting point for restructuring of
Slide 17: Outline
Outline 1. Business Area EMEA at a glance 2. EMEA market environment 3. EMEA Strategy – opportunities and challenges BA EMEA introduction and challenges, Dr. Ulrich Albrecht-Früh 5/22/2013 17
Slide 18: Outokumpu Strategy Roadmap
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 Mini
Slide 19: With strong focus on restructuring in EMEA
With strong focus on restructuring in EMEA 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
Slide 20: EMEA synergy savings – High contribution
EMEA synergy savings – High contribution ~ EUR 12 million achieved in Q1 2013 Synergy savings over time (cumulative) Others Max EMEA Min • We are on track to reach for targeted 250 annual savings of EUR 50 million on 200 group level in 2013 150 • EMEA contributes with approx. 75% to 100 Q1 and annua
Slide 21: Ramp-down of Krefeld melt shop is achieved faster than originally planned
Ramp-down of Krefeld melt shop is achieved faster than originally planned Krefeld melting swaps – cumulative ktons per month • Significant volumes successfully transferred to Bochum melt shop • Transfers to Tornio progressing according to plan and being accelerated to reach 130kt during 2013 • Shift
Slide 22: New cost-saving programs
New cost-saving programs P150 program P300 program • P150 is aiming an additional cost saving of EUR • New program targeting a net working capital 150 million on group EBITDA level reduction of EUR 300 million to be achieved • Full implementation and effective until end of through: 2014 • Inventory
Slide 23: Medium and long term actions well on track
Medium and long term actions well on track • Developing alternative price models to allow Pricing structure In introduction quicker response to raw material price changes project • From volumes to profit principle phase • Optimize costs and quality by specialization Production swaps • Improved flexi
Slide 24: Strengthening Research & Development
Strengthening Research & Development Transport Water technology Renewable energy Medical applications Household Architecture applications Meeting customer needs Process stability & costs, additional benefits Change R&D culture into “business striker” mentality Process development Base material Surfa
Slide 25: Focus on emerging industries
Focus on emerging industries • New base material H500 offers high light weight potential • Background: The combination of high strength and high formability offers interesting light weight potential for automotive applications • Target: Qualification of H500 for automotive applications • Status: • S
Slide 26: Summary
Summary • Targeted EUR 38 million synergy savings for EMEA well on track • Krefeld melt shop ramp-down is achieved faster then originally planned • Production swaps and optimization of cold rolled production under way • Alternative pricing and alloy surcharge models being introduced • Ferrochrome ra
Slide 27: Q&A
Q&A Outokumpu Experience 2013 May 22-23, 2013 Old Billingsgate, London, UK
Slide 28: Appendix
Appendix
Slide 29: Overcapacity of melting capacity in stainless production – prior to Bochum closure
Overcapacity of melting capacity in stainless production– prior to planned Bochum melt shop closure (May 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 86
Slide 30: Balanced stainless production structure – after the planned Bochum melt shop closure
Balanced stainless production structure – after the planned Bochum melt shop closure (May 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 31: Strongest growth in end-use demand by segment is forecasted for Chemical / Petrochemical & Energy
Strongest growth in end-use demand by segment is forecasted for Chemical / Petrochemical & Energy CAGR Growth [End-use demand for total stainless steel products] 2013 - 2017 8% 8% 8% 8% 8% 8% 8% 8% Consumer 3.5% Goods & Medical 14% 14% 14% 14% 14% 14% 14% 14% 7% 7% 7% 7% 7% 7% 8% Automotive 4.5% 8%
Slide 32: Strongest growth in end-use demand by grade is forecasted for Duplex grades
Strongest growth in end-use demand by grade is forecasted for Duplex grades [End-use demand for total stainless steel products] CAGR Growth 2013 - 2017 10% 11% 9% 10% 10% 10% 11% 10% Mo containing 4.6% 300series 47% 46% 47% 47% 46% 45% 45% 45% Other 300Series 3.6% 400series 5.4% CrMn 27% 28% 27% 28%
Slide 33: Price gaps between Asia and Europe trigger Chinese imports
Price gaps between Asia and Europe trigger Chinese imports 25,000 Transaction price gap grade 304, 2mm [US$/t] 1,750 China imports (EU27) [tonnes] 20,000 1,500 1,250 15,000 1,000 10,000 750 500 5,000 250 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2006
Slide 34: Development of European transaction prices
Development of European transaction prices Reference: Austenitic 304 (1.4301), Cold rolled, • Nickel volatility is the major concern SSC/Traders, sheet 2mm for all Stainless Producers European transaction price [EUR/t] Nickel price [USD/t] 5,000 55,000 • ~80% of production costs of stainless 4,500 5
Slide 35: EMEA operating model designed to improve performance measurability
EMEA operating model designed to improve performance measurability by clear accountabilities Target model: functional accountabilities & KPIs Business Area EMEA - Profitability KPIs • 1 Sales Sales Sales • 2 • 3 • 4 KPIs Supply Chain Supply Chain • 1 Management Management Supply Chain Management • 2