Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Q2 2014 Earnings Presentation
49 slides from Outokumpu Oyj's earnings presentation, Jul 24, 2014
Slide 1: Interim Report Q2 2014
Interim Report Q2 2014 CEO Mika Seitovirta CFO Reinhard Florey July 24, 2014
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 24, 2014 3
Slide 4: Contents
Contents 1. Second quarter 2014 overview and strategic priorities 2. Financial performance 3. Outlook and guidance July 24, 2014 4
Slide 5: Q2 2014 in brief
Q2 2014 in brief Underl. EBITDA (EUR million) 1, 2) • Continued relatively healthy markets 75 • Deliveries on par with Q1 37 5 • Achieved price increase avg. EUR 20-30/tonne -2 -1 • Average nickel price up 26% q-o-q -34 -32 -66 • Continued recovery in profitability IV/13 I/13 II/13 I/14 2013 III/13
Slide 6: Continued growth for stainless steel globally
Continued growth for stainless steel globally AMERICAS EUROPE +13% APAC +9% +9% +6% +7% +3% +5% +4% +1% +3% +3% -1% 2012 2013 2014f 2015f 2012 2013 2014f 2015f 2012 2013 2014f 2015f +19% +12%+11% +9% +9% +6% +8% +6% +5% +4% +5% +4% +4% +4% +3% +3% +4% +4% +4% +0% 12 13 14f 15f 12 13 14f 15f 12 13 14
Slide 7: Modest improvement in prices but still at low levels in historical terms
Modest improvement in prices but still at low levels in historical terms 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
Slide 8: Levers to improve profitability and cash flow
Levers to improve profitability and cash flow A Calvert ramp-up B EMEA restructuring C Synergy savings and P150 savings D Working capital and capex July 24, 2014 8
Slide 9: Progress in Calvert ramp-up and Stainless Americas turnaround
Progress in Calvert ramp-up and A Stainless Americas turnaround Stainless Americas EBITDA excl. NRI 1) Comments 1 • Q2/14 update o Robust market continued, effective base price increase of about USD 40/t o Technical issues in CR mill and maintenance breaks -19 o Ongoing efforts to optimize raw mater
Slide 10: EMEA restructuring progressing, traction from savings
EMEA restructuring progressing, traction B from savings • Bochum closure accelerated from end of 2016 to 2015 Bochum • Volume transfer and higher utilization in Tornio and Avesta closure • Preparations running well with continuous ramp-up of Tornio and Avesta • Benrath to be closed. Reduction of ove
Slide 11: Good progress in synergy and cost savings
C Good progress in synergy and cost savings Cumulative Synergies and Performance and Total savings expected incl. P150 savings future expectation EMEA restructuring EURm P150 Synergies EURm >470 • Target exceeded by end of Q2/14 driven by EMEA, Specialty and >440 Americas as well as savings in raw >
Slide 12: Focus on improving cash flow
D Focus on improving cash flow Cash flow from working capital change 1,2) Group CAPEX (accounting) EUR million EUR million 48 763 2013-2014 target: EUR 300m Reduced from EUR -248 <200 million 271 151 183 <160 15 33 166 -15 -71 2012 2013 I/14 II/14 2014F I/13 II/13 III/13 IV/13 I/14 II/14 Total reduc
Slide 13: Shifting gears for customer focus and efficiency
Shifting gears for customer focus and efficiency • Five business areas with profit responsibility from Sept 1 o Coil EME A headed by Olli-Matti Saksi (July 1) o Coil Americas headed by Mick Wallis o APAC headed by Austin Lu o Quarto Plate becomes a business area headed by Kari Parvento o Long Produc
Slide 14: Contents
Contents 1. Second quarter 2014 overview and strategic priorities 2. Financial performance 3. Outlook and guidance July 24, 2014 14
Slide 15: Q2 key financials overview
Q2 key financials overview Group key figures • Stainless steel deliveries on constant level at 675 kt vs. 676 kt in Q1/14 EUR million II/14 I/14 II/13 Stainless steel deliveries, kt 675 676 640 • Q2 profitability driven by better product Sales 1,753 1,617 1,738 mix, EUR 20-30/tonne higher base price
Slide 16: Good progress in cost saving programs
Good progress in cost saving programs Cumulative savings 2014-2017 and related cash costs (EURm) EMEA restructuring Synergy savings • P150 target exceeded in Q2/14 P150 • EMEA, Specialty, Americas and >470 +65 >440 raw material procurement >380 100 >340 80 316 20 contributing 251 >170 >170 >170 • Co
Slide 17: Stainless EMEA
Stainless EMEA EMEA key figures • Stainless EMEA with further EBIT EUR million II/14 I/14 II/13 improvement due to cost streamlining Stainless steel deliveries, kt 370 392 402 • Severe storm in Germany impacted deliveries in Q2 Ferrochrome deliveries, kt 25 25 65 • Base prices up about 25 EUR/tonne
Slide 18: Stainless Americas
Stainless Americas Americas key figures • Deliveries up 5.9% EUR million II/14 I/14 II/13 • EBITDA (excl. NRI) break-even in Q2 Stainless steel deliveries, kt 143 135 116 • Both Mexinox and Calvert Sales 291 254 231 contributing EBITDA excl. NRI 1 -19 -70 • Base prices up about 40 USD/tonne EBIT exc
Slide 19: Stainless APAC
Stainless APAC APAC key figures • Turbulent market environment in Q2 EUR million II/14 I/14 II/13 • Increased hot band raw material Stainless steel deliveries, kt 58 48 29 prices for Outokumpu • Cold rolled prices up and then Sales 118 88 74 again down following alloy prices EBITDA excl. NRI 4 -2 3
Slide 20: Specialty Stainless
Specialty Stainless Specialty Stainless key figures • Project business and underlying EUR million II/14 I/14 II/13 demand continued at a relatively Stainless steel deliveries, kt 136 133 116 healthy level – slowdown in June due to start of holiday period Sales 442 400 420 • Some production issues in
Slide 21: Operating cash flow
Operating cash flow II/14 I/14 II/13 EUR million Net cash from operating activities -257 -14 -175 Net cash from investing activities -69 -42 -47 Free cash flow -327 -56 -222 Net cash from financing activities -396 341 258 Net change in cash and cash equivalents -722 286 36 • Operating CF affected by
Slide 22: P300: Continued NWC efficiency focus in 2014
P300: Continued NWC efficiency focus in 2014 Cash flow from working capital change 1,2) Inventory tonnes development 2) EUR million In 1,000 tonnes 48 2013-2014 target: EUR 300m 800 300 +14% -248 271 151 600 166 -15 -71 I/13 II/13 III/13 IV/13 I/14 II/14 Total Mar June Sep Dec Mar June reduction 201
Slide 23: Capital structure
Capital structure Net interest-bearing debt and gearing development Equity and equity ratio development EUR million % EUR million % 5,000 220 5,000 50 Gearing Net interest-bearing debt Equity-to-asset ratio Total equity 200 188% 4,000 180 4,000 116% 160 40 34% 33% 3,000 140 3,000 30% 120 92% 30 2,00
Slide 24: Contents
Contents 1. Second quarter 2014 overview and strategic priorities 2. Financial performance 3. Outlook and guidance July 24, 2014 24
Slide 25: Stainless steel market with smaller expected decline in Q3 than last year's Q3
Stainless steel market with smaller expected decline in Q3 than last year’s Q3 EMEA total stainless steel real demand1) Americas total stainless steel real demand1) 1.000 tonnes 1.000 tonnes 1,900 -96kt 950 -34kt 1,850 900 1,800 850 1,750 800 1,700 750 1,650 700 1,600 650 1,550 600 1,500 550 1,450 5
Slide 26: Business and financial outlook for Q3 2014
Business and financial outlook for Q3 2014 • Outokumpu estimates overall stainless steel demand and pricing environment to remain relatively healthy in the third quarter, with a seasonal slowdown in the European market o Somewhat lower delivery volumes o Some improvement in stainless steel base pric
Slide 27: Key targets updated
Key targets updated Continued progress in the Calvert operational ramp-up expected. We estimate EBITDA in BA Americas Stainless Americas to break even for the full year 2014 and delivery volumes of about 530 kt. Production target approx. 470 kt in 2014 (2013: 434 kt). Once fully ramped-up in 2015 Fe
Slide 28: Clear operational priorities for H2/2014
Clear operational priorities for H2/2014 1. Tight management of cash flow and net working capital 2. Improvement in customer satisfaction through enhanced delivery reliability 3. Finalization of the Calvert ramp-up 4. Implementation of the EMEA restructuring 5. Execution of the savings program Clear
Slide 29: Q&A
Q&A July 24, 2014 29
Slide 30: Appendix
Appendix July 24, 2014 30
Slide 31: Outokumpu balance sheet
Outokumpu balance sheet Assets (MEUR) 30.06.14 31.03.14 Non-current assets Intangible assets 565 567 Property, plant and equipment 3,105 3,156 Investments in associated companies 71 67 and joint ventures Other financial assets 25 20 Deferred tax assets 36 23 Trade and other receivables 18 22 Total n
Slide 32: Outokumpu balance sheet
Outokumpu balance sheet Equity and liabilities (MEUR) 30.06.14 31.03.14 Total equity 2,236 2,283 Non-current liabilities Repayment of long-term debt of EUR Long-term debt 1,627 2,210 402 million Other financial liabilities 16 13 Reclassification of some long-term debt to current debt Deferred ta
Slide 33: Debt maturity profile
Debt maturity profile Debt maturity profile, June 30, 2014 EUR million • In Q2/14: proceeds from the rights issue were partly 2,500 used to repay facility loans 2,000 • During the next 12 months debt of EUR 607 million is maturing, incl. repayment of maturing bond EUR 1,500 250 million 1,000 Securit
Slide 34: Outokumpu Strategy Roadmap – 2013 good progress and delivery on restructuring
Outokumpu Strategy Roadmap – 2013 good progress and delivery on restructuring Restructuring + Profitable Growth = Perfor- mance Deliver on New Transform Ensure Ramp-up Expand Leverage Develop Full integration efficiency company financial Specialty and new synergies US presence Ferrochrome APAC
Slide 35: Cost analysis 2013
Cost analysis 2013 Operative cost components 1) 2) Comments • Raw materials account for around 60% 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 supply,
Slide 36: Headcount reductions according to plan
Headcount reductions according to plan Total headcount reduction 1) Personnel per BA at the end of Q2 2014 2) 375 -766 (3%) -196 2,620 14,000 (21%) EMEA 12,000 Americas 612 6,645 10,000 (5%) (54%) APAC 8,000 2,113 Specialty Stainless 6,000 (17%) Other operations 4,000 2012 2013 I/14 II/14 2017e • In
Slide 37: Outokumpu global production - healthy balance between melting and finished with planned closures
Outokumpu global production - healthy balance between melting and finished with planned closures (planned state end of 2015) Million tonnes 5 4 1.4 Capacity Reduction Balanced ! 3 0.4 0.4 Plate & Long 2 3.3 Hot Band White 1 2.3 Cold Rolled 0 Melting Finished products Melting capacity shown after Kre
Slide 38: Balanced stainless production structure
Balanced stainless production structure After the new EMEA industrial plan (planned state end of 2015) thousand tonnes million t EMEA Specialty Stainless Americas APAC Total Finland Germany 1) Sweden 1) UK & USA Calvert San Luis Potosí Shanghai Melting 2) 1,450 450 450 900 3.3 Hot Rolling 1,450 900
Slide 39: 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 2013 2) Nordic Total Europe: 5,450 430 Eskilstuna Outokumpu core market UK Outokumpu non-core 250 market EMEA sales split by customer segment 1) Sheffield Germany 1460 Dabrowa Gornica Wilnsdorf 4
Slide 40: 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 Other Consumer Distributors 5% goods & 45% Medical Heavy 21% industries 24% Automotive 18% Metal
Slide 41: Broadest product portfolio across stainless steel
Broadest product portfolio across stainless steel Deliveries by product grade 1) • New Outokumpu has a broad product portfolio to serve all customers 2) Other • Significantly higher share of ferritic grades Duplex 3% 3% leads into reduced sensitivity to Nickel price volatility Ferritic • Outokumpu p
Slide 42: 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 2014 - 2017 Growth Prospects 200 180 Fundamental APAC 160 140 120 +5% growth 100 2010 2011 2012 2013 2014 2015 2016 2017 140 Recovery from Americas 120 +3% economic crisis and co
Slide 43: … leads to growing stainless consumption mainly in APAC
… leads to growing stainless consumption mainly in APAC, and to some extent in Americas and EMEA [Total stainless steel real demand in million tonnes] Ø Growth p.a. 43.9 2014-2017 41.9 39.6 37.3 34.8 32.6 29.8 28.0 32.3 30.5 +7% 28.5 26.6 24.5 22.5 20.0 APAC 18.5 3.7 3.8 3.8 +2% 3.1 3.3 3.4 3.5 Amer
Slide 44: Nickel price development
Nickel price development 60,000 350 [USD/t] [Ktonnes] 50,000 300 250 40,000 200 30,000 150 20,000 100 10,000 50 0 0 2013 2014 2005 2005 2007 2008 2009 2010 2011 2012 LME stocks (rhs) LME cash price (lhs) o Nickel price increased by 35% this year, but still low at historical standards. o Market adapt
Slide 45: Raw materials - price development
Raw materials - price development 22,000 Nickel1 1.4 Ferrochrome2 21 Jul 14 Q2/14 21,000 18.725 USD/t European contract price 1.22 USD/lb U U 1.3 Q3/14 price 20,000 European spot price S S not yet 19,000 1.2 announced D D 18,000 / / 1.1 t 17,000 l o 16,000 b 1 18 Jul 14 n 15,000 0.86 USD/lb 0.9 14,0
Slide 46: Change in the definition of underlying profitability from Q1/14 onwards
Change in the definition of underlying profitability from Q1/14 onwards • Change in underlying definition Net following the change in Reported Non- Operating Metal Realized realizable EBIT/EBITDA profit recurring derivatives timing value Outokumpu’s metal hedging policy items in the beginning of 201
Slide 47: Good performance and successful ramp-up of the Ferrochrome business
Good performance and successful ramp-up of the Ferrochrome business Outokumpu ferrochrome production • Unique low cost position as Europe’s only 600 ferrochrome producer with access to the only 500 (1,000 tonnes) known chromite reserves in the EU – the Kemi 400 mine 1). 300 • The performance of the
Slide 48: 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 Simone Cujai Manager – Investor Relations Phone +49 203 488
Slide 49: outokumpu
outokumpu working towards a world that lasts forever