Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Q3 2015 Earnings Presentation
42 slides from Outokumpu Oyj's earnings presentation, Nov 5, 2015
Slide 1: Interim report Q3 2015
Interim report Q3 2015 CFO and interim CEO Reinhard Florey November 5, 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 Reinhard Florey SVP – Investor Interim CEO, CFO Relations November 5, 2015 3
Slide 4: Contents
Contents 1. Q3/15 overview and financial performance 2. Outlook and guidance November 5, 2015 4
Slide 5: Q3 2015 in brief
EBIT, EUR million 20 8 Q3 2015 in brief 2 0 -20 -6 -3 -3 -9 -9 -28 -25 -40 -26 -45-48 • Difficult market: low nickel price, destocking, price pressure -60 • Underlying EBIT loss of EUR -67 million: a clear disappointment -80 -67 -74 2014 2015 • Coil EMEA fell behind the targets due to weak market an
Slide 6: Demand growth in 2015 expected to slow to ~2%
Demand growth in 2015 expected to slow to ~2% Longer-term demand outlook remains favorable AMERICAS EUROPE APAC +13% +8% +9% +7% +5% +4% +4% +4% +4% +5% +1% +1% +1% +2% +2% +2% -0% -0% 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% +4% +4% +5% +5% +4
Slide 7: Stainless steel base prices resilient in Europe but sharply down in the US
Stainless steel base prices resilient 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 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Source: CRU October 2015 1) 2mm sheet cold rolled 304
Slide 8: Imports to Europe increased and remained high in the US
Imports to Europe increased and remained high in the US Third-country imports into Europe, total market 3.7 Mtonnes in 20141 Third-country imports into the US, total market 1.6 Mtonnes in 20141 120 CR, kt 50 CR, kt 45 100 40 Ø 31 kt Ø 70 kt 80 35 Ø 25 kt Ø 45 kt 30 60 25 20 40 15 20 10 5 0 0 2007 20
Slide 9: Q3 key financials overview
Q3 key financials overview • Stainless steel deliveries down 7% Group key figures o EMEA -10% EUR million III/15 II/15 III/14 2014 o Quarto Plate -23% Stainless steel deliveries, kt 570 616 634 2,554 Sales 1,487 1,694 1,799 6,844 o Coil Americas +21% EBITDA 3 55 67 104 • Sales declined 12% due to lo
Slide 10: Good progress in cost saving programs
Good progress in cost saving programs Cumulative savings 2013-2017 and related cash costs, MEUR • EUR 21 million savings in Q3, with EUR 10 million from the EMEA EMEA restructuring Synergy savings P250 restructuring following Bochum 550 melt shop closure 530 454 470 100 420 433 80 10 20 385 • Total
Slide 11: Targeting cumulative EUR 400 million cash release in 2015 from net working capital
Targeting cumulative EUR 400 million cash release in 2015 from net working capital Cash flow from working capital change 1) Inventory days development 2) 600 120 111 505 102 106 100 500 86 398 400 90 400 351 351 300 60 200 30 100 0 0 2013 2014 Q2/15 Q3/15 2015 2013 2014 Q2/15 Q3/15 2015 target targe
Slide 12: Coil EMEA profitability hit by low volumes and weak market
Coil EMEA profitability hit by low volumes and weak market Coil EMEA stainless deliveries, kt • Seasonally slow Q3: continued destocking, low nickel affecting order intake 395 411 415 369 374 • Planned maintenance breaks successfully completed • EUR 20/t base price increase in deliveries, vs. flat a
Slide 13: Coil Americas improved while suffering from difficult markets and declining prices
Coil Americas improved while suffering from difficult markets and declining prices Coil Americas stainless deliveries, kt • Distributor customers continued in destocking mode: low nickel price 137 134 126 126 111 • Decisive measures to improve Coil Americas’ volumes and profitability ongoing • More
Slide 14: Business areas APAC, Quarto Plate & Long Products
Business areas APAC, Quarto Plate & Long Products APAC Quarto Plate Long Products Underlying EBIT Underlying EBIT Underlying EBIT 0 12 0 -2 -2 -4 6 -4 -6 4 3 3 -9 -11 -16 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 • Demand and prices weak • Markets cont
Slide 15: Strong focus on managing the cash flows
Strong focus on managing the cash flows • Strong EUR 67 million positive EUR million III/15 II/15 III/14 2014 operating cash flow in Q3 o Change in working capital EUR 91 million (II/2015: EUR -67 million) Net cash from operating 67 -41 23 -126 o EUR -16 million of cash outflow activities related to
Slide 16: Net debt reduced and gearing stable
Net debt reduced and gearing stable. Long-term net debt target of below EUR 1.5 billion Net debt and gearing, EUR million and % Debt maturity profile, EUR million 4,000 188 200 2,000 3,000 150 1,500 93 96 97 91 2,000 100 1,000 3,556 1,000 1,974 2,034 2,116 2,012 50 500 1,500 0 0 0 2013 2014 Q1/15 Q2
Slide 17: Recent divestments strengthen financial position
Recent divestments strengthen financial position Fischer Mexicana SKS (Shanghai Krupp Stainless Co., Ltd) • Divestment of 50% stake in in Fischer Mexicana • Divestment of 55% of SKS shares to Lujiazui for USD 63 million International Trust Co., Ltd. • Fischer Mexicana is a joint venture between • Ou
Slide 18: Change in useful life assumption
Change in useful life assumption • Useful lives of its property, plant and equipment Reduction of annual reviewed depreciation charge, MEUR • Certain existing machinery and equipment have been and will be used longer than previously 2016 anticipated Coil EMEA ~35 • For heavy machinery and equipment,
Slide 19: Contents
Contents 1. Q3/15 overview and financial performance 2. Outlook and guidance November 5, 2015 19
Slide 20: Expectations for Q4 real demand flat
Expectations for Q4 real demand flat EMEA total stainless steel real demand1 Americas total stainless steel real demand1 1.000 tonnes 1.000 tonnes 2,000 0% 1,000 0% 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 1,500 500 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015f
Slide 21: Business and financial outlook for Q4 2015
Business and financial outlook for Q4 2015 Current subdued stainless steel Outokumpu estimates market situation to continue for the • Q4 delivery volumes to be at a similar rest of 2015 level as in Q3 End-user demand outside the Oil & • The Group’s underlying EBIT for the Q4 Gas sector expected to r
Slide 22: Clear business priorities
Clear business priorities 1. Coil Americas turnaround 2. Further progress in Coil EMEA 3. Additional commercial and operational improvements in all business areas 4. NWC management and cash flows 5. Closing of M&A transactions and debt reduction November 5, 2015 22
Slide 23: Q&A
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Slide 24: 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 25: Appendix
Appendix November 5, 2015 25
Slide 26: Coil EMEA
Coil EMEA EMEA key figures • Seasonally slow Q3: continued destocking, low nickel affecting order intake EUR million III/15 II/15 III/14 2014 Stainless steel deliveries, kt 374 415 395 1,666 • Planned maintenance breaks successfully Ferrochrome external 29 23 33 133 completed deliveries, kt Sales 97
Slide 27: Coil Americas
Coil Americas Americas key figures • Distributor customers continued in destocking mode: low nickel price EUR million III/15 II/15 III/14 2014 Stainless steel deliveries, kt 134 111 137 541 • Decisive measures to improve Coil Americas’ volumes and profitability Sales 276 255 316 1,158 ongoing EBIT e
Slide 28: APAC
APAC APAC key figures • Stainless steel demand has slowed down in the APAC region EUR million III/15 II/15 III/14 2014 Stainless steel deliveries, kt 51 61 60 220 • Stainless steel prices further down in Sales 97 129 124 444 China; low nickel price, overcapacity EBIT excl. NRI -8 -5 -2 -6 • Deliveri
Slide 29: Quarto Plate
Quarto Plate Quarto Plate key figures • Operating environment extremely difficult in Q3 EUR million III/15 II/15 III/14 2014 Stainless steel deliveries, kt 24 31 24 98 • Investment climate has continued Sales 104 133 113 450 subdued and customers have been EBIT excl. NRI -14 -2 -5 -26 hesitant to pl
Slide 30: Long Products
Long Products Long Products key figures • Overall demand for long products continued to be weak EUR million III/15 II/15 III/14 2014 Stainless steel deliveries, kt 58 62 60 248 • Low nickel price Sales 142 159 171 651 • Subdued project activity EBIT excl. NRI 1 5 8 33 Underlying EBIT 3 4 6 32 • Impo
Slide 31: Outokumpu balance sheet
Outokumpu balance sheet Assets (MEUR) 30.9.15 30.6.15 Non-current assets Intangible assets 567 572 Property, plant and equipment 3,061 3,138 Investments in associated companies 82 81 and joint ventures Other financial assets 38 35 Deferred tax assets 61 62 Defined benefit plan assets 38 40 Trade and
Slide 32: Outokumpu balance sheet
Outokumpu balance sheet Equity and liabilities (MEUR) 30.9.15 30.6.15 Total equity 2,085 2,195 Non-current liabilities Non-current debt 1,494 1,576 Other financial liabilities 11 12 Deferred tax liabilities 38 39 Defined benefit and other long-term 335 332 employee benefit obligations Provisions 110
Slide 33: Cost analysis Q3 2015
Cost analysis Q3 2015 Operative cost components 1) Comments • Raw materials account for around 60% 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 34: Headcount reductions
Headcount reductions Total headcount reduction 1) Personnel per BA at the end of Q3/15 13,327 301 766 (3%) 782 660 436 579 (7%) (6%) EMEA (5%) Americas 301 APAC 159 105 2,146 7,092 Quarto Plate (18%) 1,710 (62%) Long Products Other operations 9,850 2012 2013 2014 I/15 II/15 III/15 2015- 2017e 2016e
Slide 35: 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 36: 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 37: Balanced customer base across industries
Balanced customer base across industries Sales by customer segment 1) Sales by end-customer segment 1) Distributors End-customers Consumer goods Other & Medical 17% 17% 45% 18% 55% 24% Automotive Heavy 5% 4% Architecture, industries 15% Building & Construction Metal Chemical, processing Petrochemica
Slide 38: Broadest product portfolio across stainless steel
Broadest product portfolio across stainless steel Deliveries by product grade 1) • Outokumpu has a broad product portfolio to Other serve all customers 3% Duplex • Significantly higher share of ferritic grades (3%) 4% leads into reduced sensitivity to nickel price (7%) volatility2) Austenitic (CrNi)
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 2015 2) Nordic 423 Total Europe: 5.871 Eskilstuna Coil EMEA sales by customer segment 1) Outokumpu core market UK Outokumpu non-core Distributors market 267 43% 35 % 40% Sheffield Germany 1.602 D
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 • The nickel prices fell close to six-year lows of ~$9,500/t in August on soft
Slide 41: Raw materials - price development
Raw materials - price development Nickel1 1.4 Ferrochrome2 21,000 European contract price U U 1.3 19,000 European spot price Q4/15 S 9 Oct 15 S 1.2 10,710 USD/t 1.04 USD/lb D 17,000 D 1.1 / / 15,000 1 t l o 13,000 b 0.9 n 9 Oct 15 11,000 0.8 0.73 USD/lb 9,000 0.7 Jan'14 Feb Mar Apr May Jun Jul Aug S
Slide 42: November 5,
November 5, 42 2015