Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Merger or Acquisition (March 2012)
45 slides from Outokumpu Oyj's merger presentation, March 2012
Slide 1: Outokumpu–Inoxum business combination
Outokumpu–Inoxum business combination March 2012 www.outokumpu.com
Slide 2: Disclaimer
This presentation has been prepared by, and the information contained herein (unless otherwise indicated) has been provided by Outokumpu Oyj (the ―Company‖). By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limita
Slide 3: Agenda
Agenda 1 Outokumpu today: A leading stainless steel producer 3 Investment case highlights 3 4 Financial performance update Q4 2011 3 March 2012
Slide 4: Outokumpu is the most integrated stainless steel producer in Europe
Outokumpu is the most integrated stainless steel producer in Europe General Stainless – Finland Outokumpu highlights • Operations in more than 30 countries, approximately 8 000 employees • Key figures (€ million) 2010A 2011A • Deliveries (million t) 1.3 1.4 • Revenues 4 229 5 009 Specialty Stainless
Slide 5: Comprehensive strategy to achieve profitable growth
Comprehensive strategy to achieve profitable growth Inoxum transaction • Higher capacity utilization at Tornio to drive production cost improvement – expected with Production Inoxum transaction optimisation and profitability • Implemented and ongoing cost improvement programmes – workforce reducti
Slide 6: We have delivered significant improvements in 2011
We have delivered significant improvements in 2011 which will drive performance in 2012 and beyond Impact Delivered Management team • New management team • Focus on implementation • Functional efficiency: workforce optimisation • ~€ 30 million p.a. cost savings During 2012 Cost base reduction •
Slide 7: Agenda
Agenda 1 Outokumpu today: A leading stainless steel producer 3 Investment case highlights 3 4 Financial performance update Q4 2011 7 March 2012
Slide 8: Key Inoxum transaction highlights
Key Inoxum transaction highlights Outokumpu and Inoxum are going to combine under the operational leadership of Outokumpu Structure Headquartered in Espoo, Finland and listed on NASDAQ OMX Helsinki Led by Mika Seitovirta (Outokumpu CEO) Gross transaction value of € 2 869 million¹ for Inoxum
Slide 9: The transaction values Inoxum at €2,869 million on a firm value basis
The transaction values Inoxum at € 2 869 million on a firm value basis as of 1 March 2012 Consideration breakdown Payment of consideration by Outokumpu Cash payment to € 1 000 million Rights issue of € 1 000 million, expected to be completed in H1 2012 ThyssenKrupp Proceeds of rights issue will
Slide 10: The combination creates the world's largest stainless steel company
The combination of Outokumpu and Inoxum creates the world’s largest stainless steel company Annual cold rolling capacity – kt 3 445 2 490 2 225 2 063 1 710 1 510 1 350 1 260 955 801 Outokumpu Inoxum¹ Posco Acerinox Aperam Tisco Yusco Baosteel Outokumpu ATI + Inoxum¹ Source: CRU as of November 2011 ¹
Slide 11: The combination creates significant value for all stakeholders
The combination of Outokumpu and Inoxum creates significant value for all stakeholders Optimised • Highly integrated production base with best-in-class assets on three continents Optimisation global of in Europe, the Americas and Asia asset base production • Increased cost efficiency through higher
Slide 12: Substantial synergy potential
Outokumpu and Inoxum combination offers substantial synergy potential Total estimated synergy cash cost savings of € 225–250 million p.a. 2 Benefit from optimised capacity utilisation ~10% • Reduction in unit production costs through higher capacity utilisation at Tornio and Terni 4 • Optimisation o
Slide 13: Well balanced production footprint for high volume standard grades
Outokumpu Combined is going to have a state-of-the-art, well balanced production footprint for high volume standard grades… Well balanced global production footprint (annual capacity – kt) Europe Americas Asia San Luis Tornio Bochum Krefeld Dillenburg Terni Calvert Shanghai Potosí 2016 2013 Melting
Slide 14: Specialty products and high performance alloys platform
… and an optimised, highly capable specialty products and high performance alloys platform to serve global customers ―Made to order‖ specialty and high performance alloys production platform (annual production capacity – kt) Specialty High Performance Alloys Sweden USA UK Europe USA New Altena, Esse
Slide 15: Optimised capacity utilisation and product mix
Optimised capacity utilisation and product mix optimisation expected to yield significant profit potential SMR estimate: CR 304 unit production cost¹ comparison (pre closures) €/t2 2500 Significantly reduced unit production 2400 cost Production 2300 2 243 2200 Strong savings at existing producti
Slide 16: Optimising procurement, raw materials sourcing and administration costs
Optimising procurement operations, raw materials sourcing and general administration costs Expected reductions of procurement and raw material costs • Outokumpu Combined expects to benefit from bulk discounts and enhanced ability to negotiate favorable delivery and freight conditions from global sup
Slide 17: Global service centre, R&D and sales office presence
Outokumpu Combined will have a broad service centre, R&D and sales office presence globally – providing cost savings and strong customer benefits Broad global distribution, service centre network and R&D platform Highlights • Global distribution network optimised for broad end-market and customer ac
Slide 18: Diversified product range, end customer exposure and routes to market
The Combined Outokumpu benefits from a uniquely diversified product range, end customer exposure and routes to market which will result in stronger and less volatile financial performance Outokumpu Combined stainless steel deliveries by grade Outokumpu Combined stainless steel deliveries by end-mark
Slide 19: Unique range of growth opportunities driving value creation
Unique range of growth opportunities driving value creation Actions ongoing Profitability impact 1 Ferrochrome • Double ferrochrome production capacity from 265 kt to Estimated € 150 million EBIT 530 kt p.a. by 2015 impact by 2015¹ 2 Americas • Start ramp-up of Calvert, US, meltshop in end of 2012
Slide 20: Envisaged capital structure and liquidity post Inoxum closing
Overview of envisaged capital structure and liquidity of Outokumpu post Inoxum transaction closing Pro-forma net debt definition and PF gearing ratios Loan note—overview FYE Dec — (€ million) Outokumpu Outokumpu Combined² • Maturity: Ninth anniversary of the closing of the Inoxum Net debt 1 720¹ 2 4
Slide 21: Agenda
Agenda 1 Outokumpu today: A leading stainless steel producer 3 Investment case highlights 43 Financial performance update Q4 2011 21 March 2012
Slide 22: Outokumpu 2011 and Q4 2011 update
Outokumpu 2011 and Q4 2011 update Financial performance (€ million) 2011 2010 Q4 2011 Q3 2011 Q4 2010 Revenue 5 009 4 229 1 125 1 231 1 162 Adjusted EBITDA¹ 169 146 24 42 -4 % margin 3.4% 3.5% 2.1% 3.4% n/m Net interest bearing debt 1 720 1 837 1 720 1 730 1 837 Cash flow² 83 -658 37 215 -30 • Sales
Slide 23: Inoxum 2011 and calendar Q4 2011 update
Inoxum 2011 and calendar Q4 2011 update Financial performance pro forma December year end (€ million) 2011 Q4 2011 Revenue 6 571 1 438 Adjusted EBITDA¹ 81 -57 % margin 1.2% n/m CF from operating activities -2 -216 CF from investing activities -293 -84 • Full year sales grew to € 6 571 million • Adju
Slide 24: Summary
Summary • Transaction to create a new global leader in stainless steel • Optimisation of production network with high utilisation rates and efficiency • Balanced product offering and customer base • Significant growth opportunities for Outokumpu • Strengthened financial profile A new global leader i
Slide 25: Appendix
APPENDIX 25 March 2012
Slide 26: Tornio Works is the most integrated stainless steel mill in the world
Outokumpu’s Tornio Works is the most integrated stainless steel mill in the world with a highly competitive cost position… Integrated production route at Europe’s largest and most efficient stainless steel plant (annual capacity million tonnes) Meltshop Hot rolling mill Cold rolling mills Integrated
Slide 27: Specialty stainless steel platform
… complemented by a well-positioned specialty stainless steel platform ―Produced to order‖ production flow (annual production capacity – kt) Highlights Sweden USA UK • Production set-up is optimised to Avesta Kloster Nyby Degerfors New Castle Richburg Wildwood Sheffield serve end-customer requiremen
Slide 28: Successful implementation of cost saving programmes
Outokumpu’s successful implementation of cost saving programmes Implementation of operational efficiency improvements Disposal of non-core operations in 2011 Functional efficiency programme Disposal of Tibnor stake in Q2 • Implemented cost cutting in sales, supply chain and • Sold 15% stake for € 44
Slide 29: Broad product offering focused on austenitic grades
Outokumpu has a broad product offering with a focus on austenitic stainless steel grades and specialty products Broad range of products across its locations Deliveries split by grade Ferritics Other Long products 2% 5% Stainless steel Hot rolled Hot rolled Cold rolled Precision Semi- Duplex products
Slide 30: Product platform growth prospects from special stainless grades
Outokumpu product platform has strong growth prospects from tailored solutions of special stainless grades Speciality forecasted to be the highest growth area within Select applications of specialty stainless steel products stainless steel Duplex quarto plate Duplex tube and plate Forecasted global
Slide 31: Leader in sustainability
Leader in sustainability • Recycled content of our steel is 90% against the industry average of 60% • Dow Jones Sustainability Index: received the Metals Sector’s highest scores in the environmental dimension by achieving the highest possible scores in connection with the sustainability criteria (Cl
Slide 32: Inoxum – a global leader in stainless steel
Inoxum – a global leader in stainless steel… Nirosta Cold Rolling — Germany Inoxum highlights • Operations in ~20 countries, over 11 000 employees • Key figures (€ million) 2010A¹ 2011A¹ • Total deliveries (million t) ~2.1 ~2.0 • Revenues 5 901 6 739 • Adj. EBITDA² 97 176 • A recognised leader in st
Slide 33: Well invested and integrated production base in Europe, US and Asia
… with a well invested and integrated production base in Europe, the US and a footprint in Asia Inoxum stainless steel production flow (annual production capacity – kt) Europe America Asia Krefeld Bochum Dillenburg Terni Calvert San Luis Potosí Shanghai Melting 600 800 1 700 9002 1754 HR 40011 11,40
Slide 34: Inoxum's High Performance Alloys business
Inoxum’s High Performance Alloys business has a well integrated European and US production platform to serve a global customer base High Performance Alloys production flow (kt)¹ Key value drivers Europe USA • Long-term trends for lightweight construction Altena, Essen, Siegen, Terni, Unna, Werdohl R
Slide 35: Inoxum product offering: ferritic grades and HPA
Inoxum has a broad product offering with a strong focus on ferritic grades and high performance alloys (“HPA”) Broad range of products across its locations Stainless deliveries split by grade Other ~35% Low/no ~1% Stainless steel Hot rolled Hot rolled Cold rolled Cold rolled Precision Forged Nickel
Slide 36: Complementary product offering in terms of grades
Outokumpu and Inoxum have highly complementary product offering in terms of grades – benefits to customers Outokumpu stainless deliveries split by grade Outokumpu Combined stainless deliveries by grade Other Ferritics Duplex Other 2% 5% ~3% ~1% Duplex 7% Ferritics² ~23% Austenitics Austenitics 86% ~
Slide 37: Complementary presence across industry sectors
Outokumpu Combined has a well established and complementary presence across industry sectors Outokumpu end-market split¹ Outokumpu Combined deliveries by end-market¹ Catering Architecture, & appliances building Architecture, Other Transport 14% & construction building ~10% ~5% Chemicals, 18% & const
Slide 38: Growth opportunities: doubling of ferrochrome production
1 Growth opportunities: Ongoing projected doubling of the ferrochrome production provides significant profit upside Competitive advantages of Kemi mine and Ferrochrome Highly cost competitive Ferrochrome production cost Works (USc/Ib)³ Annual ferrochrome production capacity expected to double to 5
Slide 39: Growth opportunities: Calvert integrated mill with Mexinox
2 Growth opportunities: Calvert integrated mill combined with existing Mexinox facility expected to create a state-of-the-art business platform… Production base in US and Mexico (end of 2012) Value proposition NAFTA Substantial Calvert investment programme of € 1.2 bln expected to be finalised by
Slide 40: Growth opportunities: profitable growth in NAFTA
2 … for profitable growth in NAFTA Fully integrated solution platform for NAFTA 72‖ speciality product introduction to NAFTA Time advantage: short delivery times from Calvert to US • 72‖-wide stainless steel customers creates competitive advantage coil for high-end applications, such as Lower in
Slide 41: Growth opportunities: Krefeld and High Performance Alloys
3 Growth opportunities: Significant profit growth potential in Krefeld and High Performance Alloys operations in Europe Significant upside in German stainless HPA end-market opportunity Strong continued investment (capex: ~€ 240 million) into Profitable investment programme (capex: € 93 million)
Slide 42: Growth opportunities: Degerfors quarto plate expansion
4 Growth opportunities: Expansion of Degerfors quarto plate capacity planned to increase offering in high-margin specialty products Specialty quarto plate expansion Expected Degerfors quarto plate production expansion (kt) • Outokumpu is a leading provider of quarto plate special Driven by € 104 mil
Slide 43: Growth opportunities: organic growth in Asia
5 Growth opportunities: Strong organic growth opportunities in Asia Value proposition Outokumpu Combined presence in Asia • Asia is the fastest growing region in terms of stainless steel consumption • Strong demand for quality-focused special grades SKS Cold • Outokumpu and Inoxum’s SKS are recognis
Slide 44: Outokumpu cash flow generation Q3 to Q4 2011
Outokumpu cash flow generation Q3 to Q4 2011 Gearing development (€ million) Comments Gearing • Cash flow turned significantly positive in 2011 80 83 • Reduction in working capital due to lower inventories and lower metal prices 1 730 44 1 720 95 12 • Gearing at 83 at the end of 2011 • Positive impa
Slide 45: www.outokumpu.com
www.outokumpu.com