Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Investor Day (March 2020)
70 slides from Outokumpu Oyj's investor day presentation, Mar 18, 2020
Slide 1: Outokumpu Capital Markets Day 2020
Outokumpu Capital Markets Day 2020 March 18, 2020
Slide 2: Program, UK time
Program, UK time 12:30 Opening remarks Reeta Kaukiainen, EVP, Communications and Investor Relations 12:35 Shaping the future for stainless steel Roeland Baan, President &CEO Continuing to strengthen our competitiveness Maciej Gwozdz, Business Area Europe 13:35 Break (10 minutes) 13:45 Well positione
Slide 3: Presenters
Presenters Roeland Baan Maciej Gwozdz CEO President Business area Europe Pia Aaltonen- Olli-Matti Saksi Forsell President CFO Business area Americas 3 | March 18, 2020
Slide 4: 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 5: Shaping the future for stainless steel
Shaping the future for stainless steel Capital Markets Day 2020 March 18, 2020 Roeland Baan President & CEO
Slide 6: Vision 2020
Customers Vision 2020 Shareholders Employees Best value creator Time bound: in stainless steel sense of urgency by 2020 through customer orientation and efficiency Back to basics 6 | March 18, 2020
Slide 7: Our success depends on our employees
Our success depends on our employees Targets for 2020 • Total recordable injury In 2019, our TRIFR was 3.2 frequency rate (TRIFR) from 15.0 to <5.0 • Organizational Health 2 nd Index* (OHI) from the 4th In 2019, our OHI was securely on the quartile to the 1st quartile quartile * McKinsey 7 | March 1
Slide 8: Cultural shift
Cultural shift Commercial excellence from silos into one Americas’ financial and – enhanced mix and operational step change company with margins uniform processes and ways of working Improved cost Digitalization – competitiveness and successful deployment productivity of Chorus 8 | March 18, 2020
Slide 9: Our customer satisfaction is by far the highest in the industry
Our customer satisfaction is by far the highest in the industry We will be Share of absolutely or highly 72% the best value creator satisfied customers to our customers in 2019* by 2020 +14 We are ahead of our competitors by %-points * Customer satisfaction survey by Taloustutkimus in 2019 9 | March
Slide 10: Financial development in 2016–2019
Financial development in 2016–2019 Net debt Adjusted Gearing below EBITDA improved by €1.1 €1.7 35% billion* billion * Excluding IFRS16 adjustment, implementation impact on January 1, 2019 10 | March 18, 2020
Slide 11: Our market environment has changed
Adjusted EBITDA Our market environment has changed siginificantly during the last five years... 2015 2016 2017 2018 2019 11 | March 18, 2020
Slide 12: ...and the impact was especially negative in 2019
Adjusted EBITDA Adjusted EBITDA ...and the with vision 2020 market assumptions impact was especially negative in 2019 2015 2016 2017 2018 2019 12 | March 18, 2020
Slide 13: We faced significant market headwind in 2019
We faced significant market headwind in 2019 Market headwind €400M Market tailwind €100M Ferrochrome price Europe base price Lower Lower input costs EUR/USD FX rate $0.21 €80 55% 45% /lb lower /tonne lower Stainless deliveries Timing & hedging losses 10% 4 lower times higher 13 | March 18, 2020
Slide 14: Stainless steel market realities…
Historically high import Stainless steel penetration in Europe market realities… Unprecedented price pressure in Europe Weak demand as a result of challenging market environment 14 | March 18, 2020
Slide 15: … have changed the market dynamics
… have changed the market dynamics Unfair trade practices Trade wars have led and growing competition to market disruption from Asian producers New pricing mechanisms: Shift towards NPI leads from alloy surcharge to a change in scrap pricing to transaction pricing 15 | March 18, 2020
Slide 16: Scrap is a competitive advantage and driver for sustainability
Scrap is a competitive advantage and driver for sustainability Global Abundance Scrap and Scrap and competitiveness of scrap the importance correlation to vs. other forms of for carbon neutrality LME nickel nickel Scrap is the most Both Europe and Realization of Market moving competitive traded Amer
Slide 17: Market balance must be restored by addressing unfair market practices
Market balance must be restored by addressing unfair market practices Stronger Trade defence EU’s WTO Carbon Border safeguards tools complaint Adjustment needed in Europe anti-dumping & against Indonesia’s to prevent carbon also beyond current anti-subsidy ore export ban and leakage period investiga
Slide 18: The market for stainless steel keeps on growing…
The market for stainless steel keeps on growing… • Rising middle-class and urbanization • Infrastructure investments • Industrial production growth • Climate change drives the need for sustainable solutions 18 | March 18, 2020
Slide 19: …with an increasing demand for sustainable stainless steel
…with an increasing demand for sustainable stainless steel Global stainless steel real demand in 2019 Expected stainless steel real demand in 2025 Heavy Other industries Other +35% Heavy industries +17% Architecture, Building & Architecture, Construction Building & +24% 54.2 43.8 Construction +39% m
Slide 20: Sustainability is at heart of our strategy
Sustainability is at heart of our strategy Operational VISION 2020: Safety excellence To be the best value creator in stainless steel by 2020 Commercial through customer orientation Sustainability excellence and efficiency. Americas Digital transformation High-performing organization 20 | March 18,
Slide 21: We are the leading producer of sustainable stainless steel globally…
We are the leading producer of sustainable stainless steel globally… Our stainless steel Our carbon footprint is helped customers reduce less than 30% their carbon footprint by of the global industry average 1 8,000,000 tonnes in 2019 1 1) Outokumpu average carbon footprint: 1.6 t/ton of crude steel
Slide 22: … and we are committed to reaching carbon neutrality by 2050
… and we are committed to reaching carbon neutrality by 2050 in-line with EU Green Deal targets 20% lower Carbon neutral by carbon footprint by 2023 2050 1 1) Our carbon neutrality commitment relates to scope 1+2. Regarding scope 3, we’re working closely with our RM suppliers to ensure that they ide
Slide 23: We have a firm foundation for future growth
We have a firm foundation for future growth Solid Wide Best operations Leadership in Digitally product customer and sustainability enabled range service financials 23 | March 18, 2020
Slide 24: Continuing to strengthen our competitiveness
Continuing to strengthen our competitiveness Capital Markets Day 2020 March 18, 2020 Maciej Gwozdz President – Business Area Europe
Slide 25: We have improved our safety record and delivered major cost savings
We have improved our safety record and delivered major cost savings Safety Organizational Raw material Production health index to cost savings cost savings** >50% reduction on incidents* 2nd >€60 >€130 since 2015 quartile million in 2019 million since 2015 * Lost time injury frequency rate ** Fixed
Slide 26: 2019 was a tough year for us...
2019 was a tough year for us... Market headwind 404 Adjusted EBITDA 295 248 203 216 2015 2016 2017 2018 2019 Note: Market headwind based on management estimates 26 | March 18, 2020
Slide 27: …due to weak demand and high imports
…due to weak demand and high imports Headwinds 6% +30% €80 €300 /tonne lower import decrease in deliveries penetration base prices Tailwinds million headwind in 2019 Richer product Improved raw material 25% lower mix efficiency ferrosilicon price 27 | March 18, 2020
Slide 28: Our stainless steel deliveries were exceptionally low due to high import pressure from Asia
Our stainless steel deliveries were exceptionally low due to high import pressure from Asia 30% 25% 30% 28% 30% 1,600 Third-country cold rolled imports* into Europe, 20% 1,000 tonnes 1,400 1,625 1,582 Stainless steel deliveries, 1,547 1,459 10% 1,000 tonnes 1,200 0% 2016 2017 2018 2019 * Cold-rolled
Slide 29: We mitigate market headwinds through better operational efficiency
We mitigate market headwinds through better operational efficiency 4.3% Higher share of Efficient working capital productivity Pro grades management improvement 29 | March 18, 2020
Slide 30: European market is expected to grow
European market is expected to grow Europe flat product demand by segment, million tonnes Consumer goods & medical +12% ABC & infrastructure +27% 12% Chemical, petrochemical & energy +6% total demand growth by Automotive & heavy transport +4% 2024 Industrial & heavy industries +6% 2019 2024 Others +
Slide 31: Our efficiency gains come from four key areas
Our efficiency gains come from four key areas Raw material Continuous General optimization productivity procurement Digitalization and scrap improvements savings usage 31 | March 18, 2020
Slide 32: Significant 4.3% productivity improvement in 2019 – more to come in 2020
Significant 4.3% productivity improvement in 2019 – more to come in 2020 Benefit outlook for 2020, EUR million • Raw material excellence • Reduction of net working capital • Procurement initiatives • Continuous debottlenecking of key equipment • Moving towards a single operating system • Reliability
Slide 33: Restructuring in Germany
Restructuring • Target to increase our long-term competitiveness in Germany • Affects approx. 370 jobs • EUR 25 million annual savings target as of 2021 33 | March 18, 2020
Slide 34: Own ferrochrome production is an important strategic asset for us
Own ferrochrome production is an important strategic asset for us Positive outlook for Deep mine project 2020 despite low secures our ore CO2 ferrochrome pricing availability for the future footprint of our ferrochrome is only 42% Ferrochrome market Global capacity cuts of the industry expected to b
Slide 35: We have initiatives in place to reduce our carbon footprint
We have • Increased metal recovery from production side streams initiatives in • Higher scrap usage to lower our place to reduce CO2 emissions • Co-operation with EU and industry our carbon organizations to lower carbon footprint footprint 35 | March 18, 2020
Slide 36: We have increased our recycled content
We have increased our recycled content 2019 scrap ratio development, % (Europe 304/316) In 2020 additional savings from coke and scrap improvements 2018 2019 36 | March 18, 2020
Slide 37: Best customer experience compared to peers
Best customer experience compared to peers Leading 72% Strong R&D with Best expertise in customer products stainless customers satisfaction solutions 37 | March 18, 2020
Slide 38: Unlocking customer value and efficiency through digitalization
Unlocking customer value and efficiency through digitalization Digital Next generation ERP manufacturing sales renewal • Unified data platform • Digital lead • Unified tools and • Higher throughput and generation processes lower costs • eCommerce for easy • First roll-out in • 100,000 tonne access G
Slide 39: Tornio 2020 – global #1 digital stainless steel mill
Tornio 2020 – global #1 digital stainless steel mill Flow Automated, data-driven operations 100,000 tonnes capacity increase Availability Predictive maintenance 2 weeks’ Digital coil data with full traceability lead time Quality Predictive quality management Over €10 million Industry leading ways of
Slide 40: The share of premium pro and supra grades is rising…
The share of premium pro and supra grades is rising… 33% 2.5x higher margins of total sales in 2019 compared to commodities Scrubbers Forta H-series 40 | March 18, 2020
Slide 41: …but commodities are crucial to support future growth
…but commodities are crucial to support future growth Premium Commodity • Technical expertise • Cost competitiveness • Products for extreme • Leverage of local environments footprint • Close R&D collaboration • Superior quality and with customers delivery performance 41 | March 18, 2020
Slide 42: Continuing to strengthen our competitiveness
Continuing to strengthen our competitiveness Enabling Efficient Productivity our customers’ working capital improvements success management 42 | March 18, 2020
Slide 43: Break 10 minutes
Break 10 minutes 43 | March 18, 2020
Slide 44: Well positioned towards profitable growth
Well positioned towards profitable growth Capital Markets Day 2020 March 18, 2020 Olli-Matti Saksi President – Business Area Americas
Slide 45: Key deliverables in 2019
Key deliverables in 2019 Higher productivity through Foundation for commercial reliable and efficient operations success established Improved underlying financial Enhanced raw material cost performance and efficiency 45 | March 18, 2020
Slide 46: We have made solid progress during the last four years
We have made solid progress during the last four years Safety Organizational Adj. EBITDA Production performance health index in improvement cost savings** >47% 2nd €90 >€75 less incidents* quartile million million * Lost time injury frequency rate ** Fixed and variable cost savings 46 | March 18, 20
Slide 47: Our underlying performance has improved...
Our underlying performance has improved... 21 -5 -27 -27 Adjusted EBITDA Underlying EBITDA -120 2015 2016 2017 2018 2019 47 | March 18, 2020
Slide 48: …but 2019 was still challenging
…but 2019 was still challenging Headwinds 21% 9% Disruption of ~€55 Mexican lower decrease in deliveries to deliveries market demand1 USA Tailwinds million headwind in 2019 Lower scrap Article 232 costs Lower imports 1) Source: AISI StatsCan, Cancero (January 2020) 48 | March 18, 2020
Slide 49: We are mitigating market headwinds
We are mitigating market headwinds 4% Improved Improved Diligent working productivity raw material delivery mix capital improvement efficiency management in 2019 49 | March 18, 2020
Slide 50: Strong US economy provides basis for further growth
Strong US +2.3% +1.8% 2020 economy GDP growth in increase in real Strong start to provides 2019 personal consumption in the new year basis for Q4/2019 further growth 50 | March 18, 2020
Slide 51: USMCA rules of origin are expected to boost growth
USMCA* rules of origin are expected to boost growth NAFTA flat product demand by segment, million tonnes Consumer Goods & Medicals +2% Automotive & Heavy Transport +2% 7% total demand Chemical, Petrochemical and +11% growth by Energy 2024 ABC and Infrastructure +23% Industrial & Heavy Industry +8% 2
Slide 52: Our success is built on…
Our success is built on… Strong commercial New logistics set up platform and lower costs Richer customer Improved raw and product mix material efficiency 52 | March 18, 2020
Slide 53: New commercial leadership is in place to drive sales
New commercial leadership is in place to drive sales Enhance our Improved Introduce customer and customer new products product mix experience 53 | March 18, 2020
Slide 54: New distribution strategy increases efficiency and flexibility
New distribution strategy increases efficiency and flexibility 14% lower New distribution central transportation costs in 2019 Calvert 54 | March 18, 2020
Slide 55: Ferritic capabilities in Calvert strengthen our position in the US ferritic market
Ferritic capabilities in Calvert strengthen our position in the US ferritic market €40M Q4/2020 20% investment on production of our future time and under ramp-up offering budget in the US 55 | March 18, 2020
Slide 56: Sustainably higher scrap ratio improves our cost position
Sustainably higher scrap ratio improves our cost position Efficient Scrap ratio in procurement Calvert improved by Stable domestic +11 supply %-points in 2019 56 | March 18, 2020
Slide 57: We are well positioned for profitable growth
We are well positioned for profitable growth Balanced Enhanced market position Tight focus on capabilities and through cash and cost new products commercial strategy 57 | March 18, 2020
Slide 58: Focus on cash and cost to strengthen our balance sheet
Focus on cash and cost to strengthen our balance sheet Capital Markets Day 2020 March 18, 2020 Pia Aaltonen-Forsell CFO
Slide 59: Our financials reflect the continuous efforts during the past four years
Our financials reflect the continuous efforts during the past four years Net debt Adjusted Operating below EBITDA cash flow €1.1 €1.7 €1.3 billion* billion billion * Excluding IFRS16 adjustment, implementation impact on January 1, 2019 59 | March 18, 2020
Slide 60: Harsh market conditions and low deliveries impacted profitability in 2019
Harsh market conditions and low deliveries impacted profitability in 2019 Adjusted EBITDA, EUR million Europe Americas Long Products Ferrochrome 21 25 404 -5 16 217 210 295 248 -27 -27 216 -1 -7 80 96 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 60 | March 18, 2020
Slide 61: Net of timing & hedging losses also contributed to a lower result in 2019
Net of timing & hedging losses also contributed to a lower result in 2019 Underlying position Exposure Hedging Metal hedging Committed* sales Short 100% Committed** purchases Long 100% Net realizable value Excess stock Long 100% NRV, accounting principle Base stock Long Balance between managing earn
Slide 62: SG&A costs are down by ~30% as a result of tight cost control
SG&A costs are down by ~30% as a result of tight cost control SG&A costs, EUR million €100+ million reduction in SG&A costs since 2015 400 4% 331 Productivity 307 292 275 improvement in 2019 2015 2016 2017 2018 2019 62 | March 18, 2020
Slide 63: We continue to strengthen our balance sheet and reduce net debt
We continue to strengthen our balance sheet and reduce net debt Net debt/adjusted EBITDA Strong focus on cash generation Efficient net working capital management Divestment of <1.0 9.8 4.0 1.7 2.6 4.4 non-core assets 2015 2016 2017 2018 2019 Target 63 | March 18, 2020
Slide 64: Our gearing has decreased by 35% during the past four years and liquidity is strong
Our gearing has decreased by 35% during the past four years and liquidity is on a strong level Net debt, EUR million 1,800 IFRS16 impact* 80% 69% EUR 131 million Total 70% 1,600 liquidity reserves €1.0 51% 60% 1,400 45% 45% 40% 50% 1,200 40% billion in 2019 30% 1,000 20% 800 Net debt 10% 1,610 1,242
Slide 65: Efficient working capital management is crucial for net debt reduction
Efficient working capital management is crucial for net debt reduction €218 Fluctuations mainly due to • Nickel prices • Ferrochrome prices million released from net working • Seasonality capital in 2019 Inventory value EUR 1,424 million in €100+ end of 2019. million to be released in 2020 65 | Marc
Slide 66: Capital expenditure is driven by strategic investments
Capital expenditure is driven by strategic investments Capex cash flow, EUR million Total capex 240 €220 200 million in 2020 160 Annual Kemi mine 120 Ferritics, maintenance 80 digitalization & other €100 €60 Kemi mine million 40 Annual million in 2020 maintenance 0 2019 2020 66 | March 18, 2020
Slide 67: We have reduced our interest expenses by 40%
We have reduced our interest expenses by 40% Interest expenses, EUR million 130 101 92 70 76 2015 2016 2017 2018 2019 67 | March 18, 2020
Slide 68: Improved maturity profile lowers our refinancing risk
Improved maturity profile lowers our refinancing risk Debt maturity profile*, EUR million 800 New EUR 400 million term 600 loan matures in 2023 400 200 Current debt Non-current debt Unutilized facilities 0 2020 2021 2022 2023 2024 2025+ * December 31, 2019 68 | March 18, 2020
Slide 69: Our cash taxes remain on a low level
Our cash taxes remain on a low level Deferred tax assets, EUR million* Deferred tax liabilities, EUR million* 10 Property, plant, equipment and 24 -13 -11 intangible assets -16 Inventories -18 132 Net financial assets 283 -231 Defined benefit and other long-term employee benefit obligations 51 Provi
Slide 70: Cash and costs are our top priorities
Cash and costs are our top priorities We further We continue We focus on reduce our to reduce strong cash net working net debt generation capital 70 | March 18, 2020