Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Investor Day (May 2015)
136 slides from Outokumpu Oyj's investor day presentation, May 27, 2015
Slide 1: Outokumpu Capital Markets Day 2015
Outokumpu Capital Markets Day 2015 May 27, 2015 Berlin, Germany
Slide 2: Program
Program Time Topic Speaker 13:15 Progress in Outokumpu turnaround Mika Seitovirta, CEO 13:40 Coil Americas - Long-term potential intact Jose Ramon Salas, Interim Head, Coil Americas 14:05 Coil EMEA – On track to sustainable Olli-Matti Saksi, President, Coil EMEA profitability 14:30 Q&A 14:55 Coffee
Slide 3: Speakers
Speakers Mika Seitovirta CEO Mika Seitovirta has been Chairman of the Outokumpu Leadership Team since 2011. Before joining Outokumpu as the Chief Executive Officer in 2011, Mika has held several executive positions in both industrial and consumer sectors in companies such as Glaston and Volvo, and h
Slide 4: Speakers
Speakers Olli-Matti Saksi President, Coil EMEA Olli-Matti Saksi has been a Member of the Outokumpu Leadership Team since 2014 and has joined Outokumpu in 2013. Olli-Matti has a wide work experience in sales and marketing from various companies in metal industry. He holds a master’s degree in enginee
Slide 5: Speakers
Speakers Pekka Erkkilä Chief Technology Officer Pekka Erkkilä has 30 years’ experience in the stainless steel and mining industries. He is responsible for Outokumpu’s global production and technology strategy and capital investments optimization. He holds a master’s degree in physical metallurgy fro
Slide 6: 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 7: Progress in Outokumpu turnaround
Progress in Outokumpu turnaround Mika Seitovirta CEO May 27, 2015
Slide 8: Performance heading in right direction; Coil EMEA on track; Coil Americas actions
1. Performance heading in right direction 2. Coil EMEA on track to sustainable profitability 3. Taking actions to get Coil Americas back on track 5/27/2015 8
Slide 9: Outokumpu - Global leader in stainless steel
Outokumpu - Global leader in stainless steel Sales by business area 2) 6% Coil EMEA Stainless 6% 7% Coil Americas 85% recycled steel is 100% APAC 6% content raw recyclable Quarto Plate 16% 59% materials Long Products Other operations Strong market position 1) 11,800 ~30%Europe ~53% of sales is direc
Slide 10: We have strong footprint in all key markets
We have strong footprint in all key markets Avesta Tornio Kemi Degerfors Nyby Sheffield New Castle Bochum Krefeld & Benrath Shanghai Calvert Dillenburg Wildwood Richburg Dahlerbrück San Luis Potosí Integrated melt shop, hot and cold rolling Other mills Mine To be closed Service center 5/27/2015 10
Slide 11: Performance heading in right direction
Performance heading in right direction Group underlying EBIT, EUR million Group key figures, EUR million 30 2013 2014 Q1/15 2 0 Deliveries, kt 2,585 2,554 620 -6 -9 Sales 6,745 6,844 1,768 -30 -28 Underlying -45 EBIT -377 -88 2 -60 Net result -1,003 -439 -45 -90 -82 -87 Net cash from -90 operations
Slide 12: Delivering on Outokumpu turnaround
Delivering on Outokumpu turnaround 1 Synergies and efficiency programs – proceeding ahead of plans EMEA restructuring – continues on track, next Bochum closure in 2 June Calvert ramp-up – long-term potential intact, decisively addressing 3 short-term challenges ! Remedy solved & extensive financial
Slide 13: Continued demand growth for stainless steel globally
Continued demand growth for stainless steel globally AMERICAS EUROPE APAC +12% +8% +9% +7% +6%+5% +6% +6% +5% +5% +4% +2% +2% +1% +1% +1% +1% -0% 12 13 14 15f 16f 17f 12 13 14 15f 16f 17f 12 13 14 15f 16f 17f +19% +12% +9% +8% +8% +8% +8% +8% +7% +6% +6% +7% +4% +4% +5% +4% +5%+6% +3% +3% +3% +3% +3
Slide 14: Supply/demand balance remains a key
Supply/demand balance remains a key Asia Europe Americas CR, million tonnes 24.6 24.9 CR, million tonnes CR, million tonnes 23.6 22.0 4.9 4.8 21.1 4.7 4.7 20.0 4.5 4.5 4.4 4.4 19.6 18.8 17.8 17.8 16.7 3.7 3.8 3.9 15.9 6.5 3.7 6.2 3.5 3.5 3.5 14.8 15.2 3.3 3.3 3.3 3.3 3.3 3.3 5.9 3.2 3.2 13.7 5.7 1.0
Slide 15: Base prices slightly increasing in Europe, but declining in the US
Base prices slightly increasing in Europe, but declining in the US European base prices, EUR/t 1) US base prices, USD/t 1) 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 May 2015 1) 2mm sheet cold rolled 304 grade 5/27/2015 1
Slide 16: Stainless steel imports to Europe ease in Q1/15
Stainless steel imports to Europe ease in Q1/15 Asian import pressure to US remains high Third-country imports into Europe Third-country imports into the US Total market size 3.7 million tonnes in 2014* Total market size 1.6 million tonnes in 2014* CR, kt CR, kt Imports from China High import levels
Slide 17: Unbalanced trade flows
Unbalanced trade flows High pressure to export Asian overcapacities to other regions CR in kt, 2014 110 120 125 800 270 Factors supporting exports: Exchange rate benefits 35 Game changers: Cost advantages Government subsidies Different regulations EU antidumping case Nickel ore ban Pos
Slide 18: Efficiency programs progressing according to plan
Efficiency programs progressing according to plan Cumulative total savings, EUR million Cash release from NWC, EUR million 600 500 550 530 400 426 470 400 400 420 351 351 385 300 200 200 199 100 0 0 2013 2014 Q1/15 2015e 2016e 2017e 2013 2014 Q1/15 2015 target 5/27/2015 18
Slide 19: Target to reduce global headcount by 3,500 until 2017
Target to reduce global headcount by 3,500 until 2017 Total headcount reduction 1) Productivity development Employees Deliveries, kt 13,327 766 436 14,000 900 301 1,974 9,850 2,133 12,500 600 7,331 (18%) (62%) 11,000 300 9,500 0 2012 2013 2014 Q1/15 To 2017 2013 2014 2015 come Number of employees De
Slide 20: EMEA continues on track
EMEA continues on track Restructuring progressing, opportunities in markets Current status Next steps Targets • Restructuring of the • Bochum and Benrath • Competitive cost industrial set up closure, Krefeld structure and higher progressing well investment capacity utilization • Focus on higher • He
Slide 21: Coil Americas facing headwinds
Coil Americas facing headwinds Challenges • Asian imports into Americas high • Weak demand from distributor segment • Delivery challenges impacting order intake Result • Underlying EBIT deteriorated to EUR -28 million in Q1 • FY15 delivery outlook revised down to about 540 kt Actions • Strengthened
Slide 22: Coil Americas development into full potential continues
Coil Americas development into full potential continues Current status Next steps Targets • Technical ramp-up in • Getting back on track • Full capability Calvert completed in challenging market available in 2-3 years • Cold rolling issues • Active dialogue with • Improving profitability solved the
Slide 23: Step change in Quarto Plate profitability
Step change in Quarto Plate profitability Current status Next steps Targets • EUR 100 million • Increase sales in both • Degerfors towards full investment in standard and custom capacity within two Degerfors ready made plate years • EUR -30 million • Higher volumes in • Improvement in underlying EBI
Slide 24: Debt reduction is a priority: targeting below EUR 1.5 billion net debt
Debt reduction is a priority: targeting below EUR 1.5 billion net debt by the end of 2017 Net debt and gearing, EUR million and % Net debt Target to push 4,000 188 200 reduced from net debt EUR 3.5 below EUR billion to 3,000 150 1.5 billion by below EUR 2 the end of billion in 93 2017 91 2014 2,000
Slide 25: Favorable demand outlook in key customer segments
Favorable demand outlook in key customer segments End-use industry groups Route to market Architecture & Building Chemical & Energy Domestic Appliance Distributors Market size: 4.594 kt Market size: 4.599 kt Market size: 15.977 kt Growth rate: 6% Growth rate: 4% Growth rate: 5% Project/contract busi
Slide 26: Customer satisfaction drivers
Customer satisfaction drivers Other Product quality Technical expertise Easy to deal with Commercial terms Delivery reliability 5/27/2015 26
Slide 27: Introducing renewed product portfolio
Introducing renewed product portfolio By grouping our products into ranges based on performance, we aim to make choosing the best product for your application easier Outokumpu Outokumpu Classic family Pro family Moda Core Supra Forta Ultra Dura Therma Prodec Deco Mildly Corrosive Highly Duplex Extre
Slide 28: We are moving forward towards sustainable profitability
We are moving forward towards sustainable profitability Execution of the Industry leading turnaround foundation with continues: competitive cost profitability, cash, structures financial stability Customer and Focus on operational shareholder excellence value 5/27/2015 28
Slide 29: Coil Americas – Long-term potential intact
Coil Americas – Long-term potential intact Jose Ramon Salas Interim Head Coil Americas May 27, 2015
Slide 30: Coil Americas key messages
1. Established market presence with long-term customer relationships in Americas 2. Focus on getting back on track in challenging market 3. Coil Americas’ long-term potential is intact 5/27/2015 30
Slide 31: Established market presence with long-term customer relationships in Americas
Established market presence with long-term customer relationships in Americas Total stainless demand 2014, kt • Coil Americas represents 16% 1) of 240 Group sales Coil Americas, capacities • Market share of approx. kt Calvert Mexinox 22% 2) in NAFTA region 2,460 Melting 900 • Experienced sales team
Slide 32: Phasing of the Calvert mill ramp-up
Phasing of the Calvert mill ramp-up Commercial ramp-up ongoing Technical ramp-up completed 2011 2012 2013 2014 2015 2016 2017 • All production steps tested and capabilities proven • Ramp-up to full production capacity and • Stabilize production mix optimization • Complete product offering • Maximi
Slide 33: Deliveries have been growing
Deliveries have been growing Currently seeing 6-12 month delay in commercial ramp-up Coil Americas quarterly deliveries, kt Annual deliveries and forecast, kt 40 kt lost due to Revised down by 80 technical issues kt due to weak order intake 160 143 800 750 135 137 129 126 126 620 116 119 120 600 541
Slide 34: Profitability improved significantly in 2014
Profitability improved significantly in 2014 Coil Americas quarterly EBIT, EUR million 30 • Significant improvement in profitability 2013 vs. 2014 (-262 to -82 in EBIT excl. 6 NRI) 0 0 • Disappointing earnings in Q1/15 impacted by -17 -30 -25 -29 • Lower contribution margin from -28 -36 -33 -30 subo
Slide 35: Deep-dive into Coil Americas
Deep-dive into Coil Americas Market environment Commerical approach Operations A B C 5/27/2015 35
Slide 36: Growing along with the market
A Growing along with the market NAFTA cold rolled market size (kt) and Outokumpu market share OTK OTK Third party 2,500 OTK +120 +130 +100 30% Third party +100 +100 22% 2,000 20% 1,500 10% 1,000 500 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f CR consumption in NAFTA CR capacity
Slide 37: Development of US stainless steel prices
A Development of US stainless steel prices Transaction prices 304 stainless steel*, USD/t Base prices 304 stainless steel*, USD/t 5,000 32,000 1,450 4,500 1,400 22,000 4,000 1,350 3,500 12,000 1,300 3,000 2,500 2,000 1,250 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Nickel price US transaction
Slide 38: Cold rolled import development
A Cold rolled import development US cold rolled imports, kt 60 40% 28% 30% 40 24% 20% 20 10% 10% 7% 2% 3% 0 0% Apr Oct Nov Jun 2007 2008 2009 2010 2011 2012 2013 2014 Feb Feb Jan-14 Mar May Jan-15 Mar Aug Dec Jul Sep Imports from rest of world Imports from Europe Imports from Asia China import penet
Slide 39: Imports affecting strongest the service centers
B Imports affecting strongest the service centers* CR market in the US, total 1.64 mt CR service center market in the US, total 1.07 mt 24% 30% 70% 76% Supplied by domestic mills Imports Supplied by domestic mills Imports Outokumpu market share ~18% Outokumpu market share ~24% Sources: AISI 2014, th
Slide 40: US cold rolled market composition
B US cold rolled market composition Cold rolled market in the US, total 1.64 mt 0.3% 5% 3% Service Center (Stock) 6% Service Center (Bill of Material) 43% Automotive 20% Pipe&Tube Appliance OEM Conversion 23% Source: AISI, 2014 5/27/2015 40
Slide 41: Coil Americas market approach
B Coil Americas market approach Our channel structure in the Americas Sales by end-use customer segments, Q1/15 Distributors Consumer 61% goods & Medical; 29% Automotive; 7% Architecture, Other; 39% Building & Construction; 2% Metal processing & Heavy Tubes; 18% End users & industries; 5% processors
Slide 42: Outokumpu customer profile in NAFTA
B Outokumpu customer profile in NAFTA End customers 1st tier distributors ~40% of OTK 2nd tier volume distributors ~50% of OTK volume Our customers include: ~10% of OTK Samuel Whirlpool volume ThyssenKrupp EHP Materials Faurecia Reliance Group Fischer Ryerson Casa de Moneda Demand from distributor s
Slide 43: Demand outlook across end-user industries remains solid
B Demand outlook across end-user industries remains solid Sector Market size, SMR growth Market drivers kt outlook 2015- 2017 Automotive 659 2% Consumer confidence, regulatory changes, light-weight material Household/ 624 3% Consumer confidence, disposable Commercial income, aesthetics, hygiene appl
Slide 44: Synergies through optimized work share
C Synergies through optimized work share Mexinox Calvert Chicago sales office Regional Regional • Main focus on Mexico (~50%) • Main focus on the US cross regional supply when (~70%) • lack of capabilities of local mill Product specialization • production cost • Austenitics advantages • 72” wide • P
Slide 45: Calvert ramp-up update
C Calvert ramp-up update Calvert quarterly delivery volumes, kt 150 Production in melt shop and All CR lines back cold rolling in operations showing good since end 2014 quality 100 Calvert production capacity 50 Melt shop 900 kt Hot rolling 870 kt 0 Cold rolling 350 kt 2011 2012 2013 2014 2015 Cold
Slide 46: Key areas for further optimization
C Key areas for further optimization Product portfolio Delivery performance expansion Optimized loading • Light gauge • 430 polished Yield improvements Right first time Scrap ratio 5/27/2015 46
Slide 47: Achieving operational excellence in scrap ratio in Calvert melt shop
C Achieving operational excellence in scrap ratio in Calvert melt shop 100% 90% 80% 70% 60% 50% 2013 2014 2015 Scrap FeNi Pure Ni Running on highest scrap Slab production on mix and lowest pure Flexibility in raw material optimized raw material nickel consumption within usage levels Outokumpu 5/27/2
Slide 48: Taking advantage of fully integrated mill
C Taking advantage of fully integrated mill Duplex 2005 after hot rolling • Calvert melt shop is developing new grades to match customer demand • Successful trials of new steel grades such as 2205, 301 LN, 201 LN • Calvert melt shop can supply raw material feed to all Outokumpu businesses in the NAF
Slide 49: Highly cost competitive operations in Calvert
C Highly cost competitive operations in Calvert Cost components Raw materials • Scrap ratio of 80-85% • Annual austenitic scrap usage of ~400 kt Energy • Long-term contracts with Alabama Power and Sempra Gas Labor • Highly competitive labor costs • Workforce versatility Others • Freight, maintenance
Slide 50: Building on existing strengths
Building on existing strengths Strong regional producer with long- Integrated, cost term customer competitive operations relationships in across NAFTA Americas Broad portfolio that Leveraging supports and develops Outokumpu’s leading local demand technical expertise 5/27/2015 50
Slide 51: Coil EMEA – On track to sustainable profitability
Coil EMEA – On track to sustainable profitability Olli-Matti Saksi President Coil EMEA May 27, 2015
Slide 52: Coil EMEA key messages
1. We have right assets in right place 2. Efficiency measures start to show in improved profitability 3. Competitive business model to capture opportunities in stainless steel 5/27/2015 52
Slide 53: We have right assets in right place
We have right assets in right place • Coil EMEA is the largest of the five Mills business areas – 59% 1) of sales Chrome mine • About 30% market share in Europe 2) Service Centers • Comprehensive service center network in Europe • Own chrome mine and ferrochrome production Coil EMEA, capacities Kt T
Slide 54: Balanced customer base across investment and consumer driven industries
Balanced customer base across both investment and consumer driven industries Sales by customer segment 1) Sales by end-customer segment 1) Consumer Other goods & Distributors 5% Medical Heavy 19% 41% industries 34 % 23% 43 % 7% Automotive 16 % 25% Metal End users & processors processing & Tubes Chem
Slide 55: Efficiency measures start to show in improved financial performance
Efficiency measures start to show in improved financial performance Quarterly deliveries, kt Quarterly EBIT, EUR million 600 60 48 539 38 470 464 438 21 28 423 423 395 411 30 10 15 15 19 400 369 6 14 0 200 -14 -30 -24 -23 -51 0 -60 2013 2014 2015 2013 2014 2015 EBIT excl NRI Underlying EBIT 5/27/201
Slide 56: Shaping a competitive business model
Shaping an competitive business model to capture opportunites in stainless steel Rightsizing of capacity Operational efficiency Commercial focus A B C 5/27/2015 56
Slide 57: Next milestone the closure of Bochum melt shop
A Next milestone the closure of Bochum melt shop Bochum production volumes, kt Volume tests completed successfully 200 Bochum to be closed in June 150 100 50 0 Tornio Target Avesta Target 5/27/2015 57
Slide 58: Also other parts of the EMEA restructuring moving ahead
A Also other parts of the EMEA restructuring moving ahead Bochum closure Benrath to be closed in 2016 reducing cold rolling capacity by approx. 250,000 tonnes EMEA restructuring savings of EUR 100 million by the end Krefeld cold rolling facility to be redesigned. Capex of EUR 108 of 2017 million in
Slide 59: Reducing personnel to ensure competitive cost structure
A Reducing personnel to ensure competitive cost structure ~1,300 jobs reduced to date ~1,200 jobs Total of 2,500 to be 1,300 reduced by jobs reduced end-2017 by end of 2017 300 270 230 400 Next major milestone the closure of Bochum 2012 To date Bochum Benrath Other Other 2017 E100 5/27/2015 59
Slide 60: Savings of EUR 131 million since 2012 in Coil EMEA
A Savings of EUR 131 million since 2012 in Coil EMEA Total cumulative savings vs. 2012 (EUR million) 530 550 Group 470 80 100 EMEA restructuring 420 20 385 Synergy savings 200 200 200 P250 195 185 222 242 EMEA 1) 199 162 80 100 EMEA restructuring 95 126 131 20 225 72 250 250 250 Synergy savings 200
Slide 61: Operational efficiency improvements to drive competitiveness further
B Operational efficiency improvements to drive competitiveness further Capacity utilization Operational efficiency metrics • Capacity utilization rates improving in Tornio and Avesta melt shops • Further cold rolling utilization Delivery improvements targeted Right first time performance • Targeting
Slide 62: Competitive advantage with in-house ferrochrome production
B Competitive advantage with in-house ferrochrome production Ferrochrome production, kt Outokumpu Ferrochrome cost position in 2015*, USD/lb 500 ~470 120 434 441 Outokumpu 400 90 300 226 236 60 200 30 100 0 0 2011 2012 2013 2014 2015e *Source: CRU ferrochrome cost service, December 2014 5/27/2015 62
Slide 63: Streamlining of the asset base enable delivery mix improvements
Streamlining of the asset base enable B delivery mix improvements Coil EMEA delivery mix in 2013 Coil EMEA delivery mix in 2014 4% 4%4% 14% 20% 20% 61% 72% Slabs Black hot band White hot band Cold rolled 5/27/2015 63
Slide 64: Sharpening our business line profiles
C Sharpening our business line profiles Strategic Positioning Tornio Nirosta Avesta Agile Product Special gauges Standard Individual grades portfolio and surfaces Flexibility Nirosta Accuracy & Sustainability & Core Customer Speed & Low long-term technical Competitive benefits Costs partnerships exp
Slide 65: Demand outlook across customer industries is healthy
C Demand outlook across customer industries is healthy Sector Market size, kt SMR growth Market drivers outlook 2015- 2017 Architecture & 819 2% GDP growth, urbanization, corrosion Building resistance, aesthetics, life-cycle costs Chemical & Energy 881 3% GDP growth, industrial investments, oil pric
Slide 66: Our positioning in key strategic segments
C Our positioning in key strategic segments Heating & Cooling Architecture Service Profitable Growth Coil EMEA deliveries 2013 & Building Product high Architecture & Building Chemical & Service Chemical & Energy Energy Product Auto (Exhaust) Auto (Body Service Market Attractiveness in White) 1) Prod
Slide 67: Gap between overcapacities and demand in Europe is decreasing
Gap between overcapacities and demand in Europe is decreasing Demand and capacity, mt CAGR 2014-2017: 0.7% 5 4.7 4.8 4.9 4.8 4.7 4.7 4.6 4.6 4.5 4.5 4.4 4.4 4.4 4.0 3.8 3.9 4 3.6 3.8 3.7 0.5 3.5 3.4 3.4 3.3 3.3 3.5 1.0 1.0 0.7 0.5 1.0 0.9 0.3 3.5 0.6 0.6 0.7 3 3.1 0.5 3.0 2.6 2.9 2.8 2.8 2.8 2.8 2.9
Slide 68: Development of EU stainless steel prices
Development of EU stainless steel prices Transaction prices 304 stainless steel, EUR/t* Base prices 304 stainless steel, 1) EUR/t 5,500 32,000 1,300 4,500 22,000 1,200 3,500 12,000 1,100 2,500 1,500 2,000 1,000 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Nickel price EU transaction price EU ba
Slide 69: EU cold rolled imports from China and Taiwan strongly declining
EU cold rolled imports from China and Taiwan have been strongly declining in Q1 2015 EU cold rolled imports, kt 120 40% 100 30% 30% 80 21% 60 20% 40 10% 10% 8% 20 2% 0 2% 0% Jun 2007 2008 2009 2010 2011 2012 2013 2014 Feb Feb Mar Apr May Oct Nov tammi.14 Aug Dec tammi.15 Jul Sep Mar Imports from Asi
Slide 70: Timeline of the European Commission investigation on antidumping
Timeline of the European Comission investigation on antidumping European Comission Eurofer files an Separate anti-subsidy announcement on antidumping complaint investigation on CR provisional duties: China to European Comission imports from China 24-25%, Taiwan 10-12%. Effective March 26 May 13 Augu
Slide 71: Impacts of the EU antidumping measures expected only after definite decision
Impacts of the EU antidumping measures expected only after definite decision Cold rolled volume Outokumpu seizing the new Opens room for EU producers market opportunities and other imports • Tornio AP-line back online, adding Cold rolled price capacity by 5,000 t/month Opportunities for price increa
Slide 72: Coil EMEA priorities are clear
Coil EMEA priorities are clear Restructuring of the Profitable growth industrial footprint • Commitment to profitable sales • Implement the industrial plan • Reinforce market position in key and restructure the footprint regions, including Germany progressing well • Higher margin products and • Spec
Slide 73: On track to sustainable profitability
On track to sustainable profitability Right assets in right Balanced customer place base Efficiency measures Competitive business showing in improved model to capture profitability opportunities 5/27/2015 73
Slide 74: Global stainless steel market update
Global stainless steel market update Markus Moll, Managing Director SMR – Steel & Metals Market Research May 27, 2015
Slide 75: Table of Contents: Base Case Scenario
Table of Contents 1. Base Case Scenario 2. Impact of the E.U. CRC AD - Case 3. Impact of Oil Price Decline 4. Focus on the NAFTA Market 5. Outlook © Copyright SMR GmbH 2015 http://www.smr.at - 76 -
Slide 76: Global Stainless Steel – a story of success
Global Stainless Steel – a story of success China counts now for almost 50 % of the worldmarket ! CAGR – World 48,000 3 % p.a. 45,000 CAGR – World 42,000 5 % p.a. 39,000 36,000 [´000 tonnes] 33,000 CAGR - China: 30,000 +5 % p.a. 27,000 CAGR - China: +15 % p.a. 24,000 21,000 18,000 15,000 12,000 CAGR
Slide 77: Global Stainless Steel Products 2014p
Global Stainless Steel Products 2014p in ‘000 metric t The Total Stainless Steel Production increased by 8% in 2014p. Production 13 Cr OCTG Tube Change Total World: 180 2014p 1890 Seamless Tube** Semis Total World: 530 Long Products Total World: 2,080 Share: 29% Forged Products Total World: 780 17 %
Slide 78: Top 25 Global Stainless Steel Producers 2014
´Top 25` Global Stainless Steel Producers 2014 (est. volumes) There is a new No. 1! 3,900 3,600 3,300 18 of Top 25 are Asian! 3,000 2,700 [‘000 tonnes] Long Products 2,400 2,100 Flat Products 1,800 1,500 1,200 900 600 300 - * incl. Fujian Desheng ** incl. 13CrOCTG *** incl. Southwest Stainless ****
Slide 79: Global Historic Stainless Steel Enduser Price
Global Historic Stainless Steel Enduser Price CR Sheet - 304 & 316 - 2mm - 2B, Ex-Stock 6,500 6,000 Europe America Asia 5,500 April ’15 : Asia ~ 120 $/t higher than Europe 5,000 & ~ 280 $/t below US [US$ / tonne] 4,500 4,000 3,500 3,000 2,500 2,000 © Copyright SMR GmbH 2015 http://www.smr.at - 80 -
Slide 80: Key takeaways from Raw Materials
Key takeaways from Raw Materials Nickel The stainless market weakness in China has so far prevented a Ni shortage there. However, Indonesian ore stocks (high grade) depleted and NPI production will fall in HY2. Thus, Chinese STS mills will have to find new Ni sources soon. Chrome The continuous
Slide 81: Chinese NPI Advantage over Stainless Scrap
Chinese NPI Advantage over Stainless Scrap NPI has lost its cost advantage over stainless steel scrap… 275 250 225 200 175 150 125 100 [ $/ t ] 75 50 25 0 -25 -50 -75 -100 -125 © Copyright SMR GmbH 2015 http://www.smr.at - 82 -
Slide 82: Table of Contents: Impact of the E.U. CRC AD - Case
Table of Contents 1. Base Case Scenario 2. Impact of the E.U. CRC AD - Case 3. Impact of Oil Price Decline 4. Focus on the NAFTA Market 5. Outlook © Copyright SMR GmbH 2015 http://www.smr.at - 83 -
Slide 83: Effects of the AD Case in Europe
Effects of the AD Case in Europe In the long run, Imports will return to - or exceed - pre- AD levels, even without China and Taiwan There is approx. still 200 kt of Taiwanese and Chinese 4,000 Material on Stock Stocks (China & Taiwan) 3,800 Other Imports China & Taiwan 3,600 Imports from Taiwan and
Slide 84: Impact of Weak € and Weak Oil Price – Europe
Impact of Weak € and Weak Oil Price – Europe Structural Growth and Weak € compensates for Loses (due to Low Oil Prices) 6,250 +5% Oil Price: Long Oil Price: Flat Weak €: Exports Demand (FP + LP) [’000 tons] 6,000 Weak €: Imports 5,750 Structural Growth 5,500 Market Growth 2016 VS 2014: 5,250 Structu
Slide 85: Table of Contents: Impact of Oil Price Decline
Table of Contents 1. Base Case Scenario 2. Impact of the E.U. CRC AD - Case 3. Impact of Oil Price Decline 4. Focus on the NAFTA Market 5. Outlook © Copyright SMR GmbH 2015 http://www.smr.at - 86 -
Slide 86: Historical Incorporated Worldwide Rig Count
Historical Incorporated Worldwide Rig Count The graph speaks for itself 4,500 USA 4,000 World 3,500 3,000 [rigs] 2,500 2,000 1,500 1,000 500 ‐ Source: Baker Hughes © Copyright SMR GmbH 2015 http://www.smr.at - 87 -
Slide 87: Capex Reduction at Energy Companies
Capex Reduction at Energy Companies Due to the Oil Price Slump Companies are reducing their CapEx by up to 32% in 2015 50 45 2013 2014 2015 -12% 40 -9% -5% 35 -12% - 12% -20% 30 -32% +7% [billion US$] -16% 25 -16% -2% -17% 20 -4% +4% 15 -26% -30% 10 5 - Petrobras ExxonMobil Chevron RDS PEMEX BP Eni
Slide 88: Oil Price Linked Projects at Risk
Oil Price Linked Projects at Risk Many Projects under construction or pre-sanction are not economic at current price levels Brent Crude Oil Price* WTI Cride Oil Price* *Status: May 4, 2015 Source: Goldman Sachs Global Investment Research estimate © Copyright SMR GmbH 2015 http://www.smr.at - 89 -
Slide 89: Impact of the Oil Price Slump on the global STS Market by Product
Impact of the Oil Price Slump on the global STS Market by Product Long products are more exposed than flat products critical 6 very critical Seamless Tube high Forged [Exposure to Oil and Gas] 5 medium PMP 3 Welded Tube 4 7 low CRC HRC 2 Bars / Wire 1 medium uncritical critical [Importance for the S
Slide 90: Table of Contents: Focus on the NAFTA Market
Table of Contents 1. Base Case Scenario 2. Impact of the E.U. CRC AD - Case 3. Impact of Oil Price Decline 4. Focus on the NAFTA Market 5. Outlook © Copyright SMR GmbH 2015 http://www.smr.at - 91 -
Slide 91: Long Term Stainless Steel Market Development NAFTA
Long Term Stainless Steel Market Development NAFTA (2000 – 2014p) Mexico has become the North American ‘Tiger’ 275% 250% 225% Index base (2000 = 100) 200% 175% 150% 125% 100% 75% 50% 25% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014p © Copyright SMR GmbH 2015 http://w
Slide 92: Impact of Strong $ and Weak Oil Price – NAFTA
Impact of Strong $ and Weak Oil Price – NAFTA Strong USD and Low Oil Prices could lead in the Worst Case to almost no Growth between 2014 and 2016 3,300 3,200 Potential Upsides Weak €: Imports Lower Oil price higher Weak €: Exports • Demand (FP + LP) [’000 tons] Oil Price: Flat 3,100 consumer spen
Slide 93: Table of Contents: Outlook
Table of Contents 1. Base Case Scenario 2. Impact of the E.U. CRC AD - Case 3. Impact of Oil Price Decline 4. Focus on the NAFTA Market 5. Outlook © Copyright SMR GmbH 2015 http://www.smr.at - 94 -
Slide 94: Global Stainless Steel by End Use Segment
Global Stainless Steel by End Use Segment + Recovery in Pulp and Paper + Seawater Desalination Industrial & Heavy + Water Infrastructure Industry + Swimming Pools 8% + Glass to Metal Systems ABC & Infrastructure 15 % Others + Thermal Insulation Windows 3% - Elevators Consumer Goods Automotive & Heav
Slide 95: Forecasted Growth in EMEA, Americas & APAC
Forecasted Growth in EMEA, Americas & APAC APAC will remain the growth driver and Europe could turn negative in the long term Short Term Mid Term Long Term 2015 – 2016 2017 – 2020 > 2020 Americas EMEA APAC 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% © Copyright SMR GmbH 2015 http://www.smr.at - 96 -
Slide 96: Stock levels are on the rise
Stock Level Index [2007 = 100%] - 25 50 75 100 125 150 175 200 225 250 Q1/06 http://www.smr.at Q2/06 Q3/06 … are on the rise Q4/06 Q1/07 © Copyright SMR GmbH 2015 *China Average 2008 = 100% Stock levels… Q2/07 Japan China* Q3/07 Q4/07 United States Q1/08 Q2/08 Q3/08 Q4/08 Germany (Flat Products) Q1/
Slide 97: Any Questions?
Any Questions? © Copyright SMR GmbH 2015 http://www.smr.at - 98 -
Slide 98: New solutions for automotive industry
New solutions for automotive industry Pekka Erkkilä Chief Technology Officer May 27, 2015
Slide 99: Outokumpu is the leading innovator in stainless steel
Outokumpu is the leading innovator in stainless steel We develop sustainable We continuously develop We improve cost and stainless steel solutions our product portfolio and environmental efficiency of for our customers product quality our production processes • Very long life-cycle • Several new sta
Slide 100: Outokumpu R&D in nutshell
Outokumpu R&D in nutshell More than 200 R&D Developing products, experts along with State-of-the-art R&D processes and markets to extensive R&D networks facilities in Sweden, create advanced solutions with leading universities Germany and Finland together with customers and institutes. 5/27/2015 101
Slide 101: Introducing renewed product portfolio
Introducing renewed product portfolio By grouping our products into ranges based on performance, we aim to make choosing the best product for your application easier Outokumpu Outokumpu Classic family Pro family Moda Core Supra Forta Ultra Dura Therma Prodec Deco Mildly Corrosive Highly Duplex Extre
Slide 102: Automotive industry as a customer segment
Automotive industry as a customer segment Automotive and heavy Largest car transport demand manufacturers as ~1 million tonnes main customers annually Stainless steel mainly Huge potential for used in exhaust additional stainless systems steel usage 5/27/2015 103
Slide 103: Automotive as new mass market for austenitic steels
Automotive as new mass market for austenitic steels New market Exhaust system 75% Exhaust system 95% Structural parts 20% Other 5% Other 5% 5/27/2015 104
Slide 104: Making lighter cars with new materials helps to reduce CO2 emissions
Making lighter cars with new materials helps to reduce CO2 emissions New worldwide CO2 emission legislation enhance the need for breakthrough lightweight materials Source: Hillman,J (2012) 5/27/2015 105
Slide 105: Half of a car weight comes from Chassis and Body-in-White parts
Half of a car weight comes from Chassis and Body-in-White (BIW) parts Electronic 4% Equipment 14% Aggregate 15% Chassis 24% BIW 43% Source:Dr. Olaf Täger, Dr. Armin Plath: Konzernforschung Volkswagen AG; Fachtagung „Großserientaugliche thermoplastische Strukturen“ thermoPre, Chemnitz 28.08.2013 5/27
Slide 106: New high performance MnCr material offers lightweight potential
Outokumpu new high performance MnCr material offers an outstanding lightweight potential 70 60 New MnCr lightweight material group Elongation A80 [%] 50 H500 40 H800 30 H1000 20 Al 10 Carbon Steels 0 1000 300 200 400 700 900 500 800 600 1100 1200 Yield strength RP0,2 [MPa] 5/27/2015 107
Slide 107: Examples of lightweight potential of austenitic materials
Examples of lightweight potential (LWP) of austenitic materials Lightweight chassis Lightweight BIW Audi A8: Thickness reduction from 2.5 to 1.5mm- Light weight Bentley: Tanks High crash absorption System integration Prototype: LWP: 50% reduction in thickness from 1mm Volvo: Prototype to 0.5mm Weigh
Slide 108: MnCr material shows the best lightweight CO2-footprint
MnCr material shows the best lightweight CO2-footprint among lightweight materials 5/27/2015 109
Slide 109: Material validation: higher safety with new lightweight MnCr
MATERIAL VALIDATION: Higher safety with the new lightweight MnCr material group Axial crash test with square specimen: Drop height h = 10,00m Drop weight m = 186kg Better folding behavior enhance safety 5/27/2015 110
Slide 110: Added value of MnCr steels for car companies
Added value of MnCr steels for car companies • Excellent CO2 footprint • Best lightweight index • Price stability • Higher safety due to its ductility • Excellent ductility open up ways for part integrations • Improved productivity due to cold stamping compared to hot stamped 22MnB5 • Material is wo
Slide 111: Total cost of austenitic MnCr steels can be lower than hot stamped 22MnB5
Total cost of austenitic MnCr steels can be lower than a hot stamped 22MnB5 part Total cost 5/27/2015 112
Slide 112: Cooperation with leading car manufacturers and tier one suppliers
Cooperation with leading car manufactures and tier one suppliers for MnCr material 5/27/2015 113
Slide 113: Turnaround shows in gradually improving profitability
Turnaround shows in gradually improving profitability Reinhard Florey CFO May 27, 2015
Slide 114: Balance sheet strengthened; efficiency programs; Coil Americas headwinds
1. Balance sheet strengthened and significant deleveraging continuing 2. Good progress in efficiency programs 3. Coil Americas facing headwinds 5/27/2015 116
Slide 115: Outokumpu turnaround shows in gradually improving profitability
Outokumpu turnaround shows in gradually improving profitability EUR million 2013 2014 Q1/15 Group underlying EBIT, EUR million Stainless steel 2,585 2,565 620 deliveries, kt 30 Sales 6,745 6,844 1,768 2 0 EBIT excl. NRI -432 -57 8 -6 -9 -30 -28 Underlying EBIT -377 -88 2 -45 Operating cash flow 34 -
Slide 116: Balance sheet strengthened
Balance sheet strengthened Net debt and gearing, EUR million and % Total equity and equity to assets ratio, EUR million and % 4,000 188 200 2,400 40 33 32 3,000 150 2,200 30 93 91 21 2,000 100 2,000 20 1,000 50 1,800 10 0 0 1,600 0 2013 2014 Q1/2015 2013 2014 Q1/2015 Net debt Gearing Total equity Eq
Slide 117: Good progress in efficiency programs
Good progress in efficiency programs Synergies, P250 and P400 to be closed by end- Realized Targeted 2015 (EUR million) (EUR million) Cost reduction EMEA - 100 restructuring Cost reduction Synergies 200 195 200 Cost reduction P250 225 250 Total cost 420 550 reduction NWC reduction P400 426 400 2013
Slide 118: Savings programs on track
Savings programs on track Cumulative savings, EUR million Provisions*, EUR million 600 250 530 550 470 100 200 ~28 220 80 Cash out: 420 20 385 138 2013: 12 400 2014: 36 150 Q1/15: 56 250 250 250 Rest of 2015: ~40 225 200 2016: ~50 100 2017+: <30 199 200 104 50 185 195 200 200 200 54 95 0 0 2013 2014
Slide 119: Active inventory, receivable and payable management for cash extraction
Active inventory, accounts receivable and accounts payable management for cash extraction Cash flow from working capital change 1) Inventory days development 2) 500 120 426 100 102 400 97 400 351 351 86 90 300 60 200 30 100 0 0 2013 2014 Q1/15 2015 2013 2014 Q1/15 2015 3) target target 1) Change in
Slide 120: Cash flow improvement is a high priority
Cash flow improvement is a high priority Operating cash flow, EUR million 50 • 2014 operating cash flow negative due to 34 seasonal build-up in inventories and changes in nickel price 0 • Q1/15 cash flow mainly impacted by • Redundancy provisions (EUR 61 million) • Change in derivatives (EUR 85 mill
Slide 121: Raw materials account for >60% of total operative costs
Raw materials account for >60% of total operative costs Operative cost components in 2014 Raw material spend by category in 2014 5% 8% 2% 5% 9% 4% 60% 11% 49% 13% 11% 23% Stainless steel scrap Nickel primary Raw materials Personnel Chrome primary Molybdenum primary Energy and consumables Other cost
Slide 122: Currency analysis of costs and revenues
Currency analysis of costs and revenues Currency split of revenues and cost* 100% 5% 1% 2% 3% 15% 5% 1% 2% 6% 4% 19% 16% 80% 3% 26% Other 60% GBP 42% SEK 65% 40% 72% EUR 65% 20% 36% USD 11% 0% Revenues Revenues Costs incl. raw Costs excl. raw excluding AS including AS materials materials *) Manageme
Slide 123: Well-invested asset base
Well-invested asset base Group CAPEX (accounting), EUR million Recent major investments completed New Calvert facility, US Doubling of Ferrochrome, Finland 800 Expansion of Quarto Plate, Sweden and US Capex expected to be 600 below EUR 160 Moderate capex levels going forward million in 2015 In
Slide 124: Coil EMEA improving financial performance
Coil EMEA improving financial performance Stainlees steel deliveries, kt Sales by Coil EMEA positioning end-customer segment • Market leader with ~30% 600 market share* 400 5% • Highly specialized mills, close 19% proximity to customers 200 23% • In-house chrome and ferrochrome 0 • Restructurings pr
Slide 125: Coil Americas facing headwinds
Coil Americas facing headwinds Stainlees steel deliveries, kt Sales by Coil Americas positioning end-customer segment • Established market presence 150 • Experienced sales team 100 • Market share of ~22% 1) in NAFTA region 50 29% • Focus on getting back on track 39% in challenging market 0 • Commerc
Slide 126: APAC performance around break-even
APAC performance around break-even Stainlees steel deliveries, kt Sales by APAC positioning end-customer segment • SKS joint venture (60/40) with 80 Baosteel 60 5% • Route to market for 40 Outokumpu’s specialty products 26% • Highly professional and 20 30% experienced local sales team 0 • Strong bra
Slide 127: Quarto Plate targets a step change in profitability
Quarto Plate targets a step change in profitability Stainlees steel deliveries, kt Sales by Quarto Plate positioning end-customer segment 30 • Global leader in tailored and standard quarto plate products 20 10% 14% • Customer-driven solutions through tailored products and 10 value adding services 17
Slide 128: Long Products delivering healthy returns on assets
Long Products delivering healthy returns on assets Stainlees steel deliveries, kt Sales by Long Products positioning end-customer segment 90 • Extensive long products offering • Specialty melting expertise in 60 3% Sheffield, UK • Light asset structure and low 29% 30 conversion cost • Strong positio
Slide 129: Continuous financial stability enhancement
Continuous financial stability enhancement Active focus on cash flow • Operative performance and profitability Debt reduction • Net working capital management • Financing efficiency • Divestiture of smaller non-core assets Refinancing and diversification of funding ongoing • EUR 250 million high yie
Slide 130: Targeting net debt of below EUR 1.5 billion by end of 2017
Targeting net debt of below EUR 1.5 billion by the end of 2017 Net debt and gearing, EUR million and % Debt maturity profile, EUR million 4,000 188 200 2,000 3,000 150 1,500 93 2,000 91 100 1,000 3,556 1,000 1,974 2,034 50 500 0 0 0 2013 2014 Q1/15 end- 2015 2017 2019 2021 2017 Net debt Gearing Shor
Slide 131: Balanced debt distribution, solid liquidity
Balanced debt distribution, solid liquidity Debt distribution by source, Mar. 31, 2015 Total debt vs. liquidity position, EUR million Total EUR 2,332 million Bonds, EUR 547 million Convertible bonds, EUR 204 million 12 % 3,270 4% 23 % L-t loans from financial institutions, EUR 769 million 10 % 1,597
Slide 132: Business and financial outlook for Q2 2015
Business and financial outlook for Q2 2015 given in Q1 report Market outlook for stainless steel Outokumpu estimates varies by region Flat delivery volumes q-o-q: deliveries In Europe, order intake improving expected to increase somewhat in and underlying demand remaining Europe and decrease in Amer
Slide 133: Key building blocks for Outokumpu turnaround
Key building blocks for Outokumpu turnaround Continue good Step change in Overcome setbacks in progress in Coil EMEA Quarto Plate to Calvert and turn Coil and achieve targeted sustainable Americas profitable utilization and profitability efficiency 1) rates Reduce net debt to Achieve targeted Mainta
Slide 134: Closing summary
Closing summary
Slide 135: Thank you
Thank you
Slide 136: Outokumpu
Outokumpu