Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Investor Day (November 2016)
72 slides from Outokumpu Oyj's investor day presentation, Nov 29, 2016
Slide 1: Outokumpu Capital Markets Day 2016
Outokumpu Capital Markets Day 2016 November 29, 2016 Helsinki, Finland
Slide 2: Program
Program Time Topic Presenter Page 13:30 Opening remarks Tommi Järvenpää, Head of Investor Relations Best value creator in stainless steel by 2020 13:35 Roeland Baan, CEO 6 through customer orientation and efficiency 14:10 Americas – gearing up for growth Michael S. Williams, Head of Americas 24 14:4
Slide 3: Speakers
Speakers b. 1957, Dutch citizen b. 1960, US citizen Roeland Baan is the President and Chief Michael Williams heads the Americas Executive Officer of Outokumpu and business area of Outokumpu. President of the business area Europe. Michael joined the company in 2015 with Roeland joined the company in
Slide 4: Speakers
Speakers b. 1970, Finnish citizen b. 1963, German citizen Kari Tuutti heads the Long Products Chris de la Camp joined Outokumpu in business area in Outokumpu. He joined July 2016 as Chief Financial Officer. Outokumpu in 2011 and he had headed communications, marketing, investor Chris has an extensiv
Slide 5: 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 6: Best value creator in stainless steel by 2020
Best value creator in stainless steel by 2020 through customer orientation and efficiency Roeland Baan CEO
Slide 7: Best value creator in stainless steel by 2020
Best value creator in stainless steel 1. Customers by 2020 through 2. Shareholders customer orientation 3. Employees and efficiency Time bound: Back to basics sense of urgency 7
Slide 8: Improving performance: financial targets for 2020
Improving performance Financial targets for 2020 EBIT ROCE Gearing EUR 500 million 12% <35% 8
Slide 9: We have a strong foundation
We have a strong foundation Underlying EBIT, EUR million No. 1 in Europe, World-class 7 No. 2 in Americas assets -88 -101 Strong product Solid balance portfolio sheet -377 2013 2014 2015 9M/16 9
Slide 10: We have improved our profitability through self-help
We have improved our profitability through self-help European average base price, US average base price, USD/tonne Underlying EBIT, EUR million EUR/tonne 1,379 1,056 7 1,053 1,274 9M/15 9M/16 9M/15 9M/16 Nickel price, USD/tonne Ferrochrome price, USD/lb 12,636 1.08 9,194 0.90 -90 9M/15 9M/16 9M/15 9
Slide 11: Stainless steel is the answer to megatrends
Stainless steel is the answer to challenges presented by megatrends Urbanization Mobility Sustainability Stainless Stainless 11
Slide 12: Stainless steel demand continues to grow
Stainless steel demand continues to grow Other Consumer goods & +13% Medical Expected global +18% stainless steel real Global demand in 2020 +15% Automotive Stainless steel real demand in 2015 43.2 +13% 37.4 million tonnes Chemical, Petrochemical and Energy million tonnes Architecture, Building & Co
Slide 13: We focus on growth segments
We focus on growth segments Consumer goods, automotive, architecture, building and construction Distributors End-customers 5% Consumer goods & medical 22% Automotive 19% Architecture, building & construction 51% 49% Chemical, petrochem. and energy Metal processing & tubes 22% Heavy industries 23% 3%
Slide 14: We outperform our competitors in customer satisfaction
We outperform our competitors in customer satisfaction Net Promoter Score (NPS) reference values Differentiators 33 • Product quality 25 24 25 • Personnel: expertise 19 19 12 8 Irritators 2013 2014 2015 2016 • Flexibility& responsiveness Outokumpu Competition • Price >40 Excellent; >20 Good; 0-19 Sa
Slide 15: Our strategic plan
Our strategic plan VISION 2020: To be the best value creator in stainless steel by 2020 through customer orientation and efficiency. The best value in the industry for customers, shareholders and employees through: High World Class Manufacturing Commercial Safety Performing Americas Supply Chain Exc
Slide 16: Actions to achieve best-in-class safety
We have actions in place to achieve best-in-class safety Background Total recordable incident Top performers in any process industry frequency, TRIFR are the ones which have top safety • Safety audits at each performance too. We have been mill carried out in 2016 clearly behind best-in-class level.
Slide 17: High Performing Organization leading to efficiency
High Performing Organization SG&A costs at EUR 300 million in 2018 leading to efficiency 400 ~300 Background New organization Complex organization structure structure in place with multiple P&L centers. since June, reduction of 600 2015 2016 2018 Complicated and bureaucratic management model. SG&A c
Slide 18: World Class Supply Chain
World Class Supply Chain: better delivery performance, lower costs Background NWC release of EUR 200 High net working capital and poor million by end of 2016 Vigorous NWC delivery performance due to management complex, mill centric organization and supply chain. Our target 2015 reduction 2016 Recast
Slide 19: Manufacturing Excellence leading to higher productivity
Manufacturing Excellence leading to higher productivity Background • All plants assessed Negative productivity development • Productivity due to unharmonized processes, lack • Systematic to improve 2-3% of focus and systematic approach to improvement program continuous improvement. annually installe
Slide 20: Americas is the single biggest profitability lever
Americas is the single biggest profitability lever • Improvement of cost Background position and efficiency Americas’ underlying EBIT, State of the art mill in Calvert, Alabama. Highly efficient operations in • Gaining our fair share EUR million Mexinox, Mexico. The single biggest of the market, pro
Slide 21: Commercial Excellence driving profitable growth
Commercial Excellence driving profitable growth Key achievements so far: Background • Industry and region • Increased market specific strategy and share Strong product portfolio and good reputation among customers. market approach Need to leverage the best • Sales and pricing • Record-high opportuni
Slide 22: Must-win battles deliver EUR 500 million in 2020
Our must-win battles deliver EUR 500 million in 2020 Topline growth and cost efficiency based on self-help TOP LINE GROWTH • Increase volume through • Achieve 2-3% annual efficiency and productivity improvement debottlenecking 55% • Achieve 15% savings in • Richer mix through procurement improved ca
Slide 23: We are solidly on track
We are solidly on track We are driving The EUR 500 We have improved topline growth and million by 2020 our profitability efficiency through target is firmly through self-help our must-win within our reach battles 23
Slide 24: Americas – gearing up for growth
Americas – gearing up for growth Michael S. Williams Head of Americas
Slide 25: Strong foothold and good position in the Americas
Best value creator in stainless steel Strong foothold by 2020 through and good position customer orientation in the Americas and efficiency Significant further improvement potential Clear focus and in costs and topline strong execution drive growth 25
Slide 26: America's stainless market is growing
America’s stainless market is growing Total Americas cold rolled market 2016: 2,498 ktons Canada 2016-20: +16ktons 161 ktons CAGR: 2.4% US 1,627 ktons 2016-20: +132 ktons Mexico 339 ktons CAGR: 2.0% 2016-20: +65 ktons CAGR: 4.5% South America 370 ktons 2016-20: +38 ktons CAGR: 2.5% Source: SMR, Octo
Slide 27: The US market demand is recovering
The US market demand is recovering Prices still below historical averages Preliminary Demand is antidumping recovering: duties + 2% in dampening 2017* Stock levels Chinese Prices slightly imports increasing, below but below historical historical averages averages 27 *Source: SMR, October 2016
Slide 28: Distributors and service centers are the route-to-market in the US
Distributors and service centers are the predominant route-to-market in the US Distributors End-customers 11% Consumer goods 1% 3% Automotive 44% 16% Metal processing 74% 26% Heavy industries Construction & Architecture 25% Other On Sept 30, 2016, BA Americas avg. rolling 12 months, numbers above do
Slide 29: We are firmly established in the market
We are firmly established in the market Americas’ underlying EBIT, EUR million New Calvert Castle -7 -24 -43 Mexinox -91 • Strong #2 in the US -163 • 25% market share in NAFTA in 2016 YTD • Five consecutive quarters of delivery growth Q1 Q2 Q3 2014 2015 2016 • Full commercial capability in place in
Slide 30: We have significant improvement potential
We have significant improvement potential Cost improvement is the biggest lever Topline growth • 30% improvement in conversion cost • Volume increase achieved • Market share growth • 10% of SG&A cost reduced • Profitable sales growth through increased production capability and Further efficiency gai
Slide 31: Improvements achieved through the must-win battles
Improvements achieved through the must-win battles AMERICAS HIGH MANUFACTURING WORLD CLASS COMMERCIAL SAFETY PERFORMING EXCELLENCE SUPPLY CHAIN EXCELLENCE ORGANIZATION 31
Slide 32: New leaders shaping a High Performing Organization
New leaders shaping the team into a High Performing Organization Upskilled talent in SG&A New organization, commercial and cost reduction new top leaders operations teams on track Energized Business Continued and engaged service center in investment in people: San Luis Potosi, training and 96% OHI M
Slide 33: Manufacturing Excellence has a big profitability impact
Manufacturing Excellence has a big profitability impact, with visible results Operational Yield Debottlenecking Equipment improvement CAPL: Effectiveness: ongoing: 22% throughput increasing volume Every 1% = improvement achieved beyond nameplate up to USD 5 million capacity 33
Slide 34: World Class Supply Chain efforts yielding results
World Class Supply Chain efforts are already yielding results Immediate logistics optimization and spend reduction Ongoing long-term • Integrated supply development chain organization • On-time delivery • Transportation • Raw material Management System purchasing implemented, transportation • Raw ma
Slide 35: Commercial Excellence builds further inroads
Commercial Excellence builds further inroads into the market, with a lot of runway Becoming the preferred partner of Market share growth choice – earning our fair share • Outperforming the market in quality • Increased production capability • Recognized customer orientation • Broader portfolio • Unm
Slide 36: Award-winning customer orientation
Award-winning customer orientation 36
Slide 37: We are on our way to solid profitability
We are on our way to solid profitability Significant further Strong foothold Clear focus and improvement and good position strong execution potential in costs in the Americas drive and topline growth 37
Slide 38: Europe – from restructuring to profitable growth
Europe – from restructuring to profitable growth Roeland Baan CEO
Slide 39: Major restructuring steps completed
Best value creator in stainless steel by 2020 through Major restructuring customer orientation steps completed and efficiency Focus on Building on No. 1 improving efficiency market position 39
Slide 40: Healthy short-term market outlook in Europe
Healthy short-term market outlook in Europe Real Imports demand for stabilizing stainless on lower steel Inventories levels since Base prices remains below antidumping recovering stable long-term in place and raw averages to material support prices restocking stabilizing 40
Slide 41: Muted outlook in the mid-term
Muted outlook in the mid-term 4,826 4,829 254 221 Industrial & Heavy industry 660 708 Automotive & Heavy transport 854 779 Chemical, Petrochemical & Energy Flat products market demand to remain ABC & Infrastructure 913 1,076 stable in Europe 2,145 Consumer Goods & Medical 2,045 2016 2020 1,000 tonne
Slide 42: Restructured assets support earnings growth
Restructured assets Avesta Tornio support earnings growth Degerfors Europe’s underlying EBIT, EUR million Krefeld 116 85 Kemi 33 • No. 1 in Europe with 31% market share in 2016 YTD • Streamlined assets, clear roles for the mills • Restructuring in Germany nearing completion 2014 2015 9M/16 • Sales a
Slide 43: Europe's contribution to must-win battles
Europe’s contribution to must-win battles WORLD CLASS SAFETY AMERICAS SUPPLY CHAIN HIGH PERFORMING MANUFACTURING COMMERCIAL ORGANIZATION EXCELLENCE EXCELLENCE 43
Slide 44: Implementing High Performing Organization
Implementing High Performing Organization 1 2 Organization streamlined Drive for high performance • 1 P&L center, mills as cost centers • Focused team development plan • Reducing over 400 positions • Accelerating execution speed • Organizational Health Index • Driving for continuous improvement Surv
Slide 45: Manufacturing Excellence ensuring productivity improvement
Manufacturing Excellence ensuring productivity improvement of 3% Key achievements so far: • From mill P&Ls to integrated Tornio melting capacity: +15% Operations • New Head of Operations Up to 55% improvement in • Plant assessments completed AOD processing time in Avesta • KPIs and improvement targe
Slide 46: Cost savings through World Class Supply Chain
Significant cost savings through World Class Supply Chain End-to-End Planning Procurement Efficiency Net working capital Processes: statistical sales forecast, capacity forecasting Step Change in Spend Tools: Unifying order entry, 8% reduction in inventory planning and execution systems Renegotiatin
Slide 47: Commercial Excellence to drive more value
Commercial Excellence to drive more value Key achievements so far: Shift to more profitable products • Segmentation and regions: • Value-pricing • 10% increase in deliveries in the • Extended service offering most profitable regions • Specialty strategy for Asian • 1% additional margin through marke
Slide 48: Speed and strength through the decades
Speed and strength through the decades X2000 high-speed trains Customer need Our solution The X2 upgrade project, currently underway, The original stainless steel train frames will stay Sweden seeks to extend the trains’ service life by another in service into the 2020s and 2030s, saving both 20 yea
Slide 49: Extending the lead
Extending the lead Major Focus on Building on restructuring improving No. 1 steps completed efficiency market position 49
Slide 50: Long Products – creating value through efficiency
Long Products – creating value through efficiency and specialization Kari Tuutti Head of Long Products
Slide 51: Long Products strategy
Best value creator in stainless steel Take market share in by 2020 through standard products through customer orientation enhanced cost position and efficiency Grow in US with key Grow high value added customer segments business in Europe through new capabilities through focus on special and special
Slide 52: High performance long products
Creating value through high performance long products Bar & Rebar Wire Rod Semis Pipe 52
Slide 53: Diverse customer base & balanced geographical exposure
Diverse customer base & balanced geographical exposure End-customer industries Sales by region Construction Heavy 5% APAC industries Oil & gas 10% 10% 20% Consumer goods 5% Aerospace Europe 6% 50% Chemical 16% Automotive US 11% 40% Power Industrial generation components 11% 16% 53
Slide 54: Market: resuming growth after oil & gas slowdown
Market: resuming growth after oil & gas driven slowdown US: flat Global Long pricing Products expected as demand 5.5 imports million tons Demand to continue on Europe: in 2016 grow by a high level Some 2.5% improvement annually in in pricing; 2017-2020* imports flat *Source: SMR, October 2016 54
Slide 55: Gearing up after a challenging year
Gearing up after a challenging year Sweden S.Carolina UK Long Products deliveries, Long Products 1,000 tonnes underlying EBIT, EUR million 248 43 Florida 213 41 32 205 • Challenging past 12 months 179 7 172 -7 • Strong customer relationships • Continued low capital employed 2014 2015 2016YTD 2014 20
Slide 56: Significant improvement in cost competitiveness
Significant improvement in cost competitiveness Long Products Cash Conversion Cost GBP/EUR exchange rate 2009-2016 1.4 Normalization of Index (2015=100) GBP/EUR 100 1.2 75 1 2015 YTD 2016 YTD 2010 2012 2014 2016 56
Slide 57: Top priorities for Long Products in 2017
Top priorities for Long Products in 2017 HIGH PERFORMING WORLD CLASS SAFETY ORGANIZATION SUPPLY CHAIN MANUFACTURING COMMERCIAL AMERICAS EXCELLENCE EXCELLENCE 57
Slide 58: Driving growth in Americas
Driving growth in Americas Our target Fittings & Automotive & valves aerospace • Grow sales of high value added products to key segments. • Leverage existing relationships once oil & gas Service market resumes. Construction centers 58
Slide 59: Supplying rebar to major bridge project in Kuwait
Outokumpu supplying rebar to major bridge project in Kuwait Project overview Outokumpu Long Products is supplying more than 1,500 metric tons stainless steel rebar (Forta DX 2304) for The Sheikh Jaber al-Ahmad Al-Sabah project in Kuwait. The 36 km long causeway project is one of the largest infrastr
Slide 60: Driving growth through Commercial Excellence
Driving growth through Commercial Excellence Our target Hexagon & Special • Grow sales of high value square grades added specialty products to most demanding customers. • Leverage reduced cost Strategic base to gain further Service semis strategic semis customers. concepts customers 60
Slide 61: Growing sales of special products
Growing sales of special products Long Products product strategy overview Price index Round Bar – special grades & specification 200% Square Hex Special Square Bar 160% products Special Hexagon Bar Flat grades 140% Standard Prodec® & Rebar 120% products Round Bar – Classic Prodec® Standard 100% 61
Slide 62: Creating value through efficiency and specialization
Creating value through efficiency and specialization Grow in US with Take market share Grow high value key customer in standard added business in segments through products through Europe through new capabilities enhanced cost focus on special and specialist position products know-how 62
Slide 63: Improving profitability – debt declining
Improving profitability – debt declining Christoph de la Camp CFO
Slide 64: Short-term initiatives are yielding results
Best value creator in stainless steel by 2020 through Short-term initiatives customer orientation are yielding results and efficiency Initiation of must-win Strengthening of battles puts us on balance sheet solid track to achieve remains as key EUR 500 million priority target 64
Slide 65: Short-term initiatives are yielding results
Short-term initiatives are yielding results 1 2 3 Streamlined SG&A NWC reduction organization cost reduction by by at least effective EUR 100 million EUR 200 million ongoing progressing well 65
Slide 66: Profitability in 2016 has improved significantly
Profitability in 2016 has already improved significantly Underlying EBIT, EUR million 7 Target: Underlying EBIT EUR 500 million -88 -101 in 2020 FY16 underlying EBIT expected to be clearly positive -377 2013 2014 2015 9M/16 66
Slide 67: Strong cash flow improvement in 2016
Strong cash flow improvement in 2016 Net cash from operating activities, EUR million Solid underlying EBITDA 250 190 150 Net working capital release of EUR 149 50 34 million during 9M/16 -50 -34 Cash from investing activities supported -150 -126 by remainder of SKS disposal of EUR 2013 2014 2015 9M/
Slide 68: Must-win battles deliver EUR 500 million in 2020
Our must-win battles deliver EUR 500 million in 2020 Topline growth and cost efficiency based on self-help • Increase volume through efficiency and debottlenecking TOP LINE GROWTH • Richer mix through improved capability and selective sales Improvement visible strategy already in 2016 • Value based
Slide 69: Strengthening of the balance sheet is under way
Strengthening of the balance sheet is under way neg. Net debt and gearing 188% Targets 8.5 93% 8.2 5.5 • Net debt EUR 1.2 billion 69% 3.56 65% by the end of 2017 1.97 1.61 1.40 • Gearing <35% by 2020 • Net debt to underlying 2013 2014 2015 Q3/16 EBITDA <2 by 2020 Net debt, EUR billion Net debt/under
Slide 70: Stable and modest capex will support net debt reduction
Stable and modest capex will support net debt reduction Group CAPEX (accounting), EUR million Ongoing development projects 200 • Debottlenecking of the Kemi mine 183 FY 2016 EUR 10-20 million annually 150 154 ~ EUR 150 million • Fennovoima energy project 127 100 EUR 10-20 million annually • IT syste
Slide 71: Cost of financing to decline
Cost of financing to decline Debt distribution by source, Sept. 30, 2016 Financing costs of approx. EUR Total EUR 1,610 million Bonds, MEUR 496 120 million in 2016 will be reduced 14% Convertible bonds, MEUR 217 going forward by 1% 31% • Gross debt reduction L-t loans from financial 12% institutions
Slide 72: Financial recovery is under way
Financial recovery is under way Initiation of must- win battles puts Strengthening of Short-term us on solid track balance sheet initiatives are to achieve remains as key yielding results EUR 500 million priority target 72