Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Investor Day (November 2020)
30 slides from Outokumpu Oyj's investor day presentation, Nov 5, 2020
Slide 1: Outokumpu new strategy
Outokumpu new strategy De-risking the company for strong returns by the end of 2022 Heikki Malinen, President & CEO Pia Aaltonen-Forsell, CFO November 5, 2020
Slide 2: CEO’s reflections
CEO’s reflections 2 | November 5, 2020 2 | November 5, 2020
Slide 3: CEO’s perspective on current performance
CEO’s perspective on current performance Decisively managing the new market normal My observations Strong foundations, but performance has lagged Way forward • Target to de-risk the company to benefit all stakeholders • Strengthening accountability for performance: new Group operating model, active
Slide 4: Strong foundations support strategy execution
Strong foundations support strategy execution Megatrends drive High customer Leader in stainless steel satisfaction sustainability demand growth 72% Stable operations Great people and Turnaround in the and continuous strong safety Americas improvement performance culture 4 | November 5, 2020
Slide 5: Successfully mitigating the COVID-19 impacts
Successfully mitigating the COVID-19 impacts Safety Sales & Operations Financials • Rigorous safety measures • Top management and • Several measures taken in place since March sales people actively to improve free cash flow • 191 people infected with engaging with customers • Succesfully managing CO
Slide 6: Flat stainless and ferrochrome core businesses, Long Products in accelerated turnaround
Flat stainless and ferrochrome core businesses, Long Products in accelerated turnaround Core business Turnaround BA Europe BA Americas BA Ferrochrome BA Long Products • #1 in Europe in terms • #2 in the US in terms • Unique integration to • Broad range of bars, of volume of volume stainless steel wi
Slide 7: Performance lagging: Low and volatile profits, recent decline
Inoxum merger Market growth Geopolitics COVID 631 -19 485 Adjusted Performance EBITDA (million €) 263 165 309 263 172 lagging: Low and volatile -87 0.95 profits, recent 0.21 0.35 0.32 decline -0.18 -0.19 EPS (€) -1.07 -2.44 Q1-Q3 2013 2014 2015 2016 2017 2018 2019 2020 7 7 | November 5, 2020 Note: E
Slide 8: Current market requires decisive actions
Current market requires decisive actions COVID-19 impacting Low priced imports take Prices historically low stainless demand market share Stainless flat consumption, kt Market shares in Europe, % EU base price development, €/t Outokumpu vs. imports 1200 4000 30 800 28 3000 26 400 2000 24 0 2016 2017
Slide 9: My reflection on our performance – Stronger cost and capital discipline needed
My reflection on our performance – Stronger cost and capital discipline needed to improve competitiveness Unsatisfactory financial BAs Europe and Ferrochrome performance – margin, • significant operational improvements already achieved cash flow and debt • fixed cost base too high • more engagement
Slide 10: Way forward
Way forward 10 | November 5, 2020
Slide 11: Margin improvement, cash flow and de-leveraging as main sources of value creation
Margin improvement, cash flow and de-leveraging as main sources of value creation Phase 3: 2026– Customer’s Phase 2: first choice in sustainable 2023–2025 Investing in growth stainless Phase 1: and sustainability steel 2021–2022 Targeted productivity investments to improve margins Margin improvement
Slide 12: Our priority for 2021–2022: De-risking the company for strong returns
Our priority for 2021–2022: De-risking the company for strong returns Strengthen accountability for performance Lean & agile Active performance Financial Strong returns; organization management discipline Reliable partner to stakeholders Profitability improvement €200 <3.0x Europe Continue operation
Slide 13: Strengthened accountability for performance
Strengthened accountability for performance Lean and agile Active performance Financial organization management discipline • Simplified structure • Business Area Boards to • Priority to secure strong • De-layered organization manage performance balance sheet • New management team • Executional certa
Slide 14: Planned headcount reductions will improve cost competitiveness
Planned headcount reductions will improve cost competitiveness Legal headcount, average for the period 10,977 excluding VDM, AST, OSTP transaction in 2013/14 10,645 10,485 10,468 10,118 * < 9,000 ** 2016 2017 2018 2019 2020 Q3 2021 2022 * At the end of the period 14 14 | November 5, 2020 ** Planned
Slide 15: Business area Europe: Customer engagement at the core of the new strategy
Business area Europe: Customer engagement at the core of the new strategy Commercial excellence Cost & capital discipline Lean & agile organization Grow Strengthen Continue Accelerate Personnel De-layered specialty commodity raw material manufacturing measures structures grades sales grades sales co
Slide 16: Business area Americas: From turnaround to continuous improvement and growth
Business area Americas: From turnaround to continuous improvement and growth Commercial excellence Cost & capital discipline Lean & agile organization Strengthen Grow Continue Optimize Personnel measures commercial in automotive, slab cost freight costs in Mexico footprint in the appliances, and opt
Slide 17: Business area Ferrochrome: Strong potential for future value creation
Business area Ferrochrome: Strong potential for future value creation Increase Reduce Improve sales through reliance on spot fine concentrating new product market and plant capabilities development logistics costs and mining efficiencies Deep Mine investment Finalize the €283 million mine expansion
Slide 18: Business area Long Products: Turnaround driven by operational improvements & commercial excellence
Business area Long Products: Turnaround driven by operational improvements & commercial excellence Accelerated Reduce Roll-out Align headcount by manufacturing fixed costs to turnaround approximately excellence current volumes program 100 people program launched by the new management will deliver Ex
Slide 19: Improvement plans factor in potentially slow market recovery
Indexed market demand (Index, 2018 = 100) Flat products Flat products Long products1 Improvement Europe NAFTA/USMCA plans factor in potentially 100 97 84 94 98 100 89 78 86 90 100 97 78 93 96 slow market recovery 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Market deman
Slide 20: Trade defense actions by EU insufficient – Urgent need to address unfair market practices
Trade defense actions by EU insufficient – Urgent need to address unfair market practices and carbon leakage CO² footprint (per ton) 7.6 Imports have 5.4 European safeguards need to be renewed significantly and improved higher carbon 1.6 footprint Full potential of trade defense measures (anti-dumpi
Slide 21: Actions to strengthen sustainability leadership
Actions to strengthen sustainability leadership Current sustainability performance Targets Safety and • >50% reduction on incidents1 since 2015 • Ultimate goal zero accidents wellbeing • Organizational health index (OHI) in 2nd quartile • Ensure industry leader position Circular • >85% recycled cont
Slide 22: Value creation plan
Value creation plan 22 | November 5, 2020
Slide 23: €200 million EBITDA run-rate improvement delivered by end of 2022
€200 million EBITDA run-rate improvement delivered by end of 2022 Customer • Enhanced product mix in all business areas • Growth in selected segments excellence • Leverage specialty grades leadership • Increased raw material efficiency €200 Cost & capital • Maintenance optimization discipline • Stri
Slide 24: New steering model ensures diligent strategy execution
• Concrete initiatives in each business area to deliver bottom-line impact New steering • Disciplined weekly tracking of progress by model ensures Transformation Office led by CFO • Monthly CEO chaired Business Area Boards to diligent strategy address potential deviations execution • External commit
Slide 25: Significant progress to deleverage the company, but further improvement needed
Significant progress to deleverage the company, but further improvement needed Return to shareholders €0.2 billion Cumulative Net investments €0.2 billion Q3 2020 Target 2022 €0.9 billion CAPEX, €0.7 billion divestitures net debt operating €1.1 billion cash flow <3.0x Net debt / €1.3 billion Net deb
Slide 26: Priority to strengthen balance sheet to create shareholder value
Priority to strengthen balance sheet to create shareholder value Phase 1: 2021–2022 Phase 2: 2023–2025 Improved from low levels driven by Continued focus, supported by higher Operating cash flow €200 million EBITDA improvement and improving margins Following a review of the January-September 2020 fi
Slide 27: Focused capital allocation – annual CAPEX €180 million in 2021-2022
Focused capital allocation – annual CAPEX €180 million in 2021-2022 Annual capital expenditure • In 2021-2022 CAPEX focused on 250 ongoing strategic investments and retaining maintenance on a 200 sustainable level • Maintenance CAPEX optimized to 150 support the current operational level • Deep Mine
Slide 28: Closing remarks
Closing remarks 28 | November 5, 2020
Slide 29: The new Outokumpu leadership team
The new Outokumpu leadership team Heikki Malinen Pia Aaltonen-Forsell Thomas Anstots Niklas Wass Tamara Weinert President & CEO CFO EVP, Commercial, EVP, Operations, Acting President, Business Area Europe Business Area Europe Business Area Americas Martti Sassi Johann Steiner Jan Hofmann Stefan Erdm
Slide 30: The new strategy will take effect immediately
The new strategy will take effect immediately The stainless steel industry To unleash the full potential of We are externally committed remains under pressure the company a clear strategy to the financial targets, which and decisive execution is will de-risk the company. fundamental. • Asian imports