Outokumpu Oyj · OMXHEX:OUT1V
Outokumpu Oyj — Q4 2012 Earnings Presentation
51 slides from Outokumpu Oyj's earnings presentation, March 2013
Slide 1: Creating the new global leader in stainless steel
Creating the new global leader in stainless steel IR presentation March 2013
Slide 2: 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 3: Outline
Outline 1. Q4 Outokumpu highlights 2. New Outokumpu financials 3. 2013 priorities 4. 2013 market outlook 5. Q1 outlook 3 March 2013
Slide 4: Continued growth for stainless steel globally – Europe declined in 2012
Continued growth for stainless steel globally– Europe declined in 2012 +7% +21% +8% -2% +6% +6% +3% 0% +3% EMEA APAC AMERICAS +9% +4% +2% Orange = Change 2010 -2011 Green = Estimate 2012 TOTAL WORLD Blue = Forecast 2013 4 Data source: SMR, February 2013 March 2013 Real demand for total stainless (ro
Slide 5: Highlights in Q4 and full year 2012
Highlights in Q4 and full year 2012 • Weakening economy from Q2 2012 onwards • FY 2012 stainless steel deliveries grew by EUR million Q4/12 FY2012 3% to 1.4 million tonnes Stainless steel deliveries 1) 337 1,428 • Declining stainless prices and product mix resulted in weaker result Sales 1,004 4,538
Slide 6: Reduction in working capital close to EUR 1 billion since June 2011
Reduction in working capital close to EUR 1 billion since June 2011 EUR million DAYS 1 800 170 1 600 150 1 400 130 1 200 110 1 000 90 800 600 70 400 50 Working capital Working capital turnover days* 6 * Working capital turnover days = (End-of-quarter working capital / Quarterly sales) * Days in quar
Slide 7: Outline
Outline 1. Q4 Outokumpu highlights 2. New Outokumpu financials 3. 2013 priorities 4. 2013 market outlook 5. Q1 outlook 7 March 2013
Slide 8: New Outokumpu overview
New Outokumpu overview • Outokumpu finalized the acquisition of New Outokumpu 2012 Sales 1,2) Inoxum, the stainless steel unit of ThyssenKrupp on Dec 28th 2012 Total Sales EUR 9,400 million • Outokumpu is the new global leader in stainless steel and high performance alloys • 16,000 employees with st
Slide 9: New Outokumpu overview
New Outokumpu overview High Performance Stainless and Alloys • Leading position globally in the high value added high performance stainless and alloys business • Sales of EUR 3,050 million in 20121) • Multiple production facilities in Germany, Sweden, UK, and US Stainless Coil Stainless Coil Stainle
Slide 10: New Outokumpu organization and reporting
New Outokumpu organization and reporting • Outokumpu’s financial reporting will be based on the new organization structure with four Business Areas (BAs) with sales, profitability, production and supply chain management responsibility Stainless Coil Stainless Coil High Performance Stainless APAC EME
Slide 11: EBITDA and EBIT by Business Areas
EBITDA and EBIT by Business Areas 2012 EBITDA1) per Business Area 2012 EBIT1) per Business Area EUR million EUR million 150 50 100 0 50 -50 0 -100 -50 -150 -100 -150 -200 2) EMEA Americas APAC HPSA Other EMEA Americas APAC HPSA Other 2) 11 1) Excludes non-recurring items and remedy entities. 2) Othe
Slide 12: Combined Group facts and figures
Combined Group facts and figures Pro-forma 2012 2012 • Non-recurring items at Outokumpu included EUR million Reported Excl. non- mainly Inoxum transaction related costs, recurring items P100 related costs, aged inventory write Sales 9,400 9,400 downs as well as impairments of production Gross margin
Slide 13: Capital structure
Capital structure 2012 2011 Q4/12 Q3/12 Q4/11 EUR million Net cash generated from operating activities 1) 266 338 45 83 132 Net interest-bearing debt at the end of period 2) 2,620 1,720 2,620 1,714 1,720 Equity 2,953 2,050 2,953 2,773 2,050 Equity-to-assets ratio at the end of period, % 30.6 39.3 30
Slide 14: Loan note development
Loan note development EUR million 94 Loan note increase driven mainly by 54 Calvert investment project 307 • >50% of the increase was due to Capex mainly related to finalization of the Calvert investment program • NWC change of EUR 54 million includes NWC 1,229 increase in Calvert of EUR 130 million
Slide 15: Outline
Outline 1. Q4 Outokumpu highlights 2. New Outokumpu financials 3. 2013 priorities 4. 2013 market outlook 5. Q1 outlook 15 March 2013
Slide 16: New Outokumpu Strategy Roadmap
New Outokumpu Strategy Roadmap Restructuring + Growth = Perfor- mance New Transform Ensure Full integration Deliver on Ramp-up Expand Leverage Develop efficiency company financial and new synergies US presence Ferrochrome HPSA APAC projects structure stability culture Mill closures P150 project New
Slide 17: Annual synergy savings of EUR 200 million
Annual synergy savings of EUR 200 million, out of which EUR 50 million already in 2013 Total synergy savings by category Production site closures ~35% • Planned closures of meltshops in Germany (Krefeld and Bochum) 15 % • Possible additional reduction of thin cold rolling production capacity in Swed
Slide 18: EUR 50 million synergy savings in 2013
EUR 50 million synergy savings in 2013 • Krefeld meltshop closure plans progressing well 2013 synergy savings by category and the meltshop will be ramped down in Q4 2013: Sales & admin Production • October 2012: reduction from 3 to 2 shifts synergies optimization • July 2013: reduction from 2 to 1 s
Slide 19: Up to EUR 150 million of the savings achieved during the first 2 years
Up to EUR 150 million of the savings achieved during the first 2 years (annual) Synergy savings over time (cumulative) 250 200 Max 150 Min 100 50 0 2013 2014 2015 2016 2017 Note: synergy saving target of EUR 200 million includes closures of Krefeld and Bochum meltshops but excludes possible savings
Slide 20: Outokumpu global production overview
Outokumpu global production overview– healthy balance between hot and cold with planned closures 5 000 4 500 1,400 Capacity reduction 4 000 Balance for 3 500 hot and cold 3 000 325 Plate & Long 2 500 Cold rolled 1) 2 000 Melting 2) 3,500 1 500 2,795 1 000 500 0 Melting Finished products 20 1) Sales
Slide 21: Ferrochrome expansion
Ferrochrome expansion Outokumpu Ferrochrome production • Unique low cost position as Europe’s only 600 ferrochrome producer with access to the 500 only known chromite reserves in the EU 400 (1,000 tonnes) • The EUR 410 million Ferrochrome 300 investment program finalized in Q4 of 200 2012 ahead of s
Slide 22: Ramp-up US presence
Ramp-up US presence Production base in USA and Mexico (end of 2012) • Outokumpu as the new low-cost, high-quality supplier in NAFTA – strengthening the already strong market share of 20% • Broader product range and highly competitive Calvert, Alabama cost position • Target to largely ramp-down hot b
Slide 23: New efficiency programs for 2013-2014
New efficiency programs for 2013-2014 1. Cost optimization: Project P150 • New cost savings program, targeting saving of EUR 150 million on EBITDA level • Fully implemented in 2014, considerable impact expected already in 2013 • Main focus areas: • Additional procurement savings • Optimization in IT
Slide 24: Outline
Outline 1. Q4 Outokumpu highlights 2. New Outokumpu financials 3. 2013 priorities 4. 2013 market outlook 5. Q1 outlook 24 March 2013
Slide 25: Industrial Production as the major driver for Stainless Growth
Industrial Production as the major driver for Stainless Growth… Growth Economic Industrial Production 2013 - 2017 Growth Prospects Index 2005=100 160 Fundamental APAC 140 120 +6% growth 100 2011 2013 2015 2017 160 Recovery from Americas 140 120 +4% economic crisis and continued 100 growth 2011 2013
Slide 26: Growing Stainless consumption mainly in APAC
… leads to growing Stainless consumption mainly in region APAC, and to some extent in regions Americas and EMEA [Total stainless real demand in 1,000 t] Ø Growth 37.4 36.1 2013-2017 34.7 33.3 31.9 30.6 29.9 27.5 +4% 25.6 24.7 23.8 22.8 21.7 19.9 20.5 APAC 18.5 3.7 3.8 +3% 3.5 3.6 Americas 3.2 3.4 3.
Slide 27: Decrease in transaction prices in 2012
Decrease in transaction prices in 2012 Average transaction prices for 2mm cold rolled 304 stainless steel sheet USD/t USD/t 2011 2012 Change in % 5 000 Europe 4,000 3,308 -17.3% USA 3,905 3,182 -18.5% 4 500 China 3,289 2,668 -18.9% 4 000 3 500 Europe 3 000 USA 2 500 China 2 000 1 500 Jan Mar May Jul
Slide 28: Market expected to remain weak during H1 2013
Market expected to remain weak during H1 2013 – growth seen in H2 2013 EMEA stainless steel apparent consumption 1) Americas stainless steel apparent consumption 1) 1,000 tonnes 1,000 tonnes 2011 2011 2 000 1 000 2012 2012 1 900 950 1 800 2013f 900 2013f 1 700 850 1 600 800 1 500 750 1 400 700 1 300
Slide 29: Outline
Outline 1. Q4 Outokumpu highlights 2. New Outokumpu key facts 3. 2013 priorities 4. 2013 market outlook 5. Q1 outlook 29 March 2013
Slide 30: Business outlook – First quarter 2013
Business outlook – First quarter 2013 Global demand for cold rolled stainless steel is expected to increase by 4% in 2013, but Market to decline by 1% in Europe. Overall growth is expected to be weaker in the beginning of the year, and to accelerate during the second half of 2013. Stainless steel pr
Slide 31: Longer term targets – full year 2013
Longer term targets – full year 2013 Stronger performance during the second half of 2013 expected, mainly due to progress Overall in ramp-ups of Calvert and FeCr, targeted price increases. Capital expenditure is expected to decline to approximately EUR 350 million in 2013 Capex (FY 2012 combined ent
Slide 32: New Outokumpu
New Outokumpu The new global leader in stainless steel and high performance alloys Leading market #1 stainless steel with 40% market Balanced customer base across presence share in Europe and 12% globally all key industry sectors Broadest product portfolio A strong position in the attractive Product
Slide 33: Slide 33
Slide 34: Appendix
Appendix 34 March 2013
Slide 35: Deliveries and Sales by Business Areas
Deliveries and Sales by Business Areas 2012 Sales by BA 1,3) 2012 Deliveries by BA 2,3) Total Sales EUR 9,400 million Total 2,9 million tonnes EMEA 50% Americas 9% EMEA 59% Americas 12% APAC 9% HPSA 32% APAC 10% HPSA 19% 35 1) Unaudited management estimates. Excluding AST, including Willich. March 2
Slide 36: Sales by Business Areas with quarterly split
Sales by Business Areas with quarterly split 2012 management estimates of Sales split per BA 1,2) (tot. Sales EUR 9,400 million) EMEA 50% Americas 9% APAC 9% HPSA 32% Outokumpu’s yearly sales by BA split also gives a fair view of the quarterly split per BA. EUR million 2012 management estimate of qu
Slide 37: FY 2012 Operative cost break-down
FY 2012 Operative cost break-down Split of total operative costs (Sales-EBIT) incl. one-offs and AST total costs 1) 17% 10% 4% 1% Personnel D&A Impairments Materials Other 68% 37 1) Unaudited management estimates. March 2013
Slide 38: Management estimates of EBITDA and EBIT by quarter
Management estimates of EBITDA and EBIT by quarter 2012 management estimate of EBITDA % by quarter FY2012 Q1 Q2 Q3 Q4 EUR -171 1) million -45% 52% 23% 70% 2012 management estimate of EBIT % by quarter FY2012 Q1 Q2 Q3 Q4 EUR - 685 2) million 8% 27% 19% 45% 38 1) Comparable pro-forma figure is EUR -14
Slide 39: New Outokumpu opening balance sheet
New Outokumpu opening balance sheet Assets (as of Dec. 31, 2012) MEUR • PPA: Provisional negative goodwill of EUR 353 Non-current assets million as indicated in the listing particulars Intangible assets 629 was reduced to a EUR 7 million goodwill. Property, plant and equipment 3,697 • From closing o
Slide 40: New Outokumpu opening balance sheet
New Outokumpu opening balance sheet Equity and liabilites (as of Dec. 31, 2012) MEUR Total equity 2,953 • The total non-current interest bearing Non-current liabilities liabilities increased from EUR 1,197 million to EUR 2,974 million and include the IB 1) liabilities 2,974 ThyssenKrupp loan note of
Slide 41: Overcapacity of melting capacity in stainless production
Overcapacity of melting capacity in stainless production– prior to planned Bochum meltshop closure EMEA Coil HPSA Americas Coil APAC Total Finland Germany 1) Sweden UK & USA Calvert Shanghai San Luis Potosí Melting 2) 4,300 1,600 800 500 500 9006 3,970 HR 1,600 800 700 870 3,120 CR 750 940 425 105 3
Slide 42: Balanced stainless production structure after Bochum closure
Balanced stainless production structure – after the planned Bochum meltshop closure EMEA Coil HPSA Americas Coil APAC Total Finland Germany 1) Sweden UK & USA Calvert Shanghai San Luis Potosí Melting 2) 3,500 1,600 500 500 9006 3,170 HR 1,600 700 870 3,120 CR 750 940 425 105 350 270 290 Coil Coil Co
Slide 43: Raw materials price development
Raw materials price development – declining trend during 2012 Nickel (LME cash, daily) Ferrochrome 22 500 1,50 21 500 1,40 20 500 1,30 19 500 USD / lb USD / ton 18 500 1,20 17 500 1,10 16 500 1,00 15 500 14 500 0,90 Quarterly contract price, MB Spot price, MB 43 March 2013
Slide 44: Continued strong Ferritics capabilities for new Outokumpu
Continued strong Ferritics capabilities for new Outokumpu Ferritic Competence today Ferritic options for the future Possible bottlenecks from closure of Bochum can be counterbalanced by Tornio and Krefeld/Benrath Melting today done at Terni, Tornio, Bochum • Melting will continue at Bochum. and Kref
Slide 45: Remedy divestment considerations
Remedy divestment considerations • Outokumpu is committed to the divestiture of Inoxum’s integrated stainless mill in Terni, Italy as well as Outokumpu’s service center in Germany and Terninox service center in Italy. Remedy excludes the Tubificio di Terni unit (tubular business) • Remedy also inclu
Slide 46: Consideration for Inoxum
Consideration for Inoxum As of December 31, 2012 EUR million Comments Cash payment to ThyssenKrupp 1,000 Was paid to ThyssenKrupp at closing Shares issued to ThyssenKrupp (29.9% of Outokumpu issued new shares equivalent to 29.9% of 491 1) combined company) total share capital existing at the time of
Slide 47: Balanced customer base across industries
Balanced customer base across industries Sales by customer segment Sales by end-customer segment Healthy balance between end-customer segments across both investment and consumer driven industries Other Consumer Distributors 12 % goods & Medical 41% Heavy 17 % industries 8% Automotive 9% Architectur
Slide 48: Balanced customer base across industries
Balanced customer base across industries • Through our dedicated sales teams for each customer segment we ensure in-depth understanding of customer needs and materials requirements. • Customers will benefit from our material selection experience gained from various environments and applications. Hou
Slide 49: Broadest product portfolio across stainless steel
Broadest product portfolio across stainless steel …. Deliveries by product grade (mgt estimates 2011, excl. Terni) • New Outokumpu has a broad product portfolio to serve all customers 1) • Significantly higher share of ferritic grades High Performance leads into reduced sensitivity to Nickel Other A
Slide 50: Corrosion resistance and high performance alloys
… and high performance alloys High Zirconium alloys Titanium alloys HPA Nickel alloys High performance resistance Corrosion austenitic grades Duplex grades Standard Cr-Ni Mo Stainless austenitic grades Standard Cr-Ni austenitic grades Ferritic grades Martensitic grades Low Visual appearance Focus Ma
Slide 51: A strong position in the attractive high performance alloys business
A strong position in the attractive high performance alloys business • #2 market position globally with healthy profitability and growth outlook Material performance • Highly tailored material solutions to the most demanding environments in terms of material Zirconium alloys performance Titanium all