Q1 2019 results CEO Roeland Baan CFO Pia Aaltonen-Forsell - May 7, 2019 - Outokumpu
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Q1 2019 results CEO Roeland Baan CFO Pia Aaltonen-Forsell May 7, 2019
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 the date of this presentation. By their nature, forward-looking statements involve risks and uncertainties, because they relate to events and depend on circumstances that may or may not occur in the future. Future results of Outokumpu may vary from the results expressed in, or implied by, the forward- looking statements, possibly to a material degree. Factors that could cause such differences include, but are not limited to, the risks described in the "Risk factors" section of Outokumpu’s latest Annual Report and the risks detailed in Outokumpu’s most recent financial results announcement. Outokumpu undertakes no obligation to update this presentation after the date hereof. 2 | May 7, 2019
Speakers
Roeland Baan Pia Aaltonen-Forsell Tommi Järvenpää
President & CEO CFO Vice President, Investor Relations
3 | May 7, 2019
OUR VISION
Best value creator
Adjusted
EBITDA of
€750
million
in stainless steel
by 2020 through
ROCE of
12%
customer orientation
and efficiency Gearing of
Becoming the best value creator in stainless steel
Shareholders Employees Customers
Total shareholder return since Organizational health index2 Absolutely and very satisfied
beginning of 20161 customers3
1.
quartile
Outokumpu Outokumpu
2.
37% quartile
3.
63%
Acerinox quartile
9% Competitors
Aperam 4.
quartile
58%
-8%
2016 2017 2018
1) 1.1.2016 – 30.4.2019
2) McKinsey organizational health index
5 | May 7, 2019 3) Percentage, Outokumpu customer satisfaction survey 2018
First quarter reflects challenging markets
Group adjusted EBITDA, EUR million Adjusted EBITDA quarter-on-quarter comparison1, EUR million
Seasonally Insurance claim
higher and lower
deliveries benchmark price
Mainly currency
derivative losses
133 136 128 Lower base prices
offset by improved raw
89 material & product mix
54
Net of
Pricing timing Ferro-
Q1/18 Q2 Q3 Q4 Q1/19 Q4/18 Deliveries Costs Others Q1/19
& mix and chrome
hedging
1) Indicative columns based on management estimates
6 | May 7, 2019
Base prices didn’t provide support in Q1
European US Nickel price, Ferrochrome price,
average base price, average base price, USD/tonne USD/lb
EUR/tonne* USD/tonne
796 1,492 1.24
730 1,433 12,369
11,516 1.12
Q4/18 Q1/19 Q4/18 Q1/19 Q4/18 Q1/19 Q4/18 Q1/19
* According to the CRU, they have been no longer able to accurately assess base prices from June 2018 onwards. Subsequently,
7 | May 7, 2019 the reported base price value in is derived from effective prices and the published alloy surcharges.
The EU’s permanent safeguards have proven to be
effective…
Third-country cold rolled imports1 into Europe, Third-country cold rolled imports2 into the US,
1,000 tonnes 1,000 tonnes
30%
100 50 50 50
80 21% 40 40 40
19% 19%
60 30 30 30
40 20 20 20
20 10 10 10
0 0 0 0
From rest of world From China From rest of world From China
From rest of Asia Import penetration From rest of Asia Import penetration
1. Cold rolled, monthly average. Source: Eurofer, April 2019 (Q1’19 based on Jan-Feb)
2. Cold rolled, monthly average. Source: Foreign Trade Statistics, American Iron & Steel Institute, Jan 2019
8 | May 7, 2019 (Q1’19 based on Jan 2019 actual only, due to US government shutdown)
…but European prices have remained at low levels
European base prices1 (Germany)*, US base prices1, Transaction prices 304 stainless,
EUR/tonne USD/tonne USD/tonne
1,200 1,550 4,000
1,100 1,450
1,000 3,000
1,350
900
1,250
800 2,000
700 1,150
600 1,050 1,000
Europe USA China
1. 2mm sheet cold rolled 304 grade. CRU May 2019
* According to the CRU, they have been no longer able to accurately assess base prices from June 2018 onwards. Subsequently,
9 | May 7, 2019 the reported base price value in is derived from effective prices and the published alloy surcharges.
Key figures Q1/19 Q1/18 Q4/18
Stainless steel deliveries 1,000 tonnes 621 644 534
Sales EUR million 1,715 1,671 1,586
Adjusted EBITDA EUR million 54 133 89
EBITDA EUR million 40 140 92
Net result EUR million -39 49 27
Earnings per share EUR -0.09 0.12 0.07
Operating cash flow EUR million 39 39 43
Net debt EUR million 1,370 1,086 1,241
Gearing % 51.6 40.9 45.1
Capital expenditure EUR million 50 37 104
Return on capital employed, ROCE % 4.3 7.2 7.0
Personnel at the end of the period 10,449 10,111 10,449
10 | May 7, 2019Increasing market share and seasonally higher
deliveries in Europe
Europe adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million
EUR million
Seasonally Loss of €12 million
higher from currency derivatives,
deliveries as well as German pension
plan adjustment in Q4/18
83
73
Lower contract
60 prices
42
33
Net of
Pricing timing
Q1/18 Q2 Q3 Q4 Q1/19 Q4/18 Deliveries Costs Others Q1/19
& mix and
hedging
1) Indicative columns based on management estimates
11 | May 7, 2019Americas had a weak quarter caused by high
inventories of expensive raw materials
Americas adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million
EUR million
Improved product and
raw material mix partly
offset by lower spot price
10 13
-6
-22 -18
Net of
Pricing timing
Q1/18 Q2 Q3 Q4 Q1/19 Q4/18 Deliveries Costs Others Q1/19
& mix and
hedging
1) Indicative columns based on management estimates
12 | May 7, 2019Softening demand and US steel tariffs impacted
Long Products’ profitability
Long Products adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million
EUR million
UK pensions
changes in
Q4/18
13
9
4
-3
-1
Net of
Pricing timing
Q1/18 Q2 Q3 Q4 Q1/19 Q4/18 Deliveries Costs Others Q1/19
& mix and
hedging
1) Indicative columns based on management estimates
13 | May 7, 2019Ferrochrome deliveries remained at high level,
costs increased
Ferrochrome adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million
EUR million
Insurance claim
in Q4/18
Mainly higher
83 coke price
42 46
39
30
FeCr
Q1/18 Q2 Q3 Q4 Q1/19 Q4/18 Deliveries Costs Others Q1/19
price
1) Indicative columns based on management estimates
14 | May 7, 2019Operating cash flow developed favorably thanks to
increased focus on working capital
Cash flow, EUR million CAPEX estimate 2019, EUR million
250
32 -33 200
150 Expansion, digitalization & other
40 39 -35 Kemi mine
3 Annual maintenance
100
Provisions, Net cash
Working Operating Cash
EBITDA pensions, from
50
capital cash flow flow
financial investing before
charges activities financing 0
and other
activities
15 | May 7, 2019Net debt increased purely due to the IFRS16 impact
Net debt, EUR billion Net debt/LTM adjusted EBITDA
IFRS 16 impact*
EUR 131 millionOutlook for Q2 2019
• No significant changes expected in the stainless
steel markets in Q2
Adjusted EBITDA
• Deliveries expected to remain at a similar level to Q1 is expected to be
higher than in
• Positive impact from higher ferrochrome contract
price partly offset by planned maintenance work in Q1/19 (€54 million)
the Tornio ferrochrome operationsAppendix
Becoming the best value creator
Vision Best value creator Must- Safety
in stainless steel by Win High performing
2020 through customer battles organization
orientation and efficiency
Operational excellence*
Commercial excellence
Americas
Digital transformation**
Strengths Strong market position World-class assets
Broad product portfolio Solid balance sheet
Purpose
Working towards a world that lasts forever
* Includes previous must-win battles of World-class supply chain and manufacturing excellence as of 2019
** New must-win battle as of 2019
19 | May 7, 2019Adjusted EBITDA, € million
Our path to +110
deliver an +100 -100
+160
adjusted EBITDA +320
of
€750
million in 2020 2015 Efficiency Commercial
gains growth
Market 2018 Efficiency Commercial
gains growth
2020
target
Approximate figures, based on management estimates
20 | May 7, 2019How to close the gap to €750 million by 2020
Gains by
Europe Americas Other
Europe 20201
€150
million in total
Commercial growth
€50 €60
€110 • Higher deliveries
• Value-added products
• Customer & product mix
• Market share in Mexico
million • Service solutions • New products
€110
million from
commercial
€160 €100 €40 €20
growth million from
efficiency gains Efficiency gains
• Raw material optimization •
€160
Mexinox restructuring
• General procurement • Logistics costs reduction
million • 3% annual productivity • Raw material optimization
increase • Delivery reliability
Other • Digital manufacturing
Americas € 20
€100 million Total gains
€270
million in total
€150 €100 €20
million
21 | May 7, 2019 1Approximate figures, based on management estimates. Benchmark year 2018Fully integrated production asset base
Europe Americas Long Products Total
Avesta + Krefeld +
Tornio Degerfors Calvert Mexinox Sheffield Richburg Degerfors Fagersta
1,000 tonnes Nyby Dillenburg
Finland Sweden USA Mexico UK USA Sweden Sweden
Sweden Germany
Melting 1,450 450 900 450 3,250
Hot rolling 1,450 900 870 3,220
Finishing
- Cold rolling 750 130 500 350 250
- HWB 150 120 150 2,720
- Quarto plate 150
- Long 25 40 40 65
products
22 | May 7, 2019We focus on growth segments
Consumer goods, automotive, architecture, building and construction
Distributors End-customers
Consumer goods &
medical • Long term contracts
• Spot contracts 9% Chemical, petrochem.
and energy
• Large quantities
• Standard products and 2%
Automotive
grades 12 % • Special grades
Distributors
• Austenitic cold rolled and 46 %
End-customers Architecture, building &
construction • Ferritics and duplex
54% 3%
tubular products
Heavy industries • Technical advice
• Speculative behavior 11 %
Metal processing &
• Develop relationships and
• Value added services Other
4%
tubes
13 %
receive volume discounts
23 | May 7, 2019 Sales 2018Broadest product portfolio globally
Outokumpu stainless steel deliveries by product form
Chrome is the single most important raw
Stainless steel is not a single material used in stainless steel
product and there are thousands of Cold rolled 70% production. Outokumpu has its own
different grades and product forms. chrome mine and ferrochrome works and
Hot rolled white coil 17%
They can be divided to flat and long this makes us uniquely self-sufficient.
products or semi-finished products, Quarto plate 3% Ferrochrome contains 50-54% of chrome.
rolled products and products Long products 3% Most of our ferrochrome is used in our
finished by additional opetations. own melt shops and approximately 25%
Semi finished stailess steel products 6% is sold to other producers. Outokumpu is
Outokumpu has the broadest
product portfolio globally. the only producer of Ferrochrome in
Europe.
Flat
products
Slab Hot rolled Hot rolled white Quarto plate Cold rolled white Precision strip
black coil coil coil
Long Ferrochrome
products
24 | May 7, 2019 Cast semis Rolled and Bar Rebar Wire rod Wire
forged billetContinued cost efficiency improvements
Operative cost components* SG&A costs, € million
SG&A (excl. personnel and D&A) Our target is to achieve further
354 342
D&A total
€160
Other cost of 331
307
sales
275
Energy and
consumables
million
Personnel
from efficiency gains by 2020
2014 2015 2016 2017 2018
Raw materials
Personnel at the end of period
• Raw materials account for around 60% of 12,125
the total operative costs of the Group 11,002 10,60 10,141 10,449
• Energy and other consumables account Increase driven
for 10-15% of the total operative costs by acquisition of
Fagersta
• Personnel expenses 10-15% of the total Stainless
operative costs
• Other cost of sales includes e.g. freight,
maintenance and rents and leases
2014 2015 2016 2017 2018
*Jan-Dec 2018
25 | May 7, 2019Decreasing short-term financing is a key priority
Debt structure*, % Debt maturity profile*, EUR million
17% 800
34% 600
16% 400
0% 4% 200
14% 15% 0
2019 2020 2021 2022 2023+
Bonds Convertible bonds Current debt
Long-term loans Pension loans Non-current debt
Finance leases Short-term loans Unutilized facilities
Commercial paper
* March 31, 2018
26 | May 7, 2019We are the world leader in sustainable
steel production...
Recycled content, %
Our
89 ferrochrome
85 87 87 87
84 operations’
CO2 footprint
is only
Estimated global recycled
42%
content in stainless steel of industry
average*
2013 2014 2015 2016 2017 2018
* Source: ICDA LCI
27 | May 7, 2019...and we have ambitious targets
CO2 emissions intensity, tonnes per stainless steel
2
1.5
1
0.5
0
2014- 2017 2018 2023
2016 target
Upstream Indirect
Transport & travel Direct
28 | May 7, 2019Stainless steel demand is growing
Heavy industries Other
+11% +20%
Other
Heavy industries
Architecture, Building
& Construction
Architecture, Building Global +35% Expected global
& Construction stainless steel stainless steel
real demand in 2018 real demand in 2024
43.2 +20%
Automotive million tonnes
51.9
million tonnes
Consumer goods
Chemical, & Medical
Automotive
Petrochemical Consumer goods
+14%
& Energy & Medical
+22%
Chemical,
Petrochemical
& Energy
Source: SMR, April 2019
29 | May 7, 2019
+10%3% demand growth expected for 2019
Global Americas Europe APAC
5% 3% 2% 2% 4% 5% 4% 2% 2% 0% 2% 4% 4% 3% 1% 1% 0% 2% 3% 2% 2% 6% 3% 2% 2% 4% 5% 4%
18 19f 20f 21f 22f 23f 24f 18 19f 20f 21f 22f 23f 24f 18 19f 20f 21f 22f 23f 24f 18 19f 20f 21f 22f 23f 24f
USA Other Americas Other EMEA China Other APAC
1% 3% -1% 1% 3% 4% 3% 3% 2% 1% 3% 4% 4% 4% 4% 1% 2% 2% 4% 5% 4% 6% 3% 3% 2% 4% 5% 4% 5% 3% 1% 3% 4% 5% 4%
18 19f 20f 21f 22f 23f 24f 18 19f 20f 21f 22f 23f 24f 18 19f 20f 21f 22f 23f 24f 18 19f 20f 21f 22f 23f 24f 18 19f 20f 21f 22f 23f 24f
Data source: SMR, April 2019
30 | May 7, 2019 Real demand for total stainless steel (rolled & forged products, excl. 13Cr tubes, profiles)Demand expected to develop strongly in Q2
EMEA total stainless steel real demand1 Americas total stainless steel real demand1
+5% +4%
2,200 1,000
2,100
900
2,000
1,900 800
1,800 700
1,700
600
1,600
1,500 500
1) Total stainless = rolled & forged products, excl. 13Cr tubes, profiles
31 | May 7, 2019
Source: SMR April 2019Low capacity utilization in China,
on healthier level in Europe and Americas
Asia Europe Americas
[CR, Mtonnes] [CR, Mtonnes] [CR, Mtonnes]
5.0 4.9 4.8 4.9 4.9 4.9
29.4 3.3 3.3
5.0 5.1 3.2 3.2 3.2 3.2
27.1 4.2 4.2 3.0
4.1 3.0
25.0 3.8 3.9 2.8
23.9 3.7 2.7 2.7
22.8 21.9 22.7 3.5 3.5 2.5 2.5 2.5
21.3 20.7 2.4
19.5 1.1 1.2 1.2 2.3
19.2 0.9 1.0
17.5 17.8 18.3 0.6 0.8 1.1 1.0
6.7 6.9 0.9 1.0
16.7 0.9 0.8 0.9
6.3 0.8
15.2 6.1 0.8
5.7 5.8
5.5
5.3
2.8 2.7 2.9 2.9 2.9 2.9 2.9
15.3 15.8 2.6 1.6 1.7 1.7 1.7 1.7 1.8
12.1 12.4 13.4 14.4 1.4 1.6
9.9 11.2
2012
2013
2014
2015
2016
2017
2018
2019f
2012
2013
2014
2015
2016
2017
2018
2019f
2012
2013
2014
2015
2016
2017
2018
2019f
Demand covered by Rest Asia Demand covered by Imports* Demand covered by Rest Americas
Demand covered by China Demand covered by EU Mills Demand covered by USA
CRU Capacity CRU Capacity CRU Capacity
Source: SMR Real Demand April 2019; CRU Capacity February 2019
32 | May 7, 2019 * Using 2018 imports share as forecast for 2019Raw materials - price development
Nickel1, USD / tonne Ferrochrome2, USD / lb
17,000 2
European contract price European spot price
15,000
Q2/19
1.5 1.20 USD/lb
13,000
11,000 18 Apr 19
1
18 Apr 19 0.91 USD/lb
9,000 12,630 USD/t
7,000 0.5
Jan'17
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan'18
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan'19
Feb
Mar
Apr
Jan'17
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan'18
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan'19
Feb
Mar
Apr
Molybdenum3, USD / lb Carbon steel scrap4, USD / tonne 18 Apr 19
14 400
288 USD/t
12 350
300
10
250
8 18 Apr 19
12.1 USD/lb 200
6 150
4 100
Jan'17
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan'18
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan'19
Feb
Mar
Apr
Jan'17
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan'18
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan'19
Feb
Mar
Apr
Data source:
1) Nickel Cash LME Daily Official
33 | May 7, 2019 2) Contract - MetalBulletin - Ferro-chrome Lumpy CR charge basis 52% & Cr quarterly major European destinations Cr ; Spot: Platts Charge Chrome 52% DDP Europe
3) MetalBulletin - Molybdenum Drummed molybdic oxide Free market Mo in warehouse; 4 Ferrous Scrap Index HMS 1&2 (80:20 mix) $ per tonne fob RotterdamFor more information, call Outokumpu Investor
Relations or visit www.outokumpu.com/investors
Tommi Järvenpää
Vice President – Investor Relations
Phone +358 9 421 3466
Mobile +358 40 576 0288
E-mail: tommi.jarvenpaa@outokumpu.com
Aki Vesikallio
Investor Relations Manager
Mobile: +358 50 544 8925
E-mail: aki.vesikallio@outokumpu.com
Päivi Laajaranta
Executive Assistant
Phone +358 9 421 4070
Mobile +358 400 607 424
E-mail: paivi.laajaranta@outokumpu.com
34 | May 7, 2019You can also read
