Q2 2019 results CEO Roeland Baan CFO Pia Aaltonen-Forsell - August 1, 2019 - Outokumpu
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Q2 2019 results CEO Roeland Baan CFO Pia Aaltonen-Forsell August 1, 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 | August 1, 2019
Speakers
Roeland Baan Pia Aaltonen-Forsell Tommi Järvenpää
President & CEO CFO Vice President, Investor Relations
3 | August 1, 2019
OUR VISION
Best value creator
in stainless steel
by 2020 through
customer orientation
and efficiency
4 | August 1, 2019
Strong operational execution secured satisfactory
performance in the second quarter Negative Other
operations’ result
partly offset by
Group adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million reversal of currency
derivative losses
EUR million
Better product
and customer
mix in all BAs
Efficiency gains and
lower truck freight
costs in the US
136 128
89 91
54
Net of
Pricing timing Ferro-
Q2/18 Q3 Q4 Q1 Q2/19 Q1/19 Deliveries Costs Others Q2/19
& mix and chrome
hedging
1) Indicative columns based on management estimates
5 | August 1, 2019
No significant changes in the stainless steel
markets in Q2
European US Average nickel price, Ferrochrome
average base price, average base price, USD/tonne benchmark price,
EUR/tonne* USD/tonne USD/lb.
796 790 1,433 1,433 12,369 12,258 1.20
1.12
-0.8% 0% -0.9%
Q1/19 Q2/19 Q1/19 Q2/19 Q1/19 Q2/19 Q1/19 Q2/19
* According to the CRU, they have been no longer able to accurately assess base prices from June 2018 onwards. Subsequently,
6 | August 1, 2019 the reported base price value in is derived from effective prices and the published alloy surcharges.
Europe continues to battle with cheap Asian
imports...
Third-country cold rolled imports1 into Europe, Third-country cold rolled imports2 into the US,
1,000 tonnes 1,000 tonnes
100 50 50 50
80 30% 40 40 40
23%
60 30 30 30
16% 16%
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, July 2019 (Q2’19 based on Apr-May)
2. Cold rolled, monthly average. Source: Foreign Trade Statistics, American Iron & Steel Institute, May 2019
7 | August 1, 2019 (Q2’19 based on Apr-May)
…keeping European base prices at low levels
European base prices1 (Germany)*, US base prices1, Transaction prices 304 stainless,
EUR/tonne USD/tonne USD/tonne
1,200 1,500 3,400
1,100
1,400 2,900
1,000
900 1,300 2,400
800
1,200 1,900
700
600 1,100 1,400
Europe USA China
1. 2mm sheet cold rolled 304 grade. CRU July 2019
* According to the CRU, they have been no longer able to accurately assess base prices from June 2018 onwards. Subsequently,
8 | August 1, 2019 the reported base price value in is derived from effective prices and the published alloy surcharges.
More pronounced Q3 dip in demand expected in
Europe
EMEA total stainless steel real demand1 Americas total stainless steel real demand1
2,500 1,000
2,000 750
1,500
500
1,000
250
500
0 0
1) Total stainless = rolled & forged products, excl. 13Cr tubes, profiles
9 | August 1, 2019
Source: SMR July 2019
Key figures Q2/19 Q2/18 Q1/19
Stainless steel deliveries 1,000 tonnes 584 668 621
Sales EUR million 1,701 1,883 1,715
Adjusted EBITDA EUR million 91 136 54
EBITDA EUR million 91 136 40
Net result EUR million 6 25 -39
Earnings per share EUR 0.01 0.06 -0.09
Operating cash flow EUR million 177 71 39
Net debt EUR million 1,307 1,211 1,370
Gearing % 49.8 45.1 51.6
Capital expenditure EUR million 49 63 50
Return on capital employed, ROCE % 2.9 5.5 4.3
Personnel at the end of the period 10,483 10,419 10,449
10 | August 1, 2019Strong product mix in BA Europe
Europe adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million
EUR million
Improved
customer &
product mix and
raw material
optimization
Reversal of
currency
derivative losses
in Q1/19
73 73
60
42
33
Net of
Pricing timing
Q2/18 Q3 Q4 Q1 Q2/19 Q1/19 Deliveries Costs Others Q2/19
& mix and
hedging
1) Indicative columns based on management estimates
11 | August 1, 2019BA Americas suffering from continuous distributor
destocking
Americas adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million
EUR million
Lower truck freight
costs in the US
10 13
-8
-22 -18
Net of
Pricing timing
Q2/18 Q3 Q4 Q1 Q2/19 Q1/19 Deliveries Costs Others Q2/19
& mix and
hedging
1) Indicative columns based on management estimates
12 | August 1, 2019Long products’ demand weakening in Europe
Long Products adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million
EUR million
Reversal of Q1
FX losses
Improved
customer and
13 product mix
9
6
-3
-1
Net of
Pricing timing
Q2/18 Q3 Q4 Q1 Q2/19 Q1/19 Deliveries Costs Others Q2/19
& mix and
hedging
1) Indicative columns based on management estimates
13 | August 1, 2019Ferrochrome deliveries remained at a high level,
costs increased due to planned maintenance
Ferrochrome adjusted EBITDA, Adjusted EBITDA quarter-on-quarter comparison1, EUR million
EUR million
Planned
maintenance
shutdown
83
46
39
30 31
FeCr
Q2/18 Q3 Q4 Q1 Q2/19 Q1/19 Deliveries Costs Others Q2/19
price
1) Indicative columns based on management estimates
14 | August 1, 2019Strong cash generation
Q2/19 cash flow, EUR million CAPEX estimate 2019, EUR million
250
200
150 Expansion, digitalization & other
Kemi mine
Annual maintenance
100
50
0
Provisions,
Working pensions, Operating Net cash Cash
EBITDA from flow
capital financial cash flow
investing before
charges
activities financing
and other
activities
15 | August 1, 2019Net debt decreased due to continued focus on net
working capital
Net debt, EUR billion Net debt/LTM adjusted EBITDA
IFRS 16 impact*
EUR 131 millionNew term loan signed to extend debt maturities
• EUR 400 million secured
Debt structure*, % Debt maturity profile*, EUR million term loan
• Signed in June
• Matures in 2023
17% 800 • Refinancing short term debt
• Available in July
32% • Drawn latest in Q4/19
600
16% 400
0% 200
6%
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
17 | August 1, 2019 * June 30, 2019Outlook for Q3 2019
• The stainless steel market is expected to be
challenging
• Deliveries expected to be lower in Europe and Adjusted EBITDA
remain at stable level in the Americas compared to
Q2 is expected to be
• Ferrochrome result will be negatively impacted by lower than in
lower benchmark price and weaker demand Q2/19 (€91 million)
• The planned maintenance shutdown of a
ferrochrome furnace is expected to have a total cost
impact of up to EUR 10 million during H2/19
18 | August 1, 2019Appendix
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
20 | August 1, 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
21 | August 1, 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
22 | August 1, 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
23 | August 1, 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 11% • 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
24 | August 1, 2019 Sales 2018Broadest product portfolio globally
Outokumpu stainless steel deliveries by product form
Stainless steel is not a single Chrome is the most important raw
product and there are thousands of material used in stainless steel
different grades and product forms. Cold rolled 70% production. Outokumpu has its own
They can be divided to flat and long chrome mine and ferrochrome works and
Hot rolled white coil 17%
products or semi-finished products, this makes us uniquely self-sufficient.
rolled products and products Quarto plate 3% Ferrochrome contains 50-54% of chrome.
finished by additional opetations. Long products 3% Most of our ferrochrome is used in our
Outokumpu has the broadest own melt shops and approximately 25%
Semi finished stailess steel products 6% is sold to other producers. Outokumpu is
product portfolio globally and use of
our steels reduces the carbon the only producer of Ferrochrome in
footprint of our customers’ products. Europe.
Flat
products
Slab Hot rolled Hot rolled white Quarto plate Cold rolled white Precision strip
black coil coil coil
Long Ferrochrome
products
25 | August 1, 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 10,600
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
26 | August 1, 2019We are the world leader in sustainable
steel production...
CO2 footprint, index Recycled content, %
Our
250 84
87 87 87 89 ferrochrome
operations’
200 CO2 footprint
150
is only
100
50
Estimated global
recycled content in
stainless steel
42%
of industry
0 average*
Outokumpu 2014 2015 2016 2017 2018
Europe & Japan
China
27 | August 1, 2019 * Source: ICDA LCI...and we have ambitious targets
CO2 emissions intensity, tonnes per stainless Outokumpu’s emissions forecast under SBT
steel conditions, tonnes of CO2 per tonne steel 1)
2 2.5
20% reduction by 2023
2.0
1.5
50% reduction 1.5
1
1.0
0.5
0.5
34% reduction
0 0.0
2014- 2017 2018 2023 2014- 2020 2025 2030 2035 2040 2045 2050
2016 target 2016
Steel industry approach
Upstream Indirect
Scope 1, 2 & 3 reduction
Transport & travel Direct
Absolute emissions
28 | August 1, 2019 1) Restated according to the target approved by SBT initiativeStainless steel demand is growing
Heavy industries Other
+12% +11%
Other
Heavy industries
Architecture, Building
& Construction
Architecture, Building Global +38% Expected global
& Construction stainless steel stainless steel
real demand in 2018 real demand in 2024
43.2 +21%
Automotive million tonnes
52.1
million tonnes
Consumer goods
Chemical, & Medical
Automotive
Petrochemical Consumer goods
+8%
& Energy & Medical
+23%
Chemical,
Petrochemical
& Energy
29 | August 1, 2019 Source: SMR, July 2019 +14%2% demand growth expected for 2019
Global Americas Europe APAC
5% 2% 2% 3% 4% 4% 4% 2% 2% 0% 2% 4% 4% 3% 1% -2% 2% 2% 3% 2% 2% 6% 3% 3% 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
USA Other Americas Other EMEA China Other APAC
1% 2% 0% 2% 4% 4% 3% 3% 1% 1% 3% 5% 4% 3% 4% -2% 2% 3% 5% 5% 4% 6% 3% 3% 3% 4% 5% 4% 5% 3% 2% 3% 4% 4% 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, July 2019
30 | August 1, 2019
Real demand for total stainless steel (rolled & forged products, excl. 13Cr tubes, profiles)Low 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
28.7 3.2 3.3 3.3
5.0 5.1 3.2 3.2 3.2
26.7 4.1 4.2 3.0 3.0
25.3 4.1
24.3 3.8 3.9 2.8
23.1 3.7 2.7 2.7
21.9 22.6 3.5 3.5 2.5 2.5 2.5
21.7 2.4
20.7 1.1 1.2 1.0 2.3
19.6 19.5 0.9 1.0
17.9 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 2.9 2.9 3.0 2.9 3.0
2.7 2.6 1.7 1.8
13.4 14.4 15.3 15.7
1.6 1.6 1.7 1.7 1.7
11.2 12.1 12.4 1.4
9.9
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 July 2019; CRU Capacity May 2019
31 | August 1, 2019
* Using Jan-May’19 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
Q3/19
1.5 1.04 USD/lb.
13,000
11,000 17 Jul 19
1
17 Jul 19 0.88 USD/lb.
9,000 14,230 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
May
Jun
Jul
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
May
Jun
Jul
Molybdenum3, USD / lb. Carbon steel scrap4, USD / tonne
14 400 17 Jul 19
350 266 USD/t
12
300
10
250
8 17 Jul 19
11.6 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
May
Jun
Jul
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
May
Jun
Jul
Data source:
1) Nickel Cash LME Daily Official
32 | August 1, 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 RotterdamBalance sheet
Assets (EUR million) Q2/19 Q1/19 Equities and liabilities (EUR million) Q2/19 Q1/19
Non-current assets Equity attributable to the equity holders of the Company 2,624 2,656
Intangible assets 595 589 Non-current liabilities
Property, plant and equipment 2,754 2,794 Non-current debt 710 703
Investments in associated companies and joint ventures 41 49 Other financial liabilities 0 0
Other financial assets 77 75 Deferred tax liabilities 12 12
Deferred tax assets 243 248 Defined benefit and other long-term employee benefit obligations 338 329
Defined benefit plan assets 79 89 Provisions 62 61
Trade and other receivables 2 2 Trade and other payables 34 35
Total non-current assets 3,790 3,847 Total non-current liabilities 1,156 1,140
Current assets Current liabilities
Inventories 1,428 1,448 Current debt 787 800
Other financial assets 25 21 Other financial liabilities 21 17
Trade and other receivables 739 748 Provisions 4 4
Cash and cash equivalents 190 132 Trade and other payables 1,598 1,579
Total current assets 2,381 2,348 Total current liabilities 2,410 2,399
Assets held for sale 19
TOTAL ASSETS 6,190 6,195 TOTAL EQUITY AND LIABILITIES 6,190 6,195
33 | August 1, 2019 Outokumpu has adopted IFRS 16 – Leases on January 1, 2019 using the modified retrospective approach.For more information, call Outokumpu Investor Relations or visit www.outokumpu.com/investors Thank you! Tommi Järvenpää Päivi Laajaranta Vice President – Investor Relations Executive Assistant Phone +358 9 421 3466 Phone +358 9 421 4070 Mobile +358 40 576 0288 Mobile +358 400 607 424 E-mail: tommi.jarvenpaa@outokumpu.com E-mail: paivi.laajaranta@outokumpu.com Aki Vesikallio Investor Relations Manager Mobile: +358 50 544 8925 #OutokumpuIR E-mail: aki.vesikallio@outokumpu.com
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