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Interim report Q2/2016
CEO Roeland Baan
CFO Chris de la Camp
July 26, 2016
2
Today‘s attendees of Outokumpu
Chris de la Camp
CFO
Tommi Järvenpää
Director
Investor Relations
Roeland Baan
CEO
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.
3
To be the best value creator in stainless steel by 2020 through customer orientation and efficiency.
4
Our vision
Gaining momentum in Q2
• Record-high deliveries and reduction
in production costs in the Americas
• Cost savings continued in Europe
• Net working capital released further
• Positive cash flow
• Net debt reduced
• Low ferrochrome prices impacting
Europe’s profitability
• Lower deliveries in Europe
5
Underlying EBIT, EUR million
-25
-67
-11
-20
-5
Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
~1% demand growth expected for 2016
6
Americas
+5% +5%
-2% -3% +1%
+4%
13 14 15 16f 17f 18f
Europe
0%
+4%
+0% +0% +1%
+2%
13 14 15 16f 17f 18f
APAC
+9% +7%
+2% +2% +4% +4%
13 14 15 16f 17f 18f
Global
+7% +6%
+1% +1% +3%
+4%
13 14 15 16f 17f 18f
USA
+6% +5%
-3% -1% +2%
13 14 15 16f 17f 18f
-2%
OTHER AMERICAS
+3% +4%
-3% -4%
+4% +4%
13 14 15 16f 17f 18f
OTHER EMEA
+8%
-2% -1% +0% +3%
+5%
13 14 15 16f 17f 18f
CHINA +12%
+8%
+3% +2% +3%
13 14 15 16f 17f 18f
+4%
OTHER APAC
+4% +5%
+0% +1%
+4% +5%
13 14 15 16f 17f 18f
Data source: SMR, May 2016
Real demand for total stainless steel (rolled & forged products, excl. 13Cr tubes,
profiles)
7
European base prices continued to be stable
European base prices1, EUR/tonne Third-country imports2 into Europe, 1,000 tonnes
1,000
1,050
1,100
1,150
1,200
1,250
2012 2013 2014 2015 2016
Germany
Import
penetration
decreased to
21.1% in
April-May
1. 2mm sheet cold rolled 304 grade. CRU July 2016
2. Monthly average. Source: Eurofer, July 2016
0
10
20
30
40
50
0
20
40
60
80
100
2009 2011 2013 2015 Q2/16
From rest of world From China
From rest of Asia Import penetration
%
8
American base price increases gaining
traction
US base prices1, USD/tonne Third-country imports2 into the US, 1,000 tonnes
1,200
1,250
1,300
1,350
1,400
1,450
2012 2013 2014 2015 2016
1. 2mm sheet cold rolled 304 grade. CRU July 2016
2. Monthly average. Source: Foreign Trade Statistics, July 2016
0
10
20
30
40
0
10
20
30
40
2009 2011 2013 2015 Q2/16
From rest of world From China
From rest of Asia Import penetration
Import
penetration
decreased to
21.0% in
April-May
%
9
Volatile nickel price still at low levels
1,000
2,000
3,000
4,000
5,000
2011 2012 2013 2014 2015 2016
Europe USA China
Nickel price, USD/tonne Transaction prices 304 stainless, USD/tonne
0
10,000
20,000
30,000
40,000
50,000
60,000
Q2 key financials
10
Key figures Q2/16 Q1/16 2015
Stainless steel deliveries, 1,000 tonnes 629 610 2,381
Sales, EUR million 1,379 1,386 6,384
Underlying EBITDA, EUR million 51 38 196
Underlying EBIT, EUR million -5 -20 -101
EBIT, EUR million 6 -12 228
Net result, EUR million -20 -41 86
Operating cash flow, EUR million 54 74 -34
Net debt, EUR million 1,485 1,551 1,610
Capital expenditure, EUR million 28 32 154
Personnel at the end of the period 10,645 10,920 11,002
Deliveries grew driven
by the Americas and
Long Products
Sales down by 0.5%
mainly due to lower
deliveries Europe
Underlying EBIT
improved driven by
higher delivery volumes
and decrease in
production costs
Positive operating cash
flow of EUR 54 million
• Market relatively healthy
• Uncertainties in general investment
climate impacting plate products
• Base prices remained flat
• Ferrochrome production 135,000
tonnes
• EMEA restructuring program savings of
EUR 15 million
• Adjustments:
• EUR 29 million redundancy costs
• EUR 7 million net effect of raw material-
related inventory and metal derivative
gains/losses
Europe’s profitability impacted by low
ferrochrome prices
11
Europe deliveries,
1,000 tonnes
Europe underlying EBIT,
EUR million
Deliveries decreased by 1.9% Decrease in profitability due to
lower ferrochrome prices, lower
stainless steel deliveries and
higher raw material prices
413
375 381
421 413 41
-15
33
42
29
Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
Americas achieved record-high deliveries and
improved efficiency
12
Americas deliveries,
1,000 tonnes
Americas underlying EBIT,
EUR million
• Number of positive market
developments
• Apparent consumption grew by 2.1%
• Ongoing antidumping investigation curbed
Chinese imports
• Distributors started to restock
• Further price increases announced
• 14% reduction in variable costs
• Base price in deliveries up by USD
70/tonne vs. Q1
• Adjustments:
• EUR 2 million redundancy costs
• EUR -1 million adjustment to earlier
insurance compensation
• EUR 8 million net effect of raw
material-related inventory and metal
derivative gains/losses
Deliveries increased by 9.9% to
record-high 177,000 tonnes
Underlying EBIT improved as a
result of higher deliveries,
improved efficiency and lower
production costs in Calvert
117
139 144
161
177
-50 -44
-41 -43
-24
Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
Long Products’ earnings impacted by
derivative losses
13
Long Products deliveries,
1,000 tonnes
Long Products underlying EBIT,
EUR million
• Growing demand across all markets,
especially in Europe
• Oil & Gas related project activity
remained subdued
• Base prices remained at Q1 levels in
both Europe and the US
• Order intake improved
• Adjustments:
• EUR 1 million redundancy costs
• EUR -0 million net effect of raw material-
related inventory and metal derivative
gains/losses
Deliveries up by 40% driven
both by internal slab deliveries,
as well as growth in external
customer deliveries
Underlying EBIT still negative as
higher deliveries were offset by
the GBP derivative losses of
approx. EUR 5 million, and a
weak product mix
62 58
42
50
70
4 3
-3 -4
-2
Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16
Positive operating cash flow
14
EUR million Q2/16 Q1/16 2015
Net cash from operating
activities 54 74 -34
Net cash from investing
activities -22 -17 239
Cash flow before financing
activities 32 57 205
Cash and cash
equivalents 156 166 186
• Net working capital release of EUR
117 million during H1/16 (excluding
provisions and pension obligations)
• Financing costs of EUR 28 million
• Overall liquidity reserves at EUR 800
million
• Net debt decreased by EUR 66
million
Net debt decreased to below EUR 1.5 billion
15
Net debt and gearing
3.56
1.97 1.61 1.55 1.49
188%
93%
69% 70% 69%
Net debt, EUR billion Gearing, %
2013 2014 2015 Q1/16
Debt maturity profile, EUR billion
0
0.4
0.8
1.2
Current debt Non-current debt Unutilized facilities
2016 2017 2018 2019 2020 2021+ Q2/16
EUR 250 million senior
secured bond issued
and maturities of
Finnish pension loans
extended
500
550
600
650
700
750
800
850
900
950
Q1 2016 Q2 Q3 Q4
SMR Feb'16 SMR Apr'16 SMR May'16
1,500
1,600
1,700
1,800
1,900
Q1 2016 Q2 Q3 Q4
SMR Feb'16 SMR Apr'16 SMR May'16
16
Real demand in Q3 expected to slow down
in EMEA and Americas
EMEA total stainless steel real demand1 Americas total stainless steel real demand1
1,000 tonnes 1,000 tonnes
1) Total stainless = rolled & forged products, excl. 13Cr tubes, profiles
-5% -4%
17
Business and financial outlook for Q3/2016
Outokumpu estimates for Q3
Delivery volumes to be sequentially flat
Pace of the efficiency improvements to
continue and the Group’s underlying
EBIT to turn positive
Ferrochrome operations will be
impacted by major maintenance work,
partly offsetting the positive impact of
higher ferrochrome prices
Market commentary
In Europe
• Stock levels among distributors at
historical averages
• Underlying demand in key sectors is
expected to continue relatively
healthy, but demand will be impacted
by seasonality
In Americas
• Stock levels among distributors below
historical averages
• Price increases are gaining traction
• Antidumping ruling expected to curb
unfair competition
Improving competitiveness and financial
performance
18
EBIT
EUR 500 million 1
Gearing
<35% 3
ROCE
12% 2
To be the
best value
creator in
stainless steel by
2020 through
customer orientation and
efficiency.
PORTFOLIO AMERICAS MANUFACTURING
EXCELLENCE
WORLD CLASS SUPPLY
CHAIN SAFETY
The best value in the industry for
customers,
shareholders and employees
through:
HIGH PERFORMING
ORGANIZATION
Financial targets for 2020
19
Immediate actions for a step change in cost
and competitive position
SG&A cost reduction
EUR 100 million by
end of 2017
NWC reduction
At least EUR 200
million by end of 2016
1
2
3
New organizational
set-up
Net debt
EUR 1.2 billion
by end of 2017
Save the date Outokumpu Capital Markets Day on November 29 in Helsinki
20
Appendix
21
22
(MEUR) Apr-June
2016
Jan-Mar
2016
Sales 1,379 1,386
Cost of sales -1,287 -1,309
Gross margin 92 76
Other operating income 36 26
SG&A costs -112 -104
Other operating expenses -10 -11
EBIT 6 -12
Share of results in associated companies
and joint ventures 1 -1
Financial income and expenses
Interest expenses -25 -26
Net other financial expenses -3 -8
Result before taxes -22 -47
Income taxes 1 6
Net result for the period -20 -41
Income statement
Balance sheet
Assets (MEUR) June 30, 2016 Mar 31, 2016
Non-current assets
Intangible assets 495 496
Property, plant and equipment 2,911 2,924
Investments in associated companies
and joint ventures 62 62
Other financial assets 46 45
Deferred tax assets 21 22
Defined benefit plan assets 23 47
Trade and other receivables 6 36
Total non-current assets 3,565 3,632
Current assets
Inventories 1,153 1,147
Other financial assets 27 45
Trade and other receivables 773 694
Cash and cash equivalents 156 166
Total current assets 2,109 2,052
Total assets 5,674 5,684
23
Balance sheet
Equity and liabilities (MEUR) June 30, 2016 Mar 31, 2016
Total equity 2,148 2,229
Non-current liabilities
Non-current debt 1,162 870
Other financial liabilities 7 9
Deferred tax liabilities 9 16
Defined benefit and other long-term
employee benefit obligations 413 388
Provisions 114 111
Trade and other payables 47 48
Total non-current liabilities 1,752 1,442
Current liabilities
Current debt 478 848
Other financial liabilities 47 38
Provisions 34 17
Trade and other payables 1,215 1,111
Total current liabilities 1,774 2,014
Total equity and liabilities 5,674 5,684
24
Cost analysis
• Raw materials account for around 60% of
the total operative costs of the Group
• Energy and other consumables account for
10-15% of the total operative costs
• Personnel expenses 10-15% of the total
operative costs
• Other cost of sales includes e.g. freight,
maintenance and rents and leases
Operative cost components in 2015 Comments
Raw materials
Personnel
Energy and consumables
Other cost of sales
SG&A (excl. personnel and D&A)
D&A total
25
26
Headcount reductions
13,327
9,300
766
436
1,123
357 1,345
8,000
9,000
10,000
11,000
12,000
13,000
14,000
Total headcount reduction
Personnel per business area at the end Q2/16
7,561
2,170
634 280
Europe
Americas
Long Products
Other operations
27
Balanced customer base across industries
End-customers
15%
17%
5% 4%
17%
22%
20%
Consumer goods & medical
Automotive
Architecture, building & construction
Chemical, petrochem. and energy
Metal processing & tubes
Heavy industries
Other
56%
44%
Distributors
Figures for full year 2015
Austenitic
(CrNi)
56%
Austenitic
(CrNiMo)
16%
Ferritic
21%
Duplex
4%
Other
3%
28
Broadest product portfolio across stainless steel
Deliveries by product grade in 2015 Outokumpu product forms
Ferrochrome Slab Quarto plate
Hot rolled
black coil
Hot and cold rolled
white coil Precision strip
Cast semis Rolled and
forged billet Bar
Rebar Wire rod Welded pipe
29
Fully integrated production asset base
Europe Americas Long Products Total
Tornio Finland
Avesta Sweden
Krefeld Germany
Degerfors Sweden
Calvert USA
Mexinox Mexico
New Castle USA
Sheffield UK
Richburg USA
Degerfors Sweden
Wildwood USA
Melting 1,450 450 900 450 3,250
Hot rolling 1,450 900 870 3,220
Finishing - Cold rolling - Quarto plate - Long products
900
250
500
150
500
250
60
25
40
40
20
2,735
30
Low capacity utilization in China, on
healthier level in Europe and Americas
Source: SMR Real Demand May 2016; CRU Capacity Jun 2016
* Using 2016-to-date imports share as forecast for 2016-2019
Europe Americas
1.4 1.6 1.6 1.7 1.7 1.7 1.7 1.7
0.9 0.9
0.9 0.9 0.9 0.9 1.0 1.0
2.3 2.4
2.6 2.6 2.6 2.6 2.7 2.7
3.2 3.3 3.3 3.3
3.1 3.2 3.2 3.2
20
12
20
13
20
14
20
15
20
16
f
20
17
f
20
18
f
20
19
f
Demand covered by Rest Americas
Demand covered by USA
CRU Capacity
2.8 2.7 2.5 2.8 2.9 2.9 3.0 3.0
0.6 0.8 1.1 0.9 0.9 0.9 0.9 0.9
3.5 3.5 3.6 3.7 3.7 3.8 3.9 4.0
4.9 4.9 4.7 4.6 4.5 4.6 4.6 4.6
20
12
20
13
20
14
20
15
20
16
f
20
17
f
20
18
f
20
19
f
Demand covered by Imports*
Demand covered by EU Mills
CRU Capacity
[CR, Mtonnes] [CR, Mtonnes]
Asia
10 11 12 13 13 13 14 14
5
5 6 6 6
6 7
7 15
17 18 18 19
19 20
21
18
19
22
23
25 25 26 26
20
12
20
13
20
14
20
15
f
20
16
f
20
17
f
20
18
f
20
19
f
Demand covered by Rest Asia
Demand covered by China
CRU Capacity
[CR, Mtonnes]
0
50
100
150
200
250
300
350
400
450
500
,0
10,000
20,000
30,000
40,000
50,000
60,000
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
[Ktonnes] [USD/t] LME stocks (rhs)
LME cash price (lhs)
31
Nickel price development
• Nickel prices rallied in April on signs of Chinese manufacturing recovery, weaker US dollar and higher oil prices and hit the
highest level of the quarter of $9,555/t in early May.
• Subsequently prices lost most of the gains but started to increase again in June and ended the quarter at $9,415/t.
• The average price of the quarter of 8,826 USD/tonne, was 3.8% higher than 8,504 USD/tonne in the first quarter of 2016.
Update: July 8, 2016
Tommi Järvenpää
Director– Investor Relations
Phone +358 9 421 3466
Mobile +358 40 576 0288
E-mail: [email protected]
Päivi Laajaranta
Executive Assistant
Phone +358 9 421 4070
Mobile +358 400 607 424
E-mail: [email protected]
For more information, call Outokumpu Investor
Relations or visit www.outokumpu.com/investors
32
