Investor site visit to Calvert December 3, 2015
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.
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Introduction Johanna Henttonen SVP – Investor Relations
Outokumpu - Global leader in stainless steel Sales of EUR 6.8 billion by business area 2)
85% recycled content raw materials
Over 11,000 people in over 40 countries
Stainless steel is 100% recyclable
Coil EMEA Coil Americas APAC Quarto Plate
6% 6% 7% 6% 59%
16%
Long Products
Strong market position 1) ~30%Europe ~22% NAFTA ~1% Asia
Other operations
~53% of sales is direct sales to end-customers 3) Consumer goods Automotive Architecture & Building
6%
Chemical, petrochemical and energy Metal processing
Heavy industries
19%
23%
22%
5%
20% 5%
Other 1) 2) 3)
Market shares 2014 are calculated based on cold rolled deliveries. Source: Eurofer January 2014, AISI January 2014, CRU January 2014 External sales 2014 Direct sales only, ~53% of Outokumpu’s total sales in 2014
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We have strong footprint in all key markets Avesta
Tornio Kemi
Degerfors Nyby
Sheffield
New Castle
Krefeld & Benrath Shanghai
Calvert Wildwood
Dillenburg Richburg
Dahlerbrück
San Luis Potosí
Integrated melt shop, hot and cold rolling Other mills Mine Service center
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Key building blocks for Outokumpu turnaround Overcome setbacks in Calvert and turn Coil Americas profitable
Achieve targeted savings on time, continue cost optimization
Continue good progress in Coil EMEA and achieve targeted utilization and efficiency rates
Maintain moderate capex level and focus on NWC
Reduce net debt to below EUR 1.5 billion by end of 2017 and decrease financing costs
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Coil Americas update Michael Williams President – Coil Americas
Established market presence with long-term customer relationships in Americas Total stainless demand 2014, kt
•
• • •
Coil Americas represents 16% 1) of Group sales Market share of approx. 22% 2) in NAFTA region Experienced sales team Strong brand in the market and widest product range in NAFTA
Coil Americas, capacities kt
Calvert Melting
Hot rolling
250
Mexinox
2,440 900 Mills
350
870
Sales office
150 3)
Cold rolling
350
250
BRA 440 Rest of SAM 170
Source: SMR Real Demand September 2015, Total stainless= rolled & forged 1) Outokumpu sales 2) Market shares 2014 are calculated based on cold rolled deliveries. Source: Eurofer January 2014, AISI January 2014, CRU January 2014. 3) Continuous mill plate
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Phasing of the Calvert mill ramp-up Commercial ramp-up ongoing
Technical ramp-up completed
One year delay due to technical issues in 2014 and weak market Full commercial capacity over the coming years 2018 first year of steady-state operations
2011 • • • •
2012
2013
All production steps tested and capabilities proven Stabilize production Complete product offering Improve efficiencies
2014
2015
2016
2017
• Ramp-up to full production capacity and mix optimization • Maximize synergies of Mexinox & Calvert • Market penetration and margin improvement
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Q3: Coil Americas improved while suffering from difficult markets and declining prices Coil Americas stainless deliveries, kt 137
Q3/14
126
Q4/14
126
Q1/15
111
Q2/15
Q3/14
-28 Q4/14
Q1/15
•
Decisive measures to improve Coil Americas’ volumes and profitability ongoing
•
More active approach in the market resulted in improved order intake
Q3/15
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-50 Q2/15
Distributor customers continued in destocking mode: low nickel price
134
Coil Americas underlying EBIT, EUR million
-33
•
-44
•
Deliveries up 21%
•
Base price down USD 135/t in deliveries
•
Slightly improved performance •
Higher volumes, better utilization rates, cost improvements
•
Positives largely offset by difficult market and low prices
Q3/15
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Coil Americas turnaround plan key levers Commercial Operations
Cost streamlining
•Fill the mill •Customer management •Market and customer strategy •Contract business development
•Yield •Operational excellence •Quality •On-time delivery
•Contract review and management •Logistics •Optimize personnel
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Growing along with the market NAFTA cold rolled market size (kt) and Outokumpu market share
2,500
OTK +120
OTK +100
Third party +100
OTK +130
Third party +100
30%
22%
2,000 20%
1,500 10%
1,000 500
0% 2006
2007
2008
2009
CR consumption in NAFTA
2010
2011
2012
2013
CR capacity in NAFTA
Source: AISI October 2015, SMR September 2015, Outokumpu
2014 2015f 2016f 2017f Outokumpu CR market share
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Development of US stainless steel prices Transaction prices 304 stainless steel*, USD/t
5,000
32,000
4,500 4,000
22,000
Base prices 304 stainless steel*, USD/t
1,450 1,400 1,350
3,500 3,000
12,000
2,500 2,000
2,000
2011 2012 2013 2014 2015 Nickel price
1,300 1,250 2011
US transaction price
Source: CRU November 2015, Metal Bulletin November 2015 * 2mm sheet cold rolled 304 grade
2012
2013
2014
2015
US base price
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Cold rolled import development 50
40%
40
30%
30
24%
21%
20%
20 10
10%
7%
6% 3%
2%
0%
Jan-14 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-15 Feb Mar Apr May Jun Jul Aug Sep
0 2007 2008 2009 2010 2011 2012 2013 2014
Thousands
US cold rolled imports, kt
Imports from rest of world Imports from Asia Taiwan import penetration %
Imports from Europe China import penetration % Total import market penetration %
Source: Foreign Trade Statistics November 2015 Import market penetraction calculated from total market supply (AISI May 2015)
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US cold rolled market composition Cold rolled market in the US, total 1.64 mt
5% 6%
3%
Service Center (Stock)
43%
Service Center (Bill of Material) Automotive
21%
Pipe&Tube Appliance OEM
23%
Source: AISI, 2014
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Destocking continues Stainless steel stock levels at US (flat products) distributors1 ,days
120 110 100
USA US long-term average
2
90 80 Jan-14 Apr-14
Jul-14 1) 2)
Oct-14 Jan-15 Apr-15
Source: MSCI Jan 2008 – Sep 2015 average
Jul-15
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Coil Americas market approach Our channel structure in the Americas
Distributors 68%
Sales by end-use customer segments
Consumer goods & Medical; 45%
Other; 12% Heavy industries; 2% Metal processing & Tubes; 12%
End users & processors 32%
Architecture, Building & Construction; 2%
Automotive; 27%
USA: distributors 75%, end-users 25% Mexico: distributors 25%, end-users 75% Based on Q3 2015 data. December 3, 2015
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Outokumpu customer profile in NAFTA
2nd
tier distributors
1st tier distributors ~50% of OTK volume
~10% of OTK volume
Demand from distributor segment currently weak due to low nickel price and elevated stock levels
End customers ~40% of OTK volume Our customers include: Samuel
Electrolux
Wabash
ThyssenKrupp
Rolled Alloys
Reliance Group
Faurecia
Ryerson
Fischer
O’Neal
Casa de Moneda
Olympic
Specialty Rolled
Ta Chen
Franke
Whirlpool
GE December 3, 2015
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Synergies through optimized work share Mexinox Regional • Main focus on Mexico (~50%) cross regional supply when • lack of capabilities of local mill • production cost advantages Product specialization • Automotive ferritics • Medium & light gauges • Bright Annealed/Rolled-On/ Polished • Blanks & Circles
Calvert Chicago sales office
Regional • Main focus on the US (~70%)
Product specialization • Austenitics • 72” wide • Polished • Continuous mill plate
Sao Paulo sales office Buenos Aires sales office
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Calvert ramp-up update Calvert quarterly delivery volumes, kt
150 Production in melt shop and cold rolling showing good quality 100
Calvert production capacity
50
0 2011
2012 Cold Rolled
2013
2014
Melt shop
900 kt
Hot rolling
870 kt
Cold rolling
350 kt
2015
Hot band / rolled
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Key areas for operational improvement
Delivery performance
Product portfolio expansion • •
Yield improvements
Light gauge 430 polished
Right first time (Quality)
Reliability
Scrap ratio
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Highly cost competitive operations in Calvert Cost components
Raw materials • Scrap ratio of 80-85% • Annual austenitic scrap usage of ~400 kt
Energy • Long-term contracts with Alabama Power and Sempra Gas
Labor • Highly competitive labor costs • Workforce flexibility
Raw materials
Energy
Labor
Others
Others • Logistics • Maintenance and reliability • Rents and leases
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Calvert mill Finishing Connection Bay
Hot Annealing Line
Carbon Hot Strip Mill
Cold Annealing Line
Slab Yard Cold Rolling Mills River Terminal Stainless Melt Shop
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Calvert - fully integrated and state of the art stainless steel mill Calvert mill strengths
Latest production technology and equipment • Full product range • High quality • High efficiency Unique 72 inch coil capability Efficient logistics Low energy costs Good availability of scrap and other raw materials Workforce versatility Hot rolling shared service with AM/NS, 25 year contract
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Building on existing strengths Strong regional producer with longterm customer relationships in Americas
Integrated, cost competitive operations across NAFTA
Broad portfolio that supports and develops regional demand
Leveraging Outokumpu’s leading technical expertise
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Appendix
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Outokumpu Americas milestones
1976 Mexinox established 2007 Calvert greenfield project (USD 1.5 bn investment) 2010 First coil produced at Calvert mill 2011 First 74” coil produced at Calvert mill 2012 First melt at Calvert mill Dec. 2012: Inoxum transaction: two leaders each with over 100 year legacy come together to form the new Outokumpu • Over 2,500 employees form the Americas team • 2014 Record months in sales and production December 3, 2015 • • • • • •
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Outokumpu Mexinox
• • • • • • •
Cold rolling capacity of 250,000 tonnes annually Founded in 1976: 37 years of cumulative know-how in stainless steel Excellent reputation – highly respected both in the US and in Mexico Focus on ferritic, tailored material solutions Close collaboration with end-customers Strong market share in the Mexican market Largest importer into the US
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Outokumpu Mexinox
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