Download - Annual General Meeting of Rautaruukki Corporation 18 March 2014 - Review by the President and CEO
Review by thePresident & CEO
18.3.2014Sakari Tamminen
1
Sakari Tamminen
Annual General Meeting ofRautaruukki Corporation18 March 2014
Contents
• Strategic focus areas
• Financial performance in 2013
• Ruukki’s transition to a construction and steel specialist
• Business environment in the steel industry
• Ruukki as part of a competitive, Nordic special steels company
18 March 2014 Sakari Tamminen2
Strategic focus areas
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3
Ruukki’s business areas
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Back to profitability
Net sales €292mOperating loss €10m
Ruukki Building Systems
Accelerating sales growth of special steel products
Net sales €1 679mOperating profit €27m
Ruukki Metals
Growth from roofing products and energy-efficient components
Net sales €430m*Operating profit €36m
Ruukki Building Products
* 2013 figures Net sales €2.4 billionPersonnel 8 600
Cutting costs by improving operating efficiency
Energy-efficient construction is a growing business opportunity
18 March 20145 Sakari Tamminen
Products utilising renewable energy
Lower lifecycle costs Increased owner value Lower environmental impact
Products saving energy
Energyprices
Norms,regulations
Growingenvironmental
awareness
Ruukki Solar thermal roof
Ruukki Solar façade
Energy piles Energy panels and recyclable Life panels
Ruukki Building Products
Foundation and infrastructure construction products: steel piles, retaining wall structures, guard rails, main water and district heat pipes
Wall and roof components: sandwich panels, roofing sheets, façade claddings
Residential roofing products: steel roofs, rainwater systems and safety products, as well as installation services
Renovationand
installation
Ruukki is the market leader in Finland
Net sales €430m
Sakari Tamminen18 March 20146
Sakari Tamminen7
Ruukki’s energy panel system saves energy costsItella’s logistics centre exceeded air tightness expectationsAccording to Itella’s environmental values, energy efficiency is one way the company can reduce its carbon footprint.
The building’s measured air tightness rate (q50) was 0.7 m3/(h m2), when existing regulations in Finland require a rate of 4.0 m3/(h m2)
Annual energy savings are around €25 000 - €40 000, or about 20% of the building’s total energy costs
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Ruukki Building Systems
Nordics, Baltics, CEEFrame and envelope structure design, manufacture and installation
RussiaConcept buildings, material deliveries without installation
Single-storeyconstruction
Sports stadiumconstruction
Commercialconstruction
Developmentunit
Agriculturalconstruction
Sakari Tamminen18 March 2014
Net sales €292m
Sakari Tamminen9
The world’s largest gasification power plant fired by waste fuel (Mälarenergi, Sweden) Ruukki delivered the steel frame and precast concrete base blocks for the gasification plant, along with 12,000 m2 of sandwich panels and 2,300 m2 of insulated roofing panels.
The boiler house building features contemporary architectural design and has visually impressive external walls created using Ruukki’s colourful sandwich panels.
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Metals– Ruukki transforming strongly to special steels
Standard steels: 930M€
Hot-rolled special steelsHigh-strength and wear-resistant steels
Hot-dip galvanised special steels
Colour-coated special steels
Special steels: €558m*
Stainless steeland aluminium: €122m
Hot-rolled plate and strip
Cold-rolled and metal coated
Colour-coated
Standard plate and strip products: €772m
Structural hollow sections
Tubes and profiles: €228m
Precision tubes
Other tubes and profiles
18 March 2014 Sakari Tamminen* 2013 figures
Products
Segments and customers
Geographical regions
Nykyinenliiketoiminta
• Growth from new customers• Raex 400 tubes, Optim 700 Plus MH –
structural hollow sections• Optim 700 plates up to 60 mm• Pural farm & Hiarc reflect coatings• Ramor 550• Raex plates up to t 80 mm
• Growth from new customers and customer segments
• Wear-resistant steels for the mining industry
• High-strength steels in construction
• Growth from new geographical regions
• New sales offices and partners• New recruits for special steels sales
Present business
Growth in special steels from new products, customers, customer segments and geographical regions
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Inmeco (Brazil) – Sustainability and higher payloadsNew materials result in significant product improvements
Dump trucks have a short distance cycle.The wearing of equipment can be a costly problem when transporting abrasive materials.
Wear-resistant Raex® 450 was used for the new open-box bed and has significantly increased the product’s useful life.Thanks to special steels, the equipment is up to 400 kg lighter, which has increase the payload and decreased fuel consumption..
Yhteenlaskettu tuotekate
Profitability improvement in the steel business
Tuotekate
Korkea
Keskim.
Matala
Volyymi
RT & AL
Standardi-tuotteet
RT & AL
Standardi-tuotteet
Volyymi ja kannattavuus ei mittakaavassa
Putket & Profiilit
Erikois-teräkset
Total product margin
Product margin*
High
Medium
Low
Volume*
*Volumes and profitability are not to the same scale
Tubes & Profiles
Special steels
SS & AL
1. Strong growth in special steel products -> €850m (2015*)
2. Smaller, selected share of standard grades
– Growth in tube products– Growth in colour-coated and
hot-rolled flat products– Fewer galvanised products
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(*2013: €558 million)
Financial performance in 2013
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Sakari Tamminen18 March 2014
2013 highlights
• Profitability improved in all business areas. – Most positive development was in Ruukki Building Products.
– Comparable operating profit was €39 million (-50).
• Net cash from operating activities rose to €184 million (172).
• Efficiency projects generated earnings improvement of around €70m.
• Net sales were down due to lower market prices of steel products.
• Ruukki Metals’ delivery volumes were slightly higher.
• Earnings per share were -€0.10 (-0.85).• Relating to the combination agreement of SSAB AB and Rautaruukki
Corporation, the Board of Directors proposes that no dividend (0.20) be paid for the financial period ended 31 December 2013.
15
Net sales down 7% due mostly to lower market prices of steel products
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Ruukki Building Products
Ruukki Building Systems
Ruukki Metals
1 741
2 275
2 620 2 5972 404
0
500
1 000
1 500
2 000
2 500
3 000
2009
2010
2011
2012
2013
Net sales 2009-2013* (€m) Net sales by market area*2013 (2012)100% = €2 404m (€2 597m)
Other Nordic countries31% (30%)
Finland25% (26%)
Central EasternEurope15% (14%)
Rest of Europe13% (14%)
Other countries7% (6%)
Russia andUkraine10% (10%)
* Comparable
Growth in markets outside Europe
Profitability improved in all business areas
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Operating profit €39 million (-50) in 2013
Operating profit and groupEBITDA (€m)
Change in operating profit* by business area (€m) 2013 vs. 2012
* Comparable
‐248
70 78
‐50
39
‐177
150171
55
164
‐250
‐200
‐150
‐100
‐50
0
50
100
150
200
2009
2010
2011
2012
2013
Comparable operating profit Reported EBITDA
‐50
39
6
58
1411
‐60
‐50
‐40
‐30
‐20
‐10
0
10
20
30
40
50
2012
Other
Ruukki M
etals
Ruukki Building Prod
ucts
Ruukki Building System
s
2013
336
621
770 765
693
161 173 179
97 90
22.3
44.7
60.3
71.2
68.5
0
10
20
30
40
50
60
70
80
0
100
200
300
400
500
600
700
800
900
2009 2010 2011 2012 2013
Net debt decreasing
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Net interest-bearing debt Gross capex in tangible andintangible assets
Gearing ratio 68.5% at year-end 2013
Net gearing
€m %
182
‐64
114
172 184
30
‐226
‐57
78101
‐250
‐150
‐50
50
150
250
2009
2010
2011
2012
2013
Cash flow improved to €184 million
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€62 million freed up from working capital (173)
Net cash from operating activities and before financing activities (€m)
Net cash from operatingactivities
Net cash before financing activities
Building Products’ net sales
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Net sales by product group (€m)*
Full-year net sales down 5%, growth in residential construction, Sweden and in components in Norway
* Reported
Building components
Infrastructure construction
Residential roofingproducts
Building Products
457 452430
0
50
100
150
200
250
300
350
400
450
5002011
2012
2013
Net sales by market area2013 (2012)*
Other Nordic countries26% (25%)
Finland32% (33%)
CentralEasternEurope31% (30%)
Rest of Europe2% (3%)
Russia andUkraine8% (10%)
*Comparable
Building Products’ profitability clearly improved
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EBIT and EBITDA (€m) Comparable operating profit €36m (22) in 2013
• Impact of efficiency programmes on earnings improvement €8 million
• Better gross margin• More favourable geographical spread
than earlier of residential roofing products
• More effective steering of sales of building components
• Better functioning of business processes
Building Products
Comparable EBIT Reported EBITDA
5 6
2622
36
10
20
36
30
45
0
5
10
15
20
25
30
35
40
45
50
2009
2010
2011
2012
2013
Building Systems’ net sales at same level as a year earlier
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Net sales by market area, (€m) *
BuildingSystems
* Reported
Russia Nordic countries Central Eastern Europe
300288 292
0
50
100
150
200
250
300
350
2011
2012
2013
• Net sales in Finland down clearly due to weak demand
• Rouble-denominated net sales in Russia up 9% year on year
Building Systems’ profitability improved year on year, but still not yet at a satisfactory level
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Comparable operating profit-€10 (-21) in 2013
• Impact of efficiency programmes on earnings improvement €8 million
• Profitability weakened by a few loss-making steel structure contracts which, had a negative impact totalling around €8 million
• Shift in focus of production to lower cost countries
• Better gross margins and more efficient capacity utilisation rate
• Healthy order books and capacity utilisation rate in Russian businesses
BuildingSystems
‐49‐51
‐29
‐21
‐10
‐34‐32
‐13‐11
6
‐60
‐50
‐40
‐30
‐20
‐10
0
10
2009
2010
2011
2012
2013
EBIT and EBITDA (€m)
Comparable EBIT Reported EBITDA
Metals’ comparable net sales down 10%
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Net sales by product group*, (€m)
Clear rise in delivery volumes of special steels
Special steel products Strip and flat products
Stainless steel and aluminium
Tubes and profiles
* Reported
Metals
1 783 1 787
1 679
0
200
400
600
800
1000
1200
1400
1600
1800
20002011
2012
2013
Net sales by market area*2013 (2012)
Other Nordic countries32% (33%)
Finland26% (27%)
Russia andUkraine5% (5%)
Other countries10% (8%)
Rest of Europe 18% (19%)
Central EasternEurope10% (9%)
* Comparable
Metals’ profitability improved clearly
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Impact of efficiency projects was €48 million
Comparable EBIT €27 million (-31)in 2013
• Impact of efficiency projects on earnings improvement €48 million
• Lower raw material costs• EBIT weakened by lower average
selling prices of steel products
Metals
‐190
130
95
‐31
27
‐130
202
161
62
128
‐200
‐150
‐100
‐50
0
50
100
150
200
250
2009
2010
2011
2012
2013
EBIT and EBITDA (€m)
Comparable EBIT Reported EBITDA
Share of special steel products
Net sales of special steels and % of Metals’ net sales*
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Net sales of special steel products
* Share of special steel products has been calculated based on comparable net sales i.e. the reference figures have been restated to reflect the current corporate structure
Share of special steels of Metals’ comparable net sales
Target is net sales of €850 million in 2015
Metals
77
114109
124 151
160128 122
144
161 130 120 135
148131
149
22%
25%27%
29%30%
33%31%
26% 29%
33%31%
27%30%
34% 34%37%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
20
40
60
80
100
120
140
160
180
Q1/
10
Q2/
10
Q3/
10
Q4/
10
Q1/
11
Q2/
11
Q3/
11
Q4/
11
Q1/
12
Q2/
12
Q3/
12
Q4/
12
Q1/
13
Q2/
13
Q3/
13
Q4/
13
Net sales:
Comparable net sales in 2014 are estimated to grow compared to 2013.
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Guidance for 2014
Operating profit:Comparable operating profit in 2014 is estimated to improve compared to 2013.
Ruukki’s transition to a construction and steel specialist
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Reinforcement steels business(Nordics and Germany , €400m)
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Main disposals and acquisitions
Omeo MekaniskaVerkstad(Sweden,€ 23m)
Aprítógépgyár(Hungary, €43m)Velsa
(Finland, €47m*)
SynecoIndustri(Sweden, €37m)
Metalplast-Oborniki(Poland, €65m)
PPTH Steelmanagement(Finland, €101m)
Steel-Mont(Slovakia, €27m)
OOO Ventall(Russia, €70m)
SkallesElendomsselskap
(Norway, €16m)
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Acquisitions
Disposals
Plåtleverantöreni Stockholm AB(Sweden, €17m)
AZST-Kolor(Ukraina)
* net sales at time of disposal/acquisition
Ruukki ConstructionRuukki Engineering
Ruukki Metals
Star Tubes, steel tube wholesaler(UK, €15m*)
Froh HouseTech(Germany, €12m)
Duisburg ServiceCentre(Germany)Fredericia plant(Germany, €15m)
Fortaco arrangementShares in Ruukki Tisza Zrt and Ruukki Slovakia s.r.o. together with net assets of Wroclaw, Kurikka, Sepänkylä and the components business in Kalajoki (€137m)
~€61m
~€189mScanbridge AS(Norway, €9m)
UAB Gensina(Lithuania)WolterMetallverarbeitung(Germany, €5m)
OvakoLong steels (Finland, €600m)
Metalplast Systems(Poland, €8m)
Gävle colour-coating line (Sweden)
Carl Froh GmbH(Germany. €58m)
~€483m
~€93mTot. €576m
Tot. €250m
Halikko plant (Finland, €13m)
Long-term focus on special steelsAdvanced production technology and broad productportfolio create a strong foundation for growth
Productrange
Sales & distribution
Total of 13 certified partners in Brazil, Chile, Europe,
Peru and Middle East
40 new positions in international salesOwn stocks in
China
New sales offices in Australia, India
&China
4 new sales offices and new stock in
Russia
New sales offices in Chile, Canada, USA
& Russia
Focus in Europe
Z600 Zinc coating
New sales offices e.g. in France and Benelux
Expansion in Russia
Global business
New distributor cooperation partnersin Americas, Asia, Europe and Middle East
Raex plate up to80 mm
Pural farm & Hiarc reflect coatings
Raex & Optim 700 Plus tubesRaex plates
30-40 mm Optim 700 plate up to 40 mm
Form Z600 tubes
RWS Pural coating
Optim 700 plateto 60 mmLaser-welded products
Optim 700MCPlusRaex 400-500 stripOptim 900-1100 -nauhat
Raex plate 11-16 mm
Optim 700 plate 8-30 mm
Raex plate 8-30 mm
Purex coating
Ramor 500 strip Litec 800-1000DP
Litec 100DP
Litec 1000 DP
Pural Matt coatingPVDF coating
Ramor 550
30 18 March 2014 Sakari Tamminen
InvestmentsCut-to-length line #2 leveller (€13m)
Strip mill automation (€12m)
Direct quenching equipment at plate mill(€29m) Plate mill cold
leveller (€24m)
Cut-to-length line #2 improvement (€14m)
New cut-to-length line #3 (€26m)
Improvementof normalising furnace(€7m)Strip mill
automation 2 (€15m) ~€210m
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013200320022001
New coilbox at strip mill (€24m)
Steel ladle processing equipment (€17m)
Plasma cutting and bundling of plates (€9m)
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
90 %
100 %
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Construction Special steels Engineering Other steel and metal products Long steels
Share of construction and special steels rose from under 20% to more than 50%
31 18 March 2014 Sakari Tamminen
Long steel products
Other steel and metal products
Engineering businessSpecial steels
Construction business
Share of businesses of reported net sales 2004-2013 (%)
Operating profit of €2.4 billion and EBITDA of €4.0 billion during ten years
18 March 2014 Sakari Tamminen32
Reported net sales 1999-2013 (€m) Reported EBIT and EBITDA1999-2013 (€m)
0
500
1000
1500
2000
2500
3000
3500
4000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
The period since the years of rapid growth and strong profitability in 2004-2008 has been characterised by clearly weaker demand and overcapacity in the steel industry
‐350
‐150
50
250
450
650
850
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Reported EBIT Reported EBITDA
0
20
40
60
80
100
120
140
160
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Over €1.1 billion invested in production facilities during the past ten years
33
Net investments, acquisitions and gearing ratio 1999-2013€m
18 March 2014 Sakari TamminenNet investments Acquisitions Gearing ratio
%
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
1,6
1,8
2,0
2,2
2,4
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Over €1.3 billion in dividends during the past ten years
18 March 2014 Sakari Tamminen34
0
50
100
150
200
250
300
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Dividends paid 1999-2013 (€m) Dividend paid per share 1999-2013 (€)
Headcount development 1999-2013
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12 49113 000 12 975
12 80412 047 12 126
11 374
13 303
14 587 14 286
11 64811 286 11 382
9 0348 600
0
2000
4000
6000
8000
10000
12000
14000
16000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
* The Fortaco deal resulted in a decrease of 1,334 in personnel numbers.
*
Personnel at year-end 1999-2013
Business environmentin the steel industry
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36
36
CIS
79
EU
209
Asia
25
Nafta*
19
LatinAmerica*
*nominal gross overcapacity is used for the regions indicated.Sources: OECD Steel Committee 2012 (overcapacity data for 2011) and World Steel Association
2013 (production data for 2012)
Overcapacity in the steel industry a globalproblem Nominal overcapacity in the steel industry and crude steel production by region (mt)
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120
47
169
112
1012
Production
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70%
75%
80%
85%
90%
95%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: World Steel Association 2014
Lower capacity utilisation rate in steel productionNew “normal” < 80%
Capacity utilisation rate in steel production
China and other emerging economies sustain steel market growth – Europe stagnatesApparent steel consumption
18 March 2014 Sakari Tamminen39
Source: World Steel Association Short Range Outlook 10/2013
0
200
400
600
800
1000
1200
1400
1600
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013e 2014f
Kiina
EU 27
Maailma
Million tonnes
~45%China’s share of
global steel market
-0.5%Growth of European steel market in 2013
0
50
100
150
200
250
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014F
Special steel market World EU 27
Market for special steels grows faster
40
Growth of hot-rolled special steelsvs. total steel market Global market for hot-
rolled special steels~3m tonnes in 2013
Ruukki global #2 position in hot-rolled
special steels
Hot-rolled special steels are Ruukki’s largest product group, others are high-strength galvanised and special colour-coated products
Source: WSA SRO 10/2013 and Ruukki’s forecast of the hot-rolled special steels market Hot-rolled special steels include the following trademarks: Raex, Optim and Ramor.
(Indexed 2004=100)
18 March 2014 Sakari Tamminen
Global addressable market for Ruukki’s
special steels~15m tonnes in 2013
Special steels World
Creating a more competitive steel company with global reach
SSAB and Ruukki – more competitive together
The combined company will operate on the global market and offer customers high-strength steels, heavy plate, standard strip and tubular products
Value creation through tangible synergies and improved earnings potential and through greater flexibility and cost efficiency
The Boards of Directors of both companies recommend shareholders to accept the offer and the main shareholders of both companies have expressed support for the offer
Expected annual cost synergies of up to €150 million (SEK 1.4 billion)
42
A combination with a strong industrial logic
Flexible and cost-effective production system to better adapt to changes in market demand
Value creation through tangible synergies
Accelerated growth in high-strength steels, heavy plate, standard strip and tubular products – continue the shared strategic direction of both companies
Enhanced ability to invest in product development and R&D –innovation leader
A more competitive Nordic and US-based steel company
43
1
2
3
11
22
Luleå
Broader steel production base in the Nordic countries
1
2
3
Borlänge
Oxelösund
Raahe
Hämeenlinna
11
22
Steel production, heavy plate and strip products
Strip products
Steel production, heavy plate
Steel production
Strip products and tubes
44
Overview
Plannja manufacturingRuukki manufacturing
Plannja Ruukki Combined
Net sales €120m €740m €860m
Employees 371 3 266 3 637
Manufacturing sites 5 11 16
High quality, strong brands and competences
Complementary presence in Nordic markets, with strong focus on the residential segment
Synergies from optimising production network and product portfolio
45
Further synergy potential through construction business
Value creating share exchange offer for allshareholders For each Rautaruukki share is being offered:
– 0.4752 newly issued SSAB class A shares– 1.2131 newly issued SSAB class B shares
Based on the three-month volume-weighted average share prices of both SSAB and Rautaruukki, the share exchange offer corresponds to a premium of 20% for Rautaruukki shareholders
46
Conditions for completion of the share exchange offer
Subject to SSAB’s shareholders passing the resolutions required to implement the combination and share exchange offer
Acceptance of over 90% of Rautaruukki’s shareholders
Subject to clearance from the regulation authorities in the EU and in certain other areas
Estimated timetable of the share exchange offer
22 January 2014 announcement of the exchange offer
9 April 2014 SSAB’s Annual General Meeting resolves to implement the share exchange offer
Share exchange offer document and prospectus to Rautaruukki’s shareholders April 2014
Period to accept the exchange offer estimated to be late April/early May 2014
The combination is subject to approval from the competition authorities.
47
Announcement ofexchange offer
22 January 2014
Acceptance ofexchange offer
(estimated)
April-May 2014
SSAB’s AnnualGeneral Meeting
9 April 2014 April 2014
Offer documentpublished
(estimated)
>
18 March 2014 Sakari Tamminen48