interim statement q1/2016 - outokumpu...interim statement q1/2016 ceo roeland baan cfo reinhard...
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Interim statement Q1/2016
CEO Roeland Baan
CFO Reinhard Florey
April 27, 2016
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
3
Today‘s attendees of Outokumpu
Reinhard Florey
CFO
Johanna Henttonen
SVP
Investor Relations
Roeland Baan
CEO
Q1 in line with our expectations
• Delivery volumes up by 6%
• Operating cash flow EUR 74 million
• Net debt to below 1.6 billion
• Lower base prices
• Scrap costs increased
• Total of EUR 15 million write-downs
of trade receivables in Europe and
aged inventories in Americas
• Lower ferrochrome price
4
Underlying EBIT, EUR million
2
-25
-67
-11
-20
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16
Due to change in D&A in Q4/15, the underlying EBIT’s of prior quarters are not comparable
~1% demand growth expected for 2016
5
Americas
+5% +5%
-2% -1% +1% +4%
13 14 15 16f 17f 18f
Europe
0%
+4%
+1% -2%
+1% +2%
13 14 15 16f 17f 18f
APAC
+9% +7%
+2% +2% +4% +4%
13 14 15 16f 17f 18f
Global
+7% +6%
+2% +1%
+3% +4%
13 14 15 16f 17f 18f
USA
+6% +6%
-2% -1% +4%
13 14 15 16f 17f 18f
0%
OTHER AMERICAS
+3% +4%
-5% -1%
+4% +4%
13 14 15 16f 17f 18f
OTHER EMEA
+8%
-4% -5% +1%
+4% +4%
13 14 15 16f 17f 18f
CHINA +12%
+8%
+4% +3%
+4%
13 14 15 16f 17f 18f
+4%
OTHER APAC
+4% +6%
-1% +1% +3%
+4%
13 14 15 16f 17f 18f
Data source: SMR, April 2016
Real demand for total stainless steel (rolled & forged products, excl. 13Cr tubes,
profiles)
6
European base prices resilient
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
0
10
20
30
40
50
0
10
20
30
40
50
60
70
80
90
2007 2009 2011 2013 2015
From Asia
From rest of world
Import penetration
Import
penetration
decreased slightly
to 24.4% in Q1
1. 2mm sheet cold rolled 304 grade. CRU April 2016
2. Monthly average. SMR CR real demand February 2016. Source: Eurofer, March 2016
7
American base prices turning the corner
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
0
10
20
30
40
50
0
5
10
15
20
25
30
35
40
2007 2009 2011 2013 2015
From Asia
From rest of world
Import penetration
1. 2mm sheet cold rolled 304 grade. CRU April 2016
2. Monthly average. SMR CR real demand February 2016. Source: Foreign Trade Statistics, March 2016
Import
penetration
decreased to
20.7% in Jan-Feb
8
13-year low in nickel price reflected in
stainless transaction prices
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
Q1 key financials
9
Key figures Q1/16 Q4/15 2015
Stainless steel deliveries, 1,000 tonnes 610 574 2,381
Sales, EUR million 1,386 1,435 6,384
Underlying EBITDA, EUR million 38 50 196
Underlying EBIT, EUR million -20 -11 -101
EBIT, EUR million -12 341 228
Net result, EUR million -41 308 86
Operating cash flow, EUR million 74 2 -34
Net debt, EUR million 1,551 1,610 1,610
Capital expenditure, EUR million 32 65 154
Personnel at the end of the period 10,920 11,002 11,002
Deliveries grew in both
Europe and Americas
Sales down by 3.4%
driven by lower prices
Positives from higher
deliveries offset by
downward pressure on
prices, increase in scrap
costs and write-downs
Positive operating cash
flow of EUR 74 million
Updates in Outokumpu financial reporting
Reporting practices
• Interim statements in Q1
and Q3
• Q2 and Q4/FY reports
continue to follow IAS 34
format
Underlying EBIT as main
profitability measure
• Shows best underlying
profit drivers and
operational performance
• Adjustments to IFRS EBIT:
• Material income and
expense items earlier
labelled as
non-recurring items
• Raw material related
inventory gains/losses
and metal derivative
gains/losses
New business areas
• Q1 reported according to
new BA structure:
• Europe
• Americas
• Long Products
• Restated quarterly data
available for past two
years
10
• End-demand stable, distributor demand
subdued
• Prices under pressure
• Operating environment for plate
products subdued
• Ferrochrome production 132,000
tonnes
• EMEA restructuring program savings of
EUR 15 million
• Adjustments: • EUR -8 million related to earlier site
closures
• EUR -2 million net effect of raw
material-related inventory and metal
derivative gains/losses
• Write-down of EUR 12 million trade
receivable
Europe’s performance stronger
11
Europe deliveries,
1,000 tonnes
Europe underlying EBIT,
EUR million
Deliveries up by 10.5%
reflecting seasonal pick-up
Stronger performance as a
result of higher deliveries and
lower costs, partly offset by
lower base prices and one-offs
410 413
375 381
421
27
41
-15
33
42
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16
Due to change in D&A in Q4/15, the underlying EBIT’s of prior quarters are not comparable
Americas’ market dynamic started to improve
12
Americas deliveries,
1,000 tonnes
Americas underlying EBIT,
EUR million
• Apparent consumption up by 4.8%
• Antidumping and countervailing duty
petitions against Chinese importers
filed in February
• Announced price increases expected to
have a gradual positive impact from
April onwards
• Base prices in deliveries stable vs Q4
• Adjustments: • EUR 25 million insurance
compensation
• EUR -8 million net effect of raw
material-related inventory and metal
derivative gains/losses
• EUR 3 million aged inventory write
down at Calvert Deliveries increased by 11.8%
to all–time quarterly record
Underlying EBIT still at heavy
loss. Benefits from higher
volumes and better utilization
as well as implemented cost
improvements were offset by
price pressure
133
117
139 144
161
-28
-50 -44
-41 -43
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16
Due to change in D&A in Q4/15, the underlying EBIT’s of prior quarters are not comparable
Long Products’ prices still under pressure
13
Long Products deliveries,
1,000 tonnes
Long Products underlying EBIT,
EUR million
• Operating environment overall weak
particularly in the US
• Prices under pressure in both Europe
and the US • low nickel prices
• subdued Oil & Gas -related project
activity
• import pressure
• tight competition
• Gradual pick up in order intake
• Net effect of raw material-related
inventory and metal derivative
gains/losses was EUR -3 million
Deliveries up by 19% due to
higher internal slab deliveries
Weaker underlying EBIT as a
result of low prices and a weak
product mix
52
62 58
42
50 3
4 3
-3 -4
Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16
Due to change in D&A in Q4/15, the underlying EBIT’s of prior quarters are not comparable
Positive operating cash flow
14
EUR million Q1/16 Q4/15 2015
Net cash from operating
activities 74 2 -34
Net cash from investing
activities -17 319 239
Free cash flow 57 321 205
Cash and cash
equivalents 166 186 186
• Change in working capital of
EUR 58 million
• Financing costs EUR 34 million
• Overall liquidity reserves EUR
900 million
• Net debt decreased by EUR 59
million
Net debt decreased to below EUR 1.6 billion
15
Net debt and gearing
3.56
1.97 1.61 1.55
188%
93%
69% 70%
Net debt, EUR billion Gearing, %
2013 2014 2015 Q1/16
Debt maturity profile, EUR million
Current debt Non-current debt Unutilized facilities
2016 2017 2018 2019 2020 2021+
16
Real demand expected to remain
sequentially flat in Q2
EMEA total stainless steel real demand, 1,000 tonnes Americas total stainless steel real demand, 1,000 tonnes
1,500
1,550
1,600
1,650
1,700
1,750
1,800
1,850
1,900
1,950
2,000
Q12015
Q2 Q3 Q4 Q12016
Q2
SMR Jun'15 SMR Sep'15SMR Feb'16 SMR Apr'16
500
600
700
800
900
1,000
1,100
Q12015
Q2 Q3 Q4 Q12016
Q2
SMR Jun'15 SMR Sep'15
SMR Feb'16 SMR Apr'16
1) Total stainless = rolled & forged products, excl. 13Cr tubes, profiles
+2% -2%
17
Business and financial outlook for Q2/2016
Outokumpu estimates for Q2
Delivery volumes to be sequentially flat
Underlying EBIT to remain at a similar
level as in Q1
Results will be burdened by weaker
performance of the ferrochrome
business driven by low ferrochrome
price and US dollar
With current prices, net impact of raw
material-related inventory and metal
derivative gains/losses on profitability is
expected to be marginal, if any.
Market commentary
In Europe
• Underlying demand in key sectors
outside of Oil & Gas expected to
continue healthy
• Stock levels among distributors above
historical averages
In Americas
• Stock levels among distributors below
historical averages
• Price increases have been announced
• Chinese imports are being addressed
with antidumping investigation
This outlook reflects the current scope of operations.
Improving competitiveness and financial
performance
To be the
best value
creator in
stainless steel by
2020 through
customer orientation and
efficiency.
PORTFOLIO AMERICAS MANUFACTURING
EXCELLENCY
WORLD CLASS
SUPPLY CHAIN SAFETY
The best value in the industry
for customers,
shareholders and employees
through:
HIGH PERFORMING
ORGANIZATION
18
EBIT
EUR 500 million 1
Gearing
<35% 3
ROCE
12% 2
Financial targets for 2020
19
Immediate actions for a step change in cost
and competitive position
SG&A cost reduction
EUR 100 million by
the 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 the end of
2017
To be the best value creator in stainless steel by 2020 through customer orientation and efficiency.
20
Our new vision
Appendix
21
Balance sheet
Assets (MEUR) 31.3.16 31.12.15
Non-current assets
Intangible assets 496 498
Property, plant and equipment 2,924 3,005
Investments in associated companies
and joint ventures 62 63
Other financial assets 45 41
Deferred tax assets 22 16
Defined benefit plan assets 47 35
Trade and other receivables 36 40
Total non-current assets 3,632 3,698
Current assets
Inventories 1,147 1,251
Other financial assets 45 53
Trade and other receivables 694 686
Cash and cash equivalents 166 186
Total current assets 2,052 2,177
Total assets 5,684 5,874
22
Balance sheet
Equity and liabilities (MEUR) 31.3.16 31.12.15
Total equity 2,229 2,329
Non-current liabilities
Non-current debt 870 1,249
Other financial liabilities 9 9
Deferred tax liabilities 16 16
Defined benefit and other long-term
employee benefit obligations 388 369
Provisions 111 113
Trade and other payables 48 48
Total non-current liabilities 1,442 1,805
Current liabilities
Current debt 848 547
Other financial liabilities 38 50
Provisions 17 23
Trade and other payables 1,111 1,121
Total current liabilities 2,014 1,741
Total equity and liabilities 5,684 5,874
23
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
24
25
Headcount reductions
13,327
9,300
766
436
1,123
82 1,620
8,000
9,000
10,000
11,000
12,000
13,000
14,000
Total headcount reduction
Personnel per business area at the end Q1/16
7,709
2,263
656 292
Europe
Americas
Long Products
Other operations
26
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%
27
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
28
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
Cold rolling 900 250 500 150 500 250 60 25 40 40 20 2,735
29
Low capacity utilization in China, on
healthier level in Europe and Americas
Source: SMR Real Demand Feb 2016; CRU Capacity Feb 2016
* Using 2015 imports share as forecast for 2016-2019
Europe Americas
1.4 1.6 1.6 1.7 1.7 1.7 1.8 1.8
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 2.7
2.8 2.8
3.3 3.3 3.3 3.3 3.2 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 2.8 2.8 2.9 2.9
0.6 0.8 1.1 0.9 0.9 0.9 0.9 1.0
3.5 3.5 3.6 3.7 3.7 3.8 3.8 3.9
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 14 14 15
5
5 6 6 6
6 6
7 15
17 18 18 19
20 21
21
18
19
22
23
24 25 25 25
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]
30
Unbalanced trade flows
Source: Foreign trade statistics March 2016
CR in kt,
Factors supporting exports:
Exchange rate benefits
Cost advantages
Government subsidies
Different regulations
330
515
125
92
110
38
EU antidumping case
Indonesian nickel ore ban
Possible US antidumping
Game changers:
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 slumped to 13-year lows below 8,000 USD/tonne in early February on the back of increasing fears over global
economy and subdued demand.
• In early March prices recovered to around 9,400 USD/tonne on improving sentiment among commodities general, but lost
most of the gains and ended the quarter at 8,280 USD/tonne, 4.4% lower than in the beginning of the quarter.
• The average price of the quarter of 8,504 USD/tonne, was 9.6% lower than 9,412 USD/tonne in the fourth quarter of 2015.
Update: April 8, 2016
Johanna Henttonen
Senior Vice President – Investor Relations
Phone +358 9 421 3804
Mobile +358 40 5300 778
E-mail: [email protected]
Tommi Järvenpää
Manager – 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