Outokumpu Inoxum business combination March

Transcription

1 Outokumpu Inoxum business combination March

2 This presentation has been prepared by, and the information contained herein (unless otherwise indicated) has been provided by Outokumpu Oyj (the Company ). By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations. This presentation is being furnished to you solely for your information on a confidential basis and may not be reproduced, redistributed or passed on, in whole or in part, to any other person. This presentation does not constitute an offering circular in whole or part and any decision to invest in the offering of new shares (the offer shares ) with pre-emptive subscription rights (the subscription rights, together with the offer shares, the securities ) should be made solely on the basis of information to be contained in the actual offering circular related to the securities and on an independent analysis of the information contained therein. 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Neither the Company nor any other person undertakes any obligation to review or confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation. This presentation includes estimates relating to synergy benefits expected to arise from the transaction discussed herein. Such estimates are based on a number of assumptions that are based on currently available information and judgments based on such information. These assumptions present the expected course of action and the estimated future impact of the transaction and the integration of Inoxum into the Company on the combined entity s business, financial condition and results of operations. However, these assumptions are inherently uncertain and subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to materially differ from those contained in the synergy benefit estimates. Further, there can be no certainty that the transaction will be completed in the manner described in this presentation, or at all. Each of J.P. Morgan Securities Ltd., Nordea Bank Finland Plc, be BNP Paribas and Crédit Agricole CIB (together, the Banks ) and their respective affiliates are acting exclusively for the Company and no one else in connection with the matters referred to in the presentation and will not regard any other person as their respective clients in relation to such matters and will not be responsible to any other person for providing the protections afforded to their respective clients, or for providing advice in relation to such matters. 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3 Agenda Outokumpu today: A leading stainless steel producer Investment case highlights Financial performance update Q March 2012

4 Outokumpu is the most integrated stainless steel producer in Europe General Stainless Finland Specialty Stainless Sweden, UK and US Outokumpu highlights Operations in more than 30 countries, approximately employees Key figures ( million) 2010A 2011A Deliveries (million t) Revenues Adj. EBITDA¹ Approximately 20% share in Europe² Market capitalisation of 922 million³ Ferrochrome Finland Specialty Stainless 31% Revenue split by business area Other operations 4% General Stainless 65% Asia 13% America 10% Revenue split by geography RoW 2% Note: Reflecting integration into raw material source ¹ EBITDA adjusted for 26 million (inventory related gains) in 2010A and 90 million (non-recurring items of 47 and inventory related losses of EUR 43 million) in 2011A ² Company estimate ³ As of 1 March 2012 Total 2011A revenue = million Europe 75% 4 March 2012

5 Comprehensive strategy to achieve profitable growth Production optimisation and profitability expansion Product offering diversification End-market customer focus Higher capacity utilization at Tornio to drive production cost improvement expected with Inoxum transaction Implemented and ongoing cost improvement programmes workforce reduction, NWC management, distribution network optimisation Disposal of non-core assets¹ Enhance product offering, with focus on high margin products Inoxum complementary product offering expanding general stainless line with ferritic grades and specialised, niche HPA products Increase direct exposure to end-customers Enhance high value-added downstream operations, such as plate and coil service centers Distribution network expansion for optimised growth and key distributor/customer access Inoxum transaction Growth opportunities Leading global ferrochrome supplier Strategic focus on expansion in Asia (APAC focus area) current presence (service centres and sales offices) Foothold in Asia offered by Inoxum cold rolling mill, service centres and sales offices in China Expansion in the US (Calvert) and foothold for South America access offered by Inoxum transaction Revenue diversification and stainless raw material optimisation ferrochrome internal/external sourcing Largest chromite reserves in EU and unique position as sole ferrochrome producer in EU Ongoing ferrochrome production expansion to be completed by end 2015 Outokumpu to become the new global leader in stainless steel ¹ 36% in OSTP JV, 50% stake in Nordic Brass (intention to sell remaining stake), Talvivaara stake, Tibnor stake and announced intention to divest 50% holding in Fagersta 5 March 2012

6 We have delivered significant improvements in 2011 which will drive performance in 2012 and beyond Management team Cost base reduction Cash release Acquisition and synergy creation New management team Functional efficiency: workforce optimisation Kloster thin strip Project 100: workforce optimisation, distribution network consolidation Disposals of non-core assets: Tibnor stake, Talvivaara stake, Nordic Brass stake, OSTP JV Project 250: NWC improvement (inventory management, streamline distribution network) Acquisition of Inoxum: production and distribution network optimisation, complementary products/end-markets, growth platform Impact Focus on implementation ~ 30 million p.a. cost savings Turnaround of loss making operations 100 million p.a. cost savings beyond million in 2011; ongoing Fagersta, and remaining Brass operations 250 million NWC reduction million p.a. cash cost synergies in 2017 (~45% in 2014, ~70% in 2015) Delivered During 2012 During 2012 Well on track During 2012 Well on track Transaction to complete in 2012 Future growth projects Ferrochrome production expansion on track Degerfors quarto plate Estimated 150 million EBIT impact by 2015¹ 40 kt capacity increase at above group margins by 2014 On track On track ¹ Based on ferrochrome prices, the U.S. dollar/euro foreign exchange rate and electricity prices as at June 2010 when the investment decision was made. Outokumpu estimated that the investment to double its annual ferrochrome production capacity would result in additional annual operating profit of approximately 150 million once the full production capacity is reached 6 March 2012

7 Agenda Outokumpu today: A leading stainless steel producer Investment case highlights Financial performance update Q March 2012

8 Key Inoxum transaction highlights Outokumpu and Inoxum are going to combine under the operational leadership of Outokumpu Structure Headquartered in Espoo, Finland and listed on NASDAQ OMX Helsinki Led by Mika Seitovirta (Outokumpu CEO) Valuation Gross transaction value of million¹ for Inoxum Effective date as of September 2011: any cash flows until closing are going to accrue to Outokumpu Value creation Estimated cost synergies of million EBITDA p.a. in 2017, of which ~45% are expected to be achieved in 2014 and ~70% in 2015² The pro-forma gearing of the combined entity as of December 2011 is 59 (below the Outokumpu target level of 75) compared to the current Outokumpu standalone gearing of 83 Certain conditions Transaction closing subject to: Successful completion of rights issue Regulatory approvals Note: These synergy estimates are based on information available to the company and assume among other things that the contemplated closures can be effected in the planned timeline, that the planned redundancies can be effected in a manner consistent with past restructurings, that the costs underlying the analysis of cost benefits, which are based on historical performance data, will not materially change during the restructuring phase and that environmental remediation costs meet the company s estimates ¹ Based on Outokumpu share price of 5.07 as of 1 March 2012 ² Total expected implementation and non-recurring cumulative cash costs of up to 160 million incurred in ³ Based on Outokumpu Combined net debt, which excludes pension liabilities of Inoxum of 281 million as of 31 December 2011; includes reclassification of financial and other lease liabilities of 86 million of Inoxum; with the assumption that Outokumpu will utilise its option to enter into certain lease agreements of 63 million post transaction closing 8 March 2012

9 The transaction values Inoxum at million on a firm value basis as of 1 March 2012 Consideration breakdown Cash payment to ThyssenKrupp million Payment of consideration by Outokumpu Rights issue of million, expected to be completed in H Proceeds of rights issue will be fully used to finance transaction Shares issued to ThyssenKrupp = 29.9% of combined company 823 million 1 (1 March 2012) At closing, Outokumpu will issue new shares equivalent to 29.9% of total share capital existing at the time of closing to ThyssenKrupp Loan note issued by Outokumpu 656 million² Outokumpu will issue to ThyssenKrupp a subordinated loan note with a maturity of no less than 9 years and option for non-cash interest expense for 2013 and 2014, with 50% non-cash interest expense option in 2015, and cash interest expense thereafter The loan note will be adjusted with mainly Inoxum's cash flow from September 2011 until closing. Cash flow will be driven by Inoxum's operational performance including capex spending and working capital changes Pension liability of Inoxum 281 million² Outokumpu will assume the existing unfunded pension liabilities of Inoxum mainly in Germany and Italy Financial net debt of Inoxum 109 million² Outokumpu will roll over at closing the external financial debt of Inoxum of 109 million Total consideration for Inoxum = million ¹ Based on Outokumpu share price of 5.07 as of 1 March 2012 and calculated on a post rights issue basis; ² As of 31 December March 2012

10 The combination of Outokumpu and Inoxum creates the world s largest stainless steel company Annual cold rolling capacity kt Outokumpu + Inoxum¹ Inoxum¹ Posco Acerinox Aperam Tisco Yusco Baosteel Outokumpu ATI Source: CRU as of November 2011 ¹ Including the 350 kt capacity of the Calvert mill which is expected to start operation by the end of 2012 with full ramp-up expected in March 2012

11 The combination of Outokumpu and Inoxum creates significant value for all stakeholders Optimised Optimisation global of production asset base with significant synergies Highly integrated production base with best-in-class assets on three continents in Europe, the Americas and Asia Increased cost efficiency through higher capacity utilisation Estimated cash cost synergies of million p.a. (~45% in 2014, ~70% in 2015 and full run rate in 2017) Complementary products reduce volatility Growth opportunities Broad range across austenitic, ferritic, duplex and specialty grades reduces volatility Well-balanced product offering geared towards high value-add growth sectors, supported by an experienced and dedicated network of R&D and application engineers Ferrochrome production expansion Geographic expansion in the US (Calvert) Investment in Krefeld (cold rolling), Degerfors (quarto plate) and HPA Strong existing foothold in high potential Asian region Strong financial position Strengthened financial position from deleveraging transaction structure Reduced profit volatility and enlarged financial size improve access to financial markets Note: These synergy estimates are based on information available to the company and assume among other things that the contemplated closures can be effected in the planned timeline, that the planned redundancies can be effected in a manner consistent with past restructurings, that the costs underlying the analysis of cost benefits, which are based on historical performance data, will not materially change during the restructuring phase and that environmental remediation costs meet the company s estimates 11 March 2012

12 Outokumpu and Inoxum combination offers substantial synergy potential Total estimated synergy cash cost savings of million p.a. 2 Benefit from optimised capacity utilisation ~30% ~10% ~40% Reduction in unit production costs through higher capacity utilisation at Tornio and Terni Optimisation of production between Tornio, Terni and other European facilities 2 3 Procurement, raw materials, general administration ~20% Estimated cash cost synergies of million per year, ~45% expected by end of 2014, ~70% by end of 2015, full run-rate by 2017 at the latest Total expected implementation and non-recurring cumulative cash costs of up to 160 million incurred in Bulk discounts in sourcing of key commodities such as scrap and other alloys Simplification of delivery logistics and reduced number of different production sites Implementation of a unified organisational model and integration of functions 1 Reduction of cost base 4 Sales & service centre optimisation Closure of the Krefeld meltshop by end of 2013 Planned closure of the meltshop in Bochum by end of 2016 Reduction of thin strip capacity in Sweden 600 Inoxum employees in Germany to be absorbed back into ThyssenKrupp free of charge, limiting redundancy costs Note: These synergy estimates are based on information available to the company and assume among other things that the contemplated closures can be effected in the planned timeline, that the planned redundancies can be effected in a manner consistent with past restructurings, that the costs underlying the analysis of cost benefits, which are based on historical performance data, will not materially change during the restructuring phase and that environmental remediation costs meet the company s estimates 12 March 2012 Optimisation of the service centre network in Europe Enables larger and more diverse offering at all existing distribution sites from the complementary product offering of Outokumpu and Inoxum

13 CR HR Melting Outokumpu Combined is going to have a state-of-the-art, well balanced production footprint for high volume standard grades Well balanced global production footprint (annual capacity kt) Tornio Bochum Europe Americas Asia Krefeld Dillenburg Terni Calvert San Luis Potosí Shanghai ³ Existing Outokumpu Existing Inoxum ¹ Cold rolled products only; 2 Hire rolling capacity share at ThyssenKrupp owned mill in Bochum; 3 New additional capacity currently being transferred to/installed at Krefeld to be commissioned in 2015; 4 Post relocation of production line no. 5 from Torino in 2014 (until then 525 kt); 5 Sold to free market; 6 Capacity to be commissioned Q4 2012; 7 Hire rolling capacity at ThyssenKrupp owned mill in Calvert Reduced cost base in Germany Redundancies of up to 850 in Germany facilitated by free transfer of 600 employees to ThyssenKrupp Share of cash cost synergies from German and Swedish closures of ~40% 13 March 2012

14 Finished products HR Melting and an optimised, highly capable specialty products and high performance alloys platform to serve global customers Made to order specialty and high performance alloys production platform (annual production capacity kt) Specialty High Performance Alloys Sweden USA UK Europe USA Avesta Kloster/Nyby Degerfors New Castle Richburg Wildwood Sheffield Altena, Essen, Siegen, Terni, Unna, Werdohl Reno, Florham [PIC] [PIC] 700 [PIC] [PIC] [PIC] [PIC] [PIC] [PIC] [PIC] ³ Flat Cold Rolled Plate & Long Plate Bar Tubular Long Rod & Bar Plate Strip Wire Bar, flat & rod ¹ Cold rolled products; 2 Incl. 40 kt production capacity of long products; ³ Some materials taken from Degerfors mill; 4 Supplied from Degerfors and Sheffield mills Reduction of thin rolling capacity in Sweden Share of cash cost synergies from German and Swedish closures of ~40% 14 March 2012

15 Optimised capacity utilisation and product mix optimisation expected to yield significant profit potential Production in lower cost facilities SMR estimate: CR 304 unit production cost¹ comparison (pre closures) /t Outokumpu Tornio Plant A Plant B Plant C Inoxum Terni Inoxum Nirosta Significantly reduced unit production cost Strong savings at existing production levels Product swaps Tornio, Finland Austenitics Ferritics³ Terni, Italy Increased mill specialisation Longer production runs Reduced unit production costs Increased capacity utilisation Higher % utilisation at: Tornio melting (from Bochum/Krefeld) Terni melting (from Bochum/Krefeld) Krefeld CR (from Sweden & Tornio) Improve cost position from higher capacity utilisation and product mix optimisation Share of cash cost synergies benefit of ~20% 1 Based on Ni: $/t; ² Based on January 2012 average exchange rate $/ ; ³ Tornio continues to produce ferritic hot band Better utilisation of fixed costs such as heating, lighting, site up-keep Reduced power unit costs of production Higher competitiveness on marginal units vs. imports 15 March 2012

16 Optimising procurement operations, raw materials sourcing and general administration costs Expected reductions of procurement and raw material costs Outokumpu Combined expects to benefit from bulk discounts and enhanced ability to negotiate favorable delivery and freight conditions from global suppliers of key commodities such as scrap and other alloys Significant savings potential from comparison of procurement terms between different sites, simplification of delivery logistics due to more specialised production units, reduced number of different production sites and bulk purchases for the combined entity Reduction of IT expenditures through elimination of overlap identified to date, centralisation of functions and volume discounts on shared applications Potential savings from implementation of a unified organisational model and integration of functions Expected reductions in procurement costs due to increased combined purchasing power Share of cash cost synergies benefit of ~30% 16 March 2012

17 Outokumpu Combined will have a broad service centre, R&D and sales office presence globally providing cost savings and strong customer benefits Broad global distribution, service centre network and R&D platform Outokumpu Production site Sales office/sc¹ Agent Sales & stock Headquarters Inoxum Production site Sales office/sc¹ Agent Highlights Global distribution network optimised for broad end-market and customer access Competence across a wide range of products and stainless steel grades Extensive service centre network covering Europe, Americas and Asia (presence in China and Australia) Ability to offer innovative and tailored solutions globally Outokumpu intends to service all current needs of its existing customers with the combined services centre network in Europe, the Americas and Asia Optimise service centre network in Europe and global sales company resourcing Share of cash cost synergies benefit of ~10% 1 Service center 17 March 2012

18 The Combined Outokumpu benefits from a uniquely diversified product range, end customer exposure and routes to market which will result in stronger and less volatile financial performance Outokumpu Combined stainless steel deliveries by grade Outokumpu Combined stainless steel deliveries by end-market² Ferritics¹ ~23% Duplex ~3% Other ~1% Austenitics ~73% Architecture, building & construction ~5% Automotive ~20% ~40% Consumer driven Household, catering & appliances 5 ~20% Other ~10% Transport ~5% Chemicals, petrochemicals & energy³ ~15% ~45% Capital goods serving industries Process & resources 4 ~25% ~40% of Inoxum deliveries are products currently not produced by Outokumpu Broad stainless steel and specialty grade offering complete stainless solutions provider Increased revenue stability from enhanced capability to address demand shifts between grades End-market exposure geared for growth in Europe and globally Well diversified across different end markets Source: Company information Note: Outokumpu based on December YE 2010; Inoxum based on September YE 2010; 1 Includes Inoxum s martensitic grades; ² Excludes deliveries to distributors and traders; 3 Includes Inoxum s tubes; 4 Includes Inoxum s metal processing; 5 Includes Inoxums s household applications and white goods 18 March 2012

19 Unique range of growth opportunities driving value creation Actions ongoing Profitability impact 1 Ferrochrome Double ferrochrome production capacity from 265 kt to 530 kt p.a. by 2015 Estimated 150 million EBIT impact by 2015¹ 2 Americas Start ramp-up of Calvert, US, meltshop in end of 2012 and full ramp-up of Calvert cold rolling capacity to 350 kt p.a. by 2014 Target breakeven in 2013 CR capacity of 350 kt at above average EBITDA contribution by Krefeld & HPA Stainless: Increase Krefeld cold rolling capacity from 440 kt to 660 kt p.a. by kt by 2015 at above average margins HPA: Relocation and upgrade of existing HPA production and installation of 2 nd EB furnace in Essen Significantly enhanced results opportunity 4 Quarto plate Expand Degerfors quarto plate capacity from 110 kt to 150 kt p.a. by 2014 Shipments at above average contribution by Asia Grow quality focused special grade stainless steel business in Asia Future growth upside ¹ Based on ferrochrome prices, the U.S. dollar/euro foreign exchange rate and electricity prices as at June 2010 when the investment decision was made. Outokumpu estimated that the investment to double its annual ferrochrome production capacity would result in additional annual operating profit of approximately 150 million once the full production capacity is reached 19 March 2012

20 Overview of envisaged capital structure and liquidity of Outokumpu post Inoxum transaction closing Pro-forma net debt definition and PF gearing ratios FYE Dec ( million) Outokumpu Outokumpu Combined² Net debt 1 720¹ 2 462³ Equity Gearing Loan note overview Maturity: Ninth anniversary of the closing of the Inoxum Transaction Interest: 3m Euribor + margin, payable every three months First 24 months: 100% pay-in-kind interest Months 25 to 36: 50% pay-in-kind and 50% cash interest Post month 36: 100% cash interest Prepayment: Permitted Subordination: Contractually subordinated to existing debt and liquidity facilities (including planned 400 million credit facility) of Outokumpu ¹ Interest-bearing liabilities + net derivative financial instruments + other interest-bearing payables investments in associated companies available for sale financial assets investment at fair value through profit or loss other interest-bearing receivables cash and cash equivalents ² Pro forma for the Inoxum Transaction and the Offering ³ As per definition of Outokumpu s net debt, excludes pension liabilities of Inoxum of 281 million as of 31 December 2011; includes reclassification of financial and other lease liabilities of 86 million of Inoxum; with the assumption that Outokumpu will utilise its option to enter into certain lease agreements of 63 million post transaction closing 4 Including PPA 20 March 2012 Liquidity extension Outokumpu is preparing a 400 million credit facility available for working capital purpose with a group of close relationship banks Final facility agreement is expected to be signed by end of April 2012 (sufficient commitment amounts from banks have been already received)

21 Agenda Outokumpu today: A leading stainless steel producer Investment case highlights Financial performance update Q March 2012

22 Outokumpu 2011 and Q update Financial performance ( million) Q Q Q Revenue Adjusted EBITDA¹ % margin 3.4% 3.5% 2.1% 3.4% n/m Net interest bearing debt Cash flow² Sales grew to million (2010: million) Deliveries grew to 1.4 million t (2010: 1.3 million t) Underlying operational result -66 million (2010: -91 million) Adjusted EBITDA 169 million¹ (2010: 146 million) Operating loss -260 million (2010: -83 million) Strong operating cash flow of 338 million (2010: -497 million) The Board proposes that no dividend is paid for EBITDA adjusted for 26 million (inventory related gains) in 2010 and 90 million (non-recurring items of 47 and inventory related losses of EUR 43 million) in 2011A; ² Operating cash flow and capex 22 March 2012

23 Inoxum 2011 and calendar Q update Financial performance pro forma December year end ( million) 2011 Q Revenue Adjusted EBITDA¹ % margin 1.2% n/m CF from operating activities CF from investing activities Full year sales grew to million Adjusted EBITDA of 81 million Note: Q = Inoxum s Q as Inoxum has a September FYE ¹ EBITDA adjusted for other financial expense, net, assigned to EBITDA based on economic classification and impairments 23 March 2012

24 Summary Transaction to create a new global leader in stainless steel Optimisation of production network with high utilisation rates and efficiency Balanced product offering and customer base Significant growth opportunities for Outokumpu Strengthened financial profile A new global leader in stainless steel Strong potential for shareholder value creation 24 March 2012

25 25 March 2012 APPENDIX

26 Stainless steel Outokumpu s Tornio Works is the most integrated stainless steel mill in the world with a highly competitive cost position Integrated production route at Europe s largest and most efficient stainless steel plant (annual capacity million tonnes) Meltshop Hot rolling mill Cold rolling mills Integrated finishing Capacity: 1.6 million tonnes Capacity: 1.6 million tonnes Capacity: 0.75 million tonnes¹ Terneuzen, Netherlands Tornio, Finland Lowest CR304 unit production costs 2 among largest 6 European plants Tornio Works competitive advantages 2500 /t (4.3)% Peer average = /t 4 Highly competitive cost position Highly efficient through large economies of scale Ferrochrome production onsite with molten Ferrochrome charged directly No need to crush or reheat, saving energy and minimising transportation costs Cost savings from full downstream integration into finished products High-volume production Cost efficient supply of high quality volume products 1700 Outokumpu Tornio Plant A Plant B Plant C Plant D Plant E State-of-the-art technology RAP line producing new 2E semi CR products Note: Integrated stainless steel mill reflects integration into raw material source Source: SMR as of January 2012; 1 Cold rolled products only; ² Based on Ni: $/t; 3 January 2012 average exchange rate $/ ; 4 Excluding Outokumpu Tornio 26 March 2012

27 Finished product HR Melting complemented by a well-positioned specialty stainless steel platform Produced to order production flow (annual production capacity kt) Highlights Sweden USA UK Avesta Kloster Nyby Degerfors New Castle Richburg Wildwood Sheffield Production set-up is optimised to serve end-customer requirements [PIC] 500 [PIC] 350 High specialisation of each facility with unique product features [PIC] 700 Production is based on specific customer orders bespoke production [PIC] [PIC] [PIC] [PIC] [PIC] [PIC] [PIC] [PIC] Flat Cold Rolled Plate & Long¹ Plate Bar 2 Tubular 3 Long 1 Including 40 kt production capacity of long products; 2 Some materials supplied from Degerfors mill; 3 Supplied from Degerfors and Sheffield mills 27 March 2012

28 Outokumpu s successful implementation of cost saving programmes Implementation of operational efficiency improvements Disposal of non-core operations in 2011 Functional efficiency programme Implemented cost cutting in sales, supply chain and supporting functions reducing ~300 jobs Cost savings of 29 million p.a. achieved in 2011¹ Project 100 Implemented cost cutting in all units and functions reducing jobs Reduced production shifts in Sweden Centralised and consolidated distribution network Cost savings of 100 million p.a. targeted by the end of 2012 Project 250 Streamline Outokumpu s European distribution network Strengthen partnerships with independent distributors Increase inventory turnover to reduce working capital by 250 million p.a. targeted by mid 2013 Kloster Turnaround instituted in Q2 2011; results to be reevaluated by mid 2012 Disposal of Tibnor stake in Q2 Sold 15% stake for 44 million Disposal of part of Talvivaara stake in Q2 Sold shares in Talvivaara Mining Company for 60 million Sold 4% in Talvivaara Sotkamo for 60 million and granted an option for Talvivaara Mining Company to buy Outokumpu s remaining 16% in Sotkamo for 240 million² Initiated disposal of tubular business in Q3 Signed JV agreement with Tubinoxia for the OSTP business in Q (deconsolidation over next 3 years) Disposal of Nordic Brass stake in Q4 Sold 50% stake in Nordic Brass in Q4 Intention to sell remaining Brass operations 3 Disposal of Fagersta stake Announced intention to divest Outokumpu s 50% holding in Fagersta ¹ Headcount reductions implemented in 2011, full P&L impact during 2012; ² The option to buy the remaining 16% shareholding is valid until the end of Q and is based on the price per share agreed for the previous 4% stake disposal; ³ Outokumpu owns Brass rod plant in Drünen, Netherlands 28 March 2012

29 Outokumpu has a broad product offering with a focus on austenitic stainless steel grades and specialty products Broad range of products across its locations Stainless steel products Slabs Hot rolled black strip Hot rolled white strip Cold rolled strip (2B) Precision strip Quarto plate Tubes Nirosta Tornio Acciai Avesta Speciali Terni Nyby Long products Semifinished Bar & Rod Deliveries split by grade Ferritics 5% Duplex 7% Other 2% Austenitics 86% Total 2011A deliveries = 1.4 million t Mexinox Kloster Competitive strengths Shanghai Degerfors (SKS) New Castle Calvert USA Sheffield Stainless Richburg International 1 A leading position in austenitic products A global leader in duplex grades Strong position in specialty grade products Wildwood High Performance Alloys General stainless steel Specialty stainless steel Note: As of today, Tornio does not sell any slabs and Avesta does not sell any slabs or hot rolled black strip 29 March 2012

30 Outokumpu product platform has strong growth prospects from tailored solutions of special stainless grades Select applications of specialty stainless steel products Speciality forecasted to be the highest growth area within stainless steel Duplex quarto plate Duplex tube and plate Forecasted global consumption growth rates 36.7% Duplex 300 series 400 series 31.3% Transit Terminal, World Trade Centre, NY, USA (2011) Stonecutters Bridge, Hong Kong, China (2004) 17.0% Grade: Outokumpu grade LDX 2101 Volume: ~340 tonnes Produced in: Degerfors, Sweden Grade: Outokumpu grade LDX 2205 Volume: ~2 000 tonnes Produced in: Degerfors, Sweden 3.4% 8.2% 8.2% 4.5% 4.0% 6.9% 2012E 2013E 2014E Source: SMR as of January March 2012

31 Leader in sustainability Recycled content of our steel is 90% against the industry average of 60% Dow Jones Sustainability Index: received the Metals Sector s highest scores in the environmental dimension by achieving the highest possible scores in connection with the sustainability criteria (Climate Strategy, and Environmental Policy and Management) Featured in the Carbon Disclosure Project s Carbon Disclosure Leadership Index for professional approach to corporate governance in respect of climate change disclosure practices 31 March 2012

32 Inoxum a global leader in stainless steel Nirosta Cold Rolling Germany Inoxum highlights Operations in ~20 countries, over employees Key figures ( million) 2010A¹ 2011A¹ Total deliveries (million t) ~2.1 ~2.0 Revenues Adj. EBITDA² Acciai Speciali Terni (AST) Italy A recognised leader in stainless steel 100 years of experience in stainless steel A leading position in ferritic grades 3 Strong brands: Nirosta, AST and Mexinox Strong focus on stable end-customer segments Leading position in higher margin high performance alloys (HPA) with strong VDM brand Calvert USA Revenue split by business area HPA 18% Revenue split by geography Asia/Pacific 7% Americas 13% Other 4% Stainless Steel 82% Total 2011A revenue = million¹ ¹ FYE September; ² EBITDA adjusted for other financial expense, net, assigned to EBITDA based on economic classification and impairments; 3 In terms of delivery volumes in Europe EU 76% 32 March 2012

33 Market position CR HR Melting with a well invested and integrated production base in Europe, the US and a footprint in Asia Inoxum stainless steel production flow (annual production capacity kt) Europe America Asia Krefeld Bochum Dillenburg Terni Calvert San Luis Potosí Shanghai , Flat Flat Flat Flat Flat Flat Established position in cold rolled products Nirosta brand recognised as a quality leader Location in the two EU countries with the largest stainless steel demand enables optimal customer response times Forward integrated business in Italy with tubular and large forging operations into high-margin, niche products Calvert is expected to benefit from an excellent low cost position in the North American stainless steel production Significant medium-term upside from expansion in the fast growing Latin American region via platform in US, Mexico and Argentina Current share in NAFTA expected to grow with new broader product range and lower cost position Focus on high-quality production with strong brand recognition and premium segment presence 1 Hire rolling capacity share at ThyssenKrupp owned mill in Bochum; ² Capacity to be commissioned Q4 2012; 3 Hire rolling capacity at ThyssenKrupp owned mill in Calvert; 4 Sold to free market; 5 Additional capacity currently being transferred to/constructed at Krefeld expected to be commissioned in 2015; 6 Post relocation of production line no. 5 from Torino in 2014 (until then 525 kt) 33 March 2012

34 Market position Finished Hot forming Melting Inoxum s High Performance Alloys business has a well integrated European and US production platform to serve a global customer base High Performance Alloys production flow (kt)¹ Key value drivers Europe Altena, Essen, Siegen, Terni, Unna, Werdohl USA Reno & Florham Long-term trends for lightweight construction and downsizing/emission control Nickel alloys Titanium/ Zirconium alloys Long standing client relationships with strong presence across a broad range of industries and end-customer oriented sales force Partially outsourced to 3 rd party manufacturers Significant R&D pipeline with potential to produce high temperature resistant materials for power plants and rotating aerospace parts Expanding footprint in emerging markets Rod & Bar Plate Strip Wire Bar, flat & rod A global leader in high-technology materials Largest integrated titanium producer in Western Europe Focus on aircraft gas turbine and airframe manufacturing 1 Numbers in arrows denote annual production capacities 34 March 2012

35 Inoxum has a broad product offering with a strong focus on ferritic grades and high performance alloys ( HPA ) Broad range of products across its locations Stainless deliveries split by grade Stainless steel products Slabs Hot rolled black strip Hot rolled Cold rolled Cold rolled white strip strip (2B) strip (BA) Precision strip Tubes Forged products Nickel alloys Titanium products ~35% Low/no nickel grades Other ~1% Nirosta Ferritics 1 ~35% Acciai Speciali Terni Austenitics ~64% 2011A stainless deliveries = ~1.9 million t² Mexinox Competitive strengths Shanghai (SKS) Calvert USA Stainless International High Performance Alloys 1 Including martensitic; ² FYE September Future capabilities (December 2012) Stainless steel Well positioned in stainless steel with a broad and new product offering to benefit from substitution towards ferritic and low-nickel grades Production of high performance alloys (titanium and nickel alloys) with extensive exposure to sophisticated end-markets (aerospace, turbines, power generation) Lower exposure to volatile nickel price improves earnings visibility 35 March 2012

36 Outokumpu and Inoxum have highly complementary product offering in terms of grades benefits to customers Outokumpu stainless deliveries split by grade Ferritics 5% Duplex 7% Other 2% Outokumpu Combined stainless deliveries by grade Duplex ~3% Other ~1% Austenitics 86% Ferritics² ~23% Austenitics ~73% Total 2011A deliveries = 1.4 million t Inoxum stainless deliveries split by grade ~35% Low/no nickel grades Ferritics ~35%² Other ~1% Austenitics ~64% 2011A stainless deliveries = ~1.9 million t¹ ~40% of Inoxum deliveries are of products currently not produced by Outokumpu Broad stainless steel and specialty grade offering Optimally positioned to serve a broad and diverse blue-chip customer base complete stainless solutions provider Optimised to address any potential demand shifts between grades 1 FYE September; ² Including Inoxum s martensitic grades 36 March 2012

37 Outokumpu Combined has a well established and complementary presence across industry sectors Outokumpu end-market split¹ Chemicals, petrochemicals & energy 16% 68% Capital goods serving industries Inoxum end-market split 1 White goods ~16% ~51% Consumer driven Catering & appliances 14% Architecture, building & construction 18% Process & resources 37% Total 2010A end-user deliveries = 448 kt 2 Other ~15% Metal processing ~18% Transport 15% Tubes ~16% Household applications Automotive ~8% ~27% September 2010A end-user stainless deliveries (excl. SSC/Trading) = ~1 000 kt 2 Outokumpu Combined deliveries by end-market¹ Automotive ~20% ~40% Consumer driven Architecture, building & construction ~5% Other ~10% Household, catering & appliances 5 ~20% Transport ~5% Chemicals, petrochemicals & energy³ ~15% ~45% Capital goods serving industries Process & resources 4 ~25% Balanced end-market exposure geared for growth Source: Company information Note: Outokumpu based on December YE 2010; Inoxum based on September YE 2010 ¹ Based on stainless steel shipments, excludes deliveries to distributors and traders ² Outokumpu total shipments of kt, chart relates to end-user deliveries only and excludes 867 kt of distribution/trading deliveries; Inoxum total stainless deliveries of ~2 100 kt, chart relates to end-user stainless deliveries only and excludes ~1 100 kt of SSC/Trading deliveries 3 Includes Inoxum s tubes 4 Includes Inoxum s metal processing 5 Includes Inoxums s household applications and white goods 37 March 2012

38 1 Growth opportunities: Ongoing projected doubling of the ferrochrome production provides significant profit upside Competitive advantages of Kemi mine and Ferrochrome Works Highly cost competitive Ferrochrome production cost (USc/Ib)³ Annual ferrochrome production capacity expected to double to tonnes New capacity expected to be operational by 2013 and fully ramped up by 2015 generating an estimated additional EBIT of ~ 150 million p.a. 1 Total expansion capex of ~ 440 million of which 137 million spent 2 Unique position as Europe s only ferrochrome producer with access to the only known chromite reserves in the EU Fully integrated process with smelters, concentration, pelletizing and sintering plants Outokumpu Kemi Chromite mine Ferrochrome smelter Close proximity to Tornio Works meltshop provides significant energy and transport cost advantages Revenue base diversification as sole European net seller of Ferrochrome Ore reserves: 35 million tonnes 4 and additional mineral resources of 91 million tonnes Annual ore production (31 December 2011): 1.3 million tonnes Capacity: 265 kt p.a. Capacity post expansion: 530 kt p.a. 1 Exchange rate: /$ 1.35, Ferrochrome price: 1.3$/lb, based on extrapolations from December 2012; 2 As of 31 December 2011; 3 CRU as of December 2011; 4 Calculated to a depth of metres 38 March 2012

39 2 Growth opportunities: Calvert integrated mill combined with existing Mexinox facility expected to create a state-of-the-art business platform Production base in US and Mexico (end of 2012) Value proposition Calvert NAFTA San Luis Potosí Substantial Calvert investment programme of 1.2 bln expected to be finalised by end of 2012 (2012 investment: 300 million) CR HR Meeting Meltshop commissioned in end of 2012, full ramp-up in 2014 Creating a new low-cost, high-quality supplier in NAFTA State-of-the-art equipment fully integrated plant with all new equipment designed for low-cost production position Significant savings from replacing European imports to Mexinox (currently shipped from Terni, Italy) 350 Flat 270 Flat Calvert, Alabama Improved cost position with deliveries from Calvert instead of Europe to Mexinox Mexinox, San Luis Potosí 1 Capacity to be commissioned in the end of 2012; 2 Hire rolling capacity at ThyssenKrupp owned mill in Calvert; 3 Sold to free market 39 March 2012

40 2 for profitable growth in NAFTA Fully integrated solution platform for NAFTA Time advantage: short delivery times from Calvert to US customers creates competitive advantage Lower inventory risk due to short delivery cycles Strong existing customer base Entry into important automotive sector in speciality product introduction to NAFTA 72 -wide stainless steel coil for high-end applications, such as chemical and dairy tanks and petrochemical industries Introducing a new production facility to NAFTA Current share in NAFTA expected to grow with new broader product range and lower cost position Mexinox & Calvert expected to grow as share of sales and EBITDA driven by the ramp-up of Calvert integrated mill Positive demand development in Americas Cold rolled consumption (kt) +4.5% Source: SMR as of January A 2011A 2012E 2013E 2014E 2015E 40 March 2012

41 3 Growth opportunities: Significant profit growth potential in Krefeld and High Performance Alloys operations in Europe Significant upside in German stainless Strong continued investment (capex: ~ 240 million) into German cold rolled product excellence with relocation of Benrath facilities to Krefeld and planned upgrades Krefeld cold rolling capacity expected to increase from current 440 kt to 660 kt by 2015 Krefeld to become the centre of excellence for Outokumpu s cold rolling strategy with close proximity to customers in Europe HPA end-market opportunity Profitable investment programme (capex: 93 million) to serve demand in lightweight construction, engine downsizing, deep-water drilling and aerospace nickel business Relocate forged bar production to Unna and expansion of rolled bar production at Altena Upgrade plate operations to expand product range for power plants and access new, attractive poly-silicone applications (solar energy) Installation of a second electron beam furnace in Europe to achieve productivity improvement Krefeld Plant, Germany Spray pickling line for 12m sheet. Altena, Germany 41 March 2012

42 4 Growth opportunities: Expansion of Degerfors quarto plate capacity planned to increase offering in high-margin specialty products Specialty quarto plate expansion Expected Degerfors quarto plate production expansion (kt) Outokumpu is a leading provider of quarto plate special solutions Tailor-made products and special grades for end-users and projects supplied directly from the mill or via own Plate Service Centres 110 Driven by 104 million investment 150 Increasing annual quarto plate production capacity at Degerfors, Sweden expected from current 110 kt to 150 kt by 2014 bringing total quarto plate capacity to 220 kt (incl. capacity in New Castle, US, of 70 kt) 2011A E Total capital expenditure 104 million (approx. 40 million implemented by end of 2011) 42 March 2012

43 5 Growth opportunities: Strong organic growth opportunities in Asia Value proposition Outokumpu Combined presence in Asia Asia is the fastest growing region in terms of stainless steel consumption Strong demand for quality-focused special grades Outokumpu and Inoxum s SKS are recognised quality brands in the region Outokumpu Combined will have an extensive sales network across the region Outokumpu Combined has both cold rolling mill and a state-of-the-art service centre in Shanghai, China Inoxum s SKS subsidiary holds a meltshop construction license for Shanghai SKS Cold Rolling plant Service Centre Positive demand development in Asia Cold rolled consumption (kt) Asia¹ China % CAGR 2011A-2015E +3.8% Outokumpu sales / service centre Inoxum production site Inoxum sales/ service centre % 2010A 2011A 2012E 2013E 2014E 2015E Source: SMR as of January 2012; ¹ Asia ex-china 43 March 2012