Outokumpu Oyj Annual General Meeting 2011 24 March 2011 www.outokumpu.com
Opening of the Annual General Meeting Item 1 on the agenda Calling the Meeting to order Item 2 on the agenda Ole Johansson, Chairman of the Board of Directors
Election of persons to scrutinze the minutes and to supervise the counting of votes Item 3 on the agenda Recording the legality of the Meeting Item 4 on the agenda
Invitation to the AGM 2010 Invitation published as stock exchange release on 2 February 2011 Invitation available on www.outokumpu.com/agm Invitation published in Helsingin Sanomat on 21 February 2011: 4
Recording the attendance at the Meeting and adoption of the list of votes Item 5 on the agenda
Presentation of the Annual Accounts, the Report of the Board of Directors and the Auditor s Report for the year 2010 Item 6 on the agenda
Review by the CEO Juha Rantanen, CEO
Stainless steel market update Annual Accounts 2010 and outlook Outokumpu s strategy Sustainability
Not all steel is stainless but it is the fastest growing of all metals Stainless steel production ~25 million tonnes pa about 2% of all steel Carbon steel production ~1 200 million tonnes pa 400 350 300 250 200 150 100 50 0 Index 85 90 95 00 05 10 Stainless Aluminium Copper Carbon Steel OECD IP Nickel 9
10 From cutlery to bridges endless possibilities
Drivers for stainless steel demand Urbanisation Energy & environment Clean water Infrastructure Building and construction Catering & appliances Transportation Renewables Desalination Water treatment Sustainability through the unique properties of stainless 11
Long-term historical growth of stainless steel forecasted to continue kt WORLD 40 000 35 000 +6.3% 30 000 25 000 20 000 15 000 10 000 5 000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Data source: SMR Feb 2011. 2011-2015 is forecast 12
Consumption of stainless steel in Europe recovering kt EUROPE 8 000 7 000 6 000-20% +4% 5 000 4 000 3 000 2 000 1 000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Data source: SMR Feb 2011. 2011-2015 is forecast 13
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Stainless steel prices in Europe relatively flat in 2010 EUR/t 4 800 4 400 4 000 3 600 3 200 2 800 2 400 2 000 1 600 1 200 800 400 0 Cold rolled price development (304 2B German market) Transaction price Alloy surcharge Base price 14 Source: CRU, incl. February 2011 Please note: Between July - October 2007 and in February 2009, European prices for some stainless grades were quoted on a transaction price basis, therefore base prices are the calculated value of transaction price minus alloy surcharge for this time period (CRU)
Current stainless steel markets Demand for standard grades picked up in the newyear Nickel price increase supports distributor buying Lead times for standard grades somewhat above normal Distributor inventories in Europe approximately at normal level Demand from investment-driven segments has not yet shown any major recovery 15
Stainless steel market update Annual Accounts 2010 and outlook Outokumpu s strategy Sustainability
Group operating profit development EUR million 1 000 800 600 400 200 0-200 -400-600 06 07 08 09 10 17
Key figures 2010 EUR million 2010 2009 Sales 4 229 2 641 Operating profit -83-441 EPS, -0.68-1.86 ROCE, % -2.1-11.7 Dividend/share, 0.25 1) 0.35 Stainless steel deliveries, 1 000 tons 1 315 1 030 1) proposal by the Board to the AGM Operating profit in 2010 includes: EUR 17 million non-recurring write-down EUR 26 million of raw material-related inventory gains Underlying operational result impacted by Higher delivery volumes and base prices Better contribution from ferrochrome Negatively affected by weaker geographic and product mix 18
Capital structure EUR million 2010 2009 Net cash generated from operating activities -497 201 Net interest-bearing debt 1 837 1 191 Equity-to-assets ratio, % 42.2 50.6 Debt-to-equity ratio (gearing), % 77.3 48.6 Cash flow negative but turned positive in Q4 2010 Reduction of inventories reduced working capital Gearing above the target maximum of 75% Committed undrawn credit facilities of EUR 1 billion 19
Higher metal prices main driver for increased inventories EUR million 2 000 1 500 Volume +23% Metal prices +77% 1 000 500 0 I/08 II/08 III/08 IV/08 I/09 II/09 III/09 IV/09 I/10 II/10 III/10 IV/10 Inventories including raw materials, work-in-progress and finished goods 20
Short-term outlook 2 February 2011 Encouraging order intake from beginning of 2011 Base price increases Having an impact only towards end of Q1 Delivery volumes in Q1 are estimated to be some 10-20% higher than in Q4 Outokumpu s operating profit in Q1 is expected to be around break-even or slightly positive Some positive impact from raw material-related timing gains (at current metal prices) 21
Dividend proposal 2010 of 0.25 EUR/share - five year average payout ratio 65% EUR/share 1,50 1,25 1,00 0,75 0,50 0,25 0,00 05 06 07 08 09 10 22
Stainless steel market update Annual Accounts 2010 and outlook Outokumpu s strategy Sustainability
Outokumpu s key strengths Globally cost competitive and fully integrated production site in Tornio Leading position in specialty stainless products World-class chromium mine and ferrochrome production Global sales and service centre network Leader in managing environmental impacts of production 24
Outokumpu s strategic priorities Profitability Customer satisfaction Excel in sales and customer service Loading Tornio with high volume products Fast transformation to special grades and products Ferrochrome expansion Growth outside Europe Excel in operations 25
New investment decisions in 2010 Ferrochrome investment of EUR 440 million Doubling capacity to 530 000 tonnes annually Securing self-sufficiency and increasing external sales Operational 2013-, ramped up 2015 Financial impact The expansion brings additional annual operating profits in the order of EUR 150 million at full capacity (at current prices and exchange rates) 26
Outokumpu s cost-competitiveness in ferrochrome production improves Cost structure of Outokumpu s ferrochrome production Cost curve of total delivered cost for ferrochrome production, 2011f Other 18 % Depreciation 5 % Electricity 30 % USc/Ib Maintenance 8 % Personnel 10 % Excluding raw materials Source: Outokumpu, 2010 Other energy 29 % Outokumpu Outok Source: CRU December 2010 27
New investment decisions in 2010 Quarto plate investment of EUR 104 million Increasing capability and capacity in Degerfors in Sweden Broadening product range, increasing use of special grades Outokumpu s total annual quarto plate capacity to increase to 220 000 tonnes 2014-28
Stainless steel market update Annual Accounts 2010 and outlook Outokumpu s strategy Sustainability 29
Outokumpu and sustainability Financial Environmental Social 30
Majority of raw materials recycled metals Outokumpu s production is based on recycling Main raw-material is recycled steel Primary alloying metals (Cr, Ni etc.) Recycled material content of our steel is appr. 90% 31
Lowest carbon footprint, reduced emissions and efficient energy use Outokumpu products carbon footprint smallest in the EU Improved processes High proportion of recycled steel Low-carbon electricity mix Energy-efficient and sustainable production Recycled steel as primary raw-material Electricity as source of energy 32
Outokumpu s Energy and Low-Carbon Programme 2010 CO2t. 1,60 1,40 Outokumpu C0 2 emission profile per ton of cast stainless steel Target of 20% reduction in the Group s specific emission profile in stainless production by 2020 1,20 1,00 0,80 0,60 0,40 0,20 0,00 1997 2007-2009 2020 33
Continuous improvement in safety LTI * ) 35 30 Outokumpu employees and contractors Target 2011 Target 2011 < < 3.5 3.5 25 20 18 19 17 15 10 5 11 9.0 5.9 4.7 0 2004 2005 2006 2007 2008 2009 2010 * ) Lost time injuries /1 million working hours 34
Thank you!
Review by the CEO
Auditors Report 2010 Outokumpu s Financial Report 2010, page 117 37
Adoption of the Annual Accounts 2010 Item 7 on the agenda
Resolution on the use of the profit shown on the balance sheet and the payment of dividend Item 8 on the agenda
Proposal by the Board of Directors to pay a dividend Dividend proposal of 0.25 EUR/share for 2010 Ex-dividend date 25 March 2011 Record date 29 March 2011 Payment date 5 April 2011 40
Resolution on the discharge of the members of the Board of Directors and the CEO from liability Item 9 on the agenda
Discharge from liability of Board members and CEO Ole Johansson, Chairman of the Board Anssi Soila, Vice Chairman of the Board Evert Henkes, Board member Victoire de Margerie, Board member Anna Nilsson-Ehle, Board member Jussi Pesonen, Board member Leena Saarinen, Board member Olli Vaartimo, Board Member Juha Rantanen, CEO 42
Resolution on the remuneration of the members of the Board of Directors Item 10 on the agenda
Proposal for fees by the Nomination Board Remuneration levels proposed: Chairman EUR 80 000 annual fee Vice Chairman EUR 45 500 annual fee Board members EUR 36 000 annual fee and meeting fee EUR 600 per each meeting EUR 1 200 per each meeting for non-finnish resident members Proposal that 40% of the annual fees would be paid in Outokumpu shares Shares to be purchased within two weeks after the release of Outokumpu s Q1 interim report 2011 44
Election of members of the the Board of Directors Item 11 on the agenda
Proposed Board members (1) Evert Henkes b. 1943, B.Sc. (Ag. Econ.) Outokumpu board member 2003 CEO 1998 2003: Shell Chemicals Ltd Ole Johansson b. 1951, B.Sc. (Econ.) Outokumpu board member 2002 Chairman of the board 2008 President and CEO 2000 : Wärtsilä Corporation 46
Proposed Board members (2) Anna Nilsson-Ehle b. 1951, Ph.D., M.Sc. (Eng.) Outokumpu board member 2005 Director 2006 : SAFER National vehicle and traffic safety research center Jussi Pesonen b. 1960, M.Sc (Eng.) Outokumpu board member 2009 President and CEO 2004 : UPM-Kymmene Corporation 47
Proposed Board members (3) Olli Vaartimo b. 1950, M. Sc. (Econ.) Outokumpu Board member 2010 CFO 2003 : Metso Oyj 48
Proposed new Board members (4) Elisabeth Nilsson b. 1953, M. Sc. (Tech.) Governor 2010 : Östergötlands län President 2005 2010: Jernkontoret (Swedish Steel Producers Association) General Manager, Metallurgy Division 2003 2005: SSAB Oxelösund Siv M. Schalin b. 1962, M.Sc. (Econ.), MBA Managing Director and General Manager, Patient Care Solutions 2008 : GE Healthcare Finland Oy Vice President, Service 2005 2008: GE Healthcare EMEA General Manager 2004 2005: GE Healthcare Sweden 49
Proposal for Board Chairman and Vice Chairman Mr. Ole Johansson to be re-elected as Chairman Mr. Olli Vaartimo to be elected as Vice Chairman 50
Resolution on the remuneration of the Auditor Item 12 on the agenda
Remuneration of the Auditor Proposal: according to invoice Auditor fees in 2010: Audit fees EUR 1.4 million Non-audit fees EUR 0.3 million 52
Election of Auditor Item 13 on the agenda
Election of the Auditor It is proposed that KPMG Oy Ab be re-elected as the auditor for Outokumpu until the close of the following AGM Responsible auditor Mauri Palvi, Authorised Public Accountant 54
Authorising the Board of Directors to decide on the repurchase of the company s own shares Item 14 on the agenda
Proposal by the Board of Directors for the authority to repurchase the company s own shares Maximum number of shares to be re-purchased is 18 000 000 (9.84%) Outokumpu currently holds 1 040 888 of its own shares The price payable shall be based on the price of the company s shares in public trading The Board can decide how the own shares will be repurchased Shares can be repurchased in deviation from the proportional shareholdings of current shareholders (directed repurchase) Authorisation is valid until the next AGM No later than 31 May 2012 56
Authorising the Board of Directors to decide on the issuance of shares as well as other special rights entitling to shares Item 15 on the agenda
58 Proposal by the Board of Directors to issue shares and grant share entitlements New shares can be issued, treasury shares can be transferred (share issue) and share entitlements (excl. share options to management and personnel under an incentive plan) can be granted Under a share issue and/or by exercising share entitlements the max number of new shares to be issued is 18 000 000, in addition, the max number of treasury shares to be transferred is 18 000 000 The Board is authorised to decide on all other conditions The Board has the authority to decide on the issue of shares and special rights in deviation of the pre-emptive subscription right of shareholders (directed issue) Authorisation is valid until the next AGM No later than 31 May 2012
Formation of a Nomination Board Item 16 on the agenda
Proposal by Solidium Oy to elect a Nomination Board To prepare proposals on the election and remuneration of the Board of Directors to the next AGM Elected to form the board: representatives of the three largest shareholders (on 1 October 2011) the Chairman of the Board of Directors as an expert member Should a shareholder not wish to use the nomination right, the right to nominate is transferred to the next largest shareholder who would otherwise not have a nomination right Proposals submitted to the Board of Directors latest on 1 February preceding the AGM 60
Closing of the Meeting Item 17 on the agenda
Outokumpu Oyj Annual General Meeting 2011 24 March 2011 www.outokumpu.com