Petercam's Benelux Conference September 16, 2014 Sandeep Jalan Chief Financial Officer Aperam 1
Disclaimer Forward-Looking Statements This document may contain forward-looking information and statements about Aperam and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements may be identified by the words believe, expect, anticipate, target or similar expressions. Although Aperam s management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of Aperam s securities are cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the control of Aperam, that could cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forwardlooking information and statements. These risks and uncertainties include those discussed or identified in Aperam s filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de Surveillance du Secteur Financier). Aperam undertakes no obligation to publicly update its forward-looking statements or information, whether as a result of new information, future events, or otherwise. Aperam 2
Petercam's Benelux Conference Aperam s fundamentals Aperam 3
Aperam s fundamentals Solid and diversified sources of revenues Aperam sales breakdown by destination (H1 2014) Aperam EBITDA breakdown (H1 2014) Asia & Africa 6% USA 5% Alloys & Specialties 11% Brazil & Latin America 25% Services & Solutions 17% Stainless & Electrical Steel - Europe 36% Europe 64% Stainless & Electrical Steel - Brazil 36% Aperam is number 1 in South America, number 2 in Europe in stainless steel CAPEX budget of USD 4.0 billion for 2010 and world number 4 in Nickel Alloys Aperam 4
Aperam s fundamentals A unique position in Brazil Stainless steel flat stainless steel consumption per capita (kg/year) 7 South American Stainless steel demand (in kt) 800 6 5 4 3 2 1 700 600 500 400 300 200 100 0 South America USA Europe China 0 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F Aperam targeting to capture market growth Source: CRU and Aperam estimate Aperam 5
Aperam s fundamentals A global distribution network Sales, distribution and steel service centers network, including precision & tubes businesses Sales subsidiaries and representative offices Sales agencies Steel Service Centers A key competitive advantage to maintaining market share and capturing growth opportunities Aperam 6
Aperam s fundamentals A leading position in nickel alloys Global nickel alloys producers (kt) Aperam Alloys & Specialties geographical footprint Rescal Amilly Imhua 40 Wire drawing The magnetic parts company 35 30 n n n Transformation workshop 25 n n 20 15 Imphy ICS (JV) 10 5 0 Special Metals TK VDM Carpenter Aperam Hitachi Nippon Yakin Allegheny Sumitomo Daido Haynes Meltshop, wire mill, cold rolling, bars, R&D Diversification into industrial clads Profit improvement in Q1 due to market A highly and internal value creative initiatives business but Q2 expected to be more challenging Source: SMR Aperam 7
Aperam s fundamentals Three years of active restructuring for a footprint best in class in addressing all the stainless steel markets in Europe Aperam downstream rationalization in EU from 29 tools to 17 tools European stainless steel industry footprint after restructuring GENK ISBERGUES GUEUGNON Finishing line Steel making HA&P lines HAP 3 HAP 3 RD 79 CR mills CR 4 CR 2 CR 3 CR 1 CR 2 CR 2 CR 3 CR 4 CR 5 CR 6 Outokumpu CA&P/ BA lines CAP 1 CAP2 BAL LC2I CAP 2 CAP10 BA 6 BA 8 BA 11 Skins Skin 2 Skin 3 Skin 1 Skin Skin 2 Skin 3 Skin 1 Aperam Core Markets Capital goods, chemicals & energy Auto, distribution & 1 st transformation Decoration trim, heat exchanges & white goods Long term suspension Mothballing & Swing Combination of RD7 and HAP9 and investment Acerinox Terni Aperam well positioned in the core markets in Europe, with good loading of its most efficient assets benefiting from well-advanced restructuring 8
Petercam's Benelux Conference Environment and markets Aperam 9
Environment and markets European stainless steel market is improving but still under pressure of the imports and the nickel price evolution Nickel - LME Cash (USD/t) Chinese versus European CR 304 2B 2mm coil transaction price 35,000 5,000 3,500 30,000 4,500 3,000 25,000 4,000 20,000 3,500 2,500 15,000 10,000 Chinese prices in USD/t (LHS) European prices in EUR/t (RHS) Chinese prices partially integrated the impact of the nickel price increase in Q2 3,000 2,500 2,000 2,000 1,500 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 07 Apr 08 Aug 08 Dec 08 Apr 09 Aug 09 Dec 09 Apr 10 Aug 10 Dec 10 Apr 11 Aug 11 Dec 11 Apr 12 Aug 12 Dec 12 Apr 13 Aug 13 Dec 13 Apr 14 Aug 14 5,000 Source: SBB Aperam 10
Environment and markets European demand recovery underway Stainless steel slab equivalent European demand (in million tonnes) 5.5 Stocks of flat stainless steel in EU-27 for distribution ( 000t) 340 320 5.0 300 4.5 4.0 2010 2011 2012 Customers have replenished their inventories during the first semester supporting the apparent demand. Source: Eurofer, CRU & Aperam estimates 2013 2014F 2015F 280 260 240 220 200 180 Yet, inventories level remains low. Sep 2008 Jan 2009 May 2009 Sep 2009 Jan 2010 May 2010 Sep 2010 Jan 2011 May 2011 Sep 2011 Jan 2012 May 2012 Sep 2012 Jan 2013 May 2013 Sep 2013 Jan 2014 May 2014 Aperam 11
Petercam's Benelux Conference Aperam performance Aperam 12
Performance Second quarter operating performance Shipments ( 000t) 475 Q2 2014 EBITDA per division (USD million) [1] 466 450 124 436 441 100 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Brazil 58 EBITDA (USD million) Brazil 53 Europe 66 129 164 Europe 47 23 30 15 20 81 62 84 Q1 2014 Q2 2014 Q1 2014 Q2 2014 Q1 2014 Q2 2014 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Stainless & Electrical Services & Solutions Alloys & Specialties Q2 2014 as the best quarter in terms of profitability since the spin-off [1] Difference with total Aperam s quarterly Ebitda comes from the Others & Eliminations division. 13
Performance Leadership Journey Cumulated gains (USD million) Key projects completed since beginning of 2011 In Brazil, VSS*, switch from LPG to natural gas and conversion of blast furnace number 2 from coke to biomass. 450 400 350 300 250 200 150 100 50 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 In Europe, - Suspension of traditional cold roll mill in Isbergues - Completion of the new hot annealing and pickling line in Gueugnon - Industrial optimization and rationalization (from 29 to 17 tools) In Services & Solutions, Service Center expansion in Campinas Alloys & Speciality, completion of the Imphy meltshop enhancement Closure of Firminy (Precision) Key projects progressing Yield and Quality improvement, Sourcing initiative, SG&A reduction Debottlenecking the finishing line of the Imphy Wire Rod mill (A&S) Productivity increase of the downstream facilities in Genk, Gueugnon and Timoteo. Key new projects Upgrade of the Grain Oriented Electrical Steel operations in Timoteo Profit improvement in Closure Q1 due of to Firminy s market and plant internal was completed initiatives at but the Q2 end expected of Q2 2014 to be more challenging *VSS Voluntary Separation Scheme 14
Performance Balance sheet control Working capital evolution Gearing evolution (%) 1,400 1,200 1,000 800 600 400 200 0 80 75 70 65 60 55 50 45 40 35 30 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 50% 40% 30% 20% 10% 0% Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Working capital in million of USD - LHS Rotation days - RHS Strong focus on cash generation and working capital management Aperam 15
Performance Diversified funding structure & low refinancing risk Equity & net debt (USD million) Debt maturity profile (USD millions and as of October 1 st, 2014) [1] 700 600 500 2 935 3 017 2 958 3 026 3 149 400 300 200 841 30/06/13 808 30/09/13 690 31/12/13 689 31/03/14 663 31/06/2014 100-2014 2015 2016 2017 2018 > 2019 Net Debt Equity Gross debt Line of credit available Successful launch of the USD 300 m convertible bond [2] and repayment of the High Yield bond 2016 [1] Assuming the repayment of the High Yield Bond 2016 on October 1, 2014 - as announced on August 27, 2014 - and the convertible bonds reimbursement. [2] On 27th June, successful launch of Convertible Bond $300m due 2021 with coupon 0.625%, at initial conversion price of $43.92, transaction closed in July. Aperam 16
Petercam's Benelux Conference Plan 2014-2015 Aperam 17
Plan 2014-2015 Strategic priority maintained allowing to capture new opportunities Strategic priority 5 profit-driving pillars 1 1 Leadership Journey 1 2 Top Line Strategy 1 1 Aiming at best in cost with the Leadership Journey 1 2 Innovation in Stainless & Electrical Steel 1 3 Brazilian development 1 3 Reduction of net debt and cost of debt 1 4 Alloys specialties 1 5 Net debt reduction program Robust strategy with significant upsides Aperam 18
Plan 2014-2015 Aiming at best in cost with the Leadership Journey Cumulated gains (USD million) New investment announced in 2014 500 February 6 USD 10 million in debottlenecking the finishing line of the Imphy Wire Rod mill. This aims at further improving competitiveness and increasing revenue in the Alloys & Specialties segment. 450 400 350 475 May 7 USD 25 million in productivity improvement of the downstream facilities in Genk, Gueugnon and Timoteo. 300 250 349 Q3 2013 369 Q4 2013 385 Q1 2014 401 Q2 2014 End of 2015 July 31 USD 17 million aiming at offering High Grain Oriented electrical steel products while at the same time improving the costs competitiveness of Aperam s Brazilian Grain Oriented Electrical Steel operations. USD 52 m of investments launched since the beginning of 2014 to debottleneck its downstream operations and enhance Aperam s product portfolio Aperam 19
Plan 2014-2015 Optimizing portfolio with the Top Line Strategy Top line product growth target for 2014 ( 000t) Examples of innovation 45 40 35 30 25 The Selective Catalytic Reduction System New ferritics grades for Automotive applications 20 15 10 5 0 Brazil Europe Duplex offer Carbon steel substitution Expanding further high margin products to replace low contribution margin products Aperam 20
Plan 2014-2015 Brazilian protections against unfair market behaviour Type of products Import duties status Anti-dumping status Stainless Steel Flat Products Normal import duties are 14% For Cold Rolled Stainless Steel from 0,5 to 3mm, duties were temporally increased to 25%, between September 12 and September 13. AD rights published last year and valid as of October 4 th for 5 years from 236 USD/t to 1,077 USD/t. The case involves CR 304 and 430, in thicknesses between 0.35mm and 4.75mm from China, Finland, Germany, Korea, Taiwan and Vietnam. Stainless Steel Welded Tubes Electrical steel Non Grain Oriented Electrical steel Grain Oriented 14% of Import duties Stainless Steel welded tubes. 14% of Import duties on NGO. Normal import duties are also 14% For GO Electrical Steel in coil wider, duties were temporally increased to 25% between September 12 and September 13. AD rights have just been published valid as of July 29 th for 5 years and up to 911USD/t. Countries involved are China and Taiwan. AD rights imposed for NGO on July 17th with fixed USD/t values ranging from 133 USD/t to 567 USD/t for 5 years. The countries involved are China, Korea and Taiwan. On August 15, 2014, Camex released NGO AD partially, giving 45Kt of imports in the next 12 months without AD penalties. No anti-dumping investigation Recent anti-dumping measures should create a stable and fair market environment for next years Sources: SBB/Platts, Steelfirst Aperam 21
Plan 2014-2015 Growing in Alloys specialties Continuously variable transmission belt Alloys & Specialties sales breakdown by market LNG* tankers 7% 8% 24% 10% 12% 39% Special welding Mould for composite aircraft fuselage parts Energy / Oil & Gas Chemical process industries / welding / environment Aerospace Electronics & Electrical Engineering Automotive / Transportation Others On February 6, 2014, the Board of Directors of Aperam approved an investment of USD 10 million in debottlenecking the finishing line of the Imphy Wire Rod mill. Specific high margin products on star segments to drive Alloys & Specialties growth * Liquified Natural Gas Source: Aperam Aperam 22
Plan 2014-2015 Sustainable cash flow from operations across the cycles Cumulated net cash provided by operating activities (USD million) Quarterly net debt of Aperam evolution (USD million) 1,000 800 1,150 1,050 Enhanced reduction target on net debt from USD 650 m to USD 550 m by end of 2014 600 400 200 0 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Over the past 3 years, the company has continuously generated cash-flow to strengthen its balance sheet Profit improvement in Q1 due to market and internal initiatives but Q2 expected to be more challenging Net debt will be reduced to half by the end of 2014 compared to mid 2011 950 850 750 650 550 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 550 Q4 2014 23
Credits: Ceará State Government Foto: Vigliecca - Vigliecca & & Associados Q&A Castelao stadium, Fortaleza revamped with Aperam Stainless Steel Aperam 24