Exane BNP Paribas Basic Materials Seminar April 1st, 2014 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. 2
Exane BNP Paribas Basic Materials Seminar April 1st, 2014 Environment and markets Aperam 3
Environment and markets Stainless steel sustained growth worldwide Stainless steel slab equivalent global demand (in million tonnes) Stainless steel slab equivalent global utilization rates (% of capacity) 40 +5.2% 90% 85% 30 80% 20 75% 70% 10 65% 0 2010 2014F 2015F 2016F 2017F 2018F 60% 2010 2014F 2015F 2016F 2017F 2018F Demand growth expected to lead to capacity utilization improvement Source: CRU & Aperam estimates 4
Environment and markets European demand expected to recover slowly Stainless steel slab equivalent European demand (in million tonnes) 5.5 Stocks of flat stainless steel in EU-27 for distribution ( 000t) 320 300 5.0 +1.0% 280 4.5 4.0 2010 2014F 2015F Restocking needs to maintain rotation days in 2014 European slow economic recovery and restocking needs should contribute to some demand improvement Source: Eurofer, CRU & Aperam estimates 260 240 220 200 180 Jan 10 Mar 10 Mai 10 Juil 10 Sep 10 Nov 10 Janv 11 Mars 11 Mai 11 Juil 11 Sep 11 Nov 11 Jan 12 Mar 12 Mai 12 Juil 12 Sep 12 Nov 12 Jan 13 Mar 13 Mai 13 Juil 13 Sep 13 Nov 13 5
Environment and markets Nickel price sharp decline by approx. 50% over the past 3 years was led by the NPI * developments Nickel production [1] cost curve (USD/t) Nickel - LME Cash (USD/t) 30,000 28,000 NPI BF* 26,000 20,000 NPI RKEF* NPI EAF* 24,000 22,000 NPI BF* 15,000 20,000 NPI RKEF* 10,000 5,000 0 Nickel price recently on uptrend with tailwind from the Indonesian ban * Nickel Pig Iron Blast Furnace Electric Arc Furnace - Rotary Kiln Electric Furnace [1] Including Nickel Pig Iron production cost curve Source: SBB & Aperam estimates 18,000 16,000 14,000 12,000 10,000 Jan-11 Mar-11 NPI EAF* May-11 Jun-11 Aug-11 Oct-11 Dec-11 Mar-12 Jun-12 Sep-12 Nov-12 Feb-13 May-13 Aug 13 Nov 13 Feb 14 6
Environment and markets Recent pricing outlook stable to favorable Stainless steel transaction price in China for CR 304 2B 2mm coil (USD/t) Stainless steel base price in South Europe for CR 304 2B 2mm coil (USD/t) 5,000 2,050 4,500 1,850 4,000 3,500 3,000 2,500 2,000 Source: SBB 1,650 1,450 1,250 1,050 Stainless steel market started to recover at the end of 850 7 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 Feb 14 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 Feb 14
Exane BNP Paribas Basic Materials Seminar April 1st, 2014 Aperam performance Aperam 8
Aperam performance The best fourth quarter performance since the spin-off Shipments ( 000t) EBITDA per division (USD million) [1] 407 401 450 436 441 58 36 Q1 Q2 Q3 Brazil [2] 37 Europe 21 EBITDA (USD million) [1] 65 81 62 84 Brazil 34 Europe 2 1 5 16 17 43 Q3 Q3 Q3 Q1 Q2 Q3 Stainless & Electrical Services & Solutions Alloys & Specialties Profit improvement in Q1 due to market and internal initiatives but Q2 expected to be more challenging EBITDA of 190 USD/t in compared to 142 USD/t in Q3 and 106 USD/t in [1] Figures for have been restated due to change in accounting principle of defined benefit plans and other long-term employee benefits, and adoption of revised IAS 19 standard. Difference with total Aperam s quarterly Ebitda comes from the Others & Specialties division. [2] Inclusive of 9 m$ non recurring capital gain on real estate sales 9
Aperam performance Industry and historical comparison EBITDA margin of Aperam and of the European industry (USD/t) EBITDA margin of Aperam and stainless steel price (USD/t) 400 300 200 100 0 350 300 250 200 150 100 1,500 1,450 1,400 1,350 1,300 1,250-100 -200 2010 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 50 0 2010 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 1,200 1,150 Aperam European industry margin Aperam margin - LHS CR European base price -RHS Industry and historical comparisons demonstrate the positive effects of the Leadership Journey Profit improvement in Q1 due to market and internal initiatives but Q2 expected to be more challenging and the Top line strategy Sources: Corporate financial reports (Acerinox, Outokumpu, Inoxum, Aperam) 10
Aperam performance Active working capital and CAPEX management Working capital evolution CAPEX level in % of depreciation 1,400 80 1,200 75 70 140% 1,000 65 120% 800 60 100% 600 55 50 80% 60% 400 200 0 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 45 40 35 30 40% 20% 0% Aperam European competitors average 2010 Working capital in million of USD - LHS Rotation days - RHS Profit improvement Despite crisis in Q1 and due low to EBITDA, market and Aperam internal has initiatives consistently but generated Q2 expected positive to be more cash-flow challenging Sources: Corporate financial reports 11
Aperam performance Aperam debt control Quarterly net debt of Aperam and average evolution (USDm) Debt maturity profile (USD millions and as of December 31, ) 1,150 1,100 1,000 900 1,050 800 1,000 950 900 850 800 750 700 700 600 500 400 300 200 650 2010 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 100 0 2014 [1] 2015 2016 2017 [2] > 2018 Net debt (end of quarter) Net debt average Gross debt Line of credit available Over the last 3 years, Aperam has reduced its net debt by more than USD300m Profit improvement in Q1 due to market and internal initiatives but Q2 expected to be more challenging Target of net debt of USD650m by the end of 2014 [1] Including BBF Tranche A of USD69m maturing in March 2014, fully drawn as of December 31,. This amount will be redrawn under BBF Tranche B. [2] Assuming convertible bond reimbursement. 12
Exane BNP Paribas Basic Materials Seminar April 1st, 2014 Strategy: moving a step forward Aperam 13
Strategy: moving a step forward 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 Optimizing portfolio with the Top Line Strategy 1 3 Brazilian development 1 3 Reduction of net debt and cost of debt 1 4 Growing in Alloys specialties 1 5 European Restructuring Robust strategy with significant upsides 14
Strategy: moving a step forward Leadership Journey target Leadership Journey initiatives by typology Cumulated gains (USD million) Restructuring Launched at the early stage of the program, the restructuring initiatives are focused on the closure of non-competitive capacities and the reduction of fixed costs through, in particular, process simplification 500 450 Investments projects In parallel to the restructuring initiatives, major cost cutting investments have been launched with the goal to improve the industrial footprint and to reduce the number of tools. 400 350 475 Performance projects Finally, reinforcing the existing continuous improvement program, several performance projects have been launched in order to accelerate cost reduction. In particular, specific action plans have been implemented for sourcing, IT and SG&A 300 250 349 369 324 299 Q1 Q2 Q3 End of 2015 Expansion of Leadership Journey to USD 475 million by 2015, targeting more than USD 100 million of gains over next 2 years 15
Strategy: moving a step forward Further mix improvement expected Market segments Top line product growth target for 2014 ( 000t) Aperam - volume change HRAP Aust BA 2M HRAP Aust. 2B thin Continue profitable growth 2M 2B 45 40 35 30 25 Ferr BA Aust. 2B thick Aust. LC2i Selective growth based on relative competitiveness 20 15 409 10 Ebitda / cash arbitrage Ferritics Standards Mass commodities Ferritics Specialties Margin Niches Specialties 5 0 Brazil Europe Expanding further high margin products to replace low contribution margin products 16
Strategy: moving a step forward Brazilian protections against unfair market behaviour Type of products Import duties status Anti-dumping status Stainless Steel Flat Products Import duties applicable on Cold Rolled product back from 25% to 14% in October AD rights have just been published valid as of October 4 th for 5 years from 236 USD/t to 1,077 USD/t. The case involves austenitic grades (types 304, 304L and 304H) and CR ferritic stainless 430 strip, in thicknesses between 0.35mm and 4.75mm. Countries involved are China, Finland, Germany, Korea, Taiwan and Vietnam Stainless Steel Welded Tubes No import duties 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. Electrical steel Non Grain Oriented 14% of Import duties on NGO 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. Electrical steel Grain Oriented Import duties applicable on Cold Rolled product back from 25% to 14% in October No anti-dumping investigation Recent anti-dumping measures should create a stable and fair market environment for next 5 years Sources: SBB/Platts, Steelfirst 17
Strategy: moving a step forward Specific markets prospects to be key 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 18
Strategy: moving a step forward Three years of active restructuring Key European restructuring milestone European stainless steel industry footprint after restructuring January : Aperam spin-off and Leadership Journey Long term suspension of 100kt of downstream capacity in Isbergues (France) and mothballing of 80kt of downstream capacity at Gueugnon (France) and Genk (Belgium) April : ThyssenKrupp stainless steel operations strategic review Closure of the 220kt downstream plant of Benrath (Germany) and investment of 220kt of downstream capacity in Krefeld (Germany) Finishing line Steel making Outokumpu October : Aperam Leadership Journey extension Upstream optimization at Genk (Belgium) resulting a capacity reduction of 400kt February : Acquisition by Outokumpu of ThyssenKrupp s stainless steel operations Closure of 500kt of upstream capacity at Krefeld (Germany) Aperam October : Outokumpu accelerating restructuring plan Announcement of the closure of 800kt of upstream capacity at Bochum (Germany) and reduction of 550kt of downstream capacity in Dillenburg (Germany), Krefeld (Germany) and Tornio (Finland). Acerinox Terni A more competitive European industry to better serve the local market base 19
Exane BNP Paribas Basic Materials Seminar April 1st, 2014 Q&A Aperam 20