Financial Statements Release 217 CEO Roeland Baan CFO Chris de la Camp January 31, 218
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
Speakers Roeland Baan President & CEO Chris de la Camp CFO Tommi Järvenpää Vice President Investor Relations 3
Best value creator in stainless steel by 22 through customer orientation and efficiency 1. Customers 2. Shareholders 3. Employees Time bound: sense of urgency Back to basics 4
217 delivered significant improvements 216 217 217 22 target target Safety (TRIFR) 8.7 4.4 <8. <3.5 Target update Adj. EBITDA (million EUR) 39 SG&A (quarterly run-rate, million EUR) 8 631 75 67 75 Well on track ROCE (%) 2.6 11.3 12 Well on track Gearing (%) 51 4 <35 Well on track Net debt (million EUR) 1,242 1,91 1,1 5
Stainless profitability has improved as a result of self-help and better market Group, adjusted EBITDA, EUR million 217 8 17 229 58 215 216 414 217 Stainless Ferrochrome 6
Step-change in earnings in all business areas Europe 1 Americas Long Products Adj. EBITDA, EUR million 217 Adj. EBITDA, EUR million Adj. EBITDA, EUR million 8 1 21 2 3 16 23 9 56 37 295 44-27 -1 IV/16 IV/17 216 217 IV/16 IV/17 216 217 IV/16 IV/17 216 217 Stainless Ferrochrome 1. Restated numbers do not add up to historical BA results due to consolidation 7
21 211 212 213 214 215 216 217 Q1/17 Q2/17 Q3/17 Q4/17 f European prices recovered towards year-end European base prices 1 (Germany), EUR/tonne 1.2 1.15 1.1 Third-country cold rolled imports 2 into Europe, 1, tonnes 1 5 8 4 6 3 4 2 2 1 Import penetration flat q/q at ~28.5% 1.5 1. 213 214 215 216 217 From rest of world From rest of Asia From China Import penetration 1. 2mm sheet cold rolled 34 grade. CRU January 218 2. Cold rolled, monthly average. Source: Eurofer, January 218 (Q4 17 based on October & November actual and forecast for December) 8
US base prices under pressure at year-end US base prices 1, USD/tonne Third-country cold rolled imports 2 into the US, 1, tonnes 1.45 1.4 1.35 4 3 2 4 3 2 Import penetration of 25% in Q4 1.3 1.25 1 1 1.2 213 214 215 216 217 From rest of world From rest of Asia From China Import penetration 1. 2mm sheet cold rolled 34 grade. CRU December 217 2. Cold rolled, monthly average. Source: Foreign Trade Statistics, American Iron & Steel Institute, November 217 (Q4 17 based on Oct - Nov actual figures, Dec. forecast) 9
Key financials Q4 increased deliveries in the Americas and Long Products offset by lower deliveries in Europe Q4 adj. EBITDA includes net of timing & hedging of EUR 6 million FY17 net result includes EUR 125 million deferred tax income Board of Directors proposes a dividend of EUR.25 per share for 217 Key figures IV/17 IV/16 217 216 Stainless steel deliveries, 1, tonnes 561 596 2,448 2,444 Sales, EUR million 1,465 1,56 6,363 5,69 Adjusted EBITDA, EUR million 82 98 631 39 Net result, EUR million 128 192 392 144 Earnings per share, EUR.31.46.95.35 Operating cash flow, EUR million 14 199 328 389 Net debt, EUR million 1,91 1,242 1,91 1,242 Capital expenditure, EUR million 84 61 174 164 Personnel at the end of the period 1,141 1,6 1,141 1,6 1
Q4 impacted by lower deliveries and higher costs Adj. EBITDA quarter-on-quarter comparison 1, EUR million Higher input costs Spill-over of thirdparty supplier issues in the Americas in Q3 FX derivative losses 56 82 III/17 Base prices Ferrochrome Net of timing and hedging Reversal of the negative oneoffs in the Americas in Q3 Maintenance costs in Europe in Q4 Lower deliveries Higher costs Others IV/17 1) Indicative columns based on management estimates 11
Input costs continue to increase Average costs for graphite electrodes (EUR/t) Ferrosilicon 1 (EUR/t) Brent oil (USD/barrel) 1,14 1,233 1,259 1,368 1,67 55 51 52 61 69 217 218f I/17 II/17 III/17 IV/17 I/18f I/17 II/17 III/17 IV/17 Jan 18 1) Source: Metal Bulletin 12
Europe s results impacted by higher costs Deliveries, 1, tonnes Adjusted EBITDA 1, EUR million Q4 base price up by EUR 1/tonne vs. Q4/16 216: 1,625 217: 1,582 216: 374 217: 615 421 413 396 395 415 398 397 371 I II III IV I II III IV Stainless Ferrochrome 24 11 56 63 22 23 87 9 97 48 168 129 16 69 56 37 I II III IV I II III IV Net of timing and hedging EUR -4 million in Q4/17 Ferrochrome operations result improved increased ferrochrome prices higher production of 121, tonnes (19, tonnes) partially offset by weaker USD Lower deliveries due to planned maintenance Negatively impacted by planned maintenance, lower deliveries and increased input costs 1) Restated numbers do not add up to historical BA results due to consolidation 13
Americas result influenced by seasonality Deliveries, 1, tonnes Adjusted EBITDA, EUR million 216: 69 217: 742 216: -27 217: 21 Seasonally slow market in Q4/17 due to distributor destocking 161 177 185 167 182 186 23 171-37 -3 12 1 29 27-34 Q4 base price USD 1/tonne lower compared to Q4/16 mainly due to weaker product mix I II III IV I II III IV Seasonally low deliveries in Q4 I II III IV I II III IV Negatively impacted by higher costs and weaker mix due to third-party supplier maintenance work Net of timing and hedging EUR 9 million in Q4/17 14
Long Products recovered from mid-year dip Deliveries, 1, tonnes Adjusted EBITDA, EUR million 216: 245 217: 264 216: -1 217: 16 Strong demand in both Europe and the US and increasing prices in Q4 5 7 59 65 75 68 51 7-4 -1 2 2 9 7-2 3 Net of timing and hedging EUR million in Q4/17 I II III IV I II III IV I II III IV I II III IV Deliveries increased y-o-y primarily due to higher demand in Europe Adj. EBITDA driven by higher deliveries, reduced costs and improved long product prices 15
Solid cash generation in 217 EUR million 217 216 Net cash from operating activities 328 389 Net cash from investing activities -63-81 Cash flow before financing activities 264 38 Net working capital up by EUR 18 million Financing costs of EUR 127 including interest expenses of EUR 92 million Overall liquidity reserves at approx. EUR.8 billion Net debt decreased by EUR 151 million Net cash from financing activities -353-291 Cash and cash equivalents 112 24 16
Aiming to reduce leverage to below 1. Net debt and gearing Debt maturity profile, EUR billion 188% 1,2 93% 9.8 69% 4. 1.7 3.5 51% 4% 1.97 1.61 1.24 1.9 213 214 215 216 217 <1. 22,8,4 218 219 22 221 222+ Net debt, EUR billion Gearing Current debt Non-current debt Unutilized facilities Net debt/ltm adj. EBITDA 17
Halving interest expenses by 22 Debt structure*, % 4% 17% 19% Net interest expenses, EUR million 12 1 8 Interest expenses down 5% by 22 217 achievements: 219 bond called in full 221 bond: two partial calls Restructuring of pension loan portfolio Reduction of financial leases Bonds 1% 7% Long-term loans Finance leases Commercial paper 2% 14% Convertible bonds Pension loans Short-term loans 6 4 2 216 217 22e Amendment and extension of revolving credit facility Reduction of interest cost run rate by more than EUR 35 million, most of which will be visible in 218 financials * Dec 31, 217 18
Business and financial outlook for Q1/218 Healthy underlying stainless steel demand both in Europe and the US Seasonally strong market Outokumpu expects higher stainless steel deliveries in Q1 compared to Q4/17 Increased graphite electrode, ferrosilicon and energy costs, as well as weakening US dollar and lower ferrochrome price are expected to have a significant negative impact on profitability Outokumpu expects higher Q1/18 adjusted EBITDA compared to the previous quarter 19
We are solidly on track We have improved our profitability through self-help We are driving topline growth and efficiency through our must-win battles The EUR 75 million by 22 EBITDA target is firmly within our reach 2
Appendix
Our strategic plan VISION 22: To be the best value creator in stainless steel by 22 through customer orientation and efficiency. The best value in the industry for customers, shareholders and employees through: Safety High Performing Organization World Class Supply Chain Manufacturing Excellence Americas Commercial Excellence 22
Topline growth and cost reductions will deliver EBITDA of EUR 75 million TOP LINE GROWTH Increase volume through efficiency and debottlenecking Richer mix through improved capability and selective sales strategy Value based selling 55% 45% COST REDUCTION Achieve 2-3% annual productivity improvement Achieve 15% savings in procurement Reduce variable and fixed cost Reduce SG&A cost by EUR 1 million Baseline: adjusted EBITDA of EUR 165 million in 215. Target: EBITDA of EUR 75 million in 22. 23
We focus on growth segments Consumer goods, automotive, architecture, building and construction Distributors End-customers 16% Consumer goods & medical 17% Automotive 45% 55% 22% Architecture, building & construction Chemical, petrochem. and energy 18% 3% 6% 18% Metal processing & tubes Heavy industries Other Sales 217 24
Operative cost components Raw materials Personnel Energy and consumables Other cost of sales SG&A (excl. personnel and D&A) D&A total Raw materials account for around 6% of the total operative costs of the Group Energy and other consumables account for 1-15% of the total operative costs Personnel expenses 1-15% of the total operative costs Other cost of sales includes e.g. freight, maintenance and rents and leases Jan-Dec 217 25
Broadest product portfolio across stainless steel Deliveries by product grade in 217 Duplex 3% Other 3% Outokumpu product forms Ferritic 18% Austenitic (CrNi) 59% Ferrochrome Slab Quarto plate Hot rolled black coil Hot and cold rolled white coil Precision strip Cast semis Rolled and forged billet Austenitic (CrNiMo) 17% Bar Rebar Wire rod Jan-Dec 217 26
4% demand growth expected for 218 Americas Europe APAC Global +3% +3% +5% +3% +1% +1% +2% +3% +2% +2% +2% +6% +6% +4% +5% +3% +1% +4% +6% +4% +5% +3% -4% -2% 15 16f 17f 18f 19f 2f 15 16f 17f 18f 19f 2f 15 16f 17f 18f 19f 2f 15 16f 17f 18f 19f 2f USA OTHER AMERICAS OTHER EMEA CHINA OTHER APAC +2% +3% +6% +4% +1% +6% +2% +3% +3% +5% +8% +4% +5% +4% +2% +7% +8% +4% +5% +3% 1% +4% +4% +3% +5% +3% -2% -4% 15 16f 17f 18f 19f 2f -1% -7% 15 16f 17f 18f 19f 2f 15 16f 17f 18f 19f 2f 15 16f 17f 18f 19f 2f 15 16f 17f 18f 19f 2f Data source: SMR, January 218 Real demand for total stainless steel (rolled & forged products, excl. 13Cr tubes, profiles) 27
Strong start to 218 expected both in EMEA and Americas EMEA total stainless steel real demand 1 Americas total stainless steel real demand 1 1, tonnes 1, tonnes 2.1 2. 1.9 1.8 1.7 1.6 1.5 Q1 217 +7% Q2 Q3 Q4 Q1 218 SMR Jan'18 Q2 Q3 Q4 1. 95 9 85 8 75 7 65 6 55 5 Q1 217 +8% Q2 Q3 Q4 Q1 218 SMR Jan'18 Q2 Q3 Q4 1) Total stainless = rolled & forged products, excl. 13Cr tubes, profiles 28
212 213 214 215 216f 217f 218f 219f 212 213 214 215 216f 217f 218f 219f 212 213 214 215 216f 217f 218f 219f Low capacity utilization in China, on healthier level in Europe and Americas Asia [CR, Mtonnes] 28,1 28,7 25,7 23,9 22,8 22,8 21,3 21,8 21, 19,2 19,6 17,8 18,3 17,5 16,7 6,8 6,6 15,2 6,4 6,1 5,7 5,8 5,5 5,3 9,9 11,2 12,1 12,4 13,4 14,6 15,2 16, [CR, Mtonnes] 4,9 4,9 3,5 3,5 Europe 4,7 4,6 4,5 4,6 4,6 4,6 4, 4,1 4,2 3,7 3,8 3,8,9,9 1,1 1,1 1,2,6,8 1,1 2,8 2,7 2,9 2,9 2,9 3, 3, 2,6 Americas [CR, Mtonnes] 3,3 3,3 3,2 3,2 3,2 3,2 3, 3, 2,5 2,5 2,5 2,6 2,7 2,8 2,4 2,3 1,,9,8,9,9,9,8,8 1,4 1,6 1,6 1,7 1,7 1,7 1,7 1,8 Demand covered by Rest Asia Demand covered by China CRU Capacity Demand covered by Imports* Demand covered by EU Mills CRU Capacity Demand covered by Rest Americas Demand covered by USA CRU Capacity Source: SMR Real Demand January 218; CRU Capacity November 217 * Using FY217 imports share as forecast for 218-219 29
Nickel & stainless price development Nickel price, USD/tonne 6. 5. 4. 3. Transaction prices 34 stainless, USD/tonne 5. 4. 3. 2. 1. 2. 2 6 2 7 2 8 2 9 2 1 2 1 1 2 1 2 2 1 3 2 1 4 2 1 5 2 1 6 2 1 7 2 1 8 1. 211 212 213 214 215 216 217 Europe USA China 1. LME daily cash settlement 2. 2mm sheet cold rolled 34 grade. CRU January 218 3
Raw materials - price development U S D / t o n 15, 14, 13, 12, 11, 1, 9, 8, 7, Mar Feb Jan'16 May Apr Jun Aug Jul Sep Nickel 1 Nov Oct Dec Jan'17 Mar Feb May Apr Jun Aug Jul Oct Sep Jan'18 Dec Nov 29 Jan 18 13,89 USD/t U S D / l b 1,9 1,7 1,5 1,3 1,1,9,7,5 Jan'16 Apr Mar Feb European contract price European spot price Jul Jun May Sep Aug Ferrochrome 2 Mar Feb Jan'17 Dec Nov Oct Jun May Apr Sep Aug Jul Dec Nov Oct Jan'18 Q1/18 1.18 USD/lb 26 Jan 18.96 USD/lb U S D / l b 13 12 11 1 9 8 7 6 5 4 Jan'16 Feb Mar May Apr Jun Jul Aug Sep Molybdenum 3 Oct Nov Dec Jan'17 Mar Feb May Apr 29 Jan 18 12.2 USD/lb Jun Jul Aug Sep Oct Nov Jan'18 Dec U S D / t o n 4 35 3 25 2 15 1 Mar Feb Jan'16 May Apr Jun Aug Jul Carbon steel scrap 4 Sep Nov Oct Dec Jan'17 Mar Feb May Apr Jun Aug Jul Oct Sep Nov Jan'18 Dec 29 Jan 18 33 USD/t Data source: 1) Nickel Cash LME Daily Official 2) Contract - MetalBulletin - Ferro-chrome Lumpy CR charge basis 52% & Cr quarterly major European destinations Cr ; Spot: Platts Charge Chrome 52% DDP Europe 3) MetalBulletin - Molybdenum Drummed molybdic oxide Free market Mo in warehouse; 4 Ferrous Scrap Index HMS 1&2 (8:2 mix) $ per tonne fob Rotterdam 31
Fully integrated production asset base Europe Americas Long Products Total 1, tonnes Tornio Finland Avesta + Nyby Sweden Krefeld + Dillenburg Germany Degerfors Sweden Calvert USA Mexinox Mexico Sheffield UK Richburg USA Degerfors Sweden Melting 1,45 45 9 45 3,25 Hot rolling 1,45 9 87 3,22 Finishing - Cold rolling - HWB - Quarto plate - Long products 75 15 13 12 5 15 35 15 25 25 4 4 2,655 32
For more information, call Outokumpu Investor Relations or visit www.outokumpu.com/investors Tommi Järvenpää Vice President Investor Relations Phone +358 9 421 3466 Mobile +358 4 576 288 E-mail: tommi.jarvenpaa@outokumpu.com Simone Cujai Investor Relations Manager Phone: +49 2151 83 4226 Mobile: +49 172 298 4797 E-mail: simone.cujai@outokumpu.com Päivi Laajaranta Executive Assistant Phone +358 9 421 47 Mobile +358 4 67 424 E-mail: paivi.laajaranta@outokumpu.com 33