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Outokumpu
Experience2013
May 22-23, 2013
Old Billingsgate,London, UK
High PerformanceStainless and Alloys BA
Jarmo TonteriJürgen OlbrichHPSA
Outokumpu
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Outline
2
1. HPSA introduction
2. High Performance Stainless strategy
3. VDM strategy
4. Summary
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HPSA accounts for 33% of group sales and
18% of group volumes
EMEA 55% Americas 15%
APAC 12% HPSA 18%
Q1 2013 External sales by BA 1)
Q1 2013 External sales by BA 1) Q1 2013 External deliveries by BA 1,2)
Q1 2013 External deliveries by BA 1,2)
EMEA 48% Americas 10%
APAC 10% HPSA 33%
Group deliveries 703,000 tonnesGroup sales EUR 2.2 billion
HPSA
HPSA
1) Split by BA are based on management estimates. APAC figures include also direct sales and deliveries from other BAs to the region.
2) Incl. high performance alloy deliveries, excl. ferrochrome deliveries.
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High Performance Stainless and Alloys
operates in the attractive high-end of the market
P
c
e
Material performance
Stainless
Titanium
Nickel
ZirconiumHigh
Performance
stainless and
Alloys
High
Performance
stainless and
Alloys
• Highly tailored material solutions tothe most demanding environments
• High-end stainless steel, Nickel,Titanium and Zirconium alloys
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Consumergoods &Medical
3 %
Automotive& heavy
transport18 %
Heavyindustries
4 %
Other7 %
HPSA Sales by customer segmentHPSA Sales by customer segment
End users
&
processors
67%
Distributors
33%
HPSA Sales by end‐customer segmentHPSA Sales by end‐customer segment
Architecture,
Building &
Construction
4%
Chemical,
petrochemical
and energy
39%
Metal
processing
& Tubes 24%
Chemical, petrochemical and energy as the
single most important customer segment
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Application areas across key customer
segments
6
The high
corrosion
resistance
and strength of LDX 2404®
mean it can be used as a
complement or substitute in
applications where
austenitic
molother duplex grades such as
2205 have traditionally been
used.
Courtesy of Kvaerner
Pressure vesselsStorage tanksDesalination – Evaporators
Flexible lines
Process Equipment Bridges Chemical tankers
Chemical industry Solar panel industry
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1) 1,000 tonnes, incl. internal deliveries, 2) Incl. internal sales
HPSA financial highlights• Q1 2013 deliveries grew by 18% to
159.000 tonnes compared to Q4
2012• EBIT rose to EUR 14 million driven
by higher deliveries, better mix,increased prices and reduced fixedcost.
• Capex for Q1 was EUR 30. Mainprojects include:
• Quarto Plate expansion project
• VDM strategic investment program
• Headcount remained stable at4.776 out of which VDM unitaccounted for 2.000 employees
EUR million Q1/13 Q4/12comparable
FY2012comparable
Deliveries1)
159 134 597Sales 2) 798 689 3,226
EBITDA 35 -9 114
EBIT 14 -120 -70
Non-recurringitems in EBIT - -93 -94
Employees 4.776 4.764 4.764
Capex 30 na 115
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Outline
8
1. HPSA introduction
2. High Performance Stainless strategy
3. VDM strategy
4. Summary
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• Unparalleled technical expertise to recommend the best possiblesteel grades and material solutions to the most demanding
environments
• Full range of high performance stainless steel grades and productforms
• High quality & high reliability production facilities
• Material performance
• High corrosion, acids and saline water resistance
• High heat resistance and machinability
• High strength that brings e.g. weight savings
• Better durability and reduced maintenance requirements
• Leader in environmental performance
High Performance Stainless (HPS)Value proposition
9
HPS offers customers in-depth know-how on advanced materials
and delivers high performance stainless steel to the most
demanding environments and applications
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HPS is market leader in special stainless steel
grades with more than 30% market share
10
253 MA® – Micro-alloyedheat resistant grades forhighly efficient exhaustgas systems
HAA – high alloyed austeniticstainless steels for safe andefficient process technology
Duplex - High strength andcorrosion resistance enablingdurable light weightconstructions
High Alloyed
Austenitic
High Alloyed
Austenitic
Heat Resistanteat Resistant
uplexuplex
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• In house state of the art R&D team dedicated to thedevelopment of high performance stainless grades
• Alloy development since the 1920’s using state of theart in-house computer simulations and laboratoryresources
• Active in development projects and researchprogrammes together with customers & national andinternational research bodies
• Industry leading customer support in terms of materialselection and fabrication
Unparalleled technical expertise
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HPS Production setup
12HPSA BA, Jarmo Tonteri
8040 & *
60
New Castle,
US Avesta & Nyb y,
Sweden
Kloster,
Sweden
M e l t i n
g
H o t
R o l l i n g
C
o l d R o l l i n g
500
700
160 45
Sheffield, UK
105
Degerfors,
Sweden
500
Special Coil Long Products
Degerfors,
Sweden
160
Special Plate
70
PlatePlateCoil Precision strip Long Products Bar
50
160 70
Thin Strip
Richburg, US
30*
Bar & Long Products
Actual capacities will vary according to product mix and manning
* Hire rolling from third party
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• Starting point in 2010-2011• Heavy losses in the specialty stainless units in Sweden
• High fixed costs compared to sales volumes and margins
• Inconsistent pricing discipline
• New strategy formulated and implemented in 2011-2012• Optimization of production and fixed cost savings in key mills through reduction in
shifts & manning
• Reduction of other fixed and variable costs
• Focus on special grades with high value added
• Increasing prices
• Cutting the tail of the customer base (discontinuing business with the least profitable
customers)
HPS implemented a major business model
renewal in 2011-2012
13
Results
Clear product and pricing strategy, reduced costs,
positive EBIT in Q1 2013 despite weak market
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HPS consists of four Business Lines
14
High Performance
Allloys
High Performance Stainless
Thin Strip Special PlateLong
ProductsVDM
High Performance
Stainless & Alloys
Special Coil
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Special Coil Avesta & Nyby
15
Special Coil
• Product focus
• Hot band, Cold rolled coil and sheet, 2 meter wide
• Focus on special grades (high alloyed austenitic, Duplex, Heat
resistant grades)
• Key applications / customer segments
• Tanks, pressure vessels, welded and flexible tubes, for • Energy Industry, particularly oil & gas
• Chemical & petrochemical, including pulp & paper
• Mining &
Metals
• Desalination, water treatment and ‐heating
• Food & beverage
• Structural components for construction and transport
• Key priorities for 2013:
• Leverage expertise,
quality
and
reliability
to
grow
special
coil
products business globally
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Thin stripKloster
16
Thin Strip
• Product focus• Stainless Coil with focus on precision tolerances – Thicknesses
down to 0.1 mm
• Special stainless steel grades
• Key applications / customer segments• Plate Heat Exchanger Building & Construction
• Gaskets Automotive
• Flexible
Tubes Automotive• Heating Elements Catering & Appliance
• Precision Stamping Process & Resources
• Key priorities for 2013:• Grow in Special Grades• Fine tune raw material sourcing• Continue
with
price
over
volume
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Special PlateDegerfors (Sweden), New Castle (US)
17
Special Plate
• Product focus:• Thick, wide, and individually rolled quarto plates that are used in most
demanding
applications
• Tailor made products and special grades
• Key applications / customer segments• Energy Industry
• Chemical Transportation
• Desalination• Pressure Cylinders, Tanks, Thick‐walled Tubes
• Bridge Structures
• Key priorities for 2013:• Leverage technical expertise to win new customer projects
• Expand business
in
APAC
• Finalization of the ongoing Plate investment program to enhance the capabilities and capacity
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Long ProductsSheffield (UK), Degerfors (Sweden), Richburg (USA)
18
Long Products
• Product focus:• Slab, bloom, billet, rod coil and bar, including stainless
reinforcing bar
• Wide variety of long products, standard and special grades
• Key applications / customer segments• Bridge structures, ABC
• Chemical and petrochemical processing
• Electronics &
automotive
• Food and beverage processing
• Machining of valves, fittings, and other components
• Key priorities for 2013:• Investments in bar production in US
• Capitalizing duplex
and
super
duplex
offerings
• Continuous product development
• Increasing market share in Europe
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Outline
19
1. HPSA introduction
2. High Performance Stainless strategy
3. VDM strategy
4. Summary
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Outokumpu
Experience2013
May 22-23, 2013
Old Billingsgate,London, UK
VDM introduction& strategy
Dr. Juergen OlbrichPresident & CEOOutokumpu VDM
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Outokumpu VDM - Company Profile
21
Outokumpu VDM Production Sites Global Sales Network
USA27
8
Outokumpu VDM HQ
1
23 4
Germany
RenoRod&Bar
Florham ParkMelting
UnnaNickel Melting / Forging1
SiegenHot Rolling2
Al tenaRod & Bar / Plate3
WerdohlStrip/Wire/Service Center 4
7
8
EssenTitanium Melting
5
DuisburgB26
65
~ 64 of sales generated inEurope (~34% in Germany)
Production sites close toinnovative global players inkey industries
~ 23 of sales generated inNorth America
Access to strong US Aerospace and Oil & Gas
market Local production eliminates
€/$ FX risk
~ 13% of sales generated in Asia
Strong access to growingChinese market
Presence in India and theMiddle East; representativeoffice in Moscow
Long-dated presence in Australia with highlyprofitable service center
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Outokumpu VDM - Covers top end of the high-
demanding steel material pyramid
22
high
low
Overview Global businessComplementary offering between Stainlessand VDM business
Focus
R
e
s
a
visual
appearance
material
performance
200
Grade
400
Grade
300
Grade
Nickel Alloys
Titanium
Other
VDM
Stainless
Nickel Alloys
Forgings
Stainless
Steel Flat
Other
Titanium
VDM
Stainless
Zirconium Alloys 1)
Cobalt Alloys
1) Zirconium produced in cooperation with Sandvik , note: Schematic, for illustration only
Special
Grades
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Outokumpu VDM - One of only two players worldwide that offer
full HPA product rangeEspecially attractive for CPI project business where wide range of products required
23
HPA players HPA product range
Alloy Imphy
Nickel Alloys ZirconiumCobalt Alloys
Nickel Alloys Zirconium 1)Cobalt Alloys
Nickel Alloys Cobalt Alloys
Nickel Alloys
Titanium andTitanium Alloys
Titanium andTitanium Alloys
Titanium andTitanium Alloys
Titanium andTitanium Alloys
Cobalt Alloys
Nickel Alloys Cobalt Alloys
Nickel Alloys Cobalt Alloys
Special StainlessSteel 2)
Special StainlessSteel
Special StainlessSteel
Special StainlessSteel
VDM
1. Included in "Exotic Alloys" also containing hafnium and niobium alloys, 2. Product characteristics of special stainless steels are located between regularstainless steels and Nickel alloys, e.g. steels with Nickel content > ~8% found in standard 304 grades Note: Stainless steel and powder metal products
not considered as part of HPA portfolio, source: Company annual reports
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Outokumpu VDM - Product PortfolioNickel Alloys largest segment with more than 130 alloys offered
24
Product forms offered Alloys offered
Nickel Alloys
Plate &
Sheet
Titanium
Others
Strip
Rod & Bar Wire
Welding
Consumables
Forging &
Billets
Strip Plate
Long Products
Plate
Nickel Alloys
Titanium
Others
Wet
Corrosion
Alloys
Special AlloysHigh
‐Temperature
Alloys
R e s i s t a n c e
a l l o y s
Super‐
alloys M a g n e t i c
a l l o y s
C o n t r o l l e d
E x p a n s i o n
a l l o y sHeat
Resistant
Alloys
Commerical
lyCommercially
Pure AlloyedLow Alloyed
Zirconium Cobalt
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Global outlook for all major industries promising
25
Value of
new
airplanes
($bn)
AutomotiveChemical Process
Industry
Oil & GasAerospace /
Turbines
Exploration & Production
spending ($bn)
Chemical demand
(€bn) Produced
units
(m)
Electronic & Electrical
Engineering
Value ($bn)
Source: Company information, Aerospace: TEAL Group commercial airliner forecast; CPI: CEFIC Fact and Figures 2010;
E & E: ZVEI 2011; Oil & Gas: Rystad Energy, DnBNOR; Automotive: IHS Global Insight Report 2010
Lagging recovery from crisisdue to long-term contracts
But: Strong growth trendglobal mobility, especially inemerging markets
Growth driven by: Strong economic
development inemerging countries
Fast population growth(8bn in 2030)
1,871
3,722
2009 2030
2,800
2,996
3,206
2010 2011 2012
436
497537
574
2010 2011 2012 2013
74 7785
8994
98
2010 2011 2012 2013 2014 2015
69
8189
8378
8390
98105106
'11 '12 '13 '14 '15 '16 '17 '18 '19 '20
5% 3%7% 10%
6%
Largest industry sectorworldwide
Growth momentum evenlycarried by Europe and US
Increased E&P spendingdriven by:
More explorationactivity
More difficult conditions(e.g. deepwater )
Growth driven by: Increasing wealth in
emerging markets
Increased need formobility
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Highly attractive growth pockets for HPA in end
customer industries
26
700°C power plants
(high temperature)
98
64
0
50
100
Mm³/day +9%
20152010
Desalination CapacityDeepwater Drilling1Titanium usage (by weight)
139
27
0
100
200
300
# of wells drilled
+39%
20152010
Emission Control Systems
30
16
0
10
20
30
2010
in US$ bn +13%
2015
0
50
100
150
200
Tons
+92%
A380Boing 747
1. Deepwater >1500m; Source: Goldman Sachs Equity Research 2011, GWI, Continental Factbook,
SupplierBusiness, AeroStrategy, Cowen and Company; Emerging Energy Research
20
10
20
40 +35%
20202010
GW
CSP capacity
AutomotiveChem. process
industryOil
&
gasAerospace Electrical
&
Electronics
Lightweight construction
(light high‐strength
materials)
Large engines and planes
(high‐strength materials)
Sour well exploration
(high corrosion resistance)
Shafts for deep off ‐shore
drilling
(high strength materials)
Desalination plants
(high corrosion resistance)
Next generation power lines
(high temperature)
Emission control systems
(high temperature)
Downsized engines
(high temperature)
Turbo chargers
(high temperatures)
Concentrated Solar Power
(high temperature)
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Outokumpu VDM - Strong R&D capabilities and proven
innovation leadership form base for future growth
27
23
16
64
10
5
10
15
20
25
VDM ATI SMC Carpenter Haynes
Project 700°C power plant Project Status Completedroject 700°C power plant Project Status Completed
Project Power lines Project Status Completedroject Power lines Project Status Completed
Project
Aerospace alloysProject Status
Advancedroject
Aerospace alloysProject Status
Advanced
Energy companies try to increase
efficiency of power plants via higher
temperatures in steam boilers
VDM developed a heat resistant alloy now
tested in steam boiler materials
Energy companies aim to increase the
electrical current in power grids
VDM developed a special alloy preventing
thermal expansion and sagging of power
lines at high currents
Aerospace trend to more efficientengines and lightweight construction
VDM in certification for Ni-based rotating
parts in engines to complement existing
aerospace business
1
5,000 7,892 5651,7971,685Sales 2012
(in US$m)
1. ATI's patents also for stainless steel products 2. PCC patents only for HPA, * 01.01.2007 – 31.12.2011
Note: Patent numbers are family patent applications in respective countries securing the right to priority; VDM patents do not include withdrawn patent applications,
other numbers can include withdrawn or rejected applications, source: Company annual reports, DepatisNET
VDM with strong product pipeline … … mirrored by high number of patents
Achieved through strong cooperationwith clients and leading metallurgy
universities in Germany
VDM
2
Patent applications in last 5 years*
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Outokumpu VDM - Expand and upgrade
production process
28
AdvantagesSummary
CAPEX ~ €35M
Start Q4 2011
Altena
Forged & Rolled
bars
Unna
Forged bars
Altena
Rolled bars
B
i
s
h
2
3
Relocation forged bars to Unna
Capacity expansion at both sites
Project status
Improving of the
market access
Optimization of the
Production process
31.05.12
Positive
cost effect
17.07.12
Construction status – forge adjustage Unna
28.02.13 05.05.13
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Outokumpu VDM - Strategic milestones and
future strategic fields
29
Capitalize on
growth in keyindustries
Expand position in
emerging markets
Expand & upgrade
production process
Leverage strong
R&D pipeline
CornerstonesCornerstones Key activitiesKey activities
• Leverage strong industry knowledge and relationship
• Focus on niches with exceptionally high demand in HPA
• Capitalize on upgraded service center in China• Leverage newly founded subsidiary in Shanghai• Strengthen footprint in Russia, Brazil & India
• Invest budget to maximize growth/efficiency potential• Reduce lead times with new inventory mgmt. System*• Capitalize investments in new bar capacity
• Gain access to Ni alloys in rotating aerospace parts• Market mission-critical materials for energy industry
*Cash Conversion Cycle will be out from 151 days in 2010/11 to 116 days in 3 years
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Outline
30
1. HPSA introduction
2. High Performance Stainless strategy
3. VDM strategy
4. Summary
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• Highly tailored material solutions to the mostdemanding environments
• High performance stainless steel
• High performance alloys (VDM)
• Strong market position and excellent reputationglobally
• Technical expertise
• Product quality• Delivery reliability
• Highly committed management team and employees
• Streamlined cost base in HPS – once market demandrecovers, potential for attractive profits and return on
assets
• Strategic review of the VDM unit under way. Decisionsto be made by end of 2013
HPSA - summary
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Outokumpu
Experience2013
May 22-23, 2013
Old Billingsgate,London, UK
Q&A