aperam september 6, 2012 final€¦ · company overview – a global player in stainless steel ......

© Aperam 1

Goldman Sachs EMEA Leverage Finance Conference

September 6, 2012

Julien Onillon – Chief Financial Officer

© Aperam 2

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 forward-looking 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, whether as a result of new information, future events, or otherwise

1

© Aperam 3

Company overview


© Aperam 4

A leading global stainless and specialty steel producer

Revenue of USD 6.3 billion in 2011

3

Company overview

– A global player in stainless steel

• 2.5mt of flat stainless steel capacity in Europe and Brazil

– A leading position in high value added niches, allo ys and specialties

• Stainless specialties (ferritics, duplex…), electrical steel (GO & NGO), nickel alloys & specialties

– A highly integrated distribution, processing and se rvices network

– An advanced capability to produce stainless and spe cialties from low cost biomass/charcoal

– An industrial network concentrated in six main plan ts located in Brazil, Belgium and France

• Approximately 10,200 employees

Production facilities

Production assets in Europe & South America

Isbergues

Location & facts

- Cold-rolling mill

- France

Capacity:

- Finished: 350 kt

- LC2i: integrated line

Gueugnon

Location & facts

- Cold-rolling mill

- France

Capacity:

- Finished: 400 kt

- Specialised in Bright Annealing (BA) products and stabilized ferritics

Châtelet

Location & facts

- Melt shop and hot-rolling

- Belgium

Capacity:

- Slabs : 1,000 kt

- HSM : 3,400 kt

Location & facts

- Melt shop and rolling mill

- Belgium

Capacity:

- Slabs: 1,100 kt

- Finished: 740 kt

- 2,000 mm wide capacity, 316 and duplex grades

Genk Timóteo

Location & facts

- Melt shop and finishing facilities

- Brazil

Capacity:

- Melt shop: 900kt

- 320kt cold rolled & 60kt hot rolled annealed and pickled

- Silicon cold rolling: 60kt GO and 120kt of NGO

Location & facts

- Melt shop and finishing facilities

- France

Capacity:

- EAF: 60 kt

- 1 VIM, 1 VAR, Rotary Continuous Caster for Long Products

– Hot Rolling mill of wire: ~40 kt

– 6 Cold Rolling Mills

Imphy

4

Company overview

Business segmentsCompany overview

Segments

Revenue FY2011 (USDm)* 5,068

% of Group Revenue* 60%

EBITDA FY2011 (USDm)* 221

% of Group EBITDA* 72%

− Austenitics

− Ferritics, Duplex, Martensitics

− GO & NGO steels

Stainless & Electrical Steel

Revenue FY2011 (USDm)* 721




− Cutting

− Wiring

− Tubing

Services & Solutions

Revenue FY2011 (USDm)* 2,603




− Various nickel alloys for high-end applications

Alloys & Specialities

*Pre Others and intra-group elimination

Strategic investments in Biomass and Upstream

USD 356 million of EBITDA in 2011, including a char ge of USD 36 million relating to the implementation

of the Leadership Journey®

5

Unique strengths


World stainless steel flat product demand (in milli on tonnes)

CAPEX budget of USD 4.0 billion for 2010Demand expected to grow by less than 2% per year in Europe and by 3% in South America

Stainless steel consumption by end user (%)

General Industry

20%

Building & Construction

17%

Automotive & Transportation

12%

Catering & Appliance

34%

Others3%

Energy & Chemicals Industry

14%

The stainless steel market is growing again following crisis

Unique strengths

7Source: CRU and Aperam estimates

0

5

10

15

20

25

30

35

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

ChinaEmergingDeveloped

+5%

+5%

A solid industrial base

* Includes 0.06Mt of finished HRAP products

Steelshop

Chatelet

1.0Mt

Genk

1.1MtClients

Isbergues

0.35Mt

Genk

0.74Mt

Gueugnon

0.40Mt

Cold rolling

Steel Service Centers

Transformation

Direct sales

Service

Chatelet

3.4Mt

Hot rolling

Timoteo

0.90Mt

Timoteo

0.88Mt

Timoteo Electrical 0.17Mt

Timoteo Stainless 0.38 Mt*

Electrical flat

Stainless flat

Steel Service Centers

Transformation

Direct sales

Imphy

0.06 Mt Imphy (wire)

ImphySSCs, Direct sales

Transformation

Ni alloys &

specialties

Chatelet (strip)

Stainless flat

The latest greenfield built in the developed world

Unique strengths

8

Close to customers through a highly integrated distribution network

Sales, distribution and steel service centers networ k, including precision & tubes

businesses

A key competitive advantage to maintaining market s hare and capturing growth opportunities

9

Unique strengths

Sales subsidiaries and representative offices Steel Service CentersSales agencies

304

316

430

434

409

444

201

2101

317LN

317LNM904

6Mo

430

2205

2304

1Ni 14Cr

17-4 Cu

2003

2205+

2202

2507

Corrosion resistance

204

446

25% 30% 50% Elongation (%)

439

CapitalGoods

Aperam product

White Goods

AutomotiveAppliances

Building & Construction

Food & Health

FERRITIC400 series

DUPLEX “LOW NICKEL”200 series

AUSTENITIC300 series

A large product range of specialties supported by strong R&D

High-end application and specialty products benefit ing from higher margins and growth

10

Unique strengths

A unique capability to produce stainless and specialties from biomass (charcoal)

Biomass integration (% of Aperam production)

Biomass is a strong competitive cost advantage

*One tonne of charcoal is equivalent to approximately 0.90 tonne of cokeSource: Aperam

Equivalent coke and charcoal cost (USD/t)*

Brazil

(charcoal)

Imported

(coke)

– Bioenergia produces biomass (charcoal) from eucalyptus - planting, maintenance and cutting at 7 years old

– Target to produce of 450,000t of biomass (charcoal) for 2012 following the forest development and the conversion of Blast Furnace #2 from coke to biomass

– Positive impact on environment

~450

~200

0%10%20%30%40%50%60%70%80%90%

100%

2009 2010 2011E 2012E 2013E 2014EBiomass Stainless & Electrical Stainless, Electrical & Alloys

Fully integrated in biomass since mid-2011

11

Unique strengths

Debt breakdown (as of June 30, 2012)

Diversified funding & low refinancing risk

CAPEX budget of USD 4.0 billion for 2010Next significant debt maturity is in March 2014 and no net debt/EBITDA financial covenant* in financin g

Debt maturity profile (USD millions and as of Decem ber 31, 2011)

� The Borrowing base facility (“BBF”) is a USD 800 million facility which matures in March 2014 (9 relationship banks)

� Aperam has two Senior unsecured notes – USD 250 million (7 3/8%) due in 2016 and USD 250 million (7 3/4%) due in 2018

� As of June 30, 2012, Company had liquidity consisting of cash & equivalents plus committed lines of credit of USD 570 million

- USD 235 million of cash & equivalents

- USD 335 million of committed lines of credit

Unique strengths

12* The company has no profitability-linked maintenance covenants in any of its financing

0

100

200

300

400

500

600

700

800

900

2012 2013 2014 2015 2016 >2016

Drawn Undrawn

Borrowing Base Facility

& other corporate bank debt

43%

Subsidiary debt13%

Bonds44%

© Aperam 14


Environment andmarkets

Raw material prices

Environment and markets

*Source: SBB & CRU14

Quarterly European chrome contract pricing (USDc/lb )*Nickel - LME Cash (USD/t)*

0.0

0.5

1.0

1.5

2.0

2.5

Dec-0

7M

ar-0

8Ju

n-08

Sep-0

8Dec

-08

Mar

-09

Jun-

09Sep

-09

Dec-0

9M

ar-1

0Ju

n-10

Sep-1

0Dec

-10

Mar

-11

Jun-

11Sep

-11

Dec-1

1M

ar-1

2Ju

n-12

8,000

13,000

18,000

23,000

28,000

33,000

Dec 0

7Apr

08

Aug 0

8Dec

08

Apr 0

9Aug

09

Dec 0

9Apr

10

Aug 1

0Dec

10

Apr 1

1Aug

11

Dec 1

1Apr

12

Aug 1

2

Nickel price dropped by more than 1 thousand USD/to nne in Q2 2012 but consensus expecting a rebound

Environment and markets

Stainless steel prices

Profit improvement in Q1 due to market and internal initiatives but Q2 expected to be more challenging

*Source: SBB15

Southern Europe - CR 304 2B 2mm coil base price (€/t )*China - CR 304 2B 2mm coil transaction price (USD/t) *

800

850

900

950

1000

1050

1100

1150

1200

1250

Jan

08M

ay 0

8Sep

08

Jan

09M

ay 0

9Sep

09

Jan

10M

ay 1

0Sep

10

Jan

11M

ay 1

1Sep

11

Jan

12M

ay 1

2Sep

12

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Jan

08M

ay 0

8Sep

08

Jan

09M

ay 0

9Sep

09

Jan

10M

ay 1

0Sep

10

Jan

11M

ay 1

1Sep

11

Jan

12M

ay 1

2Sep

12

Both transaction prices and base prices dropped but Euro weakness expected to have positive impact in H2


Short-term priorities

Adjusted EBITDA* (USD) Short-term priorities

Conservative strategy

Stainless steel industry fundamentals and economic uncertainty justify a conservative short term strat egy

* Adjusted EBITDA is defined as operating income plus depreciation, impairment expenses and other items as defined in the “Aperam Model”


17

1 Delivering Leadership Journey to allow

underlying profitability uplift

2/ Net debt control

Restrictive capital allocation based

on cost cutting CAPEX and working

capital control

1

2

1,144

930

226

410 392

2007 2008 2009 2010 2011

OWCR as a percentage of sales for European competit ors

CAPEX budget of USD 4.0 billion for 2010Restrictive capital allocation based upon cost cutt ing CAPEX and working capital control

CAPEX (USDm)

A focus on working capital and CAPEX

0

50

100

150

200

250

300

2007 2008 2009 2010 2011


Given the uncertain economic environment, 2012 CAPEX levels

targeted to be well under USD 200 million

18Source: based on earnings releases and annual reports

0%

10%

20%

30%

40%

50%

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Competitor 2Competitor 1Aperam


Leadership Journey®


*VSS – Voluntary Separation Scheme

Key projects expected to have a positive impact in H2 2012

Cumulated gains and 2013 target (USD million)

19

33

73

123

231

350

176

204

YTD Mar2011

YTD Jun2011

YTD Sep2011

YTD Dec2011

YTD Mar2012

YTD Jun2012

LeadershipJourney

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

• In Europe, suspension of traditional cold roll mill in Isbergues.

• Completion underway of a new induction furnace and electro slag remelting furnace at Imphy (France – Alloys & Speciality)

• Completion underway of a service center expansion in Campinas (Brazil – Services & Solutions)

• Completion underway of a new hot annealing and pickling line in Gueugnon (France - Stainless & Electrical Steel)

• Industrial optimization and rationalization in Europe (from 20 tools to 17 tools)

• Systematic benchmarking in Brazil

• New sourcing initiatives

• Yield and quality improvement, SG&A reduction through organisation simplification, biomass development, new product growth…

Key projects progressing


European downstream rationalization from 29 tools t o 17 tools

Progress in-line with targets

HAP 3

CR 4 CR 3CR 2

CAP 1 BALCAP2

Skin 3 Skin 1

HAP 3

CR 2

Skin

CR 1

CAP 2

LC2I

HAP 9RD 7

CR 2 CR 4CR 3 CR 5 CR 6

CAP10 BA 6 BA 8

Skin 3 Skin 1

BA 11

Skin 2

HA&P lines

CR mills

CA&P/ BAlines

Skins Skin 2

GENK ISBERGUES GUEUGNON

Long term suspension

Mothballing & Swing

Combination and investment

RD79 in tests (Exit of scale breaker)


Key Leadership Journey® project in Stainless & Electrical Steel

20


Campinas expansion project in Sao Paulo region

Improving footprint and turnaround of loss making b usinesses

- Creating a site of almost 28.000 m 2 and of 240kt transformation capacity in total close to Brazilian main consumption area:

- New industrial building (CAMP2) designed for Cold Rolled Products

- Existing building upgraded (CAMP1) designed for Hot Rolled, tubes and bars activity

Existing Building

New Building

New slitter line


Key Leadership Journey® project in Services & Solutions

21


Imphy meltshop enhancement project

Key investment to be finalized resulting in signifi cant productivity improvement

ESR VAR

VIM

castingSecondary metallurgyIF

EAF cont. casting

billets

ingots

New Induction furnace

Short term priorities

Key Leadership Journey® project in Alloys & Specialties

22

Profit improvement in Q1 due to market and internal initiatives but Q2 expected to be more challengingMaximising production at Chatelet plant, Aperam’s mos t competitive production facility

Genk

Châtelet

Upstream optimization in Europe

EAF1 VOD1-2

EAF2 AOD

CC

CCEAF AOD

Partial closure of EAF1 and VOD to maximize Chatelet capacity utilization

Key initiatives in Sourcing

• Enhanced focus on Total Cost of Ownership (“TCO”)

- Establish a specific TCO Team and efficient tracking system

- Involve suppliers and create common project teams

- Create a “community of purchasers”

• Specific focus on non-raw material purchasing which has attracted less attention than raw material purchasing initiatives

Key initiatives in SG&A

• Targeting IT cost reduction of 10% through process simplification

• Streamlining corporate centers

• Further fixed cost reduction in Services & Solutions

Footprint in Brazil

• Following detailed benchmarking new footprint to be finalized


Other Leadership Journey® initiatives

23

© Aperam 26

CAPEX budget of USD 4.0 billion for 2010Expansion of capacity is expected to slow

Source: CRU and Aperam estimates25

Industry has suffered from overinvestment and overcapacity

Medium-term view

Stainless steel slab capacity expansion (in million tonnes)

0

2

4

6

8

10

12

2000-2005 2005-2010 2010-2015E

Europe China Rest of the World

Stainless steel slab equivalent global utilization rates (% of capacity)*

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

*Excluding capacity closures

© Aperam 27

CAPEX budget of USD 4.0 billion for 2010

Source: CRU and Aperam estimates

*Dependent upon regulatory and other approvals26

Consolidation has started and will benefit the industryMedium term view

Consolidation should help the global stainless stee l industry to become more efficient

Steel making and finishing capacity for European pr oducers (mt)

Acerin

oxTIS

COYUSCOPOSCOAper

am

Outoku

mpu*

Baoste

elJIS

CONipp

on S

teel

AK Stee

l

0

1

2

3

4

5

Flat product stainless steel global producers ranki ng by slab

capacity (mt)

0

1

2

3

4

5

6

7

8

9

Before optimization & capacity closure

After optimization & capacity closure

Steel making capacity Finishing capacity

65% 85%

Reduction in capacity

© Aperam 28

Brazilian environment

Brazil is a growth market but is a challenging envi ronment

27

Apparent consumption in South America of stainless steel flat product

(‘000t)

Average annual BRL exchange rate & annual Brazilian inflation rate

*average BRL exchange rate to 07/05/2012 and annualized inflation rate for Q1 2012

Medium-term view

1.5

1.6

1.7

1.8

1.9

2.0

2.1

2009 2010 2011 2012*

0%

5%

10%

15%

20%

25%

30%

Average BRL vs. USD exchange rate (LHS)Annual cumulative inflation rate (RHS)

0

100

200

300

400

500

600

700

2000

2002

2004

2006

2008

2010

2012

2014

2016

+3%

Medium-term viewRecent Brazilian developments

Recent developments in Brazil can potentially have a positive impact beginning after 2012

1. On March 9, 2012, Brazil's Trade Defense Department (Decom) opened an anti-dumping investigation against imported welded austenitic stainless pipes from China and Taiwan

2. On April 12, 2012, the Decom officially launched an anti-dumpinginvestigation on flat stainless steel products (304 and 430). The imports from China, South Africa, Germany, South Korea, the United States, Finland, Taiwan and Vietnam will be investigated. The investigation covers the period January 2007-December 2011. Alleged preliminary dumping margins range from 11% for the USA up to around 20 ~ 25% (Germany, Taiwan, China and South Korea)

3. On April 19, 2012, the Decom officially launched an anti-dumping

investigation on flat non-grain oriented product (NGO). Imports

from South Korea, China and Taiwan will be investigated and

alleged dumping margins are 20,1%, 39,3% and 58,6%, respectively

The unification of Brazil's taxes on interstate

trade of imported goods, was approved by

the Senate's Committee for Economic Affairs

(CAE) on April 17, 2012. The final approval was issued by the Brazilian Senate on April

24, 2012

The approved proposal – Resolution 72 –

determines a tax unification for the ICMS at a national rate of 4%, (from 7% in some

states to 12% in most of

the states) which is expected to be

implemented in January 2013.

Tax legislation

28

Anti-dumping


Q&A

Appendix – Q2 2012 performance


Operating performance in Q2 2012

Profit improvement in Q1 due to market and internal initiatives but Q2 expected to be more challengingEBITDA of 150 USD/t in Q2 2012 compared to 148 USD/ t in Q1 2012

31

429433 433

439

429

Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012

EBITDA (USD million)

Shipments (‘000t) Q1 2012 & Q2 2012 EBITDA per division (USD million)

536564

102

62

Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012

Europe 3

Brazil 23

Europe 10

Brazil 20

16

5

39

30

1111

Q1 2012 Q2 2012 Q1 2012 Q2 2012 Q1 2012 Q2 2012

Stainless & Electrical Services & Solutions Alloys & Specialties

Europe 10

Brazil 20

Europe 6

Brazil 33

Q2 2012 performance

Balance sheet at end of Q2 2012

Profit improvement in Q1 due to market and internal initiatives but Q2 expected to be more challengingNet debt of USD 882 million representing a gearing of 28%

32

Assets & liabilities (USD million) Equity & net debt (USD million)

Assets Liabilities

Non-current assets Shareholder's equity

Working capital Other net liabilitiesNet Debt Equity

3,176

7281,488

3,936

1,038 878 882

4,1673,580

3,443 3,176

1,107

6/30/2011 9/30/2011 12/31/2011 6/30/2012

857

3,545

3/31/2012

Q2 2012 performance

aperam september 6, 2012 final€¦ · company overview – a global player in stainless steel ......

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