cmd 2013 hpsa presentation by jarmo tonteri

8/19/2019 CMD 2013 HPSA Presentation by Jarmo Tonteri

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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

5/23/2013HPSA BA, Jarmo Tonteri


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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.

HPSA BA, Jarmo Tonteri 35/23/2013


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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

4HPSA BA, Jarmo Tonteri 5/23/2013


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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

5/23/2013HPSA BA, Jarmo Tonteri


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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



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

5/23/2013


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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



3. VDM strategy

4. Summary

VDM introduction and strategy, Dr. Jürgen Olbrich 5/23/2013


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Outokumpu

Experience2013

May 22-23, 2013


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




Cobalt Alloys



Special StainlessSteel 2)

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



30/32

Outline

30



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


Q&A

cmd 2013 hpsa presentation by jarmo tonteri

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