Outokumpu Oyj New

Hello all and welcome to Outokumpu's Q4 2024 results webcast. My name is Linda Häkkilä and I'm the Head of Investor Relations here at Outokumpu. Today, as our main speakers, we have our CEO Katiter Horst and our CFO Mark Simon Schaar. As per usual, we will first start with our presentations and after that we are happy to answer your questions. Before we start with the presentation, I would like to remind you about the disclaimer, as we might be making forward-looking statements. But now, without any further comments, I would like to hand over to our CEO.

Thank you very much Linda and very warmly welcome everyone to our Q4 and full year 2024 result call. So before I continue to discuss the result in more detail, I would like to say a couple opening words. So in today's geopolitical situation and with the ongoing tariff discussions, they are creating a lot of uncertainty for companies, industries and countries. That is in general not good for the investment climate nor for the economic growth in the world. Autocomp is of course a global player in stainless steel production in Europe and North America, and we are in principle clearly an advocate of free trade and fair competition. However, as Asian imports have increased significantly both in North America and in Europe, we do welcome the measures to establish a level playing field. and steel should also be seen as an infrastructure-critical industry worth protecting. Furthermore, Outokumpu is in a very key position. Outokumpu is the industry leader in sustainability, and stainless steel is part of the solution for the green transition. For instance, in electrification, transport and energy. Let's now then move to discuss our result. To summarize the year 2024, our adjusted EBITDA totalled 177 million in euros. The market conditions were difficult in terms of stainless steel deliveries and prices, but we kept our market positions. Number one in Europe with 31% market share and the clear number two in North America with 24% market share during the year 2024. Then ferrochrome this time actually contributed to 60% of our result and provided further stability. And there's clearly more interest for our low-emission, geopolitically well-located ferrochrome as the only producer in the EU area. Then we are clearly the industry leader in sustainability and safety. We are well on track with the emission reduction target, and our total recordable incident rate of 1.5 is really a world-class performance. And then despite the weaker profitability, we did maintain the strongest balance sheet in the industry and returned 144 million of capital to our shareholders. Given the current situation, we have continued to work on measures to improve our profitability. During 2024, we reached 101 million EBITDA run rate improvement, bringing the cumulative number to Euro 287 million by the end of the year. We will deliver the targeted 350 million improvement target by the end of this year, including both commercial and cost-saving actions. One recent structural change that I could give as an example is, for instance, the centralization of the advanced materials production in Germany to Dillenberg, while we were then also at the same time closing the Hockenheim Coal Service Center. This will deliver 50 million savings during this year. And due to the delayed market recovery, we have decided additional short-term cost saving actions to protect our result and financial position. And I move now to comment on that. So we will deliver 50 million of short-term cost-saving actions that will be coming into our result during 2025. And this includes a range of measures from improvements in procurement, operational efficiency, to cutting discretionary spending and postponing some of the recruitments. We have also decided to limit this year's capex to 160 million. We will definitely continue to take care of the needed maintenance, but we are then delaying somewhat some of the more strategic investments. Before we take a more detailed look at Q4 and the full year 2024 result, I would like to also comment on the market price development. As you can see from the left graph, market prices continue to decline in Europe during the Q4, while prices stabilized in Americas after a continuous decline since the beginning of 2023. At the same time, if you look at the right side of the picture, the LMEI nickel spot prices decreased then towards the USD 15,100 level towards the end of the year. And there are two key reasons for the continued price pressure on the market. Firstly, the low demand reflecting weak economic activity, low consumer confidence and basically no growth in industrial production, neither in Europe or Americas. Secondly, low-priced Asian imports have been flooding to the North American market and Europe, reaching 25% share in Europe and even 38% share in North America during the Q4. Next, I will then like to comment a bit our full year and Q4 result in more detail. So if we compare 2024 to the previous year, our group deliveries decreased by 6%. There was a difference, however, between Europe and America. So the deliveries decreased by 11% in Europe and they increased by 8% in America, coming from a low level in 2023. European demand was historically low during 2024, even lower than during the COVID year of 2020. Profitability both in Europe and Americas was negatively impacted by lower realized prices for stainless steel and unfavorable impacts from a tighter scrap market. But I would also like to note that without the Finnish political strike impact, our result would have been around 240 million. If we then add the impact of the operational issues that we had during the first half of the year in Americas, then we would have come to something like 280 million, so 100 million more than we are now reporting. And these issues in Americas have been solved. Let's then turn to look at the Q4 in isolation. So the key message that we have here for Q4 is that the stainless steel market in Europe turned out to be weaker than we expected, both in terms of volumes and prices. Our deliveries in Europe decreased by 9% and in Americas by 7% versus Q3. Realized prices were lower in Europe and relatively stable in Americas. In addition, we had a negative raw material impacts and our costs were higher, mainly due to the prolonged maintenance in Tornio, as we communicated earlier. And then business area Ferrochrome continued to perform very well in Q4 through their efficient production and energy optimization. After this, I would like to turn to discuss our sustainability performance. So Autocomp is the clear sustainability leader in our industry, and I'm extremely proud of that. We have by far the best safety performance in global steel sector, and indeed our total recordable incident frequency rate of 1.5 is a world-class level, also in the broader global process industry. Then our high scrap rate at 95% is the key contributor to our low carbon footprint for stainless steel. And we are tracking very well towards our SPTI target, reaching now 32% reduction in our emission intensity by the end of 2024 compared to the 2016 baseline. Then in line with our smart decarbonisation strategy, we will reduce CO2 emissions in ferrochrome production by gradually moving and replacing the fossil coke with biocoque. And to support this plan, we have now decided, that was announced earlier, decided to invest in biocarbon production in Germany. And to support Ferrochrome further, our chrome mining chemi will be carbon neutral by the end of 2025. And we are also experiencing increasing customer demand and interest for our low emission minimized, let's say, emission minimized Autokumpu Circle Green that we launched already more than a year ago. One note that I would like to also do here and end is that in this geopolitical situation where we are, managing the supply chains has become even more critical. And I would like to highlight in that regard that the Ecovaries has ranked Outokumpu among the top 1% of companies in the world assessed by the platinum rating. And now I would like to hand to Mark Simon Schreier to discuss further our financial strength.

Thank you, Kati. Good morning, good afternoon, everyone. Welcome also from my side to our webcast. In times of weak economic environment, securing the financial strength of a company is paramount. Kati already talked about us addressing our cost and earnings trajectory, and I will now continue with providing you an update on our financial position and liquidity at the end of last year. Let me share with you then the following overview. I must say I'm very pleased that our net debt decreased quarter on quarter to a level of 189 million euros, keeping our net debt to adjusted EBITDA ratio at 1.1. Here, please remember that our target is to stay at a leverage ratio of one during normal market conditions, from which we are currently far away. Adjusted for the impact of the political strike in Finland during the first half of the year, the leverage ratio would have even been below one. Due to swift measures to address the current market environment, we were able to improve our liquidity reserves to a strong level of 1.1 billion euros. At the same time, our 2024 annual capex was at 260 million euros. As Kati pointed out, we adjusted our capex plan for the financial year 2025 to 160 million euros, which decreases our phase two capex target by almost 50 million euros to a level of 550 million. During times like this, we must carefully manage our spending with a clear focus on smart capital allocation and especially the right timing of those. Let us now have a look at the performance of our business areas, starting with business area Europe. In Europe, we were faced with tough market conditions towards the end of last year, which led to an unsatisfactory result. The deliveries of 287 kilotons in quarter four were the lowest amount at least since 2015 and 12% less than a year ago. While imports increased year on year up to a level of 25% in the fourth quarter compared to a level of only 19% during 2023, we were able to keep our market share relatively stable in Europe, despite of the political strike impact in Finland earlier in the year. Given the low demand and high import pressure, realized prices decreased quarter on quarter. At the same time, we had increased raw material costs due to the impact of higher prices from earlier periods when we had to replenish our supply chain following the political strike. These higher costs negatively impacted our profitability in the fourth quarter. In addition, our fixed costs were higher driven by the maintenance work which was concluded in the fourth quarter. Variable costs seasonally increased due to slightly elevated energy prices. Furthermore, we had less gains from net off timing and hedging quarter on quarter. Now looking at the market environment, the manufacturing industry remained in contraction with a PMI below 50. For a proper demand recovery, consumer confidence and industrial production needs to improve. This requires a supportive and reliable investment climate with competitive energy prices, lower interest rates and overall more visibility. Generally, investments are made with a long-term perspective in a stable and predictable investment environment. Therefore, from an industry perspective, the European demand situation in appliances, construction, chemicals, heavy industries and automotive had not improved yet, but the energy, marine and mining sectors continued to run better. Additionally, we have seen distributors to notably replenish their inventories. So far, the update on business area Europe, and let's move over now to business area Americas. In the fourth quarter, the US manufacturing sector experienced a continued contraction. Overall, while there were signs of improvement in November, the manufacturing sector faced challenges throughout the quarter, including subdued demand, policy uncertainties, and inflationary pressure. In Mexico, the manufacturing sector also continues to face challenges with a PMI below 50. Concerns in the automotive sector, rising insecurity, protectionist policies and competition from Asia with currently only minimal tariffs are contributing factors. At the same time, imports into the North American market rose by three percentage points to 38% in the fourth quarter, double the level in 2020. The imports were predominantly coming from Asia, and while imports also increased year on year, we were able to keep our market share in North America stable at 24%. In this market environment, distributor inventories stayed on low levels, but given the low demand situation, the inventory days remained on a relatively high level. While the low demand situation was visible in all sectors, oil and gas continued to be on an okay level. As a result of that and given the typical Q4 seasonality, our stainless steel deliveries decreased in Q4 while we maintained our market share as mentioned before. The negative impact from production and deliveries was offset by lower variable costs and a positive impact from a property tax settlement in the U.S., Going forward, we expect the US market to be supported by increased domestic production and more infrastructure investments to come. But now let's continue with our business area, Ferrochrome. While the Ferrochrome market also remained challenging, I'm very pleased with the business area's improved result in quarter four, certainly benefiting from our unique, low-emission, European-based product. The main driver for the profitability improvement versus the third quarter was a strong cost performance in both variable and fixed costs. This was partially offset by a negative impact from lower internal deliveries, as we have seen before. Overall, the market outlook for our unique Ferrochrome remains positive and is even further supported and accelerated by the CBAM implementation starting in 2026. In these times of political uncertainty, it is important to remember that we are the largest producer of ferrochrome in the Western world. Most of the world's ferrochrome production happens in BRICS countries. And then furthermore, I would like to highlight our announcement earlier in January that our mineral reserves estimates doubled based on our underground drilling results. The updated total estimated reserves corresponds to a turnover of approximately 15 billion euros based on January through September 2024 average prices. In this context, I would like to remind that there is sufficient ore availability until 2050s without any major investment needs in our chromite ore mine in Kemi, Finland. Now my final comments relate to our strong financial position. As mentioned earlier, I'm happy to say that our net debt decreased quarter on quarter well below 200 million euros, supported by active working capital management, which we intensified after we saw the further weakening of the market. We will continue with our active working capital management and smart capital allocation, which is vitally important in the current market environment. The increase in net debt during the last year was mainly driven by the soft earnings, including the unfortunate negative impact of 60 million euros from the political strike in Finland. Total capital returns to shareholders of 144 million euros, including both dividend payments and share buybacks. and additional lease liabilities of 34 million euros for our three new liner vessels. Especially during these times of a challenging market environment, we maintain our strong focus on and take decisive actions to keep Otokumpu's financial condition healthy. With this financial update, I would like to thank you for your attention and hand over back to you, Kathi.

Thank you, Mark Simon. So before we go forward, actually, I would like to use the opportunity now a bit to update you also on the latest on the Finnish strike situation. So one thing is that there are several strike warnings in different industries for the month of February. But I would like to confirm that Autocomp is not on any of this list. So Autocomp is not expected to be affected by the strikes if they continue in February. And then the other, I think, important point is that negotiations are continuing between the parties. And of course, as Outokumpu, we are hoping that an agreement could be reached soon. And then I would like to continue to discuss the proposals from the board. So with our solid financial position and positive long-term outlook, We go to the next slide where the Board of Directors of Outokumpu proposes a dividend of 26 euro cents per share for the year 2024 to be paid then in two installments. And let's then move as normal to the outlook and guidance for Q1. So, group stainless steel deliveries in the first quarter are expected to increase by 10 to 20 percent compared to the fourth quarter, including the impact of the one week's strike, while the pressure on realized stainless steel prices is expected to continue during the first quarter. Maintenance costs are forecasted to decrease by approximately 10 million euros in the first quarter compared to the fourth quarter. Then the one week strike in Finland that happened in January is expected to have an approximately 50 million negative impact on the adjusted EBITDA in the first quarter. And then the risk of further strikes causes uncertainty for Autocompos earnings development in the first quarter and the impact of each additional week of strike is expected to be approximately Euro 15 million negative on the adjusted EBITDA. And then with the current raw material prices, some raw material related inventory and metal derivative losses, they are forecasted to be realized in the first quarter. So our guidance for Q1 stands, the justice EBITDA in the first quarter of 2025 is expected to be higher compared to the fourth quarter. And this guidance includes the impact of the one week strike. So, While we are still in the low point of the cycle, I would also like to say that we do see some first signs of market recovery coming closer by. But in the meanwhile, we will need to continue to focus our profit improvement actions and we are also developing our future strategy. Then I would like to take up on two topics that we have communicated earlier today, where we said firstly that we have decided not to proceed with a co-trolling capacity expansion in the US at this moment. I would like to clarify that this conclusion was done prior to the current tariff discussions ongoing. In principle, the tariffs under planning would support domestic production in Americas, and we will of course continue to follow the situation. It's important to note that our type of investments are done long term, so they are not depending on tariffs for one or two years or one term of a president. But in any case, I would like to confirm that we see Americas as an attractive market, and we'll continue to explore growth opportunities there. We have then also today announced that we have finalized the feasibility study on SMR. And although the outcome was very encouraging and energy as such is a strategic topic for us, we do not see energy production as a core business for Outokumpu. And therefore we are looking for a partner that would be interested in investing in energy production next to our site in Tornio, Finland. And finally, I would like to very, very warmly welcome you to our Capital Markets Day that will be then held on June 11th this summer. And this concludes our today's presentation. And I guess then we are ready for the questions and answers. So let's start.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Ioannis Masvoulas from Morgan Stanley. Please go ahead.

Hello, thank you very much for the presentation. Two questions from my side. The first on the U.S. cold rolling investment that is not going ahead. This was arguably one of the most mature and capital efficient growth options in your portfolio. And as you indicated, the U.S. market, in terms of the underlying fundamentals from the demand side, and the supply deficit in the domestic market look quite attractive, as we've seen on the pricing side as well over the past few years, as compared to other regions. Can you elaborate a bit more on the underlying reasons for your decision not to go ahead? Was it mostly a function of higher capex than you originally anticipated? And is it fair to say that without tariffs, project economics no longer look compelling? And maybe I'll stop here for the first one.

Thank you for your question. Maybe I'll start on that. I think we have looked at the America's market, how we see the demand developing and how we see the demand supply balance developing. And I think one of our key conclusions was that we didn't right at this moment see that there would be enough room for additional expansion in coal trolling capacity. Then at the same time, we have communicated that we have been working on de-bottling our current assets and doing smaller investments in the Americas and in Mexico. And that has proceeded well. We have said that there will be 80,000 tons of additional capacity. So for now, we have decided rather to do that. than do a big investment in a current environment. But like I said, we are keeping the door open and we will continue to see if that moment is right later on, as well as we are looking at other growth options in Americas and comparing them to each other.

Thank you for that. And the second question is on Mexinox. You've got 250,000 tons of coal rolling capacity in Mexico that relies mostly on hot-rolled imports from your Calvert facility in the U.S. In a scenario where we see U.S. and Mexico erecting 25% tariffs to each other, how can you reposition the supply chain for Mexinox so it can remain a competitive asset in the years to come?

I would want to start by saying that there are no tariffs that Mexico has imposed now on the US. Our view is that the negotiations in the background are continuing. Mexico has kept themselves, I think, quite calm in this situation. And I find it from a starting point difficult to imagine looking at how tight Mexico and the US are together in some of the very complex supply chains, for instance, for the automobile industry, but for many other appliances as well, that this would be in the interest of Mexico. But then, you know, should something happen, we will estimate and look at it. But we have, of course, opportunities also to supply from Tornio or some other sources. But we don't really see this now as a really, you know, like a scenario that we would believe in. Let's put it like that without speculating more on it.

OK, thanks very much. I'll go back to the queue. Thank you.

Thank you.

The next question comes from Tristan Gresser from BNPP Exane. Please go ahead.

Yes, hi. Thank you for taking my questions. Just to follow up on Mexico, can you tell us how much volumes you're shipping from Calvert to Mexico and how much then stays in Mexico and how much you ship back to the U.S.? ?

Well, it depends, of course, how full we run in Mexico to start with. But if we say that Mexico has a capacity, coal trolling capacity of about 250,000 tons, then we would be shipping for that kind of coal trolling taking place in Mexico about 280,000 tons of hot rolled material, right?

Yes.

Yes. But then what comes back to the U.S. also depends on the year, but it's a relatively small amount. We talk about 10 to 20,000 tons. And if America's market is doing really well, it could be more. But it's a minor volume of what we control in Mexico.

Okay, that's clear. So the vast majority of your production in Mexico stays in Mexico?

Yes, and depending on Mexican demand and the market situation, how much we bring there.

All right, that's clear. And just coming back to your options, if Mexico were to retaliate, can you remind us what happened in 2018 at the time you had the tariffs of Section 232? But did Mexico retaliate? And exactly how did you adjust your production? What really changed at the time for you in the region?

Yeah. Well, Tristan, if I can take that question in a way. Yes, at the beginning, there were certain measures being put in place. But then, I mean, we have this melt-in-pour provision in place as well from the Americas and therefore not being affected.

Basically, the situation was solved quite quickly. That was the point.

OK. And then my, thank you for that. Then when we look at the U.S. market in general, you mentioned the import pressure, but you also said that you're pulling this investment in the U.S., and I think you also warned of potential demand destruction from the tariffs. I just wanted to make clear, are those tariffs a positive for your business in the Americas? And if, you know, 50% of the import volumes that used to come in the U.S. were not paying the tariffs or not paying it, it should be Do you expect to see higher base prices like in 2018, or would you see the situation a bit differently from last time around?

Well, let me comment like this. I'm not commenting on pricing and forward looking, but let me comment like this, that yes, overall, we do see the tariffs put to protect American stainless steel market or steel market as positive for Autocombo being a local producer. So that is, I think, valid.

All right. And then if we look at the margin progression in the U.S., would you expect to hit the 170 million target this year? And can we already see maybe a return in Q1 and Q2 of the margins of last year levels? Is that fair?

Yeah, I don't want to speculate on that now. We have to remember that we come from low levels of demand and pricing as well. And I think we need to see also in the US market the industrial production investments picking up to support the demand. But I think the tariffs could support local production and also will bring some inflation and price increase pressure to the market. So that's how I would comment it.

And particularly the Mexican market to recover here. It's not so much about the US, but the Mexican market.

Okay, so in terms of margin pressure, should you see any more squeeze into Q1 with the lags effect or it's more stable-ish kind of development on the margin side?

So I think we said that there is still some price pressure, but we, like I also said, well, I could say that we see also our order books looking more positive, whether that is now replenishing of stocks that starts to happen. And when we really see the real demand coming in, it's a bit difficult to say, but there are some positive signs.

all right that's maybe just that's clear and just the last question so on europe would you expect to be a bit that positive in europe and kind of the same question as to the us uh it looks like uh there would be some some pressure on prices uh um but to to have a more definite and precise vision on cost is always a bit tricky so curious to hear your thought if you think the division can can turn a bit positive as soon as you want

Maybe I can take that while we are not guiding specifically on BA level. The only comment I really would like to make is that we see a notable improvement in European profitability going forward. Into Q1. All right. Thank you. Thank you.

Thanks a lot. The next question comes from Ansi Rousey from SEB.

please go ahead yes thank you for the presentation and i have a few questions left but first if i start with your q1 guidance so you're guiding somewhat i would say exceptional volume growth for q1 compared to the seasonality in the recent years So have you seen a clear uptick in an underlying demand or is it something else like inventory buildup in the US or just extended maintenance breaks in comparison period or do you see something let's say extraordinary here?

I would comment, no, nothing extraordinary. I think it's seasonality-wise, we're coming from low levels, first of all. Seasonality-wise, it's a stronger quarter. And I think there is an impact of replenishing of stocks from a low level starting to happen. And then hopefully going forward, we will see also the kind of real demand coming through. So that's a bit difficult still to estimate. But like I said, some positive signs, at least if you look at our order book.

Okay got it and then about your decision to cancel this cold rolling investment for now so you say here that these new tariffs could have an impact on your analysis but when do you plan to reassess this investment and also I think you mentioned that this decision to cancel this investment plan allows you to direct your capital into other areas so what areas you're seeing which would have a better return on capital?

Yeah, let's answer like that, that America's market continues to be interesting. So we are also looking at other opportunities, but also wider in the group. And I would like to come back on that more in detail then during our capital market stay in June.

Okay. And lastly, one simple question. about your working capital in, let's say, Q1 and the first half of 2025. So do you think that your current inventory levels are, let's say, normal or maybe some excess inventory still? Or how do you see the situation? And of course, I'm thinking your cash flows here.

Yeah. For the fourth quarter, I would say that we had been preparing somewhat for a potential strike in Finland over there. Therefore, I would say that Q4 levels still had a level of improvement there. However, on the other side, as Katja also mentioned, we do see some more activity. So in the first quarter, we expect working capital to pick up again in line with the sales activities which we have.

Okay, thank you so much. That's all from me.

Thank you.

The next question comes from Busty and Sinagowitz from Deutsche Bank. Please go ahead.

Yeah, hi, good afternoon, and thanks for taking my questions. I've got a couple, and I'll start off with volumes. So just looking at the 10% to 20% volume guidance, that's obviously a lot. Can you maybe give us a little bit of color on whether you're feeling more comfortable about the volume uplift in the first quarter in either the U.S. or America, or is this very similar, what you're seeing? That would be my first question.

I would say, relatively seen, Bastian, we see it similar in both business areas.

Okay, understood. And then just if we extrapolate that to the commercial side, I guess 10% to 20% volume uplift, that's a lot. And I guess on the other side, when we look at prices, particularly into the late last year, they've been obviously under a lot of pressure, but it would be generally hard to imagine that there is a 10% to 20% uplift in volumes without at least some positive traction on the pricing as well. Do you start to see or feel more positive about the pricing side as well? Are there any actual tangible improvements you would already see in the first quarter at this point?

Well, we have given our pricing guidance saying that the prices are still under pressure in Q1 in the guidance, and we are not giving a guidance on prices, basically, and not on longer. So I can't really comment on that. I think the only comment I gave earlier is that we see order books looking more positive. So I think you need to then draw the conclusions from that.

Okay, all right. But, I mean, we can put it the other way around. I guess if there's a 20% uplift in volumes, if you can't capture it via pricing, I guess there would be a commercial issue. So, I guess from that, I would infer that there probably should have been a little bit of pricing power moving back to the mill side in Europe?

Let's say so that we come from low levels and deals, of course, are made also a bit earlier. So it's a bit difficult one to comment without going into pricing discussion, honestly.

And maybe to give a bit more color, Bastian, here as well. We talked about the order book. We talked about then also a bit more outlook into the future. As Cathy said, that is what you need to take into consideration. But also this is driven by replenishment. We don't see a significant increase in the underlying end user demand here, right? Just to put things a bit into perspective.

Understood. Okay, great. And then just briefly on the cost situation in Europe, I guess you mentioned that there has been a bit of a headwind here from the replenishment of inventory and input factors probably after the strike, which has impacted in Q4. So I'm not quite clear. a temporary headwind and more of technical nature and that will unwind into Q1 or the quarters ahead so will be more of a tailwind from here or is the current level you've been running at more or less what you're seeing in the first quarter as well very clearly very clearly one time in nature and then also for the first quarter and going forward a tailwind Understood. Great. And then maybe coming back on tariffs here, so you've been discussing about the situation probably more from a U.S. angle. Is there any major exposure you do have from shipping stainless steel into the U.S. from the European sides as well, either Sweden or Finland or Germany? So maybe you can update us. What is the actual volume exposure you do have? I'm thinking particularly about things like bright annealed, for example. Maybe you could help us there.

Yeah, so the exposure from Tonic's point of view, I could comment it like that, that it's between one to two percent of our European sales, depending on the year. So it's small. It's very small. There are some products that are under tariffs currently, some not, kind of more alloys. And then I think the ruling now that came on the Section 232 is that when you have the exemptions, they are valid until they last. And then depending on the product category, it could be that there's, you know, 12 months to go or five months to go or something like that. So we will need to look at that. But it's small. That impact is small on Autokumpu. And then I think the other side of the story is that when they are specialty products that are not made in the US and there's need for those products, then customers will pay the tariffs.

Okay, perfect. Thanks so much. I'll jump back into the queue. Thank you.

Thank you.

The next question comes from Christian Ugerwall from Citibank.

Please go ahead.

Christian, sorry, it's very, very difficult to hear you, if at all. Is it better now? Yeah, somewhat better. Thank you.

Yeah, okay. So two questions from my side. First, on the ferrochrome, you mentioned that there was a favorable impact from the electricity cost in the Q4. Do you mind giving us a perspective if those gains on the cost base are sustainable or going ahead into the Q1 or 425? And also, what are the pricing trends you are seeing to the ferrochrome, which probably would be applicable for the Q1 earnings?

So maybe I comment in general and then Mark Simon, you can add if you want to. So, you know, maybe it's good to know that we have, of course, you know, energy hedging and at certain prices. And then we have also we are using also, you know, energy on the spot market. But and that volatility of energy prices is quite volatile in Finland, also because of the wind energy coming in. And especially in the wintertime. So Ferrochrome in their production with the three different furnaces we have has an excellent opportunity to balance and decide when they produce full and when a bit lower level. So that is what Ferrochrome continues to do. And therefore, I think the type of energy cost we have now, we expect to increase. us to be able to achieve that also now going forward. So I think that's a good thing. And I think then looking at the ferrochrome market as such, I think I would like to make the note that we have started really clearly to create our own ferrochrome market. One, because of the geopolitical location we have, the only ferrochrome producer in the EU area. And some worries about some other producers and their capability to go forward. Or then are they the right sources to source from? Could be one question. And then we have, of course, the lowest emission ferrochrome that is also valued. And CBAM coming in in 26 will support that further. So our pricing is a bit different than the overall ferrochrome pricing. So I see that longer term positive going forward.

Maybe from my side to add here, energy optimisation is an ongoing topic, as Kati said, due to the volatility over here and provides us with an advantage here on that side. And then on the pricing side, we don't give any forward guidance on pricing, but we see our overall Ferrochrome business and financial performance solid and stable.

Understand. Thanks a lot for the color. The second question is more on the announcement around the nuclear SMR expansion. I mean, I sort of reckon that it's early days because you're in the pre-feasibility stage. Is there any kind of color you would have in terms of what kind of a timeline you are looking at this particular expansion? And then... in terms of how much of the proportion you could probably get from nuclear as part of your overall requirement? And then more importantly, are there going to be any kind of subsidies from the government on this capacity?

So Christian, just to kind of clarify, we are not doing the investment ourselves. So we have done the feasibility study for SMR, looking at the site that, or let's say the land that we have now next to our Tornio site. The feasibility study outcome was very encouraging, but as a new CEO also, I have made the strategic kind of choice that we will not invest in energy production, although energy is a very strategic topic for us and therefore what we have said in the press release or investor release is that we are looking for someone else to invest in that and at the same time we are having broader options to develop the ecosystem around the Tornio site but we are not planning to invest ourselves in energy production.

I understand. So if I can push you a little bit on that, if you are looking for someone, what is the value proposition you are going to bring on the table? Is it the firm demand from your side or some kind of land availability or something like that?

Well, I would say that we have the land availability indeed, could be used for that purpose. We have done a feasibility study. That's a good start for someone to look at it. And we are the biggest electricity buyer in Finland. So those are the elements.

Yeah, okay. I understand. Very clear. Thanks a lot.

The next question comes from Maxim Koga from AutoBHF. Please go ahead.

Good afternoon. My first question is on imports. In light of the ongoing review of the safeguard mechanism in Europe, which is set to expire at the end of March, have you already seen lower import pressure in Europe? as some distributors have reported to have already considerably reduced imports. And conversely, in the U.S., have you seen higher imports recently, given that some people, some distributors and clients are set to rush to import stuff before the tariffs kicking in March?

Yes, Maxim, thank you. On the imports in Europe, as we were reporting earlier, we have seen actually an increase in imports in here. And yet we don't see any meaningful impact difference in the first quarter. However, I think it's also important to note that meanwhile, with this very low pricing environment, the pricing differential between these both continents became much smaller. That is probably as much as I want to say about that and not so much speculating way going forward. But there might be some analysts out there who have a forward-looking view on imports. And then on the higher imports in the North American market, of course, they have also increased substantially. And well, I mean, we discussed now quite a lot around tariffs. And I think as a matter of fact, we do not know yet what the terrorists really will be. There are so much uncertainties around how they will be calculated, on what they will be calculated, what's in, what's out, and so forth. We need more clarity around that one before we can make any qualified statement around that one.

Okay, fair enough. And the second one is, can you give us the high-level implications for you of the truth in Ukraine, both directly and indirectly, if Russia were able to return to commodity export markets? So I think in the past you had sourced nickel, coal, natural gas too, probably from Russia. Is it possible to give any potential financial impact of a normalization in these codes going forward?

Yeah, I don't think that's, well, I think one thing I would say, I don't think we would go back to sourcing anything from Russia. That's not our plan. I think that's one. And then, of course, we are hoping that if the war would be over, that the rebuilding of Ukraine would also provide some opportunities for us to support that. and would be in general good for Europe, for sure. But I don't think there's not really a way to kind of estimate the financial impact of that to Autocomp.

But netted will be a positive element, as you said, definitely from an economical point of view as well, besides certainly a human point of view.

Sure.

Okay, and just the last one is on the convertible bond you still have and which is maturing this year. I think your plan was to settle it in shares, but you're still short of owning all the shares that you would need to do that. So is there any plan to do another share buyback program in the coming months? Or are you going to tackle the situation otherwise?

No, there are no plans yet. Okay, thank you.

You're welcome.

The next question comes from Ioannis Mazvoulas from Morgan Stanley. Please go ahead.

Hello, yes, just a couple of follow-ups. First on SMRs, I appreciate that you're not looking to invest directly and you're looking for a partner, but can you give us an idea on what proportion of your SMRs power consumption in Finland you expect to be sourced from SMRs, assuming this project comes into fruition?

To be honest, we are not assuming anything right now being sourced by SMR. So we see it more as an opportunity based on the feasibility study for someone to look at that would be interested in that. So I see it more as a kind of an element in the whole scope of Finland. There are a lot of data center type of projects that are being looked at. some other investments being looked at. So basically Finland does need going forward more capacity. And I think there are a lot of discussions going on how that would be built and how that would be financed. The Tornio area where we are has a lot of industry around it. There will be the Aurora connection on electricity networks with Sweden. I think there's a lot of interest to that area. And we are basically inviting interested parties to look at that. Would this site and the feasibility study we've done be interesting for someone? So I believe that investments in that part of Finland could be attractive. But we are not calculating on anything coming from that now in our case at the moment.

Correct. Thanks very much.

The next question comes from Ansi Rausi from SEB. Please go ahead.

Yes, one more from me. It's about your annual contracts. So there have been some rumors that some end users of steel would like to negotiate, you know, lower volumes in their contracts or even outsource their procurement. So have you seen any changes in your contracts? and dynamics with your end use customers in your annual contracts?

No, Anssi, we haven't seen anything like that. Still the same setup and also in terms of volumes, no change to what has been communicated earlier.

Okay, thanks. And I guess nothing major regarding the pricing in these contracts. No. Thank you. Thank you.

OK, it seems that we have come to the end of the Q&A session. Thank you for being so active. Thank you for your very, very good questions. And thank you for being with us today. Yes, I would like to very much. I look very much look forward to seeing you in our next interim call. or then indeed in our Capital Markets Day in June 11th. So talk to you next time and have a nice day.

Thank you.