Outokumpu Oyj New

Hello all and welcome to Outokumpu's Q1 2025 results webcast. My name is Linda Häkkilä and I'm the head of investor relations here at Outokumpu. With me today as our main speakers, we have our CEO Kati Terhorst 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, Linda, very much. And dear ladies and gentlemen, welcome to our first quarter of 2025 results call. Let's get then going. So our Q1 adjusted EBITDA improved clearly to Euro 49 million in a very volatile market conditions. Our deliveries increased by 11% on group level, 13% in the Americas and 11% in the business area Europe. The one-week strike that we had in Finland had a 50 million negative impact on our group result, and this impact was then mainly in business area Europe. What I would like to especially highlight is the excellent result in business area Ferrochrome, and it was actually the best result since Q2 2022. We also had a good quarter regarding raw material costs and recycled material content, which actually increased to all-time high of 97%. This contributes positively to CO2 emissions. We are also targeting 50 million short-term cost savings, as communicated earlier, during 2025, and we are well on track to achieve that. If we then look at the market and especially talk a little bit about the Asian imports, both in Europe and in North America, I would like to state that we have kept our market positions in both continents, but Asian imports continue to be at a high level and they are putting pressure on prices, especially in a still muted demand environment. So during Q1, the share of Asian imports stood at 23% in Europe and 33% in North America. So in the EU, we clearly need urgent measures to create a level playing field. And therefore, we are actively participating through Eurofare, but also as Outokumpu in the discussions with the Commission regarding the steel and metals action plan. So in these difficult market conditions, we concentrate mainly on our own actions to improve the performance. Then shortly commenting on our 350 million EBITDA run rate improvement program. So after Q1, we are standing at 313 million of cumulative run rate improvements and will reach definitely the target of 350 million by the end of 2025. Key contributor to the 26 million improvement during Q1 was the closure of Dalbrook and transfer of the precision strip operations to Dillenberg. And we also benefited from scrap optimization and yield improvements in Calvert and Aavista. Let's then look at the group result a bit more in detail. So operationally, we had a very good quarter despite the one week strike in Finland that impacted our supply chain and result. As commented earlier, stainless steel deliveries increased by 11% from the previous quarter, and our cost position improved due to lower maintenance costs, but also because of the 11 million short-term cost-saving measures that we delivered during Q1. Also, our active raw material cost management compensated quite nicely for the negative impact from the pricing. Further, I'd like to highlight that business area Ferrochrome did an excellent job in electricity and cost optimization, which you also see in this bridge. Then the sustainability highlight of the quarter is our record high recycled material content due to the high scrap share. And this contributes both to lower cost and lower CO2 emissions. If I then start to comment a bit the safety performance during Q1, we did not reach our total recordable incident frequency rate target of 1.5, but landed with a rate of 1.9. This is still a world-class level, but not a performance that we are satisfied with. And therefore, we have taken prompt corrective actions to get back on the targeted level. We made good progress towards our 2030 SPTI target, and EcoVadis renewed our platinum rating. And our chemimine, as communicated earlier, will be carbon neutral by the end of 2025. This mainly results from the additional measures we take in further electrification of the mine. Alfa Laval is one of our key Circle Green customers, and our strategic partnership using Circle Green in innovative plate heat exchangers at Laakse Hospital results now in 60% lower product carbon footprint. And we've seen that Alfa Laval's competitors have also noticed what Alfa Laval is doing as a pioneer, and we have started also discussions with us on Circle Green. And then I'm handing over to Mark Simon.

Thank you, Kati. Good. Next slide. Good morning. Good afternoon, everyone. And thank you for joining us today. As mentioned earlier, in times of uncertainty, financial resilience remains our top priority. In this context, I am pleased to report that with a successful execution of a new 200 million term loan, we have strengthened our total liquidity reserves to 1.2 billion euros. Alongside this, we are making good progress on our short-term cost-saving initiatives and we are firmly on track to limit our capital expenditures to 160 million euros for this year, fully in line with our earlier communication guidance in that way. As expected, our net debt increased somewhat in the first quarter to a level of 252 million euros, thanks to an only moderate seasonal increase in working capital, reflecting our ongoing commitment to capital discipline. This limited the increase in our leverage ratio to only 1.3. Now looking ahead, our convertible bond matures in July this year and we have already received the second conversion notice at the end of March. As you can see from my earlier statements, we are prudent in how we manage our financials and this enables us to take care of our shareholder returns. For the fiscal year 2024, we declared a dividend of 26 euro cents per share, with the first installment of 13 cents per share paid out in April this year. With that, let's take a closer look at the performance of our business areas, beginning with Business Area Europe. Despite of the minus 15 million EBITDA impact from the strike in the first quarter, Business Area Europe was able to improve its profitability significantly, albeit from a low level. At the start of the quarter, we saw a slight uptick in order intake. However, the overall market sentiment remained cautious, with customers continuing to adopt a wait and see approach. While March saw the first improvement in the manufacturing PMI in two years, the index remained below the 50-point threshold, indicating an ongoing contraction in the area. Even with modest gains in both the manufacturing and the service PMIs across the Eurozone, the overall growth in Europe continued to be restrained by the economic headwinds impacting the current sentiment. On a more positive note, BA Europe's profitability was supported not only by increased volumes, but also by lower raw material costs, less maintenance work and the successful implementation of our cost saving measures, consistent with our earlier guidance. With that, let's now turn to the performance of business area Americas. Also in the North American market, uncertainty prevailed. At the beginning of the first quarter, the US manufacturing sector showed modest growth. However, as the quarter progressed and together with the new tariff measures, they began to weigh on the momentum in the market. In contrast, Mexico's manufacturing industry continued to contract, facing significant headwinds from external economic pressures and declining demand. At the same time, imports into the North American market declined slightly, but remained elevated by historical standards. Much like during the rollout of Section 232 in 2018, many importers accelerated their shipments in late of last year, beginning of this year, to stay ahead of the newly announced tariffs. This front-loaded effect temporarily stabilized import volumes, even as higher duties came into effect and put pressure on pricing in the North American stainless steel market. Now, supported by seasonal factors, our business area Americas delivered a strong performance with increased deliveries. Distributor inventories remained on similar levels in Q1 compared to Q4 of last year, and the energy as well as oil and gas sector continued to be stronger. whereas on the other side automotive and appliances see decreasing demand driven by the weak economic conditions and cost increases caused by the tariffs. Besides the increase in deliveries, the BA's profitability was further supported by a strong cost performance. Together, these factors effectively offset the impact of lower prices which we have seen in the market. While recent US economic data reflects a drop in consumer confidence and signs of renewed inflationary pressure, driven partly by the new tariffs, we saw a positive shift in customer behavior, meaning the demand for domestically produced materials has increased and improved our order intake during the quarter. Now let's move on to business area Ferrochrome. The demand for our low-emission European Ferrochrome remained strong, with deliveries up by 24% quarter on quarter. We also benefited from a stronger US dollar, which supported an increase in our average sales prices. In terms of the broader market environment, for Ferrochrome in both Europe and the North American market remained subdued. Nevertheless, the demand for our sustainable and Western-origin Ferrochrome continued to hold up well. Meanwhile, chromite ore and ferrochrome prices in China showed some early signs of recovery and ferrochrome producers in southern Africa announced further capacity reductions. Now on the cost side, costs were higher compared to the previous quarter, mainly driven or mainly due to lower fixed cost absorption, driven by lower production volumes in the first quarter and the absence of the electrification aid received in Q4 of last year. However, our team successfully mitigated part of this impact through optimized electricity usage, particularly important given the seasonal volatility in winter energy prices. Thanks to the strong operational performance, I am pleased, and Kati mentioned it already, to report that this was our first or our most profitable quarter in business area Ferrochrome since the second quarter of 2022. And all of this once again demonstrates the strategic importance of our Ferrochrome business. In this context, I think it's also worth noting that Ferrochrome remains excluded from the recent US tariffs, reflecting its designation as a critical raw material by the US administration. With that, let me now turn to a few final remarks on the Group's overall financial position. As I mentioned earlier, our net debt increased somewhat in the first quarter to a level of 252 million euros, thanks to an only moderate seasonal increase in working capital. Looking ahead, we assume that the upcoming maturity of our convertible bond in July would support our net debt position in the second quarter. That said, please note that the first installment of our dividend paid in April resulted in a 55 million cash outflow which will have an opposite impact in our net debt in the second quarter. Now, before handing it back to Kati, let me reiterate again that especially during these times of uncertainty and challenging market dynamics, we remain firmly focused on maintaining a strong and resilient financial foundation. With that, back to you, Kati.