Outokumpu Oyj New

Good afternoon. Welcome to Outokumpu's second quarter 2025 result webcast. My name is Ulla Paajanen, and I'm currently in charge of Outokumpu's investor relations. With me today are our speakers, CEO Kati Terhorst and CFO Mark Simon Schaar. Kati will tell us about the highlights of the quarter, our strategy development and the outlook. Mark Zeman will concentrate on financials and business areas. Before handing it over to Kati, please let me remind you about our disclaimer, since we might make forward-looking statements during the presentation. Please, Kati, the floor is yours.

Thank you, Ulla. So hello everyone and welcome also from my behalf on our Q2 results call. Before I go forward and dive into the result of the Q2, I would like to give a couple of comments on the current trade environment and how it impacts Autokumpu. So if we start with the US-EU trade agreement on stainless steel, and what does it actually really mean for us? So first of all, I would like to start by saying that if you look at our European deliveries, only about 2% of our European deliveries have traditionally been exported to the US. So from that perspective, directly to Autokumpu, it's not such a big issue. Then, on the other hand, we are a local player in America, and the tariffs protect our business in America. But then if you look at it from a European perspective, what the indirect impact is in this very weak demand environment, then when we couple that with low-priced Asian imports that have increased, and then the European steel industry can't export the way it used to export, then of course that puts pressure on Europe and it puts really pressure on the capacity utilization what we're having. So the indirect impact is bigger. it's still now uncertain what the future exactly will be. We currently, after the trade agreement, have 50% tariffs still on steel and aluminium. There are different voices, maybe a quota system underway, but I have at least not heard that being confirmed from the US side. So we need to follow that and see what happens. Then on Mexico and US, we are expecting announcement on the deal, agreement at some point of time. As you have seen in the press now almost daily, there are announcements of different agreements between US and different countries. So I would think that Mexico-US agreement also comes in the coming weeks. And there we are, of course, hoping that the tariffs for steel would be lower or then at least that the melted and poured principle would somehow be applied. And then, of course, what we in the end hope is that actually the tariffs would come on USMCA borders and not between the countries in North America. Then maybe still commenting also what's going on in Europe. What is EU Commission doing as part of the steel and metals action plan? There I think the most important thing right now ongoing is that we are looking at the new safeguard measures that would replace the old ones that expire in any way end of June 26. And that consultation process now is ongoing with a deadline of 18th of August. And then I think the expectation is that at least latest somewhere in September, as the commission has promised at least, we would hear what the new trade measures would be. At the same time, the commission is looking at CBAM. There are some discussions if we could include some still intensive customer segments in the CBAM. And then how do we work with the possible loopholes? And there we should also hear something before CBAM carbon border adjustment mechanism comes in force in January 26. And then the third one, I think, where we are also actively participating is creating LEED markets in Europe for sustainable steel, environmentally green steel. And that's about defining the environmental criteria that would be used for carbon and stainless steel and the thresholds. So there's a lot of important topics on the table. but the outcomes and the timings are uncertain, and therefore we can not just wait and kind of see when these measures come in place, but we need to really take our own action in this difficult market environment in Europe. If we then turn to our result and commenting on that, so our result improved to 75 million during the second quarter and the stainless steel deliveries increased by 3% on a group level, 2% in Europe and 7% in Americas. As I said, the uncertainty of tariffs, geopolitical tensions actually caused additional uncertainty during the quarter. And we saw this also in the way our customers were reacting to the market conditions. What I'm very happy about, our safety result improved to 1.2 TRFRI rate and our recycled material content was very high, remaining at 97%. And then if we look at our short-term cost-saving measures, we are very well on track with that. So after the first half of the year, we delivered now 29 million euros, when the target has been until now 50 million, and we are increasing it to 60. Then we also, during Q2, launched our new growth-focused strategy Evolve, and I will come back to some comments on that a bit later. As you can see from these pictures, the US steel tariffs have lowered the share of imports to the US. And at the same time, especially Asian producers have increased their share in Europe. And this is exactly what we said earlier that would happen with these 50% tariffs. And in addition to this, then we have a lot of Indonesian slabs coming to Europe. I think the highest volume is probably being now exactly in Q2. So this just underlines the importance of having and creating a level playing field for European producers in the steel markets. If we then move forward, I would like to comment a bit on the EBITDA bridge from Q1 to Q2. So we went from 49 million to 75, and the key contributors here were the higher deliveries and lower raw material cost. We also had some positive impacts from the net of timing and hedging, as well as our cost-saving measures that we've been executing all the time. Then a comment on Ferrochrome. Ferrochrome continues to have a robust result, I would say. But in Q2, the result was driven by somewhat weaker US dollar, as we all know, and then higher maintenance cost. Then you know we've been running this EBITDA run rate improvement program with a target to receive 350 million by the year end this year. This program was started in the beginning of the phase two strategy and now then comes end in the end of this year. And if we look at where we are now after Q2, so cumulatively we have delivered 328 million of run rate improvements. So we are well on track to reach this 350 million target by the end of the year. And especially then commenting on what we delivered during the Q2. We delivered 50 million on this program in Q2. And the impact was mainly coming from two businesses, Americas, when it has to do with optimizing our route to the market and yield improvements. And then in Europe, it was about our product portfolio optimization so that we could efficiently use our scrap. And then let's look at the safety and our safety performance, safety and environmental performance. So I'm very, very happy that we are back on track on our safety performance after a bit more difficult Q1. I would say that this cumulative result, where we are now after the first half of the year, DRFI, so total recordable incident frequency rate of 1.5, it is really world class level in the process industry. Of course, the ultimate target is zero. Every incident is one too much. But I have to say I'm happy about this performance. Then also, as commented earlier, our high recycled raw material content at 97% is really helping us also to work towards our SPTI targets. And it's also a good thing from a cost perspective. Then we also, during the Q2, we got the reward of being in the 25th place in the corporate night's top 50 list in Europe. And we are advancing very well towards the carbon neutrality regarding our chemimine by the end of this year. Commenting then a bit of Circle Green, our very green steel product with more than 90% lower emissions. We have now announced a new partnership with Alstom and there we are delivering our low emission Circle Green for their newest range of metro cars. And this is actually one of, this is our biggest Circle Green deal in the mobility segment. It's a nice way to highlight as well that this is a good area, for instance, trains, where the Europe could really develop the lead markets for green steel, for instance, through public procurement. Then before I hand over to Mark Simon, I'd like to very shortly revisit the key messages from our new Evolve strategy that we presented during our Capital Markets Day on 11th of June. So as part of the new strategy, we are really targeting on increasing the value of Outokumpu by driving the cost competitiveness in standard stainless steel. And that goes both for Europe and America, our current business. And then we are looking for profitable growth in areas where there's a higher growth percentage, where the margins are higher and there's less cyclicality. And that is very much then also about advanced materials and alloys. And then we have talked about a new technology that absolutely can revolutionize the way we think about metals and how we could produce green metals. And there we are also taking steps forward. Important from shareholder perspective, we are committed to hold our strong balance sheet. And next to that, we are also focused on the shareholder returns. Maybe one comment on capital allocation. So we have classified our businesses either to foundational or transformative, and this guides our capital allocation. So in our foundational business, standard stainless steel, we are not looking for growth. We are looking for investments that improve our cost competitiveness, which you can also see it's very needed in the European environment. And then the transformative investments are for growth. And if we look at them, the key initiatives we have announced in the evolved strategy, we're proceeding well with those. And just as the reminder on foundational business than the stainless steel, it's about the Tornio investment, where we are looking at the new annealing and pickling line. It would bring profit improvements in Europe through efficiency, low energy cost in the north. And then we would take two lines down in Krefeld in Germany. Then we are ongoing Avesta, a feasibly study where we're looking at high nickel alloys and investment in the melt shop. So that's ongoing. And we are preparing in US for the pilot line regarding our new technology and next step in developing it. And then on America's growth, I would say it's these two areas, advanced materials and alloys, as well as the new technology where America's growth would also be based on going forward when it's beyond the stainless steel. And then I think it's time to discuss the financial position and more details of our different businesses. And Mark Simon, the floor is yours.

Thank you, Kati. Good morning, good afternoon everyone, and thank you for joining us today. Given the times of uncertainty, financial resilience continues to remain our top priority. As such, I am happy to report that our balance sheet strengthened, with our leverage ratio improving to 0.8 from the first quarter. Our NADEPT improved despite the dividend payment thanks to the conversion of our convertible bond and a reduction in working capital supporting a positive cash flow during the second quarter. Our liquidity remained on a strong level of 1.1 million euros and our CapEx estimate for the full year of 160 million euros, as communicated earlier, still remains valid. Now, going forward, we will continue with our focus on capital discipline, given the weak market environment we're currently operating in. Let's now have a look at the performance of our business areas. The demand from end users in Europe remained weak across key sectors with no signs of immediate recovery. The manufacturing PMI improved somewhat in Europe, but still being below 50. Now, when we're looking at the different segments, first starting with construction, be it private, infrastructure or industrial projects. It is still a weak environment despite lower interest rate levels and improvements in that sector are still to come. Also, the demand in the oil and gas and process industry, especially on the chemical industry, is weak due to the uncertainty in outlook, as well as the cyclicality, especially in the oil and gas sector. The demand for automotive and appliances was stable during the second quarter, but still on a low level. And in appliances, we saw some demand increase three, four months ago, but that was not sustainable. On a more positive note, the demand related to the energy transition is stronger. Same for aerospace, defense and nuclear projects on a global level. Distributor stock levels have increased and combined with rising uncertainties, the demand remained low and only limited to immediate needs. At the same time, imports increased, as Kati pointed out, and are on a high level, especially compared to the European demand situation. The low demand and high level of Asian imports have put pressure on prices, which had been notably lower compared to the prior periods. The improved profitability in beer Europe was supported by lower costs, and here especially from the raw material side. Now let's move on to business area Americas. Like in Europe, the US manufacturing PMI remained below 50, indicating a recessionary industrial environment. However, there had been a trending shift in procurement from imports to domestic producers in the US. But as Katja also pointed out, imports into the North American market remained still on a high level and particularly driven by the Mexican market. Of course, going forward, current tariffs might further support local producers in the US. If we then look at the Mexican market, here the relative weakness still remains and current tariffs limit its ability to support the US domestic demand. However, a potential trade agreement between the US and the Mexican could present an upside opportunity for our Mexican operations. From a market perspective and compared to prior month, distributor inventory levels increased in June above year-to-date average levels, especially due to continued weak demand in the US, as I pointed out earlier. If we then look at the different segments, we saw that pipe and tube being stronger, supported by infrastructure investments on the one hand side and also by the oil and gas industry and projects over there, which is then being supported by the US administration. On the other side, weaker sectors include appliances and automotive, primarily driven by lower consumer confidence, higher interest rates and inflation, and therefore less demand. However, given the shift towards domestic producers, especially the demand for appliances remained on a stable level for us in our business. In addition to higher volumes, our business area America's profitability was further supported by lower raw material costs, which were partly offset by lower fixed cost absorption due to the working capital reduction. Now let's move on to business area Ferrochrome. The demand for our low-emission European Ferrochrome remained solid. In addition, we learned that producers in Southern Africa continue to report further capacity reductions, which are supporting the overall global supply-demand balance. In total, approximately 3 million tons of capacity are now being taken out. In the second quarter, our ferrochrome deliveries increased by 6% quarter-on-quarter. And in line with our guidance, the profitability of BA Ferrochrome was impacted by higher costs due to the planned maintenance and as well as lower sales prices due to the weaker US dollar. At the same time, and due to the price volatility in the Finnish electricity market, we continue to benefit from the electricity usage optimization. Usually, electricity prices are more stable during the summer month, but due to the various geopolitical events, volatility remained high during the second quarter than we originally expected. As a critical raw material, Ferrochrome is still excluded from the current US tariffs. I think that's very important to note. And yes, with that one, let's turn now to a few final remarks on the group's overall financial position. As you can see, we continued our capital discipline during the second quarter and reduced our net debt position by 83 million euros to a level of 169 million. The reduction was supported by the conversion of our convertible bond and our active working capital management during the quarter. These positive drivers were partly offset by the first dividend payment, which we made in April and with a total cash out of 55 million euros. With that, I will now hand it over back to you, Kati.

Thank you, Mark Simon. So going forward then, Let's see. There we go. Thank you, Mark Simon. So although we expect the planned measures in the European steel and metals action plan at some point to give more support to the European producers and create that level playing field that we are looking for, As Outokumpu, we cannot rely on it and therefore we can also not kind of wait, but we need to take our own actions and make sure we are improving our cost competence in this weak environment. So then couple comments on that. So we have before announced the 50 million short-term cost-saving measures that will come in this year and reported just on the progress on that. So that target is now increased to 60 million. And next to that, we also need to take structural measures. So we are now in a planning process to come at the 100 million of cost savings that are structural on annual basis. And that would be in our result latest by the end of 27. And of course, given the current challenging market environment, especially in Europe, we are going forward with that then as quickly as we can once we take the steps and negotiations take place. And then, indeed, focus, it's covering the whole Autokumpu, but focus clearly is on PA Europe and then the group functions. And then this takes me to our outlook and guidance for Q3. So the group stainless steel deliveries in the third quarter are expected to decrease by five to 15% compared to the second quarter, mainly in business area Europe, due to the seasonality and then the market weakness. Meanwhile, the pressure on realized stainless steel prices is expected to continue in Europe during the third quarter. And Asian imports to Europe remain high compared to the low demand in the stainless steel market. While in the US we do not see signs of demand recovery yet, the current tariffs are supporting more favorable market conditions for local producers like us. And then the maintenance breaks in Business Area Europe are expected to have an impact of up to Euro 10 million on adjusted negative impact on adjusted EBITDA in the third quarter compared to the second quarter. And with the current raw material prices, some raw material related inventory and metal derivative losses are forecasted to be realized during the third quarter. And therefore, our guidance for the Q3 2025 is that the adjusted EBITDA in the third quarter of 2025 is expected to be lower compared to the second quarter. Then I would say that despite the current challenges, we have a strong foundation for the future. So we continue to benefit from being in both US and Europe, definitely in this current tariff environment and geopolitical situation. We have the strongest balance sheet in the industry, and that gives us resilience in these market conditions. And as I said earlier, at some point, the EU steel and metals action plan has to start providing also some support for European producers. And mainly we're talking here about the improved safeguard measures. Then we're talking about CBAM and creating the lead markets for European green steel. And of course, what we are doing ourselves, cost measures you heard about, we're continuing forward with full speed with our Evolve strategy. So now we have basically covered our Q2 result presentation, and I would say we are ready to start the Q&A session. So operator, please, let's go ahead.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Tristan Gresser from BNP Paribas Exane. Please go ahead.

Yes, hi, thank you for taking my questions. I have two. The first one is on Europe, just looking at the group volume guidance for the group. I mean, it would imply that Europe could see volume for more than 15% in Q3, which put could put the volumes actually at a record low level in that environment. And if I understood correctly, pricing pressure are continuing in 2Q3. Is it possible to see the European division going back into negative a bit territory?

Thank you, Tristan. As you know, we don't guide on a business area level, but the main reason for the guidance and the deliveries going down is European weakness, so that I can confirm.

Is there any type of putting aside the maintenance costs, is there any other element on the bridge into into Q3 regarding the cost side.

I think maybe I can take that, Tristan. Yes, so just to repeat the elements, we talked about the volumes and as Kati mentioned, predominantly Europe. Then we do see the price pressure in the realized prices. The maintenance is related to our TORNIO operations, where we also have an ERP rollout in the third quarter and beginning of the fourth quarter. and then we have talked about the net of timing and hedging elements here as well we do see further progress on our short-term cost savings and also on other elements other cost items in here to a certain degree all right all right that's that's helpful and

And then my second question would be on Americas. Well, then there you have the highest shipment figures in a couple of years. You flag that ASP has moved higher, that you've seen higher demand for domestically produced stainless steel. But also you say you don't expect a recovery in H2. So I'm trying to put all that together. Were there any tailwinds that you saw in Q2? And I know there were some raw material gains, but that are now weakening? Are you seeing a softening from Q2 to Q3 in the U.S.? And why we shouldn't expect, given all those elements, some better guidance for the business into Q3?

Maybe you can add something, but I would say that basically we see us, our U.S. business as being robust. And of course, the 50 percent tariffs are supporting that as well. But what we meant with the comment is that it's not really like you can say that the America's market and demand on America's is really in steel picking up. So that we don't see. So industrial production is still quite low figures. consumer confidence may be a little bit improved, but we don't really see the biggest sign of picking up the overall demand in the market. But then, of course, from that whole cake, local producers now get a bigger share. I would say. So that's kind of supporting our business. And then our limitation is a bit to do much more is, of course, we can't get that Mexican capacity now to be used for the benefit of US market with a 50% tariff. So that's the upside that Mark Simon was referring to, if the tariffs between the two countries would change.

But what we have seen, maybe if I can add here, Tristan, to it, is that in our realized prices, we have seen some increase in the second quarter and then impacting apparently also the third quarter.

All right, that's clear. And maybe just a quick follow-up. Were there any tariff costs in Q2? And should you expect those tariff costs to increase into Q3?

So our tariff cost, no. Sorry, Tristan, can you rephrase so I understand your question?

So, for instance, the material you sent from Europe to the US or the material you sent from Mexico to the US, If you were paying the tariffs, what would have been the amount that you paid in Q2 and even the change starting June of the tariff level in the U.S., if you have any expectation of what that amount could be in Q3.

I think I would answer like that, that basically it's the customers who pay the tariff and with the 50% tariffs, basically we are not really bringing volumes from Mexico to US and the volumes from Europe are also very low with these tariffs.

And as we already mentioned in some of the calls also earlier that we do not send material volumes from Europe into the US market, nor from Mexico at the moment. Okay. That's very clear. Thank you. Thank you.

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

Yes. Hi, Ollanta. Thank you for the presentation. A few questions left from me. First about your adjusted EBITDA in Q2. So EBITDA was For these other operating items, it was clearly less negative than in the recent quarter. So what was the driver here and how should we think about this segment in latter half of this year?

Which segment are you referring to, Anssi?

Other items, which I think was like minus 3 million euros and it was minus 11 in Q1, if I remember correctly.

Yeah, that relates to our sales activities and our intercompany profit elimination, especially when it comes to our Ferrochrome business in here. And that's why we had less intercompany eliminations in the second quarter compared to the first quarter.

And the Can you give us any indication about the level in the coming quarters? What should we think about it?

Yes, I would say somewhere in the middle of the two quarters, what you have seen so far, I think is a good proxy.

Okay, thanks. Welcome. And maybe the next question about this mining mineral tax and proposed increase in this tax in Finland. So based on your latest discussions with the decision makers, like how likely you see this tax hike will be implemented or do you feel that politicians have heard your thoughts regarding this matter and also maybe the same question regarding the planned cut of aid for electrification in Finland. How do you see this topic?

Yes. Thank you, Anssi, for the question. I think I'm not going to speculate on the outcome because it's a very political question right now also in Finland. But what I can say, what it's about, and we are, of course, discussing this, not only us as Outokumpu, but the whole mining industry in Finland, as increasing tax for mining, kind of a royalty type of a tax, is of course a bit strange in a situation where Finland has a mineral strategy, EU has a mineral strategy, and we have the only chromium mine in the whole EU, which is also very important for Europe, the defense industry, energy industry, and then of course for steel. So So I think this comes from the Finnish government having to find sources of tax. There's not been any kind of evaluation of what it would mean, and that's why all of us in the industry are now making the points why the mining industry in Finland cannot carry this kind of tax increase, because it would be increasing the tax from 0.6% to 2.5%, which is four times, basically. and then in our perspective also the question is what is the tax based on and currently the tax in our case is based on basically on ferrochrome type of a crate and an index while mining tax should be based then on the ore itself and the ore price and there's a big kind of Yeah, that's kind of, I would say, even a mistake. So those are the topics we are discussing and we are doing everything we can to influence that decision making and bring actually the facts to the table. So hopefully that will have a good end. Then the other thing that you mentioned, the electrication aid that Finnish industry, let's say electricity intensive industry, been getting. The whole idea there has been that with the aid that you get to electrify, you also reduce your emissions. So half of the money that you get should go for green transition. You need to show that you invested in something that takes your emissions down and improves your carbon footprint. And that's exactly what Outokumpu is doing. So Otokumpus level, that is also 20 million a year. So it's sizable. And the mining tax increase could be like 30 million a year. So we talk about 50 million. So I'm hopeful that we can still influence this. And the mining tax, actually, we have been asked also to give our opinion and arguments. And that's exactly what we are doing. But I don't go into speculating what the outcome is, but I'm hopeful that we get some sense in this discussion.

Yeah, thank you. And I understand your point of view on this one. Maybe last question regarding your cash flows. So Mark Simon mentioned already a couple of things, but if you would summarize like underlying elements going into H2 this year, how should we think about this and possible drivers behind your cash flow?

Yes, while we're not guiding or commenting on our future cash flow nor net debt position, Ansi, I think fair to say we talked about the maintenance break which we have in the third quarter of this year and the ERP rollout. This is one element which we should take into consideration when we think about the third quarter in terms of inventories. We do have a couple of of one type of cash out elements from the restructuring programs of the European competitiveness in relation to our new strategy here. And that is some single digit million number over here. Then we have a legal case in the US for which we have also A labor case built a provision in our balance sheet and here cash out in the third quarter to be expected in, I would say, lower double digit number. We gave further confirmation on the CAPEX side. And I think these are the main and most important building blocks together also with the comment I made earlier that we remain very disciplined on our financial position basically going forward and then towards the end of the year and going forward.

Okay. Thank you so much. That's all from me. Thank you.

Thank you.

The next question comes from Maxime Cogger from OdoBHF. Please go ahead.

Yeah, good morning. So two questions on my side on America and one on Europe. So the first on America is regarding the CAPEX that Cleveland Cleaves has recently inaugurated in the U.S. for a new Brighton Hill Line. which will allow them to produce a mirror-finished NLC. And in their comments, actually, they made reference to Autocompo quite clearly, saying that this line would be used to replace some finished material that is being circumvented to Mexico. So I would like to have your view on that, and perhaps to give us more color on the extent of this business for Autocompo right now, and what could be the impacts of this new line for your activity in North America. So the first question.

Maybe I start by saying that that comment was wrong, because we are not bringing from Finland or Tornio any material to do what they say. They're referring actually to our Mexican operations, where we have a brighter nil line and where we have been bringing certain volumes to our US customers. And like I said, now, of course, that business is on a lower level because of the 50% tariff. So their commenting has not been correct.

Yeah. OK. A second one on America is you have a long-term guidance of EVDF for the region of $170 million. And I was wondering whether we would have a bit of upside now with the price hikes uh that we've seen on the american marketplace uh recently um would it be possible i mean when the tariff certainty is over to to possibly increase that guidance or do you have to pass through some of the price hikes to your partner, and therefore this guidance is set to remain at this level or not meaningfully move.

Maybe I say one comment and then Mark Simon can continue. I think what, you know, like to have really upside to our kind of long term result level, what we think we can have in in America's I think the market demand has to increase in general in America. So economic activity, investment, industrial production has to pick up. So I think that's a prerequisite for that. And then I hand over to Mark Simon to comment.

And I would right now at the moment remain on this 175, what we communicated earlier, given also the inflationary pressure, which we see in the US market here as well.

Okay, that's clear. And just the last one is on CBAM in Europe. So the process appears to be completely stalled and there are growing doubts whether CBAM can effectively kick in next January. What's your view on that? And do you think it's still possible to imagine scope 3 being included in CBAM and that as early as next January 2026?

Yeah, I don't dare to speculate what's possible now to be included. I think EU and the Commission has been quite busy with the agreement with the US until now. And hopefully now the business turns towards the steel and metals action plan and these items with the trade measures being the most important. But at least with several Commission members, we have discussed the elements we would like to be included in CPAM, but that would be important. And also ensuring that there are no loopholes, kind of circumvention to circumvent CBAM with resource shuffling and that kind of thing. So I think we feel like we've been heard. What is the outcome? I think we need to wait now a little bit. But I think it's good that CBAM comes. I would like to see some of our customer segments coming in. I think that would be very good.

Okay, that's all. Thank you.

The next question comes from Joni Sandvall from Nordia. Please go ahead.

Yeah, thanks for the presentation. Couple of questions from my side. I tried to figure out the Ferrochrome, you know, underlying profitability levels here. He mentioned that you had some over-optimization gains there, and if we are now adjusting for the higher maintenance, it appears that you were pretty much in line with Q1. So could you give any quantification on this electric gains, what you gained in Q2?

Yes, certainly. I would say it's a mid-single-digit number over here, which we have seen. But at the same time, as Kati also pointed out earlier, is that we also saw on the sales price certain pressure from the US dollar deterioration or weakness in the US dollar. Okay, okay.

But I think going forward, indeed, it's important to highlight that there is 3 million capacity out of the market now at the moment, and that puts the demand-supply balance in the Western world in a good place for Ferrochrome.

From Q4. Cheers. Yeah, okay, okay. Then maybe second question on this, what you are now planning, this 100 million structural improvement, could you give any indication, I know that it's early states now, but can you give any indication, would this require some investments or how you aim to achieve this 100 million cost savings?

I would say we can't comment too much because it's of course very sensitive as we just now announced it and we need to take step by step our negotiations and then come with the final decisions. But maybe I can say it's not really something we need to do a lot of investments. That's how I would say it. So it's really organizational structures, de-layering, looking for the efficiency in our operations. So not really requiring investments. That's what I would say.

Okay. And maybe lastly, still on the maybe cost levels going forward, the end demand is still sluggish. So how is the scrap market looking from your perspective currently?

Yes, I mean, I think we commented on our Q2 result that we saw support from decrease in raw material prices. And given the demand situation, which we outlined already earlier, also here we see further pressure than on the raw material cost side. But at the same time, looking at what price levels we are currently very close to what we have seen during COVID times, I think that there is a certain bottom of it as well to be reached. Okay, thanks. That's all from me.

Thank you.

Thank you.

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

Yeah, thanks. Good morning, all, and thanks for taking my question. I just have a couple of quick questions, please. Just to double check on the cost cutting, so the 100 million cost improvement target which you put out today, does this include any of the 70 million for the footprint which you announced at the CMD?

What it includes is what we are already implementing, and it's about 20 million in our Krefeld plan. But that's the only part.

OK, so basically 80 million is new in effect.

The reason is also that if we do the Tornio investment, that would only come after 27, the full impact, the rest of it. So that's why it's not included in this 100 million plan that we need to deliver before end of 27.

Understood. Okay, thank you. Then just following up on Ferrochrome, you've been, I guess, describing a pretty supportive environment here, driven by these capacity cuts in Africa, which I think are indeed very helpful. What do you expect for the next two quarters out there? Do you think that those dynamics will last? Do you think there will be maybe a bit more headwind towards the end of the year as maybe some of that capacity comes back into the market? What's your view on the Ferrochrome market? If you could share that piece.

If I say kind of high level a bit, the expectation, I think in general there are some stocks, of course, and inventories also with the South African and Zimbabwean producers. But if we look at the demand supply balance going forward and if this capacity is not coming back on stream, then I think we have a shortage of ferrochrome for the Western world in the by the end of the year or let's say going forward the beginning of next year. And we see requests coming to our direction. So I think the situation towards our order book is quite good. Then Q3, we need to of course remember that ferrochrome is delivered especially for stainless steel production. So weakness in a stainless steel is also impacting than ferrochrome.

in the third quarter, but then probably seeing some support then from the fourth quarter going forward and then combined then also with CBEM that could be another important data point or trigger point for our demand of Ferrochrome.

There's a bit of expectation because of CBEM as well that the Q4, there might be more purchases done in Q4 before CBEM comes in place in January.

And are you generally more confident on the CPEM impact with regards to ferrochrome rather than stainless itself or what's your view on that?

Well, at least in the sense that we are the only producer in Europe, so the comparison is to us and our carbon footprint is 67% lower than the industry average. So, yes.

Okay, got you. And very lastly on the strategic process, I guess at the CMD you talked about a lot of ideas for growth. Are any of these projects already getting closer and is there any early steer for CapEx next year in 2026? I guess the European market has clearly come under more pressure. And I guess at the moment at least you're not really generating much cash. So I'm just wondering whether you would lean to risk adjust your growth plans here a little bit for the moment and possibly push them out in this uncertain environment or whether you'd rather go and take your balance sheet and push ahead.

I would first say, let's go step by step. We don't have the outcome of the Avesta feasibility study yet. So I think we need to have that outcome first. And then the second question is, what is the timing? If the outcome is positive, what would be the timing of the investment? And also regarding Tornio, the annealing and pickling line, we are looking at different options to execute that. And can we get more cost savings than we have even thought about even in? So we are pushing the organization in all areas to look for more savings. So that I think is one. We will protect also our balance sheet. Then when it comes to the technology and taking the next step in having our pilot line, that's not a big investment. So there we definitely will proceed as quickly as we can when we are ready.

OK, understood. Thanks so much for taking my questions.

Thank you.

The next question comes from Adana Ikoku from Morgan Stanley. Please go ahead.

Hi, thank you for taking my question. I've just got a follow up on the America's market and on the price hikes that were announced in July. So it seems these will have a kind of minimal impact in Q3 and appreciate the uncertainty going into the end of the year. But is it possible these could have an impact in Q4 or is really just a larger demand recovery required first? Thank you.

yeah maybe just to qualify my comment on prices were unrealized prices and more to the second quarter given that we do not and cannot give price outlook going forward the only thing is what i wanted to say is then that we do see based on the realized prices also a positive impact in the third quarter

Okay, so that's kind of positive in the third quarter and then could trend up in Q4, but clearly a bit early to say.

Yeah, but once again, Q2 was a smaller impact and then the full impact then in Q3 going forward.

Okay, thank you.

The next question comes from Tristan Gresser from BNP Paribas Exane. Please go ahead. Tristan Gresser, BNP Paribas Exane, your line is now unmuted. Please go ahead.

Hello. Can you? Yeah, we can hear you. No worries. Thank you for taking the follow up. Maybe on the safeguards, do you think a 40% cut in the quota is being realistic, given your recent conversation with the Commission? And also, when we look at the import situation that you flagged, and it's pretty damaging at the moment, what are the loopholes of the safeguards at the moment? Because, you know, Indonesia has some tariffs, the quotas, they have cap by country. Is it really about volumes or it's like regardless of how much you cut this quarter, you're still going to see cords coming from Asia below $2,000 per ton? So I'd like to have your thoughts on the safeguards and what could happen in mid-September.

Yeah, I'm not going to speculate what could happen, but I maybe take two points. So one is of course that the current quotas are too high compared to the demand that we have in Europe. And those quotas were set at a time where the demand was much higher. And I think if I now talk with the mouth of Eurofare, our industry organization, what we've been discussing with the commission and proposing is that we should look at the quotas in a way that the import share would not be higher than 15%. to ensure that there is a level playing field in Europe and that there's enough capacity utilization, because Europe does need its local steel production as well going forward. So that is one item. And what is the circumvention problem is indeed the fact that everything starts with slab production in China and Indonesia, and then cold rolling, hot rolling, whatever happening in very many different countries. And the European Commission has not been able to kind of stay ahead of that, the different routes, how the cold rolled material or even hot rolled material comes to Europe. So somehow One would like to have something like melted and poured principle that, you know, where it's been melted, it's really what's tackled. But that's not the case right now. So these are actually the key areas, I think, from our point of view to tackle the sea conversion.

OK, that's clear. And the last one, it's I think earlier this month, the European Commission said it was experiencing a decline in metal scrap availability and starting to do some monitoring. And that could clearly lead to some sort of scrap export restrictions, maybe later this year. So what is your position on the topic? And let's say tomorrow there is a scrap export ban or some restriction put in place. What would be the impact for your business?

So we have been asked also as Otokumpu, what do we think about that? So at least personally as Otokumpu, we have not been a big promoter of restrictions on trade, on scrap. I think the key thing to keep scrap in Europe is to continue melting in Europe. to have the demand for the scrap in Europe. And then if we have weaker environments where there is not enough demand for the European scrap, then I would allow the players to also export so that we can keep that business and scrap handling business healthy in Europe, because that's also important. If you take that scrap yards out and the handling capacity out, then when the demand goes up, you don't have it anymore and then we don't have enough scrap. processing in Europe. So I think that's also important. I think with commission is doing that it's about scrap, but it's also about other, you know, recycled metals and materials that they want that we utilize more in Europe as there is scarcity on metals in general, looking at where you can buy them. And then there are certain countries that have actually export restrictions. And they are probably looking at also that maybe there could be then some export restrictions out of Europe to those countries who don't also allow to be exported to Europe. So those are some of the discussions we've heard. But no idea if there would be any outcome of that before the end of the year. But monitoring takes place now.

But it would be positive if it happens, more scrap stays at home, stainless scrap prices fall, you use 80-90% of that for your raw material mix. What would be the potential negative of such policies?

I don't know. We have not had problems getting scrap. That's what I'm trying to say. I don't know.

Yes, indeed. Absolutely. So we don't see any scarcity right now at the moment. We don't have any problems to procure scrap. And therefore, we don't see that.

Thank you.

The next question comes from Igor Tubic from DNB Carnegie. Please go ahead.

Thank you. I just had two follow-ups here. The first one, maybe we can start with. I just wonder, can you comment anything about what you expect in terms of the mix for BA Americas and Europe in Q3 versus Q2? Yeah, we can maybe start here.

Maybe I can take that. We expect the mix to be on a similar level as in Q2.

Okay, thank you very much. And then the second question, maybe hard for you to say anything about, but have you seen anything that the imports here in July has started to ease from Asia or have you started to see any sort of signs either in a positive or negative direction?

No, we haven't seen any signs of a decrease in imports quite the other way around. We have seen now an increase in imports from a level of 23% into Europe to 27% in the second quarter of this year. And we were highlighting, I think, and guiding also on the volume side. So that is what still continues right now. Okay, that's all from me.

Thank you.

Thank you.

Thank you.

There are no more questions at this time, so I hand the conference back to the speakers.

Thank you, everyone, for your active participations and good questions. Hopefully we were able to, with Mark Simon, to clarify at least some of them. I think as a concluding note, I think in these market conditions, we delivered a reasonably good Q2. but the market is weak, we have also seasonality and that's why the guidance of lower for Q3. We do believe in sustainable stainless steel, we do believe in our evolved strategy and we are going forward with that at the same time making sure that we keep our European business competitive and therefore the restructuring plan what we announced today. But I would like to very much thank you all for participating on a sunny day here in Helsinki. And if you still have some vacations left, also wishing you still good vacations and talk to you next time in our Q3 call. Thank you.

Thank you.