Hello all, and welcome to Outokumpu's Q4 and full year 2021 results webcast. My name is Linda Häkkilä, and I'm the Head of Investor Relations here at Outokumpu. Year 2021 was definitely a success for Outokumpu. Last year, we had our best annual safety performance ever, and at the same time, we really accelerated our de-risking. Our main speakers today are our CEO, Heikki Malinen, and our CFO, Pia Aaltonen-Forsell. We will first start with our presentations, and after that, we are happy to take your questions from the conference call lines. But now, before we start with the presentation, I would like to remind you about the disclaimer as we might be making forward-looking statements. Now, without any further comments, I would like to hand over to our CEO, Heikki.
Linda, thank you, and good morning, good afternoon to everybody. Welcome also from my behalf to Outokumpu's Q4 release and review also of 2021, year 2021. As Linda just said, 2021 was really a remarkable year for Outokumpu. It was a big rebound from the COVID bottom in summer of 2020, and overall, I think we performed across all businesses really well. If I look at the company, I think across many areas of the business, our performance was really excellent. Of course, we had operational challenges throughout the year. There was COVID, of course. We had supply chain challenges, raw material questions, volatility in the markets, but overall, the direction of the business was upward and in the right direction. You will also hear today some data on our safety performance.
I wanna always mention that because I do feel that we are in this industry, we're definitely one of the best in the steel industry regarding safety and you will see very soon data on how extraordinarily good our performance was. But let me just stop here for a moment on this photo, which I found. This is a photo from our Calvert plant in Alabama, and I think the sort of spirit of this photo in some ways sort of, you know, resembles the spirit within Outokumpu, a spirit of working together, you know, locally, globally, a spirit of trying to get things done and a spirit of increasing confidence in the company, where it is, and where it is going. I leave you with that thought.
We so often talk about numbers, and we talk less about people, and ultimately, in any business, Outokumpu, of course, it's all about people and how passionate they are about the company. We had an annual employee engagement survey in Q4, and the results of that employee engagement survey indicated or confirmed that the Outokumpu staff is committed to the direction of the company and are passionate about where we're going. That also is a good sort of basis for developing the company further. Let's go to the numbers, the traditional numbers, and maybe we just stop here for a second. Obviously, adjusted EBITDA reaching over EUR 1 billion, now that is a big number.
If we look at the historical past, in 2017, our best year, after the merger of Inoxum was EUR 631 million, so we almost made EUR 400 million more of EBITDA. It's obviously a huge result compared to, of course, the performance of the past. For me, what one billion means is that it shows that in a good market condition, Outokumpu has the potential to really perform. When our mills are running full, we get good utilization, and everything is running really well. This company can really generate a lot of value for the company, for the shareholders, and for our stakeholders overall. If we look at overall where we are today, the strategy execution is ahead of plan.
I'm really happy about that, and we'll come back to that with Pia to discuss the status of it, but overall strategy is going very well, and the company is moving in the right direction. We've also launched our climate change strategy, and we've committed to the 1.5 degrees climate target, and in that respect, we're also at the vanguard of trying to battle climate change. On the strategy side, you recall this chart from previous presentations. Our strategy has three phases. We're currently in phase number one. The time period is years 21 and 22, and now we're in the second year. Basically what we can see already now is that we are making excellent progress towards reaching the goals set.
In many areas, we've actually already started to exceed those goals, of course net debt-to-EBITDA being one of them, where we are already beyond what we aim to achieve. Therefore, we are now starting in a small team working together with Pia and some colleagues to think about what we are going to be doing in phase two. With this progress, of course, that now that we're having, I think it's a good time to start thinking about what we do then when phase two happens. Of course, it is good that we will be able to think about phase two from a much stronger position with the balance sheet of the company already being so much de-risked.
As part of the strategy execution of the company, we of course are trying to achieve sustainable improvements, things that will last, you know, beyond the current time period. We have changed many things within the company, how we're working. Many of our processes have changed. We've brought in new competencies into the company. We've put much more discipline. You'll, for example, see from capital allocation that we're very disciplined in terms of how we deploy capital and try and be very consistent and systematic in our approach. Looking at sustainability and ESG, here are two important statistics. I already talked about the safety piece.
If you look at the upper right-hand corner of the chart, you can see that our total recordable injury frequency rate hit 2.0, which is really a strong performance for the company, especially in a year when we had so many things going on. With production being so high and all the plants, you know, being really struggling to get all the volume out, making sure that our safety was so good is something I'm extremely proud about as the CEO of Outokumpu. On the lower right-hand side, you have information on our recycled materials usage. We, of course, strive to also battle climate change by having our recycled rates being as high as possible.
Last year, we were able to achieve a level of 90% in the midst of many supply chain challenges that we faced during the COVID times. In May of last year, we announced our ESG strategy for the coming years, and as part of that, we made a very bold commitment that we will be the. Well, I guess we're the one and only company in the global steel industry that has committed to SBTI's 1.5 degrees climate reduction, climate change target. In December of last year, SBTI has formally now confirmed, approved of our targets.
As you can see from this chart, our intention is that by 2030, we will reduce our emissions, measured in terms of CO2 per ton of crude stainless steel from about 1.78, where it is currently, to close to one, and that is a 30% reduction. I wanna underline that when we talk about emissions and emission reduction, we talk about Scope one, Scope two, and we also talk about Scope three. So it is important not only to look at, you know. You have to look at the whole value chain, and you have to also consider Scope three. We will be talking about also that topic in the future presentations as we go forward.
On sustainability, as part of being on the vanguard of ESG, we also want to strive to be a responsible buyer of different types of raw materials. As we've said, we are committed to the UN guiding principles on human rights and try to develop the way we operate in the company so that everything would be going very well. Last year, we were reminded in the case of Brazil that we need to do even deeper analysis of our suppliers. We have currently approximately 20 suppliers in what we call high-risk countries. Basically, now that we have completed the work on Brazil, we are going to extend the work and analysis now into Guatemala, which is the next country we're going to do a deep dive on.
After Guatemala, we're going to continue gradually working through these areas of high risk to make sure that everything on the procurement side would go well. Now moving from ESG, talking a bit about markets. As I mentioned already before, the summer of 2020 was really a period when we were really at the bottom of. We had really the bottom price level, the lowest pretty much in terms of the whole decade. From there, prices have gradually rebounded, as you can see from the chart on the left-hand side at the bottom. Maybe one thing to point out, if you look at the fourth quarter of 2021, is that the green bar or the green line, which shows China, you can see now that the bar the line charts are starting to diverge from each other.
Chinese prices starting to decline somewhat, and then the other prices somewhat rising. That divergence clearly started to grow towards the end of the fourth quarter. On the upper right-hand side, you see nickel. We've now been in a rising trend for almost, I would say, eight quarters. If you look at last year, although the picture doesn't really show it, we had a very, very volatile nickel market and nickel prices then finally starting to hit the upper 20,000-$23,000 band. On the lower right-hand side, ferrochrome. Of course, if you look at ferrochrome prices historically, at the period we're now going through in 2021, we've now had three quarters where the price level has been elevated. Going back to, let's say, 2016, 2017, we had one spike when ferrochrome prices went up.
I think they were about one quarter at that level. Now we've had about three quarters where ferrochrome prices have been, you know, higher than trend. Really looking at the full year results, 2020, we did 250 million EBITDA, adjusted EBITDA. Last year, EUR 1,021 million. Clearly, we benefited from strong market. Our deliveries increased by 13%, as you can see from the third bar. Realized prices for stainless steel also increased, obviously a result of the very, very strong recovery. The fourth last bar on the right-hand side, you can see costs, the little box in red. Clearly, we started to see inflation pressures, but we were able, through our own measures, to sort of, you know, push back and really contain the cost inflation.
At the end of the fourth quarter, we did start to see pressure from electricity prices, and also ferrosilicon and some other items. Overall, on net-net basis for the full year, I think we did quite well in terms of managing cost inflation. The last chart I wanna show, really the fourth quarter from 295- 326. At 326, this is the best Q4 in the history of what I would call the new Outokumpu since the merger. It's a strong number. As you can see from the left-hand side, we've now had five quarters consecutively where our results quarter by quarter have been rising, and I said 326, best figure so far as a quarter result in Q4.
With those, I think very positive figures, I'd very much like to hand over to Pia Aaltonen-Forsell to go even deeper. Please, Pia Aaltonen-Forsell.
Thank you, Heikki. Good afternoon and good morning, ladies and gentlemen. I'm gonna start with a few words about the accelerated de-risking. Obviously, from my perspective also really looking at the balance sheet here, I think we have been able to capture the full benefit, and some more from the improved market situation. Why I'm saying that, of course, first of all, we've also had a number of actions, and secondly, when we have had good results of those actions, we have really turned that into reduction of debt. First, we had the equity issuance, that was quite early during the spring of 2021, and obviously that was the first really good step in taking the debt down.
All of the proceeds from that equity issuance went to the reduction of the debt. The same goes then for the improved cash flow later in the year. It was possible because when we had improved cash flow from operations, we were then extremely diligent. We kept the discipline on the CapEx at 175 million, and also we only invested modestly in the working capital to support the business through the year. Clearly, we were really able to push a lot of the funds and proceeds then into the debt reductions. There's one more point that is being mentioned on this page, and that was something that we reported on in December, and it's another type of de-risking item. Obviously, we have some defined benefit plans. The one in U.K. is the one we are talking about here now.
We managed to get to a 390 million insurance solution or a buy-in solution in good cooperation, obviously, with our trustee. Here, the really good news is that I think this is both de-risking in terms of the company, in terms of future obligations, but also it is the right thing to do vis-à-vis our personnel who have now received an insurance solution. All in all, I think we are well on our way to reposition the company as a less risky investment. On the following page, I have a few KPIs, and I think I really wanna highlight and mention that on the back of the adjusted EBITDA being over one billion, you can see that we have also translated that into a very high net result figure of more than EUR 500 million for the year.
You also see that the earnings per share for the year are at EUR 1.26. Obviously, that is a record figure and a very good performance per se. I will talk about the debt levels later, let me just finally comment from this page that also the Return on Capital Employed has now reached 18.8%, which I also consider a good performance in this situation. Heikki also talked a bit about the strategy execution, let me talk through a few details on that. First of all, I wanna say, I mean, this is truly a team effort, and I think Heikki already alluded to that.
I think just about one week back, we were on a call where more than 600 people contributing to these various projects were participating. We were celebrating some of the successes. I think it also shows how we are changing the way how we are working. We are integrating these new ways of working into the DNA of the company. What you see here is, first of all, the quarterly improvements, how these improvements have been built through the quarters. When we here talk about the impact of EUR 198 million, what we mean is that we have taken a number of projects to something that in maybe a little bit of of sort of internal lingo is called level four.
What it means is that these projects are in a phase where all actions have been executed, so we are ready to harvest the benefits. This 198 million is then the annualized benefits that we will see. We have seen already some in our P&L, and then what we will see going forward. You also remember that we were hiking up the target here because these actions, I mean this is clearly moving forward like a train, and we have a really solid pipeline also for ensuring the 250 million of improvements that we have promised in the hike target that we announced after Q3. A few words about the BAs, and I will focus particularly here on BA Europe and BA Americas, I think for good reasons as well.
On BA Europe, I wanna start with a few comments around how we see the market situation right now. I think first and foremost, we do see the markets, particularly when we talk to our end users, you know, market situation and demand remains very solid across all of the segments. I know we have been talking about our longer lead times for a time period right now, but I just wanna keep on reiterating that. I mean, we still have long lead times. They are more than six months. We have booked Q1, we have booked Q2, we are clearly booking into Q3, even with some orders being booked even later or towards the end of the year. Clearly, this is all testament to still a very strong market situation.
Distributor inventories is something we keep a close eye on, and I know you do too. Maybe first just sort of looking at the stats that we still have available, we know that inventories are still below those historical average levels. Something that we have seen in the markets, particularly sort of late in Q4 and also now into Q1, is that the level of imports is somewhat increasing. I think what we talked about in the reports is then also clearly you know, the congestion that there has been in the harbors and maybe also a little bit of a catch-up effect here.
Somewhat higher imports, and overall, I think that also leads that the distributor segment is a little bit sort of watching and seeing and observing what is happening right in the markets right now. Overall, still, we have these distributor inventories below historical average levels. Maybe then, I'll move a little bit to the cost side. I do think Heikki already shared really sort of the key topics also for BA Europe when it comes to costs in the fourth quarter in particular. I mean, we did see this spike in electricity prices really towards the end of the year, particularly in December.
I think all in all now, when we have all data available, we can see that from Q3 into Q4 on the stainless side altogether, so there are a little bit of impacts also outside BA Europe, but of course, predominantly BA Europe. We have about 15 million of increase from the electricity and energy side, but it's really predominantly electricity. Then ferrosilicon was also mentioned. Then I think you may, of course, ask that how is this continuing, and you have seen that, you know, forward prices on electricity have perhaps somewhat come down by now. But it's still clear, you know, as we see the situation right now, there is still gonna be a step up in the costs from Q4 to Q1. Maybe that can be around EUR 20 million. I think that still remains to be seen.
I mean, this market has been really volatile. Then really going forward further in the year, maybe this is then sort of showing at least the forward curves at the moment, let's say some calming down, but of course remains to be seen. Finally, a word on the COVID situation, and I think that's also relevant in terms of the guidance that was part of the report. Maybe I'll just start by giving an example from you know, how we see these cases developing. Somewhere around Christmastime, I mean, when we were looking at the reports, there was really out of our 9,000 employees, I mean, there were like a handful of persons who were on sick leave or being quarantined.
What we really saw during January was a spike, really an increase in the number of people who were infected or quarantined, maybe because someone in their family had been exposed or they had been exposed. I mean, we definitely have sites where there is 10% of people being absent, in some cases, you know, even spiking towards 20%. Those are quite high absenteeism figures, and this just means that, you know, to run the operations has been more challenging right now. Until today, we have managed this without losing production. Hey, there's still, you know, seven weeks to go in the quarter or even a little bit more, so this is something we really keep an eye on.
Perhaps we are now in a situation where COVID has spiked, maybe these are the highest levels, or maybe this is in February that we will experience them. But clearly this is something we need to prudently look at. The same then obviously also goes for our supply chain. I move on to BA Americas. I think obviously, I mean, such a record result puts a smile on my face for sure. Such a solid execution also by the team, so really a great pleasure to talk about this record result. I mean, EBITDA adjusted on BA Americas level, 297 million for the year. First of all, maybe just reiterating a bit on the market situation here, I mean, demand still continues on a strong level.
The same comment then here also about somewhat higher level of imports. I mean, congestion in harbors sort of easing up and then sort of all of a sudden, somewhat higher inflows. Is this temporary? Is this not? I mean, time will tell. Time will tell for sure. Overall, good demand situation. Distributor inventories in cold rolled slightly increased towards really the end of the year, but still remained on lower levels than historical average. Maybe from the booking situation, as you remember, sort of typically for BA Americas, we are looking like one quarter ahead, so at the moment then looking into bookings in April.
Maybe there is still one bit technical comment around 2021. I still want to make it, timing and hedging, or I think as we officially say, raw material related inventory and metal derivative gains, was a quite significant positive for the full year. It was EUR 55 million out of around 70 for the full group. So quite significant part here from Business Area Americas. All in all, I mean, volumes were up in the year by 26%, so I wanna say it was a super effort from the team also, I mean, to execute on this and to enable this high result. So very pleased with that for sure. I'll be a bit briefer here on Business Area Ferrochrome.
I mean, obviously still a very strong result also, EUR 246 million for the year, breaking new records here, a little bit higher production. Then obviously we could talk a lot about the price situation and the price level, but maybe I'll just shortly mention that obviously price is here set very much by the sort of demand supply balance. Demand has still been on a high level. On the supply side, there has really been variation in how much supply there has been, for example, from China. It was still quite restricted early in the fourth quarter, and then we started to see more towards the end, that led to somewhat lower spot prices. But now spot prices have been stable for some weeks.
All in all, I mean, the big theme for 2022 for Ferrochrome will be the finalization of the Deep Mine investment, also an important strategic project for us that's expected to be finalized by really the end of the year. Finally, I mean, we do have a very cost competitive operation, and we also have a very low carbon emission footprint here. Clearly, we are also here looking forward to the year 2022. Long Products, great success on the turnaround, but if I may choose to highlight one more detail, we don't normally talk about safety performance per BA, but I still wanna say it's been such an amazing turnaround also from safety performance perspective in BA Long Products. There were no LTIs during the year, so excellent performance.
You also see the EBITDA here, adjusted EBITDA up to 47 million for the year. We have the cash flow next. I'll briefly comment first on this page to say it's clear that a big part of the improved cash flow really comes from the improved profitability. We have remained diligent on the CapEx, you see it here, EUR 175 million, and also had modest investments into working capital. In the fourth quarter, especially, when we look at the overall working capital, we managed to turn it a little bit on the positive side, and I think there was a lot of work sort of late in the year to make sure we had all the inflows we were counting on. In the end, I would say this was a nice, good positive figure for the quarter.
You see this stronger cash flow here in the net debt. You see us ending up at 408 million from a level of over one billion or 1,028 million end of 2020. You also see on the chart on the right-hand side, I mean, we set the target to be below three times. We are now at 0.4 times. I mean, clearly ahead of the target, accelerated de-risking. We actually also now have reached that debt level that I think Heikki and I talked about in some earlier webcast saying that, yeah, we probably would be comfortable at this level of, you know, 400 million-500 million of debt.
Maybe just to make it really clear, we are still in the phase one of the strategy execution. In such a good market situation, I also think it's really good to build some buffers, you know, keep some firepower for the future. You know, we are still ready to further reduce the debt with that in mind. Finally, a more technical comment on our debt portfolio. You can see, there was quite a few actions, a very busy year in 2021. Now looking at the improved credit rating, looking at, you know, the balanced debt portfolio that we have, I will say we are well-positioned also to consider future steps, whether it's refinancing, for the future. We are clearly still focused on reducing our interest expenses.
My final slide is a short note still on sustainability related topics. I wanted to answer to a question that I really often get, especially in Europe, of course, a big topic is the amount of emission allowances, what are our free allowances, what's the balance of those. We have also been quite actively describing our sustainability targets and our agenda there, also towards the year 2030. With the plans that we have discussed, with the actions that we have discussed, we really aim to ensure sufficient carbon allowances until the end of this decade. For that plan to be realized, we need about EUR 300 million of CapEx in total up until 2030.
That is sort of the balance of things to work with. Then, of course, given the fact that we are really emphasizing and working towards much lower carbon emissions, we do think that all of the questions, whether it's around the Carbon Border Adjustment Mechanism or whether it's around other measures to ensure a level playing field for the low carbon production that we have here in Europe and of course also with the same technology in the Americas. You know, we will continue to emphasize that as an important factor of building a sustainable future. With that said, thanks, and back to Heikki.
Pia, thank you very much for those remarks. Let's go to the final section. Again, it's really based on the information just heard. I think this picture also gives a bit of the sentiment in the company. Outokumpu is really confidently heading towards 2022. The board of directors have had their meeting, and they are proposing a dividend of 0.15 per share for the year 2021, and that will be presented to the AGM for approval. Paying dividend after a number of years when we were not able to pay dividend is of course a very important thing. We value our shareholders, and I personally feel that I'm very happy that the board of directors is able to make this decision or proposal and therefore we can then hopefully pay that.
15 euro cents amounts to EUR 68 million in total dividend payments when it gets paid. Let's move to the final slide, the outlook for the first quarter of 2022. Group stainless steel deliveries in the first quarter are expected to increase compared to the fourth quarter. The European ferrochrome benchmark price remains stable at $180 per pound for the first quarter. Higher stainless steel prices are reflected in the already received orders and more than offset the increase in energy and consumable prices. COVID-19 remains a risk and could potentially impact operations and logistics. Adjusted EBITDA in the first quarter of 2022 is expected to be on a similar or higher level compared to the fourth quarter. Ladies and gentlemen, these are the slides we wanted to show you and now look forward to your questions.
Thank you very much.
Please, operator, we are ready to take questions.
Thank you. Ladies and gentlemen, if you do have a question for the speakers, please press 01 on your telephone keypad now. If you wish to withdraw your question, you may do so by pressing 02 to cancel. Our first question comes from the line of Luke Nelson from J.P. Morgan . Please go ahead. Your line is now open.
Thank you. Thanks for taking the questions. Two questions from me. Firstly, just on the guidance for EBITDA flat to higher. If I just think about the other comments you made of pricing offsetting cost inflation, which means margin expansion and shipments are higher quarter on quarter. Surely that means absolute EBITDA increases for stainless. We know what the ferrochrome price is. It's been rolled into Q1. I'm just trying to square those individual building blocks with the comment, with the bottom end of the guidance range for flat. Can you maybe just outline what scenarios or other factors could get us to a situation where EBITDA is flat quarter on quarter? For example, anything such as maintenance, inventory, hedging, revaluations, or anything that we should be factoring in? Thanks. That's my first question.
Yes. Luke, thank you very much. I think it's an excellent question. First of all, I think the risks that we have really highlighted relate to operational or logistic related challenges. I mean, what that really translates into is then some lost production, some lost deliveries, and obviously, with the margin levels, I mean, those are relevant to consider. I think what I would maybe specifically say there is we have not lost production to date, but there still remains time in the quarter, and especially if we get some sort of logistic chain challenges, I mean, those could honestly still sort of the last week or the last weeks be impacting.
You know, it's then more of sort of a shift from quarter to quarter, but it could of course impact a particular sort of quarter performance. So maybe that's sort of the key message from my side. I could comment on the sort of timing and hedging side. I mean, obviously, yes, indeed. I mean, metal prices have really been varying, particularly nickel, again, sort of huge daily movements. But I think, you know, our estimates were made at levels fairly close to those that we see today. I wouldn't be seeing any significant timing or hedging kind of based on where we are right now. I mean, obviously that could change, but that's not sort of a key topic at all here.
That's maybe more of a sort of side comment. Maintenance, you know, pretty much the same level as in Q4. I mean, this is not a big maintenance quarter. There's maybe some smaller work done, but no really significant there. I mean, it's really striking the balance between if we look at those key underlying business performance sort of typical impacts, you know, whether it's higher volume, you know, from our order intake, we know the prices are higher. We know costs are increasing, but, you know, the price increases are still more than offsetting that. It is really the COVID-related risks, and I hope I was just able to illustrate what that means.
It's really the first time that we see these sort of true spikes with really so high amounts of people being taken off duty, so to say, at the same time.
Okay, great. Thank you for clarifying that. My second question is just circling back on your comments on cost inflation, power, natural gas, ferrosilicon. I think you mentioned EUR 20 million quarter on quarter impact Q1 versus Q4. Can you just clarify, is that firstly, is that at the group level or is that just in BA Europe? And then secondly, does that relate to power, natural gas and ferrosilicon or just power? And then I suppose any additional comments on ferrochrome because the costs quarter on quarter were quite a step change higher as well in Q4.
Indeed. Thanks very much. That 20 million comment, I mean, this is very much a European question. I mean, we haven't seen the same spikes at all in energy prices in America. I mean, this is really very much a sort of European question. When I talked about the 20 million increase, you know, from Q4 into Q1, I mean, obviously, that's sort of a, that's still at this point an estimate, to the best of, you know, what we know today. It's an estimate that is relevant for electricity and it's not including ferrosilicon. To add to your question, there might still be some inflationary pressure as well in ferrochrome. Both from electricity and energy consumption side.
I said I wanted to mention that 20 million just to still give an order of magnitude that there could still be a step up. I mean, obviously when you have seen the spikes in the electricity price, it's maybe not a surprise even though we are hedged by our policy. I mean, we only have sort of a top layer where we are exposed.
Okay. Just I suppose in the Q4 numbers, it looked like Europe, the cost increase was sort of around EUR 30 million quarter-over-quarter, and I think prior guidance was 10 for power, 10 for natural gas. Can I take from that ferro, ferrosilicon was an additional EUR 10 million cost along with some other sort of broader inflationary pressures? Is that roughly how we should be thinking of the split in Europe in Q4?
Yeah, I think it's fair to say that the ferrosilicon is about the same magnitude as the energy in total. About. I mean, here we haven't, you know, maybe it's kind of getting into too much detail, but the ferrosilicon increase has been significant in Europe as well.
Okay. Thank you.
Our next question comes from the line of Tristan Gresser from BNP Paribas. Please go ahead. Your line is now open.
Yes. Hi. Thank you for taking my questions. The first one, can you talk a little bit about the import situation in Europe? I mean, you mentioned it, we've seen volume surging of late. The import spread between European and Asian prices is at record high. How has this upward trend impacted your business, if at all for now? Do you view this price differential by region as sustainable?
Maybe I take on that question. Clearly, I mean, we've seen the Asian market being very strong in 2021, and we've seen very high freight rates from Asia to Europe, which of course has put sort of a bit of a damper in terms of imports into the European market. I think we've probably seen sort of two phenomena. One is that, you know, there have been supply chain or port bottlenecks and some of that volume just started to compress and sort of, you know, pile up into the fourth quarter. I recall that in November for example, we did see a clear sort of pick-up in October, November, a clear pickup in imports. I think part of that might have been just sort of, you know, clogging in the supply chain.
As we saw from the chart, the price difference between Europe and Asia has started to increase. We do have quotas in place which, you know, to some degree set a certain type of a, sort of a threshold on the volume that can come into this market. I think more recently we have also seen volumes from certain countries where they have actually now exceeded also the quota and therefore the customers of course then will pay also the duty, which could be, you know, in excess of 20%. I think that in some ways also shows that the market demand in Europe is still fairly strong and there is a need for those imports.
At the moment I would say that imports are rising, but we haven't sort of seen any I think material shift yet in the dynamics. Let's see what the rest of the year then entails.
All right. That's helpful. Thank you. My second question is still on the European stainless market. You mentioned the distributors might be a bit taking a step back. When you look at your end markets and end customer, is there also a bit of resistance regarding the level of stainless prices where they are? Are you also seeing maybe end customer taking a step back given market conditions?
I think one could sort of, you know, divide the market simply into three areas. This is a very simplistic thinking approach, but anyway, if we look at end users, you have, I would say more end users targeting consumers. Then you have end users which are targeting industrial investments, heavy investments in oil and gas, et cetera. Then we have the distributor market. As far as the end users are concerned, what they are reporting to us across, I would say the whole sector to a large degree is fairly good demand, fairly good sort of, you know, confidence about demand for the market this year. Overall I think things are fairly stable. I think where we've seen different, you know, variation, as pointed out earlier, is distributors.
You have to remember that distributors are also traders and they are also, of course, very cautious in terms of what type of risk they take, when they pile on inventory. Hard to say, whether, you know, there might be some reticence at the moment from distributors. They wanna take a bit of a wait and see what happens. What will happen next, I really cannot project. As I said, end user demand looks good, and it looks stable at the moment.
All right. Thank you very much.
Thank you. Our next question comes from the line of Antti Koskivuori from Danske Bank. Please go ahead. Your line is now open.
Yes, thank you. So two questions from my side. First, on divisional profitability. I mean, if we look at EBITDA per ton, in Americas grew by almost 200 EUR per ton now in Q4 versus Q3, while in Europe it was only up 10 EUR per ton. I mean, you talk a little bit about the energy side and the cost side in general in Europe. But could you talk us a little bit through the deviation between the two divisions now in Q4? It would be very interesting to hear if you see some structural reasons why we should not anticipate Europe to catch up in coming quarters.
The second question may be a little bit related to this, but as you described many times, the order books are now quite long in Europe. How should we think about the increases in your average sales price now in Q1 and Q2, which are, you know, fully booked more or less? Is it should we anticipate kind of a linear increase, or is the contract structure with fairly high degree of annual contracts will that kind of tilt it more towards, you know, Q1 rather than being linear? If you could talk us through that as well.
Yes.
Thank you.
Antti, thanks very much, and maybe actually the sales price is the one that I could just give sort of more of a mathematical answer to. I mean, I'm happy to sort of look backwards into already received orders and sort of consider how they would realize then according to the invoicing date. I think you are right that there is a certain sort of step up in Q1 because there's a lot of annual or six months, but I mean, typically annual contracts that would come into force then. I mean that, you know, normally that pattern should be there every year, but there is really sort of a certain step up happening this year.
Therefore, I would not sort of make the linear, you know, kind of continuing, into Q2. Obviously if we just look backward, we know that we have still been pricing in a price environment where prices have kept increasing. I think, you know, that's still what we know, based on history. Then maybe onto your question about the divisional comparison, I think that's a really interesting question to answer. Let me first frame it through the more sort of inflationary pressure. I think even though, you know, when you read macro level news, it's clear that inflation is really being debated a lot, particularly in Americas right now.
If I look at our figures, what I see is that yes, indeed, we were hit by some cost pressure, for example, freights, logistics and similar items actually already in Q2. Some part of this, you know, we kind of absorbed a little bit earlier in the year. Particularly when we look into the later part of the year, the pressure started to come more into the European side. Not to some sort of broad, you know, absolutely everything increasing because we were still pretty well protected by either longer term contracts or our own actions. Really in these particular categories of ferrosilicon and of energy, where really electricity and natural gas were the two categories. These were really sort of very prominent in Europe.
I think that sort of explains the cost increase bucket in Europe that was clearly more than in BA Americas. I will still mention that there were also some fixed cost item. I mean, can I just give one example? I mean, we have, for example, a personnel fund in Finland that is paying to employees in a situation where we reach certain profitability thresholds. Luckily, and obviously, we have reached those, so we have had some more accruals into these. There are some fixed cost items that we also kind of kept piling up towards the end of the year. I think that there are particular cost elements that were really more sort of towards the European operation.
You can obviously sort of look at prices, realized prices increasing, in both of the BAs. I'll still mention one more topic that is relevant in the context to consider for margins, and that is that we have seen this incremental increase back to more normal levels of the Pro grades, so the value-added grades in the European operations. We are not yet back to some sort of, you know, levels that we achieved, for example, in 2019. I mean, we are still sort of creeping back up. We do see a lot of order intake right now. I mean, this is clearly something where this investment cycle is sort of kicking in, but we are not quite there yet.
When you then ask sort of about the margin development going forward, I wanna be a little bit cautious because who knows the price for electricity next summer or the price for ferrosilicon. But obviously, at least on electricity, we can look at the forward curves. They seem to be sort of normalizing a little bit. Maybe that's all I dare to say sort of about the future development.
All right, thank you.
Thanks, Antti.
Our next question comes from the line of Carsten Riek from Credit Suisse. Please go ahead. Your line is now open.
Thank you very much. Two questions from my side. The first one is on the dividend. Looking at your balance sheet, you could have been able to pay a higher dividend than the EUR 0.50 you suggested now. What caused you to go more cautious, here? Yeah, if you could just give us the thinking behind the EUR 0.50, and if the year shapes up, reasonably well, is there upside risk to the dividend offering going forward? That's the first one.
Well, let me address that question. You may need to rephrase the second part again, but in terms of the dividend consideration, the 0.15, so obviously, you know, we haven't paid dividend for quite a number of years. It's great that we can restart that. Pia mentioned the fact that we are still looking to further solidify the balance sheet, build, you know, more solidity, maybe firepower, I think is the word you used. I think from the board's standpoint, it was more about, you know, let's get the dividend payment going, EUR 68 million, but at the same time still reserve, you know, funds to further strengthen the balance sheet. There was this, you know, de-risking philosophy still, I think, as a backdrop in the minds of the board.
Now, could you please reframe, rephrase the second part of your question? I didn't quite get that.
Yeah. At least if I've been looking at the earnings level, even what you guide for the first quarter, it looks like it's shaping at least up quite nicely. Would there be upside risk to that dividend offering for next year for the shareholders, or is it way too early to say?
I think it's way too early to say.
Okay. I guess so. The second question is on the net working capital. We have seen quite a bit of a relief in the fourth quarter, not because of the inventories, but rather because of the payables and receivables. Do you expect that effect to reverse in the first quarter? On a different one, what do you expect for the inventory build or not? Could inventory help here or not in the first quarter?
Carsten, thanks very much. First, I would say it is really sort of a typical seasonality to have a little bit higher inventories end of Q4 to be just ready for we simply don't even have enough capacity to deliver everything that is typically required in the first quarter. With that said, what we would then start to see is a gradual decrease in the tons of inventories towards the end of Q3. That typically is the lowest point, and then we build up a little bit again in Q4. With that said, I think I don't expect it to significantly decrease in terms of inventory tons by end of Q1, but will then really start to decrease, you know, during the second quarter.
As to your question, whether that will reverse, you know, the sort of better flows that we had from the AR/AP balance, I don't think it will reverse, but I would still remind that, you know, when we go into higher volumes, higher prices, I mean, we are in a quarter where we typically build up some working capital, really just on the balance of sort of how kind of things are shaping up during the quarter. With that said, not reversed, but still Q1 is typically a quarter where we are building up working capital.
Perfect. That helps. Thank you very much, Pia.
Thanks.
Our next question comes from the line of Patrick Mann from Bank of America. Please go ahead. Your line is now open.
Good day, and thank you very much for taking my question. Two please. Your phase one of your strategy in de-risking the business, I mean, it looks like you're obviously making very good progress on that front. I think you mentioned that you've started some early work groups just on looking into phase two and what that could look like. Could you just give us some idea of what are the priority areas you're looking into phase two, and when we can hear some more around what actions you're gonna take? The second question is, you know, just on decarbonization, you're obviously already pretty low compared to industry, and we've seen a lot of plans being announced by carbon steel around what they're doing.
I mean, can you give us a bit more detail around the specific project you can implement to lower your CO2 emissions even further? Thank you very much.
Right. Maybe if I comment that. Indeed, on phase number 1 of the strategy, we are making good progress, of which of course we're very pleased about. This is a large, you know, organization that's trying to change. In terms of the priorities for phase number two, I go back to what we said when we launched the strategy in November of 2020. What we did say at that stage is that once we have de-risked the balance sheet, we are going to start investing in our business, in our core, in the core of the business, looking to de-bottleneck, trying to sort of open up, free up, reduce costs in sharp focus and further simplify the process. We still have IT investments we have to do.
Our supply chain needs even more capital to get it even more digitalized, so these are some of the areas. Of course, sustainability and emission reduction is another area, which we'll use. We will need money for that. The journey to minus 30% in CO2 will, of course, require capital like Pia said, but of course, that will be then spread out over the decade. In terms of the details of phase two, I really don't want and I cannot really open that up more, but you should not sort of expect any massive big investments or things like that. That is not the intention of phase number two, per se.
Now, in terms of decarbonization, what we have said here in the past is that one of the areas, of course, if you look at where the emissions stem from, so of course our ferrochrome operations, the operations in Finland are an important part or an important source of emissions. One area we're looking at specifically is biocoke, looking at biomaterials, biocoke as an alternative to find ways to further reduce emissions. I said we will come back to these ideas when they are mature. As far as when in 2021 we will announce the phase one, I cannot really commit to that either. Let us...
Give us some time here to prepare our plan and when we feel we have a good plan that really holds water, we will then rush out and present it to you without any delay.
Heikki, may I still add on the decarbonization, just to say that obviously out of our Scope one emissions, Heikki already talked about the coke and the opportunities there. However, if we look at our overall emissions, obviously Scope two and particularly Scope three are really significant. We have already talked about sustainable sourcing and knowing our supply chain, but obviously it is also a big question on how we can work with our partners to ensure also really sort of low carbon partnerships. Maybe some examples there of we have recently published when it comes to electricity. We have several long-term contracts on wind power, but of course, that could also then be more broadly into, for example, raw material sourcing.
Thank you. Thank you very much.
Our next question comes from the line of Alan Spence from Jefferies. Please go ahead. Your line is now open.
Good afternoon, Heikki and Pia. Just two left from me. The first one on ferrochrome. You highlighted the big divergence between the European benchmark and Chinese spot prices. Heikki, interested in your view on how sustainable or not sustainable you believe that premium may be?
Well, I think the Chinese market, of course, as far as we understand, we obviously don't operate there actively ourselves, but, you know, two things come into play. One, of course, is what is the demand inherently in China. You know, there have been some views that maybe the Olympics and preparation to the Olympics did cause sort of a slowdown in overall industrial production. We've seen, you know, cutbacks in electricity power in China, in Mongolia, and of course, that has maybe softened the market, at least for some time. Now, it remains to be seen what happens when the Olympics are over, when industrial activity, you know, really restarts in China. Will that sort of change the dynamics?
As far as we can tell, that is probably the one sort of driver that may explain the movement in China in Q4.
Thank you. The second one, in Finland, the paper and packaging industry has recently been faced by some strikes with the unions. Can you just remind us of your contracts with the unions, last time they were negotiated and when they go until?
Basically, Outokumpu and our peer companies in the steel industry belong to the Technology Industries of Finland. We have actually completed our negotiations with the, let's say, blue collar workers, and that contract is now in place. The salary increases have been agreed upon, and we have a contract, you know, valid into 2023. As far as that is concerned, you know, that risk, if we wanna call it a risk, is sort of, you know, gone away. The one sort of thing in Finland which may pop up, of course, relates to logistics and specifically, you know, harbor employees.
The freight side, let's say the longshoremen from time to time have had strikes in Finland. Will that sort of materialize this year remains to be seen, but that might be one thing to follow.
Okay. That's really helpful. Thank you.
Outokumpu is sort of not a party in that contract, so that would be a separate. We are kind of we're not a direct party in those negotiations.
Thank you.
Our next question comes from the line of Krishan Agarwal from Citigroup. Please go ahead. Your line is now open.
Hi, thanks a lot for taking my question. Most of them have been asked by the fellow analysts, a couple of them remaining. On the ferrochrome, I was wondering if Pia can discuss those sensitivities, if there is any update to that, given in the context that the increase in ferrochrome EBITDA in Q4 has been actually lower than most people expected, despite a sharp increase in the benchmark contract prices.
Yes. Thank you very much. Indeed, I think our sort of typical sensitivity has been, you know, the 10-cent delta and the 10 million EBITDA impact per the quarter. However, before the fourth quarter, I tried to give a little bit of a word of warning there that with some of the sort of cost pressure, it would mean that even with that type of, you know, cost difference, probably the EBITDA impact would be smaller on the positive side. That was a bit sort of the setting in a fairly, you know, cost-pressurized environment, particularly on the electricity costs that we saw in the fourth quarter.
Obviously a bit sort of depending on that, kind of how pressurized, you know, the situation will be on inflation going forward. I'm sure we will have reason to come back and clarify. Obviously right now with a sort of stable outlook on the benchmark price, not so much to add exactly right now. We will probably reiterate this for our next report just to check the inflationary pressure and then the overall situation with the sensitivity.
Okay. Understood. Very clear. I think there has been a lot of mention about the, you know, exposure to freight rates, being a key reason for cautious guidance and also the cost inflation. Is there any way you can help us quantify the overall freight bills, maybe for the quarter or the annual just to give us a better sense as in how sensitive the earnings can be from the freight rates point of view?
Right. Thank you very much for that question. Now unfortunately I don't have top of mind that figure to give to you, but I wanna say it's really around freight availability. It's really then around, sort of, you know, deliveries that we, you know, possibly, you know. The risk is that there are deliveries that we are not able really to deliver all the way to customer, because, you know, maybe the truck drivers also have COVID or are not available, et cetera. It's not so much the cost.
Yeah.
It's really not the cost. It's the availability. Therefore it's really relevant to what sort of margins we do with our products and, you know, whether we lose, you know, 10 kilotons, 15 kilotons because of some disruption in the logistics chain.
Yeah. Yeah. Pretty clear. Finally, how much of the CapEx you guys are planning to spend this year?
Our plan is still at 180 million.
Okay. Thanks a lot. That's it from my side.
Thank you.
Our next question comes from the line of Bastian Synagowitz from Deutsche Bank. Please go ahead. Your line is now open.
Yeah. Thanks. Good afternoon, and thanks for taking my questions as well. I just wanted to follow up briefly on capital allocation. I think you said earlier that you aim to update on shareholder returns and capital allocation around the second quarter, and I guess now you obviously announced the dividend already. By the second quarter, you could be easily debt-free. I'm wondering, are you still planning to give an update around mid-2022? Then maybe in that context, I saw that you're seeking approval for a buyback of up to 10%, and I'm wondering whether that is a completely new approval or basically a revolver or renewal of an approval which you already had last year.
Thank you, Bastian. Yeah, really good question. So the buyback in there, that's sort of a renewal of a typical text that we have had relating to the AGM. So as such, sort of it's nothing new. I mean, now that we have the board's proposal out there with the dividend proposal, then I don't know if we will really have a new update by Q2. Let's see when we keep working with the strategy. You know, as Heikki said, once we are sort of complete with the package, of course we will really try to give a comprehensive view at that point in time.
Okay. Okay. Thanks for the update. Just, Pia, following up briefly on the maintenance cost side. I guess if I reconcile it correctly, and I really try to keep track of it as good as I can. I think you guided for an increase of 10 million of maintenance cost in Q2 last year, then you basically guided for another 10 million increase in Q3. You said I think Q4 was roughly flat, which basically means maintenance spend and costs have been at a run rate of about 20 million in Q3 and Q4, which is basically above your normal level, which is normal. I think the second half always used to be a little bit more maintenance heavy traditionally.
Now you say Q1 is going to be the same level, which basically means you could drag that maintenance spend into the first quarter. That's actually untypical. I guess usually your maintenance costs would be coming down. You're usually maintenance lighter in the first half. Is there any reason why we're not seeing that relief, or are you just being very conservative here?
Maybe to answer it this way, we have typically tried to express ourselves in some sort of, you know, good chunks, like 10 million, 20 million, you know, something reasonable. Now when just looking at the figures, we didn't sort of quite reach those threshold of reducing that much. You are right, of course, sort of seasonally, you know, Q1 is the quarter to really get, you know, goods out of the door. It's not a big quarter for maintenance at all. Typically we would reduce a little bit the maintenance, but we simply didn't get to that sort of threshold, of, you know, enough of a reduction compared with the previous quarter to talk about it.
Yeah, maybe it's a little bit downward, but it's not significant enough to sort of give, you know, a clear sort of downward statement on.
Okay. Very clear. Okay. Thanks so much, Pia.
Thank you.
Our next question comes from the line of Harri Taittonen from Nordea. Please go ahead. Your line is now open.
Yes, good afternoon. I'll sort of leave it for one question, which may be pushing a bit. I don't know if you want to kind of. You talked about the sort of ESG and the sort of CO2 balance ambitions. If you say that you need EUR 300 million CapEx total up until 2030 to achieve the targets, just wondering, I mean, to what extent would you be able to pay for the CapEx with selling emission rights? Because if you are kind of taking the sort of emissions down during the decade. If you assume current CO2 or the emission rights prices, how much would you be able to cover of that EUR 300 million?
Oh, Harri, that would be an interesting business opportunity. I still think I mean, on the balance of things, I mean, today we have a surplus, but based on our best understanding of the future free allowances, I mean, obviously, as you know, there are still you know, no sort of really straight decisions, especially from 2025 onwards. These are clear estimates from our side. But still, you know, based on our understanding of how the free allowances are decreasing, it's just a matter of fact that companies need to do a lot of efforts and actually investments to be able to keep up with those requirements. When I say that, you know, when we do these projects that we are now aiming to do, we come to a situation where we have enough allowances until the end of the decade.
For me, that also indicates I don't have sort of a huge bank here to sort of take it from. I do agree. I mean, the price level is sort of very intriguing to consider that opportunity, but at the moment, I think we are more sort of looking at balancing the situation.
Sure. Thank you very much.
Thank you, Harri.
Our next question comes from the line of Rochus Brauneiser from Kepler Cheuvreux. Please go ahead. Your line is now open.
Yes. Hi, it's Rochus Brauneiser from Kepler. Few follow-up questions in detail. I think you talked a bit about Europe and Americas, and I think the missing element for me in getting it right or wrong in terms of margin evolution in Europe and Americas was the item on the bridge called other. So I'm not sure that you referenced to that, so I didn't fully understand what was the kind of add-on in the Americas and the kind of downside covered under others, which has not been in your discussion about costs. That would be the first question.
Yeah. Indeed, I mean, those are really, you know. The thing is that it's also always a bridge impact. You know, maybe there was sort of a one-time positive impact of something in the previous quarter, and then once you got into this quarter and there wasn't a positive impact, then you get this negative bridge impact. I think that's a little bit what we are suffering from there. I have to say there was nothing of the sort of order of magnitude as an individual item that it would just pop up to my brain now, and I would be able to share it with you.
There's sort of a number of kind of, you know, maybe it's in Q4, you have some, you know, more sort of closing type of topics, maybe some provisions that need to be increased or decreased, et cetera. Nothing kind of maybe worth a special mention, but if there's something that really comes to our mind, then maybe we'll try to be clearer in our next communication.
Okay. Right. Because, you know, if I compare that with your discussions around cost, these items seem to be even bigger than that. It looks like, you know, it was over 20 million in the U.S. and probably over EUR 10 million in Europe. It's a bit of a deviation for understanding the margin evolution in detail. If there is any color, it would be really appreciated. Other more kind of housekeeping things, can you give us a bit of a flavor on the volume evolution on the Long Products side? I think typically the reason in your business is that you have the weakest point in the year in the third quarter, and then kind of at a low level in Q4, and then the Q1 is the strong quarter.
This year it looks a bit different as you had a big snap back in Q4 in volumes after a weak Q3. What shall we read for the first quarter? Is this then more of kind of a flat trend, or is there anything incremental in the business which is boosting it beyond the usual seasonality?
I think what we have seen in you know, overall in the year was, of course, you know, a really good improvement in volumes in Long Products as well, I mean, really significant. We did indeed get sort of a pretty good figure in the fourth quarter. Therefore, I would say, I mean, the normal seasonality is there, but with a good sort of background in Q4. Maybe that's sort of all I dare to say. I wouldn't expect sort of a huge jump then into the next quarter.
Okay. I think that makes sense. Yeah. I think the other question, maybe I got that wrong in your outlook statement, you were referencing to higher fixed cost as an element in your earnings evolution in the fourth quarter against the backdrop of higher shipments. Maybe you can clarify what this is referring to. Is there any kind of cost inflation baked into that statement, or how shall I read that?
When you look first of all at the evolution of the number of personnel, you see that we are approaching the targets that we set also to be below 9,000. So clearly, I mean, overall, we have been here still realizing the savings as we were talking about earlier. But in some instances, we have added shifts, you know, when there really has been high demand for some specific products, for example. So there could have been these spikes. But I think what is really visible in the figures more on the fixed cost side is first of all that indeed, you know, we are also rewarding our personnel now when we have had the good results.
I talked about the personnel fund in Finland, but we are also paying some extra bonuses, some extra rewards based on the good performance. We are sharing this also with our employees. Some of those accruals we also really had coming into the fourth quarter. That's one reason. That's of course sort of a temporary spike, but obviously still relevant in the quarter. The maintenance cost also goes into that fixed cost bucket.
Okay. Okay, that makes a lot of sense. Finally on your EBITDA breakdown and under other operations, you had, Pia, this unusual jump in the others line from eight million- 10 million in Q3 to the 18 million in Q4. Is there anything we shall keep in mind about this increase, and what's the run rate gain going forward for Q1 or Q2?
Yeah. We can have a bit of variation in the other operations, depending then on the end also of some kind of internal margin eliminations, on the group level. I'm not aware of any cost element that should really sort of long term be seen as kind of, you know, adding there to the profit levels, but rather just some variation in terms of internal inventory margin eliminations. There's nothing sort of trend-worthy that I would mention there.
Okay. That's it from my side. Thank you very much.
Thank you. Thank you all for following our event today, and thank you all for your very good questions. Before we close the call, I would like to remind you that we will be publishing our Q1 2022 results on May 5th. Now, thank you once again, and have a good evening.