Earnings Call: Q4 2020

Feb 4, 2021

Hello all, and welcome to Outokumpu's Q4 2020 Result Webcast. My name is Linda Hakkila, and I'm the Investor Relations Manager here at Outokumpo. With me today here, we have our CEO, Heikki Malinan and our CFO, Bjaldonen Forsell. We will take questions after the presentation. But now before we start the presentations, I would like to remind you of the disclaimer as we might be making forward looking statements. But now please, Heike, the stage is yours. Thank you. Can I have the clicker? Thanks. Thank you, Linde. Good afternoon, good morning. Welcome to Autokumpo's Full year 2020 and quarterly Q4 release. Let me start with some general comments here in the first On the first page and then I'll start diving into the results in more detail. Looking back, 2020 was actually a really exceptional year With exceptional circumstances and a lot of volatility in our markets, it was a year where our organization Was really tested in an ability to respond to rapidly changing circumstances in the year of COVID. As you will see from our report today, Outokumpu ended up in Q4 financially on a higher note compared to Q3. And overall, 2020 was almost as good as 2019, although in absolute terms, The financial performance of the company still needs further strengthening. I've been now 8 months in this job. I'm pleased to state that the new Outokumpa leadership team is now fully in place, fully mobilized and really focused on moving the company forward. In November of last year, we announced our new strategy. The implementation of the strategy is proceeding according to plan, and today we'll hear about some of the results of the first initiatives. Now let me go through the results and the highlights of Q4 and last year. So looking at the Q4, I said Q4 EBITDA improved significantly compared To the Q3. We were able to run our plans in the Q4 well, and we were able to capture Sure. The pickup in demand which happened towards especially towards the latter part of the Q4. Also, we were able to source sufficient amount of scrap in a timely manner in a gradually tightening raw material Allowing us to reach high scrap levels high scrap rates in our plants. Our September 2020 ferrochrome maintenance Internio went very well. It went according to plan, and we were able to get to full operating performance Quickly, as the Q4 proceeded. The turnaround in Americas continues well. We now had the 5th consecutive quarter where we had positive EBITDA And we also had the best annual result so far. I'm also very proud about our safety performance. Our total recordable injury frequency rate or TRIFR was 2.4. After the merger, our safety record was much less, let's say, positive. Our TRR figures were in the 10% to 15% range. So now we really have achieved a materially good level of safety. And I do believe that we are probably among the best in our industry globally. Indeed, last year in spite of COVID, we had a number of plans where We did not have a single accident in 2020. Finally, as part of our strategy Execution and the so called lean and agile piece of it, we have completed our employee negotiations, And I'll come back to that in a moment in more detail then. So overall, COVID was a big challenge and then it continued after March throughout the whole year. Due to our good safety work, we basically after the summer did not lose a single day of production due to COVID in any of our plants As really the virus continued to spread. Our financial position is stable. We were able to finish the year with a liquidity position of about €1,100,000,000 I'm also very pleased that we were able to complete and achieve the extension of our RCF And now towards it is now extended to May of 2023. And we got that done just before Christmas. In addition, we were able to reduce our net working capital by SEK247,000,000. This was a substantial reduction In net working capital. And finally, we were able to keep our CapEx at the EUR 180,000,000 level that we communicated to you during the Q2. So looking then at 2020, on the left hand side of the chart, EUR 250,000,000 of EBITDA, Slightly below 2019 where we had EUR 263,000,000. So as while in absolute terms, we are not where we need to be, Still, I think given the year of COVID, the result was it was a good achievement for the organization. As you can see from the chart on the right, pricing was a real challenge for us during the course of the year, especially in Europe, Although there were negative effects also in the Americas. And we were able to adjust our cost base throughout the year, As you can see from the green bar in the middle of the right hand side bar chart. Looking at the different business areas. So first of all, starting from the left business area, Europe, EUR 142,000,000 of adjusted EBITDA. You can see that over the last 4 years, Our performance financially has declined, and we need to turn the corner. We need to start heading going the other direction. We have told you about our strategy, which includes a target of improving EBITDA by EUR 200,000,000 By 2022 and that should help us turn this corner. In terms of Americas, 55,000,000 The Americas turnaround is encouraging and it is continuing according to the plans we have set internally. The work will continue then in 2021. In terms of long products, minus 8, clearly Not what we would like to see. We did have a major management change in September. The new management is now in place and they have started their work And are executing and Pia will then talk about Q4 results and where we are with LP. But anyway, we're moving Also in LP according to our internal plans. And then finally ferrochrome, 91,000,000 Ferrochrome compared to 2019 was flat. However, in September, we did have the Big shutdown in SAF3, which is our 3rd smelter. We have this big shutdown every 4 years, And the impact of that shutdown was about €15,000,000 which we communicated in our previous quarterly release. Then a few words about prices. So stainless prices were very volatile last year. Sometimes around July, August, we reached the trough and then have started to see a gradual rebound In transaction prices, here in this chart, we have added most recent data from January. And based on that data, you can see that all of those Curves or lines are moving upward in all three continents. With respect to nickel, nickel price Went up quarter by quarter about 12%. For us, of course, from Outokumpu standpoint, the euro price of nickel is more relevant, But converting that to euros, the delta was roughly about the same when you look at it on an annual basis. And then on ferrochrome, ferrochrome prices were flat quarter to quarter, but the recent data from January Indicates that the China spot prices have started to rise. A few words about trade and imports. Import penetration declined from about 30% in the summer To approximately 24% here in quarter number 4 in Q4. While this decline is helpful, The absolute level is still extraordinarily high, and trade defense measures are needed and they are merited. Looking at the quotas themselves, you can see from this chart roughly what the current What the quarter utilization was during the quarter, the high the blue bar in the middle, other, that basically contains mainly imports originating from Indonesia. During the last weeks, We have seen that the Europe 12 European Union member states have approached the commission in writing with a proposal or request To start an extension review with respect to the safeguards, which are going to expire this June 2021. So this decision by 12 EU member states is warmly welcomed and important, And we look forward then to seeing what the how the commission responds to the government's request. We continue to strongly make the case that extra trade measures are needed and that the quotas Should be extended. Then let's talk about sustainability. Sustainability is a very big theme within Outokumpu. We are the sustainability leader in stainless globally. Our recycled content was over 90% In 2020, we were also able to improve our energy efficiency by 6%. Our target as a company is to be carbon neutral by 2,050. On this journey To carbon neutrality, we are setting and have set intermediate targets. Our most immediate target relates to The amount of CO2 per ton of stainless that we emit by 2023 and the target is 1.5 tons. As you can see from this chart, we are now ahead of the plan and we're almost at the 2023 target at the moment. But I said the journey continues and we challenge ourselves as an organization to accelerate The journey towards carbon neutrality. Finally, before I hand over the presentation to Pia, Let me just still come back to the strategy. So as you recall, in our strategy, we have 3 components. There's a commercial piece, There's a cost and capital piece and then there's also what we call lean and agile organization piece. In this 3rd lean and agile, We basically have set 2 targets. 1 is to simplify our organizational structure, to de layer it and to really achieve greater transparency, Speed of decision making and simplicity. That delayering has now taken place. And in that respect, the new organization is up and running and has been, so to speak, delayered. In terms of the headcount, In November, we communicated that our target is to have total headcount of less than 9,000 by 2022. We have now completed the employee negotiations in December and the actual implementation of that contract is now underway. We are on target to reach that less than 9,000 by 2022. So in that respect, this part of the strategy It's really moving forward. So those were my opening comments. Let me now hand it over to Pia to go through the figures in more detail, and then I'll come back with the outlook, and we will be pleased to answer any questions you have. Thank you. Pia, please. Thank you, Heike. And good afternoon, good morning. I hope you are all keeping safe and well. So before I I'll start diving into the figures here. May I still say and add Heikki to the sustainability performance and the targets that we have there That the 1.5 tons of emissions per ton of stainless steel obviously also reflects our full commitment there. So if we go a bit technical, Scope 1, Scope 2 and Scope 3. And I think it reflects also the very good performance that we have within ferrochrome, where we are only about 42% of CO2 emissions compared with the average global ferrochrome producers. But hey, with that said, let's deep dive a bit to the figures here as well. So I'm going to try to change the slide. And we'll start with the key figures table here. And I think there's several messages here. I think we will get back to the figures around the volumes and the sales as well as the EBITDA in the next slides here, but Maybe a few details that we will not get back to later in the presentation. And the first one then relevant for net result as well as earnings per share. And obviously, what Heikki just described in terms of headcount reductions, we have also seen then some provisions, Restructuring provisions in our P and L through also the Q4 of 2020. So altogether there, we had more than EUR 55,000,000 worth of provisions. We did, however, also have the restructuring program Started in Germany already the previous year. So actually, on a year on year comparison, we had almost similar costs back in 2019. However, in the comparison in 2019, we also had the sale of some real estate in Germany. If you recall, it was near Dusseldorf, and this brought another €70,000,000 of extraordinary profits or Adjustments to the P and L in the previous year. So that's just sort of from a comparison perspective is relevant there. Our net debt obviously reduced to actually what we could see lowest level in recent history, and I will certainly get back to that. I think it's an important achievement and something where our own actions and self help really was the main cure to make sure that, that happened. And then finally, still maybe one more point on the restructuring costs as I have the chance to say that As Heikki stated, we have completed the restructuring now in all of our key countries. There are, however, some remaining areas. So I would say that maybe approximately €10,000,000 worth of restructuring costs could still occur during probably during 2021. And then obviously, from a cash flow perspective, we should be ready for the fact that the provisions that we have booked now in Q4 of 2020 We'll be paid out during 2021 and even predominantly during the first half of the year. So with that said, let's look first a bit into the group level performance and comparing our starting point at Q3 and then looking into the Q4 and what really happened between those two points. And as you can see, there was really a significant boost from deliveries and volumes. And I would say even more than that, if you look at our balance sheet, You see that we have also added some to inventories during Q4. Actually, balance sheet to balance sheet between Q3 and Q4, we have added EUR 100,000,000 inventories, and I think that's relevant on the back of the improved demand outlook and then the seasonal increase that we are now foreseeing for Q1. So we have definitely been able to gear up and to increase here production. But it has also had a positive impact On our cost structure, we have overall had a very good efficiency, also a very good scrap ratio, as Heki already alluded to, And then at the same time really benefited from a better fixed cost absorption. So it's just clear that once we are back to very relevant Production volumes, it's clear that our cost performance here has benefited from that. We have also continued the cost compression that we have also talked about in the previous quarters. There is one negative here That you can see, you see that even during the Q4 compared with the Q3, we still had negative impacts from pricing and mix. And I think there's many relevant elements to be discussed there. But maybe just at this point, what I still clearly want to say that even though From Q3 to Q4, we could still see this negative impact. Then what we see right now happening in the order intake and also when we see Metal prices, I mean, 1st, nickel prices and now as well then ferrochrome prices having increased rather rapidly. I mean at the moment, I am not concerned of margin erosion on sort of because of that as we are experiencing a stronger demand situation. So let's look a little bit more into the BAs as well. And maybe some specifics here BA by BA, I mean this is BA Europe. Obviously, here as well, you can clearly see the negative impact from pricing and mix. And maybe this is a good moment to talk about the recovery sort of through the various segments. So obviously, the demand recovery during the Q4, it was stronger than we had expected. And we have talked about the improvements in appliances. We have talked about the improvements in automotive. And still during Q4, we didn't really see improvements in the value added grades. And if we are now looking at the order intake and the demand structure, it seems that we have a somewhat broader recovery happening. However, oil and gas related and you know that a lot of our value added, for example, pro grades have been there going to scrubber business, etcetera. There we still can see that this has not really sort of turned the page yet. So some early signs and maybe some recovery possible throughout the year of 2021, but that's where sort of the big action is not yet happening. However, from other perspectives of value added grades, we are starting to see a gradual recovery. So I think that's important to say that compared with the fairly low point there in Q4, we are starting to see some improvements, but clearly not back to the levels that we had before the pandemic was hitting the business. What you also see in this slide is a very significant cost compression in BA Europe. So I just want to mention the self help and all of the actions that we have taken there, we have still had really significant efforts even in squeezing things like maintenance cost and Every discretionary course that we could also through the Q4. So you see the combined effect here of both the improved volumes as well as all of our then in the result. Maybe on the sort of current situation in the market still in Europe, I also want to comment the fact that lead times have increased quite significantly. So this is actually relevant both for Europe and Americas. But as we speak, it is clear that lead times are longer than normal, and we are already selling into later parts of the second quarter. And stock levels are also rather low in the market. So then Looking at BA Americas, and here really turnaround has accelerated. There has been a further improvement when it comes to the volumes. I think overall, we have been able to position ourselves well here and really grow also gradually our share. So I think here you see a good increase in volumes also on the back of the recovery in the market. And then you can actually see some negative bridge effects here from costs. So maybe just a few comments on those. I think most of all, this is due to the fact that we had some very significant cost compression in Q2 and Q3, where some of that was then released back at the point when the volumes were clearly improving again. You know that the same long term improvements through our Strategic actions are continuing also for Americas, but all of the increase here in the Q4 was then on the back of the Increased volumes and some kind of recovery from the earlier cost compression. In Americas as well, inventory levels remain very low and the same as for Europe, we see very long lead times and possible sort of next dates when we are discussing now, they are into May, they are into June for deliveries. Okay. Then maybe from a Ferrochrome perspective, really what you see in the chart here It's a big improvement from Q3. In Q3, obviously, we had the maintenance break. This had a SEK 15,000,000 negative impact on the result. So we have a recovery here in terms of volumes, but it is actually particularly strong also because there was a really successful ramp up. So I think in a quarter where still prices were on a low level and very stable, it is our own actions here, the good recovery after the maintenance as well as then significant actions to further compress costs and some positive movements there of some of the variable costs that really helped us. So I think this is a very satisfactory quarter from the ferrochrome perspective. And finally, BA Long Products, What you see here is a 0 result in the quarter. I want to say this is 0, but it is exactly on plan. So when we were working with the new management team of the Long Products business area, when we set the plans And the recovery plan then the sort of the first steps here getting back to 0 was set for the Q4. I think we are exactly there. You see as well here that the pricing environment has still remained rather challenging as well as some mix deterioration, but deliveries have clearly increased in the quarter. Then a few words on the working capital. So where we are right now in terms of managing our working capital. We can see 2 years actually of very significant reductions overall. So we had further reductions of working capital even in Q4, and the annual reduction was at EUR 247,000,000 So year on year, obviously, we have really reduced a lot in inventory. But if you look at that through the quarters of 2020, You see that the main reduction already took place before Q end of Q3. And during the Q4, what we have then seen rebalancing the increase In inventory has been also an increase in accounts payable. So I think this is a good proof point of our ability still to really manage our working capital. Now if we look into 2021 With the history of 2 years of very, very, very big working capital reductions, we think that we are now at the point where our focus will be on remaining being able to keep these levels that we have now achieved. And you should also take into account that there is some seasonal variation here. So definitely on Q1 being a typical seasonal increase in terms of volumes, I think you would then also see this in terms of the cash flow. Look back some historical years, you will find the pattern. But overall, our commitment here is to remain stable and to find ways of then managing and keeping working capital at these levels. Furthermore, then just if you look at the overall cash flow, You can see that we have been able to achieve a very positive cash flow before financing activities. Heike has already touched on the CapEx, So I think I will move to the next page just to really then show the impact on our net debt of these improved cash flows. So net debt development has continued to be really good through the year, and it's really due to self help and then the very strict CapEx control that we have continued through the year. And you see it in the slide here, obviously, you see the record low level, EUR 1,000,000,000, 28,000,000 of net debt at the end of the year. When you look at our gearing, it's there is positive development. However, The equity component of it, we had some translation differences there and obviously a net loss for the year as well. So just maybe to keep that in mind. We do remain fully committed to reaching our financial target that you can see here, which is then to reach the leverage of below 3 at the end of 2022. So you see that we are definitely trending in that direction. And then finally a few words on the funding. If I look back at the year of 2020, throughout the year we've had funding activities of Worth almost €1,000,000,000 in a pandemic year, I think it's a good proof point of our ability to act in the markets and of course also good support from our key relationship banks here. If you look overall at the maturity profile, As Heikki already said, this is one of the good or key achievements of last year. We can see here that we have moved The RCF extension, so that now the maturity is in May of 2023. And obviously, we will continue working very actively improving our maturity profile, but I think some really significant steps We're taking now during 2020 here. I think you can also see some other sort of similar elements overall in our debt structure and maybe just a really brief comment still on the commercial paper market. In terms of short term funding, it has remained a good source of funding for us this specific Finnish commercial paper market. And I think what we also see now is that We are again able to extend maturities somewhat into several months. So also here, I would say the market is It has remained open, but is also showing maybe some signs of strength from that perspective as we speak. So I think with that said, thank you very much. And Heikki, back over to you then. Thank you, Ije. So let's go to the outlook for the Q1. So the stainless steel market has begun to recover after the global downturn caused By the COVID-nineteen pandemic, the demand for stainless steel is strengthening and both business areas Europe and Americas are expected To see a seasonal increase in volumes. Consequently, Autokumpu expects its stainless steel deliveries for the whole group To increase in the Q1 by 10% to 20% compared to the Q4. Adjusted EBITDA For the Q1 of 2021 is expected to be higher compared to the Q4 Of 2020. So that is the outlook for Q1. And I guess we are now happy and pleased to take any questions. Thank you, Heike, and thank you, Pia. Please, operator, we are ready to take questions from the line. And our first question comes from the line of Seth Rosenfeld of Exane BNP Paribas. Please go ahead. Your line is open. Good afternoon. Thank you for taking our questions today. I think it's a 2 part question. First, with regards to the general guidance And then secondly, drilling into margin expectations in Europe. I guess, I think everyone on the call would like a bit more color on the scale of Strength you're expecting into Q1, your guidance originally for Q4 was roughly a quarter of what you ultimately reported. As we look forward to Q1, what scale of increase are you thinking is ultimately reasonable for us to be expecting? And then digging into a bit more, within Europe in particular, given that there's no alloy surcharge mechanism really functioning right now, Can you just give us a bit more color on your confidence in passing on rising scrap prices to customers? It does appear there's been a meaningful increase in that Cost base in recent weeks, perhaps outpacing the strength in transaction prices being reported. Is there any risk of margin compression in Europe in the near term? I'll take the guidance. I'll take the price. Yes. Very good. Thank you very much. And then in terms of the guidance, I think the first The element that we certainly wanted to make very clear is that this is a good increase in terms of volume, also compared with Q4 that had an unexpectedly good recovery. So I think that's one important point. We have said that it's We intend on 20%. So I think that gives a fairly sort of good confidence that we will have a the boost from the volume there that is important and that's also the reason of course to state that very clearly. I think to some extent, obviously, your question is related to your question about the confidence on being able To pass on then the increases in scrap prices, for example, there. So I think already given some comments, but I think Heikki will come back to that as well. Then if we look at other elements of the P and L, I mean this quarter is typically not a quarter for any kind of significant maintenance, and we've also not described that. So I think in terms of cost elements, there is like nothing that is of such significance that we would really I have talked about it separately. So it's really very much on the back of the volumes and this improved demand situation that we are giving the guidance of a higher EBITDA. And I think that's maybe there are some more details that will come up here during the Q and A, but that's as much as I would say at this point. Yes. So Seth, well, first of all, I think it is obviously a challenge when there is no alloy surcharge. The way the market operates today is that You basically have customers contract customers who have longer term price commitments, but there are mechanisms in these contracts In circumstances such as LIS to negotiate passing on the incremental cost upcharge that we get. And obviously, then we have short term business. I wouldn't really call it spot business, but it is non contractual business. And for that type of Those type of commercial transactions, we are able to pass on the full increase of raw material costs as we get them. So It's sort of a bifurcated situation, but definitely we are in a position to move a good part of that cost forward, at least we are trying to. But there's no automatic mechanism per se. Seth, I think it's Sorry, excuse me, Seth. If I may still add one more element that seems quite relevant actually to mention right now As we have seen really rapid increases in the ferrochrome prices, and that is to say that you know that the benchmark pricing mechanism here Obviously, we'll bring some change to the price from Q2 like 1st April onwards. So clearly not for that part of the business, which is a fairly significant part of the business, There is no change. So obviously, then for a smaller part of the business, where the Chinese spot price might be relevant, you could see some Tic, but this is even something that we commented in the report that these price increases in ferrochrome Shouldn't give any kind of material impacts to the Q1. Thank you. If I can just ask one follow-up. In Q4, I guess the scale of BEAT versus your guidance that you gave midway through the quarter is obviously phenomenal, very impressive. Trying to understand the guide to Q1, I guess, goes back to understanding why on earth you beat the original guide for Q4 so much. Was it just ultimately better fixed cost leverage? Or Or was this an environment where there was some tailwind of lower cost scrap in inventory that ultimately contributed to the margin expansion Beyond what you would have talked about just a few weeks prior previously. I would say from the metal impacts, I would also highlight a very good performance on scrap ratios in the melt shops. And I think you might see here some links to being really able to operate you know, on close to full speed. But at the same time, obviously, it's been on the back of us having a good scrap availability and kind of we could do this because we could react quickly. We saw the market recovering then during the quarter, and we were still able to act and take benefits of this. So I think if your question is that did we have something sort of in inventory that we could use that would really have Of course, this effect, I don't think it's that, but I think it's a quick reaction having scrap availability and then having really good melt shop performance as well. So that's one really good and big area there. And also you did mention the fixed cost absorption, and I think it's an important element there. So those are on host side at least few of the real highlights. Perfect. Thank you. Thanks. Our next question comes from the line of Ioannis Masvoulas from Morgan Stanley. Please go ahead. Yes. Good afternoon and thanks for the presentation. Just two questions from my side. The first, following up to some extent to Seth's question in Europe. I think at the call we had earlier in January, you talked about potential for some pressure in Some of the contracts you would be signing in Europe for 2021, just to reflect the dynamics We saw in the latter part of the year. So the first question or part A first question would be here just in terms of volumes. How much Contracts versus spot business we should be expecting for this year like a rough percentage would be very, very helpful. And have you managed to reflect some of the improved spot dynamics towards the end of last year in those negotiations? Or should we expect a bit of margin pressure year over year when it comes to the contract volumes? And I guess I'll stop here For the first question, then I have another one on Ferrochrome. Thank you. Right. So Janis, so in terms of the contracts, They are primarily negotiated in the Q1 and obviously those types of contracts are important for all suppliers. It was a very competitive quarter, I would say, in terms of contract business. Roughly speaking, contract accounts For about half, 50% roughly of our business in Europe changes year by year, but roughly 50% would be sort of a Nice round number. And then still coming back to this question about the cost pass through. So The contracts do have mechanisms. They vary by customer, by industry, by segment. And obviously, there's a negotiation process Depends a bit on the our ability to negotiate with the customers to pass on those costs. So there's no automatic mechanism. You have to work very hard to get that through, but it is we believe it is doable to a large degree. That's clear. Thank you. And the second question on ferrochrome. Looking at the External sales, I'm trying to figure out how much exposure you may have to surge in the Chinese price. And you mentioned that you delights, you're not going to get a benefit in Q1. But as we go into, I guess, Q2, in terms of that external part of sales, what sort of leverage do you have there? And can we shift some of the Send on volumes more towards Asia to benefit or do you have some sort of contracts that restrict your ability to shift volumes and capture that opportunity? Maybe if I can sort of turn the clock back a little bit to our previous call and also when we Freibauer Strategy. And then we said that what we really are targeting is to look for more contracts and less both sales. And obviously, that's been the way how we have approached the year. So I think that In terms of the external sales, it is very relevant to look at the benchmark price. Obviously, I don't want to speculate what it will be on 1st April, but I guess it would be unheard of that there would not be sort of a connection to the spot prices somewhat. So I think that's why it's an important timing question, of course, To see that we would expect then Q2 to have more impacts from these ferrochrome price increases. I'm not saying there wouldn't be any on spot price, but it has been the direction that we took last year to really try to have more long term commitments and sort of contracts that would then typically be on the benchmark pricing. Our next question comes from the line of Anssi Kivaniemi of SEB. Please go ahead. Thanks. It's Anssi from SEB. Hi, guys. A couple of questions for me. I will take them 1 by 1. First, starting with working capital. On payables, they were quite elevated levels. I guess the restructuring effect can be seen in there. But is there anything other impacting that balance sheet line? Thanks. Thanks, Assi. I think it's actually fairly simple. I mean, more volumes ramping up, Our ability to purchase scrap and then doing that also kind of towards the latter part of the quarter, so clearly increases our payables, Quite short story. Okay. Thanks. Then on the working capital outlook. I mean Q1 is So working capital heavy and we're going to see a negative impact. Is it a typical pressure that we see in Q1 year after year? Or is it due to the fact that the working capital is already at quite low level, the pressure is tougher on cash flow? How should we look at the dynamics there? Anssi, I think it's typical. I think we've seen this increase simply because The seasonal impact means more volume in Q1 and then typically from previous years actually also into Q2. So that means that we really try to make sure that we are ready there as well for the summer season and have things available also towards the end of Q1. So I think you can go many years back and you will see that seasonal pattern. I would just remind that Year end of 2019, we had inventories of $1,400,000,000 year end of 2020, we had 1,100,000,000 and I think we had an even lower level there during Q3. So I think we have learned to operate now in these lower levels, and we should just be ready to accept the same sort of seasonal deviation in Q1. I would just say that the big applications, home appliances, automotive, This is automotive, are strong and the demand is robust enough so that, as said, we are able to Ron, our plans very well at the moment. Okay. Thanks. Then a couple of questions on costs. I mean in Q4 you executed the restructuring program. How should we look at the benefits Q1 onwards? On a quarterly level, what's the boost? And also on Slide number 6, you showed the 2020 EBITDA bridge. Costs supported heavily the result. How much of this cost, Let's say that were partly related to COVID-nineteen will come back in 2021. Thanks. Thanks, Sanzi. Those are all sort of super relevant questions. So first of all, if I just look at What type of measures were really temporary? So I think I pretty openly described, for example, in the case of Americas that Maybe we had there you saw some rebound of cost in the Q4 due to the fact that some of the cost compression actions We're reversed in the Q4. You can see the size of the bridge there, and I think you also saw a really good volume in Q4. So that probably gives sort of A short answer to something that we have now already seen and then obviously continuing the strategic initiatives and the further cost Savings for the long term also through 2021. So I think that's maybe one part of the answer. And sorry, could you repeat your first question? I didn't have the time to write it down. Yes. The first question was about the restructurings executed in For so how much of quarterly boost there's going to be from those costs? Yes. I think it's If I just look at the current projections that we have, we expect that a big part of the cash out will be during the first quarter Sorry, first half of the year. So this means usually, not in every case, but usually these go hand in hand in the sense That at the point where we have concluded and signed, there is the cash out and it also usually then means that the Impacted individual would be leaving. So there is quite a lot of movement here and quite a lot of things that are happening in the Q1, in the Q2. But overall, I mean, these impacts will still continue through the year. Okay. Thanks. And the last question is on profitability in Europe. I mean you highlighted that perhaps The profitability improved mainly due to your own actions and of course due to volumes and also give an indication that you don't see any Margin, let's say, squeeze going ahead. But is there opportunity to make more margins with increased stainless Prices and perhaps the dynamics with the usage of scrap or how should we look at the, let's say, underlying margin In Europe, when we enter into 2021. A few elements that I think are relevant, but we don't have a price forecast per se that we would give here. But I think, first of all, precisely As you said, and I think this is a strong message for us, we do not see a risk for a margin squeeze in this market environment. So I think it is fairly visible to everyone how the metal prices are increasing. Then if we say that, Okay, could that give some further opportunities? Just on a general level, of course, this kind of market environment would be the one where also some positive movements or I would just say gaining back some of the depression that occurred during 2020 could be possible. But I think that's then in the end up to every individual negotiation. So there's plenty of things that need to happen there, and I wouldn't to conclude on that at this point in time. And then maybe still finally a bit on the mix. So I hope to share sort of the good news in terms of some improvements when it comes to the value add here. Those are always really important for us in Outokumpu. But at the same time, I don't think that we can expect To get back to the kind of pre COVID levels, at least not yet in Q1, maybe this will even be delayed to further in the year. So from that perspective, the kind of mix boost here will be gradual more than kind of a rapid increase as far as we can see you at the moment. Yes. The pro business the pro grade business, of course, that is a good part of that is project business. And for example, if you take the oil and gas industry, which is an important area for the pro sector, so those projects, of course, they are large, But the timing exactly is uncertain. So we may see some of them starting to come if oil price goes up even further In Q2 or even later this part of the year or maybe they even go into 2022. But overall as Pia said, The share of pro grade is still less than what we would like it to be, and we are actively searching globally for new opportunities to Sell that capability. Okay. That's all for me. Thank you very much. Thank you. Our next question comes from the line of Luke Nelson of JPMorgan. Please go ahead. Hi, Heidi, it's Pierre. Thanks for the call. My first question is just on ferrochrome. And Again, the price effect looks to be slightly negative versus Q3. I'm just trying to frame your comment that you made earlier We're looking to get back to more contract based business. In 2020, I think it looks just based on the waterfall charts in the quarterlies that there was actually A net negative effect from pricing and mix over 2020, over time when the contract price actually increased over $0.10 a pound. So I'm just Trying to think about what the mix effect will be in Q2. Should we expect, assuming pricing is flat, a catch up for the lost mix effect over 2020? Or should we expect a smaller effect from that over 2021? That's my first question. So I think what happened during 2020 was obviously lower volumes than expected when the plans for the year of 2020 were made up. There were definitely quite significant volumes allocated then to our internal stainless business, and those were then lower than anticipated both in Q2 and Q3, and that led to higher exposure to the spot market that was not planned initially. So now when we have planned for 2021, obviously, in the same way again, we have tried to find sort of the best You know kind of the best positioning here, how much do we want to sell internally, what will be the external exposure. And now obviously, the demand situation is quite different. So at the moment with the demand for Q1, it looks as if our original plants are for internal sales are more than there, so to say, and that would then mean less exposure to the spot market. So then you are actually asking a really difficult Question that would I then say something about whether we are catching up or not. You know that the spot prices have now also changed a lot. So Obviously, during 2020, we had really negative impacts there from low spot prices. And so this was like a hit in the terms of the mix. As we speak and today, obviously, spot prices have really, really hiked. So therefore, I guess the answer to the question then also really depends on what would the relevant prices be for those 2 different You know measurements then in Q2, and that obviously I don't know yet. So that's why it's a bit difficult to answer your question. Okay. It is fair to assume then still the sort of historical With sensitivity, I think it was €0.10 It was €10,000,000 per quarter. That is still relevant, but it's down Like maybe the underlying normalized sort of profitability has maybe reduced relative to sort of the 2019 Is that roughly how we should be thinking about it? It's overall, I mean, that sensitivity still remains. So I mean we are still that's still the values that we are discussing there. And then if you consider whether the underlying Profitability is the same or not. I would say the kind of main factor that is varying here as well is then what type of maintenance breaks and how big and in which Quarters we have, so that's another element that just would need to be considered as well. Overall, as you could see from the chart, obviously, the profitability of Ferrochrome has remained fairly flat or going sideways from 2019 to 2020. Really clear. Thanks for that. Second question Just on the 2022 targets and apologies if I missed that in the Capital Markets Day presentation. Just on the annualized run rate, is it possible to give a bit of color of the breakdown By division, but also the contribution between sort of cost out relative to product and product mix effect. So sort of big picture, we have the 3 key areas of the €200,000,000 run rate improvement, which then on a global level or group level are the commercial initiatives where really these mix improvements are really a key element of that. About 1 third of the EUR 200,000,000, the cost and capital discipline where we have a lot of the improvements, for example, through Raw material efficiency or maybe some other procurement benefits, maintenance costs, other costs, etcetera, That's 1 third. And then we have the lean and agile organization where we have already gained a lot of speed in the execution during the Q4, the remaining third. So that's sort of the global view of what we have presented. And then when it comes to the split by BAs, We haven't given targets by BAs per se, but I think it's, it's, to some extent, definitely, comparable to the scale of the business. So I think it goes without saying that we have a really significant part of the improvements into BA Europe. But in BA Americas as well, we are continuing the turnaround and we have several more initiatives, for example, on the commercial side that are really relevant also for the group level €200,000,000 improvement. Okay, great. And final question, just on your comment around lead times in Europe and Americas, which are sort of extending into end Q2. Just how should we be thinking about the price effect, assuming there is sort of a sustainable improvement going forward? Does that mean that given the longer lead times, there's potentially more of a lag and any meaningful improvement in pricing might actually be a Q3 effect or can we expect Q2 to show sort of an improvement in pricing quarter on quarter? Thank you. Look, I think the pricing mechanism in Europe now being so much tilted towards the effective price, of course, it means that for goods You know where we already have contracted, we have also agreed about the price. The situation is different then for the part where we have the alloy surcharge, and that would still be the sort of normal way of doing business in America, so for example, in Long Products. So we have those elements as well in the group as well as in Via Europe. But I think fundamentally, of course, if we have already agreed on prices, we have agreed on prices, and they are in our books. And then we are starting to book towards end of Q2 and of course then soon into Q3. So I think just conceptually, You are right in that sense that you have to take that into account. But if you look at the average price for the business area, Europe, for example, so Clearly, standard grade demand is accelerating more rapidly than for the pro grades, which, of course, have higher prices. So I guess until we see the pro grade business really pick up, which is still sometime in the future, the average Price of the business will be more tilted towards standard rate. Great. That's clear. Thanks a lot. Our next question comes from the line of Alan Spence of Jefferies. Please go ahead. Thanks. Good afternoon. Most of my questions have been asked. So I just got 2 quick ones and I'll do them 1 at a time. So So the first one is around shareholder returns. And can you just talk about perhaps the absolute net debt levels or those leverage ratios that you would need to see 12 months from now, where you would feel comfortable resuming the dividend? Alan, may I just say that from sort of a Nordic corporate governance perspective, you are asking us as management a slightly difficult question because we do have to I rely on the Board's statements here. And I think, at least to me, the Board's statements have been sort of clear on the fact that with the sort of current Financial standing or situation, dividend is not preferred or not proposed. So therefore, I don't have sort of an exact figure for you. I think what we are working towards is our financial goals, the leverage below 3 at the end of 2022, and that gives us a clear direction where to go and the EUR 200,000,000 EBITDA improvement, of course, as well then When achieved by the end of 2022, will give us quite an improvement also then down to profit before tax and net profit levels. But that's really all I dare to say. Yes. I guess what we said in November when we had the strategy presentation was that this part of the strategy, which is The 9 quarters towards end of 2022 really focuses on deleveraging, de risking the company and that is really the priority Of everything we're doing here and the Board also stated that they are very supportive of really now de risking and deleveraging In the company and they will prioritize decisions which allow us to achieve that objective. So no other comments have been made by the Board With respect to this dividend question beyond what I just said. Okay. Fine. That's clear. And the second one is just around CapEx. I think from the CMD, correct me if I'm wrong, I think the next couple of years we're going to be capped at $180,000,000 So should we take $180,000,000 as the guidance for this year? Or is there Some potential that it could be below that? I think that's the correct assumption. And I would still remain remind of One of the details that we also shared in the Capital Markets Day, which is that we still have the Deep Mine project ongoing, and it is still a substantial part of the EUR 180,000,000 also through 2021 and actually through 2022 as well. So that means that the other parts of the CapEx I'm actually very much under scrutiny to reach the 180,000,000 and that is the expectation that you should have for 2021 as well. Okay, great. Thanks very much. And we I have time for no further questions, so I'll hand back to our speakers for closing comments. Please go ahead. Thank you all for your very good questions, and thank you, Heike, and thank you, Pia. Before we close the event, I would like to remind you that Outokumpu will publish its Q1 result on May 6. But now thank you once again, and have a great evening. Thank you. Thank you.