Good day and thank you for standing by. Welcome to the Outokumpu's Q4 2022 Pre-Silent Call. At this time, all participants are in listen-only mode. After speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to slowly press star one and then one on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I would now like to hand over to your first speaker, Linda Häkkilä, Head of IR. Please go ahead.
Thank you, operator. Hello all, and happy new year. Welcome to Outokumpu's Q4 2022 pre-silent conference call. My name is Linda Häkkilä, and I'm the Head of Investor Relations. With me today, we have our CFO, Pia Aaltonen-Forsell. We will first start with a short introduction, and after that, we are happy to take your questions. Now, without any further comments, I would like to hand over to our CFO.
Thank you so much, Linda, and Happy New Year, everyone. I do hope this will be a year of some more positive external news. I do have to say that looking at sort of the news flow through 2022, there was almost an exhaustive list of, you know, continuing bad news, whether it was the war, whether it was the energy crisis, whether it was inflation, whether it was higher interest rates. Obviously this is sort of the environment that externally is there. If we take a broader brush, there was of course also a number of, I would say, very encouraging news.
Most importantly, what I would like to highlight is the developing interest both for green steel, really sort of tangible cases that we could observe close to us and in our customer behavior that I can still return to. These early steps I think are now sort of really starting. We can clearly visualize now the path here. Also on EU level, for example, the CBAM decisions. I think for a longer term development, actually there has been some good news in this whole news flow. Of course, a lot has been dominated by more short term, sort of more negative news flow. Without now even trying to predict everything for 2023, it's clear that we are ready and prepared with a strong balance sheet also for a more bumpy period, should that be necessary.
Before I go into the details of, some commentary on Q4 and the current situation that we should normally always do in this meeting, I would still like to take the opportunity to circle back to our CMD last summer. Maybe sort of the highlight of my presentation that I received at least a lot of questions about was around the normalized EBITDA. If you recall at that point, we did share that apart from the sort of particular and very strong market conditions that we had experienced post-COVID in 2021 and into the early 2022, we did expect a normalized EBITDA level of between EUR 500 million annually for Outokumpu. I think that's a good reminder. I mean, both looking sort of historically at maybe challenging periods with lower results.
I think it is still, I mean, we stand behind this calculation and the expectation that we wanted to clarify at that point, where we think Outokumpu can be in a more normalized market condition. EUR 500 million-EUR 600 million annually was that level we were talking about. We did include in that, of course, some of the ongoing improvement projects. You know, in later quarters, we will share much more about the progress of our improvement projects. That's not really the sort of, the issue for today, but I can ensure you that I think we have a good start also with strategy execution of what we initiated last summer in the CMD, our second phase. Okay.
With that background, maybe sort of a few more detailed comments on where we are right now. Maybe first to remind you that when we talked about the outlook for this quarter, we did start with the overall market view of somewhat declining volumes, expecting deliveries in the fourth quarter to decrease by 0%-10%. I think we are still sort of firmly within those boundaries. I usually like to be sort of, you know, in the middle of all of those ranges. I think based on a somewhat, I would say, demanding market conditions or, or, you know, market conditions that have been weakening, I would say we are within that range. Maybe we are a bit more on that higher side of the negative.
That's still to be confirmed, but anyway, firmly within that range. One more, of course, important observation on the market conditions is to say that we spoke already at the Q3 report a lot about the destocking. I think that's the character of the market that we are living in right now. This goes for both Europe, even though in Europe this started already during Q3, but we are still sort of at the tail end of that clearly. In Americas, I think this has sort of more clearly started during Q4, a clear destocking mentality. As we said, you know, when we have destocking in Americas, when the U.S. distributors are destocking, they are really destocking.
That means that the order intake and the deliveries are clearly weaker because of that. When we look at the typical seasonality again, obviously in Europe, Q3 is typically the weakest one with the summer holidays, et cetera, and Q4 is already balancing out a little bit. Again, in Americas, the typical seasonal pattern is actually Q4 being the weakest one, because of Thanksgiving, because of Christmas. I do see that typical also seasonal pattern repeating. In Americas, we have both the seasonal pattern plus the destocking, which really talks for a fairly challenging demand outlook or situation right now. I would still like to say just a few more words about sort of the specific market conditions in Europe.
I think because of our focus on the two business lines, we have Stainless Europe with more commodity-driven business. Then we have Advanced Materials. I think we can distinctively see that within the progress, within the value-adding portfolio of Advanced Materials, there's still a number of subsegments that continue on a true note, whether it's heavy industry, whether it's oil and gas. You know, we do have a lot of projects there going on, and the pipeline and the order book is also somewhat longer. When we come to the commodity side, obviously we are very much impacted by distributor behavior. There I would clearly call the market weaker, and we are also up for fairly short order books.
I think this is a sort of phenomena of the market conditions that we can observe of order books also clearly shortening. I think on the prices, usually I don't even give that much indication. I mean, you follow the CRU statistics, I'm sure all of you on this call. The one thing I did want to say still is that as our sort of typical order book length is the one quarter, that's what we talked about in the Q3 release. Just mathematically, that means that in Europe, when you saw the price curves going down during the third quarter, that's actually what we will realize in the invoicing in the fourth quarter. What is happening now as we speak is also that the order books are even shortening.
It means that we get sort of a quicker circulation of the realized prices then into our really sort of P&L. I think that's sort of enough said briefly about the market situation right now. In ferrochrome, we've had a bit of a special situation due to the energy prices. I think we have been indeed proceeding as we said in the Q3 release. Our capacity utilization has been somewhere between 50%-60%. The second furnace is down. We have been optimizing furnace number one and three, and that has allowed us to sort of keep in the black, you know, keep producing some important volumes, keep energy costs, I would say.
When I use the word under control, I don't mean that they stay on the same level, but they stay balanced enough that what we produce, we can still do that in a profitable way. I think all in all, that is very much as we said. Some other big cost items we typically talk about, for example, maintenance, there's really no significant change between the quarters. Q3 and Q4 will be pretty much alike. Otherwise, you know, of course there's some inflationary pressure, but there's nothing I would highlight in particular. I think the only other thing I would still add here, more from the P&L perspective, is the net of timing and hedging impacts that we typically describe, and we talked about them being negative in the quarter.
I would say based on the very late nickel price increases in the quarter, we get a little bit of that special result that we already get some of the negatives from hedging losses, but we actually don't realize the upside on the higher nickel price in the pricing out. You know that when we talk about timing, we talk about the difference between the price in and the price out of predominantly nickel, but nickel, ferrochrome, of course, a few other smaller items as well. Usually, when the prices go up, that's good news for us because we can realize higher prices than also in the invoicing, in the price out. When it occurs very late in the quarter, then there's not enough time to really do that or really benefit from that.
That means that with this sort of late nickel increase, I would say like order of magnitude, it's maybe like EUR 20 million more negative from timing and hedging than what I assumed or what we guided for before. That's one element to take into consideration. Maybe before I complete my presentation, just two more sort of details to describe. One of them, we were out with a release a couple of weeks ago relating to a deferred tax asset. Of course, for me as a CFO, I don't wanna make this too small by saying it's just an accounting item. That would maybe be counterproductive. It is truly an accounting item.
It's the result of the improvements in Americas that have occurred over the last couple of years. Simply by IFRS rules, now we have reached a point where we need to recognize that, hey, we actually have historical losses that we will benefit from in future payments of taxes. Now it's time to recognize them on the balance sheet. This does not impact the cash payments per se. It's just an accounting treatment. That's why maybe still just really confirming that we gave a relief because it was an important amount. It was EUR 350 million more on the balance sheet. Obviously, it also has a one-time positive impact in P&L that is significant. It does not impact the cash payments of tax.
Obviously, with this now being on the balance sheet, it will actually raise our effective tax rate going forward in the P&L, not so to say in the real world, if I may use that language. Finally, yesterday, we completed the divestment of Long Products to Marcegaglia. You remember the EV was EUR 228 million, all in all, we reached almost EUR 228 million in terms of cash. Three-quarters of that was with equity and one-quarter was a debt item. I think all in all, that was now sort of brought to a completion according to our earlier plans and information. With that said, I would like to stop and move over to the Q&A session, please.
Thank you. As a reminder, to ask a question, you'll need to slowly press star one and then one on your telephone and wait for your name to be announced. Once again, it's star one and then one on your telephone and wait for your name to be announced. We are now going to proceed with our first question. The question's come from the line of Krishan Agarwal from Citi. Please ask your question.
Hey, Pia. Can you hear me?
Yes. Hello, Krishan.
Yeah, happy New Year to all of you. Quick question on the inventory destocking situation, which you mentioned about both Europe and the U.S. If I'm correct, I mean, Europe is much more advanced in terms of destocking. The last time when we spoke after the Q3 results, you were saying that, okay, we are into that last leg of the destocking.
Yes.
-in Europe. Is it okay to assume that U.S. or the Americas business will continue to see the destocking in Q1 of this year, while Europe is mostly behind in terms of that destocking impact on volume?
Yeah. Yeah. I think, you know, there's a couple of things always that impact that. The one is obviously from how high is the level where you start. The second is how much imports are there, then, of course, the demand. There are, you know, of course, also the supply itself from the sort of supplying region. But with what we can see right now and what we can see, I also just looked at the latest stats from what we know. There's less stats available on the European distributor inventories. From what we can see, inventories are really more sort of, you know, they are declining and approaching a more normal level.
That's why I think it's fair to say that we are sort of at the tail end of that change. When it comes to, you know, do we then observe, do we get a lot of, you know, is the order intake now then higher from distributors? I would say that's still more sort of sporadic that we have indeed some distributors who are returning more back to some sort of, you know, placing orders, et cetera. While we have others that are not. That's not yet a uniform picture. But I think based on the sort of indicator here of the, you know, starting to normalize, not yet normalized, but approaching, then I think we are probably sort of getting there.
For the Americas, this is now U.S. in particular, I think we have good statistics, we have seen sort of I would say, a fairly sluggish reduction of the inventory levels. I think that's also on the back of imports still being higher than normal into U.S. as well. I think that's probably one of the reasons there, and probably it also talks about underlying demand being weaker because that's resulting then in, I would say, a slower sort of step-down in the inventories. For me, that clearly talks about this kind of continuing into Q1. Does it continue the full Q1 or is it just January, February? That I don't know yet. I think when I see the January statistics, I will know more.
Understand. Quickly on ferrochrome. I mean, energy prices have been one of the big headwind, and you are operating at 50%, 60%.
We get it. Can you help us in terms of quantifying that how much of the energy cost in ferrochrome is on a hedging basis?
Yeah.
Meaning that even though the spot prices have come down, the actual P&L cost of energy for the ferrochrome will take longer to reflect that lower cost.
Yeah.
It is more of a spot that, okay, yeah, spot prices come down and energy cost will come down proportionately.
Yeah.
for the ferrochrome.
Listen, I think the sort of the rule of thumb that I would take now going forward is that for the year 2023, we are hedged at about 60%. I think that exactly gives us the sort of the belief that having this operational or operating model now where we run like 50%, 60%, that's the one that will occur if the spot prices are really high. Then when the spot prices go down, then we can sort of profitably run a bigger part of the volume.
Yeah. Yeah. these are like 12 month hedges, if I assume.
Yes. Some of them are also built on a quarterly basis, but a lot of the contracts that we do are for 12 months.
Practically, you would be seeing, Q2 of last year as the energy cost for ferrochrome in this year.
To be a bit more specific even, I would rather say that, when we looked at energy costing Q2 of last year, we were still at a very low point because we had some annual contracts for 2022 that were done on a lower level, and then some quarterly contracts that were still at that point, on a low level. Now when we enter into 2023, we have a lot of new annual contracts for 2023 that are on a higher level. I don't mean that they rise now from what we see realized, you know, late in 2022 into 2023. On the contrary, we have seen some forward prices actually go down now, but they go down from a high level.
A lot of the annual contracts now have actually started from first of January, if we talk about 2023.
Got it. Got it. quickly a clarification on this, you know, metal pricing hedging gains.
Mm-hmm.
You're saying that the negative impact is going to be EUR 20 million more than the earlier guidance?
Yes.
Did I hear it correctly?
Yeah. Indeed.
Can you remind us of the earlier guidance? In the Q3 you had close to no more than EUR 100 million of negative impact.
Yeah.
how should we think about Q4?
Yeah. I think when we had a fairly sort of, how should I say, neutrally negative. I mean, we didn't say it's really negative or a big negative or anything. What we said actually, I'm just reading directly now from the guidance. We said, "With current raw material prices, raw material related inventory and metal derivative losses are expected to be realized in the fourth quarter." I think we said that because, you know, when we had the EUR 100 million, we have said that, "Hey, this is a lot, you know, it's, it's a big number." Now we just wanted to emphasize that there was gonna be a negative number. you know, we don't really have a...
We haven't really given like EUR, but for me that means that, hey, we were somewhere like, you know, more like half of what was there before, and that was the reason not to say that it's high or it's a lot or something like that.
Yeah. Now probably EUR 20 million higher than the earlier expectation.
Now about EUR 20 million higher than what we expected then. That's really sort of, the negative turbulence really towards the end of the quarter is the reason, because we don't have the time to realize through higher alloy surcharge, any higher price out. We already get some hits, on the hedges. That's really the simple reason. I mean, usually it should always be good for us when nickel price goes up. I mean, that's kind of the rule of thumb. But in this special context, it can occur the other way.
Understand. A question, I mean, not specifically for the Q4. I mean, LME nickel prices have gone up a lot.
Mm-hmm.
A couple of the arguments which we hear from our internal guys is that the liquidity in LME is very low, and hence.
Mm-hmm.
The price volatility is higher.
Yes.
low liquidity is attributed to, you know, stainless guys like you are not being that active into the LME because of the, you know, volatility which we saw.
Yes.
EUR 200,000 price.
Yes.
how should we think about your position as in you continue to use LME the way you were using before, or...
Yeah.
You guys are sort of now trying to evolve some kind of alternative mechanism for nickel price hedging.
I can say two things. I can say, one, that as a CFO, I have been putting so much pressure on the organization to figure out, you know, alternative ways of managing the nickel risk. Of course, the key way always is to have very low inventory, you know, that's sort of the... The operative tools are really highly emphasized internally right now because that gives us then sort of less need to go sort of financially risk managing nickel exposure. The other thing is that we have policies, and we are still always following our policies, and our policies call for hedging in, you know, under certain conditions.
Basically, we have some room to maneuver when it comes to our base of hedging, and we basically always are hedging when it comes to inventory that we hold available for sale, and also any sort of price out that we would have already done on a firm basis. That of course, again, reduces the position. We have a bit of a natural hedge in that, you know, if we hold inventory, but then on the other hand already have agreed a fixed price out, then of course we take both into account when we're calculating our position. I would say if I then just translate this all to what is our position in nickel trading right now, I think it's somewhat lower exposure to LME than before.
Bad news for LME. Anyways,
Mm-hmm.
That's so much clear. Thanks a lot. I'll go back in the queue.
Thank you.
We are now going to proceed with our next question. Please stand by. The next question come from the line of Anssi Raussi from SEB. Please ask your question. The line is open.
hi guys. Can you hear me?
Hi, Anssi. Yes.
Great. Great. I have a couple of questions, and I actually continue a bit on the previous ones about nickel price.
Yes.
Actually, pricing mechanisms. I've been asking this earlier as well, but, are your customers still accepting alloy surcharge pricing? What kind of impacts you have if they don't accept it and they go for this so-called all-in pricing?
Yes. I think, the prevailing, pricing mechanism in BA Americas is still alloy surcharge-based pricing, typically monthly. The market in Europe is much more dependent on basically somehow the balance, how much imports are actively in the market, because imports are typically priced on effective or all-in price, as you said. Then we also have to remember that when we deal with big projects, when we do projects in Advanced Materials business, there's a lot of project-based work. Typically, those could also be using a pricing mechanism, you know, all-in price or agreed price in advance. I would say with the current market sentiment that we have, we have an increase in so-called fixed price, effective price, all-in price in BA Europe. It's actually...
By now, I would say clearly more than half our order intake go that direction. That just brings an interesting element then when you ask that what are the impacts. I think that what the impact is and why I always say that as a CFO, I prefer the alloy surcharge, it's that provides a better risk management for us. When we talk about effective pricing, then the challenge that we have to overcome is that when we price out, you know, it's just the price that we agreed when we took the order. If the nickel price went up meanwhile, well, bad for us. If the nickel price went down, good for us.
There is not one answer, "Hey, these are the euros." It's more that there is one risk management tool that we then miss at that point. In an environment.
Okay. You mean... Yeah.
Like right now-- Sorry, Anssi. Sorry to interrupt. I just still wanted to be really clear on this one. In an environment like right now, where we see these increases on LME nickel price, but at the same time in a market environment where we have more deals done on effective prices, it means that, you know, with some, of course, with some variation here, because Americas is pricing out alloy surcharge. Part of Europe is pricing out alloy surcharge, but a big part of Europe is pricing out fixed price. The recent changes in nickel price don't impact that price out at all. We don't get the benefits in this case. Now, when we have had a higher nickel price, we don't get the benefit of that.
Okay, that's clear. The second one is about your ferrochrome furnace.
Mm-hmm.
Any estimate or changes in your plans? You're still planning to relaunch at the end of this quarter, or how do you see the situation at the moment?
That is the current estimate. Obviously, I mean, we are in readiness to change that. There's been a lot of downward movement in the forward electricity prices, but it's not been sort of significant enough yet for us to really be able to reassess our Q1. We keep a very close eye on this, so I will come back to this again in early February when we have our Q4 results. At the moment, the plan is still that we stand for Q1, as we have informed before. For furnace.
Okay. Yeah. You still think that you're able to make positive profits in ferrochrome division, even with this capacity utilization rates?
You ask a really good question. With ferrochrome production, yes, because the share of fixed cost is so low, of the overall cost burden. You know.
Yes
... we have three furnaces, so we can keep one furnace down. We have various arrangements, furloughs, et cetera, for personnel. We keep our costs down. It's not that we have a low capacity utilization per asset, but we have a total closure of one of the assets. You know, the economics work. It's a really good question because, of course, the sort of base of, you know, how to make money in our industry is you need to have a high enough capacity utilization.
Yes. Good point. Thanks. Actually the last one from me is regarding your cash flows in Q4.
Mm-hmm.
What kind of elements we should think and of course, you will receive some cash from this, Long Products divestment...
Yes
later, but not yet, yeah.
It was January. That was yesterday.
Yeah.
We received the cash yesterday.
Yeah, exactly. What kind of cash buffer you're happy with, like if we think about?
Mm-hmm
... dividend and so on?
Wow. What kind of cash buffer I am happy about? I think I always think of, you know, liquidity also in terms of available liquidity, that we have EUR 800 billion undrawn RCF. You know, I need to somehow factor that in and put that in. I think this sort of, you know, coming to a negative net debt situation is a good target for a period to make sure that we have money to pay dividends also in a possible downturn. I think I'm sort of all happy with that. Please note that we did launch the share buyback program.
This EUR 100 million is actually going to impact our balance sheet already in Q4 because, well, we make a press release every day, so I think we are somewhere a bit more than halfway through the program. It seems to me that accounting rules really ask for putting everything on debt when you have made the decision of the share buyback. That's just something to factor in. That this goes the EUR 400 million impacts our debt figure already. We have taken also some decisions to, what I would call, have a good use of the cash. That's maybe why I'm saying that, you know, reaching this sort of neutral position is for me a very good place to be in now, entering into 2023.
Okay, thank you so much. That's all from me.
Thanks, Anssi.
We are now going to proceed with our next question. The question comes from Ioannis Masvoulas from Morgan Stanley. Please ask your question.
Hello. Good afternoon, Happy New Year, Pia. A few questions from my side. I'll start with the first one. We've seen U.S.-based prices remain exceptionally resilient throughout the second half of last year, another significant premium to Europe. Given your comments around the destocking pressures, the softening underlying demand, how should we think about base pricing over the course of Q1? Do you expect to hold up, or are there downside risks?
Listen, I think based on sort of every fact that I have, there are indeed downside risks. I'm usually very cautious. I won't be able to say to you know, what's the amount of dollars per ton or something like that. I just If we just sort of counting all the factors that we know, that there have been still some imports, that the destocking has not been that fast. I mean, what is the way to solve that? What has historically always been the way to solve that? It has been that prices go lower. I think there is downside risk, therefore, clearly in the pricing.
Okay. I guess up until now, it feels that domestic producers were very disciplined on supply to avoid taking a price cut.
Mm.
Feels like that's no longer a viable strategy given the underlying demand trends, right?
Well, I go back to sort of the balance that needs to be there between demand and supply. I would say with the destocking, that is really what I'm thinking about when I give my comment. I'm just saying that, you know, destocking needs to happen, and it has been slow if I just look at the stats until now. It started in Q4, but we are already now in January, and we haven't seen that big drop yet. That's really what I base my comment on. More sort of from a general perspective, that's. I'm sorry, that's all I can say.
No, that is very helpful indeed. Thank you. Just going back to the timing and hedging effect, just to make sure I get this right. Reasonable expectation for Q4 is sort of a high double-digit million figure negative. Is that the way we should think about it?
Yeah. I think it's a reasonable assumption. I mean, given that when we were more than EUR 100 million negative per quarter, we talked about both in the real life and in our guidance that this was sort of a high negative. And we didn't talk about that now, but still we had to add EUR 20 million negative to what we had thought before. That's why I think your assumption is, you know, very aligned with how we have usually tried to describe the situation.
I see. I guess related to that, I think at Q3 you had some positive effects around scrap prices. As we go into Q4 , is there an incremental negative delta on the EBITDA bridge that we should be aware of?
Yeah, I tried to actually use some time in Q3 to put some color on this, and maybe I'll just repeat that. I mean, it was really a market situation that was quite peculiar because we could observe sort of some good deals, you know, being available for the one who could buy them, et cetera. Of course, such market situation cannot go on forever. It was a bit of a, you know... It was one of these phenomena that can occur at times. I don't think, you know... It's not that we would see something much more negative, it's just that this sort of positive temporary effects probably are not there in the same way.
Yes, if you talk about the bridge, yeah, from a bridge item perspective, you would see something negative. I wouldn't sort of wanna say that, "Hey, the market has suddenly gone all tight and all difficult." That's not the message. Not these kind of really peculiar, strong, positive one-time impacts.
I see. I see. That's clear. Thank you. Just the last question from me on working capital. If I recall correctly, you're looking at a sort of modest release for Q4.
Right.
Can you give us an update here?
Yeah. Yeah. I think it's been a sort of favorite topic of mine for the last two months to look into how we are doing on that one. I think we are on track, or I haven't seen, you know, we haven't closed the books yet, so I haven't seen the final numbers. I think all the indicators are in that direction, that it's a modest, it's a modest release
Great. Thank you for that and, all the best for 2023.
Thank you so much. The same to you, Ioannis.
We are now going to proceed with our next question. The question come from the line of Joni Sandvall from Nordea. Please ask your question. Your line is opened.
Yes, thank you, good afternoon. You touched upon the import dynamics to the U.S. and kind of imports have been surprisingly resilient.
Mm-hmm.
Can you say something, I mean, after the exceptional Q3 and the sort of the share of imports being very high, I mean, not asking for the number, but has it worked as you anticipated that the lower price differential between Asia and Europe?
Mm-hmm
... has been sort of has starting or should be starting?
Yeah.
I mean.
... what sort of, what are you seeing there?
Yeah. Yeah. I think when I talked about the import pressure, I would actually highlight that unlike the normal pattern, you know, Americas have still seen higher than normal shares of imports. When I look at Europe, I think we saw the typical sort of spike in October when the quarter started. I would say we are sort of there also at the tail of some orders that may have been placed earlier, you know, when the price picture was different, when the context was different, because there have been still quite long lead times, it seems, on some of these.
I do believe we are more sort of here again at the tail end of those impacts of, you know, the price differential being just too big and motivating a lot of imports. It's on a declining trend, but it's still there are still imports. We are not yet. Of course there's always been imports, but I mean, they are still very, you know, they are still very visible in the market.
Yes. Yeah. Okay. Well, just a quick word on CBAM and that EU decision. I mean, it's not strictly-
Yeah
... the Q4 thing, but I mean, when do you think you might, I mean, there might be sort of starting to see any change in the market behavior if the tariff if it sort of starts relaunching, was it in October 2023 and the?
Yeah
... and the transition phase will just have reporting requirements and all that. I mean, is it something that could start to sort of somehow show in the,
Mm.
In the demand patterns?
Yeah. I look at this holistically. I think it's one item combined with the others. You know, we also have the safeguard review. At the same time, obviously, you know, we have anti-dumping duties with Indonesia, you know, et cetera, et cetera. There's like a holistic concept of various measures to try to make for a level playing field. Obviously this carbon CBAM is one really important for the long term.
That's, Joni how I see it, that it's really building something that could then be consistent over a long period of time and would call for sort of a more consistent approach to how companies and countries think about how they produce, you know, how dirty they can make their production or not, what they need to emphasize, what kind of transitions there will be in production patterns, et cetera. I do see this more as a sort of a long-term view and for the next few years, if we talk about 2023, for example, and just this reporting, I don't think it will immediately change, but it will start gradually changing. There are really different alternatives than how this will play out.
I would say if those countries who are now importing into Europe continue with the same sort of high CO2 emissions, this will have an impact on their ability and willingness to import to Europe. Of course, they have options as any company or country has, and I'm sure they are now assessing what those options are. Of course, they also include then, you know, how to produce with less emissions. So we'll see. I think all in all, for me, this is a very positive and a very clear message that what is important for Europe is globally that there is less CO2, not just to prohibit production in Europe.
Okay. Great. Then final question on the other items. I mean, it used to be that sort of EBITDA for that line used to be between, say, EUR -10 - EUR -30.
Yeah.
You moved, well, the part of Long Products, which you don't divest is now.
Yeah
... and, and, and-
It is, yeah.
for a couple of quarters, it's been more like a positive rather than negative. Now with the LP kind of completed, is that sort of other line, I mean, just if you can give some color, what will there be any kind of change, or will those operations remain in that other line?
Yeah
and,
Yeah
do something else?
Those operations will remain. It's a good question, Joni. Yes. Those, so that is the Degerfors unit in Sweden that was not part of the deal. So that unit is probably gonna produce, you know, a low number EBITDA, but still impacting in this segment, other or this sort of other items. That will be there for the foreseeable future, I mean, of course, we are looking for options. What's the best way? Who is the best owner, or what's the best way to run this? We haven't communicated any decisions about that yet.
Right.
I think, you know, over time we need to go back. It's the, you know, reverting to the mean. probably, you know, - 20 is then the good long-term view, but there might be a little bit of turbulence still around that.
Yeah.
for a period of time.
Oh, okay. Okay. Thank you.
We are now going to proceed with our next question. The question's come from the line of Dominic O'Kane from JPMorgan. Please ask your question.
Hello. Thanks for taking the question. I just wanted to maybe dig into a little bit more detail on Q4 shipments, by region.
Mm-hmm.
If you could just maybe help us understand the percentage delta of how we should think about.
Yeah.
Shipments for Q4 versus Q3, for U.S. and Europe. Then, I know it's obviously a little bit early, but, is there anything we can say at all on Q1 at the moment?
Right. Okay. First, if I really... I think it's a good question at this point in time. We usually only give the guidance in percentage on the group level. I'm sorry that I won't be able to provide percentages per region, but I'm still happy to provide more color. Right now, I think where we are really in for a bigger negative impact is BA Americas for two reasons. The destocking that I mentioned and then also the seasonality. Last year, 2021, looking at Q4 there is not a good comparison point because we were still somehow in this sort of post-COVID rebound and it was a particularly strong quarter, actually, the fourth quarter of 2021.
If you take kind of a longer term view and you look into more years, you will see this distinctive pattern of a lower delivery volume in BA Americas from Q3 to Q4, and you should add the destocking impact. It really means that we have a clearly lower volume in BA Americas. I wouldn't be as dramatic when it comes to Europe. It's clear that we are in a weakening market environment. We are at the tail end of the destocking. Apart from Advanced Materials, where we clearly have some steel subsegments that are doing really well, I would say, yeah, I mean, the market environment shouldn't talk for much positive movement.
On the other side, I don't wanna overdo it simply because we really have seasonally Q4 should be a little bit stronger than Q3 in Europe. It's really in BA Americas where the drop is very clear.
Yeah. Again, sorry, I know it's very early, but in terms of how you're thinking about Q1-
Mm.
Is it too early to sort of think as though the current conditions are status quo or?
Yeah. I think
I know it's.
Yeah. The, the tricky thing here right now is that in this weakening market situation, the order books are really getting even shorter. Let me just be even more specific on that one. I mean, a normal order book for commodity would be about three months, so about sort of the next quarter is what we would usually see. We are still now booking Q1. That means that we might even book something still for February, or at least for March, we are still booking. That is where we are. We have not completed our view on Q1 yet. I think by the time we give our Q4 release, we will have a clear picture.
If I look at the market dynamics, I would be more cautious around the destocking continuing in the U.S. That's the fact that we can see right now.
Right.
that I would factor in.
Okay. Awesome. Thank you very much. Thanks for your help.
Thank you.
We are now going to proceed with our next question. The question's come from the line of Bastian Synagowitz from Deutsche Bank. Please ask your question.
Yes. Good afternoon, all. I just had two quick questions left, actually. Pia, you already talked about, I guess, cash and I think also briefly touched on the share buyback. At the CMD, I think last summer, you basically said that you could see the dividend basically doubling versus previous levels.
Yes.
I guess it's probably fair to say that, you've been probably fast-tracking shareholder returns since then with the share buyback that you announced. The comment you made last summer, would you still see that basically valid also for our expectations, on what could be announced with the full year results?
Yes, I see no reason to change that earlier assessment. Well, you know the Nordic governance. You know the board has to propose to the AGM, it's very firmly sort of in the board's hands in the Nordic governance model. Nonetheless, I see no reason to change that.
Mm-hmm. Okay. Maybe that expectation holds also for February results. Okay.
Yes.
The second question, a bit of a sneaky one, so sorry about it, for that. You basically started off basically talking about normalized EBITDA. Now I guess the question is, we're clearly far from what is a normalized environment with, I guess, volumes being very weak. On the other side, you obviously have a couple of good items with your edge prices holding up. You still have very high contract prices. What's the comment also meant for us to basically see expectations when it comes to the upcoming sets of results? Would you be comfortable to basically be within that within that normalized range even though we probably don't really have a normalized environment?
Yeah. Yeah.
At least when we look at the single buckets, if we add them all up, it maybe works out.
Yeah. Bastian, it is. I think still it's a very fair question and it's, you know, under the circumstances, you know, what is normal? I'm sure that you remember that when I described this normalized, I really was especially emphasizing that, you know, prices had really peaked. You know, we looked at a model where the prices were reverting more back to a sort of historical level. That was how we had made our assessment of, you know, what normalized could be. You are absolutely right. Now, I think when it comes to Europe, you know, just looking at how prices started to decrease through the summer, et cetera, we are of course, you know, in a declining price trend.
It's combined at the moment with this destocking that makes all this sort of volume drop being prominent, especially in Americas, which certainly, you know, once you come below a certain volume, it gets really tricky because capacity utilization is a key in our industry. You need to be above certain levels to be able to make decent money. And I think that's in an individual quarter, that's why I made this EUR 500 million-EUR 600 million on an annualized level, because then you even out a little bit some of these, you know, kind of one time impact in the quarter, which could be a really low volume in the quarter or something like that.
I think overall, I mean still holistically, if I try to assess Outokumpu as total, outing in that ferrochrome has very particular difficulties with the high electricity price, and that we have been very open with that. We operate with low volumes. We will make low results there. You know, Americas prices have still hold up, as you have all seen, at the same time we really have more pressure on the volume side. Europe, as you said, of course, we have sort of a contractual base where the prices are not altering, anything that is spot has really been on a declining trend since summer.
I mean, when I holistically sum it in all of this, I'm still really happy with this assessment of EUR 500 million-EUR 600 million normalized, and I think we are now much closer to that kind of environment, you know, than what we were. In the summer, we were still sort of in the peak. Q2 was clearly the peak. When we had the PMP in June, we were still in that, a little bit remarkable or very good, area. Clearly we have moved away from that. Do I mean by normalized that the markets will stay as they are right now forever? Of course not.
You understand this normalized holistic assessment of everything that we see, you know, moving away from high markets to something now much more on the normal, on the normal side, you know, then I look at how we can create our results from that.
Okay, perfect. Well, thanks for the call up here and all the best for the new year to you.
Thank you to you too, Bastian. Thank you so much.
We have no further questions at this time. I will now hand back the conference to Outokumpu for closing remarks.
Thank you all for joining our call today. Before we close the call, I would like to remind you that we will start our silent period on next Tuesday, January 10th, and continue until our full year results are published on Thursday, February 9th. Thank you once again and have a great year of 2023.
This concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.