Outokumpu Oyj (HEL:OUT1V)

Earnings Call: Q3 2020

← View all transcripts

Nov 5, 2020

Hello all, and welcome to Outokumpu's Q3 2020 Results and Strategy Webcast. My name is Linda Heckkila, and I'm the Investor Relations Manager here at Autocompo. With me today, we have our CEO, Heike Malinen and our CFO, Bjartorenen Forsell. Today, we will first start with our Q3 results. And after that, we will step into presenting and discussing our new strategy. We will take questions after both sessions. The strategy part will be hosted by our Group Controller, Steve Hudson. But now before we start with the Q3 results, I would like to remind you about the disclaimer as we might be making forward looking statements. But now please, Heikki, the stage is yours. Thank you, Linda. Good afternoon, and welcome to this session to discuss our Q3 results and also then quite extensive conversation around the new strategy of Outokumpu. But let's start with the Q3 update. And on the first slide, just some of the high points for the past 3 months. As was the case in the Q2, so COVID, of course, has impacted our business quite clearly. And we had lower demand in the Q3. As you may remember, also in Europe, the Q3 has typically a weaker seasonality. So those 2 combined impacted our volumes. Safety, as you know, safety is extremely important. At Outokumpu, we talk about it all the time. It's the number one topic. I'm very happy that our safety performance remained very strong in spite of the fact that we were in the midst of such a massive pandemic globally. Our performance in the Americas was good. And this was now the 4th quarter in a row when we were clearly making consistent progress in developing the business there and improving the financials. Import penetration spiked in Europe, and we'll show you a couple of slides later. But clearly, this seems to be a continuous theme now at the moment every quarter. Then if we talk about just sort of the, let's say, environment around COVID and what actually has transpired. Well, I said on the safety front, I'm really proud about the accomplishment of our employees. We had very few incidents, and we have been able to protect our employees. We have been very conscious with social distancing. We have travel restrictions in place. And if people travel or when people have to travel, they are extremely careful in how they do it. We have had 191 people infected, but out of a group of 10,000, it is a small amount. In terms of our operations, we have been able to have seamless operations. We have had no interruptions of any significance because of COVID. And on the financial side, we have been able to improve our liquidity. We made good progress in funding our business during the Q3. And what I'm specifically happy about is that we came into the quarter with an objective of reducing our net working capital, and we were able to achieve over SEK 100,000,000 in net working capital reduction. We did what we had intended what we intended to do. And so obviously, I'm pleased for that. In terms of government aid, we have received very little aid so far from the countries in which we operate. Today, of course, today is a tough day in Outokumpu. Our fixed costs in this company are too high given the operating circumstances, and we'll talk about the circumstances in much more detail today. But in a nutshell, we have to reduce our breakeven point. The market is very competitive. We've seen substantial decline in prices. And therefore, after very, very careful consideration, we have taken a decision to announce that we would like we need to start a process to have negotiations about a potential reduction of headcount of approximately 1,000 employees. The planned employee reductions would include 270 in Finland, 250 in Germany and 190 in Sweden. And then the remaining residual number will happen in other countries across Europe and also in the Americas. Pending the outcome of the negotiations, so we expect to have a charge of about €75,000,000 to €80,000,000 because of the restructuring costs. But then that is obviously pending, pending the outcome of the negotiations, which will start here shortly. A few words about the results for the quarter itself. Our group adjusted EBITDA was €22,000,000 Clearly, we came down from the previous quarter. Not happy about it, but that is where we were. On the right hand side, you can see that our volume declined about 7%. This is roughly about where we expected it to end up ultimately. In terms of prices, you can see that the red bar is quite large. We have continued to have price decline. And also in terms of our product mix, we also saw a decline of that in terms of less value added grades, which brought down the average price. We have worked very hard to try and compress our costs across the whole system. But in spite of best efforts, we have not been able to compensate the loss of coming from the revenue side fully through fixed cost compression. Worked very hard, but the decline on the revenue side was just was too big a number. And then in the quarter, we also had planned maintenance work. We mentioned already at the outset that in Artornio Ferrochrome plant, we were going to take a very major shutdown maintenance shutdown, and that went that has been completed, and it has gone according to expectations. And I'm happy to say that we have had now a good start up since we opened up the plant again for operations. Then a few words about raw material pricing. During the quarter, nickel prices started to increase again. We saw an increase of approximately 16%. And then on the ferrochrome side, benchmark prices were basically flat through that period. Then a couple of words about imports. Imports into the European Union continued to rise. Their share amounted to about 31% during the quarter. And then on the right hand side, you can see the corresponding statistics for the United States. Share of 3rd country cold rolled imports was about 14%. So obviously, here on the right hand side, one can see that Section 232 is having an impact in slowing down imports into the North American market. Here on the European side, we are able to monitor the cold rolled quotas, how they sort of get filled up. This data is now up to date to last week, so the end of October, so the 1st 4 weeks of Q4. And you can see here the days 32 days of statistics and then the blue part of the bar tells you what amount of volume actually has been filled over the quota. And interestingly, if you look at the middle bar, which is the others, I think that's a big part of that is Indonesia. So you can see that even in the 1st days weeks of the quarter, they have used the quotas the quota fully. Obviously, we're talking a lot with the European Union. We expect and hope that they are very active in also creating a level playing a field here. In September, the European Union basically initiated anti dumping investigations for cold rolled stainless steel for India and Indonesia. And then a month later in October, anti dumping duties were then definitively put in place for 5 years for Indonesia, China and Taiwan. So those are important measures that are indeed needed to try and somehow create a more level playing field. So that at this outset is a very brief update on the key figures and the market. And I will now hand it over to my colleague, Pia, who will then talk about the financials in detail, and I'll come back then and talk about the outlook. Thank you very much. Pia, please. Thank you, Heikki. Let's see. Let's get organized here. So good morning, good afternoon. I hope you are all staying safe and staying healthy at this point in time. So let me take you through some of the financials of the Q3 here. And now the clicker takes me to the key figures page. I mean, obviously, starting at the top, you can see our stainless steel deliveries coming out at 4.88 kilotons. You can compare that with the Q2. And I mean, this is still the decline here very much according to what we had also foreseen. So no surprise. I think still today, talking a bit about the BAs, I will touch upon how we see the order intake now developing and what the market situation looks like. Obviously, adjusted EBITDA, Heike has already commented on, but given the low level of EBITDA, it obviously then results in a net result that is negative of SEK 63,000,000. The operating cash flow of this quarter came in very strong, and I actually have a slide explaining that a bit later. I think that's an important combination of our own actions here really to mitigate the lower cash flow, obviously, from the lower results. So we'll talk a little bit more about that still. Gearing still at 45%. And then looking at the CapEx of the quarter, we are down at €35,000,000 But let's look a bit more at the BAs. So here you have the figures from BA Europe. Looking at the decline in the EBITDA, we started at the 30% in the second quarter, now down to 9% in the third quarter. This is obviously a really low result. You have looked into the import statistics together with Heiki here. So I mean, we have definitely seen a spike in the imports again with the start of the new safeguard period, particularly in July. This is also seasonally, typical holiday seasons during July August. But if you look overall at the green bars here, you can see that we have put in place very significant temporary mitigation actions. So actually, based on the more detailed reports that I have in the background, I mean, we have been fighting back with up to €24,000,000 of our own actions, various types of actions to really compress costs in these difficult time periods. And as Heikki said as well, I mean, these are predominantly our own actions. For the group total, we received €3,000,000 of government support in the 3rd quarter. So obviously, that's only a very small amount here. Maybe it's good to talk a little bit about the market situation because when you look at the decline here from the Q2 into the Q3, you can see that deliveries obviously were a negative contributor. We were down on deliveries. But at the same time, you can see that the pricing and mix part actually here is kind of the biggest negative impact. And I think we have talked about that sort of through our meetings during the summer as well that how we have seen kind of the pattern, so to say, unveiled during this pandemic period. I mean, after the really slow order intake early on during the pandemic period, when we started to see the pickup, we have seen it in specific segments, appliances or now also automotive. So it's clear that the sort of, say, market picture is still somewhat scattered. And I think it's also visible here that the best margin products that we have that are more the value added grades that typically go into bigger projects, CapEx type of projects. Here, we have had clearly lower volumes. And if we also look into how the pattern is developing right now, first of all, I want to say that from sort of a very general market perspective, obviously, looking at, for example, distributor inventories, we do see that they are somewhat lower during September. And there is increased activity out of appliances or automotive. I mean, you can read this in any business newspaper as well. I mean, this is all over the news. But I think that one sector where we have typically had value added sales, So the pro grades going, for example, into oil and gas sectors here, we still feel that depending, of course, on the oil price, but with current low oil prices, the demand is clearly on a lower level. So overall, of course, when you look at the picture what happened in the Q3, we can say that the lower prices were clearly deteriorating the results. Now I have used quite a lot of time here on BA Europe. There is actually still one more detail that I would like to comment. It is on maintenance because maintenance is an area where, at least, I have received a lot of questions. What is really the compression of maintenance cost? What do you mean? How does it impact the company, etcetera. And I thought maybe just to share a little bit more light on that. However, now my comments are on group level. Obviously, BA Europe being the biggest, this is where the biggest impact is as well. But we have been now working really a lot with how can we optimize the maintenance costs. And I just want to say that an average typical quarter, maybe we would have around €50,000,000 of external maintenance costs in our cost base. And through this year, we have been looking to various measures. Can we cut €10,000,000 Can we cut €15,000,000 through various measures? And when someone asked me that does this mean that now there is like a big debt waiting for us somewhere in the future, I would just really want to say as well, we have been on clearly lower volumes this year. So my interpretation is not that we have sort of a debt that we will need to pay off going further. But this maintenance cost reduction has obviously been a part of the significant cost reductions that we saw as well in the Q3. Now I will go through the other BAs slightly quicker, but still want to embrace a little bit the good news here as well out of BA Americas. You see that from the, so to say, really COVID hit Q2, where we still had a positive EBITDA. We are now up to EUR 40,000,000 of EBITDA in the 3rd quarter. You can also see that, yes, indeed, there was a little bit more of the volume side, but we've had more boost here from mix, also a little bit of the pricing side as well as then very, very significant cost compressions as well out of BA Americas. And you see that this has supported us into an EBITDA level of €14,000,000 I mean, as well in Americas, the comment about appliances and automotive, that is valid as well for the market in Americas. And I want to say that we have seen distributor inventories for a really long period at low levels, and I think that's what we still see in the statistics. But it seems that there is a little bit, so to say, more appetite now, maybe gradual is then starting to build up the inventories as well. On the next page, we have long products. Here we go from a negative result to a negative result. I would like to say we are fighting back. There is cost compression as well in this BA. However, the market situation does remain very, very difficult, and you see that deliveries are down 22% in the quarter. So this remains very challenging. The new management, of course, working since July with the accelerated turnaround. And now we just have to work through that program and start seeing then the improvements gradually. Finally, BA Ferrochrome, I think Heikki shared the most important piece of news. You do see here in the 3rd quarter the significant cost increase based on the big maintenance break in the 3rd furnace. But we know that this maintenance work was successful. We have been able to ramp up during October as we wanted to and as we predicted, and I think that really remains the main highlight here for BA Ferrochrome. Let me talk a little bit about the cash flow. Here, I'm showing the cash flow both for the quarter as well as the cumulative figures. And obviously, the Q3 for us has really been quarter now to push cash from working capital. You see the quarterly figure is EUR188,000,000 This does include the opportunity of the deferred VAT payment from the Finnish state. And I just want to say that this was €75,000,000 The benefit came in July, and this will mean then that we have 21 months where we will basically amortize this, pay this back in kind of equal installments. So this was one of those sort of cash flow based opportunities in the COVID situation that was offered and that we have also used. But you see that there's a lot of other positive movement as So it's the €75,000,000 of the VAT, and we promised early in the So it's the SEK 75,000,000 of the VAT, and we promised early in the year that we will bring at least SEK 100,000,000 out of working capital into cash flow this year. And from my perspective, what comes next now is that we have reached really sort of a low point or low level in terms of inventories. So we do not intend to squeeze inventories further down. This is now the level that we have achieved. We will look for efficiencies still in other areas of working capital. But generally, if we talk about improvements in working capital going forward, we need to then work, so to say, more profoundly on kind of the whole system that we have. In the current system and the setup that we have, it's clear that we are now our work will be on efficiency and on trying to remain on these levels. So we have delivered what we promised. Obviously, this, together with very strict CapEx control, has helped us to deliver, in my opinion, good cash flow figures in a low profitability quarter. The CapEx, there is nothing new here, but I do want to reconfirm EUR 180,000,000 CapEx guidance that we have for this year. We are well on track for that. You can see that also from our cumulative figures of cash flow for this year. And finally then, the strong cash flow has obviously helped us to keep the debt figures really under control. I was looking back at the historicals, and I would have liked to squeeze just a few million more. We would have actually been on a historically low level. But with the gearing at €45,000,000 and the net debt at €1,100,000,000 I think this is a good achievement in the midst of a pandemic. And finally, liquidity, obviously, remaining an important topic for us and a priority. And Heikki already alluded to this. But in this year of 2020, that I'm sure many of us will think about later as a really tough year, We have actually been out with new pension loan, convertible bond, the VAT funding and now most recently, an ECA backed funding out of Sweden. All in all, all of these new fundings represent more than €400,000,000 during this year. Our liquidity reserves remained really strong, actually improved during the Q3 and are now €900,000,000 So with that said, Heikki, I complete my section here and would hand back to you. Thank you, Pia. I guess you can stay here so we can then do the Q and A. So in terms of the outlook for the 4th quarter, so as communicated previously, the COVID-nineteen pandemic is expected to have a significant impact on the stainless steel industry throughout 2020, an increase in uncertainty. Autokounmpo expects its stainless steel deliveries for the whole group to remain stable in the Q4 compared to the Q3. The seasonal year in maintenance work in Tornio, Finland is expected to have an approximately €10,000,000 negative impact on the 4th quarter result compared to the 3rd quarter. Adjusted EBITDA is expected to remain at the same level during the Q4 compared to the Q3. So that is the outlook for Q4 2020. And I guess now we are moving on to the Q and A part. Thank you, Heikki, and thank you, Pia. Operator, we are ready to take questions from the line relating to our Q3 results and Q4 guidance. Our first question comes from Seth Rollins from Exane. Please go ahead with your question. Good afternoon. Thanks for taking our questions today. It would be great to get a little bit more detail on the strategy update and the cost savings initiatives, given the importance for the group. On layoffs, can you please give us some color on the timeline for realization? We expect any cost benefits in 2021 or only really going into 2022? And then also, I think you talked a bit more about improving your product mix through the new strategy. However, that's been a clear headwind for you over recent quarters. Can you give us a bit more color on what internal efforts will be needed to drive that stronger mix and whether there would be a CapEx implication of that? Thank you. So if I just generally first of all, in terms of the strategy, so we will comment on that in much more detail still later today. So if it's okay, I'll just give you general comments here and then we'll do a deeper dive on the strategic piece. But in terms of headcount, as you know, the process is very clear. We start the negotiations now, and then they will take whatever the time it takes, usually some months depending on the country. And assuming that the negotiations get completed end of this year or early next year, then one moves into implementation. And that, of course, will depend on the outcome of the negotiations. So as we are communicating, so during the course of 2021, assuming that the plans are sort of agreed with the unions, then we will have we will start seeing the impact in 'twenty one. Yes. But anything you want to add to the actual expenditures? Yes. I think on the actual expenditures, provided that the negotiations are proceeding before the year end, we could be in a position to already book the provisions during this year, obviously, then adjust for them, but this is still pending those final negotiation results. And then the cash impacts would come gradually during next year. So typically, there is also then a link to how the savings can be realized. In terms of your question regarding the value added rates, so we are the market leader in value added grades, pro grades globally. And as I will say in the strategy, so it's basically sort of a 2 pronged approach. On the one hand, we are putting more research and development funds to augment the product mix. Obviously, we're working in very complex technical situations when we work with those grades. And then secondly, we will be investing more in our selling capability, technical sales to be able to even more globally sell these grades. So the market is not only Europe, we're basically a global supplier when we talk about pro grades. But I'll comment on that also later today. Okay. And a separate question just with regards to the market outlook, please, not the strategy. But can you talk a little bit more about what you're seeing in terms of the European stainless pricing trends at present? Your peer earlier this week commented they've seen prices tick higher since September. They're guiding to stronger ASPs in Q4. Is that something that you're recognizing in your own business? Yes. Maybe if I can just start by saying that we all know that there are sort of data on price available. And yes, indeed, maybe there's been sort of small upticks visible in those. When I look at overall, I mean, the pricing in Europe is still under pressure. And I think that's something that we will definitely talk more about also later today. Okay. Thank you. Our next question comes from Anssi Calvanini. Please go ahead for your question from SEB. Yes. Hi, thanks. It's Hansi from SEB. Thanks for taking my questions. Most of my questions are related to the strategy. So kind of well, I just shoot them and you can refer to the following presentation. First of all, can you indicate a little bit on cost savings? On what functions, what units are you targeting when you are talking about the layoffs? Yes. Anssi, may I just actually kindly ask you, would it be okay to ask the strategy question after our strategy presentation? I think we are still we will still get to some more details in our presentation. And if that's possible, I think we would really appreciate. So we would like to focus on the questions really on related to the Q3 and sort of the current situation in this part of the presentation. Definitely. Then I only have one question left. Cash flow was boosted by the deferred tax payments, 21 months payments. Is it kind of split evenly during the next, let's say, 2 years, the payback. So how should we with the timing of those? And when we now enter into Q4, you indicate fairly flat volumes and indicate that inventory you cannot go further down with it. How should we kind of think about the working capital situation and development when we enter into Q4? Yes. No, Anssi, thanks. Very good questions. And I can start with sort of tackling the VAT question first because that's kind of a that's sort of a predefined scheme and it's just sort of equal amortizations through the period. So that's basically how it works. So it's roughly 2 years just paying this €75,000,000 off. That's how it works. And then visavis the Q4 cash flow, I mean, obviously, per se, we are not guiding for that. But if I just look at the main elements, you have actually mentioned an important one being the stable volumes. On top of that, when I look at working capital, I mean, we had set ourselves the target of SEK 100,000,000 improvement this year. Now we have cumulatively SEK 175,000,000 but it includes that VAT deferral. So I think we are now in a position where we will more make sure that we can keep stable on this level. So this is as far as I can go in terms of the element then of the working capital in the cash flow. Okay. That's helpful. Let's come back afterwards on the strategy. Thank you, Anssi. Our next question comes from Alan Spence from Jefferies. Please go ahead with your question. Yes, thanks. I've got 3 quick questions. The first one is on the outlook. I was a little bit surprised by the comment for flat group deliveries into the 4th quarter. I would have thought that we'd be coming out of seasonal weakness in Europe and your European deliveries are about 2.5x that of your Americas. So unless Americas is falling off a cliff, what we're not seeing that seasonal pickup, what am I missing? May I just start by saying that there is one important detail in our outlook that Heikki has mentioned, which is that we will have a more significant maintenance out of Torunio. And this is, to some extent, also putting kind of a lead on the volume that we can push out of that system during the Q4. So I think that's kind of one element of it. Obviously, then you are right that in terms of a U. S. Business, you would expect with Thanksgiving and Christmas, etcetera, a bit of a seasonal impact into the Q4. But I think what I just shared about sort of how the market looks in U. S. Right now, I mean, we are still very low distributor inventories, maybe with a little bit of appetite now kind of building it up as well as good activity in many segments, including appliances and automotive. So I think your judgment of U. S. Falling off the cliff seems a little bit harsh. Yes. Maybe if I would add on the volume scenario. So obviously, it is a very bifurcated market. There are certain segments, as Pia has already alluded to, which are more robust, like appliances, white goods, some part of automotive. But then there are others which are actually quite weak, some areas where there's actually very little demand at the moment. So in this bifurcated market, we don't get the sort of the full benefit of the whole capacity we have. Okay. So no, you didn't kind of pre produce in order to support shipments into the 4th quarter then? Sorry, could you please repeat? I didn't hear you. You mentioned sorry, I can't get the feedback from my own point. You mentioned the prime maintenance in the Q4 impacting volumes. Why not produce a little bit extra throughout the summer when demand was seasonally weaker to then fulfill those orders and that improved activity? I guess that is one of those rhetoric questions, which is, in hindsight, some things are easier to answer than at the point. So the approach that we have chosen is to be prudent during a pandemic period. We have been compressing cost and being very prudent on working capital as well. Okay. Fine. And my last one is a little bit 50% comment, 50% question. Around the balance sheet, I mean, I think, obviously, this has been a concern for the market for some time. You've kind of routinely said that yes, there are covenants and you feel comfortable with the headroom to those limits. Why not just actually provide us with those covenant limits so we can the market can understand the sensitivity to where things really would need to fall or improve and judge the headroom there. It just feels like there's not a lot of clarity in terms of how safe you might be around that. Thank you. I think it's a fair point. And I mean, let's consider I can only repeat, obviously, now as well with the gearing on the 45% that I remain confident on that, and there is plenty of headroom to the covenant level. But let us think about that. Thanks for the input. Okay. Thank you. Our next question comes from Janis Maspoulis from Morgan Stanley. Please go ahead. Hi, yes. Good afternoon and thanks for taking my questions. Just 2 left from my side. The first regarding the Kemi expansion CapEx, could you remind us how much is left to spend in 2021? And then secondly, in terms of the guidance around shipments, is it fair to say that there was a bit more destocking from your side in H1 across Europe and the U. S? And now maybe there is a bit of a catch up that explains some of the outlook for Q4, both in terms of Europe and North America? So maybe as you started with the CapEx question, if I start up with that one. So I mean, obviously, today, when we are looking into the current year, we are somewhere around the level of €70,000,000 for the Kemi mine expansion, the Deep Mine project. Obviously, also looking into next year, we are on about similar level. I don't have from the top of my head, maybe it's €69,000,000 but kind of that level of around €70,000,000 as well for 2021. And then we will still continue in the year 2022. So how much is left to spend in 2021 and 2022 overall? From the top of my head, around EUR 130,000,000. Approximately, yes. Yes. That's good. And then your second question was on destocking. And maybe Heikki wants to elaborate further on that. But I can just say that based on the working capital figures that you have seen, we had a cash inflow from working capital, both in Q2 and particularly in Q3. Well, that's it. Well, that's it. Our next question comes from Carsten Ries from KBC. Please go ahead. Thank you very much. Just one question left from my side and it's on the Business Area Americas. I noticed there was a comparably big drop in sales per tonne. Still, you managed to pull out quite a good EBITDA, EUR 14,000,000 compared to the EUR 3,000,000 yet in the second quarter. Is there are there any one offs or any other reasons why you actually got such a good result despite the rather heavy drop in the realized prices? Thank you. Yes. Thanks very much. So when you look the bridge that we presented for Americas, actually, our sort of pricing and mix impact was slightly positive. So from that sense, there was also a bit of support in that end and as well a little bit higher deliveries. However, I mean overall, looking at the cost compression actions, I mean, looking at the bridge there, you can see it somewhere €7,000,000 €8,000,000 in the quarter. And by the nature of things, I mean, we compressed a lot of costs already during Q2, but some of them actually were sort of flowing through the cost of goods sold during the Q3 in the U. S. So I think that's also a reason why you kind of really see that impact flowing through the P and L in the Q3. And without making sort of a too big of a jump right now to the strategy, then I just think that we will continue with a number of activities visavis really reducing our cost base and having a long term impact on that. I don't want to say that there were one offs in the Americas result, but there was a very, very tight cost compression for sure. Yes. So you had a mixed effect clearly because I was puzzled with the positive price effect, and then you couldn't see that in the numbers. So there was a mix effect clearly here. You got to, I believe, more standard grades, I would guess, compared to the more complex ones? There was a bit of a mix effect, yes, you are right. That is correct. Okay. Yes. Okay. Thank you. That explains it. Our next question comes from Harry Tanselman from Nordea. Please go ahead. Yes. Good afternoon. One question about the EU investigation into the cold rolled. I mean, what's your feel? When could it start to have an impact on imports, at least when the HOTREL investigation started? About a year ago, it started to have an impact already kind of in the beginning of this year. Do you have any sort of insight or on that question, please? Very hard to forecast. Obviously, I think in some ways, it may also be a bit of a function on how robust the Asian market is. We've seen just public information that the Asian demand has been pretty robust in this year. Actually, if you look at apparent demand for many of the stainless steel grades in Asia, it's been surprisingly strong, whereas Europe has been surprisingly weak. So I think I would assume that it's more of an assumption that volume flow will be somewhat dependent on what's going on in the Asian market. Right. Another question on the Ferrochrome. I mean, now this sort of decline in EBITDA was exactly the same amount as was the cost of maintenance stoppages. And if prices benchmark prices have been pretty flat. But do you see the sort of the underlying trend sort of unchanged? I mean, I pay attention to the fact that your average sales prices have come down a lot and they are way below the benchmark prices at the moment and that was kind of at least in Q2, it was a result from you selling to the spot market. But is there any kind of change there that could affect the underlying profitability per account emissions? Hari, it's a really good question. And again, maybe there is a little bit sort of a jump to our strategic journey because when we are looking at ferrochrome as a business, I mean, obviously, we need to look into the various aspects of how can we make sure that we are not dependent on spot market under any circumstances and are there other ways to improve the mix. Because I think the reality is that with the lower internal sales from the ferrochrome into the flat stainless, obviously, that means that there have been more volumes for the spot market. And the lower volumes during this year were not part of the original plan. I mean, this is caused by the pandemic. Correct. So there are some elements here that clearly are kind of temporary and that we are looking into changing a bit the structure going forward just to ensure that we would not be dependent on the spot markets. But spot volumes have been higher. I mean, that was particularly in Q2, but that's something we need to fight kind of through this pandemic period. Right. Maybe sort of last question, if I may, on the hot road imports. Do you see it sort of probable that the imports will remain clearly below the quota because of the Indonesian, Chinese and Taiwanese sort of restrictions are in force? Or do you see that this quarter could be thought to be filled by some other players? Well, yes, that's a good question. A bit of, again, a hard question to answer. I'm not sure if there are many, many alternative suppliers per se who could feel that. So my answer would be that that let's wait and see and see what happens with Asian demand. I mean, I think that is ultimately the driver here. All right. Okay. Thank you very much. Our next question comes from Bastien Tsinagoulwitz from Deutsche Bank. Please go ahead. Yes, good afternoon. So I have one follow-up just on the point around the benchmark price in the ferrochrome business. And I think as you said in the Q2, the problem is I think that you were sold sold more to the spot market. And my impression is that I think that has also still been the case in the Q3 now. Now as we move into the Q4, do you see that changing, I. E, will you capture more of the higher benchmark price in the Q4? Or has the benchmark price just in general actually stopped working as a leading indicator for ferrochrome as a business? I think it's a good question. And obviously, I mean, you are following these markets. And there's certainly, so to say, overall, a lot of changing dynamics here within. But if I still get back to your question, I mean, it has just sort of through the years always been there's been a certain portion of our ferrochrome business area that has been to external sales, but there has been a majority of the sales internal. And our internal volumes, as you can see from our stainless volumes, have been lower in the second quarter and in the third quarter. And this has just resulted in a need for more spot sales in the short term. So I still see this as more sort of pandemic driven situation rather than some sort of long term strategic shift. Thanks, Thier. And do you see that at all changing in the Q4, I. E, will the share of internal sales increase? Yes. I mean, obviously, overall, what you can see is that we are guiding for stable volumes in the 4th quarter. So maybe I would be a little bit, so to say, not prudent if I would comment too much about that. But you have to also take into then account the kind of dynamic preparing for the Q1 and what our thinking is around that. So I think kind of the market sentiment throughout the Q4 will also have an impact for that And then also a bit on how much we want to prepare, how active the Q1 will be. And obviously, that's something that we would not be commenting on yet. Okay. Okay. Got it. Thank you. Then one more question on your debt target, if you're happy to answer that already right now or maybe rather take it later. But you obviously give a relative number, but clearly, we are an industry with very high earnings volatility. And I guess the recent years and this one in particular has shown that again. Now would you describe this 3 times net debt to EBITDA target as the bottom of the cycle target or rather an over the cycle target? And is there also any absolute net debt number which you have in mind and which you're targeting here? Jan, it is certainly something for the strategy part, but I just want to say that we have a time bound target here with the kind of rather short time line. I mean, it's 9 quarters. So I think we will probably come back to that. But it's clear that we will not be able to go through a full business cycle between now and end of 'twenty 2. 2. Just as a quick reminder, Our next question comes from Luke Nelson from JPMorgan. Please go ahead. Yes. Hi. Thank you for taking my questions. 2 for me. Firstly, on the Americas, can you break out to what extent there was an FX benefit in the cost release that you reported, just given the U. S. Weakness over the period? And then secondly, in Europe, just again looking at the waterfall around pricing and mix and your comments around leverage to high value products in projects. Can you give a bit of a sense based on your order book and what you see around how we should be expecting mix to move in Q4 relative to Q3? Certainly. So your first question, Luc, was around whether the, so let's say, cost relief in Americas was also based on FX movements. And I would still like to confirm that the way how EBITDA is formed for us, I mean, in the Americas business, I mean, it's very much dollars driven on all sides, income and expenses. So and also then in terms of our bridges, there is no significant FX impact there. There might be something with the Mexican peso, and there might be €100,000,000 there. But as I recall, the other bucket is almost empty. So that's where these FX would then typically end up if it would be sort of from the Mexican peso perspective. So I think those impacts in this period were not significant. And then your second question, obviously, was more on Europe. And if I heard you right, you were asking about kind of the mix going into the Q4. And obviously, I think we have talked about the elements here. So I mean, we have seen many segments, appliances, automotive, bounce back since the pandemic period. We've also seen that there are certain more value added grades, particularly those related to oil and gas, where we still see slow activity. So I think across the board, there is still the situation that we are not at normal levels of order intake in this more value added business. I don't know, Hekke, if you want to add any more color to that. I guess, sort of we have sort of an internal, I guess, rule of thumb that if oil price is below $65 that usually at that price level, customers tend to invest less or at least they have a tendency to postpone their investments. So I think given how extensive the chemical industries and oil and gas industry for the different types of pipes and tanks, whether it's deep sea drilling or just a normal refining plant or a chemical refining plant. These prices for commodities, customers are very hesitant to invest. And I would one would expect that to have to see a clear pickup in oil price for customers to then, I think, be more forward leaving in risk. At least that is what history tells us that that's been the case in the past. Let's see what the future then entails. And Luc, obviously, as I sort of understand from your question that you are also really looking for the bridge impact from Q3 into Q4. Maybe it's still somehow, I would still like to make the point that we have seen the appetite, the order intake for these more value added grades to be shrinking now kind of through the pandemic period. So I'm not saying that it's shrinking further, just saying that we don't see the pickup here like we can see in some other segments. Okay. Thanks a lot. Thank you. Thank you. Our next question comes from an unknown number. Please hold while I try to catch the person's name and company. Next question comes from Kusha Agarwal from Citibank. Please go ahead. Hi. Most of my questions are answered. But if I can push you on little bit on the pricing part for the Europe, I mean you said that pricing continue to be under pressure, but the way I look at it is that your volumes were 7% down in the quarter, while your peers have had a double digit growth in the volume, which implies that your market share had gone down in the 3rd quarter. So is it fair for us to believe or to assume that in order to gain the market share probably your pricing continue to stay under pressure for next 1 to 2 quarters? Or maybe you lose out in the volumes? I think that would maybe be sort of too big of a jump. I mean, you are, of course, talking about the market dynamics where if I don't want to go too much into our competitors' performance, but just looking at the sort of the curve of how production and deliveries have, so to say, shifted during the pandemic period, yes, there have been some shifts. And you saw that we had really high market shares, particularly during the Q2, etcetera. So definitely, there have been been some sort of balancing there visible in the figures. But I would say that your conclusion then on the pricing is probably a bit too harsh, I would say. Okay. Okay. Understand. And then one follow-up question on the net debt. You mentioned that $72,000,000 credit you have received for the VAT deferrals. Have you included that 72,000,000 in the net debt? Or should we include that in your debt? Sorry, if I heard you right, you asked about the VAT deferral. And I mentioned it under working capital because it's an operative item and it's included in working capital. Yes. But that definitely is not included in the net debt, right? It is not included in the net debt, yes. Okay. Thanks, Paul. Thank you. Our next question comes from Jason Berkov from Bank of America. Please go ahead. Yes. Good afternoon, everybody, and thanks Pia for taking the questions. Look, two quick ones here. You mentioned the €24,000,000 in own actions to compress the costs. And I just wanted to make sure that I understand whether those need to come back at some point. So should we be thinking about Q3 underlying EBITDA really being at some lower level than what you've reported? Second question, I'll just ask them both if that's okay. Just on the €72,000,000 VAT, is there any other cash flow measure that's been undertaken that we should be aware of where you've built up a future liability that needs to unwind? Thanks. Maybe I'll just tackle the VAT one first. I think the reason for just being open with it is that it is one of those where we got the benefit now, but it's clear that we will pay it during the next 2 years. So that was the only significant item. I cannot, from the top of my head, even remember any other sort of small items that would be similar. But I can confirm that this is the one that we have disclosed that is relevant in that kind of a context. Then I think your first question is a really good one on cost compression. Does it actually lead us to a situation where it's kind of not a sort of sustainable result level? And I think that's why I was a little bit maybe lengthy in my presentation also talking about sort of maintenance and how we have been able to compress that, etcetera, because it's clear, we have had, for example, maintenance plans going into the year. And we've had we have to do a lot of risk assessment. We had to do a lot of optimization and thinking about kind of the right approach. But when you then ask that when we have compressed those costs, has that increased sort of the liability in the future? I don't think so because we also have a very much we have a lower production level out of this year. So I do think that the level of actions that we have been able to take here now, we have been able to take costs down. We have not built up a liability going forward. But in order to make a part of these cost compressions long term, I think we have elements in the strategy to address that. And I hope when we have presented the strategy that you can sort of you can get sort of a full picture of this. Just if I could follow-up. So if we look at your guidance, and in a way this relates to Alan's question as well. So you're guiding for flat EBITDA quarter on quarter. It's quite a standout versus your steel peers. I mean most steel peers were looking for materially higher EBITDA as we flow through into the Q4. And you're sitting there with flat EBITDA. And I'm just wondering if that's because there's a lot of costs that are coming back into the business that you took out for 1 quarter. I would say the main elements there sort of leading to that guidance is obviously, 1st of all, that from a volume perspective, we are stable quarter on quarter. So that's an important contributing element. The second element, I would say here, definitely is that, yes, we don't have the big ferrochrome maintenance, but we do have this maintenance stop in Tornio instead, which is really the sort of heart of our operations to a large extent. So we have this sort of just shifting the maintenance to another unit, which, of course, is then connected to the volumes as well. I think we have also talked here enough about the sort of pricing and mix that you realize that we are not yet at our optimal product mix. And as well based on that, we cannot kind of expect an uplift in this quarter. So those are at least some of the main elements. I wouldn't say that there is this sort of debt that has piled up. Actually, I would not say that at all. Okay. Thanks. Very clear. Very helpful. Thank you. There appears to be no further questions. So I'll hand back to the speakers. Thank you all for your very good questions. And thank you, Heikki and Pia. Now we will have a short 10 minute break, and we will continue with our strategy update at approximately 5 past 4 in this same webcast. Please stay online. We will continue shortly. Thank you. Good afternoon all and welcome back. My name is Steve Hudson, and I'm the Group Business Controller here at Otokumpu. We've already reviewed our Q3 results, and now it's time to step into the 2nd part of our today's webcast, and that's the strategy. I'll be hosting this session together with Heikki and Pia. Our agenda starts with the full strategy presentation. And then after that, I'll be starting a moderated Q and A session, where I'll be sitting down with Heikki and Pia to discuss the strategy a little bit more. Following that, we'll take questions from the lines. But for now, without further explanation, I'll hand over to Heikki. Heikki? Thank you, Steve, and welcome again. We have an exciting hopefully exciting hour ahead of us to go through the strategy. In terms of the agenda for the next hour and so forth, so I thought that we will first start with my own reflections and observations of Outokumpu since I've worked here for some months. I will then after I've gone through the reflections, I will then introduce the strategy, talk about the way forward and then we will take a deeper dive into the financials. Pia will join here and she will go through the detailed financial part, and then I will come back in the end and summarize. I'll also talk a bit about the team that will be leading us through this journey. Maybe at the outset, just a couple of words still. In terms of this document and the strategy, we've had a large number of Outokumpu experts and people, leaders, even new talent contributing to this work. So this is project that's been done by ourselves. In order to develop a comprehensive view of this company, I have visited all of our plants, both here in Europe. I've also visited the United States here recently. I've spoken to over 100 employees on a one to one basis with some quite extensively to really understand what they're thinking and where they think we have strengths and issues. I personally spoken with dozens of customers here in Europe and in the United States and also with a number of suppliers. So collectively, I personally feel that I have a good take on the state of affairs at Outokumpu today. So let me then start with the first slide here, just very briefly to summarize the key reflections. Obviously, we are in, I guess, what we want to call here new market normal. And then particularly when you look at Europe with the Asian imports, autocompu has very strong foundation, but our performance has lagged. And the way forward for us is really that in the short term, it is very much about setting targets that derisk the company for the benefit of all stakeholders. We are also aiming to clearly strengthen the accountability for performance across the whole group. This will involve a new operating model, active performance management and much more discipline. And throughout the conversation today, we'll talk about these in much more detail and granularity. We are also going to bring in more speed. And through speed, we're trying to accelerate performance improvement measures as we go onto this journey. A few words about Outokumpu's foundations. As we were compiling this list, we had many things and we tried to choose, let's say, the top 6 to talk about. I decided that I will just take I will focus on a couple of these here today. Let me first start with sustainability. We are the leader in sustainability in stainless steel. I'll give you an example. In Tornio in Northern Finland, we are EU's largest we have EU's largest metal recycling center. So when you, for example, buy a new washing machine or tumbler and you recycle the old one, most likely that will end up in Northern Finland in Tornio. Our scrap rate today up in Northern Finland is already in the low 90s. We've come a long way in raising that and the team is working diligently to find ways on how to further increase scrap ratio, which of course is good for sustainability and also in terms of sort of a circular economy, it's the right thing to do. In terms of the Americas, obviously, U. S, Mexico, USMCA, it's a big market. It is a growing market, and I'm extremely happy and pleased about the fact that we have been able to really take a step change in our North American business, and we made good progress in the turnaround. And I will talk about that about the Americas more today. And then obviously, any business, it's about people. Our OHI organization, Organizational Health Index numbers, they're good. We're high, high second quarter, and we're pushing to get to the Q1. We have strong bench strength, both seasoned workhorses, but also a lot of emerging talent that is growing through the ranks and the files of the Kumpu. This year, of course, has been extraordinary in the sense that we've gone through COVID. And in all of our presentations, of course, we cover this as well. It is sort of a backdrop to the situation at hand. I guess my main message here really is that I feel that we have managed our way through the pandemic well. We've had very few infections considering the size and globality of the business. We've been able to maintain our operations, serving customers and at the same time, making sure that we are sufficiently funded and we have good liquidity. So a big thanks to our finance team in working on the financial side and of course, customer operations, sales service on the others. We may have in the audience some people who are not that familiar with Autokounmpo, so I thought I'll take the liberty and just spend a moment on this page, which talks about the different businesses we have. For some of you who have been following Autokounmpo, this, of course, is very familiar, but please allow me anyway to say a few words about the businesses per se. Here you have on the bottom, you have 4 boxes, BA Europe, BA Americas, BA Ferrochrome and BA Long Products. From my standpoint, really the core businesses of Outokumpu are the stainless business here in Europe and in the Americas and then the ferrochrome business. I really labeled long products more as a turnaround case that we're now working on. And if you look at these businesses sort of 1 by 1, in Europe, of course, we are number 1. We're the largest in terms of volume. We have these large plants in Finland, Sweden and Germany. And we are, of course, a very large producer of commodity grades. But we're also what's unique about us is that we are the global market leader in value added grades. When it comes to duplex grades, ultra grades, decorative grades, many of the greatest landmarks, if you go to the United States, for example, you look at the new landmarks that are being built, there's you would find Outokumpu stainless steel shining in the glaring sun to the pleasure eyes of everybody. So we're very proud about the product range we have here. In the Americas and in the U. S. Particularly, we are number 2 in terms of volume. We have the plant down in Alabama near Mobile. We have the facility in Mexico. And what's very important is that as we now have been able to stabilize our operations, we took the decision to invest in the asset. And now with the Fruedx investment, we're basically opening ourselves opening us to a whole new market, a sizable market in the U. S. Where we have not been participating before. And as we discussed in the Q3, really pleased that we're on schedule, we're on budget. And now in Q4, we're good to go and the customers are waiting for us to introduce the products. Then we have BA Ferrochrome. It is quite unique in the sense that this is the only chromium ore mine in the European Union. It's the largest mine in Finland, but it's the only mine of its kind in Europe. What's interesting about the operation is that you have the mine, which is now going down to 1,000 meters. Then you have the ferrochrome smelting operations with its 3 smelters, and then you have the stainless steel operations. So they're all on location, they're all integrated. No one else really has a setup like this where you have all three pieces side by side with geographic proximity. And then you have the harbor and access to see next to it. And then finally, we have long products where we're now going through then a full fledged turnaround. So that was a bit about the businesses per se. And I'll talk about when I go to the strategy section, I'll discuss each of these in more detail. While the purpose of this strategy discussion is really to look at the future, where this company will be going, I think it's fair to just spend a moment and look at the past. This slide, of course, has a number of stories. If you look at the longer term horizon, our performance has lagged. Unfortunately, we have not delivered value to our shareholders. We've had a couple of years like 2017 where the market was good. We really we were on track. But then for various reasons, have they been sort of outside maybe headwinds, maybe sometime also internal matters, But anyway, we have not met the expectations that we had set for ourselves and of course that the outside world had expected from us. So of course, as management here, I can assure you that we are highly committed to doing our utmost that we would find the medicine and the treatment so that we are able to gradually turn the corner and get to a different type of trajectory so that the 2020s would look different than the past 8 years. Now this, of course, is a challenging industry and the operating circumstances do have do bring some headwinds here. So as we've discussed, we have seen COVID really hurt demand, at least in some of the segments where we operate. When you add on top of that the declining oil price, which does impact the investments, especially in process industry, in oil and gas, chemicals, we have seen stainless flat consumption come down. And of course, it has also impacted then the demand for the so called value added rates. We have low priced imports. They've taken share. If you look at historically where the market share for imports were mainly coming out of Asia, they were fairly low. And then the last 5, 6 years, we've now come to a point where the market share for these imports is roughly around 30%. So Outokumpu is about the same size as the imports. And of course, this is very different from what it was when initially the Noxum merger was put in place in 2012. And then very unfortunately, we see a negative multiyear decline in prices here in Europe. And of course, as you know, as this is a fixed cost business, you, of course, have a substantial amount of operating leverage. So when prices move down in this way, you know that you have work cut out for yourself. So what do we need in this moment in time? Well, we need even stronger cost and capital discipline. If you look at the European business, I have to say that over the last 4 years, we've really made significant step changes almost in operational improvement. The way we run our plans, just the way we daily and weekly and monthly grind through the operations. So it's really clear a lot of good stuff has happened. But unfortunately, given where we are in terms of pricing, in terms of the whole market setup, our fixed costs are too high. And that is just a numeric fact and it's something that, of course, management has to address. I do feel that we can do even more on the customer engagement side. I guess I can never do enough, but I still feel that we have opportunities to be more engaged with customers in Europe and with Ferrochrome. It basically means it's being much more sort of forward leaning in engagement with the customers on a day to day basis, trying to be even more, how should I say, sensitive to their needs and trying to be more responsive. And of course, being very, very active day in and day out. On the Americas side, the good thing is the operations have stabilized. That does not mean that we stop developing operations, but at least we've developed a stage where the volatility we had in the past years, we had issues with on time delivery. Most of that is now of the past. So the operations are stable. And now it's really with that level of performance, which of course gives customer more confidence about our delivery ability and reliability, now is then the moment to really accelerate the commercial turnaround. And then on BA Long Products, of course, it's the whole menu. In LP. We're doing basically everything, the whole menu from A to Z. So those are really my reflections from my 4 months, 4 or 5 months here at Outokumpu. I hope I've been able to share you with sufficient sort of clarity how I'm thinking about it. But I said, this is a great company. It's a strong company. It's a good company. But obviously, we have a lot of work to do, and I feel that as I now go through the strategy, I hope I'll be able to show you that we've thought about we've put together a good plan that will then be the basis for the next steps. So moving then to the way forward. So before I start to explain the essence of this chart, let me just still one more time talk about the process, how we actually got here. So when I joined Autokumpu, Pia and I and colleagues sat down and thought about sort of what type of a process do we need to put in place so that we can develop a strategy that is really grounded. It was very important for me that when the strategy is done and ready for presentation, that I personally feel that it is sufficient, it is ambitious, but it is also realistic and it's grounded. And therefore, we decided to start a very classical full potential analysis. We could have used outside consultants, but we decided we're going to do this on our own. It's also a very good way for me to test the people in the company, see how good are they really. And I can tell you with all honesty and I'm trying to be objective here that I was really impressed with the work that the teams, because we had a lot of people here, where the teams were able to pull together. And so really this, the whole work I'm showing here is a result of the analysis that came out of the full potential work. I guess this is the main headline here, of course, is that we have too much debt on our balance sheet given the current circumstances. And that is sort of really it's sort of almost like matter number 1 that has to be solved before you can even move forward. And basically what we then decided was, okay, so let's put together a plan that is that sort of looks such to eat the elephant sort of in pieces. So a plan that has phases, which are time bound, then ultimately aspiring to take the company to the next level. So what you see now in front of yourself is a slide which shows 3 phases. Phase number 1, which is time bound for 2021 2022, basically tries to address the de risking, deleveraging question. And therefore, we're putting substantial emphasis on margin improvement and deleveraging the balance sheet. When we have accomplished this phase, then we move on to Phase 2. And tentatively, we put in the years 2023, 2025, of course, that may change, but at least that is sort of indicatively how we're thinking about it in terms of time and sequence. In terms of the second phase, it's going to be about targeted investments to improve margins. So we're not talking about big massive projects, but more very, I would say, targeted investments that hopefully will have managed risk because investing always has risk, managed risk and also where the return should be coming rather sooner rather than later. And then assuming we succeed with that, which of course we intend to do, we will have earned the right to grow and then we can move into the 3rd phase, which where we will hopefully and depending on opportunities then lean more forward and look at investing more in growth. And then ultimately on the right hand side, and this is also something more for customers and our all employees, our aspiration long term is that we are and we remain customers' first choice in sustainable stainless steel. On the bottom of the page, you see a blue arrow going through from left to right. We've written, continue to deleverage the balance sheet. We do not see deleveraging to be just a phenomena for the next 2 years, but it is going to be with us because this industry, of course, is highly volatile and we see that we're now taking the first step, but we will then continue to deleverage going forward. A few words about sort of the first phase, and again we'll go into much more detail here, but the key numeric financial targets are shown on the right hand side. Ultimately, for this time period, we're targeting a net debt to EBITDA, which is less than SEK3 billion. And a key driver of how we get there is that we achieve a net EBITDA or EBITDA improvement, run rate EBITDA improvement by the end of 2022 in the amount of SEK 200,000,000 So by getting that, by being very strict on capital, we will achieve that net debt to EBITDA. And on the left hand side of the chart, a couple of observations. Well, just in terms of the way we work, it's going to be very much about strengthening accountability, the lean and agile organization, very active performance management and very strict financial discipline. And in terms of performance and profitability improvement, so as I said a moment ago, there's an operational part, there's a commercial part and also there's a very much an organizational fixed cost part to it. I still want to say a few words about accountability because there are so many strategies have been companies develop strategies and ultimately comes down to can you really execute. So that's why we talk today a lot about not only what we intend to do, but how we're actually doing that. And Pia, in her presentation, will even more still talk about the how part rather than the what part. So on the left hand side, we need and will create a leaner and more agile organization. As I said before in the previous presentation, this is a tough day, a hard day for Outokumpu. We are starting immediately now negotiations with the employee representatives, basically to then aim for planned reductions in the amount of 1,000 headcount. We have a simpler structure. My self, in addition to being the Chief Executive Officer, I will be running also working as BA President for Europe. Obviously, it accounts for 70% of the company. So it's such a big lever in terms of performance. So I will be in that sort of dual role as well. And we will also take a very active role in performance management. So we put together a structure that will very much focus on looking at deviations to these targets we've set internally, and Pia will then go through the mechanics of that in a short while. And then, of course, with respect to financial discipline, so on multiple areas, we're going to bring more discipline and we actually also changed in the company. We have now changed the way we even manage CapEx. So we have a dedicated team reporting to one of my team members who basically is very carefully monitoring both maintenance CapEx and other CapEx. So that will also bring a big step change into the way we work here at Outokumpu. In terms of headcount, so our headcount currently at the end of the third quarter is approximately dollars Given the planned negotiations and the planned reductions, so pending the outcome of those negotiations, so the figures figure will roughly be there end of 'twenty two less than $9,000 So that is assuming then the positive outcome of those negotiations with the employees. Okay. So I've talked more on the group level. Let me now go through the businesses. So we have 4 businesses. So there's a slide, one slide for each. And so I'll walk you through 1 by 1. We'll start with Europe. The way this page is structured is you have some key points on commercial areas, you have on cost and capital and then on lean. I won't go through every item, but let me just highlight a couple of things. So in terms of commercial excellence, so obviously, the specialty grades are very important for us. Most of them are manufactured in our Swedish facilities here in Europe. And basically, these are products which we can sell globally. So while it's a European business area, this is very much about being actively commercializing our service offering not only in Europe, but also in North America, Latin America and Asia. So this is very much sort of a sales driven initiative and there is a very big technical selling piece because the applications are complex and usually there might be an engineering company involved, there might be designers, architects, what have you. So isn't just simply quoting price and volume and delivery time. Then on the commodity grades, we need to be much more engaged with customers across all of the channels. We sell, of course, directly. We sell through distributors. We sell through our service centers. So in all channels, we need to be much, much more active. And at the same time, we have to reduce our cost level. We have to improve our cost competitiveness. And the commodity area is so competitive that in order to compete, our costs have to come down. On the center part, you have a box here on cost and capital. I guess I just want to say that on the raw material side, we, of course, are working constantly with scrap, how do we use that more effectively. But we also have the ferrochrome operation and how we sort of integrate that into the Tornier facility or how we supply ferrochrome into the other melting operations of Outokumpu, how that all is set up is also very critical and it can drive to reduce costs. And then on the personal measures in Europe, it does have it is quite significant and I've already discussed that in more detail. Then we come to the Americas from turnaround to continuous improvement and growth. So on the commercial excellence side, we of course, we've been now in the market for 10 years. I guess the first probably the first 5 years, we were very much in ramp up mode. And I would almost say now that now we're sort of really fully ready to really sort of embrace the market. We want to strengthen our commercial footprint in the U. S. And in Mexico, and we're specifically excited about segments such as automotive appliances and pipe and tube. And now that the Fridics investment is basically ready, So we're excited to introduce this product to our customers. And I said I had a chance to speak with many of our U. S. Customers last month, and it seems to me that they're excited about Calvert, about having a Firdix product, which is manufactured in the U. S. A. And we all understand that in today's world, of course, manufacturing in the U. S. Is, of course, it's an asset. On the cost and capital side, we've done a lot of good work. I just want to mention that I'm actually very pleased with the work Calvert has done on reducing slab cost. We will continue to doing that. And here, we're also leveraging the overall knowledge within Outokumpu across the plants. This knowledge transfer is very important because no sense in inventing the wheel somewhere if one of the other plants have come up with an innovation on how we can take out costs. And we have already started with personal measures in our Mexican facility. Then we come to Ferrochrome, our 3rd business. So as you know and we discussed a moment ago, so we have the big investment in the chromite ore mine. This investment will give us access to this very valuable ore into the 2040s. So at least for 20 years, maybe longer, we will have access to this very valuable raw material. An important part of the initiative here for the strategy is that now with the incremental ore, we will also look at expanding and augmenting the types of ferrochrome products we actually manufacture and sell. So this isn't just one size fits all ferrochrome. There are actually many subgrades underneath that. And we are working to expand the different types of products within the ferrochrome family and there are some interesting opportunities ahead of us. We will we are looking for ways to reduce the sales into the spot markets. Usually the logistics costs are higher. And of course, spot customers are it's sort of a bit of a come and go business. So for the sales organization, it means being much more active, forward leaning in developing longer strategic relationships with customers so that we have businesses as the volatility, of course, is quite considerable in demand. And finally, in terms of the actual mining activities, so we're looking for ways to further develop the way we actually mine, and we're also developing our fine concentrating plant and the yield we get out of there. And so all of this should help to further improve the performance of this very valuable part and unique part of Outokumpu. Then so these were the 3 core businesses and then Long Products. So as you know, we had the strategic review. When I came, we decided to accelerate it. On the 15th July, I appointed a new person to run the business. We've now changed the whole management team in Long Products. We have a very tight knit group with some support personnel and this team is on a mission. They have a very clear plan, which basically, as I said, is sort of a 360, so we have multiple revenue pieces there from product line development, finding new customers. There are pieces around costs. There are pieces around improving the supply chain. And we're also looking to expand into some new grades such as mid range bar. So this is really the whole package. And I feel that by implementing this, there is enough stuff on the menu that by implementing this, we should be able to succeed with the turnaround. And of course, we have given the team there's only 9 quarters time to do this. So of course, we had to start very quickly already in July. Then a few words about markets. When one does a project like this, of course, one has to make some assumptions on what the world is going to look like. Various analysts are predicting a recovery, some are bold, some are see this more as a very tepid recovery that will take even maybe 2, 3 years. Of course, it depends on the markets. We decided that for planning purposes, we are going to be prudent and not assume that there's going to be any major market growth or recovery for planning purposes. Obviously, we're hoping that the markets will recover quickly and we will get more back to normal pace of life. But for planning purposes, we have been conservative. And so the strategy that we're discussing today, the actions we're taking, these are based on self help improvement measures. Then a few words about trade defense. So obviously this is something that we can try to influence, but it's not of course in our control. The things I just discussed, those things we can influence and we can control and we can do something about them. Here, it's more around trying to bring a logical argument to the discussion and then hope that decision makers take the right steps in Europe. The share of imports has grown as you've seen from the preceding charts and there's also a box here at the bottom. The share of imports has grown. It is too high. We do not feel that the playing field is level. And in our view, the European Union should use all the trade defense measures it has available, and they have a lot of tools, and really use them. Just looking at CO2, we see a huge difference between Outokumpu and the importers such as the agents. So if you look at this chart and you look at that CO footprint per ton, I mean, we're talking about 5x difference, 4x or 5x difference between us here in Europe and the importers. And when we talk about the Green Deal and the importance of sort of changing the economy into a more environmentally friendly economy, the officials have to take some steps to stop carbon leakage. And so again, I'm sharing this so that just to bring clarity that there are many important decisions that the officials have to take and hopefully that will happen in the not too distant future. Then a word about sustainability. As said, we feel and we are the leader in sustainability in our industry in stainless steel. We have the highest recycled content. And as I mentioned earlier, we have a very unique setup in the sense that we're the only stainless steel supplier that is upstream integrated into ferrochrome, all the way into ferrochrome and even into the mine. So if you look at the total footprint, what we call sort of Scope 3, we have the lowest CO footprint. And that is really, really unique. Now we have an ambitious agenda further strengthen our sustainability record. The things that excite me especially is how can we through R and D utilize other types of production inputs that will be less CO2 intensive and by changing, for example, materials then into other materials, we can then bring CO2. So down and these are really, how should I say, they're more R and D related things we're working with different suppliers on. So dear audience, this was sort of the second part of the presentation where I have now gone through the key essence of the strategy. What will happen next is Pia will come on stage and she will talk about the value creation plan. And then after she has completed her part, I will come back, talk a bit about the team and then make some final conclusions and observations. So Pia, welcome. And here's some water for you. Yes, I have my tea. Thank you very much. Hello again. And Heike, I just want to say thanks very much for also sharing some of the background to how we have worked with this strategy. I think I'm very honored, and I think there's a big group of people within Outokumpu who have really felt that there is now a good way to contribute in building this very fact based strategy, but also something that is very much grounded in facts, but also with the team at this point in time. So a good start for all of us. Let me take you through some of the details of our value creation plan, and I'm going to start with the main instrument here that we have in order to reach our financial target of leverage of less than 3x by the end of 2022. And obviously, given the short time frame here, the main impacts we can get through EBITDA improvements. And the three areas into EBITDA improvement that I want to discuss here are around customers, customer excellence, cost and capital discipline as well as the lean and agile organization. So from a group perspective, each of these three areas will contribute with about equal weights into this EUR 200,000,000 run rate EBITDA improvement program. And all of these areas come in as important, and they all need attention. Starting with the customer excellence, I think Heike has already shared some of those great stories and achievements that we already have in this area. I mean, we talked about duplexes, the sort of long term success we have there. The high rise building, the real sort of architectural landmarks where autocompostainless steel is used and shining. And super relevantly as well the pro grades and how we have been able to develop uses for those through the years. And all in all, you know that by now, we have reached a level where the value add share of our portfolio is around 30% of the volume. So it's, of course, super significant, but we are still working with enhancing the product mix in all areas. And there are certainly segments where we still want to grow. There is one sort of, say, angle into all of the customer relationships as well, that is sustainability. And just on the back of what Heikki just described in terms of our sustainability leadership, I think that this is one more area where certainly we have more opportunities going forward. But then I would really like to take a big look into also the commodity part of our revenues. So in terms of our volumes, we are still 70% commodity. And this is a really important base for us that we really need to protect. And we have to do that by staying extremely competitive on the cost side. And that is why our program obviously addresses costs from a variety of angles, and they are all important. So starting with the cost and capital discipline, I would maybe like by combining a bit as well here the sustainability aspect with the raw material aspect. So one of the big wins that we've made in raw material efficiency through actually many years and continuing to do so now and into the strategy is the increased scrap ratio. So we have started from somewhere, 60%, 70%, building it up, certainly being kind of on the 85% level for a while now, but sort of targeting and approaching the 90% and beyond as we speak. So this does remain a really important part. In the U. S, we talked about the slab cost initiative that Heikki also praised. But overall, I mean, within the area of raw material efficiency, this still I mean, this really remains one of the main levers that we have here. So it's scrap ratio. It's obviously as well yield and other efficiencies, and it can as well be the way how we are able to procure the raw material. Another key area of the cost and capital discipline obviously is maintenance. So I think we have already talked a little bit about this in the Q3, but I still want to kind of reiterate on the key message there. I mean, around maintenance, we have really looked deeply into the optimization. And we have to understand really profoundly our asset base. I mean, as a basis, I mean, our asset platform is very strong and it has been really well maintained. And we certainly want to keep that strong asset base going forward as well. But we have to base our maintenance planning on sort of very thorough risk assessment on optimization. We have to work smarter on this, smarter, not harder. And there is this is a big cost area for us. So it's clear that it's combined with the strict asset management, but it's also a unique effort in itself to be able to work even better and more optimized in this area going forward. And I shared with you in the previous call, I mean, on sort of average quarterly level, on external maintenance costs, we have spent some around €50,000,000 So obviously, every work that we can do in this area is significant. The strict asset management, the CapEx capped at €180,000,000 I will still come back to separately. Finally, then the lean and agile organization, and I realize that this is one of the toughest part of the message that we are sharing today. The planned reductions are a significant portion, obviously, of the planned EBITDA improvement here as well. I think we have arrived at the conclusion looking into the current performance, particularly in Europe, looking at the low price level, the import pressure. So there was a lot of consideration going into this before the conclusions on what sort of plans we need to put into place. On top of those planned reductions, we are obviously as well talking about the delay of the organization and the strong performance management. I will still take a chance to come back to that in my next slide, actually. So with that said, if I should describe the new steering model, I would like to say that we have been looking into finding a really hands on approach within a big, large global corporate. And I think this is what we really need to address here. We have set ourselves a really ambitious plan. The first phase of the strategy is only 9 quarters from now. There is a lot that we need to put in place in a very short period of time. And we need to have those concrete initiatives. And I think this is one of the strengths of auto Autocompos. We have built up manufacturing excellence capabilities. We have tools for that. I mean, we have sort of detailed project planning. We are we have people who are used to work as well with, you know, projects, stage gates, you know, timelines, etcetera, etcetera. So we have all of that. We can kind of leverage from that. We can build that and expand that into all of the areas here of the development program. But we felt we needed even something more. We kind of needed, you know, the belts and suspenders. Obviously, I don't need that with my dress, but you know what I am sort of trying to say here. I mean, we really needed to make sure that we won't slip, that we can keep the drumbeat up, that we can keep delivering and get also very quick, you know, delivery of results through this program, through this improvement program. And that's why we also wanted to have a global, so to say, group level transformation office, really sort of overseeing and supporting the whole change. And that's now part of my team. And we also wanted to build a lot of practices into our performance management that are really focused on ensuring that we can deliver on this program. And, you know, we need to do this quickly. It's only 9 quarters. So we also need to find those sort of quick areas of cost reductions and other improvements here. So with that said, that's our hands on approach. I also wanted to mention something about the delayered organization and the fact that being very transparent in terms of our management style, HEIKI as well being hands on in charge of the European part of the operation. It just helps us to have that very quick feedback loops. Can I call it sort of top to bottom, bottom to top, just having that constant dialogue, having those constant feedback loops? And we'll have a feedback loop also with the markets. So starting from the Q1 of next year, we will be able to share with you the progress on this EBITA improvement program every quarter. Okay. Maybe then still a bit of a typical CFO slide looking at capital allocation. And certainly, with our emphasis and focus of 4.5x, so 4.5x, and our target by the end of 2022 is to be at below 3x. What has then happened in recent history? So we looked at our cumulative operating cash flows from 2015 until 2019. There has actually been SEK 1,300,000,000 worth of cash flows. There's been some return to shareholders, SEK 200,000,000 about. And really, where we have put a lot of emphasis as well historically has been debt reduction. So NOK 800,000,000 of the cash went into debt reduction. That still has us at a net debt of SEK 1,100,000,000 at the end of Q3. Well, what about CapEx? So today, we have spoken a lot about the need to be very restrictive, very disciplined about CapEx going forward. Well, you may say our net investment have not been huge in 5 years. They stand at SEK 200,000,000. But please do note the smaller print here. We've had pretty significant divestitures of noncore assets, primarily real estate. So the gross CapEx for the last 5 years has been SEK 0.9 billion. And that has taken us to the stage where we are today. And given the pandemic and given the overall situation, obviously, we have concluded that our main target will be to derisk, to deleverage, to make sure that our leverage will be at below 3x at the end of 2022. So then the key drivers and how we are doing this. Here, I also wanted to share a bit of a longer time perspective. So focusing on Phase 1, but giving a few comments as well about the, so to say, 2nd phase of the strategic journey. So just starting with the obvious and most important one that we have spoken about, I mean, improved margins is really the way to improve the cash flow. And that comes in the first phase on the back of also very restrictive CapEx. In the second phase, obviously, with also the Deep Mine investment being completed, there will be a little bit more room, but we have said that we will really focus on the kind of CapEx that can support higher and improving margins. So there's a clear priority there. Maybe I touch upon the CapEx just first, just to be really clear on that. The SEK 360,000,000 there, it is exactly SEK 180,000,000 per year during 2021 2022. And then the deep mine, there was actually a question about that in the previous section. So €122,000,000 still remains for the years of 2021 2022. Then finally, a point on dividends. So the board has as well now decided that there will be no dividend payments from the year 2019. And then the board also confirms that in the challenging market environment, improving the company's financial position will continue to be of highest priority. And now just to take the drama out of it, you see that this return to shareholders text here, there was also a lot of text, so it kind of goes over the 2 phases. I mean, the board has not expressed kind of an end date to this statement. I think we need to clearly interpret it as an indication that when we are in a challenging market environment, the board will prioritize improving the company's financial position. And then to my final slide, this is really a little bit of more detail on the CapEx side. This is also giving you some of the background. So you see that starting from 2018, we were sort of somewhere to SEK 20,000,000 to SEK 30,000,000 level. So we have been sort of gradually stepping down from this now, obviously, euros 180,000,000 this year, euros 180,000,000 in the next years. The maintenance CapEx part of this year, typically, we are between SEK 80,000,000 SEK 100,000,000 per year. During this period, we will try to keep to that lower end of that spectrum. We are committed to finalizing the Deep Mine investment that will happen in the year 2022. And then obviously, what you don't see in this chart, but when sort of the dark blue area of the Deep Mine investment in the presentation, once that is complete, it will obviously then give us some room to contemplate other investments with potential to improve margins further. So with that said, Heikki, over to you. Thank you, Pia. Okay, I'll take this table here. So thanks, Pia, for reviewing the value creation plan. Let me just now wrap up with some closing remarks. And let me first show I have 2 slides left. So let me show you the first slide. So we've done the analysis, and we have the strategy now put together. And of course, it comes down to delivery and delivery is all about people. This is the core leadership team of the company. Obviously, below this group, there are tens of very smart and dedicated leaders doing various things. I'm really pleased that I was able to build this team from inside the company. I said I've interviewed over 100 individuals. I feel I have a good sense on what type of talent we have, and here, this is the team. So I'm really happy I didn't have to go to the outside and look for change agents or experts in their respective fields. What we have done here by appointing this group, we've appointed people, some of them have been appointed 2 levels. So we have some new talent and we just we've given them even more, let's say, room to grow by going up 2 levels. We put together a fairly sizable rotation where for example among the mills, mill leadership is moving around. We're trying to make sure what I'm trying to achieve with this is on the one hand make sure that we move knowledge from one plan to another because this is one of the key ways how you can extract more value by knowledge sharing. And if you rotate, you get knowledge sharing. You also get a more uniform culture. People start doing this way things the same way, you get a more uniform terminology, nomenclature, KPIs. This is very important. The rotation, of course, also injects energy into the company, which is needed in order to accelerate speed. So underneath the hood, so to speak, a lot of this is happening now as we speak. The team here and a big group below is very committed to or is super committed to working on the strategy. We want to get this done. This is important to me personally. It's important for every individual on this list here and for the people working for them. We're ready to go. And as you see from the decisions we've taken, we've started the work today. So I said the new strategy will take effect immediately. It started today. To summarize, so obviously this is a tough industry. COVID has brought its own challenges. We have Asian imports, I guess the new normal. But there is clear value in Outokumpu. We did the full potential analysis top down, bottom up. I think the analysis showed to me and my colleagues that there is value, and we intend to unlock it. It's all about unleashing the full potential of this company. And as I showed in that sort of 3 phase chart, you could see that each phase will have its own targets and objectives, but now in Phase number 1, which is the 9 quarters, it's all about de risking, delevering. And the key levers we're pulling are around customer excellence, cost and capital and then the lean and agile organization. And by executing that, we will achieve a €200,000,000 adjusted EBITDA run rate improvement. We will also be very strict on capital. So Pia just talked about €180,000,000 lid on CapEx. We discussed the dividend question and deleveraging will be our priority. So ladies and gentlemen, dear audience, that is now I complete the presentation on the strategy And let me hand it over back to my colleague, Steve Hudson, who will move us then on with the agenda. So thank you very much for your interest today. Steve, please? Okay. Thank you, Heikki and Pia, for your presentations. Now we'll take a short 5 minute break, during which we'll watch a video on the stainless cycle. And after that, then we'll go a little bit back to the strategy with HEIKI and Pia. But for now, please enjoy the video. Welcome back and now we'll move to the moderated fireside session. So Heikki, first of all, what has impressed you the most at Outokumpu? Well, I had a chance to talk with a lot of people and travel through all the plans. At Outokumpu, we always start everything with safety. We have every month, we have a we sort of have a CEO led safety call. We review all the accidents. We're very meticulous in our approach to safety. I think that is very much a cultural thing, that's something very unique. Even though I've been in the industry for a long time, I haven't seen this level of rigor on safety in any other company. So that's something we're very proud of. When I walk through the plants, I've been to all our plants. I mean, they're very clean. They're very well organized. Little things like safety locks, we have this special system on how we protect from accidents. Every small detail is taken good care of. The signs are on the table. The KPRs are very visible. Small things, but they show you that the plans are well run. I've had a chance to talk with customers. I've gotten good feedback. Customers value our quality. And I already talked in the strategy presentation about people in general. We have many people who really inspire me. I get a lot of good energy when I work with these folks. So that's also something that makes me feel good. And I already talked about the fact that it was, I was lucky in the sense that I didn't have to go and have headhunters find the leadership team, but we were able to find them inside. So I think those are some of the things that have impressed me. Okay. So then what will really be changed with the new strategy? Well, I come back to this, the fact based approach. So, strategies, well, what is a strategy ultimately? It's a road map. You have your targets, but it's ultimately the road map on how do I get from here to there. And the thing you have to get right is you have to get your base case, your facts right on what is the state of affairs in the company. And we were actually pretty brutal in the sense that we really went into the end of detail to get the facts out. Some of them came easily. Some of them required actually a lot of work. Our IoT systems didn't give us all the data, so we had to do unfortunately a fair amount of data mining during the summer to get everything up. But that's normal. But it's fact based and then I think what's critical here is the time bound. So obviously, you know, you can say, well, is it the 1st phase 2 years? Should it have been 3 years or whatever? I think it's a bit of a judgment call. I mean, for me, you know, 2 years, it's long enough to have time to implement, but it's not far enough that it allows you to think that, well, I can do this tomorrow because I've still got time. Because you need to have a certain level of sort of time based scarcity of time that the organization has to mobilize itself quickly to get to action. And I think this sort of the time boundness is something that I personally found was, at least for me, something that was important. And then you've got to get the right levers. So there are a 1,000 things you can do in a company like this, but prioritization, being able to find those things that really can have impact now on the things you need to change today, I think that that's sort of probably I hope it's different, at least I do believe. And then, Pierre, as CFO, you've been closely involved in building the new strategy. So is there anything you'd like to add perhaps from the balance sheet perspective? Yes. Still, just thinking back about this journey and the profound conclusion that the initial phase of the strategy is clearly about derisking. I mean, this is where we are. We are now working on the topic, especially of having the right balance between the debt that we have and then the EBITDA that we are generating. So working on the leverage, finding that stability and also building the strength to withstand in this kind of difficult time. I mean, a pandemic is a difficult time for sure. So then as said, then derisking will really be the key objective of the new strategy. But our earnings have also been rather volatile in the past. Can we do anything about that? Yes. Thanks, Steve. That is indeed a fair question. And I mean deleveraging per se, I mean, obviously, if we have lower debt, we can also reach lower interest costs, etcetera. So I mean that alone can bring some earnings there. But maybe I could rather, so to say, take that from a portfolio perspective. So if I think about Autokumpu, even in rather recent history, we have lacked that profit engine outside of our core European operations. And with that said, we haven't had that stabilizing factor. So now obviously, you've seen good progress that we've made out of Americas. And I think I'm confident that we are now building that, can I call it, stabilizing factor or profit engine also on the other side of the Atlantic? But then I would like to talk a bit about ferrochrome as well. I think we have already today been able to share the point that we have a unique asset there. I mean, we are the only ones with a chromite ore mine out of Europe. We are really well positioned when it comes to our production cost there. So we've been making at the low points EBITDA levels of €80,000,000 at the high point EBITDA levels of €250,000,000 per year. I mean, that's a big variation. So I think this volatility, sort of based on the ferrochrome pricing, we will have sort of as part of our structure. However, I mean, it's always good and sometimes it's really good. So I think that's a variation we will see. But obviously, then sort of still coming back to our core European flat stainless operations, we have discussed today a lot about the need really to reduce the fixed cost. And I think this is just the new reality that we have seen now. I mean, there is a lot of import. The import pressure is high. It's put a lot of pressure on us also because then of impacts on pricing. And this is just now something we need to prepare for. Yes, indeed. But really, if we consider that the European stainless steel market environment really has changed, We had continued high import pressure, historically low prices. So really how do we see the future for the European stainless steel industry? Industry, it's challenged for sure, but it's not drowning. Okay. So it is tough, but we have a future. The Asian imports are here to stay. So I think that's what was important for me was to get the facts right and to, this is the state of affairs. Now how do we adjust? I think the industry and AutoKumpo have been adjusting to this reality for quite some time, but it is a process. It doesn't happen in one day. And as you can see from the decisions we've taken today or planning to do, the adjustment continues. It's necessary, it's tough, but it's unfortunately, it's just necessary. I believe we can create value for our stakeholders, for our shareholders in this industry. It requires a lot of work, smart planning, good decisions, good execution, but there is value and we can unlock it. In my strategy presentation, I talked a bit about the importance of research and development. I do feel obviously you have to differentiate, cost competitiveness is one thing, but you also have to have other things. Sustainability is one thing, and through I know there's a lot of work that our R and D guys have to do and women to get us even more advantage, competitive advantage. And I think it will come through sustainability. It will come through our ability to be smarter at how we use different raw materials. We're going to be better with our yield and better with energy efficiency and things like that. And this is how we make sure that we keep our position. We're number 1 in volume in Europe. This is our plan is to stay there. And then building on those thoughts about raw materials usage and energy usage, really, How important is sustainability, though? Hey, maybe, Steve, I can just provide a few comments because I think kind of looking at the audience we have on the line as well today, I mean, this is very much a financial community. And we know that in this community, I mean, sustainability is already very much it's the topic, I mean, from an investment perspective also from sort of access to capital. I mean, we might be going into a future where you have to be strong in sustainability, even a sustainability leader to have access to capital at, so to say, decent terms. So here, it really seems like the financial community is sort of at the forefront of this. And maybe then the other really important perspective is our customer perspective. And maybe here, it's important to take consider what does a customer think is important when they are talking to us. So sustainability could be one thing, but quality, delivery certainty, delivery time, why not even price at some point? So obviously, there would be kind of a range of topics. And I think it's fair to say, with our sustainability leadership, we could also provide some support to our customers. I mean, really sort of help them on this journey. So this is developing, but certainly, the financial markets are here kind of a step ahead or ahead of the curve even. But there's a big customer education piece that we have to do that in addition to how, as you said, I think the financial markets are a bit ahead of the curve. Yes. We have to educate the customers. Okay. But then with a slight change in direction, thinking about how Autogumpu has previously commented about catching up with its European competitors, Then why are these measures that we've announced today still required? I don't want to say catch up with the Asian competitors, but I said, you know, it's a competitive market and we cannot have any gaps. So we have to be equally competitive. The market sets the price. It's a function of demand and supply. And within those constraints and parameters, we have to make money. And without making money, we cannot develop the business. So this is very simple in that respect. So I think the math is very clear in terms of what we need to do, and we have started the work. Of course, looking at the big scheme of things, as we already said, you know, the EU has to take some further responsibility. The world is not, I think the world has changed a lot in the last 4 years, as we all know. Different countries apply different approaches on how they see their own markets. And obviously, it's sort of a decision the European Union has to make take. If they don't create the level of praying field, then it's going to be very difficult also to expect that there's going to be a very successful green agenda. Yes. And there, I guess, we've talked a lot about Europe then, but what about the situation in the U. S. Now? Heiko, you recently traveled to our operations in Carver, Alabama, quite an effort during the pandemic. Yes. I have to say, I was probably the 1st Outokumpu employee to cross the Atlantic since March. Obviously, under COVID restrictions, I don't want to get sick and none of us want to get ill. But it was very important for me to go there. I mean, obviously, it's so important. It's a big market. Customers have to see the new CEO. You know, I wanted to get the pulse of the business locally and also show the troops there that, you know, hey, we're all in this together. It was a bit of a journey. I don't recommend having the mask for 18 hours. That I can tell you. But it was a good, it was a good, it was a good trip in the sense that when you're on location and you see how people feel, you get a better sense for the state of affairs. And I think, you know, given the history of Calvert, you know, there have been tough years. The team we have in place, they've been, most of them have been there from, from the beginning. And so all the hard work they've put in, you know, now the numbers are starting to flow through, you know, the feeling of confidence. You know, in America, of course, you know how it is. You know, you've got you have to you lean a bit forward, right? So when the numbers start to be in the, go in the right direction, you get a lot of, you know, get it pumped up. And I think, you know, I think the good things are going to happen. Customers are positive. The Fridics is coming now. The U. S. Is a large market and it's a growing market. And I feel good about the future. And I've worked in my career. I spent over nearly 20 years from my study time, business school, I was working as a management consultant, then running a business of Calvert size. I spent a long time in the U. S. So I see the potential even from my own experience. Yeah. So then maybe talking a little bit about the Frutix, which you touched on earlier, but how, Pierre, would you say our investment in the Frutix is going in the U. S? Yes. I mean, this is now it's the final touches only left, and we are clearly below the original budget. So I mean, we are now at the sort of 30,000,000 dollars mark, which I think is a really, really good achievement. And we will start to have an impact here already starting from Q1. So I think next year is really going to be a game changer from this perspective. And I mean, we've let our customers know, we let all the big distributors know, everyone's excited, and I think so are we. Yes. And then I guess with the customer in mind, we've really placed the customer and engagement and our commercial capabilities at the very core of the new strategy. We say we're strengthening our commodity sales, but at the same time also growing value added products. So really what does this mean in practice? Because why don't we just focus on the value added products? Well, commodities for us are the cake. Value added rates, the icing. As we already talked about the cake, the cake needs to be providing value for the company. And then it's all I think it's at the moment where we are today, it's all about cost and it's all about how we run the plans and how well we deliver to customers. On the value added side, and I think this was a question that came on the conference call. I think there are 3 things. On the one hand, these applications are very complex. Take like a high rise building, just the color, you know, how the surface of the grade transmits light. So very little thing, if the light doesn't come from the right angle, the architect will not approve that particular sheet. Sounds, you know, it's actually a really big deal. So you don't want to make bad quality. It has to be perfect. So these grades are complex and we're pushing kind of science to the higher end. That's sort of one element. Another is just sort of the selling approach being very, very sophisticated in how we go to market, not only addressing the customers directly, but also discussing with other stakeholders because it's usually a complex decision making process before you decide. And thirdly, just the actual manufacturing operations themselves, quality has to be very, very consistent. And I said, many are German sorry, our Swedish mills are mainly where we make these high value added grades. Okay. Thank you. Then maybe with the new strategy, what's going to be done differently this time to achieve the targets? And what makes you feel so confident about this? Steve, thanks. And I talked a little bit about the how already and had really hands on approach to that. But I still think that really at the heart of it, the essence of it for me is that this plan now is independent of market recovery. So this is a plan. These are actions that are in our own hands. And that's really at the key what I feel is important here. Then obviously, I mean, this is super time bound. I mean, we are talking about 9 quarters. So we've had to look for actions with fairly quick impact. We've launched the long products initiatives already a little bit earlier. And we really have to now we are getting going now. And we will be very, very transparent about this. We will report every quarter about the progress. So those are some of the important facts there. Okay. Okay. And then maybe by way of wrapping up, Heikki, again, how would you then summarize the new strategy for us? Well, I said the sort it's a 3 phase program. We're focusing now on Phase 1. Phase number 2 will then come and then if we once we succeed with that, then we are in the right to grow in phase 3. So I think very clear, logical steps of sequencing of things, addressing those matters which are critical today And then only then moving to the next step, dollars 200,000,000 EBITDA is the first target. It will derisk the company. We get net debt to EBITDA down. We stick with the €180,000,000 on CapEx, of course. Chemimine is the main bulk. Those the money is committed. So whatever residual money we have left that we spend, but not more. And then Pia already talked about the implementation plan and I guess that's about it. And then with team, I've discussed, we have a good team, everybody wants to do this and they're committed. And so we're ready. And today, it's already started. Okay, great. Thank you. Thank you, both. Thank you. So thank you for the insightful discussion. Now it's time to start the last part of the Otakumpu strategy webcast and open the Q and A session with the audience. So please operator, we're now ready to take questions from the audience. Thank Our first question comes from Anssi Karasymi. Please go ahead with your question. Thank you, guys, and thank you for the very informative presentation. I will continue with the questions that I had in previous presentation. But firstly, kicking off, Aldokumpu has done a lot of efficiency measures in the past 5 to 6 years and now you're coming with a new program. How does the new measures differ from the already made measures during the previous years? Process industry, of course, the levers, of course, do not change. So it's around the cost structure, it's around variable costs, it's around how you run the plants. An industry like this, it's very much about continuous improvement. The only question is, okay, so what is the next part of that journey that you need to get on and how do you execute? Of course, it becomes harder and harder. I'm sure that my predecessors have captured a lot of low hanging fruit. I didn't see a lot of low hanging fruit here. So this is going to be about grinding. But in Process Industry, there is always something, sometimes it's evident, sometimes it requires research, but there's always something and that's how we move forward. So, I think that's really symptomatic of the industry in which we operate. Okay. Thanks. And the second question is on the urgency. I mean, 9 quarters, so I understand that. But kind of how should we expect the actions to take place on a time line? It's EUR 200,000,000 kind of efficiency improvement? Is it steady state improvement, I. E, euros 100,000,000 in 2021, euros 100,000,000 in 2022? Or what's the plan on that side? Thanks. And I think that it's also in the nature of these improvements. I mean, Heikki described earlier in a fairly detailed way, for example, the process. And it's a fairly lengthy process when we enter into negotiations with personnel. Those need to be concluded in a proper way. And then starting from there, you can start to get provided that the result is, you know, there is an agreed result, then you can really start to execute on that. So every action will, so to say, have its own course. And obviously, we have a focus on actions where we could get results fairly quickly. But I think it is by purpose as well that we have extended the timeline here to 9 quarters. I mean, I could say to someone in my team that, you know, if you want to see results by the end of 'twenty two, you really need to push actions through, you know, early on in this sequence. But that is not to say, I think it would be too bold a statement to say that it's kind of 100 and then it's 100 more. There will be individual times plans for all of these, more than 1,000 actions. And then as we start to report about the progress, I think it will be kind of a transparent way to also just provide you some visibility into how kind of the curve is improving, how we are improving here. Can I just add on this, Antti, that during the course of the summer, so as we did the bottom up, so of course, there's an action or, let's say, opportunity that is associated with every euro that was put into the model? So we're now at a point where we know what needs to be done. We're directly in implementation mode. So it isn't so that we now only start figuring out what needs to be done. We know what needs to be done. We're now implementation mode. The transformation office has been put together. Everything is in the system and today the team is up and running and everybody has their marching orders. So I think this is how we also try and get speed. Some things will go faster, some things slower, but it's important to get enough sort of, a broad enough wave of energy and actions going into the organization that this supertanker starts moving forward. Okay. Thanks. Then the last question. Does strategy include option or opportunity to make larger structural changes to the business setup, I. E, e, selling or end in 1 business or size or even a division? How should we think about that? So the line was a little bit breaking there. So if I don't answer your question completely right, just tell me here. But if I understood you correctly, you asked about the businesses. Well, first of all, you should read the slide where it says core business. So you should read it as this is core, this will be the auto compo for the coming years. So read that slide the way it's been intended. In terms of LP, of course, Long Products, we see the numbers. We need a clear, clear step change in performance, that will be done. And when it once it's been done, of course, any company will look at its options at that stage. But no need to talk about that now. Let the team deliver first. Anything you want to add to that? No, I think we have a clear definition now of our core areas, and we also have clear plans for improvement for all of them. And for example, sites in Europe, you're going to keep all of them, you're just going to improve the performance in each one of them, right? The historical footprint of sites, it originates from Outokumpu, of course, and from Thyssen and Avesta Polaroid from the old days. So obviously, Tornio with the ferrochrome, with the mine, of course, that is a super core asset. Then we have our German downstream facilities, Krefeld, being kind of the heart of it in the Ruhr area. And then we have the 3, I would say, 2, 3 main plants in Sweden that produce the premium pro grades. So each of these plants has a strategic role, whether it's upstream melting, downstream cold rolling or then developing these special products. So no announcements forthcoming on that thing. All the plants have a role as it is. Great. That's all for me. Thank you very much. Thank you. Our next question comes from Harry Planktonen from Nordea. Please go ahead. Yes. Good afternoon once more. And maybe sort of starting with the Deep Mine project. And as it starts to show in the forecast when we are rolling our estimates to 2023 and all that. I mean, is there something you can say about the kind of the return target or remind of the return target sort of top line impact, EBITDA impact as the start up is getting not near, but nearer? Harry, I think really that at the core of the DeepMind, obviously, is the ore availability. And I mean, we've talked about that today. With this investment, it is really strategic in nature. So we ensure that we have access to the ore for a very long period of time, I mean, kind of into early 20 40s at this point based on our estimations. So I think that's really kind of the core message that we've had all along. It's about ore availability. Obviously, we have a lot of other actions as well in place to be, so to say, super efficient when it comes to both mining as well as then the ferrochrome production. But we haven't given kind of EBITDA improvement or any such figures visavis the mine investments. I mean, we have today, we had in the presentation here that kind of over the years 2021 2022, there's still the SEK 122,000,000 left on the investment. And overall, this will bring the investment to about SEK283,000,000. So that leaves kind of a small tail into the year 2023 there. That was not visible in the slide that I showed. Okay. Thank you. Thanks for clarifying that. Just one more question on the kind of the target setting. You decided not to give any sort of separate absolute target for net debt or possible net debt reduction because if you assume that the SEK 200,000,000 is added to today's run rate or sort of this year's estimated EBITDA, then the current net debt would easily fulfill the kind of that net debt to EBITDA free or so? So is it sort of a can you say anything about what your ambition level is on the absolute net debt? Well, I think over time and with the clear message that over the whole strategic journey, I mean, we are in the mode of deleveraging. It is clear that also the level of absolute debt will come down. But if we look into the next 2 years, we have really emphasized the EBITDA improvement, the margin improvement as the main tool. And we have also been open about some of the elements there. So on one hand, really strict financial discipline, really strict CapEx control. But on the other hand, a clear message around working capital, at least vis a vis inventories, I mean, we have now been here working on this for kind of several years, and we have reached the level from which we will not further squeeze down our inventories at this point. And then maybe one more sort of, say, data point, but still pretty significant in the short term. We talked about the provisions needed when concluding the negotiations on the planned headcount reductions. I mean, we could talk about provisions in the magnitude of €75,000,000 to €80,000,000 And obviously, just looking at sort of net debt development, this also is something we need to take into account for the next 2 years. So then when kind of looking at all of that, it seems that it's really most relevant to talk about the ambition of deleveraging rather than at this period given absolute net debt target. Yes. We just sort of still want to add one thing and that is that in that we have on purpose put this horizontal blue line in one of the charts that says deleveraging continues. Obviously, this is a volatile industry. We have many dynamic effects and geopolitical shocks and what have you. So, of course, one can then have maybe a bit of a sort of a philosophical discussion of what is sort of the in an industry like this, what should the leverage be in principle when you compare that to trough earnings? But at least I, as CEO, so I want to get the company into a phase where even when times are tough and, you know, there will be tough times again that, you know, we don't need to have the conversation about, you know, leverage. So I think both Pea and I, if I can speak on your behalf here, so we want to run the company in a way and get the balance sheet into a position that when the next down cycle comes, that we won't have to be sort of thinking, talking about the themes we've been talking so much about, I. E. Derisking, etcetera. But of course, that will not happen in 1 year or 2, but at least you need to take the message here that we're that's where the arrow is pointing and that will drive also influence the types of decisions we make when we look at capital allocation. Yes. No, that's helpful. Thank you very much. Next question comes from Janis Masepos from Morgan Stanley. Please go ahead. Yes. Thanks very much for the strategy presentation. A few questions left from my side. The first one going back to CapEx. If I look at historical maintenance CapEx in the range of €70,000,000 to €80,000,000 and on top of that €60,000,000 to €70,000,000 for Kemi in the next couple of years plus this utilization and other initiatives you've guided for in the past. I don't get a lot of leeway for you to invest towards the EBITDA improvement plan. So can you provide some clarity at this point? And secondly, if we look at the building blocks to that €200,000,000 EBITDA uplift, €70,000,000 let's say it comes from the headcount reduction. Could you provide some rough indication on how the remaining €130,000,000 split across the different initiatives? Thank you. So maybe your second question was maybe sort of straightforward to answer. Is really about equal weight on all of these three main areas. So about onethree from the customer excellence, about onethree from the cost and capital discipline and about onethree, well, it's maybe a little bit more because it's around the sort of €70,000,000 mark there for the lean and agile organization. So that's roughly the split. And then I think that your conclusion on CapEx is obviously correct. So just sort of summarizing the efforts that we do still on the deep mine, combining that with the necessary maintenance CapEx and then with some efforts in digitalization, etcetera. I think it is clear and it's a right conclusion that in the next couple of years, in this first phase, we are restricting CapEx. And it is then in the 2nd phase where the Deep Mine investment is done, where we will clearly have more room and more opportunities to then consider investments with opportunities to then consider investments with quick payback, margin improvements, etcetera. That's clear. Thanks for that. And just a couple of additional questions, if that's okay. The first is around the specialty grades, where you expect to grow that part of your business. Is it fair to assume that those specialty grades tend to be more bespoke and customer specific in nature and that could lead to additional inventory requirements on a regional basis since it's a global business, I. E. Could that be a headwind in terms of working capital over the next couple of years? And then another one just on the U. S. Do you see an opportunity to take market share over the next couple of years as one of the smaller players there maybe a bit more focused on other parts of its portfolio given the recent M and A we've seen? Thank you. Maybe I can quickly answer on your question on working capital related to Specialty Grades. I think that, that is an element to it. So obviously, then with better margins in this business, there might also be some sort of stretch required on the working capital side. So I cannot rule that out, but I think you need to see it sort of in the bigger scheme of how we will still continue to work with the efficiency in working capital. So I mean, we have also, as we speak, still, actually quite a lot of efforts ongoing in addressing on a systematic way the efficiency and the approach that we have there. So maybe I stop there. So I mean, your idea is absolutely sort of going in the right direction, just see it from a bigger perspective. But a lot of the specialty grades business is really customized for custom applications, which are always sort of unique, whether it's a fuel tank or a pipe in a pulp mill or like a facade in a high rise. So you do them sort of case by case. So you don't really you can't also sort of build inventory because you don't know what the customer will ultimately want to have. In terms of the U. S. Market, of course, well, it's a growth market, first of all, which is positive. There are many, many positive growth drivers in the U. S, which hopefully will lead to more growth. So let's see what now when we have the U. S. Presidential election, whether that would lead into any kind of an infrastructure investment, which I think the U. S. Market would need, but let's see whether that comes. But obviously, we have we're proud about what we do in Calvert. The customers have told us they're excited to work with us and let's see. We're here to serve our customers and I think it's interesting in the U. S, you're starting to see also some level of movement in terms of production more to the South. There's now car manufacturing also in Texas. Some car companies are moving into the South, Alabama. So I wouldn't rule out that in the coming years also, we might have a bit of a proximity advantage. Our mill is in the south. Traditionally, customers were in the north. Maybe that will also play to our advantage, hopefully. That's clear. Thanks very much. Our next question comes from Ivan Efemcukuru from Bank of America. Please go ahead. Good afternoon. Thank you for taking my question. So I'd like to follow-up on a question that has already been asked. So I understand that each plant has a strategic role in your strategy. But do you think that the incremental efforts that you are that you have explained today through the restructuring, for example, are enough to create value for shareholders? Or do you think that you might need more dramatic reconsideration of your footprint, including the number of operational facilities, for example, or maybe reallocating some capital to a region from a region to another? Thank you. If I the line isn't super good, I'm sorry about that. Maybe Pia got it better, but let me try and answer it and Pia, you fill in. But if I understood you correctly, you were talking on the one hand about, you know, the sufficiency of the measures. And secondly, you were discussing, you know, again, sort of the footprint of the assets. So if I just address the first question, so we don't have any plans to now close assets and move to Asia. So that is we don't see that as necessary. Given the presence in the markets we serve, I think that the assets are sufficiently well placed. Commodities mainly for domestic market in Europe from the European assets. The Americas will be supplied out of Calvert and Mexico for the regions there in commodities. And then we have the specialty grades, which are sold primarily from Sweden globally. So as long as the Swedish plants are competitive in the specialty grades, they can go to Latin America, Asia, what have you, and we believe we're competitive as long as customers are buying. And now this isn't the competitiveness question on pro grades, on value added grades, it's purely a demand, lack of demand type of a problem. Then in terms of the whether these measures are sufficient, if I understood correctly, so we have calculated, done a very robust analysis and we believe with the actions we have now in place, we will get where we need to. But anyway, Bia, do you want to add anything? Thanks, Heikki. I think you covered all of the key areas of the question. You did have sort of a specific sub question there, whether we should be reallocating capital vis a vis different regions, etcetera. And I think sort of given the emphasis and the importance on the mine right now, I mean, we have this deep mine investment, and it is actually taking a fairly significant portion of the overall CapEx right now. I mean, when that is completed, we will have then the opportunity to really consider. And I mean, we are already now putting in place those plans and the team and kind of having then the pipeline of the projects. But I think it's premature to talk about that now we have to focus on finalizing the Deep Mine investment first. Thank you. Our next question comes from Carsten Reiss from Credit Suisse. Please go ahead. Thank you very much. My question is just on the run rate of €200,000,000 higher EBITDA. How realistic is that given the fact that most of your peers have similar programs? I believe, Abraham just announced the new leadership journey with a similar number, which just makes me believe that the I believe a major part of those kind of program might actually be given to the market instead of actually realizing them into the EBITDA. Do you actually also thought about this? Or you really think that the €200,000,000 which might be realized come on top of the EBITDA? Or could you give it away? Thank you very much. I think it's a really fair question, and maybe I can start by addressing it maybe a bit from the sort of how perspective, how we work with this. So we already spoke about the granularity of the projects and the initiatives, but I can even take it to the level where we've said that each initiative needs to be signed off by a financial controller, a business controller, who goes through all the details and really signs off that the impact of this is visible in the P and L, that it's not what I would call funny money. So it's clear that our own diligence is all geared towards making sure that what we have as action are then also really visible through the P and L. So that's the starting point for sure. And you may also now have seen that 2 thirds of what's part of this SEK 200,000,000 run rate EBITDA improvement program are costs, organizational costs, maintenance costs, raw material efficiency, etcetera. So I would still say that they are largely from areas that we can control. Don't know, Heikki, if you want to add some more flavor to that. No, I think that's it. And just to clarify, because I unfortunately have to join a little later. The EUR 200,000,000 higher run rate is not on the EUR 200,000,000 kind of EUR 200,000,000 EBITDA for 2020, but that's on top of what you expect as an EBITDA contribution from the underlying business. I think that's a really fair comment. I mean, this is really about improvements. I mean, this is we are now at sort of a pandemic level EBITDA performance. And now we have been looking for things that can improve from here onwards our run rate by €200,000,000 annually. And we want to achieve that run rate improvement by the end of the year '22. Okay, got it. Thank you very much. Thank you. Just as a quick reminder. You. Okay. There appears to be no further questions. So I will hand back to the speakers. Okay. Thank you, operator. Thank you, Heike and Pia. And thank you for all the good questions from the participants. Now it's time to conclude our webcast, and I wish you all a good weekend. Thank you. Thank you very much. Thank you.

• Quarterly report
• Slides