Good day, and thank you for standing by. Welcome to the Outokumpu pre-silent conference call, Q4 2021. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to our first speaker today, Linda Häkkilä. Please go ahead. Thank you, operator. Hello, all, and welcome to follow Outokumpu's Q4 2021 pre-silent period conference call. My name is Linda Häkkilä, and I'm the head of investor relations here at Outokumpu. With me today, we have our CFO, Pia Aaltonen-Forsell, and she will be the main speaker in today's call. We will today first start with a short update from our side, and then we are happy to take your questions. Now, without any further comments, I would like to hand over to Pia. Linda, thank you very much and Happy New Year to all of you on the line. I do hope you are all keeping safe and well. Let's have a bit of an overview on the market and a bit also the main drivers for profitability and cash flow, and then fairly quickly go over to Q&A. I'll start with a few comments on the European market. I mean, obviously, we are still here living the positive sentiment. The COVID rebound in the year 2021 has been solid and strong. Also, when we look into the year of 2022, we hear a lot of still positive macro news despite Omicron and despite geopolitical tension. The overarching view still seems to be more on the positive side. If we look into the development on Outokumpu side, of course, also, as earlier commented, our order book has really remained strong. We are solidly booked for the first half in Europe also of next year and already booking some even into the third quarter. The market sentiment remains on a positive note. Obviously, the same definitely also goes for Americas. Maybe I'd like to spend a few more sort of detailed comments just on some of the key segments here. I mean, I'll start with distributors and more so from the retail perspective of where we stand also in terms of stock levels. It does seem that stock levels have increased somewhat after the summer period, but we are still on very moderate levels in Europe. In the Americas, also looking here at some inventory increase through the autumn, but still, for example, based on our customer survey, 60% of customers still indicate that inventory levels are low. This is sort of the current market sentiment there. When we look into some other segments, let's talk a little bit about automotive. Obviously, this has also been a strong year of rebound. Nevertheless, also a year with a lot of news of semiconductor shortages and various supply chain issues. I would say not per se or in detail impacting Outokumpu so much, but still worth mentioning that also for the year 2022, I mean, this is still a segment that looks to be along with many other segments still on a positive and good demand situation. Appliances also still, you know, asking for more volume, looking really at strong markets also there. Then maybe my final comments more from a European perspective than as well on the heavy industry side, really see more activity also from bigger projects. This goes along somewhat with the comments relating to our Pro grades and the Pro segment, the value-added segment. There also we do see increased activity. However, this has been, you know. This is along the lines of what we talked about earlier. I mean, there is a pickup. We started to see this already during the summer. I mean more inquiries, more orders. But in practical terms, we are only gradually seeing this, you know, in terms of higher volumes in Pro. This is still something that is kind of more ahead of us. If we talk about, for example, scrubbers, that is definitely something where, you know, the timeline is still more ahead of us, you know. Is it second half of next year or is it even further on than that? That I don't really I don't think we really sort of fully have that visibility yet. Clearly more ahead of us still to this regard. Overall, I mean, if we then turn to look just a little bit more into also the here and now when it comes to the realized prices, of course, based on what we have seen, based on the received orders, we have still seen continue to see an increase. Also delivery levels, as we have guided for the fourth quarter here, they are on a good level, but on a similar level as in the third quarter, along with what we have said before. Maybe I'll round up with a few comments from the cost side. First of all, electricity costs certainly have made the headlines along with other energy-related costs, whether it's natural gas, or for example, fuels, in our case. Certainly here also I would reiterate that really in terms of the PNL impact or the impact in the fourth quarter compared with the third quarter, we do see an increase. We have a hedging policy that is protecting us, particularly in the short term. The increase as we have communicated earlier is sort of order of magnitude around EUR 10 million increased quarter on quarter from electricity. I would say that you know, looking at natural gas, looking at our other fuels, et cetera, there certainly will be an increase from those as well. Is it up to EUR 10 million? Maybe that's sort of a good round number for that as well. I would say these are sort of the limits where we are moving when it comes to the fourth quarter. Now, for those of you who are watching the prices and the sort of future prices, forward prices on a daily basis, you know, there's certainly been a lot of movement. I mean, there really was really big peak, really massive peak. Maybe some sort of calming down. I think the direction, especially for the first quarter, is still clearly upwards and maybe this is something that we will then come back to more when we give our Q4 figures. As the prices look like right now, I would expect that this you know further continues into the first quarter with cost increase. Ferrosilicon may be one more sort of worth mentioning really with also increased cost effects in the fourth quarter. Finally, all-time favorite, maybe not so much making the headlines this year, but the timing and hedging impact. Again here I would say, probably, a small positive figure in the fourth quarter, but then if I look at sort of a bridge impact versus the third quarter, it could actually sort of sequentially from Q3 to Q4 be just a little bit negative. These are small figures, overall, compared with the current profitability level. Finally, a word then from the cash flow perspective. This has been a different year in many regards, one of them also being that what we communicated ahead of Q4 in terms of a working capital development was more of a stable development than maybe the typical seasonal pattern that we've seen before, with somewhat of a dip. I think that has two reasons. One of them obviously metal prices still being on a higher level and this clearly impacts the valuations per ton, prices being higher. We also have the receivables, et cetera, on a higher level. Outlook into Q1, which clearly has also had a focus a lot on being able then to serve in a proper way. We haven't had any specific, let's say, inventory reduction targets, rather sort of optimization targets, in terms of keeping a good service level to customers. There I can just reiterate that, more sort of being stable on the working capital, this year in the fourth quarter is what we are expecting, right now. With that said, I think that would round up my overall comments here. Let's say further details we can take on questions, so operator, I would be ready for the Q&A now, please. Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound hash key. Your first question today comes from the line of Ioannis Masvoulas from Morgan Stanley. Please go ahead. Your line is open. Hello, happy New Year and, thanks for the presentation. Two questions from my side. The first one on energy. You provided some useful color for Q4 around the energy and natural gas costs. Can you perhaps give us some indication on how we should be thinking about Q1? Mm-hmm. There is a lot of volatility, but there is also the hedge book in play, so some indication on how you're thinking about the development here would be very useful. The second question relates more to the stainless side of things. If we are to look at pricing in Asia, we've seen some weakness over the past month or two, and same goes with spot FeCr prices in China. Is that impacting the purchasing behavior of some of your customers, either in Europe or the U.S.? Because you mentioned that inventories are at more comfortable levels now. Mm-hmm. Has there been any potential destocking trend that you're seeing into Q1? Thank you. Thank you. And really happy New Year to you as well. First on the electricity, I would say yes, indeed. I mean, this is really super sort of choppy and volatile from day to day even. But based on what I know right now, I think my best estimate is that the impact, the negative impact quarter-on-quarter could maybe be the double in Q1 versus Q4 as what this was in Q4 versus Q3. I'll give let's say one more thing to consider, which is, of course, also the inventory cycle that we have. I also need to take into account when I'm saying this, that there's the hedging that is of course important, but there's also the fact that, you know, we do use most of the energy here and the electricity sort of early on in the process. Once something is then, you know, inventory work in progress already, we probably already have a lot of the electricity and energy costs there in the inventory. And then it takes some cycle, you know, before that's out of inventory, and then actually the margin is realized. With that said as well, I mean, some of these impacts are pushed to the next quarter. That would be, let's say, my take on it today. I do have to say, I mean, this varies day by day a lot, so. Understand. Thank you. Maybe that's on the energy side. I think indeed, I mean, looking at sort of development in China, certainly indicates that there has been, you know, some level of change. How is that then impacting into Europe and Americas? I really cannot claim that I would see any direct impact right now, nor from the fact that, as you also said, I mean, we do see, you know, somewhat more normalized inventory levels at the moment. We are still, you know, not quite there, where we were before all of this hassle and, you know, this, these situations with COVID started. There's still some way to go there. Certainly also just looking at external statistics on prices, et cetera, I think we can see that this, you know, rate of change that was really quite big and, you know, the more sort of rapid increases early in the year now seem to be more sort of moderate, but still on a positive trend from our perspective. You know, something to watch for. I think that's related to my earlier comment as well, that, you know, we are seeing a very solid order book in Europe into the first half of next year, with, you know, booking into the second half. Of course, you know, still sort of early days to really make conclusions about that. Final comment from my side, with the order book, the sort of sequence of things or the pace of things is a bit different in the U.S., so there we are clearly typically booking one quarter ahead where we also, you know, are following there that normal pattern, to speak. Understood. Thanks very much, Pia. Thank you. Thank you. Your next question comes from the line of Krishan Agarwal from Citigroup. Please go ahead. Your line is open. Hi, Pia. Thanks a lot. My first question is on ferrochrome. I mean, over the last three, four quarters, we've seen some sort of, you know, mixed change in the ferrochrome, where the spot deliveries at the lower price were sort of impacting the realization. How should we think about- Yes. The, you know, ferrochrome price realization and the third party deliveries for the fourth quarter? Are they sort of normalizing and hence, you know, quarter-on-quarter, you know, solid increase in ferrochrome profitability? Yeah. Thank you so much. I think I was a little bit careful in some of my earlier statements, particularly when asked, you know, around the sensitivity of how does, you know, price changes impact ferrochrome profitability. I said maybe, you know, the increase is a little bit lower than what it has been historically. There's been a number of reasons for that. One of them was more on the cost side, really, that the electricity hikes are also impacting ferrochrome, which we need to remember. That's a cost element that's really quite significant there. Really on the market side as well, that we've had some pricing that has, you know, led to a situation that you cannot just look at the benchmark price. I would say I would err a little bit on the cautious side there to say, you know, it's we still need to count on, you know, some part of the pricing being more sort of impacted by the spot. This is by no means, you know, this is only a share or a fraction. You know, this is by no means sort of the majority or the big part of the ferrochrome pricing. A little bit of cautiousness may be there. You know, I don't really wanna send a too strong message of that, but rather just repeat what I've said before. Okay. The second question is more on the U.S. side of the business, where- Mm-hmm. I mean, your European competitors are announcing, you know, indicative price increases like four or five price increases. You have sort of volume opportunity in U.S. from the withdrawal- Mm-hmm. of one of the local competitors. Yes. How should we think about the U.S. business, as in you are competing on the pricing to gain, you know, further market share, or your price increases has been sort of competitive to the Europeans? Yeah. I mean, looking at, for example, capacity utilization in the U.S., I mean, clearly, you know, we have been operating at really high rates. I guess this is sort of throughout the market. Even when I was looking at some import statistics, now I haven't looked, I actually didn't have the latest numbers here available, but when I looked just around Christmas, I mean, the imports have also been a little bit up because there's really been a lot of demand, and simply, I would assume based on the imports being a bit up that there's really not been enough capacity at the moment, you know, to fulfill all the demand domestically. I think clearly we have done our best to serve customers and, you know, to keep on delivering. I really can't kind of comment on the pricing more than that. Okay. Understood. The final question is, I mean, obviously the price realization across U.S. and Europe is going to be strong in the quarter, but the nickel pricing and the scrap pricing are pointing towards stronger input cost increase, not to mention the electricity cost increase. Mm-hmm. Overall, I mean, should we increase the pricing offsetting the cost increase or you are expecting a net, you know, margin increase into the quarter on the stainless side? Well, I would say based on our guidance, of course, we are guiding for higher and the components, you know, while deliveries are really stable quarter-over-quarter. It's really the balance then of, you know, the net of the cost increases that certainly are there. At the same time also we do see realized prices increase now, you know, based on the order intake that we had earlier at the point in time when prices were really increasing. I would say our guidance gives a good hint there. Okay. That's clear. A quick clarification. When you said about stable working capital in the Q4- Mm-hmm. Do you mean similar sort of a working capital build quarter-over-quarter or no build at all? Yeah. I would say target more to sort of keep on the same level, not to have a build. Certainly, you know, there could be, I'm not saying this is not sort of around zero, absolutely stable. But usually we've had somewhat of a decrease in the fourth quarter, and I don't foresee that happening right now with sort of the current market environment that we have. Okay. Okay. Thank you. you. Thanks a lot. Thank you. Thank you. Your next question comes from the line of Tristan Gresser from BNP Paribas. Please go ahead. Your line is open. Yes. Hi. Thank you for taking my questions. The first one, we've seen a bit of industry press about a potential labor dispute in Finland. Has it- Yes. impacted at all your operations or, moving forward, should we expect some kind of disruption? If you can comment a bit on that'd be great. Yeah. Thanks. A really relevant question of course during these days. I mean, if I look the Finnish news, it seems that this is sort of all over the news right now. I mean, we haven't had a disruption until now. This hasn't you know until now, there's not been an impact on our operations in such a way you know that we would be talking more about it. Of course, there's been now more threats in the air. I would say yesterday there was some good news about sort of a tentative solution that could sort of pave the way here. There are still, you know, some decision makers out there sort of pondering whether they are to accept the proposal, et cetera. We are still living now in this period where we are expecting things to clarify, but they are not sort of fully clarified yet. Certain important meetings are happening more towards the end of the week. You know, depending then on the resolution from those meetings, we would of course be, you know, providing more information if that's needed. At least there was, let's say, some level of a resolution proposal that was put on the table yesterday that now seems to be then further debated by the parties. Okay. Thank you. My second question on contracts, we discussed it a bit at time of Q3 results. Yeah, we're in early January. Are most of the contracts, I understand a lot of them are resetting in January, being concluded. Has those negotiations been in a certain way successful? When we take into account some energy inflation, should we still look at the net impact in a positive manner? Yes. I do. I would say first of all, yes, they have been concluded. The sort of whole dynamic was, you know, for more towards sort of earlier conclusion in 2021 maybe compared with some earlier years. We have seen the new price level reflected in the new annual contracts. Meaning that we have received increases and also, you know, the volumes that we were looking for. Clearly we have secured here, you know, the portion that we wanted, which is a little bit higher than it was the year before. Overall, I would say we are happy and, you know, on the balance of things, still provided also the cost inflation that we can see currently, I would say that, you know, we have been managing this in a way that is satisfactory. Understood. Thank you. My last question please on the U.S. market, you touched on the fact that imports are rising, demand is really strong and you're operating at high capacity utilization. Mm-hmm. We've seen some news that IRNC could be filing for an exemption to get back the Indonesian slabs that were previously blocked. Mm-hmm. Is that something you would oppose or put a request for this not to happen? Or do you think there is space in the U.S. market to have a bit more supply? Actually, on that question, I need to say that I haven't yet formed a view whether we would be opposing that, you know, that individual exemption request. I do wanna say, you know, earlier that there has been, I would say, a good mechanism for keeping, you know, for somehow sort of keeping the checks and balances in the markets and also that exemption was not received before, I would say on good reasons. I really cannot provide sort of a full answer to your current question, but let's see. Okay. That's okay. Thanks a lot. Yeah. Thank you. Thank you. Your next question comes from the line of Bastian Synagowitz from Deutsche Bank. Please go ahead. Your line is open. Yeah. Thanks, and also happy New Year to all of you from my side. Pia, you already gave a lot of good color on the order book, so I can scrap my question here. Mm-hmm. I still wanna follow up briefly. Just looking at all of the positivity which you're reflecting there in your comments, I guess it's I think it's fair to assume that the usual volume seasonality which we see in the first quarter, i.e., volumes up, probably in Americas and also Europe, that's something we can probably also expect this year, right? Is that a fair statement or? Well, I would say, you know, the market, overall sort of sentiment, is positive, and that has been the typical seasonal pattern. At least it's difficult to see right now, you know, what would be talking against that if I kind of turn it a little bit. Of course, we will only provide the guidance then when we give our Q4 report. Yeah. Got it. Okay. Understood. Just looking at the very significant order book length and then the price dynamic which we basically had pretty much every month. Yeah. I suppose we also, from the spot side, we also see a further increase in realized margins, i.e., it's not just the annual contracts where you're gonna see the big reset in pricing, probably quite significantly above what costs are doing. I guess you still see obviously a further price and margin improvement on the spot business as well. Is that also a fair assumption or? Well, I think you are capturing a lot of the elements here, and the dynamics sort of environment we've been in. Obviously, you know, with the long order book, it's just the fact of the matter is that whatever orders we receive now and into the realized order intake, we have still seen the increased price levels. Of course it means that we are sort of pushing that to deliveries and realized prices in the future. To that extent, I think it's true. Obviously, you know, the spot business, yes, indeed, you know, we do have the service centers. Overall, you know, with the order book in place for such a long period of time, obviously it means that the share of spot business there is lower. The impact will come a lot from the orders that have been received. Thank you. Lastly, on capital returns, I remember when you and Heikki last spoke on the call, I think you sort of managed expectations more towards an update on shareholder returns maybe in the second quarter. Mm-hmm. Is that still your latest thinking, or have you sharpened your idea around how you wanna do it, when you wanna communicate? Thanks, Bastian. It's an excellent question, and I think I need to return to this in our next call and sort of about the, you know, more sort of steps to come there. Mm-hmm. Okay. Sorry, very last one. EUR 180 million CapEx guidance, I think you will remain firm about that. I guess, again, no change on that- Yes. Number also for 2022 as it stands today? You are right. Correct. Yes. Yeah. Okay. Got it. Okay. Thanks so much. Thank you. Thank you. As a reminder, if you would like to ask a question today, please press star and one on your telephone keypad. Your next question comes from the line of Luke Nelson from JP Morgan. Please go ahead. Your line is open. Hi. Pia, thanks for taking our questions, and Happy New Year. Just to follow up on Bastian's question before, just to maybe hit at another angle on pricing. It's a bit unclear around heading into Q1 and maybe Q2, just with the annual contracts. Mm-hmm. Resetting on the first of January. You talked to energy costs Q1 versus Q4 probably being double. Mm-hmm. -digit again. Um- Mm-hmm, mm-hmm. Maybe if we take a step forward into sort of Q2 then, can you sort of start to paint the picture on how the margins might proceed given ASP sounds like it can continue to grow into H1 and maybe even into the summer. Sort of how should we be thinking about the margins then? Is it possible to preserve that margin as we step into Q2 and summer, just given with the annual contract resets. Yes. Seems like it's been set at a fairly solid level. Luke, thank you and indeed, Happy New Year to you. Let me just comment on some of the elements because I think that's what I would be, you know, happy to do at this point in time. Yes, indeed, as discussed earlier, you know, with the long order book, particularly in Europe, it of course implies, you know, mathematically that we need to look at orders already received and the price level there, and then consider that that means that that kind of translates into realized prices in the first half of next year or this year, of course. I mean, we are already in Jan here right now. With that said, that sort of gives a certain curve of expectation, you know, I would say on the positive side. Then on the cost side, it is actually a little bit more tricky to even foresee, you know. Even saying something about Q1, I need to be careful and say it's sort of on my best information right now. What do I base it on? First of all, I base it on the fact that we do have in terms of electricity and also sort of energy more broadly. We do have a hedging policy as we have discussed before. It means that we are tackling the majority of the following quarters on a basis of being sort of sure of what the cost level will be. We also always have this spot level. Then the other element that I need to take into account there is that we are sort of gradually increasing the hedging level. It does mean that we have also concluded some contracts into, for example, 2022, also at the somewhat higher levels that we experienced late in 2021. With that said, I have some sort of educated view about what could come. We still have this certain fraction that also moves with the spot, and the spot has really been moving so much almost on a daily basis. I mean, I get a report every day of how much the estimate for Q1, you know, would change with the sort of the current current forward prices. This is just a figure that is still moving a lot. That's why I think that it seems that there is pressure into the pricing of, for example, electricity into Q1 and also Q2. There really a lot still needs to happen before, you know, that's being completed and really realized. That's why I would be more hesitant to answer that question and really sort of give a figure for the longer term there. Just sort of I was just looking into the overall figure, the spend, if we calculate all electricity and, you know, what we calculate as energy, together. I mean everything with natural gas, you know, LNG, what we have in various fuels and, you know, the whole sort of bucket of everything there. I would say the overall level is order of magnitude, like EUR 350 million for the year 2021. I think that just sort of gives you a little bit of a grip of then the kind of overall situation, you know, what certain changes could mean and how much it could change, et cetera. I guess you following the markets, I mean, you hopefully can sort of subscribe to that it's difficult to really give a sort of sound, solid answer, far into the future. Yeah, no, that's great color. Thank you. Maybe more of a straightforward one just on maintenance in Q4. Mm-hmm. I think Q3 was around EUR 20 million, roughly, and the guidance was for Mm. For zero or very low levels. Yes. in Q4. Can you maybe just confirm that is still the case? Yes. Yeah. Anything into 2022, Q1, Q2, specifically, just sort of if you have an indication of the maintenance profile? Yeah. Indeed. What I can say first of all about the maintenance profile, I don't think Q1 is typically a very low maintenance quarter, so there's not sort of any significant planned maintenance there. We need to come back with the sort of bigger schedule of maintenance for the rest of 2022 then, in our February call. If there's something that could happen already sort of in June or are we pushing a lot into Q3 next year as well, I think there's still some sort of fine-tuning ongoing to that respect. We'll need to come back, but not Q1. When it comes to the cost level, the EUR 20 million or the sort of EUR 10 million, those are the changes that we usually like to talk about if we have something, you know, more significant going on in a quarter. There wasn't anything like really, you know, no big stoppages in, for example, ferrochrome or so in the fourth quarter. We did have some planned maintenance in Calvert, but overall, the amounts were not that significant, so we did not, you know, say anything specific. I really don't have any sort of number to add here to say, you know, there would be an addition also. Okay, great. Thanks a lot. Thank you. Thank you. As a reminder, if you'd like to ask a question, please press star and one on your telephone keypad. There are currently no further questions. I will hand the call back for any closing remarks. Thank you, operator. Thanks all on the line. Again, thanks for the active participation. We will be back with more information and details then in our Q4 report early February. Best that I hand over to Linda for the concluding remarks. Thank you, Pia. Thank you all for joining our call today. Before we close the call, I would like to remind you that we will start our silent period on January ninth, and we'll continue it until we publish our full year results on February eighth. Now thank you once again and Happy New Year. Thank you. This concludes today's conference call. Thank you for participating. You may all now disconnect.