Good day, thank you for standing by. Welcome to the Outokumpu's Q1 2023 pre-silent conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Linda Häkkilä, Head of IR. Please go ahead. Hello all, welcome to Outokumpu's Q1 2023 pre-silent conference call. My name is Linda Häkkilä, and I'm the Head of Investor Relations here at Outokumpu. With me today, we have our main speaker, our CFO, Pia Aaltonen-Forsell. As always, we will first start with a short update from our CFO, and after that, we're happy to take your questions. Now, without any further comments, I would like to hand over to our CFO. Thank you, Linda, good afternoon, good morning, everybody. I have to say it's been a great day today in Finland and here being in the office as well. I can feel, you know, see a lot of smiling faces and certainly we have a little bit celebrated as well, Finland becoming a member of NATO yesterday. A good move and a good step. Let's focus on the business here. My intention today is really to give you a very brief business update to start with and then, you know, waiting for your questions, then we can dig a little bit deeper, I hope, into a number of topics. At least what's been on my mind a lot has been the market development and particularly what's going on with our distributors in US and Europe. If I start in Europe, you know, if I would take my cautious hat on, I would say that we are sort of at the end of destocking. If I would be more optimistic, I would say that at least in western part of Europe, we are already in restocking mode. You recall us talking about this as well earlier, that distributors are not all in the same positions. We have some who have been more active already for a while, I would say the broad picture is definitely that destocking is ending in Europe, and we can even talk about restocking for some of our clients. US is a little bit, sort of still more, you know, I would say put more emphasis still on that some destocking can continue into Q2, especially for some customers. Here again, our distributor customers are not the same. I mean, also if we look at the statistics in Europe, actually in Germany, distributor inventory is below average, and this is cold-rolled. In the US, we still see distributor stocks being above average on cold-rolled. However, also in the US, we can start to see definitely, let's say, differences between distributors, and some of them are already in a somewhat sort of more positive boost or mood. I guess that's what sort of then also has impacted our situation a lot, I would say. You know, we still have a fairly short order book. It's more like, you know, roughly two months, maybe a bit over two months. We have had, you know, sort of a good run in the Q1. We are very much aligned with the guidance that we gave on the volume side, where we said, you know, 10%-20% growth quarter-on-quarter. I think we are, you know, we can continue to say that now that the quarter is over, both for Europe and for Americas. I would say, particularly in Europe, I would still say, hey, you know, for our main melt shop, melt shops in Tornio, the winter was not particularly easy. I mean, especially on the Finnish labor side, there's been a number of strikes. Maybe the harbor strike was sort of the toughest one. Even though this was more than 2 weeks, I, you know, that really didn't in the end impact the overall, let's say, quarterly volume. You know, happy with us being there sort of well within that guidance. I really have nothing special to say on the mix. I have nothing special to say on the pricing. I mean, no surprise there. Maybe I'll just sort of move over to have a few comments on the cost side first. In Europe, energy has been sort of the topic on everyone's mind, and Q1 has actually been easier, as I'm sure you noted from the stats as well. You know we are pretty well hedged. I mean, we are for this year 60% hedged, and we are even pushing that still a bit up now, but you know, still around 60%. Still then looking at the sort of P&L impact quarter-on-quarter, I think in the end probably energy costs will not increase as we thought for the Q1, but rather actually decrease a bit. This then in combination with some, let's say, broad inflationary pressure in consumables, et cetera. You know, when I combine these two, I actually believe that sort of quarter on quarter, there shouldn't really be any significant inflation impacts here. You know, no significant sort of overall cost pressure, which I think is a good development, and I'm sure you already noted that based on sort of spot energy prices being lower. Certainly we've also had some opportunity to enjoy that as we have hedged a part of the portfolio. I think that's important. Important point on net of timing and hedging is again, no surprise. I think we said that, you know, in absolute terms, there's really no significant impact of this in the quarter. I mean, yes, indeed. I think what we will have is probably a bit of positive timing and a bit of negative hedging. The absolute impact should be fairly neutral. Obviously still waiting for the real final figures to come in, but, you know, this is pretty much according to expectations. Maybe you still allow me to remind that we actually had a big negative absolute, Linda, like minus EUR 50 million in the, in the Q4. She's nodding. Obviously if we now end up neutral, then this is a positive bridge impact, obviously quarter-on-quarter. I'll round up with a few words on ferrochrome, based on the earlier startup of furnace number two, and then we also restarted furnace number three after some operational problems that we had after the sort of Christmas time. I think we are well aligned with what we said about how much we can run, but I mean, it is still a low capacity utilization, like 50%-60% in the Q1. Somehow the ferrochrome market is still fairly robust and we have now been looking into the topics that we need to address in furnace number three in Kemi Tornio. What we then agreed was that, we will do the bigger maintenance in the Q3. That means we will get a pretty good run in the Q2 actually. I think I'll end my presentation here and take questions next. Thank you. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile a Q&A roster. We will now take the first question. One moment, please. It comes from the line of Ioannis Masvoulas from Morgan Stanley. Please go ahead. Your line is open. Yes, good afternoon, Pia. Thanks for the presentation. Couple of questions from my side. The first on the ferrochrome commentary. What sort of capacity utilization shall we be baking in for the Q2, if you have any indication? Right. Hi. Hey, thanks for the question. We wouldn't expect any major stops at all during the quarter. You know, kind of back to normal capacity utilization then. Well, you know, we are no longer 100%, but you know, clearly above 90. Okay, perfect. That's very clear. Just the second question on the buyback, you completed the previously announced plan. What's the capital allocation strategy here? Are you waiting for quarterly results to come up with an updated view, or do we need to see the cash from the Long Products business completing? Just interested to hear your thoughts on how we should think about capital allocation, specifically the buyback from here. Thank you. Indeed. Thanks. Obviously the Long Products, you know, the main portion of the money did flow in on January the 3rd. The overall impact of that on net debt, you remember the EV was EUR 228 million, but the overall impact on net debt is a little bit more than EUR 100 million, of course, sort of improving our position there. That money we have received, just to confirm that. We have now announced that we will sell the remaining kind of smaller Swedish parts, Storfors and Degerfors, of the Long Products operation, but that won't have any significant cash impact. That was a much smaller entity that we now announced. I would say from that point of view, that was already completed. Now on capital allocation. Dividends will be paid here in a few days. I believe it's the 12th of April. We also will stick to this around EUR 200 million CapEx for this year. Certainly as I have said sometimes before, I'm quite comfortable with having a bit of a cash buffer, just given still the uncertainty with the war in Ukraine and, well now most recently, obviously the banking crisis. However, I mean, we are now in a situation where we have more tools than before, and we have shown that we have started sort of our dividend track with a good base dividend of EUR 0.05 with EUR 0.10 of additional dividend to be paid next week. We have already completed the first share buyback program. I think we have shown that we have tools that we can use and our cash balance is remained strong. We also have an authorization from the AGM to continue. I think this sort of gives us opportunities that we will consider and then, you know, if we consider the time right, then we will inform. That's very useful. Thank you. I guess if I can push you a little bit, I think at the CMD last year you talked about cash buffer of as much as EUR 500 million. Yeah. Is that still the view, or could it be less than that given the progress you've made over the past 12 months? I think we have also de-risked, you know, more broadly. I think we are kind of constantly building the strength of the company. You know, with that in mind, I think this cash buffer of EUR 500 is, you know, that's a very extensive cash buffer for sure. I don't think we are in a hurry to change anything. Certainly, you know, I'm just really happy that we have more tools. I'll still, you know, say one thing that I think is important. I mean, this promise that we made on the dividend, we need to stay on track with that. I need to make sure that we have a cash buffer and that we are sort of, you know, ready to stay with that promise. That's really my main and first priority. Very clear. Thank you very much, Pia. Thank you. Thank you. We will now take the next question. It comes from the line of Tristan Gresser from BNP Paribas Exane. Please go ahead. Your line is open. Yes. Hi. Thank you for taking my questions. I have two. The first one, can you just talk a little bit about the working capital movements you're seeing into Q1? Yes. What should we expect there? Right. Hi, Tristan. I think I was maybe sort of fairly careful with this one earlier on, and I said, you know, what we usually see in the Q1 is a build-up of working capital. I think it's been, you know, it's been somewhat of a turbulent period for sure, because we've had metal price movements, you know, sales price movements. We've had a lot that has impacted. I'll still remind for everyone's benefit that last year we also had some build-up of working capital because we had to readjust some supply chains predominantly on raw material following the war in Ukraine. With that in mind, our working capital is somewhat higher than historically also because of that, at least EUR 100 million higher because of that. I think, you know, in the end, seasonally, we are still in a period with, you know, somewhat of a working capital build. I don't see this as too dramatic because we haven't had any, you know, kind of compared with the quarter end. Quarter end to quarter end, I don't think there will be a sort of a significant movement. Seasonally, we should still expect a little bit of a build-up. Okay. That's, that's very clear. My second question is we've seen some weakness in Asian prices, Asian stainless prices over recent week. I mean, the import situation in Europe has been pretty supportive over the past couple of months. Yeah. Are you seeing, with this price differential by region and probably also freight costs going down? Yeah, sure. ... the risk of seeing imports, maybe, you know, reboundings, sequentially into maybe Q2 or Q3? Yeah. Precisely as you said, I mean, we've also noted that this price differential has now a little bit increased. That's something we keep a sort of a very, you know, tight eye on, just because historically, you know, we know that if the price differential goes too big, then we have always historically seen this sort of move with more imports into Europe. I think sort of all that I can say without sort of... I mean, obviously, I don't know exactly how all distributors are acting now, et cetera. I think it was quite a hard situation in Europe and especially among distributors when sort of during this earlier, you know, big wave of imports, they had actually bought a lot of inventory at high prices and then had to, you know, get sort of I almost wanted to say, get rid of it in a totally different market situation with lower metal prices. I think that probably, you know, this was a hard lesson. Let's see how long that sticks in the sort of community memory. Of course, we also keep on sort of keeping a really tight eye on this. I cannot say for sure, but I would say the risk is maybe somewhat lower now because of the recent quite, you know, difficult experiences. Okay. That's really helpful. Maybe just a quick one on the US market. In your view, why the destocking there is taking so much time? Tristan, it is a really good question, and it is taking more time than what we maybe internally estimated first. I would say my understanding at the moment is that we really see now a differentiation between different distributors. It is clear that some had really overstocked on imports. I think that this sort of, you know, this differentiation shows that, you know, there certainly from a demand perspective, there must be, you know, some softness because this is then reflected in the speed of the destocking. I also think that, you know, the fact that some distributors sit really on a lot of this inventory certainly has not sort of made their situation any easier. You know, what is then the sort of, you know, how does this then play out in the market and how can you actually, how can you speed up that destocking. We still haven't really seen, you know, if I just refer now to official data, you have also seen the price graphs. I mean, prices have been fairly stable in the US. Maybe sort of all of these elements somehow play in as well. As said, I mean, we do have some distributor companies who I would say are going already kind of more back into the normal, or maybe even restocking more. Market in general is still having a higher inventory level than normal. Okay, thanks a lot. Appreciate it. Thank you, Tristan. Thank you. We will now take the next question. It comes from the line of Krishan Agarwal from Citi. Please go ahead. Your line is open. Hi, Pia. Thanks a lot for the insightful comments. Most of the questions you've addressed. Maybe a couple of question on the pricing. I mean, there is a lot of pushback when we talk to the different now, you know, producers and distributors and say, CRU is saying $400 base price. You know. What is your assessment in that sense that, is CRU correct to say that, base prices have gone to the level of $400 or that the transaction prices are much higher than what CRU is reflecting the base pricing? Right. Right. Well, thank you for the question, first of all. I think we're asking a really difficult question because I mean, I think you all know how CRU works. You know, they are collecting data from a number of market participants. I've always sort of tried to be a little bit careful, you know. I think the trick when I look or the difficult thing when I look at this from inside the company's perspective is obviously that, you know, we first of all start with, you know, a fairly big share of contractual arrangements that are more long-term. I mean, if I look at sort of our moving price list, you know, pricing data, of course it's not the same because we have a lot that is priced with, let's say, different mechanisms and where things are being set on a more long-term basis. As well, you know, on the transactions, obviously, you know, this data needs to come from somewhere, but I could not simply say it's right or it's wrong. I think it's an indication and you need to also think of it as an indication rather than as sort of an absolute truth. That is the best I can say today. Yeah. Yeah, understand. Actually the reference to CRU does reflect how the markets are doing while every contract is different. I understand that. The second question on the US, I mean, we are in the middle of the destocking from the distributors there, the pricing doesn't seem to have much of the impact from that? Does it, you know, give the signal to you that when the U.S. market is going into the destocking, there is probably a case for the higher pricing? You know, I'm always careful in giving any comments about the forward-looking pricing. Maybe I just sort of need to leave this a little bit open-ended and sort of not really reply directly to the question. I would say, you know, just observing sort of the market during this spring, I think if we are now, you know, we've sort of seen probably sort of the most difficult part of the destocking already, you know, end of last year, sort of early this year. We now have some distributors who are returning to a more normal situation. Probably we've sort of been through those darkest hours and are going for something improved. How long it takes to kind of for everyone to be back to normal, maybe that is something that still will take us kind of way into Q2. At least we are sort of heading for something more normal now it seems. Yeah. Yeah. One question on the volume. When we spoke last time, three months back, the guidance was for 10%-20% of the volume increase. I think the expectation at that time was, destocking probably is in the last phases, and then it has lasted a little longer. Is it fair to assume that the volume uptake is more at the 10% range rather than the 20%? Yeah, I think it's fair to assume that, absolutely. I would say we are solidly still within that range. Yeah. Okay. The last question is on the cost. You said that energy is probably a tailwind, some of the other cost pressure means that there is not much of a movement. Should it be the case in the ferrochrome as well, where, you know, the operating rates will be higher significantly versus the Q4? Does it mean that the positive impact on the operating leverage is also offset? Yeah. Yeah. Hey, What I would say about ferrochrome is that, you know, if we really only would look at energy costs, they get sort of a, you know, more of a tailwind because the share of energy as part of the total cost is bigger in ferrochrome than in stainless steel production. Yeah ...because of the really low capacitation rate, you get a lot of sort of other impacts kicking in. I still think it's sort of, you know, prudent to assume that those other impacts are, you know, somewhat negative. You know, you cannot sort of just give a huge boost because energy is lower because we were operating at only, you know, a little bit north of 50% capacity utilization. I, you know, that doesn't change so much in this quarter. Obviously for Q2, if we are able to run more back to normal, and we will be running back to normal and, we have, you know, lower energy price on the spot right now, then that's gonna be kind of the real benefit coming there. Yeah. Understood. Okay. Okay. That's it from my side. Thanks a lot. Thank you. Thank you. We will now take the next question. It comes from the line of Moses Ola from JP Morgan. Please go ahead. Your line is open. Moses Ola. Hi, Pia. Thank you very much for taking my question. Hello, can you hear me? Yes, please go ahead. Hello. Yeah. Hi, Pia. Thank you very much for taking my question. I had a question on the demand outlook. If you're already seeing an end to destocking in Europe and restocking in some parts of Europe, Yeah. How should we start thinking about shipments into Q2? Yeah. -is a similar range for what you guided for Q1, appropriate? That's my first question. Yeah. It's a good question, and I will come back to the, you know, what's really our guidance in the Q1 report for sure. You know, I think, somehow the market is turning, you know, kind of one notch better. We've already enjoying this sort of end of destocking and gradual start of restocking a bit during Q1 in Europe. You know, wit h that now really coming to an end, the restocking really starting, I think this is like, you know, one notch more positive. Please remember that on global level we have 50% distribution, 50% end customers. In the end customers, I haven't touched that so much yet today. I would say we there also have, you know, a bit different situation in different segments. I mean, we still have a fairly robust automotive for a number of reasons, you know, all the supply chain issues earlier, et cetera. We still have, you know, a good sort of situation in the, you know, Can we say like, you know, heavy industries, anything around energy. I mean, all of those are still looking really good. They are maybe more sort of the specialized fields. Appliances is showing some weakness, you know. We have a bit of a mixed situation there, for sure. Obviously this kind of distributor development is moving the needle kind of short term between the quarters, and that seems to be more on the kind of positive bit now. I don't wanna say it's strong, but it's kind of turning... The dial is kind of to the stronger direction. Okay, thank you for that. My second question was on ferrochrome. The Q2 benchmark settled a 15% premium versus Q1. You've historically guided for a 10 cent per pound increase corresponding to EUR 7 million-EUR 10 million. What is now, I guess, the updated sensitivity giving lower capacity utilization that we could expect? Yeah. I'm sorry, I don't have an updated sensitivity for the very low capacity utilization, but we will be back to normal capacity utilization in Q2. I know that's not making it kind of super easy, but I think energy is one notch cheaper than it was in Q4, already in Q1, just a little bit cheaper. I think this positive development as based on forward prices today, will continue into Q2. We will see an easing of the energy situation, not a tightening. There is an upgrade then to the sales price. I think if you sort of compare with the, with some, some sort of historical data, then I just, you know, the sensitivity feel the same, what we have said before. Okay. Thank you very much for that. Then, finally, just on the raw material related impact. Some of your peers have already indicated that they've seen negative inventory valuation this quarter. Could you just explain the moving parts of why you believe that there's been no real impact in your business this quarter? One of the really tricky things actually to sort of measure in here has been the part of moly as our inventory. You know, these dramatic movements in the moly price, first up and then down, I think certainly depending on sort of how you're stocked and kind of what your, you know, kind of price out mechanism and how you have, sort of done that, I think that could have a, actually a much bigger impact than ever before. We have looked through that, and I would say there shouldn't really be. Based on that, I don't really see any significant change for us in Q1. I think this could, you know, this is certainly something that has moved much more than, you know, what I have seen before during my 4 years here at Outokumpu. Just looking at sort of from our perspective, what I can say is that I see that, you know, quarter on quarter, certainly we will have some positive timing impacts. It means that the timing for us is the difference between the price in and the price out. From hedging, we will get some hits. These amounts are now smaller than what we have seen in earlier. You know, the positive on the timing and the negative on the hedging, they won't be, you know. They are two-digit, you know, figures and not three digits, and maybe quite low two digits. That's what I can say. Okay, brilliant. Thank you very much. Yeah. Thanks. Thank you. We will now take the next question. It comes from the line of Harri Taittonen from Nordea. Please go ahead. Your line is open. Yes, thank you and good afternoon, Pia, Linda. Just to double-check the on the ferrochrome kind of operationally that I think you mentioned that you will take a more kind of fundamental maintenance and service stop at the line three in Q2. Did I sort of get that right? You know, could you just kinda give a picture of the kind of the yearly profile of the maintenance impact this year with the ferrochrome, which it probably you need to take some extra measures during this year to get the technical issues fixed. Indeed. Maybe some sort of operative color on that side, please. Yes. Thank you, Harri. So this really is a change that we share now in this call. We will put it in the pre-silent newsletter as well. Due to the operational sort of problems that we encountered just after Christmas, and that continued into January on furnace number three, we are foreseeing a more sort of major maintenance break. We initially thought that we would make or plan to make this maintenance break in basically in May, but and a little bit into June. Now, based on our most recent planning and decisions, we will do this during Q3. The sort of benefit of that is that then this other maintenance that we had planned for this furnace for the year will be combined. We sort of do everything in once, we don't have to have other significant maintenance breaks. There will be a significant maintenance break on furnace number three in Q3, but this will be the only significant maintenance break in ferrochrome during this year. Okay. Okay. If I remember right, it's been around EUR 20 million in a sort of some years ago, I think normally. Sometimes 15, but, you know, if you approve, then you say 20. We will tell about this then when we have the more decline. Indeed, you are right. Understand. Understand. That is sort of the magnitude. Yeah. Basically then if you're saying... You are also saying that you will be getting to more normal capacity utilization, but that is then also we have to take into account that the line 3 will not be fully, you know, until you take the maintenance. Is that, is that the case? Yeah. There will. We are not getting up to 100. I don't actually have an exact figure here. I don't have that yet. I would say, you know, maybe we need to, maybe we need to count in that it's not 100, but we should be around 90 at least because we are indeed, you know, we will go back to, you know, running 24/7. We have sort of... You know, we are back on track to be able to run close to normal operationally at this point. I think that more detailed planning then has resulted in our decision to take the break only in Q3 and then be able to combine everything in 1 break. Okay. No, that's great. I mean, yeah, no need for exact numbers, but that's good to hear that you can add production quite a bit without, you know, or even before that maintenance. Okay. That's. Yes. Good to know. I mean, presumably now that you have not been in the spot market at all because you have been obviously cutting the production. Yes. as opposed, I mean, then are you going to be able to benefit normally from the higher benchmark price when the volumes go up? I mean, is that something? Just wondering if, you know. It's a typical pricing... Yeah, it's a typical. Yeah. -mechanism in any case at the benchmark. You know... Yes. That's one of the prevailing mechanisms for pricing. Obviously the other one is the spot price, CIF China. We are selling very, very little, if anything, really to the Asian market. Yes. Yes. Well, that's very useful. Thank you. Thank you, Harri Thank you. Once again, as a reminder, if you wish to ask a question, please press star one and one on your telephone keypad. To withdraw your question, please press star one and one again. We will now take the next question. It comes from the line of Ioannis Masvoulas from Morgan Stanley. Please go ahead. Your line is open. Hi, Pia. Sorry, just a quick follow-up, more of a housekeeping question. Now that you've sold the remaining of the Long Products business? What shall we assume for the other line in EBITDA? In the past couple of quarters, that was sort of mid-single digit million EUR. Does it go back to negative? Yeah. You're right that we've had sort of a slight positive from this remaining Long Products entity. You know, we have a few other topics as well in this other. I would say, you know, the impact of this one individual entity has not been more than, you know, EUR 1 million-2 million per month, if even that. It has been a very insignificant amount. That will, of course, now be gone then from the date of closing. Now we have signed, but we are still, of course, going into closing then as soon as possible, but we haven't closed yet. Okay. The other line remains at close to breakeven or slight positive. It doesn't turn to negative going forward. Not based on this, no. Not based on this, no. Perfect. Thank you so much. Thank you. Thank you for that. Thank you. There are no further questions at this time. I would like to hand over to Pia Aaltonen for final remarks. Thank you very much, thank you for the good questions. Obviously, we are now at a point where there's a lot of, you know, macro uncertainty. This is a topic that we will come back to also commenting in our Q1 release. Nonetheless, the way how we see, particularly the distributors, and sort of that situation developing right now has still made it possible for us, I would say, to continue according to our guidance and with a good run in Q1 and into Q2. Look forward to speaking to all of you soon in our Q1 release. Thank you and have a good day. Yes. Thank you for participating in our pre-silent conference call today. Before we close the call, I would like to remind you that we will start our silent period on April ninth and continue until our Q1 result is published on May ninth. Thank you once again, have a great day. That does conclude our conference for today. Thank you for participating. You may all disconnect.