Good day. Thank you for standing by. Welcome to the Outokumpu Q2 2023 Pre-Silent 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 and one on your telephone. You will then 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. Please go ahead. Thank you, operator. Hello, all, and welcome to Outokumpu's Q2 2023 Pre-Silent Call. My name is Linda Häkkilä, and I'm the Head of Investor Relations here at Outokumpu. With me today, as our main speaker, we have our CFO, Pia Aaltonen-Forsell. As per usual, we will first start with a short update from our CFO, and after that, we're happy to open the lines and take your questions. Now, without any further comments, I would like to hand over to our CFO. Thank you, Linda. Good afternoon, good morning, and welcome to the call, also on my behalf. Well, it's the middle of the summer. Certainly, from a market perspective, it still seems rather cool. It's been a period of uncertainty, and somehow we are still in the middle of that period. I mean, I guess we are all looking for the macro signals that would be sort of the strong signal of a rebound, and I guess we still keep looking. I will give some more detailed comments here during the call today. I think if I try to reflect first on the ongoing quarter, as we are still sort of approaching end of June here, it's been a quarter with a weaker market. It's clear now that, you know, this downturn does take, it's still taking its time. I mean, inflation, for sure, has been decreasing, and on the cost side, that is bringing some relief, and especially I would mention energy costs there. Really, when it comes to the market, I mean, even during the quarter, I think we could experience, some really weak weeks, and I would say this is especially true for Europe. If we look on the statistics, however, distributor inventories have indeed reached rather low points, but they are still cautious, buying smaller volumes, and there seems to be a bit of a wait-and-see attitude. I would say we are also in the summer holiday period, especially in the Nordics, maybe approaching that summer holiday period, more in Europe, and that can bring some changes between weeks. We have seen some weeks also with a bit of better order intake now. Let's then see if that is a sign that the bottom is here already or whether that is some movement due to the approaching summer holiday period. Just trying to reach, you know, all relevant data points and see everything what's happening. I think in that big flow of things, you know, there might now be one or two positive points as well. At least one I picked up from U.S., where at least carbon steel prices have started to increase, but let's see, is Europe next or not? Maybe a few more points still before I let over to the Q&A. I'll comment on the volume. When we gave the output for the second quarter, we said volumes would be stable, and I still say, you know, by and large, we are within that guidance. I would say in Europe, there's been a bit of pressure, so volume development was maybe a bit weaker here in the middle of the quarter. There was a little bit of pressure down, but I would say, you know, in big picture, we are within the guidance that we have given. Lead times are quite short at the moment, for sure. Ferrochrome has been rebounding, exactly as we guided. Clearly there, the production has now been in line with our guidance. I think we've had a good production run in the second quarter. We are preparing there for a maintenance break in the third quarter, so it means that we are also putting some of the production into inventory just to be prepared for Q3. Overall, I would say a good rebound for us compared with the lower first quarter. Maybe a final point on nickel price and more broadly, the impacts of the metals in our P&L. We have clearly seen declining price levels in nickel during the quarter, and you know that for our sort of impacts from a timing perspective or the inventory related changes in our P&L, usually this kind of a situation leads to some losses. On the other hand, we have hedging in nickel that is somewhat compensating that. What I would say right now is that with the moves that we had, also including what we saw in the last few weeks with a bit of a rebound, from where I've seen the analysis right now, we are probably a bit negative impact in the quarter. I think when we gave the guidance at that point, the estimates were that we would basically be neutral from timing and hedging in the quarter. From where I'm looking at it right now, we are not quite closing the month yet, you know, things could still change a little bit, but I would say it's probably a negative impact in the quarter of, let's call it, EUR 15 million, EUR 20 million, something like that. Not a big negative, but some negative there could be for sure. Overall, on costs, I would say peak inflation is behind us. We are starting to see some easing up, and especially on the energy side, also really some cost decreases. In that sense, that is helping a bit, the situation on the cost side. I think, those were my key messages in the opening, now I would be happy to move over to the Q&A session. Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile the Q&A roster. We will take our first question. Your first question 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 question. I have two. The first one for Europe, we've seen some competitors cutting or planning to cut production recently. Is that also something you are contemplating? I appreciate the color you gave on the Q2, but usually in Q3, we could see a double-digit decline in volumes. Is that also something we should consider looking into, well, those weak months into the summer? Thank you. Hi, Tristan. Yes, indeed, I see no reason not to expect normal seasonality. Especially for Europe, I think you're right that, you know, historically, what we have seen is something north of 10% quarter-on-quarter decline, just based on the seasonality. I see no signs that that's, you know, why that shouldn't occur this year. Of course, we will come back to the Q3 guidance and really in our Q2 report. During the third quarter, we are planning some maintenance breaks actually at all of our main sites. That was also scheduled for already earlier. Indeed, we will take maintenance breaks during the third quarter. Okay. That's really helpful. My second question is, towards the US market. I mean, last time we left it and what we've seen in market conditions is that the US is still relatively more resilient than what we're seeing in Europe. Is that still the case? Can you discuss a little bit what you're seeing in terms of demand? Also, I think there were expectation of potentially some base price decline in the region. Has it happened already? Yeah, that'd be it. Thank you. Yeah. Thank you, Tristan. If I look sort of backwards, and at our order intake, I cannot see extraordinary strength, but also, I mean, the market is in a bit of a wait and see mode. On the other hand, we will also have seen, I would say, fairly stable price levels in the U.S. market in particular. I think the European market has been, let's say, under some more pressure. And clearly, the U.S., sort of holistically, the situation seem somewhat more robust. However, it would be exaggeration to say the market is strong. The market is not strong, but just in comparison, stronger than Europe. Okay. Thank you. Thank you very much. Thank you. Thank you. We will take our next question. Your next question comes from the line of Bastian Synagowitz from Deutsche Bank. Please go ahead. Your line is open. Yeah, good afternoon, all. Pia, my first question is just on your, on the maintenance breaks, which you know, now have been flagging for Q3. Firstly, to check, will there be any further maintenance breaks in Q4 as well? When it comes to Q3, is there any way you could maybe quantify the cost impact as you've been doing in the past? So are you like taking these maintenance breaks both on the ferrochrome and on the stainless steel side, what is the broad earnings impact, which we should be expecting from those? Indeed, indeed. Thank you, Bastian. With the planning we have right now, I would say this follows a fairly typical pattern of maintenance in the quarter. That means that there will be a lot of European maintenance during the third quarter. We will, for sure, have some of the US maintenance in the fourth quarter. That's, you know, how usually also how things have played out. In ferrochrome, when we have the bigger maintenance break, I would say the EBITDA impact overall, given also that we will have, you know, lower deliveries, or at least marginally lower deliveries, you know, we will need to deliver from stock then during some weeks. I think historically, this has been EUR 10-15 million negative EBITDA impact, probably that's not a bad guess for this time. We will still reiterate those calculations, and we will give probably a more specific figure with the Q2 report. When I look holistically at the European stainless operations, again there, I would say if we go with all of the maintenance that we are planning right now, then probably quarter-on-quarter sequentially, that increases the maintenance spend with EUR 13 million, EUR 14 million, maybe EUR 15 million. And that would also follow a very sort of typical pattern. Some of the sort of final plans are still being, you know, completed. There's always, you know, some adjustments could happen, but I think that's sort of the order of magnitude. Okay, great. That's very helpful. Thank you. My next question would be, first of all, on costs, and then also, I guess, what that means broadly for margin. First of all, I guess you obviously had a fair amount of hedging in the first half still. Is there any further, I would say, more notable cost relief, which will benefit you in Q3 at all? Or is this something where we should be maybe taming our expectations a little bit? Well, we are hedged about closer to 70%. I think that means that, you know, should spot prices still be low, then obviously that, you know, 30% portion could come at a lower, at a lower cost. Spot prices react extremely quickly to any changes. In that sense, I agree with you. It's probably wise, sort of not to let expectations derail or sort of go too far, simply for the reason that, you know, the hits that we had during when prices were increasing, they were also just tamed or lower because of the hedging, and now the same goes in the other direction. Okay, great. Just on margins, maybe, I guess, here we'll probably have to go a little bit region by region and maybe starting with Europe. I guess we've seen pretty heavy pressure on European prices. Obviously, some of the consultants are reporting historically lows in base prices, even though they are probably distorted in terms of the way that these prices are being reported. Mm. I guess if we look at the spread of scrap versus transaction prices, there was actually a recent uptick in those spreads. I was wondering, first of all, is this something which you could mirror, i.e., do you see maybe expanding gross margins even? If not, is there any logic for you to say, well, we're sort of somewhere near the bottom of the price cycle, or are you still very much sort of unsure how far this is maybe panning out in the next couple of months, with maybe seasonal softness potentially weighing further on the market here? Yeah, that is the big question. I mean, trying to interpret macro signals alone, I think if I just look at the macro, it seems that uncertainty is prevailing, you know, not to mention what happened in Russia this weekend. I mean, there's just a lot of events that sort of keep the uncertainty around. If I then look at kind of the smaller signals, the sort of weaker signals that we get, then I think it's maybe a little bit more like, at least anecdotally, you know, the one or the other sort of small positive sign. It is always like this when we are at this kind of a weak situation in the market that, you know, that there's almost an overwhelming number of various signals. You know, I'm sure that come the end of the summer, you know, at least we will have more clarity then on when we come back from the holidays, you know, what the autumn development will be. Right now, it's, you know, approaching summer holiday period. You know, what I said before is we've had some weeks of better order intake. We've seen that as well. Is that... I just want to be really open, you know, is that temporary because summer holidays are approaching, or is that a sign of something? We will still have to wait and see to really be able to interpret that. Okay, okay. Then on the US side, here, I guess if we look at spreads, they're still, I mean, impressively, at almost record levels, I guess. Mm. We just go back and look at your numbers, I guess, and the margins you've been reporting. If I just reconcile also, I guess, is the performance you delivered in the third quarter last year, obviously, where you had a metal loss within those numbers. Still, you were basically in the, sort of, in the one hundreds in terms of EBITDA per tonne. Mm. At the moment, you're basically running pretty much at half that run rate, at least the last quarter. I suspect you said, I guess volumes are improving a little bit, maybe in the US. I guess the question is, if spreads are very similar, is there any scope for you to really go back to a similar, I would say, three-digit EBITDA contribution? Because, I mean, just reconciling this against, I guess, your mid-term guidance of your target of EUR 200. Mm. I guess your EUR 200 clearly cannot be built on the basis of the current spreads. Really, I guess the market conditions from a profitability standpoint are clearly there, I guess, maybe not from a volume standpoint, but, yeah, just wondering about your thoughts here. I mean, the operational leverage is big when we get into bigger volumes. As you've seen from our Q1 volumes, we are still at, you know, fairly sort of subdued volume levels for a first half or for a first quarter. If we are fairly similar in the second quarter, that's like, okay, but that's not great. Here is the thing, of course, that, you know, we will also need a clear volume uptick to get to higher levels. This is sort of the balancing act that we have here. Let's not forget that there have been a number of inflationary items that, in the U.S., actually were hitting a bit earlier than what they did in Europe. we have only now sort of seeing that start to decrease. so I don't wanna sort of comment the margin level per se in any more detail. We'll have to wait for the report. I think for sure we are historically still at, you know, fairly sort of subdued volume levels compared with what we could deliver normally in a first and second quarter. Okay, great. Then maybe lastly, putting all of what you have said so far, obviously, together, I guess you have a guidance out there for, I guess, flat to slightly better EBITDA. Yes. Mm. You know, highlighting obviously, this extra impact from, I guess, from metal prices, which I guess is fair. Despite that, would you still be comfortable with the guidance for flat to better? I need to be, because otherwise I would need to change it. Isn't that so? I think the, you know, the flat to better was the reason that we gave. I mean, it's a very broad guidance, and usually we try to be at least sort of clear on whether we think it's flat or whether we think it's better. The reason for giving that as a point was, of course, the overall uncertainty, and then also just the fact that, you know, we had pretty big moves in timing and hedging in the previous quarter. Now I can confirm that it's not a huge move, but it is indeed a negative one, and that's lower than what we, you know, we anticipated that it would be flat at the time when we gave our guidance. That's sort of clearly one negative that is hitting. I'm not changing the guidance, but, you know, within that room of flat to higher, at least a part of the, you know, kind of upside was now curbed, so to say, by these metal impacts being a bit more negative than we were foreseeing. Okay, great. Thanks. Thanks so much, Pia. Thank you. Thank you. We will take our next question. Your next question comes from the line of Harri Taittonen from Nordea. Please go ahead. Your line is open. Yes, hi, good afternoon. Could you say something about the ferrochrome market and how it looks like? I mean, from supply-demand point of view and the supply restrictions point of view, just to give color, to get a feel what the sort of the market side or the outlook is sort of for the coming quarter, please? Yeah. Hi, Harry. Hi. Ferrochrome markets has clearly also had, you know, its from demand side, I mean, I think it has been weaker based on the fact that the stainless steel demand has been on a lower level. I would not sort of. I think the demand side is, you know, on the weaker side. We've also then had a lot of restrictions on the supply side. This seems to be kind of, for a pretty long time now, the continued story, that, you know, some constant struggles in South Africa has certainly kept them, I would say, you know, its over exports to China have continued, but there does seem to be, you know, just continued problems and also problems with the electricity prices right now and a lot of restrictions on those. With that all in mind, you know, we still seem to be at a low level, but somehow balanced. At least that's my interpretation at the moment. Okay. No, that's great. Perhaps another question just on the stainless side and the kind of the import signals from Asia, with the current price developments... Mm ... and sort of the difference. I mean, and also, like, can you remind if there are any kind of, so import quotas that are coming up in the next months? Yeah ... or quarters or so, or, other sort of points? Just a reminder on that. Yeah. Thank you. Yeah. Sorry, Harri, I think your line broke a bit, but I think your one question was whether there is, you know, a lot of, if there's any signals about the imports from Asia right now, and if I answer that question, we really don't see any strong flows. Just simply there is not much of an economic incentive given the kind of prevailing low price levels in Europe compared with even the price level in Asia at the moment. There really, I mean, economically, it doesn't make that much of a sense. No big inflows at the moment. When it comes to the various trade protection measures, I would say really importantly, obviously, there's the anti-dumping and anti-subsidy measures that are still in force, if we talk about Indonesia, if we talk about China. The safeguards, the mechanism, the quota mechanism was extended for one more year, and then it will be up for a bigger review in June 2024. I think that sort of revision process that went through this spring went as expected. There was a bit of relaxation of the quotas according to the WTO rules, but other than that, they continue. There have been some quite important anti-circumvention cases, for example, vis-à-vis Turkish rolling, and I know that there's a lot of activity exactly on this sort of anti-circumvention space. Of course, 2026, CBAM, is kind of the next- Sure ... the next big step. Oh, that's a good refresher. Thank you very much. Thanks, Harri. Thank you. We will take our next question.... Please stand by. Your next question comes from the line of Moses Ola from JP Morgan. Please go ahead. Your line is open. Hi, Pia. Thank you for taking my question. Just one from me. Just wanted to ask what you're seeing currently on imports, and how your order book is currently competing with imports, into Q3, and also beyond that, if you have any visibility as well. Thank you. Hi. Hi, Moses. Hi. I think we do not see any sort of big import activity, and I think that's simply based on the price levels for spot being low in Europe in particular. We also don't see import activity of any magnitude, of course, in the US, but that's kind of as per normal since some time. I think how this is then reflected in our order intake, I think, of course, sort of local producers have taken market share from imports, but at the same time, demand is also lower. I don't, you know, this alone has not sort of triggered any huge increase. Rather, I think that the low imports are also reflecting the kind of weaker market situation that there is. Low prices, low imports, and bigger market share for local or regional producers. Thank you. Thank you, Moses. Thank you. We will take our next question. The question comes from the line of Patrick Mann from Bank of America. Please go ahead. Your line is open. Good day, Pia. Thanks very much for the call. I just wanted to ask maybe just around balance sheet development. I know you said you're building up some stocks in ferrochrome and ahead of the third quarter maintenance shutdowns. Just how should we think about working capital on the balance sheet into the end of this quarter? Thank you. Hi, Patrick. Hi. Yeah, what I would expect is a bit of a buildup of working capital, but not huge. From a cash flow perspective, well, you know, we also paid a dividend in the second quarter. You know, given our result guidance and then the working capital building up a bit, but not by a huge amount, I still look, you know. I think it's a comfortable sort of position still with the balance sheet, as in previous quarters. Got it. Thank you very much. Thanks, Patrick. Thank you. Once again, if you do wish to ask a question, please press star one and one on your telephone. There seems to be no further questions at this time. Please continue. Thank you, operator. I think I said earlier during the call that we see a lot of sort of wait and see from our distributor customers. I would say that's probably what we are, now all also need to do. There's a bit of wait and see now until we are ready, closing our accounts and then coming out with the Q2 report and Q3 guidance. With that, Linda, maybe you can remind us of the practicalities, please. Thank you, Pia. Before we close the call, I would like to remind you that we will start our silent period on Tuesday, July 4th, and will continue until our Q2 2023 results are published on August 3rd. Thank you once again, and have a great summer. This concludes today's conference call. Thank you for participating. You may now disconnect.