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Outokumpu unveils new vision, products and pricing model, comments on its strategy progress

At Outokumpu Experience, the company’s global event in London, UK for customers, partners and analysts, Outokumpu launched its latest addition to the duplex product family, the FDX platform, introduced a new pricing model and commented on its strategy progress and the Terni divestment process.

New vision and mission

Addressing an audience of over 500 customers, partners and analysts, Outokumpu showcased its broad range of products and innovations that bring to life a legacy of 100 years in stainless steel. The company launched a new vision that captures its belief in a world that is durable, sustainable, efficient, and designed to last forever.

Says Outokumpu CEO Mika Seitovirta: “Our vision – a world that lasts forever – is based on our conviction that the world deserves innovations that can stand the test of time and are ready to be born again at the end of their life cycle. Our materials are vital in enabling a sustainable world with economic prosperity, and so it is our mission to create advanced materials that are efficient, long lasting and recyclable.”

Through its technical expertise and high quality products, Outokumpu works together with its customers and partners to create materials for the tools of modern life, and solutions for the world’s most critical problems: clean energy, clean water and efficient infrastructure.

New formable duplex grade – the FDX product family

As the inventor and market leader in stainless steel Outokumpu continues to bring new innovations to market. The new FDX product family exhibits a unique combination of price stable alloying with high strength and substantially improved formability. FDX is a totally new material solution for applications where the formability of current duplex grades has not been sufficient. Like all duplex grades, FDX platform delivers significant material savings and lifecycle advantages compared to traditional stainless steel grades.

The FDX family comprises of two product variants: FDX 25 and FDX 27 having corrosion resistance and formability properties similar to 304 and 316 stainless steels respectively, but twice the mechanical strength.

Its characteristics make FDX grades well suited for applications with high demands on formability such as plate heat exchangers, flexible pipes and pumps, where strength, formability, durability and long-term service are required. The new grades complement Outokumpu’s already strong duplex offering: Outokumpu is the global market leader in duplex grades with a global market share of more than 40%.

New pricing model – Daily Alloy Surcharge

Outokumpu plans to introduce an additional stainless steel pricing model –the Daily Alloy Surcharge that would build on the traditional Monthly Alloy Surcharge mechanism. The new Daily Alloy Surcharge model is designed to address the weaknesses of the monthly model as it would react far quicker to changes in the volatile alloy costs.

Outokumpu sees the Daily Alloy Surcharge model as the way forward due to increased volatility of commodity markets and global nature of stainless steel business. Company plans to start piloting of the Daily Alloy Surcharge model with select distributor and tubular customers in Europe during the summer to gain learnings and insights on the planned model.

Says Mika Seitovirta: “We want to investigate potential new pricing models that would address the shortcomings of the current monthly model while maintaining its benefits. The daily alloy surcharge mechanism is a method well tested in other industries, such as aluminium, where customers benefit from daily pricing offered by the producers. In regions such as Asia-Pacific, stainless steel manufacturers already give daily full transaction prices to their customers.”

Outokumpu believes that a Daily Alloy Surcharge would decrease volatility and speculation and thus provide better delivery reliability for customers. Outokumpu’s customers would potentially also have the flexibility to decide whether to fix the Alloy Surcharge on the day of the order or only closer to the delivery time. Exact details of the planned model will be developed further based on the customer feedback and findings.

Update on strategy, business targets and Terni remedy divestment

As part of the Capital Market Days program, company management reiterated its expectations of a soft first half year with improvements in underlying EBIT expected during the second half year 2013. This is mainly due to the major ramp-ups of Ferrochrome operations and the Calvert integrated mill.

Company reiterated its savings targets of EUR 200 million synergy savings related to the Inoxum acquisition by 2017 as well as additional EUR 150 million savings by end of 2014. The Krefeld melt shop closure is progressing ahead of schedule and will be closed by end of 2013, contributing EUR 50 million to the above mentioned synergy savings from 2014 onwards. In its Stainless Coil Americas Business Area, company continues to target for a positive EBIT for the full year 2014.

Company also confirmed its decision to start a strategic review of its VDM business unit, with the aim to improve company profitability and strengthen the balance sheet. During the review, Outokumpu will evaluate strategic options for VDM and consider how best to drive continued growth and profitability for the business, within or outside of Outokumpu.

As communicated in connection with the first quarter 2013 results, the timeline for the Terni divestment has been extended.

Says Outokumpu CEO Mika Seitovirta: “The bids Outokumpu has received so far are not acceptable. We are working with the European Commission towards a solution which we believe will permit us to manage this situation toward an outcome that respects the interests of both Outokumpu and the European Commission.”

Outokumpu has agreed with the European Commission and the parties involved in the divestment process not to disclose any details of the divestment process. Outokumpu expects to give an update on the divestment process in connection with its second quarter results.

Outokumpu Group


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