Outokumpu Oyj (OUT1V) Earnings Call Transcript & Summary

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 4:05 in this same webcast. Please stay online. We will continue shortly. Thank you. [Break]

Good afternoon all, and welcome back. My name is Steve Hudson, and I am the group Business Controller here at Outokumpu. We've already reviewed our Q3 results. And now it's time to step into the second part of our today's webcast, and that's the strategy. I will 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&A session where I'll be sitting down with Heikki and Pia to discuss the strategy a little bit more. Following that, we will take questions from the lines, but for now, without further explanation, I will hand over to Heikki. Heikki?

Thank you, Steve. And welcome again. We have an exciting -- hopefully, an 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 a 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've 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 particularly when you look at Europe, with the Asian imports, Outokumpu 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 on to this journey. A few words about Outokumpu's foundations. We -- as we were compiling this list, we had many things. And we tried to choose, let's say, the top six to talk about. I decided that I will just take our 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 a 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, yes, 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 am 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, Organizational Health Index, numbers, they're good. We're high second quarter, and we're pushing to get to the first quarter. We have the strong bench strength, both seasoned workhorses but also a lot of emerging talent that is growing through the ranks and files of Outokumpu. 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 financials 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 Outokumpu, 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 Outokumpu, 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. And from the -- 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've really labeled Long Products more as a turnaround case that we're now working on. And if you look at these businesses sort of one by one. In Europe, of course, we are #1. We are 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 will find Outokumpu stainless steel shining in the glaring sun, to the eye, to the pleasure of the eyes of everybody. So we are very proud about the product range we have here. In the Americas, in the U.S. particularly, we are #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 ferritics 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 are on schedule. We're on budget. And now in Q4, we are 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 3 pieces side by side, with geographic proximity. And then you have the harbor and access to sea 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 this -- where the market was good. We really -- we were on track, but then for various reasons, have -- there have 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 will find the medicine and the treatment so that we're 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 slabs consumption go, come down. And of course, it has also impacted then the demand for the so-called value-added grades. We have low-priced imports. They've taken share. Just if you look 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 and -- is about the same size as the imports. And of course, this is very different from what it was when the -- initially the Inoxum merger was put to -- 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 one 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 as 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 are 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 I -- 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 and -- 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 Outokumpu, 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 within all honesty and trying to be objective here that I was really impressed with the work that the teams -- because we had a lot of people here, what 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 just a 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 one, 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 how 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 #1, which is time bound for '21 and '22, basically tries to address the derisking, 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 '23, '25. Of course, that may change, but at least that is 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 will say, targeted investments that, hopefully, will have managed risks because the investing always has [ innate ] 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 third 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 our customers and all employees. Our aspiration long-term is that we are and we remain customer's first choice in sustainable stainless steel. On the bottom of the page, you see a blue arrow going through from left to right. It's 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 -- so 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 3x. 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 EUR 200 million. 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 is a very much 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 it 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. Myself, 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 are 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 head count. So our head count currently, at the end of the third quarter, is approximately 10,000. 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 '22, 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 businesses. So we have 4 businesses. So there's a slide, one slide, for each. And so I'll walk you through one by one. 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 materials 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 Tornio 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 personnel 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 have been now in the market for 10 years. I guess the first -- probably, in 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. We're specifically excited about segments such as automotive, appliances and pipe and tube. And now that the ferritics investment is basically ready -- so we're excited to introduce this product to our customers. And as 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 ferritics 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 personnel measures in our Mexican facility. Then we come to Ferrochrome, our third 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 leading 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 are looking for ways to further develop the way we actually mine. And we're also developing 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 a strategic review. When I came, we decided to accelerate it. On the 15th of 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's 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 is going to be any major market growth or recovery, for planning purposes. Obviously, we are 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 in -- 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 sort of just to bring clarity that there is -- 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 are 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 to further strengthen our sustainability record. The things that excite me especially is how can we, through R&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, there are more R&D-related things that we are 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 is some water for you. You -- yes, okay.

Yes. I have my tea. Thank you very much. Hello again. And Heikki, 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 improvement. And the 3 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 3 areas will contribute with about equal weights into this EUR 200 million 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 Heikki 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 Outokumpu stainless 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 the level where the value-add share of our portfolio is around 30% of the volumes. 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 costs 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 EUR 50 million. So obviously every work that we can do in this area is significant. The strict asset management, the CapEx capped at EUR 180 million, 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 delayered 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 Outokumpu. We have built up manufacturing excellence capabilities. We have tools for that. I mean we have sort of detailed project planning. We have people who are used to work as well with projects, stage gates, time lines, et cetera, et cetera. 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 the belts and suspenders. Obviously I don't need that with my dress, but you know what I'm 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 a very quick 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 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, Heikki 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 feedbacks loops. And we'll have a feedback loop also with the markets, so starting from the first quarter of next year, we will be able to share with you the progress on this EBITDA 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 now on deleveraging, I think this is relevant. So you see that our net debt-over-EBITDA currently is 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 the -- 2015 until 2019. There has actually been EUR 1.3 billion worth of cash flows. There has been some return to shareholders, EUR 200 million, about. And really where we have put a lot of emphasis as well historically has been debt reduction, so EUR 800 million of the cash went into debt reduction. That still has us at a net debt of EUR 1.1 billion 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 that our net investments have not been huge in 5 years. They stand at EUR 200 million, but please do note the smaller print here. We've had pretty significant divestitures of noncore assets, primarily real estate, so the gross CapEx over the last 5 years has been EUR 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 you know 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, second 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 EUR 360 million there, it is exactly EUR 180 million per year during '21 and '22. And then the Deep Mine, there was actually a question about that in the previous section. So EUR 122 million still remains for the years of '21 and '22. 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 is 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 the 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 EUR 220 million, EUR 230 million level. So we have been sort of gradually stepping down from this, now obviously EUR 180 million this year, EUR 180 million in the next years. The maintenance CapEx part of this year, typically we are between EUR 80 million and EUR 100 million 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. As 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 the 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've 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 plant 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 deliver, 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 started the work today. So as 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 can see that each phase will have its own targets and objectives, but now in phase #1, which is the 9 quarters, it's all about derisking, delevering. And the key levers we are pulling are around customer excellence, cost and capital and then the lean and agile organization. And by executing that, we will achieve a EUR 200 million adjusted EBITDA run rate improvement. We will also be very strict on capital. So Pia just talked about a EUR 180 million lid on CapEx. We discussed the dividends question, then -- 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 will 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 Heikki and Pia, but for now please enjoy the video. [Break]

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 have a chance to talk with a lot of people and travel through all the plants. 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 -- it's 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 are very proud of. When I walk through the plants -- I've been to all our plants. I mean they are 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 KPIs are very visible, small things, but they show you that the plants 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 nth detail to get the facts out. Some of them came easily. Some of them required actually a lot of work. Our [ IT ] 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 can say, well, it's the first phase, 2 years. Shouldn't that have been 3 years or whatever? I think it's a bit of a judgment call. I mean, for me, 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 bound-ness 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 thousand 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 Pia, 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 strengths to withstanding this kind of difficult time. I mean a pandemic is a difficult time, for sure.

Yes.

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, so just can we do anything about that?

Yes, 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, et cetera, 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 Outokumpu 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 costs there. So we've been making, at the low point, EBITDA levels of [ 80 ]; at the high point, EBITDA levels of [ 250 ] 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 that 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 costs. 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 have continued high import pressure, historically low prices, so really how do we see the future for the European stainless steel industry?

Well, the European stainless 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's important for me was to get the facts right and to -- this is the state of affairs. How do we adjust? I think the industry and Outokumpu have been adjusting to this reality for quite some time, but it is a process. It doesn't happen in 1 day. And as we 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 plannings, good decisions, good execution, but there is value and we can unlock it. I'm -- 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&D guys have to do, and women, to get us even more of 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 #1 in volume in Europe. This is -- our plan is to say there.

And then building on those thoughts about raw materials usage and energy usage, really how important is sustainability there?

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 need or 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 customers 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 financial markets are a bit ahead of the curve. We have to educate the customers.

Yes.

Okay, but then with a slight change in direction thinking about how Outokumpu 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 we're not -- catch up with the Asian competitors, but I said 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, it's 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, 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 a level playing field, then it's going to be very difficult also to expect that there is 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? Heikki, you recently traveled to our operations in Calvert, Alabama, quite an effort during the pandemic.

Yes. I have to say I was probably the first 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. I wanted to get a pulse of the business locally and also show the troops there that, hey, we're all this -- in this together. It was a bit of a journey. I don't recommend having the mask for 18 hours. I can -- that, I can tell you, but 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, given the history of Calvert, there have been tough years. The team we have in place, they've been -- most of them have been there from the beginning. And so all the hard work they have put in, now the numbers are starting to flow through. The feeling of confidence -- in America, of course, you know how it is. You have to -- you'll lean a bit forward, right? So when the numbers start to be in the -- going in the right direction, you get a lot of -- get it pumped up. And I think the -- good things are going to happen. Customers are positive. The ferritics is coming now. I -- the U.S. is a large market and it's a growing market. And I am -- I feel good about the future. And I've worked -- in my career, I spent nearly 20 years from my study time, business school, as working as a management consultant then running a business of Calvert's size. I spent a long time in the U.S., so I see the potential even from my own experience.

Yes. So then maybe talking a little bit about the ferritics, which you've touched on earlier, but how clear would you say our investment in the ferritics is going in the U.S.?

Yes. I mean this is now it's the final touches only left, then we are clearly below the original budget. So I mean we are now at the sort of $30 million 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 will let our customers know. We'll let all the big distributors know. Everyone is excited, and I think so are we.

Yes. And then, I guess, with the customer in mind: We've really placed the customer 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 grades the icing. As we already talked about, the cake needs to be providing value for the company. And 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 plants 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, 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 -- 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 are 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, yes, 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 as said, mainly our 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 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, thank you. And then maybe by way of wrapping up: Heikki, again how would you then summarize the new strategy for us?

Well, I said it's what -- it's a 3-phase program. We're focusing now on phase #1. Phase #2 will then come, and then if we -- once we succeed with that, then we earn the right to [ grow ] on 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. EUR 200 million EBITDA is the first target. It will derisk the company. We'll get net debt-to-EBITDA down. We'll stick with the EUR 180 million on CapEx. Of course, Kemi mine is the main bulk. Those -- the money is committed, so -- or 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 are 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 Outokumpu strategy webcast and open the Q&A session with the audience. So please, operator, we're now ready to take questions from the audience.

[Operator Instructions] Our first question comes from Anssi Kiviniemi.

I will continue with the questions that I had in previous presentation, but firstly, kicking off, Outokumpu 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?

[ First ], the 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 is always something. And that's how we move forward. So I think that's really symptomatic of the industry in which we operate.

Okay. And the second question is on the urgency. I mean 9 quarters. I understand that, but kind of how should we expect the actions to take place on a time line? It's EUR 200 million kind of efficiency improvement. Is it steady-state improvement, i.e., EUR 100 million in 2021, EUR 100 million in 2022? Or what's the plan on that side?

Thanks. And I think that is 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 -- if 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 time line here to 9 quarters. I mean I could say to someone in my team that, if you want to see results by the end of '22, you really need to push actions through early on in this sequence, but that is not to say -- I think it will be too bold a statement to say that it's kind of EUR 100 million and then it's EUR 100 million more. There will be individual times -- plans for all of these more than thousand 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, Anssi, 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'll 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 super tanker starts moving forward.

Okay. Then the last question. Does the strategy include option or opportunity to make larger structural changes to the business setup, i.e., selling or ending one business or site or even 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 is the -- this will be the Outokumpu for the coming years. So read that slide the way it's been intended. In terms of LP, of course, Long Products, you, we see the numbers. We need a clear, clear step change in performance. That will be done. And when -- 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 are 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, of course, it originates from Outokumpu, of course, and from Thyssen and AvestaPolarit 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 are being kind of the heart of it in the [ rural 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.

Our next question comes from Harri Taittonen from Nordea.

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 -- [ its mid-term ] target or remind of the [ mid-term ] target sort of top line impact, EBITDA impact as the start-up is getting [ not near but nearer ].

Harri, I think really that at the core of the Deep Mine 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 2040s 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 vis-à-vis the mine investments. I mean we have -- today, we had in the presentation here that kind of over the years '21 and '22 there is still the EUR 122 million left on the investment. And overall, this will bring the investment to about EUR 283 million, so that leaves kind of a small tail into the year '23 there. That was not visible in the slide that I showed.

Okay. And 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 we assume that the EUR 200 million is added to today's or -- 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 of 3x or so. So is it sort of a -- can we 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-à-vis inventories. I mean we have now been here working on this for kind of several years. And we have reached the levels on 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 head count reductions. I mean we could talk about provisions in the magnitude of EUR 75 million to EUR 80 million. 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. I will 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 there will be tough times again, that we don't need to have the conversation about leverage. So I think, both Pia and I -- if I can speak on your behalf here.

Absolutely.

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, et cetera.

Yes.

But of course, that will not happen in 1 year or 2, but at least I -- you need to take the message here that 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.

Next question comes from Ioannis Masvoulas from Morgan Stanley.

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 EUR 70 million to EUR 80 million and, on top of that, EUR 60 million to EUR 70 million for Kemi in the next couple of years, plus these [ digitalization ] 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 on this point? And secondly, if we look at the building blocks to that EUR 200 million EBITDA uplift, EUR 70 million, let's say, comes from the head count reduction. Could you provide some rough indication on how the remaining EUR 130 million is split across the different initiatives?

So maybe your second question was maybe sort of straightforward to answer. It is really about equal weight on all of these 3 main areas. So about 1/3 from the customer excellence, about 1/3 from the cost and capital discipline and about 1/3 -- well, it's maybe a little bit more because it's around the sort of EUR 70 million 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, et cetera, I think it is clear. I think it's the right conclusion that, in the next couple of years in this first phase, we are restricting CapEx. And it is then in the second phase where the Deep Mine investment is done, where we will clearly have more room and more opportunities to then consider investments with quick payback, margin improvements, et cetera.

That's clear. 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 there 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? [ Since ] one of the smaller players there may be a bit more focused on other parts of its portfolio given the recent M&A we've seen.

Maybe I can quickly answer on your question on working capital related to specialty grades. I think 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'll stop there. So I mean your idea is absolutely sort of going in the right direction. Just see it from a bigger perspective.

Yes, all right, but a lot of the specialty grades business, yes, 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 positive growth drivers in the U.S., which hopefully will lead to more growth. And let's see but -- now when we have the U.S. presidential election whether that will 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 are 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 is now car manufacturing also in Texas. Or 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.

Our next question comes from [indiscernible] from Bank of America.

So I'd like to follow up on a question that has already been asked. And 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?

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 the sufficiency of the measures. And secondly, you were discussing 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 the assets are sufficiently well placed. Commodity is mainly for the domestic market in Europe, from the European assets. The Americas will be supplied out of Calvert, the 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 can -- 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, Pia, 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-à-vis different regions, et cetera. 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 the focus on finalizing the Deep Mine investment first.

Our next question comes from Carsten Riek from Crédit Suisse.

I -- my question is just on the run rate of EUR 200 million higher EBITDA. How realistic is that given the fact that at least most of your peers have similar programs? I mean Aperam just announced a new leadership journey with a similar number, which just makes me believe that the -- I'm going to say a major part of those kind of programs might actually be given to the market instead of actually realizing them into the EBITDA. Do you actually also thought about this? Or do you really think that the EUR 200 million which might be realized come on top of the EBITDA? Or could you give it away?

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 or a business controller who goes through all the details and really signs off that. The impact of this is visible in the P&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&L. So that's the starting point, for sure. And you may also now have seen that 2/3 of what's part of this EUR 200 million run rate EBITDA improvement program are costs, organizational costs, maintenance costs, raw material efficiency, et cetera. So I would still say that they are largely from areas that we can control. I don't know, Heikki, if you want to add some more flavor to that.

No, I think that's [ right ]. No, that's it.

And just to clarify because I, unfortunately, have to join a little later. The EUR 200 million higher run rate is not on the 200 -- kind of EUR 200 million EBITDA for 2020, but that's on top of what you expect as an EBITDA contribution from the underlying business.

Yes, 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 EUR 200 million annually. And we want to achieve that run rate improvement by the end of the year '22.

[Operator Instructions] Okay, there appears to be no further questions, so I will hand back to the speakers.

Okay. Thank you, operator. And thank you, Heikki 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.