Outokumpu Oyj (OUT1V) Earnings Call Transcript & Summary

Hello, all, and welcome to Outokumpu's Q4 2020 Results Webcast. My name is Linda Hakkila, and I'm the Investor Relations Manager here at Outokumpu. With me today here, we have our CEO, Heikki Malinen; and our CFO, Pia Aaltonen-Forsell. We will take questions after the presentation. But now before we start the presentations, I would like to remind you of the disclaimer as we might be making forward-looking statements. But now please Heikki, the stage is yours.

Thank you. Can I have the clicker? Thanks. Thank you, Linda. Good afternoon, good morning. Welcome to Outokumpu's full year 2020 and quarterly Q4 release. Let me start with some general comments here on the first page, and then I'll start diving into the results in more detail. Looking back, 2020 was actually a really exceptional year with exceptional circumstances and a lot of volatility in our markets. It was a year where our organization was really tested in its ability to respond to rapidly changing circumstances in the era of COVID. As you will see from our report today, Outokumpu ended up in Q4 financially on a higher note compared to Q3. And overall, 2020 was almost as good as 2019. Although in absolute terms, the financial performance of the company still needs further strengthening. I've been now 8 months in this job. I'm pleased to state that the new Outokumpu leadership team is now fully in place, fully mobilized and really focused on moving the company forward. In November of last year, we announced our new strategy. The implementation of the strategy is proceeding according to plan. And today, we'll hear about some of the results of the first initiatives. Now let me go through the results and the highlights of Q4 in last year. So looking at the fourth quarter, I said Q4 EBITDA improved significantly compared to the third quarter. We were able to run our plants in the fourth quarter well, and we were able to capture the pickup in demand, which happened towards -- especially towards the latter part of the fourth quarter. Also, we were able to source sufficient amount of scrap in a timely manner in a gradually tightening raw material market, allowing us to reach high scrap levels -- high scrap rates in our plants. Our September 2020 Ferrochrome maintenance in Tornio went very well. It went according to plan, and we were able to get to full operating performance quickly as the fourth quarter proceeded. The turnaround in Americas continues well. We now had the fifth consecutive quarter where we had positive EBITDA, and we also had the best annual result so far. I'm also very proud about our safety performance. Our total recordable injury frequency rate, or TRIFR, was 2.4. After the merger, our safety record was much less, let's say, positive. TRIFR figures were in the 10 to 15 range. So now we really have achieved a materially good level of safety, and I do believe that we are probably among the best in our industry globally. Indeed, last year, in spite of COVID, we had a number of plants where we did not have a single accident in 2020. Finally, as part of our strategy execution and the so-called lean and agile piece of it, we have completed our employee negotiations, and I'll come back to that in a moment in more detail then. So overall, COVID was a big challenge, and then it continued after March throughout the whole year. Due to our good safety work, we basically, after the summer, did not lose a single day of production due to COVID in any of our plants as really the virus continued to spread. Our financial position is stable. We were able to finish the year with a liquidity position of about EUR 1.1 billion. I'm also very pleased that we were able to complete and achieve the extension of our RCF, and now towards -- it is now extended to May of 2023. We got that done just before Christmas. In addition, we were able to reduce our net working capital by EUR 247 million. This was a substantial reduction in net working capital. And finally, we were able to keep our CapEx at the EUR 180 million level that we communicated to you during the second quarter. So looking then at 2020, on the left-hand side of the chart, EUR 250 million of EBITDA, slightly below 2019 where we had EUR 263 million. So as well, in absolute terms, we are not where we need to be. Still, I think, given the year of COVID, the result was -- it was a good achievement for the organization. As you can see from the chart on the right, pricing was a real challenge for us during the course of the year, especially in Europe, although there were negative effects also in the Americas. And we were able to adjust our cost base throughout the year, as you can see from the green bar in the middle of the right-hand side bar chart. Looking at the different business areas. So first of all, starting from the left, business area Europe, EUR 142 million of adjusted EBITDA. You can see that over the last 4 years, our performance financially has declined. And we need to turn the corner, we need to start heading going the other direction. We have told you about our strategy, which includes a target of improving EBITDA by EUR 200 million by 2022 and that should help us turn this corner. In terms of Americas, EUR 55 million. The Americas turnaround is encouraging, and it is continuing according to the plans we have set internally. The work will continue then in 2021. In terms of long products, minus 8%. Clearly, not what we would like to see. We did have a major management change in September. The new management is now in place, and they have started their work and are executing, and Pia will then talk about Q4 results and where we are with LP. But anyway, we're moving also in LP according to our internal plans. And then finally, Ferrochrome, EUR 91 million. Ferrochrome, compared to 2019, was flat. However, in September, we did have the big shutdown in shaft 3, which is our third smelter. We have this big shutdown every 4 years, and the impact of that shutdown was about EUR 15 million, which we communicated in our previous quarterly release. Then a few words about prices. So stainless prices were very volatile last year. Sometimes around July, August, we reached the trough and then have started to see a gradual rebound in transaction prices. Here in this chart, we have added most recent data from January. And based on that data, you can see that all of those curves or lines are moving upward in all 3 continents. With respect to nickel, nickel price went up quarter-by-quarter by about 12%. For us, of course, from Outokumpu's standpoint, the euro price of nickel is more relevant, but converting that to euros, the delta was roughly about the same when you look at it on an annual basis. And then on ferrochrome, ferrochrome prices were flat quarter-to-quarter. But the recent data from January indicates that China spot prices have started to rise. A few words about trade and imports. Import penetration declined from about 30% in the summer to approximately 24% here in quarter #4, in Q4. While this decline is helpful, the absolute level is still extraordinarily high and trade defense measures are needed and they are merited. Looking at the quotas themselves, you can see from this chart, roughly, what the current -- what the quota utilization was during the quarter. The high -- the blue bar in the middle, other, that basically contains mainly imports originating from Indonesia. During the last weeks, we have seen that the Europe -- 12 European union member states have approached the commission in writing with a proposal or request to start an extension review with respect to the safeguards, which are going to expire this June 2021. So this decision by 12 EU member states is warmly welcomed and important, and we look forward then to seeing what the -- how the commission responds to the government's request. We continue to strongly make the case that extra trade measures are needed and that the quotas should be extended. Then let's talk about sustainability. Sustainability is a very big theme within Outokumpu. We are the sustainability leader in stainless globally. Our recycled content was over 90% in 2020. We were also able to improve our energy efficiency by 6%. Our target as a company is to be carbon neutral by 2050. On this journey to carbon neutrality, we are setting and have set intermediate targets. Our most immediate target relates to the amount of CO2 per tonne of stainless that we emit by 2023, and the target is 1.5 tonnes. As you can see from this chart, we are now ahead of the plan, and we're almost at the '23 target at the moment. But as I said, the journey continues, and we challenge ourselves as an organization to accelerate the journey towards carbon neutrality. Finally, before I hand over the presentation to Pia, let me just still come back to the strategy. So as you recall, in our strategy, we have 3 components. There's a commercial piece. There's a cost and capital piece, and then there's also, what we call, lean and agile organization piece. In this third, lean and agile, we basically have set 2 targets: one is to simplify our organizational structure to delayer it and to really achieve greater transparency, speed of decision-making and simplicity. That delayering has now taken place. And in that respect, the new organization is up and running and has been, so to speak, delayered. In terms of the headcount, in November, we communicated that our target is to have total headcount of less than 9,000 by 2022. We have now completed the employee negotiations in December, and the actual implementation of that contract is now underway. We are on target to reach that less than 9,000 by 2022. So in that respect, this part of the strategy is really moving forward. So those were my opening comments. Let me now hand it over to Pia to go through the figures in more detail, and then I'll come back with the outlook, and we will be pleased to answer any questions you have. Thank you. Pia, please.

Thank you, Heikki. And good afternoon, good morning. I hope you are all keeping safe and well. So before I start diving into the figures here, may I still say and add Heikki to the sustainability performance and the targets that we have there that the 1.5 tonnes of emissions per tonne of stainless steel obviously also reflects our full commitment there. So if we go a bit technical Scope 1, Scope 2 and Scope 3. And I think it reflects also the very good performance that we have within Ferrochrome, where we are only about 42% of CO2 emissions compared with the average global ferrochrome producers. But hey, with that said, let's deep dive a bit through the figures here as well. So I'm going to try to change the slide. And we'll start with the key figures table here. And I think there's several messages here. I think we will get back to the figures around the volumes and the sales as well as the EBITDA in the next slides here. But maybe a few details that we will not get back to later in the presentation. And the first one, then relevant for net result as well as earnings per share. And obviously, what Heikki just described in terms of headcount reductions, we have also seen then some provisions -- restructuring provisions in our P&L through also the fourth quarter of 2020. So altogether there, we had more than EUR 55 million worth of provisions. We did, however, also have the restructuring program started in Germany already the previous year. So actually, on a year-on-year comparison, we had almost similar costs back in 2019. However, in the comparison, in 2019, we also had the sale of some real estate in Germany. If you recall, it was near Düsseldorf, and this brought another EUR 70 million of extraordinary profits or adjustments to the P&L in the previous year. So that just sort of from a comparison perspective is relevant there. Our net debt, obviously, reduced to actually what we could see lowest level in recent history. And I will certainly get back to that. I think it's an important achievement and something where our own actions and self-help really was the main cure to make sure that, that happened. And then finally, still maybe one more point on the restructuring costs, as I have the chance to say that. As Heikki stated, we have completed the restructuring now in all of our key countries. There are, however, some remaining areas. So I would say that maybe approximately EUR 10 million worth of restructuring cost could still occur during -- probably during 2021. And then obviously, from a cash flow perspective, we should be ready for the fact that the provisions that we have booked now in Q4 of 2020 will be paid out during 2021 and even predominantly during the first half of the year. So with that said, let's look first a bit into the group-level performance and comparing our starting point at Q3 and then looking into the Q4 and what really happened between those 2 points. And as you can see, there was really a significant boost from deliveries and volumes. And I would say, even more than that, if you look at our balance sheet, you see that we have also added some to inventories during Q4. Actually, balance sheet to balance sheet between Q3 and Q4, we have added EUR 100 million to inventories. And I think that's relevant on the back of the improved demand outlook and then the seasonal increase that we are now foreseeing for Q1. So we have definitely been able to gear up and to increase here production. But it has also had a positive impact on our cost structure. We have overall had a very good efficiency, also a very good scrap ratio, as Heikki already alluded to, and then at the same time, really benefited from a better fixed cost absorption. So it's just clear that once we are back to very relevant production volumes, it's clear that our cost performance here has benefited from that. We have also continued the cost compression that we have also talked about in the previous quarters. There is one negative here that you can see. You see that even during the fourth quarter compared with the third quarter, we still had negative impacts from pricing and mix. And I think there's many relevant elements to be discussed there. But maybe just at this point, what I still clearly want to say that even though from Q3 to Q4, we could still see this negative impact. Then what we see right now happening in the order intake and also when we see metal prices, I mean, first nickel prices and now as well then Ferrochrome prices having increased rather rapidly I mean at the moment, I am not concerned of margin erosion on the -- on sort of because of that as we are experiencing a stronger demand situation. So let's look a little bit more into the BAs as well. And maybe some specifics here BA by BA. I mean this is BA Europe. Obviously, here as well you can clearly see the negative impact from pricing and mix. And maybe this is a good moment to talk about the recovery sort of through the various segments. So obviously, the demand recovery during the fourth quarter, it was stronger than we had expected. And we have talked about the improvements in appliances. We have talked about the improvements in automotive. And still during Q4, we didn't really see improvements in the value-added grades. And if we are now looking at the order intake and the demand structure, it seems that we have a somewhat broader recovery happening, however, oil and gas related, and you know that a lot of our value added, for example, pro grades have been there going to scrubber business, et cetera. There, we still can see that this has not really sort of turned the page yet. So some early signs and maybe some recovery possible throughout the year of '21. But that's where sort of the big action is not yet happening. However, from other perspectives of value-added grades, we are starting to see a gradual recovery. So I think that's important to say that compared with the fairly low point there in Q4, we are starting to see some improvements, but clearly not back to the levels that we had before the pandemic was hitting the business. What you also see in this slide is a very significant cost compression in BA Europe. So I just want to mention the self-help and all of the actions that we have taken there. We have still had really significant efforts even in squeezing things like maintenance cost and every discretionary cost that we could also through the fourth quarter. So you see the combined effect here of both the improved volumes as well as all of our actions then in the result. Maybe on the sort of current situation in the market still in Europe, I also want to comment the fact that lead times have increased quite significantly. So this is actually relevant both for Europe and Americas. But as we speak, it is clear that lead times are longer than normal, and we are already selling in the later parts of the second quarter. And stock levels are also rather low in the market. So then looking at the Americas, and here really turnaround has accelerated. There has been a further improvement when it comes to the volumes. I think, overall, we have been able to position ourselves well here and really grow also gradually our share. So I think here, you see a good increase in volumes also on the back of the recovery in the market. And then you can actually see some negative bridge effect here from cost. So maybe just a few comments on those. I think most of all, this is due to the fact that we had some very significant cost compression in Q2 and Q3, where some of that was then released back at the point when the volumes were clearly improving again. You know that the same long-term improvements through our strategic actions are continuing also for Americas. But all of the increase here in the fourth quarter was then on the back of the increased volumes and some kind of recovery from the earlier cost compression. In Americas as well, inventory levels remained very low and the same as for Europe, we see very long lead times and possible sort of next dates when we are discussing now they are into May, they are into June for deliveries. Okay. Then maybe from a Ferrochrome perspective, really, what you see in the chart here is a big improvement from Q3. In Q3, obviously, we had the maintenance break. This had a EUR 15 million negative impact on the result. So we have a recovery here in terms of volumes. But it is actually particularly strong also because there was a really successful ramp up. So I think in a quarter where steel prices were on a low level and very stable, it is our own actions here, the good recovery after the maintenance as well as the significant actions to further compress costs and some positive movements there of some of the variable costs that really helped us. So I think this is a very satisfactory quarter from the ferrochrome perspective. And finally, BA Long Products. What you see here is a 0 result in the quarter. I want to say this is 0, but it is exactly on plan. So when we were working with the new management team of the Long Products business area, when we set the plans and the recovery plan, then the sort of the first steps here, getting back to 0 was set for the fourth quarter. I think we are exactly there. You see as well here that the pricing environment has still remained rather challenging as well as some mix deterioration, but deliveries have clearly increased in the quarter. Then a few words on the working capital. So where we are right now in terms of managing our working capital, we can see 2 years actually of very significant reductions overall. So we had further reductions of working capital even in Q4, and the annual reduction was EUR 247 million. So year-on-year, obviously, we have really reduced a lot in inventory. But if you look at that through the quarters of 2020, you see that the main reduction already took place before end of Q3. And during the fourth quarter, what we have then seen, rebalancing, the increase in inventory has been also an increase in accounts payable. So I think this is a good proof point of our ability still to really manage our working capital. Now if we look into 2021 with the history of 2 years of very, very, very big working capital reductions, we think that we are now at the point where our focus will be on remaining -- being able to keep these levels that we have now achieved. And you should also take into account that there is some seasonal variation here. So definitely, on Q1 being a typical seasonal increase in terms of volumes, I think you would then also see this in terms of the cash flow, look back some historical years, you will find a pattern. But overall, our commitment here is to remain stable and to find ways of managing and keeping working capital at these levels. Furthermore, then just if you look at the overall cash flow, you can see that we have been able to achieve a very positive cash flow before financing activities. Heikki has already touched on the CapEx. So I think I will move to the next page, just to really then show the impact on our net debt of these improved cash flows. So net debt development has continued to be really good through the year. And it's really due to self-help and then the very strict CapEx control that we have continued through the year. And you see it in the slide here, obviously, you see the record low level, EUR 1.28 billion of net debt at the end of the year. When you look at our gearing, it's -- there is positive development. However, the equity component of it, we had some translation differences there and obviously, a net loss for the year as well. So just maybe to keep that in mind. We do remain fully committed to reaching our financial target that you can see here, which is then to reach the leverage of below 3 at the end of 2022. So you see that we are definitely trending in that direction. And then finally, a few words on the funding. If I look back at the year of 2020, throughout the year, we've had funding activities of worth almost EUR 1 billion in a pandemic year. I think it's a good proof point of our ability to act in the markets and, of course, also good support from our key relationship banks here. If you look overall at the maturity profile, as Heikki already said, this is one of the good or key achievements of last year. We can see here that we have moved the RCF extension so that now the maturity is in May of 2023. And obviously, we will continue working very actively, improving our maturity profile, but I think some really significant steps we're taking now during 2020 here. I think you can also see some other sort of familiar elements overall in our debt structure and maybe just a really brief comment still on the commercial paper market. In terms of short-term funding, it has remained a good source of funding for us in this specific Finnish commercial paper market. And I think what we also see now is that we are again able to extend maturity somewhat in the several months. So also here, I would say the market is -- has remained open, but it's also showing maybe some signs of strength from that perspective as we speak. So I think with that said, thank you very much, and Heikki, back over to you then.

Thank you, Pia. So let's go to the outlook for the first quarter. So the stainless steel market has begun to recover after the global downturn caused by the COVID-19 pandemic. The demand for stainless steel is strengthening and both business areas, Europe and Americas, are expected to see a seasonal increase in volumes. Consequently, Outokumpu expects its stainless steel deliveries for the whole group to increase in the first quarter by 10% to 20% compared to the fourth quarter. Adjusted EBITDA for the first quarter of 2021 is expected to be higher compared to the fourth quarter of 2020. So that is the outlook for Q1. And I guess, we are now happy and pleased to take any questions.

Thank you, Heikki, and thank you, Pia. Please, operator, we are ready to take questions from the line.

[Operator Instructions] And our first question comes from the line of Seth Rosenfeld of Exane BNP Paribas.

I guess a 2-part question. First, with regards to the general guidance. And then secondly, drilling into margin expectations in Europe. I guess, [indiscernible] on the call would like a bit more color on the scale of strength that you're expecting in the Q1. Your guidance originally for Q4 was roughly 1/4 of what you ultimately reported. As you look forward to Q1, what scale of increase are you thinking is ultimately reasonable for us to be expecting? And then digging into a little bit more within Europe in particular, given that there's no alloy surcharge mechanism really functioning right now, can you just give us a bit more color on your confidence in passing on rising scrap prices to customers? It does appear there's been a meaningful increase in that cost base in the recent weeks, perhaps outpacing the strength in transaction prices being reported. Is there any risk of margin compression in Europe in the near term?

You take the guidance; I'll take the price.

Yes. Very good. Seth, thank you very much. And then in terms of the guidance, I think the first element that we certainly wanted to make very clear is that this is a good increase in terms of volume. Also compared with Q4, that had an unexpectedly good recovery. So I think that's one important point. We have said that it's between 10% and 20%. So I think that gives a fairly sort of good confidence that we will have a boost from the volume there that is important, and that's also the reason, of course, to state that very clearly. I think to some extent, obviously, your question is related to your question about the confidence on being able to pass on then the increases in scrap prices, for example, there. So I think already given some comments, but I think Heikki will come back to that as well. Then if we look at other elements of the P&L, I mean, this quarter is typically not a quarter for any kind of significant maintenance, and we've also not described that. So I think in terms of cost elements, there is like nothing that is of such significance that we would really have talked about it separately. So it's really very much on the back of the volumes and this improved demand situation that we are giving the guidance of higher EBITDA. And I think that -- maybe there are sort of some more details that will come up here during the Q&A, but that's as much as I would say at this point.

Yes. So Seth, well, first of all, I think it is obviously a challenge when there is no alloy surcharge. The way the market operates today is that you basically have customers, contract customers who have longer-term price commitments, but there are mechanisms in these contracts in certain circumstances such as this to negotiate passing on the incremental cost upcharge that we get. And obviously, then we have short-term business. I wouldn't really call it spot business, but it is noncontractual business. And for that type of -- those types of commercial transactions, we are able to pass on the full increase of raw material costs as we get them. So it's sort of a bifurcated situation. But definitely, we are in a position to move a good part of that cost forward, at least we are trying to. But there's no automatic mechanism per se.

Seth, I think it's -- sorry, excuse me, Seth, if I may still add one more element that seems quite relevant actually to mention right now as we have seen really rapid increases in the ferrochrome prices. And that is to say that you know that the benchmark pricing mechanism here, obviously, will bring some change to the price from Q2, like first of April onwards. So clearly not for that part of the business, which is a fairly significant part of the business. There is no change. So obviously, then for a smaller part of the business, where the Chinese spot price might be relevant, you could see some uptick, but this is even something that we commented in the report that these price increases in ferrochrome shouldn't give any kind of material impact to the first quarter.

If I can just ask one follow-up. In Q4, I guess, the scale of beat versus your guidance that you gave midway through the quarter is obviously phenomenal. It's very impressive. I'm trying to understand the guide to Q1, I guess, goes back to understanding why on earth you beat the original guide for Q4 so much. Was it just ultimately better fixed cost leverage? Or was this an environment where there was some tailwind of lower-cost scrap in inventory that ultimately contributed to the margin expansion beyond what you would have talked about just a few weeks prior previously?

Seth, from the metal impacts, I would also highlight a very good performance on scrap ratios in the melt shops. And I think you might see here some links to being really able to operate on close to full speed. But at the same time, obviously, it's been on the back of us having a good scrap availability and kind of we could do this because we could react quickly. We saw the market recovering then during the quarter, and we were still able to act and take benefits of this. So I think if your question is that did we have something sort of in inventory that we could use that would really have caused this effect, I don't think it's that. But I think it's a quick reaction, having scrap availability and then having really good melt shop performance as well. So that's one really, really good and big area there. And also, you did mention the fixed cost absorption, and I think it's an important element there. So those are on the cost side, at least a few of the real highlights.

Our next question comes from the line of Ioannis Masvoulas from Morgan Stanley.

Just 2 questions from my side. First, following up, to some extent, to Seth's question on Europe. I think the call we had earlier in January, you talked about potential for some pressure in some of the contracts you would be signing in Europe for 2021, just to reflect the dynamics that we saw in the latter part of the year. So the first question or part of the first question would be here. Just in terms of volumes, how much contract versus spot business we should be expecting for this year? Like a rough percentage would be very, very helpful. And have you managed to reflect some of the improved spot dynamics towards the end of last year in those negotiations? Or should we expect a bit of a margin pressure year-over-year when it comes to the contract volumes? And I guess I'll stop here for the first question, then I have another one on Ferrochrome.

Right. So Ioannis, so in terms of the contracts, they are primarily negotiated in the first quarter. And obviously, those type of contracts are important for all suppliers. It was a very competitive quarter, I would say, in terms of contract business. Roughly speaking, contract accounts for about half, 50% roughly of our business in Europe. It changes Year-by-year, but that roughly 50% would be sort of a nice round number. And then still coming back to this question about the cost pass-through. So the contracts do have mechanisms. They vary by customer, by industry, by segment. And obviously, there's a negotiation process. It depends a bit on our ability to negotiate with the customers to pass on those costs. So there's no automatic mechanism. You have to work very hard to get that through, but it is -- we believe it is doable to a large degree.

That's clear. And the second question on Ferrochrome. Looking at the external sales, I'm trying to figure out how much exposure you may have, the surge in Chinese prices. And you mentioned that due to lags, you're not going to get a benefit in Q1. But as we go into, I guess, Q2, in terms of that external part of sales, what sort of leverage do you have there? And can we shift some of the external volumes more towards Asia to benefit? Or do you have some sort of contracts that restrict your ability to shift volumes and capture the opportunity?

Maybe if I can sort of turn the clock back a little bit to our previous call and also when we described our strategy, and then we said that what we really are targeting is to look for more contracts and less spot sales. And obviously, that's been the way how we have approached the year. So I think that in terms of the external sales, it is very relevant to look at the benchmark price. Obviously, I don't want to speculate what it will be on 1st of April, but I guess it would be unheard of that there would not be sort of a connection to the spot prices somewhat. So I think that's why it's an important timing question, of course, to see that we would expect then Q2 to have more impacts from these Ferrochrome price increases. So I'm not saying there wouldn't be any on spot price, but it has been the direction that we took last year to really try to have more long-term commitments and sort of contracts that would then typically be on the benchmark pricing.

That's clear.

Our next question comes from the line of Anssi Kiviniemi of SEB.

It's Ans from SEB. A couple of questions from me. I will take them one by one. First, starting with working capital. On payables, they were quite elevated levels. I guess the restructuring effect can be seen in there. But is there anything other impacting that balance sheet line?

Thanks, Anssi. I think it's actually fairly simple. I mean more volumes ramping up our ability to purchase scrap and then doing that also kind of towards the latter part of the quarter, so clearly increases our payables, quite short story.

Okay. Then on the working capital outlook. I mean Q1 is working capital heavy, and we're going to see a negative move. But is it a typical pressure that we see in Q1 year after year? Or is it due to the fact if the working capital is already at quite low level, the pressure is tougher on the cash flow. How should we look at the dynamics there?

Anssi, I think it's typical. I think we've seen this increase simply because the seasonal impact means more volume in Q1. And then typically from previous years, actually also into Q2. So that means that we really try to make sure that we are ready there as well for the summer season and have things available also towards the end of the first quarter. So I think you can go many years back, and you will see that seasonal pattern. I would just remind that year-end of '19, we had inventories of EUR 1.4 billion; year-end of '20, we had EUR 1.1 billion; and I think we had an even lower level there during Q3. So I think we have learned to operate now in these lower levels, and we should just be ready to accept the same sort of seasonal deviation in Q1.

I would just say that the big applications, home appliances, automotive are strong, and the demand is robust enough so that, as I said, we are able to run our plants very well at the moment.

Okay. Then a couple of questions on costs. I mean in Q4, you executed the restructuring program. How should we look at the benefit Q1 onwards? On a quarterly level, what's the boost? And also, on Slide #6, you show the 2020 EBITDA bridge cost supported heavily the result. How much of this cost, let's say, that were partly related to COVID-19 will come back in 2021?

Thanks, Anssi. Those are all sort of super relevant questions. So first of all, if I just look at what type of measures were really temporary, so I think I pretty openly described, for example, in the case of Americas that maybe we had there -- you saw some rebound of cost in the fourth quarter due to the fact that some of the cost compression actions were reversed in the fourth quarter. You can see the size of the bridge there. And I think you also saw really good volume in Q4. So that probably gives sort of a short answer to something that we have now already seen. And then, obviously, continuing the strategic initiatives and the further cost savings for the long term also through 2021. So I think that may be one part of the answer. And sorry, could you repeat your first question? I didn't have the time to write it down.