Outokumpu Oyj (OUT1V) Earnings Call Transcript & Summary

Welcome to follow Outokumpu's Virtual Capital Markets Update Event. My name is Linda Hakkila, and I'm the Head of Investor Relations here at Outokumpu. With me today, we have our CEO, Heikki Malinen; our CFO, Pia Aaltonen-Forsell; our acting President of the Business Area Americas, Tamara Weinert; and our Chief Technology Officer and Group Sustainability, Stefan Erdmann. The focus in today's event is to show you how we have progressed with our strategy. Give you an update on business area Americas and to tell you more about our updated more ambitious sustainability strategy. As you can see, we have a full agenda ahead of us. Then I would like to remind you about the Q&A process. You may post questions through the webcast platform throughout the event. We will take 2 questions after each presentation, and then we will have a full Q&A session at the end of the event. Before we start, I would like to remind you about the disclaimer as we might be making forward-looking statements. But now let's get started. I would like to ask our CEO, Heikki Malinen, to talk about our strategy execution.

Thank you, Linda. So this is our first update since we met virtually in November of last year. I really want to say here when I -- as I begin that we have made good and speedy progress in executing our strategy during the first quarter. I'm really pleased with the work and the efforts, the whole organization at Outokumpu has done, really, they put their hearts and minds on this project to get the company to a whole new level. Now let's take a look at the highlights of the strategy so far. The essence of the strategy is to derisk the company. And the results of the first 1.5 quarters highlight the fundamental strengths of Outokumpu, namely our organization, our employees, our customer relationships, our operations globally and really our sustainability agenda, which I think is really strong. And I would also like to say our ability to turn around businesses which are not performing that well or as good as we would like them to be. Today, you will hear more about the steps we intend to take to solidify our position in the area of sustainability. Stefan Erdmann, who is our Group Technology Officer, he will be here, he will be the fourth speaker and he will tell you in more detail about the exciting things we're going to be doing and also the commitments we've made here. By way of background, Stefan, in his role as CTO, is responsible for R&D of the company. He's coordinating the whole capital expenditure program. He looks after all of our IT investments. And then finally, he's the Sustainability Officer. Let me just make 1 comment here before I go forward, and really, it's about sustainability. I do believe indeed that companies who truly commit to sustainability in this decade, fully committed to taking their companies into another level, a next level, they are the companies who have been more successful. And for that reason, I have yesterday signed Outokumpu's commitment to the UN business ambition for global warming of max 1.5 degrees using these SBTi strategic -- or Science Based Targets initiative guidelines. And so we put our name on paper, and that is going to be the Northern Star or North Star for us in the sustainability area going forward. But Stefan will talk more about that in a moment. Now let me remind you of the 3 steps of our strategy. You can see that on this chart. Our vision is to be customers' first choice in sustainable stainless steel. We have 3 phases. We are now executing Phase 1 2021, 2022, where really our objective is to improve our margins and delever, make our balance sheet stronger. And from a CapEx standpoint, as we discussed a moment ago, we are sticking firmly with our earlier commitment for '21 and '22, which was EUR 180 million of CapEx per year. Now let's look then about the highlights. So first of all, if we look at Q1, so we took decisive steps in all of the areas. We have 3, let's say, initiative categories, lean and agile, cost and capital, and commercial excellence. So we worked on all of them. And of course, our strategy execution was supported by a stronger market, which we've seen since the end of Q4. Our production lines ran at full speed, especially our melt shops ran at full speed, allowing us to capture the full value of Outokumpu today. To ensure a successful implementation, as you may recall, we have put in place a realistic program of initiatives, and we are monitoring and supporting the agenda in different ways. Pia will talk more about the transformation she's leading and also the structures and governance we've put in place to make sure that we really deliver on this EUR 200 million target that we set out half a year ago. Now let's look at the different initiatives underway, and we have a slide on group initiatives, and then we'll go into the business areas, specific ones. But on a holistic level, so I can say that we did do a lot of heavy lifting in Q1. First of all, on a group-wide level, we are targeting a total headcount reduction of 10%. That's about 1,000 FTEs by the end of 2022. We are working in Europe, we have, of course, the strong volumes. But at the same time, in Europe, especially, we've been trying to work hard to cut our operational expenses even further. In Americas, the agenda has been similar. However, there even more, it's been about getting operational effectiveness and also commercial agenda advanced. Fourthly, on the Ferrochrome, it's been very much about mining efficiency here in Q1. It's an integral part of our strategy. And also, we've raised production targets that really tried to get as much out of the smelters as we can. And finally, in terms of Long Products, we basically have the turnaround agenda, which we launched in September, and we are making good progress. Now let's take a look even deeper about the group-wide initiatives, and that's primarily the lean and agile part. So an important part of our strategy is to reduce fixed costs. and to lower our breakeven point. We started employee negotiations immediately after we launched the strategy in November. And we were able to complete the negotiations to a large degree by Christmas, by year-end '20. I want to say that the negotiations went with employee representatives, they went professionally and constructively and a big thanks to our employee representatives for that. At the end of Q1, our headcount is 9,639, this is the so-called legal headcount. And that means a reduction of 479 persons since the launch of the strategy in Q3. We will indeed reach the target that we've set out by 2022. In terms of our reports, we also have the so-called FTE number. Just for the record, by the end of Q1, our FTE number is 9,256. So the difference between legal and FTE is simply that FTE kind of shows what's actually how many employees we have at the moment and the legal -- that legal number sort of comes back with -- comes -- sort of follows with a certain lag. We have also created a more delayered, a more simple and more agile organization. We've taken organizational layers. In Europe, we've taken out 2 layers. And all in all, I can say that the changes we put -- we made, at all levels of the organization, have been put in place without any major disturbances on our operational performance. We're also having a stronger business orientation on decision-making. And overall, I think this part of the journey has gone forward quite well. Now let's take a look at Europe. In Europe, our strategic initiatives contributed to a strong quarter. In commercial excellence, we have activated our sales force to be more in tuned with the needs of our customers. Strong performance by our sales force rewarded us with good order inflow and also a gradually improving mix. We've also put more energy around the global effort to increase sales of value-added grades. And as we just discussed a moment ago, as the industrial -- sort of as the investment cycle moves forward, we will -- as we assume that the sales work will bear fruit, also value-added grades. In cost and capital, in Europe we are pushing ahead with raising performance of all of our mills and also our supply chain. We have implemented a risk-based prioritization approach to maintenance spending, allowing us to be much, much more effective in terms of the euros we spend, making sure the euros really go where they need to go rather than just spending maintenance money more generally. In Q1, we delivered 400,000 tonnes of stainless in Europe with less staff and very little overtime work. We are also tightening the integration between raw materials, supply chain and our sales, and that allows us to ensure that our buying, our purchasing is more timely, helps us also on working capital, and really allows us to take advantage of our economies of scale. We have engaged with our suppliers constructively and openly to work together to find savings. And overall, I would say that we have had a really good start in Q1, and we're obviously very pleased about that. Now moving on then to Americas. So Tamara, our acting President of BA Americas, will give you a more detailed update on the Americas situation. By way of background, Tamara has a long and distinguished career at Outokumpu. She has worked on multiple roles from finance to sales to IR, and now she has full P&L. I'm really pleased to have Tamara here today in this event in person to share her insights about the situation in Calvert and Mexinox and overall in the U.S. But let me make a few comments of my own about the Americas situation. Firstly, as you can see from the performance of Americas, our turnaround is progressing well. You just saw that we had the best quarterly results in BA Americas ever. We have calculated the full potential of BA Americas based on our total mill and cold rolled capacity in that business area. And based on the analysis, we estimate that the full potential of BA Americas is in the range of USD 150 million to USD 200 million of adjusted EBITDA. And this is a target we will be working towards midterm. Now let's move on then to the chrome mine in Finland and the Ferrochrome business. Now obviously, with Ferrochrome pricing improving, our objective is really to make sure we max out output and get the best possible mix we can. In Ferrochrome, it's really critical to complete the Kemi Mine investment and also the fine concentrate plant. In Q4, we communicated that deep mine CapEx is EUR 283 million, and that number still holds. The excavation to 1,000 meters below ground is complete. And construction of the crushing and hoisting equipment is now ongoing. We are on schedule, we are on track with the investment. Further, we are actively engaging with customers really to get the best possible grade and logistics fit to support the results. Logistics costs, of course, are important. So we want to make sure we try and find customers who have rather closer proximity to the mine and the smelters rather than exporting into far remote places. Then let's talk about loan products. So as you recall, we kicked off the turnaround program already in September of last year with a completely new management team. So far, the team has executed most of the fixed cost reduction targets we set. We've also made really big strides in our -- in raising the operational performance. This can be seen, for example, in 2 KPIs that we follow internally, namely reliability of our plants in Sweden, U.K. and the United States and also safety. In safety, we've made a massively big improvement under the new management. And I'm super pleased about that. We have also kicked off the mid-range bar program. You remember that the mid-range bar was a quite large market where we were underrepresented. So we have kicked off the program there. We're working with European distributors to sort of start to penetrate that. But these type of things always take time. And so this part of the strategic program as it will take some time to bear the full fruit where we're looking forward. So to conclude my part of the presentation, I want to note a couple of things. So first of all, we are moving forward systematically. We have a good momentum now in all business areas. The organization is really committed to doing this. The lean and agile part, i.e., the headcount reduction piece is almost completed now. In spite of good volumes, we are able to further improve our operational cost efficiency and get cost savings. And that's really important. And finally, our commercial teams are working hard to pick up new piece of business in their respective markets and globally in value-added grades, improve our customer mix, and capture the full benefits of a stronger market that we're enjoying now. So that is the -- in a nutshell, what I wanted to say here at the beginning. I'm happy to take your questions, I guess, a couple of questions now and then I will invite Pia, our very capable CFO, to continue the presentation.

Thank you for the presentation, Heikki. Now we will take 2 questions through the webcast platform. So the first one is, are the headcount reductions sustainable? Is Outokumpu able to maintain these reductions in the long run to keep EBITDA improvement at indicated level.

Yes, that's a good question. And that has been asked before as well. I do feel that, that number is solid. We will achieve it, and we will be able to keep it. I gave you 1 piece of evidence and that was the overtime percentage for the first quarter. We have had very -- just a few percent of overtime, which is de minimis. And I think that shows that we are able to achieve the production with that headcount, so yes.

Thank you, Heikki. Another question is about savings. Currently, savings are at EUR 84 million run rate. In your plans, what is the run rate at the end of 2021?

So I think I'll leave that question to Pia. She will go much, much more into this theme. I just want to say that the key sort of target is EUR 200 million by the end of '22. We've had good progress here in the first quarter, as you can see. But I don't want to take the thunder for the -- Pia's presentation, so let's get back to that in just a few minutes.

Thank you, Heikki.

Thank you very much, and see you later. Okay, Pia, please.

Yes. I would like to then welcome our CFO, Pia Aaltonen-Forsell, to talk more about the strategy financials.

Excellent. Thank you, Heikki, and thank you, Linda. And let me just get my nice cup of tea here. And so let's get started again. Looking at the strategy execution. So first of all, I just want to say that as we promised during our strategy launch back in November, our strategy is built on self-help, and is independent of any market conditions. So we are really proud of the progress that we've had here in the first quarter. So we are well on track to reach the targeted annualized EUR 200 million EBITDA run rate savings. We have achieved this through a lot of committed work from the team. The early progress is clearly focused here very much on the cost side of the program. I also want to reemphasize something Heikki has already mentioned, but I think it's important. We have managed to carry through a lot of savings, a heavy restructuring program in a period where we also have seen very strong market conditions, and still we have been able to do both, while at the same time, also continuing a very stellar safety record. So here, I think there's been a good balance of strategy execution and ensuring value creation in the good market conditions. So let's get started here now by recapping a bit the structure of the program as we presented it last November. So first of all, when we committed to this EUR 200 million EBITDA program, we said we will get it through 3 strategic initiatives: commercial excellence, cost and capital discipline as well as the lean and agile organization. We also promised that there would be about 1/3 impact from each of these initiatives. So if I start just a few words on the commercial excellence first. I just want to say this really clearly. We've been really wanting to make sure that what we emphasize here in this program are the more sort of transformational aspects of it. Of course, you've already seen in the presentation I made on Q1 earlier today that we've had really good progress on deliveries. Also, the market has been stronger. And these type of market impacts we have not captured in the program. So we want to make sure that we really get here items like growth in selected segments, improved mix. And these are clearly also areas that take longer to develop. And I think we will be seeing the fruits of these gradually through the program. Heikki also spoke about the commitment to working very closely with our customers. And I certainly think that this theme is also underlying the whole commercial excellence initiative here. Then on to cost and capital. I think Heikki already talked about the reduction of maintenance and sort of the good progress that we made through optimization. This is true the whole Outokumpu, but of course, BA Europe has contributed a lot here. We also have a lot of initiatives that are raw material related. For me, that is natural. I mean, that's clearly been the biggest cost bucket here. But again, just repeating, it's not about specific, let's call it, rebates or price levels, et cetera, it is really more about do we have the optimal processes, melt optimization, yield optimization, et cetera. And we already have several really good proof points also of these included in the benefits that we've had in the first quarter. Then on the capital side. I mean, the strict asset management continues, and I think that this also helps us in achieving here a good balance between the EUR 180 million guidance that we have for CapEx throughout the period '21 and '22, while at the same time, obviously ensuring that we continue to have a stable operational performance here. I also want to talk a little bit about working capital in this area. Still to recap, just looking a little bit back, in 2019 we were able to harvest more than EUR 200 million to cash from working capital. In 2020, obviously, a very difficult year, we managed to harvest EUR 250 million almost there. So obviously, looking at that, now looking at Outokumpu comparing us also to the industry, I think it's clear that we have created a new benchmark here in the working capital area. And as I've also said before, this is now a market condition that is stronger, better and improved, so we will now focus a lot on the working capital efficiency. And I think here, the working capital also remains an important part here of the cost and capital discipline part of the initiatives. And then finally, on lean and agile. Here, Heikki has already spoken to this. So here, the total expected savings that we discussed already during the launch, we're about EUR 70 million, and we have carried out a big part of the savings here already now with a minimal impact, for example, on our operating shift model. So next, let me talk a little bit more about how we are ensuring delivery and also how we are measuring the progress here. So when we were setting up this program, we wanted to take learnings from industry best practice, and we certainly also looked at how the big consulting firms work with big transformation programs. We are doing this ourselves, in-house, but at the same time, of course, we wanted to ensure learnings and the best practices also from outside. We also did have a good look into our own history. And I think we found sort of positives and negatives. If I start with the positive, we've had a development over already a number of years where a continuous improvement approach, a way of making sure that we deliver on projects and a way of following those up has been built very strongly throughout operations. But we also -- we wanted to improve some things. We wanted to increase accountability. We wanted to increase transparency. So now every BA is following this program. The members of the BA management teams are accountable for respective strategic initiative area within the BA there. And then we are also tracking this back each down to the individual projects with an accountable person. And we are using a very good tool here. I think this tool is also best practice. It allows us, at the same time, to have a very decentralized approach with very clear accountability, but extremely good transparency. And there is like not extra admin involved, but rather everyone involved, whether they are looking at it in a project meeting or maybe we are looking at it in an internal BA Board, we can follow the same data, the same progress, and it really gives us that good transparency. We also have set up a small team, a small transformation office, and this team also sort of help us to keep track and to have good governance and good rules here. We use something called a gate process, and that has helped me to compile the pie chart that you see here on the right-hand side. So the idea here, obviously, is that we are tracking progress of the program in various stages. So it starts with initiatives under evaluation where we are looking at potential ideas. Those ideas that sort of pass the test, they will become initiatives under progress. And then finally, at the point when we have completed all the actions, then we call the initiative implemented, and that means that from that date on, we say, click, done and then we say run rate saving has been achieved. So as you can see, we have already 540 initiatives that have been implemented, and that has then delivered towards the progress that we had seen now in the first quarter here. Finally, maybe still my final sort of word from this slide is that with the 855 initiatives in the pipeline, I think this also gives a lot of comfort as to the program going forward. There is still a lot of ideas being evaluated. And we have a really big part of the team also engaged and committed into looking for improvement opportunities. Then on the next page, I will dive into the -- through progress that we made on these 540 initiatives that have already been implemented. So when we've had this really good start of the program, I mean, we've had EUR 84 million of run rate annualized EBITDA impact here already now just until end of March. How was this possible? Obviously, it's been possible because of the really tough work on the lean and agile, so all the personnel reduction that we have talked about, but also on early implementation and planning on a lot of the cost reduction initiatives. Remember from Heikki's presentation that the headcount reduction was already at 480 persons headcount by the end of March. And I think that here, just as there was the question already, what's the trajectory until the end of this year. Then I just want to say that the visibility that we have on the headcount reduction front allows me to say that we will see a lot of this impact in this first year, and this will then be with sort of clearly smaller impact through what happens in 2022. So for example, during the next quarter, as we've had this EUR 480 million reduction in the first quarter, we will see magnitude of maybe over 100 sort of further reductions during the second quarter. But the impact then of this lean and agile initiative will be clearly lower than we gain, respectively, in 2022. We've also had a really positive impact from the cost and capital discipline side. Here, we built on our heritage of operational improvement and managed execution of projects well. And this is an area where I think we are building on our heritage and strength, and I would expect us to be able to deliver savings throughout the program. And then finally, on commercial. Early on in the program, the contribution has been a bit lower than from the others. So about 15% of what you see here in the EUR 84 million figure is from the commercial side. At the same time, we do expect delivery from this one to increase and deliver more later in the program. So with that said, I also would sort of like to clarify a bit sort of the timing of the different initiatives here. I think this still gives us confidence to say that we have a good trajectory towards the EUR 200 million annualized EBITDA run rate saving by the end of '22. However, I would not sort of put a specific milestone for the end of '21 there yet. I just think we are on a really good track with a really good and early start here as well. And then from my point of view, one of the really core slides and messages here. So looking at how we are doing versus the financial targets that we announced in November. So as I just described, obviously, our program is very realistic. It's already delivered EUR 84 million of annualized run rate EBITDA improvements. So I think there, we are making good progress towards the target. But next, let's look at the really important target of derisking our company and reaching a level of net debt over EBITDA of less than 3%, which was the target that we set to ourselves. So I mean, you see that the outcome after the first quarter is 3.3x, clear improvements to the 4.1% that we had, for example, at the end of the year. We have reached this very good improvement earlier on initially driven by the EBITDA improvement for sure. This program will continue to deliver and the targets of this first phase of the strategy are met when we have reached the EUR 200 million run rate improvement of EBITDA and, of course, the leverage target. So I just want to make that clear, I mean we have to fulfill both of these conditions before we are complete. So that has led us also to be extremely clear on how we use capital on capital allocation in this first phase of the strategy. So I already spoke about working capital, working capital efficiency will continue to be important and a priority. Also, when it comes to CapEx, we remain committed to this guidance of EUR 360 million throughout these 2 years. And as Stefan will be speaking a lot about sustainability and the path forward there in his presentation, I just want to provide you with the detail already now that in this EUR 360 million for these 2 years, we have included about EUR 20 million per year as more sustainability-related CapEx. You can see here that our net debt increased slightly compared with the year-end. I mean, this is, to a large extent, expected seasonal variability. Also, we have paid some of the restructuring provisions. So I think I deep dive into that into Q1. You can revert there for more details. However, what I think is really worth repeating here is our commitment to derisking. We have a priority to reduce net debt. We want to strengthen our balance sheet. The leverage of above -- below 3x is only a milestone. As you may remember from Heikki's presentation today and also from our strategy launch, it is clear that derisking will continue also in the second phase of the strategy. So as a natural consequence then of reducing our net debt, we will also be reducing our interest costs. And I think this is really important because that means we could be making space also for dividends in the future. Our objective also is to reduce the equity risk premium here, allowing to a broader set of investors. And naturally, and finally, from this page, I still want to say that with derisking, with reducing the debt, we also want to enable our long-term ability to invest. And you've seen the strategy phase 2 there as well with highly selective investments, obviously. But all in all, by strengthening our balance sheet, we enable also a strong journey then going forward. And that takes me to my final sort of completion of my presentation. We've had a very successful start. I'm very proud that we have delivered this early impact, while still at the same time, benefiting and being able to deliver in a much stronger market environment and at the same time, keeping a very stellar safety record. Our key objective remains to deliver the EUR 200 million run rate EBITDA improvement and to derisk the company. And then allow me a final word, just sort of looking a bit forward here, our vision is to become our customers' first choice in sustainable stainless steel. From my side, I want to say, I think this is possible based on our strong heritage but also commitment going forward. And I believe that with the derisking strategy, we are also creating the right base for this. Thank you.

Thank you, Pia, for the very good presentation. Now let's take a few questions through the webcast platform again. First one, will cost inflation make it more difficult to achieve the EUR 200 million EBITDA target.

Thank you, Linda. That's a very good question. And maybe sort of recapping sort of the basic elements of the program. It is very clear that we've designed a program that is not dependent on market conditions. So I mean, we didn't include anything like sort of reduction of prices into the program. So from that perspective, I can say, no, it doesn't matter. But of course, as a CFO of the company, I want to say we are extremely diligent about following up on cost inflation and working to mitigate it.

Thank you. Then another question. Will your priorities change if you reach the 3x leverage before end of 2022.

Again, a super good question. I mean it's just clear for me that we set the target to be below 3x. So I cannot see that sort of as a magic number changing everything. It is a milestone, of course, but I think here, the direction is clear and the derisking will continue, also, even if passing that magic number.

Thank you, Pia. Then I would like to welcome our next presenter, our acting President of the BA Americas, Tamara Weinert. She will talk more about the development in the business area Americas.

Thank you very much, Linda. Ladies and gentlemen, I'm very pleased to speak to you today about the acceleration of the successful turnaround of BA America. Let's start by looking at 3 important factors. The successful turnaround is not recent. It actually has gained traction over the last 2 years. And it culminated in a very strong quarter 1 of '21. We have a positive outlook that is supported by our own actions and our strategy execution, but also at the moment in a very healthy market environment. Strategy execution itself is supported by quite many points, very concrete action points, which we will continue to work upon. All of this will help us in achieving profitable growth. And I'm proud to say all of this by always improving safety numbers. We're improving year-on-year in the U.S., our rates and Mexico has a fabulous performance for close to 900 days without a single recordable incident. So what you see from BA America is a solid, realistic performance. What are the foundations of this performance? It is, of course, our people. We have excellent people, both in the U.S. and also in Mexico. We have 2 very good mills that complement each other. And with Calvert, we have one of the most modern mill, if not the most modern mill in the U.S. It's fully integrated. It's the most technically-advanced mill in the U.S.A. We have 900,000 tonnes of mill capacity in Calvert, and we have 350 kilotons cold-rolled in Calvert and 250 in Mexico. We have a unique location in the South of the U.S. in Alabama. And our recent ferritic investment has allowed us to serve the market even better. Let's have a look at our performance over the last 6 quarters. If you look here at the chart, you can see the trend is a good one. We had a dip in quarter 2 of 2020. That was the quarter where COVID hit us the most. And you can see quarter 1, the strongest quarter on record. Heikki has already said it, and that was really a quarter where we hit the ball right off the park. Six consecutive quarters of positive adjusted EBITDA that is supported by utilization, which is high by a favorable grate mix and also by the raw material price development. But the foundation remains on our own commercial strategy and on our improved cost levels. What are the main drivers of our successful turnaround? The commercial turnaround plays a very big part. Our systematic work where we improved raw material efficiency and we lower our fixed cost plays another big part. And of course, the successful ferritic investment has helped us in strengthening our resilience. Let's dig a little bit deeper into each of these 3 over the next couple of slides. And I would like to start with the commercial excellence and the commercial turnaround. We have our new commercial strategy, implementing this since 2019, and we really have matured as an organization. The way we set targets, our processes. the steering and the accountability. If I can give you an example here, processes, the claims process. In the past, we took an average 60 days to solve a claim from a customer. We're now down to an average of 20 days. That has a positive impact on our customer satisfaction as well. Our market share has increased 24% and we're active in the sectors of appliance, pipe and tube, and the large distributors. We've gotten a lot smarter how we do our business. We don't hunt the volume, but we hunt profitable growth. We have developed good partnerships with our customers, and we continue to develop them. 2020 was a tough year sometimes to stay in touch with customers, but we managed really well. We have quarterly video calls with our key customers where management team to management team will discuss the issues on hand. So actually, during 2020, not only did we keep the relationships, we managed in many areas to improve upon them. Last year, the operational performance was a huge driver as well for the year which we had. Also there, operational maturity in our organizational setup in our processes' steering and in the culture of continuous improvement has improved a lot. And if you look to the chart on the right side, you can see that this is not driven by the base price. We have improved despite the base price. And focus was very much slab cost optimization. That was a very successful project for us. And perhaps I can also give you an example here. We had a look at our ferrosilicon usage, and we noticed in comparison to the other mills that we were a little bit on the high side. So systematically, have reduced the ferrosilicon. Of course, then your line usage goes down as well. And this has been a very good cost saving for us. Our operational teams have here done a really great job. On fixed cost side, not only did we manage to reduce the fixed cost. We also managed to make them breathe better with the way the business went. Quarter 2 of 2020, we saw a steep decline of the business, but we managed to take the costs down in a good level as well. And then towards year-end, when the market picked up, we breathed with the market. How did we manage that? A lot of good success on our human resource side, where without any layoffs in the U.S., we managed to make the cost more in line with the business. An example here would be an excellent management of overtime cost. We also improved our planning and our forecasting. And as you can imagine, that is resulting in much lower inventories. Other areas of success are around maintenance management, supplier management. We really have left nothing untouched, and we really, as an organization, have improved step-by-step over this period of time. A great success story as well is the ferro -- sorry, the ferritic investment. Completed on time and on budget. It has improved our business resilience very much in our market. You may know that in the past, We always melted ferritic in Calvert, and then we shipped it to Mexico for cold rolling and from there, part of it went back into the U.S. to our customers. Now we melt in Calvert, we cold rolled and shipped to Mexico what is needed in the market there, but we cold rolled in Calvert what is needed for the U.S. market. This is positive for our supply chain. This is positive for our cost as we save logistic going back and up. It is positive for our lead times. And you can imagine this makes it very positive for customer satisfaction as well. Our future outlook is solid. We are executing our strategy in a really healthy market environment. We have a robust outlook, strong demand by appliances and automotive sector, and we have a good upside from GDP growth this year in the U.S., which is estimated to be between 6% to 7%. We have the new administration stimulus and other plans, which help as well. And I can confirm that the topic of sustainability is becoming ever more important. In our discussions with suppliers and customers, this topic comes back again and again. Stefan will talk shortly, much more about this. But I think the Outokumpu leadership when it comes to producing sustainable stainless steel will also help us very much in the American market. So a good position in a healthy market with Section 232, with strong relationships and our unique position in the south of the U.S. Overall, I can say there's a very upbeat mood in the U.S. The vaccine rollout has been successful. People are ready to spend the money which they have saved, and you can feel that every day, wherever you go, the mood is positive. We will continue our strategy to improve our profitable growth. It is around commercial excellence, where we continue to improve service to the customers. We have gone some way there already, but there's still quite some way to go. And we will have raised a sharp focus on cost and capital discipline. Around slab cost, we will continue, manufacturing excellence is here to stay, and we continue to work on our logistic cost. So where does all of that lead us? Heikki has already spoken about it. We are determined to reach our full potential of EUR 150 million to EUR 200 million adjusted EBITDA in the midterm. EUR 200 million more towards a healthy market environment. This will happen through commercial excellence, strengthening, expanding customer relationships and continuously improving our service. It will be around cost and capital discipline around the slab cost and very much around our manufacturing excellence with improving quality, improving yield, improving availability and improving our cost. And in lean and agile organization, our focus last year very much on short-term reduction of cost and this flexibility in the cost is now moving towards sustaining a high performance. Ladies and gentlemen, I am very pleased with the situation of BA America. We have the right people, we have the right setup, and we have excellent production facilities. I am very confident that we will deliver. I thank you for your attention. Look forward to your questions.

Thank you, Tamara, for the very interesting presentation. Now we will take a few questions regarding BA Americas. First, you say we have a unique position in the south. What is so unique about that? Shouldn't that be a disadvantage?

It is unique as we're really the only major producer of stainless steel, which is in the south. Recent data has shown that there is growth in the south. And we have seen quite a range of investments coming into the south. That will give us a unique position where we are at the moment. Also, actually, when it comes to hiring good people, it can be a real asset. It is a beautiful area with a coast. I can confirm that, having just moved there in December.

Thank you, Tamara. Then the second question is about pricing. What is the pricing in the U.S.?

As you saw earlier, the pricing was not so much for us a determination for our turnaround story. We have seen, as Heikki and Pia already discussed in quarter 1, some movements there in the order intake, and that has, of course, been contributed as well to the quarter 1 result.

Thank you, Tamara.

My pleasure. Thank you very much.

Then I would want to welcome our last presenter for today, our Chief Technology Officer and Group Sustainability, Stefan Erdmann. He will talk more about our updated, more ambitious sustainability strategy.

Thank you, Linda. So setting a new standard for sustainability. What does it mean? Our ambitious ESG strategy will not only answer this question. It will also explain how we become the industry leader in sustainability in all 3 dimensions: In environment, in social and in governance. At the end of this session, you will not only understand why we can produce the most sustainable stainless steel. You will also understand what it takes for us to meet the stringent requirements to reduce our carbon emissions according to the science-based targets initiative for 1.5 degrees. But first, I would like to introduce to you Stefan Lindfors. He is a fabulous and visionary artist of the Nordics, and he will explain in the following short video what a sustainable and long-lasting material means to him. [Presentation] As Stefan Lindfors, I'm sure everybody of us touch a stainless steel multiple times a day. And it's not just because of its aesthetics or unique properties or capabilities or recyclability that the demand is going up. Stainless steel is an interesting choice and interesting material. But beside these characteristics, also other things matter. Our customers, our stakeholders and our people are also demanding material -- sustainable material that is coming out of safely and compliantly operated production sites. Outokumpu has committed to the science-based targets initiative of 1.5 degrees. And with that, we are continuing the journey that we already showed successfully during the past couple of years. We have been committed already to science-based targets, which limit the global warming to 2 degrees Celsius, and now is the next step. But why is sustainability so important? Why do we have to focus on that? First, I think it's our values, it's our ethics that have to drive us to preserve our planet. But then, if you look at the customers, if you look at the market, also there, we see a dramatic shift happening at the moment. We see industries signing up for science-based targets initiative, which means to become carbon neutral by 2050. This number increased 18x during the last 4 years. Then, in our customers, we see the OEMs signing up for decarbonization in the value chains. We have to enable this progress at our customers with also enabling decarbonization. And then also, in the appliances area, in the household area, I recently met one of our customers and I was told, especially the younger generation, they are demanding more sustainable, more responsible solutions for appliances. This is what should drive us from the market. But then, also, we have a lot of stakeholders. We have a lot of regulations around us, which are demanding this kind of development towards sustainability. For example, governments, we saw the EU publishing recently for the EU taxonomy, the criteria. It was probably clear that with the footprint that Outokumpu has with the heritage that we have been far above 70% scrap content. We are fully aligned to the EU taxonomy. But if you then look at carbon emission prices or the carbon emission allowances, which will reduce during the next couple of years, year-by-year, it's not only regarding sustainability. It's also a risk mitigation of additional costs that might erase. And last, but not least, on the employee side. We are humble enough to understand Outokumpu is what it is because of our people, because of our experience and because of the motivation of our people. Our people are extremely motivated to work for a company that sets the standard for sustainability. I talked about heritage, I talked about our people. So let's take a look how heritage is impacting our current situation and what advantages are raised out of that. First, on safety. Safety is in our DNA. We focus on each and every employee that this person gets home safe after work. We have seen about the records that we see in North America, for example, on Long Products. But overall, over the last 5 years, we have been able to reduce the total recordable incident frequency rate by 70%. Secondly, supply chain. Probably all of you know that stainless steel is just stainless steel if the chrome content is higher than 10.5%. So we need chrome and our own ferrochrome supply chain, our in-house ferrochrome supply chain with our own mine, chrome mine in Kemi and our ferrochrome production in Tornio. is enabling us to have a low emission ferrochrome available for our production sites. The lower emissions that we achieved are 58% lower than compared to the average ferrochrome available on the market. Thirdly, our production sites. With our operations, for example, in Finland, Sweden and Germany, we are able to source low-carbon electricity. In the last year, we were able to source 76% of our electricity from low-carbon sources. And last, but not least, circular economy. I said, Outokumpu is what it is because of the experience. Throughout the last couple of years, we have demonstrated that Outokumpu is able to use more than 90% recycled content. That's a competitive advantage. And using recyclable materials is the cornerstone of our capabilities, and that's a clear point out of our experience and out of our heritage. So let's look now what impact these kind of advantages, this situation where we are today, have on the overall greenhouse gas emissions of our products. On this graph, you can see the different greenhouse gas scopes, as we call it. There are 3 different scopes. I remind you what it is. The first, the Scope 1 are the direct emissions. These are the emissions that are generated in our facilities, in our processes. Then we have Scope 2 emissions. Those Scope 2 emissions are indirect emissions that come from electricity sourcing from steam or gas sourcing. And thirdly, we have the so-called value chain emissions. And those are Scope 3 and these are, for example, raw materials, waste treatments and so forth. So looking at the graph now, you can see on the left side, the emissions per tonne crude steel generated of our peers in China and Indonesia. The total emissions of Scope 1, 2 and 3 amount to 7.8 tonnes generated CO2 per tonne produced crude steel. This compares to, on the right side, Outokumpu's Scope 1, 2, 3 emissions in total of 1.5 tonnes CO2 per tonne generated crude steel. If you compare this to our European peers, this is, let's say, almost half of the European peers. But you can also see the direct emissions are almost comparable. But bear in mind here, the direct emissions include at Outokumpu, also the ferrochrome production. So that's an advantage that you can see in Scope 3, which gives us an unmatched possibility to have the lowest environmental footprint for our products that we produce. So we learned now about our sustainability. Why sustainability is important. We saw Outokumpu's advantages about what did we achieve so far out of the heritage but also out of our experience. But how are we implementing the ESG strategy? On this picture, you will see that a little bit more clear. The base is the foundation for our environmental, social and governance strategy are our core elements. Those are basic. These incorporate environmental parts; electrified production, for example; the digitalization; they incorporate social elements, like inclusion or diversity or our leadership culture. And then finally, on the governance side, these core elements like compliance or zero tolerance. These core elements put into the ESG strategy, embedded into the corporate strategy, with continuous on improvement, environment, social and governance will enable us to become the first -- customers' first choice for sustainable stainless steel. But how do we ensure continuous improvement on all those 3 aspects? As you most likely have seen, we announced this morning that we will implement an ESG advisory council to our CEO. This council will enable us to not only look from an outside perspective, also to the things that we do inside will guide us towards transparency towards performance increase, but also ensure the continuous improvement of all 3 elements, environment, social and governance. So thinking about that, what is now Outokumpu's ambition going forward for the next 10 years? We see from the last couple of years from the basis from 2014 to '16, we announced a decrease of our carbon emissions until 2023 by 20%, which would bring us to 1.5 tonnes CO2 emitted per tonne crude steel. We almost achieved that today. We will achieve this target already ahead of time. So what comes next? Should we stop? Should we enjoy the achievement? Or should we rather focus on getting towards carbon neutrality until 2050? We decided to further increase the bar and to sign up, to commit ourselves to maximum 1.5-degree global warming. That means those kind of targets will lead us to a much lower figure by the end of the decade. And the exact target will be evaluated and will be discussed with science-based targets initiative and partners. So the target and the ambition is clear, but how do we get there? And how much does it cost? That we will see during the last -- next couple of months. We started the ESG road map. We will work over the next couple of months on the most efficient emission reduction road map. And just to elaborate a little bit on that, we have to realize we have to reduce, not only Scope 1 emissions, the direct emissions, but also Scope 2 and Scope 3 emissions. So what does it mean? Over the next couple of years, we will continue the path that we started already a couple of years ago. As Pia said, for this year and next year, we have incorporated in our investment plan already the investments that have to be done to continue the path of the last years. We will look into direct emission reductions through, for example, fuel mix optimization; we will start energy programs or expand energy programs; we work on efficiency optimization through digitalization; we work on decarbonization of our fuel mix; and we, for example, also work on new fuel types or new heating technologies. Just think about that. At home, you probably have a stove, and you cook your meal at your stove. Some of you got to know a gas stove, some electricity stove and some enjoy probably the induction stoves. The same you can apply also into production technology. You can steer with induction technology in future, probably much easier, much more relaxed, the process technology in a not only technological better way, but also in a far more sustainable and efficient way. In Scope 2, we obviously -- we will continue the path of decarbonization of our electricity sources and reduce our electricity consumption. In Scope 3, we will work on new raw materials, scrap type optimizations and also waste treatment opportunities. Now the interesting question comes, so this is an ambitious target for the next decade towards 2050 carbon neutrality. What will it cost? Well, as I said, for the next 2 years, we will continue the journey that we started already a couple of years ago, but we will also work on bigger and on the medium term and long term on bigger projects that are not only reducing our carbon footprint of our company, but also will significantly strengthen our balance sheet. At the moment, we did or we will apply at the EU or other governments for state grants for support. And we foresee, at the moment, an investment amount for the next decade of around EUR 300 million to EUR 400 million in total. Bear in mind, these will not just reduce our greenhouse gas emissions, they will significantly bring value to the company as well. The ultimate target, as you see on the right side, is the carbon neutrality by 2050. Our progress towards this direction has to be measured. KPIs have to be approved by SBTi and partners, and this will be published after the target is set. So these targets are not just displaying the environmental scope like greenhouse gas emissions, like water consumption or electricity efficiency. It's also on the social part where we look on safety, for example, the track record in total recordable incidence rate, but also workforce diversity. We also have to be transparent in governance areas. For example, code of conduct training or other things that we transparently want to talk and measure us about. Let us recapture now what we heard during the last couple of minutes. Outokumpu operates in a market that is seeing a steep increase in sustainable solutions. Our customers are demanding a decarbonization of their value chains, and we have to deliver the solution. Our advantages to our heritage and achievement position us already now as the lowest carbon emission producer of stainless steel globally. With our commitment to business ambition, 1.5 degrees, we are continuing the successful path that we started already several years ago, and we will further reduce our footprint with that. The way forward, what we will do in the next 10 years, what is required to meet the ambition target -- the ambitious target that is related to SBTi 1.5 degree are identified, and we will improve our carbon footprint with also improving our balance sheet with positive returns. These actions on the emissions side and the continuous improvement in the area of social and governance will bring us to the ultimate target to become the first choice -- customer's first choice for sustainable stainless steel. Thank you very much.

Thank you, Stefan. It was a very insightful presentation. Now let's take a few questions through the webcast platform, again. The first question, how can you scale down your CO2 emissions related to ferrochrome operations? And will those be large investments?

That's really an excellent question, and the person who posed this question knows exactly that our biggest carbon emission amount comes from our ferrochrome production. And if you look into the technology of ferrochrome production, the biggest carbon dioxide or carbon monoxide and then carbon dioxide is generated by the reductant that is given into the furnace. We will work, and that's part of our road map going forward, on one hand, on energy reduction for stabilization, efficiency improvement of the furnace, and on the other side, we will also work on alternatives for the reductants that are more environmental-friendly and do not generate as much CO2.

Thank you, Stefan. Another question about customers. Are customers willing to pay any meaningful premium for sustainably produced stainless steel versus conventional?

Well, that's another excellent question, and the answer is, I think over the medium to long term, we will see that the demand is creating these increases in the value of a sustainable solution or sustainable products that will be sold. At the moment, however, the appetite to pay more for those solutions is rather limited.

Thank you, Stefan. Now we are ready to step into the next phase of the event, which is the open Q&A session. I would like to remind you that you can ask your questions through the conference call lines. Please, operator, we are ready to take questions from the line.

[Operator Instructions] Our first question comes from Seth Rosenfeld, Exane BNP Paribas.

I have one with regards to the new U.S. target for EBITDA of EUR 150 million to EUR 200 million. Probably, quite a sizable increase. I believe your predecessor had long targeted EUR 100 million, which itself was a struggle for the company. Can you give us perhaps a time line to achieve the new target? Also, you just give us quite a long list of qualitative drivers, is there any sense of the breakdown for contribution to drive the incremental growth? I'll start there, please.

Thank you for the question. As Heikki said, and I think I repeated it, it's a midterm ambition which we have. So I think that is all I can say at this point in time. There's many factors we need to work upon. Some of them will depend very much also on our ability to generate some ideas. We have already many, we will implement them. We have to look at how production runs, what we can do in debottlenecking. And so this is a journey which we have started, and I think the start was not bad, but definitely midterm ambition, which we have stated today.

Okay. But at this stage, we don't know what midterm means time line, and we don't know what the drivers are. Is that fair?

The drivers we know. The drivers are our commercial strategy implementation, so we need to ramp up further. It is improving our service and deepening these customer relationships and partnerships. It is about continuing to be efficient on cost and our raw material usage. It is about a lean organization. So it's all of the things. Also, around manufacturing excellence, like the ferrosilicon example which I gave. There are many things we can still do to improve, and we will work on them one by one until we have hit our ambition and then we see from there.

Maybe if I just build on that question that -- especially as we get through this first phase of the strategy, we will have opportunities to use -- deploy capital to debottleneck. And I think in the case of Calvert, there are specific examples, not big money, but money that were not put effectively into use, we can further improve the output. We have opportunities to further raise the yield of the facility. And all of this provides, of course, more value. So this is -- this is how we came up with the EUR 150 million to EUR 200 million, and we feel fairly comfortable about it.

Okay. Maybe one last question for Pia, please, with regards to the commercial benefits with regard to the EUR 200 million EBITDA contribution target. I think commercial benefits only 15% contribution to date. Can you just give us a quick reminder on the key drivers there? To what extent does that reflect maybe the future ramp-up of the U.S. [indiscernible] line or needed recovery in value-add or specialty products over the coming 2 years?

Yes. Thank you, Seth. It's an excellent question. And yes, indeed, out of the initial EUR 84 million, only EUR 50 million came from commercial excellence. And until we have completed the program, of course, we also want to reach that around EUR 65 million, EUR 70 million EBITDA impact there. So clearly, we still have some way to go. And you are also right when pointing, for example, in the direction of ferritics, but I wouldn't sort of pinpoint individual segments also because I think this is a broader exercise in deepening to some extent. It's about specific customer relationships, but it's also around really the product mix that we have. So value-added for sure, but it's not about selling more tonnes into customers we already have. It's really about broadening here our scope, whether it is still a little bit more on the product mix side or geographical mix or finding their sort of new areas where we can benefit from the strengths that we have. So very much on the mix side, I would say, is the short answer.

Maybe just if I may just build on that question, 2 things. First of all, when we had the strategy launched in November, I did make the note that if we just look at our market share since the merger in 2012, so we had lost market share points. So obviously, we want to -- with our more ambitious commercial strategy, we want to recover some of that market share loss we have had since the merger. Maybe Tamara, you could just a little bit comment still on the ferritics investment and really how we see the benefits coming through. Is it more volume? Is it more mix? Is it more sort of optionality in different market situations? And just clarify for the audience, please?

Yes. It is very much about capabilities, and it is about the resilience in the market. We are now able to cold roll material, which we were not able to cold roll before in the U.S. With the drive towards faster lead times, saving the cost of going down to Mexico and up, that really gives us a good advantage to serve the market better. So I think this broadening of our portfolio and our capabilities really brings a big benefit to our resilience in the BA Americas. And we really are extremely pleased that we were able to do this investment and that we were able to complete it so successfully.

The next question comes from Carsten Riek from Credit Suisse.

I have 2 questions. The first one is for -- it's for Tamara, probably. I'm just still struggling to grab what is market and what is your own initiative. So it brings you actually to a higher market share. Because you mentioned the market share increased to 24% in 2020 compared to 2019, 21%. If I then put against the factors like AK Steel closing Mansfield in 2020, and Allegheny decided to close stainless steel tender grade. By definition, there is a market component, which drove your market share in the U.S. business. And that would rather lead to a strategy of survival and hope that the others close out, then anything which is actually triggered by yourself as a major input factor. Just trying to differentiate what is your input and what is the market input in those targets you are setting. Because at the moment, I have the feeling it's mixed. That's the first question on BA Americas. And then I have another one on -- for Pia.

Okay. I think you raised an extremely fair point. There's no doubt about that these events which you have mentioned play a role. The very good demand in the market plays a role as well. I think though if you look at the underlying performance, which we have shown in 2020, one of the really most difficult years, which I think we have seen in a very long period of time, I think that's where you saw some of the strengths I'm talking about. And when we look at quarter 1, it is a mix of the factors you have mentioned and our own efforts in this way. To give an exact number how much is from left or right, that is really, I think, impossible for me to do. We work with a lot of dedication on all the improvement points, which I mentioned. We look at our customer service, the way we do business, the lead times, being able to deliver into the U.S. made in the U.S., which is an important factor as well. All of these factors together drive our performance, but to put exact numbers on each of them, I think that's really impossible for me to do.

Okay. That's fair. One for Pia. You mentioned the EUR 84 million realized EBITDA improvement in the first quarter. How do you look at it, is it year-over-year? Is it quarter-over-quarter? Is it based on your initiatives you have? And are the EUR 84 million fully showing in the results in the first quarter? Or are they only partially be reflected in the P&L as some of those positive effects are given away to the customers?

Yes. Thanks for the questions. Excellent because it gives me the opportunity to deep dive one step deeper into this. So first of all, I want to say the EUR 84 million, that's an annualized run rate impact. And I think that's an important factor to keep in mind. So if I just turn it the other way around, what did we see in the Q1 figures, it's about EUR 30 million. So then, I would just like to sort of make the distinction that how do we measure and how do we know it's there. I spoke about those gate processes or sort of the way of following each individual initiative from the idea through evaluation going into implementation and then going to the point where we know we have completed all actions that we wanted to do, and we can just wait for the money to flow in. So if I gave -- give here the example that is maybe most straightforward, even though it's painful, it's that when we have personnel reductions, obviously, there is a period of contemplation, of negotiation. So there is this period from idea to implementation that takes time. But when we have completed the agreement and we know when the person will leave, then the action is complete. And then we say, this is complete. Now we have achieved the annualized run rate impact. And of course, in the P&L, we will then see it going forward as a saving. So then you may ask that how could we see already such a good impact in the Q1. Well, partially, it's because we had really early implementations. And partially, it's also because there could be initiatives that are under implementation, even though they are not yet completed that are already delivering benefits in the quarter.

Okay. That makes it more clear. And maybe one last question for Stefan on the ferrochrome. Correct me if I'm wrong, but it's a choice to have an own ferrochrome mine. And you could produce stainless steel probably from a higher proportion of stainless steel scrap and use less ferrochrome in the process. Why do you think it's crucial to have that mine from an ESG perspective?

That's a good question. You are just partially using scrap. You always have to use, for certain grades, also alternative materials -- raw materials, such as ferrochrome, for example. For example, for ferritics you use more ferrochrome. And in those ingredients, it is so crucial to have a solution with a raw material that has a low environmental footprint. And therefore, to have a chrome mine that is now dig deeper, so to say, which is now having a longer-lasting capability and ensuring with that continuous production of this low carbon-intensive ferrochrome, that's really, in my opinion, crucial for the production of especially those grades that are not having so huge recycled content as other grades.

Okay. So if I understand you correctly, it's about scrap collection and sorting as you can't actually have this pure ferritic stainless scrap available in the same quantities as you have the unsorted stainless steel scrap where it's mix built with all stainless steel grades?

So one component, correct.

Our next question comes from Bastian Synagowitz from Deutsche Bank.

Yes. I've got 2 questions left as well. And my first one probably comes back to a point, which has already been discussed in the previous call. You've obviously been hinting that the CapEx will remain around EUR 180 million for the next 2 years and of course, that's also driven by the mine investment you're working on. But you're also still spending quite significantly more than your peers and the teams that you have potentially a few ideas or what you could do in other parts of the business once the mine investment is concluded and probably also some of that refers to the ESG side, which Stefan mentioned. I guess, the cash flow side in CapEx, particularly is quite relevant also with regards to your balance sheet. So without giving any actual numbers, is there any help you could give us as to where the CapEx should be rather going up or down versus the EUR 180 million level once the mine investment is completed?

If I gave sort of a directional view. So -- and first of all, if you look at that chart that talks about the 3 phases of our strategy, there is that horizontal line that says we are deleveraging the company. So as Pia said, once we get below that 3x figure, that doesn't mean we stop there. And to your question about -- specifically about CapEx, without now giving any formal guidance, but I will say that once we are beyond the Kemi mine and we have completed the mine, it would seem logical that within the larger target of deleveraging that the total CapEx figure would come down somewhat. But I cannot give you an exact figure at this stage.

Okay. No, that's very helpful already. I guess, it's giving us at least some indication as what the proceeds go again. A lot of that also depends on the environment and how the market evolves until then. Then, my second question is probably another one for Tamara on the Americas business and the volumes assumed for the midterm earnings aspiration. Tamara, I remember that your predecessors have always been extremely confident regarding the volume upside and the capability to go beyond the 800- to 850-kiloton volume run rates, which you already all delivered back in 2018. And I guess with the exception of the first quarter now, which you just reported, the business was mostly far behind those levels. So could you please give us some color on the volume numbers which you assumed for the EUR 150 million to EUR 200 million EBITDA range? And maybe give us -- to basically give us some sense, how far this is also volume driven?

There's definitely a volume impact in there. There's no doubt about that. I think what you -- again, what you've seen, if you look at the baseline year of 2020, where we see that in a really bad year, we managed to have a much better profitability than before. EBIT breakeven for us, that was a huge achievement. So now from there on, the journey has to be that we go better on the volume side, but we will be smart about that. I think it's extremely important for us to understand that this is not a volume hunt, but this is about a profitable growth. So you need to shape, you need to have your production right, you need to have your product portfolio right, we have the enhanced capability of ferritics. So we have, I think, here now a much better game to play when it comes to our capabilities. Heikki said, there will be some debottlenecking we have to do, and that is right. So the work will be ongoing on debottlenecking, manufacturing excellence, improving availability, we will have yield initiatives ongoing in order to get this number slowly higher. So yes, I think the numbers, which you have seen in the past, that should be still our numbers. That always depends very much on mix. Markets can change when it comes to thinner or thicker material, more ferritics versus austenitics, changes the capacity as we can use it, but we really solve for profit. We will not solve for tonnes.

Okay. That's very helpful. Just...

[Operator Instructions] Our next question from Bastian.

Can you hear me?

Yes.

Okay. Sounds good. Sorry, I was, for some reason, kicked out of the Q&A more probably. I just wanted to follow up, really. So around 800, 850 kilotons is basically the sort of the capability which we see in the asset? Or is it actually higher? Is it more even beyond the 900 levels, I guess, which the previous management mentioned?

I think if you stick to the 800, 850, that is not a bad number. Where the journey will take us, we have many initiatives we still have to do. We're investigating the debottlenecking, we're investigating on the yield. And I guess we will update that in time. But I think if you take the numbers which you have heard in the past, you should be on a safe track there.

[Operator Instructions] There appears to be no registered questions. I hand over back to the speakers.

Thank you, operator. If we don't have any additional questions from the line, we will still have time to take a few questions through the webcast platform. So how do you see the demand of stainless steel on growing electric car industry?

Maybe I'd take a stab at that. So I think, first of all, it's a very interesting question, what will happen to the automotive market for stainless steel in general with respect to traditional combustion engines. And I guess our viewpoint here still is that this market will still remain quite resilient here through a good part of this decade. And then, when we look at EV vehicles, of course, then there is the whole battery story. But I think maybe, Stefan, you could talk about batteries and our R&D standpoint because you are obviously the technical expert.

Yes. Thank you very much, Heikki. On one hand, we all know that with the reduction of the combustion engines, we will obviously lose some of the market regarding the exhaust systems, the exhaust pipes. On the other hand, we see increasing demand, for example, for battery housings for structures within and so on. And please bear in mind what I said earlier with the decarbonization, in order to supply into the cars, into the OEMs, it is important to have a good decarbonization strategy and have that -- you're enable to also have a solution that is reducing the carbon emission of the overall car. If you then think of alternatives like, for example, fuel cells, well, typically, you use stainless steel for those membranes that you use inside the fuel cell technology. So therefore, we are collaborating with institutes, with Fraunhofer and some others on the development of such applications. So I would say, yes, electric cars is in the existing applications a challenge, but I think we are rather good positioned for alternative solutions that also will go into those electric vehicles in the future or hybrid vehicles in the future.

Thank you very much. It seems that we still have one question on the line. So please, operator, we can take the question.

Our next question comes from Seth Rosenfeld from Exane BNP.

Just 2 final questions from my side. First, a quick one for the headcount reduction. Can you please confirm the time line for cash outflows associated with that restructuring? And then, secondly, in the last week, China announced some significant changes in their import tariffs and also export VAT rebates with ferrichrome and stainless. How significant are those changes do you think for your various markets?

Good. Thanks, Seth. I'll take the cash out on restructuring fairly quickly. We had roughly EUR 24 million already sort of paid out in the first quarter, and I do see most part of this payments to happen already during this year. So still, to some extent, depending on sort of final agreements, et cetera, when it's happening, but there is a fair amount already in Q1, and this is going to continue into Q2, and most of it will be during this year.

Maybe on the China matter. So sort of what we understand about at the moment is that the impact will be more sort of regional, probably centered more around the Asian market. It might have implications on overall price levels there because, of course, the 13% VAT reduction, somebody has to pay for that, probably focus more on the hot-rolled side. Don't see any direct sort of impact into our markets where we operate. But of course, there may be indirect markets depending on how much it then -- how it sort of factors into Asia. So indirect hot rolled, but not direct.

We will take one last question through the webcast platform. So how much do you expect to reduce emissions in the new ambition for 1.5 degrees?

Well, that's another good question. And as the chart indicated, we now estimate approximately 30% reductions over the next decade. So based on the current baseline, which is 2020, but obviously, this is strongly related to the target discussions and the approvals that we will have with SBTi and partners. But from the current perspective, with the associated reductions in Scope 1, Scope 2 and Scope 3 emissions, we will expect to end up in a total number of around 30%.

Thank you. Now I would like to thank everyone for following our virtual Capital Markets update event today. And I will hand over back to our CEO, Heikki Malinen, for his closing remarks. Thank you.

Thank you, Linda. Ladies and gentlemen, thank you very much for taking the time today to join us in our CMD, and thank you for those very insightful and sharp questions. It's been really a pleasure for us here among our team to work with you on this today. It's now about 6 months since we launched the strategy to really move Outokumpu to a new level. This past 6 months has been quite challenging for Outokumpu people. It's been a very intense journey. We really tried to get going very quickly. And I hope that you see from the results and the concrete evidence we're giving to you that the whole Outokumpu team has put their hearts and minds really to get this thing going. So I have to say a big thanks. I'm really proud about Outokumpu employees contribution. I personally feel it's been a stellar performance so far. We are going to give you regular updates every quarter on how we proceed with our journey. So you will get a sharp summary every quarter about what we've done and Pia and I will then report numerically and also qualitatively, what we have been able to accomplish until we get to this objective that we've set. You've heard today a lot about sustainability. Our vision, as you've heard it, is to be customers' first choice in sustainable stainless steel. We intend to be the industry benchmark. We are really determined to do that along the E, along the S and along the G. And I know that many of you, especially the analysts, you do a very sophisticated numerical and quantitative research about different companies. So we are not going to be happy until we are at the top of the poll. And I think that we have a road map and now with the commitment to this SBTi, 1.5 degrees, when we do that, we should be really #1. At least that's what we're going to really be doing and trying to do. By doing that, I think we're going to leave a number of our competitors behind as we move forward as a company. It is really from this perspective that I think that as we go forward, we are going to create a stronger, greener and a more resilient Outokumpu. And from this perspective, we are looking into the future with a very -- with a good smile and a trust that we're going to move Outokumpu a long, long way. So thank you very much, and I wish you all a very good continuation to the day. Thank you.